AI Terminal

MODULE: AI_ANALYST
Interactive Q&A, Risk Assessment, Summarization
MODULE: DATA_EXTRACT
Excel Export, XBRL Parsing, Table Digitization
MODULE: PEER_COMP
Sector Benchmarking, Sentiment Analysis
SYSTEM ACCESS LOCKED
Authenticate / Register Log In

Fiera Milano

Governance Information Apr 27, 2017

4073_10-k_2017-04-27_c225eb2f-4200-4fe3-a7a3-5e0481d2b5a4.pdf

Governance Information

Open in Viewer

Opens in native device viewer

This document contains a faithful translation into English of the original report in Italian Relazione Finanziaria Annuale 2016. However, for information about Fiera Milano Group reference should be made exclusively to the original report in Italian. The Italian version of the Relazione Finanziaria Annuale 2016 shall prevail upon the English version.

CONTENTS

Mission 4
PART ONE Letter
to
Share
hol
der
s
6
H
istor
y of the Gro
up
8
Gro
up Str
ucture
10
Key Gro
up ValueS
12
H
ighlights
14
Busine
ss mo
del
15
Corporate
bo
dies
an
d Indepen
dent
Auditor
16
Not
ice of convo
cation
of the Extraor
dinar
S
hare
hol
der
s' Meet
ing
an
d the Ordinar
y
S
hare
hol
der
s' Meet
ing
y
18

Annual Report – Financial year 2016

Boar
d of Dire
ctor
s' Management
Report
22
PART TWO Gro
up Con
sol
idate
d Finan
cial
Statement
s
at
31 December
2016
118
De
clarat
ion
in accor
dan
ce with
Art
icle 154-bis of Leg
islat
ive
Decree
58/98
208
Report
of the Boar
d
o
f Stat
utor
y Auditor
s
209
In
depen
dent
Auditor
s' Report
211
F
iera
Milano
SpA Finan
cial
Statement
s
at
31 December
2016
214
De
clarat
ion
in accor
dan
ce with
Art
icle 154-bis of Leg
islat
ive
Decree
58/98
292
Report
of the Boar
d
o
f Stat
utor
y Auditor
s
293
In
depen
dent
Auditor
s' Report
311
Resol
ution
s passed by the Ordinar
y
Meet
ing
of Share
hol
der
s
313

Mission

  • Fiera Milano offers a means for companies to grow and become more international
  • It contributes to economic growth
  • It promotes socio-economic improvement in the region in which it is based

Letter to shareholders

Dear shareholders,

2016 was a year when the Italian exhibition business proved better than expected. However, it must be remembered that our business is affected by the seasonality that is typical of the exhibition sector. 2016 was characterised by the absence of some important proprietary biennial exhibitions and of some multi-annual exhibitions, which meant that the comparative year-on-year figures were lower. This was exacerbated by the fact that 2015 was a particularly favourable year and also benefited from the positive effect of Expo 2015.

In line with the strategy that we announced to the market, we have worked to strengthen the proprietary exhibition portfolio i.e. those exhibitions that are directly organised by Fiera Milano SpA, to expand the portfolio of exhibitions organised by third-parties and to place a greater emphasis on clients. Already in 2017, we shall benefit from a richer programme of events with a total of nine new directly and indirectly organised exhibitions. Despite the highly fragmented domestic exhibitions sector, we have been successful in sealing important collaborations both with industry associations and with other exhibition centres to promote a "sector" approach that can but benefit the companies and economy of our country.

We are particularly happy about the agreement reached last year with Veronafiere that will lead, starting in 2017, to the inclusion within Tuttofood of an area dedicated to wine to be run by Veronafiere and to the strengthening of the fruit and vegetable sector of the same exhibition. It is an important agreement that is unprecedented in Italy: two important exhibition entities uniting to help grow the Italian food & beverage industry.

As part of our business development strategy we laid the foundations for a joint undertaking with Nautica Italiana, the umbrella organisation for the 80 leading Italian nautical brands. The outcome is that, in 2017, we shall organise the new event Versilia Yachting Rendez-vous in Viareggio. This is an international exhibition that displays the most important nautical sectors in an innovative format and offers a top-quality showcase for the whole sector.

As part of our external growth we acquired the trademark Promotion Trade Exhibition, an annual international exhibition of promotional articles, business gifts and technologies for the personalisation of these items. This exhibition, already held in the Fiera Milano exhibition site but previously organised by a third-party, will now be directly organised by Fiera Milano.

Lastly, during 2016, we also reached an agreement with the Associazione Italiana Editori with whom, through the joint venture La Fabbrica del Libro SpA, we are organising the new event Tempo di Libri that will occupy three pavilions of the exhibition site when it is held in April 2017. The exhibition will bring together, editors, authors, librarians, bookshops, students and readers in a major event combining tradition with innovation and reflecting the gift that books have demonstrated they have over the centuries: the ability to remain in tune with the spirit of an era by accompanying its cultural and technological progress.

With reference to the portfolio of exhibitions organised by third-parties, in 2016, new exhibition organisers recognised the international standing of the city of Milan and the organisational ability of Fiera Milano SpA, by choosing our venues for their next exhibitions.

The proof of this faith in us is already visible in the list of events in the 2017 calendar. This includes the annual exhibitions Ferroviaria, the International Dog Show, MAM Mostra and Milano Arte e Antiquariato, which unites the worlds of art and design. It also includes TheOneMilano, the new international fair for top quality women's prêtà-porter and accessories that combines the know-how and experience of MIPAP, the prêt-à-porter exhibition

organised by Fiera Milano SpA, and of MIFUR, the fur and leather exhibition run by the exhibition organiser of the same name.

2017 also includes the biennial exhibition Lamiera, the international trade fair for bending machine tools and for all innovative technologies in this sector.

Significant operating cost reduction targets were met as a result of the restructuring implemented in the previous financial year and due to the lower rent for the fieramilano exhibition site.

Five-start hospitality and welcome: Fiera Milano becomes increasingly buyer-friendly

t

t

The Group is carrying out a strategic repositioning of its business outside Italy, which is based on a primary focus on product while investments in corporate assets have become of secondary importance. In China the sale of its shareholding in the subsidiary Worldex (that operates in non-strategic countries like Sri Lanka) is part of the Group strategy to concentrate its activities outside Europe in the joint venture with its German partner Deutsche Messe. The growth outlook for the businesses in Brazil and South Africa have been downgraded due to the socio-economic problems in these countries and this resulted in impairment losses to some of the intangible assets.

The attraction of Milan, which is highly appreciated internationally, cannot be separated from that of the exhibition site of Rho-Pero: we have focused increasingly on the quality of service provided to our clients. In 2017 we have tried to improve our reception services and also to make the exhibition site more welcoming. As part of the latter initiative, we have created relaxation areas, smoking areas, a VIP lounge and a more modern reception area for our offices. Our reception of clients starts at the airports where there are fast track ways of negotiating the airports, dedicated information desks that provide information on the transport agreements reached with the railway companies, as well as on hotel accommodation, Transfer & Tour, City Desk and Venue Finder services.

We also paid attention to renewing and increasing the catering both in terms of venue layout and food offered. New and important agreements were signed with sponsors that will generate returns already in 2017.

As is already known, in July 2016, Nolostand SpA, the subsidiary operating in the stand-fitting sector, received a judicial administrative order which was subsequently extended on 11th October 2016, to the entire standfitting business area of the Parent Company Fiera Milano S.p.A., regarding its contractual relations with a supplier.

The Board of Directors of the Company initiated measures, in complete collaboration with the Courtappointed Administrator, to improve significantly the corporate governance of the Company and took numerous other steps to ensure that these measures were implemented properly.

Following the request of the Public Prosecutor made that the administration order be extended to all sectors of the Company, in January 2017 the Board of Directors, having carefully considered only what was in the interest of the Company, decided that the best solution was to resign its responsibilities so that the shareholders could appoint a new Board of Directors.

The Milan Court – Prevention Court Independent Section rejected the request that the administration order be extended to all sectors of the Company and confirmed that the administration and management of the Company remain the domain of the Board of Directors while, at the same time, it extended the powers already given to the Court-appointed Administrator to cover the legality and compliance safeguards of the entire Company.

The Company continues to collaborate fully and assiduously with the Court-appointed Administrator in order that the administration order be removed as early as possible.

Impairment charges were taken for some of the Italian exhibition trademarks and publishing titles and the aforementioned sale of Worldex and the lower results of the Brazilian and South African subsidiaries also led to impairment charges.

However, the improvement in the reference economic environment was confirmed by the exhibitions held in Italy in the first part of the current financial year, which provided encouraging signals in terms of visitors.

We believe that in coming financial periods the Company will reap the benefits of an improved exhibition calendar, returns on the efforts made to strengthen the exhibition portfolio and the results of the restructuring measures.

The Chairperson

Roberto Rettani

History of the Group

1920

On 12 September, the Fiera Campionaria Internazionale inaugurated the new Fiera Milano exhibition site that had been rebuilt following its destruction during the World War II.

1997

The Portello site was extended with the opening of three new large pavilions that increased the available exhibition space by 74,000 square metres gross, giving a total of over 348,000 square metres of space.

2002

and internet services.

In December, Fiera Milano SpA was listed on the Italian stock market. Fiera Milano increased its range of activities through the acquisition of some important exhibition organisers and enhanced its offering in stand-fitting services, catering, trade publications

In February, Ente Autonomo Fiera Internazionale di Milano, a private foundation, was constituted. In October, the Foundation passed to Fiera Milano SpA management of the exhibition sites, the organisation of exhibitions and supply of exhibition services and the congress activities.

2008

An intense internationalisation process was started with the signature of a joint venture with Deutsche Messe, the owner of the Hannover exhibition site, covering regions outside Europe.

2011

MiCo – Milano Congressi opened: this is the largest and most modern congress centre in Europe with capacity for 18,000 delegates. It is managed by Fiera Milano Congressi and was built by Fondazione Fiera Milano through the conversion of part of the fieramilanocity

exhibition site.

On 31 March, the new Fiera Milano exhibition complex on the outskirts of Milan was inaugurated; the site has 345,000 square metres of exhibition space. Some of the pavilions of the downtown site continued in use.

2015

The World Expo 2015 was held in Milan with great success. Fiera Milano was the Official Partner for Operations. Fiera Milano Group provided stand-fitting, logistics, and structure management services to the company Expo 2015 and to several of the countries participating in the event.

Fiera Milano successfully concluded a paid share capital increase with 95.6% of the shares offered subscribed for a total value of Euro 66.8 million. 2016 was dedicated to customer satisfaction through improvements to the quality of services offered. Moreover, the Company strengthened the exhibition calendar. The results will be visible in 2017 with the launch of eight new events (including Tempo di Libri, Lamiera and Expo Ferroviaria).

Group structure

Key Group values Gruppo

Ethics

Integrity, transparency, impartiality and correctness in executing its business and in all relationships of whatever type or nature.

Innovation

A search for innovative and original solutions, finding new potential approaches to any situation or problem and conceiving/ generating original ideas.

Maximum focus on clients (organisers, exhibitors, visitors) ensuring a range of quality services that meet their needs and expectations.

Make the best possible use of the assets managed

Continuous monitoring and timely intervention for the most effective use of the exhibition facilities, to provide the most efficient services, and to offer clients areas that are not merely functional and secure but are also welcoming and aesthetically pleasing.

Professionalism

The Company offers a combination of skills, attention to detail, responsibility, diligence, conscientiousness and exceptional preparation in all its business activities.

Collaboration

Sharing of information and knowledge to enhance value and to validate professional identity while overcoming organisational restrictions.

Sustainability

Generate value for the region, support the community and businesses and identify synergies that help protect the environment.

An explicit undertaking to spread and reinforce safety in the workplace and the awareness of potential risks by using all the resources necessary for guaranteeing the health and safety of all those who work with Fiera Milano.1920

CLIENT SATISFACTION of the assets managed ETHICS innovation PROFESSIONALISM COLLABORATION make the best possible use SUSTAINABILITY SAFETY

1920

2016

companies in this sector

Corporate bodies and independent auditor

BOARD OF DIRECTORS

Roberto Rettani Chairperson(1)
Attilio Fontana Deputy Vice Chairperson(2, 3)
Licia Ronzulli Vice Chairperson(2, 3)
Corrado Peraboni Chief Executive Officer(4)
Joyce Victoria Bigio Director(2,3)
Renato Borghi Director(3, 5)
Pier Andrea Chevallard Director(2, 3, 6)
Romeo Robiglio Director
Vincenza Patrizia Rutigliano Director(2, 3)

(1) Chairperson vested with the responsibility for the ordinary management of the Company since 13 January 2017.

  • (2) Independent Director under the Self-regulatory Code of Borsa Italiana.
  • (3) Independent Director under Article 148, paragraph 3 of Legislative Decree no. 58 of 24 February 1998.
  • (4) Chief Executive Officer until 13 January 2017.
  • (5) Member of the Control and Risk Committee until 17 February 2017.
  • (6) Chairperson and member of the Supervisory Body under Legislative Decree 231/01 until 28 October 2016.

CONTROL AND RISK COMMITTEE

Joyce Victoria Bigio Vincenza Patrizia Rutigliano

REMUNERATION COMMITTEE

Attilio Fontana Romeo Robiglio Licia Ronzulli

BOARD OF STATUTORY AUDITORS

Federica Palmira Nolli Chairperson Antonio Guastoni Statutory Auditor Carmine Pallino Statutory Auditor Francesca Maria D'Alessandro Substitute Auditor Alessandro Carlo Galli Substitute Auditor

SUPERVISORY BOARD under Legislative decree 231/01

Ugo Lecis Federica Palmira Nolli Andrea Pizzoli

MANAGER RESPONSIBLE FOR PREPARING THE COMPANY'S FINANCIAL STATEMENTS UNDER LAW 262/2005

***

Sebastiano Carbone

The Board of Directors and the Board of Statutory Auditors were appointed by the Shareholders' Meeting of 29 April 2015 and their mandates were due to expire at the Shareholders' Meeting to approve the Financial Statements at 31 December 2017.

On 13 January 2017, the majority of Directors on the Board of Directors resigned their responsibilities with effect from the date of the Shareholders' Meeting to approve the Financial Statements at 31 December 2016 causing the dissolution of the whole Board of Directors.

The Board of Directors is invested with the widest powers for the ordinary and extraordinary management of the Company, except for those which, pursuant to law, are reserved for the Shareholders' Meeting.

In addition to legal representation and to the responsibilities under the law and in the Company Articles of Association, the Chairperson has, in agreement with the Chief Executive Officer, exercised the following prerogatives: relations with shareholders, national and international institutional relations, internationalisation activities, new strategic initiatives, coordination of the work of the Board of Directors for the appointment of new Directors and verification that decisions taken by the Board of Directors are implemented, as well as supervision of the internal audit activities.

On 13 January 2017, the Board of Directors gave the authority for the ordinary management of the Company to the Chairperson and on 19 January 2017: i) defined in greater detail the powers for the ordinary management of the Company: ii) gave the responsibility of overseeing the internal audit department to the Chairperson of the Control and Risk Committee, the Director Ms Joyce Victoria Bigio and iii) left the role of "Director responsible for the internal audit and risk management system" under Article 7 of the Self-Regulatory Code in the hands of the Chairperson. Following these attributions of responsibilities for the ordinary management of the Company, the Chairperson could no longer be considered independent under the requirements of the Self-regulatory Code of Borsa Italiana or under Article 148, paragraph 3 of Legislative Decree no. 58 of 24 February 1998.

At his appointment on 29 April 2015, the Chief Executive Officer, Mr Corrado Peraboni, was invested with all the powers for the ordinary and extraordinary management of the Company, except for those that are reserved exclusively for the Board of Directors.

On 13 January 2017, the Chief Executive Officer resigned his responsibilities.

INDEPENDENT AUDITOR

EY SpA

The mandate, given by the Shareholders' Meeting of 29 April 2014, is for the financial years 2014-2022.

Notice of convocation of the Extraordinary Shareholders' Meeting and the Ordinary Shareholders' Meeting

FIERA MILANO S.p.A. Registered office in Milan, Piazzale Carlo Magno, 1 Operational and administrative headquarters in Rho (MI), Strada Statale del Sempione, 28 Share capital Euro 42,445,141.00 fully paid-up Milan Company Register, Tax code and VAT number 13194800150

  • Notice of convocation of the Extraordinary Shareholders' Meeting and the Ordinary Shareholders' Meeting
  • Extraordinary and Ordinary meetings of shareholders of Fiera Milano SpA are both convened once in Rho (Milan), in the Auditorium of the Centro Servizi of the Exhibition Site, Strada Statale del Sempione 28, (reserved parking available on entering from Porta Sud), on 21 April 2017 at 14.30 hours to approve the following

Agenda

Extraordinary section

Proposed amendments to Articles 13,14,15,16,17,18 and 20 of the Articles of Association requested by the shareholder Fondazione Fiera Milano under Articles 2367 of the Italian Civil Code and 125-ter of Legislative Decree of 24 February 1998 no. 58. Resolutions pertaining thereto and resulting therefrom. 1

Ordinary section

  • The Financial Statements at 31 December 2016, the Board of Directors' Management Report, the Report of the Board of Statutory Auditors, and the Report of the Independent Auditors. Resolutions pertaining thereto and resulting therefrom. Presentation of the Consolidated Financial Statements at 31 December 2016. 1
  • The appointment of the Board of Directors and of its Chairperson following prior decisions on the length of their mandates, the number of members of the Board of Directors and their remuneration. Resolutions pertaining thereto and resulting therefrom 2
  • The Report on Remuneration pursuant to Article 123-ter of Legislative Decree 58/98. Resolutions pertaining thereto and resulting therefrom. 3
  • Authority to acquire and dispose of treasury shares under Articles 2357 and 2357-ter of the Italian Civil Code following prior cancellation of the authority granted by the Shareholders' Meeting of 28 April 2016. Resolutions pertaining thereto and resulting therefrom. 4

The issued and fully paid-up share capital is Euro 42,445,141.00 (forty-two million four hundred and forty-five thousand one hundred and forty-one) made up of no. 71,917,829 (seventy-one million nine hundred and seventeen thousand eight hundred and twenty-nine) registered shares with no nominal value. The shares are indivisible and each carries one voting right except for treasury shares held either directly or indirectly, which do not have this right. At today's date, the Company holds directly no. 939,018 treasury shares, equal to 1.31% of the share capital.

Additions to the Agenda and tabling of new resolutions.

Shareholders who collectively represent at least onefortieth of the Company's share capital may also request, in writing, additions to the agenda of the meeting within ten days of publication of this notice in accordance with Article 126-bis of Legislative Decree 58/1998 (the "Consolidated Finance Act") and Article 10.3 of the Articles of Association specifying in the request the additional topics they wish to discuss or any proposals for additional discussions on items already on the Agenda. Any such request must be sent, together with certification of ownership of the shares, by registered delivery, with proof of receipt, to the operational and administrative offices of the Company in Rho (Milan), Strada Statale del Sempione 28 (Investor Relations Department) or by e-mail to the e-mail address [email protected]. Within the same time limit and in the same way a report which gives the reasons for the request for additional topics to be deliberated or for additional discussions of items already on the Agenda must be delivered to the Board of Directors of the Company. Requests for additions to the Agenda are not permitted if they concern topics that the Shareholders' Meeting has been asked to approve by the Directors under applicable law or pertain to a plan or report prepared by the Directors.

Legitimate attendance at the Shareholders' Meeting.

Legitimate attendance at the Shareholders' Meeting and the exercise of the right to vote must be proved by a communication to the Company from an intermediary that agrees with the latter's accounting records on behalf of the person having the right to vote on the basis of evidence of possession of the shares at the end of the accounting day on the seventh trading day preceding the date set for the Shareholders' Meeting (i.e. by 10 April 2017); credit or debit registrations to the share account after this time will not be considered for the legitimate exercise of voting rights at the Shareholders' Meeting. Those who appear as shareholders of the Company after this date are not permitted to attend or vote in the Shareholders' Meeting. The aforementioned communication from the intermediary much reach the Company by the end of the third stock market trading day prior to the date set for the Shareholders' Meeting (i.e. by 18 April 2017). Those persons whose communication arrives at the Company after this date, as long as it arrives before the start of the Shareholders' Meeting that has been convened, may still legitimately attend and vote at the Meeting.

Proxy attendance at the Shareholders' Meeting.

Any person who may legitimately attend the Shareholders' Meeting may be represented by a written proxy according to the provisions of enacted law if the person who may legitimately vote signs the proxy form that is available on the Company website www. fieramilano.it (under Investor Relations/Corporate Governance/Shareholders' Meeting). Notification of the proxy may be made by sending the form to the operational and administrative headquarters of the Company in Rho (Milan), Strada Statale del Sempione 28 (Investor Relations Department) or to the e-mail address investor.relations@fieramilano. it. Proxies attending the Shareholders' Meeting on behalf of shareholders must demonstrate, assuming full responsibility, that they are the person delegated in the original notification and have a proxy form that is identical to the original notification.

The proxy may also be freely given, with instructions on how to vote, to Computershare S.p.A., which has been delegated for this purpose by the Company, in accordance with Article135-undecies of the Consolidated Finance Act, by signing the proxy form available from 10 March 2017, the date the Notice of the Shareholders' Meeting is published, on the Company website www.fieramilano.it (under Investor Relations/ Corporate Governance/Shareholders' Meetings) on condition that the original is received by Computershare S.p.A. at its registered office in via Lorenzo Mascheroni 19, 20145 Milan, and by sending in advance a fax to +39-02-46776850 declaring that the proxy corresponds

to the original notification or by sending it as an e-mail attachment to the e-mail address ufficiomilano@ pecserviziotitoli.it by the end of the second stock market trading day preceding the date of the Shareholders' Meeting (i.e. by 19 April 2017). Proxies given in this manner may only be used for proposals where voting instructions have also been given. The proxy and the voting instructions may be retracted within the same time period above (i.e. by 19 April 2017).

Right to table questions regarding items on the Agenda.

Shareholders may table questions regarding the items on the agenda of the Shareholders' Meeting before the Meeting in accordance with Article 127 ter of the Consolidated Finance Act; these must be sent by registered delivery, with proof of receipt, to the operational and administrative offices of the Company in Rho (Milan), Strada Statale del Sempione 28 (Investor Relations Department) or by e-mail to the e-mail address [email protected]. Questions received by the third day preceding the date of the only convocation of the Shareholders' Meeting (i.e. by 18 April 2017) will be answered, at the latest, during the Shareholders' Meeting and the Company reserves the right to give a single answer to questions covering the same item.

Item two on the Agenda of the Ordinary Shareholder' Meeting, it should be remembered that, in accordance with Article 14 of the Articles of Association, appointment of members of the Board of Directors takes place based on lists presented by shareholders who, alone or with other shareholders, represent at least 2.5% of the share capital with voting rights in Ordinary Shareholders' Meetings. Shareholders must deposit the lists of candidates for Directors at the Company's registered office or, preferably, at the reception desk of the administrative and operational headquarters of the Company in Rho (Milan), S.S. del Sempione 28, by the twenty-fifth day prior to the date fixed for the only convocation of the Shareholders' Meeting (i.e. by 27 March 2017); all lists of candidates to be Directors must be accompanied by information on the identities of the shareholders presenting the list and the percentage of shares held by these shareholders, as well as the necessary certification of ownership of the shares released by authorised intermediaries in accordance with law.

Certification of ownership of the shares at the date on which the lists are deposited may be provided at a later date as long as it is provided by the twenty-first day preceding the date for the only convocation of the Shareholders' Meeting (i.e. by 31 March 2017).

At least twenty-five days prior to the date fixed for the only convocation of the Shareholders' Meeting, detailed information must be provided on the professional and personal qualifications of the candidates, including a list of the administrative and control positions held by each candidate in other companies (that must updated and communicated

to the Company should any changes occur prior to the date of the Shareholders' Meeting), and statements given by individual candidates, of their own responsibility, that no reason exists to make their candidacy ineligible or incompatible and that they meet the requisites for taking office laid down by current regulations, including a declaration that they meet the necessary independence from the Company in accordance with the requirements for independence under the enacted Self-regulatory Code of listed companies. Lists of candidates for the administrative bodies that fail to comply with the relative legal requirements shall not be recognised as having been presented.

Documentation and Information.

In accordance with enacted law, the documentation relating to items on the Agenda will be deposited at the registered office of the Company and at its operational and administrative offices in Rho (Milan), Strada Statale del Sempione 28, Centro Servizi, Office Reception, on the Company website www.fieramilano. it under Investor Relations/Corporate Governance/ Shareholders' Meetings, and on the website www. emarketstorage.com managed by Spafid Connect S.p.A. as required by law. Shareholders may obtain copies of all the aforementioned documentation.

Rho (Milan), 10 March 2017

The Chairperson of the Board of Directors

Roberto Rettani

(Notice published in the daily newspaper Avvenire on 11 March 2017)

Board of Directors' Management Report

S umm
ary of results and significant
events during the year
24
Macroeconomic and reference sector
background
30
E conomic and financial performance
for the year ended 31 Decemb
er 2016
35
Business performance by operating
segment and by geographic area
40
F iera Milano Group personnel 50
E nvironment 53
R isk factors affecting
Fiera Milano Group
55
N on-financial disclosure 63
S ignificant events after the end
of the reporting period
64
Business outlook and assessment
of the Company as a going concern
65
E conomic and financial performance
of Fiera Milano SpA
66
F
iera Milano SpA personnel
70
O
ther information
E
quity investments held by members
of the Administrative and Control Bodies,
General Managers and Executives
with strategic responsibilities
74
R
eport on Corporate Governance
and Ownership Structure
at 31 Decemb
er 2016
75
P
roposals for the Ordinary
Meeting of Shareholders
(Report under Article 125-ter,
paragraph 1 of Legislative Decree
of 24 February 1998 no. 58
and subsequent amendments)
110

Summary of results and significant events during the year

In the context of an economy with continued moderate growth, the 2016 results reflect an unfavourable exhibition calendar due to the absence of some multi-annual exhibitions and some important proprietary biennial exhibitions. When the figures are compared with those of the previous financial year, which included some activities linked to Expo 2015, both revenues and margins in 2016 demonstrate the full impact of these circumstances.

During the financial year under review, there were significant reductions in operating costs from the restructuring commenced in 2015 and from savings from the new rental contract for the exhibition site.

In Italy, as part of the strategy to strengthen the portfolio of directly organised exhibitions, several exhibition trademarks were acquired and important partnership agreements signed to strengthen existing exhibitions or to launch new ones. During the financial year under review, in order to expand the portfolio of exhibitions, the Company signed agreements with third-party organisers for the transfer of several exhibitions to the Fiera Milano exhibition sites starting as early as 2017.

The outlook of lower growth required the recognition of significant impairment losses for intangible assets, in particular, for exhibition trademarks and publications in Italy and for goodwill and exhibition trademarks in foreign companies.

The Group is carrying out a strategic repositioning of its business outside Italy, which is based on a primary focus on product while investments in corporate assets have become of secondary importance.

When reading these figures it should be remembered that the exhibition business is seasonal due to the existence of exhibitions that have a biennial and multi-annual frequency. This makes a comparison between financial years more difficult. It should be noted that there were no atypical and/or unusual transactions or significant events and non-recurring transactions during the financial year under review. Details and information on related-party transactions are given in the Explanatory and Supplementary Notes to the Accounts.

Fiera Milano Group Summary of key figures

(Amounts in €'000) Full year
31.12.2016
Full year
31.12.2015
restated
Full year
31.12.2014
restated
Revenues from sales and services 221,041 335,172 240,067
Gross operating result(a) 3,652 43,538 (147)
Net operating result (EBIT) (22,994) 13,397 (18,620)
Net profit/(loss) from continuing operations (18,674) 3,903 (18,753)
Net profit/(loss) from discontinued operations (4,176) (3,474) (353)
Net profit/(loss) (22,850) 429 (19,106)
– Attributable to the shareholders of the controlling entity (22,794) 1,014 (18,955)
– Attributable to non-controlling interests (56) (585) (151)
Cash flow of the Group and non-controlling interests(b) 3,796 30,570 (633)
Net capital employed(c) 99,995 97,694 141,355
covered by:
Equity attributable to the Group 61,006 84,572 17,034
Equity attributable to non-controlling interests 673 696 2,654
Net financial debt/(cash) continuing operations and assets held
for sale
38,316 12,426 121,667
Investments (continuing operations and assets held for sale) 7,387 7,817 8,515
Employees (no. of permanent employees at year end) 725 783 807

(a) Gross operating profit is the operating result before depreciation and amortisation, adjustments to asset values and other provisions.

(b) Cash flow is the net result for the financial year, plus depreciation and amortisation, provisions and adjustments to asset values.

(c) Net capital employed is non-current assets, non-current liabilities and net working capital.

Some of the 2014 and 2015 figures have been restated for comparative purposes to reflect the accounting of the Chinese companies, Worldex and Haikou Worldex, under IFRS 5, following the divestment of the subsidiary Interteks on 27 July 2015, and for the different classification of the use of risk provisions in FY2014.

New initiatives and measures taken to optimise the exhibition portfolio

On 23 March 2016, the Parent Company acquired for € 1.400 million the trademark of the exhibition, Promotion Trade Exhibition (PTE), an annual international exhibition for promotional articles, business gifts and technologies for the personalisation of these items. The acquisition strengthens the portfolio of proprietary exhibitions, which is one of the strategic aims of the Company. This exhibition, already held in the Fiera Milano exhibition site but previously organised by a third-party, will now be directly organised by Fiera Milano SpA. The exhibition will be included in the Lifestyle division and, in the medium-term, will be held alongside HOMI. On 6 May 2016, Fiera Milano and Veronafiere signed an agreement for a single annual international fair dedicated to the fruit and vegetable sector that unites Fruit Innovation held in Milan and Fruit&Veg System held in Verona; the new exhibition will be held in even-numbered years in Verona, when the emphasis will be on upstream activities and technology used in agriculture, and in uneven-numbered years in Milan when the emphasis will be on finished products. The first edition of the fruit and vegetable exhibition, Fruit&Veg Innovation, will be held in Milan from 8-11 May 2017 in conjunction with Tuttofood. The exhibition completes the offer in the emerging sector of organic and vegan produce that is already widely available in Milan. The agreement between Fiera Milano SpA and Veronafiere, governed by a non-compete agreement, also includes an event to be organised by Veronafiere called "Wine Discovery".

Also as part of the strategy to strengthen the portfolio of directly organised exhibitions, on 5 September 2016, Fiera Milano SpA and Ediser Srl, a service company belonging to the Associazione Italiana Editori (AIE), set up a company called La Fabbrica del Libro SpA. The two companies hold respectively 51% and 49% of the shares of the new company. This partnership will develop activities connected to book publishing, also through the organisation of fairs throughout Italy, focusing on all forms of publishing. The first event, Tempo di Libri, will be held in Milan from 19-23 April 2017. It will involve editors, authors, librarians, bookshops, students and readers in a major event combining tradition with innovation.

On 27 September 2016, the exhibition trademark NF – Travel & Technology Event was acquired. In 2017 it will be integrated into the proprietary exhibition BIT as part of a content development project structured around professional conferences and seminars.

Restructuring activities abroad

On 4 November 2016, the Board of Directors of the Company approved the sale of the 75% shareholding in the Chinese subsidiary Worldex Fiera Milano Exhibitions Co., Ltd, to Singex Exhibitions Pte Ltd. The transaction was subject to the approval of the management of the latter. This sale is part of the Group strategy to concentrate its Chinese activities in the joint venture with its German partner Deutsche Messe. In accordance with IFRS 5, from 2016 the net assets of Worldex held for sale have been reclassified under discontinued operations and recognised at fair value. This had a negative impact of Euro 4.176 million on the results of discontinued operations that derived from the difference between the accounting value of the assets held for sale and the selling price of the same assets. The contract for the sale was signed on 22 February 2017. Details are given in the section on Significant events after the end of the reporting period.

Administration orders

With an order issued on 23 June 2016 and deposited on 24 June 2016, the Milan Court – Prevention Court Independent Section in the persons of the judges Mr Fabio Roia, Ms Veronica Tallarida and Mr Ilario Pontani meeting in camera issued, under Article 34 of the Legislative Decree of 6 September 2011 no. 159 pertaining to the "anti-mafia laws and prevention measures, including new provisions covering anti-mafia documentation in accordance with Articles 1 and 2 of Legislative Decree of 13 August 2010 no. 136", an Administration order for Nolostand SpA for a period of six months and appointed as authorised magistrates for the case Mr Fabio Roia and Ms Veronica Tallarida and, as Court-appointed Administrator, Mr Piero Antonio Capitini.

On 6 July 2016, the Milan Tax Squad notified Nolostand SpA of the aforementioned administration order. Under the law, the aim of the order is to protect the assets of Nolostand SpA from any potential infiltration and/or collusion.

Under the provisions of the administration order, the Court-appointed Administrator will ensure his/ her presence in the company and maintain regular contact with the directors of the company, with management and with the head of internal audit, and monitor and approve any changes in personnel, issue authorisations for contract terminations and the stipulation of new contracts with suppliers, oversee payments to suppliers and verify the service supplied by contractors while requiring the Sole Director of the company to implement initiatives aimed at counteracting any potential infiltration.

With an order issued on 28 September 2016 and deposited on 11 October 2016, the Milan Court – Prevention Court Independent Section in the persons of the judges Mr Fabio Roia, Ms Veronica Tallarida and Mr Ilario Pontani meeting in camera issued, under Article 34 of the Legislative Decree 159/2011, an Administration order for Fiera Milano SpA for a period of six months limited to the business area linked to Nolostand, since there was only evidence of criminal infiltrations in the sector delegated to the subsidiary and involving the exhibition stand-fitting business division.

The same order appointed:

  • as case-specific authorised magistrates, Mr Fabio Roia and Ms Veronica Tallarida;
  • as Court-appointed Administrator, Mr Piero Antonio Capitini;
  • as the Company defence counsel, Mr Angelo Giarda and Mr Enrico Giarda.

Under the provisions of the administration order, the Court-appointed Administrator will be present in the company and maintain regular contact with the Directors of the Company, with management and with the head of internal audit, and monitor and approve any changes in personnel, issue authorisations for contract terminations and the stipulation of new contracts with suppliers, oversee payments to suppliers and verify the service supplied by contractors while supporting the Board of Directors of the Company to implement initiatives aimed at counteracting any potential infiltration.

The two administration orders were both for six months but were extendable for a further six months. At the hearing of 22 November 2016, the Milan Court ordered that the Administration orders for Fiera Milano SpA and Nolostand SpA be unified as the matters under both were closely connected. On 20 December 2016, having heard the Court-appointed Administrator, the Milan Court extended the administration order for Nolostand SpA for a further six months.

Therefore, the unified administration order will expire on 6 July 2017 unless the Milan Court decrees otherwise. Lastly, on 27 January 2017, the Court, without prejudice to the existing procedures under the administration order, extended the order to all corporate activities regarding just the following areas/authorities of Fiera Milano SpA:

  • approval of operating procedures to safeguard the legality of administrative actions and the monitoring of actions taken by the Company to increase the efficacy of these legal safeguards;
  • to approve, in particular as far as concerns the means and timing of contract renewals, the operating procedures for the procurement of goods and services;
  • to monitor the efficacy and timeliness with which the measures are implemented by the Company, also through the use of external consultants, to ensure the legal safeguards for administrative actions during the period of the administration order;
  • quantitative and qualitative upgrading of the internal audit structure and verification of the timely implementation of the upgrades;
  • to revise the audit plan and supervise the related activity;
  • to revise the corporate responsibility structure exclusively for procurement and compliance, including reviewing the necessary requirements of professionalism and introducing any eventual rules governing rotation/replacement;
  • appointment and removal of the head of the compliance department, deciding the relative responsibilities also regarding checks on the reputations of suppliers of goods and services, and regarding the procedures governing whistleblowing.

Giving these additional specific powers to the Court-appointed Administrator is intended to support the company administration but also confirms that the administration and management of the Company remain the domain of the Board of Directors. Therefore, Fiera Milano SpA and its subsidiary Nolostand SpA continue to operate normally

carrying out their normal business under the control and oversight of the Court-appointed Administrator and, at the same time, the Board of Directors retains unchanged the authority vested in it. Fiera Milano Group is collaborating fully with the Court-appointed Administrator in order to ensure business continuity. Following receipt of the aforementioned administration orders, the Parent Company and Nolostand SpA implemented a series of initiatives to break with the past and revise, enhance and introduce new rules, based on new operational models and methodologies, to improve business management. Furthermore, the employees of Nolostand SpA and Fiera Milano SpA mentioned in the investigation documents of the Milan Public Prosecutor have been suspended and/or dismissed.

Provisions of Euro 1.390 million were made to the risk and costs provision in the Consolidated Financial Statements for risks associated with the above events; these are estimates of the probable liabilities linked to legal actions following on the measures taken.

The Group has undertaken, with the support of leading consultancy firms, an intense activity aimed at strengthening the legal safeguards in the procurement department and has adopted a procedure (that includes reputational checks and checks on the corporate structures) of Group suppliers. All the steps taken aim to avoid any further episodes of criminal infiltrations in the future. The events have provided an opportunity to improve corporate procedures in order that this episode concludes with the Group possessing a reference framework in line with current best practice.

The main features of the projects underway are expected to be finalised within the timeframe of the administration orders.

From an operational viewpoint, although there has been some difficulty and delay caused by logistical problems to replace the suppliers that were the cause of the administration orders, the stand-fitting business has continued and exhibitions have been held, which points to a positive future trend for the stand-fitting business division.

As regards the legal proceedings against the representatives of the supplier, the Parent Company Fiera Milano SpA and Nolostand SpA requested that they be allowed as victims and injured parties to bring a civil action against these persons. On 3 February 2017, all the accused were sentenced to the penalties imposed by the fair ruling of the court and to the payment of reparations for material and non-material damages arising from the civil action brought by Fiera Milano SpA and Nolostand SpA, to be settled by a separate civil judgement. Moreover, with reference to the aforementioned preventative measures, at the current time no risks linked to the application of Legislative Decree 231/2001 have been found.

At present, on the basis of available information and an evaluation carried out of the known risks when preparing these Financial Statements and, while recognising that elements of uncertainty exist given the ongoing administration orders and the procedural reorganisation currently underway, it is not felt that the administration orders have a significant impact on the ongoing business of the Fiera Milano Group. However, it cannot be excluded that the progress of the investigation and further analysis of the events that gave rise to the administration order could affect the capital and financial situation of the Group in the future.

Other information

On 14 June 2016, Fiera Milano SpA, as part of a move to strengthen its capital, decided to convert into shares the credit it held as a result of a Euro 2.893 million loan given to Eurofairs International Consultoria Participações Ltda.

On 22 July 2016, Fiera Milano SpA waived the Euro 0.706 million credit from the financing given to Fiera Milano Exhibitions Africa thereby strengthening the capital of the latter company.

On 30 June 2016, Fiera Milano SpA waived the loan of Euro 0.560 million given to Limited Liability Company Fiera Milano thereby strengthening the capital of the latter company.

On 24 June 2016, Fiera Milano SpA announced the start of a buyback of shares using the authority given to it by the Ordinary Shareholders' Meeting of 28 April 2016. The buyback was aimed at increasing the portfolio of treasury shares in support of the 2017-2023 Stock Option Plan and to be used to stabilise the share price. At 31 December 2016, the Company had bought back 294,010 treasury shares at an average price of Euro 1.58 per share for a total value of Euro 0.464 million. At 31 December, the Company held, directly and indirectly, 939,018 treasury shares, equivalent to 1.31% of the share capital.

Macroeconomic and reference sector background

Macroeconomic trends

There were unexpected outcomes to some of the elections held in 2016 which gave rise to a deep sense of uncertainty. The British Prime Minister declared that Great Britain would leave the European Union abandoning both the single market and the customs union: Great Britain intends to negotiate a free trade agreement with the EU and sign independent agreements with other countries "to remove as many barriers and obstacles as possible".

World trade; annual % change

To the political and economic uncertainties were added those caused by instability in the Middle East and terrorism threats that impacted travel and perceptions of safety. The first measures of the Trump government (a bar on entry to the US by the citizens of some Middle East countries, withdrawal from the Trans-Pacific Partnership) appear to confirm the promises made during his electoral campaign.

Alongside these circumstances, and in some ways influenced by them, is the economic crisis which continues to pose a threat on all levels – global, continental and domestic.

The global economy strongly affects the performance of the Italian economy: Italy is the ninth largest exporter in the world and has a 3.1% market share of global commerce. The Italian manufacturing system appears to have shrunk under the global crisis; between 2008 and 2016, the number of manufacturing companies declined by almost 90,000 due to a negative balance of payments in each of these years. However, the Centro Studi Confindustria, states that industrial production has increased since the last quarter of 2014.

Manufacturing activity – percentage change compared to the previous financial year

According to the Centro Studi Confindustria, Italian exports are once again on the increase; following an increase of 1.4% in constant prices in 2016, they are forecast to grow 2.4% in 2017 and 2.7% in 2018.

Percentage change in exports of goods and services

The exhibition sector

In 2015 the exhibition sector rose slightly: +1.7% in 2015 compared to 4.2% in 2014. The cause of the lower growth was the weak performance of some mature markets but also the decrease in markets such as Russia and Brazil and the stagnation in the Turkish market – namely, emerging markets that have promising growth prospects. The emerging markets were no longer the leading countries for acquisitions: transactions over the last five years peaked in the fourth quarter of 2016 (22) but many of these were in the United Kingdom and, in particular, in the United States where significant businesses owned by private equity funds were sold to exhibition organisers(1).

(1) Steve Monnington, Exhibition World 4-2016.

The Italian exhibition sector is the fourth largest globally and the second in Europe behind Germany in terms of square metres of space sold and many Italian exhibitions are global leaders in their sector. However, the Italian sector suffers from excess capacity – exhibition sites – and fierce international competition, which will probably mean that smaller sites will continue to exit the market. Digital investments remain limited and the revenues of exhibition organisers continue to be generated almost entirely from the sale of exhibition space.

The preliminary 2015 data for Italian exhibitions reveal that 2015 was a year of stability even though 2015, as an uneven-numbered year, should typically have been a year with a lower number of annual events in Italy. The results will certainly have benefited from the fact that several itinerant multi-annual events were held in 2015, for example, Expo 2015 in Milan, which encouraged other exhibitions to be held at the same time and which doubtless had considerable resonance at an international level. The amount of exhibition space and the total number of exhibitors, as well as the number of visitors, remain unchanged year-on-year. This is evidence that exhibitions are still of interest despite a decline in the budgets of those using exhibitions as a marketing tool. It is worth noting the growth in foreign exhibitors in 2015 compared to 2014 and the higher quota of foreign visitors in the unchanged figure for total visitors. The strong growth in foreign visitors largely reflects the presence of the multi-annual events.

Preliminary figures for 2016 are not yet available but early indications(2) point to a recovery in the market: all the figures from the members of CFI (Comitato Fiere Industria) on exhibitions organised in 2016 compared with the previous editions of the same exhibitions are positive: exhibition space sold is +2.7%, exhibitors are +6.5% and visitors +1.4%. There was also a noteworthy increase in Italian exhibitors: their numbers grew 7% compared to growth of 5.4% for foreign exhibitors. International exhibitions continue to be of interest to foreign visitors with their numbers increasing 4.7% compared to an unchanged figure for domestic visitors.

Dynamics such as protectionism, uncertainty, and movements in exchange rates all affect exports and the inclination of companies to participate in exhibitions, although it is difficult to estimate to what extent. Growth in the global economy stems from the free movement of goods, capital and people and the exhibition sector has made an important contribution to global growth by offering a platform for the international exchange of goods. The macroeconomic environment will influence the decisions of exhibitors and visitors but so will the strategies pursued by exhibition organisers: for example, there is an opportunity for exhibition organisers who reduce their dependence on the physical presence of international exhibitors and visitors who are more focused on their home continent. Other trends will affect the sector: digitalisation as a means of fostering collaboration among those with different competences, and the need to train and retain key personnel.

Square metres rented out at international exhibitions

Source: Studi e Strategie Fondazione Fiera Milano using CERMES, AUMA, AMR, AFE, and OJS data. 2016 figures are estimates

(2) CFI, preliminary analyses.

In 2015, Germany had a year-on-year decline in exhibition space rented out but in 2016 registered a peak with 7.5 million square metres of rented exhibition space, which exceeded the figure for 2012. This was, in part, due to an increase in annual exhibitions but also to the presence of large triennial and quadrennial exhibitions. Overall, the results for France were stable but two opposing trends were evident: an increase in the B2B sector and a significant decrease in foires, trade fairs, which make an important contribution to total exhibition space rented out in France.

The congress sector

2015 data for the sector of itinerant international congresses gathered by ICCA (International Congress and Convention Association) show little change or a decrease in the number of events. This was due, in part, to the fact that by its nature this is an international sector and is, therefore, influenced to a greater degree by volatility in international markets and worries concerning security and the risk of terrorist attacks. Moreover, competition among the different destinations, which until recently was not very significant, is growing, particularly among the most favoured destinations. Lastly, ICCA derives its data from just one part of the congress sector, which is of great importance, but does not monitor some of the new emerging trends, for example, events that do not rotate among different countries. Final figures for 2016 are not yet available but preliminary figures indicate a more or less stable trend since the sector is not impacted by the volatility of other types of gatherings such as corporate events.

Number of itinerant international congresses – ICCA

Source: Studi e Strategie Fondazione Fiera Milano using ICCA data. 2016 figures are estimates

A more detailed picture of the Italian congress market is provided by the report from the Osservatorio Italiano dei Congressi e degli Eventi, sponsored by Federcongressi & Eventi and compiled by the Alta Scuola di Economia e Relazioni Internazionali (ASERI) of the Università Cattolica in Milan: this monitors all types of congresses and events organised in Italy (congresses, conventions, promotions, product launches and meetings of any type organised by associations, companies, political parties, trade unions and entities of all kinds).

In 2015, approximately 392,000 events were held in Italy in which 26,000,000 people participated; the average duration of these events was 1.4 days and the average number of attendees at each event was ninety-two. 35% of the events in Italy were organised by associations, 55% by companies, and 10% by institutions. An analysis of the geographic distribution of these events shows that the majority were held in Northern Italy (56%) and involved 59% of attendees. Congress centres had the highest average occupancy of locations available for

these events (144) and events held in congress centres had the highest average duration (1.4 days per event); 53.1% of these events (excluding cultural and other events) were organised by associations and 18.5% by institutions. Moreover, the analyses show a significant presence at international events (13%) which cover an average of 198 days per annum.

The outlook

UFI, the Global Association of the Exhibition Industry, has published the eighteenth edition of the Global Exhibition Barometer(3), a survey carried out in January 2017 of exhibition sites, exhibition organisers and service providers in all continents to assess the health of the sector. The outlook for the global exhibition sector is positive. In the Americas, 81% of interviewees said that revenues were growing: optimism is strongest in Mexico and the United States while in South America the situation is more varied with Brazil showing good recovery following a second semester of 2016 when revenues declined; in other countries, the majority of those interviewed are forecasting a decrease in revenues. Europe, after years of ups and downs, is showing a positive trend and 78% of those interviewed expect revenues to increase in 2017. In Italy the outlook for the first semester is in line with those for Europe as a whole but there remains considerable uncertainty regarding forecasts for the second semester. The 2017 prospects for Germany are less optimistic with 8% of those surveyed expecting a decrease in revenues that could exceed 10%; however, 2016 was a particularly positive year for Germany.

According to forecasts, by 2020, GBP 600 million of the revenues of exhibition organisers will be generated by digital services provided to exhibitors and visitors compared to a current figure of GBP 400 million(4). Currently, many organisers have yet to develop a digital offer capable of generating significant revenues. Exhibition organisers are interacting and, unfortunately, sometimes competing, with innovative businesses in the digital sector that have an advantage as regards the gathering, reading and interpretation of "big data", which is an increasingly interesting area also for the exhibition sector.

Surveys of the leaders in the meetings and events(5) sector on future trends reveal a picture of moderate growth in Europe: growth of 6% is expected in the average scale of meetings and events; 58% of meeting planners expect an improvement in market conditions, 22% expect things to remain more or less stable; and 21% expect conditions to deteriorate. Organisers of congresses sponsored by associations are more cautious and highlight some risk factors, for example, restrictions on travel (both in terms of limited available budgets and stricter visa requirements), increased transport costs, and the financial risk of a potential decrease in the number of sponsors and the size of sponsorship.

(3) Global Exhibition Barometer, UFI, January 2017.

(4) Denzil Rankine, Exhibition World 4-2016.

(5) Ibtm Trends Watch Report, 2016; MPI Meetings Outlook, 2017 Winter Edition; CWT Meeting and Events Forecasts, 2016.

Economic and financial performance for the year ended 31 December 2016

Economic performance

The Consolidated Income Statement is shown below.

Consolidated Income Statement

(Amounts in €'000) 2016 2015 restated 2014 restated
Value % Value % Value %
Revenues from sales and services 221,041 100 335,172 100 240,067 100
Cost of materials 2,281 1.0 4,859 1.4 2,440 1.0
Cost of services 121,423 54.9 164,602 49.1 133,185 55.5
Costs for use of third party assets 49,837 22.5 61,265 18.3 56,463 23.5
Personnel expenses 44,101 20.0 61,023 18.2 48,171 20.1
Other operating expenses 4,222 1.9 5,705 1.7 4,925 2.1
Total operating costs 221,864 100.4 297,454 88.7 245,184 102.1
Other income 3,216 1.5 2,992 0.9 3,522 1.5
Results of equity-accounted
companies
1,259 0.6 2,828 0.8 1,448 0.6
Gross operating result 3,652 1.7 43,538 13.0 (147) –0.1
Depreciation and amortisation 8,398 3.8 12,305 3.7 13,319 5.5
Allowance for doubtful accounts and
other provisions
5,477 2.5 8,179 2.4 1,517 0.6
Adjustments to asset values 12,771 5.8 9,657 2.9 3,637 1.5
Net operating result (EBIT) (22,994) –10.4 13,397 4.0 (18,620) –7.8
Financial income/(expenses) (985) –0.4 (3,507) –1.0 (4,849) –2.0
Profit/(loss) before income tax (23,979) –10.8 9,890 3.0 (23,469) –9.8
Income tax (5,305) –2.4 5,987 1.8 (4,716) –2.0
Profit/(loss) from continuing
operations
(18,674) –8.4 3,903 1.2 (18,753) –7.8
Profit/(loss) from discontinued
operations
(4,176) –1.9 (3,474) –1.0 (353) –0.1
Profit/(loss): (22,850) –10.3 429 0.1 (19,106) –8.0
– attributable to the shareholders
of the controlling entity
(22,794) –10.3 1,014 0.3 (18,955) –7.9
– attributable to non-controlling
interests
(56) -0.0 (585) –0.2 (151) –0.1
Cash flow for the Group and non
controlling interests
3,796 1.7 30,570 9.1 (633) –0.3

Some of the 2014 and 2015 figures have been restated for comparative purposes to reflect the accounting of the Chinese companies, Worldex and Haikou Worldex, under IFRS 5, following the divestment of the subsidiary Interteks on 27 July 2015, and for the different classification of the use of risk provisions in FY2014.

Revenues from sales and services were Euro 221.041 million, a decrease of Euro 114.131 million compared to the figure of Euro 335.172 million in the 2015 financial year. The decrease in revenues mainly reflected the less favourable exhibition calendar which, in the previous financial year, included the biennial directly organised exhibitions Host and Tuttofood, the hosted exhibitions Made Expo and Simei, and the triennial exhibitions Ipack-Ima and Plast, the multi-annual exhibition EMO that is held in Milan every six years, and the itinerant exhibition ITMA. 2015 results also included revenues generated by the contracts linked to Expo 2015. The absence of these events was, in part, compensated by the presence of the biennial exhibitions Mostra Convegno Expocomfort and Bimu.

The gross operating result was a loss of Euro 3.652 million compared to Euro 43.538 million in 2015, a decrease of Euro 39.886 million.

The decrease in the gross operating profit mainly reflects the decrease in revenues offset, in part, by lower operating costs. In particular, there was a decrease in the rental cost of the exhibition site due to the absence of the variable component of the rent that was payable only in 2015 due to the presence of Expo 2015, a fall in personnel costs following the reorganisation implemented at the end of 2015, lower redundancy incentives and lower costs for the variable component of remuneration in the Parent Company.

The net operating result (EBIT) was a loss of Euro 22.994 million compared to a net operating profit of Euro 13.397 million in 2015, a decrease of Euro 36.391 million. The decrease reflects the trend in the gross operating profit and higher impairment charges that were, in part, compensated by lower depreciation and amortisation and lower risk provisions. Impairment charges totalled Euro 12.771 million: Euro 2.908 million for the exhibition trademark of the South African subsidiary; Euro 2.449 million for trademarks and goodwill in the subsidiary Cipa; Euro 3.333 million for the BIT and Transpotec & Logitec trademarks of the Parent Company, as well as for the Food & Beverage publication; and Euro 4.081 million for goodwill in the subsidiary Fiera Milano Media SpA. All these businesses suffered downgrades to expected results and to the outlook for growth. In 2015, impairment charges for goodwill and trademarks totalled Euro 9.639 million.

Net financial expenses were Euro 0.985 million compared to net expenses of Euro 3.507 million in 2015. The decrease mainly reflected lower financial charges incurred on lower average debt both current and non-current.

The Profit/(loss) before income tax was a loss of Euro 23.979 million compared to a pre-tax profit of Euro 9.890 million in 2015.

The Profit/(loss) at 31 December 2016 was a loss of Euro 22.850 million compared to a net profit of Euro 0.429 million at 31 December 2015. The result reflects the lower tax charge relating primarily to a positive item from the tax consolidation recognised by Fondazione Fiera Milano for the use of IRES tax losses generated in the financial period under review that offset the IRES tax liability that was included in the tax consolidation. There was also an absence of some taxes payable for the period under review, specifically relating to IRAP, which was due to the deducton of the tax wedge and the residual cost of permanent employees from the amount of IRAP payable.

Further details on taxes are provided in the relevant Explanatory and Supplementary Note to the Accounts.

The net result was attributable as follows:

  • • a loss of Euro 22.794 million to the shareholders of the controlling entity;
  • • a loss of Euro 0.056 million to non-controlling interests.

The net loss from continuing operations was Euro 18.674 million compared to a net profit of Euro 3.903 million in 2015.

The net loss from discontinued operations was Euro 4.176 million, compared to a net loss of Euro 3.474 million in 2015, and was mainly due to the Chinese subsidiaries Worldex and Haikou Worldex.

Equity and financial performance

The table below shows the Reclassified Consolidated Statement of Financial Position.

Reclassified Consolidated Statement of Financial Position

(Amounts in €'000) 31.12.2016 31.12.2015 31.12.2014
Goodwill and intangible assets with an indefinite useful life 94,216 104,945 109,474
Intangible assets with a finite useful life 17,777 29,408 41,584
Tangible fixed assets 14,511 14,755 18,438
Other non-current assets 34,378 33,194 35,234
A Non-current assets 160,882 182,302 204,730
Inventory and contracts in progress 5,480 1,884 5,028
Trade and other receivables 52,227 63,932 50,604
Other assets
B Current assets 57,707 65,816 55,632
Trade payables 41,114 49,267 36,160
Advances 40,239 34,880 39,641
Tax liabilities 1,605 5,168 2,091
Provisions for risks and charges and other current liabilities 21,276 41,385 21,875
C Current liabilities 104,234 130,700 99,767
D Net working capital (B – C) (46,527) (64,884) (44,135)
E Gross capital employed (A + D) 114,355 117,418 160,595
Employee benefit provisions 9,302 10,672 10,286
Provisions for risks and charges and other non-current
liabilities
7,107 9,052 8,954
F Non-current liabilities 16,409 19,724 19,240
G NET CAPITAL EMPLOYED continuing operations (E – F) 97,946 97,694 141,355
H NET CAPITAL EMPLOYED assets held for sale 2,049
TOTAL NET CAPITAL EMPLOYED (G + H) 99,995 97,694 141,355
covered by:
Equity attributable to the Group 61,006 84,572 17,034
Equity attributable to non-controlling interests 673 696 2,654
I Total equity 61,679 85,268 19,688
Cash & cash equivalents (20,904) (56,092) (12,276)
Current financial (assets)/liabilities 46,284 55,502 105,044
Non-current financial (assets)/liabilities 14,150 13,016 28,899
Net financial position continuing operations 39,530 12,426 121,667
Net financial position assets held for sale (1,214)
L Net financial position (TOTAL) 38,316 12,426 121,667
EQUITY AND NET FINANCIAL POSITION (I + L) 99,995 97,694 141,355

The entries in the Restated Consolidated Statement of Financial Position correspond to those in the Consolidated Statement of Financial Position.

Net capital employed totalled Euro 99.995 million at 31 December 2016, an increase of Euro 2.301 million compared to the figure at 31 December 2015.

Non-current assets were Euro 160.882 million at 31 December 2016 compared to Euro 182.302 million at 31 December 2015. The decrease was mainly due to the transfer of the business division of the Ipack-Ima exhibition to the joint venture Ipack Ima Srl, now valued according to the equity method; to the decrease caused by the classification of the Chinese subsidiaries in assets held for sale; and by impairment charges taken for goodwill and exhibition trademarks.

Net working capital, the balance of current assets and current liabilities, went from a negative figure of Euro 64.884 million at 31 December 2015 to a negative figure of Euro 46.527 million at 31 December 2016. The increase mainly reflects a decrease in payables to suppliers and payables to exhibition organisers caused by the different exhibition calendar; this was, in part, offset by a decrease in trade receivables and an increase in advances for future exhibitions. Fiera Milano Group has structural negative net working capital due to the favourable cash management cycle of exhibitions, where payment of part of the attendance fee is made in advance by clients. Furthermore, Fiera Milano SpA also manages these activities on behalf of third-party organisers and, in this way, generates positive cash flows also from the rent of exhibition space.

The Group had net debt of Euro 38.316 million at 31 December 2016 compared to net debt of Euro 12.426 million at 31 December 2015. The increase in net debt was mainly attributable to the decrease in cash flows from operations due to net working capital.This was caused by the payment of sums due to some exhibition organisers and also by the different exhibition calendar.

Details of the net financial position are given in the Explanatory and Supplementary Notes to the Consolidated Financial Statements.

The following table shows the reconciliation of Equity between the Parent Company Financial Statements and the Consolidated Financial Statements:

Statement of reconciliation between Fiera Milano SpA and the Consolidated Financial Statements

(€'000) Full year 2016 Full year 2015
Equity Profit/(loss) Equity Profit/(loss)
PARENT COMPANY EQUITY AND PROFIT/
(LOSS)
60,488 (25,160) 86,329 (1,456)
Equity and profit/(loss) of consolidated companies 45,651 (4,706) 46,390 (4,492)
Intragroup dividends (3,094) (2,145)
Elimination of carrying value of consolidated
investments
(110,238) (102,651)
Goodwill arising from acquisitions 12,270 (6,103) 21,700 (8,370)
Write-down of investments, net of tax effect 49,027 16,436 32,592 15,465
Elimination of write-downs of intergroup loans
and financing
3,777 2,159 850 1,438
Elimination of intragroup margins 704 (2,382) 3 (11)
Minor consolidation adjustments, net of tax effect 55
TOTAL EQUITY 61,679 (22,850) 85,268 429
of which attributable to non-controlling interests 673 (56) 696 (585)
GROUP EQUITY AND PROFIT/(LOSS) 61,006 (22,794) 84,572 1,014

Investments

In the financial year to 31 December 2016, investments totalled Euro 7.387 million and the breakdown was as follows:

(€'000) Full year to
31.12.2016
Full year to
31.12.2015
Full year to
31.12.2014
Intangible fixed assets 3,151 4,292 1,781
Tangible fixed assets 4,236 3,525 6,734
Total investments in non-current assets 7,387 7,817 8,515

Investments in intangible fixed assets totalled Euro 3.151 million and were mainly for the acquisition of two new exhibition trademarks, Promotion Trade Exhibition (PTE) for Euro 1.400 million and NF Travel & Technology Event for Euro 0.500 million, and investments of Euro 1.058 million made by the Parent Company for digital projects.

Investments in tangible fixed assets totalled Euro 4.236 million and were mainly:

  • Euro 2.178 million of acquisitions of furniture and goods to be hired out at exhibitions;
  • Euro 1.794 million for plant and machinery, electronic machinery, and improvements made to the Rho exhibition site and the North Wing of the MiCo Congress Centre.

Further details on investments are given in the Explanatory and Supplementary Notes to the Consolidated Financial Statements.

Business performance by operating segment and by geographic area

The key Group figures by operating segment and by geographic area are given in the following table.

Summary of data by operating segment and by geographic area

(Amounts in €'000) 2016 2015
Value % Value %
Revenues from sales and services
– By operating segment:
– Italian Exhibitions 173,421 66.6 277,310 70.9
– Foreign Exhibitions 6,830 2.7 6,945 1.9
– Stand-fitting Services 38,295 14.7 55,890 14.3
– Media 11,051 4.2 13,376 3.3
– Congresses 30,672 11.8 37,446 9.6
Total revenues gross of adjustments for inter-segment transactions 260,269 100.0 390,967 100.0
– Adjustments for inter-segment transactions (39,228) (55,795)
Total revenues net of adjustments for inter-segment transactions 221,041 335,172
– By geographic area:
– Italy 214,239 96.9 328,611 98.0
– Foreign countries 6,802 3.1 6,561 2.0
Total 221,041 100.0 335,172 100.0
Gross operating result
– By operating segment: on revenues on revenues
– Italian Exhibitions (3,092) –1.8 31,931 11.5
– Foreign Exhibitions 1,781 26.1 (1,236) –17.8
– Stand-fitting Services 3,033 7.9 7,197 12.9
– Media 376 3.4 821 6.1
– Congresses 2,274 7.4 4,626 12.4
– Adjustments for inter-segment transactions (720) 199
Total 3,652 1.7 43,538 13.0
– By geographic area:
– Italy 2,523 1.2 45,133 13.7
– Foreign countries 1,129 16.6 (1,595) –24.3
Total 3,652 1.7 43,538 13.0
Net operating result (EBIT)
– By operating segment: on revenues on revenues
– Italian Exhibitions (15,234) –8.8 18,204 6.6
– Foreign Exhibitions (4,507) –66.0 (9,809) –141.2
– Stand-fitting Services 493 1.3 5,221 9.3
– Media (4,103) –37.1 (2,138) –16.0
– Congresses 1,133 3.7 1,764 4.7
– Adjustments for inter-segment transactions (776) 155
Total (22,994) –10.4 13,397 4.0
– By geographic area:
– Italy (17,779) –8.3 23,609 7.2
– Foreign countries (5,215) –76.7 (10,212) –155.6
Total (22,994) –10.4 13,397 4.0
Employees
(no. of permanent employees at the end of the period)
– By operating segment:
– Italian Exhibitions 416 57.4 448 57.2
– Foreign Exhibitions 141 19.4 154 19.7
– Stand-fitting Services 57 7.9 54 6.9
– Media 63 8.7 90 11.5
– Congresses 48 6.6 37 4.7
Total 725 100.0 783 100.0
– By geographic area:
– Italy 584 80.6 629 80.3
– Foreign countries
Total
141
725
19.4
100.0
154
783
19.7
100.0

Some of 2015 figures have been restated for comparative purposes to reflect the accounting of the Chinese companies, Worldex and Haikou Worldex, under IFRS 5.

The activities of the Fiera Milano Group are grouped into five operating segments: Italian Exhibitions, Foreign Exhibitions, Stand-fitting Services, Media and Congresses.

Revenues from sales and services, before adjustments for inter-segment transactions, were Euro 260.269 million in the year to 31 December 2016, of which 66% was generated by Italian Exhibitions, 3% by Foreign Exhibitions, 15% by Stand-fitting Services, 4% by the Media segment and 12% by the Congress segment.

  • Revenues from Italian Exhibitions were Euro 173.421 million, a decrease of Euro 103.889 million compared to the figure of Euro 277.310 million in the previous financial year. The decrease mainly reflected the less favourable exhibition calendar that in the previous financial year included the directly organised biennial exhibitions Host and Tuttofood, the hosted exhibitions Made Expo and Simei, the triennial exhibitions Ipack-Ima and Plast, the multi-annual exhibitions EMO and ITMA, as well as the revenues from the contracts linked to Expo 2015. This was in part compensated by the presence of the biennial exhibitions Mostra Convegno Expocomfort and Bimu held in the period under review.
  • Revenues from Foreign Exhibitions were Euro 6.830 million and were in line with the segment revenues of the previous financial year (Euro 6.945 million).
  • Revenues from Stand-fitting Services were Euro 38.295 million, a decrease of Euro 17.595 million compared to the previous financial year (Euro 55.890 million). The decrease reflects the absence of the contracts linked to Expo 2015 that were present in 2015 and also the generally less favourable exhibition calendar compared to 2015 when it included the biennial exhibitions Host, Tuttofood and Made Expo held in uneven-numbered years and the multi-annual exhibitions Ipack-Ima, EMO and ITMA. This was partly compensated by the presence of the biennial exhibition held in even-numbered years, Mostra Convegno Expocomfort.
  • Revenues from Media were Euro 11.051 million, approximately 17% lower than in the previous financial year (Euro 13.376 million). The decrease is attributable to lower revenues from sponsorship, print advertising, and from digital services.
  • Revenues from Congresses were Euro 30.672 million and fell Euro 6.774 million compared to the figure of the previous financial year (Euro 37.446 million). The decrease primarily reflects the absence of the revenues generated from the management of the Expo 2015 Congress Centre and Auditorium.

The gross operating profit was Euro 3.652 million, a decrease of Euro 39.886 million compared to the previous financial year; the breakdown by operating segment was as follows:

  • Italian Exhibitions had a gross operating loss of Euro 3.092 million compared to a gross operating profit of Euro 31.931 million in the financial year to 31 December 2015. The decrease reflected the aforementioned fall in exhibition space occupied in the financial year under review. This was partly compensated by the absence of the variable component of rent payable only in 2015 because of the presence of Expo 2015 and by a decrease in personnel costs from the reorganisation that started at the end of 2015, lower redundancy incentives and lower costs for the variable component of remuneration paid by the Parent Company.
  • Foreign Exhibitions had a gross operating profit of Euro 1.781 million compared to a gross operating loss of Euro 1.236 million in the financial year to 31 December 2015. This increase was due to lower operating costs following the restructuring implemented in Brazil in the previous financial year.
  • Stand-fitting Services had a gross operating profit of Euro 3.033 million, a decrease of Euro 4.164 million compared to the preceding financial year (Euro 7.197 million). This decrease mirrored the decline in revenues.
  • Media had a gross operating profit of Euro 0.376 million, a decrease of Euro 0.445 million compared to the preceding financial year (Euro 0.821 million). The decrease was mainly due to the fall in revenues described above but was, in part, compensated by lower personnel costs following the corporate reorganisation that began in December 2015.

– Congresses had gross operating profit of Euro 2.274 million compared to Euro 4.626 million in the financial year to 31 December 2015, a decrease of Euro 2.352 million. The decrease was mainly due to the fall in revenues described above but was, in part, compensated by lower personnel costs and by an increase in other income from insurance claims.

The total net operating loss was Euro 22.994 million compared to a net operating profit of Euro 13.397 million in the 2015 financial year, and the breakdown was as follows:

  • Italian Exhibitions had a net operating loss of Euro 15.234 million compared to a net operating profit of Euro 18.204 million at 31 December 2015. The Euro 33.438 million decrease reflected the deterioration in the gross operating profit and higher impairment charges. This was, in part, offset by lower depreciation and amortisation as certain Group assets became fully depreciated. The impairment charges were mainly Euro 2.977 million for the BIT trademark and Euro 0.356 million for the Transpotec & Logitec trademark.
  • Foreign Exhibitions had a net operating loss of Euro 4.507 million compared to a net operating loss of Euro 9.809 million in the 2015 financial year. The lower loss reflected the improvement in the gross operating profit and lower impairment charges than in the previous financial year. The impairment charges in the period under review were Euro 2.908 million for the exhibition trademark of the South African subsidiary and Euro 2.449 million for trademarks and goodwill in Cipa.
  • Stand-fitting Services had a net operating profit of Euro 0.493 million, a Euro 4.728 million decrease compared to the figure for the previous financial year (Euro 5.221 million). The decrease reflects the fall in the gross operating profit and higher risk provisions for disputes with employees linked to an estimate of the probable liability resulting from the events that gave rise to the administration order.
  • Media had a net operating loss of Euro 4.103 million, a deterioration of Euro 1.965 million compared to the figure for the previous financial year (a net operating loss of Euro 2.138 million). This was attributable to the impairment charges of Euro 4.081 million taken for the Food & Beverage publication and for goodwill.
  • Congresses had net operating profit of Euro 1.133 million compared to Euro 1.764 million in the financial year to 31 December 2015. The decrease reflected the decrease in the gross operating profit that was, in part, compensated by lower depreciation due to the extension of the useful life of certain assets of MiCo Nord following the renewal of the rental contract with Fondazione Fiera Milano which expires on 30 June 2023.

The 725 Group employees at the end of the 2016 financial year were divided among the five operating segments as follows: 57% in Italian Exhibitions, 19% in Foreign Exhibitions, 8% in Stand-fitting Services, 9% in Media and 7% in Congresses.

The key figures of the companies in the Foreign Exhibitions segment are given in the table below.

Summary data for companies in the Foreign Exhibitions segment

(Amounts in €'000) 2016 2015
Value % Value %
Revenues from sales and services
– by company:
– Cipa FM Publicações e Eventos Ltda 5,670 83.0 5,166 74.4
– Hannover Milano Global Germany GmbH
– Fiera Milano Exhibitions Africa (PTY) Ltd 1,131 16.6 1,465 21.1
– Fiera Milano India Pvt Ltd
– Limited Liability Company Fiera Milano 29 0.4 314 4.5
– Eurofairs International Consultoria
e Partipações Ltda
Total gross of adjustments 6,830 100 6,945 100
Gross operating result
– by company:
– Cipa FM Publicações e Eventos Ltda 308 17.3 (2,973) 240.5
– Hannover Milano Global Germany GmbH 2,289 128.5 2,837 –229.5
– Fiera Milano Exhibitions Africa (PTY) Ltd (1,159) –65.0 (762) 61.7
– Fiera Milano India Pvt Ltd (14) –0.8 (50) 4.0
– Limited Liability Company Fiera Milano 487 27.3 (121) 9.8
– Eurofairs International Consultoria
e Partipações Ltda
(130) –7.3 (167) 13.5
Total 1,781 100 (1,236) 100
Net operating result (EBIT)
– by company:
– Cipa FM Publicações e Eventos Ltda (2,806) 62.3 (9,400) 95.9
– Hannover Milano Global Germany GmbH 2,289 –50.8 2,837 –28.9
– Fiera Milano Exhibitions Africa (PTY) Ltd (4,333) 96.1 (2,908) 29.6
– Fiera Milano India Pvt Ltd (14) 0.3 (50) 0.5
– Limited Liability Company Fiera Milano 487 –10.8 (121) 1.2
– Eurofairs International Consultoria
e Partipações Ltda
(130) 2.9 (167) 1.7
Total (4,507) 100 (9,809) 100

Some of 2015 figures have been restated for comparative purposes to reflect the accounting of the Chinese companies, Worldex and Haikou Worldex, under IFRS 5.

Operating figures

The tables on the following pages give the figures for events held at the and venues and those held abroad in the financial year to 31 December 2016 with comparative figures for the previous two financial years. The tables give the net square metres of exhibition space occupied and the number of participating exhibitors. The events are classified according to how frequently they are held – annual, biennial or multi-annual – and figures for exhibitions directly organised by the Group are also given for each of the periods (the figures have been rounded up to make them easier to read and compare).

Full year to 31.12.2016 Full year to 31.12.2015 Full year to 31.12.2014
Total of which
Organised
by the
Group
Total of which
Organised
by the
Group
Total of which
Organised
by the
Group
Number of exhibitions: 81 43 114 64 113 73
Italy 46 8 63 13 51 11
– annual 39 8 40 9 41 9
– biennial 7 15 4 9 1
– multi-annual 8 1 1
Foreign countries 35 35 51 51 62 62
– annual 32 32 45 45 59 59
– biennial 3 3 6 6 3 3
– multi-annual
Number of congresses with
related exhibition space – Italy
39 36 37
Net sq.metres of exhibition
space:
1,653,300 543,355 2,223,920 863,695 1,634,425 623,275
Italy 1,285,600 175,655 1,822,875 462,650 1,220,125 208,975
– annual (a) 1,031,455 175,655 988,335 187,255 928,255 178,165
– biennial 254,145 455,250 275,395 275,390 14,330
– multi-annual 379,290 16,480 16,480
(a) of which congresses with
related exhibition space
50,770 49,075 33,745
Foreign countries 367,700 367,700 401,045 401,045 414,300 414,300
– annual 336,970 336,970 376,220 376,220 375,685 375,685
– biennial 30,730 30,730 24,825 24,825 38,615 38,615
– multi-annual
Number of exhibitors: 31,830 11,635 42,640 17,830 32,790 14,275
Italy 23,800 3,605 32,340 7,530 22,430 3,915
– annual (b) 20,680 3,605 20,280 3,780 18,625 3,365
– biennial 3,120 6,475 3,750 3,565 310
– multi-annual 5,585 240 240
(b) of which congresses with
related exhibition space
2,825 2,460 2,195
Foreign countries 8,030 8,030 10,300 10,300 10,360 10,360
– annual 7,480 7,480 9,680 9,680 9,615 9,615
– biennial 550 550 620 620 745 745
– multi-annual

Fiera Milano Group Summary operating figures

The table shows that in the 2016 financial year the percentage of total net square metres of exhibition space covered by annual exhibitions was approximately 83%. Annual exhibitions covered 1,368,425 net square metres of exhibition space, in line with the figure for the 2015 financial year. The most significant change compared to 2015 was the hosted annual exhibitions in Italy (+53,025 square metres, approximately 7%). Biennial exhibitions covered 284,875 net square metres of exhibition space, a year-on-year decrease of ca. 41%. There was a decrease of 275,395 square metres in directly organised biennial exhibitions in Italy, which mainly reflected the absence of Tuttofood and Host that was, in part, compensated by the 74,290 square metres increase in space occupied by hosted biennial exhibitions mainly due to the presence of Mostra Convegno Expocomfort. There was also a decrease of 379,290 square metres in space occupied by multi-annual exhibitions. There was a year-on-year decrease of 8% or 33,345 net square metres in the space occupied by exhibitions held abroad mainly due to the effect of the sale of the business in Turkey, the cancellation of some exhibitions and the different exhibition timetable in China.

The tables below give comparative figures for the last three financial years for the portfolio of events hosted by the Group in the and sites with an indication of the net square metres of exhibition space occupied and the number of exhibitors classified by how frequently the events are held, and indicating those exhibitions that were directly organised (the figures have been rounded up to make them easier to read and compare).

Italian exhibition portfolio

Exhibitions Net sq. metres of exhibition space Number of exhibitors
Full year to Full year to Full year to Full year to Full year to Full year to
31.12.2016 31.12.2015 31.12.2014 31.12.2016 31.12.2015 31.12.2014
Annual
Directly organised
– Bit 13,505 15,335 13,750 380 405 280
– Chibimart Summer 4,445 4,020 3,310 165 125 105
– Chibimart Winter 3,080 3,110 2,820 105 95 95
– HOMI I semester 77,785 81,200 82,210 1,285 1,305 1,275
– HOMI II semester 58,310 63,845 57,840 1,220 1,265 1,055
– Miart 7,810 6,840 6,360 185 190 155
– Milano Pret a Porter Spring 2,235 2,775 2,125 105 130 105
– SposaItalia 8,485 7,550 7,145 160 145 145
– Milano Pret a Porter Autumn a) 2,580 2,605 a) 120 150
Total annual exhibitions directly organised 175,655 187,255 178,165 3,605 3,780 3,365
Hosted
– Artigiano in fiera 55,790 63,440 59,100 1,230 1,875 1,640
– Cartoomics 8,310 9,855 8,000 310 190 225
– Eicma Moto 91,950 90,090 86,435 520 615 455
– Esposizione Internazionale Canina 15,000 a) 15,000 50 a) 45
– Fa la cosa giusta 9,350 7,845 8,500 695 630 600
– G! come giocare 6,410 6,825 5,965 85 90 80
– Hobby Show (I semester) 1,815 3,425 5,000 90 115 110
– Hobby Show (II semester) 2,275 2,885 5,000 100 110 160
– Lineapelle February 43,710 41,640 1,155 945
– Lineapelle September 46,875 43,445 41,665 1,240 1,170 1,125
– Mido 46,260 43,645 40,700 1,075 990 910
– Mifur 12,080
10,180
13,350
5,295
16,885
4,430
150
100
170
55
190
20
– Milan Games Week
– Milano Auto Classica
20,965 16,440 12,545 290 245 215
– Milano Auto Classica – Winter Edition(*) 26,310 330
– Milano Unica (Autumn) 25,540 19,200 18,915 485 410 420
– Milano Unica (Spring) 18,165 18,020 18,390 390 380 400
– Mipel (Autumn) 8,065 8,390 10,640 235 235 290
– Mipel (Spring) 8,305 10,060 12,120 250 285 355
– Myplant & garden 13,855 9,330 345 285
– Prima MU 3,710 2,385 130 55
– Promotion trade exhibition 4,515 4,235 4,095 140 130 125
– Salone del Franchising Milano 3,835 3,995 4,035 125 125 145
– Salone del mobile/Complemento d'arredo 161,955 162,990 164,620 1,180 1,175 1,240
– Simac Tanning-Tech 14,900 15,200 220 275
– Smau 4,715 4,045 3,290 10 15 15
– Super Spring(°) 1,275 1,600 150 180
– Technology Hub (ex 3D Print Hub) 3,250 2,500 155 80
– The Micam (Autumn) 63,360 64,350 68,080 1,385 1,380 1,480
– The Micam (Spring) 63,425 67,075 67,910 1,425 1,425 1,490
– Viscom – Visual communication 8,880 7,800 6,605 205 175 185
– Expo Italia real estate a) a) 5,580 a) a) 140
– Expodental a) a) 3,465 a) a) 150
– Expotraining a) 1,290 1,405 a) 75 80
– Kali a) a) 4,015 a) a) 210
– Promotion Expo a) a) 3,195 a) a) 140
– Smap Expo a) a) 1,300 a) a) 25
– Super Autumn(°) a) 1,360 1,660 a) 155 200
– The innovation cloud a) a) 7,800 a) a) 200
Total annual exhibitions directly organised 805,030 752,005 716,345 14,250 14,040 13,065
Total annual exhibitions 980,685 939,260 894,510 17,855 17,820 16,430

Continues from previous page

Exhibitions Net sq. metres of exhibition space Number of exhibitors
Full year to Full year to Full year to Full year to Full year to Full year to
31.12.2016 31.12.2015 31.12.2014 31.12.2016 31.12.2015 31.12.2014
Biennial
Directly organised
– Host 132,580 1,890
– Sicurezza(°°) 14,455 14,330 305 310
– Transpotec & Logitec(**) 53,475 210
– Tuttofood 74,885 1,345
Total biennial exhibitions directly organised 275,395 14,330 3,750 310
Hosted
– Bimu 37,395 37,140 560 555
– Eurocucina 35,260 35,740 110 120
– Mostra Convegno Expocomfort 118,395 125,265 1,540 1,540
– Salone Internazionale del Bagno 19,390 18,190 175 160
– Sfortec 725 630 40 40
– Venditalia(°°) 13,740 4,600 11,990 255 130 235
– Xylexpo 29,240 26,175 440 435
– Chem Med 1,130 50
– Enovitis 575 25
– Euroluce 38,765 395
– Farmacistapiù 2,790 40
– Fruit Innovation 5,945 150
– Made Expo 57,005 910
– Made in Steel 12,260 230
– Salone Ufficio 12,505 120
– Simei 29,565 490
– Vitrum 14,715 185
– TPA Italia(°) a) 5,930 a) 170
Total biennial exhibitions hosted 254,145 179,855 261,060 3,120 2,725 3,255
Total biennial exhibitions 254,145 455,250 275,390 3,120 6,475 3,565
Multi
-annual
Directly organised
– Expodetergo(°) 16,480 240
Total multi-annual Exhibitions directly organised 16,480 240
Hosted
– Converflex 4,790 110
– EMO 116,995 1,540
– Intralogistica 2,815 75
– Ipack-Ima 52,270 855
– ITMA 109,570 1,690
– Meat Tech 6,930 95
– Plast 54,615 1,080
– World Dog Show 31,305 140
Total multi-annual exhibitions hosted 379,290 5,585
Total multi-annual exhibitions 379,290 16,480 5,585 240
TOTAL EXHIBITIONS 1,234,830 1,773,800 1,186,380 20,975 29,880 20,235
– Congresses with related exhibition space 50,770 49,075 33,745 2,825 2,460 2,195
TOTAL 1,285,600 1,822,875 1,220,125 23,800 32,340 22,430

(*) The exhibiltion was held for the first time at Fiera Milano exhibition sites.

