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. The CSSF assumes no responsibility for the economic and financial soundness of the transactions contemplated by this Base Prospectus or the quality or solvency of the Issuer in accordance with Article 7(7) of the Prospectus Act 2005. 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 Official List of 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 rating of certain Series of Notes to be issued under the Programme may be specified in the applicable Final Terms. Whether or not each credit rating applied for in relation to relevant Series of Notes will be issued by a credit rating agency established in the European Union and registered under Regulation (EC) No. 1060/2009 (as amended) (the CRA Regulation) will be disclosed in the Final Terms. 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 Supplement to the Base Prospectus in the case of listed Notes only, 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 CM-CIC HSBC ING Commercial Banking J.P. Morgan Mediobanca S.p.A. Mitsubishi UFJ Securities NATIXIS The Royal Bank of Scotland Société Générale UniCredit Bank Corporate & Investment Banking
The date of this Base Prospectus is 29 June 2012.
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) as amended (which includes the amendments made by Directive 2010/73/EU (the 2010 PD Amending Directive) to the extent that such amendments have been implemented in a Member State of the European Economic Area).
The Issuers and the Guarantor (the Responsible Persons) accept responsibility for the information contained in this Base Prospectus including all translations of their financial statements listed under "Documents incorporated by reference" below. 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).
Figures in the table relating to ranks and market shares for the cement business at page 98 have been extracted from Jefferies International Limited's Global Building Materials Report dated February 2012, page 381. The data published by Jeffries are the most up-to-date figures provided by a reliable independent source and the Issuers and the Guarantor confirm that such information has been accurately reproduced. However, according to Group estimates, in 2011 Italcementi Group's market shares have recorded a decrease in Egypt, Kazakhstan and, to a limited extent, in Morocco, as a result of a more competitive supply environment due to new entrants into the market. According to Group estimates, considering local production and imports, Italcementi Group has a lower share also in Bulgaria.
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
3 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.
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.
4 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.
5 CONTENTS
Clause Page
Overview of the Programme ...... 7 Risk Factors...... 12 Documents Incorporated by Reference...... 26 Form of the Notes...... 29 Applicable Final Terms ...... 31 Terms and Conditions of the Notes ...... 47 Use of Proceeds...... 77 Description of Italcementi S.p.A...... 78 Description of Italcementi Finance S.A...... 121 Taxation ...... 124 Subscription and Sale ...... 134 General Information ...... 138
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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.
6 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 & Investment Bank CM-CIC Securities HSBC Bank plc ING Bank N.V. J.P. Morgan Securities Ltd. Mediobanca – Banca di Credito Finanziario S.p.A. Merrill Lynch International Mitsubishi UFJ Securities International plc 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.
7 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
8 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
9 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 €100,000 (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
10 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.
Whether or not each credit rating applied for in relation to relevant Series of Notes will be issued by a credit rating agency established in the European Union and registered under Regulation (EC) No. 1060/2009 (as amended) (the CRA Regulation) will be disclosed in the Final Terms.
Listing Approval and Admission to Application has been made to the CSSF to approve this Trading: 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”.
11 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
Since the second half of 2007, disruption in the global credit markets has created increasingly difficult conditions in the financial markets. These conditions have resulted in decreased liquidity and greater volatility in global financial markets, and continue to affect the functioning of financial markets and to impact the global economy. In Europe, despite measures taken by several governments, international and supranational organisations and monetary authorities to provide financial assistance to Eurozone countries in economic difficulty and to mitigate the possibility of default by certain European countries on their sovereign debt obligations, concerns persist regarding the debt and/or deficit burden of certain Eurozone countries, including the Republic of Italy, and their ability to meet future financial obligations, given the diverse economic and political circumstances in individual member states of the Eurozone. It remains difficult to predict the effect of these measures on the economy and on the financial system, how long the crisis will exist and to what extent the Group’s business, results of operations and financial condition may be adversely affected.
As a result, the Group’s ability to access the capital and financial markets and to refinance debt to meet the financial requirements of the Group may be adversely impacted and costs of financing may significantly increase. This could materially and adversely affect the business, results of operations and financial condition of the Issuer, with a consequent adverse effect on the market value of the Notes and the Issuers’ ability to meet their obligations under the Notes.
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.
12 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 sought, and may continue to seek, 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 fuel, 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.
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 fuel have significantly affected, and may continue to affect, the Group’s results of operations and its profitability.
13 Risks related to Italcementi’s international operations
The Group’s business comprises of operations in 21 countries worldwide1. 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.
The Group has operations in Egypt, Morocco, Kuwait and Saudi Arabia, as well as investments in Syria and Libya, which have been experiencing political turmoil recently or may do so in the future. As at the date of this Base Prospectus, political instability in these countries has not determined any material adverse effect on the Group’s assets and had a limited effect on its operations and results, with the exception of Egypt, where political and social pressures have determined cost inflation and some loss of productivity, even if the Group market share, profitability and results have been affected mainly by local overcapacity, as described under Recent Developments at pages 80 and 81 and Principal markets and competitive position at page 98 below. However, Italcementi cannot exclude that future events will have a material adverse impact on Italcementi’s assets or operations in these countries and on its results.
1 As at 31 December 2011 the Group had operations in 22 countries worldwide. Following the disposal of Afyon Cement, completed in the first half of 2012. Italcementi no longer has operations in Turkey. The updated figure includes China where the Group has in 2012 agreed to sell its Fuping operations to West China Cement and become the third largest shareholder of the HK-listed company. 14 Operational risks associated with the Group’s facilities
The Italcementi Group operates industrial facilities located in 21 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.
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.
15 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.
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 the current 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.
16 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 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 market 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 financial statements 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 items are 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.
17 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.
As of 31 March 2012, Italcementi set aside provisions to cover the related risks which the Company considers to be adequate.
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
18 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.
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 or 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.
19 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.
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 revenues and cash flows
Italcementi Finance S.A.’s revenues and cash flow depend 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. under the Programme 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;
20 (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
(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;
21 (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;
(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.
22 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.
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 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).
The European Commission has proposed certain amendments to the Directive, which may, if implemented, 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
23 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.
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
24 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 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.
In general, European regulated investors are restricted under Regulation (EC) No. 1060/2009 (as amended) (the CRA Regulation) from using credit ratings for regulatory purposes, unless such ratings are issued by a credit rating agency established in the EU and registered under the CRA Regulation (and such registration has not been withdrawn or suspended). Such general restriction will also apply in the case of credit ratings issued by non-EU credit rating agencies, unless the relevant credit ratings are endorsed by an EU-registered credit rating agency or the relevant non-EU rating agency is certified in accordance with the CRA Regulation (and such endorsement action or certification, as the case may be, has not been withdrawn or suspended). The list of registered and certified rating agencies published by the European Securities and Markets Authority (ESMA) on its website in accordance with the CRA Regulation is not conclusive evidence of the status of the relevant rating agency included in such list, as there may be delays between certain supervisory measures being taken against a relevant rating agency and the publicationof the updated ESMA list. Certain information with respect to the credit rating agencies and ratings will be disclosed in the Final Terms.
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.
25 DOCUMENTS INCORPORATED BY REFERENCE
The following documents which have previously been published and have been filed with the CSSF or are published and filed with the CSSF simultaneously with this Base Prospectus shall be incorporated in, and form part of, this Base Prospectus:
(a) the English version of the auditors’ report and audited consolidated annual financial statements of Italcementi S.p.A. as of 31 December 2010 and 31 December 2011 and for the financial years then ended, as included in the annual report of Italcementi S.p.A. for 2010 (the 2010 Annual Report) and the annual report of Italcementi S.p.A. for 2011 (the 2011 Annual Report) respectively;
(b) the English versions of the interim consolidated financial statements of Italcementi S.p.A. as of 31 March 2011 and 31 March 2012 and for the three months then ended, as included in the report of Italcementi S.p.A. for the first three months of 2011 (the First Quarter 2011 Report) and the report of Italcementi S.p.A. for the first three months of 2012 (the First Quarter 2012 Report) respectively;
(c) the English versions of the auditors’ report and audited annual financial statements of Italcementi Finance S.A. as of 31 December 2010 and 31 December 2011 and for the financial years then ended, as included in the annual report of Italcementi Finance S.A. for 2010 (the Italcementi Finance S.A. 2010 Annual Report) and the annual report of Italcementi Finance S.A. for 2011 (the Italcementi Finance S.A. 2011 Annual Report) respectively.
The English versions of the documents listed in items (a) and (b) above and incorporated by reference in this Base Prospectus are unsworn translations from the respective Italian originals.
The English versions of the documents listed in item (c) above and incorporated by reference in this Base Prospectus are unsworn translations from the respective French originals.
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, 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.
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.
26 Document Information incorporated Page number Italcementi S.p.A. audited consolidated annual financial 2011 Annual statements for the financial year ended 31 December 2011 Report Balance Sheet 64 Cashflow Statement 68 Income Statement 65 Accounting Principles and 71 - 136 Notes Audit Report 146 - 147 Italcementi S.p.A. audited consolidated annual financial 2010 Annual statements for the financial year ended 31 December 2010 Report Balance Sheet 68 Cashflow Statement 72 Income Statement 69 Accounting Principles and 75 - 140 Notes Audit Report 151 - 152 Italcementi S.p.A. interim consolidated financial First Quarter statements for the three months ended 31 March 2012 2012 Report Financial Position 24 Cashflow Statement 23 Income Statement 22 Accounting Principles and 26 - 33 Notes Italcementi S.p.A. interim consolidated financial First Quarter statements for the three months ended 31 March 2011 2011 Report Financial Position 26 Cashflow Statement 25 Income Statement 24 Accounting Principles and 28 - 35 Notes
Italcementi Finance S.A. Italcementi Finance S.A. audited annual financial 2011 Annual statements for the financial year ended 31 December 2011 Report Balance Sheet 10 - 11 Income Statement 9 Notes to the financial statements 12 - 24
27 Document Information incorporated Page number Audit Report 25 - 26 Italcementi Finance S.A. Italcementi Finance S.A. audited annual financial 2010 Annual statements for the financial year ended 31 December 2010 Report Balance Sheet 13 - 14 Income Statement 12 Notes to the financial statements 15 - 26
Audit Report 27 - 28
Any information not listed in the cross reference list but included in the documents incorporated by reference is given for information purpose only.
28 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
29 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 one year 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.
30 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) as amended (which includes the amendments made by Directive 2010/73/EU (the 2010 PD Amending Directive) to the extent that such amendments have been implemented in a Member State of the European Economic Area). 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) as amended (which includes the amendments made by Directive 2010/73/EU (the 2010 PD Amending Directive) to the extent that such amendments have been implemented in a Member State of the European Economic Area) 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.
31 [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.]
[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: [ ] (N.B. Following the entry into force of the 2010 PD Amending Directive on 31 December 2010, Notes to be admitted to trading on a regulated market within the European Economic Area with a maturity date which will fall after the implementation date of the 2010 PD Amending Directive in the relevant European Economic Area Member State (which is due to be no later than 1 July 2012) must have a minimum denomination of €100,000 (or equivalent) in order to benefit from Transparency Directive exemptions in respect of wholesale securities. Similarly, Notes issued after the implementation of the 2010 PD Amending Directive in a Member State must have a minimum denomination of €100,000 (or equivalent) in order to benefit from the wholesale exemption set out in Article 3.2(d) of the Prospectus Directive in that Member State.) (Note – where multiple denominations above [€100,000] or equivalent are being used the
32 following sample wording should be followed: “[€100,000] and integral multiples of [€1,000] in excess thereof up to and including [€199,000]. No Notes in definitive form will be issued with a denomination above [€199,000].”) (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 [€100,000] 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] (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
33 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) (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
34 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 (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: [ ]
35 (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: 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
36 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 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): [ ]
37 (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): [ ] (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 38 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: “[€100,000] and integral multiples of [€1,000] in excess thereof up to and including [€199,000].” Furthermore, such 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 39 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 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
40 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]
41 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]/[are expected to be]] rated [insert details] by [insert the legal name of the relevant CRA(s)].
