Interim financial report 2019

not transferred to and/or retroceded by ISP in accordance with Articles 3 and 4 of the afore-mentioned Decree Law, together with assets, agreements an...

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Interim financial report

2019

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Interim financial report

 



Table of Contents 05 • corporate officers and independent auditors 09 • introduction 15 • corporate structure 19 • organizational structure 23 • report on operations 41 • financial statement schedules 51 • notes to financial statements 85 • declaration by the Manager in charge of financial reporting

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Interim financial report

 



01 corporate officers and independent auditors

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BOARD OF DIRECTORS Chairman

Alessandro Rivera

Chief Executive Officer

Marina Natale

Director

Domenico Iannotta

BOARD OF STATUTORY AUDITORS Chairman

Giampiero Riccardi

Permanent Auditor

Giuseppa Puglisi

Permanent Auditor

Giovanni Battista Lo Prejato

Substitute Auditor

Maurizio Accarino

Substitute Auditor

Delia Guerrera

INDEPENDENT AUDITORS

Deloitte & Touche S.p.A.1

MANAGER IN CHARGE OF FINANCIAL REPORTING Manager in Charge

Silvia Guerrini2

PARTIES APPOINTED TO CARRY OUT THE FINANCIAL CONTROL BY THE COURT OF AUDITORS (IT. LAW NO. 259/58) Principal Appointee

Giulia De Franciscis

Substitute Appointee

Carmela de Gennaro

SUPERVISORY BODY pursuant to Italian Legislative Decree No. 231/2001 Chairman

Arturo Betunio

Member (external)

Olga Cuccurullo

Member (internal)

Lorenzo Lampiano

At the date of closing of the Interim Report as at 30 June 2019

                                                        1

The mandate for the regulatory audit was assigned with resolution of the Shareholders' Meeting of 12 February 2019 and with effect from the date of approval of the 2018 Annual Report by the Shareholders' Meeting. 2 Appointed by resolution of the Board of Directors of 15 March 2019 with effect of the mandate from the date of approval of the 2018 Annual Report by the Shareholders' Meeting.

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02 introduction

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Introduction

On the 19 July 2019 the Extraordinary Shareholders’ Meeting of the Company resolved about the change of the business name form Società per la Gestione delle Attività – SGA S.p.A. into AMCO – Asset Management Company S.p.A., together with a full review of Company’s image, with the purpose to highlight the changing in the market position and mission. The resolution was transcribed in the Commercial Register at Naples on 4 September 2019, becoming effective against third parties since that date. The renaming and rebranding contribute to the company evolution, with the aim of playing a role in the Non Performing Exposures (NPEs) sector in Italy. The new brand identity reflectsthe value of an historical company with a twenty years track record in a modern and innovative way, but it also underlines the effort for transforming problematic credit portfolios in new opportunities for the borrowers. The new brand identity reflects the nature of a real full credit management company, able to entirely oversee the process of management and recovery of impaired loans, acting with promptness, concreteness, sustainability and innovation in management approaches. AMCO reflects the historical identity of SGA, but also underlines its innovation path, making it internationally recognizable. S.p.A. – AMCO - Asset Management Company S.p.A (hereinafter also “AMCO” or the “Company”) is a financial intermediary pursuant to art. 106, specialised in management and recovery of nonperforming loans. Since 1997 the Company has operated in the context of legislative and regulatory interventions pursuant to Law no. 588 of 19 November 1996 (conversion into Law from Legislative Decree no. 497 of 24 September 1996, laying down “urgent provisions for the reorganisation, restructuring and privatisation of Banco di Napoli”) and of art. 3 of Italian Ministerial Decree of 14 October 1996. In this context, the Company became a bulk assignee, pursuant to art. 58 of the Consolidated Banking Act, of loans and other assets of problematic recoverability of Banco di Napoli and of other Banco di Napoli Group companies (ISVEIMER and BN Commercio e Finanza), represented mainly by non-performing or bad loans, in addition to assets deriving from the reorganisation, equity investments and securities. With Ministerial Decree of 22 February 2018 published in Official Gazette no. 123 of 29/05/2018, the Ministry of Economy and Finance, in implementing the powers granted by art. 5, paragraphs 1 and 5 of Italian Decree Law 99 of 25 June 2017, arranged for AMCO, through Segregated Assets nominated “Gruppo Veneto” and “Gruppo Vicenza”, to become the assignee of non-performing loans, assets of problematic recoverability and connected juridical relationships respectively of Veneto Banca S.p.A. in Liquidazione Coatta Amministrativa (hereinafter, also “VB LCA”) and of Banca Popolare di Vicenza S.p.A. in Liquidazione Coatta Amministrativa (hereinafter, also “BPVI LCA”), together also the “former Veneto Banks” (hereinafter the “LCA”), both subject to administrative compulsory liquidation since June 2017, with the objective of maximising the recovery value over time and at the same time optimising the management of relationships with debtors. The transfer had, as its object, the loans classified or classifiable as bad loans, unlikely to pay and past due as of the date of the launch of the administrative compulsory liquidation procedures and not transferred to and/or retroceded by ISP in accordance with Articles 3 and 4 of the aforementioned Decree Law, together with assets, agreements and legal rights and obligations accessory to the same, including securitisation notes issued by the securitisation vehicles Flaminia SPV S.r.l. (hereinafter also “Flaminia”) and Ambra SPV S.r.l. (hereinafter also “Ambra”), with the exclusion from this scope of certain assets, liabilities, agreements and rights and obligations

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Interim financial report

identified in the transfer agreements on a consistent basis with the criteria laid down by Ministerial Decree of 22 February 2018. During 2018 the Company also acquired the ownership of foreign loans relative to banks already controlled by Veneto Banca S.p.A. in Croatia, Albania and Moldavia, as well as the Romanian branch of the same for an overall gross book value of around EUR 700 million. Management and collection of loans, partially outsourced to foreign companies specialised in credit recovery, as well as to SGA S.r.l., the newly established Romanian company fully owned by AMCO, started in the second quarter of 2018 and has mainly affected loans to residents in Romania, Croatia and Albania. With regard to the Moldovan portfolio, the process to fulfil the obligations required by local regulations connected to the transfer of loans and guarantees, aimed at guaranteeing an effective management and recovery activity, is currently being finalised. Furthermore, the LCA granted AMCO, again on 11 April 2018, a full outsourcing mandate to manage the exposures deriving from credit operations through which the purchase of shares or subordinated bonds of the former Veneto Banks (“Financed Capital”) were financed, in total or in part. The shareholders’ meeting resolution of 19 July 2019 also changed the corporate purpose set out in the AMCO Articles of Association to the following: “The Company’s corporate purpose involves the purchase and management for selling purposes, according to economic criteria, of loans and accounts originating from banks enrolled in the register set forth in Article 13 of Italian Legislative Decree No. 385 dated 1 September 1993 (hereinafter TUB), from companies belonging to bank groups enrolled in the register set forth in Article 64 of the TUB and from financial intermediaries enrolled in the register set forth in Article 106 of the TUB, even if not part of a banking group. The Company may also purchase on the market equity investments and other financial assets, including securitisation securities with underlying loans originated from banks, companies belonging to banking groups and financial intermediaries that need not belong to banking groups, as well as closed-end investment fund units, reserved for professional investors, set up for the subscription of shares issued by banks or for the subscription and/or purchase of securities issued by companies set up to finance the acquisition of loans originating from banks, companies belonging to banking groups and financial intermediaries that need not belong to banking groups, or for the direct acquisition of such loans. The Company – also through the Segregated Assets constituted pursuant to article 5 of Law Decree no. 99 of 25 June 2017, converted with amendments into Law no. 121 of 31 July 2017, and the revisions of ministerial decrees adopted pursuant to this regulation – may (i) directly or indirectly issue loans, in the various forms indicated in article 2 of Ministerial Decree no. 53 of 2 April 2015, to transferred debtors pursuant to this article or managed by the same pursuant to article 2 below, as well as to vehicles or to collective investment undertakings established to acquire and manage, directly or indirectly, loans and accounts originated from banks, financial intermediaries that need not belong to banking groups and companies belonging to banking groups, provided that those loans pursue, even with an intermediary management platform, the objective of maximising the value of the underlying loans (and of any other loans, assets legal relationships accessory or linked to them); and (ii) exercise the financial lease business, as well as the operating and hire lease businesses, becoming the assignee of assets and obligations deriving from resolved or ongoing lease contracts, stipulated between third parties, and of the underlying assets, and concluding new lease contracts in order to reallocate the leased assets acquired. The Company also deals with the management of third party judicial and extrajudicial recovery of performing loans originating from banks, companies belonging to banking groups and financial intermediaries that need not belong to banking groups. In this context, the Company, where it operates on behalf of securitisation companies constituted pursuant to Law no. 130 of 30 April 1999, will be able to carry out the role of subject mandated to the collection of transferred loans, payments and the verification of the compliance of transactions with the law 12

 

Introduction

and the information prospectus, pursuant to article 2, paragraph 6 and 6-bis, of Law no. 130 of 30 April 1999. The activities referred to in paragraphs 1 and 2 of this article will focus on non-performing loans and, ancillary to these, loans that at the time of investment or when they are subsequently taken over are classified as performing. These activities will be carried out in Italy and, in compliance with current legislation and the regulatory rules possibly applicable, abroad. In order to achieve the corporate purpose, the Company may carry out operations for the management, in any form, divestment and sale of loans and receivables, equity investments and other financial assets; as well as, in furtherance of the company purpose, any other commercial, financial, securities and real estate transactions, in compliance with current regulations. Pursuant to art. 18, paragraph 3 of Legislative Decree no. 58 of 24 February 1998, the Company can exercise with respect to transfer debtors, in connection with the activities described in paragraph 1 of this article, trading services and activities on its own behalf and order execution services on behalf of clients, in each case limited to derivative financial instruments. The Company can also issue bonds in compliance with current legislative and statutory provisions. It is for the Board of Directors to decide on the issue of financial instruments other than shares or non-convertible into such. The adoption of a program to issue financial instruments other than shares or non-convertible into such and aimed at regulated markets, or a single issue of such instruments not realised on the basis of a program authorised by the Shareholders' Meeting, may only be implemented in case of identified financial needs of the Company and with the prior authorisation of the Shareholders' Meeting pursuant to article 2364, paragraph 1, no. 5 of the Italian Civil Code.”

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Introduction

03 corporate structure

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Corporate structure In accordance with Article 12 of Italian Law No. 259 dated 21 March 1958, since it is a company entirely invested in by the Ministry for the Economy and Finance, Corte dei Conti monitors AMCO financial activities. At present, AMCO holds the entire equity investment in the company Immobiliare Carafa S.r.l. in liquidation (Board resolution of 24 May 2019), a company established for the optimum realisation of mortgages and used for auction measures and datio in solutum transactions, and in Società per la Gestione di Attività S.r.l., a Romanian registered company dealing with the management of non-performing loans to Romanian residents, held by the Segregated Assets of Veneto Group. AMCO’s corporate structure as at 30 June 2019 is shown in the following diagram:

Diagram 1 - Corporate Structure as at 30 June 2019

The fully paid-in share capital is divided into 3,000,000 ordinary shares without nominal value and amounts to EUR 3,000,000.

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Interim financial report

 

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Corporate structure

04 organizational structure

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Organisational structure

The current organisational structure of AMCO was approved by the Board of Directors on 21 June 2019, determining some changes to the Organisation Chart approved on 11 June 2018. AMCO’s organisational structure as at 30 June 2019 is shown below:

Diagram 2 - AMCO’s organisational structure as at 30 June 2019

At 30 June 2019, the following activities were outsourced: -

IT system for administrative and accounting management;

-

software and hardware consulting and support;

-

preparation of payroll and related relations with public offices;

-

tax consultancy.

In order to prevent the commission of offences from which might derive the administrative liability of entities pursuant to Legislative Decree no. 231/2001, the Company has adopted an Organisational, Management and Control Model, last updated with resolution of the Board of Directors of 21 June 2019. In compliance with the above-mentioned regulation, the Company has also provided to appoint a Supervisory Board, whose members have proven experience in financial, corporate and juridical issues. The mandate will expire with the approval of the financial statements as at 31 December 2020. The Company, with resolution of 19 October 2016, established the figure of the “Manager in Charge of Financial Reporting”, as required by the Articles of Association and on a consistent basis with the change in its shareholding structure (i.e. full control by the Ministry for the Economy and Finance).

Breakdown of the workforce As at 30 June 2019, AMCO’s employees were 211 in total, increasing from 31 December 2018 (n.144 employees). As at 30 June 2019, there are no coordinated and continuous collaboration contracts in place. During 2019 AMCO has benefited from the collaboration of some employees seconded by Intesa Sanpaolo S.p.A. (hereinafter “ISP”) from the former Veneto Banks. As at 30 June 2019, only 1 employee was seconded at AMCO.

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Interim financial report

The following table provides the breakdown of AMCO headcount as at 30 June 2019 by gender, age and length of service, qualification. Senior managers Middle management Men (number)

Whitecollar workers

Coordinated and Consultants Seconded continued collaborators

11

81

33

2

51

33

1

Total

13

132

66

1

Average age

Women (number)

52

46

39

50

Length of service (*)

1

5

8

-

Permanent contract

13

132

65

Fixed-term contract

1

(*) length of service with AMCO S.p.A.

Table 1 - Composition of the headcount as at 30 June 2019

Disputes There were no legal disputes outstanding with employees as at 30 June 2019.

Turnover With regard to staff turnover, in the first six months 2019 this was more sustained compared to the previous year following the changed organisational and personnel needs of the Company, due to the start of the management of the Non-Performing Exposure (“NPE”) portfolio of the former Veneto Banks. Permanent contract

01.01.2019

Recruitment

11

2

Senior managers

Change from Resignations, fixed-term to retirements permanent and contract terminations

Change in category

30.06.2019 13

Middle management

71

52

-2

11

White-collar workers

62

16

-2

-11

65

144

70

-4

-

210

01.01.2019

Recruitment

Change from Resignations, fixed-term to retirements permanent and contract terminations

Change in category

30.06.2019

-2

Total

Fixed-term contract

132

Senior managers Middle management

2

White-collar workers

1

Total

3

1 -2

1

Table 2 - Staff turnover in the first semester of 2019

Geographic location As at 30 June 2019, the Company had established its registered office to Via Santa Brigida 39 in Naples; general management is based at Via del Lauro 5/7 in Milan. As at 30 June 2019, the Company also operates at sites in Viale Europa 23 in Vicenza.

