2014 Annual Report d’Amico Società di Navigazione S.p.A.
2014 Annual Report Consolidated and Statutory Financial Statements for the year ended 31 December 2014
d’Amico Società di Navigazione S.p.A. Registered office: Via Siracusa 27, Palermo (Italy) Head office: Corso d’Italia 35/B, Rome (Italy) Share capital: Euro 25,000,000, fully paid-in Tax code, VAT registration and registration number in the Palermo Companies Register 00768720823
Contents
L4 Corporate Boards and Officers
B6 Report on Operations 6 Group Structure 8 d’Amico Società di Navigazione Group 9 Business Areas 12 Organization and Human Resources 14 Ship Management 16 Sustainable Development 17 Corporate Governance 21 Significant Events during the Year 24 Financial Performance Analysis – The Group 28 Operating Performance 31 Financial Performance Analysis – d’Amico Società di Navigazione S.p.A. 33 Significant Events since the End of the Year and Business Outlook 39 Other Information d’Amico Società di Navigazione Group - Consolidated Financial Statements 42 as at and for the year ended 31 December 2014 44 Consolidated Income Statement 44 Consolidated Statement of Comprehensive Income 45 Consolidated Statement of Financial Position 46 Consolidated Statement of Cash Flows 47 Consolidated Statement of Changes in Shareholders’ Equity 48 Notes d’Amico Società di Navigazione - Statutory Financial Statements 90 as at and for the year ended 31 December 2014 92 Separate Income Statement 92 Statement of Other Comprehensive Income 93 Statement of Financial Position 94 Statement of Cash Flows 95 Statement of Changes in Shareholders’ Equity 96 Notes
120 Annexes 122 List of Fleet Vessels as at 31 December 2014 126 Independent Auditors' Reports 134 Statutory Auditors' Reports
2014 Annual Report | 3 Corporate Boards and Officers
Board of Directors
Chairman Paolo d’Amico 1
Chief Executive Officer Cesare d’Amico1
Managing Director for Administration, Finance and Control Roberto Michetti
Director Giovanni Battista Nunziante
Director Alfonso Scannapieco
Board of Statutory Auditors
Standing Auditors Gianfranco Taddeo - Chairman Gian Enrico Barone Franco Guerrucci
Substitute Auditors Paolo Taddeo Renzo Marini
Independent Auditors
PricewaterhouseCoopers SpA
1 Members of the Executive Committee
4 | d’Amico Società di Navigazione S.p.A.
Report on Operations
Group Structure
d’Amico Società di Navigazione SpA 99.99% Italy d’Amico International S.A. Luxembourg
55.08% Compagnia Generale 100.00% d’Amico Shipping Telemar SpA Singapore Pte Ltd Italy Singapore
100.00% d’Amico Shipping 70.00% d'Amico Italia SpA Dry Maroc S.à.r.l. Italy Morocco
75.00% Domas 100.00% Immobiliare S.r.l. d’Amico Finance Ltd Italy Ireland
51.00% MIDA Maritime 100.00% d’Amico Shipping Company Ltd USA Limited Ireland USA 1.00% 99.83% 76.90% Sirius Ship 99.00% d’Amico Ship Ishima Saemar S.A. Management S.r.l. India Pvt Ltd Spain Italy India
55.55% d’Amico Partecipazioni 100.00% d’Amico Shipping Finanziarie S.r.l. UK Ltd Italy UK
99.70% COMARFIN S.A.M. Monaco
96.00% COGEMA S.A.M. Monaco
85.00% 100.00% Rudder S.A.M. Rudder Pte Ltd Monaco Singapore
90.00% Rudder Argentina SA Argentine
100.00% 100.00% d’Amico Dry Ltd Medbulk Maritime Ltd Ireland Ireland
100.00% 100.00% Hanford St. Andrew Estates Ltd Investments Inc Liberia Liberia
100.00% 100.00% Anglo Canadian ACGI Shipping Inc. Shipping Ltd Canada Canada
100.00% 100.00% Ishima Pte Ltd Global Maritime Singapore Supplies Pte Ltd Singapore
50.00% Cambiaso Risso Asia Pte Ltd Singapore
100.00% ACGI Shipping Singapore Pte Ltd Singapore
51.00% dACC Maritime Ltd 6 | d’Amico Società di Navigazione S.p.A. Ireland Report on Operations
58.47% d’Amico International Shipping S.A. Luxembourg
100.00% d’Amico 100.00% d’Amico Tankers Tankers Ltd UK Ltd Ireland UK
100.00% High Pool Tankers Ltd Ireland
100.00% Glenda International Management Ltd Ireland
51.00% DM Shipping Ltd Ireland
99.98% d’Amico Tankers Monaco S.A.M. Monaco
50.00% Glenda International Shipping Ltd Ireland
33.00% Eco Tankers Ltd Malta
Holding company
Shipping company
Service company
Finance company
Real-estate company
Telecommunications company
2014 Annual Report | 7 d’Amico Società di Navigazione Group d’Amico Società di Navigazione S.p.A. (“DSN”, “Parent International Shipping S.A. (“DIS”), a Luxembourg sub- Company”, “Company”) is the holding company of a holding company with global shipping operations, leading global shipping group with operations in dry specialized in the tanker sector, is listed on the STAR cargo ships, tankers and auxiliary maritime services. The segment of the market (MTA) organized and managed d'Amico Group (the "Group") boasts a long tradition as by Borsa Italiana S.p.A. Experience, competence and a family business founded in 1936 and has developed a responsibility, in addition to a strong focus on the client, worldwide presence over the years with offices in the operational safety and protection of the environment, most important operating and financial maritime are the d'Amico Group's core values. mercantile centres. Its indirect subsidiary d’Amico
Summary of results
Income Statement Figures (Thousands of euro) 2014 2013A Change % Change Consolidated revenue 755,952 625,740 130,212 20.8% Consolidated costs (731,451) (592,322) (139,129) (23.5%) Income on the disposal of fixed assets 7,559 19,109 (11,550) (60.4%) EBITDA 32,060 52,527 (20,467) (39.0%) EBIT (20,793) (93) (20,700) NET PROFIT OR LOSS (39,077) 30,889 (69,966) (226.5%) Net profit / (loss) - Minorities (817) 5,271 (6,088) (115.5%) GROUP NET PROFIT OR LOSS (38,260) 25,618 (63,878) (249.3%)
The financial statements in question closed 2014 with a 31 December 2014. As is known, the company uses loss of Euro 39.1 million, of which Euro 38.2 million various hedging instruments to protect against possible pertaining to the Group, compared to consolidated fluctuations in its main market pertaining to financial profit of Euro 30.8 million (of which Euro 25.6 million of interest (IRS), fuel purchases (bunker swaps), exchange the Group) in 2013A. In this regard we specify that the rates (FEX) and freight (FFA). Performance in the later figures for 2013 were adjusted (and posted with the part of 2014, primarily for the first two of these, wording 2013A) as a result of the retrospective first-time registered unexpected, sudden changes, bringing 10- application of the new IFRS and the reclassification of year US rates from 3% to approximately 2% and causing the ineffective portion of the cash flow hedge of the cost of bunker swaps to collapse from USD 700 to gains/(losses). For more information refer to the section approximately USD 350 per tonne. The positions of Note 1 “Accounting principles adopted from 1 cautiously put in place to fix the related costs had a January 2014”, the part covering the notes to the Group negative book value as at 31 December which, based report. on the international accounting standards, was directly posted to the income statement. That sum will, in any The reason for these results, summarized in the table event, be used at the end of 2015: the difference above, is due to the negative trend in the operating between the reference values as at 31.12.2015 and those markets as well as, and especially, the accounting effect recorded as at 31.12.2014 will be considered in of the revaluation of several financial instruments as at determining the profit (loss) for the year.
8 | d’Amico Società di Navigazione S.p.A. Report on Operations
Business areas Dry cargo and container ships "per-voyage" basis (known as the "spot" market), including the performance of freight contracts The Group operates in the dry-cargo sector of the negociated dierctly with customers. shipping market through d’Amico Dry Limited, d’Amico Shipping Singapore, d’Amico Shipping Italia S.p.A. ("DSI") and Mida Maritime Ltd. The latter sold its only vessel during 2014. Therefore, at the end of the year, its operations were substantially suspended. The fleet Tankers comprises both owned ships and ships on short-term The Group's tanker business is generated under d'Amico and long-term charters. The list of vessels (owned and International Shipping S.A., primarily through its long-term charters) managed during 2014 is attached subsidiary d'Amico Tankers Limited, based in Ireland, hereto, including “tanker” ships, described in greater with a fleet with an average age of approximately 7 detail hereinafter. Vessels employed based on “short- years, compared to a sector average of 9.96 years term” charters in order to satisfy flexibility needs and seize (source: Clarkson). All the DIS Group’s vessels are double- the opportunities presented by the dry-cargo market are hull vessels, with “coated” tanks, and are primarily not included, as they do not represent an integral part employed in the transport of refined petroleum of the d’Amico Group's core fleet. In further detail, the products, providing maritime shipping services on a Group operates in the following segments: Handysize global scale to the major oil companies and trading (from 32,000 DWT to 40,000 DWT), Supramax (from firms. In addition, all vessels have been constructed in 52,000 DWT to 58,000 DWT) and Panamax (from 74,000 accordance with IMO (International Maritime DWT to 83,000 DWT). Organization) and MARPOL (the International The composition of the dry-cargo fleet was as follows as Convention for the Prevention of Pollution from Ships) at 31 December 2014: regulations, the requirements set by the major oil and energy companies and international standards. Pursuant to MARPOL/IMO regulations, cargoes such as palm oil, As at 31 December 2014 vegetable oil and a range of other chemical products Dry cargo Handysize Supramax Panamax Total may only be transported by tankers that meet said Owned 7 4 7 18 requirements (“IMO-classed” vessels). As at 31 December Chartered 6 8 4 18 2014, 65% of the vessels in the d’Amico International TOTAL 13 12 11 36 Shipping fleet were IMO-classed, allowing the Group to transport a wide range of products, described above. In addition to that above, the company fleet includes two container vessels, owned by d’Amico Dry Limited, d’Amico Shipping Italia SpA operates in the tanker sector which are included in the attached list of the fleet. to a residual extent, employing its two Handysize vessels (40,000 DWT) acquired in 2011. The main commodities carried by the Group include coal, in which the Group boasts longstanding As at 31 December 2014, 41.8 vessels were employed: experience, and other bulk cargo, such as iron ore, 19.8 MR (“Medium Range”) and 2 Handysize vessels minerals, grain and other commoditie, with its clients under fixed-term contracts, whereas 13 MR and 7 among the leaders of their respective industries. Handysize vessels are employed on the spot market. Reliability, flexibility and strong long-term relationships Some of its ships (10 vessels) are also employed through are the competitive advantages that the d'Amico Group partnership agreements. has established over the years in the dry-cargo business. The total of 51.8 vessels at the end of 2014 is This sector also includes the transport of forest products summarised in the table below. from the Canadian North Pacific to various Mediterranean ports under both long-term contracts Tankers As at 31 December 2014 with the major timber producers and voyage-based MR Handysize Total contracts that allow the Group to seize the short-term Owned 19.3 5.0 24.3 opportunities presented by the market. Chartered 23.5 4.0 27.5 TOTAL 42.8 9.0 51.8 A portion of the vessels in the d'Amico fleet are employed under "time-charter" (medium-/long-term) A complete list of tankers as at 31 December 2014 is contracts, while the residual vessels are chartered on a annexed to this document.
2014 Annual Report | 9 Use of the fleet and partnerships clients, and comprise in particular (i) ship management, (ii) maritime telecommunications High Pool Tankers Limited - a pool with JX Ocean Co. services, (iii) insurance brokerage and (iv) Limited (Japan) and Mitsubishi Corporation. As at 31 procurement of in ship fuel purchases ("bunkering"). December 2014 the pool operated 11 MR tankers, with commercial management (chartering, operations and Ship management services constitute one of the main administrative matters) carried out by d’Amico Tankers lines of business of the Parent Company, d’Amico Limited. Società di Navigazione S.p.A., which, in part through other Group companies, and through the indirect GLENDA International Shipping Limited, a 50-50% joint subsidiary Ishima Pte Limited (“ISHIMA”) in particular, venture with Glencore Group which owns 6 MR vessels, renders services to Group companies and third parties, built between August 2009 and February 2011. including: Following the reorganisation carried out in 2013, the • technical management (supervision of construction activities previously performed by GLENDA International and maintenance projects); Management Limited (in a pool with the Glencore • planning, procurement and management of Group) were directly integrated into the above planned maintenance (“PM”); company. As a result of this process, Glenda • crew management (selection, recruitment and International Shipping currently charters three vessels management of the compensation of maritime to d’Amico Tankers and three vessels to the Glencore personnel); Group. • management of quality, safety and environmental protection systems; DM Shipping Limited, a 51% - 49% joint venture with the • management of information technology systems; Mitsubishi Group. The company owns 2 MR vessels built and in July and October 2009, respectively. • management of legal and insurance issues.
Eco Tankers Limited, a joint venture with Venice Shipping Maritime telecommunications services are entrusted to Logistics S.p.A., in which the Group holds an interest of Compagnia Generale Telemar S.p.A. (“Telemar”), a 33%. The joint venture signed a contract with Hyundai global leader in the sector in which the Parent Company Mipo Dockyard Co., Ltd for the construction of an “Eco holds an interest of just above 55%. Such activities design”, 50,000 DWT MR tanker at the latter’s location in include the provision of electronic and satellite Vietnam, Hyundai-Vinashin Shipyard Co., Ltd. The vessel communications and navigation systems and support was delivered in May 2014. The d’Amico Group is for those systems, as well as the sale of radiotelegraphic responsible for the commercial, technical and traffic. Telemar, which operates through subsidiaries in administrative management of the vessel. ten countries, is a strategic partner and agent for the major producers of telecommunications systems and Company Fleet: Ship value/impairment boasts unparalleled expertise in support services for transport and cruise vessels. Each year, the book value of the vessels in the Company’s fleet have been compared with their Bunkering operations are conducted by Rudder S.A.M. estimated market values/recoverable values by (“Rudder”), also through its subsidiaries in Argentina performing what is called an “impairment test” valuation. and Singapore, and the bunkering services provided are Based on the market of the fleet at the end of 2014 and rendered to both Group companies and third parties. future projections, the Group deemed not to record any The process includes constant monitoring of the necessary impairment of the values in the financial reliability of traders operating in the sector and is statements. founded on longstanding relationships with the oil majors.
Crew management operations are entrusted to Sirius Maritime services Ship Management S.r.l. (“Sirius”), which is responsible This segment comprises the provision of auxiliary for recruiting, provision of payroll services and training services for shipping operations. The services rendered seagoing personnel for both Group companies and benefit not only the d'Amico fleet, but also international third parties, also through its foreign subsidiaries.
10 | d’Amico Società di Navigazione S.p.A. Report on Operations
Financial and real-estate investments vehicle for the acquisition of 20% of the share capital of Eataly S.r.l., which operates in the worldwide The d’Amico Group, through its Parent Company, distribution and sale of top-quality Italian wine and d’Amico Società di Navigazione S.p.A., and the sub- food products, integrating production, sale, catering holding company d’Amico International SA, has a and education into its offering. significant presence in the financial investments sector. This line of business, in addition to the management of financial resources, includes the acquisition of qualified equity investments of a strategic nature in financial and industrial companies with a view towards diversification and from a long-term perspective. Such activities include, inter alia, the investments in:
• Clubtre S.p.A. – a company the owners of which include Tamburi Investment Partners S.p.A., with a 35% interest, and Angelini Partecipazioni Finanziarie S.r.l. and d'Amico Società di Navigazione S.p.A., each of which holds a 32.5% interest. As at 31 December 2014, d'Amico Società di Navigazione S.p.A. had invested approximately Euro 33 million. ClubTre S.p.A. holds an interest of more than 6% in Prysmian S.p.A., a global leader in cabling and high-tech systems for energy transmission and telecommunications; • Venice Shipping and Logistic S.p.A. – a company whose main shareholders as at 31 December 2014 were Palladio Finanziaria S.p.A. (56.99%), d'Amico Società di Navigazione S.p.A. (28.44%) and Vega Finanziaria S.p.A. (14.26%). The company was incorporated in September 2009 and primarily engages in investment transactions in the shipping and shipping logistics sectors. As stated, during the year, DSN increased its investment by subscribing share capital increases up to Euro 6.2 million; • Tamburi Investment Partners S.p.A. – an independent merchant bank listed on the STAR segment of Borsa Italiana S.p.A. of Milan, focused on purchasing equity interests in Italian and foreign companies. The equity interest held by the Parent Company as at 31 December 2014 increased to 11.37%; • TIP-PRE IPO S.p.A. – In 2014 the consolidated financial statements were expanded by this new corporation, incorporated during the year with the purpose of acquiring minority interests in Italian or foreign companies. These interests, in industrial or service sectors, must have the goal of being listed in a regulated stock market within five years. The equity interest is held both directly by the Parent Company and through d’Amico Partecipazioni Finanziarie srl, for a total of 3.26% of share capital; • ClubItaly Srl – This company, established in 2014, is also held through d’Amico Partecipazioni Finanziarie Srl for a total amount of over Euro 9 million, equal to a 7.50% participation. ClubItaly is a special purpose
2014 Annual Report | 11 Organization and human resources
As at 31 December 2014, the d’Amico Group employed cadets and rising, in some cases, to fill management a total staff of 1,686, of whom 1,117 were seagoing positions, also in the offices. personnel and 569 onshore personnel. A considerable effort is made for the growth and People are a fundamental lever for gaining a professional development of onshore and on board competitive advantage in the business context the personnel. Growth and development of employees is Group operates in. Company choices are always focused one of the most important objectives that the Group on creating a working environment that is motivating, sets for itself, constantly investing in initiatives that has a positive impact on the organisational climate and, support the promotion of the experience and expertise as a result, on the productivity of resources and, thus, on of resources, while consolidating their profiles with company results. Accordingly, the d’Amico Group respect to professional issues and emerging managerial invests in its people and adopts people-management issues and laying the foundation for a process of tools - from recruiting to individual development and development culminating in onshore positions. the compensation system - with a view towards honing all professional skills, retaining and developing talent An adequate training program which is always up-to- with know-how profiles with the greatest impact on date and in line with international requirements, and the core processes. To this end the Group has implemented expansion of in-house training structures guarantee that reward systems that sharply target individual the necessary professional standards required by the performance and compensation policies aimed at industry are met. In this regard, a rigorous ground and fostering an effective pay-for-performance system. sea training program has been organized for crew, starting with the pre-embarkation period and Crewing is one of the key elements in the safe and extending throughout each officer's entire career. efficient use of the fleet. The crewing policy Training capitalizes on the knowledge developed within implemented by the Group constantly aims to promote the company, involving the participation of specialized onboard safety and environmental protection, while trainers and senior staff with seagoing experience. In also maintaining conditions of crew efficiency and addition, the Group implements a consolidated policy reliability. Achievement of these objectives is founded of collaboration with various naval education upon three pillars: a meticulous selection process, institutions with the aim of increasing awareness of thorough training and a permanent monitoring and safety and environmental issues, key priorities for the assessment system for personnel. business.
In further detail, access to highly qualified personnel also As part of initiatives aimed at supporting educational requires an effective recruitment and retention program. institutions, the Group, along with other important In order to meet these needs fully, a resource selection Italian institutional partners, has continued and strategy has been adopted, resulting in recent years in consolidated its commitment to ITS Fondazione G. the implementation of specific initiatives, such as the Caboto, which provides training for specialized technical consolidation of a base of operations in Mumbai. The staff through two-year post-secondary training courses Indian market has an established track record as a intended for persons interested in embarking upon an source of high quality crews. The representation office in international career in the naval sector. Courses, which Manila also ensures the presence of the Group in an combine theoretical study and hands-on training, aim important market, namely the Philippines. Specific to provide an excellent technical background, granting programs for officer cadets of Indian and Philippine knowledge of the d’Amico Group's organizational nationality have been in place for several years and draw structure, policies, expertise and vision, thus facilitating on the manning facilities of d'Amico Ship Ishima in India the placement of pupils in positions with the Group. and the Philippines, directly associated with the company Sirius Ship Management.
The Group has a good level of retention, both of onshore personnel and personnel employed onboard ships. A significant number of captains have completed their entire careers with d'Amico, starting out as officer
12 | d’Amico Società di Navigazione S.p.A. 2014 Annual Report | 13 Ship Management Compliance with international standards concerned with preventing a specific form of marine All vessels in the d'Amico fleet are subject to constant pollution from ships. monitoring in order to ensure that they comply with IMO (International Maritime Organization) regulations, Pursuant to specific contracts with various Group MARPOL (the International Convention for the companies, the technical management of the vessels Prevention of Pollution from Ships) and the other comprising the fleet is carried out by d’Amico Società di international standards applicable to the industry. In Navigazione S.p.A. (“DSN”) and, to a lesser extent, Ishima. further detail, each year tankers are required to pass the DSN also provides support in the area of maritime following examinations conducted by external entities insurance for the fleet and coordinates the Tanker and/or clients: Management and Self-Assessment Programme (TMSA) launched in 2004 by OCIMF (Oil Companies International • inspection and monitoring of compliance with Marine Forum), in addition to the Safety Quality and MARPOL standards by the flag state; Environment (SQE) Management System. Onboard and • port-state controls, which are inspections of foreign environmental safety represent top priorities for the ships to verify that the conditions of the vessel and its Group. equipment comply with the requirements of international conventions and that the vessel is Ship management, coordinated by DSN with the manned and operated in accordance with those assistance and supervision of its operating subsidiaries, rules; includes general maintenance-related issues, with the • flag state controls in the country where a ship is aim of ensuring compliance with applicable naval registered ; and regulations and classification requirements, while also • vetting inspections by major oil and energy satisfying the requirements of the vetting procedures companies such as ExxonMobil, Shell, Total, Glencore, applied by the major oil companies. This goal is achieved Petrobras, Vitol and Vela, which are some of the by supervising maintenance services, promoting vessel Group's established clients. efficiency, planning and supervising dry-dock work, purchasing onboard supplies and spare parts and In order to ensure that its vessels comply with industry appointing advisors and technical supervisors. standards and regulations, the d'Amico Group has developed and adopted a strict environmental analysis Ship management is based on an integrated SQE (Safety, system that involves identifying vessel activities with an Quality and Environment) system applied without impact on the environment (water, air and other exception aboard the Group's vessels and in its offices. elements) and then analyzing which of those This system is compliant with the international standards interactions might have a significant impact on the ISO 9001:2008 and ISO 14001:2004, established by the environment. The IMO (International Maritime International Organisation for Standardization, and is Organization) is a specialized agency of the United certified by the international classification society RINA Nations founded in the United Kingdom in 1958 with a S.p.A. (Registro Italiano Navale) in 2003. specific mandate: creating and updating a comprehensive regulatory framework of international This system has been integrated with the management conventions and recommendations governing every of Occupational Health and Safety in accordance with facet of marine shipping, such as safety, environmental standard BS OHSAS 18001:2007, initially applied only to and legal concerns, technical co-operation, maritime offices and ships flying the Italian flag and then extended security and the efficiency of marine transport. These to the entire managed fleet in 2011. The policies and include the MARPOL convention and STCW convention procedures implemented aboard its vessels allow the on standards of training for seafarers. MARPOL 73/78 is an Group to maintain a high standard of operation with a international frame convention for the prevention of strong emphasis on the safety of all activities performed, pollution from ships (“Marpol” stands for marine pollution the potential environmental impact of its operations and and “73/78” refers to the years 1973 and 1978), the maximum client satisfaction. In order to ensure that purpose of which is to preserve the marine ecosystem offices and vessels closely adhere to the established through the complete elimination of pollution by oil and requirements and to reduce the risk of accidents and other harmful substances (e.g., gasoline, jet fuel, kerosene environmental impacts to a minimum, the system also and naphtha). It comprises six annexes, each of which is calls for systematic periodic controls. The d'Amico
14 | d’Amico Società di Navigazione S.p.A. Report on Operations
Group’s sensitivity to these issues, clearly articulated in compliant with the 50001:2011 standard for energy the Company's mission and vision statement, also management. Based on the system developed, implies careful selection and thorough oversight of procedures and practices are adopted to pursue energy external suppliers and services. efficiency throughout the entire production chain of the organisation. During the year, the SQE was also certified as compliant with the ISO 50001: 2011 standard for energy Pursuant to standard ISO 14001, and in order to management. Based on the system adopted, specifically demonstrate the compliance of its vessels and its on board the fleet, procedures and practices are adopted dedication to respecting the environment, the d’Amico to pursue energy efficiency throughout the entire Group has developed and adopted a rigorous approach production chain of the organisation. to environmental analysis based on identifying interactions between vessel activities and the The management method adopted, which relies on a environment (water, air and other elements) and then process-based approach to organize all activities analyzing which of those interactions might have a performed in a clear manner, with points of control, significant impact on the environment. The performance measurements, analysis of critical issues environmental system is constantly analyzed, monitored and measures for improvement, also allows the d'Amico and updated in order to ensure legal compliance and a Group to rank in the upper segment of the TMSA focus on improvement. programme launched in 2004 by the OCIMF. While not compulsory, TMSA is recommended by the major oil Each year, DSN’s SQE team conducts an internal audit companies in order to encourage shippers to measure, (both aboard and ashore) aimed at identifying and assess and improve their performances on the basis of analyzing all factors (for example, bunkering and certain key indicators. Satisfaction of the Programme's shipping operations, clean-up of oil/chemical products requirements often represents the basis for developing and the loading, transport and unloading of products), agreements of a commercial nature, but also drives the products or services that have or may have a significant pursuit and maintenance of higher safety levels, the environmental impact, thereby minimizing risk and prevention of pollution and a drastic reduction in the risk seeking to reduce CO2 emissions. The analysis is based of accidents. on a wide range of data, such as fuel alternatives, water consumption, measurements of acoustic and The Group is committed to involving all personnel in electromagnetic pollution, construction data, vessel and achieving the goals it has set for itself by establishing plant layouts and maintenance procedures and intervals. specific training processes, encouraging staff to The Group also considers indirect environmental aspects participate in changes, providing motivation, identifying related to the activities of third parties such as the and disseminating best operating practices and disposal of solid waste in dumps and dry-dock work. assessing risks in order to create a shared body of practical, cultural knowledge in terms of quality and safety. In this area, the Group has developed programs for controlling and measuring the performances of various operating segments, which are analyzed on a half-yearly basis with the aim of achieving constant improvement. Particular emphasis has been placed on identifying and managing those factors that have or may have a significant impact on the environment in order to minimize the associated risk and, in particular, to seek to reduce polluting emissions. In further detail, a specific energy efficiency plan for each vessel, the Ship Energy Efficiency Management Plan (SEEMP), has been prepared and implemented. Such plans aim to apply technical solutions and operating procedures to reduce consumption and thus limit emissions. Also in light of these implementations, further integrations were made to the SQE system, which in 2014 was certified as
2014 Annual Report | 15 Sustainable development
The d’Amico Group strongly believes that its social methods and, above all, improve the environmental impact must not only be focused on complying with performance of its fleet. This plan includes a system of safety regulations and procedures, but also contribute procedures and countermeasures to be implemented to sustainable development. both on board and onshore, with the main purpose of Over the last few years, its strategy has been to pursue reducing CO2 emissions. the ongoing implementation of a Corporate Social Responsibility Plan (i.e. “CSR”), investing without On this specific point, last year the company’s integrated compromise in environmental protection and management system obtained ISO 50001 certification, professional development of the team in line with which is important international recognition of its ethical principles. excellent energy efficiency management.
In December 2014, the Group’s integrated management However, it is important to note that this system, by system received ISO 26000 certification from RINA itself, is not sufficient to hold back the growth of relating to how business and operations can be carried “greenhouse gas” (GHG) emissions in this sector. For this out according to socially responsible guidelines. reason, we have developed new procedures to improve This demonstrates how the Group operates and the management of ship performance. New continues to operate in an ethical, transparent manner, instruments and electronic measurement sensors have contributing to the health and welfare of society. From been installed to allow the crew to keep increasingly an environmental point of view, the Group accurate control of the ship’s performance. implemented the plan for new-builds with the goal of In this regard, RINA’s InfoSHIP EGO system is being renovating the fleet with more efficient vessels that aim implemented, which will shortly be extended to the for lower fuel consumption and the resulting lower gas entire fleet. The first unit will be installed in two new- emissions. Furthermore, the continuous involvement of builds, one dry-cargo vessel and one tanker, in China d’Amico in sponsoring cultural events worldwide and Korea, and then the installation will be continued highlights its commitment to social values. on the other vessels. The “EGO” system will certainly provide added value for In 2014, the Code of Ethics, put in place in 2008 only by the entire fleet, enabling the Group to monitor ship Parent Company, was revised and updated. Therefore, performance, reducing emissions and consumption by to date, the entire Group follows this Code, which around 3%-5%. formulates the principles that have inspired the Our strategy continues to focus on investing in this area company in pursuing its goals. for the purpose of increasing improvements in the management of consumption and improvement of the The Corporate Social Responsibility Plan includes environment. principles and policies regarding various company functions, with the primary function being the management system entitled “Security Quality and Environment” (SQE). That system has enabled the entire Group to use a standardised approach to manage all common problems, while keeping control of the specific needs of the various sectors, also benefiting from possible synergies.
Continuous monitoring, scrupulous internal inspections, detailed analysis of data collected and quick corrective actions have enabled the entire Group to improve its performance in terms of safety, customer satisfaction and environmental protection.