(**) The exhibition was held at Veronafiere exhibition site.

(°) The exhibition is co-organised with Fiera Milano.

(°°) In 2015 an extraordinary edition of the exhibion was held.

a) The exhibition did not take place.

The table below gives details of the exhibitions organised abroad. The net exhibition space utilised was 367,700 net square metres (the figures for square metres of net exhibition space have been rounded up to make them easier to read and compare).

Foreign Exhibition portfolio

Exhibitions Net sq. metres of exhibition space Number of exhibitors
Full year to Full year to Full year to Full year to Full year to Full year to
31.12.2016 31.12.2015 31.12.2014 31.12.2016 31.12.2015 31.12.2014
Annual
Exhibitions directly organised in China
- CeMAT Asia Shanghai 19,725 17,910 15,355 500 500 470
- Chinafloor Domotex Shanghai 65,375 63,985 60,210 1,305 1,260 1,050
- China Tourism International and Commodities Fair 13,580 11,335 280 205
- Comvac Asia 5,445 5,745 5,475 145 130 150
- Food Hospitality World Guangzhou 2,300 3,140 4,000 240 345 380
- Fruit& Forest Xinjiang 2,500 2,500 2,500 250 195 210
- GITF International Tour Guangzhou 7,875 5,180 4,715 195 215 210
- Industrial Automation Beijing/FAPA 3,235 3,520 3,865 185 205 190
- Industrial Automation Shanghai 39,205 34,925 23,025 500 500 605
- Industrial Automation Shenzen 8,020 7,985 8,035 390 400 420
- Industrial Supply Asia 315 425 340 25 45 30
- Metalworking and CNC Mach. Tool Shanghai 27,085 24,025 22,900 550 550 445
- Motor Show Chengdu 76,600 77,160 76,665 90 95 95
- PTC Asia Shanghai 26,395 42,035 31,930 1,075 1,600 1,210
- China Commercial Vehicle Show a) 5,290 a) 130
- Heavy Machinery Asia a) 1,120 1,595 a) 80 85
- M3 Fair Hainan a) 2,500 7,500 a) 115 155
- The Micam Shanghai 1° semester a) 2,900 2,940 a) 150 155
- Energy Shanghai a) a) 4,855 a) a) 150
- The Micam Shanghai 2° semester a) a) 2,600 a) a) 125
- Wuhan Motor Show a) a) 4,410 a) a) 10
Total Exhibitions directly organised in China 297,655 311,680 282,915 5,730 6,720 6,145
Exhibitions directly organised in India
- CeBIT India 2,200 2,565 5,200 90 265 350
- CeMAT India 1,295 1,445 1,935 60 110 75
- Food Hospitality World Bangalore 1,885 2,400 1,950 110 120 70
- Food Hospitality World Goa 1,200 1,500 75 90
- Food Hospitality World Mumbai 2,840 3,195 2,390 180 175 155
- Industrial Automation India 785 1,865 1,405 35 100 60
- MDA India 895 1,110 1,445 40 75 50
- The China Products Show India 3,080 3,500 3,250 160 190 170
- Surface Technology a) 200 375 a) 30 30
- Industrial Supply India a) a) 1,100 a) a) 80
- Plugged-In India a) a) 1,500 a) a) 45
Total Exhibitions directly organised in India 14,180 17,780 20,550 750 1,155 1,085
Exhibitions directly organised in Russia
- HOMI Russia a) 1,700 2,600 a) 90 95
Total Exhibitions directly organised in Russia 1,700 2,600 90 95
Exhibitions directly organised in South Africa
- Capetown Art Fair 2,030 1,100 850 50 40 45
- Good Food & Wine Show Capetown 2,860 2,855 3,250 165 205 195
- Good Food & Wine Show Durban 3,490 3,330 2,700 115 130 145
- Good Food & Wine Show Gauteng 3,490 3,360 3,300 165 200 180
- Food Hospitality World Capetown a) 950 1,325 a) 70 85
Total Exhibitions directly organised in South Africa 11,870 11,595 11,425 495 645 650
Exhibitions directly organised in Thailand
- The China Products Show Bangkok 1,360 2,500 2,500 110 195 95
Total Exhibitions directly organised in Thailand 1,360 2,500 2,500 110 195 95
Exhibitions directly organised in Sri Lanka
- The China Products Show Colombo, Sri Lanka 1,000 1,800 120 30
Total Exhibitions directly organised in Sri Lanka 1,000 1,800 120 30

Continues in next page

Continues from previous page

Full year to
Full year to
Full year to
Full year to
Full year to
Full year to
31.12.2016
31.12.2015
31.12.2014
31.12.2016
31.12.2015
31.12.2014
Annual
Exhibitions directly organised in USA
- Homi New York
505
800

30
50

Total Exhibitions directly organised in USA
505
800

30
50

Exhibitions directly organised in Brazil
– Enersolar
860
1,505
995
45
50
35
– Exposec
8,100
9,760
11,355
150
170
180
– Infocomm
1,440
970
800
50
70
30
– Food Hospitality World
a)
1,375
690
a)
55
40
– Reatech, FisioTech
a)
5,545
8,110
a)
185
265
– The China Products Show Brasil
a)
400
3,000
a)
40
130
– Fast Bahia
a)
a)
250
a)
a)
25
– Fast Goiana
a)
a)
215
a)
a)
25
– Fast Rio de Janeiro
a)
a)
180
a)
a)
20
– Fecontech
a)
a)
410
a)
a)
30
– Magnum
a)
a)
285
a)
a)
10
– Fippa–pet show
a)
a)
3,150
a)
a)
110
– Gospel
a)
a)
950
a)
a)
30
– Riosec
a)
a)
230
a)
a)
20
Total Exhibitions directly organised in Brazil
10,400
19,555
30,620
245
570
950
Exhibitions directly organised in Turkey
– Beauty & Care Istanbul
b)
5,670
5,930
b)
140
125
– Home & Garden Istanbul
b)
1,710
3,015
b)
65
65
– Pro–Show
b)
1,430
1,870
b)
20
15
– Art International Istanbul
b)
b)
3,830
b)
b)
75
– Beauty & Care Ankara
b)
b)
1,670
b)
b)
45
– Promoturk
b)
b)
4,115
b)
b)
70
– Transist
b)
b)
3,365
b)
b)
60
– Zhejiang Trade Fair
b)
b)
1,280
b)
b)
140
Total Exhibitions directly organised in Turkey

8,810
25,075

225
595
Total Annual Exhibitions
336,970
376,220
375,685
7,480
9,680
9,615
Biennial
Exhibitions directly organised in China
– Metal + Metallurgy

3,770


85

– WoodMac China

9,565


80

– Aviation & Space Fair Shanghai
a)

1,200
a)

55
– West China Manufacturing and Industrial Fair
a)

430
a)

35
Total Exhibitions directly organised in China

13,335
1,630

165
90
Exhibitions directly organised in Brazil
– Feitintas(
)
*
1,045


25


– Fesqua
10,300

13,845
195

285
– Fisp
19,385

23,140
330

370
– Braseg

1,510


55

– Tubotech

5,780


190

– Wire South America

3,415


165

Total Exhibitions directly organised in Brazil
30,730
10,705
36,985
550
410
655
Exhibitions directly organised in Singapore
– Rehabtech Asia(
°)

785


45

Total Exhibitions directly organised in Singapore

785


45

Total Biennial Exhibitions
30,730
24,825
38,615
550
620
745
TOTAL EXHIBITIONS
367,700
401,045
414,300
8,030
10,300
10,360
Exhibitions Net sq. metres of exhibition space Number of exhibitors

(°) The exhibition is a joint project with the Singaporean company Singex Exhibitions Ventures Pte Ltd.

a) The exhibition did not take place.

b) The Turkish subsidiary and related exhibitions were sold in the second semester 2015.

(*) First edition of this exhibition.

Fiera Milano Group Personnel

Composition and turnover

At 31 December 2016, the Group had 725 permanent employees compared to 783 at 31 December 2015.

(units) 31.12.2016 31.12.2015 31.12.2014
Total Italy Foreign
countries
Total Italy Foreign
countries
Total Italy Foreign
countries
Fully consolidated
companies:
Executives 31 28 3 38 35 3 46 39 7
Managers and White
collar workers (including
Journalists)
633 548 85 687 594 93 698 583 115
Total 664 576 88 725 629 96 744 622 122
Equity-accounted
companies (a):
Executives 2 2 2 2 2 2
White collar workers 59 8 51 56 56 61 61
Total 61 8 53 58 58 63 63
TOTAL 725 584 141 783 629 154 807 622 185

Permanent employees at year end

(a) the indicated data corresponds to the pro-quota of total employees.

In 2016, there was a year-on-year net decrease of 58 Group employees. In Italy, this was mainly due to the early retirement plans of the Parent Company and the restructuring of the subsidiary Fiera Milano Media SpA. Abroad, it was due to the restructuring of the subsidiary Fiera Milano Africa, as well as to the high employee turnover rate of the Brazilian and Chinese (Worldex) companies.

In 2016, 74 persons joined the Group, of which 38 in Italy; the increase in numbers was to reinforce the marketing departments and also reflected the change of some personnel on fixed-term contracts to permanent contracts that was part of the Company strategy gradually to hire more junior resources that are initially taken on as interns on a training programme; the remaining 36 persons outside Italy are linked to the high employee turnover rate.

In 2016, 132 persons left the Group of which 83 were from the Italian companies and were mainly connected to the early retirement schemes and the restructuring that started in 2015; 49 persons were from the foreign businesses due to the high employee turnover rate in these companies and also due to the restructuring of some businesses.

During 2016 the early retirement project concluded. This involved 19 persons of which 17 were in the Parent Company and two in the subsidiaries Fiera Milano Congressi SpA and Nolostand SpA.

Moreover, as part of an organisational project to increase efficiency and re-examine certain products of the subsidiary Fiera Milano Media SpA, the Real Estate publications were closed along with the publication Energia Ambiente, which led to the departure of three persons. The graphic side of the publications has been outsourced, as well as the logistics connected to the organisation of events and this led to the departure of a further 22 persons.

With effect from 1 January 2016, two business divisions connected to the Ipack-Ima exhibitions of Ipack-Ima SpA and the Food Pack exhibition of Proma-Pack Srl, a company belonging to UCIMA (the Association of Italian manufacturers of packaging and packaging materials), were conferred on the newly constituted company Ipack Ima Srl, held 49% by Proma-Pack Srl and 51% by Fiera Milano SpA. This partnership will result in the largest Italian exhibition of processing and packaging technologies.

The turnover rate of employees, calculated as the difference between those joining and those leaving the Group as a percentage of the average number of employees, was 28.6% compared to 25.9% in the 2015 financial year.

Fiera Milano Group employs staff on fixed-term contracts to manage the peaks of activity in the exhibition calendar and for extraordinary projects. Personnel on fixed-term contracts went from 30 persons at 31 December 2015 to 26 persons at the end of 2016.

Governing employment contracts

The Italian companies within the Fiera Milano Group use the national collective employment agreement for tertiary, distribution and service companies; the companies in the publishing sector employ personnel under the national collective employment agreement for graphic design and similar companies, publishing companies and multimedia companies and the national contract for journalists.

The employees of Fiera Milano Group are divided into three main categories:

  • executives with a managerial role;
  • middle managers and journalists with specialist roles;
  • other employees, office staff, and technical support staff.

The Italian division of the Fiera Milano Group has no manual workers as it outsources all activities linked to the supply and organisation of exhibition services.

Outside Italy each company applies the employment laws of the jurisdiction in which it is based.

Safety measures adopted

The safety of its personnel is of primary importance and Fiera Milano Group makes significant investments on this front. In 2016 specific safety training was organised for employees with technical responsibilities.

Training

The 2016 training programme of Fiera Milano Group focused on training courses to increase and enhance the special technical competences and knowledge of information technology and foreign languages within the Group.

In addition to refresher courses on occupational health and safety requirements, first aid and firefighting measures, training focused on methods of refining procedures and increasing efficiency through courses on project management and time management.

Following the restructuring of Fiera Milano Media SpA a plan was implemented to retrain some of the personnel in order to increase digital competences as opposed to the more traditional experience required in the publishing sector and to introduce new ways of understanding the market in order to grow the business.

The total number of Group personnel that took part in the 79 training sessions held was 516 for a total 5,162 hours.

Environment

Environmental management

Fiera Milano Group pays particular attention to the responsible and efficient use of energy resources both through careful management attention to the normal running of its specific activities and to the design of new and more innovative plant.

All energy consumption in the Fiera Milano Group in Italy is mapped and monitored in real time in order to pinpoint more efficient energy solutions and a consequent reduction in emissions. Similarly, the attention paid by Fiera Milano Group to water resources has resulted in measures to reduce consumption.

The environmental impact of Fiera Milano Group in Italy comprises a variable component that is linked to the exhibitions, congresses and exhibition services and a fixed component that is constant over the year and is linked to the energy consumption of the facilities.

As part of its continuing energy performance improvement programme, Fiera Milano has replaced defective components with more efficient ones. In 2016, the lighting fixtures of pavilions 1/3 and 2/4 were replaced with units using LED technology that will guarantee the same level of light but give significant energy savings. In the current financial period similar improvements will be made to pavilions 5/7 and 6/10. In the final months of 2016, Fiera Milano Group worked to obtain LEED Silver certification, which is higher than the certification currently held; the results will be known in April 2017.

Waste management

Fiera Milano Group adheres to the laws governing waste management and follows the provisions of enacted law regarding waste disposal. It has appropriate internal procedures to ensure it meets the requirements of environmental laws and has a dedicated department to monitor these aspects.

Most of the waste produced in the exhibition sites is from setting up the exhibition areas. The waste is collected by regional operators using multi-material means to sort the different types of waste materials which are then subjected to various processes to obtain secondary raw materials.

In 2016, Fiera Milano SpA continued the work started in 2015 to improve its waste management and to encourage those visiting its sites to sort their waste. It provided recycling and sorting bins in the exhibition site and bins of recyclable corrugated cardboard inside the exhibition pavilions.

Sustainable mobility

The Company policy is to reduce energy consumption, acoustic pollution and to contain the emission of greenhouse gases. To this end it has set up an internal department to study and research ways of reducing its environmental impact.

The environmental impact linked to mobility derives from specific circumstances in the different phases of the life cycle of an event. During the organisation and setting up phase of an exhibition, the environmental impact is primarily from the supply and delivery of goods and equipment; during the event, the environmental impact derives from the transit of exhibitors and visitors to and from the exhibition site; at the end of the event, the persons dismantling and removing the materials used in the exhibition represent the major source of environmental impact. The impact of the employees of the Fiera Milano Group should be considered in the context of the cumulative effect generated across all operational activities.

To reduce the environmental impact during the various phases of the exhibitions, Fiera Milano Group has implemented several initiatives to manage mobility in the most environmentally sustainable way possible. Through its traffic control and coordination centre and a series of agreements with the main transport organisations and the law enforcement agencies, it actively contributes to managing mobility throughout the area in and around the exhibition sites during the different phases of events and provides real time traffic and mobility data through the information service, Info Mobility Fiera Milano.

Source: 2016 Sustainability Report

Risk factors affecting Fiera Milano Group

Risk management in Fiera Milano Group

The Fiera Milano Group has for some time now carried out a periodic analysis of the risks at Group level using internationally recognised standards of Enterprise Risk Management (ERM).

The main aim is to have a systematic and proactive approach to the main risks to which the Group – and also each of its companies – is exposed in carrying out its business and pursuing its pre-established targets, to assess in advance the potential negative effects, implement opportune actions to mitigate these effects, and to monitor over time any relative exposure.

In order to achieve this Fiera Milano SpA has compiled a catalogue of Group risks linked to the strategies being implemented, together with a risk mapping and risk scoring methodology. Specifically, the Group integrated risk management process entails an annual (i) update of the risk catalogue according to the strategies implemented and the management and business model used; (ii) assessment of the risks by the management of Fiera Milano SpA and of its subsidiaries; (iii) consolidation of information and prioritisation of the risks and the consequent areas of action; (iv) tolerance analysis of any exposure identified and formulation of the appropriate management strategies/actions and the identification of those responsible for implementing such actions.

The Control and Risk Committee and the Board of Statutory Auditors are informed of the results of the aforementioned annual processes.

The main risk factors and uncertainties to which the Fiera Milano Group is exposed that have emerged from the aforementioned process are described below taking into account the business sector in which it operates and the characteristics of the business model it uses. A description is also given, where necessary, of the Group policies to manage and mitigate the risks described.

1. Risks related to external factors

Risks linked to the economic environment

Despite recent signals of an economic recovery, the outlook for growth in the European markets – and, in particular, the Italian market – remains marked by considerable uncertainty. In addition, there is the extended crisis in some product areas and the significant seasonality of some of the business areas in which the Group operates and, therefore, the effect on the results of these areas. Moreover, recent international geopolitical developments on the one hand indicate the adoption of protectionist commercial policies by some leading countries, for example, the United States, and, on the other hand, a period of precarious political stability in some European countries that is contributing to the increase in uncertainty surrounding the economic growth forecasts for the business.

This gives the Group limited visibility on the likely investments of its clients – and, in particular its target clients – in exhibitions and related services and could well have an impact on the stability of revenues and profitability of the Group both in the short-term and in the medium/long-term.

In order to continue to counteract the effect of this scenario on its activities (and specifically the risk of lower numbers at the exhibitions hosted or directly organised in the Fiera Milano exhibition sites and of the relative investment budgets), in 2017, the Group intends to continue the support actions and incentives for exhibitors at the exhibitions held in Italy. It will also be done through the re-scheduling of some events so that they take place in the period considered best for them and also take account of the events held by competitors. The

Group has also implemented a strategy to rationalise its shareholdings and its involvement in exhibitions held abroad through a careful focus on countries and industrial sectors that offer considerable potential, enhancing its international presence through partnerships with international foreign exhibition and congress organisers, and through promoting abroad the excellence of all the other businesses within its portfolio.

Risks connected to trends and competition in the exhibitions, publishing and congress markets

The sectors in which the Group is active are characterised by strong competition both in terms of pricing pressure and by the complete or partial overlapping of exhibitions or of services provided.

The context in which the exhibition business of Fiera Milano Group operates remains in a mature phase and has specific characteristics: (i) the continuing consolidation of some sectors of product manufacturing/distribution activities, (ii) changes and innovation in product categories, (iii) the transformation of exhibitions from "places where demand meets supply" to events which offer even greater business opportunities and, above all, (iv) by an ever-increasing growth in competition, also on tariffs, and (v) the continuous development of the Asian and Middle Eastern markets marked by their strong competitive power due to their receptivity to exhibitions.

To maintain its domestic market position and increase its position and competitiveness on the international market, as well as awareness of its brand by foreign clients and competitors, Fiera Milano Group has continued its strategy of (i) enhancing its portfolio of directly organised or hosted exhibitions mainly by launching new proprietary initiatives, expanding some of these to include contiguous market sectors, by rescheduling them to more favourable periods of the year, and increasing the portfolio of hosted exhibitions and (ii) enhancing its international business, rationalising its foreign shareholdings and repositioning its exhibition offer to focus on more profitable sectors while pursuing partnerships with leading exhibition organisers and entering new areas of the congress sector.

Group revenues in the publishing sector are mainly affected by market trends and by strong competition, also technological, that has been a feature of this sector in recent years. Given this context, Fiera Milano SpA aims to maintain the high quality of its products by investing in content and new technologies in order to develop an integrated B2B multimedia offer and gradually to diversify the communication channels in which it is present and the services it offers whilst continuing to consolidate its relationship with its major investors through both personal and professional contacts.

In recent years, the Italian congress sector has experienced a significant drop in demand also due to the higher number and strength of the major international competitors that, in some cases, have also been helped over time by state incentive policies. The appearance of new participants in the Italian market has increased competition further also taking into consideration the worrying possibility of institutional support and the consequent synergies that can be obtained with smaller groups of visitors and smaller clients. In order to maintain and consolidate its own competitive position, the Group is continuing to follow a strategy of relaunching its integrated services and/or those services that complement the congress offer (e.g. destination management services).

Catastrophe risk

Fiera Milano Group's infrastructure, primarily its information technology, requires periodic updating to ensure it responds effectively and systematically to the requirements ensuing from its various activities. The Group is exposed to the risk of a malfunction and/or a complication at the infrastructure level that could have negative repercussions ranging from delays in the conduct of its business to a temporary interruption in its business. The Group has already planned to completely renew its infrastructure in order to minimise the possibility of such an event and has drawn up a Disaster Recovery Plan that can be activated if required.

In terms of security, the recent terrorist attempts, particularly those that have taken place in Europe, would expose the Group to possible negative repercussions from a remote-controlled attack within or near the exhibition site or in any other locality in which Fiera Milano SpA operates with injuries to visitors and damage to structures and an ensuing drop in visitors and in exhibitors. To this end, the Group has an effective security system that controls access by suppliers, exhibitors, visitors and employees to the exhibition site that will be strengthened further and it also works directly with the relevant Authorities.

Risks connected to the media exposure of the Group

The recent events involving certain Group companies increased the media exposure of the Group and, in particular, its sensitivity to risks from negative media coverage and inadequate external communication management policies, as well as the possibility that third-parties could take advantage of this exposure for their own ends. In particular, failure to manage the risk that a high profile media event could lead to widespread public exposure (including on the internet and social media platforms) has become of increased importance. Communication regarding the Group, already considerable given the nature of the Group and its various forms of communication (exhibition-related, institutional and financial) and of its principal stakeholders, has increased considerably as a result of the involvement of Fiera Milano SpA in the investigations of the Milan Court and

the subsequent administration order imposed on the Company. This media exposure left the Company open to uncontrolled damage to its image through the media (including the internet and social media platforms). Therefore, the risk that an event receiving widespread media coverage could lead to unmanaged exposure in the media has taken on greater importance.

To avoid this risk in the short-term, the Group has undertaken to outsource all "Media Crisis" related events. Moreover, the Group has revised its communication policy and, in general, its management procedures for external communications and for media crisis situations.

2. Strategic and operating risks

Risks connected to a dependency on the exhibition business

In recent years, the dependence of some Group companies on the exhibition and congress businesses has increased. In particular, the businesses of Fiera Milano Media SpA and Nolostand SpA are still almost entirely connected to the events portfolios of Fiera Milano SpA and Fiera Milano Congressi SpA. The strategic and business initiatives implemented in the last year failed to provide the expected reduction in the dependency on Group business and, therefore, the performance of Fiera Milano Media SpA continues to be closely linked to that of Fiera Milano SpA, as does that of Nolostand SpA, whose business is almost entirely dependent on the exhibitions and congresses organised/hosted by Fiera Milano SpA and Fiera Milano Congressi SpA.

To address this dependency and the inherent risks it poses to the business of the two aforementioned companies, the Group intends to introduce measures (some already implemented) to mitigate the potential negative effect on its consolidated results. In particular, Fiera Milano Media SpA is following a development strategy to build

and consolidate non-captive commercial strategies also through new initiatives (Digital Outdoor Advertising) and projects that target clients outside the Group (Club Business International). Nolostand SpA, following its success in occasional international initiatives in 2016, is broadening its business model to expand directly into new European markets and is developing further initiatives "outside the exhibition site" (that will also include a direct sales network for clients outside the Group).

Risks connected to the launch and repositioning of events and the loss of key events

Following the launch of new events and given the possible further expansion of the events portfolios of Group companies (with particular reference to the exhibition business), the risk that these events will underperform has risen considerably. The major risk is the increased probability of over-estimating the results of these events with potential repercussions for the forecast results both in the short and the medium/long-term. This uncertainty is further exacerbated by the simultaneous repositioning of some events, which have been part of the portfolio of Fiera Milano SpA for a long time, and for which is envisaged a complete change of organisational format as, for example, the transfer of an event to exhibition site.

Added to the above risk is the possibility of losing an event considered key to the Group if certain events do not meet the level of success to guarantee that they will continue in the future and, therefore, that the event becomes no longer part of the Group portfolio and results in a negative impact on Group results. This risk is heightened by the potential negative effects on the reputation of the Company caused by the recent events underlying the administration order and their repercussions on participating exhibitors (see Section 4: Risks connected to the administration order).

The Group has prepared strategic development plans to minimise any exposure to this type of risk by (i) continuous marketing and internationalisation of events and their respective brands through strengthening the sales structure and the Italian and international marketing network and (ii) implementing competitive response strategies through the creation of partnerships with other companies in the Italian and international exhibition sector and with professional associations/supranational entities that will increase visibility and media perception of such events.

Risks connected to the capacity to retain the necessary specialist competences

The Fiera Milano Group considers its human resources and competences in the exhibitions, congress and other sectors of interest to be one of its principal strategic assets. The gradual evolution of exhibitions from "large marketplace" to "major event" or "experience" (with increasing importance attached to market trends) and the pursuit of medium/long-term strategies (including the development of new proprietary exhibitions) require specialist professional competences that are not easily found. The current performance management systems for assessing the ability of employees and the employee incentive plans aim to enable the Group to increase the validity and loyalty of its personnel and key internal competences ensuring a better coordination/exchange and sharing of expertise. Nevertheless, the Group is increasingly exposed to the risk that competences and relationships built up by internal organisers are inadequate to meet new market challenges and/or are not effectively shared within the Group.

In response to this, the Group is implementing a risk mitigation plan aimed at increasing the coordination and commercial and organisational synergies that can be achieved by internal organisers together with enhanced monitoring of the performance of external organisers.

Risks connected to seasonality

Exhibition and event organisation is subject to seasonality and cyclicality. Both of the latter are particularly marked in the Italian and European markets as almost no exhibitions are held in the summer months and because of the presence of biennial or multi-annual exhibitions. This seasonality significantly affects the annual spread of the Group's revenues and profits and may also expose it to the risk that the exhibition site could reach saturation levels, which might be sub-optimal to its objectives of reaching forecast profitability. To date, the strategies pursued by management to counteract this risk include (i) enhancing the exhibition portfolio and re-positioning some long-standing events, (ii) internationalising events (in terms of exhibitors and visitors), (iii) setting up strategic and commercial collaborations/alliances with other exhibition venues and/ or organisers, and (iv) increased exploitation of other revenue sources linked to the exhibition sites (such as events other than exhibitions held in the summer months) and these led to greater stability of revenues and profitability over the year under review.

3. Compliance risks

Risks connected to the reference legislative framework

The new regulations for listed companies (regarding market abuse and the management of inside information) or data protection and the management of sensitive information, both at a European and an Italian level expose the Group to the risk of non-transposition under the indicated provisions and therefore non-compliance. As a result, the Group could be subject to significant administrative sanctions by the Regulatory Authorities with negative economic, capital and financial repercussions. A system to update the corporate operational processes and procedures has already been drawn up under the evolving legal framework and a system of internal dissemination of information has been set up involving the relevant persons.

The activities of the Group, particularly those carried out in the exhibition sites, and the number of persons (employees, suppliers, exhibitors, visitors, congress attendees and those involved in setting up exhibitions, etc.) that transit or work in the exhibition sites, expose the Group companies to the risk of accidents or breaches of the legislation governing workplace health and safety (Consolidated Law 81/2008). Should the laws on workplace health and safety be infringed, the Group could be subject to significant administrative sanctions or, in the case of accidents, could leave it exposed to litigation with possible negative implications for its economic, capital and financial situation. The Group also makes extensive use of suppliers for services connected to the exhibitions (primarily stand-fitting and catering services) that come under the law governing contractors (Legislative Decree 223/2006 and subsequent amendments). Although the relationships of the workers from the contracting companies are exclusively with those companies, under the law Group companies could be held jointly responsible with the contracting companies for the payment of social security contributions for workers carrying out the contracts. Therefore, the Group is exposed to the risk of administrative sanctions (also under the provisions of Legislative Decree 231/2001) and interruption of its business for breaches of the relevant laws, including workplace health and safety and the regulations governing remuneration and social security, made by construction companies and unauthorised sub-contractors.

Fiera Milano Group protects itself from such eventualities by rigorously adhering to the relevant laws and by a careful analysis of the underlying risks through a set of procedures that include:

  • revising the procedures for the selection, contracting and management of suppliers and contractors, requiring that they adhere to the strictest requirements;
  • the preparation of the Documento Unico per la Valutazione dei Rischi da Interferenze (DUVRI) [Unified text on assessment of risks generated by interference between activities conducted simultaneously in the same workplace] and updating of the procedures to meet the requirements of Legislative Decree 81/2008;
  • use of a computerised system (through the web portal) that records those entering the exhibition site and,

in particular, those setting up exhibitions, and supplies real-time monitoring of people flows;

  • definition of the areas of the exhibition site to ensure that the legal safety requirements are met;
  • the use of and delivery to suppliers and exhibitors of Technical Regulations for Exhibitions, which contain the rules to which exhibitors and suppliers must adhere when setting up exhibitions;
  • the application of rigorous procedures for identification and control of third parties that are not clients (i.e. organisers, exhibitors and visitors) with access to the exhibition sites;
  • contractual protection.

Administrative liability of entities

The Legislative Decree of 8 June 2001 no. 231 introduced the "discipline governing administrative liability of legal entities, companies and of associations without legal status" (Legislative Decree 231/2001) amending Italian law to meet some international conventions and requiring the adoption and effective implementation of organisational and management models. To meet the requirements of this Legislative Decree, the Italian companies of the Group have introduced organisational and management models that are constantly monitored and updated. However, it cannot be excluded that the models adopted could be considered by the competent Authority to be inadequate or not sufficiently updated, resulting in legal sanctions being imposed even if crimes are committed under the provisions of the law by persons having a functional connection to Fiera Milano SpA and its subsidiaries for their own interest or advantage.

The Group is currently revising and tightening its organisation and management models also as a result of areas for improvement being identified under the administration order. Foreign subsidiaries that are not obliged to adhere to the provisions of Legislative Decree no. 231/01 have not adopted organisation, management and control models under Decree 231. However, they have adopted the Code of Ethics of the Company and "Guidelines for the application of anti-corruption measures and other compliance programmes" in order to have a systematic reference framework of principles and standards for crime prevention.

Risks connected to third-party liability

In carrying out the activities of Fiera Milano Group unforeseen damage could occur to property or persons within the Group exhibition sites. The simultaneous presence of numerous workers with different contracts (employees, external suppliers in direct contractual relations with the Group and/or sub-contractors of other companies, etc.) also makes any eventual attribution of responsibility very difficult in cases of damage to property or persons, with potential consequences for the business of the Company and its corporate image. To guard against these risks, Fiera Milano Group has taken out insurance policies and has set up an internal unit (Exhibition Safety) responsible for circulating safety information and material for the correct management of such risks.

4. Other risks

Risks connected to developments regarding the administration order for Nolostand SpA and Fiera Milano SpA

Starting in July 2016, first the subsidiary Nolostand SpA and then Fiera Milano SpA for the "exhibition standfitting" business segment were notified of administration orders from the Milan Court aimed at verifying the existence and extent of evidentiary indications regarding contractual relations with a supplier and members of the same consortium. The order was issued to protect the assets of Nolostand SpA and Fiera Milano SpA from eventual infiltration and/or collusion, and a Court Administrator was appointed for a period of six months that could be extended for a further six months. At the hearing on 22 November 2016, the Court ordered that the administration orders for Fiera Milano SpA and Nolostand SpA be unified as the issues of both were closely connected. On 20 December 2016, the Court, having heard the Court-appointed Administrator, extended the administration order for Nolostand SpA for a further six months. Therefore the administration order for Nolostand SpA will expire on 6 July 2017 unless otherwise decreed by the Milan Court.

Following receipt of the administration order, the Company suspended all dealings with the supplier Consorzio Dominus and the Group moved to replace it by dividing the business given to that supplier for future exhibitions among several recognised suppliers. Fiera Milano SpA and Nolostand SpA put some employees on precautionary suspension and dismissed others. Given these measures, costs and risk provisions were made that are described in the Supplementary and Explanatory Notes to the Accounts.

From a financial viewpoint, it should be noted that at 31 December 2016, Nolostand SpA had no bank loans outstanding but the uncertainty created by media coverage of the events that gave rise to the administration order initially caused a hardening in the attitude of some banks, which was immediately counteracted by providing information on the aims and scope of the procedures connected to the administration order to reassure the company's counterparts.

On the basis of information available at the date of the present Report, it is not considered that the administration order has had an impact on the ongoing business operations of the Fiera Milano Group. However, it cannot be excluded that the progress of the investigation and further analysis of the events that gave rise to the administration order could affect the capital and financial situation of the Group in the future.

The main repercussions of the administration order, in terms of risk to the Group and to its business, are the increased complexity of the corporate governance of Fiera Milano SpA and the impact of adopting the legal safeguard procedures that are an appropriate and necessary consequence of the prevention measures imposed on the business and its operations.

(i) Risks linked to increased complexity in Group operations

This risk is linked to the possibility that as a result of the administration order and the measures implemented as a consequence of it, that the Group corporate governance increases in complexity or, despite measures being taken in close collaboration with the Court-appointed Administrator, that there is a delay or lengthening of the decision-making process or the management of matters regarding integrity and internal relations, also in the interaction with Group companies. Lengthening the decision-making processes could significantly increase the complexity of operations and their efficiency.

To date, the strategies implemented by management to counteract this risk comprise an analytical review of the Group organisational structure and decision-making processes in order to implement the safeguards set up as part of the administration order and ensure that they have no impact, in terms of managing the organisational complexities, in the medium/long-term but give rise to the positive effects intended by the administration order.

(ii) Risks linked to the effects on the business and its functioning

Given the events that gave rise to the administration order, reviews were carried out of the different operating procedures for the management of certain aspects of the business considered particularly sensitive and significant. This has led to an increase in the exposure to risk that the introduction of the aforementioned procedures damages, even indirectly, the business and operations of the Group, for example, extending transaction times, limiting the type and number of counterparties with which it does business, or in some way affecting the normal execution of the ongoing operations and business. In particular, this risk exposure increases with the possibility that new and stricter operational requirements imposed on counterparties (suppliers, business partners, distributors, etc.) restricts the possibility of concluding advantageous agreements within normal time limits and/or the fulfilment of beneficial contracts with third-parties who do not meet the new standards under the procedural system that has been set up: the exposure to the aforementioned risk is balanced by the certainty that the new standards minimise counterparty risk. To counteract this particular type of risk and the potential negative effects in terms of reputation and integrity

the Group has introduced a series of mitigation measures and procedures focused primarily on (i) an overhaul of the Procurement Department, the purchasing procedures and processes (and those attributable to them), (ii) a study and review of radically alternative business models and (iii) strengthening the Internal Audit department.

(iii) Risks linked to potential repercussions from the lack of transparency in dealings with counterparties

The administration order has increased focus on the fact that counterparty relations that lack transparency can give rise to illegal behaviour, for example, corruption, that compromises the Group's reputation and integrity also through media exposure and given the nature of its principal stakeholders.

To counteract this form of risk and the potential negative impact on reputation and integrity, the Group is setting up a specific compliance function to guarantee increased protection against the potential effect of risks linked to corruption or the integrity and reputation of the Fiera Milano Group. In addition to the measures described in the previous paragraph, changes are being made to the organisation aimed at segregating various responsibilities and ensuring maximum clarity regarding the responsibilities of the various company departments.

5. Financial risks

The disclosure required by IFRS 7 for financial assets and liabilities in the Explanatory and Supplementary Notes to the Financial Statements gives details of financial risk.

Non-financial disclosure

Legislative Decree no. 254 of 30 December 2016 that adopts Directive 2014/95/EU (known as the "Barnier Directive") requires large undertakings and public-interest entities that on their balance sheet dates exceed the criterion of the average number of 500 employees during the financial year on a consolidated basis to provide a non-financial statement.

Non-financial statements are mandatory for the financial years starting on 1 January 2017 or during the calendar year 2017.

Fiera Milano Group, in order to adhere to this requirement, has, in recent years, involved many of its departments in preparing the Reports on Sustainability for 2015 and 2016.

The non-financial disclosures included in the Report on Sustainability were also subject to internal reviews of a selection of indicators that were chosen in relation to the subject matters and disclosure requirements of Legislative Decree 254/2016.

Significant events after the end of the reporting period

With regard to the aforementioned administration order, the Parent Company Board of Directors has made strenuous efforts, both before and after the administration order was issued, to bring about a significant improvement in the corporate governance of the Company and to instigate numerous measures to ensure the best way of implementing these measures.

Following the request of the Public Prosecutor that the administration order be extended to all areas of the Company, on 13 January 2017, the Board of Directors, having carefully considered only what was in the interest of the Company, decided that the best solution was to resign its responsibilities so that a new Board of Directors could be appointed from the date of the Shareholders' Meeting to approve the Financial Statements at 31 December 2016, which is scheduled for 21 April 2017. The Milan Court – Prevention Court Independent Section subsequently denied the request of the Public Prosecutor and stated that the administrative and management functions should remain the domain of the Board of Directors but, at the same time, it extended the powers already given to the Court-appointed Administrator to cover the legality and compliance safeguards of the entire Company.

The Board of Directors also felt that the Chief Executive Officer should resign his responsibilities. Mr Peraboni, being informed of the resignations of the Directors, also resigned. The Board of Directors then gave the authority for the ordinary management of the Company to the Chairperson in order to ensure the ongoing management of the business.

On 22 February 2017, the contract for the sale of the 75% shareholding in Worldex (China) Fiera Milano Exhibitions Co., Ltd was signed.

The sale price under the contract is Euro 2.750 million plus an eventual deferred amount of a maximum of Euro 1.000 million dependent on certain results being achieved in the three years 2017-2019, which is not recognised in the valuation at 31 December 2016 under IFRS 5. The sale of the shareholding in the subsidiary Worldex is in line with the strategy of repositioning the Group presence outside Italy and of concentrating the foreign activities of the Group in the joint venture with its German partner Deutsche Messe.

On 28 March 2017, the Milan Court – Prevention Court Independent Section extended the administration order for the exhibition stand-fitting business division of the Company, due to expire on 11 April 2017, for a further six months; the first expiry date for the unified administration order is July 2017.

Business outlook and assessment of the Company as a going concern

The improvement in the reference economic environment was confirmed by the exhibitions held in Italy in the first part of the current financial year, which provided encouraging signals in terms of both exhibitors and visitors. The exhibitions in the fashion accessories sector had particularly positive results.

The 2017 financial year will benefit from a more favourable exhibition calendar with the presence, amongst other events, of the important directly organised biennial exhibitions Tuttofood and Host. The latter is the international leader in the HoReCA trade sector and had record results at its last edition. It is expected to grow further and, with eight months still to go until the exhibition opens, more than 90% of the exhibition space has been taken by companies and some areas are completely sold out.

The exhibition calendar of the current financial year also includes nine new exhibitions directly organised or organised by third-parties; this is the result of the efforts made in 2016. The directly organised events include Tempo di Libri and Versilia Yachting Rendez-vous whilst those organised by third-parties include Lamiera, Expo Ferroviaria, the International Dog Show, MAM Mostra and Milano Art and Antiques, which combines the world of antiques with that of design.

Assuming no events or circumstances that at the present time cannot be foreseen also in connection with developments regarding the administration order described in the paragraphs above, the Group expects a significant improvement in the gross operating profit in 2017 compared to that achieved in 2016.

Given the capital and financial position in the 2016 financial year, the financial forecasts in the budget and the 2017-2020 Industrial Plan, approved by the Board of Directors on 6 February 2017, and the forecasts for working capital requirements and for the financial and capital position, the Financial Statements and Consolidated Financial Statements have been prepared on the principles of a going concern.

Economic and financial performance of Fiera Milano SpA

Fiera Milano SpA Income Statement

(amounts in €'000) 2016 2015
Value % Value %
Revenues from sales and services 173,421 100.0 277,307 100.0
Cost of materials 506 0.3 900 0.5
Cost of services 100,614 58.0 144,893 83.5
Costs for use of third party assets 43,551 25.1 54,945 31.7
Personnel expenses 32,245 18.6 45,779 26.4
Other operating expenses 3,519 2.0 4,636 2.7
Total operating costs 180,435 104.0 251,153 144.8
Other income 5,230 3.0 6,756 3.9
Gross operating result (1,784) –1.0 32,910 19.0
Depreciation and amortisation 4,033 2.3 6,273 3.6
Allowance for doubtful accounts
and other provisions
5,241 3.0 5,463 3.2
Adjustments to asset values 3,333 1.9 1,953 1.1
Net operating result (EBIT) (14,391) –8.3 19,221 11.1
Financial income/(expenses) 5,173 3.0 1,009 0.6
Valuation of financial assets (19,521) –11.3 (16,033) –9.2
Profit/(loss) before income tax (28,739) –16.6 4,197 2.4
Income tax (3,579) –2.1 5,653 3.3
Profit/(loss) from continuing operations (25,160) –14.5 (1,456) –0.8
Profit/(loss) from discontinued operations
Profit/(loss) (25,160) –14.5 (1,456) –0.8
Total Cash flow (12,553) –7.2 12,233 7.1

Revenues from sales and services were Euro 173.421 million compared to Euro 277.307 million in 2015, a decrease of Euro 103.886 million.

The decrease in revenues was mainly due to the less favourable exhibition calendar and the absence in the year under review of the directly organised biennial exhibitions Host and Tuttofood, the hosted exhibitions Made Expo and Simei, the triennial exhibitions Ipack-Ima and Plast, the multi-annual exhibition EMO, held in Milan every six years, and the itinerant exhibition ITMA, all present in the previous financial year. Moreover, 2015 included the revenues for the contracts linked to Expo 2015. This effect was, in part, compensated by the presence of the biennial exhibitions Mostra Convegno Expocomfort and Bimu.

A breakdown of sales by geographic region is not given as Fiera Milano SpA operates almost exclusively on the domestic market.

The gross operating result was a loss of Euro 1.784 million compared to a profit of Euro 32.910 million in the previous year, a decrease of Euro 34.694 million.

The gross operating loss was mainly due to the aforementioned amount of exhibition space sold. This was,

in part, compensated by lower operating costs. There was a decrease in the rental costs for the exhibition site due to the absence of the variable component of the rent for the presence of Expo 2015 and payable only in 2015, a drop in personnel costs due to the savings from the restructuring that commenced in the last part of 2015, lower redundancy incentives, and a lower variable component of remuneration.

The net operating result was a loss of Euro 14.391 million compared to a net operating profit of Euro 19.221 million at 31 December 2015. The Euro 33.612 million decrease reflected the decline in the gross operating profit, as well as higher impairment charges, that were, in part, compensated by lower amortisation and depreciation as some assets were fully depreciated. Euro 2.977 million of the impairment charges were for the trademark BIT and Euro 0.356 million for the Transpotec & Logitec trademark.

Net financial income was Euro 5.173 million compared to Euro 1.009 million at 31 December 2015. The increase of Euro 4.164 million reflects higher dividends received and the decrease in financial expenses following lower average current and non-current debt.

The valuation of financial assets was negative for Euro 19.521 million compared to a negative figure of Euro 16.033 million at 31 December 2015. This was due to the impairment charges taken on investments. Further details are provided in Note 41 of the Explanatory and Supplementary Notes to the Financial Statements.

The profit/(loss) at 31 December 2016 was a loss of Euro 25.160 million after a positive tax item of Euro 3.579 million compared to a net loss of Euro 1.456 million after taxes of Euro 5.653 million in the previous financial year. The decrease in the tax charge is mainly due to the payment from Fondazione Fiera Milano under the tax consolidation for the use of IRES tax losses in the period under review used in the tax consolidation against the IRES payable for the period. There was also an absence of taxes payable for the period, in particular IRAP, which was mainly due to the deductibility of the tax wedge and the residual cost of permanent employees from the amount of IRAP payable.

Further details on taxes are provided in the Explanatory and Supplementary Notes to the Financial Statements.

Fiera Milano SpA Reclassified Statement of Financial Position

(Amounts in €'000) 31.12.2016 31.12.2015
Goodwill and intangible assets with an indefinite useful life 70,144 70,144
Intangible assets with a finite useful life 10,070 13,079
Tangible fixed assets 3,678 4,139
Financial assets 70,297 86,382
Other non-current assets 3,041 3,084
A Non-current assets 157,230 176,828
Inventories 4,467 1,198
Trade and other receivables 33,866 45,878
B Current assets 38,333 47,076
Trade payables 19,839 26,185
Advances 34,670 31,545
Tax liabilities 905 4,022
Provisions for risks and charges and other current liabilities 30,936 49,234
C Current liabilities 86,350 110,986
D Net working capital (B – C) (48,017) (63,910)
E Gross capital employed (A + D) 109,213 112,918
Employee benefit provisions 5,003 5,792
Provisions for risks and charges and other non-current liabilities 1,998 2,952
F Non-current liabilities 7,001 8,744
G NET CAPITAL EMPLOYED continuing operations (E – F) 102,212 104,174
H NET CAPITAL EMPLOYED asset held for sale 2,750
TOTAL NET CAPITAL EMPLOYED (G + H) 104,962 104,174
covered by:
I Equity 60,488 86,329
Cash & cash equivalents (11,983) (42,972)
Current financial (assets)/liabilities 42,349 49,845
Non-current financial (assets)/liabilities 14,108 10,972
Net financial position continuing operations 44,474 17,845
Net financial position asset held for sale
L Net financial position (TOTAL) 44,474 17,845
EQUITY AND NET FINANCIAL POSITION (I + L) 104,962 104,174

The items in the Reclassified Statement of Financial Position correspond to those in the Statement of Financial Position of Fiera Milano SpA.

Net capital employed was Euro 104.962 million at 31 December 2016, an increase of Euro 0.788 million compared to the figure at 31 December 2015.

Non-current assets were Euro 157.230 million at 31 December 2016 compared to Euro 176.828 million at 31 December 2015. The decrease mainly reflects the decrease in financial fixed assets from value adjustments following impairment tests on investments.

Net working capital, the balance of current assets and current liabilities, moved from a negative figure of Euro 63.910 million at 31 December 2015 to a negative figure of Euro 48.017 million at 31 December 2016. Fiera Milano SpA has structural negative net working capital due to the favourable cash management cycle of exhibitions where advance payment of part of the attendance fee is made by clients. Furthermore, Fiera Milano SpA also manages these activities on behalf of third-party organisers and, in this way, generates positive cash flows also from renting exhibition space.

The change in net working capital was linked to a decrease in payables to suppliers and to organisers caused by the different exhibition calendar; this effect was, in part, offset by a decrease in trade and other receivables and an increase in advances for future events.

Equity was Euro 60.488 million, a decrease of Euro 25.841 million compared to the balance at 31 December 2015, mainly due to the net result for the period.

The net financial position at 31 December 2016 was net debt of Euro 44.474 million compared to net debt of Euro 17.845 million at 31 December 2015. The increase in net debt was primarily due to the decrease in operating cash flows from net working capital following payments made to some exhibition organisers and it also reflected the different exhibition calendar.

Investments at 31 December 2016 totalled Euro 7.588 million and the breakdown was as follows

(€'000) Full year at
31.12.2016
Full year at
31.12.2015
Intangible fixed assets 3,045 1,008
Tangible fixed assets 881 1,364
Financial fixed assets 3,662 7,777
Total investments in non-current assets 7,588 10,149

Investments in intangible fixed assets totalled Euro 3.045 million and related mainly to the acquisition of exhibition trademarks, the implementation of digital projects, and the acquisition of software.

Investments in tangible fixed assets were Euro 0.881 million mainly for stand and equipment for exhibitions, plant and equipment and improvements to the Rho exhibition site.

Investments in financial fixed assets totalled Euro 3.662 million and were mainly for the acquisition of 51% of La Fabbrica del Libro and the conversion into equity of loans given to Eurofairs International Consultoria e Participações Ltda and Fiera Milano Exhibitions Africa Pty.

Information on related-party transactions is provided in Note 44 of the Explanatory and Supplementary Notes to the Fiera Milano SpA Financial Statements.

Fiera Milano SpA personnel

Composition and turnover

The Company had 408 permanent employees at 31 December 2016 and the breakdown compared to the previous financial year was as follows:

Permanent employees at year end
(units)
31.12.2016 31.12.2015
Executives 22 26
Middle management and White collar workers 386 398
Total 408 424

There was a decrease of 16 permanent employees compared to the previous year.

Seventeen persons joined the Company, six of which were to strengthen the marketing department, two in the management support team and nine were interns who became permanent employees as part of the policy to take on junior employees who have first done an internship. 33 persons left the Company of which 17 took early retirement, six resigned voluntarily, five left having signed an employment termination agreement, one transferred to another company, three were dismissed and one left because the protected employment period had been exceeded The personnel that left were from the marketing and the operations departments.

The turnover ratio of employees, calculated as the difference between those joining and those leaving the Company as a percentage of the average number of employees, was 12.2% in 2016 compared to 10.4% in 2015.

Movement in employees 2016 2015
New employees 17 16
Leavers 33 29
Employee turnover 12.2% 10.4%
Internal mobility 26 62

Fiera Milano SpA employs staff on fixed-term contracts during the peaks of activity in the exhibition calendar and for extraordinary projects. Employees on fixed-term contracts went from 17 in 2015 to 16 in 2016, including two temporary managers.

Fixed-term contracts Full year at
31.12.2016
Full year at
31.12.2015
Change
Executives 2 1 1
White collar workers 14 16 (2)
Total 16 17 (1)

Through agreements with the Milan Polytechnic, the Bocconi University, the Università Cattolica del Sacro Cuore, Iulm University, the Università degli Studi di Milano, the Università degli Studi di Milano Bicocca, the Sole 24 ore Business School, the Istituto Europeo di Design, the Università Carlo Cattaneo –LIUC, Fondazione Fiera Milano and Fondazione Le Vele, Fiera Milano SpA gave work experience in 2016 to 37 persons allocated to various Company departments (Marketing, Organization and Human Resources, Operations, Commercial Department, Customer Care, the Administration and Technical department). The average length of these internships was six months.

Part-time employees went from 47 in 2015 to 55 in 2016; 44 were horizontal part-time employees and 11 were vertical part-time employees.

Employees of Fiera Milano SpA can be divided into three main categories:

  • executives with a managerial role.
  • middle management with specialist roles.
  • office staff and technical support staff.

Fiera Milano SpA has no manual workers as it outsources all activities for providing exhibition and setting-up services.

A breakdown by length of service in Fiera Milano SpA indicates the strong employee loyalty to the Company and confirms the figures for the previous financial year. The following table gives a breakdown of employees by length of service:

Breakdown by length of service 31.12.2016 31.12.2015
< 10 years 28% 32%
From 10 to 20 years 47% 40%
> 20 years 25% 28%
Total 100% 100%

Governing employment contracts

National Collective Employment Agreement

Fiera Milano SpA uses the National Collective Employment Agreement for employees of companies in the tertiary, distribution and services sectors and also a supplementary company contract for non-executive employees; this was renewed in June 2013 and ran until 31 May 2016 when it was extended until 31 December 2017.

Fiera Milano SpA – in an economic scenario that remains difficult – has strengthened its focus on its employees by identifying alternative ways of enhancing their wellbeing while, at the same, containing the costs to the Company.

The success of the Corporate Welfare Plan continued in 2016; this plan incorporates benefits, personal services and services to ensure an optimum work-life balance. The Company has set aside an equal sum for each employee to be used on these benefits. The "WellFair" plan is accessible on-line and permits employees to choose the services that best suit them from amongst those identified by the Company under the provisions of prevailing law. It allows each individual to construct his/her own benefit package and to manage it as he/she sees fits until the credit allocated him/her has been exhausted.

Equal opportunities and non-discrimination

Fiera Milano SpA considers diversity and equal opportunities to be extremely important and this is expressed in its Code of Ethics, which states:

Fiera Milano offers all workers the same employment opportunities, operating in such a way as to ensure that all of them enjoy equitable treatment based on criteria of merit without any discrimination. The competent functions must:

  • – Adopt merit, skill, and in all cases, strictly professional criteria for any decision concerning an employee;
  • – Select, hire, train, pay and manage employees without discrimination;
  • – Create a work environment where personal characteristics cannot give rise to discrimination

Fiera Milano interprets its entrepreneurial role in the protection of both work conditions and of the worker's psychological and physical integrity, respecting his/her moral personality, and preventing the latter from suffering illicit influences or undue difficulties.

In particular, with regard to the employment of women, Fiera Milano SpA prepares a biennial report on gender equality in hiring employees, training, promotion and other factors so as to have an overview of gender equality amongst its employees as required by Legislative Decree no. 198 of 11 April 2006.

In 2016, female employees numbered 257 representing 63% of total employees.

Safety

The safety of all its employees is mandatory for Fiera Milano SpA and it makes significant investments to ensure their safety. In 2016 health and safety training was given to those with technical roles in the Company.

Training

The 2016 training programme of Fiera Milano SpA aimed to support the business functions by offering courses in professional and personal growth.

To continue to meet the changing legal requirements, training courses were held on workplace health and safety, first aid, fire safety, the use of defibrillators, and specific courses for the RSPP – Responsabile Servizio Prevenzione e Protezione [Health and Safety Service Manager] qualification.

Specialist short courses were held on areas of particular interest to the administrative, corporate, commercial, communications, and operations departments focused on keeping abreast of the continuous changes in the market and the business.

Fiera Milano SpA also continued its coaching for Company personnel whose role and responsibilities had changed in order to identify personal successes that could be used in the new challenges faced.

Fiera Milano SpA has tried out a new fast-track coaching system with the aim of detecting the source of potential problem situations, plan subsequent measures and identify concrete targets for a personal solution to problems that involve an awareness by employees of their own potential.

A new e-Learning platform was introduced to engender and disseminate an entrepreneurial culture and incentivise employees to keep updated and share acquired skills.

The first course, entitled Progetti e Risultati [Projects and Results], focused on project management, essential for the introduction of innovative business solutions. The course had a blended learning structure that alternated classroom activity with training modules on the various phases of project management based on the study of successful cases. The course included an internal group project to use the methods learnt to prepare and present an efficiency plan to the head of a department.

The e-Learning platform was also enhanced by the inclusion of training modules aimed at broadening computer competences (excel, power point, word, Lynce Microsoft Office 365) and with presentations prepared by colleagues for the monthly meetings – "in 60 minutes" – open to all employees and overing matters of interest to the Company, for example, the Financial Statements following the Shareholders' Meeting, how to understand the pay slip, use of social media to improve the brand, the Report on Sustainability, and road safety.

e-Learning has also been chosen as a means of running English language courses to be held in the first half of 2017; it will use different learning techniques that include videos, articles, exercises, workshops and telephone conversations.

The Company, in conjunction with Quadrifor (Istituto bilaterale per la formazione dei Quadri del Terziario) has organised an intercompany course on digital coaching.

The aim of this course is to provide knowledge of new digital methods and the importance of digital capabilities and provide personnel with individual and team coaching methods to promote personal development and train personnel to attain new digital standards.

The 42 Fiera Milano training programmes involved approximately 391 employees for a total of 3,103 hours.

Other information

1. Equity investments held by members of the Administrative and Control Bodies and by General Managers and Executives with strategic responsibilities

The table below shows equity investments in Fiera Milano SpA and its subsidiaries held by members of the Administrative and Control Bodies, the General Managers and Executives with strategic responsibilities, as well as by their spouses not legally separated and children that are minors, directly or through subsidiary companies, trust companies or intermediaries that appeared in the shareholders' register at 31 December 2016 or from communications received or information obtained directly from the relevant parties.

Name and surname Position Company in which
shares are held
No. of shares
held at
31.12.2015
No. of
shares
acquired
No. of
shares
sold
No. of shares
held at
31.12.2016
Directors(
*°)
Roberto Rettani(
**)
Chairperson Fiera Milano SpA 50,000 50,000
Attilio Fontana Deputy Vice Chairperson Fiera Milano SpA
Licia Ronzulli Vice Chairperson Fiera Milano SpA
Corrado Peraboni(
***)
Director Fiera Milano SpA 8,250 7,000 15,250
Joyce Victoria Bigio Director Fiera Milano SpA
Renato Borghi Director Fiera Milano SpA
Pier Andrea Chevallard Director Fiera Milano SpA
Romeo Robiglio Director Fiera Milano SpA
Vincenza Patrizia Rutigliano Director Fiera Milano SpA
Statutory Auditors(
*
)
Federica Palmira Nolli Chairperson Fiera Milano SpA
Antonio Guastoni Standing Statutory Auditor Fiera Milano SpA
Carmine Pallino Standing Statutory Auditor Fiera Milano SpA
No. of Executives with
strategic responsibilities
Company in which
shares are held
No, of shares
held at
31.12.2015
No, of
shares
acquired
No, of
shares
sold
No, of shares
held at 31.12.2016
Strategic Executives in
charge
Fiera Milano SpA no. 1
Strategic Executives no
longer in office
Fiera Milano SpA no. 1

(*) The mandates of the Board of Directors and of the Board of Statutory Auditors were given by the Shareholders' Meeting of 29 April 2015 and will expire with the Shareholders' Meeting to approve the Financial Statements at 31 December 2017.

(°) On 13 January 2017, the majority of the Board Directors resigned their responsibilities with effect from the date of the Shareholders' Meeting convened to approve the Financial Statements at 31 December 2016 thereby causing the dissolution of the entire Board of Directors.

(**) Following the resignation of the Chief Executive Officer, Mr Peraboni, on 13 January 2017, the Board of Directors gave the powers for the ordinary management of the Company to the Chairperson, Mr Rettani.

(***) Mr Peraboni was the Chief Executive Officer of the Company until his resignation on 13 January 2017.

No person in the above table holds shares in the subsidiary companies of Fiera Milano SpA.

Report on corporate governance and ownership structure at 31 December 2016

In this Report on Corporate Governance and Ownership Structure (hereinafter the "Report"), Fiera Milano S.p.A. (hereinafter the "Company" or "Fiera Milano") provides an account of its corporate governance system, information regarding the ownership structure, and disclosure on its compliance with the recommendations under the principles and application criteria of the Borsa Italiana Self-regulatory Code of Listed Companies, as amended in December 2011, July 2014, and in July 2015 (hereinafter the "Selfregulatory Code"). The term corporate governance is used to identify the body of rules and procedures used to manage and control joint stock companies. An effective and efficient corporate organisation model must be capable of using the correct means to manage the business risks and potential conflicts of interest that can arise between Directors and shareholders and between shareholders with a controlling interest and those with a non-controlling interest in the Company. These aspects are of even greater significance in listed companies with a wide shareholder base.

The indications given by Borsa Italiana in the Format for the Report on Corporate Governance and Ownership Structure issued in January 2017 have been taken into account in the preparation of this Report.

1. Administration order under Article 34 of Legislative Decree 159/2011

In order to provide greater understanding of the reference context, the following paragraphs summarise the main events connected to the administration orders issued to Fiera Milano and its subsidiary Nolostand S.p.A. (hereinafter "Nolostand").

Subsequent Sections of the present Report and, in particular, Section 13 – Changes subsequent to the end of the financial year under review, provide further information on the implications for the governance of the Company.

* * * *

On 6 July 2016, Nolostand, a subsidiary of Fiera Milano operating in the stand-fitting sector, was notified of an order by the Milan Court – Prevention Court Independent Section placing it under Administration under Articles 34 and following of Legislative Decree 159/2011 (anti-mafia laws and prevention measures, including new provisions covering anti-mafia documentation in accordance with Articles 1 and 2 of Legislative Decree of 13 August 2010 no. 136), for a period of six months due to its contractual relations with a supplier.

On 11 October 2016, Fiera Milano was also issued with a similar order from the Milan Court – Prevention Court Independent Section placing it under Administration for a period of six months although this order was limited to the " exhibition stand-fittings" business division. In accordance with the Court order, the Courtappointed Administrator of Nolostand, Mr. Piero A. Capitini, collaborated with the executives of Fiera Milano in authorising the termination of contracts and the stipulation of new contracts and orders with suppliers in the aforementioned operating area for amounts in excess of Euro 10,000. In October 2016, at the request of the Court-appointed Administrator, the Milan Court clarified certain aspects of its decision and detailed the roles and responsibilities of the Court-appointed Administrator and the boundaries of the "exhibition standfitting" sector.

Subsequently, at the end of the first hearing on the above matter held on 22 November 2016, the Milan Court ordered that the aforementioned Administration procedures be unified as they involved matters that were closely connected.

On 1 December 2016, Fiera Milano communicated to the market that, together with its subsidiary Nolostand, it had requested that it be allowed to bring a civil action at the first hearing of the accelerated legal proceedings against certain persons connected with the "Consorzio Dominus" (a supplier of Nolostand, links with which had given rise to the current circumstances) for aggravated fraud aimed at facilitating the mafia.

On 20 December 2016, the Milan Court – Prevention Court Independent Section extended for a further six months the Administration order for Nolostand that was due to expire on 5 January 2017.

Information on the effects of the Administration orders described above on the corporate governance of the Company is provided in the relative paragraphs of the present Report.

* * * *

The Company gave immediate notice to the market of the Administration order and agreed to collaborate fully with the Court-appointed Administrator.

2. Description of the Issuer

Fiera Milano, an issuer of shares listed on the Italian Equity Market (MTA – Mercato Telematico Azionario) regulated by Borsa Italiana S.p.A. (hereinafter "Borsa Italiana"), uses a corporate governance system that meets the requirements of enacted laws, existing regulations and those of the Borsa Italiana Self-regulatory Code.

The Company uses a traditional administration and control model based on the existence of a Board of Directors and a Board of Statutory Auditors.

The Company qualifies as a Small and Medium Enterprise (hereinafter "SME") under Article 1, paragraph 1, section w-quater of Legislative Decree of 24 February 1998 no.58 (hereinafter the "Consolidated Finance Act").

* * * *

It should be noted that, following the Administration orders described in the Foreword, on 4 November 2016, the Board of Directors approved that a request be made to Borsa Italiana for the voluntary withdrawal of the Company shares from the Segment of the Italian stock market for companies that meet the highest requirements of Borsa Italiana (the STAR segment) whilst maintaining their listing on the MTA. Following receipt of the formal request from the Company, on 7 November 2016, Borsa Italiana formally withdrew Fiera Milano from the STAR segment effective from 15 November 2016.

However, the Company has stated that it will continue to adhere to the corporate governance, information transparency, and liquidity requirements that are the qualitative standards of the STAR segment and that it intends to request Borsa Italiana to include again its shares in the STAR segment when the aforementioned Administration order ends.

* * * *

3. Disclosure on the ownership structure

Share capital

The paid in share capital is Euro 42,445,141.00 (forty-two million four hundred and forty-five thousand one hundred and forty-one) and comprises 71,917,829 (seventy-one million nine hundred and seventeen thousand eight hundred and twenty-nine) registered shares with no nominal value.

The increase in the share capital is the result of the Rights Issue that commenced in 2015 and was completed in 2016.

On 31 July 2015, the Extraordinary Shareholders' Meeting approved a share capital increase on a paid basis and in divisible form for a total maximum amount, inclusive of any share premium, of Euro 70 million to be offered to holders of the shares in accordance with Article 2441, paragraph 1, of the Italian Civil Code through the issue of new ordinary shares with normal entitlement and identical in character to the shares already in circulation at the time of issue, to be carried out within a period of 12 months from the date of approval granted by the Shareholders' Meeting.

The Extraordinary Shareholders' Meeting also granted the Board of Directors all necessary powers to decide, nearer to the date of the transaction, the final amount of the share capital increase, the number of ordinary shares to be issued, the rights option ratio and the issue price, as well as the timing of the share capital increase.

The Extraordinary Shareholders' Meeting also approved the cancellation of the nominal value of the shares.

In accordance with the mandate granted it by the Extraordinary Shareholders' Meeting of 31 July 2015, the Board of Directors, on 26 November 2015, approved the final terms of the Rights Issue and subsequent offer of unsubscribed rights and the relative timetable.

In detail, the Board of Directors approved the issue of a maximum of 31,126,821 ordinary Fiera Milano shares with no indication of nominal value with normal entitlement and identical in character to the shares already in circulation at the time of issue to be offered to existing shareholders at Euro 2.245 per share (of which Euro 0.01 to be assigned to share capital and Euro 2.235 to be the share premium) in the ratio of three new Fiera Milano shares every four Fiera Milano shares held, for a maximum total of Euro 69,879,713.

29,770,392 ordinary shares were subscribed in the Rights Issue. This was equal to 95.64% of the total shares offered and was for a total value of Euro 66,834,530.

The Company Articles of Association including the amendments to Article 5 – regarding the new amount of the share capital – are available on the Company website www.fieramilano.it in the section Investor Relations/ Corporate Governance/ Articles of Association.

Details of the Rights Issue are given in the Prospectus and in the Supplement to the Prospectus and in other documentation available on the Company website www.fieramilano.it in the section Investor Relations/ Rights Issue.

The shares are indivisible and each carries one voting right except in the case of treasury shares held directly and indirectly, which do not have this right.

The Company has issued no other financial instruments with rights to subscribe to newly issued shares.

At 31 December 2016, the Company had no share-based incentive plans involving an increase, even without payment, of the share capital. Although there is no mandate for a share capital increase, the Shareholders' Meeting of 28 April 2016 approved the 2017-2023 Stock Option Plan aimed at using up to a maximum of one million treasury shares. Further information is given in the Report on Remuneration prepared in accordance with 123-ter of the Consolidated Finance Act.

Restrictions on the transfer of shares

There are no restrictions on the transfer of shares.

Significant shareholdings

The Company is classified as a SME and, therefore, under Article 120, paragraph 2, of the Consolidated Finance Act the relevant level for the communication of significant shareholdings is 5%.

According to the shareholders' register and communications received pursuant to Article 120 of the Consolidated Finance Act, the shareholders that at 10 March 2017 held, directly or indirectly, shares equal to 5% or more of the share capital were as follows:

Declarant Direct shareholder No. of
shares
% of ordinary
share capital
% of voting
capital
Fondazione E.A.Fiera Internazionale
di Milano
Fondazione E.A.Fiera
Internazionale di
Milano
45,898,995 63.821 64.666
Total 45,898,995 63.821 64.666
Camera di Commercio Industria Artigianato
e Agricoltura di Milano
Parcam S.r.l. 4,689,316 6.520 6.607
Camera di
Commercio Industria
Artigianato e
Agricoltura di Milano
1 0.000 0.000
Total 4,689,317 6.520 6.607

Shares with special rights

No shares with special rights have been issued.

Employee stock options: mechanism for exercising rights

At 31 December 2016, there were no employee stock option plans.

Restrictions on voting rights

There are no restrictions on voting rights.

Shareholder agreements

There are no shareholder agreements as under Article 122 of the Consolidated Finance Act.

Change of control clauses and provisions in the Articles of Association regarding tender offers

There are no changes to control clauses pursuant to Article 123-bis, paragraph 1, section h) of the Consolidated Finance Act.

As regards tender offers, the Company's Articles of Association meet current regulations on the passivity rule and do not provide for the application of the neutralisation measures under Article 104-bis, paragraphs 2 and 3 of the Consolidated Finance Act.

Mandates to increase the share capital and authorisations for the acquisition of treasury shares

In the course of the 2016 financial year, the Shareholders' Meeting gave the Board of Directors no mandate to increase the share capital under Article 2443 of the Italian Civil Code.

The Ordinary Shareholders' Meeting of 28 April 2016 gave the Board of Directors authority to acquire treasury shares for a period of 18 months. The authorisation stipulated that (i) the maximum number of shares acquired, including those already owned by the Company and its subsidiaries, could not exceed 20% of the share capital of the Company, (ii) the acquisition price of the shares could be not be 10% higher or 10% lower than the reference price of the shares on the Italian stock market or the trading day preceding any single transaction, (iii) shares could be disposed of in one or more transactions even before the authority to acquire the shares had been completed, and (iv) the disposal price could not be lower than the lowest price at which the shares were acquired; this restriction on the disposal price does not apply if the shares are disposed of as part of a stock option plan.

On 24 June 2016, Fiera Milano communicated to the market that it had begun the buy-back of shares under the aforementioned authority granted by the Ordinary Shareholders' Meeting on 28 April 2016. The buy-back was concluded on 4 November 2016.

Using the aforementioned authority, 249,010 shares were acquired at an average price of approximately Euro 1.58 per share for a total value of Euro 464,383.

At the date of this Report, Fiera Milano SpA holds directly and indirectly 939,018 treasury shares, equal to 1.31% of the share capital.

Of the total figure for treasury shares, 626,758 shares that are held directly were acquired before the 2016 financial year under previous authorisations given to the Board of Directors and 18,250 treasury shares are held indirectly through Ipack Ima S.p.A. following the acquisition of the latter during 2015.

* * * *

Direction and coordination

As approved by the General Council of its controlling shareholder Fondazione Ente Autonomo Fiera Internazionale di Milano on 26 July 2004, Fiera Milano has organisational and management autonomy and is not subject to any direction or coordination, pursuant to Article 2497 and following of the Italian Civil Code, by the controlling company.

Any presumption of direction and coordination is negated by the fact that Fondazione Ente Autonomo Fiera Internazionale di Milano exerts no decisive influence on the long-term strategic plans or annual budgets of Fiera Milano or on its investment decisions, nor does it determine its policies regarding the acquisition of goods and services on the market, or coordinates any business initiative or activity in the sectors in which the Company and its subsidiaries operate.

4. Compliance

Fiera Milano adheres to the Self-regulatory Code, approved by the Corporate Governance Committee of Borsa Italiana in March 2006 and as modified in December 2011, July 2014 and again in July 2015.

The Self-regulatory Code is publicly available on the website of the Committee for Corporate Governance at http://www.borsaitaliana.it/comitato-corporategovernance/codice/2015clean.pdf.

The governance structure of Fiera Milano is not affected by the legal provisions of countries other than Italy.

5. Board of Directors

The Board of Directors has a central role in the Company organisation and is responsible for its activities and its strategic and operating guidelines, as well as for verifying that the necessary controls exist to monitor Company and Group performance.

Appointments and replacements

As required by law and by the Company's Articles of Association, the appointment of members of the Board of Directors is made from lists presented by shareholders who, either alone or in association with other shareholders, hold shares with voting rights that represent at least 2.5% of the shares with voting rights in ordinary shareholders' meetings, as required by both the Company's Articles of Association and by Consob Resolution no. 19856 of 25 January 2017. The lists must be deposited at the registered office of the Company at least twenty-five days preceding the date set for the first convocation of the Shareholders' Meeting and must be made publicly available at least twenty-one days prior to this date in compliance with enacted regulations. Ownership of the minimum amount required to present lists is based on the shares that are registered to the shareholder on the day on which the lists are deposited with the Company. To prove ownership of the minimum number of shares required to present lists, the Shareholders must provide within the time required for the publication of the lists by the Company the relative certification released by authorised intermediaries in accordance with law.

Each list must be accompanied, within the aforementioned time, by (i) information concerning the identity of the shareholders that have presented the list and the percentage of the company held by these shareholders, (ii) statements in which each candidate agrees to be a candidate and declares that there is no cause that would make them ineligible or incompatible and that they meet the necessary requirements under enacted law to be appointed, including any requirements of independence as established by the Statutory Auditors and as required by law and by the Self-regulatory Code (iii) a curriculum vitae of the business career of each candidate, indicating directorships and executive positions held.

It is also a legal requirement that at least one Director be appointed from the list with the greatest number of votes presented by minority shareholders and which is in no way connected, even indirectly, with the shareholders who presented, or joined together to present, or voted for the list that received the highest number of votes.

With reference to the appointment and replacement of members of the Board of Directors, in accordance with the requirements of Article 147-ter, paragraph 1-ter, of the Consolidated Finance Act and Article 144-undecies 1 of the Consob Regulation approved with Resolution 11791 of 14 May 1999 and subsequent amendments and modifications (hereinafter the "Listing Rules"), requires that:

  • the number of Directors respects the principle of gender balance and guarantees that the least represented gender has at least one third of the seats on the Board;
  • the way in which the lists are drawn up and the substitution mechanisms for replacing persons during their mandate guarantee that the approved principle of gender balance is adhered to;
  • the mechanisms used should the elected body not respect the approved principle of gender balance ensure that some or all of the last three persons elected from the list that obtained the highest number of votes and that are of the gender most represented must step down to ensure the principle of gender balance and be replaced by the first persons that failed to be elected on the same list that belong to the less represented gender.

Under the Company's Articles of Association at least one of the members of the Board of Directors, or two members if the Board is made up of more than seven members, must have the requisites of independence required of Statutory Auditors under prevailing law (Article 148 of the Consolidated Finance Act).

For information purposes the entire section of the Company's Articles of Association regarding the aforementioned principle are available on the Company website www.fieramilano.it in the section Investor Relations/ Corporate Governance/ Articles of Association.

Furthermore, Fiera Milano SpA, in accordance with the requirements for companies that are part of the STAR segment of the Italian Equity Market, has two independent Directors in a Board of Directors of up to eight members, three independent Directors in a Board of Directors of between nine and a maximum of fourteen members, and at least four independent Directors in a Board of Directors with more than fourteen members. The Self-regulatory Code also recommends that an adequate number of independent Directors are appointed to the Board of Directors by applying the principles and criteria under articles 2 and 3 of the aforementioned Self-regulatory Code.

As indicated in the Self-regulatory Code, a Director of a listed company is not normally considered independent if:

  • a) the Director, directly or indirectly, even through a subsidiary, fiduciary company or intermediary person, controls the issuer or is capable of exercising significant influence over it, or is part of a shareholding agreement through which one or more parties can exercise control or have a significant influence over the issuer;
  • b) a Director has, or has held in the previous three financial years, a significant role (Chairperson, Executive Director, executive with strategic responsibilities) in the issuer or in one of its subsidiaries of strategic importance or in a company which is subject to common control by the Company, or in a company or entity which, also with others through a shareholding agreement, controls the issuer or is capable of exercising significant influence over it;
  • c) in the preceding financial year, the Director has or has had, directly or indirectly, a significant business, financial or professional relationship with:
  • the issuer, one of its subsidiaries or any of its top management;
  • someone who, also together with others through a shareholding agreement, controls the issuer, or if a company or entity – is connected with any of the relevant top management;

or who is, or in the last three financial years has been, an employee of any of the aforementioned entities;

  • d) a Director receives or has received in the previous three financial years from the issuer, or one of its subsidiaries or from a parent company, significant additional remuneration to the compensation agreed for a non-executive Director of the issuer or remuneration for being a member of a committee recommended in the Self-regulatory Code, including any incentive plans linked to company performance, comprising those that are share-based;
  • e) a Director has been a Director of the issuer for more than nine of the previous twelve years;
  • f) a Director is an executive Director in another company in which an executive Director of the issuer is also a Director;
  • g) a Director is a shareholder or Director of a company or entity belonging to the group of the company that is appointed as legal auditor to the issuer;
  • h) a Director is closely related to a person in any of the situations described above.

Succession plans

The Company has not adopted a formal plan for the succession of the Chief Executive Officer as the professional characteristics present within the Board of Directors and in the present management ensures continuity of the operational management of the Company.

For these reasons, with reference to the events described in Section 13 of the present Report, an evaluation of the merits of adopting such plans will be discussed following the appointment of the new Board of Directors.

Composition

The Board of Directors in office at 10 March 2017 was appointed by the Shareholders' Meeting of 29 April 2015 from a single list presented by the majority shareholder, Fondazione Ente Autonomo Fiera Internazionale di Milano, to hold office until the approval of the Financial Statements at 31 December 2017 (Table 1 attached to the present Report gives the structure of the Board).

However, as described in Section 13, on 13 January 2017, the majority of the Directors resigned with effect from the date of the Shareholders' Meeting to approve the Financial Statements at 31 December 2016 thereby

forcing the retirement of the entire Board of Directors. Section 13 also gives details of changes to the internal committees of the Board that took place at the start of 2017.

The Board is composed of nine Directors. A brief curriculum vitae for each Director in office at 10 March 2017 giving his/her main personal and professional details, as well as a list of positions held is given below.

  • Roberto Rettani, Chairperson, with the authority for the ordinary management of the Company given him on 13 January 2017, has held this office since 29 April 2015 (Executive Director). Born in Milan on 16 February 1953, Mr Rettani graduated in Industrial Chemistry from the Università Statale of Milan and did an MBA at the Luigi Bocconi University. In 2010 he founded Syneresis S.r.l., a consultancy company in the healthcare sector, and since that date has been its Chairman and Chief Executive Officer. He has over thirty years' experience in large Italian and foreign companies in the chemicals and pharmaceuticals sectors: from 2005 until 2008 he was Managing Director and CEO of Bracco Imaging S.p.A.; from 1999-2005, he was Managing Director and CEO of Zambon Group S.p.A.; from 1995-1999 he was Managing Director and CEO of Antibioticos S.p.A.; from 1994-1995 he was Group Director Planning & Strategy of Montedison S.p.A., a company in which he had previously been a member of the Steering Committee. From 1988-1995 he was Chief Executive Officer of Himont S.p.A. having previously been the Finance Director of Himont Incorporated. From 2005-2012 he was Chairman of the Chemicals Group of Assolombarda and also a Council member. His other appointments include President of the Carlo Erba Foundation and member of the Scientific Advisory Board of the Filarete Foundation. Since October 2015 he has been Chairman of Impact LaB S.r.l. He is also a Board member of Lissapharma SpA and the Chairman of Italchimici SpA.
  • Attilio Fontana, Deputy Vice Chairperson and Director since April 2009, an independent Director under Article 148, paragraph 3 of the Consolidated Finance Act and under the Self-regulatory Code (independent Non-executive Director).

Born on 28 March 1952 in Varese, Mr Fontana is a graduate in law and owns a legal studio that he set up in 1980. Since 1988 he has been a lawyer entitled to represent clients in the Court of Cassation. From 1983- 1989 he was an honorary district judge. He was a member of the Advocates and Procurators Council of Varese for three mandates and is registered in the Register of Auditors of Accounts. Since 1995 he has held numerous institutional appointments.

– Licia Ronzulli, Deputy Chairperson and Director since 29 April 2015, an independent Director under Article 148, paragraph 3 of the Consolidated Finance Act and under the Self-regulatory Code (independent Nonexecutive Director).

