BASE PROSPECTUS
ITALCEMENTI S.p.A. (incorporated with limited liability in the Republic of Italy) and ITALCEMENTI FINANCE S.A. (incorporated with limited liability in the French Republic) €2,000,000,000 Euro Medium Term Note Programme unconditionally and irrevocably guaranteed in respect of Notes issued by Italcementi Finance S.A. by ITALCEMENTI S.p.A. (incorporated with limited liability in the Republic of Italy)
Under this €2,000,000,000 Euro Medium Term Note Programme (the Programme), Italcementi S.p.A. and Italcementi Finance S.A. (the Issuers, and each an Issuer) may from time to time issue notes (the Notes) denominated in any currency agreed between the relevant Issuer and the relevant Dealer (as defined below). References in this Base Prospectus to the relevant Issuer shall, in relation to any Tranche of Notes, be construed as references to the Issuer which is, or is intended to be, the Issuer of such Notes as indicated in the applicable Final Terms. The payments of all amounts due in respect of the Notes issued by Italcementi Finance S.A. will be unconditionally and irrevocably guaranteed by Italcementi S.p.A. in its capacity as guarantor (the Guarantor). The maximum aggregate nominal amount of all Notes from time to time outstanding under the Programme will not exceed €2,000,000,000 (or its equivalent in other currencies calculated as described in the Programme Agreement described herein), subject to increase as described herein. The Notes may be issued on a continuing basis to one or more of the Dealers specified under “Overview of the Programme” and any additional Dealer appointed under the Programme from time to time by the Issuers (each a Dealer and together the Dealers), which appointment may be for a specific issue or on an ongoing basis. References in this Base Prospectus to the relevant Dealer shall, in the case of an issue of Notes being (or intended to be) subscribed by more than one Dealer, be to all Dealers agreeing to subscribe such Notes. An investment in Notes issued under the Programme involves certain risks. For a discussion of these risks see “Risk Factors”. 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 on prospectuses for securities to approve this document as a base prospectus. Application has also been made to the Luxembourg Stock Exchange for Notes issued under the Programme to be admitted to trading on the Luxembourg Stock Exchange’s regulated market and to be listed on the Official List of the Luxembourg Stock Exchange. Notice of the aggregate nominal amount of Notes, interest (if any) payable in respect of Notes, the issue price of Notes and any other terms and conditions not contained herein which are applicable to each Tranche (as defined under “Terms and Conditions of the Notes”) of Notes will be set out in a final terms document (the Final Terms) which, with respect to Notes to be listed on the Luxembourg Stock Exchange will be filed with the CSSF. The Programme provides that Notes may be listed or admitted to trading, as the case may be, on such other or further stock exchanges or markets as may be agreed between the relevant Issuer, the Guarantor (in the case of notes issued by Italcementi Finance S.A.) and the relevant Dealer. The relevant Issuer may also issue unlisted Notes and/or Notes not admitted to trading on any market. The relevant Issuer and the Guarantor (in the case of Notes issued by Italcementi Finance S.A.) may agree with any Dealer that Notes may be issued in a form not contemplated by the Terms and Conditions of the Notes herein, in which event a supplemental Base Prospectus, if appropriate, will be made available which will describe the effect of the agreement reached in relation to such Notes. ARRANGERS Banca IMI BNP PARIBAS
DEALERS Banca IMI BNP PARIBAS BofA Merrill Lynch Crédit Agricole CIB Crédit Mutuel-CIC HSBC ING Commercial Banking J.P. Morgan Mediobanca S.p.A. NATIXIS The Royal Bank of Scotland Société Générale Corporate & Investment Banking UniCredit Bank
The date of this Base Prospectus is 9 March 2010.
2 This Base Prospectus comprises a base prospectus in relation to each Issuer for the purposes of Article 5.4 of Directive 2003/71/EC (the Prospectus Directive).
The Issuers and the Guarantor (the Responsible Persons) accept responsibility for the information contained in this Base Prospectus. To the best of the knowledge of the Issuers and the Guarantor (each having taken all reasonable care to ensure that such is the case) the information contained in this Base Prospectus is in accordance with the facts and does not omit anything likely to affect the import of such information.
Subject as provided in the applicable Final Terms, the only persons authorised to use this Base Prospectus in connection with an offer of Notes are the persons named in the applicable Final Terms as the relevant Dealer or the Managers, as the case may be.
Copies of Final Terms will be available from the registered office of the relevant Issuer and the specified office set out below of each of the Paying Agents (as defined below).
The table relating to ranks and market shares for the cement business at page 97 has been extracted from J.P. Morgan’s Global Equity Research Report dated 8 September 2009, page 322. The Issuers and the Guarantor confirm that such information has been accurately reproduced and that, so far as they are aware, and are able to ascertain from information published by J.P. Morgan, no facts have been omitted which would render the reproduced information inaccurate or misleading.
This Base Prospectus is to be read in conjunction with all documents which are deemed to be incorporated herein by reference (see “Documents Incorporated by Reference”). This Base Prospectus shall be read and construed on the basis that such documents are incorporated and form part of this Base Prospectus.
The Dealers have not independently verified the information contained herein. Accordingly, no representation, warranty or undertaking, express or implied, is made and no responsibility or liability is accepted by the Dealers as to the accuracy or completeness of the information contained or incorporated in this Base Prospectus or any other information provided by the Issuers or the Guarantor in connection with the Programme. No Dealer accepts any liability in relation to the information contained or incorporated by reference in this Base Prospectus or any other information provided by the Issuers or the Guarantor in connection with the Programme.
No person is or has been authorised by any of the Issuers or the Guarantor to give any information or to make any representation not contained in or not consistent with this Base Prospectus or any other information supplied in connection with the Programme or the Notes and, if given or made, such information or representation must not be relied upon as having been authorised by any of the Issuers, the Guarantor or any of the Dealers.
Neither this Base Prospectus nor any other information supplied in connection with the Programme or any Notes (a) is intended to provide the basis of any credit or other evaluation or (b) should be considered as a recommendation by any of the Issuers, the Guarantor or any of the Dealers that any recipient of this Base Prospectus or any other information supplied in connection with the Programme or any Notes should purchase any Notes. Each investor contemplating purchasing any Notes should make its own independent investigation of the financial condition and affairs, and its own appraisal of the creditworthiness, of the relevant Issuer and the Guarantor (in the case of Notes issued by Italcementi Finance S.A.). Neither this Base Prospectus nor any other information supplied in connection with the Programme or the issue of any Notes constitutes an offer or invitation by or on behalf of any of the Issuers or the Guarantor or any of the Dealers to any person to subscribe for or to purchase any Notes.
3 Neither the delivery of this Base Prospectus nor the offering, sale or delivery of any Notes shall in any circumstances imply that the information contained herein concerning any of the Issuers and/or the Guarantor is correct at any time subsequent to the date hereof or that any other information supplied in connection with the Programme is correct as of any time subsequent to the date indicated in the document containing the same. The Dealers expressly do not undertake to review the financial condition or affairs of any of the Issuers or the Guarantor during the life of the Programme or to advise any investor in the Notes of any information coming to their attention.
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 U.S. tax law requirements. Subject to certain exceptions, Notes may not be offered, sold or delivered within the United States or to, or for the account or benefit of, U.S. persons (see “Subscription and Sale”).
This Base Prospectus does not constitute an offer to sell or the solicitation of an offer to buy any Notes in any jurisdiction to any person to whom it is unlawful to make the offer or solicitation in such jurisdiction. The distribution of this Base Prospectus and the offer or sale of Notes may be restricted by law in certain jurisdictions. None of the Issuers, the Guarantor and the Dealers represent that this Base Prospectus may be lawfully distributed, or that any Notes may be lawfully offered, in compliance with any applicable registration or other requirements in any such jurisdiction, or pursuant to an exemption available thereunder, or assume any responsibility for facilitating any such distribution or offering. In particular, no action has been taken by the Issuers, the Guarantor or the Dealers which is intended to permit a public offering of any Notes or distribution of this Base Prospectus in any jurisdiction where action for that purpose is required. Accordingly, no Notes may be offered or sold, directly or indirectly, and neither this Base Prospectus nor any advertisement or other offering material may be distributed or published in any jurisdiction, except under circumstances that will result in compliance with any applicable laws and regulations. Persons into whose possession this Base Prospectus or any Notes may come must inform themselves about, and observe, any such restrictions on the distribution of this Base Prospectus and the offering and sale of Notes. In particular, there are restrictions on the distribution of this Base Prospectus and the offer or sale of Notes in the United States, the European Economic Area (including the United Kingdom, the Republic of Italy and France) and Japan, see “Subscription and Sale”.
This Base Prospectus has been prepared on the basis that any offer of Notes in any Member State of the European Economic Area which has implemented the Prospectus Directive (each, a Relevant Member State) will be made pursuant to an exemption under the Prospectus Directive, as implemented in that Relevant Member State, from the requirement to publish a prospectus for offers of Notes. Accordingly any person making or intending to make an offer in that Relevant Member State of Notes which are the subject of an offering contemplated in this Base Prospectus as completed by final terms in relation to the offer of those Notes may only do so in circumstances in which no obligation arises for the Issuers or any Dealer to publish a prospectus pursuant to Article 3 of the Prospectus Directive or supplement a prospectus pursuant to Article 16 of the Prospectus Directive, in each case, in relation to such offer Neither Issuer nor any Dealer have authorised, nor do they authorise, the making of any offer of Notes in circumstances in which an obligation arises for any Issuer or any Dealer to publish or supplement a prospectus for such offer.
All references in this document to euro and € refer to the currency introduced at the start of the third stage of European economic and monetary union pursuant to the Treaty on the functioning of the European Union, as amended.
4 CONTENTS
Clause Page
Overview of the Programme ...... 6 Risk Factors...... 11 Documents Incorporated by Reference...... 25 Form of the Notes...... 28 Applicable Final Terms ...... 30 Terms and Conditions of the Notes ...... 43 Use of Proceeds...... 73 Description of Italcementi S.p.A...... 74 Overview of Financial Information of Italcementi S.p.A...... 116 Description of Italcementi Finance S.A...... 124 Overview of Financial Information of Italcementi Finance S.A...... 126 Taxation ...... 132 Subscription and Sale ...... 141 General Information ...... 145
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In connection with the issue of any Tranche of Notes, the Dealer or Dealers (if any) named as the Stabilising Manager(s) (or persons acting on behalf of any Stabilising Manager(s)) in the applicable Final Terms may over-allot Notes or effect transactions with a view to supporting the market price of the Notes at a level higher than that which might otherwise prevail. However, there is no assurance that the Stabilising Manager(s) (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 relevant Tranche of 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 relevant Tranche of Notes and 60 days after the date of the allotment of the relevant Tranche of Notes. Any stabilisation action or over-allotment must be conducted by the relevant Stabilising Manager(s) (or persons acting on behalf of any Stabilising Manager(s)) in accordance with all applicable laws and rules.
5 OVERVIEW OF THE PROGRAMME
The following overview does not purport to be complete and is taken from, and is qualified in its entirety by, the remainder of this Base Prospectus and, in relation to the terms and conditions of any particular Tranche of Notes, the applicable Final Terms. The relevant Issuer and any relevant Dealer may agree that Notes shall be issued in a form other than that contemplated in the Terms and Conditions, in which event, in the case of listed Notes only and if appropriate, a supplement to the Base Prospectus will be published.
This Overview constitutes a general description of the Programme for the purposes of Article 22.5(3) of Commission Regulation (EC) No 809/2004 implementing the Prospectus Directive.
Words and expressions defined in “Form of the Notes” and “Terms and Conditions of the Notes” shall have the same meanings in this Overview.
Issuers: Italcementi S.p.A. Italcementi Finance S.A.
Guarantor: Italcementi S.p.A. in respect of Notes issued by Italcementi Finance S.A.
Description: Euro Medium Term Note Programme
Arrangers: Banca IMI S.p.A. BNP Paribas
Dealers: Banca IMI S.p.A. BNP Paribas Crédit Agricole Corporate & Investments Bank Crédit Industriel et Commercial HSBC Bank plc ING Bank N.V. J.P. Morgan Securities Ltd. Mediobanca – Banca di Credito Finanziario S.p.A. Merrill Lynch International NATIXIS Société Générale The Royal Bank of Scotland plc UniCredit Bank AG
and any other Dealers appointed in accordance with the Programme Agreement.
Certain Restrictions: Each issue of Notes denominated in a currency in respect of which particular laws, guidelines, regulations, restrictions or reporting requirements apply will only be issued in circumstances which comply with such laws, guidelines, regulations, restrictions or reporting requirements from time to time (see “Subscription and Sale”) including the following restrictions applicable at the date of this Base Prospectus.
6 Notes having a maturity of less than one year
Notes having a maturity of less than one year will, if the proceeds of the issue are accepted in the United Kingdom, constitute deposits for the purposes of the prohibition on accepting deposits contained in section 19 of the Financial Services and Markets Act 2000 unless they are issued to a limited class of professional investors and have a denomination of at least £100,000 or its equivalent, see “Subscription and Sale”.
Under the Luxembourg Act dated 10 July 2005 on prospectuses for securities, which implements the Prospectus Directive, prospectuses for the listing of money market instruments having a maturity at issue of less than 12 months and complying also with the definition of securities are not subject to the approval provisions of such Act and do not need to be approved by the CSSF.
Issuing and Principal Paying Agent: BNP Paribas Securities Services, Luxembourg Branch
Programme Size: Up to €2,000,000,000 (or its equivalent in other currencies calculated as described in the Programme Agreement) outstanding at any time. The Issuers and the Guarantor may increase the amount of the Programme in accordance with the terms of the Programme Agreement.
Distribution: Notes may be distributed by way of private or public placement and in each case on a syndicated or non-syndicated basis.
Currencies: Notes may be denominated in, subject to any applicable legal or regulatory restrictions, any currency agreed between the relevant Issuer and the relevant Dealer.
Maturities: The Notes will have such maturities as may be agreed between the relevant Issuer and the relevant Dealer, subject to such minimum or maximum maturities as may be allowed or required from time to time by the relevant central bank (or equivalent body) or any laws or regulations applicable to the relevant Issuer or the relevant Specified Currency.
Issue Price: Notes may be issued on a fully-paid or a partly-paid basis and at an issue price which is at par or at a discount to, or premium over, par. Special tax rules may apply to Notes which are issued at a discount to par, see “Taxation”.
Form of Notes: The Notes will be issued in bearer form as described in “Form of the Notes”.
Fixed Rate Notes: Fixed interest will be payable on such date or dates as may be agreed between the relevant Issuer and the relevant Dealer and on redemption and will be calculated on the basis of such Day Count Fraction as may be agreed between the relevant Issuer and
7 the relevant Dealer.
Floating Rate Notes: Floating Rate Notes will bear interest at a rate determined:
(a) on the same basis as the floating rate under a notional interest rate swap transaction in the relevant Specified Currency governed by an agreement incorporating the 2006 ISDA Definitions (as published by the International Swaps and Derivatives Association, Inc., and as amended and updated as at the Issue Date of the first Tranche of the Notes of the relevant Series); or
(b) on the basis of a reference rate appearing on the agreed screen page of a commercial quotation service; or
(c) on such other basis as may be agreed between the relevant Issuer and the relevant Dealer.
The margin (if any) relating to such floating rate will be agreed between the relevant Issuer and the relevant Dealer for each Series of Floating Rate Notes.
Index Linked Notes: Payments of principal in respect of Index Linked Redemption Notes or of interest in respect of Index Linked Interest Notes will be calculated by reference to such index and/or formula or to changes in the prices of securities or commodities or to such other factors as the relevant Issuer and the relevant Dealer may agree.
Other provisions in relation to Floating Floating Rate Notes and Index Linked Interest Notes may also Rate Notes and Index Linked Interest have a maximum interest rate, a minimum interest rate or both. Notes:
Interest on Floating Rate Notes and Index Linked Interest Notes in respect of each Interest Period, as agreed prior to issue by the relevant Issuer and the relevant Dealer, will be payable on such Interest Payment Dates, and will be calculated on the basis of such Day Count Fraction, as may be agreed between the relevant Issuer and the relevant Dealer.
Dual Currency Notes: Payments (whether in respect of principal or interest and whether at maturity or otherwise) in respect of Dual Currency Notes will be made in such currencies, and based on such rates of exchange, as the relevant Issuer and the relevant Dealer may agree.
Zero Coupon Notes: Zero Coupon Notes will be offered and sold at a discount to their nominal amount and will not bear interest.
Redemption: The applicable Final Terms will indicate either that the relevant Notes cannot be redeemed prior to their stated maturity (other than in specified instalments, if applicable, or for taxation reasons or following an Event of Default or a Change of Control Put Event) or that such Notes will be redeemable at the option of the relevant Issuer and/or the Noteholders upon giving notice to
8 the Noteholders or the relevant Issuer, as the case may be, on a date or dates specified prior to such stated maturity and at a price or prices and on such other terms as may be agreed between the relevant Issuer and the relevant Dealer.
The applicable Final Terms may provide that Notes may be redeemable in two or more instalments of such amounts and on such dates as are indicated in the applicable Final Terms.
Notes having a maturity of less than one year may be subject to restrictions on their denomination and distribution, see “Certain Restrictions - Notes having a maturity of less than one year” above.
Denomination of Notes: The Notes will be issued in such denominations as may be agreed between the relevant Issuer and the relevant Dealer save that the minimum denomination of each Note will be such amount as may be allowed or required from time to time by the relevant central bank (or equivalent body) or any laws or regulations applicable to the relevant Specified Currency, see “Certain Restrictions - Notes having a maturity of less than one year” above, and save that the minimum denomination of each Note admitted to trading on a regulated market within the European Economic Area or offered to the public in a Member State of the European Economic Area in circumstances which require the publication of a prospectus under the Prospectus Directive will be €50,000 (or, if the Notes are denominated in a currency other than euro, the equivalent amount in such currency).
Taxation: All payments in respect of the Notes will be made without deduction for or on account of withholding taxes imposed by any Tax Jurisdiction as provided in Condition 7. In the event that any such deduction is made, the relevant Issuer or, as the case may be, the Guarantor (in the case of notes issued by Italcementi Finance S.A.) will, save in certain limited circumstances provided in Condition 7, be required to pay additional amounts to cover the amounts so deducted.
Negative Pledge: The terms of the Notes will contain a negative pledge provision as further described in Condition 3.
Cross Default: The terms of the Notes will contain a cross default provision as further described in Condition 9.
Status of the Notes: The Notes will constitute direct, unconditional, unsubordinated and (subject to the provisions of Condition 3) unsecured obligations of the relevant Issuer and will rank pari passu among themselves and (save for certain obligations required to be preferred by law) equally with all other unsecured obligations (other than subordinated obligations, if any) of the relevant Issuer, from time to time outstanding.
Guarantee: The Notes issued by Italcementi Finance S.A. will be
9 unconditionally and irrevocably guaranteed by the Guarantor. The obligations of the Guarantor under its guarantee will be direct, unconditional, unsubordinated and (subject to the provisions of Condition 3) unsecured obligations of the Guarantor and will rank pari passu and (save for certain obligations required to be preferred by law) equally with all other unsecured obligations (other than subordinated obligations, if any) of the Guarantor from time to time outstanding.
Rating: The rating of certain Series of Notes to be issued under the Programme may be specified in the applicable Final Terms.
Listing and Admission to Trading: Application has been made to the CSSF to approve this document as a base prospectus. Application has also been made to the Luxembourg Stock Exchange for Notes issued under the Programme to be admitted to trading on the Luxembourg Stock Exchange’s regulated market and to be listed on the Official List of the Luxembourg Stock Exchange.
Notes may be listed or admitted to trading, as the case may be, on other or further stock exchanges or markets agreed between the relevant Issuer and the relevant Dealer in relation to the Series. Notes which are neither listed nor admitted to trading on any market may also be issued.
The applicable Final Terms will state whether or not the relevant Notes are to be listed and/or admitted to trading and, if so, on which stock exchanges and/or markets.
Governing Law: The Notes and any non-contractual obligations arising out of or in connection with the Notes will be governed by, and shall be construed in accordance with, English law.
Selling Restrictions: There are restrictions on the offer, sale and transfer of the Notes in the United States, the European Economic Area (including the United Kingdom, the Republic of Italy, the Netherlands and France) and Japan and such other restrictions as may be required in connection with the offering and sale of a particular Tranche of Notes, see “Subscription and Sale”.
10 RISK FACTORS
Each Issuer and the Guarantor believes that the following factors may affect its ability to fulfil its obligations under Notes issued under the Programme. All of these factors are contingencies which may or may not occur and neither of the Issuers nor the Guarantor is 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 Notes issued under the Programme are also described below.
Each Issuer and the Guarantor believes that the factors described below represent the principal risks inherent in investing in Notes issued under the Programme, but the inability of the Issuers or the Guarantor to pay interest, principal or other amounts on or in connection with any Notes may occur for other reasons which may not be considered significant risks by the Issuers and the Guarantor based on information currently available to them or which they may not currently be able to anticipate. Prospective investors should also read the detailed information set out elsewhere in this Base Prospectus and reach their own views prior to making any investment decision.
Factors that may affect the Issuers’ and the Guarantor’s ability to fulfil their obligations under the Notes issued under the Programme or the Guarantee
Adverse macroeconomic and business conditions may significantly and negatively affect the Italcementi Group’s revenues, profitability and results of operations
Global economic conditions and conditions specific to the major markets in which the Italcementi Group does business could substantially affect its sales and profitability. The Group’s business is sensitive to factors such as GDP growth and housing needs. An economic downturn could lead to a recession in the construction industry and consequently in the production of cement.
The turmoil in the financial sector, which intensified during the second half of 2008, had a negative impact on the global economy, mainly in 2009, with a reduced demand for cement and a decrease in prices in mature and in certain emerging markets. As a consequence, some of the Group’s markets have been affected by this unprecedented turmoil.
In particular, Italcementi has significant operations in Europe and the United States, and a further deterioration of macro-economic conditions in these regions could have a material negative impact on Group operating results. Moreover, the EU or US economic slowdown may have negative implications for the economies of other markets in which Italcementi operates. Italcementi cannot predict how current or worsening economic conditions will affect its customers and suppliers, which may have an impact on its business or financial results. To the extent government funding of governmental infrastructure programmes is decreased or terminated as a result of such macroeconomic developments or significant changes in government policy, these programmes’ demand for cement and concrete ready-mix products would decrease and the Group’s revenues would therefore be adversely affected.
In addition, disruption in the credit markets could adversely affect Italcementi’s access to these credit markets and the availability of future financing for its operations. Recent government initiatives to stimulate the economy and increase the availability of credit may not achieve their intended results.
Historically the Group’s broad geographic base has contributed to its earnings stability as cyclical declines in individual markets have been offset by growth in other markets. However, although the 22 countries in which the Group operates have been affected differently by the recent downturn in the global economy, there can be no assurance that the current weakening in economic growth will not affect the construction market
11 globally or that negative economic conditions in one or more regions will not affect the construction markets in some countries.
Cyclicality and seasonality
The building materials industry in any regional market is dependent upon the level of activity in the construction sector in that market. The construction industry tends to be cyclical and closely linked to the general economic situation, particularly the residential and commercial construction markets, the level of public investments and spending on infrastructure projects. As discussed above, Italcementi’s geographical diversification mitigates the effects of cyclical market movements in the construction industry in any particular market. However, negative global trends in the construction industry or in key regional markets could have a material adverse impact on Italcementi’s liquidity, financial condition and results of operations.
Moreover, the construction industry is seasonal in nature and is affected by weather conditions. During the winter season, when adverse weather conditions make large-scale construction projects difficult, there is typically lower activity in the construction sector, resulting in a lower demand for building materials. In addition, maintenance activities and related costs are typically carried out in the winter season. This leads to volatility in the quarterly financial figures of Italcementi. The results in a particular financial quarter might therefore not be representative of the expected full financial year results. Furthermore, if adverse climatic conditions are unusually intense, occur unexpectedly or last longer than usual in major geographical markets, especially during seasonal peak construction periods, this could have a material adverse effect on Italcementi’s business, financial condition and results of operations.
Competition and consolidation in the industry
The building materials and construction industries are characterised by intense competition. The competitive dynamics and profitability levels of these markets are affected by the balance between production capacity and long term demand. A cyclical weakness in the construction industry, a significant decrease in demand or the addition of new more efficient capacity by established players or new entrants might lead to overcapacity and enable such players to sustain more aggressive pricing policies, resulting in a reduction in the utilisation of Italcementi’s plants in the respective regional markets. As a result, reduced sales volumes and/or a decrease in prices may occur which could have an impact on the overall operating profitability of Italcementi.
In addition, consolidation in the building materials industry may put Italcementi at a competitive disadvantage. Italcementi’s competitors have in the past and may continue to seek to consolidate to take advantage of lower cost structures, economies of scale and other synergies. Such consolidation may increase the production capacity in the industry and result in our competitors gaining market share, leading to increased competitive and pricing pressures.
Risks associated with energy and fuel costs
The activity carried out by the Italcementi Group requires large volumes of energy and fuels, which represent approximately one third of the Group’s total variable production costs. Energy and fuel typically experience significant price fluctuations in many countries in which the Group operates. The price of energy has varied significantly in the past and it can vary significantly in the future as a result of market conditions and other factors beyond the Group’s control, including high volatility of the price of oil and changes in government subsidies on electricity and other fuel prices. The Group adopts a series of measures aimed at managing the risks of energy and fuel availability and prices (such as entering into medium-term supply contracts) and the Group’s centralised procurement organisation enables it to benefit from more efficient relations with suppliers of fuels and to obtain fuels on competitive terms. However, these measures may not be fully effective in protecting the Group from such risks.
12 In addition, in order to mitigate its exposure to price fluctuations in traditional fuels, the Group makes use of a variety of fuel sources, including alternative fuels such as drain oils, municipal solid waste, biomass, used tires and animal meal. However, these measures do not protect the Group completely from exposure to the volatility of energy and fuel prices. The costs of energy and fuels have significantly affected, and may continue to affect, the Group’s results of operations and its profitability.
Risks related to Italcementi’s international operations
The Group’s business comprises operations in 22 countries worldwide. The Groups ability to conduct and expand its business and its financial performance are subject to the risks inherent in international operations. In addition, the Group’s international operations face unpredictable changes in government policies or tax laws. The governments of countries in which the group operates, or may operate in the future, could take actions that materially adversely affect its business. Its operations may be adversely affected by trade barriers, currency fluctuations and exchange controls, declines in regional or global trade activity, high levels of inflation, terrorist attacks, limitations on the conversion of non-euro currencies into euro and cash transfers into and out of these countries, as well as the possible imposition of investment or other restrictions by governments, increases in duties, taxes and governmental royalties or other changes in local laws and policies of the countries in which the Group conducts business.
In particular, adverse changes in the general economic conditions, political instability or social unrest in the regions in which the Group operates could adversely affect the construction industry in these regions, and consequently have an adverse impact on the Group’s sales and its business, financial condition and results of operations.
The Group’s international operations and properties are also subject to a broad range of regulatory controls on the manufacturing and marketing of its products. In each of its markets the Italcementi Group must comply with stringent laws and regulations relating to pollution, environmental protection, and workplace health and safety. Such laws and regulations frequently change, are different in each jurisdiction, and often impose substantial fines and sanctions for violations. Italcementi’s operations and properties must comply with these laws and adapt to regulatory requirements in all jurisdictions as they change.
Emerging markets risk
Italcementi carries out business in developing countries, which can experience political and economic instability, civil unrest or violence and corruption, and which in some cases have legal systems in which the protection of rights and the enforceability of contractual claims are not guaranteed. In these regions, Italcementi is also exposed to increased risks of inflation and exchange rate fluctuations. Finally, in some of the developing countries in which Italcementi operates, there are limitations on international monetary transactions, import or export restrictions and, occasionally, a potential risk of expropriation. Developments relating to any of these risks in an emerging market in which the Group has a significant presence could result in lower profits or a loss in value of the Group’s assets in that country. The realisation of one or several of the above mentioned risks in any one significant country or in several developing countries may have material adverse effects on Italcementi’s liquidity, financial condition and results of operations.
Operational risks associated with the Group’s facilities
The Italcementi Group operates industrial facilities located in 22 countries. These facilities are subject to operational risks, including manufacturing, trade and labour risks, such as breakdowns of equipment, failure to comply with applicable regulations, revocation of permits and licenses, lack of manpower or work interruptions, circumstances that cause increases in the transport costs of the products, natural disasters, sabotage, attacks or significant interruptions of supplies of raw materials or components. Any interruption of the activity at the works, due either to the events described above or to other events, could have a negative impact on the activity and on the economic and financial situation of the Italcementi Group.
13 As a consequence of the capital intensive nature of the cement industry, interruptions in production capabilities at any plant may result in a significant decline in the Group’s results of operation during the affected period. The manufacturing processes of cement are dependent upon critical pieces of equipment such as crushers for raw materials, kilns to produce clinker and grinding mills. This equipment may, on occasion, be out of service as a result of strikes, 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.
Disruptions of the Group’s operations due to work stoppages or strikes may also adversely affect its business. Although Italcementi believes that it has satisfactory relations with its workers’ councils and unions, there cannot be any assurance that Italcementi will be able to reach new agreements with satisfactory terms when existing collective bargaining agreements expire, or that such agreements will be reached without work stoppages, strikes or similar industrial actions. If labour unrest were to obstruct the Group’s manufacturing operations for an extended period of time, its business, financial condition and results of operations could be materially adversely affected.
The Italcementi Group’s operations in certain locations are exposed to a risk of earthquakes and/or other natural disasters. For these risks, Italcementi has not acquired insurance coverage for the total amount of the insured assets, but within the limit of the “Expected Maximum Loss”.
Risks relating to availability of raw materials
The Group generally sources its raw materials from quarries of limestone, clay, schist, gypsum, aggregate and other materials which it uses for the production of cement and concrete. The Group also uses growing amounts of other materials, purchased from third parties, derived from industrial activities that generate wastes suitable for the cement production process, such as fly ash, blast furnace slag, and chemical gypsums. The Group owns most of the quarries from which it sources the main raw materials used in production, and generally enters into long-term renewable supply contracts and framework agreements with outside suppliers of raw materials and materials from other industrial activities, in order to ensure more efficient management of procurement. However the Group has existing short-term supply contracts in some countries. If the current suppliers, especially of secondary materials, ceased their activity or substantially reduced the production of these by-products, the Group could be exposed to significantly higher procurement costs unless alternatives were found for such materials.
The availability of raw materials needed for the production of cement is a strategic factor for the Group both in deciding investments on existing or new plants and for new acquisitions. The Group manages the quarries in which it operates or plans to operate so as to ensure efficient procurement over the long term. In most of the countries in which it operates, the Group owns the excavation rights for the quarries of raw materials essential for its business, both in the area of cement and crushed stone, and carefully manages the complex process of obtaining and renewing the excavation rights and the various authorisations required to operate the quarries. Failure to obtain or renew excavation rights or expropriation measures could constitute a significant adverse effect for the development of the Group’s activities, its business and results of operations.
Regulatory risks
The Italcementi Group’s business is subject to laws and regulations, including regulations regarding concessions of quarries, operating licences, environmental regulations, restoration of industrial sites, controlled prices, bans on exports and licence rights to be paid to allow the construction of new plants. The Group believes that it is in possession of, and/or has submitted fully compliant requests to obtain, all material permits and licences required to conduct its present industrial sites. However, it cannot assure investors that current or future regulations, and compliance with such regulations, will not have a material adverse effect on the Group’s business.
14 Risks related to capital expenditures, acquisitions and investments
The Group’s investments in fixed assets comprise both maintenance capital expenditure, to preserve existing facilities, and expansion capital expenditure, in connection with the implementation of organic growth projects as well as the acquisition of new businesses.
The Group’s acquisition and expansion projects may be affected by changes in economic and market conditions, increased funding costs and investment costs, and therefore there can be no assurance that such growth projects will be started and/or completed according to schedule.
As part of its growth strategy, the Group has made, and in the future may make, selective acquisitions to strengthen and develop its existing activities, particularly in high-growth areas.
The successful implementation of its acquisition strategy depends on a range of factors, including the Group’s ability to identify appropriate opportunities, to negotiate adequate prices and to access the necessary funding.
There may also be substantial challenges or delays in integrating and adding value to the businesses acquired or to be acquired by the Group. The costs of integration could be material and the Group may fail to achieve the synergies expected from such acquisitions, both of which may constitute a loss of opportunity.
The Group may be subject to other risks such as the assumption of unexpected or greater than expected liabilities relating to the acquired assets or businesses, in particular due to the possibility that the indemnification clauses negotiated with the sellers of such assets may not be sufficient to cover all potential liabilities arising therefrom or may be unenforceable.
Logistic risks
The Group relies upon third party service providers to distribute its products to customers. The Group’s ability to service customers at a competitive cost depends, in many cases, upon its ability to negotiate competitive terms with suppliers including railroad, trucking and shipment companies.
Due to the heavy weight of its products, the Group incurs substantial transportation costs. To the extent that the Group’s third party suppliers increase their rates, the Group may be forced to pay such increases sooner than it is able to pass on such increases to customers, if at all.
Funding risks
The Group’s ability to borrow from banks or in the capital markets to meet its financial requirements is dependent on favourable market conditions.
If sufficient sources of financing are not available in the future for these or other reasons, the Group may be unable to meet its financial requirements, which could materially and adversely affect its results of operations and financial condition.
Italcementi Group has a proactive approach toward funding risk, aimed at securing competitive financing and ensuring a balance between average maturity of funding, flexibility and diversification of sources; however, these measures may not be sufficient to fully protect the Group from such risk.
Rating risks
The Group’s ability to compete successfully in the marketplace for funding depends on various factors, including credit ratings assigned to it by recognised rating agencies. Credit ratings may change depending on changes in the operating results, financial condition, credit structure and liquidity profile of the Company. As
15 a result, a downgrade in credit ratings may impact the Group’s ability to raise funding and this could in turn adversely affect its business, financial condition and results of operations.
Currency risks
The Group is present in different countries, including emerging countries, although the Group companies (with the exception of the trading terminals) operate largely on their respective local markets or within the euro zone. However, certain activities (such as the purchase of fuels, spare parts and investments for construction of new plants) may be conducted by the Group companies pursuant to contracts denominated in currencies other than the company’s functional currency. As a consequence, the Group faces moderate transaction foreign exchange risks in connection with various currencies, and fluctuations in exchange rates may have a significant effect on such activities.
The translation of local balance sheets and statements of income into the Group’s reporting currency, the euro, leads to currency translation effects, which the Group normally does not actively hedge. In addition, the balance sheet is only partially hedged by debt in foreign currencies and therefore a significant decrease in the aggregate value of such local currencies against the euro may have a material effect on the Group’s shareholders’ equity. Currency fluctuations can also result in the recognition of exchange rate losses on transactions, which are reflected in the Group’s consolidated income statement.
Impairment risks
As in the majority of capital intensive industries, fixed assets in the cement industry and, to a lesser extent, in the concrete and the aggregates industries normally have a rather long technical life. However, the economic life of these assets and, as a consequence, their recoverable amounts depend on many factors beyond the Group’s control, such as local environment, market growth, competition, import or export facilities and regulation, environmental regulations, availability and continuity of licences and availability of raw materials, as discussed above. In certain instances, the economic life of these assets could be abruptly shortened, which could lead to a discontinuity in the Group’s operations.
The technical life of the Group’s fixed assets is periodically revised to keep adequate depreciation. The net book value of the Group’s assets (Cash Generating Unit) must be submitted to annual impairment tests in order to accurately represent the lower between the asset’s carrying amount and its recoverable amount. Impairment losses are recognised in the income statement and may therefore have a material adverse effect on Italcementi’s income and equity, both at individual and consolidated level.
Tax risks
The Group could be adversely affected by changes in tax laws in the countries in which it operates or changes in the interpretation of tax laws by any fiscal authority, which are outside of its control. Significant changes in tax legislation or difficulty in the interpretation of the tax legislation could have an adverse effect on the Group’s business, financial condition and results of operations.
Litigation risks
At the date of this Base Prospectus, a number of proceedings are pending that involve companies of the Italcementi Group. The characteristics of the principal cases are described under “Description of Italcementi S.p.A. – Legal Proceedings”, below.
In its semi-annual report as at 30 June 2009, Italcementi set aside a provision to cover the related risks which the Company considers to be adequate.
16 Although Italcementi considers the claims relating to these cases to be unfounded and believes the provision set aside to be adequate, should the proceedings have a negative outcome beyond expectations it could have negative effects on the Group’s activity, assets and liabilities and/or its economic and financial situation.
Insurance
Insurance contracts with major insurance companies are regularly established and maintained for the Group, in order to cover the risks connected with their property and employees, as well as the risks deriving from third-party liability. All the contracts are negotiated within a standard framework agreement in order to ensure congruence between the likelihood of occurrence of the risk and the damages that derive from it for each subsidiary of the Group. Such insurance cover, however, may not fully cover the risks to which the Group is exposed. This can be the case with respect to insurance covering legal and administrative claims, as well as with respect to insurance covering other risks, such as business interruption. For certain risks, such as war and war-like events, acts of terrorism and certain natural hazards adequate insurance cover may not be available on the market or may not be available at reasonable conditions. Consequently, any harm resulting from the materialisation of these risks could result in significant capital expenditures and expenses as well as liabilities, thereby harming the Group’s business and operating results. Furthermore, for risks currently covered, adequate insurance cover may not be available in the future or at all, may not be available on reasonable terms or may only be available at significantly higher premiums.
Environmental and health and safety laws, regulations and standards
The Italcementi Group is subject to a broad and increasingly stringent range of environmental and health and safety laws, regulations and standards in each of the jurisdictions in which it operates. This results in significant compliance costs and could expose the Group to legal liability or place limitations on the development of the Group’s operations. The laws, regulations and standards relate to, among other things, air (including greenhouse gases) and noise emissions, wastewater discharges, avoidance of soil and groundwater contamination, the use and handling of hazardous materials and waste disposal practices.
Environmental and health and safety laws, regulations and standards also may expose the Italcementi Group to the risk of incurring substantial costs and liabilities, including liabilities associated with assets that have been sold and activities that have been discontinued. In addition, many of the Group’s manufacturing sites have a history of industrial use and, while the Italcementi Group applies strict environmental operating standards and undertakes extensive environmental due diligence in relation to its acquisitions of new sites, some soil and groundwater contamination has occurred in the past at a limited number of sites, although to date the remediation costs have not been material to the Italcementi Group. Such contamination might occur or be discovered at other sites in the future. Consistent with the past practice of its business, the Group continues to monitor or remediate soil and groundwater contamination at certain of these sites. Furthermore, certain materials employed, added to or resulting from the production process could be classified as hazardous materials or waste according to different local or international regulations, which may vary from time to time or from region to region. The Group generally complies with all applicable environmental laws, however it may face remediation liabilities and legal proceedings concerning environmental matters. Based on information currently available, the Group has budgeted capital and revenue expenditures for environmental improvement projects and has established reserves for known environmental remediation liabilities that are probable and reasonably estimable. However, the Group cannot predict environmental matters with certainty, and its budgeted capital expenditures and established reserves may not be adequate for all purposes. In addition, the development or discovery of new facts, events, circumstances or conditions, including future decisions to close plants which may trigger remediation liabilities, and other developments such as changes in law or increasingly strict enforcement by governmental authorities, could result in increased costs and liabilities or prevent or restrict some of the Group’s operations.
17 Risks related to intellectual property
Italcementi relies on proprietary rights and information in the development of its products. There can be no assurance that any patents or trademarks it is able to obtain will adequately protect the covered products and technologies. Nor can there be any assurance that the confidentiality agreements and other measures taken by Italcementi will adequately protect its trade secrets, know-how or other proprietary information not covered by patents, or that others will not obtain this information through independent development, indiscretion of employees, industrial espionage or other means. Such use by competitors could adversely affect Italcementi’s business and financial condition. In the future, competitors may obtain patents for technologies which Italcementi does not possess, or its proprietary rights and information may become obsolete. Furthermore, there can be no assurance that the Group’s activities will not infringe on the proprietary rights of others or that it will be able to obtain licenses, on reasonable terms or otherwise, to the required technology. If Italcementi fails to obtain the necessary intellectual property rights to protect its proprietary information, or if it encounters difficulties in enforcing intellectual property rights in certain foreign countries, or if it infringes upon the proprietary rights of others, the Group’s business, financial condition and results of operations could be adversely affected.
Key personnel risks
The development of the Group’s business, and in particular its technological evolution and geographic diversification, is dependent on attracting and retaining qualified and motivated personnel. Competition for such personnel has increased in recent years, creating difficulties in obtaining or retaining such personnel. In particular, the Group’s business depends in part on the continued services of key members of management. If Italcementi were to lose their services, it may be unable to find and integrate replacement personnel in a timely manner and such loss could significantly impair the Group’s ability to develop and implement its business strategies. There can be no assurance that Italcementi will be able to successfully attract and/or retain sufficiently qualified personnel. Loss of employees of failure to retain professional personnel, particularly of individuals in key positions or at the level of the managing board, or personnel shortages could negatively impact the Group’s ability to maintain the necessary level of know-how and its future development.
Information and communication technology risks
The efficiency and uninterrupted operations of the Group’s computers, telecommunications and data processing systems are essential for the continued operation of its production facilities, sales activities and all general services, including payroll, accounting, planning and financial. To the extent that these systems are affected by disturbances, damage, electricity failures, computer viruses, fire and similar events, there may be a resulting material adverse effect on the Group’s operations and financial situation.
Italcementi as a holding company
Italcementi, in its capacity as holding company of the Group, conducts a significant part of its operations (and all of its foreign operations) through its subsidiaries, and depends on the earnings and cash flows of, and the distribution of funds from, these subsidiaries to meet its debt obligations, including its obligations with respect to the Notes and/or the Guarantee. Generally, creditors of a subsidiary, including trade creditors, secured creditors and creditors holding indebtedness and guarantees issued by the subsidiary, and preferred shareholders, if any, of the subsidiary, will be entitled to the assets of that subsidiary before any of those assets can be distributed to shareholders upon liquidation or winding up. As a result, Italcementi’s obligations in respect of the Notes and/or the Guarantee will effectively be subordinated to the prior payment of all the above debts.
18 Certain of Italcementi’s obligations may have priority over the Notes
Italcementi, by virtue of its Italian cement operations (which include several cement plants and grinding centres), is the leading cement manufacturer in the Italian market and is directly exposed to manufacturing, trade and labour liabilities. Some of Italcementi’s obligations, notably vis-à-vis the Italian State, tax authorities and its own employees, have priority vis-à-vis other Company’s indebtedness by operation of law. As a result, Italcementi’s obligations in respect of the Notes and/or the Guarantee are subordinated to such obligations.
Italcementi is subject to restrictions due to minority interests in certain of its subsidiaries
In certain subsidiaries in Morocco, Egypt, Thailand and Middle East, as well as in Ciments Français S.A., minority shareholders hold significant interests. The presence of minority shareholders, whose interests may not always align with those of Italcementi, may, among other things, affect Italcementi’s ability to implement organisational efficiencies and transfer cash and assets from one subsidiary to another in order to allocate assets most effectively.