With regard to the Group’s commitment to the environment, d’Amico has developed the Ship Energy Efficiency Management Plan, or Energy Saving Programme, to ensure the best management of
16 | d’Amico Società di Navigazione S.p.A. Report on Operations
Corporate governance Board of Directors well as updates and/or revisions thereof; • the designation of members of the Board of In accordance with the Company's Articles of Directors, Executive Committee and Board of Association, as at the date of this Report the Board of Auditors of direct or indirect subsidiares and Directors consisted of five (5) directors - three executive directors and representatives of d’Amico Società di directors and two non-executive directors - appointed Navigazione S.p.A. within consortia, associations or by the General Shareholders' Meeting of 12 June 2012 other entities; and for the three-year period 2012/2014 and thus set to end • the conferral of voting instructions for the their term of office upon the approval of the current participation of representatives of d’Amico Società financial statements for the year ending 31 December di Navigazione S.p.A. in the general meetings of 2014. The three (3) executive directors are Paolo d'Amico subsidiares. (Chairman), Cesare d'Amico and Roberto Michetti, while the two (2) non-executive directors are Giovanni Battista Lastly, on 23 October 2012 the Company’s Board of Nunziante and Alfonso Scannapieco. Directors appointed Giovanni Barberis Head of Administration, Finance and Control, granting him all In the same date, the Board of Directors delegated powers of ordinary administration, with the associated powers and the associated powers of representation to power of representation required to perform that individual directors, resolving to grant Chairman of the function. Board of Directors Paolo d'Amico and Cesare d'Amico (the latter of whom was re-appointed the Company's Chief Executive Officer) all powers of ordinary and extraordinary administration, along with the associated powers of representation, to be exercised separately Internal control system between them and with single signing authority, along Compliance with Legislative Decree No. 231 of 8 with the power to delegate third parties, separately June 2001 between them, to hold the powers of ordinary and extraordinary administration conferred upon them by Legislative Decree No. 231 of 8 June 2001 (hereinafter issuing special powers of attorney. In addition, to "Decree 231") introduced administrative liability for granted Roberto Michetti certain powers of a financial companies and entities as a result of specific types of nature for the Group with respect to transactions of an crimes set forth in the Italian Criminal Code (such as extraordinary nature, investment policies and financial crimes against the public administration, corporate reporting policies. That same session, in addition to re- crimes, market abuse, etc.) committed and prosecutable appointing Maurizio Andrea Bergamaschi to the office in Italy by persons in top-level positions or other of secretary for the three-year period corresponding to employees in the interests or for the benefit of that company financial years 2012/2014 pursuant to Art. 20 company or entity. However, Decree 231 provides for a of the Articles of Association, also formed an Executive specific form of exemption from such liability if the Committee for the three-year period corresponding to company or entity has: company financial years 2012/2014 pursuant to the Articles of Association and Article 2 of the Regulation for • adopted and effectively implemented an the Establishment and Operation of the Executive appropriate compliance program that aims to Committee approved in 2009, appointing Paolo d'Amico develop an organic, structured system of and Cesare d'Amico members and granting the procedures, rules and controls to be conducted Committee authority, within the limits of the law and both in advance and after the fact in order to reduce the Company's Articles of Association, to pass all and prevent the risk of commission of the various resolutions concerning: types of crimes to a material extent, in particular by • the determination of the Company's organizational identifying and drafting a procedure for each of the structure; sensitive activities identified as most at risk of crime • the employment, dismissal, transfer and granting of as set out in the Italian Penal Code (the positions and powers to the executives of d’Amico "Organization, Management and Control Model" or Società di Navigazione S.p.A. and/or its subsidiaries; "Model"); and • the strategic, industrial and financial plans of • entrusted responsibility for supervising the d’Amico Società di Navigazione S.p.A., along with the functioning and observance of the Model, as well as pertinent separate and consolidated budgets, as for updating the Model, to a specific body of the
2014 Annual Report | 17 entity (the “Supervisory Board”) endowed with by the Company’s Board of Directors, currently being autonomous powers of initiative, control and revised, which governs the functioning, methods of spending authority. action, rights and related duties. On the basis of the annual reports by the Supervisory Board concerning the In voluntary application of Decree 231, d’Amico Società implementation, execution, adequacy and efficacy of di Navigazione S.p.A. therefore formally adopted a the Model, the Board of Directors, after appropriate Model and implemented specific operational evaluation, has deemed the Supervisory Board procedures for preventing the commission of offences adequate in terms of organizational structure and the by resolution of the Board of Directors of 29 May 2008. powers conferred upon it also for 2014, determining its At that same session, the Board of Directors also autonomous, independent budget for exercising its approved and adopted the Code of Ethics, which sets activities. forth the fundamental ethical principles to which DSN conforms and with which directors, statutory auditors, As a result of the work being carried out to update the employees, consultants, partners and, generally, all Risk Plan, as well as in consideration of the those who act in the Company's name and on its behalf implementation of the integrated management system are required to comply, as well as appointing the (undertaken in previous years through the “MAXIMS” Supervisory Board, charged with the following duties: project), at the Supervisory Board’s initiative, it was deemed necessary to revise the Code of Ethics of • supervising the effectiveness of the Model, putting d’Amico Società di Navigazione S.p.A. to implement and in place control procedures for specific actions or include the guidelines and ethical principles that must acts carried out by d’Amico Società di Navigazione be valid for all Group companies. This new version was S.p.A., while also coordinating with the other approved by the Board of Directors on 11 April 2014, corporate functions in order to implement better which approved the contents of the revisions to the monitoring of activities at risk; Code of Ethics and recommended that it be • periodically reviewing the efficiency and adequacy disseminated and adopted within the d’Amico Group, of the Model, ascertaining that the elements specifically to the subsidiaries of d’Amico Società di provided in the special parts for the various types of Navigazione S.p.A., which still have not adopted it. crimes are adequate for the requirements of observance of the provisions of Decree 231 and identifying corporate activities in order to update the map of activities at risk; Organization, management and control • evaluating the advisability of updating the Model model (pursuant to Legislative Decree when necessary to update it in relation to corporate requirements or conditions; and 231/01) • ensuring the required information flows, in part by During 2014, the Risk Plan (the "risk assessment") was promoting suitable initiatives to raise awareness and finalised pursuant to Legislative Decree 231/2001, improve understanding of the model and co- approved by the Board of Directors on 13 May 2013 operating in drawing up and supplementing upon the initiative of the Company's Supervisory Board. internal rules. Specifically, the work was conducted using the following operational methods: The Company’s Supervisory Board is collegial in form 1. direct interview with company contact; 2. and consists of three members appointed following due examination of company documentation acquired; 3. assessment and consideration of the following highlighting of possible crossovers between the requirements established for such function by Decree reference areas and the various predicate offences 231: autonomous initiative, independence, referred to in Decree 231/01, describing the methods of professionalism, continuity of action, absence of committing such offences which could implicate conflicts of interest and integrity. The current members liability of the entity for the offence and the specific were appointed by resolution of the Board of Directors activities exposed to said risk (known as sensitive of 11 April 2014 for the three-year period 2014-2016, activities); 4. preparation of risk management technical and, thus, until the Board of Directors examines the draft forms and assignment of the level of risk to the reference financial statements for the year ending 31 December areas based on several standard parameters of 2016. In 2009 the Supervisory Board also set up a adequacy of the internal control system, considering, in specific Internal Regulation of Establishment, approved the measurement of the risk level, also the existence and
18 | d’Amico Società di Navigazione S.p.A. Report on Operations
continuity of relations of the individual functions with third year of the engagement, i.e. those for the year the public Supervisory Authorities; 5. sharing the ending 31 December 2015. mapping of the sensitive Areas and processes with the company contacts; 6. sharing of the priorities identified in relation to the gaps detected and planning of corrective actions. Privacy – Personal data protection code During the first half of 2015 the consequent update of (pursuant to Legislative Decree the Organization, Management and Control Model adopted by d’Amico Società di Navigazione S.p.A. in 196/2003) 2008, based on the Risk Assessment will be finalized, and d’Amico Società di Navigazione S.p.A. has chosen to must be promptly shared with all the functions involved maintain operational readiness of and update the and brought to the attention of the Company’s Board Personal Data Processing Security Plan, although the of Directors. obligation to draft and update the Plan ceased to apply following the entry into force of Legislative Decree Board of Statutory Auditors 5/2012, converted into Law 35/2012. In further detail, the Company, upon completing a periodic assessment of On 12 June 2012, the ordinary shareholders’ meeting re- the potential critical issues to which personal data elected for the three-year period 2012/2014 all regular processing is exposed, verified the efficacy of all security and substitute members of the Board of Statutory measures (physical, logical and organizational) already in Auditors appointed in accordance with the applicable place to protect data processing, modifying the existing provisions of the Italian Civil Code. Accordingly, their Security Plan as necessary and updating the Register of terms of office are set to expire with the approval of the Data Processors pursuant to Legislative Decree 196/2003 current financial statements for the year ending on 31 and the associated Technical Specifications. The December 2014. voluntary update to the Security Plan for 2014 was thus completed in the first quarter of the current year, 2015. Pursuant to Articles 2397 et seq. of the Italian Civil Code, the Board of Statutory Auditors supervises “compliance with the laws and the articles of association, observance of the principles of sound management and, in Management and coordination particular, the adequacy of the administrative, organizational and accounting system adopted by the d'Amico Società di Navigazione S.p.A. is not subject to company and that system's functioning in practice.” management and coordination by other companies or entities and determines its general and operational strategic guidelines in full autonomy. It is currently responsible for management and coordination, Independent auditors pursuant to Articles 2497 et seq. of the Italian Civil Code, solely for d'Amico Shipping Italia S.p.A., a fully-owned The Ordinary Shareholders’ Meeting held on 13 June subsidiary. 2013 resolved, on the basis of a justified opinion from the Board of Statutory Auditors provided pursuant to Art. 13 of Legislative Decree 39/2010, to confer the engagement for legal auditing of the separate and ICT strategy consolidated financial statements - in the functions described in further detail in the legislation, entered into Throughout 2014 the options and opportunities linked effect on 7 April 2010, along with the pertinent to the evolution towards a Cloud Computing platform implementing regulations - for the three-year period were analysed. With support from consultants of the 2013/2015 to the auditing firm Politecnico of Milan, new ICT service levels were defined PriceWaterhouseCoopers S.p.A. of Milan, Via Monte Rosa to better support the growth and evolution of the 91, registered at no. 119644 in the Register of Auditors business: a new infrastructure, acquired entirely “as a (instituted pursuant to Article 2 of Legislative Decree service”, will provide variability to computing power and 39/2010), with the term of their engagement thus set storage and the related costs. to expire upon the date of the general meeting to be The Group’s management style is aimed at encouraging convened to approve the financial statements for the the creation of working conditions which are extremely
2014 Annual Report | 19 respectful of individual needs. Mandatory international Compliance and process control have resulted in a regulations have also been issued, making it necessary sharp increase in internal and external auditing. This to adopt tools and technologies that favour crew provided the opportunity to revise and fine-tune the welfare. The most important initiatives implemented definition of ICT operating processes. However, based include the setting up of Internet Points on board of all on the logic of continuous improvement, it is not vessels and providing crew with private email accounts. planned for these activities to come to an end. The changed requirements in terms of Governance &
20 | d’Amico Società di Navigazione S.p.A. Report on Operations
Significant events during the year Dry-cargo and container vessels four on long-term charter. The vessels were mainly employed in the following At the end of 2014 the Group fleet was composed of 20 routes: owned vessels, 18 long-term charter vessels and 13 • coal (COA Jpower from Australia to Japan and time short-term charter vessels, broken down into three main charter / Enel contracts with routes from Indonesia, types of ships: 30,000-40,000 DTW Handysize (open South Africa, Colombia and the Baltic to Italy), as well hatch – box shaped); 52,000 - 58,000 DTW Supramax as spot voyages from Indonesia and Australia to (craned and grabs fitted); and 76,000 - 83,000 DTW China, Japan and India, and from Colombia and the Panamax (which include Kamsarmax vessels). Baltic to Europe; • iron ore from Brazil and Australia to Europe, China In the Handysize sector, the Company employed 13 and Japan; vessels at the end of the year, all open-hatch box- • grain from the USA, Brazil and Argentina to China, shaped ships, of which seven were owned, and six on Japan and Europe; long-term charter. The vessels were employed specifically in the following sectors: The company also operated two owned container ships, • forest products from the Canadian North Pacific to the Cielo di Casablanca and the Cielo di Agadir, the the Mediterranean, with monthly departures, and former on short-term charter from CMA and the latter from Brazil to Europe (Gearbulk contract); chartered to d’Amico Dry Maroc (Maersk “feeder” • fertilizers (SQM contract, from Chile to the USA and service). Europe); • wood pellets (Premium Pellets contract, from During 2014 the Group’s main trade counterparties were Canadian North Pacific to the Mediterranean and the following: RWE contract from the USA to Europe); • Charters: AZ Marine, Banpu, Bunge, Cargill, Cosco, • pipes and steel coils (contracts from the CSN, Enel, Gearbulk, Glencore, Kawasaki, Jpower, Mediterranean to the USA and from China to South Mitsubishi, MOL, Noble, NYK, Riverton, RWE, SQM, America); Toyota; • cement (contract from Portugal to Brazil) • Brokers: • grain and minor bulk (petcoke, bauxite, soda ash) on • Japan: Trading House (Itochu, Mitsubishi, Mitsui, worldwide routes; Sojitz, Sumitomo); • Europe: Arrow, Bancosta, Braemer, BRS, Clarkson, In the Supramax sector, the Company employed 12 Howe Robinson, Ifchor; vessels, of which four were owned (at year-end), and • USA: Chartering & Freight Services NY, Clarkson eight on long-term charter. N.Y., Icap USA, John F.Dillon N.Y., Midship Miami, The vessels were mainly employed in the following SSY N.Y.; routes: • Singapore: Bidstet Yamamizu, Clarkson • coal (COA Glencore and Eastern Energy for transport Singapore, ICAP Shanghai, RS Platou Singapore, from Indonesia to Thailand, for a total of SSY Singapore; approximately 420 days employed), as well as spot • Shipyards: Oshima shipbuilding, Sanoyas, Yangfan voyages from Indonesia and Australia to China, Zoushan Thailand and India; sea sand (COA AZ Marine and Riverton for transport • During the year in question, two new 39,000 DTW from Vietnam and Cambodia to Singapore in 32 Handysize vessels were delivered, i.e. the Cielo di voyages, for a total of 1.7 million tonnes); Monaco in August and the Cielo di Tocopilla in October. • grain from the USA, Brazil and Argentina to China, In January 2014, Cielo di Genova (55,000 DWT Supramax Japan and Europe; vessel) and Medi Chennai (39,000 DWT Handysize • minor bulk (petcoke, bauxite and nickel ore) from vessel) were disposed of, and Cielo di Monfalcone and the USA, Colombia, Venezuela and the Philippines to Cielo di Vancouver were disposed of between July and China, Europe and the Mediterranean; August 2014. The disposals of these vessels resulted in a scrap form the USA and Europe to the • capital gain of approximately Euro 2.8 million. Mediterranean With regard to units under long-term charter, note that In the Panamax/Kamsarmax class, the Company during 2014, 3 Supramax vessels 58,000 DWT were employed 11 vessels, seven of which were owned and
2014 Annual Report | 21 delivered, named Medi Hakata, Medi Manila and Medi admitted to trading on the MTA market of Borsa Italiana Yokohama. S.p.A. as “Conversion Shares”, for a total value of Euro 22,347,191.88 (equivalent to USD 30,477,100). In The plan to increase and renovate the Group's Dry- accordance with the terms and conditions of the Cargo fleet involves the acquisition of 24 new vessels, Warrant Agreement, DIS issued and allotted 62,075,533 of which 4 through DACC Maritime Ltd (a JV, 50%- conversion shares, at the ratio of one (1) conversion owned by d'Amico International S.A. along with the share per each three (3) warrants exercised based on the company Coeclerici). At the reporting date, 5 units had Warrant Ratio, with the same rights (including the right been delivered. The remaining vessels will be delivered to any dividends) and characteristics as existing ordinary between 2015 and 2017. DIS shares at the issue date, to warrant holders who validly exercised their warrants during the First Exercise Period. Following the current capital increase, the amount of DIS shares comes to USD 42,195,530.70, Tankers divided into 421,955,307 ordinary shares without par value. In accordance with the Warrant Agreement, d'Amico Tankers Ltd warrant holders who have not exercised their warrants Charter-in fleet:In order to oversee the positive during the first exercise period will be entitled to development of the business, during 2014 d’Amico exercise their warrants and subscribe for conversion Tankers Limited chartered an additional 14 vessels under shares according to the warrant ratio at the following time-charter-in and 5 were redelivered. As a result, the exercise prices and during the following exercise total fleet grew by 15 units, from 37.5 as at 31.12.2013 to periods: 51.8 vessels as at 31.12.2014,including new owned - Euro 0.40 for warrants exercised on each January vessel deliveries. 2015 trading day; and - Euro 0.46 for warrants exercised on each January Fleet under construction: As at 31 December 2014 the 2016 trading day. investment plan for the Group’s segment consisted of 16 orders, for an investment of approximately USD 400 Sale of shares through ABB million. At that date, 8 units had been delivered. The remaining vessels will be delivered by 2016. In April 2015 In March 2014, with a view to increase its free float of two new Long Range 1 vessels were ordered, with an DIS shares and, as a result, increase liquidity, d’Amico investment of USD 88 million, which will allow the International S.A. sold a portion of its equity interest held company to enter a new, profitable market segment. in d’Amico International Shipping S.A. through accelerated book building (ABB). The operation consists Sale of ships: In March 2014, d’Amico Tankers Limited of accelerated book building targeted to qualified sold the Handysize tanker M/T Cielo di Parigi, built in investors in Italy and institutional investors abroad. 2001 by the South Korean shipyard Daedong Through this procedure, d’Amico International S.A. sold Shipbuilding, for USD 13.6 million. The vessel was 42,195,531 d’Amico ordinary shares, equal to delivered to the new owners in April 2014, realizing a approximately 10% of the Company’s share capital at a capital gain of USD 6.5 million. price of Euro 0.695. The transaction saw demand approximately 6 times greater than the supply, and In 2014 the d’Amico International Shipping Group's resulted in an increase in daily volumes traded, from business was affected by the following major events: approximately 20,000 shares traded to over 2.5 million. The share price also rose sharply during 2014, exceeding Warrants Euro 0.70 per share.
As known, following the full subscription of the share capital increase launched in December 2012, the First Exercise Period for the “Warrant d’Amico International Shipping 2012–2016”, (ISIN code LU0849020044) concluded on 31 January 2014. A total of 186,226,599 warrants were exercised at the price of Euro 0.36 per each new ordinary share issued by DIS and thus
22 | d’Amico Società di Navigazione S.p.A. Report on Operations
Maritime services total investment of Euro 4.6 million, and the private- equity fund Sator Private Equity Fund, which resolved a Ishima Pte Limited – During 2014, the company reimbursement as a capital contribution of Euro 1 continued to render ship management services to third million. parties as well as group companies, while also Regarding financial investments, the Parent Company consolidating the various activities undertaken by its also increased its controlling equity interest in Sirius subsidiaries in maritime procurement, insurance Ship Management S.r.l. of Genoa and established brokerage and port services. Ishima manages an d’Amico Partecipazioni Finanziarie S.r.l. As a result of average fleet of 40 vessels and supervises a three-year the purchase of shares in February 2014, the holding in "New Buildings" programme of approximately 146 the Genoa subsidiary reached 76.90% of share capital, vessels (of which 36% are the Group’s). while, for the new company established by way of notary deed on 19 February 2014, with the primary object of holding equity investments and/or financial instruments of all kinds in companies of all natures, Financial and real-estate investments several investments were immediately sold to third d’Amico Società di Navigazione S.p.A. During the parties, retaining the controlling interest with 55.55% of year, DSN continued its policy of investing in other shares. equity interests, thereby diversifying its efforts to business sectors other than shipping. Specifically, in During 2014, d’Amico International SA decreased its 2014 such investments related to the following equity interest in listed company DIS, following the investees in particular: Datalogic S.p.A., with the full various opportunities presented the market. As of 31 disposal of shares of a total value of Euro 6.9 million, December 2014 the percentage ownership was 58.47% Tamburi Investment Partners S.p.A. which converted 0.5 compared to 69.32% at the end of 2013. million warrants and acquired 1.6 million shares for a
Relazione Annuale 2013 | 23 Financial performance analysis – the Group Forecasts for 2014, as a result of significant signs of Operating performance recovery in the economic indicators in the previous year, were not confirmed by results and both the dry-cargo (Thousands of euro) 2014 2013R market and the tankers market - though only for the first Revenue 755,952 625,740 nine months - were impacted by the harsh negativity of Gross operating profit or loss / EBITDA 32,060 52,527 the trend in charters and this also had a clear effect on the Group’s profit (loss). Operating profit or loss / EBIT (20,793) (93) Profit / (Loss) before taxes (41,497) 44,274 The Tankers sector remained substantially flat during the NET PROFIT OR LOSS (39,077) 30,889 first three quarters of the year, in which the Group realized an average daily spot rate of USD 13,133. The Despite the trend in charters, turnover rose, due more to market scenario changed completely in the fourth quantity rather than the quality of the charters. quarter of 2014, when the rates for tankers reached a Operating costs also increased, bringing gross high since 2008 as a result of a sharp drop in oil prices operating profitto Euro 32 million. This amount also and an increase in trading. The collapse of the price of includes the results of the disposal of tangible assets crude had a highly positive effect on margins of (primarily vessels) which provided an economic benefit refineries, translating into higher rates of use and of Euro 7.6 million compared to approximately Euro 19 increasing the trading of products and the demand for million in 2013R. The impact of amortization and tonnage. Despite this improvement, the consolidated depreciation is generally in line with the figure recorded financial statements of “DIS” closed with a loss of in the previous year. Financial items, showing a loss of approximately Euro 10 million, which, however, was due Euro 20.7 million, contributed significantly to the net to the mark-to-market value of derivatives hedging fuel. loss which, as stated, amounted to approximately Euro 39 million. For the dry-cargo market, 2014 began by continuing the positive trend of the last part of 2013 but immediately reversed this trend, seeing charter rates plummet to well below the 2013 averages. Even though the trough recorded in February 2013 was not reached, the averages were approximately 4% lower (for Handysize and Supramax vessels), reaching approximately 20% less for Panamax averages.
The consolidated net loss in 2014 thus came to Euro 39 million, of which Euro 38.2 million was attributable to the Parent Company, compared to the net profit of approximately Euro 31 million in the previous year (of which Euro 25.6 million was attributable to the Parent Company).
As stated, we specify that the figures for 2013 are posted with the wording 2013A as a result of the retrospective first-time application of the new IFRS and the reclassification of the ineffective portion of the cash flow hedge of gains/(losses).
24 | d’Amico Società di Navigazione S.p.A. Report on Operations
Statement of financial position
(Thousands of euro) As at 31 December 2014 As at 31 December 2013R ASSETS Non-current assets 1,187,670 935,584 Current assets 560,975 463,221 TOTAL ASSETS 1,748,645 1,398,805
SHAREHOLDERS' EQUITY AND LIABILITIES Shareholders’ equity 900,916 858,615 Non-current liabilities 520,957 314,632 Current liabilities 326,772 225,558 TOTAL SHAREHOLDERS' EQUITY AND LIABILITIES 1,748,645 1,398,805
Non-current assets increased on the previous year, cash and equivalents of Euro 182.6 million and other both due to the sharp appreciation of the USD, the financial assets (mainly relating to investments) of currency in which the Group’s entire fleet is recorded - slightly less than Euro 173 million. which rose from an exchange rate with the Euro of 1.3791 at the end of 2013 to 1.2141 at the end of 2014 - Non-current liabilities, mainly include the long-term and the increase in vessels (both on the water and portion of loans, amounting to Euro 454.6 million. The under construction). Note that the value of the fleet at remainder consists of provisions (for risks, employees the end of the year was approximately Euro 936 and deferred taxes) and other sundry liabilities. Current thousand (USD 1.1 million) compared to Euro 710 liabilities include the short-term portion of loans thousand in 2013R (approximately USD 979 million), shown above (approximately Euro 141 million), trade while the value of building remained substantially payables, taxes payable and other current financial unchanged, at Euro 87.7 million. Other long-term assets liabilities. included the amount of Euro 112 million (Euro 96 million in the previous year), primarily regarding equity Shareholders' equity increased compared to 2013A, interests that are not consolidated or are consolidated as mainly due to the translation difference, amounting to equity investments. Euro 901 million (of which approximately Euro 765 million attributable to the Group). Current assets included trade receivables and inventories, for a total of over Euro 205 million, as well as
2014 Annual Report | 25 Net financial position
(Thousands of euro) As at 31 December 2014 As at 31 December 2013R Cash and cash equivalents 182,658 109,883 Current financial assets 172,705 190,652 TOTAL CURRENT FINANCIAL ASSETS 355,363 300,535 Bank loans - current (141,407) (77,856) Other current financial liabilities (50,359) (27,922) TOTAL FINANCIAL LIABILITIES (191,766) (105,778) NET CURRENT LIQUIDITY / (INDEBTEDNESS) 163,597 194,757
OTHER NON-CURRENT FINANCIAL ASSETS 36,005 25,929 Bank loans - non-current (454,617) (292,694) Other non-current financial liabilities (55,556) (7,525) TOTAL NON-CURRENT FINANCIAL LIABILITIES (510,173) (300,219) NET NON-CURRENT LIQUIDITY / (INDEBTEDNESS) (474,168) (274,290) NET LIQUIDITY / (INDEBTEDNESS) (310,571) (79,533)
Continuing the policy of new investments in the Group liquidity, although down compared to the previous year, fleet, net indebtedness increased, reaching to remained high, amounting to Euro 163.5 million, approximately Euro 310 million compared to confirming the Group's financial soundness. approximately Euro 80 million in 2013A. Net current
Cash flow
(Thousands of euro) 2014 2013R Net cash provided by / (used in) operating activities 53,486 65,424 Net cash provided by / (used in) investing activities (178,201) (46,713) Net cash provided by / (used in) financing activities 190,898 (64,449) NET CASH PROVIDED / (USED) 66,183 (45,738)
NET INCREASE / (DECREASE) IN CASH AND CASH EQUIVALENTS 66,183 (45,738) Change in bank overdrafts 6,592 2,918 Cash and cash equivalents at the beginning of the year 109,883 152,703 CASH AND CASH EQUIVALENTS AT THE END OF THE YEAR 182,658 109,883
The investment policy continued in 2014, involving the funded by new loans (Euro 273 million) net of the purchase/construction of new vessels through the use instalments paid during the year (approximately Euro of new credit lines and new bank credit facilities. Net 100 million). Cash flow thus increased also for operating investments, primarily in the company fleet, “consumed” activities, amounting to Euro 182.6 million at the end of cash flow of approximately Euro 178 million, primarily 2014.
26 | d’Amico Società di Navigazione S.p.A. Report on Operations
The following table is presented in the interest of The debt ratio demonstrates the significant use of bank completing consolidated financial information. loans, while equity as percentage of non-current assets decreased due to the increase in investments in 2014. 2014 2013R Total debt ratio 94.10% 62.91% Borrowing ratio 66.16% 43.16% Equity less non-current assets (286,754) (76,969) Equity as percentage of non-current assets 75.86% 91.77%
2014 Annual Report | 27 Operating performance Dry-cargo and container vessels than over a short seasonal period, as occurred in previous years. Another factor deriving from the above The year 2014 began with a certain optimism was a considerable decrease in the number days vessels concerning the short-term and future performance of waited at ports, with a resulting impact on fleet the charter market, with the BDI (Baltic Dry Index) at efficiency. approximately 2200. Nonetheless, this optimism soon disappeared at the end of the first quarter, with the BDI The average market spot charter rates in 2014 (based on dropping to approximately 1,600, to then plummet to BSHI/BSI/BPI indexes – USD/day) were: 800 during the second and third quarters, where it stood • Handysize 7,470 (7,800 in 2013) at the end of the year (following a short recovery up to • Supramax 9,350 (9,750 in 2013) 1,400 in September-November). • Panamax 7,250 (9,150 in 2013) The main factors causing this market weakness can be As for bulker prices (new-building and second-hand), attributed to a chronic over-supply of tonnage (difficulty 2014 saw a diversified trend. Prices of new-buildings in absorbing year-to-year growth of the global bulker gained strength (despite a decrease in orders of fleet in the amount of 15% and 12.5%, respectively for approximately 30% compared to 2013) due to deliveries 2011 and 2012), as well as a slowdown in the Chinese postponed to 2017/2018, while second-hand prices GDP, accompanied by the continuing weakness in the declined as a result of the precarious conditions of the economies of European countries, with the resulting spot charter market. slowdown in imports of ore and coal, which account for approximately 65% of global dry-cargo traffic. In The prices at the beginning and end of 2014 for the addition, imports of ore by China saw priority given to various types of vessels used are shown below: loads from Australia rather than from Brazil, with a negative impact on the tonnes-miles factor. Grain transport, the number three commodity driving the dry- Pmax Supramax Handy cargo market, though increasing on the previous years, Jan 14 Dec 14 Jan 14 Dec 14 Jan 14 Dec 14 did not provide a boost to the charter market, despite N/B 30 M$ 32 M$ 29 M$ 30 M$ 24 M$ 26 M$ the expectations of most operators, mainly due to a 5 yrs 24 M$ 20 M$ 23 M$ 21 M$ 19 M$ 16 M$ redistribution of shipments over the entire year rather 10 yrs 17 M$ 14 M$ 17 M$ 13 M$` 13 M$ 11 M$
Market overview: average spot rates for Panamax, Supramax and Handymax
18,000 16,000 14,000 12,000 10,000 8,000 6,000 4,000 2,000 0
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr 13 13 13 13 13 13 13 13 13 13 13 13 14 14 14 14 14 14 14 14 14 14 14 14 15 15 15 15
TC Avg BPI (Baltic Panamax Index) TC Avg BSI (Baltic Supramax Index) TC Avg BHSI (Baltic Handysize Index)
Source: Baltic Exchange
28 | d’Amico Società di Navigazione S.p.A. Report on Operations
Tankers The price of oil has continued to drop recently, with Brent dropping from USD 110 per barrel at the beginning of the Global growth is expected to continue, also facilitated by second quarter of 2014 to less than USD 55 per barrel at low oil prices, though this could be partially offset by the end of the year. negative factors such as the reduced expectations regarding the medium-term growth of many advanced The tanker market for transport of refined oil products and emerging economies. The IMF revised downwards improved significantly over the last quarter of the year. The their forecasts of global growth in 2015 and 2016, bringing Atlantic Basin market was supported by the strong growth them to 3.5% and 3.7%, respectively, with a correction of in exports and, lately, by increased imports. The lack of 0.3% on the October 2014 forecast. These adjustments “Jones Act” tonnage available for delivery in the Atlantic were mainly the fruit of a redetermination of the economic stimulated imports from Northern Europe and other areas. outlook for China, Russia, the Eurozone and Japan, as well As the price of oil continued to fall, the margins of as the weaker operations forecast for several leading oil refineries improved, which boosted trade. The price exporters due to the sharp drop in the price of crude oil. differential between the various destinations of The United States is the only leading economy for which imports/exports translated into considerable arbitrage the outlook for growth was revised upwards. transactions. The Asian markets remained stable and provided additional support to average returns. Exports of Global demand for oil in 2014 amounted to an average of products to Australia almost doubled on the previous year. 92.4 million barrels per day, an increase of 620,000 barrels China retained its position as a net exporter, helping to per day (amounting to 0.7%) compared to the previous balance demand and supply of tonnage in the region. year. This figure represents the lowest level of growth in Overall, the general sentiment improved during the fourth the last five years, as the sharp downturns recorded in quarter, with increased operations and sound growth OECD countries of Europe and Asia-Oceania coincided recorded in returns on the spot charter market, with significant slowdowns in China, in the countries of significantly recovering in the first part of the year. the former USSR and in Latin America. For 2015 a modest acceleration is expected in global growth, amounting to 910,000 barrels per day (+1.0%), due to the expected improvement in the economic trend.
Market Overview – Average TC Rates for MR2 Product Tankers (US$)
35,000
30,000
25,000
20,000
15,000 dollars/day 10,000
5,000
0
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 YTD
Spot 1 year 3 years 5 years
1 Source: Clarkson, January ’15
2014 Annual Report | 29 Maritime services Ishima, a company which, along with the Parent Company, provides technical support services on vessels As stated, within the Group, several companies carry out owned by the Group and third parties, closed its financial businesses that complement the main business of statements with profit exceeding Euro 4 million. shipping, both for Group companies and for third party Lastly, we note Rudder which, along with its subsidiaries, companies. contributed a loss to the consolidated figures, as a result We specifically note Compagnia Generale Telemar S.p.A of their intermediation activity relating to purchases of which, also with the help of its subsidiaries, performs bunker fuel, of approximately Euro 250 thousand and maintenance, assistance and sales of onboard navigation Sirius which, continuing its crew management activities and communications systems in addition to satellite closed its 2014 financial statements with a loss of telecommunications services, primarily carried out via approximately Euro 43 thousand. Inmarsat, both for maritime and land applications. The consolidated profit of this investee in 2014 contributed approximately Euro 4 million to the Group’s consolidated financial statements, with its turnover exceeding Euro 100 million.
30 | d’Amico Società di Navigazione S.p.A. Report on Operations
Financial performance analysis d’Amico Società di Navigazione S.p.A. Operating performance new IFRS and the reclassification of the ineffective portion of the cash flow hedge of gains/(losses) is not The following table presents income statement results applicable to the separate financial statements. for the year ended 31 December 2014.
(Thousands of euro) 2014 2013 Dividends 17,747 23,101 Financial position Other revenue 10,822 9,710 General and administrative (Thousands of euro) As at As at costs and other operating costs (13,618) (25,051) 31 Dec 2014 31 Dec 2013 Net financial income / (charges) 1,233 (1,803) Non-current assets 275,802 266,255 Income taxes 103 280 Current assets 30,437 13,274 NET PROFIT / (LOSS) 16,287 6,237 TOTAL ASSETS 306,239 279,529 Shareholders’ equity 232,773 229,644 Company activity during the current year continued Non-current liabilities 53,205 39,860 with both the management of equity investments and services rendered by the Parent Company to other Current liabilities 20,261 10,025 Group companies. TOTAL SHAREHOLDERS' EQUITY AND LIABILITIES 306,239 279,529 The dividends collected and recognized on a cash basis relate to the sums received in 2014 from directly held Non-current assets included tangible assets (mainly companies, details of which should be seen to the table buildings for approximately Euro 65 million), financial presented in the notes. investments (for Euro 193 million), and a loan granted to the subsidiary Domas (Euro 11.5 million). By contrast, operating revenue relates to the services rendered by DSN to other Group companies in the areas Current assets included cash and cash equivalents of of ship management services for vessels in the company Euro 20 million, short-term investments of fleet and other services of a corporate nature, such as approximately Euro 3 million and trade receivables (all consulting and legal and insurance assistance, internal set to come due in 2014) for approximately Euro 7.4 auditing, human resource management and IT services million. and related support. The contracts in force are practically those made in 2013 and the change in revenue was d’Amico’s total Shareholders’ Equity increased to Euro substantially due to the movement in the average 232.7 million from Euro 229.6 million in the previous EUR/USD exchange rate for the respective years. year.
The costs of approximately Euro 13,6 million include Non-current liabilities included the portion of loans overhead and production costs relating to ship coming due after 1 January 2015 relating to the loan management activity, general and administrative costs contracted for the purchase of a building in Via Paisiello and depreciation and amortisation charges for tangible in 2011 and the loan granted during 2014 by Banca and intangible assets. The change on the previous year Popolare for Euro 20 million. In addition, in connection is essentially due to a tax item, which is illustrated at a with the loan relating to the building, the revaluation of later point in the notes. General costs net of these items the swap contract concluded as a hedge was also rose from Euro 16.2 million (in 2013) to approximately recognised among non-current liabilities in the amount Euro 17 million, and the increase can be deemed purely of Euro 4.4 million. physiological. Finally, current liabilities include the share of loans set As can be seen in the tables, the figures for 2013 in the to come due in 2014, plus the trade payables that are to separate financial statements do not have the letter “A”, be settled in the near term. as for DSN the retrospective first-time application of the
2014 Annual Report | 31 The following are some financial position ratios relating DSN is subject to taxation “on a pass-through basis” with to the way in which medium-/long-term investments respect to the income earned by its foreign subsidiaries are financed and the composition of sources of residing in countries with privileged tax regimes (Art. financing. 167, paragraph 1, of the Italian Consolidated Income Tax Act), as well as those residing in other countries 2014 2013 (following the change made effective the 2010 Total debt ratio 31.56% 21.72% incomes) but fall within the conditions envisaged in paragraph 8-bis of the above Article of the Consolidated Borrowing ratio 24.63% 14.50% Income Tax Act. For the companies in this situation, in Equity less non-current assets (/000) (43,028) (36,611) recent years d'Amico submitted various requests for Equity as percentage of rulings, all of which met positive responses, except in non-current assets 84.40% 86.25% the case of d'Amico International SA. As is known, a petition was lodged against that rejection on The changes in the ratios shown above, relating to 15/06/2012 as well as a subsequent petition for refund indebtedness reflect the increase in financial (for 2010 taxes). Through first-instance judgment of 22 indebtedness due to the loan obtained from Banco May 2014, the Provincial Tax Commission of Palermo Popolare in 2014. Equity to non-current assets remained, accepted the company’s petition and ordered the indicating substantial coverage (over 84%) of all non- amounts requested to be refunded. In that regard, current assets by equity. following that judgment and also based on the positive opinion from our advisors for this petition, the company decided it was no longer necessary to retain on the financial statements the items allocated at the end of Tax situation 2014 (and posted under general costs, not considering them to be “income taxes”), and fully recovered the d’Amico is subject to Italian tax law and therefore amount of Euro 7.6 million allocated from 2010 to 2013. calculates its direct taxes analytically. Due to the For the purpose of complete disclosure, note that on 10 estimate of a tax loss in 2014, there was no need to February 2015, the Italian Inland Revenue served an recognize any provisions. The amount recognized in the appeal against that first-instance judgement issued by income statement is negative and relates to the change the Commission. in deferred taxes during the year.
