Notice is given that, during the year, Arnoldo Mondadori Editore SpA, did not conduct and research and development activities. It did not, on the date of the Report or in 2010, own shares of controlling companies, not even through trusts or intermediaries.
Related party transactions
With reference to legislative decree no. 173, 3 November 2008, which modified art. 2427 Civil Code and introduced 22 bis and ter, there were no operations of an atypical or unusual nature during the year.
Operations between related parties are carried out at arm’s length: those carried out with Mondadori Group companies are of a commercial or financial nature and are accounted for through the intra-group current account managed by Arnoldo Mondadori Editore SpA and used by the various subsidiaries and associated companies, leading to a series of intercompany balances.
More detailed information can be found the notes to Arnaldo Mondadori Editore S.p.A.’s financial statements and the Group’s consolidated financial statements.
In compliance with article 2391 bis of the Civil Code and the general principles outlined in “Rules governing operations between related parties” issued by Consob with resolution n°. 17221 of 12 March 2010 and subsequent modifications, the board of directors on 25 November 2010 approved the “Procedures for transactions with related parties” (“Procedures”), having first obtained a favourable opinion from the Committee made up exclusively of independent directors in line with the Borsa Italiana Spa code of conduct.
On 1 January 2011, these Procedures replaced the previous rules adopted by the board of directors and describe the rules, roles, responsibilities and activities put in place to ensure transparency and the substantial and procedural correctness of transactions with related parties undertaken by the company directly or through its subsidiaries.
The “Procedures for transactions with related parties” are available on the web site www.mondadori.it - Governance Section, governance system, rules and procedures.
Tax consolidation
Following the introduction of new legislation - art. 117 and following of DPR no. 917/1986 - Arnoldo Mondadori Editore SpA opted to take part in the tax consolidation of Fininvest SpA in view of its position as a jointly consolidated entity of that company.
The consolidation agreement under which Mondadori Group companies participate in the “Fininvest tax consolidation” contains a clause safeguarding the Mondadori Group from being obliged to pay income tax in amounts greater than those that the Group would make had Arnoldo Mondadori Editore SpA opened its own tax consolidation position.
Moreover, on the basis of the transferred taxable income of all of the companies of the Fininvest group included in the fiscal consolidation, the contract recognises that a part of the fiscal advantage pertaining to Fininvest SpA is due to Arnoldo Mondadori Editore SpA in view of Mondadori Group’s participation in the consolidation.
Payables and receivables arising from the consolidation are recognised as payables to and receivables from parent companies.
Fiscal transparency
Arnoldo Mondadori Editore SpA and the following companies have jointly adopted the “fiscal transparency option” pursuant to art. 115, DPR no. 917/1986:
Harlequin Mondadori SpA
Società Europea di Edizioni SpA
As a result of this, the taxable income and tax losses of these companies are included on a pro-rata basis in the taxable income of Arnoldo Mondadori Editore SpA.
Direction and coordination (art. 2497 and subseq., Civil Code)
While holding a majority interest, as per art. 2359, Civil Code, Fininvest SpA does not exercise any direction or co-ordination functions as defined in art. 2497 bis and subseq., Civil Code, over Arnoldo Mondadori Editore SpA and limits itself to the management of its financial interest in the same.
In line with legal requirements and given that the board of directors of Arnoldo Mondadori Editore SpA also provides general strategic and organisational guidance for subsidiary companies, the Board has confirmed that the Company carries out direction and co-ordination, as per art. 2497 and subseq., Civil Code, of the following subsidiaries (as defined by art. 2359, Civil Code):
Cemit Interactive Media SpA
Edizioni Piemme SpA
Mondadori Education SpA
Giulio Einaudi Editore SpA
Mondadori Electa SpA
Mondadori Franchising SpA
Mondadori Pubblicità SpA
Mondadori Retail SpA
Press-Di Distribuzione Stampa e Multimedia Srl
Sperling & Kupfer Editori SpA
Monradio Srl
Mondadori Iniziative Editoriali SpA
Mondadori International SpA
Mondolibri SpA
These companies have consequently made the disclosures required by art. 2497 bis, Civil Code.
Security Procedural Document (privacy)
With regard to legislative decree no. 196/2003, the data controller, Arnoldo Mondadori Editore SpA, represents and warrants under obligation that it has prepared a Security Procedural Document as required by rule no. 19 of the regulations regarding minimum security measures (Enclosure B, legislative decree no. 196/2003) within the terms and according to the procedures of said regulations.
