annual financial report as at 31 december 2011 · 2014. 8. 8. · annual financial report as at 31...

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Annual financial report as at 31 December 2011

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Letter to the Shareholders

Dear Shareholders, In 2011 the Interpump Group reached a historic record for EBITDA, recording earnings of €95.0 million. Despite differences between business activities and geographical areas, we can consider that the 2009 crisis is now behind us, even though reasons for uncertainty in the global macroeconomic scenario persist. In relation to sales, the Industrial Sector far exceeded pre-crisis levels, while the Hydraulic Sector reached approximately 80% of pre-crisis levels. Highly encouraging signals were received from North America and Emerging Countries (BRIC) with significant growth percentages (respectively +20.5% and +48.2%). Contrasting signals were recorded in Europe (including Italy), which anyway returned average growth of 16.2%, although results country by country varied widely. The driving role was played by Germany (+35.3%). The Interpump Group achieved the following consolidated results in 2011:

- sales rose by 16.1% to €493.3 million (€472.3 million, excluding the sales of Unielectric, which was sold in September 2011), compared to the €424.9 million of 2010;

- as already mentioned, EBITDA rose to €95.0 million, equivalent to 19.3% of sales (€94.7 million without Unielectric or 20.0% of sales) compared to €74.1 million in 2010 (equivalent to 17.4% of sales), representing growth of 28.2%;

- EBIT reached €75.8 million, equivalent to 15.4% of sales (€54.7 million in 2010), reflecting an increase of 38.5%;

- net profit rose by 55.5% to reach €42.6 million, compared to the €27.4 million of 2010; - earnings per share were €0.439 versus €0.284 for 2010 (+54.6%); - ROCE reached 16.4% versus 12.5% of 2010 and ROE rose to 13.5% compared to the 9.5% of

2010; - Net financial indebtedness, including debts for the acquisition of the minority interests of

already controlled companies (equivalent to €19.0 million) was €146.0 million at 31 December 2011 (€147.8 million at 31 December 2010). The €28.8 million free cash flow was entirely utilised for the acquisition of investments, treasury stock and dividends.

Performance by sector Sales of the Hydraulic Sector totalled €229.9 million compared to the €190.3 million for 2010 and were therefore up by 20.8% (+18.1% on a like for like basis). Sales of US companies increased by 38.3% in dollar on dollar terms (+27.8% on a like for like basis); translated into euro the increase was 31.6% (+21.7% on a like for like basis). Sales of the other companies in the Hydraulic Sector rose by 16.7% with respect to the figure for 2010. EBITDA for the Hydraulic Sector was €32.9 million or 14.3% of sales (€23.6 million in 2010, equivalent to 12.4% of sales), reflecting growth of 39.2% and improving by 1.9 percentage points both due to increase in volumes and the control of costs. Industrial Sector turnover was up by 15.5% at €242.4 million compared to the €209.8 million of 2010. Sales of very-high pressure systems reached €148.4 million, with growth of 21.3% compared to the €122.4 million in 2010. Sales of high pressure water pumps reached €82.1 million and were up by 8.8% compared to the €75.4 million of 2010. Industrial Sector EBITDA totalled €60.7 million (25.0% of sales) compared to the figure of €50.3 million recorded in 2010 (23.9% of sales), reflecting growth of 20.5%.

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External growth 2011 saw an increase in the Group’s rate of external growth. In April 2011 the Group acquired American Mobile Power (AMP) headquartered in Fairmont (Indiana - USA), one of the main US manufacturers of aluminium and steel tanks for industrial vehicle hydraulic systems. The Company's sales from 1 April to 31 December 2011 (nine months) totalled $7.7 million with EBITDA of $1.5 million, equivalent to 19.6% of sales. The Group acquired 80% of American Mobile's shares for the overall price of $6.8 million, paid in cash. AMP’s operations are highly synergistic with respect to the business of the Interpump Group's Hydraulic Division. In this context, Muncie Power Products, which is a wholly owned subsidiary of Interpump Group, is the US leader in power take-offs for industrial vehicles and it has strengthened its position on the US market thanks to the acquisition of American Mobile, expanding its product offering with AMP's tanks. In addition, preliminary contracts were signed in 2011 for the acquisition of Takarada, Galtech and MTC: the deals were closed in January and February of 2012 so these companies were excluded from the 2011 consolidated financial statements, although they will feature in the 2012 report. Takarada, with registered office in Caxias do Sul (state of Rio Grande do Sul - Brazil), is a leading manufacturer and seller of power take-offs and related hydraulic components for industrial vehicles in Brazil. In 2011 the company recorded sales of 17.9 million Reais (€8.0 million) and EBITDA of 3.3 million Reais (€1.5 million), equivalent to 18.6% of sales. A total of 29.0 million Reais (€12.9 million) was paid for 100% of Takarada's capital, inclusive of the company's financial debt. Also Takarada’s operations are highly synergistic with respect to the business of the Interpump Group's Hydraulic Division. With the acquisition of Takarada, the Interpump Group lays the groundwork for substantial growth of the Hydraulic Sector in Brazil, currently on the verge of allocating significant funds to the development of infrastructure in the coming years, also thanks to its selection as the host of forthcoming top international sporting events (Football World Cup and the Olympics). Galtech and MTC, both headquartered in Reggio Emilia, Italy, are engaged in the manufacture and sale of directional control valves, hydraulic valves and accessories, gear pumps and gear motors. The companies recorded combined sales of €20.7 million in 2011, with EBITDA of €1.1 million. The net financial indebtedness of the two companies at 31 December 2011 was €1.1 million. 53% of Galtech's share capital and 60% of the capital of MTC was acquired for €6.3 million, of which €4.7 million paid in cash and the remaining amount settled with 300,831 Interpump Group S.p.A. treasury shares. Also the operations of Galtech and MTC are highly synergistic with respect to the business of the Interpump Group's Hydraulic Sector. In this context, it should be noted that Interpump Hydraulics S.p.A., a 100% owned subsidiary of Interpump Group S.p.A, is world leader in power take-offs for industrial vehicles and through the acquisitions of Galtech and MTC it has strengthened its market position by broadening its product offering. Treasury stock In 2011 the Group acquired 3,548,594 treasury shares at an average price of €4.6468; the shares can be used for the acquisition of equity investments or to service stock option plans. In the same period, 1,074,286 treasury shares were sold for €4.3 million to pay for investments, and 50,000 for the exercise of stock options. At 31 December 2011 Interpump Group held 5,484,280 treasury shares, equivalent to 5.6% of the share capital, with an average unit cost of €4.449.

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Dividends The Board of Directors made a proposal to the shareholders' meeting to distribute a dividend of 12 euro cents per share. If approved, the dividend will be distributed as from 10 May with coupon clipping date of 7 May. From the share listing date (16 December 1996) to 8 March 2012 (share reference price of €6.35), the total return for shareholders has been 11% annually for more than 15 consecutive years, considering the increase in value of the share, the dividends, the purchase of treasury stock and the capital increase. Warrants October 2011 saw the end of the second exercise period of Interpump Group warrants; 10,464 warrants were exercised during the period, and consequently 6,431 newly issued shares were subscribed for an equivalent value of €31 thousand. There are therefore 18,446,168 outstanding warrants exercisable in October 2012 by underwriting 59 newly issued shares for each 96 warrants at a price of €5.10 per share. Strategy for 2012 and coming years For 2012 and future years the Interpump Group will focus a significant amount of resources on development in countries with fast-growing economies. In this context, the Group considers that structured growth in the future will be achieved above all through surging business in emerging economies. In this regard we draw your attention to an additional initiative undertaken in 2011: December saw the incorporation of the Dubai based Interpump Hydraulics Middle East FZCO, founded in order to provide a local branch to penetrate the Middle Eastern market more effectively. As in the past, much importance will be awarded to North America, which is currently the most important market for the Group and which is displaying highly encouraging signs of recovery. With regard to Europe, Interpump Group plans to consolidate its competitive positions and improve them wherever possible. Special attention will be devoted to controlling costs and to finance management, in order to maximise the generation of free cash flow to be allocated to structured external growth and the remuneration of shareholders. I thank you for your confidence in Interpump Group S.p.A.. With the unwavering commitment of all our staff and that of myself, it is my belief that the Group will continue to generate adequate resources for growth and for increased value of the Group for the benefit of all our shareholders. Yours sincerely Sant’Ilario d’Enza (RE), 13 March 2012 Giovanni Cavallini Chairman The manager responsible for drafting company accounting documents, Carlo Banci, declares, pursuant to the terms of section 2 article 154(2) of the Financial Services Act, that the accounting disclosures in the present document correspond to the contents of documents, the account books and the accounting entries. Sant’Ilario d’Enza (RE), 13 March 2012

Carlo Banci Manager responsible for drafting

company accounting documents

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Contents

Page

Composition of corporate bodies 3

Board of Directors' Report for 2011 5

Consolidated financial statements at 31/12/2011 31

Consolidated statement of financial position 32

Consolidated income statement 34

Comprehensive consolidated income statement 35

Consolidated cash flow statement 36

Statement of changes in shareholders' equity 38

Explanatory notes of financial statements 39

1. General Information 39

2. Scope of consolidation 39

3. Accounting principles 40 3.1 Reference Accounting Principles 40

3.1.1 Accounting principles, amendments and interpretations in force as from 1st January 2011 41

3.1.2 Accounting standards, amendments and interpretations not yet applicable and not adopted early by the group 41 3.1.3 New accounting principles and amendments taking effect as from 1 January 2011 but not relevant for the group 43 3.2 Consolidation principles 44 3.3 Sector information 45 3.4 Treatment of foreign currency transactions 45 3.5 Non-current assets held for sale and discontinued operations 46 3.6 Property, plant and equipment 46 3.7 Goodwill 47 3.8 Other intangible assets 47 3.9 Impairment of assets 48 3.10 Equity investments 49 3.11 Cash and cash equivalents 50 3.12 Current financial assets, receivables and other current assets 50 3.13 Derivative financial instruments 50 3.14 Inventories 51 3.15 Share capital and Treasury Shares 52 3.16 Interest-bearing financial payables 52 3.17 Liabilities for employee benefits 52 3.18 Income taxes 53 3.19 Provisions for risks and charges 53 3.20 Current trade liabilities, payables and other debts 54 3.21 Revenues 54

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Page

3.22 Costs 55

4. Financial risk management 55

5. Discontinued operations 56

6. Sector information 57

7. Acquisition of investments 61

8. Cash and cash equivalents 62

9. Trade receivables 62

10. Inventories 63

11. Derivative financial instruments 63

12. Assets held for sale 68

13. Other current assets 68

14. Property, plant and equipment 68

15. Goodwill 70

16. Other intangible assets 71

17. Other financial assets 72

18. Deferred tax assets and liabilities 73

19. Interest-bearing financial payables and bank payables 74

20. Other current liabilities 76

21. Provisions for risks and charges 76

22. Liabilities for employee benefits 77

23. Share capital 78

24. Reserves 84

25. Minority interests shareholders' equity 86

26. Other net revenues 87

27. Costs by nature 87

28. Directors' and statutory auditors' remuneration 87

29. Financial income and charges 88

30. Income taxes 88

31. Earnings per share 90

32. Information on financial assets and liabilities 91

33. Information on financial risks 92

34. Notes to the cash flow statement 97

35. Commitments 98

36. Transactions with related parties 98

37. Events occurring after the close of the year 101

Annex 1: Attestation of the consolidated financial statements pursuant to art. 81(3) of

Consob regulation no.11971 of 14 May 1999 as amended 102

Report of the board of statutory auditors on the consolidated financial statements 103

Auditing report on the consolidated financial statements 104

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Board of Directors

Giovanni Cavallini

Fulvio Montipò

Deputy Chairman and Executive Director

Paolo Marinsek Executive Director

Salvatore Bragantini Independent Director

Franco Cattaneo (a), (b) Independent Director

Sergio Erede

Non-executive Director

Giuseppe Ferrero Non-executive Director

Giancarlo Mocchi (a)


Marco Reboa (a), (b) Independent Director

Giovanni Tamburi (b)


Board of Statutory Auditors

Enrico Cervellera

Chairman

Achille Delmonte Statutory Auditor

Paolo Scarioni

Statutory Auditor

Independent Auditors

PricewaterhouseCoopers S.p.A.

(a) Member of the Audit Committee

(b) Member of the Remuneration Committee

Chairman

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Board of Directors' Report for 2011

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Financial Highlights of the Interpump Group

31/12/2011 (continuing operations) 31/12/2010 31/12/2009

31/12/2008 31/12/2007

(€/000) (€/000) (€/000) (€/000) (€/000)

Consolidated net revenues 472,291 424,925 342,924 424,513 432,195

Foreign sales 84% 80% 79% 80% 79%EBITDA (Earnings before interest, tax, depreciation and amortization) 94,667 74,100 46,856 86,986 94,255

EBITDA % 20.0% 17.4% 13.7% 20.5% 21.8%

Consolidated operating profit 75,685 54,689 29,194 75,666 82,231

Operating profit % 16.0% 12.9% 8.5% 17.8% 19.0%

Consolidated net profit 43,632 27,381 13,980 40,161 42,913

Cash flow from operations 39,007 64,749 69,594 38,088 44,698

Net financial indebtedness (a) 145,975 (a) 147,759 (a) 201,833 (a) 228,264 186,173

Consolidated shareholders' equity 315,160 291,459 242,796 177,951 147,131

Debt/Equity ratio 0.46 0.51 0.83 1.28 1.38Net capital expenditure for the year

in tangible and intangible fixed assets 18,759 12,167 12,484 18,793 13,831

Average number of employees 2,439 2,492 2,427 2,036 1,882

ROE 13.8% 9.4% 5.8% 22.6% 29.2%

ROCE 16.4% 12.5% 6.6% 18.6% 23.5%

EPS - € 0.451 0.284 0.187 0.545 0.567

Dividend per share - € 0.120 0.110 - - 0.430*** The results illustrated in the table above are based on the consolidated accounts prepared in accordance with international accounting standards (IFRS) for the years ending 31/12/2004 up to and including 31/12/2011, while figures for the other years are based on consolidated accounts prepared according to Italian accounting standards. ROE: (Net profit + amortization, depreciation and write-downs of goodwill + minority interests) / Consolidated net equity.

Adjustments to net profit were made exclusively to statements prepared in accordance with Italian accounting standards. For

ROE measurement purposes, the net profit value for 2005 is net of capital gains on discontinued operations.

ROCE: Operating profit / (Consolidated shareholder's equity + Financial indebtedness – Treasury stock). In 2007 the denominators

also included the payment of an extraordinary dividend for €/000 16,594. Adjustments of treasury stock were made

exclusively to financial statements prepared in accordance with Italian accounting standards.

EPS: (Earnings per share adjusted for the amortization and write-down of goodwill). Adjustments to amortization, depreciation

and write-downs of goodwill were applied exclusively to financial statements prepared in accordance with Italian

accounting standards.

Dividends refer to the year of formation of the distributed profit.

* 0.200 of which extraordinary

** 0.690 of which extraordinary

*** 0.230 of which extraordinary

(a) inclusive of the debt related to the acquisition of investments.

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31/12/2006

31/12/2005 (continuing operations) 31/12/2004 31/12/2003 31/12/2002

(€/000) (€/000) (€/000) (€/000) (€/000)

Consolidated net revenues 364,876 331,608 531,745 501,721 492,939

Foreign sales 76% 74% 76% 79% 76%EBITDA (Earnings before interest, tax, depreciation and amortization) 79,144 67,985 77,329 75,267 84,524

EBITDA % 21.7% 20.5% 14.5% 15.0% 17.1%

Consolidated operating profit 69,715 57,384 60,488 59,181 69,208

Operating profit % 19.1% 17.3% 11.4% 11.8% 14.0%

Consolidated net profit 41,592 27,074 19,726 14,253 21,085

Cash flow from operations 37,876 31,705 17,493 35,474 51,563

Net financial indebtedness 137,464 127,701 211,633 205,616 175,408

Consolidated shareholders' equity 155,888 156,679 179,855 173,797 193,362

Debt/Equity ratio 0.88 0.82 1.18 1.18 0.91

Net capital expenditure for the year in tangible and intangible fixed assets 13,066 8,100 18,008 19,527 34,359

Average number of employees 1,617 1,589 2,360 2,363 2,468

ROE 26.6% 17.3% 11.0% 15.7% 18.4%

ROCE 23.8% 20.2% 15.4% 17.1% 20.4%

EPS - € 0.542 0.363 0.322 0.315 0.398

Dividend per share - € 0.180 0.840** 0.130 0.120 0.310*

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MAIN EVENTS OF THE YEAR 2011 confirmed the recovery in sales and profitability that began in March 2010. Sales of continuing operations rose by 18.0% to €472.3 million. The Industrial Sector surpassed the highest levels of the pre-recession period with 15.5% growth, while the Hydraulic Sector, which had suffered a far more significant downturn, rose to around 80% of the sales recorded prior to the economic crisis. The reason for this difference is connected with the fact that the Hydraulic Sector is mainly driven by the sale of industrial vehicles in a market that has been particularly hard-hit by the slump in the building construction sector, which has yet to display any significant signs of growth – at least on European markets – after the crisis. Despite this background, in 2011 the Hydraulic Sector grew by 20.8% on the heels of the promising performance in 2010, when the sector achieved growth of 27.1%. A major contribution to recovery came from BRIC countries (Brazil, Russia, India and China), which together recorded growth of 48.2%. Although volumes remain modest (sales in 2011 totalled €43.5 million), the overall incidence on consolidated sales rose from 7.3% to 9.2%. We can therefore see that the initiatives undertaken in India, and especially in China in recent years, are starting to generate rewards. In addition, to strengthen its competitive position in Brazil, on 15 February 2012 the Group acquired 100% of Takarada, a Brazilian manufacture of power take-offs and other hydraulic components, as illustrated in greater detail below. The Group retained all the initiatives undertaken in 2009 and 2010 aimed at cutting back on costs and ensuring rigorous control of working capital and expenditure, as described in the Board of Directors' Report accompanying the consolidated financial statements at 31/12/2010. Thanks also to all the initiatives undertaken, EBITDA of continuing operations was up by 28.0% versus 2010, reaching €94.7 million (20.0% of sales), reflecting a rise of 1.5 percentage points. Comprehensive EBITDA (inclusive of the Electric Motors Sector) totalled €95.0 million. This is a record in the history of the Interpump Group, higher than the prior record of 2007 when the figure was €94.3 million, thus confirming the solidity of the Group's competitive positions, which have made it possible to achieve this result in a period like the present, in which the macroeconomic outlook is uncertain in the extreme. From the standpoint of liquidity management we continued to focus attention on the control of working capital; this said, the significant level of growth recorded in sales volumes resulted in absorption of liquidity of continuing operations in the measure of €21.4 million, after the actions taken in 2009 and 2010 had served to generate liquidity from the management of working capital, respectively, of €44.7 million and €5.5 million. Since April, 2011 data also include American Mobile Power, which was acquired on 15 April 2011. American Mobile Power (AMP), headquartered in Fairmount (Indiana), is among the primary US manufacturers and sellers of tanks for industrial vehicle hydraulic systems, mainly constructed of aluminium and steel. The company's sales from 1 April to 31 December 2011 (nine months) totalled $7.7 million, while EBITDA totalled $1.5 million, equivalent to 19.6% of sales. The Group acquired 80% of American Mobile's shares for a total of $6.8 million, paid in cash. The remaining 20% will be acquired in April 2016 for a price based on the results achieved by the company in the two preceding years. The operations of AMP are highly synergistic with respect to the business of the Interpump Group's Hydraulic Division. In this context, Muncie Power Products, which is a wholly owned subsidiary of Interpump Group, is the US leader in power take-offs for industrial vehicles, and through the acquisition of American Mobile it has strengthened its position on the US market, expanding its product offering with AMP's tanks.

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The Group accentuated initiatives for external growth during the financial period. An outline agreement was signed on 11 July 2011 for the acquisition of Galtech. This transaction was closed on 31 January 2012. Headquartered in Reggio Emilia, Galtech is active in the production and sale of gear pumps and motors, directional control valves, hydraulic accessories, and general components. In 2011 company sales were €15.0 million, while adjusted EBITDA was negative in the amount of €0.3 million. The net financial indebtedness of the company as at 31 December 2011 was €1.7 million. The acquisition of 53% of Galtech's share capital was achieved for a total price of €3.3 million, paid half in cash and half with 300,831 Interpump Group S.p.A. treasury shares. The sellers are entitled to divest the remaining 47% from the date of approval of the 2014 financial statements until the date of approval of the 2025 financial statements. An outline agreement was signed on 28 November 2011 for the acquisition of MTC. This transaction was closed on 18 January 2012. Headquartered in the province of Reggio Emilia, MTC is active in the production and sale of directional control valves and a range of other hydraulic valves. In 2011 the company recorded sales of €5.7 million and EBITDA of €1.4 million, equivalent to 23.9% of sales. At 31 December 2011 the company held cash totalling €0.6 million. The acquisition of 60% of the share capital of MTC took place for a total cash payment of €3.0 million. The sellers are entitled to dispose of the remaining 40% from the date of approval of the 2014 financial statements until the date of approval of the 2025 financial statements. The operations of Galtech and MTC are highly synergic with respect to the business of the Interpump Group's Hydraulic Division. In this context, it should be noted that Interpump Hydraulics S.p.A., a 100% owned subsidiary of Interpump Group S.p.A, is the world leader in power take-offs for industrial vehicles and through the acquisitions of Galtech and MTC, it has strengthened its market position, broadening its product offering. On 2 November 2011 the Group acquired the remaining 49% of the subsidiary AVI S.r.l. for €1,350 thousand, of which €270 thousand paid at the same time as the acquisition of the holdings with the remainder to be settled in four annual instalments of €270 thousand each. Therefore since that date the Group has held 100% of AVI s.r.l. An outline agreement was signed on 21 December 2011 for the acquisition of Takarada. This transaction was closed on 15 February 2012. Takarada, with registered office in Caxias do Sul (Brazil – the state of Rio Grande do Sul ), is a leading manufacturer and seller of power take-offs and related hydraulic components for industrial vehicles. In 2011 the company recorded sales of 17.9 million Reais (€8.0 million) and EBITDA of 3.3 million Reais (€1.5 million), equivalent to 18.6% of sales. Acquisition of 100% of the share capital of Takarada occurred for a total cash payment of 29.0 million Reais (€12.9 million), including received financial indebtedness. The business of Takarada is highly synergic with respect to the business of the Interpump Group's Hydraulic Division. With the acquisition of Takarada, the Interpump Group lays the groundwork for substantial growth of the Hydraulic Sector in Brazil, currently on the verge of allocating significant funds to the development of infrastructure in the coming years, also thanks to its selection as the host of forthcoming top international sporting events (Football World Cup and the Olympics). In addition, a new company, Interpump Hydraulics Middle East FZCO with registered office in Dubai, was incorporated on 19 December 2011. The company, which is held in the measure

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of 50% by Interpump Hydraulics S.p.A. and 50% by HS Penta S.p.A., was created with the aim of obtaining a local distributor able to achieve more effective market penetration. The incorporation of this company forms part of the Group's strategy of growth in areas with the greatest potential and fastest rate of development. On 26 September 2011 Interpump Group divested its 70% stake in Unielectric, a company active in the production of windings and electric motors for a price of €3.5 million. This amount was paid in cash on the execution date in the quantity of one third (€1.2 million) while a further third will be paid within 15 December 2012 and the final third will be settled within 15 December 2013. The extended payments are secured by bank guarantees. Unielectric was sold because Interpump Group no longer considered the investment to be strategic in the framework of the business sectors of the Group, which is currently focused in the Industrial Sector (high and very high-pressure water pumps) and the Hydraulic Sector (power take-offs, hydraulic pumps, cylinders and other hydraulic components). With the sale of Unielectric the Interpump Group has therefore withdrawn from the Electric Motors Sector. The sale, which complied with the requirements of IFRS 5 and the most recent orientations of international accounting principles, has been represented in this report as a Discontinued Operation and it is the only one of its kind in the period.

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EBITDA* = EBIT + Depreciation/Amortization + Provisions ROCE = EBIT/ Capital employed ROE = Consolidated profit for the period / Consolidated shareholders' equity

* = Since EBITDA is not identified as accounting measure in the context of the Italian accounting principles nor in the context of the international accounting standards (IAS/IFRS), the quantitative determination of EBITDA may not be unequivocal. EBITDA is a measure utilized by the company to monitor and assess operating performance. EBITDA is considered by the management as a significant parameter for company performance assessment since it is not influenced by the effects of different criteria for determination of taxable income, amount and characteristics of employed capital and related amortization policies. The criterion for the determination of EBITDA applied by the company may differ from that used by other companies/groups and hence the value of this parameter may not be directly comparable with the EBITDA values disclosed by said other companies/groups.

Consolidated income statement for the year 2011 2010

(€/000) Continuing operations

Discontinuedoperations Total

Continuingoperations

Discontinued operations Total

Net sales 472,291 21,029 493,320 400,144 24,781 424,925Cost of sales (294,661) (19,187) (313,848) (250,207) (22,429) (272,636)

Gross industrial margin 177,630 1,842 179,472 149,937 2,352 152,289% on net sales 37.6% 36.4% 37.5% 35.8%

Other operating revenues 7,570 307 7,877 6,735 213 6,948Distribution costs (46,066) (492) (46,558) (40,709) (631) (41,340)General and administrative

expenses (60,372) (1,549) (61,921) (59,687) (2,091) (61,778)Other operating costs (3,077) (28) (3,105) (1,394) (36) (1,430)

EBIT 75,685 80 75,765 54,882 (193) 54,689% on net sales 16.0% 15.4% 13.7% 12.9%

Financial income 6,365 12 6,377 5,626 30 5,656Financial charges (15,032) (37) (15,069) (14,772) (80) (14,852)Adjustment of value of

investments carried at equity (367) - (367) 147 - 147Profit for the period before

taxes 66,651 55 66,706 45,883 (243) 45,640

Income taxes (23,019) (34) (23,053) (18,187) (72) (18,259)Profit for the period after

taxes and before capital loss on discontinued operations 43,632 21 43,653 27,696 (315) 27,381

Capital loss on discontinued operations - (1,068) (1,068) - - -

Consolidated profit for the 43,632 (1,047) 42,585 27,696 (315) 27,381% on net sales 9.2% 8.6% 6.9% 6.4%

Due to: Parent company shareholders 42,370 (1,138) 41,232 26,853 (344) 26,509Subsidiaries' min.shareholders 1,262 91 1,353 843 29 872

Consolidated profit for the period 43,632 (1,047) 42,585 27,696 (315) 27,381

EBITDA 94,667 320 94,987 73,938 162 74,100% on net sales 20.0% 19.3% 18.5% 17.4%

Shareholders' equity 315,160 315,160 291,459 291,459

Net financial indebtedness 126,963 126,963 126,122 126,122

Payables for acq. investments 19,012 19,012 21,637 21,637

Capital employed 461,135 461,135 439,218 439,218

ROCE 16.4% 16.4% 12.5% 12.5%ROE 13.8% 13.5% 9.5% 9.4%Basic earnings per share 0.451 0.439 0.288 0.284

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NET SALES

Continuing operations Net sales in 2011 totalled €472.3 million, up by 18.0% compared to 2010, when sales were €400.1 million. On a like for like basis growth was 16.7%, a figure that rises to 18.8% net of exchange differences. The breakdown of sales by business sector and geographical area is as follows: (€/000)

2011 ItalyRest of Europe

North America Pacific Area

Rest of the World Total

Hydraulic Sector 57,039 60,161 62,979 10592 39,150 229,921Industrial sector 19,688 73,445 92,007 39,668 17,562 242,370Total continuing operations 76,727 133,606 154,986 50,260 56,712 472,291

2010

Hydraulic Sector 51,281 50,003 47,598 6,256 35,175 190,313Industrial sector 19,368 60,303 81,031 32,579 16,550 209,831Total continuing operations 70,649 110,306 128,629 38,835 51,725 400,144

2011/2010 percentage change

Hydraulic Sector +11.2% +20.3% +32.3% +69.3% +11.3% +20.8%Industrial sector +1.7% +21.8% +13.5% +21.8% +6.1% +15.5%Total +8.6% +21.1% +20.5% +29.4% +9.6% +18.0% Sales in the Hydraulic Sector were up by 20.8% (+18.1% on a like for like basis). Sales of US companies increased by 38.3% in dollar on dollar terms (+27.8% on a like for like basis); translated into euro the increase was 31.6% (+21.7% on a like for like basis). Sales of the other companies in the Hydraulic Sector rose by 16.7% with respect to the figure for 2010. Turnover for the Industrial Sector was up by 15.5% at €242.4 million. The following table gives a breakdown of Industrial Sector sales by product type. 2011

(€/000)2010

(€/000) Growth/

ContractionHigh-pressure pumps 82,090 75,429 +8.8%Very high-pressure systems 148,427 122,366 +21.3%Other 11,853 12,036 -1.5%Total 242,370 209,831 +15.5%

The "other" item refers to cleaning machinery and machinery for sheet metal drawing, blanking and pressing. Discontinued operations The income statement for discontinued operations represents exclusively the contribution of the Electric Motors Sector to the consolidated total; indeed, sales made by the Electric Motors Sector to Interpump Group S.p.A. and its subsidiaries are not shown among discontinued operations because the aim of the income statement is to represent the situation of the Interpump Group after the divestment of Unielectric. Therefore the discontinued operations column does

15

not present pro forma figures, and nor is it representative of the marginality of the Electric Motors Sector. PROFITABILITY

Continuing operations It should be noted that the income statement for 2011 reflects various non-recurring revenues and costs which largely offset each other so EBITDA and EBIT were unaffected. Non-recurring income took the form of a capital gain of €1.2 million included under Other Operating Revenues and related to the sale of a building classified under assets held for sale. Non-recurring costs were composed of allocations of extraordinary amount although not of exceptional nature, made to the allowance for inventories and to the bad debt provision on the basis of prudential evaluations of certain specific contingencies. The allocations to the allowance for inventories however had a negative impact on the gross industrial margin in the measure of 0.2 percentage points, which were subsequently recovered in terms of EBIT and EBITDA. The cost of sales accounted for 62.4% of turnover (62.5% in 2010). Production costs totalled €102.3 million (€90.1 million in 2010), equivalent to 21.7% of sales (22.7% in 2010). The purchase costs of raw materials and components sourced on the market, including changes in inventories, totalled €192.4 million (€159.4 million in 2010). The incidence of purchase costs, including changes in inventories, was 40.7% compared to 39.8% in 2010. The effects of the consolidation of American Mobile are not significant. On a like for like basis distribution costs rose by 12.3% with respect to 2010, while the relative incidence on sales fell by 0.4 percentage points. General and administrative expenses rose by 0.5% like for like with respect to 2010, although their incidence on sales fell by 2.1 percentage points. In 2010 general and administrative expenses were influenced by the recognition of costs for stock options relative to the fourth tranche of the 2006/2009 plan (allocation of 1,100,000 options exercisable from 1 July 2010) and the recalculation of the exercise prices of options already allocated in prior years and not yet exercised, further to the share capital increase. The foregoing costs of a one-off basis totalled €1.2 million. General and administrative expenses, net of the said non-recurring one-off amount were 2.4% higher than in 2010, like for like. Overall payroll costs of continuing operations were €106.7 million (€98.1 million in 2010) for an average headcount is 2,439 (there were 2,349 employees of companies within continuing operations, hence excluding Unielectric, in 2010; the figure rises to 2,492 if Unielectric is included). The increase in the average number of employees is due, in the number of 38, to the consolidation of American Mobile, which was not present in 2010. For calculation of the average number we draw your attention to the fact that the employees of American Mobile were considered only for the period of consolidation and hence by three quarters. On a like for like basis payroll costs were up by 7.4%, with an increase of 53 in the number of personnel (+2.2%) and a 5.0% increase in the average per-capita cost. The increase in the average headcount can be broken down as follows: -17 in Europe, +63 in the US (of which 38 due to the consolidation of American Mobile, so the increase was 25 staff on a like for like basis) and +45 in the Rest of the World (China, India, Chile and Australia). The increase in the per-capita cost is due to the reduced recourse to social shock absorbers, the greater use of overtime to cope with higher sales volumes, and also contractual salary raises and bonus awards for the achievement of targets.

16

EBITDA stood at €94.7 million or 20.0% of sales, compared to the €73.9 million of 2010 which accounted for 18.5% of sales (+28.0% and +26.6% on a like for like basis). The following table shows EBITDA for each business sector:

2011

(€/000)

% on total

sales*2010

(€/000)

% on total sales* Growth/

Contraction

Hydraulic Sector 32,871 14.3% 23,607 12.4% +39.2%Industrial Sector 60,664 25.0% 50,347 23.9% +20.5%Other Revenues Sector 1,132 n.s. (16) n.s. n.s.Total 94,667 20.0% 73,938 18.5% +28.0%

* = Total sales also include sales to other group companies, while the sales analysed previously are exclusively those external to the group (see 6 in the notes). Therefore, for the purposes of comparability the percentage is calculated on total sales rather than the sales shown earlier.

On a like for like basis Hydraulic Sector EBITDA totalled €31.8 million (14.1% of sales), up by 34.7% compared to 2010. EBIT totalled €75.7 million or 16.0% of sales, compared to the €54.9 million in 2010 (13.7% of sales), reflecting an increase of 37.9%. EBIT was up by 36.3% like for like, reaching €74.8 million (16.0% of sales). The tax rate for 2011 was 34.5% compared to the 2010 rate of 39.6%. The reduction is due to the greater profitability that is reflected in a lower incidence of IRAP and the recognition of deferred tax assets, hitherto unallocated, on tax losses of 1.4 million further to legislative amendments in the realm of IRES corporate income tax introduced in Italy in relation to the tax treatment of corporate losses, which in the group resulted in a change in the evaluation of the probability of being able to make use of said tax savings in the future. At the end of 2011 net profit from continuing operations stood at €43.6 million, equivalent to 9.2% of sales (€27.7 million in 2010), reflecting an increase of 57.5%. Basic earnings per share are up by 56.6% at €0.451 (€0.288 in 2010). No atypical and/or unusual transactions were carried out in 2011. Discontinued operations The capital loss on discontinued operations of €1.1 million, including ancillary expenses associated with the sale, is relative to the disposal of the investment in Unielectric. Therefore, consolidated net profit totalled 42.6 million euro.

17

CASH FLOW

The change in net financial indebtedness can be broken down as follows (the cash flows shown are total figures inclusive of continuing and discontinued operations): 2011

€/000 2010

€/000

Opening net financial position (126,122) (185,473)Cash flow from operations 60,785 54,620

Liquidity generated (absorbed) by the management of commercial working capital (24,143) 5,532

Liquidity generated (absorbed) by other current assets and liabilities 2,365 4,597

Net liquidity generated by operating activities 39,007 64,749Capital expenditure in tangible fixed assets (10,986) (6,808)

Proceeds from sales of tangible fixed assets 1,603 360

Capital expenditure in development costs and other intangible fixed assets (2,770) (2,300)

Received financial income 2,899 1,089

Other (953) (93)

Free cash flow of continuing and discontinued operations 28,800 56,997Acquisition of investments, including received financial indebtedness and net of

treasury stock assigned in payment

(4,824) (3,730)

Sale of investments 1,551 -

Portion of capital increase in subsidiary paid by the minority shareholder

- 300

Capital increase, net of ancillary expenses paid and including rights sold

31 3,526

Loans repaid by (granted to) non-consolidated subsidiaries 7 -

Dividends paid (10,768) (147)

Outlays for purchase of treasury stock (16,489) -

Proceeds from sale of treasury stock to beneficiaries of stock options 188 -

Cash flow generated (used) (1,504) 56,946Exchange rate differences 663 2,405

Net financial position at end of period (126,963) (126,122) Net liquidity from operating activities of continuing operations stood at €60.5 million, compared to the €54.4 million in 2010, reflecting a rise of 11.1%. Free cash flow of continuing operations was €31.0 million, compared to the €56.8 million of 2010. In 2011 a total of €21.4 million from commercial working capital was absorbed by continuing operations due to the steep growth recorded in the period. We draw your attention to the fact that working capital had been greatly reduced in both 2009 and 2010. The absorption of liquidity was caused primarily by the increase in volumes; customer payment days are substantially in line with the same parameter in 2010, while inventory days have actually decreased. Working capital of continuing operations was higher in percentage terms, in line with the rise in sales. At 31 December 2011 all financial covenants had been amply complied with.

18

The net cash position breaks down as follows: 31/12/2011 31/12/2010 01/01/2010

€/000 €/000 €/000

Cash and cash equivalents 109,068 138,721 85,361

Payables to banks (8,762) (7,751) (9,569)

Interest-bearing financial payables (current portion) (113,700) (125,374) (169,373)

Interest-bearing financial payables (non-current portion) (113,569) (131,718) (91,892)

Total (126,963) (126,122) (185,473) The group also has contractual commitments for the purchase of residual interests in subsidiaries totalling €19.0 million (€21.6 million at 31/12/2010). In target company acquisition processes it is Group strategy to purchase majority packages, signing purchase commitments for the residual stakes, the price of which is set in accordance with the results that the company is able to achieve in the subsequent years, thus guaranteeing on the one hand continuation of the historic company management and on the other hand maximizing the goal of increasing profitability. The situation at 31 December was as follows: 31/12/2011

€/000 31/12/2010

€/000

Debt for acquisition of residual stakes in Hydroven 210 406

Debt for acquisition of residual stakes AVI 1,006 -

Payables for the acquisition of 20% of American Mobile 2,315 -

Commitment to exercise options to sell on the shares of Interpump Hydraulics International S.p.A.

15,481 21,231

Total 19,012 21,637 On April 2008 a commitment was entered into for the acquisition of an additional 12% in Hydroven S.r.l., to be paid partly in cash and partly with an extended payment in fixed instalments. €210 thousand was paid in 2011, while the final portion will be paid in 2012. On 2 November 2011 the group acquired the remaining 49% of the subsidiary AVI S.r.l. for €1,350 thousand, of which €270 thousand paid at the same time as the acquisition of the holdings with the remainder to be settled in four annual instalments of €270 thousand each. The debt was discounted to current value to take account of the time factor. The contract for the acquisition of an 80% stake in American Mobile envisages the purchase of the remaining 20% in April of 2016 on the basis of the results achieved by the company in the two preceding years. We therefore proceeded to estimate the expected debt on the basis of a business plan. The debt was discounted to current value to take account of the time factor. Commitments for the purchase of shares of Interpump Hydraulics International S.p.A. refer to the valuation of the put options recognized for minority shareholders of the company, which allow them to sell their holdings to Interpump Hydraulics S.p.A. on the basis of a price that will depend on the results achieved in the two years prior to the sale. We therefore proceeded to evaluate this commitment on the basis of a business plan. Debts for the acquisition of investments were discounted to current value taking into account the time factor. The change compared to 31/12/2010 is due to the revision of the business plans and the early exercise of several options on the shares of Interpump Hydraulics International, which were originally exercisable with the approval of the financial statements at 31 December 2011. In compliance

19

with the terms of the new agreement, the options were exercised on 6 September 2011. In return for 11% of the capital of Interpump Hydraulics International S.p.A. 1,074,286 shares of Interpump Group S.p.A. were transferred to the shareholders in question. The value of the options, established on the basis of the original agreement calculated in accordance with the average of Interpump Hydraulics International's consolidated results for 2010 and 2011 and in the eventuality that the option be exercised at the first useful exercise date, totalled €5.2 million on 6 September 2011; the treasury shares assigned in payment, valued at the average price at which the shares were purchased by Interpump Group S.p.A., totalled €4.7 million. After execution of the agreement the group holds 81.61% of Interpump Hydraulics International.

GROUP BALANCE SHEET The following balance sheet is reclassified in relation to cash flows obtained/used: 31/12/2011

(€/000)% 31/12/2010

(€/000) %

Trade receivables 95,912 88,536

Net inventories 117,021 108,004

Other current assets 15,302 14,043

Accounts payable to suppliers (57,962) (61,732)

Short-term tax payables (8,552) (8,125)

Short-term portion for provisions for risks and charges (2,851) (2,243)

Other short-term liabilities (24,476) (22,247)

Net operating working capital 134,394 29.1 116,236 26.5

Net intangible and tangible fixed assets 126,339 127,016

Goodwill 213,400 209,655

Other financial fixed assets 3,424 3,399

Other non-current assets 17,564 15,596

Liabilities for employee benefits (9,698) (10,225)

Medium/long-term portion for provisions for risks and charges (1,720) (1,856)

Other medium/long-term liabilities (22,568) (20,603)

Total net fixed assets 326,741 70.9 322,982 73.5

Total capital employed 461,135 100 439,218 100

Financed by:

Shareholders' equity for the group 309,697 284,282

Minority interests 5,463 7,177

Total shareholders' equity 315,160 68.3 291,459 66.4

Cash and cash equivalents (109,068) (138,721)

Payables to banks 8,762 7,751

Short-term interest-bearing financial payables 113,700 125,374

Short-term payable for purchase of investments 473 209

Total short-term financial payables 13,867 3.0 (5,387) (1.2)

Medium/long-term interest-bearing financial payables 113,569 131,718

Medium/long-term payable for purchase of investments 18,539 21,428

Total medium/long-term financial payables 132,108 28.7 153,146 34.8

Total sources of financing 461,135 100 439,218 100

20

The Interpump Group's equity structure is balanced, with a leverage index of 0.46 (0.51 at 31 December 2010). The leverage index is calculated as the ratio between the short and medium/long-term financial payables and shareholders' equity inclusive of minority interests. The leverage measured at 31 December 2011 was the lowest since the year on which the group was listed on the Stock Exchange in 1996. Capital employed increased from €439.2 million at 31 December 2010 to €461.1 million at 31 December 2011. ROCE for continuing operations was 16.4% (12.5% in 2010). ROE for continuing operations stood at 13.8% (9.5% in 2010).