32 | d’Amico Società di Navigazione S.p.A. Report on Operations
Significant events since the end of the year and business outlook d'Amico International Shipping Tankers d'Amico Tankers Limited • Results of the exercise of the Warrant d'Amico International Shipping 2012-2016. The Second • In February 2015 a new “Eco” tanker built at the Exercise Period concluded on 30 January 2015, South Korean shipyards Hyundai Mipo Dockyard during which 2,661,273 warrants were exercised at Co. Ltd., the M/T High Loyalty (50,000 DTW MR) the price of Euro 0.40 per each ordinary share was delivered to d’Amico Tankers Limited. The without nominal value issued by DIS and admitted vessel began its set five-year charter period with a to trading on the MTA market of Borsa Italiana major oil company. S.p.A. as conversion shares. As a result, on 6 February 2015 887,091 Conversion Shares were • In April 2015, it ordered three Eco MR vessels and issued - with the same rights (including the right one Eco Handysize vessel. The former, with three- to any dividends) and characteristics as existing year charter contract set with a leading oil ordinary DIS shares at the issue date, to warrant company at profitable rates, should be delivered holders who validly exercised their warrants between the fourth quarter 2015 and the end of during the Second Exercise Period. 2016, while the delivery of the Handysize vessel, • Warrant holders who did not exercise their also with a profitable charter contract of 24-30 warrants during the First Two Exercise Periods will months with a leading oil company, is expected in be entitled to exercise their warrants and the fourth quarter 2015. subscribe for conversion shares according to the warrant ratio at the following price and during the • Also in April 2015, d’Amico Tankers Limited signed following exercise period: Euro 0.46 for warrants a contract for the construction of two new exercised during trading days of January 2016. modern Long Range tankers (75,000 DWT LR1) with the South Korean shipyard Hyundai MIPO Dockyard Co. Ltd. These vessels will be built at the Vietnamese Vinashin Shipyard Co. Ltd shipyard and Dry-cargo ships are scheduled for delivery in mid-2017, for a total d’Amico Dry Limited investment of approximately USD 44.0 million each. The two new double-hull vessels belong to • During the first quarter 2015 a long-term charter a new generation of “eco design” vessels which was defined for two 88,000 DTW Post-Panamax feature very low consumption. The vessels have an units, built by the Japanese shipyard Sanoyas, with energy efficiency index (EEDI) 25% lower than the delivery expected in 2017-2018. applicable IMO limit and, therefore, more than comply with the reduction of the index set for the • In January the Sanoyas Shipyards delivered the IMO phase 2, which will be applied to vessels built vessel Cielo d’Italia, a 116,000 DTW Mini-Cape, prior to 31 December 2024. currently chartered with Oldendorff for 11-13 months, with a 65%/35% Panamax/Cape ratio. Its twin unit is expected to be delivered in January 2016. Business outlook Dry-cargo ships Mida Maritime Limited Following a disappointing 2014, in the initial months of • Following the sale of the vessel Medi Sentosa, the 2015 the dry-cargo market decreased further. The BDI company’s only asset, in December 2014, the index dropped to record lows and the values of the company is studying a new investment project. vessels also quickly dropped to the minimum levels of 2012. The reason for this is easily found in the weakness of the Chinese demand for coal and iron ore. In the second half of the year, imports from this Asian country increased only by 1% compared to the increase of 12%
2014 Annual Report | 33 in the first half of the year. The trend for 2015 seems to Nine refineries in the United States were closed for be repeating this, with not very promising short-term maintenance due to several unforeseen events, which forecasts, also due to the downwards revision of have an approximately 10% impact on US refining estimates of steel production and coal imports. capacity. At global level, total off-line refining capacity In general, for 2015 we can expect lower average reached a peak in January at 5 million barrels per day, charters than in 2014, with vessel values also declining. mainly in OECD countries. The Asian and Middle Eastern The year 2015 should mark the lowest level of the markets remained at relatively stable levels, ensuring a market, with 2016 showing growth and possible good balance between supply and demand. Given the significant increases in 2017-2019 due to the expected weakness of demand in the Atlantic Basin, the supply of lower growth of the global fleet. tonnage increased, putting pressure on rates. The Three important considerations underlie these decline in oil prices translated into a decrease in assumptions. Firstly, vessel orders dropped sharply in the (bunker) fuel costs, which supports revenue for tankers. second half of 2014 and the forecasts for the next two The refinery projects postponed in the Middle East years do not include increases in orders. Secondly, the should be completed in the first quarter of 2015 and market is sharply “converting” from the dry-cargo sector thus favour a certain improvement in the demand for to the tankers sector and, thirdly, there is significant tonnage. The forecasts of use of the fleet for 2015 increase in scrap from dry-cargo vessels (approximately amount to around 90%. 5.5 million tonnes in the initial months of 2015). The main factors that are expected to influence the Thus, we can expect growth in bulk vessels to continue tanker shipping market and the Group’s performance to exceed demand during 2015 and opposite are as follows: (i) increased global demand for petroleum projections for the following years (indicatively 2016- products, (ii) increased global GDP and (iii) the 2019). As a result of this trend, it is possible to expect significant number of new vessels. The factors that could average use of the fleet at around 84%-85% for 2015, mitigate and partially offset the current tanker with an increase up to 90% for the following years. supply/demand scenario in the long term are described in greater detail below: Concerning demand, a slight increase for 2015 is expected, global growth of 3.7% in volume and 4.2% in Tanker demand tonnes per mile. Tranport of the five “major bulk” products (ore, coal, grain, bauxite and phosphates), for a • In the Middle East, two projects, a new one and an total of approximately 3.0 million tonnes, is expected to expanding one, which was scheduled to be grow by around 4% (down compared to the growth of completed at the end of 2014, were postponed to 6% in 2014) due to declining demand in China and the beginning of 2015. These projects will add a stagnant demand in Japan, the USA and Europe. capacity of an additional 770,000 barrels per day in a region that is already expanding. Confident that there will be a significant increase in • Exports of refined products have been increasing demolitions and a decrease in new orders/deliveries of since the refinery Satorp, a joint venture with the new vessels over the next 12-18 months, as well as an French company Total, reached full operations in economic recovery in countries importing 2014. A second refinery, through a joint venture with commodities, the level of charters should stabilize in the Chinese company Sinopec in Yanbu should 2016 and see recovery starting from 2017. reach its maximum capacity of 400,000 barrels per day at the start of 2015. • In the UAE, Adnoc is perfectly on schedule to complete its expansion to 420,000 barrels per day in Tankers Ruwais within the next few months. The growth in The demand for oil should remain very high. The first demand in the region is estimated at approximately quarter 2015 began with extremely sound markets for 200,000 barrels per day in 2015. Current estimates the entire sector of tankers, in line with the situation at show that by 2019 the area will have surplus the end of 2014. Refining capacity improved in the capacity of almost 1 million barrels per day, thus fourth quarter, bringing stocks of products to 50 million making significant volumes of oil products available barrels above the five-year average. The beginning of to the export markets outside the region. the refinery maintenance season should result in • Over the next five years, the importance of withdrawals from those stocks throughout the quarter. balancing supplies among the various geographical
34 | d’Amico Società di Navigazione S.p.A. Report on Operations
regions will be of increasing importance for the Tanker supply tanker market. By 2019 the lack of refined products in Europe will increase to 1.6 million barrels per day. • The order book for MR tankers came to • On the contrary, by 2019 US exports of gasoline and approximately 120 vessels last year. The definitive naphtha should rise to 1.3 million barrels per day and figures indicate that over all of 2014 approximately those of distillates to 1.37 million barrels per day. 100 vessels were delivered. During the same period, • According to forecasts by the Australian from 27 to 34 vessels were permanently removed government, the country’s dependence on imports from operation. of oil products will rise from the current 424,000 • Over the last two years, the number of MR tanker barrels per day to 766,000 barrels per day in 2019. orders was very high, though the exact figure is not Exports of products to Australia also doubled on the known. Based on numerous reports, from 140 to 200 previous year, due to the restructuring under way of vessels are scheduled for delivery in 2015. the country’s refineries. In October, Caltex • The postponements and cancellations of deliveries completed the conversion of its Kurnell refinery to a had a significant impact on this segment - 135,000 barrel-per-day terminal. By mid-2015 BP will approximately 32% over the last five years. close down its 102,000 barrel-per-day refinery on • In 2014 orders decreased slightly, as investors began Bulwer Island in Brisbane, thus further hampering to turn to other segments of the maritime shipping Australian capacity. Australian refining capacity industry. Approximately 97 vessels were ordered in stood at an average of 485,000 barrels per day, 2014, compared to approximately 260 in 2013. demonstrating the ongoing decline. • The world map of refineries is constantly evolving • The Chinese Minister of Trade just approved higher and could cause imablances in the supply of export quotas for 2015 for products such as gasoline, products between one region and another. One diesel and aviation fuel for Petro China and Sinopec. important consequence of this situation is likely to This year Sinopec was given an oil product export be the lengthening of voyage routes and thus a quota of 260,000 barrels per day, an increase of lower supply of tonnage. 45,000 barrels per day on the previous year, while the export quota of Petro China remained unchanged at 180,000 barrels per day.
2014 Annual Report | 35 Tonne mile demand %1
14
12
10
8
6
4
2
0 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 -2 (f) (f) (f) (f) -4
Products Seabourne Trade MR Growth
1 Source: Odin Marine, Banchero Costa SSY, Icap, d’Amico
Global Oil Demand1 2014-2020
Million barrels p/d
60 58 56 54 52 50 48 46 44 42 40
Total OECD Total non-OECD
2014 2015 2016 2017 2018 2019 2020
1 Source: International Energy Agency Medium-Term Oil Market Report, Feb ‘15
36 | d’Amico Società di Navigazione S.p.A. Report on Operations
Net MR1 fleet rowth 2008 - 2019
300
250
200
150
100
50
0 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
Order Book Delivered Scrapped
1 MR product tankers ranging from 25,000 to 55,000 dwt. Source: Clarkson, ICAP, SSY, Braemar and Gibson search
Orderbook vs. deliveries – MR1 Tankers
Orderbook
Exp.Deliveries
Deliveries
Exp.Removals
Scrapped
0 20406080100 120 140
1 MR product tanker fleet Souce Clarkson
2014 Annual Report | 37 Dry Cargo fleet additions and deletion1
160 6% 5.4% 140 5% 120 4.3% 4% 100 3.4% 80 3%
60 2.2% 2% 40 1.4% 1% 20
0 0% 2010 2011 2012 2013 2014
Order book Returns Demolitions
Global Major Bulk Trade 2010-20152
30,000
24,575 25,387 25,000 23,350 22,349 20,899 19,702 20,000
15.,000
10,000
5,000
0 2010 2011 2012 20132014E 2015E
Iron Ore Coal Grains Minor Bulk
1 Source: Clarkson SHIPPING REVIEW & OUTLOOK Bulk carrier from 10,000 to 100,000 dwt 2 Source: Clarkson SHIPPING REVIEW & OUTLOOK
38 | d’Amico Società di Navigazione S.p.A. Report on Operations
Other information Approval of 2014 financial statements contracting limit and delta variation. Proper monitoring of internal control procedures is ensured by our back The statutory financial statements of d’Amico Società di and front offices. Navigazione S.p.A., pursuant to Article 2364, paragraph 2 of the Italian Civil Code and the Articles of Association, Although specified in the notes, the risk management shall be submitted for approval by the Shareholders’ method is also presented below, in the interest of clarity, Meeting within the longer term which, in any event, including quantitative and qualitative information shall not exceed one hundred and eighty days from the relating to the effect that such risks may have on the end of the financial year, as resolved by the Company’s Group. Board of Directors’ meeting on 24 March 2015. The reasons for this postponement lie in the complexity of Market risk the Group’s structure and different geographical locations of many investees, including foreign investees, Market risk is the risk that the value of financial which are each subject to their respective domestic law. instruments may fluctuate as a result of changes in Data must be received from these investees to form the market prices. The Group's investment portfolio is consolidated financial statement and it is necessary to therefore susceptible to market price risk deriving from obtain approval of the financial statements of all the uncertainties regarding future prices. consolidated companies. The Group typically employs derivative instruments known as "forward freight agreements" or "FFAs" (the "paper market") to hedge market fluctuations (the Treasury shares owned by the parent "physical market"), as limited to certain voyages by dry- company cargo vessels. Management constantly monitors open d’Amico Società di Navigazione S.p.A. does not hold any positions in such instruments. treasury shares, either directly or indirectly. In some cases, the Group enters into bunker-hedging or fuel-swap contracts to fix the price of fuel with the aim of mitigating the effect of fluctuations in the price of the fuel used by vessels (known as "bunker fuel"). For Research and development information purposes, we specify that a decrease of 10% In consideration of the characteristics of the sectors in in bunker fuel prices on consumption for the year would which it operates, neither d’Amico Società di have had a positive impact of approximately Euro 600 Navigazione S.p.A. nor the other Group companies thousand on the consolidated income statement, while engaged in any activity of this sort during the year. an equivalent increase would not have had a substantial impact.
The Company uses part of its financial resources to Disclosure concerning derivative invest in current financial assets exposed to the risk of instruments fluctuations in the market prices of securities. A 5% fluctuation in market price at the end of the year would The Group is exposed to various financial risks relating to have entailed a change in financial items and profit or its operating activity. During the budgeting process, loss of approximately Euro 5 million. A 5% fluctuation in appropriate market levels are identified in the analysis the market prices of real-estate investments would have of all implicit risks so as to systematically undertake all resulted in an impact of approximately Euro 2 million on measures required to reduce, neutralize or hedge the equity reserves and other comprehensive income. exposures assumed during the year, while taking account of market conditions and in a manner Foreign-exchange risk consistent with estimated business performance. Specific risk control policies and guidelines have been The Group constantly monitors the currency risk established in order to determine the daily overall associated with transactions denominated in foreign
2014 Annual Report | 39 currencies, primarily by seeking to hedge costs in Liquidity risk foreign currencies to the greatest possible extent. Since operating activities, like ship prices, are primarily The Group is exposed to liquidity risk arising from the denominated in U.S. dollars, for the management there possible mismatch between cash requirements, is no significant exposure arising from possible principally to purchase vessels, and credit facility fluctuations in the euro/dollar exchange rate, and the repayments and cash flows in the course of current impact would only be visible at the level of individual operations. volumes and not of profit or loss. The management constantly monitors expected future needs and at the reporting date believes that the In addition to the U.S. dollar, the Group had exposures to currently available funds and major lines of credit, along Japanese yen, for which foreign- exchange risk does not with the cash provided by operating activities, will allow correspond to equivalent fixed assets. For these items, the Group to satisfy its requirements from investing relating to financial exposures and hedging instruments, activities and working capital needs and discharge its a five percentage point change in the EUR/JPY obligations to repay its debts at their natural due dates. exchange rate as at the end of 2013 would have resulted Amounts due to banks and other lenders set to come in an impact on the income statement, and thus on due beyond five years came to Euro 148 million. In this financial position, of approximately a positive Euro 6 regard, reference should be made to Note 21, which million/negative Euro 10 million. presents full information concerning loans, and Note 30 concerning the Group's commitments. Interest-rate risk Fair-value risk The Group is exposed to interest-rate risk deriving from the fact that interest on its lines of credit and bank The management believes that the fair values of deposits accrues at variable rates. To reduce the risk to financial assets and liabilities do not diverge significantly the minimum, the Group entered into numerous from their carrying amounts as at the reporting date. interest rate swaps to hedge the loans entered into. For this reason, a change in interest rates of 100 basis points Further information regarding the nominal value and would have resulted in an increase/decrease in net fair value of such financial instruments is presented in financial charges of an insignificant amount (around the notes to the statutory and consolidated financial Euro 400 thousand). statements.
Credit risk
The Group is exposed to credit risk relating to possible Dealings with related parties default by its counterparties, primarily clients. As is For information concerning dealings with associates, common knowledge, shipping does not present subsidiaries and their subsidiaries, please refer to the particular risks, given that charters are normally paid for notes to the statutory and consolidated financial in advance. The marginal portion relating to short-term statements. accounts receivable for demurrage or various charter expenses is extraneous to this concept and is constantly monitored in order to ensure that it is properly collected. All trade receivables are thoroughly analyzed and, in some cases, subject to impairment. At the end of 2014, a total of approximately Euro 8 million had been provisioned to cover the accounts receivable presented in the financial statements. The Group also holds considerable cash deposits with leading, highly rated counterparties, and no credit risk is thus foreseeable.
40 | d’Amico Società di Navigazione S.p.A. 2014 Annual Report | 41
d’Amico Società di Navigazione Group
Consolidated financial statements As at and for the year ended 31 December 2014
2014 Annual Report | 43 Gruppo d’Amico Società di Navigazione
Consolidated income statement
(Thousands of euro) Notes 2014 2013R Revenue 4 755,952 625,740 Operating costs 5 (649,451) (511,694) General and administrative costs 6 (82,000) (80,628) Income on the disposal of fixed assets 7 7,559 19,109 GROSS OPERATING PROFIT / (LOSS) 32,060 52,527 Depreciation, amortization and impairment 10/11 (52,853) (52,620) OPERATING PROFIT / (LOSS) (20,793) (93) Financial income 8 61,119 83,820 Financial charges 8 (82,964) (42,047) Exchange gains/(losses) 8 264 (442) Result of measurements at equity 8 877 3,036 PROFIT / (LOSS) BEFORE TAXES (41,497) 44,274 Income taxes 9 2,420 (13,385) NET PROFIT / (LOSS) (39,077) 30,889 Attributable to: MINORITIES (817) 5,271 PARENT COMPANY (38,260) 25,618
Consolidated statement of other comprehensive income
(Thousands of euro) 2014 2013R Net profit or loss (39,077) 30,889 Other components of comprehensive income not to be recycled to the income statement in subsequent periods Translation differences on foreign operations 85,927 (26,523) Actuarial gain or loss (IAS 19) 46 75 Tax effects of expenses/income recognized in equity (43) (17) Other components of comprehensive income to be recycled to the income statement in subsequent periods Change in the fair value of available-for-sale financial instruments 4,153 12,757 Effective part of gains/(losses) on hedging instruments (17,779) 8,895 Tax effects of expenses/income recognized in equity (656) (2,605) Comprehensive income 32,571 23,471 Attributable to: MINORITIES 7,675 9,730 PARENT COMPANY 24,896 13,741
R Adjusted as a result of the retrospective first-time application of the new IFRS and the reclassification of the ineffective portion of the cash flow hedge of gains/(losses). For more information refer to the section of Note 1 “Accounting principles adopted from 1 January 2014”, the part covering the notes to the Group report.
44 | d’Amico Società di Navigazione S.p.A. d’Amico Società di Navigazione Group
Consolidated statement of financial position
(Thousands of euro) Notes As at 31 Dec 2014 As at 31 Dec 2013R As at 1 Jan 2013R ASSETS Non-current assets Intangible assets 10 10,911 10,325 10,325 Tangible assets 11 1,028,156 802,753 846,067 Long-term investments 12 112,598 96,577 93,599 Other non-current financial assets 13 36,005 25,929 10,079 TOTAL NON-CURRENT ASSETS 1,187,670 935,584 960,070 Current assets Inventories 14 51,325 51,322 52,620 Short-term receivables and other current assets 15 154,287 111,364 117,552 Other current financial assets 16 172,705 190,652 182,146 Cash and cash equivalents 17 182,658 109,883 112,599 TOTAL CURRENT ASSETS 560,975 463,221 464,917 TOTAL ASSETS 1,748,645 1,398,805 1,424,987
SHAREHOLDERS' EQUITY AND LIABILITIES Shareholders’ equity Share capital 25,000 25,000 25,000 Earnings reserves 727,404 728,378 726,424 Other reserves 50,701 (9,704) (15,110) Net profit / (loss) (38,260) 25,618 29,112 SHAREHOLDERS' EQUITY - PARENT 18 764,845 769,292 765,426 Capital and reserves - Minorities 136,888 84,052 81,804 Net profit / (loss) - Minorities (817) 5,271 7,000 TOTAL SHAREHOLDERS' EQUITY 18 900,916 858,615 854,230 Non-current liabilities Provisions for risks and charges 19 661 2,696 2,696 Banks and other lenders 20 454,617 292,694 309,197 Provisions for employee benefits 21 5,568 5,171 5,178 Other non-current financial liabilities 22 55,556 7,525 7,553 Other non-current liabilities 23 0 2,817 2,817 Deferred tax liabilities 24 4,555 3,729 3,729 TOTAL NON-CURRENT LIABILITIES 520,957 314,632 331,170 Current liabilities Banks and other lenders 20 141,407 77,856 79,442 Short-term payables and other current liabilities 25 131,661 112,879 122,517 Other current financial liabilities 26 50,359 27,922 30,720 Current tax liabilities 27 3,345 6,901 6,908 TOTAL CURRENT LIABILITIES 326,772 225,558 239,587 TOTAL SHAREHOLDERS' EQUITY AND LIABILITIES 1,748,645 1,398,805 1,424,987
The notes presented below are an integral part of these financial statements.
R Adjusted as a result of the retrospective first-time application of the new IFRS and the reclassification of the ineffective portion of the cash flow hedge of gains/(losses). For more information refer to the section of Note 1 “Accounting principles adopted from 1 January 2014”, the part covering the notes to the Group report.
2014 Annual Report | 45 Consolidated statement of cash flows
(Thousands of euro) 2014 2013R NET PROFIT FOR THE PERIOD (39,077) 30,889 Depreciation, amortization and impairment 52,853 52,620 Current and deferred tax (2,572) 13,385 Financial charges/Financial income 20,704 (44,367) Fair value gains on foreign currency translation 9,620 (9,061) Other non-cash items (12,838) 36,337 NET CASH PROVIDED BY / (USED IN) OPERATING ACTIVITIES BEFORE CHANGES IN WORKING CAPITAL 28,690 79,803 Changes in inventories (3) 6,061 Changes in short-term amounts receivable and other current assets (21,773) (7,829) Changes in short-term amounts payable and other current liabilities 70,518 12,579 Taxes paid (5,287) (11,943) Interest collected / (paid) (18,659) (13,247) NET CASH PROVIDED BY / (USED IN) OPERATING ACTIVITIES 53,486 65,424 Acquisition of fixed assets (240,925) (109,538) Gains (losses) on disposal/derecognition of fixed assets 62,724 62,825 NET CASH PROVIDED BY / (USED IN) INVESTING ACTIVITIES (178,201) (46,713) Other changes in shareholders' equity 36,440 14,419 Changes in financial assets/liabilities (691) (10,542) Bank loan repayments (99,553) (55,557) Bank loan draw-downs 272,919 3,271 Dividends paid (18,217) (16,040) NET CASH PROVIDED BY / (USED IN) FINANCING ACTIVITIES 190,898 (64,449)
NET CASH PROVIDED / (USED) 66,183 (45,738)
NET INCREASE / (DECREASE) IN CASH AND CASH EQUIVALENTS Cash and cash equivalents at the beginning of the year 109,883 152,703 Change in cash and cash equivalents 66,183 (45,738) Change in bank overdrafts 6,592 2,918 CASH AND CASH EQUIVALENTS AT THE END OF THE YEAR 182,658 109,883
R Adjusted as a result of the retrospective first-time application of the new IFRS and the reclassification of the ineffective portion of the cash flow hedge of gains/(losses). For more information refer to the section of Note 1 “Accounting principles adopted from 1 January 2014”, the part covering the notes to the Group report.
46 | d’Amico Società di Navigazione S.p.A. d’Amico Società di Navigazione Group
Consolidated statement of changes in shareholders’ equity
Share Retained Other Net Total Minority Total Capital earnings reserves profit interests shareholders' equity 31 DECEMBER 2013 25,000 720,020 (8,706) 29,112 765,426 88,804 854,230 RESTATEMENT IFRS 10-11-12 5,203 2,157 (3,494) 3,866 519 4,385 RESTATED AS AT 31 DECEMBER 2013 25,000 725,223 (6,549) 25,618 769,292 89,323 858,615 Dividends paid (15,000) (15,000) (3,217) (18,217) Allocation of net profit or loss 25,618 (25,618) 0 Comprehensive income / (loss) 63,157 63,157 8,492 71,649 Other changes in shareholders' equity 3,978 (5,907) (1,929) 2,944 1,015 Change in Group or minority shareholders’ equity (12,415) (12,415) 39,346 26,931 Net profit or loss (38,260) (38,260) (817) (39,077) 31 DECEMBER 2014 25,000 727,404 50,701 (38,260) 764,845 136,071 900,916
Share Retained Other Net Total Minority Total Capital earnings reserves profit interests shareholders' equity 31 DECEMBER 2012 25,000 778,345 11,568 (51,521) 763,392 67,157 830,549 RESTATEMENT IFRS 10-11-12 3,014 5,203 8,217 2,293 10,510 RESTATED AS AT 1 JANUARY 2013 25,000 778,345 14,582 (46,318) 771,609 69,450 841,059 Dividends paid (15,000) (15,000) (1,040) (16,040) Allocation of net profit or loss (46,318) 46,318 0 Comprehensive income / (loss) (11,877) (11,877) 4,458 (7,419) Other changes in shareholders' equity 8,196 (9,254) (1,058) (1,152) (2,210) Sale of minority interest to third parties 12,336 12,336 Net profit or loss 25,618 25,618 5,271 30,889 31 DECEMBER 2013A 25,000 725,223 (6,549) 25,618 769,292 89,323 858,615
The notes presented below are an integral part of these financial statements.
Paolo d’Amico, Chairman Cesare d’Amico, Chief Executive Officer
R Adjusted as a result of the retrospective first-time application of the new IFRS and the reclassification of the ineffective portion of the cash flow hedge of gains/(losses). For more information refer to the section of Note 1 “Accounting principles adopted from 1 January 2014”, the part covering the notes to the Group report
2014 Annual Report | 47 Notes Introduction those intended to be realized, disposed of or used in the Group's normal operating cycle or the twelve d’Amico Società di Navigazione S.p.A. is an Italian joint- months after year-end; current liabilities are those stock company that acts as the holding company for the expected to be extinguished during the normal d’Amico Group, which operates in shipping and auxiliary operating cycle or the twelve months after year-end. services on a global scale. Within the shipping sector, The indirect method has been used to prepare the the d’Amico Group is currently active in the dry cargo statement of cash flows. and tanker segments, as well as in container shipping, to a limited extent. IFRSs have been applied in accordance with the indications provided in the Framework for the In application of the option provided for in Legislative Preparation and Presentation of Financial Statements Decree 38 of 28 February 2005, effective 2010, these and there were no critical situations requiring the use consolidated financial statements have been prepared of departures pursuant to IAS 1 revised, paragraph 19. in accordance with the IAS/IFRS international These consolidated financial statements present the accounting principles (hereinafter “IFRSs”) endorsed by comparative figures from the previous year, prepared the European Commission, supplemented by the in accordance with the same accounting principles. associated interpretations (Standing Interpretations Committee - SIC and International Financial Reporting The d'Amico Group has access to adequate resources Interpretations Committee – IFRIC) issued by the suited to ensuring that it may continue to operate in International Accounting Standard Board (IASB) and in the near future. The financial statements have effect at year-end. The IFRS accounting principles used therefore been prepared on a going-concern basis, by to prepare the financial statements presented have applying the historical cost method, with the been supplemented by the IFRIC interpretations in force exception of those line items that are measured at fair at the date of preparation of the financial statements. value in accordance with IFRSs. Effective 2010, the Company has elected, as permitted Preparation of the consolidated financial statements by applicable legislation, to adopt the aforementioned required the use of estimates by the management. Standards on a voluntary basis. Estimates are prepared by the management on the basis of the best available information at the date of These consolidated financial statements were approved preparation of the financial statements. for publication by the Board of Directors on 9 June 2015. Where, in the interest of clearer exposition, as envisaged in Article 2423-ter (5) of the Italian Civil 1. Accounting policies applied Code, it was deemed necessary to reclassify items with respect to the previous year - without impacting Basis of presentation the consistency of these financial statements or These consolidated financial statements comprise the modifying their overall presentation - such consolidated income statement, consolidated reclassifications are thoroughly illustrated in these statement of other comprehensive income, notes. consolidated statement of financial position, consolidated statement of cash flows, consolidated The consolidated financial statements are presented statement of changes in shareholders' equity, and the in Euro, the Parent Company's functional currency. notes, in accordance with the provisions of IAS 1 Unless otherwise indicated, amounts are expressed in revised. In the income statement, costs have been thousands of Euro. classified by nature. All revenue and cost items recognized during a given year are presented in two The following is a concise presentation of the separate statements, the income statement and accounting principles and measurement criteria statement of comprehensive income. The adopted. Measurement criteria are adopted on a presentation scheme adopted for the statement of going-concern basis and are based on the principles financial position is based on a distinction between of accruals-basis accounting, the relevance and current and non-current assets and liabilities. Current significance of accounting information and the assets, which include cash and cash equivalents, are prevalence of economic substance over legal form.
48 | d’Amico Società di Navigazione S.p.A. d’Amico Società di Navigazione Group
Consolidation principles exercisable or convertible potential voting rights are also considered when assessing the existence of significant These consolidated financial statements include the influence. Such equity interests are measured according financial performance and financial position figures as at to the equity method. Profits and losses realized and for the year ended 31 December 2014 of the between consolidated entities according to the equity companies/entities included within the scope of method, and other consolidated Group entities, consolidation (hereinafter the "consolidated entities"), including those subject to line-by-line consolidation, are prepared in accordance with IFRSs. The entities included eliminated. The fair value of the equity investments in within the scope of consolidation and the pertinent portfolio, where the fair value criterion is applicable, is percent direct or indirect interests by the Group are determined in reference to market quotations (bid presented in Note 33 to these consolidated financial prices) on the final day of trading of the month of statements. reference of the IFRS situation prepared, or through the use of financial valuation techniques in cases of unlisted instruments. Subsidiaries Subsidiaries are entities for which the Group directly or indirectly holds the power to determine financial and Joint Arrangements operating policies in order to obtain benefits from their Joint ventures are entities over whose activities the operations. Effectively exercisable or convertible Group has joint control, as defined in IFRS 11 – Joint potential voting rights are also considered when Arrangements. The accounting treatment depends on assessing the existence of control. The financial the type of joint arrangement, determined by statements of subsidiaries are included in the considering the investor’s rights and obligations. In the consolidated financial statements effective the date on consolidated financial statements, the assets, liabilities, which control begins until the date on which control revenue and costs of joint operations are included on a ceases. The assets and liabilities of the Parent Company proportional basis according to the Group's interest, and subsidiaries are fully consolidated on a line-by-line while joint ventures are posted according to the equity basis, and the carrying amounts of the equity method. At each reporting date, the Group establishes investments held by the parent company and whether there is objective proof of impairment of the consolidated subsidiaries are eliminated against the investment in the associate. If so, the Group calculates corresponding share of shareholders' equity. All the amount of impairment as the difference between controlled entities are included within the scope of the recoverable amount of the associate and its carrying consolidation effective the date on which control is amount and records the amount under the “share of acquired by the Group. Entities are excluded from the profits/(losses) of associates” in the income statement. scope of consolidation effective the date on which the Group loses control. Entities the inclusion of which, from the standpoint of operating performance, would be immaterial from both a quantitative and qualitative perspective to a proper Intra-group transactions representation of the Group's financial performance and Intra-group balances and transactions and the resulting financial position are excluded from the scope of line- profits have been eliminated during the preparation of by-line consolidation. the consolidated financial statements. Unrealized gains and losses associated with intra-group transactions have also been eliminated. Minority interests and the minority share of net profit or loss are presented separately from Associated enterprises and other equity the shareholders' equity attributable to the Group on interests the basis of the percentage of net assets attributable to minorities. The Group’s share of any unrealized gains or Associated companies are those enterprises in which losses with associates and joint ventures has been the Group holds an equity interest in excess of 20% (10% eliminated to the extent of the share attributable to the if listed) or enterprises in which the Group holds a lesser Group. interest but wields significant influence. Effectively
2014 Annual Report | 49 Foreign currencies that may result in impairment losses. At the acquisition date, any emergent goodwill is allocated to each of the Transactions in foreign currencies are initially recognized cash-flow generating units that are expected to benefit at the spot exchange rate on the transaction date. from the synergistic effects of the acquisition. Monetary assets and liabilities denominated in foreign currencies are converted into the functional currency at the spot exchange rate on the reporting date. Any resulting exchange differences are recognized through the income statement. Revenue recognition Transport service revenue is recognized on a In the consolidated financial statements, the income percentage-of-completion basis, determined according statement items of subsidiaries that do not report in to the discharge-to-discharge approach for all spot Euro are converted at the average exchange rate for the voyages and voyages servicing COAs. According to this period, whereas assets and liabilities are converted at approach, freight revenue is recognized by reference to the spot exchange rate at the reporting date. Exchange the period from a vessel's departure from its original differences arising on the translation of financial discharge port to its subsequent destination. The date of statements into Euro are recognized directly through departure is defined as the date of the most recent the statement of comprehensive income and included discharge, and the voyage ends at the next discharge in the translation reserve. When the Group disposes of (hence “discharge-to-discharge"). The Group recognizes an investment in a foreign operation, and thus revenue on voyages in progress at the end of a relinquishes control, significant influence or joint control reporting period on the basis of the state of progress of of that operation, the total amount of the translation the voyage at the reporting date with respect to its total reserve associated with that operation is reclassified to estimated duration and intended destination. Revenue the income statement at the time of the disposal. from time-charter contracts is recognized in proportion to the charter period as the service is rendered.
Freight contracts include conditions concerning vessel Business combinations loading and unloading times. According to the contractual terms and conditions agreed upon by the Business combinations are accounted for according to parties to the charter contract, demurrage revenue, the acquisition method. The cost of an acquisition is recognized when freight service is rendered, represents determined as the sum of the current fair values at the the estimated compensation for the additional time date of exchange of the assets acquired and liabilities required to unload a vessel. Demurrage revenue is assumed by the acquirer, as well as any financial recognized when the voyage is complete. instruments issued by the Group in exchange for control of the acquiree. Costs directly attributable to the The operating subsidiaries of d'Amico International acquisition are recognized in the income statement. The Shipping in the tankers division earn a significant share acquiree's assets, liabilities and identifiable potential of their revenue in pools. Total pool revenue is liabilities are recognized at their fair value, with the generated by each of the vessels participating in the exception of a few limited items. The difference between pools to which the Group is a party. The Group's share of the acquisition cost and the Group' share the fair value of pool revenue depends on the number of days on which the acquiree's assets, liabilities and identifiable potential the Group's vessels were made available to the pool liabilities is recognized as goodwill, where positive, or in with respect to the total pool revenue. Pool companies the income statement, where negative. During first-time are considered joint ventures. Fully-owned pool legal adoption of IFRSs, as provided for in the applicable entities are consolidated line-by-line, but by recognizing accounting standards, the goodwill generated by the Group's share of revenue net of the share to be acquisitions prior to the date of transition to IFRSs has attributed to other pool participants. That share of been maintained at the previous value recorded in that revenue attributable to the other pool partners is capacity in the most recent financial statements prepared concurrently recognized among trade payables. according to the previous accounting principles prior to the date of transition of IASs/IFRSs (31 December 2010). Revenue on services other than marine transport are Goodwill is subject to a recoverability analysis with annual recognized according to the fees accrued on the basis of frequency or more often if events or circumstances occur the state of completion of the service.
50 | d’Amico Società di Navigazione S.p.A. d’Amico Società di Navigazione Group
Voyage costs and other direct operating statements are prepared. The election for national tax costs consolidation was not made. Voyage costs (port expenses, bunker fuel consumption The Group's main companies operating in the marine and commissions) are incurred in connection with the transport sector are based in Ireland and are subject to employment of the fleet on the spot market and under the Irish tonnage tax regime. Under the tonnage tax COAs. Voyage costs are recognized in the income regime, tax liability is not calculated on the analytical basis statement as incurred. of income and expenses, as in normal corporate taxation, but rather on the controlled fleet's notional shipping Time-charter hire rates paid for chartering vessels are income, which in turn depends on the controlled fleet's charged to the income statement on an accruals basis. total net tonnage. The tonnage tax charge is included Vessel operating costs such as crew, repairs, spares, stores, within the income tax charge in the consolidated insurance, commercial fees and technical fees are financial statements. charged to the income statement as incurred. The cost of lubricants is based on the consumption for the period. Deferred tax, where applicable, is tax that the Group expects to pay or recover on differences between taxes receivable and payable carried in the consolidated financial statements and the corresponding tax bases General and administrative costs used in calculating taxable profit. It is accounted for using the financial position liability method. Deferred tax General and administrative costs, which include liabilities are recognized for all temporary taxable administrative staff costs, management costs, office differences. Deferred tax assets are recognized to the expenses and other expenses relating to administration, extent that it is probable that taxable profits will be are expensed as incurred. available against which deductible temporary differences can be utilized. The carrying amounts of deferred tax assets are reviewed at each financial position date and reduced in the event that it is not considered probable Financial income and charges that sufficient taxable profits will be available to allow all Financial income and charges include interest income on or part of the assets to be recovered. Deferred tax is short-term investments and interest expenses on calculated at the applicable tax rates during the period borrowings, unrealized and unrealized exchange when the liability is settled or asset realized. It is charged differences relating to transactions in currencies other or credited in the income statement, unless it relates to than the functional currency and other financial income items charged or credited directly to other and charges, such as value adjustments of certain comprehensive income or loss, in which case the financial instruments not accounted for as hedging deferred tax is also accounted for in comprehensive instruments. Interest is recognized in the income income. statement on an accruals basis according to the effective interest method. Intangible assets Goodwill Taxation The taxes owed by the Parent Company, d'Amico Società The goodwill deriving from business combinations is di Navigazione S.p.A., which operates in sectors other measured at cost, net of any cumulative impairment shipping, are calculated according to taxable income for losses. Accordingly, goodwill is not subject to the year using the local tax rates in effect at the reporting amortization, but rather tested for impairment. Minority date. Tax charges are determined on the basis of the net interests in the shareholders' equity of an acquiree are profit or loss for the year, adjusted to reflect certain non- measured at their acquisition date fair value or, taxable or non-deductible elements, and are calculated alternatively, at their share of the carrying amount of the according to the tax rate in effect when the financial acquiree's net assets. The choice of measurement method is based on the specific transaction.
