Financial Statements as of December 31, 2014

Financial Statements as of December 31, 2014 Marzotto S.p.A. Registered and Administrative Office in Largo S. Margherita 1, 36078 Valdagno (VI) Subje...
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Financial Statements as of December 31, 2014

Marzotto S.p.A. Registered and Administrative Office in Largo S. Margherita 1, 36078 Valdagno (VI) Subject to Trenora S.r.l. management and coordination activities

Translation from the original Italian text

[Summary] General information

Marzotto group

General information Marzotto Group's highlights

7

Corporate management and Shareholders

8

Notice of meeting

9

Report on group operation Group business units

13

Group structure by business unit

14

Significant events during the financial year

19

Income statement

22

Balance sheet and financial position

25

Performance of the Group's business sectors

28

Investments in subsidiaries and associates

33

Other information

38

Subsequent events

47

Outlook and information on the trend for the current financial year

48

Group consolidated financial statements Consolidated Statements of financial position

50

Consolidated Statements of income and comprehensive income

51

Consolidated Statements of cash flows

52

Consolidated Statements of changes in equity

53

Notes to the financial statements

54

Report of independent auditors

Marzotto S.p.A.

101

Report on Parent Company operations Subsidiaries and affiliated companies

104

Significant events during the financial year

105

Income statement

108

Balance sheet and financial position

111

Investments in subsidiaries and associates

112

Other information

120

Subsequent events

126

Board of Directors proposal, pursuant to Art. 2364 of the Italian Civil Code

127

Financial statements of the Parent Company Company Statements of financial position

130

Company Statements of income and comprehensive income

131

Company Statements of cash flows

132

Company Statements changes in equity

133

Notes to the financial statements

134

Report of independent auditors

177

Report of the Board of Statutory Auditors

178

Reclassified financial statements of Subsidiaries

180

Resolution of the Shareholder, pursuant to Art. 2364 of the Italian Civil Code

193

3

Annual Report 2014

 General information

Marzotto group Report on the Group’s operation Consolidated financial statements

Marzotto S.p.A. Report on the Company’s operations Company financial statements

Sole 24 Ore” del 5 aprile 2007

Si ha motivo di ritenere che l’Assemblea si terrà in seconda convocazione il 9 maggio 2007 alle ore 10.00 in Milano, Via Palestro n. 2, presso lo Spazio Eventi del “Centro Svizzero”.

5

[Marzotto Group’s highlights] Main economic, financial and equity data

2014

(in millions of euro) Net revenues Result of ordinary operations EBITDA

(1)

EBITDA (%ge) Net income Shareholders'equity

change %

333.4

305.8

9.0%

21.7

11.9

82.4%

34.5

24.8

39.3%

10.4%

8.1%

2.3%

13.4

(33.7)

n.c.

110.0

99.3

10.8%

Net financial debt

82.5

90.4

8.7%

Investments

17.7

16.3

8.6%

3,135

2,999

4.5%

Number of active employees as of 31 December

Net revenues by business sector

2013

2014

(in millions of euro) Fabrics Linen Yarns Other operations

2013

change %

288.7

264.7

9.1%

40.4

37.1

8.8%

15.1

16.9

-10.5%

Adjustments

(10.8)

(12.9)

n.s.

Group

333.4

305.8

9.0%

2014

2013

Revenues’percentage composition by business sector

Profit from core business by business sector

(in millions of euro)

2014

Fabrics Linen Yarns

2013

change %

23.2

14.2

63.4%

0.3

(2.5)

n.c.

Other operations

(1.8)

0.2

n.c.

Group

21.7

11.9

82.4%

(1). Profit (loss) from core businesses + ordinary amortization and depreciation. General information

7

[Corporate management and shareholders] Corporate management

in office at 31 december 2014 Board of Directors Chairman Antonio Favrin

(1)

Deputy Chairman Andrea Donà dalle Rose

(1)

Board Members Donatella Ratti Federica Favrin Rosanna Donà dalle Rose Vittorio Marzotto Chief Executive Officer Sergio Tamborini

(1)

1. Members of Executive Committee

Board of statutory auditors Acting Auditors Michele Paolillo - Chairman Franco Corgnati Federico Giorgione Substitute Auditors Marco Della Putta Francesca Cecchin Indipendent auditors Reconta Ernst & Young S.p.A.

Shareholders

As of 31.12.2014 the total capital share is euro 65,005,047. As of 31 December 2014 the sole Shareholder of Marzotto S.p.A., directly or indirectly owning voting share, is the following

(1)

:

Sole Shareholder Wizard S.r.l. 1. Ordinary shares owned indicated as % of the fully paid share capital.

Offices

Registered (as per resolution dated 26 march 2015) and Administrative Office: Largo S. Margherita, 1 – 36078 Valdagno (VI)

8

General information

[Marzotto S.p.A. – Reports and financial statements as of 31 December 2014] Convening of the Ordinary shareholders’ meeting

The shareholders of Marzotto S.p.A. are called to the Ordinary and Extraordinary shareholders’ meeting in Vicenza, at Via Vecchia Ferriera no. 57, at the Di Marco notary firm, for 2.30 PM on 22 June 2015, to discuss and resolve on the following Agenda Ordinary part: 

 

Financial statements as of 31 December 2014, Report by the Board of Directors, Report by the Board of Auditors, Report by the Independent Auditing Firm; presentation of the consolidated financial statements as of 31 December 2014 for the Marzotto Group and related reports. Pertaining resolutions. Appointment of Auditors and the Chairman of the Board of Auditors and establishing the remuneration. Pertaining resolutions. Proposed partial amendment of the relief regarding legal assistance expenses and legal costs with regards to company directors and auditors pursuant to the guarantees and protection afforded by Art. 15 of the Italian national collective employment contract for managers of industrial companies.

Extraordinary part: 

Reduction of the share capital from Euro 65,005,047 to Euro 40,000,000 for losses pursuant to Art. 2446 of the Italian Civil Code and voluntarily pursuant to Art. 2445 of the Italian Civil Code, following the downsizing of company business, in order to establish an unrestricted reserve by allocating reserve capital. Pertaining resolutions.

Valdagno, 04 June 2015

for the Board of Directors The Chairman Antonio Favrin

General information

9

Annual Report 2014

General information Marzotto group  Report on the Group’s operations Consolidated financial statements

Marzotto S.p.A. Report on the Company’s operations Company financial statements

Sole 24 Ore” del 5 aprile 2007

Si ha motivo di ritenere che l’Assemblea si terrà in seconda convocazione il 9 maggio 2007 alle ore 10.00 in Milano, Via Palestro n. 2, presso lo Spazio Eventi del “Centro Svizzero”.

11

[Report on the Group’s operations] Group activities

The Marzotto Group operates in the following sectors:   

Fabrics Linen Yarns Other Operations

The Fabrics sector includes the manufacturing and distribution of woollen and cotton fabrics for clothing and furnishing, with the following brands: - Marzotto and Lanerossi: leading collection by sales volume worldwide featuring a strong product research, aimed at designers and international markets; - Guabello: one of the exclusive names of the Italian textile tradition. It offers a luxurious collection in a contemporary style, where wool is paired with selected fabrics such as silk and cashmere; - Marlane: a men’s collection focused on the current market trends, combining trendy products and quality with highly competitive service and price; - Tallia di Delfino: it is a historic brand specialized in the production of woollen fabrics for highend and luxury menswear; Estethia / G.B.Conte: Estethia: a dynamic collection of combed fabrics, crepe, monostretch and bistretch, solid colours and printed fabrics with innovative finishes showing high quality and research; G.B. Conte: a collection specialised in carded and combed patterned fabrics for outerwear, boiled wool and jersey; - Tessuti di Sondrio: a leading brand and collection in terms of image for cotton and linen fabrics in the high-end segment. In 2008, the historic brand Dal Sasso was acquired, identified for its elegant, sophisticated sportswear in wool and cotton/wool, complementary to the Sondrio “lifestyle” project. NTB Nuova Tessilbrenta (brand acquired in 2009) completes the product range with cotton and cotton blend fabrics for (men’s and women’s) sportswear. - Velluto: in 2012, Marzotto extended its range by entering the velvet segment with the acquisition of the brands “Redaelli Velluti”, “Redaelli 1893”, “Niedieck” and “Christoph Andreae”. The Redaelli brand, intended for the clothing and furnishing market, has a formal, elegant flavour; the Niedieck brand, on the other hand, falls into the sportswear segment of sporty/elegant clothing. The Linen Yarns sector is leader in the production of “long-fibre” linen yarns through the Linificio e Canapificio Nazionale Group, which is 100% controlled by the parent company Marzotto S.p.A. Today, Linificio produces and distributes yarns and fabrics made of linen fibres. The Group is also involved in Wool, Yarns and Silk, through the companies subject to joint control, Tintoria di Verrone S.r.l., Uab Lietvilna and Ratti S.p.A. The Other Operations sector includes mainly coordination and strategic direction activities, as well as service activities (administration and finance, legal and investors’ relations, human resources management, information technology) performed centrally in favour of the operating sectors. In this sector we also include the results of the management of the wastewater treatment plant in Schio, the renewable energies activities, and the Group’s shareholdings that are not consolidated on a straight-line basis.

Marzotto Group Report on the Group’s operations

13

[Structure of Marzotto group by business units dated 31 december 2014] Marzotto S.p.A.

Fabrics

Wool Yarns

Marzotto Fabrics division

Tintoria Piovene division

Estethia/G.B. Conte division

Tintoria di Verrone S.r.l.

50.00% [1]

Tessuti di Sondrio division

Uab Lietvilna

50.00% [1]

Textile Furnishing division

Linen Yarns

Velvet division

100.00% 100.00%

Biella Manifatture Tessili S.r.l.

Linificio e Canapificio Naz.le S.r.l.

Guabello division

Filature De Lin Filin S.A.

100.00%

Tessuti Marlane division

Lin Naturel S.A.

100.00%

Tallia di Delfino division

Licana S.p.A. in liquidation

100.00%

Uab Lietlinen

100.00%

100.00%

Novà Mosilana a.s.

99.97%

AB Liteksas

[3]

50.00%

100.00%

100.00%

Marzotto Int.Trading Shanghai Ltd [2] Marzotto Textiles Usa Inc. [2]

100.00%

Sametex spol. s r.o

100.00%

Girmes Intern. GmbH

100.00%

Marzotto Textiles Czech Republic s.r.o.

100.00%

Marzotto Wool Manufacturing S.r.l.

100.00%

14

[4]

Marzotto group Report on the Group’s operations

Marzotto Lab S.r.l.

Uab Linestus

Silk

Other operations 33.36% [1]

Ratti S.p.A.

Le Cotonerie S.r.l.

100.00%

Creomoda S.a.r.l.

95.00%

Ambiente Energia S.r.l.

100.00%

Ratti Usa Inc.

100.00%

Marzotto Textile N.V.

100.00%

Ratti Int.Trading (Shanghai) Co.Ltd

100.00%

Marzotto Wool Fabrics BV

100.00%

S.C. Textrom S.r.l.

100.00%

Marzotto Blankets BV

100.00%

Mascioni S.p.A.

28.35%

Aree Urbane S.r.l. (in liquidation)

32.50%

Mediterranean Wool Ind. S.A.E.

30.00%

Pettinatura di Verrone S.r.l.

15.00%

Marzotto S.p.A. Consolidated companies Other shareholdings [1] Consolidated using the equity method [2] Controlled by Marzotto Textile N.V. [3] Controlled by Marzotto Wool Fabrics BV [4] Controlled by Marzotto Blankets BV

Marzotto group Report on the Group’s operations

15

[Report on the Group’s operations] Introduction

Shareholders, The consolidated financial statements for the Marzotto Group close FY 2014 with a net profit of 13,351 thousand euros and net revenues of 333,356 thousand euros. The consolidated financial statements given below have been prepared in compliance with the International Financial Reporting Standards (IFRS or “international accounting standards”) issued by the International Accounting Standards Board (IASB) and approved by the European Commission, and subsequent amendments and supplements. Please note that in FY 2014, the Group altered its method of accounting joint ventures or joint arrangements, which, as from this year, have been measured according to the equity method. This has become necessary due to the standardisation of the new accounting standard IFRS 11, the application of which is compulsory as from 01 January 2014. We would refer you to the explanatory notes for comments on the results of the financial statements. Below, please find the information on the Group’s position and future prospects, as well as that required by current legislation.

16

Marzotto Group Report on the Group’s operations

[Report on the Group’s operations] Economic situation/industrial trend (1)

The longest recession ever seen in Italy’s recent history would now finally appear to be on the way out. This is the picture we are given from the data disseminated by specialised sources, which note, for the Italian textile industry, 2014 turnover that is up by 3.3%. The estimated sector turnover is given in the notes disseminated by the Italian Fashion System on the trend of the textile-fashion industry, which report period business volumes of around 52.4 billion euros, improving by around 1.7 billion in value on last year. The positive performance applies both “up” and “downstream” in the chain, as they respectively gain +2.9% and +4.1%. A mini-recovery thanks not only to exports, which mark a +3.9% on 2013, but also to domestic demand, where a return to positivity has been seen in “apparent consumption” (+2.5%). We should note that this recovery of the domestic market does not yet mean a real reawakening of the domestic market after so many years of reduction or basic stagnation, insofar as the specified growth mainly lies in the recovery of business-to-business inter-chain commercial relations, in respect of a final consumption that is still negative (although estimated as being less so than 2013). Another positive factor comes in addition to these numbers, which allows us to hope that this as yet shy, but positive sector trend will continue: “the deceleration of the declining rates” of employment, which come in at -0.3% (approximately 1,200 workers). It is an economic position for the industry where the numbers highlighted finally suggest the first, small signs of recovery that should lead FY 2015 to pursue the favourable trend. Early estimates relating to the textile-fashion chain as a whole suggest that business volumes estimated for the first half are up by 2.8%, with textile contributing for +2.5% and clothing-fashion for +2.9%. As regards the geographic area of outlet, FY 2015 will again see the greatest boost to the Italian textile-fashion industry coming from the export market. For the first six months of the year, growth in sales outside national confines is estimated as 3.3% (as compared with the first six months of 2014) and a commercial balance is also recovering with +5.9% (on the end of the halfyear in 2014). The picture that thus emerges from the estimates processed by industry sources on the basis of indications provided by sample surveys and an analysis of the outlook of the macro-economic context of reference, is that of an Italian textile industry that, as a whole, reveals positive data, with all the main indicators on the up.