Italcementi Finance S.A. is not an operating company and relies upon other companies of the Italcementi Group for its financing
Italcementi Finance S.A.’s revenues and cash flow depends upon the receipt of funds provided by Italcementi and other companies of the Italcementi Group under the loan agreements with Italcementi Finance S.A. As a consequence, Italcementi Finance S.A.’s operations depend on the ability of Italcementi and other members of the Italcementi Group to meet their payment obligations under such loans.
All debt securities of Italcementi Finance S.A. are wholly and unconditionally guaranteed by Italcementi in respect of principle and interest payments. This guarantee is enforceable under the laws of England.
Factors which are material for the purpose of assessing the market risks associated with the Notes issued under the Programme
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:
(i) 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 Base Prospectus or any applicable supplement;
(ii) 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;
(iii) have sufficient financial resources and liquidity to bear all of the risks of an investment in the Notes, including Notes with principal or interest payable in one or more currencies, or where the currency for principal or interest payments is different from the potential investor’s currency;
(iv) understand thoroughly the terms of the Notes and be familiar with the behaviour of any relevant indices and financial markets; and
19 (v) 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.
Some Notes are complex financial instruments. Sophisticated institutional investors generally do not purchase complex financial instruments as stand-alone investments. They purchase complex financial instruments as a way to reduce risk or enhance yield with an understood, measured, appropriate addition of risk to their overall portfolios. A potential investor should not invest in Notes which are complex financial instruments unless it has the expertise (either alone or with a financial adviser) to evaluate how the Notes will perform under changing conditions, the resulting effects on the value of the Notes and the impact this investment will have on the potential investor’s overall investment portfolio.
Risks related to the structure of a particular issue of Notes
A wide range of Notes may be issued under the Programme. A number of these Notes may have features which contain particular risks for potential investors. Set out below is a description of the most common such features:
Notes subject to optional redemption by the relevant Issuer
An optional redemption feature of Notes is likely to limit their market value. During any period when the relevant Issuer may elect to redeem Notes, the market value of those Notes generally will not rise substantially above the price at which they can be redeemed. This also may be true prior to any redemption period.
The relevant Issuer may be expected to redeem Notes when its cost of borrowing is lower than the interest rate on the Notes. At those times, an investor generally would not be able to reinvest the redemption proceeds at an effective interest rate as high as the interest rate on the Notes being redeemed and may only be able to do so at a significantly lower rate. Potential investors should consider reinvestment risk in light of other investments available at that time.
Index Linked Notes and Dual Currency Notes
The Issuers may issue Notes with principal or interest determined by reference to an index or formula, to changes in the prices of securities or commodities, to movements in currency exchange rates or other factors (each, a Relevant Factor). In addition, the Issuers may issue Notes with principal or interest payable in one or more currencies which may be different from the currency in which the Notes are denominated. Potential investors should be aware that:
(i) the market price of such Notes may be volatile;
(ii) they may receive no interest;
(iii) payment of principal or interest may occur at a different time or in a different currency than expected;
(iv) they may lose all or a substantial portion of their principal;
(v) a Relevant Factor may be subject to significant fluctuations that may not correlate with changes in interest rates, currencies or other indices;
20 (vi) if a Relevant Factor is applied to Notes in conjunction with a multiplier greater than one or contains some other leverage factor, the effect of changes in the Relevant Factor on principal or interest payable likely will be magnified; and
(vii) the timing of changes in a Relevant Factor may affect the actual yield to investors, even if the average level is consistent with their expectations. In general, the earlier the change in the Relevant Factor, the greater the effect on yield.
The historical experience of an index should not be viewed as an indication of the future performance of such index during the term of any Index Linked Notes. Accordingly, each potential investor should consult its own financial and legal advisers about the risk entailed by an investment in any Index Linked Notes and the suitability of such Notes in light of its particular circumstances.
Partly-paid Notes
The Issuers may issue Notes where the issue price is payable in more than one instalment. Failure to pay any subsequent instalment could result in an investor losing all of his investment.
Variable rate Notes with a multiplier or other leverage factor
Notes with variable interest rates can be volatile investments. If they are structured to include multipliers or other leverage factors, or caps or floors, or any combination of those features or other similar related features, their market values may be even more volatile than those for securities that do not include those features.
Inverse Floating Rate Notes
Inverse Floating Rate Notes have an interest rate equal to a fixed rate minus a rate based upon a reference rate such as LIBOR. The market values of those Notes typically are more volatile than market values of other conventional floating rate debt securities based on the same reference rate (and with otherwise comparable terms). Inverse Floating Rate Notes are more volatile because an increase in the reference rate not only decreases the interest rate of the Notes, but may also reflect an increase in prevailing interest rates, which further adversely affects the market value of these Notes.
Fixed/Floating Rate Notes
Fixed/Floating Rate Notes may bear interest at a rate that converts from a fixed rate to a floating rate, or from a floating rate to a fixed rate. Where the relevant Issuer has the right to effect such a conversion, this will affect the secondary market and the market value of the Notes since the relevant Issuer may be expected to convert the rate when it is likely to produce a lower overall cost of borrowing. If the relevant Issuer converts from a fixed rate to a floating rate in such circumstances, the spread on the Fixed/Floating Rate Notes may be less favourable than then prevailing spreads on comparable Floating Rate Notes tied to the same reference rate. In addition, the new floating rate at any time may be lower than the rates on other Notes. If the relevant Issuer converts from a floating rate to a fixed rate in such circumstances, the fixed rate may be lower than then prevailing rates on its Notes.
Notes issued at a substantial discount or premium
The market values of securities issued at a substantial discount or premium from their principal amount tend to fluctuate more in relation to general changes in interest rates than do prices for conventional interest- bearing securities. Generally, the longer the remaining term of the securities, the greater the price volatility as compared to conventional interest-bearing securities with comparable maturities.
21 Risks related to Notes generally
Set out below is a brief description of certain risks relating to the Notes generally:
Modification
The 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.
EU Savings Tax Directive
Under EC Council Directive 2003/48/EC on the taxation of savings income, Member States, including Belgium from 1 January 2010, are required to provide to the tax authorities of another Member State details of payments of interest (or similar income) paid by a person within its jurisdiction to an individual resident in that other Member State or to certain limited types of entities established in that other Member State. However, for a transitional period, Luxembourg and Austria are instead required (unless during that period they elect otherwise) to operate a withholding system in relation to such payments (the ending of such transitional period being dependent upon the conclusion of certain other agreements relating to information exchange with certain other countries). A number of non-EU countries and territories including Switzerland have adopted similar measures (a withholding system in the case of Switzerland).
On 15 September 2008 the European Commission issued a report to the Council of the European Union on the operation of the Directive, which included the Commission’s advice on the need for changes to the Directive. On 13 November 2008 the European Commission published a more detailed proposal for amendments to the Directive, which included a number of suggested changes. The European Parliament approved an amended version of this proposal on 24 April 2009. If any of those proposed changes are made in relation to the Directive, they may amend or broaden the scope of the requirements described above.
If a payment were to be made or collected through a Member State which has opted for a withholding system and an amount of, or in respect of, tax were to be withheld from that payment, neither the Issuers nor any Paying Agent nor any other person would be obliged to pay additional amounts with respect to any Note as a result of the imposition of such withholding tax. Each Issuer is required to maintain a Paying Agent in a Member State that is not obliged to withhold or deduct tax pursuant to the Directive.
Change of law
The conditions of the Notes are based on English law in effect as at the date of this Base 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 Base Prospectus.
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 relevant Issuer
Notes issued under the Programme may be represented by one or more Global Notes. Such Global Notes will be deposited with a common depositary or common safekeeper for Euroclear and Clearstream, Luxembourg. Except in the circumstances described in the relevant 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 one or more Global Notes, investors will be able to trade their beneficial interests only through Euroclear and Clearstream, Luxembourg.
22 While the Notes are represented by one or more Global Notes the relevant Issuer will discharge its payment obligations under the Notes by making payments to or to the order of the common depositary or common safekeeper for Euroclear and Clearstream, Luxembourg for distribution to their account holders. 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 relevant Notes. The relevant 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 relevant 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 relevant Issuer in the event of a default under the relevant Notes but will have to rely upon their rights under the Deed of Covenant.
Notes where denominations involve integral multiples: definitive Notes
In relation to any issue of Notes which have denominations consisting of a minimum Specified Denomination plus one or more higher integral multiples of another smaller amount, it is possible that such Notes may be traded in amounts that are not integral multiples of such minimum Specified Denomination. In such a case a holder who, as a result of trading such amounts, holds an amount which is less than the minimum Specified Denomination in his account with the relevant clearing system at the relevant time 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 a Specified Denomination.
If definitive Notes are issued, holders should be aware that definitive Notes which have a denomination that is not an integral multiple of the minimum Specified Denomination may be illiquid and difficult to trade.
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
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. Therefore, 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. This is particularly the case for Notes that are especially sensitive to interest rate, currency or market risks, are designed for specific investment objectives or strategies or have been structured to meet the investment requirements of limited categories of investors. These types of Notes generally would have a more limited secondary market and more price volatility than conventional debt securities. Illiquidity may have a severely adverse effect on the market value of Notes.
Exchange rate risks and exchange controls
The relevant Issuer will pay principal and interest on the Notes and (in the case of Notes issued by Italcementi Finance S.A.) the Guarantor will make any payments under the Guarantee in the Specified Currency. 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 the Specified Currency. These include the risk that exchange rates may significantly change (including changes due to devaluation of the Specified Currency 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 Specified Currency would decrease (1) the Investor’s
23 Currency-equivalent yield on the Notes, (2) the Investor’s Currency-equivalent value of the principal payable on the Notes and (3) the Investor’s Currency-equivalent market value of the Notes.
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.
Interest rate risks
Investment in Fixed Rate Notes involves the risk that subsequent changes in market interest rates may adversely affect the value of the Fixed Rate Notes.
Credit ratings may not reflect all risks
One or more independent credit rating agencies may assign credit ratings to the Notes. The ratings may not reflect the potential impact of all risks related to structure, market, additional factors discussed above, and other factors that may affect the value of the Notes. A credit rating is not a recommendation to buy, sell or hold securities and may be revised or withdrawn by the rating agency at any time.
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 (1) Notes are legal investments for it, (2) Notes can be used as collateral for various types of borrowing and (3) other restrictions apply to its purchase or pledge of any Notes. Financial 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.
24 DOCUMENTS INCORPORATED BY REFERENCE
The following documents which have previously been published or are published simultaneously with this Base Prospectus and have been filed with the CSSF shall be incorporated in, and form part of, this Base Prospectus:
(a) the auditors’ report and audited consolidated annual financial statements of Italcementi S.p.A. for the financial years ended 31 December 2007 and 31 December 2008;
(b) the press release dated 5 March 2010 relating to the approval of the consolidated annual financial statements of Italcementi S.p.A. for the financial year ended 31 December 2009;
(c) the interim consolidated financial statements of Italcementi S.p.A. for the six months ended 30 June 2008 and 30 June 2009;
(d) the interim consolidated financial statements of Italcementi S.p.A. for the nine months ended 30 September 2008 and 30 September 2009; and
(e) the auditors’ report and audited annual financial statements of Holfipar S.A.S.* for the financial years ended 31 December 2008 and 31 December 2009.
Following the publication of this Base Prospectus a supplement may be prepared by the relevant Issuer and approved by the CSSF in accordance with Article 16 of the Prospectus Directive. Statements contained in any such supplement (or contained in any document incorporated by reference therein) shall, to the extent applicable (whether expressly, by implication or otherwise), be deemed to modify or supersede statements contained in this Base Prospectus or in a document which is incorporated by reference in this Base Prospectus. Any statement so modified or superseded shall not, except as so modified or superseded, constitute a part of this Base Prospectus.
Copies of documents incorporated by reference in this Base Prospectus can be obtained from the registered office of the relevant Issuer and from the specified offices of the Paying Agents for the time being in London and Luxembourg.
Any documents themselves incorporated by reference in the documents incorporated by reference in this Base Prospectus shall not form part of this Base Prospectus.
The Issuers and (in the case of notes issued by Italcementi Finance S.A.) the Guarantor will, in the event of any significant new factor, material mistake or inaccuracy relating to information included in this Base Prospectus which is capable of affecting the assessment of any Notes, prepare a supplement to this Base Prospectus or publish a new Base Prospectus for use in connection with any subsequent issue of Notes.
The following information from Italcementi S.p.A. and Italcementi Finance S.A. annual reports is incorporated by reference, and the following cross-references lists are provided to enable investors to identify specific items of information so incorporated. Page Document Information incorporated number Italcementi S.p.A. audited consolidated annual financial statements for the financial year ended 31 December 2007 Balance Sheet 76
* Effective 29 January 2010, Holfipar S.A.S. was converted into a société anonyme and renamed Italcementi Finance S.A. 25 Page Document Information incorporated number Cashflow Statement 79 Income Statement 77 Accounting Principles and Notes 80 to 143 Audit Report 157 to 158 Italcementi S.p.A. audited consolidated annual financial statements for the financial year ended 31 December 2008 Balance Sheet 72 Cashflow Statement 75 Income Statement 73 Accounting Principles and Notes 76 to 142 Audit Report 155 Italcementi S.p.A. interim consolidated financial statements for the six months ended 30 June 2008 Balance Sheet 52 Cashflow Statement 55 Income Statement 53 Accounting Principles and Notes 56 to 75 Italcementi S.p.A. interim consolidated financial statements for the six months ended 30 June 2009 Balance Sheet 48 Cashflow Statement 52 Income Statement 49 Accounting Principles and Notes 53 to 72 Audit Report 74 Italcementi S.p.A. interim consolidated financial statements for the nine months ended 30 September 2008 Income Statement 30 to 31 Comments on the Financial Statements 33 to 42 Italcementi S.p.A. interim consolidated financial statements for the nine months ended 30 September 2009 Income Statement 28 to 29 Comments on the Financial Statements 31 to 40
26 Page Document Information incorporated number Holfipar S.A.S. audited annual financial statements for the Whole financial year ended 31 December 2008 document Audit report in respect of the Holfipar S.A.S. audited annual financial statements for the financial year ended 31 Whole December 2008 Audit Report document Holfipar S.A.S. audited annual financial statements for the Whole financial year ended 31 December 2009 document Audit report in respect of Holfipar S.A.S. audited annual financial statements for the financial year ended 31 Whole December 2009 Audit Report document
Any information not listed in the cross reference list but included in the documents incorporated by reference is given for information purpose only.
27 FORM OF THE NOTES
Each Tranche of Notes will be in bearer form and will be initially issued in the form of a temporary global note (a Temporary Global Note) or, if so specified in the applicable Final Terms, a permanent global note (a Permanent Global Note) which, in either case, will:
(i) if the Global Notes are intended to be issued in new global note (NGN) form, as stated in the applicable Final Terms, be delivered on or prior to the original issue date of the Tranche to a common safekeeper (the Common Safekeeper) for Euroclear Bank SA/NV (Euroclear) and Clearstream Banking, société anonyme (Clearstream, Luxembourg); and
(ii) if the Global Notes are not intended to be issued in NGN Form, be delivered on or prior to the original issue date of the Tranche to a common depositary (the Common Depositary) for, Euroclear and Clearstream, Luxembourg.
Whilst any Note is represented by a Temporary Global Note, payments of principal, interest (if any) and any other amount payable in respect of the Notes due prior to the Exchange Date (as defined below) will be made (against presentation of the Temporary Global Note if the Temporary Global Note is not intended to be issued in NGN form) only to the extent that certification (in a form to be provided) to the effect that the beneficial owners of interests in such Note are not U.S. persons or persons who have purchased for resale to any U.S. person, as required by U.S. Treasury regulations, has been received by Euroclear and/or Clearstream, Luxembourg and Euroclear and/or Clearstream, Luxembourg, as applicable, has given a like certification (based on the certifications it has received) to the Agent.
On and after the date (the Exchange Date) which is 40 days after a Temporary Global Note is issued, interests in such Temporary Global Note will be exchangeable (free of charge) upon a request as described therein either for (a) interests in a Permanent Global Note of the same Series or (b) for definitive Notes of the same Series with, where applicable, receipts, interest coupons and talons attached (as indicated in the applicable Final Terms and subject, in the case of definitive Notes, to such notice period as is specified in the applicable Final Terms), in each case against certification of beneficial ownership as described above unless such certification has already been given. The holder of a Temporary Global Note will not be entitled to collect any payment of interest, principal or other amount due on or after the Exchange Date unless, upon due certification, exchange of the Temporary Global Note for an interest in a Permanent Global Note or for definitive Notes is improperly withheld or refused.
Payments of principal, interest (if any) or any other amounts on a Permanent Global Note will be made through Euroclear and/or Clearstream, Luxembourg (against presentation or surrender (as the case may be) of the Permanent Global Note if the Permanent Global Note is not intended to be issued in NGN form) without any requirement for certification.
The applicable Final Terms will specify that a Permanent Global Note will be exchangeable (free of charge), in whole but not in part, for definitive Notes with, where applicable, receipts, interest coupons and talons attached upon either (a) not less than 60 days’ written notice from Euroclear and/or Clearstream, Luxembourg (acting on the instructions of any holder of an interest in such Permanent Global Note) to the Agent as described therein or (b) only upon the occurrence of an Exchange Event. For these purposes, Exchange Event means that (i) an Event of Default (as defined in Condition 9) has occurred and is continuing, or (ii) the relevant Issuer has been notified that both Euroclear and Clearstream, Luxembourg have been closed for business for a continuous period of 14 days (other than by reason of holiday, statutory or otherwise) or have announced an intention permanently to cease business or have in fact done so and no successor clearing system is available or (iii) the relevant Issuer has or will become subject to adverse tax consequences which would not be suffered were the Notes represented by the Permanent Global Note in definitive form. The relevant Issuer will promptly give notice to Noteholders in accordance with Condition
28 13 if an Exchange Event occurs. In the event of the occurrence of an Exchange Event, Euroclear and/or Clearstream, Luxembourg (acting on the instructions of any holder of an interest in such Permanent Global Note) may give notice to the Agent requesting exchange and, in the event of the occurrence of an Exchange Event as described in (iii) above, the relevant Issuer may also give notice to the Agent requesting exchange. Any such exchange shall occur not later than 45 days after the date of receipt of the first relevant notice by the Agent.
The following legend will appear on all Notes which have an original maturity of more than 365 days and on all receipts and interest coupons relating to such Notes:
“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.”
The sections referred to provide that United States holders, with certain exceptions, will not be entitled to deduct any loss on Notes, receipts or interest coupons and will not be entitled to capital gains treatment of any gain on any sale, disposition, redemption or payment of principal in respect of such Notes, receipts or interest coupons.
Notes which are represented by a Global Note will only be transferable in accordance with the rules and procedures for the time being of Euroclear or Clearstream, Luxembourg, as the case may be.
Pursuant to the Agency Agreement (as defined under “Terms and Conditions of the Notes”), the Agent shall arrange that, where a further Tranche of Notes is issued which is intended to form a single Series with an existing Tranche of Notes, the Notes of such further Tranche shall be assigned a common code and ISIN which are different from the common code and ISIN assigned to Notes of any other Tranche of the same Series until at least the expiry of the distribution compliance period (as defined in Regulation S under the Securities Act) applicable to the Notes of such Tranche.
Any reference herein to Euroclear and/or Clearstream, Luxembourg shall, whenever the context so permits, be deemed to include a reference to any additional or alternative clearing system specified in the applicable Final Terms.
A Note may be accelerated by the holder thereof in certain circumstances described in Condition 9. In such circumstances, where any Note is still represented by a Global Note and the Global Note (or any part thereof) has become due and repayable in accordance with the Terms and Conditions of such Notes and payment in full of the amount due has not been made in accordance with the provisions of the Global Note then the Global Note will become void at 8.00 p.m. (London time) on such day. At the same time, holders of interests in such Global Note credited to their accounts with Euroclear and/or Clearstream, Luxembourg, as the case may be, will become entitled to proceed directly against the relevant Issuer on the basis of statements of account provided by Euroclear and/or Clearstream, Luxembourg on and subject to the terms of a deed of covenant (the Deed of Covenant) dated 9 March 2010 and executed by the Issuers.
29 APPLICABLE FINAL TERMS
Set out below is the Form of Final Terms which will be completed form each Tranche of Notes issued under the Programme.
[DATE]
[Italcementi S.p.A.
(incorporated with limited liability in the Republic of Italy)] /
[Italcementi Finance S.A.
(incorporated with limited liability in the French Republic)]
Issue of [Aggregate Nominal Amount of Tranche] [Title of Notes] [Guaranteed by Italcementi S.p.A.] under the €2,000,000,000 Euro Medium Term Note Programme
PART A – CONTRACTUAL TERMS
Terms used herein shall be deemed to be defined as such for the purposes of the Conditions set forth in the Base Prospectus dated [date] which constitutes a base prospectus for the purposes of the Prospectus Directive (Directive 2003/71/EC) (the Prospectus Directive). This document constitutes the Final Terms of the Notes described herein for the purposes of Article 5.4 of the Prospectus Directive and must be read in conjunction with the Base Prospectus. Full information on the Issuer[, the Guarantor] and the offer of the Notes is only available on the basis of the combination of these Final Terms and the Base Prospectus. The Base Prospectus is available for viewing at www.italcementigroup.com and during normal business hours at Via Camozzi, 124, 24121 Bergamo, Italy and copies may be obtained from Via Camozzi, 124, 24121 Bergamo, Italy.
[The following alternative language applies if the first tranche of an issue which is being increased was issued under a Base Prospectus with an earlier date.
Terms used herein shall be deemed to be defined as such for the purposes of the Conditions (the Conditions) set forth in the Base Prospectus dated [original date]. This document constitutes the Final Terms of the Notes described herein for the purposes of Article 5.4 of the Prospectus Directive (Directive 2003/71/EC) (the Prospectus Directive) and must be read in conjunction with the Base Prospectus dated [current date] which constitutes a base prospectus for the purposes of the Prospectus Directive, save in respect of the Conditions which are extracted from the Base Prospectus dated [original date] and are attached hereto. Full information on the Issuer[, the Guarantor] and the offer of the Notes is only available on the basis of the combination of these Final Terms and the Base Prospectuses dated [current date] and [original date]. Copies of such Base Prospectuses are available for viewing at www.italcementigroup.com and during normal business hours at Via Camozzi, 124, 24121 Bergamo, Italy and copies may be obtained from Via Camozzi, 124, 24121 Bergamo, Italy.
[Include whichever of the following apply or specify as “Not Applicable” (N/A). Note that the numbering should remain as set out below, even if “Not Applicable” is indicated for individual paragraphs or subparagraphs. Italics denote directions for completing the Final Terms.]
30 [When adding any other final terms or information consideration should be given as to whether such terms or information constitute “significant new factors” and consequently trigger the need for a supplement to the Base Prospectus under Article 16 of the Prospectus Directive.]
If the Notes have a maturity of less than one year from the date of their issue, the minimum denomination may need to be €100,000 or its equivalent in any other currency.]
1. [(a)] Issuer: [Italcementi S.p.A./Italcementi Finance S.A.] [[(b)] Guarantor: Italcementi S.p.A.] 2. (a) Series Number: [ ] (b) Tranche Number: [ ] (If fungible with an existing Series, details of that Series, including the date on which the Notes become fungible) 3. Specified Currency or Currencies: [ ] 4. Aggregate Nominal Amount: (a) Series: [ ] (b) Tranche: [ ] 5. Issue Price: [ ] per cent. of the Aggregate Nominal Amount [plus accrued interest from [insert date] (if applicable)] 6. (a) Specified Denominations: [ ] (Note – where multiple denominations above [€50,000] or equivalent are being used the following sample wording should be followed: “[€50,000] and integral multiples of [€1,000] in excess thereof up to and including [€99,000]. No Notes in definitive form will be issued with a denomination above [€99,000].”) (N.B. If an issue of Notes is (i) NOT admitted to trading on an European Economic Area exchange; and (ii) only offered in the European Economic Area in circumstances where a prospectus is not required to be published under the Prospectus Directive, the [€50,000] minimum denomination is not required.) (b) Calculation Amount: [ ] (If only one Specified Denomination, insert the Specified Denomination. If more than one Specified Denomination, insert the highest common factor. Note: There must be a common factor in the case of two or more Specified Denominations.) 7. (a) Issue Date: [ ] (b) Interest Commencement Date: [specify/Issue Date/Not Applicable] 31 (N.B. An Interest Commencement Date will not be relevant for certain Notes, for example Zero Coupon Notes.) 8. Maturity Date: [Fixed rate - specify date/ Floating rate - Interest Payment Date falling in or nearest to [specify month]] 9. Interest Basis: [[ ] per cent. Fixed Rate] [[LIBOR/EURIBOR] +/- [ ] per cent. Floating Rate] [Zero Coupon] [Index Linked Interest] [Dual Currency Interest] [specify other] (further particulars specified below) 10. Redemption/Payment Basis: [Redemption at par] [Index Linked Redemption] [Dual Currency Redemption] [Partly Paid] [Instalment] [specify other] (N.B. If the Final Redemption Amount is other than 100 per cent. of the nominal value the Notes will be derivative securities for the purposes of the Prospectus Directive and the requirements of Annex XII to the Prospectus Directive Regulation will apply.) 11. Change of Interest Basis or [Specify details of any provision for change of Redemption/Payment Basis: Notes into another Interest Basis or Redemption/Payment Basis] 12. Put/Call Options: [Investor Put (Change of Control Put Option)] [Issuer Call] [(further particulars specified below)] 13. [Date Board approval for issuance of Notes [ ] [and [ ], respectively]] [and Guarantee] obtained: (N.B. Only relevant where Board (or similar) authorisation is required for the particular tranche of Notes or Guarantee) 14. Method of distribution: [Syndicated/Non-syndicated] PROVISIONS RELATING TO INTEREST (IF ANY) PAYABLE 15. Fixed Rate Note Provisions [Applicable/Not Applicable] (If not applicable, delete the remaining subparagraphs of this paragraph)
32 (a) Rate(s) of Interest: [ ] per cent. per annum [payable [annually/semi-annually/quarterly/other (specify)] in arrear] (If payable other than annually, consider amending Condition 4) (b) Interest Payment Date(s): [[ ] in each year up to and including the Maturity Date]/[specify other] (N.B. This will need to be amended in the case of long or short coupons) (c) Fixed Coupon Amount(s): [ ] per Calculation Amount (Applicable to Notes in definitive form.) (d) Broken Amount(s): [ ] per Calculation Amount, payable on the Interest Payment Date falling [in/on] [ ] (Applicable to Notes in definitive form.) (e) Day Count Fraction: [30/360 or Actual/Actual (ICMA) or [specify other]] (f) [Determination Date(s): [ ] in each year (Insert regular interest payment dates, ignoring issue date or maturity date in the case of a long or short first or last coupon N.B. This will need to be amended in the case of regular interest payment dates which are not of equal duration N.B. Only relevant where Day Count Fraction is Actual/Actual (ICMA))] (g) Other terms relating to the method of [None/Give details] calculating interest for Fixed Rate Notes: 16. Floating Rate Note Provisions [Applicable/Not Applicable] (If not applicable, delete the remaining subparagraphs of this paragraph) (a) Specified Period(s)/Specified Interest [ ] Payment Dates: (b) Business Day Convention: [Floating Rate Convention/Following Business Day Convention/Modified Following Business Day Convention/ Preceding Business Day Convention/[specify other]] (c) Additional Business Centre(s): [ ] (d) Manner in which the Rate of Interest [Screen Rate Determination/ISDA and Interest Amount is to be Determination/specify other] determined: (e) Party responsible for calculating the [ ] Rate of Interest and Interest Amount 33 (if not the Agent): (f) Screen Rate Determination: (i) Reference Rate: [ ] (Either LIBOR, EURIBOR or other, although additional information is required if other - including fallback provisions in the Agency Agreement) (ii) Interest Determination [ ] Date(s): (Second London business day prior to the start of each Interest Period if LIBOR (other than Sterling or euro LIBOR), first day of each Interest Period if Sterling LIBOR and the second day on which the TARGET2 System is open prior to the start of each Interest Period if EURIBOR or euro LIBOR) (iii) Relevant Screen Page: [ ] (In the case of EURIBOR, if not Reuters EURIBOR01 ensure it is a page which shows a composite rate or amend the fallback provisions appropriately) (g) ISDA Determination: (i) Floating Rate Option: [ ] (ii) Designated Maturity: [ ] (iii) Reset Date: [ ] (h) Margin(s): [+/-] [ ] per cent. per annum (i) Minimum Rate of Interest: [ ] per cent. per annum (j) Maximum Rate of Interest: [ ] per cent. per annum (k) Day Count Fraction: [Actual/Actual (ISDA) Actual/365 (Fixed) Actual/365 (Sterling) Actual/360 30/360 30E/360 30E/360 (ISDA) Other] (See Condition 4 for alternatives) (l) Fallback provisions, rounding [ ] provisions and any other terms relating to the method of calculating interest on Floating Rate Notes, if different from those set out in the Conditions:
34 17. Zero Coupon Note Provisions [Applicable/Not Applicable] (If not applicable, delete the remaining subparagraphs of this paragraph) (a) Accrual Yield: [ ] per cent. per annum (b) Reference Price: [ ] (c) Any other formula/basis of [ ] determining amount payable: (d) Day Count Fraction in relation to [Conditions 6.5 (c) and 6.10 apply/specify other] Early Redemption Amounts and late (Consider applicable day count fraction if not payment: U.S. dollar denominated) 18. Index Linked Interest Note Provisions [Applicable/Not Applicable] (If not applicable, delete the remaining subparagraphs of this paragraph) (N.B. If the Final Redemption Amount is other than 100 per cent. of the nominal value the Notes will be derivative securities for the purposes of the Prospectus Directive and the requirements of Annex XII to the Prospectus Directive Regulation will apply.) (a) Index/Formula: [give or annex details] (b) Calculation Agent [give name (and, if the Notes are derivative securities to which Annex XII of the Prospectus Directive Regulation applies, address)] (c) Party responsible for calculating the [ ] Rate of Interest (if not the Calculation Agent) and Interest Amount (if not the Agent): (d) Provisions for determining Coupon [need to include a description of market where calculation by reference to disruption or settlement disruption events and Index and/or Formula is impossible adjustment provisions] or impracticable: (e) Specified Period(s)/Specified Interest [ ] Payment Dates: (f) Business Day Convention: [Floating Rate Convention/Following Business Day Convention/Modified Following Business Day Convention/ Preceding Business Day Convention/specify other] (g) Additional Business Centre(s): [ ] (h) Minimum Rate of Interest: [ ] per cent. per annum (i) Maximum Rate of Interest: [ ] per cent. per annum (j) Day Count Fraction: [ ] 19. Dual Currency Interest Note Provisions [Applicable/Not Applicable] (If not applicable, delete the remaining
35 subparagraphs of this paragraph) (N.B. If the Final Redemption Amount is other than 100 per cent. of the nominal value the Notes will be derivative securities for the purposes of the Prospectus Directive and the requirements of Annex XII to the Prospectus Directive Regulation will apply.) (a) Rate of Exchange/method of [give or annex details] calculating Rate of Exchange: (b) Party, if any, responsible for [ ] calculating the principal and/or interest due (if not the Agent): (c) Provisions applicable where [need to include a description of market calculation by reference to Rate of disruption or settlement disruption events and Exchange impossible or adjustment provisions] impracticable: (d) Person at whose option Specified [ ] Currency(ies) is/are payable: PROVISIONS RELATING TO REDEMPTION 20. Issuer Call: [Applicable/Not Applicable] (If not applicable, delete the remaining subparagraphs of this paragraph) (a) Optional Redemption Date(s): [ ] (b) Optional Redemption Amount and [[ ] per Calculation Amount/specify other/see method, if any, of calculation of such Appendix] amount(s): (c) If redeemable in part: (i) Minimum Redemption [ ] Amount: (ii) Maximum Redemption [ ] Amount: (d) Notice period (if other than as set out [ ] in the Conditions): (N.B. If setting notice periods which are different to those provided in the Conditions, the Issuer is advised to consider the practicalities of distribution of information through intermediaries, for example, clearing systems and custodians, as well as any other notice requirements which may apply, for example, as between the Issuer and the Agent) 21. Investor Put: [Applicable/Not Applicable] (If not applicable, delete the remaining subparagraphs of this paragraph) (a) Optional Redemption Date(s): [ ]
36 (b) Optional Redemption Amount and method, if any, of calculation of such [[ ] per Calculation Amount/specify other/see amount(s): Appendix] (c) Notice period (if other than as set out in the Conditions): [ ] (N.B. If setting notice periods which are different to those provided in the Conditions, the Issuer is advised to consider the practicalities of distribution of information through intermediaries, for example, clearing systems and custodians, as well as any other notice requirements which may apply, for example, as between the Issuer and the Agent) 22. Final Redemption Amount: [[ ] per Calculation Amount/specify other/see Appendix] (N.B. If the Final Redemption Amount is other than 100 per cent. of the nominal value the Notes will be derivative securities for the purposes of the Prospectus Directive and the requirements of Annex XII to the Prospectus Directive Regulation will apply.) 23. Early Redemption Amount payable on [[ ] per Calculation Amount/specify other/see redemption for taxation reasons or on event of Appendix] default and/or the method of calculating the same (if required or if different from that set out in Condition 6.5): GENERAL PROVISIONS APPLICABLE TO THE NOTES 24. Form of Notes: (a) Form: [Temporary Global Note exchangeable for a Permanent Global Note which is exchangeable for Definitive Notes [on 60 days’ notice given at any time/only upon an Exchange Event]] [Temporary Global Note exchangeable for Definitive Notes on and after the Exchange Date] [Permanent Global Note exchangeable for Definitive Notes [on 60 days’ notice given at any time/only upon an Exchange Event/at any time at the request of the Issuer]] (Ensure that this is consistent with the wording in the “Form of the Notes” section in the Base Prospectus and the Notes themselves. N.B. The exchange upon notice/at any time options should not be expressed to be applicable if the Specified Denomination of the Notes in paragraph 6 includes language substantially to the following effect: “[€50,000] and integral multiples of [€1,000] in excess thereof up to and including [€99,000].” Furthermore, such 37 Specified Denomination construction is not permitted in relation to any issue of Notes which is to be represented on issue by a Temporary Global Note exchangeable for Definitive Notes.) (b) New Global Note: [Yes][No] 25. Additional Financial Centre(s) or other [Not Applicable/give details] special provisions relating to Payment Days: (Note that this paragraph relates to the place of payment and not Interest Period end dates to which sub-paragraphs 16(c) and 18(g) relate) 26. Talons for future Coupons or Receipts to be [Yes/No. If yes, give details] attached to Definitive Notes (and dates on which such Talons mature): 27. Details relating to Partly Paid Notes: amount of each payment comprising the Issue Price and date on which each payment is to be [Not Applicable/give details. N.B. a new form of made and consequences (if any) of failure to Temporary Global Note and/or Permanent pay, including any right of the Issuer to forfeit Global Note may be required for Partly Paid the Notes and interest due on late payment: issues] 28. Details relating to Instalment Notes: (a) Instalment Amount(s): [Not Applicable/give details] (b) Instalment Date(s): [Not Applicable/give details] 29. Redenomination applicable: Redenomination [not] applicable [(If Redenomination is applicable, specify the applicable Day Count Fraction and any provisions necessary to deal with floating rate interest calculation (including alternative reference rates))][(if Redenomination is applicable, specify the terms of the redenomination in an Annex to the Final Terms)] 30. Other final terms: [Not Applicable/give details] [(When adding any other final terms consideration should be given as to whether such terms constitute “significant new factors” and consequently trigger the need for a supplement to the Base Prospectus under Article 16 of the Prospectus Directive.)] (Consider including a term providing for tax certification if required to enable interest to be paid gross by issuers.) DISTRIBUTION 31. (a) If syndicated, names of Managers: [Not Applicable/give names] (If the Notes are derivative securities to which Annex XII of the Prospectus Directive Regulation applies, include names of entities agreeing to underwrite the issue on a firm commitment basis and names of the entities agreeing to place the
38 issue without a firm commitment or on a “best efforts” basis if such entities are not the same as the Managers.) (b) Date of [Subscription] Agreement: [ ] (The above is only relevant if the Notes are derivative securities to which Annex XII of the Prospectus Directive Regulation applies). (c) Stabilising Manager(s) (if any): [Not Applicable/give name] 32. If non-syndicated, name and address of [Not Applicable/give name and address] relevant Dealer: 33. U.S. Selling Restrictions: [Reg. S Compliance Category [2]; TEFRA D/TEFRA C/TEFRA not applicable] 34. Additional selling restrictions: [Not Applicable/give details]
PURPOSE OF FINAL TERMS
These Final Terms comprise the final terms required for issue and admission to trading on the Luxembourg Stock Exchange’s regulated market, and listing on the Official List of the Luxembourg Stock Exchange of the Notes described herein pursuant to the €2,000,000,000 Euro Medium Term Note Programme of Italcementi S.p.A. and Italcementi Finance S.A..
RESPONSIBILITY
The Issuer [and the Guarantor] accept[s] responsibility for the information contained in these Final Terms. [[Relevant third party information, for example in compliance with Annex XII to the Prospectus Directive Regulation in relation to an index or its components] has been extracted from [specify source]. The Issuer [and the Guarantor] confirm[s] that such information has been accurately reproduced and that, so far as it is aware and is able to ascertain from information published by [specify source], no facts have been omitted which would render the reproduced information inaccurate or misleading.
Signed on behalf of the Issuer: [Signed on behalf of the Guarantor:
By: ...... By: ...... Duly authorised Duly authorised]
39 PART B – OTHER INFORMATION
1. LISTING AND ADMISSION TO TRADING (i) Listing and Admission to [Application has been made by the Issuer (or on its trading: behalf) for the Notes to be admitted to trading on the Luxembourg Stock Exchange’s regulated market, and on the Official List of the Luxembourg Stock Exchange with effect from [ ].] [Application is expected to be made by the Issuer (or on its behalf) for the Notes to be admitted to trading on the Luxembourg Stock Exchange’s regulated market, and on the Official List of the Luxembourg Stock Exchange with effect from [ ].] [Not Applicable.] (ii) Estimate of total expenses [ ] related to admission to trading: 2. RATINGS Ratings: The Notes to be issued have been rated: [S & P: [ ]] [Moody’s: [ ]] [[Other]: [ ]] (The above disclosure should reflect the rating allocated to Notes of the type being issued under the Programme generally or, where the issue has been specifically rated, that rating.) 3. INTERESTS OF NATURAL AND LEGAL PERSONS INVOLVED IN THE ISSUE [Save for any fees payable to the [Managers/Dealers], so far as the Issuer is aware, no person involved in the issue of the Notes has an interest material to the offer. - Amend as appropriate if there are other interests] [(When adding any other description, consideration should be given as to whether such matters described constitute “significant new factors” and consequently trigger the need for a supplement to the Base Prospectus under Article 16 of the Prospectus Directive.)] 4. REASONS FOR THE OFFER, ESTIMATED NET PROCEEDS AND TOTAL EXPENSES [(i) Reasons for the offer: [ ] [(ii)] Estimated net proceeds: [ ] [(iii)] Estimated total expenses: [ ]] (N.B.: Delete unless the Notes are derivative securities to which Annex XII of the Prospectus Directive Regulation applies, in which case (i) above is required where the reasons for the offer are different from making profit and/or hedging certain risks and, where such reasons are inserted in (i), disclosure of net proceeds and total expenses at (ii) and (iii) above are also required.)]
40 5. YIELD (Fixed Rate Notes only) Indication of yield: [ ]
The yield is calculated at the Issue Date on the basis of the Issue Price. It is not an indication of future yield.
6. PERFORMANCE OF INDEX/FORMULA, EXPLANATION OF EFFECT ON VALUE OF INVESTMENT AND ASSOCIATED RISKS AND OTHER INFORMATION CONCERNING THE UNDERLYING (Index-linked Notes only) [Need to include details of where past and future performance and volatility of the index/formula can be obtained.] [Where the underlying is an index need to include the name of the index and a description if composed by the Issuer and if the index is not composed by the Issuer need to include details of where the information about the index can be obtained.] [Include other information concerning the underlying required by paragraph 4.2 of Annex XII of the Prospectus Directive Regulation.] [(When completing the above paragraphs, consideration should be given as to whether such matters described constitute “significant new factors” and consequently trigger the need for a supplement to the Base Prospectus under Article 16 of the Prospectus Directive.)] The Issuer [intends to provide post-issuance information [specify what information will be reported and where it can be obtained]] [does not intend to provide post-issuance information]. (N.B. This paragraph 6 only applies if the Notes are derivative securities to which Annex XII of the Prospectus Directive Regulation applies.) 7. PERFORMANCE OF RATE[S] OF EXCHANGE (Dual Currency Notes only) [Need to include details of where past and future performance and volatility of the relevant rates can be obtained.] [(When completing this paragraph, consideration should be given as to whether such matters described constitute “significant new factors” and consequently trigger the need for a supplement to the Base Prospectus under Article 16 of the Prospectus Directive.)] (N.B. This paragraph 7 only applies if the Notes are derivative securities to which Annex XII of the Prospectus Directive Regulation applies.) 8. OPERATIONAL INFORMATION (i) ISIN Code: [ ] (ii) Common Code: [ ] (iii) Any clearing system(s) other than [Not Applicable/give name(s) and number(s)] Euroclear Bank S.A./N.V. and Clearstream Banking, société anonyme and the relevant identification number(s): (iv) Delivery: Delivery [against/free of] payment (v) Names and addresses of [ ] additional Paying Agent(s) (if any): [(vi) Intended to be held in a manner [Yes] [No] which would allow Eurosystem 41 eligibility: [Note that the designation “yes” simply means that the Notes are intended upon issue to be deposited with one of the ICSDs as common safekeeper and does not necessarily mean that the Notes will 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.] [include this text if “yes” selected in which case the Notes must be issued in NGN form] 9. FURTHER INFORMATION IN RESPECT OF THE ISSUER (in the case of Notes issued by Italcementi S.p.A.) The following information relating to the Issuer is provided pursuant to Article 2414 of the Italian Civil Code. [The information set out in this section may need to be updated if, at the time of issue of the Notes, any of it has changed since the date on which the Programme was established.] (i) Objects: The objects of the Issuer, as set out in Article 2 of its by-laws are: the manufacturing, sale, and application of cements, limes and, in general, of hydraulic binders, construction materials and similar products. The Issuer can carry out any other industrial activity appropriate to promote or ensure the regular development of production and can conduct all industrial, commercial and financial operations considered by the Board of Directors necessary or useful in order to achieve its objectives. The Issuer can also acquire shareholdings or investment quotas in other financial intermediaries or real estate companies or firms, without prejudice to article 2361 of the Italian Civil Code. Further, the Issuer can grant guarantees and suretyships connected with its objects. (ii) Registered office: Via G. Camozzi 124, 24121, Bergamo, Italy. (iii) Registered number: Companies’ Register of the City of Bergamo No. 00637110164 (iv) Amount of paid-up share capital Paid-up share capital: €[ ], consisting of [ ] ordinary and reserves: shares and [ ] preference shares with nominal value of €1 each. (v) Reserves: €[ ] (vi) Date of resolutions authorising Resolution passed on [ ], registered at the Companies’ the issue of the Notes: Registry of [ ] on [ ].