 

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Organisational structure

05 Report on operations

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Report on operations

MACROECONOMIC SCENARIO During the first semester of 2019 has continued the low growth phase of the international economy started in mid-2018. In particular, the uncertainty in the international commercial relation (mostly between USA and China), generated a decrease in raw material prices and in international investments. Due to the Brexit and to a risk of duties increase by the USA to European cars exporters, clear signs of economy slowdown were noted both in American but mostly in European martkets. In the view of this elements Central Banks tried to counterbalance this prospective with accommodative monetary policies. During the first half of 2019 the Italian economy, affected by the international situation and European political tensions, remained substantially steadily3, confirming the stagnant economy phase started in mid-2018. On the domestic demand side, the positive contribution of the investments in a steady demand phase, is offset by the negative change in stocks. On the foreign trade side, import and export showed similar growth rates with substantially a zero-net contribution. During the first semester has continued the improvement in the labour market with an unemployment rates of 9,7%4 as at 30 June 2019, the lowest value since 2012, decreasing of 1%5 compared to June 2018. Banking sector showed a reduction in risks connected to the assets, because of a lower increase in the NPEs and to the management activities and disposal implemented in the NPEs market. Based on Bank of Italy data, during the first trimester of 2019 the total NPEs related to Italian banking sector, showed a reduction of 10 billion (-6%)6 compared to the end of 2018. The aforementioned trend is also confirmed by the last available data on the NPLs which have been attested at 32,6 billion at May 2019, with a reduction of 50,8 billion compared to May 2018 (-36% YoY). The NPLs ratio on total loans has been attested at 1,88% (2,93% as at May 2018) 7.

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Istat: Conti Economico trimestrali, II trimestre 2019 Istat: Occupati e disoccupati, Giugno 2019 Istat: Occupati e disoccupati, Giugno 2019 6 Banca d’Italia: Bollettino Economico n.3 – 2019 7 Abi: Monthly Outlook, Luglio 2019 4

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Interim financial report

OPERATING PERFORMANCE Following the acquisition of non-performing loans of the former Veneto Banks, AMCO is today one of the main players in the Italian market for the management of NPE. AMCO is the fifth largest Italian operator in the management of NPE with over EUR 20 billion in assets under management divided into over 110,000 counterparties, and the 2nd operator in the management of unlikely to pay and past due loans, with over EUR 7 billion managed, able to oversee the entire management process of positions affecting over 20,000 companies across the country, also through agreements with specialist partners and the possibility of directly issue new loans at competitive terms to ensure the safety and the industrial relaunch of some of these companies. In terms of gross book value, the breakdown of the assets under management, equal to 20.3 billion, as at 30 June 2019 is as follow: -

EUR 1.8 billion for around 2,500 debtors relating to the portfolio originating from the former Banco di Napoli.

-

EUR 7.7 billion for around 42,000 debtors relating to Gruppo Veneto Segregated Estates (including the securitisations Flaminia for EUR 2.2 billion);

-

EUR 9.1 billion for around 66,000 debtors relating to Gruppo Vicenza Segregated Estates (including the securitisations Ambra for EUR 4.3 billion);

-

EUR 1.7 billion for around 900 debtors relating to Financed Capital;

The net profit for the first half 2019 amounts to EUR 8.2 million.

Trend of Segregated Estates asset under management The asset under management of the Segregated Estates as at 30 June 2019 amount to EUR 7,675 million for Gruppo Veneto Segregated Assets and to EUR 9,077 million for Gruppo Vicenza Segregated Assets (data showed at 31 December 2018 equal to, respectively, EUR 7,723 million and EUR 9,019 million). On 11 May 2019, ISP activated the option set by Law Decree of 25 June 2017, n.99, article 4, subsection 5, letter b) for selling-back to LCAs of loans classified as “high risk” at the time of the acquisition of former Veneto Banks performing assets by ISP itself. The non performing exposures have been given to the Segregated Asset, for a total gross book value of EUR 414 million. The prepayments of the debts with LCAs carried out in the 1H2019 amount to EUR 254 million, of which EUR 146 million to Banca Popolare di Vicenza in LCA and EUR 108 million to Veneto Banca in LCA.

Main indicators as at 30 June 2019 In order to better explain the financial situation of the Company, also considering its peculiarity in the current financial environment, the following tables provide the reclassification of the Financial Statement according to an operational criterion. The Company has not drawn up the Interim Financial Report for 2018; consequently, the comparative information for economical data is not provided in this Report.

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Report on operations

Reclassified Balance Sheet Statement The following Balance Sheet has been reclassified on the basis of assets and liabilities nature. Asset items (Amounts €/000)

30/06/2019

31/12/2018

Loans and receivables with banks

141,110

83,093

Loans and receivables with customers

126,486

131,194

Financial Assets

699,182

502,222

Equity investments Property, plant and equipment and intangible assets

37

158

7,080

269

Fiscal assets

68,432

70,776

Other assets

59,756

34,704

Total assets

1,102,082

822,416

30/06/2019

31/12/2018

Table 3 – Reclassified Balance sheet assets as at 30 June 2019

Liabilities and net equity items (Amounts €/000) Financial liabilities measured at amortised cost

250,608

5

7,196

4,102

Specific purpose provision

39,661

35,752

Other liabilities

18,845

7,567

3,000

3,000

778,943

731,480

(4,331)

(7,009)

8,160

47,519

1,102,082

822,416

Fiscal liabilities

Share capital Reserves Valuation reserves Profit (Loss) for the year Total liabilities and net equity

Table 4 – Reclassified Balance sheet liabilities and net equity as at 30 June 2019

Aum (Amounts €/Mln)

30/06/2019

31/12/2018

GBV on balance

1,795

1,907

GBV off balance

18,470

18,330

Total GBV

20,265

20,237

Table 5 – Asset under management as at 30 June 2019

 

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Interim financial report

Reclassified Profit and Loss Statement The following reclassified Profit and Loss Statement has the purpose to highlight the EBITDA margin and the costs and revenues arising from Company core business, which consist in the management and collection of NPE either on balance or off balance (under management). Core revenues include also the income from financial instrument, such as securitization notes or investment funds, of which AMCO acts like servicer. EBITDA margin does not include costs and revenues related to the financial or non core activities of the Company. Income Statement (Amount €/000) Servicing fees Interest and commissions from activities with customers Other operating income and expenses TOTALE REVENUES

30/06/2019 23,319 7 0 23,325

Personnel expenses

(12,103)

Operational net costs

(7,963)

TOTAL COSTS

(20,066)

EBITDA

3,260

Net impairment gain on loans with costumers

8,976

Net impairment losses on property, plant and equipment and intangible assets

(622)

Accruals Other operating income and expenses Result of financial management

(5,495) 378 7,625

EBIT

14,121

Interest and commission from financial management

(2,242)

PROFIT OF CURRENT ASSETS BEFORE TAXES

11,879

Income taxes for the year on current operating activities

(3,719)

Net profit of the year

8,160

Table 6 – Reclassified income statement as at 30 June 2019

EBITDA MARGIN Table 7 – EBITDA margin as at 30 June 2019

 

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14%

Report on operations

Reconciliation of Balance Sheet Profit and Loss Statement Values (Amounts €/000)

30/06/2019

31/12/2018

Loans and receivables with banks

141,110

83,093

+ 40 (a). Loans and receivables with banks

141,110

83,093

Loans and receivables with customers

126,486

131,194

+ 40 (b). Financial assets measured at amortised cost: loans and receivables with financial companies

20

20

+ 40 (c). Financial assets measured at amortised cost: loans and receivables with customers

126,466

131,173

Financial Assets

699,182

502,222

+ 20 (c). Financial assets valued at fair value with impact on the income statement: financial assets compulsorily valued at fair value

493,321

502,022

+ 30. Financial assets valued at fair value with impact on the comprehensive income

205,861

200

Equity investments

37

158

+ 70. Equity investments

37

158

Property, plant and equipment and intangible assets

7,080

269

+ 80. Property, plant and equipment

7,012

184

+ 90. Intangible assets Fiscal liabilities + 100 (a). current fiscal liabilities

69

85

68,432

70,776

6,355

6,066

+ 100 (b). deferred fiscal liabilities

62,076

64,710

Other asset

59,756

34,704

+ 10. Cash and cash equivalents

0

0

59,755

34,704

1,102,082

822,416

+ 120. Other assets Totale assets Table 8 – Reconciliation of the reclassified balance sheet as at 30 June 2019

Values (Amounts €/000) Financial liabilities measured at amortised cost + 10 (a). Financial liabilities measured at amortised cost: payables + 10 (b). Financial liabilities measured at amortised cost: debt securities in issue

30/06/2019

31/12/2018

250,608

5

5

5

250,603

0

Fiscal liabilities

7,196

4,102

+ 60 (a). Current fiscal liabilities

7,196

4,102

+ 60 (b). Deferred fiscal liabilities Special purpose funds + 90. Employee severance indemnities

0

0

39,661

35,752

617

612

+ 100 (b). Provisions for risks and charges: pensions and similar obligations

43

5

+ 100 (c). Provisions for risks and charges: provisions for risks and charges

39,001

35,135

Other liabilities

18,845

7,567

+ 80. Other liabilities

18,845

7,567

3,000

3,000

Share capital + 110. Share capital

3,000

3,000

Reserves

778,943

731,480

+ 150. Reserves

778,943

731,480

Valuation reserves

(4,331)

(7,009)

+ 160. Valuation reserves

(4,331)

(7,009)

Profit for the year

8,160

47,519

+ 170. Profit for the year

8,160

47,519

1,102,082

822,416

Total assets Table 9 – Reconciliation of the reclassified balance sheet as at 30 June 2019

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Interim financial report

Values (Amounts €/000)

30/06/2019

Servicing fees

23,319

+ 40. Fees and commissions income (partial)

23,319

Intetest/commissions from activities with customers

7

+ 10. Interest and similar income (partial)

7

+ 40. Fees and commissions income (partial) TOTAL LIABILITIES

23,325

Personnel expenses

(12,103)

+ 160 (a). Personnel expenses

(12,103)

+ 160 (b). Administrative expenses (partial) Operational costs

(7,963)

+ 160 (b). other administrative expenses

(9,522)

- 160 (b). Administrative expenses (partial) + 200. Other operating income and expenses (partial)

2,055

+ 50. Fees and commissions expense (partial)

(496)

TOTAL COSTS

(20,066)

EBITDA

3,260

Net impairment gain on loans with costumers

8,976

 

(993)

+ 100 (a). Profit (loss) on sale/repurchase of: financial assets measured at amortised cost

 

+ 130 (a). Net impairment losses on credit risk of: financial assets measured at amortised cost

8,343

+ 10. Interest and similar income (partial)

1,626

Net impairment losses on property, plant and equipment and intangible assets

(622)

+ 180. Net impairment losses on property, plant and equipment

(606)

+ 190. Net impairment losses on intangible assets

(16)

Net accruals to provisions for risks and charges

(5,495)

+ 170. Net accruals to provisions for risks and charges

(5,495)

Other operating income and expenses

378

+ 200. Other operating income and expenses - 200. Other operating income and expenses (partial) Result of financial management

2,433 (2,055) 7,625

 

+ 100 (b). Profit (loss) on sale/repurchase of: financial assets valued at fair value with impact on comprehensive income (partial)

0

+ 110 (b). Net result of other assets and of financial liabilities valued at fair value with impact on the income statement: other financial assets compulsorily valued at fair value (partial)

8,073

+ 130 (b). Net impairment losses on credit risk of: financial assets valued at fair value with impact on comprehensive income (partial)

(327)

+ 220 Net gains (losses) on equity investments

(121)

EBIT

14,121

Interest and commission from financial management

(2,242)

+ 10. Interest and similar income (partial) + 20. Interest and similar expense + 40. Fees and commissions income (partial)

437 (2,707) 28

+ 50. Fees and commissions expense (partial) PROFIT OF CURRENT ASSETS BEFORE TAXES

11,879

+ 270. Income taxes for the year on current operating activities

(3,719)

NET PROFIT OF THE YEAR Table 10 – Reconciliation of the reclassified Profit and Loss statement as at 30 June 2019

 

30

8,160

Report on operations

Financial solidity and Key Performance Indicators Euro/millions - % Regulatory capital Weighted risk assets

FY 2019

FY 2018

Delta

775.4

725.1

6.9%

4,458.3

6,014.9

(25.9)%

CET 1

17.4%

12.1%

5.3%

Total Capital Ratio

17.4%

12.1%

5.3%

Table 11 – Key performance indicators as at 30 June 2019

AMCO confirms its Financial solidity in 2019 too, with a Total Capital Ratio of 17.4%, well above the minimum requirement set by Regulators (8%). Comparing CET 1 as at 30 June 2019 with 2018 YE ratio, a significant increase is noted and due to a decrease in Risk Weighted Assets (-25.9%), mainly related to the decrease of the exposure in Italian Recovery Fund, which has been weighted according to a payment schedule drown up in accordance with “Large Exposure” requirements. The Regulatory Capital has increased by 6.9% compared to FY 2018.

Key Balance Sheet figures Total Assets are 63.4% made up of investments in financial assets valued at fair value, of which: -

EUR 493.3 million are related to the investment in Italian Recovery Fund;

-

EUR 206.1 million made up of Italian Government Bonds (gross of impairment)

The remaining assets are made up of 12.8% of cash and cash equivalents, 11,5% of loans and receivables from borrowers, 0.6% of tangible and intangible assets and 6.2% of tax assets. Net equity at 30 June 2019 amounts to EUR 785.8 million, compared to EUR 1,102.1 million of total assets; this highlight the substantial own-fund financing of the Company. On 6 February 2019 AMCO placed its first unsecured senior bond for EUR 250 million, using the European programme for the issue of medium/long-term financial instruments (“EMTN Programme”) of EUR 1 billion, agreed with resolution of the Shareholders' Meeting of 10 May 2018 and approved by the Luxembourg stock exchange on 25 May 2018. The issue was settled, for the entire amount, on 13 February 2019. The bond has a five year maturity and confers the right to the payment of a fixed annual coupon equal to 2.625%. The issue, which was reserved to qualified and institutional investors and required a minimum investment of EUR 100,000, obtained a rating of BBB- from Fitch and is listed on the Luxembourg stock exchange.