CAPITAL EXPENDITURE Expenditure in property, plant and equipment totalled €16.5 million, of which €0.6 million through the acquisition of American Mobile (€9.8 million in 2010). We point out that the companies belonging to the very-high pressure systems segment record machinery manufactured and hired out to customers under tangible fixed assets (€3.7 million at 31/12/2011 and €2.2 million at 31/12/2010). Net of these latter amounts and expenditure related to the acquisition of equity investments, actual capital expenditure stood at €12.2 million in 2011 (€7.6 million at 31/12/2010) and refers to the normal renewal and modernization of plant, machinery and equipment. The difference with respect to the expenditure recorded in the cash flow statement is due to the dynamics of payments. Increases in intangible fixed assets were €3.8 million, of which €1.0 million through the acquisition of American Mobile (€2.3 million in 2010), and they mainly refer to expenditure for the development of new products, while the increases of American Mobile are mainly related to the enhancement of the trademark deriving from the acquisition of a line of business.

RESEARCH AND DEVELOPMENT

The Research and Design Centre (Interpump Engineering S.r.l.), set up to centralize design and development of new products in high pressure pumps, hydraulic pumps and hydraulic components, completed a new family of high pressure pumps and a new family of hydraulic pumps in 2011, in addition to two new valves. There are also several projects currently underway to design new high and very-high pressure pumps, valves for the industrial sector, and hydraulic pumps. Research and development was conducted primarily within Interpump Hydraulics for the Hydraulic Sector and in Hammelmann for very high pressure pumps and systems. Group strategy over the next few years is to continue with high levels of expenditure in the area of research and development in order to impart renewed impetus to structured growth. Research costs have been capitalized in accordance with their multi-annual usefulness. The development costs capitalized in 2011 amount to €/000 2,434 (€/000 2,044 in 2010), while the costs charged to the income statement were €/000 6,846 (€/000 6,825 in 2010).

ENVIRONMENT The Interpump Group is engaged exclusively in mechanical engineering and components assembly activities that are not accompanied by the emission of pollutants into the environment. The production process is performed in compliance with statutory legislation.

21

EXPOSURE TO RISKS, UNCERTAINTIES AND FINANCIAL RISK FACTORS The group is exposed to the normal risks and uncertainties of any business activity. The markets in which the group operates are world niche markets with limited dimensions and few significant competitors. These market characteristics constitute a significant barrier preventing the ingress of new competitors due to significant scale effects against the backdrop of relatively uncertain economic returns for potential new entrants. The Interpump Group enjoys a position of world leadership in the fields of high and very-high pressure pumps and hydraulic components, both positions accentuating the risks and uncertainties of the entrepreneurial venture.

The financial risk factors are described in note 4 of the consolidated financial statements.

CORPORATE GOVERNANCE AND EXERCISE OF WARRANTS In relation to corporate governance, Interpump Group's model is based on the provisions of the Code of Corporate Governance promoted by Borsa Italiana S.p.A., published in March 2006, to which Interpump Group adhered. This report can be consulted on the group website www.interpumpgroup.it in the Investor Relations/Corporate Governance sector. October 2011 saw the end of the second exercise period of the Interpump Group warrants; 10,464 warrants were exercised during the period, and consequently 6,431 newly issued shares were subscribed, for an equivalent value of €31 thousand. There are therefore 18,446,168 outstanding warrants exercisable in October 2012 by underwriting 59 newly issued shares for each 96 warrants at a price of €5.10. The following table provides information on the number of shares held by the directors and statutory auditors, as required by art. 79 of CONSOB Resolution no.11971/1999 (“Issuers' Code”):

Number Number of shares of shares Number held held of shares Number at end of Company at end of Purchased/or of shares year

Name issuer prior year subscribed sold in progress

Giovanni Cavallini

Held directly Interpump

Group S.p.A.1,088,800 - (300,000) 788,800

Fulvio Montipò


Group S.p.A.152,640 - - 152,640

Paolo Marinsek


Group S.p.A.- 50,000 (50,000) -

Salvatore Bragantini:


Group S.p.A.- 18,500 - 18,500

Franco Cattaneo:


Group S.p.A.43,175 10,000 - 53,175

22

Information concerning possession of the warrants is given below:

Number Number of warrants of warrants held held Number Number at end of

Company at end of of warrants of warrants yearName issuer prior year exercised sold in progress

Giovanni Cavallini


Group S.p.A.232,880 - - 232,880

Fulvio Montipò


Group S.p.A.32,640 - - 32,640

On 26 July 2007 a series of shareholders together sold a total of 22.227% of the share capital of Interpump Group S.p.A. to a company designated Gruppo IPG Holding S.r.l. domiciled in Milan, and signed a Shareholders' Agreement concerning the representative portions of the entire share capital of Gruppo IPG Holding S.r.l. The Shareholders' Agreement contains constraints and limitations on the transfer of holdings and the purchase of shares, and agreements for the exercise of voting rights in Gruppo IPG Holding S.r.l. and in Interpump Group S.p.A. The Agreement came into force on 26/07/2007 and the term is the same as that of Gruppo IPG Holding S.r.l., which, on the basis of the current articles of association, will be automatically wound up on 31/03/2013, unless otherwise decided by the shareholders. At 31/12/2011 Gruppo IPG Holding S.r.l. held 26.6261% of the share capital including treasury stock held. The shareholders of Gruppo IPG Holding S.r.l. are composed of the Montipò family, MAIS S.p.A. (controlled by Ms Isabella Seragnoli), Tamburi Investment Partners, Gruppo Ferrero S.p.A., the Cavallini family and Sergio Erede. An excerpt from the Shareholders Agreement and from the Articles of Association of IGP Holding can be consulted on the company website at www.interpumpgroup.it.

STOCK OPTION PLANS To motivate Group management by promoting the goal of value creation for shareholders, there are currently three stock option plans: one approved by the Shareholders' Meeting of 16 April 2002 (2002/2005 plan), one by the Shareholders' Meeting of 20 April 2006 (2006/2009 plan), and one by the Shareholders' Meeting of 21 April 2010 (2010/2012 plan). The 2002/2005 plan is addressed to a number of directors and group employees and involves the assignment of up to 4,000,000 options, to be allocated over the next 4 years, using the company's treasury stock at an exercise price equal to the greater of the current market value at the time of allocation or the book value. Assignment depends on share prices reaching pre-established stock market quotations and/or the achievement of specific financial parameters and personal targets. At 31 December 2011 the situation of the plan was as follows: Number of rights assigned 3,944,700Number of shares purchased (3,304,850)Number of rights matured (53,000)Number of newly exercisable rights 16,000Total number of options not yet exercised 602,850

23

Options as yet unexercised are shown in the following table:

Price per share for the

exercise of options Exercising period

Number of rights assigned

Number of rights

matured in the year

Number of shares acquired

in the year

Number of options

exercisable

Directors of the Parent Company Fulvio Montipò € 5.6774 01.05.2006-31.12.2013 247,500 - - 247,500

Paolo Marinsek € 5.6774 01.05.2006-31.12.2013 178,000 - - 178,000

Other beneficiaries (employees) € 5.6774 01.05.2006-31.12.2013 177,350 - - 177,350

Total 602,850 - - 602,850

All the options were assigned in previous years. The 2006/2009 plan is addressed to a number of directors and group employees and involves the assignment of up to 4,000,000 options, to be allocated over the next 4 years, using the company's treasury stock at an exercise price equal to the greater of the current market value at the time of allocation or the book value. Assignment depends on share prices reaching pre-established stock market quotations and/or the achievement of specific financial parameters and personal targets. The options can be exercised after three years from the date of allocation. The beneficiaries of the options were:

Price per share for the

exercise of options Exercising period

Number of rights assigned

Number of rights

matured in the year

Number of shares acquired

in the year

Number of options

exercisable

Directors of the Parent Company

€ 7.2884 01.05.2010-31.05.2015 215,033 - - 215,033

€ 5.4047 01.05.2011-31.05.2016 215,191 - - 215,191

€ 3.7524 01.05.2012-31.05.2017 80,000 - - -

Giovanni Cavallini

€ 3.7524 01.05.2010-31.05.2017 300,000 - - 300,000

€ 7.2884 01.05.2010-31.05.2015 215,033 - - 215,033

€ 5.4047 01.05.2011-31.05.2016 215,191 - - 215,191

€ 3.7524 01.05.2012-31.05.2017 80,000 - - - Fulvio Montipò

€ 3.7524 01.05.2010-31.05.2017 300,000 - - 300,000

€ 7.2884 01.05.2010-31.05.2015 148,869 - - 148,869

€ 5.4047 01.05.2011-31.05.2016 148,979 - - 148,979

€ 3.7524 01.05.2012-31.05.2017 70,000 - - - Paolo Marinsek

€ 3.7524 01.05.2010-31.05.2017 150,000 - (50,000) 100,000

€ 7.2884 01.05.2010-31.05.2015 218,000 - - 218,000

€ 5.4047 01.05.2011-31.05.2016 248,000 - - 248,000

€ 3.7524 01.05.2012-31.05.2017 45,000 - - -

Other beneficiaries (employees)

€ 3.7524 01.07.2010-31.12.2017 350,000 - - 350,000

Total 2,999,296 - (50,000) 2,674,296

The Shareholders' Meeting of 21 April 2010 approved the adoption of a new incentive plan designated “Interpump 2010/2012 Incentives Plan”. The plan, which is based on the free

24

assignment of options that grant the beneficiaries the right, on the achievement of specified objectives, to (i) purchase or subscribe the Company’s shares up to the maximum number of 3,000,000 or, (ii) at the discretion of the Board of Directors, receive the payment of a differential equivalent to any increase in the market value of the Company’s ordinary shares. Beneficiaries of the plan can be employees or directors of the Company and/or its subsidiaries, identified among the subjects with significant roles or functions. The exercise price has been set at € 3.75 per share. The options can be exercised between 30 June 2013 and 31 December 2016. The next meeting of the Board of Directors held on 21 April 2010 set a figure of 3,000,000 for the maximum number of options assignable for each tranche (750,000 for the first tranche, 1,050,000 for the second tranche and 1,200,000 for the third tranche) and established the terms for the assignment of the options that are connected to the achievement of specific accounts parameters and the performance of the Interpump Group share. The same Board of Director's meeting assigned 1,000,000 options to Interpump Group S.p.A. directors Mr Cavallini and Mr Montipò and 320,000 to Mr. Paolo Marinsek, the exercise of which is subject to the fulfilment of the above conditions. In addition, the same Board of Directors' meeting assigned 680,000 options, granting a separate mandate to the Interpump Group Chairman, Deputy Chairman and Chief Executive Officer to identify the beneficiaries from among the employees, directors and collaborators of the group. In July 2010 the beneficiaries were chosen for 540,000 assigned options, while the beneficiaries of 140,000 options are yet to be identified. The Board of Directors' meeting of 15 March 2011, after having checked that the established goals have been accomplished, determined that the 2,299,440 options of the 2010/2012 incentive plan had now become exercisable. In particular, 804,000 options assigned to Giovanni Cavallini, 804,000 options assigned to Fulvio Montipò, 257,280 options assigned to Paolo Marinsek and 434,160 options assigned to other beneficiaries all became exercisable.

INTRA-GROUP RELATIONS AND RELATED PARTY TRANSACTIONS

With regard to transactions entered into with related parties, including intra-group transactions, we point out that they cannot be defined as either atypical or unusual, inasmuch as they form part of the normal course of activities of the group companies. These transactions are regulated at arm's length conditions, taking into account the characteristics of the assets transferred and services rendered. Information on relations with related parties, including the information required by CONSOB communication of 28 July 2006, is given in Note 36 to the consolidated financial statements. In its meeting held on 10 November 2010 the Board of Directors of Interpump Group S.p.A. approved the Procedure for Transactions with Related Parties in application of the new legislation enacted to implement the relevant European Council Directive and the relative Consob Regulation. For more details we invite you to refer to the report on corporate governance and the ownership structure, which is available on www.interpumpgroup.it in the section Investor Relations/Corporate Governance. In the meeting of 24 May 2011 the Board of Directors approved the sale of associated company Wuxi Weifu China-Italy Company Ltd for approximately 4.1 million Renminbi (around €0.4 million) to a shareholder and director of a consolidated company. The Related Party Transactions Committee issued its positive opinion in relation to the transaction in question.

25

TREASURY STOCK

Information on treasury stock is given in Note 23 of the Consolidated Financial statements.

RECONCILIATION WITH THE FINANCIAL STATEMENTS OF THE PARENT COMPANY Reconciliation of consolidated net equity and net profit ascribable to the Parent company's shareholders with those relative to the individual financial statements of the Parent company is as follows:

Shareholders' equity

Net profit

Shareholders' equity

at 31/12/2011 at 31/12/2011 at 31/12/2010

Parent Company's financial statements 182,185 7,968 195,089

Difference between the book value of consolidated investments and their valuation according to the equity method 128,171

32,592 90,524

Greater book value of a building owned by the Parent Company 208 (4) 212

Lower book value of a building owned by the Parent Company - 797 (797)

Elimination of Parent Company's intra-group income (867) (121) (746)

Total consolidation adjustments 127,512 33,264 89,193

Shareholders' equity and result ascribable to the Parent Company's shareholders 309,697

41,232 284,282

GROUP COMPANIES

At 31 December 2011 the Interpump Group was composed of a structure headed by Interpump Group S.p.A., which has direct and indirect controlling stakes in the capital of 37 companies (of which 2 winding up) operating in two business sectors (Hydraulic and Industrial). The Parent company, with registered offices in Sant’Ilario d’Enza, produces high and very-high pressure plunger pumps for water and high pressure cleaners, which are classified in the Industrial Sector. The main data of the consolidated subsidiaries is presented in the table below, whereas for the Parent Company this can be taken from the financial statements attached hereto. Relations with subsidiaries are conducted at arm's length conditions.

26

Fully consolidated companies

Share capital

(€/000)

Percent stake Head office

Main activity

Sales €/million

31/12/2011

Sales €/million

31/12/2010

Av. number of employees

2011

Av. number of employees

2010

Hammelmann Maschinenfabrik GmbH 25 100% Oelde - Germany High pressure systems and pumps (Industrial Sector) 74.5

60.3 275

267

Muncie Power Products Inc. 784 100% Muncie - USA Power take-offs and hydraulic pumps (Hydraulic Sector) 63.7

52.3

266

259

NLB Corporation Inc. 12 100% Detroit (USA) High pressure systems and pumps (Industrial Sector) 54.6

49.3

202

186

Interpump Hydraulics S.p.A. 2,632 100% Nonantola (MO) Power take-offs and hydraulic pumps (Hydraulic Sector) 51.6

51.5

309

320

General Pump Companies Inc. 1,854 100% Minneapolis – USA Distributor of high pressure pumps (Industrial Sector) 32.8

30.6

57

56

HS Penta S.p.A. 4,244 100% Faenza (RA) Production and sale of hydraulic cylinders (Hydraulic Sector) 22.9

19.3

145

159

Oleodinamica Panni S.r.l. 2,000 100% Tezze sul Brenta (VI) Production and sale of hydraulic cylinders (Hydraulic Sector) 20.4

16.4

115

108

Contarini Leopoldo S.r.l. 47 100% Lugo (RA) Production and sale of hydraulic cylinders (Hydraulic Sector) 19.7

18.1

99

106

Wuxi Interpump Weifu Hydraulics Company Limited

2,095 65% Wuxi - China Sales of hydraulic pumps and power take-offs and valves (Hydraulic Sector) 14.8

6.8

93

70

Hammelmann Corporation Inc. 39 100% Dayton (USA) Sale of high pressure systems and pumps (Industrial Sector) 14.3

10.9 24

22

Hammelmann Australia Pty Ltd 472 100% Melbourne (Australia) Sale of high pressure systems and pumps (Industrial Sector) 13.3

9.0

15

14

Hydrocar Chile S.A. 37 60% Santiago (Chile) Sales of hydraulic pumps and power take-offs (Hydraulic Sector) 11.2

9.2

52

43

Cover S.r.l. 41 100% Gazzo Veronese (VR) Production and sale of hydraulic cylinders (Hydraulic Sector) 10.5

7.3

50

54

Hydroven S.r.l. 200 100% Tezze sul Brenta (VI) Sales of complementary products for industrial vehicles, hydraulic pumps and power take-offs (Hydraulic Sector) 10.2

9.2

38

40

Interpump Hydraulics India Private Ltd 236 100% Hosur (India) Production and sales of power takeoffs and hydraulic pumps (Hydraulic Sector) 7.5

4.0

74

61

Modenflex Hydraulics S.r.l. 10 100% Modena Production and sale of hydraulic cylinders (Hydraulic Sector) 6.2

5.7

29

30

A.V.I. S.r.l. 10 100% Varedo (MI) Sales of complementary products for industrial vehicles, hydraulic pumps and power takeoffs (Hydraulic Sector) 5.8

5.6

14

14

American Mobile Inc. 3,410 80% Fairmont (USA) Production and sale of hydraulic cylinders (Hydraulic Sector) 5.5

* -

48

**

-

General Technology S.r.l. 100 100% Reggio Emilia Acc. for high-pressure pumps and high-pressure cleaners (Industrial Sector) 5.2

5.4

21

17

27

Fully consolidated companies

Share capital

(€/000)

Percent stake

Head office

Main activity

Sales €/million

31/12/2011

Sales €/million

31/12/2010

Average number of employees

2011

Average number of employees

2010

Interpump Hydraulics France S.a.r.l. 76 99.77% Peltre-Metz (France) Sales of hydraulic pumps and power takeoffs (Hydraulic Sector) 5.0

4.8

21

24

Hammelmann Pump System Co. Ltd 871 90% Tianjin (China) Sale of high pressure systems and pumps (Industrial Sector) 4.1

3.0

14

13

SIT S.p.A. 105 65% Sant'Ilario d'Enza (RE) Sheet metal drawing, blanking, and pressing (Industrial Sector) 3.5

3.6

25

26

Unidro S.a.r.l. 8 90% Barby (France) Production and sale of hydraulic cylinders (Hydraulic Sector) 3.3

2.7

9

8

Interpump Engineering S.r.l 76 100% Reggio Emilia Research and development (Other Revenues Sector) 2.9

2.6

16

16

Copa Hydrosystem Odd 3 90% Trojan (Bulgaria) Production and sale of hydraulic cylinders (Hydraulic Sector) 2.1

1.6

44

42

Golf Hydrosystem Odd (4) 3 90% Sofia (Bulgaria) Production and sale of hydraulic cylinders (Hydraulic Sector) 2.0

2.0

29

29

Hammelmann S. L. 738 100% Zaragoza - Spain Sale of high pressure systems and pumps (Industrial Sector) 1.7

2.3 5

5

Hydrocar Roma S.r.l. 10 70% Modena Sales of hydraulic pumps and power takeoffs (Hydraulic Sector) 1.5

1.5

3

2

Interpump Hydraulics International S.p.A.

14,162 81,61% Nonantola (MO) Cylinders Division Holdings (Hydraulic Sector) -

-

-

-

IKO Hydraulics S.r.l. (winding up) 11 100% Forlì Production and sale of hydraulic cylinders (Hydraulic Sector) -

0.7

-

-

Teknova S.r.l. (winding up) 362 100% Reggio Emilia Inoperative (Other Revenues Sector) - - - -

* = revenues for 9 months in 2011 - acquired on 15/04/2011; ** = average headcount over nine months in 2011.

28

Companies not fully consolidated

Share capital

(€/000)

Percent stake

Head office

Main activity

General Pump China 111 100% Ningbo - China Marketing of components (Industrial Sector)

Hammelmann Bombas e Sistemas Ltda 63 100% San Paolo - Brazil Sale of high pressure systems and pumps (Industrial Sector)

HS Penta Africa Pty Ltd 351 52% Johannesburg - South Africa

Production and sale of hydraulic cylinders (Hydraulic Sector)

Syscam Gestión Integrada S.A. 27 60% Conchalì - Chile Sales of hydraulic pumps and power takeoffs (Hydraulic Sector)

Interpump Hydraulics Middle East FZCO

205 100% Dubai Sale of hydraulic cylinders (Hydraulic Sector)

Hammelmann SNG 25 100% Rheda-Weidenbück - Germany

Inoperative (Industrial Sector)

29

EVENTS OCCURRING AFTER THE END OF THE YEAR AND BUSINESS OUTLOOK

The acquisitions of M.T.C, Galtech and Takarada were closed after year end, as more fully illustrated in “Events occurring since the close of the year”.

Considering the short span of time since 31 December 2011, due to the negative economic situation on world markets and the short period of time historically covered by the order portfolio, we do not yet have sufficient information to make a reliable forecast of trends in the current year, although we do envisage that 2012 will be substantially in line with or better than 2011. In any case, no other events occurred that are deserving of mention in this report.

FURTHER INFORMATION

In relation to the regulatory prescriptions concerning the condition for the listing of controlling companies incorporated or regulated in compliance with the laws of non-EU countries and of significant relevance in relation to the consolidated financial statements, we draw your attention to the fact that, with respect to 31 December 2010, Hammelmann Australia Pty Ltd. was added further its inclusion in the audit plan, even though it had not individually exceeded the limits established as at art. 151 of the Issuers' Code. Despite this situation, Hammelmann Australia Pty Ltd. was included in the audit plan in order to comply with the cumulative limits as per said art. 151.

It should be noted that the Parent Company is not subject to activities of management or coordination. The resolution of the Interpump Group S.p.A. Board of Directors of 12 June 2008 acknowledges that "Interpump Group S.p.A." is not subject to the management or coordination of the shareholder "Gruppo IPG Holding S.r.l." because:

the shareholder has no means or facilities for the execution of such activities, having no employees or other personnel capable of providing support for the activities of the board of directors;

the shareholder does not prepare the budgets or business plans of Interpump Group S.p.A.;

it does not issue any directives or instructions to its subsidiary, nor does it require to be informed beforehand or to approve either its most significant transactions or its routine administration;

there are no formal or informal committees or work groups in existence, formed of representatives of Gruppo IPG Holding and representatives of the subsidiary

Milan, 13 March 2012 For the Board of Directors Mr. Giovanni Cavallini Chairman of the Board of Directors

31

Consolidated Financial Statements as at 31/12/2011

Interpump Group S.p.A. and subsidiaries

32

Consolidated statement of financial position (€/000) Notes 31/12/2011 31/12/2010

ASSETS

Current assets Cash and cash equivalents 8 109,068 138,721Trade receivables 9, 32 95,912 88,536Inventories 10 117,021 108,004Tax receivables 4,425 5,277Derivative financial instruments 11, 32 - 375Assets held for sale 12 2,123 4,556Other current assets 13, 32 8,754 3,835Total current assets 337,303 349,304

Non-current assets Property, plant and equipment 14 102,777 103,121Goodwill 15 213,400 209,655Other intangible assets 16 23,562 23,895Other financial assets 17, 32 3,424 3,399Tax receivables 1,017 1,021Deferred tax assets 18 15,057 14,161Other non-current assets 1,490 414Total non-current assets 360,727 355,666Total assets 698,030 704,970

33

(€/000) Notes 31/12/2011 31/12/2010

LIABILITIES

Current liabilities Trade payables 9, 32 57,962 61,732Payables to banks 19, 32 8,762 7,751Interest-bearing financial payables (current portion) 19, 32 113,700 125,374Derivative financial instruments 11 2,006 2,651Taxes payable 8,552 8,125Other current liabilities 20, 32 22,943 19,805Provisions for risks and charges 21 2,851 2,243Total current liabilities 216,776 227,681

Non-current liabilities Interest-bearing financial payables 19, 32 113,569 131,718Liabilities for employee benefits 22 9,698 10,225Deferred tax liabilities 18 20,668 18,856Other non-current liabilities 20,439 23,175Provisions for risks and charges 21 1,720 1,856Total non-current liabilities 166,094 185,830Total liabilities 382,870 413,511 SHAREHOLDERS' EQUITY

Share capital 23 47,936 49,193Legal reserve 24 10,157 10,064Share premium reserve 24 64,719 74,427Reserve for measurement of hedging derivatives at fair value 24 (1,086) (1,730)Translation provision 24 (2,908) (8,196)Other reserves 24 190,879 160,524Shareholders' equity for the group 309,697 284,282Minority interests 25 5,463 7,177Total shareholders' equity 315,160 291,459Total shareholders' equity and liabilities 698,030 704,970

34

Consolidated income statement 2011 2010

(€/000)

Notes Continuing

operationsDiscontinued

operations TotalContinuing operations


Net sales 472,291 21,029 493,320 400,144 24,781 424,925Cost of sales 27 (294,661) (19,187) (313,848) (250,207) (22,429) (272,636)

Gross industrial margin 177,630 1,842 179,472 149,937 2,352 152,289

Other net revenues 26 7,570 307 7,877 6,735 213 6,948Distribution costs 27 (46,066) (492) (46,558) (40,709) (631) (41,340)General and administrative

expenses

27, 28

(60,372) (1,549) (61,921) (59,687) (2,091) (61,778)Other operating costs 27 (3,077) (28) (3,105) (1,394) (36) (1,430)

Ordinary profit before financial charges

75,685 80 75,765 54,882 (193) 54,689

Financial income 29 6,365 12 6,377 5,626 30 5,656Financial charges 29 (15,032) (37) (15,069) (14,772) (80) (14,852)Adjustment of the value of

investments carried at equity

(367) - (367) 147 - 147

Profit for the period before taxes

66,651 55 66,706 45,883 (243) 45,640

Income taxes 30 (23,019) (34) (23,053) (18,187) (72) (18,259)

Profit for the period after taxes and before capital loss on discontinued operations

43,632 21 43,653 27,696 (315) 27,381

Capital loss on discontinued operations

- (1,068) (1,068) - - -

Consolidated profit for the period

43,632 (1,047) 42,585 27,696 (315) 27,381

Due to: Parent company shareholders 42,370 (1,138) 41,232 26,853 (344) 26,509Subsidiaries' minority

shareholders

1,262 91 1,353 843 29 872

Consolidated profit for the period

43,632 (1,047) 42,585 27,696 (315) 27,381

Basic earnings per share 31 0.451 0.439 0.288 0.284Diluted earnings per share 31 0.446 0.434 0.288 0.284

35

Comprehensive consolidated income statements 2011 2010

(€/000) Continuingoperations


Continuing operations


Consolidated profit (A) 43,632 (1,047) 42,585 27,696 (315) 27,381

Accounting of derivative financial instruments used to hedge the interest rate risk recorded in accordance with the cash flow hedging method:

- Profit (Loss) on derivatives for the period - - - - - -- Minus: Adjustment for reclassification of

profit (loss) in the income statement - - - - - -

- Minus: Adjustment for fair value recognition to reserves 1,283 - 1,283 (926) - (926)

Total 1,283 - 1,283 (926) - (926)

Accounting of derivatives to hedge the exchange risk recorded in accordance with the cash flow hedging method:

- Profit (Loss) on derivatives for the period (367) - (367) 61 6 67- Minus: Adjustment for reclassification of

profit (loss) in the income statement (61) (6) (67) 24 - 24

- Minus: Adjustment for fair value recognition to reserves - - - - - -

Total (428) (6) (434) 85 6 91

Profits (losses) arising from conversion to euro of foreign companies’ financial statements 5,344 - 5,344 12,338 - 12,338

Profits (losses) of companies carried at equity 18 - 18 40 - 40

Related taxes (208) 2 (206) 230 (2) 228

Profits (losses) recorded directly in equity (B) 6,009 (4) 6,005 11,767 4 11,771

Comprehensive consolidated profit (A) + (B) 49,641 (1,051) 48,590 39,463 (311) 39,152 Due to: Parent company shareholders 48,305 (1,141) 47,164 38,217 (341) 37,876Subsidiaries' minority shareholders 1,336 90 1,426 1,246 30 1,276

Consolidated profit for the period 49,641 (1,051) 48,590 39,463 (311) 39,152

36

Consolidated cash flow statement 2011 2010





Cash flow from operating activities

Earnings before taxes and capital losses on discontinued operations 66,651 55 66,706 45,883 (243) 45,640

Adjustments for non-cash items:

Capital losses (Capital gains) from the sale of fixed assets (1,928) (1) (1,929) (528) (11) (539)

Net Capital losses (Capital gains) from the sale of investments - - - (33) - (33)

Amortization and depreciation of intangible and tangible fixed assets 18,077 239 18,316 18,539 354 18,893

Costs ascribed to the income statement relative to stock options that do not involve monetary outflows for the group 962 34 996 2,176 104 2,280

(Profit) losses from investments 367 - 367 (147) - (147)

Net change of risk funds and allocations to provisions for employee benefits 612 (31) 581 (349) (4) (353)

Outlays for tangible fixed assets destined for hire (3,700) - (3,700) (2,225) - (2,225)

Proceeds from the sale of fixed assets granted for hire 2,250 - 2,250 1,426 - 1,426

Net financial charges 8,667 25 8,692 9,146 50 9,196

Other 180 - 180 (8) - (8)

92,138 321 92,459 73,880 250 74,130

(Increase) decrease in trade receivables and other current assets (14,452) 79 (14,373) (9,155) (2,951) (12,106)

(Increase) decrease in inventories (11,113) (1,005) (12,118) (3,372) 51 (3,321)

Increase (decrease) in trade payables and other current liabilities 5,887 (1,174) 4,713 22,377 3,179 25,556

Interest paid (8,702) (18) (8,720) (8,910) (46) (8,956)

Currency exchange gains realized (264) (3) (267) 596 (6) 590

Income taxes paid (22,687) - (22,687) (11,121) (23) (11,144)

Net liquidity generated by operating activities 40,807 (1,800) 39,007 64,295 454 64,749

Cash flows from investment activities Outlay for the acquisition of investments, net of

received cash and including the treasury shares transferred for payment (9,102) - (9,102) (7,117) - (7,117)

Proceeds from the sale of investments 1,551 - 1,551 43 - 43

Portion of capital increase of a subsidiary paid by the minority shareholder - - - 300 - 300

Capital expenditure in property, plant and equipment (10,644) (342) (10,986) (6,644) (164) (6,808)

Proceeds from sales of tangible fixed assets 1,591 12 1,603 331 29 360

Increase in intangible fixed assets (2,763) (7) (2,770) (2,279) (21) (2,300)

Received financial income 2,896 3 2,899 1,067 22 1,089

Other 139 (33) 106 - (102) (102)

Net liquidity generated (used) by investing activities (16,332) (367) (16,699) (14,299) (236) (14,535)

37

2011 2010





Cash flows of financing activity

Outlays for purchase of treasury stock (16,489) - (16,489) - - -

Proceeds from sale of treasury stock to beneficiaries of stock options 188 - 188 - - -

Treasury shares transferred for the acquisition of an equity investment 4,309 - 4,309 3,344 - 3,344

Capital increase net of ancillary expenses incurred and inclusive of rights received 31 - 31 3,526 - 3,526

Dividends paid (10,768) - (10,768) (147) - (147)

Disbursal (repayment of) loans (28,956) (7) (28,963) (2,157) (8) (2,165)

Disbursal of shareholder loans 346 - 346 - - -

Loan granted to a non-consolidated subsidiary 7 - 7 - - -

Payment of financial leasing instalments (principal portion) (2,379) - (2,379) (2,201) - (2,201)

Net liquidity obtained through (utilized in) financing activities (53,711) (7) (53,718) 2,365 (8) 2,357

Net increase (decrease) of cash and cash equivalents (29,236) (2,174) (31,410) 52,361 210 52,571

Exchange differences from the translation of the liquidity of companies in areas outside the EU 746 2,607 - 2,607

Cash and cash equivalents at the beginning of the period 130,970 73,772 2,020 75,792

Cash and cash equivalents at the end of the period 100,306 128,740 2,230 130,970

For reconciliation of cash on hand refer to note 34.

38

Statement of changes in shareholders' equity

(€/000) Share

capitalLegal

reserve

Share premium

reserve

Reserve for valuation of

hedging derivatives at

fair valueTranslation

provisionOther

reserves

Shareholders' equity for the

GroupMinority interests Total

Balances as at 1 January 2010 48,414 8,747 65,548 (1,122) (20,171) 135,332 236,748 6,048 242,796 Allocation of 2009 profit - 1,317 - - - (1,317) - - - Recording in the income statement of the fair value of the stock options assigned and

exercisable - - 2,280 - - - 2,280 - 2,280 Dividends paid - - - - - - - (147) (147) Capital increase following exercise of warrants 466 - 3,568 - - - 4,034 - 4,034 Disposal of treasury stock to pay debts for the acquisition of equity investments 313 - 3,031 - - - 3,344 - 3,344 Comprehensive profit (loss) for 2010 - - - (608) 11,975 26,509 37,876 1,276 39,152 Balances at 31 December 2010 49,193 10,064 74,427 (1,730) (8,196) 160,524 284,282 7,177 291,459 Allocation of 2010 residual profit - 93 - - - (93) - - - Recording in the income statement of the fair value of the stock options assigned and

exercisable - - 996 - - - 996 - 996 Purchase of treasury stock (1,845) - (14,644) - - - (16,489) - (16,489) Sale of treasury stock to the beneficiaries of stock options 26 - 162 - - - 188 - 188 Transfer of treasury stock to support the acquisition of the additional 11% of Interpump

Hydraulics International 559 - 3,750 - - - 4,309 - 4,309 Dividends paid - - - - - (10,412) (10,412) (356) (10,768) Disposal of investment in Unielectric - - - - - - - (1,885) (1,885) Acquisition of additional 49% of AVI - - - - - (372) (372) (899) (1,271) Capital increase following exercise of warrants 3 - 28 - - - 31 - 31 Comprehensive profit (loss) for 2011 - - - 644 5,288 41,232 47,164 1,426 48,590 Balances at 31 December 2011 47,936 10,157 64,719 (1,086) (2,908) 190,879 309,697 5,463 315,160

39

Explanatory notes of financial statements 1. General information Interpump Group S.p.A. is a company incorporated under Italian law, domiciled in Sant'Ilario d'Enza (RE). The company is listed on the Milan stock exchange.

The Group manufactures and markets high and very high-pressure plunger pumps, very high-pressure systems, power takeoffs, hydraulic pumps, hydraulic cylinders and other hydraulic products. The Group's production facilities are mainly located in northern Italy, the US, Germany, China, India, Bulgaria and, as from February 2012, also in Brazil.

The consolidated financial statements for the year ended 31 December 2011 were approved by the Board of Directors on this day (13 March 2012).

2. Scope of consolidation The consolidation basis at 31 December 2011 includes the Parent Company and the following fully consolidated subsidiaries (with the information required on the basis of DEM/6064293 of 28/07/2006): 31/12/2011

Share

capitalShareholders'

equity Profit 2011

Percent stake

Company Registered office €/000 €/000 €/000 at

Interpump Hydraulics S.p.A. Nonantola (MO) 2,632 96,381 2,200 100.00%

Muncie Power Prod. Inc. (1) Muncie (USA) 784 39,264 6,578 100.00%

American Mobile Power Inc. (5) Fairmount (USA) 3,410 5,539 459 80.00%

Hammelmann Maschinenfabrik GmbH Oelde (Germany) 25 70,452 16,670 100.00%

Hammelmann Corporation Inc (2) Dayton (USA) 39 6,492 1,543 100.00%

Hammelmann S. L. (2) Zaragoza (Spain) 738 1,285 267 100.00%

Hammelmann Pumps Systems Co Ltd (2) Tianjin (China) 871 2,917 462 90.00%

Hammelmann Australia Pty Ltd (2) Melbourne (Australia) 472 5,667 1,365 100.00%

NLB Corporation Detroit (USA) 12 65,247 5,079 100.00%

Interpump Engineering S.r.l Reggio Emilia 76 1,170 200 100.00%

General Pump Inc. Minneapolis (USA) 1,854 10,240 2,020 100.00%

General Technology S.r.l. Reggio Emilia 100 1,757 362 100.00%

SIT S.p.A. S. Ilario d'Enza (RE) 105 1,245 (8) 65.00%

Interpump Hydraulics France S.a.r.l. (1) Ennery (France) 76 1,584 74 99.77%

Hydroven S.r.l. (1) Tezze sul Brenta (VI) 200 3,490 236 100.00%

AVI S.r.l. (1) Varedo (MI) 10 1,999 300 100.00%

Interpump Hydraulics International S.p.A. (1) Nonantola (MO) 14,162 112,439 6,644 81.61%

HS Penta S.p.A (3) Faenza (RA) 4,244 3,456 (499) 100.00%

Contarini Leopoldo S.r.l. (3) Lugo (RA) 47 4,690 1,065 100.00%

Oleodinamica Panni S.r.l. Tezze sul Brenta (VI) 2,000 11,919 1,697 100.00%

Cover S.r.l. Gazzo Veronese (VR) 41 6,198 1,109 100.00%

Hydrocar Roma S.r.l. (1) Modena 10 653 14 70.00%

Hydrocar Chile S.A. (1) Santiago (Chile) 37 5,162 1,440 60.00%

Unidro S.a.r.l. (4) Barby (France) 8 1,830 277 90.00%

Copa Hydrosystem Odd (4) Troyan (Bulgaria) 3 1,565 269 90.00%

40

31/12/2011

Share

capitalShareholders'

equity Profit 2011

Percent stakeat

Company Registered office €/000 €/000 €/000 31/12/2011

Golf Hydrosystem Odd (4) Sofia (Bulgaria) 3 1,716 182 90.00%

Modenflex Hydraulics S.r.l. (3) Modena 10 1,782 619 100.00%

IKO Hydraulics S.r.l. (in liquidation) (3) Forlì 11 (399) (41) 100.00%Wuxi Interpump Weifu Hydraulics Company Ltd (1) Wuxi - China 2,095 6,209 1,449 65.00%

Interpump Hydraulics India Private Ltd (1) Hosur (India) 236 2,381 152 100.00%

Teknova S.r.l. (winding up) Reggio Emilia 362 25 (12) 100.00%

The data given in this table concern financial statements prepared for the purpose of drafting the consolidated financial statements in compliance with international accounting standards (IFRS), which may differ from the statutory financial statements prepared in compliance with local accounting standards.

(1) = controlled by Interpump Hydraulics S.p.A.

(2) = controlled by Hammelmann Maschinenfabrik GmbH

(3) = controlled by Interpump Hydraulics International S.p.A

(4) = controlled by Contarini Leopoldo S.r.l.

(5) = controlled by Muncie Power Inc.

The other companies are controlled directly by Interpump Group S.p.A.

In addition, the income statement and cash flow statement of Unielectric S.p.A., which was divested on 26 September 2011, were consolidated for nearly nine months. With respect to 2010 American Mobile Power, acquired on 15 April 2011, has now been consolidated. The minority shareholders of Interpump Hydraulics International S.p.A. are entitled to sell their holdings starting from the approval of the financial statements for the years 2012, 2013 or 2014 depending on the case, at a price established in accordance with the results of the Interpump Hydraulics International Group in the last two financial statements closed before the year in which the option is exercised. In accordance with the prescriptions of IFRS 3, Interpump Hydraulics International S.p.A. was 100% consolidated, recording a debt relative to the estimate of the current value of the exercise price of the options, determined on the basis of a business plan. Since the business combination was formed prior to 1 January 2010 it is measured in accordance with the preceding version of IFRS 3, therefore, any subsequent changes in the debt relative to the estimate of the current value of the options exercise price will be recorded as an adjustment of the original goodwill. Likewise, the minority shareholders of American Mobile Power are obliged to sell – and Muncie is obliged to purchase – their holdings in April 2016 at a price to be determined on the basis of the company's results as reported in the last two financial statements for the years closed prior to this term. American Mobile Power was 100% consolidated, recording a debt relative to the estimate of the current value of the exercise price of the options, determined on the basis of a business plan. Any subsequent changes in the debt relative to the estimate of the current value of the outlay that occur within 12 months from the date of acquisition and that are due to greater or lesser levels of information, will be recorded as an adjustment of goodwill, while after 12 months from the date of acquisition any changes will be recognized in profit and loss. 3. Accounting principles used

3.1 Reference accounting principles

41

The consolidated financial statements at 31 December 2011 were drafted in compliance with international accounting standards (IAS/IFRS) and with the interpretations of the Standing Interpretations Committee (“SIC”) approved by the European Commission as at the date of this Board of Directors' meeting.

The consolidated financial statements are drafted in thousands of euro. The financial statements are drafted according to the cost method, with the exception of financial instruments, which are carried at fair value.

Preparation of financial statements in compliance with IFRS (International Financial Reporting Standards) calls for judgments, estimates, and assumptions that have an effect on assets, liabilities, costs and revenues. The final results may differ from the results obtained using estimates of this type. The captions of the financial statements that call for more subjective appraisal by the directors when preparing estimates and for which a change in the conditions underlying the assumptions utilized could have a significant effect on the financial statements are: goodwill, amortization and depreciation of fixed assets, deferred tax assets and liabilities, the provision for bad debts and the inventories depreciation provision, provisions for risks and charges, defined benefit plans for employees, and liabilities for the acquisition of investments included under other liabilities.

The Group's income statement is prepared by functional areas (or cost of sales), this form being considered more representative than presentation by nature of expenses, this information being specified in the notes to the financial statements. The chosen form, in fact, complies with the internal reporting and business management methods. For a more comprehensive analysis of the Group's economic results, we invite you to refer to the Board of Director's Report submitted together with the Consolidated Financial Statements.

The cash flow statement was prepared with the indirect method. 3.1.1 Accounting principles, amendments and interpretations in force as from 1st

January 2011

As from 2011 the Group has applied the following new accounting standards, amendments and interpretations, reviewed by IASB: IAS 24 reviewed - Related party disclosures. The new version of IAS 24, issued in

November 2009, simplifies the type of information required in the event of transactions with related parties controlled by the State and clarifies the definition of related parties. The adoption of this accounting principle has not produced any effects for the Group from the standpoint of measurement of the captions in the financial statements;

Improvements to IAS/IFRS (2010) issued in May 2010 and approved in February 2011 is applicable for the majority of the amendments contained therein as from 1 January 2011. The adoption of said principles had no significant effects on the Group's financial statements.