[[Insert the legal name of the relevant CRA entity] is established in the European Union and is registered under Regulation (EC) No. 1060/2009 (as amended). [As such [insert the legal name of the relevant CRA entity] is included in the list of credit rating agencies published by the European Securities and Markets Authority on its website in accordance with such Regulation.]] [[Insert the legal name of the relevant non-EU CRA entity] is not established in the European Union and is not registered in accordance with Regulation (EC) No. 1060/2009 (as amended)[. [Insert the legal name of the relevant non-EU CRA entity] is therefore not included in the list of credit rating agencies published by the European Securities and Markets Authority on its website in accordance with such Regulation].] [[Insert the legal name of the relevant non-EU CRA entity] is not established in the European Union and has not applied for registration under Regulation (EC) No. 1060/2009 (as amended) (the CRA Regulation). However, the application for registration under the CRA Regulation of [insert the legal name of the relevant EU CRA entity that applied for registration], which is established in the European Union and is registered under the CRA Regulation [(and, as such is included in the list of credit rating agencies published by the European Securities and Markets Authority on its website in accordance with such Regulation)], disclosed 42 the intention to endorse credit ratings of [insert the legal name of the relevant non-EU CRA entity]. While notification of the corresponding final endorsement decision has not yet been provided by the relevant competent authority, the European Securities Markets Authority has indicated that ratings issued in third countries may continue to be used in the EU by the relevant market participants for a transitional period ending on 30 April 2012.] [[Insert the legal name of the relevant non-EU CRA entity] is not established in the European Union and has not applied for registration under Regulation (EC) No. 1060/2009 (as amended) (the CRA Regulation). The ratings [[have been]/[are expected to be]] endorsed by [insert the legal name of the relevant EU-registered CRA entity] in accordance with the CRA Regulation. [Insert the legal name of the relevant EU CRA entity] is established in the European Union and registered under the CRA Regulation[. As such [insert the legal name of the relevant EU CRA entity] is included in the list of credit rating agencies published by the European Securities and Markets Authority on its website in accordance with the CRA Regulation].] [[Insert the legal name of the relevant non-EU CRA entity] is not established in the European Union and has not applied for registration under Regulation (EC) No. 1060/2009 (as amended) (the CRA Regulation), but it [is]/[has applied to be] certified in accordance with the CRA Regulation[[[EITHER:] and it is included in the list of credit rating agencies published by the European Securities and Markets Authority on its website in accordance with the CRA Regulation] [[OR:] although notification of the corresponding certification decision has not yet been provided by the relevant competent authority and [insert the legal name of the relevant non- EU CRA entity] is not included in the list of credit rating agencies published by the European Securities and Markets Authority on its website in accordance with the CRA Regulation].] [[Insert the legal name of the relevant CRA entity] is established in the European Union and has applied for registration under Regulation (EC) No. 1060/2009 (as amended), although notification of the corresponding registration decision has not yet been provided by the relevant competent authority[ and [insert the legal name of the relevant CRA entity] is not included in the list of credit rating agencies published by the European Securities and Markets Authority on its website in accordance with such Regulation].] [[Insert the legal name of the relevant non-EU CRA
43 entity] is not established in the European Union and has not applied for registration under Regulation (EC) No. 1060/2009 (as amended) (the CRA Regulation). However, the application for registration under the CRA Regulation of [insert the legal name of the relevant EU CRA entity that applied for registration], which is established in the European Union, disclosed the intention to endorse credit ratings of [insert the legal name of the relevant non-EU CRA entity][, although notification of the corresponding registration decision has not yet been provided by the relevant competent authority and [insert the legal name of the relevant EU CRA entity] is not included in the list of credit rating agencies published by the European Securities and Markets Authority on its website in accordance with the CRA Regulation].] 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.)] 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 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.]
44 [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 [Note that the designation “yes” simply means that the eligibility: 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]
45 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 [ ].
46 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.
47 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.
48 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
49 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
50 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
51 (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.
52 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:
53 (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
54 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:
55 (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.
56 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;
57 (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;
58 (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
59 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)).
60 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. 61 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
62 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
63 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.
64 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
65 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
66 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.
67 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
68 (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
69 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
70 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
71 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.
72 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 the regulated market of, 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
73 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.
74 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
75 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.
76 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.
77 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. 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 influenced production capacity of approximately 74 million tonnes of cement.
As at 31 December 2011, the Italcementi Group had operations in 22 countries in four different continents and comprised an industrial network of 54 cement plants, 10 grinding centres, 5 terminals, 119 aggregates quarries and 494 concrete batching units1. In 2011, Group sales amounted to €4,721 million (compared to €4,660 million in 2010), net income amounted to €91 million (compared to €197 million in 2010) and sales volumes amounted to 51.1 million tonnes with regard to cement and clinker, 38.1 million tonnes with regard to aggregates and 14.5 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.
1. Following the disposal of Afyon Cement completed on 31 May 2012, the Group no longer has operations in Turkey. Therefore, as at the date of this Base Prospectus, the Group is present in 21 countries in four different continents. Following the disposal of Afyon Cement and the disposal of the Pontassieve plant in Italy, which is expected to be completed by 30 June 2012, the Group will operate 52 cement plants, 10 grinding centres and 5 terminals, 119 aggregate quarries and 494 concrete batching units. 78 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.
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 83 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.
For this purpose, in 2010, Italcementi Finance issued Fixed Rate Notes under the Programme for an aggregate nominal amount of €750 million. The proceeds were used to provide financing for Italcementi (€210 million) and Ciments Français (€540 million). This transaction enabled Ciments Français to refinance 79 the buyback of part of the notes issued in U.S. private placements in 2002 and 2006, which resulted in the repurchase of all of the notes issued in 2006 (USD300 million) and part of the notes issued in 2002 (USD183.5 million out of USD200 million). It also enabled the refinancing of some of the short-term funding of Italcementi and Ciments Français. In addition, a credit facility agreement was entered into by Italcementi Finance with a pool of 16 international banks for a 5-year revolving credit facility of €920 million.
As part of the programme to simplify the Group shareholding structure, in 2010, Société Internationale Italcementi France (SIIF), the intermediate holding company of Ciments Français, merged into Ciments Français. As a result, Italcementi became a direct shareholder in Ciments Français S.A., with 81.82 per cent. of the share capital and 89.99 per cent. of voting rights as at 31 December 2010.
At the end of 2010, Italcementi sold to its parent company Italmobiliare S.p.A. its shareholdings in Mediobanca and RCS MediaGroup S.p.A. These transactions were intended to help Italcementi focus its financial resources on its core business and further strengthen its financial structure by freeing up resources for possible growth opportunities in the future.
The Calcestruzzi group returned to the control of Italcementi on 1 January 2011. In its ruling on 20 April 2011, the court of Caltanissetta ordered the full revocation of the preventive seizure of the assets of Calcestruzzi S.p.A. and the restitution of those assets to the owners.
In March 2011 Set Group Holding was sold to the Turkish group Limak Holding and Italgen Elektrik Uretim was sold to Enerjisa (a Sabanci-Verbund joint venture).
In September 2011 the Group, through the Indian company Zuari Cement, acquired from Zuari Industries via a reserved capital increase a 74 per cent. stake in Gulbarga Cement, a company based in the region of Karnataka, which is planning to build a new cement plant with an annual cement capacity of 3 million metric tons.
Until December 2011, the admixture and additive businesses were operated by the Group, under the brand Axim, through six legal entities in Italy, France, USA, Canada, Morocco and Spain, with revenues of approximately €61 million in 2010 and 150 employees. In December 2011, all the Axim assets were sold to Sika AG, a Swiss based globally active specialty chemicals company. As part of the transaction, Sika AG and the Group entered into a strategic partnership agreement with the intention of developing joint research and development programmes and a long-term supply agreement with the Group for the supply of additives for cement and admixtures for concrete to the Group.
In 2012 the Group launched a new programme of investments intended to bring further improvements in its industrial operations in Italy and Bulgaria and raise production capacity in India and, later, in Morocco. The programme is not expected to affect negatively the Group’s capital and financial ratios.
RECENT DEVELOPMENTS
Consolidated results as at 31 March 2012
On 4 May 2012, the Italcementi Board of Directors examined and approved the consolidated quarterly report as at 31 March 2012. In the first quarter of the current year, sales were not only negatively affected by the recession in some industrialised countries but also by particularly adverse meteorological conditions in Europe, as compared with the improved situation recorded in the first quarter of 2011. Operations in the emerging economies were driven by growth in Morocco and India and the recovery in Bulgaria, areas where the Group has already set out new plans to strengthen and improve the efficiency of its production facilities.
80 In Egypt, following the price downturn that was ignited in 2011 by overcapacity due to new entrants into the market causing a strong impact on profitability, the market showed signs of a recovery, which allowed a consolidation of the upward trend in prices that emerged at the end of 2011, but prices remained below 2011 first-quarter levels. North American growth confirmed the indications of a recovery present at the end of 2011. For the first quarter of 2012, Group revenue – also at constant size and exchange rates – was down on the first quarter of 2011 due to the particularly significant negative volume effect in Europe in the first two months of the year. This was counterbalanced in part by a sales price trend that was positive in Italy and stable in most other countries with the exception of Egypt. With regard to operating results, the effects of the ongoing actions to contain fixed costs and the greater efficiency achieved by the recent investments in the Group’s industrial network mitigated in part the rise in energy costs and the impact of the decline in sales volumes.
Sales volumes and Cement and clinker Aggregates Ready mixed concrete internal transfers (*) (millions of metric tons) (millions of metric tons) (millions of m3) (unaudited) % change vs. % change vs. % change vs. 31 March 2011 31 March 2011 31 March 2011
At At At 31 March constant 31 March constant 31 March constant 2012 Historic size 2012 Historic size 2012 Historic size Central Western Europe 3.8 (19.9) (19.9) 7.2 (15.7) (15.7) 2.2 (15.7) (16.3) North America 0.8 19.5 19.5 0.3 29.2 29.2 0.2 41.5 41.5 Emerging Europe North 3.9 (1.0) (1.0) 0.5 (2.0) (2.0) 0.6 1.8 1.8 Africa and Middle East Asia 2.8 (4.6) (4.6) - n.s n.s. 0.2 (14.3) (14.3) Trading 0.8 45.9 45.9 - - - - n.s. n.s. Eliminations (0.7) n.s. n.s. ------Total 11.4 (8.1) (8.1) 8.0 (14.1) (14.1) 3.1 (10.7) (11.2)
For purposes of this Base Prospectus, “Central Western Europe” includes Italy, France, Belgium, Spain and Greece; “North America” includes the U.S.A. and Canada; “Emerging Europe, North Africa and Middle East” includes Egypt, Morocco, Bulgaria, Kuwait, Saudi Arabia; and “Asia” includes Thailand, India, China and Kazakhstan. The figures and changes shown in the table do not include sales volumes for the Turkish company Afyon, classified under discontinued operations. Revenue, at €1,071.7 million, was down 6.8 per cent. from the first quarter of 2011. Given a positive exchange-rate effect of 0.5 per cent. and an equivalent negative consolidation effect (due largely to the sale of Axim operations at the end of 2011), the entire reduction arose from the business slowdown. In cement and clinker (11.4 million metric tons), the sales decline in Central Western Europe was offset in part by the healthy progress in North America and Trading. In Emerging Europe, North Africa and Middle East, good performance in Bulgaria and Morocco substantially counterbalanced the downturn in Kuwait and Egypt as a result of the market entry of new capacity. Sales in India and Thailand were in line with the same period in the previous year. In aggregate, sales (8 million metric tons) fell in all Central Western European countries, with the sole exception of Italy. Performance was positive in North America. In ready mixed concrete, sales totaled 3.1 million cubic meters, with a reduction in all countries in Central Western Europe, while the indications of a recovery that emerged in North America at the end of 2011 were confirmed. Some progress was reported in Emerging Europe, North Africa and Middle East.