 

31

Interim financial report

Management of the non-performing assets During 2019, AMCO continued with the management of the assets of former Banco di Napoli, comprising non-performing loans, agreements and other problematic assets (unsecured loans exposed to country risk, securities, equity investments), for an original gross value of around EUR 8,980 million, acquired by AMCO for a price equating to roughly EUR 6,426 million, of which EUR 6,273 million relating to loans and receivables and EUR 153 million relating to securities and equity investments. Assets acquired from former Banco di Napoli

Price paid in 19971996 2000

20012005

20062010

Loans and Receivables

6.273

2.223

1.534

943

336

46

5

1 0 48

35

Collection

Securities e equity investments Italia (incl. BNI)

153

163

57

24

Transactions with former Banco di Napoli

n.a.

13

125

14

Total assets of former Banco di Napoli

6.426

2.398

1.716

982

20112016 2015

341

Total collection as of 30.06.2019 30/06/2019

2017

2018

35

36

14

5.168

0

0

0

250

0

0

0

152

37

14

5.569

Table 12 - Past trend in recoveries (figures in EUR/million)

Management of the non-performing loans of former Banco di Napoli Regarding the activities for recovery of the non-performing loans portfolio of former Banco di Napoli, acquired by AMCO (equivalent value EUR 6,273 million), the trend of the same as from the moment of acquisition to-date is presented in the following table.

Type of asset

Price paid in 1996

Non performing

2.827

Unlikely to pay

Collection 19972000

20012005

20062010

20112016 2015

587

938

717

328 5

2017

2018

46

34

36

0

1

0

0

0

0

0

2.610

996

551

213

Foreborne exposures

581

307

10

3

Exposures to country risk

256

293

5

Contributions relative to assets

n.a.

39

30

10

3

0

1

6.273

2.223

1.534

943

336

46

35

Total assets

Total collection as of 30.06.2019 30/06/2019 14

2.699

0

1.767

-

320 0

298

0

0

84

36

14

5.168

Method notes: The recovery values shown include around EUR 208 million relating to collections made between 1996 and today’s date, deriving from the transfer of properties by Carafa Immobiliare S.r.l. in liquidazione (currently still entirely controlled by AMCO), Mediana S.r.l. and Sintesi Seconda S.r.l. (sold respectively in 2006 and 2007) and Badia S.r.l. (wound-up), originally acquired by way of “datio in solutum”, while around EUR 0.1 million is excluded relating to repossession activities carried out by the subsidiary Carafa Immobiliare S.r.l.in liquidazione. Table 13 - Trend in recoveries on former Banco di Napoli loans (figures in EUR/million)

The recovery activities of this portfolio, launched more than 20 years ago, continued during 2019 disclosing overall collections for EUR 14 million, leading total recoveries achieved as from acquisition of the portfolio until 30 June 2019 to EUR 5,168 million, equal to 82.4% of the initial equivalent value paid by AMCO for acquiring these loans and receivables. In 2019 the recovery activities on the former Banco di Napoli non-performing loans portfolio disclosed a recovery percentage of 11% of the value of the portfolio at the start of the year, essentially in line with the percentages seen in the last few years and consistent with the vintage of the portfolio and the status of the recovery procedures originally undertaken, in many cases having reached the imminent closures stages.

32

Report on operations

Starting period amount (Eur/million) 7.000

Collection (Eur/million)

Recovery rates (%) 90%

79%

80%

6.000

70% 5.000

55%

60%

4.000 3.000 2.000

50% 35%

40% 22%

26% 20%

25%

21%

24%

22%

26%

1.000 0

30% 11%

20% 10% 0%

Diagram 3 - Recovery rates on the initial balance

During 2019, the management activities on the former Banco di Napoli portfolio made it possible to continue with the discharge of an additional portion of managed positions, further to transactions concluded by AMCO with its debtors and/or the final conclusion of the recovery procedures. The asset accounting closing related primarily to positions of unsecured loans with a greater vintage due for bankruptcy and/or insolvency proceedings dating back many years. In detail, in 2019 71 positions were settled, for an original value of EUR 71 million, and a price originally paid by AMCO in 1996 equating to EUR 62 million. The settlements achieved between 1996 and the end of 2018 had been equal to 29,433, for an original value “in respect of which an action for recovery can be brought” of EUR 7,181 million, a price originally paid by AMCO equal to EUR 5,171 million.

Management of the securities acquired from former Banco di Napoli Besides the management of the former Banco di Napoli NPL credit portfolio, AMCO had originally also acquired securities and equity investments for an equivalent value of EUR 153 million. With respect to these assets, over time AMCO has recovered well over the original purchase value equating to EUR 153 million, collecting in total EUR 249.5 million, including the partial collection, EUR 67 million, relating to the transaction for the disposal of the equity investment in former Banco di Napoli International, as well as, for EUR 83 million roughly, relating to the partial recovery of the loans acquired from former Banco di Napoli International (disposed in 1999 for 95% and in 2000 for the remaining 5%) at the time of disposal of the equity investment.

Management of the non-performing assets of former ISVEIMER S.p.A. and former GRAAL S.r.l. During the financial year recovery activities continued on non-performing loans (bad and substandard for a total of 1,889 positions, of which 169 substandard) deriving from the acquisition carried out in 2000 further to the liquidation of ISVEIMER S.p.A. The original transaction envisaged the acquisition of non-performing loans/receivables for an original gross book value of EUR 1,099 million, acquired by AMCO at a price equal to the net book value (EUR 289 million). The payment of the price took place by means of the undertaking of a lien deposited as a guarantee for the loans and receivables (EUR 29 million) and the remaining balance 33

Interim financial report

by means of quarterly transfer of the collections achieved on said loans/receivables by AMCO, net of the expenses and charges incurred during the management. Recovery activities also continued on the portfolio of loans and receivables deriving from former GRAAL S.r.l., acquired in 2002 from ISVEIMER S.p.A. and subsequently merged into AMCO during 2009, which held leasing receivables for an original gross recovery value of EUR 62 million, acquired by AMCO at a price of EUR 35 million, already fully paid by the end of 2007. With reference to the residual former ISVEIMER and former GRAAL portfolios, during 2019 collections were recorded for EUR 0.3 million, equal to 3% of the residual value at the start of 2019, therefore taking the overall recovery of the former ISVEIMER portfolio to EUR 501.4 million compared with the price recognised in 2000 equal to EUR 289 million. Starting period amount (Eur/million)

Collection (Eur/million)

Recovery rates (%)

350

160% 135%

140%

300

120%

250 84%

200

92% 80%

73%

72%

80%

58%

150 41%

100 50

100%

88%

60%

41%

40% 8%

3%

20% 0%

0 II sem 2000

dal 2001 dal 2006 al 2005 al 2010

2011

2012

2013

2014

2015

2016

2017

2018

Figura 5 - Tassi di recupero sul saldo iniziale

Investments in financial assets On a consistent basis with AMCO’s new corporate purpose and in line with the process already launched in 2016 and 2017, the Company also continued with the implementation of a new strategy involving investment in financial assets. That strategy privileges investments in assets directly and/or indirectly connected to recovery and/or “system” activities, while maintaining active management of available liquidity to offset the cost of funding and the reduction of the risk profile through investments in liquid financial assets (mainly Italian government bonds). In the 1H of 2019 200 million Italian government bonds were purchased, which generated EUR 0.4 million in interest income and a positive valuation posted in reserves of EUR 2.8 million.

Italian Recovery Fund Following the issue of Italian Law Decree No. 69/2016, and subsequently in 2017, having considered the institutional invitations to market investors to tackle the systemic critical issues related to bank NPLs, AMCO formalised a commitment to subscribe a nominal amount of EUR 450 million (in 2016) and an additional EUR 70 million (in 2017) for the investments in units of the Atlante II Fund, subsequently renamed Italian Recovery Fund (hereinafter, also referred to as the “Fund”).

34

Report on operations

Italian Recovery Fund is a closed-end alternative investment fund disciplined by Italian law, reserved for professional investors, set up for the purchase of financial instruments of different seniority, issued by one or more vehicles set up and/or to be set up for the purchase of bank NPLs. Established formally on 8 August 2016, its expiry is envisaged as at 31 March 2021. The Fund invests in so-called mezzanine and junior financial instruments, issued by vehicles established ad hoc for the acquisition of portfolios of non-performing loans originating from numerous Italian banks. On the basis of the interim report of the Fund as at 30 June 2019, prepared by Quaestio Capital Management SGR S.p.A. and audited by PricewaterhouseCoopers S.p.A., the overall value of the Fund as at that date came to EUR 2,352,760,767 and the unit value of 2,480 units came to EUR 948,693.858 (compared with the value of the units as at 31 December 2018, equal to EUR 965,427.168). As at 30 June 2019, AMCO had already paid over EUR 466.1 million by way of drawdown of its own commitment, net of the reimbursements already received. The determination of the fair value of this investment was carried out on the basis of the Net Asset Value of the units communicated by Quaestio within the sphere of the Annual report on operations as at 30 June 2019. On the basis of this value, the fair value of the investment as of the date of these financial statements came to EUR 493,3 million originating a capital gain of EUR 8.1 million. The investment in the Italian Recovery Fund represents a method for operating indirectly for AMCO in the same segment representing its core business. The independence and specialisation of the fund’s management company ensure an objective and precise valuation of the investment which the fund evaluates and makes and that specifically banks and financial entities of the Italy system are involved. Furthermore, the fund carries out the management of the assets in the portfolio by means of the active monitoring of the special servicers and of the recoveries, intervening in the strategic decisions relating to the portfolios, as envisaged by the governance rules of each transaction. It should also be pointed out that Quaestio has also recently hired specialised resources in the loan recovery process so as to ensure the necessary attention to the handling of the major files, the monitoring of the servicers and the more extensive strategic aspects. The returns expected from the investment are consistent and compatible with AMCO’s objectives, both in terms of IRR and in terms of timescale of the investment. In fact, on conclusion of the onboarding process for the portfolios acquired by the servicers, the fund - as declared by Quaestio in the Annual report - will consider the transfer of sub-portfolios attractive in bulk for specialised investors, for the purpose of speeding up the liquidation of the loans/receivables and anticipating the subject of the “queues” potentially incompatible with the statutory duration of the fund.

Banca Carige S.p.A. The investment in Banca Carige has not changed during first semester 2019 and the shares owned by AMCO amount to 698,156,788 as at 30 June 2019, for a fair value of 0.09 million (determined on the basis of internal valuation, applying a haircut on the last listing price available).

Key Profit or Loss figures The Company reaches an EBITDA of 3.3 million at 30 June 2019, composed as follow. Given that the commission structure is different on the basis of the type of activity carried out (Master Servicing, Special Servicing), as well as the commission profiles established on contractual bases, generally linked to the classification of the credit (e.g. gone concern, going concern), the margin indicated above has been calculated by adding: 35

Interim financial report

-

The total of fee and commission income as at 30 June 2019, of EUR 23.3 million, of which: o

Around EUR 17.3 million, represented by the commissions received by AMCO for the management of non-performing loans of the Veneto Group and Vicenza Group Segregated Estate;

o

Around EUR 5.8 million, for the Special Servicing activity on loans included in the Ambra and Flaminia securitisations by Credito Fondiario S.p.A. (which acts as Master Servicer);

o

EUR 0.2 million deriving from the mandate to manage Financed Capital.

The costs, as well as commissions and asset under management, show an increasing trend especially considering the transformation of the Company due to the acquisition of Veneto Banks portfolios. In particular, the costs are made up as follow: -

Staff costs, amounting to EUR 12.1 million, increasing because of the significant development of the structure (from 144 to 211 employees) and the secondment of 1 employee at 30 June 2019;

-

Other Administrative expenses, composed by: o

EUR 7.5 million (offset by the recovery from the Segregated Assets for EUR 2.1 million), essentially determined by the costs for collection, consultancy costs and setup costs associated with the structural growth of the Company's activities consistently with the development of new managed assets.

o

EUR 0.5 million for commissions paid to the Romanian subsidiary SGA S.r.l. for the management of non-performing loans of the Gruppo Veneto Segregated Assets to Romanian residents.

L’EBIT of the 1H 2019 amounts to EUR 14.1 million for the combined effect of: -

Net impairment gain, together with the actuarial reversal, of EUR 9.0 million by the management of former Banco di Napoli, ISVEIMER, GRAAL (which generated EUR 14 million of collection);

-

Net accruals to provisions for risk and charges of EUR 5.5 million: the transfer contracts with LCAs require that, at the end of each three-year period, an adjustment of the AMCO's competencies must be determined with the objective of correlating the same to the evolution of costs actually incurred for the management and recovery of the obligations and assets transferred on behalf of the two Segregated Assets. In anticipation of such possible adjustments, an allocation has been made in this interim report;

-

Net result of financial activity of EUR 7.6 million, arising from the investment in Italian Recovery Fund which originated a capital gain of EUR 8.1 million, and the impairment of equity investments and Government Bonds of EUR 0.5 million. The determination of the fair value of the investment in Italian Recovery Fund was carried out on the basis of the Net Asset Value of the units communicated by the management company Quaestio Capital Management SGR S.p.A. (hereinafter also “Quaestio”), in the interim financial report as at 30 June 2019. The recognition in the Profit or Loss statement of the changes in valuations was carried out in the light of the accounting classification given to the investment fair value to profit and loss (FVTPL), in accordance with the provisions of IFRS 9.

The Net Profit amounts to EUR 8.2 million and is affected by the negative impact of the interest expenses and taxes.

36

Report on operations

Interest expenses from financial activity amount to EUR 2.2 million and are substantially related to the interests on the unsecured bond issued in the first semester 2019. Taxes of the semester include the negative value of EUR 3.7 million and are referred to current IRAP tax for EUR 1.1 million, while the reversal of the recognition of prepaid tax assets relating to temporary deductible differences recorded in last years affects the net profit for EUR 2.6 million.

