carraro group · other operating flows 12,693 18,524 10,300 other investing flows ... interim...

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Carraro Group Interim Financial Report as at 30 June 2013

DISCLAIMER

This document contains forward-looking statements, in particular in the section “Business outlook for the current

year”, in relation to future events and the operating, economic and financial results of the Carraro Group. These

forecasts have by their very nature a component of risk and uncertainty, as they depend on the occurrence of future

events and developments. The actual results may differ, even significantly, from those announced in relation to a

multiplicity of factors.

Interim Financial Report as at 30 June 2013

CARRARO S.p.A.

Head Office in 35011 Campodarsego (PD) at Via Olmo no. 37

Share Capital Euros 23,914,696, fully paid-up.

Tax Code, VAT and Registration Number

In the Padua Companies Register 00202040283 – R.E.A. No. 84033

GENERAL INFORMATION

BOARD OF DIRECTORS ENRICO CARRARO (2) Chairman In office until approval of the 2014 Financial Statements (Appointed, General Meeting 20.04.2012)

TOMASO CARRARO Deputy Chairman ALEXANDER JOSEF BOSSARD Chief Executive Officer ARNALDO CAMUFFO (1) (2) Director * FRANCESCO CARRARO Director ANTONIO CORTELLAZZO (1) (2) Director * GABRIELE DEL TORCHIO Director * MARINA PITTINI (2) (1) Director * MARCO REBOA (1) Director * (1) Members of the Auditing and Risk Committee (2) Members of the Nominations, Human Resources and Remuneration Committee * Independent directors

BOARD OF STATUTORY AUDITORS ROBERTO SACCOMANI Chairman In office until approval of the 2014 Financial Statements (Appointed, General Meeting 20.04.2012)

SAVERIO BOZZOLAN Regular Auditor MARINA MANNA Regular Auditor BARBARA CANTONI Alternate Auditor STEFANIA CENTORBI Alternate Auditor

AUDITING COMPANY PricewaterhouseCoopers S.p.A. from 2007 to 2015

PARENT COMPANY Finaid S.p.A.

Under the terms and for the purposes of Consob Communication no. 97001574 of 20 February 1997, we state that:

The Chairman, Mr Enrico Carraro and the Chief Executive Officer, Mr Alexander Bossard, have been given severally powers

of legal representation and use of the corporate signature in relations with third parties and in legal actions; they carry out

their work within the limits of the powers conferred on them by the Board of Directors in the meeting of 20 April 2012, in

accordance with applicable legal constraints, in terms of matters which cannot be delegated by the Board of Directors and of

responsibilities reserved for the Board itself, as well as the principles and limits provided for in the Company’s Code of

Conduct.


CONSOLIDATED INCOME STATEMENT AS AT 30.06.13

(amounts in Euro thousands) 30.06.13 % 31.12.12 % 30.06.12 % Changes

30.06.13 30.06.12

restated(1)

REVENUES FROM SALES

449,166 100.00% 874,356 100.00% 474,340 100.00% -25,174 -5.31%

Purchases of goods and materials (net of changes in inventories)

-265,576 -59.13% -536,320 -61.34% -290,863 -61.32% 25,287 -8.69%

Services and Use of third-party goods and services

-77,003 -17.14% -149,711 -17.12% -84,214 -17.75% 7,211 -8.56%

Personnel costs -76,354 -17.00% -140,313 -16.05% -73,578 -15.51% -2,776 3.77% Amortisation, depreciation and impairment of assets

-15,494 -3.45% -37,022 -4.23% -16,427 -3.46% 933 -5.68%

Provisions for risks -3,917 -0.87% -13,928 -1.59% -4,186 -0.88% 269 6.43%

Other income and expenses 2,856 0.64% 4,537 0.52% 1,443 0.30% 1,413 97.92%

Internal construction 1,647 0.37% 4,656 0.53% 2,094 0.44% -447 -21.35%

OPERATING COSTS

-433,841 -96.59% -868,101 -99.28% -465,731 -98.19% 31,890 -6.85%

OPERATING PROFIT/(LOSS) (EBIT)

15,325 3.41% 6,255 0.72% 8,609 1.81% 6,716 78.01%

Income from equity investments - 0.00% -151 -0.02% - - #DIV/0!

Other financial income 979 0.22% 2,745 0.31% 1,151 0.24% -172 -14.94%

Financial costs and expenses -9,597 -2.14% -19,727 -2.26% -10,227 -2.16% 630 6.16%

Net gains/(losses) on foreign exchange -384 -0.09% -664 -0.08% 150 0.03% -534 -356.00%

GAINS/(LOSSES) ON FINANCIAL ASSETS

-9,002 -2.00% -17,797 -2.04% -8,926 -1.88% -376 0.85%

PROFIT/(LOSS) BEFORE TAXES

6,323 1.41% -11,542 -1.32% -317 -0.07% 6,640

Current and deferred income taxes -5,620 -1.25% -6,398 -0.73% -5,082 -1.07% -538 10.59%

#DIV/0!

NET PROFIT/(LOSS)

703 0.16% -17,940 -2.05% -5,399 -1.14% 6,102

Profit/(loss) pertaining to minorities -551 -0.12% 2,641 0.30% -99 -0.02% -452

GROUP CONSOLIDATED PROFIT/(LOSS)

152 0.03% -15,299 -1.75% -5,498 -1.16% 5,650

EBITDA

30,526 6.80%

40,185

4.60% 24,395 5.14% 6,131 25.13%

1 Comparative values for June, 30 2012 have been restated following the application of IAS 19 revised, which changes, among others, the principle of the recognition of actuarial gains and losses relative to termination and post-employment benefits. For further details, see section 3.2. Accounting standards, amendments and interpretations adopted since 1 January 2013 of the “Explanatory and Supplementary Notes”


CONSOLIDATED INTERIM STATEMENT OF FINANCIAL POSITION AS AT 30.06.13

(amounts in Euro thousands) 30.06.13 31.12.12 30.06.12

restated(1)

Property, plant and equipment 202,365 209,656 208,557

Intangible fixed assets 88,010 86,049 83,286

Real estate investments 707 708 710

Holdings in subsidiaries and associates - - -

Financial assets 3,302 3,909 5,262

Deferred tax assets 28,156 29,428 28,768

Trade receivables and other receivables 3,478 1,624 4,379

NON-CURRENT ASSETS 326,018 331,374 330,962

Inventory 166,773 146,754 203,830



Cash and cash equivalents 70,872 108,857 39,653

CURRENT ASSETS 418,834 394,269 448,623

TOTAL ASSETS 744,852 725,643 779,585

Share Capital 23,915 23,915 23,915

Reserves 40,088 53,678 56,612

Foreign currency translation reserve -11,210 -8,988 -4,828

Profit/(Loss) for the period 152 -15,299 -5,498

Minority interests 7,116 9,810 11,831

SHAREHOLDERS’ EQUITY 60,061 63,116 82,032

Financial liabilities 197,625 177,821 172,371

Trade payables and other payables 242 313 17

Deferred tax liabilities 2,524 3,467 6,458

Provision for severance indemnity and retirement benefits 19,859 19,676 16,997

Provisions for risks and liabilities 2,600 2,403 3,040

NON-CURRENT LIABILITIES 222,850 203,680 198,883


Trade payables and other payables 299,620 278,245 316,935

Current taxes payables 5,079 8,159 10,133


CURRENT LIABILITIES 461,941 458,847 498,670

TOTAL SHAREHOLDERS’ EQUITY AND LIABILITIES 744,852 725,643 779,585



CASH FLOW AS AT 30.06.13

(amounts in Euro thousands) 30.06.13 31.12.12 30.06.12 restated(1)

Opening Net Financial Position -213,703 -247,505 -247,505

Group profit/(loss) 152 -15,299 -5,498

Profit/(loss) pertaining to minorities 551 -2,641 99

Amortisation, depreciation and impairment of fixed assets 15,201 33,930 15,786

Cash flow before Net Working Capital 15,904 15,990 10,387

Change in Net Working Capital -44,779 43,509 -38,188

Investments in fixed assets -13,138 -41,632 -13,458

Disinvestments in fixed assets 732 2,279 375

Operating Free Cash Flow -41,281 20,146 -40,884

Other operating flows 12,693 18,524 10,300

Other investing flows -12,141 3,759 -504

Other equity flows -3,758 -8,627 -2,253

Free Cash Flow -44,487 33,802 -33,341

Closing Net Financial Position -258,190 - 213,703 -280,846

ANALYSIS OF NET WORKING CAPITAL AS AT 30.06.13


restated(1)

Trade Receivables 129,013 88,051 136,280

Inventory 166,773 146,754 203,830

Trade Payables - 262,655 -246,453 -270,061

Net Working Capital (NWC) 33,131 -11,648 70,049



The Carraro Group

Carraro is an international industrial Group which is world leader in high-efficiency and eco-compatible power

transmission systems, with headquarters in Italy, in Campodarsego (Padova).

In line with the process of change begun in reaction to the crisis in 2009, at the beginning of 2013 Carraro has started a

project for the change of its organizational set-up. The new set-up is a further development in the organization of the

Business Unit, which in recent years has enabled the Group to properly focus on specific markets and applications,

with different risk profiles and targeted strategies.

The main feature of the reorganization is the merging of the two BUs - transmission systems and components - into a

single unit. This is a fundamental step forward in achieving the most from our core business, both in terms of

development synergies for new products and for the integration of production processes. This broad-ranging structure

also maintains a vertical focus on specific markets and sectors.

As a result the new Carraro Drive Tech Business Area, with its more dynamic configuration, can tackle its target

markets with a more flexible response and products with a greater added value.

In detail, the three Business Areas today are the followings:

- Carraro Drive Tech (Transmission systems and components) is specialised in the design, manufacture and sale of

transmission systems (axles, transmissions and drives) mainly for agricultural and construction equipment, and also

markets a wide range of components and gears for very diverse sectors, from the automotive industry to light power

tools, material handling, agricultural applications and construction equipment.

- Carraro Divisione Agritalia (Vehicles) designs and manufactures special tractors (from 60 to 100 hp) for third-party

brands, and namely John Deere, Massey Ferguson and Claas. Agritalia also provides engineering services for the design

of innovative tractor ranges.

- Elettronica Santerno (Power electronics) designs, develops, manufactures and markets inverters (electronic power

converters) mainly for the photovoltaic industry and industrial automation (HVAC, water treatment, lifting systems

and large-scale transport).

Reference markets

Agriculture

In the first half of 2013, the global market for agriculture continued its growth trend, with potential further

improvements in the medium-term, especially in countries that are developing fast.

Overall turnover in the APAC area (Asia Pacific) is down, whilst demand for tractors of over 100 HP continues to be

good.

In Europe things are essentially stable, particularly in Northern and Central Europe, with a slow-down in the South.

The shrinking of the Indian market appears to be over, with a possible slight increase in the second half of the current

year. The Turkish market has made significant progress and seems to be on the verge of new growth, which should

continue over the coming months. In South America too, the market is positive, with good fundamentals in the

medium term.

In the United States the economic trend shows a weak growth, which should continue until the end of the year.

From its Indian plant, Carraro Drive Tech has successfully launched the production of a new family of T10.0

transmissions, broadening the range of products supplied in order to meet the growing demand for outsourcing from

various OEMs and entering a market segment where the Group was previously not present.


Construction equipment

In the first half of 2013, demand for earthmoving and construction equipment fell, most markedly in the mining

equipment sector.

China continues its negative trend with prospects still uncertain for the end of the year, but which could pick up if the

government takes further steps to invest in infrastructure and support the liquidity of leading OEMs.

The Indian market continues to be sluggish due to the economic uncertainty pending next year's general election.

Demand in Europe is trending down. North America is showing signs of recovery in the private housing market, which

generates demand in Utility machinery, especially for rental. The mining sector is deep in recession and is not expected

to recover in the short term.

As a result of planned infrastructure investments over the next five years, Brazil, together with Turkey, is one of the

fastest growing areas for construction equipment.

In the Brazilian market, Carraro Drive Tech has packed its current range of transmissions with innovative content (new

ECOlogy MODE and Direct Drive technology) and has further extended the product range with entry level and

premium versions.

Renewable energy

In the first half of 2013, the photovoltaic market further globalized, with new markets in countries that have decided to

invest in this energy source. Within this framework, Santerno obtained significant orders internationally for the supply

of inverters in photovoltaic plant, including 19 MW in India, 2.4 MW in Vermont USA (inverters that can be fully

integrated with transportable (skid) platforms, suitable for tough climatic conditions), the first part of a large and

important order in Australia, 13 MW in Romania for two different plants and 126 MW in Thailand, the largest plant

under construction in the Asia Pacific area.

In Italy, Santerno has supplied inverters to a 20 MW plant in Salerno, whilst the Quinto Conto Energia providing

incentives for the construction of photovoltaic plant has now ended; in the next six months the residential market will

be able to continue only if specific tax relief is provided.

In the second half of the year, there are good prospects in South East Asia and the American region, which are growth

markets in terms of the MW to be constructed, but where prices continue to fall.

Industrial Automation

In the Industrial Automation sector, the worldwide market is growing slowly. With the aim of expanding in the

segment, in just four months, Santerno obtained DNV (Det Norske Veritas) certification for its complete range of

PENTA inverters, immediately afterwards signing an important multi-year supply contract with a large Scandinavian

distributor in the sector of marine applications.

Automotive

The Automotive market will grow in 2013 by 3.9%, in particular in the United States and Asia; unlike the premium

segment, in which the Group plays an active role, which was a little down in the first part of the year. This influenced

the turnover trend in the sector, which is down 24% in the first half of 2013 compared to the same period in 2012.

PowerTools and Gardening

Demand in the PowerTools (electrical tools) segment in 2013 is essentially stable, with signs of a slight uptick here and

there, particularly in the APAC area. The leading players are seeking to increase their market share in order to

consolidate a very fragmented market. The Gardening (professional gardening) market continues its positive trend

with excellent growth in Asia and the Pacific, and in the consumer segment. Demand in both sectors should increase

slightly in 2013 (+5% compared to 2012).


The turnover achieved in these sectors in the first half of 2013 was down 16% compared to the same period of last year.

Market trends as illustrated above are consistent with Group forecasts for 2013. This was mainly due to increasing

market share, the acquisition of new clients and the development of innovative products.

Summary of the first half of 20131

Profitability for the first half of 2013 has been positively impacted by the launch of new products with high

performance and technology, by penetration into new markets and the acquisition of new clients, supported by actions

taken within the framework of the Carraro Group Reorganization Plan, begun at the end of 2012, focussed on the

reorganization of industrial activities with the re-insourcing of various processes previously transferred abroad, the

continuation of the Partnership project with leading suppliers and for the reduction of fixed costs.

The decisions taken by the Group have positively influenced the opinion of banks, leading to important agreements

during the 6-month period: specifically, a new Debt Rearrangement Agreement was signed providing greater financial

flexibility, aimed at supporting the Group investment plan (150 million Euros in three years) and an agreement was

reached with the finance company Friulia SpA leading to an increase in share capital, reserved for them, of the

subsidiary SIAP SpA for the purpose of guaranteeing the resources required to support the development of an

integrated industrial hub in Friuli.

Starting in 2013, the Group analyzes its performance on the basis of the new organizational structure, so in addition to

showing economic and equity data by Business Area, it was necessary to reconstruct values as at 30 June 2012 for

comparison purposes.

As illustrated in the introduction, in the first half of 2013, despite the fall in turnover, the Carraro Group achieved a

significant improvement in profitability compared to the same period last year. In particular, positive performance has

been led by Drive Tech (mechanical engineering); whilst Elettronica Santerno has reversed the trend, significantly

improving its profitability compared to first half of 2012, thanks to the recovery of sales outside Europe, reaching the

break even point at the operational level in June.

Particularly important has been Group performance in Q2 2013, in which turnover, EBIT and EBITDA have all

considerably improved on Q1. Turnover in Q2 was up 25% on Q1; The EBIT incidence to turnover ratio was up from

1.9% as at 31 March 2013 to 4.6% in Q2; also up was the EBITDA to turnover ratio (from 5.7% to 7.7%).

Consolidated turnover as at 30 June 2013, about 88% from sales abroad, was 449.166 million Euros, down 5.3% on

474.340 million Euros in the first half of 2012. The operational business areas in the mechanical engineering sector

achieved a turnover which was down 7.7% as at 30 June 2012 whilst Elettronica Santerno returned a turnover up

33.8% due to the important orders obtained in the previous year.

Group EBITDA in the first half of 2013 was 30.526 million Euros (6.8% of turnover) significantly up (+25.1%)

compared to 24.395 million Euros (5.1% or turnover) in the first half of 2012. EBITDA in the business areas for

mechanical engineering as at 30 June 2013 is 33.268 million Euros (7.9% of turnover), up 14.8% compared to 28.980

million Euros (6.3% of turnover) for the first half of 2012, whilst Elettronica Santerno returned a positive EBITDA of

469 thousand Euros (1.3% of turnover), reversing the trend compared to the negative value of 2.995 million Euros (-

10.7% of turnover) as at 30 June 2012.