3.1.2 Accounting standards, amendments and interpretations not yet applicable and

not adopted early by the Group

We also draw your attention to the fact that the Group has not performed any early adoptions of approved international financial reporting standards. The accounting principles are as follows:

IFRS 9 – Financial instruments. On 12 November 2009 IASB published the following principle, which was subsequently amended on 28 October 2010. The principle, which is applicable as from 1 January 2013, constitutes the first part of a process in stages

42

aimed at replacing IAS 39 and introduces new criteria for classification and evaluation of financial assets and liabilities for derecognition of the financial assets from the financial statements. Specifically, for financial assets the new principle utilizes a single approach based on the methods of management of financial instruments and on the characteristics of the contractual cash flows of financial assets in order to establish the measurement criterion, replacing the various rules contained in IAS 39. In contrast, for financial liabilities the main change that has occurred concerns the accounting treatment for changes in the fair value of a financial liability designated as a financial liability measured at fair value in profit and loss, in the event wherein such changes are due to changes in the credit rating of the liabilities in question. In accordance with the new principle, such changes must be recorded in the comprehensive income statement and cannot thereafter be derecognized in profit and loss; With a successive amendment of mid December 2011, IASB postponed the date of enforcement of IFRS 9 from 1 January 2013 until 1 January 2015;

IFRS 7 – Financial instruments: Additional information. On 7 October 2010 IASB published several amendments to the standards applicable to accounting periods starting or on or after 1 July 2011. The amendments were issued with the intention of improving the understanding of transactions for the transfer of financial assets, including the comprehension of possible effects arising from any risk to which the company that transferred such assets continues to be subject. The amendments also call for more information in the event in which an amount that is disproportional to said transactions is recorded at the end of a financial period.

IAS 12 – Income taxes. On 20 December 2010 IASB issued a minor amendment that requires the measurement of deferred taxes deriving from an asset in accordance with the way in which the book value of said asset will be recovered (through continuing use or through sale). As a consequence of this amendment, SIC-21 – SIC 21 Income Taxes – Recovery of Revalued Non-Depreciable Assets, will no longer be applicable. The amendment is applicable from 1 January 2012;

IFRS 1 – First adoption of International Financial Reporting Standards (IFRS). On 20 December 2010 IASB issued a minor amendment to this standard, which will become applicable from 1 July 2011;

IFRS 10 – Consolidated Financial Statements. On 12 May 2011 IASB issued the following standard, which will become applicable from 1 January 2013. IFRS 10 supplies a guide to assess the presence of control, this being a decisive factor for consolidation of an entity, in such cases wherein its identification is not immediate;

IFRS 11 – Joint Arrangements. On 12 May 2011 IASB issued the following standard, which will become applicable from 1 January 2013. Apart from regulating joint arrangements, the new standard supplies the criteria for their identification based on the rights and obligations that arise from the contract rather than relying merely on the legal aspects of the arrangement. IFRS 11 excludes the faculty of using the proportional method for the consolidation of joint arrangements;

IFRS 12 – Disclosure of interests in other entities. On 12 May 2011 IASB issued the following standard, which will become applicable from 1 January 2013. The new standard specifies a series of information that the company must disclose in relation to interests in other entities, associated companies, special purpose vehicles and other off balance sheet vehicles;

IFRS 13 – Fair value measurement. On 12 May 2011 IASB, in agreement with FASB, issued a fair value measurement guide. The guide, which is the product of five years of preparation, is an important support tool for fair value measurements, an element that

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helps to harmonize European and US accounting principles, and a response from IASB and FASB to markets aimed at alleviating the global financial crisis. The new standard will be applicable as from 1 January 2013:

Amendments to IAS 1 - Presentation of financial statements. On 16 June IASB published the above amendment, to require all components presented in the comprehensive income statements (OCI or Other Comprehensive Income) to be grouped depending on whether or not they can be reclassified in the future to profit and loss. The amendment was implemented also by FASB in order to improve the level of compatibility between international financial reporting standards (IFRS) and the US generally accepted accounting principles (US GAAP). The changes will take effect as from 1 July 2012;

Amendments to IAS 19 – Employee benefits. On 16 June IASB published the revised version of IAS 19. The most important changes concern the elimination of the so-called "corridor approach" for recording of actuarial profit and loss (not utilized by Interpump Group), presentation of changes in the assets and liabilities deriving from defined benefit plans , including the relative re-determination, in the comprehensive income statements, and an increased requirement for information relative to the characteristics and risks associated with defined benefits. The amendments were aimed at providing readers of financial statements with a clearer overview of the company's obligations arising from defined benefit plans, and the way in which such obligations may affect the company's economic performance, cash flow and net financial position. The changes will take effect as from 1 January 2013;

IFRIC 20 – Stripping costs in the production phase of a surface mine. With this interpretation IFRIC furnished the methods for recognition of stripping costs, i.e. the expenses that a company incurs to remove soil and rock to gain access to the surface mine. The amendment, which was released on 19 October 2011, will be applicable as from financial statements for years starting from 1 January 2013. Early adoption is permitted;

IAS 32 – Financial Instruments: presentation. On 16 December IASB clarified the requirements to allow financial instrument assets to be offset with financial instrument liabilities by publishing an amendment to IAS 32 entitled “Offsetting Financial Assets and Financial Liabilities”. The changes are applicable, retroactively, as from 1 January 2014;

IFRS 7 – Financial instruments: Additional information. On 16 December IASB and FASB issued shared provisions concerning the disclosures required in the case of offsetting of financial assets and financial liabilities. Said provisions are set down in an amendment to IFRS 7 entitled “Disclosures – Offsetting of financial assets and liabilities” which will entered into effect as from 1 January 2013. The required disclosures must be supplied retroactively.

At the current date the competent bodies of the European Union had yet to terminate the approval process required for application of the amendments and standards described above with the exception of the amendments to IFRS 7, which were approved at the end of November 2011.

3.1.3 New accounting principles and amendments taking effect as from 1 January 2011

but not relevant for the Group

The following accounting principles, amendments and interpretations, which came into force on 1 January 2011, regulate matters and cases that were not present within the Group at the

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date of the present report, but that may exert accounting effects on future transactions or agreements: Changes made to IAS 32 – Financial Instruments: Disclosure and presentation. The

amendment regulates the accounting of the issue of rights (rights, options or warrants) in currencies other than the issuer's functional currency;

IFRIC 14 – Prepayments of a minimum funding requirement. The amendment allows companies that make a prepayment of a minimum funding requirement to recognize the amount under assets;

IFRIC 19 – Extinguishing financial liabilities with equity instruments. With this interpretation, IFRIC supplies guidelines concerning the recognition of the extinction of a financial liability through the issue of equity instruments. The interpretation establishes that, if a company renegotiates the terms of extinction of a financial liability and its creditor agrees to extinguish it though the issue of shares of the company, then the shares issued by the company become part of the price paid to extinguish the financial liability and must be measured at fair value: the difference between the carrying value of the extinguished financial liability and the initial value of the equity instruments issued must be recognized in the income statement in the period.

3.2 Consolidation principles (i) Subsidiaries Companies are defined as subsidiaries when the parent company has the direct or indirect power to direct their management in such a way as to obtain benefits from the exercise of said activity. The definition of control takes account also of potential voting rights that are currently freely exercisable or convertible. Said potential voting rights are not considered for the purposes of the consolidation process at the time of attribution to minority interests of the economic result and the minority portion of shareholders' equity. The financial statements of several subsidiaries were not consolidated in consideration of their limited significance; these investments are carried in accordance with the principles illustrated in note 3.10.

The financial statements of subsidiaries are consolidated starting from the date on which the Group acquires control, and deconsolidated from the date on which control is relinquished.

Acquisitions of stakes in subsidiary companies are recorded in accordance with the purchase account method. The acquisition cost corresponds to the current value of the acquired assets, shares issued, or liabilities assumed at the date of acquisition. Ancillary expenses associated with the acquisition are generally recognized in the income statement when they are incurred. The excess of the acquisition cost with respect to the amount of pertinence to the Group of the current value of the net assets acquired is recognized under balance sheet assets as goodwill. Any negative goodwill is recorded in the income statement at the date of acquisition. After the Group has obtained control of an entity, the subsequent acquisition of stakes in said entity which result in a surplus acquisition cost with respect to the amount attributable to the Group are recognized as equity transactions.

For the purposes of consolidation of subsidiaries, the method of global integration is adopted, i.e. assuming the entire amount of equity assets and liabilities and all the costs and revenues irrespective of the percentage of control. The accounting value of consolidated equity investments is therefore eliminated against the related interest in their shareholders' equity. The portions of shareholders' equity and profits of minority interests are shown respectively in a specific caption under shareholders' equity and on a separate line of the consolidated income statement. When the losses ascribable to minority shareholders in a consolidated subsidiary exceed the minority interests, the excess and all further losses attributable to

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minority shareholders are ascribed to the Parent Company's shareholders, with the exception of the part for which the minority shareholders have a binding obligation to cover the loss with additional expenditure and are capable of doing so. If the subsidiary subsequently makes a profit, such profits are attributable to the Parent Company shareholders up to the amount of the losses of the minority shareholders that were previously covered.

(ii) Associated companies Associated companies are companies in which the Group exerts a significant influence without exerting control over their management. The consolidated financial statements include the portion of profits and losses of associated companies in relation to the interest held, evaluated with the net equity method on the date on which the significant influence on the management arose until the date of cessation of said influence. As per the above situation applicable to subsidiary companies, the acquisition of stakes in associated companies is also recognized on the basis of the purchase account method; in this case, any excess of acquisition cost with respect to the portion of pertinence to the Group of the current value of the net assets acquired is incorporated in the value of the investment.

(iii) Investments in other companies Investments in other companies constituting financial assets held for sale are measured at their fair value, if this can be established, and the gains and losses deriving from the change in fair value are recognized directly in equity until investments are divested or have suffered a loss of value; at that time, the overall gains or losses previously recognized in equity are ascribed to the income statement for the period. Investments in other companies for which the fair value is not available are recorded at cost after deducting any impairment losses.

(iv) Transactions eliminated in the consolidation process Intra-group balances and gains and losses arising from intra-group transactions are omitted in the consolidated financial statements. Intra-group gains deriving from transactions with associated companies are omitted in the valuation of the investment with the net equity method. Intra-group losses are only omitted in the presence of evidence that they have not been incurred in relation to third parties.

3.3 Business sector information The business sectors in which the Group operates are determined on the basis of the reporting utilized by Group top management to make decisions, and they have been identified as the Industrial Sector, which basically includes high and very-high pressure pumps and very high pressure systems, and the Hydraulic Sector, which includes power take-offs, hydraulic cylinders and other hydraulic components. With the aim of providing more comprehensive disclosure, information is provided for the geographical areas in which the Group operates, namely Italy, the Rest of Europe (including non-EU European countries), North America, the Pacific Area (including China and Oceania) and the Rest of the World.

3.4 Treatment of foreign currency transactions (i) Foreign currency transactions The functional and presentation currency adopted by the Interpump Group is the euro. Foreign exchange transactions are converted into euro on the basis of the exchange rates in force on the date that the related transactions were carried out. Monetary assets and liabilities are converted at the exchange rate in force on the balance sheet reference date. Foreign exchange differences arising from conversion are entered in the income statement. Non-monetary assets and liabilities valued at historic cost are converted at the exchange rates in

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force on the date of the related transactions. Monetary assets and liabilities stated at fair value are converted into euro at the exchange rate in force on the date in respect of which the relative fair value was determined.

(ii) Conversion into euro of financial statements in foreign currencies Assets and liabilities of companies residing in countries other than Eurozone countries, including adjustments deriving from the consolidation process relative to goodwill and adaptations to fair value generated by the acquisition of a foreign company outside the Eurozone, are converted at the exchange rates effective on the balance sheet reference date. Revenues and costs of the same companies are converted at the average exchange rate in force in the period, which approximates the exchange rates in force on the dates on which the individual transactions were carried out. Foreign exchange differences arising from conversion are allocated to a specific equity reserve designated Translation Reserve. At the time of disposal of a foreign economic entity, accumulated exchange differences reported in the Translation Reserve will be recognized in the income statement.

3.5 Non-current assets held for sale and discontinued operations Assets held for sale and any assets and liabilities pertaining to lines of business destined for sale are valued at the lower of their book value at the time these items were classified as held for sale, and their fair value, net of the costs of sale.

Any impairments recorded in application of said principle are recorded in the income statement, both in the event of write-downs for adaptation to the fair value and also in the case of profits and losses deriving from future changes of the fair value.

Company complexes which represent a large portion of the Group's assets are classified as discontinued operations at the time of their disposal or when they fit the description of assets held for sale, if said requirements existed previously.

3.6 Property, plant and equipment (i) Own assets Property, plant and equipment are valued at historic cost and shown net of accumulated depreciation (see next point (iv)) and impairment losses (see heading 3.9). The cost of goods produced internally includes the cost of raw materials, directly related labour costs and a portion of indirect production costs. The cost of assets, whether purchased externally or produced internally, includes the ancillary costs that are directly attributable and necessary for use of the asset and, when they are significant and in the presence of contractual obligations, the current value of the cost estimated for the dismantling and removal of the related assets.

Financial charges relative to loans utilized for the purchase of tangible fixed assets are recorded in the income statement on an accruals basis if they are not specifically allocated to the purchase or construction of the asset, otherwise they are capitalized.

Assets held for sale are valued at the lower of the fair value net of ancillary sales charges and their book value.

(ii) Assets held through financial leasing Assets held through financial leasing agreements, for which the Group has assumed practically all the risks and benefits associated with membership, are recognized as Group assets. These assets are valued at the lower of the fair value and the discounted value of the leasing instalments at the time of signing of the agreement, net of accumulated depreciation (see following point iv) and the impairment value (see section 3.9). The corresponding

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liability in relation to the lessor is recorded in the financial statements under financial debts, reduced on the basis of the plan for repayment of the principal amounts. Financial leasing instalments are booked in accordance with the method outlined in section 3.22.

(iii) Subsequent costs The replacement costs of certain parts of assets are capitalized when it is expected that said costs will result in future economic benefits and they can be measured in a reliable manner. All other costs, including maintenance and repair costs, are ascribed to the income statement when they arise.

(iv) Depreciation Depreciation is charged to the income statement on a straight-line basis in relation to the estimated residual useful life of the associated asset. Land is not depreciated. The estimated useful life of assets is as follows:

- Property 20-25 years - Plant and machinery 12.5 years - Industrial and commercial equipment 3-6 years - Other assets 3-8 years

The estimated useful life of the assets is reviewed on an annual basis, and any changes in the rates of depreciation are applied where necessary for future depreciation charges.

For assets purchased and/or that became operational during the financial period, depreciation is calculated utilizing annual rates reduced by 50%. Historically this method was represented by the effective utilization of said assets.

3.7 Goodwill For acquisitions made after 1 January 2004, goodwill represents the excess amount of the purchase cost with respect to the Group portion of the fair value of the current and potential assets and liabilities at the date of purchase.

Goodwill is recorded at cost, net of impairment losses.

Goodwill is allocated to the relative cash generating units and is no longer amortized as from 1 January 2004 (date of transition to IFRS). The book value is measured in order to assess the absence of impairment (see section 3.9). Goodwill related to non-consolidated subsidiaries and associates is included in the value of the investment.

Any negative goodwill originating from acquisitions is entered directly in the income statement.

3.8 Other intangible assets (i) Research and development costs Research costs for the acquisition of new technical know-how are ascribed to the income statement when they arise.

Development costs relating to the creation of new products/accessories or new production processes are capitalized if the Group's companies can prove:

- the technical feasibility and intention of completing the intangible asset in such a way that it is available for use or for sale;

- their ability to use or sell the asset;

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- the forecast volumes and realization values indicate that the costs incurred for development activities will generate future economic benefits;

- said costs are measurable in a reliable manner; - and the resources exist to complete the development project.

The capitalized cost includes the cost of raw materials, directly related labour costs and a portion of indirect costs. Other development costs are ascribed to the income statement when they arise. Capitalized development expenses are valued at cost, net of accumulated amortization, (see next point (v)) and impairment (see section 3.9).

(ii) Loan ancillary costs Loan ancillary costs are treated as outlined in section 3.16. Ancillary costs relating to loans still to be paid out are recorded as current assets and deducted from the loan amounts after payment has been received.

(iii) Other intangible assets Other intangible assets, all having a defined useful life, are valued at cost and recorded net of accumulated amortization (see next point (v)) and impairment (see section 3.9).

The trademarks and patents, which constitute almost the entirety of this caption, are amortized as follows: the Hammelmann trade mark and NLB trademarks and patents and the American Mobile trade mark are amortized over 15 years, this period being considered representative of the expected useful life, in consideration of their positions as world leaders in their respective markets. On the contrary, the trademarks of the Cylinders Division companies are amortized in 7 years, in consideration of the different competitive capacity and in compliance with an independent expert's opinion.

Software licenses are amortized over their period of utilization (3-5 years).

The costs sustained internally for the creation of trademarks or for goodwill are recognized in the income statement when they are incurred.

(iv) Subsequent costs Costs incurred subsequently relative to intangible fixed assets are capitalized only if they increase the future economic benefits of the specific capitalized asset, otherwise they are entered in the income statement when they are sustained.

(v) Amortization/depreciation Amortization amounts are recorded in the income statement on a straight-line basis in accordance with the estimated useful life of the capitalized assets to which they refer. The estimated useful life of assets is as follows:

- Patents and trademarks 5-15 years - Development costs 5 years - Granting of software and other licenses 3-5 years

The useful life is reviewed on an annual basis and any changes in the rates are made, where necessary, for future amounts.

3.9 Impairment of assets The book values of assets, with the exception of inventories (see section 3.14), financial assets regulated by IAS 39, deferred tax assets (see section 3.18), and non-current assets for sale regulated by IFRS 5, are subject to valuation at the balance sheet reference date in order to identify the existence of possible indicators of impairment. If the valuation process identifies

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the presence of such indicators, the presumed recoverable value of the asset is calculated using the methods indicated in the following point (i).

The presumed recovery value of goodwill and intangible assets that have not yet been used is estimated at intervals of no longer than once a year or more frequently if specific events occur that point to the possible existence of impairment.

If the presumed recovery value of the asset or its cash generating unit is lower than the net book value, the asset to which it refers is consequently adjusted for impairment loss with entry into the income statement.

Adjustments for impairment losses made in relation to the cash generating units are allocated initially to goodwill, and, for the remainder, to other assets on a proportional basis.

Goodwill is tested for impairment on a yearly basis even if there are no indicators of potential impairment.

(i) Calculation of presumed recovery value The presumed recovery value of securities held to maturity and financial receivables recorded with the criterion of the amortized cost is equivalent to the discounted value of estimated future cash flows; the discounted rate is equivalent to the interest rate envisaged at the time of issue of the security or the emergence of the receivable. Short-term receivables are not discounted to current value.

The presumed recovery value of other assets is equal to the higher of their net sale price and their utilization value. The utilization value is equivalent to the forecast future cash flows, discounted to a rate, gross of taxes, that takes account of the market value of interest rates and specific risks of the asset to which the presumed realization value refers. For assets that do not give rise to independent cash flows the presumed realization value is determined with reference to the cash generating unit to which the asset belongs.

(ii) Reinstatement of impairment losses An impairment relative to securities held to maturity and financial assets recorded with the criterion of the amortized cost is reinstated when the subsequent increase in the presumed recovery value can be objectively related to an event that occurred in a period following the period in which the impairment loss was recorded.

An impairment relative to other assets is reinstated if a change has occurred in the estimate used to determine the presumed recovery value.

Impairment is reinstated to the extent of the corresponding book value that would have been determined, net of depreciation/amortization, if no impairment loss had ever been recognized.

Impairment relative to goodwill can never be reinstated.

3.10 Investments Investments in associated companies are valued with the net equity method as specified by IAS 28.

Investments in other companies are classified among financial instruments available for sale in accordance with the requirements of IAS 39, even if the Group has not manifested any intention of divesting the relative holdings. Investments in other companies, including investments in subsidiaries, which, because of their negligible significance have not been consolidated, are entered at their fair value.

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Should any impairment of value arise at the balance sheet reference date in comparison to the value determined according to the above method, the investments in question will be written down.

3.11 Cash and cash equivalents Cash and cash equivalents include cash on hand, bank and post office deposits, and securities having original maturity date of less than three months. Current account overdrafts and advances with recourse are deducted from cash only for the purposes of the cash-flow statement.

3.12 Current financial assets, Receivables and other current assets Current financial assets, trade receivables and other current assets (excluding derivative financial instruments) are recorded, at the time of their initial entry, on the basis of the purchase cost inclusive of ancillary costs (fair value for the initial entry).

Subsequently, financial assets available for sale are assessed at their fair value (market value). Gains or losses deriving from the valuation are recognized in equity up to the moment in which the financial asset is sold, at which time the gains or losses are recorded in the income statement. If the market value of the financial assets cannot be reliably determined, they are entered at their purchase cost.

Accounts receivable, with due dates within normal commercial terms or which accrue interest at market rates, are not discounted to current prices and are brought to account at cost (fair value of the initial entry) net of a specific bad debt provision that includes the amounts deducted directly from said accounts receivable to bring the valuation to the presumed realization value (see section 3.9). Accounts receivable with due dates beyond normal commercial terms are initially entered at their fair value and subsequently at the amortized cost using the method of the effective interest rate, net of the relative value impairments.

3.13 Derivative financial instruments It is Group policy to avoid subscribing speculative derivative financial instruments, although, when derivative financial instruments fail to meet the requirements set down for the accounting of hedging derivatives (hedge accounting) in IAS 39, changes to the fair value of such instruments are booked to the income statement as financial charges and/or income.

Derivative financial instruments are brought to account using hedge accounting methods when:

- formal designation and documentation of the hedge relation is present at the start of the hedge;

- the hedge is expected to be highly effective;

- effectiveness can be reliably measured and the hedge is highly effective during the periods of designation.

The fair value of interest rate swaps (IRS) is the amount that the Group estimates it will be obliged to pay or collect to close the contract at the reference date of the balance sheet, taking account of the current interest rates and the credit rating of the counterparty. The fair value of derivative financial instruments used to hedge against exchange risks (forward contracts) is

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equivalent to their market value at the balance sheet reference date, which corresponds to the discounted market value of the forward contract.

The methods used to recognize derivative financial instruments depend on whether or not the conditions and requirements of IAS 39 have been fulfilled. Specifically:

(i) Cash flow hedges In the case of a derivative financial instrument for which formal documentation is provided of the hedging relation of the variations in cash flows originating from an asset or liability of a future transaction (underlying hedged variable), considered to be highly probable and that could impact on the income statement, the effective hedge portion deriving from the adaptation of the derivative financial instrument to the fair value is recognized directly in equity. When the underlying hedged item is delivered or settled, the relative provision is derecognized from equity and attributed at the recording value of the underlying element. The ineffective portion, if present, of the change in value of the hedging instrument is immediately ascribed to the income statement under financial expenses and/or income.

When a hedging financial instrument expires, is sold, terminated, or exercised, or the company changes the relationship with the underlying variable, and the forecast transaction has not yet occurred although it is still considered likely, the relative gains or losses deriving from adjustment of the financial instrument to fair value are still retained in equity and are recognized in the income statement when the transaction takes place in accordance with the situation described above. If the forecast transaction related to the underlying risk is no longer expected to occur, the relative gains or losses of the derivative contract, originally deferred in equity, must be taken to the income statement immediately.

(ii) Hedges of monetary assets and liabilities (Fair value hedges) When a derivative financial instrument is used to hedge changes in value of a monetary asset or liability already recorded in the financial statements that can impact on the income statement, the gains and losses relative to the changes in the fair value of the derivative instrument are taken to the income statement immediately. Likewise, the gains and losses relative to the hedged item modify the book value of said item and are recognized in the income statement.

3.14 Inventories Inventories are valued at the lower of purchase cost and the presumed realization value. The cost is determined with the criterion of the average weighted cost and it includes all the costs sustained to acquire the materials and transform them at the conditions of the reference date of the balance sheet. The cost of semi-finished goods and finished products includes a portion of indirect costs determined on the basis of normal production capacity. Write down provisions are calculated for materials, semi-finished goods and finished products considered to be obsolete or slow moving, taking account of their expected future usefulness and their realization value. The net realization value is estimated taking account of the market price during the course of normal business activities, from which the costs of completion and costs of sale are subsequently deducted.

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3.15 Share capital and Treasury stock In the case of purchase of treasury stock, the price paid, inclusive of any directly attributable ancillary costs, is deducted from share capital for the portion concerning the nominal value of shares and from shareholders' equity for the surplus portion. When said treasury shares are resold or reissued, the price collected, net of any directly attributable ancillary charges and the relative tax effect, is recorded as share capital for the portion concerning the nominal value of shares and as shareholders' equity for the surplus. 3.16 Interest-bearing financial payables Interest-bearing financial payables are initially recorded at their fair value, net of ancillary charges. After the original entry, interest-bearing financial payables are valued with the amortized cost criterion; the difference between the resulting value and the discharge value is entered in the income statement during the term of the loan on the basis of the amortization plan.

3.17 Liabilities for employee benefits (i) Defined contribution plans The Group participates in defined pension plans with public administration or private plans on a compulsory, contractual, or voluntary basis. The payment of contributions fulfils the group's obligations towards its employees. The contributions therefore constitute costs of the period in which they are due.

(ii) Defined benefit plans Defined benefits for employees disbursed on termination of their employment with the Group or thereafter, and which include severance indemnity of Italian companies, are calculated separately for each plan, using actuarial techniques to estimate the amount employees have accrued during the year and in previous years. The resulting benefit is discounted and recorded net of the fair value of any relative assets. The discount rate at the balance sheet reference date is calculated as required by IAS 19 with reference to the market yield of high quality corporate bonds. These include only securities released by corporate issuers included in rating class "A", in the assumption that this class identifies a medium rating level corresponding to a low risks level. Considering that IAS 19 makes no explicit reference to a specific product sector, we opted for a composite market curve that could summarize the market conditions existing at the date of valuation of the securities issued by companies operating in various sectors including utilities, telecommunications, finance, banking and industrial. The calculation is performed on an annual basis by an independent actuary using the projected unit credit method.

In the event increases in the benefits of the plan, the portion of the increase pertaining to the previous period of employment is entered in the income statement on a straight line basis in the period in which the relative rights will be acquired. If the rights are acquired immediately, the increase is immediately recorded in the income statement.

Actuarial gains and losses subsequent to the above date are recognized in the income statement on an accruals basis (the company does not make use of the so-called "corridor method").

Until 31 December 2006 the severance indemnity provision (TFR) of Italian companies was considered to be a defined benefits plan. The rules governing the provision were amended by Law no. 296 of 27 December 2006 (“2007 Finance Act”) and by subsequent Decrees and

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Regulations enacted in the initial months of 2007. In the light of these changes, and in particular with reference to companies with at least 50 employees, the TFR severance indemnity should now be classified as a defined benefits plan exclusively for the portions accrued prior to 1 January 2007 (and not yet paid out at the date of the financial statements), while after that date TFR should be considered as a defined contributions plan.

(iii) Stock options On the basis of the stock option plan currently in existence, certain employees and directors are entitled to purchase the treasury shares of Interpump Group S.p.A. The options are measured at their fair value, which is entered in the income statement and increased by the cost of personnel and directors with a matching entry in the share premium reserve. The fair value is measured at the grant date of the option and recorded in the income statement in the period that runs between said date and the date on which the options become exercisable (vesting period). The fair value of the option is determined using the applicable options valuation method (binomial lattice model), taking account the terms and conditions at which the options were granted.

3.18 Income taxes Income taxes disclosed in the income statement include current and deferred taxes. Income taxes are generally disclosed in the income statement, except when they refer to types of items that are recorded directly under shareholders' equity. In this case, the income taxes are also recognized directly in equity.

Current taxes are taxes that are expected to be due, calculated by applying to the taxable income the tax rate in force at the balance sheet reference date and adjustments to taxes of previous years.

Deferred taxes are calculated using the liability method on the timing differences between the amount of assets and liabilities in the consolidated financial statements and the corresponding values recognized for fiscal purposes. Deferred taxes are calculated in accordance with the envisaged method of transfer of timing differences, using the tax rate in force at the reference date of the next year's balance sheet.

Deferred tax assets are recognized exclusively in the event that it is probable that in future years sufficient taxable incomes will be generated for the realization of said deferred taxes.

3.19 Provisions for risks and charges In cases where the Group has a legal or substantial obligation resulting from a past event, and when it is probable that the loss of economic benefits must be sustained in order to fulfil such an obligation, a specific provision for risks and charges is created. If the temporal factor of the envisaged loss of benefits is significant, the amount of the future cash outflows is discounted to present values at a rate, gross of taxes, that takes account of the market interest rates and the specific risk of the liability referred to.

(i) Product warranty provision Liabilities for warranty repairs are allocated to the specific product warranty provision at the time of sale of the products. The provision is determined on the basis of historic data describing the cost of warranty repairs.

(ii) Restructuring provision

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A restructuring provision is formed exclusively in the event that the Group has approved a formal and detailed restructuring plan and has started to implement it or has published it, before the balance sheet reference date. In other cases, the future costs are not set aside.

(iii) Onerous contracts When the forecast future benefits of a contract are less than the non-eliminable costs relative to it, a specific provision is created equivalent to the difference.

3.20 Current financial payables, trade payables and other debts Trade payables and other debts, the relative due date of which is within normal commercial terms, are not discounted and are entered at a cost (fair value for the initial entry) that is representative of their discharge value.

Current financial liabilities include the short term portions of financial debts, inclusive of debts for cash advances and other financial liabilities. Financial liabilities are measured at their amortized cost according to the effective interest method.

Financial liabilities hedged by derivative financial instruments taken out to hedge the interest rate risk are valued at their current value in accordance with the methods specified for hedge accounting.

3.21 Revenues (i) Revenues from the sale of goods and services Revenues from the sale of goods are entered in the income statement when the risks and benefits connected to the ownership of the goods are substantially transferred to the purchaser. Revenues for services rendered are recorded in the income statement on the basis of the percentage of completion at the balance sheet reference date.

(ii) State grants State grants are recorded as deferred revenue under other liabilities at the time in which there exists a reasonable certainty that they will be disbursed and in which the Group has fulfilled all the necessary conditions to obtain them. Grants received against costs sustained are recorded in the income statement systematically in the same periods in which the relative costs are incurred.

3.22 Costs (i) Rental and leasing instalments Rental and operating leasing instalments are recorded in the income statement on an accrual basis.

(ii) Financial leasing instalments Financial leasing instalments are entered, in the amount of the capital portion, in reduction of the financial debt, while the interest portion is entered in the income statement.

(iii) Financial income and charges Financial revenues and charges are recorded on an accrual basis in accordance with the interest matured on the net value of the relative financial assets and liabilities, using the effective interest rate. Financial charges and income include currency exchange gains and losses and gains and losses on derivative instruments to be charged to the income statement (see heading 3.13).

55

4. Financial risk management The business of the Group is exposed to various financial risks: market risk (including the exchange rate and interest rate risk), credit risk, liquidity risk, price risk and cash flow risk. The risk management programme is based on the unpredictability of financial markets and it aims to minimize any negative impact on the Group's financial performance. The Interpump Group utilizes derivative financial instruments to hedge exchange and interest rate risks. The Group does not take out derivative financial instruments of a speculative nature, in compliance with the rulings established by the procedure approved by the Board of Directors. Based on this procedure, financial risk hedging is managed by a central department in the parent company in cooperation with individual operating units.

(a) Market risks

(i) Exchange rate risk The Group does business internationally and is exposed to exchange rate risk originating from business conducted in US dollars and Australian dollars. The exchange rate risks are generated in relation to forecasts of future commercial transactions and the recognition of assets and liabilities.

To manage exchange rate risk generated by forecasts of future commercial transactions stated in a currency other than the company's functional currency (euro), group companies use plain vanilla forward contracts or purchase options, as advised by the central department. The counterparties of these contracts are premium international banks with high credit ratings.

In particular, the Group is open to risk in dollars regarding sales to its US subsidiaries; Group policy is to hedge a prudentially determined portion of expected sales for periods of between four and eight months. In addition, the Group has a dollar exposure for other sales; the policy in this case is to hedge the irrevocable customer order or sales invoice, which is concurrent with the receipt of the letter of credit that confirms a definite sale, or the purchase order, when the time interval between the issue of the order and the payment is considered to be significant.

The Group also has an exposure in Australian dollars regarding sales to a subsidiary. It is Group policy is to hedge short-term sales forecasts.

In relation to financial exposures, in 2011 two intra-group loans were granted for a total of €2.6 million at 31 December 2011, in currencies other than the currencies utilized by the debtor companies. The Group has decided not to hedge these loans at the present.

The Group is exposed to an exchange risk in relation to the conversion of the net assets of its US subsidiaries. Considering the strategic importance of these subsidiaries, the assets of which are not expected to be realized in the short term, it was decided that hedge contracts were not necessary in this case.

56

(ii) Interest rate risk Interest rate risk derives from medium/long-term loans granted at floating rates. It is Group policy to hedge part of the existing loans and, for the unhedged part, to monitor the interest rate curve in order to assess the opportunity of taking out further hedges.

(b) Credit risk The Group does not have any significant credit concentrations. It is Group policy to sell to customers only after their credit potential has been checked and hence within predefined credit limits. Historically, the Group has not incurred any major losses for bad debts.

(c) Liquidity risk Prudent management of liquidity risk involves the retention of an appropriate level of cash on hand and sufficient access to lines of credit. Because of the dynamic nature of the company's business, which results also in frequent targeted acquisitions, it is Group policy to have access to revolving lines of stand-by credit that can be utilized at short notice.

(d) Price and cash flow risk The Group is subject to constant changes in metal prices, especially brass, aluminium, steel, stainless steel and cast iron. Group policy is to hedge this risk where possible by way of medium-term commitments with suppliers, or by means of stocking policies when prices are low, or by entering into agreements with customers to transfer the risk to them. The Group invests a significant part of its cash on hand in repurchase agreements of a maximum duration of three months, in order to optimize financial management. The underlying constitutes the bonds of a primary banking group. Excluding repurchase agreements, the Group does not hold any listed securities (i.e. securities that are subject to stock market fluctuations). Despite expenditure in repurchase agreements, the income and cash flow of Group operating activities are only marginally influenced by changes in interest generating assets.

Further quantitative information on the financial risks to which the Group is exposed is given in Note 33 "Information on financial risks".

5. Discontinued operations On 26 September 2011 the Group divested its 70% stake in Unielectric, a company active in the production of windings and electric motors, for a price of €3.5 million.

This amount was paid in cash on the execution date in the quantity of one third (€1.2 million) while a further third will paid within 15 December 2012 and the final third will be settled within 15 December 2013. The extended payments are secured by bank guarantees. The transaction led to a capital loss totalling €/000 1,068.

Unielectric was sold because Interpump Group no longer considered the investment to be strategic in the framework of the business sectors of the Group, which is currently focused in the Industrial Sector (high and very high-pressure water pumps) and the Hydraulic Sector (power takeoffs, hydraulic pumps, cylinders and other hydraulic components). With the sale of Unielectric the Interpump Group therefore abandons the Electric Motors Sector. The sale, which complied with the requirements of IFRS 5 and the most recent orientations of international accounting principles, has been represented in this report as a discontinued operation.

57

6. Business sector information Business sector information is supplied with reference to operating sectors. We also present the information required by IFRS by geographical area. Information on operating sectors reflects the Group’s internal reporting structure.

The value of components and products transferred between sectors is generally the effective sales price between Group companies and corresponds to the best customer sale prices.

Sector information includes directly attributable costs and costs allocated on the basis of reasonable estimates. The holding costs (remuneration of directors, auditors and functions of the group's financial management, control and internal auditing, and also consultancy costs and other related costs) were ascribed to the sectors on the basis of sales. Business sectors The Group is composed of the following business sectors:

Hydraulic Sector. Includes the production and sale of power take-offs, hydraulic cylinders, pumps, and other hydraulic components. Power take-offs are mechanical devices designed to transmit drive from an industrial vehicle engine or transmission to power a range of ancillary services through hydraulic components. These products, combined with other hydraulic components (spool valves, controls, etc.) allow the execution of special functions such as lifting tipping bodies, moving truck-mounted cranes, operating mixer truck drums, and so forth. Hydraulic cylinders are components of the hydraulic system of various vehicle types, utilized in a wide range of applications depending on the type. Front-end and underbody cylinders (single acting) are utilized mainly on industrial vehicles in the construction sector, while double acting cylinders are utilized in a range of applications: earthmoving machinery, agricultural machinery, cranes and truck cranes, waste compactors, etc.

Industrial Sector. Mainly composed of high and very high-pressure pumps and pumping systems used in a wide range of industrial sectors for the conveyance of fluids. High-pressure plunger pumps are the main component of professional high-pressure washers. These pumps are also utilized for a broad range of industrial applications including car wash installations, forced lubrication systems for machine tools, and inverse osmosis systems for water desalination plants. Very high-pressure pumps and systems are used for cleaning surfaces, ships, various types of pipes, and also for removing machining burr, cutting and removing cement, asphalt, and paint coatings from stone, cement and metal surfaces, and for cutting solid materials. Marginally, this sector also includes operations of drawing, shearing and pressing sheet metal and the manufacture and sale of cleaning machinery.

58

Interpump Group continuing operations sector information (amounts shown in €/000) Interpump Group Hydraulic Industrial Other revenues Elimination entries Continuing operations 2011 2010 2011 2010 2011 2010 2011 2010 2011 2010

Net sales external to the Group 229,921 190,313 242,370 209,831 - - Sales between sectors 16 7 624 653 2,856 2,603 (3,496) (3,263) Total net sales 229,937 190,320 242,994 210,484 2,856 2,603 (3,496) (3,263) 472,291 400,144 Cost of sales (154,531) (128,071) (141,023) (122,973) (2,041) (1,640) 2,934 2,477 (294,661) (250,207) Gross industrial margin 75,406 62,249 101,971 87,511 815 963 (562) (786) 177,630 149,937 % on net sales 32.8% 32.7% 42.0% 41.6% n.s. n.s. 37.6% 37.5%

Other net revenues 3,948 3,417 2,755 3,595 1,207 72 (340) (349) 7,570 6,735 Distribution costs (22,030) (19,188) (24,036) (21,520) - (1) - - (46,066) (40,709) General and administrative expenses (33,218) (32,982) (27,164) (26,783) (892) (1,057) 902 1,135 (60,372) (59,687) Other operating costs (1,897) (877) (1,180) (517) - - - - (3,077) (1,394) Ordinary profit before financial charges 22,209 12,619 52,346 42,286 1,130 (23) - - 75,685 54,882 % on net sales 9.7% 6.6% 21.5% 20.1% n.s. n.s. 16.0% 13.7%

Financial income 911 1,158 5,896 4,677 16 10 (458) (219) 6,365 5,626 Financial charges (4,323) (4,136) (11,156) (10,845) (11) (10) 458 219 (15,032) (14,772) Dividends - - 3,000 - - - (3,000) - - - Adjustment of the value of investments carried

at equity (41) 263 (326) (116) - - - - (367) 147 Profit for the period before taxes 18,756 9,904 49,760 36,002 1,135 (23) (3,000) - 66,651 45,883

Income taxes (7,356) (5,481) (15,151) (12,528) (512) (178) - - (23,019) (18,187) Consolidated profit for the period 11,400 4,423 34,609 23,474 623 (201) (3,000) - 43,632 27,696 Due to: Parent company shareholders 10,182 3,592 34,565 23,462 623 (201) (3,000) - 42,370 26,853 Subsidiaries' minority shareholders 1,218 831 44 12 - - - - 1,262 843 Consolidated profit for the period 11,400 4,423 34,609 23,474 623 (201) (3,000) - 43,632 27,696 Further information required by IFRS 8 Amortization, depreciation and write-downs 10,212 10,590 7,863 7,875 2 7 - - 18,077 18,472 Other non-monetary costs 2,362 2,087 2,565 1,226 - - - - 4,927 3,313

59

Financial position (amounts shown in €/000) Continuing operations Discontinued operations Total

31 December

201131 December

201031 December

201131 December

201031 December

201131 December

2010 Assets by sector 586,839 548,789 - 12,904 586,839 561,693 Assets held for sale 2,123 4,556 - - 2,123 4,556Subtotal of assets of the sector (A) 588,962 553,345 - 12,904 588,962 566,249 Cash and cash equivalents 109,068 136,491 - 2,230 109,068 138,721 Total assets 698,030 689,836 - 15,134 698,030 704,970

Liabilities of the sector (B) 127,827 117,471 9,560 127,827 127,031Payables for payment of investments 19,012 21,637 - - 19,012 21,637Payables to banks 8,762 7,751 - - 8,762 7,751Interest-bearing financial payables 227,269 257,092 - - 227,269 257,092Total liabilities 382,870 403,951 - 9,560 382,870 413,511

Total assets, net (A-B) 461,135 435,874 - 3,344 461,135 439,218

Hydraulic Industrial Other Revenues Elimination entries Continuing operations Continuing operations 31 December

201131 December

201031 December

201131 December

201031 December

201131 December

201031 December

201131 December

201031 December

201131 December

2010 Assets by sector 292,889 275,783 319,151 285,128 4,759 1,216 (29,960) (13,338) 586,839 548,789Assets held for sale - - 2,123 2,123 - 2,433 - - 2,123 4,556Subtotal of assets of the sector (A) 292,889 275,783 321,274 287,251 4,759 3,649 (29,960) (13,338) 588,962 553,345Cash and cash equivalents 109,068 136,491Total assets 698,030 689,836

Liabilities of the sector (B) 94,672 70,192 61,215 58,938 1,900 1,679 (29,960) (13,338) 127,827 117,471Payables for payment of investments 19,012 21,637Payables to banks 8,762 7,751Interest-bearing financial payables 227,269 257,092Total liabilities 382,870 403,951

Total assets, net (A-B) 198,217 205,591 260,059 228,313 2,859 1,970 - - 461,135 435,874 Further information required by IFRS 8 Investments carried at equity 457 772 171 139 - - 628 911Non-current assets other than financial assets

and deferred tax assets 161,208 160,435 180,896 176,136 1.42 161 342,246 336,732

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Cash flows by business sector of continuing operations are as follows:

€/000 Hydraulic Sector Industrial Sector Other Revenues Sector

Total

2011 2010 2011 2010 2011 2010 2011 2010

Cash flows from:

Operating activities 20,267 31,750 20,842 32,254 (302) 291 40,807 64,295Investing activity (15,285) (8,492) (927) (5,857) (120) 50 (16,332) (14,299)Financing activities (7,763) (18,016) (45,948) 20,382 - (1) (53,711) 2,365Total (2,781) 5,242 (26,033) 46,779 (422) 340 (29,236) 52,361

The cash flows from investing activities of the Hydraulic Sector in 2011 include the outlays made for the acquisition of 80% of American Mobile Power in the amount of €/000 4,073, net of cash received, for the purchase of the additional 11% of Interpump Hydraulics International for €/000 4,309 and for the purchase of the additional 49% of AVI (€/000 270). Moreover, the cash flows from the Industrial Sector investing activity in 2011 include proceeds from the sale of the investment in Unielectric in the amount of €/000 1,110, net of transferred cash. The cash flows from the investing activity of the Hydraulic Sector for 2010 include payment of the residual debt for acquisition of HS Penta S.p.A. in the amount of €/000 3,344, while the cash flows of the Industrial Sector for 2010 include outlays for acquisition of the remaining 6.7% of NLB for the amount of €/000 3,350. Cash flows from the Industrial Sector financing activity for 2011 include outlays for the purchase of treasury shares in the amount of €/000 16,489 (no outlay in 2010) and receipts for the sale of treasury shares to the beneficiaries of stock options in the amount of €/000 188 (no receipt in 2010), and the value of treasury shares transferred for the acquisition of the additional 11% of Interpump Hydraulics International for €/000 4,309 (€/000 3,344 in 2010 to settle the balance for the acquisition of HS Penta). Moreover, cash flows in 2011 of the Industrial Sector financing activity include dividends paid by the parent, which operates in this sector, in the amount of €/000 10,412 (no amount in 2010) and €/000 31 for the share capital increase further to the exercise of warrants (€/000 3,526 in 2010). Geographical sectors The Group's sector-based operations are divided into five geographical areas, even though management is conducted on a global level.

