AZIMUT HOLDING S.p.A.
Consolidated interim financial report as at 30 June 2019
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Contents
Company bodies 3
Azimut Group's highlights and indicators 4
Management report 7
Consolidated financial statements 26
Notes to the consolidated financial statements 35
Statement pursuant to article 154-bis, paragraphs 3 and 4 of the 120 Consolidated Law on Finance
2 WorldReginfo - 0ce5f050-b036-415a-a322-984991a7cfaf Company bodies
Board of Directors Pietro Giuliani Chairman Paolo Martini Chief Executive Officer and Managing Director Gabriele Blei Chief Executive Officer Massimo Guiati Chief Executive Officer Giorgio Medda Chief Executive Officer Alessandro Zambotti Chief Executive Officer Mirella Pardi (*) Director Ambra Zironi (*) Director Anna Maria Bortolotti Director Nicola Colavito Director Antonio Andrea Monari Director Raffaella Pagani Director
Board of Statutory Auditors Vittorio Rocchetti Chairman Costanza Bonelli Standing Auditor Daniele Carlo Trivi Standing Auditor Maria Catalano Alternate Auditor Federico Strada Alternate Auditor
Independent Auditors PricewaterhouseCoopers S.p.A.
(*) in office for one year (2019)
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Azimut Group's highlights and indicators Azimut Group's structure at 30 June 2019
Company figures updated to 1 August 2019 Note (1): controls the distribution companies M&O Consultoria, FuturaInvest and Azimut Brasil Wealth Management. Note (2): controls AZ Sinopro Insurance Planning. Note (3): controls 100% of CGM Italia SGR. Note (4): 30% held by Azimut Capital Management SGR S.p.A. and 19% by Azimut Financial Insurance S.p.A., both owned by Azimut Holding S.p.A.. Note (5): controls SDB Financial Solutions. Note (6): shows direct subsidiaries.
4 WorldReginfo - 0ce5f050-b036-415a-a322-984991a7cfaf Azimut Group—Highlights at 30 June 2019
1989 Year of incorporation 2004 Year of flotation
55.9 Total assets 18 countries Geographical coverage
Inflows for the first half 2.7 1,790 Financial advisors of 2019
Revenues for the first Net profit for the first half of 485,911 171,025 half of 2019 2019
970 Employees 16.93 Share price
5 WorldReginfo - 0ce5f050-b036-415a-a322-984991a7cfaf Indicators
Financial indicators Change 1H2019 1H2018 2018 (millions of euro) Absolute % Total income: 486 376 110 29.3% 748 - of which fixed 358 314 44 14.0% 629 management fees EBIT 192 99 93 93.9% 193 Net profit for the period 171 73 98 134.2% 122
Net inflows 2.7 2.4 0.3 12.5% 2.3 (billions of euro)
Operating indicators 30/06/2019 31/12/2018 30/06/2018 Financial advisors 1,790 1,747 1,719 AUM, net 43.5 39.8 41 (billions of euro)
Ripartizione del patrimonio al 30 giugno 2019
11% 4%
21% 64%
Fondi comuni Gestioni patrimoniali Assicurazioni AZ Life Advisory
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Introduction
The consolidated interim financial report at 30 June 2019 has been prepared in compliance with article 154-ter (Interim Reports) of Italian Legislative Decree 58/1998 (Consolidated Law on Finance), introduced by Italian Legislative Decree 195/2007, transposing EU Directive 2004/109/EC (known as the Transparency Directive), as amended. The interim financial report includes the condensed consolidated interim financial statements, the interim management report and the statement required by article 154-bis, paragraph 5. The condensed consolidated interim financial statements have been prepared in compliance with the International Financial Reporting Standards (IAS and IFRS) issued by the International Accounting Standards Board (IASB) and endorsed by the European Union. Specifically, they have been drawn up in accordance with IAS 34 - Interim Financial Reporting, applying the same accounting standards used to prepare the Consolidated Financial Statements at 31 December 2018, to which reference is made, except for the international financial reporting standards that became effective as of 1 January 2019 and described in the notes to the financial statements, section “Accounting standards, amendments and interpretations endorsed by the European Union and in force from 1 January 2019”.
1 - GROUP RESULTS
The Azimut Group ended the first half of 2019 with a consolidated net profit of 171,025 thousand euro (72,584 thousand euro for the first half of 2018) and consolidated EBIT of 193,913 thousand euro (91,264 thousand euro for the first half of 2018). At 30 June 2019, total assets under management reached 43.5 billion euro, up by approximately 9.4% compared to the 2018 year-end balance. Total assets, including assets under custody, amounted to 55.9 billion euro. Group total inflows were positive for 2.7 billion euro at 30 June 2019 (2.4 billion euro at 30 June 2018). At 30 June 2019, total advisors numbered 1,790 (1,747 at 31 December 2018).
7 WorldReginfo - 0ce5f050-b036-415a-a322-984991a7cfaf ASSETS UNDER MANAGEMENT
Change Figures in millions of euro 30/06/2019 31/12/2018 30/06/2018 Absolute % Mutual funds 33,365 30,662 31,405 2,703 8.8% Discretionary portfolio 11,217 10,090 10,216 1,127 11.2% management and other AZ Life insurance 5,872 5,678 6,290 194 3.4% Advisory 1,963 1,507 1,486 456 30.3% Double counting - 8,907 - 8,154 - 8,643 - 753 9.2% AUM, net 43,510 39,783 40,754 3,727 9.4% Securities, third-party 12,342 10,989 10,854 1,353 12.3% funds and c/a Total assets 55,852 50,772 51,608 5,080 10.0%
NET INFLOWS
Change Figures in millions of euro 1H2019 1H2018 2018 Absolute % Funds 971 306 918 665 217.3% Discretionary portfolio 524 1,014 1,385 - 490 -48.3% management and other AZ Life insurance -119 -246 -440 127 51.6% Advisory 194 380 341 - 186 -48.9% Double counting 57 42 135 15 35.7% Total net inflows - Assets 1,627 1,496 2,339 131 8.8% under management Securities, third-party 1,033 870 2,064 163 18.7% funds and c/a Total net inflows 2,660 2,366 4,403 294 12.4%
8 WorldReginfo - 0ce5f050-b036-415a-a322-984991a7cfaf RECLASSIFIED CONSOLIDATED INCOME STATEMENT
In order to provide a more effective representation of the results, the income statement has been reclassified and thus better reflects the content of the items according to operating criteria. The main reclassifications involved the following: • cost recoveries on portfolio management reported under “Fee and commission income” have been reclassified as “Other income” in the reclassified income statement; • net premiums, net profits (losses) on financial instruments at fair value through profit or loss, the change in the technical reserves, redemptions and claims, commissions and recovered expenses relating to insurance and investment products issued by AZ Life Dac, reported under “Net premiums”, “Change in technical reserves” and “Fee and commission income”, have been reclassified to “Insurance income”; • commission expenses paid to the distribution network, reported under “Fee and commission expense” are now classed as “Acquisition costs”; similarly, the Enasarco/Firr contributions related to these commission expenses and the other trade payables associated with the distribution network, recognised under “Administrative costs”, have been reclassified as “Acquisition costs”; the amount allocated to the supplementary indemnity reserve for agents (ISC) reported under the item “Accruals to the provisions and charges” has been reclassified as “Acquisition costs”; • administrative cost recoveries, reported under “Other operating income and costs”, were recognised as a reduction of “Overheads/administrative costs”; • interest expenses on loans and bonds were reported under “Interest expense” in the reclassified income statement.
9 WorldReginfo - 0ce5f050-b036-415a-a322-984991a7cfaf 01.01.19 - 01.01.18 - 01.01.18 - Euro/000 30.06.19 30.06.18 31.12.18 Acquisition fees 2,626 3,208 5,401 Fixed management fees 357,804 313,828 629,198 Variable management fees 86,767 30,325 56,548 Other income 6,224 4,346 8,487 Insurance income 32,489 24,010 48,821 Total income 485,911 375,716 748,454 Acquisition costs (185,661) (168,869) (336,195) Overhead costs/administrative costs (99,577) (100,398) (203,650) Amortisation/depreciation and provisions (9,164) (7,632) (15,763) Total costs (294,402) (276,900) (555,608) EBIT 191,509 98,817 192,846 Net financial income 11,825 (2,861) (23,312) Net non-recurring costs (4,430) (1,004) (6,238) Interest expense (4,992) (3,689) (7,414) Pre-tax profit 193,913 91,264 155,882 Income tax (16,998) (14,282) (24,836) Deferred tax assets/liabilities 1,254 6,634 9,534 Net profit (loss) 178,168 83,616 140,580 Profit (loss) attributable to minority interests 7,143 11,033 18,434 Group net profit 171,025 72,584 122,146
Consolidated EBIT and consolidated Group net profit for the first half of 2019 came to 192 million euro (99 million euro for the first half of 2018) and 171 million euro (73 million euro for the first half of 2018), respectively. At 30 June 2019, assets managed amounted to 43.5 billion euro, up by 9.4% on 31 December 2018, generating fixed management fees of 358 million euro, in addition to variable management fees of 87 million euro. The trend of acquisition costs (up by 16.8 million euro on the first half of 2018) also reflects the recruitment of financial advisors during the period. Overhead costs are in line with the previous period and benefit from the effects of the adoption of IFRS 16 as of 1 January 2019 (approximately 4.7 million euro in the first half of 2019). These effects resulted in an increase in the amortisation/depreciation charge of 4 million euro and in an impact in net financial income of 0.7 million euro.
10 WorldReginfo - 0ce5f050-b036-415a-a322-984991a7cfaf Net financial income also includes the positive effects of the fair value measurement of the investments in UCI units (6 million euro).
KEY BALANCE SHEET FIGURES
Euro/000 30/06/2019 31/12/2018 30/06/2018 Financial assets at fair value through profit or loss 6,111,001 5,848,778 6,463,106
Financial assets at fair value through other comprehensive income 8,104 4,974 3,174
Financial assets at amortised cost and equity investments 289,891 220,578 174,184 Property, plant and equipment and intangible assets 690,173 610,817 591,084 Other assets 405,990 400,730 372,720 Total assets 7,505,159 7,085,877 7,604,268 Financial liabilities at amortised cost 602,554 371,711 357,388 Technical reserves 184,689 177,068 202,236 Financial liabilities measured at fair value 5,758,337 5,582,010 6,150,274 Other liabilities and provisions 360,155 330,631 314,866 Shareholders’ equity 599,424 624,457 579,504 Total liabilities and shareholders’ equity 7,505,159 7,085,877 7,604,268
The comparative figures at 31 December 2018 and 30 June 2018 do not reflect the balances resulting from the retroactive application of IFRS 16. Indeed, for FTA purposes, the Group opted to apply the so-called modified retrospective approach, whereby the right of use is deemed equal to the lease liability. Reference should be made to the paragraph "Basis of preparation" of this consolidated interim report for a description and a presentation of the effects of the adoption of IFRS 16. Financial assets at fair value through profit or loss (FVTPL) increased by 4% on 31 December 2018. These items mainly refer to investments in unit-linked policies, related to the insurance activities carried out by AZ Life Dac, where the investment risk is borne by policyholders, in addition to the UCI units which reflect the investment of the excess liquidity of operations.
Financial assets at amortised cost mainly comprise cash equivalents with bank current accounts held by group companies which increased from 106 million euro at 31 December 2018 to 163 million euro at 30 June 2019.
Property, plant and equipment and intangible assets increased as a consequence of the rise in intangible assets with a finite life due to the investments of the period and the recognition of
11 WorldReginfo - 0ce5f050-b036-415a-a322-984991a7cfaf the right of use following the application of IFRS 16 which amounted to 50 million euro at 30 June 2019. The increase in financial liabilities at amortised cost is due to a loan granted by Banco BPM on 28 February 2019 and divided into two lines, A and B, each amounting to 100 million euro. Line A is repayable in tranches while Line B is entirely due on 31 December 2021. The interest rate is calculated based on the Euribor plus 140 basis points for Line A and 160 basis points for Line B. The loan is subject to covenants. This item also includes the lease liabilities which arose as a result of the application of IFRS 16, amounting to 48 million euro at 30 June 2019.
12 WorldReginfo - 0ce5f050-b036-415a-a322-984991a7cfaf CONSOLIDATED FINANCIAL POSITION With regard to the methods used to assess net financial position, reference is made to the recommendation issued by CESR (Committee of European Securities Regulators) dated 10 February 2005, and more specifically to the paragraph on “Capitalisation and indebtedness” in chapter II.
Euro/000 30/06/2019 31/12/2018 30/06/2018 A Cash 32 23 22 B Cash equivalents: 246,969 174,441 140,862 Due from banks 163,028 106,478 76,944 Due from managed funds 83,941 67,963 63,918 C UCI units and government securities 227,395 148,649 152,545
D Total cash A+B+C 474,396 323,113 293,429 E Short-term financial receivables - - - F Short-term bank loans G Current portion of long-term debt: (21,745) (5,351) (1,802) Bonds (Azimut '17-'22 Non-convertible) (1,745) (5,351) (1,802) Due to banks (Banco BPM loan) (20,000)
H Other short-term financial payables
I Short-term financial debt F+G+H (21,745) (5,351) (1,802)
J Short-term financial debt (net) I-E-D 452,651 317,762 291,627 K Long-term bank loans: (178,274) Due to banks (Banco BPM loan) (178,274) L Bonds (349,113) (348,815) (348,638) Azimut '17-'22 Non-convertible Bond (349,113) (348,815) (348,638) M Other long-term payables (48,318) Liabilities from the application of IFRS 16 (48,318) N Long-term financial debt K+L+M (575,705) (348,815) (348,638)
O Net financial position J+N (123,054) (31,053) (57,011)
Receivables and payables include those of a financial nature only, whereas trade receivables and payables have been excluded. Receivables in the form of fees and commissions for managed funds, discretionary portfolios and other investment services are also included and are considered as cash equivalents given that they are collected by the Group during the first few working days after the reporting date.
13 WorldReginfo - 0ce5f050-b036-415a-a322-984991a7cfaf The net financial position is negative at 123 million euro at 30 June 2019 (negative balance of 31 million euro at 31 December 2018).
The balance was impacted by the liquidity generated by the operating activities of the period as well as by the dividends paid in cash to Azimut Holding S.p.A. shareholders (166 million euro) and the following main transactions carried out during the period:
• in the first half of 2019, following the Board of Directors' resolutions of 4 May 2017 and 5 May 2018, Azimut Holding S.p.A. made a capital injection of 32.9 million euro to increase the share capital of the subsidiary AZ International Holdings Sa in order to finance the Group's international development; • in the first half of 2019, tax advances, virtual stamp duties and taxes on the mathematical reserve (the latter pertaining to the Irish AZ Life Dac) totalling approximately 27 million euro were paid.
14 WorldReginfo - 0ce5f050-b036-415a-a322-984991a7cfaf Loans raised and repaid during the period
The changes in financial debt items during the first half of 2019 are shown in the following table.
Interest rate Nominal Euro/000 Currency Nominal Effective amount Expiry Balance at 01/01/2019 Of which: “Azimut 2017-2022” Bond Euro 2% 2.11% 350,000 2022 Issues: Of which: Banco BPM loan - Line A Euro Euribor + 1.4 2.00% 100,000 2021 Banco BPM loan - Line B Euro Euribor + 1.6 2.00% 100,000 2021
SHAREHOLDERS' EQUITY At 30 June 2019, the Group’s consolidated shareholders' equity, including the profit for the period, amounted to 584 million euro (601 million euro at 31 December 2018). This figure reflects the effects of the dividend distribution approved by the shareholders in their ordinary meeting called to approve the 2018 financial statements on 24 April 2018. The shareholders resolved to pay a dividend of 1.5 euro per ordinary share, pre-tax, which was paid as of 22 May 2019, 20 May 2019 ex-dividend payment date and 21 May 2019 as the record date. Each shareholder received (before withholding tax) 1.20 euro in cash, as well as 1 Azimut Holding ordinary share per 56 ordinary shares held (totalling 2,472,548 shares) for a total consideration of 208 million euro. These shares (all held as treasury shares by the Parent Company) were assigned after the ex-dividend payment date on 20 May 2019. The shareholders also approved the payment to Fondazione Azimut Onlus of 1.6 million euro, equal to 1% of pre-tax consolidated profit and the payment of 12.21 euro for each profit-participating financial instrument held by Top Key People at the time of approval of payment of the dividend.
15 WorldReginfo - 0ce5f050-b036-415a-a322-984991a7cfaf TREASURY SHARES On 21 May 2019, a total of 2,472,548 treasury shares were assigned as ordinary dividend, as described earlier. At 30 June 2019, Azimut Holding S.p.A.’s subsidiaries did not hold any treasury shares or shares of the Parent Company, either directly or via trust companies or third parties. At 30 June 2019, Azimut Holding S.p.A.’s treasury share portfolio therefore stood at 2,319,451 shares, or 1.619% of share capital.
FINANCIAL MARKETS AND THE GLOBAL ECONOMY Various risk factors continue to weigh on the global economic outlook: protracted international trade tensions and the slowdown in China. In developed countries, long-term yields declined following the worsening of the growth prospects and the more accommodative stance of the main central banks: the Federal Reserve indicated the possibility of future cuts in interest rates. In the euro area, the economy is still weak and exposed to downside risks, while inflation remains modest. The Governing Council of the European Central Bank extended the time horizon over which it expects to keep interest rates at a low level, set the details of a new series of targeted longer-term refinancing operations (TLTRO III) and announced that, unless there are improvements, further accommodative monetary policies will be necessary, opening a discussion on the options to be used. In Italy, the latest indicators show that the economic activity remained stable after it declined slightly in the second quarter of the year. This is mainly due to the weakness of the industrial cycle, which affected also Germany, caused by continuing trade tensions. According to Bank of Italy’s surveys, companies’ expectations about the development of the demand for their products rose slightly. However, a slowdown is expected in the next few months, indicating modest investment plans for the year. Despite the decline in international trade, exports grew moderately in the first four months of the year. Given the uncertainties surrounding the global economic outlook, companies gave negative assessments of the future prospects of foreign orders. However, the current account surplus rose; Italy’s net debt position vis-à-vis foreign countries has almost been wiped out. Since the beginning of the year, foreign investors have acquired Italian government securities. The Bank of Italy’s debit balance on the TARGET2 payment system decreased.
16 WorldReginfo - 0ce5f050-b036-415a-a322-984991a7cfaf The decrease in energy prices and the weakness of the economic cycle curbed inflation, which decreased to 0.8% in June (0.4% net of food and energy prices). According to surveys, the inflation expectations of households and companies remain modest, although they were revised slightly upwards compared to the first quarter of the year.
The spreads between Italian and German government securities were affected by the uncertainties surrounding the budget policy: they increased in May and have been decreasing since the first week of June. The revision of the deficit expected for the year and the resulting European Commission's decision not to recommend the start of the excessive deficit procedure against Italy contributed to this decrease, in a context characterised by the general decline in premiums, triggered by prospects for accommodative monetary policies.
Bank loans to the private sector weakened slightly. Growth remains strong for households, while loans to businesses slightly decreased. The increase in the cost of banks' bond funding recorded last year is only gradually being transmitted to interest rate conditions on customer loans, also thanks to high levels of liquidity and banks' favourable capital conditions. However, there are signs of more tightening lending conditions for smaller businesses.
The continuation of trade tensions, which would slowdown exports and affect companies’ propensity to invest, may jeopardise the recovery expected in Italy and the euro area in the second half of 2019. In Italy, the increase in the uncertainties surrounding the direction of the budget policy in the subsequent years may cause new turmoil on the financial markets and affect business investments. Conversely, the beginning of a virtuous circle between budget policies and financial conditions may boost economic activities. The risks for inflation, which are due to the increase in energy prices and the weaker economic activity, are broadly balanced.
ITALY'S ASSETS UNDER MANAGEMENT MARKET According to Assogestioni's (Italy’s association of the investment management industry) figures, in the first half of 2019, the increase in Italy's assets under management continued, with 2,196 billion euro at period end and positive inflows of approximately 47.6 billion euro.