Consolidated EBIT as at 30 June 2013 is 15.325 million Euros (3.4% of turnover), up 78.0% compared to the 8.609

million Euros (1.8% of turnover) as at 30 June 2012. EBIT for traditional business is 20.444 million Euros (4.9% of

1 Comparative values for June, 30 2012 have been restated following the application of IAS 19 revised, which changes, among

others, the principle of the recognition of actuarial gains and losses relative to termination and post-employment benefits. For further details, see section 3.2. Accounting standards, amendments and interpretations adopted since 1 January 2013 of the “Explanatory and Supplementary Notes”


turnover) compared to 15.522 million Euros (3.4% of turnover) as at 30 June 2012; EBIT for Santerno is negative in the

amount of 751 thousand Euros (-2.0% of turnover) compared to a negative value of 4.205 million Euros (-15.0% of

turnover) in the first half of 2012.

The net Group profit/ (loss) as at 30 June 2013, distorted by taxation for the period, is back in profit in the amount of

152 thousand Euros, compared to the loss of 5.498 million Euros as at 30 June 2012. Earnings before tax are positive in

the amount of 6.323 million Euros (1.4% of turnover) compared to a loss of 317 thousand Euros (-0.1%) for the first

half of 2012.

The net financial position continues to improve, standing negatively as at 30 June 2013 at 258.190 million Euros

compared to 277.668 million Euros as at 31 March 2013 up, as anticipated, compared to the 213.703 million Euros of

31 December 2012 due to the effects of reabsorbing of actions managed at the end of 2012 in order to normalise the

trend in net working capital.

2013 figures and facts

In January, on the occasion of the Ag Connect USA Exhibition, the most important event of its kind in North America

dedicated to agricultural equipment, which took place in Kansas City, Missouri, Carraro Drive Tech launched the new

T10 transmission for tractors up to 120 HP, which is proving very successful due to high-performance technical

configuration.

In February an important agreement was signed between Carraro Drive Tech and Agco, one of the world's leading

three manufacturers of agricultural machinery. This agreement, for 5 years and with an overall value of 25 million

Euros, is for the supply of transmission systems for a new range of tractors which will be manufactured in the

Changzhou plant in China. On the basis of the agreement, Carraro Drive Tech will supply different types of integrated

front axles with a drop box, for Massey Ferguson series BX200 tractors fitted with 80 - 120 HP engines; these tractors

are designed both for the Chinese market and for export in the United States, the Far East and Africa.

Within the framework of the project called Agritalia Production System, for the first time, in the month of March,

training was carried out for clients and suppliers of Agritalia, as well as for internal personnel, with the contribution of

the Kaizen Institute. In addition to presenting the basic concept of change which characterises the new Agritalia

production process, the training led to the creation of two improvement workshops for the production line. Various

managers from leading companies cooperated with line operators to find improved or innovative solutions to organise

material flow.

In April Carraro Drive Tech staged a number of events:

- during the Bauma Exhibition in Munich, the world's leading construction equipment show, the most highly-

developed products were presented for earthmoving applications, with particular attention dedicated to

epicycloidal drives for tracked vehicles and winches. Particular interest was shown in the new range of

transmissions, partly due to the new technology dedicated to fuel saving and operational efficiency: ECOlogy

MODE and Direct Drive. These two innovations with advanced technology for the improvement of the

efficiency of transmissions is now available for all product classes: from the new TC1.0 to the consolidated

TLB1 and TLB2.

- in addition, a commercial agreement was signed with XCMG, one of the most important Chinese

manufacturers of earthmoving equipment, for the supply of a series of epicycloidal drives for the largest

tracked crane in the world (model XGC88000). In detail, Carraro is present in the vehicle both with the

reduction gears and the travel drives as well as the winch drives, with an overall value of about 2 million Euros

per vehicle. These drives were designed and manufactured in the German plant of O&K Antriebstechnik, the


Group company known at international level for its skills in products destined for high-range applications

(heavy duty).

In May the following important events took place:

- On the occasion of the SNEC, an exhibition organised in Shanghai in China - the world's leading event in the

photovoltaic sector in terms of the number of visitors - Santerno, presented to the market the new Sunway

TG Outdoor range, which attracted great interest from operators in the sector from all over China and South

East Asia.

- in the same period Agritalia began supplying its new Powertrain to its Turkish client Basak. Basak is a brand

of the Sanko Group, a historic client of Carraro Drive Tech. The cooperation between Agritalia and Drive Tech

created this opportunity. Agritalia will supply the entire powertrain (integrated transmission systems

complete with engines) to this new client, expected to be about 40 tractors per month with prospects for

further growth.

In June a new important step forward was taken by Carraro After Sales & Spare Parts which, a year after signing

a partnership with CEVA Logistics, for the operational management of the spare parts platform in Italy, has now signed

an important agreement with ToolsGroup, a multinational company specialised in the development of systems and

solutions for the planning of the services to clients with the reduction of logistics costs, in order to fully develop its own

supply chain with a view to integration.

In the same month, Santerno signed an important agreement with Energy Absolute, a Thai company active in the

cogeneration and biodiesel sector, which with this project enters into the renewable energy sector, for the supply of an

integrated system of inverters destined for the largest photovoltaic plant in South-East Asia, to be built in Thailand, in

Nakorn Sawan province. Due to this agreement, Santerno will supply a series of 3-phase inverters in outdoor cabinet

format, particularly suitable for tough climatic conditions. The same kind of product that was used in the photovoltaic

park under construction in Calexico, in the southern California desert, will now be fitted to platforms in the rain forest.

At the end of June, preliminary activities were completed for the start-up of the new SAP system (T4T project) for the

two SIAP plants in Maniago and Gorizia (over 300 people involved). Following the migration of the data base and

completion of start-up tests, these two plants will be the first to activate the new ERP, which will then be gradually

extended to the entire Group, with improvements expected at the level of operational efficiency. The Go-Live on 1 July

2013 was successful.

Significant events in the first half of 2013 On 13 February 2013, the shareholders' meetings of Carraro Drive Tech SpA and Gear World SpA passed resolutions by

majority vote, to merge Gear World SpA into Carraro Drive Tech SpA. The merger was completed with registration of

the deed on 29 April 2013.

On 14 May 2013, the Carraro Group signed a Debt Rearrangement Agreement with leading banks; the previous

Framework Agreement expired as at 31 December 2012. The new Agreement is for the rearrangement of medium/long-

term debt and renews the credit lines for short-term debt for 24 months, with the redefinition of financial parameters.

On 28 June 2013, taking effect on 1 July 2013, the Shareholders' Meeting of SIAP SpA passed a resolution to increase

its share capital by conferral by the shareholder Carraro Drive Tech SpA of the going concern comprising the Gorizia

plant. This operation, which includes a subsequent increase in capital of 3 million Euros, reserved to the shareholder

Friulia SpA, will lead to the creation of an integrated production hub in Friuli and will benefit from the ongoing alliance

between the Carraro Group and Friulia.


Share performance

In the first six months of 2013, the share price of Carraro had an up and down trend, in line with the main parameters

of the Stock Exchange (FTSE MIB).

The average official price over the period was 2.04 Euros, with a minimum on 5 April 2013 of 1.89 Euros and a peak of

2.29 Euros on 10 January 2013.

Events subsequent to the balance sheet date

Nothing to report.

BUSINESS OUTLOOK FOR THE CURRENT YEAR

On the basis of the current orders portfolio, the second half of the year should produce turnover in line with the first six

months of 2013. Turnover for the Drive Tech Business Area is expected to be slightly up in the second half of the year

compared to the first half, although the sectors will be subject to different trends. For Agritalia, market expectations

suggest an increase in the number of tractors sold of about 100 units compared to the same period in 2012, due to

increased demand from Turkey. For the Elettronica Santerno Business Area, a slight increase in turnover is expected

compared to the first half of the year, due to the acquisition of new sales contracts.

Margins for the second half of 2013 will be partially influenced by the changed mixture of products in the turnover,

with a slight downturn in the growth trend shown in the first half of the year, but still above the results for the same

period in the previous year.

Financial expenses in the second half of the year will be negatively impacted by the variation in interest rates and fees

arising from the Debt Rearrangement Agreement with banks.


ECONOMIC AND EQUITY DATA Turnover Consolidated Group turnover for the first half of 2013 is expected to be 449.166 million Euros, down 5.3% compared to

the turnover for the first half of 2012, which was 474.340 million Euros.

The following table breaks turnover down by market segment:

(amounts in Euro thousands)

SALES SALES TO THIRD PARTIES INTRA-GROUP SALES

30.06.13 30.06.12 Diff.

% 30.06.13 30.06.12

Diff. %

30.06.13 30.06.12 Diff.

%

Carraro Drive Tech 368,415 407,328 -9.6 359,713 398,935 -9.8 8,702 8,393 3.7 CARRARO AGRITALIA DIV. 53,190 49,254 8.0 51,306 46,889 9.4 1,884 2,365 -20.4 ELETTRONICA SANTERNO 37,575 28,078 33.8 37,515 27,791 35.0 60 287 -79.1 NON-ALLOCATED BUSINESS 6,714 20,607 -67.4 632 725 -12.6 6,082 19,882 -69.4

TOTAL SEGMENTS 465,894 505,267 -7.8 449,166 474,340 -5.3 16,728 30,927 -45.9

INTRA-GROUP ELIMINATIONS -16,728 -30,927 -45.9 - - -

CONSOLIDATED TOTAL 449,166 474,340 -5.3 449,166 474,340 -5.3 16,728 30,927 -45.9

The following table breaks down turnover by geographical area:

(amounts in Euro thousands) Geographical Area

30.06.13 % 30.06.12 % difference % '13-'12

North America 59,390 13.2 51,628 10.9 15.0

Germany 53,693 12.0 62,963 13.3 -14.7

South America 53,513 11.9 48,831 10.3 9.6

Turkey 33,402 7.4 20,629 4.3 61.9

France 31,866 7.1 30,760 6.5 3.6

China 29,543 6.6 34,221 7.2 -13.7

United Kingdom 27,378 6.1 43,486 9.2 -37.0

India 25,972 5.8 28,397 6.0 -8.5

Switzerland 22,754 5.1 26,337 5.5 -13.6

Poland 10,565 2.4 12,396 2.6 -14.8

Other non-E.U. areas. 14,250 3.2 8,323 1.7 71.2

Other E.U. areas. 33,800 7.5 29,854 6.3 13.2

Total Abroad 396,126 88.2 397,825 83.9 -0.4

Italy 53,040 11.8 76,515 16.1 -30.7

Total 449,166 100.0 474,340 100.0 -5.3

of which:

Total E.U. area 210,342 46.8 255,974 54.0 -17.8

Total non-E.U. area 238,824 53.2 218,366 46.0 9.4

In analysing turnover by geographic segment, it should be noted that the Group mainly sells to the production sites of

OEMs that may reside in different countries from the nations of end users of their products.

In the light of the figures set out in the table above, Group sales are increasingly focussed outside Europe, in particular

on North America (+15.0% compared to the first half of 2012), Turkey (+61.9%) and South America (+9.6%). Growth in


sales in the other areas outside the EU (+71.2%) is mainly from South Africa (+7 million Euros), thanks to the turnover

of Elettronica Santerno in that area.

As at 30 June 2013, sales to countries outside Europe were over 50% of total turnover.

EBITDA and EBIT Figures as at 30.06.13

(amounts in Euro thousands) 30.06.13 % of

turnover 30.06.121 % of

turnover Diff. %

EBITDA (a) 30,526 6.8 24,395 5.1 25.1

EBIT (b) 15,325 3.4 8,609 1.8 78.0

(a) understood as the sum of operating profit/(loss), amortisation, depreciation and impairment of fixed assets (b) understood as operating profit/(loss) in the income statement

EBITDA as at 30 June 2013 amounts to 30.526 million Euros (6.8% of turnover) compared to 24.395 million Euros

(5.1% of turnover) in the same period of 2012.

EBIT is equal to 15.325 million Euros (3.4% of turnover) compared to 8.609 million Euros (1.8% of turnover) achieved

as at 30 June 2012.

Margins for the period are significantly better than for the same period last year due to the positive effects of the

actions carried out in 2012, as described above.

In particular, Elettronica Santerno reversed its trend, achieving a positive value for EBITDA in the period.

Below are set out details of the two parameters separating the evolution of the business areas in the mechanical

engineering sector and Elettronica Santerno:

EBITDA 30.06.13 % of turnover 30.06.121 % of turnover Diff. %

Carraro Drive Tech and Div. Agritalia 33,268 7,9 28,980 6.3 +14.8

Elettronica Santerno 469 1.3 -2,995 -10.7 n.r.

EBIT 30.06.13 % of turnover 30.06.121 % of turnover Diff. %

Carraro Drive Tech and Div. Agritalia 20,444 4.9 15,522 3.4 +31.7

Elettronica Santerno -751 -2.0 -4,206 -15.0 +82.1

Net financial expenses Figures as at 30.06.13

(amounts in Euro thousands) 30.06.13 % of turnover 30.06.121 % of turnover Diff. %

Net financial expenses 8,618 1.9 9,076 1.9 -5.0

Net financial expenses total 8.618 million Euros (1.9% of turnover) slightly lower than the 9.076 million Euros (1.9% of

turnover) of the first half of 2012. The trend in financial expenses benefited in the first half of 2013 from a reduced

average financial debt compared to the first half of 2012 and, over the first three months of the year, from interest rates

in line with the previous year. Beginning in April 2013 new interest rates apply to the loans covered by the Debt

Rearrangement Agreement.

1Comparative values for June, 30 2012 have been restated following the application of IAS 19 revised, which changes, among



Exchange differences Figures as at 30.06.13


Exchange differences -384 -0.1 150 0.0 n.r.

Exchange rate differences as at 30 June 2013 caused losses of 384 thousand Euros (gains of 150 thousand Euros as at

30 June 2012).

Net profit/(loss) Figures as at 30.06.13


Net profit/(loss) 152 0.0 -5,498 -1.2 n.r.

(amounts in Euro thousands) 30.06.13 % of turnover 30.06.121 % of

turnover Diff. %

Earnings before tax 6,323 1.4 -317 -0.1 n.r.

Current and deferred income taxes -5,620 -1.3 -5,082 -1.1 10.6

Profit/(loss) pertaining to minorities -551 -0.1 -99 -0.0 n.r.

Net profit/(loss) 152 0.0 -5,498 -1.2 n.r.

The first half of 2013 ended with profits of 152 thousand Euros, compared to a loss of 5.498 million Euros (-1.2% of

turnover). Earnings before tax are 6.323 million Euros (1.4% of turnover), compared to a loss of 317 thousand Euros (-

0.1%) for the first half of 2012. The improvement is the result of a significant increase in margins for the Drive Tech

Business Area, compared to the same period last year, and to a recovery in margins by Elettronica Santerno.

Amortisation, depreciation and impairment of assets Figures as at 30.06.13


Amortisation, depreciation and impairment 15,201 3.4 15,786 3.3 -3.7

Investments Figures as at 30.06.13

(amounts in Euro thousands) 30.06.12 30.06.12

Investments 13,137 13,458

Investments as at 30 June 2013, totalling 13.137 million Euros, compared to 13.458 million Euros for the same period

last year, were made in the Drive Tech Business Area for support of the re-insourcing project for activities previously

carried out abroad, to maintain the efficiency of, and upgrade plants, and in Headquarter for the development of the

new SAP management system.

Research and Development In 2013, the Group continued its strategy of investing in constant technological innovation. Research and Development

expenses for the first half amounted to 8.9 million Euros (2.0% of turnover) compared with 9.481 million Euros as at

30 June 2012 (2.0% of turnover).




Net financial position Figures as at 30.06.13


Net financial position* -258,190 -213,703 -280,846

* understood as the sum of amounts payable to banks, short, medium and long-term bonds and loans, net of cash and cash

equivalents, negotiable securities and financial receivables.

The net financial position as at 30 June 2013 stands in debt in the amount of 258.190 million Euros compared to

280.846 million Euros as at 30 June 2012. If compared to net exposure as at 31 December 2012, totalling 213.703

million Euros, the deterioration is due to the effect of actions to reduce net working capital carried out at the end of the

year.

On the basis of the Debt Rearrangement Agreement signed with banks, the first verification of compliance with the

covenants will be carried out based on the financial statements for the period ended 31 December 2013.

PERSONNEL Workforce trend

Figures as at 30.06.13

30.06.13 31.12.12 30.06.12

Executives 52 58 58

Clerical staff 1,016 1,044 1,062

Factory workers 2,952 2,865 3,005

Temporary workers 133 43 174

Total 4,153 4,010 4,299

Group personnel as at 30 June 2013 (including temporary contracts, trainees and temporary workers) stands at 4,153

employees against 4,010 operational staff as at 31 December 2012. During the first half of 2013, the number of

temporary workers increased (+90 compared to 31 December 2012), in particular in production facilities in Italy, as did

the number of factory workers (+87 compared to 31 December 2012), in particular in production sites abroad,

including India, Argentina and China.

As at 30 June 2013 1,891 employees (46% of the total) worked in the Italian production sites of the Group and 2,262

employees (54% of the total) worked in sites abroad.

As from November 2012, Elettronica Santerno started a 12 month temporary lay-off period for restructuring.


Performance and results of the

Carraro Group Business Areas


Drivelines & Components - Drive Tech Business Area1

Starting from the beginning of 2013, the previous separate Business Units, Drivelines and Components, were brought

under the same new business area called Carraro Drive Tech which now includes all transmission systems (axles,

transmissions and epicycloidal drives) mainly for agricultural machinery, earthmoving equipment and components

and gears for similar industrial sectors, from earthmoving equipment to automobiles, from gardening and electric

tools to agricultural applications and materials handling.

