• Share
  • Email
  • Embed
  • Like
  • Save
  • Private Content
DeA Capital bilancio 2010 eng
 

DeA Capital bilancio 2010 eng

on

  • 579 views

 

Statistics

Views

Total Views
579
Views on SlideShare
575
Embed Views
4

Actions

Likes
0
Downloads
0
Comments
0

1 Embed 4

http://www.deacapital.it 4

Accessibility

Upload Details

Uploaded via as Adobe PDF

Usage Rights

© All Rights Reserved

Report content

Flagged as inappropriate Flag as inappropriate
Flag as inappropriate

Select your reason for flagging this presentation as inappropriate.

Cancel
  • Full Name Full Name Comment goes here.
    Are you sure you want to
    Your message goes here
    Processing…
Post Comment
Edit your comment

    DeA Capital bilancio 2010 eng DeA Capital bilancio 2010 eng Document Transcript

    • Financial Statements for the Year Ending 31 December 2010 1 FINANCIAL STATEMENTS FOR THE YEAR ENDING 31 DECEMBER 2010 ______________________ 2010 Board of Directors of DeA Capital S.p.A. Milan, 14 March 2011
    • Financial Statements for the Year Ending 31 December 2010 2 DeA Capital S.p.A. Corporate information DeA Capital S.p.A. is subject to the management and co-ordination of De Agostini S.p.A. Registered office: Via Borgonuovo, 24, 20121 Milan, Italy Share capital: EUR 306,612,100 (fully paid-up) comprising 306,612,100 shares with a nominal value of EUR 1 each (including 12,598,698 held in the portfolio at 31 December 2010). Tax code, VAT code and recorded in the Milan Register of Companies under no. 07918170015 Board of Directors (*) Chairman Lorenzo Pellicioli Chief Executive Officer Paolo Ceretti Directors Lino Benassi (1) Rosario Bifulco (1/4/5) Marco Boroli Daniel Buaron Claudio Costamagna (3/5) Alberto Dessy (2/5) Marco Drago Roberto Drago Andrea Guerra (3/5) Board of Statutory Auditors (*) Chairman Angelo Gaviani Permanent Auditors Gian Piero Balducci Cesare Andrea Grifoni Deputy Auditors Andrea Bonafè Maurizio Ferrero Giulio Gasloli Secretariat of the Board of Directors Manager responsible for preparing the company’s accounts Independent auditors Diana Allegretti Manolo Santilli KPMG S.p.A. (*) In office until the approval of the financial statements to 31 December 2012. (1) Member of the Internal Audit Committee. (2) Member and chairman of the Internal Audit Committee - Lead Independent Director. (3) Member of the Remuneration Committee. (4) Member and co-ordinator of the Remuneration Committee. (5) Independent director.
    • Financial Statements for the Year Ending 31 December 2010 3 Contents Report on Operations 1. Profile of DeA Capital 2. Information for shareholders 3. The group’s key Balance Sheet and Income Statement figures 4. Significant events during the year 5. Analysis of consolidated results 6. Analysis of results of the parent company DeA Capital S.p.A. 7. Other information 8. Proposal to approve the financial statements of DeA Capital S.p.A. for the year ending 31 December 2010 and related and resulting resolutions Consolidated Financial Statements for the Year Ending 31 December 2010 Statement of responsibilities for consolidated accounts pursuant to art. 154-bis of Legislative Decree 58/98 Information pursuant to Art. 149-duodecies of the Consob Issuer Regulations - consolidated financial statements Annual Financial Statements for the Year Ending 31 December 2010 Statement of responsibilities for accounts pursuant to art. 154-bis of Legislative Decree 58/98 Information pursuant to Art. 149-duodecies of the Consob Issuer Regulations - annual financial statements Summary of subsidiaries’ financial statements Independent Auditors’ Report Report of the Board of Statutory Auditors
    • Financial Statements for the Year Ending 31 December 2010 4 Report on Operations
    • Financial Statements for the Year Ending 31 December 2010 5 1. Profile of DeA Capital With an investment portfolio of over EUR 800 million and assets under management of around EUR 4,400 million, DeA Capital S.p.A. is currently one of Italy’s largest alternative investment operators. The company, which operates in both the Private Equity Investment and Alternative Asset Management businesses, is listed on the FTSE Italia STAR segment of the Milan stock exchange, and heads the De Agostini Group in the area of financial investments. DeA Capital has "permanent" capital, and therefore has the advantage – compared to traditional private equity funds, which are normally restricted to a pre-set duration – of greater flexibility in optimising the timing of entry and withdrawal from investments. In terms of investment policy, this flexibility allows it to adopt an approach based on value creation over the medium to long term. PRIVATE EQUITY INVESTMENT ALTERNATIVE ASSET MANAGEMENT • Direct investments Mainly in unlisted companies (or, if listed, with plans to delist) in Europe and Emerging Europe in the services sector. • Indirect investments In private equity and real estate funds of funds and co-investments. • IDeA Alternative Investments, a holding company of equity investments in asset management companies, active in the management of private equity, total return and special situation funds. Assets under management: EUR 1.4 billion • First Atlantic Real Estate Holding, one of the leading players in the Italian real estate sector with an integrated model for the management of funds and other services. Assets under management: EUR 2.9 billion
    • Financial Statements for the Year Ending 31 December 2010 6 At the end of 2010, the corporate structure of the group headed by DeA Capital S.p.A. (DeA Capital Group, or the Group), was broadly unchanged from that at 31 December 2009, and is summarised below: (*) In addition to usufruct rights on 51% of the shares (without voting rights). In relation to the corporate structure shown above, note that on 17 January 2011, the procedure for the partial non-proportional demerger of IDeA Alternative Investments (IDeA AI) was completed, with the result that Investitori Associati SGR and Wise SGR were removed from the group’s scope of consolidation. Moreover, on 1 February 2011, IDeA AI completed the sale of its stake in IDeA AI Sarl. Further information on both operations is given in the next section of this Report on Operations. DeA Capital S.p.A. 44,4% Shareholdings and VC funds 100%49% (*) 29% (*) 100% DeA Capital Investments S.A. (Luxembourg) IDeA COIF I quotas IDeA I Fund of Funds quotas Shareholding Kenan Investments Shareholding Santé Shareholding Sigla Luxembourg Migros Shareholding Stepstone FARE Holding FARE SGR FARE FARE DE FAI 70% 100% IDeA Alternative Investments IDeA Capital Funds SGR Investitori Associati SGR Wise SGR 100% IDeA AI Sarl LUX 100% Soprarno SGR 65% ICF II quotas FARE NPL 65% 100% 100% Other minority stakes IDeA SIM 65% Blue SkyeSiglaGDS DeA Capital S.p.A. 44,4% Shareholdings and VC funds 100%49% (*) 29% (*) 100% DeA Capital Investments S.A. (Luxembourg) IDeA COIF I quotas IDeA I Fund of Funds quotas Shareholding Kenan Investments Shareholding Santé Shareholding Sigla Luxembourg Migros Shareholding Stepstone FARE Holding FARE SGR FARE FARE DE FAI 70% 100% IDeA Alternative Investments IDeA Capital Funds SGR Investitori Associati SGR Wise SGR 100% IDeA AI Sarl LUX 100% Soprarno SGR 65% ICF II quotas FARE NPL 65% 100% 100% Other minority stakes IDeA SIM 65% Blue SkyeSiglaGDS Private Equity Investment Alternative Asset Management Holding Companies Private Equity Investment Alternative Asset Management
    • Financial Statements for the Year Ending 31 December 2010 7 At 31 December 2010, the DeA Capital Group reported group shareholders’ equity of approximately EUR 764.0 million, corresponding to a net asset value (NAV) of EUR 2.60 per share, with an investment portfolio of EUR 800.3 million. More specifically, the investment portfolio, which consists of equity investments of EUR 516.5 million, funds of EUR 132.7 million and net assets relating to the Alternative Asset Management business (the stake in IDeA Alternative Investments and the stake in FARE Holding) of EUR 151.1 million, is detailed below. PRIVATE EQUITY INVESTMENT o Shareholdings ⇒ strategic shareholding in Générale de Santé (GDS), France's leading private healthcare provider, whose shares are listed on the Eurolist market in Paris (with less than 5% in outstanding shares and low trading volumes) The investment is held through the Luxembourg-registered company Santé S.A., an associate of the DeA Capital Group ⇒ strategic shareholding in Sigla, which provides finance to all customer segments ("salary-backed loans" and personal loans) and services non- performing loans in Italy. The investment is held through the Luxembourg- registered company Sigla Luxembourg S.A., an associate of the DeA Capital Group ⇒ minority interest in Migros, Turkey's biggest food retail chain, whose shares are listed on the Istanbul Stock Exchange (with less than 2% in outstanding shares and low trading volumes). The investment is held through the Luxembourg-registered company Kenan Investments S.A., an investment recorded in the AFS portfolio of the DeA Capital Group ⇒ minority investment in Blue Skye, which is a special opportunities investment company active in the distressed assets and credit sector, particularly loans to the Public Administration (mainly healthcare), non- performing loans, mid-market real estate and corporate lending. The investment is held through the Luxembourg-registered company Stepstone Acquisition S.à.r.l., an investment recorded in the AFS portfolio of the DeA Capital Group ⇒ minority interest held in three companies based in the US and operating in the biotech (Elixir Pharmaceuticals Inc.), printed electronics (Kovio Inc.) and information and communication technology (MobileAccess Networks Inc.) sectors o Funds ⇒⇒⇒⇒ units in one co-investment fund, IDeA Co-Investment Fund I (IDeA CoIF I) ⇒⇒⇒⇒ units in two funds of funds, IDeA I Fund of Funds (IDeA I FoF) and ICF II ⇒⇒⇒⇒ units in seven venture capital funds
    • Financial Statements for the Year Ending 31 December 2010 8 ALTERNATIVE ASSET MANAGEMENT ⇒ joint controlling interest – 44.36% (100% from 2011) – in IDeA Alternative Investments, a holding company of equity investments in asset management companies that manage private equity, total return and special situation funds. ⇒ controlling interest – 70% – in First Atlantic Real Estate Holding, one of the leading players in the Italian real estate sector with an integrated model for the management of funds and other services; it controls a group of companies operating: - in asset management (First Atlantic Real Estate SGR) - in project, property and facility management and agency activities (First Atlantic Real Estate) - in the administration, management and value enhancement of non- performing loans for the real estate sector (First Atlantic Real Estate NPL)
    • Financial Statements for the Year Ending 31 December 2010 9 2. Information for shareholders Shareholder structure - DeA Capital S.p.A. (#) Mediobanca 4.8% De Agostini SpA 58.3% Treasury stock 4.1% DEB Holding* 3.8% Free float 29.0% (#) Figures to 31 December 2010. (*) Company linked to director Daniel Buaron. Share performance (°)
    • Financial Statements for the Year Ending 31 December 2010 10 0.9 1 1.1 1.2 1.3 1.4 1.5 1.6 1.7 1.8 1.9 Jan-10 M ar-10 M ay-10 Jun-10 Aug-10 O ct-10 D ec-10 DeA Capital FTSE All-Share FTSE-Star LPX 50 (°) Source: Bloomberg – 1 January to 31 December 2010
    • Financial Statements for the Year Ending 31 December 2010 11 Investor relations DeA Capital S.p.A. maintains stable and structured relationships with institutional and individual investors. In 2010, the company continued its communications campaign, participating in meetings and holding conference calls with portfolio managers and financial analysts from Italy and abroad. In addition, DeA Capital S.p.A. attended a conference on listed private equity in Zurich and has initiated a formal relationship with the European association of listed private equity operators (LPEQ). Coverage of the DeA Capital stock is carried out by Equita SIM and Intermonte SIM, the two main intermediaries on the Italian market, with Intermonte SIM acting as a specialist. The research written by these intermediaries is available in the Investor Relations section of the website www.deacapital.it. In December 2008, the DeA Capital share joined the LPX50® index. The LPX50® is a global index that measures the performance of the fifty largest and most liquid LPE (listed private equity) companies. Due to its high degree of diversification by region and type of LPE investment, the index has become one of the most popular benchmarks for the LPE asset class. The method used to constitute the index is published in the LPX Equity Index Guide. For further information, please visit: www.lpx.ch. The website www.deacapital.it underwent a comprehensive restructuring of the graphics and content, such that it now provides even more information and is more user-friendly. The website is continually updated with content, documents and new tools in order to provide straightforward and complete information. The website is the primary mode of contact with individual investors, who may choose to subscribe to a mailing list and send questions or requests for information and documents to the company's Investor Relations area, which is committed to answering queries promptly, as indicated in the Investor Relations Policy published on the site. A quarterly newsletter is also published for individual investors with the aim of keeping the latter updated on key news, as well as providing clear and simple analysis of quarterly results and share performance. Performance of the DeA Capital share in 2010 In 2010, the DeA Capital share was down 9.8%, but performed better than the FTSE Italia All- Share® index, the general index of the Italian market (-11.5%). The FTSE Star® index, however, rose by 2.9%, while the LPX50® advanced by approximately 37%, benefiting from the recovery of shares that had been heavily penalised in previous years. The ongoing lack of liquidity in the equity market particularly hurt small-/mid-cap shares, and also affected the DeA Capital share. In 2010, the value of shares traded was less than half that in 2007 and, as a proportion of outstanding shares, the figure for DeA Capital settled at just above the midpoint of the Star market.
    • Financial Statements for the Year Ending 31 December 2010 12 Share prices for 2010 are shown below: EUR Maximum price 1.37 Minimum price 1.12 Average price 1.22 Reference price as at 31 December 2010 (EUR/share) 1.14 Market capitalisation as at 31 December 2010 (EUR million) 349
    • Financial Statements for the Year Ending 31 December 2010 13 3. The group’s key Balance Sheet and Income Statement figures Key income statement and balance sheet figures to 31 December 2010 compared with the corresponding figures to 31 December 2009 are shown below. Nav / Share (€) 2.60 2.65 Group NAV 764.0 780.2 Parent Company Net Profit (Loss) 16.0 (1.8) Group Net Profit (Loss) (26.3) (29.4) Group Share of Comprehensive Income (15.6) 23.7 (Statement of Performance – IAS 1) Investments 800.3 828.4 Net Financial Position - Holdings (*) (40.7) (53.7) Net Financial Position - Consolidated (20.4) (34.9) (*) “Holdings” refer to holding companies as previously defined (€ million) 2010 2009 Investment Portfolio no. € million no. € million Shareholdings 7 516.5 7 550.9 Funds 10 132.7 11 118.2 Private Equity Investments 17 649.2 18 669.1 Alternative Asset Management (*) 2 151.1 2 159.3 Investment Portfolio 19 800.3 20 828.4 (*) Shareholdings in subsidiaries and joint ventures relating to Alternative Asset Management are valued at equity in this table. December 31, 2010 December 31, 2009
    • Financial Statements for the Year Ending 31 December 2010 14 4. Significant events during the year Significant events that occurred in 2010 are described below. IDeA I FoF - Paid calls and reimbursements On 11 January 2010, 1 April 2010, 4 August 2010 and 1 October 2010, the DeA Capital Group increased its investment in the IDeA I FoF fund with payments totalling EUR 12.8 million. At the same time, on 1 March 2010, 18 June 2010 and 6 November 2010, the DeA Capital Group received capital reimbursements from the fund of EUR 6.8 million, which were used in full to reduce the carrying value of the units. In relation to the portion attributable to the DeA Capital Group, at 31 December 2010, payments totalled EUR 93.5 million with a residual commitment of EUR 76.5 million. The carrying value of the fund in the consolidated accounts is EUR 79.9 million. IDeA CoIF I - Paid calls On 11 January 2010, 1 April 2010, 4 August 2010 and 1 October 2010, the DeA Capital Group increased its investment in the IDeA CoIF I fund with payments totalling EUR 3.3 million. In relation to the portion attributable to the DeA Capital Group, at 31 December 2010, payments totalled EUR 41.4 million with a residual commitment of EUR 58.6 million. The carrying value of the fund in the consolidated accounts is EUR 34.1 million. ICF II - Paid calls On 11 January 2010, 1 April 2010, 4 August 2010 and 5 October 2010, the DeA Capital Group increased its investment in the IDeA ICF II fund with payments totalling EUR 1.8 million. On 15 September 2010, the ICF II fund completed the fourth closing, taking overall commitments to around EUR 281 million. At the same time, the DeA Capital Group received capital reimbursements from the fund of EUR 1.7 million, which were used to reduce the carrying value of the units, net of interest (totalling around EUR 0.1 million). These repayments increased the value of the residual commitment. In relation to the portion attributable to the DeA Capital Group, at 31 December 2010, payments totalled EUR 5.3 million with a residual commitment of EUR 44.7 million. The carrying value of the fund in the consolidated accounts is EUR 5.8 million. Capital increase by Kenan Investments (indirect parent company of Migros) On 21 January 2010, Kenan Investments, the parent company of Migros, resolved to carry out a reserved capital increase to implement an incentive scheme for the senior managers of Migros. The operation, which did not involve any outlay for the DeA Capital Group, resulted in the dilution of its shareholding from 17.11% to 17.03%.
    • Financial Statements for the Year Ending 31 December 2010 15 Dividends - FARE Holding On 31 March 2010, the shareholders' meeting of FARE Holding approved the company's financial statements to 31 December 2009 and approved the distribution of dividends worth EUR 9.6 million, including EUR 6.7 million to the parent company DeA Capital S.p.A. (paid out on 31 March 2010). Memorandum of Understanding relating to the merger of FARE SGR and FIMIT SGR On 4 August 2010, a non-binding memorandum of understanding (MoU) was signed by FARE Holding, FARE SGR, FIMIT SGR, IFIM S.r.l., Feidos S.p.A. and DeA Capital S.p.A., which set out the terms of a possible merger of FARE SGR and FIMIT SGR. The MoU was signed following a series of negotiations between the parties based, inter alia, on the due diligence work carried out. The merger of the two companies would create the largest independent real estate asset management company in Italy, with over EUR 8 billion in assets under management and 19 managed funds (including five listed funds). This would put it among the major partners of Italian and international institutional investors in promoting, creating and managing Italian closed-end mutual investment funds in real estate. After the end of the financial year, FARE SGR and its parent company FARE Holding, as one party, and FIMIT SGR and the shareholders IFIM, Inpdap, Enpals and Enasarco (jointly the Fimit shareholders), as the other, approved the plan for the merger by incorporation of FARE SGR into FIMIT SGR according to the terms set out in the section "Significant events after the end of 2010" in this report. Share buy-back and disposal plan On 26 April 2010, the shareholders' meeting of DeA Capital S.p.A. approved, following the proposal made by the company's Board of Directors, the implementation of a new plan to purchase and dispose of own shares (the Plan), which authorises the Board of Directors to purchase and dispose of a maximum number of shares representing a stake of up to 20% of share capital in accordance with the law, on one or more occasions, on a rotating basis. At the same time, this resolution revoked the authorisation issued by the shareholders' meeting on 29 April 2009 for the previous plan to purchase own shares. Among other things, the authorisation specifies that purchases may be carried out in accordance with all procedures allowed by current regulations, with the sole exception of a public purchase or exchange offer, and that the unit price for the purchase must not be more than 20% above or below the share's reference price on the trading day prior to the purchase. The objective of the Plan is to allow the company to take action, in accordance with current regulations, to limit any unusual price movements and to normalise trading and pricing fluctuations resulting from distortions related to excess volatility or poor trading liquidity, as well as to purchase own shares to be used, as necessary, for share incentive schemes. These transactions will also allow the company to purchase own shares to be used, in accordance with its strategy, for capital-related transactions or other transactions in relation to which it may be appropriate to exchange or sell parcels of shares by means of an exchange, transfer or other method of disposal. The authorisation to carry out such purchases has a
    • Financial Statements for the Year Ending 31 December 2010 16 maximum duration of 18 months from the date the authorisation is granted by the shareholders’ meeting (until October 2011). The Board of Directors is also authorised to dispose of own shares purchased without time limitations in accordance with procedures it deems appropriate, at a price to be determined, from time to time, but which may not be (other than in certain specific exceptions) more than 20% below the share's reference price on the trading day prior to each disposal. The Board of Directors, which met immediately following the shareholders' meeting, passed the resolutions necessary to execute the plan, and granted the chairman and chief executive officer all the necessary powers. Stock option plan On 26 April 2010, the shareholders' meeting approved the DeA Capital stock option plan for 2010 - 2015, under which a maximum of 3,000,000 options may be allocated. To implement the resolution of the shareholders' meeting, the DeA Capital S.p.A. Board of Directors allocated a total of 2,235,000 options to certain employees of the company and its subsidiaries, and employees of the parent company De Agostini S.p.A. who carry out important roles. In line with the criteria specified in the regulations governing the DeA Capital stock option plan for 2010 – 2015, the Board of Directors also set the exercise price for the options allocated at EUR 1.318, which is the arithmetic mean of the official price of ordinary DeA Capital shares on the Mercato Telematico Azionario, the Italian screen-based trading system organised and managed by Borsa Italiana S.p.A., on the trading days between 25 March 2010 and 25 April 2010. The options can be allocated to the beneficiaries, in one or more tranches, up to 30 June 2011 and exercised by the latter, in one or more tranches, but in any case for an amount per tranche of not less than 25% of the options assigned to each, with effect from the fifth calendar day following the date that the adjusted NAV figure at 31 December 2012 is announced, until 31 December 2015. The adjusted NAV means the value of the assets, net of liabilities, calculated on the basis of the company’s operating performance at 31 December 2012 and restated, where necessary, to take account of the measurement at fair value of all investments, as assessed by an independent third party. IDeA Alternative Investments – Dividend distribution On 26 April 2010, the shareholders' meeting of IDeA Alternative Investments approved the company's financial statements to 31 December 2009 and approved the distribution of dividends worth EUR 6.0 million, including EUR 2.7 million to DeA Capital S.p.A. (paid out on 4 June 2010). Restructuring of the DeA Capital Group On 25 June 2010, the merger of DeA Capital Investments and its wholly-owned subsidiary DeA Capital Investments 2 took place, with the aim of centralising within a single entity the financial and organisational resources relating to Private Equity Investment operations in Luxembourg. The restructuring, which affected DeA Capital Investments and one of its wholly-owned subsidiaries, had no impact on the consolidated financial statements, as the same carrying values were used, pursuant to IAS/IFRS.
    • Financial Statements for the Year Ending 31 December 2010 17 Reorganisation of IDeA Alternative Investments S.p.A. (IDeA AI) On 27 August 2010, the IDeA AI Board of Directors approved a plan for a partial, non- proportional demerger, under which the stakes owned by IDeA AI in Investitori Associati SGR and Wise SGR will again become wholly owned by the management of Investitori Associati SGR and Wise SGR respectively, in return for the cancellation of the stakes held by those companies in IDeA AI. On 15 September 2010, the demerger operation was approved by the Shareholders’ Meeting of IDeA AI. After the end of the financial year, following receipt of the approval by the Bank of Italy and the Italian Competition Authority, the deed for the demerger of IDeA AI, effective from 17 January 2011, was completed in accordance with the terms set out in the section "Significant events after the end of 2010". Distribution of cash by Kenan Investments (indirect parent company of Migros) On 20 September 2010, Kenan Investments approved the distribution to shareholders of its available cash, arising in particular from dividends paid by Migros in the first half of 2010. The distribution was made via the reimbursement at fair value of instruments forming part of the company’s share capital. DeA Capital, which holds a stake of approximately 17% in the vehicle, received an amount of around EUR 20.8 million, of which EUR 2.3 million was recorded as income in the income statement. Transfer of the second tranche of DeA Capital shares to Daniel Buaron as payment for the purchase of FARE Holding On 13 December 2010, DeA Capital S.p.A. transferred 5,752,695 own shares to Deb Holding S.r.l., which is owned by Daniel Buaron, as part payment for the acquisition of 70% of FARE Holding, as stipulated by the contract agreed on 12 December 2008. These shares represent the second and final tranche of the share-based payment, the first tranche having been transferred in December 2008. The contract for the acquisition of FARE Holding specified that one portion of the purchase price would be paid in cash at the closing of the deal (12 December 2008), with a second cash payment being deferred for five years, and a portion in DeA Capital shares (around 11.5 million) to be transferred in two equal tranches at the closing of the deal and after 24 months. In February 2010, DeA Capital also transferred 184,162 shares to Daniel Buaron as part payment of the qualified purchase price. As a result of the above-mentioned transaction, Deb Holding now holds 11,689,552 DeA Capital shares, representing 3.81% of share capital. The transferred shares are subject to a lock-up agreement.
    • Financial Statements for the Year Ending 31 December 2010 18 Mediobanca loan agreement (extension of the expiry date for credit lines until the end of 2015) In 2010, DeA Capital S.p.A. negotiated an extension to the deadline for drawing down the portion of the Mediobanca credit line still available (EUR 50 million) to 31 December 2010. On 16 December 2010, DeA Capital S.p.A signed a financing agreement with Mediobanca – Banca di Credito Finanziario S.p.A. expiring in December 2015, for a maximum amount of EUR 120 million, while at the same time paying off the existing EUR 150 million unsecured bullet loan expiring in July 2013, of which EUR 100 million has been drawn down. The decision to reduce the size of the facility compared with the first loan stems from the lower capital requirements, net of expected distributions, of the private equity funds in which the DeA Capital Group has invested. The agreement concerns the granting of a EUR 80 million unsecured bullet credit facility and a revolving credit facility for a further EUR 40 million. The agreed interest rate is variable and linked to the 3- or 6-month Euribor. The bullet repayment is due to be made on 16 December 2015, although DeA Capital S.p.A. has the option to make full or partial early repayments during the term of the loan. The terms and conditions of the new loan also set out an improved covenant structure. This financing facility offers some significant advantages, including extending the term by over two years and greater flexibility in using the facility over time, given the existence of a revolving tranche.
    • Financial Statements for the Year Ending 31 December 2010 19 5. Analysis of consolidated results Consolidated results for the period relate to the operations of the DeA Capital Group in the following businesses: • Private Equity Investment, which includes the reporting units involved in private equity investment, broken down into equity investments (direct investments) and investments in funds (indirect investments) • Alternative Asset Management, which includes the reporting units involved in asset management activities and related services, with a current focus on the management of private equity, real estate, total return and special situation funds Reference market The reference markets for DeA Capital are those involving investment in private equity and alternative asset management, with a specific focus on the management of private equity and real estate funds. Private equity The global private equity market has posted strong growth in recent years, rising from a total of USD 1,000 billion in assets under management in 2003 to USD 2,500 billion at end-2009 with significant growth in buy-out funds (acquisitions of majority stakes or wholly-owned positions). The financial and economic problems that arose in the period 2008-2009 had clear repercussions on the general situation in 2010. Tax and monetary interventions by governments to kick-start the economies of individual countries mainly took the form of much higher public spending than had been seen in the past. In the fiscal arena, financial difficulties affected first Greece and then Ireland, raising a question mark over the growth prospects and future of the European Union. On the monetary side, we saw the first signs of inflationary pressure and currency fluctuations, some of which were quite marked. Against this backdrop, private equity continues to be an evolving sector. Although there were no trend reversals in funds raised, which were still declining from USD 297 billion in 2009 to USD 237 billion in 2010 (versus USD 670 billion in 2008), some signs of recovery began to appear in investment and conversions in 2010. The investment policies of funds focused on the operational improvement of portfolio companies to offset the lower recourse to debt as a means for increasing returns. Following a period of financial rationalisation and debt restructuring of the companies in the portfolio, the focus of the funds has returned to new investment driven by a greater propensity to sell and the re-opening of the debt market.
    • Financial Statements for the Year Ending 31 December 2010 20 Investment activity has more than doubled compared with 2009, with the volume of private equity investment reaching USD 261 billion, versus around USD 103 billion in 2009 1 . The recovery in the equity markets was favoured disposals. The volumes of IPOs by companies financed by private equity funds, totalling USD 16 billion1 (USD 9 billion in 2009), have almost returned to 2007 levels. The first three months of 2010 generated distributions of USD 34 billion, or double that of the corresponding period in 20091 . This enabled the funds to consolidate their track records prior to raising new funds. Private equity in Europe The European market represents about 30% of the total. Fund raising declined very markedly in 2009 and continued this negative trend in 2010; the buy-out segment, however, bucked the trend, with funds raised increasing from an estimated EUR 10 billion in 2009 to around EUR 16 billion in 2010. New investment in continental Europe rose slightly. Note that with regard to the main sectors in which DeA Capital invested, transactions in 2010 took place at multiples in line with, or above the carrying value of the multiples of Générale de Santé in DeA Capital. In the food retail sector, acquisitions were primarily made by groups operating in the sector with the aim of expanding into emerging countries, at higher multiples than the carrying values of the multiples of Migros. European fundraising (€ bn) 0 20 40 60 80 100 120 2000 2001 2002 2003 2004 2005 2006 2007 2008 20092010E European fundraising (€ bn) 0 10 20 30 40 50 60 70 80 2000 2001 2002 2003 2004 2005 2006 2007 2008 20092010E Source: EVCA, internal charts Private equity in Italy The statistics prepared by AIFI (the Italian Private Equity and Venture Capital Association) and currently updated to the first half of 2010, show a significant recovery (63%) in fund raising compared with the same period of 2009. Funds raised were, however, still 52% less than those recorded in the first half of 2008, which were already showing a sharp decline. 1 Source: Thomson Venture Economics
    • Financial Statements for the Year Ending 31 December 2010 21 There was a similar reduction in investment operations, which are still focused on small transactions – traditionally a feature of the Italian market – and which proved to be more stable than large transactions requiring significant financial leverage. The number of new investments fell from 155 to 129, with a total value of EUR 552 million (down by 48% compared with the same period of 2009). Despite the difficult environment, there are positive signs from the expansion segment, relating to minority investments intended to support the growth programmes of existing businesses. In the first half of 2010, this segment saw the amount invested increase by 10% from EUR 132 million to EUR 145 million, spread across 50 transactions. The early stage segment (investment in seeds and start-ups) also posted good results, with 51 transactions and a commitment of around EUR 41 million, or 11% higher than the same period of last year. Outlook for private equity in 2011 It is reasonable to expect there will also be a significant recovery in investment activity in private equity over the next few years, assisted by the ample resources available to the funds and the re-opening of the credit market. Specifically, investments will be more focused on the following sectors: - expansion/growth – a discipline that does not use debt, but invests in minority interests of companies to finance their growth - buy-outs – the mid-market segment is an area that is showing initial signs of recovery thanks to the availability of bank loans, especially for those operators that have direct relationships with local credit institutions. A recovery is also likely in investment activity in large buy-outs (transactions of over EUR/USD 2-3 billion in value), which until last year were not feasible in the absence of sufficient leverage (on account of their size and the economic conditions) Assuming that the development of the economic cycle will follow the traditional pattern (from the current recovery phase until the full growth phase), strategies for investing in the corporate debt of distressed companies will prove less rewarding. Lastly, a rise in conversions linked to expectations of an increase in the value of portfolios is also likely.
    • Financial Statements for the Year Ending 31 December 2010 22 Real estate funds in Italy In the first half of 2010, according to Assogestioni data, assets managed by real estate funds rose by 8.2% compared with the same period in the previous year, despite the unfavourable economic environment. At 30 June 2010, the 163 existing funds had assets under management of around EUR 22 billion, 87.4% of which was allocated to real estate. AUM of the eight largest real estate funds (€ bn) 0 1 2 3 4 5 6 7 8 9 IDeAFimit* Pirelli&C. Investire Immobiliare BNPParibas REIM Generali Immobiliare Fabrica Immobiliare Sorgente Banca Esperia *Pro-forma obtained from the sum of the assets managed by Fimit-Fondi Immobiliari Italiani and First Atlantic Real Estate Source: Assogestioni. There was a net inflow of funds (EUR 0.3 billion), albeit lower than the EUR 0.5 billion in the first half of 2009. The Italian market continues to be dominated by "reserved" funds, i.e. funds for qualified investors only, compared with retail funds, which represent around 25% of the total by value. Around 52% of investment is concentrated in the office market and 18% in the commercial market, the sector with the highest number of transactions in 2010. The trend towards a more uniform division of real estate investment still has some way to go, however, before the average distribution approaches that seen at the overall European level. Over the last eighteen months, listed real estate funds have seen a lot of volatility in the size of trades and the discount to NAV. In June 2009, the value of trades was just under EUR 300 million and the difference from NAV was 41% compared to EUR 500 million and 34% respectively in November 2010. Looking at the last twelve months, in August 2010 the size of trades reached a record low (EUR 300 million), and the discount to NAV was at an all-time high (36%).
    • Financial Statements for the Year Ending 31 December 2010 23 Real estate funds: shareholders’ equity (€ bn) 0 5 10 15 20 25 2008 2009 Jun-10 Reserved funds Retail funds Real estate funds: assets (€ bn) 0 5 10 15 20 25 30 35 40 45 2008 2009 Jun-10 Reserved funds Retail funds Source: Assogestioni. Italian real estate funds saw substantial stability in the sales price of real estate, while the volume of purchase and transfer transactions declined further. Over the last six months of 2010, property to the value of EUR 998 million was purchased and transferred, a decrease of over EUR 2.3 billion compared with the end of 2009. Sales slowed from EUR 1,335 million in the second half of 2009 to EUR 1,172 million in the first six months of 2010. Purchases and sales (€ bn) 0.0 0.5 1.0 1.5 2.0 2.5 3.0 3.5 2008 2009 Jun-10 Purchases Sales Allocation of assets Property 87.4% Equity inv. 2.3% Liquid assets 7.6% Other 2.7% Source: Assogestioni. Prices continue to be more stable than in other countries, especially with respect to high-end commercial real estate in large cities, for which there is a considerable imbalance between demand (continually growing) and supply (largely stable since 2005). Lower recourse to financial leverage in Italy than in other countries is also considered a factor of relative stability. The use of leverage is equivalent to 61% of the value of the investments for retail funds and 70% for reserved funds. Yields on real estate investment and therefore lease payments experienced a continuous and general decline across all sectors from 2008-2010, although the commercial segment was more resilient.
    • Financial Statements for the Year Ending 31 December 2010 24 The DeA Capital Group’s investment portfolio Changes in the DeA Capital Group's investment portfolio in the above-mentioned Private Equity Investment and Alternative Asset Management business areas are summarised in the table below. Investment Portfolio no. € million no. € million Shareholdings 7 516.5 7 550.9 Funds 10 132.7 11 118.2 Private Equity Investments 17 649.2 18 669.1 Alternative Asset Management (*) 2 151.1 2 159.3 Investment Portfolio 19 800.3 20 828.4 (*) Shareholdings in subsidiaries and joint ventures relating to Alternative Asset Management are valued at equity in this table. December 31, 2010 December 31, 2009 Details of portfolio asset movements in 2010 are provided in the sections on private equity investment and alternative asset management below.
    • Financial Statements for the Year Ending 31 December 2010 25 Private Equity Investment In terms of equity investments, at 31 December 2010, DeA Capital S.p.A. was a shareholder of: • Santé, the parent company of GDS (valued at approximately EUR 282.9 million) • Sigla Luxembourg, the parent company of Sigla (valued at approximately EUR 22.1 million) • Kenan Investments, indirect parent company of Migros (valued at EUR 195.0 million) • Stepstone, the parent company of Blue Skye (valued at approximately EUR 15.1 million) It was also a shareholder, with minority interests, in three companies operating in the biotech, information & communication technology and printed electronics sectors (with a total value of EUR 1.4 million). With regard to funds, at 31 December 2010, DeA Capital S.p.A. held units in: • IDeA I FoF (valued at approximately EUR 79.9 million) • IDeA CoIF I (valued at approximately EUR 34.1 million) • ICF II (valued at approximately EUR 5.8 million) • seven venture capital funds (with a total value of approximately EUR 13.0 million) In 2010, overall operations in the private equity investment business had a negative impact on NAV of approximately EUR 10.0 million, due to the combined effect of the group's portion of the net loss for the period of EUR 22.3 million, the increase in fair value of EUR 11.3 million and other positive movements of EUR 1.0 million. Valuations of equity investments and funds in the portfolio reflect estimates made using the information available on the date this document was prepared. Please see the notes to the financial statements for further details on valuations and related estimates.
    • Financial Statements for the Year Ending 31 December 2010 26 Investments in associates - Santé (parent company of GDS) Headquarters: France Sector: Healthcare Website: www.generale-de-sante.fr Investment details: On 3 July 2007, DeA Capital S.p.A. finalised the purchase, through its wholly-owned subsidiary DeA Capital Investments S.A., of a 43.01% stake in Santé S.A., the parent company of Générale de Santé S.A. both directly and indirectly through Santé Dévéloppement Europe S.A.S. In 2009, the DeA Capital Group’s interest was reduced to 42.87%, following the purchase of shares in Santé by certain GDS managers under an investment plan provided for management. Brief description: Founded in 1987 and listed on the Eurolist market in Paris since 2001, Générale de Santé is a leading player in the private healthcare sector in France with revenues of about EUR 2 billion at end-2009. France is the second largest country in Europe in terms of annual healthcare expenditure after Germany. Its healthcare system is one of the most advanced in the world, is still heavily fragmented and is marked by the presence of several independent hospital organisations. The company has around 21,500 employees and a total of about 110 clinics. In addition, it is the main independent association of doctors in France (5,500 doctors). Its activities include medicine, surgery, obstetrics, oncology and radiotherapy, mental health, subacute pathologies and rehabilitation. The company operates under the following names: Générale de Santé Cliniques (acute care), Médipsy (psychiatry), Dynamis (rehabilitation) and Généridis (radiotherapy). The investment in Santé, which is reported under "Investments in associates", is valued at approximately EUR 282.9 million in the consolidated financial statements to 31 December 2010 (EUR 289.1 million at 31 December 2009). The change compared to the figure reported at 31 December 2009 is attributable to the negative impact of the net loss of EUR 8.8 million for the period, the increase in the fair value of the interest rate swaps taken out to hedge interest rate risk on debt exposure of EUR 1.6 million, and other increases amounting to EUR 1.0 million (resulting mainly from the dilution of Santé's stake in its subsidiary GDS following the implementation of the plan to allocate shares free of charge to GDS employees).
    • Financial Statements for the Year Ending 31 December 2010 27 Générale de Santé (€ million) 2010 2009 Change % Revenue 1,926 2,046 -5.9% EBITDA 229 237 -3.3% EBIT 104 131 -20.9% Group Net Profit/(Loss) 35 42 -17.5% Net borrowing (871) (886) -2% In terms of operating performance, GDS’s revenues fell by 5.9% compared to the previous year, due to the change in the basis of consolidation (sale of the Home Care and Labs businesses completed at the end of 2009/early 2010), but rose by 3.2% if the figures are compared on a like-for-like basis. As regards operating profit, the substantial maintenance of profitability (the EBITDA margin was 11.9% compared with 11.6% in 2009), obtained despite challenging price trends, was due mainly to the company’s ability to optimise the mix of services offered and the significant improvement in operating efficiency. The widening of the gap in absolute terms between EBIT and net profit is chiefly due to the positive impact of the capital gains obtained from disposals on the relevant figures for 2009.
    • Financial Statements for the Year Ending 31 December 2010 28 - Sigla Luxembourg (parent company of Sigla) Headquarters: Italy Sector: Consumer credit Website: www.siglafinanziamenti.it Investment details: On 5 October 2007, DeA Capital Investments finalised the acquisition of a stake (currently around 41%) in Sigla Luxembourg, the holding company that controls Sigla, which operates in Italy and provides finance to all customer segments. Brief description: Sigla specialises in the consumer credit sector in Italy by providing personal loans and "salary-backed loans" (so called CQS). It is a benchmark operator in the provision of financial services to households, and operates throughout Italy chiefly through a network of agents. The company’s product range of salary-backed loans and personal loans was recently expanded to include the servicing of portfolios of unsecured non-performing loans (personal loans and credit cards). The investment in Sigla Luxembourg, which is reported under "Investments in associates", is valued at approximately EUR 22.1 million in the consolidated financial statements to 31 December 2010 (EUR 21.8 million at 31 December 2009), due mainly to the increase in the fair value of interest rate hedging instruments and the pro-rata share of the net profit for the period of approximately EUR 0.3 million. Sigla (€ million) 2010 2009 Change % Client loans* 93.5 116.7 -19.9% Revenue generated from Client Loans 8.3 16.0 -48.0% CQS Loan 128.8 97.2 32.6% CQS Revenues 7.8 5.1 53.6% Group Net Profit/(Loss) 0.1 0.9 -83.5% * Net receivables exclude "Salary backed loans" In terms of operating performance, in 2010 Sigla reported a 53.6% increase in revenues from salary-backed loans on the back of a 32.6% increase in the number of loans granted. This was obtained in a market that contracted by around 14% in 2010 and is proof that the company is gradually repositioning itself in the salary-backed loans business, which is typically less capital- intensive. As regards profitability, the company minimised the impact on net profit of the reduction in revenues from personal loans, thanks to the effects of measures to improve operational efficiency.
    • Financial Statements for the Year Ending 31 December 2010 29
    • Financial Statements for the Year Ending 31 December 2010 30 Investments in other companies - Kenan Investments (parent company of Migros) Headquarters: Turkey Sector: Food retail Website: www.migros.com.tr Investment details: In 2008, the DeA Capital Group acquired about 17% of the capital of Kenan Investments, the company heading the structure to acquire the controlling interest in Migros. Brief description: Migros was established in 1954, and is the leading company in the food retail sector in Turkey with a share of about 34% in the organised retail market. Growth in the food retail sector in Turkey is a relatively recent phenomenon, brought about by the transition from traditional systems such as bakkals (small stores typically run by families) to an increasingly widespread distribution model driven by expansion and the modernisation process under way in Turkey. The company has a total of 1,881 outlets (at 30 September 2010) with a total net sales area of approximately 933,000 square metres. 295 new stores were opened in the first nine months of 2010. Migros is present in all seven regions of Turkey, and has a marginal presence abroad in Azerbaijan, Kazakhstan, Kyrgyzstan and Macedonia. The company operates under the following names: Migros, Tansas and Macrocenter (supermarkets), 5M (hypermarkets), Sok (discount stores), Ramstores (supermarkets abroad) and Kangurum (online store). The investment in Kenan Investments is reported in the consolidated financial statements to 31 December 2010 at a value of EUR 195.0 million (compared with EUR 208.0 million at 31 December 2009), taking into account the effect of the distribution of cash to shareholders, as noted in the "Significant events during the year" section, and the effect of the increase in fair value (EUR 5.5 million) recorded in 2010.
    • Financial Statements for the Year Ending 31 December 2010 31 Migros (mln YTL) First 9 Months 2010* First 9 Months 2009** Change % Revenue 4,762 4,251 12.0% EBITDA 256 301 -15.1% EBIT 159 202 -21.2% Group Net Profit/(Loss) 103 96 7.6% Net borrowing (1,531) (1,366) -12% * Awaiting publication of the data to December 31, 2010 - the data for the first 9 months 2010 is provided ** As Restated In terms of operating performance, Migros reported a decrease in EBITDA in the first nine months of 2010, despite a 12% rise in revenues. This phenomenon is due to the impact on margins of the strong growth in the network of sales outlets (455 in 12 months), which has an immediate effect on the cost structure but a delayed effect on sales figures, as well as to the strong competition seen in the discount sector and the impact of external factors on trends in some operating costs (e.g. staff, electricity and transport). The unfavourable change at EBITDA level, however, converts to an increase in net profit due to the impact of TRY/EUR exchange rate movements on the portion of debt exposure expressed in euro.
    • Financial Statements for the Year Ending 31 December 2010 32 - Other equity investments Other equity investments totalled approximately EUR 16.5 million in the consolidated financial statements to 31 December 2010, representing a decrease of EUR 15.5 million compared with 31 December 2009, mainly connected with the stake in Stepstone. The table below shows the headquarters and the stake held in each of the four companies. Company Registered Office Sector - Business activity % Owned (Fully Diluted) Elixir Pharmaceuticals Inc. USA Biotech 1.30 Kovio Inc. USA Printed circuitry 0.42 MobileAccess Networks Inc. USA ICT 1.20 Stepstone Acquisition Sàrl Luxembourg Special Opportunities 36.72 - Elixir Pharmaceuticals Inc. Established in 1999 and based in Cambridge, Massachusetts, USA, Elixir Pharmaceuticals Inc. is a biotech company focusing on the development and marketing of medicines for the treatment and prevention of metabolic disorders (obesity and diabetes) and age-related diseases and infirmities. - Kovio Inc. Kovio Inc., which is headquartered in Silicon Valley, USA, is developing a new category of semiconductors through "printed electronics". This new category combines low costs and high printing productivity and makes it possible to manufacture semiconductors on a large scale. - MobileAccess Networks Inc. With headquarters in Virginia, USA, MobileAccess Networks Inc. develops, manufactures and markets solutions that allow wireless coverage (cellular, PCS, WiFi and other systems) to be extended to remote areas where coverage is difficult. - Stepstone Acquisition S.à.r.l. Stepstone Acquisition S.à.r.l. holds a stake in the Blue Skye (BS) fund. BS is an investment fund that focuses on distressed assets and special opportunities, and currently invests in the following businesses: - non-performing loans (through the company "Alfa Skye") - loans to the Public Administration (mainly healthcare, through the company "Beta Skye") - mid-market real estate (through the fund "Gamma Skye") - corporate lending
    • Financial Statements for the Year Ending 31 December 2010 33 Funds At 31 December 2010, the DeA Capital Group had investments (other than the investment in the IDeA CoIF I fund, which is classified under "Investments in associates", based on the units held) in two funds of funds (IDeA I FoF and ICF II) and seven venture capital funds worth a total of approximately EUR 132.7 million (corresponding to the estimated fair value calculated using the information available on the date this document was prepared) in the consolidated financial statements to 31 December 2010. The residual commitments associated with these funds were approximately EUR 180.7 million (in their respective original currencies of denomination: EUR 179.8 million and GBP 0.8 million).
    • Financial Statements for the Year Ending 31 December 2010 34 - IDeA CoIF I IDeA Co-Investment Fund I Headquarters: Italy Sector: Private equity Website: www.ideasgr.it Investment details: IDeA CoIF I is a closed-end fund for qualified investors, which began activity on 9 May 2008 and is managed by IDeA Capital Funds SGR. IDeA Capital Funds SGR is the leading Italian company managing private equity funds of funds and direct investments in private equity through co-investment funds with domestic and international exposure. The investment programmes of IDeA Capital Funds SGR, which are regulated by the Bank of Italy and Consob, leverage the management team's and sponsors' wealth of experience in the sector. The DeA Capital Group has subscribed for a total commitment of up to EUR 100 million in the fund. Brief description: IDeA CoIF I has total assets of approximately EUR 217 million. Its objective is to make co- investments by purchasing minority interests, as part of medium-sized and large transactions, together with other professional investors. At 31 December 2010, IDeA CoIF I had called up approximately 41.4% of subscribers' total commitments after making three investments: - on 8 October 2008, it acquired a 5% stake in Giochi Preziosi S.p.A., a company active in the production, marketing and sale of children’s games with a product line covering childhood to early adolescence - on 22 December 2008, it acquired a 4% stake in Manutencoop Facility Management S.p.A. through the subscription to a reserved capital increase. Manutencoop is Italy’s leading integrated facility management company, providing and managing a wide range of property management services and other services for individuals and government agencies - on 31 March 2009, a 17.43% stake was acquired in Grandi Navi Veloci S.p.A., an Italian shipping company that transports passengers and goods on various routes around the Mediterranean Sea. At 31 December 2010, the company owned a stake of 18.42% After the end of the 2010 financial year, IDeA CoIF I made two additional investments, namely: - subscription to a bond that is convertible into shares of Euticals S.p.A., Italian leader in the production of active ingredients for pharmaceutical companies that operate in the generics sector
    • Financial Statements for the Year Ending 31 December 2010 35 - purchase of a 9.39% stake in Telit Communications PLC, the third-largest producer of machine-to-machine communications systems in the world The units in IDeA CoIF I are valued at approximately EUR 34.1 million in the consolidated financial statements to 31 December 2010 (EUR 34.4 million at end-2009) due to contributions made in the form of capital calls of EUR 3.3 million, the pro-rata share of the net loss for the period of EUR 6.8 million, largely attributable to the partial impairment of the investment in Grandi Navi Veloci, and increases in fair value amounting to EUR 3.2 million, reported in shareholders' equity in line with the valuation criteria adopted by the DeA Capital Group. The table below shows the key figures for IDeA CoIF I at 31 December 2010: Co-Investment Funds HQ Year of Commit ment Fund Size Subscribed Commitment % DeA Capital in Fund Euro (€) IDeA Co-Investment Fund I Italy 2008 216,550,000 100,000,000 46.18 Residual Commitments Total residual commitment in: Euro 58,630,000