81 At constant size and exchange rates, revenue performance was diminished in large part by the reductions in revenues in Central Western Europe and in Egypt, while the largest increases were reported in North America, Morocco, India and Trading. Revenues by business 31 March 2012 31 March 2011 % change % change (*) (unaudited) (€thousands) Cement and clinker 701,669 747,544 -6.1 -6.7 RMC/Aggregates 304,099 326.862 -7.0 -7.5 Other 65,940 75,131 -12.2 -4.2 Total 1.071.708 1,149,537 -6.8 -6.8
(*) at constant size and exchange rates Recurring EBITDA was €126.7 million (€130.8 million in the first quarter of 2011), a reduction of 3.1 per cent. due to the negative volume effect and the rise in variable costs as a result of higher fuel and electricity prices, although the decrease in the return on revenue was smaller, thanks to action to boost efficiency and cut costs. Looking at individual countries, the largest increases were reported in Italy and North America, although recurring EBITDA was still negative, and in Morocco. The largest reductions in absolute terms were in Egypt and France-Belgium. In Egypt, profitability was affected by local overcapacity and the still incomplete absorption of price pressure caused by new entrants into the market in 2011. EBITDA, at €135.5 million, was down by 8.7 per cent. from the first quarter in the previous year, when the Group posted higher non-recurring income (positive net items for €17.6 million in the first three months of 2011 compared with €8.8 million in the first quarter of 2012). EBIT, at €21.3 million, was down by 41.4 per cent., while profit before tax was negative at €7.8 million (+€24.1 million in the same period in the previous year which included capital gains from the sale of Goltas shares), reflecting the impact of net finance costs of €28.2 million (€21.1 million). The first quarter of 2011 also benefited from impairment reversals on financial assets of €7.5 million relating to the Calcestruzzi group. The Group posted a loss for the period of €34.6 million compared with a profit of €127.6 million in the first quarter of 2011, when it also posted capital gains from the sale of operations in Turkey (€123.1 million). There was a loss attributable to owners of the parent of €49.0 million (profit of €80.7 million in the first quarter of 2011), and profit attributable to non-controlling interests of €14.4 million (€46.9 million). After capital expenditure of €82.5 million (€107.3 million), net financial debt at March 31, 2012 stood at €2,179.1 million compared with €2,093.0 million at December 31, 2011. Consolidated equity at the end of the first quarter was €4,794.5 million (€4,894.9 million), while the gearing ratio (net financial debt/equity) rose to 45.4 per cent. from 42.8 per cent. at 31 December 2011.
Results by geographical area and total
Central Western Europe
Revenues and operating results Revenues Recurring EBITDA EBITDA EBIT
(€ millions) 31 (unaudited) 31 March % change 31 March % change 31 March % change vs. March % change 2012 vs. 2011 2012 vs. 2011 2012 2011 2012 vs. 2011
Italy 193.6 (9.0) (5.6) 70.9 3.1 n.s. (22.4) 3.0
82 France / Belgium 353.6 (10.0) 47.2 (12.2) 48.6 (8.8) 25.3 (13.9) Spain 30.5 (21.4) 1.4 (52.7) (0.1) n.s. (4.7) (>100.0) Others(1) 5.8 (52.2) (0.6) n.s. (0.6) n.s. (1.7) (89.0) Eliminations (5.9) n.s. ------Total 577.6 (11.3) 42.4 12.7 51.0 (7.8) (3.5) n.s. North America
Revenues and operating results Revenues Recurring EBITDA EBITDA EBIT
31 (€ millions) 31 March % change 31 March % change 31 March % change vs. March % change (unaudited) 2012 vs. 2011 2012 vs. 2011 2012 2011 2012 vs. 2011
Total 79.8 25.0 (12.6) 42.4 (12.5) 43.8 (28.4) 26.9
Emerging Europe, North Africa and Middle East
Revenues and operating results Revenues Recurring EBITDA EBITDA EBIT
31 (€ millions) 31 March % change 31 March % change 31 March % change vs. March % change (unaudited) 2012 vs. 2011 2012 vs. 2011 2012 2011 2012 vs. 2011
Egypt 146.6 (12.5) 35.4 (30.4) 35.6 (30.1) 19.2 (44.1) Morocco 91.4 7.7 40.9 11.9 40.9 11.9 32.0 13.8 Others(2) 24.2 7.8 5.6 (21.9) 5.6 (22.9) 2.5 (32.2) Eliminations ------Total 262.2 (4.6) 81.9 (13.4) 82.1 (13.3) 53.8 (18.8) Asia
Revenues and operating results Revenues Recurring EBITDA EBITDA EBIT
(€ millions) 31 (unaudited) 31 March % change 31 March % change 31 March % change vs. March % change 2012 vs. 2011 2012 vs. 2011 2012 2011 2012 vs. 2011
Thailand 53.3 (1.7) 6.8 (32.3) 6.9 (32.0) 1.0 (78.9) India 63.9 5.7 15.3 (1.6) 15.2 (2.0) 10.5 (2.1) Others(3) 12.2 (22.1) (3.3) (>100.0) (3.3) (>100.0) (5.7) (77.1) Eliminations ------Total 129.4 (0.7) 18.9 (23.9) 18.8 (24.1) 5.8 (52.5)
Cement/Clinker Trading
Revenues and operating results Revenues Recurring EBITDA EBITDA EBIT
83 (€ millions) 31 March % change 31 March % change 31 March % change 31 March % change (unaudited) 2012 vs. 2011 2012 vs. 2011 2012 vs. 2011 2012 vs. 2011
Total 51.8 25.4 1.8 (36.0) 1.7 (41.7) 1.0 (49.0)
Group Total
Revenues and operating results Revenues Recurring EBITDA EBITDA EBIT
(€ millions) 31 March % change 31 March % change 31 March % change 31 March % change (unaudited) 2012 vs. 2011 2012 vs. 2011 2012 vs. 2011 2012 vs. 2011
Total 1,071.7 (6.8) 126.7 (3.1) 135.5 (8.7) 21.3 (41.4) (1) Greece
(2) Bulgaria, Kuwait, Saudi Arabia
(3) China and Kazakhstan n.s.: not significant
Strategic partnership in China On 4 May 2012, Italcementi Group announced that it had strengthened its presence in China by becoming one of the main shareholders and strategic partner of West China Cement Limited (West China Cement), the largest player in the Shaanxi Province, with development initiatives in Western China. The agreement foresees the sale to West China Cement of 100 per cent. of the share capital of Shaanxi Fuping Cement Company, acquired by the Group in 2007, which in turn also owns 35 per cent. of the share capital of Shifeng Cement, acquired in 2010, against the subscription of a reserved capital increase of West China Cement, after which Italcementi Group will own approximately a 6.25 per cent. stake in West China Cement becoming the third largest shareholder of the company. Italcementi will be represented with one member on the Board of Directors of West China Cement. The transaction is based on a valuation of Fuping equal to approximately €86 million, gross of the net financial debt of the company, approximately €26 million which will be removed from the consolidated Group accounts. Italcementi Group will underwrite 284,200,000 newly issued shares of West China Cement at the price of approximately 2.18 HK$/share. West China Cement is a holding company which has been listed in Hong Kong since 2010, with a current market capitalisation of approximately €775 million. West China Cement controls, via its Chinese subsidiary Yaobai Cement, including cement production units in Shaanxi and Xinjiang with a total capacity of approximately 20 million tons, which will grow to 24 million tons by the end of 2012 - with 15 cement production units - including Fuping and Shifeng. In 2011 West China Cement recorded net revenues of approximately €380 million and net income of approximately €80 million. The closing of the transaction occurred on 26 June 2012.
84 Afyon sale to the Cimsa Group finalized On 31 May 2012 Italcementi Group announced that Ciments Français and the subsidiary Parcib s.a.s. completed the sale to Cimsa Cimento Sanayi ve Ticaret A.S. of the outstanding 51 per cent. of the share capital of Afyon Cimento Sanayii Turk A.S. In accordance with the sale agreement, the shares were transferred for a global price of 57,530,000 Turkish lira, equivalent to approximately €25 million. Following the closing of this transaction, and the sale of Set Group in 2011, the Group has no further operations in the Turkish market as a cement producer. Italian capacity optimisation On 8 June 2012, Italcementi announced the agreement to sell its Pontassieve (Italy) plant to Colacem Group, and a plan to close two prodution facilities in Southern Italy, in Vibo Valentia and Porto Empedocle. These actions will help the Group to counterbalance the significant reduction in cement demand in Italy, which has increased overcapacity levels on the market.
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 21 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 also from the skills of CTG, whose activities aid Italcementi and its 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. In keeping with its financial policy goals, the Group may from time to time review its existing investments and decide to divest non-core activities to generate financial resources necessary to fund strategic growth initiatives. • 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
85 business1 . 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. • 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 use of energy and non-renewable resources). 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 IT model enabling operations efficiency and best-practice dissemination. • Sustainable development Sustainable development constitutes the foundation of the Italcementi Group’s strategy and 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) and the Cement Sustainability Initiative (CSI), which provides participating companies with a
1 The Group’s presence in the concrete (and aggregates) business enables Italcementi to be in direct contact with the construction companies and planners who express the new demands of the end market, particularly with regard to new needs in terms of performance, product innovation and sustainable construction. The end market requires concrete with better mechanical, structural, durability, thermal and acoustic insulation, fire resistance and seismic properties, but also a lower use of energy and resources. These needs can be met using an “integrated” approach to the components of 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.
86 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, non-governmental and intergovernmental associations. In 2010 the Group adhered to the United Nations Global Compact (UNGC), completing the Group's long-standing participation in the WBCSD. The UNGC brings together organisations to protect and promote human rights, employment, the environment and the fight against corruption. Further details are 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 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 74 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 2010 and 20111.
Year ended 31 December
2010 2011
(audited)
Sector (€ millions) % (€ millions) %
Cement and clinker 3,315 71.1 3,056 64.7
Ready mixed concrete/Aggregates 1,038 22.3 1,388 29.4
1 Through the subsidiary Ciments Français, on March 25, 2011, the Group sold the companies in Set Group Holding – Turkey; consequently the operations in question have been accounted for in compliance with IFRS 5 “Non-current assets held for sale and discontinued operations”. Also in compliance with IFRS 5, the amounts in the income statement and the statement of cash flows for 2010 and shown in this prospectus have been restated accordingly. Please note that as from 1 January, 2011 the Calcestruzzi group has been consolidated (on a line-by-line basis). 87 Other activities 307 6.6 277 5.9
Total Revenues 4,660 100.0 4,721 100.0
Financial Highlights
The following table sets out certain measures of financial performance of the Italcementi Group for the years ended 31 December 2010 and 2011.
Year ended 31 December
2010 2011
(audited)
(€ millions)
Revenues 4,660 4,721
Recurring EBITDA 842 697
EBITDA 839 738
EBIT 370 129
Net profit for the period 197 91
Group net profit for the period 46 (3)
Investments in fixed assets(*) 542 402
Total shareholders’ equity 4,986 4,895
Group shareholders’ equity 3,525 3,495
Net debt (financial position) 2,231 2,093
Number of employees at period end 20,139 19,896 (unaudited)
(*) 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:
88 • 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 and premixes, 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, also supporting sustainable construction. 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 2010 and 2011.
Year ended 31 December
Sector 2010 2011
(audited)
Cement and clinker (metric tonnes) 52.1 51.1
Aggregates (metric tonnes) 36.7 38.1
Ready-mix concrete (million cubic 9.5 14,5 metres)
Cement and clinker
Cement and clinker production constitutes Italcementi’s main business, accounting for approximately 64.7 per cent. of its total consolidated revenues for the year ended 31 December 2011.
As at 31 December 2011, the Group operated 54 cement plants in 16 countries, 10 grinding centres in 7 countries and five trading terminals in 4 countries1 . In 2011, sales of cement and clinker amounted to €3,056.3 million (compared to €3,315.0 in 2010) and 51.1 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.