(1). Source: SMI - Study Centre; SMI on ISTAT data and internal investigations, publication of 05 March 2015 Marzotto Group Report on the Group’s operations

17

[Report on the Group’s operations] Group operating trend

FY 2014 confirmed the economic and equity solidity of the Marzotto Group, which during the period achieved consolidated revenues of 333.4 million euros (305.8 million in 2013), net profits of 13.4 million (loss of 33.7 million in 2013) and a significant decline of net financial debt. Pursuit of a strategy that remains coherent over time, focussed on excellent quality and the constant monitoring of the value chain, have helped achieved these favourable results. The Group aims to grow and develop through the range of products of extremely high quality and a style that seeks to preserve the identity of the brands with which it operates on the market. At the same time, the Group is paying attention to the creation in value and profitability through an integrated organisational structure and, considering the various different goods types, common to the various Group businesses. The results achieved are even more positive in view of the current macroeconomic context, which, although showing some signs of recovery, is burdened down by multiple complexities and as yet poor consumption levels. The strategic choices pursued and the organisational model adopted, in continuous improvement, as presented below, have enabled us to cope with this complex outlook and achieve revenues and profitability that show high growth rates. The consolidated data booked for FY 2014 reveals business volumes of 333.4 million euros, up 9% on last year and a gross margin of 76.9 million (23.1% on net revenues), up 19.8%. EBIT is positive for 15.6 million euros, despite the fact that this year was also influenced by net non-recurring expenses in the amount of 6.1 million euros, deriving from the Praia dispute for 4.6 million, in relation to which (as better described in the next paragraph), in December the Court ruled the full acquittal of all defendants and, for the residual portion, mainly ascribed to restructuring interventions involving various departments. Financial operations come in with a positive balance of 1.1 million euros (-19.6 million in 2013) and mainly include net financial expense for 3.1 million euros, income from measurement with the equity method of affiliates and joint ventures for 1.2 million euros and other financial income and expense positive for 3 million euros. In detail, net financial expense totals a reduction of 1.7 million euros (-35.4% on last year) due to the combined effect of the reduction of net financial debt, which goes from 90.4 million euros to 82.5 million euros with a simultaneous reduction in interest rates. Other financial income and expense reverse the sign, with an improvement of 17.5 million euros, mainly deriving from the consolidated capital gain achieved from the sale of the equity investment in Filivivi S.r.l. (for 6.5 million euros), partly offset by the impairment of the equity investment in the affiliate Mascioni S.p.A. (for 3.3 million euros). Please remember, however, that last year financial operations included impairment of the receivable due to the parent company from the affiliate Aree Urbane S.r.l. in liquidation for 14.7 million euros. The significant growth in turnover, together with an increase in the gross percentage margin and a limited trend of operating costs, strengthened by good financial operations, have led to a clear increase in the net result, which reaches 13.4 million euros.

18

Marzotto Group Report on the Group’s operations

[Key events of FY 2014] Before moving onto discussing the business of the Group in FY 2014, we would first note the highlights the year just ended and this year.

Group reorganisation

As part of a revision of the Marzotto Group organisational model involving the restructuring of the production units and Italian and foreign investments according to their industrial vocation, on 06 November 2014 the parent company Marzotto S.p.A. established the companies Marzotto Wool Manufacturing S.r.l. and Marzotto Lab S.r.l. Later, by notary’s deed of 15 December 2014 and with legal and accounting effect as from 01 January 2015, the parent company increased its share capital by conferring the following businesses: 

the “wool” business unit and related investments owned to the company Marzotto Wool Manufacturing S.r.l.;



the “linen, cotton, fabric furnishing and velvets” business unit and related investments owned to Marzotto Lab S.r.l.

The activities carried out during the year examined by the newly-established companies was mainly focused on initiating all the tax, customs, social security, insurance and financial-related procedures and activities required and necessary to make the company fully operative as of 01 January 2015, the date on which the conferral made by Marzotto S.p.A. took effect.

Business restructuring Wool Yarns

During the year, the Wool Yarns business was organised. In the early months of the year this resulted in the sale of the investment (held 50%) in the affiliate Filivivi S.r.l. and in its purchase of certain assets strictly related to the Wool Yarns business unit. More specifically, the main stages in which the operation took place are described below: 

Marzotto S.p.A. acquired the Lanerossi trademark from Filivivi S.r.l., which has the right to use it granted by virtue of a licence agreement;



Marzotto S.p.A. acquired a portion of the Lithuanian carding plant, by acquiring a 50% stake in the share capital of Uab Lietvilna;



Marzotto S.p.A. acquired the “top dye” business unit of Piovene Rocchette;



Marzotto S.p.A. acquired 50% of the company Tintoria di Verrone S.r.l., the company to which Filivivi S.r.l. had conferred the business unit for the cone dying and wool tops treatment processes;



Marzotto S.p.A. sold off its investment in Filivivi S.r.l. to the other shareholder, which now holds 100% of it. The buyer also undertook to repay the shareholder loan disbursed in previous years by the parent company to the former affiliate.

Mascioni S.p.A.

In relation to the continued difficult economic-financial position of the affiliate Mascioni S.p.A., in FY 2014 the parent company considered it reasonable to fully impair the value of the investment previously registered. This operation entailed the registration of an expense of 3.3 million euros in “other financial income and expense”.

Dividend stripping

During FY 2010, in relation to the dispute against sentence no. 78/2010 issued by the 4th chambers of the Regional Tax Commission of Venezia-Mestre on 21/09/2010, Marzotto S.p.A. has been notified of an entry in the tax litigation list and the pertaining payment request for a total of 28.2 million euros, subsequently reduced to 16.2 thanks to the steps taken by the competent Bodies based on appeals presented by the involved Corporations, namely Marzotto S.p.A. and, by virtue of the partial proportional spin-off of July 2005, Valentino Fashion Group S.p.A., jointly and respectively 1/3 and 2/3 of said liability towards the tax authority. In January 2014, Marzotto S.p.A. and Valentino Fashion Group S.p.A. stipulated a settlement agreement to define, amongst other aspects, their joint liability to make payment of said tax notice and the lawsuit in question. Under this agreement, Marzotto S.p.A. paid the residual tax payable as a lump sum, thereby benefiting from the 2014 Stability Law, releasing Valentino Fashion Group S.p.A. from its obligations, which, in turn, waived all claims made against Marzotto S.p.A., abandoning all civil proceedings brought before the Court of Milan. Said dispute against sentence no. 78/2010 is still pending in Cassation.

Marzotto Group Report on the Group’s operations

19

[Key events of FY 2014] Praia dispute

Beginning in 1999, some former employees and heirs of former employees at the Praia a Mare plant filed a motion with the Attorney General through the Court of Paola, seeking criminal action against the persons in charge of the plant from the 1960s through 2004, allegedly for functional omissions that, because of work safety conditions there, would have been the cause of death and serious health problems to some employees. After the Judge of the same Court rejected three requests by the Examining Judge to close the case, in October 2009 and February 2010, the prosecution issued notices of completion of preliminary investigations, also for environmental crimes. In March 2011 Marzotto S.p.A. was served the summons, pursuant to Art. 83 of the Italian Code of Criminal Procedure, of the responsible officer who, according to the ordinary proceedings, even if he did not commit crime, is jointly responsible for the payment of damages, if any. In November 2013, by agreement with ENI S.p.A. (jointly obliged as previous owner), all financial claims lodged by natural persons involved in the criminal proceedings and all those who had taken civil action, were settled. By sentence of the Court of Paola, read out in the hearing of 19 December 2014, the full acquittal of all defendants was ruled, because the events do not exist. It was also established that the external area of the Praia a Mare plant, overlooking the sea, was to be returned, the area on which, by virtue of the order of the mayor of January 2007, Marzotto S.p.A. will be completing the characterisation works started some time previous and thereafter suspended by virtue of interim measures.

20

Marzotto Group Report on the Group’s operations

[Report on the Group’s operations] Income statement and balance sheet highlights

The table below contains summaries of the Group’s main income statement, balance sheet and financial position items for the year ended on 31 December 2014. (in millions of euro)

2014

2013

Consolidated net revenues

333.4

305.8

27.6

+ 9.0%

21.7

11.9

9.8

+ 82.4%

9.7

+ 39.3%

43.6

n.c.

2.2

n.c.

47.1

n.c.

Profit from core businesses % of net revenues

(1)

6.5%

EBITDA (2) % of net revenues

10.4%

Income before taxes

16.7

% of net revenues

34.5

5.0%

8.1% (26.9) (8.8%)

=

(2.2)

% of net revenues

=

(0.7%)

% of net revenues

13.4 4.0%

change %

3.9% 24.8

Result from activities held for sale Group net income

change

(33.7) (11.0%)

68.3

72.5

(4.2)

- 5.8%

Net employed capital

192.5

189.7

2.8

+ 1.5%

Net financial position

82.5

90.4

(7.9)

+ 8.7%

1.4

+ 8.6%

Net working capital

Investments for the period Active staff: persons

17.7

16.3

3,135

2,999

2014

2013

136

+ 4.5%

change

ROI

11.4%

6.1%

5.3%

ROE

12.8%

-28.0%

40.8%

ROS Debt/Equity Financial coverage rate of assets Inventory rotation index Number of days of credit to clients

6.5%

3.9%

2.6%

75.0%

91.0%

-16.0%

106.2%

118.3%

-12.1%

152

155

-3

79

85

-6

Legend: ROI: Operating results / Average invested capital ROE: Net results / Average shareholders’ equity ROS: Operating results / Net revenues Borrowing / Equity: Net financial position / Shareholders’ equity Rate of financial coverage of fixed assets: Fixed assets + ML term funds / Shareholders’ equity + ML term financial debt Stock rotation index: Net inventory / Cost of goods sold x 360 days Credit days to customers: Gross trade receivables / Net revenues x 360 days (1). Revenues from sales and services – Operating costs (2). Result of ordinary operations + Ordinary depreciation and amortisation Marzotto Group Report on the Group’s operations

21

[Report on the Group’s operations] Income statement

As of 31 December 2014 the Group’s net result was positive for 13.4 million euros, with a +47.1 million euros difference compared to the final figure recorded in 2013. Summarized consolidated income statement data for the period, compared to those of the year 2013, are as follows (1): 2014

(in millions of euro)

333.4

Cost of sales

(256.5)

(76.9%)

(241.6)

Gross income

76.9

23.1%

64.2

21.0%

R&D and marketing costs

(35.7)

(10.7%)

(33.9)

(11.1%)

General and administrative costs

(19.5)

(5.9%)

(18.4)

(6.0%)

100.0%

Profit from core businesses

21.7

Non-recurring income/(charges)

(6.1)

Operating income

15.6

305.8

100.0% (79.0%)

6.5%

11.9

3.9%

(1.8%)

(19.2)

(6.3%)

4.7%

(7.3)

(2.4%)

(3.1)

(0.9%)

(4.8)

(1.6%)

Equity valuations

1.2

0.4%

(0.3)

(0.1%)

Other financial income/charges

3.0

0.9%

(14.5)

(4.7%)

16.7

5.0%

(26.9)

(8.8%)

Net financial charges

Income before taxes Taxes

(3.3)

Income before activities held for sale

13.4

Result from activities held for sale

(1.0%) 4.0%

=

Group net income

Net revenues (2)

2013

Net revenues

=

13.4

4.0%

(4.6)

(1.5%)

(31.5)

(10.3%)

(2.2)

(0.7%)

(33.7)

(11.0%)

The year just ended shows an increase in net revenues of 9%, with a volume of turnover that comes in at 333.4 million euros. With reference to product type, the Wool and Cotton Fabrics close the year with an increase in business volumes of 9.1%, equal to 24 million euros, whereas the Linen Yarns booked +8.9%, or 3.3 million euros. With regards to the outlet market, the Group enjoys a positive trend on all its main markets. In detail, sales made on the domestic market and in other European countries stood at 267.8 million euros (+9.2% on the final figure for 2013), those made on the international market came to 65.6 million euros (+8.4% on the final figure for 2013). Below is a brief presentation of the breakdown of net revenues by sector and geographical area, as compared with the same results of the last year.

by sector

(in millions of euro)

2014

2013

Textile Sector

327.8

98.3%

298.1

Fabrics

288.7

86.6%

264.7

86.6%

40.4

12.1%

37.1

12.1%

Inter-company sales

(1.3)

(0.4%)

(3.7)

(1.2%)

Other Operations

15.1

4.5%

16.9

5.5%

342.9

102.8%

315.0

103.0%

Linen Yarn

Aggregate total Inter-company sales/other

(9.5)

(2.8%)

(9.2)

97.5%

(3.0%)

Consolidated total

333.4

100.0%

305.8

100.0%

of which: Italy

107.3

32.2%

100.7

32.9%

of which: Other markets

226.1

67.8%

205.1

67.1%

(1). The Ratti Group, Tintoria di Verrone S.r.l., Uab Lietvilna and Uab Linestus are consolidated with the equity method, in application of the standard IFRS 11. (2). Compared to 2013, the main foreign currency of interest for the Group had the following trends compared to the euro: GBP – British pound: 0.806 (average 2014); 0.849 (average 2013); JPY – Japanese Yen 140.377 (average 2014); 129.660 (average 2013); USD – US Dollar 1.328 (average 2014); 1.328 (average 2013); CZK – Czech Crown 27.536 (average 2014); 25.987 (average 2013).

22

Marzotto Group Report on the Group’s operations

[Report on the Group’s operations] Below is a brief representation of the geographic breakdown of net revenues as compared with last year’s results.

by geographical area

2013

Italy

107.3

32.2%

100.7

32.9%

Other European countries

160.5

48.1%

144.6

47.3%

North America

17.1

5.1%

11.2

3.7%

Asia

37.2

11.2%

36.8

12.0%

Other countries Total

Result of ordinary operations

2014

(in millions of euro)

11.3

3.4%

12.5

4.1%

333.4

100.0%

305.8

100.0%

The clear increase in the business volume recorded is reflected on the core business result, which reaches 21.7 million euros (+9.8 million euros on end 2013), with an incidence of 6.5% of net income from sales. This growth characterises both the Fabrics business, which books a positive result of 23.2 million euros (+63.4%) and an incidence of 8% on income from sales and the Linen Yarns business, which reverses its sign on the previous year end, with a positive result of 0.3 million euros (negative for 2.5 million last year) and an incidence on business volumes of 0.7%. The pursuit of the rationalisation of the industrial and production structure, undertaken during previous years, helped towards the achievement of this result, giving rise to an intensification of synergies and consolidation of the logistics/commercial network in order to obtain an improvement in the quality of service and a limitation of costs, to become more competitive on the outlet markets.

by business sector

2014 (in millions of euro)

2013 %age

Amounts

%age

Textile Sector

23.5

7.2%

11.7

3.9%

Fabrics

23.2

8.0%

14.2

5.4%

Linen Yarns

0.3

0.7%

(2.5)

(6.7%)

Other Operations

(2.5)

n.s.

(0.3)

n.s.

Adjustments/other

0.7

Total

Non-recurring income and charges

Amounts

21.7

= 6.5%

0.5 11.9

= 3.9%

In the year in question, non-recurring events has a negative balance for 6.1 million euros. This item mainly includes: 

provisions made for charges on the business plan, for 1.0 million euros, relating to costs connected with the reorganisation and increased efficiency of production departments, as well as to charges related to decommissioned plants and areas;



expenses for the Praia dispute, for 4.6 million euros, against costs incurred during the year and other legal charges and expenses forecast for the coming years.

The change on last year is +13.1 million euros, mainly relating to the impairment of 9.1 million euros booked in FY 2013 for the receivable due to the parent company from Valentino Fashion Group S.p.A., by virtue of a settlement agreement stipulated by the parties in January 2014, as described amongst the “Key events for FY 2014”.

Marzotto Group Report on the Group’s operations

23

[Report on the Group’s operations] Net financial expense

Net financial expense as of 31 December 2014 comes to 3.1 million euros, down 1.7 million euros on the final figure of 2013. The improvement is mainly due to the joint effect of the reduction of net financial debt and the decline in interest rates.

Dividends and equity measurements

Dividends from non-consolidated equity investments and equity measurements (1.2 million euros) include the economic impact of the measurement using the equity method, of equity investments in affiliates.

Other financial income and charges

Other financial income and charges includes the capital gain in relation to the sale of the investment in Filivivi S.r.l. (for 6.5 million euros) and the impairment of the equity investment in Mascioni S.p.A. (for 3.3 million euros); in 2013, it included the write-down applied to the financial receivable due from the affiliate Aree Urbane S.r.l. in liquidation for 14.7 million euros.