42 TERMS AND CONDITIONS OF THE NOTES
The following are the Terms and Conditions of the Notes which will be incorporated by reference into each Global Note (as defined below) and each definitive Note, in the latter case only if permitted by the relevant stock exchange or other relevant authority (if any) and agreed by the relevant Issuer and the relevant Dealer at the time of issue but, if not so permitted and agreed, such definitive Note will have endorsed thereon or attached thereto such Terms and Conditions. The applicable Final Terms in relation to any Tranche of Notes may specify other terms and conditions which shall, to the extent so specified or to the extent inconsistent with the following Terms and Conditions, replace or modify the following Terms and Conditions for the purpose of such Notes. The applicable Final Terms (or the relevant provisions thereof) will be endorsed upon, or attached to, each Global Note and definitive Note. Reference should be made to “Form of the Notes” for a description of the content of Final Terms which will specify which of such terms are to apply in relation to the relevant Notes.
This Note is one of a Series (as defined below) of Notes issued by Italcementi S.p.A. or Italcementi Finance S.A., as specified in the applicable Final Terms (as defined below), and references to the Issuer shall be construed accordingly. This Note is issued pursuant to the Agency Agreement (as defined below).
References herein to the Notes shall be references to the Notes of this Series and shall mean:
(a) in relation to any Notes represented by a global Note (a Global Note), units of each Specified Denomination in the Specified Currency;
(b) any Global Note; and
(c) any definitive Notes issued in exchange for a Global Note.
The Notes, the Receipts (as defined below) and the Coupons (as defined below) have the benefit of an Agency Agreement (such Agency Agreement as amended and/or supplemented and/or restated from time to time, the Agency Agreement) dated 9 March 2010 and made between Italcementi S.p.A. in its capacity both as an Issuer and as guarantor (the Guarantor), Italcementi Finance S.A., BNP Paribas Securities Services, Luxembourg Branch as issuing and principal paying agent and agent bank (the Agent, which expression shall include any successor agent) and the other paying agents named therein (together with the Agent, the Paying Agents, which expression shall include any additional or successor paying agents).
Interest bearing definitive Notes have interest coupons (Coupons) and, if indicated in the applicable Final Terms, talons for further Coupons (Talons) attached on issue. Any reference herein to Coupons or coupons shall, unless the context otherwise requires, be deemed to include a reference to Talons or talons. Definitive Notes repayable in instalments have receipts (Receipts) for the payment of the instalments of principal (other than the final instalment) attached on issue. Global Notes do not have Receipts, Coupons or Talons attached on issue.
The final terms for this Note (or the relevant provisions thereof) are set out in Part A of the Final Terms attached to or endorsed on this Note which supplement these Terms and Conditions (the Conditions) and may specify other terms and conditions which shall, to the extent so specified or to the extent inconsistent with the Conditions, replace or modify the Conditions for the purposes of this Note. References to the applicable Final Terms are to Part A of the Final Terms (or the relevant provisions thereof) attached to or endorsed on this Note.
The payment of all amounts in respect of Notes issued by Italcementi Finance S.A. have been guaranteed by the Guarantor pursuant to a guarantee (the Guarantee) dated 9 March 2010 and executed by the Guarantor.
43 The original of the Guarantee is held by the Agent on behalf of the Noteholders, the Receiptholders and the Couponholders at its specified office.
Any reference to Noteholders or holders in relation to any Notes shall mean the holders of the Notes and shall, in relation to any Notes represented by a Global Note, be construed as provided below. Any reference herein to Receiptholders shall mean the holders of the Receipts and any reference herein to Couponholders shall mean the holders of the Coupons and shall, unless the context otherwise requires, include the holders of the Talons.
As used herein, Tranche means Notes which are identical in all respects (including as to listing and admission to trading) and Series means a Tranche of Notes together with any further Tranche or Tranches of Notes which are (a) expressed to be consolidated and form a single series and (b) identical in all respects (including as to listing and admission to trading) except for their respective Issue Dates, Interest Commencement Dates and/or Issue Prices.
The Noteholders, the Receiptholders and the Couponholders are entitled to the benefit of the Deed of Covenant (the Deed of Covenant) dated 9 March 2010 and made by the Issuers. The original of the Deed of Covenant is held by the common depositary for Euroclear (as defined below) and Clearstream, Luxembourg (as defined below).
Copies of the Agency Agreement, the Guarantee and the Deed of Covenant are available for inspection during normal business hours at the specified office of each of the Paying Agents. Copies of the applicable Final Terms are available for viewing at the registered office of the Issuer, of the Guarantor (in the case of Notes issued by Italcementi Finance S.A.) and of the Agent and copies may be obtained from those offices save that, if this Note is neither admitted to trading on a regulated market in the European Economic Area nor offered in the European Economic Area in circumstances where a prospectus is required to be published under the Prospectus Directive, the applicable Final Terms will only be obtainable by a Noteholder holding one or more Notes and such Noteholder must produce evidence satisfactory to the Issuer and the relevant Paying Agent as to its holding of such Notes and identity. The Base Prospectus and, in the case of Notes admitted to trading on the regulated market of the Luxembourg Stock Exchange, the applicable Final Terms will also be published on the website of the Luxembourg Stock Exchange (www.bourse.lu).
The Noteholders, the Receiptholders and the Couponholders are deemed to have notice of, and are entitled to the benefit of, all the provisions of the Agency Agreement, the Guarantee (in the case of Notes issued by Italcementi Finance S.A.), the Deed of Covenant and the applicable Final Terms which are applicable to them. The statements in the Conditions include summaries of, and are subject to, the detailed provisions of the Agency Agreement.
Words and expressions defined in the Agency Agreement or used in the applicable Final Terms shall have the same meanings where used in the Conditions unless the context otherwise requires or unless otherwise stated and provided that, in the event of inconsistency between the Agency Agreement and the applicable Final Terms, the applicable Final Terms will prevail.
1. FORM, DENOMINATION AND TITLE
The Notes are in bearer form and, in the case of definitive Notes, serially numbered, in the Specified Currency and the Specified Denomination(s). Notes of one Specified Denomination may not be exchanged for Notes of another Specified Denomination.
This Note may be a Fixed Rate Note, a Floating Rate Note, a Zero Coupon Note, an Index Linked Interest Note, a Dual Currency Interest Note or a combination of any of the foregoing, depending upon the Interest Basis shown in the applicable Final Terms.
44 This Note may be an Index Linked Redemption Note, an Instalment Note, a Dual Currency Redemption Note, a Partly Paid Note or a combination of any of the foregoing, depending upon the Redemption/Payment Basis shown in the applicable Final Terms.
Definitive Notes are issued with Coupons attached, unless they are Zero Coupon Notes in which case references to Coupons and Couponholders in the Conditions are not applicable.
Subject as set out below, title to the Notes, Receipts and Coupons will pass by delivery. The Issuer, the Guarantor (in the case of Notes issued by Italcementi Finance S.A.) and the Paying Agents will (except as otherwise required by law) deem and treat the bearer of any Note, Receipt or Coupon as the absolute owner thereof (whether or not overdue and notwithstanding any notice of ownership or writing thereon or notice of any previous loss or theft thereof) for all purposes but, in the case of any Global Note, without prejudice to the provisions set out in the next succeeding paragraph.
For so long as any of the Notes is represented by a Global Note held on behalf of Euroclear Bank S.A./N.V. (Euroclear) and/or Clearstream Banking, société anonyme (Clearstream, Luxembourg), each person (other than Euroclear or Clearstream, Luxembourg) who is for the time being shown in the records of Euroclear or of Clearstream, Luxembourg as the holder of a particular nominal amount of such Notes (in which regard any certificate or other document issued by Euroclear or Clearstream, Luxembourg as to the nominal amount of such Notes standing to the account of any person shall be conclusive and binding for all purposes save in the case of manifest error) shall be treated by the Issuer, the Guarantor (in the case of Notes issued by Italcementi Finance S.A.) and the Paying Agents as the holder of such nominal amount of such Notes for all purposes other than with respect to the payment of principal or interest on such nominal amount of such Notes, for which purpose the bearer of the relevant Global Note shall be treated by the Issuer, the Guarantor (in the case of Notes issued by Italcementi Finance S.A.) and any Paying Agent as the holder of such nominal amount of such Notes in accordance with and subject to the terms of the relevant Global Note and the expressions Noteholder and holder of Notes and related expressions shall be construed accordingly.
Notes which are represented by a Global Note will be transferable only in accordance with the rules and procedures for the time being of Euroclear and Clearstream, Luxembourg, as the case may be. References to Euroclear and/or Clearstream, Luxembourg shall, whenever the context so permits, be deemed to include a reference to any additional or alternative clearing system specified in the applicable Final Terms.
2. STATUS OF THE NOTES AND THE GUARANTEE
2.1 Status of the Notes
The Notes and any relative Receipts and Coupons are direct, unconditional, unsubordinated and (subject to the provisions of Condition 3) unsecured obligations of the Issuer and rank pari passu among themselves and (save for certain obligations required to be preferred by law) equally with all other unsecured obligations (other than subordinated obligations, if any) of the Issuer, from time to time outstanding.
2.2 Status of the Guarantee
Applicable in the case of Notes issued by Italcementi Finance S.A.
The Guarantor has in the Guarantee unconditionally and irrevocably guaranteed the payment of all principal and interest and other sums from time to time payable in respect of Notes issued by Italcementi Finance S.A. and any relevant Receipts and Coupons. The obligations of the Guarantor under the Guarantee are direct, unconditional, unsubordinated and (subject to the provisions of
45 Condition 3) unsecured obligations of the Guarantor and (save for certain obligations required to be preferred by law) rank equally with all other unsecured obligations (other than subordinated obligations, if any) of the Guarantor, from time to time outstanding.
3. NEGATIVE PLEDGE
3.1 So long as any of the Notes or, if applicable, any Receipts or Coupons relating to them, remain outstanding, the Issuer and (in the case of Notes issued by Italcementi Finance S.A.) the Guarantor will not, and the Issuer (in the case of Notes issued by Italcementi S.p.A.) or the Guarantor (in the case of Notes issued by Italcementi Finance S.A.) will ensure that no Principal Subsidiary will, create or permit to subsist any mortgage, charge, pledge, lien or other security interest (each a Security Interest), other than a Permitted Security, upon any of its or their respective assets or revenues, present or future, to secure any Relevant Indebtedness or any guarantee or indemnity in respect of any Relevant Indebtedness (whether before or after the issue of Notes) unless:
(a) the Issuer’s obligations under the Notes, Receipts and Coupons and (in the case of Notes issued by Italcementi Finance S.A.) the Guarantor’s obligations under the Guarantee are equally and rateably secured so as to rank pari passu with such Relevant Indebtedness or such guarantee or indemnity in respect thereof; or
(b) such other security interest or other arrangement is provided as may be approved by an Extraordinary Resolution (as defined in the Agency Agreement) of the Noteholders.
3.2 Definitions
In these Conditions:
Permitted Security means any Security Interest:
(i) arising by operation of law; or
(ii) existing on the date on which agreement is reached to issue the first Tranche of the Notes; or
(iii) created by any entity upon the whole or any part of its undertaking or assets and subsisting at the time such entity (A) merges or consolidates with or is demerged, contributed or merged into or transferred to the Issuer, the Guarantor or a Principal Subsidiary, (B) becomes a Principal Subsidiary or (C) sells, contributes or transfers all or substantially all of its assets to the Issuer, the Guarantor or a Principal Subsidiary, provided, in each case, that such Security Interest was not created in connection with, or in contemplation of, such merger, consolidation, demerger, contribution, transfer or sale or such entity becoming a Principal Subsidiary and provided further that the amount of Relevant Indebtedness secured by such Security Interest is not subsequently increased; or
(iv) created over (A) the receivables of a Securitisation Entity (and any bank account to which such proceeds are deposited) which are subject to a Non-recourse Securitisation as security for Non-recourse Securitisation Debt raised by such Securitisation Entity in respect of such receivables; and/or (B) the shares or other interests owned by any member of the Italcementi Group in any Securitisation Entity as security for Non-recourse Securitisation Debt raised by such Securitisation Entity, provided, in each case, that the receivables or revenues which are the subject of the relevant Non-recourse Securitisation comprise all or substantially all of the business
46 of such Securitisation Entity, or any Security Interest created in order to extend, renew or replace, in whole or in part, any Security Interest referred to in this paragraph (or any successive extensions, renewals or replacements thereof) or extend, renew or refinance any Relevant Indebtedness secured by any Security Interest permitted by this paragraph;
Relevant Indebtedness means any present or future indebtedness for borrowed money represented by notes or other securities which are for the time being, or are capable of being, quoted, listed or ordinarily dealt in on any stock exchange, over-the-counter- or other securities market;
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;
Principal Subsidiary means at any relevant time a Subsidiary of Italcementi S.p.A.:
(i) whose accounts are consolidated with those of Italcementi S.p.A. and whose net revenues or whose net total assets, represent not less than 10 per cent. of the consolidated net revenues or, as the case may be, consolidated net total assets of Italcementi S.p.A., all as calculated by reference to the then latest audited accounts of such Subsidiary and the then latest audited consolidated accounts of Italcementi S.p.A.; or
(ii) which is required to publish consolidated accounts under the applicable local laws and regulations and whose consolidated net revenues or consolidated net total assets, represent not less than 10 per cent. of the consolidated net revenues or, as the case may be, consolidated net total assets of Italcementi S.p.A., all as calculated by reference to the then latest audited consolidated accounts of such Subsidiary and the then latest audited consolidated accounts of Italcementi S.p.A.; or
(iii) to which is transferred the whole or substantially the whole of the undertaking of a Subsidiary of Italcementi S.p.A. which immediately before the transfer was a Principal Subsidiary under either paragraph (i) or (ii) above; provided that, for the purposes of Condition 9(g) only and, for the avoidance of doubt, not in connection with any other of the Conditions, Principal Subsidiary will not include any Subsidiary of Italcementi S.p.A. that is not located or domiciled in an OECD Member Country;
OECD Member Country means a country that is a member of the Organisation for Economic Cooperation and Development or any successor organisation thereof (or, to the extent that the Organisation for Economic Cooperation and Development or a successor organisation no longer exists, was a member thereof at the time the relevant organisation ceased to exist);
A report by the auditors of Italcementi S.p.A. that in their opinion a Subsidiary of Italcementi S.p.A. is or is not or was or was not at any particular time or throughout any Specified Period a Principal Subsidiary will, in the absence of manifest error, be conclusive and binding on all parties;
Subsidiary means, in relation to any Person (the first Person) at any particular time, any other Person (the second Person):
(i) whose affairs and policies the first Person directly or indirectly controls or has the power to control, whether by ownership of share capital or contract, the power to appoint or remove members of the governing body of the second Person or otherwise; or
47 (ii) whose financial statements are, in accordance with applicable law and generally accepted accounting principles, consolidated with those of the first Person;
Italcementi Group means Italcementi S.p.A. and its Subsidiaries;
Securitisation Entity means any special purpose vehicle created for the sole purpose of carrying out, or otherwise used solely for the purpose of carrying out a Non-recourse Securitisation or any other Subsidiary of Italcementi S.p.A. which is effecting Non-recourse Securitisations;
Non-recourse Securitisation means any securitisation, asset backed financing or transaction having similar effect under which an entity (or entities in related transactions) on commercially reasonable terms:
(i) acquires receivables for principally cash consideration or uses existing receivables; and
(ii) issues any notes, bonds, commercial paper, loans or other securities (whether or not listed on a recognised stock exchange) to fund the purchase of or otherwise backed by those receivables and/or any shares or other interests falling under the scope of item (v)(B) of the Permitted Security definition and the payment obligations in respect of such notes, bonds, commercial paper, loans or other securities:
(A) are secured on those receivables, provided that if the relevant Securitisation Entity is a Principal Subsidiary of Italcementi S.p.A., the aggregate book value of the assets over which such Security Interest is created does not exceed, at any time, 10 per cent. of the consolidated net assets of Italcementi S.p.A. and its Subsidiaries taken as a whole; and
(B) are not guaranteed by any member of the Italcementi Group (other than as a result of any Security Interest which is granted by any member of the Italcementi Group in accordance with item (v)(B) of the Permitted Security definition or as to the extent of any Standard Securitisation Undertakings);
Non-recourse Securitisation Debt means any Relevant Indebtedness incurred by a Securitisation Entity pursuant to a securitisation of receivables where the recourse in respect of that Relevant Indebtedness to the Issuer or the Guarantor or a Principal Subsidiary is limited to:
(i) those receivables and/or related insurance and/or any Standard Securitisation Undertakings; and
(ii) if those receivables comprise all or substantially all of the business or assets of such Securitisation Entity, the shares or other interests of any member of the Italcementi Group in such Securitisation Entity; and
Standard Securitisation Undertakings means representations, warranties, covenants and indemnities entered into by any member of the Italcementi Group from time to time which are customary in relation to Non-recourse Securitisations, including any performance undertakings with respect to servicing obligations or undertakings with respect to breaches of representations or warranties.
48 4. INTEREST
4.1 Interest on Fixed Rate Notes
Each Fixed Rate Note bears interest from (and including) the Interest Commencement Date at the rate(s) per annum equal to the Rate(s) of Interest. Interest will be payable in arrear on the Interest Payment Date(s) in each year up to (and including) the Maturity Date.
If the Notes are in definitive form, except as provided in the applicable Final Terms, the amount of interest payable on each Interest Payment Date in respect of the Fixed Interest Period ending on (but excluding) such date will amount to the Fixed Coupon Amount. Payments of interest on any Interest Payment Date will, if so specified in the applicable Final Terms, amount to the Broken Amount so specified.
As used in the Conditions, Fixed Interest Period means the period from (and including) an Interest Payment Date (or the Interest Commencement Date) to (but excluding) the next (or first) Interest Payment Date.
Except in the case of Notes in definitive form where an applicable Fixed Coupon Amount or Broken Amount is specified in the applicable Final Terms, interest shall be calculated in respect of any period by applying the Rate of Interest to:
(A) in the case of Fixed Rate Notes which are represented by a Global Note, the aggregate outstanding nominal amount of the Fixed Rate Notes represented by such Global Note (or, if they are Partly Paid Notes, the aggregate amount paid up); or
(B) in the case of Fixed Rate Notes in definitive form, the Calculation Amount;
and, in each case, multiplying such sum by the applicable Day Count Fraction, and rounding the resultant figure to the nearest sub-unit of the relevant Specified Currency, half of any such sub-unit being rounded upwards or otherwise in accordance with applicable market convention. Where the Specified Denomination of a Fixed Rate Note in definitive form is a multiple of the Calculation Amount, the amount of interest payable in respect of such Fixed Rate Note shall be the product of the amount (determined in the manner provided above) for the Calculation Amount and the amount by which the Calculation Amount is multiplied to reach the Specified Denomination, without any further rounding.
Day Count Fraction means, in respect of the calculation of an amount of interest in accordance with this Condition 4.1:
(a) if “Actual/Actual (ICMA)” is specified in the applicable Final Terms:
(i) in the case of Notes where the number of days in the relevant period from (and including) the most recent Interest Payment Date (or, if none, the Interest Commencement Date) to (but excluding) the relevant payment date (the Accrual Period) is equal to or shorter than the Determination Period during which the Accrual Period ends, the number of days in such Accrual Period divided by the product of (I) the number of days in such Determination Period and (II) the number of Determination Dates (as specified in the applicable Final Terms) that would occur in one calendar year; or
(ii) in the case of Notes where the Accrual Period is longer than the Determination Period during which the Accrual Period ends, the sum of:
49 (A) the number of days in such Accrual Period falling in the Determination Period in which the Accrual Period begins divided by the product of (x) the number of days in such Determination Period and (y) the number of Determination Dates that would occur in one calendar year; and
(B) the number of days in such Accrual Period falling in the next Determination Period divided by the product of (x) the number of days in such Determination Period and (y) the number of Determination Dates that would occur in one calendar year; and
(b) if “30/360” is specified in the applicable Final Terms, the number of days in the period from (and including) the most recent Interest Payment Date (or, if none, the Interest Commencement Date) to (but excluding) the relevant payment date (such number of days being calculated on the basis of a year of 360 days with 12 30-day months) divided by 360.
In the Conditions:
Determination Period means each period from (and including) a Determination Date to (but excluding) the next Determination Date (including, where either the Interest Commencement Date or the final Interest Payment Date is not a Determination Date, the period commencing on the first Determination Date prior to, and ending on the first Determination Date falling after, such date); and
sub-unit means, with respect to any currency other than euro, the lowest amount of such currency that is available as legal tender in the country of such currency and, with respect to euro, one cent.
4.2 Interest on Floating Rate Notes and Index Linked Interest Notes
(a) Interest Payment Dates
Each Floating Rate Note and Index Linked Interest Note bears interest from (and including) the Interest Commencement Date and such interest will be payable in arrear on either:
(i) the Specified Interest Payment Date(s) in each year specified in the applicable Final Terms; or
(ii) if no Specified Interest Payment Date(s) is/are specified in the applicable Final Terms, each date (each such date, together with each Specified Interest Payment Date, an Interest Payment Date) which falls the number of months or other period specified as the Specified Period in the applicable Final Terms after the preceding Interest Payment Date or, in the case of the first Interest Payment Date, after the Interest Commencement Date.
Such interest will be payable in respect of each Interest Period (which expression shall, in the Conditions, mean the period from (and including) an Interest Payment Date (or the Interest Commencement Date) to (but excluding) the next (or first) Interest Payment Date).
If a Business Day Convention is specified in the applicable Final Terms and (x) if there is no numerically corresponding day in the calendar month in which an Interest Payment Date should occur or (y) if any Interest Payment Date would otherwise fall on a day which is not a Business Day, then, if the Business Day Convention specified is:
(A) in any case where Specified Periods are specified in accordance with Condition 4.2(a)(i) above, the Floating Rate Convention, such Interest Payment Date (a) in the case of (x) above, shall be the last day that is a Business Day in the relevant month and the provisions
50 of (ii) below shall apply mutatis mutandis or (b) in the case of (y) above, shall be postponed to the next day which is a Business Day unless it would thereby fall into the next calendar month, in which event (i) such Interest Payment Date shall be brought forward to the immediately preceding Business Day and (ii) each subsequent Interest Payment Date shall be the last Business Day in the month which falls the Specified Period after the preceding applicable Interest Payment Date occurred; or
(B) the Following Business Day Convention, such Interest Payment Date shall be postponed to the next day which is a Business Day; or
(C) the Modified Following Business Day Convention, such Interest Payment Date shall be postponed to the next day which is a Business Day unless it would thereby fall into the next calendar month, in which event such Interest Payment Date shall be brought forward to the immediately preceding Business Day; or
(D) the Preceding Business Day Convention, such Interest Payment Date shall be brought forward to the immediately preceding Business Day.
In the Conditions, Business Day means a day which is both:
(a) a day on which commercial banks and foreign exchange markets settle payments and are open for general business (including dealing in foreign exchange and foreign currency deposits) in Luxembourg and each Additional Business Centre specified in the applicable Final Terms; and
(b) either (i) in relation to any sum payable in a Specified Currency other than euro, a day on which commercial banks and foreign exchange markets settle payments and are open for general business (including dealing in foreign exchange and foreign currency deposits) in the principal financial centre of the country of the relevant Specified Currency (if other than Luxembourg and any Additional Business Centre and which if the Specified Currency is Australian dollars or New Zealand dollars shall be Sydney and Auckland, respectively) or (ii) in relation to any sum payable in euro, a day on which the Trans-European Automated Real-Time Gross Settlement Express Transfer (TARGET2) System (the TARGET2 System) is open.
(b) Rate of Interest
The Rate of Interest payable from time to time in respect of Floating Rate Notes and Index Linked Interest Notes will be determined in the manner specified in the applicable Final Terms.
(i) ISDA Determination for Floating Rate Notes
Where ISDA Determination is specified in the applicable Final Terms as the manner in which the Rate of Interest is to be determined, the Rate of Interest for each Interest Period will be the relevant ISDA Rate plus or minus (as indicated in the applicable Final Terms) the Margin (if any). For the purposes of this subparagraph (i), ISDA Rate for an Interest Period means a rate equal to the Floating Rate that would be determined by the Agent under an interest rate swap transaction if the Agent were acting as Calculation Agent for that swap transaction under the terms of an agreement incorporating the 2006 ISDA Definitions, as published by the International Swaps and Derivatives Association, Inc. and as amended and updated as at the Issue Date of the first Tranche of the Notes (the ISDA Definitions) and under which:
51 (A) the Floating Rate Option is as specified in the applicable Final Terms;
(B) the Designated Maturity is a period specified in the applicable Final Terms; and
(C) the relevant Reset Date is either (a) if the applicable Floating Rate Option is based on the London interbank offered rate (LIBOR) or on the Euro-zone interbank offered rate (EURIBOR), the first day of that Interest Period or (b) in any other case, as specified in the applicable Final Terms.
For the purposes of this subparagraph (i), Floating Rate, Calculation Agent, Floating Rate Option, Designated Maturity and Reset Date have the meanings given to those terms in the ISDA Definitions.
Unless otherwise stated in the applicable Final Terms the Minimum Rate of Interest shall be deemed to be zero.
(ii) Screen Rate Determination for Floating Rate Notes
Where Screen Rate Determination is specified in the applicable Final Terms as the manner in which the Rate of Interest is to be determined, the Rate of Interest for each Interest Period will, subject as provided below, be either:
(A) the offered quotation; or
(B) the arithmetic mean (rounded if necessary to the fifth decimal place, with 0.000005 being rounded upwards) of the offered quotations,
(expressed as a percentage rate per annum) for the Reference Rate which appears or appear, as the case may be, on the Relevant Screen Page as at 11.00 a.m. (London time, in the case of LIBOR, or Brussels time, in the case of EURIBOR) on the Interest Determination Date in question plus or minus (as indicated in the applicable Final Terms) the Margin (if any), all as determined by the Agent. If five or more of such offered quotations are available on the Relevant Screen Page, the highest (or, if there is more than one such highest quotation, one only of such quotations) and the lowest (or, if there is more than one such lowest quotation, one only of such quotations) shall be disregarded by the Agent for the purpose of determining the arithmetic mean (rounded as provided above) of such offered quotations.
The Agency Agreement contains provisions for determining the Rate of Interest in the event that the Relevant Screen Page is not available or if, in the case of (A) above, no such offered quotation appears or, in the case of (B) above, fewer than three such offered quotations appear, in each case as at the time specified in the preceding paragraph.
If the Reference Rate from time to time in respect of Floating Rate Notes is specified in the applicable Final Terms as being other than LIBOR or EURIBOR, the Rate of Interest in respect of such Notes will be determined as provided in the applicable Final Terms.
(c) Minimum Rate of Interest and/or Maximum Rate of Interest
If the applicable Final Terms specifies a Minimum Rate of Interest for any Interest Period, then, in the event that the Rate of Interest in respect of such Interest Period determined in accordance with the provisions of paragraph (b) above is less than such Minimum Rate of Interest, the Rate of Interest for such Interest Period shall be such Minimum Rate of Interest.
52 If the applicable Final Terms specifies a Maximum Rate of Interest for any Interest Period, then, in the event that the Rate of Interest in respect of such Interest Period determined in accordance with the provisions of paragraph (b) above is greater than such Maximum Rate of Interest, the Rate of Interest for such Interest Period shall be such Maximum Rate of Interest.
(d) Determination of Rate of Interest and calculation of Interest Amounts
The Agent, in the case of Floating Rate Notes, and the Calculation Agent, in the case of Index Linked Interest Notes, will at or as soon as practicable after each time at which the Rate of Interest is to be determined, determine the Rate of Interest for the relevant Interest Period. In the case of Index Linked Interest Notes, the Calculation Agent will notify the Agent of the Rate of Interest for the relevant Interest Period as soon as practicable after calculating the same.
The Agent will calculate the amount of interest (the Interest Amount) payable on the Floating Rate Notes or Index Linked Interest Notes for the relevant Interest Period by applying the Rate of Interest to:
(A) in the case of Floating Rate Notes or Index Linked Interest Notes which are represented by a Global Note, the aggregate outstanding nominal amount of the Notes represented by such Global Note (or, if they are Partly Paid Notes, the aggregate amount paid up); or
(B) in the case of Floating Rate Notes or Index Linked Interest Notes in definitive form, the Calculation Amount;
and, in each case, multiplying such sum by the applicable Day Count Fraction, and rounding the resultant figure to the nearest sub-unit of the relevant Specified Currency, half of any such sub-unit being rounded upwards or otherwise in accordance with applicable market convention. Where the Specified Denomination of a Floating Rate Note or an Index Linked Interest Note in definitive form is a multiple of the Calculation Amount, the Interest Amount payable in respect of such Note shall be the product of the amount (determined in the manner provided above) for the Calculation Amount and the amount by which the Calculation Amount is multiplied to reach the Specified Denomination, without any further rounding.
Day Count Fraction means, in respect of the calculation of an amount of interest in accordance with this Condition 4.2:
(i) if “Actual/Actual (ISDA)” or “Actual/Actual” is specified in the applicable Final Terms, the actual number of days in the Interest Period divided by 365 (or, if any portion of that Interest Period falls in a leap year, the sum of (I) the actual number of days in that portion of the Interest Period falling in a leap year divided by 366 and (II) the actual number of days in that portion of the Interest Period falling in a non-leap year divided by 365);
(ii) if “Actual/365 (Fixed)” is specified in the applicable Final Terms, the actual number of days in the Interest Period divided by 365;
(iii) if “Actual/365 (Sterling)” is specified in the applicable Final Terms, the actual number of days in the Interest Period divided by 365 or, in the case of an Interest Payment Date falling in a leap year, 366;
(iv) if “Actual/360” is specified in the applicable Final Terms, the actual number of days in the Interest Period divided by 360;
53 (v) if “30/360”, “360/360” or “Bond Basis” is specified in the applicable Final Terms, the number of days in the Interest Period divided by 360, calculated on a formula basis as follows:
[360 x (Y2 - Y1)] + [30 x (M2 - M1)] + (D2 - D1) Day Count Fraction = 360
where:
“Y1” is the year, expressed as a number, in which the first day of the Interest Period falls;
“Y2” is the year, expressed as a number, in which the day immediately following the last day of the Interest Period falls;
“M1” is the calendar month, expressed as a number, in which the first day of the Interest Period falls;
“M2” is the calendar month, expressed as a number, in which the day immediately following the last day of the Interest Period falls;
“D1” is the first calendar day, expressed as a number, of the Interest Period, unless such number is 31, in which case D1 will be 30; and
“D2” is the calendar day, expressed as a number, immediately following the last day included in the Interest Period, unless such number would be 31 and D1 is greater than 29, in which case D2 will be 30;
(vi) if “30E/360” or “Eurobond Basis” is specified in the applicable Final Terms, the number of days in the Interest Period divided by 360, calculated on a formula basis as follows:
[360 x (Y2 - Y1)] + [30 x (M2 - M1)] + (D2 - D1) Day Count Fraction = 360
where:
“Y1” is the year, expressed as a number, in which the first day of the Interest Period falls;
“Y2” is the year, expressed as a number, in which the day immediately following the last day of the Interest Period falls;
“M1” is the calendar month, expressed as a number, in which the first day of the Interest Period falls;
“M2” is the calendar month, expressed as a number, in which the day immediately following the last day of the Interest Period falls;
“D1” is the first calendar day, expressed as a number, of the Interest Period, unless such number would be 31, in which case D1 will be 30; and
“D2” is the calendar day, expressed as a number, immediately following the last day included in the Interest Period, unless such number would be 31, in which case D2 will be 30;
54 (vii) if “30E/360 (ISDA)” is specified in the applicable Final Terms, the number of days in the Interest Period divided by 360, calculated on a formula basis as follows:
[360 x (Y2 - Y1)] + [30 x (M2 - M1)] + (D2 - D1) Day Count Fraction = 360
where:
“Y1” is the year, expressed as a number, in which the first day of the Interest Period falls;
“Y2” is the year, expressed as a number, in which the day immediately following the last day of the Interest Period falls;
“M1” is the calendar month, expressed as a number, in which the first day of the Interest Period falls;
“M2” is the calendar month, expressed as a number, in which the day immediately following the last day of the Interest Period falls;
“D1” is the first calendar day, expressed as a number, of the Interest Period, unless (i) that day is the last day of February or (ii) such number would be 31, in which case D1 will be 30; and
“D2” is the calendar day, expressed as a number, immediately following the last day included in the Interest Period, unless (i) that day is the last day of February but not the Maturity Date or (ii) such number would be 31, in which case D2 will be 30.
(e) Notification of Rate of Interest and Interest Amounts
The Agent will cause the Rate of Interest and each Interest Amount for each Interest Period and the relevant Interest Payment Date to be notified to the Issuer and any stock exchange on which the relevant Floating Rate Notes or Index Linked Interest Notes are for the time being listed (by no later than the first day of each Interest Period) and notice thereof to be published in accordance with Condition 13 as soon as possible after their determination but in no event later than the fourth London Business Day thereafter. Each Interest Amount and Interest Payment Date so notified may subsequently be amended (or appropriate alternative arrangements made by way of adjustment) without prior notice in the event of an extension or shortening of the Interest Period. Any such amendment will be promptly notified to each stock exchange on which the relevant Floating Rate Notes or Index Linked Interest Notes are for the time being listed and to the Noteholders in accordance with Condition 13. For the purposes of this paragraph, the expression London Business Day means a day (other than a Saturday or a Sunday) on which banks and foreign exchange markets are open for general business in London.
(f) Certificates to be final
All certificates, communications, opinions, determinations, calculations, quotations and decisions given, expressed, made or obtained for the purposes of the provisions of this Condition 4.2, whether by the Agent or, if applicable, the Calculation Agent, shall (in the absence of wilful default, bad faith, manifest error or proven error) be binding on the Issuer, the Guarantor (in the case of Notes issued by Italcementi Finance S.A.), the Agent, the Calculation Agent (if applicable), the other Paying Agents and all Noteholders, Receiptholders and Couponholders and (in the absence of wilful default or bad faith) no liability to the Issuer, the Guarantor (in the case of Notes issued by
55 Italcementi Finance S.A.), the Noteholders, the Receiptholders or the Couponholders shall attach to the Agent or, if applicable, the Calculation Agent in connection with the exercise or non-exercise by it of its powers, duties and discretions pursuant to such provisions.
4.3 Interest on Dual Currency Interest Notes
The rate or amount of interest payable in respect of Dual Currency Interest Notes shall be determined in the manner specified in the applicable Final Terms.
4.4 Interest on Partly Paid Notes
In the case of Partly Paid Notes (other than Partly Paid Notes which are Zero Coupon Notes), interest will accrue as aforesaid on the paid-up nominal amount of such Notes and otherwise as specified in the applicable Final Terms.
4.5 Accrual of interest
Each Note (or in the case of the redemption of part only of a Note, that part only of such Note) will cease to bear interest (if any) from the date for its redemption unless, upon due presentation thereof, payment of principal is improperly withheld or refused. In such event, interest will continue to accrue until whichever is the earlier of:
(a) the date on which all amounts due in respect of such Note have been paid; and
(b) five days after the date on which the full amount of the moneys payable in respect of such Note has been received by the Agent and notice to that effect has been given to the Noteholders in accordance with Condition 13.
5. PAYMENTS
5.1 Method of payment
Subject as provided below:
(a) payments in a Specified Currency other than euro will be made by credit or transfer to an account in the relevant Specified Currency maintained by the payee; and
(b) payments in euro will be made by credit or transfer to a euro account (or any other account to which euro may be credited or transferred) specified by the payee.
Payments will be subject in all cases to any fiscal or other laws and regulations applicable thereto in the place of payment, but without prejudice to the provisions of Condition 7.
5.2 Presentation of definitive Notes, Receipts and Coupons
Payments of principal in respect of definitive Notes will (subject as provided below) be made in the manner provided in Condition 5.1 above only against presentation and surrender (or, in the case of part payment of any sum due, endorsement) of definitive Notes, and payments of interest in respect of definitive Notes will (subject as provided below) be made as aforesaid only against presentation and surrender (or, in the case of part payment of any sum due, endorsement) of Coupons, in each case at the specified office of any Paying Agent outside the United States (which expression, as used herein, means the United States of America (including the States and the District of Columbia, its territories, its possessions and other areas subject to its jurisdiction)).
56 Payments of instalments of principal (if any) in respect of definitive Notes, other than the final instalment, will (subject as provided below) be made in the manner provided in Condition 5.1 above only against presentation and surrender (or, in the case of part payment of any sum due, endorsement) of the relevant Receipt in accordance with the preceding paragraph. Payment of the final instalment will be made in the manner provided in Condition 5.1 above only against presentation and surrender (or, in the case of part payment of any sum due, endorsement) of the relevant Note in accordance with the preceding paragraph. Each Receipt must be presented for payment of the relevant instalment together with the definitive Note to which it appertains. Receipts presented without the definitive Note to which they appertain do not constitute valid obligations of the Issuer. Upon the date on which any definitive Note becomes due and repayable, unmatured Receipts (if any) relating thereto (whether or not attached) shall become void and no payment shall be made in respect thereof.
Fixed Rate Notes in definitive form (other than Dual Currency Notes, Index Linked Notes or Long Maturity Notes (as defined below)) should be presented for payment together with all unmatured Coupons appertaining thereto (which expression shall for this purpose include Coupons falling to be issued on exchange of matured Talons), failing which the amount of any missing unmatured Coupon (or, in the case of payment not being made in full, the same proportion of the amount of such missing unmatured Coupon as the sum so paid bears to the sum due) will be deducted from the sum due for payment. Each amount of principal so deducted will be paid in the manner mentioned above against surrender of the relative missing Coupon at any time before the expiry of 10 years after the Relevant Date (as defined in Condition 7) in respect of such principal (whether or not such Coupon would otherwise have become void under Condition 8) or, if later, five years from the date on which such Coupon would otherwise have become due, but in no event thereafter.
Upon any Fixed Rate Note in definitive form becoming due and repayable prior to its Maturity Date, all unmatured Talons (if any) appertaining thereto will become void and no further Coupons will be issued in respect thereof.
Upon the date on which any Floating Rate Note, Dual Currency Note, Index Linked Note or Long Maturity Note in definitive form becomes due and repayable, unmatured Coupons and Talons (if any) relating thereto (whether or not attached) shall become void and no payment or, as the case may be, exchange for further Coupons shall be made in respect thereof. A Long Maturity Note is a Fixed Rate Note (other than a Fixed Rate Note which on issue had a Talon attached) whose nominal amount on issue is less than the aggregate interest payable thereon provided that such Note shall cease to be a Long Maturity Note on the Interest Payment Date on which the aggregate amount of interest remaining to be paid after that date is less than the nominal amount of such Note.
If the due date for redemption of any definitive Note is not an Interest Payment Date, interest (if any) accrued in respect of such Note from (and including) the preceding Interest Payment Date or, as the case may be, the Interest Commencement Date shall be payable only against surrender of the relevant definitive Note.
5.3 Payments in respect of Global Notes
Payments of principal and interest (if any) in respect of Notes represented by any Global Note will (subject as provided below) be made in the manner specified above in relation to definitive Notes and otherwise in the manner specified in the relevant Global Note against presentation or surrender, as the case may be, of such Global Note at the specified office of any Paying Agent outside the United States. A record of each payment made against presentation or surrender of any Global Note, distinguishing between any payment of principal and any payment of interest, will be made on such Global Note by the Paying Agent to which it was presented and such record shall be prima facie evidence that the payment in question has been made. 57 5.4 General provisions applicable to payments
The holder of a Global Note shall be the only person entitled to receive payments in respect of Notes represented by such Global Note and the Issuer or the Guarantor (in the case of Notes issued by Italcementi Finance S.A.) will be discharged by payment to, or to the order of, the holder of such Global Note in respect of each amount so paid. Each of the persons shown in the records of Euroclear or Clearstream, Luxembourg as the beneficial holder of a particular nominal amount of Notes represented by such Global Note must look solely to Euroclear or Clearstream, Luxembourg, as the case may be, for his share of each payment so made by the Issuer or the Guarantor (in the case of Notes issued by Italcementi Finance S.A.) to, or to the order of, the holder of such Global Note.
Notwithstanding the foregoing provisions of this Condition, if any amount of principal and/or interest in respect of Notes is payable in U.S. dollars, such U.S. dollar payments of principal and/or interest in respect of such Notes will be made at the specified office of a Paying Agent in the United States if:
(a) the Issuer has appointed Paying Agents with specified offices outside the United States with the reasonable expectation that such Paying Agents would be able to make payment in U.S. dollars at such specified offices outside the United States of the full amount of principal and interest on the Notes in the manner provided above when due;
(b) payment of the full amount of such principal and interest at all such specified offices outside the United States is illegal or effectively precluded by exchange controls or other similar restrictions on the full payment or receipt of principal and interest in U.S. dollars; and
(c) such payment is then permitted under United States law without involving, in the opinion of the Issuer and the Guarantor (in the case of Notes issued by Italcementi Finance S.A.), adverse tax consequences to the Issuer or the Guarantor (in the case of Notes issued by Italcementi Finance S.A.), as the case may be.
5.5 Payment Day
If the date for payment of any amount in respect of any Note, Receipt or Coupon is not a Payment Day, the holder thereof shall not be entitled to payment until the next following Payment Day in the relevant place and shall not be entitled to further interest or other payment in respect of such delay. For these purposes, Payment Day means any day which (subject to Condition 8) is:
(a) a day on which commercial banks and foreign exchange markets settle payments and are open for general business (including dealing in foreign exchange and foreign currency deposits) in:
(i) the relevant place of presentation;
(ii) Luxembourg;
(iii) each Additional Financial Centre specified in the applicable Final Terms; and
(b) either (A) in relation to any sum payable in a Specified Currency other than euro, a day on which commercial banks and foreign exchange markets settle payments and are open for general business (including dealing in foreign exchange and foreign currency deposits) in the principal financial centre of the country of the relevant Specified Currency (if other than the place of presentation, London and any Additional Financial Centre and which if the Specified Currency is Australian dollars or New Zealand dollars shall be Sydney and
58 Auckland, respectively) or (B) in relation to any sum payable in euro, a day on which the TARGET2 System is open.
5.6 Interpretation of principal and interest
Any reference in the Conditions to principal in respect of the Notes shall be deemed to include, as applicable:
(a) any additional amounts which may be payable with respect to principal under Condition 7;
(b) the Final Redemption Amount of the Notes;
(c) the Early Redemption Amount of the Notes;
(d) the Optional Redemption Amount(s) (if any) of the Notes;
(e) in relation to Notes redeemable in instalments, the Instalment Amounts;
(f) in relation to Zero Coupon Notes, the Amortised Face Amount (as defined in Condition 6.5); and
(g) any premium and any other amounts (other than interest) which may be payable by the Issuer under or in respect of the Notes.
Any reference in the Conditions to interest in respect of the Notes shall be deemed to include, as applicable, any additional amounts which may be payable with respect to interest under Condition 7.