1 Following the disposal of Afyon Cement completed in the first half of 2012 and the disposal of the Pontassieve plant in Italy, which is expected to be completed by 30 June 2012, the Group will operate 52 cement plants, 10 grinding centres and 5 terminals.
89 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.
Ready mixed concrete and aggregates
Ready mixed concrete and aggregates production accounted for approximately 29,4 per cent. of Italcementi’s total consolidated revenues for the year ended 31 December 2011.
As at 31 December 2011, the Group operated 119 aggregate quarries in 7 countries and 494 concrete batching units in 13 countries1. In 2011, sales of concrete and aggregate amounted to €1,387.9 million (compared to €1,037.5 in 2010), 38.1 million tonnes, with regard to aggregates and 14.5 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 5.9 per cent. of Italcementi’s total consolidated revenues for the year ended 31 December 2011.
Admixtures
Until December 2011, the admixture and additive businesses were operated, under the brand Axim, by the Group through six legal entities in Italy, France, USA, Canada, Morocco and Spain. In December 2011 all the Axim assets were sold to Sika AG, a Swiss based globally active specialty chemicals company.
A strategic partnership agreement was entered into between the Group and Sika AG at the same time with the intention of developing joint research and development programmes, leveraging on the respective competencies of the Group and Sika AG, and evaluating other areas of possible cooperation.
1 Following the disposal of Afyon Cement completed in the first half of 2012, the Group now operates 119 aggregate quarries and 494 concrete batching units.
90 The sale of the Axim assets and the other strategic agreements entered into with Sika AG allow the Group, through a long-term supply agreement, to face the increasing competition in the field of chemicals for construction, while concentrating its efforts on the core activities. In addition, by entering into this long-term supply agreement, the Group has ensured the availability of additives and admixtures at best performance/cost ratio and preferential access to the latest technologies available. This partnership with a worldwide leader in chemicals enforces the strategic role of additives for cement and admixtures for concrete as a key to efficiency in production and products innovation.
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 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 2011, Italgen had revenues of €57.4 million (i.e. approximately 1.22 per cent. of Italcementi’s consolidated revenues), earning before interest tax depreciation and amortisation (recurring EBITDA) of €17.7 million (approximately 2.54 per cent. of Italcementi’s consolidated recurring EBITDA) and a net profit of €19.7 million (approximately 21.62 per cent. of the Group’s net profit), a significant increase from 2010 (€7.3 million), thanks to the gain from the sale, in March 2011, of Italgen Elektrik Uretim, the company that developed the 142.5 MW wind farm project in Balikesir, Turkey.
At the end of June 2011, two months ahead of schedule, work was completed on the photovoltaic plant in Guiglia (Modena), by i.Fotoguiglia S.r.l. owned 30 per cent. by Italgen and 70 per cent. owned by Fotowatio Italy, a subsidiary of the Spanish group Fotowatio Renewable Ventures S.A.. From July-December 2011, the plant, which involved a total investment of €20 million and is run jointly by the two partners, generated 4.7 GWh of electrical energy, 30 per cent. above the forecast volume, thanks in part to very favorable meteorological conditions.
Consistent with the business model drawn up by Italgen and Ciments du Maroc, in 2011 the Laayoune wind farm was completed. In the period July-December 2011, it generated a total of approximately 7.1 GWh.
At the beginning of 2011 preliminary studies commenced to assess the installation of a concentrated solar power (CSP) plant next to the Ait Baha cement plant and a technical partner was identified with an innovative technology based on parabolic reflectors. The pilot plant will comprise 3 solar modules with a total surface area of approximately 6,000 m2. Planned peak power is 150 kW and projected annual production is approximately 1 million kWh, for a total investment of €2.7 million.
Despite some delays due to the political difficulties in Egypt, the authorization process for the project continued, the preparation of the documents and the tender specifications for the supply of the plant were completed for the preliminary farm project, and negotiations continued with the Egyptian authorities on drafting the usufruct agreement, which we hope will be signed in the near future.
During 2011 commercial operations began for the Kavarna II wind farm through a joint venture company in Bulgaria of which Italgen owns a 49 per cent. stake. The reliability test was completed successfully and in the first two months of activity the farm exceeded the contractually planned availability rate. Operations at the two farms were hampered, however, by unplanned interruptions caused by the inability of the local grid to cope with power generation peaks and low wind levels during the year. Total production was 32.5 GWh, 20 per cent. below projected production.
91 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. In February 2011, BravoSolution GmbH was established in Munich, to operate in German-speaking markets. The company began operations and posted its first revenue. BravoSolution do Brasil Servicos de Tecnologia Ltda, owned 99.99 per cent. by BravoSolution Mexico, was established in December as a commercial operation on the Brazilian market to begin work in 2012 with a tender for the Rio Olympics in 2016. In 2011, Bravo Solutions had consolidated revenues of €55.5 million (i.e. approximately 1.2 per cent. of Italcementi’s consolidated revenues), EBITDA of €6.8 million (approximately 1 per cent. of Italcementi’s consolidated recurring EBITDA) and a net profit of €1.1 million (approximately 1.2 per cent. of the Group’s net profit). GEOGRAPHICAL PRESENCE
Italcementi operates in 21 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 the five 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 five Zones comprise: Italy (Zone 1); France, Belgium, Spain and Morocco (Zone 2); Greece, Bulgaria, Cyprus, Egypt, Kazakhstan and Kuwait (Zone 3); India, Thailand and China1 (Zone 4); and North America (Zone 5). For accounting purposes, Group results are disclosed on a more conventional basis also in accordance with IFRS 8 and divided between: Central Western Europe; North America; Emerging Europe, North Africa and Middle East; Asia; Cement and clinker trading and finally, Other operations.
The following table shows the breakdown of the consolidated revenues of the Italcementi Group by geographic area for the years ended 31 December 2010 and 2011.
Year ended 31 December
2010 2011
(audited)
Revenues by Revenues Intragroup Contributive per Revenues Intragroup Contributive per region sales revenues cent. Sales revenues cent. (€ thousands)
Italy 689,475 (46,528) 642,947 13.8 918,060 (59,439) 858,621 18.2
France- Belgium 1,493,788 (13,444) 1,480,344 31.7 1,589,687 (10,984) 1,578,703 33.4
1 In 2012 Italcementi Group strengthened its presence in China by becoming the third shareholder of West China Cement. 92 Spain 176,458 (24,729) 151,729 3.3 155,440 (33,564) 121,876 2.6
Others C.W.E.(1) 70,262 (7,687) 62,575 1.3 41,786 (4,706) 37,080 0.8
Eliminations (22,643) 22,643 (24,208) 24,208
Central Western Europe (C.W.E.) 2,407,340 (69,745) 2,337,595 50.2 2,680,765 (84,485) 2,596,280 55.0
North America 415,295 (670) 414,625 8.9 405,111 (446) 404,665 8.6
Egypt 788,682 (5,764) 782,918 16.8 551,832 (16,543) 535,289 11.3
Morocco 326,066 (1,298) 324,768 7.0 353,164 (2,547) 350,617 7.4
Others EE.NA.ME.(2) 130,328 (312) 130,016 2.8 125,466 (1,869) 123,597 2.7
Eliminations (518) 518 (239) 239
Emerging Europe, North Africa and Middle East (EE.NA.ME.) 1,244,558 6,856 1,237,702 26.6 1,030,223 (20,720) 1,009,503 21.4
Thailand 180,236 (3,635) 176,601 3.8 194,142 194,142 4.1
India 169,806 169,806 3.6 223,475 (1,453) 222,022 4.7
Others Asia(3) 98,926 98,926 2.1 81,762 (1) 81,761 1.7
Eliminations 1 (1)
Asia 448,969 (3,636) 445,333 9.5 499,379 (1,454) 497,925 10.5
Cement and clinker trading(4) 229,286 (93,056) 136,230 2.9 183,423 (44,774) 138,649 2.9
Other operations(5) 424,634 (336,112) 88,522 1.9 423,861 (350,341) 73,520 1.6
Unallocated postings
Eliminations (510,075) 510,075 (502,220) 502,220 93 Total 4,660,007 4,660,007 100.0 4,720,542 4,720,542 100,0
(1) Greece (2) Bulgaria, Turkey (Afyon), Kuwait and Saudi Arabia. Following the disposal of Afyon Cement, completed in the first half of 2012, the Group no longer has operations in Turkey. (3) China and Kazakhstan (4) “Cement and clinker trading” includes cement and clinker marketing activities in countries where Group terminals are located: Gambia, Mauritania, Sri Lanka and Albania, as well as direct exports to markets not covered by Group subsidiaries. (5) “Other operations” comprises the operations of the Ciments Français sub-holding, consisting essentially of provisions of services to subsidiaries. It also includes liquid fuel procurement operations for Group companies, the BravoSolution group in the field of e-business, Italcementi Finance, other international holdings and other minor operations in Italy.
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. As at 31 December, 2011, the Group’s operated 682 production facilities (including 54 integrated cement plants with the related quarries, 10 grinding centres, 494 concrete batching units, 119 aggregate plants and five terminals)1 . 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. 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 techniques aimed at reducing the carbon dioxide (CO2) and other emissions generated by the production cycle, and the adoption of responsible management systems aimed at limiting any environmental impact of the installations have
1 Following the disposal of Afyon Cement completed in the first half of 2012 and the disposal of the Pontassieve plant in Italy, which is expected to be completed by 30 June 2012, the Group will operate 52 cement plants, 10 grinding centres and 5 terminals, 119 aggregate quarries and 494 concrete batching units.
94 therefore become a competitive factor for companies in the sector, which operate while respecting the traditions and needs of local communities. 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. To the extent that applicable limitations on CO2 emissions are complied with, emission certificates may be sold on the CO2 trading market. Other regionals markets are developing similar approaches. 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 major environmental aspects, with defined reduction goals periodically updated. 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. 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.
95 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 limited exceptions in India and North America, where other standards are applied. 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.
Since stakeholder dialogue is a key factor in creating value and enhancing customer relationships, Italcementi decided to develop a customer satisfaction standard, based on the long experience of its Italian subsidiary and easily adaptable to capture different local expectations and market segmentations. Moreover, the Group has launched a new initiative called the “Italcementi Way to Quality”. The project aims to define Italcementi's concept of quality (dealing with processes, products, services/logistics and brands), identify key objectives and targets for quality across the Group countries and define key actions and roadmap to excellence. 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.
The vast majority of the Group’s markets are also assisted by a standardised customer satisfaction survey, easily adaptable to address different local expectations and market segmentations. Product, service, logistics and the overall perception of the Group are the four elements in the survey.
Trading
96 The Italcementi Group’s companies sell their products mainly in their respective local markets. However the Group’s subsidiaries in Bulgaria, Egypt Thailand and more recently Spain and Greece have historically been the most active in international trade and export, selling cement and clinker to countries in which the Group has no production facilities. The trading sector is managed by Interbulk Trading 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 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 2006-2011, world cement consumption significantly increased (an increase of 6.6 per cent. per year). This growth was due exclusively to the performances of emerging markets (mainly China, India and the Middle East), which in the same period posted a growth rate in cement demand of 8.8 per cent. per year. On the contrary, as a consequence of the world financial crisis, the mature markets registered a decline (7.6 per cent. annually), in some countries (like United States and Japan) already started in 2006, in other begun only in 2010.
On account of this market trend, the world demand for cement is now concentrated in the emerging markets, which in 2010 represented approximately 91 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 (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. In keeping with
97 its financial policy goals, the Group may from time to time review its existing investments and decide to divest non-core activities to generate financial resources necessary to fund strategic growth initiatives.