Renewal of authorisation to effect share buy backs
The Annual General Meeting of the Shareholders on 27 April 2010, following the expiry of a previous authorisation issued at the AGM on 29 April 2009, voted, as per art. 2357, Civil Code, to renew authorisation for the buy back of Company shares, taking account of the shares already in the portfolio or held by subsidiaries, up to the limit of 15% of the share capital.
The main points of the buy back programme are as follows:
1. Objectives and reasons:
- to use treasury shares for the exercise of stock options allocated under stock option plans put in place by the shareholders;
- to use treasury shares, either bought back or already held, for the exercise of rights, including conversion rights, deriving from financial instruments issued by the Company, its subsidiaries or third parties;
- to use treasury shares, either bought back or already held, as part or whole payment in acquisitions or equity investments that fall within the Company’s stated investment policy;
- to take advantage, where and when considered strategic for the Company, of investment opportunities, also in relation to available liquidity.
2. Cap on the number of shares that may be bought
The authorisation applied for entails a limit of 15% of the Company’s share capital, or 38,914,474 shares.
Given that, on the date of the shareholders’ resolution, the Company already held 17,850,101 of its own shares and that a further 4,517,486 Mondadori shares were held by the subsidiary Mondadori International SpA, making an overall total of 22,367,587 shares, corresponding to 8.62% of the share capital, the new authorisation gave the Board the faculty to buy back a further 16,546,887 ordinary shares, corresponding to 6.38% of the share capital.
3. Method of acquisition and price range
Buy-backs would be made on regulated markets as per art. 132, legislative decree no. 58, 24 February 1998, and art. 144 bis, para. 1, B, Consob Regulation 11971/99, according to operating procedures established by the markets themselves, which do not permit the direct combination of offers to buy with predetermined offers to sell.
Consequently, the corresponding minimum and maximum price of sale will be determined at the same conditions that applied to previous authorisations agreed by the shareholders, i.e. at a unit price not less than the official market price on the day prior to any operation, less 20%, and not more than the official market price on the day prior to any operation, plus 10%.
In terms of prices and daily volumes, acquisition operations will in any case be conducted in accordance with art. 5, EU Regulation 2273/2003, and in particular:
- the Company will not buy shares at a price higher than that of the last independent operation or, if higher, the highest current independent offer on the regulated market where the acquisition is made.
- in terms of daily volumes, the Company will not purchase a quantity greater than 25% of the average daily volume of Mondadori shares traded on the regulated market and calculated on the basis of the average daily volume of trading of Mondadori shares in the 20 trading days prior to the dates of purchase.
4. Duration
The authorisation to buy back shares will remain valid until approval of the financial statements for the year to 31 December 2010, and in any case for a period of no longer than 18 months from the date of the shareholders’ resolution.
In the period between 8 and 26 February 2010, Arnoldo Mondadori Editore SpA acquired on the automated stock market, in compliance with the resolutions of the 2009 AGM, a total of 2,270,000 own shares at a cost of €6.1 million. The company made no provision for the use of these shares and none of its subsidiaries made buy backs or provisions for the use of treasury stock.
Following these operations, on the date of approval of this report, the total number of treasury shares held by the Company was 22,367,587 (8.62 % of the share capital), of which 17,850,101 held directly by Arnoldo Mondadori Editore SpA (average unit price €6.17) and 4,517,486 by the subsidiary Mondadori International SA (average unit price €7.71).
Allocations for 2010 under the 2009-2011 stock option plan
On 21 July 2010, the board of directors, at the proposal of the Remuneration Committee, approved the allocationof options for 2010 under the 2009-2011 three-year stock option plan set up, as indicated above, by the AGM on 29 April 2009 for executives of the Company and its subsidiaries whose functions have a determining impact on the achievement of the Group’s strategic objectives, directors of the Company and its subsidiaries, journalists employed by the Company and its subsidiaries with the position of editor or co-editor, parent company executives whose functions are conducted in the interests of the Company.
The shareholders entrusted the board of directors with the management of the plan, giving it full powers to select people from the categories outlined above to whom to allocate option rights, set performance objectives to which the exercise of such rights is subordinate and implement the plan in all its details.
The Plan provides for the allocation, for each year of the plan, of personal, non-transferable options for the acquisition of Mondadori ordinary shares at a one-to-one ratio and with standard dividend rights.
Options assigned may be exercised after the 36 month vesting period at a price corresponding to the arithmetical average of the Mondadori share price in the period between the date of allocation of the options and the same day of the previous calendar month.
The board of directors allocated a total of 1,800,000 share options to 19 persons selected from among the categories indicated in the aforementioned shareholders’ resolution on 29 April 2009.
The total number of options allocated amounts to 0.69% of the company’s share capital.
The board of directors decided on performance objectives (consolidated ROE and free cash flow) as conditions for the exercise of options allocated for 2010.