6. REDEMPTION AND PURCHASE
6.1 Redemption at maturity
Unless previously redeemed or purchased and cancelled as specified below, each Note (including each Index Linked Redemption Note and Dual Currency Redemption Note) will be redeemed by the Issuer at its Final Redemption Amount specified in, or determined in the manner specified in, the applicable Final Terms in the relevant Specified Currency on the Maturity Date.
6.2 Redemption for tax reasons
The Notes may be redeemed at the option of the Issuer in whole, but not in part, at any time (if this Note is neither a Floating Rate Note, an Index Linked Interest Note nor a Dual Currency Interest Note) or on any Interest Payment Date (if this Note is either a Floating Rate Note, an Index Linked Interest Note or a Dual Currency Interest Note), on giving not less than 30 nor more than 60 days’ notice to the Agent and, in accordance with Condition 13, the Noteholders (which notice shall be irrevocable), if:
(a) on the occasion of the next payment due under the Notes, the Issuer has or will become obliged to pay additional amounts as provided or referred to in Condition 7 or (in the case of Notes issued by Italcementi Finance S.A.) the Guarantor would be unable for reasons outside its control to procure payment by the Issuer and in making payment itself would be required to pay such additional amounts, in each case as a result of any change in, or amendment to, the laws or regulations of a Tax Jurisdiction (as defined in Condition 7) or any change in the application or official interpretation of such laws or regulations, which
59 change or amendment becomes effective on or after the date on which agreement is reached to issue the first Tranche of the Notes; and
(b) such obligation cannot be avoided by the Issuer or, as the case may be, the Guarantor (in the case of Notes issued by Italcementi Finance S.A.) taking reasonable measures available to it,
provided that no such notice of redemption shall be given earlier than 90 days prior to the earliest date on which the Issuer or, as the case may be, the Guarantor (in the case of Notes issued by Italcementi Finance S.A.) would be obliged to pay such additional amounts were a payment in respect of the Notes then due.
Prior to the publication of any notice of redemption pursuant to this Condition, the Issuer shall deliver to the Agent a certificate signed by two Directors of the Issuer or, as the case may be, two Directors of the Guarantor (in the case of Notes issued by Italcementi Finance S.A.) 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 an opinion of independent legal advisers of recognised standing to the effect that the Issuer or, as the case may be, the Guarantor (in the case of Notes issued by Italcementi Finance S.A.) has or will become obliged to pay such additional amounts as a result of such change or amendment.
Notes redeemed pursuant to this Condition 6.2 will be redeemed at their Early Redemption Amount referred to in Condition 6.5 below together (if appropriate) with interest accrued to (but excluding) the date of redemption.
6.3 Redemption at the option of the Issuer (Issuer Call)
If Issuer Call is specified in the applicable Final Terms, the Issuer may, having given:
(a) not less than 15 nor more than 30 days’ notice to the Noteholders in accordance with Condition 13; and
(b) not less than 15 days before the giving of the notice referred to in (a) above, notice to the Agent;
(which notices shall be irrevocable and shall specify the date fixed for redemption), redeem all or some only of the Notes then outstanding on any Optional Redemption Date and at the Optional Redemption Amount(s) specified in, or determined in the manner specified in, the applicable Final Terms together, if appropriate, with interest accrued to (but excluding) the relevant Optional Redemption Date. Any such redemption must be of a nominal amount not less than the Minimum Redemption Amount and not more than the Maximum Redemption Amount, in each case as may be specified in the applicable Final Terms. In the case of a partial redemption of Notes, the Notes to be redeemed (Redeemed Notes) will be selected individually by lot, in the case of Redeemed Notes represented by definitive Notes, and in accordance with the rules of Euroclear and/or Clearstream, Luxembourg, (to be reflected in the records of Euroclear and Clearstream, Luxembourg as either a pool factor or a reduction in nominal amount, at their discretion) in the case of Redeemed Notes represented by a Global Note, not more than 30 days prior to the date fixed for redemption (such date of selection being hereinafter called the Selection Date). In the case of Redeemed Notes represented by definitive Notes, a list of the serial numbers of such Redeemed Notes will be published in accordance with Condition 13 not less than 15 days prior to the date fixed for redemption. No exchange of the relevant Global Note will be permitted during the period from (and including) the Selection Date to (and including) the date fixed for redemption pursuant to this Condition 6.3 and notice to that effect shall be given by the Issuer to the Noteholders in accordance with Condition 13 at least five days prior to the Selection Date.
60 6.4 Redemption at the Option of the Noteholders (Change of Control Put Option)
If Investor Put is specified in the applicable Final Terms, upon the occurrence of a Change of Control Put Event (as defined below), the holder of any Note may give to the Issuer in accordance with Condition 13 not less than 15 nor more than 30 days’ notice (or such other notice period as may be specified in the applicable Final Terms), and the Issuer will, upon the expiry of such notice, redeem such Note on the date specified for such redemption in the notice, being a date not earlier than 7 days nor later than 14 days after the expiry of the aforementioned notice period at their principal amount together with interest accrued to (but excluding) the date of redemption.
To exercise the right to require redemption of this Note the holder of this Note must, if this Note is in definitive form and held outside Euroclear and Clearstream, Luxembourg, deliver, at the specified office of any Paying Agent at any time during normal business hours of such Paying Agent falling within the notice period, a duly completed and signed notice of exercise in the form (for the time being current) obtainable from any specified office of any Paying Agent (a Put Notice) and in which the holder must specify a bank account (or, if payment is required to be made by cheque, an address) to which payment is to be made under this Condition accompanied by this Note or evidence satisfactory to the Paying Agent concerned that this Note will, following delivery of the Put Notice, be held to its order or under its control. If this Note is represented by a Global Note or is in definitive form and held through Euroclear or Clearstream, Luxembourg, to exercise the right to require redemption of this Note the holder of this Note must, within the notice period, give notice to the Agent of such exercise in accordance with the standard procedures of Euroclear and Clearstream, Luxembourg (which may include notice being given on his instruction by Euroclear or Clearstream, Luxembourg or any common depositary or common safekeeper, as the case may be, for them to the Agent by electronic means) in a form acceptable to Euroclear and Clearstream, Luxembourg from time to time and, if this Note is represented by a Global Note, at the same time present or procure the presentation of the relevant Global Note to the Agent for notation accordingly.
Any Put Notice or other notice given in accordance with the standard procedures of Euroclear and Clearstream, Luxembourg given by a holder of any Note pursuant to this Condition 6.4 shall be irrevocable except where, prior to the due date of redemption, an Event of Default has occurred and is continuing, in which event such holder, at its option, may elect by notice to the Issuer to withdraw the notice given pursuant to this Condition 6.4 and instead to declare such Note forthwith due and payable pursuant to Condition 9.
A Change of Control Put Event shall be deemed to occur if:
(a) a Change of Control occurs; and
(b) at the time of the occurrence of the Change of Control, the Notes carry from any Rating Agency either:
(i) an investment grade credit rating (BBB-/Baa3/BBB-, or equivalent, or better), and such rating from any Rating Agency is within 120 days of the occurrence of the Change of Control either downgraded to a non-investment grade credit rating (BB+/Ba1/BB+, or equivalent, or worse) or withdrawn and is not within such 120- day period subsequently (in the case of a downgrade) upgraded to an investment grade credit rating by such Rating Agency or (in the case of a withdrawal) replaced by an investment grade credit rating from any other Rating Agency; or
(ii) a non-investment grade credit rating (BB+/Ba1/BB+, or equivalent, or worse), and such rating from any Rating Agency is within 120 days of the occurrence of the Change of Control downgraded by one or more notches (for illustration, Ba1 to Ba2
61 being one notch) and is not within such 120-day period subsequently upgraded to its earlier credit rating or better by such Rating Agency; or
(iii) no credit rating, and no Rating Agency assigns within 90 days of the occurrence of the Change of Control an investment grade credit rating to the Notes, and
(c) in making the relevant decision(s) referred to above, the relevant Rating Agency announces publicly or confirms in writing to the Issuer and the Agent that such decision(s) resulted, in whole or in part, from the occurrence of the Change of Control.
A Change of Control shall be deemed to occur if control of Italcementi S.p.A. is acquired by any one Person or group of Persons Acting in Concert, other than one or more of the Related Parties;
Rating Agency means any of Standard & Poor’s Ratings Services, a division of The McGraw-Hill Companies, Inc., or Moody’s Investors Service Inc. or Fitch Ratings Ltd, or any of their successors;
Related Parties shall mean Italmobiliare S.p.A., Efiparind B.V. – Amsterdam and any Person directly or indirectly controlled by Italmobiliare S.p.A. or Efiparind B.V. – Amsterdam.
Persons Acting in Concert shall have the meaning set forth by Article 101-bis, paragraphs 4 and 4- bis, of Italian Legislative Decree No. 58/1998; and
For the purposes of this Condition, the term control shall have the meaning set forth by Article 93 of the Italian Legislative Decree no. 58/1998.
6.5 Early Redemption Amounts
For the purpose of Condition 6.2 above and Condition 9, each Note will be redeemed at its Early Redemption Amount calculated as follows:
(a) in the case of a Note with a Final Redemption Amount equal to the Issue Price, at the Final Redemption Amount thereof;
(b) in the case of a Note (other than a Zero Coupon Note but including an Instalment Note and a Partly Paid Note) with a Final Redemption Amount which is or may be less or greater than the Issue Price or which is payable in a Specified Currency other than that in which the Note is denominated, at the amount specified in, or determined in the manner specified in, the applicable Final Terms or, if no such amount or manner is so specified in the applicable Final Terms, at its nominal amount; or
(c) in the case of a Zero Coupon Note, at an amount (the Amortised Face Amount) calculated in accordance with the following formula:
Early Redemption Amount = RP × (1+ AY)y
where:
RP means the Reference Price;
AY means the Accrual Yield expressed as a decimal; and
y is a fraction the numerator of which is equal to the number of days (calculated on the basis of a 360-day year consisting of 12 months of 30 days each) from (and
62 including) the Issue Date of the first Tranche of the Notes to (but excluding) the date fixed for redemption or (as the case may be) the date upon which such Note becomes due and repayable and the denominator of which is 360,
or on such other calculation basis as may be specified in the applicable Final Terms.
6.6 Instalments
Instalment Notes will be redeemed in the Instalment Amounts and on the Instalment Dates. In the case of early redemption, the Early Redemption Amount will be determined pursuant to Condition 6.5.
6.7 Partly Paid Notes
Partly Paid Notes will be redeemed, whether at maturity, early redemption or otherwise, in accordance with the provisions of this Condition and the applicable Final Terms.
6.8 Purchases
The Issuer, the Guarantor (in the case of Notes issued by Italcementi Finance S.A.) or any Subsidiary of the Issuer or (in the case of Notes issued by Italcementi Finance S.A.) any Subsidiary of the Guarantor may at any time purchase Notes (provided that, in the case of definitive Notes, all unmatured Receipts, Coupons and Talons appertaining thereto are purchased therewith) at any price in the open market or otherwise. Such Notes may be held, reissued, resold or, at the option of the Issuer or (in the case of Notes issued by Italcementi Finance S.A.) the Guarantor, surrendered to any Paying Agent for cancellation.
6.9 Cancellation
All Notes which are redeemed will forthwith be cancelled (together with all unmatured Receipts, Coupons and Talons attached thereto or surrendered therewith at the time of redemption). All Notes so cancelled and any Notes purchased and cancelled pursuant to Condition 6.8 above (together with all unmatured Receipts, Coupons and Talons cancelled therewith) shall be forwarded to the Agent and cannot be reissued or resold.
6.10 Late payment on Zero Coupon Notes
If the amount payable in respect of any Zero Coupon Note upon redemption of such Zero Coupon Note pursuant to Condition 6.1, 6.2, 6.3 or 6.4 above or upon its becoming due and repayable as provided in Condition 9 is improperly withheld or refused, the amount due and repayable in respect of such Zero Coupon Note shall be the amount calculated as provided in Condition 6.5(c) above as though the references therein to the date fixed for the redemption or the date upon which such Zero Coupon Note becomes due and payable were replaced by references to the date which is the earlier of:
(a) the date on which all amounts due in respect of such Zero Coupon Note have been paid; and
(b) five days after the date on which the full amount of the moneys payable in respect of such Zero Coupon Notes has been received by the Agent and notice to that effect has been given to the Noteholders in accordance with Condition 13.
63 7. TAXATION
All payments of principal and interest in respect of the Notes, Receipts and Coupons by the Issuer or (in the case of Notes issued by Italcementi Finance S.A.) the Guarantor will be made without withholding or deduction for or on account of any present or future taxes or duties of whatever nature imposed or levied by or on behalf of any Tax Jurisdiction unless such withholding or deduction is required by law. In such event, the Issuer or, as the case may be, the Guarantor (in the case of Notes issued by Italcementi Finance S.A.) will pay such additional amounts as shall be necessary in order that the net amounts received by the holders of the Notes, Receipts or Coupons after such withholding or deduction shall equal the respective amounts of principal and interest which would otherwise have been receivable in respect of the Notes, Receipts or Coupons, as the case may be, in the absence of such withholding or deduction; except as follows:
(a) Where the Issuer is Italcementi S.p.A., or in the event of payment by Italcementi S.p.A. as Guarantor, no such additional amounts shall be payable with respect to any Note, Receipt or Coupon:
(i) presented for payment in Italy; or
(ii) presented for payment by or on behalf of a holder who is liable for such taxes or duties in respect of such Note, Receipt or Coupon by reason of his having some connection with the Tax Jurisdiction other than the mere holding of such Note, Receipt or Coupon; or
(iii) presented for payment more than 30 days after the Relevant Date (as defined below) except to the extent that the holder thereof would have been entitled to an additional amount on presenting the same for payment on such thirtieth day assuming that day to have been a Payment Day (as defined in Condition 5.5); or
(iv) where such withholding or deduction 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, such Directive; or
(v) presented for payment by or on behalf of a holder who would have been able to avoid such withholding or deduction by presenting the relevant Note, Receipt or Coupon to another Paying Agent in a Member State of the European Union; or
(vi) presented for payments by, or on behalf of, a holder who is entitled to avoid such withholding or deduction in respect of such Note, Receipt or Coupon by making a declaration or any other statement to the relevant tax authority, including, bur not limited to, a declaration of residence or non-residence or other similar claim for exemption.
(b) Where the Issuer is Italcementi Finance S.A., no such additional amounts shall be payable with respect to any Note, Receipt or Coupon:
(i) presented for payment by or on behalf of a holder who is liable for such taxes or duties in respect of such Note, Receipt or Coupon by reason of his having some connection with a Tax Jurisdiction other than the mere holding of such Note, Receipt or Coupon; or
64 (ii) presented for payment more than 30 days after the Relevant Date (as defined below) except to the extent that the holder thereof would have been entitled to an additional amount on presenting the same for payment on such thirtieth day assuming that day to have been a Payment Day (as defined in Condition 5.5); or
(iii) where such withholding or deduction 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, such Directive; or
(iv) presented for payment by or on behalf of a holder who would have been able to avoid such withholding or deduction by presenting the relevant Note, Receipt or Coupon to another Paying Agent in a Member State of the European Union; or
(v) presented for payments by, or on behalf of, a holder who is entitled to avoid such withholding or deduction in respect of such Note, Receipt or Coupon by making a declaration or any other statement to the relevant tax authority, including, bur not limited to, a declaration of residence or non-residence or other similar claim for exemption.
As used herein:
(A) Tax Jurisdiction means France or any political subdivision or any authority thereof or therein having power to tax (in the case of payments by Italcementi Finance S.A.) or Italy or any political subdivision or any authority thereof or therein having power to tax (in the case of payments by Italcementi S.p.A.); and
(B) the Relevant Date means the date on which such payment first becomes due, except that, if the full amount of the moneys payable has not been duly received by the Agent on or prior to such due date, it means the date on which, the full amount of such moneys having been so received, notice to that effect is duly given to the Noteholders in accordance with Condition 13.
8. PRESCRIPTION
The Notes, Receipts and Coupons will become void unless presented for payment within a period of 10 years (in the case of principal) and five years (in the case of interest) after the Relevant Date (as defined in Condition 7) therefor.
There shall not be included in any Coupon sheet issued on exchange of a Talon any Coupon the claim for payment in respect of which would be void pursuant to this Condition or Condition 5.2 or any Talon which would be void pursuant to Condition 5.2.
9. EVENTS OF DEFAULT
If any one or more of the following events (each an Event of Default) shall occur and be continuing:
(a) if default is made in the payment of any principal or interest due in respect of the Notes or any of them and the default continues for a period of 14 days; or
(b) if the Issuer or (in the case of Notes issued by Italcementi Finance S.A.) the Guarantor fails to perform or observe any of its other obligations under the Conditions or (in the case of Notes issued by Italcementi Finance S.A.) the Guarantee and (except in any case where the
65 failure is incapable of remedy when no such continuation or notice as is hereinafter mentioned will be required) the failure continues for the period of 30 days next following the service by a Noteholder on the Issuer or (in the case of Notes issued by Italcementi Finance S.A.) the Guarantor (as the case may be) of notice requiring the same to be remedied; or
(c) in relation to: (A) any other present or future indebtedness of the Issuer or (in the case of Notes issued by Italcementi Finance S.A.) the Guarantor or any Principal Subsidiary for borrowed money in excess of, individually or in the aggregate, €30,000,000 (or its equivalent in any other currency) or (B) any guarantee or indemnity by the Issuer or (in the case of Notes issued by Italcementi Finance S.A.) the Guarantor or any Principal Subsidiary of any such indebtedness, whether individually or in the aggregate:
(i) in the case of (A), such indebtedness shall become due and repayable prematurely by reason of an event of default (however described) or shall not be paid in full on the due date thereof (as extended by any originally applicable grace period); or
(ii) in the case of (B), default shall be made in making any payment due under such guarantee or indemnity for any amount in excess of, individually or in the aggregate, €30,000,000 (or its equivalent in any other currency),
provided that no such event shall constitute an Event of Default so long as and to the extent that the Issuer, Guarantor or any Principal Subsidiary, as the case may be, is contesting in good faith and by all appropriate means, including where applicable, before a court or arbitration panel, that such payment is not due and/or such default has not occurred, as appropriate; or
(d) if any order is made by any competent court or resolution passed for the winding up or dissolution of the Issuer or (in the case of Notes issued by Italcementi Finance S.A.) the Guarantor or any Principal Subsidiary, save for the purposes of (A) a Permitted Reorganisation or (B) a reorganisation on terms previously approved by an Extraordinary Resolution; or
(e) if the Issuer, (in the case of Notes issued by Italcementi Finance S.A.) the Guarantor or any Principal Subsidiary ceases or threatens to cease to carry on the whole or a substantial part of its business, save for the purposes of (A) a Permitted Reorganisation or (B) a reorganisation on terms previously approved by an Extraordinary Resolution (for the purposes of this paragraph (e), a substantial part of its business means a part of the relevant entity’s business which accounts for 33 per cent. or more of the Group’s assets and/or revenues); or
(f) if the Issuer, the Guarantor (in the case of Notes issued by Italcementi Finance S.A.) or any Principal Subsidiary stops or threatens to stop payment generally of, or is unable to, or admits inability to, generally pay, its debts (or any class of its debts) as they fall due, or is deemed unable to pay its debts pursuant to or for the purposes of any applicable law, or is adjudicated or found bankrupt or insolvent; or
(g) if, under any applicable civil liquidation, insolvency, composition, reorganisation or other similar civil laws, (A) proceedings are initiated against the Issuer, (in the case of Notes issued by Italcementi Finance S.A.) the Guarantor or any Principal Subsidiary; or (B) an application is made (or documents filed with a court) for the appointment of an administrative or other receiver, manager, administrator or other similar official, or an administrative or other receiver, manager, administrator or other similar official is appointed, in relation to the Issuer, (in the case of Notes issued by Italcementi Finance S.A.) the Guarantor or any Principal Subsidiary or, as the case may be, in relation to the whole or
66 substantially the whole of the undertaking or assets of any of them, provided that, in relation to an application for the appointment of an administrative or other receiver, manager, administrator or other similar official only, an Event of Default shall not be deemed to have occurred under this item (B) so long as and to the extent that (i) any such application has not been made by the Issuer, the Guarantor or any Principal Subsidiary and (ii) the Issuer, Guarantor or Principal Subsidiary, as the case may be, is contesting in good faith and by all appropriate means that any such application is frivolous or vexatious; or (C) an encumbrancer takes possession of the whole or substantially the whole of the undertaking or assets of any of the Issuer, (in the case of Notes issued by Italcementi Finance S.A.) the Guarantor or any Principal Subsidiary; or (D) a distress, execution, attachment, sequestration or other process is levied, enforced upon, sued out or put in force against the whole or substantially the whole of the undertaking or assets of any of the Issuer, (in the case of Notes issued by Italcementi Finance S.A.) the Guarantor or any Principal Subsidiary; and (E) in any case (other than the appointment of an administrator) is not discharged within 60 days, save for the purposes of a reorganisation on terms previously approved by an Extraordinary Resolution; or
(h) if the Issuer, (in the case of Notes issued by Italcementi Finance S.A.) the Guarantor or any Principal Subsidiary initiates or consents to judicial proceedings relating to itself under any applicable liquidation, insolvency, composition, reorganisation or other similar laws (including the obtaining of a moratorium) or makes a conveyance or assignment for the benefit of, or enters into any composition or other arrangement with, its creditors generally (or any class of its creditors) or any meeting is convened to consider a proposal for an arrangement or composition with its creditors generally (or any class of its creditors), save for the purposes of a reorganisation on terms previously approved by an Extraordinary Resolution; or
(i) in the case of Notes issued by Italcementi Finance S.A., if the Issuer ceases to be a Subsidiary of the Guarantor; or
(j) in the case of Notes issued by Italcementi Finance S.A., if the Guarantee ceases to be, or is claimed by the Issuer or the Guarantor not to be, in full force and effect, then any holder of a Note may, by written notice to the Issuer at the specified office of the Agent, effective upon the date of receipt thereof by the Agent, declare any Note held by it to be forthwith due and payable whereupon the same shall become forthwith due and payable at its Early Redemption Amount, together with accrued interest (if any) to the date of repayment, without presentment, demand, protest or other notice of any kind.
For the purposes of this Condition 9:
Principal Subsidiary has the meaning set forth in Condition 3;
Permitted Reorganisation means:
(a) in the case of the Issuer or (in the case of Notes issued by Italcementi Finance S.A.) the Guarantor, (A) an amalgamation, reorganisation, merger, demerger, consolidation or restructuring whilst solvent whereby the assets and undertaking of the Issuer or, if relevant, the Guarantor (or, in the case of a demerger, all or substantially all of such assets and undertaking) are vested in a Person (including but not limited to a Subsidiary of the Issuer or (in the case of Notes issued by Italcementi Finance S.A.) the Guarantor) in good standing and such Person (1) assumes or maintains (as the case may be) liability as principal debtor in respect of the Notes or the Guarantee, as the case may be; and (2) continues to carry on
67 substantially the same business of the Issuer or the Guarantor, as the case may be; or (B) a sale, demerger or other disposal of assets to the Issuer, the Guarantor or another Subsidiary of Italcementi S.p.A. (including a Principal Subsidiary), provided that the transaction is carried out on commercial arm’s length terms, as ascertained by an independent expert appointed by Italcementi S.p.A. or as appropriate, Italcementi Finance S.A.; and
(b) in the case of a Principal Subsidiary, (A) an amalgamation, reorganisation, merger, demerger, consolidation or restructuring whilst solvent whereby the assets and undertaking of such Principal Subsidiary are transferred to (or otherwise vested in) the Issuer, (in the case of Notes issued by Italcementi Finance S.A.) the Guarantor or another Subsidiary of Italcementi S.p.A. (including a Principal Subsidiary) or any other Person, provided that such other Person continues to carry on substantially the same business of the Principal Subsidiary and the transaction is carried out on commercial arm’s length terms, as ascertained by an independent expert appointed by Italcementi S.p.A.; or (B) a sale, demerger or other disposal of assets to the Issuer, (in the case of Notes issued by Italcementi Finance S.A.) the Guarantor or another Subsidiary of Italcementi S.p.A. (including a Principal Subsidiary) or any other Person provided that the transaction is carried out on commercial arm’s length terms, as ascertained by an independent expert appointed by the Principal Subsidiary.
10. REPLACEMENT OF NOTES, RECEIPTS, COUPONS AND TALONS
Should any Note, Receipt, Coupon or Talon be lost, stolen, mutilated, defaced or destroyed, it may be replaced at the specified office of the Agent upon payment by the claimant of such costs and expenses as may be incurred in connection therewith and on such terms as to evidence and indemnity as the Issuer may reasonably require. Mutilated or defaced Notes, Receipts, Coupons or Talons must be surrendered before replacements will be issued.
11. PAYING AGENTS
The names of the initial Paying Agents and their initial specified offices are set out below.
The Issuer and the Guarantor (in the case of Notes issued by Italcementi Finance S.A.) are entitled to vary or terminate the appointment of any Paying Agent and/or appoint additional or other Paying Agents and/or approve any change in the specified office through which any Paying Agent acts, provided that:
(a) there will at all times be an Agent;
(b) so long as the Notes are listed on any stock exchange or admitted to listing by any other relevant authority, there will at all times be a Paying Agent with a specified office in such place as may be required by the rules and regulations of the relevant stock exchange or other relevant authority;
(c) there will at all times be a Paying Agent in a Member State of the European Union that will not be obliged to withhold or deduct tax pursuant to European Council Directive 2003/48/EC or any law implementing or complying with, or introduced in order to conform to, such Directive; and
(d) there will at all times be a Paying Agent in a jurisdiction within continental Europe, other than the jurisdiction in which the Issuer or the Guarantor is incorporated.
68 In addition, the Issuer and the Guarantor (in the case of Notes issued by Italcementi Finance S.A.) shall forthwith appoint a Paying Agent having a specified office in New York City in the circumstances described in Condition 5.4. Any variation, termination, appointment or change shall only take effect (other than in the case of insolvency, when it shall be of immediate effect) after not less than 30 nor more than 45 days’ prior notice thereof shall have been given to the Noteholders in accordance with Condition 13.
In acting under the Agency Agreement, the Paying Agents act solely as agents of the Issuer and the Guarantor (in the case of Notes issued by Italcementi Finance S.A.) and do not assume any obligation to, or relationship of agency or trust with, any Noteholders, Receiptholders or Couponholders. The Agency Agreement contains provisions permitting any entity into which any Paying Agent is merged or converted or with which it is consolidated or to which it transfers all or substantially all of its assets to become the successor paying agent.
12. EXCHANGE OF TALONS
On and after the Interest Payment Date on which the final Coupon comprised in any Coupon sheet matures, the Talon (if any) forming part of such Coupon sheet may be surrendered at the specified office of the Agent or any other Paying Agent in exchange for a further Coupon sheet including (if such further Coupon sheet does not include Coupons to (and including) the final date for the payment of interest due in respect of the Note to which it appertains) a further Talon, subject to the provisions of Condition 8.
13. NOTICES
All notices regarding the Notes will be deemed to be validly given if published (a) in a leading English language daily newspaper of general circulation in London, and (b) if and for so long as the Notes are admitted to trading on, or listed on the Official List of the Luxembourg Stock Exchange, a daily newspaper of general circulation in Luxembourg and/or the Luxembourg Stock Exchange’s website, www.bourse.lu. It is expected that any such publication in a newspaper will be made in the Financial Times in London and the Luxemburger Wort or the Tageblatt in Luxembourg. The Issuer and the Guarantor (in the case of Notes issued by Italcementi Finance S.A.) shall also ensure that notices are duly published in a manner which complies with the rules of any stock exchange or other relevant authority on which the Notes are for the time being listed or by which they have been admitted to trading. Any such notice will be deemed to have been given on the date of the first publication or, where required to be published in more than one newspaper, on the date of the first publication in all required newspapers.
Until such time as any definitive Notes are issued, there may, so long as any Global Notes representing the Notes are held in their entirety on behalf of Euroclear and/or Clearstream, Luxembourg, be substituted for such publication in such newspaper(s) the delivery of the relevant notice to Euroclear and/or Clearstream, Luxembourg for communication by them to the holders of the Notes and, in addition, for so long as any Notes are listed on a stock exchange or are admitted to trading by another relevant authority and the rules of that stock exchange or relevant authority so require, such notice will be published in a daily newspaper of general circulation in the place or places required by those rules. Any such notice shall be deemed to have been given to the holders of the Notes on the day after the day on which the said notice was given to Euroclear and/or Clearstream, Luxembourg.
Notices to be given by any Noteholder shall be in writing and given by lodging the same, together (in the case of any Note in definitive form) with the relative Note or Notes, with the Agent. Whilst any of the Notes are represented by a Global Note, such notice may be given by any holder of a Note to the Agent through Euroclear and/or Clearstream, Luxembourg, as the case may be, in such
69 manner as the Agent and Euroclear and/or Clearstream, Luxembourg, as the case may be, may approve for this purpose.
14. MEETINGS OF NOTEHOLDERS AND MODIFICATION
14.1 In the case of Notes issued by Italcementi S.p.A.:
In accordance with the rules of the Italian Civil Code, the Agency Agreement contains provisions for convening meetings of the Noteholders to consider any matter affecting their interests, including the sanctioning by Extraordinary Resolution (a resolution adopted by the favourable vote of one or more persons present holding or representing Notes representing in the aggregate not less than one half of the principal amount of the Notes outstanding at the time such resolution is adopted) of a modification of these Conditions. The constitution of meetings and the validity of resolutions thereof shall be governed pursuant to the relevant provisions of the Italian Civil Code (and, namely, by those provided for by Article 2415) and, as long as the Issuer has its shares listed on a regulated market in Italy or an other EU member country, pursuant to Legislative Decree no. 58 of 24 February 1998 (as amended from time to time). Any resolution (including an Extraordinary Resolution) passed at any meeting of the Noteholders shall be binding on all the Noteholders, whether or not they are present at the meeting, and on all Receiptholders and Couponholders and unless the Principal Paying Agent agrees otherwise, any modification shall be notified to the Noteholders in accordance with Condition 14 as soon as practicable thereafter.
In accordance with the Italian Civil Code, a “rappresentante comune”, being a joint representative of Noteholders may be appointed in order to represent the Noteholders’ interest hereunder and to give execution to the resolutions of the Noteholders’ meeting. The “rappresentante comune” is appointed by resolution passed at the Noteholders’ meeting. In the event the Noteholders’ meeting fails to appoint the “rappresentante comune”, the appointment is made by the President of the Court of First Instance of the venue where the registered office of the Issuer is located at the request of any Noteholder or the board of directors of the Issuer.
14.2 In the case of Notes issued by Italcementi Finance S.A.:
The Agency Agreement contains provisions for convening meetings of the Noteholders to consider any matter affecting their interests, including the sanctioning by Extraordinary Resolution of a modification of the Notes, the Receipts, the Coupons or any of the provisions of the Agency Agreement. Such a meeting may be convened by the Issuer and shall be convened by the Issuer if required in writing by Noteholders holding not less than one-twentieth in nominal amount of the Notes for the time being remaining outstanding. The quorum at any such meeting for passing an Extraordinary Resolution is one or more persons holding or representing not less than one half in nominal amount of the Notes for the time being outstanding, or at any adjourned meeting one or more persons being or representing Noteholders whatever the nominal amount of the Notes so held or represented, except that at any meeting the business of which includes the modification of certain provisions of the Notes, the Receipts or the Coupons (including modifying the date of maturity of the Notes or any date for payment of interest thereon, reducing or cancelling the amount of principal or the rate of interest payable in respect of the Notes or altering the currency of payment of the Notes, the Receipts or the Coupons), the quorum shall be one or more persons holding or representing not less than two-thirds in nominal amount of the Notes for the time being outstanding, or at any adjourned such meeting one or more persons holding or representing not less than one-third in nominal amount of the Notes for the time being outstanding. An Extraordinary Resolution passed at any meeting of the Noteholders shall be binding on all the Noteholders, whether or not they are present at the meeting, and on all Receiptholders and Couponholders.
70 14.3 Modification
The Agent, the Issuer and the Guarantor (in the case of Notes issued by Italcementi Finance S.A.) may agree, without the consent of the Noteholders, Receiptholders or Couponholders, to:
(a) any modification (except such modifications in respect of which an increased quorum is required as mentioned above) of the Notes, the Receipts, the Coupons or the Agency Agreement which is not prejudicial to the interests of the Noteholders; or
(b) any modification of the Notes, the Receipts, the Coupons or the Agency Agreement which is of a formal, minor or technical nature or is made to correct a manifest or proven error or to comply with mandatory provisions of the law.
Any such modification shall be binding on the Noteholders, the Receiptholders and the Couponholders and any such modification shall be notified to the Noteholders in accordance with Condition 13 as soon as practicable thereafter.
15. FURTHER ISSUES
The Issuer shall be at liberty from time to time without the consent of the Noteholders, the Receiptholders or the Couponholders to create and issue further notes having terms and conditions the same as the Notes or the same in all respects save for the amount and date of the first payment of interest thereon and so that the same shall be consolidated and form a single Series with the outstanding Notes.
16. CONTRACTS (RIGHTS OF THIRD PARTIES) ACT 1999
No person shall have any right to enforce any term or condition of this Note under the Contracts (Rights of Third Parties) Act 1999, but this does not affect any right or remedy of any person which exists or is available apart from that Act.
17. GOVERNING LAW AND SUBMISSION TO JURISDICTION
17.1 Governing law
The Agency Agreement, the Guarantee, the Deed of Covenant, the Notes, the Receipts, the Coupons and any non-contractual obligations arising out of or in connection with the Agency Agreement, the Guarantee, the Deed of Covenant, the Notes, the Receipts, the Coupons are governed by, and shall be construed in accordance with, English law.
17.2 Submission to jurisdiction
Each of the Issuer and the Guarantor (in the case of Notes issued by Italcementi Finance S.A.) irrevocably agrees, for the benefit of the Noteholders, the Receiptholders and the Couponholders, that the courts of England are to have exclusive jurisdiction to settle any disputes which may arise out of or in connection with the Notes, the Receipts and/or the Coupons (including a dispute relating to any non-contractual obligations arising out of or in connection with the Notes, the Receipts and/or the Coupons) and accordingly submits to the exclusive jurisdiction of the English courts.
Each of the Issuer and the Guarantor (in the case of Notes issued by Italcementi Finance S.A.) waives any objection to the courts of England on the grounds that they are an inconvenient or inappropriate forum. The Noteholders, the Receiptholders and the Couponholders may take any suit, action or proceedings (together referred to as Proceedings) arising out of or in connection with the
71 Notes, the Receipts and the Coupons (including any Proceedings relating to any non-contractual obligations arising out of or in connection with the Notes, the Receipts and the Coupons) against the Issuer or the Guarantor (in the case of Notes issued by Italcementi Finance S.A.) in any other court of competent jurisdiction and concurrent Proceedings in any number of jurisdictions.
17.3 Appointment of Process Agent
Each of the Issuer and the Guarantor (in the case of Notes issued by Italcementi Finance S.A.) appoints UK Process Services Limited at its registered office at 12 Gough Square, London EC 4A 3DW, United Kingdom as its agent for service of process, and undertakes that, in the event of UK Process Services Limited ceasing so to act or ceasing to be registered in England, it will appoint another person as its agent for service of process in England in respect of any Proceedings. Nothing herein shall affect the right to serve proceedings in any other manner permitted by law.
17.4 Other documents
The Issuer and, where applicable, the Guarantor have in the Agency Agreement, the Guarantee and the Deed of Covenant submitted to the jurisdiction of the English courts and appointed an agent for service of process in terms substantially similar to those set out above.
72 USE OF PROCEEDS
The net proceeds from each issue of Notes will be applied by the relevant Issuer for its general corporate purposes. If, in respect of any particular issue of Notes which are derivative securities for the purposes of Article 15 of the Commission Regulation No 809/2004 implementing the Prospectus Directive, there is a particular identified use of proceeds, this will be stated in the applicable Final Terms.
73 DESCRIPTION OF ITALCEMENTI S.p.A.
GENERAL OVERVIEW Italcementi S.p.A. (Italcementi or the Company) is incorporated as a joint stock company (società per azioni) under the laws of Italy and is registered in the Companies’ Register of the City of Bergamo under number 00637110164. Its registered office and principal place of business is at Via Gabriele Camozzi 124, Bergamo, Italy and its telephone number is +39 035 396 111. The Company was founded in 1864 and its duration is until 31 December 2050. The Company’s shares are listed on the Mercato Telematico Azionario, the screen-based market of the Italian Stock Exchange and are included in FTSE MIB Index. Italcementi is the leading cement manufacturer in Italy as well as one of Italy’s ten largest industrial companies and is the parent company of the Italcementi Group (the Italcementi Group or the Group), which is the world’s fifth largest international cement producer and one of the market leaders in the Mediterranean Rim, with an annual global production capacity of approximately 70 million tonnes of cement. The Italcementi Group is present in 22 countries in four different continents and comprises an industrial network of 59 cement plants, 15 grinding centres, five terminals, 91 aggregates quarries and 367 concrete batching units. In 2008, Group sales amounted to €5,776 million (compared to €6,001 million in 2007), net income amounted to €272 million (compared to €613 million in 2007) and sales volumes amounted to 63 million tonnes with regard to cement and clinker, 48 million tonnes with regard to aggregates and 14 million cubic metres with regard to ready-mixed concrete.
HISTORY AND DEVELOPMENT Italcementi was founded in 1864 under the name Società Bergamasca per la Fabbricazione del Cemento e della Calce Idraulica. The Pesenti brothers acquired this company in the beginning of the twentieth century and merged it with their company, Fabbrica Cementi e Calci Idrauliche Fratelli Pesenti fu Antonio. The resulting company had 12 cement plants with over 1,500 employees and a production capacity of over 210,000 tonnes per year. The company was listed on the Milan Stock Exchange in 1925 and was renamed Italcementi S.p.A. in 1927. At this stage, the Company had 33 cement plants, with a production capacity of 1.8 million tonnes of cement per year. In the period between the two world wars, the Group continued its expansion through acquisitions of other companies in the cement industry, including Società Anonima Fabbrica Calce e Cemento di Casale, which was its main competitor and was renowned for its technologically innovative production plants. In the early 1940s the management of the Group was taken over by Mr. Carlo Pesenti, who led the growth of the Company and generally of Italian entrepreneurship, and with his cousin Mr. Antonio Pesenti represented the third generation of the Pesenti family in the industry. In 1946, the Group was reorganised and three new companies were constituted, Sacelit, Società Calci Idrate d’Italia and Italmobiliare S.p.A. Italmobiliare S.p.A. (which in 1979 became the parent company of Italcementi) held the companies which undertook non-core activities, which over time, would include insurance companies, banks, industrial concerns and newspapers. In 1964, on the 100th anniversary of its founding, Italcementi had eight affiliated companies and 28 plants, an annual production of 7.5 million tonnes and ranked 13th among Italian companies in terms of turnover. This expansion phase, which was sustained by the positive cycle of the construction industry, was followed in the 1970s by a more critical period linked to the energy crisis and the resulting increase in inflation and interest rates. In 1984, the Group’s leadership was taken over by Mr. Giampiero Pesenti, who was the Company’s Chief Operating Officer at the time. Meanwhile the Group had expanded, reaching an annual production of 14 million tonnes and 6,500 employees.
74 In the late 1980s Italcementi began expanding outside Italy, and in April 1992 it acquired a controlling stake (45 per cent.) in the French company Ciments Français S.A. (Ciments Français). Through this acquisition - which required a commitment of approximately 1.5 trillion Italian lire (approximately €775 million) - the Group achieved significant importance in the international market with 51 cement factories and over 20,000 employees in 13 different countries. Revenues generated in Italy dropped from 97 per cent. of total revenues to 27.5 per cent. The integration process started by establishing the Group Technical Centre (CTG), in which Italcementi concentrated the Group’s research, development, engineering and technical assistance activities. A centralised purchasing organisation was also created at the same time. In the following years the Group adopted a single, shared corporate identity and began the consolidation of its information system (Group ERP). At the end of the 1990s it launched an organisational project aimed at boosting efficiency and operational integration. More recently the Group adopted shared rules of corporate governance based on a “Charter of Values”. After this phase of reorganisation and integration of the acquired companies, in 1997 Italcementi completed the acquisition of the Italian company Calcestruzzi S.p.A. (Calcestruzzi), a ready-mixed concrete producer, and began an expansion strategy in emerging markets, in order to diversify its business in geographic areas with higher growth potential. Since the end of the 1990s, the Group’s geographic diversification process has taken shape through a series of acquisitions in emerging markets such as Bulgaria, Egypt, Morocco, Kazakhstan, Thailand and India, as well as transactions aimed at reinforcing the Group’s profile in North America. In 2005, as part of its programme to expand its presence in the Mediterranean Rim, the Group further developed its presence in Egypt, becoming a market leader. In 2006 the Group acquired the 50 per cent. stake of its activities in India which it did not own and in 2007 it further expanded its presence into Asia and the Middle East by carrying out acquisitions in China and Kuwait and by entering into a joint venture in Saudi Arabia. In 2008, the Group entered into a joint venture in Libya in order to develop the Group’s presence in that market. The Group’s operational integration and growth in size were also accompanied by an increase in Italcementi’s participation in the capital of Ciments Français, in 1998 its stake rose to over 63 per cent. of the share capital, a percentage that has steadily increased in the subsequent years until reaching its current level of approximately 82 per cent. In the first half of 2009, Italcementi approved the guidelines for a Group structure simplification project to be implemented through the merger of Ciments Français into Italcementi, which was subsequently abandoned. However the Company will continue to pursue opportunities to strengthen the integration of its operations, management structures and policies with those of Ciments Français, including the establishment of intercompany lending facilities in favour of Ciments Français and its subsidiaries funded by debt incurred by Italcementi or Italcementi Finance S.A.
RECENT DEVELOPMENTS
2009 Annual Report
On 5 March 2010, the Italcementi Board of Directors examined and approved the annual financial report as at 31 December 2009, which will be submitted to the approval of the next Shareholders’ Meeting (to be held in Bergamo on 16 and 19 April 2010, on first and second call, respectively).
As a result of the severe worldwide economic and financial crisis in 2009, the Group experienced a reduction in sales volumes in all lines of business, although the slowdown eased in the last part of the year. While markets in the industrialised countries as a whole were weak, in some emerging countries the Group reported an improvement in sales compared with 2008.
The downturn in volumes, combined with stable average prices, pushed down revenues and results. Nevertheless, due to the benefits of the cost-cutting plan introduced at the beginning of the crisis, the Group was able to maintain its 2009 profit margins at the 2008 levels (with recurring EBITDA/revenues equal to 75 19.4 per cent.). In addition, the strong increase in cash flows from operations, assisted by the Group’s initiatives to reduce working capital, and a lower level of financial investments brought an improvement (a reduction) of approximately 10 per cent. (€259 million) in the net financial position compared with the position at the end of 2008.
The measures taken to raise efficiency led to significant savings in variable and fixed costs in 2009, estimated at more than €240 million; cost control and on-going efficiency programs are also expected to produce cost reductions in 2010, albeit on a smaller scale.