TRANSITION TO INTERNATIONAL TO INTERNATIONAL ACCOUNTING STANDARD IFRS 16 The new accounting standard IFRS 16, issued by the IASB in January 2016 and approved by the European Commission through Regulation no. 1986/2017, from 1 January 2019 replaces IAS 17 “Leases”, IFRIC 4 “Determining whether an Arrangement Contains a Lease”, SIC 15 “Operating Leases - Incentives” and SIC 27 “Evaluating the Substance of Transactions in the Legal Form of a Lease”, and sets out the requirements for the accounting of lease contracts. The new standard requires the determination of whether a contract is (or contains) a lease, based on the concept of control of the use of an identified asset for a fixed period of time; hence it follows that also rental contracts and gratuitous loans for use are included in the application scope of the new rules. Given the above, significant amendments have been introduced to the accounting of lease operations in the financial statements of the lessee/user, requiring the introduction of a single accounting model of lease contracts by the lessee, on the basis of the right of use model. The first time adoption of the new accounting standards led the Company to recognize, at 1 January 2019, rights of use of EUR 5.5 million and financial liabilities due to leasing of EUR 5.6 million.

RATING Following the amendments to the Articles of Association in 2016 and for the purpose of endowing itself with the necessary requirements to intervene as servicer in NPL securitisation transactions, as from 2017 the Company obtained the rating as servicer from Fitch Ratings. During 2017, the appointed agency assigned AMCO the following ratings: RSS2- CSS2- and ABS2, confirmed in August 2018, following the rating agency’s annual review. As regards Issuer Default Rating, in September 2018 Fitch Ratings allocated the Company an LTDR of BBB- and an STIDR of F3, with a negative outlook.

OPERAZIONI CON PARTI CORRELATE At present, AMCO holds the entire shareholding in the company Immobiliare Carafa S.r.l. in liquidazione, a company established for the optimum realisation of mortgages and used for auction measures and datio in solutum transactions. Carafa Immobiliare S.r.l. was placed into liquidation in the first half of 2019. No transactions were held with the subsidiary. In addition to Immobiliare Carafa S.r.l., AMCO also controls Società per la Gestione di Attività S.r.l., a Romanian registered company dealing with the management of non-performing loans to Romanian residents, held by the Segregated Estate of Veneto Group. A contract is in place with Società per la Gestione di Attività S.r.l. for servicing activities and fee and commission expense of EUR 0.5 million was recorded.

37

Interim financial report

The financial transactions carried out with other investees of the Ministry of Economy and Finance refer exclusively to the current account held by Banca Monte Paschi di Siena S.p.A. and Banco Posta S.p.A. at normal market conditions. Further transactions of a commercial nature with other investees of the Ministry of Economy and Finance (ENEL) are part of the normal use of services as a user at market conditions.

EVENTS AFTER THE REPORTING PERIOD As already mentioned in the Summary, on the 19 July 2019 the Extraordinary Shareholders’ Meeting of the Company resolved about the change of the business name form Società per la Gestione delle Attività – SGA S.p.A. into AMCO – Asset Management Company S.p.A., together with a full review of Company’s image, with the purpose to highlight the changing in the market position and mission. The resolution was transcribed in the Commercial Register at Naples on 4 September 2019, becoming effective against third parties since that date. The renaming and rebranding contribute to the company evolution, started since the second half of 2017, with the aim of playing a role in NPE sector in Italy. The renaming promotes the value of an historical company with a twenty years track record in a modern and innovative way, but it also underlines the effort for transforming problematic credit portfolios in new opportunities for the borrowers. The new brand identity reflects the nature of a real full credit management company, able to entirely oversee the process of management and recovery of impaired loans, acting with promptness, concreteness, sustainability and innovation in management approaches. AMCO reflects the consolidated identity of SGA, but also underlines its innovation path, making it internationally recognizable at the same time. Following the resolution of the Board of Directors’ meeting of 15 March 2019, on 19 July 2019 the equity investment held by AMCO in Impianti S.r.l. in liquidazione was sold for EUR 68,030, posted in the financial statements for a value of EUR 5.16, and 100% of the receivables due to AMCO from that company were sold for a price of EUR 3,510. The shareholders’ meeting resolution of 19 July 2019 also changed the corporate purpose set out in the AMCO Articles of Association. On 12 September 2019 Fitch Ratings, following the annual review, has confirmed the Special Servicer Rating assigned to the Company in August 2018. As regards the Issuer Default Rating, in addition to that received from Fitch Ratings in September 2018, which, as we note, allocated the Company an LTDR of BBB- and an STIDR of F3, with a negative outlook, in July 2018 Standard & Poor’s allocated AMCO a long-term rating of BBB with a negative outlook, a rating in line with that of Italy. In December 2018, AMCO presented a binding offer to Banca Fucino S.p.A. for structuring the securitisation operation of a Non-Performing Exposure portfolio for a GBV of EUR 314 million. The portfolio, made up of over 3,200 positions, includes both bad loans (EUR 211 million) and loans classified as unlikely to pay/past due (EUR 103 million). In the context of the securitisation, AMCO will assume the role of Master Servicer and Special Servicer, as well as underwriter of equity tranches. The finalisation of the operation is expected on 14 September 2019. The initiative is part of the process of increasing AMCO's business volumes, planned by the development Strategic Lines for the five-year period from 2019 to 2023, approved on 18 October 2018 by the Company's Board of Directors. Finally, it has to be highlighted that in August 2019 Quaestio SGR, on behalf of

38

Report on operations

Italian Recovery Fund, has reimbursed EUR 8.4 million of the investment and, afterwards, has required a capital call of EUR 6.3 million.

BUSINESS OUTLOOK The Company's development will follow the main 2019-2023 strategic Guidelines approved on 17 October 2018 by the Board of Directors of AMCO. These guidelines aim to recognise opportunities in the market to consolidate and develop managed assets, based on the scalability of its business model. The objective is the maximising of economies of scale and the effective and sustainable management of recovery activities, obtaining new managing mandates, in particular for the management of “UTP going concern” loans (i.e. UTPs with unrevoked lines). With the objective of maximising the value of asset management and loans recovery, AMCO can assess the opportunity to grant loans to facilitate the continuity of operation of companies and create the premises for an industrial relaunch also during a restructuring process. The development of human capital is considered to be a priority which requires specific development strategies and dedicated investments that allow, on the one hand, to have employees who are prepared and competent in their relationship with customers and debtors and, on the other, to create value for the sustainable growth of AMCO. In addition to the promotion of professional skills and the effective NPE management/recovery, there is the adoption of innovative technological infrastructures based on an open and flexible operating model, with processes diversified to enable differentiated management strategies, processes and monitoring instruments of the operations of internal managers and third party servicers, as well as the application of appropriate asset analysis and valuation procedures for the issue of new loans to support customers.

GOING CONCERN In addition to the indications already provided previously, owing to the absence of financial or managerial ratios that could compromise the Company's operational capacity, there are no elements that would call into question the ability to operate on a going concern basis. These financial statements were prepared on a going concern basis.

OTHER INFORMATION In accordance with the provisions of paragraph 125 of Law 124/2017 of 4 August 2017, it is noted that as at 30 June 2019 the Company had not received subsidies, contributions, paid assignments or in any case economic advantages of any type from public administrations. Pursuant to the matters laid down by Article 2428 of the Italian Civil Code, the following information is provided: -

the Company has not carried out any research and development activities during the year;

-

the Company does not hold any own shares or shares or holdings in parent companies.

 

39

Interim financial report

-

 

40

Report on operations

06 financial statement schedules

41

Financial statement schedule

   

42

 

Financial statement schedules

BALANCE SHEET ASSETS In EUR

Amounts in EUR

30/06/2019

31/12/2018

417

148

ASSET ITEMS 10.

Cash and cash equivalents

20.

Financial assets valued at fair value with impact on the income statement a) financial assets held for trading b) financial assets designated at fair value c) financial assets compulsorily valued at fair value

30.

Financial assets valued at fair value with impact on the comprehensive income

40.

Financial assets valued at amortised cost a) loans and receivables with banks b) loans and receivables with financial companies c) loans and receivables with customers

50.

493,320,806

502,022,127

205,860,777

199,878

141,110,267

83,092,790

20,135

20,135

126,465,532

131,173,462

Hedging derivatives

60.

Change in value of financial assets object of a generic hedge (+/-)

70.

Equity investments

80.

Property, plant and equipment

90.

Intangible assets

100.

Fiscal assets a) current b) paid in advance

110.

Non-current assets and groups of assets held for disposal

120.

Other assets

Total assets

37,135

157,881

7,011,649

184,434

68,655

84,994

6,355,312

6,065,654

62,076,467

64,710,196

59,755,126

34,704,309

1,102,082,278

822,416,007

   

43

Interim financial report

BALANCE SHEET LIABILITIES AND NET EQUITY In EUR

Amounts in EUR

30/06/2019

31/12/2018

6,500,713

4,692

LIABILITIES AND NET EQUITY ITEMS 10.

Financial liabilities measured at amortised cost a) payables b) debt securities in issue

20.

Financial liabilities held for trading

30.

Financial liabilities designated at fair value

40.

Hedging derivatives

50.

Change in value of financial liabilities object of a generic hedge (+/-)

60.

Fiscal liabilities a) current

250,603,362

7,196,029

4,102,357

12,349,335

7,567,300

617,422

612,448

b) deferred 70.

Liabilities associated to assets held for disposal

80.

Other liabilities

90.

Employee severance indemnities

100.

Provisions for risks and charges a) undertakings and guarantees issued b) pensions and similar obligations

42,769

4,650

c) provisions for risks and charges

39,000,986

35,135,251

3,000,000

3,000,000

778,943,429

731,479,965

(4,331,488)

(7,009,422)

110.

Share capital

120.

Treasury shares

130.

Capital instruments

140.

Share premiums

150.

Reserves

160.

Valuation reserves

170.

Profit (Loss) for the year

8,159,721

47,518,765

Total liabilities and net equity

1,102,082,278

822,416,007

     

44

Financial statement schedules

PROFIT OR LOSS STATEMENT In EUR

Amounts in EUR

30/06/2019

ITEMS 10.

Interest and similar income

20.

Interest and similar expense

30.

Interest margin

40.

Fees and commissions income

50.

Fees and commissions expense

60.

Net fees and commissions

70.

Dividends and similar revenues

80.

Trading activity net result

90.

Hedging activity net result

100.

Profit (loss) on sale/repurchase of: a) financial assets measured at amortised cost

2,069,766 (2,707,116) (637,350) 23,346,519 (496,068) 22,850,451

(993,159)

b) financial assets valued at fair value with impact on comprehensive income c) financial liabilities 110.

Net result of other assets and of financial liabilities valued at fair value with impact on the income statement: a) financial assets and liabilities designated at fair value b) other financial assets compulsorily valued at fair value

120.

Brokerage margin

130.

Net impairment losses on credit risk of:

140.

8,072,872 29,292,814

a) financial assets measured at amortised cost

8,342,874

b) financial assets valued at fair value with impact on comprehensive income

(327,383)

Profit/loss from contractual amendments without cancellation

150.

Net result of financial management

160.

Administrative expenses: a) personnel expenses b) other administrative expenses

170.

Net accruals to provisions for risks and charges

180.

Net impairment losses on property, plant and equipment

190.

Net impairment losses on intangible assets

200.

Other operating income and expenses

210.

Operational costs

220.

Net gains (losses) on equity investments

230.

Net result of the valuation at fair value of property, plant and equipment and intangible assets

240.

Changes in impairment losses

37,308,305

(12,102,875) (9,521,725) (5,495,141) (605,592) (16,339) 2,432,772 (25,308,901) (120,746)

250.

Profit (loss) on disposal of investments

260.

Profit (loss) of current assets before taxes

11,878,509

270.

Income taxes for the year on current operating activities

(3,718,788)

280.

Profit (loss) of current assets after taxes

290.

Profit (loss) on groups of activities held for disposal net of taxes

300.

Net profit (loss) of the year

(149)

8,159,721

8,159,721

       

45

Interim financial report

OTHER COMPREHENSIVE INCOME In EUR

  Amounts in EUR

30/06/2019

ITEMS 10.

Net profit (loss) of the year

8,159,721

Other components of income net of taxes without reversal to the income statement 20. 30. 40.

Equity securities valued at fair value with impact on comprehensive income Financial liabilities designated at fair value with impact on the income statement (change in its creditworthiness) Hedging of capital securities valued at fair value with impact on comprehensive income

50.

Property, plant and equipment

60.

Intangible assets

70.

Defined-benefit plans

80.

Non-current assets and groups of assets held for disposal

90.

(92,507)

(55,616)

Share of equity investment valuation reserve valued at net equity Other components of income net of taxes with reversal to the income statement

100.

Hedging of foreign investments

110.

Currency exchange differences

120.

Hedging of financial flows

130.

Hedging instruments (non-designated elements)

140.

Financial assets (other than capital securities) valued at fair value with impact on comprehensive income

150.

Non-current assets and groups of assets held for disposal

160.

Share of equity investment valuation reserve valued at net equity

170.

Total other components of income net of taxes

180.