    • Financial Statements for the Year Ending 31 December 2010 36 - IDeA I FoF IDeA I Fund of Funds Headquarters: Italy Sector: Private equity Website: www.ideasgr.it Investment details: IDeA I FoF is a closed-end fund for qualified investors, which began activity on 30 January 2007 and is managed by IDeA Capital Funds SGR. The DeA Capital Group has subscribed for a total commitment of up to EUR 170 million in the fund. Brief description: IDeA I FoF, which has total assets of approximately EUR 681 million, invests its assets in units of unlisted closed-end funds that are mainly active in the local private equity sector of various countries. It optimises the risk-return profile through careful diversification of assets among managers with a proven track record of returns and solidity, different investment approaches, geographical areas and maturities. At the date of the latest report available, the IDeA ICF II portfolio was invested in 42 funds with different investment strategies; these funds in turn hold around 362 positions in companies with various degrees of maturity that are active in geographical regions with different growth rates. The funds are diversified in the buy-out (control) and expansion (minorities) categories, with an overweighting in medium-sized and small transactions and special situations (distressed debt and equities and turnarounds). At 31 December 2010, IDeA I FoF had called up approximately 55% of its total commitment and had made distributions totalling 7.8% of that commitment. Other important information: Below is an analysis of the portfolio, updated to the date of the latest report available, broken down by year of investment, geographic area, type and sector.
    • Financial Statements for the Year Ending 31 December 2010 37 Breakdown by Industry(3)Breakdown by style(2) Breakdown by vintage (1) Breakdown by geographical area(2) Not committed 5% Global 20% RoW 13% US 18% Europe44% 6% Not committed 5% Special Situations 17% Expansion 9% VC 5% Asset Based PE Small Buyout 14% Mid Buyout 30% Large Buyout 15% 10 % Not invested 34% 2010 2009 8% 2008 17% 200713% 20067% 2005 4% 2000-2004 7% 7% 6% 12 % Distressed assets 18% Other 3% Commodities Energy 10% Transport Manufacturing 7% RE 3% Luxury 3% IT Media 3% Financials4% Pharma2% Healthcare 6% Consumer staples 5% Consumer discretionary 11% Notes 1. % of adjusted capital invested. Based on the adjusted capital invested (capital calls + secondary purchase price) at 31 December 2010 2. % of fund size. Based on paid-in exposure (capital invested + residual commitments) at 31 December 2010 3. Based on the FMVs of the companies in the portfolio at 30 September 2010 The units in IDeA I FoF were shown at approximately EUR 79.9 million in the consolidated financial statements to 31 December 2010 (EUR 65.3 million at end-2009); the change in the carrying value compared to the end-2009 figure was due to contributions made for capital calls totalling EUR 12.8 million, capital distributions of about EUR 6.8 million and an increase in fair value of around EUR 8.6 million. The table below shows the key figures for IDeA I FoF at 31 December 2010. Fund of Funds HQ Year of Commit ment Fund Size Subscribed Commitment % DeA Capital in Fund Euro (€) IDeA I Fund of Funds Italy 2007 681,050,000 170,000,000 24.96 Residual Commitments Total residual commitment in: Euro 76,500,000
    • Financial Statements for the Year Ending 31 December 2010 38 - ICF II IDeA ICF II Headquarters: Italy Sector: Private equity Website: www.ideasgr.it Investment details: ICF II is a closed-end fund for qualified investors, which began activity on 24 February 2009 and is managed by IDeA Capital Funds SGR. The DeA Capital Group has subscribed for a total commitment of up to EUR 50 million in the fund. Brief description: IDeA ICF II, which had total assets of approximately EUR 281 million at 31 December 2010 (after the fourth and final closing, which was completed on 15 September 2010), proposes to invest its assets in units of unlisted closed-end funds which are mainly active in the local private equity sector of various countries. It optimises the risk-return profile through the careful diversification of assets among managers with proven historical returns and solidity, different investment approaches, geographical areas and maturities. The fund started building its portfolio by focusing on funds in the area of mid-market buy-outs, distressed and special situations, loans, turnarounds and funds with a specific sector slant, targeting in particular potential opportunities offered in the secondary market. At the date of the latest report available, the IDeA ICF II portfolio was invested in 15 funds with different investment strategies; these funds in turn hold around 52 positions in companies with various degrees of maturity that are active in geographical regions with different growth rates. At 31 December 2010, ICF II had called on about 10.7% of the total commitment. Other important information: Below is an analysis of the portfolio, updated to the date of the latest report available, broken down by year of investment, geographic area, type and sector.
    • Financial Statements for the Year Ending 31 December 2010 39 Breakdown by industry(3)Breakdown by style(2) Breakdown by vintage(1) Breakdown by geographical area(2) Global 20% RoW 10% US 29% Europe 41% Special Situations 29% Expansion 10% VC 4% Small/Mid Buyout 35% Large Buyout 22% 13 % 2010 41% 2009 41% 2008 2% 2007 2004-2006 2% 5% Distressed assets 40% Energy 3% Commodities 3% Manufacturing 4% Luxury 4% IT 17% Media4% Financials Healthcare 3% Consumer staples 9% Consumer discretionary 9% Notes 1. % of adjusted capital invested. Based on the adjusted capital invested (capital calls + secondary purchase price) at 31 December 2010 2. % of the commitment. Based on paid-in exposure (capital invested + residual commitments) at 31 December 2010 3. Based on the FMVs of the companies in the portfolio at 30 September 2010 The units in ICF II are valued at approximately EUR 5.8 million in the consolidated financial statements to 31 December 2010 (EUR 4.9 million at end-2009), due to contributions made in the form of capital calls and the increase in fair value. The table below shows the key figures for IDeA ICF II at 31 December 2010. ICF II Fund HQ Year of Commit ment Fund Size Subscribed Commitment % DeA Capital in Fund Euro (€) IDeA ICF II Italy 2009 281,000,000 50,000,000 17.79 Residual Commitments Total residual commitment in: Euro 44,657,739
    • Financial Statements for the Year Ending 31 December 2010 40 - Units in venture capital funds Units in venture capital funds are all concentrated in the parent company DeA Capital S.p.A., and are valued at approximately EUR 13.0 million in the financial statements to 31 December 2010 (EUR 13.5 million at end-2009). The change in carrying value compared with 31 December 2009 was due to decreases in fair value, capital calls totalling EUR 0.7 million, and capital distributions of around EUR 0.3 million. The table below shows the key figures for venture capital funds in the portfolio at 31 December 2010. Venture Capital Funds HQ Year of Commitm ent Fund Size Subscribed Commitment % DeA Capital in Fund Dollar (USD) Doughty Hanson & Co Technology UK EU 2004 271,534,000 1,925,000 0.71 GIZA GE Venture Fund III Delaware U.S.A. 2003 211,680,000 10,000,000 4.72 Israel Seed IV Cayman Islands 2003 200,000,000 5,000,000 2.50 Pitango Venture Capital II Delaware U.S.A. 2003 125,000,000 5,000,000 4.00 Pitango Venture Capital III Delaware U.S.A. 2003 387,172,000 5,000,000 1.29 Total Dollars 26,925,000 Euro (€) Nexit Infocom 2000 Guernsey 2000 66,325,790 3,819,167 5.76 Pound Sterling (GBP) Amadeus Capital II UK EU 2000 235,000,000 13,500,000 5.74 Residual Commitments Total residual commitment expressed in : Euro 949,615
    • Financial Statements for the Year Ending 31 December 2010 41 Alternative Asset Management At 31 December 2010, DeA Capital S.p.A. held a joint controlling interest (44.36%) in IDeA Alternative Investments (IDeA AI) and a controlling interest (70%) in FARE Holding. In relation to the corporate structure, note that on 17 January 2011, the procedure for the partial non-proportional demerger of IDeA Alternative Investments (IDeA AI) was completed with the result that Investitori Associati SGR and Wise SGR were removed from the Group’s scope of consolidation. In addition, on 1 February 2011, IDeA AI completed the sale of its stake in IDeA AI Sarl. In 2010, alternative asset management activities had a positive impact on NAV of approximately EUR 4.2 million (including decreases in fair value of EUR 0.6 million). The consolidated net profit generated during the period by the business concerned was EUR 5.7 million, including the impact of allocating a portion of the purchase price for the investments in IDeA AI and FARE Holding in the amount of EUR 5.1 million; had this been stripped out, the consolidated net profit for the period would have been EUR 10.8 million.
    • Financial Statements for the Year Ending 31 December 2010 42 - IDeA Alternative Investments Headquarters: Italy Sector: Alternative Asset Management - Private Equity Website: www.ideasim.it, www.soprarno.it, www.ideasgr.it Investment details: On 1 April 2008, DeA Capital S.p.A. finalised the acquisition of a 44.36% stake in IDeA Alternative Investments (IDeA AI). The acquisition was made following the resolution by DeA Capital’s Board of Directors on 14 February 2008 approving the purchase by De Agostini Invest (a De Agostini Group company). On 27 August 2010, the IDeA AI Board of Directors approved a plan for a partial, non-proportional demerger, under which the stakes owned by IDeA AI in Investitori Associati SGR and Wise SGR will again become wholly owned by the management of Investitori Associati SGR and Wise SGR respectively, in return for the cancellation of the stakes held by those companies in IDeA AI. On 15 September 2010, the demerger operation was approved by the Shareholders’ Meeting of IDeA AI. After the end of the financial year, following receipt of the approval by the Bank of Italy and the Italian Competition Authority, the deed for the demerger of IDeA AI, effective from 17 January 2011, was completed in accordance with the terms set out in the section "Significant events after the end of 2010". DeA Capital, which previously held 44.36% of the company’s capital, has therefore acquired control of 90.11% of IDeA AI and the assets it owns. These primarily include 100% of IDeA Capital Funds SGR, 65% of Soprarno SGR, 65% of IDeA SIM and 10% of Alkimis SGR. Moreover, on 20 January 2011, in order to gain control of the entire share capital of IDeA AI, DeA Capital S.p.A. acquired the remaining 9.89% of the company’s stock that was held privately, including by directors Lorenzo Pellicioli and Paolo Ceretti, in exchange for 4,806,921 DeA Capital shares, using existing own shares in the portfolio, equal to 1.57% of capital. Brief description: IDeA AI is a holding company of independent asset management companies that manage private equity funds and other alternative asset management products. Among other things, IDeA AI owns 100% of IDeA Capital Funds, the asset management company that manages funds in which the DeA Capital Group invests. In December 2008, IDeA AI purchased a minority interest in Alkimis SGR, an Italian asset management company, which, after obtaining authorisation from the Bank of Italy, focused on absolute-return products. At the end of June 2009, IDeA AI completed the acquisition of 65% of Soprarno SGR, an asset management company that operates in Italy, which manages total return funds that use a quantitative investment approach. On 13 October 2009, IDeA AI established IDeA SIM, taking a 65% stake in the company. The
    • Financial Statements for the Year Ending 31 December 2010 43 purpose of this transaction was for IDeA AI to gain a foothold in the segment of property brokerage companies, without holding, even temporarily, clients’ cash and financial instruments and without the assumption of risks by the company. Other important information IDeA AI organisational chart In relation to the corporate structure shown above, note that on 17 January 2011, the procedure for the partial non-proportional demerger of IDeA AI was completed, with the result that Investitori Associati SGR and Wise SGR were removed from the Group’s scope of consolidation. Moreover, on 1 February 2011, IDeA AI completed the sale of its stake in IDeA AI Sarl. In 2010, IDeA AI operations had a positive impact on the group’s NAV of approximately EUR 1.2 million, which was largely attributable to net profit for the period. Note that net profit for the period takes into account the impact of allocating a portion of the purchase price for the stake in IDeA AI totalling EUR 0.3 million; stripping out this impact, the contribution to NAV made by IDeA AI would have been EUR 1.5 million. Before Demerger SGR demerged After Demerger AUM 2,416 969 1,447 Management fees 19.0 0.0 19.0 Other revenues 0.4 0.3 0.1 Consolidated Net Profit/(Loss) - Before PPA 4.6 0.6 4.0 Consolidated Net Profit/(Loss) 3.9 0.6 3.3 IDeA Alternative Investments (mln €) 2010 (*) Note that the two asset management companies that were demerged are accounted for using the equity method. Small-mid sized Stepstone Acquisition 65%100% 49%/100%29%/80% * Voting/Economic rights 44,4 % 0,12 Mid-large sized PE funds of funds, thematic funds VC funds Absolute return funds Distressed assets Special 10% 100% 65% Fee-only
    • Financial Statements for the Year Ending 31 December 2010 44 - First Atlantic Real Estate Holding Headquarters: Italy Sector: Alternative Asset Management - Real Estate Website: www.firstatlantic.it Investment details: On 12 December 2008, DeA Capital S.p.A. completed the acquisition of a 70% stake in First Atlantic Real Estate Holding. On 4 August 2010, a non-binding memorandum of understanding (MoU) was signed by FARE Holding, FARE SGR, FIMIT SGR, IFIM S.r.l., Feidos S.p.A. and DeA Capital S.p.A., which set out the terms of a possible merger of FARE SGR and FIMIT SGR. The MoU was signed following a series of negotiations between the parties based, inter alia, on the due diligence work carried out. The merger of the two companies would create the largest independent real estate asset management company in Italy, with over EUR 8 billion in assets under management and 19 managed funds (including five listed funds). This would put it among the major partners of Italian and international institutional investors in promoting, creating and managing Italian closed-end mutual investment funds in real estate. After the end of the financial year, FARE SGR and its parent company FARE Holding, as one party, and FIMIT SGR and the shareholders IFIM, Inpdap, Enpals and Enasarco (jointly the Fimit shareholders), as the other, approved the plan for the merger by incorporation of FARE SGR into FIMIT SGR according to the terms set out in the section "Significant events after the end of 2010" in this report. Brief description: Established in 1998 by Daniel Buaron, the First Atlantic Real Estate Holding Group is one of Italy’s leading players by assets under management in the property sector, where it operates as an asset manager, fund manager and advisor, providing an integrated range of fund management and other services. The group comprises the following main companies: • First Atlantic Real Estate SGR, authorised by the Bank of Italy in 2005, which manages six real estate funds, two of which – Atlantic 1 and Atlantic 2-Berenice – are listed and four of which are reserved • First Atlantic Real Estate, a company specialising in the provision of asset management, property management, project management and agency services • First Atlantic Real Estate NPL, operating in the administration, management and value enhancement of non-performing loans for the real estate sector The group and its founder have an excellent track record in managing real estate assets, and
    • Financial Statements for the Year Ending 31 December 2010 45 have participated in some of the major transactions recently carried out in Italy, handling the management, redevelopment, income generation and sale of the properties acquired. In addition, since 1988 the group has been the operating partner of a leading international investment bank for the Italian market, and is the advisor and asset manager for the first Italian real estate fund with an "ethical" emphasis promoted by Banca Popolare di Milano. In 2010, the operations of FARE Holding had a positive impact on NAV of approximately EUR 3.0 million, taking into account the impact of the allocation of a portion of the purchase price for the investment in FARE Holding amounting to EUR 3.4 million. Excluding this impact, the contribution to NAV made by FARE Holding would have been EUR 6.4 million. FARE Holding (mln €) 2010 2009 Var. % AUM 2,946 2,981 -1% Management fees 19.4 18.2 7% Other revenues 9.8 8.1 22% Consolidated Net Profit/(Loss) - Before PPA 8.8 8.7 1% Consolidated Net Profit/(Loss) 4.0 1.7 n.a. The table below summarises the value of assets under management for the FARE Holding Group at 31 December 2010. (€ million) Asset Under Management at December 31, 2010 Detail of funds Atlantic 1 722 Atlantic 2 - Berenice 579 Atlantic 6 58 Atlantic 8 33 Atlantic 12 19 Ippocrate 1,535 Total 2,946 Certain key financials relating to the listed funds (Atlantic 1 and Atlantic 2) in the asset management portfolio are also reported together with an analysis of the real estate portfolio at the date of the latest report available, broken down by geographical area and by intended use.
    • Financial Statements for the Year Ending 31 December 2010 46 Atlantic 1 (mln €) 31/12/2010 * Market value of real estate 670.4 Historical cost and capitalised charges 607.5 Loan 372.4 Net Asset Value ("NAV") 333.5 NAV / Share (Euro) 639.4 Market price/share (Euro) 417.8 Dividend Yield ** 5.9% * Data for the last Report is provided ** Ratio of income per share to average nominal value of the share
    • Financial Statements for the Year Ending 31 December 2010 47 Atlantic 1: Diversification by intended use Atlantic 1: Diversification by geographical area Offices 81% Commercial 18% Other 1% Lombardy 65% Lazio 15% Campania 13% Piedmont 6% Other 1% Atlantic 2 - Berenice (mln €) 31/12/2010 * Market value of real estate 548.6 Historical cost and capitalised charges 493.0 Loan 293.4 Net Asset Value ("NAV") 275.2 NAV / Share (Euro) 458.7 Market price/share (Euro) 332.6 Dividend Yield ** 12.3% * Ratio of income per share to average nominal value of the share Atlantic 2: Diversification by intended use Atlantic 2: Diversification by geographical area Offices 67% TLC exchanges 29% Manufacturing 4% Lombardy 42% Lazio 40% Piedmont 14% Other 4%
    • Financial Statements for the Year Ending 31 December 2010 48 Financial Review - Income Statement The group had a net loss of approximately EUR 26.3 million in 2010 compared with a loss of EUR 29.4 million in 2009. Revenues and other income at 31 December 2010 break down as follows: - alternative asset management fees totalling EUR 27.8 million - a contribution from investments valued at equity of EUR 15.5 million (EUR 27.9 million in 2009), mainly due to the investment in Santé of around EUR 8.8 million and the investment in IDeA CoIF I of EUR 6.8 million - other investment income/expenses totalling EUR -3.4 million compared with EUR -1.8 million in 2009 (largely attributable to impairment reported for equity investments and funds) - other revenues and income totalling EUR 10.5 million due largely to the Alternative Asset Management business (EUR 10.1 million) Operating costs totalled EUR 36.8 million (EUR 34.3 million in 2009), of which EUR 28.9 million was attributable to Alternative Asset Management, EUR 1.7 million to the Private Equity Investment business and EUR 6.3 million to holding company activities. Financial income and charges, which totalled EUR -4.6 million at 31 December 2010 (EUR -3.6 million in 2009), mainly related to income generated from cash assets, financial charges and income/charges on derivative contracts used to hedge the exchange rate risk connected with investments denominated in currencies other than the euro and the interest rate risk connected with variable-rate lines of credit utilised and the reorganisation of the Mediobanca credit facility. The tax impact of EUR -3.4 million in 2010 (EUR +3.1 million in 2009) is the result of taxes relating to Alternative Asset Management and Private Equity Investment activities, which were partly offset by income from the tax consolidation of DeA Capital S.p.A. Of the total consolidated net loss of EUR 25.4 million, about EUR -22.3 million was attributable to the Private Equity Investment business, around EUR 5.7 million to Alternative Asset Management and approximately EUR -8.8 million to holding company operations/eliminations. The consolidated net profit of EUR 5.7 million generated during the period by the Alternative Asset Management business includes the impact of the allocation of a portion of the purchase price of the investments in IDeA AI and FARE Holding totalling EUR 5.1 million; excluding this impact, the net profit of the Alternative Asset Management business would have been EUR 10.8 million, and the consolidated net loss would have been EUR 20.3 million (versus the actual figure of EUR 25.4 million). For details concerning individual items, please see the comments in the notes to the consolidated financial statements for the year ending 31 December 2010 indicated below.
    • Financial Statements for the Year Ending 31 December 2010 49 Summary Group Income Statement (Euro thousand) Year 2010 Year 2009 Alternative Asset Management fees 27,844 25,250 Income (loss) from equity investments (15,507) (27,865) Other investment income/expense (3,405) (1,803) Income from services 10,112 8,322 Other income 412 1,851 Other expenses (36,800) (34,346) Financial income and expenses (4,641) (3,555) PROFIT/(LOSS) BEFORE TAX (21,985) (32,146) Income tax (3,424) 3,095 PROFIT/(LOSS) FOR THE PERIOD FROM CONTINUING OPERATIONS (25,409) (29,051) Profit (Loss) from discontinued operations/held-for-sale assets 0 0 PROFIT/(LOSS) FOR THE PERIOD (25,409) (29,051) - Group share (26,348) (29,377) - Non controlling interests 939 326 Earnings per share, basic (€) (0.091) (0.101) Earnings per share, diluted (€) (0.091) (0.101) Summary group income statement - performance by business in 2010 (€ thousand) Private Equity Investment Alternative Asset Management DeA Capital SpA (*) and eliminations Consolidated Alternative Asset Management fees 0 27,844 0 27,844 Income (loss) from equity investments (15,637) 130 0 (15,507) Other investment income/expense (3,490) 85 0 (3,405) Other income 39 10,053 432 10,524 Other expenses (1,665) (28,869) (6,266) (36,800) Financial income and expenses 196 106 (4,943) (4,641) PROFIT/(LOSS) BEFORE TAX (20,557) 9,349 (10,777) (21,985) Income tax (1,793) (3,627) 1,996 (3,424) PROFIT/(LOSS) FOR THE PERIOD FROM CONTINUING OPERATIONS (22,350) 5,722 (8,781) (25,409) Profit (Loss) from discontinued operations/held-for-sale assets 0 0 0 0 PROFIT/(LOSS) FOR THE PERIOD (22,350) 5,722 (8,781) (25,409) - Group share (22,350) 4,783 (8,781) (26,348) - Minority interests 0 939 0 939 Summary group income statement - performance by business in 2009 (€ thousand) Private Equity Investment Alternative Asset Management DeA Capital SpA (*) and eliminations Consolidated Alternative Asset Management fees 0 25,250 0 25,250 Income (loss) from equity investments (29,015) 1,150 0 (27,865) Other investment income/expense (1,875) 72 0 (1,803) Other income 54 9,733 386 10,173 Other expenses (897) (26,578) (6,871) (34,346) Financial income and expenses 953 155 (4,663) (3,555) PROFIT/(LOSS) BEFORE TAX (30,780) 9,782 (11,148) (32,146) Income tax 4,551 (3,010) 1,554 3,095 PROFIT/(LOSS) FOR THE PERIOD FROM CONTINUING OPERATIONS (26,229) 6,772 (9,594) (29,051) Profit (Loss) from discontinued operations/held-for-sale assets 0 0 0 0 PROFIT/(LOSS) FOR THE PERIOD (26,229) 6,772 (9,594) (29,051) - Group share (26,229) 6,446 (9,594) (29,377) - Minority interests 0 326 0 326
    • Financial Statements for the Year Ending 31 December 2010 50 Financial Review - Statement of Performance - IAS 1 Comprehensive income or the Statement of Performance (IAS 1), in which performance for the year attributable to the Group is reported including results posted directly to shareholders' equity, reflects a net negative balance of approximately EUR 15.6 million compared with a net positive balance of around EUR 23.7 million in 2009. Results posted directly to shareholders' equity were mainly due to the changes in fair value of Kenan/Migros totalling EUR 5.5 million. Please see the notes to the financial statements for additional details on the valuation process described. (Euro thousand) Year 2010 Year 2009 Profit/(loss) for the period (A) (25,409) (29,051) Gains/(Losses) on fair value of available-for-sale financial assets 5,785 54,018 Share of other comprehensive income of associates 4,961 (892) Other comprehensive income, net of tax (B) 10,746 53,126 Total comprehensive income for the period (A)+(B) (14,663) 24,075 Total comprehensive income attributable to: - Group share (15,602) 23,749 - Non Controlling Interests 939 326
    • Financial Statements for the Year Ending 31 December 2010 51 Financial Review - Balance Sheet The Summary Balance Sheet for the group at 31 December 2010 compared with 31 December 2009 is shown below. (Euro thousand) 31.12.2010 31.12.2009 ASSETS Non-current assets Intangible and tangible assets Goodwill 71,756 74,360 Intangible assets 2,120 9,102 Property, plant and equipment 382 478 Total intangible and tangible assets 74,258 83,940 Investments Investments valued at equity 339,022 345,372 Other available-for-sale companies 211,511 239,917 Available-for-sale funds 98,622 83,776 Other avalaible-for-sale financial assets 304 304 Total Investments 649,459 669,369 Other non-current assets Deferred tax assets 243 279 Financial loan and receivables 996 2,662 Other non-current assets - - Total other non-current assets 1,239 2,941 Total non-current assets 724,956 756,250 Current assets Trade receivables 2,658 2,045 Available-for-sale financial assets 15,038 15,779 Financial receivables 1,682 338 Tax receivables from Parent companies 4,065 3,199 Other tax receivables 1,832 2,211 Other receivables 557 403 Cash and cash equivalents 86,517 98,874 Total current assets 112,349 122,849 Total current assets 112,349 122,849 Assets relating to joint ventures 63,842 66,019 Held-for-sale assets - - TOTAL ASSETS 901,147 945,118 SHAREHOLDERS' EQUITY AND LIABILITIES SHAREHOLDERS' EQUITY Net equity Group 763,955 780,195 Shareholders' equity 764,507 780,887 LIABILITIES Non-current liabilities Deferred tax liabilities 649 2,845 Provisions for risks and charges - - Provisions for employee termination benefits 858 634 Long term financial loans 119,839 146,712 Total non-current liabilities 121,346 150,191 Current liabilities Trade payables 3,165 2,289 Payables to staff and social security organisations 2,027 1,084 Current tax 575 135 Other tax payables 2,113 1,414 Other payables 256 476 Short term financial loans 4,821 5,497 Total current liabilities 12,957 10,895 Liabilities relating to joint ventures 2,337 3,145 Held-for-sale liabilities - - TOTAL SHAREHOLDERS' EQUITY AND LIABILITIES 901,147 945,118
    • Financial Statements for the Year Ending 31 December 2010 52 At 31 December 2010, group shareholders’ equity was approximately EUR 764.0 million, compared with EUR 780.2 million at 31 December 2009. The decrease in the Group’s shareholders’ equity in 2010 (around EUR 16.2 million) was due to the reasons set out in the Statement of Performance – IAS 1. For details concerning individual items, please see the comments in the notes to the consolidated financial statements for the year ending 31 December 2010 indicated below. Financial Review - Net debt At 31 December 2010, consolidated net debt was approximately EUR 20.4 million, as shown in the table below, which provides a breakdown of assets and a comparison with the same figures at 31 December 2009: Net debt at 30 September Net Financial Position (€ million) Cash and Bank deposits 86.5 98.9 (12.4) Available-for-sale financial assets 15.0 15.8 (0.8) Financial receivables 2.7 2.6 0.1 Non-current financial payables (119.8) (146.7) 26.9 Current financial payables (4.8) (5.5) 0.7 TOTAL (20.4) (34.9) 14.5 Dec. 31, 2010 Dec. 31, 2009 Change The change in consolidated net debt in 2010 was due to the combined effect of the following factors: net investments in funds of EUR -9.7 million, chiefly accounted for by: - EUR 16.9 million in investments in funds (EUR 12.8 million in IDeA I FoF, EUR 3.3 million in IDeA CoIF I, EUR 0.1 million in ICF II and EUR 0.7 million in venture capital funds) - EUR 7.2 million in distributions from funds in the portfolio, primarily from IDeA I FoF cash outlay of EUR 1.1 million for the share buy-back plan dividends of EUR 2.7 million from IDeA AI and a cash distribution of EUR 20.8 million from Kenan Investments operating cash flow (mainly in the form of fees and revenues for services net of current expenses and financial income and charges, including fair value changes in interest rate swaps) and other movements totalling EUR 1.8 million Please see the notes to the accounts and the consolidated cash flow statement for a detailed breakdown of changes in these items. Consolidated net debt does not include the cash position of the IDeA AI Group since it is a joint venture: for the purposes of disclosure, this group reported a net cash position of approximately EUR 6.3 million (the DeA Capital portion) at 31 December 2010; it does, however, include the fair value estimate of the strike price of the option on the remaining 30% stake in FARE Holding (EUR 27.0 million at 31 December 2010), which is largely determined based on the acquisition cost of the 70% stake, adjusted for dividends received and other changes in shareholders’ equity since the date of acquisition.
    • Financial Statements for the Year Ending 31 December 2010 53 The company believes that the cash and cash equivalents and the other financial resources available are sufficient to cover the requirement relating to payment commitments already subscribed in funds, also taking into account the amounts expected to be called up/distributed by these funds. With regard to these residual commitments, totalling EUR 180.7 million, the company believes that the funds and credit lines currently available, as well as those that will be generated by its operational and financing activities, will enable the DeA Capital Group to meet the financing required for its investment activity and to manage working capital and repay debts when they become due.
    • Financial Statements for the Year Ending 31 December 2010 54 6. Analysis of results of the parent company DeA Capital S.p.A. The parent company DeA Capital S.p.A. operates as a holding company that carries out activities of coordination, development and strategic management of its subsidiaries, and also acts as an entity that makes financial investments directly. A summary of the income statement and balance sheet of DeA Capital S.p.A. for the financial year ending 31 December 2010 is shown below. Analysis of the results of the parent company – income statement (Euro) Year 2010 Year 2009 Other investment income/expense 24,694,430 7,598,652 Income from services 516,647 315,255 Realized gains 0 0 Other income 121,913 181,544 Personnel costs (3,268,826) (3,370,972) Service costs (3,038,525) (3,412,505) Depreciation, amortization and impairment (154,436) (183,343) Other expenses (10,244) (15,772) Financial income 1,384,249 1,623,126 Financial expenses (6,251,938) (6,088,044) PROFIT/(LOSS) BEFORE TAX 13,993,270 (3,352,059) Income tax 1,759,281 1,008,402 Income tax-Joint Venture 236,607 545,337 PROFIT/(LOSS) FOR THE YEAR FROM CONTINUING OPERATIONS 15,989,158 (1,798,320) Profit (Loss) from discontinued operations/held-for-sale assets 0 0 PROFIT/(LOSS) FOR THE YEAR 15,989,158 (1,798,320) The parent company reported net profit of approximately EUR 16.0 million in 2010, an improvement over the loss of EUR 1.8 million registered in 2009. For details concerning operating performance items, please see the comments in the notes below.
    • Financial Statements for the Year Ending 31 December 2010 55 Analysis of the results of the parent company - balance sheet The summary balance sheet for the parent company at 31 December 2010 compared to 31 December 2009 is shown below. (Euro thousand) 31.12.2010 31.12.2009 ASSETS Non-current assets Intangible and tangible assets Intangible assets 5,629 40,005 Tangible assets 158,969 209,390 Total intangible and tangible assets 164,598 249,395 Investments Subsidiaries and joint ventures 765,199,369 800,512,702 Available-for-sale investments 1,431,230 566,631 Available-for-sale funds 12,977,513 13,541,968 Receivables - - Total Investments 779,608,112 814,621,301 Other non-current assets Deferred tax assets - - Other non-current assets - - Total other non-current assets - - Total non-current assets 779,772,710 814,870,696 Current assets Trade receivables 150,541 203,104 Available-for-sale financial assets 15,037,722 15,017,469 Financial receivables 634,750 1,263,664 4,064,725 3,199,437 Other tax receivables 1,759,463 1,824,440 Other receivables 116,109 36,407 Cash and cash equivalents 54,234,322 58,559,529 Total current assets 75,997,632 80,104,050 Totale Attivo corrente 75,997,632 80,104,050 Held-for-sale assets - - TOTAL ASSETS 855,770,342 894,974,746 SHAREHOLDERS' EQUITY AND LIABILITIES SHAREHOLDERS' EQUITY Share capital 294,013,402 289,020,888 Share premium reserve 395,613,265 395,880,420 Legal reserve 61,322,420 61,322,420 Fair Value reserve (8,594,317) 20,555,910 Other reserves 726,307 8,927,714 Retained earnings (losses) - - Profit/(loss) for the year 15,989,158 (1,798,320) Shareholders' equity 759,070,235 773,909,032 LIABILITIES Non-current liabilities Deferred tax liabilities - - Provisions for risks and charges - - Provisions for employee termination benefits 193,076 131,915 Long term financial loans 90,621,354 114,876,893 Total non-current liabilities 90,814,430 115,008,808 Current liabilities Trade payables 986,394 982,703 Payables to staff and social security organisations 1,007,040 195,936 Current tax payables 4,911 - Other tax payables 175,930 177,328 Other payables 31,547 65,059 Short term financial loans 3,679,855 4,635,880 Total current liabilities 5,885,677 6,056,906 Held-for-sale liabilities - - TOTAL SHAREHOLDERS' EQUITY AND LIABILITIES 855,770,342 894,974,746 Tax receivables from Parent companies
    • Financial Statements for the Year Ending 31 December 2010 56 At 31 December 2010, the parent company's shareholders' equity totalled about EUR 759.1 million compared with EUR 773.9 million at 31 December 2009, a decrease of about EUR 14.8 million (due largely to the reduction in the fair value of the stake in DeA Capital Investments). For details concerning individual items, please see the comments in the notes to the annual financial statements at 31 December 2010 indicated below. Pursuant to the Consob Communication of 28 July 2006, the reconciliation between the profit and shareholders' equity reported at 31 December 2010 by the parent company DeA Capital S.p.A. is shown below together with the corresponding consolidated figures. (€ thousand) Net Equity at Dec. 31, 2010 Net Profit/(Loss) 2010 Net Equity at Dec. 31, 2009 Net Profit/(Loss) 2009 EQUITY and net profit/(loss) for the year, as reported in the Parent Company financial statements 759,070 15,989 773,909 (1,798) Elimination of book values from consolidated shareholdings: - Surplus of net equity amounts reported in financial statements compared to book values of shareholdings in consolidated companies 4,925 0 6,286 0 - Pro-rata results achieved by shareholdings 0 (1,377) 0 10,776 - Pro-rata results achieved by associated companies, valued as Shareholders’ Equity 0 (15,637) 0 (29,015) - Elimination of impairment of investments in DeA Capital S.p.A. 0 4,006 0 0 - Elimination of dividends received by shareholdings 0 (29,329) 0 (9,340) EQUITY and Group share of net profit/(loss) 763,995 (26,348) 780,195 (29,377) EQUITY and minority interests share of net profit/(loss) 552 939 692 326 EQUITY and net profit for the year, as reported in the consolidated financial statements 764,547 (25,409) 780,887 (29,051)
    • Financial Statements for the Year Ending 31 December 2010 57 7. Other information Own shares and parent company shares On 26 April 2010, the shareholders' meeting of DeA Capital S.p.A. approved, following the proposal made by the company's Board of Directors, the implementation of a new plan to purchase and dispose of own shares (the Plan), which authorises the Board of Directors to purchase and dispose of a maximum number of shares representing a stake of up to 20% of share capital in accordance with the law, on one or more occasions, on a rotating basis. At the same time, this resolution revoked the authorisation issued by the shareholders' meeting on 29 April 2009 for the previous plan to purchase own shares. Among other things, the authorisation specifies that purchases may be carried out in accordance with all procedures allowed by current regulations, with the sole exception of a public purchase or exchange offer, and that the unit price for the purchase must not be more than 20% above or below the share's reference price on the trading day prior to the purchase. The objective of the Plan is to allow the company to take action, in accordance with current regulations, to limit any unusual price movements and to normalise trading and pricing fluctuations resulting from distortions related to excess volatility or poor trading liquidity, as well as to purchase own shares to be used, as necessary, for share incentive schemes. These transactions will also allow the company to purchase own shares to be used, in accordance with its strategy, for capital-related transactions or other transactions in relation to which it may be appropriate to exchange or sell parcels of shares by means of an exchange, transfer or other method of disposal. The authorisation to carry out such purchases has a maximum duration of 18 months from the date the authorisation is granted by the shareholders’ meeting (until October 2011). The Board of Directors is also authorised to dispose of own shares purchased without time limitations in accordance with procedures it deems appropriate, at a price to be determined, from time to time, but which may not be (other than in certain specific exceptions) more than 20% below the share's reference price on the trading day prior to each disposal. The Board of Directors, which met immediately following the shareholders' meeting, passed the resolutions necessary to execute the plan, and granted the chairman and chief executive officer all the necessary powers. At 31 December 2010, the company held 12,598,698 own shares, resulting from the acquisition in 2010 of 944,343 shares, and the delivery of 5,963,857 shares relating to the acquisition of FARE Holding. As of the date of this document, based on purchases made after the end of 2010, totalling 3,968,629 shares, and the delivery of 4,806,920 shares as part of the reorganisation of IDeA AI (see "Significant events after the end of 2010"), the company had a total of 11,760,407 own shares, corresponding to about 3.8% of the share capital. During 2010, the company did not hold, purchase or sell, on its own account or through a trust company, any shares in parent company De Agostini S.p.A.
    • Financial Statements for the Year Ending 31 December 2010 58 Stock option plans As regards company incentive plans (stock option plans), pursuant to the provisions of the 2004 and 2005 stock option plans, as at 31 December 2010, another 63,200 stock options became exercisable. On 26 April 2010, the shareholders' meeting approved the DeA Capital stock option plan for 2010 - 2015, under which a maximum of 3,000,000 options may be allocated. To implement the resolution of the shareholders' meeting, the DeA Capital S.p.A. Board of Directors allocated a total of 2,235,000 options to certain employees of the company and its subsidiaries, and employees of the parent company De Agostini S.p.A. who carry out important roles. In line with the criteria specified in the regulations governing the DeA Capital stock option plan for 2010 – 2015, the Board of Directors also set the exercise price for the options allocated at EUR 1.318, which is the arithmetic mean of the official price of ordinary DeA Capital shares on the Mercato Telematico Azionario, the Italian screen-based trading system organised and managed by Borsa Italiana S.p.A., on the trading days between 25 March 2010 and 25 April 2010. The options can be allocated to the beneficiaries, in one or more tranches, up to 30 June 2011 and exercised by the latter, in one or more tranches, but in any case for an amount per tranche of not less than 25% of the options assigned to each, with effect from the fifth calendar day following the date that the adjusted NAV figure at 31 December 2012 is announced, until 31 December 2015. The adjusted NAV means the value of the assets, net of liabilities, calculated on the basis of the company’s operating performance at 31 December 2012 and restated, where necessary, to take account of the measurement at fair value of all investments, as assessed by an independent third party. With reference to the options assigned pursuant to the 2007-2013 stock option plans, as the conditions for exercising these options did not occur, they must be considered annulled and the right to subscribe to shares in DeA Capital S.p.A. incorporated therein must consequently be deemed to have lapsed. Finally, the authority granted to the Board of Directors by the above-mentioned shareholders' meeting of 7 September 2007 to increase share capital, pursuant to art. 2443, para. 2 of the Italian civil code for transactions to purchase equity investments (including through mergers or spin-offs), companies or business divisions with no annual limit, remains effective. DeA Capital 2009-2012 warrants On 3 March 2009, the shareholders' meeting of DeA Capital S.p.A. approved an investment plan entailing the offer of warrants for subscription by the management. Under the plan regulations, the DeA Capital 2009-2012 warrants allow holders to purchase (under certain conditions) one new DeA Capital share with a nominal value of EUR 1 for each warrant held, at an exercise price of EUR 1.92. The warrants may be exercised between 1 April 2012 and 30 September 2012. In order to implement the plan, the extraordinary shareholders' meeting of DeA Capital S.p.A. also voted to issue up to 1,500,000 DeA Capital 2009-2012 warrants and to increase the share capital, pursuant to the combined provisions of art. 2441, para. 8 of the Italian civil code and art. 134, para. 2 of Legislative Decree 58 of 24 February 1998 by a nominal amount of up to EUR 1,500,000 in separate issues pursuant to art. 2439, para. 2 of the Italian civil code, to be
    • Financial Statements for the Year Ending 31 December 2010 59 carried out through the issuance of up to 1,500,000 ordinary shares with a nominal value of EUR 1, to be used solely and irrevocably for the exercise of these warrants. The subscription price for the warrants was EUR 0.211, based on the fair value estimated by the Board of Directors supported by independent valuations. The warrants, available for subscription by beneficiaries from the date on which the resolution of the extraordinary shareholders' meeting on the issue of the warrants was recorded in the companies register until 31 July 2009, were fully subscribed. Beneficiaries are individuals who were classified as employees of the company and/or its subsidiaries and/or the parent company De Agostini S.p.A. at the time of the warrant subscription offer and at the time of the subscription itself, as identified by the Board of Directors’ meeting of 13 January 2009. For further information on the terms and conditions of the plan and its beneficiaries, please see the Information Prospectus prepared in accordance with art. 84-bis, para. 1 of Consob Regulation 11971/1999 and table 7 of Appendix 3A of Consob Regulation 11971/1999 available to the public at the headquarters of DeA Capital S.p.A. and on the company's website www.deacapital.it. Transactions with parent companies, subsidiaries and related parties Transactions with related parties Transactions with related parties, including intercompany transactions, were typical, usual transactions that are a part of the normal business activities of group companies. These transactions were regulated under market conditions in light of the nature of the goods and services provided. Specifically, on 22 March 2007, the company signed a service agreement with the controlling shareholder of De Agostini S.p.A. for the latter to provide operating services in the administration, finance, control, legal, corporate and tax areas. The agreement, which is renewable annually, is priced at market rates, and is intended to allow the company to maintain a streamlined organisational structure in keeping with its development policy, and to obtain adequate operational support at the same time. Information on related party transactions is presented in the sections "Intercompany relationships with the parent company and its group" in the annual and consolidated financial statements. Remuneration and stock options to directors, auditors, general managers and managers with strategic responsibilities Information regarding the remuneration and stock options allocated to directors, auditors, general managers and managers with strategic responsibilities is reported in the relevant sections of the annual and consolidated financial statements. Shareholdings held by directors, auditors, general managers and managers with strategic responsibilities
    • Financial Statements for the Year Ending 31 December 2010 60 Information regarding the shareholdings held by directors, auditors, general managers and managers with strategic responsibilities is reported in the relevant sections of the annual and consolidated financial statements. Management and coordination Since 30 January 2007, the company has been controlled by De Agostini S.p.A., which, in accordance with art. 2497-sexies of the Italian civil code, carries out management and coordination activities for the company. Please see the notes to the financial statements for key figures from the latest approved financial statements of De Agostini S.p.A. Research and development activities Note that pursuant to art. 2428, para. 2 of the Italian civil code, the company did not carry out any research and development activity in 2010. Security Planning Document - Personal data processing Art. 34 of Legislative Decree 196 of 30 June 2003 stipulates that in cases where personal data is processed electronically, certain security measures must be adopted, as set out in the Technical Regulations of Attachment B of the law. These include, under para. g), the maintenance of an up-to-date Security Planning Document. The Security Planning Document contains the technical and organisational security measures implemented in compliance with the law to ensure the protection of personal data with regard to its storage and handling. These measures are based on risk analysis and the distribution of duties and responsibilities within the structures set up to handle personal data. In accordance with the prescriptions of the above-mentioned Legislative Decree, the company has revised and updated the Security Planning Document. Atypical or unusual transactions and non-recurring significant events and transactions Pursuant to Consob Communication 6064293 of 28 July 2006, in 2010 neither the company nor the group carried out any atypical and/or unusual transactions or non-recurring significant transactions. Corporate governance Please see the document entitled "Report on Corporate Governance and Ownership Structure" (found in the Corporate Governance section of the company's website) for information on the corporate governance structure of DeA Capital S.p.A., which was adopted for the purposes of adapting to the principles of the Code of Conduct prepared by the "Committee for the Corporate Governance of Listed Companies". Below is a summary of the main information governing DeA Capital S.p.A.'s corporate governance.
    • Financial Statements for the Year Ending 31 December 2010 61 Issuer's profile The Issuer's corporate governance structure is based on the traditional administration and control model, and hinges on the central role played by the Board of Directors, the proper disclosure of management decisions, an effective internal control system, the effective regulation of potential conflicts of interest and on rigorous standards of conduct for carrying out transactions with related parties. Extent of application of the Code of Conduct For 2010, the Board of Directors again implemented the Board's self-assessment process. Directors showed a high degree of participation in the Board's self-assessment process, and a review of the results of the board performance evaluation resulted in an overall positive judgement on the functioning of the Board. Corporate bodies • The Board of Directors consists of eleven members, nine of whom are non-executive directors, and four of whom are independent directors. It plays a key role in the corporate governance system of DeA Capital S.p.A. In particular, it has the power and the duty to manage the operations of the Issuer with the ultimate and main goal of creating value for shareholders. Pursuant to the articles of association, the Board manages the company's business, and is invested with all the administrative powers needed for this purpose, with the exception of those powers reserved for the shareholders' meeting, pursuant to legislation and the articles of association. In 2010, the Board of Directors met five times, with an average meeting length of about an hour and a half. For 2011, the calendar of scheduled meetings has been published in both Italian and English (also available at www.deacapital.it). • The Board of Auditors comprises six members, consisting of the chairman, two permanent auditors and three deputy auditors. It monitors compliance with the law and the company’s articles of association, observance of the principles of proper management, and the suitability and proper functioning of the organisational, administrative and accounting structure. In 2010, the Board of Auditors met nine times. • The Remuneration Committee comprises three independent directors. The Committee submits proposals to the Board of Directors concerning the remuneration of the chief executive, and assesses the chief executive’s recommendations regarding the remuneration of directors with strategic responsibility. In 2010, the Remuneration Committee met once. • The Internal Audit Committee comprises three non-executive directors, of which two are independent. The Committee has a consultative role and makes proposals to the Board of Directors. In 2010, the Internal Audit Committee met six times.
    • Financial Statements for the Year Ending 31 December 2010 62 Corporate Governance Chart as at 31 December 2010: Shareholders’ meeting External Auditors: KPMG Statutory Auditors: Chairman: Angelo Gaviani Permanent Auditors: Cesare Andrea Grifoni, Gian Piero Balducci Deputy Auditors: Giulio Gasloli, Andrea Bonafé, Maurizio Ferrero Board of Directors Executive: Lorenzo Pellicioli (Chair.), Paolo Ceretti (CEO) Non executive: Lino Benassi, Daniel Buaron, Marco Drago, Roberto Drago, Marco Boroli Independent: Rosario Bifulco, Claudio Costamagna, Alberto Dessy, Andrea Guerra Remuneration Committee: Coordinator: Rosario Bifulco Members: Claudio Costamagna (Indp. Dir.), Andrea Guerra (Indep. Dir.) Manager responsible for the company accounting statements: Manolo Santilli (CFO) Internal Audit: Davide Bossi Internal Audit Board: Gian Piero Balducci (Stat. Auditor), Alberto Dessy (Indep. Dir.), Davide Bossi (Internal Audit) Lead Independent Director: Alberto Dessy (Indep.) Internal Control Committee: Chairman: Alberto Dessy (Indep. Dir.) Members: Rosario Bifulco(Indep. Dir.), Lino Benassi (non executive Dir.) Shareholders’ meeting External Auditors: KPMG Statutory Auditors: Chairman: Angelo Gaviani Permanent Auditors: Cesare Andrea Grifoni, Gian Piero Balducci Deputy Auditors: Giulio Gasloli, Andrea Bonafé, Maurizio Ferrero Board of Directors Executive: Lorenzo Pellicioli (Chair.), Paolo Ceretti (CEO) Non executive: Lino Benassi, Daniel Buaron, Marco Drago, Roberto Drago, Marco Boroli Independent: Rosario Bifulco, Claudio Costamagna, Alberto Dessy, Andrea Guerra Remuneration Committee: Coordinator: Rosario Bifulco Members: Claudio Costamagna (Indp. Dir.), Andrea Guerra (Indep. Dir.) Manager responsible for the company accounting statements: Manolo Santilli (CFO) Internal Audit: Davide Bossi Internal Audit Board: Gian Piero Balducci (Stat. Auditor), Alberto Dessy (Indep. Dir.), Davide Bossi (Internal Audit) Lead Independent Director: Alberto Dessy (Indep.) Internal Control Committee: Chairman: Alberto Dessy (Indep. Dir.) Members: Rosario Bifulco(Indep. Dir.), Lino Benassi (non executive Dir.)
    • Financial Statements for the Year Ending 31 December 2010 63 Main risks and uncertainties to which the parent company and consolidated group companies are exposed As described in this Report on Operations, the DeA Capital Group operates through, and is structured as, two business areas, Private Equity Investment and Alternative Asset Management. The risks set out below consider the characteristics of the market and the operations of parent company DeA Capital S.p.A. and the companies included in the group’s consolidated financial statements, and the main outcomes of a risk assessment, conducted in 2010, as well as the periodic monitoring conducted partly through the regulatory policies adopted by the group. It should be noted, however, that there could be risks that are currently unidentified or deemed not significant that could have an impact on the group's operations. The group has adopted a modern corporate governance system that provides effective management of the complexities of its operations, and enables both the company and the group to achieve their strategic objectives. Furthermore, the assessments conducted by the organisational units and the directors confirm both the non-critical nature of these risks and uncertainties and the financial solidity of the DeA Capital Group. With reference to the specific risks relating to the main Private Equity investments, i.e. Générale de Santé and Migros, please refer to the respective annual reports, and more specifically Générale de Santé’s Document de référence and Migros’ Annual Report (available on their websites). In particular, the latest Document de référence (sections 4.1 - RISQUES LIES AUX ACTIVITES DU GROUPE and 4.2 - GESTION DES RISQUES) available as of the date of this report, indicates the following as the main risk factors for Générale de Santé: • Risks related to company debt (Risques liés à l’endettement de Générale de Santé) • Liquidity risks (Risques de liquidité) • Interest rate risks (Risques de taux d’intérêt) • Risks relating to obtaining financing (Risques liés à l’obtention de financements) • Risks relating to the sale of 32 operational facilities to Gécimed and Icade (Risques liés aux conséquences de la cession des murs de 32 sites d’exploitation à Gécimed et Icade) • Risks relating to the clinic restructuring and construction programme (Risques liés aux programmes de restructuration ou de construction majeures de cliniques) • Risks relating to the external growth strategy (Risques liés à la stratégie de croissance externe) • Risks relating to changes in prices (Risques liés à l’évolution de la tarification) • Risks relating to the recruitment and retention of staff and practitioners (Risques liés au recrutement et à la fidélisation du personnel et des praticiens) • Risks relating to applicable legislation (Risques liés à la réglementation applicable) • Risks of a deterioration in the reputation of Générale de Santé in the event of legal proceedings being brought against a group facility or practitioner (Risques liés à la dégradation de la réputation de Générale de Santé en cas de mise en jeu de la responsabilité d’un établissement ou d’un praticien du Groupe) • Risks relating to environmental protection legislation (Risques liés à la réglementation relative à la protection de l’environnement) • Risks relating to the adequacy, costs and availability of insurance cover (Risques liés à l’adéquation, aux coûts et à la disponibilité de couverture d’assurance) • Exceptional events and disputes (Faits exceptionnels et litiges) • Risks relating to IT suppliers (Risques liés au fournisseur en matière informatique).