For the year ended 31 December 2009, cement and clinker sales totalled 55.7 million metric tons ( a decrease of 11.1 per cent. on an historic basis); aggregates sales were 39.1 million metric tons (a decrease of 17.8 per cent.), and ready mixed concrete sales were 11.2 million cubic meters (a decrease of 19.2 per cent.). The reduction in cement sales volumes was heavier in the industrialised countries, whereas Egypt and China reported significant growth and Morocco maintained the same levels as in 2008.
Turning to revenues, the downturn in volumes, combined with stable average prices, generated consolidated revenues in 2009 of €5,006.4 million, a reduction of 13.3 per cent. from 2008 (a decrease of 13.6 per cent. at constant size and exchange rates).
Revenue growth was reported in several emerging countries, including Egypt, Morocco and China.
Operating results, were also adversely affected by the significant volume effect, while the positive price trend of the first half of the year was undermined in part during the second half. Recurring EBITDA was €971.6 million (a decrease of 12.7 per cent.); EBIT was €443.0 million (a decrease of 27.1 per cent.), reflecting the impact of impairment variations on industrial assets, mainly in Thailand, where the residual service life of a number of plants was shortened.
Profit before tax was €309.5 million (a decrease of 27.7 per cent.), while net profit was €215.3 million (a decrease of 22.2 per cent.). Group net profit, at €71.3 million, reflected a heavier decrease (a decrease of 50.0 per cent.) due to the fact that the positive contribution of companies with significant minority interests was not sufficient to counterbalance the general earnings decline.
Investments in fixed assets for the year ended 31 December 2009 totalled €742.3 million, and related largely to strategic projects in North America (Martinsburg), Morocco (Ait Baha), India (Yerraguntla) and Italy (Matera), where the new plants are expected to begin making a positive contribution to operations in 2010.
Due to careful cash flow management, and tight control of the working capital requirement in particular, at the end of 2009 Group net debt was significantly lower, at €2,419.9 million, a decrease of €259.4 million from €2,679.3 million at the end of 2008. Shareholders’ equity rose to €4,692.2 million (€4,621.6 million at the end of 2008). The gearing ratio (net debt / shareholders’ equity) was 51.6 per cent. (60.8 per cent. at 30 June 2009, and 58.0 per cent. at 31 December 2008).
Due largely to the difficult situation in the Italian market, Italcementi S.p.A. reported unconsolidated revenues for €769.3 million in 2009, down from €991.3 million in 2008. Recurring EBITDA was €26.4 million (€76.1 million), while the net result for the year was a loss of €16.3 million (net profit of €35.0 million).
At the next Shareholders’ Meeting (to be held in Bergamo on 16 and 19 April 2010, on first and second call, respectively), the Board of Directors will propose distribution of a dividend of €0.12 per ordinary share (€0.18 for 2008) and €0.12 per savings share (€0.21). The dividend is the same for both share classes as it is taken from available reserves, as allowed under art.7 of the by-laws. The dividend will be paid from 20 May 2010 (coupon date 17 May 2010).
76 Fourth quarter 2009
Sales volumes for the fourth quarter ended 31 December 2009 decreased with respect to the fourth quarter ended 31 December 2008 in all lines of business, although the slowdown eased with respect to the nine months ended 30 September 2009.
In the cement and clinker sector, performance declined in North America and Central Western Europe, while the emerging countries reported growth, with the exception of Bulgaria and Turkey. Performance was also positive for the Trading sector.
The smaller reduction in the countries in Central Western Europe and the progress achieved in Morocco produced a significantly smaller downturn in performance in aggregates and ready mixed concrete in the final quarter compared with the figures for the first nine months. Full year Q4 Q3 Q2 Q1 Quarterly results 2009 2009 2009 2009 2009 (€ millions) (unaudited) Revenues 5,006.4 1,158.9 1,261.7 1,384.6 1,201.2 % change vs. 2008 (13.3) (14.5) (15.5) (12.1) (11.1) Recurring EBITDA 971.6 183.9 290.3 308.5 188.9 % change vs. 2008 (12.7) (11.2) (7.2) (7.8) (27.0) % of revenues 19.4 15.9 23.0 22.3 15.7 EBITDA 956.7 185.5 283.0 310.8 177.4 % change vs. 2008 (13.3) (7.7) (7.8) (7.4) (31.6) % of revenues 19.1 16.0 22.4 22.4 14.8 Amortisation and depreciation (459.8) (123.2) (110.5) (113.3) (112.8) Impairment variation (54.0) (24.6) (5.1) (24.3) EBIT 443.0 37.7 167.3 173.3 64.6 % change vs. 2008 (27.1) 28.1 (16.2) (23.5) (57.3) % of revenues 8.8 3.3 13.3 12.5 5.4 Finance income and costs (106.9) (25.5) (25.0) (27.6) (28.9) Impairment on financial assets (41.1) (17.7) (23.4) Share of result of associates 14.6 4.8 6.3 2.3 1.2 Net profit for the period 215.3 (6.1) 94.1 107.2 20.1 % of revenues 4.3 (0.5) 7.5 7.7 1.7
In the fourth quarter, revenues continued to be affected by the volume slowdown caused by the impact of the financial crisis on the real economy (especially in certain industrialised countries), and decreased to €1,158.9 million (a decrease of 14.5 per cent. from the fourth quarter ended 31 December 2008). A significant decline was reported in North America, Central Western Europe and cement and clinker trading, counterbalanced by growth in some emerging countries, notably Egypt, Morocco and China.
Fourth-quarter revenues were also affected by a negative overall exchange-rate effect.
77 Recurring EBITDA was €183.9 million, a decrease of 11.2 per cent. from the fourth quarter of 2008, a result arising mainly from the decrease in volumes and sales prices. These effects were largely countered by continuing incisive action to contain variable and fixed costs.
EBIT at €37.7 million (an increase of 28.1 per cent.) was up from the fourth quarter ended 31 December 2008 due to the decrease in non-recurring charges and impairment variations.
The fourth quarter ended 31 December 2009 showed a net result of €-6.1 million (a decrease of €51.4 million from the fourth quarter ended 31 December 2008).
Business Performance in 2009
Group sales volumes for the year ended 31 December 2009 declined significantly in all lines of business, a trend that eased, as mentioned above, in the last quarter of the year. In cement and clinker, the fall in sales volumes arose largely in the mature economies (especially Italy, France, Spain and North America), and in the Trading sector. In the emerging countries, performance declined overall, but at a slower rate, with trends varying from country to country. While Egypt, Kazakhstan and China reported growth, Morocco maintained the levels of 2008, and the other countries reported a reduction in sales volumes.
Sales volumes and Cement and clinker Aggregates Ready mixed concrete internal transfers (1) (millions of metric tons) (millions of metric tons) (millions of m3) (unaudited) % change vs. % change vs. % change vs. 2008 2008 2008 Year Year Year ended 31 At ended 31 At ended 31 At December constant December constant December constant 2009 Historic size 2009 Historic size 2009 Historic size Central Western Europe 20.1 (16.4) (16.4) 35.4 (19.1) (19.1) 6.0 (18.6) (19.9) North America 4.0 (24.6) (24.6) 0.6 42.6 33.0 0.8 (23.0) (26.2) Eastern Europe and Southern Mediterranean 19.6 (4.7) (4.7) 2.6 (2.3) (0.7) 3.4 (23.2) (23.2) Rim Asia 10.6 (5.7) (5.7) 0.5 (33.2) (33.2) 0.6 (31.5) (31.5) Cement/clinker trading 4.1 (24.5) (24.5) - - - 0.4 120.1 (4.0) Eliminations+others (2.7) - n.s. ------Total 55.7 (11.1) (11.1) 39.1 (17.8) (17.8) 11.2 (19.2) (21.5)
For purposes of this table, “Central Western Europe” includes Italy, France, Belgium, Spain and Greece; “North America” includes the U.S.A., Canada and Puerto Rico; “Eastern Europe and Southern Mediterranean Rim” includes Bulgaria, Egypt, Morocco and Turkey; and “Asia” includes Thailand, India, Kazakhstan and China.
(1) amounts refer to companies consolidated on a line-by-line basis and, pro-quota, to companies consolidated on a proportionate basis. “n.s.” means not significant
The aggregates sector was affected by the decline in all the countries in Central Western Europe, where the large majority of Group operations are based. Performance in Morocco was stable, thanks to a lively fourth quarter; significant growth was reported in North America, but absolute values were low and had a modest impact on total sales volumes.
Ready mixed concrete saw a general decline in sales volumes on a wider scale than in cement, due to the sharper fall in demand on the Group markets. The largest reductions in absolute values were in France, Turkey, Spain and Egypt; in Egypt, the downturn arose as work was completed on a series of major contracts.
78 Financial Performance
Group revenues for the year ended 31 December 2009 amounted to € 5,006.4 million.
The 13.3 per cent. fall in revenues compared with the year ended 31 December 2008 was due to the slowdown in business performance (a decrease of 13.6 per cent.), offset only to a limited extent by a modest exchange-rate effect (an increase of 0.4 per cent.), whose positive impact in the first nine months faded in the fourth quarter. The consolidation effect was immaterial (a decrease of 0.1 per cent.). Year ended 31 Year ended 31 Revenues by business December 2009 December 2008 % % change (1) (unaudited) (€ millions) Cement and clinker 3,638.6 4,131.2 (11.9) (12.4) RMC/Aggregates 1,110.6 1,334.0 (16.7) (19.0) Other 257.2 310.4 (17.1) (5.0) Total 5,006.4 5,775.6 (13.3) (13.6)
(1) at constant size and exchange rates
At constant size and exchange rates, the revenue decrease affected all the macro areas, notably Central Western Europe and North America. Among emerging countries, which as a whole showed a contained decline, performance was positive in Egypt, Morocco, China and Kazakhstan.
The action taken by management in all countries to cut variable and fixed costs and boost operating efficiency generated significant savings of around €240 million.
Following these measures, recurring EBITDA for the year ended 31 December 2009 was € 971.6 million, a decrease of 12.7 per cent. as compared to for the year ended 31 December 2008, but the recurring EBITDA margin increased slightly from 19.3 per cent. to 19.4 per cent. EBITDA for the year ended 31 December 2009 was €956.7 million, a decrease of 13.3 per cent. as compared to the year ended 31 December 2008.
EBIT for the year ended 31 December 2009, after higher amortisation and depreciation charges and an increase in impairment variations compared with the year ended 31 December 2008, totalled €443.0 million, a decrease of 27.1 per cent. from 2008.
Finance costs net of finance income increased from €79.5 million to €106.9 million (an increase of 34.5 per cent.), rising in relation to revenues from 1.4 per cent. to 2.1 per cent.
The year ended 31 December 2008 had benefited from the €50 million compensation received in connection with the non-sale of operations in Turkey. Net interest expense on net debt decreased from €127.9 million to €102.3 million.
The share of results of associates the year ended 31 December 2009 was €14.6 million, a decrease as compared to the year ended 31 December 2008 (€25.1 million) largely due to the decline in results at Vassiliko (Cyprus) and Ciment Quebec (Canada).
Impairment on financial assets was equal to €41.1 million (as compared to €124.9 million in 2008) and referred to the share held in the Calcestruzzi group.
Profit before tax amounted to €309.5 million, a decrease of 27.7 per cent. from 2008 (€428.0 million).
Income tax expense, at €94.2 million, decreased by 37.8 per cent. compared with 2008 (€151.4 million).
79 Net profit attributable to the Group was €71.3 million, a decline of 50.0 per cent. from 2008 (€142.5 million), while net profit attributable to minority interests rose by 7.4 per cent., from €134.1 million to €144.0 million.
Revenues and operating results Revenues Recurring EBITDA EBITDA EBIT
(€ millions) % % % % change change change change (unaudited) 2009 vs. 2008 2009 vs. 2008 2009 vs. 2008 2009 vs. 2008
Central Western Europe 2,754.4 (17.3) 460.3 (18.5) 467.1 (19.6) 209.6 (39.1) North America 401.2 (19.8) 12.5 (77.4) 2.4 (95.6) (55.5) n.s. Eastern Europe and Southern Mediterranean Rim 1,345.0 (1.0) 414.3 4.8 413.5 11.2 287.1 24.0 Asia 411.7 (8.4) 95.4 (9.2) 88.8 (14.4) 26.2 (31.0) Cement/clinker trading 253.0 (31.8) 15.5 14.6 15.5 (15.4) 9.6 (29.2) Others and eliminations (159.0) - (26.4) n.s. (30.6) n.s. (34.0) n.s. Total 5,006.4 (13.3) 971.6 (12.7) 956.7 (13.3) 443.0 (27.1) n.s.: not significant
Investments in fixed assets totalled €742.3 million for the year ended 31 December 2009, a decrease of €245.4 million from the year ended 31 December 2008 (€987.7 million), largely as a result of the decrease in investments in non-current financial assets.
Capital expenditure, at €680.1 million, was comparable with the 2008 level (€705.4 million); to an increasing extent (approximately 57 per cent. of the total compared with approximately 41 per cent. in 2008) it referred to the strategic plant projects launched in previous years, which went into operation in 2009 or are due to begin in 2010: Martinsburg (North America), Ait Baha (Morocco), Yerraguntla (India) and Matera (Italy).
Investments in non-current financial assets amounted to €42.8 million (€252.9 million in 2008), and referred largely to acquisitions in the ready mixed concrete sector in France (Masoni) and Kuwait (Gulf Ready Mix).
The strong improvement achieved in cash flows from operations (€1,101.9 million, from €642.2 million in 2008), notwithstanding the business slowdown, was supported by a significant containment of working capital, in part through measures designed to keep inventories and terms of collection under tight control. The change in working capital generated a net cash inflow of €380.1 million, compared with a net outflow of €153.9 million in 2008. The reduction in investments in non-current financial assets was another significant factor contributing to the decrease in net debt.
As a result, net debt was equal to €2,419.9 million at 31 December 2009, a decrease of €259.4 million from the year ended 31 December 2008.
Total shareholders’ equity at 31 December 2009 was equal to €4,692.2 million, an increase of €70.5 million from 31 December 2008.
At 31 December 2009, no changes had taken place in treasury shares in portfolio compared with 31 December 2008. Italcementi S.p.A. held 3,793,029 ordinary treasury shares (representing 2.14 per cent. of ordinary share capital) servicing stock option plans, and 105,500 savings treasury shares (0.1 per cent. of savings share capital).
80 The gearing ratio (net debt/consolidated shareholders’ equity) was 51.6 per cent. at 31 December 2009 (as compared to 58.0 per cent. at 31 December 2008).
Italcementi S.p.A. Unconsolidated Results
Italcementi S.p.A. reported revenues of €769.3 million in 2009, a decrease of 22.4 per cent. from 2008 (€991.3 million), determined primarily by the fall in sales volumes and, to a lesser extent, by the fall in sales prices.
Recurring EBITDA, at €26.4 million, was down 65.3 per cent. from 2008 (€76.1 million), with the return on revenues falling from 7.7 per cent. to 3.4 per cent. despite the cost savings obtained during the year. Widespread and significant reductions were achieved on variable production costs, particularly energy.
On the fixed costs front, important improvements were reported in all expenditure categories. This was the result of the action taken in response to the reduction in volumes produced and the benefits of the production and logistics restructuring (introduced in 2008 and continued in 2009) with temporary or permanent plant shutdowns, a block on staff turnover and recourse to social security benefits (state subsidised lay-off).
A mobility procedure was introduced at the Bergamo site to reduce the workforce, the social impact of which was mitigated with early-retirement incentives. For this procedure and the previously announced permanent closure of two grinding centres and the conversion of a full-cycle cement plant into a grinding centre, non- recurring charges of €10.1 million were provided (€5.4 million in 2008).
EBITDA for the year ended 31 December 2009 was €30.2 million, a reduction of 61.2 per cent. from 2008, with an EBITDA margin of 3.9 per cent. (7.9 per cent. in 2008).
After amortisation and depreciation charges (€83.9 million) in line with the previous year, and impairment variations (€12.9 million) arising from the aforementioned closures and those announced for the first half of 2010, EBIT was negative at €66.6 million (negative EBIT of €6.2 million in 2008).
Net finance income for the year ended 31 December 2009 amounted to €70.7 million (€90.1 million in 2008). Dividends totalled €101.6 million, down from €114.9 million in 2008, which benefited from the capital gain on the sale of Intercom S.r.l.; net finance costs on the net financial position decreased from €35.5 million in 2008 to €27.3 million in 2009.
Italcementi S.p.A. reported a negative result before tax of €36.9 million (a positive result of €27.6 million in 2008), reflecting the adverse impact of impairment on financial assets for €41.1 million (€57.0 million in 2008) relating almost entirely to the write-down of Calcestruzzi S.p.A..
After tax income of €20.6 million (compared to tax income of €7.4 million in 2008), the year ended 31 December 2009 closed with a net loss of €16.3 million (net profit of €35.0 million in 2008).
Italcementi S.p.A. shareholders’ equity decreased by €48.6 million from 31 December 2008, from €1,952.2 million to €1,903.6 million.
Net debt, at €751.1 million, decreased by €78.4 million from 31 December 2008 (€829.4 million), largely thanks to the significant increase in cash flows from operations, which rose from €138.7 million to €214.8 million as a result of containment of net working capital.
Debenture issues and maturities
The Italcementi Group has not issued any debentures during the last 12 months.
81 Debenture maturities in the 18 months from 31 December 2009 amount to €50 million and refer to the €50 million stand-alone debenture issued by Ciments Français International S.A., a subsidiary of Ciments Français S.A., on 3 March 2005, and maturing on 3 March 2010.
To permit comparison on a like-for-like basis, 2008 figures have been restated in compliance with revised IAS 1 and IAS 23
Italcementi S.p.A. Unaudited Consolidated Income Statement
For the year ended 31 December
2008 (€ thousands) 2009 % re-stated % % change
Revenues 5,006,379 100.0 5,775,557 100.0 (13.3) Other revenues 34,385 60,216 Change in inventories (91,199) 59,906 Internal work capitalised 58,685 52,560 Goods and utilities expenses (1,880,728) (2,363,059) Services expenses (1,096,234) (1,326,986) Employee expenses (914,589) (938,884) Other operating income (expense) (145,121) (206,179) Recurring EBITDA 971,578 19.4 1,113,131 19.3 (12.7) Net capital gains on sale of fixed assets 26,102 24,247 Non-recurring employee expenses for re- organisations (33,987) (27,537) Other non-recurring income (expense) (7,008) (6,964) EBITDA 956,685 19.1 1,102,877 19.1 (13.3) Amortisation and depreciation (459,755) (450,873) Impairment (53,956) (44,712) EBIT 442,974 8.8 607,292 10.5 (27.1) Finance income 33,652 102,848 Finance costs (131,712) (180,926) Net exchange rate differences and derivatives (8,811) (1,397) Impairment on financial assets (41,129) (124,892) Share of results of associates 14,568 25,078 Profit before tax 309,542 6.2 428,003 7.4 (27.7) Income tax expense (94,225) (151,387) Net profit for the period 215,317 4.3 276,616 4.8 (22.2) Attributable to: Equity holders of the parent 71,288 1.4 142,501 2.5 (50.0) Minority interests 144,029 2.9 134,115 2.3 7.4
82 Earnings per share - Basic savings shares € 0.274 € 0.53 ordinary shares € 0.244 € 0.50 - Diluted savings shares € 0.274 € 0.53 ordinary shares € 0.244 € 0.50
Italcementi S.p.A. Unaudited Consolidated Statement of Comprehensive Income
For the year ended 31 December
2008 (€ thousands) 2009 % re-stated % % change
Net profit for the period 215,317 4.3 276,616 4.8 -22.2 Fair value adjustments to: Available-for-sale financial assets 32,973 (60,532) Derivative financial instruments (36,486) (13,331) Translation differences (40,448) (53,933) Tax relating to components of other comprehensive income 11,027 2,909 Components of other comprehensive income (32,934) (124,887) Total comprehensive income 182,383 3.6% 151,729 2.6% -20.2 Attributable to: Equity holders of the parent 61,169 13,575 Minorities 121,214 138,154
Italcementi S.p.A. Unaudited Consolidated Balance Sheet
As at As at 31 December 2008 (€ thousands) 31 December 2009 re-stated Change
Non-current assets Property, plant and equipment 4,392,993 4,269,194 123,799 Investment property 31,621 24,022 7,599 Goodwill 1,961,616 1,956,717 4,899 Intangible assets 122,353 122,618 (265) Investments in associates 228,437 218,884 9,553 Other equity investments 269,124 266,252 2,872 Deferred tax assets 42,289 39,488 2,801 Other non-current assets 80,399 114,893 (34,494) 83 Total non-current assets 7,128,832 7,012,068 116,764 Current assets Inventories 686,289 941,256 (254,967) Trade receivables 881,066 1,103,531 (222,465) Other current assets 270,456 313,451 (42,995) Income tax assets 70,976 52,591 18,385 Equity investments and financial receivables 227,826 210,691 17,135 Cash and cash equivalents 547,273 363,864 183,409 Total current assets 2,683,886 2,985,384 (301,498) Total assets 9,812,718 9,997,452 (184,734) Shareholders’ equity Share capital 282,549 282,549 - Reserves 361,362 358,908 2,454 Treasury shares (58,690) (58,690) - Retained earnings 2,767,874 2,747,581 20,293 Group shareholders’ equity 3,353,095 3,330,348 22,747 Minority interests 1,339,062 1,291,283 47,779 Total shareholders’ equity 4,692,157 4,621,631 70,526 Non-current liabilities Interest-bearing loans and long-term borrowings 2,632,588 2,684,198 (51,610) Employee benefit liabilities 180,930 166,395 14,535 Non-current provisions 227,820 266,250 (38,430) Deferred tax liabilities 261,114 282,805 (21,691) Other non-current liabilities 56,197 42,908 13,289 Total non-current liabilities 3,358,649 3,442,556 (83,907) Current liabilities Bank overdrafts and short-term borrowings 392,096 368,083 24,013 Interest-bearing loans and short-term borrowings 140,393 233,398 (93,005) Trade payables 548,358 697,907 (149,549) Current provisions 3,387 1,967 1,420 Income tax liabilities 66,682 62,334 4,348 Other current liabilities 610,996 569,576 41,420 Total current liabilities 1,761,912 1,933,265 (171,353) Total liabilities 5,120,561 5,375,821 (255,260) Total shareholders’ equity and liabilities 9,812,718 9,997,452 (184,734)
84 Italcementi S.p.A. Unaudited Consolidated Net Debt
An itemised correlation of net debt with the balance sheet is set out below: Financial asset and As at As at liability category Balance sheet line item 31 December 2009 31 December 2008 (€ thousands) (unaudited) Cash, cash equivalents and current financial assets (782,749) (592,945) Cash and cash equivalents Cash and cash equivalents (547,273) (363,864) Equity investments and Current financial receivables financial receivables (227,536) (210,402) Other current financial assets Other current assets (5,626) - Derivative instruments Other current assets (2,314) (18,679) Short-term financing 551,034 611,876 Bank overdrafts and short-term Bank overdrafts and short-term borrowings borrowings 392,096 368,083 Interest-bearing loans and short- Interest-bearing loans and term borrowings short-term borrowings 140,393 233,398 Derivative instruments Other current liabilities 18,545 10,395 Medium/long-term financial assets (34,809) (64,000) Securities and debentures Other non-current assets (14,464) (5,616) Derivative instruments Other non-current assets (20,345) (58,384) Medium/long-term financing 2,686,408 2,724,386 Interest-bearing loans and long- Interest-bearing loans and long- term borrowings term borrowings 2,632,588 2,684,198 Derivative instruments Other non-current liabilities 53,820 40,188 Net debt 2,419,884 2,679,317
Consolidated net debt as at 31 December 2009 continues to reflect the current account financial relationship between Italcementi S.p.A. and the Calcestruzzi group companies for €196.4 million (€175.4 million at 31 December 2008).
Italcementi S.p.A. Unaudited Income Statement
For the year ended 31 December
2008 % (€) 2009 % re-stated % change
Revenues 769,342,962 100.0 991,257,392 100.0 -22.4 Other revenues 21,231,360 32,531,756 Change in inventories (37,368,445) 15,149,413 Internal work capitalized 274,524 0 Goods and utilities expenses (362,495,691) (518,693,562)
85 Services expenses (189,877,561) (226,996,182) Employee expenses (185,294,201) (197,244,584) Other operating income (expense) 10,553,972 (19,941,922) Recurring EBITDA 26,366,920 3.4 76,062,311 7.7 -65.3 Net capital gains on sale of fixed assets 19,933,505 8,661,703 Other non-recurring income (expense) (16,076,922) (6,859,983) EBITDA 30,223,503 3.9 77,864,031 7.9 -61.2 Amortisation and depreciation (83,889,517) (84,049,250) Impairment (12,906,251) EBIT (66,572,265) -8.7 (6,185,219) -0.6 n.s. Finance income 111,441,257 151,517,241 Finance costs (40,094,748) (58,499,816) Net exchange-rate differences and derivatives (603,255) (2,254,434) Impairment on financial assets (41,089,932) (57,011,481) Profit before tax (36,918,943) -4.8 27,566,291 2.8 n.s. Income tax income 20,633,370 7,449,898 Net profit for the period (16,285,573) -2.1 35,016,189 3.5 n.s.
Italcementi S.p.A. Unaudited Statement of Comprehensive Income
For the year ended 31 December
2008 (€) 2009 % re-stated % % change
Net profit for the period (16,285,573) -2.1 35,016,189 3.5 n.s Fair value adjustments to: Available-for-sale financial assets 18,160,474 (97,700,938) Derivative financial instruments (3,706,972) (19,126,499) Tax relating to components of other comprehensive income (249,706) 4,808,737 Components of other comprehensive income 14,203,796 (112,018,700) Total comprehensive income (2,081,777) 3.6% (77,002,511) 2.6% n.s.
Italcementi S.p.A. Unaudited Balance Sheet
As at 31 December
2008 (€) 2009 re-stated Change
Non-current assets Property, plant and equipment 591,644,621 593,265,986 (1,621,365)
86 Investment property 14,641,998 16,959,889 (2,317,891) Intangible assets 9,541,513 6,958,230 2,583,283 Investments in subsidiaries and associates 1,754,720,153 1,799,401,192 (44,681,039) Other equity investments 107,591,072 87,712,383 19,878,689 Deferred tax assets 3,971,502 0 3,971,502 Other non-current assets 6,966,695 5,528,307 1,438,388 Total non-current assets 2,489,077,554 2,509,825,987 (20,748,433) Current assets Inventories 116,014,785 207,761,090 (91,746,305) Trade receivables 274,218,670 328,159,903 (53,941,233) Other current assets 46,078,739 48,477,104 (2,398,365) Income tax assets 266,249 201,969 64,280 Equity investments and financial receivables 398,156,534 411,796,857 (13,640,323) Cash and cash equivalents 1,710,658 315,995 1,394,663 Total current assets 836,445,635 996,712,918 (160,267,283) Total assets 3,325,523,189 3,506,538,905 (181,015,716) Shareholders’ equity Share capital 282,548,942 282,548,942 0 Reserves 386,784,174 365,771,710 21,012,464 Treasury shares (58,689,585) (58,689,585) 0 Retained earnings 1,292,920,765 1,362,523,189 (69,602,424) Total shareholders’ equity 1,903,564,296 1,952,154,256 (48,589,960) Non-current liabilities Interest-bearing loans and long-term borrowings 891,957,173 1,023,180,735 (131,223,562) Employee benefit liabilities 39,906,865 33,012,175 6,894,690 Non-current provisions 28,506,556 24,394,275 4,112,281 Deferred tax liabilities 0 17,030,717 (17,030,717) Other non-current liabilities 10,992,657 10,545,964 446,693 Total non-current liabilities 971,363,251 1,108,163,866 (136,800,615) Current liabilities Bank overdrafts and short-term borrowings 216,814,780 164,348,147 52,466,633 Interest-bearing loans and short-term borrowings 38,760,500 48,674,212 (9,913,712) Trade payables 130,439,735 166,728,835 (36,289,100) Income tax liabilities 2,659,390 1,461,674 1,197,716 Other current liabilities 61,921,237 65,007,915 (3,086,678) Total current liabilities 450,595,642 446,220,783 4,374,859 Total liabilities 1,421,958,893 1,554,384,649 (132,425,756) Total shareholders’ equity and liabilities 3,325,523,189 3,506,538,905 (181,015,716)
87 U.S. Private Placement
On 5 March 2010 Ciments Français reached an agreement on a clarifying amendment to the regulation for the 2002 and 2006 US private placement notes for an aggregate face value of 500 million US dollars, to expressly permit Ciments Français to borrow funds from Italcementi. Ciments Français also announced an offer to holders of the notes in question to repurchase any and all outstanding notes at a price of 1,065 US dollars per 1,000 US dollars face value. The offer period will expire at 12.00 midnight, New York time, on 24 March 2010, and will be extended for a further ten business days if certain conditions are met. The company will announce the amount tendered promptly after the expiry of the offer period. The offer will be funded with resources provided by Italcementi Finance S.A.
STRATEGY Objectives The Italcementi Group pursues a series of medium/long-term objectives in order to continue to successfully compete and grow within the global building materials industry and on the international markets in which it operates, creating value for all of its stakeholders through innovative, sustainable use of natural resources for the benefit of the customers and local communities the Group works with. The Group’s current organisation thus responds to the need to effectively pursue the strategic objectives indicated above and to compete effectively in the sector, combining its “local” identity and its “multiactivity” (cement, concrete and aggregates) dimensions and an international presence in 22 countries according to criteria of operational efficiency, leanness and rapidity of management processes and in full respect of the corporate governance principles adopted. The planning, development and realisation of the Group’s investments benefit from the skills of CTG, whose activities aid Italcementi’s subsidiaries both in Italy and abroad, as further described below. These strategic objectives can be summarised as follows: • Dimensional growth in the cement production activity, especially in the emerging markets. In a rapidly consolidating sector, the Group has set dimensional growth objectives in order to reinforce its presence in the mature markets where it is already active, but especially to expand its presence significantly in the emerging markets, which are considered the drivers of future demand for cement and therefore represent strategic markets for operators in the sector. Such growth has been and will be pursued, depending on the specific industry structure and market conditions, through organic actions aimed at increasing the Group’s production capacity via greenfield and brownfield investments and through external acquisitions and other business combinations. • Selective increase of its presence in the concrete and aggregates sectors. Concrete constitutes an increasingly important distribution channel to construction companies, planners and end users. Aggregates, in turn, represent a strategic resource at the local level (given the high cost involved in transporting them compared to their value) for operating in the concrete business*. Italcementi therefore continues to monitor its degree of vertical integration along the production chain, in particular by selectively bolstering its presence in the concrete and aggregates markets, especially in those markets where the share of cement sold through the concrete channel is high or rapidly rising.
* The Group’s presence in the concrete (and aggregates) business enables Italcementi to be in direct contact with the construction companies and planners who manifest the new demands of the end market, particularly with regard to the new needs in terms of performance and product innovation. The end market in fact requires concretes with better mechanical, structural, durability, thermal and acoustic insulation, fire resistance and seismic properties. These needs can be met using an “integrated” approach to the components of the concrete (cement, binders, aggregates, additives). The Group’s presence in the concrete sector thus makes it possible to grasp new needs and to respond promptly and competently to the demands for innovation of the end market, building customer loyalty. Innovation of the concrete product, which requires a constant research commitment on the single components, the formula and its application, also makes it possible to stimulate the adoption of higher quality construction techniques by the end customer.
88 • Improvement in operational efficiency on variable costs and fixed costs. The Group constantly strives to improve efficiency on both fixed costs and variable costs. For this purpose, the Group recently started a programme aimed at distributing best operating practices within the Group and at identifying new opportunities for operational efficiency, pursuing the optimisation of all the principal determinants of the industrial cost: fuel consumption, electricity consumption, costs of raw materials, reliability of machinery, efficiency of maintenance resources (internal and external). These opportunities can be pursued either by improving technical and other efficiency parameters within the existing production footprint and organisational structure, or through new capital expenditure on brownfield and greenfield facilities replacing older, less efficient assets (such as wet process clinker lines) with state of the art facilities. • Strengthening and development of innovation and the brand In light of the rising costs of raw materials and fuels on the international markets, product and process innovation represents an increasingly important factor in order to compete on the international cement market. The Group’s strategy thus calls for a large commitment to the research activity for product innovation (for example, products with high environmental value like photocatalytic cements, or products that offer significant advantages to the construction industry, like self-levelling concretes) or the process industry (such as cement production processes with lower energy use). At the same time the Group pursues a specific strategy to strengthen the brand, in particular in the emerging markets and/or those of recent expansion. In some of these countries (in India, for instance) the brand represents an important purchase factor for the customer, who associates it with the quality of the product. • Development of resources and systems in order to further improve the Group’s capabilities in the fields of IT, corporate governance, and human resources management To cope with the increasing complexity of the competitive context and the degree of internationalisation, a key element of the Italcementi Group’s strategy is further improvement of its mechanisms of governance and management of resources and information systems. As regards human resources, the Group proposes to further develop the principal technical and managerial skills, as well as to ensure an increasing availability of resources capable of managing multicultural contexts in the various geographic areas in which it is present. In terms of corporate governance, the Group’s priority objective is the adoption of governance and control systems in line with the international best practices. As concerns information systems, the Group intends to gradually implement a global supply model that furnishes IT services to the individual subsidiaries by means of regional/world competence centres specialised in the various activities. • Sustainable development Among the long-term strategic objectives of the Group, sustainable development constitutes the foundation of the Italcementi Group’s strategy and of its work culture. In 2000, Italcementi formalised its commitment to the protection of the environment and social responsibility by joining the World Business Council for Sustainable Development (WBCSD), which provides participating companies a platform for the exchange of knowledge, experiences and best practices as well as for support of their positions on these issues through forums and by working with governments and non-governmental and intergovernmental associations, as further described under “Programme for sustainable development and social responsibility” below. • Moderate financial policy Italcementi’s financial policy aims to support the Group’s industrial long term strategy by optimising its cost of capital and maintaining a strong financial and liquidity structure. Italcementi Group has a moderate financial policy organised around five key elements, targeted to be consistent with a solid investment grade rating: (i) prudent level of leverage, taking into account the cash flow generated by the Group; (ii) safe debt maturity profile ensuring that debt repayments are appropriately distributed over time, to reduce refinancing risk; (iii) availability of unutilised medium and long term committed credit lines, providing Italcementi with the option of refinancing its short term debt at any time, guaranteeing 89 the Group’s liquidity. To ensure ample liquidity reserves, Italcementi maintains long term and close relationships with leading domestic and international banks; (iv) access to diversified financial sources to limit the concentration or the dependence on a specific market, and risk linked to counterparties; (v) an appropriate balance between debt at variable rates and debt at fixed rates, in accordance with its objectives of performance and risk exposure limitation. The Company believes that further financial efficiencies are achievable by the Group through a stronger coordination of its treasury operations and a more centralised approach to its funding transactions, providing greater liquidity to its debt instruments.
BUSINESS OVERVIEW Main activities With an annual production capacity of approximately 70 million tonnes of cement, the Italcementi Group is the world’s fifth largest international cement producer. The Italcementi Group operates mainly in the production and sale of cement, aggregate and concrete. The following table sets out the breakdown of the consolidated revenues of the Italcementi Group by sector for the years ended 31 December 2007 and 2008 and the six-month periods ended 30 June 2008 and 2009. Year ended 31 December Six months ended 30 June 2007 2008 2008 2009 (audited) (unaudited) Sector (€ millions) % (€ millions) % (€ millions) % (€ millions) % Cement and clinker 4,000.3 66.7 4,131.2 71.5 2,087.7 71.3 1,876.6 72.6 Concrete and aggregates 1,736.4 28.9 1,334.0 23.1 687.9 23.5 572.1 22.1 Other activities 264.3 4.4 310.4 5.4 150.5 5.1 137.1 5.3 Total Revenues 6,000.9 100.0 5,775.6 100.0 2,926.1 100.0 2,585.8 100.0
Financial Highlights The following table sets out certain measures of financial performance of the Italcementi Group for the years ended 31 December 2007 and 2008 and the six-month periods ended 30 June 2008 and 2009.
Year ended 31 December Six months ended 30 June 2007 2008(*) 2008(**) 2009 (audited) (unaudited) (€ millions) (€ millions) Revenues 6,001 5,776 2,926 2,586 Recurring EBITDA 1,404 1,113 593 497 EBITDA 1,405 1,103 595 488 EBIT 958 607 378 238 Net profit for the period 612 272 220 127 Group net profit for the period 424 139 131 55 Investments in fixed assets(***) 999 980 484 394 Total shareholders’ equity 4,760 4,615 4,443 4,580 Group shareholders’ equity 3,479 3,325 3,253 3,312 Net debt (financial position) 2,418 2,679 2,608 2,785
90 Number of employees at period end (unaudited) 23,706 22,243 22,902 21,743
(*) Figures for the year ended 31 December 2008 reflect the impact of the deconsolidation of Calcestruzzi and its subsidiaries, as a result of the preventive seizure of the company’s assets ordered on 29 January 2008 in connection with the criminal proceeding described in “Legal Proceedings” below. (**) To permit comparison with the first half of 2009, the 2008 figures have been re-stated for compliance with revised IAS 1 and IAS 23, and with operations in Turkey, previously classified as available for sale in compliance with IFRS 5. (***) Gross of cash of acquired and consolidated companies
PRODUCTS The Italcementi Group offers a diversified range of products to meet the specific local needs of construction companies in the various countries it operates in, even if it is not present in all countries with the entire range of products. Generally, the products offered can be grouped as follows: • cement, clinker and hydraulic binders, which are accounted for under the item “Cement and clinker” in Italcementi’s consolidated financial statements; • concrete, ready-mix concrete and aggregates, which are accounted for under the item “Concrete and aggregates” in Italcementi’s consolidated financial statements; and • cement mortars, premixes and concrete admixtures, which are accounted for under the item “Other activities” in Italcementi’s consolidated financial statements. The range of cements and hydraulic binders is well developed and responds to the standards and construction techniques proper to each geographic area. For example, with regard to Europe and North America, the reference standards for cements and binders are the European Norms (EN) and the American Society for Testing and Materials (ASTM), respectively. These standards apply to aggregates and concrete additives, as well. The reference standards for concrete are analogous to those of cements (EN and ASTM being the main ones). The following table sets out the breakdown of sales volumes of the Italcementi Group by sector for the years ended 31 December 2007 and 2008 and the six-month periods ended 30 June 2008 and 2009. Year ended 31 December Six months ended 30 June Sector 2007 2008* 2008** 2009 (audited) (unaudited) Cement and clinker (metric tonnes) 64.6 62.6 31.9 27.8 Aggregates (metric tonnes) 56.3 47.6 25.0 20.0 Ready-mix concrete (million cubic metres) 20.5 13.9 7.2 5.6
(*) Figures for the year ended 31 December 2008 reflect the impact of the deconsolidation of Calcestruzzi and its subsidiaries, as a result of the preventive seizure of the company’s assets ordered on 29 January 2008 in connection with the criminal proceeding described under “Legal Proceedings” below. (**) To permit comparison with the first half of 2009, the 2008 figures have been re-stated with operations in Turkey, previously classified as available for sale in compliance with IFRS 5. Cement and clinker Cement and clinker production constitutes Italcementi’s main business, accounting for approximately 71.5 per cent. of its total consolidated revenues for the year ended 31 December 2008 and 72.6 per cent. for the six months ended 30 June 2009.
