BUZZI UNICEM S.p.A. (incorporated with limited liability under the laws of the Republic of Italy) €350,000,000 6.250 per cent. Notes due 28 September 2018 The issue price of the €350,000,000 6.250 per cent. Notes due 28 September 2018 (the “Notes”) of Buzzi Unicem S.p.A. (the “Issuer”) is 100 per cent. of their principal amount. Unless previously redeemed or cancelled, the Notes will be redeemed at their principal amount on 28 September 2018. The Notes are subject to redemption in whole at their principal amount at the option of the Issuer at any time in the event of certain changes affecting taxation in the Republic of Italy. In addition, the holder of a Note may, by the exercise of the relevant option, require the Issuer to redeem, or at the Issuer’s option, to purchase or procure the purchase of, such Note at its principal amount upon the occurrence of a Put Event (as defined below). See “Terms and Conditions of the Notes — Redemption and Purchase”. The Notes will bear interest from 28 September 2012 (the “Closing Date”) at the rate of 6.250 per cent. per annum payable annually in arrear on 28 September each year commencing on 28 September 2013. Payments on the Notes will be made in Euro without deduction for or on account of taxes imposed or levied by the Republic of Italy to the extent described under “Terms and Conditions of the Notes — Taxation”. Application has been made to the Commission de Surveillance du Secteur Financier (the “CSSF”) in its capacity as competent authority under the Luxembourg Act dated 10 July 2005 (the “Luxembourg Act”) on prospectuses for securities to approve this document as a prospectus (the “Prospectus”). The CSSF assumes no responsibility for the economic and financial soundness of the transactions contemplated by this Prospectus or the quality or solvency of the Issuer in accordance with Article 7(7) of the Luxembourg Act. Application has also been made to the Luxembourg Stock Exchange for the listing of the Notes on the Official List of the Luxembourg Stock Exchange and admission to trading on the Luxembourg Stock Exchange’s regulated market. This Prospectus will be available for viewing on the website of the Luxembourg Stock Exchange (www.bourse.lu). The Notes have not been, and will not be, registered under the United States Securities Act of 1933 as amended (the “Securities Act”) and are subject to United States tax law requirements. The Notes are being offered outside the United States by the Managers (as defined in “Subscription and Sale”) in accordance with Regulation S under the Securities Act (“Regulation S”), and may not be offered, sold or delivered within the United States or to, or for the account or benefit of, U.S. persons except pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act. An investment in the Notes involves certain risks. Prospective investors should have regard to the factors described under the heading “Risk Factors” on page 6. The Notes will be in bearer form and in the denomination of €100,000 each and, for so long as the Notes are represented by a Global Note (as defined below) and Euroclear Bank SA/NV (“Euroclear”) and Clearstream Banking, société anonyme (“Clearstream, Luxembourg”) (or other relevant clearing system) allow, in denominations of €1,000 in excess of €100,000, up to and including €199,000. The Notes will initially be in the form of a temporary global note (the “Temporary Global Note”), without interest coupons, which will be deposited on or around the Closing Date with a common safekeeper for Euroclear and Clearstream, Luxembourg. The Temporary Global Note will be exchangeable, in whole or in part, for interests in a permanent global note (the “Permanent Global Note”, and together with the Temporary Global Note, each a “Global Note”), without interest coupons, not earlier than 40 days after the Closing Date upon certification as to non-U.S. beneficial ownership. Interest payments in respect of the Notes cannot be collected without such certification of non U.S. beneficial ownership. The Permanent Global Note will be exchangeable in certain limited circumstances in whole, but not in part, for Notes in definitive form in principal amounts equal to €100,000 and integral multiples of €1,000 in excess thereof, up to and including €199,000, each with interest coupons attached. No Notes in definitive form will be issued with a denomination above €199,000. See “Summary of Provisions Relating to the Notes in Global Form”. The Notes are expected on issue to have a BB+ rating assigned by Standard & Poor’s Credit Market Services Europe Limited (“S&P”). Such rating will reflect only the views of S&P. S&P is established in the EEA and registered under Regulation (EU) No 1060/2009, as amended (the “CRA Regulation”) and is included in the list of registered credit rating agencies published on the website of the European Securities and Markets Authority at http://www.esma.europa.eu/page/List-registered- andcertified-CRAs. A security rating is not a recommendation to buy, sell or hold securities and may be subject to review, revision, suspension, reduction or withdrawal at any time by the assigning rating agency.
JOINT LEAD MANAGERS BofA Merrill Lynch Mediobanca – Banca di Credito Finanziario S.p.A. CO-MANAGERS Banca Aletti & C. Banca IMI Commerzbank Crédit Agricole CIB
Prospectus dated 26 September 2012 Level: 4 – From: 4 – Tuesday, September 25, 2012 – 10:22 – mark – 4463 Intro
CONTENTS
Page
IMPORTANT NOTICES ...... 3
INFORMATION INCORPORATED BY REFERENCE ...... 5
RISK FACTORS ...... 6
TERMS AND CONDITIONS OF THE NOTES ...... 15
SUMMARY OF PROVISIONS RELATING TO THE NOTES IN GLOBAL FORM ...... 27
USE OF PROCEEDS...... 29
DESCRIPTION OF THE ISSUER ...... 30
OVERVIEW OF FINANCIAL INFORMATION RELATING TO THE ISSUER...... 58
TAXATION ...... 69
SUBSCRIPTION AND SALE...... 75
GENERAL INFORMATION ...... 77
INDEX OF DEFINED TERMS...... 79
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IMPORTANT NOTICES
This document comprises a prospectus for the purposes of Article 5.3 of Directive 2003/71/EC (the “Prospectus Directive”), as amended by Directive 2010/73/EU, and for the purposes of the Luxembourg Act.
The Issuer accepts responsibility for the information contained in this Prospectus and declares that, having taken all reasonable care to ensure that such is the case, the information contained in this Prospectus to the best of its knowledge is in accordance with the facts and contains no omission likely to affect its import.
The Issuer has confirmed to the Managers (as defined in “Subscription and Sale”) that this Prospectus contains all information regarding the Issuer and its subsidiaries (together, the “Group”) and the Notes which is (in the context of the issue of the Notes) material; such information is true and accurate in all material respects and is not misleading in any material respect; any opinions, predictions or intentions expressed in this Prospectus on the part of the Issuer or the Group are honestly held or made and are not misleading in any material respect; this Prospectus does not omit to state any material fact necessary to make such information, opinions, predictions or intentions (in such context) not misleading in any material respect; and all proper enquiries have been made to ascertain and to verify the foregoing.
No representation, warranty or undertaking, express or implied, is made and no responsibility or liability is accepted by the Managers or the Paying Agents as to the accuracy or completeness of the information contained in this Prospectus or any other information provided by the Issuer in connection with the Notes or their distribution.
This Prospectus is to be read in conjunction with all documents which are deemed to be incorporated herein by reference (see “Information Incorporated by Reference”). This Prospectus should be read and construed on the basis that such documents are incorporated in and form part of this Prospectus.
The Issuer has not authorised the making or provision of any representation or information regarding the Issuer or the Notes other than as contained in this Prospectus or as approved for such purpose by the Issuer. Any such representation or information should not be relied upon as having been authorised by the Issuer or the Managers.
Neither the delivery of this Prospectus nor the offering, sale or delivery of any Note shall in any circumstances create any implication that the information contained herein concerning the Issuer and/or its Group is correct at any time subsequent to the date hereof or that any other information supplied in connection with the offering of the Notes is correct as of any time subsequent to the date indicated in the document containing the same or that there has been no adverse change, or any event reasonably likely to involve any adverse change, in the condition (financial or otherwise) of the Issuer and/or its Group since the date of this Prospectus.
This Prospectus does not constitute an offer of, or an invitation to subscribe for or purchase, any Notes.
The distribution of this Prospectus and the offering, sale and delivery of Notes in certain jurisdictions may be restricted by law. Persons into whose possession this Prospectus comes are required by the Issuer and the Managers to inform themselves about and to observe any such restrictions. For a description of certain restrictions on offers, sales and deliveries of Notes and on distribution of this Prospectus and other offering material relating to the Notes, see “Subscription and Sale”.
In particular, the Notes have not been and will not be registered under the Securities Act and are subject to United States tax law requirements. Subject to certain exceptions, Notes may not be offered, sold or delivered within the United States or to U.S. persons.
In this Prospectus, unless otherwise specified, references to a “Member State” are references to a Member State of the European Economic Area and references to “U.S.$”, “U.S. dollars” or “dollars” are to United States dollars, references to “€”, “EUR” or “Euro” are to the single currency introduced at the start of the third stage of the European Economic and Monetary Union pursuant to the Treaty on the Functioning of the European Union, as amended.
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In connection with the issue of the Notes, Merrill Lynch International (the “Stabilising Manager”) (or persons acting on behalf of the Stabilising Manager) may over allot Notes or effect transactions with a view to supporting the price of the Notes at a level higher than that which might otherwise prevail. However, there is no assurance that the Stabilising Manager (or persons acting on behalf of a Stabilising Manager) will undertake stabilisation action. Any stabilisation action may begin on or after the date on which adequate public disclosure of the terms of the offer of the Notes is made and, if begun, may be ended at any time, but it must end no later than the earlier of 30 days after the issue date of the Notes and 60 days after the date of the allotment of the Notes. Any stabilisation action or over allotment must be conducted by the Stabilising Manager (or persons acting on behalf of the Stabilising Manager) in accordance with all applicable laws and rules.
Market Share Information and Statistics
This prospectus contains statements regarding the Issuer’s industry and its relative competitive position in the industry that are not based on published statistical data or information obtained from independent third parties, but are based on the Issuer’s experience and its own investigation of market conditions, including its own elaborations of such published statistical or third-party data. Although the Issuer’s estimates are based on information obtained from its customers, sales force, trade and business organizations, market survey agencies and consultants, government authorities and associations in the Issuer’s industry which the Issuer believes to be reliable, there is no assurance that any of these assumptions are accurate or correctly reflect the Issuer’s position in the industry. None of the Issuer’s internal surveys or information have been verified by independent sources.
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INFORMATION INCORPORATED BY REFERENCE
The information set out in the table below shall be deemed to be incorporated in, and to form part of, this Prospectus provided however that any statement contained in any document incorporated by reference in, and forming part of, this Prospectus shall be deemed to be modified or superseded for the purpose of this Prospectus to the extent that a statement contained herein modifies or supersedes such statement.
Such documents will be made available, free of charge, during usual business hours at the specified offices of the Fiscal Agent, and will be published on the website of the Luxembourg Stock Exchange (www.bourse.lu), unless such documents have been modified or superseded.
For ease of reference, the tables below set out the relevant page references for the Issuer’s consolidated annual financial statements, the notes to the consolidated financial statements and the auditors’ reports for the years ended 31 December 2009, 2010 and 2011 and the Issuer’s unaudited consolidated semi-annual financial statements and the notes to the half-yearly financial report as at and for the six months ended 30 June 2012. Any information not listed in the cross reference table but included in the documents incorporated by reference is given for information purposes only.
Buzzi Unicem S.p.A. consolidated annual report for the year ended 31 December 2009 Consolidated balance sheet ...... Page 66 Consolidated income statement ...... Page 68 Consolidated cash flow statement...... Page 69 Consolidated statement of changes in equity ...... Page 70 Notes to the consolidated financial statements ...... Pages 71-146 Auditors’ report ...... Pages 158-159
Buzzi Unicem S.p.A. consolidated annual report for the year ended 31 December 2010 Consolidated balance sheet ...... Page 64 Consolidated income statement ...... Page 66 Consolidated cash flow statement...... Page 67 Consolidated statement of changes in equity ...... Page 68 Notes to the consolidated financial statements ...... Pages 69-145 Auditors’ report ...... Pages 158-159
Buzzi Unicem S.p.A. consolidated annual report for the year ended 31 December 2011 Consolidated balance sheet ...... Pages 66-67 Consolidated income statement ...... Page 68 Consolidated cash flow statement...... Page 69 Consolidated statement of changes in equity ...... Page 70 Notes to the consolidated financial statements ...... Pages 71-148 Auditors’ report ...... Pages 162-163
Buzzi Unicem S.p.A. consolidated semi-annual report for the six months ended 30 June 2012 Consolidated balance sheet ...... Pages 17-18 Consolidated income statement ...... Pages 19-20 Consolidated statement of cash flows...... Page 21 Consolidated statement of changes in equity ...... Page 22 Notes to the half yearly financial report ...... Pages 23-58 Auditor’s review report ...... Pages 66-67
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RISK FACTORS
The Issuer believes that the following factors may affect its ability to fulfil its obligations under the Notes. Most of these factors are contingencies which may or may not occur and the Issuer is not in a position to express a view on the likelihood of any such contingency occurring. In addition, factors which are material for the purpose of assessing the market risks associated with the Notes are also described below.
The Issuer believes that the factors described below represent the principal risks inherent in investing in the Notes, but the inability of the Issuer to pay interest, principal or other amounts on or in connection with the Notes may occur for other reasons which may not be considered significant risks by the Issuer based on information currently available to it or which it may not currently be able to anticipate.
Prospective investors should also read the detailed information set out elsewhere in this Prospectus and reach their own views prior to making any investment decision.
Words and expressions defined in “Terms and Conditions of the Notes” or elsewhere in this Prospectus have the same meaning in this section. References to a “Condition” is to such numbered condition in the Terms and Conditions of the Notes. Prospective investors should read the entire Prospectus.
Factors that may affect the Issuer’s ability to fulfil its obligations under the Notes
Risks related to the building materials industry
Cyclical nature of construction business
The building materials industry in any particular jurisdiction is dependent on the level of activity in the construction sector. The construction industry tends to be cyclical, and dependent on the level of residential and commercial construction and the level of infrastructure spending. Political instability or changes in government policy can also have an adverse impact on the construction industry. In addition, the industry is sensitive to factors such as interest rates and a downturn in economic activity in a particular country, region or sector may lead to a recession in the construction industry (see also “Global economic recession” below). Finally, the level of construction activity may fall even if the economy in general is growing.
The Group has operations in eleven countries worldwide, and some markets or regions account for a significant portion of its total sales. Accordingly, its results of operations and profitability may be adversely affected by a downturn in construction activity, whether it is on a global scale or in a significant market in which it operates.
Global economic recession
The Issuer’s results depend mainly on residential, commercial and infrastructure construction activity and spending levels in various European and Non-European economies. Since the second half of the year 2011, the focus on sovereign risks became intense after the Eurozone bailout of Greece and the rating downgrade of several European countries including Italy, which has impacted consumer and public spending. To varying degrees depending on the geographical area, this may continue to have an adverse effect on the market for the Issuer’s products and affect its business and results of operations. It is impossible to predict how long the volatility in global economies will last, and whether the economic situation will deteriorate before it improves. Depending on the geographical area, a worsening of the current economic crisis could negatively affect demand for Issuer’s products and may affect the Issuer’s customer economic behaviour increasing the exposure to credit risk
The Issuer has taken a number of measures in response to the market slowdown in construction activity, including significant cuts in capital expenditure. The Issuer is confident that these measures are adequate to strengthen its position and respond to the volatility in some of its core markets; however there is no assurance that such measures are sufficient and that the turmoil of the global economy and of any of the major markets where the Issuer and the Group operate may not have an adverse effect on the Group’s business.
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Seasonality and weather
Construction activity, and thus demand for the Issuer’s products, decreases during periods of cold weather, snow, or heavy or sustained rainfall. Consequently, demand for the Issuer’s products is lower during the winter in temperate countries. The Issuer’s operations in Western Europe, North America and similar markets are seasonal, with sales generally increasing during the second and third quarters because of usually better weather conditions. However, high levels of rainfall can adversely affect the Issuer’s operations during these periods as well. Such adverse weather conditions can materially affect the Issuer’s results of operations and profitability if they occur with unusual intensity, during abnormal periods, or last longer than usual in its major markets, especially during peak construction periods.
Environmental and health and safety matters and other regulatory risks
Cement industry CO2 emissions result mainly from the chemical process during the clinker production and from combustion of fossil fuels. Compared to other energy-intensive industrial activities, CO2 emission per unit of financial added value is relatively high for the cement industry. Public concern in relation to greenhouse gas emissions thus poses a risk of potentially significant additional costs for the cement industry. The exercise of increasingly varied regulatory systems in different parts of the world may affect international competitiveness and may eventually lead to stranded assets in regions with the most severe caps on absolute emissions.
The operations of building material suppliers are subject to numerous other national and supranational environmental, health and safety laws, regulations, treaties and conventions, including those controlling the discharge of materials into the environment, requiring removal and clean-up of environmental contamination, establishing certification, licensing, health and safety, taxes, labour and training standards, or otherwise relating to the protection of human health and the environment. Existing environmental legislation imposes substantial fines and sanctions for violations and may require investments to ensure compliance with mandatory emission limit values. In addition, existing environmental laws and regulations may be amended or new laws or regulations may be adopted further curtailing or regulating the cement industry and related industries in the varied jurisdictions in which the Group operates. The Issuer cannot predict the extent to which future earnings of the Group might be affected by compliance with such new or amended laws or regulations and it cannot assure investors that current and future law and regulation, and compliance with such regulation and law, will not have a material adverse effect on the Group’s business.
Finally, many of the Group’s current and former properties are or have been used for industrial purposes and Group companies have arranged for disposal of waste on their own premises, in their quarries and at third party disposal sites. Under certain environmental laws, liability for actions at contaminated sites, including buildings and other facilities, is strict, and in some cases, joint and several. The Group may in the future be subject to potentially material liabilities relating to the investigation and clean-up of contaminated areas, including groundwater, at properties now or formerly owned, operated or used by the Group, and to claims alleging personal injury or damage to natural resources.
Energy and fuel costs
The Issuer’s operations consume significant amounts of energy and fuel, the cost of which can fluctuate significantly in many parts of the world. The price of energy and fuel has varied significantly in the past several years and may vary significantly in the future, largely as a result of market conditions and other factors beyond the Issuer’s control, including significant volatility in oil prices.
The Issuer takes a number of steps designed to manage the risk of energy and fuel costs, these measures may not be fully effective to protect it from this risk. By enhancing the technology of its cement plants and its supply chain, the issuer continues to increase the proportion of secondary fuels utilized in clinker production. The cost for secondary fuels may increase or the quantity or quality of the alternative fuels may not be sufficient to substitute primary fuels. The Issuer enters into medium-term supply contracts. Nonetheless, these supply contracts may contain indexation clauses which limits the protection of the Issuer from fluctuations in energy prices. Similarly, if the Issuer enters into fixed price contracts when prices are high, it will not benefit if energy prices subsequently decline. Furthermore, the Issuer uses derivative instruments
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such as forward energy price agreements on organised markets or on the over the counter (OTC) market to manage its exposure to commodity risk.
While these protective measures can be useful, they may not fully protect the Issuer from exposure to energy and fuel price volatility. As a result, in spite of these measures, energy and fuel costs have significantly affected, and may continue to affect, the Issuer’s results of operations and profitability.
Sourcing and access to raw materials
The Issuer generally maintains reserves of limestone, gypsum, aggregates and other materials that it uses to manufacture its products. However, the Issuer also obtains certain raw materials from third parties who produce such materials as by-products of industrial processes, such as synthetic gypsum, slag and fly ash. In general, the Issuer is not dependent on single raw materials suppliers and it tries to secure the supply of these materials through long-term renewable contracts and framework agreements, which ensure better management of its supplies.
The Issuer does, however, have short-term contracts in certain countries. Should its existing suppliers cease operations or reduce or eliminate production of these by-products, its sourcing costs for these materials may increase significantly or it may be required to find alternatives to these materials. Access to the raw materials necessary for the Issuer’s operations is a key consideration in its investments. The Issuer usually owns or holds long-term land and mining rights on the quarries of raw materials essential to its operations spread in several countries across the world, and is managing with the necessary care the time-consuming and complex process to obtain and renew its various rights and permits. However, failure to obtain or maintain these land and mining rights as a result of local legislative action or otherwise could have a significant impact on the development of the Issuer’s operations and results.
Competition
Many of the markets for cement, aggregates and other construction materials and services are highly competitive. Competition in these segments is based largely on price and, to a lesser extent, on quality and service due to the nature of such building materials.
The Issuer competes in each of its cement, concrete and aggregates markets with other suppliers of these products as well as with importers of foreign building materials. Due to this the Group’s profitability is dependent on the level of demand for such building materials as a whole, and on its ability to control efficiency and operating costs. Prices in these segments are subject to changes in response to relatively minor fluctuations in supply and demand, general economic conditions, and other market conditions beyond the Group’s control. As a consequence, the Group may face price, margin or volume declines in the future.
Competition regulation
The Group has internal guidelines and policies in place setting out guidelines relating to competitive behaviour in order to ensure compliance with competition laws in the respective markets. In recent years, various European competition regulators have been subjecting the building materials industry to increased scrutiny. The Issuer and certain subsidiaries of the Issuer have become subject to investigations by cartel and competition authorities in various countries and, in some cases, fines have been imposed. (see “Description of the Issuer — Legal Proceedings”). There can be no assurance that the pending proceedings or investigations will not lead to the imposition of further fines or that certain of the Issuer’s subsidiaries or affiliates will not in the future be subject of investigations by cartel authorities or be subject to additional fines.
Risks of business interruption, production curtailment or loss of assets
Due to the high fixed cost nature of the building materials industry, interruptions in production capabilities at any facility may cause the productivity and results of operations of an industry participant to decline significantly during the affected period. The manufacturing processes of producers of building materials are dependent upon critical pieces of equipment such as cement kilns, mils and others. This equipment may, on
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occasion, be out of service as a result of strikes, unanticipated failures, accidents or force majeure events. In addition there is a risk that equipment or production facilities may be damaged or destroyed by such events.
Risks related to the Group
Currency risks
The Group operates internationally and faces foreign exchange risks arising from various currency exposures and from the volatility of currency market. The Group has operations in eleven countries worldwide and movements in exchange rates have had a significant influence on the Group‘s business, results of operations and financial condition. The translation of local balance sheets and statements of income into the Group’s reporting currency (Euros) leads to currency translation effects which the Group normally does not hedge in the financial markets.
Currency fluctuations can also result in the recognition of exchange rate losses in the Issuer’s consolidated income statement. In addition, the translational risk in the Issuer’s balance sheet equity is not hedged, and a significant decrease in the aggregate value of local currencies against the Euro can have a material effect on the Issuer’s consolidated balance sheet items.
Emerging markets
In 2011, the Group derived approximately 19 per cent. of its revenues from emerging markets (defined, for these purposes, as countries outside of the European Union and North America, other than Japan, Australia and New Zealand). The Issuer’s growth strategy focuses on opportunities in emerging markets, and it expects that an increasing portion of its total revenues and earnings will continue to flow from these markets.
The Issuer’s presence in emerging markets exposes it to risks such as gross domestic product volatility, significant and unstable currency fluctuations, political, financial and social uncertainties and turmoil, high rates of inflation, the possible implementation of exchange controls, less certainty concerning legal rights and enforcement mechanisms and the possible nationalization or expropriation of privately-held assets, any of which could damage or disrupt the Issuer’s operations in a given market. While the Issuer’s emerging markets operations are spread among several countries, with no individual country representing over 9 per cent. of its consolidated net sales (the highest being Mexico with about 9 per cent.), such diversification will not enable it to avoid risks that affect multiple emerging markets at the same time.
Capital expenditure programme
The Group has a number of capital expenditure projects either underway or in the planning or permitting stages. There can be no assurance that such projects will be completed on time or to budget. Factors that could result in planned optimizations being delayed or cancelled due to construction difficulties and the failure to obtain all requisite planning and other consents. Especially in well developed countries, it is becoming increasingly difficult to obtain permits for new installations and quarries and even the extension in time of existing permits is becoming more challenging. Permitting difficulties could result in significant delays of future investments and growth or even in the suspension of particular projects.
In addition, due to the current economic volatility and the potential impact on the Group’s results of operations (see “Risks related to the building materials industry — Global economic recession”), the Issuer has postponed a number of its capital expenditure projects and, although this is intended as a temporary measure, any reduction in capital expenditure may have an adverse impact on the Issuer’s business in the medium or long term.
Litigation risks
In the ordinary course of business, the Group is involved, and may in the future become involved, in lawsuits, claims, investigations and proceedings, including commercial, environmental, health and safety and product liability matters and tax claims. As at the date of this Prospectus, there are several legal and administrative proceedings involving the Group, both pending and threatened, including tax, environmental and antitrust
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proceedings (see “Description of the Issuer — Legal Proceedings”). In the opinion of the Issuer’s management, none of these proceedings is likely to have a material impact on the Group’s business or results of operations and any financial exposure arising from these proceedings is adequately covered by provision made in the Issuer’s financial statements. Nevertheless, an unfavourable outcome of one or more of these proceedings may have an adverse effect on the Group’s business or results of operations. Furthermore, there can be no assurance that future litigation will not adversely affect the Group’s business, results of operation or financial condition.