    • Financial Statements for the Year Ending 31 December 2010 64 A. Contextual risks A.1. Risks relating to general economic conditions The operating performance and financial position of the DeA Capital Group are affected by the various factors that make up the macro-economic environment, including increases or decreases in gross domestic product, investor and consumer confidence, interest rates, inflation, the costs of raw materials and unemployment. The ability to meet medium- to long-term objectives could be affected by general economic performance, which could slow the development of sectors the group has invested in, and at the same time, the business of DeA’s investee companies. A.2. Socio-political events In line with its own strategic growth guidelines, one of the DeA Capital Group’s activities is private equity investment in companies and funds in different jurisdictions and countries spread around the world, which, in turn, invest in various states and geographical areas. The DeA Capital Group may invest in foreign countries subject to social, political and economic conditions that put the achievement of its investment objectives at risk. A.3. Regulatory changes Many group companies conduct their operations in highly regulated sectors and markets. Any changes to or developments in the legislative or regulatory framework that affect the costs and revenues structure of investee companies or the tax regime applied, could have negative effects on the group’s financial results, and necessitate changes in the group’s strategy. To combat this risk, the group has established procedures to constantly monitor sector regulation and any changes thereto, in order to seize business opportunities and respond to any changes in the legislation and regulations in force in good time. A.4. Performance of the financial markets The company’s ability to meet its strategic and management objectives could depend on the performance of public markets. A negative trend on the public markets could have an effect on the private equity sector in general, making investment and divestment transactions more complex, and on the group’s capacity to increase the NAV of investments in particular. The value of investments held directly or indirectly through funds in which the company has invested could be affected by factors such as comparable transactions concluded on the market, sector multiples and market volatility. These factors that cannot be directly controlled by the group are constantly monitored in order to identify appropriate response strategies that involve both the provision of guidance for the management of group companies, and the investment and value enhancement strategy for the assets held.
    • Financial Statements for the Year Ending 31 December 2010 65 A.5. Exchange rates Holding investments in currencies other than the euro exposes the group to changes in exchange rates between currencies. The investment in Kenan is managed on an ad hoc basis, since although it was made in euro, the underlying asset is expressed in Turkish lira. Taking into account the medium-/long-term time horizon of the investment, it is believed that the expected return on the investment is able to absorb any devaluation of the underlying currency, in line with the outlook for the currency. A.6. Interest rates Ongoing financing operations that are subject to variable interest rates could expose the group to an increase in related financial charges, in the event that the reference interest rates rise significantly. DeA Capital S.p.A. has established appropriate strategies to hedge against the risk of fluctuations in interest rates. Given the partial hedge of the underlying, the company classifies these securities as speculative instruments, even though they are put in place for hedging purposes. B. Strategic risks B.1. Concentration of the Private Equity investment portfolio The private equity investment strategy adopted by the group includes: - direct investments - indirect investments (in funds) Within this strategy, the group’s overall profitability could be very negatively affected by an unfavourable trend in one or a few investments, in the event that there is insufficient risk diversification, resulting from the excessive concentration of investment in a small number of assets, sectors, countries, currencies or of indirect investments in funds with limited investment targets/types of investment. To combat these risk scenarios, the group pursues an asset allocation strategy intended to create a balanced portfolio with a moderate risk profile, investing in attractive sectors and in companies with an interesting current and future risk/return ratio. Furthermore, the combination of direct and indirect investments, which, by their nature, guarantee a high level of diversification, helps reduce the level of asset concentration. B.2. Concentration of Alternative Asset Management activities In Alternative Asset Management, in which the group is active through the companies IDeA Alternative Investments and First Atlantic Real Estate Holding, events could arise as a result of excessive concentration that hinder the achievement of the returns targeted. These events could refer to:
    • Financial Statements for the Year Ending 31 December 2010 66 • Private equity/absolute return funds o concentration of the management activities of asset management companies across a limited number of funds, in the event that one or more funds decides to cancel its asset management mandate o concentration of the financial resources of the funds managed in a limited number of sectors and/or geographical areas, in the event of currency, systemic or sector crises o for closed funds, concentration of the commitment across just a few subscribers, in the event of a counterparty experiencing financial difficulties • Real estate funds o concentration of real estate present in the portfolio of managed funds in a few cities and/or in limited types of property (management/commercial), in the event of a crisis on the property market concerned o concentration in respect of certain important tenants, in the event that these withdraw from the rental contracts, which could lead to a vacancy rate that has a negative impact on the funds' financial results and the valuation of the property managed o concentration of the maturities of numerous real estate funds within a narrow timeframe, with related high availability of property on the market, leading to a decrease in its value and requiring a longer timeframe for liquidation For each of the risk scenarios outlined above, the group has defined and implemented appropriate strategies that include strategic, operational and management aspects, as well as a system monitoring the level of diversification of AAM activities. B.3. Key resources (governance/organisation) The success of the DeA Capital Group depends to a large extent on its executive directors and key management figures, their ability to effectively manage the business and the normal activities of individual group companies, as well as knowledge of the market and the professional relationships established. The departure of one or more of these key resources, without a suitable replacement being found, as well as an inability to attract and retain new and qualified resources, could impact growth targets and have a negative effect on the group’s activities and financial results. To mitigate this risk, the group has put in place HR management policies, in strict correlation to the needs of the business, and incentive policies that are periodically reviewed, including in light of the general economic climate and the results achieved by the group. C. Operating risks C.1. Investment operations Investment operations conducted by the group are subject to the risks typical of private equity activities, such as the correct valuation of the target company and the nature of the transactions carried out, which require the acquisition of strategic shareholdings, but not controlling interests, governed by appropriate shareholders’ agreements.
    • Financial Statements for the Year Ending 31 December 2010 67 The group has implemented a structured process of due diligence on target companies, which requires the involvement of the different group offices concerned and the careful definition of shareholders’ agreements in order to conclude agreements in line with the investment strategy and the risk profile chosen by the group. C.2. Compliance with covenants Some investment operations were concluded using financial leverage to invest in the target companies. For financing contracts signed by investee companies, specific covenants backed by real guarantees are in place; failure to comply with these could necessitate recapitalisation operations for investee companies and lead to an increase in financial charges relating to debt refinancing. Failure to comply with covenants on financing could have negative effects on both the financial situation and operations of investee companies, and on the value of the investment. The group constantly monitors the significant reference parameters for the financial obligations taken on by investee companies, in order to identify any unexpected deviation in good time. C.3. Divestment operations The group invests over a medium-/long-term time horizon, normally three to six years for investments made through the acquisition of direct shareholdings in companies or up to ten years for investments made through funds. Over the investment management period, exogenous situations could arise that might have a significant impact on the management results of the investee companies, and consequently the value of the investment itself. Furthermore, in the case of co-investment, guiding the management of an investee company could prove problematic or unfeasible, and it may ultimately prove impossible to dispose of the stakes held owing to lock-up clauses. The divestment strategy could therefore be negatively affected by various factors, some of which cannot be forecast at the time the investments are made. There is therefore no guarantee that expected earnings will be realised given the risks resulting from the investments made. To combat these risk situations, the group has defined a process to monitor the performance of its investee companies, facilitated by its representation on the management bodies of significant investee companies, with a view to identifying in good time any critical situations. C.4. Funding risk The income flows expected from the Alternative Asset Management business depend on the capacity of the group’s asset management companies to stabilise/grow their assets under management. In this environment, fund raising activity could be negatively affected by both exogenous factors, such as the continuation of the global economic crisis or the trend in interest rates, and endogenous factors, such as bad timing in respect of fund raising activities by the asset management companies or the departure of key managers from the companies. The group has established appropriate risk management strategies in relation to fund raising, with a view to both involving new investors and retaining current investors. Other information
    • Financial Statements for the Year Ending 31 December 2010 68 At 31 December 2010, the group had 60 employees including 13 senior managers, 15 middle managers and 32 clerical staff (57 employees at 31 December 2009); this headcount does not include those seconded by the parent company De Agostini S.p.A., and it can be broken down into 15 employees at the holding company and 45 employees at the FARE Holding Group. The company signed a service agreement with the controlling shareholder for the latter to provide operating services in the administration, finance, control, legal, corporate and tax areas. This agreement, which is renewable annually, is priced at market rates, and is intended to allow the company to maintain a streamlined organisational structure in keeping with its development policy, and at the same time to obtain adequate operational support. DeA Capital S.p.A. has adopted the national tax consolidation scheme of the B&D Holding Group (the group headed by B&D Holding di Marco Drago e C. S.a.p.a.). This option was exercised jointly by each company and the parent company B&D Holding di Marco Drago e C. S.a.p.a. by signing the "Regulation for participation in the national tax consolidation scheme for companies in the De Agostini Group" and providing notification of this option to the tax authorities pursuant to the procedures and terms and conditions set out by law. The option is irrevocable for the three-year period of 2008-2010 unless the requirements for applying the scheme are not met. With regard to the regulatory requirements set out in art. 36 of the Market Regulation on conditions for the listing of parent companies of companies formed or regulated by laws of non-EU countries and of significant importance in the consolidated accounts, it is hereby noted that no group company falls within the scope of the above-mentioned provision. Furthermore, conditions prohibiting listing pursuant to art. 37 of the Market Regulation relating to companies subject to the management and coordination of other parties do not apply.
    • Financial Statements for the Year Ending 31 December 2010 69 Significant events after the end of 2010 and outlook Significant events after the end of 2010 Reorganisation of IDeA Alternative Investments S.p.A. (IDeA AI) The reorganisation of IDeA Alternative Investments (IDeA AI) was conducted through a partial non-proportional demerger, with a reduction in the share capital of IDeA AI and allocation of Investitori Associati SGR and Wise SGR to the management of Investitori Associati SGR and Wise SGR respectively, in return for the cancellation of the stakes held by those companies in IDeA AI. As a result of the demerger, DeA Capital S.p.A. acquired control of IDeA AI. Following approval by the Bank of Italy and the Italian Competition Authority, the deed of the demerger of IdeA AI, effective from 17 January 2011, was completed on 13 January 2011. DeA Capital S.p.A., which previously held 44.36% of the company’s capital, has therefore acquired control of 90.11% of IDeA AI and the assets it owns. These primarily include 100% of IDeA Capital Funds SGR, 65% of Soprarno SGR, 65% of IDeA SIM and 10% of Alkimis SGR. Moreover, on 20 January 2011, in order to gain control of the entire share capital of IDEA AI, DeA Capital S.p.A. acquired the remaining 9.89% of the company’s stock held by private investors, including directors Lorenzo Pellicioli and Paolo Ceretti, in exchange for 4,806,921 DeA Capital shares, using existing own shares in the portfolio, equal to 1.57% of the capital. As part of the valuation performed for the various transactions mentioned above, the company employed the services of an independent external consultant. Agreement for the merger of FIRST ATLANTIC RE SGR and FIMIT SGR On 26 January 2011, FARE SGR and parent company FARE Holding (70%-owned by DeA Capital S.p.A.), as one party, and FIMIT - Fondi Immobiliari Italiani SGR S.p.A. and shareholders IFIM, Inpdap, Enpals and Enasarco (jointly, the "Fimit shareholders"), as the other, approved the plan for the merger by incorporation of FARE SGR into FIMIT SGR. The merger of the two companies will create the largest independent real estate asset management company in Italy, with over EUR 8 billion in assets under management and 19 managed funds (including five listed funds) and commission estimated at around EUR 57 million for 2010. This will put it among the major partners of Italian and international investors in promoting, creating and managing closed-end mutual investment funds in real estate. The transaction will strengthen the strategic position of both companies and their relations with institutional investors in Italy, also creating the conditions for the future development of activities on foreign markets and generating economies of scale and synergies in real estate fund management. Based on the commitments made in the framework agreement signed (Framework Agreement), the two asset management companies will carry out the necessary steps to approve the merger plan at their respective boards of directors' meetings. Subject to the necessary approval by the Bank of Italy and the Italian Competition Authority, the shareholders’ meetings of the two asset management companies will approve the merger plan, and will draw up the merger deed within an estimated timescale of around six months.
    • Financial Statements for the Year Ending 31 December 2010 70 It has been contractually agreed between the parties in the Framework Agreement that the FIMIT/FARE exchange ratio shall be 1.48:1, which must be confirmed by the court-appointed expert. The calculation of the ratio did not include the economic rights to the performance fees of the two asset management companies’ existing funds at the time of the merger, which shall continue to belong to the current shareholders of FIMIT SGR and FARE SGR, via the issue and allocation to the latter of financial equity instruments. FARE SGR will be merged into FIMIT SGR, after which the incorporating company will change its name to IDeA FIMIT SGR S.p.A. (also New Asset Management Company). At the same time as the merger, the following operations will be completed: • DeA Capital S.p.A. shall acquire from Feidos S.p.A. (Feidos, a company owned by Massimo Caputi) a 58.31% stake in IFIM (the IFIM Investment), the company that exclusively holds a 17.15% stake, pre-merger, in FIMIT SGR • IFIM shall purchase the stake held by the LBREP III Fimit Sarl fund (LBREP) in FIMIT SGR, equal to 18%, pre-merger, of the asset management company’s capital Following the operations listed above and based on the exchange ratio defined, after the merger, FARE Holding will own a stake of 40.32% in the New Asset Management Company, IFIM will own 20.98%, Inpdap 18.33%, Enpals 11.34%, Enasarco 5.97%, Inarcassa 2.98% and other Fimit shareholders 0.08%. As a result, the DeA Capital subsidiaries, FARE Holding (70.0%) and IFIM (58.31%), shall jointly hold a stake of 61.30% in the New Asset Management Company. The remaining capital will be broadly split between the shareholders Inpdap, Enpals, Enasarco and Inarcassa. Note that, by virtue of the existing options that allow the purchase of the remaining 30% of FARE Holding, DeA Capital S.p.A. could acquire complete control of the company by December 2013. At the same time as the conclusion of the Framework Agreement, Shareholders’ Agreements were also reached: (i) between FARE Holding and the FIMIT Shareholders regarding the corporate governance of the New Asset Management Company; and (ii) between DeA Capital, Massimo Caputi and Feidos regarding the corporate governance of IFIM. On the basis of these agreements, the parties agreed that: — the operational management of the New Asset Management Company will be assigned to a CEO, to be appointed by IFIM’s new majority shareholder, DeA Capital S.p.A. — Massimo Caputi and Daniel Buaron, the current CEOs of the two asset management companies, will be appointed to the Board of Directors of the New Asset Management Company, as well as to the Executive Committee, with responsibility for the Italian market and the foreign market respectively — the Board of Directors of the New Asset Management Company will have 13 members, comprising the CEO, two members appointed by IFIM, five appointed by FARE Holding, and the remaining five appointed by Inpdap, Enpals and Enasarco — a qualified majority of 72% will be introduced for the shareholders’ meeting of the New Asset Management Company for voting on the most important decisions (capital increases, mergers, demergers, liquidation, other changes to the articles of association, etc.) in order to protect minority shareholders — reciprocal put and call options will be attached to the IFIM shares owned by Feidos and Massimo Caputi, enabling these shares to be transferred to DeA Capital S.p.A. over a maximum period of six years, after which operation DeA Capital S.p.A. will own the whole of IFIM — a lock-up period of 36 months starting from the merger will apply to the IdeA FIMIT SGR shares of FARE Holding, while the lock-up period for the shares owned by IFIM will end with
    • Financial Statements for the Year Ending 31 December 2010 71 the expiry of the above-mentioned options (maximum six years), as these firms are strategic partners in the initiative — starting from the 24th month after the completion of the merger, and continuing until the 54th month, shareholders representing at least 20% of the share capital of the New Asset Management Company have the right to request the flotation of the New Asset Management Company, and are obliged to offer the requisite number of shares for the public offer to ensure that it is successful Sale of the stake in Stepstone by IDeA AI On 1 February 2011, IDeA AI sold the entire share capital of IDeA AI Sarl, which in turn owns a 4.9% stake in Stepstone, and also has a right to a portion of the management fees and carried interest of the Blue Skye fund. The stake was sold for a total of approximately EUR 2.6 million. Increase in daily purchase limits in the share buy-back plan In relation to the plan to buy and sell own shares approved by the shareholders on 26 April 2010, on 14 February 2011 DeA Capital S.p.A. announced its intention to buy, depending on market conditions, shares up to a maximum of 50% of the average daily trading volume for the 20 trading days preceding the date of purchase. The decision to increase purchase volumes was made on the basis of two factors: a) the reduction in own shares held by the company to 2.56% of the share capital (with a value of around EUR 7.9 million) following the last instalment of the payment in shares for the acquisition of FARE Holding in December 2010 and the use of own shares to acquire a 9.9% stake in IDeA Alternative Investments in January 2011 b) the continuing low liquidity of DeA Capital shares, for which 2010 trading volumes were significantly below the average for stocks listed on markets managed by Borsa Italiana, calculated as a percentage of the free float Under the plan to buy and sell own shares, DeA Capital is authorised to purchase, for a period of 18 months, up to 20% of the share capital, equivalent to 61,322,420 shares, in accordance with the regulatory procedures, excluding public purchase or exchange offers. This plan also allows for the shares purchased to be sold at any time and for an unlimited period, whether on the market, in implementation of management incentive plans, or in the context of transactions such as acquisitions, asset transfers, mergers, demergers or the issue of convertible bonds or warrants.
    • Financial Statements for the Year Ending 31 December 2010 72 Outlook The outlook continues to focus on the strategic development guidelines followed last year, with an emphasis on increasing the value of assets in the Private Equity Investment area and on developing the Alternative Asset Management platform. Specifically, as regards direct private equity investment, the group expected to improve on the results registered in 2010, both for GDS and for Migros, mainly thanks to major efficiency initiatives in the businesses in question; in terms of indirect private equity investment (i.e. the funds in which the group has subscribed to capital commitments), it expects a further improvement in capital distributions, which should largely offset capital calls, thereby reducing net cash requirements. In alternative asset management (the management of own and third-party funds), significant growth is expected with the launch of new products and the completion of the integration of FARE SGR and FIMIT SGR. In this regard, the necessary authorisation requests have already been submitted to the relevant authorities, and the operation is expected to be completed by the end of the current year; as stated in the Report on Operations, the merger of FARE SGR and FIMIT SGR will lead to the creation of the largest real estate asset management company in Italy, with assets under management of more than EUR 8 billion and 19 managed funds, in which DeA Capital S.p.A. will be the majority shareholder. Obviously, the economic environment – for which it is still difficult to make forecasts – will influence the operating and financial performance of the group’s assets, as well as the prospects of generating a return on the investments made. The group believes, however, that it has built a portfolio well able to withstand any shocks and one that at the same time is able to benefit from improvements in conditions, particularly in terms of the financial markets, which more than anything else drive expectations regarding growth in the value of investments and the raising of new funds. At the same time, in support of the strategic guidelines set out above, the company will continue to maintain a solid asset and financial structure, implementing any initiative with rigour and discipline.
    • Financial Statements for the Year Ending 31 December 2010 73 8. Proposal to approve the financial statements of DeA Capital S.p.A. for the year ending 31 December 2010 and related and resulting resolutions Dear shareholders, In submitting the annual financial statements for the period ending 31 December 2010 for your approval, the Board of Directors proposes that you pass the resolution below: “”” The DeA Capital S.p.A. ordinary shareholders’ meeting, - after reviewing the draft annual financial statements for the year ending 31 December 2010, which show profit of EUR 15,989,158 (versus a loss of EUR 1,798,320 in 2009) - in acknowledgement of the reports from the Board of Auditors and from the external auditors, KPMG S.p.A. votes 1. to approve the report of the Board of Directors on the group's position and on operating performance 2. to approve the balance sheet, income statement and notes to the financial statements for the year ending 31 December 2010 and the related annexes 3. to carry forward the profit of EUR 15,989,158 reported in the financial statements for the year ending 31 December 2010 4. to grant Chairman Lorenzo Pellicioli and Chief Executive Officer Paolo Ceretti broad powers to execute this resolution, jointly or severally through their agents and in compliance with the deadlines and procedures established by law “”” Milan, 14 March 2011 FOR THE BOARD OF DIRECTORS Chairman Lorenzo Pellicioli
    • Financial Statements for the Year Ending 31 December 2010 74 Consolidated Financial Statements for the Year Ending 31 December 2010
    • Financial Statements for the Year Ending 31 December 2010 75 Consolidated Financial Statements for the Year Ending 31 December 2010 • Consolidated Statement of Financial Position • Consolidated Income Statement • Consolidated Statement of Comprehensive Income • Consolidated Cash Flow Statement • Statement of Changes in Consolidated Shareholders’ Equity • Notes to the financial statements
    • Financial Statements for the Year Ending 31 December 2010 76 Consolidated Statement of Financial Position (Euro thousand) Note 31.12.2010 31.12.2009 ASSETS Non-current assets Intangible and tangible assets Goodwill 1a 71,756 74,360 Intangible assets 1b 2,120 9,102 Property, plant and equipment 1c 382 478 Total intangible and tangible assets 74,258 83,940 Investments Investments valued at equity 2a 339,022 345,372 Other available-for-sale companies 2b 211,511 239,917 Available-for-sale funds 2c 98,622 83,776 Other avalaible-for-sale financial assets 2d 304 304 Total Investments 649,459 669,369 Other non-current assets Deferred tax assets 3a 243 279 Financial loan and receivables 3b 996 2,662 Other non-current assets - - Total other non-current assets 1,239 2,941 Total non-current assets 724,956 756,250 Current assets Trade receivables 4a 2,658 2,045 Available-for-sale financial assets 4b 15,038 15,779 Financial receivables 4c 1,682 338 Tax receivables from Parent companies 4d 4,065 3,199 Other tax receivables 4e 1,832 2,211 Other receivables 4f 557 403 Cash and cash equivalents 4g 86,517 98,874 Total current assets 112,349 122,849 Total current assets 112,349 122,849 Assets relating to joint ventures 5 63,842 66,019 Held-for-sale assets - - TOTAL ASSETS 901,147 945,118 SHAREHOLDERS' EQUITY AND LIABILITIES SHAREHOLDERS' EQUITY Share capital 294,013 289,021 Share premium reserve 395,614 395,881 Legal reserve 61,322 61,322 Fair Value reserve 29,723 18,977 Other reserves (5,868) 1,293 Translation reserve - 0 Retained earnings (losses) 15,499 43,078 Profit/(loss) for the year (26,348) (29,377) Net equity Group 763,955 780,195 Minority interests 552 692 Shareholders' equity 6 764,507 780,887 LIABILITIES Non-current liabilities Deferred tax liabilities 3a 649 2,845 Provisions for risks and charges - - Provisions for employee termination benefits 7a 858 634 Long term financial loans 7b 119,839 146,712 Total non-current liabilities 121,346 150,191 Current liabilities Trade payables 8a 3,165 2,289 Payables to staff and social security organisations 8b 2,027 1,084 Current tax 8c 575 135 Other tax payables 8d 2,113 1,414 Other payables 8e 256 476 Short term financial loans 8f 4,821 5,497 Total current liabilities 12,957 10,895 Liabilities relating to joint ventures 5 2,337 3,145 Held-for-sale liabilities - - TOTAL SHAREHOLDERS' EQUITY AND LIABILITIES 901,147 945,118 Pursuant to Consob Resolution 15519 of 27 July 2006, the impact of dealings with related parties on the statement of financial position, income statement and cash flow statement is explained in the notes to the financial statements.
    • Financial Statements for the Year Ending 31 December 2010 77 Consolidated Income Statement (Euro thousand) Year 2010 Year 2009 Alternative Asset Management fees 19,424 18,126 Alternative Asset Management fees -joint ventures 8,420 7,124 Income from equity investments (15,637) (29,015) Income from equity investments - joint ventures 130 1,150 Other investment income/expense (3,405) (1,803) Income from services 10,112 8,322 Other income 208 275 Other income - joint ventures 204 1,576 Personnel costs (11,677) (10,451) Service costs (10,849) (9,592) Depreciation, amortization and impairment (7,230) (10,524) Costs and expenses (excluding taxes) - joint ventures (5,900) (3,282) Other expenses (1,144) (497) Financial income 1,709 2,064 Financial expenses (6,350) (5,619) PROFIT/(LOSS) BEFORE TAX (21,985) (32,146) Income tax (2,445) 4,569 Income tax - joint ventures (979) (1,474) PROFIT/(LOSS) FOR THE PERIOD FROM CONTINUING OPERATIONS (25,409) (29,051) Profit (Loss) from discontinued operations/held-for-sale assets 0 0 PROFIT/(LOSS) FOR THE PERIOD (25,409) (29,051) - Group share (26,348) (29,377) - Non controlling interests 939 326 Earnings per share, basic (€) (0.091) (0.101) Earnings per share, diluted (€) (0.091) (0.101) Pursuant to Consob Resolution 15519 of 27 July 2006, the impact of dealings with related parties on the statement of financial position, income statement and cash flow statement is explained in the notes to the financial statements.
    • Financial Statements for the Year Ending 31 December 2010 78 Consolidated Statement of Comprehensive Income (Statement of Performance - IAS 1) Comprehensive income or the Statement of Performance (IAS 1), in which performance for the year attributable to the Group is reported including results posted directly to shareholders' equity, reflects a net negative balance of approximately EUR 15,602 thousand compared with a net positive balance of EUR 23,749 thousand in 2009. This statement provides an overview of the group’s performance and shows the actual result of the group’s activities, as explained in the Report on Operations and the notes to the financial statements. Results posted directly to shareholders' equity were mainly due to the changes in fair value of Kenan/Migros totalling EUR 5,518 thousand. (Euro thousand) Note Year 2010 Year 2009 Profit/(loss) for the period (A) (25,409) (29,051) Gains/(Losses) on fair value of available-for-sale financial assets 6d 5,785 54,018 Share of other comprehensive income of associates 6d 4,961 (892) Other comprehensive income, net of tax (B) 10,746 53,126 Total comprehensive income for the period (A)+(B) (14,663) 24,075 Total comprehensive income attributable to: - Group share (15,602) 23,749 - Non Controlling Interests 939 326
    • Financial Statements for the Year Ending 31 December 2010 79 Consolidated Cash Flow Statement (direct method) (Euro thousand) Year 2010 Year 2009 CASH FLOW from operating activities Investments in funds and shareholdings (19,899) (52,515) Acquisition of subsidiaries net of cash acquired (4,236) (5,551) Capital reimbursements from funds 7,922 1,785 Proceeds from the sale of investments 0 638 Interest received 728 847 Interest paid (3,672) (2,063) Cash distribution from investments 21,775 1,264 Realized gains (losses) on exchange rate derivatives (1,041) (924) Taxes paid (2,997) (6,705) Taxes refunded 0 0 Dividends received 5,632 6,781 Management and performance fees received 19,512 18,133 Revenues for services 9,223 11,990 Operating expenses (20,658) (19,408) Net cash flow from operating activities 12,289 (45,728) CASH FLOW from investment activities Acquisition of property, plant and equipment (156) (19) Sale of property, plant and equipment 0 0 Purchase of licenses (63) (3) Net cash flow from investing activities (219) (22) CASH FLOW from investing activities Acquisition of financial assets 0 (21,973) Sale of financial assets 196 18,290 Share capital issued 0 348 Share capital issued: stock option plan 0 0 Own shares acquired (1,093) (5,766) Own shares sold 0 0 Interest from financial activities 0 0 Dividends paid (2,880) (3,837) Warrant 0 316 Loans to third parties 0 (2,627) Bank loans (20,650) 100,000 Net cash flow from financing activities (24,427) 84,751 CHANGE IN CASH AND CASH EQUIVALENTS (12,357) 39,001 CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 98,874 59,873 Cash and cash equivalents relating to held-for-sale assets 0 0 Cash and cash equivalents at beginning of period 98,874 59,873 EFFECT OF CHANGE IN BASIS OF CONSOLIDATION: CASH AND CASH EQUIVALENTS 0 0 CASH AND CASH EQUIVALENTS AT END OF PERIOD 86,517 98,874 Held-for-sale assets and minority interests 0 0 CASH AND CASH EQUIVALENTS AT END OF PERIOD 86,517 98,874 Pursuant to Consob Resolution 15519 of 27 July 2006, the impact of dealings with related parties on the statement of financial position, income statement and cash flow statement is explained in the notes to the financial statements. The group's cash and cash equivalents do not include the cash position of the IDeA Alternative Investments Group since it is a joint venture; for the purposes of disclosure, this group reported a net cash position of EUR 3,743 thousand at 31 December 2010.
    • Financial Statements for the Year Ending 31 December 2010 80 Statement of Changes in Consolidated Shareholders’ Equity (€ thousand) Share capital Share premium Legal reserve Fair value reserve Reserves related to Joint Ventures Other reserves Translation adjustment Profit (loss) brought forward Group net profit (loss) for the year Total Group Non- controlling interest Consolidated net equity Total at December 31, 2008 293,418 401,440 61,322 (34,048) (101) 2,974 0 76,808 (38,236) 763,577 0 763,577 Allocation of 2008 net profit 0 (4,506) 0 0 0 0 0 (33,730) 38,236 0 0 0 Cost of Stock Options 0 0 0 0 0 461 0 0 0 461 0 461 Soprarno and FARE NPL acquisition 0 0 0 0 0 0 0 0 0 0 892 892 Purchase of own shares (4,397) (1,369) 0 0 0 0 0 0 0 (5,766) 0 (5,766) Reclassification of proportionally-accounted minority investment in Santé 0 0 0 0 0 (3,001) 0 0 0 (3,001) 0 (3,001) Warrant 0 316 0 0 0 0 0 0 316 0 316 Other movements 0 0 0 0 0 859 0 0 0 859 0 859 Total comprehensive income for the year 0 0 0 52,439 687 0 0 0 (29,377) 23,749 (200) 23,549 Total at December 31, 2009 289,021 395,881 61,322 18,391 586 1,293 0 43,078 (29,377) 780,195 692 780,887 Allocation of 2009 Net profit 0 (1,798) 0 0 0 0 0 (27,579) 29,377 0 0 0 Cost of Stock Options 0 0 0 0 0 564 0 0 0 564 0 564 Reversal of Stock Option plan 2007-2013 0 0 0 0 0 (1,379) 0 0 0 (1,379) 0 (1,379) Purchase of own shares (944) (149) 0 0 0 0 0 0 0 (1,093) 0 (1,093) Payment in own shares for FARE acquisition 5,936 1,680 0 0 0 (7,386) 0 0 0 230 0 230 Santé stock dividend 0 0 0 0 0 1,198 0 0 0 1,198 0 1,198 Dilution of Santé in GDS 0 0 0 0 0 (182) 0 0 0 (182) 0 (182) Other movements 0 0 0 0 0 24 0 0 0 24 192 216 Put option on 30% of FARE Holding 0 0 0 0 0 0 0 0 0 0 (1,271) (1,271) Total comprehensive income for the year 0 0 0 11,352 (606) 0 0 0 (26,348) (15,602) 939 (14,663) Total at December 31, 2010 294,013 395,614 61,322 29,743 (20) (5,868) 0 15,499 (26,348) 763,955 552 764,507
    • Financial Statements for the Year Ending 31 December 2010 81 Notes to the Consolidated Financial Statements for the Year Ending 31 December 2010
    • Financial Statements for the Year Ending 31 December 2010 82 Notes to the Consolidated Financial Statements for the year ending 31 December 2010 A. Structure and content of the consolidated financial statements The consolidated financial statements for the year ending 31 December 2010 include the parent company DeA Capital S.p.A. and all subsidiaries (Group), and were prepared using the separate financial statements of the companies included in the basis of consolidation corresponding to the relevant individual statements, restated as necessary, to adapt them to the accounting standards listed below as dictated by Italian law. The consolidated financial statements were prepared in accordance with the general principles of IAS 1, specifically: - accruals principle: the effect of events and transactions is recorded when they occur, and not when payment is made or received; - going concern principle: the financial statements are prepared under the assumption that business operations will continue in the near future. In this regard, the directors have evaluated this assumption with particular scrutiny in light of the current economic and financial crisis. As indicated in the section on uncertainties and the management of financial risks in the Report on Operations, the directors believe that the risks and uncertainties described therein are not critical in nature, confirming the financial solidity of the DeA Capital Group; - relevance principle: when reporting operating events in accounting entries, preference is given to the principle of economic substance over form; - comparative information: the consolidated financial statements must show comparative information for the previous period. The consolidated financial statements consist of the statement of financial position, the income statement, the statement of changes in shareholders’ equity, the cash flow statement, the statement of comprehensive income (Statement of Performance – IAS 1) and the notes to the consolidated financial statements. The consolidated financial statements are also accompanied by the Report on Operations and a Statement of Responsibilities for the Accounts pursuant to art. 154-bis of Legislative Decree 58/98. The statement of financial position provides a breakdown of current and non-current assets and liabilities with separate reporting for those resulting from discontinued or held-for-sale operations. In the income statement, the Group has adopted the nature of expense method, whereby costs and revenues are classified according to type. The cash flow statement is prepared using the "direct method". Companies over which the Group exercises joint control are consolidated proportionally in the consolidated financial statements, as stipulated by IAS 31 (Interests in joint ventures). Specifically, the group’s portions of the assets, liabilities, costs and revenues are classified as follows: • assets and liabilities are included under "assets relating to joint ventures" and "liabilities relating to joint ventures" respectively • revenues, costs and taxes are included in the applicable items relating to "joint ventures" Unless otherwise indicated, all tables and figures included in these notes to the financial statements are reported in EUR thousand. In addition to the figures at 31 December 2010, the financial statement formats used also provide comparable figures for 31 December 2009.
    • Financial Statements for the Year Ending 31 December 2010 83 The publication of consolidated financial statements for the period ending 31 December 2010 was authorised by resolution of the Board of Directors dated 14 March 2011. Statement of compliance with accounting standards The consolidated financial statements for the year ending 31 December 2010 (2010 consolidated financial statements) have been prepared in accordance with the International Accounting Standards adopted by the European Union and approved by the date the financial statements were prepared (International Accounting Standards, or individually IAS/IFRS, or collectively IFRS (International Financial Reporting Standards)). "IFRS" also means all interpretations of the International Financial Reporting Interpretations Committee (IFRIC), including those previously issued by the Standing Interpretations Committee (SIC), and approved by the European Union. The consolidated financial statements were prepared with a focus on clarity, and accurately and fairly represent the statement of financial position, financial situation, income statement and cash flows for the period. Accounting standards, amendments and interpretations applied for the first time The IASB-approved international accounting standards and interpretations authorised for adoption in Europe that were applied for the first time from 1 January 2010 are detailed below. None had any significant impact on the consolidated financial statements for the year ending 31 December 2010. The group did not apply any IFRS in advance. Accounting standards, amendments and interpretations applied as of 1 January 2010 The group applied the accounting standards, amendments and interpretations below for the first time from 1 January 2010: • IAS 27 (Consolidated and separate financial statements) The changes to IAS 27 mainly relate to the accounting treatment for transactions or events that change the value of the group’s interests in subsidiaries and the allocation of subsidiaries’ losses to minority interests. In accordance with the rules for transitioning to the accounting standard, the DeA Capital Group adopted these changes to IAS 27 prospectively, disclosing the effects on the accounting treatment of certain acquisitions and sales of minority interests. IAS 27 establishes that, once a controlling interest has been obtained, transactions in which the controlling company acquires or sells further minority stakes without changing the control exercised on the subsidiary are considered transactions with shareholders and must therefore be recognised in shareholders’ equity. The carrying values of the controlling interest and the minority interests must therefore be adjusted to reflect the change in interest in the subsidiary, and any difference between the amount of the adjustment made to minority interests and the fair value of the price paid or received in respect of such a transaction is posted directly to shareholders’ equity and allocated to the shareholders of the controlling company. No adjustments will be made to the value of goodwill or to profits or losses posted to the income statement. The ancillary costs of such transactions must also be posted to shareholders’ equity in accordance with the provisions of IAS 32. Previously, in the absence of an accounting standard or specific interpretation on this issue, when the DeA Capital Group made an acquisition of a minority interest in an existing subsidiary, it adopted the parent entity extension method, which required the
    • Financial Statements for the Year Ending 31 December 2010 84 difference between the purchase cost and the carrying values of the assets and liabilities acquired to be posted under "Goodwill". Conversely, in the case of sales of minority interests that did not entail the loss of control, the group posted the difference between the carrying value of the assets and liabilities sold and the purchase price to the income statement. • IFRS 3 (Business combinations) In accordance with the rules for transitioning to the accounting standard, the Group adopted IFRS 3 (Business Combinations), as revised in 2008, prospectively for the business combinations that took place from 1 January 2010. The updated version of IFRS 3 introduced some important changes, which are described below, mainly concerning the rules governing step acquisitions of subsidiaries; the option to measure any minority interests acquired in a partial acquisition at fair value; the posting to the income statement of all costs connected with the business combination and the recognition at the date of acquisition of liabilities for payments that are conditional on future events. The new IFRS 3 establishes that, in the case of a step acquisition, a business combination is created only at the time that control is acquired and that all the identifiable net assets of the company must be measured at fair value at that time; minority interests must be valued on the basis of either their fair value or the pro rata portion of the fair value of the identifiable net assets of the acquired company (a method that was also permitted by the previous version of IFRS 3). When control of an investee company is acquired in stages, the stake previously held – accounted for until that point in accordance with IAS 39 (Financial Instruments: Recognition and Measurement), or with IAS 28 (Investments in Associates), or with IAS 31 (Investments in Joint Ventures) – must be treated as though it had been sold and reacquired on the date that control is acquired. This investment must be valued at its fair value on the date of "sale" and any profits or losses resulting from this valuation must be posted to the income statement. Moreover, each value previously recorded in shareholders’ equity as "Other total profits and losses", which must be posted to the income statement following the sale of the asset to which it refers, must be reclassified in the income statement. The goodwill or income (in the case of badwill) arising from the transaction completed with the subsequent acquisition must be calculated as the sum of the price paid to obtain control, the value of the minority interests (valued in accordance with one of the methods permitted by the standard) and the fair value of the minority interests held previously, net of the fair value of the identifiable net assets acquired. Under the previous version of the standard, the acquisition of control in stages was recorded transaction by transaction as a series of separate acquisitions. Total goodwill was then calculated as the sum of the portions of goodwill generated by the individual transactions. IFRS 3 (2008) stipulates that the ancillary costs of the transactions that make up a business combination should be posted to the income statement in the period in which they are incurred. Under the previous version of the standard, these costs were included in the calculation of the acquisition cost of the acquired company’s net assets. IFRS 3 (2008) states that the payments that are conditional on future events should be considered as part of the price of transferring the net assets acquired and should be measured at fair value on the date of acquisition. Similarly, if a business combination contract includes the right to obtain a refund of certain components of the price on the occurrence of certain conditions, this right is classified as an asset in the acquirer’s accounts. Any subsequent changes in the fair value must be posted as an adjustment to the original accounting treatment only if such changes have been determined from
    • Financial Statements for the Year Ending 31 December 2010 85 additional or better information on the fair value and if they occur within 12 months from the date of acquisition; all other changes must be posted to the income statement. The previous version of the standard stipulated that portions of the price that were conditional on future events should be accounted for on the date of acquisition only if their payment was considered probable and their amount could be reliably determined. In addition, any subsequent change in the value of such payments was always posted as an adjustment to goodwill. Accounting standards, amendments and interpretations applied from 1 January 2010 that were not relevant to the group's consolidated financial statements The following accounting standards, amendments and interpretations, which were applicable from 1 January 2010, did not apply to the group. For additional details on these, please see the notes to the consolidated financial statements to 31 December 2009. • Improvement to IFRS 5 (Non-current assets held for sale and discontinued operations) • Amendment to IAS 28 (Investments in associates) and IAS 31 (Interests in joint ventures) as a result of the amendments made to IAS 27 • Improvements to International Financial Reporting Standards (IFRS improvements 2009) • Amendments to IFRS 2 (Share-based payment): group cash-settled share-based payment transactions • Amendments to IFRS 1 (First-time adoption of International Financial Reporting Standards) • Amendments to IAS 39 (Financial instruments: Recognition and Measurement): exposures qualifying for hedge accounting • IFRIC 17 (Distribution of non-cash assets to owners) • IFRIC 18 (Transfers of assets from customers) Future accounting standards, amendments and interpretations Accounting standards, amendments and interpretations that are not yet applicable and have not been adopted in advance by the group, but were approved for adoption in the European Union as of 28 February 2011 The International Accounting Standards, interpretations and changes to existing IASB- approved accounting standards and interpretations that were ratified for adoption in the European Union on 28 February 2011, but which are not yet applicable, are as follows: Amendments to IAS 24 (Related party disclosures) On 4 November 2009, the IASB published a revised version of IAS 24 (Related parties), which will replace the current version of IAS 24. The document simplifies disclosure requirements on related parties for companies in which a government entity is a controlling shareholder that exercises significant influence or joint control, and removes certain application-related difficulties resulting from the current definition of related parties. Furthermore, the revised definition of related parties contained in the amended version of IAS 24: • makes the application of disclosure requirements in the financial statements of related parties symmetrical (i.e. if A is related to B for the purposes of the financial statements
    • Financial Statements for the Year Ending 31 December 2010 86 of B, then B must also be considered a related party of A in the financial statements of A) • clarifies that related party disclosures also apply to transactions entered into with the subsidiaries of associates and joint ventures, and not just the associate or joint venture • equates the position of individuals to that of companies for the purposes of identifying the relationship • also requires disclosure on commitments received and granted to related parties These amendments will take effect on 1 January 2011. Amendments to IFRIC 14 (IAS 19 - Limit on a defined benefit asset, minimum funding requirements and their interaction) On 26 November 2009, the IASB published the document "Amendments to IFRIC 14 (Prepayments of a minimum funding requirement)". The amendment to IFRIC 14 (Limit on a defined benefit asset, minimum funding requirements and their interaction) (the interpretation document for IAS 19) was deemed necessary since the document in its original version did not include the impact from any advance payments of minimum contributions. The amendment to IFRIC 14 allows companies to report the amount of advance payments of minimum contributions under defined benefit assets. The amendment will be applicable from 1 January 2011. IFRIC 19 (Extinguishing financial liabilities with equity instruments) On 26 November 2009, the IFRIC published IFRIC 19 (Extinguishing financial liabilities with equity instruments). The document defines the accounting treatment a debtor must follow when, following the renegotiation of the contractual terms of a financial liability, the creditor and debtor reach an agreement over a "debt-for-equity swap", i.e. the total or partial extinction of the financial liability upon the issuance of equity instruments by the debtor. Based on the interpretations provided by IFRIC 19: • the issuance of equity instruments constitutes the "payment of consideration" as defined in para. 41 of IAS 39 • equity instruments are measured at fair value; if the fair value of such instruments cannot be measured reliably, the fair value of the derecognised financial liabilities must be used • the difference between the carrying value of the financial liability and the consideration paid (represented by the fair value of the equity instruments) must be posted to the income statement This interpretation will be applicable from 1 January 2011. It may, however, be applied in advance. Amendments to IFRS 1 (First-time adoption of International Financial Reporting Standards) On 28 January 2010, the IASB published the amendment entitled IFRS 1 (Limited exemption from comparative IFRS 7 disclosures for first-time adopters). By modifying IFRS 1, this amendment extends the exemption from presenting comparative information as per the amendment published in March 2009 (Improving disclosures about financial statements) to entities that adopt international accounting standards for the first time in financial statements beginning before 1 January 2010.
    • Financial Statements for the Year Ending 31 December 2010 87 This amendment was part of the IASB's response to the financial crisis along with a request for supplementary information on fair value and liquidity risk. This amendment will be applicable from 1 January 2011. It may, however, be applied in advance. Accounting standards, amendments and interpretations not yet approved for adoption in the European Union as of 28 February 2011 The International Accounting Standards, interpretations and changes to existing IASB- approved accounting standards and interpretations that had not been ratified for adoption in the European Union as of 28 February 2011, are as follows: IFRS 9 (Financial instruments) On 12 November 2009, the IASB issued the first part of IFRS 9, which only changed the requirements relating to the classification and valuation of the financial assets currently covered by IAS 39. On 28 October 2010, the IASB published a revised version of IFRS 9, which differed from the version published in November 2009 in that it contained regulations on the classification and valuation of financial liabilities. IFRS 9 is likely to be further changed and supplemented with regulations relating to the impairment of financial assets and hedge accounting. IFRS 9, which will replace IAS 39 when complete, aims to simplify the accounting treatment set out under the current IAS 39, develop a classification and measurement model that will provide better information on the ways in which cash flows from financial instruments are expected to be obtained, improve the calculation of amortised costs, with particular reference to the transparency of losses on receivables and the credit quality of financial assets, and lastly, review the current regulations on hedge accounting with a view to simplifying the effectiveness tests. The endorsement process for IFRS 9 is currently on hold, and this standard is not applicable in the EU, ahead of the European Commission's full assessment of the plan to completely replace IAS 39. Improvements to International Financial Reporting Standards (IFRS improvements 2009) On 6 May 2010, the IASB issued the latest series of documents detailing the minor changes to be made to existing accounting standards (Improvements to IFRS). The document contains a series of improvements to seven International Accounting Standards and Interpretations (IFRS 1, IFRS 3, IFRS 7, IAS 1, IAS 27, IAS 34 and IFRIC 13). They have not yet been ratified by the European Union. The changes that could potentially have a significant impact relate to: • IFRS 3 (Business combinations): currently, in application of the new IFRS 3, there is the option to value all the components of the minority interests at their fair value or in proportion to the minority stake in the identifiable net assets of the acquisition. This option has now been restricted to include only those components representative of instruments that currently confer on minority shareholders rights equivalent to those pertaining to ordinary shares, particularly as regards obtaining a pro-rata portion of net assets in the event of liquidation. All other components relating to minority interests (such as privileged shares or