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(1) 26% (1)
France 2 (1) 32% (1)
Belgium 3 (1) 15% (1)
Spain 7 (1) 6% (1)
Greece 3 (1) 7% (1)
USA 7 (1) (2) 5% (1)
Canada 5 (1) (2) 4% (1) (3)
Egypt 1 (1) 28% (1)
Morocco 2 (1) 26% (1)
Bulgaria 1 (1) 36% (1)
Turkey 8 (1) 6% (1)
Thailand 4 (1) 15% (1)
India 7 (1) (4) 3% (1)
Kazakhstan 4 (1) 14% (1)
(1) Source: Jefferies – February 2012. Market shares in 2010.The data published by Jeffries are the most updated figures provided by a reliable independent source. Compared to the 2010 situation above reported, according to Group estimates, in 2011 Italcementi Group's market shares have recorded a decrease in Egypt, Kazakhstan and, to a limited extent, in Morocco, as a result of a more competitive supply environment due to new entrants into the market. According to Group estimates, considering local production and imports, Italcementi Group has a lower share also in Bulgaria.
(2) Second in North American regions where the Group operates (Source: Ciments Français estimates)
(3) Share of Canadian capacity
(4) Referred to regional market where the Group operates
98 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 approximately 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 new products, processes, know- how and solutions that can give a technical and economical competitive advantage in the framework of the actual market trends.
The research activity of CTG, one of Europe’s most important research centres on cement materials, is carried out in two centres located in Bergamo (Italy) and Guerville (France), respectively. Research is also performed 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 internationally recognised independent research 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 and focused researches are conducted. 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. In April 2012, Italcementi inaugurated i.lab, the new research and innovation centre, designed by the US architect Richard Meier. Located in the Kilometro Rosso Science Park (Bergamo), the research and innovation centre has an overall surface area of 23,000 square meters and hosts engineers, technicians and researchers from the research and development and laboratories departments of CTG and from Italcementi’s innovation direction, all engaged in investigating and developing innovative technological, functional and aesthetic solutions for new construction materials. 99 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; • additions for mix cements; • special cements with advanced strength and workability characteristics; • high-performance concrete; • recycling of cement materials; • photocatalytic cements; • permeable concrete; • special concretes for thermal and acoustic insulation; 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 programmes through industrial patents aimed at protecting its technical inventions both at the national and international level. From 1992 to the date of this Base Prospectus, the Group filed 97 patents for over 700 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 31 December 2011, the Group held over 410 trademarks, 102 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.
Pursuant to this policy, a license agreement was 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.
PROGRAMME FOR SUSTAINABLE DEVELOPMENT
100 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) and the Cement Sustainability Initiative (CSI), which provide 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.
In 2010, the commitment was confirmed and further expanded with the adhesion to the Global Compact of the United Nations, adding to well established objectives in terms of environmental protection, health and safety and wider commitments on human and labour rights and on anti-corruption.
The complete series of “Sustainability Policies”, issued in 2010 and circulated for gradual implementation in 2011 reflects and details these formal commitments. Operative, quantified improvement targets are established and the full disclosure on progress is to be done on a yearly basis through dedicated reporting and integration into the financial elements of the Annual Report.
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 policies, 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
101 - minimisation of the impact (visual and structural aspects, sensitivity of local ecosystems) of its production facilities on the land, including quarry restoration.
The Group has committed itself to applying the guidelines and protocols progressively developed jointly at 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 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.
In 2010, the Group maintained and strengthened its commitment to sustainable development in all countries and lines of business, with initiatives coordinated by the Group’s “Sustainable Development Steering Committee”. Details on objectives, initiatives and results are provided in the 2011 Sustainable Development Disclosure, attached to the Annual Report. • Italcementi's sustainability record was reconfirmed in “The Sustainability Yearbook 2012”, the most complete publication on corporate sustainability issued annually by the Sustainable Asset Management (SAM); it was ranked in the “SAM Bronze Class” category.
RISK MANAGEMENT
In May 2010, Italcementi formed a Risk Management Department, reporting to the Italcementi S.p.A. Chief Executive Officer, to improve its ability to create value for stakeholders by optimising enterprise risk management (ERM). The mission of the function is to guarantee a structured approach to risk management, integrated with the Group growth strategy, and to support the improvement of Group performance by identifying, measuring, managing and controlling key risks.
The creation of the Risk Management Department is part of the “Risk & Compliance” programme set up in 2008, based on the methodology developed by the Committee of Sponsoring Organizations of the Tradeway Commission (COSO), and consisting of the following phases:
1. identification of the main areas of risk for Group strategic goals and development of methods and tools to analyse and assess the correlated risk events;
2. assessment, at country level and at aggregate level, of identified risk events in terms of impact, probability and timeframe, in order to acquire an overall vision of the Group risk portfolio;
102 3. selection of priority risks and definition of response strategies, Group governance rules and actions to integrate and improve risk management systems; some operating risks are managed at individual company level, while others requiring specific competences or involving a variety of responsibilities are managed at Group level;
4. implementation of mitigation strategies and action and development of the Enterprise Risk Management process;
5. reporting to Top Management and the governance bodies on the main risks, and their management and evolution; in this phase quantification of risks and opportunities is integrated with the enterprise management process, for example in the budget, in results forecasting reviews and in assessment of strategic projects.
CORPORATE STRUCTURE
Italcementi S.p.A. is the parent company of Italcementi Group, which, as at 31 December 2011, was comprised of 208 companies, of which:
• 158 are directly or indirectly controlled by Italcementi and therefore consolidated on a line-by-line basis;
• 26 are jointly controlled and therefore consolidated on a proportionate basis; and
• 24 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.
With limited exceptions, such 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 owned, as at 31 December 2011, 83.20 per cent. of the share capital and 90.74 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 99.47 per cent. of Helwan Cement Company, 66.1 per cent. of Tourah Portland Cement, 52 per cent. of Ready Mix Production Company SAE and Ready Mix Production Universal SAE and 51 per cent. of Hilal Cement Company - Kuwait) and France (Ciments Français).
The table below provides an overview of the structure of the Italcementi Group as at 31 December 2011
103 (*) Controlling presence with significant minority interests. (**) Signed SPA for the sale of Fuping and SSA for partnership with WCC (May 2012). (***) Includes operations in Kuwait, Saudi Arabia and Turkey (i.e. Afyon, sold in May 2012), operating terminals in Albania, Gambia, Sri Lanka and Mauritania (grinding centre) and minor investments in Cyprus and Syria.
Below is a table representing the leading operating companies headed by the Italcementi Group as at 31 December 2011, broken down by country and area of activity.
Aggregates and ready- Country Cement mixed concrete Other
Italy Italcementi Calcestruzzi Italgen
Bravo Solutions
France Ciments Calcia GSM Socli
Unibeton Tratel
Belgium Compagnie des Ciments Aggregates and ready-mixed Trabel Belges concrete subsidiaries
Spain Financiera y Minera Aggregates and ready-mixed concrete subsidiaries
104 Greece Halyps Building Materials Aggregates and ready-mixed concrete subsidiaries
Cyprus Vassiliko(1) (2)
United States of America Essroc Corp. Aggregates and ready-mixed and Porto Rico concrete subsidiaries
Canada Essroc Canada
Ciment Quebec
Thailand Asia Cement Public Company Aggregates and ready-mixed concrete subsidiaries Jalaprathan Cement Public Company
India Zuari Cement Ltd. Sitapuram Power Ltd.
China Fuping Cement
Kazakhstan Shymkent Cement BetonAta
Saudi Arabia International City for Ready Mix(4)
Egypt Suez Cement Company (1) RMB Egypt Italgen Misr
Tourah (1) Other aggregates and ready- mixed concrete subsidiaries Helwan Cement Co.
Morocco Ciments du Maroc (1) Aggregates and ready-mixed Italgen Maroc concrete subsidiaries Asment (2)
Bulgaria Devnya Cement AD
Vulkan AD
Kuwait Hilal Cement (1) Aggregates and ready-mixed concrete subsidiaries
Albania Eurotech Cement (4)
Sri Lanka Singha Cement (PTE) Limited(4)
Gambia Gacem (4)
105 Mauritania Mafci (4) Mauritanienne des Batiments et Routes S.A.
Switzerland Interbulk Trading
(1) Listed company
(2) Companies valued with the equity method
(3) Joint venture
(4) 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 is based on the Company’s By-laws, as well as the following codes and/or regulations:
• Code of Conduct;
• Code of Ethics;
• Treatment of Confidential Information;
• Internal Dealing Code of Conduct;
• Procedure for Transactions with Related Parties;
• Insider Register Procedure;
• Regulation for manager in charge of preparing the company’s financial reports; and
• Organisation, Management and Control Model.
The texts of the above documents are all available on the corporate website www.italcementigroup.com, except for the Regulation for the manager in charge of preparing the company’s financial reports and for the special part of the Organizational, 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.
106 According to Article 2409-bis of the Italian Civil Code, and Legislative Decree no. 39/2010, implementing Directive 2006/43/EC on statutory audits of annual and consolidated accounts, listed companies organised under the laws of Italy shall appoint – by resolution of the ordinary shareholders’ meeting - an auditing firm or auditor 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. Directors shall serve for the period established at the time of their appointment, and in any case no more than three financial years, and may be re-elected.
The Board of Directors is vested with 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 corporate purposes, with the sole exclusion of 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;
• transfer of the registered office, provided that it remains in Italy;
• establishment or removal of secondary offices, both in Italy and abroad;
• reduction in share capital in the event of shareholder’s withdrawal; and
• amendment of the By-laws to comply with mandatory legal requirements.
Furthermore, the Board of Directors, in accordance with the Code of Conduct, has the task of examining and approving in advance:
• the transactions with related parties undertaken by the Company and by its subsidiaries when such transactions are of strategic or financial importance for Italcementi; and
• other transactions with related parties when expressly required by the specific Company procedure and in compliance with the methods therein. Finally, the Board of Directors must review, at least once a year, the size, composition and functioning of the Board itself and of its Committees.
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 six 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 resolutions are of advisory nature without being binding on the Board.
107 The Remuneration Committee has the task of proposing to the Board, in the absence of those directly concerned, the remuneration of the directors vested with special powers as well as of the Chief Operating Officer and of the officers with strategic responsibilities. It also enforces their application on the basis of the information supplied by the Chief Executive Officer. The Remuneration Committee also performs additional advisory functions on remuneration and related matters that the Board of Directors may request from time to time.
The Internal Control Committee has, among others, the following purposes: to verify, together with the manager in charge of preparing the Company’s financial reports and the external auditors, the correct application of accounting policies and their consistency 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; and to examine the activities programme and periodic reports prepared by the Controller. In addition, the Internal Control Committee performs further duties assigned by the Board of Directors and reports, at least, on a half-yearly basis, at the time of the approval of the annual and the half-year reports, 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.
Finally, the Board of Directors, in compliance with the Consob regulation no. 17221 of 12 March 2010 envisaged for transactions with related parties, set up from among its own members, during the adoption of the related procedure, a Committee for Transactions with Related Parties, which consists of only independent directors and is composed of the same members as the Internal Control Committee.
The Committee for Transactions with Related Parties has the task of assessing the formal and substantial accuracy of the transactions undertaken directly by the Company, or through its subsidiaries, with other related parties. Specifically, the Committee for Transactions with Related Parties has: (i) the duty to give and explain its opinion on both minor (non-binding opinion) and significant (binding opinion) transactions; (ii) the right, for significant transactions, to take part in the negotiations and in the preliminary investigation stage through a complete and prompt flow of information, and the right to ask for information and to submit its remarks to the delegated bodies and to those in charge of the negotiations or the preliminary investigation; (iii) the right to seek the assistance, at the Company’s expense, of independent experts of its choosing. In the case of minor transactions, the Procedure for Transactions with Related Parties envisages the right, in any case, to execute the transaction even if the Committee for Transactions with Related Parties expresses a negative opinion, provided that this is disclosed to the market through a specific document setting out the reasons for this divergence. For significant transactions, on the other hand, should the Committee for Transactions with Related Parties express a negative opinion, the Board of Directors may approve the transaction only with the prior authorisation of the Shareholders’ Meeting. In this case, the Shareholders’ Meeting will give its approval on the basis of an enhanced quorum (the majority of shareholders who are not related parties must not vote against the transaction) and a vote against will be valid only if the unrelated shareholders present at the meeting represent at least 10 per cent. of the share capital, with voting rights (the so-called “whitewash”).