Subject to ascertainment by the board of directors of the achievement of the conditions for exercise, options for 2010 will be exercisable after the 36 month period following the date of assignment.
Further details regarding stock option plans can be found in Note 25 of the Notes to the consolidated financial statements.
For some time the Group has also had in place incentive and retention plans linked to business performance, in particular:
in 2010, objectives were achieved and bonuses matured for the three-year 2008-2010 plans for a total of €2,309,000 (see Annex H, note 3, AME SpA financial statements), while a retention plan for the three-year period 2010-2012 is ongoing and provides for the payment of a further €2 million in 2013 on attainment of the conditions of the plan;
- in line with a specific recommendation by the Remuneration Committee, during 2010 a highly selective, high performance three-year incentive plan was introduced for 19 people, identified from among the company’s executive directors, executives with strategic functions and other high-potential executives.
The three-year periods of reference for the plan are 2010-2012 (13 executives) and 2011-2013 (6 executives). The plan provides for extraordinary one-off payments, in April 2013 and April 2014 respectively, of a maximum of €6,370,000 subject to the attainment of individual annual and three-year Group objectives and continued employment in the company.
With regard to the stock option plan, the Remuneration Committee, noting that 2011 was the last year of the plan established in 2009, has recommended that the allocation not be made for this year, holding that the three-year plan outlined above (point “b”) offers the Group a more effective and lasting way of incentivising management and building loyalty.
Report on Corporate Governance and ownership structure (art. 123 bis, legislative decree no. 58, 24 February 1998)
The Report on Corporate Governance and ownership structure containing information regarding the compliance of Arnoldo Mondadori Editore SpA with the Borsa Italiana SpA Code of Conduct for Listed Companies, as well as additional information as per art. 123 bis, clauses 1 and 2, legislative decree no. 58, 24 February 1998, has been posted, along with this management report, on the website www.mondadori.it (Corporate Governance section) as well as in accordance with the indications of the aforementioned art. 89bis, Consob Regulation 11971/1999.
Shares held by directors, statutory auditors and general managers
In accordance with art. 79, Consob Regulation 11971, 14 May 1999, and with reference to the year 2010, we disclose the following details of shares held in Arnoldo Mondadori Editore SpA and subsidiary companies by the Company’s directors, statutory auditors, general managers and executives with strategic responsibilities.
It should be noted that, unless otherwise indicated, shares are held directly by the persons named.
The same information, in aggregate form, is also supplied for executives with strategic responsibilities as identified by the Group’s Management Committee.
| Surname & name | Company shares | Number of shares owned at end of previous year | Number of shares bought | Number of shares sold | Number of shares owned at end of current year |
|---|---|---|---|---|---|
| Berlusconi Marina | Arnoldo Mondadori Editore | - | - | - | - |
| Costa Maurizio | Arnoldo Mondadori Editore | 350,000 | 50,000 | - | 400,000 |
| Berlusconi Pier Silvio | Arnoldo Mondadori Editore | 172,000 | - | - | 172,000 |
| Briglia Roberto | Arnoldo Mondadori Editore | - | - | - | - |
| Cannatelli Pasquale | Arnoldo Mondadori Editore | - | - | - | - |
| Ermolli Bruno | Arnoldo Mondadori Editore | - | - | - | - |
| Forneron Mondadori Martina | Arnoldo Mondadori Editore | 137,127 | - | - | 137,127 |
| Poli Roberto | Arnoldo Mondadori Editore | - | - | - | - |
| Renoldi Angelo | Arnoldo Mondadori Editore |
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| Resca Mario | Arnoldo Mondadori Editore | - | - | - | - |
| Sangalli Carlo | Arnoldo Mondadori Editore |
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| Spadacini Marco | Arnoldo Mondadori Editore | 8,000 (1) | - | - | 8,000(1) |
| Veronesi Umberto | Arnoldo Mondadori Editore | - | - | - | - |
| Vismara Carlo Maria | Arnoldo Mondadori Editore | 35,000 | - | - | 35,000 |
| Superti Furga Ferdinando | Arnoldo Mondadori Editore | - | - | - | - |
| Giampaolo Francesco Antonio | Arnoldo Mondadori Editore | - | - | - | - |
| Papa Franco Carlo | Arnoldo Mondadori Editore | - | - | - | - |
| Simonelli Ezio | Arnoldo Mondadori Editore | - | - | - | - |
| Vittadini Francesco | Arnoldo Mondadori Editore | - | - | - | - |
| Executives with strategic responsibilities | Arnoldo Mondadori Editore | 1,000 | - | - | 1,000 |
| (1) shares held by spouse. |
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