91 As at 31 December 2009, the Group operated 59 cement plants in 13 countries, 15 grinding centres in 7 countries and five trading terminals in 4 countries. In 2008, sales of cement and clinker amounted to €4,131.2 million (compared to €4,000.3 in 2007) and 63 million tonnes. Cement is manufactured from raw materials of natural origin that are crushed to form a compound comprised of approximately 80 per cent. limestone and 20 per cent. clay that is ground to obtain a powder known as “raw meal”. Raw meal is subjected to a temperature of close to 1,500°C in rotary kilns, where it undergoes chemical reactions that transform it into clinker. Cement is obtained from clinker by grinding it into a fine powder and adding gypsum, and possibly secondary constituents that determine the qualities of the final product. Clinker is an important intermediate product which is itself actively traded between cement manufacturers. The Group’s cement plants have quarries with sizeable reserves that enable them to meet their needs for a long period of time. Most of the quarries have an estimated period of exploitable reserves of over 50 years. The Group’s clinker production facilities operate at a high utilisation rate in each of the various country in which it operates. Concrete and aggregates Concrete and aggregates production accounted for approximately 23.1 per cent. of Italcementi’s total consolidated revenues for the year ended 31 December 2008 and 22.1 per cent. for the six months ended 30 June 2009. As at 31 December 2009, the Group operated 92 aggregate quarries in 6 countries and 373 concrete batching units in 10 countries. In 2008, sales of concrete and aggregate amounted to €1,334.0 million (compared to €1,736.4 in 2007), 48 million tonnes, with regard to aggregates and 14 million cubic metres with regard to ready-mixed concrete. Concrete is obtained from cement, aggregate, water and additives and its composition must comply with very rigorous technical and strength requirements. Concrete additives are products, generally liquid, that are added to the material being produced in order for it to have certain desired characteristics, or to attenuate critical behaviours of the material. Concrete is classified according to its characteristics. The main characteristic of concrete is its compressive strength, but just as important is its effectiveness in the fresh state and its aging behaviour. Aggregates are made up of sand and natural gravels that are extracted from alluvial quarries or massive rocks and then crushed and screened. Around 40 per cent. of aggregates are used for the production of concrete, of which they constitute the main component, while the rest is used, in its natural state, for road work. Raw materials are supplied in conditions similar to those for cement, and dynamic management of the quarries ensures renewal of the reserves. An aggregate quarry has an exploitation period that is generally shorter than that of a cement quarry. Other businesses The Italcementi Group is also engaged in the manufacturing and sale of admixtures, limes, mortars and premixes for cement and concretes, the production and sale of electric energy and e-business services. These activities accounted for approximately 5.4 per cent. of Italcementi’s total consolidated revenues for the year ended 31 December 2008 and 5.3 per cent. for the six months ended 30 June 2009. Admixtures In the admixtures business, the Group operates through Axim in Italy, France, USA, Morocco, Spain and Egypt. Admixtures play an important role in the formulation of concretes, and in particular special concretes (self compacting, self levelling, high performances, etc.) and in the cement and binders (grinding aids, performance improvers, etc.). The role of admixtures becomes key for the innovative products both in relation to cement and concretes. In 2008 the total volume of admixtures produced for cement was equal to approximately 41,000 tonnes (compared to 45,000 tonnes in 2007), while the total volume of admixtures produced for concrete was equal to approximately 67,000 tonnes (which is approximately the same volume in 2007). 92 Electric energy In the electric energy business, Italcementi operates through its subsidiary Italgen S.p.A. (Italgen), which was founded in 2001 following a spin-off of the hydro and thermal power plant operated by Italcementi since the 1920s. The activity has been historically oriented towards the production of energy for the Group’s needs. Italgen’s main assets in Italy are a 70 Megawatt thermal power plant in Villa di Serio, in Lombardy (currently under a revamping process), 14 hydroelectric power plants located in Lombardy, Piedmont and Veneto for a total installed capacity of approximately 56 Megawatt, as well as approximately 400 kilometres of distribution lines. In 2008, Italgen had revenues of €57 million (i.e. approximately 1 per cent. of Italcementi’s consolidated revenues), earning before interest tax depreciation and amortisation (EBITDA) of €15 million (1.4 per cent. of Italcementi’s consolidated recurring EBITDA) and a net profit of €6 million (approximately 2 per cent. of the Group’s net profit). Italgen is currently developing three wind farm projects in Morocco (first step 5 Megawatt), Turkey (142.5 Megawatt) and Egypt (first step 120 Megawatt) of which the most advanced are the Turkish and the Moroccan projects with completion expected by the end of 2010 and the end of 2011, respectively. E-Business Services In the e-business sector, Italcementi operates through its subsidiary BravoSolution S.p.A. (BravoSolution), which has developed a technological platform and related organisational processes and skills, through which corporate customers can manage their supply and procurement activities. BravoSolution is recognised as an international market leader for web-based supply management solutions by industry analysts. BravoSolution is pursuing an international expansion strategy, and at the beginning of 2008 it acquired the US Verticalnet group and in the second half of the year it formed two new subsidiaries in Mexico and the Netherlands. GEOGRAPHICAL PRESENCE Italcementi operates in 22 countries in Europe, North America, North Africa, the Middle East and Asia. The operations in each country are led by a Country Manager reporting to one of four Zone Managers who ensure the coordination and implementation of the industrial policies and actions set by the Chief Operating Officer. As of the date of this Base Prospectus, the four Zones comprise: Italy (Zone 1); France, Belgium, Spain, Morocco and North America (Zone 2); Greece, Bulgaria, Turkey, Khazakstan, Egypt and the Middle East (Zone 3); and India, Thailand and China (Zone 4). Group results are disclosed on a more conventional basis and divided between: Western Europe; North America; Eastern Europe and the Southern Mediterranean; and Asia. The following table shows the breakdown of the consolidated revenues of the Italcementi Group by geographic area for the years ended 31 December 2007 and 2008 and the six month periods ended 30 June 2008 and 2009. Year ended 31 December Six months ended 30 June 2007 2008(*) 2008 2009 (audited) (unaudited) Revenues by region (€ millions) % (€ millions) % (€ millions) % (€ millions) % Italy 1,501.7 1,212.7 634.0 485.7 France/Belgium 1,730.9 1,749.1 921.0 795.8 Spain 362.5 299.7 161.7 114.9 Greece 103.4 97.4 47.3 40.3 Inter-area -30.8 -27.6 -13.9 -11.3 eliminations Western Europe 3,667.7 61.1 3,331.4 57.7 1,750.2 59.8 1425.4 55.1 North America 605.7 500.4 228.2 189.6 93 Egypt 538.9 664.5 311.8 417.6 Morocco 276.0 309.4 154.9 166.6 Bulgaria 147.7 170.2 81.9 60.2 Turkey 260.0 215.2 111.9 60.8 Inter-area -5.2 -0.4 - 0.4 -0.3 eliminations Eastern Europe and Southern 1,217.4 20.3 1,358.9 23.5 660.1 22.6 705.0 27.3 Mediterranean rim Thailand 208.5 199.6 101.5 79.0 India 173.8 188.2 94.6 95.2 China 13.5 32.3 10.7 23.8 Kazakhstan 48.5 29.5 8.5 13.5 Inter-area 0.0 0.0 0.0 0.0 eliminations Asia 444.3 449.5 215.2 7.4 211.5 8.2 Cement and clinker 364.5 370.8 186.0 124.6 trading Others and -298.6 -235.5 -113.7 -70.3 eliminations Total Revenues 6,000.9 100.0 5,775.6 100.0 2,926.1 100 2,585.8 100 (*) Figures for the year ended 31 December 2008 reflect the impact of deconsolidation of Calcestruzzi and its subsidiaries, as a result of the preventive seizure on the company’s assets ordered on 29 January 2008 in connection with the criminal proceeding described in “Legal Proceedings” below.
PRODUCTION The industrial operations aimed at production include the various phases from excavation of the raw materials to delivery of the end product, with a set of tasks that differ from phase to phase and from plant to plant at local level. The most important raw materials, limestone, clay and aggregates, are mainly extracted from quarries, either owned or leased, for which the Group’s operating companies hold the excavation licenses, while the other raw materials, including chemical gypsum, fly ash and blast furnace slag, are primarily purchased from third parties. At the local level the extraction activities can either be performed directly by the Company or can be subcontracted to third parties, as most efficient. The Company usually retains ownership of the area and title to the concession of the area. The Group’s operates 446 production facilities (including 59 integrated cement plants with the related quarries, 15 grinding centres, 373 concrete batching units and five terminals). The production process is mainly managed by the personnel of the operating companies, who to differing degrees avail themselves of third-party services for industrial cleaning operations, maintenance, and ancillary and general services. The plants’ technical and economic performances are continuously monitored by the Group, which pursues the optimisation of results through benchmarking comparison and experience sharing, if necessary providing technical assistance through the CTG’s specialists.
94 The product loading installations are an integral part of the production plants or distribution terminals fed by the production plants or the trading companies. The transport of the cement products to destination, either in bags or in bulk, as well as of the aggregates, is mainly performed directly by the customers or accomplished through third parties, with the notable exception of France where the Group operates its own in-house transportation company, Tratel. Environment The cement sector is characterised by high consumption of primary energy and the use of non-renewal resources. Therefore, environmental issues take on fundamental importance for successfully carrying out the production activity. Lowering the production cost of the product cannot disregard respect for the environment and for the community in which one operates. The development of methods and systems aimed at reducing the carbon dioxide (CO2) and particulates emissions generated by the production cycle, limiting the environmental impact of the installations and operating with respect for traditions and the needs of local communities has therefore become a competitive factor for companies in the sector.
In particular, control of CO2 emissions represents an important competitive factor, especially in Europe. The Emission Trading Scheme Directive in fact imposes on cement manufacturers a maximum limit on CO2 emissions per production site; beyond this limit the plant owner must purchase emission certificates on the CO2 trading market, impacting the cost structure and consequently the enterprise’s ability to compete effectively in the market. The Italcementi Group adopts environmental management systems as tools for risk prevention and continuous improvement of its environmental performances in relation in particular to the responsible use of resources, the control of gaseous emissions and the management of the quarries of raw materials. In addition, the Group is constantly engaged in the control of CO2 emissions with defined reduction goals. Planning and scheduling of production The Group’s activities have a prevalently local nature and therefore the planning and scheduling of production are managed by the operating companies, as a matter of priority on the basis of the indications of their respective commercial functions and in addition, for what regards clinker and cement, of the requests for the trading activities managed at Group level. The latter are directed both at supplementing the product availability of the operating companies whose the production capacity is lower than the demand in their markets and at maintaining or acquiring market shares in countries where the Group is not present with production facilities, as well as to satisfy specific requests from third parties. In this way maximisation of the degree of plant utilisation is pursued and consequently the unit cost of production is reduced. Italcementi, however, maintains a stringent production and inventories monitoring system, managed by CTG, which is aimed at reinforcing operational controls and ensure consistency of local activities with Group-wide goals, notably in terms of working capital management. Quality control Italcementi constantly seeks to improve the quality of the products and services it supplies. To this end it has adopted a quality management system that is aimed in particular at ensuring constant quality of its products over time and in keeping with the specified requirements. The entire cement production cycle is monitored and subject to continuous control by the technical personnel. Automatic control combined with computerised techniques enables uniform interpretation of the results as well as the definition of preventive measures to maintain consistent product quality. The reference standards for product quality are those adopted in the destination countries and, for specific applications, the technical specifications of the clients and the performances guaranteed by the manufacturer. To ensure product quality, in addition to the quality controls on production, which regard all the phases of the process, full efficiency of all the production facilities, especially of dosing systems, is a major focus. Each plant is equipped with a lab and dedicated staff for this activity who cover the entire operating period.
95 In particular the controls regard: • sampling and controlling of raw materials (also those from the Company’s own quarries), additives and fuels entering the plant; • analysing semi-finished materials through automatic online systems or through samples taken at preset intervals; and • finished products sent to the stockyard (for controls also through automatic online systems) and finished products sent to shipping. For the plants that produce the hydraulic binders, the reliability of the controls is ensured by adopting a quality manual with procedures, technical instructions, forms and registrations followed up by periodic checks. To verify the reliability of its laboratories, the Company also has recourse to the use of standard cements and to interventions by the Calibration Center of the Laboratory Quality Assurance Service of Bergamo and Guerville. All the production plants are ISO 9001 certified with the sole exceptions of those in Kazakhstan, India and North America. All the operating companies have a system for managing the data resulting from the quality controls that is identical for the entire Group, through which CTG monitors the quality performances in the different phases of the process and develops a benchmarking comparison.
SALES, TRADING AND MARKETING ACTIVITIES Sales Given the “local” nature of the cement business, the sales activities are consistently developed according to the structure of the construction market and the specific operating methods of the customers and there is a substantial difference in the commercial approach between mature markets and emerging markets. In mature markets, characterised by a high incidence of sales of bulk cement, due to the high penetration of ready-mixed concrete and prefabrication, the supplier/client relationship requires an orientation towards satisfying the explicit and latent needs of the customer, so that each commercial opportunity necessarily requires the development of competitive solutions for the customer. A commercial organisation with qualified personnel constantly updated in regard to customers’ requests is therefore needed, able to offer information on the product range and the related applications, support in the various phases of product use, technical consulting on the integrated use of cement and additives and on the optimisation/development of mix designs, and information on technical standards and their possible evolutions. The technical assistance constitutes an important customer loyalty building tool and is able to provide all operators with technical support in their various application needs, also through the aid of mobile laboratories that carry out the activity directly at the customer’s work site. In emerging markets, which are instead characterised by a high incidence of bagged cement consumption, sales are aimed mainly at the channel of distributors who make the deliveries and transport the cement to the end users. In this case, since there is no systematic, direct interaction between producer and end user, the commercial organisation carries out an activity of an essentially distributive nature, as the relationship of supplier-customer interdependency which characterises the mature markets is absent. Trading The Italcementi Group’s companies sell their products mainly in their respective local markets. However the Group’s subsidiaries in Bulgaria, Egypt and Thailand have historically been the most active in international trade and export, selling cement and clinker to countries in which the Group does not conduct business directly. The trading sector is managed by Interbulk S.A., the Group’s international trading company, which is active in direct trading with countries in which the Group is not present and also coordinates the activities of the Group’s terminals located in Gambia, Mauritania, Sri Lanka and Albania. The terminal facilities in
96 Kuwait are managed as part of the Middle East operations. The cement and aggregate sectors sell part of their production to the ready-mixed concrete sector. Marketing As regards marketing activities, the goal is differentiation of the supply vis-à-vis the main competitors, through brand enhancement, promotion of the use of special products, and partnerships with primary customers to develop new product applications. The initiatives adopted by the Group include, among others: • advertising in the media and specialised trade journals, used to strengthen the brand and to provide information on new products, especially in the launch phase of special products (for example TX Active photocatalytic cement, natural limes and sulfoaluminate cements); • product promotion of customers’ and end users’ facilities (for example construction site demonstrations and merchandising); • participation at specialised trade fairs and seminars/conferences aimed at contractors and operators in the sector; and • sponsorship for the realisation of works of particular architectural merit that can constitute a point of reference for the market (for example the Dives in Misericordia Church). Principal markets and competitive position The world demand for cement is closely linked to the growth rate of the construction sector (residential, commercial and industrial building and infrastructure). In the period 2004-2008, world cement consumption significantly increased (an increase of 7.4 per cent. per year). This increase was concentrated primarily in the emerging markets (mainly China, India, the Middle East and Eastern Europe), which in the same period posted a growth rate in cement demand of 9.7 per cent. per year. This increase is much higher than in the mature markets (Europe, United States), which registered a decline of 3.3 per cent. annually. On account of this market trend, the world demand for cement is now concentrated in the emerging markets, which in 2008 represented approximately 87 per cent. of the total demand. The orientation of the leading cement manufacturers towards a global presence has become more marked in recent years also as a result of the strong expansion of the emerging markets, and operators addressed their growth initiatives towards these markets to benefit from the notable growth in demand. The Italcementi Group has developed this strategy, diversifying beyond its main markets (Italy and France), into the rest of the European Union, North America, and the Mediterranean Rim (Turkey, Greece and Morocco). Since 1998, the Group has continued its policy of external growth in order to maintain and extend its geographical positions in markets with a strong potential, and create a new balance between market share in mature markets and emerging markets. In this way, the Group has reinforced its position in Morocco and extended its presence in Asia (Thailand, India, Kazakhstan and China), Bulgaria and Egypt. The Group’s main competitors at world level are the following groups: Lafarge, Holcim, Cemex and HeidelbergCement. The competitive situation in each country may vary, depending on the geographical location of these producers and on the local presence of several other companies that compete with Italcement at regional or country level. For information only, ranks and market shares for Italcementi’s cement business may be estimated as follows: Country Rank* Market share* Italy 1 27% France 2 33% Belgium 3 16%
97 Spain 6 6% Greece 3 6% USA 8 4%(1) Canada 5 8% Egypt 1 30% Morocco 2 26% Bulgaria 1 40% Turkey 5 6% Thailand 4 13% India 5 3%(2) Kazakhstan 4 13% China - 5%(3) Source: JP Morgan Global Equity Research Report dated 8 September 2009 (1) 16% in regions where the Group operates (Source: Italcementi estimates) (2) 6% in regions where the Group operates (Source: Italcementi estimates) (3) in regions where the Group operates (Source: Italcementi estimates) CTG Since 1994 CTG combines the skills and specific knowledge of two previously separate technical centres respectively of Italcementi and Ciments Français, improving the quality of the services offered both to the companies of the Group and to third parties around the world. CTG has its headquarters in Bergamo and a branch in Guerville, France, and has a staff of 400 employees. CTG’s principal activities are: • planning and supervision of the realisation of industrial plants and machinery; • modernisation and optimisation of production processes; • monitoring of technical and economic performances for plants; • research and development on materials, products and processes; and • specialised technical assistance.
RESEARCH AND DEVELOPMENT In the Italcementi Group, research is a strategic activity aimed at developing innovation projects in the framework of new market trends. The research activity is carried out through a network of scientific collaborations at the international level that includes research centres, universities and companies in the materials and construction sector. The network is comprised of ten outside centres, 30 companies and 26 among Italian, European and non- European universities. Through the network, scientific collaboration projects are carried out on transversal topics (for example, the reduction of CO2 emissions, sustainable development, the durability of materials, etc.), specific bilateral collaborations are undertaken to achieve industrial objectives, technical standards are developed in the CEN (European Committee for Standardisation) and UNI (Ente Nazionale Italiano di Unificazione) frameworks, but above all, basic research and targeted researches are conducted. The research activity is carried out by CTG, one of Europe’s most important research centres on cement materials, as discussed above.
98 Cement presents notable possibilities of development linked both to the general evolution of inorganic materials and to that of composite materials. In particular, the combination of cement with other materials like organic polymers and inorganic fillers can significantly improve some fundamental properties of the finished product, and such characteristics have oriented the research towards higher levels of strength, durability and toughness. In addition, cement is the material that best adapts to future needs linked to the environment, where recycling will be one of the fundamental requirements. With these objectives the laboratories of the CTG have attained national and international recognition linked to its strong commitment in the field of research and development. These honours have also enabled CTG to obtain European and national funding for specific research projects. At the date of this Base Prospectus the Italcementi Group is involved in numerous research projects regarding: • use of alternative fuels in cement production; • new systems for clinker grinding;
• new clinker with reduced CO2 impact; • new additions for mix cements; • new additives for cement and concrete; • special cements with advanced strength and workability characteristics; • high-performance cement materials; • recycling of cement materials; • photocatalytic cements; and • architectonic concrete.
INTELLECTUAL PROPERTY The Group’s activity is not substantially dependent on trademarks, patents or licenses, as the development of the technology occurs proprietarily through its own organisation and/or through consulting contracts with related parties. The Italcementi Group protects the results of its research and development programs through industrial patents aimed at protecting its technical inventions both at the national and international level. From 1994 to the date of this Base Prospectus, the Group filed 76 patents for over 400 extensions, mainly in Europe, the United States and other countries where the Group is present. The Italcementi Group’s portfolio of trademarks is one of the world’s most significant in the reference market, both in terms of renown and prestige and in terms of the overall number of registrations and coverage of the territory. As at 30 June 2009, the Group held over 400 trademarks, 99 of which were held directly by Italcementi. The Italcementi Group pursues an attentive policy to protect its intellectual assets, including through a surveillance system, in order to prevent imitations and abuses of those assets and to contest them when they occur. In 2008 the Italcementi Group introduced a policy aimed at valuing the intellectual property outside the perimeter of the Group wherever it may be possible without conflict with its commercial activities and expects this policy to generate positive returns both economically and in terms of publicity. The first valuable example of this policy is represented by a license agreement signed with Heidelberg Cement AG, pertaining to know-how, patents and product trademark related to photocatalytic products, a field in which the Italcementi Group owns the relevant technology know-how. The agreement is operative in 12 countries, including 9 countries where the Italcementi Group does not currently operate.
99 PROGRAMME FOR SUSTAINABLE DEVELOPMENT AND SOCIAL RESPONSIBILITY Among the long-term strategic objectives of the Group, sustainable development constitutes the foundation of the Italcementi Group’s strategy and of its work culture. In 2000, Italcementi formalised its commitment to the protection of the environment and social responsibility by joining the World Business Council for Sustainable Development (WBCSD), which provides participating companies a platform for the exchange of knowledge, experiences and best practices as well as for support of their positions on these issues through forums and by working with governments and non- governmental and intergovernmental associations. As a member of the WBCSD, Italcementi signed the Cement Sustainability Initiative’s Agenda for Action, which is the first formal commitment that binds a number of world cement industry leaders to an action plan that aims at satisfying present-day needs at the same time as safeguarding the requirements of future generations. The intervention areas in which Italcementi is engaged in sustainable development can be grouped into the following categories: • Management and corporate governance system: to ensure the efficacy of its operational activities and its decision-making process, the Group has adopted specific corporate governance standards and has undertaken actions aimed at improving the efficiency and the transparency of its management and control systems. This has required careful definition of its decision-making structure and the adoption of a series of rules and principles that guide and control the actions and conduct of all employees which the Group has codified in a set of voluntary codes. • Economic development: the principal economic objectives of the Italcementi Group are long-term growth and profitability. These goals are pursued through acquisitions, industrial investments and product innovation, with a portfolio balanced between mature markets and emerging markets. This produces economic benefits not only for the Group and its investors but also for the countries in which the Group operates and invests. Cement factories are important catalysts for the development of local economies; they support infrastructure development and generate work opportunities, making an important contribution to government revenue. The multiplier effect exerted by these benefits in the value chain is very positive, especially in the emerging economies. • Protection of the environment: the Italcementi Group’s proactive approach is centred on the prevention and mitigation of every potential environmental impact and on the conservation of natural resources in the development and operation of its production plants. The Group has identified four specific priorities, in line with the sustainability strategy adopted:
- climate protection through adequate control and careful management of CO2 emissions; - responsible use of resources, such as fuels and raw materials, electricity and water; - control and reduction of atmospheric emissions, ensuring careful monitoring of all kilns and the adoption of the best techniques available for the reduction of emissions; and - minimisation of the impact (visual, structural, geologic) of its production facilities on the land, including quarry restoration. The Group has committed itself to applying the guidelines and protocols developed by the Cement Sustainability Initiative (CSI) on climate protection, on the use of fuels and raw materials, on the monitoring and reporting of emissions and, for new projects and substantial modifications, on environmental and social impact assessments. The Italcementi Group’s primary interest in environmental matters consists in controlling and reducing the consumption of raw materials, fuels, electricity and water. • Social commitment: the Italcementi Group is strongly committed to improving the quality of life of its employees, to supporting local communities and to collaborating with customers, suppliers and public administrations. Diversity is perceived as one of the core values of the Italcementi Group: employment and development and human resource promotion programmes are carried out without discrimination. The health and safety of employees, as well as of the surrounding environment, are fundamental for the 100 Group. In addition, the Group has adopted a safety policy that involves all of its production and work sites, with the objective of eliminating injuries. This goal is pursued by applying the highest safety standards, encouraging a culture of risk prevention and promoting the adoption of responsible conduct on the part of all the employees and those who work or have relations with the Group. The Group’s sustainability management is entrusted to the Sustainable Development Steering Committee (SDSC). The SDSC, chaired by the Group’s Chief Executive Officer and coordinated by the Director for Sustainable Development, is made up of all members of the Italcementi Steering Committee plus the directors of the Communication & Image and Research & Innovation.
CORPORATE STRUCTURE Italcementi S.p.A. is the parent company of Italcementi Group, which, as at 30 June 2009, comprised of 229 companies, of which: • 185 are directly or indirectly controlled by Italcementi and therefore consolidated on a line-by-line basis; • 23 are jointly controlled and therefore consolidated on a proportional basis; and • 21 are affiliated and therefore consolidated with the equity method. Italcementi directly operates its cement business in Italy and also controls the Group’s main operational subsidiaries in Italy and, through Italgen S.p.A. and Bravosolution S.p.A, the foreign operational subsidiaries of the Group in the electricity and e-business services businesses. As at the date of this Base Prospectus, due to the legal proceedings in which it is involved (described under “Legal Proceedings”, below,) Calcestruzzi is subject to the control of an administrator appointed by the competent court and is therefore not consolidated on a line-by-line basis with Italcementi, even though Italcementi holds 100 per cent. of its share capital. The Group’s net income is indirectly affected by the fair value evaluation of Calcestruzzi at the end of the each accounting period. With limited exceptions, such as the terminal business in Albania and the ready-mixed concrete joint venture in Saudi Arabia, Italcementi owns practically all of the non-Italian operational subsidiaries indirectly through Ciments Français, of which Italcementi owns (indirectly through Société Internationale Italcementi France SAS), as of the date of this Base Prospectus, approximately 82 per cent. of the share capital and approximately 90 per cent. of the voting rights. The main subsidiaries with a significant presence of minority shareholders are located in Thailand (Asia Cement Company and Jalaprathan Cement Public Company), Morocco (Ciments du Maroc), Egypt (Suez Cement Company, which also owns 98.7 per cent. of Helwan Cement Company, 66.1 per cent. of Tourah Portland Cement, 52 per cent. of Ready Mix Beton SAE and Universal for Ready Mix Production SAE and 51 per cent. of Hilal Cement Company - Kuwait) and France (Ciments Français).
101 The table below provides an overview of the current structure of the Italcementi Group:
Diversified activities ItalcementiItalcementi S.p.A.S.p.A. Holding company also operating Support activities Italian cement activities
AdAdditivesAdditivesditives andand 100% otherother ItalianItalian 100% ItalcementiItalcementi FinanceFinance S.A.S.A. operationsoperations ItalgenItalgenS.p.A.S.p.A. 81.9%
Group financing (Issuer) Power production Ciments Français S.A. 100% SociSociééttééInternationaleInternationale Ciments Français S.A. AffiliatesAffiliates ItalcementiItalcementi ((LuxembourgLuxembourg)) S.A.S.A.
Captive reinsurance 83% BravoSolutionBravoSolutionS.p.A.S.p.A. 50% FranceFrance BulgariaBulgaria 50% CTGCTG S.p.A.S.p.A. BelgiumBelgium TurkeyTurkey E-business initiatives R&D, engineering and technical support AffiliatesAffiliates SpainSpain EgyptEgypt((**))
InterbulkInterbulkTradingTrading S.p.A.S.p.A. 15% 85% GreeceGreece MoroccoMorocco((**))
50% Trading Co U.S.U.S. IndiaIndia
( ) MedcemMedcemS.r.lS.r.l.. CanadaCanada ThailandThailand(**)
Others((**)) China Shipping Others ** China International cement, RMC, aggregates and additives activities KazakhstanKazakhstan
All figures as of 31 December 2009, pro-forma for redenomination of Italcementi Finance S.A. (*) Controlling presence with significant minority interests (**) Italcementi is also present in Cyprus and Saudi Arabia, as well operating terminals in Albania, Gambia, Kuwait, Sri Lanka and Mauritania (grinding centre)
Below is a table representing the leading operating companies headed by the Italcementi Group as at 30 June 2009, broken down by country and area of activity. Aggregates and ready- Country Cement mixed concrete Other Italy Italcementi Calcestruzzi(1) Axim Italia Italgen Bravo Solutions France Ciments Calcia GSM Axim France Unibeton Socli Tratel Belgium Compagnie des Ciments Aggregates and ready-mixed Trabel Belges concrete subsidiaries Spain Financiera y Minera Aggregates and ready-mixed Axim concrete subsidiaries Greece Halyps Building Materials Aggregates and ready-mixed concrete subsidiaries Cyprus Vassiliko(2) (3) United States of America Essroc Corp. Aggregates and ready-mixed Axim and Porto Rico concrete subsidiaries
102 Canada Essroc Canada Axim Ciment Quebec(2) Thailand Asia Cement Public Company Aggregates and ready-mixed Jalaprathan Cement Public concrete subsidiaries Company India Zuari Cement Ltd. Sitapuram Power Ltd. Fuping Cement China Kazakhstan Shymkent Cement Saudi Arabia International City for Ready Mix(4) Egypt Suez Cement Company (2) RMB Egypt Italgen Misr Tourah Other aggregates and ready- Helwan Cement Co. (2) mixed concrete subsidiaries Morocco Ciments du Maroc (2) Aggregates and ready-mixed Italgen Maroc Asment (3) concrete subsidiaries Bulgaria Devnya Cement AD Vulkan AD Turkey Set Group Aggregates and ready-mixed Italgen Elektrik Uretim Cement subsidiaries concrete subsidiaries Kuwait Hilal Cement (2) Aggregates and ready-mixed concrete subsidiaries Albania Eurotech Cement (5) Sri Lanka Singha Cement (PTE) Limited(5) Gambia Gacem (5) Mauritania Mafci (5) Switzerland Interbulk (Trading) (1) Company not consolidated as at 30 June 2009, therefore all the numerical data cited in this section do not take in account the data relating to the concrete sector - scope of consolidation Italy (2) Listed company (3) Companies valued with the equity method (4) Joint venture (5) Terminals
CORPORATE GOVERNANCE Overview Corporate governance rules for Italian companies whose shares are listed on the Italian Stock Exchange are set forth in the Italian Civil Code, the Legislative Decree no. 58 of 24 February 1998 (Testo Unico della Finanza, the Italian Financial Services and Markets Act, hereinafter the TUF) and CONSOB rules implementing the TUF. The corporate governance system adopted by Italcementi comprises not only the Company’s By-laws, but also the following codes and/or regulations (the texts of which are available on the corporate website www.italcementigroup.com): • Voluntary Code of Conduct; • Code of Ethics;
103 • Treatment of Confidential Information; • Internal Dealing Code of Conduct; • Procedural Code for Transactions with Related Parties; • Insider Register Procedure; and • Organisation, Management and Control Model. Italcementi is organised according to the so-called “traditional” administration and control system (sistema tradizionale) provided for by Articles 2380-bis et seq. of the Italian Civil Code, where (i) the Board of Directors (Consiglio di amministrazione), appointed by the ordinary shareholders’ meeting, is responsible for the Company’s management; and (ii) the Board of Statutory Auditors (Collegio Sindacale) also appointed by the ordinary shareholders’ meeting is responsible for control over the Company’s administration. According to Article 2409, paragraph 2, of the Italian Civil Code, and Articles 155 et seq. of Legislative Decree no. 58/1998, listed companies organised under the laws of Italy shall appoint – by resolution of the ordinary shareholders’ meeting - an auditing firm to audit their financial statements and carry out the accounting control. Board of Directors According to the Company’s By-laws, the Board of Directors of Italcementi shall be made up of a minimum of 11 and a maximum of 21 directors, appointed on the basis of lists of candidates that ensure for minority shareholders the minimum number of directors provided for by the law. The Board of Directors has the widest powers for the ordinary and extraordinary management of the Company, thus being entitled to take all actions as it deems appropriate in order to achieve the Company’s purposes, excluding only those which are expressly reserved by the law to the shareholders’ meeting. In addition to the powers provided for by the law and the By-laws, according to Art. 2436 of the Italian Civil Code the Board of Directors (as well as the extraordinary shareholders’ meeting, which derives its authority by operation of law) shall be entitled to resolve upon the following matters: • incorporation of wholly owned companies or 90 per cent-owned companies; • moving the Company’s head office, as long as it remains in Italy; • establishment or cancellation of branch offices, both in Italy and abroad; • reduction in share capital in the event of shareholder’s withdrawal; and • adjustment of the By-laws to comply with mandatory regulatory provisions. Furthermore, the Board of Directors, in accordance with the Code of Conduct, has the task of examining and approving in advance: • subsidiaries’ operations, when they have significant strategic, economic or financial relevance also for Italcementi; and • transactions with related parties when expressly required by the specific Company’s procedures and in keeping with the ways provided therein. The Board of Directors has delegated all of its powers, except for those which the Italian Civil Code and the Company’s By-laws do not allow to be delegated, to an Executive Committee, composed by five members, including the Chairman, the Executive Deputy Chairman and the Chief Executive Officer. In accordance with the Code of Conduct, the Board of Directors has set up, internally, a Remuneration Committee and an Internal Control Committee, whose deliberations have a consultative, propositional nature without being binding on the Board. The Remuneration Committee has the task of formulating to the Board, in the absence of those directly concerned, proposals for the remuneration of the directors holding specific positions as well as of the Chief
104 Operating Officer and of the executives with strategic responsibilities, monitoring their application on the basis of the information provided by the empowered directors. The Remuneration Committee also provides other advisory functions that the Board of Directors may request from time to time on the matter or any connected item. The Internal Control Committee has, among others, the following purposes: to assess, together with the executive in charge of the drawing up of the Company’s accounting documents and the auditors, the correct use of accounting standards and their uniformity for the purpose of preparing the consolidated financial statements; to express, when requested by the Chief Executive Officer, opinions on specific issues regarding the identification of the main company risks, as well as the planning, implementation and management of the internal control system; to examine the work plan prepared by the person in charge of internal control, as well as periodical reports prepared by him. In addition, the Internal Control Committee must carry out any additional tasks assigned by the Board of Directors and report, at least twice a year, on the occasion of the approval of the financial statements and the interim report, on the activities performed and the adequacy of the internal control system. In addition, the Internal Control Committee assists the Board of Directors in the activities connected with the functioning of the internal control system. Board of Statutory Auditors Italcementi’s By-laws provide that the Board of Statutory Auditors consists of three Acting Auditors and three Substitute Auditors, appointed on the basis of lists of candidates that ensure for minority shareholders one Acting Auditor and one Substitute Auditor. They hold office for three years and their terms expire on the date of the shareholders’ meeting called to approve the financial statements regarding their third year in office. They can be re-elected. In accordance with art. 149 of the TUF the Board of Statutory Auditors monitors: (i) compliance with the law and the By-laws; (ii) respect of the principles of proper administration and adequacy of the Company’s organisational structure in respect of competency of the internal control systems and of the administrative and accounting systems, as well as of the reliability of the latter in correctly representing the business operations; (iii) the procedures for the realistic implementation of the corporate governance rules provided for by the codes of conduct drawn up by regulated-market management companies or trade associations, to which the Company, by informing the public, declares that it abides to; and (iv) adequacy of the instructions given by the Company to its subsidiaries. In addition the Board of Statutory Auditors reports on the oversight activity carried out and on the omissions and the reprehensible actions reported to the Shareholders’ Meeting called to approve the financial statements. In accordance with art. 151 of the TUF, the auditors can in addition carry out individually in any moment inspections and controls, as well as request information from the directors, also in relation to the subsidiaries, regarding company operations or specific businesses, or make the same requests for information directly to the management and control bodies of the subsidiaries. The Board of Statutory Auditors can exchange information with the corresponding organs of the subsidiaries in relation to the administration and control systems and to the general trend of the their business. It can also, after having so communicated to the Chairman of the Board of Directors, call meetings of shareholders, the Board of Directors or the Executive Committee, and avail itself of the Company’s employees in carrying out its functions. Its powers of convocation and request for collaboration can also be exercised individually by each member of the Board, with the exception of the power to call a Shareholders’ Meeting, for which at least two members are necessary. Management and Supervisory Bodies Board of Directors Italcementi’s Board of Directors currently consists of 18 members, including 14 non-executive members and ten members considered as independent directors according to the Italian Stock Exchange guidelines.
105 The current Board of Directors was appointed by the Company’s Ordinary Shareholders’ Meeting of 18 April 2007 and will remain in office until the approval of the financial statements for the year ending 31 December 2009. Outgoing directors may be re-elected. The current members of the Board of Directors are set out below, together with an indication of their principal activities outside the Company as at 31 December 2009. Principal activities outside the Name Position Company Antonio Catani Honorary Chairman Giampiero Pesenti Chairman (1) Chairman and Chief Executive Officer of Italmobiliare S.p.A., Chairman of Franco Tosi S.r.l., Deputy Chairman of Fincomind AG, Director of Ciments Français S.A. (in representation of Italcementi S.p.A.), Allianz S.p.A., Compagnie Monegasque de Banque, Credit Mobilier de Monaco, Finter Bank Zürich, Mittel S.p.A., Pirelli S.p.A. Pierfranco Barabani Executive Deputy Chairman (1) Director of Ciments Français S.A. (in representation of Société Internationale Italcementi (Luxembourg) S.A.). Carlo Pesenti Chief Executive Officer(1) (2) Director and Chief Operating Officer of Italmobiliare S.p.A., Deputy Chairman of Ciments Français S.A., Director of Mediobanca S.p.A., RCS MediaGroup S.p.A., Unicredit S.p.A., Ambienta SGR. Alberto Bombassei Director(5) Chairman and Chief Executive Officer of Brembo S.p.A., Director of Atlantia S.p.A., Ciccolella S.p.A., Pirelli S.p.A. Alberto Clô Director (4) (5) (7) Director of Atlantia S.p.A., ENI S.p.A., De Longhi S.p.A. Federico Falck Director (4) (5) Chairman of Actelios S.p.A., Falck S.p.A., Riesfactoring S.p.A., Director of Banca Popolare di Sondrio S.c.a.r.l., Cassa di Risparmio di Parma e Piacenza S.p.A. Pietro Ferrero Director (5) Chairman of Ferrero S.p.A., Chief Executive Officer of Ferrero International S.A., Director of Allianz S.p.A. Danilo Gambirasi Director Karl Janjöri Director (3) (5) Italo Lucchini Director (3) Deputy Chairman of Italmobiliare S.p.A., Supervisory Director of Unione di Banche Italiane S.c.p.a., Director of Ciments Français S.A. (in representation of Calcestruzzi ), Chairman of the Board of Statutory Auditors of BMW Italia S.p.A., BMW Financial Services Italia S.p.A. Emma Marcegaglia Director (5) Chairman of Mita Resort S.r.l., Turismo e Immobiliare S.p.A., Chief Executive
106 Officer of Albarella S.p.A., Marcegaglia S.p.A., Pugnochiuso Gruppo Marcegaglia S.p.A., Director of Bracco S.p.A., Gabetti Property Solutions S.p.A., Indesit Company S.p.A. Edilacciai S.r.l., Siderfactor S.p.A. Sebastiano Mazzoleni Director Director of Ciments Français S.A. (in representation of Sicil.Fin. S.r.l.). Yves René Nanot Director (1) Chairman of Ciments Français S.A., Director of Rhodia S.A., Asia Cement Public Co. Ltd, Ciments du Maroc, Provimi S.A, Essroc Corporation, Set Group Holding, Suez Cement Company, Zuari Cement Ltd. Marco Piccinini Director Chairman of Finterlife Insurance, Deputy Chairman of Finter Bank & Trust Bahamas Ltd, Director of Compagnie Monegasque de Banque, Credit Mobilier de Monaco, Ferrari S.p.A, Finter Bank Zürich, Groupe Société des Bains de Mer à Monaco (SBM), Montezemolo & Partners S.p.A., Poltrona Frau S.p.A. Ettore Rossi Director (5) (6) Director of Ciments Français S.A. (in representation of Société Internationale Italcementi France S.A.S.). Attilio Rota Director (1) (3) (4) (5) Director of Banca d’Italia - Bergamo branch Carlo Secchi Director (4) (5) Director of Allianz S.p.A., Mediaset S.p.A., Parmalat S.p.A., Pirelli & C. S.p.A., Sviluppo del Mediterraneo S.p.A., La Centrale Finanziaria Generale S.p.A. Emilio Zanetti Director (3) (5) Chairman of the Operating Board of Unione Banche Italiane S.c.p.a., Chairman of Banca Popolare di Bergamo S.p.A., Sesaab S.p.A., Deputy Chairman of SACBO S.p.A.
(1) Member of the Executive Committee. (2) Executive Director charged with overseeing the functionality of the internal control system. (3) Member of the Remuneration Committee. (4) Member of the Internal Control Committee. (5) Independent Director (in accordance with the Code of Conduct). (6) Member of the Compliance Committee. (7) Lead Independent Director. The business address of each of the members of the Board of Directors is at Via Gabriele Camozzi 124, Bergamo, Italy. Executive Committee The Executive Committee is comprised of the Chairman, the Chief Executive Officer and three directors of the Company. At the date of this Base Prospectus, its members are Mr. Giampiero Pesenti (Chairman), Mr. Pierfranco Barabani, Mr. Carlo Pesenti (Chief Executive Officer), Mr. Yves René Nanot and Mr. Attilio Rota.
107 Remuneration Committee The Remuneration Committee is comprised of non-executive directors, a majority of them independent. At the date of this Base Prospectus, its members are Mr. Emilio Zanetti (Chairman), Mr. Italo Lucchini, Mr. Karl Janjöri and Mr. Attilio Rota. Internal Control Committee The Internal Control Committee is comprised of independent directors. At the date of this Base Prospectus, its members are: Mr. Carlo Secchi (Chairman) Mr. Alberto Clô, Mr. Federico Falck and Mr. Attilio Rota. Board of Statutory Auditors The current Board of Statutory Auditors was elected by the shareholders’ meeting of 17 April 2009 and will remain in office until the date of the shareholders’ meeting called to approve the financial statements for the financial year ending on 31 December 2011. Outgoing auditors may be re-elected. The current members of the Board of Statutory Auditors are set out below: Name Office Maria Martellini Chairwoman Mario Comana Acting Auditor Luciana Gattinoni Acting Auditor Fabio Bombardieri Substitute Auditor Carlo Luigi Rossi Substitute Auditor Leonardo Cossu Substitute Auditor Auditing firm The Italcementi shareholders’ meeting held on 18 April 2007, availing itself of its right to extend the auditing appointment by an additional three years, and therefore until approval of the financial statements for the year ending 31 December 2010, confirmed the proposal of the Board of Statutory Auditors to appoint Reconta Ernst & Young for auditing the financial statements and the consolidated financial statements and verifying the proper keeping of the Company’s books and the proper recording of the business operations in the accounts, in accordance with Article 155 of the TUF and with CONSOB Communication No. 97001574 of 20 February 1997, as well as their appointment for the review of the semi-annual report.
Managers Below is the list of the top executive managers of Italcementi and of the positions they hold within Italcementi on the date of this Base Prospectus. Name Position Giovanni Ferrario Chief Operating Officer Giorgio Ghinaglia Deputy Chief Operating Officer Silvestro Capitanio Director of Human Resources and Organizational Development Carlo Giuseppe Bianchini Administration and Control Director and Manager in charge of preparing the Company’s financial reports Giovanni Maggiora Finance Director Graziano Molinari Corporate Affairs Director Agostino Nuzzolo Legal and Tax Affairs Director Sergio Crippa Communication and Image Director Michele Pennazio Director of Strategic Planning 108 Mauro Maestrini Head of Internal Audit Giancarlo Berera Head of Investor Relations Federico Vitaletti CTG Chief Executive Officer Giovanni Noberasco Purchasing Director
Conflicts of interest There are no potential conflicts of interest between the duties of members of the Board of Directors and Board of Statutory Auditors to the Company and their private interest or other duties.
Employees The following table shows the overall number of employees on the payroll of the companies of the Italcementi Group as at 31 December 2007 and 2008, broken down into the main categories and subdivided between Italy and abroad: As at 31 December 2007 As at 31 December 2008 Employees Italy Abroad Total Italy Abroad Total Executives 280 903 1,183 267 906 1,173 Middle management 2,238 6,320 8,558 1,679 6,233 7,912 & white collar Blue collar 2,575 11,390 13,965 1,993 11,165 13,158 Total 5,093 18,613 23,706 3,939 18,303 22,243
Major shareholders The entity which controls Italcementi as defined by Article 93 of the TUF is Italmobiliare S.p.A. The following table shows the persons and entities who, at the date of this Base Prospectus and according to the Shareholders’ book, the official communications received and other information available, hold more than 2 per cent. of Italcementi’s voting share capital and the amount of treasury shares held by Italcementi. Shareholder Ordinary shares % of ordinary share capital Efiparind BV - Amsterdam (indirectly 106,734,000 60.262 through Italmobiliare S.p.A.) First Eagle Investment Management LLC (which manages, among others, 4,750,409 2.682 the fund First Eagle Global Fund ) 3,793,029 2.142 Ordinary treasury shares As far as the Company is aware, no voting trusts exist among the shareholders of Italcementi.
LEGAL PROCEEDINGS The main cases that involve Italcementi are illustrated below.
Criminal proceedings In the course of 2008, Italcementi and its Chief Executive Officer, Mr. Carlo Pesenti, were notified by the Office of the Public Prosecutor of Caltanissetta of a request for collection of pre-trial evidence informing them of their involvement in a criminal investigation, which started as a consequence of the separation from the proceeding in which the former Chief Executive Officer of Calcestruzzi, a subsidiary of Italcementi operating in the ready-mix business, and three of its former employees are indicted for alleged illegal behaviour and irregularities in a number of supplies of ready-mix sold to third parties. 109 The notification is required by Italian law in order to provide persons under investigation with the right to carry out their defence and it only represents an investigative hypothesis which still needs to be proven. According to the notification referred to above (which remains the only source of information in relation to the matter available at the date of this Base Prospectus), Italcementi’s Chief Executive Officer is under investigation for fraud in government procurement (art. 356 Penal Code), aggravated fraud against the State (art. 640 Penal Code), money laundering (art. 648-bis Penal Code) and use of money, goods or assets derived from criminal activity (art. 648-ter Penal Code). Such charges are allegedly aggravated under art. 7 of the Law 203/1991.
The alleged liability of Calcestruzzi derives, according to Law Decree 231/2001, as a consequence of the fact that an employee and/or a director committed a crime in the interest or for the advantage of Calcestruzzi.