A breakdown of sales of continuing operations by geographical area is provided below: 2011

(€/000) %2010

(€/000)

% Growth

Italy 76,727 16 70,649 18 +8.6%Rest of Europe 133,606 28 110,306 27 +21.1%North America 154,986 33 128,629 32 +20.5%Pacific Area 50,260 11 38,835 10 +29.4%Rest of the World 56,712 12 51,725 13 +9.6%Total 472,291 100 400,144 100 +18.0%

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Data by geographical sector on the basis of the location of non-current assets other than financial assets and deferred tax assets are as follows: 31/12/2011 31/12/2010 (€/000) (€/000)

Italy 194,401 200,312Rest of Europe 76,219 77,195North America 66,170 55,577Pacific Area 2,781 2,388Rest of the World 2,675 2,634Total 342,246 338,106

The geographical areas to which assets are assigned depend on the nationality of the company that holds them. No companies have assets in more than one area.

7. Acquisition of investments On 15 April 2011 80% of American Mobile Power was acquired by Muncie Power Product Inc. The fair value of the assets and liabilities acquired via American Mobile Power was established on a provisional level as allowed by the terms of IFRS 3, in consideration of the limited time since the date of acquisition. The acquisition had the following impacts on the assets and liabilities of the Interpump Group (exchange rate of 15/04/2011, specifically 1.445 USD / 1 Euro):

€/000 Amounts acquired

Adjustments to fair value

Carrying values in the acquiring

company

Cash and cash equivalents 615 - 615Trade receivables 82 - 82Inventories 578 - 578Other current assets 25 - 25Property, plant and equipment 649 - 649Trade marks 1,021 - 1,021Goodwill 1,830 - 1,830Trade payables (116) - (116)Financial payables to banks - loans (current portion) (19) - (19)Taxes payable (67) - (67)Other current liabilities (63) - (63)Provisions for risks (short-term portion) (6) - (6)Financial payables to banks - loans (medium/long-term portion) (12) - (12)Net assets acquired 4,517 - 4,517Goodwill related to the acquisition 2,192Total acquisition cost 6,709

Total amount paid by cash 4,688Total amount due in medium/long-term 2,021Total acquisition cost 6,709Cash on hand of the acquired company (584)Total change in the net financial position including changes in payables related to the acquisition of investments 6,125

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The transaction involved both the acquisition of holdings in North American Manufacturer (NAM) and the payment of capital to the same company, to be used for the acquisition of assets (including the brand and goodwill) of American Mobile Power (AMP). NAM then changed its name to American Mobile Power to bring it into line with the recognized brand name in the sector on the US market. The fair value of plant and machinery was considered to be identical to amortized cost in consideration of the fact that the majority of capital assets had been purchased in recent years and in consideration of the limited significance in the consolidated financial statements. The trade mark fair value assessment was made by an independent valuator. The acquisition contract states that Muncie must acquire the remaining 20% in April 2016 (after approval of the financial statements at 31 December 2015), on the basis of the company's results achieved in the two prior years. According to the requirements of IFRS 3 an estimate was made of the amount of the debt for the acquisition of the remaining 20% on the basis of a business plan up to the 2015 financial year. Said value was actualized on the basis of a 3.6% interest rate and recorded under medium-long term payables. 8. Cash and cash equivalents 31/12/2011 31/12/2010 (€/000) (€/000)

Cash 61 119Repurchase agreements 45,120 73,611Bank deposits 63,887 64,991Total 109,068 138,721

Bank accounts include €/000 14,003 held in US dollars ($/000 18,119). At 31 December 2011 bank deposits included locked up deposits maturing in January and February 2012 for a notional amount of €20 million at a fixed rate of 3.2%. The interest rate in the year on freely available bank deposits was approximately 0.5%-1%, while the average rate on locked-up deposits was Euribor+1.2 percentage points (around 2.5% on average). The average interest rate of repurchase agreements is Euribor +1.4 percentage points (on average approximately 2.7%). The underlying is composed of bonds of a primary national banking group, covered by the bank's repurchase commitment on maturity, normally established by the group at three months. 9. Trade receivables 31/12/2011 31/12/2010 (€/000) (€/000)

Fair value for initial recording 99,448 91,891Bad debt provision (3,536) (3,355)Trade receivables, net 95,912 88,536

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Changes in the bad debt provision were as follows: 2011 2010 (€/000) (€/000)

Opening balances 3,355 3,599Exchange rate difference 7 39Change to consolidation basis (162) -Allocation for the period 1,387 738Decreases in the period due to surpluses - (20)Drawdowns in the period (1,051) (1,001)Closing balance 3,536 3,355

Allocations in the period are booked under other operating costs.

No trade receivables or payables are due beyond 12 months.

10. Inventories 31/12/2011 31/12/2010 (€/000) (€/000)

Raw materials and components 25,074 24,800Semi-finished products 40,129 36,920Finished products 51,818 46,284Total inventories 117,021 108,004

Inventories are net of the depreciation provision that changed as indicated below:

2011 2010 (€/000) (€/000) Opening balances 11,966 11,337Exchange rate difference 53 166Change to consolidation basis (978) -Allocations for the period 2,620 1,983Drawdowns in the period (2,141) (1,500)Reversal of provisions due to surpluses (211) (20)Closing balance 11,309 11,966

11. Derivative financial instruments Interest rate hedging. The Group adopts a procedure, approved by the Board of Directors, which identifies the derivative financial instruments to be used to hedge against the risk of interest rate fluctuations. These instruments are as follows: Interest Rate Swaps (IRS), Forward Rate Agreements (FRA) and options on interest rates (Caps & Floors).

Company policy is currently to assess the opportunities offered by the market in relation to the possibility to take out Interest Rate Swaps at economically advantageous conditions. This strategy underpinned the two hedges taken out during 2009 for a total amount of €114 million (residual amount of €/103 million at 31/12/2011). The first hedge counters the interest rate risk on a loan repayment instalment of €/000 33,333 due on 19 January 2012. The interest rate swap (IRS), of the same amount and due on that date with respect to the loan, was taken out on 19

64

July 2010 at a rate of 2.70%. At 30 September 2011 the hedge relationship displayed an effectiveness percentage lower than the limits established by IAS 39 (80-125 percent), so as from said date the IRS was no longer classified as a hedge and was instead classified under derivative instruments held for trading. The second hedge, which was taken out from 31 December 2009 at a rate of 2.83%, was designed to cancel the interest rate risk on several loans for a total original amount of €/000 80,670 on the basis of a plan of utilizations prepared at the time of the hedge. The loans are to be repaid in several instalments, with the final payment falling due on 30/06/2014. However, certain loans, which were originally to constitute the underlyings of the IRS hedge at the time of their maturity in 2010 and 2011, were either not renewed or were renewed at terms that meant the conditions required by IAS 39 for the hedge relationship were no longer met so the relative portion of the IRS value that referred to said loans could no longer be considered as a hedge. At 31 December 2011 all the group's cash on hand was subject to floating interest rates, as were all financial and bank debts.

Exchange rate risk hedging. At 31 December 2011 the Group is subject to: exposure to US dollar risk for sales in USD:

- high-pressure pumps;

- various hydraulic components;

- very high pressure systems and pumps;

Australian dollar exchange risk in relation to sales of very high pressure systems and pumps made in AUD.

The sale of Unielectric was accompanied by the cessation, as from September 2011, of the Group's exposure to US dollar exchange rate fluctuations for the purchase of several electric motor components.

Hedging can be carried out using two types of financial instruments: plain vanilla forwards and sale or purchase options in dollars.

The Group classifies derivatives as shown below:

Purpose of hedge Recognition

Hedges on high pressure pump sales Cash flow hedging Hedges on sales of very high pressure systems Cash flow hedging Hedges on sales of a number of hydraulic components Fair value hedging Derivatives that do not meet all the requirements of IAS 39 Fair value

The fair values of exchange rate risk derivative instruments, as defined by IAS 39, were as follows at the close of the year: 31/12/2011

Notional 31/12/2011

Positive fair value

31/12/2011Negative fair value

31/12/2010 Notional

31/12/2010 Positive

fair value


(€/000) (€/000) (€/000) (€/000) (€/000) (€/000)

IRS to hedge loan of €/000 33,333 - - -

33,333

- 604

IRS to hedge loans for a total amount of €/000 43,230 at 31/12/2011 and €/000 54,680 at 31/12/2010 43,230 - 798

54,680

- 1,260

Total 43,230 - 798 88,013 - 1,864

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IRS used to hedge interest risks are brought to book according to the cash flow hedging method. The fair value breakdown of hedging derivatives according to the accounting method is as follows: 31/12/2011

Notional 31/12/2011

Positive fair value


31/12/2010 Notional

31/12/2010 Positive

fair value


(€/000) (€/000) (€/000) (€/000) (€/000) (€/000)

IRS recorded according to cash flow hedging method 43,230 - 798

88,013

- 1,864

IRS that do not comply with the requirements of IAS 39 to be defined as hedges 59,733 - 585

25,000

- 587

Total derivative financial instruments to hedge the exchange rate risk 102,963 - 1,383

113,013

- 2,451

The fair values of exchange rate risk derivative hedges at the close of the year were as follows: 31/12/2011

Notional 31/12/2011

Positive fair value


31/12/2010 Notional

31/12/2010 Positive

fair value


($/000) (€/000) (€/000) ($/000) (€/000) (€/000)

Plain vanilla forwards relative to hedges of sales of high-pressure pumps 9,600 - 277

14,662

368 72

Plain vanilla forwards relative to hedges of sales of hydraulic components - - -

449

- 9

Plain vanilla forwards relative to hedges of sales of very high pressure systems and pumps 4,067 - 197

1,972

- 21

Plain vanilla forwards to hedge the risk in purchases of electric motor

components - - -

374

7 -

Total derivative financial instruments to hedge USD exchange rate risk 13,667 - 474

17,457

375 102

31/12/2011

Notional 31/12/2011

Positive fair value


31/12/2010 Notional

31/12/2010 Positive

fair value


(AUD/000) (€/000) (€/000) (AUD/000) (€/000) (€/000)

Plain vanilla forwards relative to hedges of sales of very high pressure systems and pumps 2,750 - 149

2,160

- 98

Total derivative financial instruments to hedge AUD exchange rate risk 2,750 - 149

2,160

- 98

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The fair value breakdown of hedging derivatives according to the accounting method is as follows:

31/12/2011Notional

31/12/2011Positive

fair value


31/12/2010 Notional

31/12/2010 Positive

fair value


($/000) (€/000) (€/000) ($/000) (€/000) (€/000)

Plain vanilla forwards recorded according to the cash flow hedging method 13,667 - 474

13,468

320 87

Plain vanilla forwards recorded according to the fair value hedging method - - -

449

- 9

Plain vanilla forwards that do not meet all the requirements of IAS 39 - - -

3,540

55 6

Total derivative financial instruments to hedge USD exchange rate risk 13,667 474

17,457

375 102

Derivative hedging instruments in AUD are recorded according to the cash flow hedging method.

At the time of drafting of the financial statements no situations of overhedging were identified. Cash flow hedges The effects recognized in the income statement refer, in the amount of 171 €/000 (719 €/000 in 548) to the loss recorded on the interest rate risk management activity (no effect in 2010) and, for the remainder, to the exchange risk management activity. Hedging of the exchange risk concerned loans maturing within 2014. The Interpump Group exchange risk management policy involves hedging of future sales flows and purchase orders. The maximum time frame in which it is predicted that the cash flows will occur is as follows: Purposes of hedging

Derivatives to hedge high pressure pump sales 6 months Derivatives to hedge very high pressure system sales 7 months

It is therefore reasonable to assume that the relative hedge effect suspended in the Reserve for valuation of hedging derivatives at fair value will be recorded in the income statement in the next year.

During 2011 the Group removed from equity and transferred to the income statement a negative portion of previously recorded losses in the amount of €/000 48, net of the theoretical tax effect. This value was set off against net sales for €/000 47, under fair value losses for €/000 20, and under deferred and current taxes with positive sign in the amount of €/000 19.

The ineffectiveness deriving from cash flow hedging transactions in 2011 and in 2010 was negligible.

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Fair value hedges The profits and losses deriving from the valuation of derivative financial instruments in compliance with the rules of fair value hedging and the profits and losses ascribable to the relative hedged elements are shown in the following table: 2011 2010 (€/000) (€/000)

Net profits (losses) on derivative instruments used to hedge against exchange risks

18 (38)

Change in the fair value of the other underlying elements (8) 33Profit (loss), net 10 (5)

Fair values The main methods and assumptions made in the estimation of fair values are outlined below.

Derivatives The fair value of plain vanilla forwards is obtained using market prices, if the forwards are listed, or discounting the difference between the contractual forward exchange rate and the current spot exchange rate. The interest rate utilized for discounting corresponds to swap brokers quotes, tested by applying pricing models and cash flow techniques discounted to current values. In this latter case, the calculation of future cash flows is based on the management's best estimate, whilst the interest rate applied is the market rate for said derivative instruments at the balance sheet date.

Investments in other companies The fair value is essentially represented by the cost, written down, if applicable, due to any value impairments.

Interest-bearing financial payables The fair value is based on the predicted cash flows for the principal amount and interest.

Financial leasing payables The fair value is represented by the discounted value of future cash flows generated by the payment of instalments; the interest rate utilized is the market rate for similar transactions.

Receivables/Payables For receivables and payables within twelve months the nominal value is assumed as the fair value. The fair value of other receivables and payables is the discounted nominal value if the temporal factor or notional value are significant.

Interest rates utilized to obtain the fair value To establish the fair value, the Group utilities the interest rate curve at 31 December plus a suitable spread. The interest rates utilized are as follows:

31/12/2011 31/12/2010 % %

Derivative financial instruments (euro) 0.300/2.570 0.750/3.3525Derivative financial instruments (USD) 0.200/2.592 0.195/4.150Derivative financial instruments (AUD) 4.350/4.610 4.800/5.840Interest bearing financial payables (euro) Euribor+0.40/2.00 Euribor+0.40/1.75Interest bearing financial payables (US dollars) - 1.1Financial leasing agreements 3.4/6.8 3.4/7.3Receivables 3.0 -Payables 4.7 5.0

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Financial instruments measured at fair value refer to financial assets and liabilities listed on active markets (fair value hierarchy level 1).

12. Assets held for sale Assets held for sale at 31 December 2011 refer to an industrial building for sale (already classified as such last year, and another building that was sold in 2011). It is deemed that the book value calculated by taking the lower of the cost or fair value was no higher than the realizable value of the above-mentioned building in its current condition.

On 26 April 2011 the Group sold a building classified under "Assets held for sale" for €3.7 million. The price will be settled in several instalments, the last of which falling due on 31 December 2012. We have received an adequate bank guarantee to secure the extended payment. This sale resulted in a capital gain of €1.2 million and a cash inflow that totalled €0.9 million at December 2011.

13. Other current assets 31/12/2011 31/12/2010 (€/000) (€/000)

Accrued income and prepayments 2,103 1,881Receivables from the disposal of assets held for sale 2,795 -Receivables from the disposal of investments 1,129 -Other receivables 1,292 1,278Other 1,435 676Total other current assets 8,754 3,835

14. Property, plant and equipment Land and

buildingsPlant and

machinery EquipmentOther assets Total

(€/000) (€/000) (€/000) (€/000) (€/000)

At 31 December 2009 Cost 50,230 120,109 34,015 27,241 231,595Accumulated depreciation (13,425) (66,948) (27,656) (16,511) (124,540)Book value 36,805 53,161 6,359 10,730 107,055

Changes during 2010 Opening book value 36,805 53,161 6,359 10,730 107,055Exchange rate differences 319 626 167 649 1,761Increases due to purchases 217 5,426 1,452 2,750 9,845Disposals (18) (215) (5) (1,009) (1,247)Reclassifications (124) 39 79 10 4Depreciation (1,343) (7,853) (2,569) (2,532) (14,297)Closing book value 35,856 51,184 5,483 10,598 103,121


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Land and

buildingsPlant and


(€/000) (€/000) (€/000) (€/000) (€/000)

Changes during 2011 Opening book value 35,856 51,184 5,483 10,598 103,121Exchange rate differences 154 143 119 336 752Change to consolidation basis - (1,162) 462 (54) (754)Increases due to purchases 555 7,719 2,640 5,010 15,924Disposals - (942) (99) (1,340) (2,381)Reclassifications 108 (81) 3 - 30Depreciation (1,373) (7,482) (2,439) (2,621) (13,915)Closing book value 35,300 49,379 6,169 11,929 102,777


The cost of assets under construction, included in the net book values disclosed in the previous table, is as follows:

Land and buildings

Plant and machinery Equipment

Other assets Total

(€/000) (€/000) (€/000) (€/000) (€/000)

At 1 January 2010 - 161 508 51 720At 31 December 2010 28 170 112 96 406At 31 December 2011 1 974 430 52 1,457

The following values, included in the net book value of assets disclosed above, are relative to financial leasing agreements:

Land and buildings

Plant and machinery Equipment

Other assets Total

(€/000) (€/000) (€/000) (€/000) (€/000)

At 1 January 2010 3,141 7,157 7 192 10,497At 31 December 2010 2,827 6,371 7 148 9,353At 31 December 2011 2,610 5,147 - 160 7,917

Depreciation of €/000 11,528 was charged to the cost of sales (€/000 11,815 in 2010), €/000 479 to distribution costs (€/000 448 in 2010) and €/000 1,908 for general and administrative costs (€/000 2,034 in 2010).

At 31 December 2011 the Group had contractual commitments for the purchase of tangible assets in the amount of €/000 2,057 (€/000 55 at 31/12/2010).

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15. Goodwill Goodwill is allocated to the relative cash generating units (CGU) as shown in the table below.

Balance at

31/12/2010

Increases for theperiod

Decreases for theperiod

Foreign exchange

differences Balance at

31/12/2011Company: (€/000) (€/000) (€/000) (€/000) (€/000)

High pressure pumps division 37,344 - - 158 37,502

Very high pressure pumps division 89,707 - - 952 90,659Power takeoffs and hydraulic pumps

division 33,967 4,022 - 833 38,822Cylinders Division 48,637 - (2,220) - 46,417Total 209,655 4,022 (2,220) 1,943 213,400 The increase in the period refers to goodwill paid at the time of the acquisition of American Mobile on 15 April 2011. The decrease of the period refers, in the measure of €/000 900 to the change in goodwill due to the effect of the exercise on 6 September 2011 of the put options by several shareholders of Interpump Hydraulics International S.p.A., which resulted in a lower than estimated outlay and, for the remainder, to the adaptation of the value of the put options, as more fully described in the "Cash Flow" section of the Board of Directors' Report. The impairment test was conducted using the Discounted Cash Flow method (DCF) net of taxation. Expected cash flows utilized in the calculation of DCF were determined on the basis of 5-year business plans that take account of the various reference scenarios and on the basis of growth forecasts in the various markets. Specifically, in view of the extreme uncertainty around the evolution of markets, and in consideration also of the healthy recovery of sales experienced by all Group sectors, it was chosen to prudentially adopt modest growth percentages for the high-pressure pumps division (approximately +2%) and the very high-pressure pumps division (+3%), also because in 2011 these divisions exceeded the maximum pre-crisis levels, while for the power take-offs and hydraulic pumps division and the cylinders division, which were more severely affected by the 2009 crisis, forecasts point to the potential to restore the sales levels of 2009 on average in 2015/2016. For periods after 2016 a perpetual growth rate of 1% was used for the power take-offs and hydraulic pumps CGUs and for the cylinders division, while perpetual growth of 1.5% was applied to the high pressure and very high pressure pumps division CGUs in view of the greater defensibility of these latter business areas. The forecast cash flows determined in this manner were reduced by a discount factor in order to take into consideration the risk that the future plans could prove to be impracticable. WACC, after tax, was measured for the various CGUs as follows:

CGU WACC

High pressure pumps division 6.23%

Very high pressure pumps division 5.39% Power take-offs and hydraulic pumps division 5.78% Cylinders Division 6.37%

Weighted average cost of capital 5.80%

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The WACC utilized in 2010 was 5.91%. In addition, a sensitivity analysis was carried out in compliance with the requirements of the joint document issued by Banca d'Italia, Consob, and ISVAP on 3 March 2010. Reducing the expected cash flows of each CGU by 10% would not have resulted in the need to write down goodwill, and nor would increasing the cost of capital utilized to actualize the predicted flows by 50 basis points.

16. Other intangible assets

Product development

expenses

Patents trademarks

and industrial rights

Other intangible assets Total

(€/000) (€/000) (€/000) (€/000)

At 31 December 2009 Cost 13,035 27,745 2,590 43,370Accumulated amortization (7,051) (8,515) (2,164) (17,730)Book value 5,984 19,230 426 25,640

Changes during 2010 Opening book value 5,984 19,230 426 25,640Exchange rate differences 61 483 3 547Increases 2,044 138 140 2,322Decreases - (14) - (14)Write-downs (554) - - (554)Reclassifications - - (4) (4)Amortization (1,414) (2,392) (236) (4,042)Closing book value 6,121 17,445 329 23,895 At 31 December 2010 Cost 13,918 28,316 2,282 44,516Accumulated amortization (7,797) (10,871) (1,953) (20,621)Book value 6,121 17,445 329 23,895

Changes during 2011 Opening book value 6,121 17,445 329 23,895Exchange rate differences 55 263 (4) 314Changes to consolidation basis - 1,021 (31) 990Increases 2,434 201 200 2,835Decreases (35) (6) - (41)Reclassifications - (30) - (30)Write-downs (702) (14) - (716)Amortization (1,185) (2,327) (173) (3,685)Closing book value 6,688 16,553 321 23,562

At 31 December 2011 Cost 16,668 29,752 2,307 48,727Accumulated amortization (9,980) (13,199) (1,986) (25,165)Book value 6,688 16,553 321 23,562

The cost of assets in under development, included in the net book values disclosed in the previous table, is as follows:

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Product development

expenses

Patents trademarks

and industrial rights


(€/000) (€/000) (€/000) (€/000)

At 1 January 2010 3,956 - 55 4,011At 31 December 2010 3,908 - 43 3,951At 31 December 2011 4,235 2 - 4,237

Amortization amounts were recorded entirely under general and administrative expenses, while write-downs were recorded under other operating costs.

Product development costs consist exclusively of capitalized internal costs. 17. Other financial assets This item comprises:

31/12/2011 31/12/2010 (€/000) (€/000)

Employee and directors' life insurance policy 2,406 2,135Investments in non-consolidated subsidiaries 628 441Investments in associates - 470Investments in other companies 161 164Loans to non-consolidated subsidiaries 224 187Other 5 2Total 3,424 3,399

The following changes were recorded:

2011 2010 (€/000) (€/000)

Opening balance 3,399 2,873Exchange rate differences 84 213Increases for the period 597 473Changes to consolidation basis 2 -Decreases for the year (658) (45)Reclassifications to provisions for risks and charges - (115)Closing balance 3,424 3,399

The value of investments in non-consolidated subsidiaries and in associates is detailed below

Company

31/12/2011

% stake 31/12/2010

% stake

(€/000) (€/000)

Subsidiaries General Pump China 171 100% 139 100% HS Penta Africa Pty Ltd 50 52% 131 52% Interpump Hydraulics Middle East FZCO 205 100% - - Syscam Gestión Integrada S.A. 202 60% 171 60% Total subsidiaries 628 441

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Company

31/12/2011

% stake 31/12/2010

% stake

(€/000) (€/000)

Associate Wuxi Weifu China-Italy Company Ltd - - 470 20%

Despite the relationship of control, subsidiaries General Pump China, HS Penta Africa Pty Ltd and Syscam Gestion Integrada S.A. were not consolidated because of their marginal size. In the first half of 2010 the Group incorporated Hammelmann Bombas e Sistemas Ltda in Sao Paolo in Brazil. This 100% controlled company was incorporated to obtain a local distributor capable of maximizing the effectiveness of penetration on the Brazilian market. Hammelmann Bombas e Sistema Ltda was not consolidated in 2011 because it had only started operated recently; in addition, the value of the investment was cancelled and a risks provision was set up for €/000 179 in accordance with the losses sustained following the start-up stage.

The company Interpump Hydraulics Middle East FZCO with registered office in Dubai was incorporated on 19 December 2011. The company is controlled in the measure of 50% by Interpump Hydraulics S.p.A. and 50% by HS Penta S.p.A.. The incorporation of this company forms part of the Group's strategy of growth in areas with the greatest potential and fastest rate of development.

The investment in Hammelmann SNC was completely written down.

Wuxi Weifu China-Italy Company Ltd was sold in 2011 for approximately 4.1 million Renminbi (equivalent to around €0.4 million).

18 Deferred tax assets and liabilities Changes during the year in deferred tax assets and liabilities are listed below:

Deferred tax assets Deferred tax liabilities

2011 2010 2011 2010

(€/000) (€/000) (€/000) (€/000)

At 31 December of the previous year 14,161 14,153 18,856 18,269

Exchange rate differences 50 126 388 411

Changes to consolidation basis (336) 94 (72) -

Charged to income statement in the period 1,431 (531) 1,539 84

Recording in reserves for the year (249) 319 (43) 92

At 31 December 15,057 14,161 20,668 18,856

Deferred tax assets/liabilities brought to account at the relative equity value refer to the accounting of the fair value of derivative financial instruments recorded in accordance with the hedge accounting method.

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Deferred tax assets and liabilities refer to the following items of the balance sheet:

Deferred tax assets Deferred tax liabilities

31/12/2011 31/12/2010 31/12/2011 31/12/2010

(€/000) (€/000) (€/000) (€/000)

Property, plant and equipment 5,970 6,916 12,957 11,365

Intangible fixed assets 477 346 6,724 6,176

Inventories 4,212 4,010 - -

Receivables 482 454 - 10

Derivative financial instruments 448 697 - 42

Liabilities for employee benefits 193 186 540 669

Shareholders’ Equity (capital increase ancillary expenses) 77 117

- -

Provisions for risks and charges 642 587 76

Past tax losses 1,395 54 - -

Other 1,161 794 447 518

Total 15,057 14,161 20,668 18,856

In 2011 the Group recognized hitherto unallocated deferred tax assets on tax losses of €/000 1,370 further to legislative amendments in the realm of IRES corporate income tax introduced in Italy in relation to the tax treatment of corporate losses, which resulted in a change in the estimation of the probability of being able to make use of said tax savings in the future.

No deferred tax liabilities were recorded for reserves qualifying for tax relief as they are not expected to be distributed (see note 23). 19. Interest-bearing financial payables and bank payables The main loans are all subject to the following financial covenants, calculated using consolidated figures:

- Net financial indebtedness / Shareholders' equity;

- Net financial indebtedness / EBITDA;

- EBIT / Financial charges;

- EBITDA / Financial charges;

At 31/12/2011 all financial covenants had been amply complied with.

31/12/2011 31/12/2010 (€/000) (€/000)

Current Payables to banks 8,762 7,751

Bank loans 111,128 123,113Financial leasing agreements 2,226 2,261Other 346 -Total current interest bearing financial payables 113,700 125,374

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31/12/2011 31/12/2010 (€/000) (€/000)

Non-current Bank loans 109,423 125,370Financial leasing agreements 4,146 6,348Total non-current interest bearing financial payables 113,569 131,718 Non-current financial payables have the following due dates:

31/12/2011 31/12/2010 (€/000) (€/000)

From 1 to 2 years 62,733 82,142From 2 to 5 years 38,938 48,583After 5 years 11,898 993Total 113,569 131,718 See note 11 for details of interest rates.

At 31/12/2011 all loans were subject to floating-rate interest. Hedge contracts were taken out on some of the loans for a total amount of €/000 43,230 (see note 11).

Loans include the following amounts in USD and concern US subsidiaries:

31/12/2011 31/12/2010 (€/000) (€/000)

Interest-bearing financial payables (current portion) - 2,607 The conversion rate at 31/12/2011 was USD 1.2939 for one euro, while at 31/12/2010 it was USD 1.3362 for one euro.

The Group has the following lines of credit that were unused at year-end:

31/12/2011 31/12/2010 (€/000) (€/000)

Export advances and Italian portfolio 70,852 93,026Current account overdrafts 20,135 19,826Medium/long-term financing 50,676 79,847Total 141,663 192,699 The unused medium-long-term lines of credit at 31/12/2011 refer mainly to a pool loan subscribed on 8 August 2008. The €120 million loan, of which €84 million already utilized at 31/12/2011, is destined to finance potential future acquisitions and refinance the existing debt. The syndicated loan can be repaid starting from month seventeen up to month seventy-one after the time of granting. This loan is not backed by collateral. The interest rate is 3/6 month Euribor, with a spread that varies in accordance with the Net financial indebtedness/EBITDA ratio. An additional €18 million has been utilized for acquisitions in 2012. The possibility for utilization expires on 31 March 2012.

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20. Other current liabilities 31/12/2011 31/12/2010 (€/000) (€/000)

Payables for acquisition of investments 473 209Other short-term payables 22,192 19,191Other 278 405Total 22,943 19,805

The residual amount of other short-term payables mainly concerns payables to personnel, directors and auditors, and to social security institutions. 21. Provisions for risks and charges Changes were as follows:

(€/000) Product

warranty provision

Agents' termination indemnity provision

Provision for returns

on sales

Provision for liabilities and

charges on investments

Restructuring

provision Other Total

Balance at 31/12/2010 2,127 412 81 429 - 1,050 4,099

Exchange rate difference 32 - 6 - - 22 60

Increase of the year 594 60 41 76 138 114 1,023

Surplus transferred to the income statement (130) - - -

-

(5) (135)

Changes to consolidation basis

6 (10) - -

-

- (4)

Utilization of the year (243) (17) - - - (212) (472)

Balance at 31/12/2011 2,386 445 128 505 138 969 4,571

The balance of other provisions at 31/12/2011 refers to various disputes or estimated liabilities in Group companies.

The final balance is disclosed as shown below in the consolidated balance sheet:

31/12/2011 31/12/2010 (€/000) (€/000)

Current 2,851 2,243Non-current 1,720 1,856Total 4,571 4,099

The Parent company and several of its subsidiaries are directly involved in several lawsuits. It is however considered that the settlement of said lawsuits will not generate any significant liabilities for the Group that cannot be covered by the risk provisions that have already been created. On 28 November 2011 parent company Interpump Group S.p.A. submitted a tax clearance application to the Italian Revenue Agency relating to the deductibility of the tax loss incurred by the sale of Unielectric. If the result of the application is positive, taxes for the year would be reduced by €2.7 million.

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22. Liabilities for employee benefits Liabilities for defined benefit plans The following movements were recorded in liabilities:

2011 2010 (€/000) (€/000)

Liabilities at 1 January 10,225 9,955Amount charged to income statement in the period 916 1,054Reclassifications to other current liabilities (200) (111)Change to consolidation basis (707) -Payments made (536) (673)Liabilities at 31 December 9,698 10,225

The following items were recognized in the income statement:

2011 2010 (€/000) (€/000)

Current service cost 215 194Financial charges 160 185Actuarial loss (profit) recorded in the period 541 675Past service cost - -Total recognized in the income statement 916 1,054

Items recognized in the income statement were booked as follows:

2011 2010 (€/000) (€/000)

Cost of sales 418 515Distribution costs 144 162General and administrative expenses 194 192Financial charges 160 185Total 916 1,054

Liabilities for defined benefit plans (Severance indemnity - TFR) were established with the following actuarial assumptions:

Unit of measurement 2011 2010

Interest rate % 4.32 4.43Expected increase in rate of remuneration* % 3.33 3.33Percentage of employees expected to resign (turnover)** % 4.11 3.94Annual cost-of-living increase % 2.0 2.0Average period of employment Years 11.30 11.12

* = restricted to companies with less than 50 employees. ** = average annual resignation percentage, all causes, in the first ten years following the assessment.

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23. Share capital The share capital is composed of 97,668,822 ordinary shares with a unit face value of €0.52 for a total amount of €50,787,787.44. In contrast, share capital recorded in the financial statements amounts to €/000 47,936 because the nominal value of purchased treasury shares, net of divested treasury stock, was deducted from the share capital in compliance with the reference accounting principles.

In October 2011 a total of 10,464 warrants were exercised, with the consequent subscription of 6,431 ordinary shares at a unit price of €4.80 for a total value of €30,868.8, of which €3,344.12 by way of share capital and €27,524,68 by way of a premium. There are therefore 18,446,168 outstanding warrants exercisable in October 2012 by underwriting 59 newly issued shares for each 96 warrants at a price of €5.10. Changes in treasury stock over the past two years have been as follows: Number

Balance at 31/12/2009 3,660,7202010 purchases -Sale of treasury shares for the purchase of subsidiaries (600,748)Balance at 31/12/2010 3,059,9722011 purchases 3,548,594Sale of treasury shares for the purchase of subsidiaries (1,074,286)Sale of shares for the exercise of stock options (50,000)Balance at 31/12/2011 5,484,280

Taking treasury stock into consideration, the following changes were recorded in the number of shares in circulation: 2011 2010 Number of shares Number of shares

Ordinary shares in existence at 1 January 97,662,391 96,766,004Treasury stock (3,059,972) (3,660,720)Shares in circulation at 1 January 94,602,419 93,105,284Purchased treasury stock (3,548,594) -Treasury stock sold 1,124,286 600,748Increase in share capital 6,431 896,387Total shares in circulation at 31 December 92,184,542 94,602,419

The aims identified by the Group in the management of capital are the creation of value for shareholders and supporting the growth of the group. The Group therefore intends to maintain an adequate level of capitalization, which simultaneously makes it possible to generate a satisfactory economic return for shareholders and to guarantee the economically effective access to external sources of borrowing. The Group constantly monitors the evolution of the level of debt in relation to shareholders' equity and the generation of cash by virtue of its industrial operations. In order to attain the aforementioned goals, the Group constantly monitors the cash flows generated by the business sectors in which it operates, both through improvement or maintenance of profitability, and careful management of working capital and of other expenditure. The Board of Directors can propose, to the Shareholders' Meeting, increases or decreases of the share capital or, where permitted by law, the distribution of reserves. In this

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context the Group also purchases treasury stock, within the limits authorized by the Shareholders' Meeting, following the same logic of value creation, in line with the aims of financial and developmental equilibrium, also by means of targeted acquisitions. Capital is construed as both the value provided by Interpump Group shareholders (share capital and share premium reserve, totalling €/000 112,655 at 31 December 2011 and €/000 123,620 at 31 December 2010), and the value generated by operations (other reserves and legal reserve, including profit for the year, overall equivalent to €/000 201,036 at 31 December 2011 and €/000 170,588 at 31 December 2010, excluding the translation provision and the provision for fair value measurement of hedge derivatives). Purchased treasury stock The amount of treasury stock held by Interpump Group is recorded in an equity provision. In 2011 the Group acquired 3,548,594 treasury shares at an average unit cost of €4.6468 (no treasury shares were purchased in 2010). Treasury stock sold In the context of the execution of the stock option plans 50,000 options were exercised resulting in proceeds of €/000 188. Moreover, with the acquisition of the additional 11% of Interpump Hydraulics International on 6 September 2011 a total number of 1,074,286 treasury shares were transferred for the amount of €/000 4,309. In 2010 the Group divested 600,748 treasury shares for the deferred payment of the acquisition cost of HS Penta, for a value of €/000 3,344 Assigned options The Board of Directors' meeting of 15 March 2011, after having checked that the established goals have been accomplished, determined that the 2,299,440 options of the 2010/2012 incentive plan had now become exercisable. In particular, 804,000 options assigned to Giovanni Cavallini, 804,000 options assigned to Fulvio Montipò, 257,280 options assigned to Paolo Marinsek and 434,160 options assigned to other beneficiaries all became exercisable. The options can be exercised at the price of €3.75 per share as from 30 June 2013 until 31 December 2016. The fair value of the stock options assigned with the new incentives plan had already been established at the time of the prior allocation, which was dependent on the accomplishment of the goals. Stock options The fair value of 2002/2005, 2006/2010 and 2011/2012 stock option plans was recorded in the 2011 and 2010 financial statements in compliance with IFRS 2. Costs of €/000 996 (€/000 2,280 in 2010) relating to the stock option plans were therefore recognized in the 2011 income statement, with a matching entry in the share premium reserve. Said costs represent the portion for the financial period of the value of the options assigned to employees and directors, established at the allocation date, corresponding to the value of the services rendered by the latter in addition to normal remuneration. The difference compared to 2010 is due to the fact that the allocation of the fourth tranche of the 2006/2009 plan is entirely exercisable as from July 2010 so the entire cost was ascribed to the 2010 income statement rather than being distributed between the years of maturity, as occurred for the other plans.

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Items recognized in the income statement were booked as follows:

2011 2010 (€/000) (€/000)

Cost of sales - 32Distribution costs 47 60General and administrative expenses 949 2,188Total 996 2,280

Changes in the share premium reserve were as follows:

2011 2010 €/000 €/000

Share premium reserve at 1 January 74,427 65,548Increase of the period due to recording in the income statement of the fair value of stock options assigned

996 2,280

Increases for the transfer of treasury stock following the payment for acquisitions of subsidiaries

3,750 3,031

Increase for share capital increase 28 3,568Increases for the transfer of treasury stock following the exercise of stock options

162 -

Utilization to cover purchase of treasury stock (14,644) -Share premium reserve at 31 December 64,719 74,427

The 2002/2005 plan is described analytically in the Board of Directors' Report. The cost of each tranche is determined in a different manner for each vesting period and is recorded in the income statement for each tranche in the period of maturity on the basis of the months that have elapsed from the date of allocation to the reporting date.

Changes in options are as follows:

2011 2010 Number of options Number of options

Options assigned at 1 January 602,850 586,850Options assigned during the year - -Options exercised during the year - -Options reissued (cancelled) during the year - 16,000Total options assigned at 31 December 602,850 602,850Of which: vested at 31 December 602,850 602,850not vested at 31 December - -Total options assigned at 31 December 602,850 602,850

The remaining 602,850 options refer to the fourth tranche (exercise price of € 5.6774) and are exercisable until 31/12/2013.

The Shareholders' Meeting of 20 April 2006 approved another stock option plan (2006/2009) which, like the previous one, is described in detail in the Board of Directors' Report. Options are exercisable as shown in the following table:

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No. of options granted

Period for exercising

Exercise price

Euro

First tranche 796,935 01/05/2010 – 31/05/2015 7.2884Second tranche 827,361 01/05/2011 – 31/05/2016 5.4047Third tranche 275,000 01/05/2012 – 31/05/2017 3.7524Fourth tranche 1,050,000 01/07/2010 – 31/12/2017 3.7524Total 2,949,296



Options assigned at 1 January 2,999,296 1,869,296Options assigned during the year - 1,100,000Options exercised during the year (50,000) -Options reissued (cancelled) during the year - 30,000Total options assigned at 31 December 2,949,296 2,999,296Of which: - vested at 31 December 2,674,296 1,896,935- not vested at 31 December 275,000 1,102,361Total options assigned at 31 December 2,949,296 2,999,296

The Shareholders' Meeting of 21 April 2010 approved the adoption of a new incentive plan designated “Interpump 2010/2012 Incentives Plan”. The plan, which is based on the free assignment of options that grant the beneficiaries the right, on the achievement of specified objectives, to (i) purchase or subscribe the Company’s shares up to the maximum number of 3,000,000 or, (ii) at the discretion of the Board of Directors, receive the payment of a differential equivalent to any increase in the market value of the Company’s ordinary shares. Beneficiaries of the plan can be employees or directors of the Company and/or its subsidiaries, identified among the subjects with significant roles or functions. The exercise price has been set at € 3.75 per share. The options can be exercised between 30 June 2013 and 31 December 2016. The next meeting of the Board of Directors held on 21 April 2010 set a figure of 3,000,000 for the maximum number of options assignable for each tranche (750,000 for the first tranche, 1,050,000 for the second tranche and 1,200,000 for the third tranche) and established the terms for the assignment of the options that are connected to the achievement of specific accounts parameters and the performance of the Interpump Group share. The same Board of Director's meeting assigned 1,000,000 options to Interpump Group S.p.A. directors Mr Cavallini and to Mr Montipò and 320,000 to Mr. Paolo Marinsek, the exercise of which is subject to the occurrence of the above conditions. In addition, the same Board of Directors' meeting assigned 680,000 options, granting a separate mandate to the Interpump Group Chairman, Deputy Chairman and Chief Executive Officer to identify the beneficiaries from among the employees, directors and collaborators of the Group. In July 2010 the beneficiaries were chosen for 540,000 assigned options, while the beneficiaries of 140,000 options are yet to be identified. The Board of Directors' meeting of 15 March 2011, after having checked that the established goals have been accomplished, determined that the 2,299,440 options of the 2010/2012 incentive plan had now become exercisable. In particular, 804,000 options assigned to Giovanni

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Cavallini, 804,000 options assigned to Fulvio Montipò, 257,280 options assigned to Paolo Marinsek and 434,160 options assigned to other beneficiaries all became exercisable.