In order to make the results comparable with the previous year, figures for the first half of 2012 was reconstructed in

line with the new business model.

Revenues from sales as at 30 June 2013 amount to 368.415 million Euros compared to 407.328 million Euros in the

first half of 2012, down 9.6%.

The breakdown of turnover by geographical area shows the increasing focus on markets outside Europe, which are at

the same level as previous year, particularly South America, China and India.

Overall turnover from foreign markets as at 30 June 2013 was 89.2% of the total turnover from the business area,

against 87.2% as at 30 June 2012.

In terms of sectors of application, the Agricultural and Materials Handling sectors continued their positive trends

whilst there was a sharp drop in the Construction Equipment, Mining and Automotive sectors, compared with the

same period last year.

Turnover for Q2 2013 was slightly below forecast due to the sudden fall in the Mining sector.

Variable margins, although penalized by lower turnover, grew compared to the same period last year, both in absolute

terms and in terms of ratio to turnover, due to continuous improvements in industrial processes, and in the efficiency

of the procurement of direct materials as well as the start-up of the activities of insourcing, leading to reduced costs for

processing by third parties.

Industrial costs remained slightly below the previous year and in line with expectations, as did overheads; leading to an

increased EBIT compared to the first half of 2012 despite lower turnover, as previously pointed out.

EBITDA as at 30 June 2013 is 31.415 million Euros (8.5% of turnover), up compared to 27.833 million Euros (6.8% of

turnover) as at 30 June 2012.

EBIT for the first half of 2013 is 19.193 million Euros (5.2% of turnover), compared to 14.928 million Euros (3.7% of

turnover) for the first half of 2012.

The net profit of 6,830 million Euros (1.9% of turnover) are up 4.1 million Euros compared to the profits of 2.740

million Euros (0.7% of turnover) as at 30 June 2012.

In terms of the net financial position, the improvement over 30 June 2012 is 209.685 million Euros compared to

161.730 million Euros and 140.655 million Euros compared to 31 December 2012. Debt was up due to the actions

carried out at the end of 2012 to normalise net working capital.




SUBCONSOLIDATED INCOME STATEMENT AS AT 30.06.13

CARRARO DRIVE TECH BUSINESS AREA

(amounts in Euro thousands) 30.06.13 % 31.12.12 % 30.06.12 % Changes 30.06.13 30.06.12

restated(1)

REVENUES FROM SALES

368,415 100.00% 750,571 100.00% 407,328 100.00% -38,913 -9.55%


-218,055 -59.19% -459,128 -61.17% -249,496 -61.25% 31,441 -12.60%


-61,402 -16.67% -128,133 -17.07% -72,714 -17.85% 11,312 -15.56%

Personnel costs -59,027 -16.02% -108,852 -14.50% -56,893 -13.97% -2,134 3.75%

Amortisation, depreciation and impairment of assets

-12,364 -3.36% -28,943 -3.86% -13,343 -3.28% 979 -7.32%

Provisions for risks - 2,171 -0.59% -10,376 -1.38% -2,689 -0.66% 518 -19.23%

Other income and expenses 2,887 0.78% 6,022 0.80% 1,890 0.46% 997 52.83%

Internal construction 910 0.25% 1,770 0.24% 847 0.21% 63 7.57%

OPERATING COSTS

-349,222 -94.79% -727,640 -96.94% -392,398 -96.34% 43,176 -11.00%


19,193 5.21% 22,931 3.06% 14,930 3.66% 4,263 28.57%

Other financial income 952 0.26% 2,178 0.29% 720 0.18% 232 32.22%

Financial costs and expenses -8,207 -2.23% -16,990 -2.26% -8,775 -2.15% 568 -6.45%

Net gains/(losses) on foreign exchange -153 -0.04% -86 -0.01% 428 0.11% -581 -135.75%


-7,408 -2.01% -14,898 -1.98% -7,627 -1.87% -219 2.85%

0!


11,785 3.20% 8,033 1.07% 7,303 1.79% 4,482 61.37%

Current and deferred income taxes -4,778 -1.30% -6,955 -0.93% -4,205 -1.03% -572 13.60%

NET PROFIT/(LOSS)

7,007 1.90% 1,078 0.14% 3,098 0.76% 3,909 131,79%

/0!

Profit/(loss) pertaining to minorities -177 -0.05% 1,371 0.18% -358 -0.09% 181 -50.56%

BUSINESS AREA CONSOLIDATED PROFIT/(LOSS)

6,830 1.85% 2,449 0.33% 2,740 0.67% 4,090 156.29%

EBITDA

31,415 8.53%

51,013 6.80%

27,833 6.83%

3,582 12.87%



SUBCONSOLIDATED INTERIM STATEMENT OF FINANCIAL POSITION

AS AT 30.06.13 FOR THE CARRARO DRIVE TECH BUSINESS AREA


restated(1)



Real estate investments 168 169 171

Holdings in subsidiaries and associates - - -





Inventory 135,349 120,477 165,495




CURRENT ASSETS 320,334 304,668 356,320

TOTAL ASSETS 552,835 542,776 603,319

Share Capital 30,102 58,902 58,902

Reserves 35,502 4,994 8,502

Foreign currency translation reserve -12,186 -9,159 -4,610

Profit/(Loss) for the period 6,830 2,449 2,740

Minority interests 3,823 3,649 3,687



Trade payables and other payables 20 20 17

Deferred tax liabilities 2,724 3,441 6,442 Provision for severance indemnity and retirement benefits

17,172 17,003 14,637





Current taxes payables 4,479 7,589 7,765



TOTAL SHAREHOLDERS’ EQUITY AND LIABILITIES

552,835 542,776 603,319



CASH FLOW AS AT 30.06.13 FOR THE CARRARO DRIVE TECH BUSINESS AREA


restated (1)

Opening Net Financial Position -140,655 -188,562 -188,562

Group profit/(loss) 6,830 2,449 2,740

Profit/(loss) pertaining to minorities 177 -1,371 358





Disinvestments in fixed assets 378 653 -45

Operating Free Cash Flow -18,282 31,300 -25,843

Other operating flows -1,936 20,024 11,547

Other investing flows 2,914 4,319 -5,452

Other equity flows -3,771 -7,736 -1,378

Free Cash Flow -21,075 47,907 -21,124

Closing Net Financial Position -161,730 -140,655 -209,685

ANALYSIS OF NET WORKING CAPITAL AS AT 30.06.13

CARRARO DRIVE TECH BUSINESS AREA


restated(1)


Inventory 135,349 120,477 165,496

Trade Payables - 204,118 - 196,423 - 220,394

Net Working Capital (NWC) 22,671 - 6,148 57,850



Vehicles – Agritalia Business Area1

The first half of 2013 ends with a turnover of 53.190 million Euros, up 8.0% compared to the 49.254 million Euros for

the same period last year. The sale of tractors reached 1,916 units in line with the 1,915 in the first half of 2012; the

increase in turnover comes mainly from the new Powertrain product line on sale since April 2013 to the Turkish client

Basak, with which the Divisione Agritalia started their important cooperation.

The variable margin for the 6-month period is 15% of turnover, slightly up compared to the 13.7% last year, due to the

continuous improvement in the management of production processes.

Specific overheads are slightly up compared to the first half of 2012, due in particular to preparation costs incurred for

the launch of the new tractor platform, scheduled for the beginning of 2014. Profitability is nonetheless up compared to

the first half of 2013, in particular EBITDA stands at 1.853 million Euros (3.5% of turnover), up 1.147 million Euros

(2.3% of turnover) as at 30 June 2012. EBIT for the first half of 2013 stands at 1.251 million Euros (2.4% of turnover),

compared to 594 thousand Euros (1.2% of turnover) for the same period in 2012.

The net profits for the period, amounting to 1.103 million Euros (2.1% of turnover), are up compared to the figure of

508 thousand Euros (1.0% of turnover) for the period ended 30 June 2012.

The net financial position as at 30 March 2013 was positive amounting to 14.875 million Euros compared to 14.784

million Euros for the first half of 2012 and 13.001 million Euros as at 31 December 2012. Compared to 31 March 2013,

when the net financial position stood at 7.773 million Euros, the situation has improved due to the careful management

of net working capital.




SUBCONSOLIDATED INCOME STATEMENT AS AT 30.06.13

DIVISIONE AGRITALIA OF CARRARO BUSINESS AREA


30.06.13 30.06.12

restated(1)

REVENUES FROM SALES 53,190 100.00% 91,777 100.00% 49,254 100.00% 3,936 7.99%


-39,292 -73.87% -68,288 -74.41% -36,744 -74.60% -2,548 6.93%

Services and Use of third-party goods and services -4,629 -8.70% -8,673 -9.45% -4,790 -9.73% 161 -3.36%

Personnel costs -6,563 -12.34% -11,010 -12.00% -5,914 -12.00% -649 10.97%

Amortisation, depreciation and impairment of assets -609 -1.14% -1,083 -1.18% -558 -1.13% -51 9.14%

Provisions for risks -819 -1.54% -1,274 -1.39% -766 -1.56% -53 6.92%

Other income and expenses -27 -0.05% 198 0.22% 112 0.23% -139 -124.32%

OPERATING COSTS -51,939 -97.65% -90,131 -98.21% -48,660 -98.79% -3,279 6.74%

OPERATING PROFIT/(LOSS) (EBIT) 1,251 2.35% 1,646 1.79% 594 1.21% 657

Other financial income - 0.00% 48 0.05% 24 0.05% - 24 -100.00%

Financial costs and expenses -64 -0.12% -135 -0.15% -26 0.05% -38

Net gains/(losses) on foreign exchange -4 -0.01% 11 0.01% -1 0.00% -3 -

GAINS/(LOSSES) ON FINANCIAL ASSETS -68 -0.13% -76 -0.08% -3 0.00% -65

PROFIT/(LOSS) BEFORE TAXES 1,183 2.22% 1,570 1.71% 591 1.20% 592

Current and deferred income taxes -80 -0.15% -59 -0.06% -83 -0.17% -13 3.61%

BUSINESS AREA CONSOLIDATED PROFIT/(LOSS) 1,103 2.07% 1,511 1.65% 508 1.03% 587

EBITDA 1,853 3.48% 2,722 2.97% 1,147 2.33% 706 61.55%



SUBCONSOLIDATED INTERIM STATEMENT OF FINANCIAL POSITION AS AT 30.06.13

DIVISIONE AGRITALIA OF CARRARO BUSINESS AREA


restated(1)


Intangible fixed assets 283 334 387


Trade receivables and other receivables 8 7 5


Inventory 11,744 13,204 18,022


Financial assets 6 7 5


CURRENT ASSETS 35,537 29,085 34,924

TOTAL ASSETS

48,528 41,928

50,236

Share Capital - - -

Reserves 9,435 7,930 8,044

Profit/(Loss) for the period 1,103 1,511 508


Trade payables and other payables 1 - 1

Deferred tax liabilities 15 17 69

Provision for severance indemnity and retirement benefits 1,227 1,222 1,131

Provisions for risks and liabilities 715 578 529


Financial liabilities - - 24


Current taxes payables 30 28 -8






CASH FLOW AS AT 30.06.13 DIVISIONE AGRITALIA OF CARRARO BUSINESS AREA


restated(1)

Opening Net Financial Position 13,001 11,083 11,083

Group profit/(loss) 1,103 1,511 508

Amortisation, depreciation and impairment of fixed assets 602 1,076 553


Change in Net Working Capital -54 -1,080 2,650

Investments in fixed assets -562 -1,244 -379

Disinvestments in fixed assets - 1,599 5

Operating Free Cash Flow 1,089 1,862 3,337

Other operating flows 790 181 377

Other investing flows 1 -1 -2

Other equity flows -6 -124 -11

Free Cash Flow 1,874 1,918 3,701

Closing Net Financial Position 14,875 13,001 14,784

ANALYSIS OF NET WORKING CAPITAL AS AT 30.06.13 DIVISIONE AGRITALIA OF CARRARO BUSINESS AREA


restated(1)


Inventory 11,744 13,204 18,022

Trade Payables - 31,540 - 26,787 - 35,913

Net Working Capital (NWC) - 11,199 - 11,253 - 14,983



Electronics – Elettronica Santerno Business Area1

During the first half of 2013, intense activities were carried out to develop foreign markets, particularly the United

States, China, Thailand, Australia, India and South Africa. In this way, Santerno was able to drastically reduce its

dependence on the Italian market as at 30 June 2013, which now represents only 21% of turnover compared to 70% in

2012.

In June 2013, the two main orders acquired at the end of 2012 in the United States and South Africa are about 50%

towards completion, whilst the new agreements in China and Thailand (where Santerno is helping to build the largest

plant in Asia) have now begun to be implemented.

For the sector of industrial applications, an important agreement has been reached with a leading North-European

operator for the development and sale of products destined for marine applications, a completely new market for

Elettronica Santerno; the first phase of DNV certification of products ended successfully and this will contribute to

improving sales in the second half of 2013.

In general, the market trend for the sector of industrial applications was positive in the first half of the year; the

forecast for the second half of the year is similarly positive.

The first half of 2013 ends with a turnover of 37.575 million Euros, up 33.8% compared to the 28.078 million Euros for

the same period last year.

EBITDA as at 30 December 2013 was positive amounting to 469 thousand Euros (+1.3% of turnover) compared to a

negative value of 2.995 million Euros (-10.8% of turnover) as at 30 June 2012.

EBIT for the first half of 2013 is negative in the amount of 751 thousand Euros (-2.0% of turnover) compared to a

negative value of 4.206 million Euros (-15.0% of turnover) as at 30 June 2012.

A net loss was recorded amounting to 1.393 million Euros (-3.7 % of turnover) compared to a loss of 4.944 million

Euros (-17.6% of turnover) for the first half of 2012.

The budget for the second half of the year is confirmed, with the aim of braking even by the end of the year.

The net financial position as at 30 June 2013 was negative amounting to 17.379 million Euros compared to 6.444

million Euros as at 31 December 2012 and 7.048 million Euros as at 30 June 2012, due to the effect of absorbing cash

and cash equivalents arising from the trend in net working capital resulting from the need to set up storage facilities for

important orders in the United States, South Africa and Asian countries. This effect will decrease at the end of the year

due to collections for these order.




SUBCONSOLIDATED INCOME STATEMENT AS AT 30.06.13 THE ELETTRONICA SANTERNO BUSINESS AREA


30.06.13 30.06.12

restated(1)

REVENUES FROM SALES

37,575 100.00% 49,683 100.00% 28,078 100.00% 9,497 33.82%


-18,181 -48.39% -29,796 -59.97% -16,362 -58.27% -1,819 11.12%


-12,333 -32.82% -14,789 -29.77% -8,107 -28.87% -4,226 52.13%

Personnel costs -6,320 -16.82% -11,814 -23.78% -6,099 -21.72% -221 3.62% Amortisation, depreciation and impairment of assets

-1,363 -3.63% -4,804 -9.67% -1,411 -5.03% 48 -3.40%

Provisions for risks -927 -2.47% -1,278 -2.57% -732 -2.61% -195 26.64%

Other income and expenses 61 0.16% -1,290 -2.60% -296 -1.05% 357 -114.14%

Internal construction 737 1.96% 2,002 4.03% 723 2.57% 14 1.94%

OPERATING COSTS

-38,326 -102.00% -61,769 -124.33% -32,284 -114.98% -6,042 18.72%


-751 -2.00% -12,086 -24.33% -4,206 -14.98% 3,455 -82.14%

Other financial income 23 0.06% 139 0.28% 51 0.18% -28 -54.90%

Financial costs and expenses -578 -1.54% -757 -1.52% -375 -1.34% -203 54.13%

Net gains/(losses) on foreign exchange -207 -0.55% -469 -0.94% -198 -0.71% -9 4.55%


-762 -2.03% -1,087 -2.19% -522 -1.86% -240 45.98%


-1,513 -4.03% -13,173 -26.51% -4,728 -16.84% 3,215 -68.00%

Current and deferred income taxes 120 0.32% 1,649 3.32% -216 -0.76% 336

BUSINESS AREA CONSOLIDATED PROFIT/(LOSS)

-1,393 -3.71%

-11,524 -23.20%

-4,944 -17.61% 3,551 -71.82%

EBITDA

469 1.25% - 9,507 -19.14% - 2,995 -10.67% 3,464



SUBCONSOLIDATED INTERIM STATEMENT OF FINANCIAL POSITION AS AT 30.06.13 THE ELETTRONICA SANTERNO BUSINESS AREA


restated(1)




Trade receivables and other receivables 199 200 210


Inventory 21,176 14,626 23,288


Financial assets 397 22 144


CURRENT ASSETS 63,107 41,141 57,664

TOTAL ASSETS 102,622 80,692 95,736

Share Capital 2,500 2,500 2,500

Reserves 33,815 45,345 45,264

Foreign currency translation reserve 236 163 90

Profit/(Loss) for the period -1,393 -11,524 -4,944


Trade payables and other payables 222 293 -

Deferred tax liabilities 4 9 -54

Provision for severance indemnity and retirement benefits 656 627 529

Provisions for risks and liabilities 119 59 77

NON-CURRENT LIABILITIES 1,001 988 552



Current taxes payables 145 - 946






CASH FLOW AS AT 30.06.13 BUSINESS AREA ELETTRONICA SANTERNO


restated(1)

Opening Net Financial Position -6,444 1,583 1,583

Group profit/(loss) -1,393 -11,524 -4,944


Cash flow before Net Working Capital -173 -8,945 -3,733



Disinvestments in fixed assets - 30 6

Operating Free Cash Flow -12,409 -1,616 -8,201

Other operating flows 1,399 -6,572 -427

Other investing flows 8 21 12

Other equity flows 67 140 -15

Free Cash Flow -10,935 -8,027 -8,631

Closing Net Financial Position -17,379 -6,444 -7,048

ANALYSIS OF NET WORKING CAPITAL AS AT 30.06.13 ELETTRONICA SANTERNO BUSINESS AREA


restated(1)


Inventory 21,176 14,626 23,288

Trade Payables - 35,653 - 27,938 - 28,271

Net Working Capital (NWC) 18,785 7,608 21,173



TRANSACTIONS WITH RELATED PARTIES

Transactions with related parties carried out during the period gave rise to relationships of a commercial, financial or

advisory nature and were expedited at market terms, in the economic interest of the individual companies involved in

the transactions.