During the period, outflows of open-ended funds amounted to 3.7 billion euro, while inflows of closed-ended funds amounted to 0.6 billion euro. Portfolio management inflows were extremely positive for institutional product management (+50 billion euro), while retail portfolio management performed negatively (-0.48 billion euro).
17 WorldReginfo - 0ce5f050-b036-415a-a322-984991a7cfaf ITALY'S FINANCIAL PRODUCT AND SERVICE DISTRIBUTION MARKET Assoreti's (Italy’s association of the sales networks in the financial services industry) surveys show total inflows of 3.9 billion euro for authorised off-premises financial advisors. The investment mix privileges, although not significantly, custody products (2.1 billion euro); however, growth was driven by the assets under management segment, with net resources of 1,8 billion euro.
The monthly contribution of networks to open-ended UCI, through the direct and indirect distribution of units, is positive for 1.4 billion euro, or 65.7% of the total net resources for the fund management system (2.2 billion euro). Since the beginning of the year, the contribution of networks has risen to 2.7 billion, while the entire open-ended funds system recorded outflows of 3.7 billion euro.
Net inflows from assets under custody was positive at 1.3 billion euro and includes equity securities (1.1 billion), certificates (304 million), monetary market instruments (253 million) and bonds (117 million). Conversely, government securities were negative for 691 million. Liquidity inflows are positive for 815 million euro.
At month end, customers holding contracts, within the sample of companies included in the survey, rose to 4.406 million, Authorised off-premises financial advisors with mandate conferred by the companies covered by the Assoreti’s survey, numbered 23,152 (24,855 for the entire group – estimated number). Of them, 22,889 are effectively operating (with portfolio > 0).
SIGNIFICANT EVENTS OF THE PERIOD
2.1 Capitalisation transactions carried out by Azimut Holding S.p.A.
In the first half of 2019, following the Board of Directors' resolution of 4 May 2017, Azimut Holding S.p.A. made a cash capital injection of 32.9 million euro, in tranches, to increase the share capital of the subsidiary AZ International Holdings SA and finance the Group's international development.
2.2 Loan granted by Banco BPM to Azimut Holding S.p.A.
18 WorldReginfo - 0ce5f050-b036-415a-a322-984991a7cfaf On 22 February 2019, the Parent signed an unsecured loan agreement with Banco BPM worth 200 million euro at the best market terms currently available. The loan (part amortising and part bullet) expires on 31 December 2021. It provides the Group with increased financial flexibility in order to seize any growth and investment opportunity, including buyback programmes, without using the available cash in potentially non-optimal situations.
2.3 Transactions carried out in the first half of 2019 by AZ International Holdings SA:
Rasmala Egypt Asset Management - On 8 January 2019, the Group signed an agreement to acquire 100% of Rasmala Egypt Asset Management (“Rasmala Egypt”), one of the largest independent asset manager in Egypt, from Rasmala Group (“Rasmala”), an independent alternative asset management group. Rasmala Egypt, founded in 1997, specialises on conventional and Shariah compliant portfolio management with AUM of EGP 8.46 billion (USD 474 million), with a strong expertise in equity strategies (85% of total AUM). The company is based in Cairo. The total consideration is calculated based on a percentage of AUM and amounted to 11.2 million euro. The Azimut Group obtained control of Rasmala Egypt Asset Management on 30 June 2019 following the occurrence of the conditions precedent provided for in the relevant contract and the issue of some guarantees by the counterparty. The company was subsequently renamed Azimut Egypt Asset Management.
Youmy Wealth Management - On 12 March 2019, through An Zhong (AZ) Investment Management Hong Kong Ltd, the Group signed an agreement with Youmy Wealth Management (“Youmy”). The agreement governs the strategic trade relationship between Youmy and An Zhong (AZ) Investment Management Hong Kong Ltd and is based on an increasing equity investment in Youmy, subject to the local authorities’ approval. Founded in 2014, Youmy is built on an innovative business model based on partnerships with family offices. Youmy now includes a network of 28 family offices in 15 cities across China. Youmy's expertise extends to the Private Equity and Venture Capital asset classes where their subsidiary manages just over RMB 1 billion of PE and VC funds. Youmy's founders include some of the pioneers of the wealth management industry in China with deep knowledge and insights on the needs of Chinese high net worth clients.
19 WorldReginfo - 0ce5f050-b036-415a-a322-984991a7cfaf Spencer Fuller & Associates - Spencer Fuller & Associates was acquired in March 2019. This financial advisory company based in Australia was acquired via the local sub-holding AZ NGA. The consideration amounted to approximately 4 million euro.
Sigma Fund Management PTY - On 24 April 2019, the company’s Board of Directors approved the early dissolution of Sigma, authorising the directors to take the actions necessary to strike the company off the company register by 31 December 2019 in accordance with local legislation.
P&G S.G.R.’s acquisition by CGM Italia SGR
During the previous year, Azimut Holding S.p.A., through its subsidiary CGM Italia SGR S.p.A. (“CGM”), entered into a sale and purchase agreement with P&G SGR S.p.A. (“P&G SGR”), that provides for the acquisition of P&G SGR’s business concerning the management of UCITS and alternative, non-reserved collective investment funds. P&G SGR, founded in 2005, is one of the main operators in Italy active in the ABS and structured credit sectors, focusing on absolute return strategies in niche markets and contributing to the birth of the European CDO market. P&G has been cooperating with Azimut Group since 2016, with a first joint project of a Luxembourg fund with sub-advisory agreement in favour of P&G (“AZ ABS”). Following this initiative, Azimut and P&G developed another project in the retail segment and launched the Azimut Private Debt fund in the first two months of 2019. The scope of the transaction includes the management mandates for the UCITS fund “AZ Multi Asset – ABS”, and the closed-end alternative, non-reserved investment fund “Azimut Private Debt”. As a result of the transaction, all the activities, relationships and contracts will be transferred within the scope of the Azimut Group. The agreement provides several representations and warranties, including indemnities, and non-compete clauses. The acquisition of P&G SGR was completed in June 2019 following the occurrence of the conditions precedent provided for in the relevant contract and the authorisation from the Bank of Italy. The total consideration amounted to 8 million euro.
2.4 New methodology to calculate variable performance fees on Luxembourg funds
On 24 January 2019, the Azimut Group submitted to the Luxembourg supervisory authority a new methodology to calculate variable performance fees on Luxembourg funds, which will
20 WorldReginfo - 0ce5f050-b036-415a-a322-984991a7cfaf generate significant cost savings for customers, in line with that set out in IOSCO principles. Specifically, the new methodology will be based on a benchmark annual calculation plus a spread pegged to several product categories while providing for an increase in fixed performance fees of approximately 50 basis points. Customers’ TER will remain in line with that applied by competitors and other market participants.
2.5 Azimut Holding S.p.A. General Shareholders’ Meeting of 24 April 2019
The shareholders’ meeting (both ordinary and extraordinary) of 24 April 2019 resolved the following: Approval of 2018 financial statements The shareholders’ meeting approved the 2018 financial statements, which included a Parent Company net profit of 186.3 million euro. The shareholders concurrently resolved to pay a dividend of 1.50 euro per ordinary share, pre-tax, which was paid as of 22 May 2019, 20 May 2019 ex-dividend payment date and 21 May 2019 as the record date. Each shareholder received (before withholding tax) a minimum of ¾ by cash and the residual portion in shares of Azimut Holding, held as treasury shares by the company. These shares were assigned after the ex- dividend payment date on 20 May 2019. The portion of dividends to be paid in cash, the value and the allocation ratio of any dividend to be paid as shares, and the fractional rights arising from the allocation, were disclosed to the shareholders and the public on the third trading day prior to the ex-dividend payment date (20 May 2019), i.e., on 15 May 2019, based on the official price of Azimut Holding shares in the last five trading days, including 15 May 2019. The fractional rights arising from the share allocation were monetised based on the official price resulting from the transactions carried out on the last market trading day prior to the ex- dividend date, without expenses, fees or other charges for the shareholders. The shareholders also approved the payment to Fondazione Azimut Onlus of 1.6 million euro, equal to 1% of pre- tax consolidated profit and the payment of 12.21 euro for each profit-participating financial instrument held by Top Key People at the time of approval of payment of the dividend. Appointment of the Board of Directors and the Board of Statutory Auditors The shareholders’ meeting appointed twelve members of the Board of Directors, of whom ten with a three-year term of office and two, representing the distribution network, for one year, confirming Mr. Pietro Giuliani as Chairman.
21 WorldReginfo - 0ce5f050-b036-415a-a322-984991a7cfaf The shareholders’ meeting also appointed the Board of Statutory Auditors for the next three years.
Proposal for purchase and allocation of treasury shares and consequent resolutions Furthermore, the Shareholders approved the purchase of up to 28,000,000 Azimut Holding S.p.A. ordinary shares, or 19.55% of the current share capital, including in one or more instalments, considering the shares already in portfolio upon purchase at a minimum unit price equal to at least the carrying amount of Azimut Holding S.p.A. ordinary shares and a maximum unit price of 50 euro.
Resolution on remuneration policies. Remuneration Report and resolution pursuant to article 123-ter, paragraph 6 of Legislative decree no. 58/98. The Shareholders approved the Parent Company policy concerning the remuneration of members of the management boards, general managers and key managers, as well as the procedures used to adopt and implement said policy.
2.6 Other significant events of the period
During the period 19 March 2018 - 21 November 2018, Azimut Capital Management SGR S.p.A. was subject to Consob (the Italian commission for listed companies and the stock exchange) regular inspection. The supervisory authorities provided the SGR's Board of Directors with the final report on the inspection on 28 February 2019. The SGR provided extensive feedback on the above report on 1 April 2019 by submitting an action plan to deal with the critical issues identified. The plan was subsequently integrated to meet the additional requests which resulted from the continuous interactions with the authorities. In this respect, the company was required to prepare a quarterly status report to be submitted to the supervisory authorities: the first report was submitted on 31 July 2019 and covered the progress of the implementation of the corrective measures at 30 June 2019.
At the same time, on 28 March 2019, Consob notified the commencement of a sanctioning procedure for violations subject to administrative sanctions against Azimut Capital Management Sgr. In this respect, the related rebuttal arguments were filed on 14 June 2019. At the publication date of this consolidated interim financial report, the outcome of the sanctioning procedure was still unknown.
22 WorldReginfo - 0ce5f050-b036-415a-a322-984991a7cfaf
AZIMUT HOLDING S.P.A. AND GROUP: MAIN RISKS AND UNCERTAINTIES
The main risks and uncertainties to which Azimut Holding S.p.A. and the Group are exposed are as follows: - Strategic risk; - Sales network risks; - Operational risk; - Outsourcing risk; - Reputational risk; - Compliance risk; - Financial risk; - Liquidity risk. For further information on the main risks and uncertainties for the Group, reference should be made to the consolidated financial statements at 31 December 2018. As regards Financial risks in particular, please see details in “Other Information – Information on risk management and hedging policies” in the notes to the condensed consolidated interim financial statements.
23 WorldReginfo - 0ce5f050-b036-415a-a322-984991a7cfaf RELATED-PARTY DISCLOSURES
Pursuant to Consob Regulation on Related Parties (Resolution No. 17221 of 10 March 2010, as amended), on 22 November 2010, the Board of Directors of Azimut Holding S.p.A. approved the procedures that ensure transparency and fairness of related-party transactions (“Related-Party Transaction Procedure” available on Azimut’s website at www.azimut-group.com).
With reference to paragraph 8 of article 5 of the Consob regulation on periodic disclosure of related-party transactions, the Group did not engage in any “significant” transactions during the first half of 2019.
No other atypical or unusual transactions were performed.
Disclosures on other related-party transactions carried out as part of ordinary business activities are provided in the relevant paragraph in the notes to the condensed consolidated interim financial statements.
ORGANISATIONAL STRUCTURE AND CORPORATE GOVERNANCE
Human Resources
At 30 June 2019, Group personnel amounted to 970, broken down as follows:
Position 30/06/2019 31/12/2018 30/06/2018
Managers 116 133 166 Middle managers 173 194 184 Office staff 681 635 559 Total 970 962 909
24 WorldReginfo - 0ce5f050-b036-415a-a322-984991a7cfaf BUSINESS OUTLOOK
Given the above figures and the positive results of the subsidiaries in early 2018, consolidated performance is expected to be positive this year. Nonetheless, this year’s financial position and results of operations will also be affected by financial market trends.
Milan, 1 August 2019
Chief Executive Officer On behalf of the Board of Directors (Gabriele Roberto Blei)
25 WorldReginfo - 0ce5f050-b036-415a-a322-984991a7cfaf CONSOLIDATED BALANCE SHEET AS AT 30 JUNE 2019
Assets 30/06/2019 31/12/2018 30/06/2018 Cash and cash equivalents 32 23 22 Financial assets at fair value through profit or loss 6,111,001 5,848,778 6,463,106 c) other financial assets mandatorily measured at fair value 6,111,001 5,848,778 6,463,106
Financial assets at fair value through other comprehensive income 8,104 4,974 3,174 Financial assets at amortised cost 286,936 217,709 171,773 Equity investments 2,955 2,869 2,411 Property, plant and equipment 55,421 8,470 7,621 Intangible assets 634,752 602,347 583,463 of which: - goodwill 549,017 525,976 513,449 Tax assets 68,544 74,879 76,327 a) current 15,341 21,887 25,612 b) deferred 53,203 52,992 50,715 Non-current assets and disposal groups - 300 - Other assets 337,414 325,528 296,371 TOTAL ASSETS 7,505,159 7,085,877 7,604,268
26 WorldReginfo - 0ce5f050-b036-415a-a322-984991a7cfaf Liabilities and Shareholders’ Equity 30/06/2019 31/12/2018 30/06/2018
Financial liabilities at amortised cost 602,554 371,711 357,388 a) Payables 251,696 17,546 6,948 b) Outstanding securities 350,858 354,165 350,440 Technical reserves where the investment risk is borne by policyholders 184,689 177,068 202,236 Financial liabilities designated at fair value 5,758,337 5,582,010 6,150,274 Tax liabilities: 74,114 72,505 74,944 a) current 6,412 4,356 5,740 b) deferred 67,702 68,149 69,204 Other liabilities 242,764 217,527 198,898 Staff severance pay (TFR) 2,582 2,812 3,583 Provisions for risks and charges: 40,695 37,787 37,441 c) other provisions 40,695 37,787 37,441 Share capital 32,324 32,324 32,324 - Treasury shares (-) - 23,713 - 46,337 36,337 Equity instruments 36,000 36,000 36,000 Share premium reserve 173,987 173,987 173,987 Reserves 199,458 288,003 289,984 Valuation reserves - 5,345 - 5,512 - 7,117 Profit (loss) for the period 171,025 122,146 72,584 Minority interests 15,688 23,846 18,079 TOTAL LIABILITIES 7,505,159 7,085,877 7,604,268
27 WorldReginfo - 0ce5f050-b036-415a-a322-984991a7cfaf CONSOLIDATED INCOME STATEMENT AT 30 JUNE 2019
Items 30/06/2019 30/06/2018 31/12/2018
Fee and commission income 434,675 358,433 699,010 Fee and commission expense (173,114) (152,480) (304,791) NET FEE AND COMMISSION INCOME 261,561 205,953 394,219 Dividends and similar income 3
Interest income and similar income 451 461 1,198 Interest expense and similar charges (6,409) (4,263) (8,922) Profits (losses) on disposal or repurchase of: 31 (12) (9) b) financial assets at fair value through other comprehensive income 31 (12) (9) Net gains (losses) on other financial assets and financial liabilities at fair value through profit or loss 13,075 (2,427) (22,138) a) assets and liabilities designated at fair value 6,504 (1,063) (13,666) b) other financial assets mandatorily measured at fair value 6,571 (1,364) (8,472)
Net premiums 879 797 2,111 Net profits (losses) on financial instruments at fair value through profit or loss 146,008 89,610 166,035
Change in technical reserves where the investment risk is borne by (7,621) 25,621 50,789 policyholders
Redemptions and claims (80,623) (97,404) (166,859) TOTAL INCOME 327,352 218,336 416,427 Administrative costs: (120,770) (118,284) (240,699) a) personnel costs (53,019) (48,764) (97,608) b) other administrative costs (67,751) (69,520) (143,091) Net accruals to provisions for risks and charges (3,575) (3,156) (4,280) Net impairment losses/reversals of impairment losses on property, plant and equipment (5,328) (1,182) (2,295) Net impairment losses/reversals of impairment losses on intangible assets (5,337) (5,241) (12,522) Other operating income and costs 1,391 763 (522) OPERATING EXPENSE (133,619) (127,100) (260,318) Profits (losses) on equity investments 180 28 190 PRE-TAX PROFIT (LOSS) FROM CONTINUING OPERATIONS 193,913 91,264 156,299 Income tax on profit from continuing operations (15,745) (7,647) (15,302) NET PROFIT (LOSS) FROM CONTINUING OPERATIONS 178,168 83,617 140,997 Gains/(losses) of discontinued operations, net of taxes (417)
Profit (loss) for the year/period attributable to minority interests 7,143 11,033 18,434 PROFIT (LOSS) FOR THE YEAR/PERIOD 171,025 72,584 122,146
Chief Executive Officer On behalf of the Board of Directors (Gabriele Roberto Blei)
28 WorldReginfo - 0ce5f050-b036-415a-a322-984991a7cfaf CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME 30/06/2019 30/06/2018 31/12/2018 Items Profit (loss) for the year/period 178,168 83,617 140,997 Other comprehensive income, net of taxes, not transferred to profit or loss Defined benefit plans (57) (128) 159 Other comprehensive income, net of taxes, transferred to profit or loss Exchange rate differences 212 2,569 3,662 Financial assets (other than equity instruments) at fair value through other comprehensive income 12 (78) 147 Non-current assets held for sale (417) Total other comprehensive income (expense), net of taxes 167 2,363 3,551 Comprehensive income 178,335 85,980 144,548 Consolidated comprehensive income attributable to minority interests 7,143 11,033 18,434 Consolidated comprehensive income attributable to the parent company 171,192 74,947 126,114
Chief Executive Officer On behalf of the Board of Directors (Gabriele Roberto Blei)
29 WorldReginfo - 0ce5f050-b036-415a-a322-984991a7cfaf Statement of changes in consolidated shareholders' equity for the period ended 30 June 2019 Allocation of Changes during the period prior year Shareholders’ equity
profit (loss) transactions
balance
Items
/06/2019
2019
at 30at
Reserves
Balance at 31/12/18 at Balance 01/01/19 at Balance
Other changes Other
Changes in reserves in Changes
Changes in opening opening in Changes
Issue of new shares of new Issue
Treasury share purchases purchases share Treasury
Changes in equity instruments equity in Changes
Dividends and other distributions other and Dividends
Group shareholders’ equity at 30/06/2019 at equity shareholders’ Group
Extraordinary dividend distribution dividend Extraordinary
Shareholders’ equity attributable to minority interests interests minority to attributable equity Shareholders’
Consolidated comprehensive income for the first half of first half the for income comprehensive Consolidated
Share capital 32,324 32,324 32,324 70,440
Share premium reserve 173,987 173,987 173,987 Other reserves:
a) income-related 396,918 396,918 (84,365) (4,180) 308,373 (56,251)
b) other (108,915) (108,915) (108,915) Valuation reserves (5,512) (5,512) 167 (5,345) (5,644)
Equity instruments 36,000 36,000 36,000 Treasury shares (46,337) (46,337) 22,624 (23,713) (122,146 Profit (loss) for the period 122,146 122,146 ) 171,025 171,025 7,143
(206,51 171,19 Group shareholders’ equity 600,611 - 600,611 1) 18,444 2 583,736 Shareholders’ equity attributable to minority interests 23,846 23,846 (15,301) 7,143 15,688 Chief Executive Officer On behalf of the Board of Directors (Gabriele Roberto Blei)
30 WorldReginfo - 0ce5f050-b036-415a-a322-984991a7cfaf Statement of changes in consolidated shareholders' equity for the period ended 30 June 2018 Allocation of Changes during the period prior year profit Shareholders’ equity
(loss) transactions
Items
2018
at 30.06.18 at
new shares new
Reserves
Other changes Other
Balance at 31/12/2017 at Balance 01/01/2018 at Balance
Changes in reserves in Changes
shareholders’ equity at 30.06.18 at equity shareholders’
Changes in opening balance opening in Changes
Issue of Issue
Treasury share purchases purchases share Treasury
Group Group
Changes in equity instruments equity in Changes
Dividends and other distributions other and Dividends
Extraordinary dividend distribution dividend Extraordinary