Risks concerning liquidity
In order to ensure that the Group continues to meet its financing requirements and to maintain or grow its business generally, it aims to maintain flexibility by keeping committed credit lines available and, for renewal of existing loans, commences negotiations at an early stage. However, the ability of the Group to access financing sources on favourable economic terms is dependent on a variety of factors, some of which are outside of its control, such as liquidity constraints, general market conditions and confidence in the banking system. The most recent bail out of Greece and sovereign crises in the EU and the resulting financial turmoil affecting the banking system and the financial markets could result in incremental tightening of the credit markets and may have an impact on borrowers and on the wider economy. Furthermore the risk of insufficient capital procurement or of significantly increased cost of funding may be triggered by a deterioration of the credit risk of the Issuer itself. In September 2011 the Issuer was downgraded by Standard & Poor’s to a BB+ long term rating with a stable outlook due to the cyclicality of the cement business in an economic downturn and to its strong footprint in the underperforming US and Italian markets. The deterioration of the Issuer’s credit risk profile has lead and may continue to lead to increased costs of funding and may limit its sources of funding. Any failure by the Group to obtain financing on favourable economic terms may affect the Group’s ability to meet its financial obligations as they fall due (See also “Description of the Issuer — Financing”).
Tax risks
Given the dynamic nature of tax law, there is an intrinsic risk in the interpretation and application of tax legislation in the countries where the Group is operating. Tax issues are monitored closely for this purpose and adequate provisions have been made for risks relating to disputed matters. Notwithstanding unexpected tax claims may have an adverse effect on the Group’s business and financial condition and may adversely affect results and liquidity of the Issuer (see also “Description of the Issuer – legal proceedings”).
Impairment Risks
Fixed and intangible assets of the Group are subject to an impairment testing, at least annually or upon occurrence of significant events or change in relevant circumstances. In some case the economic life of fixed asset may be shortened and the value of goodwill may be reduced due to factors outside the control of the Group (such as market conditions, availability of permits, availability of raw material) and in such situation impairment losses are recognized. Impairment losses have a direct effect in the financial statement of the Group and of the Issuer and may therefore have an adverse effect on the Issuer’s profit and equity.
Risks relating to the Notes
There is no active trading market for the Notes
The Notes are new securities which may not be widely distributed and for which there is currently no active trading market. If the Notes are traded after their initial issuance, they may trade at a discount to their initial offering price, depending upon prevailing interest rates, the market for similar securities, general economic conditions and the financial condition of the Issuer. Although application has been made for the Notes to be admitted to listing on the official list and trading on the Luxembourg Stock Exchange’s regulated market, there is no assurance that such application will be accepted or that an active trading market will develop. Accordingly, there is no assurance as to the development or liquidity of any trading market for the Notes.
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The Notes are fixed rate securities and are vulnerable to fluctuations in market interest rates
The Notes will carry fixed interest. A holder of a security with a fixed interest rate is exposed to the risk that the price of such security falls as a result of changes in the current interest rate on the capital market (the “Market Interest Rate”). While the nominal interest rate of a security with a fixed interest rate is fixed during the life of such security or during a certain period of time, the Market Interest Rate typically changes on a daily basis. As the Market Interest Rate changes, the price of such security changes in the opposite direction. If the Market Interest Rate increases, the price of such security typically falls, until the yield of such security is approximately equal to the Market Interest Rate. Conversely, if the Market Interest Rate falls, the price of a security with a fixed interest rate typically increases, until the yield of such security is approximately equal to the Market Interest Rate. Investors should be aware that movements of the Market Interest Rate could adversely affect the market price of the Notes.
The Notes may not be a suitable investment for all investors
Each potential investor in the Notes must determine the suitability of that investment in light of its own circumstances. In particular, each potential investor should:
(a) have sufficient knowledge and experience to make a meaningful evaluation of the Notes, the merits and risks of investing in the Notes and the information contained or incorporated by reference in this Prospectus or any applicable supplement;
(b) have access to, and knowledge of, appropriate analytical tools to evaluate, in the context of its particular financial situation, an investment in the Notes and the impact the Notes will have on its overall investment portfolio;
(c) have sufficient financial resources and liquidity to bear all of the risks of an investment in the Notes, including where the currency for principal or interest payments is different from the potential investor’s currency;
(d) understand thoroughly the terms of the Notes and be familiar with the behaviour of any relevant indices and financial markets; and
(e) be able to evaluate (either alone or with the help of a financial adviser) possible scenarios for economic, interest rate and other factors that may affect its investment and its ability to bear the applicable risks.
The Notes may be redeemed prior to maturity
In the event that the Issuer would be obliged to increase the amounts payable in respect of any Notes due to any withholding or deduction for or on account of, any present or future taxes, duties, assessments or governmental charges of whatever nature imposed, levied, collected, withheld or assessed by or on behalf of the Republic of Italy or any political subdivision thereof or any authority therein or thereof having power to tax, the Issuer may redeem all outstanding Notes in accordance with the Conditions.
Because the Global Notes are held by or on behalf of Euroclear and Clearstream, Luxembourg, investors will have to rely on their procedures for transfer, payment and communication with the Issuer
The Notes will be represented by the Global Notes except in certain limited circumstances described in the Permanent Global Note. The Global Notes will be deposited with a common depositary for Euroclear and Clearstream, Luxembourg. Except in certain limited circumstances described in the Permanent Global Note, investors will not be entitled to receive definitive Notes. Euroclear and Clearstream, Luxembourg will maintain records of the beneficial interests in the Global Notes. While the Notes are represented by the Global Notes, investors will be able to trade their beneficial interests only through Euroclear and Clearstream, Luxembourg.
The Issuer will discharge its payment obligations under the Notes by making payments to or to the order of the common depositary for Euroclear and Clearstream, Luxembourg for distribution to their account holders.
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A holder of a beneficial interest in a Global Note must rely on the procedures of Euroclear and Clearstream, Luxembourg to receive payments under the Notes. The Issuer has no responsibility or liability for the records relating to, or payments made in respect of, beneficial interests in the Global Notes.
Holders of beneficial interests in the Global Notes will not have a direct right to vote in respect of the Notes. Instead, such holders will be permitted to act only to the extent that they are enabled by Euroclear and Clearstream, Luxembourg to appoint appropriate proxies. Similarly, holders of beneficial interests in the Global Notes will not have a direct right under the Global Notes to take enforcement action against the Issuer in the event of a default under the Notes but will have to rely upon their rights under the Deed of Covenant.
Minimum denomination
As the Notes have a denomination consisting of the minimum denomination plus a higher integral multiple of another smaller amount, it is possible that the Notes may be traded in amounts in excess of €100,000 (or its equivalent) that are not integral multiples of €100,000 (or its equivalent). In such case a Noteholder who, as a result of trading such amounts, holds a principal amount of less than the minimum denomination may not receive a Definitive Note in respect of such holding (should Definitive Notes be printed) and would need to purchase a principal amount of Notes such that its holding amounts to the minimum denomination.
Payments in respect of the Notes may in certain circumstances be made subject to withholding or deduction of tax
All payments in respect of Notes will be made free and clear of withholding or deduction of Italian taxation, unless the withholding or deduction is required by law. In that event, the Issuer will pay such additional amounts as will result in the Noteholders receiving such amounts as they would have received in respect of such Notes had no such withholding or deduction been required. The Issuer’s obligation to gross up is, however, subject to a number of exceptions, including withholding or deduction of:
(a) imposta sostitutiva (Italian substitute tax), pursuant to Italian Legislative Decree No. 239 of 1 April 1996 (“Decree No. 239”); and
(b) withholding tax operated in certain EU Member States pursuant to European Council Directive 2003/48/EC regarding the taxation of savings income (the “EU Savings Tax Directive”) and similar measures agreed with the European Union by certain non EU countries and territories, a brief description of which is set out below.
Prospective purchasers of Notes should consult their tax advisers as to the overall tax consequences of acquiring, holding and disposing of Notes and receiving payments of interest, principal and/or other amounts under the Notes, including in particular the effect of any state, regional or local tax laws of any country or territory. See also “Taxation”.
Imposta sostitutiva
Imposta sostitutiva (Italian substitute tax) is applied to payments of interest and other income (including the difference between the redemption amount and the issue price) at a rate of 20.00 per cent. to (i) certain Italian resident Noteholders and (ii) non Italian resident Noteholders who have not filed in due time with the relevant depository a declaration (autocertificazione) stating, inter alia, that he or she is resident for tax purposes in a country which allows for an adequate exchange of information with the Italian tax authorities.
EU Savings Tax Directive
Under EC Council Directive 2003/48/EC on the taxation of savings income (the “EU Savings Tax Directive”), each Member State is required to provide to the tax authorities of another Member State details of payments of interest or other similar income paid by a paying agent (within the meaning of the EU Savings Tax Directive) within its jurisdiction to, or collected by such a paying agent (within the meaning of the EU Savings Tax Directive) for, an individual resident or certain limited types of entity known as “residual
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entities” as defined in article 4-2 of the EU Savings Tax Directive established in that other Member State; however, for a transitional period, Austria and Luxembourg may instead apply a withholding system in relation to such payments, deducting tax at the rate of 35 per cent. The transitional period is to terminate at the end of the first full fiscal year following agreement by certain non-EU countries to the exchange of information relating to such payments.
A number of non-EU countries (including Switzerland) and certain dependent or associated territories of certain Member States, have adopted similar measures (either provision of information or transitional withholding) in relation to payments made by a paying agent (within the meaning of the EU Savings Tax Directive) within its jurisdiction to, or collected by such a paying agent (within the meaning of the EU Savings Tax Directive) for, an individual resident or certain limited types of entity, known as “residual entities”, established in a Member State. In addition, the Member States have entered into provision of information or transitional withholding arrangements with certain of those dependent or associated territories in relation to payments made by a person in a Member State to, or collected by such a person for, an individual resident or certain limited types of entity, known as “residual entities”, established in one of those territories.
The European Commission has proposed certain amendments to the EU Savings Tax Directive, which may, if implemented, amend or broaden the scope of the requirements described above. Investors who are in any doubt as to their position should consult their professional advisers.
Change of law
The terms and conditions of the Notes are based on English law in effect as at the date of this Prospectus. No assurance can be given as to the impact of any possible judicial decision or change to English law or administrative practice after the date of this Prospectus.
Modification
The terms and conditions of the Notes contain provisions for calling meetings of Noteholders to consider matters affecting their interests generally. These provisions permit defined majorities to bind all Noteholders including Noteholders who did not attend and vote at the relevant meeting and Noteholders who voted in a manner contrary to the majority.
Risks related to the market generally
Set out below is a brief description of the principal market risks, including liquidity risk, exchange rate risk, interest rate risk and credit risk:
The secondary market generally
The Notes may have no established trading market when issued and one may never develop. If a market does develop, it may not be very liquid and, consequently, investors may not be able to sell their Notes easily or at prices that will provide them with a yield comparable to similar investments that have a developed secondary market. Illiquidity may have a severely adverse effect on the market value of the Notes.
The market value of the Notes may also be significantly affected by factors such as variations in the Group’s annual and interim results of operations, news announcements or changes in general market conditions. In addition, broad market fluctuations and general economic and political conditions may adversely affect the market value of the Notes, regardless of the actual performance of the Group.
Legal investment considerations may restrict certain investments
The investment activities of certain investors are subject to legal investment laws and regulations, or review or regulation by certain authorities. Each potential investor should consult its legal advisers to determine whether and to what extent (i) Notes are legal investments for it, (ii) Notes can be used as collateral for various types of borrowing and (iii) other restrictions apply to the purchase or pledge of any Notes. Financial
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institutions should consult their legal advisors or the appropriate regulators to determine the appropriate treatment of Notes under any applicable risk based capital or similar rules.
Exchange rate risks and exchange controls
The Issuer will pay principal and interest on the Notes in Euro. This presents certain risks relating to currency conversions if an investor’s financial activities are denominated principally in a currency or currency unit (the “Investor’s Currency”) other than Euro. These include the risk that exchange rates may change significantly (including changes due to devaluation of the Euro or revaluation of the Investor’s Currency) and the risk that authorities with jurisdiction over the Investor’s Currency may impose or modify exchange controls. An appreciation in the value of the Investor’s Currency relative to the Euro would decrease (i) the Investor’s Currency equivalent yield on the Notes, (ii) the Investor’s Currency equivalent value of the principal payable on the Notes and (iii) the Investor’s Currency equivalent market value of the Notes.
In addition, government and monetary authorities may impose (as some have done in the past) exchange controls that could adversely affect an applicable exchange rate. As a result, investors may receive less interest or principal than expected, or no interest or principal.
Credit Rating
The Notes have been assigned a rating of BB+ by Standard & Poor’s Credit Market Services Europe Limited (“S&P”). Such rating will reflect only the views of S&P. S&P is established in the EEA and registered under the CRA Regulation. A security rating is not a recommendation to buy, sell or hold securities and may be subject to suspension, reduction or withdrawal at any time by the assigning rating agency. Any adverse change in an applicable credit rating could adversely affect the trading price for the Notes.
In general, European regulated investors are restricted from using a rating for regulatory purposes if such rating is not issued by a credit rating agency established in the EEA and registered under the CRA Regulation unless (1) the rating is provided by a credit rating agency operating in the EEA before 7 June 2010 which has submitted an application for registration in accordance with the CRA Regulation and such registration has not been refused, or (2) the rating is provided by a credit rating agency not established in the EEA but is endorsed by a credit rating agency established in the EEA and registered under the CRA Regulation or (3) the rating is provided by a credit rating agency not established in the EEA which is certified under the CRA Regulation.
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TERMS AND CONDITIONS OF THE NOTES
The following is the text of the Terms and Conditions of the Notes which (subject to completion and amendment) will be endorsed on each Note in definitive form:
The €350,000,000 6.250 per cent. Notes due 28 September 2018 (the “Notes”, which expression includes any further notes issued pursuant to Condition 13 (Further Issues) and forming a single series therewith) of Buzzi Unicem S.p.A. (the “Issuer”) are the subject of a fiscal agency agreement dated 28 September 2012 (as amended or supplemented from time to time, the “Agency Agreement”) between the Issuer, Deutsche Bank AG, London Branch as fiscal agent (the “Fiscal Agent”, which expression includes any successor fiscal agent appointed from time to time in connection with the Notes) and the paying agents named therein (together with the Fiscal Agent, the “Paying Agents”, which expression includes any successor or additional paying agents appointed from time to time in connection with the Notes). Certain provisions of these Conditions are summaries of the Agency Agreement and subject to its detailed provisions. The holders of the Notes (the “Noteholders”) and the holders of the related interest coupons (the “Couponholders” and the “Coupons”, respectively) are bound by, and are deemed to have notice of, all the provisions of the Agency Agreement applicable to them. Copies of the Agency Agreement are available for inspection by Noteholders during normal business hours at the Specified Offices (as defined in the Agency Agreement) of each of the Paying Agents, the initial Specified Offices of which are set out below.
1. Form of Denomination and Title
The Notes are serially numbered and are in bearer form in the denomination of €100,000 attached at the time of issue and integral multiples of €1,000 in excess thereof, up to and including €199,000, with Coupons attached at the time of issue. No Definitive Notes will be issued with a denomination above €199,000. Title to the Notes and Coupons will pass by delivery. The holder of any Note or Coupon shall (except as otherwise required by law) be treated as its absolute owner for all purposes (whether or not it is overdue and regardless of any notice of ownership, trust or any other interest therein, any writing thereon or any notice of any previous loss or theft thereof) and no person shall be liable for so treating such holder. No person shall have any right to enforce any term or condition of the Notes under the Contracts (Rights of Third Parties) Act 1999.
2. Status
The Notes constitute direct, general and unconditional obligations of the Issuer which will at all times rank pari passu among themselves and at least pari passu with all other present and future unsecured obligations of the Issuer, save for such obligations as may be preferred by provisions of law that are both mandatory and of general application.
3. Negative Pledge
So long as any Note remains outstanding (as defined in the Agency Agreement), the Issuer shall not, and the Issuer shall procure that none of its Material Subsidiaries will, create or permit to subsist any Security Interest (other than a Permitted Security Interest) upon the whole or any part of its present or future undertaking, assets or revenues (including uncalled capital) to secure any Relevant Indebtedness or Guarantee of Relevant Indebtedness without (a) at the same time or prior thereto securing the Notes equally and rateably therewith or (b) providing such other security for the Notes as may be approved by an Extraordinary Resolution (as defined in the Agency Agreement) of Noteholders.
In these Conditions:
“Guarantee” means, in relation to any Indebtedness of any Person, any obligation of another Person to pay such Indebtedness including (without limitation):
(a) any obligation to purchase such Indebtedness;
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(b) any obligation to lend money, to purchase or subscribe shares or other securities or to purchase assets or services in order to provide funds for the payment of such Indebtedness; (c) any indemnity against the consequences of a default in the payment of such Indebtedness; and (d) any other agreement to be responsible for such Indebtedness; “Indebtedness” means any indebtedness of the Issuer or any Material Subsidiary of the Issuer to any Person for money borrowed or raised including (without limitation) any indebtedness for or in respect of amounts raised under any transaction (including, without limitation, any forward sale or purchase agreement) having the commercial effect of a borrowing; “Material Subsidiary” means, at any time, any Subsidiary of the Issuer whose revenues or total assets on a non-consolidated or, if applicable, consolidated basis, as shown in the most recent audited non-consolidated or consolidated financial statements of such Subsidiary (as the case may be), represent 7 per cent. or more of the consolidated revenues or consolidated total assets, respectively, of the Issuer, as shown in or calculated by reference to the Issuer’s most recent audited consolidated financial statements; “Permitted Security Interest” means: (a) any Security Interest arising solely by operation of law provided that such Security Interest is discharged within 20 days of arising; (b) any Security Interest created by any entity over the whole or any part of its undertaking or assets and subsisting at the time such entity (i) merges or consolidates with or is demerged, contributed or merged into or transferred to the Issuer or a Material Subsidiary of the Issuer, (ii) becomes a Material Subsidiary of the Issuer or (iii) sells, contributes or transfers all or substantially all of its assets to the Issuer or a Material Subsidiary of the Issuer; or (c) in addition to the Permitted Security Interests referred to in sub-paragraphs (a) and (b) above, any other Security Interest securing Relevant Indebtedness, but only if the aggregate amount of Relevant Indebtedness secured by such Security Interest created or outstanding under this sub- paragraph (c) does not at any time exceed €40,000,000 (or its equivalent in other currencies); “Person” means any individual, company, corporation, firm, partnership, joint venture, association, organisation, state or agency of a state or other entity, whether or not having separate legal personality; “Relevant Indebtedness” means any Indebtedness which is in the form of or represented by any bond, note, debenture, debenture stock, loan stock, certificate or other instrument which is, or is capable of being, listed, quoted or traded on any stock exchange or in any organised securities market (including, without limitation, any over the counter market); “Security Interest” means any mortgage, charge, pledge, lien or other security interest including, without limitation, anything analogous to any of the foregoing under the laws of any jurisdiction; and “Subsidiary” means, in relation to any Person (the “first Person”) at any particular time, any other Person (the “second Person”): (a) whose affairs and policies the first Person controls or has the power to control, whether by ownership of share capital, contract, the power to appoint or remove members of the governing body of the second Person or otherwise; or (b) whose financial statements are, in accordance with applicable law and generally accepted accounting principles, consolidated with those of the first Person.
4. Interest The Notes bear interest from 28 September 2012 (the “Issue Date”), at the rate of 6.250 per cent. per annum, (the “Rate of Interest”) payable in arrear on 28 September in each year (each, an “Interest Payment Date”), subject as provided in Condition 6 (Payments).
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Each Note will cease to bear interest from the due date for redemption unless, upon due presentation, payment of principal is improperly withheld or refused, in which case it will continue to bear interest at such rate (both before and after judgment) until whichever is the earlier of (a) the day on which all sums due in respect of such Note up to that day are received by or on behalf of the relevant Noteholder and (b) the day which is seven days after the Fiscal Agent has notified the Noteholders that it has received all sums due in respect of the Notes up to such seventh day (except to the extent that there is any subsequent default in payment). The amount of interest payable on each Interest Payment Date shall be €6,250.00 in respect of each Note of €100,000 denomination, and €62.50 in respect of each Note of €1,000 denomination in excess of €100,000. If interest is required to be paid in respect of a Note on any other date, it shall be calculated by applying the Rate of Interest to the Calculation Amount, multiplying the product by the relevant Day Count Fraction and rounding the resulting figure to the cent, with 0.5 cents being rounded up and multiplying such rounded figure by a fraction equal to the denomination of such Note divided by the Calculation Amount, where: “Calculation Amount” means €1,000; “Day Count Fraction” means, in respect of any period, the number of days in the relevant period, from (and including) the first day in such period to (but excluding) the last day in such period, divided by the number of days in the Regular Period in which the relevant period falls; and “Regular Period” means each period from (and including) the Issue Date or any Interest Payment Date to (but excluding) the next Interest Payment Date. 5. Redemption and Purchase (a) Scheduled redemption: Unless previously redeemed, or purchased and cancelled, the Notes will be redeemed at their principal amount on 28 September 2018 (the “Maturity Date”), subject as provided in Condition 6 (Payments). (b) Redemption for tax reasons: The Notes may be redeemed at the option of the Issuer in whole, but not in part, at any time, on giving not less than 30 nor more than 60 days’ notice to the Noteholders (which notice shall be irrevocable), at their principal amount, together with interest accrued to the date fixed for redemption, if: (i) the Issuer has or will become obliged to pay additional amounts as provided or referred to in Condition 7 (Taxation) as a result of any change in, or amendment to, the laws or regulations of the Republic of Italy or any political subdivision or any authority thereof or therein having power to tax, or any change in the application or official interpretation of such laws or regulations (including a holding by a court of competent jurisdiction), which change or amendment becomes effective on or after 26 September 2012; and (ii) such obligation cannot be avoided by the Issuer taking reasonable measures available to it; provided, however, that no such notice of redemption shall be given earlier than 90 days prior to the earliest date on which the Issuer would be obliged to pay such additional amounts if a payment in respect of the Notes were then due. Prior to the publication of any notice of redemption pursuant to this paragraph, the Issuer shall deliver to the Fiscal Agent: (A) a certificate signed by two directors of the Issuer stating that the Issuer is entitled to effect such redemption and setting forth a statement of facts showing that the conditions precedent to the right of the Issuer so to redeem have occurred; and
(B) an opinion of independent legal advisers of recognised standing to the effect that the Issuer has or will become obliged to pay such additional amounts as a result of such change or amendment.
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Upon the expiry of any such notice as is referred to in this Condition 5(b), the Issuer shall be bound to redeem the Notes in accordance with this Condition 5(b).
(c) Redemption at the option of Noteholders: If at any time while any Note remains outstanding, either of the following events shall occur (each, as applicable, a “Put Event”):
(i) a Change of Control occurs and, if at the start of the Change of Control Period the Notes are rated by any Rating Agency, a Rating Downgrade in respect of that Change of Control occurs within such Change of Control Period; or
(ii) a Change of Control occurs and, on the occurrence of the Change of Control, the Notes are not rated by any Rating Agency,
each Noteholder will have the option (the “Put Option”) (unless, prior to the giving of the Put Event Notice, the Issuer gives notice of its intention to redeem the Notes under paragraph (b) (Redemption for tax reasons) above) to require the Issuer to redeem that Note on the Optional Redemption Date, at 101 per cent. of its principal amount together with (or, where purchased, together with an amount equal to) accrued interest to but excluding the Optional Redemption Date.
Promptly upon the Issuer becoming aware that a Put Event has occurred, the Issuer shall give notice (a “Put Event Notice”) to the Noteholders in accordance with Condition 14 (Notices) specifying the nature of the Put Event and the circumstances giving rise to it and the procedure for exercising the Put Option contained in this paragraph (c).
To exercise the Put Option, the Noteholder must deposit any applicable Note, together with each unmatured Coupon relating thereto (if any), to the account of any Agent for the account of the Issuer within the period (the “Put Period”) of 45 days after the day on which the Put Event Notice is given, together with a duly signed and completed Put Option Notice in the form (for the time being current and in the form substantially set out in the Agency Agreement) obtainable from the Specified Office of any Agent.
Subject to the deposit of any such Notes to the account of an Agent for the account of an Issuer as described above, the Issuer shall redeem the Notes in respect of which the Put Option has been validly exercised as provided above on the date which is the tenth Business Day following the end of the Put Period (the “Optional Redemption Date”). The Agent to whom a Note has been so deposited shall deliver a duly completed Put Option Receipt to the depositing Noteholder. No Note, once so deposited with a duly completed Put Option Notice in accordance with this paragraph (c), may be withdrawn; provided, however, that if, prior to the relevant Optional Redemption Date, any such Note becomes immediately due and payable or, upon due presentation of any such Note on or prior to the end of the Put Period, payment of the redemption moneys is improperly withheld or refused on the relevant Optional Redemption Date, the relevant Agent shall mail notification thereof to the depositing Noteholder at such address as may have been given by such Noteholder in the relevant Put Option Notice and shall hold such Note at its Specified Office for collection by the depositing Noteholder against surrender of the relevant Put Option Receipt. For so long as any outstanding Note is held by an Agent in accordance with this paragraph (c), the depositor of such Note and not such Agent shall be deemed to be the holder of the Note for all purposes.