The fair value of the stock options and the actuarial assumptions utilized in the binomial lattice model are as follows:

2002-2005 plan, fourth tranche

Unit of measurement

Number of shares assigned no. 944,700Grant date May 2006Exercise price € 5.6774

Vesting date 1/3 May 2006

1/3 May 20071/3 May 2008

Fair value per option at the grant date € From 1.288620 to

1.452840Expected volatility (expressed as weighted average of volatility values utilized in construction of the binomial lattice model)

% 23%

Expected average duration of the plan life Years From 4.7 to 6.7Expected dividends (compared with share value) % 4%Risk free interest rate (calculated by means of a linear interpolation of Swap rates at 30/04/2005)

% From 3.774 to 3.998

2006-2009 Plan - First tranche

Unit of measurement

Number of shares assigned no. 826,935Grant date May 2007Exercise price € 7.2884Vesting date 1 May 2010Fair value per option at the grant date € 1.8187Expected volatility (expressed as the weighted average of volatility values utilized in construction of the binomial lattice model)

% 23%

Expected average duration of the plan life Years 7.7Expected dividends (compared with share value) % 4%Risk free interest rate (calculated by means of a linear interpolation of Swap rates at 30/05/2007)

% From 4.36 to 4.3745

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2006-2009 Plan - Second tranche

2006-2009 Plan - Third tranche

Unit of measurement

Number of shares assigned no. 275,000Grant date April/July 2009Exercise price € 3.7524Vesting date 1 November 2012Fair value per option at the grant date € 0.57306Expected volatility (expressed as the weighted average of volatility values utilized in construction of the binomial lattice model)

% 30%


% From 3.258 to 3.395


Unit of measurement

Number of shares assigned no. 827,361Grant date May 2008Exercise price € 5.4047Vesting date 1 May 2011Fair value per option at the grant date € 1.2431Expected volatility (expressed as weighted average of volatility

values utilized in construction of the binomial lattice model) % 23%

Expected average duration of the plan life Years 7.7Expected dividends (compared with share value) % 4%Risk free interest rate (calculated by means of a linear

interpolation of Swap rates at 17/04/2008) % From 4.445 to 4.496

Unit of measurement

Number of shares assigned no. 1,100,000Grant date March 2010Exercise price 3.7524Vesting date 1 July 2010Fair value per option at the grant date € 0.92286Expected volatility (expressed as weighted average of volatility



interpolation of Swap rates at 2010) % From 2.899 to 3.069

84

2010//2012 Plan

First assignment Unit of measurement

Number of shares assigned no. 2,320,000Grant date 21 April 2010Exercise price 3.7500Vesting date 1 July 2013Fair value per option at the grant date € 0.89555Expected volatility (expressed as weighted average of volatility values utilized in construction of the binomial lattice model)

% 30%

Expected average duration of the plan life Years 6.666Expected dividends (compared with share value) % 4%Risk free interest rate (calculated by means of a linear interpolation of swap rates at 21 April 2010)

% From 2.63 to 2.83

Second assignment Unit of

measurement Number of shares assigned no. 540,000Grant date 07 July 2010Exercise price 3.7500Vesting date 1 July 2013Fair value per option at the grant date € 1.08964Expected volatility (expressed as weighted average of volatility values utilized in construction of the binomial lattice model)

% 30%

Expected average duration of the plan life Years 6.5Expected dividends (compared with share value) % 4%Risk free interest rate (calculated by means of a linear interpolation of swap rates at 7 July 2010)

% From 2.29 to 2.49

The expected volatility of the underlying (Interpump Group share) is a measure of the prospect of price fluctuations in a specific period. The indicator that measures volatility in the model utilized to evaluate the options is the mean square annualized deviation of compound returns of the Interpump Group share through time.

24. Reserves Reserve for valuation of hedging derivatives at fair value This includes net accumulated changes in the fair value of derivative financial instruments classified as hedges and recorded using the hedge accounting method.

Translation provision This provision consists of exchange gains generated by the conversion of the financial statements of foreign subsidiaries based outside the EU and from variations in goodwill ascribable to these companies, again as a result of exchange rate fluctuations.

85

Classification of net equity depending on the possibility of utilization

(amounts in €/000)

Amount Possibility of

utilization

Available portion

Tax payable in the event of distribution

Summary of amounts utilized in previous three

years

to cover losses for other reasons

Share capital 50,788 B - - - 1,596

Nominal value of treasury stock in the portfolio

(2,852)

Total share capital 47,936

Capital reserves

From Parent’s financial statements:

Legal reserve 6,860 B - - - -

Share premium reserve 43,257 A,B,C 43,256

Total from Parent Company's financial statements

50,117

Consolidation entries 36

Total from cons. financial statements 50,153

Profit reserves:

From Parent’s financial statements:


Share premium reserve 20,868 A,B,C 20,481 1,687 - 7,960

Reserve for treasury stock held 24,400 - - - - 17,786

Extraordinary reserve 49,827 A,B,C 49,148 - - 3,527

Reserve for share capital reduction 2,851 - - - - -

First Time Adoption Reserve (30) - - - - -

Reserve for valuation of hedging derivatives at fair value

(649) - - -

-

-

Profit for the period 7,968 A,B,C 7,968 - - -

Total from Parent's fin. statements 108,532 120,853

Consolidation entries 127,476

Total from cons. financial statements 236,008

Treasury stock (24,400)

Non-distributable portion* (3,916)

Remaining distributable portion 116,937

A: to increase capital B: to cover losses C: for shareholder dividends

*= represents the non-distributable portion destined to cover deferred costs that have not yet been amortized.

Utilizations refer to dividends and reductions of reserves for other causes and do not include transfers between reserves. Specifically, with reference to the changes that have occurred in the previous three years, note that use of the share premium and extraordinary reserves refers to the distribution of dividends, and to the cancellation of treasury stock.

According to Italian tax regulations, reserves and profit can be freely distributed and are not subject to tax even in the event of distribution if the reserves and net profit exceed the negative components of income ascribed only in the tax return. Otherwise, distributed reserves and profit are subject to tax in the measure in which the residual reserves and profits are lower than the negative components of income that have been ascribed exclusively to the tax return. At 31 December 2011, this condition has been complied with in full, hence no taxes were payable in

86

the event of distribution of the parent company's entire profits for the year and the entirety of available reserves, beyond the taxes already indicated in the prior statement.

Breakdown of components recorded directly in equity

2011 2010 (amounts in €/000)

Amount before taxes Taxes

Amount net of taxes

Amount before taxes

Taxes

Amount net of taxes

Accounting of derivative financial instruments used to hedge the interest rate risk recorded in accordance with the cash flow hedging method 1,283 (352) 931 (926)

255 (671)Accounting of derivative financial

instruments used to hedge the exchange rate risk recorded in accordance with the cash flow hedging method (434) 146 (288) 91

(27) 64Profits (Losses) arising from the

conversion to euro of the financial statements of foreign companies 5,344 - 5,344 12,338

- 12,338Profits (Losses) of companies

carried at equity 18 - 18 40

- 40Total 6,211 (206) 6,005 11,543 228 11,771

25. Minority shareholders' equity This is the portion of consolidated shareholders' equity pertaining to minority shareholders of the consolidated subsidiaries. The following changes were recorded:

(€/000)

Interpump Hydraulics

Group

Interpump Hydraulics

International Group

Unielectric S.p.A.

SitS.p.A.

Hammelmann Pump System

(China)

Portions of intra-group

profits tied up in inventory Total

Balance at 31/12/2010 4,594 438 1,804 439 224 (322) 7,177Dividends distributed to minority interests (356) - - - - - (356)Other changes directly to

minority shareholders' equity - - (1) - - - (1)

Exchange rate difference 52 - - - 22 - 74

Sale of Unielectric - - (1,892) - - 7 (1,885)

Minority interests acquired (899) - - - - - (899)

Minority interests profit (loss) for the period 1,115 74 89 (3) 47 31 1,353

Balance at 31/12/2011 4,506 512 - 436 293 (284) 5,463

87

26. Other net revenues Continuing operations 2011 2010 (€/000) (€/000)

Income from the sale of waste and scrap 2,073 2,350Reimbursement of expenses 2,559 2,222Capital gain from the disposal of assets held for sale 1,162 -Capital gains from the sale of property, plant and equipment 112 147Capital gains from assets available for sale 1 38Utilization of surplus provisions and allocations 135 140Insurance refunds 134 111Other 1,394 1,727Total 7,570 6,735

27. Costs by nature Continuing operations 2011 2010 (€/000) (€/000)

Amortization and depreciation of intangible and tangible fixed assets 18,077 18,539Payroll expenses 106,704 98,147Purchases of raw materials, components and changes in inventory 192,398 159,417External manufacturing 11,733 9,979Hire purchase and leasing charges 7,278 7,212Other costs 67,986 58,703Total cost of sales, distribution costs, general and administrative expenses and other operating costs

404,176 351,997

In accordance with the requirements of article 149-duodecies if the Issuers' Code as amended by Consob Resolution no. 15915 of 3 May 2007 published in the Official Journal of the Italian Republic no. 111 of 15 May 2007 (S.O. no. 115), the remuneration amounts for 2011 are listed below for services rendered to the Group by the independent auditors and the entities belonging to the network of said independent auditing company:

assignments for auditing of the parent company €/000 129;

assignments for auditing of subsidiaries 571 €/000.

The above amounts are included under Other costs within general and administrative expenses.

28. Directors' and statutory auditors' remuneration The compensation paid to the Directors and Statutory auditors of Interpump Group S.p.A. for the conduct of their functions, also in the other companies included in the scope of consolidation, is as follows: 2011 2010 (€/000) (€/000)

Directors 5,073 5,415Statutory auditors 171 146Total compensation 5,244 5,561

88

The amounts include the compensation resolved by the Shareholders’ Meeting, the remuneration established by the Board of Directors for directors vested with special offices, inclusive of bonuses, employment compensation and the salary component deriving from stock option plans disclosed at the fair value of the options calculated at the grant date, for the portion accruing to the year. 29. Financial income and charges Continuing operations 2011 2010 (€/000) (€/000)

Financial income Interest income 3,044 1,078Other financial income 2 280Foreign exchange gains 1,668 2,708Earnings from valuation of derivative financial instruments 1,651 1,590Total financial income 6,365 5,656

Financial charges Interest payable 10,500 9,379Other financial charges 160 1,250Foreign exchange losses 2,444 2,304Losses from valuation of derivative financial instruments 1,928 1,919Total financial charges 15,032 14,852Total financial charges, net 8,667 9,196

30. Income taxes The tax rate for 2011 was 34.5% versus the 39.6% of 2010. The reduction is due to the greater profitability that is reflected in a lower incidence of IRAP and the recognition of deferred tax assets, hitherto not allocated, on tax losses of 1.4 million further to legislative amendments in the realm of IRES corporate income tax introduced in Italy in relation to the tax treatment of corporate losses, which in the Group resulted in a change in the evaluation of the probability of being able to make use of said tax savings in the future. Taxes recognized in the income statement can be broken down as follows:

2011 2010 (€/000) (€/000)

Current taxes (23,021) (17,734)Current taxes of prior financial periods 76 90Deferred taxes (108) (615)Total taxes (23,053) (18,259)

89

Deferred tax recognized in the income statement can be broken down as follows:

2011 2010 (€/000) (€/000)

Deferred tax assets generated during the period 2,201 1,537Deferred tax liabilities generated during the period (2,877) (1,640)Deferred tax assets transferred to the income statement (2,140) (2,068)Deferred tax liabilities transferred to the income statement 1,338 1,556Unrecognized deferred tax assets - -Deferred taxes not calculated in previous years 1,370 -Total deferred taxes (108) (615)

The reconciliation of taxes calculated on the basis of the nominal rates in force in the different countries and the effective tax burden is a follows:

2011 2010

(€/000) (€/000)

IRES/National tax

Profit before taxes from the income statement 66,706 45,640

Theoretical taxes at Italian rate (27.5%) 18,344 12,551

Effect of different rates applicable to foreign subsidiaries (1,425) (1,014)

Tax on dividends of subsidiaries 342 957

Higher (Lower) taxes resulting from the valuation of investments using the equity method 64 (84)

Higher taxes for non-deductible stock option costs 42 106

Higher (Lower) taxes due to non-recording of deferred tax assets on fiscal losses (224) (176)

Previously unallocated deferred tax assets on tax losses (1,370) -

Taxes relating to previous years (7) (40)Higher taxes on financial expenses relative to discounting of debts for the acquisition of equity investments 234 391

Higher (Lower) taxes for non-taxable revenues and non-deductible costs 35 105

Total IRES/National tax 16,035 12,796

IRAP/Local income taxes


Theoretical taxes at Italian rate (3.9%) 2,602 1,780

Effect of different rates applicable to foreign subsidiaries 2,157 1,950

Higher taxes for non-deductible payroll costs 1,501 1,378

Higher taxes for non-deductible directors' emoluments 286 298

Higher taxes due to non-deductible financial expenses 310 268

Higher tax resulting from valuation of investments using equity method 11 (12)

Taxes relating to previous years (69) (50)

Higher (Lower) taxes for non-taxable revenues and non-deductible costs 220 (149)

Total IRAP/Local income taxes 7,018 5,463

Total income taxes recognized in the income statement 23,053 18,259

90

The Parent Company chose along with Teknova S.r.l. and Interpump Hydraulics S.p.A. to take up the option of national fiscal consolidation. In addition, also Interpump Hydraulics International S.p.A., HS Penta S.p.A., Contarini Leopoldo S.r.l., Oleodinamica Panni S.r.l., Cover S.r.l. and Modenflex Hydraulics S.r.l., have adhered to another national fiscal consolidation.

31. Earnings per share Basic earnings per share Basic earnings per share for the year are calculated on the basis of consolidated profit for the period attributable to the Parent company's shareholders divided by the weighted average number of ordinary shares calculated as follows: 2011 2010

Consolidated profit for the period attributable to parent company shareholders (€/000)

41,232 26,509

Average number of shares in circulation 93,963,275 93,229,066Basic earnings per share for the period (€) 0.439 0.284

Diluted earnings per share Comprehensive diluted earnings per share are calculated on the basis of diluted consolidated profit of the period attributable to the parent company's shareholders, divided by the weighted average number of ordinary shares in circulation adjusted by the number of potentially dilutive ordinary shares. The calculation is as follows:

2011 2010

Consolidated profit for the period attributable to Parent company shareholders (€/000)

41,232 26,509

Adjustment: financial charges matured in the period on the debt for the acquisition of HS Penta

- 12

Total earnings for calculation of earnings per diluted share 41,232 26,521Average number of shares in circulation 93,963,275 93,229,066Number of potential shares for stock option plans (*) 840,181 154,083Number of potential shares for the exercise of warrants (**) 166,593 -Average number of shares (diluted) 94,970,049 93,383,149Diluted earnings per share for the period (€) 0.434 0.284

(*) calculated as the number of shares assigned for in-the-money stock option plans multiplied by the ratio between the difference between the average value of the share in the period and the exercise price at the numerator, and the average value of the share in the period at the denominator.

(*) calculated as the number of shares potentially exercisable by the ratio between the difference between the average value of the share in the period and the exercise price at the numerator, and the average value of the share in the period at the denominator.

For 2010 the plans for capital increases through the exercise of warrants were not considered because of their anti-dilutionary effects (out of the money).

91

32. Information on financial assets and liabilities Financial assets and liabilities, broken down by the categories identified by IAS 39, are summarized in the following table:

Financial assets at

31/12/2011

Financial liabilities at 31/12/2011

(€/000)

At the fair value recorded in the Income Statement

Initially* IAS 39

Loans and receivables

Held for sale

Valued at amortized

cost

Total

Fair value

Trade receivables - - 95,912 - - 95,912 95,912Derivative instruments -

assets

- - - -

-

-

-Other current assets - - 6,651 - - 6,651 6,651Other financial assets - 2,406 224 789 - 3,419 3,419Trade payables - - - - (57,962) (57,962) (57,962)Payables to banks - - - - (8,762) (8,762) (8,762)Current interest bearing

financial payables

- - - -

(113,700)

(113,700)

(113,700)Derivative instruments -

payables

- (585) - -

-

(585)

(585)Other current liabilities - - - - (22,943) (22,943) (22,943)Non-current interest-

bearing financial payables

- - - -

(113,569)

(113,569)

(113,569)Other non-current

liabilities

- - - -

(20,439)

(20,439)

(20,439)Total - 1,821 102,787 789 (337,375) (231,978) (231,978)

* = designated as such at the time of initial recording. ** = classified as held for trading according to the requirements of IAS 39.

Financial

assets as at31/12/2010

Financial liabilities as at

31/12/2010

(€/000)


Initially* IAS 39


Held for sale

Valued at amortized

cost

Total

Fair value

Trade receivables - - 88,536 - - 88,536 88,536Derivative instruments -

assets

- 55 - -

-

55

55Other current assets - - 1,954 - - 1,954 1,954Other financial assets - 2,135 187 605 - 2,927 2,927Trade payables - - - - (61,732) (61,732) (61,732)Payables to banks - - - - (7,751) (7,751) (7,751)Current interest bearing

financial payables

- - - -

(125,374)

(125,374)


payables

- (593) - -

-

(593)

(593)Other current liabilities - - - - (19,805) (19,805) (19,805)Non-current interest-


- - - -

(131,718)

(131,718)

(131,718)Other non-current

liabilities

- - - -

(23,175)

(23,175)

(23,175)Total - 1,597 90,677 605 (369,555) (276,676) (276,676)

* = designated as such at the time of initial recording. ** = classified as held for trading according to the requirements of IAS 39.

92

The accounting value of financial assets and liabilities is substantially the same as their fair value.

In 2011 the Group income statement showed fair value earnings for €/000 608 (€/000 72 in 2010) and fair value losses for €/000 763 (€/000 18 in 2010) on derivative financial instruments, which, although arising for hedging purposes, failed to meet all the requirements of IAS 39 in order to be considered hedges. These derivative financial instruments are the non-hedging proportion of IRS (Interest Rate Swaps) and several plain vanilla forwards that arose, with the exception of one contract, in 2010 and all were extinguished in 2011. Of the IRS that do not comply with the requirements for classification as hedges in accordance with IAS 39, the value of €33.3 million will be extinguished on 19 January 2012, while €26.4 will be extinguished in accordance with a predetermined amortization plan that will terminate on 30 June 2014. Note 11 gives the methods for calculation utilized to establish the fair value of derivative financial instruments. Profits of €/000 3 and losses of €/000 20 were recorded on the underlyings (profits of €/000 1 in 2010).

Loans and receivables generated revenues and costs. Revenues are referred to exchange gains in the amount of €/000 1,140 (€/000 1,945 in 2010) and the reversal due to surplus in 2010 of the bad debt provision of €/000 20 (not present in 2011) included among other revenues. In contrast, costs refer to bad debts for €/000 1,525 (€/000 808 in 2010), included under other operating costs in the face of the Income Statement adopted, to foreign exchange losses for €/000 1,454 (€/000 1,540 in 2010) and to financial expenses in 2010 for €/000 1,065 (not present in 2011).

Also financial liabilities valued at the amortized cost generated costs and revenues in the Income Statement. Revenues refer to cash discounts from suppliers for €/000 1,140 (€/000 763 in 2010) and cash discounts from suppliers in 2010 equivalent to €/000 280 (not present in 2010), while costs refer to currency exchange losses of €/000 970 (€/000 763 in 2010) and the portion of ancillary charges initially incurred to obtain the loans and then distributed over the life of the loan in accordance with the financial method. In 2011 ancillary charges ascribed to the Income Statement totalled €/000 493 (€/000 524 in 2010).

Financial assets and liabilities that are not designated at fair value recorded in the Income Statement (all those indicated in the previous table with the exception of those appearing in the first two columns) generated, respectively, interest receivable for €/000 90 (€/000 38 in 2010) and interest payable for €/000 10,007 (€/000 8,855 in 2010); in addition, general and administrative expenses include commission amounts and bank charges for €/000 643 (€/000 660 in 2010).

33. Information on financial risks The company is exposed to financial risks associated with its activities: market risk (mainly relative to exchange rates and interest rates), since the Group does

business internationally and is exposed to the exchange rate risk related to business conducted in US dollars and Australian dollars;

credit risk connected with business relations with customers;

liquidity risk, with special reference to the availability of financial resources and access to the lending market and financial instruments in general;

price risk in relation to metal price fluctuations that constitute a significant portion of the raw materials purchase price.

The Group is not exposed to significant risk concentrations.

93

As described in Note 4 "Financial risks management", the Interpump Group constantly monitors the financial risks to which it is exposed so that the potential negative effects can be evaluated in advance and appropriate actions can be taken to mitigate them.

The following section provides reference qualitative and quantitative indications concerning the uncertainty of such risks for the Interpump Group.

The quantitative data given below are not to be construed as forecasts; specifically, the sensitivity analyses concerning market risks are unable to reflect the complexity and correlated relations of markets that may derive from each prospected change.

Exchange risk The Group is exposed to risks deriving from fluctuations in currency exchange rates that can impact on the economic result and shareholders' equity value. Specifically:

wherever Group companies generate revenues in currencies other than the currencies in which the respective costs are denominated, exchange rate fluctuations can impact on the relative companies' operating profit. In 2011 the total amount of cash flows directly exposed to exchange risks corresponded to approximately 9% of Group turnover (approximately 8% in 2010). The main exchange relations to which the Group is exposed concern: - EUR/USD, concerning sales of high-pressure pumps and very high-pressure systems in

dollars in North America through the Group's distribution companies;

- EUR/USD, concerning sales in dollars of various hydraulic components in South America;

- Chilean Peso/USD, concerning sales in dollars of various hydraulic components in South America;

- EUR/AUD, concerning sales in Australian dollars of very high-pressure systems in Australia through one of the Group's distribution companies;

- Renminbi/USD and Renminbi/EUR, in relation to sales in dollars and euros of hydraulic pumps on the North American and Indian markets.

The Interpump Group has adopted a policy of hedging commercial transactions denominated in foreign currency, in the framework of which the most effective derivative instruments for the achievement of the preset goals have been identified and the relative responsibilities, duties and system of delegations have been defined. In relation to the exposure in dollars for sales of high-pressure pumps and very high pressure systems to its US subsidiaries and to third party customers, it is Group policy to hedge a prudentially determined portion of predicted sales for periods of four to eight months. This strategy is followed also for sales in AUS dollars, although due to the more limited predictive time span, at times the decision to hedge may coincide with the reception of the order. With regard to sales in dollars made from Europe on the South American market, Group policy involves hedging the irrevocable order of the customer or the sales invoice, this moment coinciding with the reception of the relative letter of credit wherein the sale becomes certain, because the period of time that elapses prior to payment is considered to be significant and the Group intends to reduce its exposure to the exchange fluctuation risk by this method. In 2011 the Group exchange risk hedging policy concerned approximately 61% of the cash-flows described above (72% in 2010).

Whenever Group companies sustain costs denominated in foreign currencies other than the currencies of denomination of the relative revenues, fluctuations in the exchange rates can affect the operating profit of the companies in question.

94

In 2011 the total amount of cash flows directly exposed to exchange risks corresponded to approximately 10% of Group purchases of continuing operations (approximately 11% in 2010) and mainly concerned the USD/EUR exchange rate. Currently, Group policy relative to purchases in foreign currency is to refrain from systematically taking out hedges because it is considered that said costs have not yet reached a level such as to allow the benefits connected with stabilization of the exchange risk to offset the costs associated with the setting up of the relative hedge. However, the Group monitors this phenomenon constantly both in relation to exchange rate trends and also the evolution of business.

Again in relation to commercial activities, Group companies can be in a position wherein they hold commercial receivables or payables denominated in currencies other than the account currency of the holding entity. Fluctuations in exchange rates can therefore result in the realization or assessment of positive or negative exchange differences. As highlighted earlier, it is Group policy to hedge exposure deriving from trade receivables and keep constant track of the effectiveness of hedging exposures deriving from trade receivables.

In relation to financial exposure, wherever the monetary outflows/inflows are denominated in a currency other than the account currency utilized by the creditor/debtor company, fluctuation of the exchange rates can impact negatively on the net profits of said companies. In 2010 Interpump Hydraulics S.p.A. granted a €2 million loan to its subsidiary Interpump Hydraulics India. For the present the Group has decided not to hedge this exposure, which generated exchange rate gains of €/000 236 in 2011 (€/000 18 in 2010). Also, in 2011 Interpump Hydraulics S.p.A. granted a $/000 813 loan to its subsidiary Wuxi Interpump Weifu Hydraulics. For the present the Group has decided not to hedge this exposure, which generated exchange rate gains of €/000 38 in 2011.

Several group subsidiaries are situated in countries outside the Eurozone, notably the US, Chile, Australia, China and India. Since the Group's functional currency is the euro, the income statements of these companies are converted into euro at the average exchange rate of the period. Changes in exchange rates can impact on the corresponding value of revenues, costs and economic result in euro.

The assets and liabilities of consolidated companies whose account currency is different from the euro can assume different equivalent euro values depending on the rates of exchange. As provided for by the reference accounting principles, the effects of changes in the exchange rate are recognized directly in equity in the Translation provision caption. The Group monitors the main exposures to the conversion exchange risk; at the date of the financial statements there were no hedges in existence taken out to cover said exposures.

In 2011 and 2010 the nature and structure of exposures to the exchange risk and the hedging policies followed by the Group remained substantially similar to those of the prior year, although the 2011 departure of the Electric Motors Sector from the Interpump Group resulted in lower Group exposure to the exchange fluctuation risk associated with purchases of supplies in dollars. Sensitivity analysis relative to the exchange risk The potential loss deriving from the change in the fair value of financial assets and liabilities caused by a hypothetical and immediate increase in the value of the euro of 10% with respect to the main foreign currencies would therefore be approximately €/000 801 (€/000 709 in 2010). The sensitivity analysis did not take account of changes in the receivables and payables in relation to which the hedge operations were set up. It is reasonable to assume that the fluctuation in exchange rates could produce an opposite economic effect on the derivative financial instruments of an amount that is identical to the change in the underlying hedged transactions thereby effectively offsetting the fluctuation.

95

Interest rate risk Group companies utilize external financial resources in the form of debt and allocate cash on hand to bank and post office deposits or repurchase agreements. Changes in the market interest rate influence the cost and yield of various forms of financing and investment, thus impacting on the level of financial charges sustained by the Group. It is Group policy to monitor the slope of the interest rates curve and to hedge part of the loans currently in existence. As more fully described in note 11, at 31/12/2011 loans for which the interest range was hedged totalled €/000 43,230.

At 31 December 2010 all the Group's cash on hand and loans were subject to floating interest rates.

Sensitivity analysis relative to the interest rate risk The effects on the Group of a hypothetical and immediate upward variation in interest rates of 50 basis points would be higher financial expenses, net of the increase in financial income, totalling €/000 120 (€/000 73 in 2010). It is reasonable to assume that a 50 basis points decrease in interest rates would produce an equivalent effect, although this time in terms of lower financial expenses. The sensitivity analysis did not take account of loans in relation to which hedge operations were set up. It is reasonable to assume that the fluctuation in interest rates could produce an opposite economic effect on the derivative financial instruments of an amount that is identical to the change in the underlying hedged transactions thereby effectively offsetting the fluctuation. Credit risk The maximum theoretical credit risk exposure of the Group at 31 December 2011 and 2010 is represented by the accounting value of the financial assets recorded in the financial statements.

However, historically the Group has never suffered any significant bad debts (0.3% of sales of continuing operations in 2011 and 0.2% of sales of continuing operations in 2010). This is because the Group generally allows extended payments only to its long-term customers, whose solubility and economic stability is known. In contrast, new customers, after having passed an initial credit rating analysis, are required to make payments in advance or to open a letter of credit for amounts due.

Individual write-downs are applied in relation to positions, if of significant magnitude, in relation to which an objective condition of bad debt is recorded for the totality or a part of the outstanding amount. The amount of the write-down takes account of an estimate of the recoverable flows and the relative collection date, and the expenses and costs for future debt recovery. Provisions on a collective basis are allocated in relation to receivables that are not subject to individual write-downs, taking account of the historic exposure and statistical data.

At 31 December 2011 Loans and Receivables included under financial assets for the purposes of IFRS 7 totalled €/000 105,982 (€/000 93,417 at 31/12/2010), and they include €/000 3,536 relative to written down receivables (€/000 3,355 at 31/12/2010); on the residual amount payments overdue by less than three months were €/000 17,257 (€/000 12,371 at 31/12/2010), while those overdue beyond three months totalled €/000 4,929 (€/000 5,904 at 31/12/2010). In relation to receivables overdue by less than three months guarantees received total €/000 944 (€/000 606 at 31/12/2010), while in relation to receivables overdue by more than three months the guarantees received totalled €/000 200 (no guarantee in 2010).

The Group is not exposed to any significant concentrations of sales. In fact, in 2011 the top customer in terms of sales of continuing operations accounted for around 2% of turnover (2%

96

also in 2010) while the top 10 customers accounted for 8% (8% also in 2010). In terms of sector, the concentration is similar because the top customer in terms of sales accounts for around 2% for the Industrial Sector and around 3% for the Hydraulic Sector, while the top 10 customers absorb 13% for the Industrial Sector and 14% for the Hydraulic Sector.

Liquidity risk The liquidity risk can arise if it becomes impossible to obtain, at acceptable economic conditions, the financial resources needed for the Group's business operations.

The two main factors that define the Group's liquidity situation are the resources generated by or used in operating and spending activities, and the characteristics of expiry and renewal of debt or liquidity of financial investments and the relative market conditions.

The Group has adopted a series of policies and processes aimed at optimizing the management of resources in order to reduce the liquidity risk:

retention of an appropriate level of cash on hand;

strengthening of the Group's equity structure thanks to the availability of equity financing (share capital increase performed in 2010, 2011 and in the following years through the exercises of warrants);

diversification of the banks with which the Group operates;

access to adequate lines of credit;

negotiation of covenants on the consolidated level;

monitoring of the prospective conditions of liquidity in relation to the corporate process.

The characteristics of maturity of interest bearing financial debts and bank debts are described in note 19.

Management considers that the currently available funds and lines of credit, in addition to resources that will be generated by operating activities, by loans and by future share capital increases through the exercise of warrants, will allow the Group to meet requirements deriving from investing activities, management of working capital and repayment of debts at the natural maturity dates, in addition to ensuring the pursuit of a strategy of growth, also by means of targeted acquisitions capable of creating value for shareholders. Cash on hand at 31 December 2011 totals €109,068 million. Cash on hand, combined with the significant cash generation from operations that the Group has been able to realize in 2011 are definitely factors that will make it possible to reduce Group exposure to the liquidity risk. In consideration of the high level of liquidity held in 2010 and 2011, the Group invested in repurchase agreements in order to optimize finance management. The decision to maintain a high level of liquidity was adopted in order to minimize the liquidity risk, which is considered important given the current state of uncertainty of the economy. At 30 December 2011 the Group had entered into such contracts for a total of €45.1 million.

Price risk The Group is exposed to risks deriving from fluctuations in the prices of metals that can impact on economic results and profit margins. Specifically, purchases costs of continuing operations for metals accounted for 20% of total Group purchase costs of raw materials, semi-finished products and finished products in 2011 (20% also in 2010). The main metals utilized by the Group include brass, aluminium, copper, steel, stainless steel, cast iron, and, to a lesser extent, copper, sheet metal and mild steel. With the departure from the Electric Motors Sector the Group is less exposed to fluctuations in the price of copper and sheet steel. With respect to 31 December 2010, prices of raw materials used by the Group increased significantly. The Group

97

however managed to restrict the negative effects of the increases. Moreover, wherever possible, selling prices have been revised in order to pass on the entirety or part of the expense resulting from the increased price of raw materials to the Group's customers. The Group constantly monitors the trend of the prices of these materials in the attempt to adopt the most effective policies to reduce the potential exposure to this risk.

The Group sectors feature differing levels of propensity towards the risk of fluctuations in the prices of metals, notably:

metal costs in the Industrial Sector constituted approximately 18% of costs for the purchase of raw materials, semi-finished products and finished products in 2011 (17% in 2010). The metals utilized are primarily brass, steel, stainless steel, aluminium and copper. It is Group policy to leave the cost of stocking materials to our suppliers; in this manner the risk is hedged by means of orders for specific periods and quantities agreed at fixed prices; at 31 December 2011 there were signed commitments covering 52% of expected brass consumption and 20% of expected aluminium consumption for 2012 (12% coverage of brass consumption forecasts and 4% coverage of aluminium consumption forecasts for 2011). The percentages of coverage of the predicted consumption of brass and aluminium rise still further to 60% and to 32% if, in addition to the commitments entered into, we consider also the stocks of brass and aluminium on hand at 31/12/2011.

metal costs in the Hydraulic Sector constituted around 21% of purchase costs for raw materials, semi-finished products and finished products in 2011 (23% in 2010). The metals utilized are primarily steel, aluminium, mild steel and cast iron. The prices of these commodities, with the exception of aluminium, are not historically sensitive to significant fluctuations. The Group therefore considers that a strategy aimed at accurate analysis of price trends is sufficient to mitigate the price risk. In relation to aluminium, no hedging transactions are undertaken because of the limited effect of such operations on purchase prices.

Generally the selling prices of the various Group companies are reviewed once a year.

34. Notes to the cash flow statement

Property, plant and equipment In 2011, the Group purchased buildings, plant and machinery totalling €/000 15,924 (€/000 19,845 in 2010). This expenditure involved the payment of €/000 14,686, inclusive of the payment of past debts for the same purpose and net of deferred payables and outlays for tangible fixed assets destined for hire (€/000 9,033 in 2010).

Cash and cash equivalents This item can be broken down as follows:

31/12/2011 31/12/2010 (€/000) (€/000)

Cash and cash equivalents from the balance sheet 109,068 138,721Payables to banks (for current account overdrafts and advances subject to collection)

(8,762) (7,751)

Cash and cash equivalents from the cash flow statement 100,306 130,970

98

Net financial position and cash-flow statement For the amount and detail of the main components of the net financial position and the changes that occurred in 2011 and 2010 we invite you to refer to the "Cash Flow" section of the Board of Directors' Report.

35. Commitments At 31/12/2011 the Group had commitments to purchase raw materials totalling €/000 7,331 (€/000 7,415 at 31/12/2010).

Furthermore, the Group also has commitments to purchase tangible assets totalling €/000 2,057 (€/000 55 at 31/12/2010).

The Group has signed rental and hire purchase agreements primarily regarding buildings, machinery, cars and computers. The total outlay in 2011 was €/000 8,564 (€/000 8,478 at 31/12/2010). At 31/12/2011, the following commitments were outstanding:

(€/000)

Due within 1 year 7,845Due from 1 to 2 years 7,054Due from 2 to 5 years 8,701Due beyond 5 years 2,743Total 26,343

36. Transactions with related parties The Group has relations with unconsolidated subsidiaries and other related parties at arm's length conditions considered to be normal in the respective reference markets, taking account of the characteristics of the goods and services rendered. Transactions between Interpump Group S.p.A. and its consolidated subsidiaries, which are related parties of the company, were eliminated in the consolidated financial statements and are not described in this note.

The effects in the Group's consolidated income statement for 2011 and 2010 are given below:

2011 (€/000)

Consolidated

Total

Non-consolidated subsidiaries

Associates

Other related parties

Total related parties

% incidence on fin.

statements caption

Net sales 493,320 1,494 - 131 1,625 0.3% Cost of sales 313,848 263 33 14,290 14,586 4.6% Other revenues 7,877 9 - 2 11 0.1% Distribution costs 46,558 583 - 1,242 1,825 3.9% General and admin.

Expenses 61,921

-

-

910

910

1.5% Financial charges 15,069 - - 8 8 0.1%

2010 (€/000)

Total

Consolidated


Associates



% incidence on fin.

statements caption

Net sales 424,925 1,412 70 167 1,649 0.4% Cost of sales 272,636 257 - 9,750 10,007 3.7%

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Other revenues 6,948 11 - 12 23 0.3% Distribution costs 41,340 92 - 1,258 1,350 3.3% General and admin.

expenses

61,778

-

-

763

763

1.2% Financial income 5,656 - - 3 3 0.1%

The increase in the cost of sales in other related parties is primarily due to the higher level of purchases compared to 2010 made by Wuxi Interpump Weifu Hydraulics Company Ltd. (hereinafter Wuxi) from a company in which the Wuxi minority shareholder exerts significant influence. The effects on the consolidated statement of financial position at 31 December 2011 and 2010 are described below:

31 December 2011 (€/000)

Total

Consolidated


Associates



% incidence on fin.

statements caption

Trade receivables 95,912 1,050 - 20 1,070 1.1% Other non-current financial assets

3,424

852

-

-

852

24.9%

Trade payables 57,962 243 - 3,864 4,107 7.1% Current interest


122,462

-

-

346

346

0.3% Other current liabilities

22,943

-

-

13

13

0.1%

Short-term provision for risks and charges

2,851

179

-

-

179

6.3% Other non-current

liabilities

20,439

217

-

-

217

1.1%

31/12/2010 (€/000)

Total Consolidated


Associates


Total

related parties

% incidence on fin.

statements caption

Trade receivables 88,536 922 - 58 980 1.1% Other non-current

financial assets

3,399

628

470

-

1,098

32.3% Trade payables 61,732 12 - 1,130 1,142 1.8% Other current

liabilities

19,805

-

-

41

41

0.2%. Short-term

provision for risks and charges

2,243

103

-

-

103

4.6%

100

Loans to non-consolidated subsidiaries Relations with non-consolidated subsidiaries are as follows. (€/000) Trade receivables Revenues and Other revenues

31/12/2011 31/12/2010 2011 2010

HS Penta Africa Pty Ltd 715 674 1,142 615Hammelmann Bombas e Sistemas Ltda 267 209 (68) 433General Pump China Inc. 39 15 349 265Syscam Gestione Entegrada 29 24 80 110

Total subsidiaries 1,050 922 1,503 1,423

(€/000) Trade payables Total costs

31/12/2011 31/12/2010 2011 2010

Hammelmann Bombas e Sistemas Ltda 173 5 552 92

General Pump China Inc. 59 7 294 257HS Penta Africa Pty Ltd 11 - - -

Total subsidiaries 243 12 846 349

(€/000) Financing Interest income

31/12/2011 31/12/2010 2011 2010General Pump China Inc. 195 166 - -Hammelmann Bombas e Sistemas Ltda 29 21 - -Total subsidiaries 224 187 - -

(€/000) Other non-current liabilities Interest payable

31/12/2011 31/12/2010 2011 2010Hammelmann SNG 217 - - -Total subsidiaries 217 - - -

Relationships with associates Relations with associates are as outlined below (amounts shown in €/000): (€/000) Receivables Revenues

31/12/2011 31/12/2010 2011 2010

COPMA 2000 - - - 70

Total associates - - - 70

(€/000) Payables Costs

31/12/2011 31/12/2010 2011 2010

Wuxi Weifu China-Italy Company Ltd - - 33 -

Total associates - - 33 -

101

Because of losses sustained, Copma 2000 utilized the totality of its share capital at September 2010, and subsequently reconstituted the amount. HS Penta, which held 23% of the investment, subscribed only 10% of the newly constituted capital and hence Copma 2000 ceased to be an associated company.

At June 2011 the investment in Wuxi Weifu China-Italy Company Ltd was divested for approximately 4.1 million RMB (equivalent to approximately €0.4 million), corresponding to its value in the consolidated financial statements at 31 December 2010. The Related Party Transactions Committee issued its positive opinion in relation to the transaction in question.

Transactions with other related parties Transactions with related parties include the leasing of facilities owned by companies controlled by current shareholders and directors of group companies for the amount of 3,806 thousand euro (3,827 thousand euro in 2010) and consultancy services provided by entities connected with directors of the group for 299 thousand euro (221 thousand euro in 2010). Costs for rentals were ascribed in the amount of €2,826 thousand (€2,802 thousand in 2010) to the cost of sales, €773 thousand (€793 thousand in 2010) to distribution costs, and €207 thousand (€232 thousand in 2010) to general and administrative expenses. Consultancy costs were ascribed, in the amount of €60 thousand to distribution costs (€60 thousand also in 2010) and in the amount of €239 thousand to general and administrative expenses (€161 thousand in 2010).

Moreover, further to the stipulation of building rental contracts with other related parties, the Group has commitments for €13,052 thousand (€15,098 thousand at 31 December 2010). 37. Events occurring after the close of the year 18 January 2012 was the closing date for the MTC acquisition, 31 January 2012 was the closing date for the Galtech acquisition, while the Takarada acquisition was closed on 15 February 2012. For more details concerning the industrial effects and the methods of execution of these acquisitions we invite you to consult the Board of Directors' Report. After 31 December 2011 no other atypical or unusual transactions were carried such that would require mention in this report or call for changes to the consolidated financial statements at 31 December 2011.

102

Annex 1 Attestation of the consolidated financial statements pursuant to art. 81-(3) of Consob regulation no. 11971 (which refers to art. 154-(2) para. 5 of the Consolidated Finance Act) of 14 May 1999 and subsequent amendments 1. The undersigned Paolo Marinsek and Carlo Banci, respectively Executive

Director and Manager responsible for the drafting of company accounting documents of Interpump Group S.p.A.,, taking account also of the provisions of art. 154-(2), paras. 3 and 4 of decree D.Lgs 24 February 1998 no. 58:

– the adequacy in relation to the characteristics of the business and

– the effective application

of the administrative and accounting procedures for the formation of the consolidated financial statements during 2011.

2. In addition, it is confirmed that consolidated financial statements of Interpump

Group S.p.A. and its subsidiaries for the year ended 31 December 2011, which show consolidated total assets of €698,030 thousand, consolidated net profit of €42,585 thousand and consolidated shareholder's equity of €315,160 thousand:

a) correspond to the results of the company books and accounting entries;

b) were prepared in compliance with the international accounting standards approved by the European Commission further to the enforcement of Ruling (CE) no. 1606/2002 of the European Parliament and the European Council of 19 July 2002, and the provisions issued in implementation of art. 9 of decree D. Lgs. 38/2005 and the contents are suitable for providing a truthful and fair representation of the equity, economic and financial situation of the company and the Group of companies included in the scope of consolidation;

c) the Board of Directors' report contains a reliable analysis of performance and results and the situation of the issuer and the companies included in the consolidation together with a description of the main risks and uncertainties to which they are exposed.