2014 Annual Report | 51 The goodwill recognized among intangible assets is in Depreciation is calculated on a straight-line basis to effect connected with business combinations and estimated residual value according to the estimated useful represents the difference between the cost incurred to lives of the major components of the vessels. New vessels acquire a company or business unit and the algebraic are generally estimated to have useful lives of 20 years, sum of the fair values assigned at the date of acquisition depending on their specifications and intended use. of the individual assets and liabilities comprising that Residual value is estimated as the lightweight tonnage of company or business unit’s capital. Since it has an each vessel multiplied by the current market scrap value indefinite useful life, goodwill is not subject to per ton, which is reassessed every year. Vessel tank systematic amortization but rather impairment testing coatings are depreciated over ten years and the dry-dock with at least annual frequency, unless the market and element is depreciated over the period to the next management indicators identified by the Company lead expected dry dock. Residual useful life is estimated at the to the belief that it is necessary to perform the test when date of acquisition or delivery from the shipyard and is preparing interim situations as well. For the purposes of periodically reassessed. conducting impairment testing, the goodwill acquired in a business combination is allocated to the individual Vessels under construction (new-builds) are carried at cost cash-generating units (CGUs) or groups of CGUs that are less any identified impairment losses. The cost of new- expected to benefit from combination synergies. The builds includes the instalment payments made through CGUs through which the Group operates in the various the date of delivery and other vessel costs incurred during segments of the market have been identified as the the construction period, including capitalized interest. smallest business units that generate cash inflows and Depreciation commences when a vessel is delivered. are largely independent of the cash inflows generated by other activities or groups of activities. Gains or losses on the disposal of vessels are recognized when the risks and rewards of ownership of the vessel Other intangible assets have been transferred to the buyer. Such gains or losses are measured as the sale price net of transaction costs and Other purchased or internally generated intangible the residual carrying amount of the vessel. assets are recognized at cost, including directly attributable auxiliary costs required to render the assets Dry-docking costs available for use, provided that it is likely that the use of the assets will yield future economic benefits and the To comply with industry certification or governmental cost of the assets may be determined reliably. Such requirements, vessels are required to undergo major assets, which have finite useful lives, are measured at inspections or classification for major repairs and purchase or production cost and amortized on a maintenance (dry-docking) that cannot be carried out straight-line basis according to their estimated useful while the vessels are operating. On average, vessels are lives, which are reviewed on at least an annual basis. Any dry-docked once every 30 months, depending on the changes are applied prospectively. Amortization begins type of work and requirements. Dry-docking costs, which when an asset becomes available for use. The estimated may also include some related costs, are capitalized and useful life of assets in this category is considered to be depreciated on a straight-line basis over the period until three years. the next dry-docking. If the next dry-docking of a vessel is performed less than 30 months from the previous dry- docking, the residual value of the previously capitalized costs is written off. Tangible assets The initial dry-docking asset for new-builds and newly Vessels purchased vessels is presented and capitalized separately. The cost of such assets is estimated on the Owned vessels are carried at historical cost, less basis of the costs required for the next dry-docking. accumulated depreciation and any impairment losses. Historical cost includes acquisition costs, as well as other Aircraft costs directly attributable to the acquisition or construction of the vessel, including interest expenses Interests in aircraft (held by d’Amico Dry) are recognized incurred during the period of construction based on the at acquisition cost and depreciated on a straight-line loans obtained for the vessels. basis over five years on the basis of possible use and until the residual realizable value has been exhausted.
52 | d’Amico Società di Navigazione S.p.A. d’Amico Società di Navigazione Group
Buildings and other tangible assets Assets that do not generate independent cash flows are tested at the level of cash-generating unit. Owned buildings and other tangible assets are recognized at acquisition cost or fair value and If the conditions that resulted in a previously recognized depreciated on a straight-line basis according to their impairment loss cease to apply, the carrying amount of residual useful lives at the following rates: the asset is recovered within the limits of the carrying amount that would have resulted if no impairment loss Years had been recognized in the previous years. The recovery is recognized in the income statement. By contrast, Owned properties 33 under no circumstances may previously impaired Furniture, fittings and office equipment 3-8 goodwill be recovered. Leasehold improvements Term of contract In further detail, the values of vessels are periodically The estimates of useful life and residual value are reviewed in light of market conditions. The carrying periodically revised. Depreciation ends at the date of amount of a vessel is tested for impairment whenever disposal or reclassification of an asset as held for sale. If an circumstances indicate that the carrying amount may asset subject to depreciation consists of separately not be recovered through the use of the vessel. If there identifiable elements the useful lives of which differ is any indication that this is the case, the recoverable significantly from that of the other parts of the asset, amount of the asset is estimated in order to determine depreciation is calculated separately for each of the parts the extent of impairment. Recoverable amount is of the asset in application of the component approach normally defined as the higher of an asset's fair value less principle. costs to sell and its value in use. An asset's value in use is based on the present value of the estimated future cash Real-estate investments flows over the duration of its residual useful life. Write- downs are applied to account for any impairment of Real properties held with the aim of earning rent or vessels. An impairment loss recognized in previous years benefiting from appreciation in value, or for may subsequently be reversed if the current estimated indeterminate future use, are classified as investment value in use is higher than at the time the impairment properties. They are measured at purchase or loss was recognized. Management's judgement is critical construction cost, plus any auxiliary charges, less in assessing whether there have been events that may accumulated depreciation and any impairment losses. impact the carrying amounts of the Company's vessels. Future cash flows are assessed by preparing estimates of Impairment of tangible and intangible assets future charter rates, operating costs, residual useful life and residual value for each vessel. Such estimates are Assets with indefinite useful lives are not subject to based on historical trends and future expectations. depreciation or amortization, but rather are tested for the recoverability of their carrying amounts with at least annual frequency (impairment testing). Operating leases (charter contracts) and Assets subject to depreciation or amortization are finance leases assessed for any presence of internal and external indicators supporting impairment losses: where such Charter-in and charter-out contracts for vessels, where indicators are found to exist, the asset’s recoverable the risks and rewards of ownership are not transferred to amount is estimated and any excess amount is charged the lessee, are treated as operating leases. Lease to the income statement. payments and income are recognized in the income statement on a straight-line basis over the lease term. The recoverable amount is equal to the greater of market Contractual obligations for the remaining lease period value, net of selling costs, and value in use determined of charter-in contracts are disclosed as commitments in according to a discounted cash flow approach. The the notes to the financial statements. discounting rate incorporates the specific risks associated with the asset that have not already been Assets acquired under finance leases, where substantially considered among expected cash flows. all the risks and rewards of ownership are transferred to
Relazione Annuale 2012 | 53 the Group, are initially recognized as assets by the Group redemption of principal, increased or decreased by at the lower of their fair values or the present value of the overall depreciation, applying the effective interest minimum payments due, including any sum to be paid method on any difference between the initial value and to the lessor to exercise the purchase option. The value at maturity. Such amounts may nonetheless be corresponding liability is recognized among financial adjusted to account for impairment or irrecoverability. liabilities. After initial recognition, such assets are The effective interest rate is the rate that reduces at measured according to the applicable accounting source the future contractual cash flows to the net principles. amount of the financial asset or liability. The calculation also includes the external expenses and income directly assigned during initial recognition of the financial instrument. Inventories Financial assets and liabilities measured at fair value are Inventories are recognized at the lesser of cost and net classified into the three hierarchical levels described realizable value. IFO and MDO fuel stocks aboard vessels, below according to the relevance of the information as well as inventories of finished products (primarily (inputs) used in determining their fair values. In further related to telecommunications activity), are recognized detail: at cost, calculated according to the FIFO method. • Level 1: financial assets and liabilities the fair values of which are determined according to unmodified prices quoted on active markets for similar assets or liabilities; Financial instruments • Level 2: financial assets and liabilities the fair values Financial instruments are contracts that give rise to of which are determined on the basis of inputs other financial assets and liabilities or equity instruments of than the quoted prices used in level 1, but that may another entity, as defined in IAS 32 (Financial be observed directly or indirectly on the market; Instruments: Presentation) and IAS 39 (Financial • Level 3: financial assets and liabilities the fair values Instruments: Recognition and Measurement). Such of which are determined on the basis of non- instruments are measured at their fair values when the observable market data. Group becomes a party to the contractual provisions of the instrument (the trade date). Liabilities are classified The Company classifies financial assets to the following in accordance with the substance of the contractual categories: arrangements from which they arise and the relevant • assets designated at fair value through the income definitions of a financial liability. For contracts statement; negotiated at market price, the fair value of the • loans and receivables; instrument is equivalent to the purchase cost (nominal • held-to-maturity investments; and value of the transaction). • available-for-sale financial assets.
The external costs and income from transactions directly Management determines the classification of assets attributable to negotiation, such as intermediation costs, when they are initially recognized. The accounting are included during initial recognition of the instrument, policies adopted for specific assets and liabilities are unless measured at fair value. Financial assets are presented below. measured at fair value or amortized cost, depending on the characteristics of each instrument. Financial liabilities Assets designated at fair value through the income are measured on the basis of their amortized cost. Only statement derivative instruments are measured at fair value. Held-for-trading financial assets are measured at fair Fair value is the price that would be received to sell an value. The fair value of such instruments is determined asset or paid to transfer a liability in an orderly by reference to their market value (bid price) on the transaction between market participants at the reporting date: the fair value of unlisted instruments is measurement date. Measurement on the basis of determined through the use of commonly applied amortized cost involves recognizing the asset or liability financial valuation techniques. Changes in the fair values at the value initially measured, deducting any of instruments classified to this category are recognized immediately in the income statement.
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Trade and other short-term receivables techniques and models, with changes in value recognized through a specific equity reserve (the Trade receivables are initially recognized at their face "reserve for available-for-sale assets"). The above reserve value (which represents the "fair value" of the is reversed to the income statement only when the transaction) and are subsequently measured at financial asset is effectively disposed of, or, in the event amortized cost, net of impairment losses recognized in of decreases, when it is determined that a significant, the income statement where there is objective evidence prolonged decrease in value already recognized in that an asset has become impaired. Impairment is equity cannot be recovered. Classification as current or calculated as the difference between the carrying non-current depends on management's intentions and amount and present value of estimated future cash the effective marketability of the securities: those flows, discounted at the effective interest rate. In the expected to be realized within the following twelve case of short-term trade receivables in particular, given months are recognized among current assets. the brief period of time at issue, measurement at If there is objective evidence of indicators of amortized cost is equivalent to nominal value, less impairment, the value of the assets is reduced so that it impairment losses. Impairment losses are recognized is equal to the discounted value of future cash flows: when management consider the full recovery of a decreases in value previously recognized in the equity receivable to be in doubt. If management consider the reserve are reversed to the income statement. Previous amounts non-recoverable, then they are written off in impairment losses are recovered if the circumstances their entirety. that had resulted in their recognition cease to apply, but only in cases of financial instruments not representing Held-to-maturity investments equity. The fair value of a financial instrument is determined Such assets, which are initially recognized at their fair according to market price quotations or, where such value and subsequently measured at amortized cost, quotations are not available, estimated according to include non-derivative instruments without pre- appropriate valuation techniques that make use of up- determined maturities that the Group has the intention to-date financial variables employed by market and ability to hold to maturity. Instruments with operators, while also taking account of the prices of contractual maturities falling the following twelve recent transactions involving similar financial months are classified among current assets. If there is instruments, where possible. objective evidence of indicators of impairment, the value of the assets is reduced so that it is equal to the Cash and cash equivalents discounted value of future cash flows: impairment losses identified through impairment tests are recognized in Cash and cash equivalents include cash in hand, current the income statement. accounts and demand deposits held with banks, as well If the grounds for previous impairment losses cease to as other short-term, highly liquid investments readily apply in subsequent periods, the value of the assets is convertible to a known amount of cash within six recovered up to the amount that would have resulted months, and are subject to an insignificant risk of from the application of amortized cost if no impairment changes in value. Cash and cash equivalents are had been recognized. measured at fair value, corresponding to their nominal value, or at cost, plus any interest charges, depending Available-for-sale financial assets on their nature.
Equity investments in non-consolidated enterprises, Banks and other lenders classified as available-for-sale assets from an accounting standpoint, are recognized among non-current assets Interest-bearing bank borrowings relating to the under the item "Long-term investments." This category financing of vessels and overdrafts are recognized includes financial assets other than derivative according to the amounts received, net of transaction instruments specifically designated as classified to that costs, and are subsequently measured at amortized cost item or not classified to any of the previous items. Such according to the effective interest rate method. The assets are measured at fair value, which is determined difference between the amount actually collected on in reference to market prices at the annual or interim the loans and their nominal value is recognized in the reporting date, or through financial valuation income statement over the entire term of the loan.
2014 Annual Report | 55 Trade and other payables in relation to changes caused by the underlying risk, and to the hedging instrument are recognized in the income Trade and other payables are measured at amortized statement. Any difference, representing the partial cost, which is generally equivalent to face value, ineffectiveness of the hedge, therefore corresponds to considering the characteristics and maturity of such the net financial effect. payables. Changes in the fair value of derivatives that do not Derivative instruments qualify for hedge accounting treatment are recognized directly in the income statement. Derivative instruments are used to hedge exposure to the following types of risks: (a) interest-rate swaps (IRSs) hedge the risk of fluctuations of interest rates on loans; (b) forward freight agreements (FFAs) hedge charter Provisions for employee benefits rates; (c) currency options, forward foreign exchange Liabilities relating to employee benefits paid in the and futures contracts hedge fluctuations in exchange course of service or thereafter in connection with rates; and (d) bunker swaps hedge fluctuations in the defined-benefit plans are calculated separately for each cost of fuel for vessels. plan according to actuarial hypotheses by estimating the amount of the future benefit that has accrued to In accordance with IAS 39, all derivative instruments are employees in exchange for services rendered during the measured at fair value. They are carried among short- current and previous years. That benefit is discounted term receivables or other liabilities. to determine its present value, while any unrecognized past service costs and the fair value of any plan assets Pursuant to IAS 39, derivative instruments qualify for are subtracted from the liabilities. The calculation is hedge accounting only when at the inception of the performed by an independent actuary using the hedge there is a formal designation and documentation projected unit credit method. The Group recognizes all of the hedging relationship, the hedge is expected to actuarial gains and losses deriving from defined-benefit be highly effective, its effectiveness can be reliably plans in other comprehensive income. For this type of measured and it is highly effective throughout the plan, the Company uses the equity option recognition financial reporting periods for which the hedge is method. As a result of that option, the liabilities posted designated. When derivative instruments qualify for in the financial statements are thus aligned with those hedge accounting, the following accounting treatment deriving from the actuarial measurement of said applies: liabilities, with full and immediate recognition of actuarial gains and losses, in the period in which they Cash flow hedges - These are derivatives to hedge arise, in the statement of comprehensive income under exposure to fluctuations in future cash flows arising in “Revaluation of defined-benefit plans” and a specific particular from risks relating to changing interest rates equity reserve. Italian termination indemnity on loans or currency risks relating to loans and (hereinafter, also TFR), accrued as at 31 December 2006, commitments in foreign currencies. Changes in the fair falls under the definition of such plans. value of the effective portion of the hedge are recognized in other comprehensive income, whereas In defined-contribution plans, the entity's obligation, the ineffective portion is recognized in the income which is limited to the payment of contributions to statement. Hedge effectiveness, i.e. the ability of a governmental organizations or a segregated body of hedge to adequately offset fluctuations caused by the assets or legal entity (a "fund"), is determined according hedged risk, is periodically tested, in particular by to the contributions owed. analyzing the correlation between the fair value of the cash flows from the hedged item and hedging instrument.
Fair value hedges - Hedging instruments fall within this Provisions for risks and charges category when used to hedge changes in the fair value Provisions for risks and charges are recognized to of an asset or liability that are attributable to a specific account for costs and expenses the nature of which is risk. Changes in value related both to the hedged item, fixed and the existence of which is certain or probable,
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but the amount or date of occurrence of which is not It is believed that certain accounting principles are known at the reporting date. Provisions for risks and particularly significant to comprehension of the financial charges are recognized when the Company has a statements. In this respect, the following is an account present obligation as a result of a past event and it is of the areas most extensively affected by such likely that the Company will be required to discharge procedures, as well as of the assumptions employed by that obligation, the amount of which can be estimated management in the process of assessing the foregoing reliably. Provisions are allocated based on the Directors' line items, in accordance with the above-mentioned best estimate of the costs required to meet the international accounting standards. The critical element obligation at the reporting date, and are discounted inherent in such estimates is a result of the use of when the effect is significant. assumptions and/or professional judgements concerning matters that are uncertain by nature.
Carrying amount and recoverability of goodwill - Since it Shareholders’ equity has an indefinite useful life, goodwill is not subject to systematic amortization but rather impairment testing Share capital with at least annual frequency, unless the market and management indicators identified by the Company Share capital consists of subscribed, paid-in capital. support the belief that it is necessary to perform the test Costs closely correlated with the issuance of shares are when preparing interim situations as well. When classified as reductions in share capital where they conducting impairment tests, the goodwill acquired in consist of costs directly attributable to the capital a business combination is allocated to the individual transaction, net of the deferred tax effect. cash-generating units (CGUs) or groups of CGUs that are expected to benefit from the synergies of the combination, in a manner consistent with the minimum level at which such goodwill is monitored within the Dividends Group. Dividends payable are reported as a movement in shareholders' equity in the period in which they are Fleet carrying amount and recoverability - The carrying approved by the general meeting of the shareholders. amount of the fleet is tested for impairment periodically or wherever circumstances or events required more frequent testing. If it is believed that the carrying amount of the fleet may have become impaired, that Significant aspects and material estimates amount is written down to its recoverable amount, which is estimated on the basis of future use and by the management disposal, in accordance with the provisions of the most In preparing the consolidated financial statements, the recent company plans. Estimates of such recoverable Group's Directors are required to make assessments, amounts are believed to be reasonable. However, estimates and assumptions that influence the possible variations in the factors on which the application of accounting principles and the amounts calculation of the foregoing recoverable amounts is of assets, liabilities, costs and revenue. Directors' based could result in different assessments. The analysis decisions are based on past experience and of the recoverability of carrying amounts is unique and expectations of the occurrence of future events and are requires management to use estimates and therefore to be considered reasonable. However, it assumptions deemed prudent and reasonable in should be noted that, since they are in fact estimates, relation to the specific circumstances. actual results may differ from the results presented in these financial statements. The process of preparing Depreciation period and residual value of the fleet- The estimates involves the various business areas. Such fleet is depreciated over its expected useful life of 20 estimates and assumptions are revised regularly. Any years, considering the residual value determined on the effects deriving from the revision of accounting basis of the market price of each vessel per tonne. The estimates are accounted for in the period in which the fleet's residual value and useful life are revised at least revision is conducted and the associated subsequent at the end of each period. If expectations differ from periods. previous estimates, the change is considered a change
2014 Annual Report | 57 of an accounting estimate. Changes in such estimates To measure fair value, measurement techniques are may have significant effects on depreciation. used based on three levels of elements: • The first level elements consist of prices listed on Tax liabilities - Tax liabilities are calculated according to active markets for assets and liabilities of the same the Group's specific tax situation, determined on the type; basis of the laws in force in the countries where the • The second level elements, different from the listed Group operates. Tax liabilities may be affected by prices included in the first level, can be directly or changes in the treatment or assessment of freight indirectly observed for the assets or liabilities revenue, withholding tax on charters, tonnage tax and examined; value-added tax. • The third level elements cannot be observed from market data. Defined-benefit plans - The expenses and liabilities associated with such plans are calculated according to When the elements used to determine the fair value of estimates prepared by actuarial consultants who use a an asset or liability belong to different categories, the combination of statistical and actuarial factors, including fair value measurement is fully classified in the lowest statistical data concerning previous years and and most important level of the fair value hierarchy. projections of future costs. Estimation components also Transfers between levels of the fair value hierarchy are include mortality and withdrawal rates, assumptions recorded at the end of the accounting period in which regarding the future discount rate trend, salary growth the change occurred. rates and an analysis of the year-on-year change in healthcare costs. Such estimates may diverge materially from actual results due to the evolution of economic and market conditions, increases/decreases in Segment information withdrawal rates and the length of participants' lives and In accordance with IFRS 8 (Operating Segments), since changes in the effective costs of healthcare. the Parent Company's shares are not listed on regulated markets and there are no ongoing listing processes, Leases - Lease contracts are classified as operating or detailed disclosure of the sectors in which the Parent finance leases at the commencement of the contractual Company and its subsidiaries operate (segment period and such classification is not modified thereafter. information) is not provided in these financial Classification depends on estimates based on statements. The report on operations contains some contractual conditions. In such case, the "substance over figures concerning the individual business areas in form" approach is adopted. which the Group operates, but these do not fall within the scope of IFRS 8. Fair Value Measurement - Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction on the main/most advantageous market at the measurement date, at the market conditions in force, irrespective of whether the price can be directly New accounting principles recorded or is arrived at using another measurement Accounting principles, amendments and technique. The fair value of financial instruments is interpretations applicable from 1 January 2014 represented by their market price or, if not available, by the value resulting from the adoption of adequate financial The following is a brief description of the amendments, measurement models that take account of all the factors improvements and interpretations applicable from 1 used by market participants and the prices obtained in January 2014. similar transactions actually executed on the market. To obtain a specific fair value measurement, listed prices or Accounting principles IFRS 10, IFRS 11 and IFRS 12 take information from brokers are used, as well as the regular effect from accounting periods beginning on 1 January checking of the adjustments to said measurements and 2014, or after that according to the date of adoption in non-observable data, to classify these measurements at the EU. The new accounting principles must be applied the appropriate fair value level. Fair value measurement retroactively. must consider the greatest possible number of market data.
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IFRS 10 “Consolidated Financial Statements”. This Amendments to IAS 36 – Recoverable Amount accounting principle establishes the rules for the Disclosures for Non-Financial Assets: disclosure of preparation and presentation of consolidated financial information concerning the recoverable amount of statements where an entity controls one or more other impaired assets, if said value is based on the fair value less entities. The new accounting principle provides costs of disposal, without any impact on these financial comprehensive guidelines on the application of the statements. This amendment introduces several principle of control, which governs the consolidation of additional disclosures regarding fair value when an entity. impairment or recovery has occurred. The application of those amendments could result in more extensive IFRS 11 “Joint Arrangements”. This accounting principle disclosure in the notes, in the event of impairment based applies to all entities that jointly control an arrangement, on the fair value less costs of disposal. and replaced IAS 31 “Interests in Joint Ventures”. The accounting treatment depends on the type of joint Amendments to IAS 39 - Financial Instruments: arrangement, determined by considering the investor’s Recognition and Measurement – Novation of Derivatives rights and obligations. With the application of IFRS 11, the and Continuation of Hedge Accounting: these accounting principle IAS 28 was amended and renamed amendments allow for the continuation of hedge “Investments in Associates and Joint Ventures”. In any accounting if a hedging derivative is novated for the event, this influenced several items which were purpose of clearing with a central counterparty pursuant previously recognised using the proportional method. to laws or regulations, provided certain strict criteria are met. IFRS 12 “Disclosure of Interests in Other Entities”. This accounting principle requires the disclosure of IFRIC 21 clarifies when to recognise a liability for the information on the nature of investments in interests in payment of a levy where said liability falls under the scope subsidiaries, associates, joint arrangements and un- of application of IAS 37 Provisions, Contingent Liabilities consolidated structured entities and on the related risks, and Contingent Assets. The interpretation provides as well as on the effects of these interests on the financial guidance on identifying the obligating event that triggers statements. the recognition of the liability for payment of a levy. This interpretation is applicable from January 2014. The Group Amendments to IFRS 10, 11 and 12 “Transition Guidance.” is currently not subject to significant levies and, as a result, This document clarified that the date of first-time the impact of the application of this standard is application of these three new standards (IFRS 10, 11 and immaterial. 12) is the first day of the administrative period in which IFRS 10 is adopted for the first time (for example, 1 January As envisaged by the accounting standards, the table 2014 for companies closing their accounts as at 31 below shows the comparison, with the related December 2014). Entities that adopt IFRS 10 must assess differences, of the amounts for the periods examined, control on the date of first-time application. The communicated in the previous year, and the reclassified treatment of comparative data depends on this amounts, as shown in the consolidated statement of measurement. other comprehensive income, the consolidated statement of financial position and the consolidated IFRIC 21 - Levies clarifies when to recognise a liability for statement of cash flows. the payment of a levy where said liability falls under the scope of application of IAS 37 Provisions, Contingent Liabilities and Contingent Assets. The interpretation provides guidance on identifying the obligating event that triggers the recognition of the liability for payment of a levy.
Amendments to IAS 32 - Financial Instruments: Presentation – Offsetting Financial Assets and Financial Liabilities. This clarifies the application of specific criteria for offsetting financial assets and liabilities, to be applied retroactively.
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Consolidated income statement
(Thousands of euro) FY 2013 2013 FY 2013 Published Adjustments Adjusted Revenue 625,047 693 625,740 Operating costs (445,817) (65,877) (511,694) General and administrative costs (142,448) 61,820 (80,628) Income on the disposal of fixed assets 19,109 0 19,109 GROSS OPERATING PROFIT / (LOSS) 55,891 (3,364) 52,527 Depreciation, amortization and impairment (54,776) 2,156 (52,620) OPERATING PROFIT / (LOSS) 1,115 (1,208) (93) Financial income and charges 48,394 (4,027) 44,367 PROFIT / (LOSS) BEFORE TAXES 49,509 (5,235) 44,274 Income taxes (13,397) 12 (13,385) NET PROFIT / (LOSS) 36,112 (5,223) 30,889 Attributable to: MINORITIES 7,000 (1,729) 5,271 PARENT COMPANY 29,112 (3,494) 25,618
Consolidated statement of other comprehensive income
(Thousands of euro) FY 2013 2013 FY 2013 Published Adjustments Adjusted Net profit or loss 36,112 (5,223) 30,889 Other components of comprehensive income not to be recycled to the income statement in subsequent periods Translation differences on foreign operations (26,268) (255) (26,523) Actuarial gain or loss (IAS 19) 75 75 Tax effects of expenses/income recognized in equity (17) (17) Other components of comprehensive income to be recycled to the income statement in subsequent periods Change in the fair value of available-for-sale financial instruments 12,757 12,757 Effective part of gains/(losses) on hedging instruments 10,012 (1,117) 8,895 Tax effects of expenses/income recognized in equity (2,605) (2,605) Comprehensive income 30,066 (6,595) 23,471 Attributable to: MINORITIES 11,790 (2,060) 9,730 PARENT COMPANY 18,276 (4,535) 13,741
2014 Annual Report | 61 Consolidated statement of financial position
(Thousands of euro) FY 2013 2013 FY 2013 Published Adjustments Adjusted ASSETS Non-current assets Intangible assets 10,325 0 10,325 Tangible assets 846,067 (43,314) 802,753 Long-term investments 93,599 2,978 96,577 Other non-current financial assets 10,079 15,850 25,929 TOTAL NON-CURRENT ASSETS 960,070 (24,486) 935,584 Current assets Inventories 52,620 (1,298) 51,322 Short-term receivables and other current assets 117,552 (6,188) 111,364 Other current financial assets 182,146 8,506 190,652 Cash and cash equivalents 112,599 (2,716) 109,883 TOTAL CURRENT ASSETS 464,917 (1,696) 463,221 TOTAL ASSETS 1,424,987 (26,182) 1,398,805
SHAREHOLDERS' EQUITY AND LIABILITIES Shareholders’ equity Share capital 25,000 0 25,000 Earnings reserves 720,020 5,203 725,223 Other reserves (8,706) 2,157 (6,549) Net profit / (loss) 29,112 (3,494) 25,618 SHAREHOLDERS' EQUITY - PARENT 765,426 3,866 769,292 Capital and reserves - Minorities 81,804 2,248 84,052 Net profit / (loss) - Minorities 7,000 (1,729) 5,271 TOTAL SHAREHOLDERS' EQUITY 854,230 4,385 858,615 Non-current liabilities Provisions for risks and charges 2,696 0 2,696 Banks and other lenders 309,197 (16,503) 292,694 Provisions for employee benefits 5,178 (7) 5,171 Other non-current financial liabilities 7,553 (28) 7,525 Other non-current liabilities 2,817 0 2,817 Deferred tax liabilities 3,729 0 3,729 TOTAL NON-CURRENT LIABILITIES 331,170 (16,538) 314,632 Current liabilities Banks and other lenders 79,442 (1,586) 77,856 Short-term payables and other current liabilities 122,517 (9,638) 112,879 Other current financial liabilities 30,720 (2,798) 27,922 Current tax liabilities 6,908 (7) 6,901 TOTAL CURRENT LIABILITIES 239,587 (14,029) 225,558 TOTAL SHAREHOLDERS' EQUITY AND LIABILITIES 1,424,987 (26,182) 1,398,805
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Consolidated statement of cash flows
(Thousands of euro) FY 2013 Adjustments FY 2013 published 2013 adjusted Net cash provided by / (used in) operating activities 66,317 (893) 65,424 Net cash provided by / (used in) investing activities (54,454) 7,741 (46,713) Net cash provided by / (used in) financing activities (59,139) (5,310) (64,449) NET CASH PROVIDED / (USED) (47,276) 1,538 (45,738) Cash and cash equivalents at the beginning of the year 156,945 (4,242) 152,703 Change in bank overdrafts 2,918 - 2,918 CASH AND CASH EQUIVALENTS AT THE END OF THE YEAR 112,587 (1,514) 109,883
In detail, this amendment resulted in the change in the accounting treatment of several cases of contributions consolidation of Eco Tankers Ltd, DACC Shipping, Ltd, to defined-benefit plans by employees or third parties. DM Shipping Ltd e Mida Maritime Limited, from the No significant effects are expected for the Company. proportional method to the equity method. This resulted in a reduction in the items of the income Amendments to IAS 16 and IAS 38 - Property, Plant and statement and statement of financial position due to Equipment and Tangible Assets. The amendments clarify the substantial exclusion of the figures of these three that revenue-based methods are not appropriate for entities from the consolidated financial statements of calculating depreciation. the group. The note shows figures in the column FY 2013 corresponding to those presented last year, as well IFRS 15 – Revenue from Contracts with Customers: was as the adjusted figures, under the wording 2013R issued by the IASB in May 2014 to bring together rules relating to the figures adjusted to reflect the effects of scattered in various standards and create a framework of the retrospective first-time application of the new IFRS. basic principles to apply to all categories of transactions, The table above also includes a reclassification of the including revenue, substantially requiring that ineffective portion of a derivative previously allocated companies recognise revenue at the time the control of to Shareholders’ equity items, specifically, under the the asset or service is transferred to customers, at an Cash Flow Hedge reserve . amount reflecting the expected consideration, in five phases. The approach also requires supplementary Other standards, amendments and interpretations information on the nature, amount, timing and certainty applicable for the financial year starting on or after 1 of revenue and cash flows arising from contracts with January 2014 are immaterial for the preparation of these customers. The standard will enter into force in January financial statements. 2017, but early adoption is permitted.
Accounting principles, amendments and IFRS 9 – Financial Instruments: was issued in July 2014 and interpretations not yet in force should be applied retrospectively to years from 1 January 2018. The improvements introduced will At the reporting date, the following accounting replace the rules for recognition and measurement of principles and related interpretations, applicable to the financial instruments contained in IAS 39. More Group, had been issued but not yet in force, or not yet specifically, financial assets will be divided into two endorsed by the European Union. Therefore, they were categories: those measured at amortised cost and those not applicable to the preparation of the financial measured at fair value. The first group will include statements as at 31 December 14. The following is an financial assets whose contractual terms generate cash account of the main changes (excluding the flows at specific dates that constitute only payment of improvements) and their potential effects on the principal and interest and whose business model financial statements: consists of holding these assets for the purpose of realising the contractual cash flows. The second group Amendments to IAS 19 - Defined-Benefit Plans: will include all other financial assets (measurement at Employee Contributions. The amendment simplifies the fair value). While the rules applied to financial liabilities
2014 Annual Report | 63 are essentially equal to those set out in IAS 39, allowing for economies of scale in organizing work and amendments to the approach have been introduced assessing cost/quality levels. The process of managing regarding the classification to the income statement of repair costs is similar. The policy of maintaining a young changes in the fair value of several debt instruments, fleet also contributes to minimizing this risk; (iv) fleet based on its credit risk, which means that changes in insurance - adverse events and incidents of various the fair value of the liability will be broken down into the kinds may occur in the course of vessel operations and amount of the change attributable to the changes in may give rise to financial losses, including in light of the the credit risk of the liability – to be exported to the international corpus of applicable regulations and statement of other comprehensive income – and the treaties. In order to reduce or eliminate the financial risks remainder of the change in the fair value of the liability, and/or other types of liability to which the Group may to be posted to the income statement. be exposed in such situations, the fleet is insured against various types of risk. The total insurance program provides extensive cover of risk in relation to the 2. Risk Management operation of vessels and transport of cargoes, including the risks of personal injury, environmental damage and The transactions undertaken by the Group in the course pollution, third-party casualty and liability, hull and of its operations expose it to a variety of financial risks, engine damage, total loss and war; and (v) piracy risk – and risk management is an integral part of the Group's as a result of the increase in the number of armed strategy. The shipping sector is highly sensitive to attacks in the waters off the coast of Somalia, and in the market fluctuations, which may cause significant Gulf of Aden in particular, two sets of countermeasures variations in freight rates and vessel prices. The overall have been implemented with the aim of: (a) minimizing risk management goal is to reduce the Group's earnings risk during transit in the Aden area and increasing exposure to cyclical fluctuations. voyage safety; and (b) verifying the suitability of the insurance structure currently in place to ensure that events deriving from particular situations enjoy adequate cover. The Group has identified some Technical and operational risks precautions to be applied to its vessels and certain suppliers. A detailed analysis of the situation has allowed In the shipping sector, the Group is exposed to risk the d'Amico Group to draw up guidelines that all vessels deriving from fluctuations in the costs associated with must follow when travelling through areas of risk. operating its vessels. The key areas of operating risks are Moreover, in order to obtain as much information as crew, bunkering, dry-docking, repairs and insurance. This possible and remain up-to-date on the issue, websites type of risk is managed through the following strategies: devoted to the piracy problem are systematically (i) the crew policy is coordinated at the Group level monitored. On the matter of the related insurance owing to d'Amico's experience in this area (training issues, it has been determined that main piracy risks are school and Group companies specialized in training already covered under the existing policies. services). This approach allows the Group to achieve synergies and economies of scale between its various business segments, while also assessing whether there are opportunities in the various geographical areas, with Market risk the aim of containing costs while also maintaining high crew quality. The Safety & Quality (SQE) Department The Group companies that operate in the shipping sector aims to ensure that vessels and crews operate in full are exposed to market risk principally in respect of vessels compliance with external requirements such as trading on the spot market and earning revenue at regulations and certifications; (ii) bunkering – the current market rates. In particular, when chartering Group enters into swap contracts for petroleum vessels, hire rates may be too high to allow for profit products in connection with its fixed-rate margins on the use of those vessels on the market. medium/long-term shipping contracts, where deemed Conversely, when chartering out vessels to third parties, appropriate to hedge the risk deriving from future hire rates may be too low to ensure an adequate return. fluctuations in bunker fuel prices; (iii) dry-dock The following risk management strategies are applied: (i) contracts – technical management also includes dry- for the various segments of the market in which it dock work and is coordinated at the Group level, operates, the Group pursues the goal of chartering vessels at fixed rates for the medium/long term
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(“hedging”) to an extent that permits the percentage of its on a portion of the Group's borrowings will make it easier revenue generated by such contracts to fall between 40% to predict future interest costs, until a level deemed and 60%. The purpose of this arrangement is to ensure appropriate to the Group is achieved, thereby allowing it that its exposure to the spot market does not exceed to reduce the risk of significant fluctuations in interest 60%, depending on market conditions, rate trends and rates. Such transactions are periodically and expectations; (ii) tanker fleet vessels are partially systematically reviewed and confirmed. Management employed in pools. This allows the Group to reduce the continuously review the interest rates available on the impact of specific risks associated with individual vessels; market to ensure that the Group's credit facilities are (iii) vessels trade on a worldwide basis to reduce the effect competitive. of different market conditions and rates of different routes between the Eastern and Western hemisphere; and (iv) for its tankers, the Group directly or via its pools enters into contracts of affreightment (COAs) at fixed rates, Liquidity risk which call for the shipment of an agreed number of The Group is exposed to liquidity risk deriving from the future cargoes at fixed rates. The Group normally uses possible mismatch between cash requirements, derivative instruments to manage its exposure to spot principally to purchase vessels and repay credit facilities, market rates for its dry-cargo vessels. and operating cash flow. To minimize that risk, the Group maintains adequate credit facilities and standby credit lines in order to respond to any such situations. Management regularly reviews the Group's credit Foreign-exchange risk facilities and cash requirements. The Group operates at an international level and in sectors in which transactions are undertaken in various currencies, and is thus exposed to risk deriving from the fluctuation of exchange rates for transactions Credit risk denominated in certain currencies (such as U.S. dollars, The Group is exposed to credit risk resulting from euro and Japanese yen). The exposure to the risk of possible default by its counterparties, primarily clients changes in exchange rates is periodically and and agents. The policy for managing this risk is based on systematically assessed, and management of this risk is the following instruments: (i) the client portfolio is based on the use of certain derivative instruments in analyzed and systematically assessed and outstanding accordance with the Group's policies in this area. In trade receivables are reviewed in a timely manner; (ii) further detail, fair-value and/or cash-flow hedging is payments to service providers and fuel suppliers are primarily undertaken through the use of instruments scheduled in such a way as to minimize credit risk, such as forward contracts and currency options. The whereas advances paid to shipyards with which orders purpose of such transactions is to fix the exchange rate have been placed to construct ships are covered by at which outstanding and/or projected transactions in appropriate bank performance guarantees; (iii) the foreign currencies are to be recognized. The Group's policy is to have dealings only with large banks counterparties to such contracts are a differentiated enjoying strong credit ratings specialized in the Group's group of leading financial institutions. sectors of operation; and (iv) the Group monitors its overall contractual exposure.