    • Financial Statements for the Year Ending 31 December 2010 88 warrants issued by the acquired company to minorities) must be stated at fair value, unless the IFRS specify a different valuation criterion. In addition, the document clarifies that in the case of stock option plans acquired or voluntarily replaced following business combinations, such plans must be (re)calculated at the date of acquisition in accordance with IFRS 2. It also specifies that the current requirement of IFRS 2, namely that the value of the stock option plan acquired following a business combination must be allocated partly to "purchase costs" and partly to "services to be provided in the future", applies to all allocations regardless of whether or not they have been voluntarily replaced as a result of the business combination. • IFRS 7 (Financial instruments: Disclosures): the amendment emphasises the interaction between the qualitative and quantitative supplementary information required by the standard on the nature and extent of the risks inherent in financial instruments. This should help users of the financial statements to link the information presented and to obtain a general overview of the nature and extent of the risks inherent in financial instruments. • IAS 1 (Presentation of financial statements): the amendment requires that a summary of changes to each component of shareholders' equity should be presented in the financial statements or in the notes to the financial statements. • IAS 34 (Interim Financial Reporting): the information relating to significant events and transactions to be reported in the interim financial statements must represent an update on the information provided in the annual financial statements. It also specifies the circumstances in which it is mandatory to disclose information relating to financial instruments and their fair value in the interim financial statements. Changes to IFRS 7 (Financial instruments: Disclosures) On 7 October 2010, the IASB published the amendment to IFRS 7 “Disclosures – transfers of financial assets”, which requires further information on transfers of financial assets. The changes to IFRS 7 aim to promote greater transparency in relation to the risks associated with transactions, where, when a financial asset is transferred, the transferring company continues to be exposed, within certain limits, to risks associated with the derecognised financial asset (known as "continuing involvement"). Additional information is also required on significant transfers of financial assets at particular times (e.g. at the end of an accounting period). The amendments to IFRS 7, which are awaiting ratification by the European Commission, must be applied in the financial statements of periods starting from 1 July 2011 onwards. Changes to IFRS 12 (Income taxes) On 20 December 2010, the IASB published a number of changes to IAS 12 (Income Taxes), which now stipulates that the entity should assess whether it expects to recover the deferred tax through the use or sale of the asset. This assessment can be difficult and subjective, e.g. if investment property is recorded at fair value, as permitted by IAS 40 (Investment property). To provide a simplified approach, the amendments introduce the presumption, when calculating deferred taxes, that the carrying amount of the underlying asset will be recovered entirely by sale, unless there is clear evidence that it can be recovered through use. The presumption applies not only to investment property but also to assets such as plant and machinery or intangible assets recorded or revalued at fair value. As a result of these changes, the interpretation document SIC 21 (Income Taxes - recovery of revalued, non-depreciable assets) was withdrawn at the same time. The entire contents of this document are now covered in IAS 12.
    • Financial Statements for the Year Ending 31 December 2010 89 The amendments to IAS 12, which are awaiting ratification by the European Commission, must be applied from 1 January 2012. Amendments to IFRS 1 (First-time adoption of International Financial Reporting Standards): Severe hyperinflation and removal of fixed dates for first-time adopters On 20 December 2010, the IASB published two amendments to IFRS 1 (First-time adoption of International Financial Reporting Standards). The first amendment introduced the option for entities that are transitioning to IFRS to use the same simplified rules as those permitted to entities that made the transition to international accounting standards in 2005. The second amendment grants an exemption from the retrospective application of IFRS at first-time adoption to entities that are presenting financial statements in accordance with IFRS for the first time, after having been unable to present them due to hyperinflation, allowing such entities to use fair value as a replacement for cost for all assets and liabilities presented. The amendments to IFRS 1, which are awaiting ratification by the European Commission, must be applied in the financial statements of periods starting from 1 July 2011 onwards. We do not anticipate that the potential adoption of the standards and interpretations noted above will have a material impact on the valuation of the DeA Capital Group's assets, liabilities, costs and revenues. Basis of consolidation As a result of the events described in the Report on Operations, the basis of consolidation has been changed from the position at 31 December 2009. This is due to the merger of DeA Capital Investments and its wholly-owned subsidiary DeA Capital Investments 2. As a result, at 31 December 2010, the following companies formed part of the DeA Capital Group's basis of consolidation: Company Registered office Currency Share capital % holding Consolidation method DeA Capital S.p.A. Milan, Italy Euro 306,612,100 Capogruppo DeA Capital Investments S.A. Luxembourg Euro 515,992,516 100% Full consolidation (IAS 27) Santè S.A. Luxembourg Euro 99,014,700 42.87% Equity accounted (IAS 28) Sigla Luxembourg S.A. Luxembourg Euro 482,684 41.39% Equity accounted (IAS 28) IDeA Alternative Investments S.p.A. Milan, Italy Euro 5,000,000 44.36% Proportionate (IAS 31) IDeA Capital Funds SGR Milan, Italy Euro 1,200,000 44.36% Proportionate (IAS 31) IDeA AI Sarl Lux Luxembourg Euro 50,000 44.36% Proportionate (IAS 31) Investitori Associati SGR Milan, Italy Euro 1,200,000 21.74% Equity accounted (IAS 28) Wise SGR Milan, Italy Euro 1,250,000 12.86% Equity accounted (IAS 28) IDeA CoIF I Milan, Italy Euro - 46.18% Equity accounted (IAS 28) Soprarno SGR S.p.A. Florence, Italy Euro 2,000,000 28.83% Proportionate (IAS 31) IDeA SIM S.p.A. Milan, Italy Euro 120,000 28.83% Proportionate (IAS 31) FARE Holding S.p.A. Milan, Italy Euro 600,000 70.00% Full consolidation (IAS 27) FARE S.p.A. Milan, Italy Euro 500,000 70.00% Full consolidation (IAS 27) First Atlantic RE SGR S.p.A. Milan, Italy Euro 5,000,000 70.00% Full consolidation (IAS 27) FAI S.r.l. Milan, Italy Euro 105,000 70.00% Full consolidation (IAS 27) FARE DE GmbH (in liquidazione) Munich, Germany Euro 25,000 70.00% Full consolidation (IAS 27) FARE NPL S.p.A. Milan, Italy Euro 720,000 45.50% Full consolidation (IAS 27) The shares held in Santé are subject to a lien in favour of the entities providing credit lines available for companies forming part of the control structure of Générale de Santé (i.e. Santé S.A. and Santé Développement Europe S.A.S.). The above list meets the requirements of Consob Resolution 11971 of 14 May 1999 and subsequent amendments (art. 126 of the Regulation).
    • Financial Statements for the Year Ending 31 December 2010 90 Consolidation method Subsidiaries are consolidated on a line-by-line basis from their date of acquisition, i.e. on the date the group acquires a controlling interest, and they cease to be consolidated when control is transferred outside the group. Subsidiaries are those companies in which the parent company, directly or indirectly through subsidiaries, holds a majority of the capital subscribed and/or voting rights, or over which the parent company exercises de facto control allowing it to direct the financial and operating policies of the investee company pursuant to the articles of association or by agreement. The financial statements of subsidiaries are prepared for each period using the same accounting standards used by the parent company. The main criteria adopted to apply this method are indicated below: - the financial statements of the parent company and subsidiaries are incorporated on a "line-by-line" basis - the carrying value of the investment is offset against the corresponding net equity figure. When a company is included in the basis of consolidation for the first time, the difference between the acquisition cost and the net equity of the investee companies is posted, if the conditions are right, to the assets or liabilities included in the consolidation, pursuant to the provisions of IFRS 3. Any residual portion is taken to the income statement if negative, or recorded as a specific item, "goodwill", under assets if positive. The latter is subject to an annual impairment test. Alternatively, when a company is included in the basis of consolidation for the first time, the entire amount may be recorded as goodwill including the portion relating to the minority interests (full goodwill approach) - significant transactions between consolidated companies are eliminated, as are payables and receivables and unrealised profits resulting from transactions between group companies net of any tax impact - the portions of shareholders' equity pertaining to minority shareholders are reported, along with the respective share of net profit for the period, in appropriate shareholders' equity items In the case of joint control, the integration is carried out, pursuant to IAS 31, in proportion to the share held by the parent company. Restructuring of the DeA Capital Group On 25 June 2010, the merger of DeA Capital Investments and its wholly-owned subsidiary DeA Capital Investments 2 took place, with the aim of centralising within a single entity the financial and organisational resources relating to Private Equity Investment operations in Luxembourg. The restructuring, which affected DeA Capital Investments and one of its wholly-owned subsidiaries, had no impact on the consolidated financial statements, as the same carrying values were used, pursuant to IAS/IFRS. B. Valuation criteria adopted The valuation criteria adopted on the basis of International Accounting Standards and reported below are consistent with the going concern principle and have not changed from those used in the preparation of the consolidated financial statements for the year ending 31 December 2009 and the summary consolidated half-year financial statements to 30 June 2010 except as a result of the application of new IAS/IFRS accounting standards as described above.
    • Financial Statements for the Year Ending 31 December 2010 91 Current and non-current assets and liabilities An asset is considered current if it meets at least one of the following conditions: ♦ it is expected to be converted during the company's normal operating cycle. The "company's operating cycle" means the period from the acquisition of an asset to its conversion to cash and cash equivalents. When the company's operating cycle cannot be clearly identified, its duration is assumed to be twelve months ♦ it is held mainly for trading purposes ♦ its conversion is expected to occur within twelve months following the end of the financial year ♦ it consists of cash and cash equivalents which have no restrictions that would limit its use in the twelve months following the end of the financial year All other assets are carefully analysed to separate the "current" portion from the "non-current" portion. Furthermore, deferred tax assets are recorded under non-current components. A liability is considered current if it meets at least one of the following conditions: ♦ it is expected to be settled during the company's normal operating cycle ♦ it is held mainly for trading purposes ♦ its settlement is expected to occur within twelve months following the end of the financial year ♦ the company does not have an unconditional right to defer payment of the liability for at least twelve months following the end of the financial year All other liabilities are carefully analysed to separate the "current" portion from the "non- current" portion. Furthermore, deferred tax liabilities are recorded under non-current components. Intangible assets Intangible assets are those assets with no physical form that can be identified and produce future economic benefits. They are recorded under assets when it is likely that their use will generate future economic benefits and when their cost can be determined reliably. The above assets are recorded at purchase cost, or at production cost if they are generated internally. The cost of acquisition is represented by the fair value of the price paid to acquire the asset and all direct costs incurred to prepare the asset for use. The carrying value of intangible assets is maintained in the financial statements to the extent that there is evidence that this value can be recovered through use or if it is likely that these assets will generate future economic benefits. The useful life of intangible assets is assessed as finite or indefinite. Intangible assets with an indefinite useful life are tested to check that their value is still appropriate at any time when there are indications of possible impairment as required by IAS 36 (Impairment of assets). Intangible assets with an indefinite life are not amortised. The useful life of an intangible asset with an indefinite life is reviewed annually to check that the underlying conditions for the classification continue to apply. For additional details, please see the section "Impairment".
    • Financial Statements for the Year Ending 31 December 2010 92 Intangible assets with a finite useful life are amortised regularly on a straight-line basis over their expected useful life. The useful life of these assets is tested to check that their value is still appropriate whenever there are indications of possible impairment. Tangible assets Tangible assets are recorded at purchase price or production cost adjusted for accumulated depreciation and any impairment. Their cost includes ancillary costs and direct and indirect costs incurred at the time of purchase necessary to make the asset usable. The purchase cost is represented by the fair value of the price paid to acquire the asset and by all other direct costs incurred to prepare the asset for use. Tangible assets are depreciated on a straight-line basis over their remaining useful life, using the depreciation rates indicated in the notes on the item relating to similar groups of assets. If factors are discovered that lead the company to believe that it may be difficult to recover the net carrying value, an impairment test is performed. If the reasons for the impairment cease to exist, the carrying value of the asset is increased to its recoverable amount. Financial assets Based on the classification of financial assets required by IAS 39, the group classified its financial assets at the time of the transition to International Accounting Standards, and subsequently when individual financial assets were acquired. Minority interests and investments in funds, which constitute the main, predominant area of the group's operations, are classified under available-for-sale assets, which are recorded at fair value with a balancing item in shareholders' equity. Fair value is the payment for which an asset could be exchanged in a free transaction between knowledgeable and independent parties. In the case of securities traded in active regulated markets, fair value is determined based on the bid price recorded on the last trading day of the related accounting period. In the case of assets not listed in active markets, such as the group's direct investments in companies, investments in venture capital funds and funds of funds, the fair value reported in financial statements is determined by the directors based on their best judgment and estimation, using the knowledge and evidence available when the financial statements are prepared. In these cases, the company acts in accordance with the provisions of the IAS. In particular, IAS 39 specifies that: • if there are recent transactions related to the same financial instrument, these may be used to determine fair value after verifying that there have been no significant changes in the economic environment between the date of the transactions being considered and the valuation date • if there are transactions involving similar financial instruments, these may be used to determine fair value after verifying the similarity (as a function of the type of business, size, geographic market, etc.) between the instrument for which transactions have been found and the instrument to be valued • if no prices can be found in active markets, fair value must be determined on the basis of valuation models that account for all factors that market participants would consider in setting a price However, due to objective difficulties in making assessments and the lack of a liquid market, the values assigned to such assets could differ, and in some cases significantly, from those that could be obtained when the assets are sold. Direct investments in companies that are not subsidiaries or associates and in funds are classified as available-for-sale financial assets, which are initially reported at fair value on the
    • Financial Statements for the Year Ending 31 December 2010 93 date of the original posting. These assets are measured at fair value when all interim and full- year financial statements are prepared. Gains and losses from fair value measurement are posted to a special shareholders' equity reserve called the "fair value reserve" until the investment is sold or otherwise disposed of, or until impairment occurs, in which cases the gain or loss previously recorded in the fair value reserve is posted to the income statement for the period. On the date of the annual or interim financial statements (IAS 34), a test is performed as to the existence of objective evidence of impairment following one or more events that have occurred after the initial recording of the asset, and this event (or events) has an impact on the estimated cash flow from the financial asset. For equity instruments, a significant or prolonged reduction in fair value below their cost is considered to be objective evidence of impairment. Although International Accounting Standards introduced important reference to quantitative parameters that must be adhered to, they do not govern quantitative limits to determine when a loss is significant or prolonged. Thus, the DeA Capital Group has an accounting policy that defines these parameters. In particular, "significant" means there has been an objective reduction in value when fair value is more than 35% below its historical cost. In this case, impairment is recorded in the income statement without further analysis. The duration of the reduction in value is deemed to be prolonged when the reduction of fair value below historical cost continues for a period of over 24 months. After exceeding 24 months, impairment is recorded in the income statement without further analysis. Associates These are companies in which the group holds at least 20% of the voting rights or exercises significant influence, but no individual or joint control over their financial and operating policies. The consolidated financial statements include the group’s share of its associates' results, which are reported using the equity method, starting on the date on which significant influence began until the significant influence ceases to exist. If the group's share of an associate's losses exceeds the carrying value of the equity investment reported in the financial statements, the value of the equity investment is eliminated, and the share in further losses is not reported unless, and to the extent that, the group is legally liable for such losses. When the equity investment is acquired, any difference between its cost and the parent company's stake in the net fair value of the associate's identifiable assets, liabilities and contingent liabilities is recorded as required by IFRS 3, i.e. any goodwill is included in the carrying value of the equity investment. As governed by IAS 28.33, since the goodwill included in the carrying value of an equity investment in an associate is not recorded separately, it is not subject to a separate impairment test pursuant to IAS 36 (Impairment of assets). Instead, the entire carrying value of the equity investment is subject to an impairment test pursuant to IAS 36 by comparing its recoverable value (the greater of its value in use and the fair value adjusted for sales costs) and carrying value whenever there is evidence indicating the possible impairment of the equity investment as set out in IAS 28.31.
    • Financial Statements for the Year Ending 31 December 2010 94 Derivative instruments Derivatives are recorded in the statement of financial position at fair value and calculated in accordance with the criteria already stated in the "Financial assets" section. Fair value changes are reported differently depending on their designation (hedging or speculative) and the nature of the risk hedged (fair value hedge or cash flow hedge). For contracts designated for hedging purposes, the group documents this relationship when the hedge is established. The documentation incorporates the identification of the hedging instrument, the item or transaction hedged, the nature of the risk hedged, the criteria used to ascertain the effectiveness of the hedging instrument as well as the risk. The hedge is considered effective when the projected change in fair value or in the cash flows of the hedged instrument is offset by the change in fair value or in the cash flows of the hedging instrument, and the net results fall within the range of 80% to 125%. If the instruments are not, or cannot be, designated as hedging instruments, they must be considered "speculative"; in this case, fair value changes are posted directly to the income statement. In the case of fair value hedges, changes in the fair value of the hedging instrument and the hedged instrument are posted to the income statement regardless of the valuation criterion used for the hedged instrument. In the case of cash flow hedges, the portion of the fair value change in the hedging instrument that is recognised as an effective hedge is posted to shareholders' equity, while the portion that is not effective is posted to the income statement. Put options on minority shareholdings If, at the time a controlling interest is purchased, put options ("options") are purchased which relate to shareholdings held by minority shareholders and which effectively grant access to the actual economic benefits associated with owning the minority shareholdings, the shares or shareholdings forming a part of the options are recorded as if they had been purchased. The cost of the combination includes the fair value of the liability to minority shareholders associated with the option (equal to the present value of the option's exercise price). The impact of the discounting is posted to the income statement. The change in the fair value of the liability is recorded as an adjustment to goodwill since it is considered to be a contingent consideration. For business combinations that took place from 1 January 2010, any subsequent changes in the fair value of the portion of payment subject to conditions must be posted as an adjustment to the original accounting treatment only if such changes have been determined from additional or better information on the fair value and if they occur within 12 months from the date of acquisition; all other changes must be posted to the income statement. An unexercised option is recorded as a sale of minority shareholdings; the difference between the minority interest to be recognised and the settled liability is recorded under the group's shareholders' equity. For options that do not grant actual access to the economic benefits associated with owning the minority shareholdings, the shares or shareholdings covered by the options are reported on the date control is acquired as "minority interests"; the portion of profits and losses (and other changes in shareholders' equity) of the entity acquired is allocated to the minority shareholding after the business combination. The minority shareholding is reversed on each reporting date and reclassified as a financial liability at its fair value (equal to the present value of the option exercise price) as if the acquisition had occurred on that date. The difference between the fair value of the financial liability and the minority interest reversed on the reporting date is recorded as an acquisition of minority shareholdings and reported as a change in goodwill. For business combinations that took place from 1 January 2010, any subsequent changes in the fair value of the portion of payment subject to conditions must be posted as an adjustment to the original accounting treatment only if such changes have been determined from additional or better information on the fair value and if they occur within 12 months from the date of acquisition; all other changes must be posted to group shareholders' equity.
    • Financial Statements for the Year Ending 31 December 2010 95 If the option is not exercised, minority interests are recognised in the amount that would have been reported if the option had not been recorded; the difference between the minority interests recognised and the liability settled is reported under group shareholders' equity. Impairment - IAS 36 Impairment always occurs when the carrying value of an asset is greater than its recoverable value. On each reporting date, the company determines whether there are any indicators that would indicate that impairment had occurred. If such indicators exist, the recoverable value of the asset is estimated (impairment test) and any write-down is recorded. The recoverable value of an asset is the higher of its fair value less costs to sell the asset and its value in use. IAS 36 provides instructions on determining fair value less costs to sell an asset, as follows: • if there is a binding sales agreement, the asset's fair value is the negotiated price • if there is no agreement, but the asset is marketed in an active market, the fair value is the current bid price (thus, the exact price on the value date and not the average price) • if no prices can be found in active markets, fair value must be determined based on valuation methods that incorporate the best information available including any recent transactions involving the same asset, after verifying that there were no significant changes in the economic environment between the date of the transactions under consideration and the valuation date IAS 36 defines value in use as the present value of future cash flows that an asset is projected to produce. The estimate of the value in use must include the items listed below: • an estimate of future cash flows that the company expects to derive from the asset • expectations of potential changes in the value and timing of such cash flows • the time value of money • other factors such as the volatility of the asset's value and the lack of a liquid market for it For more information on determining value in use, please see Appendix A of IAS 36. However, the main elements for accurately estimating the value in use are an appropriate determination of projected cash flows (for which, the investee company's business plan is essential) and their timing, as well as the application of the proper discount rate that accounts for both the present value of money and the specific risk factors for the asset to be valued. In all cases, when determining the value it is important to: • base cash flow projections on reasonable and sustainable assumptions that provide the best estimate of the economic conditions that are likely to exist over the remaining useful life of the asset • base cash flow projections on the most recent budget/plan approved by the investee company, which, however, must exclude any future inflows or outflows of cash that are expected to come from the future restructuring, improvement or optimisation of operating performance. Projections based on these budgets/plans must cover a maximum period of five years unless a longer period of time can be justified • estimate higher cash flow projections for the period covered by the most recent budgets/plans by extrapolating projections based on the budgets/plans taken into consideration, and using a stable or declining growth rate for subsequent years unless a rising rate can be justified. This growth rate must not exceed the average long-term growth rate for production in the country or countries in which the investee company operates or for markets in which the asset used is placed unless a higher rate can be justified The assumptions used to determine cash flow projections must be reasonable, and based partly on an analysis of the factors that generated differences between projections of past and current cash flows. In addition, the assumptions used to determine current cash flow projections must be checked to ensure that they are consistent with actual past results, unless
    • Financial Statements for the Year Ending 31 December 2010 96 in the meantime changes have occurred in the investee company's business model or in the economic environment in which it operates that justify changes vis-a-vis the past. Receivables and payables A receivable is first reported at fair value on the date it is agreed. After initial reporting, receivables are valued at amortised cost. Payables that fall due within normal contractual terms are initially posted at fair value and later valued at amortised cost. Trade receivables If there is objective evidence that a trade receivable has suffered impairment, it must be written down and the loss posted to the income statement; the write-down is allocated to the item "impairment provisions", as a direct contra item to the asset item. The amount of the write-down must take into account recoverable cash flows, the related collection dates, future recovery charges and expenses and the discount rate to be applied. Held-for-sale assets A non-current asset or disposal group is classified as held for sale if the carrying value will mainly be recovered from its sale or disposal instead of its ongoing use. In order for this to occur, the asset or disposal group must be available for immediate sale in its current condition, and the sale must be highly likely. Assets meeting the criteria to be classified as held-for-sale assets are valued at the lower of carrying value and sales value adjusted for any related costs. Own shares Own shares are not considered financial assets of the company that issued the shares. The purchase and sales value of own shares is recorded as a change to shareholders' equity. No gain or loss is reported in the income statement for the sale, purchase, issue or cancellation of own shares. Cash and cash equivalents Cash and cash equivalents include cash at hand, demand deposits and short-term, highly liquid financial investments that are readily convertible to cash and subject to a negligible risk of price variation. Their value is reported at fair value. Provisions for risks and future liabilities As necessary, the group records provisions for risks and future liabilities when: ♦ it has a legal or implicit obligation to third parties resulting from a past event ♦ it is likely that group resources will be used to fulfil the obligation ♦ a reliable estimate can be made of the amount of the obligation Provisions are recorded based on the projected value discounted as necessary when the time value is considerable. Changes in estimates are recognised in the income statement of the period in which the change occurs. Income tax Current income taxes are determined and reported on the basis of a reasonable forecast of tax charges resulting from applying the tax rates in effect in the various countries where group companies operate to taxable income, and taking into account any exemptions and tax credits to which such companies are entitled. Deferred tax liabilities are allocated for all temporary differences between the carrying value of the assets and liabilities and the corresponding amount for tax purposes. Deferred tax assets are recorded for all deductible temporary differences and for tax assets and liabilities carried forward to the extent that it is likely there will be sufficient future taxable
    • Financial Statements for the Year Ending 31 December 2010 97 profit against which the deductible temporary differences and the tax assets and liabilities carried forward can be used. Deferred taxes are classified under non-current assets and liabilities and are determined using tax rates expected to be applicable under the laws in the countries where the group operates in the years when the temporary differences will be realised or will expire. The carrying values of deferred tax assets are analysed periodically and reduced if it is not likely that sufficient taxable income will be generated against which the benefits resulting from such deferred assets can be used. Revenues and income Service revenues are recognised at the time the services are rendered based on the progress of the activity on the reporting date. Income from equity investments for dividends or for their full or partial sale is reported when the right to receive payment is determined, with a balancing item (receivable) at the time of the sale or decision to distribute dividends by the entity or appropriate body. Interest is reported using the effective interest rate method. Employee benefits Short-term employee benefits, whether in cash or in kind (meal vouchers) are reported in the income statement in the period when work is performed. Employee benefits related to participation in a defined benefit plan are determined by an independent actuary using the projected unit credit method. Actuarial gains and losses are posted to the income statement in the period in which they occur using the corridor method to record the gains or losses unless these exceed a certain percentage of the obligation. Employee benefits in respect of participation in a defined contribution plan only relate to those plans under mandatory government administration. The payment of contributions fulfils the group's obligation to its employees. Thus, contributions are costs in the period in which they are payable. In the group, benefits were provided in the form of stock options or share-based payments. This applies to all employees eligible for stock option plans. The cost of these transactions is determined with reference to the fair value of the options on the date allocation is made and is reported over the period from such date until the expiry date with a balancing entry in shareholders' equity. The cost of stock options for the group's directors and contributors is determined in the same way. Fair value reserve The fair value reserve incorporates fair value changes to entries measured at fair value with a balancing entry in shareholders' equity. Warrants Warrants issued by the group, which do not meet the requirements either for being classified as share-based payments to employees pursuant to IFRS 2 or as financial liabilities, are treated as group equity instruments. Earnings per share In accordance with IAS 33, basic earnings per share is determined as the ratio of net profit for the period attributable to shareholders owning parent company shares to the weighted
    • Financial Statements for the Year Ending 31 December 2010 98 average number of shares outstanding during the period. Own shares in the portfolio are, of course, not included in this calculation. Diluted earnings per share is calculated by adjusting the weighted average number of shares outstanding for all potential ordinary shares resulting from the possible exercise of assigned stock options, which may therefore result in a diluting effect. C. Changes in accounting principles and the treatment of errors Accounting principles are changed from one year to another only if the change is dictated by an accounting standard or if it contributes to providing more reliable information or more complete reporting of the impact of transactions on the group's statement of financial position, income statement and cash flow. Changes in accounting principles are applied retroactively with the impact reflected in shareholders' equity in the first of the periods presented. Comparative reporting is adapted accordingly. The prospective approach is used only when it is not practical to restate comparative reporting. The application of a new or amended accounting standard is recorded as required by the standard. If the standard does not specify transition methods, the change is reflected retroactively, or if impractical, prospectively. If there are significant errors, the same treatment dictated for changes in accounting principles is used. If there are minor errors, corrections are posted to the income statement in the period when the error is discovered. D. Use of estimates and assumptions in preparing the financial statements The company's management must make assessments, estimates and assumptions that affect the application of accounting principles and the amounts of assets, liabilities, costs and revenues recorded in the financial statements. Estimates and related assumptions are based on past experiences and other factors deemed reasonable in the case concerned; these have been used to estimate the carrying value of assets and liabilities that cannot be easily obtained from other sources. These estimates and assumptions are reviewed regularly. Any changes resulting from revisions to accounting estimates are recorded in the period when the revision is made if such revisions only affect that period. If the revision affects current and future periods, the change is recorded in the period in which the revision is made and in related future periods. Financial statement balances are reported and valued using the valuation criteria described above. At times the application of these criteria involves the use of estimates that may have a significant impact on amounts reported in the financial statements. Estimates and related assumptions are based on past experiences and factors deemed reasonable in the case concerned; these are used to estimate the carrying value of assets and liabilities that cannot be easily obtained from other sources. However, since these are estimates, the results obtained should not necessarily be considered definitive. With the understanding that the use of reasonable estimates is an essential part of preparing financial statements, the items where the use of estimates is most prevalent are stated below: • valuation of financial assets not listed in active markets • valuation of financial assets listed in active markets but considered illiquid on the reference market • valuation of equity investments The process described above is made particularly complicated by the unusual levels of volatility in the current macroeconomic and market environment, which affect financial indicators that have a bearing on the above valuations.
    • Financial Statements for the Year Ending 31 December 2010 99 An estimate may be adjusted as a result of changes in the circumstances on which it was based, or as a result of new information. Any change in the estimate is applied prospectively and has an impact on the income statement in the period in which the change occurred and potentially on income statements in future periods. As highlighted earlier, a significant proportion of the assets shown in the DeA Capital Group’s consolidated financial statements is represented by unlisted financial investments. These investments are valued at their fair value, calculated by directors based on their best estimate and judgement using the knowledge and evidence available at the time the consolidated financial statements are prepared. However, due to objective difficulties in making assessments and the lack of a liquid market, the values assigned to such assets could differ, and in some cases significantly, from those that could be obtained when the assets are sold.
    • Financial Statements for the Year Ending 31 December 2010 100 NON-CURRENT ASSETS 1 – Intangible and tangible assets 1a – Goodwill Changes in goodwill are shown in the table below: (Euro thousand) Balance at Jan. 1, 2010 Additions Decrease Impairment Balance at Dec. 31, 2010 Goodwill 74,360 0 (2,604) 0 71,756 The item totalled EUR 71,756 thousand (EUR 74,360 thousand at end-2009) relates to goodwill reported for: • the acquisition of a 65% controlling stake in FARE NPL in 2009 • the acquisition of a 70% controlling stake in FARE Holding in 2008 • the recognition of options relating to the residual minority shareholders’ interests (30%) in FARE Holding Under the contract for the acquisition of FARE Holding, the parties determined call and put options on the remaining 30% of the capital of FARE Holding, to be exercised within 60 days of the expiry of the fifth anniversary of the date that the deal was closed (12 December 2008), by both DeA Capital and the seller at market values. In accordance with the valuation criteria adopted by DeA Capital, the minority interest in the shareholders’ equity was reversed and reclassified as a financial liability at its fair value. The difference between the fair value of the financial liability and the minority interest reversed on the reporting date is recorded as an acquisition of minority shareholdings and reported as a change in goodwill. Financial liabilities include the portion of minorities’ profits at 31 December 2010. Adjustments to the opening value of goodwill, totalling EUR 2,604 thousand, relate to the reduction in the component of the price connected with the recognition of earn-out payments to the seller linked to the expected performance of some of the funds managed by FARE SGR in the next few years. Impairment tests on goodwill Pursuant to IAS 36, goodwill is not subject to amortisation, and is tested for impairment at least annually. The main assumptions used in the impairment test calculations, together with the results, are set out below. In order to carry out impairment testing on goodwill, the DeA Capital group allocates it to its CGUs, identified as the FARE Holding Group (real estate fund management and related services) and the IDeA Alternative Investments Group (private equity fund management), which represent the minimum level of monitoring that the DeA Capital Group undertakes for management control purposes, in line with DeA Capital’s strategic vision. In the case of CGUs that are not wholly controlled, goodwill is reported on a notional basis, which also includes the portion of goodwill that relates to minorities, using the grossing up method. The carrying value of the CGU is calculated using the same criterion as that used to determine the recoverable value of the CGU.
    • Financial Statements for the Year Ending 31 December 2010 101 Impairment testing consists of comparing the recoverable amount of each CGU with the carrying amount of goodwill and other assets attributed to each CGU. Impairment testing was carried out on the FARE Holding CGU by determining the value in use, calculated as the current value of dividend flows (the dividend discount model, or DDM) expected in the 2011-2013 period from the various companies belonging to the FARE Group ("sum of the parts" approach). A number of assumptions were used in determining these flows, including estimates of future increases in revenues, based on expected trends in managed assets, EBITDA and net income. These assumptions were based on a weighted average cost of capital of 12.0% for FARE SGR and 14.0% for the other group companies, plus a terminal value based on growth assumptions of 2.0%. Note that the recoverable amount relating to this CGU exceeds its carrying amount. Sensitivity analysis performed on the discount rate and growth rate used to determine the terminal value leads to a potential change in the value in use of FARE Holding (100%) of EUR -13.5/+18 million (for a variation of 0.5% and -0.5% respectively in the discount rate) and of EUR -3.1/+3.4 million (for a variation of -0.5% and +0.5% respectively in the growth rate used to calculate the terminal value). 1b – Intangible assets Changes in intangible assets are shown in the tables below: (Euro thousand) Historical cost at Jan. 1, 2010 Cum. amort. & prov. charges at Jan. 1, 2010 Net book value at Jan. 1, 2010 Historical cost at Dec. 31, 2010 Cum. amort. & prov. charges at Dec. 31, 2010 Net book value at Dec. 31, 2010 Concessions, licence fees & trademarks 318 (266) 52 319 (311) 8 Computer software & other licenses 48 (37) 11 72 (28) 44 Other intangible assets 19,829 (10,790) 9,039 19,820 (17,752) 2,068 Total 20,195 (11,093) 9,102 20,211 (18,091) 2,120 (Euro thousand) Balance at Jan.1, 2010 Additions Amortization Balance at Dec.31, 2010 Concessions, licence fees & trademarks 52 7 (51) 8 Computer software & other licenses 11 55 (22) 44 Other intangible assets 9,039 0 (6,971) 2,068 Total 9,102 62 (7,044) 2,120 Increases in the items "concessions, licences and trademarks" and "software costs" relate to purchases of software usage licences and the related development costs. Other intangible assets mainly relate to customer contracts, which arise from the allocation of the merger cost for the acquisition of FARE Holding and are recorded separately from goodwill.
    • Financial Statements for the Year Ending 31 December 2010 102 1c – Tangible assets Changes in tangible assets are shown in the tables below: (Euro thousand) Historical cost at Jan. 1, 2010 Cum. amort. & prov. charges at Jan. 1, 2010 Net book value at Jan. 1, 2010 Historical cost at Dec. 31, 2010 Cum. amort. & prov. charges at Dec. 31, 2010 Net book value at Dec. 31, 2010 Plant 200 (177) 23 213 (201) 12 Furniture and fixtures 706 (404) 302 683 (462) 221 Computer and office equipment 394 (295) 99 458 (343) 115 Motor vehicles 53 (14) 39 53 (28) 25 Other tangible assets 50 (35) 15 50 (41) 9 Total 1,403 (925) 478 1,457 (1,075) 382 (Euro thousand) Balance at Jan.1, 2010 Additions Amortization Other movements Balance at Dec.31, 2010 Plant 23 14 (26) 1 12 Furniture and fixtures 302 2 (83) 0 221 Computer and office equipment 99 72 (56) 0 115 Motor vehicles 39 0 (13) (1) 25 Other tangible assets 15 3 (7) (2) 9 Total 478 91 (185) (2) 382 Depreciation is calculated on a straight-line basis, based on the estimated useful life of the asset. The depreciation rates used in the financial statements are 20% for specific plant assets, 12% for furniture and furnishings, 20% for electronic office equipment and 20% for company vehicles. 2 – Financial investments Financial investments in companies and funds are the group's typical assets. These investments fell from EUR 669,369 thousand at 31 December 2009 to EUR 649,459 thousand at end-2010. 2a – Investments in associates This item, totalling EUR 339,022 thousand at 31 December 2010 (EUR 345,372 thousand at end-2009), relates to the following assets: - The investment in Santé is reported in the consolidated financial statements to 31 December 2010 at approximately EUR 282,907 thousand (EUR 289,150 thousand at end-2009). The change compared to the figure reported at the reporting date in 2009 is attributable to the portion of the net loss of EUR 8,795 thousand, the increase in the fair value of the interest rate swaps taken out to hedge interest rate risk on debt exposure of EUR 1,614 thousand, and other decreases amounting to EUR 938 thousand (resulting mainly from the dilution of Santé's stake in its subsidiary GDS following the implementation of the plan to allocate shares free of charge to GDS employees).
    • Financial Statements for the Year Ending 31 December 2010 103 - The investment in Sigla Luxembourg (the parent company of the Sigla Group) is recorded in the consolidated financial statements to 31 December 2010 at EUR 22,055 thousand (EUR 21,832 thousand at end-2009). The increase of around EUR 223 thousand compared with the reporting date of 2009 is largely due to the rise in value of the instruments used to hedge interest rates. - The stake in the IDeA Co-Investment Fund I was valued in the consolidated financial statements to 31 December 2010 at EUR 34,060 thousand (EUR 34,389 thousand at 31 December 2009). The change compared to the figure at the end of 2009 is due to contributions made in the form of capital calls of EUR 3,290 thousand, the pro-rata share of the net loss for the period of EUR 6,826 thousand and increases in fair value totalling EUR 3,207 thousand. Summary financial information on these holdings is shown in the table below: Santé Group Sigla Group CoIF I €/M 31.12.2010 31.12.2010 31.12.2010 Total assets/liabilities 2,381 99.0 74.4 Revenues 1,926 20.7 0.0 Net profit/(loss) (12.6) (0.0) (7.8) Non controlling interests 7.9 0.0 0.0 Group share (20.5) (0.0) (7.8) When the equity investment is acquired, any difference between its cost and the parent company's stake in the net fair value of the associate's identifiable assets, liabilities and contingent liabilities is recorded as required by IFRS 3. Any goodwill relating to an associate is therefore included in the carrying value of the equity investment. The DeA Capital Group performed impairment testing on the above-mentioned holdings in associates by determining the value of the said holdings using the methodology summarised below: For Santé, the discounted cash flow (DCF) method was applied for the period 2011- 2015, using a number of assumptions, including estimates of future increases in revenues, EBITDAR, investment and working capital. Discounted cash flow here is based on a weighted average cost of capital of 7.5%, which is in turn based on a cost of equity of 11.5%, combined with a debt component – including the capitalisation of rental charges (see below) – that has a weight of 76% of the capital structure. In addition to the discounted cash flows, the enterprise value is also calculated on the basis of a terminal value that has been established from the perpetual yield, which in turn was determined from the cash flow up to 2015 minus the non-recurring components and capitalised based on an expected growth rate of 1.5%. As a result of the impairment test, the value of the holding was broadly brought in line with its carrying value. It is important to note that, although we continued to use the DCF approach, analysis was focused on gross cash flows (including the effect of rental costs), with the amount of debt deducted from the enterprise value adjusted by a "theoretical" value for the debt arising from the capitalisation of these rental costs. This makes the valuation more sensitive to changes to the input parameters. Sensitivity
    • Financial Statements for the Year Ending 31 December 2010 104 analysis performed on the discount rate and growth rate used leads to a potential change in the carrying value of EUR -125/+148 million (for a variation of +0.5%/-0.5% respectively in the discount rate) and of EUR -43/+45 million (for a variation of -0.2%/+0.2% respectively in the growth rate). For Sigla, the market multiple method was used (considered more appropriate than discounted cash flow as the company is still in the start-up phase, and given that its short-term forecasts are heavily dependent on the ongoing turbulence that has affected the credit markets since 2007). The method was applied in different ways to the Personal Loans and Salary-Backed Loans businesses. The Personal Loans business was valued by applying a multiple to the carrying value of the loans to identify the average recognised premium, while a capital and interest multiple was applied to the Salary-Backed Loans business. Applying the ranges of market multiples to the Sigla portfolio (-17.5%/+16% for the premium on the carrying value of personal loans and +10%/+20% for the capital and interest multiple for the salary-backed loans) leads to a range of valuations for the stake held by DeA Capital of between EUR 15 million and EUR 31 million, which is consistent with the carrying value recorded at 31 December 2010. Sensitivity analysis performed on the multiples leads to fluctuations in the carrying value of the holding of between EUR - 1.5 million and EUR +1.5 million for variations of -5%/+5% respectively for the multiple relating to the premium on the carrying value of the loans, and of EUR -2.7 million to EUR +2.7 million for variations of -5%/+5% for the multiple relating to the salary-backed loans. The IDeA Co-Investment Fund I (IDeA CoIF I) is shown in the financial statements under "Investments in associates" in view of the stake held by the DeA Capital Group. The investment was recorded at EUR 34,060 thousand at 31 December 2010. This carrying value represents the NAV advised by its management company in its annual report to 31 December 2010, drafted in accordance with the Bank of Italy’s regulation of 14 April 2005 on collective asset management. 2b – Investments in other available-for-sale companies At 31 December 2010, the DeA Capital Group was a minority shareholder in Kenan Investments (indirect parent company of Migros), Stepstone and three US companies operating in the biotech, information and communication technology and printed electronics sectors. Al 31 December 2010, the item totalled EUR 211,511 thousand compared with EUR 239,917 thousand at 31 December 2009. The investment in Kenan Investments (indirect parent company of Migros) was recorded in the financial statements to 31 December 2010 at EUR 195,000 thousand, equal to the estimated fair value of the holding itself at 31 December 2010, taking into account the effect of the cash distribution of EUR 18,518 thousand to shareholders and an increase in fair value of EUR 5,518 thousand versus 31 December 2009 (with positive fair value reserves totalling EUR 35,928 thousand). This increase in fair value is due to the updated valuation procedure for the asset based on the market multiples methodology applied to the company's EBITDA figures, and can be attributed to the substantial reduction in the riskiness of the Turkish market as perceived by the financial community: the risk-free reference rate decreased from around 12% to approximately 9% during 2010, even though there was an increase in the volatility of the TRY/EUR exchange rate.