Milan, 13 March 2012 Mr. Paolo Marinsek Mr Carlo Banci Executive Director Manager responsible for drafting


103

Report of the Board of Statutory Auditors on the consolidated financial statements for the year ended 31 December 2011

Shareholders of the parent company Interpump Group SpA,

This report refers to the consolidated financial statements of the member companies of the Group headed by Interpump Group SpA. The report reflects the duties assigned to the Board of Statutory Auditors by decree D.Lgs. no.58 of 24 February 1998, and which in this case refer to the report of this Board in relation to the separate financial statements at 31 December 2011 of the parent company Interpump Group SpA.

On these grounds, the Board of Statutory Auditors: - has verified and monitored, within the scope of our competence, the suitability of the

company's organizational structure and the observance of the principles of correct administration by means of direct checks and through information gathered from the persons in charge of the administrative function and meetings with representatives of the Independent Auditors appointed to perform legal auditing of the accounts, PriceWaterhouseCoopers SpA, with the purpose of assuring the reciprocal exchange of data and significant information;

- has received from the Board of Directors within the required legal terms both the separate financial statements for 2011 accompanied by the board of directors' report and the consolidated financial statements with the relative report;

- has checked the full observance of legal requirements concerning the consolidated financial statements and the accompanying board of directors' report;

- has examined the independent auditors' report of 20 March 2012, which contains no qualified remarks or information requests;

- has acknowledged that the financial statements of the main subsidiaries are subject to legal auditing of the accounts by their respective Boards of Statutory Auditors, by a legal auditor, or by an independent auditing company, depending on the context.

During our general supervisory activities we saw no major events requiring disclosure in this report.

To complete this report you are invited to read our comments on the separate financial statements of Interpump Group Spa for the year ending 31 December 2011, containing all information required by the Italian stock exchange regulatory body.

It is our opinion that the consolidated financial statements as a whole provide an accurate representation of the financial situation and result (€/000 42,585) of the Group headed by Interpump Group SpA for the year ended 31 December 2011, in conformity with the regulations governing consolidated financial statements mentioned above.

The Board of Statutory Auditors also declares that the board of directors' report on Group operations is an accurate and consistent representation of the consolidated accounts.

Milan, 21 March 2012

the Board of Statutory Auditors Enrico Cervellera Achille Delmonte Paolo Scarioni

107

Interpump Group S.p.A.

Financial Statements as at 31 December 2011

109

Contents Page

Board of Directors' Report for 2011 of the Parent Company Interpump Group S.p.A. 111

Financial Statements of Parent Company Interpump Group S.p.A. at 31/12/2011 123

Statement of financial position 124

Income statement 126

Comprehensive income statement 127

Cash Flow Statement 128

Statement of changes in shareholders' equity 130

Explanatory notes of Interpump Group S.p.A. financial statements 131

1 General Information 131

2 Accounting Principles used: 2.1 Reference accounting standards 131

2.1.1 Accounting principles, amendments and Interpretations in force as from 1 January 2011 132

2.1.2 Accounting standards, amendments and interpretations not yet applicable and not adopted early by the group 132

2.1.3 New accounting principles and amendments enforced from 1 January 2011 but not relevant for the company 134

2.2 Sector information 135 2.3 Treatment of foreign currency transactions 135 2.4 Non-current assets held for sale and discontinued operations 135 2.5 Property, plant and equipment 136 2.6 Goodwill 136 2.7 Other intangible assets 137 2.8 Impairment of assets 138 2.9 Investments 138 2.10 Cash and cash equivalents 139 2.11 Current financial assets, Receivables and other current assets 139 2.12 Inventories 139 2.13 Share capital and Treasury Shares 139 2.14 Interest-bearing financial payables 140 2.15 Liabilities for employee benefits 140 2.16 Income taxes 141 2.17 Provisions for risks and charges 141 2.18 Current trade liabilities, payables and other debts 142 2.19 Income 142 2.20 Costs 142

110

3 Financial risk management 142 3.1 Financial risk factors 142 3.2 Accounting methods for derivative financial instruments and hedged transactions 144

4 Cash and cash equivalents 145

5 Trade receivables 145

6 Inventories 146

7 Derivative financial instruments 146

8 Assets held for sale 149

9 Other current assets 149

10 Property, plant and equipment 150

11 Goodwill 151

12 Other intangible assets 151

13 Investments in subsidiaries 152

14 Other financial assets 153

15 Deferred tax assets and liabilities 153

16 Interest-bearing financial payables and bank payables 154

17 Other current liabilities 155

18 Provisions for risks and charges 155

19 Liabilities for employee benefits 156

20 Share capital 157

21 Reserves 164

22 Information on financial assets and liabilities 165

23 Information on financial risks 166

24 Net sales 170

25 Other net revenues 170

26 Costs by nature 171

27 Financial income and charges 171

28 Income taxes 172

29 Earnings per share 173

30 Notes to the cash flow statement 173

31 Commitments 174

32 Transactions with related parties 174

33 Events occurring after the close of the year 175 Annex 1: Attestation of the consolidated financial statements pursuant to art. 81(3) of Consob regulation no.11971 of 14 May 1999 as amended 176

Statutory Auditors' Report to the Shareholders' Meeting 177

Independent Report on the annual financial statements of Interpump Group S.p.A. 180

111

Board of Directors' Report for 2011 of the Parent Company Interpump Group S.p.A.

113

As in previous years, the operations of Interpump Group S.p.A. consisted, in addition to ordinary industrial activities, in the strategic and management coordination of the group, in the drive to optimize the group's financial flows, and in research activities and the selection of equity investments to acquire with the aim of accelerating the group's expansion. Since 1996, the year in which the group was first listed on the Stock Exchange, at 31/12/2011 a total of twenty acquisitions have been made. Specifically, in 2011 Interpump Group S.p.A. acquired 80% of American Mobile Power through group subsidiary Muncie Power Inc. for the price of USD 6.8 million, paid in cash. American Mobile Power (AMP), headquartered in Fairmount (Indiana), is among the primary US manufacturers and distributors of tanks for industrial vehicle hydraulic systems, mainly constructed of aluminium and steel. The remaining 20% will be acquired by Muncie in April 2016 for a price based on the results achieved by the company in the two preceding years. The operations of AMP are highly synergistic with respect to the business of the Interpump Group's Hydraulic Division.

Interpump Group S.p.A. has also acquired, through its subsidiary Interpump Hydraulics S.p.A. (IPH), an additional 11% of Interpump Hydraulics International, transferring 1,074,286 treasury shares to the relative shareholders and booking an interest-bearing loan to IPH for the corresponding value of the treasury shares in the amount of €4.3 million.

On 26 September 2011 Interpump Group S.p.A. divested its 70% stake in Unielectric, a company active in the production of windings and electric motors, for a price of €3.5 million. This amount was paid in cash on the execution date in the quantity of one third (€1.2 million) while a further third will paid within 15 December 2012 and the final third will be settled within 15 December 2013. The extended payments are secured by bank guarantees. Unielectric was sold because Interpump Group S.p.A. no longer considered the investment to be strategic in the framework of the business sectors of the group, which is currently focused in the Industrial Sector (high and very high-pressure water pumps) and the Hydraulic Sector (power takeoffs, hydraulic pumps, cylinders and other hydraulic components). With the sale of Unielectric the Interpump Group has therefore withdrawn from the Electric Motors Sector. The sale, which complied with the requirements of IFRS 5 and the most recent orientations of international accounting principles, has been represented as a Discontinued Operation in the consolidated financial statements and the individual financial statements of Interpump Group S.p.A.

1 Profitability

Interpump Group S.p.A. booked net revenues of € 73.5 million (€67.7 million in 2010), reflecting growth of 8.6%.

The analysis by geographic area of the revenues from sales and services is given in the commentary on this item in the notes to the financial statements.

The cost of sales accounted for 66.8% of turnover (65.5% in 2010). Production costs, which totalled 21.0 million euro (20.1 million euro in 2010) accounted for 28.6% of sales (29.7% in 2010). The purchase costs of raw materials and components sourced on the market, including changes in inventories, totalled €28.1 million (€24.3 million in 2010). The percent incidence of purchase costs, including the change in inventories, was 2.4% higher than in 2010 due to the increase in average prices across all goods categories, although with steeper rises in raw materials (brass, aluminium and steel). Commercial costs decreased by 5.8% compared to 2010, and their incidence on sales dropped by 0.7%.

114

General and administrative expenses were down by 2.1% with respect to 2010, with the relative incidence on sales falling by 1.8 percentage points. General and administrative expenses in 2010 had however been influenced by the recognition of costs for stock options relative to the fourth tranche of the 2006/2009 plan (allocation of 880,000 options exercisable from 1 July 2010) and the recalculation of the exercise prices of options already allocated in prior years and not yet exercised, further to the share capital increase. The foregoing costs of a one-off nature totalled €0.9 million. General and administrative expenses, net of the aforementioned one-off costs, were up by 5.9%, although their incidence on sales fell by 0.4 percentage points. Payroll costs overall €18.1 million (€17.7 million in 2010) for an average of 359 employees. Payroll costs increased by 2.0% essentially because of an increase in the average headcount, while the per capita cost remained substantially unchanged. Reconciliation of the income statement to obtain interim values is shown below: 2011

(€/000)% on sales

2010 (€/000)

% on sales

Ordinary profit before financial charges 15,337 27,465 Dividends (5,906) (17,601) Reinstatement of the value of assets held for sale - (412) Impairment losses on investments 12 48 Operating profit (EBIT) 9,443 12.8% 9,500 14.0%Amortization, depreciation and write-downs 3,068 2,886 Gross operating profit (EBITDA) 12,511 17.0% 12,386 18.3%

EBIT was €9.4 million or 12.8% of sales, compared to the €9.5 million of 2010 (14.0% of sales) and therefore basically unchanged in absolute value with respect to 2010, while the drop of 1.2% in relation to sales was mainly due to a higher incidence of purchase costs. EBITDA totalled €12.5 million or 17.0% of sales, compared to the €12.4 million of 2010, which accounted for 18.3% of sales.

115

The year to 31 December 2011 closed, after the capital loss on discontinued operations, with a net profit of €8.0 million (€18.7 million in 2010) influenced by the events summarized in the following table: 2011 2010 (€/000) (€/000)

Net profit disclosed in income statement 7,968 18,710Capital loss on discontinued operations 798 -Income taxes 2,882 3,367Earnings before tax 11,648 22,077Reinstatement of the value of assets held for sale - (412)Impairment losses on investments 12 48Earnings before tax adjusted by non-recurring operations (A) 11,660 21,713Dividends from subsidiaries (B) (5,906) (17,601)Earnings before tax adjusted by non-recurring operations and dividends (A+B)

5,754 4,112

Income taxes (2,882) (3,367)Taxes relating to previous years 26 42Deferred taxes on value reinstatements of assets held for sale - 129Taxes on dividends 219 936Earnings (net) after non-recurring operations and dividends 3,117 1,852

2 Balance sheet The following is a reclassified balance sheet in relation to cash flows obtained/used: 31/12/2011

(€/000)% 31/12/2010

(€/000) %

Trade receivables 10,788 10,172

Net inventories 10,534 11,588

Other current assets 7,569 6,984

Accounts payable to suppliers (10,034) (11,675)

Short-term tax payables (660) (1,704)

Other short-term liabilities (6,462) (8,160)

Net operating working capital 11,735 4.1 7,205 2.6

Net intangible and tangible fixed assets 17,366 16,875

Goodwill 32,506 32,506

Investments 191,768 195,785

Other financial fixed assets 34,369 24,510

Other non-current assets 3,228 2,510

Liabilities for employee benefits (3,269) (3,237)

Medium/long-term portion for provisions for risks and charges (304) (463)

Other medium/long-term liabilities (1,005) (1,051)

Total net fixed assets 274,659 95.9 267,435 97.4

Total capital employed 286,394 100.0 274,640 100.0

116

31/12/2011

(€/000)% 31/12/2010

(€/000) %

Financed by:

Total shareholders' equity 182,185 63.6 195,089 71.0

Cash and cash equivalents (68,232) (89,282)

Payables to banks 2,360 602

Short-term interest-bearing financial payables 79,941 75,453

Total short-term financial payables 14,069 4.9 (13,227) -4.8

Total medium/long-term financial payables 90,140 31.5 92,778 33.8

Total sources of financing 286,394 100 274,640 100.0 The reclassified layout of the balance sheet adopted makes it possible to assess the capital soundness of the company, highlighting its capacity to maintain a condition of financial equilibrium in the medium/long-term.

3 Capital expenditure

Capital expenditure in tangible fixed assets stood at 2.1 million euro (1.5 million euro in 2010) and is related to the normal renewal and modernization of plant and equipment. The difference with respect to the expenditure recorded in the cash flow statement is due to the dynamics of payments. Increases in intangible fixed assets amounted to 1.5 million euro (1.3 million euro in 2010), mostly concerning product development costs of Interpump Engineering.

117

4 Loans

Net financial indebtedness as at 31 December 2011 was €104.2 million (79.6 million euro at 31/12/2010). Changes during the year are listed in the table below.

2011 2010 (€/000) (€/000)

Opening net financial position (79,551) (126,747)Cash flow from operations 1,005 7,878Liquidity generated (absorbed) by commercial working capital (1,363) 675Liquidity generated (absorbed) by other current assets and liabilities 1,020 1,806Net expenditure in tangible and intangible fixed assets (2,661) (2,628)Received financial income 2,932 1,252Other (393) 249Free cash flow 540 9,232Acquisition of 6.7% of NLB - (3,350)Outlay for the incorporation of Hammelmann Bombas e Sistemas Ltda - (13)Proceeds from the disposal of investments 1,128 -Purchase of treasury stock (16,489) -Proceeds from sales of treasury stock for stock options 188 -Dividends received 5,906 29,601Dividends paid (10,412) -Increase in share capital 31 3,526Reimbursement (Disbursement) of loans from (to) subsidiaries (5,550) 8,200Cash flow generated (used) (24,658) 47,196Net financial position at end of year (104,209) (79,551) The net cash position breaks down as follows: 31/12/2011 31/12/2010 1/1/2010 (€/000) (€/000) (€/000)

Cash and cash equivalents 68,232 89,282 38,649Payables to banks (2,360) (602) (302)Interest-bearing financial payables (current portion) (79,941) (75,453) (98,490)Interest-bearing financial payables (non-current portion) (90,140) (92,778) (66,604)Total (104,209) (79,551) (126,747)

At 31 December 2011 all the loan covenants had been amply complied with.

118

5 Relations with subsidiaries and associates

The company also operates through subsidiaries with which it entertains commercial and financial relationships. These relations are detailed in the table below (amounts expressed in €/000):

Receivables Revenues 31/12/2011 31/12/2010 2011 2010Subsidiaries: General Pump Inc. 2,000 2,109 14,620 13,308General Technology S.r.l. 261 298 698 787NLB Corporation Inc. - 29 409 73General Pump China Inc. 39 15 328 265Interpump Engineering S.r.l 25 10 174 115Interpump Hydraulics S.p.A. 264 36 79 108Unielectric S.p.A. (*) - 46 2 40Muncie Inc. - 37 - 37AVI S.r.l. 10 8 15 19Interpump Hydraulics India Ltd 79 17 78 16Hydrocar Roma S.r.l. 1 1 4 8Hydroven S.r.l. 1 1 7 7SIT S.p.A. - 1 4 4Contarini Leopoldo S.r.l. - - 3 3Cover S.r.l. - - 3 3Oleodinamica Panni S.r.l. 2 - 3 3HS Penta S.p.A. 17 6 3 3Modenflex Hydraulics S.r.l. - - 2 2Hammelmann Maschinenfabrik GmbH 212 187 - -Teknova S.r.l. (winding up) 7 4 - -Interpump Hydraulics International S.p.A. 127 - - -Total 3,045 2,805 16,432 14,801

(*) the investment was divested on 26 September 2011, so as from that date it has no longer been part of the Interpump Group.

At 31/12/2011 the entire receivable due from Hammelmann Machinenfabrik GmbH and Interpump Hydraulics International S.r.l. concerns the relative financial income on loans, while the receivables due from General Technology S.r.l., Interpump Hydraulics S.p.A., HS Penta S.p.A. and Teknova S.r.l., in addition to components of trade receivables, include also the part of uncollected financial income amounting, respectively, to €/000 14, €/000 175, €/000 13 and €/000 5. The receivables from Teknova S.r.l. refers, in the amount of €/000 2, to the inclusion in the Italian tax consolidation regime. All other receivables refer to relations of a commercial nature governed at arm's length conditions.

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Payables Costs

31/12/2011 31/12/2010 2011 2010Subsidiaries: General Technology S.r.l. 450 538 5,068 5,132Unielectric S.p.A. (*) - 613 1,461 1,635Interpump Engineering S.r.l 881 301 453 683SIT S.p.A. 53 98 274 277Hammelmann Maschinenfabrik GmbH 37 - 175 62General Pump Inc. 3 20 32 41Hydroven S.r.l. - - 1 1Contarini Leopoldo S.r.l. - - 1 -Interpump Hydraulics S.p.A. 508 287 - -HS Penta S.p.A. 21 - - -Teknova S.r.l. - 3 - -Total subsidiaries 1,953 1,860 7,465 7,831

(*) the investment was divested on 26 September 2011, so as from that date it has no longer been part of the Interpump Group.

Payables Costs

31/12/2011 31/12/2010 2011 2010Associates: Wuxi Weifu China-Italy Gear Company Ltd (**) - - 33 -Total subsidiaries - - 33 -

(**) the investment was divested on 17 June 2011, so as from that date it has no longer been part of the Interpump Group.

The accounts payable to Interpump Hydraulics S.p.A. and, solely in 2010, to Teknova S.r.l. refer to inclusion in the Italian tax consolidation regime. All other payables refer to relations of a commercial nature governed at arm's length conditions.

Financial relations are as outlined below (amounts shown in €/000):

Financing Interest income 31/12/2011 31/12/2010 2011 2010Subsidiaries: Hammelmann Maschinenfabrik GmbH 9,000 14,000 396 432Interpump Hydraulics International S.p.A. 2,000 9,000 247 158Interpump Hydraulics S.p.A. 21,309 - 176 -General Technology S.r.l. 1,050 1,300 26 30HS Penta S.p.A. 800 - 25 -Teknova S.r.l. (winding up) 210 210 5 4Total 34,369 24,510 875 624

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Loans were disbursed at the following conditions:

- General Technology Euribor +0.75;

- Hammelmann Maschinenfabrik Euribor +1.75;

- HS Penta S.p.A. Euribor +1.75;

- Interpump Hydraulics International S.p.A. Euribor +1.75;

- Interpump Hydraulics S.p.A. Euribor +1.75;

- Teknova S.r.l. Euribor +1

6 Transactions with related parties These operations are described in note 32 of the financial statements.

7 Exposure to risks and uncertainties and Financial risk factors

The company is exposed to the normal risks and uncertainties of any business activity. The markets in which the company operates are world niche markets of moderate size and with few competitors. These market characteristics constitute a significant barrier preventing the ingress of new competitors due to significant scale effects against the backdrop of relatively uncertain economic returns for potential new entrants. The company retains world leadership positions that mitigate the risks and uncertainties of the business activity.

These financial risk factors are described in note 3 of the financial statements.

8 Environment The company is engaged exclusively in mechanical engineering and components assembly activities that are not accompanied by the emission of pollutants into the environment. The production process is performed in full compliance with statutory legislation.

9 Further information

The Research and Design Centre (Interpump Engineering S.r.l.), set up to centralize design and development of new products, completed a new pump version and a large number of new accessories in 2011. A number of projects are currently underway to design new high and very high pressure pumps.

It is company policy to continue to invest heavily in research and development in future years in order to add further impetus to organic growth. The subsidiary Interpump Engineering S.r.l. charged €/000 1,949 in payment for the aforesaid operations, €/000 1,512 of which was capitalized in intangible fixed assets in accordance with their multi-annual usefulness (€/000 1,802 in 2010, of which €/000 1,179 capitalized).

As at 31 December 2011 the company held 5,484,280 treasury shares corresponding, on that date, to 5.6152% of the capital, purchased at an average unit cost of € 4.4490.

With regard to stock option plans and the shares of the company and of subsidiaries held by directors, auditors, and general managers, you are invited to consult the 2011 Board of Directors' Report, which is attached to the consolidated financial statements.

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In 2010 the company renewed its adherence to the national tax consolidation which, in addition to Interpump Group S.p.A., also includes Teknova S.r.l. and Interpump Hydraulics S.p.A.

We draw your attention to the fact that the company is not subject to activities of management and coordination, and that Gruppo IPG Holding S.r.l., with registered office in Milan, is the company that drafts the consolidated financial statements that include the data of Interpump Group S.p.A. and its subsidiaries. The consolidated financial statements are available from the Milan business register.

10 Events occurring after the end of the year and the business outlook

The acquisitions of M.T.C, Galtech and Takarada were closed after year end, as more fully illustrated in “Events occurring since the close of the year” in the 2011 Board of Directors' Report on the consolidated financial statements.

Considering the short time since 31 December 2011, and in the light of the short period of time historically covered by the order portfolio, we do not yet have enough information to make a reliable forecast of expected trends in the current year. No other events occurred such as to deserve mention in this report, and the company's business proceeded smoothly.

11 Proposal to the Shareholders' Meeting

In relation to the profit for the year of €7,967,945, we propose:

- allocating €668 to the Legal reserve;

- assigning a dividend of € 0.12 for each of the outstanding shares including the right as per art. 2357-ter par. 2 of the Italian Civil Code, withdrawing the portion not covered by the profit for the period from the extraordinary reserve;

Milan, 13 March 2012

For the Board of Directors

Mr. Giovanni Cavallini

Chairman

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Financial Statements as at 31 December 2011 of the Parent Company Interpump Group S.p.A.

INTERPUMP GROUP S.p.A.

Registered office: S. Ilario d'Enza (RE) Via E. Fermi, 25

Share Capital: € 50,787,787.44 fully paid-up. Reggio Emilia Court - Company Register no. 117217

Tax code number 11666900151 VAT number 01682900350

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Statement of financial position Euro Notes 31/12/2011 31/12/2010 ASSETS

Current assets Cash and cash equivalents 4 68,231,937 89,281,789Trade receivables 5, 22 10,788,069 10,171,546Inventories 6 10,533,931 11,588,194Tax receivables 1,013,785 466,341Derivative financial instruments 7, 22 - 368,326Assets held for sale 8 2,121,484 5,715,877Other current assets 9, 22 4,433,107 433,565Total current assets 97,122,313 118,025,638

Non-current assets Property, plant and equipment 10 13,397,870 13,015,839Goodwill 11 32,505,900 32,505,900Other intangible assets 12 3,967,840 3,859,068Investments in subsidiaries 13 191,768,276 195,784,687Other financial assets 14, 22 34,368,961 24,510,000Tax receivables 450,624 385,902Deferred tax assets 15 1,658,451 2,108,731Other non-current assets 1,119,060 15,022Total non-current assets 279,236,982 272,185,149Total assets 376,359,295 390,210,787

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Euro Notes 31/12/2011 31/12/2010 LIABILITIES

Current liabilities Trade payables 5, 22 10,034,121 11,675,749Payables to banks 22 2,359,796 602,448Interest-bearing financial payables (current portion) 16, 22 79,941,231 75,453,333Derivative financial instruments 7 1,659,351 2,523,440Taxes payable 660,489 1,704,097Other current liabilities 17, 22 4,802,477 5,633,917Total current liabilities 99,457,465 97,592,984

Non-current liabilities Interest-bearing financial payables 16, 22 90,139,961 92,777,735Liabilities for employee benefits 19 3,268,929 3,236,711Deferred tax liabilities 15 1,004,575 1,050,720Provisions for risks and charges 18 303,515 463,331Total non-current liabilities 94,716,980 97,528,497Total liabilities 194,174,445 195,121,481 SHAREHOLDERS' EQUITY Share capital 20 47,935,962 49,193,258Legal reserve 21 10,156,890 10,063,665Share premium reserve 21 63,887,046 73,622,769Reserve for valuation of hedging derivatives at fair

value

21 (649,457) (1,181,841)Other reserves 21 60,854,409 63,391,455Total shareholders' equity 182,184,850 195,089,306Total shareholders' equity and liabilities 376,359,295 390,210,787

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Income statement Euro Notes 2011 2010

Net sales 24 73,513,979 67,723,157Cost of sales 26 (49,133,228) (44,361,118)

Gross industrial margin 24,380,751 23,362,039

Other net revenues 25 1,435,455 2,610,147

Distribution costs 26 (3,415,560) (3,626,910)General and administrative expenses 26 (12,257,006) (12,517,455)Impairment losses on assets 12, 13 (662,926) (327,893)

Reversal of impairment losses 9 - 411,793Other operating costs 26 (49,000) (47,980)Dividends 5,905,710 17,600,909

Ordinary profit before financial charges 15,337,424 27,464,650

Financial income 27 5,323,094 3,893,436

Financial charges 27 (9,012,508) (9,279,699)

Profit for the period before taxes 11,648,010 22,078,387

Income taxes 28 (2,882,316) (3,367,497)Profit for the period after taxes and before

capital loss on discontinued operations 8,765,694 18,710,890

Capital loss on discontinued operations (797,749) -

Net profit for the period 7,967,945 18,710,890 Basic earnings per share 29 0.085 0.201

Diluted earnings per share 29 0.084 0.200

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Comprehensive income statements (€/000) 2011 2010

Net profit (A) 7,968 18,711

Accounting of derivative financial instruments used to hedge the interest rate risk recorded in accordance with the cash flow hedging method:

- Profit (Loss) on derivative financial instruments for the period - -- Minus: Adjustment for reclassification of profits (losses) to the

income statement -

-- Minus: Adjustment for recognition of fair value to reserves in the

previous period 969

(707)

Total 969 (707)

Accounting of derivative financial instruments used to hedge the exchange rate risk recorded in accordance with the cash flow hedging method:

- Profit (Loss) on derivative financial instruments for the period (123) 126- Minus: Adjustment for reclassification of profits (losses) to the

income statement (126)

20- Minus: Adjustment for recognition of fair value to reserves in the

previous period -

-

Total (249) 146

Related taxes (188) 148

Profits (losses) recorded directly in equity (B) 532 (413) Comprehensive net profit (A) + (B) 8,500 18,298

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Cash flow statement (€/000) 2011 2010

Cash flow from operating activities

Earnings before taxes and capital losses on discontinued operations 11,648 22,078

Adjustments for non-cash items:

Capital gains from the sale of fixed assets (4) (1)

Amortization and depreciation of tangible and intangible fixed assets 3,066 2,885

Costs ascribed to the income statement relative to stock options that do not involve monetary outflows for the group 845 1,894

Impairment losses (reinstatements) of assets 12 (364)

Net change of risk funds and allocations to provisions for employee benefits (118) 56

Dividends ascribed in the income statement (5,906) (17,601)

Net financial charges 3,689 5,386

13,232 14,333

(Increase) decrease in trade receivables and other current assets (1,071) (1,777)

(Increase) decrease in inventories 1,054 (1,135)

Increase (decrease) in trade payables and other current liabilities (326) 5,393

Taxes paid (5,486) (260)

Interest paid (6,832) (6,684)

Currency exchange gains realized 91 489

Cash flow from operations 662 10,359

Cash flows from investment activities Acquisition of stakes in NLB - (3,350)

Shareholders' capital subscriptions to Interpump Hydraulics S.p.A. - (3,344)

Outlay for the incorporation of Hammelmann Bombas e Sistemas Ltda - (13)

Proceeds from the sale of Unielectric net of ancillary expenses paid 1,128 -

Outlays for purchase of treasury stock (16,489) -

Proceeds from sales of treasury stock for stock options 188 -

Disposal of treasury stock to support the acquisition of the companies in the Cylinders Division 4,309 3,344

Capital expenditure in property, plant and equipment (1,882) (1,348)

Proceeds from sales of tangible fixed assets 710 2

Increase in intangible fixed assets (1,489) (1,282)

Received financial income 2,932 1,252

Other (77) 1

Net liquidity generated (used) by investing activities (10,670) (4,738)

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(€/000) 2011 2010

Cash flow of financing activities

Dividends received 5,906 29,601

Dividends paid (10,412) -

(Disbursal) Repayment of intra-group loans (9,859) 8,200

Capital increase, net of ancillary expenses paid and including rights sold 31 3,526

Disbursal (repayment of) loans 1,534 3,385

Net liquidity obtained through (utilized in) financing activities (12,800) 44,712Net increase (decrease) of cash and cash equivalents (22,808) 50,333Cash and cash equivalents at the beginning of the period 88,680 38,347Cash and cash equivalents at the end of the period 65,872 88,680 For reconciliation of cash on hand refer to Note 30.

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Statement of changes in shareholders' equity

Share

capitalLegal

reserve

Share premium

reserve

Reserve for valuation of

hedging derivatives

at fair valueOther

reserves

Total shareholde

rs' equity

Balances as at 1 January 2010 48,414 8,746 64,866 (769) 45,999 167,256Allocation of 2009 profit - 1,318 - - (1,318) -Recording in the income statement of the fair value of stock options assigned to and exercisable

by Interpump Group S.p.A. employees. - - 1,894 - - 1,894Fair value measurement of the stock options assigned to and exercisable by employees of

subsidiaries - 263 - - 263Capital increase following exercise of warrants 466 - 3,568 - - 4,034Sale of treasury stock for the acquisition of equity investments. 313 - 3,031 - - 3,344Comprehensive net profit for the year - - - (413) 18,711 18,298

Balances at 31 December 2010 49,193 10,064 73,622 (1,182) 63,392 195,089Allocation of 2010 profit - 93 - - (93) -Distribution of the dividend - - - - (10,412) (10,412)Recording in the income statement of the fair value of stock options assigned to and exercisable

by Interpump Group S.p.A. employees. - - 845 - - 845Fair value measurement of the stock options assigned to and exercisable by employees of

subsidiaries - 124 - - 124Capital increase following exercise of warrants 3 - 28 - - 31Purchase of treasury stock (1,845) - (14,644) - - (16,489)Sale of treasury stock to the beneficiaries of stock options 26 - 162 - - 188Sale of treasury stock for the acquisition of equity investments. 559 - 3,750 - - 4,309Comprehensive net profit for the year - - - 532 7,968 8,500

Balances at 31 December 2011 47,936 10,157 63,887 (650) 60,855 182,185

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Explanatory notes of Interpump Group S.p.A. financial statements 1. General information Interpump Group S.p.A. is a company incorporated under Italian law with registered offices in Sant'Ilario d'Enza (RE), listed on the Milan Stock Exchange. The company manufactures and markets high and very high-pressure plunger pumps, and has controlling interests in 37 companies. Interpump Group S.p.A. has production facilities in Sant'Ilario d'Enza (RE). For more specific information on the company's operations, refer to the Board of Directors' Report provided with the consolidated financial statements. The financial statements for the year ended 31 December 2011 were approved by the Board of Directors on this day (13 March 2011).

2. Accounting principles used 2.1 Reference Accounting Principles The financial statements at 31 December 2011 were drafted in compliance with international accounting standards (IAS/IFRS) and with the interpretations of the Standing Interpretations Committee (“SIC”) approved by the European Commission as at the date of this Board of Directors' meeting. The figures of Balance sheet and Income statement are shown in euro, while the other schedules and notes are shown in thousands of euro. The financial statements are drafted according to the cost method, with the exception of financial instruments, which are carried at fair value. Preparation of a report in compliance with IFRS (International Financial Reporting Standards) calls for judgments, estimates, and assumptions that have an effect on assets, liabilities, costs and revenues. The final results may differ from the results obtained using estimates of this type. The captions of the financial statements that call for more subjective appraisal by the directors when preparing estimates and for which a change in the conditions underlying the assumptions utilized could have a significant effect on the financial statements are: goodwill, amortization and depreciation of fixed assets, deferred tax assets and liabilities, the provision for bad debts and the inventories depreciation provision, provisions for risks and charges and defined benefit plans for employees. The company's income statement is prepared by functional areas (or cost of sales), this form being considered more representative than presentation by nature of expenses, this information being specified in the notes to the financial statements. The chosen form, in fact, complies with the internal reporting and business management methods. For a complete analysis of the economic results of the company, refer to the Board of Directors' Report submitted with the 2011 financial statements. The cash flow statement was prepared with the indirect method.

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2.1.1 Accounting principles, amendments and interpretations in force as from 1st January 2011

As from 2011 the company has applied the following new accounting standards, amendments and interpretations, reviewed by IASB: IAS 24 reviewed - Related party disclosures. The new version of IAS 24, issued

in November 2009, simplifies the type of information required in the event of transactions with related parties controlled by the State and clarifies the definition of related parties. The adoption of this accounting principle has not produced any effects for the company from the standpoint of measurement of the captions in the financial statements;

Improvements to IAS/IFRS (2010) issued in May 2010 and approved in February 2011 is applicable for the majority of the amendments contained therein as from 1 January 2011. The adoption of said principles had no significant effects on the company's financial statements.

2.1.2 Accounting standards, amendments and interpretations not yet applicable and not

adopted early by the company

We also draw your attention to the fact that the company has not performed any early adoptions of approved international financial reporting standards. The accounting principles are as follows: IFRS 9 – Financial instruments. On 12 November 2009 IASB published the

following principle, which was subsequently amended on 28 October 2010. The principle, which is applicable as from 1 January 2013, constitutes the first part of a process in stages aimed at replacing IAS 39 and introduces new criteria for classification and evaluation of financial assets and liabilities for derecognition of the financial assets from the financial statements. Specifically, for financial assets the new principle utilizes a single approach based on the methods of management of financial instruments and on the characteristics of the contractual cash flows of financial assets in order to establish the measurement criterion, replacing the various rules contained in IAS 39. In contrast, for financial liabilities the main change that has occurred concerns the accounting treatment for changes in the fair value of a financial liability designated as a financial liability measured at fair value in profit and loss, in the event wherein such changes are due to changes in the credit rating of the liabilities in question. In accordance with the new principle, such changes must be recorded in the comprehensive income statement and cannot thereafter be derecognized in profit and loss; With a successive amendment of mid December 2011, IASB postponed the date of enforcement of IFRS 9 from 1 January 2013 until 1 January 2015;

IFRS 7 – Financial instruments: Additional information. On 7 October 2010 IASB published several amendments to the standards applicable to accounting periods starting or on or after 1 July 2011. The amendments were issued with the intention of improving the understanding of transactions for the transfer of financial assets, including the comprehension of possible effects arising from any risk to which the company that transferred such assets continues to be subject. The amendments also call for more information in the event in which an amount that is disproportional to said transactions is recorded at the end of a financial period.

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IAS 12 – Income taxes. On 20 December 2010 IASB issued a minor amendment that requires the measurement of deferred taxes deriving from an asset in accordance with the way in which the book value of said asset will be recovered (through continuing use or through sale). As a consequence of this amendment, SIC-21 – SIC 21 Income Taxes – Recovery of Revalued Non-Depreciable Assets, will no longer be applicable. The amendment is applicable from 1 January 2012;

IFRS 1 – First adoption of International Financial Reporting Standards (IFRS). On 20 December 2010 IASB issued a minor amendment to this standard, which will become applicable from 1 July 2011;

IFRS 10 – Consolidated Financial Statements. On 12 May 2011 IASB issued the following standard, which will become applicable from 1 January 2013. IFRS 10 supplies a guide to assess the presence of control, this being a decisive factor for consolidation of an entity, in such cases wherein its identification is not immediate;

IFRS 11 – Joint Arrangements. On 12 May 2011 IASB issued the following standard, which will become applicable from 1 January 2013. Apart from regulating joint arrangements, the new standard supplies the criteria for their identification based on the rights and obligations that arise from the contract rather than relying merely on the legal aspects of the arrangement. IFRS 11 excludes the faculty of using the proportional method for the consolidation of joint arrangements;

IFRS 12 – Disclosure of interests in other entities. On 12 May 2011 IASB issued the following standard, which will become applicable from 1 January 2013. The new standard specifies a series of information that the company must disclose in relation to interests in other entities, associated companies, special purpose vehicles and other off balance sheet vehicles;

IFRS 13 – Fair value measurement. On 12 May 2011 IASB, in agreement with FASB, issued a fair value measurement guide. The guide, which is the product of five years of preparation, is an important support tool for fair value measurements, an element that helps to harmonize European and US accounting principles, and a response from IASB and FASB to markets aimed at alleviating the global financial crisis. The new standard will be applicable as from 1 January 2013:

Amendments to IAS 1 - Presentation of financial statements. On 16 June IASB published the above amendment, to require all components presented in the comprehensive income statements (OCI or Other Comprehensive Income) to be grouped depending on whether or not they can be reclassified in the future to profit and loss. The amendment was implemented also by FASB in order to improve the level of compatibility between international financial reporting standards (IFRS) and the US generally accepted accounting principles (US GAAP). The changes will take effect as from 1 July 2012;

Amendments to IAS 19 – Employee benefits. On 16 June IASB published the revised version of IAS 19. The most important changes concern the elimination of the so-called "corridor approach" for recording of actuarial profit and loss (not utilized by Interpump Group), presentation of changes in the assets and liabilities deriving from defined benefit plans , including the relative re-determination, in the comprehensive income statements, and an increased requirement for information relative to the characteristics and risks associated with defined benefits. The amendments were aimed at providing readers of financial

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statements with a clearer overview of the company's obligations arising from defined benefit plans, and the way in which such obligations may affect the company's economic performance, cash flow and net financial position. The changes will take effect as from 1 January 2013;

IFRIC 20 – Stripping costs in the production phase of a surface mine. With this interpretation IFRIC furnished the methods for recognition of stripping costs, i.e. the expenses that a company incurs to remove soil and rock to gain access to the surface mine. The amendment, which was released on 19 October 2011, will be applicable as from financial statements for years starting from 1 January 2013. Early adoption is permitted;

IAS 32 – Financial Instruments: presentation. On 16 December IASB clarified the requirements to allow financial instrument assets to be offset with financial instrument liabilities by publishing an amendment to IAS 32 entitled “Offsetting Financial Assets and Financial Liabilities”. The changes are applicable, retroactively, as from 1 January 2014;

IFRS 7 – Financial instruments: Additional information. On 16 December IASB and FASB issued shared provisions concerning the disclosures required in the case of offsetting of financial assets and financial liabilities. Said provisions are set down in an amendment to IFRS 7 entitled “Disclosures – Offsetting of financial assets and liabilities” which will entered into effect as from 1 January 2013. The required disclosures must be supplied retroactively.

At the current date the competent bodies of the European Union had yet to terminate the approval process required for application of the amendments and standards described above with the exception of the amendments to IFRS 7, which were approved at the end of November 2011.

2.1.3 New accounting principles and amendments taking effect as from 1 January 2011

but not relevant for the company

The following accounting principles, amendments and interpretations, which came into force on 1 January 2011, regulate matters and cases that were not present within the company at the date of the present interim report, but that may exert accounting effects on future transactions or agreements: Changes made to IAS 32 – Financial Instruments: Disclosure and presentation.

The amendment regulates the accounting of the issue of rights (rights, options or warrants) in currencies other than the issuer's functional currency;

IFRIC 14 – Prepayments of a minimum funding requirement. The amendment allows companies that make a prepayment of a minimum funding requirement to recognize the amount under assets;

IFRIC 19 – Extinguishing financial liabilities with equity instruments. With this interpretation, IFRIC supplies guidelines concerning the recognition of the extinction of a financial liability through the issue of equity instruments. The interpretation establishes that, if a company renegotiates the terms of extinction of a financial liability and its creditor agrees to extinguish it though the issue of shares of the company, then the shares issued by the company become part of the price paid to extinguish the financial liability and must be measured at fair value: the difference between the carrying value of the extinguished financial liability and the initial value of the equity instruments issued must be recognized in the income statement in the period.

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2.2 Sector information The business sectors in which the group operates are determined on the basis of the reporting utilized by group top management to make decisions, and they have been identified as the Industrial Sector, which basically includes high and very-high pressure pumps and very high pressure systems, and the Hydraulic Sector, which includes power take-offs, hydraulic cylinders and other hydraulic components. Interpump Group S.p.A. operates entirely in the Industrial Sector so it was not considered necessary to present the relative sector information. With the aim of providing more comprehensive disclosure, information is provided for the geographical areas in which the company operates, namely Italy, the Rest of Europe (including non-EU European countries) and the Rest of the World.

2.3 Treatment of foreign currency transactions (i) Foreign currency transactions

The functional and presentation currency adopted by Interpump Group S.p.A. is the euro. Foreign exchange transactions are converted into euro on the basis of the exchange rates in force on the date that the related transactions were carried out. Monetary assets and liabilities are converted at the exchange rate in force on the balance sheet reference date. Foreign exchange differences arising from conversion are entered in the income statement. Non-monetary assets and liabilities valued at historic cost are converted at the exchange rates in force on the date of the related transactions. Monetary assets and liabilities stated at fair value are converted into euro at the exchange rate in force on the date in respect of which the relative fair value was determined.

2.4. Non-current assets held for sale and discontinued operations Assets held for sale and any assets and liabilities pertaining to lines of business or consolidated investments held for sale, are valued at the lower of their book value at the time of classification of said captions as "held for sale", and their fair value, net of the costs of sale. Any impairments recorded in application of said principle are recorded in the income statement, both in the event of write-downs for adaptation to the fair value and also in the case of profits and losses deriving from future changes of the fair value. Investments that fit the definition of discontinued operations are classified as discontinued operations at the time of their disposal or when they fit the description of assets held for sale, if said requirements existed previously.

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2.5 Property, plant and equipment (i) Own assets Property, plant and equipment are valued at the historic cost and are disclosed net of accumulated depreciation (see next point iii) and impairment losses (see section 2.8). The cost of goods produced internally includes the cost of raw materials, directly related labour costs, and a portion of indirect production costs. The cost of assets, whether purchased externally or produced internally, includes the ancillary costs that are directly attributable and necessary for use of the asset and, when they are significant and in the presence of contractual obligations, the current value of the cost estimated for the dismantling and removal of the related assets.