In this paragraph (c):
“Acting in Concert” means a group of persons who, pursuant to an agreement or understanding, whether formal or informal, actively co-operate through the acquisition or control, whether directly or indirectly, of shares in the Issuer by any of them or otherwise, either directly or indirectly, to obtain or consolidate control of the Issuer;
a “Change of Control” shall be deemed to have occurred each time (whether or not approved by the Board of Directors of the Issuer) that any person or persons Acting in Concert or any
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person or persons acting on behalf of any such person(s) (other than Presa S.p.A. and Fimedi S.p.A.) (the “Relevant Person(s)”), at any time, whether directly or indirectly, come(s) to hold(s) more than 50 per cent. of the voting rights of the Issuer;
“Change of Control Period” means the period (i) commencing on the date that is the earlier of (A) the date of the first public announcement of the relevant Change of Control and (B) the date of the earliest Potential Change of Control Announcement (as defined below), if any, and (ii) ending on the date which is 120 days after the date of the first public announcement of the relevant Change of Control (such 120th day, the “Initial Longstop Date”); provided that, unless any other Rating Agency has on or prior to the Initial Longstop Date effected a Rating Downgrade in respect of its rating of the Notes, if a Rating Agency publicly announces, at any time during the period commencing on the date which is 45 days prior to the Initial Longstop Date and ending on the Initial Longstop Date, that it has placed its rating of the Notes under consideration for rating review either entirely or partially as a result of the relevant public announcement of the Change of Control or Potential Change of Control Announcement, the Change of Control Period shall be extended to the date which falls 75 days after the date of such public announcement by such Rating Agency;
“Potential Change of Control Announcement” means any public announcement or statement by the Issuer, any actual or potential bidder or Relevant Person or any designated advisor thereto relating to any specific and near-term potential Change of Control (whereby “near- term” shall mean that such potential Change of Control is reasonably likely to occur, or is publicly stated by the Issuer, any such actual or potential bidder or Relevant Person or any such designated advisor to be intended to occur, within 90 days of the date of such announcement or statement);
“Rating Agency” means any of the following: (i) Standard & Poor’s Credit Market Services Europe Limited; (ii) Moody’s Investor Services; or (iii) any other rating agency of equivalent international standing specified from time to time by the Issuer, and, in each case, their respective successors or affiliates; and
a “Rating Downgrade” shall be deemed to have occurred in respect of a Change of Control if within the Change of Control Period the rating previously assigned to the Notes by any Rating Agency is (i) withdrawn or (ii) changed from an investment grade rating (BBB-/Baa3, or their respective equivalents for the time being, or better) to a non-investment grade rating (BB+/Ba1, or their respective equivalents for the time being, or worse) or (iii) if such rating previously assigned to the Notes by any Rating Agency was below an investment grade rating (as described above), lowered by at least one full rating notch (for example, from BB+ to BB or their respective equivalents).
(d) No other redemption: The Issuer shall not be entitled to redeem the Notes otherwise than as provided in paragraphs (a) (Scheduled Redemption) to (c) (Redemption at the option of Noteholders) above.
(e) Purchase: The Issuer or any of its Subsidiaries may at any time purchase Notes in the open market or otherwise and at any price, provided that all unmatured Coupons relating to those Notes are purchased therewith.
(f) Cancellation: All Notes so redeemed or purchased by the Issuer or any of its Subsidiaries and any unmatured Coupons attached to or surrendered with them shall be cancelled and may not be reissued or resold.
6. Payments
(a) Principal: Payments of principal shall be made only against presentation and (provided that payment is made in full) surrender of Notes at the Specified Office of any Paying Agent outside the United States by Euro cheque drawn on, or by transfer to a Euro account (or other account
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to which Euro may be credited or transferred) maintained by the payee with, a bank in a city in which banks have access to the TARGET System.
(b) Interest: Payments of interest shall, subject to paragraph (g) (Payments other than in respect of matured Coupons) below, be made only against presentation and (provided that payment is made in full) surrender of the appropriate Coupons at the Specified Office of any Paying Agent outside the United States in the manner described in paragraph (a) (Principal) above.
(c) Interpretation: In these Conditions:
“TARGET2” means the Trans European Automated Real Time Gross Settlement Express Transfer payment system which utilises a single shared platform and which was launched on 19 November 2007; and
“TARGET System” means TARGET2.
(d) Payments subject to fiscal laws: All payments in respect of the Notes are subject in all cases to any applicable fiscal or other laws and regulations in the place of payment, but without prejudice to the provisions of Condition 7 (Taxation). No commissions or expenses shall be charged to the Noteholders or Couponholders in respect of such payments.
(e) Deduction for unmatured Coupons: If a Note is presented without all unmatured Coupons relating thereto, then:
(i) if the aggregate amount of the missing Coupons is less than or equal to the amount of principal due for payment, a sum equal to the aggregate amount of the missing Coupons will be deducted from the amount of principal due for payment; provided, however, that if the gross amount available for payment is less than the amount of principal due for payment, the sum deducted will be that proportion of the aggregate amount of such missing Coupons which the gross amount actually available for payment bears to the amount of principal due for payment;
(ii) if the aggregate amount of the missing Coupons is greater than the amount of principal due for payment:
(A) so many of such missing Coupons shall become void (in inverse order of maturity) as will result in the aggregate amount of the remainder of such missing Coupons (the “Relevant Coupons”) being equal to the amount of principal due for payment; provided, however, that where this sub paragraph would otherwise require a fraction of a missing Coupon to become void, such missing Coupon shall become void in its entirety; and
(B) a sum equal to the aggregate amount of the Relevant Coupons (or, if less, the amount of principal due for payment) will be deducted from the amount of principal due for payment; provided, however, that, if the gross amount available for payment is less than the amount of principal due for payment, the sum deducted will be that proportion of the aggregate amount of the Relevant Coupons (or, as the case may be, the amount of principal due for payment) which the gross amount actually available for payment bears to the amount of principal due for payment.
Each sum of principal so deducted shall be paid in the manner provided in paragraph (a) (Principal) above against presentation and (provided that payment is made in full) surrender of the relevant missing Coupons. No payments will be made in respect of void coupons.
(f) Payments on business days: If the due date for payment of any amount in respect of any Note or Coupon is not a business day in the place of presentation, the holder shall not be entitled to payment in such place of the amount due until the next succeeding business day in such place
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and shall not be entitled to any further interest or other payment in respect of any such delay. In this paragraph, “business day” means, in respect of any place of presentation, any day on which banks are open for presentation and payment of bearer debt securities and for dealings in foreign currencies in such place of presentation and, in the case of payment by transfer to a Euro account as referred to above, on which the TARGET System is open and on which commercial banks and foreign exchange markets settle payments generally in London.
(g) Payments other than in respect of matured Coupons: Payments of interest other than in respect of matured Coupons shall be made only against presentation of the relevant Notes at a Specified Office of any Paying Agent outside the United States.
(h) Partial payments: If a Paying Agent makes a partial payment in respect of any Note or Coupon presented to it for payment, such Paying Agent will endorse thereon a statement indicating the amount and date of such payment.
7. Taxation
All payments of principal and interest in respect of the Notes and the Coupons by or on behalf of the Issuer shall be made free and clear of, and without withholding or deduction for or on account of, any present or future taxes, duties, assessments or governmental charges of whatever nature imposed, levied, collected, withheld or assessed by or on behalf of the Republic of Italy or any political subdivision thereof or any authority therein or thereof having power to tax, unless the withholding or deduction of such taxes, duties, assessments or governmental charges is required by law. In that event the Issuer shall pay such additional amounts as will result in receipt by the Noteholders and the Couponholders after such withholding or deduction of such amounts as would have been received by them had no such withholding or deduction been required, except that no such additional amounts shall be payable in respect of any Note or Coupon presented for payment:
(a) by or on behalf of a holder which is liable to such taxes, duties, assessments or governmental charges in respect of such Note or Coupon by reason of its having some connection with the Republic of Italy other than the mere holding of the Note or Coupon; or
(b) in relation to any payment or deduction of any interest, principal or other proceeds of any Note or Coupon on account of imposta sostitutiva, pursuant to Italian Legislative Decree No. 239 of 1 April 1996 and related implementing regulations, as amended, supplemented or re enacted from time to time (“Decree No. 239”); or
(c) where such withholding or deduction is imposed on a payment to an individual or a residual entity within the meaning of the European Council Directive 2003/48/EC and is required to be made pursuant to European Council Directive 2003/48/EC on the taxation of savings income or any law implementing or complying with, or introduced in order to conform to, this Directive; or
(d) by or on behalf of a holder who would have been able to avoid such withholding or deduction by (A) presenting the relevant Note or Coupon to another Paying Agent in a member state of the European Union or (B) making a declaration of non residence or other similar claim for an exemption; or
(e) more than 30 days after the Relevant Date except to the extent that the holder of such Note or Coupon would have been entitled to such additional amounts on presenting such Note or Coupon for payment on the last day of such period of 30 days; or
(f) by or on behalf of a non-Italian resident legal entity or individual which is resident in a country which, for the purposes of Decree No. 239 does not allow for a satisfactory exchange of information with the tax authorities of the Republic of Italy.
In these Conditions, “Relevant Date” means whichever is the later of (1) the date on which the payment in question first becomes due and (2) if the full amount payable has not been received in a
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city in which banks have access to the TARGET System by the Fiscal Agent on or prior to such due date, the date on which (the full amount having been so received) notice to that effect has been given to the Noteholders.
Any reference in these Conditions to principal or interest shall be deemed to include any additional amounts in respect of principal or interest (as the case may be) which may be payable under this Condition 7 (Taxation).
If the Issuer becomes subject at any time to any taxing jurisdiction other than the Republic of Italy, references in these Conditions to the Republic of Italy shall be construed as references to the Republic of Italy and/or such other jurisdiction.
8. Events of Default
If any of the following events occurs:
(a) Non payment: the Issuer fails to pay any amount of principal in respect of the Notes on the due date for payment thereof or fails to pay any amount of interest in respect of the Notes on the due date for payment thereof and such default continues for a period of 3 days in respect of payments of any amount of principal in respect of the Notes or 5 days in respect of payments of any amount of interest in respect of the Notes; or
(b) Breach of other obligations: the Issuer defaults in the performance or observance of any of its other obligations under or in respect of the Notes and such default remains unremedied for 30 days after written notice thereof, addressed to the Issuer by any Noteholder, has been delivered to the Issuer or to the Specified Office of the Fiscal Agent; or
(c) Cross default of Issuer or Material Subsidiary:
(i) any Indebtedness of the Issuer or any of its Material Subsidiaries is not paid when due or (as the case may be) within any applicable grace period;
(ii) any such Indebtedness becomes (or becomes capable of being declared) due and payable prior to its stated maturity otherwise than at the option of the Issuer or (as the case may be) the relevant Material Subsidiary or (provided that no event of default, howsoever described, has occurred) any person entitled to such Indebtedness; or
(iii) the Issuer or any of its Material Subsidiaries fails to pay when due any amount payable by it under any Guarantee of any Indebtedness,
provided that, in the case of sub-paragraphs (i), (ii) or (iii) above, such Indebtedness is, either individually or in the aggregate, in a principal amount of €40,000,000 or more (or its equivalent in other currencies) and provided that such payment or such default is not contested in good faith by the Issuer or the relevant Material Subsidiary by all appropriate means including (where applicable) an application to a competent court for a declaration that such payment is not due and/or such default has not occurred; or
(d) Unsatisfied judgment: one or more enforceable judgment(s) or order(s) from which no further appeal or judicial review is permissible under applicable law of an amount exceeding either individually or in the aggregate, €30,000,000 is rendered against the Issuer or any of its Material Subsidiaries and continue(s) unsatisfied and in each case for a period of or within 30 days after the date(s) thereof or, if later, the date therein specified for payment; or
(e) Security enforced: a secured party takes possession, or a receiver, manager or other similar officer is appointed, of the whole or a material part of the undertaking, assets and revenues of the Issuer or any of its Material Subsidiaries provided that such action is not dismissed, discharged or restrained within 20 days thereafter; or
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(f) Insolvency, etc: (i) the Issuer or any of its Material Subsidiaries becomes insolvent or is unable to pay its debts as they fall due, (ii) an administrator or liquidator of the Issuer or any of its Material Subsidiaries or the whole or a material part of the undertaking, assets and revenues of the Issuer or any of its Material Subsidiaries is appointed (or application by the Issuer or by the relevant Material Subsidiary for any such appointment is made), (iii) the Issuer or any of its Material Subsidiaries takes any action for a readjustment or deferment of all or a material part of its obligations or makes a general assignment or an arrangement or composition with or for the benefit of its creditors or declares a moratorium in respect of a material part of its Indebtedness or any Guarantee of any Indebtedness given by it or (iv) the Issuer or any of its Material Subsidiaries ceases or threatens to cease to carry on all or any substantial part of its business except for the purposes of, or pursuant to, a Permitted Transaction; or
(g) Winding up, etc: an order is made or an effective resolution is passed for the winding up, liquidation or dissolution of the Issuer or any of its Material Subsidiaries except for the purposes of, or pursuant to, a Permitted Transaction; or
(h) Analogous event: any event occurs which under the laws of the Republic of Italy has an analogous effect to any of the events referred to in paragraphs (d) (Unsatisfied judgment) to (g) (Winding up, etc.) above; or
(i) Failure to take action, etc: any action, condition or thing at any time required to be taken, fulfilled or done in order (i) to enable the Issuer lawfully to enter into, exercise its rights and perform and comply with its obligations under and in respect of the Notes, (ii) to ensure that those obligations are legal, valid, binding and enforceable, (iii) to make the Notes and the Coupons admissible in evidence in the courts of the Republic of Italy is not taken, fulfilled or done by the Issuer and (iv) in any of the foregoing cases such default remains unremedied for 10 days as from the date of such action, condition or thing should have been taken, fulfilled or done; or
(j) Unlawfulness: it is or will become unlawful for the Issuer to perform or comply with any of its obligations under or in respect of the Notes such as would affect the ability of the Issuer to make payments of any amounts under the Notes,
then any Note may, by written notice addressed by the holder thereof to the Issuer and delivered to the Issuer or to the Specified Office of the Fiscal Agent, be declared immediately due and payable, whereupon it shall become immediately due and payable at its principal amount together with accrued interest without further action or formality.
As used in these Conditions, “Permitted Transaction” means:
(i) any “fusione”or “scissione” (such expressions bearing the meanings ascribed to them by the laws of the Republic of Italy) or any other reconstruction, amalgamation, reorganisation, merger, consolidation, or other similar arrangement, in each case:
(A) on terms approved by an Extraordinary Resolution of the Noteholders; or
(B) comprising, in the case of a Material Subsidiary, a transaction whilst solvent whereby the assets and undertaking of such Material Subsidiary are transferred to or otherwise vested in (1) the Issuer or another Subsidiary of the Issuer or (2) a new entity resulting out of such Material Subsidiary following any such transaction, provided that such entity is or thereby becomes a Subsidiary of the Issuer; or
(C) comprising, in the case of the Issuer and a Material Subsidiary, a transaction whilst solvent whereby the assets and undertaking of the Issuer and such Material Subsidiary are transferred to or otherwise vested in a new entity resulting out of the Issuer and such Material Subsidiary following any such transaction and such new entity (1) validly assumes the obligations of the Issuer as principal debtor
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under or in respect of the Notes by operation of law and (2) does not assume any liabilities (actual or contingent) other than those liabilities of the Issuer and such Material Subsidiary which subsist prior to (and which are not assumed in contemplation of) such transaction; or
(ii) in the case of a Material Subsidiary, a transfer whilst solvent by such Material Subsidiary to a third party or parties of its business as a going concern for full consideration on arm’s length terms.
9. Prescription
Claims for principal shall become void unless the relevant Notes are presented for payment within ten years of the appropriate Relevant Date. Claims for interest shall become void unless the relevant Coupons are presented for payment within five years of the appropriate Relevant Date.
10. Replacement of Notes and Coupons
If any Note or Coupon is lost, stolen, mutilated, defaced or destroyed, it may be replaced at the Specified Office of the Fiscal Agent, subject to all applicable laws and stock exchange requirements, upon payment by the claimant of the expenses incurred in connection with such replacement and on such terms as to evidence, security, indemnity and otherwise as the Issuer may reasonably require. Mutilated or defaced Notes or Coupons must be surrendered before replacements will be issued.
11. Paying Agents
In acting under the Agency Agreement and in connection with the Notes and the Coupons, the Paying Agents act solely as agents of the Issuer and do not assume any obligations towards or relationship of agency or trust for or with any of the Noteholders or Couponholders.
The initial Paying Agents and their initial Specified Offices are listed below. The Issuer reserves the right at any time to vary or terminate the appointment of any Paying Agent and to appoint a successor fiscal agent and additional or successor paying agents; provided, however, that the Issuer shall at all times maintain (a) a fiscal agent and (b) a paying agent in an EU member state other than the Republic of Italy or (if different) the jurisdiction to which the Issuer is subject for the purpose of Condition 7 (Taxation) that will not be obliged to withhold or deduct tax pursuant to any law implementing European Council Directive 2003/48/EC.
Notice of any change in any of the Paying Agents or in their Specified Offices shall promptly be given to the Noteholders.
12. Meetings of Noteholders; Noteholders’ Representative; Modification
(a) Meetings of Noteholders: The Agency Agreement contains provisions for convening meetings of Noteholders to consider matters relating to the Notes, including the modification of any provision of these Conditions. Any such modification may be made if sanctioned by an Extraordinary Resolution.
In relation to the convening of meetings, quorums and the majorities required to pass an Extraordinary Resolution, the following provisions shall apply in respect of the Notes but are subject to compliance with mandatory laws, legislation, rules and regulations of Italy in force from time to time and, where applicable Italian law so requires, the Issuer’s By laws:
(i) a meeting of Noteholders may be convened by the Issuer and/or the Noteholders’ Representative (as defined below) and shall be convened by either of them upon the request in writing of Noteholders holding not less than one twentieth of the aggregate principal amount of the outstanding Notes;
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(ii) a meeting of Noteholders will be validly held if (A) there are one or more persons present, being or representing Noteholders holding at least half of the aggregate principal amount of the outstanding Notes, or (B) in the case of a second meeting following adjournment of the first meeting for want of quorum, there are one or more persons present being or representing Noteholders holding more than one third of the aggregate principal amount of the outstanding Notes, or (C) in the case of a third meeting or any subsequent meeting following a further adjournment for want of quorum, there are one or more persons present being or representing Noteholders holding at least one fifth of the aggregate principal amount of the outstanding Notes provided, however, that the quorum at any meeting shall always be at least one half of the aggregate principal amount of the outstanding Notes for the purposes of considering a Reserved Matter; and
(iii) the majority required to pass an Extraordinary Resolution at any meeting (including any meeting convened following adjournment of the previous meeting for want of quorum) will be (A) for voting on any matter other than a Reserved Matter, one or more persons holding or representing at least two thirds of the aggregate principal amount of the Notes represented at the meeting or (B) for voting on a Reserved Matter, one or more persons holding or representing at least one half of the aggregate principal amount of the outstanding Notes (whether or not represented at the meeting).
In this Condition 12, “Reserved Matter” has the meaning given to it in the Agency Agreement and includes, inter alia, any proposal to modify the maturity of the Notes or the dates on which interest is payable on them, to reduce, cancel or alter the method of calculating the principal amount of, or interest on, the Notes or to change the currency of payment of the Notes.
(b) Noteholders’ Representative: Pursuant to Articles 2415 and 2417 of the Italian Civil Code, a representative of the Noteholders (rappresentante comune or “Noteholders’ Representative”) may be appointed, inter alia, to represent the interests of Noteholders, such appointment to be made by an Extraordinary Resolution or by an order of a competent court at the request of one or more Noteholders or the Issuer. Each such Noteholders’ Representative shall have the powers and duties set out in Article 2418 of the Italian Civil Code.
(c) Modification: The Notes and these Conditions may be amended without the consent of the Noteholders or the Couponholders to correct a manifest error. In addition, the parties to the Agency Agreement may agree to modify any provision thereof, but the Issuer shall not agree, without the consent of the Noteholders, to any such modification unless it is of a formal, minor or technical nature, it is made to correct a manifest error or it is, in the opinion of such parties, not materially prejudicial to the interests of the Noteholders.
13. Further Issues
The Issuer may from time to time, without the consent of the Noteholders or the Couponholders, create and issue further notes having the same terms and conditions as the Notes in all respects (or in all respects except for the first payment of interest) so as to form a single series with the Notes.
14. Notices
Notices to the Noteholders shall be valid if published in a leading newspaper having general circulation in Luxembourg (which is expected to be the Luxemburger Wort) and, if the Notes are admitted to trading on the regulated market of the Luxembourg Stock Exchange and it is a requirement of applicable law or regulations, published on the website of the Luxembourg Stock Exchange (www.bourse.lu) or in either case, if such publication is not practicable, in a leading English language daily newspaper having general circulation in Europe. Any such notice shall be deemed to have been given on the date of first publication. Couponholders shall be deemed for all purposes to have notice of the contents of any notice given to the Noteholders.
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15. Currency Indemnity
If any sum due from the Issuer in respect of the Notes or the Coupons or any order or judgment given or made in relation thereto has to be converted from the currency (the “first currency”) in which the same is payable under these Conditions or such order or judgment into another currency (the “second currency”) for the purpose of (a) making or filing a claim or proof against the Issuer, (b) obtaining an order or judgment in any court or other tribunal or (c) enforcing any order or judgment given or made in relation to the Notes, the Issuer shall indemnify each Noteholder, on the written demand of such Noteholder addressed to the Issuer and delivered to the Issuer or to the Specified Office of the Fiscal Agent, against any loss suffered as a result of any discrepancy between (i) the rate of exchange used for such purpose to convert the sum in question from the first currency into the second currency and (ii) the rate or rates of exchange at which such Noteholder may in the ordinary course of business purchase the first currency with the second currency upon receipt of a sum paid to it in satisfaction, in whole or in part, of any such order, judgment, claim or proof.
This indemnity constitutes a separate and independent obligation of the Issuer and shall give rise to a separate and independent cause of action.
16. Governing Law and Jurisdiction
(a) Governing law: The Notes and any non contractual obligations arising out of or in connection with the Notes are governed by English law.
(b) English courts: The courts of England have exclusive jurisdiction to settle any dispute (a “Dispute”) arising out of or in connection with the Notes (including any non contractual obligation arising out of or in connection with the Notes).
(c) Appropriate forum: The Issuer agrees that the courts of England are the most appropriate and convenient courts to settle any Dispute and, accordingly, that it will not argue to the contrary.
(d) Rights of the Noteholders to take proceedings outside England: Condition 16 (b) (English courts) is for the benefit of the Noteholders only As a result, nothing in this Condition 16 (Governing law and jurisdiction) prevents any Noteholder from taking proceedings relating to a Dispute (“Proceedings”) in any other courts with jurisdiction. To the extent allowed by law, Noteholders may take concurrent Proceedings in any number of jurisdictions.
(e) Service of process: The Issuer agrees that the documents which start any Proceedings and any other documents required to be served in relation to those Proceedings may be served on it by being delivered to TMF Corporate Services Limited at 5th Floor, 6 St. Andrews Street, London EC4A 3AE, United Kingdom or at any address of the Issuer in Great Britain at which service of process may be served on it in accordance with the Companies Act 2006. Nothing in this paragraph shall affect the right of any Noteholder to serve process in any other manner permitted by law. This Condition applies to Proceedings in England and to Proceedings elsewhere.
There will appear at the foot of the Conditions endorsed on each Note in definitive form the names and Specified Offices of the Fiscal Agent and the Paying Agents as set out at the end of this Prospectus.
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SUMMARY OF PROVISIONS RELATING TO THE NOTES IN GLOBAL FORM
The Notes will be in the form of the Temporary Global Note which will be deposited on or around the Closing Date with a common depositary for Euroclear and Clearstream, Luxembourg.
The Notes will be issued in new global note (“NGN”) form. On 13 June 2006 the European Central Bank (the “ECB”) announced that Notes in NGN form are in compliance with the “Standards for the use of EU securities settlement systems in ESCB credit operations” of the central banking system for the euro (the “Eurosystem”), provided that certain other criteria are fulfilled. At the same time the ECB also announced that arrangements for Notes in NGN form will be offered by Euroclear and Clearstream, Luxembourg as of 30 June 2006 and that debt securities in global bearer form issued through Euroclear and Clearstream, Luxembourg after 31 December 2006 will only be eligible as collateral for Eurosystem operations if the NGN form is used.
The Notes are intended to be held in a manner which would allow Eurosystem eligibility - that is, in a manner which would allow the Notes to be recognised as eligible collateral for Eurosystem monetary policy and intra-day credit operations by the Eurosystem either upon issue or at any or all times during their life. Such recognition will depend upon satisfaction of the Eurosystem eligibility criteria.
The Permanent Global Note will become exchangeable in whole, but not in part, for Notes in definitive form (“Definitive Notes”) in the denomination of €100,000 each and integral multiples of €1,000 in excess thereof, up to and including €199,000 each at the request of the bearer of the Permanent Global Note if (a) Euroclear or Clearstream, Luxembourg is closed for business for a continuous period of 14 days (other than by reason of legal holidays) or announces an intention permanently to cease business or (b) any of the circumstances described in Condition 8 (Events of Default) occurs.
So long as the Notes are represented by a Global Note and the relevant clearing system(s) so permit, the Notes will be tradeable only in the minimum authorised denomination of €100,000 and higher integral multiples of €1,000, notwithstanding that no Definitive Notes will be issued with a denomination above €199,000.
Whenever the Permanent Global Note is to be exchanged for Definitive Notes, the Issuer shall procure the prompt delivery (free of charge to the bearer) of such Definitive Notes, duly authenticated and with Coupons attached, in an aggregate principal amount equal to the principal amount of the Permanent Global Note to the bearer of the Permanent Global Note against the surrender of the Permanent Global Note to or to the order of the Fiscal Agent within 30 days of the bearer requesting such exchange.