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
108 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 eventual omissions and reprehensible actions to the Shareholders’ Meeting called to approve the financial statements. Moreover, in accordance with art. 151 of the TUF, the auditors individually and at any time can carry out 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 bodies 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.
In addition to the above mentioned duties, Leg. Dec. 39/2010 by which VIII EU directive on statutory audits has been acknowledged in Italy, the Board of Statutory Auditors is also required to: (i) oversee the independence of the external auditors by verifying both compliance with relevant laws and the nature and extent of services other than account auditing provided to the Company and its subsidiaries by the external auditors and companies belonging to their group; (ii) evaluate the proposals made by external auditors for their appointment to this position, as well as the audit plan and the results set out in their report and any letter of recommendations; (iii) oversee the effectiveness of the audit process and risk management, (iv) monitor the financial disclosure process.
The Code of Conduct provides that an auditor who has, directly or through third parties, any interest in a specific Company transaction, to inform the other Auditors and the Chairman of the Board of Directors about nature, terms, cause and value of his/her interest in a timely and exhaustive manner. Management and Supervisory Bodies Board of Directors Italcementi’s Board of Directors currently consists of 20 members, elected by the shareholders’ meeting of 16 April 2010, except for Mr. Lorenzo Renato Guerini, elected by the shareholders’ meeting of 19 April 2011, Mr. Carlo Garavaglia and Mr. Giulio Antonello, both elected by the shareholders’ meeting of 18 April 2012. Italcementi’s Board of Directors currently includes 16 non-executive members and 10 members considered as independent directors according to the Italian Stock Exchange guidelines and the provisions of the TUF. Among the directors currently in office, 19 members represent the majority shareholder Italmobiliare S.p.A, while one, Mr. Giulio Antonello, was elected upon proposal of the minority shareholder First Eagle Investment Management LLC. The current Board of Directors will remain in office until the approval of the financial statements for the year ending 31 December 2012. 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 2011 or further updated.
109 Principal activities outside the Name Position Company Giampiero Pesenti Chairman (1) Chairman and Chief Executive Officer of Italmobiliare S.p.A., Director of Ciments Français S.A. (in representation of Italcementi S.p.A.), Compagnie Monegasque de Banque, Credit Mobilier de Monaco, Finter Bank Zürich, Mittel S.p.A. Pierfranco Barabani Executive Deputy Chairman (1) Director of SACBO S.p.A.. Lorenzo Renato Guerini Deputy Chairman 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. Giulio Antonello Director(6) Chief Executive Officer of Alerion Clean Power S.p.A., Director of Industria e Innovazione S.p.A. and Reno de Medici S.p.A. Alberto Bombassei Director(3) (6) Chairman and Chief Executive Officer of Brembo S.p.A., Director of Atlantia S.p.A., Fiat Industrial S.p.A., Nuovo Trasporto Viaggiatori S.p.A., Pirelli& C. S.p.A. Giorgio Bonomi Director Director of Italmobiliare S.p.A., IGP – Decaux S.p.A. Carlo Garavaglia Director (6) Chairman of Beltrame Holding S.p.A., Elba Assicurazioni S.p.A., Eunomia S.p.A., Director of Cordifin S.p.A., De Longhi S.p.A., Del Clima S.p.A., Supervisory Director of Unione di Banche Italiane S.c.p.a, Chairman of the Board of Statutory Auditors of Comitalia Compagnia Fiduciaria S.p.A., Statutory Auditor of Habitat S.p.A. Alberto Clô Director (4) (5) (6) (8) Director of Atlantia S.p.A., De Longhi S.p.A., Iren S.p.A. Federico Falck Director (1) (4) (5) (6) Chairman of Falck S.p.A., Falck Renewables S.p.A., Director of Banca Popolare di Sondrio S.c.a.r.l., Avvenire Nuova Editoriale Italiana S.p.A., Falck Renewables Wind Ltd. Danilo Gambirasi Director Italo Lucchini Director (3) Deputy Chairman of Italmobiliare S.p.A., Supervisory Director of Unione di Banche Italiane S.c.p.a., 110 Director of Ciments Français S.A., Chairman of the Board of Statutory Auditors of BMW Italia S.p.A., BMW Financial Services Italia S.p.A., Cartiere Fedrigoni & C. S.p.A., Fedrigoni S.p.A. Sebastiano Mazzoleni Director Director of Italmobiliare S.p.A. and Ciments Français S.A. (in representation of Italcementi Ingegneria S.r.l.) Yves René Nanot Director (1) Chairman of Ciments Français S.A., Director of Asia Cement Public Co. Ltd, Ciments du Maroc, Essroc Corporation,, Suez Cement Company, Zuari Cement Ltd. Marco Piccinini Director Director of Ferrari S.p.A, Finter Bank Zürich, Montezemolo & Partners S.p.A. Ettore Rossi Director (6) (7) Attilio Rota Director (1) (4) (5) (6) Director of Banca d’Italia - Bergamo branch Carlo Secchi Director (4) (5) (6) Director of Allianz S.p.A., Expo 2015 S.p.A., Mediaset S.p.A., Pirelli & C. S.p.A., Member of the Management Board of A2A S.p.A. Elena Zambon Director (6) Chairman of Secofind S.I.M. S.p.A. and Zambon S.p.A., Director of Zambon Company S.p.A. and Fondo Strategico Italiano S.p.A. Emilio Zanetti Director (3) (6) Chairman of the Operating Board of Unione Banche Italiane S.c.p.a., Chairman of Banca Popolare di Bergamo S.p.A., Deputy Chairman of SACBO S.p.A.
(1) Member of the Executive Committee. (2) Executive Director responsible for overseeing the internal control system. (3) Member of the Remuneration Committee. (4) Member of the Internal Control Committee. (5) Member of the Committee for Transactions with Related Parties (6) Independent Director (in accordance with the Code of Conduct and the TUF). (7) Member of the Compliance Committee. (8) 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
111 The Executive Committee is composed of the Chairman, the Executive Deputy 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 (Executive Deputy Chairman), Mr. Carlo Pesenti (Chief Executive Officer), Mr. Federico Falck, Mr. Yves René Nanot and Mr. Attilio Rota. Remuneration Committee The Remuneration Committee is composed 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 and Mr.Alberto Bombassei. Internal Control Committee The Internal Control Committee is composed by 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. Committee for Transactions with Related Parties The Committee for Transactions with Related Parties is composed by 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 18 April 2012 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 2014. On renewal of the Board of Statutory Auditors at the shareholders’ meeting, the majority shareholder presented its own list of candidates. The minority shareholders did not present a list. Therefore, none of the auditors currently in office represents the minority shareholders.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 Luciana Ravicini Substitute Auditor Carlo Luigi Rossi Substitute Auditor Auditing firm The Italcementi Shareholders’ Meeting held on 19 April 2011 appointed KPMG for the external audit of the financial statements of the Company and the limited review of the half-yearly report as at June 30 each year for the nine year period 2011-2019, in compliance with current laws and regulations and with the indications of the relevant authorities. 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 Fabrizio Pedetta Deputy Chief Operating Officer
112 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 Mauro Maestrini Head of Internal Audit Frederic Groussaud Chief Risk Officer Giancarlo Berera Head of Investor Relations Federico Vitaletti CTG Chief Executive Officer – Zone 5 manager Andrea Dentone Global Procurement Director
Conflicts of interest There are no potential conflicts of interest between the duties of the members of the administrative, management or supervisory bodies of 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 2010 and 2011, broken down into the main categories and subdivided between Italy and abroad: As at 31 December 2010(1) As at 31 December 2011(2) Employees Italy Others(3) Total Italy Others(3) Total Executives 170 1,000 1,170 212 932 1,144 Middle 1,104 6,541 7,645 1,462 6,372 7,834 management & white collar Blue collar 1,641 10,307 11,948 1,765 9,153 10,918 Total 2,915 17,848 20,763 3,439 16,457 19,896 (1) 2010 figures include all of the Group operations in Turkey – i.e. Set Group (624 employees) and Afyon (128 employees) – and do not include the Calcestruzzi operations in Italy. (2) 2011 figures include only part of the Group operations in Turkey – i.e. Afyon (131 employees) – which have been disposed of during the first half of financial year 2012 and also include the Calcestruzzi operations in Italy (721 employees). (3) “Others” also includes the employees of Bravo Solution Italia S.p.A., CTG Italia S.p.A. and Ing. Sala S.p.A. 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.
113 Shareholder Ordinary shares % of ordinary share capital Efiparind BV - Amsterdam (indirectly through Italmobiliare S.p.A.) 106,914,000 60.36 First Eagle Investment Management LLC (which manages, among others, the fund First Eagle Global Fund ) 5,165,359 2.92
Ordinary treasury shares 3,793,029 2.14 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.
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 four years of investigations, the allegations against Italcementi 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:
114 - 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 former CEO and employees, which began before the Court of Caltanissetta on 7 April 2009, is still in progress. As far as Italcementi is aware, a new allegation against the former CEO of Calcestruzzi has been contested during the on-going trial recently. To the knowledge of Italcementi, the former CEO has been alleged to be the promoter of a criminal organisation, conducted in agreement with other employees of Calcestruzzi, aiming at committing the already alleged crimes of fraud against the State and fraud in governmental procurement. Another investigation for the same crimes and against the former CEO of Calcestruzzi was started in 2010 by the Tribunal of Ferrara and is still in progress.
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 by Calcestruzzi 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, also in consideration of the already recognised effectiveness of the new company governance, 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. 115 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 and the results of these actions have already been considered adequate and effective by the Tribunal when it decided to revoke the preventive seizure of Calcestruzzi’s assets.
Management does not expect any repercussions to impact on Italcementi or its personnel and directors.
Civil proceedings
Sibcem
The non-performance of the agreement (SPA) signed between Ciments Français and OJSC Holding Company Sibirskiy Cement (Sibcem) in 2008 regarding the disposal of the Turkish assets held by Ciments Français has resulted in legal proceedings in numerous countries.
• Legal proceedings
Russia
Sibconcord (Sibcem’s majority shareholder) instituted legal proceedings in Russia to obtain cancellation of the SPA. The regional Court of Cassation upheld the decisions of the first two judicial degrees (first instance and appeal), which annulled the SPA. Final recourse has been filed by Ciments Français with the Supreme Commercial Court of Russia. The Supreme Commercial Court of Russia overturned the decisions of the lower courts. Accordingly, the Kemerovo judgment invalidating the SPA no longer exists. The Supreme Commercial Court of Russia did not dismiss Sibconcord's claim but decided to remand the case back to the Kemerovo court for new consideration.
Kazakhstan
On 22 December 2011, Sibconcord filed a request for a writ of execution in respect of the Russian Court's decision of 13 August 2010 annulling the SPA with the competent Kazakh Tribunal of first instance. The Kazakh Tribunal of first instance denied the request on 19 January 2012. Sibconcord filed an appeal. The appeal instance court rejected Sibconcord's appeal on 20 March 2012 and upheld the first instance decision refusing the grant of a writ of execution of the Russian decision of 13 August 2010.
Turkey
Ciments Français submitted the dispute to an ICC arbitration in Turkey and a partial award in favour of Ciments Français was issued by the arbitral tribunal on 7 December 2010. The arbitral tribunal held, amongst other things, that (i) Ciments Français had duly and validly exercised its right to terminate the SPA, following Sibcem’s failure to close the deal and that (ii) as a consequence of Ciments Français' valid termination of the SPA, Ciments Français was entitled to keep the €50 million paid by Sibcem as the initial payment amount.
• Enforcement
116 Ciments Français started recognition and enforcement proceedings in respect of the arbitral award in various countries. At this stage, proceedings are on-going in Russia, France, Kazakhstan, Italy, Egypt and Bulgaria. Recognition and enforcement has been granted in France, Italy and Russia, however, in these three countries Sibcem appealed. In Belgium, the recognition has been granted and has now become final.