Financial charges relative to loans utilized for the purchase of tangible fixed assets are recorded in the income statement on an accruals basis if they are not specifically allocated to the purchase or construction of the asset, otherwise they are capitalized.

Assets held for sale are valued at the lower of the fair value net of ancillary charges to the sale and their book value at the time of classification of said captions as held for sale. (ii) Subsequent costs The replacement costs of certain parts of assets are capitalized when it is expected that said costs will result in future economic benefits and they can be measured in a reliable manner. All other costs, including maintenance and repair costs, are ascribed to the income statement when they arise. (iii) Depreciation Depreciation is charged to the income statement on a straight-line basis in relation to the estimated useful life of the assets in accordance with their residual possibility of utilization. Land is not depreciated. The estimated useful life of assets is as follows: - Buildings 25 years - Plant and machinery 12.5 years - Industrial and commercial equipment 4 years - Other assets 4-8 years The estimated useful life of the assets is reviewed on an annual basis, and any changes in the rates of depreciation are applied where necessary for future depreciation charges.

For assets purchased and/or that became operational during the financial period, depreciation is calculated utilizing annual rates reduced by 50%. Historically, this method of calculation has been representative of the effective utilization of the assets in question.

2.6 Goodwill Goodwill represents the portions of the merger deficit paid under this name and originating in the merger operations of previous years and allocated to this item on the basis of an independent survey.

Goodwill is recorded at cost, net of impairment losses. Goodwill is allocated to a single cash generating unit and is no longer amortized as from 1 January 2004. The book value is measured in order to assess the absence of impairment (see section 2.8).

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2.7 Other intangible assets (i) Research and development costs Research costs for the acquisition of new technical know-how are ascribed to the income statement when they arise. Development costs relating to the creation of new products/accessories or new production processes are capitalized if the group's companies can prove: - the technical feasibility and intention of completing the intangible asset in such a way that it

is available for use or for sale; - their ability to use or sell the asset; - the forecast volumes and realization values indicate that the costs incurred for development

activities will generate future economic benefits; - said costs are measurable in a reliable manner; - and the resources exist to complete the development project. The activity of new products development is handled by the subsidiary Interpump Engineering S.r.l. The capitalized cost is determined by the invoices received for this type of activity. Capitalized development costs are valued at cost, net of accumulated amortization, (see next point v) and impairment (see section 2.8). Other development costs are ascribed to the income statement when they arise. (ii) Loan ancillary costs Loan ancillary costs are deducted from the nominal amount of the loan and handled as outlined in section 2.14 (iii) Other intangible assets Other intangible assets, all having a defined useful life, are valued at cost and recorded net of accumulated amortization (see next point v) and impairment (see section 2.8).

Software licenses are amortized over their period of utilization (5 years).

The costs sustained internally for the creation of trademarks or for goodwill are recognized in the income statement when they are incurred. (iv) Subsequent costs Costs incurred subsequently relative to intangible fixed assets are capitalized only if they increase the future economic benefits of the specific capitalized asset, otherwise they are entered in the income statement when they are sustained. (v) Amortization Amortization amounts are recorded in the income statement on a straight-line basis in accordance with the estimated useful life of the capitalized assets to which they refer. The estimated useful life of assets is as follows: Patents and trademarks 3 years Development costs 5 years Granting of software licenses 5 years The useful life is reviewed on an annual basis and any changes in the rates are made, where necessary, for future amounts.

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2.8 Impairment of assets

The book values of assets, with the exception of inventories (see section 2.12), financial assets regulated by IAS 39, deferred tax assets (see section 2.16), and non-current assets for sale regulated by IFRS 5, are subject to valuation at the balance sheet reference date in order to identify the existence of possible indicators of impairment. If the valuation process identifies the presence of such indicators, the presumed recoverable value of the asset is calculated using the methods indicated in the following point (i).

The presumed recovery value of goodwill and intangible assets that have not yet been used is estimated at intervals of no longer than once a year or more frequently if specific events occur that point to the possible existence of impairment. If the presumed recovery value of the asset or its cash generating unit is lower than the net book value, the asset to which it refers is consequently adjusted for impairment loss with entry into the income statement.

Goodwill is systematically measured (impairment test) at least once a year or more as prescribed by IAS 36. (i) Calculation of presumed recovery value The presumed recovery value of securities held to maturity and financial receivables recorded with the criterion of the amortized cost is equivalent to the discounted value of estimated future cash flows; the discounted rate is equivalent to the interest rate envisaged at the time of issue of the security or the emergence of the receivable. Short-term receivables are not discounted to current value.

The presumed recovery value of other assets is equal to the higher of their net sale price and their utilization value. The utilization value is equivalent to the forecast future cash flows, discounted to a rate, gross of taxes, that takes account of the market value of interest rates and specific risks of the asset to which the presumed realization value refers. For assets that do not give rise to independent cash flows the presumed realization value is determined with reference to the cash generating unit to which the asset belongs. (ii) Reinstatement of impairment losses An impairment relative to securities held to maturity and financial assets recorded with the criterion of the amortized cost, is reinstated when the subsequent increase in the presumed recovery value can be objectively related to an event that occurred in a period following the period in which the impairment loss was recorded.

An impairment relative to other assets is reinstated if a change has occurred in the estimate used to determine the presumed recovery value.

Impairment is reinstated to the extent of the corresponding book value that would have been determined, net of depreciation/amortization, if no impairment loss had ever been recognized.

Impairment relative to goodwill can never be reinstated.

2.9 Investments Investments in subsidiaries and associated companies are valued at cost.

Should any impairment of value arise at the balance sheet reference date in comparison to the value determined according to the above method, the investments in question will be written down.

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2.10 Cash and cash equivalents Cash and cash equivalents include cash on hand, bank and post office deposits, and securities having original maturity date of less than three months. Current account overdrafts and advances with recourse are deducted from cash only for the purposes of the cash-flow statement.

2.11 Current financial assets, Receivables and other current assets Current financial assets, trade receivables and other current assets (excluding derivative financial instruments) are recorded, at the time of their initial entry, on the basis of the purchase cost inclusive of ancillary costs (fair value for the initial entry).

Subsequently, financial assets available for sale are assessed at their fair value. Gains or losses deriving from the valuation are recognized in equity up to the moment in which the financial asset is sold, when the gains or losses are recorded in the income statement. If the market value of the financial assets cannot be reliably determined, they are entered at their purchase cost.

Accounts receivable, with due dates within normal commercial terms or which accrue interest at market rates, are not discounted to current values and are brought to account at cost (fair value of the initial entry) net of a specific bad debt provision that includes the amounts deducted directly from said accounts receivable to bring the valuation to the presumed realization value (see section 2.8). Accounts receivable with due dates beyond normal commercial terms are initially entered at their fair value and subsequently at the amortized cost using the method of the effective interest rate, net of the relative value impairments.

2.12 Inventories Inventories are valued at the lower of purchase cost and the presumed realization value. The cost is determined with the criterion of the average weighted cost and it includes all the costs sustained to acquire the materials and transform them at the conditions of the reference date of the balance sheet. The cost of semi-finished goods and finished products includes a portion of indirect costs determined on the basis of normal production capacity. Write down provisions are calculated for materials, semi-finished goods and finished products considered to be obsolete or slow moving, taking account of their expected future usefulness and their realization value. The net realization value is estimated taking account of the market price during the course of normal business activities, from which the costs of completion and costs of sale are subsequently deducted.

2.13 Share capital and Treasury stock In the case of purchase of treasury stock, the price paid, inclusive of any directly attributable ancillary costs, is deducted from share capital for the portion concerning the nominal value of shares and from shareholders' equity for the surplus portion. When said treasury shares are resold or reissued, the price collected, net of any directly attributable ancillary charges and the relative tax effect, is recorded as share capital for the portion concerning the nominal value of shares and as shareholders' equity for the surplus.

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2.14 Interest-bearing financial payables Interest-bearing financial payables are initially recorded at their fair value, net of ancillary charges. After the original entry, interest-bearing financial payables are valued with the amortized cost criterion; the difference between the resulting value and the discharge value is entered in the income statement during the term of the loan on the basis of the amortization plan.

2.15 Liabilities for employee benefits (i) Defined contribution plans The company participates in defined pension plans with public administration or private plans on a compulsory, contractual or voluntary basis. The payment of contributions fulfils the company's obligations towards its employees. The contributions therefore constitute costs of the period in which they are due. (ii) Defined benefit plans Defined benefit plans for employees - disbursed at the time of termination of the period of employment with the company or thereafter - that include severance indemnity, are calculated separately for each plan, estimating the amount of the future benefit that the employees have accrued during the year and in previous years by means of actuarial techniques. The resulting benefit is discounted and recorded net of the fair value of any relative assets. The discount rate at the balance sheet reference date is calculated as required by IAS 19 with reference to the market yield of high quality corporate bonds. These include only securities released by corporate issuers included in rating class "A", in the assumption that this class identifies a medium rating level corresponding to a low risks level. Considering that IAS 19 makes no explicit reference to a specific product sector, we opted for a composite market curve that could summarize the market conditions existing at the date of valuation of the securities issued by companies operating in various sectors including utilities, telecommunications, finance, banking and industrial. The calculation is performed on an annual basis by an independent actuary using the projected unit credit method.

In the event increases in the benefits of the plan, the portion of the increase pertaining to the previous period of employment is entered in the income statement on a straight line basis in the period in which the relative rights will be acquired. If the rights are acquired immediately, the increase is immediately recorded in the income statement.

Actuarial gains and losses are recognized in the income statement on an accruals basis (the company does not make use of the so-called "corridor method").

Until 31 December 2006 the severance indemnity provision (TFR) of Italian companies was considered to be a defined benefits plan. The rules governing the provision were amended by Law no. 296 of 27 December 2006 (“2007 Finance Act”) and by subsequent Decrees and Regulations enacted in the initial months of 2007. In the light of these changes, and in particular with reference to companies with at least 50 employees, as is the case of Interpump Group S.p.A., the TFR severance indemnity provision should now be classified as a defined benefits plan exclusively for the portions accrued prior to 1 January 2007 (and not yet paid out at the date of the financial statements), while after that date TFR should be considered as a defined contributions plan. (iii) Stock options

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On the basis of the stock option plan currently in existence, certain employees and directors are entitled to purchase the treasury shares of Interpump Group S.p.A. The options are measured at their fair value, which is entered in the income statement and increased by the cost of personnel and directors with a matching entry in the share premium reserve. The fair value is measured at the grant date of the option and recorded in the income statement in the period that runs between said date and the date on which the options become exercisable (vesting period). The fair value of the option is determined using the applicable options valuation method (binomial lattice model), taking account the terms and conditions at which the options were granted.

The remuneration component deriving from stock option plans with Interpump Group S.p.A. shares as the underlying, in accordance with the matters envisaged by interpretation IFRIC 11, is recognized as a capital grant disbursed to subsidiaries wherein the beneficiaries of the stock option plans are employees and consequently recorded as an increase of the relative value of the shareholdings, with a matching entry recorded directly in equity

2.16 Income tax Income taxes disclosed in the income statement include current and deferred taxes. Income taxes are generally disclosed in the income statement, except when they refer to types of items that are recorded directly under shareholders' equity. In this case, the income taxes are also recognized directly in equity.

Current taxes are taxes that are expected to be due, calculated by applying to the taxable income the tax rate in force at the balance sheet reference date and adjustments to taxes of previous years

Deferred taxes are calculated using the liability method on the temporary differences between the amount of assets and liabilities in the financial statements and the corresponding values recognized for fiscal purposes. Deferred taxes are calculated in accordance with the envisaged method of transfer of timing differences, using the tax rate in force at the reference date of years in which the timing differences arose.

Deferred tax assets are recognized exclusively in the event that it is probable that in future years sufficient taxable incomes will be generated for the realization of said deferred taxes.

2.17 Provisions for risks and charges In cases wherein the company has a legal or substantial obligation resulting from a past event, and when it is probable that the loss of economic benefits must be sustained in order to fulfil such an obligation, a specific provision for risks and charges is created. If the temporal factor of the envisaged loss of benefits is significant, the amount of the future cash outflows is discounted to present values at a rate, gross of taxes, that takes account of the market interest rates and the specific risk of the liability in question.

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2.18 Current trade liabilities, payables and other debts Trade payables and other debts, the relative due date of which is within normal commercial terms, are not discounted and are entered at a cost (fair value for the initial entry) that is representative of their discharge value.

Current financial liabilities include the short term portions of financial debts, inclusive of debts for cash advances and other financial liabilities. Financial liabilities are measured at their amortized cost according to the effective interest method. Financial assets hedged by derivative financial instruments taken out to hedge the interest rate risk are valued at their current value in accordance with the methods specified for hedge accounting.

2.19 Revenues (i) Revenues from the sale of goods and services Revenues from the sale of goods are entered in the income statement when the risks and benefits connected to the ownership of the goods are substantially transferred to the purchaser. Revenues for services rendered are recorded in the income statement on the basis of the percentage of completion at the balance sheet reference date. (ii) Dividends Dividends are recognized in the income statement on the date they became payable, and are classified under ordinary earnings before interest and tax because they are considered to represent the ordinary holding activities performed by the company.

2.20 Costs (i) Rental and operating leasing instalments Rental and operating leasing instalments are recorded in the income statement on an accrual basis. (ii) Financial income and charges Financial revenues and charges are recorded on an accrual basis in accordance with the interest matured on the net value of the relative financial assets and liabilities, using the effective interest rate. Financial charges and income include foreign exchange gains and losses and gains and losses on derivative instruments booked to the income statement (see section 3.2)

3. Financial risk management 3.1 Financial risk factors The business of the company is exposed to various financial risks: market risk (including the interest rate risk and interest rate risk), credit risk and liquidity risk. The financial risks management programme is based on the unpredictability of financial markets and it is aimed at minimizing any negative impact on the company's financial performance. Interpump Group S.p.A. utilizes derivative financial instruments to hedge against exchange and interest rate risks. The company does not hold derivative financial instruments of a speculative nature, in compliance with the rulings established by the procedure approved by the Board of Directors.

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(a) Market risks (i) Exchange rate risk

The company does business internationally and is exposed to the exchange rate risk related to business conducted in US dollars. Exchange rate risks are generated in relation to forecasts of future commercial and financial transactions outside the EU. To manage the exchange rate risk that is generated in relation to forecasts of future commercial transactions and from the recognition of assets and liabilities in a different currency from the company's functional currency (euro); the company utilizes plain vanilla forwards or options. The company bills its US subsidiaries in dollars and also a major US customer, and has therefore hedged forecast future cash-flows; the policy is to hedge a prudentially determined portion of predicted sales for a variable period of between four and eight months.

(ii) Interest rate risk Interest rate risk derives from medium/long-term loans granted at floating rates. Company policy is to hedge part of the existing loans and, for the unhedged part, to monitor the interest rate curve in order to assess the opportunity of taking out further hedges.

(b) Credit risk

The company does not have any significant concentrations of receivables. It is company policy to make sales to customers following a careful assessment of their credit rating and therefore within preset credit limits. Historically, the company has not had to support any significant losses on receivables.

(c) Liquidity risk Prudent management of liquidity risk involves the retention of an appropriate level of cash on hand and sufficient access to lines of credit. Because of the dynamic nature of the company's business, which results also in frequent targeted acquisitions, it is company policy to ensure access to revolving lines of stand-by credit that can be utilized at short notice.

(d) Price and cash flow risk The company is subject to constant changes in metal prices, especially brass, aluminium, copper and steel. It is company policy to hedge this risk where possible by way of medium-term commitments with suppliers or stockpiling policies when prices are at the low point of their cycle. In 2010 the company started investing a significant part of its cash on hand in repurchase agreements of a maximum duration of three months, in order to optimize financial management. The underlying constitutes the bonds of a primary banking group. Excluding repurchase agreements, the company does not hold any listed securities (i.e. subject to stock market fluctuations). Despite the significant level of expenditure in repurchase agreements, the income and cash flow of the company's operating activities are only marginally influenced by changes in interest generating assets and fluctuations in the interest rates.

Further quantitative information on the financial risks to which the company is exposed is given on Note 23 "Information on financial risks".

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3.2 Accounting methods for derivative financial instruments and hedged transactions As already pointed out, the company avoids subscribing speculative derivative financial instruments, although, when derivative financial instruments fail to meet the requirements set down for the accounting of hedging derivatives (hedge accounting) in IAS 39, changes to the fair value of such instruments are booked to the income statement as financial charges and/or income. Derivative financial instruments are brought to account using hedge accounting methods when: - formal designation and documentation of the hedge relation is present at the start of the

hedge; - the hedge is expected to be highly effective; - effectiveness can be reliably measured and the hedge is highly effective during the periods

of designation.

The fair value of interest rate swaps (IRS) is the amount that the company estimates it will be obliged to pay or collect to close the contract at the reference date of the balance sheet, taking account of the current interest rates and the credit rating of the counterparty. The fair value of derivative financial instruments used to hedge against exchange risks (forward contracts) is equivalent to their market value at the balance sheet reference date, which corresponds to the discounted market value of the forward contract.

The methods used to recognize derivative financial instruments depend on whether or not the conditions and requirements of IAS 39 have been fulfilled. Specifically: (i) Cash flow hedges In the case of a derivative financial instrument for which formal documentation is provided of the hedging relation of the variations in cash flows originating from an asset or liability of a future transaction (underlying hedged variable), considered to be highly probable and that could impact on the income statement, the effective hedge portion deriving from the adaptation of the derivative financial instrument to the fair value is recognized directly in equity. When the underlying hedged item is delivered or settled, the relative provision is derecognized from equity and attributed at the recording value of the underlying element. The ineffective portion, if present, of the change in value of the hedging instrument is immediately ascribed to the income statement under financial expenses and/or income.

When a hedging financial instrument expires, is sold, terminated, or exercised, or the company changes the relationship with the underlying variable, and the forecast transaction has not yet occurred although it is still considered likely, the relative gains or losses deriving from adjustment of the financial instrument to fair value are still retained in equity and are recognized in the income statement when the transaction takes place in accordance with the situation described above. If the forecast transaction related to the underlying risk is no longer expected to occur, the relative gains or losses of the derivative contract, originally deferred in equity, must be taken to the income statement immediately. (ii) Hedges of monetary assets and liabilities (Fair value hedges) When a derivative financial instrument is used to hedge changes in value of a monetary asset or liability already recorded in the financial statements that can impact on the income statement, the gains and losses relative to the changes in the fair value of the derivative instrument are taken to the income statement immediately. Likewise, the gains and losses relative to the hedged item modify the book value of said item and are recognized in the income statement.

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4. Cash and cash equivalents 31/12/2011 31/12/2010 (€/000) (€/000)

Cash 6 5Bank deposits 23,226 16,786Repurchase agreements 45,000 72,491Total 68,232 89,282

Bank accounts include €/000 709 originally held in US dollars ($/000 918). At 31 December 2011 bank deposits included locked up deposits maturing in January and February 2012 for a notional amount of €20 million at a fixed rate of 3.2%. The interest rate in the year on freely available bank deposits was approximately 0.9% (0.3% in 2010), while the average rate on locked-up deposits was Euribor+1.2 percentage points (around 2.5% on average). The average interest rate of repurchase agreements is Euribor +1.4 percentage point (on average approximately 2.7%). The underlying is composed of bonds of a primary national banking group, covered by the bank's repurchase commitment on maturity, normally established by the company at three months. 5. Trade receivables 31/12/2011 31/12/2010 (€/000) (€/000)

Fair value for the initial entry 11,125 10,494Bad debt provision (337) (322)Trade receivables, net 10,788 10,172

Changes in the bad debt provision were as follows: 2011 2010 (€/000) (€/000)

Opening balances 322 301Allocation for the period 49 47Utilizations in the period due to losses (34) (26)Closing balance 337 322

Allocations in the period are booked under other operating costs. Receivables in US dollars amount to €/000 2,000 (corresponding to $/000 2,587), €/000 1,331 of which hedged against currency exchange rate fluctuations. No trade receivables or payables are due beyond 12 months.

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6. Inventories 31/12/2011 31/12/2010 (€/000) (€/000)

Raw materials and components 3,973 4,360Semi-finished products 5,151 5,352Finished products 1,410 1,876Total inventories 10,534 11,588

Inventories are net of an allowance for inventories totalling €/000 800 (€/000 450 at 31/12/2010) allocated to cover materials considered to be obsolete or slow moving stock. Changes in the inventories allowance were as follows: 2011 2010 (€/000) (€/000)

Opening balances 450 450Allocation for the period 395 -Utilizations in the period due to losses (45) -Closing balance 800 450

7. Derivative financial instruments Interest rate hedging The company adopts a procedure, approved by the Board of Directors, which identifies the derivative financial instruments to be used to hedge against the risk of interest rate fluctuations These instruments are as follows: Interest Rate Swaps (IRS), Forward Rate Agreements (FRA) and options on interest rates (Caps & Floors). Company policy is currently to assess the opportunities offered by the market in relation to the possibility to take out Interest Rate Swaps at economically advantageous conditions. This strategy underpinned the two hedges taken out during the first half of 2009 for a total amount of €114 million. The first hedge counters the interest rate risk on a loan repayment instalment of €/000 33,333 due on 19 January 2012. The interest rate swap (IRS), of the same amount and due on that date with respect to the loan, was taken out on 19 July 2010 at a rate of 2.70%. At 30 September 2011 the hedge relationship displayed an effectiveness percentage lower than the limits established by IAS 39 (80-125 percent), so as from said date the IRS was no longer classified as a hedge and was therefore classified under derivative instruments held for trading. The second hedge was taken out to cancel the interest rate risk on a loan for a total of €/000 80,670 on the basis of a plan of utilizations prepared at the time of the hedge, that envisages several reimbursements with final payment at 30/06/2014. However, the loan – which was to constitute the underlying of the IRS hedge – in the final accounts had been utilized for a lower amount (€/000 43,230 at 31/12/2011 and €/000 49,680 at 31/12/2010) with respect to the initial predictions of €/000 80,670 resulting, for the amount exceeding the IRS (€/000 26,400 at 31/12/2011 and €/000 30,000 at 31/12/2010) the loss of the conditions required by IAS 39 to qualify as a hedging derivative. The company therefore classified the ineffective part of the IRS as a derivative instrument held for trading. The IRS was taken out on 31 December 2009 at a rate of 2.83%. At 31 December 2011 all the company's cash on hand was subject to floating interest rates, as were all financial and bank debts.

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Exchange risk hedging The company is subject to exposure of the US dollar for sales in the US of high pressure pumps to subsidiary General Pump; of a mechanical component to subsidiary NLB; of high pressure pumps also to customers outside the group. The hedges, which were solely related to the sale of high pressure pumps, because the sales of mechanical components are still for insignificant amounts, were created using a single financial instrument: the plain vanilla forward. The company classifies derivatives hedging sales of high pressure pumps as cash flow hedging. The fair values of exchange risk derivative hedges at the close of the year were as follows:

31/12/2011Notional

31/12/2011Positive

fair value


31/12/2010

Notional

31/12/2010 Positive

fair value


(€/000) (€/000) (€/000) (€/000) (€/000) (€/000)

IRS a hedges on loans 102,963 - 1,383 113,013 - 2,451

Total 102,963 - 1,383 113,013 - 2,451

The fair values of exchange rate risk derivative hedges at the close of the year were as follows:

31/12/2011Notional

31/12/2011Positive

fair value


31/12/2010

Notional

31/12/2010 Positive

fair value


($/000) (€/000) (€/000) ($/000) (€/000) (€/000)

Plain vanilla forwards relative to the hedging of high-pressure pump sales 9,600 - 276 14,662 368 72

Total derivative financial instruments to hedge USD exchange rate risk 9,600 - 276 14,662 368 72

IRS used to hedge interest risks are brought to book according to the cash flow hedging method. The fair value breakdown of hedging derivatives according to the accounting method is as follows:

31/12/2011 Notional

31/12/2011Positive

fair value


31/12/2010

Notional

31/12/2010 Positive

fair value


(€/000) (€/000) (€/000) (€/000) (€/000) (€/000)

IRS recorded according to cash flow hedging method 43,230 - 798

83,013

- 1,749

IRS that do not comply with the requirements of IAS 39 to be defined as hedges 59,733 - 585

30,000

- 702

Total derivative financial instruments to hedge the exchange rate risk 102,963 - 1,383

113,013

- 2,451

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Plain vanilla forwards used to hedge interest risks are brought to book according to the cash flow hedging method. The fair value breakdown of hedging derivatives according to the accounting method is as follows:

31/12/2011 Notional

31/12/2011Positive

fair value


31/12/2010

Notional

31/12/2010 Positive

fair value


($/000) (€/000) (€/000) ($/000) (€/000) (€/000)

Plain vanilla forwards recorded according to the cash flow hedging method 9,600 - 276

11,122

313 66

Plain vanilla forwards that do not comply with the requirements of IAS 39 to be defined as hedges - - -

3,540

55 6

Total derivative financial instruments to hedge USD exchange rate risk 9,600 - 276

14,662

368 72

At the time of drafting of the financial statements no situations of overhedging were identified. Cash flow hedges The effects recognized in the income statement refer, in the amount of €/000 143 (€/000 719 losses from fair value and €/000 862 profit from fair value) to the profit recorded on the interest rate risk management activity (losses of €/000 702 in 2010) and, for the remainder, to the exchange risk management activity.

Hedging of the exchange risk concerned loans maturing within 2014. The company exchange risk management policy involves the hedging of future commercial cash flows. The maximum time span in which it is predicted that the cash flows will originate is 6 months. It is therefore reasonable to assume that the relative hedge effect suspended in the Provision for valuation of hedging derivatives at fair value will be recorded in the income statement in the next year.

In 2011 the company transferred from equity and ascribed to the income statement a negative portion of profits previously booked for €/000 86 (€/000 14 in 2010) net of the theoretical tax effect. This value was set off against net sales for €/000 106, under fair value losses for €/000 20, and under current taxes with positive sign in the amount of €/000 40.

The ineffectiveness deriving from cash flow hedging transactions in 2011 and in 2010 was negligible. Fair value hedges The profits and losses deriving from the valuation of derivative financial instruments in compliance with the rules of fair value hedging and the profits and losses ascribable to the relative hedged elements are shown in the following table: 2011 2010 (€/000) (€/000)

Net profit (loss) on derivative instruments utilized to hedge against exchange risks

- (74)

Change in the fair value of the other underlying elements - 124Profit (loss), net - 50

Fair values The main methods and assumptions made in the estimation of fair values are outlined below.

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Derivatives The fair value of plain vanilla forwards is obtained using market prices, if the forwards are listed, or discounting the difference between the contractual forward exchange rate and the current spot exchange rate. The interest rate utilized for discounting corresponds to swap brokers quotes, tested by applying pricing models and cash flow techniques discounted to current values. In this latter case, the calculation of future cash flows is based on the management's best estimate, whilst the interest rate applied is the market rate for said derivative instruments at the balance sheet date.

Interest-bearing financial payables The fair value is based on the predicted cash flows for the principal amount and interest.

Receivables/Payables For receivables and payables within twelve months the nominal value is assumed as the fair value. The fair value of other receivables and payables is the discounted nominal value if the temporal factor or notional value are significant.

Interest rates utilized to obtain the fair value To establish the fair value, the company utilizes the interest rate curve plus a suitable spread. The interest rates utilized are as follows: 31/12/2011 31/12/2010 % %Derivative financial instruments (euro) 0.300/2.570 0.750/3.525Derivative financial instruments (USD) 0.200/2.592 0.195/4.150Interest bearing financial payables (euro) Euribor+0.450/1.75 Euribor+0.450/1.75Financial leasing agreements N/a N/aReceivables and payables 3.0 4.5

Financial instruments measured at value refer to financial assets and liabilities listed on active markets (fair value hierarchy level 1). 8. Assets held for sale In 2011 this category includes an industrial building that is no longer used, for which a property agent has been appointed to secure a sale in a period that is commensurate with current property market conditions. On 26 April 2011 another building, classified under assets held for sale, was sold for €3.7 million. The price will be settled in several instalments, the last of which falling due on 31 December 2012. We have received an adequate bank guarantee to secure the extended payment. At December 2011 the total proceeds from the sale of the building totalled €/000 850. 9. Other current assets This item comprises: 31/12/2011 31/12/2010 (€/000) (€/000)

Receivables from the disposal of investments 1,129 -Receivables from the disposal of assets held for sale 2,795 -Accrued income and prepayments 342 308Other receivables 167 126Total 4,433 434

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10. Property, plant and equipment Land and

buildingsPlant and


(€/000) (€/000) (€/000) (€/000) (€/000)

At 1 January 2010 Cost 7,541 21,637 10,120 2,189 41,487Accumulated amortization (2,655) (15,246) (8,532) (1,830) (28,263)Book value 4,886 6,391 1,588 359 13,224

Changes during 2010 Opening book value 4,886 6,391 1,588 359 13,224Increases - 1,045 391 45 1,481Disposals - - - (1) (1)Amortization (117) (806) (627) (138) (1,688)Closing book value 4,769 6,630 1,352 265 13,016

At 31 December 2010 Cost 7,541 22,680 10,511 2,225 42,957Accumulated amortization (2,772) (16,050) (9,159) (1,960) (29,941)Book value 4,769 6,630 1,352 265 13,016

Changes during 2011 Opening book value 4,769 6,630 1,352 265 13,016Increases 9 1,174 826 64 2,073Disposals (1) (1) (3) - (5)Amortization (116) (865) (593) (112) (1,686)Closing book value 4,661 6,938 1,582 217 13,398 At 31 December 2011 Cost 7,552 23,724 11,334 2,286 44,896Accumulated amortization (2,891) (16,786) (9,752) (2,069) (31,498)Book value 4,661 6,938 1,582 217 13,398

The cost of assets in progress, included in the net book values disclosed in the previous table, is as follows: Land and

buildingsPlant and

machinery Equipment Other assets Total

(€/000) (€/000) (€/000) (€/000) (€/000)

At 1 January 2010 - 38 478 - 516At 31 December 2010 - 119 105 - 224At 31 December 2011 - 231 427 - 658

There are no finance leasing contracts in existence. Depreciation of €/000 1,605 was charged to the cost of sales (€/000 1,588 in 2010) and €/000 81 for general and administrative expenses (€/000 100 in 2010). At 31 December 2011 the company had contractual commitments for the purchase of tangible assets equal to €/000 1,507 ( €/000 24 at 31/12/2010).

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11. Goodwill Goodwill consists of the merger surplus, as described in section 2.6. The impairment test was conducted using the Discounted Cash Flow method (DCF) net of taxation. Expected cash flows utilized in the DCF calculation were determined on the basis of a 5-year business plan that takes account of the various reference scenarios and on the basis of growth forecasts in the various markets. For periods after 2016 a prospect of perpetual growth of 1.5% was utilized. The forecast cash flows determined in this manner were reduced by a discount factor in order to take into consideration the risk that the future plans could prove to be impracticable. WACC, after tax, was measured at 6.23%. At 31/12/2010 the WACC was 6.14%. In addition, a sensitivity analysis was carried out in compliance with the requirements of the joint document issued by Banca d'Italia, Consob, and ISVAP on 3 March 2010. Reducing the expected cash flows of the CGU by 10% would not have resulted in any form of impairment, likewise, also increasing the cost of capital utilized to actualize the forecast flows by 0.5% would not have produced any impairment. For a complete and more detailed analysis of goodwill, refer to Note 15 in the Consolidated Financial Statements at 31/12/2011. 12. Other intangible assets Product

development costsOther intangible

assets Total (€/000) (€/000) (€/000)

At 1 January 2010 Cost 9,155 494 9,649Accumulated depreciation (5,500) (375) (5,875)Book value 3,655 119 3,774 Changes during 2010 Opening book value 3,655 119 3,774Increases 1,268 14 1,282Impairment losses (280) - (280)Depreciation (871) (46) (917)Closing book value 3,772 87 3,859

At 31 December 2010 Cost 10,235 508 10,743Accumulated depreciation (6,463) (421) (6,884)Book value 3,772 87 3,859

Changes during 2011 Opening book value 3,772 87 3,859Increases 1,512 12 1,524Contributions received (35) - (35)Impairment losses (651) - (651)Depreciation (683) (46) (729)Closing book value 3,915 53 3,968

At 31 December 2011 Cost 11,857 520 12,377Accumulated depreciation (7,942) (467) (8,409)Book value 3,915 53 3,968

152

As described in section 2.7, product development costs refer to invoices received from the subsidiary Interpump Engineering S.r.l. for new product development. The invoices are capitalized in the portion that complies with the criteria imposed by IAS 38, in addition, wherever future recoverability of the projects is deemed to be impossible, they are written down. The cost of assets in progress, included in the net book values disclosed in the previous table, is as follows: Product

development costs


(€/000) (€/000) (€/000)

At 1 January 2010 2,066 - 2,066At 31 December 2010 2,155 - 2,155At 31 December 2011 2,405 - 2,405

Amortization of €/000 729 (€/000 917 in 2010) was booked entirely to general and administrative costs. 13. Investments in subsidiaries (€/000)

Balance at 31 December

2010

Increases due to assignment of stock options Decreases

Impairment losses

Balance at 31 December

2011

Subsidiaries: NLB Corporation Inc. 62,048 - - - 62,048General Pump Companies Inc. 8,903 - - - 8,903Interpump Hydraulics S.p.A. 91,312 - - - 91,312Hammelmann GmbH 26,032 - - - 26,032Interpump Engineering S.r.l 138 - - - 138Unielectric S.p.A. 4,129 - (4,129) - -General Technology S.r.l. 2,095 - - - 2,095Teknova S.r.l. (winding up) 37 - - (12) 25SIT S.p.A. 814 - - - 814Hammelmann Bombas e Sistemas Ltda 13

- - - 13

Fair value of stock options of subsidiaries' employees 263 124 -

- 387

Total subsidiaries 195,784 124 (4,129) (12) 191,767

All the equity investments held by Interpump Group S.p.A., with the exception of the investment in Sit S.p.A., are considered, starting from the date of acquisition, as financial assets since they correspond to financial instruments available for sale. As required by IFRIC 11, which came into force on 1 January 2010, share-based payment agreements (stock option plans) were recorded, the subject of which is equity instruments of the Parent Company in favour of the employees of its subsidiaries. The fair value of the stock options assigned to and exercisable by employees of subsidiaries of €/000 124 was added to the value of the investment, with the increase in the share premium reserve as a matching entry.

153

The decrease refers to the divestment of the 70% stake in Unielectric, a company active in the production of windings and electric motors, for a price of €3.5 million. This amount was paid in cash on the execution date in the quantity of one third (€1.2 million) while a further third will paid within 15 December 2012 and the final third will be settled within 15 December 2013. The extended payments are secured by bank guarantees. Unielectric was sold because Interpump Group S.p.A. no longer considered the investment to be strategic in the framework of the business sectors of the group, which is currently focused in the Industrial Sector (high and very high-pressure water pumps) and the Hydraulic Sector (power takeoffs, hydraulic pumps, cylinders and other hydraulic components). With the sale of Unielectric the Interpump Group has therefore withdrawn from the Electric Motors Sector. The sale, which complied with the requirements of IFRS 5 and the most recent orientations of international accounting principles, has been represented in this report as a Discontinued Operation. The impairment of Teknova S.r.l. (in liquidation) is due to adaptation to the book value of shareholders' equity, following losses for the year. 14. Other financial assets The only item included under other financial assets relates to loans to subsidiaries, a breakdown of which is given in Note 5 of the "2011 Board of Directors' Report of Parent Company Interpump Group S.p.A.". 15. Deferred tax assets and liabilities Changes in deferred tax assets and liabilities are listed below: 2011 2010 2011 2010 Deferred

taxassets

Deferredtax

assets

Deferred tax

liabilities

Deferred tax

liabilities (€/000) (€/000) (€/000) (€/000)

At 1 January 2,109 2,120 1,051 1,257Charged to income statement in the period (223) (199) (6) (245)Recording in reserves for the year (228) 188 (40) 39At 31 December 1,658 2,109 1,005 1,051

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Deferred tax assets and liabilities can be booked under the following items of the balance sheet: 31/12/2011 31/12/2010 31/12/2011 31/12/2010

Deferred tax assets

Deferred tax assets

Deferred tax

liabilities

Deferred tax

liabilities (€/000) (€/000) (€/000) (€/000)Property, plant and equipment 350 941 730 740Intangible fixed assets 250 117 - -Inventories 251 141 - -Receivables 21 21 - -Investments - - 12 12Liabilities for employee benefits - - 221 241Shareholders' equity

- capital increase ancillary expenses - derivative financial instruments

70252

106481

- -

-40

Other 464 302 42 18Total 1,658 2,109 1,005 1,051

Deferred tax assets/liabilities brought to account at the relative equity value refer to the accounting of the fair value of derivative financial instruments recorded in accordance with the hedge accounting method and booking of capital increase ancillary expenses. No deferred tax liabilities were recorded for reserves qualifying for tax relief as they are not expected to be distributed (see note 21). 16. Interest-bearing financial payables and bank payables The main loans are all subject to the following financial covenants, calculated using consolidated figures:

- Net financial indebtedness / Shareholders' equity;

- Net financial indebtedness / EBITDA;

- EBIT / Financial charges;

- EBITDA / Financial charges;

At 31/12/2011 all financial covenants had been amply respected.

Non-current financial payables have the following due dates: 31/12/2011 31/12/2010 (€/000) (€/000)

From 1 to 2 years 45,927 62,931From 2 to 5 years 33,081 29,847After 5 years 11,132 -Total 90,140 92,778

The average interest rate on loans in 2011 was approximately 3.4% (2.9% in 2010).

155

At 31/12/2011 all loans were at floating-rates. The company has the following lines of credit which were unused at year-end: 31/12/2011 31/12/2010 (€/000) (€/000)

Current account overdrafts and export advances 35,416 36,845Medium/long-term financing 45,472 69,000Total 80,888 105,845

The unused medium/long-term lines of credit at 31/12/2011 and at 31/12/2010 refer primarily to a pool loan subscribed on 8 August 2008. The €120 million loan is destined to finance potential future acquisitions and refinance the existing debt. The syndicated loan can be repaid starting from month seventeen up to month seventy-one after the time of granting. This loan is not backed by collateral. The interest rate is 3-6 month Euribor, with a spread that varies in accordance with the Net financial indebtedness/EBITDA ratio. An additional €/000 18,000 has been used in 2012 to finance the acquisition of Galtech, MTC and Takarada. 17. Other current liabilities This item comprises: 31/12/2011 31/12/2010 (€/000) (€/000)

Payables to personnel 1,432 1,744Payables to social security institutions 1,265 1,354Customer advances 406 552Customer credit balances 301 578Payables for the remuneration of directors/auditors 1,321 1,064Guarantee deposits received - 150Other 77 192Total 4,802 5,634

18. Provisions for risks and charges Changes were as follows:

(€/000) Balance at

31/12/2010Allocations of the

yearUtilizations of the year

Balance at31/12/2011

Provision for contingent liabilities associated to the sale of investments 300 - - 300

Other 163 2 (161) 4Total 463 2 (161) 304

156

The closing balance is disclosed as shown below in the balance sheet: 31/12/2011 31/12/2010 (€/000) (€/000)

Current - -Non-current 304 463Total 304 463

On 28 November 2011 the company submitted a tax clearance application to the Italian Revenue Agency relating to the deductibility of the tax loss incurred by the sale of Unielectric. If the result of the application is positive, taxes for the year would be reduced by €2.7 million. 19. Liabilities for employee benefits Liabilities for defined benefit plans The following movements were recorded in liabilities:

2011 2010 (€/000) (€/000)

Liabilities at 1 January 3,237 3,161Amount charged to income statement in the period 219 262Reclassifications to other current liabilities (64) (39)Payments made (123) (147)Liabilities at 31 December 3,269 3,237

The following items were recognized in the income statement: 2011 2010 (€/000) (€/000)

Current service cost - -Financial charges 55 60Actuarial loss (profit) recorded in the period 164 202Past service cost - -Total recognized in the income statement 219 262

Items recognized in the income statement were booked as follows: 2011 2010 (€/000) (€/000)

Cost of sales 119 145Distribution costs 26 31General and administrative expenses 19 26Financial charges 55 60Total 219 262

Refer to the "Board of Directors' Report" in chapter “1. Profitability” for a breakdown of labour costs.

157

The average number of employees broken down by category is as follows: 2011 2010

Managers 8 8Supervisors 8 8White collar 62 62Blue collar 281 275Total 359 353

Liabilities for defined benefit plans (Severance indemnity - TFR) were established with the following actuarial assumptions: Unit of

measurement 2011 2010Interest rate % 4.34 4.43Expected increase in rate of remuneration % n.a. n.a.Percentage of employees expected to resign before retirement age

(turnover) % 4.03 4.02

Annual cost-of-living increase % 2.0 2.0Average period of employment Years 13.00 13.58

20. Share capital The share capital is composed of 97,668,822 ordinary shares with a unit face value of €0.52 for a total amount of €50,787,787.44. In contrast, share capital recorded in the financial statements amounts to €/000 47,936 because the nominal value of purchased treasury shares, net of divested treasury stock, was deducted from the share capital in compliance with the reference accounting principles.

In October 2011 a total of 10,464 warrants were exercised, with the consequent subscription of 6,431 ordinary shares at a unit price of €4.80 for a total value of €30,868.8, of which €3,344.12 by way of share capital and €27,524,68 by way of a premium. There are therefore 18,446,168 outstanding warrants exercisable in October 2012 by underwriting 59 newly issued shares for each 96 warrants at a price of €5.10.