Income taxes

Starting from FY 2008, the companies Marzotto S.p.A., Immobili e Partecipazioni S.r.l., Linificio e Canapificio Nazionale S.r.l. and Licana S.p.A. (in liquidation) and starting from FY 2009, Biella Manifatture Tessili S.r.l. (formerly Tallia di Delfino S.p.A.), Le Cotonerie S.r.l. (formerly Immobiliare Isola S.r.l.) and Ambiente Energia S.r.l. chose the national tax consolidation regime, for which the parent company of Marzotto S.p.A. is the holding Wizard S.r.l., and its effects are reflected in the results as of 31 December 2014. The incidence of the tax burden on the period result is negative for 3.3 million euros (negative for 4.6 million in 2013), consisting of current tax for -4.1 million, deferred tax assets for 0.1 million and previous years’ taxes, positive for 0.7 million euros.

Net result

The analyses performed thus far reveal a positive net period result for 13.4 million euros as compared with a negative result for 33,7 million for FY 2013. The table given below shows the economic contribution made by each management area to the improvement achieved, equal to a total of 47.1 million euros.

(in millons of euro)

change in profit from core businesses change in non-recurring income (charges) change in net financial charges change in income from shareholdings Total

43.6

Total changes versus the comparison period

Report on the Group’s operations

1.5 17.5

change in result from activities held for sale

Marzotto Group

1.7

change in other financial income (charges) change in income taxes

24

9.8 13.1

1.3 2.2 47.1

[Report on the Group’s operations] Group’s balance sheet and financial position

The Marzotto Group’s balance sheet and financial position is summarized in the table below, compared with the corresponding amounts as of 31 December 2013: 31.12.14

31.12.13

Net trade receivable

66.5

65.1

Other receivables

19.6

16.3

Inventory

108.3

103.7

Commercial suppliers

(98.3)

(78.4)

Other payables

(27.8)

(34.2)

A) Net working capital

68.3

72.5

(in millions of euro)

B) Assets/liabilities held for sale

=

(0.6)

Receivables beyound 12 months

21.2

Equity investments

20.6

21.5

106.9

102.1

Tangible fixed assets Intangible fixed assets

22.4

9.4

6.6

C) Net fixed assets D) Employee severance fund, reserves, and other non-financial M/L term payables E) Deferred taxes reserve

158.1

152.6

(29.2)

(29.5)

F) Invested capital net of current liabilities (A+B–C–D-E)

192.5

189.7

95.6

159.0

(20.1)

(68.9)

(4.7)

(5.3)

Covered by: Short-term financial payables Cash and short-term financial receivables Medium/long term financial payables Medium/long term financial receivables G) Net borrowing

Net invested capital

7.4

0.4

(0.4)

(0.1)

82.5

90.4

H) Group shareholders' net equity

110.0

99.3

I) Total (G+H) as in F

192.5

189.7

At the end of FY 2014, invested capital, net of operating liabilities, comes to 192.5 million euros, as compared with the 189.7 million of 31 December 2013. The increase recorded (2.8 million euros) is mainly due to the combined effect, with opposite sign, of the reduction in net working capital (-4.2 million), the reduction in the value of discontinued operations (+0.6 million) and the increase in fixed assets (+5.5 million). The decline recorded by operating capital is mainly in respect of a different invoicing time and careful credit monitoring and management, pursuing an increasingly focussed policy for the award of clients and management of collection times with respect to agreed contractual due dates. The trend of current assets is carefully monitored by the Group in order to improve its financial position. The value booked last year amongst assets held for sale (discontinued operations) related to the economic impact of the consolidation of the Filivivi Group. Net fixed assets as of 31 December 2014 came to 158.1 million and increased by 5.5 million on FY 2013, mainly in connection with period investments, net of the normal period amortisation process. In detail, the net change recorded by tangible and intangible fixed assets is 7.6 million euros, of which 17.7 million are ordinary investments made by the Group during the year (16.3 in 2013).

Marzotto Group Report on the Group’s operations

25

[Report on the Group’s operations] The table below highlights the investments made in each business sector.

2014

(in millions of euro)

2013

Textile Sector

15.0

84.7%

14.9

91.4%

Fabrics

14.2

80.2%

14.1

86.5%

Linen Yarns

0.8

4.5%

0.8

4.9%

Other Operations/other

2.7

15.3%

1.4

8.6%

17.7

100.0%

16.3

100.0%

Total

Investments were mostly for renovation and modernization measures of plants and machinery, in particular in the spinning, weaving and finishing departments, in execution of the planned product improvements and the efficiency of the production process, as well as the adjustment and bringing up to standard of plants and buildings.

Net financial debt

During FY 2014, the Group’s financial position recorded a progressive improvement, enabling the Group’s equity structure to continue to be strengthened. The net financial debt has dropped by 7.9 million euros, settling at 82.5 million euros, with a timely debt index(1) of 42.9% of the net invested capital (47.7% as of 31 December 2013). For the presentation of flows that generated the change in the financial position during the year, the indirect method was used, by means of which the net period result is adjusted to account for non-monetary operations, changes in working capital and cash flow from investments, as shown below(2). (in millions of euro)

2014

2013

Net income

13.4

Adjustments to income line items

(1.2)

(33.7) 1.0

Depreciation, amortization and write-downs

13.0

13.0

Provision and use of reserve

(1.3)

Cash Flow

23.9

4.0

Change in trade receivables

(4.0)

Change in inventory

(4.5)

4.7

Change in short-term payables

13.1

1.9

(15.7) 10.8

Cash Flow from current assets

28.5

1.7

Investment in tangible and intangible fixed assets

(17.7)

(16.3)

0.4

0.3

Disposals of tangible and intangible fixed assets Acquisitions/change in shareholdings Cash Flow from investments

=

=

(17.3)

(16.0) (14.3)

Free Cash Flow

11.2

Conversion differences from net borrowing and minority interests

(3.3)

Free Cash Flow before dividends

7.9

= (14.3)

Shareholders' dividends

=

=

Capital increase in Parent company

=

(0.4)

7.9

(14.7)

Initial net borrowing

(90.4)

(75.7)

Final net borrowing

(82.5)

(90.4)

Change in net financial position for the year

(1). Ratio between Net financial debt and Capital employed net of current liabilities. (2). The Ratti Group, Tintoria di Verrone S.r.l., Uab Lietvilna and Uab Linestus are consolidated with the equity method. 26

Marzotto Group Report on the Group’s operations

[Report on the Group’s operations] Period free cash flow is positive for 7.9 million euros, as compared with a negative 14.3 for last year. Current operations allowed for the generation of cash flow for 28.5 million (as compared with the 1.7 million totalled in 2013), used for 17.3 million in investments. Conversion differences and changes to the area of consolidation mainly include the acquisition of the Lanerossi trademark from the ex-affiliate Filivivi S.r.l. (for 2.9 million euros).

Shareholders’ equity

The Group’s shareholders’ equity at year end comes to 110.0 million euros (up 10.7 million on 31 December 2013). The capitalisation index (1), calculated as ratio between shareholders’ equity and net invested capital, goes from 52.3% in 2013 to 57.1% at the end of 2014.

(1). Ratio between Shareholders’ equity and Capital employed net of current liabilities. Marzotto Group Report on the Group’s operations

27

[Report on the Group’s operations] Analysis by business sector

Fabrics

In FY 2014, the Group realised 86.6% of consolidated revenues in the Fabrics sector, 12.1% in the Linen Yarns and the remaining in other businesses. Below we report on the trends of the businesses in which the Group operates through the parent company and the Italian and foreign subsidiaries. The main indicators for the Fabrics sector are summarized below: (in millions of euro)

Consolidated net revenues (1)

2013

change

change %

288.7

264.7

24.0

+ 9.1%

23.2

14.2

9.0

+ 63.4%

% of net revenues

8.0%

5.4%

2.6%

Operating income

22.7

14.6

8.1

% of net revenues

7.9%

5.5%

2.4%

119.4

122.7

Profit from core businesses

Consolidated net invested capital Investment for the period Active staff at 31 December: persons

Net revenues

2014

14.2

14.1

2,126

2,096

+ 55.5%

(3.3)

- 2.7%

0.1

+ 0.7%

30

+ 1.4%

During the year, the volume of business achieved by the Fabrics sector shows an increase of 9.1%, going from 264.7 million in 2013 to 288.7 million euros at end 2014. All the segments examined here, apart from the cotton sector, record significant growth rates in 2014, in particular the Velvet division, which books +25.3% (2.4 million euros), the Wool Fabrics sector shows +11.5% (23.5 million euros), and Furnishing Fabrics also has a positive trend with +5.7% (0.5 million euros). The Cotton Fabrics branch is slightly down, with a reduction of 4.6% (1.8 million euros). The table below shows the contribution and trend of turnover according to brand.

by brand

2014

(in millions of euro)

Marzotto and Lanerossi Fabrics

2013

117.9

40.9%

106.0

40.0%

Guabello

32.4

11.2%

33.8

12.8%

Tallia di Delfino

28.1

9.7%

25.1

9.5%

Tessuti Marlane

37.4

13.0%

30.2

11.4%

Estethia/G.B. Conte

11.3

3.9%

8.5

3.2%

Tessuti di Sondrio

36.4

12.6%

38.2

14.4%

Velvet

11.9

4.1%

9.5

3.6%

9.3

3.2%

8.8

3.3%

Textile Furnishing Other

4.0

1.4%

4.6

1.8%

Total

288.7

100.0%

264.7

100.0%

As regards the geographic outlet markets, Europe, which accounts for 78.6% of the Fabrics Business volume, despite the fact that it is also the geographic area that has most suffered the severe economic crisis that has struck the entire continent, is showing some recovery, with an increase in turnover of 20.6 million euros (+10%). The same positive trend is also seen in North America, where the Group records an improvement in turnover in the amount of 6 million euros (+54.5%). The Asiatic market remains basically stable, accounting for 11.7% of the sector business volume, with turnover down by 1.6 million euros (4.5%).

(1). Including revenues towards other sectors of the Group for 2.1 million (2013: 2.3 million). 28

Marzotto Group Report on the Group’s operations

[Report on the Group’s operations] Analysis by business sector

Fabrics by geographical area

2014

(in millions of euro)

2013

Italy

81.0

28.1%

73.0

27.6%

Germany

46.9

16.2%

49.4

18.7%

Other European countries

99.1

34.3%

84.0

31.7%

North America

17.0

5.9%

11.0

4.2%

Asia

33.7

11.7%

35.3

13.3%

Other countries Total

11.0 288.7

3.8%

12.0

4.5%

100.0%

264.7

100.0%

Result of ordinary operations

The positive trend of turnover, the improved production and distribution efficiency and a careful rationalisation policy have successfully achieved a core business result from Fabrics that is positive for 23.2 million euros - a clear improvement on the last year end (core business result of 14.2 million euros as of 31 December 2013).

Invested capital

Invested capital (119.4 million euros) is down on the figure booked for 2013. The reduction (of 3.3 million euros) is mainly as a result of the reduction in net working capital for 6.6 million euros, offset against the increase in net fixed assets for 3.3 million euros. In 2014 investments in equipment and machinery continued to maintain high productivity and production quality standards, as well as the adjustment and bringing up to standard of the whole of the Fabrics segment in Italy and abroad, investments totalled approximately 14 million euros.

Marzotto Group Report on the Group’s operations

29

[Report on the Group’s operations] Linen Yarns sector Linificio e Canapificio Nazionale Group

Analysis by business sector 2014 saw the world linen market record a strengthened demand, also due to the significant increase in emerging markets and India and China in particular. The success enjoyed on these markets is due to both the promotional efforts made of the product by leading operators on the markets (in particular, Jaya Shree in India) and the correct value for money boasted by the linen fibre in 2014. This year’s aim is to further strengthen turnover and margins, exploiting the opportunities offered up by a market that looks to be favourable, through a further recovery of production efficiency and investments aimed at increasing production capacity in Lithuania and quality in Tunisia. The main figures of the Linificio e Canapificio Nazionale Group of 2014 are shown below. (in millions of euro)

2013

40.4

% of net revenues

change

change %

37.1

3.3

+ 8.9%

0.3

(2.5)

2.8

n.c.

0.7%

(6.7%)

7.4% 3.1

n.c. n.c.

Operating income

0.4

(2.7)

% of net revenues

1.0%

(7.3%)

Group net income

0.2

(3.8)

4.0

31.5

36.4

(4.9)

Consolidated net invested capital Investment for the period Active staff at 31 December: persons

Net revenues

2014

Consolidated net revenues (1) Profit from core businesses

0.8 895

0.8 776

0.0

- 13.5% + 0.0% + 15.3%

119

The year just ended shows an increase in net revenues of 8.9%, with a volume of turnover that comes in at 40.4 million euros. As regards the quantities listed on the market, we note a +11.5% for Linen Yarns and -13.7% for Linen Fabrics. Sales made on the domestic market account for 51% of the total volume for the Linen Yarns business and still show signs of weakness, with a decrease in terms of turnover of 1.1 million euros (-5.1%). Other European countries, which account for 39.6% of volumes, have instead shown clear signs of recovery, archiving an increase of 2.8 million euros (+21.2%). The same positive trend is seen in Asia, where the Group realised greater revenues in the amount of 1.9 million euros, more than double last year’s result (+126.7%).

by geographical area

2013

Italy

20.6

51.0%

21.7

58.5%

Other European countries

16.0

39.6%

13.2

35.6%

North America

0.1

0.2%

0.2

0.5%

Asia

3.4

8.4%

1.5

4.0%

Other countries Total

Operating income

2014

(in millions of euro)

0.3

0.8%

0.5

1.4%

40.4

100.0%

37.1

100.0%

The increased revenues are reflected on core business, which reverses its sign from last year, recording a positive 0.3 million euros (negative EBIT for -2.5 million as of 31 December 2013), thereby booking total growth of 2.8 million euros.

(1). Including revenues towards other sectors of the Group for 1.1 million (2014) and 1.5 million (2013). 30

Marzotto Group Report on the Group’s operations

[Report on the Group’s operations] Linen Yarns sector Linificio e Canapificio Nazionale Group

Foreign subsidiary trends

Analysis by business sector The pursuit of the rationalisation of the industrial and production structure, undertaken during previous years, helped towards the achievement of this result, giving rise to an intensification of synergies with the Marzotto Group and consolidation of the logistics/commercial network in order to improve the quality of service and limit costs, to become more competitive on the outlet markets. As regards the Tunisian subsidiary Filin SA, the favourable settlement of the union disputes, which had resulted in 12 days of strikes between November 2013 and January 2014, obtained through the mediation applied of the central structures of the parent company, helped ensure a recovery of productivity and the consolidation of quality levels. The plant’s production performance, despite not yet having reached maximum plant capacity, in 2014 recorded a significant improvement. The Lithuanian plant, in pursuing its optimisation, effectively resulted in the saturation of the plants in the approach to maximum theoretical production capacity. As compared with last year, FY 2014 recorded an increase in volumes both in terms of orders placed (+4.4%) and dispatched (+10.5%); this result was made possible by the development of commercial strategies that consolidated the positioning on traditional and emerging markets and by the preparation of the business plan that led to the improvement of plant performance, both in terms of productivity and quality.