If:
(a) Definitive Notes have not been delivered by 5.00 p.m. (London time) on the thirtieth day after the bearer has duly requested exchange of the Permanent Global Note for Definitive Notes; or
(b) the Permanent Global Note (or any part of it) has become due and payable in accordance with the Conditions or the date for final redemption of the Notes has occurred and, in either case, payment in full of the amount of principal falling due with all accrued interest thereon has not been made to the bearer in accordance with the terms of the Permanent Global Note on the due date for payment, then the Permanent Global Note (including the obligation to deliver Definitive Notes) will become void at 5.00 p.m. (London time) on such thirtieth day (in the case of (a) above) or at 5.00 p.m. (London time) on such due date (in the case of (b) above) and the bearer of the Permanent Global Note will have no further rights thereunder (but without prejudice to the rights which the bearer of the Permanent Global Note or others may have under a deed of covenant dated 28 September 2012 (the “Deed of Covenant”) executed by the Issuer). Under the Deed of Covenant, persons shown in the records of Euroclear and/or Clearstream, Luxembourg as being entitled to an interest in the Permanent Global Note will acquire directly against the Issuer all those rights to which they would have been entitled if, immediately before the Permanent Global Note became void, they had been the holders of Definitive Notes in an aggregate principal amount equal to the principal amount of Notes they were shown as holding in the records of Euroclear and/or (as the case may be) Clearstream, Luxembourg.
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In addition, the Global Notes will contain provisions which modify the Terms and Conditions of the Notes as they apply to the Global Notes. The following is a summary of certain of those provisions:
Payments: All payments in respect of the Permanent Global Note will be made against presentation and (in the case of payment of principal in full with all interest accrued thereon) surrender of the Permanent Global Note to or to the order of any Paying Agent and will be effective to satisfy and discharge the corresponding liabilities of the Issuer in respect of the Notes. On each occasion on which a payment of principal or interest is made in respect of the Permanent Global Note, the Issuer shall procure that the payment is entered pro rata in the records of Euroclear and Clearstream, Luxembourg.
Exercise of put option: For so long as all of the Notes are represented by a Global Note and such Global Note is held on behalf of Euroclear and/or Clearstream, Luxembourg, the option of the Noteholders provided for in Condition 5 (c) (Redemption at the option of the Holders) may be exercised by an Accountholder giving notice to the Fiscal Agent in accordance with the standard procedures of Euroclear and Clearstream, Luxembourg (which may include notice being given on the Accountholder’s instructions by Euroclear or Clearstream, Luxembourg or any common depositary for them to the Fiscal Agent by electronic means) of the principal amount of the Notes in respect of which such option is exercised and at the same time presenting or procuring the presentation of the relevant Global Note to the Fiscal Agent for notation accordingly within the time limits set forth in that Condition.
Notices: Notwithstanding Condition 14 (Notices), while all the Notes are represented by a Global Note and the Temporary Global Note or (as the case may be) the Permanent Global Note is deposited with a common safekeeper for Euroclear and Clearstream, Luxembourg, notices to Noteholders may be given by delivery of the relevant notice to Euroclear and Clearstream, Luxembourg and, in any case, such notices shall be deemed to have been given to the Noteholders in accordance with Condition 14 (Notices) on the date of delivery to Euroclear and Clearstream, Luxembourg, except that, for so long as such Notes are admitted to trading on the Luxembourg Stock Exchange and it is a requirement of applicable law or regulations, such notices shall be published in a leading newspaper having general circulation in Luxembourg (which is expected to be Luxemburger Wort or published on the website of the Luxembourg Stock Exchange (www.bourse.lu)).
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USE OF PROCEEDS
The net proceeds of the issue of the Notes, expected to amount to €348,075,000 after deduction of the combined management and underwriting commission, calculated on the principal amount of the Notes, and the other expenses incurred in connection with the issue of the Notes, will be used by the Issuer to refinance existing indebtedness, diversify its funding sources and raise its average debt maturity profile, as well as for general corporate purposes.
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DESCRIPTION OF THE ISSUER
Overview The Issuer’s name is Buzzi Unicem S.p.A. and its registered office is at Via Luigi Buzzi 6, 15033 Casale Monferrato, Alessandria, Italy. The Issuer is a company limited by shares (società per azioni) incorporated under the laws of the Republic of Italy and is registered with the Companies’ Registry (Registro delle Imprese) of Alessandria under number 00930290044. The Issuer’s telephone number is +39 0142 416111. The financial information contained in this section as at and for the years ended 31 December 2011, 2010 and 2009 and is derived from the audited consolidated financial information of the Issuer incorporated by reference herein and the financial information contained in this section as at and for the six month period ended 30 June 2012 is derived from the interim unaudited consolidated financial statements of the Issuer which were subject to a limited review by Deloitte & Touche s.p.a. incorporated by reference herein. (See “Information Incorporated by Reference”).
Duration and Corporate Objects
The Issuer’s corporate objects are the production and supply of cement, other hydraulic binding agents and building materials in general, including ready-mix concrete, and the excavation of mining and quarry materials as well as direct and indirect operations in the field of plant construction. The Issuer’s period of incorporation runs until 31 December 2085, and may be extended beyond that date by the Issuer.
History The Issuer is the result of the merger of Unicem S.p.A. and Buzzi Cementi S.p.A. Prior to the effective merger of the two companies, Buzzi Cementi S.p.A. acquired a 21 per cent. stake in Unicem S.p.A. from IFIL S.p.A. in June 1997 and February 1998, it acquired a further 21 per cent. by means of a public tender offer in March 1998. The merger of the two companies was finalised in September 1999, at which time all of the shares of the surviving entity Buzzi Unicem S.p.A. were admitted to trading on the Milan Stock Exchange. Buzzi Cementi S.p.A. was founded in 1907 by Pietro and Antonio Buzzi as Fratelli Buzzi S.p.A., producing cement at a factory in Trino, Piedmont. Fratelli Buzzi S.p.A. expanded its business over three generations, subsequently founding Presacementi S.p.A. in 1980. As a consequence of various restructuring measures, Presacementi S.p.A. acquired Fratelli Buzzi S.p.A.’s cement activities and changed its name to Buzzi Cementi S.p.A. The Issuer’s overseas expansion started in 1979 with the purchase of Alamo Cement Company (Texas, USA) (“Alamo Cement”) and continued in 1981 with the acquisition of a stake in Corporación Moctezuma, SA de CV (“Corporación Moctezuma”) in Mexico. Between 1981 and 1990, the Issuer further consolidated its position in the Italian market through other acquisitions and the establishment of Addiment Italia S.r.l. a joint venture with Heidelberg Cement AG. As mentioned above, in 1997, the Issuer reached an agreement with IFIL S.p.A. to purchase 21 per cent. of Unicem S.p.A., paving the way for the merger between Buzzi Cementi S.p.A. and Unicem S.p.A. in 1999. Unicem S.p.A. was founded in 1872 by Luigi Marchino under the name of Cementi Marchino in Casale Monferrato, Alessandria. In 1924, the company changed its name into Marchino & C., and, in 1933, merged with Unione Italiana Cementi, thus creating Unione Cementi Marchino & C. S.p.A. In 1969, S.A.I.C.E. (Industrie Cementifere Emiliane) and Cementeria di Augusta S.p.A. were merged by incorporation into Unicem S.p.A. (Unione Cementerie Marchino ed Emiliane e di Augusta). In 1973, Unicem S.p.A. was listed on the Milan Stock Exchange. Unicem S.p.A. expanded its operations into the United States of America at approximately the same time as Buzzi Cementi S.p.A., acquiring 20 per cent. of River Cement Company of St. Louis, Missouri in 1979. Unicem S.p.A. continued its international expansion with the acquisitions of Hercules Cement Company in 1980, Signal Mountain Cement Company in 1982 and Heartland Cement Company in 1986. Finally, in 1999, Unicem S.p.A. was merged by incorporation into Buzzi Cementi S.p.A., which subsequently changed its name to Buzzi Unicem S.p.A.
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In June 2001, the Issuer agreed to purchase 34 per cent. of the ordinary share capital of Dyckerhoff AG (“Dyckerhoff”), a company incorporated in Germany that operates in the cement industry predominantly in Germany, United States of America and Eastern Europe. Between 2002 and 2007, the Issuer gradually increased its shareholding in Dyckerhoff, including by means of a voluntary tender offer to minority shareholders in 2007, and by further acquisitions, resulting in a Group holding of 98.0 per cent. of the ordinary share capital and 89.0 per cent. of the preferred share capital of Dyckerhoff, equivalent to 93.5 per cent. of the overall share capital, as at 30 June 2012.
Share Capital
As at 30 June 2012, the Issuer’s fully paid up share capital was €123,636,658.80 which was divided into 165,349,149 ordinary shares and 40,711,949 savings shares, each with a par value of €0.60. Since 30 June 2012, there have been no changes to the Issuer’s share capital.
The Issuer’s shares are admitted to trading on the Mercato Telematico Azionario (MTA) organised and operated by Borsa Italiana S.p.A., and are included in FTSE MIB index.
Shareholders
The principal shareholders of the Issuer as at 30 June 2012 were as follows:
Number of % of % of ordinary share voting Name shares capital shares –––––– ––––––––––– ––––––––––– ––––––––––– Presa S.p.A. (Buzzi family) ...... 79,200,000 38.4 47.9 Fimedi S.p.A. (Buzzi family) ...... 17,750,000 8.6 10.7 Platinum Investment Management Ltd...... 3,344,212 1.6 2.0
Source: Shareholder’s register and additional information available to the Issuer
Presa S.p.A. is a subsidiary of Fimedi S.p.A., which in turn is wholly owned, either directly or indirectly, by members of the Buzzi family.
Business Overview
The Issuer, together with its subsidiaries (the “Group”), is one of the leading manufacturers of cement and cement-related products in Italy and is well established in several countries including the United States, Germany, Luxembourg, the Netherlands, Czech Republic and Slovakia, Poland, Russia, Ukraine, Algeria and Mexico. The Group’s main area of activity is the production and sale of cement, which accounted for about 61 per cent. of total revenues for the year ended 31 December 2011 (compared to 60 per cent. for the year ended 31 December 2010). In addition, the Group is involved in the manufacture and sale of ready-mix concrete and aggregates, which accounted for about 38 per cent. of revenues for the year ended 31 December 2011 (compared to 39 per cent. for the year ended 31 December 2010). The Group’s other activities, which include the production of admixtures, mortars and expanded clay, accounted for the remaining 1 per cent. of revenues for the year ended 31 December 2011 (compared to 1 per cent. for the year ended 31 December 2010). The Issuer’s strategic focus is on cement and ready-mix concrete, both of which are core activities in all of the business regions in which it is active.
The Group has a long tradition of cement production that dates back to the early 1900s. It was one of the first Italian cement manufacturers to diversify its activities internationally in the 1970s and 1980s. As a result, Germany became the Group’s most important market, contributing 21.8 per cent. of revenues in 2011(compared to 19.9 per cent. for the year ended 31 December 2010), followed by Italy and the United States of America, which respectively represented 20.4 per cent. and 20.0 per cent. of the Group’s revenues for the year ended 31 December 2011 (compared to 23.2 and 22.7 per cent. respectively for the year ended 31 December 2010). The remaining 37.8 per cent. of revenues for the year ended 31 December 2011 were derived from the Group’s operations in Luxembourg, the Netherlands, Czech Republic and Slovakia, Poland, Russia, Ukraine and Mexico (compared to 34.2 per cent. for the year ended 31 December 2010).
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Products
The Group’s main operating companies can be generally divided into the following units: (i) cement; (ii) ready-mix concrete and aggregates and (iii) related activities.
Cement
Cement is a largely homogenous product that is standardised pursuant to international rules and regulations. The production process for cement is similar throughout the world. Cement serves as a primary ingredient for most other products manufactured by the Group, in particular, concrete. Cement is an hydraulic binding agent that reacts with water and progressively hardens into a solid substance. The water-cement mix binds aggregate solid materials such as sand and gravel to form mortar and concrete, which are essential components for most types of construction activity.
The manufacture of cement involves the following stages: • extraction and collection of raw materials such as limestone and clay (containing calcium carbonate, silica, aluminium and iron); • crushing and blending of raw materials; • treatment of the raw materials at high temperatures; and • the resulting output, clinker, is ground together with gypsum and other complementary materials to produce cement.
Although there are several types of cement depending on the different blends used in the production process, cement is viewed as a homogenous product. The investment required for the construction of a cement production plant is substantial: estimated at €150 and €200 per ton of production capacity, with a minimum investment to generate profit of €150 to €180 million. In addition, it often takes years to acquire the necessary permits for plant construction. These factors represent significant barriers to entry into the market by new operators. However, cement production processes and technology are generally regarded as mature and are not expected by industry observers to experience substantial change.
The main costs incurred by cement manufacturers are as follows: • investments for the construction of production plants; • energy and fuel used in the production process; • labour costs; • maintenance and consumables; • transport costs; and • research and development. Given that cement has relatively high fixed costs and a low value to weight ratio, profitability is closely linked with efficient logistics and transportation, strategic location near major markets and quarries and the high utilisation of production facilities.
The Group, over the last years, has been increasingly shifting its mix of energy sources towards alternative fuels, i.e. plastic, WDFS (Waste-Derived Fuels), used oil, biomasses and solvents. With reference to cement production, heat substitution from alternative fuels accounted for 17.5 per cent. of total energy sources in 2011, vs. a figure of 13.4 per cent. in 2007 and 8.3 per cent. in 2004.
Over the period 2004-2011, the Group’s volumes of cement sold and the average capacity utilisation for the Group’s plants’ network is reported in the chart below. These calculations refer to total plant capacity and total production of cement of the respective year. These calculations are not subject to auditors review. Volumes of cement sold decreased from 31.9 million tonnes in 2004 to 25.5 million tonnes in 2009, then
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increasing up to 28.2 million tonnes in 2011; average capacity utilization decreased from 83 per cent. in 2004 to 64 per cent. in 2009, then increasing up to 68 per cent. in 2011. Volumes of cement sold decreased from 13.4 million tonnes in the first half of 2011 to 13.1 million tonnes in the first half of 2012.
Below is reported the evolution of cement prices for the period 2009-2011, across the different geographic markets in which the Group is active. These calculations refer to the evolution of average net prices per ton of cement in the respective markets from 2009 to 2011, assuming that figures are based on a starting point of 100 in 2009. These calculations are not subject to auditors review.
Concrete
Concrete, which is obtained by mixing cement, natural aggregates (sand and gravel), water and admixtures, is a basic element of most construction activity. Main features of concrete are its resistance to pressure, malleability and durability. Concrete can be either produced by specialist firms and then distributed to construction companies or be mixed directly by the construction companies on-site.
The Group operates in the ready-mix concrete industry. A ready-mix concrete plant primarily consists of storage silos for sand, gravel and cement and a concrete mixing plant in which the components are mixed in the following approximate proportions (by volume): 80 per cent. sand and gravel, 10 per cent. cement, 10 per cent water and, if necessary, concrete admixtures. The ready-mix concrete can be used immediately after the mixing process and is poured into special trucks at the plant. From there, the ready-mix concrete is transported directly to the construction sites. As cement mixed with water enters the hydrate phase, ready- mix concrete cannot be transported over long distances.
Over the period 2004-2011, the Group’s volumes of ready-mix concrete sold are reported in the chart below. Volumes of ready-mix concrete sold decreased from 15.2 million m3 in 2004 to 13.9 million m3 in 2009, then increasing up to 15.1 million m3 in 2011 (6.6 million m3 in the first half of 2012 vs. 7.4 million m3 in the first half of 2011).
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Other products
The Issuer also holds active minority investments in companies producing the following other building materials:
Expanded clay
Expanded clay is a light aggregate that is extracted from surface quarries and is produced through the mechanical processes of grinding and mixing, followed by a burning process. Its properties include: sound insulation, compression strength, and resistance to fire, chemical agents and weather conditions. Expanded clay is used in the building industry as a lightweight insulator and as an alternative to conventional aggregate for the production of lightweight concrete.
Admixtures
Admixtures are chemicals that modify the properties of concrete, such as mechanical resistance and hardening time.
Premixed materials and mortars
Premixes, or premixed materials, are products such as mortar and plaster, which are premixed and ready to use and which can also be used for automated applications such as the finishing layer for walls.
Regions of Operations
The Group’s operations are principally carried out in Italy, the United States of America, Germany, Mexico, Luxembourg, the Netherlands, Poland, Czech Republic and Slovakia, Russia and Ukraine.
The following table shows the geographic breakdown of the Group’s revenues and Earnings Before Interests, Taxes, Depreciation and Amortization (“EBITDA”) for the years ended 31 December 2009, 2010 and 2011 and for the six months ended 30 June 2012 and 2011.
Net sales Operating cash flow (EBITDA) –––––––––––––––––––––––––––––– –––––––––––––––––––––––––––––– Year ended 31 December Year ended 31 December –––––––––––––––––––––––––––––– –––––––––––––––––––––––––––––– 2011 2010 2009 2011 2010 2009 –––––––– –––––––– –––––––– –––––––– –––––––– –––––––– (Audited) (Audited) (millions of Euro) (millions of Euro) Italy ...... 568.1 614.2 706.6 10.3 32.5 92.7 USA ...... 557.9 600.9 612.8 66.6 88.7 131.3 Mexico ...... 237.9 213.4 180.4 82.4 77.2 69.9 Central Europe ...... 826.7 728.5 702.5 125.4 93.3 134.9 Eastern Europe ...... 598.3 492.7 470.0 144.7 95.3 112.9 –––––––– –––––––– –––––––– –––––––– –––––––– –––––––– Total (1)...... 2,787.4 2,648.4 2,671.8 429.4 387.0 541.7 –––––––– –––––––– –––––––– –––––––– –––––––– ––––––––
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Operating cash Net sales flow (EBITDA) ––––––––––––––––––– ––––––––––––––––––– 6 months ended 6 months ended 30 June 30 June ––––––––––––––––––– ––––––––––––––––––– 2012 2011 2012 2011 –––––––– –––––––– –––––––– –––––––– (millions of Euro) (millions of Euro) Italy ...... 245.7 290.2 (1.3) 6.9 USA...... 323.1 258.9 50.7 15.8 Mexico...... 131.6 118.3 49.8 41.4 Central Europe ...... 372.5 410.3 34.7 67.6 Eastern Europe ...... 281.0 261.9 63.4 51.5 –––––––– –––––––– –––––––– –––––––– Total (1) ...... 1,350.9 1,339.4 197.2 183.1 –––––––– –––––––– –––––––– ––––––––
Notes: (1) The total includes the intra-group eliminations
With specific reference to Group EBITDA, this has evolved from €183.1 million in 1H 2011 to €197.2 million in 1H 2012. Such change has been mainly driven by the decrease in volumes sold (€72.0 million decrease in EBITDA), more than offset by trend in prices (€81.8 million increase in EBITDA), a decrease in variable costs (€20.0 million increase in EBITDA), a decrease in sales of CO2 emission rights (€21.3 million decrease in EBITDA), an increase in fixed costs (€16.6 million decrease in EBITDA) and other revenues and costs (€22.1 million increase in EBITDA).
The table below shows the Group’s total cement production capacity, currently in place, in the regions in which it operates: Cement Region Capacity –––––– ––––––––– (millions of tonnes) Italy ...... 10.77 USA ...... 9.50 Germany/Lux ...... 8.60 Eastern Europe ...... 9.30 Mexico (50%) ...... 3.15 Total (100%) ...... 44.47 ––––––––– Total Consolidated...... 41.32 ––––––––– Plants...... 39 of which grinding...... 6
Based on total installed cement capacity as of 2011YE, the Group believes itself, based on its own calculations, to be the sixth largest global cement producer, excluding from such ranking Chinese and Indian players.
Italy
For the year ended 31 December 2011, the Group’s sales volume in Italy amounted to €568.1 million (compared to €614.2 million in 2010). Based on volumes sold, the Group believes itself, based on its own calculations, to be the second cement producer in Italy, with a 16 per cent. market share.
The key figures for Buzzi Unicem operations are as follows:
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Year ended 31 December Variation –––––––––––––––––––––––––––––– ––––––––––––––––––– 2011/ 2010/ 2011 2010 2009 2010/ 2009 –––––––– –––––––– –––––––– –––––––– –––––––– (millions of Euro) (%) Net Sales ...... 568.1 614.2 706.6 (7.5) (13.1) EBITDA...... 10.3 32.5 92.7 (68.3) (64.9) % of sales...... 1.8 5.3 13.1 Capital expenditure ...... 22.4 30.8 51.9 (27.3) (38.6) Headcount end of the period ...... 1,887 1,963 2,041 (3.9) (3.8) Cement Volumes (Tonnes/000)(1) ...... 5,799 6,480 6,143 (10.5) 5.5
Notes: (1) These calculations are not subject to auditors review. 6 months ended 30 June Variation ––––––––––––––––––– –––––––– 1H 2012/ 2012 2011 1H 2011 –––––––– –––––––– –––––––– (millions of Euro) (%) Net Sales ...... 245.7 290.2 (15.3) EBITDA ...... (1.3) 6.9 n.m. % of sales ...... (0.5) 2.4 Capital expenditure ...... 15.0 10.4 44.2
In 2011, the average capacity utilisation for the Group’s Italian plant network was 55 per cent. The current production capacity of each of the Group’s 14 plants is illustrated in the table below: Cement Company Cement Plant Capacity –––––––––––––– ––––––––––––––––––––––––––––––––––––––––––– ––––––––––– (millions) (of tonnes) Issuer Robilante (Piedmont) ...... 1.7 Issuer Guidonia (Lazio) ...... 1.9 Issuer Augusta (Sicily) ...... 1.2 Issuer Vernasca (Emilia Romagna) ...... 1.3 Issuer Barletta (Puglia) ...... 1.1 Issuer Trino(2) (Piedmont)...... 0.8 Issuer Siniscola (Sardinia) ...... 0.5 Issuer Sorbolo(2) (Emilia Romagna) ...... 0.4 Issuer Manfredonia(2) (Puglia) ...... 0.4 Issuer Travesio (Friuli Venezia Giulia) ...... 0.4 Issuer Cadola (Veneto)...... 0.3 Issuer Riva del Garda (Trentino Alto Adige) ...... 0.2 Issuer Settimello (Tuscany) ...... 0.2 Cementi Moccia(3) Caserta (Campania)...... 0.3 ––––––––––– Total Italy 10.7 –––––––––––
Notes: (1) Grinding Plant only (2) Cementi Moccia is 50 per cent. owned by the Issuer and thus for the purposes of the overall production capacity of the Issuer, only 50 per cent. of the plant’s capacity (620tonne/000s) has been taken into account in the calculation of the total capacity.
As part of the Issuer’s vertical integration strategy, it also produces ready-mix concrete through its wholly owned subsidiary Unical S.p.A. In 2011, the production of ready-mix concrete in the 160 plants of the Group
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in Italy amounted to 4.1 million cubic metres. Additionally, the Group in Italy operates 6 terminals. Its presence in the sector is supplemented by minority shareholdings in other companies, most of which are located in Northwest Italy. Finally, the Group’s admixture operations are carried out in Italy by Addiment Italia S.r.l., a 50-50 joint venture with the Swiss company Sika AG.
United States
The Group’s sales in the United States totalled Euro 557.9 million for the year ended 31 December 2011 (compared to Euro 600.9 million in 2010). 20 per cent. of the total revenues in 2011 resulted from the Group’s U.S. cement and ready-mix concrete operations. Based on volumes sold, the Group believes itself, based on its own calculations, to be the fifth cement producer in the United States, with a 9 per cent. market share.
The key figures for the Group’s U.S. cement and concrete operations, which include Buzzi Unicem USA (“Buzzi Unicem USA”) and Alamo Cement, are as follows: Year ended 31 December Variation –––––––––––––––––––––––––––––– ––––––––––––––––––– 2011/ 2010/ 2011 2010 2009 2010/ 2009 –––––––– –––––––– –––––––– –––––––– –––––––– (millions of Euro) (%) Net Sales ...... 557.9 600.9 612.8 (7.2) (1.9) EBITDA...... 66.6 88.7 131.3 (24.9) (32.4) EBITDA recurring ...... 66.6 100.0 136.9 (33.3) (27.0) % of sales...... 11.9 16.6 22.3 Capital expenditure ...... 24.1 35.3 82.7 (31.7) (57.1) Headcount end of the period ...... 2,290 2,410 2,317 (5.0) 4.0 Cement Volumes (Tonnes/000)(1) ...... 6,177 6,275 6,356 (1.6) (1.3)
Notes: (1) These calculations are not subject to auditors review 6 months ended 30 June Variation ––––––––––––––––––– –––––––– 1H 2012/ 2012 2011 1H 2011 –––––––– –––––––– –––––––– (millions of Euro) (%) Net Sales ...... 323.1 258.9 24.8 EBITDA ...... 50.7 15.8 221.5 EBITDA recurring ...... 43.0 15.8 172.6 % of sales ...... 13.3 6.1 Capital expenditure ...... 20.4 13.0 56.9
In 2011, the Group’s U.S. operations ran at an average capacity utilisation rate of 63 per cent. The current production capacity of each of the Group’s 8 plants is illustrated in the table below:
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Cement Company Cement Plant Capacity –––––––––––––– ––––––––––––––––––––––––––––––––––––––––––– ––––––––––– (millions of tonnes) Alamo Cement Alamo (San Antonio, Texas) ...... 1.2 Buzzi Unicem USA River (St. Louis, Missouri) ...... 2.3 Buzzi Unicem USA Herculese (Stockertown, Pennsylvania) ...... 1.0 Buzzi Unicem USA Signal Mountain (Chattanooga, Tennessee) ...... 1.0 Buzzi Unicem USA Cape Girardeau, Missouri ...... 1.35 Buzzi Unicem USA Greencastle, Indiana ...... 1.4 Buzzi Unicem USA Pryor, Oklahoma ...... 0.7 Buzzi Unicem USA Maryneal, Texas ...... 0.55 ––––––––––– Total 9.5 –––––––––––
In the United States, the Group operates through its two sub-groups of subsidiaries centred around Buzzi Unicem USA and Alamo Cement Company.