Born in Milan on 14 September 1975, Ms Ronzulli took a Masters degree in Health Management and from 2003-2009 was responsible for coordinating the health professions within the IRCCS – Istituto Ortopedico Galeazzi of Milan (the San Donato Hospital Group). From 2009-2014 she was a member of the European Parliament and a member of the Committee for Employment and Social Affairs. She also became a member of the Committee for Environment, Public Health and Food Safety. Since 2004, she has worked with the international non-profit organisation, ONLUS Smile Project in the World, travelling several times to Bangladesh with a surgical team specialising in the treatment of children with physical abnormalities. She is a consultant, manager and instructor in Corporate Welfare, Work-life Balance and Social Innovation.

– Joyce Victoria Bigio, Director since 29 April 2015, an independent Director under Article 148, paragraph 3 of the Consolidated Finance Act and under the Self-regulatory Code (independent Non-executive Director). Born in Norfolk, Virginia (USA), in 1954, Ms Bigio graduated in Economy and Commerce from the University of Virginia in Charlottesville (USA) in 1976. From 1976-1986 she worked for Arthur Andersen & Co both in Milan and Washington becoming a Senior Audit Manager. From 1986-1990, she was responsible for

setting up and implementing the management control system at Euromobiliare SpA in Milan; in 1990 she joined The Waste Management Group, a company with offices in both London and Milan, first as a Finance Manager for Europe and later as Controller of Mergers & Acquisitions. For three years from 1995 she was Director General of American International Bakeries in Milan and in 1998 became the Finance Director and a Board member of the Italian and Swiss subsidiaries of Sotheby's auction house. In 2002 she founded International Accounting Solutions Srl where she is currently a Managing Partner. She has been a nonexecutive independent board Director of Fiat SpA, as well as a member of the Committee for Control and Risks and the Appointments Committee until the effective merger by incorporation of Fiat S.p.A. into Fiat Investments N.V.

She has also been an independent Director of Gentium S.p.A., a pharmaceutical company listed on NASDAQ, and of Simmel Difesa S.p.A. Since 2014 she has been an independent Board member and Chairperson of the Committee for Control and Risks of RAI WAY SpA. In 2015, she was an independent Director and Chairperson of the Committee for Control and Risks of Veneto Banca S.c.p.a..

  • Renato Borghi, Director since 2006, an independent Director under Article 148, paragraph 3 of the Consolidated Finance Act and under the Self-regulatory Code (independent Non-executive Director). Born on 30 October 1948 in Milan, Mr Borghi is the Managing Director of Pellux S.r.l. He is also Deputy Chairman of Confcommercio Nazionale; Deputy Vice Chairman of Confcommercio Lombardia. He is the National Chairman of Federazione Moda Italia and the Provincial Chairman of Federmodamilano, both entities that represent companies in the retail and wholesale distribution of textiles, garments, furnishings, shoes, leather goods, travel goods and accessories.
  • Pier Andrea Paolo Edoardo Chevallard, Director since 2010, an independent Director under Article 148, paragraph 3 of the Consolidated Finance Act and under the Self-regulatory Code (independent Nonexecutive Director).

Born on 24 May 1951 in Turin, Mr Chevallard graduated in Political Sciences from the University of Turin. Since January 2015, he has been CEO and General Director of Tecnoinvestimenti SpA. From November 2001 – December 2014, he was Secretary General of the Artisan and Agriculture Industries within the Chamber of Commerce of Milan. He is also Chief Executive Officer of Parcam Srl, Tecno Holding S.p.A., Ribes S.p.A., and ASSICOM S.p.A..

– Corrado Peraboni, Chief Executive Officer since 29 April 2015 (Executive Director); until 13 January 2017 he was the Chief Executive Officer of the Company.

Born in Monza on 2 June 1964, Mr Peraboni is a graduate in law from the Università degli Studi of Milan. He is currently the Incoming President of UFI, the Global Association of the Exhibition Industry. From 2001- 2014 he was the Vice President of the European Chapter of UFI and from 2004 – 2008 was simultaneously International Vice President of UFI and President of the European Chapter.

From July 2012 – May 2015, he was a Director of Arexpo S.p.A.; from 2000-April 2015, he was Director General of Ente Autonomo Fiera Internazionale di Milano. From 1996-1999, he was a member of the General Council and Executive Council of Ente Autonomo Fiera Internazionale di Milano. Within the Fiera Milano Group he has been Chairman and Chief Executive Officer of Edizioni Fiera Milano S.p.A. (1997-2000); Chairman and Chief Executive Officer of Rassegne S.p.A. (1998-2000); a Board director of Fiera Milano International S.p.A. (2003-2007); Sole Director of Quartiere Fiera S.r.l. (2003-2012); a member of the Board of Directors of Villa Erbe S.p.A. (2001-2014); and Chief Executive Officer of Expo CTS (2007-2009).

He has also held several institutional offices: in 1992 he was elected to the Chamber of Deputies and was re-elected again in 1994; he has been a member of the Production Activity Commission, the Commission for Regional Affairs, and the cross-Chamber Committee overseeing the Cassa Depositi e Prestiti.

– Romeo Robiglio, Director since 2003 (non-executive Director).

Born in Montechiaro d'Acqui (Alessandria) on 20 January 1931, Mr Robiglio became the Deputy Director of the Milan headquarters of Credito Italiano in 1976 and from 1978-2003 was the Managing Director of Gruppo Siti Novara, a group of companies in the mechanical engineering sector. He has been a Director and member of the Executive Committee of Fondazione Cariplo (1998-2001) and of Intesa Asset Management (2000-2003). In 2001-2004, he was also Deputy Chairman of the Industrial Association of Novara and from 2004-2007 was appointed a board Director of Esatri S.p.A., a company that is part of the Intesa San Paolo Group. He is currently a Director of Sirefid S.p.A., a company of the Intesa San Paolo Group.

– Vincenza Patrizia Rutigliano, Director since 29 April 2015, an independent Director under Article 148, paragraph 3 of the Consolidated Finance Act and under the Self-regulatory Code (independent Nonexecutive Director).

Born in Barletta on 25 February 1968, Ms Rutigliano graduated in Foreign Languages and Literature. Since 2009, she has been the Director of Institutional Relations and Communications at Snam, one of the main European companies in the management of natural gas infrastructure. Since 2011, she has also been the President of FERPI, the Italian Public Relations Federation. From 2004-2009, she was Director of Communications at Autogrill and from 2001-2004 was the external relations Officer for Fastweb and Press Officer for e.Biscom. From 1997-2001 she was the spokesperson of the City of Milan. A specialist in Social Communications, she has been a professional journalist since 1997. In 2008 she was Director of the course for the Masters degree in Media Relations at the Alta Scuola in Media Communicazione e Spettacolo of the Università Cattolica del Sacro Cuore in Milan. Since 2012 she has been a member of the Steering Committee of the Department of Political Sciences of the Università LUISS Guido Carli di Roma. She is a member of the General Council of Assolombarda and the Committee for the Milano Expo 2015 Brand. She is a member of the Board of Directors of Toscana Energie and of Il Cittadino of Monza and Brianza.

With the exception of the Chairperson, all other members of the Board are non-executive Directors since none have any management responsibility.

For information on positions as Director or Statutory Auditor held by members of the Board of Directors in other companies listed on regulated markets, also foreign, or in financial, banking or insurance companies or companies of significant size, please refer to the section above and Table 1 of the present Report.

It should be noted that the number of independent Directors shown above exceeds the minimum ratio to the total number of Board Directors that is required under prevailing law and regulations.

The Board of Directors verified the requisite independence of the Directors at its board meeting on 13 May 2016. On the aforementioned date, the Board of Statutory Auditors, as part of their duties under the law, verified that the Board of Directors had correctly applied the criteria and procedures for ascertaining and evaluating the independence of its own members.

The Chairperson of the Board of Directors and the Chairperson of the Board of Statutory Auditors therefore certified the existence of the requisite independence of the Directors on the basis of declarations given to this end in accordance with enacted law.

Profiles of the members of the Board of Directors may be found on the Company website www.fieramilano.it under Investor Relations/Corporate Governance/Corporate Bodies.

Role of the Board of Directors and Delegated Bodies

The Board of Directors is invested with the widest powers for the ordinary and extraordinary management of the Company; specifically, it may take any action deemed appropriate or useful to achieve the Company objectives, except for those which, pursuant to law, are reserved for the Shareholders' Meeting.

In addition to those responsibilities that by law are the exclusive preserve of the Board of Directors, the Company's Articles of Association specifically assign the Board the following responsibilities:

  • (a) the purchase, underwriting and transfer on its own behalf of shares, shareholdings or investments in other companies, including newly incorporated companies, and the transfer of option rights, except for normal treasury investment transactions;
  • (b) the conferral of fixed or other assets to other companies in the process of incorporation or already incorporated;
  • (c) any form of loan taken out by the Company which exceeds 30% of shareholders' funds;
  • (d) taking out mortgages, charges or other guarantee rights of any type on all or a significant part of the bonds, property or assets of the Company;
  • (e) approval of the budget;
  • (f) giving bank guarantees from the Company to third-parties;
  • (g) the stipulation of property-related contracts, with the exception of property rental contracts for a period not exceeding six years, agreed as part of the Company business;
  • (h) the acquisition, divestment, creation, lease and contractual licensing agreements for patents, brands, models, internet sites and/or domains, satellite or cable television channels, editorial publications, royalties and similar and any intellectual property rights in general that are connected to the corporate objectives of the Company;
  • (i) the appointment, use of consultants, and authorisation of services not covered by the budget and exceeding Euro 100,000 to third-parties that are in no way connected to the Board;
  • (j) the appointment and removal of the Manager responsible for preparing the company accounts.

The Board of Directors is also responsible for the following:

(k) any merger decision in circumstances pursuant to Articles 2505 and 2505-bis of the Italian Civil Code;

  • (l) the setting up and closure of branch offices;
  • (m)the reduction of the share capital in cases of shareholder rescission;
  • (n) amending the Company's Articles of Association so that they adhere to the law;
  • (o) the transfer of the registered office to another location in the same Province.

At his re-appointment on 29 April 2015, the Chief Executive Officer, Mr Corrado Peraboni, was given all the powers necessary for the ordinary and extraordinary management of the Company, except for those matters that are the exclusive preserve of the Board of Directors.

During the 2016 financial year, the Chief Executive Officer provided the Board of Directors, at least quarterly, with adequate information on the general progress of operations, on the foreseeable outlook for the business, as well as on the more significant transactions carried out by the Company and its subsidiaries.

On 13 January 2017, the Chief Executive Officer resigned and the Board of Directors vested the Chairperson, Mr Roberto Rettani, with the powers for the ordinary management of the Company as described in Section 13 of this Report.

The Directors notify the Board of Statutory Auditors in a timely manner in writing, and at least quarterly at the meeting of the Board of Directors, of any material economic, financial or equity-related transactions carried out by the Company and its subsidiaries.

As regards the provisions of point 1.C.3 of the Self-regulatory Code concerning an opinion of the Board about the maximum number of appointments that may be held as Directors or Statutory Auditors in listed companies, financial institutions, banks, insurance companies or companies of a significant size, it should be noted that the current Articles of Association of the Company do not stipulate a maximum number of such positions that may be held. However, the members of the Board of Directors have undertaken to guarantee that they will carry out their duties effectively and dedicate the necessary time to these duties. This is confirmed by the significant number of Board meetings held during the 2016 financial year and the high level of attendance at these meetings.

The meetings of the Board of Directors are usually scheduled according to a timetable approved at the start of the year in order to ensure maximum attendance at the meetings.

The corporate calendar is available on the Company website in the Investor Relations/Financial calendar section.

During the financial year to 31 December 2016, the Board of Directors met nineteen times with a high attendance rate for all Directors (the number of meetings attended by each member of the Board of Directors is shown in Table 1). The average duration of the board meetings was approximately two hours. At the date the present Financial Statements were approved, seven Board Meetings had been held in the current financial year, one of which stretched over two sessions.

Group executives, who are responsible for the corporate activities pertaining to matters that are on the agenda, are invited to attend board meetings to provide additional information on the matters under discussion by the Board of Directors.

On 29 April 2015, the Board of Directors appointed a Secretary to the Board who is the Central Director of Corporate Affairs of Fiera Milano.

The Chairperson is supported by the Secretary in ensuring the timely delivery and completeness of the documentation supplied ahead of the board meetings and in maintaining the confidentiality of the data and information given.

Board Directors and Statutory Auditors receive the documentation and information sufficiently in advance of the date of the Board meeting to allow them to speak knowledgeably on the arguments submitted to them for discussion and approval.

The Board of Directors decided that the appropriate advance period for documentation given to Directors and Statutory Auditors ahead of board meetings was: seven days prior to the date of the meeting for any documentation regarding financial statements, budgets and business plans except when there are valid reasons otherwise.

The Chairperson of the Board of Directors

The Chairperson directs the proceedings of the Shareholders' Meetings, verifies the correct constitution of the meeting, checks the identity and the legitimate right of attendees, oversees its conduct, including the rules governing the order and duration of any intervention, organises the voting system and the counting of votes, and scrutinises the results of any vote. The Chairperson also oversees relations with shareholders, supervises national and international institutional relations, and corporate communication; he/she coordinates strategies and the internal audit, and verifies that decisions taken by the Board of Directors are implemented, whilst assisting the Chief Executive Officer in the internationalisation of the Group.

Section 13 describes the new responsibilities that became part of the role of Chairperson at the Board meeting of 13 January 2017 as a result of which he no longer met the requirements of independence under the Selfregulatory Code and under Article 148, paragraph 3 of Legislative Decree 148.

Induction program

In the course of the 2016 financial year, the Chairperson and the Chief Executive Officer were diligent in informing the Board of Directors of market conditions in the national and international exhibition sector in which Fiera Milano S.p.A. operates; corporate trends and their evolution; and the reference legal framework. They also informed the Board of Directors of the activities to update corporate procedures, particularly given the specific circumstances described in the Foreword to this Report.

Self-appraisal by the Board of Directors

The Board of Directors carried out a self-appraisal of the functioning, composition and size of the Board of Directors and of its committees for the 2016 financial year.

The self-appraisal, instigated by the Chairperson of the Board of Directors, was made by each Director anonymously completing a questionnaire; the results were revealed during the Board Meeting held on 10 March 2017.

The questions were designed to analyse (i) the size and composition of the Board of Directors with reference to the nature and professional experience of the Directors; (ii) its modus operandi, (iii) the composition and responsibilities of the internal committees of the Board; (iv) the knowledge of the legal framework of the sector and the participation of Directors at meetings and in the decision-making process.

This questionnaire was completed by each Director and the results were aggregated and presented to the Board of Directors in an anonymous form.

The results of the questionnaire showed that the Board of Directors believes that the size and modus operandi of the Board meet the organisational and administrative requirements of the Company. They selfappraisal highlighted that the diversity of professional qualifications of the Directors needed to be increased. A positive opinion was also expressed on the frequency of the meetings. There was also a positive evaluation of the internal committees concerning the role guaranteed by these committees within the Board.

6. Internal Committees within the Board of Directors

The Control and Risk Committee and the Remuneration Committee have been set up by the Board of Directors; their roles and functions are in line with the standards indicated in the Self-regulatory Code and with corporate governance best practice.

On 29 April 2015, the Board of Directors decided against having a specific appointments committee within the Board of Directors, under Article 5.P.1 of the Self-regulatory Code, as there appeared to be no requirement for such a committee. It decided that the functions of an appointments committee would be carried out by the Board in order to meet the criteria of 4.C.2 of the Self-regulatory Code.

On 26 July 2013, the Board of Directors adopted Rules for the Appointment of the Corporate Bodies of Subsidiaries, which gives guidelines for appointments to the administration and control bodies in subsidiaries that refer to the Rules for the Regulation of Direction and Coordination by the Parent Company (see Section 12).

Remuneration Committee

A Remuneration Committee has been constituted within the Board of Directors.

The Board of Directors meeting of 29 April 2015 appointed the Deputy Vice Chairperson, Attilio Fontana, as Chairperson of the Remuneration Committee and the non-executive Directors, Licia Ronzulli and Romeo Robiglio, as the other members of the committee.

The members of the Remuneration Committee are remunerated for the work they do.

During the financial year to 31 December 2016, the Remuneration Committee met ten times, with minutes taken, making proposals, as is its duty, to the Board of Directors. The average duration of these meetings was approximately forty-five minutes.

At the date of the approval of the present Financial Statements, two meetings had been held in the current financial year.

Information on the composition, activities and operation of the Remuneration Committee, is given in the Report on Remuneration published in accordance with Article 123-ter of the Consolidated Finance Act.

Remuneration of the Board of Directors

Reference should be made to the Report on Remuneration published in accordance with Article 123-ter of the Consolidated Finance Act for:

  • the general policy on remuneration;
  • remuneration of Executive and Non-executive Directors;
  • remuneration of executives with strategic responsibilities;
  • compensation payable to Directors on resignation, dismissal or termination of employment.

Control and Risk Committee

The Board of Directors set up a Control and Risk Committee composed of independent and non-executive Directors. The Committee has an advisory role, makes proposals and carries out preliminary research to aid the Board of Directors in its decisions and evaluations regarding the internal control and risk management systems, as well as the approval of the financial statements and the six month interim financial statements; it gives the Board of Directors information, on at least a six-monthly basis when the annual financial statements and the interim six-monthly statements are approved, regarding its activities and also the adequacy of the internal control and risk management system.

Specifically the responsibilities of the Control and Risk Committee are the following:

  • to give a preliminary opinion to the Board of Directors regarding:
  • (i) the definition of the guidelines of the internal control and risk management system so that the main risks faced by the Company and its subsidiaries are correctly identified, quantified, managed and monitored while assessing the compatibility of these risks with management of the company in a way that is consistent with the stated strategic objectives;

  • (ii) the annual evaluation of the adequacy and efficacy of the internal control and risk management system given the nature of the business and its risk profile;

  • (iii) the description, which forms part of the Report on Corporate Governance, of the main features of the internal control and risk management system and the evaluation of its adequacy;
  • to express a considered opinion on the interests of the Company and on the substantial correctness of conditions regarding significant related-party transactions, pursuant to the prevailing Procedures for Related-Party Transactions adopted by the Company in accordance with Consob Resolution no. 17221/2010 and the relative enacted organisational procedures;
  • to express a considered opinion on specific aspects regarding the identification of the main corporate risks;
  • to evaluate, in collaboration with the Manager responsible for preparing the Company accounts and having asked the opinions of the Independent Auditors and the Board of Statutory Auditors, the correct application of accounting principles, as well as their consistent application across the Group in preparing the consolidated financial statements;
  • to express a preliminary opinion regarding the appointment or removal of the Head of Internal Audit, ensuring that he/she has the necessary resources to carry out his/her role, as well as on whether his/her remuneration is consistent with Company policy;
  • to express its opinion regarding the adoption and subsequent updating of the guidelines for the Manager responsible for preparing the Company accounts;
  • to express a preliminary opinion to the Board of Directors on the annual approval of the work schedule prepared by the Head of Internal Audit and to examine the periodic reports made by the internal audit department assessing the internal control and risk management system, and any other important evaluations;
  • to give a preliminary opinion to the Board of Directors on the results of the independent audit expressed in any eventual letter of suggestions and in the report on any fundamental matters under Article 19, paragraph 3 of Legislative Decree no. 39/10 that have emerged as part of the independent audit;
  • to express an obligatory but non-binding opinion on any intra-group service contracts that could come under the Rule governing the exercise of direction or coordination by the Parent Company;
  • to monitor the independence, adequacy, efficacy and efficiency of the internal control procedures.

The Chairperson of the Board of Statutory Auditors (or a member of the Board of Statutory Auditors delegated by the Chairperson) and the Head of Internal Audit for Fiera Milano attend meetings of the Control and Risk Committee. Other Statutory Auditors may also attend.

If considered appropriate, the Committee may invite Directors and executives of Fiera Milano or of Group companies to attend its meetings so that they may give their opinion on specific matters; it may also invite other persons who may be able to assist in the business of the Committee.

The Control and Risk Committee has access to information and the corporate functions necessary to carry out its responsibilities and may also use external consultants.

At its meeting on 29 April 2015, the Board of Directors appointed the following as members of the Control and Risk Committee: Joyce Victoria Bigio (Chairperson), Renato Borghi and Patrizia Rutigliano, all independent Non-executive Directors.

At the time of these appointments, the Board of Directors expressed a positive opinion on the professional accounting and financial experience of the Director, Ms Bigio.

On 17 February 2017, the Director Renato Borghi resigned from the Control and Risk Committee.

The members of the Control and Risk Committee are remunerated for the work they do.

During the financial year to 31 December 2016, the Control and Risk Committee held eleven meetings, minuted in accordance with the regulations. The average duration of the meetings of this Committee was approximately two and a half hours. At the date of the approval of the present Report, four meetings had been held in the current financial year.

During the financial year under review, the Control and Risk Committee:

  • evaluated the work schedule prepared by the Head of Internal Audit, with relevant periodic reports on the audit activity;
  • examined the work schedule proposed by the independent audit firm, the relevant audit reports and the report on fundamental matters;
  • examined the delegations and authorisations system;
  • investigated evidence of direction and coordination of the companies Mico DMC and Ipack Ima Srl;
  • assimilated information regarding the Administration orders issued by the Milan Court to the subsidiary Nolostand and the stand-fitting business division of the Parent Company, expressed its opinion and made suggestions where applicable;
  • carried out preliminary and preparatory analyses of the Board decisions regarding extraordinary financial transactions made in the financial period under review;
  • monitored the functioning of Group shared services;
  • monitored the corporate project to review the Group information systems;
  • examined the process for preparing the quarterly and half-year reports on operations, as well as that for the annual Financial Statements, and evaluated the adequacy of the accounting standards used with particular attention to the methodology followed in carrying out any impairment tests;
  • monitored the preparation of the Parent Company rights issue;
  • expressed its opinion on the updating of the guidelines for the responsibilities of the Manager responsible for preparing the Company accounts;
  • expressed its opinion on a series of newly adopted corporate procedures, in particular, in the Procurement department;
  • examined the periodic management reports.

The Control and Risk Committee also exercised its prerogative to give a preliminary analysis to the Board of Directors identifying, quantifying, managing and monitoring the main risks to the Company.

On the subject of related-party transactions, the Committee examined the suitability and substantive correctness of the main economic, capital and financial transactions with related parties.

7. Internal Control and Risk Management System

The internal control and risk management system of the Company and the Group is made up of rules, procedures and organisational structures that are designed to identify, quantify, manage and monitor the main risks. It contributes to the conduct of the Company and the Group as it is consistent with the corporate objectives established by the Board of Directors of the Parent Company and favours the adoption of informed decisions. It also contributes to guaranteeing (i) the protection of shareholder equity, (ii) efficient and effective corporate procedures, (iii) reliability of financial reporting, and (iv) compliance with applicable laws and regulations, the Company's Articles of Association, and internal procedures.

Fiera Milano Group has developed an integrated risk management model based on internationally recognised Enterprise Risk Management (ERM) standards.

The main aim is to have a systematic and pro-active approach to identifying the principal risks to which the Group is exposed and to identify as early as possible the potential negative effects, taking suitable action to mitigate these effects while continually monitoring the relevant exposure.

In order to achieve this Fiera Milano has compiled a catalogue of Group risks linked to the strategies being implemented, together with a risk mapping and risk scoring methodology, and has made the necessary organisational changes in order to identify the roles and responsibilities of those involved.

Specifically, the Group integrated risk management process entails an annual (i) update of the risk catalogue according to the strategies implemented and the management and business model used; (ii) assessment of the risks by the management of Fiera Milano and of its subsidiaries; (iii) consolidation of information and prioritisation of the risks and the consequent course of action; (iv) tolerance analysis of any exposure identified and formulation of the appropriate management strategies/actions and the identification of those responsible for implementing such actions; (v) monitoring over time of any exposure that has been identified.

The Control and Risk Committee and the Board of Statutory Auditors are informed of the results of the aforementioned procedure.

Risk management and internal control system for financial reporting

The aforementioned integrated risk management model cannot be considered separately from the internal control system used for the financial information process as both are elements of the overall internal control and risk management system of Fiera Milano. It should be noted that the process for preparing the annual and interim financial statements and, in particular, the procedures to describe the principal risks and uncertainties to which Fiera Milano and the Group are exposed, are strictly linked and coordinated to the information flows deriving from the Enterprise Risk Management (ERM) processes of the Company and of the Group, which aim to identify, evaluate and mitigate any corporate risks.

In recent financial years, Fiera Milano has modified its internal control system for financial reporting in keeping with the provisions of Law 262/05 so as to document, where necessary, the administrative and accounting control model adopted, and to schedule and implement periodic checks on the operational efficacy of the controls that are behind the certification processes of the Manager responsible for preparing the Company accounts.

The aforementioned administrative and accounting control model combines the internal procedures and methods used by the Company to attain the corporate targets of integrity, accuracy, reliability and timeliness of financial information. The approach of Fiera Milano in formulating, implementing and continually updating the aforementioned administrative and accounting control model follows a development process initially in line with generally accepted best practice, with the guidelines for the duties of the Manager responsible for preparing the Company accounts under Article 154-bis of the Consolidated Finance Act issued by Confindustria, and with the control elements identified in the Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission.

This reference model, based on the components of the internal control system (Control environment, Risk assessment, Control activities, Information & Communications, and Monitoring) necessary to attain the aforementioned financial reporting objectives favours, inter alia, the identification of coordination opportunities and the development of synergies among, for example, Enterprise Risk Management activities, activities undertaken to comply with Decree Law 231/2001 and the activities of the Head of Internal Audit.

The internal control system phases relating to the financial reporting system of Fiera Milano can be divided into the following macro-categories:

  • identifying procedures, risks and controls;
  • defining and updating administrative and accounting procedures;
  • monitoring and updating administrative and accounting procedures.

As part of the responsibilities and powers given him/her by the Board of Directors, the Manager responsible for preparing the Company accounts must effectively implement any actions falling into the above categories.

The main activities under the model used, and included in the macro-categories listed above, are summarised below.

Identifying procedures, risks and controls

This category includes all activities concerned with identifying or updating the extent of analysis and monitoring carried out, the identification and assessment of risks, the planning of administrative and accounting procedures and the formulation and assessment of checks aimed at mitigating those risks.

At least once a year, the Manager responsible for preparing the Company accounts decides the areas of the Company and Group processes that will be subject to risk analysis and to monitoring of the controls existing in the administrative and accounting control model. This will be done using both quantitative and qualitative parameters to ensure that the most significant areas and/or those that pose the greatest risk of failing to meet the objectives of the financial reporting controls are included in the aforementioned areas.

Defining the areas to be analysed and monitored necessitates identification of the relevant accounts, disclosures and connected procedures so that the subsequent identification and assessment of controls, both at entity level and at procedure and transaction level, can effectively mitigate the risks inherent in the process of preparing financial information.

With regard to identifying and assessing risk in financial reporting, the approach adopted considers both the risk of unintentional errors and those that may be caused by fraudulent activity, providing for the formulation and monitoring of checks and balances that address these types of risk, as well as coordinating the controls implemented with others in the overall internal control system.

Without prejudice to the main elements of the administrative and accounting control model already implemented in previous financial periods, the continuous activity of updating the monitoring model carried out by the Manager responsible for preparing the Company accounts also includes, where they affect the administrative accounting procedures, any changes the Company might introduce to the entity level controls of the various parts of the overall Internal Control and Risk Management System, for example, those pertaining to compliance, organisation and risk prevention.

To support the assessment of inherent risk levels, the reference criteria used are based on the following main potential risk indicators, generally recognised by the reference best practice: changes in information systems, processes and procedures and other complex elements, for example, the complexity of information processing required by a certain procedure, a high level of transactions, or, for example, in processes that employ a considerable amount of estimates and valuations, the adequacy of the documentation and the reliability of the assumptions made.

When significant risks in financial reporting are identified, the administrative and accounting control model provides for the appropriate identification of controls to mitigate these risks. Specifically, the approach adopted takes adequate account of both manual controls and the data system controls in the administrative and accounting procedures, the so-called automatic system controls application, the general IT control that govern system access, the control of developments and modifications to the application systems, and the adequacy of the information structures.

The administrative and accounting model, in line with reference best practice, ensures that the surveillance procedures for the processes, risks and controls is updated for significant changes in the Group administrative and accounting procedures whenever necessary.

Defining and updating administrative and accounting procedures

Based on the results of monitoring the processes, risks and controls, the Manager responsible for preparing the Company accounts defines or updates the administrative and accounting procedures and guarantees their adequacy as regards the internal control model and monitors the various phases of the definition or updating of the procedures.

In particular, the updating of the administrative and accounting procedures is done in conjunction with the evaluation of the design of the controls and the continuous monitoring of their implementation.

Monitoring the administrative and accounting procedures

The Manager responsible for preparing the Company accounts constantly monitors the administrative and accounting procedures, with particular reference to those linked to the preparation of the financial statements, the consolidated financial statements and the summary half-year financial statements, as well as any action or communication of a financial nature that requires statements, attestations and declarations under paragraphs 2 and 5 of Article 154-bis of the Consolidated Finance Act, so as to ensure the adequacy and effective implementation of these procedures.

To achieve this, special verification actions to ascertain the correct implementation of the controls incorporated in the administrative and accounting procedures exist. The checks, analyses, and verification of the administrative and accounting procedures are based on defining a test strategy that determines the modus operandi, the controls and ways of monitoring the procedural systems implemented.

The timetable of the monitoring activity is prepared in such a way as to give priority to verifications of identified "key" controls, and to balance the objectives of efficiency with the requirement of achieving adequate coverage of the verification activities, introducing rotational tests for the significant processes and sub-processes for subsequent important end of financial period dates.

With regard to the organisational aspects and to the roles involved in the various phases of formulating, implementing, monitoring and updating over time the administrative and accounting control model, it should be noted that specific information flows have been defined between the Head of Internal Audit and the corporate, administrative and control committees and the corporate executives and/or areas that, outside the Department of Administration, Finance and Tax, are involved in compiling, preparing and circulating the annual financial statements, the consolidated financial statements, the summary half-year financial statements, the interim management reports and, more in general, any information subject to attestation/ declaration by the Manager responsible for preparing the company accounts. The accounting and administrative model also covers specific information flows among Group companies and internal attestations/declarations.

In preparing the annual and interim financial statements and describing the principal risks and uncertainties to which Fiera Milano and the Group are exposed, the Manager responsible for preparing the Company accounts works with the Enterprise Risk Management of the Company and of the Group in order to identify and assess all corporate risks.

In 2016, under the Administration orders for the stand-fitting procurement area of Fiera Milano S.p.A. and the subsidiary Nolostand S.p.A. that are still in place, the actions implemented by the Company also comprised the revision of some corporate procedures that included those for procurement and the purchasing cycle. The evaluation of the adequacy of the administrative and accounting procedures for the preparation of the Consolidated Financial Statements at 31 December 2016 took account of the aforementioned circumstances in deciding the periodic monitoring activities.

Governance of subsidiaries in countries outside the EU

In accordance with the provisions of Article 36, as referred to in Article 39, paragraph 3 of the Stock Market Regulations, the Company and its subsidiaries have administrative and accounting systems which make public the accounting procedures used to prepare the consolidated financial statements of the companies to which this law is applicable and which permit the regular communication of the data required to prepare the Consolidated Financial Statements to the Parent Company management and its independent auditors.

Therefore, the conditions exist under the aforementioned Article 36, paragraphs a), b) and c) of the Stock Market Regulations issued by Consob.

Director responsible for the internal control and risk management system

The Board of Directors is responsible for internal control and risk management and, with the help of the Control and Risk Committee, for establishing its guidelines and periodically verifying that it is fit for purpose and is functioning effectively, ensuring that the principal corporate risks are identified and managed in an appropriate manner. On 29 April 2015, the Board of Directors, in accordance with Rule no. 7 of the Self-regulatory Code, also gave the Chief Executive Officer the responsibility for the internal control and risk management system.

Section 13 provides details of the changes to the administrative bodies at the start of the 2017 financial year. At the Board meeting of 19 January 2017, this function passed to the Chairperson of the Board of Directors.

Head of Internal Audit (the "Internal Audit Department")

The Head of the Internal Audit Department is responsible for verifying that the internal control and risk management system is fit for purpose and working; he/she is not hierarchically answerable to anyone in charge of an operating area but reports directly to the Chairperson so that independence and autonomy are guaranteed. There is also a system for functional reporting to the Control and Risk Committee. The Head of the Internal Audit Department has direct access to all the information necessary and has adequate means for carrying out his/her role.

At its meeting on 13 January 2017, the Board of Directors assigned the ordinary management of the Company to the Chairperson to ensure continuity of its day-to-day management; at the same time, the responsibility for oversight of the internal audit was assigned to the Chairperson of the Control and Risk Committee, the Director Ms Joyce Victoria Bigio.

It is the responsibility of the Board of Directors, on the suggestion of the Chief Executive Officer prepared in conjunction with the Chairperson, and having received a favourable opinion from the Control and Risk Committee and having consulted the Board of Statutory Auditors, to appoint or dismiss the Head of the Internal Audit Department, to ensure that the latter has all the resources required to carry out his/her duties and is remunerated in line with Company policies. The Board of Directors is also responsible for annually approving the work schedule prepared by the Head of the Internal Audit Department, having considered the opinion of the Control and Risk Committee, consulted the Board of Statutory Auditors, the Chairperson and the Chief Executive Officer.

The Head of the Internal Audit Department reports regularly to the Chairperson and periodically to the corporate control bodies, the Control and Risk Committee and the Board of Statutory Auditors.

Organisational model pursuant to Legislative Decree no. 231/01

The Company has adopted an Organisation, Management and Control Model in accordance with Legislative Decree no. 231/01.

The aim of the Organisation, Management and Control Model is to describe the operating and conduct rules governing the Company's activities, as well as the additional controls that the Company has adopted in order to prevent any of the offences described in the Decree being committed. The Model covers the current organisational and control tools, such as the organisational chart, the system of proxies and delegations and the service instructions.

In particular, the Model aims to:

  • ensure, amongst those persons operating in the name of and on behalf of the Company in areas where there is a risk of offences being committed and in areas vulnerable to the committing of offences, that there is an awareness of the risk of committing an offence if the adopted procedures are violated, an event that might give rise to administrative or criminal sanctions not only for those persons but also for the Company;
  • emphasise that any form of unlawful behaviour is strongly condemned by the Company (even where the Company may apparently be in a position to derive some advantage from it) as it contravenes not only the law but also the corporate ethics to which the company wishes to adhere in carrying out its corporate mission;
  • permit the Company, through continuous monitoring of areas where there is a risk of offences being committed and of areas vulnerable to the committing of offences, to intervene promptly so as to prevent or act against the perpetration of any unlawful activity.

The Company's Model is composed of a general part, which describes the contents of Legislative Decree no. 231/2001, the function and principles of the Model, the identification of activities at risk, the definition of protocols, the characteristics and functions of the Supervisory Body, the activities of training and information, the system of sanctions, and fourteen special sections, each dedicated to a category of offence under Legislative Decree no. 231/2001: (i) crimes committed against the public administration (ii) corporate crimes (iii) crimes of market abuse (iv) transnational offences (v) crimes against persons in violation of workplace health and safety (vi) crimes concerning receiving, laundering and the re-use and self-laundering of money and goods of unlawful origin (vii) IT crimes (viii) crimes of organised crime (ix) crimes against industry and trade (x) crimes of copyright infringement (xi) inducements not to make statements or to make false statements to the court (xii) environmental crimes (xiii) employment of citizens from outside the EU who do not have a legal right to be in the country (xiv) private bribery. Each special section gives a description of the relevant crime, describes the sensitive operations, the instrumental procedures, and the general and specific supervision principles. The Model is completed by appendices, which are an integral part of it, that include the Code of Ethics and the reporting lines to the Supervisory Body of each Organisational Unit.

The Code of Ethics clearly defines the values recognised, accepted and shared by the Company and the responsibilities it assumes both internally and externally. Observance of the Code by the employees of Fiera Milano is of fundamental importance to the functioning, reliability and reputation of the Company, factors that are a decisive asset in the success of the Group. The employees of Fiera Milano, in addition to meeting the normal requirements of loyalty, correct behaviour, and acting in good faith under the terms of the employment contract, must avoid carrying out any activity that is in competition with Fiera Milano, must respect the company rules and comply with the requirements of the Code of Ethics.

All those who have business relations with the Company are made aware of the Code.

The most recent update to the Model was approved by the Board of Directors at its meeting on 26 February 2016. This version incorporates the effects of the most recent legislation and specifically the enactment of (i) Law no. 186/2014 containing "Disposizioni in materia di emersione e rientro di capitali detenuti all'estero nonché per il potenziamento della lotta all'evasione fiscale. Disposizioni in materia di autoriciclaggio" [Measures for the disclosure and repatriation of capital held abroad and to strengthen the measures against tax evasion. Measures for self-laundering], which introduced a new crime, that of self-laundering, (ii) of Law no.68/2015 containing "Disposizioni in materia di delitti contro l'Ambiente" [Measures against environmental crimes]; and (iii) of Law no. 69/2015 containing "Disposizioni in material di delitti contro la pubblica amministrazione, di associazioni di tipo Mafioso e di falso in bilancio" [Measures for crimes against the public administration, crimes by Mafia-style organisations and for fraudulent accounting]".

At the date of the present Report, the Model is being revised to reflect changes to the law and the organisational set-up that have been introduced since the most recent update. In order to monitor the functioning, efficacy and observance of the Model and to manage its revision, the Board of Directors has given the role of the Supervisory Body to a collective body that has the responsibilities described above.

At the date of the present Report, the Supervisory Body is composed of the lawyer Mr Ugo Lecis, an external professional, as Chairperson; the Chairperson of the Board of Statutory Auditors Ms Federica Nolli; and the Director of Internal Audit Mr Andrea Pizzoli. In 2016 the composition of the Supervisory Board under Legislative Decree 231 changed as follows:

(i) the Director of Internal Audit Mr Andrea Pizzoli was appointed as a member from 17 June 2016;

(ii) the independent and non-executive Director Mr Pier Andrea Chevallard resigned as a member from 28 October 2016.

The members of the Supervisory Body are remunerated for their work.

The Organisational Model, in implementation of the terms of Article 6 paragraph 2 of Legislative Decree no. 231/01, provides for specific information flows to the Supervisory Body so that it can carry out with greater effect the supervision and monitoring of the functioning of the Model.

With reference to the unlisted companies of the Group that have adopted their own organisational model, the Supervisory Body has conducted research on each of these in order to identify adequate technical/operational solutions that, while respecting the mandate and powers reserved for the same by the prevailing regulations, are appropriate to the dimensions and organisational context of each corporate entity, also taking account of the relevant guidelines issued by the Parent Company.

As regards foreign subsidiaries operating under foreign law, which do not have to adhere to the provisions of Legislative Decree no. 231/01 and which do not have their own Organisational, Management and Control Models pursuant to the aforementioned Decree 231, these have adopted the Code of Ethics and the guidelines for anti-corruption rules and other compliance programmes in order to have a systematic reference framework of crime prevention regulations and standards.

Independent audit firm

Accounting audit and control has been entrusted to EY SpA (previously known as Reconta Ernst & Young S.p.A.), a company registered in the specific Consob Register, in compliance with applicable law. The mandate was conferred by the Shareholders' Meeting of 29 April 2014 and relates to the financial years ending 31 December 2014-2022.

Manager responsible for preparing the company accounts

The Board of Directors of the Company, on 29 April 2015, having previously sought the opinion of the Board of Statutory Auditors, appointed as Manager responsible for preparing the company accounts Mr. Flaminio Oggioni, previously the company's Director of Administration Finance and Tax, at the same time conferring on him, through the appropriate delegation of functions, adequate means and powers to carry out the duties attributed to him under enacted law. The Board of Directors also supervises the effective compliance with administrative and accounting procedures. The Company's Articles of Association require the Manager to be an expert in matters of administration, finance and control and to possess the same characteristics of personal probity required of Statutory Auditors under current legislation. The Manager's appointment is for three financial years and must not exceed the mandate of the Board of Directors that made the appointment.

On 4 November 2016, Mr Sebastiano Carbone, previously head of Administration and Financial Reporting for Fiera Milano was appointed Manager responsible for preparing the Company accounts.

Coordination among persons involved in the internal control and risk management system

The coordination of persons involved in the internal control and risk management system is through a series of mechanisms and means of interaction: i) scheduling and holding joint meetings of the various corporate bodies and functions responsible for internal control and risk management; ii) attendance at meetings of the Control and Risk Committee by the Chairperson of the Board of Statutory Auditors and other members of the Board of Statutory Auditors and by the Head of Internal Audit; iii) attendance by the Head of Internal Audit at the meetings of the Supervisory Committee under Legislative Decree 231/01.

8. Board of Statutory Auditors

Appointment of Auditors

The Company's Articles of Association currently require that the appointment of the Statutory Auditors is made on the basis of lists presented by the shareholders; the articles state that the position of Chairperson of the Board of Statutory Auditors is granted to the first candidate on the second list by number of votes and who is in no way related, even indirectly, to those shareholders who presented, or combined to present, or voted for the first-placed list by number of votes. Only those shareholders who, individually or together, represent at least 2.5% of the share capital and are entitled to vote in the ordinary shareholders' meeting have the right to present a list, as required by the Company's Articles of Association and by Consob Resolution no. 19856 of 25 January 2017. A shareholder who intends to present a list of candidates and who does not own a controlling shareholding or the relative majority of the share capital of the Company must deposit a declaration stating the absence of any relationship with the controlling shareholder, as required by the regulatory provisions. The lists must be deposited at the Company's registered office at least twenty-five days before the date fixed for the first convocation of the Shareholders' Meeting and must be made public by the Company at least twenty-one days before the date fixed for the first convocation of the Shareholders' Meeting.

Ownership of the minimum shareholding required to present lists is based on the shares that are registered to the shareholder on the day on which the lists are deposited with the Company. To prove ownership of the minimum number of shares required to present lists, the shareholders must provide within the time for the publication of the lists by the Company the relative certification by authorised intermediaries released in accordance with law.

Each list, deposited within the periods described above, must be accompanied by a declaration in which each candidate accepts the candidacy and declares that no reasons of ineligibility or incompatibility exist with reference to the accumulation of positions referred to below, that the requirements of prevailing law relating to the assumption of the position are fulfilled, and must include a curriculum vitae of the career of each candidate that gives the administration and control positions held.

The Articles of Association also provide that, without prejudice to situations of incompatibility under prevailing laws, any person who is already an acting Statutory Auditor in five companies listed on regulated markets may not take up a position as Statutory Auditor and, if elected, their mandate is nullified, except where different limits are established by laws which may periodically be introduced.

To meet the requirements of Article 148, paragraph 1-bis of the Consolidated Finance Act and Article 144-undecies of the Listing Rules regarding the appointment and replacement of members of the Board of Statutory Auditors, the Company Articles of Association contain the same criteria and principles as those for the appointment and replacement of members of the Board of Directors described above.

The complete Company Articles of Association is available on the Company website www.fieramilano.it in the section Investor Relations/Corporate Governance/ Articles of Association.

Composition of the Board of Statutory Auditors

The Board of Statutory Auditors was appointed by the Shareholders' Meeting of 29 April 2015, on the basis of a single list presented by the controlling shareholder, Ente Autonomo Fiera Internazionale di Milano – and will remain in position until the approval of the Financial Statements to 31 December 2017.

The Board of Statutory Auditors is composed of the following members and a short curriculum vitae is given indicating the personal and professional experience of each Statutory Auditor.

  • Federica Palmira Nolli, Chairperson of the Board of Statutory Auditors of Fiera Milano since 29 April 2015. Born in Cremona on 3 February 1959, Ms Nolli graduated in Business Economics from the University of Pavia. She is on the National Register of Chartered Accountants [Dottori Commercialisti] and Legal Auditors. Since 1988 she has been a partner of FP & Partners and is Head of its Administration and Control Division and a consultant in Corporate Management and Organisation. She holds several supervisory positions.
  • Antonio Guastoni, Standing Statutory Auditor of Fiera Milano since 29 April 2015. Born in Milan on 11 January 1951, Mr Guastoni has a degree in Economics and Business from the Università Commerciale Luigi Bocconi. He is qualified as a Chartered Accountant and is on the National Register of Auditors. He holds several administrative and supervisory positions.
  • Carmine Pallino, Standing Statutory Auditor of Fiera Milano since 29 April 2015.

Born in Milan on 20 March 1967, Mr Pallino has a degree in Business Economics from the Università Commerciale Luigi Bocconi. He is on the Register of Chartered Accountants and of Business Economists. He is an auditor for companies and public entities. He is Chairperson of the Board of Statutory Auditors of A.S.A. M. S.p.A., Official Receiver of Fondazione Molina on behalf of the Lombardy Region; Chairperson of the Milan Association of Certified Accountants and, since 2014, has been an external member of the Supervisory Body of A.L.E.R. Milan, He works as a Certified Accountant and employment consultant.

– Francesca Maria D'Alessandro, Substitute Statutory Auditor of Fiera Milano since 29 April 2015.

A graduate in Business and Economics from the Università Cattolica del Sacro Cuore of Milan, Ms d'Alessandro is qualified as a Chartered Accountant and enrolled on the Register of Auditors. She is a member of the Crises, Restructuring and Company Recovery Commission and of the Business Insolvency Procedure Commission of the Milan Association of Accountants and Accounting Experts. She has considerable consultancy experience in corporate restructuring and business crisis management. She has been a Statutory Auditor of several important national companies and entities.

– Alessandro Carlo Galli, Substitute Statutory Auditor of Fiera Milano since 29 April 2015.

Born in Busto Arsizio (Varese) on 11 May 1973, Mr Galli has a degree in Economics and Business from the Università Commerciale Luigi Bocconi and is qualified as a Chartered Accountant and enrolled on the Register of Auditors. He is a member and Chairperson of AdCerta S.r.l. and a partner of AGR & Partners. He holds several administrative and supervisory positions.

All the members possess the necessary requisites of professionalism and probity required by enacted law, as well as the independence required by Statutory Auditors in the Self-regulatory Code, possession of which was verified by the Board of Directors when they were appointed. During the 2016 financial year, the Board of Statutory Auditors met twenty-three times. The average duration of the meetings of the current Board of Statutory Auditors was approximately three hours. At the date of approval of these Financial Statements, four meetings had been held in the current financial year.

Role and responsibilities of the Board of Statutory Auditors

The Board of Statutory Auditors, in accordance with Article 149 of the Consolidated Finance Act, monitors the Company's activities: to ensure compliance with the law and the Company's Articles of Association; to ensure compliance with the principles of correct administration; to ensure the adequacy of the company's organisational

structure regarding positions and responsibilities, the internal control system and the administrative/accounting system, as well as the reliability of the latter in accurately representing management information; to ensure there exist the means of concrete implementation of the rules of corporate governance provided by the codes of conduct prepared by the companies responsible for the organisation and management of regulated markets and to ensure the adequacy of the regulations prepared by the Company and applicable to its subsidiaries, in accordance with Article 114 paragraph 2 of Legislative Decree 58/98. In accordance with Article 19 of Legislative Decree 39/2010, the Board of Statutory Auditors also oversees the legal auditing of the annual financial statements and the consolidated financial statements and the effectiveness of the internal control and risk management systems, as well as the process for financial reporting.

The Board of Statutory Auditors also monitors the independence of the independent audit firm, ensuring compliance with existing regulations, and the nature and scale of the various accounting services provided by the independent audit firm and its network of entities to the Company and its subsidiaries. In carrying out its activities the Board of Statutory Auditors also operates in conjunction with the internal audit function and with the Control and Risk Committee on matters of common interest through meetings and exchanges of information.

9. Procedures adopted by the Company

Internal Dealing Code

The Company has adopted an Internal Dealing Code, prepared in accordance with EU Regulation of 16 April 2014 no. 596 ("MAR"), Commission Delegated Regulation (EU) 2016/522 of 17 December 2015, Commission Implementing Regulation (EU) 2016/523 of 10 March 2016 and of Consob Resolution no. 0061330 of 1 July 2016 (all together "Internal Dealing Regulations").

Under the Internal Dealing Code, a number of relevant persons, and persons close to them, who have regular access to inside information and the power to make management decisions that could affect the performance and prospects of the listed issuer, are obliged to inform the market of any transaction involving listed financial instruments issued by the company. The relevant persons that come under the Internal Dealing Code are those with administrative, direction and control responsibilities within the Company Fiera Milano.

The relevant persons identified above must communicate to the Company, to Consob any transactions they have made or that have been made by persons closely connected to them within three trading days of the date of the transaction.

Consistent with the requirements of the MAR, the current Internal Dealing Code provides for a black-out period of thirty days preceding the announcement of interim results or year-end financial statements to be made public during which the relevant persons are prohibited from trading in financial instruments issued by the Company.

The Internal Dealing Code was initially approved by the Board of Directors on 8 November 2002 and enacted from 12 December 2002; it was updated on 29 July 2016 to meet the requirements of the new EU regulations.

Communications made in compliance with the Internal Dealing Code (filing models) and the Internal Dealing Code itself are available on the Company website www.fieramilano.it in the section Investor Relations/ Corporate Governance/ Internal Dealing.

Procedure for the management of insider information

The Company has adopted a Procedure for internal management and public disclosure of inside information, which incorporates the provisions of regulations on market abuse and also governs the setting up of a register of persons having access to inside information.

On 29 July 2016, the Company adopted the updated version of the aforementioned Procedure that incorporated the requirements of Regulation (EU) no. 596/2014 of 16 April 2014 governing market abuse ("MAR"), of the Commission Implementing Regulation (EU) 2016/347 of 10 March 2016, of the Commission Implementing Regulation (EU) 2016/959 of 17 May 2016, of the Commission Delegated Regulation (EU) 2016/960 of 17 May 2016, and of the Commission Implementing Regulation (EU) 2016/1055 of 29 June 2016.

The Procedure contains specific sections covering the definition of inside information, the related procedures for managing inside information, ways of managing so-called market rumours, and also governs instances of delays in communicating to the market, the approval process for press releases, the setting up of a register of persons having access to inside information, persons authorised to maintain external relations and persons obliged to maintain confidentiality. In incorporating the requirements of the new EU regulations, the term Inside Information now includes the intermediary phase of a prolonged process. The measures governing delayed communication of inside information to the market and those regarding maintenance of a Register of those with inside information were also updated to comply with the relevant EU laws.

With adoption of the updated Procedure, the pre-existing Procedure for the maintenance and updating of the register of persons having access to insider information (the "Insider Register") that identifies the responsibilities and ways of maintaining and updating the Insider Register was incorporated into the Procedure. It identifies the individual responsible for managing the register, an inside information committee and the individuals registered within it; and it governs the procedures for initial inclusion and subsequent updating of the register, as well as aspects regarding confidentiality obligations. The Insider Register is structured in such a way as to highlight the type of inside information to which each person has access and is made up of two sections: one section providing information on persons who have permanent access to all inside information (the "Permanent Insiders Section") and a section that is added to each time a new piece of inside information is identified (the "Occasional Sections").

Procedures for Related-Party Transactions

The Company has a Procedure for Related-Party Transactions (hereinafter the Procedure). The Procedure was adopted on 5 November 2010 and implemented from 1 January 2011. It was prepared in compliance with the provisions of the Rule governing related-party transactions approved by Consob Resolution no. 17221 of 12 March 2010, subsequently modified by Consob Resolution no. 17389 of 23 June 2010 (hereinafter the "Rule"), and with the guidelines for the application of the Rule governing related-party transactions supplied by Consob with Communication no. DEM/10078683 of 24 September 2010. The current Procedure was amended by the Board of Directors during the 2015 financial year to bring it in line with the definition of a related-party, which included executives with strategic responsibilities, and with the new definition of executives with strategic responsibilities that was identified in the course of the same financial year.

The Procedure identifies the rules and measures to be adopted to ensure transparency and the substantial and procedural correctness of related-party transactions carried out directly by Fiera Milano or through

its subsidiaries. The Control and Risk Committee has been identified as the body designated to express a considered opinion on the interests of the Company and the substantial correctness of the relevant conditions for the completion of related-party transactions.

The new Procedure takes advantage of the dispensation given in the Rule that, without prejudice to the requirements regarding the dissemination of information to the public, allows smaller listed companies – or for those with balance sheet assets or revenues as shown in the most recently approved Financial Statements that do not exceed Euro 500 million – the possibility of applying to Transactions of Greater Importance the guidance and approval procedures for Operations of Lesser Importance.

The Board of Directors of the Company will periodically evaluate, and anyway at intervals of not more than three years, whether to update the Procedure taking into account, inter alia, any eventual changes to its assets, as well as the efficacy of the application of the rules and guidance adopted.

The Procedure is available on the Company website, www.fieramilano.it, in the section Investor Relations/ Corporate Governance/Related-parties.

The Company has also adopted Organisational Implementation Instructions with regard to the Procedure for Related-Party Transactions in order to:

  • (i) establish the methods and timing for the preparation and updating of the related-party database compiled specifically for the Procedure;
  • (ii) monitor the rules for identifying related-party transactions before they are finalised and oversee the preliminary procedures by identifying those persons that should give and/or receive information, the subjects appointed to ascertain if a specific transaction comes under the application of the Procedure, as well as the means of guaranteeing the traceability of the transaction under examination;
  • (iii) establish the methods, timing and responsibility for managing the process of informing the public as required by the Procedure.

10. Investor Relations

The Company has adopted a communication policy with the aim of establishing a continuous dialogue with all shareholders and, in particular, with institutional investors, ensuring the systematic and prompt dissemination of exhaustive information regarding its activities, while complying with the regulations on inside information.

The Company has an Investor Relations Manager who reports to the Chief Executive Officer.

The means of financial communication are those of systematic contact with financial analysts, institutional investors and the specialist media in order to ensure a full and proper understanding of the trends in the Company's strategic direction, the implementation of strategy and the impact on the results of the business.

In addition, the Company believes that dialogue with investors is fostered by providing them with sufficient information to allow them to make informed decisions when exercising their rights and by organising the content of the Company's website (www.fieramilano.it in the Investor Relations section) so that they can access economic and financial information (annual financial statements, half-yearly and quarterly interim financial statements, presentations to the financial community), as well as updated data and documents of general interest to shareholders (press releases, Company calendar, composition of the Company's governing bodies, Articles of Association, minutes of Shareholder Meetings, an outline of the Group structure, the Code of Ethics, the Internal Dealing Code, and the related filing models etc.).

11. Shareholders' Meetings

The Shareholders' Meeting is conducted for the benefit of all shareholders and the resolutions approved in Shareholders' Meetings, in accordance with the law and the Articles of Association, are mandatory and binding on all shareholders, including those who did not participate, who abstained or who dissented, although dissenting shareholders have rights of rescission under certain circumstances.

The Shareholders' Meeting of 23 April 2013 adopted, in accordance with the provisions of Article 9.C.3 of the Self-regulatory Code, Rules of Procedure that govern the conduct of Ordinary and Extraordinary Shareholders' Meetings. These Rules are publicly available on the Company website www.fieramilano.it in the section Investor Relations/ Corporate Governance/ Shareholders' Meetings.

The aforementioned Rules of Procedure define the procedure to be followed to ensure the orderly and correct conduct of Shareholders' Meetings whilst guaranteeing the right of each shareholder to speak on the matters under discussion.

The Shareholders' Meeting is convened and deliberates, in accordance with law and the regulations pertaining to companies with listed shares, on matters that are its right under the law.

The Shareholders' Meeting is authorised to approve, among other matters, in an ordinary or extraordinary meeting (i) the appointment or removal of members of the Board of Directors and of the Board of Statutory Auditors and their relevant remuneration and responsibilities, (ii) the approval of the Financial Statements and the allocation of profits, (iii) the purchase and disposal of treasury stock, (iv) changes to the Company's Articles of Association, (v) the issue of convertible bonds.

Under enacted law, legitimate attendance and the exercise of the right to vote in Shareholders' Meetings is restricted to those who appear as shareholders on the seventh trading day prior to the date of the Shareholders' Meeting and who present to the issuer the relevant communication from an intermediary that accords with the latter's accounting records on behalf of the person having the right to vote at the Shareholders' Meeting using the aforementioned mechanism.

12. Other corporate governance procedures

Management policy for whistleblowing disclosures, including anonymous disclosures, received by Fiera Milano S.p.A. and its subsidiaries

On 8 November 2016, a Management policy for whistleblowing disclosures, including anonymous disclosures, received by Fiera Milano S.p.A. and its subsidiaries was adopted; the policy governs the procedure for the receipt, analysis and treatment of whistleblowing disclosures, including those made anonymously or in confidence from third-parties or from Fiera Milano Group personnel.

The disclosures may concern problems with the internal control system (e.g. adhering to external laws and regulations, corporate rules and procedures, fraud regarding corporate assets and corporate information, the administrative responsibilities of the company) or other matters that violate the Code of Ethics (e.g. behavioural ethics, workplace mobbing, harassment, personnel management conflicts). The channels set up for direct disclosure to the Supervisory Bodies of the Group companies under Legislative Decree 231 remain valid (dedicated accounts).

Regulation of Direction and Coordination

The Company has regulations governing the exercise of direction and coordination by the Parent Company.

This document was prepared to set guidelines governing the direction and coordination activity of the higher authority over the subordinate entity, with the aim of providing a solid base for the research and development of more extensive and more effective interrelationships.

The Regulation identifies precise responsibilities regarding, respectively, the Company and its subsidiaries, within an unambiguous and reciprocal assumption of duties, and it establishes precise governance procedures appropriately gauged to provide an equitable balance between requirements for centralisation and respect for the autonomous management of the subsidiaries.

It also specifies that in the Group's regulatory hierarchy the organisational regulations come below the Parent Company's Articles of Association and those of the various companies of the Group.

This Regulation was approved by the Parent Company Shareholders' Meeting on 15 April 2010 and, subsequently, in order for it to be adopted, was presented to the Shareholders' Meetings of the individual companies of the Group so that each of them could independently approve it as the basis for their own operations.

On 12 January 2011, the individual companies of the Group amended their own articles of association to make specific reference to the exercise of direction and coordination, pursuant to Articles 2497 and 2497-bis of the Italian Civil Code, by the Parent Company Fiera Milano SpA, as well as to assess the possibility for the Parent Company to centralise the management and, in the interest of the entire Group, specific functions for the subsidiaries as part of a shared services policy.

On 23 April 2013, the Shareholders' Meeting of the Parent Company approved the integration of the Regulation with a recommendation that the members of the Board of Statutory Auditors of the Parent Company, in line with best practice on this matter, should be appointed as Statutory Auditors in the Boards of Statutory Auditors of the subsidiaries. The aim of this change was to rationalise and simplify the organisation and to create important synergies that would guarantee greater efficiency and efficacy of the control systems to the benefit of the whole Group.

13. Changes subsequent to the end of the financial year under review

This Section gives information on changes to the governance of the Company since the end of the financial year under review that are connected to the Administration orders imposed on the subsidiary Nolostand and on Fiera Milano (limited to the stand-fittings business sector) and analyses in greater detail and in chronological order matters that have previously been mentioned in this Report.

Firstly, it should be noted that in the Board meeting held on 13 January 2017 the Board of Directors:

– acknowledged that the Board of Directors, from the time of its appointment, had been very effective, both before and after the imposition of the Administration orders mentioned in Section 2, in ensuring a significant improvement in the corporate governance of the Company and enacting numerous measures to ensure that these improvements are implemented in the most advantageous way;

  • considered that, given the current complex situation in which the Company finds itself due to the circumstances described above, it would perhaps be opportune to make a further break with the past and, at the same time, ensure the Administration regime was concluded as soon as possible;
  • considered that, following extensive deliberations that focused exclusively on the interests of the Company, the preferable solution appeared to be for the Board to resign permitting the appointment of a new Board of Directors;
  • recognised that the 2016 financial year had just ended and that the Board of Directors must ensure the preparation of the Financial Statements and Consolidated Financial Statements and present the financial documents to the Shareholders' Meeting, convened under law, for its approval.

Given the above, the Chairperson, Mr Roberto Rettani, the Directors Ms Joyce Victoria Bigio, Mr Renato Borghi, Mr Pier Andrea Chevallard, Mr Attilio Fontana, Ms Licia Ronzulli and Ms Vincenza Patrizia Rutigliano (Mr Romeo Robiglio having justified his absence) resigned their positions thereby forcing the retirement of the Board of Directors with effect from the date of the Shareholders' Meeting convened to approve the Financial Statements at 31 December 2016. Under Article 14.2 of the Company Articles of Association the same Shareholders' Meeting will be convened to deliberate on the agenda that will include the appointment of a new Board of Directors.

The Board maintained that the Chief Executive Officer should also resign his responsibilities. Mr Corrado Peraboni, who, having reported on the circumstances, had absented himself from the Board meeting to allow the Board of Directors to evaluate and approve the measures in the greatest interests of the Company, having learnt of the resignations of the Directors also offered his resignation effective from the same date.

During the Board meeting of 13 January 2017, the Board of Directors vested the Chairperson with the powers for the ordinary management of the Company in order to ensure the continuity of the business. At the Board meeting of 19 January 2017, the Board of Directors determined the best way of carrying out the ordinary management of the Company.

Also at this meeting the responsibility of overseeing the internal audit was given to the Chairperson of the Control and Risk Committee, the Director Ms Joyce Victoria Bigio; at the same meeting it was decided that the role of the Director in charge of the internal control system and risk management under Article 7 of the Selfregulatory Code should remain with the Chairperson.

On 24 January 2017, the Board of Directors of Fiera Milano, in order to adhere to the timing required to convene the Shareholders' Meeting to appoint the corporate bodies based on lists of candidates, as required by Article 125-bis, paragraph 2, of Legislative Decree 58/98, amended the 2017 corporate events timetable, which had been published on 22 December 2016. The Board of Directors brought forward the Board Meeting to approve the draft Financial Statements and Consolidated Financial Statements at 31 December 2016 to 10 March 2017 from the original date of 13 March 2017.

On 27 January 2017, at the end of the hearing held on 26 January 2017, the Milan Court – Prevention Court Independent Section:

  • refused the request of the Public Prosecutor to change the terms of the Administration orders "to give it complete control of the administrative bodies";
  • stated that the administrative and management responsibilities should remain with the Board of Directors;
  • at the same time, it gave the Court-appointed Administrator the following additional powers within the Company: i) to approve operating procedures to safeguard the legality of administrative matters already contracted with third-party consultants; ii) to approve, in particular as far as concerns the means and timing of contract renewals, the contract procedures to acquire goods and services already in existence

with third-parties; iii) to monitor the efficacy and timing of measures taken by the Company to improve the legal safeguards of administrative actions for the duration of the Administration order; iv) quantitative and qualitative upgrading of the internal audit structure; v) to revise the audit plan and to supervise the related activity; vi) to revise the structure of corporate responsibilities for procurement and compliance; vii) to appoint and remove the person responsible for compliance and to determine his/her remuneration, as well as the procedures to verify suppliers and the procedures governing whistleblowing.

* * * *

With regard to the implications of the above for the corporate governance and internal control system of the Company, it should be noted that the Milan Court in its statement given at the conclusion of the hearing on 26 January 2017 specified that the Court-appointed Administrator "will act with the necessary cooperation of the administrative bodies" and that "the administrative functions of the Company and its business management will remain the responsibility of the Board of Directors of Fiera Milano S.p.A.". Therefore, the provisions of the order did not change or impose limitations to the company structure of Fiera Milano or to the control bodies of the Company.

* * * *

In the Report on items on the agenda of the next Shareholders' Meeting convened by Fiera Milano S.p.A. as an Extraordinary Shareholders' Meeting at the request of the shareholder Fondazione Fiera Milano under Article 125-ter, paragraph three of Legislative Decree of 24 February 1998 no. 58 and subsequent amendments dated 24 February 2017 and the subsequent communication dated 2 March 2017, the shareholder Fondazione E.A. Fiera Internazionale di Milano proposed the amendments to the Articles of Association of the Company that are described in the documentation provided in support of item one on the agenda of the Extraordinary Shareholders' Meeting.

Together with this Report, the Company has made publicly available the evaluation made by its Board of Directors as required by Article 125-ter of Legislative Decree 58/1998.

Tables

The two tables on the following pages summarise the Company's adherence to the main corporate governance aspects of the Self-regulatory Code.

The first table gives the structure of the Board of Directors and its internal committees. It lists the Directors and the category to which they belong (executive, non-executive and independent). It also shows the composition of the various committees.

The second table gives the composition of the Board of Statutory Auditors. It lists the members of the Board, both standing and substitute, and indicates if they have been nominated from lists put forward by noncontrolling interests.

Both tables give information on the number of meetings held by the Board of Directors, the various committees and by the Board of Statutory Auditors and the attendance rate of each individual member. The tables also show the number of administrative positions held in other companies; these have also been detailed in this Report.

Structure of the Board of Directors and Committees

BOARD OF DIRECTORS Control and
Risk Committee
Remuneration
Committee
Position Constituent Year
of
birth
Date first
appointed
Duration of
appointment
List Exec
utive
Non
executive
Independent
under the
Code
Indep.
under the
Consol.
Finance
Act (TUF)
(
)
*
No. of
other
positions
held**
(
***)
(
)
*
(
***)
(
)
*
Chairperson Roberto
Rettani(•)
1953 29.04.2015 a c X 19/19
Deputy Vice
Chairperson
Attilio
Fontana
1952 16.04.2009 a c X X X 18/19 C 10/10
Vice
Chairperson
Licia
Ronzulli
1975 29.04.2015 a c X X X 18/19 M 8/10
Director Joyce Victoria
Bigio
1954 29.04.2015 a c X X X 18/19 C 11/11
Director Renato
Borghi(o)
1948 29.10.2006 a c X X 14/19 (
°)
Director Pier Andrea
Chevallard
1951 08.02.2010 a c X X X 17/19 2
Director Corrado
Peraboni(◊)
1964 29.04.2015 b c 19/19
Director Romeo Robiglio 1931 27.10.2003 b c X 18/19 M 9/10
Director Vincenza
Patrizia
Rutigliano
1968 29.04.2015 a c X X X 16/19 M 10/11
Board of Directors Control and Risk
Committee
Remuneration
Committee
Number of meetings held in the financial year to 31 December 2016 19 11 10
Quorum required for the presentation of lists of nominees by minority shareholders (ex art.147-ter
Consolidated Finance Act):
2.50%

NOTES

  • (*) This column shows the attendance rate of Directors at Board Meetings and at Committee meetings. It gives the number of meetings attended compared to the number of meetings held. (no.attended/no. of meetings held during the period under review when the Director held office).
  • (**) This column shows the number of other positions held in listed companies, banks or insurance companies.
  • (***) This column shows the role of the Director on the committee: "C": Chairperson; "M": member.
  • (•) Following the resignation by Mr Peraboni from his responsibilities as CEO, on 13 January 2017, the Board of Directors assigned the responsibility for the ordinary management of the Company to the Chairman, Mr Rettani. Having assumed responsibility for the ordinary management of the Company, the Chairperson no longer met the requirements for independence of the Self-regulatory Code of Borsa Italiana or those under Article 148, paragraph 3 of Legislative Decree no.58 of 24 February1998.
  • (◊) Mr Peraboni held the position of Chief Executive Officer until 13 January 2017, the date on which he resigned these responsibilities.
  • (o) The Director Mr Borghi was a member of the Control an d Risk Committee until 17 February 2017, the date on which he resigned. During the 2016 financial year, Mr Borghi attended 6/11 meetings of the Control and Risk Committee.
  • (a) Appointed by the Shareholders' Meeting of 29 April 2015 for a three-year period ending with the approval of the Financial Statements at 31 December 2017. However, following the resignation on 13 January 2017, the Board member will remain in position until the date of the Shareholders' Meeting to approve the Financial Statements and Consolidated Financial Statements at 31 December 2016.
  • (b) Appointed by the Shareholders' Meeting of 29 April 2015 for a three-year period ending with the approval of the Financial Statements at 31 December 2017. However, the resignation on 13 January 2017, of the majority of the members of the Board of Directors caused the resignation of the entire Board. The Board member will remain in position until the date of the Shareholders' Meeting to approve the Financial Statements and Consolidated Financial Statements at 31 December 2016.
  • (c) Appointed from the only list put forward by the controlling shareholder Fondazione E.A. Fiera Internazionale di Milano.

Structure of the Board of Statutory Auditors

Position Constituent Year of
birth
Date first
appointed
In office from/
until
List Independent
under the
Code
Attendance at the
meetings (%)(*)
Number of other
positions held(**)
Chairperson Federica Palmira Nolli 1959 29.04.2015 a b X 21/23
Statutory Auditor Antonio Guastoni 1951 29.04.2015 a b X 21/23
Statutory Auditor Carmine Pallino 1967 29.04.2015 a b X 20/23
Substitute Auditor Francesca Maria D'Alessandro 1970 29.04.2015 a b
Substitute Auditor Alessandro Carlo Galli 1973 29.04.2015 a b
Number of meetings held in the financial year to 31 December 2016 23
Quorum required for the presentation of lists of nominees by minority shareholders (ex art. 148 TUF) 2.50%

NOTES

(*) This column shows the attendance rate of the statutory auditors at the meetings of the Board of Statutory Auditors (no. of times present/ no. of meetings held during the period of appointment).

(**) This column shows the number of appointments as director or statutory auditor held, in accordance with Article 148 bis of the Consolidated Finance Act.

(a) Appointed by the Shareholders' Meeting of 29 April 2015 for a three-year period ending with the approval of the Financial Statements at 31 December 2017.

(b) Appointed from the only list presented, which was that of the controlling shareholder Ente Autonomo Fiera Internazionale di Milano.

Proposals for the Ordinary Meeting of Shareholders

The Ordinary Meeting of shareholders of Fiera Milano SpA will be convened once in Rho (Milan), in the Auditorium in the Centro Servizi of the Exhibition Site, Strada Statale del Sempione 28, (reserved parking is available with entry from Porta Sud), on 21 April 2017 at 14.30 hours.

(Report pursuant to Article 125-ter, paragraph 1, of Legislative Decree 24/02/1998, no. 58 and subsequent amendments)

  1. Financial Statements at 31 December 2016, the Board of Directors' Management Report, the Report of the Board of Statutory Auditors, The Report of the Independent Auditors. Resolutions pertaining thereto and resulting therefrom. Presentation of the Consolidated Financial Statements at 31 December 2016.

Dear shareholders,

The preliminary Financial Statements for the financial year ended 31 December 2016 that we submit for your attention show a net loss of Euro 25,159,578.92, which we propose should be covered as indicated below. We also submit the Group Consolidated Financial Statements for the financial year to 31 December 2016 for your attention; although these are not subject to approval by the Shareholders' Meeting, they complement the information provided in the Financial Statements of Fiera Milano SpA.

Given the above, we submit for your approval the following

proposed resolution

"The Shareholders' Meeting of Fiera Milano SpA, having considered the Board of Directors' Management Report, the Report of the Board of Statutory Auditors and the Report of the Independent Auditors, and having examined the Financial Statements for the year to 31 December 2016,

approves

  • 1) the Financial Statements for the year to 31 December 2016, comprising the statement of financial position, the statement of comprehensive income, the statement of changes in equity, the statement of cash flows and the relative explanatory and supplementary notes to the financial statements that show a net loss of Euro 25,159,578.92 as presented by the Board of Directors in its entirety, and each individual item with the proposed allocations, as well as the Board of Directors' Management Report;
  • 2) to cover the net loss of Euro 25,159,578.92 for the financial year by using the share premium reserve;
  • 3) to cover the residual losses of the preceding financial year of Euro 154,268.60 by using the share premium reserve.

  • Appointment of the Board of Directors and its Chairperson, following prior decisions regarding the length of its mandate and the number of its members; decision regarding its remuneration. Resolutions pertaining thereto and resulting therefrom.

Dear shareholders,

The mandate of the Board of Directors was given at the Shareholders' Meeting of 29 April 2015 and should have expired at the Shareholders'' Meeting to approve the financial statements at 31 December 2017.

On 13 January 2017, the majority of Directors resigned their positions from the date of the Shareholders' Meeting to approve the Financial Statements at 31 December 2016, thereby forcing the dissolution of the Board of Directors.

We would like to thank you for the faith you placed in us and would ask you to approve, under Article 2364, paragraph 1, point 2) of the Italian Civil Code, the appointment of a new administrative body, following prior decision regarding the length of its mandate, the number of its members, in accordance with the prevailing laws and regulations and with the Articles of Association that are available on the Company website www. fieramilano.it in the section Investor Relations/Corporate Governance/Articles of Association.

We also invite you to appoint the Chairperson of the Board of Directors.

In this regard, we would remind you that:

  • Under Article 14.1 of the Articles of Association, the mandate of the administrative body may not exceed three financial years and that the number of its members may not be less than three or more than nine, including the Chairperson;
  • the outgoing Directors may be re-appointed;
  • the Directors must meet the requirements under prevailing law;
  • to meet the provisions of Article 147-ter, paragraph four of Legislative Decree no. 58/1998, at least one member of the Board of Directors, or two members if the Board of Directors is made up of more than seven members, must meet the requirements of independence required of Statutory Auditors under Article 148, paragraph three of Legislative Decree no. 58/1998;
  • appointment of members of the Board of Directors takes place based on lists presented by shareholders who, under the Articles of Association, prevailing laws, and Consob Resolution no. 19856 of 25 January 2017, alone or with other shareholders, represent at least 2.5% of the Company share capital;
  • in accordance with the provisions of Article 147-ter, paragraph three of Legislative Decree no. 58/1998 and Article 14.4 of the Articles of Association, at least one Director must be appointed from the list presented by non-controlling interests that obtains the greatest number of votes and that is in no way connected, directly or indirectly, with the shareholders that presented, took part in presenting, or voted for the list receiving the highest number of votes;
  • under Article 14.4 of the Articles of Association, the lists must respect gender balance in order to ensure that the least represented gender is a minimum of one-third of the candidates on any list;
  • the presentation of the lists of candidates to be members of the Board of Directors and their appointments must be made in accordance with the provisions of Article 14.4 of the Articles of Association and of prevailing law. Lists that fail to comply with these provisions will not be recognised as having been presented;
  • if just one list is presented or if no list is presented, the Shareholders' Meeting will appoint the Board of Directors in accordance with the majorities under the law ensuring that the requirement for gender balance is met.

Furthermore, we would point out to those shareholders who wish to propose candidates for the positions of Director that:

  • since 15 November 2016, Fiera Milano S.p.A. is no longer part of the STAR segment of the Italian Stock Exchange (MTA – Mercato Telematico Azionario) of Borsa Italiana S.p.A. (hereinafter, "Borsa Italiana") but has stated its intention to adhere to the qualitative standards of corporate governance, information transparency, and liquidity required by the STAR segment and, therefore, in accordance with Borsa Italiana Rules and relevant Regulations, intends:
  • i. to ensure the presence of two independent Directors in a Board of Directors composed of up to a maximum of eight members and of three independent Directors in a Board of Directors composed of nine or up to a maximum of fourteen members;
  • ii. to apply the provisions and criteria of Articles 2 and 3 of the Self-regulatory Code of Listed Companies (hereinafter the "Self-regulatory Code") regarding the composition of the Board of Directors;
  • the proposals for appointees must be deposited at the Company's registered office or, preferably at the operational and administrative offices of the Company in Rho (Milan), S.S. del Sempione 28, at least twenty-five days prior to the date fixed for the only convocation of the Shareholders' Meeting, and must be accompanied by:
  • i. information on the identities of the shareholders presenting the list and the percentage of the share capital they hold, as well certification of ownership of the shares given in accordance with law by authorised intermediaries;
  • ii. the certification proving ownership of the shares on the date the lists were deposited may be provided at a later date but at least twenty-one days prior to the date fixed for the only convocation of the Shareholders' Meeting;
  • iii. statements in which individual candidates, of their own responsibility, accept their candidacy and testify to the absence of causes of ineligibility and incompatibility, and to the existence of the requisites for taking office under prevailing law, including the requirements for probity under Article 148, paragraph four of Legislative Decree 58/98, reiterated in Article 147-quinquies of the same Legislative Decree 58/98, and personal statements indicating that they have the prerequisites of independence demanded of Statutory Auditors under prevailing law and the Self-regulatory Code;
  • iv. a personal and professional curriculum vitae of each candidate that lists the administration and control positions held in other companies;
  • the lists will be made publicly available by the Company at least twenty-one days before the date fixed for the Shareholders' Meeting in accordance with the Articles of Association and Article 144-octies of the Rule under Consob Resolution no. 11971/1999 and subsequent amendments and additions (hereinafter the "Listing Rules").

We also ask you to decide – under Article 2364, paragraph 1, point 3) of the Italian Civil Code – the annual overall remuneration to be paid to the Directors and the remuneration to be paid to the Chairperson of the Board of Directors.

The Board of Directors leaves to the Shareholders' Meeting all decisions regarding the appointment of the Board of Directors, the number of its members, the length of the mandate of the Directors and their remuneration.

3. Report on Remuneration pursuant to Article 123-ter of Legislative Decree 58/98. Resolutions pertaining thereto and resulting therefrom

Dear shareholders,

On 10 March 2017, the Board of Directors, in accordance with prevailing law, approved the Report on Remuneration under Article 123-ter of Legislative Decree 58/98 (hereinafter also the "Report"), which was made publicly available on 10 March 2017.

In particular, the Directors would like to submit for your consideration Section One of the aforementioned Report, which defines the principles and guidelines to which the Board of Directors must adhere when setting the remuneration payable to members of the Board of Directors and, in particular, Directors with specific responsibilities, members of the Committees, and the Executives with Strategic Responsibilities of the Group.

The Remuneration Policy (hereinafter also the "Policy") is the result of a clear and transparent process in which the Company Board of Directors and the Remuneration Committee play central roles.

The Board of Directors of Fiera Milano SpA, on the proposal of the Remuneration Committee, has adopted the Policy that was prepared also following the recommendations of Article 6 of the Self-regulatory Code as most recently modified in July 2015.

Specifically, the Remuneration Policy of Fiera Milano SpA aims to:

  • attract, motivate and retain resources with the professional qualities necessary to the advantageous pursuit of the Group objectives;
  • align the interests of management with those of the shareholders, pursuing the main aim of sustainable value creation over the medium-long term by forging a strong link between remuneration on the one hand and individual and Group performance on the other;
  • reward merit so as to recognise adequately the individual contribution made by employees.

For details of the Report on Remuneration and, in particular, Section One that we submit for your consideration, please refer to the document which is available on the Company website www.fieramilano.it in the section Investor Relations/ Corporate Governance/ Shareholders' Meetings.

Given the above, we submit for your approval the following

proposed resolution

"The Shareholders' Meeting of Fiera Milano SpA, having considered the Report on Remuneration pursuant to Article 123-ter of Legislative Decree 58/98 and, in particular, Section One of the Report,

approves

the Report on Remuneration pursuant to Article 123-ter of Legislative Decree 58/98 and, in particular, Section One of the Report".

  1. Authority for the buy back and disposal of treasury shares under Articles 2357 and 2357-ter of the Italian Civil Code, following prior cancellation of the decision of the Shareholders' Meeting of 28 April 2016. Resolutions pertaining thereto and resulting therefrom.

(Report pursuant to Article 73 and Attachment 3A of the Rule adopted with Consob Resolution no. 11971/99 of and subsequent modifications and additions)

Dear shareholders,

The Shareholders' Meeting of 28 April 2016 authorised the Company to buy back treasury shares for a period of 18 months from the date the authority was approved and to dispose of all and/or part of the shares acquired with no time limits and even before the purchase mandate has been exhausted.

With this authority Fiera Milano bought back 294,010 treasury shares and, therefore, at today's date, holds, directly and indirectly 939,018 treasury shares, equivalent to 1.31% of the share capital.