Invested capital

At the end of FY 2014, invested capital, net of operating liabilities, comes to 31.5 million euros, as compared with the 36.4 million of 31 December 2013. The decline recorded (4.9 million euros) is mainly due to the reduction of operating capital (for 3.9 million euros) and the reduction in fixed assets (for 1.7 million euros); these are partially offset by the lowering of long-term funds (for 0.7 million). The main change is therefore connected with the decline recorded by operating capital on last year, mainly in respect of a different invoicing time and careful credit monitoring and management, pursuing an increasingly focussed policy for the award of clients and management of collection times with respect to agreed contractual due dates. The trend of current assets is carefully monitored by the Group in order to improve its financial position. The change booked to net fixed assets is closely linked to period investments (0.8 million euros), offset by the normal amortisation/depreciation process. Please note that this year was also affected by factoring operations. More specifically, as of the reporting date, the impact deriving from the transfer of receivables without recourse comes to 1.0 million euros, in line with the disposal implemented last year (1.1 million euros).

Net financial position

The Linificio Group’s net financial position is positive, as a consequence of a positive change of 5.1 million euros, going from a debt of 0.1 million to liquid funds of 5.0 million euros. The financial improvement is seen from the combined effect, of opposite sign, of the following factors: • reduction of the short-term financial debt in the amount of 6.7 million euros; • reduction in financial assets for 1.6 million euros; and is mainly due to the cash flow generated by current business operations, positive for 5.1 million euros.

Marzotto Group Report on the Group’s operations

31

[Report on the Group’s operations] Other Operations

Other operations

Analysis by business sector

2014

(in millions of euro)

2013

change

change %

Net revenues (1)

15.1

16.9

(1.8)

- 10.5%

Profit from core businesses

(2.5)

(0.3)

(2.2)

>100.0%

Operating income

(7.5)

(19.7)

12.2

+ 61.9%

Net financial revenues: (2)

8.8

5.8

3.0

- 51.7%

- financial charges

(4.7)

(35.7)

31.0

>100.0%

Income before taxes

(3.4)

(49.6)

46.2

+ 93.1%

1.3

+ 92.9%

(13)

- 10.2%

- from equity investments

Investments for the period Active staff at 31 December: persons

2.7 114

1.4 127

The Other Operations sector includes mainly coordination and strategic direction activities, as well as service activities (administration and finance, legal and investors’ relations, human resources management, information technology) performed centrally in favour of the operating sectors. This sector also includes the results of management of the waste water treatment plant in Schio, the renewal energies activities, and non-consolidated shareholdings owned by the Group. The operating loss is attributable to the costs incurred by the corporate structure and not charged back to the Group divisions. The balance of operations, negative for 7.5 million, shows an improvement of 12.2 million euros. This change is related for 9.1 million euros to the impairment, booked by the parent company last year, of the receivable due from Valentino Fashion Group S.p.A. under the settlement agreement stipulated by the parties in January 2014 (as described previously). Financial operations show a net positive result of 4 million euros, of which 8.8 million essentially relating to dividends received (separated out during consolidation) and -4.7 million for financial expenses. As of 31 December 2014, the latter included the impairment of the equity investment in the affiliate Mascioni S.p.A. for 3.3 million euros, which the parent company believed reasonable to apply in view of the continued economic and financial difficulties. Please remember that the severely negative value of last year was due to the joint effect of several factors, such as the impairment of the financial receivable due from Aree Urbane (14.7 million euros), the adjustment of the value of the equity investment held in Filivivi to the assumed sale price (for 7.0 million euros) and the impairment of the equity investment held in Linificio S.r.l. for 11.9 million.

(1). Including revenues towards other sectors of the Group for 9.6 million (2014) and 9.1 million (2013). (2). It includes the equity measurement of companies consolidated using the equity method. 32

Marzotto Group Report on the Group’s operations

[Equity investments] Shareholdings in subsidiaries

Below we provide a summary of the performance of the main direct subsidiaries (consolidated in the Group income statement), as well as of the most important Group affiliated companies and other significant shareholdings of the Group.

Biella Manifatture Tessili S.r.l. (formerly Tallia di Delfino S.p.A.)

The Company’s aim is to deal with all commercial, industrial and financial, equity and property operations relating to the purchase and main and accessory processing of wools and all textile fibre activities. The Company acquisition process began in July 2008 and was completed in January 2010, when the parent company became a Sole Shareholder. Thereafter, in April 2011, a share capital increase was resolved, which was fully subscribed, by means of the conferral of the business unit referred to as “Lanifici Biellesi”, corresponding to the Guabello and Marlane business. This operation has concentrated the textile activities of the Marzotto Group around the Biella area in one single corporate hub, to take advantage of all possible actions to increase the system as a whole. In operative terms, the operation enabled completion of the synergies initiated in relation to the industrial, logistic, managerial and human resource processes. Thanks to the relevant synergies existing between Guabello, Marlane and Tallia, there’s a structural and functional bond between them which ensures competitive and efficiency advantages for the respective products which, since they are complementary, have enabled us to offer the market a complete range of “Made in Biella” articles. At the same time, the operation has enabled us to seize the opportunities to enhance and better develop the different brands, creating a strong group in its size, strengthened by belonging to the wool district and therefore benefiting for the quality and product recognition typical of the Made in Biella, exploiting the added value deriving from the fact that it is part of the wool-making district par excellence. The Company closes 2014 with net profits of 6.6 million euros, showing a clear improvement on last year, despite the difficult economic outlook that characterised the main markets of interest, and the Italian market in particular, where the decline in consumption of the reference merchandise has been significant. Biella Manifatture Tessili S.r.l records an increase in turnover on last year, going from 89.5 million euros in 2013 to 98.3 million euros in 2014 (+9.8%), improving the already high margins. More specifically, the result of core business totalled 10.8 million euros, with an incidence on turnover of 10.9%; last year, this result came to 6.1 million euros, with an incidence of 6.8%. This performance therefore confirms the value of the unitary management, within the Company, of three very different, differentiated brands, with entirely independent market positions.  Marlane with a product typical of the Biella area, of the “diffusion” segment;  Guabello in the medium-high segment, with a collection that is attentive to style rules;  Tallia di Delfino with a tailored, yet modern collection that expresses a recognisable, exclusive luxury. By virtue of the above reorganisation operations, as from 01 January 2015, the Company is a direct subsidiary of Marzotto Wool Manufacturing S.r.l.

Marzotto Textile N.V.

The Company, established on 19 April 2005 following the spin-off of Marzotto International N.V., directly controls Marzotto International Trading Shanghai Co. Ltd (a commercial representation company established in 2005 to monitor the markets of the Far East) and Marzotto Textiles Usa Inc. (a company established on 02 January 2008 to carry out commercial activities on the North American area markets for the fabrics and furnishing sector) and until October 2014, also controlled Novà Mosilana a.s. (in the Czechoslovakian Republic and operating in wool fabrics) and AB Liteksas (in Lithuania and operating in furnishing fabrics). In this year, the Company was spun-off with the simultaneous conferral of the investment of Novà Mosilana a.s. in the newly-established Marzotto Wool Fabrics BV and of the investment of AB Liteksas in the newly-established Marzotto Blankets BV. As from 01 January 2015, by virtue of the Group reorganisation as described above, the Company is held on equal terms by Marzotto Wool Manufacturing S.r.l. and Marzotto Lab S.r.l.

Marzotto Group Report on the Group’s operations

33

[Equity investments] Marzotto Wool Manufacturing S.r.l.

The Company was established on 06 November 2014 with its registered office in Valdagno (VI) and is a full subsidiary of Marzotto S.p.A., to which the parent company conferred, in December 2014, the “wool” business unit and related investments in Nova Mosilana (through the investment in Marzotto Wool Fabrics B.V.), in Biella Manifatture Tessili S.r.l and in Tintoria di Verrone S.r.l. (the latter for a stake of 25%). With the establishment of Marzotto Wool Manufacturing, the aim is to concentrate the control and coordination of all activities operating in the wool fabrics sector in a single company, thereby creating a Group that looks to be the world leader of its reference sector. The activities carried out during the year by the Company was mainly focused on initiating all the tax, customs, social security, insurance and financial-related procedures and activities required and necessary to make the company fully operative as of 01 January 2015, the date on which the conferral made took effect.

Marzotto Lab S.r.l.

The Company was established on 06 November 2014 with its registered office in Valdagno (VI) and is a full subsidiary of Marzotto S.p.A., to which the parent company conferred, in December 2014, the “Linen, Cotton, Textile Furnishings, Velvets and Yarns” business and the related investments in AB Liteksas (through the direct parent company Marzotto Blankets B.V.), in Linificio e Canapificio Nazionale S.r.l., in Uab Lietvilna, in Sametex spol s r. o, in Girmes G.m.b.H. and in Tintoria di Verrone S.r.l. (the latter for a stake of 25%). The aim, for Marzotto Lab too, is to bring the various non-wool Fabrics activities under a single umbrella, mainly consisting of the wool yarns, fabrics and linen yarns, cotton, velvet and furnishing fabrics business. The activities carried out during the period by the subsidiary was mainly focused on initiating all the tax, customs, social security, insurance and financial-related procedures and activities required and necessary to make the company fully operative as of 01 January 2015, the date on which the conferral made took effect.

Sametex spol. s r.o

The Czechoslovakian company acquired by Marzotto S.p.A. on 01 August 2012 under the scope of a strategic choice aimed at entering the Velvet business produces velvet fabrics for the international market. The Company was subjected to bankruptcy proceedings early 2012 after long-standing economic and financial difficulties connected with the events of the Italian parent company “Redaelli Tessuti S.r.l in liquidazione e concordato preventivo”. Previous years were mainly characterised by the pursuit of the restructuring business with a view to launching its normal operations. This year, the Company has increased business volumes, showing a 42.3% increase, even if profitability remains negative. By virtue of the above reorganisation operations, as from 01 January 2015, the Company is a full subsidiary of Marzotto Lab S.r.l.

Marzotto Textiles Czech Republic s.r.o.

The Czechoslovakian company was established on 10 June 2013 and provides technical consultancy service.

Girmes International G.m.b.H

Girmes was acquired by Marzotto under the scope of the “Velvet project”; it distributes velvet fabrics internationally. As part of the rationalisation undertaken to restore economic management conditions for the activities relating to the new Velvet business, the rationalisation and simplification of the logistic and distribution activities of Girmes was evaluated in order to exploit the synergies that the existing Italian structures can allow in the mentioned areas. As from FY 2013, Girmes provides representation and commercial intermediation for the parent company Marzotto S.p.A. By virtue of the above conferrals, as from 01 January 2015, the Company is a full subsidiary of Marzotto Lab S.r.l.

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Marzotto Group Report on the Group’s operations

[Equity investments] Shareholdings in affiliates Ratti S.p.A. Share capital Euro 11,115,000

In the following pages we report on the main non-consolidated shareholdings:

Equity investments no. of shares owned

2014

2013

33.36%

33.36%

9,125,000

9,125,000

Marzotto S.p.A. book value

10.4 euro/millions

10.4 euro/millions

consolidated book value

14.8 euro/millions

15.0 euro/millions

In 2010, Marzotto S.p.A. acquired a 33.36% investment in Ratti S.p.A., a company listed on the Milan stock exchange and based in Guanzate (CO); together with other parties, it operates joint control. Ratti S.p.A. operates in the silk sector, producing and marketing printed, solid-colour or yarn-dyed fabrics for clothing and furnishing and develops and distributes finished products, mainly men’s and women’s accessories. During FY 2014, the Ratti Group booked revenues of 100.9 million (-1.8% on the 102.8 million of FY 2013), a core business result of 7.4 million (+23% on the 6.0 million of 2013) and a net result of 2.7 million (3.1 million in 2013). At the shareholders’ meeting called for this coming 23 April there will be a proposal to distribute, against the profit for the year, a 0.10 euro dividend per share, for a total of 2,735,000 euros (the portion pertaining to Marzotto is 912,500 euros). In application of the reference accounting standards, the equity investment was measured as equity and its values were therefore adjusted accordingly.

Tintoria di Verrone S.r.l. Share capital Euro 100,000

2014

2013

Equity investments

50.00%

=

no. of shares owned

1

=

0.1 euro/millions

=

=

=

Marzotto S.p.A. book value consolidated book value

The Company was established on 02/01/2014 and is based in Verrone (BI). It is held equally by Marzotto S.p.A. and Filivivi S.r.l. In 2014, Tintoria di Verrone recorded revenues of 6.4 million euros and a negative result of 0.5 million euros. In application of the reference accounting standards, the equity investment was measured as equity and its values were therefore adjusted accordingly. As from 01 January 2015, by virtue of the reorganisation described above, the 50% share held by Marzotto S.p.A. was conferred 25% to Marzotto Wool Manufacturing S.r.l. and the remaining 25% to Marzotto Lab S.r.l.

Uab Lietvilna Share capital Ltl 15,710,900

2014

2013

Equity investments

50.00%

=

no. of shares owned

1

=

Marzotto S.p.A. book value

2.1 euro/millions

=

consolidated book value

2.8 euro/millions

=

Company based in Kaunas (Lithuania) and up until 2013 controlled by Filivivi S.r.l.; as from 2014, it is controlled equally by Marzotto S.p.A. and Fraver S.p.A. Uab Lietvilna prepares, weaves and dyes carded yarn for knitwear. In 2014, it recorded revenues of 16.1 million euros (+5.3% on 2013), a core business result of 0.7 million (+23.5%) and a positive net result of 0.6 million (+27.1%). In application of the reference accounting standards, the equity investment was measured as equity and its values were therefore adjusted accordingly. By virtue of the above conferrals, as from 01 January 2015, the Company is a full subsidiary of Marzotto Lab S.r.l.

Marzotto Group Report on the Group’s operations

35

[Equity investments] Mediterranean Wool Industries CO. S.A.E. (ET) Share capital U$ 10,000,000

Equity investments no. of shares owned

2014

2013

30.00%

30.00%

30,000

30,000

Marzotto Spa book value

2.0 euro/millions

2.0 euro/millions

consolidated book value

1.2 euro/millions

1.5 euro/millions

In FY 2010, Marzotto S.p.A. acquired 30% of the capital of Mediterranean Wool Industries Co (MWI) S.A.E., a company incorporate in Egypt whose business purpose is the processing of textile fibres (combing, carbonization, other processes) at a newly built factory in Sadat City (Egypt); this is the result of a cooperation agreement with the Schneider Group, an important and well known player in the industry. The factory full capacity operation was postponed to the end of 2011 due to the country’s socialpolitical situation, in view of which, Marzotto has decided to undertake a five year insurance policy to protect the Group from any possible negative impact which may arise mainly from expropriation actions, currency restrictions, wars and civil unrest. In FY 2014, the Company recorded a negative economic result. In application of the reference accounting standards, the equity investment was measured as equity and its values were therefore adjusted accordingly. As from 01.01.2015, the investment share held in Mediterranean Wool was conferred to Marzotto Wool Manufacturing S.r.l.

Mascioni S.p.A. (MI) Share capital Euro 5,000,000

2014

2013

Equity investments

28.35%

28.35%

no. of shares owned

283,500

283,500

Marzotto S.p.A. book value

=

4.0 euro/millions

consolidated book value

=

3.4 euro/millions

The 2014 draft financial statements of the affiliate Mascioni S.p.A., leader on the international markets in high-end fabric enhancing production, recorded a loss of 3.2 million euros (loss of 4.9 million euros in 2013). Turnover comes in at 46.6 million euros, up 1.2% on last year. The net financial position has improved slightly, going from 7.2 million in 2013 to 6.8 million this year. In application of the reference accounting standards, the equity investment was measured as equity and its values were therefore adjusted accordingly to incorporate the period loss. In relation to the continued difficult economic-financial position of the affiliate, the parent company considered it reasonable to fully impair the value of the equity investment previously booked. This operation entailed the registration of an expense of 3.3 million euros in “other financial expense”.