Buzzi Unicem USA has its headquarters in Bethlehem, Pennsylvania and operates in central and northeast United States through 7 cement plants and 31 distribution terminals. Three plants are positioned along the Mississippi river, which is a key long-range means of transportation to distribution terminals and end customers.
Buzzi Unicem USA opened its new River 7000 plant, located in the suburbs of St. Louis, Missouri, in August 2009. The new plant is the largest single line production plant of the Group and has already achieved increased performance levels in terms of electrical energy and fuel consumption. River 7000 has a production capacity of 2.3 million tonnes per year, whilst significantly reducing its environmental impact. The previous line had a production capacity of 1.3 million tonnes per year.
Alamo Cement Company has its headquarters in San Antonio, Texas and its areas of operations are in South and Central Texas. Incorporated in 1881, it is the oldest cement producer west of the Mississippi river, becoming part of the Group in 1979.
Through its subsidiaries, Alamo Concrete Products Company and Dorsett Bros. Concrete Supply Inc., Alamo Cement Company is also active in the concrete business, manufacturing ready-mix concrete, aggregates and other cement products. It operates through 68 active batching plants, 466 mixer-trucks. Alamo Concrete Products Ltd. and mainly serves the San Antonio, Corpus Christi and Austin areas. Dorsett Bros. Concrete Supply, which was acquired at the end of 2008, is an important producer of ready-mix and stabilisers in the Houston area of Texas. To a minor extent, the Issuer is also active in the concrete business through BuzziUnicem USA subsidiaries Red-e-mix LLC and BuzziUnicem ready mix LLC, which own 10 batching plants and 95 mixer-trucks.
In 2011, total ready-mix concrete production was equal to 2.2 million cubic metres. The Issuer also produces premixed Quikrete®, packaged concrete in bags.
Germany
The Issuer operates in Germany through its subsidiary Dyckerhoff AG, of which it owns 93.5 per cent. of the total share capital and 98.00 per cent. of the ordinary shares. The Issuer holds 73.79 per cent. of ordinary shares directly whilst the remaining 24.19 per cent. is held by Buzzi Unicem Investment S.r.l., a wholly- owned subsidiary of the Issuer. Dyckerhoff operates in the cement business through 7 production sites, of which 2 are grinding plants only, and is strongly vertically integrated in the ready-mix concrete business. Dyckerhoff operates in the ready-mix concrete sector through 129 batching plants and 68 own mixer-trucks with total production amounting to 4.0 million cubic metres as at 31 December 2011. Based on volumes sold, the Group believes itself, based on its own calculations, to be the second cement producer in Germany, with a 14 per cent. market share.
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For the year ended 31 December 2011, the Group’s sales volume in Germany amounted to €636.6 million (compared to €548.5 million in 2010).
The key figures for the Group’s domestic cement, ready-mix concrete and aggregates operations are as follows: Year ended 31 December Variation –––––––––––––––––––––––––––––– ––––––––––––––––––– 2011/ 2010/ 2011 2010 2009 2010/ 2009 –––––––– –––––––– –––––––– –––––––– –––––––– (millions of Euro) (%) Net Sales...... 636.6 548.5 528.0 16.0 3.9 EBITDA...... 90.3 76.3 116.3 18.3 (34.3) EBITDA recurring...... 90.3 76.3 81.4 18.3 (6.2) % of sales...... 14.2 13.9 15.4 Capital expenditure ...... 29.0 26.6 43 9.2 (38.1) Headcount end of the period ...... 1,822 1,756 1,647 3.8 6.6 Cement Volumes (Tonnes/000)(1) ...... 5,409 4,797 4,777 12.8 0.4
Notes: (1) These calculations are not subject to auditors review 6 months ended 30 June Variation ––––––––––––––––––– –––––––– 1H 2012/ 2012 2011 1H 2011 –––––––– –––––––– –––––––– (millions of Euro) (%) Net Sales ...... 286.0 308.3 (7.2) EBITDA ...... 30.1 44.5 (32.4) % of sales ...... 10.5 14.4 Capital expenditure ...... 13.2 15.0 (12.0)
In 2011, the average capacity utilisation for the Group’s plant network in Germany was 77 per cent.
The current production capacity of each of the Group’s seven plants is illustrated in the table below:
Cement Plant Capacity ––––––––––––– ––––––––––––– (millions of tonnes) Amöneburg ...... 1.0 Deuna ...... 2.0 Geseke ...... 0.4 Göllheim ...... 0.8 Lengerich ...... 1.77 Neuss(1) ...... 0.4 Neuwied(1) ...... 0.88 ––––––––––––– Total ...... 7.25 ––––––––––––– Notes: (1) Grinding plant only
The company recently completed the modernization of Amoneburg white cement kiln.
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Luxembourg
For the year ended 31 December 2011, the Group’s sales volume in Luxembourg amounted to €112.8 million (compared to €92.3 million in 2010), all of which was derived from cement production and sales. The Group does not operate in the ready-mix concrete sector in Luxembourg.
The key figures for the Group’s domestic cement operations in Luxembourg are as follows: Year ended 31 December Variation –––––––––––––––––––––––––––––– ––––––––––––––––––– 2011/ 2010/ 2011 2010 2009 2010/ 2009 –––––––– –––––––– –––––––– –––––––– –––––––– (millions of Euro) (%) Net Sales ...... 112.8 92.3 83.0 22.2 11.3 EBITDA...... 33.4 16.4 14.1 104.3 16.0 EBITDA recurring ...... 26.4 16.4 14.1 61.0 16.0 % of sales...... 23.4 17.8 17.0 Capital expenditure ...... 2.2 8.0 31.5 (72.5) (74.6) Headcount end of the period ...... 157 156 152 0.6 2.6 Cement Volumes (Tonnes/000)(1) ...... 1,319 1,079 1,000 22.2 7.8
Notes: (1) These calculations are not subject to auditors review 6 months ended 30 June Variation ––––––––––––––––––– –––––––– 1H 2012/ 2012 2011 1H 2011 –––––––– –––––––– –––––––– (millions of Euro) (%) Net Sales ...... 54.0 60.4 (10.6) EBITDA ...... 6.2 21.3 (70.9) EBITDA recurring ...... 6.2 14.2 (56.3) % of sales ...... 11.5 23.5 Capital expenditure ...... 1.1 1.3 (15.4)
The Group’s operational structure in Luxembourg is divided in two sites: a clinker plant located in Rumelange and a grinding and distribution centre in Esch-sur-Alzette. In 2011, production capacity was 1.4 million tonnes, and the plants ran close to full capacity.
The Issuer recently completed an expansion of grinding capacity in Luxembourg, with the installation of a new cement mill. Approximately 31 per cent. of the plant’s production is currently sold in the domestic market, while the other 69 per cent. is exported to Germany, France and Belgium.
The Netherlands
The Group entered the Netherlands market in 2007 through its wholly-owned subsidiary Dyckerhoff Basal Nederland BV, which operates in the country through 16 batching plants and 117 own mixer-trucks.
The company is integrated upstream in the aggregate business and owns 2 aggregate quarries.
For the year ended 31 December 2011, the Group’s sales volume in the Netherlands amounted to €109.7 million (compared to €113.2 million in 2010).
The key figures for the Group’s domestic ready-mix concrete and aggregates operations in the Netherlands are as follows:
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Year ended 31 December Variation –––––––––––––––––––––––––––––– ––––––––––––––––––– 2011/ 2010/ 2011 2010 2009 2010/ 2009 –––––––– –––––––– –––––––– –––––––– –––––––– (millions of Euro) (%) Net Sales ...... 109.7 113.2 112.7 (3.0) 0.5 EBITDA...... 1.6 0.6 4.5 169.0 (87.1) % of sales...... 1.4 0.5 4.0 Capital expenditure ...... 2.3 2.2 4.0 (4.5) (45.0) Headcount end of the period ...... 287 287 296 0.0 (3.0)
6 months ended 30 June Variation ––––––––––––––––––– –––––––– 1H 2012/ 2012 2011 1H 2011 –––––––– –––––––– –––––––– (millions of Euro) (%) Net Sales ...... 47.0 58.1 (19.1) EBITDA ...... (1.7) 1.8 n.m. % of sales ...... 3.1 Capital expenditure ...... 1.9 1.8 5.6
Production capacity is approximately 1.0 million cubic metres per annum.
Poland
The Issuer operates in Poland through Dyckerhoff, which entered the Polish market in 1996 with the acquisition of Nowiny cement plant, located about 180 km south of Warsaw. In 2000, the plant was refurbished with the introduction of the most advanced production technologies.
For the year ended 31 December 2011, the Group’s sales volume in Poland amounted to €144.0 million (compared to €129,3 million in 2010). Based on volumes sold, the Group believes itself, based on its own calculations, to be the fifth cement producer in Poland, with a 9 per cent. market share.
The key figures for the Group’s domestic cement, ready-mix concrete and aggregates operations in Poland are as follows: Year ended 31 December Variation –––––––––––––––––––––––––––––– ––––––––––––––––––– 2011/ 2010/ 2011 2010 2009 2010/ 2009 –––––––– –––––––– –––––––– –––––––– –––––––– (millions of Euro) (%) Net Sales ...... 144.0 129.3 121.1 11.4 6.8 EBITDA...... 36.9 33.4 31.2 10.5 7.0 EBITDA recurring ...... 36.9 33.4 37.9 10.5 (11.9) % of sales...... 25.6 25.8 31.3 Capital expenditure ...... 2.2 2.3 15.9 (4.3) (85.5) Headcount end of the period ...... 389 411 423 (5.4) (2.8) Cement Volumes (Tonnes/000)(1) ...... 1,614 1,497 1,396 7.8 7.3
Notes: (1) These calculations are not subject to auditors review
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6 months ended 30 June Variation ––––––––––––––––––– –––––––– 1H 2012/ 2012 2011 1H 2011 –––––––– –––––––– –––––––– (millions of Euro) (%) Net Sales ...... 53.1 65.6 (19.1) EBITDA ...... 9.9 15.0 (34.4) % of sales ...... 18.6 22.8 Capital expenditure ...... 1.0 1.5 (33.3)
Production capacity is in the range of 1.6 million tonnes per year and capacity utilisation in 2011 was 88 per cent. The Issuer also operates in the ready-mix concrete business through 30 concrete batching plants and 15 own mixer-trucks. Additionally, the Group in Poland operates 1 terminal. For the year ended 31 December 2011, production exceeded 1 million cubic metres and sales represented 39 per cent. of total domestic turnover.
Czech Republic and Slovakia
For the year ended 31 December 2011, the Group’s sales volume in the Czech Republic and Slovakia amounted to €172.0 million (compared to €159.4 million in 2010).
The key figures for the Group’s domestic cement, ready-mix concrete and aggregates operations are as follows: Year ended 31 December Variation –––––––––––––––––––––––––––––– ––––––––––––––––––– 2011/ 2010/ 2011 2010 2009 2010/ 2009 –––––––– –––––––– –––––––– –––––––– –––––––– (millions of Euro) (%) Net Sales ...... 172.0 159.4 175.7 7.8 (9.3) EBITDA...... 35.2 32.8 44.2 7.4 (25.9) % of sales...... 20.5 20.6 25.2 Capital expenditure ...... 3.0 5.2 6.1 (42.3) (14.8) Headcount end of the period ...... 871 908 914 (4.1) (0.7) Cement Volumes (Tonnes/000)(1) ...... 959 760 809 26.2 (6.1)
Notes: (1) These calculations are not subject to auditors review
The Issuer has a cement plant located in Hranice, in the eastern part of the country. Since its acquisition by Dyckerhoff in 1997, the plant has undergone major refurbishment, resulting in a decrease in production costs. The annual production capacity is about 1.1 million tonnes and average utilisation capacity in 2011 was above 84 per cent. The Group has 82 batching plants located both in the Czech Republic and Slovakia, with sales amounting to 1.7 million cubic metres in 2011, distributed through 137 own mixer-trucks. 6 months ended 30 June Variation ––––––––––––––––––– –––––––– 1H 2012/ 2012 2011 1H 2011 –––––––– –––––––– –––––––– (millions of Euro) (%) Net Sales ...... 64.1 80.3 (20.2) EBITDA ...... 7.9 15.0 (47.3) % of sales ...... 12.3 18.7 Capital expenditure ...... 2.1 0.7 200.0
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Russia
For the year ended 31 December 2011, the Group’s sales volume in Russia amounted to €175.5 million (compared to €124.1 million in 2010), all of which related to the cement sector.
The key figures for the Group’s cement operations in Russia are as follows: Year ended 31 December Variation –––––––––––––––––––––––––––––– ––––––––––––––––––– 2011/ 2010/ 2011 2010 2009 2010/ 2009 –––––––– –––––––– –––––––– –––––––– –––––––– (millions of Euro) (%) Net Sales ...... 175.5 124.1 98.8 41.4 25.6 EBITDA...... 65.7 39.7 42.1 65.7 (5.7) % of sales...... 37.4 32.0 42.6 Capital expenditure ...... 36.8 76.2 76.7 (51.7) (0.7) Headcount end of the period ...... 1,049 1,190 1,279 (11.8) (7.0) Cement Volumes (Tonnes/000)(1) ...... 2,434 1,820 1,347 33.7 35.1
Notes: (1) These calculations are not subject to auditors review 6 months ended 30 June Variation ––––––––––––––––––– –––––––– 1H 2012/ 2012 2011 1H 2011 –––––––– –––––––– –––––––– (millions of Euro) (%) Net Sales ...... 105.4 75.1 40.2 EBITDA ...... 41.2 20.5 100.5 % of sales ...... 39.1 27.3 Capital expenditure ...... 9.8 20.3 (51.7)
The Issuer operates out of a cement plant located in Suchoi Log, east of the Ural Mountains and approximately 100 km from Yekaterinburg, which has belonged to the Group since 1994. It has an annual production capacity of 3.6 million tonnes and serves the Ural and Western Siberian markets. Its range of products includes special cements for the strengthening of oil wells.
The Issuer has recently completed the new production line based on dry technology which improved the existing capacity to 3.6 million tonnes per year.
In 2011, the average capacity utilisation for the Group’s Russian plant network was 69 per cent.
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Ukraine
As at 31 December 2011, the Group’s sales volume in Ukraine amounted to €112.5 million (compared to €81.5 million in 2010). Based on volumes sold, the Group believes itself, based on its own calculations, to be the third cement producer in Ukraine, with an 18 per cent. market share. Year ended 31 December Variation –––––––––––––––––––––––––––––– ––––––––––––––––––– 2011/ 2010/ 2011 2010 2009 2010/ 2009 –––––––– –––––––– –––––––– –––––––– –––––––– (millions of Euro) (%) Net Sales ...... 112.5 81.5 75.3 37.9 8.3 EBITDA...... 6.9 (10.5) (4.5) n.m. n.m. % of sales...... 6.2 Capital expenditure ...... 14.4 46.2 58.1 n.m. (20.5) Headcount end of the period ...... 1,617 1,653 1,672 (2.2) (1.1) Cement Volumes (Tonnes/000)(1) ...... 1,902 1,534 1,381 24.0 11.1
Notes: (1) These calculations are not subject to auditors review 6 months ended 30 June Variation ––––––––––––––––––– –––––––– 1H 2012/ 2012 2011 1H 2011 –––––––– –––––––– –––––––– (millions of Euro) (%) Net Sales ...... 60.8 42.4 43.3 EBITDA ...... 4.4 1.0 367.6 % of sales ...... 7.3 2.2 Capital expenditure ...... 4.2 5.3 (20.8)
In Ukraine, the Group owns two cement plants located near Rivne in the north-west and in Nikolayev in the south-east of the country; in addition, the Group in Ukraine operates 3 terminals. As at 31 December 2011, the total annual production capacity was 3.0 million tonnes and utilisation capacity was above 65 per cent. The Group also operates in the ready-mix concrete sector with 6 batching plants and 13 own mixer-trucks. The Issuer has recently completed the investments for switching its fuel source from gas to coal in order to improve efficiency in the production process and increase its competitiveness.
Production capacity in Eastern Europe
The table below provides details of the Group’s cement production capacity in Eastern Europe, including the Czech Republic and Slovakia, Russia and Ukraine: Cement Plant Capacity –––––– –––––––––––– (millions of tonnes) Czech Rep. Hranice ...... 1.1 Poland, Nowiny ...... 1.6 Russia, Suchoi Log ...... 3.6 Ukraine, Volyn (Rivne)...... 1.7 Ukraine, Yug (Nikolajev) ...... 1.3 –––––––––––– Total Ukraine ...... 3.0 –––––––––––– Total Eastern Europe ...... 9.3 –––––––––––– Number of Plants ...... 5
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Mexico
The Issuer operates in Mexico through Corporación Moctezuma, which it jointly controls with Cementos Molins, a Spanish cement producer. Corporación Moctezuma is listed on the Mexico City Stock Exchange and owns two cement plants, Tepetzingo (near Mexico City) and Cerritos (in San Luis Portosì). Corporación Moctezuma is the fourth largest cement producer in Mexico and has a total cement production capacity of 6.3 million tonnes. Based on volumes sold, the Group believes itself, based on its own calculations, to be the fourth cement producer in Mexico, with a 12 per cent. market share.
The 50 per cent. of Corporación Moctezuma’s sales in Mexico which Buzzi Unicem consolidates totalled €237.9 million in 2011. As at 31 December 2011, 8.5 per cent. of total revenues resulted from the Group’s Mexico operations.
The following table sets out key financial information in relation to Corporacion Moctezuma: Year ended 31 December Variation –––––––––––––––––––––––––––––– ––––––––––––––––––– 2011/ 2010/ 2011 2010 2009 2010/ 2009 –––––––– –––––––– –––––––– –––––––– –––––––– (millions of Euro) (%) Net Sales ...... 237.9 213.4 180.4 11.5 18.3 EBITDA...... 82.4 77.2 69.9 6.8 10.4 % of sales...... 34.6 36.2 38.7 Capital expenditure ...... 20.2 38.5 36.2 (47.1) 5.4 Headcount end of the period ...... 587 582 528 0.9 10.3 Cement Volumes (Tonnes/000)(1) ...... 2,785 2,452 2,402 13.6 2.1
Note: figures refer to the 50 per cent. of Corporación Moctezuma sales which Buzzi Unicem consolidates. (1) These calculations are not subject to auditors review
In 2011, the Group’s two Mexican plants ran at an average capacity utilisation rate of over 88 per cent.
In 2010 Corporación Moctezuma completed investment in a new plant in the state of Veracruz, in the municipality of Apazapan for a 1.3 million tonne line, which started working in January 2011.
Corporación Moctezuma also produces a significant amount of ready-mix concrete through its wholly owned subsidiary, Latino Americana de Concretos, SA de CV, which operates 57 plants and 363 trucks and distributes ready-mix concrete to end customers. For the year ended 31 December 2011, total annual production of ready-mix concrete was close to 2 million cubic metres. 6 months ended 30 June Variation ––––––––––––––––––– –––––––– 1H 2012/ 2012 2011 1H 2011 –––––––– –––––––– –––––––– (millions of Euro) (%) Net Sales ...... 131.6 118.3 11.2 EBITDA ...... 49.8 41.4 20.2 % of sales ...... 37.8 35.0 Capital expenditure ...... 4.3 9.5 (54.7)
Algeria
As part of the Algerian government’s privatisation programme, in January 2008, the Issuer completed the purchase of 35 per cent. of two Algerian companies, Societè des Ciments de Hadjar Soud and Societè des Ciments de Sour el Ghozlane, which own cement factories located in Hadjar Soud (about 30 km from Annaba) and Sour El Ghozlane (about 130 km south of Algiers) respectively. For the year ended 31 December 2011, overall production capacity well exceeded 2 million tonnes of cement.
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The governance agreement signed with the Algerian government (which is the majority shareholder in both companies), which assigned the management of the units’ operations to the Issuer for four years, expired in January 2012. New conditions have been proposed to the Algerian Ministry of Industry to renew the agreement, under new conditions, in order to recommence management of the Companies.
Management still believes that the Algerian market offers significant potential in the long term due to increasing domestic demand combined with low production costs.
The Issuer accounts for its Algerian activities under the equity method.
Raw Materials
As a fully integrated cement, concrete and natural aggregates producer, the Issuer sources most of its raw materials from within the Group. The main raw materials used by the Issuer for the production of cement, such as limestone and clay, are supplied by the Issuer’s network of quarries. The Issuer’s production plants are strategically located in proximity to the quarries that provide them with the necessary raw materials. This guarantees a cost efficient supply process, which is a key driver of profitability given the low value to weight ratio of these materials and, consequently, their high transportation costs.
For the production of concrete, the Issuer uses cement, natural aggregates and admixtures. Cement is mainly produced in-house while natural aggregates are either supplied by the Issuer’s quarries or purchased from external suppliers.
Suppliers
The Group is not dependent on any particular suppliers in order to produce its products.
Customers, Sales and Marketing
Customers
The Group enjoys a highly diversified customer base in all of the regions in which it operates. For its cement activities, the Group’s top five customers in core markets accounted for only 9.7 per cent. of segmental revenues in 2011 in Italy, 9.5 per cent. in the United States, 12.6 per cent. in Central Europe, 9.9 per cent. in Eastern Europe and 20.8 per cent. in Mexico. Concrete operations are also characterised by a high degree of customer diversification, with the Group’s top five clients accounting for only 10.6 per cent. of segmental revenues in 2011 in Italy, 12.5 per cent. in the United States, 6.5 per cent. in Central Europe, 8.3 per cent. in Eastern Europe and 17.2 per cent. in Mexico. On a consolidated basis, no single customer accounted for more than 0.5 per cent. of total revenues.(1)
(1) Source: Issuer’s internal management data.
Sales and marketing
The main end market for the Group’s cement output is the production of ready-mix concrete, which absorbed about 45 per cent. of the Group’s cement production in 2011. The second largest end market is the retail sector (i.e. the sale of bagged cement by building product outlets), which absorbed about 16 per cent. of output.
Marketing does not play a large role in the business of the Group and its annual marketing costs are relatively low.
Research and Development
The Group devotes significant attention to research and development, through its Research & Development Division, which oversees and co-ordinates the three central laboratories situated in Guidonia, Trino and Wiesbaden. Recent activity has been focused on researching new construction materials, including nanosciences, nanotechnologies and the study of new materials and production technologies.
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Sustainable development remains one of the objectives of the Group’s research and development activity. New materials and processes with lower environmental impact, reduction of CO2 emissions, as well as natural resource and combustible consumption are the challenges for the future. In 2011 the Group has been particularly focused on the durability of sulphur-aluminate cements (Buzzi Unicem is market leader in Italy and in the US in the production of this innovative hydraulic binder), as well as new composite cements and other materials.
The Group has also focused much attention on photo-catalytic systems and materials with highly efficient, long-lasting photo-catalytic properties, which have a positive environmental impact.
Since 2012 the Issuer has been part of the research and development network “Innovation Poles” of the Piedmont region (north western Italy), composed of companies and research entities working together to produce high value-added infrastructure and services.
Regarding Unical, the development of a new, coordinated set of production initiatives has reached an advanced level of implementation.
Employees
As at 31 December 2011, the Group had 10,956 full time employees across the regions shown in the table below:
As at December 31 –––––––––––––––––––––––––––––– 2012 2011 1H 2011 –––––––– –––––––– –––––––– Italy ...... 1,887 1,963 2,041 United States of America ...... 2,290 2,410 2,317 Germany ...... 1,822 1,756 1,647 Luxembourg ...... 157 156 152 The Netherlands ...... 287 287 296 Poland ...... 389 411 423 Czech Republic and Slovakia ...... 871 908 914 Ukraine ...... 1,617 1,653 1,672 Russia ...... 1,049 1,190 1,279 Mexico (50%) ...... 587 582 528 –––––––– –––––––– –––––––– Total ...... 10,956 11,316 11,269 –––––––– –––––––– ––––––––
Intellectual Property
The Group holds various trademarks and patents but the Issuer does not consider that any of these have a significant impact on the Group’s business. “Buzzi Unicem” is the main cement trademark and is registered in Europe and the United States, whilst “Dyckerhoff” is registered in Europe. “Unical” is the Group’s principal concrete trademark in Italy. The logo of the main trademark is also used by other cement subsidiaries in conjunction with their respective company names.
Material Contracts
The Issuer and the companies forming part of the Group have not entered into any contracts in the last two years outside the ordinary course of their business that have been or may be reasonably be expected to be material to their ability to meet their obligations to Noteholders.
Manufacturing Plant, Real Estate and Quarries
Overall, the Group currently operates 45 plants, six of which are grinding centres, and 41 terminals. Whereas the actual manufacture of cement, ready-mix concrete and aggregates takes place at the plants, storage and distribution of cement takes place via the terminals. The Group owns the majority of the quarries that supply
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its cement and concrete production plants. Quarries that are not owned by the Group are leased under long- term lease contracts.