Russia
In Russia the partial award was recognised at first instance (notwithstanding that it had been set aside at the seat of arbitration in Turkey), however that decision was overturned by the appeal instance court. The regional cassation court upheld the appeal court decision. Ciments Français filed an appeal with the Supreme Commercial Court of Russia. The court stayed the appeal pending the outcome of the SPA invalidation proceedings (as described above).
Turkey
In Turkey Sibcem challenged the validity of the arbitration award in Turkey and obtained a judgment in its favour, setting aside the arbitral tribunal award. Ciments Français lodged an appeal against that judgment.
On 15 March 2012, the Turkish Court of Appeal quashed the first instance decision setting aside the partial award, such that the partial award continues to have full legal effect. The decision of the Court of Appeal is final. However, in accordance with Turkish court rules, the matter has been remitted to the Kadikoy first instance court to reconsider its decision in light of the Court of Appeal's decision. Following a hearing on 14 June 2012, the Kadikoy court rendered a decision complying with the overruling decision of the Court of Appeal.
Larsen & Toubro
At the end of 2007, Zuari Cement Ltd signed a contract with Larsen & Toubro Ltd ECC Division (L&T) concerning civil, structural and mechanical works for the erection of the second line at the Yerraguntla cement plant in India. During the performance of the contract, L&T requested an additional amount for alleged extra costs and extended duration of work. In turn, Zuari Cement Ltd, presented a request for compensation of €29 million based on penalties for delays and breaches in the execution of the work. In August 2011, Zuari Cement Ltd terminated the contract for non-fulfillment. Also in August 2011, L&T sent Zuari Cement Ltd a request for arbitration followed in January 2012 by a revised request for compensation of €32 million while the Zuari Cement Ltd counterclaim was increased to €39 million. The proceedings, which are taking place in India, are still underway.
Antitrust proceedings
EU In November 2008, the European Commission started an investigation that was aimed at verifying alleged infringements to the European antitrust rules by several group of cement producers, among which Italcementi and its foreign subsidiaries Ciments Français SA, Ciments Calcia SAS and Compagnie des Ciments Belges SA. In December 2010, the EU Commission notified to Italmobiliare (and, indirectly, to the aforesaid companies and the Spanish affiliated company Financiera Y Minera), a decision to open formally the proceedings. In April 2011, the Commission notified Italmobiliare a further decision requesting extensive additional economic, financial and commercial information. Italmobiliare provided the information within the required term and, simultaneously, challenged the decision before the EU General Court. Both the investigation and the proceedings are still underway. No formal statements of objections have been notified by the European Commission to Italmobiliare.
Italy
117 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; and (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 fine.
Belgium
In July 2009, the Belgian Directorate General for Competition started an investigation against the cement producers (including Compagnie des Ciments Belges and the Belgian Association of Producers of Materials for Constructions (PMC-BMP)) for alleged anticompetitive practices. The parties exchanged briefs and hearings took place before the Belgian Competition Authority, which is expected to issue the decision in the first half of 2012.
India
(i) The Indian Antitrust Authority began proceedings in 2000 for anti-competitive practices allegedly carried out by cement producers, including Zuari Cement Ltd. These proceedings are still pending and no significant developments took place. Since proceedings are being carried out under the old act, i.e MRTP Act, the decision should take the form of a “cease and desist order”: no possibility of fines. (ii) Zuari Cement Ltd. is also involved in anti-trust proceedings brought by the Indian Antitrust Authority in 2006.
On July 2011 Zuari Cement Ltd received the investigative report along with a notice alleging anticompetitive behaviour performed by the major players in the Indian market and facilitated by the CMA, but without any specific charges against Zuari Cement Ltd.
On June 2012, the Indian Antitrust Authority issued a decision and fined 11 companies for cartel activity: Zuari Cement Ltd has not been fined and it has therefore been left out of such proceedings.
(iii) The Indian Antitrust Authority started another investigation in 2006 on the basis of two media reports alleging that various cement companies entered into a cartel and are fixing the prices of the cement in an arbitrary manner which is a Restrictive Trade Practice under the MRTP Act.
The DGIR completed its investigation and filed a Preliminary Investigation Report in 2007.
Following this report, the MRTP Commission issued a notice of enquiry with regard to the alleged restrictive trading practices. Zuari Industries Ltd. was initially involved as a party. Subsequently, Zuari Cement Ltd. was indicted in its capacity of the successor entity of Zuari Industries Ltd. Zuari Cement Limited has since filed the preliminary arguments. The procedure is still pending and no significant developments have occurred.
118 (iv) In August 2010 the Indian Antitrust Authority started a preliminary investigation against the cement, producers, including Zuari Cement Ltd and Sri Vishnu Cement, for alleged unfair trading. No developments took place after the response to the request for information. The Antitrust Authority may decide to combine this inquiry with that started in 2006.
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. 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 2010 and 2011.
Consolidated Annual Net Debt
Financial asset and liability Statement of financial As at As at category position caption 31 December 2010 31 December 2011 (audited)
119 (€ thousands) Current financial assets (835,610) (659,685) Cash and cash equivalents Cash and cash equivalents (575,220) (613,334) Current loan assets Equity investments, bonds and financial assets (249,561) (35,733) Other current financial assets Other current assets (6,122) (4,625) Derivatives Other current assets (4,707) (5,993) Current financial liabilities 535,481 756,719 Bank overdrafts and short- term borrowings Loans and borrowings 222,985 189,296 Loans and short-term borrowings Financial liabilities 293,493 543,934 Derivatives Other current liabilities 18,940 23,489
Non-current financial assets (65,021) (117,073) Securities and bonds Other non-current assets (17,266) (21,816) Derivatives Other non-current assets (47,755) (95,257) Non-current financial liabilities 2,596,108 2,113,054 Loans and long-term borrowings Financial liabilities 2,567,468 2,099,268 Derivatives Other non-current liabilities 28,640 13,786 Net debt 2,230,895 2,093,015
120 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 par actions simplifiée 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 Holfipar, 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 wholly 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.
Starting from 2010, and in connection with the first issuance of Notes under the Programme, Italcementi Finance has 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 carrying out other financial and treasury services for Italcementi and its Subsidiaries.
In March 2010, Italcementi Finance issued €750 million Fixed Rate Notes due 19 March 2020 under the Programme, listed on the Official List of the Luxembourg Stock Exchange. In September 2010, Italcementi Finance entered into a €920 million syndicated revolving credit facility agreement, guaranteed by Italcementi S.p.A., expiring in 2015.
During the first six-month period of 2011, the company entered into a five-year bilateral bank revolving credit facility of €50 million. Italcementi Finance also renewed €200 million in credit lines falling due in 364 days with international banks. These lines totaled €350 million in 2010 but their amount was reduced to better suit the Group's needs. These lines of credit were not drawn at the end of December 2011 and are under renewal for the same amount to cover 2012-2013 short term financing needs.
At the end of October of 2011, Italcementi Finance launched its first Commercial paper programme for a maximum amount of €800 million. The programme guaranteed by Italcementi S.p.A. complies with the STEP label (Short-Term European Paper). As of 31 March 2012, the company had a total of €21 million of commercial paper notes outstanding.
In May 2012, Italcementi Finance entered, as alternate borrower to Italcementi SpA, and with the guarantee of the latter, into a five years revolving credit line of €200 million with an international bank.
121 Italcementi Finance also started centralising the Group's liquidity, closing the year 2011 with an outstanding amount of €40 million in intercompany financial payables.
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 Officer Italcementi S.p.A. and Ciments Francais S.A., Chief Executive Officer of several French subsidiaries of Italcementi S.p.A. and director of other Group companies.
Philippe Raymond Missika Director Partner of DMMS & Associés Law Firm, Paris
Carlo Giuseppe Bianchini Director Administration and Control Director of Italcementi S.p.A. and Ciments Français S.A., and Manager in charge of preparing the financial reports of Italcementi S.p.A., Director of other Group Italian companies.
Giancarlo Berera Director Head of Investor Relations of Italcementi S.p.A., Director of Société Internationale Italcementi (Luxembourg) S.A.
Agostino Nuzzolo Director Legal and Tax Affairs Director of Italcementi S.p.A. and Ciments Français S.A., Director of Société Internationale Italcementi (Luxembourg) S.A. and person responsible for the permanent establishment of Italcementi S.p.A. in France.
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.
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.
122 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. - Permanent establishment 1,999,994 99.9997 19,999,940
92800 Puteaux (Paris), 5 place de la Pyramide, Quartier Villon
Calcestruzzi S.p.A. 1 0.00005 10
24121 Bergamo, via G.Camozzi 124
Gruppo Italsfusi S.r.l. 1 0.00005 10
24121 Bergamo, via G.Camozzi 124
SAMA S.r.l. 1 0.00005 10
24121 Bergamo, via G.Camozzi 124
Italcementi Ingegneria S.r.l. 1 0.00005 10
24121 Bergamo, via G.Camozzi 124
Italgen S.p.A. 1 0.00005 10
24121 Bergamo, via G.Camozzi 124
Société Internationale Italcementi (Luxembourg) SA 1 0.00005 10
2220 Luxembourg, 534 rue de Neudorf
Total 2,000,000 100 20,000,000
123 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.
This summary does not describe the tax consequences for an investor with respect to Notes that provide payout linked to the profits of the Issuer, profits of other company of the group or profits of the business in relation to which they are issued.
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.
For these purposes, debentures similar to bonds are defined as securities that incorporate an unconditional obligation to pay, at maturity, an amount not less than their nominal value and that do not give any right to directly or indirectly participate in the management of the issuer or of the business in relation to which they are issued nor any type of control on the management.
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 pursuant to article 5 of the Italian Income Consolidated Code (TUIR) (with the exception of general partnership, limited partnership and similar entities), (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 20 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 124 1994, are subject neither to imposta sostitutiva nor to any other income tax in the hands of a real estate investment fund..
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 subject to imposta sostitutiva, but must be included in the management results of the Fund accrued at the end of each tax period. The Fund or SICAV will not be subject to taxation on such result, but a substitutive tax, up to 20 per cent., will apply, in certain circumstances, to distributions made in favour of unitholders or shareholders.
Where an Italian resident Noteholder is a pension fund (subject to the regime provided for by Article 17 of the 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 (a) resident in Italy or (b) a permanent establishment in Italy of a non-Italian resident financial intermediary or (c) an entity or a company not resident in Italy, acting through a system of centralised administration of notes and directly connected with the Department of Revenue of the Italian Ministry of Finance having appointed an Italian representative for the purposes of Decree No. 239; 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 20 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, 125 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.
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 20 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.
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. For these purposes, debentures similar to bonds are defined as securities that incorporate an unconditional obligation to pay, at maturity, an amount not less than their nominal value and that do not give any right to directly or indirectly participate in the management of the issuer or of the business in relation to which they are issued nor any type of control on the management. 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 pursuant to article 5 of the Italian Income Consolidated Code (TUIR) (with the exception of general partnership, limited partnership and similar entities), (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 20 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). 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.
126 If the investor is resident in Italy and is a 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. The Fund or SICAV will not be subject to taxation on such result, but a substitutive tax, up to 20 per cent., will apply, in certain circumstances, to distributions made in favour of unitholders or shareholders. Where an Italian resident Noteholder is a pension fund (subject to the regime provided for by article 17 of the 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 (a) resident in Italy or (b) a permanent establishment in Italy of a non-Italian resident financial intermediary or (c) an entity or a company not resident in Italy, acting through a system of centralised administration of notes and directly connected with the Department of Revenue of the Italian Ministry of Finance having appointed an Italian representative for the purposes of Decree No. 239; 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 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 20 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 a rate of 20 per cent. 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. 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 20 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 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.
127 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 20 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. Capital losses realised before 1 January 2012 may be carried forward to be offset against subsequent capital gains of the same nature for an overall amount of 62.5 per cent. of the relevant capital losses.