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Marzotto Group Report on the Group’s operations

[Equity investments] Pettinatura di Verrone S.r.l. Share capital Euro 3,000,000

Equity investments no. of shares owned

2014

2013

15.00%

15.00%

1

1

Marzotto S.p.A. book value

1.5 euro/millions

1.5 euro/millions

consolidated book value

1.7 euro/millions

1.6 euro/millions

In September 2012, together with Loro Piana and Ermenegildo Zegna, Marzotto acquired a 15% share in Pettinatura di Verrone, a Biella-based company specialised in super-fine, cashmere and vicuña wool combing, heading the Schneider Group, which controls it with a 55% share. Focusing on a high quality product, Pettinatura di Verrone targets a niche market that does not directly suffer the competition of the companies based in emerging countries, at the same time striving to optimise the value of “Made in Italy”. The 2014 draft financial statements of the affiliate show net revenues of 8.4 million euros, making for an improvement on last year (revenues of 7.8 million euros in 2013) and a net result of +0.7 million euros (result of +0.2 million in 2013). In application of the reference accounting standards, the equity investment was measured as equity and its values were therefore adjusted accordingly. By virtue of the above conferrals, as from 01 January 2015, the Company is a full subsidiary of Marzotto Wool Manufacturing S.r.l.

Aree Urbane S.r.l. (MI) Share capital Euro 100,000

2014

2013

32.50%

32.50%

Marzotto S.p.A. book value

0.0

0.0

consolidated book value

0.0

0.0

Equity investments

The company was established in October 2002 as part of a project aimed at increasing the value and therefore the sale appeal of some real estate properties held by Marzotto S.p.A. It has been placed in liquidation in August 2010 following the failed share capital increase proposed by its shareholders. In November 2012, Marzotto S.p.A. and the shareholders Prelios and Telecom stipulated an agreement aimed at defining the guidelines of conduct to be held in restoring “Aree Urbane S.r.l. in liquidation” to performing status; these involved achieving a prior agreement with the banks chosen to refinance the past-due debt of Aree Urbane. As this condition was not met, the shareholders decided to proceed with an “orderly” liquidation of Aree Urbane, as there was no further interest in pursuing the business.

Marzotto Group Report on the Group’s operations

37

[Other information]

38

Industrial relations Fabrics

January 2014 saw consultation resume with the Trade Unions and Union Representatives for the renewal of the Company Supplementary Agreement (2nd level contract) in relation to the plant of Sondrio, Fabrics Division of Sondrio and Nuova TessilBrenta. The agreement was reached on 07 March 2014 and is valid until 31 December 2014. The “Piovene Dyes and Yarns” business unit, formerly part of the affiliate Filivivi S.r.l., has been incorporated into Marzotto S.p.A. with effect as from 02 January 2014. This BU included all plants, machinery, assets and staff of the dye area, reconditioning and some complementary offices based in Piovene Rocchette (VI). More specifically, 23 people were transferred and included in the Marzotto S.p.A. workforce, of whom 14 classified as blue-collar workers and 9 as white-collar workers/middle management. On 28 October 2014, an agreement to extend flexible working hours for production staff in the plant of Valdagno, GMF Fabrics Division, was signed with the Trade Unions and Union Representatives. On 19 November 2014, the union report on the closure and discontinuation of the “Dyes and Yarns” unit of Piovene Rocchette was signed at the Provincial Administration of Vicenza - Work and Education Sector. By virtue of this agreement, on 01 December 2014, the employed staff, totalling 20 people of whom 11 are blue-collar and 9 white-collar/middle management, found themselves suspended from work and assigned to the extraordinary redundancy fund (CIGS). On 10 December 2014, as part of the plan to manage surplus staff assigned to CIGS (as envisaged in the agreement of 19 November mentioned and regarding the “Dyes and Yarns” unit of Piovene Rocchette), mobility proceedings were concluded with union agreement for 16 workers (6 whitecollar/middle management and 10 blue-collar), of which 12 had already been assigned to CIGS. This procedure also regarded the Warehouse and Logistics unit, again based in Piovene Rocchette, for the remaining 4 surplus workers, 2 blue-collar and 2 white-collar. On 20 November 2014, a trade union agreement concluded the mobility proceedings regarding the Valdagno plant (GMF Division and Central Staff) up to a maximum of 25 people, of whom 4 whitecollar and 21 blue-collar workers. By virtue of these proceedings, a total of 17 surplus workers have been made redundant and assigned to mobility in connection with pensions, of whom 16 bluecollar and 1 white-collar. December saw a start-up of union consultations pursuant to Art. 47 of Italian Law no. 428/90 in relation to the corporate reorganisation of Marzotto S.p.A. and in particular the sale of the business units to the newly-established “Marzotto Wool Manufacturing S.r.l.” and “Marzotto Lab S.r.l.”. On 11 and 17 December, the above reports were drafted in Vicenza. The reorganisation and sales were envisaged with effect as from 01 January 2015. As concerns the subsidiary Biella Manifatture Tessili, please note that on 26 March 2014, the company’s supplementary contract (or second level contract) was renewed with the Trade Unions and Union Representatives for all workers of the plants of Strona and Mongrando. This agreement envisaged a series of legislative clauses in addition to the terms and conditions of disbursement of the premium connected with the business results (defined as “PRO”, premium on EBIT). The agreement is valid until 30 June 2016. On 21 May 2014, due to production requirements, an agreement was signed with the Trade Unions and Union Representatives to encourage work during weekends, including in the period from 23 May to 28 July 2014. The following departments were concerned: yarns warehouse, warping, weaving, finishing, darning and finished control. On 31 December 2014, a final redundancy closed the mobility proceedings that had involved both plants of Strona and Mongrando. As a result of said proceedings, in the period running from 31 October 2013 to 31 December 2014, a total of 24 redundancies were made, of which 21 relating to blue-collar workers and 3 to white-collars.

Woollen Yarns

On 10 November 2014, at the Industrial Workers’ Union of the Province of Biella, a union agreement defined the mobility proceedings for the company Tintoria di Verrone S.r.l. The agreement envisages up to 12 redundancies, of whom 4 white-collar workers/middle management and 8 blue-collar workers. The agreement establishes that the redundancies will be made with effect as from 11 November 2014 and until 31 December 2015.

Marzotto Group Report on the Group’s operations

[Other information] Linen Yarns

The defensive solidarity contract, stipulated to the benefit of staff of the production unit of Villa Almè (BG) terminated early, ahead of expiry, with the consequent restoration of full working hours. For the two years 2014-2015, the company employment contract for staff of the subsidiary Lietlinen (Lithuania) has been renewed.

Silk

On 04 November 2014, negotiations were completed for the trade union agreement on the methods for managing mobility proceedings that began in October 2014. With respect to the 51 surplus positions declared in the letter opening the proceedings, the agreement closed on the maximum basis of 40 employees who could be placed on mobility proceedings in accordance with Italian Law no. 223/91. In order to attenuate the social impact of the reorganisation, it was agreed to prioritise, when determining outgoing staff, those who will be accruing pension entitlement during the mobility period and who are willing to leave. As of 31 December 2014, 32 people had been made redundant, in addition to a further 3 people in 2015, making for a total of 35 units.

Marzotto Group Report on the Group’s operations

39

[Other information] Training and development of human resources

Training and development implemented during the year was aimed at strengthening managerial, language and specialised technical skills to increase competitive capacity. In 2014, Marzotto S.p.A. invested 620 hours in training (apart from training on safety), using inter-professional funds such as Fondimpresa and Fondirigenti. Marzotto has further developed the “Young Project”, the route involving the inclusion of young graduates in the Operations and Sales areas. Thanks to this, today the Group benefits from the presence of 10 engineers hired. The “Looking for Designers” project has also been launched, including 9 young designers in the Group and involving all the major international fashion and design schools. These young men and women have been included in the Group’s style offices and participated in technical training to better understand the various stages and techniques of production. Marzotto has continued to invest in the development of individual and community competences and performance: alongside interventions aimed at the individual (masters, specialisation courses), specific training programmes have also been organised involving some strategic communities for the business (sales area, fashion designers and “young talents”). More specifically, all the first and second lines of the Marzotto Group have been involved in an assessment and evaluation of skills, which has affected around 50 people in the various business units. These assessments have enabled a map to be prepared of the current skills available and potential to be developed to face up to the market challenges. A 36-hour finance course was then organised for non-specialists that involved 25 young members of the Group and investigated matters relating to the financial system, management accounting and the related dynamics of the business organisation. Another matter on which Marzotto has worked is leadership and in particular collaborator management: a training intervention has been organised that involved 32 assistants and heads of the weaving, finishing, dyes and quality control departments of the Valdagno plant, for a total of 16 hours, in which they shared the importance of strengthening awareness of oneself and one’s role, as well as consolidating communication skills and the development of trust with collaborators. In 2014, the main training initiatives were as follows:  training according to the State-Regions agreement, Italian Legislative Decree no. 81/08, which involved 24 employees in Valdagno, 35 in Sondrio, 59 in Mongrando and 21 in Strona, on all levels;  course for workers operating forklift trucks for 27 employees of Valdagno, 24 of Sondrio and 34 in Mongrando;  course for workers in charge of operating mobile elevating working platforms for 4 employees of Valdagno and 1 of Mongrando;  fire-fighting course for 52 employees of Valdagno and 19 of Sondrio and training of first aid operators for another 34 people in Valdagno, 7 in Mongrando, 9 in Strona and 7 in Villa d’Almè;  course for appointed persons in accordance with Italian Legislative Decree 09 April 2008 and State-Regions agreements no. 221 of 21/12/2011 for 2 employees of Valdagno, 1 in Schio and 1 in Sondrio;  “confined spaces: managerial, technical and operative needs from Italian Presidential Decree no. 177/11” course for 19 employees of Valdagno and 4 in Schio;  update course for workers’ safety representatives in accordance with the State-Regions agreement, Italian Legislative Decree no. 81/08 for 3 employees of Valdagno, 1 of Villa d’Almè and 2 of Sondrio;  course for the use of the PERSONAL TRACKER device for working alone, course on the use of generic PPE and on the use of face masks for 10 employees in Schio. In 2014, 24 young men and women were included on training contracts in various functional areas of the Marzotto plants. At the subsidiary Novà Mosilana a.s., all employees are trained twice a year in safety, protection of health and fire prevention, in compliance with local legislation. More specifically, various courses were initiated relating to: rules on safety at work, salary and customs standards, driving forklift trucks and the use of dangerous and flammable materials. During the year, 65 employees also attended foreign language courses (English, Italian and Czech) for a total of approximately 80 hours and 99 employees participated in technical and managerial courses, such as “technology of textile production”, “settlement of conflicts at work” and “the role of leadership in the working team”. A technical textile training cycle was also delivered to 104 new employees.

40

Marzotto Group Report on the Group’s operations

[Other information] Silk

Marzotto Group Report on the Group’s operations

In the Ratti Group, 2014 investments in training totalled approximately 500 hours, using the interprofessional funds Fondimpresa and Fondirigenti. Training courses were developed for all employees to improve their English and company safety, according to Italian Legislative Decree 81/2008. An in-house technical textile training school was also pursued for all our Creative workers, involving both time spent in the production departments and specific classroom routes, taught by internal and external staff. Collaboration continued with the most important national and international fashion and design schools for some years now, running study grants and projects. Ratti also participated in the “Looking for Designers” project and included 4 of the 9 creative young members of staff. In 2014, 12 students were admitted for traineeships. Finally, we have also continued to focus on some of the company potential with external masters courses.

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[Other information] Employees by sector

On an international level, the Group records an increase in the average number of workers as compared with end 2013, going from 3,002 units to 3,088 units in 2014. This increase is closely linked to the recovery of the market and the development of export trade. On a national level, the Group employment in recent years has declined slightly, standing at 1,093 units as of 31 December 2014. Active staff went from 2,999 at the end of 2013 to 3,135 as of 31 December 2014. Year-end staff 31.12.2014 Fabrics Linen Yarns Total Textile Sector Other Operations Total

Active employees by Country

2013

67.8%

2,096

69.9%

2,141

69.3%

2,096

895

28.6%

776

25.9%

829

26.9%

785

26.1%

3,021

96.4%

2,872

95.8%

2,970

96.2%

2,881

95.9%

69.8%

114

3.6%

127

4.2%

118

3.8%

121

4.1%

3,135

100.0%

2,999

100.0%

3,088

100.0%

3,002

100.0%

11

4

3

4

3,146

3,003

3,091

3,006

Year-end staff

Average staff

at 31.12.2014

at 31.12.2013

Italy

1,093

34.9%

Czech Republic

1,121

37.4%

2014

2013

1,126

36.5%

1,116

37.2%

1,066

34.0%

1,027

34.2%

1,044

33.8%

1,013

33.7%

Lithuania

337

10.7%

305

10.2%

326

10.5%

308

10.3%

Tunisia

631

20.1%

535

17.8%

581

18.8%

546

18.2%

8

0.3%

11

0.4%

11

0.4%

19

0.6%

3,135

100.0%

2,999

100.0%

3,088

100.0%

3,002

100.0%

Other countries Total

Research and development

2014

2,126

Laid off/dismissed Total staff year end

Average staff

31.12.2013

Research and development is the main source of technological innovation for the types of products offered by the Marzotto Group. Research and development activities referred mostly to research and technology innovation to improve the quality standards of the production processes, research into innovative products, both in terms of style and technology and materials, and improvement of the flexibility of customer service. The main actions undertaken were: Marzotto – GMF Division The Division continued its research into developing new fabrics with special blends for the application on the clothing market with significant increases in the technical/technological contents. More specifically, fabrics have been developed with unique designs, wind-proof and water-proof properties, double elasticised and informal models with a vintage flavour as well as new three-coat fabrics with a “wetsuit” effect. Marzotto – Blankets Division Research concentrated on the creation of new product ranges based on the use of the very best natural fibres (such as cashmere, baby alpaca, silk, wool and linen) and on the combination of new materials, products able to satisfy the needs for practicality, comfort and design.

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Marzotto Group Report on the Group’s operations

[Other information] Research and development

Marzotto – Estethia/GB Conte Division Business is focused on the development of new solutions seeking to create new product ranges. More specifically:  new, more constructed, compact shuttle fabrics;  new wool imitation fabrics;  new fabrics with metallic yarn inserts;  new printed fabrics;  new cotton-based fabrics that are extremely light with far finer thread counts;  new linen-based fabrics characterised by new treatments and finishes;  new jersey fabrics characterised by three-dimensional effects and depth;  new fabrics coupled with jersey, that are very fine and light;  new, innovative dye and finishing treatments for the development of unique délavé effects. Marzotto – Tessuti Sondrio Division Research and development carried out by the division related to solutions for the development of highly specialised fabrics with great comfort and fit, suitable for use in both new and traditional contexts. Biella Manifatture Tessili Research and development focused on the evolution and identification of alternative, innovative solutions for products and fabrics intended for ranges and niches in the reference clothing market, tending towards a medium/high quality range. Technical solutions and design and construction methods have also been developed to guarantee the optimisation of industrial activities and the related qualitative and aesthetic value of the finished product. Linificio e Canapificio Nazionale R&D in Linificio focused on pursuing and perfecting new processes with a view to producing pure linen and blended yarns with noble fibres (such as cashmere wool, mohair, alpaca and silk), obtaining yarns to be used not only in the clothing fabrics sector but also in the wool fabrics sector. Linificio and Canapificio Nazionale have also developed new dye techniques that give the yarns and fabrics special chromatic aspects. Studies have been conducted on the plasma treatment of linen fibre. Linificio continues to be an active partner in the BioInNano project for the development of multipurpose fabrics using innovative finishes. Ambiente Energia Ambiente Energia is devoted to the research for an automatic depression system that would enable the discharge of dried sludge from the storage silos to the tanker. This system would avoid the dust that forms in performing this operation with the consequent risk of inhalation for the staff involved. Low-cost systems for oxygenating the homogenisation tanks have also been researched, so as to reduce the deposit of sludge on the bottom of these tanks.