The table below shows the breakdown of Group raw material quarries by activity and geographical location:
Minimum Estimated estimated reserves duration Plant Raw material supplied (tonnes) (years) Tenure –––––––––––––––– –––––––––––––––––––––––– ––––––––––– ––––––––––– –––––––––––––– Italy Robilante Limestone/shale 34,889,000 17 Owned/leased Cadola Limestone/marl 10,289,000 27 Owned Travesio Limestone/marl 2,698,000 6 Owned Riva del Garda Limestone/clay 1,139,000 6 Owned Vernasca Limestone/marl 17,504,000 12 Owned/leased Guidonia Limestone/clay/gypsum/pozzolan 22,059,000 10 Owned/leased Settimello Marl 1,067,000 6 Owned Siniscola Limestone/sandstone/schist 16,567,000 20 Owned Barletta Limestone/clay 27,298,000 23 Owned Megara Limestone/clay 53,542,000 31 Owned Germany Göllheim Limestone/sand 87,000,000 59 Owned Lengerich Limestone/sand 87,170,000 41 Owned Geseke Limestone 30,180,000 52 Owned Deuna Limestone/sand 40,510,000 16 Owned Luxembourg Rumelange Limestone/marl 59,030,000 55 Owned Poland Nowiny Limestone/marl 69,000,000 38 Owned Czech Republic Hranice Limestone 17,300,000 12 Owned Ukraine Nikolajev Limestone/clay/marl 13,400,000 8 Owned Rivne Chalk/clay 150,100,000 78 Owned Russia Suchoi Log Limestone/argilite/tripel 248,400,000 47 Owned USA Cape Girardeau, Mo. Limestone 303,765,328 179 Owned Chattanooga, Tn. Limestone 99,730,833 83 Leased Festus, Mo. Limestone 170,679,667 57 Owned Greencastle, In. Limestone/shale 257,445,378 59 Owned Maryneal, Tx. Limestone 99,701,003 100 Owned Oglesby, Il. Cement rock 36,040,000 36 Owned Pryor, Ok. Limestone 32,409,757 32 Owned Stockertown, Pa. Cement rock 15,496,116 13 Owned San Antonio, Tx. Chalk 19,240,000 23 Owned San Antonio, Tx. Shale 7,510,000 83 Owned Mexico Tepetzingo Limestone/clay 327,000,000 130 Owned Cerritos Limestone/clay/gypsum 952,000,000 60 Owned Apazapan Limestone/clay/gypsum 300,000,000 76 Owned
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Plant Raw materials supplied Estimate Reserves Tenure –––––––––––––––––––– –––––––––––––––––––––– ––––––––––––––––– –––––––––––––– Italy Piedmont Sand/Gravel 17,633,000 Owned Emilia Romagna Sand/Gravel 230,000 Owned Marche Sand/Gravel 505,000 Owned Tuscany Sand/Gravel 2,053,000 Owned Lazio Sand/Gravel 1,172,000 Leased Puglia Sand/Gravel 2,082,000 Leased/owned Sardinia Sand/Gravel 6,980,000 Owned Sicily Sand/Gravel 3,403,000 Owned Germany Trebur Gravel 886,000 Owned Leubingen Gravel 5,498,000 Owned Seltz Gravel 6,511,000 Owned Netherlands Markelo Sand 10,433,000 Owned Zwolle Sand 4,707,000 Owned Slovakia/Hungary Ducové Sand 3,193,000 Owned Povazany Sand 320,000 Owned Sonda Sand 4,613,000 Owned Zsujta Sand 4,641,000 Owned Czech Republic Václavice Sand 10,554,000 Owned PiskovaLhota Sand 868,412 Owned Krasny les Sand 8,800,000 Owned Nebanice Sand 1,610,000 Owned Votice Gravel 4,445,000 Owned HrubáVoda Gravel 39,427,000 Owned USA – ALAMO San Antonio, Tx. Sand/Gravel 129,500,000 Owned Bastrop, Tx. Sand/Gravel 8,970,000 Owned Starr County, Tx. (Valley) Sand/Gravel 5,350,000 Leased/owned Eagle Pass Tx. Sand/Gravel 180,000 Leased/owned Georgetown, Tx. (Wier) Sand/Gravel 6,190,000 Leased
Regulation
A wide range of laws apply to the Group’s operations in relation to land and highway usage, noise emissions, health, safety and environmental matters. The Group holds all material permits and licences required to conduct its operations and believes it is materially in compliance with all the regulatory requirements relating to its operations. The Issuer currently does not anticipate any material adverse effect on its business or financial position as a result of its future compliance with existing environmental laws controlling the discharge of materials into the environment. The various sites on which the Group manufactures its products may trigger environmental risks. Depending on the manufacturing process, the risk potential may differ. However, the main environmental issues which have been identified as typical risks in this industry are the following: • emissions; • contamination of soil and groundwater; • waste water;
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• hazardous substances;
• recultivation; and
• noise.
The Issuer believes that it conducts its operations substantially in compliance with applicable regulations and requirements regarding the above-named environmental risks.
Legal Proceedings
The Issuer and the Group are exposed to legal risks in the ordinary course of their business, stemming from the variety and complexity of the laws and regulations that apply to the Group’s industrial operations, particularly in the areas of environment, safety, product liability, taxation and competition. While it is not feasible to predict the outcome of any case, management believes that the final results of these proceedings will not have a material adverse effect on the Group’s financial condition.
Tax proceedings
In 2005, tax audits by the Italian authorities resulted in two notices of assessment in respect of the 2000 financial year relating to the deductibility of the antitrust fines imposed on the Group by the European Commission. In July 2006, the Provincial Tax Court of Alessandria held that the antitrust fines incurred by the Group were not tax deductible and, as a consequence, the Group was liable for approximately €4.3 million in additional taxation and accrued interest. Full provision for this amount was made in the annual consolidated financial statements as at 31 December 2006 and in the financial statements for the year ended 31 December 2010, the relevant provision was used up, following the total payment of the tax-assessment bills received, which were paid in installments. In January 2009, the Regional Tax Court of Piedmont confirmed the ruling of the Provincial Tax Court of Alessandria; the Issuer filed an appeal with the Supreme Court against the verdict of the Regional Tax Court of Piedmont on 1 March 2010. The appeal has not yet been heard.
On 2 March 2011, the Issuer received from the Italian Revenue Service a notice of assessment requesting the payment of an additional registration fee and related sanctions and interest, relating to the purchase in February 2008 of a 100 per cent. interest in Cementi Cairo S.r.l. This tax claim stems from the fact that the purchase of an equity interest has been classified as the purchase of a line of business. The Provincial Tax Court of Turin rejected the appeal. Deeming that de jure and de facto sound grounds existed, on 19 December 2011 the Issuer filed an appeal with the Regional Tax Court of Piedmont against this judgment, together with a related petition for the suspension of tax collection, but following the adverse judgment of the Regional Tax Court of Turin, the company received the tax assessment bill on 5 April 2012 for €1.9 million related to higher registration fee, sanctions, interests and collection charges; the fine has been fully provided for in the financial statements for which splitting into instalments was granted. The appeal with the Regional Tax Court of Turin was discussed on 9 July 2012; to date no judgment has been issued.
On 13 June 2011, the Issuer’s subsidiary Unical S.p.A. received from the Italian Revenue Service a notice of assessment requesting the payment of an additional registration fee and related interest, for a total amount of €0.4 million, of which €0.2 million pertained to Unical S.p.A., relating to the purchase in October 2008 of a 100 per cent. interest in Calcestruzzi Nord Ovest S.r.l. This tax claim stems from the fact that the purchase of an equity interest has been classified as the purchase of a line of business. The whole amount of the notice of assessment has been paid, with €0.2 million paid by Unical S.p.A. and the remainder paid by the seller. Unical S.p.A. has filed an appeal with the Provincial Tax Court of Piacenza which has not yet been heard.
In late 2011, the Issuer underwent a tax audit by the Italian Revenue Service; the audit concerned direct tax and value added tax attributable to 2008 and was subsequently extended to 2006, 2007 and 2009. The record of this assessment was notified to the Issuer on 1 December 2011 and contained an objection regarding the valuation of intra-group interest expenses in each of the fiscal years from 2006 through 2009. In June 2012 the tax audit was extended to the years 2010 and 2011 with regard to intra-group interest expenses. The objection suggested there should be an increase in the Issuer’s taxable income for the years from 2006 to
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2009, amounting to an aggregate increase of approximately €14.5 million and an increase for the years 2010 and 2011 amounting to approximately €5.0 million. The Issuer sent a defense brief related to both revenue Service audits to the Italian Revenue Service, as permitted under the taxpayers’ bill of rights. The Issuer has not yet received a notice of assessment. The Issuer’s advisors deem that the defense is well-grounded and the risk of adverse judgment is remote; consequently the Issuer has not made provision for this amount in its financial statements.
In the Ukraine there is litigation pending against two Ukrainian subsidiaries of the Group concerning claims filed by the Ukrainian Revenue Office relating to V.A.T. issues and the deductibility of operating expenses for the Group’s plants. The total amount of unpaid taxes alleged by the Ukrainian Revenue Office is approximately €15 million. The Issuer deems that the defense is well-grounded and that the risk of adverse judgment is remote; consequently the Issuer has not made provision for this amount in its consolidated financial statements.
Antitrust proceedings
In 2004, a €11 million fine was imposed by the Italian antitrust authority on one of the Issuer’s subsidiaries, Unical S.p.A. for alleged anticompetitive practices in the region of Milan, together with other ready-mix concrete producers. Provision has been made for the total amount of the fine in the Issuer’s consolidated annual financial statements, since 2008. Following a set of appeals brought by the Issuer against the decision of the authority, the amount of the fine will be reassessed by the authority, taking into account evidence supporting a shorter period of infringement and the downgrading of the severity of the infringement by the authority from “very harsh” to “harsh”. A reduction of the fine is therefore possible.
At the end of 2009 and in January 2010 the European Commission - DG Competition (the “Commission”), sent a request for information to the Issuer and other major European cement producers, about the markets of cement, cement related products (clinker, ready-mix concrete), cement-based products and other raw materials used in the respective production cycles (fly ash, slag, sand, gravel). The Issuer and the relevant Group companies provided, to the best of their knowledge, the required data and information. Subsequently, in December 2010, the Commission informed the Issuer of its decision to initiate proceedings to ascertain the existence of anticompetitive practices in the European Economic Area (EEA) and of restrictions to imports into the EEA, in the market for cement and other related products. As specifically stated in the letter, the opening of the proceedings does not mean that the Commission has any conclusive evidence of alleged violations, but only that it intends to address the issue as a priority. Since then, the Commission has sent various information requests up to April 2011. The Issuer has answered those requests, as far as has been feasible, but challenged the last one, received on 1 April 2011, as groundless and not proportionate. At the current stage of the survey, the Issuer deems that no infringement of the antitrust laws appears likely to be ascertained and therefore the Issuer has not made any provision for this in its consolidated financial statements
In addition, proceedings for damages have been brought before the Düsseldorf District Court against the Issuer’s subsidiary Dyckerhoff AG and five of its competitors in relation to alleged cartel agreements. The claim for damages is pending before the Düsseldorf Court. The hearing was initially scheduled for May 2011 but has been postponed to October 30th 2012. The risk of possible claims for damages arising from these proceedings has been fully provided for in the Issuer’s consolidated financial statements by including it in the provisions for liabilities and charges.
In December 2009 the Polish antitrust Authority fined six cement producers, including the Issuer’s subsidiary Dyckerhoff Polska sp.zo.o. for anticompetitive behavior. Dyckerhoff Polska sp.zo.o. has been fined an amount of €15 million. The decision has been challenged although the date of the first hearing has not yet been decided. The fine has been fully provided for by the Issuer in its consolidated financial statements.
In February 2012, representatives from the Dutch antitrust authorities and the German Federal Cartel Office searched the business premises of the Issuer’s subsidiary Dyckerhoff Basal Netherlands BV in the Netherlands, and some of the Issuer’s subsidiaries in Germany, as part of a preliminary investigation by the Dutch antitrust authorities. All the requested information, files, and data were made available to the authorities. The results of the investigation are not available yet and no formal notice has been sent by the
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antitrust Authority to the company. However, the Issuer’s opinion is that they will have no material impact, if any, on the Group’s earnings, financial or asset position.
Environmental proceedings
The Italian Ministry for the Environment and Land and Sea Conservation (the “Ministry”) and other public bodies have enacted compulsory measures for the clean-up of the Augusta roadstead in Sicily and in relation to the land and aquifer of a wide coastal area nearby and facing the roadstead itself, which is a contaminated site of national interest (the “Priolo Site”). Under these measures liability for pollution damage and clean- up costs lies with companies with industrial sites situated around the Augusta roadstead and within the Priolo Site, which are predominantly operators in the petrochemical industry. The Issuer has a cement factory within the Priolo Site, and therefore these compulsory measures have been enforced against the Issuer. The Issuer has challenged these compulsory measures before the Regional Administrative Court (TAR) of Sicily, Catania, and has issued litigation against the Ministry and various public and private entities.
The Regional Administrative Court (TAR) decided in favour of the Issuer, but the Ministry appealed to the Regional Administrative Court of Appeal for Sicily, which suspended the effect of the first decision. The appeal is pending.
In the meantime, additional compulsory measures relating to the clean-up of the Priolo Site have been issued to which the Issuer objects. The Issuer has therefore challenged these compulsory measures, bringing several lawsuits before the Regional Administrative Court of Sicily, Catania. An expert report into the sources of the roadstead’s contamination, commissioned by the Regional Administrative Court, was favorable to the Issuer. On September 11, 2012 the Regional Administrative Court (TAR) decided in favour of the Issuer, stating inter alia that the Issuer is not liable for the contamination of the roadstead. The decision may be appealed to the Regional Administrative Court of Appeal for Sicily.
In addition, the Issuer may be held to be collectively responsible for environmental clean-up and pollution prevention measures in the event that the liable polluter does not meet such costs. In January 2012 the Issuer was notified that the Ministry’s clean up project for the Priolo Site involved an area of the Issuer’s land and that proceedings for expropriation for public purposes of that area were therefore commencing. The expropriation does not affect the Issuer’s production facility, nevertheless the Issuer has challenged the expropriation before the Regional Administrative Court of Sicily, Catania. To date, no hearing has been fixed yet. At the same time, the Issuer submitted some remarks on the approval proceedings of the Ministry’s clean up project, requesting its partial amendment with regard to the works to be carried out on the company’s land subject to the possible expropriation process.
Finally the Issuer has initiated a technical consultation with the Ministry for Environment in order to evaluate the feasibility, fairness and sustainability of an out-of-court settlement. The Issuer has not agreed to the Framework Agreement entitled “Actions of environmental reclamation aimed at the reindustrialization of the areas included in the Priolo Site of National Interest” put forward by the Ministry and other public bodies, containing possible settlement provisions involving the private parties. The Issuer appealed the Framework Agreement to the Regional Administrative Court of Sicily, Catania.
Pending the outcome of the above proceedings the Issuer has made a provision of €3 million in its consolidated financial statements for possible works required by public authorities,
Lone Star Industries, Inc.
Lone Star Industries, Inc. (“LSI”) is an indirect wholly-owned subsidiary of the Issuer that sold or distributed certain silica-containing materials until 1985 and certain asbestos-containing materials until the mid-1970s. LSI is presently party to a number of claims in the United States, in which it is alleged that the use of such materials caused work-related injuries, including silicosis, silica-related lung cancer, asbestosis, mesothelioma and similar conditions.
LSI maintained product liability and comprehensive general liability insurance coverage for most of the time that it sold or distributed silica-containing and asbestos-containing materials and believes that it has
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significant insurance coverage for these liabilities. Between 2009 and 2010, LSI and its major insurance providers entered into settlement agreements that define the parties’ responsibilities and sharing of costs for these liabilities until 2019. Estimating the costs associated with silica-related and asbestos-related claims involves many uncertainties that may affect the amount and timing of the losses. The Issuer however maintains a provision for amounts not expected to be covered by insurance in its consolidated financial statements by including it in the provision for liabilities and charges.
Related Party Transactions
The Issuer regularly carries out commercial transactions with a number of its associates and/or joint ventures, which mainly consist of sales of goods to entities operating in the business of cement, ready-mix concrete and admixtures. Management believes that none of these transactions are material to the Issuer’s business. In addition, the Issuer provides technical and engineering services upon request to the same entities. Goods are sold on the basis of the price lists in force with non-related parties. Services are usually negotiated with related parties on a cost basis. There are also a number of transactions of financial nature with the same entities, again on arm’s length commercial terms and interest rates.
Financing
The financial indebtedness of the Group as at 30 June 2012 amounted to €1,676.6 million (compared to €1,728.8 million as at 31 December 2011) and consisted of senior notes, promissory notes and bank financing.
The senior notes include the Buzzi Unicem 5.125% Notes due 2016 with a IFRS accounting value as of 30 June 2012 of €347.4 million. These Notes are listed on the Luxembourg Stock Exchange, have a minimum denomination of €50,000, pay a fixed annual coupon of 5.125% and their due date is 9 December 2016.
The Issuer’s US subsidiary RC Lonestar Inc. has issued non-convertible senior unsecured notes that were privately placed on the US market, which are guaranteed by the Issuer. These fund-raising operations are partly backed by interest rate swaps, cross currency swaps and forward foreign exchange contracts, entered into by the Issuer. The principal notes outstanding include financial covenants by RC Lonestar Inc. and the Issuer in its capacity as guarantor, which require compliance with certain financial ratios. The most important of these are a minimum level of consolidated net worth and a ratio of consolidated net debt to consolidated EBITDA of 3:1 starting from July 2012 onwards. As at 30 June 2012 the Group complied with these covenants and management expects this to be the case in the year 2012. As of 30 June 2012, total outstanding amount of senior unsecured notes at RC Lonestar Inc. stood at €471 million expiring for €94 million in 2013, €109 million in 2014, €109 million in 2015, €132 million in 2016 and €27 million in 2017.
Dyckerhoff AG had in place a mezzanine loan of €231.2 million at June 30, 2012 granted by its former shareholders, the Dyckerhoff family, and due to mature in December 2012. The loan is subject to a fixed interest rate of 4.5 per cent. per annum plus an additional interest rate of 2.5 per cent. per annum that is payable as a lump sum upon maturity.
In 2009, Dyckerhoff AG took out a bullet borrower’s note loan in two tranches totalling €175 million with a term of four years. Of that amount, €37 million were issued at a fixed interest rate and €138 million at a variable interest rate.
During 2011 Dyckerhoff AG stipulated an exchange offer on the variable part of existing “Schuldscheindarlehen” promissory notes for a total amount of €134.5 million. The existing promissory notes were exchanged for new promissory notes which are due to mature in July 2015; once the swap or purchase offer was concluded, the floating rate tranche totals €185 million.
In November 2011 Dyckerhoff AG issued new “Schuldscheindarlehen” promissory notes for a total amount of €100 million with maturities in 2014, 2015 and 2017.
During the year 2011, a new €200 million facility with maturity on the 30 of June 2016 has been entered into by the Issuer, replacing a previous committed facility of €250 million.
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Furthermore in June 2011 the Issuer entered into a syndicated credit facility of €300 million with maturity on the 28 of June 2016, replacing a previous syndicated credit facility of €280 million. In February 2012 a new bilateral credit facility was entered into for an amount of €50 million with final maturity on 30 June 2017. Furthermore in April 2012 a new bilateral credit facility was entered into for an amount of € 35 million, with final maturity on 30 September 2013. Both borrowings are at floating rate and do not require compliance with covenants.
As at 30 June 2012 the Group’s financing with banks amounted to an aggregate of €307.3 million (compared to €307.0 million as at 31 December 2011).
As of 30 June 2012, total outstanding amount of financing with banks and “Schuldscheindarlehen” at Buzzi Unicem S.p.A. and Dyckerhoff AG stood at €628 million, expiring for € 99 million in 2012 (€92 million at Buzzi Unicem S.p.A. and €7 million at Dyckerhoff AG), €197 million in 2013 (€101 million at Buzzi Unicem S.p.A. and €96 million at Dyckerhoff AG), €97 million in 2014 (€38 million at Buzzi Unicem S.p.A. and €59 million at Dyckerhoff AG), €180 million in 2015 (€12 million at Buzzi Unicem S.p.A. and €168 million at Dyckerhoff AG), €17 million in 2016 (€12 million at Buzzi Unicem S.p.A. and €5 million at Dyckerhoff AG), €31 million in 2017 (€6 million at Buzzi Unicem S.p.A. and €25 million at Dyckerhoff AG) and €7 million in 2018 or beyond.
As of 30 June 2012 the Group’s cash and other financial assets amounted to an aggregate of €544.0 million (compared to €604.0 million as at 31 December 2011), of which a significant portion is attributable to Dyckerhoff AG (€322.6 million), representing 59.3 per cent of consolidated cash and other financial assets of the Group. This liquidity is available for the repayment of debts of Dyckerhoff maturing in 2012 such as mezzanine loan referred to above. However, as Dyckerhoff is not a wholly owned subsidiary of the Issuer, the availability of cash generated by Dyckerhoff for use by other companies within the Group may in some cases be subject to approval by its shareholders and, as a consequence, there may be circumstances where the Issuer would need to look to other sources for funding. The remaining cash and other financial assets as of 30 June 2012 are owned by Buzzi Unicem SpA (€16.6 million), Alamo Cement (€45.6 million), RC Lonestar (€102.3 million), Moctezuma (€41.2 million) and others (€15.7 million).
As at 30 June 2012 the Group had undrawn committed facilities of €754.8 million of which €451.4 million available to the Issuer and the remaining amount of €303.4 million to Dyckerhoff AG. The main committed facilities are due to mature in the years 2015 and 2016.
As at 30 June 2012 the Group Net Debt (including derivatives and other financial assets) amounted to €1,159.6 million (compared to €1,143.1 million as at 31 December 2011).
As at As at 31 30 June December 2012 2011 Variation ––––––––– ––––––––– ––––––––– (millions of Euro) Cash and other financial assets...... 544.0 604.0 (60.0) Short-term debt ...... (457.8) (495.8) 38.0 Net short-term cash ...... 86.2 108.2 (22.0) Long-term financial assets ...... 18.0 14.3 3.7 Long-term debt ...... (1,263.8) (1,265.6) 1.8 Net debt ...... (1,159.6) (1,143.1) (16.5)
Management
The Issuer is managed by a board of directors (the “Board of Directors”). In addition, it has a board of statutory auditors (the “Board of Statutory Auditors”).
Under Italian law, the management of a listed company is exercised by a board of directors, performing all actions necessary to achieve the Issuer’s objects. The scope and limits of the board of directors’ powers are determined in the Issuer’s by-laws.
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The Italian Civil Code provides that every società per azioni must also have a board of statutory auditors (collegio sindacale) whose duty is to oversee the Issuer’s compliance with the law and its by-laws, the proper administration, the adequacy of internal controls and accounting reporting systems and the adequacy of provisions concerning the supply of information by the Issuer‘s subsidiaries in order to comply with all obligations of public disclosure. Board of Directors The shareholders’ meeting appoints the members of the Board of Directors for a maximum term of three years. According to the Issuer’s by-laws, the Board of Directors must comprise seven to fifteen members, which is established by the general shareholders’ meeting. At the date of this prospectus, it consists of thirteen members, five of whom are executive and eight are non-executive members. The current members of the Board of Directors are set out below, together with an indication of their principal activities outside the Issuer as at the date of the “Report of the board of directors on the system of Corporate Governance and on the adoption of the Code of Conduct for listed companies” (March 2012) in accordance with the criteria contained in the Code of Conduct. Name Function Positions held in other companies –––––––––––––––––––– ––––––––––––––––––– –––––––––––––––––––––––––––––––––––––––––– Alessandro Buzzi Chairman Vice Chairman of Dyckerhoff AG’s Supervisory Board Enrico Buzzi Vice Chairman CEO of Fimedi S.p.A. CEO of Presa S.p.A. Member of Dyckerhoff AG’s Supervisory Board Chairman of Unical S.p.A. Director of Corporacìon Montezuma S.A.B. de CV Veronica Buzzi Vice Chairman – Non-executive Michele Buzzi Chief Executive CEO of Unical S.p.A. Operations Member of the Management Board of Dyckerhoff AG Director of RC Lonestar Inc. Director of Dyckerhoff Luxembourg S.A. Director of Cimalux S.A. Pietro Buzzi Chief Executive Finance Chairman of Fimedi S.p.A. Chairman of Presa S.p.A. Director of Buzzi Unicem Investimenti S.r.l. Director of Unical S.p.A. Member of Dyckerhoff AG’s Supervisory Board Chairman of RC Lonestar Inc. Director of Corporacìon Montezuma S.A.B. de CV Director of Banco Popolare(1) Wolfgang Bauer Director Chairman of the Management Board of Dyckerhoff AG Director of Sievert AG Vice Chairman of Dyckerhoff Luxembourg S.A. Vice Chairman of Cimalux S.A. Director of RC Lonestar Inc. Chairman of NCD i.L. Chairman of Dyckerhoff Basal Nederland B.V.
Notes: (1) Banca Aletti, one of the Co-Managers, is a member of the Banco Popolare group.