Since the aforementioned authority expires on 28 October 2017, in order to avoid convening a special Shareholders' Meeting around this expiry date, we believe that it would be useful to propose that you grant a new authority to buy back and dispose of treasury shares in accordance with Articles 2357 and following of the Italian Civil Code, following prior cancellation of the existing authority.

The buy back of the Company's own ordinary shares will be carried out in accordance with the existing rules for listed companies and any other European Union and national laws that are applicable.

The reasons and procedures for the buy back and disposal of treasury shares for which we request your authority are given below.

A) Reasons for the request for authority to buy back and dispose of treasury shares

The Board of Directors is requesting this authority as it is of the opinion that the buy back of treasury shares could represent an attractive investment opportunity and/or may be instrumental in improving the financial structure of the Company as it may facilitate future agreements involving the exchange of shareholdings.

The authority is requested in order to carry out transactions, in accordance with enacted law and regulations, to stabilise share price movements linked to anomalies in the market and improve the liquidity of the shares.

The authority is also requested so that treasury shares are available for use in stock option incentive plans that may be approved under the provisions of law or as part of any bond issue convertible into shares of the Company.

It is also proposed that, at the same time, the Shareholders' Meeting authorises the Board of Directors to dispose, under the conditions and within the limits stipulated below, of any shares purchased, as well as of any treasury shares already held as this facility is considered an important component of management and strategic flexibility.

B) Maximum number and nominal value of the shares to which the authority applies; compliance with the provisions of paragraph 3 of Article 2357 of the Italian Civil Code

The buyback mandate requested applies to the Company's ordinary shares that have no nominal value and, in accordance with Article 2357, paragraph 3, of the Italian Civil Code, may not exceed one-fifth of the share capital, including the shares held by the Company and its subsidiaries at today's date. Directions given to the subsidiaries will require them to give prompt notice of any purchase of shares in Fiera Milano SpA in order to ensure compliance with the aforementioned total limit of 20% of the share capital of the Company.

At the date of the present Report, the issued and fully paid up share capital is Euro 42,445,141.00 (fortytwo million four hundred and forty-five thousand one hundred and forty-one) and is made up of 71,917,829 (seventy-one million nine hundred and seventeen thousand eight hundred and twenty-nine) registered shares with no nominal value.

The consideration paid or received for transactions in treasury shares will be recognised directly in equity as required by IAS 32 and the accounting treatment thereof will comply with any regulations that may be enacted.

C) Duration of the authority

The buyback authority is requested for a period of eighteen months from the date of approval by the Shareholders' Meeting, while the authority for the Board of Directors to dispose of the shares is requested without a time limit.

D) Consideration for the buyback and disposal of shares

Without prejudice to the provisions of paragraph E) below, treasury shares may be purchased under the provisions regarding transactions in Article 3 of the Commission Delegated Regulation (EU) 2016/1052 (the "Regulation 1052") supplementing Regulation (EU) 596/2014 (the Market Abuse Regulation, hereinafter "MAR") and the applicable provisions of the Italian Civil Code at a price that is no higher than the higher of the price of the most recent independent transaction and the current highest independent offer price in the market where the acquisition transaction is done subject to the unit price of the shares being no higher than 10% and no lower than 10% of the reference price recorded by Fiera Milano shares on the Italian stock exchange (MTA – Mercato Telematico Azionario) organised and managed by Borsa Italiana SpA in the trading session preceding each individual transaction.

The shares may be sold, even before the buyback mandate has been exhausted, in one or more tranches and the selling price must be no lower than that of the lowest purchase price.

This price limit will not be applicable in the event the shares are disposed of as part of a stock option plan.

E) Procedures for the buyback of treasury shares

The buyback of treasury shares may be made in one or more tranches, in compliance with applicable laws and regulations including the market procedures recognised by Consob.

Purchases of treasury shares must be made respecting the provisions of Article 3 of Regulation 1052 and the applicable provisions of the Italian Civil Code and in such a way as to ensure equal treatment for all shareholders in accordance with Article 132 of Legislative Decree no. 58/1998, exclusively in the following ways:

  • i. public offer to buy or exchange;
  • ii. on regulated markets in accordance with the operating procedures established by the rules for the organisation and management of said markets, which do not allow the direct matching of buy orders with sell orders at a predetermined price;
  • iii. purchase and sale of derivative instruments traded on regulated markets that provide for the physical delivery of underlying shares, on the condition that the rules for organisation and management of the market provide for procedures that comply with those under Article 144-bis, paragraph 1, section c) of the Listing Rules.

Disposals may be made, even before the buyback authority has been exhausted, in one or more tranches, through sales on regulated and/or unregulated markets, or off market, or by public offer, or as consideration for the purchase of shareholdings or by way of a distribution to shareholders.

Given the above, we submit for your approval the following

proposed resolution

  • "The Shareholders' Meeting of Fiera Milano SpA of 21 April 2017,
  • having considered the proposal of the Board of Directors,
  • having taken account of the provisions of Articles 2357 and 2357-ter of the Italian Civil Code,

approves

  • 1) the cancellation of the authority to buy back and dispose of treasury shares approved by the Ordinary Shareholders' Meeting of 28 April 2016;
  • 2) authorising the Board of Directors, in accordance with and by effect of Article 2357 and following of the Italian Civil Code, to buy back shares of the Company, in the amount, at the price, and according to the procedures described below:
  • – that purchases may be made in one or more tranches up to 18 months from the date of the present resolution;
  • – that the purchase price of each share is no higher than the higher of the price of the most recent independent transaction and the current highest independent offer price in the market where the acquisition transaction is done subject to the unit price of the shares being no higher than 10% and no lower than 10% of the reference price recorded by Fiera Milano shares on the Italian stock exchange (MTA – Mercato Telematico Azionario) organised and managed by Borsa Italiana SpA in the trading session preceding each individual transaction;
  • – that the maximum number of shares purchased, including treasury shares already held by the Company and its subsidiaries, must not have a total nominal value that exceeds one fifth of the share capital;
  • – that purchases of treasury shares may be made in one or more tranches, in compliance with applicable laws and regulations including the market procedures recognised by Consob. The buyback of treasury shares must be made respecting the provisions of Article 3 of Regulation 1052 and the applicable provisions of the Italian Civil Code and in such a way as to ensure equal treatment for all shareholders in accordance with Article 132 of Legislative Decree no. 58/1998, exclusively in the following ways:
  • i. public offer to buy or exchange;
  • ii. on regulated markets in accordance with the operating procedures established by the rules for the organisation and management of said markets, which do not allow the direct matching of buy orders with sell orders at a predetermined price;
  • iii. purchase and sale of derivative instruments traded on regulated markets that provide for the physical delivery of underlying shares, on the condition that the rules of organisation and management of the market provide for procedures that comply with those provided in article 144-bis, paragraph 1, section c) of the Listing Rules;
  • 3) authorising the Board of Directors under enacted law to dispose of part or all of the shares with no time restrictions even before the buyback authority has been exhausted; the disposals may be made through sales on regulated and/or unregulated markets or off market, or by public offer, or as consideration for the purchase of shareholdings or by way of a distribution to shareholders.

The selling price must be no lower than that of the lowest purchase price.

This price limit will not be applicable in the event the shares are disposed of as part of a stock option plan;

4) granting the Board of Directors and, acting on its behalf, the appointed Chairperson and Chief Executive Officer, jointly and severally, any necessary power to make purchases or disposals and, however, to implement the aforementioned resolutions, also through agents, complying with any eventual request from the competent authorities."

Rho (Milan), 10 March 2017

On behalf of the Board of Directors The Chairperson Roberto Rettani

CONTENTS

Fiera Milano Group Consolidated Financial Statements at 31 December 2016

Consolidated Financial Statements:
Consolidated Statement of Financial Position 120
Consolidated Statement of Comprehensive Income 121
Consolidated Statement of Cash Flows 122
Consolidated Statement of Changes in Equity 123
Explanatory and Supplementary Notes
to the Consolidated Financial Statements:
1) Accounting standards and consolidation criteria 124
2) Disclosure on subsidiaries, joint ventures
and associates
141
3) Disclosure on discontinued operations 143
4) Segment reporting 145
Non-current Assets
5) Property, plant and equipment 149
6) Leased property, plant and equipment 151
7) Goodwill and intangible assets
with an indefinite useful life
152
8) Intangible assets with a finite useful life 155
9) Equity accounted investments 160
10) Other investments 160
11) Trade and other receivables 160
12) Deferred tax assets 161
Current Assets
13) Trade and other receivables 161
14) Inventories 162
15) Current financial assets 163
16) Cash and cash equivalents 164
Equity
17) Equity 164
Non-current liabilities
18) Bank borrowings 167
19) Other financial liabilities 168
20) Provisions for risks and charges 168
21) Employee benefit provisions 169
22) Deferred tax liabilities 170
Current Liabilities
23) Bank borrowings 171
24) Trade payables 171

25) Advances
172

26) Other current financial payables
173

27) Current provisions for risks and charges
173

28) Current tax liabilities
174

29) Other current liabilities
174

30) Financial assets and liabilities
175

31) Financial and market risk management
178

32) Disclosure on guarantees given, undertakings
and other potential liabilities
183
Income Statement

33) Revenues from sales and services
184

34) Costs of materials
185

35) Costs of services
186

36) Costs of use of third-party assets
187

37) Personnel expenses
187

38) Other operating expenses
188

39) Other income
189

40) Results of equity accounted associates
and joint ventures
189

41) Depreciation and amortisation
189

42) Adjustments to asset values
190

43) Provision for doubtful receivables
and other provisions
190

44) Financial income and similar
191

45) Financial expenses and similar
191

46) Income tax
192

47) Earning/(losses) per share
194

48) Related-party transactions
195

49) Other information
201
Attachments:

1) List of companies included in the consolidation
area and other investments at 31 December 2016
207
Declaration in acc
ordance with
Article 154-bis of Legislative Decree 58/98
208
Report of the Board of Statutory Auditors 209
Independent Auditors' Report 211

Consolidated Financial Statements:

Consolidated Statement of Financial Position

(€'000)
Notes 31.12.2016 31.12.2015
ASSETS
Non-current assets
5 Property, plant and equipment 14,509 14,746
6 Leased property, plant & equipment 2 9
Investments in non-core property
7 Goodwill and intangible assets with an indefinite useful life 94,216 104,945
8 Intangible assets with a finite useful life 17,777 29,408
9 Equity accounted investments 18,198 16,955
10 Other investments 29 29
Other financial assets
11 Trade and other receivables 12,473 13,035
48 of which from related parties 11,862 12,125
12 Deferred tax assets 3,678 3,175
Total 160,882 182,302
Current assets
13 Trade and other receivables 52,227 63,932
48 of which from related parties 8,372 5,341
14–48 Inventories 5,480 1,884
Contracts in progress
15
48
Current financial assets
of which from related parties
2,622
2,622
16 Cash and cash equivalents 20,904 56,092
Total 81,233 121,908
Assets held for sale
3 Assets held for sale 3,436
Total assets 245,551 304,210
EQUITY AND LIABILITIES
17 Equity
Share capital 41,645 41,818
Share premium reserve 35,668 65,679
Revaluation reserve
Other reserves 1,714 (6,936)
Retained profits/(losses) 4,773 (17,003)
Profit/(loss) for the year (22,794) 1,014
Total Group equity 61,006 84,572
Equity attributable to non-controlling interests 673 696
Total equity 61,679 85,268
Non-current liabilities
Bonds in issue
18 Bank borrowings 14,108 10,922
19–48 Other financial liabilities 42 2,094
20 Provisions for risks and charges 3,584 3,343
21 Employee benefit provisions 9,302 10,672
22 Deferred tax liabilities 3,523 5,709
Other non-current liabilities
Total 30,559 32,740
Current liabilities
Bonds in issue
23 Bank borrowings 45,542 39,466
24 Trade payables 41,114 49,267
25–48 Advances 40,239 34,880
26 Other current financial liabilities 3,364 16,036
48 of which to related parties 2,503 15,225
27 Current provision for risks and charges 4,763 3,915
28 Current tax liabilities 1,605 5,168
29 Other current liabilities 16,513 37,470
48 of which to related parties 3,490 5,832
Total 153,140 186,202
Liabilities held for sale
3 Liabilities held for sale 173
Total liabilities 245,551 304,210

Consolidated Statement of Comprehensive Income

(€'000)
Notes 2016 2015 restated(
*)
33–48 Revenues from sales and services 221,041 335,172
Total revenues 221,041 335,172
34–48 Cost of materials 2,281 4,859
35 Cost of services 121,423 164,602
48 of which with related parties 1,350 1,040
36 Cost of use of third-party assets 49,837 61,265
48 of which with related parties 45,891 45,882
48 of which non-recurring with related parties 10,000
37–48 Personnel expenses 44,101 61,023
38–48 Other operating expenses 4,222 5,705
Total operating expenses 221,864 297,454
39 Other income 3,216 2,992
48 of which with related parties 1,380 276
40 Results of equity accounted associates and joint ventures 1,259 2,828
Gross operating result 3,652 43,538
41 Depreciation of property, plant and equipment 4,409 6,764
Depreciation of property investments
41 Amortisation of intangible assets 3,989 5,541
42 Adjustments to asset values 12,771 9,657
43 Provision for doubtful receivables and other provisions 5,477 8,179
Net operating result (EBIT) (22,994) 13,397
44–48 Financial income and similar 576 824
45 Financial expenses and similar 1,561 4,331
48 of which with related parties 107 1,045
Valuation of financial assets
Profit/(loss) before tax (23,979) 9,890
46 Income tax (5,305) 5,987
48 of which with related parties (3,340)
Profit/(loss) from continuing operations (18,674) 3,903
3 Profit/(loss) from discontinued operations (4,176) (3,474)
Profit/(loss) of the period (22,850) 429
Profit/(loss) attributable to:
The shareholders of the controlling entity (22,794) 1,014
Non-controlling interests (56) (585)
17 Other comprehensive income/(loss) that will not be
reclassified subsequently to profit or loss
Revaluation of defined benefit schemes (537) 228
Fair value stock option allocation
Profit/(loss) from hedging instruments
Tax effects (128) 63
17 Other comprehensive income/(loss) that will be reclassified
subsequently to profit or loss
Currency translation differences of foreign subsidiaries 15 (1,224)
2 Other comprehensive income/(loss) of equity accounted associates
and joint ventures that will not be reclassified subsequently to profit or loss
Revaluation of defined benefit schemes 35
Tax effects 8
Currency translation differences of foreign subsidiaries (185) 499
Other comprehensive income/(loss) net of related tax effects (552) (560)
Total comprehensive income/(loss) for the year (23,402) (131)
Total comprehensive income/(loss) for the year attributable to:
The shareholders of the controlling entity (23,199) 433
Non-controlling interests (203) (564)
47 Earnings/(losses) per share (€) Basic (0.2611) 0.1062
Diluted (0.2611) 0.1062

(*) Some figures in the Consolidated Financial Statements at 31 December 2015 have been restated for comparative purposes to reflect the accounting of the Chinese companies, Worldex and Haikou Worldex, under IFRS 5.

Consolidated Statement of Cash Flows

(€'000)
Notes 2016 2015 restated(
*)
Net cash at beginning of the year 56,092 12,276
Cash flow from operating activities
16 Net cash from operating activities (22,893) 52,526
48 of which from related parties (48,535) (54,714)
Interest paid (1,149) (2,617)
Interest received 95 91
Income taxes paid (126) (1,475)
Total from continuing operations (24,073) 48,525
Total from assets held for sale (463) (2,024)
Cash flow from investing activities
5 Investments in tangible assets (3,004) (3,388)
5 Write-downs of tangible assets 107 283
7–8 Investments in intangible assets (2,501) (1,262)
Investments in subsidiaries (2,363)
2–9 Investments in joint ventures 2,939 1,827
Total from continuing operations (2,459) (4,903)
Total from assets held for sale 2,442
Cash flow from financing activities
17 Equity (318) (108)
Share capital increase of the Parent Company 65,684
18–19 Non-current financial assets/liabilities 2,119 (17,243)
15–23–26 Current financial assets/liabilities (9,159) (48,539)
48 of which from related parties (17,153) (6,688)
Total from continuing operations (7,358) (206)
Total from assets held for sale (295)
17 Total translation differences (1,298) 277
Net cash for the period from continuing operations (33,890) 43,416
Net cash for the period from assets held for sale (463) 123
Net cash at the end of the year from assets held for sale 1,214 1,677
Net cash at the end of the year from continuing operations 20,904 54,415

(*) Some figures in the Consolidated Financial Statements at 31 December 2015 have been restated for comparative purposes to reflect the accounting of the Chinese companies, Worldex and Haikou Worldex, under IFRS 5.

(€'000)
Net cash from operating activities 2016 2015 restated(
*)
Result of continuing operations (18,674) 3,903
Adjustments for:
Profit from equity accounted investments (1,259) (2,828)
Depreciation and Amortisation 8,398 12,315
Provisions, write-downs and impairment 16,936 15,743
Capital gains and losses 39
Net financial income/expenses 985 3,520
Net change in employee provisions (1,907) 32
Changes in deferred taxes (2,561) 1,828
Inventories (3,688) 3,207
Trade and other receivables 11,262 (11,574)
Trade payables (10,136) 12,237
Advances 5,354 (4,519)
Tax payables (3,512) 4,596
Provisions for risks and charges and other liabilities (excluding payables to Organisers) (12,883) 7,186
Payables to Organisers (11,208) 6,841
Total (22,893) 52,526

(*) Some figures in the Consolidated Financial Statements at 31 December 2015 have been restated for comparative purposes to reflect the accounting of the Chinese companies, Worldex and Haikou Worldex, under IFRS 5.

Consolidated Statement of Changes in Equity

(€'000)
Note 17 Share
capital
Share
premium
reserve
Legal
reserve
Other
reserves
Retained
profits/
(losses)
Profit/(loss) for
the period
Total Group
equity
Capital and
reserves
attributable to
non-controlling
interests
Profit/(loss)
attributable to
non-controlling
interests
Total non
controlling
interests
Total
equity
Balance at 31 December 2014 41,521 909 7,865 (4,478) (9,828) (18,955) 17,034 2,805 (151) 2,654 19,688
Allocation of earnings at 31.12.14: (18,955) 18,955 (151) 151
use of reserves (909) (7,865) (1,420) 10,194
dividend distribution
Parent Company share capital
increase
297 66,537 66,834 66,834
Expenses related to the share
capital increase
(858) (858) (858)
Other share capital increases 17 17 17
Acquisition of 25% of Cipa Ltda 1,047 1,047 (932) (932) 115
Acquisition of 15% of Fiera
Milano Exhibitions Africa Ltd
207 374 581 (484) (484) 97
Acquisition of 51% of MiCo
DMC Srl
5 5 5
Remeasurement of defined
benefit plans
165 165 165
Total comprehensive
income/(losses) for the year
(1,245) 1,014 (231) 21 (585) (564) (795)
Balance at 31 December 2015 41,818 65,679 (6,936) (17,003) 1,014 84,572 1,281 (585) 696 85,268
Allocation of earnings at 31.12.15: 1,014 (1,014) (585) 585
use of reserves (29,657) 8,489 21,168
dividend distribution (26) (26) (26)
Expenses related to the share
capital increase
(63) (63) (63)
Treasury shares (173) (291) (464) (464)
Capital contributions 3 3 147 147 150
Acquisition of 51% of La fabbrica
del Libro SpA
59 59 59
Remeasurement of defined
benefit plans
(409) (409) (409)
Total comprehensive
income/(losses) for the year
161 (22,794) (22,633) (147) (56) (203) (22,836)
Balance at 31 December 2016 41,645 35,668 8,489 (6,775) 4,773 (22,794) 61,006 729 (56) 673 61,679

Explanatory and Supplementary Notes to the Consolidated Financial Statements

On 10 March 2017, the Board of Directors approved the Fiera Milano Group Consolidated Financial Statements at 31 December 2016 and authorised their publication.

The Fiera Milano Group is active in all the characteristic areas of the exhibition and congress industry and is one of the largest integrated exhibition companies worldwide.

The Group business consists of hosting exhibitions, fairs and other events, promoting and making available equipped exhibition spaces, as well as offering support for projects and related services. This includes the business of staging exhibitions (and providing final services to exhibitors and visitors).

The business of the Group has dual seasonality: (i) a higher concentration of exhibitions in the six months from January to June; (ii) exhibitions that have a multiannual frequency.

Greater detail on Group structure is provided in the relevant section of the Directors' Management Report on Operations.

1) Accounting standards and consolidation criteria

Standards used to prepare the Consolidated Financial Statements

The Consolidated Financial Statements were prepared in accordance with IAS and IFRS accounting standards in force at 31 December 2016, issued by the International Accounting Standards Board (IASB) and endorsed by the European Union, and the relative interpretative documents and provisions of Article 9 of Legislative Decree no. 38/2005.

The accounting standards used to prepare the present Financial Statements are the same as those used to prepare the Financial Statements at 31 December 2015, except for those applicable from 1 January 2016 that are listed below.

Given the capital and financial position in the 2016 financial year, the financial forecasts in the budget and the 2017-2020 Industrial Plan, approved by the Board of Directors on 6 February 2017, the forecasts for working capital requirements and for the financial and capital position, the Financial Statements and Consolidated Financial Statements have been prepared on the principles of a going concern.

The Financial Statements are prepared in Euro and all figures are rounded to the nearest thousand Euro unless otherwise indicated. The Financial Statements give comparative data for the previous financial year; it should be noted that some numbers from the previous financial year have been restated to make the numbers comparable.

In the 2016 financial year no atypical and/or unusual transactions took place.

The present Financial Statements have been prepared on the principles of a going concern.

The risks and uncertainties affecting the Group business are described in the Board of Directors' Management Report in the section on Risk factors affecting Fiera Milano Group, in Note 32, and in paragraph 1.5 on The Use of Estimates in the Explanatory and Supplementary Notes to the Consolidated Financial Statements.

The present Financial Statements have been audited by the independent audit firm EY SpA.

1.1 New accounting standards, interpretations and amendments adopted

The Group has adopted for the first time some accounting standards and amendments that are applicable to financial periods beginning on or after 1 January 2016.

The content and effect of each new accounting standard and amendment is given below:

  • Amendment to IAS 19 Defined Benefit Plans: Employee Contributions.
  • IAS 19 requires an entity to account for contributions to defined benefit schemes from employees or third parties linked to service to be attributed as a cost to periods of service. The amendment clarifies the requirements that relate to how contributions from employees or third parties that are linked to service should be attributed to periods of service. If the amount of the contribution is independent of the number of years of service, contributions can, but are not required, to be recognised as a reduction in the service costs in the period in which the related service is rendered. This amendment is applicable to annual periods beginning on or after 1 February 2015. This amendment has no significance for the Group as none of the entities that form the Group receive contributions from employees or third parties.
  • Amendments to IAS 16 and 38 Clarification of Acceptable Methods of Depreciation and Amortisation. The amendments provide additional guidance for IAS 16 – Property, Plant and Equipment and IAS 38 – Intangible Fixed Assets that a depreciation method based on revenue that is generated by an activity (that includes the use of an asset) reflects a pattern of generation of economic benefits that arise from the operation of the business of which an asset is part rather than the pattern of consumption of an asset's expected future economic benefits. As a result a depreciation method that is revenue-based may not be used for intangible assets except in limited circumstances when this presumption can be overcome. The amendments are effective for annual periods beginning on or after 1 January 2016. They have had no impact on the Group as the Group does not use revenue-based amortisation methods for non-current assets.

– Amendment to IFRS 11 – Accounting for Acquisitions of Interests in Joint Operations.

The amendment to IFRS 11 requires that the acquirer of an interest in a joint operation in which the activity constitutes a business is required to apply all of the principles on business combinations accounting in IFRS 3 – Business Combinations. The amendment also makes it clear that any previously held interest in the joint operation would not be remeasured if the joint operator acquires an additional interest while retaining joint control. Furthermore, an exception has been added to IFRS 11 to clarify that the amendments do not apply when the parties who have joint control, including the reporting entity, are themselves both controlled by the same third party.

The amendments apply to the acquisition of both the initial interest and additional interests in a joint operation where joint control is maintained. The amendments apply prospectively to acquisitions in scope that occur on or after the effective date. These amendments had no impact on the Group as it made no acquisitions of interests in joint operations in the period under review.

– Amendments to IAS 16 and IAS 41 – Financial reporting for bearer plants.

– Amendments to IFRS 10, IFRS 12 and IAS 28 – Investment Entities: Applying the Consolidation Exception. The amendments address issues that arose in the context of applying the consolidation exception for investment entities under IFRS 10 – Consolidated Financial Statements. The amendments to IFRS 10 clarify that the exemption from preparing consolidated financial statements is available to a parent entity that is a subsidiary of an investment entity even if the investment entity measures all of its subsidiaries at fair value.

The amendments to IFRS 10 also state that a subsidiary that provides services related to the activities of the investment should not be consolidated if the subsidiary itself is an investment entity. All the other subsidiaries of an investment entity are measured at fair value. The amendments to IAS 28 – Investments in Associates and Joint Ventures allow the investor, when applying the equity method, to retain the fair value measurement applied by the investment entity associate or joint venture to its interests in subsidiaries.

The amendments must be applied retrospectively but had no impact on the Group as it does not apply the consolidation exception for investment entities.

– Amendments to IAS 27 – Equity Method in Separate Financial Statements.

The amendments allow an entity to account for investments in subsidiaries, joint ventures and associates in its separate financial statements. An entity that has already adopted IFRS and decides to change the accounting criteria in its separate financial statements to use the equity method must apply the change retrospectively. These amendments had no impact on the Consolidated Financial Statements of the Group.

– Amendments to IAS 1 – Disclosure Initiative.

The amendments to IAS 1 – Presentation of Financial Statements clarify, rather than significantly change, the existing IAS 1 requirements. The amendments clarify:

  • • the materiality requirements in IAS 1.
  • • that specific line items in the statement(s) of profit or loss, the statement of other comprehensive income and the statement of financial position may be disaggregated.
  • • that entities have flexibility as to the order in which they present the notes to the financial statements.
  • • that the share of other comprehensive income of associates and joint ventures accounted for using the equity method must be presented in aggregate as a single line item that will or will not be subsequently reclassified to profit or loss.

Furthermore, the amendments clarify the requirements that apply when additional subtotals are presented in the statement of financial position and the statement(s) of profit or loss and of other comprehensive income. These amendments had no impact on the Consolidated Financial Statements of the Group.

  • IFRS – Annual Improvements Cycle 2012-2014.

This document amended IFRS 5, IFRS 7, IAS 19, and IAS 34 for matters requiring clarification.

The amendment to IAS 34 – Disclosure of information "elsewhere in the interim report" clarifies the requirement relating to information required by IAS 34 that is presented elsewhere within the interim financial report but outside the interim financial statements. The amendments require that such information be incorporated by way of cross-reference from the interim financial statements to the other part of the interim financial report that is available to users on the same terms and at the same time as the interim financial statements.

  • IFRS – Annual Improvements Cycle 2010-2012.

The aim of the annual improvements, started in 2011, is to make necessary but non-urgent amendments to inconsistencies or where clarification in wording is required in IFRS; the proposed amendments are recommended to the IASB before they are issued. Some amendments are clarifications or corrections to IFRS (IFRS 8, IFRS 13, IAS 16, IAS 24 and IAS 38) others are changes to existing requirements or provide further information regarding their application (IFRS 2 and 3).

The aforementioned amendments to IAS/IFRS had no significant impact on the Consolidated Financial Statements of the Group at 31 December 2016.

The following accounting standards were approved by the European Union during 2016 but are not applicable for the 2016 Financial Statements:

– IFRS 9 – Financial Instruments.

In July 2014, the IASB issued the final version of IFRS 9 – Financial Instruments that replaces IAS 39 – Financial Instruments: Recognition and Measurement and all previous versions of IFRS 9. IFRS 9 brings together the three aspects of the IASB project: the classification and measurement, impairment, and hedge accounting of financial instruments. IFRS 9 is effective for annual periods beginning on or after 1 January 2018; early application is permitted. With the exception of hedge accounting the standard must be applied retrospectively but grants an exception to restating comparatives for classification and measurement and impairment but not for hedge accounting. IFRS 9 requires prospective application of the hedge accounting requirements but specifies a limited number of exceptions.

The Group will adopt this standard from the date it is effective. During 2016, the Group carried out a preliminary analysis of all three aspects of IFRS 9. This preliminary analysis was based on the information available and could be subject to change following a more detailed analysis and if further information for the Group becomes available in the future. In principle, the Group does not expect any significant impact on its financial statements and equity from the introduction of IFRS 9.

– IFRS 15 Revenue from Contracts with Customers.

IFRS 15, issued in May 2014, is a new five-step model for recognising revenue from contracts with customers. Under IFRS 15 an entity will recognise revenue at an amount that reflects the consideration to which the entity expects to be entitled in exchange for transferring goods or services to a customer.

The new standard will supersede virtually all of the revenue standards and interpretations in IFRS. IFRS 15 is effective for annual periods beginning on or after 1 January 2018 and requires retrospective application, either full retrospective adoption in which the standard is applied to all of the periods presented or a modified retrospective adoption. Early adoption is permitted.

The Group will apply the new standard from the effective date with full retrospective adoption. During 2016, the Group carried out a preliminary analysis of the possible effects of IFRS 15, which may be subject to changes following the more detailed analysis which is currently underway. Furthermore, the Group is considering the clarifications issued by the IASB in the Exposure Draft of July 2016 and will assess any further developments.

IFRS 14 – Regulatory Deferral Accounts issued by the IASB has yet to be approved by the European Union.

1.2 Form and content of the Consolidated Financial Statements

With regard to the form and content of the Consolidated Financial Statements, the Group has made the following choices:

  • the Consolidated Statement of Financial Position is presented with separate sections for Assets, Liabilities, and Equity. Assets and liabilities are also classified as current, non-current, and held for sale;
  • the Consolidated Statement of Comprehensive Income is shown as a single statement in a continuous format and items are analysed by nature since this approach provides reliable information that is more relevant than classification by function;
  • the Consolidated Statement of Cash Flows is presented using the indirect method;
  • the Consolidated Statement of Changes in Equity is presented with separate entries for comprehensive income and transactions with shareholders.

1.3 Area and principles of consolidation

The present Consolidated Financial Statements include the Parent Company Fiera Milano SpA and its subsidiary companies, as well as companies under joint control.

The Consolidated Financial Statements are based on financial statements as at 31 December 2016 approved by the boards of directors of the companies included in the area of consolidation and prepared according to Group accounting policies and IAS/IFRS.

The list of companies included in the area of consolidation at 31 December 2016 is given in Attachment 1 to this document.

Regarding the area of consolidation:

– As part of the strategy to strengthen the portfolio of directly organised exhibitions, on 5 September 2016, Fiera Milano SpA and Ediser Srl, a service company belonging to the Associazione Italiana Editori (AIE), set up a company called La Fabbrica del Libro SpA. The two companies hold respectively 51% and 49% of the shares of the new company and, since the majority of the voting rights in the Board of Directors is with Fiera Milano SpA, control is exercised by Fiera Milano SpA.

This partnership will develop activities connected to book publishing, also through the organisation of fairs throughout Italy, to focus on all forms of publishing. The first event, Tempo di Libri, will be held in Milan from 19-23 April 2017. The event will involve editors, authors, librarians, bookshops, students and readers in a major event that combines tradition with innovation.

The fully paid up share capital comprises 120,000 ordinary shares with a value of Euro 1.0 per share with no restrictions on dividend distributions or reimbursements of paid up capital.

The company has two different classes of shares; category A shares that belong to the majority shareholder Fiera Milano SpA and category B shares belonging to Ediser Srl. The maximum amount of losses in the first two financial years (2016/2017 and 2018) that can be attributed to the category B shares is 15% of the total losses.

The first financial year will end on 31 December 2017 and estimates for the net results for 2016 and the relevant tax charge at 31 December 2016 are based on the costs and revenues generated and on estimates of the relevant applicable tax charge and tax rate.

In the period between 5 September 2016 and 31 December 2016, when it held no exhibitions, La Fabbrica del Libro SpA generated losses of Euro 0.103 million, equivalent to 0.4% of the consolidated results of the Group.

– On 4 November 2016, the Board of Directors of the Parent Company approved the sale of its 75% shareholding in the Chinese subsidiary Worldex Fiera Milano Exhibitions Co. Ltd and its subsidiary Haikou Worldex Milan Exhibitions Co. Ltd, together with the exhibition trademark Food Hospitality World China, to SingEx Exhibitions Pte Ltd.

The costs and revenues attributable to the company have been reclassified in the net results of discontinued activities, while the assets and liabilities are recognised in assets and liabilities held for sale, as described in Note 3.

Subsidiaries

Subsidiaries are consolidated from the date when control is effectively transferred to the Group and cease to be consolidated on the date when control is transferred to third parties.

The carrying value of consolidated investments is eliminated against the corresponding portion of equity at the acquisition date, against the assumption of the liabilities and assets shown in the respective financial statements of the subsidiaries on a line-by-line basis. Acquisitions of subsidiaries are recognised using the purchase method, as required by IFRS 3 revised in 2008.

The non-controlling interests in the capital and reserves of subsidiaries are recognised in equity under noncontrolling interests. Similarly, the portion of the Consolidated Income Statement pertaining to non-controlling interests is shown in profit or loss attributable to non-controlling interests.

Joint Ventures

A joint venture is a joint arrangement whereby the parties that have joint control of the arrangement have rights to the net assets of the arrangement. The Group recognises its interest in a joint venture as an investment and accounts for it using the equity method under IAS 28 – Investments in Associates and Joint Ventures. In the transition from proportionate consolidation to the equity method the interest in the joint venture is shown at the start of the period presented. Initial recognition as an investment must aggregate the carrying amounts of the assets and liabilities that the entity had previously proportionately consolidated, including any goodwill arising on acquisition. If the goodwill previously belonged to a larger cash generating unit, or group of cash generating units, the entity must allocate goodwill to the joint venture according to the carrying values of the joint venture in the cash generating unit, or group of cash generating units, to which it belongs.

Intercompany transactions

Profits and losses not yet realised that stem from transactions between consolidated companies are eliminated, as are all payables and receivables, costs and revenues, unrealised gains and losses and all other transactions between consolidated companies.

Translation of financial statements in foreign currencies

At the end of the reporting period, the assets and liabilities of consolidated companies with an accounting currency that is not the Euro are translated into the presentation currency of the Group's consolidated accounts at the exchange rate in force on that date. Income Statement items are translated at the average exchange rate for the year and differences arising from the adjustment of opening equity to year-end exchange rates, as well as the differences stemming from the different methodology used for the translation of the results for the financial year, are shown in the entry, other items, of the Statement of Comprehensive Income and aggregated in a specific equity reserve.

The exchange rates used for the translation into Euro of the 2016 and 2015 financial statements of foreign companies were the following:

average 2016 average 2015 31.12.2016 31.12.2015
South African rand 16.2645 14.1723 14.457 16.953
Brazilian reals 3.8561 3.7004 3.4305 4.3117
Russian rouble 74.1446 68.072 64.3 80.6736
Indian rupee 74.3717 71.1956 71.5935 72.0215
Yuan renminbi 7.3522 6.9733 7.3202 7.0608

Source: Banca d'Italia

1.4 Summary of accounting standards and valuation criteria

Business combinations

Business combinations are accounted for by applying the purchase method in accordance with IFRS 3 revised in 2008. Under this method the transaction cost of a business combination is valued at fair value, determined as the aggregate of the fair value of the assets transferred and the liabilities assumed by the Group at the acquisition date and equity instruments issued for control of the acquired entity. All other costs associated with the transaction are expensed in the Statement of Comprehensive Income at their acquisition date value.

Contingent considerations, considered part of the acquisition consideration, must be measured at fair value at the time of the business combination. Subsequent changes to the fair value are recognised in the Statement of Comprehensive Income.

The identifiable assets acquired and the liabilities assumed are measured at fair value at the acquisition date.

Goodwill is measured as the difference between the aggregate of the acquisition-date fair value of the consideration transferred for the business combination, the amount of any non-controlling interest and the acquisition date fair value of any previously held equity interest in the acquiree and the net of the acquisitiondate amounts of the identifiable assets acquired and the liabilities assumed. If the difference between the acquisition-date amounts of the identifiable assets acquired and the liabilities assumed exceeds the consideration transferred for the business combination, the amount of any non-controlling interest and the acquisition-date fair value of any previously held equity interest in the acquiree, the excess sum is immediately recognised in the Statement of Comprehensive Income as income from the transaction.

The non-controlling interest in equity at the acquisition date may be valued at fair value or the non-controlling interest's proportionate share of the identifiable net assets of the acquiree. The measurement method is carried out transaction by transaction.

In measuring the fair value of business combinations, the Fiera Milano Group uses available information and, for more material business combinations, also uses the support of external valuations.

Business combinations transacted prior to 1 January 2010 are recognised using the previous version of IFRS 3.

Business combinations achieved in stages

When a business combination is achieved in stages (step acquisition), the previously held share of the entity's assets and liabilities are measured at fair value at the date that control is obtained and any resulting adjustments are recognised in profit or loss. Previously held investments are therefore recognised as though they had been sold and reacquired at the date that control is obtained.

Puttable instruments

The concession of put options to non-controlling shareholders gives the latter the right to request that the Group redeem the shares they hold at a future date. IAS 32, paragraph 23, establishes that a contractual right to receive cash or another financial asset from the entity constitutes a financial liability for the actual

value of the exercise price of the put. Therefore, where the entity does not have the unconditional right to avoid delivering cash or another financial instrument when the put option on shares of the subsidiaries is exercised, it must recognise the financial liability. The financial liability is initially recognised at fair value corresponding to the current value of the amount to be reimbursed based on the best information available and changes in the fair value between one financial period and another are recognised in profit or loss under financial income/ expenses.

This liability is recognised in non-controlling interests or in Group equity depending on whether the risks or benefits associated with ownership of the shares underlying the options have been transferred.

Transactions involving non-controlling interests

Partial disposal of an investment where control is retained is accounted for as an equity transaction. For acquisitions of additional investments in a subsidiary any gain or loss between the acquisition consideration and the related share of equity is accounted for as an equity transaction with owners as is the partial disposal of an investment in a subsidiary where control is retained.

In cases where the partial disposal of an investment in a subsidiary results in loss of control, the residual holding is remeasured at fair value and any difference between fair value and the carrying amount is a gain or a loss and is recognised in profit or loss.

Tangible fixed assets

Property, plant and equipment

Property, plant and equipment are recognised at purchase or production cost, including contingent costs and costs incurred, and adjusted for accumulated depreciation.

Tangible assets are depreciated in each accounting period on a straight-line basis, using economic/technical rates determined by the residual life of the assets.

Routine maintenance costs are charged to profit or loss when they are incurred.

The replacement costs of identifiable components of complex assets are allocated to the assets and depreciated over their useful lives. The residual carrying amount of the component being replaced is recognised in profit or loss.

Improvements to third-party assets are recognised in property, plant and equipment based on the nature of the cost incurred; the depreciation period corresponds to the lesser of the residual useful life of the tangible asset and the residual period of the rental contract.

The depreciation rates applied are listed below:

Office furniture and machinery 12.0%
Exhibition furniture and equipment 27.0%
Catering equipment 25.0%
Metal components to be hired out 13.5%
Sundry machinery and equipment 15.0%
Motor vehicles 25.0%
Site motor vehicles 20.0%
Electronic equipment 20.0%
Plant and machinery 10.0%
Telecommunication systems 20.0%
Alarm systems 30.0%
Furnishings 12.0%

If there is any indication of impairment, the tangible assets are subjected to an impairment test as described in the section on impairment of assets.

Intangible fixed assets

An intangible asset is recognised only if it is identifiable, is controlled by the entity, is expected to generate future economic benefits, and if its cost can be reliably measured.

Goodwill and intangible assets with an indefinite useful life

Goodwill arising from business combinations is initially recognised at cost on the acquisition date, as indicated in the paragraph above on Business Combinations, and, for purposes of the impairment test, allocated to a cash-generating unit or group of cash-generating units which benefit from the synergies generated by the acquisition that gave rise to the goodwill. After initial recognition, goodwill is measured at cost less any impairment stemming from the impairment tests (see the section on Impairment of Assets). An intangible asset is considered to have an indefinite useful life when no limit can be foreseen to the period during which the asset can generate financial inflows for the Group. Intangible assets with an indefinite useful life and goodwill are not subject to amortisation.

Intangible assets with a finite useful life

Intangible assets with a finite useful life are measured at purchase or production cost, including any contingent costs, and systematically amortised on a straight-line basis over their estimated useful life. If there is any indication of impairment, the intangible assets are subject to an impairment test as described in the section on impairment of assets.

Since the last quarter of 2008, trademarks of exhibitions (i.e. exhibitor lists, visitor lists, and the actual trademark of the exhibition) and of publishing titles have been reclassified from goodwill with an indefinite life to intangible assets with a finite life. The initial choice was based on the consideration that the businesses underlying these assets, that is to say, exhibitions and specialist publications, do not lend themselves to a precise evaluation of their duration. In essence, at the time of the initial choice, no factors of a general economic, regulatory or legal

nature or factors specific to the entity or to the sector in which it is active emerged such as to set a foreseeable limit on the period during which the asset is expected to generate net cash inflows.

However, general trends in national and international markets, together with the internal competitive dynamics of the reference sectors for exhibitions and specialist publications, led to a reconsideration of the initial assumptions. After comparing the practices of the main Italian and foreign competitors, it was concluded that an estimated finite useful life of 20 years was appropriate in most cases, both for exhibitions and publications. Where the estimate of the reference time horizon for certain intangible assets was shown to be more uncertain, the useful life was set at 10 years.

The amortisation rates applied are given below:

  • Exhibition trademarks 5% or 10%
  • Other trademarks and publications 5% or 10%

Industrial patents, intellectual property rights, licences and concession agreements are amortised over three to ten years from the year they were acquired.

Research costs are recognised at the time they are incurred. In compliance with IAS 38, development costs relating to specific projects, including the launch of new exhibitions, are capitalised when it is probable that the project will be completed and generate future economic benefits and when such costs can be reliably measured. Their cost is amortised from the point when the asset is ready for use on a straight line basis over its useful life. The carrying value of costs is reviewed annually at the end of the reporting period or more often if there are any particular reasons for doing so to analyse the fair value and ascertain the existence of any impairment.

Impairment of assets

Goodwill and other intangible assets with an indefinite life are tested for impairment at least annually at the end of the reporting period or more often if there are any indications that an asset has been impaired.

Tangible and intangible assets with a definite useful life that are depreciated or amortised are tested for impairment only when there is an indication of impairment.

The recoverable amount of the asset is the higher of its fair value less costs of disposal and its value in use. The fair value is the price that would be received from the sale of an asset in an orderly transaction between independent, informed, and willing parties, less the costs of disposal. In the absence of binding agreements, it is necessary to use the prices expressed by an active market, or the best information available taking into account factors such as recent transactions for similar assets completed in the same business segment. The value in use is the present value, discounted at the weighted average cost of capital of an entity with a similar risk profile and level of indebtedness, of the cash flows expected to arise from the asset (or from a group of assets – a cash generating unit) and from its sale at the end of its useful life.

If subsequently there is an indication that an impairment loss, other than for goodwill, may have decreased or no longer exists, the carrying value of the asset is adjusted to the new estimate of the recoverable value although this value may not exceed the value which would have been measured if there had been no impairment. Reversal of impairment is recognised in profit or loss.

Leased assets

There are two types of leases: finance leases and operating leases.

A lease is considered a finance lease when it transfers a significant and substantial part of the risks and rewards associated with the ownership of the asset to the lessee.

Given this, as determined by IAS 17 – Leases, a leasing contract is considered a finance lease when the following factors are separately or jointly present:

  • the lease transfers ownership of the asset to the lessee by the end of the lease term;
  • the lessee has the option to purchase the asset at a price that is expected to be sufficiently lower than fair value at the date the option becomes exercisable such that, at the inception of the lease, it is reasonably certain the option will be exercised;
  • the lease term covers most of the economic life of the asset, even if title is not transferred;
  • at the inception of the lease, the present value of minimum lease payments amounts substantially to the fair value of the leased asset;
  • the leased assets are of a specialised nature such that only the lessee can use them without major modifications being made.

Assets available to Group companies under leasing contracts that can be considered finance leases are recognised as tangible or intangible assets at the lower of their value at the date acquired or the net current value of the minimum charges under the contract amortised over their estimated useful life; the corresponding liability to the lessor is recognised in equity as a current or non-current financial liability depending on whether the contract expires within or beyond twelve months.

Lease payments are subdivided into principal, which is taken against financial liabilities, and interest, which is recognised in profit or loss under financial expenses.

Charges for operating leases are recognised in profit or loss pro-rata temporis for the duration of the contract.

Financial assets

In accordance with the requirements of IAS 39 and IAS 32, financial assets are classified under the following four categories:

    1. Financial assets at fair value through profit or loss;
    1. Held-to-maturity (HTM) investments;
    1. Loans and receivables;
    1. Available-for-sale (AFS) financial assets.

Classification depends on the purpose for which assets are purchased and held. Management decides on their initial classification at the time of their initial recognition in the accounts, subsequently checking this classification at the end of each reporting period.

Financial assets are initially recognised at cost, which is equal to fair value plus contingent transaction costs. Subsequent measurement depends on the type of instrument concerned.

Financial assets at fair value recognised in the Income Statement, which include held-for-trading (HFT) financial assets and financial assets designated as such at the time of initial recognition, are classified among current financial assets and measured at fair value, with the gains or losses stemming from this valuation recognised in profit or loss. Gains and losses from any changes in the fair value are recognised in profit or loss.

Held-to-maturity investments are classified under current financial assets if they mature in less than 12 months and among non-current financial assets if maturity exceeds that period, and are subsequently valued at amortised cost. The latter is calculated using the effective interest method, taking into account any purchase discounts or premiums and spreading them over the entire period up to maturity, less any impairment.

Loans and receivables are valued at amortised cost using the effective interest method. At the end of each reporting period, the companies belonging to the Group measure the realisable value of these receivables taking account of estimated future cash payments or receipts through their expected life.

Available-for-sale financial assets are recognised as non-current assets, unless they are to be divested within twelve months of the end of the reporting period, and are measured at fair value. Losses or gains on availablefor-sale financial assets are recognised in other comprehensive income and aggregated in a specific equity reserve, until they are sold, recovered or otherwise derecognised. When there is an indication of impairment in an available-for-sale financial asset and there is objective evidence of this, the cumulative gain or loss that was recognised in other comprehensive income is reclassified from equity to profit or loss for the period as a reclassification adjustment even if the financial asset has not been derecognised.

Investments

In compliance with the requirements of IAS 39 and IAS 32, investments in companies other than subsidiaries and associates are classified as available-for-sale (AFS) and are measured at fair value except for when fair value cannot be determined; in such cases, the cost method is used. Gains and losses stemming from adjustments of value are recognised in other comprehensive income in a specific equity reserve. When there is an indication of impairment in an AFS financial asset and there is objective evidence of this, the cumulative gain or loss that was recognised in other comprehensive income is reclassified from equity to profit or loss for the period as a reclassification adjustment even if the financial asset has not been derecognised. Investments in associates are valued using the equity method with a separate entry in the Statement of Comprehensive Income for the share of the Group in the results of the companies over which it exercises significant influence.

Inventories

Inventories are valued at the lower of purchase or production cost, including contingent costs, calculated using the FIFO method, and the presumable net realisable value based on market trends. Group inventories consist mainly of suspended costs relating to activities in future financial periods and consumables.

Cash and cash equivalents

Cash and cash equivalents comprise cash on hand, bank demand deposits and cash investments with an original maturity of not more than three months. The definition of cash and cash equivalents in the Consolidated Statement of Cash Flows is the same as that of the Statement of Financial Position.

Assets and liabilities held for sale

This category includes assets and liabilities (or assets and liabilities in a disposal group/discontinued operations) where the carrying value will be recovered primarily through a sale rather than through continued use.

For this to happen, the following conditions must be met:

  • the assets (or disposal groups) must be available for immediate sale in their present condition;
  • the sale must be highly probable, i.e. the company must be committed to a programme for their disposal; activities to identify a buyer must have been initiated; and completion of the sale must be scheduled to take place within one year of the date of classification in this category.

Assets held for sale are measured at the lower of their net carrying value and their fair value less costs to sell.

If an asset that is depreciated or amortised is reclassified to this category, the depreciation or amortisation process is discontinued at the time of reclassification.

In compliance with IFRS 5, data relating to discontinued operations are presented as follows:

  • in two specific statement of financial position accounts: held-for-sale assets and held-for-sale liabilities;
  • in a specific entry in the Consolidated Statement of Comprehensive Income: net result for the period from discontinued operations.

Equity

Treasury shares

The par value of treasury shares is deducted from share capital and any amount in excess of par value is deducted from the share premium reserve.

Under IAS/IFRS regarding the acquisition of treasury shares, the nominal value of the shares is deducted from share capital while the difference between the nominal value and the acquisition value is taken against the share premium reserve. Regarding the sale of treasury shares, the share capital and the share premium reserve are reconstituted by the same amounts that they were reduced when the shares were acquired while any profit/ loss from the sale are recognised in equity, under other reserves, with no impact on profit or loss. The shares taken as the reference for the calculation of profit/loss on disposal are selected using the FIFO method.

Costs of capital transactions

Costs directly attributable to capital transactions are recognised as a direct reduction of equity.

Trade payables, tax liabilities, advances and other liabilities

Payables, advances and other liabilities are initially recognised at fair value. After that, they are measured at amortised cost. Payables are derecognised when underlying financial obligations have been discharged. If they have a due date exceeding twelve months, liabilities are discounted to present value using an interest rate reflecting market assessments of the time value of money and specific risks connected with the liability concerned. Discounted interest is classified in financial expenses.

Derivative instruments

A derivative or any other contract with the following characteristics is classified as a financial instrument and consequently fair-valued at the end of each accounting period: (i) its value changes in response to the change in an interest rate, the price of a financial instrument, a commodity price, a foreign-exchange rate, a price or rates index, creditworthiness, or another pre-established underlying variable; (ii) it requires no net initial investment or, if initial investment is required, one that is smaller than would be required for a contract from which a similar response to changes in market factors would be expected; (iii) it is settled at a future date. The effects of fair-value measurement are recognised in profit or loss as financial income/expense.

Provisions for risks and charges

Provision is made for risks and charges when the Group must meet a present obligation (legal or constructive) stemming from a past event, the amount of which can be reliably estimated and for settlement of which an outflow of resources is probable. If expectations of resource outflow go beyond the next financial year, the obligation is recognised at its present value through discounting of future cash flows at a rate that also considers the time value of money and the liability's risk.

Risks for which manifestation of a liability is only possible, not probable, are shown in the paragraph, disclosure on guarantees given, undertakings and other contingent liabilities, and no provisions are made for these.

Bank borrowings and other financial liabilities

Financial liabilities are initially recognised at cost as represented by the fair value of the funds received net of related costs incurred to receive the loan. After initial recognition, borrowings are measured according to amortised cost calculated using the effective interest rate. Amortised cost is calculated taking into account issuance costs and any discount or premium envisaged at the time of settlement.

Employee benefits

Employee benefits paid out upon or after cessation of the employment relationship consist mainly of employee severance indemnities [trattamento di fine rapporto or TFR], which are governed by Article 2120 of the Italian Civil Code.

In compliance with IAS 19, employee severance indemnities are considered a defined benefit plan, i.e. a plan consisting of benefits provided after cessation of employment, which constitutes a future obligation for which the Group assumes actuarial risks and related investments. As required by IAS 19 Revised, the Group uses the projected unit credit method to determine the present value of its defined benefit obligations and the related current service costs. This calculation requires the application of objective and mutually compatible actuarial assumptions concerning demographic variables (mortality rate, employee turnover) and financial variables (discount rate, future increases in salary levels). The Fiera Milano Group recognises changes in actuarial gains/losses in other items of comprehensive income. From 1 January 2007, following social security reform, cumulative employee severance indemnities had to be allocated to pension funds or to the INPS treasury fund, or, in the case of companies with fewer than 50 employees, could remain within the company as in previous years. Employees were given the option until 30 June 2007 to choose the destination of their severance indemnities.

In that regard, the allocation of accumulated employee severance indemnities to pension funds or to INPS means that a portion of these indemnities will be classified as a defined contribution plan in that the company's obligation is solely the payment of contributions either to the pension fund or to INPS. The liability related to past severance indemnities continues to be a defined benefit plan to be measured using actuarial assumptions.

Employee termination benefits not included in the employee severance indemnities (TFR) are recognised as liabilities and employee expenses when the enterprise is demonstrably committed to terminate the employment of an employee or group of employees before the normal retirement date or provides termination benefits as a result of an offer made in order to encourage voluntary redundancy. The benefits owed to employees for termination of their employment do not give any future economic benefits to the enterprise and are therefore recognised immediately as a cost.

Revenue recognition

Revenue is recognised to the extent that it is probable that the economic benefits associated with the sale of goods or rendering of services will flow to the Group and the relevant amount can be reliably measured. Revenues are recognised at the fair value of the consideration received or receivable, taking into account any trade discounts and quantity-based reductions granted.

Revenue from the sale of goods is recognised when the entity has transferred a significant and substantial part of the risks and rewards associated with the ownership of the asset.

Revenue from the sale of services is recognised when the service is supplied. In compliance with the requirements of IAS 18 paragraph 25, revenues for the supply of services relating to exhibitions and congresses are recognised when the exhibitions and congresses actually take place, because it is during the actual exhibition/congress that most of the related costs are borne. When it is probable that the total costs of an exhibition will exceed its total revenues, the expected loss is recognised as a cost in a specific provision.

Operating costs

Costs are recognised when they relate to goods and services sold or used in the financial year or on an accrual accounting basis when their future usefulness cannot be precisely identified.

Personnel expenses include both the fixed and variable remuneration of Directors taking account of the effective period of service.

Costs that are not eligible to be recognised in assets are recognised in profit or loss in the period in which they are incurred.

Other income

This item has a residual nature and includes grants and subsidies.

Financial income and expenses

Financial income and expenses are recognised in the accounts based on timing that considers the effective yield/expense of the asset/liability concerned.

Income tax

For each company, income taxes are recognised according to estimated taxable income in compliance with current tax rates and regulations in the countries where the Group operates. Income taxes are recognised in profit or loss, except for those relating to items recognised outside profit or loss, in which case the tax effect is recognised in equity.

Deferred taxes are measured according to the taxable temporary differences existing between the carrying amounts of assets and liabilities and their tax base and are classified among non-current assets and liabilities. Deferred tax assets are recognised to the extent that there is likely to be sufficient future taxable income against which the positive balance can be utilised. The carrying amount of deferred tax assets is subject to review at the end of each reporting period.

Deferred tax assets and liabilities are measured according to the tax rates that are expected to be applied in the period when the deferrals materialise, considering the tax rates in force or those that are scheduled to come into force subsequently.

Current and deferred tax assets and liabilities are offset only when they are levied by the same taxing authority and when there is a legal right to settle on a net basis.

Further information on the tax consolidation may be found in Note 47.

Transactions in foreign currencies

Transactions in foreign currencies are recorded at the current exchange rate in force on the transaction date. Monetary assets and liabilities denominated in foreign currencies are converted at the exchange rate in force at the end of the reporting period. Foreign exchange differences generated by the extinction of monetary items or their translation at different exchange rates from those at which they were translated at the time of initial recognition in the period or in previous periods are recognised in profit or loss. Exchange rate differences are recognised in financial expenses and income.

Dividends

Dividend income is recognised when the shareholders' right to receive payment has been established. This is normally the date of the Annual General Shareholders' Meeting that approves the dividend distribution.

Earnings (losses) per share

Basic earnings (losses) per share are calculated by dividing the Group profit or loss attributable to ordinary equity holders of the Parent Company by the weighted average number of ordinary shares outstanding in the period, excluding treasury shares.

Diluted earnings (losses) per share are calculated by adjusting the weighted average number of shares outstanding to allow for all dilutive potential ordinary shares.

1.5 Use of estimates

Preparation of financial statements and related notes using IFRS requires estimates and assumptions to be made that affect the amounts of assets and liabilities in the Statement of Financial Position and disclosures concerning potential assets and liabilities at the end of the reporting period. Actual results may differ from these estimates. Estimates are used to recognise provisions for doubtful accounts, depreciation and amortisation, employee benefits, taxes, and other provisions and reserves, as well as any adjustments to asset value. Estimates and assumptions are reviewed regularly and the effects of any change are immediately recognised in profit or loss.

The most important estimates used to prepare the Financial Statements are given below as these involve a significant level of subjective opinion, assumptions and estimates:

– Goodwill and intangible assets with an indefinite useful life are tested for impairment at least annually at the end of each reporting period; this test requires an estimate of the value in use of the cash generating unit to which the goodwill and intangible assets with an indefinite useful life have been allocated, which itself is based on an estimate of the cash flows the cash generating unit is expected to generate and discounting them to their net present value using an identified discount rate.

The recoverable amount is measured by comparing the carrying value with the higher of fair value less costs of disposal and value in use. The fair value less costs of disposal is the price at which an orderly transaction to sell the asset would take place between market participants at the measurement date under market conditions less costs of disposal. In the absence of binding agreements, prices and other relevant information generated by market transactions, or of the best information available, for recent transactions involving identical or similar assets in the same business sector are used. The value in use is calculated as the net present value of the future cash flows the company expects to derive from the asset (or group of assets – the cash generating unit) and from its disposal at the end of its useful life discounted at the average weighted cost of capital of an entity with a similar risk and debt profile.

  • – Intangible assets with a finite useful life are tested for impairment when there are internal or external indications that an asset is impaired; this test requires an estimate of the value in use of the cash generating unit to which the asset belongs, which itself is based on an estimate of the cash flows the cash generating unit is expected to generate and discounting them to their net present value using an appropriate discount rate.
  • – Deferred tax assets are carried against tax losses carried forward and other taxable temporary differences to the extent that it is probable there will be sufficient future taxable profits available to utilise the tax losses and other taxable temporary differences. Management must use its judgement in estimating the amount of deferred tax assets to be recognised. The Industrial Plan of the Company was used when calculating the amount of deferred tax assets to be recognised.
  • – Provisions for risks and costs are estimated using the best available information at the date of the Financial Statements under review and include estimates based on historic and future data regarding the likely outcome of legal disputes or events where the judgement of the risk profile and the calculation of the likely financial impact are uncertain and complex and could result in an adjustment to estimates.

Reference should be made to the specific paragraph in the notes to the Financial Statements for the use of estimates of financial risk. The valuation of the provision for risks refers to the best information available at the end of the reporting period.

The industrial plans used to carry out the impairment tests are based on certain expectations and assumptions for future performance that by their very nature are subject to uncertainties. Therefore, given the current macroeconomic scenario, the results could differ from the forecasts.

The plan will be continually assessed by the Directors regarding the effective realisation of the initiatives and forecasts and the effects on the financial and economic performance of the Group.

2) Disclosure on subsidiaries, joint ventures and associates

The Group has a 49% shareholding in Hannover Milano Global Germany GmbH, jointly controlled with Deutsche Messe AG. Under IAS 31 – Interests in joint ventures (before application of IFRS 11), the investment in Hannover Milano Global Germany GmbH was classified as a jointly controlled entity and the Group share of assets, liabilities, revenues and expenses were accounted using proportionate consolidation.

Following the application of IFRS 11 – Joint arrangements, the Group maintains that its shareholding under the agreement gives it joint control and it is, therefore, a joint venture that must be accounted using the equity method.

Significant business decisions relating to Hannover Milano Global Germany Gmbh require the unanimous agreement of the parties and neither party has any specific rights over the individual assets or obligations for any individual liability of the company of the legal entity.

Under the joint venture agreement with Deutsche Messe AG, the Group share of equity is calculated on the results generated by the various exhibitions; this share went from 40.82% in 2015 to 41.41% in 2016.

The equity and the financial value of the joint venture and the share of the Group are summarised in the following tables:

Hannover Milano Global Germany GmbH

(€'000) 2016 2015
Current assets 3,306 2,444
Non-current assets 9,050 9,567
Current liabilities 12,197 11,093
Non-current liabilities
Net financial debt/(cash) (19,853) (21,221)
Equity 20,012 22,139
Book value of the joint venture 9,442 10,280
(€'000) 2016 2015
Total revenues 33,653 40,920
Total operating costs (24,301) (29,904)
Depreciation and amortisation (356) (416)
Interest income 71 298
Interest payable (2) (6)
Profit/(loss) before tax 9,065 10,892
Income tax (3,537) (3,941)
Profit/(loss) for the year 5,528 6,951
Group profit/(loss) 2,289 2,837

At 31 December 2016 and at 31 December 2015, there were no contingent liabilities or material obligations relating to the investment of the Parent Company in the joint venture.

On 16 October 2015, the subsidiary Ipack-Ima SpA and Proma Pack Srl, a company belonging to UCIMA, the association of the Italian manufacturers of processing and packaging machinery, constituted Ipack Ima Srl.

The company has capital of Euro 20,000 and the two companies hold respectively 49% and 51% of the new company. The Group considers its investment to be a joint venture and has accounted for it using the equity method.

On 1 January 2016, the business division of the Ipack-Ima exhibition of Fiera Milano and that of the Food Pack exhibition of UCIMA were conferred on Ipack Ima Srl. This partnership will result in the most important Italian exhibition for processing and packaging technology.

The company held no exhibition in 2016 and the next one is scheduled to be held in 2018.

The equity and financial value of the joint venture and the share pertaining to the Group comprises inventories and advances for deferred costs and revenues for exhibitions to be held after 31 December and which are listed in the following table:

Ipack Ima Srl

(€'000) 2016 2015
Current assets 1,468 13
Non-current assets 5,989 15
Current liabilities 1,402 33
Non-current liabilities 908
Net financial debt/(cash) 2,326 (6)
Equity 2,821 1
Book value of the joint venture 1,382 1
(€'000) 2016 2015
Total revenues 331
Total operating costs (2,691) (26)
Depreciation and amortisation (333)
Interest income
Interest payable (45)
Profit/(loss) before tax (2,738) (26)
Income tax 635 7
Profit/(loss) for the year (2,103) (19)
Group profit/(loss) (1,030) (9)

At 31 December 2016, there were no contingent liabilities or material obligations relating to the investment of the Parent Company in the joint venture.

Summary financial information on subsidiaries, joint ventures and associates is given in Attachment 2 to the Financial Statements of Fiera Milano SpA.

3) Disclosure on discontinued operations

On 4 November 2016, the Board of Directors of the Parent Company approved the sale of the 75% shareholding in the Chinese subsidiary Worldex Fiera Milano Exhibitions Co. Ltd and its subsidiary Haikou Worldex Milan Exhibitions Co. Ltd, together with the exhibition trademark Food Hospitality World China, to SingEx Exhibitions Pte Ltd. The sale of the shareholding was signed on 22 February 2017.

This transaction is in line with the Group strategy of repositioning its presence outside Italy and concentrating its business in China in the joint venture with Deutsche Messe.

The transaction price comprises a fixed component of Euro 2.750 million and a variable component of maximum Euro 1.000 million. 50% of the fixed component is payable on finalisation of the transaction and the remaining

50% when the purchaser obtains the necessary business licence and it will be subject to a price adjustment exclusively in favour of Fiera Milano should the sum of the net cash and net working capital of Worldex exceed Euro 1.213 million at the closing date of the transaction. The variable component of the transaction price, payable in three deferred tranches of equal amounts, depends on the targets for the EBITDA of Worldex being reached in each of the three years 2017-2019.

The sale of the shareholding generated Euro 5.487 million in impairment charges for goodwill in the consolidated accounts. The calculation considered only the fixed part of the transaction price as the variable parts are linked to future events and circumstances that are beyond the control of the Group.

The transaction is subject to resolutive clauses including the issue of the necessary licences by the relevant Chinese authorities.

Under IFRS 5 – Non-current Assets Held for Sale and Discontinued Operations, the results of the company and the impairment charges for goodwill are recognised in a single item of the Income Statement, net result for the period of discontinued operations, while the assets and liabilities are recognised in the items assets and liabilities held for sale.

At the same time the transaction was signed, an agreement was also signed whereby the minority shareholder waived its right to exercise the put option it held on 25% of the company. The accounting effect of the adjustment of the fair value of the put option, as part of the transaction, was Euro 0.850 million and was recognised in the Statement of Comprehensive Income under net result for the period of discontinued operations giving a positive impact of Euro 1.001 million.

The income statement and the result per share of discontinued operations is shown in the following table:

(€'000) 2016 2015
Revenues 2,505 2,182
Costs (2,170) (2,149)
Profit/(loss) from discontinued operations 335 33
Income tax (25) (23)
Profit/(loss) from discontinued operations net of related tax effects 310 10
Adjustment of the put option to the fair value of the company
under the sale agreement
1,001
Adjustment to the fair value of goodwill (5,487) (1,486)
Profit/(loss) from discontinued operations (4,176) (1,476)
attributable to:
The shareholders of the controlling entity (4,210) (1,516)
Non-controlling interests 34 40

Worldex Income statement

Earnings/losses per share

2016 2015
Profit/(loss) (€'000) (4,210) (1,516)
Average no. of shares in circulation ('000) 71,175 42,654
Basic and fully diluted earnings/(losses) per issued share (€) (0,0591) (0,0355)

The main assets and liabilities of Worldex recognised in assets and liabilities held for sale were the following:

(€'000) 2016
Assets
Property, plant and equipment 10
Goodwill and intangible assets with an indefinite useful life 1,115
Trade and other receivables 1,005
Inventories 92
Cash and cash equivalents 1,214
Total assets held for sale 3,436
Liabilities
Trade payables 35
Advances 5
Current tax liabilities 75
Other liabilities 58
Total liabilities held for sale 173
Net assets held for sale
Amounts included in other comprehensive income/(loss) (316)

The cash flows from discontinued operations were the following:

(€'000) 31.12.2016 31.12.2015
Cash flow from operating activities (463) 137
Cash flow from investing activities
Cash flow from financing activities
Net cash for the period from assets held for sale (463) 137
Currency translation differences (316) 655

4) Segment reporting

In compliance with IFRS 8, the identification of operating segments and related information is based on the data used by management to take its operating decisions and is consistent with the management and control model used. The internal accounting system, regularly reviewed and used by the top decision makers in the Group, gives information by segment and also by individual company.

The operating segments defined by the management criteria are as follows:

  • Italian Exhibitions: this segment covers all activities for the organisation and hosting of exhibitions and other events in Italy through the use, promotion and offer of furnished exhibition spaces, of project support, and of ancillary services. Specifically this segment includes all activities associated with exhibitions (including end services for exhibitors and visitors):
  • • that are directly organised by the Group or in partnership with third-parties;
  • • organised by third parties, through the hiring out of spaces and services.

These activities are carried out by the Parent Company Fiera Milano SpA, Ipack Ima Srl and La Fabbrica del Libro SpA.

– Foreign Exhibitions: this segment covers all activities for the organisation of exhibitions and other events abroad through the use, promotion and offer of furnished exhibition spaces, of project support, and of ancillary services. Specifically this segment includes all activities associated with exhibitions (including end services for exhibitors and visitors) that are directly organised by the Group or in partnership with thirdparties.

These activities are carried out by:

  • • Hannover Milano Global Germany GmbH, a joint venture with Deutsche Messe AG of Hanover, which operates in China through two subsidiaries, Hannover Milano Fairs Shanghai Co Ltd and Hannover Milano Fairs China Ltd, and in India through its 50% shareholding in Hannover Milano Fairs India Pvt Ltd and the latter's investment in Global Fairs & Media Private Ltd;
  • • Cipa FM Publicações e Eventos Ltda (hereinafter "Cipa FM"), with its registered office in São Paulo; it is owned through the Brazilian subsidiary, Eurofairs International Consultoria e Participações Ltda (hereinafter "Eurofairs");
  • • Fiera Milano India Pvt Ltd, with its registered office in New Delhi;
  • • Limited Liability Company Fiera Milano, with its registered office in Moscow;
  • • Fiera Milano Exhibitions Africa PTY Ltd (hereinafter "Fiera Milano Africa"), with its registered office in Westlake – Cape Town.
  • Stand-fitting services: this segment covers stand-fitting services, technical services and all exhibition site services for exhibitions and congresses carried out by Nolostand SpA.
  • Media: this segment covers the production of content and supply of online and offline publishing services, as well those associated with the organisation of events and congresses by Fiera Milano Media SpA.
  • Congresses: this segment covers the management of conferences and events by Fiera Milano Congressi SpA and MiCo DMC Srl.

The tables below give Income Statement and Statement of Financial Position data by segment for the financial years to 31 December 2016 and 31 December 2015.

Income Statement to 31.12.16

(€'000) ITALIAN
EXHIBITIONS
FOREIGN
EXHIBITIONS
STAND-FITTING
SERVICES
MEDIA CONGRESSES Adjustments Consolidated
Revenues from sales and services to third-parties 169,035 6,802 6,625 9,095 29,484 221,041
Revenues from intersegment sales and services 4,386 28 31,670 1,956 1,188 (39,228)
Total revenues 173,421 6,830 38,295 11,051 30,672 (39,228) 221,041
of which from Italy 214,239
of which from foreign activities 6,802
Cost of materials 504 42 1,448 210 86 (9) 2,281
Cost of services 100,761 5,837 28,244 6,543 21,363 (41,325) 121,423
Cost for use of third-party assets 43,555 473 2,031 272 4,077 (571) 49,837
Personnel expenses 32,286 1,577 3,887 3,966 3,551 (1,166) 44,101
Other operating expenses 3,539 223 173 76 290 (79) 4,222
Total operating expenses 180,645 8,152 35,783 11,067 29,367 (43,150) 221,864
Other income 5,162 814 521 392 969 (4,642) 3,216
Profit/(loss) of equity accounted companies (1,030) 2,289 1,259
Gross operating result (3,092) 1,781 3,033 376 2,274 (720) 3,652
of which from Italy 2,523
of which from foreign activities 1,129
Depreciation of property, plant & equipment 1,312 168 1,922 31 976 4,409
Depreciation of property investments
Amortisation of intangible assets 2,711 568 624 30 56 3,989
Adjustments to asset values 3,333 5,357 4,081 12,771
Provision for doubtful accounts and other
provisions
4,786 195 618 (257) 135 5,477
Net operating result (EBIT) (15,234) (4,507) 493 (4,103) 1,133 (776) (22,994)
of which from Italy (17,779)
of which from foreign activities (5,215)
Financial income and similar 576
Financial expenses and similar 1,561
Valuation of financial assets
Profit/(loss) before income tax (23,979)
Income tax (5,305)
Profit/(loss) from continuing operations (18,674)
Profit/(loss) from discontinued operations (4,176)
Revenues 2,505
Operating expenses 6,681
Profit/(loss) for the year (22,850)
Profit/(loss) attributable to non-controlling interests (56)
Group profit/(loss) (22,794)

Statement of Financial Position Data at 31.12.16

(€'000) Investments Depreciation and amortisation of
non-current assets
Italian exhibitions 3,925 4,023
Foreign exhibitions 121 736
Stand-fitting services 1,968 1,922
Media 35 655
Congresses 1,338 1,006
Adjustments 56
Total 7,387 8,398

Income Statement to 31.12.2015

(€'000) ITALIAN
EXHIBITIONS
FOREIGN
EXHIBITIONS
STAND-FITTING
SERVICES
MEDIA CONGRESSES Adjustments Consolidated(
)
*
Revenues from sales and services to third-parties 271,124 6,561 10,020 10,672 36,795 335,172
Revenues from intersegment sales and services 6,186 384 45,870 2,704 651 (55,795)
Total revenues 277,310 6,945 55,890 13,376 37,446 (55,795) 335,172
of which from Italy 328,611
of which from foreign activities 6,561
Cost of materials 912 49 3,563 223 127 (15) 4,859
Cost of services 145,187 7,231 39,028 6,977 24,634 (58,455) 164,602
Cost for use of third-party assets 55,022 540 2,031 341 4,029 (698) 61,265
Personnel expenses 46,409 2,800 4,632 5,363 3,840 (2,021) 61,023
Other operating expenses 4,644 464 131 72 504 (110) 5,705
Total operating expenses 252,174 11,084 49,385 12,976 33,134 (61,299) 297,454
Other income 6,804 66 692 421 314 (5,305) 2,992
Profit/(loss) of equity accounted companies (9) 2,837 2,828
Gross operating result 31,931 (1,236) 7,197 821 4,626 199 43,538
of which from Italy 45,133
of which from foreign activities (1,595)
Depreciation of property, plant & equipment 2,041 140 1,757 47 2,779 6,764
Depreciation of property investments
Amortisation of intangible assets 4,237 685 553 22 44 5,541
Adjustments to asset values 1,953 7,384 19 301 9,657
Provision for doubtful accounts and other
provisions
5,496 364 200 2,058 61 8,179
Net operating result (EBIT) 18,204 (9,809) 5,221 (2,138) 1,764 155 13,397
of which from Italy 23,609
of which from foreign activities (10,212)
Financial income and similar 824
Financial expenses and similar 4,331
Valuation of financial assets
Profit/(loss) before income tax 9,890
Income tax 5,987
Profit/(loss) from continuing operations 3,903
Profit/(loss) from discontinued operations (3,474)
Revenues 3,125
Operating expenses 6,599
Profit/(loss) for the year 429
Profit/(loss) attributable to non-controlling interests (585)
Group profit/(loss) 1,014

Statement of Financial Position Data at 31.12.15

(€'000) Investments Depreciation and amortisation
of non-current assets(
)
*
Italian exhibitions 5,543 6,278
Foreign exhibitions 184 825
Stand-fitting services 1,520 1,757
Media 11 600
Congresses 559 2,801
Adjustments 44
Total 7,817 12,305

(*) Some figures in the Consolidated Financial Statements at 31 December 2015 have been restated for comparative purposes following the introduction of IFRS 5 following the divestment of the Chinese subsidiary Worldex-Haikou Worldex.

Notes to the Consolidated Financial Statements

STATEMENT OF FINANCIAL POSITION

ASSETS

Non-current assets

5) Property, plant and equipment

The breakdown and changes in the last two financial years were as follows:

(€'000) Balance at Changes during the financial year Balance at
31.12.2014 Incr. Decr. Depr. Assets held
for sale
Impairment Currency
translation
differences
Change in area of
consolidation
Assets of
discontinued
operations
Reclassification 31.12.2015
Plant and machinery
– historic cost 16,856 529 34 19 17,370
– depreciation 12,350 15 2,126 19 14,480
Net 4,506 529 19 2,126 2,890
Industrial and
commercial equipment
– historic cost 34,394 1,692 1,039 95 144 35,096
– depreciation 29,971 976 1,865 77 144 30,927
Net 4,423 1,692 63 1,865 18 4,169
Other assets
– historic cost 56,064 1,228 812 (156) 233 (422) 56,135
– depreciation 46,566 611 2,785 10 (70) 157 (388) 48,449
Net 9,498 1,228 201 2,785 10 (86) 76 (34) 7,686
Contracts in progress
and advances
– historic cost 1 1
Net 1 1
Total property, plant and
equipment
– historic cost 107,314 3,449 1,885 95 (156) 396 (422) 1 108,602
– depreciation 88,887 1,602 6,776 10 77 (70) 320 (388) 93,856
Net 18,427 3,449 283 6,776 10 18 (86) 76 (34) 1 14,746
(€'000) Balance at Changes during the financial year
31.12.2015 Incr. Decr. Depr. Assets held for sale Currency
translation
differences
Reclassification 31.12.2016
Plant and machinery
– historic cost 17,370 150 19 17,501
– depreciation 14,480 18 884 15,346
Net 2,890 150 1 884 2,155
Industrial and commercial
equipment
– historic cost 35,096 2,178 436 36,838
– depreciation 30,927 424 1,977 32,480
Net 4,169 2,178 12 1,977 4,358
Other assets
– historic cost 56,135 1,908 284 (41) 110 1 57,829
– depreciation 48,449 190 1,571 (22) 25 49,833
Net 7,686 1,908 94 1,571 (19) 85 1 7,996
Contracts in progress and
advances
– historic cost 1 (1)
Net 1 (1)
Total property, plant and
equipment
– historic cost 108,602 4,236 739 (41) 110 112,168
– depreciation 93,856 632 4,432 (22) 25 97,659
Net 14,746 4,236 107 4,432 (19) 85 14,509

The breakdown and changes were as follows:

Plant and machinery

This entry totalled Euro 2.155 million, net of depreciation in the financial year of Euro 0.884 million, and was mainly electrical and thermal plant and alarm and audiovisual systems.

The increase of Euro 0.150 million was primarily attributable to investments made by the Parent Company in the plant and equipment of the Rho exhibition site.

Industrial and commercial equipment

This item was Euro 4.358 million, net of depreciation in the financial year of Euro 1.977 million, and was mainly for equipment and furnishings related to the exhibition business.

The increase of Euro 2.178 million was mainly attributable to the purchase of exhibition equipment and wooden fittings to be hired out during exhibitions.

Other assets

This entry was Euro 7.996 million net of depreciation in the financial year of Euro 1.571 million; Euro 5.316 million was for improvements to the assets of Fondazione Fiera Milano and Euro 2.680 million was for furniture, furnishing accessories, minor equipment, vehicles and electronic equipment.

The breakdown of the Euro 1.908 million increase was as follows:

  • Euro 1.250 million attributable to Fiera Milano Congressi SpA mainly for building work and upgrading of the plant and equipment in the MiCo North Wing and MoMeC congress areas;
  • Euro 0.544 million was attributable to the Parent Company of which Euro 0.383 million for electronic equipment and furnishings and Euro 0.161 million for improvements made to assets belonging to Fondazione Fiera Milano under the existing leasing contracts;
  • the remaining Euro 0.114 million was attributable to other companies.

Depreciation on improvements to third-party assets is calculated on the residual length of the lease contract for the property.

6) Leased property, plant and equipment

Details of the amounts and changes to various items in the last two financial years are given below:

(€'000) Balance at Balance at
31.12.2014 Incr. Decr. Depr. Currency
translation
differences
Reclassification 31.12.2015
Leased property
– historic cost 11 (2) 9
– depreciation
Net 11 (2) 9
Total leased property, plant and equipment
– historic cost 11 (2) 9
– depreciation
Net 11 (2) 9
(€'000) Balance at Changes during the financial year
31.12.2015 Incr. Decr. Depr. Currency
translation
differences
Reclassification 31.12.2016
Leased property
– historic cost 9 1 10
– depreciation 7 1 8
Net 9 7 2
Total leased property, plant and equipment
– historic cost 9 1 10
– depreciation 7 1 8
Net 9 7 2

7) Goodwill and intangible assets with an indefinite useful life

The breakdown and changes in the last two financial years were as follows:
---------------------------------------------------------------------------- --
(€'000) Balance at
31.12.2014
Changes during the financial year
Incr. Decr. Impairment Change in area of
consolidation
Assets held
for sale
Assets of
discontinued
operations
Currency
translation
differences
31.12.2015
Goodwill
– historic cost 126,071 6,216 3,173 (1,486) (700) 700 121,542
– amortisation 16,597 16,597
Net 109,474 6,216 3,173 (1,486) (700) 700 104,945
(€'000) Balance at Changes during the financial year
31.12.2015 Incr. Decr. Impairment Conferral of the business
division to the JV
Assets held for
sale
Currency
translation
differences
31.12.2016
Goodwill
– historic cost 121,542 823 (3,084) (6,844) 22 110,813
– amortisation 16,597 16,597
Net 104,945 823 (3,084) (6,844) 22 94,216

The decrease of Euro 3.084 million derives from the conferral of the business division of the Ipack-Ima exhibition to the joint venture Ipack Ima Srl valued using the equity method.