No transactions were carried out that were atypical or unusual with respect to normal business operations and the

interest rates and terms applied to and by the companies in their reciprocal financial relationships are in line with

market terms.

Detailed information on the transactions carried out with related parties are provided in the Explanatory Notes to the

Condensed Consolidated Interim Financial Statements.

STANDARDS USED IN PREPARING THE CONDENSED CONSOLIDATED INTERIM FINANCIAL

STATEMENTS

The consolidated annual financial statements are drawn up in compliance with the International Financial Reporting

Standards (IFRS) issued by the International Accounting Standard Board (“IASB”) and homologated by the European

Union in accordance with Regulation no. 1606/2002 and with the provisions issued in implementation of Art. 9 of

Italian Legislative Decree no. 38/2005. The present Condensed Consolidated Interim Financial Statements have been

drawn up in abbreviated form in accordance with IAS 34 ‘Interim financial reporting’ and does not include the

information required for the consolidated annual financial statements and must therefore be read together with the

consolidated annual financial statements drawn up for the year ended as at 31 December 2012. Furthermore, the

Condensed Consolidated Interim Financial Statements are based on the assumption of the company as a going

concern.

**********************

With reference to the provisions of Articles 36 and 39 of Consob Order 16191 of 29.10.2007 (the so-called “Market

Regulations”) and of Art. 2.6.2 paragraph 15 of the Stock Exchange Regulations we can confirm that the parent

company Carraro S.p.A. meets the conditions required by points a), b) and c) of paragraph 1 of the aforementioned Art.

36 on the subject of accounting situations, articles of association, corporate bodies and administrative and accounting

control of its subsidiaries incorporated and regulated in countries that do not belong to the European Union.

The Group perimeter includes 26 companies of which 15 are established and regulated in non-European Union

countries, specifically in Argentina, Brazil, China, India, Russia and the United States; of these, five, in Argentina,

China, India, and the United States, are significant under the terms of Title VI, Section II of the Issuer Regulations

(Consob Order 11971/1999).


CARRARO S.p.A.

Registered office in Campodarsego, Padua (Italy) – 37 Via Olmo

Share Capital Euros 23,914,696, fully paid-up.

Tax Code/VAT Registration Number and

In the Padua Companies Register 00202040283

R.E.A. no. 84033

CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS OF THE CARRARO GROUP

AS AT 30 JUNE 2013

BOARD OF DIRECTORS ENRICO CARRARO (2) Chairman In office until approval of the 2014 Financial Statements (Appointed, General Meeting 20.04.2012 - Powers conferred, Board resolution 20.04.2012)

TOMASO CARRARO Deputy Chairman

ALEXANDER JOSEF BOSSARD (1) Chief Executive Officer

ARNALDO CAMUFFO (1) (2) Director * FRANCESCO CARRARO Director ANTONIO CORTELLAZZO (1) (2) Director * GABRIELE DEL TORCHIO Director * MARINA PITTINI (1) (2) Director * MARCO REBOA (1) Director * (1) Members of the Auditing and Risk Committee (2) Members of the Nominations, Human Resources and Remuneration Committee * Independent directors

BOARD OF STATUTORY AUDITORS ROBERTO SACCOMANI Chairman In office until approval of the 2014 Financial Statements (Appointed, General Meeting 20.04.2012)

SAVERIO BOZZOLAN Regular Auditor MARINA MANNA Regular Auditor BARBARA CANTONI Alternate Auditor STEFANIA CENTORBI Alternate Auditor

AUDITING COMPANY PricewaterhouseCoopers S.p.A. from 2007 to 2015

PARENT COMPANY Finaid S.p.A.

Under the terms and for the purposes of Consob Communication no. 97001574 of 20 February 1997, we state

that:

The Chairman, Mr Enrico Carraro and the Chief Executive Officer, Mr Alexander Bossard, have been given

severally powers of legal representation and use of the corporate signature in relations with third parties and in

legal actions; they carry out their work within the limits of the powers conferred on them by the Board of

Directors in the meeting of 20 April 2012, in accordance with applicable legal constraints, in terms of matters

which cannot be delegated by the Board of Directors and of responsibilities reserved for the Board itself, as well

as the principles and limits provided for in the Company’s Code of Conduct.


CONSOLIDATED INCOME STATEMENT

(amounts in Euro thousands) NOTES 30.06.2013 30.06.2012

restated(1)

A) REVENUES FROM SALES

1) Products 440,138 468,360

2) Services 4,732 2,876

3) Other revenues 4,296 3,104

TOTAL REVENUES FROM SALES 1 449,166 474,340

B) OPERATING COSTS

1) Purchases of goods and materials 287,458 296,422

2) Services 74,097 81,308

3) Use of third-party goods and services 2,906 2,906

4) Personnel costs 76,354 73,578

5) Amortisation, depreciation and impairment of assets 15,494 16,427

5.a) depreciation of property, plant and equipment 12,866 13,621

5.b) amortisation of intangible assets 2,283 2,119

5.c) impairment of fixed assets 52 46

5.d) impairment of receivables 293 641

6) Changes in inventories -21,882 -5,559

7) Provision for risks and other liabilities 3,917 4,186

8) Other income and expenses -2,856 -1,443

9) Internal construction -1,647 -2,094

TOTAL OPERATING COSTS 2 433,841 465,731

OPERATING PROFIT/(LOSS) 15,325 8,609

C) GAINS/(LOSSES) ON FINANCIAL ASSETS

10) Income from equity investments - -

11) Other financial income 979 1,151

12) Financial costs and expenses -9,597 -10,227

13) Net gains/(losses) on foreign exchange -384 150

14) Value adjustments of financial assets - -

NET GAINS/(LOSSES) ON FINANCIAL ASSETS 3 -9,002 -8,926

PROFIT/(LOSS) BEFORE TAXES 6,323 -317

15) Current and deferred income taxes 4 5,620 5,082

NET PROFIT/(LOSS) FOR THE PERIOD 703 -5,399

16) Net profit/(loss) pertaining to minority interest 551 99

NET GROUP PROFIT/(LOSS) 152 -5,498

EARNINGS (LOSSES) PER SHARE 5 - basic, for the profit for the period attributable to ordinary shareholders of the parent company € 0.00 € -0.13 -diluted, for the profit for the period attributable to ordinary shareholders of the parent company € 0.00 € -0.13

(1) Comparative values have been restated following the application of IAS 19 revised, which changes, among others, the principle of the recognition of actuarial gains and losses relative to termination and post-employment benefits. For further details, see section 3.2. Accounting standards, amendments and interpretations applied as from 1 January 2012 of the "Notes”


CONSOLIDATED COMPREHENSIVE INTERIM INCOME STATEMENT

(amounts in Euro thousands) 30.06.2013 30.06.2012 restated(1)

NET PROFIT/(LOSS) FOR THE PERIOD 703 -5,399

Other income components that could be recognized in the income statement in subsequent periods:

Change in cash flow hedge reserve -895 -1,041

Foreign operation translation exchange differences -2,928 -361

Taxes on other comprehensive income components 359 119

Total other income components that could be recognized in the income statement in subsequent periods -3,464 -1,283

Other income components that will not be recognized in the income statement in subsequent periods:

Change in the provision for discounting employee benefits -267 -128

Taxes on other comprehensive income components 77 35 Total other income components that will not be recognized in the income statement in subsequent periods -190 -93

OTHER COMPREHENSIVE INCOME COMPONENTS, NET OF TAX EFFECTS -3,654

-1,376

TOTAL COMPREHENSIVE INCOME FOR THE PERIOD -2,951 6,775

Total comprehensive income attributable to:

Shareholders of the parent company -2,737 -6,838

Profit/(loss) pertaining to minorities -214 63

Total comprehensive income for the period -2,951 -6,775



CONSOLIDATED INTERIM STATEMENT OF FINANCIAL POSITION


A) NON-CURRENT ASSETS

1) Property, plant and equipment 6 202,365 209,656

2) Intangible fixed assets 7 88,010 86,049

3) Real estate investments 8 707 708

4) Investments 9 - -

5) Financial assets 10 3,302 3,909

5.1) Loans and receivables 3,023 3,484

5.2) Other financial assets 279 425

6) Deferred tax assets 11 28,156 29,428

7) Trade receivables and other receivables 12 3,478 1,624

7.1) Trade receivables - -

7.2) Other receivables 3,478 1,624

TOTAL NON-CURRENT ASSETS 326,018 331,374

B) CURRENT ASSETS

1) Inventory 13 166,773 146,754

2) Trade receivables and other receivables 12 175,553 134,261

2.1) Trade receivables 129,013 88,051

2.2) Other receivables 46,540 46,210

3) Financial assets 10 5,636 4,397

3.1) Loans and receivables 2,472 2,764

3.2) Other financial assets 3,164 1,633

4) Cash and cash equivalents 14 70,872 108,857

4.1) Cash 155 191

4.2) Bank current accounts and deposits 70,702 108,119

4.3) Other cash and cash equivalents 15 547

TOTAL CURRENT ASSETS 418,834 394,269

TOTAL ASSETS 744,852 725,643


CONSOLIDATED INTERIM STATEMENT OF FINANCIAL POSITION


A) SHAREHOLDERS’ EQUITY 15

1) Share Capital 23,915 23,915

2) Other Reserves 41,853 54,725

3) Profits/(Losses) brought forward - -

4) Other IAS/IFRS reserves -1,044 -553

5) Provision for discounting employee benefits -721 -494

6) Foreign currency translation reserve -11,210 -8,988

7) Profit/loss for the year pertaining to the group 152 -15,299

GROUP SHAREHOLDERS’ EQUITY 52,945 53,306

8) Minority interests 7,116 9,810

TOTAL SHAREHOLDERS’ EQUITY 60,061 63,116

B) NON-CURRENT LIABILITIES

1) Financial liabilities 16 197,625 177,821

1.1) Bonds - -

1.2) Loans 197,622 177,809

1.3) Other financial liabilities 3 12

2) Trade payables and other payables 17 242 313

2.1) Trade payables - -

2.2) Other payables 242 313

3) Deferred tax liabilities 11 2,524 3,467

4) Provision for severance indemnity and retirement benefits 19 19,859 19,676

4.1) Provision for severance indemnity 13,985 13,966

4.2) Provision for retirement benefits 5,874 5,710

5) Provision for risks and liabilities 20 2,600 2,403

5.1) Provision for warranties 1,723 1,723

5.2) Provision for legal claims 322 322

5.3) Provision for restructuring and reconversion - -

5.4) Other provisions 555 358

TOTAL NON-CURRENT LIABILITIES 222,850 203,680

C) CURRENT LIABILITIES

1) Financial liabilities 16 140,762 153,504

1.1) Bonds - -

1.2) Loans 136,634 151,761

1.3) Other financial liabilities 4,128 1,743

2) Trade payables and other payables 17 299,620 278,245

2.1) Trade payables 262,655 246,453

2.2) Other payables 36,965 31,792

3) Current taxes payables 18 5,079 8,159

4) Provision for risks and liabilities 20 16,480 18,939

4.1) Provision for warranties 9,831 9,040

4.2) Provision for legal claims 1,201 1,754

4.3) Provision for restructuring and reconversion 3,601 5,869

4.4) Other provisions 1,847 2,276

TOTAL CURRENT LIABILITIES 461,941 458,847

TOTAL LIABILITIES 684,791 662,527

TOTAL SHAREHOLDERS’ EQUITY AND LIABILITIES 744,852 725,643


STATEMENT OF CHANGES IN CONSOLIDATED SHAREHOLDERS’ EQUITY


Share Capital

Capital reserves

Other reserves

(1)

Provision for discounting

employee benefits (1)

Treasury stock

acquired

Reserve cash flow

hedge

Foreign currency

translation reserve

Profit/(Loss) for the period

Equity of Group

Minority interests

Total

Balance as at 1.1.2012 (1)

23,915 27,130 29,952 1,345 -5,411 360 -4,447 5,071 77,915 11,768 89,683

Total profit/loss for the year -85 -874 -381 -5,498 -6,838 63 -6,775

Transactions with shareholders: - -

Allocation of 2011 results (1) 5,071 -5,071 - -

Own share purchase -876 -876 -876 Change in consolidation scope - - - -

Other changes - - -

Total transactions of the period - - 5,071 - -876 - - -5,071 -876 - -876

Balance as at 30.06.2012

23,915 27,130 35,023 1,260 -6,287 -514 -4,828 -5,498 70,201 11,831

82,032


Share Capital

Capital reserves

Other reserves

Provision for discounting

employee benefits

Treasury stock

acquired

Reserve cash flow

hedge

Foreign currency

translation reserve

Profit/(Loss) for the period

Equity of Group

Minority interests

Total


23,915 27,130 34,030 -494 -6,435 -553 -8,988 -15,299 53,306 9,810 63,116

Total profit/loss for the year -176 -491 -2,222 152 -2,737 -214 -2,951

Transactions with shareholders: - -

Allocation of 2012 results -15,299 15,299 - -

Own share purchase -104 -104 -104 Change in consolidation scope

Other changes 2,531 -51 2,480 -2,480 -

Total transactions of the period - - -12,768 -51 -104 - - 15,299 2,376 -2,480 -104


23,915 27,130 21,262 -721 -6,539 -1,044 -11,210 152 52,945 7,116

60,061



CONSOLIDATED STATEMENT OF CASH FLOWS


restated(1)

Profit/(loss) for the year pertaining to the Group 15 152 -5,498

Profit/(Loss) for the year pertaining to minority interests 551 99

Tax for the year 5,620 5,082

Profit/(loss) before taxes 6,323 -317

Depreciation of property, plant and equipment 2 12,866 13,621

Amortisation of intangible assets 2 2,283 2,119

Impairment of intangible assets 2 52 46

Provisions for risks 2 3,917 4,186

Provisions for employee benefits 2 2,638 3,316

Net gains/(losses) on foreign exchange 3 384 -150

Cash flows before changes in Net Working Capital 28,463 22,821

Changes in inventory 13 -20,019 -6,178

Changes in trade receivables and other receivables 12 -43,146 -1,633

Changes in trade payables and other payables 17 21,304 -18,420

Changes in receivables/payables for deferred taxation 11 -165 -460

Use of funds for employee benefits 19 -2,455 -3,297

Use of risks funds 20 -6,221 -6,116

Changes of other financial assets and liabilities 1,063 -312

Tax consolidation expense and income - 31

Tax payments 4 -8,164 -3,994

Cash flows from operating activities -29,340 -17,558

Investment of property, plant and equipment 6 -8,893 -10,201

Disinvestments and other movements in property, plant and equipment 6 3,267 -87

Investments in intangible assets 7 -4,244 -3,257

Disinvestments and other movements in intangible assets 7 - -48

Equity investments/divestments -

Effect of forex conversion on equity investments - -

Cash flows from Investing activities -9,870 -13,593

Changes in current financial assets 10 -1,266 -57

Changes in non-current financial assets 10 461 428

Changes in current financial liabilities 16 -14,025 -8,264

Changes in non-current financial liabilities 16 19,813 -19,457

Changes in reserves 15 -513 -2,259

Declared dividends 15 - -

Changes in minority interests -3,245 -28

Cash flows from financing activities 1,225 -29,637

Total cash flow for the period -37,985 -60,788

Opening cash and cash equivalents 108,857 100,441

Closing cash and cash equivalents 70,872 39,653



EXPLANATORY AND SUPPLEMENTARY NOTES

1. Introduction Publication of the Consolidated Interim Financial Report and condensed Consolidated Interim Financial Statements of Carraro S.p.A. and subsidiaries, the Carraro Group, for the period running from 1 January 2013 to 30 June 2013 is authorised by resolution taken by the Board of Directors on 1 August 2013.

Carraro S.p.A. is a joint-stock company registered in Italy at the Padua Companies Register and controlled by Finaid S.p.A.

Carraro S.p.A. is not subject to management and coordination activities under the terms of Art. 2497 et seq of the Civil Code. The controlling shareholder Finaid S.p.A. does not perform any activity of management and coordination in relation to Carraro, and in particular: - Finaid is a purely financial holding; - Finaid does not issue any directions to Carraro; - the Finaid Board of Directors does not approve Carraro’s strategic plans or business plans nor does it “interfere”

regularly in its operations; - there are no relationships of a commercial or financial nature between Finaid and Carraro.