Marzotto Group Report on the Group’s operations

43

[Other information] Going concern

These consolidated financial statements have been prepared on the basis of the Group as a going concern insofar as, despite the continued difficulties of the economic-financial context, we believe that there is no significant uncertainty regarding the capacity to continue to operate for the foreseeable future, also due to the guidelines defined and strategic choices made, and being implemented, in order to suit the altered market demands.

Risks management (IFRS 7)

The Group acts to identify and assess risk, thereafter implementing procedures for managing any risk factors that may influence Group results. Below, we will analyze the risk factors distinguishing between external (contextual) risks and internal (processing) risks.

External risks (contextual)

Risks connected with the economic outlook The Group products are addressed to markets subject to demand cycles and are influenced by the general economic trend. Major downturns in consumption levels can have a considerable impact on the Group’s economic, equity and financial position. In order to mitigate the possible negative impact, the Group has a flexible structure, outsourcing part of production and splitting sales over a fleet of clients diversified according to products/trademarks and markets. Risks related to competition in the sectors of the Group’s operations The Group operates in a competitive environment; it is possible that the competition pressure due to a drop in demand translates to pressure on prices. Part of the product offered by the Group, especially in the more basic part, is interchangeable with products offered by our main competitors and therefore, in such cases, price is a significant sales factor. Should there be a particularly significant drop in volume and/or sale prices, the Group believes that there are actions that can be taken to cut its own cost structure, in order in minimize the possible negative effects on the economic, financial and equity situation. Country risk The Group operates in Tunisia through the subsidiary Filature de Lin SA and Lin Naturel SA. In order to hedge the risks of losses in relation to these investments, deriving from unfavourable political and economic developments in that area, including war and civil disorder, the parent company Linificio has stipulated a specific insurance policy with an important insurance company.

Internal risks (procedural)

Risks related to financing sources and liquidity risk The effects of the possible turmoil in the global financial system could represent a risk factor in relation to the possibility of obtaining further financial means at the current conditions. However, the Group believes that the present debt structure, in particular the availability of lines committed in the medium/long term, the financial resources immediately available (deposits) and the lines of credits not used will limit the negative impacts of a possible difficulty in obtaining credit. Credit risk Credit risk is the risk that a customer or one of the parties in a financial instrument may cause a financial loss by not complying with an obligation and it pertains mainly to trade receivables and financial investments of the Group. 

44

Marzotto Group Report on the Group’s operations

Trade receivables The credit risk is partly essentially reduced considering the type of customers, which are diversified and not significantly concentrated in the new outlet markets. The risk is handled through an insurance coverage policy managed by a specific function in the Group, together with the sales organizations. The Group uses also on a regular basis specialized agencies to obtain business information to know in detail the geographical areas served.

[Other information] 

Financial investments The Group limits its exposure to credit risk by investing exclusively in high liquidity securities and only with high credit rating parties.

The book value of financial assets represents the maximum exposure of the Group to the credit risk. At the end of the year the exposure was as follows:

(thousands of euro)

2014

2013

Financial assets available for sale

=

=

Financial assets at fair value carried on Income statement

=

=

Financing and credits

86,891

82,050

Cash and cash equivalents on hand

20,075

68,883

Other

114

114

Total

107,080

151,047

Trade receivables aging at the date of the financial statements was: 2014 (thousands of euro)

gross

2013 fund

gross

fund

Current

57,411

(4,837)

56,997

Overdue from 0 to 90 days

10,058

(526)

11,127

(515)

3,791

(1,471)

1,889

(1,286)

71,260

(6,834)

70,013

(6,994)

Overdue over 90 days Total

(5,193)

The information on guarantees given and received is contained in the section Contractual commitments and guarantees (memorandum accounts of the Group note). The information on the provisions for bad debt is indicated in point 3.2 of the Group note. Market risk Market risk is the risk that the fair value or the future cash flows of a financial instrument might change following variations in the market prices, of exchange rates, tax rates or quotations of the instruments representing the capital. 

Marzotto Group Report on the Group’s operations

Exchange rate risk Considering the Group’s exposure to exchange rates fluctuations in foreign currency operations, we carry out hedging operations to determine the exchange rate based on estimates of sales and purchases volumes and the currency exchange rate considered when the price lists are prepared. Specifically, the Group uses the following hedging instruments: foreign currency loans; forward sales and purchases in foreign currency; foreign currency options at fixed exchange rates. These hedging instruments are agreed upon with highest rated banks. The Group does not enter into term or option exchange rate contracts for speculative purposes. The hedged cash flows are expected within the next 12 months. The impact of the conversion in foreign currencies on the subsidiaries’ own capitals is recorded under a separate item in the shareholders’ equity. With reference to the most significant currencies, the table below shows the Group exposure to the exchange rate risk at the date of the financial statements.

45

[Other information] 2014 (thousands of euro) Trade receivables Short term financial assets and cash and cash equivalents Trade payables Short term financial payables Total



Usd

2013 Jpy

13,319

Usd

529,634

Jpy

13,394

460,228

1,750

104,591

7,577

147,448

(2,973)

(770,939)

(3,996)

(697,578)

=

=

=

=

12,096

(136,714)

16,975

(89,902)

Interest rate risk The Group is exposed to the risk of volatility of interest rates associated both with liquid funds and loans. The effects of the possible turmoil, already experienced in the banking system, could potentially represent a risk in relation to the cost of obtaining the financial resource. The considerable reduction of the reference rates has offset more than proportionally the average increase in the spreads recognized to the financing banking institutions in the recent past. The Group constantly monitors this risk and we do not believe that this risk is significant in terms of possible effects.

Environmental risk and safety The Group manages the environmental risk and safety with suitable staff training according to new legislation and by introducing systems to prevent and improve health and safety at work. In terms of safety, the Group invests constantly in protecting and ensuring the safety of the workplace, both inside and outside the production facilities. The activities of the Group are subject to laws and regulations (local, national and international) on the environment. In particular, the production plants are affected by regulations on atmospheric emissions, waste management and waste water treatment, especially because we have finishing and purification plants. The organization is constantly committed to respecting environmental standards in compliance with the environmental regulations in force in each local area in reference to the specific activities. New investments are been considered, also in view of the environmental impact, the potential savings in resources and energy consumption during operations as well as the reduction of total waste material produced. Please note that under the scope of its business, no damages have been caused to the environment, nor have any sanctions applied for environmental crimes and/or damages. Other risks The risk of price increase for raw materials, if significant, is analyzed when the price lists are prepared. At that same time, the net demand generated by the purchase budget are covered by placing the orders with the suppliers, in order to minimize the effect on the income statement should the raw materials costs increase during the year. Considering the type of production and the financial structure, there are no other significant risks.

46

Marzotto Group Report on the Group’s operations

[Significant events after the close of the year] As from 01 January 2015, the Marzotto Group rationalisation and reorganisation took effect, as had been implemented by notary’s deed of 15 December 2014 and is described in the paragraph on “Significant events of 2014”. On 05 March 2015, the subsidiary Biella Manifatture Tessili S.r.l. made early repayment of the loan of 5,000 thousand euros it had stipulated on 28 March 2015 and in place as of the date it was extinguished in the amount of 4,594 thousand euros. On 26 March 2015, the parent company Marzotto S.p.A. resolved to move the registered office from Milan to Valdagno (VI). At the date of this document, there are no further significant events to report after the close of the year.

Marzotto Group Report on the Group’s operations

47

[Performance news and outlook for the current year] The Group aims to maintain and further strengthen its leadership position on the reference markets of the medium-high level textile sector, improving and completing its product range. As regards the economic trend seen during the first two months of this year, we note that consolidated net revenues come to 40.5 million euros, down 5.1% on the same period of 2014. The Group does not, however, believe that the reduction seen during these early months of the year is such as to risk achievement of the positive economic and financial results forecast for FY 2015. (in millions of euro)

02.2015

02.2014

Textile Sector

40.1

99.0%

42.2

Fabrics

34.1

84.2%

36.7

85.9%

6.0

14.8%

5.5

12.9%

Linen Yarns Other Operations

98.8%

2.5

6.2%

2.5

5.9%

Aggregate total

42.6

105.2%

44.7

104.7%

Inter-company sales

(2.1)

(5.2%)

(2.0)

(4.7%)

Consolidated total

40.5

100.0%

42.7

100.0%

Valdagno (VI), 26 March 2015 FOR THE BOARD OF DIRECTORS THE MANAGING DIRECTOR

48

Marzotto Group Report on the Group’s operations

Annual Report 2014

General information Marzotto group Report on the Group’s operations

 Consolidated financial statements

Marzotto S.p.A. Report on the Company’s operations Company financial statements

Sole 24 Ore” del 5 aprile 2007

Si ha motivo di ritenere che l’Assemblea si terrà in seconda convocazione il 9 maggio 2007 alle ore 10.00 in Milano, Via Palestro n. 2, presso lo Spazio Eventi del “Centro Svizzero”.

49

Financial statements

[Consolidated balance sheet] 31.12.2014

(thousands of euro)

Partial

31.12.2013 Total

Partial

Total

1. Non-current assets 1.1 Property, plant and equipment 1.2 Civil buildings 1.3 Goodwill, trademarks and other intangible assets

105,335

100,872

1,494

1,202

9,415

6,592

1.4 Equity Investments

20,497

21,416

1.5 Other investments

114

114

1.6 Long-term receivables

436

506

1.7 Deferred tax assets 1.8 Long-term financial receivables third parties Long-term financial receivables affiliates

20,763 373 =

Total non-current assets 2. Non-current assets held for sale

21,921 105

373

=

105

158,427

152,728

=

=

108,306

103,623

3. Current assets 3.1 Inventories 3.2 Trade receivables third parties

64,426

Trade receivables affiliates

2,021

3.3 Other receivables Other receivables affiliates

63,019 66,447

19,623 12

3.4 Current financial assets, cash and cash equivalents third parties

18,838

Current financial assets, cash and cash equivalents affiliates

1,237

Total current assets Total assets

2,100

65,119

16,320 19,635

=

16,320

64,013 20,075

4,870

68,883

214,463

253,945

372,890

406,673

96,676

133,002

13,351

(33,706)

110,027

99,296

4. Shareholders' equity 4.1 Share capital and reserves 4.2 Income/(Loss) for the year Group shareholders' equity 4.3 Non controlling interests

=

=

110,027

99,296

30,460

30,678

261

431

5.3 Deferred tax liabilities

3,139

3,757

5.4 Long-term financial payables

7,374

337

Total non-current liabilities

41,234

35,203

=

575

Total shareholders' equity 5. Non-current liabilities 5.1 Long-term provisions 5.2 Other long-term payables

6. Non-current liabilities held for sale 7. Current liabilities 7.1 Trade payables and other payables third parties Trade payables and other payables affiliates 7.2 Current financial payables Total current liabilities

50

125,280 772

111,413 126,052 95,577

1,149

112,562 159,037

221,629

271,599

Total shareholders' equity and liabilities

372,890

406,673

Net financial debt

(82,503)

(90,386)

Marzotto Group Consolidated financial statements

Financial statements

[Consolidated statement of profit/(loss) and other items of the Consolidated statement of comprehensive income] Year 2014

(thousands of euro) 8.

Amounts

Net revenues third parties

%age

324,283

Net revenues affiliates

Year 2013 Amounts

97.3

%age

298,548

97.6

9,073

2.7

7,216

2.4

Totale net revenues

333,356

100.0

305,764

100.0

9.

(250,149)

(75.0)

(236,293)

(77.3)

Cost of sales third parties Cost of sales affiliates

(6,350)

(1.9)

(5,259)

(1.7)

76,857

23.1

64,212

21.0

11. R&D and marketing costs

(35,673)

(10.7)

(33,896)

(11.1)

12. General and administrative costs

(19,505)

(5.9)

(18,436)

(6.0)

(6,110)

(1.8)

(19,195)

(6.3)

15,569

4.7

(7,315)

(2.4)

(3,060)

(0.9)

(4,839)

(1.6)

29

=

20

1,163

0.3

(329)

10. Gross income

13. Other income and charges 14. Operating income 15. Net financial charges third parties Net financial charges affiliates 16. Dividends from non consol. equity investments and valuations to equity 17. Valuation of equity investments held for sale 18. Other financial income and charges 19. Income before taxes 20. Taxes 21. Net income from continuing operations 22. Net profit/(loss) from discontinued operations 23. Net income (before non controlling interests) 24. Income attributable to non-controlling interests 25. Group net income (1) 26. Fair Value adjustments

= (0.1)

=

=

=

=

3,025

0.9

(14,441)

(4.7)

16,726

5.0

(26,904)

(8.8)

(3,375)

(1.0)

(4,566)

(1.5)

13,351

4.0

(31,470)

(10.3)

=

=

(2,236)

(0.7)

13,351

4.0

(33,706)

(11.0)

=

=

=

=

13,351

4.0

(33,706)

(11.0)

(1,956)

(0.7)

682

0.2

(1) 27. Other adjustments

(323)

(0.1)

(6,826)

(2.2)

Items that will be reclassified subsequently to profit and loss

359

0.1

(8,782)

(2.9)

28. IAS 19 adjustments (1)

(911)

(0.3)

419

0.1

(911)

(0.3)

419

0.1

29. Total comprehensive income for the period

Items that will not be reclassified subsequently to profit and loss

12,799

3.8

(42,069)

(13.8)

30. Base income per ordinary share (in euro)

0.21

(0.52)

1. Components recognized in equity.

Marzotto Group Consolidated financial statements

51

Financial statements

[Consolidated cash flow statement]

(thousands of euro) Income before taxes (including non controlling interests)

2013

13,351

(33,706)

15,657

14,747

Change in provisions

314

1,678

(Gains)/losses on disposal of fixed assets

(93)

Amortisation, depreciation and impairment

Investments valued at equity

(5,572)

(642) 1,572

Change in inventories

(4,582)

4,798

Change in trade receivables and other receivables third parties

(5,569)

11,803

Change in trade receivables and other receivables affiliates/parent Change in trade payables and other payables third parties

67 14,518

Change in trade payables and other payables affiliates/parent

(377)

Change in other long term receivables and payables

(100)

Operating cash flow (A) Investments in intangible and tangible fixed assets Disposals in intangible and tangible fixed assets (Investments in) /disposals of other equity investments Cash flow from investments (B) Translation exchange differences and other equity changes (C) Change in scope of consolidation (D) Cash flow before dividends (A+B+C+D)

(694) 19,317 522 (15,871)

27,615

3,524

(17,739)

(16,320)