The Euro 6.844 million decrease in assets held for sale refers to the Chinese company Worldex as described in Note 3.

The positive translation effect of Euro 0.022 million was for goodwill in the Brazil cash generating unit.

As described in the section on Valuation Criteria, goodwill is not depreciated but is subject to impairment tests at the end of each reporting period or more frequently if there are any indications of impairment. The methods used for the impairment tests are described in the section Use of estimates.

The new four-year financial plans of the Events and Training cash-generating unit and the Brazil group of cashgenerating units showed an impairment loss for the residual goodwill attributable to these cash-generating units of Euro 0.616 million for Fiera Milano Media SpA and Euro 0.207 million for Cipa Fiera Milano Ltda.

The impairment test on the goodwill allocated to the Events and Training cash-generating unit used a WACC of 6.80% that comprised a risk-free rate of 1.46%, a market risk premium of 5.6%, a levered beta equivalent to the sector average of 0.72, a specific risk premium of 3%, a cost of debt of 2.36% and a ratio of debt to invested capital of 25%.

The impairment test on the goodwill allocated to the Brazil group of cash-generating units used a WACC of 14.10% that comprised a risk-free rate of 13%, a market risk premium of 5.6%, a levered beta equivalent to the sector average of 0.70, a specific risk premium of 1%, a cost of debt of 4.06% and a ratio of debt to invested capital of 25%.

Goodwill is allocated to the relevant cash generating units or groups of cash generating units.

To identify "the smallest identifiable group of assets that generates cash inflows that are largely independent of the cash inflows from other assets or groups of assets" (IAS 36), the different reportable segments of the Group were identified as specific cash generating units.

In the reportable segment "Exhibitions" each exhibition constitutes a cash generating unit.

Each of the two reportable segments "Stand-fitting Services" and "Congresses" is one cash generating unit that encompasses all the assets of each individual segment.

In the reportable segment "Media" different cash generating units have been identified that correspond to the various publications, while digital services is another cash-generating unit and all the activities relating to seminars and conventions are a single cash-generating unit (the "Events and Training" CGU).

Lastly, in the reportable segment "Overseas" the situation varies according to whether the Group is active in a country with its own exhibitions.

In order to avoid using arbitrary allocation criteria for the impairment tests, goodwill was allocated on the basis of appropriate groupings that reflect the strategic vision of the company, as well as how the goodwill was generated.

The goodwill allocations were as follows:

  • The Directly Organised Exhibition cash-generating unit: this comprises the cash generating units of all the exhibitions directly organised by Fiera Milano SpA. The goodwill allocated to this group was Euro 40.223 million for goodwill on the acquisitions of companies that organise exhibitions that were subsequently incorporated in Fiera Milano SpA through various merger transactions.
  • The Exhibition cash-generating unit: this comprises the cash generating units of all the exhibitions of Fiera Milano SpA. The goodwill allocated to this group was Euro 29.921 million of which Euro 29.841 million was the goodwill coming from the contribution of the exhibition entity by Fondazione Fiera Milano to Fiera Milano SpA on 17 December 2001 and Euro 0.080 million was goodwill from the acquisition by the Parent Company of the Information Communication Technology business division from its subsidiary Expopage SpA, which is now Fiera Milano Media SpA.
  • The Exhibition Stand-fitting cash generating unit: the goodwill of Euro 12.581 million from the acquisition of the "standard stand-fitting" business division by Nolostand SpA was allocated to this cash generating unit.
  • The Publishing and Digital Services group of cash generating units: this includes the cash generating units of publications and digital services and the goodwill allocated to this group of cash-generating units was Euro 5.947 million.
  • The Congress cash generating unit: the goodwill allocated to this cash generating unit was Euro 5.544 million of which Euro 5.455 million was the goodwill from the acquisition of Fiera Milano Congressi SpA and Euro 0.089 million was from the acquisition of MiCo DMC Srl.

The recoverable value of the cash generating units (CGUs) to which individual goodwill was attributed is verified by calculating their value in use.

Discounted cash flows are used to assess impairment. These are based on the industrial plan of each Group company and approved by their respective board of directors. The time horizon considered is four financial years as several important events in the exhibition calendar have a biennial frequency. Cash flow projections beyond the time horizons of the industrial plans are generally made by taking the average gross operating margin of the whole period of the plan and estimating a normalised cash flow with no changes in

working capital but including maintenance or replacement expenditure. The terminal value was measured as a perpetuity obtained by calculating the net present value of the average net cash flows of the last four years of the plan that had detailed estimates and using a discount rate that differed according to the various reference countries of the cash-generating units. Zero growth in real terms was assumed but an estimate of the medium/long-term inflation rates in the specific geographic areas was used.

The WACC (Weighted Average Cost of Capital) used for the Italian businesses was calculated using: (i) a risk-free rate of 1.46%; (ii) a market risk premium of 5.6%; (iii) a levered beta of 0.72, equal to the average for the sector; (iv) a risk premium that varied according to the different CGUs; (v) a cost of debt of 2.36%; (vi) with average debt equal to 25% of invested capital (the average of the peer companies).

The single elements were arrived at using as far as possible publicly available sources. A rate net of taxes was used for cash flows net of taxes.

The WACC of the different CGUs varied according to: (i) the different risk-free rates (the yield on a 10-year government bond in the jurisdiction of the CGU); and (ii) the specific risk coefficient to cover the execution risk of the forecast cash flows. The risk factors reflect the differences between historical data and estimated figures and also forecasts for the impact of the business initiatives to be implemented; (iii) the different cost of debt due to the estimated rate of inflation in the jurisdiction of each CGU. A summary of the results is given in the table below:

CGU WACC
Exhibitions CGU 5.30%
Directly Organised Exhibitions CGU 5.30%
Exhibition Stand-fitting CGU 6.80%
Publications and Digital Services CGU 6.80%
Events and Training CGU 6.80%
Congresses CGU 5.67%
Brazil CGU 14.10%
South Africa CGU 12.25%

Sensitivity analyses were carried out by varying the WACC (+0.5%) and the forecast operating cash flows (–10%) with a positive outcome for all the CGUs that were not written down, except for the Directly Organised Exhibition cash-generating unit. If a 0.5% higher WACC had been used in the calculation for this cashgenerating unit (5.80% instead of 5.30%), the recoverable value would have been Euro 0.450 million lower than the carrying value.

If a 0.5% higher WACC had been used in the calculation of the impairment of goodwill in the Events and Training cash generating unit, it would have been unchanged (the WACC used resulted in the complete write-down of the residual goodwill). Using a WACC that was 0.5% lower would have given a value of Euro 0. 559 million, Euro 0.057 million lower than the carrying value.

The impairment of goodwill in the Brazil group of cash generating units would have been unchanged whether a 0.5% higher WACC or a 0.5% lower WACC had been used.

8) Intangible assets with a finite useful life

The breakdown and changes in the last two financial years were as follows:

(€'000) Balance at Changes during the financial year Balance at
31.12.2014 Incr. Decr. Depr. Impair
ment
Change in area of
consolidation
Assets of
discontinued
operations
Currency
translation
differences
Reclassification 31.12.2015
Trademarks and publishing
titles
– historic cost 62,291 11 3,423 (1,707) (3,223) 53,949
– amortisation 26,417 2,078 (236) (673) 27,586
Net 35,874 11 2,078 3,423 (1,471) (2,550) 26,363
Concessions, licenses and
similar rights
– historic cost 6,321 250 3,000 (46) 3,525
– amortisation 4,734 3,000 1,388 (46) 3,076
Net 1,587 250 1,388 449
Industrial patents and
intellectual property rights
– historic cost 36,133 836 549 (7) (58) 37,453
– amortisation 32,473 2,031 538 (7) (3) 35,032
Net 3,660 836 2,031 11 (55) 2,421
Non-competition agreements
– historic cost 676 (276) (123) (14) 263
– amortisation 213 44 (115) (30) (14) 98
Net 463 44 (161) (93) 165
Intangible fixed assets under
construction
– historic cost 11 (1) 10
Net 11 (1) 10
Total intangible assets with a
finite useful life
– historic cost 105,421 1,108 3,000 3,423 549 (1,990) (3,404) (61) 95,200
– amortisation 63,837 3,000 5,541 538 (358) (706) (60) 65,792
Net 41,584 1,108 5,541 3,423 11 (1,632) (2,698) (1) 29,408
(€'000) Balance at Changes during the financial year Balance at
31.12.2015 Incr. Decr. Depr. Impair
ment
Currency
translation
differences
Reclassification 31.12.2016
Trademarks and publishing
titles
– historic cost 53,949 1,916 11,948 1,983 45,900
– amortisation 27,586 2,039 903 30,528
Net 26,363 1,916 2,039 11,948 1,080 15,372
Concessions, licenses and
similar rights
– historic cost 3,525 160 3,685
– amortisiaton 3,076 287 3,363
Net 449 160 287 322
Industrial patents and
intellectual property rights
– historic cost 37,453 1,058 878 59 10 37,702
– amortisation 35,032 871 1,606 12 35,779
Net 2,421 1,058 7 1,606 47 10 1,923
Non-competition agreements
– historic cost 263 81 344
– amortisation 98 57 46 201
Net 165 57 35 143
Intangible fixed assets under
construction and advances
– historic cost 10 17 (10) 17
Net 10 17 (10) 17
Total intangible assets with a
finite useful life
– historic cost 95,200 3,151 878 11,948 2,123 87,648
– amortisation 65,792 871 3,989 961 69,871

Net 29,408 3,151 7 3,989 11,948 1,162 – 17,777

Trademarks and publishing titles

This item totalled Euro 15.372 million with the following breakdown:

  • exhibition trademarks:
  • • Host: Euro 1.968 million;
  • • Mipap Milano Prêt-à-Porter: Euro 1.850 million;
  • • Exposec: Euro 1.697 million;
  • • Fisp: Euro 1.636 million;
  • • Promotion Trade Exhibition: Euro 1.346 million;
  • • Fluidtrans Compomac: Euro 0.824 million;
  • • Transpotec & Logitec: Euro 0.511 million;
  • • NF Travel & Technology Event: Euro 0.490 million;
  • • Festivity: Euro 0.399 million;
  • • Bias: Euro 0.367 million;
  • • Miart: Euro 0.137 million;
  • • BtoBio Expo: Euro 0.089 million;
  • • Other: Euro 0.029 million;

– other trademarks and publishing titles:

  • • Business International: Euro 2.111 million;
  • • Technology publications: Euro 1.376 million;
  • • Food & Beverage publications: Euro 0.542 million.

Most trademarks are of specific directly organised exhibitions of the Group.

Publications are specialist trade publications.

The trademarks and the publications came under Group control through various transactions and corporate mergers that took place over time. Since the last quarter of 2008, following the assessment of the finite useful life of each exhibition and publication, these have been amortised. Previously, they were accounted as assets with an indefinite useful life.

The increase of Euro 1.916 million in intangible assets relating to trademarks and publishing titles in the financial year under review is mainly attributable to the Parent Company for the following:

  • Euro 1.400 million for the acquisition on 23 March 2016 of the trademark of the Promotion Trade Exhibition (PTE), an international exhibition for promotional items, business gifts and technologies for their personalisation;
  • Euro 0.500 million for the acquisition of the trademark NF Travel & Technology Event, which in 2018 will become part of the proprietary exhibition BIT through a content development project structured around professional conferences and seminars; the useful life of this trademark was brought in line with that of the BIT trademark.

During 2016, the internal and external sources of information under paragraphs 12-14 of IAS 36 were analysed and gave indications of impairment loss. The impairment tests showed the following impairment losses:

  • Euro 3.465 million for the Food & Beverage publications of Fiera Milano Media SpA;
  • Euro 2.977 million for the Parent Company trademark BIT;
  • Euro 2.908 million for the trademarks of the Good Food & Wine Show of Fiera Milano Exhibitions Africa PTY Ltd;
  • Euro 0.993 for the Tubotech trademark of Cipa FM;
  • Euro 0.774 million for the Cipa trademark of Cipa FM;
  • Euro 0.356 million for the Transpotec & Logitec trademark of the Parent Company;
  • Euro 0.177 million for the Exposec trademark of Cipa FM;
  • Euro 0.127 million for the Braseg trademark of Cipa FM;
  • Euro 0.096 million for the Security trademark of Cipa FM;
  • Euro 0.052 million for the Incendio trademark of Cipa FM;
  • Euro 0.023 million for other trademarks of Cipa FM.

The intangible assets of the exhibition trademark of the Good Food & Wine Show in South Africa and of the Brazilian trademarks, with the exception of Fisc and Exposec, were written down to zero. In Italy, impairment losses were recognised for the entire value of the exhibition trademarks of BIT and Transpotec and for the Food & Beverage publications that had suffered a slowdown in revenues.

The impairment tests on the Food & Beverage publications used a WACC of 6.80% with a risk-free rate of 1.46%, a market risk premium of 5.6%, a levered beta representing the average for the sector of 0.72, a specific risk premium of 3%, a cost of debt of 2.36% and a ratio of debt to invested capital of 25%.

To measure the recoverable value, the cash flow projections in the 2017-2020 Industrial Plan approved by Fiera Milano Media SpA were discounted; the useful life of the publications was considered but no terminal value was included.

The impairment tests on the BIT and Transpotec trademarks used a WACC of 5.30% with a risk-free rate of 1.46%, a market risk premium of 5.6%, a levered beta representing the average for the sector of 0.72, a specific risk premium of 1%, a cost of debt of 2.36% and a ratio of debt to invested capital of 25%.

To measure the recoverable value, the cash flow projections in the 2017-2020 Industrial Plan approved by Fiera Milano SpA were discounted; the useful life of the trademarks was considered but no terminal value was included.

The impairment test on the Good Food & Wine trademark used a WACC of 12.25% with a risk-free rate of 9.03%, a market risk premium of 5.6%, a levered beta representing the average for the sector of 0.71, a specific risk premium of 2%, a cost of debt of 5.56% and a ratio of debt to invested capital of 25%.

To measure the recoverable value, the cash flow projections in the 2017-2020 Industrial Plan approved by the subsidiary FMEA were discounted; the useful life of the trademark was considered but no terminal value was included.

The impairment tests on the Brazilian trademarks used a WACC of 14.10% with a risk-free rate of 13.0%, a market risk premium of 5.6%, a levered beta representing the average for the sector of 0.70, a specific risk premium of 1%, a cost of debt of 4.06% and a ratio of debt to invested capital of 25%.

To measure the recoverable value, the cash flow projections in the 2017-2020 Industrial Plan approved by the subsidiaries Cipa FM and Eurofairs were discounted; the useful life of each trademarks was considered but no terminal value was included.

There were no indications of impairment for the other intangible assets with a finite useful life.

Other changes in this item were as follows:

  • Euro 2.039 million of amortisation;
  • Euro 1.080 million of exchange rate effects.

Concessions, licences and similar rights

This entry was Euro 0.322 million net of amortisation for the year of Euro 0.287 million; the Euro 0.160 million increase was mainly for the purchase of software licences with rights of use for a limited period by the Parent Company.

Time-limited software licences are amortised over a period of three years.

Industrial patents and intellectual property rights

These totalled Euro 1.923 million net of amortisation for the year of Euro 1.606 million. The total increase of Euro 1.058 million mainly referred to costs associated with the implementation of digital projects and the purchase of licensed software by the Parent Company.

These are amortised over a period of between three and ten years. The Parent Company information system is amortised over a useful life of three years.

Non-compete agreements

This item was Euro 0.143 million net of depreciation and amortisation for the year of Euro 0.057 million and is attributable to Cipa FM.

Intangible fixed assets under construction

This item was Euro 0.017 million and was for an analysis of the management communication processes with the Parent Company clients. The value of this asset, when completed, will be reclassified in fixed assets and it will start to be amortised.

9) Equity accounted investments

This entry was Euro 18.198 million (Euro 16.955 million at 31 December 2015) and included:

  • Euro 16.116 million for the 49% shareholding in Hannover Milano Global Germany GmbH;
  • Euro 2.082 million for the 49% shareholding in Ipack Ima Srl.

The changes in these investments are given below:

(€'000) Balance at Changes during the financial year
31.12.2015 Results Dividend
distribution
Conferral of the
Currency
business division
translation
to the JV
differences
31.12.2016
Equity-accounted investments 16,955 1,259 (2,939) 3,111 (188) 18,198
Total 16,955 1,259 (2,939) 3,111 (188) 18,198

Further details are provided in Note 2 – Disclosure on subsidiaries, joint ventures and associates.

10) Other investments

This item was Euro 0.029 million (Euro 0.029 million at 31 December 2015) and was for the shareholding in Esperia SpA.

11) Trade and other receivables

These totalled Euro 12.473 million (Euro 13.035 million at 31 December 2015). The changes in this item were as follows:

(€'000) Balance at Changes during the financial year Balance at
31.12.2015 Increase Decrease 31.12.2016
Other receivables from the controlling
shareholder
12,125 263 11,862
Other guarantee deposits 585 2 587
Other receivables 325 301 24
Total 13,035 2 564 12,473

The entry included:

– other receivables from the controlling shareholder of Euro 11.862 million (Euro 12.125 million at 31 December 2015). Euro 10.412 was for the guarantee deposit paid by the Parent Company under the lease agreements for the two exhibitions sites of Rho and Milan. This sum is equivalent to the combined quarterly rent on the two exhibition sites; the residual amount of Euro 1.450 million is the non-current part of the receivable arising from the right to repayment from Fondazione Fiera Milano of the guarantee deposit paid on the two previous lease agreements offset by the payable by Fiera Milano of the guarantee deposits for the new lease agreements. This receivable will be paid over the length of the contracts through a reduction in the amount payable by Fiera Milano SpA to Fondazione Fiera Milano for each six-monthly rental payment;

  • other guarantee deposits totalling Euro 0.587 million (Euro 0.585 million at 31 December 2015). These were almost entirely for the guarantee deposit under the property lease agreement for the Palazzo Italia project in Berlin in the Parent Company. The sum of Euro 0.498 million equates to the quarterly rent under the agreement;
  • other receivables of Euro 0.024 million (Euro 0.325 million at 31 December 2015). This was the Parent Company receivable from the disposal of the Rich-Mac trademark to be paid in December 2019. The amount of the receivable was adjusted by a movement to the provision for doubtful receivables to bring the carrying value of the receivable in line with the presumed recoverable value.

Trade and other receivables included Euro 11.862 million (Euro 12.125 million at 31 December 2015) for relatedparty transactions. Further details on related-party transactions are given in Note 48.

12) Deferred tax assets

These were Euro 3.678 million (Euro 3.175 million at 31 December 2015) and were the net balance of deferred tax assets and deferred tax liabilities.

An analysis of the changes in deferred taxes is given in Note 46 to the Income Statement.

Current assets

13) Trade and other receivables

(€'000) 31.12.2016 31.12.2015 Change
Trade receivables 37,216 52,756 (15,540)
Trade receivables from the controlling shareholder 4,186 801 3,385
Trade receivables from associates 204 204
Other receivables 5,786 4,621 1,165
Prepaid expenses from the controlling shareholder 3,982 4,540 (558)
Accrued income and prepaid expenses 853 1,214 (361)
Total 52,227 63,932 (11,705)

These were Euro 52.227 million (Euro 63.932 million at 31 December 2015) and included the following items:

– Trade receivables from clients of Euro 37.216 million (Euro 52.756 million at 31 December 2015) net of Euro 7.813 million of provisions for doubtful receivables. They comprised receivables from organisers and exhibitors related to providing exhibition space and services for exhibitions. The decrease compared to the preceding financial year mainly reflected lower business volumes due to the different exhibition calendar.

The sum for receivables was adjusted for the provision for doubtful receivables in order to bring the nominal value in line with the estimated recoverable value. The change in this provision in the financial year under review is shown in the table below:

(€'000) 31.12.2015 Provisions Utilisation and
other changes
31.12.2016
Provision for doubtful receivables 8,570 1,312 (2,069) 7,813

The provision was for receivables that were deemed difficult to recover.

  • Euro 4.186 million (Euro 0.801 million at 31 December 2015) of receivables from the controlling shareholder were:
  • • Euro 3.432 million (zero at 31 December 2015) for the tax consolidation;
  • • Euro 0.205 million (Euro 0.243 million at 31 December 2015) of Group VAT receivables;
  • • Euro 0.549 million (Euro 0.558 million at 31 December 2015) of other receivables.
  • Euro 5.786 million (Euro 4.621 million at 31 December 2015) of other receivables that were:
  • • Euro 2.598 million (Euro 1.311 million at 31 December 2015) of advances to suppliers;
  • • Euro 1.593 million (Euro 0.748 million at 31 December 2015) of other tax receivables of which Euro 0.871 million for Cipa FM and Euro 0.722 million for other companies;
  • • Euro 0.408 million (Euro 0.407 million at 31 December 2015) of VAT receivables;
  • • Euro 0.299 million (Euro 0.294 million at 31 December 2015) of receivables for tax credits on employee severance indemnities;
  • • Euro 0.236 million (Euro 0.360 million at 31 December 2015) of receivables from employees;
  • • Euro 0.202 million (Euro 0.170 million at 31 December 2015) for advance payments to INAIL;
  • • Euro 0.459 million (Euro 1.331 million at 31 December 2015) of other receivables.
  • Accruals from the controlling shareholder of Euro 3.982 million (Euro 4.540 million at 31 December 2015) that were mainly for the rent for the exhibition site.
  • Accruals of Euro 0.853 million (Euro 1.214 million at 31 December 2015) for insurance premiums and other accruals and for costs incurred in the financial year under review but pertaining to future financial years.

The entry for trade and other receivables included Euro 8.372 million (Euro 5.341 million at 31 December 2015) for related-party transactions. Further details on related-party transactions are given in Note 48.

14) Inventories

Inventories were Euro 5.480 million (Euro 1.884 million at 31 December 2015) and the breakdown was as follows:

(€'000) 31.12.2016 31.12.2015 Change
Raw materials, subsidiary materials and consumables 35 62 (27)
Deferred costs 5,445 1,822 3,623
Total inventories 5,480 1,884 3,596

Deferred costs referred to exhibitions and congresses to be held after 31 December 2016.

Information by exhibition is given in the following table:

Exhibition

(€'000) 31.12.2016 31.12.2015 Change
Tuttofood 1,781 346 1,435
Host 608 109 499
Bit 318 192 126
Homi I semester 313 301 12
Fruit Innovation 237 237
Expodetergo 236 236
Transpotec & Logitec 204 2 202
Sicurezza 176 176
Promotion Trade Exhibition 162 162
Miart 155 201 (46)
Fisp 142 157 (15)
Other 1,113 514 599
Total 5,445 1,822 3,623

The entry for inventories included Euro 0.191 million (zero at 31 December 2015 for related-party transactions. Further details on related-party transactions are given in Note 48.

15) Current financial assets

These were Euro 2.622 million (zero at 31 December 2015) and the breakdown was as follows:

(€'000) 31.12.2015 Increase 31.12.2016
Current financing to Group companies 2,622 2,622
Total 2,622 2,622

Current financial assets were for financing given by the Parent Company to the joint venture Ipack Ima Srl. The interest rate on this financing had been 3-month Euribor plus a spread of 220 basis points but was changed to a fixed rate of 1.50% from 1 October 2016;

This entire entry is a related-party transaction (zero at 31 December 2015). Further details on related-party transactions are given in Note 48.

16) Cash and cash equivalents

These were Euro 20.904 million (Euro 56.092 million at 31 December 2015) and were mainly bank deposits of temporary cash.

The figure for the previous financial year included the proceeds of the share capital increase.

The financial flows compared to 31 December 2015 are shown in the Statement of Cash Flows.

EQUITY AND LIABILITIES

17) Equity

The breakdown of consolidated equity was as follows:

(€'000) 31.12.2016 31.12.2015 Change
Share capital 41,645 41,818 (173)
of which treasury shares (800) (627) (173)
Share premium reserve 35,668 65,679 (30,011)
of which treasury shares (3,204) (2,913) (291)
Legal reserve 8,489 8,489
Other reserves (6,775) (6,936 161
Retained profits/(losses) 4,773 (17,003) 21,776
Profit/(loss) for the period (22,794) 1,014 (23,808)
Group equity 61,006 84,572 (23,566)
Capital and reserves – non-controlling interests 729 1,281 (552)
Profit/(loss) – non-controlling interests (56) (585) 529
Non-controlling interests 673 696 (23)
Total 61,679 85,268 (23,589)

The amounts and changes compared to 31 December 2015 were as follows:

Share capital

At 31 December 2016, the share capital was Euro 41.645 million (Euro 41.818 million at 31 December 2015), net of Euro 0.800 million of treasury shares. The fully paid-up share capital of the Parent Company was 71,917,829 ordinary shares with no restrictions on dividend distribution and repayment of share capital, except as provided by law for treasury shares.

The breakdown of the shares outstanding is shown in the following table:

Number of Change Number of
shares at 31
December
2015
Capital
Increase
Purchase Sale shares at 31
December
2016
Ordinary shares in issue 71,917,829 71,917,829
Treasury shares 645,008 294,010 939,018
Total shares outstanding 71,272,821 70,978,811

Under IAS/IFRS, the nominal value of treasury shares is carried directly to equity whilst the difference between the nominal value and the acquisition price of treasury shares is taken to the share premium reserve.

The Extraordinary Shareholders' Meeting of 31 July 2015, at the same time as approving the share capital increase, also approved the cancellation of the nominal value of the shares that comprise the share capital. Therefore, since that date the nominal value is calculated by dividing the share capital by the number of shares outstanding. At 31 December 2016, this gave an implicit nominal value of Euro 0.59 per share.

On 24 June 2016, the Parent Company announced a buyback of shares under the authority given it by the Ordinary Shareholders' Meeting of 28 April 2016. The aim of Fiera Milano SpA was to increase the number of treasury shares held to support the 2017-2023 Stock Option Plan, as well as to stabilise movements in the share price. At 31 December 2016, it had bought back 294,010 treasury shares at an average price of Euro 1.58 per share for a total value of Euro 0.464 million. At 31 December 2016, the Parent Company held 920,768 treasury shares, equal to 1.28% of the share capital. The remaining 18,250 shares are held by Ipack-Ima SpA.

Share premium reserve

This was Euro 35.668 million (Euro 65.679 million at 31 December 2015) net of Euro 3.204 million of treasury shares.

The changes during the financial year under review were in the Parent Company and were as follows:

  • a Euro 29.657 million decrease following the approval of the Shareholders' Meeting of 28 April 2016 to use the share premium reserve to cover the Euro 21.168 million of losses carried forward and Euro 8.489 million to rebuild the legal reserve;
  • a Euro 0.291 million decrease from the buyback of shares;
  • a Euro 0.063 million decrease in pre-paid taxes and in the amount deducted for costs associated with the share capital increase, which in the previous year were taken against equity, net of the tax effect as required by IAS 32.

Legal reserve

This entry was Euro 8.489 million (zero at 31 December 2015). The increase followed the approval of the Parent Company Shareholders' Meeting of 28 April 2016 to rebuild the legal reserve under Article 2430, paragraph 2, by using the share premium reserve.

Other reserves

These were negative for Euro 6.775 million (negative for Euro 6.936 million at 31 December 2015).

The change in the period under review was attributable to the translation reserve.

Retained profits/losses

This entry was Euro 4.773 million (negative for Euro 17.003 million at 31 December 2015).

Changes in the period under review were as follows:

  • an improvement of Euro 21.168 million following the decision to cover the Parent Company losses carried forward by using the share premium reserve;
  • Euro 1.014 million for the allocation of the result for the previous financial year;
  • a decrease of Euro 0.409 million for the remeasurement of the defined benefit plans net of the tax effect;
  • Euro 0.003 million of other movements.

Profit/(loss) for the period

The Group net loss for the financial year at 31 December 2016 was Euro 22.794 million. The net profit in the previous financial year was Euro 1.014 million.

Non-controlling interests

Capital and reserves: non-controlling interests

At 31 December 2016, these totalled Euro 0.729 million (Euro 1.281 million at 31 December 2015).

The changes in the financial year under review were as follows:

  • a decrease of Euro 0.585 million following allocation of the net result of the previous financial year;
  • a decrease of Euro 0.147 million in the translation reserve;
  • a decrease of Euro 0.026 million for dividend distributions;
  • an increase of Euro 0.059 million for the 49% shareholding in the company La Fabbrica del Libro SpA;
  • an increase of Euro 0.147 million for financing from the shareholders of MiCo DMC Srl.

Profit/(loss) for the period: non-controlling interests

The net result attributable to non-controlling interests was a loss of Euro 0.056 million (net profit of Euro 0.585 million at 31 December 2015).

LIABILITIES

Non-current liabilities

18) Bank borrowings

Bank borrowings totalled Euro 14.108 million (Euro 10.922 million at 31 December 2015):

Non-current bank borrowings

(€'000) 31.12.2016 31.12.2015 Change
Bank loans – non current 14,108 10,922 3,186
Total 14,108 10,922 3,186
(€'000) Fiera Milano SpA Total
Non-current bank borrowings 14,108 14,108
of which maturing beyond five years
Total 14,108 14,108

Non-current bank borrowings were those of the Parent Company and were:

  • Euro 2.201 million (Euro 6.601 million at 31 December 2015) for the non-current portion of the Euro 20.000 million financing granted by Banca Popolare di Milano SpA on 6 December 2013 and repayable in six-monthly instalments in arrears from 30 June 2014 until 30 June 2018 with interest at 3-month Euribor plus a spread of 2.0%;
  • Euro 2.886 million (zero at 31 December 2015) for the non-current portion of the Euro 10.000 million financing granted by Banca Popolare di Bergamo on 23 May 2016 and repayable in quarterly instalments in arrears from 23 August 2016 until 23 May 2018 with interest at 3-month Euribor plus a spread of 1.85%;
  • Euro 3.774 million (zero at 31 December 2015) for the non-current portion of the Euro 15.000 million financing given by Banca Popolare di Lodi on 25 May 2016 and repayable in quarterly instalments in arrears from 30 June 2016 until 30 June 2018 with interest at 3-month Euribor plus a spread of 1.50%;
  • Euro 1.505 million (zero at 31 December 2015) for the non-current portion of the Euro 3.000 million financing given by Cassa di Risparmio di Parma e Piacenza SpA on 27 May 2016 and repayable in quarterly instalments in arrears from 27 August 2016 until 27 May 2019 with interest at 3-month Euribor plus a spread of 1.50%;
  • Euro 1.258 million (zero at 31 December 2015) for the non-current portion of the Euro 5.000 million financing given by Banca Popolare di Lodi on 22 June 2016 by Banca Popolare di Lodi and repayable in quarterly instalments in arrears from 30 June 2016 until 30 June 2018 with interest at 3-month Euribor plus a spread of 1.50%;
  • Euro 2.484 million (zero at 31 December 2015) for the non-current portion of the Euro 5.000 million financing given by Banca Nazionale del Lavoro SpA on 22 December 2016 and repayable in monthly instalments in arrears from 22 January 2017 until 22 December 2018 with interest at 1-month Euribor plus a spread of 1.50%.

The change compared to the previous financial year was due to new non-current loans taken out and to the early repayment (Euro 4.321 million at 31 December 2015) of the Euro 20.000 million financing given by Banca Popolare di Bergamo SpA on 21 December 2012.

The loan received on 6 December 2013 is subject to financial covenants governing the maximum level for the net debt/ equity ratio. This is measured annually and, when measured at 31 December 2016, had not exceeded the maximum levels under the covenants.

The loan received on 27 May 2016 is subject to commercial covenants. For the duration of the loan, the Parent Company has agreed to channel receivables and payables for a specific amount through current accounts opened with Cassa di Risparmio di Parma e Piacenza SpA.

The commercial covenants agreed as part of the credit line with the bank that gave the loan on 22 December 2016 were met.

19) Other financial liabilities

These totalled Euro 0.042 million (Euro 2.094 million at 31 December 2015) and the breakdown was as follows:

Other non-current financial liabilities

(€'000) 31.12.2016 31.12.2015 Change
Adjustment of the put option on the shares of the Wolrdex Ltd.
minority shareholder
1,851 (1,851)
Other non-current financing 42 193 (151)
Finance leases 50 (50)
Total 42 2,094 (2,052)

The entire item is a related-party transaction (Euro 1.851 million at 31 December 2015). Further details on related-party transactions are given in Note 48.

20) Provisions for risks and charges

Provisions for risks and charges totalled Euro 3.584 million (Euro 3.343 million at 31 December 2015) and were as follows:

(€'000) 31.12.2015 Provisions Utilisation Currency
translation
differences
Reclassifications 31.12.2016
Provision for charges
for "Palazzo Italia"
project
2,057 (938) 1,119
Other provisions for
risks and charges
1,286 118 87 12 1,136 2,465
Total 3,343 118 87 12 198 3,584

Provisions for risks and costs were:

– Euro 1.119 million (Euro 2.057 million at 31 December 2015) for the non-current part of the provision for the Palazzo Italia project in Berlin. The current portion of the provision, Euro 1.473 million, was classified under current provision for risks and charges. At 31 December 2016, the total provision for this risk was

Euro 2.592 million. At 31 December 2015 the total provision for this risk was Euro 3.302 million but Euro 1.739 million of the provision was used in the financial year under review and it was increased by Euro 1.029 million following a reworking of the forecasts for the use of the property;

– Euro 2.465 million (Euro 1.286 million at 31 December 2015) of risks and costs provisions for legal disputes with suppliers and other disputes calculated on their presumable outcome based on internal valuations supported by external legal advice. The reclassification of Euro 1.136 million to deferred tax liabilities was attributable to risk provisions of Cipa FM to cover any potential tax risks and the Euro 0.089 million provision was for the translation effect.

21) Employee benefit provisions

These were Euro 9.302 million (Euro 10.672 million at 31 December 2015).

Employee benefit provisions, calculated using actuarial methods, were for employee severance indemnities that had accrued at 31 December 2016 and were as follows:

(€'000) 31.12.2015 Effect of
defined benefit
plans on debt
Indemnities and
advances paid
Conferral to the Joint
Venture
31.12.2016
Defined benefit plans 10,672 1,187 1,962 595 9,302
Total 10,672 1,187 1,962 595 9,302

Effect of defined benefit plans on debt

(€'000)
Personnel expenses:
– indemnities related to defined benefit plans 449
Financial expenses:
– actualisation charges 201
Other comprehensive income
– Remeasurement of defined benefit plans 537
Total 1,187

The Company uses a duly certified professional to determine the actuarial amounts.

The main hypotheses/assumptions used in the actuarial calculations for the defined benefit plans were as follows.

Demographic assumptions

Mortality rate Based on the ISTAT 2011 mortality tables by gender
Probability of disability Based on the disability tables used in the INPS 2010 forecast model
Probability of termination
of employment
Based on the probable employee turnover rate equal to 5% per annum
of the companies being valued
Retirement probability Assumption that the basic requirements needed to receive the compulsory general
insurance (Assicurazione Generale Obbligatoria) were met
Probability of early retirement Assumption of 3% per annum and an average amount of 70% of the staff-leaving
indemnities of all the companies valued

Economic and financial assumption for calculation of severance indemnity provisions

31.12.2016 31.12.2015
Annual technical discount rate 1.30% 2.00%
Annual inflation rate 1.50% 1.50%
Annual rate of increase in total employees' salary 2.50% 2.50%
Annual rate of increase in severance indemnity provisions 2.62% 2.62%

The discount rate was calculated with reference to the Eurozone Iboxx Corporate AA index for a period equal to or greater than ten years and for three years for the calculation of the Directors' severance indemnity.

The following table gives sensitivity analyses for the main assumptions used to calculate the liability for defined benefit plans.

Effect of defined benefit plans on debt

(€'000)
Economic and financial assumptions
Range Base figure
(excluding the
CEO's termination
benefit)
Increase in
assumptions
Decrease in
assumptions
Annual technical discount rate +/–0.5% 9,285 8,792 9,634
Annual rate of increase in total employees' salary +/–0.5% 9,285 9,288 9,139
Life expectancy +/–1 year 9,285 9,027 8,863

22) Deferred tax liabilities

(€'000) 31.12.2016 31.12.2015 Change
Deferred tax liabilities 3,523 5,709 (2,186)
Total 3,523 5,709 (2,186)

Deferred tax liabilities totalled Euro 3.523 million (Euro 5.709 million at 31 December 2015) and was the net balance of deferred tax assets and deferred tax liabilities for each company included in the area of consolidation.

The entry includes:

  • Euro 2.914 million for the IRES deferred tax provision;
  • Euro 0.609 million for the IRAP deferred tax provision.

An analysis of the changes in deferred tax liabilities is given in Note 46 to the Income Statement.

Current liabilities

23) Bank borrowings

Current bank borrowings and changes in the period under review were as follows:

(€'000) 31.12.2016 31.12.2015 Change
Bank accounts 79 (79)
Bank overdrafts 18,019 22,500 (4,481)
Loans – current portion 27,523 16,887 10,636
Total 45,542 39,466 6,076
(€'000) Fiera Milano MiCo DMC Srl Cipa FM Total
Bank overdrafts 18,019 18,019
Loans – current portion 26,049 209 1,265 27,523
Total 44,068 209 1,265 45,542

Credit lines to cover cash requirements were for the Parent Company and totalled Euro 18.019 million (Euro 22.500 million at 31 December 2015).

Credit lines with conditions attached included that from Banca Nazionale del Lavoro SpA, which was for advances on domestic receivables. Under the agreement for the credit line, each year Fiera Milano SpA channels through the bank incoming commercial funds in the form of payments, bank transfers, POS payments and notice payment forms (MAV) for an amount equal to a multiple of the credit line. At 31 December 2016, Euro 12.500 million of this credit line had been used.

Euro 27.523 million of the bank borrowings was mainly for the current part of the Parent Company loans and were:

  • Euro 2.517 million payable on the Euro 5.000 million loan agreed on 26 February 2016 with Banca di Credito Cooperativo di Carate Brianza and repayable in quarterly instalments in arrears from 25 May 2016 until 25 August 2017 with interest at 3-month Euribor plus a spread of 1.75%;
  • current payables on the loans described in Note 18: Euro 4.400 million for the loan taken out on 6 December 2013; Euro 5.707 million for the loan taken out on 23 May 2016; Euro 7.462 million for the loan taken out on 25 May 2016; Euro 0.990 million for the loan taken out on 27 May 2016; Euro 2.488 million for the loan taken out on 22 June 2016; and Euro 2.485 million for the loan taken out on 22 December 2016.

Bank borrowings are subject to floating rate interest.

24) Trade payables

These were Euro 41.114 million (Euro 49.267 million at 31 December 2015). Trade payables were mainly to Italian suppliers for the purchase of services required to mount the exhibitions that is the typical business of the Company.

25) Advances

Advances totalled Euro 40.239 million (Euro 34.880 million at 31 December 2015) and were mainly advances invoiced to clients for exhibitions to be held after the end of the financial year. Revenue recognition is delayed until the exhibition is held.

The table below gives a breakdown by exhibition. The change in advances compared to the previous financial year can be explained by the biennial and multi-annual frequency of some exhibitions:

(€'000) 31.12.2016 31.12.2015 Change
Homi I semester 11,700 11,035 665
Host 4,789 2,144 2,645
Tuttofood 3,108 168 2,940
Salone del mobile/Complemento d'arredo 1,941 1,956 (15)
Lineapelle I semester 1,800 1,600 200
Mido 1,756 1,402 354
Transpotec & Logitec 1,534 1,534
Micam Spring 953 985 (32)
Promotion trade exhibition 822 275 547
Mostra Convegno Expocomfort 790 7,894 (7,104)
Made Expo 692 692
Sicurezza 620 620
The One Milano 611 611
Simac Tanning–Tech 595 443 152
Milano Unica Spring 546 528 18
Exposec 504 369 135
Euroluce 492 492
Expodetergo 324 324
Lamiera 219 219
Fisp 190 945 (755)
Bit 176 557 (381)
Sposaitalia 175 103 72
Ipack–Ima 166 166
Mipel 144 139 5
GF&WS Cape Town 133 133
Myplant & garden 132 132
Made in Steel 103 103
Eurocucina 433 (433)
Bimu 381 (381)
Mifur 381 (381)
Salone Internazionale del bagno 250 (250)
Xylexpo 249 (249)
Fesqua 234 (234)
Venditalia 182 (182)
Esposizione Canina 166 (166)
Congresses and other exhibitions 5,224 2,061 3,163
Total 40,239 34,880 5,359

This entry included Euro 0.178 million (zero at 31 December 2015) for related-party transactions. Further details on related-party transactions are given in Note 48.

26) Other current financial payables
-------------------------------------- -- -- -- --
(€'000) 31.12.2016 31.12.2015 Change
Financial payables to the controlling shareholder 1,627 15,225 (13,598)
Adjustment of the put option on the shares of the Wolrdex Ltd.
minority shareholder
850 850
Other financial payables 836 641 195
Finance leases 51 170 (119)
Total 3,364 16,036 (12,672)

These totalled Euro 3.364 million (Euro 16.036 million at 31 December 2015).

The entry for financial payables to the controlling shareholder refers to the Parent Company and was the balance in the current account held with Fondazione Fiera Milano that carries interest at 1-month Euribor plus a spread of 1.75%. The change compared to the previous financial year was mainly due to the rent payable on the exhibition site in 2015.

Other financial payables were mainly for the non-controlling interests of Cipa FM acquired by Eurofairs and for the dividend distributions of MiCo DMC Srl and AIM Group International SpA.

Other financial payables included Euro 2.503 million (Euro 15.225 million at 31 December 2015) for relatedparty transactions. Further details on related-party transactions are given in Note 48.

27) Current provisions for risks and charges

(€'000) 31.12.2015 Provisions Utilisation Reclassification Currency
translation
differences
31.12.2016
Palazzo Italia project 1,245 1,029 1,739 938 1,473
Losses on exhibitions 1,564 1,564
Other provisions for risks
and charges
2,670 1,978 2,961 39 1,726
Total 3,915 4,571 4,700 938 39 4,763

These were Euro 4.763 million (Euro 3.915 million at 31 December 2015) and the breakdown was as follows:

  • Euro 1.473 million for the current portion of the provision for the Palazzo Italia project in Berlin already described in Note 20;
  • Euro 1.564 million for the net present value of estimated cash flows in the Industrial Plan for loss-making exhibitions in 2017;

– Euro 1.726 million for disputes with employees, suppliers and others. The provisions were mainly for the estimates of the probable liabilities arising from disputes with employees linked to the administration orders. No provision was made for costs directly attributable to the Court-appointed Administrator and his assistants as these costs, under prevailing law and at this stage of the proceedings, are borne by the State. However, it cannot be excluded that, as part of the procedure, costs could occur or be charged to the companies involved, which, at the present date, cannot be identified or quantified.

Furthermore, the measures adopted as a result of the administration order have given rise to costs that are included in costs of services under services and technical, legal, commercial and administrative consultancy.

28) Current tax liabilities

(€'000) 31.12.2016 31.12.2015 Change
Income tax payable on profits for the year 56 2,980 (2,924)
Income tax payable for employees (IRPEF) 1,147 1,806 (659)
Income tax payable for self-employed and project workers
(IRPEF)
201 233 (32)
Other tax liabilities 201 149 52
Total 1,605 5,168 (3,563)

Current tax liabilities totalled Euro 1.605 million (Euro 5.168 million at 31 December 2015).

The change in this figure is mainly due to the decrease in the tax payable by the Parent Company in the financial year under review.

29) Other current liabilities

Other current liabilities totalled Euro 16.513 million (Euro 37.470 million at 31 December 2015) and the breakdown was as follows:

(€'000) 31.12.2016 31.12.2015 Change
Payables to employees 4,994 11,081 (6,087)
Payables to exhibition organisers 3,961 15,169 (11,208)
Payables to Fondazione Fiera Milano 1,676 5,633 (3,957)
Payables to pension and social security entities 2,182 2,613 (431)
Group VAT payables 1,493 199 1,294
Trade payables to Subsidiaries 310 310
Payables to directors and statutory auditors 68 97 (29)
Other payables 1,533 2,259 (726)
Payables to related parties 11 11
Deferred income and Accrued liabilities 285 419 (134)
Total 16,513 37,470 (20,957)

The main changes compared to the previous financial year were the following:

  • lower payables to exhibition organisers due to the decrease in payments received on behalf of exhibition organisers;
  • a decrease in liabilities for personnel that mainly referred to the Parent Company for the variable component of employee remuneration and redundancy incentives that were part of the voluntary retirement plan, which were recognised in the previous financial year;
  • a decrease in payables to the controlling shareholder mainly for the variable component of rent payable to Fondazione Fiera Milano only in the 2015 financial year because a target level of revenues had been exceeded;
  • an increase in Group VAT payables.

This entry also included Euro 3.490 million (Euro 5.832 million at 31 December 2015) for related-party transactions. Further details on related-party transactions are given in Note 48.

30) Financial assets and liabilities

At 31 December 2016, the Group had net debt of Euro 38.316 million (Euro 12.426 million at 31 December 2015), as shown in the following table. Where applicable, any component of each entry that is a related-party transaction is shown separately.

Group Net Financial Position

(Amounts in €'000) 31.12.2016 31.12.2015 Change
A. Cash (including bank balances) 20,904 56,092 (35,188)
B. Other cash equivalents
C. Securities held for trading
D. Cash and cash equivalents (A+B+C) 20,904 56,092 (35,188)
E. Current financial assets 2,622 2,622
– E.1 of which Other non current liabilities to other related parties 2,622 2,622
F. Current bank borrowings 18,019 22,579 (4,560)
G. Current portion of non-current debt 27,523 16,887 10,636
H. Other current financial liabilities 3,364 16,036 (12,672)
– H.1 of which Other current financial liabilities to the controlling shareholder 1,627 15,225 (13,598)
– H.2 of which Other current financial liabilities to other related parties 876 876
I. Current financial debt (F+G+H) 48,906 55,502 (6,596)
J. Current net financial debt (cash) (I–E–D) 25,380 (590) 25,970
K. Non-current bank borrowings 14,108 10,922 3,186
L. Debt securities in issue
M. Other non-current liabilities 42 2,094 (2,052)
– M.1 of which Other non current liabilities to other related parties 42 1,851 (1,809)
N. Non-current financial debt (K+L+M) 14,150 13,016 1,134
Net financial debt/(cash) from continuing operations (J+N) 39,530 12,426 27,104
Net financial debt/(cash) from assets held for sale (1,214) (1,214)
O. Net financial debt/(cash) 38,316 12,426 25,890

Net debt increased by Euro 25.890 million. The higher figure was due to a decrease in operating cash flows from net working capital, mainly due to a change in payables to exhibition organisers, caused by the different exhibition calendar, and in payables to suppliers.

Additional information on the financial instruments of the Company is given below to enable a better assessment of:

  • a) the importance of financial instruments for the Statement of Financial Position and Income Statement;
  • b) the significance and type of risks deriving from the financial instruments to which the Company was exposed during the financial year under review and the previous financial year and the relevant risk management procedures.

Classes of financial instruments

The items in the Statement of Financial Position and the types of risk related to financial instruments at 31 December 2016 and 31 December 2015 are shown in the following table.

(€'000) Notes FY
31.12.2016
FY
31.12.2015
Liquidity
risk
Interest
rate risk
Credit
risk
NON-CURRENT ASSETS
1) Trade and other receivables 11 12,473 13,035 X
CURRENT ASSETS
2) Trade and other receivables 13 52,227 63,932 X
3) Financial assets 15 2,622 X
4) Cash and cash equivalents 16 20,904 56,092 X
NON-CURRENT LIABILITIES
5) Bank borrowings 18 14,108 10,922 X X
6) Other financial liabilities 19 42 2,094 X X
CURRENT LIABILITIES
7) Bank borrowings 23 45,542 39,466 X X
8) Trade payables 24 41,114 49,267 X
9) Other financial liabilities 26 3,364 16,036 X X
10) Other current liabilities 29 16,513 37,470 X

Risk class

Significance of financial instruments

Financial instruments and their relative significance, as regards the Statement of Financial Position and Income Statement at 31 December 2015 and 31 December 2016, are shown in the following tables.

Financial assets and liabilities shown in the accounts

(€'000) Notes FY
31.12.2015
Assets at
fair value(a)
through profit
& loss
Loans
and
receivables
Investments
held to
maturity
Liabilities at
amortised
cost
Fair value Impact on
Income
Statement
NON-CURRENT ASSETS
1) Trade and other receivables 11 13,035 13,035 13,035 78
CURRENT ASSETS
2) Trade and other receivables 13 63,932 63,932 63,932 (2,092)
3) Financial assets 15
4) Cash and cash equivalents 16 56,092 56,092 56,092 42
NON-CURRENT LIABILITIES
5) Bank borrowings 18 10,922 10,922 10,922 (1,339)
6) Other financial liabilities 19 2,094 2,094 2,094 (70)
CURRENT LIABILITIES
7) Bank borrowings 23 39,466 39,466 39,466 (782)
8) Trade payables 24 49,267 49,267 49,267 (1)
9) Other financial liabilities 26 16,036 16,036 16,036 (1,054)
10) Other current liabilities 29 37,470 37,470 37,470

(a) Fair value at the recognition date.

(€'000) Notes FY
31.12.2016
Assets at
fair value(a)
through profit
& loss
Loans
and
receivables
Investments
held to
maturity
Liabilities at
amortised
cost
Fair value Impact on
Income
Statement
NON-CURRENT ASSETS
1) Trade and other receivables 11 12,473 12,473 12,473 24
CURRENT ASSETS
2) Trade and other receivables 13 52,227 52,227 52,227 (1,312)
3) Financial assets 15 2,622 2,622 2,622 32
4) Cash and cash equivalents 16 20,904 20,904 20,904 113
NON-CURRENT LIABILITIES
5) Bank borrowings 18 14,108 14,108 14,108 (809)
6) Other financial liabilities 19 42 42 42 (6)
CURRENT LIABILITIES
7) Bank borrowings 23 45,542 45,542 45,542 (301)
8) Trade payables 24 41,114 41,114 41,114 (54)
9) Other financial liabilities 26 3,364 3,364 3,364 (118)
10) Other current liabilities 29 16,513 16,513 16,513

(a) Fair value at the recognition date.

As shown in the above tables, the accounting value of financial assets and liabilities is a reasonable approximation of their fair value; most of the financial instruments are current investments and borrowings and where non-current instruments have been used these have not been subject to significant contingent charges.

The financial instruments are classifiable under Level 3 of the fair value hierarchy of IFRS 13.

31) Financial and market risk management

The main financial instruments used by the Group are bank financing, current accounts and current financial loans from the controlling shareholder Fondazione Fiera Milano.

The Fiera Milano Group has a favourable cash management cycle due to the financial profile that characterises companies that organise exhibitions and congresses. These companies request an advance from their clients to confirm their participation in an event and this sum is normally cashed prior to the start of the event or at its conclusion. Suppliers of goods and services are paid using normal payment conditions. The organisers generate negative working capital from this system which gives a cash management surplus.

The Parent Company Fiera Milano SpA rents exhibition space to the organisers and provides administrative and cash management services, receiving on behalf of the organisers everything that the exhibitors pay the organiser. After receiving the cash, Fiera Milano SpA, depending on the contractual agreements, retrocedes to the organiser what is its due and keeps the payment for the space rented out in the exhibition venues and for the services provided. This system allows the Company to receive in advance the sums it is due, consistent with what is arranged with the organisers. Therefore, the companies in the Group that benefit from this favourable cash management cycle are those that organise events and the Parent Company.

The situation is different for the companies that belong to the Stand-fitting and Media segments: they have a cash management cycle that is typical of companies who manufacture and supply goods and services. They generate working capital requirements that are funded by bank borrowings.

The Company is exposed to the following different types of risk.

31.1 Credit risk

Credit risk is represented by the Company's exposure to potential losses from the non-fulfilment of obligations undertaken by counterparties. Credit risk is adequately monitored, as is that pertaining to the cash management that characterises the Group business. Fiera Milano hosts and organises exhibitions that are leaders in their sector and, therefore, the loyalty of exhibitors is high. For the Parent Company Fiera Milano SpA, the current system means that all receipts from exhibitors flow into the Fiera Milano SpA accounts and it is Fiera Milano SpA that retrocedes to its clients/organisers the amounts due to them. Part of the services provided by the companies in the Stand-fitting and Media segments is invoiced and received on behalf of single Group companies by Fiera Milano SpA. Nevertheless, the companies in the Stand-fitting and Media segments carry out solvency assessments of potential clients and outstanding amounts are constantly monitored by the relevant departments so that any appropriate measures for debt recovery are implemented.

Three different categories of credit risk have been identified: organisers, exhibitors and other receivables. The first risk category is the exhibition organisers; the receivables included in this category are considered

to represent the lowest risk as the Parent Company Fiera Milano SpA manages the cash flows of all the exhibitions at the two sites. Provisions for doubtful receivables are minimal in comparison to the amounts received and have been made for a few receivables that are proving difficult to recover.

The second risk category is the exhibitors; the receivables from this category are considered medium risk as exhibitors normally have to make payment before the end of the exhibition.

The third risk category is other receivables, which mainly comprises exhibition-related activities (standfitting, congresses, promotions, internet services) and activities that are not exhibition- related (sponsorship, advertising, etc.). These receivables are payable under normal payment conditions.

The Group sometimes uses bank guarantees as a further means of counteracting credit risk.

The categories of credit risk at 31 December 2015 and at 31 December 2016 and the breakdown of overdue payments are shown in the following tables:

Class FY Due Breakdown of late payments (days) Provision
(€'000) 31.12.2015
Receivables
Overdue 0–90 91–180 181–270 >270
Organisers 6,650 2,390 6,334 3,478 357 2,499 2,074
Exhibitors 16,799 9,987 8,493 4,053 617 1,228 2,595 1,681
Other 29,307 8,329 25,793 16,264 2,244 1,995 5,290 4,815
Total 52,756 20,706 40,620 23,795 2,861 3,580 10,384 8,570
Class FY
Due
Breakdown of late payments (days)
Provision
(€'000) 31.12.2016
Receivables
Overdue 0–90 91–180 181–270 >270
Organisers 3,170 1,721 3,421 1,079 65 2,277 1,972
Exhibitors 14,910 712 15,852 11,830 655 1,149 2,218 1,654
Other 19,136 6,901 16,422 8,319 1,695 935 5,473 4,187
Total 37,216 9,334 35,695 21,228 2,350 2,149 9,968 7,813

The provision for doubtful receivables is based on presumed recoverability, using internal assessments supported by those of external legal consultants.

Changes in the provision for doubtful receivables by class of risk are shown in the following table:

Class
(€'000)
Balance at
31.12.2014
Provision
Provisions Utilisation Other
changes
Balance at
31.12.2015
Provision
Organisers 1,355 719 2,074
Exhibitors 1,923 631 873 1,681
Other 5,811 742 1,378 (360) 4,815
Total 9,089 2,092 2,251 (360) 8,570
Class
(€'000)
Balance at
31.12.2015
Provision
Provisions Utilisation Other
changes
Balance at
31.12.2016
Provision
Organisers 2,074 102 1,972
Exhibitors 1,681 900 927 1,654
Other 4,815 412 1,085 45 4,187
Total 8,570 1,312 2,114 45 7,813

31.2 Liquidity risk

Although the Group has taken measures to ensure that it has adequate levels of working capital and liquidity, a drop in business volumes caused be the seasonality and cyclicality that characterise the exhibition business could affect its financial results and its ability to generate cash flow. The year-on-year increase in Group net debt at 31 December 2016 was influenced by the less favourable exhibition calendar and, in particular, by the decrease in advances from organisers confirming their participation in events.

The aim of risk management at Fiera Milano SpA and the use of debt is to guarantee an adequate level of liquidity, minimising the opportunity cost and maintaining a balance in terms of the duration and composition of debt. To cover its investments, over the years, the Parent Company has transferred part of its current debt to non-current debt by agreeing a series of loans that last from two to five years.

As described in Note 18, the non-current loan granted by Banca Popolare di Milano SpA to the Parent Company on 6 December 2013, of which Euro 6.601 million is still outstanding, is subject to financial covenants that are measured annually. At 31 December 2016, these covenants had been met.

The credit lines currently existing with banks, together with forecast operating cash flows, were considered sufficient to cover the short-term financial requirements despite the peaks in cash absorption that are concentrated in the months when there are no exhibitions and when financial requirements are covered using the funds available in the current account held with the controlling shareholder Fondazione Fiera Milano.

Maintaining the financial equilibrium of the Company is also dependent on attaining the targets of the Industrial Plan, as well as on the performance of the economy, forecasts for which necessitate an assessment of the outcome of future events and circumstances that by their very nature are uncertain.

The tables below give the breakdown of financial liabilities by maturity date and the outstanding interest payable to maturity at 31 December 2015 and 31 December 2016.

Financial liabilities

(€'000) Balance at
31.12.2015
3 mths 6 mths 12
mths
18
mths
24
mths
3
years
5
years
>5
years
Current bank
borrowings
39,466 24,514 7,937 7,015
Current interest payable 203 247 461
Other current financial
liabilities
16,036 5,085 10,225 726
Current interest payable 63 45 2
Non-current bank
borrowings
10,922 4,338 4,382 2,202
Non-current interest
payable
187 109 37
Trade payables 49,267 49,267
Other non-current
financial liabilities
2,094 50 1,851 193
Non-current interest
payable
94 32 24 58
Total 117,785 79,132 18,454 8,204 4,669 4,523 4,114 251
(€'000) Balance at
31.12.2016
3 mths 6 mths 12
mths
18
mths
24
mths
3
years
5
years
>5
years
Current bank
borrowings
45,542 23,610 7,942 13,990
Current interest payable 178 135 419
Other current financial
liabilities
3,364 850 1,678 836
Current interest payable 15
Non-current bank
borrowings
14,108 11,860 1,744 504
Non-current interest
payable
87 9 2
Trade payables 41,114 41,114
Other non-current
financial liabilities
42 42
Non-current interest
payable
11
Total 104,170 65,752 9,770 15,245 11,947 1,753 506 53

31.3 Market risk

The Company reserves the right to use appropriate hedging instruments if the market risks become significant.

a) Interest rate risk

The Company has access to credit lines at competitive rates and is able to manage interest rate fluctuations. Moreover, the Company constantly monitors market conditions so as to intervene promptly should conditions change.

The composition of non-current and current bank borrowings is described in Notes 18 and 23.

The tables below give interest rate sensitivity analyses that show the effect of a +0.5% and a –0.5% change in interest rates on financial income and expenses in equity and in profit or loss for the 2015 and 2016 financial years.

(€'000) Total at
31.12.15
Balance(
*
)
(debt)
Income
(expense)
Rate +0,5% –0,5%
Current accounts 55,958 24,253 42 0.17% 162 (80)
Bank overdrafts (22,500) (30,834) (752) 2.44% (907) (598)
Current account with the controlling
shareholder Fondazione Fiera Milano
(15,225) (42,753) (1,045) 2.44% (1,257) (829)
Current and non-current bank borrowings (27,889) (41,119) (1,369) 3.33% (1,575) (1,164)
Other current and non-current financial
liabilities
(2,905) (2,528) (89) 3.52% (102) (76)

(*) average for the financial year

(€'000) Total at
31.12.16
Balance(
*
)
(debt)
Income
(expense)
Rate +0,5% –0,5%
Current accounts 20,791 24,968 113 0.45% 237 (12)
Current loans to joint venture 2,622 1,640 32 1.95% 40 24
Bank overdrafts (18,019) (10,199) (95) 0.93% (146) (44)
Current account (1,627) (6,039) (107) 1.77% (137) (77)
Current and non-current bank borrowings (41,631) (39,314) (1,021) 2.60% (1,216) (823)
Other current and non-current financial
liabilities
(1,779) (1,829) (11) 0.60% (20) (2)

(*) average for the financial year

b) Exchange rate risk

The Group operates in different markets worldwide and, therefore, is exposed to market risks from fluctuations in exchange rates.

As in the previous financial year, this risk remained relatively insignificant despite the presence of the Group in international markets. This is because the Group has no financing in foreign currencies and the exchange rate risk of the foreign activities is fairly limited as the business in each country has costs and revenues that are in the same currency. The risk is mainly related to infragroup transactions for debits that are part of cost sharing agreements, which give rise to exchange rate risk in the company whose functional currency differs from that in which the infragroup transaction is denominated.

c) Risk of movements in raw material prices

The Group has limited exposure to the risk of changes in raw material prices. It normally has more than one supplier for any material considered critical and in some cases has long-term contracts that ensure lower price volatility.

32) Disclosure on guarantees given, undertakings and other potential liabilities

Guarantees given

These totalled Euro 6.363 million and the breakdown was as follows:

  • Euro 2.921 million for the guarantee given by Fiera Milano Congressi SpA to the Tax Authority to offset VAT as part of the Group payment;
  • BRL (Brazilian real) 5.500 million, equivalent to Euro 1.603 million, for the guarantee given by the Parent Company to Banco BNP Paribas Brasil SA on behalf of the subsidiary Cipa FM to cover the bank loans given by the bank;
  • Euro 1.243 million for two bank guarantees given as a security deposit at the request of Expo 2015 Raggruppamento Temporaneo di Imprese that includes Nolostand SpA, Fiera Milano Congressi SpA and Siram SpA to guarantee the contractual obligations under the TCP1 and TCP2 (Auditorium) contracts;
  • Euro 0.564 million for guarantees given for lease contracts of the subsidiaries Nolostand SpA, Fiera Milano Congressi SpA and Fiera Milano Media SpA;
  • Euro 0.032 million for other guarantees.

Potential liabilities

There are currently several legal proceedings involving the Group and the estimated potential adverse outcome of these affects the following companies:

  • – Cipa FM for Euro 2.095 million (BRL 7.186 million) Tax Assessments Municipality of São Paulo Brazil;
  • Fiera Milano SpA for approximately Euro 0.500 million.

There are other potential liabilities the timing or size of which cannot be estimated. These are connected to the interruption or non-fulfilment of contracts with some suppliers following the implementation of the detailed reputational analysis described in Note 49.

INCOME STATEMENT

REVENUES

33) Revenues from sales and services

Revenues from sales and services were Euro 221.041 million (Euro 335.172 million at 31 December 2015). The breakdown of revenues was as follows:

(€'000) 2016 2015 Change
Sales of exhibition space 73,494 93,913 (20,419)
Rental of stands, fittings and equipment 48,854 71,212 (22,358)
Exhibitor fees 33,644 78,816 (45,172)
Catering and canteen services 19,605 25,835 (6,230)
Advertising space and services 10,970 12,836 (1,866)
Revenues from exhibition and congress organisation services 10,833 15,617 (4,784)
Exhibition site services 6,890 11,052 (4,162)
Miscellaneous fees and royalties 4,835 6,701 (1,866)
Supplementary exhibition services 2,622 7,487 (4,865)
Administrative, telephone and internet services 2,441 2,306 135
Exhibition insurance services 2,440 3,351 (911)
Access surveillance and customer care services 2,316 2,916 (600)
Congress organisation 1,021 1,103 (82)
Ticket office sales 591 1,379 (788)
Multimedia and on-line catalogue services 485 648 (163)
Total 221,041 335,172 (114,131)

The decrease in revenues was mainly attributable to the less favourable exhibition calendar, which the previous year had included the directly organised exhibitions Host and Tuttofood, the hosted exhibitions Made Expo and Simei, the triennial exhibitions Ipack-Ima and Plast, the multi-annual exhibition EMO, held in Milan every six years, and the itinerant exhibition ITMA. Furthermore, the 2015 financial year also benefited from higher standfitting and congress revenues from the contracts linked to Expo 2015. This effect was, in part, compensated by the presence of the important biennial exhibitions Mostra Convegno Expocomfort and Bimu.

The decrease in the item congress and events was due to Fiera Milano Congressi and was primarily caused by the absence of the revenues from the management of the Expo 2015 Congress Centre and Auditorium.

Revenues from sales and services included Euro 0.077 million (Euro 0.483 million at 31 December 2015) for related-party transactions. Further details on related-party transactions are given in Note 48.

OPERATING COSTS

34) Costs of materials

These were Euro 2.281 million (Euro 4.859 million at 31 December 2015). The breakdown was as follows:

(€'000) 2016 2015 Change
Subsidiary materials and consumables 1,669 3,893 (2,224)
Printed materials, forms and stationery 441 705 (264)
Raw materials 124 244 (120)
Finished goods and packaging 11 34 (23)
Change in inventories of raw materials 37 (17) 54
Uses of provisions (1) (1)
Total 2,281 4,859 (2,578)

The decrease of Euro 2.578 million mainly refers to Nolostand SpA and is mainly due to lower purchases of subsidiary materials caused by the different exhibition calendar.

This entry included Euro 0.001 million (Euro 0.001 million at 31 December 2015) for related-party transactions. Further details on related-party transactions are given in Note 48.

35) Costs for services

These totalled Euro 121.423 million (Euro 164.602 million at 31 December 2015). The breakdown was as follows:

(€'000) 2016 2015 Change
Stands and equipment for exhibitions 20,469 27,049 (6,580)
Equipment hire 20,205 30,427 (10,222)
Catering services 15,221 19,984 (4,763)
Energy costs 8,765 10,652 (1,887)
Technical, legal, commercial and administrative services 8,367 9,545 (1,178)
Maintenance 8,304 8,915 (611)
Advertising 7,766 4,549 3,217
Security and gate services 5,177 7,348 (2,171)
Cleaning and waste disposal 4,880 6,902 (2,022)
Insurance 3,301 3,623 (322)
Telephone and internet expenses 2,154 2,407 (253)
Collateral events connected to exhibitions 2,023 6,605 (4,582)
Ticketing 1,822 2,516 (694)
IT services 1,714 1,679 35
Transport 1,475 1,773 (298)
Technical assistance and ancillary services 1,383 1,548 (165)
Conference and congress services 884 798 86
Remuneration of Statutory Auditors 230 190 40
Expenses for statutory bodies 31 111 (80)
Change in suspended costs for future exhibitions (3,783) 3,259 (7,042)
Other 11,526 14,917 (3,391)
Uses of provisions (491) (195) (296)
Total 121,423 164,602 (43,179)

Costs of services mainly included costs for managing the exhibition sites during the setting up, running, and dismantling of exhibitions and congresses.

The figure decreased by Euro 43.179 million, compared to the figure at 31 December 2015, due to lower business volumes reflecting the cyclicality of the exhibition calendar.

The entry includes Euro 1.350 million (Euro 1.040 million at 31 December 2015) for related-party transactions. Further details on related-party transactions are given in Note 48.

36) Cost of use of third-party assets

This item totalled Euro 49.837 million (Euro 61.265 million at 31 December 2015) and the breakdown was as follows:

(€'000) 2016 2015 Change
Rent and expenses for exhibition sites 46,023 56,748 (10,725)
Other rental expenses 4,531 4,418 113
Vehicle hire 563 639 (76)
Lease of company division 140 63 77
Office equipment and photocopier hire 60 136 (76)
Uses of provisions (1,480) (739) (741)
Total 49,837 61,265 (11,428)

The item, rent and expenses for exhibition sites, included the rent of Euro 45.889 million payable to the controlling shareholder Fondazione Fiera Milano, whilst other rental expenses included Euro 1.968 million under the lease agreement for the Palazzo Italia in Berlin.

The decrease is largely attributable to the absence of the non-recurring variable component of the rent for the exhibition site that was payable only in 2015.

The total rental costs for the Rho and Milan exhibition sites and for the MiCo congress centre for the following periods are:

  • 2017: Euro 45.822 million;
  • 1 5 years: Euro 178.297 million;
  • over 5 years: Euro 64.950 million.

The entry includes Euro 45.891 million (Euro 55.882 million at 31 December 2015 of which Euro 10.000 million was the non-recurring item of additional rent paid to Fondazione Fiera Milano) for related-party transactions. Further details on related-party transactions are given in Note 48.

37) Personnel expenses

These totalled Euro 44.101 million (Euro 61.023 million at 31 December 2015) and the breakdown was as follows:

(€'000) 2016 2015 Change
Salaries 29,441 37,315 (7,874)
Social Security payments 9,408 11,858 (2,450)
Redundancy incentives 2,208 6,634 (4,426)
Defined contribution plan charges 1,464 1,649 (185)
Directors' remuneration 1,460 1,578 (118)
Defined benefit plan charges 449 433 16
Seconded employees from subsidiaries 425 141 284
External and temporary employees 389 728 (339)
Other expenses 1,008 1,132 (124)
Uses of provisions (2,151) (445) (1,706)
Total 44,101 61,023 (16,922)

Salaries, remuneration and related social security contributions decreased mainly due to the savings generated by the restructuring of the Parent Company that began at the end of 2015, as well as to lower redundancy incentives and lower costs for the variable component of remuneration.

The entry includes Euro 0.170 million (Euro 0.093 million at 31 December 2015) for related-party transactions. Further details on related-party transactions are given in Note 48.

The breakdown of the average number of employees (including those on fixed-term contracts) was as follows:

Breakdown of personnel by category

2016 2015 Change
Managers 38 44 (6)
Middle managers and white collar workers 745 783 (38)
of which equity accounted companies:
Managers 3 2 1
Middle managers and white collar workers 59 64 (5)
Total personnel 783 827 (44)

38) Other operating expenses

These were Euro 4.222 million (Euro 5.705 million at 31 December 2015) and the breakdown was as follows:

(€'000) 2016 2015 Change
Doubtful receivables 2,153 2,446 (293)
Other taxes 1,996 2,748 (752)
Contributions and donations 490 487 3
Taxes other than income tax 454 458 (4)
Copyright royalties (SIAE) 283 384 (101)
Municipal tax on advertising 259 284 (25)
Gifts and promotional merchandise 75 205 (130)
Balancing item from closure of prior year exhibition accounts 62 209 (147)
Other expenses 617 712 (95)
Uses of provisions (2,167) (2,228) 61
Total 4,222 5,705 (1,483)

The decrease in other taxes was mainly due to lower local taxes for TARI [the part of local taxes relating to waste services] for the Rho exhibition site.

The entry includes Euro 0.746 million (Euro 0.896 million at 31 December 2015) for related-party transactions. Further details on related-party transactions are given in Note 48.

39) Other income

Other income was Euro 3.216 million (Euro 2.992 million at 31 December 2015) and the breakdown was as follows:

(€'000) 2016 2015 Change
Other recovered costs 1,334 671 663
Insurance indemnities 566 36 530
Office rent and expenses 460 1,477 (1,017)
Recovery of expenses for seconded employees 230 246 (16)
Capital gains on non-current assets 4 30 (26)
Other income 622 532 90
Total 3,216 2,992 224

The decrease in office rent and expenses was mainly attributable to the expiry of a contract the Parent Company had with the company Expo 2015 for the latter to rent certain areas of the site.

The increase in insurance indemnities reflected the payment of claims in the accounts of Fiera Milano Congressi SpA for structural damage to MiCo Nord.

The entry includes Euro 1.380 million (Euro 0.276 million at 31 December 2015) for related-party transactions. Further details on related-party transactions are given in Note 48.

40) Results of equity accounted associates and joint ventures

This item totalled Euro 1.259 million (Euro 2.828 million at 31 December 2015). Euro 2.289 million was for the investment in the joint venture with Deutsche Messe AG and a negative figure of Euro 1.030 million for that in Ipack Ima Srl.

41) Depreciation and amortisation

Depreciation of property, plant and equipment

This was Euro 4.409 million (Euro 6.764 million at 31 December 2015). Details of depreciation are given in the Notes to the Accounts under the entry for property, plant and equipment.

The item includes a negative figure of Euro 0.030 million (a negative figure of Euro 0.012 million at 31 December 2015) for use of part of the risk provisions for the depreciation of the Palazzo Italia.

The item includes depreciation of leased property, plant and machinery.

Amortisation of intangible assets

This was Euro 3.989 million (Euro 5.541 million at 31 December 2015).

Details of amortisation are given in the Notes to the Accounts under the entry for intangible assets with a finite useful life.

42) Adjustments to asset values

These totalled Euro 12.771 million (Euro 9.657 million at 31 December 2015).

The breakdown is given in the following table:

(€'000) 2016 2015 Change
Write-downs of Property, Plant and Equipment 18 (18)
Impairment of goodwill on acquisitions 823 6,216 (5,393)
Impairment of exhibition trademarks and publications 11,948 3,423 8,525
Total 12,771 9,657 3,114

Comments on the adjustments to asset values may be found in Notes 7 and 8.

43) Provision for doubtful receivables and other provisions

These were Euro 5.477 million (Euro 8.179 million at 31 December 2015).

Changes in this entry are shown in the following table:

(€'000) 2016 2015 Change
Disputes with personnel 1,987 671 1,316
Losses on future exhibitions 1,564 1,564
Write-down of doubtful receivables 1,312 2,092 (780)
Palazzo Italia project 1,029 3,065 (2,036)
Other disputes 109 390 (281)
Provision for reorganisation of personnel 1,961 (1,961)
Write-back of provisions (524) (524)
Total 5,477 8,179 (2,702)

Further details on changes in provisions for risks and charges are given in Notes 13, 20 and 27.

44) Financial income and similar

These totalled Euro 0.576 million (Euro 0.824 million at 31 December 2015) and the breakdown was as follows:

(€'000) 2016 2015 Change
Exchange rate gains 336 610 (274)
Interest income on bank deposits 113 38 75
Other financial income associates 32 32
Interest income from cautionary deposits
related to the rent of the exhibition site
21 52 (31)
Interest income on receivables from the controlling shareholder 3 10 (7)
Other financial income 71 114 (43)
Total 576 824 (248)

This entry includes Euro 0.056 million (Euro 0.062 million at 31 December 2015) for related-party transactions. Further details on related-party transactions are given in Note 44.

45) Financial expenses and similar

These totalled Euro 1.561 million (Euro 4.331 million at 31 December 2015) and the breakdown was as follows:

(€'000) 2016 2015 Change
Interest payable on bank accounts 1,116 2,143 (1,027)
Interest payable on the current account with the controlling
shareholder Fondazione Fiera Milano
107 1,045 (938)
Exchange rate losses 117 849 (732)
Charges on discounting defined benefit plans 201 168 33
Other financial expenses 72 126 (54)
Uses of provisions (52) (52)
Total 1,561 4,331 (2,770)

The change mainly reflected lower financial expenses due to lower average current and non-current debt.

This entry includes Euro 0.107 million (Euro 1.045 million at 31 December 2015) for related-party transactions. Further details on related-party transactions are given in Note 48.

46) Income tax

Income taxes were Euro 5.305 million at 31 December 2016 (a positive figure of Euro 5.987 million at 31 December 2015) and was mainly due to the use of deferred tax assets.

The breakdown was as follows:

(€'000) 2016 2015 Change
Current income tax (3,561) 3,091 (6,652)
Deferred income tax (1,744) 2,896 (4,640)
Total (5,305) 5,987 (11,292)

The breakdown of current taxes at 31 December 2016 was as follows:

(€'000) 2016 2015 Change
Current income tax (IRAP) (252) 1,932 (2,184)
Other current income tax 462 1,542 (1,080)
Income from tax consolidation (3,771) (383) (3,388)
Total (3,561) 3,091 (6,652)

This entry includes a positive item of Euro 3.340 million (zero at 31 December 2015) for related-party transactions. Further details on related-party transactions are given in Note 48.

In the financial years 2007-2015, Fiera Milano SpA, acting as the consolidating entity, and all the Italian subsidiaries opted for the Italian national tax consolidation for payment of IRES.

Starting in 2016, Fiera Milano SpA and some of its Italian subsidiaries opted to adhere to the tax consolidation of Fondazione Fiera Milano acting as the consolidating entity. This decision is binding for the 2016, 2017 and 2018 financial years.

The positive item from the tax consolidation is the sum recognised by Fondazione Fiera Milano for the use of the IRES tax losses generated in the financial period under review that offset the IRES tax liability that was included in the tax consolidation.

The change in the deferred tax assets was mainly due to the use of deferred tax assets recognised in previous financial years to offset risk provisions, which became tax deductibile at the time they were utilised.

The change in deferred tax liabilities was mainly due to the use of tax provisions made in previous financial periods for impairment charges to trademarks and for amortisation and depreciation that were used in the period under review.

Other current taxes included the costs under the tax consolidation and the current taxes of the foreign companies of the Group.

The changes are shown in the following table:

Deferred income taxes

(€'000) 31.12.2015 Recognised
in the Income
Statement
Recognised
in equity
Reclassification Exchange
rate effect
31.12.2016
Deferred tax assets
Excess amortisation,
depreciation and write-downs
893 577 1,469
Provisions for risks and charges 2,656 (577) 2,079
Doubtful receivables 2,083 (155) 1,928
Tax losses carried forward 10,463 205 10,668
Costs for share capital increase 229 (63) 166
Other temporary differences 1,931 (7) 128 30 2,082
Total 18,255 44 65 30 18,394
Deferred tax liabilities
Goodwill amortisation and
deferred taxes on acquisition of
intangible assets
18,963 (1,608) 54 17,409
Other temporary differences 1,826 (91) (1,136) 232 830
Total 20,789 (1,700) (1,136) 286 18,239
Net deferred income taxes 2,534 (155)
of which:
Deferred tax assets 3,175 3,678
Deferred tax liabilities 5,709 3,523

The breakdown of total theoretical deferred tax assets relating to tax losses carried forward from previous financial years and recognised in the accounts was:

  • losses prior to the tax consolidation: Euro 10.573 million;
  • losses outside of the tax consolidation: Euro 0.032 million;
  • losses from foreign companies: Euro 0.063 million.

Reconciliation of theoretical and effective corporation tax charge (IRES)

(€'000)
Consolidated profit/(loss) before income tax (23,979)
Percentage applicable for corporation income tax (IRES) 27.5%
Theoretical IRES tax charge (corporation income tax) (6,594)
Difference between theoretical and effective tax charges:
Exchange rate effect 130
Non-deductible write downs 917
Other (62)
Effective IRES tax charge (5,610)

Reconciliation of theoretical and effective corporation tax charge (IRAP)

(€'000)
Net operating result (EBIT) (22,994)
Personnel expenses 44,101
Consolidated taxable base for purposes of IRAP 21,107
Statutory rate applicable for corporation income tax (IRAP) 3.9%
Theoretical IRAP tax charge (corporation income tax) 823
Difference between theoretical and effective tax charges:
Tax wedge (1,202)
Other 684
Effective IRAP tax charge 305

NET RESULT OF THE GROUP

At 31 December 2016, the Group had a net loss of Euro 22.794 million, compared to a net profit of Euro 1.014 million at 31 December 2015.

47) Earnings/losses per share

For the financial year 2016, the losses per share were Euro 0.2611 compared to earnings per share of Euro 0.1062 in the financial year ended 31 December 2015; the figures were calculated by dividing the net result by the weighted average number of Fiera Milano SpA shares outstanding in the period.

The increase in the average number of shares reflects the Parent Company share capital increase held in December 2015.

2016 2015
Profit/(loss) (€'000) (18,584) 4,528
Average no. of shares in circulation ('000) 71,175 42,654
Basic earnings/(losses) per issued share (€) (0.2611) 0.1062
Earnings/(losses) per fully diluted no. of shares (€) (0.2611) 0.1062

The value used as the numerator to calculate basic earnings (losses) per share and fully diluted earnings (losses) per share was a loss of Euro 18.584 million at 31 December 2016 (net profit of Euro 4.528 million at 31 December 2015).