These condensed consolidated interim financial statements are presented in Euro, as this is the currency in which most of the group’s operations are conducted. The foreign companies are included in the consolidated interim financial statements in accordance with the principles described in the notes that follow. Amounts in these financial statements are given in thousand Euro, while amounts in the notes are indicated in million Euro (mln). The Carraro Group companies are principally engaged in the manufacture and marketing of drive systems developed for agricultural tractors, construction equipment, material moving machinery, light commercial vehicles and automobiles, and electronic control and power systems. Carraro S.p.A., as the parent company, has functions of strategic guidance, control and coordination of the three Carraro Group Business Areas: Carraro Drive Tech (under the control of Carraro Drive Tech S.p.A.), Carraro Divisione Agritalia (division part of Carraro S.p.A. itself) e Elettronica Santerno (under the control of Elettronica Santerno S.p.A.). The new Business Area model, effective as from 1 January 2013, replaces the previous four Business Units; in particular, on 29 April 2013, the merger by incorporation of Gear World S.p.A. in Carraro Drive Tech S.p.A.was completed, involving the merger of the two previous Drivelines and Components Business Units in the new Carraro Drive Tech Business Area. The condensed consolidated interim financial statements, in addition to Business Areas, include Carraro International based in Luxembourg which performs financial and treasury management for the Group, as well as commercial activities at the Swiss branch of Carraro Deutschland with headquarters in Hattingen (Germany), financial company which owns 8.01% of Carraro Drive Tech S.p.A. Reporting criteria and accounting principles The consolidated annual financial statements are drawn up in compliance with the International Financial Reporting Standards (“IFRS”) issued by the International Accounting Standard Board (“IASB”) and homologated by the European Union in accordance with Regulation no. 1606/2002 and with the provisions issued in implementing Art. 9 of Italian Legislative Decree no. 38/2005. The present condensed consolidated interim financial statements have been drawn up in abridged form in compliance with IAS 34 “Interim Financial Reporting”. As such, it do not include all the information required by the consolidated annual financial statements; they must be read together with the consolidated annual financial statements drawn up for the year ended on 31 December 2012. In preparing the present condensed interim financial statements, drawn up in accordance with IAS 34 “Interim Financial Reporting” the same accounting standards have been used as adopted in preparing the consolidated financial statements as at 31 December 2012, with the exception of that described in the paragraph below entitled “Accounting standards, amendments and interpretations coming into effect as from 1 January 2013”. The condensed consolidated interim financial statements were prepared assuming that the company is a going concern. The preparation of the interim financial statements requires management to make estimates and assumptions based on the best information available, which affect the value of revenues, costs, assets and liabilities on the statements and the disclosure in relation to potential assets and liabilities as of the date of the interim financial statements. Some of the measurement processes, and in particular the more complex processes, such as calculating any impairment of non-current assets, are generally only carried out in a complete manner upon preparing the annual financial statements, when all information as may be necessary is available. This is without prejudice to cases where there are indicators of impairment that require an immediate assessment of loss of value.


2. Structure and content of the condensed consolidated interim financial statements These condensed consolidated interim financial statements have been prepared in accordance with the International Financial Reporting Standards (IFRS) issued by the International Accounting Standards Board (IASB) and ratified by the European Union and to this end the figures of financial statements of the consolidated companies have been reclassified and adjusted appropriately. 2.1 Format of the consolidated financial statements With regard to the format of consolidated accounting schedules, the Company opted to present the following accounting statements. Income Statement Items on the consolidated income statement are classified by their nature. Statement of Comprehensive Income The statement of comprehensive income includes items of income and costs which are not included in the income statement for the year, as requested or allowed by IFRS, such as the variations of the cash flow hedge reserve, and the variations of the currency exchange reserve. Financial position The consolidated interim statement of financial position is presented with separate disclosure of Assets, Liabilities and Shareholders’ Equity. Assets and Liabilities are in turn presented according to their classification as “current” and “non-current”. Statement of Cash Flows The consolidated statement of cash flows illustrates the changes in cash and cash equivalents (as presented in the balance sheet) divided by cash generating area in accordance with the “indirect method”, as permitted by IAS 7. Statement of Changes in Shareholders’ Equity The statement of changes in shareholders’ equity is presented in accordance with the requirements of the international accounting standards, showing the comprehensive income for the period and all changes generated from transactions with shareholders. Accounting statements of transactions with related parties (Consob resolution 15519) With reference to the reporting of related-party transactions in the financial statements, provided for in Consob Resolution 15519 of 27 July 2006, balances of a significant amount are specifically indicated, to facilitate understanding of the assets and liabilities, financial position and results of the group, in the table of paragraph 8 below devoted to related party transactions.


2.2 Content of the Condensed Consolidated Interim Financial Statements Consolidation area The Carraro Group’s condensed consolidated interim financial statements include the financial statements of Carraro S.p.A. and of the companies in which it holds, directly or indirectly, the majority of voting rights at the meeting of shareholders. The definition of a subsidiary is consistent with that given in the Carraro Group’s annual financial statements as at 31 December 2012.

The following companies are consolidated using the line-by-line method:

Name Based in Currency

Par value Group stake Share capital

Parent company:

Carraro S.p.A. Campodarsego (PD) EURO 23,914,696

Italian subsidiaries:

Carraro Drive Tech S.p.A. Campodarsego (PD) EURO 30,102,365 94.53%

Elettronica Santerno S.p.A. Campodarsego (PD) EURO 2,500,000 100.00%

Energy Engineering S.r.l. Imola (Bologna) EURO 110,000 100.00%

M.G. Mini Gears S.p.A. Padua EURO 5,256,951 94.53%

Siap S.p.A. Maniago (PN) EURO 17,622,616 78.44%

Foreign subsidiaries:

Carraro International S.A. Luxembourg EURO 39,318,000 100.00%

Carraro Deutschland GmbH Hattingen (Germany) EURO 10,507,048 100.00%

Carraro Technologies India Pvt. Ltd. Pune (India) INR 18,000,000 94.53%

O&K Antriebstechnik Gmbh Kg Hattingen (Germany) EURO 4,000,000 94.53%

Carraro Argentina S.A. Haedo (Argentina) ARS 105,096,503 94.49%

Carraro China Drive System Qingdao (China) CNY 168,103,219 94.53%

Carraro India Ltd. Pune (India) INR 568,260,000 94.53%

Carraro North America Inc. Norfolk (USA) USD 1,000 94.53%

Fon S.A. Radomsko (Poland) PLN - 93.23%

Carraro Drive Tech Do Brasil Santo Andrè (State of Sao Paulo)

BRL 1,182,369

94.44%

Eletronica Santerno Industria e Comercio Ltda Minas Gerais (Brazil) BRL 2,443,827 100.00%

Elettronica Santerno ES.p.A.na S.L. Valencia (Spain) EURO 1,003,006 100.00%

Santerno Inc. San Francisco (USA) USD 1,000 100.00%

Zao Santerno Moscow (Russia) RUB 100,000 100.00%

Santerno Shangai Trading Ltd Shanghai (China) CNY 5,562,734 100.00%

Turbo Gears India Ltd. Pune (India) INR 960,000,000 94.53%

Mini Gears Inc. Virginia Beach (USA) USD 8,910,000 94.53%

Gear World North America Inc. Virginia Beach (USA) USD 20,000 94.53%

Mini Gears Property Virginia Beach (USA) USD 20,000 94.53%

MiniGears Suzhou Co. Ltd. Suzhou (China) CNY 49,487,176 94.53%

Changes in the consolidation area and other operations of company reorganisation

There are no changes in the consolidation area in the reference period. As already mentioned in the condensed interim financial report, with deed dated 29 April 2013, having effect as from 1 January 2013, the company Carraro Drive Tech S.p.A. merged the company Gear World S.p.A..


3. Consolidation criteria and accounting principles 3.1 Consolidation criteria The figures are consolidated using the line by line method, that is assuming the entire amount of the assets, liabilities, costs and earnings of the individual companies, regardless of the stock held in the company. Subsidiaries are consolidated using financial statement formats in line with the layout adopted by the parent company and compiled in accordance with common accounting standards, as applied for Carraro S.p.A. The carrying amount of consolidated equity interests, held by Carraro S.p.A. or by other companies within the consolidation scope, was offset by the relevant amount of shareholders’ equity in the subsidiary companies. The amount of shareholders’ equity and the net profit/(loss) of these third-party shareholders are shown in the Consolidated Statement of Financial Position and Income Statement respectively. Payable and receivables, income and expenditure and all operations undertaken between the companies included within the consolidation scope have been eliminated, including dividends distributed within the Group. Profits not yet realised and capital gains and losses deriving from operations between companies of the Group have also been eliminated. Intra-group losses that indicate impairment are recognised in the consolidated financial statements. Balances in foreign currencies have been converted into Euro using the exchange rate of the end of the period for assets and liabilities, historical exchange rates for shareholders’ equity items and average exchange rates in the period for the income statement. Exchange differences resulting from this conversion method are shown in a specific shareholders’ equity item entitled “Foreign currency translation reserve”. The exchange rates applied for the translation of balances presented in foreign currencies were as follows:

Currency

Average exchange 01.01. 13/ 30.06.13

Exchange as at

30.06.13

Average exchange 01.01.12/ 30.06.12

Exchange as at

30.06.12

Indian Rupee 72.28 77.72 67.60 70.12

Polish Zloty 4.18 4.34 4.25 4.25

US Dollar 1.31 1.31 1.30 1.26

Chinese Renminbi 8.13 8.03 8.19 8.00

Argentine Peso 6.73 7.04 5.69 5.64

Russian Ruble 40.75 42.84 39.71 41.37

Brazilian Real 2.67 2.89 2.41 2.58

3.2 Accounting standards and measurement criteria Accounting standards, amendments and interpretations coming into effect as from 1st January 2013 Standards relevant to the Group for the first half of 2013 - IAS 19 Revised “Employee Benefits", retrospective application from 1 January 2013. The Carraro Group opted for the early application, from the Financial Statements as at 31 December 2012, of IAS 19 Revised, according to which actuarial gains/losses are recognised in the Statement of Comprehensive Income and financial income/expenses are classified as interest costs. Moreover, net financial expenses are determined using the discount rate adopted at the beginning of the current reporting period to measure the defined benefit plan obligation. During the first-time adoption of IAS 19, the Carraro Group opted to recognise actuarial components in the income statement under Personnel costs; the amendment, endorsed by the European Commission in June 2012, requires the posting of actuarial gains/losses directly under Shareholders' Equity, with immediate recognition in the Statement of Comprehensive Income. Adoption of IAS 19 Revised by the company, considering the obligation for retrospective application as required by IAS 8, gave rise to the following effects:

- recognition in a reserve of Shareholders' equity of actuarial gains/losses, and classification of interest costs under the item Net financial income/expenses;

- restatement of the item Personnel costs (net of actuarial gains/losses classified in the Statement of Comprehensive Income) and of Financial Income/Expenses (including the item interest cost) in the 2012 interim Income Statement.

The following effects may therefore be identified in these financial statements:

- the actuarial loss in the first half 2012 Income Statement, amounting to 0.13 million Euros, under Personnel Costs, was not recognised; the negative change, for the same amount, under the Provision for discounting employee benefits in the Statement of Financial Position and the item Change in the Provision for discounting employee benefits in the Statement of Comprehensive Income were not recognised; moreover, the item Interest cost, amounting to 0.27 million Euros was reclassified from the item Personnel Costs to the item Financial Expenses.

- the actuarial loss in the first half 2013 Income Statement, amounting to 0.3 million Euros, was not recognised under Personnel Costs; the negative change, amounting to 0.19 million Euros (net of taxes) of the Provision


for discounting employee benefits in the Statement of Financial Position and the item Change in the Provision for discounting employee benefits in the Statement of Comprehensive Income were not recognised;

- IFRS 13 “Fair value measurement” which clarifies how fair value shall be measured for the purposes of financial statements, and applies all IFRSs that require the fair value measurement or presentation of information based on the fair value (forward-looking application as from 1 January 2013).

Accounting standards, amendments and interpretations not relevant or not yet applicable and not adopted in advance by the Group - Amendment to IAS 12 – "Income Taxes - determination of deferred tax assets on real estate investments"

(retrospective application from 1 January 2012). - Amendment to IAS 32 – "Financial Instruments: presentation” (retroactive application from 1 January 2014). - Amendment to IFRS 7 – "Financial Instruments: additional disclosure - transfers of financial assets" (retroactive

application as from 1 January 2012). - IFRS 10 “Consolidated Financial Statements” which replaces SIC 12 “Consolidation: special purpose entities

(special purpose vehicles) and parts of IAS 27 “Consolidated and Separate Financial Statements” (retroactive application as from 1 January 2014).

- IFRS 11 “Joint Arrangements” which replaces IAS 31 “Interests in Joint Ventures” and SIC 13 “Jointly Controlled Entities” (retroactive application as from 1 January 2014).

- IFRS 12 “Disclosure of Interest in Other Entities” which is a new standard on additional disclosure for all types of interest (retroactive application as from 1 January 2014).

Intra-group transactions In accordance with the Consob recommendations of 20 February 1997 (DAC/97001574) and 27 February 1998 (DAC/98015375) we can confirm that: a) intragroup transactions and transactions with related parties which took place during the period, gave rise to

trade, financial or consultancy-related relationships, and were carried out under standard market terms, in the financial interest of the individual companies involved in the transactions;

b) no atypical or unusual operations were implemented as compared with normal business management; c) the interest rates and terms applied (paid and received) in financial relationships between the various companies

are in line with market terms. 4. Information on business segments and geographical areas Information on Operating Segments is given on the basis of the internal reporting provided to the highest operating decision-making level. For operational purposes, the group manages and controls its business on the basis of the type of products supplied. Three operating segments were identified, corresponding to the following Business Areas:

- Carraro Drive Tech (Transmission systems and components): specialised in the design, manufacture and sale of transmission systems (axles, transmissions and planetary drives) mainly for agricultural and construction equipment, and also markets a wide range of components and gears for very diverse sectors, from the automotive industry to light power tools, material handling, agricultural applications and construction equipment;

- Carraro Divisione Agritalia (Vehicles): designs and manufactures special tractors (from 60 to 100 hp) for third-party brands;

- Elettronica Santerno (Power electronics) designs, develops, manufactures and markets inverters (electronic power converters) mainly for the photovoltaic industry and industrial automation (HVAC, water treatment, lifting systems and large-scale transport).

The item “other segments” brings together the Group’s operations not allocated to the three segments, and comprises the central holding and management activities of the Carraro Group. The Management examines separately the results achieved by the operating segments in order to take decisions on the allocation of resources and on assessment of the results.


4.1 Business segments The most significant information by business segment is presented in the tables below, with comparisons for the first half of 2013 and first half of 2012. a) economic data

30.06.2013 (amounts in Euro thousands) Drive Tech

Div. Agritalia

Elettronica Santerno

Eliminations and items

not allocated

Consolidated Total

Revenues from sales 368,415 53,190 37,575 -10,014 449,166

Sales to third parties 359,713 51,306 37,515 632 449,166

Sales between divisions 8,702 1,884 60 -10,646 -

Operating costs 349,222 51,939 38,326 -5,646 433,841

Purchases of goods and materials 234,874 37,670 24,808 -9,894 287,458

Services 57,138 4,624 11,896 439 74,097

Use of third-party goods and services 4,264 5 437 -1,800 2,906

Personnel costs 59,027 6,563 6,320 4,444 76,354

Amortisation, depreciation and impairment of assets 12,364 609 1,363 1,158 15,494

Changes in inventories -16,819 1,622 -6,627 -58 -21,882

Provisions for risks 2,171 819 927 - 3,917

Other income and expenses -2,887 27 -61 65 -2,856

Internal construction -910 - -737 - -1,647

Operating profit/(loss) 19,193 1,251 -751 -4,368 15,325

Gains/(losses) on financial assets -7,408 -68 -762 -764 -9,002

Current and deferred income taxes 4,778 80 -120 882 5,620

Minorities 177 - - 374 551

Net profit/(loss) 6,830 1,103 -1,393 -6,388 152

30.06.2012

Drive Tech Div.