    • Financial Statements for the Year Ending 31 December 2010 105 Sensitivity analysis performed on the EBITDA multiple leads to potential variations in the carrying value of between EUR -12.9 million and EUR +15.4 million (for a variation of +0.5% and -0.5% in the multiple respectively). The stake in Stepstone was recorded in the consolidated financial statements to 31 December 2010 at EUR 15,080 thousand (EUR 31,350 thousand at end-2009), broadly equivalent to the acquisition cost, a decrease of EUR 16,270 thousand compared with 31 December 2009. The above-mentioned decrease in fair value is due to the decision to adopt a more prudent approach which, while taking account of the increase in value of the company’s only asset (units in the Blue Skye Fund, whose NAV would support a higher fair value of Stepstone), at the same time is mindful of the need to refinance the debt held by Stepstone in 2011 and the possible erosion of value for the equity holders that could result from that. The total value of the US shareholdings is around EUR 1,431 thousand, a rise of EUR 812 thousand compared to 31 December 2009, due particularly to the increase in fair value of Mobile Access Networks Inc. The table below shows changes to the US holdings during 2010. (Euro thousand) Total shares % holding (Fully Diluted) Balance at Jan.1, 2010 Share capital increase Fair value adjustment Impairment recorded in Income Statement Translation adjustment Balance at Dec. 31, 2010 Elixir Pharmaceuticals Inc. 1,602,603 1.30 47 0 0 (51) 4 0 Kovio Inc. 151,909 0.42 51 0 0 64 (1) 114 Mobile Access Networks Inc. 1,962,402 1.20 469 0 0 812 36 1,317 Total 567 0 0 826 38 1,431 2c – Available-for-sale funds This item relates to investments in units of two funds of funds (IDeA I FoF and IDeA ICF II) and seven venture capital funds, totalling EUR 98,622 thousand in the financial statements at the end of 2010, compared with EUR 83,776 thousand at end-2009. The table below shows changes to the funds during 2010. (Euro thousand) Balance at Jan. 1, 2010 Increase (capital call) Decrease (Capital Distribution) Impairment Fair Value Adjustment Translation adjustment Balance at Dec. 31, 2010 Venture Capital funds 13,542 698 (360) (252) (1,407) 756 12,977 IDeA I FoF 65,336 12,750 (6,800) 0 8,601 0 79,887 IDeA ICF II 4,898 1,824 (1,663) 0 699 0 5,758 Total Funds 83,776 15,272 (8,823) (252) 7,893 756 98,622 Units in venture capital funds are valued at around EUR 12,977 thousand in the consolidated financial statements to 31 December 2010 (EUR 13,542 thousand at end-2009). The overall decrease in the investments is mainly attributable to a decrease in fair value (and related exchange rate effects) of EUR 651 thousand, the impairment (and related exchange rate effects) of certain funds, of around EUR 252 thousand, and capital calls paid totalling EUR 698 thousand. The fair value measurement of investments in venture capital funds at 31 December 2010, carried out based on the information and documents received from the funds, as well as other available information, meant that the amount had to be written down by EUR 252 thousand;
    • Financial Statements for the Year Ending 31 December 2010 106 the significant reduction to below cost was considered clear evidence of impairment, especially in view of the short time to maturity. During the year, the company received capital distributions of EUR 360 thousand, which had a positive impact on the income statement of EUR 554 thousand. Units in IDeA I FoF were valued at around EUR 79,887 thousand in the consolidated financial statements to 31 December 2010 (EUR 65,336 thousand at end-2009). The change versus end-2009 was attributable to payments made in response to capital calls of EUR 12,750 thousand, capital reimbursements received from IDeA I FoF of EUR 6,800 thousand, an increase in fair value of EUR 13,789 thousand, and impairment of EUR 5,188 thousand due to a fall in value compared to the cost of the investment for a period of two years. Units in ICF II were valued at around EUR 5,758 thousand in the consolidated financial statements to 31 December 2010 (EUR 4,898 thousand at end-2009). The change versus end-2009 was attributable to payments made in response to capital calls of EUR 1,824 thousand, capital reimbursements received from IDeA I FoF of EUR 1,663 thousand and an increase in fair value of EUR 699 thousand. 2d – Other available-for-sale financial assets The item totalled EUR 304 thousand and relates to the stakes held by the FARE Group in Beni Immobili Gestiti S.p.A. (0.25%) and in AEDES BPM Real Estate SGR S.p.A. (5.0%). 3 – Other non-current assets 3a – Deferred tax assets The balance on the item "deferred tax assets" totalled EUR 243 thousand and comprises the value of deferred tax assets minus deferred tax liabilities, where they may be offset. Deferred tax assets relating to the parent company of EUR 821 thousand were fully offset against deferred tax liabilities. The changes to deferred tax assets and liabilities during the year, broken down by type, are analysed below.
    • Financial Statements for the Year Ending 31 December 2010 107 (Euro thousand) At December 31, 2009 Recorded in the income statement Recorded in Equity Offset At December 31, 2010 Deferred tax assets for: -other 187 (25) 13 (236) (61) Total prepaid tax assets 187 (25) 13 (236) (61) Deferred tax liabilities for: -available-for-sale securities: DeA Capital S.p.A. (39) 0 0 0 (39) -available-for-sale securities (5,114) 0 (228) 0 (5,342) -intangible assets (2,853) 2,188 0 236 (429) Total deferred tax liabilities (8,006) 2,188 (228) 236 (5,810) Losses carried forward available for offset against future taxable profits 5,253 211 0 0 5,464 Total deferred tax liabilities 279 186 13 (236) 243 Total deferred tax assets (2,845) 2,188 (228) 236 (649) Deferred tax liabilities relating to intangible assets, at EUR 649 thousand, are mainly attributable to the tax effect in respect of the allocation of part of the purchase cost of FARE Holding to intangible assets (customer contracts). As required by IFRS 3 (Business combinations), the company recorded a deferred tax liability for the assets identified at the date of acquisition. No further deferred tax assets were allocated for the significant tax losses of DeA Capital S.p.A. (around EUR 108,074 thousand, to be reported without limitation) and of DeA Capital Investments S.A. (around EUR 104,019 thousand). This was because there was insufficient information leading the group to believe that in future periods it would be possible to generate sufficient taxable income against which such tax losses could be recovered. Deferred taxes were calculated using the liability method based on the temporary differences at the reporting date between the tax amounts used as a reference for the assets and liabilities and the amounts reported in the financial statements. 3b – Non-current loans and receivables This item totalled EUR 996 thousand at 31 December 2010 and relates to loans from the original Santé shareholders to the senior management of GDS for the capital increase at Santé, which was partly subscribed by the original shareholders and partly by the senior management of GDS. 4 – Current assets 4a – Trade receivables Receivables amounted to EUR 2,658 thousand and chiefly include receivables from customers of the FARE Holding Group of EUR 2,507 thousand, which are broken down by maturity in the table below. AGEING SCHEDULE OF TRADE RECEIVABLES AT 31.12.2010 - FARE GROUP (*) (Euro thousand) Due within 30 days Due 30 days Due 60 days Due 90 days Due 120 days Due 150 days Total Total provision for bad and doubtful debts Net amount Total 2,027 561 0 0 0 3 2,591 (83) 2,507
    • Financial Statements for the Year Ending 31 December 2010 108 The item "transactions with Related Parties" includes EUR 35 thousand from De Agostini S.p.A. for the agreement to sublet rented premises and the reimbursement of costs associated with said agreement 4b – Available-for-sale financial assets At 31 December 2010, this item totalled EUR 15,038 thousand, compared with EUR 15,779 thousand at 31 December 2009. This amount relates to 2,933,044,992 units in the Soprarno Pronti Termine fund with an average subscription price of EUR 5.149. The market price of the units at 30 December 2010, the last day in the year that the markets were open, was EUR 5.127, giving a total value of EUR 15,038 thousand. This is to be regarded as a temporary investment of excess cash. 4c – Current financial receivables This item totalled EUR 1,682 thousand at 31 December 2010 and relates to loans from the original Santé shareholders to the senior management of GDS for the capital increase at Santé, which was partly subscribed by the original shareholders and partly by the senior management of GDS. 4d – Tax receivables from parent companies relating to the tax consolidation scheme This item totalled EUR 4,065 thousand at 31 December 2010 (EUR 3,199 thousand at 31 December 2009) and relates to the receivable from the parent company B&D Holding S.a.p.A. for joining the tax consolidation scheme. The option for DeA Capital S.p.A. to join the Italian tax consolidation scheme to which the B&D Group (the group headed by B&D Holding di Marco Drago e C. S.a.p.a) belongs was exercised jointly by each company and the parent company B&D Holding di Marco Drago e C. S.a.p.a. by signing the "Regulation for participation in the national tax consolidation scheme for companies in the De Agostini Group" and notifying the tax authorities of this option pursuant to the procedures and terms and conditions set out by law. The option is irrevocable for the three- year period of 2008-2010 unless the requirements for applying the scheme are not met. 4e – Other tax receivables At 31 December 2010, this item totalled EUR 1,832 thousand, compared with EUR 2,211 thousand at 31 December 2009. It includes: • advance payments on IRAP of EUR 442 thousand • tax deductions in the form of advance payments on interest, of EUR 186 thousand • corporate income tax (IRES) credits to be reported resulting from the tax return for the previous year, of EUR 671 thousand • receivable of EUR 506 thousand, mainly due to the change in the percentage against which the parent company may offset VAT, from 100% to 92% • Other receivables from the tax authorities of EUR 27 thousand 4f – Other receivables This item, which totalled EUR 557 thousand at 31 December 2010 (EUR 403 thousand at 31 December 2009), chiefly includes guarantee deposits, advances to suppliers and prepaid expenses.
    • Financial Statements for the Year Ending 31 December 2010 109 4g – Cash and cash equivalents This item, which totalled EUR 86,517 thousand at 31 December 2010 (EUR 98,875 thousand at the end of the previous year), comprises bank deposits and cash, including interest accrued to 31 December 2010. This decrease is primarily due to the combined effect of the following factors: • receipt of dividends totalling EUR 2,661 thousand from IDeA Alternative Investments S.p.A. and EUR 2,971 thousand from the associate Santé • cash distribution by Kenan Investments SA of EUR 20,800 thousand • payment of EUR 4,236 thousand for the second tranche of the deferred portion of the price and the qualified price component relating to the FARE deal • revenues for services and fees of EUR 28,735 thousand • costs for services of EUR20,658 thousand and taxes totalling EUR 2,997 thousand • share buyback plan for DeA Capital S.p.A. totalling EUR 1,093 thousand • repayment of EUR 20,000 thousand relating to the credit line agreed with Mediobanca and EUR 650 thousand relating to the FARE bond • net investment in shareholdings and funds of EUR 19,899 thousand, chiefly comprising: - EUR 2,999 thousand relating to the capital increase by Santé - EUR 16,900 thousand for investments in funds (EUR 12,750 thousand in IDeA I FoF, EUR 3,290 thousand in IDeA CoIF I, EUR 162 thousand in ICF II and EUR 698 thousand in venture capital funds) Please see the consolidated cash flow statement for further information on changes to this item. The item "cash and cash equivalents" relates to cash balances and bank deposits in the name of group companies. Cash deposited at banks accrues interest at floating rates, based on the prevailing overnight, 1-2-week and 1-3-month interest rates. Sensitivity analysis performed at market interest rate level (instant hypothetical variation of +/- 2%), applicable to cash and cash equivalents at 31 December 2009, shows an effect of EUR +/- 1,730 thousand on pre-tax profit and on shareholders’ equity. 5 - Assets and liabilities related to joint ventures This item includes assets and liabilities relating to the IDeA Alternative Investments Group. Below are details of items applicable to the DeA Capital Group related to the pro-rata share (44.36%) of IDeA Alternative Investments at 31 December 2010.
    • Financial Statements for the Year Ending 31 December 2010 110 (Euro thousand) Balance sheet at 31.12.2010 - DeA Capital share 44.36% Balance sheet at 31.12.2009 - DeA Capital share 44.36% Goodwill 387 387 Intangible assets 2,071 2,500 Property, plant and equipment 174 178 Investments in associated companies and other companies 14,799 16,807 Available-for-sale assets 15,412 15,412 Shares in investment funds 3,650 864 Interest-bearing receivables 324 2,113 Cash and cash equivalents 3,743 4,118 Other assets 907 1,265 Assets 41,467 43,644 Goodwill on acquisition 22,375 22,375 Joint venture assets 63,842 66,019 Trade payables (372) (449) Tax payables and deferred tax (1,428) (2,307) Other payables (459) (408) Provisions for risks (79) 0 Joint venture liabilities (2,338) (3,164) Net joint venture assets 61,504 62,855 Net equity on the date of acquisition 56,490 56,490 Increase in fair value reserves during the year (20) 587 Retained earnings 2,903 373 Group net result 1,814 5,192 Non-controlling interest reserve 383 312 Non-controlling interest net profit (loss) (66) (99) Net equity 61,504 62,855 Net equity Group 61,187 62,642 Non-controlling interests 317 213 Shareholders’ equity 57,096 The decrease of EUR 1,455 thousand in group shareholders’ equity of IDeA Alternative Investments at 31 December 2010 (DeA Capital portion) compared with the figure reported at 31 December 2009 is largely attributable to the profit for the period of EUR 1,814 thousand, the decrease in the fair value reserves of EUR 607 thousand and the dividend distribution totalling EUR 2,662 thousand. The impairment test performed on the IDeA Alternative Investments CGU was based on the calculations made to determine the exchange ratios for the partial, non-proportional demerger completed in January 2011 (see the section "Significant events after the year-end" in this document). The value in use was calculated as the current value of net income flows expected over the period 2011-2013 by the various companies in the group (the sum of the parts model). A number of assumptions are used in determining these flows, including estimates of future increases in revenues, based on expected trends in managed assets, EBITDA and net income. The valuation was based on a weighted average cost of capital, broken down by asset management company included in the valuation, of between +12.1% and +13.6%, plus a terminal value based on growth assumptions of 2.0%. Note that the recoverable amount relating to this CGU exceeds its carrying amount.
    • Financial Statements for the Year Ending 31 December 2010 111 Sensitivity analysis performed on the discount rate and growth rate used leads to a potential change in the carrying value of EUR -5.0/+5.5 million (for a variation of +0.5% and -0.5% respectively in the discount rate) and of EUR -2.9/+3.2 million (for a variation of -0.5% and +0.5% respectively in the growth rate). As detailed in the section "Significant events after the year-end" below, the reorganisation of IDeA AI was completed in January 2011. The process took place in two stages: - the execution of the demerger of the holdings in Investitori Associati SGR and Wise SGR following approval by the Bank of Italy and the Italian Competition Authority - the acquisition of the remaining stock held by private shareholders The reorganisation of IDeA AI was effected through a partial non-proportional demerger, with a reduction in the share capital of IDeA AI and allocation of Investitori Associati SGR and Wise SGR to the management of Investitori Associati SGR and Wise SGR respectively, in return for the cancellation of the stakes held by those companies in IDeA AI. As a result of the demerger, DeA Capital S.p.A. acquired control of IDeA AI. For the purposes of classifying this deal at 31 December 2010, the group took account of the fact that authorisation by the supervisory authorities had not been received by the reporting date. 6 – Shareholders' equity At 31 December 2010, group shareholders’ equity was approximately EUR 763,955 thousand, compared with EUR 780,195 thousand at 31 December 2009. The decrease in the group's shareholders' equity in 2010 (about EUR 16,240 thousand) was largely due to: • the share buyback plan for DeA Capital S.p.A. totalling EUR 1,094 thousand. • the reversal of the cost allocated to the "Stock Options 2007-13" reserve, of EUR 1,379 thousand • the positive effects of the increase in the fair value reserve, totalling EUR 10,746 thousand. These effects can be seen more clearly in the Statement of Performance • the loss of EUR 26,348 thousand for the period • other increases of EUR 1,835 thousand The main changes in shareholders’ equity are described in more detail in the relevant table of changes included in the Consolidated Financial Statements. 6a – Share capital The parent company’s share capital (fully subscribed and paid up) totalled EUR 306,612,100, represented by 306,612,100 shares (of which 12,598,698 in the portfolio) with a nominal value of EUR 1 each. Given that the nominal value of the 12,598,698 own shares held at 31 December 2010 is deducted from total share capital, share capital of EUR 294,013,402 was reported in the financial statements. Changes in share capital are shown in the table below: (Euro thousand) no. of shares amount no. of shares amount Share Capital 306,612,100 306,612 306,612,100 306,612 of which: own shares (12,598,698) (12,599) (17,591,212) (17,591) Share Capital (excluding own shares) 294,013,402 294,013 289,020,888 289,021 Dec. 31, 2010 Dec. 31, 2009
    • Financial Statements for the Year Ending 31 December 2010 112 The table below shows a reconciliation of the shares outstanding: Shares issued Own shares held Shares outstanding Shares at December 31, 2009 306,612,100 (17,591,212) 289,020,888 Share capital increase 0 0 0 Own shares purchased 0 (944,343) (944,343) Own shares sold 0 0 0 Own shares disposed for FARE acquisition 0 5,936,857 5,936,857 Used for stock option plan 0 0 0 Shares issued through exercise of stock options 0 0 0 Shares at December 31, 2010 306,612,100 (12,598,698) 294,013,402 6b – Share premium reserve This item decreased by around EUR 268 thousand (from EUR 395,881 thousand at 31 December 2009 to EUR 395,613 thousand at 31 December 2010) following the posting to this reserve of: (a) the allocation of part of the loss for the previous year, totalling EUR 1,798 thousand (b) the purchase of own shares in the amount of EUR 149 thousand (c) the value of the shares assigned for the acquisition of FARE Holding totalling EUR 1,679 thousand 6c – Legal reserve This reserve, which was unchanged compared with the end of 2009, totalled EUR 61,322 thousand at 31 December 2010. 6d – Fair value reserve The fair value reserve at 31 December 2010 was positive at EUR 29,723 thousand (positive at EUR 18,977 thousand at 31 December 2009) and comprises the following items: (Euro thousand) Balance at Jan. 1, 2010 Impairment Change in Fair Value Tax effect Balance at Dec. 31, 2010 Direct Investments / Shareholdings 32,824 50 (4,877) 2,357 30,354 Venture capital funds and funds of funds (14,092) 5,993 9,184 (1,344) (259) First time adoption IFRS and other reserves (341) 0 (11) 0 (352) Fair value reserves related to joint ventures 586 0 (606) 0 (20) Total 18,977 6,043 3,691 1,013 29,723 6e – Other reserves Other reserves totalled a negative EUR 5,868 thousand (a positive EUR 1,293 thousand at 31 December 2009) and are made up of: - a reserve for stock option costs totalling EUR 313 thousand - a reserve for the sale of option rights, totalling EUR 413 thousand. This originated from the sale of the remaining option rights to subscribe to a capital increase that had not been exercised by the shareholders, which were sold by the company - other reserves that are negative at EUR 7,477 thousand relate to the associate Santé, chiefly for the reclassification of the minority interests in Santé connected with the 2008-2009 extraordinary dividend distribution by Générale de Santé - other reserves of EUR 883 thousand
    • Financial Statements for the Year Ending 31 December 2010 113 6f – Retained earnings (losses) carried forward This item stood at EUR 15,499 thousand at 31 December 2010 compared with EUR 43,078 thousand at 31 December 2009. The total decrease of EUR 27,579 thousand was due to the allocation of the loss for 2009. 6g – Profit (loss) for the year The loss reported for the year of EUR 26,348 thousand relates to the consolidated loss attributable to the group (EUR 29,377 thousand at 31 December 2009). 6h – Minority interests This item totalled EUR 552 million at 31 December 2010 and relates to the minority interests’ portion of shareholders’ equity arising from the consolidation on a line-by-line basis of the 65% holding in FARE NPL S.p.A. and the proportional consolidation of Soprarno SGR S.p.A. 7 – Non-current liabilities 7a – End-of-service payment fund The end-of-service payment fund is a defined benefit plan, and has therefore been valued using actuarial assessments. The assumptions used in calculating the fund were: a discount rate of 4.6%; an annual rate of inflation of 2.0%; annual salary growth of 3.0%; and an annual rate of increase for the fund of 3.0%. Changes in the end-of-service payment fund in 2010 were as follows: (Euro thousand) Balance at Jan 1, 2010 Portion matured Payments Advances Balance at Dec. 31, 2010 Movement in provision 634 367 (143) 0 858 The amounts recognised in the item were calculated as follows: (Euro thousand) Dec. 31, 2010 Dec. 31, 2009 Nominal value of provision 873 650 Discounting effect (15) (16) Total provision 858 634 7b – Non-current financial liabilities This item totalled EUR 119,839 thousand (EUR 146,712 thousand at 31 December 2009) and relates to: • an amount of EUR 80,000 thousand for the use of the credit line provided by Mediobanca for the same amount (maturing on 16 December 2015 and subject to a variable rate of three-month Euribor + spread). On 31 December 2010, the covenant tests for this credit line were successfully passed (i.e. debt and debt to equity) • the decrease in the fair value of the interest rate swap contracts to partially hedge interest rate risk on the debt exposure with Mediobanca, totalling EUR 1,448 thousand (maturing on 30 July 2013)
    • Financial Statements for the Year Ending 31 December 2010 114 • the estimated future cost for DeA Capital of exercising its pro-rata share of the put options on Santé shares held by the senior management of GDS, totalling EUR 2,254 thousand • EUR 36,137 thousand relating to the acquisition of the FARE Group This amount mainly comprises: - payment of the deferred purchase price ("deferred portion", which matures each year until 31 December 2013, of EUR 6,900 thousand plus interest (variable 6-month Euribor rate) accrued from the closing date (12 December 2008) to 31 December 2010, totalling EUR 244 thousand - the earn-out (maturing in 2014) of EUR 2,029 thousand, inclusive of interest calculated at present value from the closing date (12 December 2008) to 31 December 2010, equal to EUR 4 thousand. This earn-out, which DeA Capital intends to pay to the seller, is worth EUR 2,237 thousand, equal to 50% of any performance fees accrued on the funds managed by FARE - the fair value of the exercise price for the sale options (agreed by the seller) on the remaining 30% of the capital of FARE Holding, equal to EUR 26,965 thousand (EUR 29,005 thousand al 31 December 2009). In accordance with the valuation criteria adopted by DeA Capital, the minority interest in the shareholders’ equity was reversed and reclassified as a financial liability at its fair value. The difference between the fair value of the financial liability and the minority interest reversed on the reporting date is recorded as an acquisition of minority shareholdings and reported as a change in goodwill Sensitivity analysis performed at market interest rate level (instant hypothetical variation of +/- 2%), applicable to financial liabilities at 31 December 2010, shows an effect of EUR +/- 807 thousand on pre-tax profit and on shareholders’ equity. 8 – Current liabilities Total liabilities amounted to EUR 12,957 thousand (EUR 10,895 thousand at 31 December 2009) and are all due within the following year. These payables are not secured on any company assets. 8a – Trade payables Trade payables were EUR 3,165 thousand versus EUR 2,289 thousand at 31 December 2009. With regard to transactions with related parties, this item included: - payables to the parent company, De Agostini S.p.A., of EUR 34 thousand - payables to affiliate De Agostini Editore S.p.A. of approximately EUR 10 thousand - payables to affiliate Istituto Geografico De Agostini S.p.A. of approximately EUR 1 thousand - payables to affiliate La Talpa S.r.l. of approximately EUR 1 thousand - payables to affiliate Lottomatica Group S.p.A. of approximately EUR 38 thousand - payables to affiliate De Agostini Invest SA of approximately EUR 25 thousand Trade payables do not accrue interest and are settled, on average, within 30 to 60 days.
    • Financial Statements for the Year Ending 31 December 2010 115 8b – Payables to staff and social security organisations This item totalled EUR 2,027 thousand (EUR 1,084 thousand at end-2009) and is largely due to: - payables to social security organisations of EUR 879 thousand, paid after the close of the financial year 2010, with the exception of payables for social security liabilities calculated on bonuses being accrued - payables to employees for holidays not taken and bonuses being accrued of EUR 996 thousand - other payables to employees totalling EUR 152 thousand 8c – Current tax payables This item was EUR 575 thousand (EUR 135 thousand at end-2009) and is largely due to the payable to the tax authorities for the FARE Group's IRAP, calculated as the difference between advance payments and the tax due for the year. 8d – Other tax payables This item, of EUR 2,113 thousand at 31 December 2010 (EUR 1,414 thousand at end-2009), relates to the payable to the tax authorities in respect of taxes deducted from the income of employees and self-employed staff totalling EUR 871 thousand, the VAT payable of EUR 60 thousand, and miscellaneous tax payables totalling EUR 1,182 thousand stemming from the Luxembourg wealth tax. 8e – Other payables This item was EUR 256 thousand at 31 December 2010 (EUR 476 thousand at end-2009) and mainly relates to accrued expenses, payables to credit card issuers and directors’ emoluments. 8f – Short-term financial payables This item relates to the short-term payable of EUR 4,821 thousand (EUR 5,497 thousand at end-2009) in respect of the acquisition of the FARE Group. This amount mainly comprises: • the short-term portion of the deferred purchase price ("deferred price") of approximately EUR 3,450 thousand • interest accrued from the closing date (12 December 2008) to 31 December 2010, totalling EUR 122 thousand • an accrued expense in respect of interest on the line of credit provided by Mediobanca totalling EUR 108 thousand • a financial payable to the seller in accordance with the provisions of the "pass-through arrangement" relating to financial income from the units in the closed-end mutual investment funds, totalling EUR 1,141 thousand
    • Financial Statements for the Year Ending 31 December 2010 116 9. Alternative asset management fees Alternative asset management fees in 2010 were EUR 27,844 thousand versus EUR 25,250 thousand in 2009. 9a – Alternative asset management fees In 2010, alternative asset management fees totalled EUR 19,424 thousand, compared with EUR 18,126 thousand in 2009; these related mainly to management fees paid to First Atlantic RE SGR for the funds it manages. These revenues are mainly attributable to the activity carried out in relation to the funds Ippocrate and Atlantic 1. 9b – Alternative asset management fees - joint ventures In 2010, alternative asset management fees from joint ventures were EUR 8,420 thousand, compared with EUR 7,124 thousand in 2009. These mainly related to management fees paid to IDeA Capital Funds SGR for the funds it manages (IDeA I FoF, IDeA COIF I and IDeA ICF II), Soprarno SGR and IDeA AI Sàrl. 10 – Income from investments valued at equity The item, which was negative at EUR 15,507 thousand in 2010, compared with EUR 27,865 thousand in 2009, is mainly attributable to the loss relating to the holding in Santé. 10a – Income from investments valued at equity This item includes income from companies valued at equity for the period. The negative figure of EUR 15,637 thousand (negative at EUR 29,015 thousand at end-2009) was due to the pro-rata losses from the stakes held in Santé (EUR 8,795 thousand), IDeA CoIF I (EUR 6,826 thousand) and Sigla Luxembourg (EUR 16 thousand). 10b – Income from investments valued at equity - joint ventures This item totalled EUR 130 thousand in 2010, compared with EUR 1,150 thousand in 2009, and was due to the profit from the investments in Investitori Associati SGR and Wise SGR (in relation to the stakes of 49% and 29% respectively held in these companies). 11 – Other investment income and expenses The net income realised on investments in shareholdings and funds totalled around EUR -3,405 thousand in 2010, compared with EUR –1,803 thousand in 2009. Details are shown below:
    • Financial Statements for the Year Ending 31 December 2010 117 (Euro thousand) Year 2010 Year 2009 Gains realized from available-for-sale investments 2,326 151 Income from FoF I distribution 0 0 Income from venture capital funds distributions 554 127 Dividends from available-for-sale investments 85 73 Gains from investments 2,965 351 Impairment Venture capital funds 1,131 682 Impairment Funds of funds 5,188 0 Impairment Kovio 0 1,186 Impairment Elixir 51 0 Other charges 0 286 Charges from investments 6,370 2,154 Total (3,405) (1,803) Investment income During 2010, the group received capital distributions of EUR 914 thousand, which had a positive impact on the income statement of EUR 554 thousand. In addition, the group received dividends from the smaller stakes held by FARE (EUR 85 thousand) and income from Kenan of EUR 2,326 thousand. On 20 September 2010, Kenan Investments approved the distribution to shareholders of its available cash, arising in particular from dividends already paid by Migros in the first half of 2010. The distribution was made via the reimbursement at fair value of instruments forming part of the company’s share capital. The DeA Capital Group, which holds a stake of around 17% in Kenan Investments, received an amount of around EUR 20,800 thousand. This included income of EUR 2,326 thousand that was recorded in the income statement as a substantial conversion of part of the fair value reserve. Impairment The valuation at fair value of investments in funds and holdings at 31 December 2010, made on the basis of information and documents received from the funds and holdings, and other available information, made it necessary to record impairment of EUR 5,188 thousand in respect of the funds of funds, EUR 1,131 thousand for the venture capital funds and EUR 51 thousand for the holding in the US investee company Elixir Pharmaceuticals Inc. For the venture capital funds, the funds of funds and the minority holding in Elixir Pharmaceuticals Inc., the significant reduction below cost was considered clear evidence of impairment. 12 – Service revenues In 2010, these revenues totalled EUR 10,112 thousand, compared with EUR 8,322 thousand in 2009, and chiefly relate to services provided by the FARE Group in consulting, management and the sale of real estate held in the portfolios of real estate funds. 13 – Other revenues and income Other revenues and income in 2010 totalled EUR 412 thousand, compared with EUR 1,851 thousand at end-2009. 13a – Other revenues and income
    • Financial Statements for the Year Ending 31 December 2010 118 This item totalled EUR 208 thousand in 2010, compared with EUR 275 thousand in the previous year. 13b – Other revenues and income - joint ventures This item totalled EUR 204 thousand in 2010 versus EUR 1,576 thousand in the previous year. It mainly includes the income of IDeA Alternative Investments for the return on the usufruct on 51% of the shares of Investitori Associati SGR and Wise SGR, totalling EUR 142 thousand, and bank interest of EUR 25 thousand. 14 – Operating costs Operating costs totalled EUR 36,800 thousand in 2010, compared with EUR 34,346 thousand in the previous year. 14a – Personnel costs Total personnel costs were EUR 11,677 thousand, compared with EUR 10,451 thousand in 2009. The effect of the cost arising from the stock option plans for 2010, of EUR 564 thousand (EUR 461 thousand in 2009), was more than offset by the reversal of the cost allocated to the "Stock Options 2007-13" reserve of EUR 1,379 thousand. In the third quarter of 2010, as the exercise condition for the Adjusted NAV was not met at 30 June 2010, DeA Capital recycled the total cost accrued since the start of the stock options plan for 2007-13 (date of definition of the beneficiaries) to the income statement. According to the plan regulations, the options may be exercised by the beneficiaries on condition that, inter alia, the above-mentioned Adjusted NAV is equal to a stated pre- determined level, which was not reached at 30 June 2010. The item breaks down as follows: (Euro thousand) Year 2010 Year 2009 Salaries and wages 6,314 5,754 Social charges on wages 2,040 1,733 Board of directors' fees 3,318 1,959 Stock options 565 461 Stock options reversal (1,379) - Employee severance indemnity 407 356 Other personnel costs 412 188 Total 11,677 10,451 At 31 December 2010, the group had a total of 60 employees (57 at 31 December 2009). The table below shows the changes and average number of group employees during 2010.
    • Financial Statements for the Year Ending 31 December 2010 119 Position Jan. 1, 2010 Recruits Internal movements Departures Dec. 31, 2010 Average Senior Managers 10 3 2 (2) 13 13 Junior Managers 18 1 (1) (3) 15 17 Staff 29 6 (1) (2) 32 31 Total 57 10 0 (7) 60 60 Share-based payments Employees of DeA Capital S.p.A. are beneficiaries of stock option plans based on the shares of DeA Capital S.p.A. Unexercised but valid call options on the company’s shares at 31 December 2010 totalled 2,298,200 (1,348,200 at 31 December 2009). Stock option plans were valued using the numerical binomial tree procedure (the original Cox, Ross and Rubinstein method). Numerical analysis using binomial trees generates simulations of the various possible developments in the share price in future periods. On 26 April 2010, the Board of Directors authorised a paid capital increase, in separate issues, of a maximum of EUR 3,000,000 via the issue of a maximum of 3,000,000 shares with a nominal value of EUR 1.00 each at a price of EUR 1.318 per share. The increase is reserved for beneficiaries of the 2010-2015 stock option plan approved by the shareholders' meeting held on 26 April 2010. The table below summarises the assumptions regarding the calculation of the fair value of the stock option plans: 2004 Plan 2005 plan April 2010 plan N° options allocated 160,000 180,000 2,235,000 Average market price at allocation date 2.445 2.703 1.2964 Value at allocation date 391,200 486,540 2,897,454 Average exercise price 2.026 2.459 1.318 Expected volatility 31.15% 29.40% 35.49% Option expiry date 31/08/2015 30/04/2016 31/12/2015 Risk free yield 4.25125% 3.59508% 1.88445% No loans and/or guarantees in favour of directors and/or auditors of the parent company and its subsidiaries were issued. 14b – Service costs Service costs were EUR 10,849 thousand in 2010 versus EUR 9,592 thousand in 2009. A breakdown of these costs is shown in the table below:
    • Financial Statements for the Year Ending 31 December 2010 120 (Euro thousand) Year 2010 Year 2009 Admin. Consulting, Tax and Legal and other 6,793 5,454 Compensation to Committees 521 577 Maintenance 148 142 Travel expenses 366 362 Utilities and general expenses 572 573 Third party rentals 1,110 1,137 Bank charges 30 33 Books, stationery and conventions 273 282 Other expenses 1,036 1,032 Total 10,849 9,592 14c – Depreciation, amortisation and impairment losses Please see the table on changes in intangible and tangible assets for details on this item. 14d – Costs and charges relating to joint ventures This item totalled EUR 5,900 thousand in 2010, compared with EUR 3,282 thousand in 2009, and mainly includes personnel costs of EUR 2,741 thousand, administrative expenses and ordinary depreciation of EUR 1,890 thousand and amortisation relating to intangible assets of EUR 408 thousand, reported at the time the price of acquiring IDeA Alternative Investments was calculated. 14e – Other costs Other costs totalled EUR 1,144 thousand (EUR 497 thousand in 2009). The main item is an amount of EUR 974 thousand in respect of Luxembourg wealth tax. 15 – Financial income and charges 15a – Financial income Financial income totalled EUR 1,709 thousand in 2010 (EUR 2,064 thousand in 2009) and chiefly includes interest income of EUR 958 thousand. Interest income breaks down as follows: − bank interest receivable of EUR 898 thousand − interest receivable from available-for-sale financial instruments totalling EUR 24 thousand − interest receivable from third parties of EUR 36 thousand
    • Financial Statements for the Year Ending 31 December 2010 121 (Euro thousand) Year 2010 Year 2009 Interest income 958 1,172 Income from financial instruments valued at fair value through profit and loss 4 - Derivative income 210 - Foreign exchange gains 537 892 Total 1,709 2,064 15b – Financial charges Financial charges were EUR 6,350 thousand during the year (EUR 5,619 thousand in 2009), due mainly to interest payable, losses realised on hedging derivatives, and realised and translated exchange rate losses. Specifically, financial charges break down as follows: - charges relating to derivatives used to hedge the EUR/USD – EUR/GBP exchange rate risk of EUR 949 thousand - premiums on currency options to hedge the EUR/TRY exchange rate risk of EUR 92 thousand - charges relating to interest rate swaps of EUR 680 thousand - realised losses on financial instruments of EUR 65 thousand - exchange rate losses of EUR 3 thousand - realised exchange rate losses on financial instruments of EUR 460 thousand - interest payable for the acquisition of the FARE Group accrued during 2010 totalling EUR 146 thousand - interest payable on the Mediobanca credit line of EUR 3,000 thousand, fees of EUR 857 thousand and other interest payable totalling EUR 98 thousand (Euro thousand) Year 2010 Year 2009 Interest expenses 4,101 3,219 Foreign exchange for impairment 460 614 Derivative expenses 1,786 1,694 Foreign exchange losses 3 92 Total 6,350 5,619 16 – Income tax for the period, deferred tax assets and deferred tax liabilities 16a – Income tax This item, totalling EUR 2,445 thousand for 2010, includes current income tax for the year of EUR 3,041 thousand and deferred tax assets of EUR 596 thousand. The table below shows the taxes determined on the basis of the rates and the group’s taxable income. The latter was calculated in light of applicable legislation.
    • Financial Statements for the Year Ending 31 December 2010 122 (Euro thousand) Year 2010 Year 2009 Current taxes: - Tax consolidation benefit - 1,008 - IRES (3,813) (3,959) - IRAP (987) (914) - Other taxes 1,759 (11) Total current taxes (3,041) (3,876) Deferred taxes relating to the period: - Deferred tax expenses (2,518) 13 - Deferred tax income 629 5,244 - Deferred tax liabilties used 2,872 3,214 - Deferred tax assets used (387) (26) Total deferred taxes 596 8,445 Total income tax (2,445) 4,569 Current IRES tax relates to the FARE Group. 16b – Income tax – joint ventures This item, totalling EUR 979 thousand for 2010, includes current income tax for the year of EUR 1,111 thousand and deferred tax assets of EUR 132 thousand. The table below shows a reconciliation of the tax charges recorded in the consolidated financial statements and the theoretical tax charge for 2010 calculated using the corporate income tax (IRES) rate applicable in Italy. (Euro thousand) Amount Rate Amount Rate Profit before tax (21,985) (32,146) Theoretical income tax (6,046) 27.5% (8,840) 27.5% Participation exemption 32 -0.1% (672) 2.1% Intercompany dividends 1,363 -6.2% 2,497 -7.8% Different tax rates used in countries other than Italy 384 -1.7% (216) 0.7% Tax effect of the utilisation of previously unrecognised tax losses 1,556 -7.1% (5,108) 15.9% Subsidiaries' net results: not taxable 0 0.0% 109 -0.3% Associates' net results: not taxable 4,300 -19.6% 7,679 -23.9% Non-deductible interests 909 -4.1% 0 0.0% Income from Tax consolidation 434 -2.0% 0 0.0% Other differences (599) 2.7% 250 -0.8% IRAP and other taxes on foreign income 1,091 -5.0% 1,206 -3.8% Income tax charged in the income statement 3,424 -15.6% (3,095) 9.6% Income tax 2,445 (4,569) Income tax - Joint Venture 979 1,474 Income tax in Income Statement 3,424 (3,095) Year 2010 Year 2009
    • Financial Statements for the Year Ending 31 December 2010 123 17 – Basic earnings (loss) per share Basic earnings per share are calculated by dividing net profit for the period attributable to the group's shareholders by the weighted average number of shares outstanding during the period. Diluted earnings per share are calculated by dividing net profit for the period attributable to the group's shareholders by the weighted average number of shares outstanding during the period including any diluting effects of stock option plans and existing warrants, in the event the allocated options are "in the money". The table below shows the income and the share information used to calculate basic and diluted earnings per share. Year 2010 Year 2009 Consolidated net profit/(loss) – Group share (A) (26,348,307) (29,377,151) Weighted average number of ordinary shares outstanding (B) 289,233,469 290,359,390 Basic earnings/(loss) per share (€ per share) (C=A/B) (0.0911) (0.1012) Restatement for dilution effect - - Consolidated net profit/(loss) restated for dilution effect (D) (26,348,307) (29,377,151) Weighted average number of shares to be issued for the exercise of stock options (E) - - Total number of shares outstanding and to be issued (F) 289,233,469 290,359,390 Diluted earnings/(loss) per share (€ per share) (G=D/F) (0.0911) (0.1012) Options and warrants have a dilutive effect only when the average market price of the share for the period exceeds the strike price of the options or warrants (i.e. when they are "in the money"). At 31 December 2010, all allocated options and warrants were "out of the money".
    • Financial Statements for the Year Ending 31 December 2010 124 Primary and secondary reporting formats The information on businesses reflects the group's internal reporting structure adopted at the time the shareholdings in IDeA Alternative Investments and in FARE Holding were purchased, and thus at the time the DeA Capital Group entered the Alternative Asset Management business. These businesses are: - Private Equity Investment, which includes the reporting units involved in investment activities and breaks down into equity investments ("direct investments") and investments in funds ("indirect investments") - Alternative Asset Management, which includes reporting units involved in asset management activities and related services, with a current focus on the management of private equity and real estate funds Summary group income statement - performance by business in 2010 (€ thousand) Private Equity Investment Alternative Asset Management DeA Capital SpA (*) and eliminations Consolidated Alternative Asset Management fees 0 27,844 0 27,844 Income (loss) from equity investments (15,637) 130 0 (15,507) Other investment income/expense (3,490) 85 0 (3,405) Other income 39 10,053 432 10,524 Other expenses (1,665) (28,869) (6,266) (36,800) Financial income and expenses 196 106 (4,943) (4,641) PROFIT/(LOSS) BEFORE TAX (20,557) 9,349 (10,777) (21,985) Income tax (1,793) (3,627) 1,996 (3,424) PROFIT/(LOSS) FOR THE PERIOD FROM CONTINUING OPERATIONS (22,350) 5,722 (8,781) (25,409) Profit (Loss) from discontinued operations/held-for-sale assets 0 0 0 0 PROFIT/(LOSS) FOR THE PERIOD (22,350) 5,722 (8,781) (25,409) - Group share (22,350) 4,783 (8,781) (26,348) - Minority interests 0 939 0 939 (*) The column includes data relating to holding companies and not directly attributable to business segments Summary group income statement - performance by business in 2009 (€ thousands) Private Equity Investment Alternative Asset Management DeA Capital SpA (*) and eliminations Consolidated Alternative Asset Management fees 0 25,250 0 25,250 Income (loss) from equity investments (29,015) 1,150 0 (27,865) Other investment income/expense (1,875) 72 0 (1,803) Other income 54 9,733 386 10,173 Other expenses (897) (26,578) (6,871) (34,346) Financial income and expenses 953 155 (4,663) (3,555) PROFIT/(LOSS) BEFORE TAX (30,780) 9,782 (11,148) (32,146) Income tax 4,551 (3,010) 1,554 3,095 PROFIT/(LOSS) FOR THE PERIOD FROM CONTINUING OPERATIONS (26,229) 6,772 (9,594) (29,051) Profit (Loss) from discontinued operations/held-for-sale assets 0 0 0 0 PROFIT/(LOSS) FOR THE PERIOD (26,229) 6,772 (9,594) (29,051) - Group share (26,229) 6,446 (9,594) (29,377) - Minority interests 0 326 0 326 (*) The column includes holding data not directly attributable to different business segment The consolidated net profit of EUR 5.7 million generated during the period by the Alternative Asset Management business includes the impact of the allocation of a portion of the purchase price of the investments in IDeA AI and FARE Holding totalling EUR 5.1 million; excluding this impact, the net profit of the Alternative Asset Management business would have been EUR 10.8 million, and the consolidated net loss would have been EUR 20.3 million (versus the actual figure of EUR 25.4 million).
    • Financial Statements for the Year Ending 31 December 2010 125 Notes to the cash flow statement Given the type of activity carried out by the Group, cash flow from investment in companies and funds (the Group’s main activity) is included in cash flow from operating activities. In 2010, changes to operating activities, as defined above, generated cash and cash equivalents of EUR 12,289 thousand (EUR -45,728 thousand in 2009), mainly due to the cash distribution by Kenan. Cash flows of EUR 24,427 thousand were absorbed by financing activities (EUR 84,751 thousand in 2009), mainly due to the partial repayment of the Mediobanca credit line (EUR 20,000 thousand). Cash and cash equivalents totalled EUR 86,517 thousand at end-2010 (EUR 98,874 thousand at the end of the previous year). Changes to the cash flow statement have been reported using the direct method.
    • Financial Statements for the Year Ending 31 December 2010 126 Other information Commitments At 31 December 2010, residual commitments for payments to funds totalled EUR 180.7 million, compared with EUR 197.6 million at end-2009. The change in commitments is shown in the table below. (Euro million) Residual Commitments on Funds - Dec. 31, 2009 197.6 Change in commitments on venture capital funds (0.1) New Commitments 0.0 Capital Calls (16.9) Residual Commitments on Funds - Dec. 31, 2010 180.7 Net financial position- Dec. 31, 2010 (20.4) NFP vs. Residual Commitments - Dec. 31, 2010 (Overcommitment) (201.1) With regard to these overcommitments, the management believes that the funds and credit lines currently available, as well as those that will be generated by its operating and financing activities, will enable the DeA Capital Group to meet the financing required for its investment activity, manage working capital and repay debts when they become due. Own shares and parent company shares On 26 April 2010, the shareholders' meeting of DeA Capital S.p.A. approved, following the proposal made by the company's Board of Directors, the implementation of a new plan to purchase and dispose of own shares (the Plan), which authorises the Board of Directors to purchase and dispose of a maximum number of shares representing a stake of up to 20% of share capital in accordance with the law, on one or more occasions, on a rotating basis. At the same time, this resolution revoked the authorisation issued by the shareholders' meeting on 29 April 2009 for the previous plan to purchase own shares. Among other things, the authorisation specifies that purchases may be carried out in accordance with all procedures allowed by current regulations, with the sole exception of a public purchase or exchange offer, and that the unit price for the purchase must not be more than 20% above or below the share's reference price on the trading day prior to the purchase. The objective of the Plan is to allow the company to take action, in accordance with current regulations, to limit any unusual price movements and to normalise trading and pricing fluctuations resulting from distortions related to excess volatility or poor trading liquidity, as well as to purchase own shares to be used, as necessary, for share incentive schemes. These transactions will also allow the company to purchase own shares to be used, in accordance with its strategy, for capital-related transactions or other transactions in relation to which it may be appropriate to exchange or sell parcels of shares by means of an exchange, transfer or other method of disposal. The authorisation to carry out such purchases has a maximum duration of 18 months from the date the authorisation is granted by the shareholders’ meeting (until October 2011). The Board of Directors is also authorised to dispose of own shares purchased without time limitations in accordance with procedures it deems appropriate, at a price to be determined, from time to time, but which may not be
    • Financial Statements for the Year Ending 31 December 2010 127 (other than in certain specific exceptions) more than 20% below the share's reference price on the trading day prior to each disposal. The Board of Directors, which met immediately following the shareholders' meeting, passed the resolutions necessary to execute the plan, and granted the chairman and chief executive officer all the necessary powers. At 31 December 2010, the company held 12,598,698 own shares, resulting from the acquisition in 2010 of 944,343 shares, and the delivery of 5,963,857 shares relating to the acquisition of FARE Holding. As of the date of this document, based on purchases made after the end of 2010, totalling 3,968,629 shares, and the delivery of 4,806,920 shares as part of the reorganisation of IDeA AI (see "Significant events after the end of 2010"), the company had a total of 11,760,407 own shares, corresponding to about 3.8% of the share capital. Over 2010, the company did not hold, purchase or sell, on its own account or through a trust company, any shares in parent company De Agostini S.p.A. Stock option plans As regards company incentive plans (stock option plans), pursuant to the provisions of the 2004 and 2005 stock option plans, as at 31 December 2010, 63,200 stock options were still exercisable. On 26 April 2010, the shareholders' meeting approved the DeA Capital stock option plan for 2010 - 2015, under which a maximum of 3,000,000 options may be allocated. To implement the resolution of the shareholders' meeting, the DeA Capital S.p.A. Board of Directors allocated a total of 2,235,000 options to certain employees of the company and its subsidiaries, and employees of the parent company De Agostini S.p.A. who carry out important roles. In line with the criteria specified in the regulations governing the DeA Capital stock option plan for 2010 – 2015, the Board of Directors also set the exercise price for the options allocated at EUR 1.318, which is the arithmetic mean of the official price of ordinary DeA Capital shares on the Mercato Telematico Azionario, the Italian screen-based trading system organised and managed by Borsa Italiana S.p.A., on the trading days between 25 March 2010 and 25 April 2010. The options can be allocated to the beneficiaries, in one or more tranches, up to 30 June 2010 and exercised by the latter, in one or more tranches, but in any case for an amount per tranche of not less than 25% of the options assigned to each, with effect from the fifth calendar day following the date that the adjusted NAV figure at 31 December 2012 is announced, until 31 December 2015. The adjusted NAV means the value of the assets, net of liabilities, calculated on the basis of the company’s operating performance at 31 December 2012 and restated, where necessary, to take account of the measurement at fair value of all investments, as assessed by an independent third party. With reference to the options assigned pursuant to the 2007-2013 stock option plans, as the conditions for exercising these options did not occur, they must be considered annulled and the right to subscribe to shares in DeA Capital S.p.A. incorporated therein must consequently be deemed to have lapsed. Finally, the authority granted to the Board of Directors by the above-mentioned shareholders' meeting of 7 September 2007 to increase share capital, pursuant to art. 2443, para. 2 of the
    • Financial Statements for the Year Ending 31 December 2010 128 Italian civil code for transactions to purchase equity investments (including through mergers or spin-offs), companies or business divisions with no annual limit, remains effective. The table below summarises the assumptions regarding the determination of the fair value of the stock option plans: 2004 Plan 2005 plan April 2010 plan N° options allocated 160,000 180,000 2,235,000 Average market price at allocation date 2.445 2.703 1.2964 Value at allocation date 391,200 486,540 2,897,454 Average exercise price 2.026 2.459 1.318 Expected volatility 31.15% 29.40% 35.49% Option expiry date 31/08/2015 30/04/2016 31/12/2015 Risk free yield 4.25125% 3.59508% 1.88445% DeA Capital 2009-2012 warrants On 3 March 2009, the shareholders' meeting of DeA Capital S.p.A. approved an investment plan entailing the offer of warrants for subscription by the management. Under the plan regulations, the DeA Capital 2009-2012 warrants allow holders to purchase (under certain conditions) one new DeA Capital share with a nominal value of EUR 1 for each warrant held, at an exercise price of EUR 1.92. The warrants may be exercised between 1 April 2012 and 30 September 2012. In order to implement the plan, the extraordinary shareholders' meeting of DeA Capital S.p.A. also voted to issue up to 1,500,000 DeA Capital 2009-2012 warrants and to increase the share capital, pursuant to the combined provisions of art. 2441, para. 8 of the Italian civil code and art. 134, para. 2 of Legislative Decree 58 of 24 February 1998 by a nominal amount of up to EUR 1,500,000 in separate issues pursuant to art. 2439, para. 2 of the Italian civil code, to be carried out through the issuance of up to 1,500,000 ordinary shares with a nominal value of EUR 1, to be used solely and irrevocably for the exercise of these warrants. The subscription price for the warrants was EUR 0.211, based on the fair value estimated by the Board of Directors supported by independent valuations. The warrants, available for subscription by beneficiaries from the date on which the resolution of the extraordinary shareholders' meeting on the issue of the warrants was recorded in the companies register until 31 July 2009, were fully subscribed. Beneficiaries are individuals who were classified as employees of the company and/or its subsidiaries and/or the parent company De Agostini S.p.A. at the time of the warrant subscription offer and at the time of the subscription itself, as identified by the Board of Directors’ meeting of 13 January 2009. For further information on the terms and conditions of the plan and its beneficiaries, please see the Information Prospectus prepared in accordance with art. 84-bis, para. 1 of Consob Regulation 11971/1999 and table 7 of Appendix 3A of Consob Regulation 11971/1999 available to the public at the headquarters of DeA Capital S.p.A. and on the company's website www.deacapital.it.