Shareholders’ equity attributable to minority interests interests minority to attributable equity Shareholders’ Consolidated comprehensive income for the first half of first half the for income comprehensive Consolidated
Share capital 32,324 32,324 32,324 71,716
Share premium reserve 173,987 173,987 173,987 Other reserves:
a) income-related 383,478 27,965 411,443 5,944 (19,072) 398,315 (59,885) (108,33 b) other (104,409) (104,409) (3,922) 1) Valuation reserves (13,542) 4,062 (9,480) 2,363 (7,117) (4,785)
Equity instruments 36,000 36,000 36,000 (30,066 (36,337 Treasury shares (130,028) (130,028) ) 123,757 ) (5,94 (208,842 Profit (loss) for the period 214,786 214,786 4) ) 72,584 72,584 11,033 (208,84 (30,06 Group shareholders’ equity 592,596 32,027 624,623 2) 6) 100,763 74,947 561,425 Shareholders’ equity attributable to minority interests 19,592 19,592 (12,546) 11,033 18,079 Chief Executive Officer On behalf of the Board of Directors (Gabriele Roberto Blei)
31 WorldReginfo - 0ce5f050-b036-415a-a322-984991a7cfaf Consolidated statement of changes in shareholders’ equity at 31 December 2018 Changes during the period
Allocation of prior
year profit (loss) Shareholders’ equity transactions
Items
Reserves
in equity instruments equity in
hanges in reserves in hanges
Other changes Other
interests at 31/12/18 at interests
Balance at 31/12/2017 at Balance 01/01/2018 at Balance
C
Issue of new shares of new Issue
Changes in opening balance opening in Changes
Treasury share purchases purchases share Treasury
Changes
Group shareholders’ equity at 31/12/18 at equity shareholders’ Group
Dividends and other distributions other and Dividends
Extraordinary dividend distribution dividend Extraordinary
Shareholders’ equity attributable to minority minority to attributable equity Shareholders’
Consolidated comprehensive income for 2018 for income comprehensive Consolidated
Share capital 32,324 32,324 32,324 63,803
Share premium reserve 173,987 173,987 173,987 Other reserves: (52,680 a) income-related 383,478 27,965 411,443 (14,525) 396,918 )
b) other (104,409) (104,409) (4,506) (108,915) Valuation reserves (13,542) 4,062 (9,480) 3,968 (5,512) (5,711)
Equity instruments 36,000 36,000 36,000 Treasury shares (130,028) (130,028) (40,070) 123,761 (46,337) Profit (loss) for the period 214,786 214,786 (214,786) 122,146 122,146 18,434 Group shareholders’ equity 592,596 32,027 624,623 (229,311) (40,070) 119,255 126,114 600,611 Shareholders’ equity attributable to minority interests 19,592 19,592 (14,180) 18,434 23,846
Chief Executive Officer On behalf of the Board of Directors (Gabriele Roberto Blei)
32 WorldReginfo - 0ce5f050-b036-415a-a322-984991a7cfaf CONSOLIDATED CASH FLOW STATEMENT Indirect method
A. OPERATING ACTIVITIES 1H2019 1H2018 2018
1. Operations 317,372 79,561 85,618 - profit (loss) for the period (+/-) 171,025 72,584 122,146
- gains/losses on held-for-trading financial assets and financial assets/liabilities at fair value through profit or loss (-/+) 123,418 (13,797) (63,878) - gains/losses on hedging activities (-/+) 0 0 0 - net impairment losses for credit risk (+/-) 0 0 0 - net impairment losses on property, plant and equipment and intangible assets (+/-) 10,665 6,423 14,817 - net accruals to provisions for risks and charges and other expenses/income (+/-) 3,575 3,156 4,280 - taxes and tax credits still to be paid (+) 5,084 7,647 8,026 - net impairment losses on discontinued assets, net of tax (+/-) 0 0 417 - other changes (+/-) 3,606 3,548 (190) 2. Cash generated from or used by financial assets (311,445) 337,659 957,671 - held-for-trading financial assets 0 0 0 - financial assets measured at fair value (302,612) 421,181 1,081,723 - other assets mandatorily measured at fair value (4,786) (99) (626)
- financial assets at fair value through other comprehensive income (2,627) 0 (1,301) - financial assets measured at fair value 0 0 0 - financial assets at amortised cost 3,301 438 (11,919) - other assets (4,477) (83,862) (110,206) 3. Cash generated from or used by financial liabilities 431,278 (484,148) (1,047,529) - financial liabilities at amortised cost 227,237 (20,229) (2,358) - financial liabilities held-for-trading 0 0 0 - financial liabilities measured at fair value 176,327 (455,187) (1,023,451) - technical reserves 7,621 (25,621) (50,789) - other liabilities 20,092 16,889 29,069 Net cash generated from or used by operating activities 437,448 (66,927) (4,240)
B. INVESTMENT ACTIVITIES
1. Cash generated from 0 0 0 - disposal of equity investments 0 0 0 - dividends from equity investments 0 0 0 - disposal of property, plant and equipment 0 0 0 - disposal of intangible assets 0 0 0 - disposal of subsidiaries and business units 0 0 0 2. Cash used by (90,107) (33,062) (61,457) - purchase of equity investments (86) (1,068) (1,336) - purchase of property, plant and equipment (52,279) (700) (2,662) - purchase of intangible assets (14,701) (17,149) (30,787) - purchase of subsidiaries and business units (23,041) (14,145) (26,672) Net cash generated from or used by investment activities (90,107) (33,062) (61,457)
33 WorldReginfo - 0ce5f050-b036-415a-a322-984991a7cfaf C. FINANCING ACTIVITIES - issue/purchase of treasury shares 22,624 (30,066) (40,070) - issue/purchase of equity instruments 0 0 0 - dividends and other distributions (206,511) (208,842) (229,311) - change in other reserves (4,013) 135,153 155,250 - sale/purchase of non-controlling interests (8,158) (1,513) 4,254 Net cash generated from or used by financing activities (196,058) (105,268) (109,877)
NET CASH GENERATED OR USED FOR THE PERIOD/YEAR 151,283 (205,257) (175,574)
RECONCILIATION
1H2019 1H2018 2018
Opening cash and cash equivalents 323,113 498,686 498,686
Total net cash generated/used for the period/year 151,283 (205,257) (175,574)
Closing cash and cash equivalents 474,396 293,429 323,113
Reference should be made to the paragraph on the “Consolidated financial position” of the Management Report for a breakdown of “Cash and cash equivalents”.
Chief Executive Officer On behalf of the Board of Directors (Gabriele Roberto Blei)
34 WorldReginfo - 0ce5f050-b036-415a-a322-984991a7cfaf NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Reporting criteria for condensed consolidated interim financial statements and accounting standards
The condensed consolidated interim financial statements at 30 June 2019 comply with the International Accounting Standards (IAS) / International Financial Reporting Standards (IFRS) issued by the International Accounting Standards Board (IASB) and the related interpretations of the IFRS Interpretations Committee, endorsed by the European Commission and in force on 30 June 2019, implementing Italian Legislative Decree No. 38/2005 and Regulation (EC) No. 1606/2002, specifically IAS 34 - Interim Financial Reporting. The condensed consolidated interim financial statements have been drawn up in accordance with the instructions issued by the Bank of Italy for the preparation of financial statements of IFRS financial intermediaries, other than banking intermediaries, on 15 March 2019. The Instructions lay down the mandatory financial statement schedules and how they must be filled in, and the content of the notes thereto for asset management companies that were adequately adjusted to better represent the Group's financial position and business activities, which include the Irish insurance company Az Life Dac. In particular, the balance sheet and income statement include the items which are typical of the insurance business, taking as a reference ISVAP (now IVASS) Regulation No. 7 dated 13 July 2007 concerning the provisions governing the consolidated financial statements of insurance companies drawn up on the basis of IAS/IFRS. The condensed consolidated interim financial statements have also been drawn up based on the interpretative documents on the application of IAS/IFRS in Italy prepared by the Italian Accounting Standard Setter (OIC), and the ESMA (European Securities and Markets Authority) and Consob (the Italian Commission for Listed Companies and the Stock Exchange) documents which refer to specific IAS/IFRS. These consolidated interim financial statements have been prepared in a condensed format; consequently, they should be read together with the annual financial statements at 31 December 2018. These condensed consolidated interim financial statements have been prepared using the same accounting policies and methods applied to draw up the consolidated financial statements at 31 December 2018, except for the application of the international
35 WorldReginfo - 0ce5f050-b036-415a-a322-984991a7cfaf accounting standards that became effective on 1 January 2019 and described in the note “Accounting standards, amendments and interpretations endorsed by the European Union and in force from 1 January 2019". It is comprised of the balance sheet, the income statement, the statement of comprehensive income, the cash flow statement (prepared using the indirect method), the statement of changes in shareholders’ equity and these notes. In accordance with the provisions of article 5.2 of Legislative decree no. 38 of 28 February 2005 "Exercise of the options permitted by article 5 of (EC) regulation no. 1606/2002 on the application of international accounting standards", the condensed consolidated interim financial statements have been drawn up using the euro as the reporting currency. Unless otherwise specified, the amounts shown in the financial statements and the notes thereto are in thousands of euros. These condensed consolidated interim financial statements have been prepared based on the going concern assumption. Financial, operating and other indicators1 have been considered which, as also shown in the joint document issued on 6 February 2009 by the supervisory authorities Bank of Italy, Consob and ISVAP (now IVASS), may highlight problems that, if not taken into proper consideration, could compromise the Group’s stability and ability to operate as a going concern. An overall valuation of the past and current financial position and results of operations of the Group, its operating guidelines, business model and the risks to which business activity is exposed2, leads us to believe that there is no doubt that the Group can continue to operate on a going concern basis for the foreseeable future. The condensed consolidated interim financial statements have been prepared clearly and give a true and fair view of the Group's financial position, results of operations for the period, changes in shareholders' equity and cash flows. Transactions and other corporate events have been recognised and presented in accordance with the principle of substance over form. As stated above, the condensed consolidated interim financial statements have also been prepared based on the going concern assumption, on an accruals basis, based on the commonly-used criteria of historic cost, save for the valuation of
1 Examples of which are shown in audit standard No. 570 on “Going Concerns”. 2 As described in the Management Report to the financial statements at 31 December 2018 to which reference should be made.
36 WorldReginfo - 0ce5f050-b036-415a-a322-984991a7cfaf certain financial assets and liabilities, in the cases where the fair value criterion must be applied. Assets and liabilities, costs and income have not been offset against each other, unless required or permitted by a standard or interpretation.
37 WorldReginfo - 0ce5f050-b036-415a-a322-984991a7cfaf Accounting standards, amendments and interpretations in force from 1 January 2019 Standards IASB publication Endorsement Date of coming date date into force IFRS 16 Leases 13 January 2016 31 October 2016 1 January 2019 IFRIC 23 “Uncertainty over 7 June 2017 23 October 2018 1 January 2019 income tax treatments”
Amendments IASB publication Endorsement Date of coming date date into force Amendments to IFRS 9: 12 October 2017 22 March 2018 1° January 2019* Prepayment features with negative compensation
Amendments to IAS 28: Long- 12 October 2017 8 February 2019 1° January 2019* term interests in associates and joint ventures Annual improvements to IFRS 12 December 14 March 2019 1° January 2019* 2015-2017 cycle 2017 Amendments to IAS 19: plan 7 February 2018 13 March 2019 1° January 2019* amendments, curtailments, and settlements * Date identified by IASB. Confirmation of the European Union's competent bodies is pending.
Accounting standards, amendments and interpretations which will come into force. Standards IASB publication Endorsement Date of coming date date into force IFRS 14 “Regulatory deferral 30 January 2014 n.a.* n.a.* accounts” IFRS 17 “Insurance contracts” 18 May 2017 --- 1 January 2021 * The European Commission does not intend to start the endorsement process concerning IFRS 14 (interim standard) pending the publication of the final standard governing tariff-regulated activities.
Amendments IASB publication Endorsement Date of coming date date into force Amendments to IFRS 3: 22 October 2018 --- 1 January 2020 Definition of a business Amendments to IAS 1 and IAS 31 October 2018 --- 1 January 2020 8: Definition of material
38 WorldReginfo - 0ce5f050-b036-415a-a322-984991a7cfaf Accounting policies
The IAS/IFRS applied to prepare the Azimut Group's condensed consolidated interim financial statements, governing the classification, recognition, measurement and derecognition criteria of asset and liability items and the recognition of income and expense are those in force at the drafting date of this report, as endorsed by the European Union. For information on the classification, recognition, measurement and derecognition criteria of the main items, reference should be made to that set out in Part A.2. of the Notes to the Azimut Group's consolidated financial statements at 31 December 2018. In addition to that set out in Part A.2, following the completion of the endorsement procedure, IFRS 16 became effective on 1 January 2019.
Transition to IFRS 16
The following accounting standard, amendments and interpretations were applied for the first time starting from 1 January 2019. On 13 January 2016, the IASB published IFRS 16 – Leases which replaced IAS 17–Leases, and IFRIC 4 Determining whether an Arrangement contains a Lease, SIC-15 Operating Leases— Incentives and SIC-27 Evaluating the Substance of Transactions Involving the Legal Form of a Lease. The standard introduces a new definition of lease and a control-based criterion (right of use) to distinguish between leases and contracts for the provision of services, specifically: the identification of the asset, its right of substitution, the right to obtain substantially all the economic benefits from the use of the asset and, finally, the right to direct the identified asset’s use. It provides a single lessee accounting model, requiring lessees to recognise assets and liabilities for all leases unless, including operating ones. By contrast, the standard does not introduce significant changes in accounting by lessors. Finally, for FTA purposes, the Group opted to apply the so-called modified retrospective approach, whereby the right of use is deemed equal to the lease liability, without modifying the 2018 comparative information in accordance with IFRS 16, paragraphs C7-C13. Specifically, with respect to the leases previously classified as operating leases, the group recognised:
39 WorldReginfo - 0ce5f050-b036-415a-a322-984991a7cfaf a) a financial liability equal to the present value of the residual future lease payments at the date of transition, discounted at their incremental borrowing rate ruling at the date of transition; b) a right of use equal to the amount of the financial liability at the date of transition, net of any prepayments and accrued income/accrued expenses and deferred income related to the lease and recognised in the balance sheet at the reporting date. The right of use and the lease liability were estimated at 56.6 million euro at 1 January 2019. The decision to adopt the modified approach (option B) has no impact on shareholders’ equity. The table below shows the impact of the adoption of IFRS 16 at the date of transition.
Impact at the date of transition Euro/000 (01.01.2019) ASSETS Property, plant and equipment Right of use - buildings 54,385 Right of use - cars 340 Right of use - printers 1,858 Total 56,583 LIABILITIES Payables Lease liabilities 56,583 Total 56,583
Reconciliation of lease liabilities 01/01/2019 Operating lease commitments (IAS 17) not discounted at 31 December 2018 62,916 Operating lease liabilities to be recognised in the balance sheet as at 1 62,916 January 2019, not discounted Discount effect on operating lease liabilities - 6,333 Total lease liabilities (IFRS 16) at 1 January 2019 56,583
The table below shows the reconciliation between the consolidated balance sheet as at 31 December 2018 and that as at 1 January 2019 calculated under IFRS 16.
EFFECTS OF thousands of euro 31.12.2018 01.01.2019 IFRS 16 Assets Cash and cash equivalents 23 23 Financial assets at fair value through profit or loss 5,848,778 5,848,778 Financial assets at fair value through other 4,974 4,974 comprehensive income Financial assets at amortised cost 217,709 217,709 Equity investments 2,869 2,869 Property, plant and equipment 8,470 56,583 65,053
40 WorldReginfo - 0ce5f050-b036-415a-a322-984991a7cfaf Intangible assets 602,347 602,347 Tax assets 74,879 74,879 Other assets 325,528 325,528 Total assets 7,085,577 56,583 7,142,160
EFFECTS OF thousands of euro 31.12.2018 01.01.2019 IFRS 16 Liabilities Financial liabilities at amortised cost: 371,711 371,711 b) Payables 17,546 56,583 74,129 c) Outstanding securities 354,165 354,165 Technical reserves where the investment risk is borne by 177,068 177,068 policyholders Financial liabilities measured at fair value 5,582,010 5,582,010 Tax liabilities 72,505 72,505 Other liabilities 217,527 217,527 Staff severance pay (TFR) 2,812 2,812 Provisions for risks and charges 37,787 37,787 Share capital 32,324 32,324 Treasury shares (-) - 46,337 - 46,337 Equity instruments 36,000 36,000 Share premium reserve 173,987 173,987 Reserves 288,003 288,003 Valuation reserves - 5,512 - 5,512 Profit (loss) for the year 122,146 122,146 Minority interests 23,846 23,846 Total liabilities 7,085,877 56,583 7,142,460
The Group adopted IFRS 16 availing itself of the exemption allowed by paragraph 5(a) of IFRS 16 on the short-term leases of the following asset categories: • buildings for office use; • company cars; • printers. Similarly, it availed itself of the exemption allowed by paragraph 5(b) of IFRS 16 related to leases where the underlying asset has a low value (i.e., assets underlying the lease never exceed 5 thousand euro, when new). The exemption applied mainly to the following categories: • computers, telephones and tablets; • printers; • other electronic devices.
41 WorldReginfo - 0ce5f050-b036-415a-a322-984991a7cfaf For these leases, the adoption of IFRS 16 had no effect on the recognition of the lease liability and the related right-of-use asset. However, lease payments are recognised in profit or loss on a straight-line basis over the term of the relevant leases. With regard to non-lease components, based on the lease payments related to buildings (e.g., considering the existence of building management fees) and those related to cars and electronic devices (considering the existence of additional ancillary costs), the group separated them and recognised them separately from lease components and did not consider them together with the latter components when determining the lease liability and the related right-of-use asset. Furthermore, with respect to transition provisions, the Group also availed itself of the following practical expedients available when opting for the modified retrospective approach: • excluding initial direct costs from the measurement of the right-of-use asset at 1 January 2019; • using the information available at the date of transition to determine the lease term, specifically with respect to the exercise of options to extend or terminate early a lease.
Furthermore, the transition to IFRS 16 introduces some elements of substantial judgement which require the preparation of some accounting policies and the use of estimates and assumptions in relation to the lease term and the incremental borrowing rate. The main estimates and assumptions are as follows: • the Group opted not to apply IFRS 16 to arrangements containing a lease where the underlying asset is an intangible asset; • lease term: the Group analysed all leases and, for each of them, identified the lease term, being the non-cancellable period plus the effects of any extension or early termination options whose exercise is reasonably certain. Specifically, when assessing buildings, the Group considered the facts and the circumstances specific to each asset: regardless of the period («first period» in the case, e.g., of the first 6 years of a 6 + 6 period, or «second or subsequent period»), it has always considered the reasonably certainty of renewal for leases including a renewal option, especially a tacit one: (e.g., in the case of Italian companies, when the lessor waives the right to refuse the renewal of the lease on its first expiration date pursuant to article 29 of Italian Law 392/78); With respect to the other asset categories, mainly company cars and devices, the Group, in general, considered the exercise of any extension or early termination options not probable,
42 WorldReginfo - 0ce5f050-b036-415a-a322-984991a7cfaf based on its usual practice. Car leases do not provide for any renewal option, while IT devices, whose residual term coincides with the expiry date when no explicit renewal option exists, include printers and copiers. • Definition of incremental borrowing rate: since most of the Group’s leases do not include an implicit interest rate, the discount rate to be applied to future lease payments was calculated as the risk-free rate of each country in which the leases were signed, with expiry dates that match the specific lease term, increased by the parent’s specific credit spread.
Significant events after the reporting date This condensed consolidated interim financial report was authorised for publication by Azimut Holding S.p.A’s Board of Directors on 1 August 2019.