327

972

1,135

=

(16,277)

(15,348)

(209)

(2,839)

(3,250)

=

7,879

(14,663)

Dividends paid

=

=

Increase in capital share of Parent Company

=

=

7,879

(14,663)

Change in net financial position Change in long-term financial payables Change in current financial payables third parties

7,041 (63,460)

(169) (5,632)

Change in current financial payables affiliates/parent

=

=

Change in long-term financial receivables third parties

=

84

Change in long-term financial receivables affiliates/parent Total change in current financial assets, cash and cash equivalent

52

2014

(268)

14,722

(48,808)

(5,658)

Cash and current financial assets - beginning of the period

68,883

74,541

Cash and current financial assets - end of the period

20,075

68,883

Marzotto Group Consolidated financial statements

Financial statements

[Statement of changes in consolidated shareholders’ equity] Fair

(thousand euro) Balance as of 31.12.2012

Profits

Group

Share

Legal

Transl.

value

IAS 19

Other

carried

Group

s/holders'

capital

reserve

reserve

reserve

reserve

reserves

forward

result

equity

15,000

10,250

62

35,497

65,005

137

13,142

2,718

141,811

Allocation of net income: dividends

=

carried forward

2,718

(2,718)

=

(33,706)

(33,706)

=

(33,706)

(42,069)

15,860

(33,706)

99,296

(33,706)

33,706

=

13,351

13,351

13,351

12,799

13,351

110,027

Net income for the year 2013 Other total profit/ (losses) (1) Total other income/charges

(6,859)

(1,956)

419

33

=

=

(6,859)

(1,956)

419

33

65,005

15,000

3,391

(1,819)

481

35,084

Changes in capital

(8,363)

(446)

Balance as of 31.12.2013

(446)

Allocation of net income: dividends

=

carried forward Net income for the year 2014 Other total profit/ (losses)

(1)

Total other income/charges

(570)

682

(911)

247

=

=

(570)

682

(911)

247

65,005

15,000

2,821

(430)

33,263

Other variations Balance as of 31.12.2014

(552) =

(2,068) (1,137)

(2,068) (17,846)

1. Profits and Losses of the Comprehensive Income Statement recognized in the Shareholders’ Equity.

Marzotto Group Consolidated financial statements

53

Introduction

[Notes to the consolidated financial statements]

General information

The Marzotto Group mainly operates in the development, production and distribution of high quality wool and cotton fabrics, linen yarns and linens, furnishing fabrics, velvets and silk; it is one of the most important international players on the textile industry. The paragraph entitled “Consolidation area and method” gives information on the companies included in the Group consolidation area.

Management and coordination activities

The parent company Marzotto S.p.A. is subject to the management and coordination of Trenora S.r.l., with registered office at Largo S. Margherita 1, Valdagno (VI). In compliance with the provisions of Art. 2497 bis, paragraph 4 of the Italian Civil Code, below is the summary statement of the essential data of the last approved financial statements. Balance sheet (thousands of euro) B) Fixed assets C) Current assets

30.06.2014 52,402 5,642

D) Accruals and deferrals Total assets

30.06.2014

2 58,046

Income statements

A) Shareholders' equity D) Accounts payable

51,421 6,625

E) Accruals and deferrals Total liabilities

= 58,046 30.06.2014

(thousands of euro) A) Value of production B) Cost of goods sold Difference between value and cost of goods sold (A+B)

8 (119) (111)

C) Financial income and charges

=

D) Adjustment to value of financial assets

=

E) Other income and charges Income before taxes (A+B+C+D+E) Income taxes Profit (loss) for the year

= (111) = (111)

The consolidated financial statements of the Marzotto Group were approved by the Marzotto S.p.A. Board of Directors on 26 March 2015. Publication will take place in accordance with the law.

Compliance with IFRS/IAS

54

Marzotto Group Consolidated financial statements

These consolidated financial statements have been prepared in compliance with the International Financial Reporting Standards (IFRS) issued by the International Accounting Standards Board (IASB) and approved by the European Union, as well as with the orders issued in implementation of Italian Legislative Decree no. 38/2005. IFRS also means all revised international accounting standards (IAS) and all interpretations by the International Financial Reporting Interpretations Committee (IFRIC), previously named the Standing Interpretations Committee (SIC).

Introduction

Adoption of IFRS 11

[Notes to the consolidated financial statements] Please note that in FY 2014, the Group altered its method of accounting joint ventures or joint arrangements, which, as from this year, have been measured according to the equity method. This has become necessary due to the standardisation of the new accounting standard IFRS 11, the application of which is compulsory as from 01 January 2014. The change to the consolidation criteria resulted in, as regulated by international accounting standard IAS 8, the restatement of the comparative data of the balance sheet as of 31 December 2012 and 31 December 2013, as shown below:

Balance sheet (thousands of euro)

8,305

15,822

24,127

(24,804)

151,003

(8,982)

175,130

50

(50)

=

325,642

(54,550)

271,092

Total assets

509,804

(63,582)

446,222

4) Shareholders' equity

141,811

=

141,811

52,290

(11,511)

40,779

315,703

(52,071)

263,632

509,804

(63,582)

446,222

(101,555)

25,832

(75,723)

Other non-current assets 1) Non-current assets 2) Non-current assets held for sale 3) Current assets

5) Non-current liabilities 6) Current liabilities Total shareholders' equity and liabilities Net financial debt

Income statement (thousands of euro)

31.12.2012

31.12.2012 restated

adjust

7) Net revenues

334,335

(33,038)

301,297

8) Cost of sales

(260,346)

19,854

(240,492)

9) Gross income

73,989

(13,184)

60,805

14) Operating income

12,244

(2,063)

10,181

19) Income before taxes

6,845

(3,076)

3,769

21) Net profit/(loss) from discontinued operations

(2,970)

2,466

(504)

(1,157)

610

(547)

2,718

=

2,718

Taxes 20) Group net income

Consolidated financial statements

31.12.2012 restated

adjust

175,807 184,112

Other investments

Marzotto Group

31.12.2012

55

Introduction

[Notes to the consolidated financial statements] Balance sheet (thousands of euro) Other investments Other non-current assets 1) Non-current assets

31.12.2013

adjust

31.12.2013 restated 21,530

6,606

14,924

144,053 150,659

(12,855)

131,198

2,069

152,728

2) Non-current assets held for sale

=

=

=

3) Current assets Total assets

275,264

(21,319)

253,945

425,923

(19,250)

406,673

4) Shareholders' equity

99,296

=

99,296

5) Non-current liabilities

41,059

(5,856)

35,203

5) Non-current liabilities held for sale

575

=

575

6) Current liabilities Total shareholders' equity and liabilities

284,993

(13,394)

271,599

425,923

(19,250)

406,673

Net financial debt

(90,470)

84

(90,386)

7) Net revenues

338,516

(32,752)

31.12.2013 restated 305,764

8) Cost of sales

(262,134)

20,582

(241,552)

9) Gross income

76,382

(12,170)

64,212

14) Operating income

(5,492)

(1,823)

(7,315)

(26,222)

(682)

(26,904)

(2,236)

=

(2,236)

(5,248)

682

(4,566)

(33,706)

=

(33,706)

Income statement (thousands of euro)

19) Income before taxes 21) Net profit/(loss) from discontinued operations Taxes 20) Group net income

31.12.2013

adjust

It is also considered significant to state the economic, equity and financial data as of 31 December 2014 in continuity with last year and in compliance with the new accounting standard IFRS 11.

Balance sheet (thousands of euro) Other investments Other non-current assets 1) Non-current assets

31.12.2014 3,009

17,602

20,611

152,558

(14,742)

137,816

155,567

2,860

158,427

2) Non-current assets held for sale

=

=

=

239,512

(25,049)

214,463

Total assets

395,080

(22,190)

372,890

4) Shareholders' equity

110,027

=

110,027

46,387

(5,153)

41,234

238,666

(17,037)

221,629

395,080

(22,190)

372,890

(82,520)

17

(82,503)

3) Current assets

5) Non-current liabilities 6) Current liabilities Total shareholders' equity and liabilities Net financial debt

Income statement (thousands of euro)

372,584

(39,228)

333,356

(282,782)

26,283

(256,499)

9) Gross income

89,802

(12,945)

76,857

14) Operating income

17,641

(2,072)

15,569

19) Income before taxes

17,502

(776)

16,726

=

=

=

(4,152)

777

(3,375)

13,351

=

13,351

20) Group net income

Consolidated financial statements

31.12.2014 restated

adjust

8) Cost of sales

Taxes

Marzotto Group

31.12.2014

7) Net revenues

21) Net profit/(loss) from discontinued operations

56

31.12.2014 restated

adjust

Introduction

Identification of the segments

[Notes to the consolidated financial statements] The disclosure according to business segment and geographic area is given in accordance with that required by IFRS 8 - Operating Segments. The criteria applied to identify said segments is inspired by the ways by which the management manages the Group and attributes managerial responsibilities. The information by sector is primarily organised by product line, as follows:   

Fabrics; Linen Yarns; Other Operations.

The Group also operates through joint ventures in the silk and Wool Yarns sector. All these activities are carried out in various plants located throughout Italy (wool and cotton weaving, linen yarns, silk making, velvet fabric production), in Tunisia (linen spinning and weaving), in Lithuania (linen spinning, wool spinning, blankets), in the Czech Republic (woollen spinning and weaving and velvet fabric production), as well as by qualified contractors. Furthermore, the Group operates in the textile machinery sector in the linen area (through Linificio e Canapificio Nazionale S.r.l.). The information is presented secondarily by geographical area.

Going concern

The consolidated financial statements as of 31 December 2014 have been prepared on the basis of the business as a going concern insofar as, despite the difficult economic and financial context, the Group believes that there is no significant uncertainty as to the capacity to continue to operate in the foreseeable future, also due to the action taken to adjust to changes in demand and the Group’s own industrial and financial flexibility.

Change in accounting standards

The accounting principles adopted are comparable to those used as of 31 December 2013, except for the adoption of the following new or revised IFRS or IFRIC: 

IFRS 10 – Consolidated financial statements IFRS 10 replaces the portion of IAS 27 - Consolidated and Separate Financial Statements that addresses the accounting for consolidated financial statements. It also addresses the issues raised in SIC-12 Consolidation – Special Purpose Entities. IFRS 10 establishes a single control model that applies to all entities, including “special purpose entities”. The changes introduced by IFRS 10 will require management, as compared with the requests made in IAS 27, to exercise significant judgement to determine which entities are controlled and, therefore, must be consolidated by the parent company. This standard applies retrospectively from the financial years starting on 01 January 2014.

 IFRS 11 - Joint arrangements IFRS 11 replaces IAS 31 - Interests in Joint Ventures and SIC-13 Jointly-controlled Entities Non-monetary Contributions by Venturers. IFRS 11 removes the option to account for jointly controlled entities using proportionate consolidation. For joint operations which respect the joint venture definition must be accounted for using the equity method. The application of this principle will affect the consolidated financial statements for the deconsolidation of the Ratti Group and their accounting based on the equity method, which will impact the exposure of the financial position, the economic result and the cash flows of this Group. This standard applies retrospectively from the financial years starting on 01 January 2014.

Marzotto Group Consolidated financial statements

57

Introduction

58

Marzotto Group Consolidated financial statements

[Notes to the consolidated financial statements] 

IAS 27 - Separate financial statements (revised in 2011) Following the new IFRS 10 and IFRS 12, what remains of IAS 27 is limited to accounting for investments in subsidiaries, joint ventures and affiliates in separate financial statements. The amendments are applicable retrospectively for annual periods beginning on 01 January 2014.



IAS 28 - Investments in affiliates (revised in 2011) Following the new IFRS 11 and IFRS 12, IAS 28 was renamed “Investments in affiliates and joint ventures”, and it describes the application of the equity method for joint ventures, in addition to affiliates. The amendments are applicable for annual periods beginning on 01 January 2014.



IAS 32 - Offsetting financial assets and liabilities The changes clarify the meaning of “currently has a legally enforceable right of set-off”. The changes also clarify the application of the offsetting criterion of IAS 32 in the event of regulation systems (such as, for example, centralised offsetting rooms), which apply gross, non-simultaneous settlement mechanisms. These changes should not affect the Group’s financial position or results and shall come into force for years starting on 01 January 2014 or thereafter.



IFRS 12 - Disclosure of interests in other entities IFRS 12 includes all of the disclosures that were previously in IAS 27 related to consolidated financial statements, as well as all of the disclosures that were previously included in IAS 31 and IAS 28. These disclosures relate to an entity’s interests in subsidiaries, joint arrangements, affiliates and structured entities. A number of new disclosures are also required. This principle is effective for annual periods beginning on or after 01 January 2014.



IAS 32 - Financial instruments: presentation The IASB has issued some amendments to IAS 32 to clarify the application of some criteria for offsetting the financial assets and liabilities present in IAS 32. The amendments apply retrospectively for years starting on or after 01 January 2014. The first application of these amendments has no effect.



IAS 36 - Impairment of assets The IAS has issued an amendment to IAS 36, which regulates the disclosure to be provided on the value that can be recovered on assets that have not been impaired, if this amount is based on the fair value net of the costs of sale. The changes apply retroactively from the years that started on 01 January 2014. The adoption of this amendment has no effect on the disclosure.

Introduction

[Notes to the consolidated financial statements] As of the date of this Report, moreover, the competent bodies of the European Union have not yet completed the approval process necessary for the adoption of the following accounting standards and amendments:

Marzotto Group Consolidated financial statements



on 12 November 2009, the IASB published standard IFRS 9 - Financial instruments; the same standard was then re-issued in October 2010 and amended in November 2013. The standard regards the classification, recognition and valuation of financial assets and liabilities as well as hedge accounting; it aims to replace IAS 39 - Financial instruments: recognition and measurement for these matters. With the November 2013 amendments, in addition to other changes, the IASB also eliminated the date of the first compulsory adoption of the standard, previously fixed at 01 January 2015. This date will be re-introduced with the publication of a complete standard, upon conclusion of the project on IFRS 9;



on 20 May 2013, the IASB issued IFRIC 21 - Levies, an interpretation of IAS 37 - Provisions, contingent liabilities and contingent assets. The interpretation provides clarifications on the recording of liabilities for the payment of tax other than income taxes;



on 21 November 2013, the IASB published some minor amendments to IAS 19 - Employee benefits, entitled “Defined benefits plans”: Employee contributions”. These amendments seek to simplify the accounting treatment of contributions made by employees or third parties (in specific cases) to defined benefits plans. The amendments apply retrospectively for years starting as from 1 July 2014 and early adoption is permitted;



on 12 December 2013, the IASB issued a set of amendments to the IFRS (Annual Improvements to IFRSs - 2010-2012 Cycle and Annual Improvements to IFRSs - 2011-2013 Cycle). Amongst others, the most significant issues discussed in these amendments are: the definition of conditions for accrual in IFRS 2 - Share-based payments, the grouping of operating segments in IFRS 8 - Operating segments and the definition of managers with strategic responsibilities in IAS 24 - Related party disclosures, the exclusion from the scope of application of IFRS 3 Business combinations, of all types of joint arrangements (as defined in IFRS 11 - Joint arrangements) and some clarifications on the exceptions to the application of IFRS 13 - Fair value measurement.