Comprehensive income (Item 10+170)

       

46

2,826,057

2,677,934 10,837,656

Financial statement schedule

 

STATEMENT OF CHANGES IN NET EQUITY - 2019 In EUR

  Changes in the year

Allocation of previous year profit (loss) Amounts in EUR

Total at 31/12/2018

Amendment of opening balances

Total at 01/01/2019 Reserves

Share capital

Dividends and other distributions

Comprehensive income for 2019

Transactions on net equity

Changes in reserves Issue of new shares

Purchase Extraordinary Changes in of treasury distribution capital shares of dividends instruments

Net equity at 30/06/2019

Other changes

3,000,000

3,000,000

3,000,000

731,479,966

(55,302) 731,424,664

(7,009,422)

(7,009,422)

2,677,934

(4,331,488)

47,518,765

47,518,765 (47,518,765)

8,159,721

8,159,721

10,837,656

785,771,662

Issues share-premium Reserves a) of profits

47,518,765

778,943,429

b) others Valuation reserves Capital instruments Treasury shares Profit (Loss) for the year Net equity

774,989,309

(55,302) 774,934,007

0

     

 

 

47

 

  Interim financial report

STATEMENT OF CHANGES IN NET EQUITY - 2018 In EUR

Changes in the year

Allocation of previous year profit (loss) Amounts in EUR

Total at 31/12/2017

Amendment of opening balances

Reserves

Share capital

Comprehensive income for 2018

Transactions on net equity

Total at 01/01/2018

600,000

600,000

733,471,385

733,471,385

(4,868,088)

(4,868,088)

1,857,929

1,857,929

(1,857,929)

731,061,226

731,061,226

0

Dividends and other distributions

Changes in reserves Issue of new shares

Purchase Extraordinary Changes in of treasury distribution capital shares of dividends instruments

Net equity at 31/12/2018

Other changes

2,400,000

3,000,000

Issues share-premium Reserves a) of profits

1,857,929

(1,449,347)

(2,400,000)

(1)

731,479,966

b) others Valuation reserves

(2,141,334)

(7,009,422)

47,518,765

47,518,765

Capital instruments Treasury shares Profit (Loss) for the year Net equity

     

 

  48

(1,449,347)

0

(1)

45,377,431 774,989,309

Financial statement schedule

 

STATEMENT OF CASH FLOWS – Direct method In EUR

Amounts in EUR

30/06/2019

31/12/2018

A. OPERATING ACTIVITIES 1. Business activities - Interest income received (+) - Interest paid (-)

13,606,721

(10,171,114)

443,841

813,608

(225,952)

(1,936)

- dividends and similar revenues (+) - net fees and commissions (+/-)

40,427,782

7,797,789

- personnel expenses

(11,704,384)

(13,654,983)

- other costs (-)

(10,816,392)

(13,746,740)

- other revenues (+)

2,432,771

889,103

- levies and taxes (-)

(6,950,945)

7,732,044

(269,396,883)

5,009,686

- charges/revenue relating to discontinued operations net of taxes 2. Cash flow generated/absorbed by financial assets - financial assets held for trading - financial assets designated at fair value - other financial assets compulsorily valued at fair value

16,774,193

(217,789,717)

(203,254,732)

220,794,576

- financial assets measured at amortised cost

(44,333,907)

12,506,014

- other assets

(38,582,436)

(10,501,187)

263,522,689

5,894,295

- financial assets valued at fair value with impact on the comprehensive income

3. Cash flow generated/absorbed by financial liabilities - financial liabilities measured at amortised cost

257,099,383

- financial liabilities held for trading - financial liabilities designated at fair value - other liabilities

6,423,306

5,894,295

Net cash flow generated/absorbed by operating activities

7,732,527

732,866

(7,732,258)

(733,660)

B. INVESTMENT ACTIVITIES 1. Cash flow generated by - sale of equity investments - dividends collected from equity investments - sale of property, plant and equipment - sale of intangible assets - sale of company business units 2. Cash flow absorbed by - purchases of equity investments - purchases of property, plant and equipment - purchases of intangible assets

(9,825) (7,432,956)

(191,987)

(299,302)

(531,848)

(7,732,258)

(733,660)

269

(795)

- purchase of company business units Net cash flow generated / absorbed by investment activities C. FUNDING ACTIVITIES - issue/purchases of treasury shares - issue/purchase of capital instruments - distribution of dividends and other distributions Net cash flow generated/absorbed by funding activities NET CASH FLOW GENERATED/ABSORBED IN THE YEAR

 

49

 

Interim financial report

RECONCILIATION In EUR

Amounts in EUR

     

50

30/06/2019

31/12/2018

Cash and cash equivalents at the start of the year

148

943

Total net cash flow generated/absorbed in the year

269

(795)

Cash and cash equivalents at the end of the year

417

148

Financial statement schedules

07 notes to the financial statement

51

Interim financial report

 

52

Notes to the financial statement

PART A – ACCOUNTING POLICIES A.1 - GENERAL PART Section 1 – Statement of compliance with international accounting standards This interim report as at 30 June 2019 was prepared in accordance with International Accounting Standards (IAS) and International Financial Reporting Standards (IFRS) as endorsed by the European Commission as at 30 June 2019 based on the procedure envisaged by Regulation (EC) No. 1606/2002. Although being prepared using the international accounting standard (IAS/IFRS), the current Interim Financial Report, for profit and loss items solely, does not show the comparative information as at 30 June 2018 because the Company has not drawn up the Interim Financial Report for 2018; consequently, the current Report is not compliant to IAS 34 “Interim Financial Reporting”. For the preparation of this report, reference was also made to what was established by the Bank of Italy in the Provisions relating to the Financial Statements of IFRS Intermediaries other than Banking Intermediaries, issued with Measure of 30 November 2018. This interim report as at 30 June 2019 reflects the first application of the IFRS 16 “Leases” accounting standard, effective 1 January 2019, and is not drafted in accordance with the instructions of IAS 34, which governs interim financial statements. The accounting principles used for carrying out the actual Interim Financial Report, with reference to classification, initial measurement, valuation and cancellation of assets and liabilities have not changed compared to the ones used for the Annual Report 2018, unless the modifications due to the mandatory application, since 1 January 2019, of IFRS 16 “Leasing” (see next para 3.1 for further details). In the current Interim Financial Report a reclassification from Balance Sheet item “120 Other assets” to “40 Financial assets valued at amortising cost - loans and receivables with customers” at 31 December 2018 was made, because of the changing in the classification of the receivable with Segregated Estates. With reference to the going-concern principle, having also taken into account the recent evolution characterising the legislative and operational context in which the Company falls, there is reasonable certainty that the Company will operate in the future with a management model aimed at achieving an efficient and effective recovery of the non-performing loans/receivables and the other assets. As things stand, there are no elements in the financial and equity structure of the Company, which may give rise to any uncertainties in this sense. This interim report is consistent with the accounting records of the Company. In compliance with the provisions of art. 5 of Italian Legislative Decree 38/2005, this interim financial report was prepared using the Euro as the reporting currency. The amounts in the financial statements are expressed in Euro, while the notes to the Financial Statement are expressed in Euro thousand. The statement of financial flows for the period of reference and for the previous one was prepared using the direct method. This interim report is considered exhaustive for all practical purposes in terms of information and data referring to AMCO and its investees, considering that, with reference to the Preparation and Presentation of Financial Statements - Framework and to the concepts referred to therein of

53

Interim financial report

"significance" and "relevance", the preparation of the consolidated interim report as at 30 June 2019 was considered to be not useful. This in consideration of: -

the irrelevance of the assets of the subsidiaries, Immobiliare Carafa S.r.l. in liquidation and SGA S.r.l, compared to total consolidated assets;

-

the absence of minority interests in the shareholding structure of both AMCO and the subsidiaries;

-

the relevance of any additional information deriving from the possible consolidation of the subsidiaries and on the effects deriving from the same, pursuant to IAS 1.31 and IAS 8.8;

-

the relationship between charges and benefits, in terms of information, connected with the consolidation of subsidiaries,

-

the substantial representation of the equity and profitability of the group already reflected in AMCO’s financial statements.

Section 2 – Subsequent events after the end of the year Please refer to the Report on Operations

Section 3 – Other aspects 3.1 International accounting standards in force since 2019 In addition to the first application of IFRS 16, the European Commission has published the following Regulations: -

on 26 March 2018, Regulation (EU) No. 2018/498, endorsing the Amendment to IFRS 9: Prepayment Features with Negative Compensation, was published. This amendment makes certain marginal amendments to IFRS 9 “Financial instruments” designed to specify that the instruments which involve early repayment could pass the SPPI test even in cases where reasonable additional compensation, to be paid in cases of early repayment, constitutes “negative compensation” for the lending entity;

-

on 24 October 2018, Regulation (EU) No. 2018/1595 endorsing IFRIC 23 “Uncertainty over Income Tax Treatments” was published with the aim of specifying which factors to consider in the event of uncertainty when recognising income taxes;

-

on 11 February, Regulation (EU) No. 2019/237 endorsing the Amendments to IAS 28: Long-term Interests in Associates and Joint Ventures was published with the aim of transposing the application of IFRS 9 to such interests;

-

on 13 March, Regulation (EU) No. 2019/402 endorsing the Amendment to IAS 19: Plan Amendments, Curtailment or Settlement was published with the aim of specifying the methods for recording income statement components relating to the modification, reduction or extinction of defined benefit plans;

-

on 14 March, Regulation (EU) No. 2019/412 endorsing the Annual Improvements to IFRS Standards 2015-2017 Cycle, which contains minor changes to IFRS 3, IFRS 11, IAS 12, and IAS 23.

3.1.1 Transition to international accounting standard IFRS 16 “Leases” The new accounting standard IFRS 16, issued by the IASB in January 2016 and approved by the European Commission through Regulation no. 1986/2017, from 1 January 2019 replaces IAS 17 54

Notes to the financial statement

“Leases”, IFRIC 4 “Determining whether an Arrangement Contains a Lease”, SIC 15 “Operating Leases - Incentives” and SIC 27 “Evaluating the Substance of Transactions in the Legal Form of a Lease”, and sets out the requirements for the accounting of lease contracts. The new standard requires the determination of whether a contract is (or contains) a lease, based on the concept of control of the use of an identified asset for a fixed period of time; hence it follows that also rental contracts and gratuitous loans for use are included in the application scope of the new rules. Given the above, significant amendments have been introduced to the accounting of lease operations in the financial statements of the lessee/user, requiring the introduction of a single accounting model of lease contracts by the lessee, on the basis of the right of use model. Specifically, the main change is represented by dispensing with the distinction, provided for in IAS 17, between operating and financial leases: all lease contracts must therefore be treated in the same way, with recognition of an asset and liability. The accounting model envisages the recognition in assets of the right of use of the leased asset; payables for lease instalments that have yet to be paid to the lessor are recognised in liabilities, in contrast to the requirements of the standards in effect through 31 December 2018. In addition, the methods for recognising the income statement components have changed: while, under IAS 17, lease instalments were reflected under administrative expenses, they are now recognised in expenses related to the amortisation of the “right of use” and interest expense on the payable, in accordance with IFRS 16. The effects on financial statements following the application of IFRS 16 can be identified, for the lessee, as an increase in assets recognised (leased assets), an increase in liabilities (payable against the leased asset), a reduction in administrative expenses (lease instalments), and a simultaneous increase in financial charges (remuneration for the recorded payable) and amortisation (for the right of use). With reference to the income statement, considering the entire duration of the contracts, the economic impact does not change, whether under the previous regulation IAS 17 or in application of the new IFRS 16, but there is a different breakdown over time.

3.1.2 Effects of the first application of IFRS 16 For AMCO, the analysis of contracts included in the standard’s application scope entailed, in particular, those related to: (i) fixed assets, (ii) automobiles, and (iii) hardware. Fixed asset lease contracts represent the most significant area of impact, while the impact for automobiles and hardware is marginal. Fixed asset lease contracts essentially include fixed assets intended for office use or sub-leased to employees. Typically, the contracts have a duration greater than 12 months, provide for the option for renewal/early termination exercisable by the lessee, and do not include the option to purchase at the end of the lease. Contracts relative to automobiles are long-term rental contracts for the fleet of company cars available to employees. The rental contract generally does not include the renewal option nor the option to purchase the asset. AMCO chose to implement the first-time adoption (FTA) of IFRS 16 using a retrospective approach. In relation to the accounting treatment of lease contract, from the perspective of the lessee, the Company made the following decisions: -

to not apply the new accounting standard to contracts with the value of the underlying asset, when new, less than or equal to EUR 5,000 (low-value contracts). This threshold was

55

Interim financial report

applied to the individual leased asset, and the exemption was applied even when the amount of the contract was material in consideration of the total assets leased; -

to not apply the instructions of IFRS 16 for lease contracts with a lease term less than or equal to 12 months underlying. If the contract includes a lease renewal option, an analysis was performed on a lease-by-lease basis, to assess the likelihood that the option would be exercised and, hence, the duration of the contract;

-

in order to determine the borrowing rate, the implicit interest rate of each contract was used, where available. If it was not available, the risk-free inter-bank rate was used, increased by a credit spread that reflected the Company’s actual funding conditions.

The reconciliation schedule between the balance sheet as at 31 December 2018 (pursuant to IAS 17) and the balance sheet as at 1 January 2019 (pursuant to IFRS 16) is presented below.

Balance Sheet - Assets 10. 20.

Cash and cash equivalents Financial assets valued at fair value with impact on the income statement a) financial assets held for trading

30.

c) financial assets compulsorily valued at fair value Financial assets valued at fair value with impact on the comprehensive income Financial assets valued at amortised cost

31/12/2018 (IAS 17)

FTA impact of IFRS 16

01/01/2019 (IFRS 16)

502,022

502,022

502,022

502,022

200

200

214,286

214,286

83,093

83,093

b) financial assets designated at fair value

40.

a) loans and receivables with banks b) loans and receivables with financial companies c) loans and receivables with customers 50.

20

20

131,173

131,173

70.

Hedging derivatives Change in value of financial assets object of a generic hedge (+/-) Equity investments

158

80.

Property, plant and equipment

184

90.

Intangible assets

100.

Fiscal assets

60.

a) current

110. 120.

b) paid in advance Non-current assets and groups of assets held for disposal Other assets

Total assets

56

158 5,535

5,720

85

85

70,776

70,776

6,066

6,066

64,710

64,710

34,704

(424)

34,281

822,416

5,112

827,528

Notes to the financial statement

Balance Sheet - Liabilities 10.

31/12/2018 (IAS 17)

FTA impact of IFRS 16 01/01/2019 (IFRS 16)

Financial liabilities measured at amortised cost a) payables

5

5,606

5,611

b) debt securities in issue 20.

Financial liabilities held for trading

30.

Financial liabilities designated at fair value

40.

Hedging derivatives Change in value of financial liabilities object of a generic hedge (+/-) Fiscal liabilities

4,102

4,102

a) current

4,102

4,102

50. 60.

b) deferred 70.

Liabilities associated to assets held for disposal

80.

Other liabilities

90.

Employee severance indemnities

7,567

(439)

7,128

612

612

100. Provisions for risks and charges a) undertakings and guarantees issued b) pensions and similar obligations

5

5

c) provisions for risks and charges

35,135

35,135

3,000

3,000

110. Share capital 120.

Treasury shares

130. Capital instruments 140. Share premiums 150. Reserves

525,037

151. FTA reserves

206,443

160. Valuation reserves

(7,009)

170.

47,519

Profit (Loss) for the year

Total liabilities and net equity

822,416

525,037 (55)

206,387 (7,009) 47,519

5,112

827,528

The increase in property, plant and equipment totalling EUR 5,535 thousand is attributable to the recognition of the right of use relative to: -

fixed assets for EUR 5,368 thousand;

-

automobiles for EUR 167 thousand;

In addition to the recognition of the lease liability of EUR 5,606 thousand, the application of IFRS 16 resulted in the derecognition of other assets and other liabilities (for EUR 424 thousand and EUR 439 thousand, respectively) linked to the step-up of the lease instalment for the Milan office. The average weighted marginal borrowing rate used for purposes of measuring lease liability at the date of initial application was 2.97%. The disclosure relative to the reconciliation of future lease commitments in accordance with the former IAS 17 with the lease liabilities recorded in the financial statements as at 1 January 2019 is shown below.