Interest rates The Group is exposed to interest-rate risk deriving from Fraud risk the fact that interest on its lines of credit and bank The Group is exposed to the risk of fraud deriving from deposits accrues at variable rates. Strategies for the significant volume and value of the transactions managing this risk, which aim to achieve a financing undertaken. The following risk-management strategies structure characterized by a pre-determined, optimal are adopted to minimize this risk: (i) limits of powers and mix of variable and fixed rates, involve the use of authority; (ii) controls over bank signing authority; (iii) derivative instruments such as interest-rate swap (IRS) controls over tendering processes; (iv) the Board of contracts. Management believe that fixing the interest Statutory Auditors of DSN supervises compliance with
2014 Annual Report | 65 the laws and the articles of association, observance of 4. Revenue the principles of sound management and, in particular, the adequacy of the administrative, organizational and accounting system adopted by the company and that (Thousands of euro) 2014 2013R system's functioning in practice, (v) the Parent Company Shipping 635,802 506,289 d’Amico Società di Navigazione S.p.A. - and several Services 120,150 119,451 subsidiaries, voluntarily adopted the provisions of TOTAL 755,952 625,740 Legislative Decree no. 231 of 8 June 2001, which provides that companies and entities are liable for Revenue generated in the tanker and dry-cargo shipping certain crimes committed by their directors or segments accounted for 84% of the total in 2014. The employees in the company’s interest and/or advantage, remainder relates to service activities, also pertaining to establishing and adopting the Organization, the shipping sector, prevalently in the Management and Control Model prescribed therein, as telecommunications field (13%). well as by appointing a Supervisory Board which As illustrated in the report, “Shipping” revenue increased controls compliance with said Model by the parties on the previous year due to the higher number of involved and the adequacy of the Model to the days/vessel performed by group vessels. company situation. That Decree provides for the implementation of a compliance program that aims to develop an organic, structured system of procedures, 5. Operating costs rules and controls to be put into practice both preventively and subsequently in order to reduce and prevent to a material extent the risk of commission of (Thousands of euro) 2014 2013R the various types of crimes. Direct operating costs 339,867 267,558 Time charter hire costs 227,489 165,527 3. Capital Other operating costs 82,095 78,609 TOTAL 649,451 511,694 The objectives pursued by the d'Amico Group in managing its capital are: Operating costs are the typical costs of the shipping sector (primarily "voyage" costs) associated with the use • to safeguard the Group's ability to continue as a (directly or in partnerships) of fleet vessels on voyages going concern, so that it may continue to provide undertaken under spot contracts and COAs. Direct returns for shareholders and benefits for other operating costs primarily relate to “voyage costs” and, stakeholders; and more specifically, fuel purchases (bunker costs of Euro • to provide an adequate return for shareholders by 161 million), port expenses (approximately Euro 57 operating on the spot/time-charter market, million) and fee and commission expenses balancing its level of commercial risk. (approximately Euro 15 million). This item also includes direct costs (of approximately Euro 90 million) directly In addition to equity, the Company's capital structure related to revenue for “services” posted under the principally comprises various lines of credit and bank revenue table (Note 4). borrowings. The Group's capital structure is periodically reviewed and, where necessary, adjusted to suit the Time charter hire costs represent the cost of Group's capital requirements, changes in general medium/long-term charter-in contracts for vessels in economic conditions and industry risk characteristics. In the Group's fleet. this respect, the Group continuously monitors its capital position on the basis of the assets cover ratio for its Other direct operating costs mainly include the cost of borrowings in comparison to the market value of its crew (Euro 42 million). The rest of the costs related to owned vessels subject to mortgages securing credit technical expenses, including technical management facilities. As an additional measure of monitoring risk and quality control, and other ship operating costs, such associated with its debt structure, the Group monitors as insurance and lubricants. its debt-to-equity ratio.
66 | d’Amico Società di Navigazione S.p.A. d’Amico Società di Navigazione Group
Personnel 7. Income on the disposal of fixed assets
The Group's personnel in service at the end of the year consisted of a seagoing staff of 1,117 and an (Thousands of euro) 2014 2013R administrative staff of 569, while the figures for the TOTAL 7,559 19,109 previous year, also adjusted based on the above principles, came to 947 and 557, respectively. The cost of This item comprises the (positive or negative) results of onshore personnel is included in general and disposals made by the various Group companies, of 5 administrative costs. For full information regarding legal vessels in addition to other tangible assets of compliance and the training of human resources, the insignificant amount. reader is referred to the report on operations, in which For disposals of vessels, the tables below show the the subject is discussed in detail. original values, expressed in US dollars, of the vessels sold during 2014.
6. General and administrative costs Ship Carrying Sale Gain/ amount price Loss Cielo di Monfalcone (Thousands of euro) 2014 2013R (d'Amico Shipping Italia) 13,217 12,375 (842) Personnel costs 55,651 52,051 Cielo di Vancouver Other general and (d'Amico Shipping Italia) 13,826 12,375 (1,451) administrative costs 26,349 28,576 Cielo di Parigi TOTAL 82,000 80,628 (d'Amico Tankers) 6,687 13,174 6,487 Cielo di Genova The personnel costs presented above refer to (d'Amico Dry ) 13,339 16,119 2,780 administrative personnel not employed on board ships. Other general and administrative costs include Medi Chennai (d'Amico Dry ) 16,227 19,177 2,950 consultancy and office operating expenses. This category also includes the emoluments of directors of Group companies in the amount of Euro 6.6 million As stated, the results shown in the financial statements (Euro 8.6 million in the previous year). include the disposals listed in the table above (for a The costs incurred in connection with emoluments paid value of Euro 7,470 thousand) as well as the results of during the reporting year for the Parent Company alone the disposal of other tangible assets for approximately came to Euro 1.5 million, in line with that spent in 2013. 90 thousand Euro. The costs of the services rendered by the Group's various independent auditors amounted to approximately Euro 1 million (of which Euro 142 thousand was incurred directly by the Parent Company).
2014 Annual Report | 67 8. Financial income, financial charges The dividends presented in the financial statements are and foreign-exchange gains and losses those collected by the companies outside the scope of consolidation while the other charges primarily consist of financial charges on loans and investment (Thousands of euro) 2014 2013R management activity. Financial income 61,119 83,820 Financial charges (82,964) (42,047) Translation differences arise from the recognition of amounts paid and collected during the year and Translation differences 264 (442) adjustments to items in foreign currencies – other than Result of measurements at equity 877 3,036 the functional currency – that continued to be carried at TOTAL (20,703) 44,367 the end of 2014. For better understanding of the amounts recorded, we attach the following table: 9. Income taxes
(Thousands of euro) 2014 2013R Financial income (Thousands of euro) 2014 2013R Bank interest 852 854 Current income taxes 5,203 8,732 Investment income 59,000 81,145 Taxes on a pass-through basis (7,670) 5,071 Dividend income 1,267 1,821 Deferred taxes 47 (418) TOTAL FINANCIAL TOTAL (2,420) 13,385 INCOME 61,119 83,820 Financial charges The table above shows the amounts recorded during Bank and sundry interest (451) (463) the year to account for the taxation of all Group Interest on borrowings (14,815) (11,472) companies. The taxable profit concerned is calculated Losses on investments (63,409) (26,909) on a lump-sum basis, according to ship tonnage, for Group companies operating in the shipping sector Other financial charges (4,289) (3,203) subject to the tonnage tax system, and on an analytical TOTAL FINANCIAL basis for those income components not subject to that CHARGES (82,964) (42,047) system. The ordinary tax rates in force in each applicable TRANSLATION DIFFERENCES 264 (442) country are applied to such amounts. As in the previous Result of measurements at equity years, this also included amounts recorded by the Parent Income from measurements Company to account for taxes calculated on a pass- at equity 2,774 3,060 through basis (Art. 167 (1) of Italy's Consolidated Income Charges from measurements Tax Act or TUIR) on the profits generated by foreign at equity (1,896) (24) companies (primarily d'Amico International SA). In this 877 3,036 regard, note that in2011 the Company submitted a TOTAL FINANCIAL INCOME / request for a ruling to avoid the taxation of the income (CHARGES) (20,703) 44,367 attributable to the subsidiary d’Amico International Sa and, following the negative response from the tax As extensively illustrated in the report, the consolidated authorities, submitted an appeal against the rejection net profit (loss) for 2014 was highly impacted by as well as an application for refund of the amount paid. financial income (charges), especially if compared to During 2014, as a result of the first-instance judgment those of the previous year. While the items relating to of 22 May 2014, issued by the Provincial Tax Commission interest remain substantially unchanged, income of Palermo which accepted the appeal submitted by the (losses) on investments worsened significantly, closing parent company, the latter decided it was no longer the year with a net loss of Euro 3.5 million. Note that this necessary to keep the items allocated in 2010-2013 in item includes the realized and unrealized gains and the financial statements, and fully recovered the amount losses reported by the various Group companies in their of Euro 7.6 million. For the purpose of complete financial operations, and in particular on the trading of disclosure, note that on 10 February 2015, the Italian financial assets designated at fair value through the Inland Revenue served an appeal against that first- income statement as well as those relating to instance judgement issued by the Commission. derivatives.
68 | d’Amico Società di Navigazione S.p.A. d’Amico Società di Navigazione Group
It should also be noted that the Parent Company is Losses carried forward subject to the Italian tax code and the ordinary tax rate that applies to its taxable profit is 27.50%. Differences According to the tax returns it has filed to date, and the between the tax charges recognized in the consolidated estimate of its 2014 taxable result, d’Amico Società di income statement and the notional tax charge Navigazione S.p.A. has accumulated prior-year tax losses calculated according to the ordinary corporate income of approximately Euro 21 million, which, when used, will tax (IRES) rate in effect in Italy are essentially due to the yield a tax savings of approximately Euro 5.8 million, circumstance that subsidiaries operating in the shipping calculated according to current tax rates. Within the sector are subject to the tonnage tax regime. scope of consolidation, the subsidiaries (sub-holding Accordingly, there is not believed to be a need to companies) d’Amico International S.A. and d’Amico prepare a detailed statement of reconciliation of actual International Shipping S.A. have a total of Euro 61.7 recognized income taxes and the income taxes million of losses eligible to be carried forward. In this calculated according to the rate theoretically applicable regard, it is worth noting that in Luxembourg, the to the Parent Company. country of residence of these latter companies, the corporate income tax rate is 28.59%. Deferred tax assets have not been recognized in connection with the above tax losses.
2014 Annual Report | 69 10. Intangible assets
(Thousands of euro) As at 31 December 2014 As at 31 December 2013R As at 1 January 2013R TOTAL 10,911 10,325 8,853
The following is an account of changes during the year:
(Thousand of Euro) Goodwill Other assets Total Net carrying amount AS AT 1 JANUARY 2014 9,473 852 10,325 Additions 400 543 943 Disposals (200) (200) Amortization for the year (388) (388) Other changes 49 56 105 Exchange differences 73 53 126 Net carrying amount AS AT 31 DECEMBER 2014 9,795 1,116 10,911
We also report the adjusted 2013 figures, which did not change compared to the figures presented last year.
(Thousand of Euro) Goodwill Other assets Total Net carrying amount AS AT 1 JANUARY 2013 8,438 415 8,853 Additions 188 642 830 Disposals 0 Amortization for the year (213) (213) Other changes 860 4 864 Exchange differences (13) 4 (9) Net carrying amount AS AT 31 DECEMBER 2013 9,473 852 10,325
Goodwill originated primarily from the consolidation of resulting from the plans prepared by the CGU's the subsidiary Compagnia Generale Telemar S.p.A., the directors, projected beyond the express forecasting carrying amount of which has been specifically period according to the perpetual annuity method assessed. That assessment did not result in the detection (terminal value), using a growth rate ("g" rate) of no of any elements that would have required the greater than that projected for the markets on which recognition of impairment. the individual CGU operates. Goodwill is assessed for impairment through The cash flows determined according to this method impairment testing. Such tests are performed on the are then discounted at a discount rate (WACC) of 10.5%. CGU concerned, by comparing the carrying amount The growth rate ("g" rate) used for the purposes of with the greater of the value in use of the CGU and the impairment testing is 2%. amount recoverable through disposal. In further detail, value in use is determined by using the The other intangible assets refer primarily to software, discounted cash flow method, applied to the cash flows which is amortized over a period of three years.
70 | d’Amico Società di Navigazione S.p.A. d’Amico Società di Navigazione Group
11. Tangible assets
(Thousands of euro) As at 31 December 2014 As at 31 December 2013R As at 1 January 2013R Fleet 935,819 710,220 721,755 Real Estate 87,667 87,763 89,023 Other tangible assets 4,670 4,770 3,826 TOTAL TANGIBLE ASSETS 1,028,156 802,753 814,604
The changes for the year are shown below, broken down by category.
(Thousands of euro) Fleet Land and buildings Other assets Total Historical cost 1,003,773 104,327 17,106 1,125,206 Depreciation and impairment (293,553) (16,564) (12,336) (322,453)
BALANCE AS AT 31 DECEMBER 2013A 710,220 87,763 4,770 802,753
Additions 235,809 2,374 1,799 239,982 Disposals/Decreases (101,836) (459) (102,295) Exchange differences 127,335 1,706 1,037 130,078 Reclassifications 33 33 Depreciation (47,498) (2,978) (1,989) (52,465) Depreciation transfer 47,088 242 47,330 Exchange differences (35,299) (1,198) (763) (37,260)
Historical cost 1,265,081 108,407 19,516 1,393,004 Depreciation and impairment (329,262) (20,740) (14,846) (364,848)
BALANCE AS AT 31 DECEMBER 2014 935,819 87,667 4,670 1,028,156
Tangible assets comprise: delivery of the tankers Cielo di New York and Cielo di Gaeta, as well as the dry-cargo ships Cielo di Monaco Fleet and vessels under construction and Cielo di Tocopilla. As mentioned, disposals regarded the OHBS vessels Cielo di Monfalcone and Cielo di The values presented include both the capitalized costs Vancouver, the M/T Cielo di Parigi and the M/N Medi of owned vessels purchased and payments to shipyards Chennai and Medi Genova. We also note that during through the reporting date for units under construction 2014 the Medi Sentosa, owned by Mida Maritime, was delivery of which is scheduled for the next several years. also sold. This vessel was included under Group tangible In addition to the above, the item also includes costs assets prior to application of the new accounting relating to the fleet's dry-dock programs. standards.
In 2014, increases regarded the amounts for works on For the complete list of owned vessels and vessels under vessels under construction (whose value as at 31 construction, refer to the specific table appended to the December came to approximately Euro 233 million), the financial statements.
2014 Annual Report | 71 Impairment testing testing has been conducted on a going-concern basis.
The net carrying amount of the fleet, including vessels It should also be noted that, in the event of a change in in dry-dock, has been reviewed to determine whether charter rates of USD 500, with all other calculation the conditions for an impairment loss had been met. parameters remaining unchanged, the results of the Recoverable amount is defined as the higher of an impairment test would change by Euro 44 million, asset's fair value less costs to sell and its value in use. An whereas a 1% change in the discount rate would have asset's value in use is based on the present value of the entailed a change of Euro 84 million. estimated future cash flows over the duration of its residual useful life. Land and buildings
Impairment testing was conducted through the use of This item includes properties used in operations, the discounted cash flow method, in the unlevered including those acquired under finance lease, in the version, applied to the cash flows indicated in business possession of the various Group companies. The plans approved by the management, projected beyond increases during the year primarily relate to renovation the express plan forecasting period, using growth rates works, mainly relating to the property on Via Paisiello of no greater than those forecast for the markets in (Rome), owned by the parent company. which the individual CGUs operate, with appropriate updates to the parameters applied. It is worth noting that the property located in Via It was not deemed necessary to recognize any Paisiello, carried at its historical cost of Euro 58.5 million impairment losses on company units inasmuch as, on (currently Euro 52.9 million, after depreciation) and the basis of a comparison of the carrying amounts and originally acquired to host the Company's offices, may the greater of the market value of the asset, net of costs now be regarded as an investment property. The use of to sell, and its value in use and, where appropriate, an the property is being changed from “office use” to impairment test, the net carrying amounts of fleet “residential use”, to subsequently sell the resulting vessels were found to be fully recoverable. apartments. The asset's estimated useful life is 33 years. As stated in the section concerning measurement In order to conduct impairment tests, estimates criteria, the property has been recognized at cost, net prepared by the management take account of available of the pertinent depreciation charges. According to the market information, including figures concerning sales most recent appraisals available, that cost is near the of similar vessels and expectations, based on the property's market value. following key assumptions: (i) revenue is estimated on the basis of contracts signed and estimates of future Other assets rates, determined according to quotes from leading industry brokers; (ii) a residual useful life of 20 years; (iii) Other assets include various items of office equipment, the projected economic value at the end of the asset’s and in particular furniture and fixtures, computers and useful life, determined according to the most recent other electronic machines and motor vehicles. The estimates of the fleet's scrap value; (iv) costs reflect change on the previous year, net of depreciation d'Amico's current structure; and (v) figures are charges, can be considered physiological in relation to discounted at a rate of 6.00%, representative of the the normal turnover of office equipment. Group's current and projected weighted average cost of capital profile, taking account of the current cost of For the purpose of complete disclosure, below are the borrowings and the return on equity. The Company’s changes occurring following the restatement of the management takes account of the fact that such year-end 2012 / beginning of 2013 balances and their calculations are especially sensitive to changes in key comparison with the adjusted opening balances of assumptions concerning future charter values and 2014. discount rates.
These consolidated financial statements continue to present impairment losses, recognized in previous years, on vessels owned by d’Amico Tankers Ltd. and d’Amico Dry Ltd. of approximately Euro 56.2 million. Impairment
72 | d’Amico Società di Navigazione S.p.A. d’Amico Società di Navigazione Group
(Thousands of euro) Fleet Land and buildings Other assets Total Historical cost 1,104,467 103,229 14,505 1,222,201 Adjustments due to restatement (71,291) 0 0 (71,291) Adjusted historical cost 1,033,176 103,229 14,505 1,150,910 Depreciation and impairment (331,232) (14,206) (10,679) (356,117) Adjustments due to restatement 19,811 0 0 19,811 Adjusted depreciation and impairment (311,421) (14,206) (10,679) (336,306)
VALUES AS AT 1 JANUARY 2013A 721,755 89,023 3,826 814,604
Additions 103,635 3,330 1,438 108,403 Disposals/Decreases (88,076) (531) (88,607) Exchange differences (44,562) (203) (734) (45,499) Reclassifications (398) (2,029) 2,427 0 Depreciation (47,445) (2,945) (1,990) (52,380) Depreciation transfer 50,152 175 50,327 Exchange differences 15,159 587 159 15,905 Impairment/recovery 0 Historical cost 1,003,775 104,327 17,105 1,125,207 Depreciation and impairment (293,555) (16,564) (12,335) (322,454)
BALANCE AS AT 31 DECEMBER 2013A 710,220 87,763 4,770 802,753
2014 Annual Report | 73 12. Long-term investments
(Thousands of euro) As at 31 December 2014 As at 31 December 2013R As at 1 January 2013R Equity investments 63,316 48,874 50,030 Available-for-sale financial assets. 43,038 41,130 32,864 Held-to-maturity investments 6,244 6,573 3,447 TOTAL 112,598 96,577 86,341
The amounts presented above refer to non-current the Parent Company. financial assets and equity investments in other The following table presents the changes during the year enterprises and associated enterprises, primarily held by and the percent interests held at year-end.
Company name As at 31 Acquisitions / Impairment As at 31 Percent (Thousand of Euro) December 2013R (disposals) losses / recoveries December 2014 interest Companies Consolidated at Equity Clubtre S.p.A. 34,251 - 2,100 36,352 32.50% Venice Shipping & Logistic S.p.A. 4,904 2,422 (1,078) 6,247 28.44% Eco Tankers Limited 2,243 864 507 3,615 19.30% DACC Maritime Ltd 19 - (13) 6 51.00% MIDA Maritime Ltd 688 - (688) 0 51.00% DM Shipping Ltd 51 - 7 58 29.82% TOTAL 42,156 3,286 835 46,278 Other companies Sator S.p.A. 2,800 - - 2,800 1.13% Civita Cultura S.r.l. 1,504 (605) - 899 14.30% ClubItaly srl - 9,220 - 9,220 7.50% TIP-PRE IPO S.p.A. - 1,104 - 1,104 3.26% Other 2,414 602 - 3,015 TOTAL 6,718 10,321 0 17,038
Company name As at 31 Acquisitions / Changes in As at 31 Percent (Thousand of Euro) December 2013R (disposals) FV December 2014 interest Available-for-sale financial assets Tamburi Investments Partners S.p.A. 32,346 4,661 5,568 42,574 11.37% Datalogic S.p.A. 6,898 (6,898) - 0 1.43% Banca Profilo S.p.A. 299 - 164 464 0.22% Banca Popolare Group 1,587 (1,587) - 0 0.06% TOTAL 41,130 (3,824) 5,732 43,038
Company name As at 31 Acquisitions / As at 31 Percent (Thousand of Euro) December 2013R (disposals) December 2014 interest Held-to-maturity investments Sator Private Equity Fund 6,573 (329) - 6,244 - TOTAL 6,573 (329) - 6,244
TOTAL 96,578 9,454 6,567 112,598
74 | d’Amico Società di Navigazione S.p.A. d’Amico Società di Navigazione Group
The values presented above relate to investments of a Società di Navigazione S.p.A. (28.44%) and Vega strategic nature in enterprises operating primarily in Finanziaria S.p.A. (14.26%). The company was sectors other than shipping. Those investments have incorporated in September 2009 and primarily been undertaken through the use of cash in hand. engages in investment transactions in the shipping and shipping logistics sectors. As stated, during the The main changes in 2014 involved an increase in the year, DSN increased its investment through share equity interest in VSL, due to several share capital capital increases up to Euro 6.2 million; increases during the year, and the increase in the equity • Tamburi Investment Partners S.p.A. – an independent interest in TIP S.p.A. The newco ClubItaly S.r.l. and TIP- merchant bank listed on the Milan Stock Exchange PRE IPO S.p.A. also became shareholders of the parent and focused on medium-sized Italian companies. As company. We also note that during the year, the stated, the equity interest as at 31 December 2014 previous equity interests in Datalogic SpA and in the increased up to 11.37%; Banca Popolare Group were fully sold. • TIP-PRE IPO S.p.A. – In 2014 the consolidated financial statements were expanded by this new corporation, As disclosed above in the report on operations, the incorporated during the year with the purpose of following is an account of the most important acquiring minority interests in Italian or foreign information regarding the major long-term investments companies. These interests, in the industrial and owned by the Parent Company: services sectors, must have the goal of being listed on a regulated stock market within five years. The • Clubtre S.p.A. – a company the owners of which equity interest is held both directly by the Parent include Tamburi Investment Partners S.p.A., which Company and through d’Amico Partecipazioni holds a 35% interest, and Angelini Partecipazioni Finanziarie srl, for a total of 3.26% of share capital. Finanziarie S.r.l. and d'Amico Società di Navigazione • ClubItaly Srl – This equity interest, in the company S.p.A., each of which holds a 32.5% interest. As at 31 established in 2014, is also held through d’Amico December 2014, d'Amico Società di Navigazione Partecipazioni Finanziarie Srl for a total amount of S.p.A. had invested a total of approximately Euro 33 over Euro 9 million, equal to a share of 7.50%. million. Clubtre S.p.A. holds an interest of more than ClubItaly is the company’s special purpose vehicle 6% in Prysmian S.p.A., a global leader in cabling and for the acquisition of 20% of the share capital of high-tech systems for energy transmission and Eataly Srl, which operates in the worldwide telecommunications; distribution and sale of top-quality Italian wine and • Venice Shipping and Logistic S.p.A. – a company food products, integrating production, sale, catering whose main shareholders as at 31 December 2014 and education into its offering. were Palladio Finanziaria S.p.A. (56.99%), d'Amico
2014 Annual Report | 75 For comparative purposes, we present the same table as set out above but with the changes in 2013A
Company name As at 31 Acquisitions / Impairment As at 31 Percent (Thousand of Euro) December 2012 (disposals) losses / recoveries December 2013R interest Companies Consolidated at Equity Clubtre S.p.A. 38,969 (6,013) 1,295 34,251 32.50% Venice Shipping & Logistic S.p.A. 3,862 1,042 4,904 28.26% Eco Tankers Limited 2,277 (33) 2,243 22.88% DACC Maritime Ltd 37 (18) 19 51.00% MIDA Maritime Ltd 37 652 688 51.00% DM Shipping Ltd 51 51 35.35% TOTAL 445,233 (6,013) 2,938 42,156
Other companies Sator S.p.A. 2,800 2,800 1.09% Civita Servizi S.r.l. 1,460 43 1,504 14.30% Other 1,887 527 2,414 TOTALE 6,147 570 0 6,718
Company name As at 31 Acquisitions / Changes in As at 31 Percent (Thousand of Euro) December 2012 (disposals) FV December 2013 interest Available-for-sale financial assets Tamburi Investments Partners S.p.A. 21,315 11,032 32,346 10.38% Datalogic S.p.A. 9,247 (3,745) 1,395 6,898 1.43% 368 (69) 299 0.22% Banca Popolare Group 1,935 (503) 155 1,587 0.06% TOTAL 32,864 (4,248) 12,514 41,130
Company name As at 31 Acquisitions / As at 31 (Thousand of Euro) December 2012 (disposals) December 2013 Held-to-maturity investments Sator Private Equity Fund 3,447 3,126 6,573 - TOTAL 3,447 3,126 0 6,573
TOTAL 87,691 (6,565) 15,452 96,577
13. Other non-current financial assets
(Thousands of euro) As at 31 December 2014 As at 31December 2013R As at 1 January 2013R TOTAL 36,005 25,929 29,928
Other non-current financial assets mainly included the Shipping of Euro 17 million. The remainder regards several receivables due from Group companies consolidated at tax receivables pertaining to previous years (Euro 4.5 equity and, thus, not netted in the consolidated figures, million) and the measurement at fair value of various and, specifically, a receivable of d'Amico International due financial instruments (Euro 3 million). For a summary of from DACC Maritime of approximately Euro 11.2 million the derivatives outstanding as at year-end and the fair and one of d'Amico Tankers due from the subsidiary DM values of those derivatives, please refer to Note 28.
76 | d’Amico Società di Navigazione S.p.A. d’Amico Società di Navigazione Group
14. Inventories
(Thousands of euro) As at 31 December 2014 As at 31 December 2013R As at 1 January 2013R TOTAL 51,325 51,322 57,253
Year-end inventories consist of stocks of intermediate (Euro 18.3 million, below the value of the updated fuel oil (IFO) and marine diesel oil (MDO), as well as appraisal conducted on the property) and inventories Luboil aboard vessels, of Euro 24.3 million, the value of of Euro 8.7 million, primarily of finished products, held the property under construction owned by Domas by the Telemar Group.
15. Short-term receivables and other current assets
(Thousands of euro) As at 31 December 2014 As at 31 December 2013R As at 1 January 2013R TOTAL 154,287 111,364 107,191
The accounts receivable in this item primarily consist of end. Provisions for doubtful receivables are also included trade receivables, also including advances to suppliers as a deduction from this item, amounting to and prepaid expenses and accrued income as at year- approximately Euro 8 million.
16. Other current financial assets
(Thousands of euro) As at 31 December 2014 As at 31 December 2013R As at 1 January 2013R TOTAL 172,705 190,652 181,763
Current financial assets remained essentially unchanged equities and other securities, primarily held by d’Amico in terms of both their value and composition. The item International S.A. of approximately Euro 167 million. This refers to short-term investments of liquidity in short- is in addition to several derivative financial instruments term and/or negotiable securities and instruments. In (specified in greater detail in Note 28) of Euro 3.7 million further detail, the carrying amount includes, at their and other sundry financial receivables. market values, various portfolios of mutual funds, bonds,
17. Cash and cash equivalents
(Thousands of euro) As at 31 December 2014 As at 31 December 2013R As at 1 January 2013R TOTAL 182,658 109,883 152,703
The item primarily comprises short-term bank deposits pertains to cash in hand. in the amount of Euro 111.4 million. The residual balance
2014 Annual Report | 77 18. Shareholders’ equity
(Thousands of euro) Al 31 Dicembre 2014 As at 31 December 2013R As at 1 January 2013R Share capital 25,000 25,000 25,000 Earnings reserves 727,404 728,378 790,754 Other reserves 50,701 (9,704) 2,173 Net profit / (loss) (38,260) 25,618 (46,318) SHAREHOLDERS' EQUITY - PARENT 764,845 769,292 771,609 Capital and reserves - Minorities 136,888 84,052 91,282 Net profit / (loss) - Minorities (817) 5,271 (21,832) TOTAL SHAREHOLDERS' EQUITY 900,916 858,615 841,059
Share capital posting of the profit (loss) for 2013A, derives from the sale to the market of a share of the equity interest of The authorized and paid-in share capital of d’Amico d’Amico International in the listed d’Amico International Società di Navigazione S.p.A. came to Euro 25 million Shipping. This decrease is shown in the statement of and is divided into 10 million shares with a par value of changes in shareholders’ equity, along with the change Euro 2.5 each. deriving from the purchase of treasury shares of Compagnia Generale Telemar, in 2014, and, thus, the Earnings reserves concurrent increase in the parent company’s shareholders’ equity. This item includes the various reserves (the legal reserve, extraordinary reserve and retained earnings reserve) to Other reserves which net profit has been allocated over the years, net of dividends distributed. The decrease, even net of the Other reserves include the following items:
(Thousands of euro) As at 31 December 2014 As at 31 December 2013R As at 1 January 2013R Cash-flow hedging reserve (16,780) (1,985) (10,436) Fair-value reserve 16,299 14,384 1,627 Translation and consolidation reserve 54,402 (22,786) 7,548 Comprehensive income taxation reserve (3,314) (2,615) Actuarial gain or loss 94 48 Other reserves 0 6,405 15,843 TOTAL 50,701 (6,549) 14,582
The cash-flow hedging reserve (fair value of derivatives consolidation reserve, which relates to differences / cash flow hedges) and the fair-value reserve for deriving from the elimination of shareholders' equity available-for-sale financial assets include, respectively, against the respective equity interests. the effects of the measurement of cash-flow hedging contracts, recognized among other financial assets and Minority interests liabilities and the effects of the measurement of available-for-sale financial assets at fair value. The net profit and shareholders' equity attributable to minorities relate primarily to Compagnia Generale The remaining reserves include the translation reserve, Telemar S.p.A. and d’Amico International Shipping S.A., which refers to differences relating to the translation of whose minority interests amount to approximately 38% financial statements in foreign currencies, and the and 41%, respectively.
78 | d’Amico Società di Navigazione S.p.A. d’Amico Società di Navigazione Group
19. Provisions for risks and charges
(Thousands of Euro) As at 31 December 2014 As at 31 December 2013R As at 1 January 2013R TOTAL 661 2,696 2,704
The item refers to allocations to provisions for risks or disputes that it was decided to recognize on a litigation relating to certain ongoing labour suits or prudential basis.
20. Banks and other lenders
(Thousands of euro) As at 31 December 2014 As at 31 December 2013R As at 1 January 2013R Non-current liabilities Banks and other lenders 454,617 292,694 361,257 Current liabilities Banks and other lenders 141,407 77,856 76,663 TOTAL 596,024 370,550 437,920
2014 Annual Report | 79 The following table specifies amounts due to bank by individual loan.
Institution Currency Non-current Current Total Intesa S.Paolo USD 3,542 1,071 4,613 Meliorbanca USD 16,473 1,647 18,120 Credit Agricole USD 7,125 7,125 Credit Suisse USD 23,223 1,680 24,903 Credit Agricole Corp.&Inv. USD 74,632 5,851 80,483 Mizuho YEN 4,275 936 5,211 Commerzbank-Credit Suisse USD 46,272 4,423 50,695 Unicredit USD 5,107 5,107 Banca Popolare di Lodi USD 8,562 1,167 9,729 Banca Popolare di Lodi USD 7,248 988 8,236 Banca Popolare di Lodi USD 6,548 741 7,289 ABN Amro Bank USD 8,018 8,018 Unicredit Leasing EUR 1,101 1,101 Banco Popolare EUR 13,333 6,814 20,147 BNP USD 3,706 1,235 4,941 Monte dei Paschi di Siena USD 17,009 1,647 18,656 Banco Popolare USD 18,009 2,428 20,437 Credit Agricole DNB USD 28,609 2,543 31,152 Credit Agricole ABN USD 29,659 2,043 31,702 Danish Ship Finance USD 22,033 2,018 24,051 DNB USD 45,038 3,344 48,382 Banca Intesa USD 49,420 12,355 61,775 JPMorgan USD 16,473 16,473 BSI USD 14,826 14,826 Goldman Sachs USD 12,355 12,355 Banco di Brescia EUR 28,945 1,490 30,435 Loan Depreciation fees (3,449) (3,449) Other minor overdrafts 63 33,448 33,511 TOTAL 454,617 141,407 596,024
Bank debt consists largely of medium-/long-term in a range from 1.19% to 3.68%. The remainder borrowings contracted by companies operating in the (approximately Euro 33.5 million) is related to bank shipping industry to purchase fleet vessels. The account overdrafts. balance includes Euro 156.5 million in borrowings with variable interest rates, spreads on which range from 45 Loans are subject to the customary collateral conditions, to 225 basis points on the benchmark, generally the such as mortgages of the financed property, and some LIBOR or EURIBOR. The total amount of Euro 406 million covenants, particularly as regards the ratio of the vessel's relates to borrowings for which the risk associated with market value to the amount of the loan. As at 31 changes in the benchmark rate has been hedged by December 2014, such covenants had been observed. entering into interest rate swap (IRS) contracts in order Finally, it bears noting that the share of debt set to come to fix the overall rate associated therewith. Such IRS due beyond five years is approximately Euro 148.5 contracts have been entered into with fixed-rate levels million.