Agritalia Elettronica Santerno

Eliminations Consolidated

Total (amounts in Euro thousands) and items

restated(1) not allocated

Revenues from sales 407,328 49,254 28,078 -10,320 474,340

Sales to third parties 398,935 46,889 27,791 725 474,340

Sales between divisions 8,393 2,365 287 -11,045 -

Operating costs 392,398 48,660 32,284 -7,611 465,731

Purchases of goods and materials 249,972 41,765 16,503 -11,818 296,422

Services 68,732 4,722 8,369 - 515 81,308

Use of third-party goods and services 3,982 68 520 -1,664 2,906

Personnel costs 56,893 5,914 6,099 4,672 73,578

Amortisation, depreciation and impairment of assets 13,343 558 1,411 1,115 16,427

Changes in inventories -476 -5,021 -924 862 -5,559

Provisions for risks 2,689 766 732 -1 4,186

Other income and expenses -1,890 -112 297 262 -1,443

Internal construction -847 - -723 -524 -2,094

Operating profit/(loss) 14,930 594 -4,206 -2,709 8,609

Gains/(losses) on financial assets -7,627 -3 -522 -774 -8,926

Current and deferred income taxes 4,205 83 216 578 5,082

Minorities 358 - - -259 99

Net profit/(loss) 2,740 508 -4,944 -3,802 -5,498

(1) The values have been restated following the application of IAS 19 revised, which changes, among others, the principle of the recognition of actuarial gains and losses relative to termination and post-employment benefits. For further details, see section 3.2. Accounting standards, amendments and interpretations applied as from 1 January 2012 of the "Notes”


b) balance sheet

30.06.2013 Drive Tech Div. Agritalia


Eliminations and items not

allocated

Consolidated Total


Non-current assets 232,501 12,991 39,515 41,011 326,018

Current assets 320,334 35,537 63,107 -144 418,834

Shareholders’ equity 64,071 10,538 35,158 -49,706 60,061

Non-current liabilities 59,701 1,958 1,001 160,190 222,850

Current liabilities 429,063 36,032 66,463 -69,617 461,941

31.12.2012 Drive Tech Div. Agritalia



allocated

Consolidated Total


Non-current assets 238,108 12,843 39,551 40,872 331,374

Current assets 304,668 29,085 41,141 19,375 394,269

Shareholders’ equity 60,835 9,441 36,484 -43,644 63,116

Non-current liabilities 56,059 1,817 988 144,816 203,680

Current liabilities 425,882 30,670 43,220 -40,925 458,847

c) Other information

30.06.2013 Drive Tech Div. Agritalia Elettronica Santerno


allocated

Consolidated Total

Investments (Euro/000) 9,073 562 1,060 2,442 13,137

Workforce as at 30.06 3,623 249 198 83 4,153

30.06.2012 restated(1)

Drive Tech Div. Agritalia Elettronica Santerno


allocated

Consolidated Total

Investments (Euro/000) 9,781 379 1,262 2,035 13,458

Workforce as at 30.06 3,754 235 222 88 4,299



4.2 Geographic areas The Carraro Group’s industrial operations are located in various areas of the world: Italy, other European countries, North and South America, Asia and other non-European countries. The Group’s sales, deriving from the manufacturing carried out in the above areas are achieved equally with customers in Europe, Asia and the Americas. Other information is better commented in the condensed interim financial report. a) Sales The breakdown of sales by main geographic area is shown in the following table.

(amounts in Euro thousands) Geographical Area

30.06.13 % 30.06.12 %

North America 59,390 13.2 51,628 10.9

Germany 53,693 12.0 62,963 13.3

South America 53,513 11.9 48,831 10.3

Turkey 33,402 7.4 20,629 4.3

France 31,866 7.1 30,760 6.5

China 29,543 6.6 34,221 7.2

United Kingdom 27,378 6.1 43,486 9.2

India 25,972 5.8 28,397 6.0

Switzerland 22,754 5.1 26,337 5.5

Poland 10,565 2.4 12,396 2.6

Other non-E.U. areas. 14,250 3.2 8,323 1.7

Other E.U. areas. 33,800 7.5 29,854 6.3

Total Abroad 396,126 88.2 397,825 83.9

Italy 53,040 11.8 76,515 16.1

Total 449,166 100.0 474,340 100.0

of which:

Total E.U. area 210,342 46.8 255,974 54.0

Total non-E.U. area 238,824 53.2 218,366 46.0

b) Assets The following table illustrates the book values of current and non-current assets according to the primary geographic areas of manufacture.


30.06.2013 31.12.2012

CURRENT ASSETS

NON-CURRENT ASSETS

CURRENT ASSETS

NON-CURRENT ASSETS

Italy 266,667 401,665 212,478 394,595

Other E.U. countries 220,059 79,388 232,208 79,698

North America 20,487 3,640 8,806 4,414

South America 46,530 11,050 44,722 12,075

Asia (India, China) 113,995 67,123 106,665 68,312

Non-E.U. countries 652 80 715 88

Eliminations and items not allocated -249,556 -236,928 -211,325 -227,808

Total 418,834 326,018 394,269 331,374


c) Investments The table below illustrates the value of investments in the primary geographic areas of manufacture.


Italy 10,122 9,944

Other E.U. countries (Germany, Poland) 998 1,484

North America 26 -

South America 265 440

Asia (India, China) 3,368 2,406

Non-E.U. countries - -

Eliminations and items not allocated -1,642 -816

Total 13,137 1 3,458

5. Assets held for sale and non-recurrent Transactions As at 30 June 2013, there were no assets held for sale or non-recurrent transactions. 6. Notes and comments Revenues and costs A) Revenues from sales (Note 1) Analysis by business segment and geographical area See the information provided in section 4 above. B) Operating costs (Note 2)

OPERATING COSTS

(amounts in Euro thousands) 30.06.2013

30.06.2012

restated (1)

1) PURCHASES OF GOODS AND MATERIALS 287,458 296,422

2) SERVICES 74,097 81,308

3) USE OF THIRD-PARTY GOODS AND SERVICES 2,906 2,906

4) PERSONNEL COSTS 76,354 73,578

5) AMORTISATION, DEPRECIATION AND IMPAIRMENT OF ASSETS 15,494 16,427

6) CHANGES IN INVENTORIES -21,882 -5,559

7) PROVISION FOR RISKS AND OTHER LIABILITIES 3,917 4,186

8) OTHER INCOME AND EXPENSES -2,856 -1,443

9) INTERNAL CONSTRUCTION -1,647 -2,094

Total 433,841 465,731



C) Net income from financial assets (note 3)



30.06.2012

restated(1)

10) INCOME FROM EQUITY INVESTMENTS - -

11) OTHER FINANCIAL INCOME 979 1,151

12) FINANCIAL COSTS AND EXPENSES -9,597 -10,227

13) NET GAINS/(LOSSES) ON FOREIGN EXCHANGE -384 150

14) ADJUSTMENTS OF FINANCIAL ASSETS - -

Total -9,002 -8,926

Net financial expenses totalled 8.618 million Euros (1.9% of turnover) a slight reduction compared to the 9.076 million Euros (1.9% of turnover) of the first half of 2012. The trend in financial expenses benefited in the first half of 2013 from a reduced average financial debt compared to the first half of 2012 and, over the first three months of the year, from interest rates in line with the previous year. Beginning in April 2013 new interest rates apply to the loans covered by the Debt Rearrangement Agreement. The net exchange differences as at 30 June 2013 were negative at -0.384 million Euros and include, as well as financial items, also the MTM (Market-to-Market) effects of the measurement at fair value of derivative instruments. Income taxes (note 4)

INCOME TAXES


30.06.2012

restated(1)

CURRENT TAXES 5,698 4,593

TAX CONSOLIDATION EXPENSE AND INCOME - -31

TAXES FROM PREVIOUS YEARS -614 -26

DEFERRED TAXES 494 314

PROVISION FOR TAX RISKS RELATIVE TO DIRECT TAXES 42 232

Total 5,620 5,082

Current taxes Tax on the income of Italian companies is calculated at 27.50%, for IRES (corporation tax), and at 3.90% for IRAP (regional business tax) on the respective taxable income for the period. Taxes for the other foreign companies are calculated at the rates in force in the various countries. Tax consolidation expense and income Carraro S.p.A., Carraro Drive Tech S.p.A., Elettronica Santerno S.p.A. and Energy Engineering S.r.l. adhere to the tax consolidation area of the parent company Finaid S.p.A. The charges/income deriving from the transfer of the IRES taxable base are booked under current taxes. According to the regulations of the Tax Consolidation Agreement, companies of the Carraro Group have the right to “relief” for use of the tax losses of companies controlled by Finaid, other than those belonging to the Carraro Group. This “relief” amounts to 3% of the tax losses of the other companies of the Finaid Consolidation area possibly offset with the taxable amounts of Carraro Group companies. The regulations also provide for a mechanism of priority offsetting of the positive and negative taxable amounts between Carraro Group companies with respect to offsetting with the other companies of the Finaid Consolidation. The same mechanism is provided for with reference to the non-deductible expenses as an effect of the Thin Cap Rule. The fiscal consolidation in place between Gear World S.p.A. and its subsidiaries for the period 2011-2013 was discontinued with effect from 30 April 2013 due to the merger of Gear World S.p.A. in Drive Tech S.p.A.



Deferred taxes These are set aside on the temporary differences between the carrying amount of the assets and liabilities and the corresponding tax value. As well as taxes entered in the income statement for the period, deferred tax assets for 0.436 million Euros were charged directly to the deferred tax assets shareholders’ equity.

Group earnings or losses per share (note 5) Basic earnings (losses) per share are calculated by dividing the net earnings (net losses) for the year attributable to the company’s ordinary shareholders by the weighted average number of outstanding ordinary shares during the year.

30.06.2013

30.06.2012

restated(1)

Earnings Euro/000 Euro/000

Earnings (Losses) for the purposes of calculation of basic earnings per share 152 -5,498

Diluting effect deriving from potential ordinary shares: - -

Earnings (Losses) for the purposes of calculation of diluted earnings per share 152 -5,498

30.06.2013 30.06.2012

Number of shares No./000 No./000

Weighted average number of ordinary shares for calculating

of basic earnings (losses) per share: 42,489 43,812

of diluted earnings (losses) per share: 42,489 43,812

Basic earnings (losses) per share (Euro): 0.00 -0.13

Diluted earnings (losses) per share (Euro): 0.00 -0.13



Property, plant and equipment (Note 6) These items present a net balance of 202.37 million Euros compared with 209.66 million Euros in the previous period. The breakdown is as follows:

Items (amounts in Euro thousands)

Land and buildings

Plant and machinery

Industrial equipment

Other assets

Invest. in prog.

and deposits

Total

Historical cost 78,986 214,253 118,508 19,597 7,925 439,269

Provisions for amortisation and impairment -20,277 -111,884 -83,038 -14,414 - -229,613

Net as at 31.12.2012 58,709 102,369 35,470 5,183 7,925 209,656

Movements in 2013:

Increases 355 1,625 3,233 474 3,206 8,893

Decreases - -216 -260 -27 -229 -732

Capitalisation 419 344 297 - -1,060 -

Depreciation and amortisation -956 -6,587 -4,673 -650 - -12,866

Reclassification - 1,051 -61 -74 -916 -

Impairment - -52 - - - -52

Translation exchange differences -414 -2,101 68 -28 -59 -2,534

Net as at 30.06.2013 58,113 96,433 34,074 4,878 8,867 202,365

Made up of:

Historical cost 79,227 208,992 120,681 19,711 8,867 437,478

Provisions for amortisation and impairment -21,114 -112,559 -86,607 -14,833 - -235,113

As at 30.06.2013, leased assets were registered under plant and machinery for 1.73 million Euros. Investments in land and buildings were made in particular by Carraro Argentina, Elettronica Santerno S.p.A., Carraro Technologies and Siap S.p.A. The main investments in plant and machinery were made by MiniGears S.p.A. Poggiofiorito division, O&K Gmbh and Siap S.p.A. The increases in industrial equipment relate mainly to purchases of fusion moulds and tools by Carraro Drive Tech S.p.A., MiniGears S.p.A. and Carraro India. The investments in other goods relate to the purchase of various office materials by Carraro S.p.A., Elettronica Santerno S.p.A. and O&K Gmbh. The increases in amounts relative to Investments in progress and deposits is primarily owing to investments currently under way in Carraro China, Carraro India and O&K Gmbh. The properties of the Group have mortgage loans secured against them for a total of 33.4 million Euros, of which 23.4 million Euros on the properties of Carraro S.p.A., 2.0 million Euros on the properties of Siap S.p.A. and 8 million Euros on the properties of Carraro India Pvt Ltd. Decrease, reclassification and exchange difference values are highlighted by the net value of the historical cost and the amortisation fund.


Intangible assets (Note 7) These items present a net balance of 88.01 million Euros compared with 86.05 million Euros in the previous period. The breakdown is as follows:


Goodwill Development

costs

Royalties and

patents

Licences and

Trademarks

Invest. in prog.

and deposits

Other intangible

assets Total

Historical cost 63,171 15,774 1,536 24,530 9,886 878 115,775

Provisions for amortisation and impairment - -10,283 -1,333 -17,259 - -851 -29,726

Net as at 31.12.2012 63,171 5,491 203 7,271 9,886 27 86,049

Movements in 2013:

Increases - - 17 330 3,897 - 4,244

Decreases - - - - - - -

Depreciation and amortisation - -809 -46 -1,414 - -14 -2,283

Reclassification - - - 5 -5 - -

Translation exchange differences - - 4 -4 - - -

Net as at 30.06.2013 63,171 4,682 178 6,188 13,778 13 88,010

Made up of:

Historical cost 63,171 15,774 1,557 24,839 13,778 878 119,997

Provisions for amortisation and impairment - -11,092 -1,379 -18,651 - -865 -31,987

The item Licences and trademarks includes the fair value of the Brand (3.30 mln Euro) and the Technology (3.50 mln Euro) recognised in 2007 on acquisition of the company Mini Gears. These intangible fixed assets with a limited useful life are amortised on a straight-line basis over the terms estimated at 10 and 7 years respectively. The other intangible fixed assets with a limited useful life are amortised on a straight-line basis over terms estimated at between 3 and 5 years. Decrease, reclassification and exchange difference values are highlighted by the net value of the historical cost and the amortisation fund. Goodwill Goodwill is allocated to the CGU (cash-generating units), identified in the three new business areas: “Drivetech” result of the aggregation of “Drivelines” and “Components”, “Santerno”, equivalent to the previous Electronics BU and “Agritalia”, which corresponds to the previous Vehicles BU as indicated in the following table. These CGUs are subjected to specific impairment testing at least once a year, in application of the provisions of IAS 36 as described in the explanatory notes to the consolidated financial statements as at 31.12.2012. No elements have arisen up to the current date, compared to the date of the last execution, such to deem that the hypotheses and parameters used in the impairment test shall be reviewed. The amounts of goodwill recognised are shown below (amounts in euro thousands):

Business Unit (CGU) 30.06.2012 Changes 30.06.2013

Drivetech 41,294 - 41,294

Elettronica Santerno 21,877 - 21,877

Total 63,171 - 63,171


Investments in progress and deposits The item mainly refers to the development costs incurred by the companies Carraro S.p.A., Carraro Drive Tech S.p.A. and Elettronica Santerno S.p.A. These expenses derive from the design of new product lines developed in connection with similar projects launched by customers. Development costs generated internally are capitalised at cost. Licences and Trademarks The increases mainly refer to licences and patents taken out by Carraro S.p.A. and Carraro Drive Tech S.p.A. for the new ERP management system.

Research and development costs (non-capitalisable) During the course of the first half of 2013 research and tests were carried out by some of the personnel employed in both development and production. For these operations, the Group sustained total expenditure of 8.90 million Euro (not capitalised through the lack of the requirements envisaged by IAS 38) (9.48 million Euros in the first half of 2012). Real estate investments (Note 8) These present a net balance of 0.7 million Euro and relate to civil property owned by Carraro S.p.A., Siap S.p.A. and Carraro Argentina SA. Equity investments (Note 9) Equity investments in associates As at 30 June 2013 no equity investments were held in associates. Financial assets (Note 10)


Loans to third parties 3,023 3,484

LOANS AND RECEIVABLES 3,023 3,484

Available for sale 111 111

Other financial assets 168 314

OTHER FINANCIAL ASSETS 279 425

NON-CURRENT FINANCIAL ASSETS 3,302 3,909

With third parties 2,472 2,764

LOANS AND RECEIVABLES 2,472 2,764

Fair value of derivatives 1,555 381

Other financial assets 1,609 1,252

OTHER FINANCIAL ASSETS 3,164 1,633

CURRENT FINANCIAL ASSETS 5,636 4,397

Non-current loans and receivables These are the medium-/long-term portion of the financial receivable from the company MARIV S.r.l to which the company STM S.r.l was sold, amounting to 1.03 million Euros. The financial receivable will mature on 30 December 2014. The item also includes 2 million Euros, relative to the medium-/long-term portion of the financial receivable from the company FON SKB sp. Zo.o. arising from the sale of the company branch of the Polish subsidiary Fabryka Osi Napedowych S.A, on 8 September 2011, which matures on 1 August 2016. Other non-current financial assets The item also includes the commissions for 0.15 million Euros, paid to Carraro International for the re-negotiation of the financing falling within the Framework Agreement with the main financing banks, described in note 16.

Current loans and receivables They mainly refer to the short-term portion of the financial receivable from MARIV S.r.l., equal to 1.03 million Euros and the remaining financial receivable from the company STM S.r.l. (equal to 0.39 million Euros), which no longer belongs to the Carraro Group. The item also includes 1.02 million Euros for the current portion of the financial receivable from the Company, FON SKB sp. Zo.o.