Changes in treasury stock over the past two years have been as follows: Number

Balance at 31/12/2009 3,660,7202010 purchases -Sale of treasury shares for the purchase of subsidiaries (600,748)Balance at 31/12/2010 3,059,9722011 purchases 3,548,594Sale of treasury shares to finance the acquisition of subsidiaries (1,074,286)Sale of treasury shares for stock options (50,000)Balance at 31/12/2011 5,484,280

Taking treasury stock into consideration, the following changes were recorded in the number of shares in circulation:

158

2011 2010 Number of shares Number of shares

Ordinary shares in existence at 1 January 97,662,391 96,766,004Treasury stock (3,059,972) (3,660,720)Shares in circulation at 1 January 94,602,419 93,105,284Purchased treasury stock (3,548,594) -Treasury stock sold 1,124,286 600,748Increase in share capital 6,431 896,387Total shares in circulation at 31 December 92,184,542 94,602,419

The aims identified in the management of capital are creating value for shareholders and supporting growth of the group. The company therefore intends to maintain an adequate level of capitalization, which simultaneously makes it possible to generate a satisfactory economic return for shareholders and to guarantee the economically effective access to external sources of borrowing. The company constantly monitors the evolution of the level of debt in relation to shareholders' equity and the generation of cash by virtue of its industrial operations. In order to attain the aforementioned goals, the company constantly monitors the cash flows generated by the business sectors in which it operates, both through improvement or maintenance of profitability, and through careful management of working capital and of other expenditure. The Board of Directors can propose, to the Shareholders' Meeting, increases or decreases of the share capital or, where permitted by law, the distribution of reserves. In this context the company also purchases treasury stock, within the limits authorized by the Shareholders' Meeting, following the same logic of value creation, in line with the aims of financial and developmental equilibrium, also by means of targeted acquisitions. The expression capital is construed as both the value supplied by the shareholders of Interpump Group S.p.A. (share capital and share premium reserve, totalling €/000 111,823 at 31 December 2011 and €/000 122,816 at 31 December 2010), and the value generated by operations (other reserves and legal reserve, including profit for the year, overall equivalent to €/000 71,011 at 31 December 2011 and €/000 73,455 at 31 December 2010, excluding the provision for fair value recognition of hedge derivatives). Purchased treasury stock The amount of treasury stock held by Interpump Group S.p.A. is recorded in an equity provision. In 2011 the company acquired 3,548,594 treasury shares at an average unit cost of €4.6468 (no treasury shares were purchased in 2010).

Treasury stock sold In the context of the execution of the stock option plans 50,000 options were exercised resulting in proceeds of €/000 188. Moreover, to finance the acquisition of the additional 11% of Interpump Hydraulics International from Interpump Hydraulics on 6 September 2011 a total number of 1,074,286 treasury shares were transferred for €/000 4,309. In 2010 the company divested 600,748 treasury shares for the deferred payment of the acquisition cost of HS Penta S.p.A., for an equivalent value of €/000 3,344. Assigned options The Board of Directors' meeting of 15 March 2011, after having checked that the established goals have been accomplished, determined that the 2,299,440 options of the 2010/2012 incentive plan had now become exercisable. In particular, 804,000 options assigned to Giovanni Cavallini, 804,000 options assigned to Fulvio Montipò, 257,280 options assigned to Paolo

159

Marinsek and 434,160 options assigned to other beneficiaries all became exercisable. The options can be exercised at the price of €3.75 per share as from 30 June 2013 until 31 December 2016. The fair value of the stock options assigned with the new incentives plan had already been established at the time of the prior allocation, which was dependent on the accomplishment of the goals. Stock options The fair value of 2002/2005, 2006/2010 and 2011/2012 stock option plans was recorded in the 2011 and 2010 financial statements in compliance with IFRS 2. Costs of €/000 845 (€/000 1,894 in 2010) relating to the stock option plans were therefore recognized in the 2011 income statement, with a matching entry in the share premium reserve. Said costs represent the portion for the financial period of the value of the options assigned to employees and directors, established at the allocation date, corresponding to the value of the services rendered by the latter in addition to normal remuneration. The difference with respect to 2010 is due:

- to the fact that the allocation of the fourth tranche of the 2006/2009 plan is entirely exercisable as from July 2010 so the entire cost was ascribed to the 2010 income statement rather than being distributed between the years of maturity, as occurred for the other plans;

- to the changes made to the exercise price of the fourth tranche of the 2002/2005 plan and to all the tranches of the 2006/2009 plan due to the effects of the share capital increase (refer to the Board of Directors' Report submitted with the 2010 consolidated financial statements) and that were promptly ascribed to 2010;

Changes in the share premium reserve were as follows:

2011 2010 (€/000) (€/000)

Share premium reserve at 1 January 73,622 64,866Increase of the period due to recording in the income statement

of the fair value of stock options assigned to Interpump Group S.p.A. employees.

845 1,894Increase of the period due to recording in equity of the fair

value of stock options assigned to subsidiaries' employees

124 263Increases for the sale of treasury stock to beneficiaries of stock

options

162 -Increases for the transfer of treasury stock following the

payment for acquisitions of subsidiaries

3,750 3,031Increase for share capital increase 28 3,568Utilization for coverage of the purchase of treasury stock (14,644) -Share premium reserve at 31 December 63,887 73,622

Items recognized in the income statement were booked as follows: 2011 2010 (€/000) (€/000)

Cost of sales - 28Distribution costs 29 42General and administrative expenses 816 1,824

160

Total 845 1,894The 2002/2005 plan is described analytically in the Board of Directors' Report submitted together with the consolidated financial statements. The cost of each tranche is determined in a different manner for each vesting period and is recorded in the income statement for each tranche in the period of maturity on the basis of the months that have elapsed from the date of allocation to the reporting date.



Options assigned at 1 January 602,850 586,850Options assigned during the year - -Options exercised during the year - -Options reissued (cancelled) during the year - 16,000Total options assigned at 31 December 602,850 602,850Of which: vested at 31 December 602,850 602,850not vested at 31 December - -Total options assigned at 31 December 602,850 602,850

The remaining 602,850 options refer to the fourth tranche (exercise price of € 5.6774) and are exercisable until 31/12/2013.

The Shareholders' Meeting of 20 April 2006 approved another stock option plan ("2006/2009 stock option plan") which, like the previous one, is described in detail in the aforementioned Board of Directors' Report of the consolidated financial statements. Options are exercisable as shown in the following table:

No. of options granted

Vesting period

Exercise price

First tranche 796,935 01/05/2010 – 31/05/2015 € 7.2884Second tranche 827,361 01/05/2011 – 31/05/2016 € 5.4047Third tranche 275,000 01/05/2012 – 31/05/2017 € 3.7524Fourth tranche 1,050,000 01/07/2010 – 31/12/2017 € 3.7524Total 2,949,296



Options assigned at 1 January 2,999,296 1,869,296Options assigned during the year - 1,100,000Options exercised during the year (50,000) -Options reissued (cancelled) during the year - 30,000Total options assigned at 31 December 2,949,296 2,999,296Of which: - vested at 31 December 2,674,296 1,896,935- not vested at 31 December 275,000 1,102,361Total options assigned at 31 December 2,949,296 2,999,296

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The Shareholders' Meeting of 21 April 2010 approved the adoption of a new incentive plan designated “Interpump 2010/2012 Incentives Plan”. The plan, which is based on the free assignment of options that grant the beneficiaries the right, on the achievement of specified objectives, to (i) purchase or subscribe the Company’s shares up to the maximum number of 3,000,000 or, (ii) at the discretion of the Board of Directors, receive the payment of a differential equivalent to any increase in the market value of the Company’s ordinary shares. Beneficiaries of the plan can be employees or directors of the Company and/or its subsidiaries, identified among the subjects with significant roles or functions. The exercise price has been set at € 3.75 per share. The options can be exercised between 30 June 2013 and 31 December 2016. The next meeting of the Board of Directors held on 21 April 2010 set a figure of 3,000,000 for the maximum number of options assignable for each tranche (750,000 for the first tranche, 1,050,000 for the second tranche and 1,200,000 for the third tranche) and established the terms for the assignment of the options that are connected to the achievement of specific accounts parameters and the performance of the Interpump Group share. The same Board of Director's meeting assigned 1,000,000 options to Interpump Group S.p.A. directors Mr Cavallini and to Mr Montipò and 320,000 to Mr. Paolo Marinsek, the exercise of which is subject to the occurrence of the above conditions. In addition, the same Board of Directors' meeting assigned 680,000 options, granting a separate mandate to the Interpump Group Chairman, Deputy Chairman and Chief Executive Officer to identify the beneficiaries from among the employees, directors and collaborators of the Interpump Group. In July 2010 the beneficiaries were chosen for 540,000 assigned options, while the beneficiaries of 140,000 options are yet to be identified.

The Board of Directors' meeting of 15 March 2011, after having checked that the established goals have been accomplished, determined that the 2,299,440 options of the 2010/2012 incentive plan had now become exercisable. In particular, 804,000 options assigned to Giovanni Cavallini, 804,000 options assigned to Fulvio Montipò, 257,280 options assigned to Paolo Marinsek and 434,160 options assigned to other beneficiaries all became exercisable.

The fair value of the stock options and the actuarial assumptions utilized in the binomial lattice model are as follows:


Unit of measurement

Number of shares assigned no. 944,700Grant date May 2006Exercise price € 5.6774

Vesting date 1/3 May 2006

1/3 May 20071/3 May 2008

Fair value per option at the grant date € From 1.288620 to

1.452840Expected volatility (expressed as weighted average of volatility values utilized in construction of the binomial lattice model)

% 23%

Expected average duration of the plan life Years From 4.7 to 6.7Expected dividends (compared with share value) % 4%Risk free interest rate (calculated by means of a linear interpolation of Swap rates at 30/04/2005)

% From 3.774 to 3.998

162

2006-2009 Plan - First tranche

Unit of measurement

Number of shares assigned no. 826,935Grant date May 2007Exercise price € 7.2884Vesting date 1 May 2010Fair value per option at the grant date € 1.8187Expected volatility (expressed as weighted average of volatility values utilized in construction of the binomial lattice model)

% 23%


% From 4.36 to 4.3745

2006-2009 Plan - Second tranche

2006-2009 Plan - Third tranche

Unit of measurement

Number of shares assigned no. 275,000Grant date April/July 2009Exercise price € 3.7524Vesting date 1 November 2012Fair value per option at the grant date € 0.57306Expected volatility (expressed as the weighted average of volatility values utilized in construction of the binomial lattice model)

% 30%


% From 3.258 to 3.395

Unit of measurement

Number of shares assigned no. 827,361Grant date May 2008Exercise price € 1.2431Vesting date 1 May 2011Fair value per option at the grant date € 5.4047Expected volatility (expressed as weighted average of volatility



interpolation of Swap rates at 17/04/2008) % From 4.445 to 4.496

163


2010//2012 Plan

First assignment Unit of measurement

Number of shares assigned no. 2,320,000Grant date 21 April 2010Exercise price 3.7500Vesting date 1 July 2013Fair value per option at the grant date € 0.89555Expected volatility (expressed as weighted average of volatility values utilized in construction of the binomial lattice model)

% 30%

Expected average duration of the plan life Years 6.666Expected dividends (compared with share value) % 4%Risk free interest rate (calculated by means of a linear interpolation of swap rates at 21 April 2010)

% From 2.63 to 2.83

Second assignment Unit of

measurement Number of shares assigned no. 540,000Grant date 07 July 2010Exercise price 3.7500Vesting date 1 July 2013Fair value per option at the grant date € 1.08964Expected volatility (expressed as weighted average of volatility values utilized in construction of the binomial lattice model)

% 30%

Expected average duration of the plan life Years 6.5Expected dividends (compared with share value) % 4%Risk free interest rate (calculated by means of a linear interpolation of swap rates at 7 July 2010)

% From 2.29 to 2.49

The expected volatility of the underlying (Interpump Group share) is a measure of the prospect of price fluctuations in a specific period. The indicator that measures volatility in the model utilized to evaluate the options is the mean square annualized deviation of compound returns of the Interpump Group share through time.

Unit of measurement

Number of shares assigned no. 1,100,000Grant date March 2010Exercise price 3.7524Vesting date 1 July 2010Fair value per option at the grant date € 0.92286Expected volatility (expressed as weighted average of volatility



interpolation of swap rates at 2010) % From 2.899 to 3.069

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21. Reserves Reserve for valuation of hedging derivatives at fair value This includes net accumulated changes in the fair value of derivative financial instruments classified as hedges and recorded using the hedge accounting method.

Classification of net equity depending on the possibility of utilization (amounts in €/000)

Amount Possibility of

utilization

Available portion

Tax payable in the event of distribution

Summary of amounts utilized in previous three

years

to cover losses for other reasons

Share capital

Subscribed and fully paid-up share capital

50,788 B - -

-

1,596

Nominal value of treasury stock in the portfolio

(2,852) - - -

-

-

Total share capital 47,936 - - -

Capital reserves


Share premium reserve 43,257 A,B,C 43,257

Total capital reserves 50,117

Profit reserves:


Share premium reserve 20,868 A,B,C 20,480 1,687 - 7,960

Extraordinary reserve 49,827 A,B,C 49,148 - - 3,527

Reserve for share capital reduction 2,851 - - - - -

First Time Adoption Reserve (30) - - - - -

Reserve for valuation of hedging derivatives at fair value

(649) - - -

-

-

Reserve for treasury stock held 24,400 - - - - 17,786

Profit for the period 7,968 A,B,C 7,968 - - -

Total profit reserves 108,532 120,853

Treasury stock (24,400) - - - - -

Non-distributable portion* (3,916)

Remaining distributable portion 116,937

A: to increase capital B: to cover losses C: for shareholder dividends

*= represents the non-distributable portion destined to cover deferred costs that have not yet been amortized.

We draw your attention to the fact that €/000 12,987 of the share premium reserve qualifies for tax relief in that it was fiscally formed from the revaluation reserve, Law 342/2000 and Law 266/2005.

Utilizations refer to dividends and reductions of reserves for other causes and do not include transfers between reserves or adjustments made as a result of the first-time adoption of international accounting standards. Specifically, with reference to the changes that have occurred in the previous three years, note that use of the share premium and extraordinary reserves refers to the distribution of dividends, and to the cancellation of treasury stock.

According to national tax regulations, reserves and profit can be freely distributed and are not subject to tax even in the event of distribution if the reserves and net profit exceed the negative

165

components of income ascribed only in the tax return. Otherwise, distributed reserves and profit are subject to tax in the measure in which the residual reserves and profits are lower than the negative components of income that have been ascribed exclusively to the tax return. At 31 December 2011, this condition has been complied with in full, hence no taxes were payable in the event of distribution of the parent company's entire profits for the year and the entirety of available reserves, beyond the taxes already indicated in the prior statement.

Breakdown of components recorded directly in equity

2011 2010

(€/000)

Pre-tax

amount Taxes

Amount net

of taxes

Pre-tax

amount

Taxes

Amount net

of taxes

Accounting of derivative financial

instruments used to hedge the

interest rate risk recorded in

accordance with the cash flow

hedging method 969 (266) 703 (707)

194 (513)

Accounting of derivative financial

instruments used to hedge the

exchange rate risk recorded in

accordance with the cash flow

hedging method (249) 78 (171) 146

(46) 100

Total 720 (188) 532 (561) 148 (413) 22. Information on financial assets and liabilities Financial assets and liabilities, broken down by the categories identified by IAS 39, are summarized in the following tables: Financial assets

at 31/12/2011 Financial

liabilities at 31/12/2011

(€/000)


Initially* IAS 39


Valued at amortized cost

Total

Fair value

Trade receivables - - 10,788 - 10,788 10,788Derivative instruments -

assets

- - - -

-

-Other current assets - - 4,091 - 4,091 4,091Other financial assets - - 34,369 - 34,369 34,369Trade payables - - - (10,034) (10,034) (10,034)Current interest bearing

financial payables

- - - (79,941)

(79,941)


payables

(489) (96) - -

(585)

(585)Other current liabilities - - - (4,802) (4,802) (4,802)Non-current interest-bearing

financial payables

- - - (90,140)

(90,140)

(90,140)Total (489) (96) 49,248 (184,917) (136,254) (136,254) * = designated as such at the time of initial recording. ** = classified as held for trading according to the requirements of IAS 39.

166

Financial assets

at 31/12/2010 Financial

liabilities at 31/12/2010

(€/000)


Initially* IAS 39


Valued at amortized cost

Total

Fair value

Trade receivables - - 10,172 - 10,172 10,172Derivative instruments -

assets

- 55 - -

55

55Other current assets - - 126 - 126 126Other financial assets - 24,510 - 24,510 24,510Trade payables - - - (11,676) (11,676) (11,676)Current interest bearing

financial payables

- - - (75,453)

(75,453)


payables

(702) (6) - -

(708)

(708)Other current liabilities - - - (5,634) (5,634) (5,634)Non-current interest-bearing

financial payables

- - - (92,778)

(92,778)

(92,778)Total (702) 49 34,808 (185,541) (151,386) (151,386) * = designated as such at the time of initial recording. ** = classified as held for trading according to the requirements of IAS 39.

The accounting value of financial assets and liabilities is substantially the same as their fair value.

The company has recorded fair value profits in the income statement in the amount of €/000 919 (€/000 72 in 2010) and fair value losses for €/000 757 (€/000 237 in 2010) on derivative financial instruments, which, although they arose for hedging purposes, failed to meet all the requirements of IAS 39 in order to qualify as hedges. Note 7 gives the methods for calculation utilized to establish the fair value of derivative financial instruments. The loss recorded on the underlying transactions was €/000 11 (€/000 1 in 2010); there was no profit recorded in 2011 as in 2010.

Loans and receivables generated revenues and costs. Revenues refer to exchange rate gains for €/000 22 (€/000 376 in 2010). Costs, on the other hand, refer to exchange losses of €/000 263 (€/000 344 in 2010), to bad debts of €/000 49 (€/000 47 in 2010) classified under other operating costs, and to other financial expenses in 2010 for €/000 967 (not present in 2011).

Financial liabilities measured at the amortized cost generated costs relative to the portion of ancillary expenses initially incurred to obtain the loans and subsequently distributed throughout the duration of the loan in accordance with the financial method. In 2011 the value of these expenses booked to the income statement totalled €/000 458 (€/000 371 in 2010).

Financial assets and liabilities that are not designated at fair value recorded in the Income Statement (in the case of Interpump Group S.p.A., all those indicated in the above tables) generated interest receivable for €/000 873 (€/000 624 in 2010) and interest payable for €/000 6,709 (€/000 5,102 in 2010); in addition, general and administrative expenses include commissions and bank charges for €/000 97 (€/000 101 in 2010).

23. Information on financial risks The company is exposed to financial risks associated with its activities: market risks (mainly relative to currency exchange rates and interest rates) since the group

does business internationally and is exposed to the exchange risk deriving from exposure to the US dollar;

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credit risk connected with business relations with customers;

liquidity risk, with special reference to the availability of financial resources and access to the lending market and financial instruments in general;

price risk in relation to metal price fluctuations that constitute a significant portion of the raw materials purchase price.

The company is not exposed to significant concentrations of risks

As described in Note 3 "Management of financial risks" the company constantly monitors the financial risks to which it is exposed in such a way as to make an advance assessment of potential negative effects and take appropriate actions to mitigate them.

The following section contains reference qualitative and quantitative indications regarding the uncertainty of these risks for Interpump Group S.p.A.

The quantitative data given below are not to be construed as forecasts; specifically, the sensitivity analyses concerning market risks are unable to reflect the complexity and correlated relations of markets that may derive from each prospected change.

Exchange risk The company is exposed to risks arising from fluctuations in currency exchange rates, which may affect economic results. Specifically:

for revenues denominated in currencies other than the currencies in which the respective costs are denominated, exchange rate fluctuations can impact on the company's operating profit. In 2011 the total amount of cash flow exposed directly to exchange risks was approximately 22% of company sales (approximately 22% also in 2010). The exchange rates to which the company is exposed are EUR/USD, in relation to sales in dollars of high-pressure pumps in North America through General Pump Inc., which is sited in this important market, and, stating from 2010, directly to an important US customer. Starting from 2011 the company began billing in USD also to its other US subsidiary, NLB Inc, even though the relative amounts remain fairly modest. The Interpump Group has adopted a policy of hedging commercial transactions denominated in foreign currency, in the framework of which the most effective derivative instruments for the achievement of the preset goals have been identified and the relative responsibilities, duties and system of delegations have been defined. In relation to the exposure in dollars for sales on the US market, it is company policy to hedge a prudentially determined portion of predicted sales for periods of four to eight months. In 2011 the company's exchange risk hedging policy involved 89% of the previously illustrated cash flows (98% in 2010).

again in relation to commercial activities, the company may be in a position wherein it holds commercial receivables denominated in currencies other than the account currency. Fluctuations in exchange rates can therefore result in the realization or emergence of positive or negative exchange differences. It is company policy, as previously specified, to hedge exposure deriving from trade receivables.

In relation to financial exposure, wherever the monetary outflows are denominated in a currency other than the account currency, fluctuation of the exchange rates can impact negatively on the net profits of the company. As 31 December 2011 and 31 December 2010 the company had no financial exposures in foreign currency

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In 2011 and 2010 the nature and structure of exposure to the exchange risk and the hedging policies adopted by the company remained substantially unchanged with respect to the previous year.

Sensitivity analysis relative to the exchange risk The potential profit deriving from the change in the fair value of financial assets and liabilities caused by a hypothetical and immediate increase in the value of the euro of 10% with respect to the US dollar would be in the order of approximately €/000 62 (potential profit of €/000 49 in 2010). The sensitivity analysis did not take account of changes in the receivables and payables in relation to which the hedge operations were set up. It is reasonable to assume that the fluctuation in exchange rates could produce an opposite economic effect on the derivative financial instruments of an amount that is identical to the change in the underlying hedged transactions thereby effectively offsetting the fluctuation.

Interest rate risk It is group policy to monitor the slope of the interest rates curve and to hedge part of the loans currently in existence. As more fully described in note 7 at 31/12/2011, loans for which the interest range was hedged totalled €/000 43,230. At 31 December 2011 all cash on hand and loans were subject to floating interest rates.

Sensitivity analysis relative to the interest rate risk The effects of a hypothetical and instantaneous upward variation in interest rates of 50 basis points would provide Interpump Group S.p.A. with higher financial income, net of the increase in financial expenses of €/000 8 (€/000 11 in 2010). It is reasonable to assume that a 50 basis points decrease in interest rates would produce an equivalent effect in the opposite direction.

Credit risk The maximum theoretical credit risk exposure of the company at 31 December 2011 and 2010 is represented by the accounting value of the financial assets recorded in the financial statements.

Historically the company has not suffered any significant losses on receivables. This is because the company generally allows extended payments only to its long-term customers, whose solubility and economic stability is known. In contrast, new customers, after having passed an initial credit rating analysis, are required to make payments in advance or to open a letter of credit for amounts due.

Individual write-downs are applied in relation to positions, if of significant magnitude, in relation to which an objective condition of bad debt is recorded for the totality or a part of the outstanding amount. The amount of the write-down takes account of an estimate of the recoverable flows and the relative collection date, and the expenses and costs for future debt recovery. Provisions on a collective basis are allocated in relation to receivables that are not subject to individual write-downs, taking account of the historic exposure and statistical data.

At 31 December 2011, Loans and Receivables from financial assets totalled €/000 49,248 (€/000 34,808 at 31/12/2010), and include €/000 337 relative to written down receivables (€/000 322 at 31/12/2010); on the residual amount payments overdue by less than three months were €/000 1,193 (€/000 847 at 31/12/2010), while those overdue beyond three months totalled €/000 1,243 (€/000 303 at 31/12/2010). In relation to receivables overdue by less than three months, guarantees received total €/000 356 (€/000 277 at 31/12/2010).

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The company is not exposed to significant concentrations of sales, although the top customer in terms of turnover accounted for approximately 20% of sales in 2011 (19% in 2010), given that the customer in question is a member of the Interpump Group. In this context, the top customer outside the group accounted for approximately 5% in 2011 (7% in 2010) while the top 10 customers accounted for 24% (24% also in 2010).

Liquidity risk The liquidity risk can arise if it becomes impossible to obtain, at acceptable economic conditions, the financial resources needed for the company's business operations.

The two main factors that define the company's liquidity situation are the resources generated by or used in business activities and investment, and the characteristics of expiry and renewal of debt or liquidity of financial investments and the relative market conditions.

The company has adopted a series of policies and processes aimed at optimizing the management of resources in order to reduce the liquidity risk:

retention of an appropriate level of cash on hand;

strengthening of the company's equity structure thanks to the availability of own equity (share capital increases performed in 2011, 2010 and in the next year through the exercise of warrants);

diversification of the banks with which the company operates;

access to adequate lines of credit;

negotiation of covenants on the consolidated level;

monitoring of the prospective conditions of liquidity in relation to the corporate process.

The characteristics of maturity of interest bearing financial debts and bank debts are described in note 16.

Management considers that the currently available funds and lines of credit, in addition to resources that will be generated by operating activities, by loans and by future share capital increases through the exercise of warrants, will allow the company to meet requirements deriving from investing activities, management of working capital and repayment of debts at the natural maturity dates, in addition to ensuring the pursuit of a strategy of growth, also by means of targeted acquisitions capable of creating value for shareholders. Cash on hand at 31 December 2011 totals €68.2 million. Cash on hand, combined with the cash generation that the company has been able to realize in 2011, are definitely factors that make it possible to mitigate exposure of the company to the liquidity risk. In consideration of the high level of liquidity held in 2010 and even more in 2011, the company has invested in repurchase agreements in order to optimize finance management. The decision to maintain a high level of liquidity was adopted in order to minimize the liquidity risk, which is considered important given the current state of uncertainty of the economy. The underlying constitutes the bonds of a primary banking group. At 31 December 2011 the company had entered into such contracts for a total of €45.0 million.

Price risk Interpump Group S.p.A. is exposed to risks deriving from price fluctuations of metals, which may affect economic results and profitability. Specifically, the purchase cost of metals accounted for 27% of the company purchase cost of raw materials, semi-finished products and finished products (25% in 2010). The main metals utilized by the company include brass, aluminium, steel and stainless steel.

It is our policy to transfer the cost of stocking materials to suppliers; in this scenario the risk is hedged by means of orders for specific periods and quantities agreed at fixed prices; at 31

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December 2011 there existed signed commitments covering 61% of expected brass consumption and 21% of expected aluminium consumption for 2011 (13% coverage of brass consumption forecasts and 4% coverage of forecast aluminium consumption at 31/12/2010), 13% of steel consumption (14% at 31/12/2010) and 22% of stainless steel consumption predicted for next year (29% at 31/12/2010). In addition, at 31 December 2011 stocks covered 4% of the prospected consumption of brass (8% at 31/12/2010), 11% of the consumption of aluminium (6% at 31/12/2010), 33% of the consumption of steel (23% at 31/12/2010) and 16% of the consumption of stainless steel (28% at 31/12/2010).

Generally speaking the company reviews selling prices on a once-yearly basis. 24. Net sales The following table gives a breakdown of sales by geographical area: 2011 2010 (€/000) (€/000)

Italy 15,818 16,202Rest of Europe 20,201 18,447Rest of the World 37,495 33,074Total 73,514 67,723

Details of net sales in each invoicing currency are provided below: 2011 2010 (€/000) (€/000)

Euro 57,082 52,987USD 16,432 14,736Total 73,514 67,723

Sales in USD refer primarily to invoices issued to the US subsidiary General Pump Inc. Starting from 2011 the company began billing in USD also to its other US subsidiary, NLB Inc, even though the relative amounts remain fairly modest. 25. Other net revenues 2011 2010 (€/000) (€/000)

Sale of scrap 498 1,344Capital gains on the sale of tangible assets 4 2Reimbursement of expenses 343 307Other 590 957Total 1,435 2,610

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26. Costs by nature 2011 2010 (€/000) (€/000)

Amortization, depreciation and write-downs of tangible and intangible fixed asset (notes 10 and 12)

3,066 2,885

Payroll expenses 18,095 17,742Raw materials and components 28,109 24,264External manufacturing 3,783 3,526Hire purchase and leasing charges 260 256Other costs 12,191 12,160Total cost of sales, distribution costs, general and administrative expenses, other operating costs and impairment losses on tangible and intangible fixed assets.

65,506 60,833 The compensation awarded to the Directors and Statutory Auditors of Interpump Group S.p.A. in 2011 totalled., respectively €/000 4,642 and €/000 147 and it includes compensation resolved by the Shareholders’ Meeting for directors vested with special offices, inclusive of bonuses, salaries for employment and the remuneration component deriving from stock option plans disclosed at the fair value of the options calculated on the grant date, for the portion accruing to the year. 27. Financial income and charges 2011 2010 (€/000) (€/000)

Financial income Interest income 3,401 1,398Foreign exchange gains 373 1,139Earnings from valuation of derivative financial instruments 1,549 1,356Total 5,323 3,893

Financial charges Interest payable 7,167 5,474Other financial charges 55 1,027Foreign exchange losses 274 1,108Losses from valuation of derivative financial instruments 1,517 1,671Total 9,013 9,280

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28. Income taxes The reconciliation of taxes calculated on the basis of the nominal rates in force and the effective tax burden is a follows: 2011 2010 (€/000) (€/000)

IRES


Theoretical taxes at nominal rate (27.5%) 3,203 6,071

Lower taxes for non-taxable dividends (1,405) (3,904)

Higher taxes due to non-deductible write-downs of investments 3 13

Taxes for prior financial periods (27) (40)

Other 45 196

Total IRES 1,819 2,336

IRAP/Local income taxes


Theoretical taxes at nominal rate (3.9%) 454 861

Lower taxes for non-taxable dividends (231) (686)

Higher taxes due to non-deductible write-downs of investments - 2

Higher taxes for non-deductible payroll costs 472 453

Higher taxes for non-deductible directors' emoluments 162 173

Higher taxes due to non-deductible financial expenses 144 210

Taxes for prior financial periods 1 (2)

Other 61 20

Total IRAP/Local income taxes 1,063 1,031

Total income taxes recognized in the income statement 2,882 3,367

You are informed that the company chose along with Teknova S.r.l. and Interpump Hydraulics S.p.A. to take up the option of national fiscal consolidation Taxes recognized in the income statement can be broken down as follows:

2011 2010 (€/000) (€/000)

Current taxes (2,691) (3,455)Current taxes of prior financial periods 26 42Deferred taxes (217) 46Total taxes (2,882) (3,367)

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Deferred tax recognized in the income statement can be broken down as follows:

2011 2010 (€/000) (€/000)

Deferred tax assets generated during the period 706 342Deferred tax liabilities generated during the period (23) (15)Deferred tax assets transferred to the income statement (929) (541)Deferred tax liabilities transferred to the income statement 29 260Total deferred taxes (217) 46

29. Earnings per share Basic earnings per share Earnings per share are calculated on the basis of profit for the period divided by the weighted average number of ordinary shares during the year as follows

2011 2010

Profit for the period attributable to shareholders (€/000) 7,968 18,711Average number of shares in circulation 93,963,275 93,229,066Basic earnings per share for the period 0.085 0.201

Diluted earnings per share Diluted earnings per share are calculated on the basis of diluted profit of the period attributable to the parent company's shareholders, divided by the weighted average number of ordinary shares in circulation adjusted by the number of potentially dilutive ordinary shares. The calculation is as follows:

2011 2010

Profit for the period attributable to shareholders (€/000) 7,968 18,711Average number of shares in circulation 93,963,275 93,229,066Number of potential shares for stock option plans (*) 840,181 154,084Number of potential shares for the exercise of warrants (**) 166,593 -Average number of shares (diluted) 94,970,049 93.383150Earnings per diluted share at 31 December (€) 0.084 0.200

(*) calculated as the number of shares assigned for in-the-money stock option plans multiplied by the ratio between the difference between the average value of the share in the period and the exercise price at the numerator, and the average value of the share in the period at the denominator.

(**) calculated as the number of shares potentially exercisable by the ratio between the difference between the average value of the share in the period and the exercise price at the numerator, and the average value of the share in the period at the denominator.

For 2010 the plans for capital increases through the exercise of warrants were not considered because of their anti-dilutionary effects (out of the money). 30. Notes to the cash flow statement Property, plant and equipment In 2011 the company purchased property, plant and equipment totalling €/000 2,073 (€/000 1,481 in 2010). This expenditure involved the payment of €/000 1,882, inclusive of the payment

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of past debts for the same purpose and net of payables deferred to the following year (€/000 1,348 in 2010). Cash and cash equivalents This item can be broken down as follows:

31/12/2011 31/12/2010 1/1/2010 (€/000) (€/000) (€/000)

Cash and cash equivalents from the balance sheet 68,232 89,282 38,649Payables to banks (for current account overdrafts, advances subject to collection and accrued interest) (2,360)

(602) (302)

Cash and cash equivalents from the cash flow statement 65,872 88,680 38,347 Net financial position and cash-flow statement For the amount and details of the main components of the net financial position and the changes that occurred in 2011 and 2010 we invite you to refer to the "Loans" section of the Board of Directors' Report. 31. Commitments The company has commitments to purchase tangible assets totalling €/000 1,507 (€/000 24 at 31/12/2010). Interpump Group S.p.A. signed rental and hire purchase agreements mainly for warehouses, offices, and cars. The total outlay in 2011 was €/000 363 (€/000 374 in 2010). At 31/12/2011, the following commitments were outstanding:

€/000

Due within 1 year 340Due from 1 to 2 years 283Due from 2 to 5 years 264Due beyond 5 years -Total 887

Interpump Group S.p.A. also has a commitment to cover the repayment of a loan by a fully owned subsidiary for a total of €/000 10,000.

As indicated in Notes 8 and 13, in relation to the disposal of an asset held for sale and of an equity investment, the company has received adequate bank guarantees, which totalled €/000 5,183 at 31/12/2011. 32. Transactions with related parties Transactions involving top management Transactions with related parties concerned consultancy provided by entities related to directors of the Parent company and subsidiaries in the amount of €170 thousand (€160 thousand in 2010) and other costs for €4 thousand (€4 thousand also in 2010). The financial statements at 31 December 2011 show residual payables due to such entities for €/000 33 (€/000 55 at 31/12/2010). With regard to transactions with group companies we invite you to refer to chapter 5 of the Board of Directors' Report.

The transactions mentioned above were carried out at arm's length conditions.

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33. Events occurring after the close of the year 18 January 2012 was the closing date for the MTC acquisition, 31 January 2012 was the closing date for the Galtech acquisition, while the Takarada acquisition was closed on 145 February 2012. For more details concerning the industrial effects and the methods of execution of these acquisitions we invite you to consult the Board of Directors' Report on the consolidated financial statements at 31/12/2011.

After 31 December 2011 there were no further events such that require mention here.

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Annex 1

Attestation of the annual financial statements pursuant to art. 81-(3) of Consob regulation no. 11971 of 14 May 1999 and subsequent amendments and integrations 1. The undersigned Paolo Marinsek and Carlo Banci, respectively Executive Director and

Manager responsible for the drafting of company accounting documents of Interpump Group S.p.A., taking account also of the provisions of art. 154-(2), paras. 3 and 4 of decree D.Lgs 24 February 1998 no. 58:

- adequacy in relation to the characteristics of the business and

- the effective application,

of the administrative and accounting procedures for the formation of the annual financial statements during 2011.

2. In addition, it is confirmed that the annual financial statements of Interpump Group S.p.A for the year ended 31 December 2011, showing total assets of €376,359 thousand, net profit of €7,968 thousand and shareholders' equity of €182,185 thousand:

a) correspond to the results of the company books and accounting entries;

b) were prepared in compliance with the international accounting standards approved by the European Commission further to the enforcement of Ruling (CE) no. 1606/2002 of the European Parliament and the European Council of 19 July 2002, and the provisions issued in implementation of art. 9 of decree D. Lgs. 38/2005 and the contents are suitable for providing a truthful and fair representation of the equity, economic and financial situation of the company;

c) the Board of Directors' report contains a reliable analysis of performance and results and the situation of the issuer together with a description of the main risks and uncertainties to which it is exposed.

Milan, 13 March 2012 Mr. Paolo Marinsek Mr Carlo Banci Executive Director Manager responsible for drafting


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Report of the Board of Statutory Auditors to the Shareholders' Meeting of Interpump Group S.p.A. on the financial statements at 31 December 2011, in compliance with the provisions of art. 2429 of the Italian Civil Code and art. 153 of decree D. Lgs. 58/1998. Shareholders, The Board of Statutory Auditors herewith reports to you on its operations as required by Art. 2429 of the Italian Civil Code and Art. 153 of decree D. Lgs. 58/1998, taking account also of the principles of conduct prescribed by the "Consigli Nazionali dei Dottori Commercialisti e degli Esperti Contabili" (National Councils of Certified Public Accountants) and CONSOB Communication of 6 April 2001, as amended. The Board of Directors regularly informed the Board of Statutory Auditors as required under Art. 150 of decree D.Lgs. 58/1998. The operations of the greatest significance in economic and financial terms performed by the company in 2011 were as follows: 15 April 2011: acquisition of 80% of American Mobile Power Inc. (USA) for $/million 6.8. 11 July 2011: signing of the outline agreement for acquisition of 53% of Galtech SpA for €/million 3.3; transaction closed on 31 January 2012. 28 November July 2011: signing of the outline agreement for acquisition of 60% of Galtech SpA for €/million 3.0; transaction closed on 18 January 2012. 21 December 2011: signing of the preliminary agreement for acquisition of 100% of Takarada (Brazil) for Reais 29 million (€/million 12.9); transaction closed on 15 February 2012. 26 September 2011: disposal of 70% of Unielectric SpA for €/million 3.5. 2.1 We found no trace of any atypical and/or unusual transactions conducted with third parties, related parties or intra-group transactions carried out in 2011 by the Company. 2.2 With regard to the transactions performed in the framework of the Group and with related parties, the Directors provided specifications and precise information in the Board of Directors' Report and in the Notes to the separate financial statements for 2011, specifying the following matters in particular: the Company entertained relations at arm's length conditions with other Group companies and with top management, as described in Note no. 32 of the Notes to the separate financial statements; the Company currently has active stock option plans designed to incentivize and build loyalty among company management (including Directors G. Cavallini, F. Montipò and P. Marinsek), as described in detail in note no. 20 of the Notes to the separate financial statements. The Company has issued a specific report to provide the remuneration disclosures required by statutory legislation. 2.3 With regard to intra-group transactions, the Directors' report describes the characteristics of commercial and financial relations entertained with subsidiaries and associates; we consider that the relative amounts are congruous and that the operations carried out were in line with the interests of the Company. The independent auditing company PriceWaterhouseCoopers S.p.A. issued its report on 20 March 2012, in compliance with the requirements of articles 14 and 16 of decree D.Lgs. 39/2010, wherein it attests that the annual financial statements provide a clear and fair view of the financial position, results and cash flows of the Company.

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The Independent Auditors also judged the information given in the corporate governance report to be in compliance with the financial statements, as required by the amendments introduced by decree D. Lgs 173/2008. We have received no complaints or indications pursuant to art. 2408 of the Italian Civil Code. The Company has not awarded any additional assignments to PriceWaterhouseCoopers SpA. No assignments were awarded to parties associated with the independent auditors. We have expressed our opinions in relation to the incentive plans (including the stock option plans), the remuneration amounts as per art. 2389 no. 3 of the Italian Civil Code and their consistency with the general remuneration policy; also, pursuant to the requirements of art. 3.C.5 of the Code of Corporate Governance, we have checked the correct application of the criteria and procedures for assessment utilised by the Board of Directors to assess the independence of its members. The Board of Statutory Auditors met 8 times during the year and attended 10 meetings of the Board of Directors; we also participated in 5 meetings of the Audit Committee and in the Shareholders' Meetings. We hereby attest to the fact that the Remuneration Committee met once during the year. We have verified and monitored, within the scope of our competence, the observance of the principles of correct administration, by means of direct checks and through information gathered from the persons in charge of the various company functions and meetings with representatives of the Independent Auditing Company, arranged with the purpose of assuring the reciprocal exchange of data and relevant information. No anomalies or matters to be submitted to your attention have emerged in this context. We have also verified and supervised, within the scope of our competence, the suitability of the company's organizational structure, in which context we have no matters to submit to your attention. We evaluated the adequacy of the Company's internal control system and administrative and accounts system, and the reliability of this latter in relation to the true and faithful representation of all aspects of company operations, by means of: (i) examination of reports of the manager responsible for drafting company accounting documents on the Administrative and Accountancy Structure and the Internal Control System on Company Information; (ii) information gathered from the managers of the various company functions; (iii) relations with the supervisory bodies of subsidiaries pursuant to the terms of subsections 1 and 2 of Art. 151 of decree D.Lgs. 58/1998; (iv) participation in the works of the Audit Committee (in compliance with the Code of Corporate Governance). From the activities performed no anomalies emerged that could be construed as indicators of inadequacy of the internal control system. On the basis of the provisions contained in art. 19 of decree D. Lgs. 27 January 2010 no. 39, the Board of Statutory Auditors - identified by said provisions as the Committee for Internal Control and Accounts Auditing - also supervised over : the financial information process; legal auditing of the annual accounts and the consolidated accounts; independence of the legal independent auditing company, in particular with regard to the provision of services other than auditing to Interpump Group SpA and the Group companies. We found no trace of elements requiring mention in this report.

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The Company has issued its subsidiaries with the instructions necessary to comply with the disclosure obligations prescribed in Art. 114(2) of decree D.Lgs. 58/1998. Said instructions are adequate in compliance with statutory requirements. We have verified, through direct checks and by analysing information obtained from the Independent Auditing Company, the full observance of legal requirements concerning the formation of the separate financial statements and the attached Board of Directors' Report. With reference to Corporate Governance and the methods of tangible implementation of the rules of governance set down by the Code of Corporate Governance issued by Borsa Italiana, the Company's methods of adherence are described in detail in the relative report with which we are in full agreement. As part of our general supervisory role, no major events emerged requiring notification to supervisory bodies or disclosure in this report. Having taken account of the results of the separate financial statements for the year ending 31 December 2011, which show net profit for the year of €7,967,945, in consideration of the matters illustrated above and taking account of the report issued by the independent auditors, we express our agreement with the proposal made by the Board of Directors, both with regard to the approval of the separate financial statements and also with regard to the proposal for distribution of profit for the year. Finally, we agree with the proposal to take part of the dividend from available reserves, in consideration of the group's consolidated profit and the economic and financial outlook of the group. Milan, 21 March 2012

the Board of Statutory Auditors Enrico Cervellera Achille Delmonte Paolo Scarioni

annual financial report as at 31 december 2011 · 2014. 8. 8. · annual financial report as at 31...

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