As an alternative to the tax declaration regime, Italian resident individual Noteholders holding the Notes not in connection with an entrepreneurial activity may elect to pay the imposta sostitutiva separately on capital gains realised on each sale or redemption of the Notes (the “risparmio amministrato” regime). Such separate taxation of capital gains is allowed subject to (i) the Notes being deposited with Italian banks, SIMs or certain authorised financial intermediaries and (ii) an express election for the risparmio amministrato regime being timely made in writing by the relevant Noteholder. The depository 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. Capital losses realised before 1 January 2012 may be carried forward to be offset against subsequent capital gains of the same nature for an overall amount of 62.5 per cent. of the relevant capital losses.
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 20 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. Depreciation of the management assets accrued before 1 January 2012 may be carried forward to be
128 offset against subsequent increase of value for an overall amount of 62.5 per cent. of the relevant depreciation.
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. The Fund or SICAV will not be subject to taxation on such result, but a substitutive tax, up to 20 per cent., will apply, in certain circumstances, to distributions made in favour of unitholders or shareholders.
Any capital gains realised by a Noteholder who is an Italian pension fund (subject to the regime provided for by Article 17 of the 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.
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.
Capital gains realised by non-Italian-resident Noteholders, not having a permanent establishment in Italy to which the Note is connected, 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, not having a permanent establishment in Italy to which the Note is connected, 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 for income tax purposes 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 20 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.
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;
129 (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.
Stamp duty
Pursuant to Article 19(1) of Decree No. 201 of 6 December 2011 (Decree 201), a proportional stamp duty applies on an annual basis to the periodic reporting communications sent by financial intermediaries to their clients for the securities deposited therewith. The stamp duty applies at a rate of 0.1 per cent. for year 2012 and at 0.15 per cent. for subsequent years; this stamp duty is determined on the basis of the market value or – if no market value figure is available – the nominal value or redemption amount of the securities held. The stamp duty can be no lower than € 34.20 and, for the year 2012 only, it cannot exceed € 1,200.
Under a preliminary interpretation of the law, it may be understood that the stamp duty applies both to Italian resident and non-Italian resident securityholders, to the extent that the Notes are held with an Italian-based financial intermediary.
Wealth Tax on securities deposited abroad
Pursuant to Article 19(18) of Decree 201, Italian resident individuals holding the securities outside the Italian territory are required to pay an additional tax at a rate of 0.1 per cent. for 2011 and 2012, and at 0.15 per cent. for subsequent years.
This tax is calculated on the market value of the securities at the end of the relevant year or – if no market value figure is available – the nominal value or the redemption value of such financial assets held outside the Italian territory. Taxpayers are entitled to an Italian tax credit equivalent to the amount of wealth taxes paid in the State where the financial assets are held (up to an amount equal to the Italian wealth tax due).
EU Savings Directive
Under EC Council Directive 2003/48/EC on the taxation of savings income (the EU Savings Directive), Member States 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).
130 The European Commission has proposed certain amendments to the Directive, which may, if implemented, 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 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 report to the Italian Tax Authorities details of the relevant payments and personal information on the individual beneficial owner and shall not apply the withholding tax. 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 to the more favourable provisions of an applicable double tax treaty) by virtue of Article 125 A III of the French Code général des impôts.
Furthermore, according to Article 238 A of the French Code general des impôts, 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 (the Deductibility Exclusion). 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 30 per cent. or 55 per cent, subject to the more favourable provisions of an applicable double tax treaty, if any.
Notwithstanding the foregoing, neither the 50 per cent. withholding tax nor the Deductibility Exclusion 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 and regulations published in the BOI (bulletin officiel des impôts) 14 A-5-12 dated 10 May 2012, 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:
131 (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 State 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 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 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. The information contained within this section is limited to Luxembourg withholding tax issues and 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. 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 35 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
132 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.
133 SUBSCRIPTION AND SALE
The Dealers have, in a programme agreement (the Programme Agreement) dated 29 June 2012, 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. Treasury regulations. Terms used in this paragraph have the meanings given to them by the U.S. Internal Revenue Code of 1986 and Treasury regulations promulgated 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:
134 (a) at any time to any legal entity which is a qualified investor as defined in the Prospectus Directive;
(b) at any time to fewer than 100 or, if the Relevant Member State has implemented the relevant provision of the 2010 PD Amending Directive, 150, 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
(c) 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 (c) 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 amendments thereto, including the 2010 PD Amending Directive, to the extent implemented in the Relevant Member State) and includes any relevant implementing measure in each Relevant Member State and the expression 2010 PD Amending Directive means Directive 2010/73/EU.
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 (Act 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 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 Act (Act No. 228 of
135 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) persons providing 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 €100,000 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.
Please note that in accordance with Article 100-bis of the Financial Services Act, where no exemption from the rules on public offerings applies, Notes which are initially offered and placed in Italy or abroad to qualified investors only but in the following year are regularly ("sistematicamente") distributed on the secondary market in Italy to non qualified investors become subject to the public offer and the prospectus 136 requirement rules provided under the Financial Services Act and Regulation No. 11971. Failure to comply with such rules may result in the sale of such Notes being declared null and void and in the liability of the intermediary transferring the Notes for any damages suffered by such non qualified investors.
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.
137 GENERAL INFORMATION
Authorisation
The update 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 4 May 2012.
The update of the Programme has been duly authorised by a resolution of the Board of Directors of Italcementi Finance S.A. dated 26 April 2012.
Listing, approval 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 Luxembourg:
(a) the constitutional documents of each of Italcementi S.p.A. (with an unsworn 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 2011 and 2010 (with an unsworn English translation thereof) and the audited financial statements of Italcementi Finance S.A. in respect of the financial years ended 31 December 2011 and 2010, in each case together with the audit reports prepared in connection therewith. Each of Italcementi S.p.A. and Italcementi Finance S.A. is required to publish audited accounts on an annual basis;
(c) the unaudited interim consolidated financial statements of Italcementi S.p.A. in respect of the three months ended 31 March 2012 and 31 March 2011, with limited review report prepared in connection therewith. Italcementi S.p.A. is required to publish unaudited interim accounts on a quarterly basis;
(d) 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;
(e) a copy of this Base Prospectus;
(f) any future base prospectuses, prospectuses, information memoranda, supplements to this Base Prospectus and 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) and any other documents incorporated herein or therein by reference; and
138 (g) 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
There has been no significant change in the financial position of Italcementi S.p.A. or the Group since 31 March 2012 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 2011.
There has been no significant change in the financial position of Italcementi Finance S.A. since 31 December 2011 and there has been no material adverse change in the financial position or prospects of Italcementi Finance S.A. since 31 December 2011.
Litigation
Save as disclosed in this Base Prospectus under “Description of Italcementi S.p.A. – Legal Proceedings” from page 114 to 119 and “Description of Italcementi Finance S.A. – Legal Proceedings” on page 123, 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 Base Prospectus 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.
Auditors
KPMG S.p.A. and Reconta Ernst & Young S.p.A. have audited, without qualification, Italcementi S.p.A.’s accounts for the financial years ended on 31 December 2011 and 31 December 2010, respectively, in each case prepared in accordance with International Financial Reporting Standards (IFRS). Neither KPMG S.p.A.nor Reconta Ernst & Young S.p.A. has 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 TUF and under No. 70945 in the Register of Accountancy
139 Auditors (Registro dei Revisori Contabili), in compliance with the provisions of the Legislative Decree 27 January 1992, No. 88.
Further to the expiration of the Reconta Ernst & Young S.p.A.’s term of office, on 19 April 2011 the ordinary shareholders’ meeting of Italcementi S.p.A. appointed KPMG S.p.A. as auditing firm for the legal audit of the annual financial statements and the consolidated financial statements for the years 2011-2019 and for the limited review of the half year reports at 30 June 2011-2019.
KPMG S.p.A. is registered under No. 13 in the Special Register (Albo Speciale) maintained by CONSOB and set out at Article 161 of the TUF and under No. 70623 in the Register of Accountancy Auditors (Registro dei Revisori Contabili), in compliance with the provisions of the Legislative Decree 27 January 1992, No. 88. KPMG S.p.A.'s address is Via Vittor Pisani 25 20124 Milan, Italy.
The auditors of Italcementi Finance S.A. are KPMG Audit, a Department of KPMG S.A., and Ernst & Young et Autres, both members of the Compagnie Nationale des Commissaires aux Comptes. KPMG Audit, a Department of KPMG S.A., and Ernst & Young et Autres have audited, without qualification, the accounts of Italcementi Finance S.A. prepared in accordance with accounting principles generally accepted in France as of and for the financial year ended on 31 December 2011. Ernst & Young et Autres (which at the time were the only auditors of Italcementi Finance S.A.) have audited, without qualification, the accounts of Italcementi Finance S.A. prepared in accordance with accounting principles generally accepted in France as of and for the financial year ended on 31 December 2010 as stated in their report incorporated by reference in this Base Prospectus. The auditors of Italcementi Finance S.A. have no material interest in Italcementi Finance S.A.
Unsworn English translations of the reports of the auditors of Italcementi S.p.A. and Italcementi Finance S.A. on the annual financial statements for the financial years ended 31 December 2011 and 31 December 2010 are incorporated by reference in this Base Prospectus.
Post-issuance information
The Issuers will not provide any post-issuance information, except if required by any applicable laws and regulations.
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.
In addition, in the ordinary course of their business activities, the Dealers and their affiliates may make or hold a broad array of investments and actively trade debt and equity securities (or related derivative securities) and financial instruments (including bank loans) for their own account and for the accounts of their customers. Such investments and securities activities may involve securities and/or instruments of the Issuers or the Guarantor, or the Issuers’ or the Guarantor’s affiliates. Certain of the Dealers or their affiliates that have a lending relationship with the Issuers or the Guarantor routinely hedge their credit exposure to the Issuers or the Guarantor consistently with their customary risk management policies. Typically, such Dealers and their affiliates would hedge such exposure by entering into transactions which consist of either the purchase of credit default swaps or the creation of short positions in securities, including potentially the Notes issued under the Programme. Any such short positions could adversely affect future trading prices of Notes issued under the Programme. The Dealers and their affiliates may also make investment recommendations and/or publish or express independent research views in respect of such securities or financial instruments and may hold, or recommend to clients that they acquire, long and/or short positions in such securities and instruments.
140 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 Howald – Hesperange L – 2085 Luxembourg
LEGAL ADVISERS
To Italcementi S.p.A. as to Italian law
d’Urso Gatti e Bianchi Studio Legale Associato Piazza Borromeo, 8 20123 Milan Italy
To the Dealers as to English, French and Italian law
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. KPMG S.p.A. KPMG Audit Via Vittor Pisani 25 Département de KPMG S.A. 20124 Milan 1, cours Valmy Italy 92923 Paris La Défense Cedex Ernst & Young et Autres 1/2 Place des Saisons 92400 Courbevoie-Paris-La Défense France ARRANGERS
Banca IMI S.p.A. BNP Paribas Largo Mattioli, 3 10 Harewood Avenue 20121 Milan London NW1 6AA Italy United Kingdom
DEALERS
Banca IMI S.p.A. BNP Paribas Largo Mattioli, 3 10 Harewood Avenue 20121 Milan London NW1 6AA Italy United Kingdom
Crédit Agricole Corporate & Investment Bank CM-CIC Securities 9 quai du Président Paul Doumer 6, avenue de Provence 92920 Paris La Défense Cédex 75441 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 Mitsubishi UFJ Securities International plc 2 King Edward Street Ropemaker Place, 25 Ropemaker Street London EC1A 1HQ London EC2Y 9AJ United Kingdom United Kingdom
Natixis Société Générale 30 avenue Pierre Mendès France 29 boulevard Haussmann 75013 Paris 75009 Paris France France The Royal Bank of Scotland plc UniCredit Bank AG 135 Bishopsgate Arabellastrasse 12 London EC2M 3UR 81925 Munich
United Kingdom Germany
LISTING AGENT BNP Paribas Securities Services, Luxembourg Branch 33, rue de Gasperich Howald – Hesperange L – 2085 Luxembourg 0010155-0001958 ML:4618029.17