43 WorldReginfo - 0ce5f050-b036-415a-a322-984991a7cfaf Other aspects Risks and uncertainties related to estimates The drafting of the condensed consolidated interim financial statements also entails the use of estimates and assumptions that may have a significant impact on the carrying amounts recognised in the balance sheet and the income statement, and on the disclosure about contingent assets and liabilities. The computation of such estimates is based on the use of available information and the adoption of subjective assessments, also based on historical experience, used to develop reasonable assumptions underlying the recognition of operations. These estimates and assumptions, based on the best possible calculations by management, are revised periodically and the effects of any changes are reflected directly in the income statement. Estimates with a significant impact on these condensed consolidated interim financial statements relate to the impairment test on intangible assets (trademark, goodwill and goodwill on consolidation), the recoverability of deferred tax assets, accruals to hedge contingent liabilities for litigation, charges for supplementary indemnity for clients to be paid to financial advisors, tax assessments underway and the financial liabilities recognised in respect of the contractual commitments for the purchase of the residual equity investments in some subsidiaries and/or contractual clauses which provide for put and call options on the Parent Company’s shares assigned to transferors. There is no other relevant information to be disclosed for reporting purposes.
Consolidation scope and methods
The condensed consolidated interim financial statements include the balance sheet and income statement figures of Azimut Holding S.p.A. and the companies directly or indirectly controlled by the latter.
Subsidiaries The Azimut Group consolidation scope has been established in accordance with IFRS 10. Specifically, subsidiaries are those companies in respect of which the Azimut Group is exposed, or has rights, to variable returns from its involvement with the investees and has the ability to affect those returns through its power over the investees. Control exists only when the following elements simultaneously exist: (i) the power to direct the relevant activities; (ii)
44 WorldReginfo - 0ce5f050-b036-415a-a322-984991a7cfaf exposure, or rights, to variable returns from involvement with the investee; (iii) the ability to use its power over the investee to affect the amount of its returns.
Associates Associates are those companies subject to significant influence, i.e. companies in which the Azimut Group, either directly or indirectly, holds at least 20% of the voting rights (including “potential” voting rights) or in which – despite holding a smaller percentage of voting rights – has the power to participate in the financial and operating policy decisions, such as the participation in shareholders' agreements, due to specific legal relationships. These companies are consolidated using the equity method whereby on initial recognition the investment is recognised at cost, and the carrying amount is increased or decreased based on the investee’s share of equity, using the most recently approved financial statements of the companies. The difference between the carrying amount of the equity investment and the investee's share of equity is included in the carrying amount of the investee.
Compared to 31 December 2018, the following companies joined the consolidation scope: • Rasmala Egypt Asset Management (now Azimut Egypt Asset Management), based in Egypt, following its 100% acquisition by AZ International Holdings Sa; • Azimut (ME) Limited, a newco, based in the United Arab Emirates, a direct wholly- owned subsidiary of AZ International Holdings Sa; • Spencer Fuller & Associates and Spencer Fuller Lending Solutions Pty Ltd, in which AZ Next Generation has a direct and indirect investment of 57.28%, respectively; while the following companies left the consolidation scope: Azimut Global Counseling S.r.l. (sold to third parties) and H&H Wealth Management Pty Ltd (which ceased operations).
45 WorldReginfo - 0ce5f050-b036-415a-a322-984991a7cfaf Wholly and jointly-owned subsidiaries
Stake Type of Registered Name ownership Voting office Shareholder % stake (*) rights %
A. Wholly-owned companies consolidated on a
line-by-line basis 1 Azimut Capital Management SGR S.p.A. Italy 1 Azimut Holding S.p.A. 100 100 Azimut Holding S.p.A. 51 51 2 AZ Fund Management SA Luxembourg 1 Azimut Capital Management SGR S.p.A. 30 30 Azimut Financial Insurance S.p.A. 19 19 3 AZ Life DAC Ireland 1 Azimut Holding S.p.A. 100 100 4 Azimut Enterprises S.r.l. Italy 1 Azimut Holding S.p.A. 100 100 5 Azimut Analytics S.r.l. in liquidation Italy 1 Azimut Enterprises S.r.l. 100 100 6 Azimut Libera Impresa SGR S.p.A. Italy 1 Azimut Holding S.p.A. 100 100 7 Azimut Financial Insurance S.p.A. Italy 1 Azimut Holding S.p.A. 100 100 8 AZ International Holdings S.A. Luxembourg 1 Azimut Holding S.p.A. 100 100 9 An Zhong (AZ) Investment Management Hong Kong 1 AZ International Holdings SA 100 100 An Zhong (AZ) Investment Management Hong 10 Hong Kong 1 An Zhong (AZ) Investment Management 100 100 Kong Ltd An Zhong (AZ) Investment Management Hong 11 AZ Investment Management (Shanghai) Co. Ltd. Shanghai 1 100 100 Kong Ltd 12 CGM – Azimut Monaco Monaco 1 AZ International Holdings SA 100 100 13 CGM Italia SGR S.p.A. Italy 1 CGM – Azimut Monaco 100 100 14 Katarsis Capital Advisors SA Switzerland 1 AZ International Holdings SA 100 100 15 Eskatos Capital Management Sarl Luxembourg 1 Katarsis Capital Advisors SA 100 100
46 WorldReginfo - 0ce5f050-b036-415a-a322-984991a7cfaf Type of Stake Registered Name ownership Voting office Shareholder % stake (*) rights % A. Wholly-owned companies consolidated on a
line-by-line basis 16 AZ Swiss & Partners SA Switzerland 1 AZ International Holdings SA 51 51 17 AZ Sinopro Financial Planning Ltd Taiwan 1 AZ International Holdings SA 51 51 18 AZ Sinopro Investment Planning Ltd Taiwan 1 AZ Sinopro Financial Planning Ltd 51 51 19 AZ Sinopro Insurance Planning Ltd Taiwan 1 AZ Sinopro Investment Planning Ltd 51 51 20 AZ Investment Management Singapore Ltd Singapore 1 AZ International Holdings SA 100 100 21 AZ Brasil Holdings Ltda Brazil 1 AZ International Holdings SA 99.9 99.9 22 AZ Quest Participações SA Brazil 1 AZ Brasil Holdings Ltda 62.69 62.69 23 AZ Quest Investimentos Ltda Brazil 1 AZ Quest Participações SA 62.69 62.69 24 Azimut Brasil Wealth Management Holding S.A. Brazil 1 AZ Brasil Holdings Ltda 95.8 95.8 M&O Consultoria, Planejamento e Análise de 25 Brazil 1 Azimut Brasil Wealth Management Holding S.A. 95.79 95.79 Valores Mobiliários Ltda 26 Futurainvest Investimentos e Participações Ltda Brazil 1 Azimut Brasil Wealth Management Holding S.A. 95.79 95.79 27 Azimut Brasil Wealth Management Ltda Brazil 1 Azimut Brasil Wealth Management Holding S.A. 95.74 95.74 28 Futurainvest Holding SA Brazil 1 AZ Brasil Holdings Ltda 99.9 99.9 29 Azimut Brasil DTVM Ltda Brazil 1 Futurainvest Holding SA 99.9 99.9 30 Azimut Portföy Yönetimi A.Ş. Turkey 1 AZ International Holdings SA 100 100 31 AZ Mexico Holdings S.A. de CV Mexico 1 AZ International Holdings SA 95.64 95.64 32 Mas Fondos S.A. Mexico 1 AZ Mexico Holdings S.A. de CV 95.64 95.64 33 AZ Next Generation Advisory PTY Ltd Australia 1 AZ International Holdings SA 57.28 57.28 34 Eureka Whittaker Macnaught PTY Ltd Australia 1 AZ Next Generation Advisory PTY Ltd 57.28 57.28
47 WorldReginfo - 0ce5f050-b036-415a-a322-984991a7cfaf Type of Stake Registered Name ownership Voting office Shareholder % stake (*) rights % A. Wholly-owned companies consolidated on a
line-by-line basis 35 Pride Advice PTY Ltd Australia 1 AZ Next Generation Advisory PTY Ltd 57.28 57.28 Lifestyle Financial Planning Services (LFPS) PTY 36 Australia 1 AZ Next Generation Advisory PTY Ltd 57.28 57.28 Ltd 37 Eureka Financial Group PTY Ltd Australia 1 AZ Next Generation Advisory PTY Ltd 57.28 57.28 38 Pride Financial PTY Ltd Australia 1 AZ Next Generation Advisory PTY Ltd 57.28 57.28 39 Wise Planners PTY Ltd Australia 1 AZ Next Generation Advisory PTY Ltd 57.28 57.28 40 Domane Financial Advisers PTY LTD Australia 1 Wise Planners PTY Ltd 57.28 57.28 41 Financial Lifestyle Partners PTY Ltd Australia 1 AZ Next Generation Advisory PTY Ltd 57.28 57.28 42 Harvest Wealth PTY Ltd Australia 1 AZ Next Generation Advisory PTY Ltd 57.28 57.28 43 RI Toowoomba PTY Ltd Australia 1 AZ Next Generation Advisory PTY Ltd 57.28 57.28 44 Empowered Financial Partners PTY Ltd Australia 1 AZ Next Generation Advisory PTY Ltd 57.28 57.28 45 Wealthwise PTY Ltd Australia 1 AZ Next Generation Advisory PTY Ltd 57.28 57.28 46 Priority Advisory Group PTY Ltd Australia 1 AZ Next Generation Advisory PTY Ltd 57.28 57.28 47 Sterling Planners PTY Ltd Australia 1 AZ Next Generation Advisory PTY Ltd 57.28 57.28 48 Logiro Unchartered PTY Ltd Australia 1 AZ Next Generation Advisory PTY Ltd 57.28 57.28 49 Aspire Pty Ltd Australia 1 Logiro Unchartered PTY Ltd 57.28 57.28 50 On-Track Financial Solutions Pty Ltd Australia 1 AZ Next Generation Advisory PTY Ltd 57.28 57.28 51 AZ Sestante Ltd Australia 1 AZ International Holdings SA 100 100 52 AZ Andes SA Chile 1 AZ International Holdings SA 100 100
48 WorldReginfo - 0ce5f050-b036-415a-a322-984991a7cfaf Type of Stake Registered Name ownership Voting office Shareholder % stake (*) rights % A. Wholly-owned companies consolidated on a
line-by-line basis 53 Sigma Funds Management PTY Ltd Australia 1 AZ International Holdings SA 67.3 67.3 54 AZ US Holding Inc. United States 1 AZ International Holdings SA 100 100 55 AZ Apice Capital Management LLC United States 1 AZ US Holding Inc. 70 70 56 Pride SMSF PTY Ltd Australia 1 Pride Financial Pty Ltd 57.28 57.28 57 Priority Advisory Trust Australia 1 Priority Advisory Group PTY Ltd 57.28 57.28 1 Wise Planners Pty Ltd 28.64 28.64 58 Priority Lifestile Advice Pty Ltd Australia 1 Priority Advisory Group Pty Ltd 28.64 28.64 59 Peters & Partners PTY Ltd Australia 1 AZ Next Generation Advisory Accounting PTY Ltd 57.28 57.28 60 Menico Tuck Parrish Financial Solution Pty Ltd Australia 1 AZ Next Generation Advisory PTY Ltd 57.28 57.28 61 AZ Next Generation Accounting PTY Ltd Australia 1 AZ Next Generation Advisory PTY Ltd 57.28 57.28 Azimut (DIFC) Limited (formerly AZ New Horizon United Arab 62 1 AZ International Holdings SA 100 100 Ltd) Emirates 63 Wealthmed Australia Pty Ltd Australia 1 AZ Next Generation Advisory PTY Ltd 57.28 57.28 64 Wealthmed Accounting Pty Ltd Australia 1 Wealthmed Australia Pty Ltd 57.28 57.28 65 Wealthmed Property Pty Ltd Australia 1 Wealthmed Australia Pty Ltd 57.28 57.28 Farrow Hughes Mulcahy Financial Services Pty 66 Australia 1 AZ Next Generation Advisory PTY Ltd 57.28 57.28 Ltd 67 Menico Tuck Parish Pty Ltd Australia 1 AZ Next Generation Advisory PTY Ltd 57.28 57.28 68 Henderson Maxwel No.2 Pty Ltd Australia 1 AZ Next Generation Advisory PTY Ltd 57.28 57.28 69 Henderson Maxwell Financial Planning Pty Ltd Australia 1 Henderson Maxwel No.2 Pty Ltd 57.28 57.28 70 Henderson Maxwell Accounting Pty Ltd Australia 1 Henderson Maxwel No.2 Pty Ltd 57.28 57.28
49 WorldReginfo - 0ce5f050-b036-415a-a322-984991a7cfaf Type of Stake Registered Name ownership Voting office Shareholder % stake (*) rights % A. Wholly-owned companies consolidated on a
line-by-line basis 71 Herwitz Geller Pty Ltd Australia 1 AZ Next Generation Accounting Pty Ltd 57.28 57.28 72 Dunsford Financial Plannings Pty Ltd Australia 1 AZ Next Generation Advisory PTY Ltd 57.28 57.28 73 SDB Financial Solutions SA Switzerland 1 AZ Swiss & Partners SA 51 51 74 BRM Holdich Australia 1 AZ Next Generation Accounting Pty Ltd 57.28 57.28 75 Nextstep Financial Services Pty Ltd Australia 1 Sterling Planners Pty Ltd 57.28 57.28 76 Next Steps Home Loans Pty Ltd Australia 1 Nextstep Financial Services Pty Ltd 57.28 57.28 77 Rit Coastal Australia 1 AZ Next Generation Accounting Pty Ltd 57.28 57.28 78 MP Holdings WA Australia 1 AZ Next Generation Advisory Pty Ltd 57.28 57.28 79 Sage Business Group Pty Ltd Australia 1 AZ Next Generation Accounting Pty Ltd 57.28 57.28 80 PM Financial Services Pty Ltd Australia 1 MP Holdings WA 57.28 57.28 81 MP Wealth WA Pty Ltd Australia 1 MP Holdings WA 57.28 57.28 82 PT Services WA Pty Ltd Australia 1 MP Holdings WA 57.28 57.28 83 MPM Finance Pty Ltd Australia 1 MP Holdings WA 57.28 57.28 84 MPM Specialist Finance Pty Ltd Australia 1 MP Holdings WA 57.28 57.28 85 Spencer Fuller & Associates (*) Australia 1 NGA Next Generation Advisory Ltd 57.28 57.28
86 Spencer Fuller Lending Solutions Pty Ltd (*) Australia 1 Spencer Fuller & Associates 57.28 57.28 United Arab 87 1 AZ International Holdings SA 100 100 Azimut (ME) Limited (*) Emirates Rasmala Egypt Asset Management (now Azimut 88 Egypt 1 AZ International Holdings SA 100 100 Egypt Asset Management) (*)
(*) Type of ownership: (1) majority of voting rights at ordinary shareholders’ meetings (*) Newly consolidated compared to 31 December 2018
50 WorldReginfo - 0ce5f050-b036-415a-a322-984991a7cfaf Investments measured at equity
Stake
Registered Name Voting rights % office Shareholder % Stake
Companies measured at equity
1. Cofircont Compagnia Fiduciaria S.r.l. Italy Azimut Enterprises S.r.l. 30 30
2 . SiamoSoci S.r.l. Italy Azimut Enterprises S.r.l. 22 22 3. Sterling Planners WA Australia Sterling Planners Pty Ltd 28.6 28.6 4. Mofid Entekhab Asset Management Iran AZ International Holdings SA 20 20
51 WorldReginfo - 0ce5f050-b036-415a-a322-984991a7cfaf
Significant assessments and assumptions used to determine the consolidation scope
Unit linked The line-by-line consolidation scope excludes the Unit-Linked Funds (insurance internal funds) ("Unit linked") in which the Azimut Group does not hold any equity investment and to which the IFRS 10 definition of control does not apply. With respect to the mutual funds underlying the Unit-Linked Funds, the Azimut Group considers that these conditions do not apply. Indeed, it believes that: - it does not hold the outstanding majority units; - it does not have full power over the investment entity (funds), since it is limited by funds' regulations governing asset allocation and management policies; - it is not significantly exposed to the variable returns from the investment entity, since the profits or losses from the measurement of Unit-Linked assets are entirely paid to policyholders by adjusting the mathematical reserve. The exposure to the changes in the value of the Group's funds is limited to the change in terms of fee impact. Specifically, the Group is exposed to the risk of changes in entry fees and charges on premiums, linked to the performance of inflows, the management fees related to assets under management and the incentive fees linked to the performance of the managed funds.
Wholly-owned Australian subsidiaries with significant non-controlling interests Since 2015, the Azimut Group, through AZ NGA, the holding company incorporated in November 2014, has begun a series of acquisitions in Australia. The relevant agreements provide for the following: (i) the exchange of shares with AZ NGA shares and the progressive repurchase of said shares in the next ten years, equal to 49% of each company through a put/call option mechanism and (ii) a cash payment to founding members over two years for the residual 51%.
Other wholly-owned subsidiaries with significant non-controlling interests On 30 June 2019, with respect to the investments held by the Azimut Group in AZ Quest Participações SA and Mas Fondos SA, the agreements entered into with the minority
52 WorldReginfo - 0ce5f050-b036-415a-a322-984991a7cfaf shareholders provide for the repurchase of their equity investments using a put/call option mechanism.
Significant restrictions There are no significant legal, contractual or regulatory restrictions within the Azimut Group which may limit the Parent Company's ability to transfer cash and cash equivalents or other assets to other Group companies, or guarantees which may limit the distribution of dividends, capital or loans and advances granted or repaid to other Group companies.
Other information Basis of consolidation Investments in subsidiaries are consolidated on a line-by-line basis, while interests in jointly-controlled entities and associates are measured using the equity method. Line-by-line method – Under this consolidation method, the companies' balance sheet and income statements figures are consolidated line-by-line. The carrying amount of equity investments is offset against the relevant equity of the subsidiary pertaining to the group after allocating the relevant portions of equity and profit or loss to non-controlling interests. Upon first consolidation, the positive differences are recognised under Intangible assets, e.g., goodwill, after allocation to the subsidiary's asset or liability items, where necessary. Conversely, negative differences are taken to profit or loss.
For the purposes of consolidation, the balance sheets and the income statements as at and for the six months ended 30 June 2019 (interim financial statements) of consolidated companies were used. They were prepared in accordance with the IFRS and Group criteria to which they make reference. The interim financial statements used are those prepared by the Boards of Directors of each company, duly reclassified and adjusted to comply with the above standards and criteria. The data about individual interim financial statements are obtained through the information included in the reporting packages prepared in accordance with the Group's accounting policies. The Parent Company interim financial statements and those of the subsidiaries have been consolidated on a line-by-line basis, including all subsidiaries and assuming all assets, liabilities, costs and income of each subsidiary, while eliminating the carrying amount of
53 WorldReginfo - 0ce5f050-b036-415a-a322-984991a7cfaf the equity investments against the relevant share/quotaholders' equity, as set out by the IFRS. The assets, liabilities, costs and income generated by transactions among consolidated companies have been eliminated in full, as have the profits and losses generated by transactions among consolidated companies which do not involve third parties. The positive differences between the equity investments consolidated on a line-by-line basis and the related net fair value of the acquired assets and assumed liabilities, were considered as goodwill on consolidation and tested for impairment to check the adequacy of the amount recognised. For consolidated companies that prepare their interim financial statements in a functional currency different from that of the Parent Company, the amounts expressed in currencies other than the euro were translated as follows: for the balance sheet, using the closing rate (30 June 2019), and for the income statement, using the average exchange rate for the period. The differences arising from the translation of opening shareholders’ equity using period-end exchange rates, along with those triggered by the use of period-end and average exchange rates are classified under the specific item “Exchange rate differences” in the valuation reserve. Equity method—The investees over which the Group exerts significant influence or has joint control, as defined by IAS 28, are measured using the equity method. Under this method, the equity investment is initially recognised at cost and the carrying amount is increased or decreased to reflect the parent's share of profit or loss of the investee earned/incurred after the acquisition date. The share of the profit (loss) for the year attributable to the parent is recognised in the latter's income statement. The dividends received from an investee decrease the carrying amount of the equity investment. Furthermore, the carrying amount may be adjusted also following the change in the percentage of investment in the investee, due to changes in the latter's equity not recognised in the income statement. These changes include also those related to the differences arising from the translation of foreign currency amounts into the financial statements' functional currency. The portion related to these changes is recognised directly in equity. When the investee incurs losses and these losses exceed the carrying amount of the investment, the latter's carrying amount is zeroed and any further losses are recognised only when the parent has legal or
54 WorldReginfo - 0ce5f050-b036-415a-a322-984991a7cfaf constructive obligations or has made payments on behalf of the investee. If the investee subsequently earns a profit, the parent recognises the share of profit attributable to it only when it has reached the same amount of the previously unrecognised loss. The consolidation of associates and/or jointly controlled entities considers the financial statements prepared by the Boards of Directors of each company.