The weighted average number of ordinary shares used to calculate basic earnings (losses) per share and fully diluted earnings (losses) per share, with related reconciliation of the two figures if required, is shown in the following table:

('000) 2016 2015
Weighted average no. of shares used for calculation of EPS 71,175 42,654
+ Potential no. of shares issued without payment
Weighted average no. of shares used to calculate diluted EPS 71,175 42,654

In the financial period under review, no financial instruments were issued, including shares that could potentially be issued and that could dilute future basic earnings per share and there have been no transactions involving the ordinary shares or ordinary shares to be issued in the future since the end of the reporting period.

48) Related-party transactions

Transactions carried out by companies that are part of the Fiera Milano Group with other entities of the Group and with other related parties were done at market conditions.

As part of its corporate governance, Fiera Milano SpA has adopted Principles of Conduct regarding Relatedparty Transactions as described in the Report on corporate governance and ownership structure, which is part of the Board of Directors' Management Report in these Financial Statements.

The commercial relations between the companies of Fiera Milano Group concern the organisation and management of exhibitions and other events managed by the Group. Fiera Milano SpA provides administrative services to some subsidiaries in order to optimise the use of personnel and professional competences and also provides communication services to subsidiaries in order to ensure a uniform Group image.

All the Italian subsidiaries, as consolidated companies, have opted for the Italian tax consolidation method for payment of IRES tax for the mandatory period of three financial years.

The tax consolidation procedure gives Fiera Milano Group a definite economic and financial benefit, particularly in allowing the immediate use of the Group tax losses, generated in the financial years in which this option is available, to offset the profits of the consolidated companies. In this way it benefits from an immediate tax saving from the use of these losses.

The internal legal relations among companies participating in the tax consolidation are governed by a rule that provides, inter alia, for a uniform procedure for the proper fulfilment of the tax obligations and relevant responsibilities of participating companies.

In the Statement of Financial Position, the Statement of Comprehensive Income and the Statement of Cash Flows, the amounts for related-party positions or transactions, if material, are shown separately. Given the total amount of statement of financial position and income statement items, Fiera Milano Group has decided that Euro 2.000 million is the material threshold above which separate disclosure must be made in the Statement of Financial Position and Euro 1.000 million is that for separate disclosure in the Income Statement.

Detailed information on related-party transactions is given below and is divided between related-party transactions with the controlling shareholder Fondazione Fiera Milano and transactions with related parties that are not consolidated.

Related-party transactions with the controlling shareholder Fondazione Fiera Milano

Recurring related-party transactions are summarised below.

I. Real estate lease agreements with Fiera Milano SpA

As described below, on 31 March 2014 new lease agreements were signed for the exhibition sites of Rho and Milan. These contracts were effective from the second semester of 2014.

On 18 January 2003, Fiera Milano SpA signed a lease agreement with Fondazione Fiera Milano for the Rho exhibition site. The same agreement established the terms of the lease for the Milan City site, giving an effective date of 1 January 2006 in the contracts for both exhibition areas.

Initially cancellation of the contracts had to be notified eighteen months prior to the expiry of the contracts on 31 December 2014. On 31 March 2014, new rental agreements for the exhibition sites of Rho and Milan were signed. The new rental agreements are for nine years effective from 1 July 2014 (following the agreed early termination of the existing lease agreements due to expire on 31 December 2014) and are automatically renewable for a further nine years.

Under the rental agreement for the Rho exhibition site, compared to the previous agreement that was valid until 30 June 2014, the rent was reduced by Euro 2.000 million in the second semester of 2014 and by Euro 14.000 million for the full-year 2015 and for each subsequent year of the agreement. Therefore, the rent was Euro 24.400 million for the second semester of 2014 and Euro 38.800 million from 2015 and for each subsequent year of the agreement annually adjusted for 100% of the change in the ISTAT consumer price index. For 2015 alone, because of the presence of Expo 2015 and the positive impact on the exhibition business of Fiera Milano, the agreement stipulated that Fondazione Fiera Milano would be paid an additional rent.

For the Milan City exhibition site, the parties agreed to maintain the existing rent of Euro 2.850 million per annum, annually adjusted for 100% of the change in the ISTAT consumer price index.

As the transaction was a transaction of greater importance under Article 5 of the Regulation on Relatedparty Transactions and of Article 10.2 of the Procedures for Transactions with Related-parties adopted by the Company, it was carried out under the Procedures for Transactions with Related-parties and, on 21 March 2014, an Information Document for a related-party transaction of greater importance ("Information Document OPC") was published.

To ensure that market conditions applied, the rental agreements were prepared by the parties also using valuations prepared for Fiera Milano SpA by an independent expert.

II. Real estate lease agreement with Fiera Milano Congressi SpA

On 24 January 2000, Fondazione Fiera Milano signed a contract with Fiera Milano Congressi SpA, valid until 31 December 2012, relating to the availability of part of Pavilion 17 in the Milan City site.

On 15 March 2005, this contract was updated to reflect the expansion of the congress centre activities hosted in Pavilion 17 of the Milan City site. The new agreement between the controlling shareholder Fondazione Fiera Milano and Fiera Milano Congressi SpA was valid until 30 June 2011 and renewable until 30 June 2017. At the

first lease expiry date, the cancellation option, which expired on 30 June 2011, was not exercised. Under the new agreement, Fiera Milano Congressi SpA pays a fixed annual rent plus an additional variable component that is dependent on achieving a specified level of revenues.

The annual fixed rent for Pavilion 17 of the Milan City site is Euro 0.350 million (adjusted annually for movements in ISTAT) whilst the variable component of the rent is 5% of any revenues above a minimum of Euro 15.000 million of the subsidiary Fiera Milano Congressi SpA.

On 18 May 2009, Fondazione Fiera Milano signed a preliminary contract with Fiera Milano Congressi SpA for the use of Pavilions 5 and 6 in the Milan City site; this area was used to build the new congress centre that was inaugurated in May 2011 and which is integrated with the congress areas of Pavilion 17 and called MiCo – Milano Congressi. The final lease agreement for the area known as MiCo – Milano Congressi South Wing (the former pavilions 5 and 6) was agreed in 2012 and is effective for nine years with the initial period running from 1 May 2011. The contract is automatically renewable for a further nine years unless terminated by one of the parties. The annual fixed rent is Euro 3.000 million with a variable component of 5% of revenues realised by Fiera Milano Congressi SpA in the centre that exceed the revenue targets in its 2011–2014 industrial plan. The rent is adjusted annually by an amount equal to 100% of the change in the ISTAT index for the previous year. Under the contract there was a reduction in the full rent for the first four years of the contract. The rent for the first year was fixed at Euro 0.750 million with the rent rising annually by Euro 0.750 million in the following three years to reach the agreed full rent of Euro 3.000 million per annum. Since the full quota of the fixed rent has been reached, no variable component of rent has been payable for Pavilions 5 and 6 since 2015.

III. Settlement of Group VAT

Taking advantage of the facility provided by Presidential Decree (DPR) 633/72, from 1 January 2002, Fiera Milano SpA chose to follow the procedures, managed by the controlling shareholder, Fondazione Fiera Milano, for settlement of Group VAT. This mechanism makes it easier to settle any tax obligations, without the Company incurring additional costs.

IV. Group tax consolidation with the controlling shareholder Fondazione Fiera Milano

In the financial year 2004/2005, Fiera Milano SpA and several of its subsidiaries opted to participate in the tax consolidation of the controlling shareholder Fondazione Fiera Milano. Following the change in the accounting year-end of Fiera Milano SpA and all its subsidiaries, participation in this tax consolidation ceased. However there remain certain contractual obligations to Fondazione Fiera Milano which are referred to in the Notes to the Financial Statements.

In 2016, Fiera Milano SpA and some of the other Italian subsidiaries did not renew the option to participate in the tax consolidation of Fiera Milano SpA and opted instead to participate in the tax consolidation of Fondazione Fiera Milano acting as the consolidating entity. This option is binding for the 2016, 2017 and 2018 financial years.

The rule adopted under the tax consolidation of Fondazione Fiera Milano, provides that the tax losses of the consolidated companies, generated in each of the years that the option is valid, may be utilised to offset the taxes in the same financial year of the companies participating in the tax consolidation, after the tax losses of Fiera Milano SpA and the consolidating entity have been calculated; compensation for the tax losses of the companies consolidated are repaid for the amount of the effective benefit generated by the tax consolidation.

V. Contract for supply of services

Fiera Milano SpA has an annual contract with Fondazione Fiera Milano for the reciprocal provision of services, which arise from or are necessary for the exercise of their respective activities. The contract is renewable annually unless cancelled by a written agreement between the parties.

The contract provides for the reciprocal supply of two kinds of services: i) services of a general nature, which fall within the range of activities of the entity providing them, supplied to the buyer on a continuous and systematic basis; ii) specific services, or services provided on request and relating to specific activities to be agreed from time to time between the buyer and the supplier, also on the basis of appropriate offers/estimates. The service supply contract is governed by market conditions.

VI. Licence contracts for use of the Fiera Milano brand name

On 17 December 2001, Fondazione Fiera Milano, as owner of the "Fiera Milano" brand name granted Fiera Milano SpA an exclusive licence for the use of the said brand name in order to typify its own activities, also through its use on headed paper, on its commercial material, and to differentiate its headquarters and offices. The licence has been granted for Italy and all countries and locations where the brand name has been or will be registered or lodged.

The symbolic consideration paid by Fiera Milano SpA to Fondazione Fiera Milano was Euro 1.0. Fondazione Fiera Milano, having as its corporate objective the development of the exhibition sector, has maintained Fiera Milano as part of its name and did not include it in the business division "Exhibition Management Activity" contributed to the Parent Company in 2001, but with the expectation that Fiera Milano SpA would use the said brand name for an extended period of time and without incurring further costs for its use.

This licence is valid until 31 December 2017 with automatic renewal for a further fifteen years, unless cancelled by one of the parties.

VII. Current account with Fiera Milano SpA

On 24 June 2016, effective from 1 July 2016, a new contract for the current account was agreed. The contract expired on 31 December 2016 and is automatically renewed each year unless one of the parties cancels by 30 September preceding the date of expiry.

Under the contract, the parties agreed to terminate the pre-existing contract for the current account which was done prior to its replacement by the new contract.

The parties settle receipts and payments under the contracts existing between them, in particular the rental payments for the exhibition sites and the services provided by each party to the other, and the account carries interest of 1-month Euribor plus a spread of 1.75% that may be periodically revised by the parties.

Credits for invoices issued by the parties will accrue interest sixty days from the end of the month in which the invoice is issued although the interest may not be collected and will remain unavailable until the current account is closed, except for invoices that are overdue by more than 180 days which are always payable immediately. Invoices for the rent of the exhibition sites are part of the agreement but carry interest and are payable under the specific terms of the rental contracts. The balance of any invoices that are overdue by at least 180 days, together with the balance of the invoices for the leasing contracts on the exhibition sites that are due under the terms of the relevant contracts represent the collectable balance.

Credits which are not due for repayment are not included in the current account.

The party for which the overdue credit or debit balance exceeds Euro 5 million has the right to request payment of the balance, or to pay the balance. Where a request for payment has been made, the amount of the payment must be settled within 15 working days of the date of the said request.

The current account is closed and all interest paid every quarter.

Related-party transactions with joint ventures

On 20 April 2016, Hannover Milano Global Germany GmbH, a joint venture between Fiera Milano SpA and Deutsche Messe AG, approved the 2015 Financial Statements and also approved a dividend distribution of Euro 7.200 million. The amount attributable to Fiera Milano Group was Euro 2.939 million, which was received on 15 July 2016.

On 21 February 2016, Fiera Milano SpA and Ipack Ima Srl, a company in joint venture with UCIMA, signed a financing agreement for a maximum of Euro 3.000 million expiring on 21 February 2017, with automatic renewal, and carrying interest at 3-month Euribor plus a spread of 220 basis points. Under the agreement, Fiera Milano SpA paid Ipack Ima Srl Euro 1.00 million on 22 February 2016, Euro 1.200 million on 8 June 2016, Euro 0.100 million on 29 July 2016 and Euro 0.300 million on 19 October 2016.

Transactions with other related parties

Transactions with other related parties are part of the normal management activity and are carried out at market conditions. Non-current financial payables refer to the ten-year loan given to MiCo DMC Srl by AIM Group International SpA, which expires on 6 May 2025 and carries interest at 3%. Further details of current financial payables are given in Notes 3 and 26.

Financial, capital and economic transactions with related-parties that are not consolidated are shown in the following table.

Information on the remuneration paid to the Administrative and Control Bodies, to the General Directors and to the Executives with strategic responsibilities in the financial year to 31 December 2016 is given in the table included in the section below on other information.

(€'000)
Trade
and other
non-current
receivables
Trade
and other
receivables
Inventories Current
financial
assets
Other
non-current
financial
liabilities
Advances Other
current
financial
liabilities
Other
current
liabilities
Revenues
from
sales and
services
Cost for
materials
Cost of
services
Cost of use
of third-party
assets
Personnel
Expenses
Other
operating
expenses
Other
income
Financial
income
and similar
Financial
expenses
and similar
Income
tax
and other Group companies
Controlling shareholder
Fondazione Fiera Milano 11,862 8,168 1,627 3,169 57 1,338 45,889 105 746 1,195 24 107 (3,340)
Sviluppo Sistema Fiera Srl under
liquidation
5
Companies under joint control
Ipack Ima Srl 204 186 2,622 178 310 20 1 (1) 2 60 185 32
Other related parties
Ediser Srl 5 11 8 5
Yilong QI 850
AIM Group International SpA 42 26
Total related parties
transactions
11,862 8,372 191 2,622 42 178 2,503 3,490 77 1 1,350 45,891 170 746 1,380 56 107 (3,340)
Total reported 12,473 52,227 5,480 2,622 42 40,239 3,364 16,513 221,041 2,281 121,423 49,837 44,101 4,222 3,216 576 1,561 (5,305)
% Rel. party transactions/Total
reported
95% 16% 3% 100% 100% 74% 21% 1% 92% 18% 43% 10% 7% 63%

Related party entries in the Statement of Financial Position and Income Statement in the financial year to 31 December 2016

Statement of related party cash flow

(€'000) 2016 2015
Cash flow from operating activities
Revenues and income 1,457 759
Costs and expenses (48,158) (57,912)
Interest receivable 56 62
Interest payable (107) (1,045)
Income/(losses) from tax consolidation 3,340
Changes in trade and other receivables (2,959) 1,718
Change in other current liabilities (2,164) 1,704
Total (48,535) (54,714)
Cash flow from investment activities
Investments in non-current activities
– Tangible and intangible
– Other non-current assets
Total
Cash flow from financing activities
Change in financial (assets)/liabilities (17,153) (6,688)
Total (17,153) (6,688)
Cash Flow in the period (65,688) (61,402)
The table below shows cash flow from related party transactions:
Cash flow from operating activities Cash flow from investing activities Cash flow from financing activities
FY to 31.12.16:
Total (24,536) (2,459) (7,358)
Related party transactions (48,535) (17,153)
FY to 31.12.15:
Total 46,501 (2,461) (501)
Related party transactions (54,714) (6,688)

The financial accounts for related-party transactions at 31 December 2015 included the following non-recurring items:

  • Euro 10.000 million of costs and expenses;
  • a Euro 3.000 million change in other current liabilities.

49) Other information

Material non-recurring events and transactions

In the financial year under review there were no material non-recurring transactions or events.

Transactions relating to atypical and/or unusual operations

In compliance with Consob Communication of 28 July 2006, it should be noted that no unusual and/or atypical operations were carried out in 2016 as defined in the aforementioned Communication.

Administration orders

With an order issued on 23 June 2016 and deposited on 24 June 2016, the Milan – Prevention Court Independent Section in the persons of the judges Mr Fabio Roia, Ms Veronica Tallarida and Mr Ilario Pontani meeting in camera issued, under Article 34 of the Legislative Decree of 6 September 2011 no. 159 pertaining to the "anti-mafia laws and prevention measures, including new provisions covering anti-mafia documentation in accordance with Articles 1 and 2 of Legislative Decree of 13 August 2010 no. 136" an Administration order for Nolostand for a period of six months and appointed as authorised magistrates for the case Mr Fabio Roia and Ms Veronica Tallarida and, as Court-appointed Administrator, Mr Piero Antonio Capitini.

On 6 July 2016, the Milan Tax Squad notified Nolostand SpA of the aforementioned administration order. Under the law, the aim of the order is to protect the assets of Nolostand SpA from any potential infiltration and/or collusion.

Under the provisions of the administration order, the Court-appointed Administrator will ensure his/her presence in the company and maintain regular contact with the directors of the company, with management and with the head of internal audit, and monitor and approve any changes in personnel, issue authorisations for contract terminations and the stipulation of new contracts with suppliers, oversee payments to suppliers and verify the service supplied by contractors while requiring the Sole Director of the company to implement initiatives aimed at counteracting any potential infiltration.

With an order issued on 28 September 2016 and deposited on 11 October 2016, the Milan – Prevention Court Independent Section in the persons of the judges Mr Fabio Roia, Ms Veronica Tallarida and Mr Ilario Pontani meeting in camera issued, under Article 34 of the Legislative Decree 159/2011 an Administration order for Fiera Milano for a period of six months limited to the business area linked to Nolostand, since there was only evidence of business corruption in the sector delegated to the subsidiary and involving the exhibition standfitting business division.

The same order appointed:

  • as case-specific authorised magistrates, Mr Fabio Roia and Ms Veronica Tallarida;
  • as Court-appointed Administrator, Mr Piero Antonio Capitini;
  • as the Company defence counsel, Mr Angelo Giarda and Mr Enrico Giarda.

Under the provisions of the administration order, the Court-appointed Administrator will be present in the company and maintain regular contact with the Directors of the Company, with management and with the head of internal audit, and monitor and approve any changes in personnel, issue authorisations for contract terminations and the stipulation of new contracts with suppliers, oversee payments to suppliers and verify the service supplied by contractors while supporting the Board of Directors of the Company to implement initiatives aimed at counteracting any potential infiltration.

The two administration orders were both for six months but were extendable for a further six months. At the hearing of 22 November 2016, the Milan Court ordered that the Administration orders for Fiera Milano SpA and Nolostand SpA be unified as the matters under both were closely connected. On 20 December 2016, having heard the Court-appointed Administrator, the Milan Court extended the administration order for Nolostand S.p.A. for a further six months. Therefore, the administration order for Nolostand SpA will expire on 6 July 2017 unless the Milan Court decrees otherwise.

Lastly, on 27 January 2017, the Court, without prejudice to the existing procedures under the administration order for Fiera Milano SpA, extended the order to all corporate activities regarding just the following areas/ authorities:

  • approval of operating procedures to safeguard the legality of administrative actions and the monitoring of actions taken by the Company to increase the efficacy of these legal safeguards;
  • to approve, in particular as far as concerns the means and timing of contract renewals, the operating procedures for the procurement of goods and services;
  • quantitative and qualitative upgrading of the internal audit structure and verification of the timely implementation of the upgrades;
  • to monitor the efficacy and timeliness with which the measures are implemented by the Company, also through the use of external consultants, to ensure the legal safeguards for administrative actions during the period of the administration order;
  • to revise the audit plan and supervise the related activity;
  • to revise the corporate responsibility structure exclusively for procurement and compliance, including reviewing the necessary requirements of professionalism and introducing any eventual rules governing rotation/replacement;
  • appointment and removal of the head of the compliance department, deciding the relative responsibilities also regarding checks on the reputations of suppliers of goods and services, and regarding the procedures governing whistleblowing.

The attribution of these further duties to the Court-appointed Administrator are intended to support the company administration but they also confirm that the administration and management of the Company remain the domain of the Board of Directors. Therefore, Fiera Milano SpA and its subsidiary Nolostand SpA, continue to operate normally carrying out their normal corporate activity under the control and oversight of the Court-appointed Administrator and, at the same time, the management body maintains unchanged the authority attributed it. Fiera Milano Group is collaborating fully with the Court-appointed Administrator in order to ensure business continuity. Following receipt of the aforementioned administration orders, the Parent Company and Nolostand SpA implemented a series of initiatives to break with the past and revise, enhance and introduce new rules to improve business management that are based on new work models and methodologies. Furthermore the employees of Fiera Milano and Nolostand mentioned in the investigation documents of the Milan Public Prosecutor have been suspended and/or dismissed.

Provisions of Euro 1.390 million were also made to the risk and costs provision in the Consolidated Financial Statements for the risks associated with the above matter; these are estimates of the probable liabilities linked to legal proceedings following on the measures taken. The Group has undertaken, with the support of leading consultancy firms, an intense activity aimed at strengthening the legal safeguards in the procurement department and has adopted a procedure (that includes reputational checks and checks on the corporate structures) for Group suppliers. More generally, the steps taken are to avoid any future episodes of business corruption/business manipulation. The events have provided an opportunity to improve the corporate procedures in order that this episode concludes with the Group in possession of a reference framework that is in line with current best practice. The main features of the projects underway are expected to be finalised within the timeframe of the administration orders.

From an operational viewpoint, although there has been some difficulties and delays caused by the organisational impact of replacing the suppliers that were behind the administration orders, the stand-fitting business has continued and the exhibitions have been held, which points to a positive future trend for the stand-fitting business division in the future.

As regards the legal proceedings against the representatives of the supplier, the Parent Company Fiera Milano SpA and Nolostand SpA requested that they be allowed to bring a civil action as the victims and injured parties against these persons. On 3 February 2017 all the accused were sentenced to the penalties imposed by the fair ruling of the court and to the payment of reparations for material and non-material damages arising from the civil action brought by Fiera Milano SpA and Nolostand SpA, to be settled by a separate civil judgement. Moreover, with reference to aforementioned preventative measures, at the current time no risks linked to the application of Legislative Decree 231/2001 have been found.

At present, on the basis of available information and an evaluation of the known risks carried out in preparing these Financial Statements and while recognising that elements of uncertainty exist given the ongoing administration orders and the reorganisation of procedures currently underway, it is not felt that the administration orders have a significant impact on the ongoing business of the Fiera Milano Group. However, it cannot be excluded that the progress of the investigation and further analysis of the events that gave rise to the administration order could affect the capital and financial situation of the Group in the future.

Significant events after the end of the reporting period

With regard to the aforementioned administration order, the Parent Company Board of Directors has made strenuous efforts, both before and after the administration order was issued, to bring about a significant improvement in the corporate governance of the Company and to instigate numerous measures to ensure their optimum implementation.

Following the request of the Public Prosecutor that the administration order be extended to all areas of the Company, on 13 January 2017, the Board of Directors, having carefully considered only what was in the interests of the Company, decided that the best solution was to resign its responsibilities so that a new Board of Directors could be appointed from the date of the Shareholders' Meeting to approve the Financial Statement at 31 December 2016, which is scheduled for 21 April 2017. The Milan Court – Prevention Court Independent Section subsequently denied the request of the Public Prosecutor and stated that the administrative and management functions should remain the domain of the Board of Directors but, at the same time, it extended the powers already given to the Court-appointed Administrator to cover the legality and compliance safeguards of the entire Company.

The Board of Directors also felt that the Chief Executive Officer should resign his responsibilities. Mr Peraboni, on learning of the resignations of the Directors, also resigned. The Board of Directors then gave the authority for the ordinary management of the Company to the Chairperson in order to ensure the ongoing management of the business.

On 22 February 2017, the contract for the sale of the 75% shareholding in Worldex (China) Exhibition & Promotion Ltd was signed.

The sale price under the contract is Euro 2.750 million plus an eventual deferred amount of maximum Euro 1.000 million dependent on certain results being achieved in the three years 2017-2019, which is not recognised in the value at 31 December 2016 under IFRS 5. The sale of the shareholding in the subsidiary Worldex is in line with the strategy of repositioning the Group presence outside Italy and concentrating the foreign activities of the Group in the joint venture with its German partner Deutsche Messe.

On 28 March 2017, the Milan Court – Prevention Court Independent Section extended the administration order for the exhibition stand-fitting business division of the Company, due to expire on 11 April 2017, for a further six months; the first expiry date for the unified administration order is July 2017.

Remuneration of the Administrative and Control Bodies, General Managers and Executives with strategic responsibilities

Executives with strategic responsibilities are those that have the power and responsibility, both direct and indirect, for the planning, management and control of the Group activities.

Since 1 May 2015, executives with strategic responsibilities have been identified as the Directors, the Statutory Auditors, and the Manager responsible for preparing the company accounts of the Parent Company.

The total remuneration for this category of Executives was Euro 1.805 million at 31 December 2016 (Euro 4.195 million at 31 December 2015) and the breakdown was as follows:

Remuneration

(€'000) 2016
Directors Statutory
Auditors
Others
Short-term benefits 925 182 644
Post-employment benefits 17 37
Other non current benefits
Staff-leaving indemnities
Notional income from stock option plans
Total 942 182 681
(€'000) 2015
Directors Statutory
Auditors
Others
Short-term benefits 1,151 138 1,362
Post-employment benefits 7 76
Other non current benefits
Staff-leaving indemnities 1,461
Notional income from stock option plans
Total 2,619 138 1,438

At 31 December 2016, the residual amount payable to this category was Euro 0.175 million (Euro 0.136 million at 31 December 2015).

Information under Article 149-duodecies of the Consob Listing Rules

The fees paid for the services provided by the independent audit firm in the 2016 financial year are shown in the following table.

(€'000) Service provider Client Fees for financial year 2016
Auditing EY SpA Parent Company – Fiera Milano SpA 265
EY SpA Subsidiaries 149
Other services(
)
*
EY SpA Parent Company – Fiera Milano SpA 58
Other services(
**)
Network EY SpA Parent Company – Fiera Milano SpA 20
Other services(
)
*
EY SpA Subsidiaries 30
Other services(
**)
Network EY SpA Subsidiaries 10
Total 532

(*) Agreed upon procedures.

(**) Other professional services related to enviroment, health and safety.

Rho (Milan), 10 March 2017

On behalf of the Board of Directors The Chairperson Roberto Rettani

ATTACHMENTS

  1. List of companies included in the consolidation area and other investments at 31 December 2016
Company name and registered office Main activity Share capital Shareholding % Shareholding of Group companies
(000)(
*)
Group
total
Directly
held by
Fiera
Milano
Indirectly
held
through
other Group
companies
%
A) List of companies included in the area of consolidation
Parent Company
Fiera Milano SpA
Milan, p.le Carlo Magno 1
Organisation and hosting of
exhibitions in Italy
42,445
Fully consolidated companies
Fiera Milano Media SpA
Milan, p.le Carlo Magno 1
Media services 2,803 100 100 100 Fiera Milano SpA
Fiera Milano Congressi SpA
Milan, p.le Carlo Magno 1
Management of congresses 2,000 100 100 100 Fiera Milano SpA
MiCo DMC S.r.l.
Milan, p.le Carlo Magno 1
Management of congresses 10 51 51 51 Fiera Milano Congressi SpA
La Fabbrica del Libro SpA
Milan, p.le Carlo Magno 1
Organisation of exhibitions in Italy 120 51 51 51 Fiera Milano SpA
Nolostand SpA
Milan, p.le Carlo Magno 1
Stand fitting services 7,500 100 100 100 Fiera Milano SpA
Ipack–Ima SpA
Rho, S.S. del Sempione km.28
Organisation of exhibitions in Italy 200 100 100 100 Fiera Milano SpA
Eurofairs International Consultoria e Participações Ltda Organisation of exhibitions R \$ 47,032 100 99.98 0.02 99.98 Fiera Milano SpA
São Paulo Brasil, na Avenida Angélica, nº 2350, Sala B, Consolação, outside of Italy 0.02 Nolostand SpA
CIPA Fiera Milano Publicações e Eventos Ltda
São Paulo Brasil, Av. Angelica
Organisation of exhibitions
outside of Italy
R \$ 7,003 100 1 99 99 Eurofairs International
Consultoria e Participações Ltda
1 Fiera Milano SpA
Fiera Milano India Pvt Ltd
New Delhi, Barakhamba Road, Connaught Place
Organisation of exhibitions
outside of Italy
INR 20,000 99.99 99.99 99.99 Fiera Milano SpA
Limited Liability Company "Fiera Milano"
Moscow, 24 A/1 ul. B. Cherkizovskaya
Organisation of exhibitions
outside of Italy
RUB 10,000 100 100 100 Fiera Milano SpA
Fiera Milano Exhibitions Africa Pty Ltd
Cape Town, The Terraces, Steenberg Office Park, Tokai
Organisation of exhibitions
outside of Italy
ZAR 0.3 100 100 100 Fiera Milano SpA
Worldex Fiera Milano Exhibitions Co. Ltd
Guangzhou, 538 Dezheng Bei Road, Yuexiu District
Organisation of exhibitions
outside of Italy
CNY 6,000 75 75 75 Fiera Milano SpA
Haikou Worldex Milan Exhibitions Co. Ltd
Haikou, 12 Lantian Road West
Organisation of exhibitions
outside of Italy
CNY 200 74.25 99 99 Worldex Ltd
B) List of jointly controlled companies equity-accounted
Hannover Milano Global Germany GmbH
Hannover Germany, Messegelaende
Organisation of exhibitions
outside of Italy
25 49 49 49 Fiera Milano SpA
Hannover Milano Fairs Shanghai Co. Ltd
Shanghai China, Pudong Office Tower
Organisation of exhibitions
outside of Italy
USD 500 49 100 100 Hannover Milano Global
Germany GmbH
Hannover Milano Fairs China Ltd
Hong Kong China, Golden Gate Building
Organisation of exhibitions
outside of Italy
HKD 10 49 100 100 Hannover Milano Global
Germany GmbH
Hannover Milano Fairs India Pvt Ltd
East Mumbai, Andheri
Organisation of exhibitions
outside of Italy
INR 274,640 48.99 99.99 99.99 Hannover Milano Global
Germany GmbH
Global Fairs & Media Private Ltd
New Delhi, Bahadur Shah Zafar Marg 9–10
Organisation of exhibitions
outside of Italy
INR 207,523 24.5 50 50 Hannover Milano Fairs India
Pvt Ltd
Ipack Ima Srl
Rho, S.S. del Sempione km.28
Organisation of exhibitions in Italy 20 49 49 49 Ipack–Ima SpA
C) List of companies accounted at cost
Esperia SpA
Rose (Cosenza)
Other activities 1,403 2 2 2 Fiera Milano Media SpA

(*) Euro or other currencies as specifically indicated.

Declaration relating to the Financial Statements in accordance with Article 154-bis, paragraph 5 of Legislative Decree of 24 February 1998, no. 58

    1. The undersigned, Roberto Rettani, as Chairperson, and Sebastiano Carbone, as Manager responsible for preparing the Financial Statements of Fiera Milano SpA, declare, having noted the provisions of article 154 bis, paragraphs 3 and 4, of Legislative Decree of 24 February 1998, no. 58:
  • the appropriateness in relation to the characteristics of the business and
  • the effective application of the administrative and accounting procedures for the preparation of the Consolidated Financial Statements for the year to 31 December 2016.
    1. In 2016, due to the administration orders, still ongoing, for the entire exhibition stand-fitting business division of the Parent Company Fiera Milano SpA and for the subsidiary Nolostand SpA, the actions of the Company have also focused on updating some corporate procedures, including those for procurement and the purchasing cycle. The evaluation process of the adequacy of the administrative and accounting procedures for the preparation of the Consolidated Financial Statements at 31 December 2016 took account of these circumstances in identifying the periodic monitoring activities.
    1. It is also declared that:
  • 3.1 the Consolidated Financial Statements at 31 December 2016:
    • have been prepared in accordance with the applicable international accounting standards recognised by the European Union in accordance with EC Regulation no. 1606/2002 of the European Parliament and of the European Council of 19 July 2002;
    • correspond to the results contained in the accounting records and documents;
    • provide a true and correct representation of the capital, economic and financial situation of the Issuer and of the entities included in the consolidation.
  • 3.2 the report on operations includes a reliable analysis of the trend and results of operations and the situation of the Issuer and of the entities included in the consolidation, together with a description of the main risks and uncertainties to which they are exposed.

10 March 2017

Signed by The Chairperson Roberto Rettani

Signed by

The Manager responsible for preparing the the Company's Financial Statements

Sebastiano Carbone

Report of the Board of Statutory Auditors for the Consolidated Financial Statements at 31 December 2016

Dear shareholders,

The 2016 Consolidated Financial Statements of Fiera Milano S.p.A. were communicated to us under the provisions of prevailing law, together with the Board of Directors' Management Report. They have been prepared in accordance with the International Financial Reporting Standards – IFRS – issued by the International Accounting Standards Board (IASB) and adopted by the European Union, and in accordance with the provisions of Article 9 of Legislative Decree no. 38/2005.

Under Legislative Decree of 27 January 2010 no. 39 and of Article 41, paragraph 2 of Legislative Decree of 9 April 1991 no. 127, the responsibility for verifying that the Consolidated Financial Statements conform to the law and correpsond to the accounting and consolidation records lies with the independent Audit Firm. Our assessment was carried out in accordance with the code of conduct for Boards of Statutory Auditors issued by the Consigli Nazionali dei Dottori Commercialisti e dei Ragionieri [National Councils of Chartered Accountants and Bookeepers] and covered in particular:

  • verifying the existence within the organisational structure of Fiera Milano S.p.A. of a department responsible for relations with subsidiaries and associate companies;
  • examining the structure of the Group and the shareholdings in order to evaluate how the area of consolidation should be identified and how it had changed since the previous financial year;
  • obtaining information on the activities of subsidiaries and on any significant economic, financial and capital transactions within the Group through information received from the Directors of Fiera Milano S.p.A., the independent Audit Firm, and from the Boards of Statutory Auditors of the subsidiaries of which some members of this Board are also members.

Following the asessment of the Consolidated Financial Statements, we declare that:

  • the definition of the area of consolidation and the standards of consolidation used by those companies within this area conform to IFRSs;
  • the requirements of law governing the preparation and methodology of the Financial Statements and the Board of Directors' Management Report have been met;
  • we monitored the adequacy of the instructions given by the relevant departments of Fiera Milano S.p.A. to obtain the necessary data for the consolidation and reviewed the information supplied by the subsidiaries that are subject to the legal controls of their respective Boards of Statutory Auditors;
  • the Statement of Financial Position is consistent with the facts and information that has come to the knowledge of the Board of Statutory Auditors in carrying out its monitoring responsibilities and using its control and inspection authority;
  • the Supplementary and Explanatory Notes to the Consolidated Finanacial Statements give the information required by paragraph 134 of IAS 36 – Impairment of Assets, application of which was included in the Banca d'Italia/ CONSOB/ Isvap Document no. 4 of 3 March 2010. The Board of Statutory Auditors declares that it has examined the documents relating to the analyses and results of the impairment tests. The Board of Statutory Auditors believes that the procedure was correct and that the main valuation assumptions were reasonable and therefore agrees with the outcomes;
  • the Board of Directors' Management Report is consistent with the figures and results in the Consolidated

Financial Statements and gives wide-ranging information on the Group financial and economic performance and on the risks to which the Group is exposed, as well as on any significant events that took place in the financial year under review and subsequent to the year-end date and on the likely business outlook;

– The Chairperson of the Board of Directors and the Manager responsible for preparing the Company accounts released the declaration required under Article 81-ter of CONSOB Regulation no. 11971/1999 and subsequent amendments and additions and under Article 154-bis of Legislative Decree 58/1998 (the Consolidated Finance Act).

On 30 March 2017, the independent Audit Firm released its report under Articles 14 and 16 of Legislative Decree 39/2010; the report confirms that the Consolidated Financial Statements at 31 December 2016 conform to the IFRSs and to the provisions of Article 9 of Legislative Decree no. 38/2005, and have been drawn up with clarity and give a true and fair view of the financial and capital situation, the income statement and the cash flows of the Fiera Milano Group for the financial year ended 31 December 2016.

Milan, 30 March 2017

The Board of Statutory Auditors

Ms Federica Palmira Nolli Mr Antonio Guastoni Mr Carmine Pallino

Independent Auditors' Report

CONTENTS

Fiera Milano SpA Financial Statements at 31 December 2016

Financial Statements:
Fiera Milano SpA Statement of Financial Position 216
Fiera Milano SpA Statement of Comprehensive Income 217
Fiera Milano SpA Statement of Cash Flows 218
Fiera Milano SpA Statement of Changes in Equity 219
Explanatory and Supplementary Notes
to the Financial Statements:
1) Accounting standards and criteria used
to prepare the Financial Statements 220
2) Disclosure on discontinued operations 233
Non-current Assets
3) Property, plant and equipment 235
4) Goodwill and intangible assets with
an indefinite useful life 237
5) Intangible assets with a finite useful life 239
6) Investments 242
7) Trade and other receivables 244
8) Deferred tax assets 245
Current Assets
9) Trade and other receivables 245
10) Inventories 247
11) Current financial assets 247
12) Cash and cash equivalents 248
13) Assets held for sale 248
Equity
14) Equity 249
Non-current Liabilities
15) Bank borrowings 251
16) Other financial liabilities 252
17) Provisions for risks and charges 253
18) Employee benefit provisions 253
Current Liabilities
19) Bank borrowings 255
20) Trade payables 255
21) Advances 255
22) Other financial payables 257
23) Current provisions for risks and charges 257

24) Current tax liabilities
258

25) Other current liabilities
258

26) Financial assets and liabilities
259

27) Financial and market risk management
262

28) Disclosure on guarantees given, undertakings
and other potential liabilities 267
Income Statement

29) Revenues from sales and services
267

30) Costs of materials
268

31) Costs of services
269

32) Costs of use of third-party assets
270

33) Personnel expenses
270

34) Other expenses
271

35) Other operating income
272

36) Depreciation and amortisation
272

37) Adjustments to asset values
273

38) Provision for doubtful receivables
and other provisions 273

39) Financial income and similar
273

40) Financial expenses and similar
274

41) Valuation of financial assets
274

42) Income tax
275

43) Profit/(loss) for the year
277

44) Related-party transactions
277

45) Other information
284
Attachments:

1. List of investments in subsidiaries and joint ventures
for the financial year at 31 December 2016 (Article 2427 –
Italian Civil Code paragraph.1 no.5) 288

2. Summary of key figures of the last financial statements
of subsidiaries and joint ventures included in the consolidation
area (Article 2429, paragraph 4 of the Italian Civil Code)
289
Declaration in accordance with Article
154-bis of Legislative Decree 58/98 292
Report of the Board of Statutory Auditors 293
Independent Auditors' Report 311
RE
SOLUTION
S pass
ed by the Ordinary
Meeting of Shareholders
313

Financial Statements

Fiera Milano SpA Statement of Financial Position

(Euro)
Notes 31.12.2016 31.12.2015
ASSETS
Non-current assets
3–44 Property, plant and equipment 3,677,920 4,139,144
Leased property, plant and equipment
Investments in non-core property
4 Goodwill and intangible assets with an indefinite useful life 70,144,099 70,144,099
5–44 Intangible assets with a finite useful life 10,070,125 13,079,442
6 Investments 57,827,948 73,350,722
Other financial assets
7 Trade and other receivables 12,469,181 13,031,120
44 of which from related parties 11,861,629 12,125,107
8 Deferred tax assets 3,041,040 3,083,994
Total 157,230,313 176,828,521
Current assets
9 Trade and other receivables 33,865,767 45,877,971
44 of which from related parties 10,289,341 10,595,546
10–44 Inventories 4,467,106 1,197,852
Contracts in progress
11 Current financial assets 6,084,518 4,034,972
44 of which from related parties 6,084,518 4,034,972
12 Cash and cash equivalents 11,982,917 42,971,750
Total 56,400,308 94,082,545
Assets held for sale
13 Assets held for sale 2,750,000
Total 2,750,000
Total assets 216,380,621 270,911,066
EQUITY AND LIABILITIES
14 Equity
Share capital 41,644,917 41,818,383
Share premium reserve 35,667,706 65,679,470
Revaluation reserve
Other reserves 8,489,028
Retained profits/(losses) (154,269) (19,712,226)
Profit/(loss) for the year (25,159,579) (1,456,384)
Total 60,487,803 86,329,243
Non-current liabilities
Bonds in issue
15 Bank borrowings 14,108,114 10,922,456
16 Other financial liabilities 50,280
17 Provisions for risks and charges 1,998,103 2,951,986
18 Employee benefit provisions 5,003,497 5,792,339
Deferred tax liabilities
Other non-current liabilities
Total 21,109,714 19,717,061
Current liabilities
Bonds in issue
19 Bank borrowings 44,068,430 38,485,373
20 Trade-payables 19,839,126 26,184,964
21–44 Advances 34,669,952 31,544,918
22 Other financial liabilities 4,364,582 15,395,485
44 of which to related parties 4,314,049 15,224,542
23 Current provision for risks and charges 3,865,509 1,636,318
24 Current tax liabilities 904,991 4,022,317
25 Other current liabilities 27,070,514 47,595,387
44 of which to related parties 16,178,763 19,495,875
Total 134,783,104 164,864,762
Liabilities held for sale
Liabilities held for sale
Total
Total liabilities 216,380,621 270,911,066

Fiera Milano SpA Statement of Comprehensive Income

(Euro)
Notes 2016 2015
29 Revenues from sales and services 173,421,414 277,307,280
44 of which with related parties 4,513,745 6,862,907
Total revenues 173,421,414 277,307,280
30–44 Cost of materials 505,784 899,822
31 Cost of services 100,613,172 144,892,370
44 of which with related parties 33,122,787 48,515,696
32 Cost of use of third-party assets 43,551,434 54,945,417
44 of which with related parties 42,483,200 42,588,310
44 of which non-recurring with related parties 10,000,000
33–44 Personnel expenses 32,245,498 45,779,108
34 Other operating expenses 3,518,878 4,636,458
44 of which with related parties 973,518 1,132,360
Total operating expenses 180,434,766 251,153,175
35 Other income 5,229,661 6,756,278
44 of which with related parties 3,985,416 4,431,645
Gross operating result (1,783,691) 32,910,383
36 Depreciation of property, plant and equipment 1,312,148 2,030,405
Depreciation of property investments
36 Amortisation of intangible assets 2,721,043 4,242,743
37 Adjustments to asset values 3,332,862 1,953,000
38 Provision for doubtful receivables and other provisions 5,241,292 5,463,570
Net operating profit (EBIT) (14,391,036) 19,220,665
39 Financial income and similar 6,363,579 4,305,837
44 of which with related parties 6,288,250 4,227,295
40 Financial expenses and similar 1,190,596 3,297,016
44 of which with related parties 138,302 1,044,837
41 Valuation of financial assets (19,520,867) (16,033,039)
Profit/(loss) before tax (28,738,920) 4,196,447
42 Income tax (3,579,341) 5,652,831
44 of which with related parties (3,236,626) (330,991)
Profit/(loss) from continuing operations (25,159,579) (1,456,384)
Profit/(loss) from discontinued operations
43 Profit/(loss) for the year (25,159,579) (1,456,384)
Other comprehensive income/(loss) that will not be reclassified
subsequently to profit or loss
Revaluation of defined benefit schemes (202,985) 100,499
Tax effects (48,716) 27,637
Other comprehensive income/(loss) net of related tax effects (154,269) 72,862
Total comprehensive income/(loss) for the year (25,313,848) (1,383,522)

Fiera Milano SpA Statement of Cash Flows

(Euro)
Notes 2016 2015
Net cash at beginning of year 42,971,750 3,563,919
Cash flow from operating activities
12 Net cash from operating activities (21,334,230) 47,868,324
44 of which with related parties (62,299,887) (83,009,750)
Interest paid (1,735,803) (3,277,474)
Interest received 460,004 250,647
Total (22,610,029) 44,841,497
Cash flow from investing activities
3 Investments in tangible assets (881,168) (1,364,131)
3 Write-downs of tangible assets 2,659 21,067
5 Investments in intangible assets (2,374,587) (1,008,405)
6 Acquisition of investments (63,290) (6,319,263)
6 Subsidiary company share capital transactions (3,599,345) (951,977)
39 Dividends received 6,006,359 3,972,383
Total (909,372) (5,650,326)
Cash flow from financing activities
14 Share capital increase (464,382) 65,685,259
15–16 Non-current financial assets/liabilities 3,135,378 (16,145,630)
11–19– Current financial assets/liabilities (10,140,428) (49,322,969)
22
44 of which with related parties (12,960,039) (7,768,899)
Total (7,469,432) 216,660
Cash flow for the period (30,988,833) 39,407,831
Net cash from assets held for sale
Net cash at the end of year 11,982,917 42,971,750
(Euro)
2016 2015
Cash generated from operating activities
Result including non-operating activities (25,159,579) (1,456,384)
Adjustments for:
Depreciation and Amortisation 4,033,191 6,273,148
Provisions, write-downs and impairment 8,574,154 7,416,570
Valuation of financial activities 19,520,867 16,033,039
Capital gains and losses (2,505) (19,917)
Net financial income/expenses (5,172,983) (1,008,766)
Net change in employee provisions (991,827) (316,098)
Changes in deferred taxes 28,460 3,455,291
Inventories (3,269,254) 3,268,474
Trade and other receivables 11,098,651 (8,726,714)
Trade payables (7,015,838) 4,168,544
Pre-payments 3,125,034 (3,298,424)
Tax payables (3,117,326) 2,907,477
Provisions for risks and charges and other liabilities (excluding payables to Organisers) (17,983,118) 16,871,798
Payables to Organisers (5,002,157) 2,300,286
Total (21,334,230) 47,868,324

Fiera Milano SpA Statement of Changes in Equity

(Euro)
Note 14 Share capital Share premium Legal reserve Other Retained Profit/(loss) for Total
reserve reserves profits/(losses) the financial
period
Balance at 31 December 2014 41,520,679 1,783,076 7,865,332 1,419,688 (179,063) (30,674,121) 21,735,591
Loss for the year covered by:
– Legal reserve (7,865,332) 7,865,332
– Share premium reserve (1,783,076) 1,783,076
– Other reserves (1,419,688) 1,419,688
– Retained profits/(losses) (19,606,025) 19,606,025
Shareholdes' Meeting approval 31.07.15 – 297,704 66,536,826 66,834,530
share capital increase
Expenses related to the share capital (857,356) (857,356)
increase
Remeasurement of defined benefit plans 72,862 72,862
Total comprehensive income/(loss) for the (1,456,384) (1,456,384)
financial year at 31.12.15
Balance at 31 December 2015 41,818,383 65,679,470 (19,712,226) (1,456,384) 86,329,243
Loss for the year covered by:
– Legal reserve (8,489,028) 8,489,028
– Share premium reserve (21,168,610) 19,712,226 1,456,384
Treasury shares (173,466) (290,916) (464,382)
Expenses related to the share capital (63,210) (63,210)
increase
Remeasurement of defined benefit plans (154,269) (154,269)
Total comprehensive income/(loss) for the (25,159,579) (25,159,579)
financial year at 31.12.16
Balance at 31 December 2016 41,644,917 35,667,706 8,489,028 (154,269) (25,159,579) 60,487,803

Explanatory and Supplementary Notes to the Financial Statements

On 10 March 2017, the Board of Directors approved the Fiera Milano SpA Financial Statements at 31 December 2016 and authorised their publication.

Fiera Milano SpA, as Parent Company of the Group, has also prepared the Consolidated Financial Statements at 31 December 2016.

Fiera Milano SpA and its subsidiaries are active in all the characteristic areas of the exhibition industry and the Company is one of the largest integrated companies in this sector worldwide.

The Company business consists of hosting exhibitions, fairs and other events, promoting and making available equipped exhibition spaces, as well as offering support for projects and related services. This includes the business of staging exhibitions (and providing final services to exhibitors and visitors).

The business of the Company has dual seasonality: (i) a higher concentration of exhibitions in the six months from January to June; (ii) exhibitions that have a multiannual frequency.

1) Accounting standards and criteria used to prepare the Financial Statements

1.1 Standards used to prepare the Financial Statements

The Financial Statements were prepared in accordance with IAS and IFRS accounting standards in force at 31 December 2016, issued by the International Accounting Standards Board (IASB) and endorsed by the European Union, and the relative interpretative documents and provisions of Article 9 of Legislative Decree no. 38/2005.

The accounting standards used to prepare the present Financial Statements are the same as those used to prepare the Financial Statements at 31 December 2015, except for those applicable from 1 January 2016 which are listed below.

Given the capital and financial position in the 2016 financial year, the financial forecasts in the budget and the 2017-2020 Industrial Plan, approved by the Board of Directors on 6 February 2017, the forecasts for working capital requirements and for the financial and capital position, the Financial Statements have been prepared on the principles of a going concern.

The Financial Statements are prepared in Euro and all figures are rounded to the nearest thousand Euro unless otherwise indicated. The Financial Statements give comparative data for the previous financial year.

In the 2016 financial year no atypical and/or unusual transactions took place.

The risks and uncertainties affecting the Company business are described in the Board of Directors' Management Report in the section on Risk factors affecting Fiera Milano Group, in Note 27, and in paragraph 1.5 on the Use of Estimates.

The present Financial Statements have been audited by the independent audit firm EY SpA.

1.2 New accounting standards, interpretations and amendments adopted

The Company has adopted for the first time some accounting standards and amendments that are applicable to financial periods beginning on or after 1 January 2016.

The content and effect of each new accounting standard and amendment is given below:

  • Amendment to IAS 19 Defined Benefit Plans: Employee Contributions.
  • IAS 19 requires an entity to account for contributions to defined benefit schemes from employees or third parties linked to service to be attributed as a cost to periods of service. The amendment clarifies the requirements that relate to how contributions from employees or third parties that are linked to service should be attributed to periods of service. If the amount of the contribution is independent of the number of years of service, contributions can, but are not required, to be recognised as a reduction in the service costs in the period in which the related service is rendered. This amendment is applicable to annual periods beginning on or after 1 February 2015. This amendment is not relevant for the Company as none of the entities that form the Company receive contributions from employees or third parties.
  • Amendments to IAS 16 and 38 Clarification of Acceptable Methods of Depreciation and Amortisation. The amendments provide additional guidance for IAS 16 – Property, Plant and Equipment and IAS 38 – Intangible Fixed Assets that a depreciation method based on revenue that is generated by an activity (that includes the use of an asset) reflects a pattern of generation of economic benefits that arise from the operation of the business of which an asset is part rather than the pattern of consumption of an asset's expected future economic benefits. As a result a depreciation method that is revenue-based may not be used for intangible assets except in limited circumstances when this presumption can be overcome. The amendments are effective for annual periods beginning on or after 1 January 2016. They have had no impact on the Company as the Company does not use revenue-based amortisation methods for noncurrent assets.

– Amendment to IFRS 11 – Accounting for Acquisitions of Interests in Joint Operations.

The amendment to IFRS 11 requires that the acquirer of an interest in a joint operation in which the activity constitutes a business is required to apply all of the principles on business combinations accounting in IFRS 3 – Business Combinations. The amendment also makes it clear that any previously held interest in the joint operation would not be remeasured if the joint operator acquires an additional interest while retaining joint control. Furthermore, an exception has been added to IFRS 11 to clarify that the amendments do not apply when the parties who have joint control, including the reporting entity, are themselves both controlled by the same third party.

The amendments apply to the acquisition of both the initial interest and additional interests in a joint operation where joint control is maintained. The amendments apply prospectively to acquisitions in scope that occur on or after the effective date. These amendments had no impact on the Group as it made no acquisitions of interests in joint operations in the period under review.

  • Amendments to IAS 16 and IAS 41 Financial reporting for bearer plants.
  • Amendments to IAS 27 Consolidated and Separate Financial Statements.

The amendments allow an entity to account for investments in subsidiaries, joint ventures and associates in its separate financial statements. An entity that has already adopted IFRS and decides to change the accounting criteria in its separate financial statements to use the equity method must apply the change retrospectively. These amendments had no impact on the Financial Statements of the Company.

– Amendments to IAS 1 – Disclosure Initiative.

The amendments to IAS 1 – Presentation of Financial Statements clarify, rather than significantly change, the existing IAS 1 requirements. The amendments clarify:

  • • the materiality requirements in IAS 1;
  • • that specific line items in the statement(s) of profit or loss, the statement of other comprehensive income and the statement of financial position may be disaggregated;
  • • that entities have flexibility as to the order in which they present the notes to the financial statements;
  • • that the share of other comprehensive income of associates and joint ventures accounted for using the equity method must be presented in aggregate as a single line item that will or will not be subsequently reclassified to profit or loss.

Furthermore, the amendments clarify the requirements that apply when additional subtotals are presented in the statement of financial position and the statement(s) of profit or loss and of other comprehensive income. These amendments had no impact on the Financial Statements of the Company.

– IFRS – Annual Improvements Cycle 2010-2012.

The aim of the annual improvements, started in 2011, is to make necessary but non-urgent amendments to inconsistencies or where clarification in wording is required in IFRS; the proposed amendments are recommended to the IASB before they are issued. Some amendments are clarifications or corrections to IFRS (IFRS 8, IFRS 13, IAS 16, IAS 24 and IAS 38) others are changes to existing requirements or provide further information regarding their application (IFRS 2 and 3).

– IFRS – Annual Improvements Cycle 2012-2014.

This document amended IFRS 5, IFRS 7, IAS 19, and IAS 34 for matters requiring clarification.

The amendment to IAS 34 – Disclosure of information "elsewhere in the interim report" clarifies the requirement relating to information required by IAS 34 that is presented elsewhere within the interim financial report but outside the interim financial statements. The amendments require that such information be incorporated by way of cross-reference from the interim financial statements to the other part of the interim financial report that is available to users on the same terms and at the same time as the interim financial statements.

The aforementioned amendments to IAS/IFRS had no significant impact on the Financial Statements of the Company at 31 December 2016.

The following accounting standards were approved by the European Union during 2016 but are not applicable for the 2016 Financial Statements:

– IFRS 9 – Financial Instruments.

In July 2014, the IASB issued the final version of IFRS 9 – Financial Instruments that replaces IAS 39 – Financial Instruments: Recognition and Measurement and all previous versions of IFRS 9. IFRS 9 brings together the three aspects of the IASB project: the classification and measurement, impairment, and hedge accounting of financial instruments. IFRS 9 is effective for annual periods beginning on or after 1 January 2018; early application is permitted. With the exception of hedge accounting the standard must be applied retrospectively but grants an exception to restating comparatives for classification and measurement and impairment but not for hedge accounting. IFRS 9 requires prospective application of the hedge accounting requirements but specifies a limited number of exceptions.

The Company will adopt this standard from the date it is effective. During 2016, the Group carried out a preliminary analysis of all three aspects of IFRS 9. This preliminary analysis was based on the information available and could be subject to change following a more detailed analysis and if further information for the Company becomes available in the future. In principle, the Company does not expect any significant impact on its financial statements and equity from the introduction of IFRS 9.

– IFRS 15 – Revenue from Contracts with Customers.

IFRS 15, issued in May 2014, is a new five-step model for recognising revenue from contracts with customers. Under IFRS 15 an entity will recognise revenue at an amount that reflects the consideration to which the entity expects to be entitled in exchange for transferring goods or services to a customer.

The new standard will supersede virtually all of the revenue standards and interpretations in IFRS. IFRS 15 is effective for annual periods beginning on or after 1 January 2018 and requires retrospective application, either full retrospective adoption in which the standard is applied to all of the periods presented or a modified retrospective adoption. Early adoption is permitted.

The Company will apply the new standard from the effective date with full retrospective adoption. During 2016, the Company carried out a preliminary analysis of the possible effects of IFRS 15, which may be subject to changes following the more detailed analysis which is currently underway. Furthermore, the Company is considering the clarifications issued by the IASB in the Exposure Draft of July 2016 and will assess any further developments.

– IFRS 14 – Regulatory Deferral Accounts issued by the IASB has yet to be approved by the European Union.

1.3 Form and content of the Financial Statements

With regard to the form and content of the Financial Statements, Fiera Milano SpA has made the following choices:

  • the Statement of Financial Position is presented with separate sections for Assets, Liabilities, and Equity. Assets and liabilities are also classified as current, non-current, and held for sale;
  • the Statement of Comprehensive Income is shown as a single statement in a continuous format and items are analysed by nature since this approach provides reliable information that is more relevant than classification by function;
  • the Statement of Cash Flows is presented using the indirect method;
  • the Statement of Changes in Equity is presented with separate entries for comprehensive income and transactions with shareholders.

1.4 Area and principles of consolidation

Business combinations

Business combinations are accounted for by applying the purchase method in compliance with IFRS 3 revised in 2008. Under this method the transaction cost of a business combination is valued at fair value, determined as the aggregate of the fair value of the assets transferred and the liabilities assumed by the Company at the acquisition date and equity instruments issued for control of the acquired entity. All other costs associated with the transaction are expensed in the Statement of Comprehensive Income at their acquisition date value.

Contingent considerations, considered part of the acquisition consideration, must be measured at fair value at the time of the business combination. Subsequent changes to the fair value are recognised in the Statement of Comprehensive Income.

The identifiable assets acquired and the liabilities assumed are measured at fair value at the acquisition date.

Goodwill is measured as the difference between the aggregate of the acquisition-date fair value of the consideration transferred for the business combination, the amount of any non-controlling interest, the acquisition date fair value of any previously held equity interest in the acquiree, and the net of the acquisition-date amounts of the identifiable assets acquired and the liabilities assumed. If the difference between the acquisition-date amounts of the identifiable assets acquired and the liabilities assumed exceeds the consideration transferred for the business combination, the amount of any non-controlling interest and the acquisition-date fair value of any previously held equity interest in the acquiree, the excess sum is immediately recognised in the Statement of Comprehensive Income as income from the transaction.

In measuring the fair value of business combinations, the Company uses available information and, for more material business combinations, also uses the support of external valuations.

Business combinations achieved in stages

When a business combination is achieved in stages the previously held share of the entity's assets and liabilities are measured at fair value at the date that control is obtained and any resulting adjustments are recognised in profit or loss. Previously held investments are therefore recognised as though they had been sold and reacquired at the date that control is obtained.

Business combinations under common control

Business combinations under common control (the combining entities are controlled by the same party) are excluded from the scope of IFRS 3, which governs business combinations. In the absence of a standard that deals specifically with this type of transaction, the application of the most suitable treatment must be guided by the general scope of IAS 8, i.e. to provide information on the transaction that is relevant and reliable and gives priority to the economic substance and financial reality of the transaction and not merely its legal form. Under OPI 1 (Assirevi Preliminary Opinions on IFRS) on the "Accounting treatment of business combinations under common control in the separate and in the consolidated financial statements" the economic substance refers to the generation of value added which results in a significant change in cash inflows from the net assets transferred before and after the transaction. Should it be impossible to estimate a significant increase in future cash inflows from the assets transferred, the choice of how the transaction is accounted should be governed by prudence, which results in the application of the accounting principle of continuity. This principle entails the recognition in the financial statements of values equal to those that would have existed if the assets that are the object of the combination had always been combined. The net assets must be recognised at their carrying values in the relevant accounts prior to the transaction or, if available, at the values in the Consolidated Financial Statements of the controlling shareholder Fiera Milano SpA. Where the transfer values are higher than the historic values, the excess must be eliminated against the equity of the acquirer through the appropriate reduction of a reserve.

Tangible fixed assets

Property, plant and equipment

Property, plant and equipment are recognised at purchase or production cost, including contingent costs and costs incurred, and adjusted for accumulated depreciation.

Tangible assets are depreciated in each accounting period on a straight-line basis, using economic/technical rates determined by the residual life of the assets.

Routine maintenance costs are charged to profit or loss when they are incurred.

The replacement costs of identifiable components of complex assets are allocated to the assets and depreciated over their useful lives. The residual carrying amount of the component being replaced is charged to profit or loss.

Leasehold improvements are classified in property, plant and equipment based on the nature of the cost incurred; the depreciation period corresponds to the lesser of the residual useful life of the tangible asset and the residual period of the rental contract.

The depreciation rates applied are listed below:

Office furniture and machinery 12.0%
Exhibition furniture and equipment 27.0%
Catering equipment 25.0%
Sundry machinery and equipment 15.0%
Site motor vehicles 20.0%
Electronic equipment 20.0%
Plant and machinery 10.0%
Telecommunication systems 20.0%
Alarm systems 30.0%
Furnishings 12.0%

If there is any indication of impairment, the tangible assets are subjected to an impairment test as described in the section on impairment of assets.

Intangible fixed assets

An intangible asset is recognised only if it is identifiable, is controlled by the entity, is expected to generate future economic benefits, and if its cost can be reliably measured.

Goodwill and intangible assets with an indefinite useful life

Goodwill arising from business combinations is initially recognised at the cost on the acquisition date, as indicated in the paragraph above on Business Combinations, and, for purposes of the impairment test, allocated to a cash-generating unit or group of cash-generating units that benefit from the synergies generated by the acquisition which gave rise to the goodwill. After initial recognition in accounts, goodwill is measured

at cost less any impairment stemming from the impairment tests (see section on the Impairment of Assets). An intangible asset is considered to have an indefinite useful life when no limit can be foreseen to the period during which the asset can generate financial inflows for the Group. Intangible assets with an indefinite useful life, such as goodwill, are not subject to amortisation.

Intangible assets with a finite useful life

Intangible assets with a finite useful life are measured at purchase or production cost, including any contingent costs, and systematically amortised on a straight-line basis over their estimated useful life. If there is any indication of impairment, the intangible assets are subjected to an impairment test as described in the section on the Impairment of Assets.

Industrial patents and rights for the use of intellectual property, licenses, and concessions are amortised over a period of three years from the year in which the cost is incurred.

Amortisation of the trademarks of exhibitions is based on a useful life of between ten and twenty years, estimated on the basis of the competitive dynamics of the industry and of a comparison with the methodology used by the leading Italian and foreign competitors.

Research costs are recognised at the time they are incurred. In compliance with IAS 38, development costs relating to specific projects, including the launch of new exhibitions, are capitalised when it is probable that the project will be completed and generate future economic benefits and when such costs can be reliably measured. The cost is amortised on a straight line basis over the period of the estimated future benefits of the project. The carrying value of costs is reviewed annually at the end of the reporting period or more often if there are any particular reasons for doing so, to analyse the fair value and ascertain any indication of impairment.

Impairment of assets

Goodwill and other intangible assets with an indefinite life are tested for impairment at least annually at the end of the reporting period or more often if there are any indications that an asset has been impaired. Tangible and intangible assets with a finite useful life that are depreciated or amortised are tested for impairment only when there is an indication of impairment.

The recoverable amount of the asset is the higher of its fair value less costs of disposal and its value in use. The fair value is the price that would be received from the sale of an asset in an orderly transaction between independent, informed, and willing parties, less the costs of disposal. In the absence of binding agreements, it is necessary to use the prices expressed by an active market, or the best information available taking into account factors such as recent transactions for similar assets completed in the same business segment. The value in use is the present value, discounted at the weighted average cost of capital of an entity with a similar risk profile and level of indebtedness, of the cash flows expected to arise from the asset (or from a group of assets – a cash generating unit) and from its sale at the end of its useful life.

If subsequently there is an indication that an impairment loss, other than goodwill, may have decreased or no longer exists, the carrying value of the asset is adjusted to the new estimate of the realisable value although this value may not exceed the value which would have been measured had there been no impairment. Reversal of impairment is recognised in profit or loss.

Leased assets

There are two types of leases: finance leases and operating leases.

A lease is considered a finance lease when it transfers a significant and substantial part of the risks and rewards associated with the ownership of the asset to the lessee.

Given this, as determined by IAS 17 – Leases, a leasing contract is considered a finance lease when the following factors are separately or jointly present:

  • the lease transfers ownership of the asset to the lessee by the end of the lease term;
  • the lessee has the option to purchase the asset at a price that is expected to be sufficiently lower than fair value at the date the option becomes exercisable such that, at the inception of the lease, it is reasonably certain the option will be exercised;
  • the lease term covers most of the economic life of the asset even if title is not transferred;
  • at the inception of the lease, the present value of minimum lease payments amounts substantially to the fair value of the leased asset;
  • the leased assets are of a specialised nature such that only the lessee can use them without major modifications being made.

Assets available to Fiera Milano SpA under leasing contracts that can be considered finance leases are recognised as tangible or intangible assets at the lower of their acquisition value or the net current value of the minimum charges under the contract amortised over their estimated useful life; the corresponding liability to the lessor is recognised in equity as a current or non-current financial liability depending on whether the contract expires within or beyond twelve months.

Lease payments are subdivided into principal, which is taken against financial liabilities, and interest, which is recognised in profit or loss under financial expenses.

Charges for operating leases are recognised in profit or loss pro-rata temporis for the duration of the contract.

Financial assets

In compliance with the requirements of IAS 39 and 32, financial assets are classified under the following four categories:

    1. Financial assets at fair value through profit or loss;
    1. Held-to-maturity (HTM) investments;
    1. Loans and receivables;
    1. Available-for-sale (AFS) financial assets.

Classification depends on the purpose for which assets are purchased and held. Management decides on their initial classification at the time of their initial recognition in the accounts, subsequently checking this classification at the end of each reporting period.

Financial assets are initially recognised at cost, which is equal to fair value plus contingent transaction costs. Subsequent measurement depends on the type of instrument concerned.

Financial assets at fair value shown in the Income Statement, which include held-for-trading (HFT) financial assets and financial assets designated as such at the time of initial recognition, are classified among current financial assets and measured at fair value, with the gains or losses stemming from this valuation recognised in profit or loss. Gains and losses from any changes in the fair value are recognised in profit or loss.

Held-to-maturity investments are classified under current financial assets if they mature in less than 12 months and among non-current financial assets if maturity exceeds that period, and are subsequently valued at amortised cost. The latter is calculated using the effective interest rate method, taking into account any purchase discounts or premiums and spreading them over the entire period up to maturity, less any impairment.

Loans and receivables are valued at amortised cost using the effective interest method. At the end of each reporting period, the Company measures the realisable value of these receivables taking account of estimated future cash payments or receipts through their expected life.

Available-for-sale financial assets are recognised as non-current assets, unless they are to be divested within twelve months of the end of the reporting period, and are measured at fair value. Losses or gains on availablefor-sale financial assets are recognised in other comprehensive income and aggregated in a specific equity reserve until they are sold, recovered or otherwise derecognised. When there is an indication of impairment in an available-for-sale financial asset and there is objective evidence of this, the cumulative gain or loss that was recognised in other comprehensive income is reclassified from equity to profit or loss for the period as a reclassification adjustment even if the financial asset has not been eliminated.

Investments

After initial recognition, equity investments in subsidiaries and associate companies are valued at cost less any loss of value stemming from impairment testing.

In compliance with the requirements of IAS 32 and IAS 39, investments in companies other than subsidiaries and associates are classified as available-for-sale and are measured at fair value except when fair value cannot be determined; in such cases, the cost method is used. Gains and losses stemming from adjustments of value are recognised in other comprehensive income, aggregated in a specific equity reserve. When there is an indication of impairment in an available-for-sale financial asset and there is objective evidence of this, the cumulative loss that was recognised in other comprehensive income is reclassified from equity to profit or loss for the period as a reclassification adjustment even if the financial asset has not been eliminated.

Inventories

Inventories are valued at the lower of purchase or production cost, including contingent costs, calculated using the FIFO method, and the presumable net realisable value based on market trends. Inventory consists mainly of outstanding costs relating to activities in future financial periods.

Cash and cash equivalents

Cash and cash equivalents comprise cash on hand, bank demand deposits and cash investments with an original maturity of not more than three months. The definition of cash and cash equivalents in the Statement of Cash Flows is the same as that of the Statement of Financial Position.

Assets and liabilities held for sale

This category includes assets and liabilities (or assets and liabilities in a disposal group/discontinued operations) where the carrying value will be recovered primarily through a sale rather than through continued use. For this to happen, the following conditions must be met:

  • the assets (or disposal groups) must be available for immediate sale in their present condition;
  • the sale must be highly probable, i.e. the company must be committed to a programme for their disposal; activities to identify a buyer must have been initiated; and completion of the sale must be scheduled to take place within one year of the date of classification in this category.

Assets held for sale are measured at the lower of their net carrying value and their fair value less costs to sell. If an asset that is depreciated or amortised is reclassified to this category, the depreciation or amortisation process is discontinued at the time of reclassification.

In compliance with IFRS 5, data relating to discontinued operations are presented as follows:

  • in two specific statement of financial position entries: held-for-sale assets and held-for-sale liabilities;
  • in a specific income statement entry: net result for the period from discontinued operations.

Equity

Treasury shares

The par value of treasury shares is deducted from share capital and any amount in excess of par value is deducted from the share premium reserve.

Under IAS/IFRS regarding the acquisition of treasury shares, the nominal value of the shares is deducted from share capital while the difference between the nominal value and the acquisition value is taken against the share premium reserve. On the sale of treasury shares, the share capital and the share premium reserve are reconstituted by the same amounts that they were reduced when the shares were acquired while any profit/ loss from the sale is recognised in equity with no impact on profit or loss. The shares taken as the reference for the calculation of profit/loss on disposal are selected using the FIFO method.

Costs for capital transactions

Costs directly attributable to capital transactions are recognised as a direct reduction in equity.

Trade payables, tax liabilities, pre-payments and other liabilities

Payables, advances and other liabilities are initially recognised at fair value. After that, they are measured at amortised cost. Payables are derecognised when underlying financial obligations have been discharged.

If they have a due date exceeding twelve months, liabilities are discounted to present value using an interest rate reflecting market assessments of the time value of money and specific risks connected with the liability concerned. Discounted interest is classified in financial expenses.

Derivative instruments

A derivative or any other contract with the following characteristics is classified as a financial instrument and consequently fair-valued at the end of each accounting period: (i) its value changes in response to the change in an interest rate, the price of a financial instrument, a commodity price, a foreign-exchange rate, a price or rates index, creditworthiness, or another pre-established underlying variable; (ii) it requires no net initial investment or, if initial investment is required, one that is smaller than would be required for a contract from which a similar response to changes in market factors would be expected; (iii) it is settled at a future date. The effects of fair-value measurement are recognised in profit or loss as financial income/expense.

Provisions for risks and charges

Provision is made for risks and charges when the Company must meet a present obligation (legal or constructive) stemming from a past event, the amount of which can be reliably estimated and for settlement of which an outflow of resources is probable. If expectations of resource outflow go beyond the next financial year, the obligation is recognised at its present value through discounting of future cash flows at a rate that also considers the time value of money and the liability's risk.

Risks for which manifestation of a liability is only possible, not probable, are shown in the paragraph, disclosure on guarantees given, undertakings and other contingent liabilities, and no provisions are made for these.

Bank borrowings and other financial liabilities

Financial liabilities are initially recognised at cost as represented by the fair value of the funds received net of related costs incurred to receive the loan. After initial recognition, borrowings are measured according to amortised cost calculated using the effective interest rate. Amortised cost is calculated taking into account issuance costs and any discount or premium envisaged at the time of settlement.

Employee benefitsi

Employee benefits paid out upon or after cessation of the employment relationship consist mainly of employee severance indemnities [trattamento di fine rapporto or TFR], which are governed by Article 2120 of the Italian Civil Code.

In compliance with IAS 19, employee severance indemnities are considered a defined benefit plan, i.e. a plan consisting of benefits provided after cessation of employment, which constitutes a future obligation for which the Company assumes actuarial risks and related investments. As required by IAS 19 Revised, the Company uses the projected unit credit method to determine the present value of its defined benefit obligations and the related current service costs.

This calculation requires the application of objective and mutually compatible actuarial assumptions concerning demographic variables (mortality rate, employee turnover) and financial variables (discount rate, future increases in salary levels). Fiera Milano SpA recognises changes in actuarial gains/losses in other items of comprehensive income.

From 1 January 2007, following social security reform, cumulative employee severance indemnities had to be allocated to pension funds or to the INPS treasury fund. Employees were given the option until 30 June 2007 to choose the destination of their severance indemnities.

In that regard, the allocation of accumulating employee severance indemnities to pension funds or to INPS means that a portion of these indemnities will be classified as a defined contribution plan in that the company's obligation is solely the payment of contributions either to the pension fund or to INPS. The liability related to past severance indemnities continues to be a defined benefit plan to be measured using actuarial assumptions.

Termination benefits not included in employee severance indemnities (TFR) are recognised as liabilities and employee expenses when the enterprise is demonstrably committed to terminate the employment of an employee or group of employees before the normal retirement date or provides termination benefits as a result of an offer made in order to encourage voluntary redundancy. The benefits owed to employees for termination of their employment do not give any future economic benefits to the enterprise and are therefore recognised immediately as a cost.

Revenue recognition

Revenue is recognised to the extent that it is probable that the economic benefits associated with the sale of goods or rendering of services will flow to the Company and the relevant amount can be reliably measured. Revenues are recognised at the fair value of the consideration received or receivable, taking into account any trade discounts and quantity-based reductions granted.

Revenue from the sale of goods is recognised when the entity has transferred a significant and substantial part of the risks and rewards associated with the ownership of the asset.

Revenues from the sale of services are recognised when the service is supplied. In compliance with the requirements of IAS 18 paragraph 25, revenues for the supply of services relating to exhibitions and congresses are recognised when the exhibitions and congresses actually take place, because it is during the actual exhibition/congress that most of the related costs are borne. When it is probable that the total costs of an exhibition will exceed its total revenues, the expected loss is recognised as a cost in a specific provision.

Operating costs

Costs are recognised when they relate to goods and services sold or used in the financial year or on an accrual accounting basis when their future usefulness cannot be precisely identified.

Personnel expenses include both the fixed and variable remuneration of Directors.

Costs that are not eligible to be recognised in assets are recognised in profit or loss in the period in which they are incurred.

Other income

This item has a residual nature and includes grants and subsidies.

Financial income and expenses

Financial income and expenses are recognised in the accounts based on timing that considers the effective yield/expense of the asset/liability concerned.

Income tax

Income taxes are recognised according to estimated taxable income in compliance with current tax rates and regulations. Income taxes are recognised in profit or loss, except for those relating to items recognised outside profit or loss, in which case the tax effect is recognised in equity.

Deferred taxes are measured according to the taxable temporary differences existing between the carrying amounts of assets and liabilities and their tax base and are classified among non-current assets and liabilities. Deferred tax assets are recognised to the extent that there is likely to be sufficient future taxable income against which the positive balance can be utilised. The carrying amount of deferred tax assets is subject to review at the end of each reporting period.

Deferred tax assets and liabilities are measured according to the tax rates that are expected to be applied in the period when the deferrals materialise, considering the tax rates in force or those that are scheduled to come into force subsequently.

Current and deferred tax assets and liabilities are offset only when they are levied by the same taxing authority and when there is a legal right to settle on a net basis.

Further information on the tax consolidation may be found in Note 42.

Transactions in foreign currencies

Transactions in foreign currencies are recorded at the current exchange rate in force on the transaction date. Monetary assets and liabilities denominated in foreign currencies are converted at the exchange rate in force at the end of the reporting period. Foreign exchange differences generated by the extinction of monetary items or their translation at different exchange rates from those at which they were translated at the time of initial recognition in the period or in previous periods are recognised in profit or loss. Exchange rate differences are recognised in financial expenses and income.

Dividends

Dividend income is recognised when the shareholders' right to receive payment has been established. This is normally the date of the Annual General Meeting that approves the dividend distribution.

1.5 Use of estimates

Preparation of financial statements and related notes using IFRS requires estimates and assumptions to be made that affect the amounts of assets and liabilities in the Statement of Financial Position and disclosures concerning potential assets and liabilities at the end of the reporting period. Actual results may differ from these estimates. Estimates are used to recognise provisions for doubtful accounts, depreciation and amortisation, employee benefits, taxes, and other provisions and reserves, as well as any adjustments to asset value.

Estimates and assumptions are reviewed regularly and the effects of any change are immediately recognised in profit or loss.

The most important estimates used in preparing the Financial Statements are given below as these involve a significant level of subjective opinion, assumptions and estimates:

  • Goodwill and of intangible assets with an indefinite useful life are tested for impairment at least annually at the end of each reporting period; this test requires an estimate of the value in use of the cash generating unit to which the goodwill and intangible assets with an indefinite useful life have been allocated, which itself is based on an estimate of the cash flows the cash generating unit is expected to generate and discounting them to their net present value at an identified discount rate.
  • Intangible assets with a finite useful life are tested for impairment when there are internal or external indications that an asset is impaired; this test requires an estimate of the value in use of the cash generating unit to which the asset belongs which itself is based on an estimate of the cash flows the cash generating unit is expected to generate and discounting them to their net present value using an appropriate discount rate.
  • Deferred tax assets are carried against tax losses carried forward and other taxable temporary differences to the extent that it is probable there will be sufficient future taxable profits available to utilise the tax losses and other taxable temporary differences. Management must use its judgement in estimating the amount of deferred tax assets to be recognised. The Industrial Plan of the Company was used when calculating the amount of deferred tax assets to be recognised.
  • – Provisions for risks and costs are estimated using the best available information at the date of the Financial Statements under review and include estimates based on historic and future data regarding the likely outcome of legal disputes or events where the judgement of the risk profile and the calculation of the likely financial impact are uncertain and complex and could result in an adjustment to estimates.

Reference should be made to the specific paragraph in the notes to the Financial Statements for the use of estimates of financial risk. The valuation of the provision for risks uses the best information available at the end of the reporting period.

The industrial plans used to carry out the impairment tests are based on certain expectations and assumptions for future performance that by their very nature are subject to uncertainties. Therefore, given the current macroeconomic scenario, the results could differ from the forecasts.

The plan will be continually assessed by the Directors regarding the effective realisation of the initiatives and forecasts and the effects on the financial and economic performance of the Company.

2) Disclosure on discontinued operations

On 4 November 2016, the Board of Directors of the Company approved the sale of the 75% shareholding in the Chinese subsidiary Worldex Fiera Milano Exhibitions Co. Ltd and its subsidiary Haikou Worldex Milan Exhibitions Co. Ltd, together with the exhibition trademark Food Hospitality World China, to SingEx Exhibitions Pte Ltd.

The sale of the shareholding was signed on 22 February 2017.

This transaction is in line with the Group strategy of repositioning its presence outside Italy and concentrating its business in China in the joint venture with Deutsche Messe.

The transaction price comprises a fixed component of Euro 2.750 million and a variable component of maximum Euro 1.000 million. 50% of the fixed component is payable on finalisation of the transaction and the remaining 50% when the purchaser obtains the necessary business licence and it will be subject to a price adjustment exclusively in favour of Fiera Milano should the sum of the net cash and net working capital of Worldex exceed Euro 1.213 million at the closing date of the transaction. The variable component of the transaction price, payable in three deferred tranches of equal amounts, depends on the targets for the EBITDA of Worldex being reached in each of the three years 2017-2019.

The sale of the shareholding generated an impairment charge of Euro 5.128 million. The calculation considered only the fixed part of the transaction price as the variable parts are linked to future events and circumstances that are beyond the control of the Company.

The transaction is subject to resolutive clauses including the issue of the necessary licences by the relevant Chinese authorities.

Under IFRS 5 – Non-current Assets Held for Sale and Discontinued Operations, the value of the investment is recognised in assets and liabilities held for sale.