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21. Provisions for employee benefits
(Thousands of euro) As at 31 December 2014 As at 31 December 2013R As at 1 January 2013R TOTAL 5,568 5,171 4,737
The amount presented above refers to the sum directors, as approved by the general meetings of the provisioned for Italian termination indemnity (TFR) owed shareholders, for Italian companies. Both amounts are to seagoing and administrative personnel in service as updated in accordance with IAS 19 and the amount at 31 December 2014, net of advances disbursed and the subject to discounting was allocated to a specific equity share accrued prior to 1 January 2007 that has been reserve pursuant to that Standard. allocated to complementary pension systems pursuant to Legislative Decree 252 of 5 December 2005 (or The following table presents the change in actuarial transferred to the INPS treasury fund). The share of the liabilities during the year and a reconciliation of those Italian end-of-service indemnity (TFM) refers to the actuarial liabilities with the carrying amounts of the amount provisioned as end-of-service indemnity for liabilities concerned in these financial statements:
(Thousands of euro) As at 31 December 2014 ACTUARIAL LIABILITY AT THE BEGINNING OF THE YEAR 5,171 Normal cost 472 Financial charges 103 Disbursements (132) Actuarial (gains)/losses during the period (46) RECOGNIZED LIABILITY AS AT YEAR-END 5,568
The following is a presentation of the key assumptions employee-benefit liability as at 31 December 2014: employed in preparing an actuarial estimate of the
31 December 2014 TERMINATION INDEMNITY/END-OF-SERVICE INDEMNITY Discount rate 0.91% Inflation rate 1.5% Staff turnover rate 5% Mortality rate IPSMF 55
22. Other non-current financial liabilities
(Thousands of euro) As at 31 December 2014 As at 31 December 2013R As at 1 January 2013R TOTAL 55,556 7,525 11,778
The table above mainly includes the measurement of reference should be made to the specific table under derivative financial instruments (interest rate swaps) set Note 28. to come due beyond twelve months contracted by the The balance also includes the share of amounts payable Group (approximately Euro 50 million). The change on to third parties contracted in the form of shareholders' the previous year specifically derives from the increase loans by the subsidiary Domas Immobiliare in said measurement at year-end. Also for this liability, (approximately Euro 4 million).
2014 Annual Report | 81 23. Other non-current liabilities
(Thousands of euro) As at 31 December 2014 As at 31 December 2013R As at 1 January 2013R TOTAL 0 2,817 0
As at 31 December 2013 this item included deferred balance was reclassified under current liabilities as at 31 income relating to payment in advance for a charter out December 2014. relating to the period January – November 2015. This
24. Deferred taxes
(Thousands of euro) As at 31 December 2014 As at 31 December 2013R As at 1 January 2013R TOTAL 4,556 3,729 1,027
This item includes provisions for deferred taxes, the by the companies inasmuch as it is not certain that financial impact of which is deferred to subsequent profits from which to deduct such losses carried forward years. As mentioned above, deferred taxes have not will be earned. been recognized on the prior-year losses carried forward
25. Short-term payables and other current liabilities
(Thousands of euro) As at 31 December 2014 As at 31 December 2013R As at 1 January 2013R TOTAL 131,661 112,879 104,291
The accounts payable presented above consist primarily year-end. of trade payables, payments to seagoing personnel The changes during the year are to be considered settled in early 2015 and deferred income present at normal as a function of working capital dynamics.
26. Other current financial liabilities
(Thousands of euro) As at 31 December 2014 As at 31 December 2013R As at 1 January 2013R TOTAL 50,359 27,922 27,975
The item primarily refers to hedging derivative summary of the derivatives outstanding as at year-end instruments for approximately Euro 50 million, used by and the fair values of those derivatives, please refer to the Group set to mature within twelve months. For a Note 28.
27. Taxes payable
(Thousands of Euro) As at 31 December 2014 As at 31 December 2013R As at 1 January 2013R TOTAL 3,345 6,901 27,975
The balance includes current income taxes allocated where applicable. by Group companies, including the tonnage tax,
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28. Derivative instruments
The following table specifies the various types of changes in those instruments in 2014 compared with derivative instruments used by the Group and the the previous years’ adjusted figures.
(Thousands of euro) 31 December 2014 31 December 2013R 1 January 2013R Fair value Eur Eur Eur Positive Negative Positive Negative Positive Negative fair value fair value fair value fair value fair value fair value Fair value through the income statement Forward charter derivatives / FFAs - (10,819) 2,873 - - - Guarantee transactions 554 - 1,147 - - - Forward foreign exchange transactions 672 0 2,968 - - (3,717) Currency options - (19,411) - (20,965) 1,648 - Forward bunker purchase derivatives 672 (24,590) - - - - Interest rate derivatives - (18,709) 4,730 - - (1,616) 1,226 (73,529) 11,718 (20,965) 1,648 (5,333) Fair value through equity Foreign exchange and currency transactions - - - (2,502) - (4,421) Forward bunker purchase derivatives - (7,125) 16 - 5,151 - Interest rate derivatives - (13,790) 0 - 3,824 151 (6,259) - (20,915) 16 (6,326) 5,302 (10,680) TOTAL 1,226 (94,444) 11,734 (27,291) 6,950 (16,013)
The following is a specification of the specific account allocations, also compared to the previous years’ adjusted figures.
Posted under: Other non-current financial assets 3,225 - 3,354 - 3,580 - Other non-current financial liabilities 0 (50,151) 0 (6,020) - (9,973) Other current financial assets 3,736 0 14,817 0 23,592 - Other current financial liabilities 0 (50,028) 0 (27,708) - (26,262) TOTAL 6,961 (100,179) 18,171 (33,728) 27,172 (36,235)
Financial assets and financial liabilities designated at fair recognized in the income statement. For hedging value are classified to level 2 in the hierarchy. In further instruments defined as fair-value hedges, changes in detail, the fair values of derivative contracts are value associated with both the hedged item (in relation calculated according to the market quotations supplied to changes determined by the underlying risk) and the by leading counterparties or, in the absence of market hedging instrument are recognized in the income information, on the basis of appropriate valuation statement. Any difference, representing the partial techniques generally adopted in the financial world. ineffectiveness of the hedge, therefore corresponds to the net financial effect. The changes in the fair value of the effective portion of The changes in the fair value of the effective portion of hedging derivatives classified as cash-flow hedges are hedging derivatives classified as cash-flow hedges are recognized in shareholders' equity (other reserves) and recognized in shareholders' equity (other reserves) and presented in the statement of comprehensive income, presented in the statement of other comprehensive whereas the ineffective portion of the hedge is income.
2014 Annual Report | 83 Prospective and retrospective effectiveness tests on the Foreign-exchange risk aforementioned instruments were conducted by using the linear regression method, and the results obtained The Group constantly monitors the currency risk confirmed that the hedging strategy adopted has associated with transactions denominated in foreign proved suited to the Company's needs. Consequently, currencies, primarily by seeking to hedge costs in it was not deemed necessary to recognize any foreign currencies to the greatest possible extent. Since allocation for fair value measurement in the income operating activities, like ship prices, are primarily statement. denominated in U.S. dollars, for the management there is no significant exposure arising from possible fluctuations in the euro/dollar exchange rate, and the 29. Information on financial risk impact would only be visible at the level of individual volumes and not of profit or loss. As disclosed in note 2, Risk management, the d'Amico Group is exposed to some financial risks associated with In addition to the U.S. dollar, the Group had exposures to its operations. This section provides qualitative and Japanese yen, for which foreign- exchange risk does not quantitative disclosure on the effect that those risks may correspond to equivalent fixed assets. For these items, have on the Group. relating to financial exposures and hedging instruments, a five percentage point change in the EUR/JPY Market risk exchange rate as at the end of 2013 would have resulted in an impact on the income statement, and thus on Market risk is the risk that the value of financial financial position, of approximately a positive Euro 6 instruments may fluctuate as a result of changes in million/negative Euro 10 million. market prices. The Group's investment portfolio is therefore susceptible to market price risk deriving from Interest-rate risk uncertainties regarding future prices. The Group is exposed to interest-rate risk deriving from The Group typically employs derivative instruments the fact that interest on its lines of credit and bank known as "forward freight agreements" or "FFAs" (the deposits accrues at variable rates. To reduce the risk to "paper market") to hedge market fluctuations (the the minimum, the Group entered into numerous "physical market"), as limited to certain voyages by dry- interest rate swaps to hedge the loans entered into. For cargo vessels. Management constantly monitors open this reason, a change in interest rates of 100 basis points positions in such instruments. would have resulted in an increase/decrease in net financial charges of an insignificant amount (around In some cases, the Group enters into bunker-hedging or Euro 400 thousand). fuel-swap contracts to fix the price of fuel with the aim of mitigating the effect of fluctuations in the price of the fuel Credit risk used by vessels (known as "bunker fuel"). For information purposes, we specify that a decrease of 10% in bunker The Group is exposed to credit risk relating to possible fuel prices on consumption for the year would have had default by its counterparties, primarily clients. As is a positive impact of approximately Euro 600 thousand on common knowledge, shipping does not present the consolidated income statement, while an equivalent particular risks, given that charters are normally paid for increase would not have had a substantial impact. in advance. The marginal portion relating to short-term accounts receivable for demurrage or various charter The Company uses part of its financial resources to expenses is extraneous to this concept and is constantly invest in current financial assets exposed to the risk of monitored in order to ensure that it is properly collected. fluctuations in the market prices of securities. A 5% All trade receivables are thoroughly analyzed and, in fluctuation in market price at the end of the year would some cases, subject to impairment. At the end of 2014, have entailed a change in financial items and profit or a total of approximately Euro 8 million had been loss of approximately Euro 5 million. A 5% fluctuation in provisioned to cover the accounts receivable presented the market prices of real-estate investments would have in the financial statements. The Group also holds resulted in an impact of approximately Euro 2 million on considerable cash deposits with leading, highly rated equity reserves and other comprehensive income. counterparties, and no credit risk is thus foreseeable.
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Liquidity risk second levels of the hierarchy described above. In further detail, it should be noted that available-for-sale The Group is exposed to liquidity risk arising from the assets and held-for-trading assets are measured possible mismatch between cash requirements, according to the first and second levels depending on principally to purchase vessels, and credit facility the type of market on which they are traded, whereas repayments and cash flows in the course of current the fair values of derivatives have been determined operations. with the aid of the pertinent financial institutions. The management constantly monitors expected future needs and at the reporting date believes that the currently available funds and major lines of credit, along 31. Related-party transactions with the cash provided by operating activities, will allow the Group to satisfy its requirements from investing Costs and revenue associated with transactions activities and working capital needs and discharge its between companies within the scope of consolidation obligations to repay its debts at their natural due dates. are naturally eliminated as part of the consolidation Amounts due to banks and other lenders set to come procedures. Such dealings, which are governed by due beyond five years came to Euro 148 million. In this contracts subject to arm's-length conditions, regard, reference should be made to Note 21, which considering the quality of the services rendered, are presents full information concerning loans, and Note 30 conducted in the mutual interest of the parties and are concerning the Group's commitments. necessary to the Company's management and organization, as well as functionally associated with the Fair-value risk income generated by the Company. For “related party” and “transactions with related parties,” reference is to be The management believes that the fair values of made to the definitions presented in IAS 24 revised – financial assets and liabilities do not diverge significantly Related Party Disclosures. There were no material from their carrying amounts as at the reporting date. related-party items deserving of mention in 2014 other than those mentioned above. 30. Classification of financial instruments 32. Guarantees, commitments and contingencies Financial assets and liabilities measured at fair value are classified into the three hierarchical levels described As at 31 December 2014, the Group was exposed with below according to the relevance of the information respect not only to the items payable presented in the (inputs) used in determining their fair values. In further financial statements, but also contracts or obligations of detail: a financial nature assumed over the years. The following • Level 1: This level includes financial assets and is an account of the amounts concerned, broken down liabilities the fair values of which are determined by category. according to unmodified prices quoted on active markets for similar assets or liabilities; Investment commitments • Level 2: This level includes financial assets and liabilities the fair values of which are determined on As at 31 December 2014, the Group's investment the basis of inputs other than the quoted prices commitments stood at Euro 497 million and related to used in level 1, but that may be observed directly or construction contracts in force for various vessels indirectly on the market for such assets and liabilities; (amounting to a value of USD 604 million). Specifically, • Level 3: This level includes financial assets and these vessels are 9 tankers (four 40,000-DWT units and liabilities the fair values of which are determined on five 50,000-DWT units) with deliveries scheduled for the basis of non-observable market data. 2015 and 2017 and the construction of 19 dry-cargo ships (two Minicape units, nine Handysize units and The Group's financial assets and financial liabilities are eight Supramax units), with deliveries scheduled in the measured at fair value according to the first and next three years.
2014 Annual Report | 85 The following table presents the amounts broken down by due date.
(Thousands of euro) As at 31 December 2014 As at 31 December 2013R As at 1 January 2013R Up to one year 264,766,371 204,544,286 28,508,257 From one to five years 232,720,426 360,170,041 257,330,771 Beyond five years 0 00 TOTALE 497,486,797 564,714,327 285,839,028
In addition to the items presented in the table, the Parent Company’s commitments also include an additional Euro 3.2 million in commitments ("on call") associated with subscription of additional units of the Sator private equity fund.
Operating leases – chartered-in vessels
At the end of the year, the Group's commitments for vessel operating charters came to Euro 482.7 million (equal to USD 586 million) and also proportionally included the commitments relating to companies consolidated according to the proportional method. The following is a breakdown by expiration date:
(Thousands of euro) As at 31 December 2014 As at 31 December 2013R As at 1 January 2013R Up to one year 155,673,073 156,328,068 115,206,157 From one to five years 224,766,081 208,309,466 256,224,071 Beyond five years 102,294,399 45,344,348 127,481,605 TOTALE 482,733,553 409,981,882 498,911,833
Other operating leases
Other operating leases primarily comprise office lease contracts in the amount of approximately Euro 7 million.
(Thousands of euro) As at 31 December 2014 As at 31 December 2013R As at 1 January 2013R Up to one year 2,352,182 1,167,901 1,130,275 From one to five years 5,756,107 3,075,158 2,733,429 Beyond five years 2,898,017 3,261,386 1,344,135 TOTALE 11,006,306 7,504,445 5,207,839
Ongoing disputes Tonnage tax deferred taxation
The Group is currently involved in a number of ongoing According to the Irish tonnage tax regime, to which the commercial disputes concerning both owned and Group's shipping companies resident in Ireland have chartered vessels. Most current disputes relate to cargo been admitted, if vessels are sold and not replaced contamination claims. In addition, there are some within the specified time limit or the Company fails to collision claims and disputes relating to time-charter continue to comply with the requirements to remain contracts. Disputes are mostly covered by insurance within the regime, the tax authorities may seek to provided by P&I Club (a mutual ship-owners club). The recover the taxes owed under the ordinary regime. No Group therefore believes that its financial exposure will provision has been made for such circumstances, be limited to the value of the appropriate insurance inasmuch as no liability is reasonably expected to arise policy deductibles. in this connection.
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33. List of companies belonging to the d’Amico Società di Navigazione Group
The scope of consolidated remained essentially consolidation, along with the following information for unchanged compared to the previous year, except for each company: the interest held directly and/or the inclusion of DACC Maritime Limited and Eco Tankers indirectly by d’Amico Società di Navigazione S.p.A, the Limited. The table below presents the complete list of consolidation method adopted, registered office and Group companies included within the scope of share capital.
Scope of consolidation - 2014
Company name Consolidation City or Share capital % interest % interest method country in Euro held by Parent held by Company minorities d'Amico Shipping Italia SpA (a) Line-by-line Palermo 15,000,000 100.0000 0.0000 d'Amico International S.a. (a) Line-by-line Luxembourg 3,385,718 99.9998 0.0002 Cogema S.A.M. (b) Line-by-line Monte Carlo 150,000 95.9998 4.0002 Comarfin S.A.M. (b) Line-by-line Monte Carlo 300,000 99.6998 0.3002 d’Amico Dry Limited (b) Line-by-line Ireland 79,689 99.9998 0.0002 d’Amico Finance Limited (b) Line-by-line Ireland 98,015 99.9998 0.0002 d’Amico Shipping Singapore Pte Ltd (b) Line-by-line Singapore 62,274 99.9998 0.0002 d’Amico Shipping UK Ltd (b) Line-by-line England 51,354 99.9998 0.0002 Hanford Investments Inc. (b) Line-by-line Liberia 1,076 94.9998 5.0002 Saint Andrew Estates Ltd (c) Line-by-line Liberia 530 94.9998 5.0002 Ishima Pte Limited (b) Line-by-line Singapore 622,743 99.9998 0.0002 Global Maritime Supplies Pte.Ltd (n) Line-by-line Singapore 62,274 99.9998 0.0002 Cambiaso e Risso Asia Pte.Ltd (n) Line-by-line Singapore 129,463 49.9999 50.0001 Rudder S.A.M. (b) Line-by-line Monte Carlo 150,000 84.9998 15.0002 Rudder Pte Ltd (d) Line-by-line Singapore 124,549 84.9998 15.0002 Rudder Argentina SA (d) Line-by-line Argentina 9,732 76.4998 23.5002 Anglo Canadian Shipping Co. Ltd (b) Line-by-line Canada 640,048 99.9998 0.0002 ACGI Shipping Inc. (e) Line-by-line Canada 1,095,889 99.9998 0.0002 ACGI Shipping Singapore Pte Ltd (n) Line-by-line Singapore 6,227 99.9998 0.0002 Saemar S.a. (b) Line-by-line Spain 72,120 99.8298 0.1702 Medbulk Maritime Limited (f) Line-by-line Ireland 85,659 99.8298 0.1702 d'Amico Dry Maroc Sarl (b) Line-by-line Morocco 7,211 69.9999 30.0001 d'Amico International Shipping SA (b) Line-by-line Luxembourg 123,507,048 59.1691 40.8309 Glenda International Shipping Ltd (g) Proportional Ireland 165 29.5845 70.4155 d'Amico Tankers Ltd (g) Line-by-line Ireland 100,000 59.1691 40.8309 d'Amico Tankers Monaco sam (h) Line-by-line Monte Carlo 150,000 59,0507 40,9493 d'Amico Tankers UK Ltd (h) Line-by-line UK 41,183 59.1691 40.8309 DM Shipping Ltd (h) Equity Ireland 82,366 30.1762 69.8238 Glenda International Management Ltd (h) Line-by-line Ireland 2 59.1691 40.8309 High Pool Tankers Limited (h) Proportional Ireland 2 59.1691 40.8309 VPC Logistic Ltd (h) Line-by-line UK 41,183 59.1691 40.8309 Eco Tankers Limited (h) Equity Malta 41,183 19.5258 80.4742 Compagnia Generale Telemar S.p.A. (a) Line-by-line Rome 7,373,675 61.6915 38.3085
2014 Annual Report | 87 Company name Consolidation City or Share capital % interest % interest method country in Euro held by Parent held by Company minorities Telemar UK Limited (i) Line-by-line England 320,965 61.6915 38.3085 Adci International LLC (i) Line-by-line USA 206,326 56.2472 43.7528 Telemar Usa LLC (i) Line-by-line USA 206,317 43.5665 56.4335 Telemar AB (i) Line-by-line Sweden 628,181 61.6915 38.3085 Telemar Scandinavia AB (m) Line-by-line Sweden 25,551 61.6915 38.3085 Iridium Nordic Ab (m) Line-by-line Sweden 10,646 61.6915 38.3085 Telemar OY AB (m) Line-by-line Finland 16,819 61.6915 38.3085 Telemar Gmbh (i) Line-by-line Germany 28,409 54.2885 45.7115 Telemar Shanghai Ltd (i) Line-by-line China 282,149 49.3532 50.6468 Telemar Norge (i) Line-by-line Norway 155,172 61.6915 38.3085 Telemar Singapore Pte Ltd (i) Line-by-line Singapore 114,028 61.6915 38.3085 Funkelectronics (i) Line-by-line Germany 25,000 61.6915 38.3085 Telemar Hong Kong (i) Line-by-line Hong Kong 1,062 61.6915 38.3085 d'Amico Shipping USA Ltd (b) Line-by-line USA 82 99.9998 0.0002 DACC Maritime Limited (b) Equity Ireland 82,366 50.9999 49.0001 Domas Immobiliare srl (a) Line-by-line Imperia 258,228 75.0000 25.0000 d'Amico Partecipazioni Finanziarie srl (a) Line-by-line Rome 10,000 55.5500 44.4500 Mida Maritime Company Limited (a) Equity Ireland 68,856 51.0000 49.0000
(a) Controlled directly (g) Controlled through d’Amico International Shipping (b) Controlled through d’Amico International (h) Controlled through d’Amico Tankers (c) Controlled through Hanford (i) Controlled through Compagnia Generale Telemar (d) Controlled through Rudder (l) Controlled through Telemar UK (e) Controlled through Anglo Canadian Shipping Co. Ltd (m) Controlled through Telemar AB (f) Controlled through Saemar (n) Controlled through Ishima
Equity investments in joint ventures • a 33% equity interest, with 50% voting rights, in Eco Tankers Limited (Malta), a joint venture with the The Group holds the following equity investments in shipping industry investment firm Venice Shipping & joint ventures: Logistics. • a 51% equity interest, with equivalent voting rights, • a 51% equity interest, with equivalent voting rights, in DACC Maritime Limited, a joint venture with in Mida Maritime Limited, a joint venture with Mitsui Coeclerici SpA, with headquarters in Ireland. & Co., with headquarters in Ireland. • a 51% equity interest, with 50% voting rights, in DM In 2014 and 2013 no changes were recorded in the Shipping Ltd, a joint venture with Mitsubishi Group, shares of ownership held by the Group or in the related with headquarters in Ireland. voting rights in said joint ventures.
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Joint ventures have been consolidated according to the expressed in thousands of euro: equity method based on the following amounts
Thousands of euro Revenue Net profit / (loss) Total assets Shareholders’ equity As at 31 December 2014 DM Shipping Ltd 8,090 6,122 51,441 (3,564) Eco Tankers Limited 2,899 501 26,023 10,677 Mida Maritime Limited 3,505 (1,530) 1,595 (50) DACC Maritime Limited 0 (26) 22,014 13
As at ended 31 December 2013 DM Shipping Ltd 8,480 12,621 46,290 (9,036) Eco Tankers Limited 0 (16) 6,509 6,799 Mida Maritime Limited 3,566 883 21,657 1,350 DACC Maritime Limited 0 (36) 8,328 37
The consolidated financial statements also include a Shipping Ltd, a joint venture with Glencore Group, with joint operation relating to a 50% equity interest, with headquarters in Ireland. equivalent voting rights, in Glenda International
34. Subsequent events
For the disclosures required by Article 2428 of the Italian please refer to the report on operations. Civil Code concerning significant events after year-end,
2014 Annual Report | 89
d’Amico Società di Navigazione
Statutory Financial Statements As at and for the year ended 31 December 2014
2014 Annual Report | 91 d’Amico Società di Navigazione
Separate income statement
(Euro) Notes 2014 2013 Revenue 4 10,821,525 9,709,897 Direct operating costs 5 (1,493,505) (1,142,934) General and administrative costs 6 (9,375,554) (21,326,963) GROSS OPERATING PROFIT / (LOSS) (47,534) (12,760,000) Depreciation and amortization 9/10 (2,749,041) (2,581,359) OPERATING PROFIT / (LOSS) (2,796,575) (15,341,359) Dividends 7 17,747,177 23,100,684 Other financial income 7 3,181,243 1,886,027 Financial charges 7 (1,947,893) (3,688,639) PROFIT / (LOSS) BEFORE TAXES 16,183,952 5,956,713 Income taxes 8 102,578 280,289 NET PROFIT / (LOSS) 16,286,530 6,237,002
Statement of other comprehensive income
(Euro) 2014 2013 NET PROFIT / (LOSS) 16,286,530 6,237,002 Other components of comprehensive income not to be recycled to the income statement in subsequent periods Actuarial gain or loss (IAS 19) 155,048 (116) Tax effects of expenses/income recognized in equity (42,638) 32 Other components of comprehensive income to be recycled to the income statement in subsequent periods Effective part of gains/(losses) on fair value accounting for investments (available for sale) 4,152,656 12,756,762 Effective part of gains/(losses) on cash flow hedges (1,766,462) 1,474,055 Tax effects of expenses/income recognized in equity (656,204) (2,605,470) COMPREHENSIVE INCOME / (LOSS) 18,128,930 17,862,264
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Statement of financial position
(Euro) Notes As at 31 December 2014 As at 31 December 2013 ASSETS Non-current assets Intangible assets 9 284,241 310,354 Tangible assets 10 66,419,303 67,045,111 Long-term investments 11 193,026,350 182,840,871 Other non-current financial assets 12 11,570,884 15,444,000 Other non-current assets 13 4,500,620 614,358 TOTAL NON-CURRENT ASSETS 275,801,398 266,254,694
Current assets Short-term receivables and other current assets 14 7,399,343 5,938,997 Other current financial assets 15 2,913,273 1,328,338 Cash and cash equivalents 16 20,124,751 6,007,040 TOTAL CURRENT ASSETS 30,437,367 13,274,375 TOTAL ASSETS 306,238,765 279,529,069
LIABILITIES Shareholders’ equity Share capital 25,000,000 25,000,000 Earnings reserves 182,775,110 191,538,108 Other reserves 8,711,284 6,868,884 Net profit / (loss) 16,286,530 6,237,002 TOTAL SHAREHOLDERS' EQUITY 17 232,772,924 229,643,994
Non-current liabilities Provisions for risks and charges 18 661,186 661,186 Banks and other lenders 22 42,272,705 31,518,247 Provisions for employee benefits 19 2,497,654 2,269,875 Deferred-tax liabilities 20 3,334,914 2,738,650 Other non-current financial liabilities 21 4,438,760 2,672,298 TOTAL NON-CURRENT LIABILITIES 53,205,219 39,860,256
Current liabilities Banks and other lenders 22 15,058,939 1,791,498 Short-term payables and other current liabilities 23 5,201,683 8,233,321 TOTAL CURRENT LIABILITIES 20,260,622 10,024,819 TOTAL SHAREHOLDERS' EQUITY AND LIABILITIES 306,238,765 279,529,069
2014 Annual Report | 93 Statement of cash flows
(Euro) 2014 2013 NET PROFIT FOR THE PERIOD 16,286,530 6,237,002 Depreciation and amortization 2,749,041 2,581,359 Current, deferred and pass-through taxation (7,772,601) 4,796,724 Financial charges / (income) (16,351,637) (21,748,402) Changes in the fair value of financial assets (59,000) (174,587) Other non-cash items (1,852,007) 1,293,048 NET CASH PROVIDED BY / (USED IN) OPERATING ACTIVITIES BEFORE CHANGES IN WORKING CAPITAL (6,999,674) (7,014,856) Change in amounts receivable (1,460,346) (3,159,070) Change in amounts payable and provisions for Italian termination indemnity 711,827 (513,181) Taxes paid 0 (1,305,009) Interest collected / (paid) (1,398,328) (1,352,282) NET CASH PROVIDED BY / (USED IN) OPERATING ACTIVITIES (9,146,521) (13,344,398) Acquisition of intangible assets (204,187) (321,696) Acquisition of tangible assets (1,892,933) (3,530,054) Acquisition of fixed assets and financial assets (19,335,226) (3,536,958) Increase in other financial assets 2,886,616 (285,000) Sale/disposal of fixed assets and financial assets 15,053,136 16,311,714 Dividends collected 17,747,177 23,100,684 NET CASH PROVIDED BY / (USED IN) INVESTING ACTIVITIES 14,254,583 31,738,690 Loans applied for 20,000,000 0 Bank loan repayments (1,791,498) (1,692,743) Dividends paid (15,000,000) (15,000,000) NET CASH PROVIDED BY / (USED IN) FINANCING ACTIVITIES 3,208,502 (16,692,743) NET CASH PROVIDED / (USED) 8,316,564 1,701,549 Cash and cash equivalents at the beginning of the year 6,007,040 4,305,491 Change in bank overdrafts 5,801,147 0 CASH AND CASH EQUIVALENTS AT THE END OF THE YEAR 20,124,751 6,007,040
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Statement of changes in shareholders’ equity
(Euro) Share Retained Other Net profit / Total capital earnings reserves (loss) BALANCE AS AT 31 DECEMBER 2012 25,000,000 154,876,424 (4,756,378) 51,661,684 226,781,730 Dividends (15,000,000) (15,000,000) Allocation of 2012 profit 36,661,684 (36,661,684) 0 Comprehensive income 11,625,262 6,237,002 17,862,264 BALANCE AS AT 31 DECEMBER 2013 25,000,000 191,538,108 6,868,884 6,237,002 229,643,994
(Euro) Share Retained Other Net profit / Total capital earnings reserves (loss) BALANCE AS AT 31 DECEMBER 2013 25,000,000 191,538,108 6,868,884 6,237,002 229,643,994 Dividends (8,762,998) (6,237,002) (15,000,000) Comprehensive income 1,842,400 16,286,530 18,128,930 BALANCE AS AT 31 DECEMBER 2014 25,000,000 182,775,110 8,711,284 16,286,530 232,772,924
Paolo d’Amico, Chairman Cesare d’Amico, Chief Executive Officer
2014 Annual Report | 95 Notes Introduction departures pursuant to IAS 1 revised, paragraph 19. d’Amico Società di Navigazione S.p.A. is an Italian joint- The Company has access to adequate resources suited stock company with registered office in Palermo, Italy to ensuring that it may continue to operate in the near and head office in Rome, Italy. It holds equity future. The financial statements have therefore been investments in companies responsible for the business prepared on a going-concern basis, by applying the sectors in which the d'Amico Group operates both historical cost method, with the exception of those line directly and indirectly through sub-holding companies. items that are measured at fair value in accordance with IFRSs. In application of the option provided for in Legislative Decree 38 of 28 February 2005, effective 2010, the The financial statements as at and for the year ended 31 Company's financial statements have been prepared in December 2014 were approved on 31 March 2014 by accordance with the IAS/IFRS international accounting the Board of Directors, which authorized their principles (hereinafter “IFRSs”) endorsed by the publication. European Commission, supplemented by the associated interpretations (Standing Interpretations The financial statements have been presented in euro, Committee - SIC and International Financial Reporting the Company's functional currency. The income Interpretations Committee – IFRIC) issued by the statement, statement of comprehensive income, International Accounting Standard Board (IASB) and in statement of financial position, statement of cash flows effect at year-end. The IFRS accounting principles used and statement of changes in shareholders' equity have to prepare the financial statements presented have been presented in euro, whereas the figures presented been supplemented by the IFRIC interpretations in force in the notes are in euro, unless otherwise indicated. at the date of preparation of the financial statements. The following is a discussion of accounting policies, applied in a uniform manner to all years presented and 1. Accounting policies to the opening IFRS financial position as at 1 January 2009. Basis of presentation The financial statements comprise the income statement, statement of comprehensive income, statement of financial position, statement of cash flows, Foreign currencies statement of changes in shareholders' equity and the Transactions in foreign currencies are initially recognized notes. In the income statement, costs have been at the spot exchange rate on the transaction date. classified by nature. All revenue and cost items Monetary assets and liabilities denominated in foreign recognized during a given year are presented in two currencies are converted into the functional currency at separate statements, the income statement and the spot exchange rate on the reporting date. Any statement of comprehensive income. The presentation resulting exchange differences are recognized through scheme adopted for the statement of financial position the income statement. Non-monetary items measured is based on a distinction between current and non- at their historical cost in a foreign currency are current assets and liabilities. Current assets, which converted using the exchange rate in force on the date include cash and cash equivalents, are those intended of recognition of the transaction. Non-monetary items to be realized, disposed of or used in the Company's measured at their fair values in foreign currencies are normal operating cycle or the 12 months after year-end; converted using the exchange rate on the date said current liabilities are those expected to be extinguished values are calculated. during the normal operating cycle or the 12 months after year-end. The indirect method has been used to prepare the statement of cash flows. Dividends and other income from equity IFRSs have been applied in accordance with the indications provided in the Framework for the investments Preparation and Presentation of Financial Statements Dividends collected from partecipated companies are and there were no critical situations requiring the use of recognized in the income statement when entitlement
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to collect them arises. Dividends payable are reported extent it is believed likely that there will be taxable as a movement in shareholders' equity in the period in income equal to at least the amount of the differences which they are approved by the general meeting of the to be reversed during the years in which the temporary shareholders. differences concerned are to be reversed. They are charged or credited in the income statement, unless they relate to items charged or credited directly to other comprehensive income, in which case the deferred tax Revenue recognition charge is also recognized in other comprehensive income. Service revenue is recognized in reference to the contractually accrued consideration.
Intangible assets Operating costs and general and Other purchased or internally generated intangible assets are recognized at cost, including directly administrative costs attributable auxiliary costs required to render the assets Operating costs and general and administrative costs available for use, provided that it is likely that the use of are recognized in the income statement as incurred. the assets will yield future economic benefits and the cost of the assets may be determined reliably. Such assets are measured at purchase or production cost and amortized on a straight-line basis according to their Financial income and charges estimated useful lives, which are reviewed on at least an annual basis. Any changes are applied prospectively. Financial income and charges include interest income Amortization begins when an asset becomes available on investments and interest expenses on the for use. The useful life considered for such assets, almost borrowings or account overdrafts used, realized and all of which relate to software, is three years. unrealized exchange differences associated with transactions undertaken in currencies other than the functional currency and other financial income and charges. Interest is recognized in the income statement Tangible assets on an accruals basis according to the effective interest Buildings and other tangible assets method. Owned buildings and other tangible assets are recognized at acquisition cost or fair value and depreciated on a straight-line basis according to their Taxation residual useful lives at the following rates: Taxes are calculated according to the taxable profit for the year by applying the tax rates in force when the Years financial statements are prepared. Tax charges are Owned properties 33 determined on the basis of the net profit or loss for the Furniture and fittings 8.5 year, adjusted to reflect certain non-exempt or non- Electronic machines 4 deductible elements, and are calculated according to Motor vehicles 5 the tax rate in effect when the financial statements are Leasehold improvements Term of contract (max. of 5) prepared, taking account of any prior-year losses.
Deferred taxes are calculated on the basis of the Tangible assets may also include costs or advances temporary differences that arise between the value of associated with the acquisition of assets that are the assets and liabilities included in the Company's commissioned after the reporting date. The accounting situation and the value attributed to those depreciation of such assets begins to be calculated assets and liabilities for tax purposes. Deferred tax assets when the assets are commissioned. and liabilities are measured by applying the tax rate in effect when the temporary differences are expected to The estimates of useful life and residual value are be reversed. Deferred tax assets are recognized to the periodically revised.
2014 Annual Report | 97 Depreciation ends at the date of disposal or instruments are measured at their fair values when the reclassification of an asset as held for sale. If an asset Company becomes a party to the contractual provisions subject to depreciation consists of separately of the instrument (the trade date). Liabilities are identifiable elements the useful lives of which differ classified in accordance with the substance of the significantly from that of the other parts of the asset, contractual arrangements from which they arise and the depreciation is calculated separately for each of the relevant definitions of a financial liability. For contracts parts of the asset in application of the component negotiated at market price, the fair value of the approach principle. instrument is equivalent to the purchase cost (nominal value of the transaction).