    • Financial Statements for the Year Ending 31 December 2010 129 Transactions with parent companies, subsidiaries and related parties Intercompany relationships with the parent company and its group In 2010, the company carried out transactions at normal market conditions with the parent company De Agostini S.p.A. and its subsidiaries. In particular, on 22 March 2007 the company signed a Service Agreement with the controlling shareholder, De Agostini S.p.A., for the latter to provide operating services in administration, finance, control, legal, corporate and tax areas for a total payment of EUR 200,000 per year. The agreement, which is renewable annually, is priced at market rates, and is intended to allow the company to maintain a streamlined organisational structure in keeping with its development policy, and to obtain adequate operational support at the same time. The consolidated statement of financial position at 31 December 2010 reflects the payable to De Agostini S.p.A. of EUR 120 thousand relating to the above-mentioned contract. Finally, in 2010 the company did not hold, purchase or dispose of shares of related-party companies. The table below summarises the amounts of transactions with related parties. (Euro thousand) Trade receivables Tax receivables Tax payables Trade payables Income for services Tax income Costs relating to joint venture Personnel costs Service costs B&D Holding di Marco Drago e C. S.a.p.a. 0 4,065 5 0 0 1,759 0 0 0 De Agostini S.p.A. 35 0 0 34 141 0 0 121 323 De Agostini Editore S.p.A. 0 0 0 10 0 0 0 0 43 De Agostini Scuola S.p.A. 0 0 0 0 0 0 0 0 0 Ist.Geografico De Agostini S.p.A. 0 0 0 1 0 0 0 0 3 Lottomatica S.p.A. 0 0 0 38 0 0 0 0 38 La Talpa S.r.l. 0 0 0 1 0 0 0 0 3 De Agostini Invest SA 0 0 0 25 0 0 0 0 25 Total with related parties 35 4,065 5 109 141 1,759 0 121 435 Total financial statement line item 2,658 4,065 575 3,165 10,112 1,759 3,282 11,677 10,849 As % of financial statement line item 1.3% 100.0% 0.9% 3.4% 1.4% 100.0% 0.0% 1.0% 4.0% Balances at Dec. 31, 2009 2010 FY Income Statement Remuneration of directors, auditors, general managers and managers with strategic responsibilities In 2010, remuneration payable to the directors and auditors of DeA Capital S.p.A. for the performance of their duties totalled EUR 320 thousand and EUR 175 thousand respectively. Remuneration paid to directors and auditors is shown in the table below:
    • Financial Statements for the Year Ending 31 December 2010 130 Director Position Year appointed Term ends Compensation received for office within the consolidating company (€ thousands) Benefits in kind Bonuses and other benefits Other principal auditor fees for subsidiaries Other compensa tion (€ thousand) Lorenzo Pellicioli Chairman 2010 2012 AGM 30 0 0 0 0 Paolo Ceretti CEO 2010 2012 AGM 30 0 0 0 0 Daniel Buaron Director 2010 2012 AGM 30 0 0 0 560 Lino Benassi Director 2010 2012 AGM 30 0 0 0 120 Rosario Bifulco Director 2010 2012 AGM 30 0 0 0 20 Claudio Costamagna Director 2010 2012 AGM 30 0 0 0 5 Alberto Dessy Director 2010 2012 AGM 30 0 0 0 25 Roberto Drago Director 2010 2012 AGM 30 0 0 0 15 Marco Drago Director 2010 2012 AGM 30 0 0 0 0 Andrea Guerra Director 2010 2012 AGM 30 0 0 0 5 Boroli Marco Director 2010 2012 AGM 20.5 0 0 0 0 Angelo Gaviani Chairman of the Board of 2010 2012 AGM 75 0 0 43 0 Cesare Andrea Grifoni Principal Auditor 2010 2012 AGM 50 0 0 0 0 Gian Piero Balducci Principal Auditor 2010 2012 AGM 50 0 0 0 15 The item "other remuneration" for the director Daniel Buaron relates to remuneration received from FARE Group companies totalling EUR 560 thousand (the major components of which are EUR 410 thousand from Fare SGR and EUR 140 thousand from FARE Holding). "Other remuneration" for the director Lino Benassi relates mainly to remuneration received from FARE Group companies totalling EUR 110 thousand (of which EUR 60 thousand relates to Fare SGR). In 2010, salaries and bonuses paid to managers with strategic responsibilities in the parent company totalled EUR 579 thousand. Shareholdings held by directors, auditors, general managers and managers with strategic responsibilities Details of stakes held in DeA Capital S.p.A. and its subsidiaries by members of the boards of directors and auditors and by managers with strategic responsibilities (in aggregate format) are provided in the table below. No shareholdings were reported for general managers, since to date, this position does not exist. All those who held positions on the boards of directors or auditors, or as managers with strategic responsibilities, for the whole or part of the year in question, are included. Beneficiary Company Number of shares held at 1.1.2010 Number of shares purchased Number of shares sold Number of shares held at 31.12.2010 Rosario Bifulco DeA Capital S.p.A. 1,536,081 - - 1,536,081 Lino Benassi DeA Capital S.p.A. 23,500 - - 23,500 Daniel Buaron * DeA Capital S.p.A. 5,752,695 5,936,857 - 11,689,552 Daniel Buaron FARE Holding S.p.A. 180,000 - - 180,000 Claudio Costamagna ** FARE NPL S.p.A. 72,000 - - 72,000 Dirigenti con responsabilità strategiche DeA Capital S.p.A. 50,000 - - 50,000 * through DEB Holding S.r.l. ** through CC & Co. S.p.A.
    • Financial Statements for the Year Ending 31 December 2010 131 Furthermore, pursuant to the shareholder agreement entered into between De Agostini S.p.A. and the company, as one party, and Daniel Buaron, as the other party, on 1 February 2010, the director Daniel Buaron received 184,162 DeA Capital shares, and on 12 December 2010, he received another 5,752,695 shares. Other than the shares indicated above, no DeA Capital shares are held by other board directors or auditors who are currently in office; furthermore, no shares are held in companies controlled by DeA Capital. The directors Lorenzo Pellicioli, Lino Benassi, Marco Drago and Roberto Drago own shares of B&D Holding di Marco Drago e C. S.a.p.a., the parent company of De Agostini S.p.A. (which is in turn the parent company of DeA Capital S.p.A.), and they are parties to a shareholder agreement covering these shares. Stock options allocated to members of the boards of directors and auditors, general managers and to managers with strategic responsibilities Details of stock options held by members of the boards of directors and auditors and by managers with strategic responsibilities (in aggregate format) in DeA Capital S.p.A. and its subsidiaries are provided in the table below. Options lapsed during 2010 Beneficiary Position Number of options Average exercise price Average expiry date Number of options Average exercise price Average expiry date Number of options Number of options Average exercise price Average expiry date Paolo Ceretti CEO 1,000,000 2.7652 6 0 0 0 -1,000,000 0 0 0 Paolo Ceretti CEO 0 0 0 750,000 1.318 5 0 750,000 1.318 5 145,000 2.7652 6 0 0 0 -145,000 0 0 0 100,000 2.3477 6 0 0 0 -100,000 0 0 0 0 0 0 985,000 1.318 5 0 985,000 1.318 5 Options outstanding at Dec. 31, 2010 Key Management Key Management Key Management Options outstanding at Jan. 1, 2010 Options granted during 2010 Lastly, note that the Chief Executive Officer Paolo Ceretti and managers with strategic responsibilities have subscribed to 575,000 and 925,000 warrants respectively. Under the Investment Plan regulations, the DeA Capital 2009-2012 warrants allow holders to purchase (under certain conditions) one new DeA Capital share with a nominal value of EUR 1 for each warrant held, at an exercise price of EUR 1.92. The warrants may be exercised between 1 April 2012 and 30 September 2012. National tax consolidation scheme: De Agostini Group DeA Capital S.p.A. has adopted the national tax consolidation scheme of the B&D Group (the group headed by B&D Holding di Marco Drago e C. S.a.p.a.). This option was exercised jointly by each company and the parent company B&D Holding di Marco Drago e C. S.a.p.a. by signing the "Regulation for participation in the national tax consolidation scheme for companies in the De Agostini Group" and providing notification of this option to the tax authorities pursuant to the procedures and terms and conditions set out by law. The option is irrevocable for the three-year period of 2008-2010 unless the requirements for applying the scheme are not met.
    • Financial Statements for the Year Ending 31 December 2010 132 Information on financial assets and liabilities Financial assets and liabilities, broken down according to the categories set out by IAS 39, are summarised in the table below: (Euro thousand) Receivables and loans Available for sale Amortised cost 31.12.2010 Receivables and loans Available for sale Amortised cost 31.12.2009 CONSOLIDATED ASSETS Equity investments in companies - available for sale - 211,511 211,511 - 239,917 239,917 Funds - available for sale - 98,622 98,622 - 83,776 83,776 Other non-current financial assets available for sale - 304 304 - 304 304 Loans and receivables 996 996 2,662 Other non-current assets - - - - - - Trade receivables 2,658 - 2,658 2,045 - 2,045 Current financial assets available-for-sale - 15,038 15,038 - 15,779 15,779 Financial receivables 1,682 - 1,682 - - - CONSOLIDATED LIABILITIES Non-current financial liabilities 119,839 119,839 146,712 146,712 Trade payables 3,165 3,165 2,289 2,289 Liabilities to personnel and social welfare 2,027 2,027 1,084 1,084 Short-term financial liabilities 4,821 4,821 5,497 5,497 The carrying value of hedging instruments such as trade receivables and payables is a good approximation of their fair value. Information on the "fair value hierarchy" In March 2009, the IASB issued an amendment to IFRS 7, adopted and approved by the European Union on 27 November 2009, which introduced a number of changes aimed at providing an appropriate response to the demands for greater transparency engendered by the financial crisis and associated with the high degree of uncertainty in market prices. These changes include the creation of the "fair value hierarchy". Specifically, the amendment defines three levels of fair value: • level 1: if the financial instrument is listed in an active market • level 2: if the fair value is measured on the basis of valuation techniques that use observable market parameters other than the price of financial instruments as benchmarks • Level 3: if the fair value is measured on the basis of valuation techniques that do not use observable market parameters as benchmarks For this reason, appropriate information on the methods and assumptions used to estimate the fair value is provided below, together with details of any changes to the valuation techniques used the previous year. All the financial instruments held by the DeA Capital Group except available-for-sale current financial assets are valued at fair value level 3. We provide the following information on financial instruments valued at fair value: - there were no significant transfers between the three levels in 2010 - for level 3, a reconciliation of the opening and closing balances is shown in the table below. Income and expenses posted to the income statement or shareholders’ equity, and purchases and sales made during 2010 are identified separately - please see the analysis of the sensitivity of the key financial instruments’ fair values to changes in the significant input parameters that cannot be observed on the market, which is shown in the relevant sections of this document
    • Financial Statements for the Year Ending 31 December 2010 133 (Euro thousand) Balance at 01.01.2010 Increase (capital call) Decrease (capital distribution) Impairment Fair value adjustment Translation adjustment Balance at 31.12.2010 Fondi di Venture Capital 13,542 698 (360) (252) (1,407) 756 12,977 IDeA I FoF 65,336 12,750 (6,800) 0 8,601 0 79,887 IDeA ICF II 4,898 1,824 (1,663) 0 699 0 5,758 Funds available-for-sale 83,776 15,272 (8,823) (252) 7,893 756 98,622 Kenan Investments S.A. (Migros) 208,000 0 (18,518) 0 5,518 0 195,000 Stepstone Acquisition S.à r.l. 31,350 0 0 (151) (16,119) 0 15,080 Elixir Pharmaceuticals Inc. 47 0 0 0 (51) 4 0 Kovio Inc. 51 0 0 0 64 (1) 114 Mobile Access Networks Inc. 469 0 0 0 812 36 1,317 Other shareholdings available-for-sale 239,917 0 (18,518) (151) (9,775) 38 211,511 Other non current financial assets available-for-sale 304 0 0 0 0 0 304
    • Financial Statements for the Year Ending 31 December 2010 134 Main risks and uncertainties to which the parent company and consolidated group companies are exposed As described in the Report on Operations, the DeA Capital Group operates through, and is structured as, two business areas, Private Equity Investment and Alternative Asset Management. The risks set out below consider the characteristics of the market and the operations of parent company DeA Capital S.p.A. and the companies included in the group’s consolidated financial statements, and the main outcomes of a risk assessment, conducted in 2010, as well as the periodic monitoring conducted partly through the regulatory policies adopted by the group. It should be noted, however, that there could be risks that are currently unidentified or deemed not significant that could have an impact on the group's operations. The group has adopted a modern corporate governance system that provides effective management of the complexities of its operations, and enables both the company and the group to achieve their strategic objectives. Furthermore, the assessments conducted by the organisational units and the directors confirm both the non-critical nature of these risks and uncertainties and the financial solidity of the DeA Capital Group. With reference to the specific risks relating to the main Private Equity investments, i.e. Générale de Santé and Migros, please refer to the respective annual reports, and more specifically Générale de Santé’s Document de référence and Migros’ Annual Report (available on their websites). In particular, the latest Document de référence (sections 4.1 - RISQUES LIES AUX ACTIVITES DU GROUPE and 4.2 - GESTION DES RISQUES) available as of the date of this report indicates the following as the main risk factors for Générale de Santé: • Risks related to company debt (Risques liés à l’endettement de Générale de Santé) • Liquidity risks (Risques de liquidité) • Interest rate risks (Risques de taux d’intérêt) • Risks relating to obtaining financing (Risques liés à l’obtention de financements) • Risks relating to the sale of 32 operational facilities to Gécimed and Icade (Risques liés aux conséquences de la cession des murs de 32 sites d’exploitation à Gécimed et Icade) • Risks relating to the clinic restructuring and construction programme (Risques liés aux programmes de restructuration ou de construction majeures de cliniques) • Risks relating to the external growth strategy (Risques liés à la stratégie de croissance externe) • Risks relating to changes in prices (Risques liés à l’évolution de la tarification) • Risks relating to the recruitment and retention of staff and practitioners (Risques liés au recrutement et à la fidélisation du personnel et des praticiens) • Risks relating to applicable legislation (Risques liés à la réglementation applicable) • Risks of a deterioration in the reputation of Générale de Santé in the event of legal proceedings being brought against a group facility or practitioner (Risques liés à la dégradation de la réputation de Générale de Santé en cas de mise en jeu de la responsabilité d’un établissement ou d’un praticien du Groupe) • Risks relating to the adequacy, costs and availability of insurance cover (Risques liés à l’adéquation, aux coûts et à la disponibilité de couverture d’assurance) • Exceptional events and disputes (Faits exceptionnels et litiges) • Risks relating to IT suppliers (Risques liés au fournisseur en matiére informatique)
    • Financial Statements for the Year Ending 31 December 2010 135 A. Contextual risks A.1. Risks relating to general economic conditions The operating performance and financial position of the DeA Capital Group are affected by the various factors that make up the macro-economic environment, including increases or decreases in GDP, investor and consumer confidence, interest rates, inflation, the costs of raw materials and unemployment. The ability to meet medium- to long-term objectives could be affected by general economic performance, which could slow the development of sectors the group has invested in, and at the same time, the business of DeA’s investee companies. A.2. Socio-political events In line with its own strategic growth guidelines, one of the DeA Capital Group’s activities is private equity investment in companies and funds in different jurisdictions and countries around the world, which, in turn, invest in a number of countries and geographical areas. The DeA Capital Group may have invested in foreign countries whose social, political and economic conditions put the achievement of its investment objectives at risk. A.3. Regulatory changes Many group companies conduct their operations in highly regulated sectors and markets. Any changes to or developments in the legislative or regulatory framework that affect the costs and revenues structure of investee companies or the tax regime applied, could have negative effects on the group’s financial results, and necessitate changes in the group’s strategy. To combat this risk, the group has established procedures to constantly monitor sector regulation and any changes thereto, in order to seize business opportunities and respond to any changes in the prevailing legislation and regulations in good time. A.4. Performance of the financial markets The company’s ability to meet its strategic and management objectives could depend on the performance of public markets. A negative trend on the public markets could have an effect on the private equity sector in general, making investment and divestment transactions more complex, and on the group’s capacity to increase the NAV of investments in particular. The value of investments held directly or indirectly through funds in which the company has invested could be affected by factors such as comparable transactions concluded on the market, sector multiples and market volatility. These factors that cannot be directly controlled by the group are constantly monitored in order to identify appropriate response strategies that involve both the provision of guidance for the management of group companies, and the investment and value enhancement strategy for the assets held.
    • Financial Statements for the Year Ending 31 December 2010 136 A.5. Exchange rates Holding investments in currencies other than the euro exposes the group to changes in exchange rates between currencies. The investment in Kenan is managed as a special case, since although it was made in euro, the underlying asset is expressed in Turkish lira. Taking into account the medium-/long-term time horizon of the investment, it is believed that the expected return on the investment is able to absorb any devaluation of the underlying currency, in line with the outlook for the currency. A.6. Interest rates Ongoing financing operations that are subject to variable interest rates could expose the group to an increase in related financial charges, in the event that the reference interest rates rise significantly. DeA Capital S.p.A. has established appropriate strategies to hedge against the risk of fluctuations in interest rates. Given the partial hedge of the underlying, the company classifies these securities as speculative instruments, even though they are put in place for hedging purposes. B. Strategic risks B.1. Concentration of the Private Equity investment portfolio The private equity investment strategy adopted by the group includes: - direct investments - indirect investments (in funds) Within this strategy, the group’s overall profitability could be adversely affected by an unfavourable trend in one or a few investments, if there were insufficient risk diversification, resulting from the excessive concentration of investment in a small number of assets, sectors, countries, currencies or of indirect investments in funds with limited investment targets/types of investment. To combat these risk scenarios, the group pursues an asset allocation strategy intended to create a balanced portfolio with a moderate risk profile, investing in attractive sectors and in companies with an appealing current and future risk/return ratio. Furthermore, the combination of direct and indirect investments, which, by their nature, provide a high level of diversification, helps reduce the level of asset concentration. B.2. Concentration of Alternative Asset Management activities In Alternative Asset Management, in which the group is active through the companies IDeA Alternative Investments and First Atlantic Real Estate Holding, events could arise as a result of excessive concentration that would hinder the achievement of the level of expected returns. These events could be due to:
    • Financial Statements for the Year Ending 31 December 2010 137 • Private equity/absolute return funds o concentration of the management activities of asset management companies across a limited number of funds, in the event that one or more funds decides to cancel its asset management mandate o concentration of the financial resources of the funds managed in a limited number of sectors and/or geographical areas, in the event of currency, systemic or sector crises o for closed funds, concentration of the commitment across just a few subscribers, in the event of a counterparty experiencing financial difficulties • Real estate funds o concentration of real estate present in the portfolio of managed funds in a few cities and/or in limited types of property (management/commercial), in the event of a crisis on the property market concerned o concentration in respect of certain important tenants, in the event that these withdraw from the rental contracts, which could lead to a vacancy rate that has a negative impact on the funds' financial results and the valuation of the property managed o concentration of the maturities of numerous real estate funds within a narrow timeframe, with related high availability of property on the market, leading to a decrease in property values and an increase in selling times For each of the risk scenarios outlined above, the group has defined and implemented appropriate strategies that include strategic, operational and management aspects, as well as a system monitoring the level of diversification of AAM activities. B.3. Key resources (governance/organisation) The success of the DeA Capital Group depends to a large extent on its executive directors and key management figures, their ability to efficiently manage the business and the normal activities of individual group companies, as well as knowledge of the market and the professional relationships established. The departure of one or more of these key resources, without a suitable replacement being found, as well as an inability to attract and retain new and qualified resources, could impact growth targets and have a negative effect on the group’s activities and financial results. To mitigate this risk, the group has put in place HR management policies that correspond closely to the needs of the business, and incentive policies that are periodically reviewed in light of, among other things, the general economic climate and the results achieved by the group. C. Operating risks C.1. Investment operations Investment operations conducted by the group are subject to the risks typical of private equity activities, such as an accurate valuation of the target company and the nature of the transactions carried out, which require the acquisition of strategic shareholdings, but not controlling interests, governed by appropriate shareholders’ agreements.
    • Financial Statements for the Year Ending 31 December 2010 138 The group has implemented a structured process of due diligence on target companies, which requires the involvement of the different levels of group management concerned and the careful definition of shareholders’ agreements in order to conclude agreements in line with the investment strategy and the risk profile chosen by the group. C.2. Compliance with covenants Some investment operations were concluded using financial leverage to invest in the target companies. For financing contracts signed by investee companies, specific covenants backed by real guarantees are in place; failure to comply with these could necessitate recapitalisation operations for investee companies and lead to an increase in financial charges relating to debt refinancing. Failure to comply with covenants attached to loans could have negative effects on both the financial situation and operations of investee companies, and on the value of the investment. The group constantly monitors the significant reference parameters for the financial obligations taken on by investee companies, in order to identify any unexpected variance in good time. C.3. Divestment operations The group invests over a medium-/long-term time horizon, normally three to six years for investments made through the acquisition of direct shareholdings in companies or up to ten years for investments made through funds. Over the investment management period, external situations could arise that might have a significant impact on the operating results of the investee companies, and consequently on the value of the investment itself. Furthermore, in the case of co-investment, guiding the management of an investee company could prove problematic or unfeasible, and it may ultimately prove impossible to dispose of the stakes held owing to lock-up clauses. The divestment strategy could therefore be negatively affected by various factors, some of which cannot be forecast at the time the investments are made. There is therefore no guarantee that expected earnings will be realised given the risks resulting from the investments made. To combat these risk situations, the group has defined a process to monitor the performance of its investee companies, facilitated by its representation on the management bodies of significant investee companies, with a view to identifying any critical situations in good time. C.4. Funding risk The income flows expected from the Alternative Asset Management business depend on the capacity of the group’s asset management companies to stabilise/grow their assets under management. In this environment, fund raising activity could be harmed by both external factors, such as the continuation of the global economic crisis or the trend in interest rates, and internal factors, such as bad timing in respect of fund raising activities by the asset management companies or the departure of key managers from the companies. The group has established appropriate risk management strategies in relation to fund raising, with a view to both involving new investors and retaining current investors.
    • Financial Statements for the Year Ending 31 December 2010 139 Significant events after the year-end Reorganisation of IDeA Alternative Investments S.p.A. (IDeA AI) The reorganisation of IDeA Alternative Investments (IDeA AI) was conducted through a partial non-proportional demerger, with a reduction in the share capital of IDeA AI and allocation of Investitori Associati SGR and Wise SGR to the management of Investitori Associati SGR and Wise SGR respectively, in return for the cancellation of the stakes held by those companies in IDeA AI. As a result of the demerger, DeA Capital S.p.A. acquired control of IDeA AI. Following approval by the Bank of Italy and the Italian Competition Authority, the deed of the demerger of IDeA AI, effective from 17 January 2011, was completed on 13 January 2011. DeA Capital S.p.A., which previously held 44.36% of the company’s capital, has therefore acquired control of 90.11% of IDeA AI and the assets it owns. These primarily include 100% of IDeA Capital Funds SGR, 65% of Soprarno SGR, 65% of IDeA SIM and 10% of Alkimis SGR. Moreover, on 20 January 2011, in order to gain control of the entire share capital of IDEA AI, DeA Capital S.p.A. acquired the remaining 9.89% of the company’s stock held by private investors, including directors Lorenzo Pellicioli and Paolo Ceretti, in exchange for 4,806,921 DeA Capital shares, using existing own shares in the portfolio, equal to 1.57% of the capital. As part of the valuation performed for the various transactions mentioned above, the company employed the services of an independent external consultant. Agreement for the merger of FIRST ATLANTIC RE SGR and FIMIT SGR On 26 January 2011, FARE SGR and parent company FARE Holding (70%-owned by DeA Capital S.p.A.), as one party, and FIMIT - Fondi Immobiliari Italiani SGR S.p.A. and shareholders IFIM, Inpdap, Enpals and Enasarco (jointly, the "Fimit shareholders"), as the other, approved the plan for the merger by incorporation of FARE SGR into FIMIT SGR. The merger of the two companies will create the largest independent real estate asset management company in Italy, with over EUR 8 billion in assets under management and 19 managed funds (including five listed funds) and commission estimated at around EUR 57 million for 2010. This will put it among the major partners of Italian and international investors in promoting, creating and managing closed-end mutual investment funds in real estate. The transaction will strengthen the strategic position of both companies and their relations with institutional investors in Italy, also creating the conditions for the future development of activities on foreign markets and generating economies of scale and synergies in real estate fund management. Based on the commitments made in the framework agreement signed (Framework Agreement), the two asset management companies will carry out the necessary steps to approve the merger plan at their respective boards of directors' meetings. Subject to the necessary approval by the Bank of Italy and the Italian Competition Authority, the shareholders’ meetings of the two asset management companies will approve the merger plan, and will draw up the merger deed within an estimated timescale of around six months. It has been contractually agreed between the parties in the Framework Agreement that the FIMIT/FARE exchange ratio shall be 1.48:1, which must be confirmed by the court-appointed expert. The calculation of the ratio did not include the economic rights to the performance fees
    • Financial Statements for the Year Ending 31 December 2010 140 of the two asset management companies’ existing funds at the time of the merger, which shall continue to belong to the current shareholders of FIMIT SGR and FARE SGR, via the issue and allocation to the latter of financial equity instruments. FARE SGR will be merged into FIMIT SGR, after which the incorporating company will change its name to IDeA FIMIT SGR S.p.A. (hereinafter also referred to as the "New Asset Management Company"). At the same time as the merger, the following operations will be completed: • DeA Capital S.p.A. shall acquire from Feidos S.p.A. (Feidos, a company owned by Massimo Caputi) a 58.31% stake in IFIM (the IFIM Investment), the company that exclusively holds a 17.15% stake, pre-merger, in FIMIT SGR • IFIM shall purchase the stake held by the LBREP III Fimit Sarl fund (LBREP) in FIMIT SGR, equal to 18%, pre-merger, of the asset management company’s capital Following the operations listed above and based on the exchange ratio defined, after the merger, FARE Holding will own a stake of 40.32% in the New Asset Management Company, IFIM will own 20.98%, Inpdap 18.33%, Enpals 11.34%, Enasarco 5.97%, Inarcassa 2.98% and other Fimit shareholders 0.08%. As a result, the DeA Capital subsidiaries, FARE Holding (70.0%) and IFIM (58.31%), shall jointly hold a stake of 61.30% in the New Asset Management Company. The remaining capital will be broadly split between the shareholders Inpdap, Enpals, Enasarco and Inarcassa. Note that, by virtue of the existing options that allow the purchase of the remaining 30% of FARE Holding, DeA Capital S.p.A. could acquire complete control of the company by December 2013. At the same time as the Framework Agreement was drawn up, Shareholders’ Agreements were also reached: (i) between FARE Holding and the FIMIT Shareholders regarding the corporate governance of the New Asset Management Company; and (ii) between DeA Capital, Massimo Caputi and Feidos regarding the corporate governance of IFIM. On the basis of these agreements, the parties agreed that: — the operational management of the New Asset Management Company will be assigned to a CEO, to be appointed by IFIM’s new majority shareholder, DeA Capital S.p.A. — Massimo Caputi and Daniel Buaron, the current CEOs of the two asset management companies, will be appointed to the Board of Directors of the New Asset Management Company, as well as to the Executive Committee, with responsibility for the Italian market and the foreign market respectively — the Board of Directors of the New Asset Management Company will have 13 members, comprising the CEO, two members appointed by IFIM, five appointed by FARE Holding, and the remaining five appointed by Inpdap, Enpals and Enasarco — a qualified majority of 72% will be introduced for the shareholders’ meeting of the New Asset Management Company for voting on the most important decisions (capital increases, mergers, demergers, liquidation, other changes to the articles of association, etc.) in order to protect minority shareholders — reciprocal put and call options will be attached to the IFIM shares owned by Feidos and Massimo Caputi, enabling these shares to be transferred to DeA Capital S.p.A. over a maximum period of six years, after which operation DeA Capital S.p.A. will own the whole of IFIM — a lock-up period of 36 months starting from the merger will apply to the IDeA FIMIT SGR shares of FARE Holding, while the lock-up period for the shares owned by IFIM will end with the expiry of the above-mentioned options (maximum six years), as these firms are strategic partners in the initiative
    • Financial Statements for the Year Ending 31 December 2010 141 — starting from the 24th month after the completion of the merger, and continuing until the 54th month, shareholders representing at least 20% of the share capital of the New Asset Management Company have the right to request the flotation of the New Asset Management Company, and are obliged to offer the requisite number of shares for the public offer to ensure that it is successful Sale of the stake in Stepstone by IDeA AI On 1 February 2011, IDeA AI sold the entire share capital of IDeA AI Sarl, which in turn owns a 4.9% stake in Stepstone, and also has a right to a portion of the management fees and carried interest of the Blue Skye fund. The stake was sold for a total of approximately EUR 2.6 million. Increase in daily purchase limits in the share buyback plan In relation to the plan to buy and sell own shares approved by the shareholders on 26 April 2010, on 14 February 2011 DeA Capital S.p.A. announced its intention to buy, depending on market conditions, shares up to a maximum of 50% of the average daily trading volume for the 20 trading days preceding the date of purchase. The decision to increase purchase volumes was made on the basis of two factors: a) the reduction in own shares held by the company to 2.56% of the share capital (with a value of around EUR 7.9 million) following the last instalment of the payment in shares for the acquisition of FARE Holding in December 2010 and the use of own shares to acquire a 9.9% stake in IDeA Alternative Investments in January 2011 b) the continuing low liquidity of DeA Capital shares, which saw trading volumes in 2010 significantly below the average for stocks listed on markets managed by Borsa Italiana, calculated as a percentage of the free float Under the plan to buy and sell own shares, DeA Capital is authorised to purchase, for a period of 18 months, up to 20% of the share capital, equivalent to 61,322,420 shares, in accordance with the regulatory procedures, excluding public purchase or exchange offers. This plan also allows for the shares purchased to be sold at any time and for an unlimited period, whether on the market, in implementation of management incentive plans, or in the context of transactions such as acquisitions, asset transfers, mergers, demergers or the issue of convertible bonds or warrants.
    • Financial Statements for the Year Ending 31 December 2010 142 Further information Publication of the 2010 financial statements In accordance with the provisions of IAS 10, the parent company authorised the publication of these financial statements within the terms authorised by existing legislation. Atypical or unusual transactions In 2010, there were no atypical or unusual transactions as defined by Consob Communication 6064293 of 28 July 2006. Significant non-recurring events and transactions In 2010, the DeA Group did not undertake any significant non-recurring transactions as defined by the above-mentioned Consob Communication.
    • Financial Statements for the Year Ending 31 December 2010 143 Statement of responsibilities for the consolidated financial statements pursuant to article 154-bis of Legislative Decree 58/98 The undersigned, Paolo Ceretti, as Chief Executive Officer, and Manolo Santilli, as the manager responsible for preparing the accounting statements of DeA Capital S.p.A., hereby certify, pursuant to art. 154-bis, paragraphs 3 and 4 of Legislative Decree 58 of 24 February 1998, that based on the characteristics of the company, the administrative and accounting procedures for preparing the consolidated financial statements of the DeA Capital Group during the year were suitable and effectively applied. The assessment as to the suitability of the administrative and accounting procedures for preparing the consolidated financial statements for the year ending 31 December 2010 was based on a process established by DeA Capital S.p.A. in keeping with the Internal Control - Integrated Framework model issued by the Committee of Sponsoring Organisations of the Treadway Commission, which is the generally accepted reference framework at international level. Note in this regard, that as described in the notes to the annual financial statements, a significant portion of the assets are investments stated at fair value. Fair values were determined by directors based on their best estimate and judgment using the knowledge and evidence available at the time the financial statements were prepared. However, due to objective difficulties in making assessments and the absence of a liquid market, the values assigned to such assets could differ, and in some cases significantly, from those that could be obtained when the assets are sold. The undersigned further certify that the consolidated financial statements to 31 December 2010: - correspond to the companies' accounting records - have been prepared in compliance with the Financial Reporting Standards adopted by the European Union, and the measures issued to implement art. 9 of Legislative Decree 38/2005 - to the best of their knowledge, provide a true and fair view of the operating performance and financial position of the issuer and the group of companies included in the basis of consolidation The report on operations contains a reliable analysis of operating performance and results and of the position of the issuer and all companies included in the basis of consolidation, together with a description of the main risks and uncertainties to which they are exposed. 14 March 2011 Paolo Ceretti Chief Executive Officer Manolo Santilli Manager responsible for preparing the company’s accounts
    • Financial Statements for the Year Ending 31 December 2010 144 Information pursuant to art. 149-duodecies of the Consob Issuer Regulations The table below was prepared in accordance with art. 149-duodecies of the Consob Issuer Regulations and reports the fees for 2010 for auditing and other services provided by the independent auditors and entities belonging to the independent auditors’ network. The fees reported below do not include VAT and out-of-pocket expenses. (Euro thousand) Company providing the service Beneficiary Compensation paid for FY 2010 Audit KPMG S.p.A. DeA Capital S.p.A. 91 KPMG S.p.A. FARE Holding S.p.A. 37 KPMG Audit S.à.r.l. DeA Capital Investments SA 44 KPMG S.p.A. FARE S.p.A. 12 KPMG S.p.A. FARE NPL S.p.A. 12 Certification services (1) KPMG S.p.A. DeA Capital S.p.A. 7 KPMG S.p.A. FARE Holding S.p.A. 2 KPMG S.p.A. FARE NPL S.p.A. 1 Other services KPMG S.p.A. DeA Capital S.p.A. 55 KPMG S.p.A. FARE NPL S.p.A. 7 Total 268 1) Presentation of tax return
    • Financial Statements for the Year Ending 31 December 2010 145 Annual Financial Statements for the Year Ending 31 December 2010
    • Financial Statements for the Year Ending 31 December 2010 146 Annual financial statements for DeA Capital S.p.A. for the period 1 January to 31 December 2010 • Statement of financial position • Income Statement • Statement of Comprehensive Income • Cash Flow Statement • Statement of Changes in Shareholders’ Equity • Notes to the financial statements
    • Financial Statements for the Year Ending 31 December 2010 147 Statement of financial position - DeA Capital S.p.A. (Euro thousand) Note 31.12.2010 31.12.2009 ASSETS Non-current assets Intangible and tangible assets Intangible assets 1a 5,629 40,005 Tangible assets 1b 158,969 209,390 Total intangible and tangible assets 164,598 249,395 Investments Subsidiaries and joint ventures 2a 765,199,369 800,512,702 Available-for-sale investments 2b 1,431,230 566,631 Available-for-sale funds 2c 12,977,513 13,541,968 Crediti 2d - - Total Investments 779,608,112 814,621,301 Other non-current assets Deferred tax assets 3a - - Other non-current assets 3b - - Total other non-current assets - - Total non-current assets 779,772,710 814,870,696 Current assets Trade receivables 4a 150,541 203,104 Available-for-sale financial assets 4b 15,037,722 15,017,469 Financial receivables 634,750 1,263,664 4c 4,064,725 3,199,437 Other tax receivables 4d 1,759,463 1,824,440 Other receivables 4e 116,109 36,407 Cash and cash equivalents 4f 54,234,322 58,559,529 Total current assets 75,997,632 80,104,050 Totale Attivo corrente 75,997,632 80,104,050 Held-for-sale assets - - TOTAL ASSETS 855,770,342 894,974,746 SHAREHOLDERS' EQUITY AND LIABILITIES SHAREHOLDERS' EQUITY Share capital 5a 294,013,402 289,020,888 Share premium reserve 5b 395,613,265 395,880,420 Legal reserve 5c 61,322,420 61,322,420 Fair Value reserve 5d (8,594,317) 20,555,910 Other reserves 5e 726,307 8,927,714 Retained earnings (losses) 5f - - Profit/(loss) for the year 5g 15,989,158 (1,798,320) Shareholders' equity 759,070,235 773,909,032 LIABILITIES Non-current liabilities Deferred tax liabilities - - Provisions for risks and charges - - Provisions for employee termination benefits 6a 193,076 131,915 Long term financial loans 6b 90,621,354 114,876,893 Total non-current liabilities 90,814,430 115,008,808 Current liabilities Trade payables 7a 986,394 982,703 Payables to staff and social security organisations 7b 1,007,040 195,936 Current tax payables 4,911 - Other tax payables 7c 175,930 177,328 Other payables 7d 31,547 65,059 Short term financial loans 7e 3,679,855 4,635,880 Total current liabilities 5,885,677 6,056,906 Held-for-sale liabilities - - TOTAL SHAREHOLDERS' EQUITY AND LIABILITIES 855,770,342 894,974,746 Tax receivables from Parent companies Pursuant to Consob Resolution 15519 of 27 July 2006, the impact of dealings with related parties on the statement of financial position, income statement and cash flow statement is explained in the notes to the financial statements.
    • Financial Statements for the Year Ending 31 December 2010 148 Income Statement-DeA Capital S.p.A. (Euro) Note Year 2010 Year 2009 Gains from subsidiaries 8a 0 0 Dividends from subsidiaries and joint ventures 8a 29,328,800 9,339,600 Gains from Funds available-for-sale 8a 553,574 126,865 Impairment of Investments in Subsidiaries and joint ventures 8a (4,006,280) 0 Impairment of Investments in other companies-available-for-sale 8a (50,659) (1,185,542) Impairment of Funds - available-for-sale 8a (1,131,005) (682,271) Income from services 8b 516,647 315,255 Other income 8c 121,913 181,544 Personnel costs 9a (3,268,826) (3,370,972) Service costs 9b (3,038,525) (3,412,505) Depreciation, amortization and impairment 9c (154,436) (183,343) Other expenses 9d (10,244) (15,772) Financial income 10a 1,384,249 1,623,126 Financial expenses 10b (6,251,938) (6,088,044) PROFIT/(LOSS) BEFORE TAX 13,993,270 (3,352,059) Income tax 11a 1,759,281 1,008,402 Income tax-Joint Venture 11b 236,607 545,337 PROFIT/(LOSS) FOR THE YEAR FROM CONTINUING OPERATIONS 15,989,158 (1,798,320) Profit (Loss) from discontinued operations/held-for-sale assets 0 0 PROFIT/(LOSS) FOR THE YEAR 15,989,158 (1,798,320) Earnings per share, basic (€) 12 0.06 (0.01) Earnings per share, diluted (€) 12 0.06 (0.01) Pursuant to Consob Resolution 15519 of 27 July 2006, the impact of dealings with related parties on the statement of financial position, income statement and cash flow statement is explained in the notes to the financial statements.
    • Financial Statements for the Year Ending 31 December 2010 149 Statement of Comprehensive Income (Statement of Performance – IAS 1) Comprehensive income or the Statement of Performance (IAS 1), in which performance for the year is reported including results posted directly to shareholders' equity, reflects a net negative balance of approximately EUR 13,161 thousand compared with a net positive balance of around EUR 18,382 thousand in 2009. This statement provides an overview of the performance of the company and shows the actual result of the company’s activities, as explained in the Report on Operations and the notes to the financial statements. Statement of comprehensive income (Euro) Notes 31.12.2010 31.12.2009 Profit/(loss) for the year (A) 15,989,158 (1,798,320) Gains/(Losses) on fair value of available-for-sale financial assets 5d (29,150,226) 20,180,243 Other comprehensive income, net of tax (B) 5d (29,150,226) 20,180,243 Total comprehensive income for the year (A)+(B) (13,161,068) 18,381,923
    • Financial Statements for the Year Ending 31 December 2010 150 Cash Flow Statement-DeA Capital S.p.A. (Euro thousand) Year 2010 Year 2009 CASH FLOW from operating activities Investments in funds and shareholdings (4,934) (6,039) Proceeds from the sale of investments 0 0 Capital reimburments by Funds 360 0 Interest received 504 525 Interest received-intercompany 0 0 Interest paid (3,653) (2,042) Interest paid-intercompany 0 (606) Cash distribution from investments 345 224 Realized gains (losses) on exchange rate derivatives (1,041) (924) Exhange gains (losses) 0 0 Taxes paid (697) Taxes refunded 1,095 0 Dividends received 30,182 9,340 Revenues for services 0 1,933 Revenues for services-intercompany 80 97 Operating expenses -intercompany 0 0 Operating expenses-Cash movements 0 0 Operating expenses (5,641) (6,120) Net cash flow from operating activities 17,297 (4,309) CASH FLOW from investment activities Acquisition of property, plant and equipment (132) (8) Sale of property, plant and equipment 0 0 Purchase of licenses (8) (4) Net cash flow from investing activities (140) (12) CASH FLOW from investing activities Acquisition of financial assets 0 (15,822) Sale of financial assets (388) 0 Share capital issued 0 0 Share capital issued:stock option plan 0 0 Own shares acquired (1,093) (5,766) Own shares sold 0 0 Warrant 0 317 Bank Lona reimbursement (20,000) 0 Bank loan 100,000 Loan intercompany (30,000) Net cash flow from financing activities (21,481) 48,729 CHANGE IN CASH AND CASH EQUIVALENTS (4,324) 44,408 CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 58,560 14,414 Cash and cash equivalents relating subsidiaries merged in the year 0 (262) Cash and cash equivalents at beginning of period 58,560 14,152 EFFECT OF CHANGE IN BASIS OF CONSOLIDATION: CASH AND CASH EQUIVALENTS 0 0 54,236 58,560 Held-for-sale assets and minority interests 0 0 CASH AND CASH EQUIVALENTS AT END OF PERIOD 54,236 58,560 CASH AND CASH EQUIVALENTS AT END OF PERIOD
    • Financial Statements for the Year Ending 31 December 2010 151 Summary statement of Changes in Net Shareholders’ Equity for the Parent Company DeA Capital SpA Euro thousand Share capital (par value) Share premium Legal reserve Fair value reserve Stock options reserve Reserve for sale of rights Other reserves Profit (loss) brought forward Group net profit (loss) Discontinued operations result Total Total at 31.12.2008 293,418 401,440 61,322 376 667 413 7,386 76,808 (81,315) 0 760,515 Allocation of 2008 net profit 0 (4,507) 0 0 0 0 0 (76,808) 81,315 0 0 Stock options exercised 0 0 0 0 0 0 0 0 0 0 0 Buy-back of treasury shares (4,397) (1,369) 0 0 0 0 0 0 0 0 (5,766) Treasury shares disposed 0 0 0 0 0 0 0 0 0 0 0 Reclassification of stock options exercised 0 0 0 0 0 0 0 0 0 0 0 Cost of stock options and warrant 0 317 0 0 461 0 0 0 0 0 778 Total comprehensive income for the year 2009 0 0 0 20,180 0 0 0 0 (1,798) 0 18,382 Total at 31.12.2009 289,021 395,881 61,322 20,556 1,128 413 7,386 0 (1,798) 0 773,909 Allocation of 2009 net profit 0 (1,798) 0 0 0 0 0 0 1,798 0 0 Cost of stock options 0 0 0 0 564 0 0 0 0 0 564 Buy-back of treasury shares (944) (149) 0 0 0 0 0 0 0 0 (1,093) Shares disposed for FARE acquisition 5,936 1,680 0 0 0 0 (7,386) 0 0 0 230 Reversal of Stock Options Plan 2007-2013 0 0 0 0 (1,379) 0 0 0 0 0 (1,379) Total comprehensive income for the year 2010 0 0 0 (29,150) 0 0 0 0 15,989 0 (13,161) Totale al 31.12.2010 294,013 395,614 61,322 (8,594) 313 413 0 0 15,989 0 759,070
    • Financial Statements for the Year Ending 31 December 2010 152 Notes to the Annual Financial Statements for the Year Ending 31 December 2010
    • Financial Statements for the Year Ending 31 December 2010 153 A. Structure and content of the financial statements DeA Capital S.p.A. (the company or the parent company or DeA Capital) is a stock company with its registered office in Via Borgonuovo 24, Milan. The financial statements were prepared in accordance with the general principles of IAS 1, specifically: - accruals principle: the effect of events and transactions is recorded when they occur, and not when payment is made or received - going concern principle: the financial statements are prepared under the assumption that business operations will continue in the near future. In this regard, the directors have evaluated this assumption with particular scrutiny in light of the current economic and financial crisis. As indicated in the section "Uncertainties and the management of financial risks" in the Report on Operations, the directors believe that the risks and uncertainties described therein are not critical in nature, confirming the financial solidity of the parent company, DeA Capital S.p.A. - relevance principle: when reporting operating events in accounting entries, preference is given to the principle of economic substance over form - comparative information: the financial statements must show comparative information for the previous period The DeA Capital financial statements consist of the statement of financial position, the income statement, the statement of changes in shareholders’ equity, the cash flow statement, the statement of comprehensive income (Statement of Performance – IAS 1) and the notes to the financial statements. The statement of financial position provides a breakdown of current and non-current assets and liabilities with separate reporting for those resulting from discontinued or held-for-sale operations. In the income statement, the company has adopted the nature of expense method, whereby costs and revenues are classified according to type. The cash flow statement is prepared using the "direct method". Unless otherwise indicated, all tables and figures included in these notes to the financial statements are reported in EUR thousand. As the parent company, DeA Capital S.p.A. has also prepared the consolidated financial statements for the DeA Capital Group to 31 December 2010. In addition to the figures at 31 December 2010, the financial statement formats used also provide comparable figures for 31 December 2009. In order to provide more in-depth information, in 2010 a greater level of detail has been given about certain items on the statement of financial position. The items from the 2009 financial statements listed below have therefore been broken down differently as follows: a) under Current assets, the item "Other receivables" (EUR 1,300 thousand) has been broken down into "Financial receivables from the pass-through arrangement" (EUR 1,264 thousand) and "Other receivables" (EUR 36 thousand) b) also under Current assets, the item "Current tax receivables, including receivables from parent companies relating to the tax consolidation scheme" (EUR 5,024 thousand) has been broken down into "Tax receivables from parent companies relating to the tax consolidation scheme" (EUR 3,200 thousand) and "Other tax receivables" (EUR 1,824 thousand)
    • Financial Statements for the Year Ending 31 December 2010 154 The publication of the draft financial statements for the period ending 31 December 2010 was authorised by resolution of the Board of Directors dated 14 March 2011. Statement of compliance with accounting standards The financial statements for the year ending 31 December 2010 (2010 financial statements) have been prepared in accordance with the International Accounting Standards adopted by the European Union and approved by the date the financial statements were prepared (International Accounting Standards, or individually IAS/IFRS, or collectively IFRS (International Financial Reporting Standards)). "IFRS" also means all interpretations of the International Financial Reporting Interpretations Committee (IFRIC), including those previously issued by the Standing Interpretations Committee (SIC), and approved by the European Union. The financial statements were prepared with a focus on clarity, and provide a true and fair view of the statement of financial position, financial situation, income statement and cash flows for the period. Accounting standards, amendments and interpretations applied for the first time The IASB-approved international accounting standards and interpretations authorised for adoption in Europe that were applied for the first time from 1 January 2010 are detailed below. None had any significant impact on the annual financial statements for the year ending 31 December 2010. The company did not apply any IFRS in advance. Accounting standards, amendments and interpretations applied as of 1 January 2010 The company applied the accounting standards, amendments and interpretations below for the first time from 1 January 2010: • IFRS 27 (Consolidated and separate financial statements) The changes to IAS 27 mainly relate to the accounting treatment for transactions or events that change the value of the group’s interests in subsidiaries and the allocation of subsidiaries’ losses to minority interests. In accordance with the rules for transitioning to the accounting standard, the DeA Capital Group adopted these changes to IAS 27 prospectively, disclosing the effects on the accounting treatment of certain acquisitions and sales of minority interests. IAS 27 establishes that, once a controlling interest has been obtained, transactions in which the controlling company acquires or sells further minority stakes without changing the control exercised on the subsidiary are considered transactions with shareholders and must therefore be recognised in shareholders’ equity. The carrying values of the controlling interest and the minority interests must therefore be adjusted to reflect the change in interest in the subsidiary, and any difference between the amount of the adjustment made to minority interests and the fair value of the price paid or received in respect of such a transaction is posted directly to shareholders’ equity and allocated to the shareholders of the controlling company. No adjustments will be made to the value of goodwill or to profits or losses posted to the income statement. The ancillary costs of such transactions must also be posted to shareholders’ equity in accordance with the provisions of IAS 32. Previously, in the absence of an accounting standard or specific interpretation on this issue, when the DeA Capital Group made an acquisition of a minority interest in an existing subsidiary, it adopted the parent entity extension method, which required the