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Name Function Positions held in other companies –––––––––––––––––––– ––––––––––––––––––– –––––––––––––––––––––––––––––––––––––––––– Paolo Burlando Non-executive Director Director of Presa S.p.A. Chairman of Buzzi Unicem Investimenti S.r.l. Statutory Auditor of Prysmian S.p.A. Statutory Auditor of Gruppo Mutui Online S.p.A. Statutory Auditor of Yarpa Investimenti SGR S.p.A. York Dyckerhoff Non-executive Director — (Independent) Ester Faia Non-executive Director — (Independent) Aldo Fumagalli Romario Non-executive Director Chairman and CEO of SOL S.p.A. (Independent) Chairman of Credito Artigiano S.p.A. Director of Credito Valtellinese S.p.A. Gianfelice Rocca Non-executive Director Chairman of San Faustin S.A. (Independent) Director of TAMSA Honorary Chairman of Techint S.p.A. Director of Allianz S.p.A. Director of Brembo S.p.A. Director of Tenaris S.A. Chairman of Techint Industrial Corporation S.p.A. Chairman of Tenova S.p.A. Chairman of Humanitas S.p.A. Chairman of Humanitas Mirasole S.p.A. Director of Cliniche Gavazzeni S.p.A. Director of Ternium S.A. Maurizio Sella Non-executive Director Chairman of Banca Sella S.p.A. (Independent) Chairman of Banca Sella Holding S.p.A. Chairman of Selban S.p.A. Chairman of Banca Patrimoni Sella & C. S.p.A. Chairman of Maurizio Sella S.A.p.A. Director of Sofise S.p.A. Chairman of Finanziaria 1900 S.p.A. Director of Finind S.p.A. Chairman of Finanziaria 2006 S.p.A. Director of Banca Sella Nord Est Bovio Calderari S.p.A. Director of Alleanza Toro S.p.A. Director of Compagnie Financière Martin-Maurel Marco Weigmann Non-executive Director Director of Società Reale Mutua Assicurazioni di Assicurazioni Director of Italiana Assicurazioni S.p.A. Director of Reale Immobili S.p.A. Director of Banca Reale S.p.A. Director of Banca Sella Holding S.p.A. Director of Auchan Italia S.p.A. Director of Pernigotti S.p.A.
The term of office of the current Board of Directors is due to expire at the shareholders’ meeting convened to approve the Issuer’s annual financial statements as at 31 December 2013.
The members of the Board of Directors are domiciled at Via Luigi Buzzi 6, 15033 Casale Monferrato (AL), Italy for the purpose of their respective roles with the Issuer.
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Board of Statutory Auditors
The Board of Statutory Auditors consists of three standing auditors who are independent accounting experts and/or experts in the concrete and building industry elected by the shareholders’ meeting, and two substitute auditors who automatically replace the statutory auditors who resign or are otherwise unable to serve as a statutory auditor. The Board of Statutory Auditors is appointed for a term of three years. The current term of appointment of the current Board of Statutory Auditors is due to expire at the shareholders’ meetings held to approve the Issuer’s annual consolidated financial statements as at 31 December 2013.
At present, the Board of Statutory Auditors is composed of the following three permanent and two substitute members:
Statutory Auditors Mario Pia Chairman Gianfranco Barzaghini Standing Auditor Giorgio Giorgi Standing Auditor Roberto D’amico Substitute Audtor Paola Giordano Substitute Audtor
Conflicts of interests
There are no potential conflicts of interest between any of the duties of the members of the Board of Directors or Board of Statutory Auditors of the Issuer and their private interests and other duties.
Independent auditors
Deloitte & Touche S.p.A. audited the Issuer’s annual financial statements as at and for the years ended 31 December 2009, 2010 and 2011. They were appointed at shareholders’ meetings held on 29 April 2005 and 11 May 2007 for the period from 2005 to 2013.
Recent developments
There have been no material changes to the Issuer’s business, including its subsidiaries, material contracts, joint ventures or acquisitions since 30 June 2012.
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OVERVIEW OF FINANCIAL INFORMATION RELATING TO THE ISSUER
The tables below set out an overview of the consolidated financial information of the Issuer as at and for the years ended 31 December 2011, 2010 and 2009, and as at and for the six months ended 30 June 2012 and 31 December 2011.
The financial information contained in this section as at and for the years ended 31 December 2011, 2010 and 2009, and as at and for the six months ended 2012 and 31 December 2011 is derived from the financial information of the Issuer incorporated by reference herein and the financial information contained in this section as at and for the six month period ended 30 June 2012 is derived from the interim unaudited consolidated financial statements of the Issuer which were subject to a limited review by Deloitte & Touche s.p.a. incorporated by reference herein. (See “Information Incorporated by Reference”).
The Issuer has prepared its consolidated annual and semi-annual financial statements in accordance with International Financial Reporting Standards, as adopted by the European Union and with the provisions implementing Article 9 of Italian Legislative Decree No. 38/2005. Deloitte & Touche S.p.A., auditors to the Issuer, have audited the annual consolidated financial statements of the Issuer as at and for the years ended 31 December 2011, 2010 and 2009.
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Consolidated annual balance sheets
As at 31 December ––––––––––––––––––––––––––––––––––––– 2011 2010 2009 (Audited) (Audited) (Audited) –––––––––– –––––––––– –––––––––– (Amounts in € thousands) ASSETS Non-current assets Goodwill ...... 588,607 586,180 565,655 Other intangible assets ...... 10,245 11,282 14,113 Property, plant and equipment ...... 3,334,646 3,477,712 3,411,174 Investment property ...... 21,209 19,093 14,834 Investments in associates ...... 207,893 216,505 227,167 Available-for-sale financial assets ...... 5,243 5,524 6,108 Deferred income tax assets...... 44,469 40,082 44,997 Defined benefit plan assets...... 41,894 41,882 46,782 Derivative financial instruments ...... 1,698 2,630 250 Other non-current assets...... 60,350 69,000 81,793 –––––––––– –––––––––– –––––––––– 4,316,254 4,469,890 4,412,873 –––––––––– –––––––––– –––––––––– Current assets Inventories...... 404,480 394,760 387,061 Trade receivables ...... 487,412 451,025 436,245 Other receivables ...... 107,050 138,010 124,513 Available-for-sale financial assets ...... 11 11 1,024 Derivative financial instruments ...... 4,216 1,859 782 Cash and cash equivalents ...... 592,028 396,459 696,965 –––––––––– –––––––––– –––––––––– 1,595,197 1,382,124 1,646,590 Assets held for sale...... 17,421 3,250 –––––––––– –––––––––– –––––––––– Total Assets ...... 5,928,872 5,855,264 6,059,463 –––––––––– –––––––––– –––––––––– EQUITY Equity attributable to owners of the company Share capital ...... 123,637 123,637 123,637 Share premium ...... 458,696 458,696 458,696 Other reserves ...... 164,945 157,499 10,604 Retained earnings ...... 1,875,981 1,828,581 1,910,690 Treasury shares ...... (6,180) (6,986) (7,671) –––––––––– –––––––––– –––––––––– 2,617,079 2,561,427 2,495,956 Non-controlling interest ...... 227,724 242,252 216,418 –––––––––– –––––––––– –––––––––– Total Equity...... 2,844,803 2,803,679 2,712,374 –––––––––– –––––––––– ––––––––––
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Consolidated annual balance sheets (cont.)
LIABILITIES Non-current liabilities Long-term debt ...... 1,247,855 1,458,850 1,448,713 Derivative financial instruments ...... 13,837 28,991 58,552 Employee benefits ...... 315,791 318,002 314,754 Provisions for liabilities and charges ...... 121,123 119,531 137,014 Deferred income tax liabilities ...... 427,152 442,291 462,285 Other non-current liabilities ...... 15,400 18,278 15,350 –––––––––– –––––––––– –––––––––– 2,141,158 2,385,943 2,436,668 –––––––––– –––––––––– –––––––––– Current liabilities Current portion of long-term debt ...... 402,413 175,718 354,655 Short term debt ...... 78,560 2,198 7,789 Derivative financial instruments ...... 151 1,317 14,604 Trade payables ...... 263,597 278,576 265,667 Income tax payables ...... 19,723 15,857 40,681 Provisions for liabilities and charges ...... 42,365 52,352 49,460 Other payables ...... 136,102 139,624 177,565 –––––––––– –––––––––– –––––––––– 942,911 665,642 910,421 –––––––––– –––––––––– –––––––––– Total Liabilities ...... 3,084,069 3,051,585 3,347,089 –––––––––– –––––––––– –––––––––– Total Equity and Liabilities ...... 5,928,872 5,855,264 6,059,463 –––––––––– –––––––––– ––––––––––
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Consolidated annual income statements
For the year ended 31 December ––––––––––––––––––––––––––––––––––––– 2011 2010 2009 (Audited) (Audited) (Audited) –––––––––– –––––––––– –––––––––– (Amounts in € thousands, except per share and share data) Net sales ...... 2,787,385 2,648,442 2,671,809 Changes in inventories of finished goods and work in progress...... 3,645 (9,496) 779 Other operating income ...... 100,305 108,091 137,841 Raw materials, supplies and consumables ...... (1,246,303) (1,175,320) (1,105,156) Services...... (704,356) (669,596) (653,506) Staff costs ...... (432,187) (437,811) (420,828) Other operating expenses ...... (79,085) (77,286) (89,208) –––––––––– –––––––––– –––––––––– Operating cash flow (EBITDA)...... 429,404 387,024 541,731 Depreciation, amortisation and impairment charges ...... (243,498) (386,706) (218,718) –––––––––– –––––––––– –––––––––– Operating profit (EBIT)...... 185,906 318 323,013 Gains (losses) on disposal of investments ...... 1,172 597 6,191 Finance revenues ...... 73,600 106,508 106,828 Finance costs...... (173,394) (210,123) (206,750) Equity in earnings of associates ...... (2,999) 641 5,895 Profit before tax ...... 84,285 (102,059) 235,177 Income tax expense ...... (30,178) 60,646 (63,750) Profit for the year ...... 54,107 (41,413) 171,427 –––––––––– –––––––––– –––––––––– Attributable to: Owners of the company ...... 26,408 (63,463) 139,519 Non-controlling interest ...... 27,699 22,050 31,908 Earnings per share ordinary shares...... 0.12 (0.31) 0.67 savings shares ...... 0.15 (0.29) 0.70
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Consolidated annual Statement of Comprehensive Income
For the year ended 31 December ––––––––––––––––––––––––––––––––––––– 2011 2010 2009 (Audited) (Audited) (Audited) –––––––––– –––––––––– –––––––––– (Amounts in € thousands) Profit for the year ...... 54,107 (41,413) 171,427 Currency translation differences...... 1,365 180,495 (65,081) Income taxes related to components of other comprehensive income ...... (1.178) – – Other comprehensive income for the year, net of tax .. 187 180,495 (65,081) Total comprehensive income for the year...... 54,294 139,082 106,346 Attributable to: Owners of the company ...... 34,513 97,900 77,215 Non-controlling interest ...... 19,781 41,182 29,131
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Consolidated annual Statement of Cash Flows
For the year ended 31 December ––––––––––––––––––––––––––––––––––––– 2011 2010 2009 (Audited) (Audited) (Audited) –––––––––– –––––––––– –––––––––– (Amounts in € thousands) Cash flows from operating activities Cash generated from operations ...... 381,996 380,284 378,203 Interest paid ...... (91,847) (99,029) (83,314) Income tax paid ...... (41,903) (44,971) (46,918) –––––––––– –––––––––– –––––––––– Net cash generated from operating activities...... 248,246 236,284 247,971 Cash flows from investing activities Purchase of intangible assets ...... (1,214) (1,416) (2,866) Purchase of property, plant and equipment ...... (147,797) (269,346) (380,991) Acquisition of subsidiaries, net of cash acquired...... (2,213) 3,395 (353) Purchase of other equity investments ...... (55) (857) (1,361) Proceeds from sale of property, plant and equipment ...... 49,797 15,055 10,579 Proceeds from sale of equity investments ...... 3,946 2,783 7,511 Capital grants received ...... 38 296 994 Changes in available-for-sale financial assets ...... - 1,013 (1,022) Changes in financial receivables ...... (16,520) 3,803 6,642 Dividends received from associates ...... 8,054 12,235 10,837 Interest received ...... 15,446 18,235 22,595 –––––––––– –––––––––– –––––––––– Net cash used in investing activities ...... (90,518) (214,804) (327,435) Cash flows from financing activities Proceeds from long-term debt ...... 172,521 146,109 704,300 Repayments of long-term debt ...... (182,197) (384,183) (419,376) Net change in short-term debt ...... 76,320 (15,540) (3,142) Changes in financial payables ...... (9,729) (51,021) 29,013 Changes in ownership interests without loss of control.... (5,301) (3,660) (3,565) Dividends paid to owners of the company ...... (1,215) (37,926) (74,862) Dividends paid to non-controlling interest...... (14,569) (8,333) (21,320) –––––––––– –––––––––– –––––––––– Net cash generated (used) in financing activities...... 35,830 (354,554) 211,048 Increase (decrease) in cash and cash equivalents ...... 193,558 (333,074) 131,584 Cash and cash equivalents at beginning of year ...... 396,459 696,965 578,694 Translation differences ...... 2,354 32,568 (14,629) Change in scope of consolidation...... (343) – 1,316 –––––––––– –––––––––– –––––––––– Cash and cash equivalents at end of year ...... 592,028 396,459 696,965
Note: Cash Flow statement for 2011 and 2010 based on new methodology adopted in 2011 due to IFRS requirements.
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Consolidated semi-annual Balance Sheets
As at 31 As at December 30 June 2011 2012 (Audited) –––––––––– –––––––––– (Amounts in € thousand) ASSETS Non-current assets Goodwill ...... 589,719 588,607 Other intangible assets...... 11,306 10,245 Property, plant and equipment...... 3,345,785 3,334,646 Investment property ...... 21,078 21,209 Investments in associates...... 204,088 207,893 Available-for-sale financial assets ...... 5,348 5,243 Deferred income tax assets ...... 62,224 44,469 Defined benefit plan assets ...... 39,048 41,894 Derivative financial instruments ...... 4,400 1,698 Other non-current assets ...... 54,655 60,350 –––––––––– –––––––––– 4,337,651 4,316,254 Current assets Inventories ...... 409,116 404,480 Trade receivables ...... 561,294 487,412 Other receivables ...... 124,362 107,050 Available-for-sale financial assets ...... 55,028 11 Derivative financial instruments ...... 1,301 4,216 Cash and cash equivalents ...... 472,202 592,028 –––––––––– –––––––––– 1,623,303 1,595,197 Assets held for sale ...... 14,677 17,421 –––––––––– –––––––––– Total Assets ...... 5,975,631 5,928,872 –––––––––– –––––––––– EQUITY Equity attributable to owners of the company Share capital ...... 123,637 123,637 Share premium...... 458,696 458,696 Other reserves ...... 228,197 164,945 Retained earnings ...... 1,866,394 1,875,981 Treasury shares ...... (4,768) (6,180) –––––––––– –––––––––– 2,672,156 2,617,079 Non-controlling interest...... 230,515 227,724 –––––––––– –––––––––– Total Equity ...... 2,902,671 2,844,803 –––––––––– ––––––––––
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Consolidated semi-annual Balance Sheets (cont.)
As at 31 As at December 30 June 2011 2012 (Audited) –––––––––– –––––––––– (Amounts in € thousand) LIABILITIES Non-current liabilities Long-term debt ...... 1,246,838 1,247,855 Derivative financial instruments ...... 13,786 13,837 Employee benefits ...... 316,029 315,791 Provisions for liabilities and charges...... 123,847 121,123 Deferred income tax liabilities ...... 435,636 427,152 Other non-current liabilities ...... 14,937 15,400 –––––––––– –––––––––– 2,151,073 2,141,158 Current liabilities Current portion of long-term debt ...... 363,914 402,413 Short term debt ...... 65,948 78,560 Derivative financial instruments ...... 416 151 Trade payables...... 258,576 263,597 Income tax payables ...... 25,773 19,723 Provisions for liabilities and charges...... 40,769 42,365 Other payables ...... 166,491 136,102 –––––––––– –––––––––– 921,887 942,911 –––––––––– –––––––––– Total Liabilities ...... 3,072,960 3,084,069 –––––––––– –––––––––– Total Equity and Liabilities ...... 5,975,631 5,928,872 –––––––––– ––––––––––
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Consolidated semi-annual income statements
For the 6 months ended 30 June ––––––––––––––––––––––– 2012 2011 –––––––––– –––––––––– (Amounts in € thousands, except per share and share data) Net sales ...... 1,350,865 1,339,351 Changes in inventories of finished goods and work in progress...... 1,022 (14,049) Other operating income ...... 41,818 59,506 Raw materials, supplies and consumables ...... (586,547) (610,942) Services ...... (344,202) (339,473) Staff costs...... (224,115) (214,752) Other operating expenses...... (41,658) (36,504) –––––––––– –––––––––– Operating cash flow (EBITDA) ...... 197,183 183,137 Depreciation, amortisation and impairment charges...... (113,189) (120,662) –––––––––– –––––––––– Operating profit (EBIT) ...... 83,994 62,475 Gains on disposal of investments ...... 343 596 Finance revenues ...... 34,669 57,011 Finance costs ...... (96,910) (103,012) Equity in earnings of associates ...... (82) (922) Profit before tax ...... 22,014 16,148 Income tax expense ...... (3,881) (4,231) Profit for the period...... 18,133 11,917 –––––––––– –––––––––– Attributable to: Owners of the company...... 3,294 (330) Non-controlling interest...... 14,839 12,247 Earnings per share ordinary shares ...... 0.01 (0.01) savings shares ...... 0.06 0.03
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Consolidated semi-annual Statement of Comprehensive Income
For the 6 months ended 30 June ––––––––––––––––––––––– 2012 2011 –––––––––– –––––––––– (Amounts in € thousands) Profit for the period...... 18,133 11,917 Currency translation differences ...... 69,739 (128,055) Income taxes related to components of other comprehensive income ...... (321) 779 –––––––––– –––––––––– Other comprehensive income for the period, net of tax ...... 69,418 (127,276) Total comprehensive income for the period ...... 87,551 (115,359) Attributable to: Owners of the company...... 64,228 (122,074) Non-controlling interest...... 23,323 6,715
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Consolidated semi-annual Statement of Cash Flows
For the 6 months ended 30 June ––––––––––––––––––––––– 2012 2011 –––––––––– –––––––––– (Amounts in € thousands) Cash flows from operating activities Cash generated from operations ...... 128,386 132,851 Interest paid ...... (41,527) (37,728) Income tax paid ...... (17,781) (11,119) –––––––––– –––––––––– Net cash generated from operating activities ...... 69,078 84,004
Cash flows from investing activities Purchase of intangible assets...... (634) (307) Purchase of property, plant and equipment ...... (67,932) (74,867) Acquisition of subsidiaries, net of cash acquired ...... 224 (2,190) Purchase of other equity investments ...... (407) (50) Proceeds from sale of property, plant and equipment...... 17,895 12,548 Proceeds from sale of equity investments ...... 672 2,737 Capital grants received ...... - 38 Changes in available-for-sale financial assets ...... (55,017) - Changes in financial receivables ...... (887) 156 Dividends received from associates...... 1,569 4,151 Interest received...... 11,628 7,754 –––––––––– –––––––––– Net cash used in investing activities...... (92,889) (50,030) Cash flows from financing activities Proceeds from long-term debt ...... 84,698 25,040 Repayments of long-term debt ...... (141,683) (110,791) Net change in short-term debt ...... (12,597) (1,209) Changes in financial payables ...... (6,947) 986 Changes in ownership interests without loss of control ...... (3,613) (1,737) Dividends paid to owners of the company ...... (10,271) (1,215) Dividends paid to non-controlling interest ...... (18,510) (14,137) –––––––––– –––––––––– Net cash used in financing activities ...... (108,923) (103,063) Increase (decrease) in cash and cash equivalents...... (132,734) (69,089) Cash and cash equivalents at beginning of period ...... 592,028 396,459 Translation differences ...... 12,908 (21,962) Change in scope of consolidation ...... – (20) –––––––––– –––––––––– Cash and cash equivalents at end of period ...... 472,202 305,388
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TAXATION
The statements herein regarding taxation are based on the laws in force as at the date of this Base Prospectus and are subject to any changes in law occurring after such date, which changes could be made on a retroactive basis. The following summary does not purport to be a comprehensive description of all the tax considerations which may be relevant to a decision to subscribe for, purchase, own or dispose of the Notes and does not purport to deal with the tax consequences applicable to all categories of investors, some of which (such as dealers in securities or commodities) may be subject to special rules. Prospective purchasers of the Notes are advised to consult their own tax advisers concerning the overall tax consequences of their ownership of the Notes.
Republic of Italy
Tax treatment of Notes issued by the Issuer
Italian Legislative Decree No. 239 of 1 April 1996 (“Decree 239”) sets out the applicable regime regarding the tax treatment of interest, premium and other income (including the difference between the redemption amount and the issue price) (hereinafter collectively referred to as “Interest”) deriving from Notes falling within the category of bonds (obbligazioni) and similar securities issued, inter alia, by: (i) companies listed on an Italian regulated market; and (ii) non-listed companies issuing Notes Traded on regulated markets or on multilateral trading platforms. The provisions of Decree 239 only apply to Notes issued by the Issuer that qualify as obbligazioni (bonds) or as titoli similari alle obbligazioni (securities similar to bonds) pursuant to Article 44 of Presidential Decree No. 917 of 22 December 1986, as amended and supplemented (“Decree No. 917”).
Italian resident Noteholders
Where an Italian resident Noteholder is:
(a) an individual not engaged in an entrepreneurial activity to which the Notes are connected (unless he has opted for the application of the risparmio gestito regime – see under “Capital gains tax” below);
(b) a non-commercial partnership;
(c) a non-commercial private or public institution; or
(d) an investor exempt from Italian corporate income taxation, interest, premium and other income relating to the Notes, accrued during the relevant holding period, are subject to a withholding tax, referred to as “imposta sostitutiva”, levied at the rate of 20 per cent. In the event that the Noteholders described under (a) and (c) above are engaged in an entrepreneurial activity to which the Notes are connected, the imposta sostitutiva applies as a provisional tax.
Where an Italian resident Noteholder is a company or similar commercial entity, or a permanent establishment in Italy of a foreign company to which the Notes are effectively connected, and the Notes are deposited with an authorised intermediary, Interest from the Notes will not be subject to imposta sostitutiva. They must, however, be included in the relevant Noteholder’s income tax return and are therefore subject to general Italian corporate taxation and, in certain circumstances, depending on the “status” of the Noteholder, also to IRAP (the regional tax on productive activities).
Italian real estate funds created under Article 37 of Italian Legislative Decree No. 58 of 24 February 1998 and Article 14 bis of Italian Law No. 86 of 25 January 1994, are not subject to any substitute tax at the fund level nor to any other income tax in the hands of the fund.
If the investor is resident in Italy and is an open-ended or closed-ended investment fund (the “Fund”) or a SICAV, and the Notes are held by an authorised intermediary, Interest accrued during the holding period on the Notes will not be subject to imposta sostitutiva. The Fund or SICAV will not be subject to taxation on
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such result, but a withholding tax of 20 per cent. will apply, in certain circumstances, to distributions made in favour of unitholders or shareholders.
Where an Italian resident Noteholder is a pension fund (subject to the regime provided for by article 17 of the Italian Legislative Decree No. 252 of 5 December 2005) and the Notes are deposited with an authorised intermediary, Interest relating to the Notes and accrued during the holding period will not be subject to imposta sostitutiva, but must be included in the result of the relevant portfolio accrued at the end of the tax period, to be subject to an 11 per cent. substitute tax.
Pursuant to Decree 239, imposta sostitutiva is applied by banks, SIMs, fiduciary companies, SGRs, stockbrokers and other entities identified by a decree of the Ministry of Finance (each an “Intermediary”).
An Intermediary must (a) be resident in Italy or be a permanent establishment in Italy of a non-Italian resident financial intermediary, and (b) intervene, in any way, in the collection of interest or in the transfer of the Notes. For the purpose of the application of the imposta sostitutiva, a transfer of Notes includes any assignment or other act, either with or without consideration, which results in a change of the ownership of the relevant Notes or in a change of the Intermediary with which the Notes are deposited.
Where the Notes are not deposited with an Intermediary, the imposta sostitutiva is applied and withheld by any Italian financial intermediary paying interest to a Noteholder or, absent that, by the issuer.
Non-Italian resident Noteholders
Where the Noteholder is a non-Italian resident, an exemption from the imposta sostitutiva applies provided that the non-Italian resident beneficial owner is:
(a) resident, for tax purposes, in a country which allows for a satisfactory exchange of information with Italy (the “White List States”) as listed (i) in the Italian Ministerial Decree dated 4 September 1996, as amended from time to time, or (ii) as from the fiscal year in which the decree pursuant to article 168-bis of Italian Presidential Decree of 22 December 1996, No 917 is effective, in the list of States allowing an adequate exchange of information with the Italian tax authorities as per the decree issued to implement Article 168-bis, paragraph 1 of Italian Presidential Decree of 22 December 1986, No. 917 (for the 5 years starting on the date of publication of the Decree in the Official Gazette, States and territories that are not included in the current black-lists set forth by Italian Ministerial Decrees of 4 May 1999, 21 November 2001 and 23 January 2002 nor in the current white list set forth by Italian Ministerial Decree of 4 September 1996 are deemed to be included in the new white-list); or
(b) an international body or entity set up in accordance with international agreements which have entered into force in Italy; or
(c) a Central Bank or an entity which manages, inter alia, the official reserves of a foreign State; or
(d) an “institutional investor”, whether or not subject to tax, which is established in a country which allows for a satisfactory exchange of information with Italy.