The external costs and income from transactions directly Real-estate investments attributable to negotiation, such as intermediation costs, are included during initial recognition of the instrument, Real properties held with the aim of earning rent or unless measured at fair value. Financial assets are benefiting from appreciation in value, or for measured at fair value or amortized cost, depending on indeterminate future use, are classified as investment the characteristics of each instrument. Financial liabilities properties. They are measured at purchase or are measured on the basis of their amortized cost. Only construction cost, plus any auxiliary charges, less derivative instruments are measured at fair value. accumulated depreciation and any impairment losses. "Fair value" is the amount for which an asset could be exchanged, or a liability discharged, between knowledgeable, willing parties in an arm's-length Leases transaction. Measurement on the basis of amortized Lease contracts are classified as operating or finance cost involves recognizing the asset or liability at the leases at the commencement of the contractual period. value initially measured, deducting any redemption of Lease classifications are not modified after they have principal, increased or decreased by overall been determined. Classification depends on estimates depreciation, applying the effective interest method on based on contractual conditions. In such case, the any difference between the initial value and value at "substance over form" approach is adopted. maturity. Such amounts may nonetheless be adjusted to account for impairment or irrecoverability. The Assets acquired under finance leases, where substantially effective interest rate is the rate that reduces at source all the risks and rewards of ownership are transferred to the future contractual cash flows to the net amount of the Company, are initially recognized as assets by the the financial asset or liability. The calculation also Company at the lower of their fair values or the present includes the external expenses and income directly value of the minimum payments due, including any sum assigned during initial recognition of the financial to be paid to the lessor to exercise the purchase option. instrument. The corresponding liability is recognized among financial liabilities. After initial recognition, such assets are Financial assets and liabilities measured at fair value are measured according to the applicable accounting classified into the three hierarchical levels described principles. below according to the relevance of the information (inputs) used in determining their fair values. In further Operating leases are not recognized in the Company's detail: statement of financial position. • Level 1: financial assets and liabilities the fair values of which are determined according to unmodified prices quoted on active markets for similar assets or liabilities; Financial instruments • Level 2: financial assets and liabilities the fair values of which are determined on the basis of inputs other Financial instruments are contracts that give rise to than the quoted prices used in level 1, but that may financial assets and liabilities or equity instruments of be observed directly or indirectly on the market; another entity, as defined in IAS 32 (Financial • Level 3: financial assets and liabilities the fair values Instruments: Presentation) and IAS 39 (Financial of which are determined on the basis of non- Instruments: Recognition and Measurement). Such observable market data.
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The accounting policies adopted for specific assets and Financial assets designated at fair value through the liabilities are presented below. income statement
Equity investments and other financial assets Held-for-trading financial assets are measured at fair value. The fair value of such instruments is determined by The Company classifies its equity investments as reference to their market value (bid price) on the reporting investments in: date: the fair value of unlisted instruments is determined • “subsidiaries” for which the investor has the power to through the use of commonly applied financial valuation determine financial and operational decisions and techniques. Changes in the fair values of instruments obtain the benefits thereof; classified to this category are recognized immediately in • “associates” over which the investor exercises the income statement. significant influence (which is assumed to be the case when the investor may cast at least 20% of the Trade and other short-term receivables votes in the ordinary general meeting). The item also includes cases of entities subject to joint control Trade receivables are initially recognized at their face (joint ventures); and value (which represents the "fair value" of the • “other companies” for which none of the foregoing transaction) and are subsequently measured at requirements has been met. amortized cost, net of impairment losses recognized in the income statement where there is objective evidence Equity investments intended for sale, as well as those that an asset has become impaired. Impairment is acquired for the sole purpose of being disposed of calculated as the difference between the carrying within the following twelve months, are classified amount and present value of estimated future cash separately among assets held for sale. flows, discounted at the effective interest rate. In the case of short-term trade receivables in particular, given Subsidiaries, joint ventures, associates and other the brief period of time at issue, measurement at companies, with the exception of those classified as amortized cost is equivalent to nominal value, less held for sale, are measured at purchase or incorporation impairment losses. Impairment losses are recognized cost. Said cost is retained in subsequent financial when management consider the full recovery of a statements, unless the investment is subject to receivable to be in doubt. If management consider the impairment or recovery following a change in economic amounts non-recoverable, then they are written off in purpose or a capital transaction. Equity investments their entirety. intended for sale are measured at the lesser of cost and fair value less costs to sell. Interests in joint operations Held-to-maturity investments are recognised in the investor’s financial statements by posting the elements of the statement of financial Such assets, which are initially recognized at their fair position, cash flows and income statement arising from value and subsequently measured at amortized cost, the participation in the agreement. include non-derivative instruments without pre- determined maturities that the Company has the In further detail: intention and ability to hold to maturity. Instruments with contractual maturities falling the following twelve The Company classifiesfinancial assets to the months are classified among current assets. If there is following categories: objective evidence of indicators of impairment, the value of the assets is reduced so that it is equal to the • assets designated at fair value through the income discounted value of future cash flows: impairment losses statement; identified through impairment tests are recognized in • loans and receivables; the income statement. • held-to-maturity investments; and If the grounds for previous impairment losses cease to • available-for-sale financial assets. apply in subsequent periods, the value of the assets is recovered up to the amount that would have resulted from the application of amortized cost if no impairment had been recognized.
2014 Annual Report | 99 Available-for-sale financial assets value, or at cost, plus any interest charges, depending on their nature. Equity investments, classified as available-for-sale assets from an accounting standpoint, are recognized among Banks and other lenders non-current assets under the item "Long-term investments." This category includes financial assets Bank borrowings relating to the financing of tangible other than derivative instruments specifically assets and overdrafts are recognized according to the designated as classified to that item or not classified to amounts received, net of transaction costs, and are any of the previous items. Such assets are measured at subsequently measured at amortized cost according to fair value, which is determined in reference to market the effective interest rate method. The difference prices at the annual or interim reporting date, or between the loan proceeds and nominal value is through financial valuation techniques and models, recognized in the income statement over the term of with changes in value recognized through a specific the loan. equity reserve (the "reserve for available-for-sale assets"). The above reserve is reversed to the income statement Trade and other payables only when the financial asset is effectively disposed of, or, in the event of decreases, when it is determined that Trade and other payables are measured at amortized a significant, prolonged decrease in value already cost, which is generally equivalent to face value, recognized in equity cannot be recovered. Classification considering the characteristics and maturity of such as current or non-current depends on management's payables. intentions and the effective marketability of the securities: those expected to be realized within the Derivative instruments following twelve months are recognized among current assets. Derivative instruments are used to hedge exposure to If there is objective evidence of indicators of interest rate risk (interest rate swaps). Pursuant to IAS 39, impairment, the value of the assets is reduced so that it derivative instruments qualify for hedge accounting is equal to the discounted value of future cash flows: only when at the inception of the hedge there is a decreases in value previously recognized in the equity formal designation and documentation of the hedging reserve are reversed to the income statement. Previous relationship, it is expected that the hedge will be highly impairment losses are recovered if the circumstances effective, its effectiveness may be measured reliably and that had resulted in their recognition cease to apply, but it will remain highly effective throughout the financial only in cases of financial instruments not representing reporting periods for which the hedge is designated. In equity. accordance with IAS 39, all derivative instruments are measured at fair value. When derivative instruments The fair value of a financial instrument is determined qualify for hedge accounting, the following accounting according to market price quotations or, where such treatment applies. quotations are not available, estimated according to appropriate valuation techniques that make use of up- Cash flow hedges to-date financial variables employed by market operators, while also taking account of the prices of These are derivatives aimed at hedging exposure to recent transactions involving similar financial fluctuations in future cash flows arising in particular instruments, where possible. from risks relating to changing interest rates on loans and commitments in currencies other than the euro. Cash and cash equivalents Changes in the fair value of the effective portion of the hedge are recognized directly in equity and presented Cash and cash equivalents include cash in hand, current in other comprehensive income, whereas the ineffective accounts and demand deposits held with banks, as well portion is recognized in the income statement. Hedge as other short-term, highly liquid investments readily effectiveness, i.e. the ability of a hedge to adequately convertible to a known amount of cash within six offset fluctuations caused by the hedged risk, is months, and are subject to an insignificant risk of periodically tested, in particular by analyzing the changes in value. Cash and cash equivalents are correlation between the fair value of the cash flows from measured at fair value, corresponding to their nominal the hedged item and hedging instrument.
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Fair value hedges Provisions for risks and charges Provisions for risks and charges are recognized to Hedging instruments fall within this category when account for costs and expenses the nature of which is used to hedge changes in the fair value of an asset or fixed and the existence of which is certain or probable, liability that are attributable to a specific risk. Changes but the amount or date of occurrence of which is not in value related both to the hedged item, in relation to known at the reporting date. Provisions for risks and changes caused by the underlying risk, and to the charges are recognized when the Company has a hedging instrument are recognized in the income present obligation as a result of a past event and it is statement. Any difference, representing the partial likely that the Company will be required to discharge ineffectiveness of the hedge, therefore corresponds to that obligation, the amount of which can be estimated the net financial effect. reliably. Provisions are allocated based on the Directors' best estimate of the costs required to meet the Changes in the fair value of derivatives that do not obligation at the reporting date, and are discounted qualify for hedge accounting treatment are recognized when the effect is significant. directly in the income statement.
Employee benefits Shareholders’ equity Share capital Liabilities relating to employee benefits paid in the course of service or thereafter in connection with defined-benefit Share capital consists of subscribed, paid-in capital. plans are calculated separately for each plan according to Costs closely correlated with the issuance of shares are actuarial hypotheses by estimating the amount of the classified as reductions in share capital where they future benefit that has accrued to employees in exchange consist of costs directly attributable to the capital for services rendered during the current and previous transaction, net of the deferred tax effect. years. That benefit is discounted to determine its present value, while any unrecognized past service costs and the fair value of any plan assets are subtracted from the liabilities. The calculation is performed by an independent actuary using the projected unit credit method. For this Significant aspects and material type of plan, the Company uses the equity option estimates by the management recognition method. As a result of that option, the In preparing the financial statements, d'Amico's liabilities posted in the financial statements are thus Directors are required to make assessments, estimates aligned with those deriving from the actuarial and assumptions that influence the application of measurement of said liabilities, with full and immediate accounting principles and the amounts of assets, recognition of actuarial gains and losses, in the period in liabilities, costs and revenue. Directors' decisions are which they arise, in the statement of comprehensive based on past experience and expectations of the income under “Revaluation of defined-benefit plans” and occurrence of future events and are therefore to be a specific equity reserve. Italian termination indemnity considered reasonable. However, it should be noted (hereinafter, also TFR), accrued as at 31 December 2006, that, since they are in fact estimates, actual results may falls under the definition of such plans. differ from the results presented in these financial statements. The process of preparing estimates involves In defined-contribution plans, the entity's obligation, the various business areas. Such estimates and which is limited to the payment of contributions to assumptions are revised regularly. Any effects deriving governmental organizations or a segregated body of from the revision of accounting estimates are accounted assets or legal entity (a "fund"), is determined according for in the period in which the revision is conducted and to the contributions owed. the associated subsequent periods.
It is believed that certain accounting principles are particularly significant to comprehension of the financial statements. In this respect, the following is an account
2014 Annual Report | 101 of the areas most extensively affected by such 2014, or after that according to the date of adoption in procedures, as well as of the assumptions employed by the EU. The new accounting principles must be applied management in the process of assessing the foregoing retroactively. line items, in accordance with the above-mentioned international accounting standards. The critical element IFRS 10 “Consolidated Financial Statements”. This inherent in such estimates is a result of the use of accounting principle establishes the rules for the assumptions and/or professional judgements preparation and presentation of consolidated financial concerning matters that are uncertain by nature. statements where an entity controls one or more other entities. The new accounting principle provides Income taxes – Taxes payable are calculated based on comprehensive guidelines on the application of the the Company's specific tax situation, determined on the principle of control, which governs the consolidation of basis of the law in force in the countries where the an entity. The Standard did not have a material impact Company operates. on the Company's financial statements.
Defined-benefit plans - The expenses and liabilities IFRS 11 “Joint Arrangements”. This accounting principle associated with such plans are calculated according to applies to all entities that jointly control an arrangement, estimates prepared by actuarial consultants who use a and replaced IAS 31 “Interests in Joint Ventures”. The combination of statistical and actuarial factors, including accounting treatment depends on the type of joint statistical data concerning previous years and arrangement, determined by considering the investor’s projections of future costs. Estimation components also rights and obligations. With the application of IFRS 11, include mortality and withdrawal rates, assumptions the accounting principle IAS 28 was amended and regarding the future discount rate trend, salary growth renamed “Investments in Associates and Joint Ventures”. rates and an analysis of the year-on-year change in In any event, this influenced several items which were healthcare costs. Such estimates may diverge materially previously recognised using the proportional method. from actual results due to the evolution of economic The Standard did not have a material impact on the and market conditions, increases/decreases in Company's financial statements. withdrawal rates and the length of participants' lives and changes in the effective costs of healthcare. IFRS 12 “Disclosure of Interests in Other Entities”. This accounting principle requires the disclosure of Leases - Lease contracts are classified as operating or information on the nature of investments in interests in finance leases at the commencement of the contractual subsidiaries, associates, joint arrangements and un- period and such classification is not modified thereafter. consolidated structured entities and on the related risks, Classification depends on estimates based on as well as on the effects of these interests on the contractual conditions. In such case, the "substance over financial statements. The Standard did not have a form" approach is adopted. material impact on the Company's financial statements.
Amendments to IFRS 10, 11 and 12 “Transition Guidance.” This document clarified that the date of first- New accounting principles time application of these three new standards (IFRS 10, 11 and 12) is the first day of the administrative period in Accounting principles, amendments and which IFRS 10 is adopted for the first time (for example, interpretations applicable from 1 January 2014 1 January 2014 for companies closing their accounts as at 31 December 2014). Entities that adopt IFRS 10 must The following is a brief description of the amendments, assess control on the date of first-time application. The improvements and interpretations applicable from 1 treatment of comparative data depends on this January 2014. The application of the above measurement. Just as for the standards it refers to, that amendments, where applicable, did not entail amendment had significant impact on the company. significant effects on these separate financial statements. IFRIC 21 - Levies clarifies when to recognise a liability for the payment of a levy where said liability falls under the Accounting principles IFRS 10, IFRS 11 and IFRS 12 take scope of application of IAS 37 Provisions, Contingent effect from accounting periods beginning on 1 January Liabilities and Contingent Assets. The interpretation
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provides guidance on identifying the obligating event Amendments to IAS 19 - Defined-Benefit Plans: that triggers the recognition of the liability for payment Employee Contributions. The amendment simplifies the of a levy. This interpretation, applicable on or after accounting treatment of several cases of contributions January 2014, did not have a material impact on the to defined-benefit plans by employees or third parties. Company's financial statements. No significant effects are expected for the Company. The Company will apply that standard starting on 1 Amendments to IAS 32 - Financial Instruments: January 2015. Presentation – Offsetting Financial Assets and Financial Liabilities. This clarifies the application of specific criteria Amendments to IAS 16 and IAS 38 - Property, Plant and for offsetting financial assets and liabilities, to be applied Equipment and Tangible Assets. The amendments clarify retroactively. The application of those amendments did that revenue-based methods are not appropriate for not entail any effects on the company’s separate calculating depreciation. financial statements. No significant effects are expected for the Company. The Company will apply that standard starting on 1 January Amendments to IAS 36 – Recoverable Amount 2016. Disclosures for Non-Financial Assets: disclosure of information concerning the recoverable amount of IFRS 15 – Revenue from Contracts with Customers: was impaired assets, if said value is based on the fair value issued by the IASB in May 2014 to bring together rules less costs of disposal, without any impact on these scattered in various standards and create a framework of financial statements. This amendment introduces basic principles to apply to all categories of transactions, several additional disclosures regarding fair value when including revenue, substantially requiring that impairment or recovery has occurred. The application companies recognise revenue at the time the control of of those amendments could result in more extensive the asset or service is transferred to customers, at an disclosure in the notes, in the event of impairment amount reflecting the expected consideration, in five based on the fair value less costs of disposal. phases. The approach also requires supplementary information on the nature, amount, timing and certainty Amendments to IAS 39 - Financial Instruments: of revenue and cash flows arising from contracts with Recognition and Measurement – Novation of customers. The standard will enter into force in January Derivatives and Continuation of Hedge Accounting: 2017, but early adoption is permitted. these amendments allow for the continuation of hedge accounting if a hedging derivative is novated for the IFRS 9 – Financial Instruments: was issued in July 2014 and purpose of clearing with a central counterparty should be applied retrospectively to years from 1 pursuant to laws or regulations, provided certain strict January 2018. The improvements introduced will criteria are met. The application of those amendments replace the rules for recognition and measurement of did not entail any significant effects on the company’s financial instruments contained in IAS 39. More separate financial statements. specifically, financial assets will be divided into two categories: those measured at amortised cost and those Other principles, amendments and interpretations measured at fair value. The first group will include applicable for the financial year starting on or after 1 financial assets whose contractual terms generate cash January 2014 are immaterial for the company. flows at specific dates that constitute only payment of principle and interest and whose business model Accounting principles, amendments and consists of holding these assets for the purpose of interpretations not yet in force realising the contractual cash flows. The second group will include all other financial assets (measurement at At the reporting date, the following accounting fair value). While the rules applied to financial liabilities principles and related interpretations, applicable to the are essentially equal to those set out in IAS 39, Group, had been issued but not yet in force, or not yet amendments to the approach have been introduced endorsed by the European Union. Therefore, they were regarding the classification to the income statement of not applicable to the preparation of the financial changes in the fair value of several debt instruments, statements as at 31 December 14. The following is an based on its credit risk, which means that changes in account of the main changes (excluding the the fair value of the liability will be broken down into the improvements) and their potential effects on the amount of the change attributable to the changes in financial statements: the credit risk of the liability – to be exported to the
2014 Annual Report | 103 statement of other comprehensive income – and the impact of the USD/EUR exchange rate. In relation to remainder of the change in the fair value of the liability, amounts invoiced in euro, the average exchange rate to be posted to the income statement. for 2014 (1.3285) was in line with that of the previous year (1.3281). For more details, please refer to table 27.
2. Risk management 5. Operating costs d’Amico Società di Navigazione S.p.A. is subject to the same type of risks of the other companies belonging to (Euro) 2014 2013 the Group of which it is the Parent Company, whether TOTAL 1,493,505 1,142,934 directly or indirectly through its subsidiaries. Accordingly, the reader is referred to note 26 below, as well as to the notes to the consolidated financial Operating costs refer to services received and directly statements. associated with the generation of revenue, such as crewing or ship management operations, which are partly outsourced to other Group companies. The 3. Capital increase is directly linked to the rise in revenue mentioned above. The objectives pursued by d’Amico Società di Navigazione S.p.A. in managing its capital are: • to safeguard the Company's ability to continue as a 6. General and administrative costs going concern, so that it may continue to provide returns for shareholders and benefits for other (Euro) 2014 2013 stakeholders; and Personnel costs 8,903,246 8,618,298 • to provide an adequate return for shareholders by Other general and operating on the spot/time-charter market, administrative costs 7,761,804 7,225,310 balancing its level of commercial risk. Taxes on a pass-through basis (7,670,023) 5,071,284 In addition to equity, the Company's capital structure Other 380,527 412,071 principally comprises various lines of credit and bank TOTALE 9,375,554 21,326,963 borrowings. The Company's capital structure is periodically reviewed and, where necessary, adjusted to Personnel costs, in line with the figure from the previous suit the Company's capital requirements, changes in year, comprise salaries, including pension costs and general economic conditions and industry risk accruals of end-of-service benefits for personnel in characteristics. In this respect, the Company monitors service at year-end. At the end of 2014, employed its capital situation continually. As an additional measure personnel totalled 72, two fewer than the previous year. of monitoring risk associated with its debt structure, the Company also monitors its debt-to-equity ratio. Other costs include compensation for the Company’s directors which, in line with the amounts recognised in the previous year, came to Euro 1,479 thousand. These 4. Revenue also include the costs of “control” bodies, i.e. those of the Board of Statutory Auditors, equal to Euro 76 thousand (also in line with 2013) and independent auditing costs (Euro) 2014 2013 for Euro 142 thousand (Euro 65 thousand in 2013). The TOTAL 10,821,525 9,709,897 remainder relates to costs for sundry assistance and advice (Euro 2.4 million), and other general costs of The revenue presented in the financial statements approximately Euro 4 million. derives from the services rendered, primarily to Group companies, in the areas of ship management, SQE, legal As in the previous years, income tax was posted here, affairs and insurance, information technology and taxed on a pass-through basis up to 2013 by the administration. The increase on the previous year subsidiary d’Amico International SA. In this regard, note derives from increased activities performed, without any that following the appeal submitted by the company
104 | d’Amico Società di Navigazione S.p.A. d’Amico Società di Navigazione
on 15 June 2012 against the rejection of a request for a Income from dividends collected and recorded during ruling submitted for the above Luxembourg subsidiary, the year is shown below, compared to the amounts and the subsequent application for refund (relating to collected in 2013: 2010 taxes) submitted in January 2013, through first- instance judgment of 22 May 2014, the Provincial Tax (Euro) 2014 2013 Commission of Palermo accepted the company’s Subsidiaries petition and ordered the amounts requested to be d'Amico Shipping Italia S.p.A. 7,250,000 7,700,000 refunded. Following that judgment the company d'Amico International S.A. 8,200,082 13,073,774 decided it was no longer necessary to retain on the financial statements the items allocated at the end of C.G.Telemar S.p.A. 1,015,287 1,015,287 2014, and fully recovered the amount of Euro 7.6 million Mida Maritime Limited 15,433 0 allocated from 2010 to 2013, as shown in the table. For 16,480,802 21,789,061 the purpose of complete disclosure, note that on 10 February 2015, the Italian Inland Revenue served an Other companies appeal against that first-instance judgement issued by Tamburi Investments the Commission. Partners S.p.A. 1,213,875 579,124 Sator S.p.A. 48,000 32,000 Banca Profilo 4,500 3,000 7. Dividends, other financial income 1,266,375 1,311,623 and financial charges TOTAL 17,747,177 23,100,684
(Euro) 2014 2013 Other financial incomerefers primarily to interest income DIVIDENDS 17,747,177 23,100,684 from banks and other creditors, income deriving from short-term investments in bonds and funds (other income) and foreign exchange gains originating from Other financial income the differences registered during the year and Bank interest 28,876 39,701 translation of items of the statement of financial position Interest on sundry receivables 88,935 88,861 in foreign currencies still in existence at the exchange Other income 251,880 457,264 rates as at 31 December 2014. Gains on disposals of Exchange gains 361,691 27,807 equity interests regard the disposal of Datalogic shares Gains on the disposal of in 2014. equity investments 2,449,862 1,272,393 Among financial charges, it bears noting that interest on loans is mainly generated by the financing for the TOTAL 3,181,243 1,886,027 property located on Via Paisiello in Rome and amounted to Euro 555 thousand in interest and Euro 720 thousand Financial charges to hedge the swap. The remainder regards costs Interest on borrowings (1,388,795) (1,389,131) deriving from the finance lease contract referring to the Bank and sundry interest (124,556) (123,550) administrative office in Rome and the interest on the Other financial charges (74,691) (52,420) loan from Banco Popolare entered into in 2014. Losses on equity investments (305,445) (328,917) As for the other items, it may be observed that the losses Financial losses 0 (448,835) on equity investments relate to the partial forgiveness Exchange losses (54,406) (1,345,787) of the receivable from Domas Immobiliare for coverage of the 2014 losses (Euro 206 thousand), as well as the TOTAL (1,947,893) (3,688,639) proceeds of the sales of Banca Profilo shares.
2014 Annual Report | 105 8. Income taxes 9. Intangible assets
(Euro) 2014 2013 (Euro) As at As at Current income taxes 31 Dec 2014 31 Dec 2013 of which, IRES TOTAL 284,241 310,354 (corporate income tax) - - of which, IRAP The amounts of intangible assets refer to software costs, (regional production tax) - - which are amortized over a period of three years. The Adjustment of prior-year taxes - (5,729) difference on the previous year relates to increases due to software purchases undertaken during the year, net of Deferred taxes (102,578) (274,560) the amortisation charge for the year, as shown in the table TOTAL (102,578) (280,289) below. d’Amico Società di Navigazione S.p.A. is subject to the (Euro) As at As at Italian tax code and the ordinary tax rate that applies to 31 Dec 2014 31 Dec 2013 its taxable profit is 27.50%. Net carrying amount The following is a statement of reconciliation between As at 1 January 2014 310,354 131,111 charges for taxes recognized in the income statement Additions 204,187 321,696 and the theoretical tax charge calculated on the basis Amortization for the year (230,300) (142,453) of the ordinary corporate income tax (IRES) rate in force Net carrying amount in Italy: As at 31 December 2014 284,241 310,354
2014 PROFIT (LOSS) BEFORE TAXES 16,183,952 10. Tangible assets Tax adjustments for: Reduced taxation of dividends (16,859,650) (Euro) As at As at Taxes on a pass-through basis (7,658,429) 31 Dec 2014 31 Dec 2013 Partial deductibility of costs 1,253,833 TOTAL 66,419,303 67,045,111 Sale of equity investments (2,021,924) Non-deductible interest expense 1,393,578 The following table presents changes in tangible assets TAXABLE PROFIT OR LOSS (7,708,640) during the year. Tax charges accrued - (Euro) Land and Other Total It should be noted that on the basis of the 2013 tax buildings assets returns, the Company presents approximately Euro 13.5 Historical cost 71,511,569 3,239,142 74,750,711 million in unused prior-year losses (starting with 2008 Depreciation (5,809,238) (1,896,362) (7,705,600) income). Upon their future use, these will yield a tax BALANCE AS AT 31 savings, calculated according to current tax rates, of DECEMBER 2013 65,702,331 1,342,780 67,045,111 approximately Euro 3.7 million.
Deferred taxes arise from the recognition of fair value Additions 1,398,077 494,856 1,892,933 gains and losses on the translation of receivables in Disposals / foreign currency and the measurement of bonds posted Decreases 0 0 0 in the financial statements, both under financial items. Depreciation (2,183,918) (334,823) (2,518,741) Both items shall be taxed only at the time of their Historical cost 72,909,646 3,733,998 76,643,644 effective realization. Depreciation (7,993,156) (2,231,185) (10,224,341) BALANCE AS AT 31 DECEMBER 2014 64,916,490 1,502,813 66,419,303
106 | d’Amico Società di Navigazione S.p.A. d’Amico Società di Navigazione
Land and buildings include the registered office in apartments. This property was posted at cost, net of the Palermo, head office in Rome, property located in Via related depreciation, and according to the most recent Paisiello in Rome, purchased in 2011, a warehouse in appraisals available, that cost is near the property's Genoa and several residential and office units in Rome. market value. The asset's estimated useful life is 33 years. The increases during the year relate to both work in progress for the renovation of the property on Via Other assets include furniture and fittings, electronic Paisiello, whose completion, originally scheduled for machines, motor vehicles and office equipment. In 2014, was postponed to 2015, as well as the work to addition to the aforementioned, certain purchases of modernize the offices on Corso d’Italia (Rome). office equipment undertaken in 2014 were recognized as additions to other assets. It is worth noting that the property located in Via Paisiello, carried at its historical cost of Euro 58.5 million Pursuant to article 10 of Law 72/1983, it is hereby (currently Euro 52.9 million, after depreciation) and specified that tangible assets include the revalued originally acquired to host the Company's offices, may amount of buildings, as a result of the revaluation now be regarded as an investment property. The use of applied in 1994 following the merger of Segesta Soc. the property is being changed from “office use” to Mob. Fin. S.p.A.) in the residual amount of Euro 115,995. “residential use”, to subsequently sell the resulting
2014 Annual Report | 107 11. Long-term investments
(Euro) As at 31 December 2014 As at 31 December 2013 Equity investments 143,744,663 135,138,033 Available-for-sale financial assets 43,037,900 41,129,597 Held-to-maturity investments 6,243,786 6,573,241 TOTAL 193,026,349 182,840,871
The following is a breakdown of long-term investments by type.
Equity investments
Company name As at ended Changes As at Percent 31 December Acquisitions / Measurement 31 December interest 2013 (disposals) at FV 2014 Subsidiaries d'Amico Shipping Italia S.p.A. 44,976,428 44,976,428 100.00% d'Amico International S.A. 26,954,779 26,954,779 99.99% Compagnia Generale Telemar S.p.A. 21,183,807 21,183,807 55.08% Domas Immobiliare S.r.l. 577,500 577,500 75.00% Sirius Ship Management S.r.l. 84,578 50,000 134,578 76.90% Mida Maritime Limited 36,706 36,706 51.00% d'Amico Partecipazioni Finanziarie S.r.l. 0 5,255,030 5,255,030 55.55% Other 3 3
Associates Clubtre S.p.A 32,956,250 32,956,250 32.50% Venice Shipping & Logistic S.p.A. 3,861,600 2,421,600 6,283,200 28.42%
Other Sator S.p.A. 2,800,000 2,800,000 1.13% Civita Cultura S.r.l. 1,503,799 (604,643) 899,156 8.23% Film Master Group S.r.l. 0 604,643 604,643 2.78% TIP-Pre IPO S.p.A. 0 880,000 880,000 2.86% Other 202,583 202,583 TOTAL 135,138,033 8,606,630 0 143,744,663
Available-for-sale financial assets Tamburi Investments Partners S.p.A. 32,346,250 4,660,550 5,567,600 42,574,400 11.37% Datalogic S.p.A. 6,897,596 (6,897,596) 0 0.00% Banca Profilo S.p.A. 299,100 164,400 463,500 0.22% Banca Popolare Group 1,586,651 (1,586,651) 0 0.00% TOTAL 41,129,597 (3,823,697) 5,732,000 43,037,900
Held-to-maturity investments Sator Private Equity Fund 6,573,241 (329,455) 6,243,786 TOTAL 186,538,108 (329,455) 0 6,243,786
108 | d’Amico Società di Navigazione S.p.A. d’Amico Società di Navigazione
Subsidiaries Near the end of 2013 and the beginning of 2014 the financial instruments of all kinds in companies of all equity interest in Sirius was increased to 76.90% of natures. ownership. On 19 February 2014 d’Amico Partecipazioni Finanziarie Srl was established, which DSN controlled at The following table presents information regarding the end of the year, with 55.55% of units. The company's investments in subsidiaries. Amounts are in euro primary object is holding equity investments and/or rounded to the nearest thousand.
Subsidiaries Registered Reporting Capital Equity Net profit Percent Corresponding Carrying office date or loss interest book equity amount d'Amico Shipping Italia S.p.A. Palermo 31-Dec 15,000 87,447 (5,559) 100.00% 87,447 44,976 d'Amico International S.A. Luxembourg 31-Dec 2,981 273,077 8,055 99.99% 273,050 26,955 Compagnia Generale Telemar S.p.A. Rome 31-Dec 7,374 32,822 2,889 55.08% 18,078 21,184 Domas Immobiliare S.r.l. Imperia 31-Dec 258 258 0 75.00% 194 578 Sirius Ship Management S.r.l. Genoa 31-Dec 101 258 (43) 76.90% 234 135 Mida Maritime Limited Dublin 31-Dec 69 (50) (133) 51.00% (26) 37 d'Amico Partec. Finanziarie S.r.l. Rome 31-Dec 10 9,452 (8) 55.55% 5,251 5,255
For equity investments the carrying amount of which of the profits reported in the previous five years. In exceeds the corresponding interest in equity, the addition, according to prospective plans, profits are management did not observe indicators that such expected in future years, and the investments equity investments had become impaired, on the basis concerned are thus regarded as recoverable.
Associates The increase during the year relating to associates Information concerning current investments in regards the capitalisation of Venice Shipping & associates is presented below. Amounts are in euro Logistics through a payment of an additional Euro 2.4 rounded to the nearest thousand. million as a result of the share capital increases approved by the investee.
Associates Registered Reporting Capital Equity Net profit Percent Corresponding Carrying office Date or loss interest book equity amount Clubtre S.p.A. Milan 30-Jun 50 111,851 7,963 32.50% 36,352 32,956 Venice Shipping and Logistic S.p.A. Milan 31-Dec 11,240 24,093 (3,805) 28.42% 6,847 6,283
2014 Annual Report | 109 Other equity interests million. Investments continued to be made in TIP in the amount of Euro 4.7 million, also due to the continuing The changes in “other” equity interests regard the recovery of the equity market which, as demonstrated conversion of the shares held in Civita Cultura with the by the measurement shown in the financial statements, equivalent value of those in Film Master Group srl. This in the table above, resulted in the revaluation of shares company, established in 2014, brings together the in portfolio by a total of Euro 5.6 million. As carried out experience and operations of the Filmmaster Group, also in previous years, the contra-item of this Civita Cultura and Cine District Entertainment in a measurement, net of deferred taxes, has been allocated business project combining their expertise in the field of among shareholders' equity reserves (the available-for- communications, entertainment and culture. Among sale fair value reserve) and presented in the statement of the increases in “other” equity interests, note that in June other comprehensive income. 2014 shares were also acquired of TIP-Pre IPO S.p.A. (also known as TIPO SpA), an investment firm of the Group whose purpose is to invest in companies that intend to be listed in the short-term. Held-to-maturity investments The value of the investment in the Sator Private Equity Fund decreased by a total of Euro 329,455. During 2014, Available-for-sale financial assets the company received the liquidation of a portion of the In the first half of 2014 the equity interests in Datalogic investment made, in the amount of Euro 1.04 million, SpA and in the Banca Popolare Group were disposed of. following the disposal by the fund of its equity interest in As specified under financial income and charges, these Unipol Sai. Furthermore, the company subscribed fund disposals provided a positive contribution to profit (loss) units totalling Euro 0.7 million. for the year, of a net amount of approximately Euro 2.3
110 | d’Amico Società di Navigazione S.p.A. d’Amico Società di Navigazione
12. Other non-current financial assets 15. Other current financial assets
(Euro) As at As at (Euro) As at As at 31 Dec 2014 31 Dec 2013 31 Dec 2014 31 Dec 2013 TOTAL 11,570,884 15,444,000 TOTAL 2,913,273 1,328,338
The balance shown above regards the receivable due As in the previous year, other current financial assets from the subsidiary Domas, equal to the amount paid include assets held for trading and, more specifically, as a shareholders’ loan, net of the forgiveness of the loan short-term investments of liquidity. These were joined to cover the 2014 losses, posted under financial charges. by the reclassification of the receivable due from Mida The receivable due from Mida, posted in 2013 in the which equals JPY 112 million (approximately Euro 800 amount of Euro 4.2 million, was partially collected and thousand) after, the Irish subsidiary repaid part of the reclassified under short-term assets, as it is expected to shareholders loan in the amount of JPY 510 million in be fully paid in 2015. December 2014. This repayment resulted in the realisation - for the portion collected - of the exchange rate difference recorded up to the previous year, also 13. Other non-current assets freeing up the corresponding percentage of deferred taxes. As the existing receivable is smaller than in the past (obviously adjusted to the year-end exchange rate) (Euro) As at As at the exchange-rate risk calculated on a shift in the 31 Dec 2014 31 Dec 2013 exchange rate of five percentage points at year-end TOTAL 4,500,620 614,358 would have entailed immaterial effects on the income statement. The item refers solely to sundry taxes receivable. The increase is essentially due to the portion paid up to 2013 The other changes relate to normal movement of the (Euro 3.9 million) of taxes on a pass-through basis, securities during the year as well as the measurement described in greater detail under the item taxes in this at fair value of the remaining securities at year-end. document. 16. Cash and cash equivalents 14. Short-term receivables and other non-current assets (Euro) As at As at 31 Dec 2014 31 Dec 2013 Bank deposits 20,114,650 6,005,160 (Euro) As at As at 31 Dec 2014 31 Dec 2013 Cash 10,101 1,880 TOTAL 7,399,343 5,938,997 TOTAL 20,124,751 6,007,040
The item is primarily represented by short-term deposits The foregoing receivables derive from the invoicing of and the change was due to corporate activity, the cash revenue for services rendered according to the used to undertake investments and increases in contracts in force, of approximately Euro 5.2 million, and payables for contract financing. The change compared the VAT receivable of approximately Euro 2.1 million. to the previous year is illustrated in further detail in the Both amounts can be considered current and fully set statement of cash flows. to come due by the end of 2015.
