DeA Capital bilancio 2010 eng

916 views

Published on

Published in: Economy & Finance, Business
  • Be the first to comment

  • Be the first to like this

DeA Capital bilancio 2010 eng

  1. 1. 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
  2. 2. 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.
  3. 3. 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
  4. 4. Financial Statements for the Year Ending 31 December 2010 4 Report on Operations
  5. 5. 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
  6. 6. 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
  7. 7. 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
  8. 8. 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)
  9. 9. 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 (°)
  10. 10. 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
  11. 11. 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.
  12. 12. 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
  13. 13. 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
  14. 14. 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%.
  15. 15. 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
  16. 16. 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.
  17. 17. 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.
  18. 18. 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.
  19. 19. 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.
  20. 20. 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
  21. 21. 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.
  22. 22. 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%).
  23. 23. 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.
  24. 24. 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.
  25. 25. 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.
  26. 26. 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).
  27. 27. 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.
  28. 28. 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.
  29. 29. Financial Statements for the Year Ending 31 December 2010 29
  30. 30. 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.
  31. 31. 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.
  32. 32. 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
  33. 33. 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).
  34. 34. 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
  35. 35. 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
  36. 36. 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.
  37. 37. 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
  38. 38. 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.
  39. 39. 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
  40. 40. 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
  41. 41. 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.
  42. 42. 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
  43. 43. 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
  44. 44. 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
  45. 45. 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.
  46. 46. 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
  47. 47. 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%
  48. 48. 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.
  49. 49. 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
  50. 50. 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
  51. 51. 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
  52. 52. 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.
  53. 53. 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.
  54. 54. 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.
  55. 55. 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
  56. 56. 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)
  57. 57. 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.
  58. 58. 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

×