Leasing commitment (former IAS 17)

Financial liabilities (EX IFRS 16)

Difference

6,140

5,606

534

The difference is entirely attributable to the effect of discounting future cash flows from lease contracts at the marginal borrowing rate. 57

Interim financial report

Finally, note that during the first half of 2019, AMCO appropriately recognised new operating lease contract and contracts that were renewed, which fell under the application scope of IFRS 16.

3.2 Other Gruppo Veneto and Gruppo Vicenza Segregated Estates On 11 April 2018, AMCO acquired the NPE portfolio and other assets linked to Banca Popolare di Vicenza in LCA and Veneto Banca in LCA. The Decree that regulated the operation indicated in article 5, paragraph 4, that “The separate financial statements are prepared in compliance with international accounting standards”. These separate statements, prepared for each dedicated asset, forms an annex to these financial statements, in accordance with the general provisions on Segregated Assets provided by the Italian Civil Code. The adoption of international accounting standards for the preparation of separate financial statements for Segregated Assets requires that, in application of the IFRS 9 accounting standard, an analysis of the derecognition of assets must be carried out by the transferor, assuming that it prepares financial statements in accordance with IAS/IFRS standards, even when this is not the case, in order to check if the conditions for the recognition of the assets by the Segregated Assets transferee apply. The analyses carried out on the two separate Gruppo Veneto and Gruppo Vicenza Segregated Assets have considered the following scenarios: -

Estimate of the net future financial flows of loans in the hypothesis of the existence of Assignment Contracts;

-

Estimate of the net future financial flows of loans in the hypothesis that there has not been a transfer of assets by the LCAs but in the hypothesis of adoption of the same business model on the part of the LCAs;

-

Estimate of the net future financial flows of loans in the hypothesis that there has not been a transfer of assets by the LCAs but in the hypothesis of adoption of a different same business model and pricing of the activities of master and special servicing with respect to the two previous hypotheses

From the analysis carried out on the basis of cash flows currently expected by the acquired loans it has emerged that in all the hypotheses described above, not only the cumulative incidence of the commission components is considerably below 10% (parameter used for the derecognition), but the variability between the hypothesis of Transfer to AMCO Segregated Assets and the hypotheses in which this did not occur (both maintaining the same management business model – nevertheless shared with the LCA, and in hypothesis of an alternative one) is essentially nil. On the basis of these assumptions, AMCO has not essentially acquired all the risks and benefits of the ownership of the acquired financial assets and, in consequence, the requirements in the provisions of IFRS 9 for the accounting recognition of the financial asset in the financial statements have not been met. Consequently, because the originating LCA essentially in practice and in law retain all the risks and benefits of the transferred assets, the criteria for the derecognition of assets in the financial statements of the originators, should they apply IAS/IFRS accounting standards, have not been met. As the holder of Segregated Assets, even though not a beneficiary of the results of assets and liabilities, the Company is required to provide adequate disclosure in its financial statements, in

58

Notes to the financial statement

accordance with the requirements of accounting standard IFRS 12. In more detail, for the purposes of the information be supplied, it has been assessed that: -

AMCO is not required to consolidate the Segregated Assets, nor can these be considered joint ventures with the Company;

-

AMCO does not have an equity investment in the Segregated Assets, which cannot therefore be considered to be equity investments in non-consolidated structured entities;

-

The constitution of two Segregated Assets, in order to pursue the specific statutory safeguards offered by this institution, and the existence of an ongoing management contract between them and AMCO ensures that the relationship between the Company and the Segregated Assets falls within the cases of sponsorship envisaged by IFRS 12. Therefore, the disclosure obligations are those defined by IFRS 12.27. The informative has been disclosed through the Report on Operations and the Notes to Financial Statements.

According to Italian Civil Law (art. 2447), the preparation of Segregated Account Financial Statement is required together with the Annual Report solely. Consequently, the information is not provided in this Interim Financial Report (See 2018 Annual Report for the “Section on Segregated Account”). Reference is made to the “Section on Segregated Estates” of the Notes to the Financial Statements for further details.

A.2 – PART RELATING TO THE MAIN FINANCIAL STATEMENT ITEMS The measurement bases adopted for the preparation of the financial statements in accordance with current IAS/IFRS accounting standards are illustrated below.

Financial assets valued at fair value with impact on the income statement Classification criteria This category includes financial assets other than those classified under financial assets valued at fair value with impact on the comprehensive income and financial assets valued at amortised cost. This item, in particular, can include: -

financial assets held for trading;

-

financial assets designated at fair value, or financial assets so defined at the time of initial recognition and where the prerequisites apply. In this case, an entity can irrevocably designate a financial asset as valued at fair value with impact on the income statement at initial recognition if, and only if, by so doing it eliminates or significantly reduces a value inconsistency;

-

financial assets compulsorily valued at fair value, which have not exceeded the requirements for the valuation at amortised cost;

Recognition criteria The initial recognition of financial assets takes place on the settlement date for debt securities and for equity securities. At the time of initial recognition, financial assets valued at fair value with impact on the income statement are recognised at fair value, without taking into account transaction expenses or revenues directly attributable to the same instrument. 59

Interim financial report

Measurement and recognition criteria of income items Market prices are used for the determination of the fair value of financial instruments listed on an active market; In the absence of an active market, estimation methods and commonly adopted assessment methods are used, which take into account all the risk factors related to the instruments themselves and that are based on market data or internal Company information For equity securities not quoted on an active market and derivative instruments, which have as their object such equity securities, the cost criterion is used as estimate of fair value only on a residual basis and in a limited number of circumstances, or in case of non-applicability of all the valuation methods previously mentioned, or in the presence of a wide range of possible valuations of fair value, in the context of which cost represents the most significant estimate.

Derecognition criteria Financial assets are derecognised when the rights to contractual financial flows connected to them expire or when the financial asset is disposed of with the essential transfer of all risks and contractual rights connected to the ownership of the same financial assets.

Financial assets valued at fair value with impact on the comprehensive income (FVOCI) Classification criteria This category includes financial assets that satisfy both of the following conditions: -

financial asset held according to a business model whose objective is achieved both through the collection of contractually anticipated financial flows and through their disposal (“Hold to Collect and Sell” business model);

-

the contractual terms of the financial asset involve, on pre-set dates, financial flows represented exclusively by payment of capital and the interest on the amount of capital to be repaid (“SPPI test” passed). The item also includes equity instruments not held for the purposes of trading for which, at the time of initial recognition, the option for the designation at fair value with impact on comprehensive income was chosen.

In particular, this item includes: -

debt securities attributable to a Hold to Collect and Sell business model that have passed the SSPI test;

-

equity investments, not classifiable as controlling, associated or of joint control, that are not held for trading, for which the option of the designation at fair value with impact on comprehensive income was chosen.

With the exception of equity securities for which no reclassification is allowed, reclassification of financial assets to other categories of financial assets is allowed except in the case where the entity modifies its own business model for the management of financial assets. In such cases, which must absolutely be infrequent, financial assets can be reclassified from the category valued at fair value with impact on comprehensive income to one of the other two categories listed in IFRS 9 (Financial assets valued at amortised cost or Financial assets valued at fair value with impact on the income statement).

60

Notes to the financial statement

The transfer value is represented by the fair value at the time of reclassification and the effects of the reclassification apply from the date of the same. In case of reclassification from the category in object to that at amortised cost, the cumulative profit (loss) recognised in the valuation reserve must be adjusted to the fair value of the financial asset at the date of reclassification. However, in case of reclassification to the category of fair value with impact on the income statement, the cumulative profit (loss) previously recognised in the valuation reserve is restated from net equity to the profit (loss) of the year.

Recognition criteria Initial recognition of financial assets takes place on the settlement date on the basis of their fair value inclusive of transaction charges/revenues directly attributable to the acquisition of the financial instrument. Charges/revenues that are subject to reimbursement by the debtor counterpart or are classified as ordinary internal administrative costs are excluded, even though the above-mentioned characteristics might apply. The initial fair value of the financial asset is normally equivalent to the cost incurred for its acquisition.

Measurement and recognition criteria of income items After the initial recognition, financial assets are valued at fair value, with allocation of profits or losses deriving from the variations in fair value, with respect to the amortised cost, to a specific net equity reserve in the statement of comprehensive income until the financial asset is derecognised, or a reduction in value is not observed. Equity instrument for which the choice has been made for classification in this category are valued at fair value and the matching entry of the recognised amounts in net equity (statement of comprehensive income) must not subsequently be transferred to the income statement, not even in case of disposal (“OCI exemption”). The only component attributable to equity securities in question to be recognised in the income statement is represented by their relative dividends. Fair value is determined on the basis of criteria already illustrated for Financial assets valued at fair value with impact on the income statement: For equity securities not quoted on an active market, the cost criterion is used as estimate of fair value only on a residual basis and in a limited number of circumstances, or in case of nonapplicability of all the valuation methods previously mentioned, or in the presence of a wide range of possible valuations of fair value, in the context of which cost represents the most significant estimate.

Derecognition criteria Financial assets are derecognised when the rights to contractual financial flows connected to them expire or when the financial asset is disposed of, with the essential transfer of all risks and contractual rights connected to the ownership of the same financial assets.

61

Interim financial report

Financial assets valued at amortised cost Classification criteria This item includes loans and receivables with banks, with financial companies and which customers, that is to say, all loans that require fixed or in any case determinable payments and that are not listed on an active market.

Recognition criteria The initial recognition of financial assets takes place on the settlement date for debt securities and at the date of issue in case of loans. At the time of initial recognition, financial assets are valued at fair value, inclusive of transaction expenses or revenues directly attributable to the same instrument. Specifically, with regards to loans, the date of issue normally coincides with the date of signature of the contract. When this is not the case, at the time of signature of the contract a commitment is entered into to issue funds which is fulfilled at the date of issue of the loan. The recognition of the loan takes place on the basis of the fair value of the same, equal to the amount issued, or subscription price, inclusive of charges/revenues directly attributable to the individual loan and determinable from the start of the transaction even though liquidated at a later time. Charges are excluded when, even though they have the above-mentioned characteristics, they are subject to reimbursement by the debtor counterpart of the difference between the amount issued and that reimbursable at maturity, typically attributed to charges/revenues deriving directly from a single loan.

Measurement and recognition criteria of income items After the initial recognition, loans and receivables with customers are valued at amortised cost, equal to the value of first recognition increased/decreased by reimbursements of capital, impairments/reversals of value and amortisation – calculated with the effective interest rate method – of the difference between the amount issued and that repaid at maturity, typically attributed to charges/revenues deriving directly from a single loan. This criterion is not used for exposures with a duration of less than 12 months (given the insignificance of the same in this case). The effective interest rate is the rate that discounts the flow of estimated future payments for the expected duration of the loan such as to obtain exactly the net accounting value at the time of first recognition, which includes both transaction charges/revenues directly attributable and payments paid or received by contracting parties. This accounting treatment, using a financial logic, allows the distribution of the economic effect of charges/revenues along the expected residual life of the loan. Valuation criteria are strictly linked to the stage assigned to the loan, where stage 1 includes performing loans, stage 2 includes under-performing loans, or those loans where there has been a significant increase of the credit risk (“significant impairment”) compared to the initial recognition of the instrument and stage 3 includes non-performing loans, or those loans that show objective evidence of impairment. Value adjustments that are recognised in the income statement for performing loans classified as stage 1 are calculated by taking into account the loss expected in one year, while performing loans in stage 2 by taking into account the expected losses attributable to the contractually determined entire residual life of the asset (Lifetime expected loss).

62

Notes to the financial statement

Performing financial assets are subject to evaluation in function of the parameters of probability of default (PD), loss given default (LGD) and exposure at default (EAD), derived from internal historical data. For impaired assets, the amount of loss to be recognised in the income statement is defined on the basis of a process of analytical valuation or determined by homogeneous categories and, therefore, analytically attributed to each position. Financial instruments defined as non-performing, likely to default or overdue/past due by more than 90 days in accordance with the regulations of Banca d’Italia are defined as impaired assets in accordance with the IAS/IFRS and European supervisory regulations. The expected cash flows take into account the expected recovery time and the estimated realisable value of any guarantees. With regard to the discount rate of estimated future cash flows in expected repayment schedules of non-performing exposures, taking into account the Company's specific operating characteristics and since the original effective rate would have been excessively costly to determine, the interest rate applied to the loans outstanding with Banco di Napoli is used, in that it expresses an average representation of the charges related to the lost return on the portfolio of managed loans and receivables. Should the reasons for the impairment be eliminated following an event occurring after the recognition of the same, write-backs are carried out with allocation to the income statement. The write-back cannot in any case exceed the amortised cost that the loan would have in the absence of previous impairments. Reversals of impairment linked to the passing of time contribute to the generation of interest margin. The amortised cost corresponds to the nominal value.

Derecognition criteria Loans are derecognised when they are deemed to be definitely unrecoverable or in case of disposal, if this involves the essential transfer of all risks and benefits connected to the same loans.

Other assets This item includes assets not attributable to other asset items in the balance sheet.

Current and deferred taxes Classification, recognition and measurement criteria Deferred tax assets relating to temporary differences deductible for IRES purposes and future tax benefits obtainable from the carry-forward of tax losses are recognised only if there is a reasonable probability that they will be recovered, considered on the basis of SGA’s capacity to generate sufficient taxable income in future years and taking into account the specific regulations laid down by Italian Law Decree No. 225 of 29 December 2010 as amended. Deferred tax liabilities, relating to taxable temporary differences, are recognised in full in the financial statements. Where deferred tax assets and deferred tax liabilities refer to components that have affected the income statement, the balancing entry is represented by income taxes. In cases where deferred tax assets or deferred tax liabilities relate to transactions that have directly affected net equity without affecting the income statement, such as the measurement of availablefor-sale financial instruments, they are recognised against net equity, since they affect the specific reserve. With Italian Law Decree no. 59 of 3 May 2016, converted into Italian Law No. 119 of 30 June, regulations concerning DTAs were amended, in order to avoid the classification as "State aid" of 63

Interim financial report

the national regulations that establish the automatic convertibility of "qualified" DTAs into tax credits, in the presence of statutory and/or tax losses. In particular, Article 11 of the aforementioned decree established that the convertibility into tax credits of "qualified" DTAs in excess of the taxes already paid can be maintained, upon specific exercise of irrevocable option, by paying an annual fee in the amount of 1.5% of any positive difference between: -

the sum of “qualified” DTAs recognised as from 2008, including those already converted into tax credits and

-

the sum of taxes paid as from 2008.