In order to ensure gross payment, non-Italian resident Noteholders must be the beneficial owners of the payments of Interest and must:
(a) deposit, directly or indirectly, the Notes with a resident bank or SIM or a permanent establishment in Italy of a non-Italian resident bank or SIM or with a non-Italian resident entity or company participating in a centralised securities management system which is in contact, via computer, with the Ministry of Economy and Finance; and
(b) file with the relevant depository, prior to or concurrently with the deposit of the Notes, a statement of the relevant Noteholder, which remains valid until withdrawn or revoked, in which the Noteholder declares to be eligible to benefit from the applicable exemption from imposta sostitutiva. This statement, which is not requested for international bodies or entities set up in accordance with international agreements which have entered into force in Italy nor in the case of foreign Central
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Banks or entities which manage, inter alia, the official reserves of a foreign State, must comply with the requirements set forth by Ministerial Decree of 12 December 2001.
The imposta sostitutiva will be applicable at the rate of 20 per cent. to Interest paid to Noteholders who do not qualify for the exemption.
Noteholders who are subject to the substitute tax might, nevertheless, be eligible for a total or partial relief under an applicable tax treaty.
Capital gains tax
Any gain obtained from the sale or redemption of the Notes would be treated as part of the taxable income (and, in certain circumstances, depending on the “status” of the Noteholder, also as part of the net value of the production for IRAP purposes) if realised by an Italian company, a similar commercial entity (including the Italian permanent establishment of foreign entities to which the Notes are connected) or Italian resident individuals engaged in an entrepreneurial activity to which the Notes are connected.
Where an Italian resident Noteholder is an individual not engaged in an entrepreneurial activity to which the Notes are connected, any capital gain realised by such Noteholder from the sale or redemption of the Notes would be subject to an imposta sostitutiva, levied at the rate of 20 per cent. Noteholders may set off any losses with their gains.
In respect of the application of imposta sostitutiva, taxpayers may opt for one of the three regimes described below:
(a) Under the tax declaration regime (regime della dichiarazione), which is the default regime for Italian resident individuals not engaged in an entrepreneurial activity to which the Notes are connected, the imposta sostitutiva on capital gains will be chargeable, on a cumulative basis, on all capital gains (net of any incurred capital loss) realised by the Italian resident individual Noteholder holding the Notes. In this instance, “capital gains” means any capital gain not connected with an entrepreneurial activity pursuant to all sales or redemptions of the Notes carried out during any given tax year. Italian resident individuals holding the Notes not in connection with an entrepreneurial activity must indicate the overall capital gains realised in any tax year, net of any relevant incurred capital loss, in the annual tax return and pay the imposta sostitutiva on such gains together with any balance income tax due for such year. Capital losses in excess of capital gains may be carried forward against capital gains realised in any of the four succeeding tax years. Capital losses realised before 1st January 2012 may be carried forward to be offset against subsequent capital gains of the same nature realized from 1st January 2012 for a portion equal to 62.5 per cent. of the relevant capital loss.
(b) As an alternative to the tax declaration regime, Italian resident individual Noteholders holding the Notes not in connection with an entrepreneurial activity may elect to pay the imposta sostitutiva separately on capital gains realised on each sale or redemption of the Notes (the risparmio amministrato regime). Such separate taxation of capital gains is allowed subject to:
(i) the Notes being deposited with Italian banks, SIMs or certain authorised financial intermediaries; and
(ii) an express election for the risparmio amministrato regime being timely made in writing by the relevant Noteholder.
The depository must account for the imposta sostitutiva in respect of capital gains realised on each sale or redemption of the Notes (as well as in respect of capital gains realised upon the revocation of its mandate), net of any incurred capital loss. The depository must also pay the relevant amount to the Italian tax authorities on behalf of the taxpayer, deducting a corresponding amount from the proceeds to be credited to the Noteholder or using funds provided by the Noteholder for this purpose. Under the risparmio amministrato regime, where a sale or redemption of the Notes results in a capital loss, which may be deducted from capital gains subsequently realised, within the same securities management, in the same tax year or in the following tax years up to the fourth. Under the risparmio
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amministrato regime, the Noteholder is not required to declare the capital gains in the annual tax return.
(c) In the “risparmio gestito” regime, any capital gains realised by Italian resident individuals holding the Notes not in connection with an entrepreneurial activity who have entrusted the management of their financial assets (including the Notes) to an authorised intermediary, will be included in the computation of the annual increase in value of the managed assets accrued, even if not realised, at year end, subject to a 20 per cent. substitute tax, to be paid by the managing authorised intermediary. Any depreciation of the managed assets accrued at the year end may be carried forward against increase in value of the managed assets accrued in any of the four succeeding tax years. The Noteholder is not required to declare the capital gains realised in the annual tax return.
Any capital gains realised by a Noteholder who is an Italian open ended or a closed-ended investment fund or a SICAV will be included in the result of the relevant portfolio accrued at the end of the tax period. A 20 per cent. withholding tax will apply in certain circumstances, to distributions by the Fund or SICAV to unitholders or shareholders.
Any capital gains realised by a Noteholder who is an Italian pension fund (subject to the regime provided for by article 17 of the Italian Legislative Decree No. 252 of 5 December 2005) will be included in the result of the relevant portfolio accrued at the end of the tax period, to be subject to an 11 per cent. substitute tax.
Capital gains realised by non Italian resident Noteholders from the sale or redemption of Notes issued by an Italian resident issuer and traded on regulated markets are not subject to the imposta sostitutiva.
Capital gains realised by non Italian resident Noteholders from the sale or redemption of Notes issued by an Italian resident issuer not traded on regulated markets are not subject to the imposta sostitutiva, provided that the effective beneficiary is:
(a) resident in a country which allows for a satisfactory exchange of information with Italy;
(b) an international entity or body set up in accordance with international agreements which have entered into force in Italy;
(c) a Central Bank or an entity which manages, inter alia, the official reserves of a foreign State; or
(d) an “institutional investor”, whether or not subject to tax, which is established in a country which allows for a satisfactory exchange of information with Italy.
If none of the conditions above is met, capital gains realised by non Italian resident Noteholders from the sale or redemption of Notes issued by an Italian resident issuer and not traded on regulated markets may be subject to the imposta sostitutiva at the current rate of 20 per cent. However, Noteholders may benefit from an applicable tax treaty with Italy providing that capital gains realised upon the sale or redemption of the Notes are to be taxed only in the resident tax country of the recipient.
Inheritance and gift taxes
Transfers of any valuable asset (including shares, Notes or other securities) as a result of death or donation are taxed as follows:
(a) transfers in favour of spouses and direct descendants or direct ancestors are subject to an inheritance and gift tax applied at a rate of 4 per cent. on the value of the inheritance or gift exceeding €1,000,000;
(b) transfers in favour of relatives to the fourth degree or relatives in law to the third degree are subject to an inheritance and gift tax at a rate of 6 per cent. on the entire value of the inheritance or the gift. Transfers in favour of brothers/sisters are subject to the 6 per cent. inheritance and gift tax on the value of the inheritance or gift exceeding €100,000; and
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(c) any other transfer is subject to an inheritance and gift tax applied at a rate of 8 per cent. on the entire value of the inheritance or gift.
Transfer tax
Contracts relating to the transfer of securities are subject to a Euro 168 registration tax as follows: (i) public deeds and notarised deeds are subject to mandatory registration; (ii) private deeds are subject to registration only in the case of voluntary registration.
EU Savings Directive
Under EC Council Directive 2003/48/EC (the “EU Savings Directive”) on the taxation of savings income, each Member State is required, from 1 July 2005, to provide to the tax authorities of another Member State details of payments of interest or other similar income (within the meaning of the EU Savings Directive) paid by a person within its jurisdiction to, or collected by such a person for an individual resident or certain limited types of entity established in that other Member State; however, for a transitional period, Austria and Luxembourg are permitted to apply an optional information reporting system, whereby if a beneficial owner (within the meaning of the EU Savings Directive) does not comply with one of two procedures for information reporting, the relevant Member State will levy a withholding tax on payments to such beneficial owner. The withholding tax system applies for a transitional period during which the withholding tax rate is 35 per cent. The transitional period is to terminate at the end of the first full fiscal year following agreement by certain non-EU countries to the exchange of information relating to such payments.
Also with effect from 1 July 2005, a number of non-EU countries, including Switzerland and certain dependent or associated territories of certain Member States, have agreed to adopt similar measures (either provision of information or transitional withholding) in relation to payments made by a person within its jurisdiction to, or collected by such a person for an individual resident or certain limited types of entity established in a Member State. In addition, the Member States have entered into provision of information or transitional withholding arrangements with certain of those dependent or associated territories in relation to payments made by a person in a Member State to, or collected by such a person for an individual resident or certain limited types of entity established in one of those territories.
On 13 November 2008, the European Commission published a proposal for amendments to the EU Savings Directive, which included a number of suggested changes. The European Parliament approved an amended version of the proposal on 24 April 2009. If any of these proposed changes are made in relation to the EU Savings Directive, they may amend or broaden the scope of the requirements described above. Investors who are in any doubt as to their position should consult their professional advisers.
Implementation in Italy of the EU Savings Directive
Italy has implemented the EU Savings Directive through Legislative Decree 84/2005. Under 84/2005, subject to a number of important conditions being met, for interest paid from 1 July 2005 to individuals which qualify as beneficial owners of the interest payment and are resident for tax purposes in another Member State, Italian qualified paying agents shall not apply the withholding tax. Instead, they shall report to the Italian Tax Authorities details of the relevant payments and personal information on the individual beneficial owner. Such information is transmitted by the Italian Tax Authorities to the competent foreign tax authorities of the State of residence of the beneficial owner.
In certain circumstances, the same reporting requirements must be complied with also in respect of interest paid to an entity established in another Member State, other than legal persons (with the exception of certain Finnish and Swedish entities), whose profits are taxed under general arrangements for business taxation and, in certain circumstances, undertakings for collective investments in transferable securities or “UCITS” recognised in accordance with Directive 2009/65/EC.
Either payments of interest on the Notes or the realisation of the accrued interest through the sale of the Notes would constitute “payments of interest” under Article 6 of the EU Savings Directive and, as far as Italy
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is concerned, Article 2 of Decree 84/2005. Accordingly, such payments of interest arising out of the Notes would fall within the scope of the EU Savings Directive being the Notes issued after 1st March, 2001.
Luxembourg
The following summary is of a general nature. It is based on the laws presently in force in Luxembourg, though it is not intended to be, nor should it be construed to be, legal or tax advice. Prospective investors in the Notes should therefore consult their own professional advisers as to the effects of state, local or foreign laws, including Luxembourg tax law, to which they may be subject.
The information contained within this section is limited to withholding taxation issues and prospective investors should not apply any information set out below to other areas, including (but not limited to) the legality of transactions involving the Notes.
Withholding tax
All payments of interest and principal by the relevant Issuer in the context of the holding, disposal, redemption or repurchase of the Notes can be made free and clear of any withholding or deduction for or on account of any taxes of whatsoever nature imposed, levied, withheld, or assessed by Luxembourg or any political subdivision or taxing authority thereof or therein, in accordance with the applicable Luxembourg law, subject however to:
(a) the application of the Luxembourg laws of 21 June 2005 implementing the European Union Savings Directive (Council Directive 2003/48/EC) and agreements concluded with certain dependant or associated territories providing for the possible application of a withholding tax (35 per cent. from 1st July, 2011) on interest paid to certain non Luxembourg resident investors(individuals and certain types of entities called “residual entities” as defined in article 4-2 of the EU Savings Tax Directive) in the event of the Issuer appointing a paying agent in Luxembourg within the meaning of the above mentioned directive (see, paragraph “EU Savings Directive” above). For a transitional period, however, Luxembourg introduced an optional information reporting system whereby if a beneficial owner, within the meaning of the EU Savings Tax Directive, does not comply with one of the procedures for information reporting, the relevant Member State will levy a withholding tax on payments to such beneficial owner; and
(b) the application as regards Luxembourg resident individuals of the Luxembourg law of 23 December 2005 which has introduced a 10 per cent. withholding tax on savings income paid by a Luxembourg paying agent (within the meaning of the EU Savings Tax Directive) (i.e. with certain exemptions, savings income within the meaning of the Luxembourg law of 21 June 2005, as amended, implementing the European Union Savings Directive).
Responsibility for the withholding of tax in application of the above-mentioned Luxembourg laws of 21 June 2005 and 23 December 2005, as amended, is assumed by the Luxembourg paying agent within the meaning of these laws.
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SUBSCRIPTION AND SALE
Merrill Lynch International and Mediobanca – Banca di Credito Finanziario S.p.A. (the “Joint Lead Managers”), Banca Aletti & C. S.p.A., Banca IMI S.p.A., Commerzbank Aktiengesellschaft and Crédit Agricole Corporate and Investment Bank (the “Co-Managers” and, together with the Joint Lead Managers, the “Managers”) have, in a subscription agreement dated 26 September 2012 (the “Subscription Agreement”) and made between the Issuer and the Managers upon the terms and subject to the conditions contained therein, jointly and severally agreed to subscribe for the Notes. The Issuer has also agreed to reimburse the Managers for certain of their expenses incurred in connection with the management of the issue of the Notes. The Managers are entitled in certain circumstances to be released and discharged from their obligations under the Subscription Agreement prior to the closing of the issue of the Notes.
United Kingdom
Each Manager has further represented, warranted and undertaken that:
(a) it has only communicated or caused to be communicated and will only communicate or cause to be communicated an invitation or inducement to engage in investment activity (within the meaning of Section 21 of the Financial Services and Markets Act 2000 (the “FSMA”)) received by it in connection with the issue or sale of the Notes in circumstances in which Section 21(1) of the FSMA does not apply to the Issuer; and
(b) it has complied and will comply with all applicable provisions of the FSMA with respect to anything done by it in relation to the Notes in, from or otherwise involving the United Kingdom.
United States of America
The Notes have not been and will not be registered under the Securities Act and may not be offered or sold within the United States or to, or for the account or benefit of, U.S. persons except in certain transactions exempt from the registration requirements of the Securities Act. Terms used in this paragraph have the meanings given to them by Regulation S.
The Notes are subject to U.S. tax law requirements and may not be offered, sold or delivered within the United States or its possessions or to a United States person, except in certain transactions permitted by U.S. tax regulations. Terms used in this paragraph have the meanings given to them by the United States Internal Revenue Code and regulations thereunder.
Each Manager has agreed that, except as permitted by the Subscription Agreement, it will not offer, sell or deliver the Notes, (a) as part of their distribution at any time or (b) otherwise, until 40 days after the later of the commencement of the offering and the issue date of the Notes, within the United States or to, or for the account or benefit of, U.S. persons, and that it will have sent to each dealer to which it sells Notes during the distribution compliance period a confirmation or other notice setting forth the restrictions on offers and sales of the Notes within the United States or to, or for the account or benefit of, U.S. persons.
In addition, until 40 days after commencement of the offering, an offer or sale of Notes within the United States by a dealer (whether or not participating in the offering) may violate the registration requirements of the Securities Act.
Republic of Italy
The offering of the Notes has not been registered pursuant to Italian securities legislation and, accordingly, each Manager has represented and agreed that no Notes may be offered, sold or delivered nor may copies of this Prospectus or of any other document relating to the Notes be distributed in the Republic of Italy, except:
(a) to qualified investors (investitori qualificati) as defined in Article 34-ter, first paragraph, letter b) of Commissione Nazionale per le Società e la Borsa (“CONSOB”) Regulation No. 11971 of 14 May 1999, as amended (“Regulation No. 11971”); or
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(b) in circumstances where an exemption from the rules governing public offers of securities applies, pursuant to Article 100 of Decree No. 58 and Article 34-ter, first paragraph of CONSOB Regulation No. 11971.
Any such offer, sale or delivery of the Notes or distribution of copies of this Prospectus or any other document relating to the Notes in the Republic of Italy must be:
(i) made by an investment firm, bank or financial intermediary permitted to conduct such activities in the Republic of Italy in accordance with Legislative Decree No. 58 of 24 February 1998, CONSOB Regulation No. 16190 of 29 October 2007 and Legislative Decree No. 385 of 1 September 1993 (in each case as amended from time to time); and
(ii) in compliance with any other applicable laws and regulations or requirement imposed by CONSOB or any other Italian authority.
General
Each Manager has represented, warranted and agreed that it has complied and will comply with all applicable laws and regulations in each country or jurisdiction in which it purchases, offers, sells or delivers Notes or possesses, distributes or publishes this Prospectus or any other offering material relating to the Notes. Persons into whose hands this Prospectus comes are required by the Issuer and the Managers to comply with all applicable laws and regulations in each country or jurisdiction in which they purchase, offer, sell or deliver Notes or possess, distribute or publish this Prospectus or any other offering material relating to the Notes, in all cases at their own expense.
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GENERAL INFORMATION
Authorisation
1. The creation and issue of the Notes has been authorised by a resolution of the Board of Directors of the Issuer dated 30 March 2012.
Listing and Admission to Trading
2. Application has been made for the Notes to be admitted to listing on the official list and trading on the Luxembourg Stock Exchange’s regulated market. The total expenses related to the admission of the Notes to trading on the Luxembourg Stock Exchange’s regulated market are expected to amount to approximately €4,710.
Legal and Arbitration Proceedings
3. Save as disclosed in “Description of the Issuer – Legal proceedings”, there are no governmental, legal or arbitration proceedings, (including any such proceedings which are pending or threatened, of which the Issuer is aware), which may have, or have had during the 12 months prior to the date of this Prospectus, a significant effect on the financial position or profitability of the Issuer and the Group.
Significant/Material Change
4. Since 31 December 2011 there has been no material adverse change in the prospects of the Issuer or the Group and since 30 June 2012 there has been no significant change in the financial or trading position of the Issuer or the Group.
Auditors
5. The consolidated annual financial statements of the Issuer have been audited without qualification for the years ended 31 December 2009, 2010 and 2011 by Deloitte & Touche S.p.A. of Galleria San Federico, 54, 10121 Torino, Italy. The consolidated semi-annual financial statements of the Issuer as at and for the six months ended 30 June 2012 were subject to a limited review by Deloitte & Touche S.p.A. of Galleria San Federico, 54, 10121 Torino, Italy. Deloitte & Touche S.p.A. is registered under No. 46 in the special register (albo speciale) maintained by CONSOB and set out under Article 161 of Decree No. 58 and under No. 132587 in the Register of Accountancy Auditors (Registro dei Revisori Contabili) in compliance with the provisions of Legislative Decree No. 88 of 27 January 1992. Deloitte & Touche S.p.A. is a member of ASSIREVI (the Italian auditors’ association).
Documents on Display
6. Copies of the following documents (together, where appropriate, with English translations thereof) may be inspected during normal business hours at the offices of the Fiscal Agent at Winchester House, 1 Great Winchester Street, London EC2N 2DB, United Kingdom from the date of this Prospectus:
(a) the By laws (statuto) of the Issuer;
(b) this Prospectus;
(c) the Subscription Agreement;
(d) the Fiscal Agency Agreement;
(e) the Deed of Covenant;
(f) the audited consolidated annual financial statements of the Issuer as at and for the years ended 31 December 2009, 2010 and 2011; and
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(g) the consolidated semi-annual financial statements of the Issuer as at and for the six months ended 30 June 2012.
Clearing Systems
7. The Notes have been accepted for clearance through Euroclear and Clearstream, Luxembourg. The ISIN is XS0835273235 and the common code is 083527323. The address of Euroclear is 1 Boulevard du Roi Albert II, B 1210 Brussels, Belgium and the address of Clearstream, Luxembourg is 42 Avenue JF Kennedy, L 1855 Luxembourg, Grand Duchy of Luxembourg.
Material Contracts
8. The Issuer and the companies forming part of the Group have not entered into any contracts in the last two years outside the ordinary course of their business which could result in the Issuer being under an obligation or entitlement that is material to the Issuer’s ability to meet its obligation to holders of the Notes.
Potential Conflicts of Interest
9. The Managers and their respective affiliates engage, and may in the future engage, in investment banking, commercial banking (including the provision of loan facilities) and other related transactions with the Issuer and its affiliates and may perform services for them, in each case in the ordinary course of business.
10. In addition, in the ordinary course of their business activities, the Managers and their affiliates may make or hold a broad array of investments and actively trade debt and equity securities (or related derivative securities) and financial instruments (including bank loans) for their own account and for the accounts of their customers. Such investments and securities activities may involve securities and/or instruments of the Issuer or Issuer’s affiliates. Certain of the Managers or their affiliates that have a lending relationship with the Issuer routinely hedge their credit exposure to the Issuer consistent with their customary risk management policies. Typically, such Managers and their affiliates would hedge such exposure by entering into transactions which consist of either the purchase of credit default swaps or the creation of short positions in securities, including potentially the notes offered hereby. Any such short positions could adversely affect future trading prices of notes offered hereby. The Managers and their affiliates may also make investment recommendations and/or publish or express independent research views in respect of such securities or financial instruments and may hold, or recommend to clients that they acquire, long and/or short positions in such securities and instruments.
Yield
11. On the basis of the issue price of the Notes of 100 per cent. of their principal amount, the yield of the Notes is 6.250 per cent. on an annual basis.
Legend Concerning US Persons
12. The Notes and any Coupons appertaining thereto will bear a legend to the following effect: “Any United States person who holds this obligation will be subject to limitations under the United States income tax laws, including the limitations provided in Sections 165(j) and 1287(a) of the Internal Revenue Code.”
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INDEX OF DEFINED TERMS
Acting in Concert...... 18 Agency Agreement...... 15 Board of Directors ...... 18 Board of Statutory Auditors...... 54 business day ...... 21 Calculation Amount ...... 17 Change of Control ...... 18 Change of Control Period ...... 19 Clearstream, Luxembourg ...... 1 Closing Date...... 1 Co-Managers ...... 75 CONSOB ...... 75 Couponholders ...... 15 Coupons ...... 15 CRA Regulation...... 1 CSSF ...... 1 Day Count Fraction ...... 17 Decree No. 239 ...... 21 Deed of Covenant...... 27 Definitive Notes ...... 27 Dispute ...... 26 dollars...... 3 ECB ...... 27 EU Savings Tax Directive ...... 12 Euro ...... 3 Euroclear ...... 1 Eurosystem...... 27 first currency ...... 26 first Person ...... 16 Fiscal Agent ...... 15 FSMA...... 75 Global Note ...... 1 Group ...... 3 Guarantee ...... 15 Indebtedness...... 16 Initial Longstop Date ...... 19 Investor’s Currency ...... 14 Issuer ...... 1 Joint Lead Managers ...... 1 LSI ...... 52 Luxembourg Act...... 1 Managers ...... 75 Market Interest Rate...... 11 Material Subsidiary ...... 16 Member State ...... 3 NGN...... 27 Noteholders ...... 15 Noteholders’ Representative ...... 25 Optional Redemption Date ...... 18 Paying Agents ...... 15 Permanent Global Note ...... 1 Permitted Security Interest...... 16 Permitted Transaction ...... 23
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Person...... 15 Potential Change of Control Announcement ...... 19 Proceedings ...... 26 Prospectus ...... 1 Prospectus Directive...... 3 Put Event ...... 18 Put Event Notice ...... 18 Put Option ...... 18 Put Period...... 18 Rating Agency ...... 19 Rating Downgrade ...... 19 Regular Period ...... 17 Regulation No. 11871 ...... 75 Regulation S...... 1 Relevant Coupons ...... 20 Relevant Date...... 21 Relevant Indebtedness ...... 16 Relevant Person(s) ...... 19 Reserved Matter ...... 25 risparmio amministrato regime ...... 71 S&P ...... 1 second currency ...... 26 second Person...... 16 Securities Act ...... 1 Security Interest ...... 16 Subscription Agreement...... 75 Subsidiary...... 16 TARGET System ...... 20 TARGET2 ...... 20 Temporary Global Note ...... 1 U.S. dollars...... 3 U.S.$...... 3
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REGISTERED OFFICE OF THE ISSUER Via Luigi Buzzi, 6 15033 Casale Monferrato (AL) Italy
JOINT LEAD MANAGERS Merrill Lynch International Mediobanca – Banca di Credito Finanziario S.p.A. 2 King Edward Street Piazzetta E. Cuccia 1 London EC1A 1HQ 20121 Milan United Kingdom Italy
CO-MANAGERS Banca Aletti & C. S.p.A. Banca IMI S.p.A. Via Santo Spirito, 14 Largo Mattioli, 3 20121 Milan 20121 Milan Italy Italy
Commerzbank Crédit Agricole Aktiengesellschaft Corporate and Investment Bank Kaiserstraße 16 (Kaiserplatz) 9 Quai du President Paul Doumer 60311 Frankfurt am Main 92920 Paris-La Defense Federal Republic of Germany Cedex France
FISCAL AGENT AND PAYING AGENT Deutsche Bank AG, London Branch Winchester House 1 Great Winchester Street London EC2N 2DB United Kingdom
LISTING AGENT Deutsche Bank Luxembourg S.A. 2 Boulevard Konrad Adenauer L 1115 Luxembourg Grand Duchy of Luxembourg
LEGAL ADVISERS To the Issuer as to Italian law: Tosetto, Weigmann e Associati Corso Galileo Ferraris, 43 10129 Torino Italy
To the Joint Lead Managers as to English and Italian law: Clifford Chance Studio Legale Associato Piazzetta M. Bossi, 3 20121 Milan Italy
AUDITORS TO THE ISSUER Deloitte & Touche S.p.A. Galleria San Federico, 54 10121 Torino Italy Level: 4 – From: 4 – Tuesday, September 25, 2012 – 10:23 – mark – 4463 Section 07
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