As at the date of this Base Prospectus, after two years of investigations, the allegations remain generic and the outcome is still unclear. Italcementi and its personnel have not been subject to any investigative activities and therefore it is not possible to identify the reasons that led to the involvement in the investigation of both Italcementi and its CEO. Management believes that this involvement might be a consequence of the investigation against its subsidiary, Calcestruzzi. However, Italcementi has never played a direct role in the production or sales processes of its subsidiary, which have always been organised and performed autonomously by Calcestruzzi and its operating units.
With reference to the original main proceedings against the former employees of Calcestruzzi, at the end of the preliminary hearing the former CEO of Calcestruzzi was ordered to be sent for trial, in relation to the following offences:
• false registration of assets with regard to a quarry of aggregates, with the aggravating circumstance of facilitating the activity of criminal organisations. The former CEO of Calcestruzzi has been accused of having granted an undue advance payment of approximately €150,000 to a quarry supplier who was subsequently discovered to be associated to a criminal organisation jointly with three of the former employees of Calcestruzzi referred to above. It should be added that it is quite common in the ready-mix business to grant advanced payments to the supplier of aggregates in order to assure the continuity of the supply at a predetermined price;
• fraud against the State and fraud in government procurement, offences that were allegedly performed through certain supplies of “low quality concrete”. The former employees of Calcestruzzi have been accused of reducing the quantity of cement in the concrete mix in violation of the law, public tenders and contracts. As far as this offence is concerned, the outcome of a technical survey performed by experts appointed by the Court (“incidente probatorio”) stated that the quality (measured in terms of the coefficient of cubic resistance) of the ready-mix supplied by Calcestruzzi complied with public and private legal requirements. The allegations concern four local civil works in Sicily supplied by four local plants of Calcestruzzi, which represent less than 3 per cent. of the average total production of Calcestruzzi (over ten years); and • posing a threat to public safety in relation to an alleged risk of collapse of a Palermo-Messina motorway road junction in Castelbuono, built in 2002, allegedly manufactured with supplies of “low quality concrete”. The above mentioned technical survey excluded any risks to public safety. Calcestruzzi faced commercial litigation with its client, the construction company which carried out the work, in relation to the decision of the construction site director to reinforce part of the road junction structure. At the end of the judgment of first instance, the Court’s decision found the construction company liable and excluded any fault on the part of Calcestruzzi. The concrete supplied by Calcestruzzi was also held to be in compliance with the tender obligations.
At the date of this Base Prospectus, the above-mentioned criminal trial against Calcestruzzi’s CEO and employees, which began before the Court of Caltanissetta on 7 April 2009, is still in progress.
110 At the date of this Base Prospectus, the collection of pre-trial evidence gathered to establish the safety of the public works carried out with Calcestruzzi’s ready-mix concrete and to examine the quality of Calcestruzzi’s supplies has just been completed. The results of the technical verifications performed by the experts appointed by the judge confirmed the safety of the public works in question and that the quality of the ready- mix concrete supplied was in compliance with public tender obligations.
With regard to criminal corporate liability, potentially incurred by Calcestruzzi in relation to the trial referred to above, law Decree 231/2001 provides for different penalties (a monetary fine, disqualification, confiscation, seizure and publication of the final conviction judgment) which might be imposed on the Company by the court’s decision in the event of a conviction.
According to the status of the pending investigations and to the information available, while it is still unclear whether there are grounds for such liability, in management’s view, since the current accusations are generic and the outcome of investigations is still unclear, the worst case scenario, which entails confiscation of the company, would appear to be very improbable, even in respect to the Sicilian plants only.
In the event that Calcestruzzi is found liable for infringement of Law Decree 231/2001, the penalty will very likely be a monetary fine which can vary approximately from €25,000 to €1,500,000 and, in any case, up to a limit equal to the company’s equity or assets. Within this range the size of the fine is at the judge’s discretion.
As regards potential prohibition/disqualifications sanctions, it is impossible to predict the results of the investigations with any certainty. At the time of the allegedly criminal conduct in question, the Group had in place code of conduct rules (audited by the Company’s external auditors) that complied with the requirements of law, and further improvements were implemented subsequently. The exposure of such conduct rules provides significant protection against potential liability under Law Decree No.231/2001. The quality control software used by the Italcementi Group has also been updated following the allegations described above. In the opinion of the management of Italcementi, the Group acted promptly and took adequate measures in reacting to the commencement of the investigations.
Management does not expect any repercussions to impact on Italcementi or its personnel and directors.
In connection with the criminal proceedings described above, a preventive seizure of the assets of Calcestruzzi was ordered on 29 January 2008 and an administrator was appointed by the competent court, Consequently, as of 1 January 2008 Calcestruzzi is not consolidated on a line-by-line basis with Italcementi, although Italcementi owns 100 per cent. of its share capital. The Group’s net income is indirectly affected by the fair value valuation of Calcestruzzi at the end of each accounting period.
If the preventive seizure of the assets of Calcestruzzi is revoked, Italcementi will reacquire control of Calcestruzzi and, consequently, the company will be reconsolidated. In this case the Group’s income statement will be directly and line-by-line influenced by the results of Calcestruzzi; the Group’s net financial position will show higher net debt due to the elimination, by consolidation, of the financial receivable for loans currently granted by Italcementi to Calcestruzzi and the consolidation of Calcestruzzi’s third party debt. Please refer to “Recent Developments” above for the most recent main consolidated financial figures of the Italcementi Group.
Civil proceedings In March 2009 Ciments Français was notified of a lawsuit brought in Russia by Financial and Industrial Union Sibkonkord (SIBCONCORD), the parent company of OJSC Holding Company Sibirskiy Cement (SIBCEM), with which Ciments Français had :
• concluded an agreement (the SPA) for the sale of its industrial assets in Turkey; and
111 • received €50 million, an advance payment made by Sibcem at the time of entering into the SPA, that Ciments Français was entitled to retain, in compliance with a specific contractual clause, for SIBCEM not having complied with conditions required for the closure of the contract.
Sibconcord obtained that a Russian court rule in February that SIBCEM shareholders meeting having approved the transaction was null and void; Sibconcord thereafter presented a petition to the Russian judicial authorities requesting that the SPA be declared unenforceable and the €50 million returned by Ciments Français.
Antitrust proceedings EU Italcementi and its subsidiaries Ciments Français, Ciments Calcia S.A. and Compagnie des Ciments Belges S.A. are the object of an investigation begun in November 2008 by the European Commission aimed at verifying their alleged involvement in unfair trading practices violating community regulations. The case is currently in the preliminary investigation stage and no formal statement of objections has been notified by the European Commission. Italy
(a) In 2004, the companies Calcestruzzi and Cemencal were ordered in a ruling by the Competition Authority to pay a total of €11,850,000 for alleged anti-competitive activities in the Milan Province. In a 2005 decision the Regional Administrative Court (TAR) of Lazio partially amended the 2004 ruling. The companies nevertheless appealed the TAR of Lazio’s decision to the Consiglio di Stato, Italy’s supreme judicial/administrative review body, which on 7 July 2009 issued a decision entirely discharging Cemencal and thus abolishing the fine imposed on it, as well as reducing the period of time of the participation of Calcestruzzi in the infringement. The Competition Authority, therefore, re-calculating the amount of fine to be imposed on Calcestruzzi, shall: (i) reduce it because of the lesser offense; (ii) reduce it because of its short duration, since the administrative decision ruled that evidences of the infringement were proved until the year 2000; (iii) apply the law in force until March 2001 (when the law was amended) requiring the Competition Authority to calculate the amount of the fine taking into account only the turnover achieved by Calcestruzzi with regard to the product object of the infringement - and not the overall turnover - in the year preceding the decision issued by the Competition Authority (2003). The companies had not paid the aforesaid pecuniary penalty.
(b) Calcestruzzi lodged an appeal to the Consiglio di Stato against some parts of TAR Lazio’s 2005 decision which had partially amended the sentence issued by the Competition Authority in relation to the proceedings begun in 1997 regarding certain operators active in Sardinia in the concrete sector. The case is scheduled to be heard in March 2010. Calcestruzzi (known as Italcalcestruzzi at the time of the investigation) has already paid the financial penalty charged in relation to this proceedings.
Bulgaria
In June 2009 the Bulgarian Antitrust Authority started an investigation against the Bulgarian Association of the Cement Industry (BACI), of which Devnya Cement is a member and Vulkan Cement an outside affiliated member, to verify an alleged infringement of Bulgarian national antitrust laws. The cement producers members of the association referred to above have not been directly or formally involved in the investigation, in the context of which the Bulgarian Antitrust Authority notified a request for information (questionnaire), to which the association and its members replied within the requested deadline.
Belgium
112 In July 2009, the Belgian Directorate General for Competition opened an investigation against the cement producers and the Belgian Association of Producers of Materials for Constructions (PMC-BMP) for alleged anticompetitive practices. The investigation is in its preliminary stage and no formal statement of objections has been notified to the companies involved.
India
The Indian Competition Authority began proceedings in 2000 for anti-competitive practices allegedly carried out by cement producers, including Zuari Cement Ltd. These proceedings are still pending.
Zuari Ltd. is also involved in anti-trust proceedings brought by the Indian Competition Authority in 2006 and is waiting for the statement of objections.
Turkey
In 2006, the Turkish National Antitrust Authority issued a decision fining several companies of the Set Group (Afyon Cimento, Anadolu Cimento Cimentolari and Set) for their alleged involvement in previous anti-competitive activities. The companies, despite the payment of the monetary fines, lodged an appeal to the competent national court against the decision. The trial is currently pending and it is unlikely that the court will issue the final decision in the current year. Tax proceedings Tax proceedings against Italcementi and some of its subsidiaries are pending in different countries. Provisions have been set aside in order to cover the probable tax burden (including tax, fines and interests) arising from these proceedings.
REGULATORY FRAMEWORK The activities and the plants of the Italcementi Group are subject to regulations that vary greatly from country to country. The principal applicable regulations relate to the environment and occupational safety. Among other things these regulations govern: • the excavation of the natural raw materials from the quarries under the Group’s operational control; • the procurement methods and the permissible characteristics of the fossil fuels used; • the procurement methods and the permissible characteristics of alternative fuels and raw materials; • the release of pollutants into the air; • the assigned quotas of greenhouse gas emissions; • water intake and waste water discharge arrangements; • the management of any wastes generated; • the use, storage and disposal of hazardous substances and waste; • the rehabilitation of contaminated zones; • the decommissioning of sites that are no longer operational; • noise in indoor and outdoor industrial environments; • the safety characteristics of the machinery used; • the safety conditions to be ensured in the workplace; • industrial hygiene; and • the safety of the commercialised products. 113 The Group operates in accordance with precautionary procedures and operating methods aimed at ensuring over time, in accordance with the methods required in the various territorial contexts, compliance with the environmental and safety standards and maintenance of the validity of the necessary authorisations for engaging in the various activities.
INDEBTEDNESS The tables below set out the Group’s consolidated net debt as at 31 December 2007 and 2008, and as at 30 June 2008 and 2009.
Consolidated Annual Net Debt
Financial asset and liability As at As at category Balance sheet line item 31 December 2007 31 December 2008 (audited) (€ thousands) Cash, cash equivalents and current financial assets (458,922) (592,945) Cash and cash equivalents Cash and cash equivalents (374,086) (363,864) Current financial receivables Equity investments and financial receivables (75,933) (210,402) Derivative instruments Other current assets (8,903) (18,9) Short-term financing 647,753 611,876 Bank overdrafts and short- Bank overdrafts and short- term borrowings term borrowings 430,103 368,083 Interest-bearing loans and Interest-bearing loans and short-term borrowings short-term borrowings 210,782 233,398 Derivative instruments Other current liabilities 6,868 10,395 Medium/long-term financial assets (30,352) (64,000) Securities and debentures Other non-current assets (3,173) (5,616) Derivative instruments Other non-current assets (27,179) (58,384) Medium/long-term financing 2,259,767 2,724,386 Interest-bearing loans and Interest-bearing loans and long-term borrowings long-term borrowings 2,213,399(1) 2,684,198(2) Derivative instruments Other non-current liabilities 46,368 40,188 Net debt 2,418,246 2,679,317 (1) Including €10,000,000 of commercial paper outstanding. (2) Including €284,000,000 of commercial paper outstanding.
114 Unaudited Consolidated Half-Yearly Net Debt
Financial asset and liability As at As at category Balance sheet line item 30 June 2008 30 June 2009 (unaudited) (€ thousands) Cash, cash equivalents and current financial assets (588,647) (614,499) Cash and cash equivalents Cash and cash equivalents (403,175) (371,114) Current financial receivables Equity investments and financial receivables (173,860) (226,928) Derivative instruments Other current assets (11,612) (16,457) Short-term financing 500,889 524,479 Bank overdrafts and short-term Bank overdrafts and borrowings short-term borrowings 429,102 236,771 Interest-bearing loans and short- Interest-bearing loans term borrowings and short-term borrowings 62,302 281,218 Derivative instruments Other current liabilities 9,484 6,490 Medium/long-term financial assets (46,236) (38,270) Securities and debentures Other non-current assets (3,973) (12,284) Derivative instruments Other non-current assets (42,263) (25,986) Medium/long-term financing 2,730,998 2,913,080 Interest-bearing loans and long- Interest-bearing loans term borrowings and long-term borrowings 2,665,404(1) 2,856,469(2) Other non-current Derivative instruments liabilities 65,594 56,611 Net debt 2,597,004 2,784,790 Net debt in respect of discounted operations 11,341 Net debt 2,608,345 (1) Including €300,000,000 of commercial paper outstanding. (2) Including €385,000,000 of commercial paper outstanding.
115 OVERVIEW OF FINANCIAL INFORMATION OF ITALCEMENTI S.p.A.
The tables below set out a summary of selected consolidated financial information of the Italcementi Group as at and for the years ending 31 December 2007 and 2008, and as at and for the six months ended 30 June 2008 and 2009.
The financial information set out below is derived from and should be read in conjunction with, and is qualified in its entirety by reference to the full audited consolidated annual financial statements of Italcementi S.p.A. as at and for the years ended 31 December 2007 and 2008, and the unaudited consolidated half-yearly financial statements of Italcementi S.p.A. as at and for the six months ended 30 June 2008 and 2009, in each case together with the accompanying notes and auditors’ reports, all of which are incorporated by reference in this Base Prospectus. See “Documents Incorporated by Reference”.
The Issuer has prepared its consolidated annual financial statements and its half-yearly financial information in accordance with International Financial Reporting Standards, as adopted by the European Union. Reconta Ernst & Young S.p.A., auditors to Italcementi S.p.A., have audited the annual consolidated financial statements of Italcementi S.p.A. as at and for the years ended 31 December 2007 and 2008, and have performed a limited review on the half-yearly financial information of Italcementi S.p.A. as at and for the six months ended 30 June 2008 and 2009 in accordance with Article 81 of CONSOB Regulations No. 11971 of 14 May 1999, as amended.
To permit comparison with the six months ended 30 June 2009, the figures for the six months ended 30 June 2008 have been restated for compliance with revised IAS 23, and with operations in Turkey, previously classified as available for sale in compliance with IFRS 5.
Figures of 2008 and 2009 reflect the impact of deconsolidation of Calcestruzzi and its subsidiaries, as a result of the preventive seizure on the company’s assets ordered on 29 January 2008 in connection with the criminal proceeding described in “Legal Proceedings” above.
CONSOLIDATED ANNUAL BALANCE SHEET As at As at 31 December 2007 31 December 2008(*) (audited) (€ millions) Non-current assets Property, plant and equipment 4,121.6 4,258.1 Investment property 22.8 24.0 Goodwill 1,928.6 1,956.7 Intangible assets 66.8 122.6 Investments in associates 143.1 218.9 Other equity investments 439.1 266.3 Deferred tax assets 33.7 39.5 Other non-current assets 82.4 114.9 Total non-current assets 6,838.1 7,001.0 Current assets 0.0 0.0 Inventories 843.2 941.3 Trade receivables 1,349.1 1,103.5 Other current assets 272.4 313.5 Income tax assets 23.2 52.6 Equity investments and financial receivables 76.2 210.7 116 As at As at 31 December 2007 31 December 2008(*) (audited) (€ millions) Cash and cash equivalents 374.1 363.9 Total current assets 2,938.2 2,985.4 Total assets 9,776.3 9,986.4 Shareholders’ equity 0.0 0.0 Share capital 282.5 282.5 Reserves 557.6 358.8 Treasury shares (58.7) (58.7) Retained earnings 2,698.0 2,742.1 Group shareholders’ equity 3,479.5 3,324.8 Minority interests 1,281.0 1,290.2 Total shareholders’ equity 4,760.5 4,615.0 Non-current liabilities 0.0 0.0 Interest-bearing loans and long-term borrowings 2,213.4 2,684.2 Employee benefit liabilities 188.5 166.4 Non-current provisions 258.5 266.3 Deferred tax liabilities 316.8 278.4 Other non-current liabilities 46.4 42.9 Total non-current liabilities 3,023.5 3,438.1 Current liabilities 0.0 0.0 Bank overdrafts and short-term borrowings 430.1 368.1 Interest-bearing loans and short-term borrowings 210.8 233.4 Trade payables 764.4 697.9 Current provisions 3.1 2.0 Income tax liabilities 37.1 62.3 Other current liabilities 546.7 569.6 Total current liabilities 1,992.3 1,933.3 Total liabilities 5,015.8 5,371.4 Total shareholders’ equity and liabilities 9,776.3 9,986.4
(*) Figures for the year ended 31 December 2008 reflect the impact of deconsolidation of Calcestruzzi and its subsidiaries, as a result of the preventive seizure of Calcestruzzi’s assets ordered on 29 January 2008 in connection with the criminal proceeding described in “Legal Proceedings” above.
CONSOLIDATED ANNUAL INCOME STATEMENT
For the year ended 31 December 2007 2008(*) (audited) (audited) (€ millions) (%) (€ millions) (%) Revenues 6,000.9 100.0 5,775.6 100.0 Other revenues 83.4 60.2 Change in inventories 57.6 59.9 Internal work capitalized 41.0 52.6 Goods and utilities expenses (2,258.8) (2,363.1) Services expenses (1,418.4) (1,327.0)
117 For the year ended 31 December 2007 2008(*) (audited) (audited) (€ millions) (%) (€ millions) (%) Employee expenses (953.2) (938.9) Other operating income (expense) (148.6) (206.2) Recurring EBITDA 1,403.9 23.4 1,113.1 19.3 Net capital gains on sale of fixed assets 16.0 24.2 Non-recurring employee expenses for re-organisations (15.4) (27.5) Other non-recurring income (expense) 0.5 (7.0) EBITDA 1,405.1 23.4 1,102.9 19.1 Amortisation and depreciation (445.9) (450.9) Impairment variation (1.2) (44.7) EBIT 958.0 16.0 607.3 10.5 Finance income 53.1 102.8 Finance costs (164.5) (188.2) Net exchange-rate differences and derivatives (7.9) (1.4) Adjustment to financial asset values 0.0 (124.9) Share of results of associates 13.3 25.1 Profit before tax 851.9 14.2 420.8 7.3 Income tax expense (239.4) (148.5) Net profit for the year 612.5 10.2 272.2 4.7 Attributable to: Equity holders of the parent 423.9 7.1 138.8 2.4 Minority interests 188.6 3.1 133.4 2.3 (*) Figures for the year ended 31 December 2008 reflect the impact of deconsolidation of Calcestruzzi and its subsidiaries, as a result of the preventive seizure of Calcestruzzi’s assets ordered on 29 January 2008 in connection with the criminal proceeding described in “Legal Proceedings” above.
CONSOLIDATED ANNUAL CASH FLOW STATEMENT
For the year ended 31 December 2007 2008(*) (audited) (€ millions) A) Cash flow from operating activities: Profit before tax 851.9 420.8 Adjustments for: Amortisation, depreciation and impairment 447.7 617.5 Reversal undistributed results of associates (7.8) (16.0) Capital (gains)/losses on sale of fixed assets (18.0) (74.7) Change in employee benefit liabilities and other provisions (53.1) 27.3 Stock options 10.3 13.5 Reversal finance costs 112.9 136.8 Cash flow from operating activities before tax, finance income/costs and change in working capital: 1,343.8 1,125.1 Change in working capital 17.0 (153.9)
118 For the year ended 31 December 2007 2008(*) (audited) (€ millions) Cash flow from operating activities before tax, and finance income/costs: 1,360.8 971.2 Net finance costs paid (127.8) (147.6) Dividends received 12.8 17.3 Taxes paid (310.9) (206.0) Total A) 935.0 634.9 B) Cash flow from investing activities: 0.0 0.0 Investments in fixed assets: 0.0 0.0 Intangible assets (11.8) (29.4) Property, plant and equipment and investment property (529.7) (698.1) Financial assets (equity investments) net of cash acquisitions (1) (422.2) (237.3) Total investments in fixed assets (963.8) (964.8) Proceeds from divestments of fixed assets 47.8 106.8 Total divestments 47.8 106.8 Change in other long-term financial assets and liabilities 13.8 (3.0) Total B) (902.2) (861.0) C) Cash flow from financing activities: 0.0 0.0 New interest-bearing loans and long-term borrowings 681.5 650.8 Repayments of long-term financing (574.0) (212.5) Change in short-term financing 117.6 (50.1) Net change in treasury shares (15.8) 0.0 Dividends paid (175.8) (171.5) Other changes in shareholders’ equity 6.1 1.5 Other sources and applications (13.1) 1.2 Total C) 26.4 219.5 D) Currency translation differences and other changes (4.8) (0.7) E) Calcestruzzi cash and cash equivalents 0.0 (3.0) F) Cash flows for the period (A+B+C+D+E) 54.4 (10.2) G) Cash and cash equivalents at beginning of period 319.7 374.1 Cash and cash equivalents at end of period (F+G) 374.1 363.9
(1) cash of acquired and consolidated companies 35,255 15,624
(*) Figures for the year ended 31 December 2008 reflect the impact of deconsolidation of Calcestruzzi and its subsidiaries, as a result of the preventive seizure of Calcestruzzi’s assets ordered on 29 January 2008 in connection with the criminal proceeding described in “Legal Proceedings” above.
119 UNAUDITED CONSOLIDATED HALF-YEARLY BALANCE SHEET
As at 30 June 2008 Restated(*) 2009 (unaudited) (€ millions) Non-current assets Property, plant and equipment 3,941.5 4,314.3 Investment property 21.7 36.7 Goodwill 1,887.2 1,955.4 Intangible assets 65.4 119.4 Investments in associates 185.1 223.3 Other equity investments 388.9 299.5 Deferred tax assets 33.6 45.9 Other non-current assets 90.7 78.7 Total non-current assets 6,614.1 7,073.1 Current assets - - Inventories 823.3 786.0 Trade receivables 1,319.7 1,086.6 Other current assets 296.1 324.3 Income tax assets 50.4 34.1 Equity investments and financial receivables 174.2 227.2 Cash and cash equivalents 417.6 371.1 Total current assets 3,081.3 2,829.3 Total assets 9,695.4 9,902.4 Shareholders’ equity - - Share capital 282.5 282.5 Reserves 287.8 337.6 Treasury shares (58.7) (58.7) Retained earnings 2,741.2 2,750.6 Group shareholders’ equity 3,252.9 3,312.1 Minority interests 1,190.4 1,267.9 Total shareholders’ equity 4,443.3 4,579.9 Non-current liabilities - - Interest-bearing loans and long-term borrowings 2,665.4 2,856.5 Employee benefit liabilities 169.3 166.8 Non-current provisions 219.5 243.6 Deferred tax liabilities 277.2 253.9 Other non-current liabilities 68.7 58.6 Total non-current liabilities 3,400.2 3,579.3 Current liabilities - - Bank overdrafts and short-term borrowings 454.9 236.8 Interest-bearing loans and short-term borrowings 62.3 281.2 120 As at 30 June 2008 Restated(*) 2009 (unaudited) (€ millions) Trade payables 708.2 574.7 Current provisions 2.9 1.5 Income tax liabilities 49.8 49.1 Other current liabilities 573.9 599.9 Total current liabilities 1,851.9 1,743.2 Total liabilities 5,252.1 5,322.5 Total shareholders’ equity and liabilities 9,695.4 9,902.4
(*) In order to compare the figures of the six months ended 30 June 2009, the figures for the six months ended 30 June 2008 have been restated in order to comply with revised IAS 1 and IAS 23, and with operations in Turkey, previously classified as available for sale in compliance with IFRS 5.
UNAUDITED CONSOLIDATED HALF-YEARLY INCOME STATEMENT
For the six months ended 30 June 2008 Restated(*) 2009 (unaudited) (€ millions) Revenues 2,926.1 2,585.8 Other revenues 28.1 22.5 Change in inventories (1.0) (70.6) Internal work capitalized 15.5 22.4 Goods and utilities expenses (1,136.7) (969.3) Services expenses (676.4) (559.4) Employee expenses (476.6) (464.2) Other operating income (expense) (85.9) (69.9) Recurring EBITDA 593.3 497.4
Net capital gains on sale of fixed assets 5.7 4.7
Non-recurring employee expenses for re-organisations (4.3) (12.8) Other non-recurring income (expense) 0.4 (1.1) EBITDA 595.1 488.2 Amortisation and depreciation (217.0) (226.1) Impairment (0.0) (24.2) EBIT 378.1 237.9 Finance income 24.3 16.1 Finance costs (86.9) (66.6)
Net exchange-rate differences and derivatives (6.5) (5.9) Impairment on financial assets (15.2) - Share of results of associates 13.1 3.5 Profit before tax 306.8 185.0 Income tax expense (86.4) (57.7)
121 For the six months ended 30 June 2008 Restated(*) 2009 (unaudited) (€ millions) Net profit for the period 220.4 127.3 Attributable to: - - Equity holders of the parent 131.0 55.1 Minority interests 89.4 72.2
(*)In order to compare the figures of the six months ended 30 June 2009, the figures for the six months ended 30 June 2008 have been restated in order to comply with revised IAS 1 and IAS 23, and with operations in Turkey, previously classified as available for sale in compliance with IFRS 5.
UNAUDITED CONSOLIDATED HALF-YEARLY CASH FLOW STATEMENT For the six months ended 30 June 2008 Restated(*) 2009 (unaudited) (€ millions) A) Cash flow from operating activities: Profit before tax 306.8 185.0 Adjustments for: Amortisation, depreciation and impairment 232.5 249.3 Reversal undistributed results of associates (10.7) (3.2) Capital (gains)/losses on sale of fixed assets (9.0) (5.9) Change in employee benefit liabilities and other provisions (1.8) (11.9) Stock options 6.5 6.2 Reversal finance costs 64.0 40.2 Cash flow from operating activities before tax, finance income/costs and change in working capital: 588.5 459.6 Change in working capital (178.9) 75.9 Cash flow from operating activities before tax and finance income/costs 409.6 535.5 Net finance costs paid (68.8) (41.7) Dividends received (2.0) (1.4) Taxes paid (101.9) (83.6) Total A) 236.9 408.8 B) Cash flow from investing activities: - - Investments in fixed assets - - Intangible assets (3.0) (9.5) Property, plant and equipment and investment property (312.3) (361.2) Financial assets (equity investments) net of cash acquisitions (1) (167.5) (17.4) Total investments in fixed assets (482.8) (388.1) Proceeds from divestments of fixed assets 69.1 17.3 Total divestments 69.1 17.3 Change in other long-term financial assets and liabilities 8.7 (6.4) Total B) (405.0) (377.2) C) Cash flow from financing activities: - - New interest-bearing loans and long-term borrowings 510.1 263.4 Repayments of long-term financing (184.6) (14.8)
122 For the six months ended 30 June 2008 Restated(*) 2009 (unaudited) (€ millions) Change in short-term financing 37.9 (132.8) Dividends paid (167.3) (115.9) Other changes in shareholders’ equity 1.7 (1.4) Other sources and applications 36.4 (17.5) Total C) 234.3 (18.9) D) Currency translation differences and other changes (19.5) (5.4) E) Calcestruzzi cash and cash equivalents (3.0) - F) Cash flows for the period (A+B+C+D+E) 43.6 7.3 G) Cash and cash equivalents at beginning of period 374.1 363.9 Cash and cash equivalents at end of period (F+G) 417.6 371.1
(1) cash of acquired and consolidated companies 1.7 6.1
(*)In order to compare the figures of the six months ended 30 June 2009, the figures for the six months ended 30 June 2008 have been restated in order to comply with revised IAS 23, and with operations in Turkey, previously classified as available for sale in compliance with IFRS 5.
123 DESCRIPTION OF ITALCEMENTI FINANCE S.A.
Overview
Italcementi Finance S.A. (Italcementi Finance) is organised as a société anonyme under the laws of France, registered in the Trade and Companies Register of Nanterre (France) under number 440413730, with registered office at Tour Ariane, 5 Place de la Pyramide, 92800-Puteaux (France), telephone number: +33 1 42917500.
Italcementi Finance was incorporated on 24 December 2001 as a société simplifiée par action under the laws of France. The company’s original name “Unibeton Med” was changed into “Holfipar” as of 9 October 2007. On 22 December 2009 Italcementi Finance, which until then was a wholly owned subsidiary of Ciments Français S.A., was purchased by Italcementi. On 29 January 2010, the company’s share capital was increased to €20 million, the company was transformed in a société anonyme and its name was changed to Italcementi Finance. The duration of the company is until 23 December 2100.
Italcementi Finance is a 99.9 per cent. owned subsidiary of Italcementi S.p.A. and, as at the date of this Base Prospectus, has no subsidiaries.
Business of Italcementi Finance
Italcementi Finance was originally formed as a holding company, but has remained dormant since its incorporation. Upon issuing Notes under the Programme it will become the funding vehicle of the Italcementi Group, incurring external debt and on-lending proceeds to Italcementi and its Subsidiaries at arm’s length basis and may over time carry out other financial and treasury services for Italcementi and its Subsidiaries.
Board of Directors
The Directors of Italcementi Finance and their functions and principal activities outside the company are as follows: Principal activities outside the Name Office Company Giovanni Maggiora Chairman and Chief Executive Chief Financial Officer of Italcementi Officer S.p.A. and Ciments Francais S.A. Philippe Raymond Missika Director Partner of DMMS & Associés Law Firm, Paris Carlo Giuseppe Bianchini Director Administration and Control Director and Manager in charge of preparing the financial reports of Italcementi S.p.A. Giancarlo Berera Director Head of Investor Relations of Italcementi S.p.A. Agostino Nuzzolo Director Legal and Tax Affairs Director of Italcementi S.p.A.
The business address of Mr. Giovanni Maggiora, Mr. Carlo Giuseppe Bianchini, Mr. Giancarlo Berera and Mr. Agostino Nuzzolo is at the offices of Italcementi S.p.A. in Via Gabriele Camozzi 124, Bergamo Italy.
The business address of Philippe Raymond Missika is at 36 rue de Lisbonne, Paris, France.
124 There are no potential conflict of interests between the duties to Italcementi Finance of any of the Directors listed above and their private interests and/or duties.
Litigation
Italcementi Finance is not nor has been involved in any governmental, legal or arbitration proceedings, during the 12 months prior to the date hereof, which may have, or have had in the recent past a significant effect on the financial position or profitability of Italcementi Finance.
Share Capital
The authorised share capital of Italcementi Finance is equal to €20,000,000 divided into 2,000,000 ordinary shares with a par value of €10 each.
The following table shows the shareholders of Italcementi Finance at the date of this Base Prospectus.
Shareholder Share capital Shares Number % Euro Italcementi S.p.A 1,999,994 99.9997 19,999,940 92800 Puteaux (Paris), 5 place de la Pyramide, Quartier Villon Axim Italia Srl 1 0.00005 10 24010 Sorisole (BG), via G. Marconi 1 Gruppo Italsfusi Srl 1 0.00005 10 41056 Savignano sul Panaro (MO), via Claudia 6089 SAMA Srl 1 0.00005 10 24121 Bergamo, via G.Camozzi 124 SICIL.FIN Srl 1 0.00005 10 24121 Bergamo, via G.Camozzi 124 Société Internationale Italcementi France SAS 1 0.00005 10 75008 Paris, 40 avenue Hoche Société Internationale Italcementi (Luxembourg) SA 1 0.00005 10 2015 Luxembourg, 19 rue de Bitbourg Total 2,000,000 100 20,000,000
125 OVERVIEW OF FINANCIAL INFORMATION OF ITALCEMENTI FINANCE S.A.
The tables below set out a summary of selected financial information of Italcementi Finance S.A. as at and for the years ending 31 December 2008 and 2009, in euros.
The independent auditors of Italcementi Finance S.A. are Ernst & Young et Autres.
BALANCE SHEET AS AT 31 DECEMBER 2008 Net amount As at 31 December 2008 as at Gross Depreciation Net 31 December ASSETS amount & provisions amount 2007 Variation TANGIBLE FIXED ASSETS - Quarry lands 0.00 0.00 0.00 0.00 0.00 - Fixtures, land development 0.00 0.00 0.00 0.00 0.00 - General plants, fixtures, 0.00 0.00 0.00 0.00 0.00 - Other developments 0.00 0.00 0.00 0.00 0.00 FINANCIAL FIXED ASSETS (1) - Shareholdings 0.00 0.00 0.00 0.00 0.00 - Loans 0.00 0.00 0.00 0.00 0.00 - Other 0.00 0.00 0.00 0.00 0.00 TOTAL I 0.00 0.00 0.00 0.00 0.00 ACCOUNTS RECEIVABLES (2) - Trade receivables and related accounts 0.00 0.00 0.00 0.00 0.00 - Other receivables 0.00 0.00 0.00 0.00 0.00 SUNDRY RECEIVABLES (2) 0.00 0.00 0.00 0.00 0.00 CASH AT BANK AND IN HAND 22,259.90 0.00 22,259.90 27,771.85 -5,511.95 TOTAL II 22,259.90 0.00 22,259.90 27,771.85 -5,511.95 UNREALISED EXCHANGE LOSSES III 0.00 0.00 0.00 0.00 0.00 GENERAL TOTAL (I + II + III) 22,259.90 22,259.90 27,771.85 -5,511.95 (1) of which at less than 12 months (2) of which at over 12 months
As at As at LIABILITIES 31 December 2008 31 December 2007 Variation
CAPITAL 40,000.00 40,000.00 0.00 SHARE PREMIUMS 0.00 0.00 0.00 RESERVES : - Legal reserve 0.00 0.00 0.00 - Statutory reserve 0.00 0.00 0.00 - Other 0.00 0.00 0.00 RETAINED PROFIT OR LOSS BROUGHT FORWARD -12,228.15 -9,074.81 -3,153.34 PROFIT OR LOSS FOR THE PERIOD -8,711.95 -3,153.34 -5,558.61 TOTAL I 19,059.90 27,771.85 -8,711.95 PROVISION FOR RISKS AND CHARGES 0.00 0.00 0.00
126 TOTAL II 0.00 0.00 0.00 FINANCIAL LIABILITIES (1) - Convertible loans 0.00 0.00 0.00 - Bank loans (2) 0.00 0.00 0.00 - Borrowings and other financial liabilities 0.00 0.00 0.00 ACCOUNTS PAYABLE (1) - Trade payables and related accounts 3,200.00 0.00 3,200.00 - Tax and social security payables 0.00 0.00 0.00 SUNDRY PAYABLES (1) - Amounts payable for fixed assets and related accounts 0.00 0.00 0.00 - Other payables 0.00 0.00 0.00 TOTAL III 3,200.00 0.00 3,200.00 UNREALISED EXCHANGE GAINS IV 0.00 0.00 0.00 GENERAL TOTAL (I + II + III + IV) 22,259.90 27,771.85 -5,511.95 (1) of which at less than 12 months 0.00 0.00 0.00 of which at over 12 months 0.00 0.00 0.00 (2) Including short term bank loans and overdrafts and post office accounts
INCOME STATEMENT FOR THE YEAR ENDED 31 DECEMBER 2008
As at As at 31December 2008 31 December 2007 Variation
OPERATING INCOME (1) - Sales of finished goods 0.00 0.00 0.00 - Supply of services 0.00 0.00 0.00 NET SALES 0.00 0.00 0.00 - Other income 0.00 0.00 0.00 TOTAL I 0.00 0.00 0.00 OPERATING EXPENSES (2) - Other external costs 0.00 0.00 0.00 - External services 8,198.95 2,093.49 6,105.46 - Taxes (other than income taxes) 393.00 459.00 -66.00 - Depreciation and amortisation expense 0.00 0.00 0.00 - Provisions for risks and charges 0.00 0.00 0.00 - Other 0.00 0.00 0.00 TOTAL II 8,591.95 2,552.49 6,039.46 1/ OPERATING PROFIT (LOSS) (I - II) -8,591.95 -2,552.49 -6,039.46 SHARE OF PROFIT/LOSS FROM UNINCORPORATED JOINT VENTURES Attributed profit or transferred loss 0.00 0.00 0.00 TOTAL III 0.00 0.00 0.00 Sustained loss or transferred profit 0.00 0.00 0.00 TOTAL IV 0.00 0.00 0.00 (1) of which revenues relating to previous financial years 0.00 0.00 0.00 (2) of which costs relating to previous financial years 0.00 0.00 0.00
127 FINANCIAL INCOME - Income from investments (3) 0.00 0.00 0.00 - Income from other investments (3) 0.00 0.00 0.00 - Other interest receivable and similar income (3) 0.00 0.00 0.00 - Reversal of provisions 0.00 0.00 0.00 - Foreign exchange gains 0.00 0.00 0.00 TOTAL V 0.00 0.00 0.00 FINANCIAL CHARGES - Provisions 0.00 0.00 0.00 - Interest and similar charges (4) 0.00 0.00 0.00 - Foreign exchange losses 0.00 0.00 0.00 - Net losses from sales of marketable securities 0.00 0.00 0.00 TOTAL VI 0.00 0.00 0.00 2/ FINANCIAL INCOME (V - VI) 0.00 0.00 0.00 3/ INCOME BEFORE TAX & EXTRAORDINARY ITEMS -8,591.95 -2,552.49 -6,039.46 (I - II + III - IV + V - VI) EXTRAORDINARY INCOME - From operations 0.00 0.00 0.00 - From capital transactions 0.00 0.00 0.00 - From sales of assets 0.00 0.00 0.00 - Other 0.00 207.15 -207.15 - Reversal of provisions 0.00 0.00 0.00 TOTAL VII 0.00 207.15 -207.15 EXTRAORDINARY CHARGES - From operations 120.00 808.00 -688.00 - From capital transactions 0.00 0.00 0.00 - Book value of sold fixed and financial assets 0.00 0.00 0.00 - Depreciation and Provisions 0.00 0.00 0.00 TOTAL VIII 120.00 808.00 -688.00
4/ EXTRAORDINARY PROFIT/LOSS (VII - VIII) -120.00 -600.85 480.85
5/ NET INCOME BEFORE TAX (LOSS) (3 + 4) -8,711.95 -3,153.34 -5,558.61 Employee profit-sharing 0.00 0.00 0.00 TOTAL IX 0.00 0.00 0.00 Income tax 0.00 0.00 0.00 TOTAL X 0.00 0.00 0.00 TOTAL INCOME (I + III + V + VII) 0.00 207,15 -207.15
TOTAL CHARGES (II + IV + VI + VIII + IX + X) 8,711.95 3,360.49 5,351.46
NET PROFIT/LOSS -8,711.95 -3,153.34 -5,558.61 (3) of which income related to associated undertakings 0.00 0.00 0.00 (4) of which interests related to associated undertakings 0.00 0.00 0.00
128 BALANCE SHEET AS AT 31 DECEMBER 2009
As at 31 December 2009 Net amount Gross Depreciation Net as at 31 ASSETS amount & provisions amount December 2008 Variation TANGIBLE FIXED ASSETS - Quarry lands 0.00 0.00 0.00 0.00 0.00 - Fixtures, land development 0.00 0.00 0.00 0.00 0.00 - General plants, fixtures, 0.00 0.00 0.00 0.00 0.00 - Other developments 0.00 0.00 0.00 0.00 0.00 FINANCIAL FIXED ASSETS (1) - Shareholdings 0.00 0.00 0.00 0.00 0.00 - Loans 0.00 0.00 0.00 0.00 0.00 - Other 0.00 0.00 0.00 0.00 0.00 TOTAL I 0.00 0.00 0.00 0.00 0.00 ACCOUNTS RECEIVABLES (2) - Trade receivables and related accounts 0.00 0.00 32.58 0.00 32.58 - Other receivables 0.00 0.00 0.00 0.00 0.00 SUNDRY RECEIVABLES (2) 0.00 0.00 35,968.30 0.00 35,968.30 CASH AT BANK AND IN HAND 0.00 0.00 2,024.45 22,259.90 -20,235.45 TOTAL II 0.00 0.00 38,025.33 22,259.90 15,765.43 UNREALISED EXCHANGE LOSSES (III) 0.00 0.00 0.00 0.00 0.00 TOTAL (I + II + III) 0.00 0.00 38,025.33 22,259.90 15,765.43 (1) of which at less than 12 months (2) of which at over 12 months
As at As at LIABILITIES 31 December 2009 31 December 2008 Variation CAPITAL 40,000.00 40,000.00 0.00 SHARE PREMIUMS 0.00 0.00 0.00 RESERVES : - Legal reserve 3.90 0.00 3.90 - Statutory reserve 0.00 0.00 0.00 - Other 0.00 0.00 0.00 RETAINED PROFIT OR LOSS BROUGHT FORWARD 0.00 -12,228.15 12,228.15 PROFIT OR LOSS FOR THE PERIOD -5,178.57 -8,711.95 3,533.38 TOTAL I 34,825.33 19,059.90 15,765.43 PROVISIONS FOR RISKS AND CHARGES 0.00 0.00 0.00 TOTAL II 0.00 0.00 0.00 FINANCIAL LIABILITIES(1) - Convertible loans 0.00 0.00 0.00 - Bank loans (2) 0.00 0.00 0.00 - Borrowings and other financial liabilities 0.00 0.00 0.00
129 ACCOUNTS PAYABLE (1) - Trade payables and related accounts 3,200.00 3,200.00 0.00 - Tax and social security payables 0.00 0.00 0.00 SUNDRY PAYABLES (1) - Amounts payable for fixed assets and related accounts 0.00 0.00 0.00 - Other payables 0.00 0.00 0.00 TOTAL III 3,200.00 3,200.00 0.00 UNREALISED EXCHANGE GAINS IV 0.00 0.00 0.00 TOTAL (I + II + III + IV) 38,025.33 22,259.90 15,765.43
(1) of which at less than 12 months 0.00 0.00 0.00 of which at over 12 months 0.00 0.00 0.00 (2) Including short term bank loans and overdrafts and post office accounts
INCOME STATEMENT FOR THE YEAR ENDED 31 DECEMBER 2009
For the year ended
31 December 2009 31 December 2008 Variation OPERATING INCOME (1) - Sales of finished products 0.00 0.00 0.00 . Supply of services 0.00 0.00 0.00 Net sales 0.00 0.00 0.00 - Other income 0.00 0.00 0.00 TOTAL I 0.00 0.00 0.00 OPERATING EXPENSES (2) - Other external costs 0.00 0.00 0.00 - External services 4,837.45 8,198.95 -3,361.50 - Taxes (other than income taxes) 398.00 393.00 5.00 - Depreciation and amortisation expense 0.00 0.00 0.00 . Provisions for risks and charges 0.00 0.00 0.00 - Other 0.00 0.00 0.00 TOTAL II 5,235.45 8,591.95 -3,356.50 1/ OPERATING PROFIT (LOSS) (I - II) -5,235.45 -8,591.95 3,356.50 SHARE OF PROFIT/LOSS FROM UNINCORPORATED JOINT-VENTURES Attributed profit or transferred loss 0.00 0.00 0.00 TOTAL III 0.00 0.00 0.00 Sustained loss or transferred profit 0.00 0.00 0.00 TOTAL IV 0.00 0.00 0.00 (1) of which revenues referring to previous financial years 0.00 0.00 0.00 (2) of which costs referring to previous financial years 0.00 0.00 0.00
130 For the year ended 31 December 2009 31 December 2008 Variation FINANCIAL INCOME - Income from investments (3) 0.00 0.00 0.00 - Income from other investments (3) 0.00 0.00 0.00 - Other interest and similar income (3) 56.88 0.00 56.88 - Reversal of provisions 0.00 0.00 0.00 - Realised exchange gains 0.00 0.00 0.00 TOTAL V 56.88 0.00 56.88 FINANCIAL CHARGES - Provisions 0.00 0.00 0.00 - Interest and similar charges (4) 0.00 0.00 0.00 - Foreign exchange losses 0.00 0.00 0.00 - Net losses from sales of marketable securities 0.00 0.00 0.00 TOTAL VI 0.00 0.00 0.00
2/ FINANCIAL INCOME (V - VI) 56.88 0.00 56.88 3/ INCOME BEFORE TAX & EXTRAORDINARY ITEMS -5,178.57 -8,591.95 3,413.38 (I - II + III - IV + V - VI) EXTRAORDINARY INCOME - From operations 0.00 0.00 0.00 - From capital transactions 0.00 0.00 0.00 - From sales of assets 0.00 0.00 0.00 - Other 0.00 0.00 0.00 - Reversal of provisions 0.00 0.00 0.00 TOTAL VII 0.00 0.00 0.00 EXTRAORDINARY CHARGES - From operations 0.00 120.00 -120.00 - From capital transactions 0.00 0.00 0.00 . Book value of sold fixed and financial assets 0.00 0.00 0.00 . Depreciation and provisions 0.00 0.00 0.00 TOTAL VIII 0.00 120.00 -120.00
4/ EXTRAORDINARY PROFIT / LOSS (VII - VIII) 0.00 -120.00 120.00
5/ NET INCOME BEFORE TAX (3 + 4) -5,178.57 -8,711.95 3,533.38 Employee profit-sharing 0.00 0.00 0.00 TOTAL IX 0.00 0.00 0.00 Income tax 0.00 0.00 0.00 TOTAL X 0.00 0.00 0.00 TOTAL INCOME (I + III + V + VII) 56.88 0.00 56.88
TOTAL CHARGES (II + IV + VI + VIII + IX + X) 5,235.45 8,711.95 -3,476.50 NET PROFIT / LOSS -5,178.57 -8,711.95 3,533.38 (3) Of which income related to associated undertakings 56.88 0.00 56.88 (4) Of which interests related to associated undertakings 0.00 0.00
131 TAXATION
Italian Taxation
The statements herein regarding taxation are based on the laws in force in Italy as of 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.