Other current financial assets They include the cash flow hedge derivatives for 1.56 million Euros. The amount refers to the fair value calculated as at 30.06.2013 on current instruments on currencies. As described in detail in the section on derivative financial instruments (Paragraph 9), gains or losses deriving from hedging instruments are recognised in the consolidated comprehensive income statement and accumulated in a specific shareholders’ equity reserve for the efficient part, while the remaining (inefficient) portion is recognised in the consolidated income statement. Deferred tax assets and liabilities (Note 11) The carrying amount of net deferred tax assets recognised as at 30 June 2013 was 25.6 million Euros (26.0 million Euros as at 31 December 2012). Deferred tax assets include the benefits associated with retained tax losses, insofar as it is likely that there will be adequate future taxable profits against which these losses can be used in a reasonably short period. Tax losses for which it was decided not to recognise deferred tax assets as at 30 June 2013 amounted to 95.3 million Euros (89.8 million Euros as at 31.12.2012) with a tax effect of 26.5 million Euros (24.9 million Euros as at 31.12.2012). It was also not considered prudent to recognise deferred tax assets with reference to temporarily non-deductible financial expenses for a taxable income of 13.8 million Euros (14 million Euros as at 31.12.2012), with a tax effect of 3.8 million Euros (3.9 million Euros as at 31.12.2012). Trade receivables and other receivables (Note 12)


NON CURRENT TRADE RECEIVABLES - -


OTHER NON-CURRENT RECEIVABLES 3,478 1,624

NON-CURRENT TRADE RECEIVABLES AND OTHER RECEIVABLES 3,478 1,624

With related parties 164 170


CURRENT TRADE RECEIVABLES 129,013 88,051

With related parties 1,762 1,142


OTHER CURRENT RECEIVABLES 46,540 46,210

CURRENT TRADE RECEIVABLES AND OTHER RECEIVABLES 175,553 134,261

Inventory (Note 13)


30.06.2013 31.12.2012

Raw materials 100,726 91,115 Work in progress and semi-finished products

40,269 30,576

Finished products 50,465 47,805

Goods in transit 609 443

Total inventories 192,069 169,939 Provisions for impairment of inventories

-25,296 -23,185

Total inventories 166,773 146,754


Cash and cash equivalents (Note 14)


CASH 155 191

BANK CURRENT ACCOUNTS AND DEPOSITS 70,702 108,119

OTHER LIQUID FUNDS OR EQUIVALENT ASSETS 15 547

TOTAL 70,872 108,857

Shareholders’ equity (Note 15)


1) Share Capital 23,915 23,915

2) Other Reserves 41,853 54,725

3) Profits/(Losses) brought forward - -

4) Other IAS/IFRS reserves -1,044 -553

5) Provision for discounting employee benefits -721 -494

6) Foreign currency translation reserve -11,210 -8,988

7) Result for the period pertaining to the group 152 -15,299

GROUP SHAREHOLDERS’ EQUITY 52,945 53,306

8) Minority interests 7,116 9,810

The Shareholders’ Meeting of Carraro S.p.A. held on 19 April 2013 approved a treasury share purchase and disposal plan involving no more than 10% of the share capital, for a term of 18 months, which provides for: a purchase price per ordinary share no less than 30% lower, and no more than 20% higher than the reference price for the share recorded in the stock exchange session on the day prior to each individual transaction, and a sale price per ordinary share no less than 20% lower, and no more than 20% higher than the reference price for the share recorded in the stock exchange session on the day prior to each individual transaction. The same Meeting resolved to cover the loss of Carraro S.p.A. for 2012 amounting to 4,134,183 Euros using the Extraordinary Reserve.

The company has issued a single category of ordinary shares which do not give the right to a fixed dividend. No other financial instruments which assign equity and investment rights have been issued. As at 30 June 2013, 2,286,537 were fully acquired for a total investment of 6.539 million Euros, of which 50,164 in the first half of 2013 for a value equal to 0.1 million Euros. Other reserves The item “Other reserves” of 41.853 million Euros, includes the reserves of Carraro S.p.A. relating to profits not distributed or carried forward and others as follows: - 27.130 million Euro relating to the Carraro S.p.A. share premium reserve; - 4.761 million Euros relating to the Carraro S.p.A. legal reserve; - 5.1 million Euros relating to Carraro S.p.A. extraordinary reserve and profits carried forward; - 44.384 million Euros relative to the first-time adoption of IAS/IFRS; - less 6.539 million Euros for deduction of the reserve corresponding to own share purchase of Carraro S.p.A.; - less 32.983 million generated by the reduction of the shareholders’ equities of consolidated companies with respect to

the corresponding carrying amounts of the equity investments and consolidation adjustments. Other IAS/IFRS reserves It contains the values derived from the application of the criterion foreseen for the cash flow hedges for negative 1.044 million Euros.


Foreign currency translation reserve This reserve, of 11.210 million Euros is used to record the exchange differences deriving from the conversion into Euros of the financial statements of foreign subsidiaries. The change to the reserve (negative for 8.988 million Euros as at 31.12.2012 and negative for 11.210 million Euros as at 30.06.2013) particularly derives from the great changes recorded during the period of the Argentine Peso, the Chinese Renminbi and the Indian Rupee.


Movements of

the period 30.06.2013

restated(1)

Exchange reserve of the parent company’s shareholders -8,988 -2,222 -11,210

Exchange reserve of minority interests 43 -706 -663

Effect of the exchange reserve on the consolidated comprehensive income statement

-8,945 -2,928 -11,873

Minority interest For the analysis of movements in Minority interest see the paragraph 2.2. Financial liabilities (Note 16) The classification of the financial liabilities as at 30.06.2013 and 31.12.2012 is indicated.


Medium/long-term loans 197,622 177,809

Other non-current financial liabilities 3 12

NON-CURRENT FINANCIAL LIABILITIES 197,625 177,821

Medium/long-term loans – short-term portion 17,098 59,731

Short-term loans 119,536 92,030

LOANS 136,634 151,761

Fair value of interest rate derivatives 109 199

Fair value derivatives on exchange rates 1,944 752

Other current financial liabilities 2,075 792

OTHER FINANCIAL LIABILITIES 4,128 1,743

CURRENT FINANCIAL LIABILITIES 140,762 153,504



A breakdown of medium- and long-term financial debts (shown at par value) is presented below, inclusive of the portion expiring before the end of the year.

COMPANY

LENDER

Short-term portion as

at 30.06.2013

Md/ lg-term

portion as at

30.06.2013

EXPIRY RATE RATE TYPE

CURRENCY


Carraro China Drive System Intesa SanPaolo 1,940 - Jun-14 7.86% variable CNY

Carraro India Exim 1,128 3,977 Jun-18 12.50% fixed INR

Carraro India Idbi Bank 358 1,165 Sep-17 13.00% variable INR

Carraro India Axis 386 1,061 Nov-16 14.50% variable INR

Carraro Drive Tech do Brasil Bradesco Financ 9 7 Mar-15 23.71% variable BRL

Carraro International BPV Finance - 17,333 Jun-19 4.54% variable EURO

Carraro International Banca Antonveneta - 7,500 Jun-15 3.84% variable EURO

Carraro International MPS - 6,454 Mar-15 3.84% variable EURO

Carraro International Pool of banks - 81,820 May-17 3.84% variable EURO

Carraro International Pool of banks (revolving) 10,000 40,000 May-16 3.85% variable EURO

Carraro S.p.A. Banca Antonveneta - 15,575 Dec-20 3.84% variable EURO

O&K Unicredit Leasing 170 648 Nov-Dec 17 3.72% variable EURO

Eletronica Santerno Industria e Comercio Ltda Santander Leasing 6 - Sept - Nov 13 1.45% -1.46% variable BRL

Eletronica Santerno Industria e Comercio Ltda Banco Itauleasing 14 1 Jul-14 1.44% variable BRL

SIAP Friulia 985 2,059 Jun-16 3.00% variable EURO

MG MINI GEARS SPA Banca Pop.Verona - 16,539 Mar-16 3.72% variable EURO

MG MINI GEARS SPA Interbanca 500 - Dec-13 1.84% variable EURO

MG MINI GEARS SPA Albaleasing 141 615 May-18 4.22% variable EURO

Turbo Gears Siemens Financial 121 486 Oct-16/Nov 17 13% -13.50% variable INR

Turbo Gears MCC 736 1,839 Dec-16 1.69% variable EURO

Turbo Gears MCC - 5,000 Jul-14 3.74% variable EURO

TOTAL 16,492 202,080

Medium- and long-term financial debts are indicated below according to the year of expiry.

Year of expiry


2013 (2nd half) 3,528

2014 36,798

2015 54,911

2016 53,748

2017 52,304

2018 5,212

2019 8,702

2020 3,369

amortised cost effect and exchange delta

-3,852

Total financial debts 214,720

Other current financial liabilities They include cash flow hedge derivatives for a total of 2.053 million Euros, of which 1.944 million refers to fair value calculated as at 30.06.2013 on current instruments on currencies and 0.109 Euros refers to fair value calculated as at 30.06.2013 on interest rate derivatives. As described in detail in the section on derivative financial instruments (Paragraph 9), profits or losses deriving from hedging instruments are recognised in the statement of comprehensive income and accumulated in a specific shareholders’ equity reserve for the efficient portion, while the remaining (inefficient) portion is recognised in the income statement.


The net financial position is broken down below.

Net financial position (amounts in Euro thousands)

30.06.2013 31.12.2012

Non-current loans payable 197,622 177,809

Current loans payable 136,634 151,761

Other non-current financial liabilities 3 12

Other current financial liabilities 2,075 792

Financial liabilities: 336,334 330,374

Non-current loans and receivables -3,023 -3,484

Current loans and receivables -2,472 -2,764

Other non-current financial assets -168 -314

Other current financial assets -1,609 -1,252

Financial assets: -7,272 -7,814

Cash -155 -191

Bank current accounts and deposits -70,717 -108,666

Cash and cash equivalents: -70,872 -108,857

Net financial position 258,190 213,703 of which payables / (receivables):

- non-current 194,434 174,023

- current 63,756 39,680

The Carraro Group has available short term banking credit facilities for a total of 187.910 million Euros, 119.536 million Euros used. These facilities may be used for current account overdrafts and short-term loans. Medium- and long-term bank credit facilities amount to a total of 233.562 million Euros, where 214.72 million Euros are used (medium- and long-term portion and portion due within the year). On 14 May 2013, the Carraro Group signed a Debt Rearrangement Agreement with leading banks; the previous Framework Agreement expired as at 31 December 2012. The new Agreement is for the rearrangement of medium/long-term debt and renews the credit lines for short-term debt for 24 months, with the redefinition of covenants. On the basis of the Debt Rearrangement Agreement signed with banks, the first verification of compliance with the covenants will be carried out based on the financial statements for the period ended December 31, 2013. Fair Value The fair value of medium- and long-term financial liabilities, taking account of the fact that these are almost exclusively for variable-rate funding and that the terms being renegotiated with the banking counterparties are in line with the average levels for the market and the segment – even considering the residual volatility of the markets and the relative uncertainty in identifying “reference” conditions – as measured is not significantly different overall from the carrying amounts. Management of capital The Carraro Group’s main management objective is to ensure that a sound credit rating is maintained, together with adequate levels of the capital indicators so as to support its activities and maximise value for the shareholders. The Carraro Group manages and modifies the capital structure in line with changes in the economic conditions. To maintain or change the capital structure, the Group can adjust the dividends paid to the shareholders, redeem the capital or issue new shares.


Trade payables and other payables (Note 17)


NON-CURRENT TRADE PAYABLES - -

With third parties 242 313

OTHER NON-CURRENT PAYABLES 242 313

TRADE PAYABLES AND OTHER NON-CURRENT PAYABLES 242 313

With related parties 2,278 4,663


CURRENT TRADE PAYABLES 262,655 246,453

With related parties 300 -


OTHER CURRENT PAYABLES 36,965 31,792

TRADE PAYABLES AND OTHER CURRENT PAYABLES 299,620 278,245

Current taxes payables (Note 18)


Current taxes payables 5,079 8,159

Employee severance indemnities and retirement benefits (note 19)

PROVISION FOR SEVERANCE INDEMNITY AND RETIREMENT BENEFITS


Opening severance indemnities in accordance with IAS 19 13,966 12,381

Utilisation of employee severance indemnities -385 -807

Employee severance indemnities transferred to other companies -282 -305

Employee severance indemnities transferred from other companies 282 305

Current Service Cost 0 10

Interest Cost 211 621

Actuarial Gains/Losses 194 1,761

Closing severance indemnities in accordance with IAS 19 13,986 13,966

The severance indemnity, calculated according to current Italian laws, is treated for accounting purposes as a defined-benefit fund and as such is recalculated at the end of each accounting period according to a statistical-actuarial criterion which also takes account of the effects of financial discounting. The actuarial valuation of this obligation is carried out according to the actuarial criterion of the “projected unit credit method” with the support of the data issued by ISTAT, the INPS and the ANIA. The parameters used are as follows: 1) annual discount rate: 3.0%, 2) personnel rotation rate 5%, 3) annual inflation index 2%, 4) advances rate 2%, 5) remuneration increase rate 3%. As from the 2012 Financial Statements, the accounting treatment of employee benefits recognised in the financial statements complies with IAS 19 Revised for defined benefit plans; for further details, see section 3.2. Termination benefits are benefits to employees regulated by the laws in force in Italy and recognised in the financial statements of Italian companies. Sensitivity analysis IAS 19 revised The table below indicates the values of the Employee benefits provision as at 30.06.2013 calculated based on changes in actuarial assumptions reasonably possible at that date:


variation in assumptions

turnover freq.

inflation rate discount rate

+1% +0.25% -0.25% +0.25% -0.25%

Provision for employee benefits as at 30.06.2013 14,018 14,183 13,800 13,710 14,279


Pension/retirement funds Pension and similar funds for 5.87 million Euros (5.71 million Euros as at 31.12.2012) mainly relate to the liabilities recognised in the financial statements of the company O&K Antriebstechnik; the actuarial recalculation, except for the structural differences of the relevant plans, follows the same criterion described for the aforementioned Italian termination benefit provisions. As from the 2012 Financial Statements, the accounting treatment of employee benefits recognised in the financial statements complies with IAS 19 Revised for defined benefit plans; Sensitivity analysis IAS 19 revised The table below indicates the values of the O&K Pension Fund as at 30.06.2013 calculated based on changes in actuarial assumptions reasonably possible at that date:

(amounts in Euro thousands) inflation rate +0.25%; discount rate +0.2%

Pension fund 30.06.2013 5,325

Number of employees The number of employees refers only to the fully consolidated companies and is divided into categories:

Employees 30.06.2013 31.12.2012

Executives 52 58

Clerical staff 1,016 1,044

Factory workers 2,952 2,865

Temporary workers 133 43

Total 4,153 4,010

Provision for risks and liabilities (Note 20) The item can be broken down as follows:

(amounts in Euro thousands) Provisions 31.12.2012

Increases 1st half 2013

Decreases 1st half 2013

Reclassification 1st half 2013

Exchange-rate adjustments

Provisions 30.06.2013

Non-current portion

1) WARRANTY 1,723 - - - - 1,723

2) LEGAL CLAIMS 322 - - - - 322

3) RESTRUCTURING AND RECONV. - - - - - -

4) OTHERS 358 220 -23 - - 555

TOTAL 2,403 220 -23 - - 2,600

Current portion

1) WARRANTY 9,040 3,620 -2,716 - -113 9,831

2) LEGAL CLAIMS 1,754 55 -716 147 -39 1,201

3) RESTRUCTURING AND RECONV. 5,869 - -2,187 -78 -3 3,601

4) OTHERS 2,276 2,202 -2,623 - -8 1,847

TOTAL 18,939 5,877 -8,242 69 -163 16,480

In the period 0.2 million Euros were allocated for future liabilities and charges in Elettronica Santerno S.p.A and Carraro Divisione Agritalia.

From the product warranty reserve, 2.7 million Euros was used for customer claims accepted and the reserve was increased by 3.6 million Euros on the basis of the expected warranty costs which will be incurred in relation to the sales made.

The use of the costs of legal claims provision relates to personnel disputes. The restructuring provision allocated as at 31 December 2012, concerning the reorganisation and restructuring of the Carraro Group, has been used for an amount of 2.2 million Euros. The item Others includes amounts recognised in the individual companies for future expenses and liabilities. It is pointed out that the item Others, amounting to 1.8 million Euros, is constituted by the MBO (Management By Objectives) provision for 1.57 million Euros.


7. Commitments and risks No significant events occurred as worthy of note. 8. Transactions with related parties (Note 21) The Carraro Group is controlled directly by Finaid S.p.A., which as at 30.06.2013 held 64.9736% of the shares outstanding. Carraro S.p.A., Carraro Drive Tech S.p.A., Elettronica Santerno S.p.A. and Energy Engineering S.r.l. adhere to the tax consolidation area of the parent company Finaid S.p.A. The charges/income deriving from the transfer of the IRES taxable base are booked under current taxes. According to the regulations of the Tax Consolidation Agreement, companies of the Carraro Group have the right to “relief” for use of the tax losses of companies controlled by Finaid, other than those belonging to the Carraro Group. This “relief” amounts to 3% of the tax losses of the other companies of the Finaid Consolidation area possibly offset with the taxable amounts of Carraro Group companies. The regulations also provide for a mechanism of priority offsetting of the positive and negative taxable amounts between Carraro Group companies with respect to offsetting with the other companies of the Finaid Consolidation. The same mechanism is provided for with reference to the non-deductible expenses as an effect of the Thin Cap Rule. The transactions between Carraro S.p.A. and its subsidiaries which are affiliated entities of Carraro S.p.A., were eliminated in the consolidated financial statements and are not pointed out in these notes. The details of the transactions between Carraro Group and other affiliated companies according to principle IAS 24 and Consob requirements, are indicated below.