Business combinations carried out in the first half of 2019 At the reporting date, the activities related to the implementation of IFRS 3 and the fair value calculation of the assets and liabilities of the companies acquired in the first half of 2019 are still underway. In this respect, IFRS 3 allows the provisional allocation of acquisition costs, provided that completion takes place within twelve months of the acquisition date.
55 WorldReginfo - 0ce5f050-b036-415a-a322-984991a7cfaf Disclosure about financial asset transfers between portfolios
Transfers between portfolios The Group did not transfer any financial assets between portfolios during the period.
Fair value disclosure Qualitative information The fair value of other financial assets mandatorily measured at fair value is based on the prices reported on the respective markets on the last day of trading in the reference period. At the end of each year, impairment tests are carried out to establish which financial assets are to be impaired. This test is performed for each individual financial instrument, considering the impairment effects in accordance with IFRS 9. Financial assets are derecognised when the contractual rights to the cash flows generated by the assets expire or when the asset is sold and all the risks and rewards of ownership have been transferred.
Quantitative information In accordance with the provisions of IFRS 7 and IFRS 13, the Group companies classify fair value measurement of financial assets and financial liabilities based on a hierarchy that conveys the nature of inputs used. The levels are as follows: • Level 1: (unadjusted) quoted prices in active markets for assets and liabilities identical to those subject to measurement; • Level 2: inputs other than unadjusted quoted prices (as per level 1) that are directly (as in the case of prices) or indirectly (deriving from prices) observable market data; • Level 3: inputs based on unobservable market data.
Specifically, the fair value of a financial instrument measured at level 1 corresponds to the unadjusted price, at which the instrument – or an identical instrument – is sold on an active market on the measurement date. For classification at level 1, prices are measured together with all other characteristics of the financial asset or financial liability: if the quoted price is adjusted in order to take account of specific conditions that require adjustment, the financial instrument is classified under a level other than level 1.
56 WorldReginfo - 0ce5f050-b036-415a-a322-984991a7cfaf Analyses for classification at other levels within the fair value hierarchy are performed analytically for each individual financial asset or liability held/issued; these analyses and measurement criteria are applied consistently over time. With respect to the financial instruments held as part of liquidity management policies and financial liabilities issued, according to the Group's main policies: • government bonds and open-ended mutual funds, whose fair value is designated as level 1 if represented by the Net Asset Value (NAV) provided by the fund manager at the measurement date, are classified as level 1; conversely, with respect to listed funds and Exchange Traded Funds (ETF), level 1 fair value is equal to the closing price of the relevant stock market, and the liquidity to be invested relating to unit-linked policies issued; • level 2 reflects the investments related to the unit-linked policies issued (where the investment risk is borne by policyholders), the associated financial liabilities and the bonds issued; • level 3 reflects the equity securities reported as “Financial assets at fair value through other comprehensive income” measured at cost and financial liabilities related to the commitments to purchase the residual equity investments in some subsidiaries in accordance with ruling contractual agreements. With respect to liabilities, the measurement reflects the estimated amount to be paid to the seller, based on the estimate of the future parameters set out in the relevant contracts, including AUM and profit for the year and which are subject to specific sensitivity analyses. The change in the amount on first recognition is taken to the income statement. The liabilities also include the covered warrant issued by Azimut Capital Management Sgr S.p.A. to some employees (managers) which provides for the subscription of the purchase or sale of a specific underlying financial asset at a pre- established price and date. No covered warrants were issued in the first half of 2019 Financial liabilities are derecognised once settled.
57 WorldReginfo - 0ce5f050-b036-415a-a322-984991a7cfaf Fair value hierarchy Assets and liabilities measured at fair value on a recurring basis: breakdown by fair value level
30/06/2019 31/12/2018 30/06/2018
Financial assets/liabilities measured at fair value Level 1 Level 2 Level 3 Level 1 Level 2 Level 3 Level 1 Level 2 Level 3
1. Financial assets at fair value through profit or loss
a) held-for-trading financial assets b) financial assets designated at fair value c) financial assets mandatorily measured at fair value 249,369 5,861,632 166,340 5,682,438 170,207 6,292,899
2. Financial assets at fair value through other comprehensive income 2,660 5,444 2,157 2,817 1,658 1,516
3. Hedging derivatives 4. Property, plant and equipment 5. Intangible assets
Total 252,029 5,861,632 5,444 168,497 5,682,438 2,817 171,865 6,292,899 1,516
1. Held-for-trading financial liabilities 2. Financial liabilities designated at fair value 5,688,316 70,021 5,505,370 76,639 6,090,663 82,117 3. Hedging derivatives
Total 5,688,316 70,021 5,505,370 76,639 6,090,663 82,117
58 WorldReginfo - 0ce5f050-b036-415a-a322-984991a7cfaf
Annual changes in financial assets measured at Level 3 fair value on a recurring basis
FINANCIAL ASSETS of of of which: which: which: c) other Financial a) b) financial assets at fair Property held- financial assets value Hedging , plant Tot for- Intangib assets mandato through derivativ and al tradin le assets designat rily other es equipme g ed at measure comprehens nt financi fair d at fair ive income al value value assets 1. Opening balance 2,817 2. Increases 2,760 2.1. Purchases 2,760 2.2. Profits allocated to: 2.2.1 Profit or loss of which: gains 2.2.2 Shareholders’
equity 2.3. Transfers from
other levels 2.4. Other increases 3. Decreases (133) 3.1. Sales (133) 3.2. Redemptions 3.3. Losses charged to: 3.3.1 Profit or loss of which: losses 3.3.2 Shareholders’
equity 3.4. Transfers from
other levels 3.5. Other decreases 4. Closing balance 5,444
59 WorldReginfo - 0ce5f050-b036-415a-a322-984991a7cfaf Annual changes in liabilities measured at Level 3 fair value on a recurring basis
Financial liabilities Held-for-trading measured at fair Hedging derivatives financial liabilities value
1. Opening balance 76,639 2. Increases 2,523 2.1. Purchases 1,418 2.2. Losses charged to: 2.2.1 Profit or loss of which: losses 2.2.2 Shareholders’ equity 1,105 2.3. Transfers from other levels 2.4. Other increases 3. Decreases 9,141 3.1. Sales 3.2. Redemptions 2,160 3.3. Profits allocated to: 6,981 3.3.1 Profit or loss 6,503 of which: gains 6,503 3.3.2 Shareholders’ equity 478 3.4. Transfers from other levels 3.5. Other decreases 4. Closing balance 70,021 Assets and liabilities not measured at fair value or measured at fair value on a non-recurring basis: breakdown by fair value level
Assets/liabilities not 30/06/2019 31/12/2018 30/06/2018 measured at fair value or measured at fair value on a non- CA L1 L2 L3 CA L1 L2 L3 CA L1 L2 L3 recurring basis
1. Financial assets at - - - amortised cost - 217,709 - 217,709 171,773 - 171,773 286,936 286,936 2. Property, plant
and equipment held for ------investment purposes 3. Non-current
assets held for sale and ------300 - 300 - - - discontinued operations
Total 286,936 - 218,009 - 218,009 171,773 - - 171,773 - 286,936 -
1. Financial liabilities at amortised - - - cost 602,554 350,858 251,696 371,711 354,165 17,546 357,388 350,440 6,948 2. Liabilities related - - - to discontinued operations ------Total 602,554 - 350,858 251,696 371,711 - 354,165 17,546 357,388 - 350,440 6,948 CA: Carrying amount L1: Level 1 L2: Level 2 L3: Level 3
60 WorldReginfo - 0ce5f050-b036-415a-a322-984991a7cfaf Disclosure about the “Day one profit/loss” The Group did not carry out transactions which entailed recognition of the so-called “day one profit/loss”.
Operating segment disclosure (IFRS 8) The Azimut Group operates via various companies, each specialising in the sale, marketing, and management of financial and insurance products (essentially unit-linked). As a matter of fact, the nature of the various products and services offered, the structure of the management and operating processes, the type of customers, as well as the methods adopted for the distribution of products and services are sufficiently similar as to ensure that the risks and benefits of the various Group companies do not differ to any great extent but, on the contrary, have many comparable features. Although it operates as a single structure, dedicated in its entirety to asset management and the sale of investment instruments, in which the contributions made by the individual companies appear to be indistinguishable, starting from last year, the Group has launched a review of operating segments in accordance with IFRS 8 and chose the allocation by geographical areas as the method to measure the Group’s performance and make significant economic decisions. Indeed, the Group identified four geographical areas: - the first area (Italy) reflects the activity carried out by the companies directly controlled by Azimut Holding S.p.A., each specialising in the distribution, promotion and management of financial and insurance products (basically unit-linked products) and operating as a single structure, dedicated in its entirety to asset management and the sale of investment instruments, in which the contributions made by the individual companies appear to be indistinguishable and operating results are revised periodically by management for the purpose of decisions regarding allocation of resources and measurement of results and company performance. This area also includes the foreign product companies AZ Fund Management SA and AZ Life Dac; - the three other areas (Europe, Middle East & Africa, America and Asia & Pacific)refer to the activity carried out by the foreign companies belonging to the Luxembourg
61 WorldReginfo - 0ce5f050-b036-415a-a322-984991a7cfaf company AZ International Holdings SA, wholly owned by Azimut Holding S.p.A.. Foreign companies are also specialised in the management, promotion and distribution of financial and asset management products, each in the relevant geographical area and in accordance with the same above-mentioned business model. Therefore, management has set out a consolidated reporting system for AZ International Holdings SA which, in turn, must send the Parent Company Azimut Holding a consolidated reporting package for all foreign companies broken down according to the above geographical areas. This section shows the consolidated figures broken down by geographical area, according to the reporting system selected by management and in line with the information disclosed to the market. The main figures broken down by geographical area are as follows:
Euro/000 30/06/2019 31/12/2018 30/06/2019 31/12/2018 30/06/2019 31/12/2018 Fee and Fee and Area AUM AUM commission commission Total income Total income income income Italy 39,631,005 36,938,101 371,023 579,311 263,013 319,535 Europa - Middle East 4,652,363 3,904,471 19,832 39,124 24,923 18,226 Americas 6,142,538 4,932,682 19,918 35,756 18,337 25,794 Asia-Pacific 5,426,366 4,997,162 23,902 44,819 21,079 52,872
62 WorldReginfo - 0ce5f050-b036-415a-a322-984991a7cfaf The breakdown by company of the above geographical areas/CGUs is as follows: Azimut/Italy CGU
Company Country Geographical area AZ Fund Management Luxembourg Italy AZ International Holdings SA Luxembourg Italy AZ Life Dac Ireland Italy Azimut Capital Management SGR S.p.A. Italy Italy Azimut Enterprises S.r.l. Italy Italy Azimut Financial Insurance S.p.A. Italy Italy Azimut Libera Impresa SGR S.p.A. Italy Italy
Europe, Middle East & Africa CGU
Company Country Geographical area United Arab Europe, Middle East & Azimut (DIFC) Limited Emirates Africa United Arab Europe, Middle East & Azimut (ME) Limited Emirates Africa Rasmala Egypt Asset Management (now Azimut Egypt Europe, Middle East & Egypt Asset Management) Africa Europe, Middle East & AZ Swiss & Partners SA Switzerland Africa Europe, Middle East & Katarsis Capital Advisors SA Switzerland Africa Europe, Middle East & SDB Financial Solutions SA Switzerland Africa Europe, Middle East & Eskatos Capital Management Sarl Luxembourg Africa Europe, Middle East & CGM – Azimut Monaco Monaco Africa Europe, Middle East & CGM Italia SGR S.p.A. Italy Africa Europe, Middle East & Azimut Portföy Yönetimi A.Ş. Turkey Africa
63 WorldReginfo - 0ce5f050-b036-415a-a322-984991a7cfaf Asia & Pacific CGU
Company Country Geographical area AZ Next Generation Advisory Pty Ltd Australia Asia & Pacific Eureka Whittaker Macnaught Pty Ltd Australia Asia & Pacific Lifestyle Financial Planning Services Pty Ltd Australia Asia & Pacific AZ Sestante Ltd Australia Asia & Pacific Eureka Financial Group PTY Ltd Australia Asia & Pacific Pride Financial Pty Ltd Australia Asia & Pacific Wise Planners Pty Ltd Australia Asia & Pacific Financial Lifestyle Partners Pty Ltd Australia Asia & Pacific Pride Advice PTY Ltd Australia Asia & Pacific Harvest Wealth Pty Ltd Australia Asia & Pacific RI Toowoomba Pty Ltd Australia Asia & Pacific Empowered Financial Partners Pty Ltd Australia Asia & Pacific Wealthwise Pty Ltd Australia Asia & Pacific Priority Advisory Group Pty Ltd Australia Asia & Pacific Sterling Planners Pty Ltd Australia Asia & Pacific Sigma Funds Management Pty Ltd Australia Asia & Pacific Logiro Unchartered Pty Ltd Australia Asia & Pacific On-Track Financial Solutions Pty Ltd Australia Asia & Pacific Aspire Pty Ltd Australia Asia & Pacific Pride SMSF Pty Ltd Australia Asia & Pacific Priority Advisory Trust Australia Asia & Pacific Priority Lifestyle Advice Pty Ltd Australia Asia & Pacific Peters & Partners Pty Ltd Australia Asia & Pacific Menico Tuck Parrish Financial Solutions Pty Ltd Australia Asia & Pacific AZ Next Generation Accounting Pty Ltd Australia Asia & Pacific Wealthmed Australia Pty Ltd Australia Asia & Pacific Wealthmed Accounting Pty Ltd Australia Asia & Pacific Wealthmed Property Pty Ltd Australia Asia & Pacific Farrow Hughes Mulcahy Financial Services Pty Ltd Australia Asia & Pacific Domane Financial Advisers PTY LTD Australia Asia & Pacific Menico Tuck Parish Pty Ltd Australia Asia & Pacific Henderson Maxwel No. 2 Pty Ltd Australia Asia & Pacific Henderson Maxwell Financial Planning Pty Ltd Australia Asia & Pacific Henderson Maxwell Accounting Pty Ltd Australia Asia & Pacific Herwitz Geller Pty Ltd Australia Asia & Pacific Dunsford Financial Plannings Pty Ltd Australia Asia & Pacific BRM Holdich Pty Ltd Australia Asia & Pacific
64 WorldReginfo - 0ce5f050-b036-415a-a322-984991a7cfaf Company Country Geographical area Nextstep Financial Services Pty Ltd Australia Asia & Pacific Next Steps Home Loans Pty Ltd Australia Asia & Pacific RIT Coastal Pty Ltd Australia Asia & Pacific Spencer Fuller & Associates Australia Asia & Pacific Spencer Fuller Lending Solutions Pty Ltd Australia Asia & Pacific MP Holdings WA Australia Asia & Pacific Sage Business Group Pty Ltd Australia Asia & Pacific PM Financial Services Pty Ltd Australia Asia & Pacific MP Wealth WA Pty Ltd Australia Asia & Pacific PT Services WA Pty Ltd Australia Asia & Pacific MPM Finance Pty Ltd Australia Asia & Pacific MPM Specialist Finance Pty Ltd Australia Asia & Pacific An Zhong Investment Management (Shanghai) China Asia & Pacific An Zhong (AZ) Investment Management Hong Kong Asia & Pacific An Zhong (AZ) Investment Management Hong Kong Ltd Hong Kong Asia & Pacific AZ Investment Management Singapore Ltd Singapore Asia & Pacific AZ Sinopro Financial Planning Ltd Taiwan Asia & Pacific AZ Sinopro Investment Planning Ltd Taiwan Asia & Pacific AZ Sinopro Insurance Planning Ltd Taiwan Asia & Pacific
America CGU
Company Country Geographical area AZ Brasil Holdings Ltda Brazil Americas AZ Quest Participações SA Brazil Americas AZ Quest Investimentos Ltda Brazil Americas Azimut Brasil Wealth Management Holding SA Brazil Americas Azimut Brasil Wealth Management Ltda Brazil Americas M&O Consultoria, Planejamento e Analise de Valores Mobiliarios Ltda Brazil Americas Futurainvest Investimentos e Participacoes Ltda Brazil Americas Futurainvest Holding SA Brazil Americas Azimut Brasil DTVM Ltda Brazil Americas AZ Andes S.p.A. Chile Americas AZ Mexico Holdings S.A. De CV Mexico Americas Mas Fondos S.A. Mexico Americas AZ US Holding Inc. USA Americas AZ Apice Capital Management LLC USA Americas
65 WorldReginfo - 0ce5f050-b036-415a-a322-984991a7cfaf With respect to the information about the financial position required by IFRS 8, the Group’s management does not show or analyse a different breakdown of assets and liabilities other than that approved in the separate and consolidated financial statements. In accordance with paragraph 34 of IFRS 8, it is noted that the Group has no customers which account for more than 10% of consolidated revenue.
Earnings per share Basic earnings per share are calculated by dividing the net profit for the year by the average number of outstanding ordinary shares. There were no earnings-dilutive transactions to be disclosed at 30 June 2019.
30.06.2019 30.06.2018 2018
Basic earnings per share (*) 1.228 0.541 0.900
Average number of outstanding shares (*) 139,286,681 134,281,441 135,710,934
Diluted earnings per share (*) 1.228 0.541 0.900
Average number of diluted outstanding shares 139,286,681 134,281,441 135,710,934 (*) * Outstanding shares are calculated net of treasury shares held by Azimut Holding S.p.A. at the reporting date.
66 WorldReginfo - 0ce5f050-b036-415a-a322-984991a7cfaf NOTES TO THE BALANCE SHEET
ASSETS
Cash and cash equivalents
“Cash and cash equivalents” amount to 32 thousand euro and refer to cash on hand.
Financial assets at fair value through profit or loss The item amounts to 6,111,001 thousand euro (5,848,778 thousand euro at 31 December 2018 and 6,463,106 thousand euro at 30 June 2018).
Other financial assets mandatorily measured at fair value: breakdown
Total 30/06/2019 Total 31/12/2018 Total 30/06/2018 Items/Value Level 1 Level 2 Level 3 Level 1 Level 2 Level 3 Level 1 Level 2 Level 3
1. Debt securities 1.1 Structured
securities 1.2 Other debt
securities 2. Equity instruments
3. UCI units 249,369 5,861,632 166,340 5,682,438 170,207 6,292,899
4. Loans 4.1 Repurchase
agreements 4.2 Other
Total 249,369 5,861,632 - 166,340 5,682,438 - 170,207 6,292,899
“UCI units” (Level 1) refers to the units in mutual funds managed by the Azimut Group as part of the Group’s liquidity management policies. “UCI units” (Level 2) refers to liquidity and investments, respectively, measured at fair value, relating to unit-linked policies issued by Az Life Dac, where the investment risk is borne by policyholders.
67 WorldReginfo - 0ce5f050-b036-415a-a322-984991a7cfaf Other financial assets mandatorily measured at fair value: breakdown by debtor/issuer
Items/Value Total 30/06/2019 Total 31/12/2018 Total 30/06/2018
1. Equity instruments of which: banks of which: other financial companies of which: non-financial companies of which: insurance companies 3. Debt securities a) Public administrations b) Banks c) Other financial companies of which: insurance companies d) Non-financial companies
3. UCI units 6,111,001 5,848,778 6,463,106 4. Loans a) Public administrations b) Banks c) Other financial companies of which: insurance companies d) Non-financial companies e) Households
Financial assets at fair value through other comprehensive income This item amounts to 8,104 thousand euro (31 December 2018: 4,974 thousand euro and 30 June 2018: 3,174 thousand euro). It comprises minority interests over which the Group has no control, significant influence or joint control (5,444 thousand euro) and government securities in portfolio held as part of the Group's liquidity (2,660 thousand euro).