This fee, deductible for IRES and IRAP purposes, must be calculated (and, if due, paid) with regard to each financial year up to the last financial year affected by the regulations, initially expected for 2029 and subsequently postponed to 2030 with Law no. 15 of 17 February 2017. In order to ensure that qualified DTAs entered in the financial statements can be converted into loans and receivables, the Company opted for the above fee system. Therefore, since the fee is an expense adapted to elements that change in time, it is recognised as a cost on the basis of the annual contribution determined and paid each year. Income taxes, calculated in accordance with national tax legislation, are recognised as an expense on an accrual basis, on a consistent basis with the recognition method of the expenses and revenues that generated them. Current assets and liabilities include the net balance of the Company's tax position with respect to the Italian tax authorities. Specifically, these entries include the net balance of the current tax liabilities of the year, calculated on the basis of a prudential expectation of the tax due for the year, determined on the basis of current tax regulations, and current tax assets represented by payments on account and other tax credits.

Post-employment benefits Staff severance indemnity refers to a “post-employment benefits” classified as: -

“defined contribution plan” for the portions of post-employment benefits accruing from 1 January 2007 (the date of application of the supplementary pension reform pursuant to Italian Legislative Decree no. 252 of 5 December 2005) both in case of employee choice of supplementary pension and in the case of allocation to the Treasury Fund managed by INPS. The amount of the portions accounted under personnel expenses is determined based on the contributions due without using actuarial calculations;

-

“defined benefit plan” and therefore recognised on the basis of its actuarial value determined with the “Projected unit credit” method, for the portion of post-employment benefits accrued until 31 December 2006. The determination of the relative liability is carried out by an external expert using the “Projected Unit Credit Method”.

The Iboxx Eurozone Corporates AA index with a duration of more than 10 years is used to determine the annual discount rate adopted for the calculations, as it is considered to be more representative of market returns, taking into account the average residual duration of the liability. Following the entry into force of the new version of IAS 19 issued by the IASB in June 2011 and effective as from 1 January 2013, actuarial gains and losses are recognised immediately and entirely in the statement of comprehensive income with an impact on Net Equity.

64

Notes to the financial statement

Provisions for risks and charges Classification, recognition and measurement criteria Provisions for risks and charges are made up of liabilities of uncertain timing or amount and recognised in the financial statements in that: -

there is a present obligation (legal or constructive) as a result of a past event;

-

the payment to settle the obligation is probable;

-

a probable future outflow can be estimated reliably.

The item includes provisions for estimated losses on lawsuits, including revocatory actions, as well as estimated outlays against legal or implicit obligations outstanding at the end of the reporting period. Where the effect of the timing deferral in bearing the estimated charge is objectively foreseeable and assumes a material aspect, the Company calculates the amount of the provisions and allocations to an extent equal to the present value of the outlays that are expected to be necessary to settle the obligations. If the provisions are discounted, the amount of the provisions recognised in the financial statements increases in each period to reflect the passage of time. The adjustment of provisions is recognised in the income statement. The provision is reversed when the use of resources to produce economic benefits to fulfil the obligation become unlikely or when the obligation expires.

Revenues and expenses Revenues are gross flows of economic benefits deriving from the performance of the company's ordinary activities and are recognised at the time the control of goods or services is transferred to the client, at an amount that represents the amount of consideration to which the entity deems it is entitled. The price of transaction represents the amount of consideration to which the entity deems it is entitled in exchange of the transfer to the customer of the promised goods and services. It can include fixed or variable amounts, or both. Revenues from variable consideration are recognised in the income statement if reliably estimated and only if it is highly likely that this consideration will not be, at a later date, totally or for a significant portion derecognised from the income statement. Costs are recognised in the income statement in compliance with the accrual principle; the expenses relative to obtaining the contract and the fulfilment of obligations towards customers are recognised in the income statement in the periods in which the relative revenues are recognised.

Other information Expenses for improvements to third-party assets Property restructuring costs are capitalised in consideration of the fact that for the duration of the rental contract the user company has control of the assets and can derive future economic benefits from them. The above-mentioned costs, classified in the item “Other assets” as required by the Instructions of the Banca d’Italia, are depreciated for a period not exceeding the duration of the rental contract.

65

Interim financial report

A.3 – INFORMATION ON TRANSFERS BETWEEN PORTFOLIOS OF FINANCIAL ASSETS During the year no transfers between the different assets portfolios held took place.

66

Notes to the financial statement

PART B – INFORMATIONS ON BALANCE SHEET ASSETS Financial assets valued at fair value with impact on profit and loss – Item 20 Items / Values

30/06/2019 L1

L2

31/12/2018 L3

L1

L2

L3

1. Debt securities 1.1 Structured securities 1.2 Other debt securities 2. Equity securities 3. UCITS units

493,321

502,022

493,321

502,022

4. Loans 4.1 Repurchase agreement 4.2 Others Total

The item “UCITs” includes the investment in Italian Recovery Fund. As at 30 June 2019, the Company holds 520 units at the unit value of EUR 948,963.858 for a total value of EUR 493,321 thousand. The valuation of the investment was made on the basis of the unit value communicated by the Asset Management Company (Quaestio SGR) as at 30 June 2019. It should be noted that in March 2019 the Fund distributed EUR 16,774 thousand as a reimbursement of the initial investment, deducted from the investment value.

 

67

Interim financial report

Financial assets valued at fair value with impact on the comprehensive income – Voce 30 Items/Valuations

30/06/2019 L1

L2

31/12/2018 L3

L1

L2

L3

1. Debt securities 1.1 Structured securities 1.2 Other debt securities 2. Equity securities

205,756

15

18

90

182

105

200

3. Loans Total

205,756

The increase compared to 31 December 2018 in debt securities is due to the acquisition of a Italian Government Bond portfolio carried out in the first semester, which value amounts to EUR 206,092 thousand at 30 June 2019 (gross of impairment of EUR 336 thousand). The investment in Government Bond has been realized as a temporary occupation of cash liquidity in the view of a more efficient treasury management. According to the final purpose of the investment the company has chosen the business model Held to collect and sell. The item Equity securities include the residual investment in Banca Carige S.p.A. shares made by AMCO and its decrease, compared to 31 December 2018 is entirely due to the depreciation of the investment recorded in the first semester 2019, other than shares of Impianti S.r.l. in liquidazione (for a value of EUR 5).

Gross value

Total impairment losses

First stage of which: Second stage Third stage instruments with low credit risk Debt securities

First stage Second stage

206,092

206,092

15

(336)

206,092

206,092

15

(336)

Loans Total at 30/06/2019 Total at 31/12/2018 of which: acquired or originated impaired financial assets

68

18 X

X

X

Third stage

Notes to the financial statement

Financial assets measured at amortised cost – Item 40 Breakdown

30/06/2019

31/12/2018

Carrying amount

First and second stage 1. 2.

Deposits and current accounts Loans 2.1 Repurchase agreements 2.2 Loans

Fair value of which: acquired or originated impaired

Carrying amount

Fair value of which: acquired or originated impaired

L3

First and second stage

141,110

141,110

83,093

83,093

0

0

0

0

141,110

141,110

83,093

83,093

Third stage

L1

L2

Third stage

L1

L2

L3

2.3 Factoring - with recourse - without recourse 2.4 Other loans 3.

4.

Debt securities 3.1 Structured securities 3.2 Other debt securities Other assets

Total

The item includes the cash at bank as at 30 June 2019 for a total value of EUR 141,110 thousand, net of the impairment at bank account of EUR 202 thousand.

69

Interim financial report

Breakdown

30/06/2019

31/12/2018

Carrying amount First and second stage 1. Loans

Fair value

Carrying amount

Fair value

L3

First and second Third stage stage

of which: acquired or originated impaired

126,466

126,466

131,173

131,173

131,173

126,466

126,466

126,466

131,173

131,173

131,173

126,466

126,466

126,466

131,173

131,173

131,173

Third stage

of which: acquired or originated impaired

126,466

L1

L2

L1

L2

L3

1.1 Loans for leasing of which: without option of final purchase 1.2 Factoring - with recourse - without recourse 1.3 Consumer credit 1.4 Credit cards 1.5 Loans secured by pledge 1.6 Loans granted in relation to payment services rendered 1.7 Other loans of which: from enforcement of guarantees and commitments 2. Debt securities 2.1 Structured securities 2.2 Other debt securities 3. Other assets Total

The item has a total value of EUR 126.5 million as at 30 June 2019. It is composed by the loans with customers related to the former Banco di Napoli loans. The item mainly referrs to: -

Former ISVEIMER portflio: for a net value of EUR 7.4 million compared to EUR 7.5 million at 31 December 2018;

-

Former GRAAL portfolio: for a net value of EUR 241 thousand, substantially in line with 31 December 2018;

-

Former Banco di Napoli portfolio: for a net value of EUR 118.9 million compared to EUR 123.4 million at 31 December 2018;

-

Credem Lux portfolio: with a gross value of EUR 29 million completely impaired.

  70

Notes to the financial statement

Gross value

Total impairment losses

First stage of which: instruments with low credit risk

Second stage

Third stage

First stage

Second stage

Third stage

1,001,731

202

875,266

1,001,731

202

875,266

Debt securities Loans Other assets

141,312

45,826

20

20

Total at 30/06/2019

141,332

45,846

Total at 31/12/2018

83,138

33,138

1,053,483

25

922,310

X

X

1,001,731

X

875,266

of which: acquired or originated impaired financial assets

 

 

71

Interim financial report

Equity investments - Item 70 Name

Registered office Operational office

Immobiliare Carafa S.r.l. in liquidation SGA S.r.l.

Shareholding interest %

Votes available %

Carrying amount

Fair value

27

n.a.

10

n.a.

Naples

Naples

100%

100%

Romania

Romania

100%

100%

Total

37

The amounts refer to the participating interests held by AMCO at 30 June 2019, specifically: -

EUR 27 thousand, net of impairment, for the controlling interest held in the company Immobiliare Carafa S.r.l. in liquidation, constituted on 12 October 1999 and relating to the acquisition, management and sale of properties and the completion of relative construction works, with the objective of realising a portion of AMCO receivables;

-

EUR 10 thousand for the equity investment in SGA S.r.l., a Romanian-registered company constituted during the year having as its object the recovery of the Romanian portfolio of the Group Veneto Segregated Estates.

Attività materiali e immateriali – Voce 80 e 90 Assets/Values 1.

30/06/2019

31/12/2018

Owned assets a) land b) buildings c) movable assets d) electronic equipment e) other

2.

135

3

79

80

397

101

Right of use acquired through leases a) land b) buildings

6,112

c) movable assets d) electronic equipment e) other Total of which: from enforcement of guarantees and commitments

72

95 194 7,012

184

Notes to the financial statement

Items/Valuations

30/06/2019 Assets valued at cost

31/12/2018

Assets valued at fair value

assets valued at cost

1.

Goodwill

2.

Other intangible assets:

69

85

2.1 owned

69

85

69

85

69

85

Total (1+2+3)

69

85

Total at 31/12/2018

85

assets valued at fair value

- generated internally - other 2.2 right of use acquired through leases Total 2 3.

Assets attributable to financial leases: 3.1 unexercised assets 3.2 assets retired following termination of agreement 3.3 other assets

Total 3

The increase in the items at 30 June 2019 is mainly due to the first recognition of the right of use for the leasing contracts included by the application of the IFRS 16. The item “other” amounting to EUR 194 thousand refers to company cars right of use.

Fiscal assets and tax liabilities - Item 100 of assets and Item 60 of liabilities 30/06/2019 Taxes to reimburse or mitigate Deferred tax Withholding tax charged Totale

31/12/2018

6,340

6,066

62,076

64,710

15

0

68,432

70,776

This item includes only tax assets recognised in accordance with IAS 12 and therefore relating to direct taxes. Other tax receivables are included in the item "Other assets". Recognise prepaid tax refers to: -

for EUR 58,192 thousand to DTA IRES generated from temporary deductible differences (EUR 52,262 thousand for write-downs of assets not yet deducted pursuant to art. 106, paragraph 3, TUIR as per the provisions envisaged in art. 2 of Italian Law Decree no. 225 of 29 December 2010 and subsequent amendments former Law 214/2011) as well as from previous tax losses and use of ACE;

-

for EUR 3,884 thousand to IRAP DTAs relative to deductible temporary differences for provisions for risks and charges and to assets impairments not previously recognised.

-

Instead, owing to the uncertainty of their future recoverability, deferred tax assets were not recognised for tax losses carried forward and other temporary differences, whose amount of potential tax benefit is calculated by applying the tax rate currently envisaged by the relevant IRES regulations (27.5%), equivalent to EUR 8.1 million.

It is specified that, as things stand, no elements have been identified such as to the highlight restrictive conditions for the carrying forward of the tax losses. 73

Interim financial report

Payables for current taxes

30/06/2019

31/12/2018

7,196

4,102

7,196

4,102

Other Deferred IRAP tax Totale

Payables for current taxes consist of the IRAP tax balance at first semester 2019 (EUR 1,085 thousand) and of the IRAP balance at 31 December 2018 (EUR 4,102 thousand paid on 1 July 2019). Moreover, the item include the debt connected to the IRES adjustment of 3,5% for EUR 2,009 thousand also booked as a fiscal asset because considered fully recoverable in the next fiscal years.

Other assets – Item 120 30/06/2019 Loans and receivables to lessor

31/12/2018 424

Guarantee deposits

584

119

Improvements to third party assets

616

407

1

1

Tax credit for paid taxes to be returned VAT receivables Miscellaneous receivables for register fees and expenses to be recovered Receivables from segregated estates Receivables for service invoices to be issued or collected

3,074 276

276

49,253

29,204

4,840

3,711

Prepaid expenses

858

364

Other

252

198

Total

59,755

34,704

As at 30 June 2019, the item “Other assets” has a balance of EUR 59,755 thousand, mainly made up of: -

“Receivables from Segregated Estates” which includes amounts relative to expenses paid in advance by AMCO and reallocated to Segregated Estates, other than receivables for commission;

-

“Receivables for invoices/services to be issued” includes amounts relative to recovery of expenses paid in advance by AMCO in the management of Financed Capital;

-

“Improvements on third-party assets” refers to structural works carried out on the property in Via Santa Brigida 39 in Naples to which the registered office of the Company was transferred.