Tax Treatment of Notes issued by Italcementi S.p.A.
Legislative Decree No. 239 of 1 April 1996, as subsequently amended (Decree 239), provides for the applicable regime with respect to the tax treatment of interest, premium and other income (including the difference between the redemption amount and the issue price) from Notes falling within the category of bonds (obbligazioni) or debentures similar to bonds (titoli similari alle obbligazioni) issued, inter alia, by Italian resident companies with shares listed on a EU regulated market or a regulated market of the European Economic Area, provided that the notes are issued for an original maturity of not less than 18 months.
Italian Resident Noteholders
Where an Italian resident Noteholder is (i) 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 “Capital Gains Tax” below), (ii) a non-commercial partnership, (iii) a non-commercial private or public institution, or (iv) an investor exempt from Italian corporate income taxation, interest, premium and other income relating to the Notes are subject to a withholding tax, referred to as “imposta sostitutiva”, levied at the rate of 12.5 per cent. If the Noteholders described under (i) and (iii) 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, premium and other income from the Notes will not be subject to imposta sostitutiva, but must be included in the relevant Noteholder’s annual 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).
Under the current regime provided by Law Decree No. 351 of 25 September 2001 converted into law with amendments by Law No. 410 of 23 November 2001, as clarified by the Italian Ministry of Economy and Finance through Circular No. 47/E of 8 August 2003, payments of interest, premiums or other proceeds in respect of the Notes made to Italian resident real estate investment funds established pursuant to Article 37 of Legislative Decree No. 58 of 24 February 1998 or pursuant to Article 14-bis of Law No. 86 of 25 January 1994, are subject neither to imposta sostitutiva nor to any other income tax in the hands of a real estate investment fund. However, Law Decree No.112 of 25 June 2008, converted with amendments, into Law No. 133 of 6 August 2008, has introduced a 1 per cent property tax applying on real estate investment funds’ net value, where (i) their units are not expected to be listed on regulated markets and (ii) their equity is less than €400,000,000, if (a) there are less than 10 unitholders, or (b) funds are reserved to institutional investors and speculative funds whose units are held by individuals for more than 2/3, by individuals, trusts, or other companies referable to individuals.
If the investor is resident in Italy and is an open-ended or a closed-ended investment fund (a Fund) or a SICAV (Società di Investimento a Capitale Variabile) and the Notes are deposited with an authorised intermediary, interest, premium and other income accrued during the holding period on the Notes will not be 132 subject to imposta sostitutiva, but must be included in the management results of the Fund accrued at the end of each tax period, subject to an ad hoc substitute tax applicable at a 12.5 per cent rate.
Where an Italian resident Noteholder is a pension fund (subject to the regime provided for by Article 17 of the Legislative Decree No. 252 of 5 December 2005) and the Notes are deposited with an authorised intermediary, interest, premium and other income 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 Economy and Finance (each an Intermediary).
An Intermediary must (i) be resident in Italy or be a permanent establishment in Italy of a non-Italian resident financial intermediary and (ii) 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 entity paying interest to a Noteholder.
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 either (i) resident, for tax purposes, in a country which allows for a satisfactory exchange of information with Italy; or (ii) an international body or entity set up in accordance with international agreements which have entered into force in Italy; or (iii) a Central Bank or an entity which manages, inter alia, the official reserves of a foreign State; or (iv) an institutional investor which is resident in a country which allows for a satisfactory exchange of information with Italy, even if it does not possess the status of a taxpayer in its own country of residence.
The imposta sostitutiva will be applicable at the rate of 12.5 per cent. (or at the reduced rate provided for by the applicable double tax treaty, if any) to interest, premium and other income paid to Noteholders who are resident, for tax purposes, in countries which do not allow for a satisfactory exchange of information with Italy. Please note that according to the Law No. 244 of 24 December 2007 (Budget Law 2008) a Decree still to be issued will introduce a new “white list” replacing the current “black list” system, so as to identified those countries which allow for a satisfactory exchange of information.
In order to ensure gross payment, non-Italian resident Noteholders must be the beneficial owners of the payments of interest, premium or other income and (i) 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 (ii) 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. Such 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 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.
Early Redemption
Without prejudice to the above provisions, in the event that Notes having an original maturity of at least 18 months are redeemed, in full or in part, prior to 18 months from the Issue Date, the relevant Issuer will be
133 required to pay a tax equal to 20 per cent. of the interest and other amounts accrued up to the time of the early redemption. Such payment will be made by the relevant Issuer and will not affect the amounts to be received by the Noteholder by way of interest or other amounts to be received by the Noteholder by way of interest or other amounts, if any, under the Notes.
Notes with an original maturity of less than 18 months
Interest payments relating to Notes issued with an original maturity of less than 18 months are subject to a withholding tax levied at the rate of 27 per cent.
Where the Noteholder is (i) an Italian individual engaged in an entrepreneurial activity to which the Notes are connected, (ii) an Italian company or a similar Italian commercial entity, (iii) a permanent establishment in Italy of a foreign entity to which the Notes are connected, (iv) an Italian commercial partnership, or (v) an Italian commercial private or public institution, such withholding tax is a provisional withholding tax. In all other cases, including where the Noteholder is a non-Italian resident, the withholding tax is a final withholding tax.
Atypical securities
Interest payments relating to Notes that are not deemed to fall within the category of bonds (obbligazioni) or debentures similar to bonds (titoli similari alle obbligazioni) may be subject to a withholding tax, levied at the rate of 27 per cent.
Where the Noteholder is (i) an Italian individual engaged in an entrepreneurial activity to which the Notes are connected, (ii) an Italian company or a similar Italian commercial entity, (iii) a permanent establishment in Italy of a foreign entity to which the Notes are connected, (iv) an Italian commercial partnership or (v) an Italian commercial private or public institution, such withholding tax is a provisional withholding tax. In all other cases, the withholding tax is a final withholding tax. For this purpose, debentures similar to bonds are securities that incorporate an unconditional obligation to pay, at maturity, an amount not lower than their nominal value.
Tax Treatment of the Notes issued by Italcementi Finance S.A. Decree No. 239 also provides for the applicable regime with respect to the tax treatment of interest, premium and other income (including the difference between the redemption amount and the issue price) from Notes falling within the category of bonds (obbligazioni) or debentures similar to bonds (titoli similari alle obbligazioni) issued, inter alia, by non-Italian resident issuers. Italian Resident Noteholders Where the Notes have an original maturity of at least 18 months and the Italian resident Noteholder is (i) 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 “Capital Gains Tax” below), (ii) a non-commercial partnership, (iii) a non-commercial private or public institution, or (iv) 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 12.50 per cent. In the event that the Noteholders described under (i) and (iii) 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 such Notes are deposited with an authorised intermediary, interest, premium and other income from such Notes will not be subject to imposta sostitutiva, but must 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).
134 Under the current regime provided by Law Decree No. 351 of 25 September 2001 converted into law with amendments by Law No. 410 of 23 November 2001, as clarified by the Italian Ministry of Economy and Finance through Circular No. 47/E of 8 August 2003, payments of interest in respect of the Notes made to Italian resident real estate investment funds established pursuant to Article 37 of Legislative Decree No. 58 of 24 February 1998, as amended and supplemented, and Article 14-bis of Law No. 86 of 25 January 1994 are subject neither to substitute tax nor to any other income tax in the hands of a real estate investment fund. However, Law Decree No. 112 of 25 June 2008, converted with amendments into Law No. 133 of 6 August 2008, has introduced a 1 per cent. property tax applying on real estate investment funds’ net value, where (i) their units are not expected to be listed on regulated markets and (ii) their equity is less than €400,000,000, if: (a) there are less than 10 unitholders, or (b) funds are reserved to institutional investors or are speculative funds and their units are held, for more than 2/3, by individuals, trusts or other companies referable to individuals. 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, premium and other income accrued during the holding period on the Notes will not be subject to imposta sostitutiva, but must be included in the management results of the Fund or the SICAV accrued at the end of each tax period, subject to an ad-hoc substitute tax applicable at a 12.50 per cent. rate. Where an Italian resident Noteholder is a pension fund (subject to the regime provided for by article 17 of the Legislative Decree No. 252 of 5 December 2005) and the Notes are deposited with an authorised intermediary, interest, premium and other income 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 a 11 per cent. substitute tax. Pursuant to Decree No. 239, imposta sostitutiva is applied by banks, SIMs, fiduciary companies, SGRs, stockbrokers and other entities identified by a decree of the Ministry of Economy and Finance (each an Intermediary). An Intermediary must (i) be resident in Italy or be a permanent establishment in Italy of a non-Italian resident financial intermediary and (ii) 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 entity paying interest to a Noteholder. Notes with an original maturity of less than 18 months If the Notes are issued for an original maturity of less than 18 months, the imposta sostitutiva applies at the rate of 27 per cent. The 27 per cent. imposta sostitutiva is also applied to any payment of interest or premium relating to the Notes made to (i) Italian pension funds, (ii) Italian Funds and (iii) Italian SICAVs. Non-Italian Resident Noteholders No imposta sostitutiva is applied on payments to a non-Italian resident Noteholder of interest or premium relating to the Notes provided that, if the Notes are held in Italy, the non-Italian resident Noteholder declares itself to be a non-Italian resident according to Italian tax regulations. Payments made by an Italian resident guarantor With respect to payments on the Notes made to certain Italian resident Noteholders by an Italian resident guarantor, in accordance with one interpretation of Italian tax law, any payment of liabilities equal to interest and other proceeds from the Notes may be subject to a provisional withholding tax at a rate of 12.5 per cent. pursuant to Presidential Decree No. 600 of 29 September 1973, as subsequently amended. In case of payments to non-Italian resident Noteholders, the withholding tax may be applied at (i) 12.5 per cent. if the payment is made to non-Italian resident Noteholders, other than those mentioned under (ii); or (ii) 27 per
135 cent. if payments are made to non-Italian resident Noteholders who are resident in “tax haven” countries (as defined and listed in Ministerial Decree 23 January 2002, as amended from time to time). Double taxation treaties entered into by Italy may apply allowing for a lower (on, in certain cases, nil) rate of withholding tax. In accordance with another interpretation, any such payment made by the Italian resident guarantor will be treated, in certain circumstances, as a payment by the Issuer and will thus be subject to the tax regime described in the previous paragraphs of this section. Early Redemption Without prejudice to the above provisions, in the event that Notes having an original maturity of at least 18 months are redeemed, in full or in part, prior to 18 months from their issue date, Italian resident Noteholders will be required to pay, by way of a withholding to be applied by the Italian intermediary responsible for payment of interest or the redemption of the Notes, an amount equal to 20 per cent. of the interest and other amounts accrued up to the time of the early redemption. Atypical securitites Interest payments relating to Notes that are not deemed to fall within the category of bonds (obbligazioni) or debentures similar to bonds (titoli similari alle obbligazioni) may be subject to a withholding tax, levied at 27 per cent. For this purpose, debentures similar to bonds are securities that incorporate an unconditional obligation to pay an amount not lower than their nominal value. The 27 per cent. withholding tax mentioned above does not apply to interest payments made to a non-Italian resident Noteholder and to an Italian resident Noteholder which is: (i) a company or similar commercial entity (including the Italian permanent establishment of foreign entities), (ii) a commercial partnership, or (iii) a commercial private or public institution.
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 or 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 holding the Notes in connection with an entrepreneurial activity and certain other persons, 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 current rate of 12.5 per cent. Noteholders may set off losses with gains.
In respect of the application of the imposta sostitutiva, taxpayers may opt for one of these three regimes described below.
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 not in connection 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 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.
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 136 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 is responsible for accounting for 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, and is required to 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, such loss 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 amministrato regime, the Noteholder is not required to declare the capital gains in the annual tax return.
Any capital gains realised by Italian resident individuals holding the Notes not in connection with entrepreneurial activity who have entrusted the management of their financial assets, including the Notes, to an authorised intermediary and have opted for the so-called risparmio gestito regime 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 12.5 per cent. substitute tax, to be paid by the managing authorised intermediary. Under this risparmio gestito regime, any depreciation of the managed assets accrued at year end may be carried forward against increase in value of the managed assets accrued in any of the four succeeding tax years. Under the risparmio gestito regime, 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, to be subject to the 12.5 per cent substitute tax.
Any capital gains realised by a Noteholder who is an Italian pension fund (subject to the regime provided for by Article 17 of the 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 the 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 issuer and not traded on regulated markets are not subject to the imposta sostitutiva, provided that the actual beneficiary: (i) is resident in a country which allows for a satisfactory exchange of information with Italy; or (ii) is an international entity or body set up in accordance with international agreements which have entered into force in Italy; or (iii) is a Central Bank or an entity which manages, inter alia, the official reserves of a foreign State; or (iv) is an institutional investor which is resident in a country which allows for a satisfactory exchange of information with Italy, even if it does not possess the status of a taxpayer in its own country of residence.
If none of the conditions above are met, 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 subject to the imposta sostitutiva at the current rate of 12.5 per cent.
In any event, non-Italian resident individuals or entities without a permanent establishment in Italy to which the Notes are connected, that may benefit from a double taxation treaty with Italy providing that capital gains realised upon the sale or redemption of Notes are to be taxed only in the country of tax residence of the recipient, will not be subject to imposta sostitutiva in Italy on any capital gains realised upon the sale or redemption of Notes.
Capital gains realised by non-Italian resident Noteholders from the sale or redemption of Notes issued by a non-Italian resident issuer are not subject to Italian taxation, provided that the Notes are held outside Italy.
137 Inheritance and gift taxes
Pursuant to Law Decree No. 262 of 3 October 2006 (Decree No. 262), converted into Law No. 286 of 24 November 2006, as subsequently amended, the transfers of any valuable asset (including shares, bonds or other securities) as a result of death or donation are taxed as follows:
(i) 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 the gift exceeding €1,000,000;
(ii) 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 the gift exceeding €100.000; and
(iii) any other transfer is, in principle, subject to an inheritance and gift tax applied at a rate of 8 per cent. on the entire value of the inheritance or the gift.
Transfer Tax
Article 37 of Law Decree No. 248 of 31 December 2007, converted into Law No. 31 of 28 February 2008, published in the Italian Official Gazette No. 51 of 29 February 2008, has abolished the Italian transfer tax provided for by the Royal Decree No. 3278 of 30 December 1923, as amended and supplemented by the Legislative Decree No. 435 of 21 November 1997.
Following the repeal of the Italian transfer tax, as from 31 December 2007 contracts relating to the transfer of securities are subject to the registration tax as follows: (i) public deeds and notarised deeds are subject to fixed registration tax at rate of €168; (ii) private deeds are subject to registration tax only in case of use or voluntary registration.
EU Savings Directive
Under EC Council Directive 2003/48/EC on the taxation of savings income, Member States, including Belgium from 1 January 2010, are required to provide to the tax authorities of another Member State details of payments of interest (or similar income) paid by a person within its jurisdiction to an individual resident in that other Member State or to certain limited types of entities established in that other Member State. However, for a transitional period Luxembourg and Austria are instead required (unless during that period they elect otherwise) to operate a withholding system in relation to such payments (the ending of such transitional period being dependent upon the conclusion of certain other agreements relating to information exchange with certain other countries). A number of non-EU countries and territories including Switzerland have adopted similar measures (a withholding system in the case of Switzerland).
On 15 September 2008 the European Commission issued a report to the Council of the European Union on the operation of the Directive, which included the Commission’s advice on the need for changes to the Directive. On 13 November 2008 the European Commission published a more detailed proposal for amendments to the Directive, which included a number of suggested changes. The European Parliament approved an amended version of this proposal on 24 April 2009. If any of those proposed changes are made in relation to the Directive, they may amend or broaden the scope of the requirements described above.
Implementation in Italy of the EU Savings Directive
Italy has implemented the EU Savings Directive through Legislative Decree No. 84 of 18 April 2005 (Decree No. 84). Under Decree No. 84, subject to a number of important conditions being met, in the case of interest paid starting 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 and shall report to the Italian Tax Authorities details of the relevant payments and
138 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.
Implementation in France of the EU Savings Directive
The EU Savings Directive has been implemented into French law under article 242 ter of the French Code général des impôts.
French Taxation
The statements herein regarding taxation are based on the laws in force in France as of 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 statements are of a general nature and do not constitute legal or tax advice and should not be understood as such. Prospective investors in the Notes are therefore advised to consult their own qualified advisors so as to determine, in the light of their individual situation, the tax consequences of the purchase, holding, redemption or sale of the Notes.
Payments of interest and other revenues with respect to Notes issued by Italcementi Finance S.A. will not be subject to the withholding tax set out under Article 125 A III of the French Code général des impôts unless such payments are made outside France in a non-cooperative State or territory (Etat ou territoire non coopératif) within the meaning of Article 238-0 A of the French Code général des impôts (a Non- Cooperative State). If such payments under the Notes are made in a Non-Cooperative State, a 50 per cent. withholding tax will be applicable (subject to certain exceptions and potentially the more favourable provisions of an applicable tax treaty) by virtue of Article 125 A III of the French Code général des impôts.
Furthermore, interest and other revenues on such Notes will no longer be deductible from the Issuer’s taxable income, as from the fiscal years starting on or after 1 January 2011, if they are paid or accrued to persons established in a Non-Cooperative State or paid in such a Non-Cooperative State. Under certain conditions, any such non-deductible interest and other revenues may be recharacterised as constructive dividends pursuant to Article 109 of the French Code général des impôts, in which case such non-deductible interest and other revenues may be subject to the withholding tax set out under Article 119 bis of the French Code général des impôts, at a rate of 25 per cent. or 50 per cent.
Notwithstanding the foregoing, neither the 50 per cent. withholding tax nor the non-deductibility will apply if the Issuer can prove that the principal purpose and effect of a particular issue of Notes was not that of allowing the payments of interest or other revenues to be made in a Non-Cooperative State (the Exception). Pursuant to the ruling (rescrit) n°2010/11 (FP and FE) of the French tax authorities dated 22 February 2010, an issue of Notes will benefit from the Exception without the Issuer having to provide any proof of the purpose and effect of such issue of Notes, if such Notes are:
(i) offered by means of a public offer within the meaning of Article L.411.1 of the French Code monétaire et financier or pursuant to an equivalent offer in a jurisdictions which is not a Non-Cooperative State. For this purpose, an “equivalent offer” means any offer requiring the registration or submission of an offer document by or with a foreign securities market authority; or
(ii) admitted to trading on a regulated market or on a French or foreign multilateral securities trading system provided that such market or system is not located in a Non-Cooperative State, and the operation of such market is carried out by a market operator or an investment services provider, or by such other similar foreign entity, provided further that such market operator, investment services provider or entity is not located in a Non-Cooperative State; or
(iii) admitted, at the time of their issue, to the clearing operations of a central depositary or of a securities clearing and delivery and payments systems operator within the meaning of Article L.561-2 of the French
139 Code monétaire et financier, or of one or more similar foreign depositaries or operators provided that such depositary or operator is not located in a Non-Cooperative State.
Luxembourg Taxation
The following summary is of a general nature and is included herein solely for information purposes. 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.
Withholding Tax
(i) Non-resident holders of Notes
Under Luxembourg general tax laws currently in force and subject to the laws of 21 June 2005 (the Laws) mentioned below, there is no withholding tax on payments of principal, premium or interest made to non- resident holders of Notes, nor on accrued but unpaid interest in respect of the Notes, nor is any Luxembourg withholding tax payable upon redemption or repurchase of the Notes held by non-resident holders of Notes.
Under the Laws implementing the EC Council Directive 2003/48/EC of 3 June 2003 on taxation of savings income in the form of interest payments and ratifying the treaties entered into by Luxembourg and certain dependent and associated territories of EU Member States (the Territories), payments of interest or similar income made or ascribed by a paying agent established in Luxembourg to or for the immediate benefit of an individual beneficial owner or a residual entity, as defined by the Laws, which is a resident of, or established in, an EU Member State (other than Luxembourg) or one of the Territories will be subject to a withholding tax unless the relevant recipient has adequately instructed the relevant paying agent to provide details of the relevant payments of interest or similar income to the fiscal authorities of his/her/its country of residence or establishment, or, in the case of an individual beneficial owner, has provided a tax certificate issued by the fiscal authorities of his/her country of residence in the required format to the relevant paying agent. Where withholding tax is applied, it is currently levied at a rate of 20 per cent. and will be levied at a rate of 35 per cent. as of 1 July 2011 as of 1 July 2011. Responsibility for the withholding of the tax will be assumed by the Luxembourg paying agent. Payments of interest under the Notes coming within the scope of the Laws would at present be subject to withholding tax of 20 per cent.
(ii) Resident holders of Notes
Under Luxembourg general tax laws currently in force and subject to the law of 23 December 2005 (the Law) mentioned below, there is no withholding tax on payments of principal, premium or interest made to Luxembourg resident holders of Notes, nor on accrued but unpaid interest in respect of Notes, nor is any Luxembourg withholding tax payable upon redemption or repurchase of Notes held by Luxembourg resident holders of Notes.
Under the Law payments of interest or similar income made or ascribed by a paying agent established in Luxembourg to or for the benefit of an individual beneficial owner who is a resident of Luxembourg will be subject to a withholding tax of 10 per cent. Such withholding tax will be in full discharge of income tax if the beneficial owner is an individual acting in the course of the management of his/her private wealth. Responsibility for the withholding of the tax will be assumed by the Luxembourg paying agent. Payments of interest under the Notes coming within the scope of the Law would be subject to withholding tax of 10 per cent.
140 SUBSCRIPTION AND SALE
The Dealers have, in a programme agreement (the Programme Agreement) dated 9 March 2010, agreed with the Issuers and the Guarantor the basis upon which they or any of them may from time to time agree to purchase Notes. Any such agreement will extend to those matters stated under “Form of the Notes” and “Terms and Conditions of the Notes”. In the Programme Agreement, the Issuers and the Guarantor have agreed to reimburse the Dealers for certain of their expenses in connection with the establishment and any future update of the Programme and the issue of Notes under the Programme and to indemnify the Dealers against certain liabilities incurred by them in connection therewith.
United States
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 under the Securities Act.
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 U.S. Internal Revenue Code of 1986 and regulations thereunder.
Each Dealer has represented and agreed, and each further Dealer appointed under the Programme will be required to represent and agree, that it will not offer, sell or deliver Notes (a) as part of their distribution at any time or (b) otherwise until 40 days after the completion of the distribution, as determined and certified by the relevant Dealer or, in the case of an issue of Notes on a syndicated basis, the relevant lead manager, of all Notes of the Tranche of which such Notes are a part, within the United States or to, or for the account or benefit of, U.S. persons. Each Dealer has further agreed, and each further Dealer appointed under the Programme will be required to agree, that it will send to each Dealer to which it sells any 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. Terms used in this paragraph have the meanings given to them by Regulation S under the Securities Act.
Until 40 days after the commencement of the offering of any Series of Notes, an offer or sale of such Notes within the United States by any dealer (whether or not participating in the offering) may violate the registration requirements of the Securities Act if such offer or sale is made otherwise than in accordance with an available exemption from registration under the Securities Act.
Each issuance of Index Linked Notes or Dual Currency Notes shall be subject to such additional U.S. selling restrictions as the relevant Issuer and the relevant Dealer may agree as a term of the issuance and purchase of such Notes, which additional selling restrictions shall be set out in the applicable Final Terms.
Public Offer Selling Restriction under the Prospectus Directive
In relation to each Member State of the European Economic Area which has implemented the Prospectus Directive (each, a Relevant Member State), each Dealer has represented and agreed, and each further Dealer appointed under the Programme will be required to represent and agree, that with effect from and including the date on which the Prospectus Directive is implemented in that Relevant Member State (the Relevant Implementation Date) it has not made and will not make an offer of Notes which are the subject of the offering contemplated by this Base Prospectus as completed by the final terms in relation thereto to the public in that Relevant Member State except that it may, with effect from and including the Relevant Implementation Date, make an offer of such Notes to the public in that Relevant Member State:
141 (a) at any time to legal entities which are authorised or regulated to operate in the financial markets or, if not so authorised or regulated, whose corporate purpose is solely to invest in securities;
(b) at any time to any legal entity which has two or more of (1) an average of at least 250 employees during the last financial year; (2) a total balance sheet of more than €43,000,000; and (3) an annual net turnover of more than €50,000,000, as shown in its last annual or consolidated accounts;
(c) at any time to fewer than 100 natural or legal persons (other than qualified investors as defined in the Prospectus Directive) subject to obtaining the prior consent of the relevant Dealer or Dealers nominated by the relevant Issuer for any such offer; or
(d) at any time in any other circumstances falling within Article 3(2) of the Prospectus Directive, provided that no such offer of Notes referred to in (a) to (d) above shall require any Issuer or any Dealer to publish a prospectus pursuant to Article 3 of the Prospectus Directive or supplement a prospectus pursuant to Article 16 of the Prospectus Directive.
For the purposes of this provision, the expression an offer of Notes to the public in relation to any Notes in any Relevant Member State means the communication in any form and by any means of sufficient information on the terms of the offer and the Notes to be offered so as to enable an investor to decide to purchase or subscribe the Notes, as the same may be varied in that Member State by any measure implementing the Prospectus Directive in that Member State and the expression Prospectus Directive means Directive 2003/71/EC and includes any relevant implementing measure in each Relevant Member State.
United Kingdom
Each Dealer has represented and agreed, and each further Dealer appointed under the Programme will be required to represent and agree, that:
(a) in relation to any Notes which have a maturity of less than one year, (i) it is a person whose ordinary activities involve it in acquiring, holding, managing or disposing of investments (as principal or agent) for the purposes of its business and (ii) it has not offered or sold and will not offer or sell any Notes other than to persons whose ordinary activities involve them in acquiring, holding, managing or disposing of investments (as principal or as agent) for the purposes of their businesses or who it is reasonable to expect will acquire, hold, manage or dispose of investments (as principal or agent) for the purposes of their businesses where the issue of the Notes would otherwise constitute a contravention of Section 19 of the Financial Services and Markets Act 2000 (FSMA) by the relevant Issuer;
(b) 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 FSMA) received by it in connection with the issue or sale of any Notes in circumstances in which Section 21(1) of the FSMA does not apply to the relevant Issuer or the Guarantor; and
(c) it has complied and will comply with all applicable provisions of the FSMA with respect to anything done by it in relation to any Notes in, from or otherwise involving the United Kingdom.
Japan
The Notes have not been and will not be registered under the Financial Instruments and Exchange Act of Japan (Law No.25 of 1948, as amended; the FIEA) and each Dealer has represented and agreed, and each further Dealer appointed under the Programme will be required to represent and agree, that it will not offer or
142 sell any Notes, directly or indirectly, in Japan or to, or for the benefit of, any resident of Japan (as defined under Item 5, Paragraph 1, Article 6 of the Foreign Exchange and Foreign Trade Control Law (Law No. 228 of 1949, as amended)), or to others for re-offering or resale, directly or indirectly, in Japan or to, or for the benefit of, a resident of Japan, except pursuant to an exemption from the registration requirements of, and otherwise in compliance with, the FIEA and any other applicable laws, regulations and ministerial guidelines of Japan.
France
Each of the Dealers and the Issuer has represented and agreed that it has not offered or sold and will not offer or sell, directly or indirectly, Notes to the public in France, and has not distributed or caused to be distributed and will not distribute or cause to be distributed to the public in France, this Base Prospectus, the relevant Final Terms or any other offering material relating to the Notes, and that such offers, sales and distributions have been and will be made in France only to (a) providers of investment services relating to portfolio management for the account of third parties, and/or (b) qualified investors (investisseurs qualifiés), other than individuals, all as defined in, and in accordance with, Articles L.411-1, L.411-2, and D.411-1 to D.411- 3 of the French Code monétaire et financier.
The Netherlands
Each Dealer has represented and agreed that any Notes with a maturity of less than 12 months and a denomination of less than €50,000 will only be offered in The Netherlands to professional market parties as defined in the Financial Supervision Act (Wet op het financieel toezicht) and the decrees issued pursuant thereto. Republic of Italy
The offering of the Notes has not been registered pursuant to Italian securities legislation and, accordingly, no Notes may be offered, sold or delivered, nor may copies of the Base Prospectus or of any other document relating to the Notes be distributed in the Republic of Italy, except:
(i) to qualified investors (investitori qualificati), as defined pursuant to Article 100 of Legislative Decree No. 58 of 24 February 1998, as amended (the Financial Services Act) and Article 34-ter, first paragraph, letter b) of CONSOB Regulation No. 11971 of 14 May 1999, as amended from time to time (Regulation No. 11971); or (ii) in other circumstances which are exempted from the rules on public offerings pursuant to Article 100 of the Financial Services Act and Article 34-ter of Regulation No. 11971.
Any offer, sale or delivery of the Notes or distribution of copies of the Base Prospectus or any other document relating to the Notes in the Republic of Italy under (i) or (ii) above must be:
(a) made by an investment firm, bank or financial intermediary permitted to conduct such activities in the Republic of Italy in accordance with the Financial Services Act, CONSOB Regulation No. 16190 of 29 October 2007 (as amended from time to time) and Legislative Decree No. 385 of 1 September 1993, as amended (the Banking Act); and (b) in compliance with Article 129 of the Banking Act, as amended, and the implementing guidelines of the Bank of Italy, as amended from time to time, pursuant to which the Bank of Italy may request information on the issue or the offer of securities in the Republic of Italy; and (c) in compliance with any other applicable laws and regulations or requirement imposed by CONSOB or other Italian authority.
143 General
Each Dealer has agreed and each further Dealer appointed under the Programme will be required to agree that it will (to the best of its knowledge and belief) comply with all applicable securities laws and regulations in force in any jurisdiction in which it purchases, offers, sells or delivers Notes or possesses or distributes this Base Prospectus and will obtain any consent, approval or permission required by it for the purchase, offer, sale or delivery by it of Notes under the laws and regulations in force in any jurisdiction to which it is subject or in which it makes such purchases, offers, sales or deliveries and none of the Issuers, the Guarantor nor any of the other Dealers shall have any responsibility therefor.
None of the Issuers, the Guarantor nor the Dealers represents that Notes may at any time lawfully be sold in compliance with any applicable registration or other requirements in any jurisdiction, or pursuant to any exemption available thereunder, or assumes any responsibility for facilitating such sale.
With regard to each Tranche, the relevant Dealer will be required to comply with such other restrictions as the relevant Issuer and the relevant Dealer shall agree and as shall be set out in the applicable Final Terms.
144 GENERAL INFORMATION
Authorisation
The establishment of the Programme and the giving of the Guarantee in respect of Notes issued by Italcementi Finance S.A. have been duly authorised by a resolution of the Board of Directors of Italcementi S.p.A. dated 5 March 2010.
The establishment of the Programme has been duly authorised by a resolution of the Board of Directors of Italcementi Finance S.A. dated 5 March 2010.
Listing and admission to trading of Notes
Application has been made to the CSSF to approve this document as a base prospectus. Application has also been made to the Luxembourg Stock Exchange for Notes issued under the Programme to be admitted to trading on the Luxembourg Stock Exchange’s regulated market and to be listed on the Official List of the Luxembourg Stock Exchange. The Luxembourg Stock Exchange’s regulated market is a regulated market for the purposes of the Markets in Financial Instruments Directive (Directive 2004/39/EC).
Documents Available
For the period of 12 months following the date of this Base Prospectus, copies of the following documents will, when published, be available for inspection from the registered office of the relevant Issuer and from the specified offices of the Paying Agents for the time being in London and Luxembourg:
(a) the constitutional documents of each of Italcementi S.p.A. (with an English translation thereof) and Italcementi Finance S.A.;
(b) the audited consolidated financial statements of Italcementi S.p.A. in respect of the financial years ended 31 December 2008 and 2007 (with an English translation thereof) and the audited financial statements of Italcementi Finance S.A. in respect of the financial years ended 31 December 2009 and 2008, in each case together with the audit reports prepared in connection therewith. Each of Italcementi S.p.A. and Italcementi Finance S.A. currently prepares audited accounts on an annual basis;
(c) the most recently published audited consolidated annual financial statements of Italcementi S.p.A. and the most recently published unaudited consolidated interim financial statements (if any) of Italcementi S.p.A. (in each case with an English translation thereof), in each case together with any audit or review reports prepared in connection therewith. Italcementi S.p.A. currently prepares unaudited interim accounts on a quarterly basis;
(d) the most recently published audited annual financial statements of Italcementi Finance S.A. and the most recently published unaudited interim financial statements (if any) of Italcementi Finance S.A., in each case together with any audit or review reports prepared in connection therewith. Italcementi Finance S.A. does not currently prepare interim accounts;
(e) the Programme Agreement, the Agency Agreement/the Guarantee, the Deed of Covenant and the forms of the Global Notes, the Notes in definitive form, the Receipts, the Coupons and the Talons;
(f) a copy of this Base Prospectus;
145 (g) any future base prospectuses, prospectuses, information memoranda and supplements including Final Terms (save that a Final Terms relating to a Note which is neither admitted to trading on a regulated market in the European Economic Area nor offered in the European Economic Area in circumstances where a prospectus is required to be published under the Prospectus Directive will only be available for inspection by a holder of such Note and such holder must produce evidence satisfactory to the relevant Issuer and the Paying Agent as to its holding of Notes and identity) to this Base Prospectus and any other documents incorporated herein or therein by reference; and
(h) in the case of each issue of Notes admitted to trading on the Luxembourg Stock Exchange’s regulated market subscribed pursuant to a subscription agreement, the subscription agreement (or equivalent document).
In addition, copies of this Base Prospectus, each Final Terms relating to Notes which are admitted to trading on the Luxembourg Stock Exchange’s regulated market and each document incorporated by reference are available on the Luxembourg Stock Exchange’s website at www.bourse.lu.
Clearing Systems
The Notes have been accepted for clearance through Euroclear and Clearstream, Luxembourg (which are the entities in charge of keeping the records). The appropriate Common Code and ISIN for each Tranche of Notes allocated by Euroclear and Clearstream, Luxembourg will be specified in the applicable Final Terms. If the Notes are to clear through an additional or alternative clearing system the appropriate information will be specified in the applicable Final Terms.
The address of Euroclear is Euroclear Bank SA/NV, 1 Boulevard du Roi Albert II, B-1210 Brussels and the address of Clearstream, Luxembourg is Clearstream Banking, 42 Avenue JF Kennedy, L-1855 Luxembourg.
Conditions for determining price
The price and amount of Notes to be issued under the Programme will be determined by the relevant Issuer and each relevant Dealer at the time of issue in accordance with prevailing market conditions.
Significant or Material Change
Save as disclosed in this Base Prospectus, there has been no significant change in the financial position of Italcementi S.p.A. or the Group since 30 June 2009 and there has been no material adverse change in the financial position or prospects of Italcementi S.p.A. or the Group since 31 December 2008.
Save as disclosed in this Base Prospectus, there has been no significant change in the financial position of Italcementi Finance S.A. since 31 December 2009 and there has been no material adverse change in the financial position or prospects of Italcementi Finance S.A. since 31 December 2009.
Litigation
Save as disclosed in this Base Prospectus under “Description of Italcementi S.p.A. – Legal Proceedings” and “Description of Italcementi Finance S.A. – Legal Proceedings”, above, there are no governmental, legal or arbitration proceedings (including any such proceedings which are pending or threatened of which Italcementi S.p.A. or Italcementi Finance S.A. are aware) in the 12 months preceding the date of this documents which may have or have in such period had a significant effect on the financial position or profitability of Italcementi S.p.A., Italcementi Finance S.A. or the Group.
146 Auditors
The auditors of Italcementi S.p.A. are Reconta Ernst & Young S.p.A., who have audited, without qualification, Italcementi S.p.A.’s accounts, prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the European Union for each of the two financial years ended on 31 December 2007 and 31 December 2008. The auditors of Italcementi S.p.A. have no material interest in Italcementi S.p.A.
Reconta Ernst & Young S.p.A. is registered under No. 2 in the Special Register (Albo Speciale) maintained by CONSOB and set out at Article 161 of the Unified Text of the Rules for the Capital Markets (Testo Unico delle Disposizioni in materia di mercati finanziari) and under No. 70945 in the Register of Accountancy Auditors (Registro dei Revisori Contabili), in compliance with the provisions of the Legislative Decree 27 January 1992, No. 88.
The auditors of Italcementi Finance S.A. (previously known as Holfipar S.A.S.) are Ernst & Young et Autres, members of the Compagnie Nationale des Commissaires aux Comptes, who have audited, without qualification, the accounts of Holfipar S.A.S. prepared in accordance with French accounting principles for each of the two financial years ended on 31 December 2008 and 31 December 2009. The auditors of Italcementi Finance S.A. have no material interest in Italcementi Finance S.A.
The reports of the auditors of Italcementi S.p.A. and Italcementi Finance S.A. are incorporated in this Base Prospectus.
Post-issuance information
Save as set out in the Final Terms, the Issuers do not intend to provide any post-issuance information in relation to any issues of Notes.
Dealers transacting with Italcementi S.p.A. and Italcementi Finance S.A.
Certain of the Dealers and their affiliates, including parent companies, have engaged, and may in the future engage, in investment banking and/or commercial banking transactions with, and may perform services to the Issuers, the Guarantor and their affiliates in the ordinary course of business.
147 ISSUERS Italcementi S.p.A. Italcementi Finance S.A. Via G. Camozzi 124 Tour Ariane 24121 Bergamo 5 Place de la Pyramide Italy 92800 Puteaux France
GUARANTOR
Italcementi S.p.A. Via G. Camozzi 124 24121 Bergamo Italy
ISSUING AND PRINCIPAL PAYING AGENT
BNP Paribas Securities Services, Luxembourg Branch 33, rue de Gasperich Howland – Hesperange L – 2085 Luxembourg
LEGAL ADVISERS
To Italcementi S.p.A. as to Italian law
D’Urso Gatti e Associati Piazza Borromeo, 8 20123 Milan Italy
To the Dealers as to English, French and Italian law
Allen & Overy Studio Legale Associato Corso Vittorio Emanuele II, 284 00186 Rome Italy
Allen & Overy Studio Legale Associato Via Manzoni 41 20121 Milan Italy
Allen & Overy LLP Edouard VII 26, boulevard des Capucines 75009 Paris France AUDITORS To Italcementi S.p.A. To Italcementi Finance S.A. Reconta Ernst & Young S.p.A. Ernst & Young et Autres Via Po, 32 41, rue Ybry 00198 Rome 92576 Neuilly-sur-Seine Cedex Italy France ARRANGERS
Banca IMI S.p.A. BNP Paribas Piazzetta Giordano dell’Amore, 3 10 Harewood Avenue 20121 Milan London NW1 6AA Italy United Kingdom
DEALERS
Banca IMI S.p.A. BNP Paribas Piazzetta Giordano dell’Amore, 3 10 Harewood Avenue 20121 Milan London NW1 6AA Italy United Kingdom
Crédit Agricole Corporate & Investment Bank Crédit Industriel et Commercial 9 quai du Président Paul Doumer 6, avenue de Provence 92920 Paris La Défense Cédex 75452 Paris Cedex 9 France France
HSBC Bank plc ING Bank N.V. 8 Canada Square Foppingadreef 7 London E14 5HQ 1102 BD Amsterdam United Kingdom The Netherlands
J.P. Morgan Securities Ltd. Mediobanca–Banca di Credito Finanziario S.p.A. 125 London Wall 1 Piazzetta Cuccia London EC2Y 5AJ 20121 Milan United Kingdom Italy
Merrill Lynch International Natixis 2 King Edward Street 30 avenue Pierre Mendès France London EC1A 1HQ 75013 Paris United Kingdom France
Société Générale The Royal Bank of Scotland plc 29 boulevard Haussmann 135 Bishopsgate 75009 Paris London EC2M 3UR France United Kingdom
UniCredit Bank AG Arabellastrasse 12 81925 Munich Germany LISTING AGENT BNP Paribas Securities Services, Luxembourg Branch 33, rue de Gasperich Howland – Hesperange L – 2085 Luxembourg
0010155-0001570 RM:2862946.20