68 WorldReginfo - 0ce5f050-b036-415a-a322-984991a7cfaf Financial assets at fair value through other comprehensive income: breakdown
Total 30/06/2019 Total 31/12/2018 Total 30/06/2018 Items/Value Level Level Level Level 1 Level 3 Level 1 Level 3 Level 1 Level 3 2 2 2
1. Debt securities 2,660 2,157 1,658 - of which: government
securities 2,660 2,157 1,658
2. Equity instruments 5,444 2,817 1,516 3. Loans
Total 2,660 5,444 2,157 2,817 1,658 1,516
Financial assets at fair value through other comprehensive income: breakdown by debtor/issuer
Items/Value Total 30/06/2019 Total 31/12/2018 Total 30/06/2018
1. Debt securities 2,660 2,157 1,658 a) Public administrations 2,660 2,157 1,658 b) Banks c) Other financial companies of which: insurance companies d) Non-financial companies 2. Equity instruments 5,444 2,816 618 a) Banks 919 819 618 b) Other financial companies of which: insurance companies c) Non-financial companies 1,159 1,159 d) Other 3,366 838 898 3. Loans a) Public administrations b) Banks c) Other financial companies of which: insurance companies d) Non-financial companies e) Households
69 WorldReginfo - 0ce5f050-b036-415a-a322-984991a7cfaf Financial assets at amortised cost The item amounts to 286,936 thousand euro (31 December 2018: 217,709 thousand euro and 30 June 2018: 171,773 thousand). It mainly comprises receivables for portfolio management services (83,941 thousand euro), receivables for other services (39,226 thousand euro) and deposits and current accounts (162,732 thousand euro). As receivables related to portfolio management services and other services are due in the very short term, and as receivables from banks are on-demand deposits, the amortised cost coincides with their nominal amount.
70 WorldReginfo - 0ce5f050-b036-415a-a322-984991a7cfaf Financial assets at amortised cost: breakdown
Total 30/06/2019 Total 31/12/2018 Total 30/06/2018
Carrying amount Fair value Carrying amount Fair value Carrying amount Fair value
Breakdown of which: of which: of which: impaired impaired impaired III I and II III I and II III I and II stage acquired Level 1 Level 2 Level 3 acquired Level 1 Level 2 Level 3 acquired Level 1 Level 2 Level 3 stage stage stage stage stage or or or originated originated originated
1. Receivables for portfolio management services 83,941 83,941 67,963 67,963 63,918 63,918
1.1. UCI units 67,916 67,916 63,349 63,349 59,900 59,900
1.2 individual portfolio management 14,445 14,445 2,678 2,678 2,592 2,592
1.3 pension fund management 1,580 1,580 1,937 1,937 1,426 1,426
2. Receivables for other services 39,226 39,226 43,482 43,482 31,148 31,148
2.1 advisory services ------
2.2 outsourced corporate functions ------
2.3 other 39,226 39,226 43,482 43,482 31,148 31,148
3. Other receivables 162,732 162,732 106,264 106,264 76,708 76,708
3.1 repurchase agreements ------
of which: government securities ------
of which: for other debt securities ------
of which: for equity instruments and units ------
3.2 deposits and current accounts 162,732 162,732 106,264 106,264 76,708 76,708
3.3 other ------
4. Debt securities ------
Total 285,899 285,899 217,709 217,709 171,773 171,773
71 WorldReginfo - 0ce5f050-b036-415a-a322-984991a7cfaf “Deposits and current accounts” consists of cash deposited in the current accounts of the Group companies, with interest in line with that applied to term deposits.
“Receivables for other services” mainly includes receivables in the form of fees and commissions from the sale of products of third-party banks and receivables in the form of fee income to be collected for the sale of insurance products of third-party companies.
“Receivables for portfolio management services” include receivables in the form of fee and commission income on mutual funds and discretionary portfolios accrued during June 2019 and collected the following month.
Financial assets at amortised cost: breakdown by debtor/issuer
Banks Financial institutions Customers Breakdown/Counterparty of which: of which: of which:
Group Group Group 1. Receivables for portfolio management - - - services - 1,580 82,361
1.1. UCI units - - - - - 67,916
1.2 individual portfolio management - - - - - 14,445
1.3 pension fund management - - - - 1,580 -
2. Receivables for other services - - - 361 - -
2.1 advisory services ------
2.2 outsourced corporate functions ------
2.3 other - - - 361 - -
3. Other receivables - - - 167,877 12,295 22,461
3.1 repurchase agreements ------
of which: government securities ------
of which: for other debt securities ------of which: for equity instruments and - - - units - - -
3.2 deposits and current accounts - - - 162,732 - -
3.3 other - - - 5,145 12,295 22,461
4. Debt securities ------
Total 30/06/2019 - - - 168,238 13,875 104,822
Total 31/12/2018 - - - 110,841 14,507 92,360
72 WorldReginfo - 0ce5f050-b036-415a-a322-984991a7cfaf Equity investments
The item amounts to 2,955 thousand euro (2,869 thousand euro at 31 December 2018 and 2,411 thousand euro at 30 June 2018).
Equity investments: Information
Stake Registered Name Voting rights % office Shareholder % Stake
Companies measured
at equity 1. Cofircont Azimut Compagnia Fiduciaria Italy 30 30 Enterprises S.r.l. S.r.l. Azimut 2. SiamoSoci S.r.l. Italy 22 22 Enterprises S.r.l. 3. Sterling Planners Sterling Planners Australia 26.45 26.45 WA Pty Ltd 4. Mofid Entekhab AZ International Iran 20 20 Asset Management Holdings SA
Changes for the period in equity investments Total value A. Opening balance 2,869 B. Increases 208 B.1 Purchases B.2 Reversals of impairment losses B.3 Revaluations 208 B.4 Other changes C. Decreases 122 C.1 Sales 80 C.2 Impairment losses C.3 Other changes 42 D. Closing balance 2,955
73 WorldReginfo - 0ce5f050-b036-415a-a322-984991a7cfaf Significant equity investments: accounting figures Name Carrying amount Fair value (*) Dividends received 1. Cofircont Compagnia Fiduciaria S.r.l. 982 982 2. SiamoSoci S.r.l. 96 96 3. Mofid Entekhab Asset Management 1,877 1,877 (*) As these companies are not listed, fair value coincides with the carrying amount.
Property, plant and equipment The item amounts to 55,421 thousand euro (8,470 thousand euro at 31 December 2018 and 7,621 thousand euro at 30 June 2018).
“Property, plant and equipment - business purposes: breakdown of assets at cost”
Items/Value Total 30/06/2019 Total 31/12/2018 Total 30/06/2018
1. Company-owned 9,163 8,470 7,621 a) land - - - b) buildings 135 139 144 c) furniture & fixtures 1,508 1,538 1,651 d) electronic systems 229 284 229 e) other 7,291 6,508 5,597
2. Right of use: assets acquired under leases 46,257 a) land b) buildings 43,522 c) furniture & fixtures d) electronic systems e) other 2,735
Total 55,421 8,470 7,621
74 WorldReginfo - 0ce5f050-b036-415a-a322-984991a7cfaf Property, plant and equipment - business purposes: changes in the period
Furnitur Electronic Land Buildings e & Other Total systems fixtures D. Gross closing balance - 311 9,058 2,377 23,690 35,436 - - D.1 Total net impairment losses - 7,520 - 2,093 - 17,181 172 26,966 D.2 Net closing balance 139 1,538 284 6,509 8,470 B. Increases 47,036 136 3 5,103 52,278
B.1 Purchases 136 1,783 3 1,922 B.2 Leasehold improvements
B.3 Reversals of impairment losses
B.4 Increases in fair value taken to:
a) shareholders’ equity
b) profit or loss
B.5 Exchange rate gains
B.6 Transfers from investment property
B.7 Other changes 47,036 3,320 50,356 C. Decreases -3,518 -166 -58 -1,586 -5,328 C.1 Sales 0
C.2 Depreciation -3,518 -166 -58 -1,586 -5,328
C.3 Impairment losses charged to:
a) shareholders’ equity b) profit or loss C.4 Decreases in fair value charged to: Charged to: a) shareholders’ equity b) profit or loss C.5 Exchange rate losses C.6 Transfers to: a) property, plant and equipment held for
investment purposes b) assets held for sale C.7 Other changes
D. Net closing balance - 43,657 1,508 229 10,026 55,420 D.1 Total net impairment losses (3,690) ( 7,686) (2,151) (18,767) (32,294) D.2 Net closing balance 47,347 9,194 2,380 28,793 87,714
E Measurement at cost 1,508 229 10,026 55,421 43,657
The disclosure required by IFRS 16 is provided in the section “Transition to IFRS 16” of these notes. Intangible assets
75 WorldReginfo - 0ce5f050-b036-415a-a322-984991a7cfaf
The item amounts to 634,752 thousand euro (602,347 thousand euro at 31 December 2018 and 583,463 thousand euro at 30 June 2018).
Breakdown of “Intangible assets”
Total 30/06/2019 Total 31/12/2018 Total 30/06/2018
Assets at Assets at Assets at Assets at cost Assets at cost Assets at cost fair value cost fair value
1. Goodwill 549,017 525,976 513,449
2. Other intangible assets 85,735 76,371 70,014 2.1 generated internally 2.2 other 85,735 76,371 70,014
Total 634,752 602,347 583,463
• “Goodwill” refers to: o the acquisition by Azimut Holding S.p.A. (formerly Tumiza S.p.A.) of the merged company Azimut Holding S.p.A., completed on 12 February 2002. This company wholly owned (directly or indirectly) all the companies of the Azimut Group. This item was calculated as the difference between the initial cost of the equity investment, at acquisition date, and the shareholders’ equity of the subsidiaries at 31 December 2001. Following the merger of Azimut Holding S.p.A. into Tumiza S.p.A., with accounting effects on 1 July 2002, a portion of goodwill arising on consolidation, equal to 176.3 million euro amortised by 26.4 million euro prior to the adoption of IFRS (calculated based on a valuation by the independent company PricewaterhouseCoopers Corporate Finance S.r.l.) was included in “Goodwill" in the separate financial statements of Azimut Holding S.p.A.; o the acquisitions carried out through the subsidiary AZ International Holdings SA to expand the Group abroad.
76 WorldReginfo - 0ce5f050-b036-415a-a322-984991a7cfaf Recognised goodwill is shown below:
Company Total Total Total 30/06/2019 31/12/2018 30/06/2018 Azimut Holding S.p.A. (formerly Tumiza 292,145 292,145 292,145 S.p.A.) Azimut Libera Impresa SGR S.p.A. 173 173 173 - Total Azimut/Italy CGU 292,318 292,318 292,318 CGM – Azimut Monaco 39,425 31,425 31,425 AZ Swiss & Partners 22,617 22,398 23,077 Azimut Portföy 9,232 9,232 9,232 Katarsis Capital Advisory 6,756 6,756 6,756 Azimut (DIFC) Limited 255 255 255 Rasmala Egypt Asset Management (now Azimut Egypt Asset Management) 9,548 0 0 - Total Europe, Middle East & Africa CGU 87,833 70,066 70,745 AZ NGA and subsidiaries 129,546 123,704 110,496 AZ Sestante 50 50 50 Sigma Funds Management 1,442 1,442 1,442 AZ Sinopro Financial Planning 1,247 1,247 1,247 AZ Investment Management Singapore 592 592 592 - Total Asia & Pacific CGU 132,877 127,035 113,827 Azimut Brasil Holdings and subsidiaries 29,867 30,437 30,437 Mas Fondos 6,122 6,122 6,122 - Total America CGU 35,989 36,559 36,559 Total 549,017 525,978 513,449
The increase at 30 June 2019 is mainly due: - to consolidation differences of 23,041 thousand euro, included in goodwill arising from the difference between the fair value of assets acquired and liabilities assumed and the carrying amount, at the relevant acquisition dates, of the equity investments acquired in the first half of 2019 in Rasmala Egypt Asset Management (now Azimut Egypt Asset Management), Spencer Fuller & Associates and Spencer Fuller Lending Solutions Pty through the Australian subsidiary AZ NGA and P&G SGR’s business unit acquired through CGM Italia Sgr S.p.A. which, in turn, is controlled by CGM-Azimut Monaco.
“Other intangible assets – Other” refers to: • Trademarks and rights of 44,887 thousand euro, of which the “Azimut” trademark amounting to 35,338 thousand euro. • Software totalling 27,898 thousand euro.
77 WorldReginfo - 0ce5f050-b036-415a-a322-984991a7cfaf • Other intangible assets of 12,951 euro.
Other intangible assets include client relationships worth 13,244 thousand euro acquired by Azimut Capital Management Sgr S.p.A. as part of the business unit acquired from Sofia SGR S.p.A. in liquidation in 2018. This is an intangible asset under IAS 38 from which the buyer will probably obtain future economic benefits. The useful life was estimated on a ten-year horizon, based on the historical percentage of deterioration of assets under management (AUM).
“Intangible assets”: changes in the period
Total A. Opening balance 602,347 B. Increases 37,742 B.1 Purchases 37,742 B.2 Reversals of impairment losses B.3 Increases in fair value taken to: - shareholders’ equity - profit or loss B.4 Other changes C. Decreases (5,337) C.1 Sales C.2 Depreciation (5,337) C.3 Impairment losses charged to: - shareholders’ equity - profit or loss C.4 Decreases in fair value charged to: - shareholders’ equity - profit or loss C.5 Other changes D. Closing balance 634,752
Impairment test
At the reporting date of the condensed interim consolidated financial statements there is no evidence that the impairment test on goodwill and the trademark performed for the purpose of the consolidated financial statements at 31 December 2018 requires updating, as this test confirmed the fairness of the amounts posted. Reference should be made to this test for more information.
78 WorldReginfo - 0ce5f050-b036-415a-a322-984991a7cfaf Tax assets and tax liabilities
Tax assets Tax liabilities stand at 68,544 thousand euro (74,879 thousand euro at 31 December 2018 and 76,327 thousand euro at 30 June 2018). The breakdown is as follows:
Breakdown of Tax assets: current and deferred
Total Total Total Breakdown 30/06/2019 31/12/2018 30/06/2018 Current 15,341 21,887 25,612 Deferred 53,203 52,992 50,715 Total 68,544 74,879 76,327
“Current tax assets” mainly refers to non-offset IRES and IRAP tax credits for the year 2019. “Deferred tax assets” mainly includes: • 4,210 thousand euro of deferred tax assets arising from the value of the lease instalments deductible in future years by virtue of the sale and lease-back agreement for the Azimut trademark; • 28,644 thousand euro of deferred tax assets relating to tax losses; • the remaining portion, i.e. the temporary differences resulting from the different timing criteria of IRES (Italian corporate income tax) and IRAP tax deductibility for some cost items compared to that recognised in the income statement. As regards deferred tax assets recognised on tax losses, in accordance with IAS 12, the probability of these losses being recovered in subsequent tax years was assessed. Based on the assumptions pursuant to current tax regulations, the ability of future taxable income, at Group level, comprising the companies which have adopted the tax consolidation regime, was assessed, generating the recognition of deferred tax assets on losses.
Tax liabilities This item amounts to 74,114 thousand euro (72,505 thousand euro at 31 December 2018 and 74,944 thousand euro at 30 June 2018). The breakdown is as follows:
Breakdown of Tax liabilities: current and deferred
79 WorldReginfo - 0ce5f050-b036-415a-a322-984991a7cfaf Total Total Total Breakdown 30/06/2019 31/12/2018 30/06/2018 Current 6,412 4,356 5,740 Deferred 67,702 68,149 69,204 Total 74,114 72,505 74,944
“Current tax liabilities” includes the provisions for IRAP tax payable by Azimut Holding S.p.A. and Azimut Capital Management SGR S.p.A., for IRES tax payables as well as tax payables of the Group’s foreign companies net of the tax advances paid. “Deferred tax liabilities” mainly includes deferred tax liabilities relating to the temporary difference between the carrying amount and tax value of the trademark amounting to 11,686 thousand euro and the deferred tax liabilities recognised on the temporary difference between the carrying amount and tax value of goodwill of 40,847 thousand euro. These tax liabilities, recognised in accordance with IAS 12, are not reasonably expected to become actual costs given that the aforementioned temporary differences will only be reduced following a negative impairment test on goodwill and the trademark and in the case of disposal of these assets. Moreover, this item includes deferred IRES and IRAP taxes on unallocated earnings of the subsidiaries at 30 June 2019. The item also includes the deferred tax liabilities recognised on incentive costs relating to total inflow target which are directly attributable to the existing contracts which meet the requirements for deferring the costs incurred to fulfil a contract introduced by IFRS 15. They amount to 7,342 thousand euro at 30 June 2019.
80 WorldReginfo - 0ce5f050-b036-415a-a322-984991a7cfaf Non-current assets held for sale and discontinued operations and related liabilities This item has a nil balance (300 thousand euro at 31 December 2018). Indeed, the subsidiary Azimut Global Counseling S.r.l. was sold on 16 May 2019.
Other assets The item amounts to 337,414 thousand euro (325,528 thousand euro at 31 December 2018 and 296,371 thousand euro at 30 June 2018).
Other assets: breakdown
Total 30/06/2019 Total 31/12/2018 Total 30/06/2018
Due from Italian Tax Authorities 111,396 113,973 110,041 Due from financial advisors 19,150 18,579 19,890 Other receivables 132,566 137,831 116,284 Prepayments 74,302 55,145 50,156 Total 337,414 325,528 296,371
“Due from Italian Tax Authorities” includes amounts related to mathematical reserves of 111,158 thousand euro. “Prepayments” includes the assets generated via the deferral of acquisition costs for the unit-linked policies issued by the Group’s Irish insurance company, classified as investment contracts. The item also includes incentive costs relating to total inflow target which are directly attributable to the existing contracts which meet the requirements for deferral to the new category of costs incurred to fulfil a contract introduced by IFRS 15. They amount to 48,747 thousand euro at 30 June 2019. “Due from financial advisors” mainly includes loans granted to financial advisors amounting to 11,481 thousand euro, which generate interest income in line with the Euribor plus spread, in addition to advance commissions paid to the same financial advisors to the amount of 5,745 thousand euro. The terms for repayment of these loans vary on average from 12 to 36 months. "Other receivables" mainly comprises tax assets for virtual stamp duties of 45,337 thousand euro and receivables related to the payment of capital gain tax advances of 36,897 thousand euro.
81 WorldReginfo - 0ce5f050-b036-415a-a322-984991a7cfaf LIABILITIES Financial liabilities at amortised cost
This item amounts to 602,554 thousand euro (371,711 thousand euro at 31 December 2018 and 357,388 thousand euro at 30 June 2018). The breakdown is as follows: Financial liabilities at amortised cost: breakdown
Breakdown/Value Total 30/06/2019 Total 31/12/2018 Total 30/06/2018
1. Due to sales networks: 4,125 4,531 4,602 1.1 for UCI sales 4,125 4,531 4,602 1.2 for individual portfolio management sales - - - 1.3 for pension fund sales - - - 2. Payables for asset management services: 454 4891 289 2.1 for proprietary portfolio management 454 4891 289 2.2 for discretionary portfolio management - - - 2.3 for other - - - 3. Payables for other services: 525 8,123 2,057 3.1 advisory services - - - 3.2 outsourced corporate functions - - - 3.3 other 525 8,123 2,057 4. Other payables 246,592 - - 4.1 repurchase agreements - - - of which: government securities - - - of which: for other debt securities - - - of which: for equity instruments and units - - - 4.2 Lease liabilities 48,318 - 4.3 Other payables 198,274 -
Total 251,696 17,546 6,948
Fair value – Level 1 - - - Fair value – Level 2 - - - Fair value – Level 3 251,696 17,546 6,948
Total fair value 251,696 17,546 6,948
The item “Due to sales networks” mainly includes commissions accrued and to be settled for the sale of fund units.