It should be noted that “Receivables from Segregated Estates” decreased of EUR 43,793 thousand because of the collection performed in July 2019.

74

Notes to the financial statement

LIABILITIES Financial liabilities measured at amortised cost - Item 10 Financial liabilities measured at amortised cost: breakdown of payables Items

30/06/2019 With banks

31/12/2018

With financial With customers companies

With banks

With financial With customers companies

1. Loans 1.1 Repurchase agreements 1.2 Other loans 2. Payables for leasing

6,496 5

3. Other payables

5

Total

5

6,496

5

Fair value – level 3

5

6,496

5

Total fair value

5

6,496

5

Fair value – level 1 Fair value – level 2

The increase in the item “Liabilities” at 30 June 2019 is ascribable to the accounting of the financial liabilities related to the IFRS 16.

Financial liabilities measured at amortised cost: breakdown of debt securities in issue Type of security / Value

30/06/2019

Carrying amount A.

31/12/2018

Fair value L1

L2

L3

Carrying amount

Fair value L1

L2

L3

Securities 1. Bonds 1.1 Structured 1.2 Other

250,603

250,603

250,603

250,603

2. Other securities 2.1 Structured 2.2 Other Total

The item includes the bond issued on 13 February 2019 amounting to EUR 250 million with maturity on 13 February 2024.

Tax liabilities – Item 60 See section 10 of assets.

 

75

Interim financial report

Other liabilities – Item 80 30/06/2019

31/12/2018

Payables to customers

6,096

2,110

Payable deductions and social security contributions

1,193

838

Invoices to be received

1,798

3,138

Remuneration, reimbursement of expenses and payables to personnel

1,573

465

Other payables

1,689

1,016

12,349

7,567

Total

Provisions for risks and charges – Item 100 Items/Values 1.

Provision for credit risk relating to commitments and guarantees issued

2.

Provision for other commitments and guarantees issued

3.

Company pension fund

4.

Other provisions for risks and charges 4.1 Legal and fiscal disputes 4.2 Personnel expenses 4.3 Other

Total

30/06/2019

31/12/2018

12,417

13,067

1,396

2,270

25,231

19,803

39,044

35,140

The provisions for risks and charges are equal to EUR 39,044 thousand and are composed by:

76

-

Legal and tax disputes: the provision is due to the risk of losing in legal disputes.

-

Personnel expenses: the item refers to the provision for staff bonus set forth in art. 48 of the National Collective Labour Agreement;

-

Other: this item includes a provision for EUR 23,780 thousand related to the adjustment mechanism for AMCO’s fees indicated in the transfer contract (also called as ”Collar”). This mechanism ensures the correlation of fees due to SGA to the costs actually sustained for the management and recovery activities of the obligations of the transferred assets. The liquidation of the amounts is carried out on a three-year basis. Furthermore, this item includes the provision for the risk of the retrocession of ISMEA (former SGFA) for EUR 1,1451 thousand, to cover the expected disbursements for the forfeited portion of revenue already enforced to be reversed to the guarantor, as required by the relative regulations.

Notes to the financial statement

PART C – INFORMATION ON THE PROFIT AND LOSS STATEMENT Interest – Items 10 and 20 Interest and similar income: breakdown Debt securities

Items/Technical forms 1.

Loans

Other 30/06/2019 operations

Financial assets valued at fair value with impact on the income statement: 1.1. Financial assets held for trading 1.2. Financial assets designated at fair value 1.3. Other financial assets compulsorily valued at fair value

2.

Financial assets valued at fair value with impact on the comprehensive income

380

X

380

X

57

3. Financial assets measured at amortised cost 3.1 Loans and receivables with banks

57

3.2 Loans and receivables with financial companies

X

3.3 Loans and receivables with customers

1,633

4. Hedging derivatives 5.

X

Other assets

X

X

6. Financial liabilities

X

X

380

1,689

Total

X

1,633

X

of which: interest income from impaired financial assets

X 2,070

1,633

of which: interest income on leases

Interests and similar income include EUR 1.6 million of impairment reversal connected to the passing of time, corresponding to the interest accrued on impaired financial assets during the first semester of 2019, in addition to the interests on the Government Bonds amounting to EUR 380 thousand.

Interest and similar expenses: breakdown Items/Technical forms 1.

Payables

Other operations

30/06/2019

X

X

(1)

X

X

Financial liabilities measured at amortised cost 1.1 Payables to banks

(1)

1.2 Payables to financial companies

2.

Securities

1.3 Payables to customers

(79)

X

X

(79)

1.4 Debt securities in issue

X

(2,626)

X

(2,626)

(1)

(1)

Financial liabilities held for trading

3.

Financial liabilities designated at fair value

4.

Other liabilities

X

X

5.

Hedging derivatives

X

X

6.

Financial assets

X

X

X

(80)

(2,626)

(1)

Total of which: interest expense for lease payables

(2,707)

(79)

The item mainly includes the instalments connected to the interest expenses related to the bond, which will be settled on 13 February 2020. The item also includes the interest expenses related to the financial liabilities for IFRS 16. 77

Interim financial report

Fees and commission – Items 40 and 50 Fees and commissions income: breakdown Detail

30/06/2019

a)

leasing operations

b)

factoring operations

c)

consumer credit

d)

guarantees issued

e)

services of: - fund management for third parties - foreign exchange intermediation - product distribution - other

f)

collection and payment services

g)

servicing of securitisation operations

h)

other commissions

Total

23,347 23,347

This account includes servicing commissions received for the management of Segregated Estates relative to the former Veneto Banks. The account in composed by: -

EUR 22,313 thousand for the activity as a special servicer;

-

EUR 1,006 thousand for the activity as a master/corporate servicer.

Fees and commissions expense: breakdown Detail/Sectors a)

guarantees received

b)

distribution of services by third parties

c)

collection and payment services

d)

other commissions (to be specified)

Total

30/06/2019

(496) (496)

Commissions mainly refer to the amount recognised to Società per la Gestione di Attività S.r.l. for servicing activity during the first semester 2019 on the Romanian portfolio of the Segregated Estate of the Veneto Group.

 

78

Notes to the financial statement

Net result of other assets and of financial liabilities valued at fair value with impact on profit and loss statement - Item 110 Items/Income components

Capital gains Gains on disposal Losses (A)

1. Financial assets

(B)

(C)

Losses on disposal

Net result

(D) [(A+B) − (C+D)

8,073

8,073

8,073

8,073

1.1 Debt securities 1.2 Equity securities 1.3 UCITS units 1.4 Loans 2. Financial assets in currency: exchange differences Total

X 8,073

X

X

X 8,073

As at 30 June 2019, capital gain amount to EUR 8.1 million, entirely attributable to the investment in Italian Recovery Fund as at 30 June 2019 on the basis of the unit value communicated by Quaestio Management SGR S.p.A.

 

79

Interim financial report

Net impairment losses for credit risk – Item 130 Operations/Income components

Impairment losses First and second stage

1.

Reversal of losses

Third stage Writeoffs

Other

First 30/06/2019 and Third stage second stage

Loans and receivables with banks Acquired or originated impaired loans and receivables - for leasing - for factoring - other loans and receivables Other loans and receivables - for leasing - for factoring - other loans and receivables

2.

(177)

(177)

Loans and receivables with financial companies Acquired or originated impaired loans and receivables - for leasing - for factoring - other loans and receivables Other loans and receivables - for leasing - for factoring - other loans and receivables

3.

Loans and receivables with customers Acquired or originated impaired loans and receivables - for leasing - for factoring - for consumer credit - other loans and receivables

(1,631)

10,151

8,520

(1,631)

10,151

8,343

Other loans and receivables - for leasing - for factoring - for consumer credit - loans secured by pledge - other loans and receivables Total

(177)

Net impairment and losses recorded on loans and receivables with customers originate from the economic effects generated as a result of recovery activities, as well as from the update of the analytical measurements of managed positions. During the first semester 2019 the collection on loans and receivables with costumers are equal to EUR 14 million and it generates net reversal of loss of EUR 8,520 thousand. The item also includes the impairment of EUR 177 thousand on the bank accounts.

 

80

Notes to the financial statement

Operations/Income components

Impairment losses First Third stage and second WriteOther stage offs

A.

Debt securities

B.

Loans

Reversal of losses First 30/06/2019 and Third stage second stage

(336)

8

(327)

(336)

8

(327)

- With customers - With financial companies - With banks of which: acquired or originated impaired financial assets Total

The item includes the impairment on the Government Bonds.

Administrative expenses - Item 160 Personnel expenses: breakdown Type of expenses/Value 1.

Employees

30/06/2019 (10,768)

a) salaries and wages

(7,531)

b) social security

(2,069)

c) post-employment benefits

(225)

d) pension funds e) provision for post-employment benefits

(21)

f) provision for pensions and similar obligations: - defined contribution plan - defined benefit plans g) payments to external complementary pension funds: - defined contribution plan

(360)

- defined benefit plans h) other benefits for dependents

(562)

2.

Other active personnel

(63)

3.

Directors and Auditors

(77)

4.

Retired personnel

5.

Recoveries of expenses for personnel seconded to other companies

6.

Reimbursements of expenses for personnel seconded to the company

Total

(1,195) (12,103)

Personnel expenses are related to salaries, leave accrual, and bonus accrual at 30 June 2019. Staff seconded expenses are connected to reimbursement of the expenditure due to Intesa Sanpaolo for the personnel coming from the former Veneto Banks and seconded at AMCO during the 1H2019.

 

81

Interim financial report

Other administrative expenses: breakdown Type of expenses/Value

30/06/2019

1.

Reimbursement of expenses for coordinated and continued collaborators

2.

Expenses for other consultants

3.

Expenses for technical consultancy

102

4.

Legal and other recovery expenses

1,644

5.

Other

6,416

Total

1,360

9,522

This item includes the administrative expenses related to software and IT implementation due to the new and increasing needs connected with an efficient and effective management of the assets of the Segregated Estates.

Net allocations to provisions for risks and charges – Item 170 Net allocations to other risks and charges provisions: breakdown 30/06/2019 a)

For risk of sums repayments

b)

For guaranteed disputes

c)

For supplemental employee welfare

d)

For risk of litigation

e)

For risk of compensation for damages

f)

For risk of expense reimbursement;

g)

For risk on TARI-TARSU

i)

For solidarity contribution

l)

For risk of adjustment to servicing fee

m)

For risk of retrocession of ISMEA (former SGFA)

Total

238

(38) (245)

(23)

(5,427)

(5,495)

The provision is mainly related to the adjustment mechanism for AMCO’s fees indicated in the transfer contract (”Collar”). For the 1H2019 it is equal to EUR 5,427 thousand.

Other operating income and expenses – Item 200 Other operating charges: breakdown 30/06/2019 1.

Non-existent assets

2.

Charges for ISP BDN transaction

3.

Other operating expenses

Total

 

82

(55) (55)

Notes to the financial statement

Other operating income: breakdown 30/06/2019 1.

Allocation of expenses to positions

2.

Other operating income

375 2,113

Total

2,488

The item mainly includes the recovery of direct and indirect expenses incurred by AMCO during the first semester 2019 and reallocated to the Segregated Estates and to the Financed Capital on the basis of internal allocation criteria.

Income taxes for the year on current operating activities - Item 270 Income tax for the period for current operations: breakdown 30/06/2019 1.

Current taxes (-)

2.

Changes in current taxes of previous financial years (+/-)

(1,085)

3.

Reduction of current year taxes (+)

3bis.

Reduction of current year taxes for tax credits pursuant to Law no. 214/2011 (+)

4.

Changes in taxes paid in advance (+/-)

5.

Changes in deferred taxes (+/-)

6.

Taxes for the year (-) (-1+/-2+3+3 bis +/-4+/-5)

(2,634)

(3,719)

Taxes of the semester include the negative value of EUR 3.7 million and refers to current IRAP tax for 1.1 million, while the related of the recognition of prepaid tax assets relating to temporary deductible differences recorded in last years affects the net profit for EUR 2.6 million.

 

 

83

Interim financial report

 

84

Notes to the financial statement

   

 

08 declaration by the Manager in charge of financial reporting

85

  Interim financial report

 

86

 

  Notes to the financial statement

Attestation of the Chief Executive Officer and Manager in Charge of Financial Reporting on the Financial Statements and Report on Operations as at 31 December 2018 pursuant to art. 154 bis of Italian Legislative Decree 58/1998

1.

The undersigned MARINA NATALE, in her role of Chief Executive Officer and SILVIA GUERRINI, in her role of Manager in Charge of Financial Reporting of AMCO – Asset Management Company S.p.A., also taking into account the provisions of art.154 bis, paragraphs 3 and 4, of Italian Legislative Decree no. 58 of 24 February 1998, art. 13, paragraph 6, of the Articles of Association and what stated at point 2 below, certify:

– – 2.

3.

4.

the adequacy in relation to the characteristics of the company and the corporate structure the effective application of administrative and accounting procedures and practices in the preparation of the financial statements as at 30 June 2019.

At this regard it should be noted that the undersigned SILVIA GUERRINI was appointed Manager in Charge of Financial Reporting on 15 March 2019, to replace the previously Manager in Charge of Financial Reporting MARINA NATALE, and that the same has carried out the activities necessary to verify the adequacy and effective application of the procedures and consolidated administrative and accounting practices in place, while at the same time proceeding to rationalise the same. The undersigned also certified that the financial statements as at 30 June 2019:

– –

correspond to the accounting entries and records;



are drawn in compliance with the IAS/IFRS international accounting standards recognised by the European Community and the Provisions of the Bank of Italy on the subject.

are suitable to provide a truthful and correct representation of the financial, economic and assets situation of the Company;

Lastly, it is certified that the Report on Operations as at 30 June 2019includes a reliable analysis of the Company’s performance and EBITA as well as the Company’s situation, together with a description of the main risks and uncertainties to which the Company is exposed. 

Milan, 17 Settembre 2019

Marina Natale Chief Executive Officer

Silvia Guerrini Manager in charge of financial reporting

   

 

87

  Interim financial report

 

88

 

  Notes to the financial statement

 

 

89

Interim financial report

 

90