Notes to the Financial Statements

STATEMENT OF FINANCIAL POSITION

ASSETS

Non-current assets

3) Property, plant and equipment

The breakdown and changes in the last two financial years were as follows:

(€'000) Balance at Balance at
31.12.2014 Incr. Decr. Depr. Impairment Reclassification Other
changes
31.12.2015
Plant and
machinery
– historic cost 15,079 369 15,448
– depreciation 12,322 1,415 13,737
Net 2,757 369 1,415 1,711
Industrial and
commercial
equipment
– historic cost 11,922 173 12,095
– depreciation 11,664 116 11,780
Net 258 173 116 315
Other assets
– historic cost 26,591 822 228 27,185
– depreciation 24,787 227 512 25,072
Net 1,804 822 1 512 2,113
Total property,
plant and
equipment
– historic cost 53,592 1,364 228 54,728
– depreciation 48,773 227 2,043 50,589
Net 4,819 1,364 1 2,043 4,139
(€'000) Balance at Balance at
31.12.2015 Incr. Decr. Depr. Impairment Reclassification Other
changes
31.12.2016
Plant and
machinery
– historic cost 15,448 127 15,575
– depreciation 13,737 705 14,442
Net 1,711 127 705 1,133
Industrial and
commercial
equipment
– historic cost 12,095 210 12,305
– depreciation 11,780 102 11,882
Net 315 210 102 423
Other assets
– historic cost 27,185 544 27,729
– depreciation 25,072 535 25,607
Net 2,113 544 535 2,122
Total property,
plant and
equipment
– historic cost 54,728 881 55,609
– depreciation 50,589 1,342 51,931
Net 4,139 881 1,342 3,678

The breakdown and changes in the financial year were as follows:

Plant and machinery

This entry was Euro 1.133 million, net of depreciation for the year of Euro 0.705 million, and was for electric and thermal plant and security and audiovisual systems.

The total increase of Euro 0.127 million was mainly for plant for the Rho exhibition site.

Industrial and commercial equipment

This was Euro 0.423 million, net of depreciation for the year of Euro 0.102 million, and was mainly for equipment and furnishings related to the exhibition business.

The total increase of Euro 0.210 million was for the purchase of furniture and equipment related to exhibition activities in the Rho exhibition site.

Other assets

This entry was Euro 2.122 million, net of depreciation for the year of Euro 0.535 million, and was for electronic equipment, furniture and furnishing, and transport vehicles.

The total increase of Euro 0.544 million was made up of Euro 0.383 million for electronic equipment and furnishing accessories and of Euro 0.161 million for improvements made to assets belonging to Fondazione Fiera Milano, which were the responsibility of the Company under existing lease agreements.

Depreciation on improvements to third-party assets is calculated on the residual length of the lease contract for the property.

The entry for fixed assets, plant and equipment includes related-party transactions for Euro 0.103 million (Euro 0.002 at 31 December 2015). Further details on related-party transactions are given in Note 44.

4) Goodwill and intangible assets with an indefinite useful life

(€'000) Balance at Balance at
31.12.2014
Incr.
Decr.
Impairment
Reclassification Other
changes
31.12.2015
Goodwill
– historic cost 82,933 82,933
– depreciation 12,789 12,789
Net 70,144 70,144
Total
– historic cost 82,933 82,933
– depreciation 12,789 12,789
Net 70,144 70,144

The amounts and changes in the last two financial years were as follows:

(€'000) Balance at Balance at
31.12.2015 Incr. Decr.
Impairment
Reclassification
Other
changes
31.12.2016
Goodwill
– historic cost 82,933 82,933
– depreciation 12,789 12,789
Net 70,144 70,144
Total
– historic cost 82,933 82,933
– depreciation 12,789 12,789
Net 70,144 70,144

The amounts and changes in the different items in the last financial year were as follows:

Goodwill

Goodwill totalled Euro 70.144 million.

Goodwill of Euro 29.841 million was initially recognised in the Statement of Financial Position following the contribution by Fondazione Fiera Milano of the exhibition entity on 17 December 2001. In the 2011 financial year, it increased by Euro 40.350 million due to the merger by incorporation of the 100% controlled company Rassegne SpA into its parent company Fiera Milano SpA and by a further Euro 0.080 million following the acquisition of the business division, Information Communication Technology, from the subsidiary Expopage SpA, now Fiera Milano Media SpA.

During the 2012 financial year it increased by Euro 0.021 million as a result of the merger by incorporation of the 100% owned company, TL.TI Expo SpA, into the Parent Company Fiera Milano SpA and decreased by Euro 0.148 million for the acquisition of the business division F&M Fiere & Mostre Srl in 2009 and by the adjustment to the final transaction consideration made as a result of the failure to reach the targets for the 2012 edition of the exhibition.

As described in Note 1 on the valuation criteria used to prepare the Financial Statements, goodwill is not amortised but is tested for impairment at the end of each reporting period or more often if there are any impairment losses. The methods used for the impairment tests in the 2016 financial period are described in the section Use of estimates.

The recoverable value of the cash generating units (CGUs) to which individual goodwill was attributed is verified by determining their value in use.

For Fiera Milano SpA, each individual exhibition is considered a cash-generating unit.

In order to avoid using arbitrary allocation criteria for the impairment tests, goodwill was allocated on the basis of appropriate groupings that reflect the strategic vision of the company, as well as how the goodwill was generated.

The goodwill allocations are as follows:

  • the Directly Organised Exhibition cash generating unit: this comprises the cash generating units of the exhibitions directly organised by Fiera Milano SpA. The goodwill allocated to this group was Euro 40.223 million and was the goodwill generated on the acquisition of companies that organise exhibitions that were subsequently merged with Fiera Milano SpA through various merger transactions;
  • the Exhibition cash generating unit group: this comprises the cash generating units of all the exhibitions of Fiera Milano SpA. The goodwill allocated to this group was Euro 29.921 million of which Euro 29.841 million was the goodwill arising from the contribution of the exhibition entity by Fondazione Fiera Milano to Fiera Milano SpA on 17 December 2001; Euro 0.080 million was goodwill deriving from the acquisition by the Company of the Information Communication Technology business division of its subsidiary Expopage SpA, now Fiera Milano Media SpA.

Discounted cash flow is used to assess impairment and is based on the 2017-2020 Industrial Plan approved by the Board of Directors.

Cash flow projections beyond the time horizons of the respective business plans are generally made using the average gross operating profit of the last two years of the plan and reconstructing a normalised cash flow without considering changes in working capital but including maintenance and replacement costs.

As described above, the terminal value was calculated as a perpetuity obtained by determining the net present value of the average net cash flows and discounting it using a WACC (Weighted Average Cost of Capital) of 5.30% whilst assuming a growth rate of 1.5% in line with the medium/long-term inflation estimates.

The WACC incorporates a cost of risk capital of 6.47%, a cost of debt of 2.36% and debt equal to 25% of invested capital (the average of peer companies). The single elements were arrived at using as far as possible publicly available sources. A rate net of taxes was used for cash flows net of taxes.

The cost of risk capital incorporates a risk-free rate of 1.46%, a market risk premium of 5.6% and a levered beta of 0.72, in line with the average for the sector. It also incorporates a specific risk coefficient to cover the execution risk of the forecast cash flows.

Sensitivity analyses were carried out by varying the WACC (+0.5%) and the forecast operating cash flows (–10%) with a positive result for both CGUs. Applying a WACC that was 0.5% higher at 5.8% for the sensitivity analysis on the Directly Organised Exhibition cash generating unit gave a recoverable value that was Euro 0.450 million lower than the accounting value.

5) Intangible assets with a finite useful life

The breakdown and changes in the last two financial years were as follows:

(€'000) Balance at Changes during the financial year
31.12.2014 Incr. Decr. Amort. Impairment Reclassification Other
changes
31.12.2015
Industrial patents and intellectual
property rights
– historic cost 35,353 755 36,108
– amortisation 31,961 1,981 33,942
Net 3,392 755 1,981 2,166
Concessions, licenses and similar rights
– historic cost 6,274 243 3,000 3,517
– amortisation 4,690 3,000 1,387 3,077
Net 1,584 243 1,387 440
Trademarks
– historic cost 22,533 22,533
– amortisation 9,242 875 1,953 12,070
Net 13,291 875 1,953 10,463
Intangible fixed assets under
construction
– historic cost 10 10
– amortisation
Net 10 10
Total intangible assets with a finite
useful life
– historic cost 64,160 1,008 3,000 62,168
– amortisation 45,893 3,000 4,243 1,953 49,089
Net 18,267 1,008 4,243 1,953 13,079
(€'000) Balance at Changes during the financial year Balance at
31.12.2015 Incr. Decr. Amort. Impairment Reclassification Other
changes
31.12.2016
Industrial patents and intellectual
property rights
– historic cost 36,108 957 10 37,075
– amortisation 33,942 1,516 35,458
Net 2,166 957 1,516 10 1,617
Concessions, licenses and similar rights
– historic cost 3,517 161 3,678
– amortisation 3,077 285 3,362
Net 440 161 285 316
Trademarks
– historic cost 22,533 1,910 24,443
– amortisation 12,070 920 3,333 16,323
Net 10,463 1,910 920 3,333 8,120
Intangible fixed assets under
construction
– historic cost 10 17 (10) 17
– amortisation
Net 10 17 (10) 17
Total intangible assets with a finite
useful life
– historic cost 62,168 3,045 65,213
– amortisation 49,089 2,721 3,333 55,143
Net 13,079 3,045 2,721 3,333 10,070

The breakdown and changes in the last two financial years were as follows:

Industrial patents and intellectual property rights

These totalled Euro 1.617 million net of amortisation for the year of Euro 1.516 million. The total increase of Euro 0.967 million included Euro 0.054 million of capitalised costs for functional upgrades to the information management system and Euro 0.913 million for the implementation of other digital projects and the purchase of software.

Amortisation is calculated on the estimated useful life of the asset, which is three years for the information system, the management reporting system, and the other projects and software.

Concessions, licences and similar rights

This entry was Euro 0.316 million net of amortisation for the year of Euro 0.285 million; the Euro 0.161 million increase was mainly for the purchase of software licences with rights of use for a limited period.

Time-limited software licences are amortised over a period of three years.

Trademarks

This entry totalled Euro 8.120 million net of amortisation for the year of Euro 0.920 million and the breakdown was as follows:

Host Euro 1.968 million;
Mipap Milano Prêt-à-Porter Euro 1.850 million;
Promotion Trade Exhibition Euro 1.346 million;
Fluidtrans Compomac Euro 0.824 million;
Transpotec & Logitec Euro 0.511 million;
NF Travel & Technology Event Euro 0.490 million;
Festivity Euro 0.399 million;
Bias Euro 0.367 million;
Miart Euro 0.137 million;
La Campionaria Euro 0.117 million;
BtoBio Expo Euro 0.089 million;
Tuttofood Euro 0.012 million;
Fruit&Veg Innovation Euro 0.010 million.

The total increase of Euro 1.910 was mainly attributable to the acquisition of the following trademarks:

  • Euro 1.400 million for the acquisition on 23 March 2016 of the trademark of the Promotion Trade Exhibition (PTE), an international exhibition for promotional items, business gifts and technologies for their personalisation. The Company has taken on the direct organisation of this exhibition, which was already hosted in its exhibition site but had previously been organised by a third-party. The exhibition will become part of the Lifestyle division and in the medium-term will be held alongside HOMI.
  • Euro 0.500 million for the acquisition on 27 September 2016 of the trademark NF Travel & Technology Event, which in 2018 will be integrated into the proprietary exhibition BIT as part of a content development project structured around professional conferences and seminars. Its useful life has been brought in line with that of the BIT trademark.

For the trademarks and publications to which Fiera Milano has attributed a finite useful life, the internal and external sources of information indicated in paragraphs 12-14 of IAS 36 were used to assess if there were any indications of impairment.

The impairment tests showed impairment losses for the following trademarks:

  • Euro 2.977 million for BIT due to the negative results expected for the 2017 edition and to the future estimates which do not foresee a return to profitability in the short-term. This gave rise to an impairment loss.
  • Euro 0.356 million for Transpotec & Logitec due to the operating loss of the 2017 edition.

The exhibition trademarks are amortised over a useful life of between ten and twenty years. The calculation of the useful life of each trademark is made by determining its continuous presence on a given reference market, its competitive position and its operating profitability.

Intangible fixed assets under construction

This item was Euro 0.017 million for analyses carried out on client communication management. As soon as it is completed, the value of the asset will be reclassified in fixed assets and it will start to be amortised.

Intangible assets with a finite life included related-party transactions of Euro 0.010 million (zero at 31 December 2015). Further details on related-party transactions are given in Note 44.

6) Investments

(€'000) % held Book value
Changes during the financial year
Book value
31.12.2016 31.12.2015 Incr. Decr. Reclassification Revaluations Write-downs 31.12.2016
Equity investments in subsidiaries
companies
Fiera Milano Congressi SpA 100% 12,200 12,200
Fiera Milano Media SpA 100% 18,170 3,893 14,277
Ipack-Ima SpA 100% 6,825 6,825
La Fabbrica del Libro SpA 51% 61 61
Nolostand SpA 100% 13,390 13,390
Cipa Fiera Milano Publicações e Eventos Ltda 1.00% 2 2
Eurofairs International Consultoria e
Participações Ltda
99.98% 536 2,893 3,429
Fiera Milano Exhibitions Africa Pty Ltd 100% 3,256 706 3,962
Fiera Milano India Pvt Ltd 99.99% 105 23 82
Worldex Fiera Milano Exhibitions Co., Ltd 75% 7,878 (2,750) 5,128
Total 62,360 3,662 (2,750) 16,435 46,837
Equity investments in joint-ventures
Hannover Milano Global Germany GmbH 49% 10,990 10,990
Total 10,990 10,990
Total equity investments 73,350 3,662 (2,750) 16,435 57,827

The breakdown and changes in this entry in the financial period under review were as follows:

The values of investments are shown net of any impairment losses.

The amount and changes in investments are described below.

  • On 3 March 2016, Fiera Milano SpA acquired 1% of Cipa Fiera Milano Publicações e Eventos Ltda from Eurofairs International Consultoria e Participações Ltda for Euro 0.002 million.
  • on 14 June 2016, to strengthen the share capital, Fiera Milano SpA approved the conversion of the credit deriving from a loan of Euro 2.983 million given to Eurofairs International Consultoria Participações Ltda into shares of the company.
  • On 22 July 2016, Fiera Milano SpA waived the credit deriving from the loan of Euro 0.706 million given to Fiera Milano Exhibitions Africa Pty Ltd thereby strengthening the capital of the company.

– On 5 September 2016, as part of its strategy to strengthen its portfolio of directly organised exhibitions, Fiera Milano SpA and Ediser Srl, a service company belonging to the Associazione Italiana Editori (AIE), set up a company called La Fabbrica del Libro SpA.

Fiera Milano SpA paid Euro 0.061 million for 51% of the share capital while the remaining 49% was paid by Ediser Srl. The company has two different classes of shares; category A shares (ordinary shares) that belong to the majority shareholder Fiera Milano SpA and category B shares (preference shares) belonging to Ediser Srl. The maximum amount of losses in the first two financial years (2016/2017 and 2018) that can be attributed to the category B shares is 15% of the total losses.

This partnership will develop activities connected to book publishing, also through the organisation of fairs throughout Italy, to focus on all forms of publishing. The first event, Tempo di Libri, will be held in Milan from 19-23 April 2017.

– Euro 2.750 million was for the reclassification of the investment in Worldex Fiera Milano Exhibitions Co. Ltd to assets held for sale following the decision by the Board of Directors on 4 November 2016 to approve the sale of the 75% shareholding in the Chinese subsidiary. The sale of this shareholding generated an impairment charge of Euro 5.128 million.

At the end of the financial year under review, impairment tests were carried out on the investments and the following impairment losses taken: Euro 3.893 million for Fiera Milano Media SpA, Euro 3.429 million for Eurofairs International Consultoria e Participações Ltda, and Euro 3.962 million for Fiera Milano Exhibitions Africa Pty Ltd.

The investment in Fiera Milano India Pvt Ltd (a non-operative company) was adjusted to bring it in line with its net financial position and resulted in a write-down of Euro 0.023 million.

The impairment tests used discounted cash flows based on the industrial plans approved by the management of the companies. The reference time horizon was four financial years given the biennial timing of some of the important exhibitions. The estimated cash flows beyond the time period of the business plans were calculated by taking the average gross operating margin of the period covered by the plans and estimating a normalised cash flow with no changes in working capital but including maintenance or replacement expenditure.

The terminal value used was a perpetuity obtained by calculating the net present value of the average net cash flows of the last four years in the industrial plans, as described above, at a discount rate that differs for the different reference countries of the various investments. Zero growth in real terms was assumed but an estimate of the medium/long-term inflation rates in the specific geographic areas was used. Only the estimated growth of Fiera Milano Media SpA was not in line with the estimate for medium/long-term inflation and therefore appears as a negative factor in real terms.

The WACC (Weighted Average Cost of Capital) used was different for each investment depending on the: (i) different risk-free rate (the yield on a 10-year government bond in the jurisdiction of the investment); (ii) the specific risk coefficient to cover the execution risk of the forecast cash flows. The risk factors reflect the differences between historical data and estimated figures as well as future valuations of the business strategies; (iii) the different cost of debt due to the estimated rate of inflation in the jurisdiction of each investment.

A summary of the results is given below:

Fiera Milano SpA 5.30%
Fiera Milano Congressi SpA 5.67%
Fiera Milano Media SpA 6.80%
Ipack-Ima SpA 6.05%
Nolostand SpA 6.80%
Eurofairs International Consultoria e Participações Ltda 14.10%
Fiera Milano Exhibitions Africa Pty Ltd 12.25%
Hannover Milano Global Germany GmbH 5.74%

Sensitivity analyses were carried out by varying the WACC (+0.5%) and the forecast operating cash flows (–10%) with a positive outcome for all the investments that were not impaired.

The sensitivity analyses on the investments that were impaired gave the following results:

  • Fiera Milano Media SpA: a 0.5% increase in the WACC reduced the recoverable value by Euro 1.236 million while a 0.5% decrease in the WACC increased the recoverable value by Euro 1.431 million. A 10% decrease in expected cash flows gave a decrease in the recoverable value of Euro 1.941 million.
  • Eurofairs International Consultoria e Participaçoes Ltda: a 0.5% increase in the WACC had no impact as the recoverable value was already zero with the WACC used for the impairment test. A reduction of 0.5% in the WACC also had no effect on the recoverable value.
  • Fiera Milano Exhibitions Africa Pty Ltd: a 0.5% increase in the WACC had no effect as the recoverable value was already zero with the WACC used for the impairment test. A reduction of 0.5% in the WACC also had no effect on the recoverable value.

7) Trade and other receivables

These totalled Euro 12.469 million (Euro 13.031 million at 31 December 2015) of which Euro 10.890 million due beyond five years. The breakdown was as follows:

(€'000) 31.12.2016 31.12.2015 Change
Other receivables from the controlling shareholder 11,862 12,125 (263)
Other guarantee deposits 583 583
Other receivables 24 323 (299)
Total 12,469 13,031 (562)

The entry included:

– other receivables from the controlling shareholder of Euro 11.862 million (Euro 12.125 million at 31 December 2015). Euro 10.412 million was for the guarantee deposit under the lease agreements for the two exhibitions sites of Rho and Milan City. This sum is equivalent to the combined quarterly rent on the two exhibition sites; the residual amount of Euro 1.450 million was the non-current part of the receivable arising from the right to repayment from Fondazione Fiera Milano of the guarantee deposit paid on the two previous lease agreements offset by the payable by Fiera Milano of the guarantee deposits for the new lease agreements. This receivable will be paid over the length of the contracts through a reduction in the amount payable by Fiera Milano SpA to Fondazione Fiera Milano for each six-monthly rental payment;

  • other guarantee deposits totalling Euro 0.583 million (Euro 0.583 million at 31 December 2015). These referred almost totally to the guarantee deposit under the property lease agreement for the Palazzo Italia project in Berlin. The sum of Euro 0.498 million equates to the quarterly rent under the agreement;
  • other receivables of Euro 0.024 million (Euro 0.323 million at 31 December 2015). These were receivables from the disposal of the Rich-Mac trademark to be paid in December 2019. The amount of the receivable was adjusted through a provision for doubtful receivables in order to adjust the accounting value to the estimated recoverable value.

Trade and other receivables included Euro 11.862 million (Euro 12.125 million at 31 December 2015) for relatedparty transactions. Further details on related-party transactions are given in Note 44.

8) Deferred tax assets

These were Euro 3.041 million (Euro 3.084 million at 31 December 2015) and were the net of deferred tax assets and deferred tax liabilities.

An analysis of the changes in deferred taxes is given in Note 42 to the Income Statement.

Current assets

9) Trade and other receivables

(€'000) 31.12.2016 31.12.2015 Change
Receivables from clients 21,500 32,220 (10,720)
Trade receivables from subsidiaries 2,957 5,431 (2,474)
Trade receivables from associates 199 68 131
Receivables from the controlling shareholder for tax consolidation 2,897 2,897
Receivables from subsidiaries for tax consolidation 413 (413)
Other receivables 1,744 2,214 (470)
Other receivables from the controlling shareholder 518 414 104
Prepaid expenses 333 848 (515)
Prepaid expenses from the controlling shareholder 3,714 4,270 (556)
Prepaid expenses from subsidiaries 4 4
Total 33,866 45,878 (12,012)

These were Euro 33.866 million (Euro 45.878 million at 31 December 2015) and included the following items:

– trade receivables from clients of Euro 21.500 million (Euro 32.220 million at 31 December 2015) net of Euro 5.799 million of provisions for doubtful receivables. They comprised receivables from organisers and exhibitors for providing exhibition space and services for exhibitions. The decrease compared to the preceding financial year mainly reflected lower business volumes caused by the different exhibition calendar.

The sum for receivables was adjusted for the provision for doubtful receivables in order to bring the accounting value in line with the presumed recoverable value. The change in this provision in the financial year under review is shown in the table below:

(€'000) 31.12.2015 Provisions Utilisation 31.12.2016
Provision for doubtful receivables 5,742 1,475 1,418 5,799

The provision was primarily for receivables that were deemed difficult to recover.

Use of the provision refers to receivables which, in the financial year under review, were found to be unrecoverable.

  • Trade receivables from the controlling shareholder of Euro 2.957 million (Euro 5.431 million at 31 December 2015). These were trade receivables at market conditions. The services provided are part of the organisation and management of exhibitions and other events in the exhibition site.
  • Receivables of Euro 2.897 million (zero at 31 December 2015) from the controlling shareholder for the tax consolidation and were the net balance of receivables and payables included in the tax consolidation.
  • Other receivables of Euro 1.744 million (Euro 2.214 million at 31 December 2015). These included receivables for IRAP tax of Euro 0.445 million, receivables for IRES of Euro 0.104 million, advances to INAIL of Euro 0.134 million, other tax receivables of Euro 0.072 million, receivables from employees of Euro 0.187 million, receivables for tax credits on employee severance indemnities of Euro 0.292 million, advances to suppliers of Euro 0.410 million, and other current receivables of Euro 0.100 million.
  • Accruals of Euro 0.333 million (Euro 0.848 million at 31 December 2015) for insurance premiums and other accruals and for costs incurred in the financial year but pertaining to the following financial year.
  • Accruals from the controlling shareholder of Euro 3.714 million (Euro 4.270 million at 31 December 2015) that were mainly for the rent on the fieramilano exhibition site.

The entry for trade and other receivables included Euro 10.289 million (Euro 10.596 million at 31 December 2015) for related-party transactions. Further details on related-party transactions are given in Note 44.

10) Inventories

Inventories includes deferred costs of Euro 4.467 million (Euro 1.198 million at 31 December 2015) for exhibitions to be held after 31 December 2016.

(€'000) 31.12.2016 31.12.2015 Change
Tuttofood 1,781 346 1,435
Host 608 109 499
Bit 318 192 126
HOMI I semester 313 301 12
Fruit Innovation 237 237
Expodetergo 236 236
Transpotec & Logitec 204 2 202
Sicurezza 176 176
Promotion Trade Exhibition 162 162
Miart 155 201 (46)
HOMI II semester 3 (3)
Other 277 44 233
Total 4,467 1,198 3,269

The change in this entry mainly referred to costs incurred in the period under review for exhibitions that were not present in the previous financial year due to the different exhibition calendar but will be held in the next financial year.

The entry for inventories includes Euro 0.490 million (Euro 0.206 million at 31 December 2015) for related-party transactions. Further details on related-party transactions are given in Note 44.

11) Current financial assets

These were Euro 6.084 million (Euro 4.035 million at 31 December 2015) and the breakdown was as follows:

(€'000) 31.12.2016 31.12.2015 Change
Current financing to the Group 9,155 4,580 4,575
Provision for financing 3,071 545 2,526
Total 6,084 4,035 2,049

This entry included some financial receivables from subsidiaries that were done at market conditions:

  • a Euro 3.212 million loan to the subsidiary Fiera Milano Media SpA. The interest payable is 3-month Euribor plus a spread of 220 basis points that was changed, effective from 1 October 2016, to a fixed rate of interest of 1.5%;
  • a Euro 2.622 million loan to the joint venture Ipack Ima Srl. The interest payable is 3-month Euribor plus a spread of 220 basis points that was changed, effective from 1 October 2016, to a fixed rate of interest of 1.5%;

  • a Euro 1.561 million loan to the subsidiary Eurofairs International Consultoria e Participações Ltda. The interest rate is 6%. At the end of the reporting period, the loan was adjusted by Euro 1.561 million through a bad debt provision to bring the nominal value of the loan in line with the estimated recoverable value;

  • a Euro 1.510 million loan to the subsidiary Fiera Milano Exhibitions Africa Pty Ltd. The interest rate is 2%. At the end of the reporting period, the loan was adjusted by Euro 1.510 million through a bad debt provision to bring the nominal value of the loan in line with the estimated recoverable value;
  • a Euro 0.250 million loan to the subsidiary La Fabbrica del Libro SpA. The interest rate is 1.50%.

This entire entry is a related-party transaction (Euro 4.035 million at 31 December 2015). Further details on related-party transactions are given in Note 44.

12) Cash and cash equivalents

These totalled Euro 11.983 million (Euro 42.972 million at 31 December 2015) and was almost entirely composed of short-term bank deposits.

(€'000) 31.12.2016 31.12.2015 Change
Bank and postal accounts 11,890 42,874 (30,984)
Cheques 85 95 (10)
Cash and cash equivalents 8 3 5
Total 11,983 42,972 (30,989)

The decrease was mainly due to the decrease in operating cash flows from net working capital. The figure for the previous financial year included the cash inflows from the share capital increase.

The financial flows with comparative data at 31 December 2015 are shown in the Statement of Cash Flows.

13) Assets held for sale

Assets held for sale were Euro 2.750 million (zero at 31 December 2015).

This was for the investment in Worldex Fiera Milano Exhibitions Co. Ltd, following the decision of the Board of Directors on 4 November 2016 to approve the sale of the 75% shareholding in this company. Further details on this transaction are provided in Note 2.

EQUITY AND LIABILITIES

14) Equity

The breakdown of equity was as follows:

(€'000) 31.12.2016 31.12.2015 Change
Share capital 41,645 41,818 (173)
of which treasury shares (800) (627) (173)
Share premium reserve 35,668 65,679 (30,011)
of which treasury shares (3,204) (2,913) (291)
Legal reserve 8,489 8,489
Other reserves
Retained profits/(losses) (154) (19,712) 19,558
Profit/(loss) for the period (25,160) (1,456) (23,704)
Equity 60,488 86,329 (25,841)

The amounts and changes compared to 31 December 2015 were as follows:

Share capital

At 31 December 2016, the share capital was Euro 41.645 million (Euro 41.818 million at 31 December 2015), net of Euro 0.800 million of treasury shares. The fully paid-up share capital was made up of 71,917,829 ordinary shares with no restrictions on dividend distribution and repayment of share capital, except as provided by law for treasury shares.

The breakdown of the shares in issue is shown in the following table:

Number of Number of
shares at 31
December
2015
Capital
increase
Purchase Sale shares at 31
December
2016
Ordinary shares in issue 71,917,829 71,917,829
Treasury shares 626,758 294,010 920,768
Total shares outstanding 71,291,071 70,997,061

In accordance with IAS/IFRS, the nominal value of treasury shares acquired in previous years was carried directly to equity whilst the difference between the nominal value and the acquisition price of treasury shares was taken to the share premium reserve.

The Extraordinary Shareholders' Meeting of 31 July 2015, at the same time as approving the share capital increase, also approved the cancellation of the nominal value of the shares that comprise the share capital. Therefore, since that date the nominal value is calculated by dividing the share capital by the number of shares outstanding. At 31 December 2016, this gave an implicit nominal value of Euro 0.59 per share.

On 24 June 2016, the Company announced a buyback of shares under the authority given it by the Ordinary Shareholders' Meeting of 28 April 2016. The aim of Fiera Milano SpA was to increase the number of treasury shares held to support the 2017-2023 Stock Option Plan, as well as to stabilise movements in the share price. At 31 December 2016, it had bought back 294,010 treasury shares at an average price of Euro 1.58 per share for a total value of Euro 0.464 million. At 31 December 2016, the Company held 920,768 treasury shares, equal to 1.28% of the share capital.

Share premium reserve

The share premium reserve was Euro 35.668 million (Euro 65.679 million at 31 December 2015) net of Euro 3.204 million of treasury shares.

Movements in the period under review were as follows:

  • a Euro 29.657 million decrease following the approval of the Shareholders' Meeting of 28 April 2016 to use the share premium reserve to cover the Euro 21.168 million of losses carried forward and Euro 8.489 million to rebuild the legal reserve;
  • a Euro 0.291 million decrease from the buyback of shares;
  • a Euro 0.063 million decrease in pre-paid taxes and for the amount deducted for the costs associated with share capital increase, which in the previous year were taken against equity, net of the tax effect as required by IAS 32.

Legal reserve

This entry was Euro 8.489 million (zero at 31 December 2015). The increase followed the approval of the Parent Company Shareholders' Meeting of 28 April 2016 to rebuild the legal reserve under Article 2430, paragraph 2, by using the share premium reserve.

Retained profits/losses

The retained losses were Euro 0.154 million (retained losses of Euro 19.712 million at 31 December 2015). Euro 19.712 of this improvement followed the approval given at the Shareholders' Meeting of 28 April to cover the losses carried forward by using the share premium reserve but there was also a Euro 0.154 million decrease for the remeasurement of the defined benefit plans net of the tax effect.

Net result for the period

The net loss for the financial year at 31 December 2016 was Euro 25.160 million. The net loss in the previous financial year was Euro 1.456 million.

The table below gives a breakdown of share capital and reserves and shows the possible uses and amounts available for distribution for each component, as well as any use made in previous financial years.

Equity available and equity available for distribution

(€'000) Balance
Possible uses
Amount
Summary of uses
available to cover
losses
for other
reasons
Share capital 41,645
of which treasury shares 800
Capital reserves:
Share-premium reserve 35,668 A,B,C 35,668 44,104
Legal reserve 8,489 5,212
Other reserves 895
Reserves for earnings:
Legal reserve 2,653
Other reserves 525
Retained profits/(losses) (154)
Profit (loss) for period (25,160)
Total 60,488 35,668 53,389
Amount unavailable for
distribution
(share-premium reserve)
Remainder available
for distribution
35,668

Key

A: for capital increase

B: to cover losses

C: for distribution to shareholders

LIABILITIES

Non-current liabilities

15) Bank borrowings

Bank borrowings totalled Euro 14.108 million (Euro 10.922 million at 31 December 2015):

(€'000) 31.12.2016 31.12.2015 Change
Bank borrowings 14,108 10,922 3,186
Total 14,108 10,922 3,186

Non-current payables to banks were:

– Euro 2.201 million (Euro 6.601 million at 31 December 2015) for the non-current portion of the Euro 20.000 million financing granted by Banca Popolare di Milano SpA on 6 December 2013 and repayable in sixmonthly instalments in arrears from 30 June 2014 until 30 June 2018 with interest at 3-month Euribor plus a spread of 2.0%;

  • Euro 2.886 million (zero at 31 December 2015) for the non-current portion of the Euro 10.000 million financing granted by Banca Popolare di Bergamo on 23 May 2016, and repayable in quarterly instalments in arrears from 23 August 2016 until 23 May 2018 with interest at 3-month Euribor plus a spread of 1.85%;
  • Euro 3.774 million (zero at 31 December 2015) for the non-current portion of the Euro 15.000 million financing given by Banca Popolare di Lodi on 25 May 2016 and repayable in quarterly instalments in arrears from 30 June 2016 until 30 June 2018 with interest at 3-month Euribor plus a spread of 1.50%;
  • Euro 1.505 million (zero at 31 December 2015) for the non-current portion of the Euro 3.000 million financing given by Cassa di Risparmio di Parma e Piacenza SpA on 27 May 2016 and repayable in quarterly instalments in arrears from 27 August 2016 until 27 May 2019 with interest at 3-month Euribor plus a spread of 1.50%;
  • Euro 1.258 million (zero at 31 December 2015) for the non-current portion of the Euro 5.000 million financing given by Banca Popolare di Lodi on 22 June 2016 and repayable in quarterly instalments in arrears from 30 June 2016 until 30 June 2018 with interest at 3-month Euribor plus a spread of 1.50%;
  • Euro 2.484 million (zero at 31 December 2015) for the non-current portion of the Euro 5.000 million financing given by Banca Nazionale del Lavoro SpA on 22 December 2016 and repayable in monthly instalments in arrears from 22 January 2017 until 22 December 2018 with interest at 1-month Euribor plus a spread of 1.50%.

The change compared to the previous financial year was due to new non-current loans taken out and to the early repayment (Euro 4.321 million at 31 December 2015) of the Euro 20.000 million financing given by Banca Popolare di Bergamo SpA on 21 December 2012.

The loan received on 6 December 2013 is governed by financial covenants governing the maximum level for the net debt/ equity ratio. This is measured annually and, when measured at 31 December 2016, had not exceeded the maximum levels under the covenants. Further details of this loan are given in Note 27.2.

The loan received on 27 May 2016 is subject to commercial covenants. For the duration of the loan, the Company has agreed to channel receivables and payables for a specific amount through current accounts opened with the Cassa di Risparmio di Parma e Piacenza SpA.

The commercial covenants agreed as part of the credit line with the bank that gave the loan on 22 December 2016 were met.

16) Other financial liabilities

These were zero (Euro 0.050 million at 2015):

(€'000) 31.12.2016 31.12.2015 Change
Finance leases 50 (50)
Total 50 (50)

The change compared to the previous financial year was for the reclassification of the non-current part of a finance lease that gave the right to use the Festvity trademark to other current financial liabilities.

17) Provision for risks and charges

(€'000) 31.12.2015 Provisions Utilisation Reclassification 31.12.2016
"Palazzo Italia" Berlin project 2,057 (938) 1,119
Supplementary indemnity
reserve for customers
5 5
Other provisions for risks
and charges
890 11 879
Total 2,952 16 (938) 1,998

Provisions for risks and charges totalled Euro 1.998 million (Euro 2.952 million at 31 December 2015) and were as follows:

  • Euro 1.119 million (Euro 2.057 million at 31 December 2015) for the non-current part of the provision for the Palazzo Italia project in Berlin. The current portion of the provision, Euro 1.473 million, was classified under current provisions for risks and charges. At 31 December 2016, the total provision for this risk was Euro 2.592 million. At 31 December 2015 the total provision for this risk was Euro 3.302 million but Euro 1.739 million of the provision was used in the financial year under review and it was increased by Euro 1.029 million following a reworking of the forecasts for the use of the property;
  • Euro 0.879 million (Euro 0.890 million at 31 December 2015) for other risks for potential payments on the outcome of legal disputes with suppliers and calculated on their probable outcome using internal evaluations and those of external legal consultants.

18) Employee benefit provisions

These were Euro 5.003 million (Euro 5.792 million at 31 December 2015).

They were made up of employee severance indemnities that had accrued at 31 December 2006 and were valued using actuarial methods. The change in the financial year under review is shown in the following table:

(€'000) 31.12.2015 Actuarial
evaluation
Indemnities and
advances paid
Other
movements
31.12.2016
Defined benefit plans 5,792 328 1,059 (58) 5,003
Total 5,792 328 1,059 (58) 5,003

Actuarial evaluation

(€'000)
Personnel expenses:
– Indemnities related to defined benefit plans 9
Financial expenses:
– Actuarial loss 116
Other comprehensive income:
– Remeasurement of defined benefit plans 203
Total 328

The Company uses a duly certified professional to determine the actuarial amounts.

The main hypotheses/assumptions used in the actuarial calculations for the defined benefit plans were as follows:

Demographic assumptions

Mortality rate Based on the ISTAT 2011 mortality tables by gender
Probability of disability Based on the disability tables used in the INPS 2010 forecast model
Probability of termination
of employment
Based on the probable employee turnover rate equal to 5% per annum of the
companies being valued
Retirement probability Assumption that the basic requirements needed to receive the compulsory general
insurance (Assicurazione Generale Obbligatoria) were met
Probability of early retirement Assumption of 3% per annum and an average amount of 70% of the staff-leaving
indemnities of all the companies valued

Economic and financial assumption for calculation of severance indemnity provisions

31.12.2016 31.12.2015
Technical discount rate 1.30% 2.00%
Annual inflation rate 1.50% 1.50%
Annual rate of increase in severance indemnity provisions 2.62% 2.62%

The discount rate was calculated with reference to the Eurozone Iboxx Corporate AA index for a period equal to or greater than ten years.

The following table gives sensitivity analyses for the main assumptions used to calculate the liability for defined benefit plans.

Effect of defined benefit plans on debt

(€'000)
Economic and financial
assumptions
Range Base figure
(excluding the
CEO's termination
benefit)
Increase in
assumptions
Decrease in
assumptions
Annual technical discount rate +/–0.5% 4,987 4,731 5,183
Annual rate of increase in total
employees salary
+/–0.5% 4,987 4,987 4,987
Life expectancy +/–1 year 4,987 5,032 4,944

Current liabilities

19) Bank borrowings

Bank borrowings totalled Euro 44.068 million (Euro 38.485 million at 31 December 2015) and the breakdown was as follows:

(€'000) 31.12.2016 31.12.2015 Change
Bank overdrafts 18,019 22,500 (4,481)
Current financing 26,049 15,985 10,064
Total 44,068 38,485 5,583

Bank borrowings were:

  • Euro 18.019 million (Euro 22.500 million at 31 December 2015) of credit lines to meet cash requirements. Credit lines with conditions attached included that from Banca Nazionale del Lavoro SpA which was for advances on domestic receivables. Under the agreement for the credit line, each year Fiera Milano SpA agrees to channel through the bank incoming commercial funds in the form of payments, bank transfers, POS payments and notice payment forms (MAV) for an amount equal to a multiple of the credit line. At 31 December 2016, Euro 12.500 million of this credit line had been used.
  • Euro 26.049 million (Euro 15.985 million at 31 December 2015) consisting of: the current loan of Euro 5.000 million, which had a residual sum of Euro 2.517 million, agreed on 26 February 2016 with Banca di Credito Cooperativo di Carate Brianza and repayable in quarterly instalments in arrears from 25 May 2016 until 25 August 2017 with interest at 3-month Euribor plus a spread of 1.75%; and the current portion of the noncurrent loans described in Note 15.

The current portion of non-current loans were: Euro 4.400 million for the loan taken out on 6 December 2013; Euro 5.707 million for the loan taken out on 23 May 2016; Euro 7.462 million for the loan taken out on 25 May 2016; Euro 0.990 million for the loan taken out on 27 May 2016; Euro 2.488 million for the loan taken out on 22 June 2016; and Euro 2.485 million for the loan taken out on 22 December 2016.

Bank borrowings are subject to floating rate interest.

20) Trade payables

These were Euro 19.839 million (Euro 26.185 million at 31 December 2015). Trade payables were mainly to Italian suppliers for the purchase of services required to mount the exhibitions that is the typical business of the Company. The change is primarily attributable to the lower number of transactions caused by the different exhibition calendar.

21) Advances

Advances totalled Euro 34.670 million (Euro 31.545 million at 31 December 2015) and were advances invoiced to clients for exhibitions to be held after the end of the financial year. Revenue recognition is delayed until the exhibition is held.

The table below gives a breakdown by exhibition. The change in advances compared to the previous financial year can be explained by the biennial and multi-annual frequency of some exhibitions.

(€'000) 31.12.2016 31.12.2015 Change
HOMI I semester 11,700 11,035 665
Host 4,789 2,144 2,645
Tuttofood 3,108 168 2,940
Salone del mobile/Complemento d'arredo 1,941 1,956 (15)
Lineapelle I semester 1,800 1,600 200
Mido 1,756 1,402 354
Transpotec & Logitec 1,534 1,534
Micam Spring 953 985 (32)
Promotion trade exibition 822 275 547
Mostra Convegno Expocomfort 790 7,894 (7,104)
Made Expo 692 692
Sicurezza 620 620
The One Milano 611 611
Simac Tanning-Tech 595 443 152
Milano Unica Spring 546 528 18
Euroluce 492 492
Expodetergo 324 324
Lamiera 219 219
Bit 176 557 (381)
Sposaitalia 175 103 72
Ipack-Ima 166 166
Mipel 144 139 5
Myplant & Garden 132 132
Made in Steel 103 103
Eurocucina 433 (433)
Mifur 381 (381)
Bimu 381 (381)
Salone Internazionale del Bagno 250 (250)
Xylexpo 249 (249)
Venditalia 182 (182)
Esposizione Canina 166 (166)
Other 482 274 208
Total 34,670 31,545 3,125

This entry included Euro 0.288 million (Euro 0.041 million at 31 December 2015) for related-party transactions. Further details on related-party transactions are given in Note 44.

22) Other financial payables

These totalled Euro 4.365 million (Euro 15.395 million at 31 December 2015) and the breakdown was as follows:

(€'000) 31.12.2016 31.12.2015 Change
Financial payables to the controlling shareholder 1,627 15,225 (13,598)
Financial payables to the subsidiaries 2,687 2,687
Finance leases 51 170 (119)
Total 4,365 15,395 (11,030)

The entry for financial payables to the controlling shareholder refers to the balance in the current account held with Fondazione Fiera Milano that carries interest at 1-month Euribor plus a spread of 1.75%. The change in the figure compared to the previous year was due to the rent payable in 2015. Further details on this account are given in Note 44.

The entry financial payables to subsidiaries refers to the balance in the current account held with Ipack-Ima SpA. This current account is part of the cash pooling agreement of 20 April 2016, effective from 27 April 2016, and shows the daily banking transactions of the two companies that may be offset against each other. The account carries interest rate at 1-month Euribor plus a spread of 1.75%.

Other financial payables included Euro 4.314 million (Euro 15.225 million at 31 December 2015) for related-party transactions. Further details on related-party transactions are given in Note 44.

(€'000) 31.12.2015 Provisions Utilisation Reclassification 31.12.2016
"Palazzo Italia" Berlin project 1,245 1,029 1,739 938 1,473
Losses on exhibitions 1,564 1,564
Other provisions for risks and charges 391 1,238 800 829
Total 1,636 3,831 2,539 938 3,866

23) Current provisions for risks and charges

These were Euro 3.866 million (Euro 1.636 million at 31 December 2015) and the breakdown was as follows:

  • Euro 1.473 million for the current portion of the provision for the Palazzo Italia project in Berlin already described in Note 17;
  • Euro 1.564 million for the net present value of estimated cash flows in the Industrial Plan for loss-making exhibitions in 2017;
  • Euro 0.829 million (Euro 0.391 million at 31 December 2015) of other risk provisions mainly for legal disputes with employees. The provisions were mainly for the estimates of the probable liabilities arising from disputes with employees linked to the administration orders. No provision was made for costs directly attributable to the Court-appointed Administrator and his assistants as these costs, under prevailing law and at this state of the proceedings, are borne by the State. However, it cannot be excluded that, as part of the procedure, costs could occur or be charged to the companies involved which, at the present date, cannot be identified or quantified.

Furthermore, the measures adopted as a result of the administration order have given rise to costs that are included in costs of services under services and technical, legal, commercial and administrative consultancy.

24) Current tax liabilities

Current tax liabilities totalled Euro 0.905 million (Euro 4.022 million at 31 December 2015).

(€'000) 31.12.2016 31.12.2015 Change
Income tax payable in the financial year 2,432 (2,432)
Income tax (IRPEF) payable for employees 775 1,411 (636)
Income tax (IRPEF) payable for self-employed
and project workers
108 162 (54)
Other tax liabilities 22 17 5
Total 905 4,022 (3,117)

The decrease was mainly due to the absence of taxes for the period; for IRAP this was due to the deducibility of the tax wedge and of the residual costs for the permanent personnel hired.

25) Other current liabilities

Other current liabilities totalled Euro 27.071 million (Euro 47.595 million at 31 December 2015).

(€'000) 31.12.2016 31.12.2015 Change
Trade payables to subsidiaries 12,796 14,410 (1,614)
Trade payables to associates 318 133 185
Other payables to the controlling shareholder 1,314 4,378 (3,064)
Payables to controlling shareholder for tax consolidation 345 (345)
Payables to subsidiaries for tax consolidation 134 141 (7)
Payables to the controlling shareholder for Group VAT 1,477 88 1,389
Payables to pension and social security entities 1,648 1,944 (296)
Payables to directors and statutory auditors 25 39 (14)
Payables to employees 3,920 9,171 (5,251)
Payables to exhibition organisers and others 5,111 16,811 (11,700)
Payables to subsidiaries' exhibition organisers 78 78
Payables to associates' exhibition organisers 62 62
Deferred income 188 134 54
Deferred income to subsidiaries 1 (1)
Total 27,071 47,595 (20,524)

The main changes compared to the previous financial year were the following:

  • lower payables to exhibition organisers resulting from the trend in payments received on behalf of exhibition organisers;
  • lower payables for the variable component of employee remuneration and for redundancy incentives;
  • lower payables to the controlling shareholder mainly for the variable component of rent payable to Fondazione Fiera Milano only in the 2015 financial year because of the presence of Expo 2015.

This entry also included Euro 16.179 million (Euro 19.496 million at 31 December 2015) for related-party transactions. Further details on related-party transactions are given in Note 44.

26) Financial assets and liabilities

At 31 December 2016, the Company had net debt of Euro 44.474 million (Euro 17.845 million at 31 December 2015), as shown in the following table. Where applicable, any component of each entry that is a related-party transaction is shown separately.

Net Financial Position

(€'000) 31.12.2016 31.12.2015
A. Cash (including bank balances) 11,983 42,972
B. Other cash equivalents
C. Securities held for trading
D. Cash and cash equivalents (A+B+C) 11,983 42,972
E. Current financial assets 6,084 4,035
– E.1 of which current financial receivables from the controlling shareholder
– E.2 of which current financial receivables from the subsidiaries 6,084 4,035
F. Current bank borrowings 18,019 22,500
G. Current portion of non-current debt 26,049 15,985
H. Other current financial liabilities 4,365 15,395
– H.1 of which current financial payables to the controlling shareholder 1,627 15,225
– H.2 of which current financial payables to the subsidiaries 2,687
I. Current financial debt (F+G+H) 48,433 53,880
J. Net current financial debt (cash) (I-E-D) 30,366 6,873
K. Non-current bank borrowings 14,108 10,922
L. Debt securities in issue
M. Other non-current liabilities 50
N. Non-current net financial debt (K+L+M) 14,108 10,972
Net financial debt (cash) from continuing operations (J+N) 44,474 17,845
Net financial debt (cash) from assets held for sale
O. Net financial debt (cash) 44,474 17,845

Net debt increased by Euro 26.629 million. The higher figure was due to a decrease in operating cash flows from net working capital, mainly due to the change in payables to some exhibition organisers and also to the different exhibition calendar.

Additional information on the financial instruments of the Company is given below to enable a better assessment of:

  • a) the importance of financial instruments for the Statement of Financial Position and Income Statement;
  • b) the significance and type of risks deriving from the financial instruments to which the Company was exposed during the financial year under review and the previous financial year and the relevant risk management procedures.

Classes of financial instruments

The items in the Statement of Financial Position and the types of risk related to financial instruments at 31 December 2016 and 31 December 2015 are shown in the following table. Where recurring, related-party amounts are shown separately under each item:

Risk class

(€'000) Notes Balance at
31.12.2015
Balance at
31.12.2016
Liquidity
risk
Interest
rate risk
Credit
risk
NON-CURRENT ASSETS
1) Trade and other receivables 7 13,031 12,469 X
CURRENT ASSETS
2) Trade and other receivables 9 45,878 33,866 X
3) Current financial assets 11 4,035 6,084 X
4) Cash and cash equivalents 12 42,972 11,983 X
NON-CURRENT LIABILITIES
5) Bank borrowings 15 10,922 14,108 X X
6) Other financial liabilities 16 50 X X
CURRENT LIABILITIES
7) Bank borrowings 19 38,485 44,068 X X
8) Trade payables 20 26,185 19,839 X
9) Other financial liabilities 22 15,395 4,365 X X
10) Other current liabilities 25 47,595 27,071 X

Significance of financial instruments

Financial instruments and their relative significance, as regards the Statement of Financial Position and Income Statement at 31 December 2015 and 31 December 2016, are shown in the following tables.

Financial assets and liabilities shown in the accounts
-------------------------------------------------------- -- --
(€'000) Notes FY
31.12.2015
Assets at fair
value(a)
through profit
and loss
Loans
and
receivables
Investments
held to
maturity
Liabilities at
amortised
cost
Fair value Impact on
Income
Statement
NON-CURRENT ASSETS
1) Trade and other receivables 7 13,031 13,031 13,031 62
CURRENT ASSETS
2) Trade and other receivables 9 45,878 45,878 45,878 (1,844)
3) Current financial assets 11 4,035 4,035 4,035 193
4) Cash and cash equivalents 12 42,972 42,972 42,972 9
NON-CURRENT LIABILITIES
5) Bank borrowings 15 10,922 10,922 10,922 (1,339)
6) Other financial liabilities 16 50 50 50
CURRENT LIABILITIES
7) Bank borrowings 19 38,485 38,485 38,485 (754)
8) Trade payables 20 26,185 26,185 26,185
9) Other financial liabilities 22 15,395 15,395 15,395 (1,054)
10) Other current liabilities 25 47,595 47,250 47,595

(a) Fair value at the recognition date.

(€'000) Notes FY
31.12.2016
Assets at fair
value(a)
through profit
and loss
Loans
and
receivables
Investments
held to
maturity
Liabilities at
amortised
cost
Fair value Impact on
Income
Statement
NON-CURRENT ASSETS
1) Trade and other receivables 7 12,469 12,469 12,469 24
CURRENT ASSETS
2) Trade and other receivables 9 33,866 33,866 33,866 (1,470)
3) Current financial assets 11 6,084 6,084 6,084 257
4) Cash and cash equivalents 12 11,983 11,983 11,983 9
NON-CURRENT LIABILITIES
5) Bank borrowings 15 14,108 14,108 14,108 (809)
6) Other financial liabilities 16
CURRENT LIABILITIES
7) Bank borrowings 19 44,068 44,068 44,068 (95)
8) Trade payables 20 19,839 19,839 19,839
9) Other financial liabilities 22 4,365 4,365 4,365 (143)
10) Other current liabilities 25 27,071 27,071 27,071

(a) Fair value at the recognition date.

As shown in the above tables, the accounting value of financial assets and liabilities is a reasonable approximation of their fair value; most of the financial instruments are current investments and borrowings and where non-current instruments have been used these have not been subject to significant contingent charges. The financial instruments are classifiable under Level 3 of the fair value hierarchy of IFRS 13.

27) Financial and market risk management

The main financial instruments used by Fiera Milano SpA are bank borrowings, current accounts and current financial loans from the controlling shareholder Fondazione Fiera Milano.

The Company has a favourable cash management cycle from the business of renting exhibition space to organisers and offering administrative and cash management services, receiving on behalf of the organisers everything that the exhibitors pay the organiser. After receiving the cash, Fiera Milano SpA, depending on the contractual agreements, retrocedes to the organiser what is its due and keeps the payment for the space rented out in the exhibition venues. The suppliers of goods and services are paid using normal payment conditions. This system allows the Company to receive in advance the sums it is due and thereby generate negative working capital, which, in turn, gives a cash surplus.

The Company is exposed to the following different types of risk.

27.1 Credit risk

Credit risk is represented by the Company's exposure to potential losses from the non-fulfilment of obligations undertaken by counterparties. Credit risk is adequately monitored, as is that pertaining to the cash management that characterises the business of the Company. Fiera Milano SpA hosts and organises exhibitions that are leaders in their sector and, therefore, the loyalty of exhibitors is high. For Fiera Milano SpA, the current system means that all receipts from exhibitors flow into the Fiera Milano SpA accounts and it is Fiera Milano SpA that retrocedes to its clients/organisers the amounts due them.

Three different categories of credit risk have been identified: organisers, exhibitors and other receivables.

The first category is the exhibition organisers; the receivables included in this category are considered to represent the lowest risk as the Company manages the cash flows of all the exhibitions at the two sites. Provisions for doubtful receivables are minimal in comparison to the amounts received and have been made for a few receivables that are proving difficult to recover.

The second risk category is the exhibitors; the receivables from this category are considered medium risk as exhibitors normally have to make payment before the end of the exhibition.

The third risk category is other receivables, which mainly comprises exhibition-related activities (standfitting, congresses, promotions, internet services) and activities that are not exhibition- related (sponsorship, advertising, etc.). These receivables are payable under normal payment conditions.

The categories of credit risk at 31 December 2015 and at 31 December 2016 and the breakdown of overdue payments are shown in the following tables:

(€'000) FY Due
Breakdown of late payments (days)
Provision
Class 31.12.2015
Receivables
Overdue 0–90 91–180 181–270 >270
Organisers 6,585 2,324 6,334 3,478 357 2,499 2,073
Exhibitors 15,781 9,219 8,243 4,016 609 1,224 2,394 1,681
Other 15,502 6,322 11,168 5,453 1,738 1,467 2,510 1,988
Total 37,868 17,865 25,745 12,947 2,347 3,048 7,403 5,742
(€'000) FY Due Breakdown of late payments (days) Provision
Class 31.12.2016
Receivables
Overdue 0–90 91–180 181–270 >270
Organisers 3,170 1,721 3,421 1,079 65 2,277 1,972
Exhibitors 14,454 712 15,852 11,830 655 1,149 2,218 2,110
Other 7,287 3,795 5,209 2,241 242 252 2,474 1,717
Total 24,911 6,228 24,482 15,150 897 1,466 6,969 5,799

The provision for doubtful receivables is based on presumed recoverability, using internal assessments supported by those of external legal consultants.

Changes in the provision for doubtful receivables at 31 December 2015 and at 31 December 2016 and the breakdown by risk category are given in the following tables:

(€'000)
Class
FY
31.12.2014
Provision
Provisions Utilisation FY
31.12.2015
Provision
Organisers 1,355 718 2,073
Exhibitors 1,923 631 873 1,681
Other 1,832 499 343 1,988
Total 5,110 1,848 1,216 5,742
(€'000)
Class
FY
31.12.2015
Provision
Provisions Utilisation FY
31.12.2016
Provision
Organisers 2,073 101 1,972
Exhibitors 1,681 1,356 927 2,110
Other 1,988 119 390 1,717
Total 5,742 1,475 1,418 5,799

27.2 Liquidity risk

Although the Company has taken measures to ensure that it has adequate levels of working capital and liquidity, a drop in business volumes caused be the seasonality and cyclicality that characterise the exhibition business could affect its financial results and its ability to generate cash flow.

The net debt at 31 December 2016, which had increased compared to the figure at 31 December 2015, was influenced by the less favourable exhibition calendar and the consequent effect on advances paid by organisers to participate in exhibitions.

The aim of the Company risk management and use of debt is to guarantee an adequate level of liquidity, minimising the opportunity cost and maintaining a balance in terms of the duration and composition of debt. To cover its investments, over the years, the Company has transferred part of its current debt to non-current debt by agreeing a series of loans that last from two to five years.

As described in Notes 15 and 19, the non-current loan granted to the Company by Banca Popolare di Milano SpA on 6 December 2013, of which Euro 6.601 million is still outstanding, is subject to financial covenants that are measured annually. At 31 December 2016, these covenants had been met.

The credit lines currently existing with banks, together with forecast operating cash flows, were considered sufficient to cover the short-term financial requirements despite the peaks in cash absorption that are concentrated in the months when there are no exhibitions and when financial requirements are covered using the funds available in the current account held with the controlling shareholder Fondazione Fiera Milano. Maintaining the financial equilibrium of the Company is also dependent on attaining the targets of the Industrial Plan, as well as to the performance of the economy, forecasts for which necessitate an assessment of the outcome of future events and circumstances that by their very nature are uncertain.

The tables below give the breakdown of financial liabilities by maturity date and the outstanding interest payable to maturity at 31 December 2015 and 31 December 2016.

Financial liabilities

(€'000) FY at
31.12.2015
3 mths 6 mths 12 mths 18 mths 24 mths 3 years 5 years >5 years
Current bank payables 38,485 24,435 7,937 6,113
Current interest payable 202 247 293
Other current financial liabilities 15,395 5,085 10,225 85
Current interest payable 63 45 2
Non-current bank borrowings 10,922 4,338 4,382 2,202
Non-current interest payable 187 109 37
Other non-current financial liabilities 50 50
Non-current interest payable 1
Trade payables 26,185 26,185
Total 91,037 55,970 18,454 6,493 4,576 4,491 2,239
(€'000) FY at
31.12.2016
3 mths 6 mths 12 mths 18 mths 24 mths 3 years 5 years >5 years
Current bank payables 44,068 23,521 7,852 12,695
Current interest payable 177 134 185
Other current financial liabilities 4,365 4,178 187
Current interest payable 38 1
Non-current bank borrowings 14,108 11,860 1,744 504
Non-current interest payable 87 9 2
Other non-current financial liabilities
Non-current interest payable
Trade payables 19,839 19,839
Total 82,380 43,537 12,202 13,068 11,947 1,753 506

27.3 Market risk

The Company reserves the right to use appropriate hedging instruments if the market risks become significant.

a) Interest rate risk

The Company has access to credit lines at competitive rates and is able to manage interest rate fluctuations. Moreover, the Company constantly monitors market conditions so as to intervene promptly should conditions change.

The composition of non-current and current bank borrowings is described in Notes 15 and 19.

The tables below give interest rate sensitivity analyses that show the effect of a +0.5% and a -0.5% change in interest rates on financial income and expenses in equity and in profit or loss for the 2015 and 2016 financial years.

(€'000) Balance at
31.12.2015
Balance(
*
)
(debt)
Income
(expense)
Rate +0,5% –0,5%
Current accounts 42,874 13,911 9 0.06% 78 (61)
Current financial receivables from subsidiaries 4,035 3,852 193 5.01% 212 174
Current account with the controlling shareholder (15,225) (42,753) (1,045) 2.44% (1,257) (829)
Current financial liabilities (22,500) (30,834) (752) 2.44% (907) (598)
Current and non-current bank borrowings (26,907) (40,545) (1,341) 3.31% (1,545) (1,139)
Other current and non-current financial
liabilities
(220) (259) (9) 3.47% (10) (8)

(*) average for the financial year.

(€'000) Balance at
31.12.2016
Balance(
*
)
(debt)
Income
(expense)
Rate +0,5% –0,5%
Current accounts 11,890 13,995 9 0.06% 78 (62)
Current financial receivables from subsidiaries
and joint venture
6,084 7,886 257 3.26% 297 218
Current account with the controlling shareholder (1,627) (6,039) (107) 1.77% (137) (77)
Current account with the subsidiaries (2,687) (1,813) (32) 1.77% (41) (23)
Current financial liabilities (18,019) (10,199) (95) 0.93% (146) (44)
Current and non-current bank borrowings (40,157) (38,170) (809) 2.12% (1,000) (618)
Other current and non-current financial
liabilities
(51) (101) (4) 3.96% (5) (3)

(*) average for the financial year.

b) Exchange rate risk

This remained relatively insignificant in the financial year to 31 December 2016; the Company's activities were mainly focused on the domestic market and it had no bank borrowings in foreign currencies.

c) Risk of movements in raw material prices

Fiera Milano SpA has limited exposure to the risk of changes in raw material prices. It normally has more than one supplier for any material considered critical and in some cases has long-term contracts that ensure lower price volatility.

28) Disclosure on guarantees given, undertakings and other potential liabilities

Guarantees given

These totalled Euro 1.635 million (Euro 1.714 million at 31 December 2015) and the breakdown was as follows:

  • BRL (Brazilian real) 5.500 million, equivalent to Euro 1.603 million, for the guarantee given by the Company to Banco BNP Paribas Brasil SA on behalf of the subsidiary Cipa FM to cover the bank loans given by the bank;
  • Euro 0.032 million for other guarantees.

Potential liabilities

The Company is currently involved in several legal proceedings and the legal advisor has estimated the effect of a potential adverse outcome, although, to date, this is uncertain, to be approximately Euro 0.500 million. There are other potential liabilities the timing or size of which cannot be estimated. These are connected to the interruption or non-fulfilment of contracts with some suppliers following the implementation of the detailed reputational analysis described in Note 45.

INCOME STATEMENT

REVENUES

29) Revenues from sales and services

Revenues from sales and services were Euro 173.421 million (Euro 277.307 million at 31 December 2015). The breakdown of revenues was as follows:

(€'000) 2016 2015 Change
Facility fee for use of exhibition centre 73,494 93,913 (20,419)
Rentals of stands, fittings, and equipment 30,312 46,237 (15,925)
Rent of space to exhibitors 28,101 73,880 (45,779)
Catering and canteen services 17,570 23,749 (6,179)
Exhibition site services 6,216 10,256 (4,040)
Miscellaneous fees and royalties 4,198 6,609 (2,411)
Advertising space and services 3,549 4,369 (820)
Supplementary exhibition services 2,268 5,693 (3,425)
Exhibition insurance services 2,219 3,189 (970)
Access surveillance and customer care services 1,851 2,585 (734)
Telephone and internet services 1,091 936 155
Facility fees for use of conference centre 1,009 1,447 (438)
Administrative services 641 647 (6)
Ticket sales 371 1,054 (683)
Services from event organisation 40 966 (926)
Revenues from publishing products 6 1,112 (1,106)
Other 485 665 (180)
Total 173,421 277,307 (103,886)

The decrease in revenues was mainly attributable to the decrease in square metres of exhibition space occupied due to the less favourable exhibition calendar that the previous year had included the directly organised exhibitions held in uneven-numbered years Host and Tuttofood, the hosted exhibitions Made Expo and Simei, the triennial exhibitions Ipack-Ima and Plast, the multi-annual exhibition EMO, held in Milan every six years, and the itinerant exhibition ITMA. Furthermore, the 2015 financial year also benefited from revenues from the contracts linked to Expo 2015. This effect was, in part, compensated by the presence of the important biennial exhibitions held in even-numbered years Mostra Convegno Expocomfort and Bimu.

Revenues from sales and services included Euro 4.514 million (Euro 6.863 million at 31 December 2015) for related-party transactions. Further details on related-party transactions are given in Note 44.

The business of the Company is almost exclusively concentrated in the domestic market.

OPERATING COSTS

30) Costs of materials

These were Euro 0.506 million (Euro 0.900 million at 31 December 2015).

The breakdown was as follows:

(€'000) 2016 2015 Change
Printed materials, forms and stationery 355 605 (250)
Subsidiary materials and consumables 152 295 (143)
Use of provisions (1) (1)
Total 506 900 (394)

This entry included Euro 0.003 million (Euro 0.004 million at 31 December 2015) for related-party transactions. Further details on related-party transactions are given in Note 44.

31) Costs of services

These totalled Euro 100.613 million (Euro 144.892 million at 31 December 2015).

The breakdown was as follows:

(€'000) 2016 2015 Change
Stands and equipment for exhibitions 34,518 51,746 (17,228)
Catering 11,641 16,204 (4,563)
Energy costs 8,016 9,818 (1,802)
Technical, legal, commercial and administrative services 6,361 7,065 (704)
Cost of marketing projects for exhibitions 6,101 7,899 (1,798)
Maintenance 5,610 6,270 (660)
Security and gate services 4,603 6,476 (1,873)
Cleaning and waste disposal 4,078 5,795 (1,717)
IT services 3,825 4,520 (695)
Insurance 2,922 3,183 (261)
Advertising 2,385 3,890 (1,505)
Other professional and collaborative services 2,311 4,701 (2,390)
Telephone and internet expenses 1,303 1,601 (298)
Technical assistance and ancillary services 1,147 1,102 45
Transport 595 811 (216)
Ticketing 515 430 85
Remuneration of statutory auditors 110 102 8
Conference and congress services 69 134 (65)
Change in suspended costs for future exhibitions (3,271) 3,268 (6,539)
Other 8,049 10,057 (2,008)
Use of provisions (275) (180) (95)
Total 100,613 144,892 (44,279)

Costs of services mainly included costs for managing the exhibition sites during the setting up, running, and dismantling of exhibitions and congresses.

The figure decreased by Euro 44.279 million compared to the figure at 31 December 2015 due to lower business volumes reflecting the cyclicality of the exhibition calendar.

The entry includes Euro 33.123 million (Euro 48.516 million at 31 December 2015) for related-party transactions. Further details on related-party transactions are given in Note 44.

32) Cost of use of third-party assets

This totalled Euro 43.551 million (Euro 54.945 million at 31 December 2015) and the breakdown was as follows:

(€'000) 2016 2015 (€'000)
Rent and expenses for exhibition sites 42,390 53,005 (10,615)
Other rental expenses 2,184 2,119 65
Vehicle hire 437 529 (92)
Office equipment and photocopier hire 20 31 (11)
Use of provisions (1,480) (739) (741)
Total 43,551 54,945 (11,394)

The item, rent and expenses for exhibition sites, included the rent of Euro 42.207 million payable to the controlling shareholder Fondazione Fiera Milano, whilst other rental expenses included Euro 1.968 million under the lease agreement for the Palazzo Italia in Berlin.

The decrease is largely attributable to the absence of the non-recurring variable component of rent for the fieramilano exhibition site that was payable only in 2015 because of the presence of Expo 2015.

The total rental costs for the Rho and Milan exhibition sites for the following periods are:

  • 2017: Euro 42.206 million;
  • 1 5 years: Euro 168.822 million;
  • over 5 years: 64.733 million.

The entry includes Euro 42.483 million (Euro 52.588 million at 31 December 2015 of which Euro 10.000 million was the non-recurring item of additional rent paid to Fondazione Fiera Milano) for related-party transactions. Further details on related-party transactions are given in Note 44.

33) Personnel expenses

These totalled Euro 32.245 million (Euro 45.779 million at 31 December 2015) and the breakdown was as follows:

(€'000) 2016 2015 Change
Salaries 21,263 26,974 (5,711)
Social Security payments 6,779 8,652 (1,873)
Defined contribution plans charges 1,387 1,557 (170)
Directors' remuneration 1,007 1,152 (145)
Seconded employees from subsidiaries 820 874 (54)
Redundancy incentives 712 5,597 (4,885)
External and temporary employees 248 334 (86)
Defined benefit plans charges 9 (31) 40
Other expenses 673 870 (197)
Use of provisions (653) (200) (453)
Total 32,245 45,779 (13,534)

Salaries, remuneration and related social security contributions decreased mainly due to the savings generated by the restructuring that began at the end of 2015, as well as to lower redundancy incentives and lower costs for the variable component of remuneration.

The entry includes Euro 0.820 million (Euro 0.874 million at 31 December 2015) for related-party transactions. Further details on related-party transactions are given in Note 44.

The breakdown of the average number of employees (including those on fixed-term contracts) was as follows:

Breakdown of personnel by category

2016 2015 Change
Managers 24 30 (6)
Middle managers and white collar workers 409 419 (10)
Total 433 449 (16)

34) Other operating expenses

These were Euro 3.519 million (Euro 4.636 million at 31 December 2015) and the breakdown was as follows:

(€'000) 2016 2015 Change
Other tax expenses 2,842 3,786 (944)
Doubtful receivables covered by provisions 1,418 1,216 202
Association fees 248 277 (29)
Subscriptions 35 27 8
Other expenses 446 547 (101)
Use of provisions (1,470) (1,217) (253)
Total 3,519 4,636 (1,117)

The decrease in other taxes was mainly due to lower local taxes for TARI [the part of local taxes relating to waste services] for the Rho exhibition site.

The entry includes Euro 0.974 million (Euro 1.132 million at 31 December 2015) for related-party transactions. Further details on related-party transactions are given in Note 44.

35) Other income

Other income was Euro 5.230 million (Euro 6.756 million at 31 December 2015) and the breakdown was as follows:

(€'000) 2016 2015 Change
Other recovered costs 2,168 2,004 164
Recovery of expenses for seconded employees 746 1,445 (699)
Office rent and expenses 719 1,732 (1,013)
Insurance indemnities 57 20 37
Other income 1,540 1,555 (1)
Total 5,230 6,756 (1,526)

The decrease in the item office rent and expenses was mainly attributable to the expiry of a contract with the company Expo 2015 for the latter to rent certain areas of the site.

The entry includes Euro 3.985 million (Euro 4.432 million at 31 December 2015) for related-party transactions. Further details on related-party transactions are given in Note 44.

36) Depreciation and amortisation

Depreciation of property, plant and equipment

This was Euro 1.312 million (Euro 2.030 million at 31 December 2015).

The item includes a negative figure of Euro 0.030 million (a negative figure of Euro 0.013 million at 31 December 2015) for use of part of the risk provisions for the depreciation of the Palazzo Italia.

Details of depreciation are given in the Notes to the Accounts under the entry for property, plant and equipment.

Amortisation of intangible assets

This was Euro 2.721 million (Euro 4.243 million at 31 December 2015).

The decrease in the figure mainly reflected the end of amortisation of certain asset groups.

Details of amortisation are given in the Notes to the Accounts under the entry for intangible assets with a finite useful life.

37) Adjustments of asset values

These totalled Euro 3.333 million (Euro 1.953 million at 31 December 2015).

The breakdown is given in the following table:

(€'000) 2016 2015 Change
Impairment of exhibition trademarks 3,333 1,953 1,380
Total 3,333 1,953 1,380

Further details on impairment losses are given in Note 5 to the Statement of Financial Position.

38) Provision for doubtful receivables and other provisions

These were Euro 5.241 million (Euro 5.464 million at 31 December 2015). Changes in this entry are show in the following table:

(€'000) 2016 2015 Change
Losses on future exhibitions 1,564 1,564
Write-down of doubtful receivables 1,475 1,848 (373)
Disputes with personnel 1,220 551 669
Palazzo Italia project 1,029 3,065 (2,036)
Other disputes 18 18
Write-back of provisions (65) (65)
Total 5,241 5,464 (223)

Further details on movements in risk provisions during the financial year under review are given in Notes 9, 17 and 23 to the Statement of Financial Position.

39) Financial income and similar

These totalled Euro 6.364 million (Euro 4.306 million at 31 December 2015) and the breakdown was as follows:

(€'000) 2016 2015 Change
Dividends 6,006 3,972 2,034
Interest income on financing granted to subsidiaries 257 193 64
Interest income from cautionary deposits for rent of the exhibition
sites from the controlling shareholder
21 52 (31)
Exchange rate gains 11 9 2
Interest income on bank accounts 9 9
Interest income on receivables from the controlling shareholder 4 10 (6)
Other financial income 56 61 (5)
Total 6,364 4,306 2,058

The increase was mainly due to dividends received from subsidiaries and joint ventures.

This entry includes Euro 6.288 million (Euro 4.227 million at 31 December 2015) for related-party transactions. Further details on related-party transactions are given in Note 44.

40) Financial expenses and similar

These totalled Euro 1.191 million (Euro 3.297 million at 31 December 2015) and the breakdown was as follows:

(€'000) 2016 2015 Change
Interest payable on bank accounts 919 2,114 (1,195)
Expenses from calculation of net present value of defined benefit
plans
116 99 17
Interest payable on current account held with the controlling
shareholder
107 1,045 (938)
Interest payable on current account held with the subsidiaries 31 31
Exchange rate losses 9 3 6
Other financial expenses 9 36 (27)
Total 1,191 3,297 (2,106)

The change mainly reflected lower financial expenses due to lower average current and non-current debt.

This entry includes Euro 0.138 million (Euro 1.045 million at 31 December 2015) for related-party transactions. Further details on related-party transactions are given in Note 44.

41) Valuation of financial assets

(€'000) 2016 2015 Change
Fiera Milano Exhibitions Africa Pty Ltd (5,472) (3,211) (2,261)
Worldex Fiera Milano Exhibitions Co., Ltd (5,128) (5,128)
Eurofairs International Consultoria e Participações Ltda (4,990) (9,413) 4,423
Fiera Milano Media SpA (3,893) (3,893)
Limited Liability Company Fiera Milano (15) (806) 791
Fiera Milano India Pvt Ltd (23) (20) (3)
Fiera Milano Interteks Uluslararasi Fuarcilik A.S. (2,560) 2,560
Milan International Exhibitions Srl under liquidation (23) 23
Total (19,521) (16,033) (3,488)

This entry was negative for Euro 19.521 million (negative for Euro 16.033 million at 31 December 2015). It was mainly attributable to the impairment losses already detailed in Notes 6 and 11 to the Statement of Financial Position. It also includes the impairment charge for the difference between the selling price and the carrying value of the shareholding in the Chinese subsidiary Worldex Fiera Milano Exhibitions Co. Ltd, as described in Notes 2 and 6 to the Statement of Financial Position.

42) Income tax

Income tax was positive for Euro 3.579 million (a charge of Euro 5.653 million at 31 December 2015).

The breakdown was as follows:

(€'000) 2016 2015 Change
Current income tax (3,608) 2,198 (5,806)
Deferred income tax 29 3,455 (3,426)
Total (3,579) 5,653 (9,232)

The breakdown of current taxes at 31 December 2016 was as follows:

Current income tax

(€'000) 2016 2015 Change
Current income tax – IRAP (371) 1,483 (1,854)
Current income tax – IRES 1,046 (1,046)
Income/expenses from tax consolidation (3,237) (331) (2,906)
Total (3,608) 2,198 (5,806)

Since the 2007 financial period, Fiera Milano SpA, acting as the consolidating entity, and all the Italian subsidiaries, as the consolidated entities, have opted for the Italian national tax consolidation for payment of IRES. This option was reduced every three years until the 2015 financial year.

Starting in 2016, Fiera Milano SpA and some of its Italian subsidiaries opted to adhere to the tax consolidation of Fondazione Fiera Milano acting as the consolidating entity. This decision is binding for the 2016, 2017 and 2018 financial years.

Income from the tax consolidation is the sum recognised by Fondazione Fiera Milano for the use of the IRES tax losses of the financial year under review transferred to offset the IRES tax charge of the financial year under review in the tax consolidation.

Deferred taxes in the financial year under review were Euro 0.029 million and were the net balance of deferred tax assets (Euro 0.237 million) and deferred tax liabilities (Euro 0.208 million).

The change in the deferred tax assets was mainly due to the use of pre-paid taxes recognised in previous financial years to offset risk provisions, which became tax deductible at the time they were utilised.

The change in the deferred tax liabilities was mainly due to the use of tax provisions made in previous financial periods for impairment charges to trademarks and for amortisation and depreciation that were used in the period under review.

A breakdown of deferred tax assets and deferred tax liabilities are given in the following table:

Deferred income taxes

(€'000) 31.12.2015 Recognised
in the Income
Statement
Recognised
in equity
31.12.2016
Deferred tax assets
Excess amortisation, depreciation and write-downs 280 (31) 249
Provisions for risks and charges 2,050 (449) 1,601
Write-down of doubtful receivables 1,298 58) 1,356
Tax losses carried forward 8,759 298 9,057
Other temporary differences 453 (113) 49 389
Costs for share capital increase 229 (63) 166
Total 13,069 (237) (14) 12,818
Deferred tax liabilities
Goodwill and other amortisation 9,984 (210) 9,774
Other temporary differences 1 2 3
Total 9,985 (208) 9,777
Net deferred taxes 3,084 (29) (14) 3,041
of which:
Tax assets for deferred taxes 13,069 12,818
Deferred tax liabilities 9,985 9,777

The total theoretical deferred tax assets relating to tax losses carried forward from previous financial years and recognised in the accounts was Euro 9.057 million and was for losses prior to the tax consolidation.

Reconciliation of theoretical and effective corporation tax charge (IRES)

(€'000)
Profit/(loss) before income tax (28,739)
Percentage applicable for corporation income tax (IRES) 27.5%
Theoretical IRES tax charge (corporation income tax) (7,903)
Difference between theoretical and effective tax charges:
Non-deductible operating expenses 7,104
Effect of change rate 130
Shares of dividends not subject to tax (1,610)
Effect of tax consolidation (710)
Other (883)
Effective IRES tax charge (3,872)

Reconciliation of theoretical and effective corporation tax charge (IRAP)

(€'000)
Net operating result (EBIT) (14,391)
Personnel expenses 32,245
Taxable base for purposes of IRAP 17,854
Statutory rate applicable for corporation income tax (IRAP) 3,9%
Theoretical IRAP tax charge (corporation income tax) 696
Difference between theoretical and effective tax charges:
Effect of tax wedge (1,094)
Other 691
Effective IRAP tax charge 293

The entry for income taxes included a positive figure of Euro 3.237 million (positive for Euro 0.331 million at 31 December 2015) for related-party transactions. Further details on related-party transactions are given in Note 44.

43) Profit/(loss) for the year

At 31 December 2016, the Company made a net loss of Euro 25.160 million compared to a net loss of Euro 1.456 million at 31 December 2015.

44) Related-party transactions

As part of its corporate governance, Fiera Milano SpA has adopted Principles of Conduct regarding Relatedparty Transactions as described in the Report on corporate governance and ownership structure, which is part of the Board of Directors' Management Report in the Financial Statements.

Transactions between Fiera Milano SpA and related parties were carried out at market conditions.

In the Statement of Financial Position, the Statement of Comprehensive Income and the Statement of Cash Flows, the amounts for related-party positions or transactions, if material, are shown separately. Given the total amount of statement of financial position and income statement items, Fiera Milano SpA has decided that Euro 2.000 million is the material threshold above which separate disclosure must be made in the Statement of Financial Position and Euro 1.000 million is that for separate disclosure in the Income Statement.

Detailed information on related-party transactions is given below and is divided between related-party transactions with the controlling shareholder Fondazione Fiera Milano and related-party transactions with subsidiaries.

Related-party transactions with the controlling shareholder Fondazione Fiera Milano

Recurring transactions are summarised below.

I. Real estate lease agreements

As described below, on 31 March 2014 new lease agreements were signed for the exhibition sites of Rho and Milan. These contracts were effective from the second semester of 2014.

On 18 January 2003, Fiera Milano SpA signed a lease agreement with Fondazione Fiera Milano for the Rho exhibition site. The same agreement established the terms of the lease for the Milan City site, giving an effective date of 1 January 2006 in the contracts for both exhibition areas.

Initially cancellation of the contracts had to be notified eighteen months prior to the expiry of the contracts on 31 December 2014. On 31 March 2014 new rental agreements for the exhibition sites of Rho and Milan were signed. The new rental agreements are for nine years effective from 1 July 2014 (following the agreed early termination of the existing lease agreements due to expire on 31 December 2014) and are automatically renewable for a further nine years.

Under the rental agreement for the Rho exhibition site, compared to the previous agreement that was valid until 30 June 2014, the rent was reduced by Euro 2.000 million in the second semester of 2014 and by Euro 14.000 million for the full-year 2015 and for each subsequent year of the agreement. Therefore, the rent was Euro 24.400 million for the second semester of 2014 and Euro 38.800 million from 2015 and for each subsequent year of the agreement annually adjusted for 100% of the change in the ISTAT consumer price index. For 2015 alone, because of the presence of Expo 2015 and the positive impact on the exhibition business of Fiera Milano, the agreement stipulated that Fondazione Fiera Milano would be paid an additional rent.

For the Milan City exhibition site, the parties agreed to maintain the existing rent of Euro 2.850 million per annum, annually adjusted for 100% of the change in the ISTAT consumer price index.