82 WorldReginfo - 0ce5f050-b036-415a-a322-984991a7cfaf The increase in “Other payables” comprises a loan granted by Banco BPM on 28 February 2019 and divided into two lines, A and B, each originally amounting to 100 million euro. Line A is repayable in tranches while Line B is entirely due on 31 December 2021. The interest rate is calculated based on the Euribor plus 140 basis points for Line A and 160 basis points for Line B. The loan is subject to covenants.
Breakdown of “Financial liabilities at amortised cost”: “Outstanding securities”
Total 30/06/2019 Total 31/12/2018 Total 30/06/2018
Breakdown Fair value Fair value Fair value CA CA CA L1 L2 L3 L1 L2 L3 L1 L2 L3
1. Securities 350,858 350,858 354,165 354,165 350,440 350,440 - Bonds 350,858 350,858 354,165 354,165 350,440 350,440 - Other securities
Total 350,858 350,858 354,165 354,165 350,440 350,440
This item is solely comprised of the bond “Azimut 2017-2022 2.000%” amounting to 350,858 euro originally composed of 3,500 bonds worth 100,000 euro with a duration of five years and issued on 27 March 2017. The amount refers to total bonds sold and includes the charges incurred by the Parent Company for the issue and placement (349,113 thousand euro), in addition to interest expense accrued at 30 June 2019 which will be paid on the pre-established date. The bond bears annual fixed interest of 2.000% (1,745 thousand euro).
Subordinated securities
The Group has no subordinated securities.
83 WorldReginfo - 0ce5f050-b036-415a-a322-984991a7cfaf Financial liabilities at amortised cost: breakdown by counterparty
Banks Financial companies Customers
Breakdown/Counterparty of of of which: which: which: Group Group Group
1. Due to sales networks - 2,805 - 610 - -
1.1 for UCI sales - 2,805 - 610 - - 1.2 for individual portfolio management - - - sales - - -
1.3 for pension fund sales ------2. Payables for asset management - - services: - - 1,165 -
2.1 for proprietary portfolio management - - - - 1,165 - 2.2 for discretionary portfolio - - - management - - -
2.3 for other ------
3. Payables for other services: - - - 525 - -
3.1 advisory services received ------
3.2 outsourced corporate functions ------
3.3 other - - - 525 - -
4. Other payables - 48,318 198,274 - - -
4.1 repurchase agreements ------
of which: government securities ------
of which: for other debt securities ------of which: for equity instruments and - - - units - - - 4.2 Lease liabilities 48,318
4.3 Other payables - - 198,274 - - -
Total 30/06/2019 201,079 - 1,135 - 49,483 -
Total 31/12/2018 3,255 - 8,472 - 5,819 -
84 WorldReginfo - 0ce5f050-b036-415a-a322-984991a7cfaf Technical reserves where the investment risk is borne by policyholders
The item amounts to 184,689 thousand euro (177,068 thousand euro at 31 December 2018 and 202,236 thousand euro at 30 June 2018) and refers to the commitments arising from the unit-linked policies issued by the subsidiary company AZ Life Dac, classified as insurance contracts.
Financial liabilities designated at fair value
The item amounts to 5,758,337 thousand euro (31 December 2018: 5,582,010 thousand euro and 30 June 2018: 6,150,274 thousand euro). It comprises the commitments arising from the unit-linked policies issued by the subsidiary AZ Life Dac, classified as investment contract (level 2) (5,688,316 thousand euro) and financial liabilities designated at fair value (70,021 thousand euro). These liabilities refer to the future exercise of the purchase options for the remaining equity investments in some acquired companies which are not wholly owned (level 3).
Breakdown of “Financial liabilities designated at fair value”
Total 30/06/2019 Total 31/12/2018 Total 30/06/2018
Liabilities Carrying Fair value Fair value Fair value Carrying Carrying amount amount amount L1 L2 L3 L1 L2 L3 L1 L2 L3
1. Payables 5,758,337 5,688,316 70,021 5,582,010 5,505,370 76,639 6,150,274 6,090,663 59,611 2. Debt
securities bonds other
securities
Total 70,021 5,582,010 5,505,370 76,639 5,758,337 5,688,316 6,150,274 6,090,663 59,611
85 WorldReginfo - 0ce5f050-b036-415a-a322-984991a7cfaf Financial liabilities designated at fair value (L3) are broken down as follows:
Fair value Fair value Fair value Company measurement measurement measurement 30/06/2019 31/12/2018 30/06/2018 Eureka Whittaker Macnaught 1,340 1,259 1,838 Pride Advice 664 625 1,243 Lifestyle Financial Planning Services 1,800 1,689 1,439 Wise Planners 336 311 2,085 Financial Lifestyle Partners 860 801 1,099 Harvest Wealth 699 650 972 RI Toowoomba 1,571 1,461 1,938 Empowered Financial Partners 172 160 506 Wealthwise Pty Ltd 1,907 1,773 2,583 Priority Advisory Group 1,456 1,355 2,160 Sterling Planners Pty Ltd 2,604 2,421 2,503 Logiro Unchartered Pty Ltd 1,072 997 2,076 On Track Financial Solutions Pty Ltd 1,239 1,152 1,624 BRM Holdich 401 367 649 MP Holdings WA 3,471 3,184 - Peters & Partners Pty Ltd 1,465 1,352 1,462 Menico Tuck Parrish Financial Solutions Pty Ltd 499 461 1,090 Wealthmed Australia Pty Ltd 1,395 1,286 1,430 Henderson Maxwel Pty Ltd 1,920 1,768 2,012 Hurwitz Geller Pty Ltd 950 876 1,179 Dunsford Financial Plannings Pty Ltd 1,342 1,252 1,645 Sage Business Group Pty Ltd 469 429 - Farrow Hughes Mulcahy Financial Services Pty 2,145 1,978 2,319 Ltd Spencer Fuller & Associates (*) 1,464 - - AZ Quest Participações SA 29,593 29,548 20,695 Azimut Brasil Wealth Management Holdings SA 1,775 1,324 - Compagnie de Géstion Privée Monegasque 7,147 15,614 4,292 Mas Fondos S.A. 263 245 772 Total 70,021 74,339 59,611 *acquired in the first half of 2019 That measurement reflects the discounted amount to be paid – in Azimut Holding shares, where contractually provided for – to non-controlling interests, following the exercise of the call options. The measurement reflects an estimate of the discounted amount to be paid to the seller. This amount is based on the estimate of key parameters (future income statement, balance sheet and financial position parameters set out in the relevant contracts), that are subject to specific sensitivity analyses.
86 WorldReginfo - 0ce5f050-b036-415a-a322-984991a7cfaf With respect to the liability measured at fair value recognised in respect of the subsidiary CGM-Monaco, the contract governing its acquisition also provides for the exercise of a put option in favour of the seller on the Azimut Holding shares assigned, for four years beginning on the closing date, and a call option in favour of AZ International Holdings which can be exercised subject to specific conditions. The 7,147 thousand euro liability related to the fair value of the put and call options on Azimut Holding shares, against consideration, was estimated with the support of a leading independent advisor. The estimate is based on two scenarios which reflect the likelihood of occurrence of the terms and conditions being rediscussed with the counterparty. The probabilities reflect the directors’ estimated outcome of the negotiations at the date of the report. Financial liabilities measured at fair value and the related measurement at 30 June 2019 led to the recognition of gains of 6.504 thousand euro under “Net result of financial assets and financial liabilities measured at fair value”.
Tax liabilities
The item “Tax liabilities” is described in detail in the section on “Tax assets” of these notes to which reference should be made.
87 WorldReginfo - 0ce5f050-b036-415a-a322-984991a7cfaf Other liabilities
The item amounts to 242,764 thousand euro (31 December 2018: 217,527 thousand euro and 30 June 2018: 198,898 thousand euro). The breakdown is as follows:
Total Total Total
30/06/2019 31/12/2018 30/06/2018 Due to suppliers 83,305 62,445 52,061 Due to Inland Revenue and tax 11,465 8,465 15,102 authorities Due to employees 8,471 8,608 8,293 Due to social security bodies 4,228 5,086 4,853 Other payables 72,690 75,634 63,930 Due to Financial Advisors 61,378 53,391 52,537 Deferred income 1,227 3,898 2,123 Total 242,764 217,527 198,899
“Deferred income” includes liabilities arising from the deferral of fee and commission income on the premiums of unit-linked policies issued by the Irish insurance company AZ Life Dac, classified as investment contracts. “Due to financial advisors” mainly includes amounts due to financial advisors for commissions of June 2019 paid in July 2019, in addition to other accruals relating to the first half of 2019, which will be paid during the year, and other contractual commitments for commissions, including loyalty commissions, to be paid to financial advisors over the medium-long term. “Other payables” includes the residual amount to be paid to purchase the remaining 49% of Augustum Opus SIM S.p.A. (now merged into Azimut Capital Management SGR S.p.A.) to minority investors (the company’s former shareholders) (14,000 thousand) and the deferred consideration to purchase the business unit of Sofia SGR in liquidation calculated based on the assets under management transferred to Azimut Capital Management SGR and their net profitability (11,305 thousand euro), which will be paid after 24 months, provided that the relevant contractual clauses are complied with. Finally, the item includes SDB’s price adjustment of 24,652 thousand euro.
Staff severance pay (TFR)
88 WorldReginfo - 0ce5f050-b036-415a-a322-984991a7cfaf The item amounts to 2,582 thousand euro (2,812 thousand euro at 31 December 2018 and 3,583 thousand euro at 30 June 2018) and refers to TFR accrued by personnel employed by the Group companies at 30 June 2018.
Provisions for risks and charges The item amounts to 40,695 thousand euro (37,787 thousand euro at 31 December 2018 and 37,441 thousand euro at 30 June 2018).
“Provisions for risks and charges”: breakdown
Items/Value Total 30/06/2019 Total 31/12/2018 Total 30/06/2018 1. Commitments and guarantees issued - - - - - 2. Company pension funds 296 0 0
3. Other provisions for risks and charges 40,399 37,787 37,441
3.1 tax and legal disputes 6,092 7,554 7,320 3.2. personnel costs - - -
3.3 other 34,307 30,233 30,121
Total 40,695 37,787 37,441
“Other provisions for risks and charges” comprises the supplementary indemnity provision for clients calculated on an actuarial basis in accordance with IFRS and the provision for legal disputes related to the risks arising from disputes with clients, equal to the present value of the charge deemed necessary to settle the obligations.
89 WorldReginfo - 0ce5f050-b036-415a-a322-984991a7cfaf Shareholders’ Equity
Breakdown of “Share Capital”
Types of shares Amount 1. Share capital 32,324 1.1 Ordinary shares 32,324 1.2 Other shares -
At 30 June 2019, the fully paid-up and subscribed share capital was composed of 143,254,497 ordinary shares, with a total value of 32,324 thousand euro.
Breakdown of “Treasury shares”
Types of shares Amount 1. Treasury shares 23,713 1.1 Ordinary shares 23,713 1.2 Other shares -
At 30 June 2019, Azimut Holding S.p.A. held 2,319,451 treasury shares at an average carrying amount of 10.22 euro per share.
Breakdown of “Equity instruments” At 30 June 2019, this item amounted to 36,000 thousand euro and related to the issue amount, as per the shareholders' resolution of 29 April 2010, of 1,500,000 financial instruments (equal to their fair value calculated by an independent leading company upon issue).
Breakdown of “Share premium reserve” The share premium reserve amounts to 173,987 thousand euro at 30 June 2019.
90 WorldReginfo - 0ce5f050-b036-415a-a322-984991a7cfaf Minority interests Breakdown of “Minority interest”
Items/Value 30/06/2019 31/12/2018 30/06/2018 1. Share capital 70,440 63,803 71,716 2. Treasury shares 3. Equity instruments 4. Share premium reserve 5. Reserves -56,251 -52,680 -59,885 6. Valuation reserves -5,644 -5,711 -4,785 7. Profit (loss) for the period 7,143 18,434 11,033 Total 15,688 23,846 18,079
“Minority interest” relates to stakes held by third parties.
91 WorldReginfo - 0ce5f050-b036-415a-a322-984991a7cfaf NOTES TO THE INCOME STATEMENT Fee and commission income and expense
Breakdown of “Fee and commission income and expense”
The breakdown is as follows:
Total 30/06/2019 SERVICES Fee and comm. Fee and comm. Net fees and income expense comm. A. ASSET MANAGEMENT 1. Proprietary portfolio management 1.1 Mutual funds - Management fees 263,669 - 263,669 - Incentive fees 85,135 - 85,135 - Entry / redemption fees 1,622 - 1,622 - Switch fees 6 - 6 - Other fees 552 - 552 Total mutual fund fees 350,984 - 350,984 1.2 Individual portfolio management - Management fees 16,954 - 16,954 - Incentive fees 1,632 - 1,632 - Entry / redemption fees - - - - Other fees 494 - 494 Total individual portfolio management fees 19,080 - 19,080 1.3 Open-ended pension funds - Management fees 6,504 - 6,504 - Incentive fees - - - - Entry / redemption fees - - - - Other fees 599 - 599 Total open-ended pension fund fees 7,103 - 7,103 2. Discretionary portfolio management - Management fees 1,227 - 1,227 - Incentive fees - - - - Other fees - - - Total discretionary portfolio management fees 1,227 - 1,227 TOTAL ASSET MANAGEMENT FEES (A) 378,395 - 378,395 B. OTHER SERVICES 56,280 - 56,280 - Advisory services 6,261 - 6,261 - Sales commissions 41,328 - 41,328 - Order intake 93 - 93 - Insurance products 6,709 - 6,709 - Other services 1,889 - 1,889
92 WorldReginfo - 0ce5f050-b036-415a-a322-984991a7cfaf Fee expenses for sales, distribution and order - - 173,114 - 173,114 intake TOTAL FEES AND COMMISSIONS (A+B) 434,675 - 173,114 261,561
Total 30/06/2018 SERVICES Fee and comm. Fee and comm. Net fees and income expense comm. A. ASSET MANAGEMENT 1. Proprietary portfolio management 1.1 Mutual funds - Management fees 248,022 - 248,022 - Incentive fees 29,727 - 29,727 - Entry / redemption fees 1,728 - 1,728 - Switch fees 8 - 8 - Other fees 607 - 607 Total mutual fund fees 280,092 - 280,092 1.2 Individual portfolio management - Management fees 17,262 - 17,262 - Incentive fees 390 - 390 - Entry / redemption fees - - - - Other fees 410 - 410 Total individual portfolio management fees 18,062 - 18,062 1.3 Open-ended pension funds - Management fees 5,556 - 5,556 - Incentive fees - - - - Entry / redemption fees - - - - Other fees 730 - 730 Total open-ended pension fund fees 6,286 - 6,286 2. Discretionary portfolio management - Management fees 1,124 - 1,124 - Incentive fees - - - - Other fees - - - Total discretionary portfolio management fees 1,124 - 1,124 TOTAL ASSET MANAGEMENT FEES (A) 305,565 - 305,565 B. OTHER SERVICES 52,869 - 52,869 - Advisory services 5,375 - 5,375 - Sales commissions 36,209 - 36,209 - Order intake 159 - 159 - Insurance products 9,498 - 9,498 - Other services 1,627 - 1,627 Fee expenses for sales, distribution and order - - 152,480 - 152,480 intake TOTAL FEES AND COMMISSIONS (A+B) 358,433 - 152,480 205,953
93 WorldReginfo - 0ce5f050-b036-415a-a322-984991a7cfaf “Fee and commission expense” comprises the cost pertaining to the period related to the Long- term incentive plan described in the consolidated financial statements at 31 December 2018 to which reference should be made.
94 WorldReginfo - 0ce5f050-b036-415a-a322-984991a7cfaf Fee and commission expense: breakdown by type and counterparty
SERVICES Banks Financial institutions Other Total of which of which of which of which
Group Group Group Group A. ASSET MANAGEMENT 1. Proprietary portfolio management ------
1.1 Sales fees ------
- UCI ------Individual portfolio management ------
- Pension funds ------
1.2 Maintenance fees ------
- UCI ------Individual portfolio management ------
- Pension funds ------
1.3 Incentive fees ------
- UCI ------Individual portfolio management ------
- Pension funds ------
1.4 Other fees and commissions ------
- UCI ------Individual portfolio management ------
- Pension funds ------2. Discretionary portfolio management ------
- UCI ------Individual portfolio management ------
- Pension funds ------TOTAL ASSET MANAGEMENT FEES (A) ------B. OTHER SERVICES
- Advisory services ------
- Other services ------TOTAL FEES FOR OTHER SERVICES (B) ------
Fee expenses for sales,
distribution and order intake 7,108 - 940 - 165,066 - 173,114 TOTAL FEES AND - COMMISSIONS (A+B) 7,108 - 940 - 165,066 173,114
95 WorldReginfo - 0ce5f050-b036-415a-a322-984991a7cfaf Interest
Breakdown of “Interest income and similar income”
This item amounts to 451 thousand euro (first half of 2018: 461 thousand euro). Deposits Debt Repurchase and Total Total Items/Technical forms Other securities agreements current 30/06/2019 30/06/2018 accounts
1. Financial assets at fair value through profit or loss: ------
1.1. Held-for-trading financial assets ------1.2. Financial assets designated at fair value ------1.3 Other financial assets mandatorily measured at fair value ------2. Financial assets at fair value through other comprehensive income 28 - - - 28 7
3. Financial assets at amortised cost: - - 248 - 248 308
3.1. Due from banks - - 248 - 248 308
3.2. Due from financial companies ------
3.3 Due from customers ------
4. Hedging derivatives ------
5. Other assets - - - 175 175 147
6. Financial liabilities ------
Total 28 - 248 175 451 461 of which: interest income on impaired financial assets ------
Breakdown of “Interest expense and similar charges”
This item amounts to 6,409 thousand euro (first half of 2018: 4,263 thousand euro).
96 WorldReginfo - 0ce5f050-b036-415a-a322-984991a7cfaf Deposits and Repurchase Total Total Items/Technical forms Loans current Other agreements 30/06/2019 30/06/2018 accounts
1. Financial liabilities at amortised cost 4,991 505 652 6,148 4,079 1.1. Payables 1,298 505 652 2,455 438 1.2. Outstanding securities 3,693 3,693 3,641 2. Held-for-trading financial liabilities 3. Financial liabilities measured at fair value 4. Other liabilities 261 261 183 5. Hedging derivatives 6. Financial assets Total 4,991 505 913 6,409 4,263
97 WorldReginfo - 0ce5f050-b036-415a-a322-984991a7cfaf Profits (losses) on disposal or repurchase
This item is a profit of 31 thousand euro (first half of 2018: a loss of 12 thousand euro).
Breakdown of “Profits (losses) on disposal or repurchase”
Total 30/06/2019 Total 30/06/2018
Items/Income items Profit Loss Net result Profit Loss Net result
1. Financial assets 1.1 Financial assets at amortised
cost: due from banks due from financial companies due from clients
1.2 Financial assets at fair value
through other comprehensive income
debt instruments 31 31 (12) (12) loans
Total (1) 31 31 (12) (12) 2. Financial liabilities at amortised
cost 2.1 Payables 2.2 Outstanding securities Total (2) Total (1+2) 31 31 (12) (12)
98 WorldReginfo - 0ce5f050-b036-415a-a322-984991a7cfaf Net gains (losses) on financial assets and financial liabilities at fair value through profit or loss
Net gains (losses) on financial assets and financial liabilities at fair value through profit or loss: assets and liabilities designated at fair value
Profits Losses on Net Items/Income items Gains on Losses disposal result disposal
1. Financial assets
1.1 Debt instruments 1.2 Loans
2. Financial assets and financial liabilities in foreign currency: exchange rate differences
3. Financial liabilities 6,504 6,504 3.1 Payables 3.2 Debt instruments Total 6,504 6,504
Net gains (losses) on financial assets and financial liabilities at fair value through profit or loss: other financial assets mandatorily measured at fair value
Profits on Losses on Items/Income items Gains Losses Net result disposal disposal
1. Financial assets
1.1 Debt instruments
of which: government securities
1.2. Equity instruments 1.3. UCI units of which: owned UCI 6,179 392 6,571 1.4 Loans
2. Financial assets and financial liabilities in foreign currency: exchange rate differences
Total 6,179 392 6,571
99 WorldReginfo - 0ce5f050-b036-415a-a322-984991a7cfaf Net premiums “Net premiums” amounts to 879 thousand euro (797 thousand euro in the first half of 2018) for premiums relating to unit-linked policies issued by the Irish insurance company AZ Life Dac, classified as insurance contracts.