(amounts in euro thousands) Financial and

equity transactions Economic transactions

Trade receivables and other

receivables

Trade payables and other payables

Sales of

services Other

Revenue

Purchases of goods

and materials

Purchases of

services

Use of third-

party goods and

services

Other related parties

FINAID S.p.A. 1,765 2,562 3

Maus S.p.A. 120 14 133 10 3 1

Maus U.S.A. 29 - - -

The positive items relative to Finaid S.p.A. refer mainly to receivables deriving from tax consolidation.


9. FINANCIAL INSTRUMENTS

9.1 Derivative financial instruments on currencies The following tables indicate all the key information relating to the portfolio of derivative financial instruments on currencies outstanding as at 30.06.2013. These are instruments designated to cover: - foreign currency sales budgets; - cash flows of medium- and long-term loans; - imbalances of current receivables and payables in foreign currencies.

a) Notional values

CONTRACT (amounts in Euro thousands)

Swaps (DCS) (1) Swap (DCS) (2) Total notional

values

Carraro SpA - 4,358 4,358

Carraro Drive Tech 443 4,817 5,260

Carraro Argentina - -6,650 -6,650

Carraro India 30,320 -2,000 28,320

Carraro International - 4,205 4,205

Elettronica Santerno 8,242 -2,581 5,661

Turbo Gears 2,820 7,396 10,216

O&K -1,537 - -1,537

Mini Gears SpA 994 - 994

SIAP 1,686 - 1,686

MG Suzhou 6,341 - 6,341

Carraro China 10,529 - 10,529

GROUP TOTAL 30.06.2013 59,838 9,545 69,383

GROUP TOTAL 31.12.2012 58,185 -5,429 52,756

b) Reference currencies and expiry dates of contracts

CONTRACT Swaps (DCS) (1) Swap (DCS) (2)

Currencies Expiry dates Currencies Expiry dates

Carraro SpA - - EUR/USD Jul-Sep 13

Carraro Drive Tech EUR/USD Jul-Oct 13 EUR/USD Jul-Sep 13

Carraro Argentina - - ARS/EUR Jul - Aug 13

Carraro India INR/EUR Jul 13 - Feb 14 INR/EUR Nov-13

Carraro International - - EUR/USD Jul-13

Elettronica Santerno EUR/USD Jul 13 - Mar 14

EUR/USD BRL/EUR

Jul-Aug 13 Sep 13

Turbo Gears INR/EUR Jul 13 - Jan 14 INR/EUR Nov-13

O&K EUR/USD Jul 13 - Jan 14 - -

Mini Gears SpA EUR/USD Jul 13 - Feb 14 - -

SIAP EUR/USD Jul 13 - Mar 14 - -

MG Suzhou CNY/EUR CNY/USD

Jul 13- Feb 14 Jul 13- Feb 14 - -

Carraro China CNY/EUR CNY/USD

Jul 13- Feb 14 Jul-Dec 13 - -


c) Fair value


Swaps (DCS) (1) Swap (DCS) (2) Total

Carraro SpA - 34 34

Carraro Drive Tech 6 -2 4

Carraro Argentina - -19 -19

Carraro India -1,439 81 -1,358

Carraro International - 1 1

Elettronica Santerno -61 300 239

Turbo Gears -133 354 221

O&K 13 - 13

Mini Gears SpA 4 - 4

SIAP 11 - 11

MG Suzhou 146 - 146

Carraro China 315 - 315

GROUP TOTAL 30.06.2013 -1,138 749 -389

GROUP TOTAL 31.12.2012 -620 249 -371

(1) instruments hedging foreign currency sales budget (2) instruments hedging imbalances of current receivables and payables in foreign currencies d) Details of fair values


30.06.2013 31.12.2012

Positive fair value

Negative fair value

Fair Value positive

Fair Value negative

CASH FLOW HEDGE Exchange rate risk - Domestic Currency Swap 1,555 -1,944 381 -752

e) Summary of fair values recognised before tax effect according to their accounting treatment


FV recognised in inc stat

FV recognised in net equity

Total

Carraro SpA 34 - 34

Carraro Drive Tech 0 4 4

Carraro Argentina -19 - -19

Carraro India 335 -1,693 -1,359

Carraro International 1 - 1

Elettronica Santerno 237 2 239

Turbo Gears 387 -166 221

O&K 3 10 13

Mini Gears SpA 1 4 4

SIAP 1 10 11

MG Suzhou 66 80 146

Carraro China 158 157 315

GROUP TOTAL 30.06.2013 1,204 -1,593 -389

GROUP TOTAL 31.12.2012 240 -610 -371


In relation to the positioning in the hierarchy of fair values pursuant to IFRS 7 par. 27 the financial instruments described are classifiable as level 2; there were no transfers of level during the period.

The fair values as at 30 June 2013 of financial instruments on exchange rates were calculated using the forward exchange rate method. The counterparties with which the contracts are stipulated are leading national and international banking institutions. The financial instruments on currencies are used, on a basis consistent with the financial risk management policy adopted by the group, to hedge the risks deriving from exchange rate fluctuations and concern sales volumes compared with the budget exchange rate and the collections and payment of short and medium-term receivables and payables with respect to the historical value. For accounting purposes in relation to contracts hedging sales budgets in foreign currencies effective at the reporting date, it should be noted that for the transactions executed, especially Domestic Currency Swaps, and in accordance with all the conditions provided by the IAS/IFRS standards, hedge accounting was applied with reference to the type of “cash flow hedge”. Consequently, the corresponding changes in fair values are reflected in a shareholders’ equity reserve, net of the tax effect. 9.2 Derivative financial instruments on interest rates a) Notional values and fair value The table shows the details of the notional and fair values and other information regarding the various types of derivative contracts on interest rates in existence as at 30.06.2013; on said date, open agreements concern Carraro International S.A.

CONTRACT (amounts in Euro thousands)

CURRENCY EXPIRY NOTIONAL 30.06.2013

NOTIONAL 31.12.2012

FAIR VALUE 30.06.2013

FAIR VALUE

31.12.2012

Interest Rate Swap EUR 31.03.2013 - 1,347 - -12

Interest Rate Swap EUR 30.06.2015 7,500 7,500 -109 -186

Total derivatives from cash flow hedge 7,500 8,847 -109 -198

In relation to the positioning in the hierarchy of fair values pursuant to IFRS 7 par. 27 the financial instruments

described are classifiable as level 2; there were no transfers of level during the period. For determination of the fair value of Interest Rate Swaps the discounted cash flow method was applied. Below is a summary table of the assets and liabilities valued at fair value as at 30 June 2013, as required by IFRS 13, described in paragraph 3.2:


Level 2 30.06.2013

Level 2 31.12.2012

Assets

Foreign exchange derivative assets 1,555 381

Total Assets 1,555 381

Liabilities Foreign exchange derivative liabilities 1,944 752 Interest rate derivative liabilities 109 199

Total Liabilities 2,053 951


10. Events subsequent to the reporting date.

There were no significant events such as to have any effect on the financial statements and the related disclosures.

The Chairman

______________

Enrico Carraro


Certification of the condensed interim financial statements pursuant to article 154-bis, subsection 5 of Legislative Decree 58/1998 (Consolidated Finance Act) and article 81-ter of Consob Regulation no. 11971 of 14 May 1999 as amended. 1. The undersigned Alexander Bossard, Chief Executive Officer, and Enrico Gomiero, Director Responsible for producing the company’s accounting documents of Carraro S.p.A., taking into account also the provisions of Art. 154-bis, paragraphs 3 and 4, of Legislative Decree 58 of 24 February 1998, certify: • the adequacy in relation to the characteristics of the enterprise; • the effective application of the administrative and accounting procedures for preparation of the consolidated condensed interim financial statements during the first half of 2013; 2. In this regard no significant aspects emerged which require disclosure. 3. We can also certify that: 3.1 the condensed interim financial statements: a) were prepared in conformity with the applicable international accounting standards endorsed by the European Community under the terms of Regulation (EC) N° 1606/2002 of the European Parliament and Council, of July 19, 2002; b) correspond to the figures in the accounting documents and books; c) give a true and fair view of the economic, financial and equity position of the Group and of all the companies included in the consolidation; 3.2 The consolidated interim financial report includes a reliable analysis of the references to important events that occurred in the first six months of the year and their impact on the condensed interim financial statements, together with a description of the main risks and uncertainties for the remaining six months of the year. The consolidated interim financial report also includes a reliable analysis of significant operations with related parties. Date: 1 August 2013 /signature/ Alexander Bossard /signature/ Enrico Gomiero _____________________ _____________________

PricewaterhouseCoopers SpA

Sede legale e amministrativa: MilanoReg. Imp. Milano 12979880155 Iscritta al0712132311 - Bari 70124 Via Don Luigi Guanella 17 Tel. 080564021125123 Via Borgo Pietro Wuhrer 23 Tel. 03036975010552482811 - Genova 16121 Piazza Dante 7 Tel.Tel. 049873481 - Palermo 90141 Via Marchese Ugo 60Largo Fochetti 29 Tel. 06570251 - Torino31100 Viale Felissent 90 Tel. 0422696911043225789 - Verona 37135 Via Francia 21/C

www.pwc.com/it

REPORT ON THE REVIEW OF THE CONDENSED CONSOLIDATED INTERIMFINANCIAL STATEMENTS

To the Shareholders ofCarraro SpA

1 We have reviewed the condensed consolidated interim financial statements of Carraro SpAand its subsidiaries (“Carraro Group”) as of 30 June 2013 and for the six months period thenended, which comprise statement of financial position, statement of income,comprehensive income, statement of changes in shareholders’ equity, statement of cash flowsand related explanatory and supplementary notes. The Directors of Carraro SpA areresponsible for the preparation of these condensed consolidated intein accordance with the International Accounting Standard (“IAS 34”) applicable to interimfinancial reporting, as adopted by the European Union. Our responsibility is to issue thisreport based on our review.

2 Our work was conductNational Commission for Companies and the Stock Exchange (C10867 of 31 July 1997. The review mainly consisted of making inquiries of company’spersonnel about thestatements and about the consistency of the accounting principlesthe application of analytical review procedures on the data contained in the above mentionedcondensed consolidated interim financial statements. The review excluded certain auditingprocedures such as compliance testing and verification and validation tests of the assets andliabilities and was therefore substantially less in scope than an auditwith generally accepted auditing standards. Accordingly, unlike an audit on the annualconsolidated financial statements, we do not express a professional audit opinion on thecondensed consolidated interim financial statements.

The condensed consolidated interim financial statements present, for comparative proposes,the data of the consolidated financial statements of the prior year and the condensedconsolidated interim financial statements of the prior year period. Regardingconsolidated financial statements of the prior year, reference should be made to our reportdated 29 March 2013. As disclosed in the explanatory and supplementary notes, with theadoption of the international accounting standard 19 Revised,have restated some comparative information of the prior year period compared to thatpreviously presented which were reviewed by us and on which we issued our report dated 9August 2012. We have examined the restatement methodthe related disclosure in the explanatory notes for the purpose of our review of the condensedconsolidated financial statements as of 30 June 2013.


20149 Via Monte Rosa 91 Tel. 0277851 Fax 027785240 Cap. Soc. Euro12979880155 Iscritta al n° 119644 del Registro dei Revisori Legali - Altri Uffici: Ancona

Via Don Luigi Guanella 17 Tel. 0805640211 - Bologna Zola Predosa 40069 Via Tevere 18Tel. 0303697501 - Catania 95129 Corso Italia 302 Tel. 0957532311 -

16121 Piazza Dante 7 Tel. 01029041 - Napoli 80121 Piazza dei Martiri 58 Tel. 0813618190141 Via Marchese Ugo 60 Tel. 091349737 - Parma 43100 Viale Tanara 20/A Tel.

Torino 10122 Corso Palestro 10 Tel. 011556771 - Trento 38122 Via Grazioli 73Tel. 0422696911 - Trieste 34125 Via Cesare Battisti 18 Tel. 0403480781Via Francia 21/C Tel.0458263001

REPORT ON THE REVIEW OF THE CONDENSED CONSOLIDATED INTERIMFINANCIAL STATEMENTS

We have reviewed the condensed consolidated interim financial statements of Carraro SpAand its subsidiaries (“Carraro Group”) as of 30 June 2013 and for the six months period thenended, which comprise statement of financial position, statement of income,comprehensive income, statement of changes in shareholders’ equity, statement of cash flowsand related explanatory and supplementary notes. The Directors of Carraro SpA areresponsible for the preparation of these condensed consolidated intein accordance with the International Accounting Standard (“IAS 34”) applicable to interimfinancial reporting, as adopted by the European Union. Our responsibility is to issue thisreport based on our review.

Our work was conducted in accordance with the criteria for a review recommended by theNational Commission for Companies and the Stock Exchange (Consob10867 of 31 July 1997. The review mainly consisted of making inquiries of company’spersonnel about the information reported in the condensed consolidated interim financialstatements and about the consistency of the accounting principles utilisedthe application of analytical review procedures on the data contained in the above mentionedcondensed consolidated interim financial statements. The review excluded certain auditingprocedures such as compliance testing and verification and validation tests of the assets andliabilities and was therefore substantially less in scope than an auditwith generally accepted auditing standards. Accordingly, unlike an audit on the annualconsolidated financial statements, we do not express a professional audit opinion on thecondensed consolidated interim financial statements.

The condensed consolidated interim financial statements present, for comparative proposes,the data of the consolidated financial statements of the prior year and the condensedconsolidated interim financial statements of the prior year period. Regardingconsolidated financial statements of the prior year, reference should be made to our reportdated 29 March 2013. As disclosed in the explanatory and supplementary notes, with theadoption of the international accounting standard 19 Revised, the Directors of the Companyhave restated some comparative information of the prior year period compared to thatpreviously presented which were reviewed by us and on which we issued our report dated 9August 2012. We have examined the restatement methods of the comparative information andthe related disclosure in the explanatory notes for the purpose of our review of the condensedconsolidated financial statements as of 30 June 2013.

Euro 6.812.000,00 i.v., C .F. e P.IVA eAncona 60131 Via Sandro Totti 1 Tel.

Zola Predosa 40069 Via Tevere 18 Tel. 0516186211 - Brescia- Firenze 50121 Viale Gramsci 15 Tel.

Tel. 08136181 - Padova 35138 Via Vicenza 443100 Viale Tanara 20/A Tel. 0521275911 - Roma 00154

38122 Via Grazioli 73 Tel. 0461237004 - TrevisoTel. 0403480781 - Udine 33100 Via Poscolle 43 Tel.

REPORT ON THE REVIEW OF THE CONDENSED CONSOLIDATED INTERIM

We have reviewed the condensed consolidated interim financial statements of Carraro SpAand its subsidiaries (“Carraro Group”) as of 30 June 2013 and for the six months period thenended, which comprise statement of financial position, statement of income, statement ofcomprehensive income, statement of changes in shareholders’ equity, statement of cash flowsand related explanatory and supplementary notes. The Directors of Carraro SpA areresponsible for the preparation of these condensed consolidated interim financial statementsin accordance with the International Accounting Standard (“IAS 34”) applicable to interimfinancial reporting, as adopted by the European Union. Our responsibility is to issue this

ed in accordance with the criteria for a review recommended by theonsob) with Resolution n°

10867 of 31 July 1997. The review mainly consisted of making inquiries of company’sinformation reported in the condensed consolidated interim financial

utilised therein as well asthe application of analytical review procedures on the data contained in the above mentionedcondensed consolidated interim financial statements. The review excluded certain auditingprocedures such as compliance testing and verification and validation tests of the assets andliabilities and was therefore substantially less in scope than an audit performed in accordancewith generally accepted auditing standards. Accordingly, unlike an audit on the annualconsolidated financial statements, we do not express a professional audit opinion on the

The condensed consolidated interim financial statements present, for comparative proposes,the data of the consolidated financial statements of the prior year and the condensedconsolidated interim financial statements of the prior year period. Regarding the data of theconsolidated financial statements of the prior year, reference should be made to our reportdated 29 March 2013. As disclosed in the explanatory and supplementary notes, with the

the Directors of the Companyhave restated some comparative information of the prior year period compared to thatpreviously presented which were reviewed by us and on which we issued our report dated 9

s of the comparative information andthe related disclosure in the explanatory notes for the purpose of our review of the condensed

3 Based on our review, nothing has come to our attention that causes uscondensed consolidatedfor the six months period than ended have not been prepared, in all material respects, inaccordance with thefinancial reporting, as adopted by the European Union.

Padua, 8 August 2013


Signed byMassimo Dal Lago(Partner)

This report has been translated into the English language from theItalian, solely for the convenience of international readers.

Based on our review, nothing has come to our attention that causes usconsolidated interim financial statements of Carraro Group as of 30 June 2013 and

for the six months period than ended have not been prepared, in all material respects, inaccordance with the International Accounting Standard (“IAS 34”) applicable to interimfinancial reporting, as adopted by the European Union.


This report has been translated into the English language from the original, which was issued inItalian, solely for the convenience of international readers.

2 of 2

Based on our review, nothing has come to our attention that causes us to believe that theinterim financial statements of Carraro Group as of 30 June 2013 and

for the six months period than ended have not been prepared, in all material respects, in(“IAS 34”) applicable to interim

original, which was issued in

carraro group · other operating flows 12,693 18,524 10,300 other investing flows ... interim...

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