2014 Annual Report | 111 17. Shareholders’ equity
(Euro) As at 31 December 2014 As at 31 December 2013 Share capital 25,000,000 25,000,000 Earnings reserves 182,775,110 191,538,108 Other reserves 8,711,284 6,758,961 Net profit / (loss) 16,286,530 6,237,002 TOTAL SHAREHOLDERS' EQUITY 232,772,924 229,534,071
The table below shows the items of shareholders’ equity distribution and any uses in the three previous years. broken down by origin, possible use and possible
Nature / Description Amount Possible Available Actual uses in three Actual uses in use (*) portion previous years to three previous years (Euro) cover losses for other reasons Capital 25,000,000 Legal reserve 5,000,000 B 5,000,000 Earnings reserves 177,775,110 A, B, C 177,775,110 8,762,998 Other reserves 8,711,284 TOTAL 216,486,394 182,775,110 8,762,998 Non-distributable portion 803,352 RESIDUAL DISTRIBUTABLE PORTION 181,971,758
(*) A: for capital increases; B: for coverage of losses; C: for distribution to shareholders
Share capital investments undertaken by the Company, as well as the measurement at fair value of the swap contracted to The authorized, fully paid-in share capital of d’Amico hedge the loan associated with the property on Via Società di Navigazione S.p.A. came to Euro 25 million Paisiello and the actuarial gain or loss reserve (IAS 19 and was divided into 10 million shares with a par value revised). All the measurements mentioned above are of Euro 2.50 each. shown net of taxation, which is also shown in shareholders’ equity. Earnings reserves Nonetheless, the following is a breakdown at the end of the year, compared with the 2013 figures. Retained earnings comprise profits retained, net of dividends distributed. It should be noted that as at 31 (Euro) As at As at December 2014 the amount of Euro 803,352, included 31 Dec 2014 31 Dec 2013 in the item, was to be considered not available for Revaluation reserve distribution inasmuch as it derived from revaluations (CFH) (4,438,760) (2,672,298) through shareholders' equity (for slightly more than Fair value reserve (AFS) 16,299,392 12,146,735 Euro 600 thousand) and unrealized exchange adjustments applied in previous years. Italian term. indemn. actuarial gain or loss reserve 154,932 (116) Other reserves Tax on comprehensive income (3,304,280) (2,605,437) Other reserves include the effects of the measurement 8,711,284 6,868,884 at fair value of short- and long-term financial
112 | d’Amico Società di Navigazione S.p.A. d’Amico Società di Navigazione
It should be noted that a dividend of Euro 15 million (Euro) As at (Euro 1.50 per share) was distributed to the shareholders 31 Dec 2014 in 2014 on the 2013 earnings. ACTUARIAL LIABILITY AT THE BEGINNING OF THE YEAR 2,269,875 18. Provisions for risks and charges Normal cost 366,992 Financial charges 47,440 Disbursements (31,605) (Euro) As at As at Actuarial (gains)/losses during the period (155,048) 31 Dec 2014 31 Dec 2013 RECOGNIZED LIABILITY TOTAL 661,186 661,186 AS AT YEAR-END 2,497,654
Provisions include allocations for risks or litigation The main assumptions used in preparing an actuarial relating to certain ongoing labour suits or disputes, estimate of employee-benefit liabilities are summarized which did not show any changes on the previous year. in the table below: The amount provisioned was deemed appropriate to the maximum presumable risk. TERMINATION INDEMNITY/ 31 December 2014 END-OF-SERVICE INDEMNITY Discount rate 0.91% 19. Provisions for employee benefits Inflation rate 1.5% Staff turnover rate 5% Mortality rate IPSMF 55 (Euro) As at As at 31 Dec 2014 31 Dec 2013 Termination indemnity provision 608,711 606,062 20. Deferred tax liabilities End-of-service indemnity provision 1,888,943 1,663,813 (Euro) As at As at TOTAL 2,497,654 2,269,875 31 Dec 2014 31 Dec 2013 TOTAL 3,334,914 2,738,650 The termination indemnity provision represents the amount allocated and subject to actuarial calculation to This item includes deferred taxes calculated on account for the liability to employees pursuant to law measurements according to the equity method and labour contracts in force, less the benefits accrued (available-for-sale, cash flow hedges and actuarial after 1 January 2007, which have been allocated to calculations), as well as those on unrealized foreign complementary pension schemes in accordance with exchange differences due to adjustment and Legislative Decree 252 of 5 December 2005 (or measurement, both recognized in the income transferred to the INPS treasury fund). statement. The same category also includes the provision set aside for the end-of-service benefits of members of the Board of Directors established in 2006, also discounted as 21. Other non-current financial required by international accounting principles. The liabilities amounts have been updated in accordance with IAS 19 revised, and the discounted amount has been allocated (Euro) As at As at to a specific equity reserve. 31 Dec 2014 31 Dec 2013 TOTAL 4,438,760 2,672,298 The following table presents changes in actuarial liabilities in 2013, reconciled with the liabilities This section includes measurements of financial presented in the financial statements. The actuarial gain instruments, and more specifically the swap on the loan or loss has been properly allocated to a specific equity relating to the property located on Via Paisiello reserve. contracted from Banco di Brescia. Please refer to Note
2014 Annual Report | 113 24, which reports the information regarding impacts on mentioned above falling due during 2015 the 2014 financial statements. (approximately Euro 9.3 million) in addition to certain bank overdrafts/”hot money” of approximately Euro 5.8 million. It should be noted that the portion due beyond 22. Banks and other lenders five years comes to Euro 22.5 million and relates solely to the debt contracted from Banco di Brescia. As mentioned above, the loan from Banco di Brescia is (Euro) As at As at hedged by a specific swap contract, whereas the lease 31 Dec 2014 31 Dec 2013 agreement , as well as the loan obtained in 2014, are Non-current payables subject to interest-rate risk. In the event of a change in to financial institutions 42,272,705 31,518,247 the rate of 1% in 2014 the impact on the company’s Current payables to income statement would not have been material. financial institutions 15,058,939 1,791,498 TOTAL 57,331,644 33,309,745 All of the foregoing loans have been contracted in Euro.
Payables to financial institutions refer to: financing of Euro 1.1 million associated with the finance 23. Short-term payables and other lease agreement currently in force with Unicredit Leasing current liabilities S.p.A. governing the property located at Corso d’Italia 35/b (the location of the Company’s head office), set to come due in 2015; (Euro) As at As at the loan contracted from Banco di Brescia of Euro 30.4 31 Dec 2014 31 Dec 2013 million, for the property located in Rome (Via Paisiello), TOTAL 5,201,683 8,233,321 purchased in June 2011, secured by a mortgage on the property concerned, set to come due in 2026; As at 31 December 2013, short-term payables and other a loan of Euro 20 million contracted in October 2014 with current liabilities consisted of trade payables, in addition Banca Popolare, which is scheduled to be fully repaid by to the social-security and tax payables deriving from the October 2017. Company's role as withholding agent, settled in January “Current” payables include the portions of loans 2014.
114 | d’Amico Società di Navigazione S.p.A. d’Amico Società di Navigazione
24. Derivative instruments
Interest rate swaps relative interest-rate risks associated with the primary loan and having the same maturity (July 2026). As mentioned above, the Company's only outstanding hedge is on the loan (of two different amounts) from The following tables show the impact of measurements at Banco di Brescia, providing protection against the fair value (before the tax effect) on the financial statements:
Hedge accounting Change in Income statement Cash flow hedge Fair value Net financial reserve 2014 income / (charges) Interest rate swaps (1,766,462) - (1,766,462)
Hedge accounting Fair value Income statement Cash flow hedge 2013 Net financial reserve income / (charges) Interest rate swaps 1,474,055 - 1,474,055
The above derivative financial instruments have been classified to the following item:
As at 31 December 2014 As at 31 December 2013 Liabilities Other non-current financial liabilities 4,438,760 2,672,298
The fair values of derivative contracts are calculated The prospective and retrospective effectiveness test on according to the market quotations supplied by leading the above instruments was conducted using the linear counterparties or, in the absence of market information, regression method, and the results achieved confirmed on the basis of appropriate valuation techniques that the hedging strategy adopted has proved suited to generally adopted in the finance industry. the Company's needs.
The changes in the fair value of the effective portion of Those instruments, contracted in July 2011, have a fixed hedging derivatives classified as cash-flow hedges are maturity in April 2026 and a notional amount at year- recognized in equity (other reserves) and presented in end of Euro 30.4 million. the statement of other comprehensive income, net of the pertinent tax effect.
2014 Annual Report | 115 25. Information on financial risk comprehensive income. A change in the interest rate of one percentage point on the other items payable shown As disclosed in Note 2, Risk management, the Company in these financial statements would not have resulted in is exposed to some financial risks associated with its a significant difference in the figures on the company’s operations. This section provides qualitative and income statement. quantitative disclosures concerning the effect that those risks may have on the Company. Credit risk
Market risk The receivables outstanding as at year-end are essentially claimed from Group companies. There were no past-due Given its role of holding company, the Company is not items of material amount. exposed to market risk bearing directly on its operations. Liquidity risk Foreign-exchange risk The Company is exposed to liquidity risk arising from the As at 31 December 2014, with the exception of the possible mismatch between cash requirements and remainder of the loan in Japanese yen disbursed to the credit facility repayments and cash flows. Information subsidiary Mida, the Company is not exposed to concerning credit facilities is presented in note 22, while significant positions payable or receivable in foreign the details of commitments are set out in note 27. currencies and does not make use of derivative Management believes that the currently available funds instruments exposed to foreign-exchange risk. For and major lines of credit, along with the cash provided by information purposes, the impact of the year-end operating activities, will allow the Company to satisfy its adjustments to items recognised in currencies other than requirements from investing activities and working the Euro came to Euro 113 thousand. capital needs and discharge obligations to repay debts at their natural due dates. Interest-rate risk Fair-value risk The Company is exposed to interest-rate risk deriving from the fact that interest on its sundry exposures to Assets quoted on regulated markets are measured at banks accrues at variable rates. As mentioned above, the year-end at their market values, and a fluctuation of those rate for the loan contracted with Banco di Brescia has values of 5% would have entailed an increase or decrease been transformed to fixed through an interest rate swap of approximately Euro 2.1 million. The Company's (IRS) contract. The part of the gain or loss arising from the management believes that the fair values of financial measurement of that instrument at fair value considered assets and liabilities do not diverge significantly from their a hedge (IAS 39) is recognized in equity and thus in other carrying amounts as at the reporting date.
26. Related-party transactions
In the reporting year, as in the previous year, d'Amico normal arm's-length conditions equivalent to those Società di Navigazione S.p.A. had dealings with related agreed to with independent third parties. The following parties pertaining essentially to service contracts in force is a presentation of transactions affecting the income with subsidiaries. Such contracts were entered into at statement undertaken in 2014.
(Thousands of euro) d'Amico Cogema d'Amico d'Amico d’Amico d'Amico Ishima d'Amico d’Amico ACGI d'Amico Mida Shipping International Finance Internat. Tankers Dry ShippingShipping Partecipaz. Maritime Italia Shipping Singapore Singapore Finanziarie Revenue Assistance 3,812 25 100 10 80 3,913 372 1,731 221 49 4 - Financial ------87
116 | d’Amico Società di Navigazione S.p.A. d’Amico Società di Navigazione
For dividend revenue, please refer to the illustrative table presented in note 7.
(Thousands of euro) Cogema d'Amico Ishima d'Amico Ship Sirius International Ishima India Ship Management Costs Operating/administrative 965 - 356 101 610 Financial - 43 - - -
Owing to their nature, given that they derive from long- The following table presents the balances of the term contracts, the amounts relating to services statement of financial position as at 31 December 2014, rendered in 2014 do not diverge significantly from excluding, due to immateriality, those of less than Euro those reported in the previous year. 5 thousand:
(Thousands of euro) d'Amico Cogema d'Amico Ishima d’Amico Mida Domas d’Amico ACGI Shipping Tankers Dry Maritime Immobil. ShippingShipping Italia srl Singapore Singapore Accounts receivable Trade 1,208 45 1,864 101 1,687 - - 51 21 Financial - - - - - 791 11,741 - -
Accounts payable Trade - 727 1 98 109 - - 14 - Financial ------
27. Guarantees, commitments and contingencies
Guarantees given amongst amounts due to banks and other lenders, but also the interest on those loans, which is set to accrue As at 31 December 2014, the Company had an until repayment in full. In addition, the Company outstanding guarantee granted to the subsidiary Domas entered into a commitment to pay Sator Private Equity Immobiliare S.r.l. (of Euro 1.7 million) and several letters Funds a maximum of Euro 10 million. At the end of 2014, of patronage (or comfort letters) for the benefit of the the Company had a residual commitment of indirect subsidiary d’Amico Dry Limited. On 19 approximately Euro 2.8 million. December 2014, the subsidiary d’Amico Tankers Limited was granted a guarantee of USD 75 million in relation Ongoing disputes to Intesa San Paolo for a loan of the same amount granted by the Italian bank to the Irish company. The Company is currently a party to ongoing legal disputes relating to commercial and labour matters for Commitments which ample allocations have been made to provisions for risks and charges. There are no other disputes that As at 31 December 2014, the Company's commitments may give rise to potential liabilities. included not only the bank borrowings presented
2014 Annual Report | 117 28. Sundry disclosures
As required by applicable legislation, it is hereby disclosed • no research or development activities were carried that: out in 2014; • the Company does not hold own shares or shares of • no atypical or unusual transactions were parent companies; undertaken.
29. Subsequent events
No significant events worthy of mention occurred in the referred to the report on operations for full information first few months of 2015. The reader is nonetheless concerning developments in 2015.
118 | d’Amico Società di Navigazione S.p.A.
Annexes
2014 Annual Report | 121 Annexes
List of Fleet Vessels as at 31 December 2014 Dry cargo
Name of vessel Vessel type Dwt Year Company OWNED Medi Lausanne Panamax 83,002 2006 d'Amico Shipping Singapore Pte Ltd Medi Hong Kong Panamax 83,000 2006 d'Amico Shipping Italia SpA Medi Baltimore Panamax 76,290 2005 d'Amico Shipping Italia SpA Medi Venezia Panamax 76,600 2005 d'Amico Shipping Italia SpA Medi Vitoria Panamax 76,616 2004 d'Amico Dry Limited Medi Cagliari Panamax 75,500 2004 d'Amico Shipping Italia SpA Medi Tokyo Panamax 74,356 1999 d'Amico Shipping Italia SpA
Medi Valencia Handymax 56,000 2008 d'Amico Shipping Italia SpA Medi Bangkok Handymax 53,466 2006 d'Amico Dry Limited Medi Lisbon Handymax 58,700 2006 d'Amico Dry Limited Medi Nagasaki Handymax 53,098 2002 d'Amico Dry Limited
Cielo di Vaiano OHBS 37,000 2012 d'Amico Dry Limited Cielo di Capalbio OHBS 37,000 2012 d'Amico Dry Limited Cielo di Dublino OHBS 37,000 2011 d'Amico Dry Limited Cielo di San Francisco OHBS 37,000 2011 d'Amico Dry Limited Cielo di Livorno OHBS 37,277 2008 d'Amico Dry Limited Cielo di Tocopilla OHBS 38,670 2014 d'Amico Dry Limited Cielo di Monaco OHBS 38,670 2014 d'Amico Dry Limited
Cielo di Casablanca Containers Carrier 9,950 1998 d'Amico Dry Limited Cielo di Agadir Containers Carrier 22,984 1996 d'Amico Dry Limited
CHARTERED Medi Salerno Panamax 81,000 2008 d'Amico Dry Limited Medi Antwerp Panamax 76,600 2007 d'Amico Dry Limited Medi Singapore Panamax 75,397 2006 d'Amico Dry Limited Medi Genova Panamax 75,600 2004 d'Amico Dry Limited
Medi Okinawa Handymax 56,000 2011 d'Amico Dry Limited Medi Paestum Handymax 55,500 2009 d'Amico Dry Limited Medi Segesta Handymax 58,000 2009 d'Amico Dry Limited Medi Firenze Handymax 58,000 2008 d'Amico Dry Limited Medi Imabari Handymax 56,047 2008 d'Amico Dry Limited Medi Hakata Handymax 58,078 2014 d'Amico Dry Limited Medi Yokohama Handymax 57,700 2014 d'Amico Dry Limited Medi Manila Handymax 57,903 2014 d'Amico Dry Limited
122 | d’Amico Società di Navigazione S.p.A. Annexes
Name of vessel Vessel type Dwt Year Company CHARTERED Cielo di Palermo OHBS 37,059 2013 d'Amico Dry Limited Cielo di Pisa OHBS 32,248 2008 d'Amico Dry Limited Cielo di Tokyo OHBS 37,296 2008 d'Amico Dry Limited Cielo di Venezia OHBS 37,313 2008 d'Amico Dry Limited Cielo di Amalfi OHBS 37,322 2007 d'Amico Dry Limited Giulia I OHBS 38,670 2014 d'Amico Dry Limited
Name of vessel Vessel type Dwt Expected delivery Company NEW BUILDINGS Medi TBN (Sanoyas/1315) Mini Capesize 115,000 2015 d'Amico Dry Limited Medi TBN (Sanoyas/1316) Mini Capesize 115,000 2016 d'Amico Dry Limited Cielo di Virgin Gorda Handysize 38,670 2015 d'Amico Dry Limited Cielo di Valparaiso Handysize 39,500 2015 d'Amico Dry Limited Cielo di Cartagena Handysize 38,670 2015 d'Amico Dry Limited Cielo di Angra Handysize 38,670 2015 d'Amico Dry Limited Cielo di Tampa Handysize 38,670 2015 d'Amico Dry Limited Cielo di Jari Handysize 38,670 2015 d'Amico Dry Limited Cielo di Panama Handysize 38,670 2016 d'Amico Dry Limited Medi Hunagpu Handymax 63,800 2015 d'Amico Dry Limited Medi Zhoushan Handymax 63,800 2015 d'Amico Dry Limited Medi Cork Handymax 63,800 2015 d'Amico Dry Limited Medi Mumbai Handymax 63,800 2016 d'Amico Dry Limited Medi Zuoz Handymax 63,800 2016 d'Amico Dry Limited Medi Roma Handymax 60,250 2017 d'Amico Dry Limited Medi Kyoto Handymax 60,250 2017 d'Amico Dry Limited Cielo d'Italia Mini Capesize 115,000 2015 d'Amico Dry Limited Cielo d'Europa Mini Capesize 115,000 2016 d'Amico Dry Limited
2014 Annual Report | 123 Product tankers
Name of vessel Vessel type Dwt Year Company OWNED GLENDA Meryl 2 MR 47.251 2011 Glenda International Shipping GLENDA Melissa 1 MR 47.203 2011 Glenda International Shipping GLENDA Melody 1 MR 47.238 2011 Glenda International Shipping GLENDA Melanie 2 MR 47.162 2010 Glenda International Shipping GLENDA Meredith 2 MR 46.147 2010 Glenda International Shipping GLENDA Megan 1 MR 47.147 2009 Glenda International Shipping High Efficiency 3 MR 46.547 2009 DM Shipping Ltd High Strength 3 MR 46.800 2009 DM Shipping Ltd High Venture MR 51.087 2006 d'Amico Tankers Limited High Courage MR 46.975 2005 d'Amico Tankers Limited High Performance MR 51.303 2005 d'Amico Tankers Limited High Presence MR 48.700 2005 d'Amico Tankers Limited High Priority MR 46.847 2005 d'Amico Tankers Limited High Prosperity MR 48.711 2006 d'Amico Tankers Limited High Progress MR 51.303 2005 d'Amico Tankers Limited High Valor MR 46.975 2005 d'Amico Tankers Limited High Endeavour MR 46.992 2004 d'Amico Tankers Limited High Endurance MR 46.992 2004 d'Amico Tankers Limited High Tide MR 51.768 2012 d'Amico Tankers Limited High Seas MR 51.678 2012 d'Amico Tankers Limited High Voyager MR 45.999 2014 d'Amico Tankers Limited High Fidelity MR 49.990 2014 d'Amico Tankers Limited High Sun 4 MR 49.990 2014 d'Amico Tankers Limited High Discovery MR 50.036 2014 d'Amico Tankers Limited High Freedom MR 49.990 2014 d'Amico Tankers Limited
Cielo di Milano Handysize 40.096 2003 d'Amico Shipping Italia SpA Cielo di Roma Handysize 40.081 2003 d'Amico Shipping Italia SpA Cielo di New York Handysize 39.990 2014 d'Amico Tankers Limited Cielo di Gaeta Handysize 39.990 2014 d'Amico Tankers Limited Cielo di Salerno Handysize 36.032 2002 d'Amico Tankers Limited
1 d'Amico International Shipping owns 50% of GLENDA International Shipping Limited. Vessels are chartered to d'Amico Tankers Limited.
2 d'Amico International Shipping owns 50% of GLENDA International Shipping Limited.
3 d'Amico Tankers Limited owns 51% of DM Shipping Limited. Vessels are chartered to d'Amico Tankers Limited.
4 d'Amico International Shipping owns 33% of Eco Tankers Limited.
124 | d’Amico Società di Navigazione S.p.A. Annexes
Name of vessel Vessel type Dwt Year Company CHARTERED High Pearl MR 48.023 2009 d'Amico Tankers Limited High Enterprise MR 45.800 2009 d'Amico Tankers Limited Carina MR 47.962 2010 d'Amico Tankers Limited Future Prosperity MR 47.990 2010 d'Amico Tankers Limited High Force MR 53.603 2009 d'Amico Tankers Limited High Current MR 46.590 2009 d'Amico Tankers Limited High Beam MR 46.646 2009 d'Amico Tankers Limited High Jupiter MR 51.149 2008 d'Amico Tankers Limited High Mercury MR 51.149 2008 d'Amico Tankers Limited High Mars MR 51.149 2008 d'Amico Tankers Limited High Saturn MR 51.149 2008 d'Amico Tankers Limited Freja Baltic MR 47.548 2008 d'Amico Tankers Limited High Glow MR 46.846 2006 d'Amico Tankers Limited Citrus Express MR 53.688 2006 d'Amico Tankers Limited Freja Hafnia MR 53.700 2006 d'Amico Tankers Limited Baizo MR 44.997 2004 d'Amico Tankers Limited Port Said MR 45.999 2003 d'Amico Tankers Limited Port Stanley MR 45.996 2003 d'Amico Tankers Limited Port Union MR 46.256 2003 d'Amico Tankers Limited Port Moody MR 44.999 2002 d'Amico Tankers Limited
Cielo di Guangzhou Handysize 38.877 2006 d'Amico Tankers Limited Cielo di Milano Handysize 40.081 2003 d'Amico Tankers Limited Port Stewart Handysize 38.877 2003 d'Amico Tankers Limited Cielo di Roma Handysize 40.096 2003 d'Amico Tankers Limited Port Russel Handysize 37.808 2002 d'Amico Tankers Limited Port Louis Handysize 37.791 2002 d'Amico Tankers Limited
2014 Annual Report | 125 126 | d’Amico Società di Navigazione S.p.A. 2014 Annual Report | 127 128 | d’Amico Società di Navigazione S.p.A.
130 | d’Amico Società di Navigazione S.p.A. Relazione Annuale 2013 | 131 132 | d’Amico Società di Navigazione S.p.A.
Board of Statutory Auditors Report on the Consolidated Financial Statements to the Shareholders’ meeting of d’Amico Società di Navigazione S.p.A.
Shareholders,
We received the Consolidated Financial Statements of d’Amico Società di Navigazione SpA for 2014 by the deadline set out by law, along with the Report on Operations drawn up along with the company’s Statutory Financial Statements 2014, which comply with the International Financial Reporting Standards – IFRS, issued by the International Accounting Standard Board (IASB) and adopted by the European Union.
We considered the scope of consolidation, examined the consolidation principles and verified the fairness of the measurement criteria applied.
In accordance with the regulations in force on the matter, our activity was focused on verifying the correctness and adequacy of the information contained in the documents pertaining to the Consolidated Financial Statements and the Report on Operations for the year ended as at 31 December 2014, as the auditing firm PricewaterhouseCoopers was tasked with verifying that the consolidated financial statements were compliant with the law and reflect the accounting and consolidation records.
We conducted our supervisory activity in accordance with the principles of conduct for Boards of Statutory Auditors issued by the Italian National Council of Chartered Accountants and Accounting Experts. Our activity specifically regarded: • examining the composition of the Group and equity relationships, in order to assess the determination of the scope of consolidation and its change compared to the previous financial statements; • compliance with the law on the formation and set up of the Financial Statements and Report on Operations; • the adequacy of the Parent Company’s organisation in terms of feeding information into consolidation procedures; • the consistency of the Group’s Report on Operations, as stated, drawn up along with the Statutory Financial Statements 2014, with the facts and figures of the Consolidated Financial Statements in order to provide ample disclosure of the Group’s financial performance and financial position and on the risks it is exposed to, as well as the significant events after the reporting date, which had no impacts on the Financial Statements 2014. • verification of the existence and adequacy within the context of the Company’s organisational structure of a function responsible for dealings with subsidiaries and associates; • obtaining information regarding the activity performed by the subsidiaries and the transactions with the greatest impact on financial performance and financial position in the context of Group dealings, through the information received from the Company’s Directors and the auditing firm; the Board covered said transactions, including those with related parties, in its report on operations and notes to the financial statements, also concerning the method for determining and the amount of the fees due to said parties, and in this regard, the Directors informed us of the fact that said transactions were conducted at arm's length. We did not detect any atypical or unusual transactions.
The consolidation principles adopted comply with the provisions of IAS 27 and, specifically: • The reporting date of the consolidated financial statements coincides with the balance sheet date of the parent company and the consolidated financial statements are based on the financial statements of the companies within the scope of consolidation for the year ended on the same date; • the financial statements reflect the facts and information of which the Board of Statutory Auditors became aware in performing its supervisory duties and its control and inspection powers; • the Group’s Report on Operations is consistent with the facts and figures of the Consolidated Financial Statements and provides ample disclosure of the Group’s financial performance and financial position and on the risks it is exposed to, as well as the significant events after the reporting date.
All of our activities relating to the consolidated financial statements were conducted with the cooperation of the auditing firm whose report we received on today’s date. The Report states that the consolidated financial statements as at 31 December 2014 have been prepared in a clear manner and provide a true and fair view of the d’Amico Group’s financial performance and financial position.
Rome, 10 June 2015 Board of Statutory Auditors
134 | d’Amico Società di Navigazione S.p.A.
Board of Statutory Auditors Report on the Financial Statements for the Year Ended as at 31 December 2014 pursuant to article 2429 of the Italian Civil Code to the Shareholders’ meeting of d’Amico Società Di Navigazione S.p.A.
Shareholders,
During the year in question, the Board of Statutory Auditors conducted its supervisory activities, as envisaged by applicable regulations, having regard to the principles of conduct recommended by the Italian National Council of Chartered Accountants and Accounting Experts on company audits and the activities of Boards of Statutory Auditors.
Note that our duties lie solely in conducting the supervisory activities pursuant to Article 2403 of the Italian Civil Code, while legal auditing pursuant to Article 2409 bis was conducted by the auditing firm PricewaterhouseCoopers SpA.
We checked that the control system and organisational structures implemented were suitable for promptly capturing signs that give rise to doubts about your company’s ability to continue operating as a going concern.
Note that we also acquired information from the supervisory board concerning the organisational model adopted by your company and the effective functioning of the Supervisory Board pursuant to Legislative Decree 231/2001.
On a regular basis, we obtained information from the Directors on the activity performed and the transactions with the greatest impact on financial performance and financial position carried out by the Company and we can reasonably confirm that the actions approved comply with the law and the Articles of Association and do not appear clearly imprudent, dangerous or liable to compromise the integrity of company equity.
We also exchanged information with the company assigned to carry out legal auditing according to the provisions of Article 2409-septies of the Italian Civil Code, also with regard to the assessment of the adequacy of the (accounting and administrative) organisational structure of the company and the Group. No facts or information came to light which must be noted in this report.
Note that the Company carries out transactions with Group companies and related parties. The Board covered said transactions in its report on operations and notes to the financial statements, also concerning the method for determining and the amount of the fees due to said parties, and in this regard, the Directors informed us of the fact that said transactions were conducted at arm's length. We did not detect any atypical or unusual transactions.
No statements or complaints pursuant to Article 2408 of the Italian Civil Code were received, nor were any opinions requested pursuant to law.
The Board of Statutory Auditors monitored the Company’s compliance with the provisions of Legislative Decree no. 81/2008 (Consolidated Law on Health and Safety in the Workplace) and Legislative Decree no. 196/2003 (Personal Data Protection Code).
The Board of Statutory Auditors also acknowledged that the Board of Directors, at its meeting of 24 March 2015, resolved to apply, in compliance with the provisions of Article 12 of the Articles of Association, the option to postpone the approval of the financial statements to the longer deadline of 180 days after the end of the year.
136 | d’Amico Società di Navigazione S.p.A. Annexes
The financial statements for the year ended as at 31 December 2014, provided to us by the deadlines pursuant to law, can be summarised as follows: Income statement
Euro 2014 2013 Revenue 10,821,525 9,709,897 GROSS OPERATING PROFIT / (LOSS) (47,534) (12,760,000) OPERATING PROFIT / (LOSS) (2,796,575) (15,341,359) PROFIT / (LOSS) BEFORE TAXES 16,183,952 5,956,713 NET PROFIT / (LOSS) 16,286,530 6,237,002
Statement of other comprehensive income
Euro 2014 2013 Net profit / (loss) 16,286,530 6,237,002 AOTHER COMPONENTS OF COMPREHENSIVE INCOME NOT TO BE RECYCLED TO THE INCOME STATEMENT IN SUBSEQUENT PERIODS 112,410 (84) OTHER COMPONENTS OF COMPREHENSIVE INCOME TO BE RECYCLED TO THE INCOME STATEMENT IN SUBSEQUENT PERIODS 1,729,990 11,625,346 COMPREHENSIVE INCOME / (LOSS) 18,128,930 17,862,264
Statement of financial position
Euro As at 31 December 2014 As at 31 December 2013 ASSETS NON-CURRENT ASSETS 275,801,398 266,254,694 CURRENT ASSETS 30,437,367 13,274,375 TOTAL ASSETS 306,238,765 279,529,069 LIABILITIES SHAREHOLDERS’ EQUITY 232,772,924 229,643,994 NON-CURRENT LIABILITIES 53,205,219 39,860,256 CURRENT LIABILITIES 20,260,622 10,024,819 TOTAL SHAREHOLDERS' EQUITY AND LIABILITIES 306,238,765 279,529,069
We examined the draft financial statements and supervised their general layout, general compliance with law in terms of formation and structure, and compliance with the law pertaining to the preparation of the report on operations. In that regard, we have no specific comments to make, as, to the extent of our knowledge, the Directors did not deviate from the law as set out in Article 2423, paragraph four of the Italian Civil Code.
We verified that the financial statements reflect the facts and information we became aware of following the performance of our duties and we have no comments in this regard.
The above being stated, also considering the results of the report of the auditing firm, the Board of Statutory Auditors proposes that the Shareholders’ Meeting approve the statutory financial statements as at 31 December 2014, as drawn up by the Directors, and has no objections to be put forward regarding the proposed allocation of profit and its distribution as formulated by the Board of Directors.
Rome, 10 June 2015 Board of Statutory Auditors
2014 Annual Report | 137
Palermo d’Amico Società di Navigazione S.p.A. Dublin d’Amico Tankers Limited Ph: +39 091 625 9822 Ph: +353 1 676 1840 Fax: +39 091 848 6027 Fax: +353 1 677 0231 (Commercial) e-mail: [email protected] Fax: +353 1 677 0232 (Accounts) e-mail: [email protected] d’Amico Shipping Italia S.p.A. Ph: +39 091 625 9822 d’Amico Dry Limited Fax: +39 091 848 6027 Tel: +353 1 674 0100 e-mail: [email protected] Fax: +353 1 677 0212 e-mail: [email protected] REGISTERED OFFICE Via Siracusa, 27 d’Amico Finance Limited 90141 - Palermo Ph: +353 1 674 0100 Italy Fax: +353 1 677 0212 e-mail: [email protected]
The Anchorage Rome d’Amico Società di Navigazione S.p.A. 17 - 19, Sir John Rogerson’s Quay Ph: +39 06 845 611 Dublin 2 Fax: +39 06 9896 8092 Ireland e-mail: [email protected]
d’Amico Shipping Italia S.p.A. Ph: +39 06 845 611 Singapore d’Amico Shipping Singapore Pte Ltd. Fax: +39 06 9896 8092 Ph: +65 6854 7360 e-mail: [email protected] Fax: +65 6854 7369 e-mail: [email protected] HEAD OFFICE Corso d’Italia, 35/B Ph: +65 6586 0860 00198 - Rome Fax: +65 6586 0879 Italy e-mail: [email protected]
6 Battery Road #34-02 049909 - Singapore Genoa d’Amico Società di Navigazione S.p.A. Singapore Ph: +39 010 449 5901 Fax: +39 010 986 8037 Ishima Pte Ltd. e-mail: [email protected] Ph: +65 6586 0880 Fax: +65 6586 0899 d’Amico Shipping Italia S.p.A. Ph: +39 010 449 5901 6 Battery Road, #34-01 Fax: +39 010 986 8037 049909 - Singapore e-mail: [email protected] Singapore
OPERATIONS Via de Marini 53 Torre Shipping scala A - 14° Floor London d’Amico Tankers UK Limited 16149 - Genoa Ph: +44 20 7340 2000 Italy Fax: +44 20 7340 2001 e-mail: [email protected] Sirius Ship Management S.r.l Ph: +39 010 648 941 d’Amico Shipping UK Limited Fax: +39 010 648 9442 Ph: +44 20 7340 2000 e-mail: [email protected] Fax: +44 20 7340 2001 e-mail: [email protected] OPERATIONS Via de Marini 53 2, Queen Anne’s Gate Buildings Torre Shipping building B Dartmouth Street 16149 - Genoa SW 1H 9BP - London Italy United Kingdom
Luxembourg d’Amico International S.A. Mumbai d'Amico Ship Ishima India Pvt. Ltd. Ph: +352 26 63 24 Ph: +91 22 4037 2222 Fax: +352 26 26 25 49 Fax: +91 22 2823 4987 e-mail: [email protected] e-mail: [email protected]
d’Amico International Shipping S.A. 202/203 City Point Ph: +352 26 26 29 29 J.B. Nagar, Andheri Kurla Road Fax: +352 26 26 24 54 400 059 - Andheri (E) e-mail: [email protected] State of Maharashtra - Mumbai India 25/C, Boulevard Royal - 11° Floor L-2449 - Luxembourg Grand Duchy of Luxembourg Vancouver ACGI Shipping Inc. Ph: +1 604 891 7447 Fax: +1 604 891 7377 Monte-Carlo d’Amico Tankers Monaco S.A.M. e-mail: [email protected] Ph: +377 9310 5656 Fax: +377 9310 5607 HEADQUARTERS e-mail: [email protected] 1100-900, West Hastings Street - V6C 1E5 British Colombia - Vancouver Cogema S.A.M. Canada Ph: +377 9310 5270 Fax: +377 9325 4162 e-mail: [email protected] Casablanca d'Amico Dry Maroc Srl 20, Boulevard de Suisse Ph: +212 522 224 236 MC 98000 - Monte Carlo Fax: +212 522 224 228 Principality of Monaco [email protected]
OPERATIONS 3 Rue Mohamed Abdou -7° Floor, Nr. 2 Stamford d'Amico Shipping USA Limited 20070 Casablanca Ph: +1 203 274 8484 Morocco
One Atlantic Street - 6° Floor Stamford 06901 – CONNECTICUT USA