As the transaction was a transaction of greater importance under Article 5 of the Regulation on Relatedparty Transactions and of Article 10.2 of the Procedures for Transactions with Related-parties adopted by the Company, it was carried out under the Procedures for Transactions with Related-parties and, on 21 March 2014, an Information Document for a related-party transaction of greater importance ("Information Document OPC") was published.

To ensure that market conditions applied, the rental agreements were prepared by the parties also using valuations prepared for Fiera Milano SpA by an independent expert.

II. Settlement of Group VAT

Taking advantage of the facility provided by Presidential Decree (DPR) 633/72, from 1 January 2002, Fiera Milano SpA chose to follow the procedures, managed by the controlling shareholder, Fondazione Fiera Milano, for settlement of Group VAT. This mechanism makes it easier to settle any tax obligations, without the Company incurring additional costs.

III. Group tax consolidation

In the financial year 2004/2005, Fiera Milano SpA and several of its subsidiaries opted to participate in the tax consolidation of the controlling shareholder Fondazione Fiera Milano. Following the change in the accounting year-end of Fiera Milano SpA and all its subsidiaries, participation in this tax consolidation ceased. However there remain certain contractual obligations to Fondazione Fiera Milano which are referred to in the Notes to the Financial Statements.

In 2016, Fiera Milano SpA and some of the other Italian subsidiaries did not renew the option to participate in the tax consolidation of Fiera Milano SpA and opted instead to participate in the tax consolidation of Fondazione Fiera Milano acting as the consolidating entity. This option is binding for the 2016, 2017 and 2018 financial years.

The rule adopted under the tax consolidation of Fondazione Fiera Milano, provides that the tax losses of the consolidated companies, generated in each of the years that the option is valid, may be utilised to offset the taxes in the same financial year of the companies participating in the tax consolidation, after the tax losses of Fiera Milano SpA and the consolidating entity have been calculated; compensation for the tax losses of the companies consolidated is recognised for the amount of the effective benefit generated by the tax consolidation.

IV. Contract for supply of services

Fiera Milano SpA has an annual contract with Fondazione Fiera Milano for the reciprocal provision of services, which arise from or are necessary for the exercise of their respective activities. The contract is renewable annually unless cancelled by a written agreement between the parties.

The contract provides for the reciprocal supply of two kinds of services: i) services of a general nature, which fall within the range of activities of the entity providing them, supplied to the buyer on a continuous and systematic basis; ii) specific services, or services provided on request and relating to specific activities to be agreed from time to time between the buyer and the supplier, also on the basis of appropriate offers/estimates. The service supply contract is governed by market conditions.

V. Licence contracts for use of the Fiera Milano brand name

On 17 December 2001, Fondazione Fiera Milano, as owner of the "Fiera Milano" brand name granted Fiera Milano SpA an exclusive licence for the use of the said brand name in order to typify its own activities, also through its use on headed paper, on its commercial material, and to differentiate its headquarters and offices. The licence has been granted for Italy and all countries and locations where the brand name has been or will be registered or lodged.

The symbolic consideration paid by Fiera Milano SpA to Fondazione Fiera Milano was Euro 1.0. Fondazione Fiera Milano, having as its corporate objective the development of the exhibition sector, has maintained Fiera Milano as part of its name and did not include it in the business division "Exhibition Management Activity" contributed to the Parent Company in 2001, but with the expectation that Fiera Milano SpA would use the said brand name for an extended period of time and without incurring further costs for its use.

This licence is valid until 31 December 2017 with automatic renewal for a further fifteen years, unless cancelled by one of the parties.

VI. Current account contract

On 24 June 2016, effective from 1 July 2016, a new contract for the current account was agreed. The contract expired on 31 December 2016 and is automatically renewed each year unless one of the parties cancels by 30 September preceding the date of expiry.

Under the contract, the parties agreed to terminate the pre-existing contract for the current account which was done prior to its replacement by the new contract.

The parties settle receipts and payments under the contracts existing between them, in particular the rental payments for the exhibition sites and the services provided by each party to the other, and the account carries interest of 1-month Euribor plus a spread of 1.75% that may be periodically revised by the parties.

Credits for invoices issued by the parties will accrue interest sixty days from the end of the month in which the invoice is issued although the interest may not be collected and will remain unavailable until the current account is closed, except for invoices that are overdue by more than 180 days which are always payable immediately.

Invoices for the rent of the exhibition sites are part of the agreement but carry interest and are payable under the specific terms of the rental contracts. The balance of any invoices that are overdue by at least 180 days, together with the balance of the invoices for the leasing contracts on the exhibition sites that are due under the terms of the relevant contracts represent the collectable balance.

Credits which are not due for repayment are not included in the current account.

The party for which the overdue credit or debit balance exceeds Euro 5 million has the right to request payment of the balance, or to pay the balance. Where a request for payment has been made, the amount of the payment must be settled within 15 working days of the date of the said request.

The current account is closed and all interest paid every quarter.

Transactions with subsidiaries

Fiera Milano SpA carried out commercial transactions with subsidiaries under market conditions that were for the organisation and management of exhibitions and other events.

As part of the corporate reorganisation and to achieve more efficient management of the organisational processes and strengthen the centralisation and single management of strategic services, Fiera Milano SpA provides the following services to some of its subsidiaries:

  • administration, financial, and tax services;
  • planning and control;
  • procurement;
  • legal services;
  • human resources management;
  • Information Communication Technology.

Fiera Milano SpA also provides communication services to subsidiaries in order to ensure a uniform Group image.

Transactions with subsidiaries are done at market conditions.

Fiera Milano Media SpA, Nolostand SpA and Fiera Milano Congressi SpA have a licence agreement with Fiera Milano SpA to use the brand "Fiera Milano" as part of their own trademarks. These agreements last until 31 December 2016 with no automatic renewal of the agreement. The agreed amount payable by each licensee company is Euro 100.00.

On 1 January 2017 the contracts were renewed until 31 December 2019.

I. Tax consolidation

In the 2007 financial year, Fiera Milano SpA, as the consolidating entity, and all the Italian subsidiaries, as consolidated companies, opted for the Italian tax consolidation method for payment of IRES tax. The tax consolidation was renewed every three years until the 2015 financial year. When this agreement was not renewed the tax consolidation agreement was cancelled. However, certain contractual obligations still exist from this agreement that are shown in the financial statements.

II. Nolostand SpA

On 14 May 2010, Fiera Milano SpA signed an agreement with its subsidiary Nolostand SpA for the exclusive supply of stand-fitting services to the clients of the Parent Company at exhibitions, events and other initiatives in the fieramilano and fieramilanocity exhibition sites. On 20 February 2015, a new agreement was signed under which the method of calculating the payment was modified. On 14 December 2015 a private agreement was signed to extend the existing contract from 1 January 2016 until 31 December 2016. For 2016 the amount to be paid was calculated as 25% of the operating profit (direct revenues less direct costs) and the amount was Euro 2.410 million.

On 4 February 2016, Fiera Milano SpA signed a contract with the subsidiary Nolostand SpA for the annual maintenance of the Corporate Quality Management System of Fiera Milano SpA from 1 January 2016 until 31 December 2016, with no automatic renewal of the agreement. The payment made to Nolostand SpA for 2016 was Euro 0.116 million.

III. Fiera Milano Media SpA

Fiera Milano SpA has an agreement with Fiera Milano Media SpA whereby the latter has the exclusive rights to manage the advertising on the billboards owned by Fiera Milano SpA and also to promote and market its business to certain specific clients of the Parent Company. Fiera Milano Media SpA pays Fiera Milano SpA 35% of the revenues generated by these two activities. The remaining 65% remains with the subsidiary as remuneration for the services it provides under the agreement. The remaining 65% remains with the subsidiary as payment for the services provided under the contract.

IV. Ipack-Ima SpA

On 20 April 2016, Fiera Milano SpA signed a cash pooling contract with Ipack-Ima SpA effective from 27 April 2016 that shows the daily balances regarding payments between the two companies. The interest rate is 1-month Euribor plus a spread of 1.75% IV. Ipack-Ima SpA.

Financial, capital and economic transactions with related-parties are shown in the following table:

(€'000)
Property,
plant and
equipment
Other
Intangible
assets
Trade
receivables
and other
non current
Trade
receivables
and other
current
Inventories Current
financial
assets
Advances Other
current
financial
liabilities
Other
current
liabilities
Revenues
from sales
and services
Costs for
materials
Costs of
services
Cost of
use of
third-party
assets
Personnel
expenses
Other
operating
expenses
Other
revenues
Financial
income
Financial
expenses
Tax
Controlling shareholder:
Fondazione Fiera Milano 11,862 7,129 1,627 2,791 13 1,119 42,207 105 729 564 25 107 (3,237)
Subsidiaries:
Fiera Milano Congressi SpA 700 14 250 1,183 2 570 241 963 1,051
Fiera Milano Media SpA 428 115 3,212 1,146 468 1,833 348 245 1,207 59
Ipack – Ima SpA 2,687 1 31
La Fabbrica del Libro SpA 92 250 67 78 82
Mico DMC Srl 25 24 15
Nolostand SpA 103 1,606 50 11,501 2,442 29,273 307 969 2,016
Cipa Fiera Milano Publicações
e Eventos Ltda
2 4 13
Eurofairs International Consultoria e
Partipações Ltda
3 135
Fiera Milano Exhibitions Africa Pty Ltd 36 120 8 25 32 16
Limited Liability Company "Fiera Milano" 84 108 15
Worldex (China) Exhibition & Promotion Ltd 13 5 10 294 124
Joint-ventures:
Ipack Ima Srl 10 187 186 2,622 178 310 4 1 (1) 2 60 185 32
Hannover Milano Fairs China Ltd
Hannover Milano Fairs India Ltd 4
Hannover Milano Fairs Shangai Ltd 12 29 70 110 23
Hannover Milano Global Germany GmbH 2,939
Associates:
Sviluppo Sistema Fiera Srl under
liquidation
5
Total related parties 103 10 11,862 10,289 490 6,084 288 4,314 16,179 4,514 3 33,123 42,483 820 974 3,985 6,288 138 (3,237)
Total reported 12,469 33,866 4,467 6,084 34,670 4,365 27,071 173,421 506 100,613 43,551 32,245 3,519 5,230 6,364 1,191 (3,579)
Related party entries/Total reported
(%)
95% 30% 11% 100% 0.83% 99% 60% 3% 0.59% 33% 98% 3% 28% 76% 99% 12% 90%

Related party entries in the Statement of Financial Position and Income Statement in the financial year to 31 December 2016

Information on the remuneration paid to the Administrative and Control Bodies, to the General Directors and to the Executives with strategic responsibilities in the financial year to 31 December 2016 is given in the table included in the section below on other information.

Statement of related party cash flow

(€'000) 2016 2015
Cash flow from operating activities
Revenues and income 8,499 11,295
Costs and expenses (77,402) (103,114)
Financial income 6,288 4,227
Financial expenses (138) (1,045)
Income/expenses from tax consolidation 3,237 331
Change in inventories (284) (14)
Change in trade and other receivables 570 (1,167)
Change advances 247 31
Change in other current liabilities (3,317) 6,446
Total (62,300) (83,010)
Cash flow from investing activities
Investments in non-current assets
Tangible and intangible (113) (2)
Total (113) (2)
Cash flow from financing activities
Change in current financial (assets)/liabilities (12,960) (7,769)
Total (12,960) (7,769)
Cash flow in the period (75,373) (90,781)
The table below shows cash flow from related party transactions:
Cash flow from operating activities Cash flow from investing activities Cash flow from financing activities
FY to 31.12.16:
Total (22,610) (909) (7,469)
Related party transactions (62,300) (113) (12,960)
FY to 31.12.15:
Total 44,841 (5,650) 217
Related party transactions (83,010) (2) (7,769)

The financial accounts for related-party transactions included the following non-recurring items:

  • Euro 10.000 million of Costs and expenses;
  • a Euro 3.000 million Change in other current liabilities.

45) Other information

Administration orders

With an order issued on 28 September 2016 and deposited on 11 October 2016, the Milan – Prevention Court Independent Section in the persons of the judges Mr Fabio Roia, Ms Veronica Tallarida and Mr Ilario Pontani meeting in camera issued, under Article 34 of the Legislative Decree 159/2011 an Administration order for Fiera Milano for a period of six months limited to the business area linked to Nolostand, since there was only evidence of criminal infiltrations in the exhibition stand-fitting business division relating to the subsidiary Nolostand SpA, which had received a similar administration order on 6 July 2016.

The same order appointed:

  • as case-specific authorised magistrates, Mr Fabio Roia and Ms Veronica Tallarida;
  • as Court-appointed Administrator, Mr Piero Antonio Capitini;
  • as the Company defence counsel, Mr Angelo Giarda and Mr Enrico Giarda.

Under the provisions of the administration order, the Court-appointed Administrator will be present in the company and maintain regular contact with the Directors of the Company, with management and with the head of internal audit, and monitor and approve any changes in personnel, issue authorisations for contract terminations and the stipulation of new contracts with suppliers, oversee payments to suppliers and verify the service supplied by contractors while supporting the Board of Directors of the Company to implement initiatives aimed at counteracting any potential infiltration.

The two preventive administration orders were both for six months but were extendable for a further six months. At the hearing of 22 November 2016, the Milan Court ordered that the Administration orders for Fiera Milano SpA and Nolostand SpA be unified as the matters under both were closely connected. On 20 December 2016, having heard the Court-appointed Administrator, the Milan Court extended the administration order for Nolostand SpA. for a further six months. Therefore, the administration order for Nolostand SpA will expire on 6 July 2017 unless the Milan Court decrees otherwise. Lastly, on 27 January 2017, the Court, without prejudice to the existing procedures under the administration order, extended the order to all corporate activities regarding just the following areas/authorities.

Lastly, on 27 January 2017, the Court, without prejudice to the existing procedures under the administration order, added further duties to the role of the Court-appointed Administrator regarding the following areas/authorities:

  • approval of operating procedures to safeguard the legality of administrative actions and the monitoring of actions taken by the Company to increase the efficacy of these legal safeguards;
  • to approve, in particular as far as concerns the means and timing of contract renewals, the operating procedures for the procurement of goods and services;
  • to monitor the efficacy and timeliness with which the measures are implemented by the Company, also through the use of external consultants, to ensure the legal safeguards for administrative actions during the period of the administration order;
  • quantitative and qualitative upgrading of the internal audit structure and verification of the timely implementation of the upgrades;
  • to revise the audit plan and supervise the related activity;
  • to revise the corporate responsibility structure exclusively for procurement and compliance, including reviewing the necessary requirements of professionalism and introducing any eventual rules governing rotation/replacement;
  • appointment and removal of the head of the compliance department, deciding the relative responsibilities also regarding checks on the reputations of suppliers of goods and services, and regarding the procedures governing whistleblowing.

The attribution of these additional duties to the Court-appointed Administrator is intended to support the company administration but also confirms that the administration and management of the Company remain the domain of the Board of Directors.

Therefore, Fiera Milano SpA and its subsidiary Nolostand SpA, continue to operate normally carrying out their normal corporate activity under the control and oversight of the Court-appointed Administrator and, at the same time, the authority vested in the management body remains unchanged. The Company is collaborating fully with the Court-appointed Administrator in order to ensure business continuity. Following receipt of the aforementioned administration orders, the Company and Nolostand SpA implemented a series of initiatives to break with the past and revise, enhance and introduce new rules to improve business management that are based on new work models and methodologies. Furthermore the employees of Fiera Milano and Nolostand mentioned in the investigation documents of the Milan Public Prosecutor have been suspended and/or dismissed.

Provisions of Euro 0.720 million were also made to the risk and costs provision in the Financial Statements for the risks associated with the above matter; these are estimates of the probable liabilities linked to legal proceedings following on the measures taken.

The Company has instigated, with the support of leading consultancy firms, intense activity aimed at strengthening the legal safeguards in the procurement department and has adopted a procedure (that includes reputational checks and checks on the corporate structures) of the suppliers of Fiera Milano SpA. More generally, the steps taken are to avoid any future episodes of criminal infiltrations . The events have provided an opportunity to improve the corporate procedures in order that this episode concludes with the Company in possession of a reference framework that is in line with current best practice.

The main features of the projects underway are expected to be finalised within the timeframe of the administration orders.

From an operational viewpoint, although there has been some difficulties and delays caused by the organisational impact of replacing the suppliers that were behind the administration orders, the stand-fitting business has continued and the exhibitions have been held, which points to a positive future trend for the stand-fitting business division in the future.

As regards the legal proceedings against the representatives of the supplier, Fiera Milano SpA and Nolostand SpA requested that they be allowed to bring a civil action as the victims and injured parties against these persons. On 3 February 2017 all the accused were sentenced to the penalties imposed by the fair ruling of the court and to the payment of reparations for material and non-material damages arising from the civil action brought by Fiera Milano SpA and Nolostand SpA, to be settled by a separate civil judgement. Moreover, with reference to aforementioned preventative measures, at the current time no risks linked to the application of Legislative Decree 231/2001 have been found.

At present, on the basis of available information and an evaluation of the known risks carried out in preparing these Financial Statements and while recognising that elements of uncertainty exist given the ongoing administration orders and the reorganisation of procedures currently underway, it is not felt that the administration orders have a significant impact on the ongoing business of the Company.

Non-recurring events and transactions

There were no material non-recurring transactions in the financial year under review under Consob communication of 28 July 2006. The amount of Euro 10.000 million referring to the previous financial year and shown separately under the entry for costs for the use of third-party assets was the non-recurring additional rent paid by Fiera Milano to the controlling shareholder Fondazione Fiera Milano because the revenues generated in the 2015 financial year exceeded the average annual revenues in 2012-2014.

Transactions relating to atypical and/or unusual operations

In compliance with Consob Communication of 28 July 2006, it should be noted that no unusual and/or atypical operations were carried out in the financial year to 31 December 2016 as defined in the aforementioned Communication.

Significant events after the end of the reporting period

With regard to the aforementioned administration order, the Company Board of Directors has made strenuous efforts, both before and after the administration order was issued, to bring about a significant improvement in the corporate governance of the Company and to instigate numerous measures to ensure their optimum implementation.

Following the request of the Public Prosecutor that the administration order be extended to all areas of the Company, on 13 January 2017, the Board of Directors, having carefully considered only what was in the interests of the Company, decided that the best solution was to resign its responsibilities so that a new Board of Directors could be appointed at the Shareholders' Meeting to approve the Financial Statements at 31 December 2016, scheduled for 21 April 2017. The Milan Court – Prevention Court Independent Section subsequently denied the request of the Public Prosecutor and stated that the administrative and management functions should remain the domain of the Board of Directors but, at the same time, it extended the powers already given to the Courtappointed Administrator to cover the legality and compliance safeguards of the entire Company.

The Board of Directors also felt that the Chief Executive Officer should resign his responsibilities. Mr Peraboni, on learning of the resignations of the Directors, also resigned. The Board of Directors then gave the authority for the ordinary management of the Company to the Chairperson in order to ensure the ongoing management of the business.

On 22 February 2017, the contract for the sale of the 75% shareholding in Worldex (China) Exhibition & Promotion Ltd was signed.

The sale price under the contract is Euro 2.750 million plus an eventual deferred amount of a maximum of Euro 1.000 million dependent on certain results being achieved in the three years 2017-2019, which is not recognised in the value at 31 December 2016 under IFRS 5. The sale of the shareholding in the subsidiary Worldex is in line with the strategy of repositioning the Group presence outside Italy and concentrating the foreign activities of the Group in the joint venture with its German partner Deutsche Messe.

On 28 March 2017, the Milan Court – Prevention Court Independent Section extended the administration order for the exhibition stand-fitting business division of the Company, due to expire on 11 April 2017, for a further six months; the first expiry date for the unified administration order is July 2017.

Information under Article 149-duodecies of the Consob Listing Rules

The fees paid for the services provided by the independent audit firm in the 2016 financial year are shown in the following table.

(€'000) Service provider Fees for FY 2016
Auditing EY SpA 265
Other services (*) EY SpA 58
Other services (**) Network EY 20
Total 343

(*) Agreed upon procedures.

(**) Other professional services related to enviroment, health and safety.

Remuneration of the Administrative and Control Bodies, General Managers and Executives with strategic responsibilities in the financial year to 31 December 2016

Executives with strategic responsibilities are those that have the power and responsibility, both direct and indirect, for the planning, management and control of the Company activities.

Since 1 May 2015, executives with strategic responsibilities have been identified as the Directors, the Statutory Auditors, and the Manager responsible for preparing the Company accounts. Until 30 April 2015, Executives with strategic responsibilities also included the members of the Supervisory Body.

The total remuneration for this category of Executives was Euro 1.704 million at 31 December 2016 (Euro 3.479 million at 31 December 2015) and the breakdown was as follows:

Remuneration

(€'000) 2016
Directors Statutory
Auditors
Other
Short-term benefits 896 110 644
Post-employment benefits 17 37
Other non-current benefits
Staff-leaving indemnities
Notional income from stock option plans
Total 913 110 681
(€'000) 2015
Directors Statutory
Auditors
Other
Short-term benefits 1,006 102 837
Post-employment benefits 7 66
Other non-current benefits
Staff-leaving indemnities 1,461
Notional income from stock option plans
Total 2,474 102 903

At 31 December 2016, the residual amount payable to this category was Euro 0.150 million.

Rho (Milan), 10 March 2017

On behalf of the Board of Directors The Chairperson Roberto Rettani

Attachments

  1. List of investments in subsidiaries and joint ventures for the financial year at 31 December 2016 (art. 2427, paragraph 1, no.5 of the Italian Civil Code)
(€'000) Registered Share Equity Net profit/(loss) % Carrying
Company name Office capital Total Pro- Total Pro held value
quota quota
Subsidiaries:
Fiera Milano Congressi SpA Milan 2,000 5,448 5,448 832 832 100.00% 12,200
Fiera Milano Media SpA Milan 2,803 1,804 1,804 (776) (776) 100.00% 14,277
La Fabbrica del Libro SpA Milan 120 17 9 (103) (53) 51.00% 61
Nolostand SpA Milan 7,500 8,006 8,006 339 339 100.00% 13,390
Ipack–Ima SpA Milan 200 5,402 5,145 2,196 2,196 100.00% 6,825
Fiera Milano Exhibitions Africa Pty Ltd Cape Town (424) (424) (3,345) (3,345) 100.00%
Cipa Fiera Milano Publicações e Eventos Ltda San Paolo – Brazil 2,041 1,021 10 (2,077) (21) 1.00% 2
Eurofairs International Consultoria e San Paolo – Brazil 13,710 9,948 9,946 552 552 99.98%
Participações Ltda 2 +0.02%
ind.
Fiera Milano India Pvt Ltd New Delhi 279 195 195 (14) (14) 99.99% 82
Total 46,837
Joint Venture:
Hannover Milano Global Germany GmbH Hannover – Germany 25 20,012 9,806 5,528 2,709 49.00% 10,990
Total 10,990

(*) For subsidiary companies the indirect percentage held in the share capital has also been shown.

  1. Summary of key figures of the last financial statements of subsidiaries and associates included in the area of consolidation (Art. 2429, paragraph 4 of Italian Civil Code). Italian GAAPs:

Fiera Milano Congressi SpA

(amounts in €'000) 31.12.2016 31.12.2015
Revenues from sales and services 28,458 36,633
Profit/(loss) 832 1,062
Equity 5,448 5,668
Net financial debt/(cash) (4,515) (4,568)

Fiera Milano Media SpA

(amounts in €'000) 31.12.2016 31.12.2015
Revenues from sales and services 11,093 13,421
Profit/(loss) (776) (1,522)
Equity 1,804 2,581
Net financial debt/(cash) 2,668 541

Ipack-Ima SpA

(amounts in €'000) 31.12.2016 31.12.2015
Revenues from sales and services 3
Profit/(loss) 2,196 (1,126)
Equity 5,145 2,949
Net financial debt/(cash) (2,730) (3,552)

Nolostand SpA

(amounts in €'000) 31.12.2016 31.12.2015
Revenues from sales and services 38,328 55,891
Profit/(loss) 339 3,249
Equity 8,006 9,682
Net financial debt/(cash) (2,057) (2,054)

Summary of key figures of the last financial statements of subsidiaries and associates included in the area of consolidation (Art. 2429, paragraph 4 of Italian Civil Code). IAS/IFRS:

Cipa Fiera Milano Publicações e Eventos Ltda

(amounts in Brazilian reals '000) 31.12.2016 31.12.2015
Revenues from sales and services 21,864
Profit/(loss) (8,008)
Equity 3,502
Net financial debt/(cash) 9,036

Eurofairs International Consultoria e Participaçoes Ltda

(amounts in Brazilian reals '000) 31.12.2016 31.12.2015
Revenues from sales and services
Profit/(loss) 2,127 (4,710)
Equity 34,127 23,728
Net financial debt/(cash) 1,834 5,236

Fiera Milano Exhibitions Africa Pty Ltd

(amounts in South African rand '000) 31.12.2016 31.12.2015
Revenues from sales and services 18,401 20,760
Profit/(loss) (54,407) (16,572)
Equity (6,137) 37,135
Net financial debt/(cash) 11,005 1,339

Fiera Milano India Pvt Ltd

(amounts in rupees '000) 31.12.2016 31.12.2015
Revenues from sales and services
Profit/(loss) (1,062) (4,066)
Equity 13,935 14,998
Net financial debt/(cash) (5,871) (7,574)

Worldex Fiera Milano Exhibitions Co., Ltd( *)

(amounts in yuan renminbi '000) 31.12.2016 31.12.2015
Revenues from sales and services 17,842 15,218
Profit/(loss) 1,560 416
Equity 14,012 12,453
Net financial debt/(cash) (7,573) (10,350)

(*) On 4 Novembrer 2016 the Board of Directors approved the sale of the 75% stake.

Summary of key figures of the last financial statements of joint ventures included in the area of consolidation (Art. 2429, paragraph 4 of Italian Civil Code). Italian GAAPs:

Ipack Ima Srl

(amounts in € '000) 31.12.2016 31.12.2015
Revenues from sales and services
Profit/(loss) (2,184)
Equity 2,728
Net financial debt/(cash) 2,326

Summary of key figures of the last financial statements of joint ventures included in the area of consolidation (Art. 2429, paragraph 4 of Italian Civil Code). IAS/IFRS:

Hannover Milano Global Germany GmbH

(amounts in € '000) 31.12.2016 31.12.2015
Revenues from sales and services 33,414 40,684
Profit/(loss) 5,528 6,989
Equity 20,012 22,139
Net financial debt/(cash) (19,853) (21,221)

Declaration relating to the Financial Statements in accordance with Article 154-bis, paragraph 5 of Legislative Decree of 24 February 1998, no. 58

      1. The undersigned, Roberto Rettani, as Chairperson, and Sebastiano Carbone, as Manager responsible for preparing the Financial Statements of Fiera Milano SpA, declare, having noted the provisions of article 154-bis, paragraphs 3 and 4 of Legislative Decree of 24 February 1998, no. 58:
  • the appropriateness in relation to the characteristics of the business and
  • the effective application of the administrative and accounting procedures for the preparation of the Financial Statements for the year to 31 December 2016.
    1. In 2016, due to the administration orders, still ongoing, for the entire exhibition stand-fitting business division of Fiera Milano SpA and for the subsidiary Nolostand SpA, the actions of the Company have also focused on updating some corporate procedures, including those for procurement and the purchasing cycle. The evaluation process of the adequacy of the administrative and accounting procedures for the preparation of the Financial Statements at 31 December 2016 took account of these circumstances in identifying the periodic monitoring activities.
    1. It is also declared that:
  • 3.1 The Financial Statements at 31 December 2016:
    • have been prepared in accordance with the applicable international accounting standards recognised by the European Union in accordance with EC Regulation no. 1606/2002 of the European Parliament and of the European Council of 19 July 2002;
    • correspond to the results contained in the accounting records and documents;
    • provide a true and correct representation of the capital, economic and financial situation of the Issuer.
  • 3.2 The report on operations includes a reliable analysis of the trend and results of operations and the situation of the Issuer, together with a description of the main risks and uncertainties to which they are exposed.

10 March 2017

Signed by The Chairperson Roberto Rettani

Signed by

The Manager responsible for preparing the Company's Financial Statements

Sebastiano Carbone

Report of the Board of Statutory Auditors to the Shareholders' Meeting pursuant to Article 153 of Legislative Decree no. 58/98 and Article 2429 of the Italian Civil Code

To the Shareholders' Meeting of Fiera Milano

Dear shareholders,

Under Article 153 of Legislative Decree of 24 February 1998 no. 58 (the "Consolidated Finance Act") the Board of Statutory Auditors is required to report to the Shareholders' Meeting called to approve the Financial Statements on its auditing and supervisory duties and any reprehensible acts or omissions noted. It also has the authority to make proposals to the Meeting regarding the Financial Statements, their approval, and any other items that fall within its remit.

The Board of Statutory Auditors in office at the date of the present Report was appointed by the Shareholders' Meeting of 29 April 2015 and its mandate will expire with the approval of the Financial Statements at 31 December 2017. The appointment of the Board of Statutory Auditors was made in accordance with all applicable legal and statutory provisions and regulations and the composition of the Board of Statutory Auditors respects the requirements of gender balance under Article 148 of Legislative Decree 58/98 (the Consolidated Finance Act).

The appointment of the Statutory Auditors was made on the basis of the proposal put forward by the majority shareholder under applicable legal and statutory provisions and regulations.

In the 2016 financial year, the Board of Statutory Auditors ascertained, through declarations received from the Statutory Auditors themselves and from available information, that there were no reasons for their appointments to be forfeit, or to consider the Statutory Auditors ineligible or unfit under Articles 2382 and 2399 of the Italian Civil Code and of Article 148 of the Consolidated Finance Act, and that they had the independence required by law under the Rules of Conduct for the Boards of Statutory Auditors drawn up by the Consiglio Nazionale dei Dottori Commercialisti ed Esperti Contabili [equivalent of the Association of Chartered Accountants] and the Self-regulatory Code for Listed Companies regarding independent Directors, giving greater weight to substance (a guarantee of independent judgement) over form as recommended by the Self-regulatory Code.

The Board of Statutory Auditors communicated the results of these assessments, in accordance with Article 144-novies, paragraph 1-ter of Consob Listing Rule no. 11971, so that they could be made publicly available.

No events have occurred that would result in any Statutory Auditor losing his/her required independence since the last assessment was made.

During the financial year under review, the Statutory Auditors carefully assessed their responsibilities and the time required to execute these responsibilities diligently; it also checked that the limit on positions that can be held in other companies established in law (Article 148-bis of the Consolidated Finance Act and other enacted laws, Articles 144-duodecies to 144-quinquiesdecies of the Listing Rules) had not been exceeded, and fulfilled the disclosure requirements of Consob under Article 148 of the Consolidated Finance Act and under Article 144-terdecies of the Listing Rules.

The Board of Statutory Auditors reports that no Statutory Auditor has had any personal interest or acted on behalf of a third-party in any important transaction during the financial year under review.

Administration orders imposed by the Milan Court

With an order issued on 23 June 2016 and notified on 6 July 2016, the Milan Court imposed an administration order on Nolostand S.p.A. , a subsidiary of Fiera Milano S.p.A. , for a period of six months. Subsequently in a ruling dated 28 September 2016 that was notified on 11 October 2016 it imposed an administration order on Fiera Milano S.p.A. , also for a period of six months and limited to the business area linked to Nolostand S.p.A.

The Milan Court imposed the administration orders under Article 34 of Legislative Decree no. 159/2011, because it judged that the organisational structure of both Fiera Milano S.p.A. and Nolostand S.p.A. were not sufficiently coordinated to guarantee internal preventative measures capable of avoiding infiltration by persons intent on criminal activity, with particular reference to Articles 416-bis e 648-bis of the Penal Code.

The administration orders imposed by the Milan Court, given the limited area in which, according to the Court, these illegal activities took place in previous financial years, did not replace the members of the Board of Directors or the delegated executives with appointees of the Court nor did it choose to suspend the administrative rules of the internal bodies of the two companies and, as a result, the management of the normal exhibition business continued.

On 27 January 2017, the Milan Court ruled that the administration order for Fiera Milano S.p.A. should continue in the same way as before, as should that for the subsidiary Nolostand S.p.A., and gave the Court-appointed Administrator further powers that are normally the domain of the Board of Directors and which specifically cover all the areas of intervention of the Company: approval of operating procedures to safeguard the legality of administrative actions, approval of procedures for the procurement of goods and services, monitoring of the efficacy and timeliness with which the measures already adopted by the Company to ensure the legal safeguards for administrative actions are implemented, quantitative and qualitative upgrading of the internal audit structure and revision of the audit plan, revision of the corporate responsibility structure for procurement of goods and services, improvements to the compliance department and the relevant areas of responsibility, including review of the integrity due diligence for suppliers of goods and services.

The Board of Statutory Auditors acknowledges that the administration orders imposed by the Milan Court, expire on 6 July 2017; it is possible that a new expiry date will be set for Fiera Milano S.p.A, as explained below.

On 3 February 2017, the preliminary investigations judge of the Milan Court in a shortened proceeding passed sentence on the main members of the Consorzio Dominus in the civil action brought by Fiera Milano S.p.A. and its subsidiary Nolostand S.p.A., and required the accused to pay patrimonial and moral damages to Fiera Milano S.p.A. and Nolostand S.p.A.; the payment will be part of a separate judgement.

On 28 March 2017, the Milan Court ruled that the administration order for Fiera Milano S.p.A. should be extended for a further six months because, inter alia, the Company still needed to complete, perfect and test the efficacy of the procedures for the legal safeguards governing administrative actions and the procurement procedures for goods and services; to remedy the lack of an internal department to monitor the risks to which the Group is exposed; to rectify the inadequacy of the Internal Control department; and the absence of a compliance department, which should be resolved by the setting up of a dedicated structure to become operational in May of this year.

The Milan Court in its ruling extending the administration order and requested the Court-appointed Administrator and the new administrative bodies to implement in a timely and effective manner all the measures identified by the external consultants, who have already been appointed to draw up a definitive corporate governance structure for the Group.

Requests for information under Article 115, paragraph 1 of Legislative Decree no. 58/98 (the "Consolidated Finance Act")

On 14 October 2016, Consob called a meeting at its offices to request information pertaining to and resulting from the administration orders issued by the Milan Court.

Following this meeting, on 17 October 2016, a memo was delivered from the Board of Statutory Auditors to Consob: "Memo regarding the initiatives taken by the Fiera Milano Group as a consequence of the preventive administration orders under Article 34 of Legislative Decree no. 159/2011", as well as other updated information.

On 1 December 2016, Consob requested, under Article 15 of the Consolidated Finance Act, "the receipt of updated information on the Memo of 17 October 2016 and, in particular, on the results of the internal investigations carried out by the Audit department, the Supervisory Board and by Deloitte Financial Advisory, with the relevant reports to be attached".

On 15 December 2016, the Board of Statutory Auditors sent Consob an acknowledgement with the documentation on the activities carried out as part of its responsibilities.

The Board of Statutory Auditors, in answer to a specific request from Consob, reported on the precautionary suspension and subsequent dismissal for just cause of the Manager responsible for preparing the accounts of the Fiera Milano Group, a decision taken by the Board of Directors of Fiera Milano S.p.A., as the aforementioned Manager was also the Chief Executive Officer of the subsidiary Nolostand S.p.A.

The Board of Statutory Auditors was invited by Consob to attend a second meeting under Article 115, paragraph 1 of the Consolidated Finance Act on 7 March 2017 to provide information on any eventual critical issues that had emerged of or were emerging from the legal audit of the 2016 Financial Statements of Fiera Milano S.p.A. and any eventual significant irregularities in the internal control system relating to the provision of financial information or that emerged in the course of preparing the Report of the Board of Statutory Auditors to the Shareholders' Meeting called to approve the 2016 Financial Statements.

On that occasion the Board of Statutory Auditors updated Consob on the measures taken by the Board of Directors of Fiera Milano S.p.A. and, in particular, on the improvements and revisions made to the corporate procedures or to be made in the future.

On 29 March 2017, the Board of Statutory Auditors sent a further documentary update to Consob on its recent activities.

Resignation of the Board of Directors

The majority of the members of the Board of Directors resigned at its meeting on 13 January 2017 causing the dissolution of the entire Board with delayed effect from the Shareholders' Meeting called to approve the Financial Statements at 31 December 2016.

On the same date, the Chief Executive Officer of the Company resigned.

The outgoing Board of Directors gave the Chairperson of the Board of Directors all the necessary powers for the ordinary management of the Company.

Subsequently, six meetings of the Board of Directors have been held during which the Chairperson has reported on the exercise of the powers vested in him and, from time to time, has requested the express approval and ratification, where necessary, of administrative acts that exceeded the ordinary powers assigned him.

Supervisory activity: legal, regulatory and ethical

The supervisory duties of the Board of Statutory Auditors were carried out in accordance with legal requirements and, in particular, those of Article 149 of the Consolidated Finance Act; with the recommendations of Consob on corporate controls and the role of the Board of Statutory Auditors (in particular, Consob Communication of 20 February 1997 no. DAC/RM 97001574); with the provisions of the Self-regulatory Code and those of the 2015 edition of the Rules of Conduct of the Board of Statutory Auditors of Listed Companies issued by the Consiglio Nazionale dei Dottori Commercialisti e degli Esperti Contabili.

In preparing the present Report, the Board of Statutory Auditors took account of Consob Communications no. 1025564 of 6 April 2001, no. 3021582 of 4 April 2003 and no. 6031329 of 7 April 2006, which govern the content of the Reports of Boards of Statutory Auditors to Shareholders' Meetings of listed companies.

The Board of Statutory Auditors declares that on 29 April 2016 it sent Consob, in accordance with Consob Communication no. 6031329 of 7 April 2006, the "Summary Report of Supervisory Activities" for the 2015 financial year, using the model prepared for this purpose by Consob.

Attendance at meetings of the corporate bodies

The Board of Statutory Auditors states that it held 23 meetings in the 2016 financial year, attended the Shareholders' Meeting and also the 19 meetings of the Board of Directors.

Since the end of the 2016 reporting period until the date of the present Report, the Board of Statutory Auditors has held six meetings.

During the 2016 financial year, the Control and Risk Committee met 11 times (two were joint meetings with the Board of Statutory Auditors given the matters under discussion and the resignation of Mr Renato Borghi, a member of the Board of Directors) and the Remuneration Committee met 10 times.

The Board of Statutory Auditors took part in all the meetings of the Control and Risk Committee through the presence of its Chairperson and/or through that of another Standing Statutory Auditor and also all the meetings of the Remuneration Committee through the presence of its Chairperson.

Monitoring of compliance with legal and statutory requirements and regulations and adherence to the principles of correct management

Through its presence at meetings of the Board of Directors, the Board of Statutory Auditors has monitored compliance with legal and statutory requirements and regulations that govern the functioning of the Company bodies and the adherence to the principles of correct management.

The frequency of the Board of Directors' meetings, also under the administration order, and the average attendance rate of the Directors and the duration of the meetings were sufficient and no significant decisions were taken without appropriate information being provided to the Directors and the Board of Statutory Auditors, also given the specific matters discussed and the exhaustive nature of the discussions.

The Board of Statutory Auditors has verified that all the decisions taken were in the interests of the Company and were supported by appropriate documentation and, if necessary, expert opinions regarding the economic and financial suitability of the transactions.

Executives responsible for the various corporate departments and external consultants attended meetings of the Board of Directors, as required, to report on specific matters.

The Board of Statutory Auditors has recommended that regulations for the correct functioning of the Board of Directors be adopted, as is best practice, and also for notifications made by the Control and Risk Committee.

The Board of Statutory Auditors acknowledges that the Board of Directors received adequate information from the Chairperson, the Chief Executive Officer and the Control and Risk Committee and that it monitored the general management of the Company, periodically comparing the results achieved with those in the business plan, studied and approved transactions of a material size, and was aware of the risks and consequences of any transaction undertaken, and also examined the matters that the Board of Statutory Auditors put to the Board of Directors.

On 30 January 2017, Fondazione Fiera Milano, as the majority shareholder of Fiera Milano S.p.A. requested the Board of Directors to include in the Agenda of the Extraordinary Shareholders' Meeting a request that the latter approve specific amendments to Articles 13, 14, 15, 16, 17, 18 and 20 of the Articles of Association of Fiera Milano S.p.A. The Board of Directors did this and has proposed to the Extraordinary and Ordinary Shareholders' Meetings, convened just once on 21 April 2017, that they approve the aforementioned amendments to the Articles of Association.

Since 10 March 2017, in compliance with Article 125-ter, paragraph 3 of the Consolidated Finance Act, the report on items on the Agenda of the Extraordinary Shareholders' Meeting has been made publicly available.

The Board of Statutory Auditors acknowledges that the Board of Directors, at its meeting on 4 November 2016, and as a consequence of the administration order under Article 34 of Legislative Decree 159/2011 decided temporarily to withdraw the Company shares from the STAR (Segmento Titoli con Alti Requisiti di Borsa Italiana) segment and asked Borsa Italiana to implement the voluntary withdrawal of the shares of the Company from the STAR segment . Since 15 November 2016, the ordinary shares of Fiera Milano S.p.A. have been traded on the MTA (Mercato Telematico Azionario). Further information on corporate governance is given in the Report on Corporate Governance and Ownership Structure of Fiera Milano S.p.A. at 31 December 2016.

Information on the overall activities of the Company and subsidiaries

The Board of Statutory Auditors received from the Directors, sometimes as a result of specific requests, at least quarterly information on the overall activities of the Company, the various sectors in which it operates, also through subsidiaries and associates, and on any material economic, financial or capital transactions. On the basis of the information flows acquired in the course of its monitoring activities, the Board of Statutory Auditors was able to ascertain that the actions discussed and implemented adhered to the law and to the Company Articles of Association and were neither manifestly imprudent or risky, created conflicts of interest or differed from the resolutions of the corporate bodies or would compromise the integrity of the corporate assets.

At the various Board meetings, the Chairperson of the Board of Directors and the Chief Executive Officer provided information on decisions taken that by their nature and their impact had to be put to the judgement and authority of the Court-appointed Administrator as they fell within the area of activity identified by the Milan Court.

The Board of Statutory Auditors obtained the knowledge and monitored, to the extent of their remit, that principles of correct management were followed; this was also done through information obtained directly from the various Company departments and from the independent Audit Firm, and requesting, where necessary, that specific actions be taken.

On the basis of the information acquired, it emerged that the most significant economic, financial, and capital transactions of the Company, also through entities in which it has direct or indirect investments, were the following:

1. Ipack Ima S.r.l.

In December 2015 Ipack Ima S.r.l., had a share capital increase through the conferral of business divisions, in compliance with the relevant requirements of the Italian Civil Code, from Ipack Ima S.p.A. and Proma-Pack S.r.l.

As a result of these conferrals, effective from January 2016, Fiera Milano S.p.A. , through Ipack Ima S.p.A., holds 49% of the share capital of Ipack Ima S.r.l., which organises the triennial exhibition Ipack Ima, one of the most important exhibitions worldwide in the packaging sector.

The economic impact of the conferral of the business division was Euro 2.369 million in total, which represented the capital gain generated by Ipack Ima S.p.A. on the conferral of the business division.

2. Fabbrica del Libro S.p.A.

In September 2016, Fiera Milano S.p.A .and Ediser S.r.l. set up a company called La Fabbrica del Libro S.p.A. to develop activities connected to the historic "Fiera del Libro" [Book Fair] and to promote the publishing sector through exhibitions. Fiera Milano S.p.A. holds 51% of the share capital of Fabbrica del Libro S.p.A. and has undertaken to support the industrial plan of the subsidiary through a loan of maximum Euro 2 million of which Euro 1 million has already been provided.

In the first quarter of 2017, Fabbrica del Libro S.p.A. asked its shareholders for a capital contribution payment thereby strengthening its net equity.

The following transactions also merit a mention since they refer to foreign investments:

1. Eurofairs International Ltda

In June 2016, Fiera Milano S.p.A. converted the loan equal to Euro 2.893 million made previously to Eurofairs International Ltda into equity.

2. Limited liability company Fiera Milano

In June 2016, Fiera Milano S.p.A., given the operating performance of the company, decided to waive the credit representing the loan of Euro 0.560 million given to Limited Liability Company.

3. Fiera Milano Exhibitions Africa

In June 2016, Fiera Milano S.p.A., given the operating performance of the company, decided to waive the credit representing the loan of Euro 0.706 million given to Fiera Milano Exhibition Africa.

4. Worldex Fiera Milano Exhibitions Ltd

Subsequent to the end of the reporting period, Fiera Milano S.p.A. sold its entire shareholding of 75% in Worldex (China) to third-parties for Euro 2.750 million.

Fiera Milano S.p.A. recognised the effect of this transaction in its Financial Statements at 31 December 2016 through an impairment charge of Euro 5.128 million in its Income Statement.

The Board of Statutory Auditors wishes to point out that, among the financial transactions of Fiera Milano S.p.A. with Group companies, the loan of Euro 3.2 million given in February 2016 by the Parent Company to Fiera Milano Media S.p.A. to support the effects of the reorganisation and restructuring plan of the subsidiary was of particular significance.

Adequate information to permit informed decisions on all the aforementioned transactions was given in the meetings of the Board of Directors and the transactions have been comprehensively described in the Notes to the Financial Statements and in the Directors' Management Report on Operations 2016.

The Board of Statutory Auditors has, from time to time, made observations as part of it own opinions regarding the activities of the Company and of its subsidiaries, in particular, regarding structural operations having a capital and financial effect. These observations have been acknowledged by the Board of Directors and/or, where necessary, by the relevant delegated corporate bodies.

Relations with the majority shareholder Fondazione Fiera Milano

In June 2016, effective from July 2016, Fondazione Fiera Milano and Fiera Milano S.p.A. signed a new agreement for a current account between the two entities for managing cash inflows and outflows. The contract expired on 31 December 2016 but is automatically renewed.

The parties settle receipts and payments under the contracts existing between them, in particular the rental payments for the exhibition sites and the services provided by each party to the other, and the account carries interest of 1-month Euribor plus a spread, currently 1.75%, which may be periodically revised by the parties.

In 2016, Fiera Milano S.p.A. and some of the Italian subsidiaries opted to participate in the tax consolidation of Fondazione Fiera Milano. This option is binding for the 2016, 2017 and 2018 financial years.

Monitoring of relations with subsidiaries and related-party transactions

The instructions given to subsidiaries were adequate to ensure the timely fulfilment by the latter of the disclosure requirements under the law and Article 114 of the Consolidated Finance Act.

Related-party transactions were almost exclusively transactions done as part of the ordinary management of the Company and were governed by market conditions and are reported in the Board of Directors' Management Report and the Notes to the Financial Statements.

The Control and Risk Committee ascertained that procedures were followed: to guarantee that related-parties were identified and that transactions carried out with them were transparent and respected essential integrity and procedural correctness; to evaluate the adequacy of the limits for procedures for related-party transactions and of the Organisational Instructions for Implementing the Procedure; and to ensure that these transactions were in the corporate interest. It also monitored the adequacy of the information disclosed by the Directors in the Board of Directors' Management Report and the Notes to the Financial Statements.

As regards intergroup transactions, in the Notes to the Financial Statements and in the Board of Directors' Management Report, the Directors have disclosed the existence of commercial and financial relations among Group companies and has explained that these transactions were part of the ordinary management of the Company and were governed by market conditions.

The Control and Risk Committee, the Supervisory Board and the Internal Control department, also at the behest of the Board of Statutory Auditors, exercised appropriate control over any direction and coordination activity as required by Article 2497 and following of the Italian Civil Code.

In particular, the Board of Statutory Auditors examined and approved the document giving the key financial conditions of intergroup service contracts in the 2016 financial year and believe that the degree of analysis to identify the criteria for attributing the costs to the single companies on the basis of the services used was appropriate.

Opinions expressed by the Board of Statutory Auditors

The Board of Statutory Auditors acknowledges that, from time to time, the Board of Directors accepted the opinion of the Remuneration Committee and, under Article 2389 of the Italian Civil Code, expressed favourable opinions on the following:

Meeting of the Board of Directors of 14 March 2016

  • alignment of remuneration paid to corporate bodies of the Italian subsidiaries with those of the foreign companies,
  • incentive scheme for members of the Board of Directors based on a stock option plan with free allocation of options,
  • appraisal procedure for executives with strategic responsibilities;

Meeting of the Board of Directors of 23 September 2016

– acknowledgement of the wish of the Board of Directors of the newly constituted company, La Fabbrica del Libro, to waive any remuneration for the first financial year ending 31 December 2017 except for the reimbursement of expenses sustained in the execution of their responsibilities. The Chairperson and Chief Executive Officer of the company also waived their rights to remuneration.

Meeting of the Board of Directors of 10 March 2017

– decisions regarding the variable MBO (Management by Objectives) system in relation to the 2016 results.

In compliance with Group Guidelines, the Board of Statutory Auditors in the person of its Chairperson expressed a favourable opinion on the proposal of the Committee for Remuneration, approved by the Board of Directors at its meeting on 16 December 2016, for the remuneration of the corporate bodies of Nolostand S.p.A.

Information on the nature and amount of remuneration is provided in the Report on Remuneration (under Article 123-ter of Legislative Decree 58/98).

The Board of Statutory Auditors agreed with the proposal of the Committee for Remuneration and expressed its favourable opinion on the decision of the Board of Directors, taken on 10 March 2017, regarding the Report on Remuneration prepared for the 2017 Shareholders' Meeting.

Transactions involving treasury shares

On 24 June 2016, the Company announced the start of a buy-back of shares under the mandate given by the Shareholders' Meeting of 28 April 2016 in order to increase the portfolio of treasury shares as part of the stock option plan. At 31 December 2016, the Company had acquired 294,010 treasury shares for a total value of Euro 0.464 million; at the same date, the total number of treasury shares held was 939,018 equal to 1.31 % of the share capital of the Company.

Market Abuse Regulation and Protection of Savings

The Board of Statutory Auditors monitored compliance with the Market Abuse Regulation and Protection of Savings as regards corporate disclosure and Internal Dealing and, in particular, the use of inside information and the Procedure for Dissemination of Press Releases and Public Disclosure of Inside Information. The Board of Statutory Auditors monitored compliance with the provisions of Article 115-bis of the Consolidated Finance Act and of Articles 152-bis and 152-quinques of the Regulation governing the updating of Insider Registers.

The Board of Statutory Auditors noted that the Company adopted a new Procedure for Internal Management and Public Disclosure of Inside Information following the introduction of the MAR (Market Abuse Regulation); adopted a new Internal Dealing Procedure; implemented updates to the Insider Register and is awaiting a Consob Regulation to amend the prevailing Regulation 11971/99 ("Listing Rules'') following the introduction of the MAR before proceeding to update the Procedure for Internal Management and Public Disclosure of Inside Information.

Practical implementation of corporate governance rules

With regard to the Report on Corporate Governance and Ownership Structure, the Board of Statutory Auditors, in order to comply with Article 124-ter of the Consolidated Finance Act and with Article 89-bis of the Listing Rules, wishes to state the following:

As part of its monitoring of the practical implementation of corporate governance rules, in accordance with Article 3, c. 5 of the Self-regulatory Code, the Board of Statutory Auditors verified the correct application of the criteria and procedures used by the Board of Directors to verify and arrive at a positive assessment of the independence of its Directors, both under Article 148, third paragraph of the Consolidated Finance Act and under the Self-regulatory Code, which gives greater weight to substance (a guarantee of independent judgement) than to form.

The self-appraisal process of the Board of Directors was done through the anonymous completion of a questionnaire by each Director, as required by application criteria no.1 c.1. paragraph g) of the Self-regulatory Code, regarding the size, composition and modus operandi of the Board of Directors , as well as the size, composition and modus operandi of the Advisory Committees within the Board of Directors. The results of the questionnaires were presented to the Board of Directors at its meeting on 24 March 2017.

The Board of Statutory Auditors considered the outcome of the appraisal to be substantially positive.

The appraisal was based on the same criteria that was used in the previous financial year.

Monitoring the adequacy of the organisational structure

The Board of Statutory Auditors had, even prior to the imposition of the administration order by the Milan Court, noted the need for the Fiera Milano Group to reinforce the corporate organisation and, in particular, the Internal Control department, and to review, update and implement different corporate procedures with a particular focus on those governing the activities of Company departments with direct relations with suppliers, clients and third-parties in general.

As a consequence of these recommendations, the Board of Statutory Auditors would like to note that already in the period prior to the imposition of the administration order by the Milan Court the Board of Directors had started to review the procedures, in particular, the procurement procedure and has already implemented some measures and plans to introduce others that are aimed at strengthening management controls.

The Board of Statutory Auditors notes that the Fiera Milano Group, given the considerable organisational complexities of the internal structure, has turned for operational and consultancy support to third-party professionals and consultants.

The Board of Directors now requires that all companies that are subject to direction and coordination by Fiera Milano S.p.A. under Articles 2497 and following of the Italian Civil Code adopt the new procedures, and if there is good reason for them not doing so, should comply with the most important elements of the new procedures.

The Board of Statutory Auditors has at different times found it necessary to recommend to the outgoing Board of Directors, and now repeats this recommendation to the new Board of Directors, that it proceed swiftly and effectively to conclude in the shortest time possible the process of reorganising the organisational structure.

This should be achieved through the inclusion of experienced professional persons that would bring about the desired strengthening of the Company departments, in particular, the Internal Control department and the Procurement department, that is fundamental to guarantee that the award of supply and service contracts is completely transparent and that their correctness can be verified.

The Board of Statutory Auditors, to the extent of its remit, considers that the administration order imposed through the various rulings of the Milan Court represents a guarantee that the Board of Directors and the various Committees will implement amendments and revise the duties and operational and procedural methods of the different Company departments to rectify weaknesses in procedures and to strengthen controls (for example, authorisation procedures, segregation of responsibilities, control procedures to ascertain that work has been executed or to check the stage of completion of services and supplies).

Compliance with Legislative Decree no. 231/2001

The Board of Statutory Auditors verified the organisational and procedural activities implemented under Legislative Decree 231/2001 for the administrative responsibility of Entities for crimes under the law through meetings of the Supervisory Board, at which the Chairperson of the Board of Statutory Auditors participated as a member, through joint meetings, and through the periodic reports prepared by the aforementioned Supervisory Board on its activities.

To the extent of its remit, the Board of Statutory Auditors has:

  • verified the existence of the professional requirements of the members of the Supervisory Board as required by the Model under Legislative Decree 231/2001;
  • checked the adequacy of the powers and financial resources given the Supervisory Board for the normal execution of its corporate responsibilities;
  • verified that the reports received were consistent with the disclosure requirements under the Model;
  • assessed the programme and budget of the Supervisory Board for the 2016 financial year;
  • received the Periodic Report for the Board of Directors and the Board of Statutory Auditors on the activities of the Supervisory Board in 2016, also in the light of the provisions of the administration order for Nolostand S.p.A. and Fiera Milano S.p.A. The Report includes suggestions and recommendations on actions to be taken by the Company for its procedural and organisational framework.

The Board of Statutory Auditors acknowledges that the Board of Directors at its meeting on 26 February 2016 approved the update of the Organisational, Management and Control Model necessitated by the inclusion of additional crimes under Legislative Decree no. 186/2014 and Legislative Decree no. 68 and 69/2015, and by the changes in the organisational framework of Fiera Milano Group and in the proposed amendments received.

During the financial year under review, the Board of Statutory Auditors received from the Supervisory Board a report on its activities, which included: monitoring the correct functioning of information flows from the Supervisory Boards of subsidiary and associate companies with an evaluation of the contents of the annual reports of these bodies; examining the results of the integrity due diligence carried out on the suppliers of the Fiera Milano Group; periodic evaluations that the requirements under the Model had been met and of the information provided by the Company departments; examining the results of the integrity due diligence carried out on the suppliers of the Fiera Milano Group; an examination of any initiatives taken, if required, by Fiera Milano S.p.A. and its subsidiaries following the receipt of anonymous disclosures and verifying these to the extent required as part of its responsibilities; monitoring the conduct of Company departments in tenders to award contracts for the supply of services and consultancy services; constant monitoring of the measures to be adopted following the administration order imposed on Fiera Milano S.p.A. and its subsidiary Nolostand S.p.A. and reporting on the results of this activity in its periodic reports.

With regard to the administration order imposed on Fiera Milano S.p.A. and its subsidiary Nolostand S.p.A., the Supervisory Board , in coordination with the Board of Directors and the Control and Risk Committee, in the financial year 2016 implemented a series of measures (some are provided above as an example) for adequate safeguards within the Control, Management and Organisational Model and in the body of corporate procedures that are aimed at rectifying the critical situations that emerged from the investigations carried out by the Public Prosecutor of the Milan Court and thereby avoiding any infiltration by Persons that could perpetrate criminal acts, in particular those under Articles 146-bis and 648-bis of the Penal Code.

Legislation governing data protection

During the financial year under review, the Fiera Milano Group updated its security practices to guarantee an adequate level of personal data protection under the provisions of the Data Protection Code (Legislative Decree 196/2003) and of the Provisions issued by the Data Protection Authority.

Assessment of the adequacy of the internal control system

The Board of Statutory Auditors has the responsibility of monitoring and assessing the adequacy of the Internal Control System and its compliance with the Self-regulatory Code and, in general, that it adheres to best practice both in terms of structure and operation.

The presence of a member of the Board of Statutory Auditors at all meetings of the Control and Risk Committee ensured the timely exchange of information necessary for both bodies to carry out their roles; it also ensured oversight of the Control and Risk Committee as required of the Board of Statutory Auditors under Article 19 of Legislative Decree no. 39/2010, and of the accounting audit and, in particular, ensured that the financial information process and the efficacy of the internal control systems, the internal audit, and risk management were monitored.

The Board of Statutory Auditors declares that it monitored the most important activities of the internal control and risk management systems through its attendance at meetings of the Control and Risk Committee and the Committee for Remuneration and by studying the reports prepared by the Internal Audit department.

Periodic meetings with the Head of Internal Audit and the Manager responsible for preparing the Company accounts and an analysis of the reports prepared by these persons on their activities allowed the Board of Statutory Auditors to monitor the financial information process and the efficacy of the internal control systems and the internal audit and risk management, as required by Article 19 of Legislative Decree 39/2010.

As part of this activity the Board of Statutory Auditors examined, in particular:

  • the Audit Plan of activities scheduled for the financial year;
  • the periodic reports prepared by the Control and Risk Committee and the Head of Internal Audit on their activities;
  • the reports prepared at the end of the evaluation and monitoring process by the Head of Internal Audit with the relative results, recommendations and follow up;
  • the quarterly updates on the risk management process, the results of the monitoring and assessment activities of the Internal Audit department.

The Board of Statutory Auditors expressed a favourable opinion, as required by the Self-regulatory Code, on the resources allocated in the budget to the Internal Audit department. This opinion was expressed on the total resources, both internal and external, allocated to this department. In its assessments the Board of Statutory

Auditors recommended that the number of persons working in this department, currently dependent on external resources, be increased.

On the matter of risk management, the Board of Statutory Auditors ascertained that the Control and Risk Committee had carried out its required responsibilities of managing the main risks to which the Company is exposed.

The Board of Statutory Auditors examined and agreed with the Control and Risk Committee proposals to be put to the Board of Directors for updating the corporate governance procedures.

As already described in this Report, the Milan Court issued a court administration order and then extended it judging that the organisation of the Company and of the subsidiary Nolostand S.p.A. did not provide adequate structural safeguards, including procedures and compliance policies, to prevent criminal infiltration by third-parties.

The Board of Directors implemented and/or scheduled a series of initiatives to deal with the critical situations in the Internal Control system that were identified by the Court-appointed Administrator. The Milan Court judged that this improvement process had not been completed during the financial year under review and consequently with its ruling of 27 January 2017 extended the administration order and also expanded it to cover all Company functions in certain sectors/powers. With the ruling of 28 March 2017 it extended the administration order for a further six months.

In order to carry out the additional responsibilities given him by the Milan Court, on 27 January 2017, the Courtappointed Administrator chose PricewaterhouseCoopers Advisory S.p.A. Forensics Services as the consultant he wished to use for the functional analyses to test the restructured organisational model of Fiera Milano S.p.A.

On 7 February 2017, the Milan Court authorised the appointment of the aforementioned consultant and the Board of Directors prepared a specific contract for the designated consultant which, inter alia, specified that the work under the contract should be completed by 30 June 2017.

At its meeting on 24 March 2017, the Board of Directors examined and approved the procedure for the procurement of goods and services, the procurement cycle procedure, the procedure for consultants and collaborators, the qualification procedure for suppliers, the integrity due diligence procedure, the operating procedure for stand-fitting sales, the procedure to manage recommendations for suppliers made by clients, and the catering procedure.

Following the approval of the Board of Directors, the aforementioned new procedures, which are currently being implemented, have been added to those that had been updated and amended during 2016, which were: the Management Policy for Whistleblowing Disclosures, including anonymous disclosures, received by Fiera Milano S.p.A. and its subsidiaries in Italy, the procedure for managing inside information, and the internal dealing procedure.

At the date of the present Report, the Company is awaiting the report of the Court-appointed Administrator on the adoption of these procedures.

Assessment of the adequacy of the administrative and accounting system

Regarding assessment of the adequacy of the administrative and accounting system and its reliability to provide a true and fair view of the management of the business, the Board of Statutory Auditors declares that it received adequate information on the monitoring of the corporate processes of the administrative and accounting system and on the Internal Control system carried out during the year both for the periodic management reports and for the preliminary phase of preparation of the Financial Statements, to ensure that the obligations of supervision and monitoring that Fiera Milano S.p.A. is subject to under Legislative Decree 262/05 were fulfilled.

The Board of Statutory Auditors examined the work of the Manager responsible for preparing the Company accounts in accordance with the Model under Law 262/2005, the risk assessment process and the tests on the areas identified as requiring improvement and acknowledged the outcomes of the tests made on the control procedures and the schedule of activities planned.

The adequacy of the administrative and accounting procedures was verified also through information acquired from the managers of the various departments and through the analyses of the results of the work done on the procedures and on the impact these had on the financial information.

The Board of Statutory Auditors with appropriate assistance continued the work started in 2015 to examine the Company cycle of receivables and payables and reported its results to the Control and Risk Committee.

There are no critical issues or impediments to the release of the declaration by the Manager responsible for preparing the company accounts and the Chairperson of the Board of Directors (pro tempore) regarding the adequacy of the administrative and accounting procedures employed in preparing the Financial Statements of Fiera Milano S.p.A. and the Consolidated Financial Statements for the 2016 financial year.

The Board of Statutory Auditors, also through the use of information provided by the Audit Firm, monitored that the preparation and publication, as well as the format, of the Half-year Accounts and of the Interim Financial Statements adhered to the relevant regulations and complied with the accounting standards.

The Board of Statutory Auditors, also through the presence of some of its members on the Boards of Statutory Auditors of the subsidiaries, monitored that the instructions given to the subsidiaries by Fiera Milano S.p.A. were adequate as regards the data flows required to prepare the Financial Statements and the Interim Financial Statements.

The Board of Statutory Auditors reports that on 16 December 2016 the Board of Directors of the Company, having noted the changes made to the Listing Rules by Consob Resolution no. 19770 on interim management reporting, decided to continue to prepare and publish the quarterly reports in the same way as previously and specifically made public its decision.

As described on page 61 of the Board of Directors' Management Report in the Financial Statements at 31 December 2016, the Company is introducing measures to comply with the law governing non-financial disclosures, which must be adopted from the start of the 2017 financial year.

The Legislative Decree no. 254 of 30 December 2016 that incorporates the Directive 2014/95/EU (known as the "Barnier Directive") makes it mandatory to disclose non-financial information for certain large undertakings and public entities, defined by certain parameters that include an average number of employees that exceeds 500 persons on a consolidated basis.

Non-financial disclosure for these entities is mandatory from the 2017 financial year. Fiera Milano Group, also to meet this imminent requirement, has in recent years involved numerous Company departments in the preparation of Reports on Sustainability for the financial years 2015 and 2016.

The non-financial disclosure in the 2016 Report on Sustainability was subject to certain internal verification procedures using a selection of indicators depending on the subject covered and the reporting requirements under Legislative Decree 254/2016.

As part of its responsibilities, the Board of Statutory Auditors will monitor the internal process for preparing the nonfinancial disclosures.

Omissions or reprehensible actions

Following the monitoring and control activities carried out in the financial year under review, the Board of Statutory Auditors can state that:

  • in the course of its activities no omissions, irregularities, reprehensible actions or matters of significance emerged that needed to be reported to the corporate bodies or included in the present Report;
  • on 12 October 2016, the Board of Statutory Auditors received a complaint under Article 2408 of the Italian Civil Code from one of the shareholders owning one share. The complaint was made following the publication of an article in the daily paper "Il Fatto quotidiano" on 11 October 2016, about an enquiry being conducted by the Milan Court regarding the mafia and bribes and relating to the events involving Nolostand S.p.A. and that also involved the Parent Company Fiera Milano S.p.A.

The Board of Statutory Auditors, for the sake of completeness, promptly brought the disclosure to the attention of the Court-appointed Administrator. As far as the Board of Statutory Auditors is aware, as regards criminal and personal liability for omissive, intentional or negligent behaviour relating to the circumstances of the administration orders, there are no specific liabilities that have not been the object of committal proceedings. The current enquiries by the magistrates have meant that a more detailed analyses could not be made by the Board of Statutory Auditors, which would have found itself acting outside its normal remit.

With regard to the adequacy of the systems of safeguards covering specific reprehensible actions, the Board of Directors has prepared a summary table, which shows that for every weakness in the systems of safeguards there exists one or more previous communications made to the relevant bodies/departments. The communications from the Board of Statutory Auditors are always detailed and are the result of indepth tests carried out as part of normal monitoring and not just as part of special investigative processes.

– no transactions were identified with third-parties, intergroup and/or with related-parties that could be considered atypical or unusual because of their content, nature, size and timing.

During the financial year under review, the Company received, and passed on to the Board of Statutory Auditors several anonymous disclosures regarding facts and persons that were notified to the Milan prosecutor.

The Company informed the Authorities carrying out the investigations of the anonymous reports.

In November 2016, the Board of Directors approved the adoption of a Management Policy for Whistleblowing Disclosures that currently governs the procedure for such disclosures, the relevant corporate bodies and relevant information flows.

Monitoring the legal audit of the Financial Statements

During the financial year under review, regular meetings were held with the independent Audit Firm, both formal meetings at which the administrative executives of the Company were present and informal meetings between individual members of the Board of Statutory Auditors and representatives of the Audit Firm, to have a reciprocal exchange of relevant data and information as required under Article 150 of the Consolidated Finance Act. There was always maximum collaboration between the parties – also regarding the preparatory activity for the Annual Financial Statements and no problematic issues arose that are worthy of mention.

As required by Article 19 of Legislative Decree 39/2010, in which the Board of Statutory Auditors is considered the Committee for Internal Control and Audit, the Audit Firm presented the 2016 Audit Plan to the Board of Statutory Auditors.

On 30 March 2017, the independent Audit Firm sent the Board of Statutory Auditors, as the Committee for Internal Control and Audit under Article 190 of Legislative Decree 39/2010 the report on the key issues that emerged from the legal audit; this indicated no significant failings in the Internal Audit for the financial information process. The Board of Statutory Auditors expressed a favourable opinion on the results described in the report, as required under Article 7.C.1, letter e) of the Self-regulatory Code.

Given the "Annual Transparency Report" prepared by E&Y S.p.A., published on its website and given to the Board of Statutory Auditors, the formal confirmation of its independence provided by the aforementioned company, and the notification of the assignments given it and the entities linked to it by Fiera Milano S.p.A. and its subsidiaries, and having ascertained that no tasks were assigned the firm that could compromise the independence of the Audit Firm under Article 17 of Legislative Decree 39/2010, the Board of Statutory Auditors does not believe there are any problematic issues regarding the independent status of E&Y S.p.A.

Further assignments for the legal audit of the accounts given to E&Y

The Audit Firm E&Y S.p.A. was paid a total of Euro 265,000 for the complete audit of the Financial Statements and the Consolidated Financial Statements and a limited audit of the Half-year Financial Statements of which:

  • Legal audit Euro 189.000;
  • Adoption of IFRS 15 and new standards from the Italian Accounting Board (OIC) Euro 40.000;
  • Increase in legal audit fee due to increased complexity Euro 36.000.

Additional assignments given to E&Y

A total of Euro 78,000 was paid by Fiera Milano S.p.A. to E&Y S.p.A. for additional assignments:

– agreed audits of regular reports Euro 58.000;

and to entities that are part of the same network:

– consultancy services for the Sustainability Report Euro 20.000.

The Board of Statutory Auditors believes that the increase in the remuneration requested by E&Y S.p.A. under the contractual terms of the original proposal, was consistent with the number of hours worked.

The Board of Statutory Auditors examined the proposals received from E&Y S.p.A. for the supply of professional and consultancy services and verified that these activities were not incompatible with that of the legal audit under Article 160 of the Listing Rules, as confirmed by Consob in the document "Outcome of the Consultation" of 4 May 2007.

Furthermore, Article 5 of the European Regulation (adopted with Article 17 of Legislative Decree 139/2010 and amended by Legislative Decree of 17 July 2016 no. 135) requires that the Board of Statutory Auditors approves any non-audit services provided by the Audit Firm or by entities that are part of the same network. Although this provision is applicable from 2017 the Audit Firm asked for prior approval from the Board of Statutory Auditors. Therefore, the Board of Statutory Auditors verified the compatibility of the services provided under Article 5 of the European Regulation and found no incompatibility.

In the interests of providing complete information, Fiera Milano S.p.A. and its subsidiaries gave auditing assignments to E&Y S.p.A. and to entities linked to it for a total of Euro 414,000 and further assignments that were not related to the audit of the accounts for a total of Euro 118,000. These were for:

  • agreed audit services for the interim reports Euro 88.000=;
  • other professional services relating to occupational health and safety, environmental and safety laws Euro 30.000=.
  • Changes to the area of the audit

E&Y S.p.A. informed the Board of Statutory Auditors that the audit activities had been prolonged due to the increased complexity of the mandate following the imposition of the administration order. The administration order had resulted in an increased level of risk to the areas to be audited and, consequently, required more in-depth audit tests.

E&Y S.p.A. requested a further Euro 36,000 in remuneration given the increased resources used for the audit. This was approved by the Board of Statutory Auditors.

Monitoring of the Full-year Financial Statements and the Consolidated Full-year Financial Statements

Regarding the Full-year Financial Statements and the Consolidated Full-year Financial Statements at 31 December 2016, the following should be noted:

The Board of Statutory Auditors ascertained, through direct verification and through information received from E&Y S.p.A. that the legal requirements governing the form and preparation of the Financial Statements, the Board of Directors' Management Report and the tables have been met, and certifies the correct use of the accounting standards described in the Notes to the Financial Statements and in the Board of Directors' Management Report.

In accordance with Consob Resolution no. 15519/2006 the effect of related-party transactions is clearly shown in the tables of the Financial Statements.

The Notes to the Financial Statements provide the information on impairment of assets required under International Accounting Standards. The Board of Directors at its meeting on 3 March 2017, formally recognised that the impairment tests complied with the requirements of IAS 36 and of Banca d'Italia/Consob/Isvap Document no. 4 of 3 March 2010. This was done independently and prior to approval of the Financial Statements as recommended by the aforementioned Document. The Board of Statutory Auditors states that it analysed and discussed in a joint meeting with the Control and Risk Committee the supporting documentation and verified that the methodologies were consistent with those used previously. It believes that the procedures were correct and that the main valuation assumptions used were reasonable and, therefore, agreed with the outcomes.

The Board of Statutory Auditors wishes to point out that the results of the impairment tests had a material impact on the financial results and led to strategic appraisals being carried out by the Board of Directors.

The Board of Statutory Auditors also points out that the impairment of intangible assets are the consequence, amongst other matters, of:

  • revised business plans for the coming financial years for some of the companies in the Fiera Milano Group that led to a reduction in the expected gross operating profit of some investments and in that of the whole Group; this resulted in a lower recoverable value and had a material effect on the valuation of investments and of goodwill;
  • the period for which the gross operating profit was used to calculate the terminal value was extended from two financial years to four financial years.

The Financial Statements reflect the facts and information of which the Board of Statutory Auditors became aware during the exercise of its monitoring responsibilities and through its control and inspection powers.

The Chairperson of the Board of Directors and the Manager responsible for preparing the company accounts have released the declaration under Article 81-ter of Consob Resolution no. 11971/1999 and subsequent amendments and modifications and of Article 154-bis of the Consolidated Finance Act.

The Board of Directors' Management Report meets the requirements of law and is consistent with the figures and information in the Financial Statements; it provides wide-ranging information on the activities and material transactions of which the Board of Statutory Auditors was duly made aware, as well as the main risks to which the Company and the subsidiaries are exposed, on intergroup and related-party transactions, and also on changes to the corporate organisation to meet the corporate governance requirements, in accordance with the Self-regulatory Code governing listed companies.

In accordance with Article 123-ter of the Consolidated Finance Act, the Report on Remuneration, the preparation and form of which were studied and approved by the Board of Statutory Auditors in a joint meeting with the Control and Risk Committee, is presented to the Shareholders' Meeting.

On 30 March 2017, the Audit Firm released its report in accordance with Articles 14 and 16 of Legislative Decree 39/2010; this states that the Financial Statements and the Consolidated Financial Statements at 31 December 2016 conform to the International Accounting Standards – IFRS – adopted by the European Union and to the provisions of Article 9 of Legislative Decree no. 38/2005, have been prepared with clarity and represent a true and fair view of the capital and financial situation, the financial results and the cash flows for the financial period ending on that date.

The audit report comments on the congruence of the Financial Statements of the Company and the Consolidated Financial Statements of the Group with the Board of Directors' Management Report and the information given in the Report on Corporate Governance and Ownership Structure as required under Article 123-bis of the Consolidated Finance Act.

Except for the contents of the present Report, the Board of Statutory Auditors has no comments to make about the approval of the Financial Statements at 31 December 2016 and the proposal of the Board of Directors as expressed in the Board of Directors' Management Report.

Milan, 30 March 2017

The Board of Statutory Auditors The Board of Statutory Auditors

Ms Federica Palmira Nolli Mr Antonio Guastoni Mr Carmine Pallino

Independent Auditors' Report

Resolutions passed by the Ordinary Meeting of Shareholders

The Ordinary Shareholders' Meeting held on 21 April 2017 in Rho (Milan) at the Auditorium of the Centro Servizi of the Exhibition Site, Strada Statale del Sempione no. 28,

passed a resolution

1)

  • • to approve the Financial Statements for the year to 31 December 2016, comprising the statement of financial position, the statement of comprehensive income, the statement of changes in equity, the statement of cash flows and the relative explanatory and supplementary notes to the financial statements that show a net loss of Euro 25,159,578.92 as presented by the Board of Directors in its entirety, and each individual item with the proposed allocations, as well as the Board of Directors' Management Report;
  • • to cover the net loss of Euro 25,159,578.92 for the financial year by using the share premium reserve;
  • • to cover the residual losses of the preceding financial year of Euro 154,268.60 by using the share premium reserve.

2)

  • • to establish eight as being the number of members of the Board of Directors and the term of office as being three years, therefore until the approval of the financial statements for the financial year ending on 31 December 2019;
  • • to appoint Directors the following persons with no exemption to the non-competition clause in Article 2390 of the Italian Civil Code:
  • Lorenzo Caprio, as Chairperson
  • Alberto Baldan
  • Francesca Golfetto
  • Stefania Chiaruttini
  • Marina Natale
  • Elena Vasco
  • Gianpietro Corbari
  • Angelo Meregalli
  • • to determine the remuneration payable to the Board of Directors as follows: (i) fixed annual remuneration for the Chairperson of Board of Directors of Euro 107,000; (ii) fixed annual remuneration for each Board Director of Euro 35,000, for a maximum total of Euro 245,000, both (i) and (ii) hypothesis pro rata temporis and (iii) an attendance fee of Euro 350.00 for each Board meeting attended by the same and also reimbursement of any documented expenses incurred in carrying out his/her role.

3)

• to approve the Report on Remuneration pursuant to Article 123–ter of Legislative Decree 58/98 and, in particular, Section One of the Report.

-

4)

  • • to cancel the authority to buy back and dispose of treasury shares approved by the Ordinary Shareholders' Meeting of 28 April 2016;
  • • to authorise the Board of Directors, in accordance with and by effect of Article 2357 and following of the Italian Civil Code, to buy back shares of the Company, in the amount, at the price, and according to the procedures described below:
  • • that purchases may be made in one or more tranches up to 18 months from the date of the present resolution;
  • • that the purchase price of each share is no higher than the higher of the price of the most recent independent transaction and the current highest independent offer price in the market where the acquisition transaction is done subject to the unit price of the shares being no higher than 10% and no lower than 10% of the reference price recorded by Fiera Milano shares on the Italian stock exchange (MTA – Mercato Telematico Azionario) organised and managed by Borsa Italiana SpA in the trading session preceding each individual transaction;
  • • that the maximum number of shares purchased, including treasury shares already held by the Company and its subsidiaries, must not have a total nominal value that exceeds one fifth of the share capital;
  • • that purchases of treasury shares may be made in one or more tranches, in compliance with applicable laws and regulations including the market procedures recognised by Consob. The buyback of treasury shares must be made respecting the provisions of Article 3 of Regulation 1052 and the applicable provisions of the Italian Civil Code and in such a way as to ensure equal treatment for all shareholders in accordance with Article 132 of Legislative Decree no. 58/1998, exclusively in the following ways:
    • i. public offer to buy or exchange;
    • ii. on regulated markets in accordance with the operating procedures established by the rules for the organisation and management of said markets, which do not allow the direct matching of buy orders with sell orders at a predetermined price;
    • iii. purchase and sale of derivative instruments traded on regulated markets that provide for the physical delivery of underlying shares, on the condition that the rules of organisation and management of the market provide for procedures that comply with those provided in article 144-bis, paragraph 1, section c) of the Listing Rules;
  • • to authorise the Board of Directors under enacted law to dispose of part or all of the shares with no time restrictions even before the buyback authority has been exhausted; the disposals may be made through sales on regulated and/or unregulated markets or off market, or by public offer, or as consideration for the purchase of shareholdings or by way of a distribution to shareholders. The selling price must be no lower than that of the lowest purchase price. This price limit will not be applicable in the event the shares are disposed of as part of a stock option plan;
  • • to grant the Board of Directors and, acting on its behalf, the appointed Chairperson and Chief Executive Officer, jointly and severally, any necessary power to make purchases or disposals and, however, to implement the aforementioned resolutions, also through agents, complying with any eventual request from the competent authorities.

Fiera Milano S.p.A.

Registered offices: Piazzale Carlo Magno, 1 – 20149 Milan, Italy Operational and administrative headquarters: Strada Statale del Sempione, 28 – 20017 Rho (Milan) Italy Share capital: Euro 42,445,141.00 fully paid up Companies Register, Tax code and VAT no. 13194800150 Economic Administrative Register 1623812

April 2017 This document is available in the Investor Relations section of the Company website www.fieramilano.it/en

Graphic design, layout and printed by

This book is printed on FSC forest friendly paper. The FSC logo identifies products that contain paper from forests managed according to strict environmental, economic and social defined by the Forest Stewardship Council

Tel. +39 02 4997.1 Fax. +39 02 4997.7379 email: [email protected] Freephone number: 800820029 Phone +39 02 4997.1 Fax +39 02 4997.7379 email: [email protected]

Talk to a Data Expert

Have a question? We'll get back to you promptly.