Net profits (losses) on financial instruments at fair value through profit or loss This item amounts to 146,008 thousand euro (89,610 thousand euro in the first half of 2018) and comprises realised gains and losses and changes in the value of financial assets and liabilities, relating to unit-linked policies, and measured at fair value.
Administrative costs
Breakdown of “Personnel costs”
This item amounts to 53,019 thousand euro (48,764 thousand euro in the first half of 2018). The breakdown is as follows:
Items Total 30/06/2019 Total 30/06/2018 1. Employees 43,798 40,208 a) wages and salaries 33,174 32,377 b) social security 7,418 4,816 c) staff severance pay (TFR) - d) pension contributions - e) TFR provisions 582 711 f) accrual to the pension provision and similar obligations: - - defined contribution - - defined benefit - g) private pension plans: 17 36 - defined contribution 17 36 - defined benefit - h) other employee benefits 2,607 2,268 2. Other personnel 610 445 3. Directors and Statutory Auditors 8,611 8,111 4. Early retirement costs - 5. Cost recoveries for employees seconded to other companies - 6. Reimbursed costs for employees seconded to the company - Total 53,019 48,764
100 WorldReginfo - 0ce5f050-b036-415a-a322-984991a7cfaf Average number of employees by category
30/06/2019 30/06/2018 2018 Managers 125 151 156 Middle managers 186 175 179 Other employees 681 505 550 Total 992 831 885
Breakdown of “Other administrative costs” This item amounts to 67,751 thousand euro (69,520 thousand euro in the first half of 2018). The breakdown is as follows:
Items Total 30/06/2019 Total 30/06/2018
Professional services rendered 8,813 8,286 Advertising, promotion and marketing expenses 7,447 6,051 Telephone and fax 1,397 1,337 Lease and rent 1,162 4,268 Insurance premiums 634 4,489 Tax liabilities 1,193 613 Enasarco/Firr contributions 4,224 640 Lease and hire 6,934 5,498 Outsourced functions 22,284 20,224 Services other than IT services 4,535 7,346 Maintenance costs 629 440 Other administrative costs 8,500 9,968 Total 67,750 69,520
Net accruals to provisions for risks and charges
Breakdown of “Net accruals to provisions for risks and charges” This item amounts to 3,575 thousand euro (3,156 thousand euro in the first half of 2018) and includes the accrual to the supplementary indemnity provision for clients (5,044 thousand euro) and the net accrual to the provision for sundry risks and changes (1,469 thousand euro), related to risks for disputes with clients, as described in the note to “Provisions for risks and charges” of Liabilities.
101 WorldReginfo - 0ce5f050-b036-415a-a322-984991a7cfaf Net impairment losses/reversals of impairment losses on property, plant and equipment
In the first half of 2019, net impairment losses and reversals of impairment losses on property, plant and equipment based on depreciation are broken down as follows:
Breakdown of “Net impairment losses/reversals of impairment losses on property, plant and equipment”
Reversals Impairment of Items/Impairment losses and reversals Amortisation Net result losses impairment losses
1. Business purposes 5,328 5,328 - Company-owned 1,226 1,226 - Right of use acquired under leases 4,102 4,102 2. Held for investment purposes - Company-owned
- Right of use acquired under leases
Total 5,328 5,328
Net impairment losses/reversals of impairment losses on intangible assets
In the first half of 2019, net impairment losses and reversals of impairment losses on intangible assets based on amortisation are broken down as follows: Breakdown of “Net impairment losses/reversals of impairment losses on intangible assets”
Reversals Impairment of Items/Impairment losses and reversals Amortisation Net result losses impairment losses
1. Intangible assets other than goodwill 5,337 5,337 1.1 Group-owned 5,337 5,337
- generated internally - other 5,337 5,337 1.2 right of use acquired under
leases Total 5,337 5,337
102 WorldReginfo - 0ce5f050-b036-415a-a322-984991a7cfaf
103 WorldReginfo - 0ce5f050-b036-415a-a322-984991a7cfaf
Income tax on profit from continuing operations
Breakdown of “Income tax on profit from continuing operations”
Breakdown Total 30/06/2019 Total 30/06/2018
1. Current taxes 16,998 14,282 2. Changes in current taxes of previous years 3. Decrease in current taxes for the period 3.bis Decrease in current taxes for the period due to tax credits pursuant to Italian Law No. 214/2011 4. Change in deferred tax assets (774) (143) 5. Change in deferred tax liabilities ( 480) (6,491) Total 15,745 7,647
Current income taxes for the period mainly refer to IRAP and IRES paid by the Group’s Italian companies, taxes payable by the foreign companies as well as the income from tax consolidation amounting to the taxes receivable and due on taxable income transferred to the parent company by the Group’s Italian subsidiaries that have adopted the tax consolidation regime pursuant to Article 117 of Italian Presidential Decree 917/86. Taxes for the Group’s foreign companies are calculated in accordance with the tax regulations in force in the individual countries of residence. “Change in deferred tax assets” includes the release of deferred tax assets on the amount of the lease instalment deductible during the period and the recognition of deferred tax assets on temporary differences resulting from the different timing criteria of IRES tax deductibility. The same item also includes the deferred tax liabilities on dividends to be paid by the subsidiaries within the consolidation scope.
Profit (loss) for the period attributable to minority interests This item is positive by 7,143 thousand euro (11,033 thousand in the first half of 2018). It reflects the net balance of profits and losses attributable to minority interests in consolidated companies.
Risks
104 WorldReginfo - 0ce5f050-b036-415a-a322-984991a7cfaf FINANCIAL RISKS
As regards financial risks, the Company's proprietary trading is exposed to market risk. Moreover, the financial instruments in question are easily liquidated and are monitored closely, most being mutual fund units managed by the Group companies. As for credit risk, there are no specific problems given the nature of the corporate activity. At 30 June 2019, the Group held only funds managed by Group companies in its proprietary portfolio as part of liquidity management policies. The financial risks associated with the use of liquidity refer to flexible mutual funds, such as AZ Fund Multiasset whose goal is the appreciation of capital by investing in the Eurozone in the equity, bond and liquidity markets to the extent of UCIs managed by AZ Fund Management SA. As regards financial risks linked to the investment held in Eskatos Multistrategy ILS Fund, this UCI is an asset that is completely uncorrelated with the normal risks that instruments usually present on the market are subject to. The return of the Eskatos Multistrategy ILS Fund was higher than that recorded in the previous year, which in turn was already positive. As regards the Assessment Procedure for the management of financial assets on behalf of third parties, the Risk Management function plays a significant role. This service involves both performing ex-ante and ex-post evaluations of the risk profiles of the various managed portfolios and providing the Investment Department with an ex-ante evaluation procedure of the market risk. Specifically, the assessment is performed by analysing the portfolios of the individual Funds and monitoring, on an on-going basis, the significant risk factors identified, such as the average financial duration, equity exposure and its distribution in geographical areas and industry segments, currency exposure and the credit rating of the issuers. The assessment of the Fund’s risk profile is performed ex-post both in absolute terms (volatility understood as the standard annual deviation) and in relative terms compared to the benchmark (tracking error volatility). These latter factors represent the basis for the establishment of the limits within which the manager may accept the risk. The Risk Management function uses external providers to calculate the Value at Risk (VaR) of all the portfolios managed with regard to the ex-ante evaluation of the market risk. In
105 WorldReginfo - 0ce5f050-b036-415a-a322-984991a7cfaf addition, the Risk Management function monitors the development of the risk models adopted and the return of the funds in relation to peers and the benchmark.
OPERATIONAL RISKS
This form of risk includes those that are typical of the various business operating procedures. In the broader framework of its own activities, the Risk Management function “maps out” and monitors the risks, through specific analyses based on an internally-developed model approved by the internal control and risk management committee. The operating model applied associates an index which summarises the risk level, to each type of risk identified, based on the combination of empirical findings, theoretical assessments and interviews with operators. The results of the analyses are subsequently presented, analysed and discussed with the internal control and risk management committee. Where necessary, the latter takes the necessary measures in respect of the irregularities identified. Since the Company's incorporation, the losses arising from the above-mentioned operational risks have never been significant. With respect to operational risks arising from outsourced functions, when the relevant contract was signed, the Company agreed the terms and conditions governing the provision of the outsourced services and prepared specific service level agreements whereby the outsourcer undertakes to provide its supplies at an appropriate qualitative service level, allowing the Company to take action against the supplier in the event of any economic losses arising from problems in the provision of services. Another measure to ensure that services are performed correctly was the creation of an Operating Committee, whose members come from both Azimut Capital Management SGR S.p.A. and the supplier company, to establish the procedures, define the timescales, and monitor the correct execution of all services provided. This Committee meets at least once a month. Minutes are drawn after the meeting which are subsequently discussed with the participants.
106 WorldReginfo - 0ce5f050-b036-415a-a322-984991a7cfaf Information on Shareholders' Equity Company shareholders’ equity Qualitative information As regards the individual items of the consolidated shareholders’ equity, please see the relevant description in these notes.
Quantitative information Company equity: breakdown Items/Value 30/06/2019 31/12/2018 30/06/2018 1. Share capital 32,324 32,324 32,324 2. Share premium reserve 173,987 173,987 173,987 3. Reserves 199,458 288,003 289,984 income-related a) legal 6,465 6,465 6,465 b) statutory c) treasury shares d) other 301,908 390,453 391,850 other -108,915 -108,915 -108,331 4. (Treasury shares) -23,713 -46,337 -36,337 5. Valuation reserves -5,345 -5,512 -7,117 Financial assets at fair value through other comprehensive 287 276 49 income Property, plant and equipment Intangible assets Foreign investment hedge Cash flow hedge Exchange rate differences -5,585 -5,798 -6,890 Non-current assets held for sale and discontinued
operations Special revaluation laws
Actuarial gains/losses on defined benefit plans -47 10 -277 Share of valuation reserves for investments measured at
equity 6. Equity instruments 36,000 36,000 36,000 7. Profit (loss) for the period/year 171,025 122,146 72,584 Total 583,736 600,611 561,425
Statement of comprehensive income
107 WorldReginfo - 0ce5f050-b036-415a-a322-984991a7cfaf Items 30/06/19 30/06/18 31/12/18 10. Profit (loss) for the period/year 178,168 83,617 140,997 Other comprehensive income not transferred to profit or loss (45) (128) 159 20. Equity instruments at fair value through other comprehensive income: a) changes in fair value 12 0 b) transfers to other equity items 30. Financial liabilities designated at fair value through profit or loss (change in credit rating) a) changes in fair value b) transfers to other equity items 40. Hedges of equity instruments at fair value through other comprehensive income: a) changes in fair value (hedged item) changes in fair value (hedging instrument) 50. Property, plant and equipment 60. Intangible assets 70. Defined benefit plans (57) (128) 159 80. Non-current assets held for sale and discontinued operations 90. Share of valuation reserves of investments measured at equity 100. Income taxes on other comprehensive income not transferred to profit or loss Other comprehensive income transferred to profit or loss 110. Foreign investment hedge: a) changes in fair value b) transfer to profit or loss c) other changes 120. Exchange rate differences: 212 2,569 3,662 a) changes in fair value b) transfer to profit or loss c) other changes 212 2,569 3,662 130. Cash flow hedge: a) changes in fair value b) transfer to profit or loss c) other changes 140. Hedging instruments (non-designated items) a) changes in fair value b) transfer to profit or loss c) other changes 150. Financial assets (other than equity instruments) at fair value through other comprehensive income: (78) 147 a) changes in carrying amount (78) 147 b) transfer to profit or loss - credit risk adjustments - profits/losses on disposal c) other changes 160. Non-current assets held for sale and discontinued operations: (417)
108 WorldReginfo - 0ce5f050-b036-415a-a322-984991a7cfaf a) changes in fair value (417) b) transfer to profit or loss c) other changes 170. Share of valuation reserves of investments measured at equity: measured at equity: a) changes in fair value b) transfer to profit or loss - impairment losses - profits/losses on disposal c) other changes 180. Income taxes on other comprehensive income transferred to profit or loss 190. Total other comprehensive income (expense) 167 2,363 3,551 200. Comprehensive income (Items 10+190) 178,335 85,980 144,548
210. Consolidated comprehensive income attributable to minority interests 7,143 11,033 18,434
200. Consolidated comprehensive income attributable to the parent company 171,192 74,947 126,114
109 WorldReginfo - 0ce5f050-b036-415a-a322-984991a7cfaf Related-party transactions
Information on key management fees Directors' fees amounted to 8,232 thousand euro in the first half of 2019. Fees for the Board of Statutory Auditors, calculated based on the parameters in force, amounted to 379 thousand euro.
Information on related-party transactions Related-party transactions referring to commercial transactions carried out by Azimut Holding S.p.A. with its subsidiaries and associates, as well as among its subsidiaries and/or associates during the first half of 2019, are part of the Group's ordinary business and were conducted on an arm’s length basis. Moreover: • for the use of the trademark, the subsidiary Azimut Capital Management SGR S.p.A. pays Azimut Holding S.p.A. contractually established annual royalties totalling 2,000 thousand euro;
• Azimut Holding S.p.A., as the Parent Company, and Azimut Capital Management Sgr S.p.A., Azimut Financial Insurance S.p.A. and Azimut Enterprises S.r.l. as subsidiaries, have adopted the tax consolidation regime;
• a contractually established annual fee (totalling 1,000 thousand euro) is payable for the coordination activities carried out by the company on behalf of the subsidiary Azimut Capital Management SGR S.p.A.;
• Azimut Holding S.p.A. has issued sureties to the subsidiary Azimut Capital Management Sgr S.p.A.. Azimut Capital Management Sgr S.p.A. has disbursed loans to several financial advisors, identified as related parties, to develop their business. The terms and conditions of these loans are at arm’s length. At 30 June 2019, they amounted to 11,481 thousand euro. Moreover, the directors of the Group who also act as managers of mutual funds are exempt from paying fees and commissions on any personal investments made in the funds they manage.
110 WorldReginfo - 0ce5f050-b036-415a-a322-984991a7cfaf Finally, during the first half of 2019, the subsidiary Azimut Capital Management Sgr S.p.A. paid the covered warrant issued in 2018 and subscribed by the Group’s employees, some of whom are also directors of the parent company and its subsidiaries. The instruments exercised by the Group’s employees who also act as directors are equal to 261 for a total consideration of 600 thousand euro. With respect to profit-participating financial instruments, in accordance with Shareholders' resolutions, 4 key directors subscribed 180,000 instruments (paying the corresponding amount), including the Chairman Pietro Giuliani (100,000), the directors Gabriele Blei (30,000), Paolo Martini (30,000) and Alessandro Zambotti (20,000). As per the Shareholders' agreement related to Azimut Holding S.p.A., 933 related parties subscribed a total of 1,144,570 profit-participating financial instruments. At 30 June 2019, the Parent Company held 175,430 profit-participating instruments.
111 WorldReginfo - 0ce5f050-b036-415a-a322-984991a7cfaf The following table shows the impact that the transactions or positions with related parties (other than those listed above) have on the Group’s financial position and results of operations: Total Related parties Absolute value % Assets Other assets 337,414 11,481 3.40 Liabilities Other liabilities: 242,764 4,236 1.74 Due to the Board of Statutory Auditors 243 0.10 Due to Directors 3,993 1.64 Income statement Administrative costs 120,770 8,941 7.40
Statutory Auditors' fees 379 0.31
Directors' fees 8,232 6.82
VAT on royalties, coordination activities 330 0.27
These amounts are shown in detail in the corresponding notes to the balance sheet and income statement.
112 WorldReginfo - 0ce5f050-b036-415a-a322-984991a7cfaf Other information
Average number of financial advisors In the first half of 2019, the average number of financial advisors amounted to 1,769.
Dividends paid The unit dividend for 2019 amounted to 1.2 euro per ordinary share and was paid in May 2019 in cash. Treasury shares were assigned in the ratio of one treasury share every 56 shares held.
Significant non-recurring events and transactions In the first half of 2019, the Azimut Group did not carry out non-recurring transactions which have not already been disclosed in these notes. There were no atypical and/or unusual transactions.
On behalf of the Board of Directors Chief Executive Officer (Gabriele Roberto Blei)
113 WorldReginfo - 0ce5f050-b036-415a-a322-984991a7cfaf Certification of the condensed consolidated interim financial statements pursuant to article 154-bis of Italian Legislative Decree No. 58/98
1. The undersigned, Gabriele Roberto Blei, Chief Executive Officer, and Alessandro Zambotti, manager in charge of financial reporting of Azimut Holding S.p.A., hereby represent, having also taken into account the provisions of Article 154-bis, paragraphs 3 and 4 of Italian Legislative Decree No. 58 of 24 February 1998:
• the adequacy in view of the nature of the business and
• the effective application of the administrative and accounting procedures used for the preparation of the condensed consolidated interim financial statements for the first half of 2019.
2. The evaluation of the adequacy of the administrative and accounting procedures for the preparation of the condensed consolidated interim financial statements at 30 June 2019 is based on a system drafted by Azimut Holding, in accordance with the Internal Control – Integrated Framework model issued by the Committee of Sponsoring Organizations of the Treadway Commission, an internationally accepted reference framework.
3. The undersigned also represents that:
3.1. the condensed consolidated interim financial statements at 30 June 2019:
a) were prepared in accordance with the International Financial Reporting Standards endorsed by the European Commission pursuant to Regulation (EC) 1606/2002 of the European Parliament and Council, of 19 July 2002;
b) are consistent with the accounting books and records;
c) and provide a true and fair view of the financial position and results of operations of the issuer and the companies included in its scope of consolidation.
3.2. The interim management report contains a reliable analysis of the references to important events during the first six months and their impact on the condensed consolidated interim financial statements, as well as a description of the key risks and uncertainties for the remaining six months of the year. The interim management report also includes a reliable analysis of significant related-party transactions.
Milan, 1 August 2019
Chief Executive Officer The Manager in charge of financial reporting (Gabriele Roberto Blei) (Alessandro Zambotti)
114 WorldReginfo - 0ce5f050-b036-415a-a322-984991a7cfaf
REVIEW REPORT ON CONSOLIDATED INTERIM FINANCIAL REPORT AS OF 30 JUNE 2019
To the shareholders of Azimut Holding SpA
Foreword
We have reviewed the accompanying consolidated interim financial report of Azimut Holding SpA and its subsidiaries (the Azimut Holding Group) as at 30 June 2019, comprising the balance sheet, the income statement, the statement of comprehensive income, the statement of changes in shareholders’ equity, the cashflow statement and the related notes. The directors of Azimut Holding SpA are responsible for the preparation of the consolidated interim financial report in accordance with International Accounting Standard 34 applicable to interim financial reporting (IAS 34) as adopted by the European Union. Our responsibility is to express a conclusion on this consolidated interim financial report based on our review.
Scope of review
We conducted our work in accordance with the criteria for a review recommended by Consob in Resolution No. 10867 of 31 July 1997. A review of consolidated interim financial report consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than a full-scope audit conducted in accordance with International Standards on Auditing (ISA Italia) and, consequently, does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion on the consolidated interim financial report.
Conclusion
Based on our review, nothing has come to our attention that causes us to believe that the consolidated interim financial report of Azimut Holding Group as of 30 June 2019 is not prepared, in all material respects, in accordance with International Accounting Standard 34 applicable to interim financial reporting (IAS 34) as adopted by the European Union.
Milan, 30 August 2019
PricewaterhouseCoopers SpA
Signed by
Lia Lucilla Turri (Partner)
This report has been translated into English from the Italian original solely for the convenience of international readers
WorldReginfo - 0ce5f050-b036-415a-a322-984991a7cfaf