    • Financial Statements for the Year Ending 31 December 2010 155 difference between the purchase price and carrying value of the assets and liabilities acquired to be posted under "Goodwill". Conversely, in the case of sales of minority interests that did not entail the loss of control, the group posted the difference between the purchase price and carrying value of the assets and liabilities sold to the income statement. • IFRS 3 (Business combinations) In accordance with the rules for transitioning to the accounting standard, the Group adopted IFRS 3 (Business Combinations), as revised in 2008, prospectively for the business combinations that took place from 1 January 2010. The updated version of IFRS 3 introduced some important changes, which are described below, mainly concerning the rules governing step acquisitions of subsidiaries; the option to measure any minority interests acquired in a partial acquisition at fair value; the posting to the income statement of all costs connected with the business combination and the recognition at the date of acquisition of liabilities for payments that are conditional on future events. The new IFRS 3 establishes that, in the case of a step acquisition, a business combination is created only at the time that control is acquired and that all the identifiable net assets of the company must be measured at fair value at that time; minority interests must be valued on the basis of either their fair value or the pro rata portion of the fair value of the identifiable net assets of the acquired company (a method that was also permitted by the previous version of IFRS 3). When control of an investee company is acquired in stages, the stake previously held – accounted for until that point in accordance with IAS 39 (Financial Instruments: Recognition and Measurement), or with IAS 28 (Investments in Associates), or with IAS 31 (Investments in Joint Ventures) – must be treated as though it had been sold and bought back on the date that control is acquired. This investment must be valued at its fair value on the date of "sale" and any profits or losses resulting from this valuation must be posted to the income statement. Moreover, each value previously recorded in shareholders’ equity as "Other total profits and losses", which must be posted to the income statement following the sale of the asset to which it refers, must be reclassified in the income statement. The goodwill or income (in the case of badwill) arising from the transaction completed with the subsequent acquisition must be calculated as the sum of the price paid to obtain control, the value of the minority interests (valued in accordance with one of the methods permitted by the standard) and the fair value of the minority interests held previously, net of the fair value of the identifiable net assets acquired. Under the previous version of the standard, the acquisition of control in stages was recorded transaction by transaction as a series of separate acquisitions. Total goodwill was then calculated as the sum of the portions of goodwill generated by the individual transactions. IFRS 3 (2008) stipulates that the ancillary costs of the transactions that make up a business combination should be posted to the income statement in the period in which they are incurred. Under the previous version of the standard, these costs were included in the calculation of the acquisition cost of the acquired company’s net assets. IFRS 3 (2008) states that the payments that are conditional on future events should be considered as part of the price of transferring the net assets acquired and should be measured at fair value on the date of acquisition. Similarly, if a business combination contract includes the right to obtain a refund of certain components of the price on the occurrence of certain conditions, this right is classified as an asset in the acquirer’s accounts. Any subsequent changes in the fair value must be posted as an adjustment to the original accounting treatment only if such changes have been determined from additional or better information on the fair value and if they occur within 12 months from the date of acquisition; all other changes must be posted to the income statement.
    • Financial Statements for the Year Ending 31 December 2010 156 The previous version of the standard stipulated that portions of the price that were conditional on future events should be accounted for on the date of acquisition only if their payment was considered probable and their amount could be reliably determined. In addition, any subsequent change in the value of such payments was always posted as an adjustment to goodwill. Accounting standards, amendments and interpretations applied from 1 January 2010 that were not relevant to the company’s financial statements The following accounting standards, amendments and interpretations, which were applicable from 1 January 2010, did not apply to the company. For additional details on these, see the notes to the financial statements to 31 December 2009. • Improvement to IFRS 5 (Non-current assets held for sale and discontinued operations) • Amendment to IAS 28 (Investments in associates) and IAS 31 (Interests in joint ventures) as a result of the amendments made to IAS 27 • Improvements to International Financial Reporting Standards (IFRS improvements 2009) • Amendments to IFRS 2 (Share-based payment): group cash-settled share-based payment transactions • Amendment to IFRS 1 (First-time adoption of International Financial Reporting Standards) • Amendments to IAS 39 (Financial instruments: Recognition and Measurement): exposures qualifying for hedge accounting • IFRIC 17 (Distribution of non-cash assets to owners) • IFRIC 18 (Transfers of assets from customers) Future accounting standards, amendments and interpretations Accounting standards, amendments and interpretations that are not yet applicable and have not been adopted in advance by the company, but were approved for adoption in the European Union as of 28 February 2011 The International Accounting Standards, the interpretations and changes to existing IASB- approved accounting standards and interpretations that were ratified for adoption in the European Union on 28 February 2011, but which are not yet applicable, are as follows: Amendments to IAS 24 (Related party disclosures) On 4 November 2009, the IASB published a revised version of IAS 24 (Related parties), which will replace the current version of IAS 24. The document simplifies disclosure requirements on related parties for companies in which a government entity is a controlling shareholder that exercises significant influence or joint control, and removes certain application-related difficulties resulting from the current definition of related parties. Furthermore, the revised definition of related parties contained in the amended version of IAS 24: • makes the application of disclosure requirements in the financial statements of related parties symmetrical (i.e. if A is related to B for the purposes of the financial statements of B, then B must also be considered a related party of A in the financial statements of A)
    • Financial Statements for the Year Ending 31 December 2010 157 • clarifies that related party disclosures also apply to transactions entered into with the subsidiaries of associates and joint ventures, and not just the associate or joint venture • equates the position of individuals to that of companies for the purposes of identifying the relationship • also requires disclosure on commitments received and granted to related parties These amendments will take effect on 1 January 2011. Amendments to IFRIC 14 (IAS 19 - Limit on a defined benefit asset, minimum funding requirements and their interaction) On 26 November 2009, the IASB published the document "Amendments to IFRIC 14 (Prepayments of a minimum funding requirement)". The amendment to IFRIC 14 (Limit on a defined benefit asset, minimum funding requirements and their interaction) (the interpretation document for IAS 19) was deemed necessary since the document in its original version did not include the impact from any advance payments of minimum contributions. The amendment to IFRIC 14 allows companies to report the amount of advance payments of minimum contributions under defined benefit assets. The amendment will be applicable from 1 January 2011. IFRIC 19 (Extinguishing financial liabilities with equity instruments) On 26 November 2009, the IFRIC published IFRIC 19 (Extinguishing financial liabilities with equity instruments). The document defines the accounting treatment a debtor must follow when, following the renegotiation of the contractual terms of a financial liability, the creditor and debtor reach an agreement over a "debt-for-equity swap", i.e. the total or partial extinction of the financial liability upon the issuance of equity instruments by the debtor. Based on the interpretations provided by IFRIC 19: • the issuance of equity instruments constitutes the "payment of consideration" as defined in para. 41 of IAS 39 • equity instruments are measured at fair value; if the fair value of such instruments cannot be measured reliably, the fair value of the derecognised financial liabilities must be used • the difference between the carrying value of the financial liability and the consideration paid (represented by the fair value of the equity instruments) must be posted to the income statement This interpretation will be applicable from 1 January 2011. It may, however, be applied in advance. Amendments to IFRS 1 (First-time adoption of International Financial Reporting Standards) On 28 January 2010, the IASB published the amendment entitled IFRS 1 (Limited exemption from comparative IFRS 7 disclosures for first-time adopters). By modifying IFRS 1, this amendment extends the exemption from presenting comparative information as per the amendment published in March 2009 (Improving disclosures about financial statements) to entities that adopt international accounting standards for the first time in financial statements beginning before 1 January 2010. This amendment was part of the IASB's response to the financial crisis along with a request for supplementary information on fair value and liquidity risk.
    • Financial Statements for the Year Ending 31 December 2010 158 This amendment will be applicable from 1 January 2011. It may, however, be applied in advance. Accounting standards, amendments and interpretations not yet approved for adoption in the European Union as of 28 February 2011 The International Accounting Standards, interpretations and changes to existing IASB- approved accounting standards and interpretations that had not been ratified for adoption in the European Union as of 28 February 2011 are as follows: IFRS 9 (Financial instruments) On 12 November 2009, the IASB issued the first part of IFRS 9, which only changed the requirements relating to the classification and valuation of the financial assets currently covered by IAS 39. On 28 October 2010, the IASB published a revised version of IFRS 9, which differed from the version published in November 2009 in that it contained regulations on the classification and valuation of financial liabilities. IFRS 9 is likely to be further changed and supplemented with regulations relating to the impairment of financial assets and hedge accounting. IFRS 9, which will replace IAS 39 when complete, aims to simplify the accounting treatment set out under the current IAS 39, develop a classification and measurement model that will provide better information on the ways in which cash flows from financial instruments are expected to be obtained, improve the calculation of amortised costs, with particular reference to the transparency of losses on receivables and the credit quality of financial assets, and lastly, review the current regulations on hedge accounting with a view to simplifying the effectiveness tests. The endorsement process for IFRS 9 is currently on hold, and this standard is not applicable in the EU, ahead of the European Commission's full assessment of the plan to completely replace IAS 39. Improvements to International Financial Reporting Standards (IFRS improvements 2009) On 6 May 2010, the IASB issued the latest series of documents detailing the minor changes to be made to existing accounting standards (Improvements to IFRS). The document contains a series of improvements to seven International Accounting Standards and Interpretations (IFRS 1, IFRS 3, IFRS 7, IAS 1, IAS 27, IAS 34 and IFRIC 13). They have not yet been ratified by the European Union. The changes that could potentially have a significant impact relate to: • IFRS 3 (Business combinations): currently, in application of the new IFRS 3, there is the option to value all the components of the minority interests at their fair value or in proportion to the minority stake in the identifiable net assets of the acquisition. This option has now been restricted to include only those components representative of instruments that currently confer on minority shareholders rights equivalent to those pertaining to ordinary shares, particularly as regards obtaining a pro-rata portion of net assets in the event of liquidation. All other components relating to minority interests (such as privileged shares or warrants issued by the acquired company to minorities) must be stated at fair value, unless the IFRS specify a different valuation criterion. In addition, the document clarifies that in the case of stock option plans acquired or voluntarily replaced following business combinations, such plans must be (re)calculated at
    • Financial Statements for the Year Ending 31 December 2010 159 the date of acquisition in accordance with IFRS 2. It also specifies that the current requirement of IFRS 2, namely that the value of the stock option plan acquired following a business combination must be allocated partly to "purchase costs" and partly to "services to be provided in the future", applies to all allocations regardless of whether or not they have been voluntarily replaced as a result of the business combination. • IFRS 7 (Financial instruments: Disclosures): the amendment emphasises the interaction between the qualitative and quantitative supplementary information required by the standard on the nature and extent of the risks inherent in financial instruments. This should help users of the financial statements to link the information presented and to obtain a general overview of the nature and extent of the risks inherent in financial instruments. • IAS 1 (Presentation of financial statements): the amendment requires that a summary of changes to each component of shareholders' equity should be presented in the financial statements or in the notes to the financial statements. • IAS 34 (Interim financial reporting): the information relating to significant events and transactions to be reported in the interim financial statements must represent an update on the information provided in the annual financial statements. It also specifies the circumstances in which it is mandatory to disclose information relating to financial instruments and their fair value in the interim financial statements. Changes to IFRS 7 (Financial instruments: Disclosures) On 7 October 2010, the IASB published the amendment to IFRS 7 "Disclosures – transfers of financial assets", which requires further information on transfers of financial assets. The changes to IFRS 7 aim to promote greater transparency in relation to the risks associated with transactions where, when a financial asset is transferred, the transferring company continues to be exposed, within certain limits, to risks associated with the derecognised financial asset (known as "continuing involvement"). Additional information is also required on significant transfers of financial assets at particular times (e.g. at the end of an accounting period). The amendments to IFRS 7, which are awaiting ratification by the European Commission, must be applied in the financial statements of periods starting from 1 July 2011 onwards. Changes to IAS 12 (Income Taxes) On 20 December 2010, the IASB published a number of changes to IAS 12 (Income Taxes), which now stipulates that the entity should assess whether it expects to recover the deferred tax through the use or sale of the asset. This assessment can be difficult and subjective, e.g. if investment property is recorded at fair value, as permitted by IAS 40 (Investment property). To provide a simplified approach, the amendments introduce the presumption, when calculating deferred taxes, that the carrying amount of the underlying asset will be recovered entirely by sale, unless there is clear evidence that it can be recovered through use. The presumption applies not only to investment property but also to assets such as plant and machinery or intangible assets recorded or revalued at fair value. As a result of these changes, the interpretation document SIC 21 (Income Taxes - recovery of revalued, non-depreciable assets) was withdrawn at the same time. The entire contents of this document are now covered in IAS 12. The amendments to IAS 12, which are awaiting ratification by the European Commission, must be applied from 1 January 2012.
    • Financial Statements for the Year Ending 31 December 2010 160 Amendments to IFRS 1 (First-time adoption of International Financial Reporting Standards): Severe hyperinflation and removal of fixed dates for first-time adopters On 20 December 2010, the IASB published two amendments to IFRS 1 (First-time adoption of International Financial Reporting Standards). The first amendment introduced the option for entities that are transitioning to IFRS to use the same simplified rules as those permitted to entities that made the transition to international accounting standards in 2005. The second amendment grants an exemption from the retrospective application of IFRS at first-time adoption to entities that are presenting financial statements in accordance with IFRS for the first time, after having been unable to present them due to hyperinflation, allowing such entities to use fair value as a replacement for cost for all assets and liabilities presented. The amendments to IFRS 1, which are awaiting ratification by the European Commission, must be applied in the financial statements of periods starting from 1 July 2011 onwards. We do not anticipate that the potential adoption of the standards and interpretations noted above will have a material impact on the valuation of the company's assets, liabilities, costs and revenues. B. Most important accounting principles and valuation criteria The accounting principles and valuation criteria adopted for the 2010 annual financial statements of DeA Capital are the same as those used in drawing up the consolidated financial statements, with the exception of specific principles and criteria relating to the consolidated financial statements and methods for valuing subsidiaries and joint ventures, as specified below. Investments in subsidiaries and joint ventures are classified as available-for-sale assets and are measured at fair value with appropriate reserves of shareholders’ equity as a balancing entry. Current and non-current assets and liabilities An asset is considered current if it meets at least one of the following conditions: • it is expected to be converted during the company's normal operating cycle. The "company's operating cycle" means the period from the acquisition of an asset to its conversion to cash and cash equivalents. When the company's operating cycle cannot be clearly identified, its duration is assumed to be twelve months • it is held mainly for trading purposes • its conversion is expected to occur within twelve months following the end of the financial year • it consists of cash and cash equivalents which have no restrictions that would limit its use in the twelve months following the end of the financial year All other assets are carefully analysed to separate the "current" portion from the "non-current" portion. Furthermore, deferred tax assets are recorded under non-current components. A liability is considered current if it meets at least one of the following conditions: • it is expected to be settled during the company's normal operating cycle • it is held mainly for trading purposes • its settlement is expected to occur within twelve months following the end of the financial year
    • Financial Statements for the Year Ending 31 December 2010 161 • the company does not have an unconditional right to defer payment of the liability for at least twelve months following the end of the financial year All other liabilities are carefully analysed to separate the "current" portion from the "non- current" portion. Furthermore, deferred tax liabilities are recorded under non-current components. Intangible assets Intangible assets are those assets with no identifiable physical form that are controlled by the company and produce future economic benefits. They are recorded under assets when it is likely that their use will generate future economic benefits and when their cost can be determined reliably. The above assets are recorded at purchase cost, or at production cost if they are generated internally. The purchase cost is represented by the fair value of the price paid to acquire the asset and by all other direct costs incurred to prepare the asset for use. The carrying value of intangible assets is maintained in the financial statements to the extent that there is evidence that this value can be recovered through use or if it is likely that these assets will generate future economic benefits. The useful life of intangible assets is assessed as finite or indefinite. Intangible assets with an indefinite useful life are tested to check that their value is still appropriate whenever there are indications of possible impairment, as required by IAS 36 (Impairment of assets). Intangible assets with an indefinite life are not amortised. The useful life of an intangible asset with an indefinite life is reviewed annually to check that the underlying conditions for the classification continue to apply. Intangible assets with a finite useful life are amortised on a straight-line basis over their expected useful life. The useful life of these assets is tested to check that their value is still appropriate whenever there are indications of possible impairment. Tangible assets Tangible assets are recorded at purchase price or production cost adjusted for accumulated depreciation and any impairment. Their cost includes ancillary costs and direct and indirect costs incurred at the time of purchase necessary to make the asset usable. The purchase cost is represented by the fair value of the price paid to acquire the asset and by all other direct costs incurred to prepare the asset for use. Tangible assets are depreciated on a straight-line basis over their remaining useful life, using the depreciation rates indicated in the notes on the item relating to similar groups of assets. If factors are discovered that lead the company to believe that it may be difficult to recover the net carrying value, an impairment test is performed. If the reasons for the impairment cease to exist, the carrying value of the asset is increased to its recoverable amount. Impairment Impairment always occurs when the carrying value of an asset is greater than its recoverable value. On each reporting date, the company determines whether there are any indications that an asset may be impaired. If such indications exist, the recoverable value of the asset is estimated (impairment test) and any write-down is recorded. The recoverable value of an asset is the higher of its fair value less costs to sell the asset and its value in use.
    • Financial Statements for the Year Ending 31 December 2010 162 IAS 36 provides instructions on determining fair value less costs to sell an asset, as follows: • if there is a binding sales agreement, the asset's fair value is the negotiated price • if there is no agreement, but the asset is marketed in an active market, the fair value is the current bid price (thus, the exact price on the value date and not the average price) • if no prices can be found in active markets, fair value must be determined based on valuation methods that incorporate the best information available including any recent transactions involving the same asset, after verifying that there were no significant changes in the economic environment between the date of the transactions under consideration and the valuation date IAS 36 defines value in use as the present value of future cash flows that an asset is projected to produce. The estimate of the value in use must include the items listed below: • an estimate of future cash flows that the company expects to derive from the asset • expectations of potential changes in value and the timing of such cash flows • the time value of money • other factors such as the volatility of the asset's value and the lack of a liquid market for it For more information on determining value in use, please see Appendix A of IAS 36. However, the main elements for accurately estimating the value in use are an appropriate calculation of projected cash flows (for which, the investee company's business plan is essential) and their timing, as well as the application of the right discount rate that accounts for both the present value of money and the specific risk factors for the asset to be valued. In all cases, when calculating the value it is important to: • base cash flow projections on reasonable and sustainable assumptions that provide the best estimate of the economic conditions that are likely to exist over the remaining useful life of the asset • base cash flow projections on the most recent budget/plan approved by the investee company, which, however, must exclude any future inflows or outflows of cash that are expected to come from the future restructuring, improvement or optimisation of operating performance. Projections based on these budgets/plans must cover a maximum period of five years unless a longer period of time can be justified • estimate higher cash flow projections for the period covered by the most recent budgets/plans by extrapolating projections based on the budgets/plans taken into consideration, and using a stable or declining growth rate for subsequent years unless a rising rate can be justified. This growth rate must not exceed the average long-term growth rate for production in the country or countries in which the investee company operates or for markets in which the asset used is placed unless a higher rate can be justified The assumptions used to determine cash flow projections must be reasonable, and based partly on an analysis of the factors that generated differences between projections of past and current cash flows. In addition, the assumptions used to determine current cash flow projections must be checked to ensure that they are consistent with actual past results, unless in the meantime changes have occurred in the investee company's business model or in the economic environment in which it operates that justify changes vis-a-vis the past. Financial assets Based on the classification of financial assets required by IAS 39, the company classified its financial assets at the time of the transition to International Accounting Standards, and subsequently when individual financial assets were acquired. Minority interests and investments in funds, which constitute the main, predominant area of the parent company's operations, are classified under available-for-sale assets, which are recorded at fair value with a balancing item in shareholders' equity.
    • Financial Statements for the Year Ending 31 December 2010 163 Fair value is the payment for which an asset could be exchanged in a free transaction between knowledgeable and independent parties. In the case of securities traded in active regulated markets, fair value is determined based on the bid price recorded on the last trading day of the related accounting period. In the case of assets not listed on active markets, such as the company’s direct investments in companies and its investments in venture capital funds, the fair value reported in the financial statements is determined by the directors based on their best estimate and judgment, using the knowledge and evidence available when the financial statements are prepared. In these cases, the company acts in accordance with the provisions of the IAS. In particular, IAS 39 specifies that: • if there are recent transactions related to the same financial instrument, these may be used to determine fair value after verifying that there have been no significant changes in the economic environment between the date of the transactions being considered and the valuation date • if there are transactions involving similar financial instruments, these may be used to determine fair value after verifying the similarity (as a function of the type of business, size, geographic market, etc.) between the instrument for which transactions have been found and the instrument to be valued • if no prices can be found in active markets, fair value must be determined using valuation models that account for all factors that market participants would consider in setting a price However, due to objective difficulties in making assessments and the lack of a liquid market, the values assigned to such assets could differ, and in some cases significantly, from those that could be obtained when the assets are sold. Direct investments in companies that are neither subsidiaries nor associates and in venture capital funds are classified as available-for-sale financial assets, which are initially reported at fair value on the date of the original posting. These assets are measured at fair value when all interim and full-year financial statements are prepared. Gains and losses from fair value measurement are posted to a special shareholders' equity reserve called the "fair value reserve" until the investment is sold or otherwise disposed of, or until impairment occurs, in which cases the gain or loss previously recorded in the fair value reserve is posted to the income statement for the period. At each reporting date, a test is performed as to the existence of objective evidence of impairment following one or more events that have occurred after the initial recording of the asset, and that this event (or events) has an impact on the estimated cash flow from the financial asset. For equity instruments, a significant or prolonged reduction in fair value below their cost is considered to be objective evidence of impairment. Although International Accounting Standards introduced important reference to quantitative parameters that must be adhered to, they do not govern quantitative limits to determine when a loss is significant or prolonged. DeA Capital S.p.A. has adopted an accounting policy that defines these parameters. In particular, "significant" means there has been an objective reduction in value when fair value is more than 35% below its historical cost. In this case, impairment is recorded in the income statement without further analysis. The duration of the reduction in value is deemed to be prolonged when the reduction of fair value below historical cost continues for a period of over 24 months. After exceeding 24 months, impairment is recorded in the income statement without further analysis.
    • Financial Statements for the Year Ending 31 December 2010 164 Derivative instruments Derivatives contracts are recorded in the statement of financial position at fair value. Fair value changes are reported differently depending on their designation (hedging or speculative) and the nature of the risk hedged (fair value hedge or cash flow hedge). For contracts designated for hedging purposes, the company documents this relationship when the hedge is established. The documentation incorporates the identification of the hedging instrument, the item or transaction hedged, the nature of the risk hedged, the criteria used to ascertain the effectiveness of the hedging instrument as well as the risk. The hedge is considered effective when the projected change in fair value or in the cash flows of the hedged instrument is offset by the change in fair value or in the cash flows of the hedging instrument, and the net results fall within the range of 80% to 125%. If the instruments are not, or cannot be, designated as hedging instruments, they must be considered "speculative"; in this case, fair value changes are posted directly to the income statement. In the case of fair value hedges, changes in the fair value of the hedging instrument and the hedged instrument are posted to the income statement regardless of the valuation criterion used for the hedged instrument. In the case of cash flow hedges, the portion of the fair value change in the hedging instrument that is recognised as an effective hedge is posted to shareholders' equity, while the portion that is not effective is posted to the income statement. Receivables and payables A receivable is first reported at fair value on the date it is agreed. After initial reporting, receivables are valued at amortised cost. Payables that fall due within normal contractual terms are initially posted at fair value and later valued at amortised cost. Held-for-sale assets A non-current asset or disposal group is classified as held for sale if the carrying value will mainly be recovered from its sale or disposal instead of its ongoing use. In order for this to occur, the asset or disposal group must be available for immediate sale in its current condition, and the sale must be highly likely. Assets meeting the criteria to be classified as held-for-sale assets are valued at the lower of carrying value and sales value adjusted for any related costs. Own shares Own shares are not considered financial assets of the company that issued the shares. The purchase and sales value of own shares is recorded as a change to shareholders' equity. No gain or loss is reported in the income statement for the sale, purchase, issue or cancellation of own shares. Fair value reserve The fair value reserve incorporates fair value changes to entries measured at fair value with a balancing entry in shareholders' equity. Cash and cash equivalents Cash and cash equivalents include cash at hand, demand deposits and short-term, highly liquid financial investments that are readily convertible to cash and subject to a negligible risk of price variation. Their value is reported at fair value.
    • Financial Statements for the Year Ending 31 December 2010 165 Provisions for risks and future liabilities If necessary, the company records provisions for risks and future provisions when: • it has a legal or implicit obligation to third parties resulting from a past event • it is likely that it will be necessary to use company resources to fulfil the obligation • a reliable estimate can be made of the amount of the obligation Provisions are recorded based on the projected value discounted as necessary when the time value is considerable. Changes in estimates are recognised in the income statement of the period in which the change occurs. Income tax Current income taxes are determined and reported on the basis of a reasonable forecast of tax liability by applying the tax rates in force to taxable income, taking into account any exemptions and tax credits to which the company may be entitled. Deferred tax liabilities are allocated for all temporary differences between the carrying value of the assets and liabilities and the corresponding amount for tax purposes. Deferred tax assets are recorded for all deductible temporary differences and for tax assets and liabilities carried forward to the extent that it is likely there will be sufficient future taxable profit against which the deductible temporary differences and the tax assets and liabilities carried forward can be used. Deferred taxes are classified under non-current assets and liabilities and are determined using tax rates expected to be applicable in the years when the temporary differences will be realised or will expire. The carrying values of deferred tax assets are analysed periodically and reduced if it is not likely that sufficient taxable income will be generated against which the benefits resulting from such deferred assets can be used. Revenues and income Service revenues are recognised at the time the services are rendered based on the progress of the activity on the reporting date. Income from equity investments for dividends or for their full or partial sale is reported when the right to receive payment is determined, with a balancing item (receivable) at the time of the sale or decision to distribute dividends by the entity or appropriate body. Interest is reported using the effective interest rate method. Employee benefits Short-term employee benefits, whether in cash or in kind (meal vouchers) are reported in the income statement in the period when the work is performed. Employee benefits related to participation in a defined benefit plan are determined by an independent actuary using the projected unit credit method. Actuarial gains and losses are posted to the income statement in the period in which they occur using the corridor method to record the gains or losses unless these exceed a certain percentage of the obligation.
    • Financial Statements for the Year Ending 31 December 2010 166 Employee benefits in respect of participation in a defined contribution plan only relate to those plans under mandatory government administration. The payment of contributions fulfils the company's obligation to its employees. Thus, contributions are costs in the period in which they are payable. Benefits have been provided in the form of stock options and share-based payments. This applies to all employees eligible for stock option plans. The cost of these transactions is determined with reference to the fair value of the options on the date allocation is made and is reported over the period from such date until the expiry date with a balancing entry in shareholders' equity. The cost of stock options for the company's directors and contributors is determined in the same way. Warrants Warrants issued by the company, which do not meet the requirements either for being classified as share-based payments to employees pursuant to IFRS 2 or as financial liabilities, are treated as company equity instruments. Earnings per share In accordance with IAS 33, basic earnings per share is determined as the ratio of net profit for the period attributable to holders of parent company shares to the weighted average number of shares outstanding during the period. Own shares in the portfolio are, of course, not included in this calculation. Diluted earnings per share is calculated by adjusting the weighted average number of shares outstanding for all potential ordinary shares resulting from the potential exercise of assigned stock options, which may therefore result in a diluting effect. C. Changes in accounting principles and the treatment of errors Accounting principles are changed from one year to another only if the change is dictated by an accounting standard or if it contributes to providing more reliable information or more complete reporting of the impact of transactions on the company's statement of financial position, income statement and cash flow. Changes in accounting principles are applied retroactively with the impact reflected in shareholders' equity in the first of the periods presented. Comparative reporting is adapted accordingly. The prospective approach is used only when it is not practical to restate comparative reporting. The application of a new or amended accounting standard is recorded as required by the standard itself. If the standard does not specify transition methods, the change is reflected retroactively, or if impractical, prospectively. If there are significant errors, the same treatment dictated for changes in accounting principles is used. If there are minor errors, corrections are posted to the income statement in the period when the error is discovered. D. Use of estimates and assumptions in preparing the financial statements The company's management must make assessments, estimates and assumptions that affect the application of accounting principles and the amounts of assets, liabilities, costs and revenues recorded in the financial statements. Estimates and related assumptions are based on past experience and other factors deemed reasonable in the case concerned; these have
    • Financial Statements for the Year Ending 31 December 2010 167 been used to estimate the carrying value of assets and liabilities that cannot be easily obtained from other sources. These estimates and assumptions are reviewed regularly. Any changes resulting from revisions to accounting estimates are recorded in the period when the revision is made if such revisions only affect that period. If the revision affects current and future periods, the change is recorded in the period in which the revision is made and in related future periods. Financial statement balances are reported and valued using the valuation criteria described above. At times the application of these criteria involves the use of estimates that may have a significant impact on amounts reported in the financial statements. Estimates and related assumptions are based on past experience and factors deemed reasonable in the case concerned; these are used to estimate the carrying value of assets and liabilities that cannot be easily obtained from other sources. However, since these are estimates, the results obtained should not necessarily be considered definitive. With the understanding that the use of reasonable estimates is an essential part of preparing financial statements, the items where the use of estimates is most prevalent are stated below: • valuation of financial assets not listed in active markets • valuation of financial assets listed in active markets but considered illiquid on the reference market • valuation of equity investments The process described above is made particularly complicated by the unusual levels of volatility in the current macroeconomic and market environment, which affect financial indicators that have a bearing on the above valuations. An estimate may be adjusted as a result of changes in the circumstances on which it was based, or as a result of new information. Any change in the estimate is applied prospectively and has an impact on the income statement in the period in which the change occurred and potentially on income statements in future periods. As highlighted earlier, a significant proportion of the assets shown in the annual financial statements of DeA Capital S.p.A. is represented by unlisted financial investments. These investments are valued at their fair value, calculated by directors based on their best estimate and judgement using the knowledge and evidence available at the time the financial statements are prepared. However, due to objective difficulties in making assessments and the lack of a liquid market, the values assigned to such assets could differ, and in some cases significantly, from those that could be obtained when the assets are sold.
    • Financial Statements for the Year Ending 31 December 2010 168 D. Notes to the statement of financial position and income statement NON-CURRENT ASSETS 1 – Intangible and tangible assets 1a – Intangible assets Changes in intangible assets are shown in the tables below: (Euro thousand) Historic cost at Jan. 1, 2010 Cum. amort. & prov. charges at Jan. 1, 2010 Net book value at Jan. 1, 2010 Historic cost at Dec. 31, 2010 Cum. amort. & prov. charges at Dec. 31, 2010 Net book value at Dec. 31, 2010 Concessions, licence fees & trademarks 285 (245) 40 292 (286) 6 Total 285 (245) 40 292 (286) 6 (Euro thousand) Balance at Jan.1, 2010 Additions Amortization Balance at Dec.31, 2010 Concessions, licence fees & trademarks 40 7 (41) 6 Total 40 7 (41) 6 The increase in "Concessions, licences and trademarks" relates to the acquisition of new software licences, the cost of which will be amortised over three years. 1b – Tangible assets Changes in tangible assets are shown in the tables below: (Euro thousand) Historic cost at Jan. 1, 2010 Cum. amort. & prov. charges at Jan. 1, 2010 Net book value at Jan. 1, 2010 Historic cost at Dec. 31, 2010 Cum. amort. & prov. charges at Dec. 31, 2010 Net book value at Dec. 31, 2010 Plant 200 (178) 22 213 (202) 11 Furniture and fixtures 468 (327) 141 470 (388) 82 Computer and office equipment 214 (196) 18 258 (220) 38 Non-depreciable tangible assets 28 0 28 28 0 28 Total 910 (701) 209 969 (810) 159 (Euro thousand) Balance at Jan.1, 2010 Additions Disposals (at cost) Disposals (provision) Amortization Balance at Dec.31, 2010 Plant 22 15 (2) 2 (26) 11 Furniture and fixtures 141 2 0 0 (61) 82 Computer and office equipment 18 46 (2) 2 (26) 38 Non-depreciable tangible assets 28 0 0 0 0 28 Total 209 63 (4) 4 (113) 159 Depreciation is calculated on a straight-line basis, based on the estimated useful life of the asset. The depreciation rates used in the financial statements are 20% for specific plant assets, 12% for furniture and furnishings, and 20% for electronic office equipment.
    • Financial Statements for the Year Ending 31 December 2010 169 2 – Financial investments 2a – Investments in subsidiaries and joint ventures Investments in subsidiaries are measured at fair value in accordance with the provisions of IAS 39, whereas investments in joint ventures are valued at cost. For the method of determining fair value, please refer to the relevant paragraphs in the section "Key accounting principles and valuation criteria adopted". Details of the existing investments at 31 December 2010 are shown in the table below: (Euro thousand) % shareholding at Dec. 31,2010 Value at Dec. 31, 2010 % shareholding at Dec. 31,2009 Value at Dec. 31, 2009 FARE Holding S.p.A. 70.00% 62,917 70.00% 67,280 IDeA Alternative Investments S.p.A. 44.36% 56,490 44.36% 56,490 DeA Capital Investments S.A. 100.00% 645,792 100.00% 676,743 Totale 765,199 800,513 Changes since 31 December 2009 are as follows: - The value of the stake in FARE Holding was adjusted by EUR 1,424 thousand, mainly as a result of: • the reduction of EUR 1,822 thousand in the part of the price consisting of an earn-out payment tied to the expected performance of the funds managed over the next few years • the increase of EUR 400 thousand resulting from the reclassification of the receivable for the payment of the Atlantic 2 closed-end units to the seller of FARE Holding at the end of December 2008 - The fair value measurement of the subsidiaries resulted in an increase in the fair value reserve of EUR 26,945 thousand for DeA Capital Investments S.A. and a decrease of EUR 2,939 thousand for FARE Holding S.p.A. The investments and the information required under art. 2427 of the Italian Civil Code are shown in the table below: LIST OF INVESTMENTS IN SUBSIDIARIES AND JOINT VENTURE AS DEC. 31, 2010 First Atlantic Real Estate Holding S.p.A. Milan, Italy Euro 600,000 25,738,212 8,943,902 70.00% 18,016,748 62,917,570 IDeA Alternative Investments S.p.A. Milan, Italy Euro 5,000,000 87,493,237 1,813,710 44.36% 38,812,000 56,490,048 DeA Capital Investments S.A. Luxembourg, Luxembourg Euro 515,992,516 645,791,751 (21,798,116) 100.00% 645,791,751 645,791,751 Totale (11,040,504) 702,620,499 765,199,369 Company Registered Office Curren cy Share Capital Book Value (€uro) Total Net Equity Net profit/(loss) for the year % holding Value of share of net equity (€uro) 2b – Investments in other companies Investments in other companies consist of direct minority investments in three external companies. These investments already existed in the previous year. Changes that took place during the course of 2009 are shown in the table below:
    • Financial Statements for the Year Ending 31 December 2010 170 (Euro thousand) Total shares % holding (Fully Diluted) Balance at Jan.1, 2010 Share capital increase Fair value adjustment Impairment recorded in Income Statement Translation adjustmen t Balance at Dec. 31, 2010 Elixir Pharmaceuticals Inc. 1,602,603 1.30 47 0 (51) 0 4 0 Kovio Inc. 151,909 0.42 51 0 64 0 (1) 114 Mobile Access Networks Inc. 1,962,402 1.20 469 0 812 0 36 1,317 Total 567 0 825 0 39 1,431 The total value of other investments was EUR 1,431 thousand, a rise of EUR 864 thousand compared with 31 December 2009, due in particular to the increase in fair value of EUR 39 thousand attributable to movements in the USD/EUR exchange rate and the increase in fair value of EUR 812 thousand on Mobile Access Networks. 2c – Venture capital funds This item relates to investments in seven venture capital funds totalling EUR 12,977 thousand compared with EUR 13,542 thousand at the end of 2009, as shown in the table below. (Euro thousand) Balance at Jan. 1, 2010 Increase (capital call) Decrease (Capital Distribution) Impairment Fair Value Adjustment Translation adjustment Balance at Dec. 31, 2010 Venture Capital funds 13,542 698 (360) (252) (1,407) 756 12,977 Total Funds 13,542 698 (360) (252) (1,407) 756 12,977 The overall decrease in the investments is mainly attributable to a decrease in fair value (and related exchange rate effects) of EUR 651 thousand, the impairment (and related exchange rate effects) of certain funds, of around EUR 252 thousand, and capital calls paid totalling EUR 698 thousand. The fair value measurement of investments in venture capital funds at 31 December 2010, carried out based on the information and documents received from the funds, as well as other available information, meant that the amount had to be written down by EUR 252 thousand; the significant reduction to below cost was considered clear evidence of impairment, especially in view of the short time to maturity. During the year, the company received capital distributions of EUR 360 thousand, which had a positive impact on the income statement of EUR 554 thousand. 3 – Other non-current assets 3a – Deferred tax assets The deferred tax assets of EUR 821 thousand were fully offset against deferred tax liabilities. The changes in deferred tax assets and deferred tax liabilities are shown in the table below: (Euro thousand) At December 31, 2009 Taken to the income statement Taken to equity At December 31, 2010 Total prepaid tax assets 0 0 0 0 Prepaid tax assets from: - securities available-for-sale (584) 0 (237) (821) Total deferred tax liabilities (584) 0 (237) (821) Losses carried forward available for offset against future taxable profits 584 237 0 821 Total prepaid tax assets, net of deferred tax liabilities 0 237 (237) 0
    • Financial Statements for the Year Ending 31 December 2010 171 No deferred tax assets were allocated against the significant tax losses of DeA Capital S.p.A. (around EUR 108,074 thousand to be reported without limitation). This was because there was insufficient evidence to indicate that in future periods it would be possible to generate sufficient taxable income against which such tax losses could be recovered. Deferred taxes were calculated using the liability method based on the temporary differences at the reporting date between the tax amounts used as a reference for the assets and liabilities and the amounts reported in the financial statements. 4 – Current assets At 31 December 2010, current assets were approximately EUR 75,998 thousand, compared with EUR 80,104 thousand at 31 December 2009. 4a – Trade receivables Trade receivables came in at EUR 151 thousand (EUR 203 thousand at 31 December 2009), comprising: - EUR 35 thousand from De Agostini S.p.A. for the agreement to sublet rented premises and the reimbursement of costs associated with said agreement - EUR 116 thousand from Santé S.A. for remuneration due as part of the subsidiary’s "director fee" agreement A breakdown of these receivables by region is set out below: - 77.06% from Luxembourg subsidiaries - 22.94% from Italian parent companies 4b – Available-for-sale financial assets At 31 December 2010, this item totalled EUR 15,038 thousand, which relates to 2,933,044.992 units in the Soprarno Pronti Termine fund with an average subscription price of EUR 5.149. The market price of the units at 30 December 2010, the last day in the year that the markets were open, was EUR 5.127, giving a total value of EUR 15,038 thousand. This is to be regarded as a temporary investment of excess cash. 4c – Financial receivables from the pass-through arrangement This item, of EUR 635 thousand, relates to the receivable for the payment of the Atlantic 1 and Atlantic 2 closed-end units to the vendor of FARE Holding during 2010. These receivables fall due within the next year. 4d – Tax receivables from parent companies relating to the tax consolidation scheme These receivables totalling EUR 4,065 thousand (EUR 3,199 thousand at 31 December 2009) refer to the receivable from the parent company B&D Holding di Marco Drago e C. S.a.p.A. for participation in the tax consolidation scheme. 4e – Other tax receivables Tax receivables were EUR 1,759 thousand (EUR 1,824 thousand at 31 December 2009) and relate to: - advance payments on IRAP of EUR 442 thousand - tax deductions in the form of advance payments on interest of EUR 186 thousand
    • Financial Statements for the Year Ending 31 December 2010 172 - IRES credits to be reported resulting from the tax return for the previous year of EUR 670 thousand - receivable of EUR 461 thousand due to the change in the percentage against which VAT may be offset from 100% to 92% 4f – Other receivables These receivables totalling EUR 116 thousand (EUR 36 thousand at 31 December 2009) relate mainly to receivables for guarantee deposits, advances to suppliers and prepaid expenses. These receivables fall due within the next year. 4g – Cash and cash equivalents This item consists of bank deposits and cash (EUR 4 thousand), including interest accrued at 31 December 2010. At the end of 2010, this came in at EUR 54,234 thousand, compared with the figure of EUR 58,560 thousand recorded at the end of 2009. This increase is primarily due to the combined effect of the following factors: - dividends of EUR 2,662 thousand received from IDeA Alternative Investments S.p.A., dividends of EUR 6,720 thousand received from FARE Holding S.p.A. and dividends of EUR 20,800 thousand received from DeA Capital Investments S.A. - capital calls paid to venture capital funds totalling EUR 698 thousand - payment of EUR 3,570 thousand for the second tranche of the deferred portion of the price and the release of EUR 667 thousand from the escrow account as part of the FARE deal - interest, commission and bank fees of EUR 3,653 in relation to the credit facilities taken out with Mediobanca - service expenses of EUR 5,641 thousand - share buyback plan for DeA Capital S.p.A. totalling EUR 1,093 thousand - repayment of EUR 20,000 thousand from the credit line granted by Mediobanca and payment of interest of EUR 2,095 thousand Please see the company’s cash flow statement for further information on changes to this item. Cash deposited at banks accrues interest at floating rates, based on the prevailing overnight, 1-2-week and 1-3-month interest rates. Sensitivity analysis performed at market interest rate level (instant hypothetical variation of +/- 2%), applicable to cash and cash equivalents at 31 December 2010, shows an effect of EUR +/- 1,085 thousand on pre-tax profit and on shareholders’ equity. 5 – Shareholders' equity At 31 December 2010, shareholders’ equity totalled approximately EUR 759,070 thousand, compared with EUR 773,909 thousand at 31 December 2009. In 2010, shareholders’ equity fell by around EUR 14,839 thousand, due mainly to: − a decrease of EUR 29,150 thousand in the fair value reserve − the outlay for the share buyback plan for DeA Capital S.p.A. of EUR 1,093 thousand − the reversal to the stock option reserve of EUR 1,379 thousand − provisions relating to employee stock option plans of EUR 564 thousand − the profit of EUR 15,989 thousand for the period Please see the statement of changes in shareholders’ equity for more information on the main changes in this item.
    • Financial Statements for the Year Ending 31 December 2010 173 5a – Share capital The share capital (fully subscribed and paid up) totalled EUR 306,612,100, represented by 306,612,100 shares (of which 12,598,698 own shares) with a nominal value of EUR 1 each. Given that the nominal value of the 12,598,698 own shares held at 31 December 2010 is deducted from total share capital, share capital of EUR 294,013,402 was reported in the financial statements. Changes in share capital are shown in the table below: (Euro thousand) no. of shares amount no. of shares amount Share Capital 306,612,100 306,612 306,612,100 306,612 of which: Treasury shares (12,598,698) (12,599) (17,591,212) (17,591) Share Capital (excluding treasury shares) 294,013,402 294,013 289,020,888 289,021 Dec. 31, 2010 Dec. 31, 2009 The table below shows a reconciliation of the shares outstanding: Shares issued Treasury shares held Shares outstanding December 31, 2009 306,612,100 (17,591,212) 289,020,888 2010 movements Share capital increase Treasury shares purchased (944,343) (944,343) Treasury shares sold Treasury shares disposed for FARE acquisition 5,936,857 5,936,857 Used for stock option plan Shares issued through exercise of stock options December 31, 2010 306,612,100 (12,598,698) 294,013,402 5b – Share premium reserve (net of the reserve for share issue costs) This item decreased by EUR 267 thousand (from EUR 395,880 thousand at 31 December 2009 to EUR 395,613 thousand at 31 December 2010) following the posting to this reserve of: - the allocation of part of the loss for the previous year, totalling EUR 1,798 thousand - the purchase of own shares in the amount of EUR 149 thousand - the transfer of own shares worth EUR 1,680 thousand as part of the FARE deal 5c – Legal reserve At 31 December 2010, this reserve totalled EUR 61,322 thousand, which was unchanged from the figure at the end of 2009. 5d – Fair value reserve The fair value reserve is negative to the tune of EUR 8,595 thousand (compared with a positive balance of EUR 20,556 thousand at the start of the year) and comprises:
    • Financial Statements for the Year Ending 31 December 2010 174 - the reserve for first-time adoption of IAS/IFRS, which has a negative balance of EUR 337 thousand (unchanged from 31 December 2009) - the negative fair value reserve, which has a negative balance of EUR 8,258 thousand compared with a positive balance of EUR 20,893 thousand at 31 December 2009. The table below shows a summary of the changes in this item during the year: (Euro thousand) Balance at Jan. 1, 2010 Impairment Change in Fair Value Tax effect Balance at Dec. 31, 2010 Direct Investments / Shareholdings 20,896 50 (29,019) 371 (7,702) Venture Capital Funds (20) 805 (651) (608) (474) Available-for-sale financial assets 17 0 (99) 0 (82) Fair value reserves IFRS transition and other reserves (337) 0 0 0 (337) Total 20,556 855 (29,769) (237) (8,595) 5e – Other reserves This item consists of: - a reserve for stock option costs totalling EUR 313 thousand - a reserve for the sale of option rights, unchanged from last year, totalling EUR 413 thousand. This originated from the sale of the remaining option rights to subscribe to a capital increase that had not been exercised by the shareholders, which were sold by the company The reserve for shares to be delivered totalling EUR 7,386 thousand, which arose from the contractual obligation to transfer the second tranche of DeA Capital shares as part of the acquisition of FARE Holding, has been eliminated following the settlement of the remaining price component, due within 24 months of the date the acquisition was completed. 5f – Retained earnings (losses) carried forward The balance of this item is zero, following the decision to cover the loss for 2009. 5g – Profit (loss) for the year In 2010, the company made a profit of EUR 15,989 thousand, compared with a loss of EUR 1,798 thousand in 2009, mainly as a result of the receipt of dividends from IDeA Alternative Investments S.p.A. (EUR 2,662 thousand), FARE Holding S.p.A. (EUR 6,720 thousand) and DeA Capital Investments S.A. (EUR 20,800 thousand), which were offset by net financial charges of EUR 4,868 thousand, structural costs of EUR 6,307 thousand and impairment losses of EUR 5,187 thousand. Art. 2427, para. 1 no. 7-bis) of the Italian Civil Code: details of shareholders' equity items The table below shows a breakdown of the shareholders’ equity items at 31 December 2010, with details of their origin, how they can be used and paid out, and use in previous years:
    • Financial Statements for the Year Ending 31 December 2010 175 Description (Euro) Possible use Share available per altre ragioni Share capital = = Share capital reserves Treasury shares holding reserve A,B,C, = = 51,300,000 Share premium A,B,C, 403,441,437 4,506,397 28,946,835 Profit reserves: Legal reserve B = = Reserve for the cost of share issue = = = = Stock option reserve = = = = Reserve for the sale of rights = = = = Reserve for shares to be transferred = = = = Fair value reserve = = = = Profit/(loss) brought forward A,B,C, = Net loss for the year = = = = TOTAL 403,441,437 11,946,945 294,013,402 313,509 0 -7,828,172 =61,322,420 0 per copertura perdite Summary of use in previous yearsAmount 76,808,340 15,989,158 Key: A capital increase, B to cover losses, C for distribution to shareholders 759,070,235 403,441,437 0 -8,594,317 412,798 6 – Non-current liabilities 6a – End-of-service payment fund The end-of-service payment fund is a defined benefit plan, and has therefore been valued using actuarial assessments. The assumptions used in calculating the fund were: a discount rate of 4.60%; an annual rate of inflation of 2.0%; annual salary growth of 3.0%; and an annual rate of increase for the fund of 3.0%. Changes in the end-of-service payment fund were as follows: (Euro thousand) Balance at Jan 1., 2010 Portion matured Payments Advances Balance at Dec. 31, 2010 Movement in provision 132 80 (19) 0 193 The amounts recognised in shareholders’ equity were calculated as follows: (Euro thousand) Dec. 31, 2010 Dec. 31, 2009 Nominal value of provision 237 159 Discounting effect (44) (27) Total provision 193 132 6b – Financial liabilities This item, totalling EUR 90,621 thousand, relates to: - the remaining payable for the deferred purchase price ("deferred portion", which matures each year until 12 December 2013) of EUR 6,900 thousand plus interest (variable 6-month Euribor rate) accrued from the closing date (12 December 2008) to 31 December 2010, equal to EUR 244 thousand - the earn-out payment (maturing in 2014) of EUR 2,029 thousand, inclusive of interest calculated at present value accrued from the closing date (12 December 2008) to 31 December 2010, equal to EUR 4 thousand. This earn-out, which DeA Capital intends to pay to the seller, is worth EUR 2,237 thousand, equal to 50% of the portion of any performance fees accrued on the funds managed by FARE
    • Financial Statements for the Year Ending 31 December 2010 176 - an amount of EUR 80,000 thousand for the use of the credit line provided by Mediobanca for the same amount (maturing on 16 December 2015 and subject to a variable rate of 3-month Euribor + spread. On 31 December 2010, the covenant tests for this credit line were successfully passed (i.e. debt and debt to equity) - the liability of EUR 1,448 thousand due to the decrease in the fair value of the interest rate swap contracts to partially hedge interest rate risk on the debt exposure with Mediobanca (maturing on 30 July 2013) Sensitivity analysis performed at market interest rate level (instant hypothetical variation of +/- 2%), applicable to cash and cash equivalents at 31 December 2010, shows an effect of EUR +/- 807 thousand on pre-tax profit and on shareholders’ equity. 7 – Current liabilities Total current liabilities amounted to EUR 5,886 thousand (EUR 6,057 thousand at 31 December 2009) and are all due within the following year. These payables are not secured on any company assets. These liabilities comprise: 7a – Trade payables This item totalled EUR 986 thousand, compared with EUR 983 thousand in 2009, and result from ordinary operations. With regard to transactions with related parties, this item includes: - payables to the parent company, De Agostini S.p.A., of EUR 34 thousand - payables to affiliate De Agostini Editore S.p.A. of approximately EUR 10 thousand - payables to affiliate Lottomatica Group S.p.A. of approximately EUR 39 thousand - payables to affiliate La Talpa S.r.l. of approximately EUR 1 thousand - payables to affiliate Istituto Geografico De Agostini S.p.A. of approximately EUR 1 thousand A breakdown of these payables by region is set out below: - 90.59% due to suppliers in Italy - 3.40% due to suppliers in respect of parent companies in Italy - 5.11% due to suppliers in respect of affiliates in Italy - 0.76% due to suppliers in the UK - 0.14% due to suppliers in Switzerland Trade payables do not accrue interest and are settled, on average, within 30 to 60 days. 7b – Payables in respect of staff and social security organisations This item amounted to EUR 1,007 thousand (EUR 196 thousand at 31 December 2009) and breaks down as follows: - EUR 311 thousand for payables to social security organisations, paid after the close of the financial year 2010 - EUR 696 thousand for payables to staff for holidays not taken and accrued bonuses 7c – Other tax payables This item amounted to EUR 176 thousand (EUR 177 thousand at 31 December 2009) and consists of payables to the tax authorities in respect of taxes deducted from the income of employees and self-employed staff.
    • Financial Statements for the Year Ending 31 December 2010 177 7d – Other payables This item, totalling EUR 32 thousand (EUR 65 thousand at 31 December 2009), includes payables to credit card companies (EUR 4 thousand), payables for the settlement of directors' emoluments (EUR 16 thousand) and payables for accrued expenses based on the fees for the Mediobanca revolving credit line (EUR 12 thousand). 7e – Short-term financial payables These financial payables totalling EUR 3,680 thousand (EUR 4,636 thousand at 31 December 2009) are mostly attributable to the acquisition of the FARE Group. They consist of: - the short-term portion of the deferred purchase price ("deferred price") of EUR 3,450 thousand - interest accrued from the closing date (12 December 2008) to 31 December 2010, totalling EUR 122 thousand - an accrued expense in respect of interest on the line of credit provided by Mediobanca totalling EUR 108 thousand
    • Financial Statements for the Year Ending 31 December 2010 178 Notes to the income statement 8 – Revenues and income 8a – Investment income and expenses The net income realised on investments in 2010 totalled EUR 24,695 thousand (EUR 7,599 thousand in 2009). Details of this item are shown below: (Euro thousand) Year 2010 Year 2009 Dividends from subsidiaries and joint ventures 29,329 9,340 Gains from venture capital fund distributions 554 127 Gains from investments 29,883 9,467 Impairment Dea Capital Investments S.A. 4,006 0 Impairment Elixir 51 0 Impairment Kovio 0 1,186 Impairment Venture capital funds 1,131 682 Charges from investments 5,188 1,868 Total 24,695 7,599 Dividends from subsidiaries and joint ventures This item comprises dividends received from IDeA Alternative Investments S.p.A. (EUR 2,662 thousand), the FARE Group (EUR 5,867 thousand) and DeA Capital Investments S.A. (EUR 20,800 thousand). Gains from available-for-sale funds Income from payouts from venture capital funds totalled EUR 554 thousand (EUR 127 thousand in 2009). Impairment of investments in other available-for-sale companies and funds The fair value measurement of investments in venture capital funds and minority shareholdings at 31 December 2010, carried out based on the documents received and the information available, made it necessary to record impairment of EUR 1,131 thousand in respect of the venture capital funds, EUR 51 thousand for US investee company Elixir Pharmaceuticals Inc. and EUR 4,006 thousand for investee company DeA Capital Investments S.A. In relation to the subsidiary DeA Capital Investments S.A., the venture capital funds and the minority interest in Elixir Pharmaceuticals Inc., the significant reduction below cost was considered clear evidence of impairment. 8b – Service revenues Income of EUR 517 thousand was reported in 2010 (EUR 315 thousand in 2009), consisting of: - EUR 282 thousand for the provision of consultancy services, the secondment of a director and intercompany reimbursement from IDeA Alternative Investments S.p.A. - EUR 141 thousand from the reimbursement of costs for subletting offices to De Agostini S.p.A. - EUR 3 thousand from Soprarno SGR S.p.A. - EUR 91 thousand from the FARE Group
    • Financial Statements for the Year Ending 31 December 2010 179 8c – Other revenues and income Other revenues and income, totalling EUR 122 thousand (compared with EUR 182 thousand in 2009), related mainly to directors' fees from Santé S.A. of EUR 116 thousand. 9 – Operating costs 9a – Personnel costs Personnel costs were EUR 3,269 thousand, compared with EUR 3,371 thousand in 2009. The effect of the cost arising from the stock option plans for 2010, of EUR 564 thousand (EUR 461 thousand in 2009), was more than offset by the reversal of the cost allocated to the "Stock Options 2007-13" reserve of EUR 1,379 thousand. In the third quarter of 2010, as the exercise condition for the Adjusted NAV was not met at 30 June 2010, the company recycled the total cost accrued since the start of the stock options plan for 2007-13 (date of definition of the beneficiaries) to the income statement. The item breaks down as follows: (Euro thousand) Year 2010 Year 2009 Salaries and wages 2,470 1,913 Social charges on wages 912 606 Board of directors' fees 332 258 Costo figurativo stock options 564 461 Stock options reversal (1,379) 0 Employee severance indemnity 120 111 Other personnel costs 250 22 Total 3,269 3,371 The parent company has 15 employees (14 at 31 December 2009). The table below shows changes and the average number of group employees during 2010. Position Jan.1, 2010 Recruits Internal movements Departures Dec.31, 2010 Average Senior Managers 5 2 1 (1) 7 7 Junior Managers 6 0 (1) (2) 3 5 Staff 3 2 0 0 5 4 Total 14 4 0 (3) 15 16 Share-based payments Employees of DeA Capital S.p.A. are beneficiaries of stock option plans based on the shares of DeA Capital S.p.A. Unexercised but valid call options on the company’s shares at 31 December 2010 totalled 2,298,200 (1,348,200 at 31 December 2009). Stock option plans were valued using the numerical binomial tree procedure (the original Cox, Ross and Rubinstein method). Numerical analysis using binomial trees generates simulations of various possible developments in the share price in future periods.
    • Financial Statements for the Year Ending 31 December 2010 180 On 26 April 2010, the Board of Directors authorised a paid capital increase, in separate issues, of a maximum of EUR 3,000,000 via the issue of a maximum of 3,000,000 shares with a nominal value of EUR 1 each at a price of EUR 1.318 per share. The increase is reserved for beneficiaries of the 2010-2015 stock option plan approved by the shareholders' meeting held on 26 April 2010. 9b – Service costs The table below shows a breakdown of service costs, which came in at EUR 3,039 thousand (EUR 3,413 thousand in 2009): (Euro thousand) Year 2010 Year 2009 Admin. Consulting, Tax and Legal and other 1,601 1,863 Remuneration of internal committees 270 389 Maintenance 119 116 Travel expenses 135 110 Utilities and general expenses 680 706 Bank charges 5 6 Books, stationery and conventions 201 189 Other expenses 28 34 Total 3,039 3,413 9c – Depreciation and amortisation Please see the table on changes in intangible and tangible assets for details on this item. 9d – Other costs This item was EUR 10 thousand (EUR 16 thousand in 2009) and mainly included regional taxes and other taxes. 10 – Financial income and charges 10a – Financial income Financial income totalled EUR 1,384 thousand (EUR 1,623 thousand in 2009) and included interest received of EUR 691 thousand, income of EUR 156 thousand from financial instruments at fair value with changes recognised through profit or loss, and exchange rate gains of EUR 537 thousand. Specifically, interest income consisted of interest earned on current accounts. (Euro thousand) Year 2010 Year 2009 Interest income 691 731 Income from financial instruments valued at fair value through profit and loss 156 0 Foreign exchange gains 537 892 Total 1,384 1,623
    • Financial Statements for the Year Ending 31 December 2010 181 10b – Financial charges Financial charges totalled EUR 6,252 thousand in 2010, compared with EUR 6,088 thousand in 2009. These mainly included interest payable on loans and losses on hedging derivatives and exchange rates. Specifically, financial charges break down as follows: - charges relating to derivatives used to hedge the EUR/USD – EUR/GBP exchange rate risk of EUR 949 thousand - premiums on currency options to hedge the EUR/TRY exchange rate risk of EUR 92 thousand - charges relating to interest rate swaps of EUR 680 thousand - realised exchange rate losses on financial instruments of EUR 65 thousand - exchange rate losses of EUR 2 thousand - realised exchange rate losses on financial instruments of EUR 461 thousand - interest payable for the acquisition of the FARE Group accrued during 2010 totalling EUR 146 thousand - interest payable on the Mediobanca credit line of EUR 3,000 thousand and fees of EUR 857 thousand (Euro thousand) Year 2010 Year 2009 Interest expenses 4,003 3,701 Expenses from financial instruments valued at fair value through profit and loss 65 614 Derivative expenses 1,721 1,694 Foreign exchange losses 463 79 Total 6,252 6,088 11 - Tax 11a – Income tax for the period At 31 December 2010, no IRAP taxes were recorded because of the negative tax base. Current tax income, amounting to EUR 1,759 thousand relates to DeA Capital S.p.A.’s decision to join (on 13 June 2008) the national tax consolidation scheme of the B&D Group (the group headed by B&D Holding di Marco Drago e C. S.a.p.a.). 11b – Deferred tax assets and liabilities This item came in at EUR 237 thousand and consists entirely of provisions for deferred tax assets during the year. The table below shows a reconciliation of the tax charges recorded in the financial statements and the theoretical tax charge calculated using the IRES rate applicable in Italy:
    • Financial Statements for the Year Ending 31 December 2010 182 (Euro thousand) Amount Rate Amount Rate Profit before tax 13,993 (3,352) Theoretical income tax 3,848 27.5% (922) 27.5% Tax effect on permanent differences - Impairment on Investments 1,132 8.1% 0 0.0% - Dividends (7,662) -54.8% 0 0.0% - Non deductible interests 909 6.5% 0 0.0% - Other movements (428) -3.1% (86) 2.6% Tax assets utilization 0 0.0% 0 0.0% Tax assets used and reversed to net equity in the year 0 0.0% 0 0.0% Tax effect of utilisation of previously unrecognised tax losses (237) -1.7% (545) 16.3% Deferred tax assets for available losses 0 0.0% 0 0.0% Fiscal consolidation gain 434 3.1% 0 0.0% Other net differences 7 0.1% 0 0.0% IRAP and taxes on foreign income 0 0.0% 0 0.0% Income tax charged in the income statement (1,996) -14.3% (1,553) 46.3% 2010 2009 12 – Basic earnings (loss) per share Basic earnings per share are calculated by dividing net profit or loss for the period attributable to the parent company by the weighted average number of ordinary shares outstanding during the period. Diluted earnings per share are calculated by dividing net profit for the period attributable to shareholders by the weighted average number of ordinary shares outstanding during the period, including any dilutive effects of stock options. The table below shows the share information used to calculate basic and diluted earnings per share: Year 2010 Year 2009 Parent company net profit/(loss) (A) 15,989,158 (1,798,320) Weighted average number of ordinary shares outstanding (B) 289,233,469 290,359,390 Basic earnings/(loss) per share (€ per share) (C=A/B) 0.0553 (0.0062) Restatement for dilutive effect - - Parent company net profit/(loss) restated for dilutive effect (D) 15,989,158 (1,798,320) Weighted average number of shares to be issued for the exercise of stock options (E) - - Total number of shares outstanding and to be issued (F) 289,233,469 290,359,390 Diluted earnings/(loss) per share (€ per share) (G=D/F) 0.0553 (0.0062) Options and warrants have a dilutive effect only when the average market price of the share for the period exceeds the strike price of the options or warrants (i.e. when they are "in the money"). At 31 December 2010, all allocated options and warrants were "out of the money".
    • Financial Statements for the Year Ending 31 December 2010 183 Other information Commitments At 31 December 2010, remaining commitments to make paid calls to venture capital funds totalled EUR 0.9 million, compared with EUR 1.2 million in 2009. Changes in commitments are shown in the table below. (Euro million) Residual Commitments vs. Funds - Dec. 31, 2009 1.2 Capital Calls at commitment value (0.7) Exchange differences 0.4 Residual Commitments vs. Funds - Dec. 31, 2010 0.9 Own shares and parent company shares On 26 April 2010, the shareholders' meeting of DeA Capital S.p.A. approved, following the proposal made by the company's Board of Directors, the implementation of a new plan to purchase and dispose of own shares (the Plan), which authorises the Board of Directors to purchase and dispose of a maximum number of shares representing a stake of up to 20% of share capital in accordance with the law, on one or more occasions, on a rotating basis. At the same time, this resolution revoked the authorisation issued by the shareholders' meeting on 29 April 2009 for the previous plan to purchase own shares. Among other things, the authorisation specifies that purchases may be carried out in accordance with all procedures allowed by current regulations, with the sole exception of a public purchase or exchange offer, and that the unit price for the purchase must not be more than 20% above or below the share's reference price on the trading day prior to the purchase. The objective of the Plan is to allow the company to take action, in accordance with current regulations, to limit any unusual price movements and to normalise trading and pricing fluctuations resulting from distortions related to excess volatility or poor trading liquidity, as well as to purchase own shares to be used, as necessary, for share incentive schemes. These transactions will also allow the company to purchase own shares to be used, in accordance with its strategy, for capital-related transactions or other transactions in relation to which it may be appropriate to exchange or sell parcels of shares by means of an exchange, transfer or other method of disposal. The authorisation to carry out such purchases has a maximum duration of 18 months from the date the authorisation is granted by the shareholders’ meeting (until October 2011). The Board of Directors is also authorised to dispose of own shares purchased without time limitations in accordance with procedures it deems appropriate, at a price to be determined, from time to time, but which may not be (other than in certain specific exceptions) more than 20% below the share's reference price on the trading day prior to each disposal. The Board of Directors, which met immediately following the shareholders' meeting, passed the resolutions necessary to execute the plan, and granted the chairman and chief executive officer all the necessary powers. At 31 December 2010, the company held 12,598,698 own shares, resulting from the acquisition in 2010 of 944,343 shares, and the delivery of 5,963,857 shares relating to the acquisition of FARE Holding.
    • Financial Statements for the Year Ending 31 December 2010 184 As of the date of this document, based on purchases made after the end of 2010, totalling 3,968,629 shares, and the delivery of 4,806,920 shares as part of the reorganisation of IDeA AI (see "Significant events after the end of 2010"), the company had a total of 11,760,407 own shares, corresponding to about 3.8% of the share capital. During 2010, the company did not hold, purchase or sell, on its own account or through a trust company, any shares in parent company De Agostini S.p.A. Stock option plans As regards company incentive plans (stock option plans), pursuant to the provisions of the 2004 and 2005 stock option plans, as at 31 December 2010, 63,200 stock options were still exercisable. On 26 April 2010, the shareholders' meeting approved the DeA Capital stock option plan for 2010-2015, under which a maximum of 3,000,000 options may be allocated. To implement the resolution of the shareholders' meeting, the DeA Capital S.p.A. Board of Directors allocated a total of 2,235,000 options to certain employees of the company and its subsidiaries, and employees of the parent company De Agostini S.p.A. who carry out important roles. In line with the criteria specified in the regulations governing the DeA Capital stock option plan for 2010-2015, the Board of Directors also set the exercise price for the options allocated at EUR 1.318, which is the arithmetic mean of the official price of ordinary DeA Capital shares on the Mercato Telematico Azionario, the Italian screen-based trading system organised and managed by Borsa Italiana S.p.A., on the trading days between 25 March 2010 and 25 April 2010. The options can be allocated to the beneficiaries, in one or more tranches, up to 30 June 2011 and exercised by the latter, in one or more tranches, but in any case for an amount per tranche of not less than 25% of the options assigned to each, with effect from the fifth calendar day following the date that the adjusted NAV figure at 31 December 2012 is announced, until 31 December 2015. The adjusted NAV means the value of the assets, net of liabilities, calculated on the basis of the company’s operating performance at 31 December 2012 and restated, where necessary, to take account of the measurement at fair value of all investments, as assessed by an independent third party. With reference to the options assigned pursuant to the 2007-2013 stock option plans, as the conditions for exercising these options did not occur, they must be considered annulled and the right to subscribe to shares in DeA Capital S.p.A. incorporated therein must consequently be deemed to have lapsed. Finally, the authority granted to the Board of Directors by the above-mentioned shareholders' meeting of 7 September 2007 to increase share capital, pursuant to art. 2443, para. 2 of the Italian civil code for transactions to purchase equity investments (including through mergers or spin-offs), companies or business divisions with no annual limit, remains effective. The table below summarises the assumptions regarding the calculation of the fair value of the stock option plans:
    • Financial Statements for the Year Ending 31 December 2010 185 2004 plan 2005 plan April 2010 plan N° options allocated 160,000 180,000 2,235,000 Average market price at allocation date 2.445 2.703 1.2964 Value at allocation date 391,200 486,540 2,897,454 Average exercise price 2.026 2.459 1.318 Expected volatility 31.15% 29.40% 35.49% Option expiry date 31/08/2015 30/04/2016 31/12/2015 Risk free yield 4.25125% 3.59508% 1.88445% DeA Capital 2009-2012 warrants On 3 March 2009, the shareholders' meeting of DeA Capital S.p.A. approved an investment plan entailing the offer of warrants for subscription by the management. Under the plan regulations, the DeA Capital 2009-2012 warrants allow holders to purchase, under certain conditions, one new DeA Capital share with a nominal value of EUR 1 for each warrant held, at an exercise price of EUR 1.92. The warrants may be exercised between 1 April 2012 and 30 September 2012. In order to implement the plan, the extraordinary shareholders' meeting of DeA Capital S.p.A. also voted to issue up to 1,500,000 DeA Capital 2009-2012 warrants and to increase the share capital, pursuant to the combined provisions of art. 2441, para. 8 of the Italian civil code and art. 134, para. 2 of Legislative Decree 58 of 24 February 1998 by a nominal amount of up to EUR 1,500,000 in separate issues pursuant to art. 2439, para. 2 of the Italian civil code, to be carried out through the issue of up to 1,500,000 ordinary shares with a nominal value of EUR 1, to be used solely and irrevocably for the exercise of these warrants. The subscription price for the warrants was EUR 0.211, based on the fair value estimated by the Board of Directors and supported by independent valuations. The warrants, available for subscription by beneficiaries from the date on which the resolution of the extraordinary shareholders' meeting on the issue of the warrants was recorded in the companies register until 31 July 2009, were fully subscribed. Beneficiaries are individuals who were classified as employees of the company and/or its subsidiaries and/or the parent company De Agostini S.p.A. at the time of the warrant subscription offer and at the time of the subscription itself, as identified by the Board of Directors’ meeting of 13 January 2009. For further information on the terms and conditions of the plan and its beneficiaries, please see the Information Prospectus prepared in accordance with art. 84-bis, para. 1 of Consob Regulation 11971/1999 and table 7 of Appendix 3A of Consob Regulation 11971/1999 available to the public at the headquarters of DeA Capital S.p.A. and on the company's website www.deacapital.it.
    • Financial Statements for the Year Ending 31 December 2010 186 Transactions with parent companies, subsidiaries and related parties - Intercompany relationships with the parent company and its group On 22 March 2007, the company signed a Service Agreement with the controlling shareholder, De Agostini S.p.A. for the latter to provide operating services in the administration, finance, control, legal, corporate and tax areas for a total payment of EUR 200,000 per year. The agreement, which is renewable annually, is priced at market rates, and is intended to allow the company to maintain a streamlined organisational structure in keeping with its development policy, and to obtain adequate operational support at the same time. The company also carried out transactions with its subsidiaries, particularly with regard to the provision of management support services. These transactions were carried out under normal market conditions. Lastly, the Company did not hold, purchase or dispose of the shares of any related parties in 2010. The table below shows the balances arising from transactions with related parties. (Dati in migliaia di Euro) Trade receivables Tax receivables Tax payables Trade payables Service revenues Tax income Personnel costs Service costs IDeA Alternative Investments S.p.A. - - - - 281.4 - - - Soprarno SGR S.p.A. - - - - 3.4 - - - FARE Holding S.p.A. - - - - 5.0 - - - FARE SGR S.p.A. - - - - 50.5 - - - FARE Real Estate S.p.A. - - - - 35.0 - - - De Agostini S.p.A. 34.5 - - 33.5 141.3 - 229.2 240.0 La Talpa S.r.l. - - - 1.4 - - - 2.3 B&D Holding di Marco Drago e C. S.a.p.A. - 4,064.7 4.9 - - 1,759.3 - - Lottomatica Group S.p.A. - - - 38.7 - - - 38.7 Ist.Geografico De Agostini S.p.A. - - - 0.5 - - - 3.3 De Agostini Editore S.p.A. - - - 9.8 - - - 51.8 Total related parties 34.5 4,064.7 4.9 83.9 516.6 1,759.3 229.2 336.1 Total financial statement line item 150.5 4,064.7 4.9 986.4 516.6 1,759.3 3,268.8 3,038.5 as % of financial statement line item 22.9% 100.0% 100.0% 8.5% 100.0% 100.0% 7.0% 11.1% Year 2010Balances at Dec. 31, 2010
    • Financial Statements for the Year Ending 31 December 2010 187 - Remuneration of directors, auditors, general managers and managers with strategic responsibilities In 2010, remuneration payable to the directors and auditors of DeA Capital S.p.A. for the performance of their duties totalled EUR 320 thousand and EUR 175 thousand respectively. Remuneration paid to directors and auditors is shown in the table below: Director Position Year appointed Term ends Compensation received for office within the consolidating company (€ thousands) Benefits in kind Bonuses and other benefits Other principal auditor fees for subsidiaries Other compensa tion (€ thousand) Lorenzo Pellicioli Chairman 2010 2012 AGM 30 0 0 0 0 Paolo Ceretti CEO 2010 2012 AGM 30 0 0 0 0 Daniel Buaron Director 2010 2012 AGM 30 0 0 0 560 Lino Benassi Director 2010 2012 AGM 30 0 0 0 120 Rosario Bifulco Director 2010 2012 AGM 30 0 0 0 20 Claudio Costamagna Director 2010 2012 AGM 30 0 0 0 5 Alberto Dessy Director 2010 2012 AGM 30 0 0 0 25 Roberto Drago Director 2010 2012 AGM 30 0 0 0 15 Marco Drago Director 2010 2012 AGM 30 0 0 0 0 Andrea Guerra Director 2010 2012 AGM 30 0 0 0 5 Boroli Marco Director 2010 2012 AGM 20.5 0 0 0 0 Angelo Gaviani Chairman of the Board of 2010 2012 AGM 75 0 0 43 0 Cesare Andrea Grifoni Principal Auditor 2010 2012 AGM 50 0 0 0 0 Gian Piero Balducci Principal Auditor 2010 2012 AGM 50 0 0 0 15 The item "Other remuneration" for the director Daniel Buaron relates to remuneration received from FARE Group companies totalling EUR 560 thousand (the major components of which are EUR 410 thousand from Fare SGR and EUR 140 thousand from FARE Holding). "Other remuneration" for the director Lino Benassi relates mainly to remuneration received from FARE Group companies totalling EUR 110 thousand (of which EUR 60 thousand relates to Fare SGR). In 2010, annual salaries and bonuses paid to managers with strategic responsibilities in the parent company totalled EUR 579 thousand. Shareholdings held by directors, auditors, general managers and managers with strategic responsibilities Details of stakes held in DeA Capital S.p.A. and its subsidiaries by members of the boards of directors and auditors and by managers with strategic responsibilities are provided (in aggregate format) in the table below. No shareholdings were reported for general managers, since to date, this position does not exist. All those who held positions on the boards of directors or auditors, or as managers with strategic responsibilities, for the whole or part of the year in question, are included.
    • Financial Statements for the Year Ending 31 December 2010 188 Beneficiary Company Number of shares held at 1.1.2010 Number of shares purchased Number of shares sold Number of shares held at 31.12.2010 Rosario Bifulco DeA Capital S.p.A. 1,536,081 - - 1,536,081 Lino Benassi DeA Capital S.p.A. 23,500 - - 23,500 Daniel Buaron * DeA Capital S.p.A. 5,752,695 5,936,857 - 11,689,552 Daniel Buaron FARE Holding S.p.A. 180,000 - - 180,000 Claudio Costamagna ** FARE NPL S.p.A. 72,000 - - 72,000 Dirigenti con responsabilità strategiche DeA Capital S.p.A. 50,000 - - 50,000 * through DEB Holding S.r.l. ** through CC & Co. S.p.A. Furthermore, pursuant to the shareholder agreement entered into between De Agostini S.p.A. and the company, as one party, and Daniel Buaron, as the other party, on 1 February 2010, the director Daniel Buaron received 184,162 DeA Capital shares, and on 12 December 2010, he received another 5,752,695 shares. Other than the shares indicated above, no DeA Capital shares are held by other directors or auditors who are currently in office; furthermore, no shares are held in companies controlled by DeA Capital. The directors Lorenzo Pellicioli, Lino Benassi, Marco Drago and Roberto Drago own shares of B&D Holding di Marco Drago e C. S.a.p.a., the parent company of De Agostini S.p.A. (which is in turn the parent company of the DeA Capital S.p.A.), and are parties to a shareholder agreement covering these shares. Stock options allocated to members of the boards of directors and auditors, general managers and managers with strategic responsibilities Details of stock options held by members of the boards of directors and auditors and by managers with strategic responsibilities in DeA Capital S.p.A. and its subsidiaries are provided (in aggregate format) in the table below. Options lapsed during 2010 Beneficiary Position Number of options Average exercise price Average expiry date Number of options Average exercise price Average expiry date Number of options Number of options Average exercise price Average expiry date Paolo Ceretti CEO 1,000,000 2.7652 6 0 0 0 -1,000,000 0 0 0 Paolo Ceretti CEO 0 0 0 750,000 1.318 5 0 750,000 1.318 5 145,000 2.7652 6 0 0 0 -145,000 0 0 0 100,000 2.3477 6 0 0 0 -100,000 0 0 0 0 0 0 985,000 1.318 5 0 985,000 1.318 5 Options outstanding at Dec. 31, 2010 Key Management Key Management Key Management Options outstanding at Jan. 1, 2010 Options granted during 2010 Lastly, note that the Chief Executive Officer Paolo Ceretti and managers with strategic responsibilities have subscribed to 575,000 and 925,000 warrants respectively. Under the Investment Plan regulations, the DeA Capital 2009-2012 warrants allow holders to purchase, under certain conditions, one new DeA Capital share with a nominal value of EUR 1 for each warrant held, at an exercise price of EUR 1.92. The warrants may be exercised between 1 April 2012 and 30 September 2012.
    • Financial Statements for the Year Ending 31 December 2010 189 Management and coordination The parent company is subject to the management and coordination of De Agostini S.p.A. Key figures from the latest approved financial statements of De Agostini S.p.A. are shown below. INCOME STATEMENT 2009 2008 Total operating revenues 2,885,519 2,672,865 Total operating expenses (28,571,451) (35,509,563) Financial income and expenses (11,725,284) 16,611,471 Restatement of financial assets (272,270,649) (420,000) Extraordinary income/(expenses) (5,501,517) 364,398 Income tax charge 11,367,766 29,614,409 Net profit (303,815,616) 13,333,580 BALANCE SHEET 2009 2008 Receivables from shareholders for amounts due 0 0 Non-current assets 3,680,814,949 2,970,357,874 Operating assets 586,589,163 1,143,694,469 Prepaid expenses and accrued income 2,843,701 23,763,820 Net equity (2,921,122,108) (3,219,177,724) Provisions for liability and charges (71,535,975) (153,014,590) Provisions for employee end-of-service benefits (1,583,338) (1,562,589) Financial debt (1,271,068,400) (763,030,862) Accrued expenses and deferred income (4,937,992) (1,030,398)
    • Financial Statements for the Year Ending 31 December 2010 190 Risks As described earlier in the Report on Operations, the company operates through, and is structured as, two business areas, Private Equity Investment and Alternative Asset Management. The risks set out below stem from a consideration of the characteristics of the market and the company’s operations, and the main findings of a risk assessment conducted in 2010, and from periodic monitoring, including that carried out through the regulatory policies adopted by the group. However, that there could be risks that are currently unidentified or deemed not significant that could have an impact on the company's operations. The company has adopted a modern corporate governance system that provides effective management of the complexities of its operations and enables its strategic objectives to be achieved. Furthermore, the assessments conducted by the organisational units and the directors confirm both the non-critical nature of these risks and uncertainties and the financial solidity of the company. A. Contextual risks A.1. Risks relating to general economic conditions The operating performance and financial position of the company are affected by the various factors that make up the macro-economic environment, including increases or decreases in GDP, investor and consumer confidence, interest rates, inflation, the costs of raw materials and unemployment. The ability to meet medium- to long-term objectives could be affected by general economic performance, which could slow the development of sectors the group has invested in, and at the same time, the business of DeA’s investee companies. A.2. Socio-political events In line with its own strategic growth guidelines, one of the company's activities is private equity investment in companies and funds in different jurisdictions and countries around the world, which, in turn, invest in a number of countries and geographical areas. The company may have invested directly and indirectly in foreign countries whose social, political and economic conditions put the achievement of its investment objectives at risk. A.3. Regulatory changes Many of the company's investee companies conduct their operations in highly regulated sectors and markets. Any changes to or developments in the legislative or regulatory framework that affect the costs and revenues structure of investee companies or the tax regime applied, could have negative effects on the company's financial results, and necessitate changes in the company's strategy. To combat this risk, the company has established procedures to constantly monitor sector regulation and any changes thereto, in order to seize business opportunities and respond to any changes in the prevailing legislation and regulations in good time.
    • Financial Statements for the Year Ending 31 December 2010 191 A.4. Performance of the financial markets The company’s ability to meet its strategic and management objectives could depend on the performance of public markets. A negative trend on the public markets could have an effect on the private equity sector in general, making investment and divestment transactions more complex, and on the company’s capacity to increase the NAV of investments in particular. The value of investments held directly or indirectly through funds in which the company has invested could be affected by factors such as comparable transactions concluded on the market, sector multiples and market volatility. These factors that cannot be directly controlled by the company are constantly monitored in order to identify appropriate response strategies that involve both the provision of guidance for the management of investee companies, and the investment and value enhancement strategy for the assets held. A.5. Exchange rates Holding investments in currencies other than the euro exposes the company to changes in exchange rates between currencies. A.6. Interest rates Ongoing financing operations that are subject to variable interest rates could expose the company to an increase in related financial charges, in the event that the reference interest rates rise significantly. The company has established appropriate strategies to hedge against the risk of fluctuations in interest rates. Given the partial hedge of the underlying, the company classifies these securities as speculative instruments, even though they are put in place for hedging purposes. B. Strategic risks B.1. Concentration of the Private Equity investment portfolio The private equity investment strategy adopted by the company includes: - direct investments - indirect investments Within this strategy, the company's overall profitability could be adversely affected by an unfavourable trend in one or a few investments, if there were insufficient risk diversification, resulting from the excessive concentration of investment in a small number of assets, sectors, countries, currencies or of indirect investments in funds with limited investment targets/types of investment. To combat these risk scenarios, the company pursues an asset allocation strategy intended to create a balanced portfolio with a moderate risk profile, investing in attractive sectors and in companies with an appealing current and future risk/return ratio. Furthermore, the combination of direct and indirect investments, which, by their nature, guarantee a high level of diversification, helps reduce the level of asset concentration.
    • Financial Statements for the Year Ending 31 December 2010 192 B.2. Concentration of Alternative Asset Management activities In Alternative Asset Management, in which the company is active through the companies IDeA Alternative Investments and First Atlantic Real Estate Holding, events could arise as a result of excessive concentration that would hinder the achievement of the level of expected returns. These events could be due to: • Private equity/absolute return funds o concentration of the management activities of asset management companies across a limited number of funds, in the event that one or more funds decides to cancel its asset management mandate o concentration of the financial resources of the funds managed in a limited number of sectors and/or geographical areas, in the event of currency, systemic or sector crises o for closed funds, concentration of the commitment across just a few subscribers, in the event of a counterparty experiencing financial difficulties • Real estate funds o concentration of real estate present in the portfolio of managed funds in a few cities and/or in limited types of property (management/commercial), in the event of a crisis on the property market concerned o concentration in respect of certain important tenants, in the event that these withdraw from the rental contracts, which could lead to a vacancy rate that has a negative impact on the funds' financial results and the valuation of the property managed o concentration of the maturities of numerous real estate funds within a narrow timeframe, with related high availability of property on the market, leading to a decrease in property values and an increase in selling times For each of the risk scenarios outlined above, the company has defined and implemented appropriate strategies that include strategic, operational and management aspects, as well as a system monitoring the level of diversification of AAM activities. B.3. Key resources (governance/organisation) The success of the company depends to a large extent on its executive directors and key management figures, their ability to efficiently manage the business and the normal activities of individual group companies, as well as knowledge of the market and the professional relationships established. The departure of one or more of these key resources, without a suitable replacement being found, as well as an inability to attract and retain new and qualified resources, could impact growth targets and have a negative effect on the group’s activities and financial results. To mitigate this risk, the group has put in place HR management policies that correspond closely to the needs of the business, and incentive policies that are periodically reviewed, in light of, among other things, the general economic climate and the results achieved by the group.
    • Financial Statements for the Year Ending 31 December 2010 193 C. Operating risks C.1.Investment operations Investment operations conducted by the company are subject to the risks typical of private equity activities, such as an accurate valuation of the target company and the nature of the transactions carried out, which require the acquisition of strategic shareholdings, but not controlling interests, governed by appropriate shareholders’ agreements. The company implements a structured process of due diligence on target companies, which requires the involvement of the different levels of group management involved and the careful definition of shareholders’ pacts in order to conclude agreements in line with the investment strategy and the risk profile defined by the company. C.2.Compliance with covenants Some investment operations were concluded using financial leverage to invest in the target companies. For financing contracts signed by investee companies, specific covenants backed by real guarantees are in place; failure to comply with these could necessitate recapitalisation operations for investee companies and lead to an increase in financial charges relating to debt refinancing. Failure to comply with covenants attached to loans could have negative effects on both the financial situation and operations of investee companies, and on the value of the investment. The company constantly monitors the significant reference parameters for the financial obligations taken on by investee companies, in order to identify any unexpected variance in good time. C.3.Divestment operations The company invests over a medium-/long-term time horizon, normally three to six years for investments made through the acquisition of direct shareholdings in companies or up to ten years for investments made through funds. Over the investment management period, external situations could arise that might have a significant impact on the operating results of the investee companies, and consequently on the value of the investment itself. Furthermore, in the case of co-investment, guiding the management of an investee company could prove problematic or unfeasible, and it may ultimately prove impossible to dispose of the stakes held owing to lock-up clauses. The divestment strategy could therefore be negatively affected by various factors, some of which cannot be forecast at the time the investments are made. There is therefore no guarantee that expected earnings will be realised given the risks resulting from the investments made. To combat these risk situations, the company has defined a process to monitor the performance of its investee companies, facilitated by its representation on the management bodies of significant investee companies, with a view to identifying any critical situations in good time. C.4.Funding risk The income flows expected from the Alternative Asset Management business depend on the capacity of the asset management companies in which the company invests to stabilise/grow their assets under management.
    • Financial Statements for the Year Ending 31 December 2010 194 In this environment, fund raising activity could be harmed by both external factors, such as the continuation of the global economic crisis or the trend in interest rates, and internal factors, such as bad timing in respect of fund raising activities by the asset management companies or the departure of key managers from the companies. The company has established appropriate risk management strategies in relation to fund raising, with a view to both involving new investors and retaining current investors.
    • Financial Statements for the Year Ending 31 December 2010 195 Significant events after the end of 2010 Reorganisation of IDeA Alternative Investments S.p.A. (IDeA AI) The reorganisation of IDeA Alternative Investments (IDeA AI) was conducted through a partial non-proportional demerger, with a reduction in the share capital of IDeA AI and allocation of Investitori Associati SGR and Wise SGR to the management of Investitori Associati SGR and Wise SGR respectively, in return for the cancellation of the stakes held by those companies in IDeA AI. As a result of the demerger, DeA Capital S.p.A. acquired control of IDeA AI. Following approval by the Bank of Italy and the Italian Competition Authority, the deed of the demerger of IDeA AI, effective from 17 January 2011, was completed on 13 January 2011. DeA Capital S.p.A., which previously held 44.36% of the company’s capital, has therefore acquired control of 90.11% of IDeA AI and the assets it owns. These primarily include 100% of IDeA Capital Funds SGR, 65% of Soprarno SGR, 65% of IDeA SIM and 10% of Alkimis SGR. Moreover, on 20 January 2011, in order to gain control of the entire share capital of IDEA AI, DeA Capital S.p.A. acquired the remaining 9.89% of the company’s stock held by private investors, including directors Lorenzo Pellicioli and Paolo Ceretti, in exchange for 4,806,921 DeA Capital shares, using existing own shares in the portfolio, equal to 1.57% of the capital. As part of the valuation performed for the various transactions mentioned above, the company employed the services of an independent external consultant. Increase in daily purchase limits in the share buyback plan In relation to the plan to buy and sell own shares approved by the shareholders on 26 April 2010, on 14 February 2011 DeA Capital S.p.A. announced its intention to buy, depending on market conditions, shares up to a maximum of 50% of the average daily trading volume for the 20 trading days preceding the date of purchase. The decision to increase purchase volumes was made on the basis of two factors: a) the reduction in own shares held by the company to 2.56% of the share capital (with a value of around EUR 7.9 million) following the last instalment of the payment in shares for the acquisition of FARE Holding in December 2010 and the use of own shares to acquire a 9.9% stake in IDeA Alternative Investments in January 2011 b) the continuing low liquidity of DeA Capital shares, which saw trading volumes in 2010 significantly below the average for stocks listed on markets managed by Borsa Italiana, calculated as a percentage of the free float Under the plan to buy and sell own shares, DeA Capital is authorised to purchase, for a period of 18 months, up to 20% of the share capital, equivalent to 61,322,420 shares, in accordance with the regulatory procedures, excluding public purchase or exchange offers. This plan also allows for the shares purchased to be sold at any time and for an unlimited period, whether on the market, in implementation of management incentive plans, or in the context of transactions such as acquisitions, asset transfers, mergers, demergers or the issue of convertible bonds or warrants.
    • Financial Statements for the Year Ending 31 December 2010 196 Further information In accordance with the provisions of IAS 10, the company authorised the publication of these financial statements within the terms authorised by existing legislation. Atypical or unusual transactions In 2010, there were no atypical or unusual transactions as defined by Consob Communication 6064293 of 28 July 2006. Significant non-recurring events and transactions In 2010, the company did not undertake any significant non-recurring transactions as defined by the above-mentioned Consob Communication.
    • Financial Statements for the Year Ending 31 December 2010 197 Statement of responsibilities for the annual financial statements pursuant to article 154-bis of Legislative Decree 58/98 The undersigned, Paolo Ceretti, as Chief Executive Officer, and Manolo Santilli, as the manager responsible for preparing the accounting statements of DeA Capital S.p.A., hereby certify, pursuant to art. 154-bis, paragraphs 3 and 4 of Legislative Decree 58 of 24 February 1998, that based on the characteristics of the company, the administrative and accounting procedures for preparing the annual financial statements of DeA Capital S.p.A. during the year were suitable and effectively applied. The assessment as to the suitability of the administrative and accounting procedures for preparing the annual financial statements for the year ending 31 December 2010 was based on a process established by DeA Capital S.p.A. in keeping with the Internal Control - Integrated Framework model issued by the Committee of Sponsoring Organisations of the Treadway Commission, which is the generally accepted reference framework at international level. Note in this regard, that as described in the notes to the annual financial statements, a significant portion of the assets are investments stated at fair value. Fair values were determined by directors based on their best estimate and judgment using the knowledge and evidence available at the time the financial statements were prepared. However, due to objective difficulties in making assessments and the absence of a liquid market, the values assigned to such assets could differ, and in some cases significantly, from those that could be obtained when the assets are sold. The undersigned further certify that the annual financial statements to 31 December 2010: - correspond to the company’s accounting records - have been prepared in compliance with the Financial Reporting Standards adopted by the European Union, and the measures issued to implement art. 9 of Legislative Decree 38/2005 - to the best of their knowledge, provide a true and fair view of the operating performance and financial position of the issuer The report on operations contains a reliable analysis of operating performance and results and of the position of the issuer and all companies included in the basis of consolidation, together with a description of the main risks and uncertainties to which they are exposed. 14 March 2011 Paolo Ceretti Chief Executive Officer Manolo Santilli Manager responsible for preparing the company’s accounts
    • Financial Statements for the Year Ending 31 December 2010 198 Information pursuant to art. 149-duodecies of the Consob Issuer Regulations The table below was prepared in accordance with art. 149-duodecies of the Consob Issuer Regulations and reports the fees for 2010 for auditing and other services provided by the independent auditors and entities belonging to the independent auditors’ network. The fees reported below do not include VAT and out-of-pocket expenses. (Euro thousand) Company providing the service Beneficiary Compensation paid for 2010 FY Audit KPMG S.p.A. DeA Capital S.p.A. 91 Due diligence consultancy KPMG S.p.A. DeA Capital S.p.A. 55 Certification services (1) KPMG S.p.A. DeA Capital S.p.A. 7 Total 153 1) Presentation of tax return
    • Financial Statements for the Year Ending 31 December 2010 199 Summary of Subsidiaries’ Financial Statements to 31 December 2010
    • Financial Statements for the Year Ending 31 December 2010 200 (Euro thousand) DeA Capital Investments S.A. Group Fare Holding S.p.A. Group Non-current assets 635,743 7,648 Current assets 13,735 23,251 Assets relating to joint ventures 0 0 Available-for-sale non-current assets 0 0 Consolidated assets 649,478 30,899 Net shareholders' equity 645,792 25,738 Non-current liabilities 2,253 665 Current liabilities 1,433 4,496 Liabilities relating to joint ventures 0 0 Consolidated liabilities 649,478 30,899 Fees from Alternative Asset Management 0 19,424 Services to third parties 0 9,802 Other investment income/expenses (18,499) 343 Other income 39 47 Personnel costs (82) (8,406) External services costs (609) (7,202) Depreciation, amortisation and writedowns 0 (104) Joint venture costs (excluding taxes) 0 0 Other expenses (974) (160) Financial income 192 133 Financial expenses (72) (27) Taxes (1,793) (4,907) Profit/(loss) from operations to be disposed of 0 0 Net profit/(loss) (21,798) 8,943
    • Financial Statements for the Year Ending 31 December 2010 201 Independent Auditors’ Reports (Original reports in Italian version only)
    • Financial Statements for the Year Ending 31 December 2010 202 Report of the Board of Statutory Auditors (Original report in Italian version only)