59

Consolidation area and method

[Notes to the consolidated financial statements] Marzotto S.p.A. not only carries out significant production and commercial activities, but is also a holding of equity investments that also provides strategic direction and coordination of the Group and the activities it carries out. The economic, equity and financial position of the Marzotto Group includes the economic, equity and financial position of the parent company Marzotto S.p.A. and the companies over which it has the right to exercise control. The definition of control is not based exclusively on the concept of legal ownership. Control exists when a Group has the direct or indirect power to govern the financial and operative policies of a business in order to obtain the relevant benefits. Generally speaking, control is assumed to exist when the Group directly or indirectly holds more than half the voting rights, also considering those that can be potentially exercised immediately. The financial statements of the subsidiaries are included in the consolidated financial statements starting from the date on which control is assumed and until such time as the control ceases to exist, adopting the full method by way of consolidation criteria. The Group uses the purchase accounting method for business combinations. The cost of the business combination is calculated as of the acquisition date in consideration of the fair value of the assets sold and/or liabilities accepted and the capital instruments issued in order to obtain control. The cost of the combination includes the fair value of all liabilities incurred or assumed. The costs of the acquisition are recorded on the consolidated income statement when incurred. The assets, liabilities and potential liabilities acquired and identifiable are noted at fair value as of the date of acquisition. At each acquisition, the Group decides whether or not to recognise the minority interests of the company acquired at fair value or according to their interest share in the fair value of the net assets acquired. The surplus between the total cost of the business acquired, the amount of each minority interest in the company acquired and the fair value as of the acquisition date of each minority interest pre-existing in the company acquired with respect to the portion of the buyer in the fair value of the assets and liabilities that can be identified and potential liabilities, is recorded as goodwill. If the buyer’s share of the fair value of the assets and liabilities that can be identified and the potential liabilities of the business acquired exceeds the cost of the combination, the difference is noted directly on the income statement. As regards the accounting treatment of transactions or events that modify the interest shares in subsidiaries and the attribution of the subsidiary’s losses pertaining to minorities, IAS 27 (revised 2008) establishes that, once control has been obtained of a business, the transactions in which the parent company acquires or transfers further minority shares without altering the control exerted over the subsidiary are transactions with shareholders and should therefore be recognised as equity. Accordingly, it follows that the book value of controlling interests and minority interests must be adjusted to reflect the change in the interest in the subsidiary and all differences between the amount of the adjustment made to the minority interest and fair value of the price paid or received against this transaction, is noted directly as equity and attributed to the shareholders of the parent company. There will be no adjustments to the value of goodwill and profits or losses booked as profit and loss. The main consolidation criteria adopted are as follows:

60

Marzotto Group Consolidated financial statements



for equity investments consolidated according to the full method, the book value of the individual equity investments consolidated is eliminated against the related shareholders’ equity, with the assumption of the assets, liabilities, costs and revenues of the subsidiaries, regardless of the entity of the investment held, the portion of capital and reserves pertaining to the minority shareholders in the subsidiaries and the portion pertaining to minority shareholders of the period profit or loss of subsidiaries consolidated are identified separately in the consolidated balance sheet and income statement;



for the booking of the acquisitions of subsidiaries, the purchase method is used, as envisaged by IFRS 3 Revised (see the paragraph on “Business combinations”);



all balances and significant transactions between group companies are eliminated, as are profits and losses (the latter unless representative of an effective lesser value of the asset sold) deriving from commercial or financial intra-group operations not yet realised with regards to third parties;

Consolidation area and method

[Notes to the consolidated financial statements] 

increases/decreases in the shareholders’ equity of consolidated companies allocated to the results achieved after the purchase of the equity investment, during elision, are booked to a specific equity reserve called “Profits (losses) carried forward”;



the dividends distributed by Group companies were eliminated from the income statement during consolidation.

The consolidated financial statements include the portion pertaining to the Group of the results of the companies booked using the equity method starting from the date on which the significant influence or joint control takes effect and until such time as said significant influence or joint control ceases to apply. Intra-group profits not yet realised with regards to third parties are eliminated for the portion pertaining to the Group in the investee company. Intra-group losses not yet realised with regards to third parties are also eliminated unless representing an effective lesser value of the asset sold. Any losses exceeding shareholders’ equity are booked to the extent to which the participating company is committed to fulfilling the legal or implicit obligations with regards to the investee or in any case to covering its losses. Equity investments in affiliated companies Equity investments held in companies over which the Group exercised significant influence over the financial and operative policies. Equity investments held in companies over which significant influence is exerted (“affiliates”), which is assumed to exist when the percentage of the investment held ranges between 20% and 50%, are measured using the equity method. By virtue of the application of the equity method, the book value of the investment is aligned to the shareholders’ equity, adjusted, where necessary, to reflect the application of the IFRSs approved by the European Commission and includes the registration of any goodwill identified at the time of acquisition. The portion of profits/losses realised by the affiliate after acquisition is booked to the income statement, whilst the portion of changes to reserves subsequent to acquisition is booked to equity reserves. When the portion of Group losses in an affiliate equals or exceeds its share pertaining to the affiliate, considering all credits that are not guaranteed, the value of the equity investment can be zeroed and the Group does not book any additional losses with respect to those of its competence, apart from to the extent to which the Group is held liable. Profits and losses not realised and generated on transactions with affiliates are eliminated according to the value of the investment of the Group held in them. Equity investments in joint ventures or companies under joint control Joint ventures are companies subject to the joint control of companies over which the Group has the power to govern the operative and financial policies if there is unanimous consent by the other parties with joint control. Investments in joint ventures or companies under joint control are consolidated using the equity method and the homogeneous accounting standards as applicable to the Group. Equity investments in other companies Equity investments in other companies constituting “financial assets available for sale” are measured at fair value and all profits and losses deriving from the changes in fair value are allocated directly to shareholders’ equity until sold. Comprehensive profits and losses are booked to the income statement of the year during which the sale is made, unless a financial asset available for sale has accumulated a significant or prolonged reduction in fair value. In this case, the accumulated capital loss in the fair value reserve is transferred from shareholders’ equity to the income statement.

Marzotto Group Consolidated financial statements

61

Consolidation area and method Change to consolidation area

[Notes to the consolidated financial statements] During FY 2014, the Marzotto Group recorded the following changes:  







purchase of a 50% share in the share capital of Uab Lietvilna for 4,250 thousand euros, from the former affiliate, Filivivi S.r.l. The company produces carded yarn for knitwear; purchase of a 50% share in the share capital of Tintoria di Verrone S.r.l. for 515 thousand euros, from the former affiliate, Filivivi S.r.l. The company carries out cone dying and treats wool tops; the leaving of the consolidation scope of Filivivi S.r.l., as a result of the sale of the equity investment, equal to 50% of the capital, for 5,900 thousand euros. The consolidated capital gain booked amounts to 6,475 thousand euros; establishment by the parent company, Marzotto S.p.A., of Marzotto Wool Manufacturing S.r.l. and payment of the share capital of 10 thousand euros. This operations comes under the more extensive project for the Group reorganisation, as extensively described in the Report on Operations; establishment by the parent company, Marzotto S.p.A., of Marzotto Lab S.r.l. and payment of the share capital of 10 thousand euros. This operation comes under the more extensive project for the Group reorganisation, as extensively described in the Report on Operations.

Below are the subsidiaries and affiliates included in the consolidation scope as of 31 December 2014. Operating Companies consolidated on a line-by-line basis: Share Capital Currency 1,000.00 K EUR

% Ownership 2014 2013 100.00 100.00

Company Biella Manifatture Tessili S.r.l.

Reg. office Milan (I)

Le Cotonerie S.r.l.

Milan (I)

15.00 K EUR

100.00

100.00

Ambiente Energia S.r.l.

Schio (I)

100.00 K EUR

100.00

100.00

Sametex spol. s r.o

Kraslice (CZ)

343,691.00 K CZK

100.00

100.00

Girmes International G.m.b.h.

Nettetal (DE)

800.00 K EUR

100.00

100.00

Marzotto Textiles Czech Republic s. r.o.

Praga (CZ)

200.00 K CZK

100.00

100.00

Marzotto Wool Manufacturing S.r.l.

Valdagno (I)

10.00 K EUR

100.00

=

Marzotto Lab S.r.l.

Valdagno (I)

10.00 K EUR

100.00

=

Marzotto Textile N.V. and its subsidiaries:

Amsterdam (NL)

45.00 K EUR

100.00

100.00

Marzotto Int.Trad. (Shanghai) Ltd.

Shanghai (RPC)

1,001.46 K CNY

100.00

100.00

Marzotto Textiles USA Inc.

Wilmington (USA)

410.00 K USD

100.00

100.00

Amsterdam (NL)

18.00 K EUR

100.00

100.00

1,095,000.00 K CZK

100.00

100.00

18.00 K EUR

100.00

100.00

Kaunas (LT)

41,000.00 K LTL

99.97

99.97

Milan (I)

27,648.00 K EUR

100.00

100.00

Chbedda (TN)

14,000.00 K TND

100.00

100.00

Kaunas (LT)

29,120.00 K LTL

100.00

100.00

Kaunas (LT)

1,726.40 K LTL

50.00

50.00

Marzotto Wool Fabrics B.V. and its subsidiaries: Novà Mosilana a.s. Marzotto Blankets B.V. and its subsidiaries: AB Liteksas Linificio e Canapificio Nazionale S.r.l.

Brno (CZ) Amsterdam (NL)

and its subsidiaries: Filature de Lin Filin S.A. UAB Lietlinen UAB Linestus

62

Marzotto Group Consolidated financial statements

Licana S.p.A. in liquidation

Fara Gera d'Adda (I)

120.00 K EUR

100.00

100.00

Lin Naturel S.A.

Chbedda (TN)

100.00 K TND

100.00

100.00

Basis of consolidation

[Notes to the consolidated financial statements] Operating Companies consolidated at equity: % Ownership Share Company

Reg. office

Mascioni S.p.A.

Milan (I)

Mediterranean Wool Industries Co. S.A.E.

Capital

Currency

2014

2013

5,000.00 K EUR

28.35

28.35

Sadat City (ET)

10,000.00 K USD

30.00

30.00

UAB Lietvilna

Kaunas (LT)

15,711.00 K LTL

50.00

=

Tintoria di Verrone S.r.l.

Verrone (I)

100.00 K EUR

50.00

=

Pettinatura di Verrone S.r.l.

Verrone (I)

3,000.00 K EUR

15.00

15.00

Ratti S.p.A.

Guanzate (I)

11,115.00 K EUR

33.36

33.36

10.00 K TND

31.70

31.70

and its subsidiaries: Creomoda S.a.r.l.

Sousse (TN)

Ratti USA Inc.

New York (USA)

500.00 K USD

33.36

33.36

Ratti Int. Trading (Shanghai) Co. Ltd

Shanghai (RPC)

110.00 K EUR

33.36

33.36

Textrom S.r.l.

Cluj - Napoca (RO)

0.20 K RON

33.36

33.36

Operating Companies classified among non-current assets held for sale: Share

Marzotto Group Consolidated financial statements

Capital

% Ownership Currency

Company

Reg. office

2014

2013

Aree Urbane S.r.l. in liquidation

Milan (I)

100.00 K EUR

32.50

32.50

Filivivi S.r.l.

Milan (I)

15,000.00 K EUR

=

50.00

63

Basis of consolidation Conversion of accounts carried in foreign currencies

[Notes to the consolidated financial statements] The presentation currency adopted by the Group is the euro, which is also the functional currency of the parent company Marzotto S.p.A. As of the closing date, the accounts of foreign companies carried in functional currencies that differ from the euro, are converted into the presentation currency as follows:  

assets and liabilities are converted using the exchange rates in force as of the year-end date; items of the income statement are converted using average period exchange rates.

Any exchange differences emerging from this conversion process are accrued into a separate item of equity (Conversion reserve) until disposal of the foreign company. The exchange rates applied for the conversion of the financial statements of the companies included in the consolidation are given in the table below: Currency (units per 1 euro)

2014

2013

% change

- for the profit and loss account (average prevailing exchange rates for the year) CZK

Czech Crown

LTL

Lithuanian Litas

27.536

25.987

6.0

3.453

3.453

=

CNY

China Renmimbi

8.188

8.165

0.3

TND

Tunisian Dinar

2.251

2.159

4.3

RON

New Leu

0.6

HKD

Hong Kong Dollar

USD

USA Dollar

4.444

4.419

10.305

10.302

=

1.329

1.328

0.1

1.1

- for the balance sheet (year-end prevailing exchange rates)

64

Marzotto Group Consolidated financial statements

CZK

Czech Crown

27.735

27.427

LTL

Lithuanian Litas

3.453

3.453

=

CNY

China Renmimbi

7.536

8.349

(9.7)

TND

Tunisian Dinar

2.260

2.267

(0.3)

RON

New Leu

4.483

4.471

0.3

HKD

Hong Kong Dollar

9.417

10.693

(11.9)

USD

USA Dollar

1.214

1.379

(12.0)

Valuation criteria

[Notes to the consolidated financial statements]

Valuation criteria

The most significant valuation criteria adopted when preparing the financial statements are described as follows:

1.1 Real estate, plants and machinery 1.2 Civil real estate

Real estate, plants and machinery are carried at historical cost, including directly attributable accessory costs. Land, both vacant and annexed to residential or industrial buildings, has not been amortized since its useful life is indefinite. Some assets that had been revaluated in previous periods are shown at the revaluated amount, considered their deemed cost on the transition date to IAS. Assets acquired through business combination operations are recognized at fair value defined provisionally at the acquisition date and adjusted, if necessary, within the following twelve months. Maintenance and repair expenses that do not increase the value or prolong the remaining useful life of assets are recognized as expenses in the period in which they are incurred. Tangible assets are shown net of accumulated depreciation and any reductions in value, determined in accordance with the methods described below. Depreciation is straight-line, based on the estimated useful life of the asset. The estimated useful life of the main real estate, plants and machinery is as follows: Land undefined Civil buildings 33 years/undefined Industrial buildings 10/33 years Plants and machinery: - Textile 8 years - Corrosive environment textile 5/6 years - Other 7/25 years Industrial and commercial equipment 4/7 years Other assets: - Electronic office machines 5 years - Office furniture and fixtures 7/8 years - Vehicles 4 years

1.3 Goodwill, trademarks and other intangible assets

Intangible assets with a “finite useful life” are recognised at cost, determined according to the methods prescribed for tangible assets, and shown net of accumulated amortization and any permanent reductions in value, determined according to the methods described below. Intangible assets with “indefinite useful life” are not amortized. Intangible assets acquired through business combination operations are recognized at fair value defined provisionally at the acquisition date and adjusted, if necessary, within the following twelve months.

Value reduction

In application of the reference accounting standards (IAS 36), the Group verifies, at each financial statements’ date, if there is any indication of lasting reduction in value for all assets. If these indications exist, an estimate is prepared of the value that can be recovered on the asset, i.e. the greater of the fair value of an asset or cash generating unit, less the costs of sale, and its use value. In determining its use value, estimated future cash flow is discounted to current value, using a gross tax rate that reflects current market appraisals of the value of the money and specific risks of the asset. A reduction in value is recognized in the income statement when the book value of the asset, or of the related cash generating unit, to which it is allocated, is greater than the estimated realizable value. Reductions in value are written back if the reasons for the devaluation are no longer present.

Marzotto Group Consolidated financial statements

65

Valuation criteria

[Notes to the consolidated financial statements]

1.5 Other shareholdings

Shareholdings in companies other than subsidiaries and affiliates are valued at fair value, charging any profits or losses directly to shareholders’ equity. At the time of their sale, such accumulated profits and losses are recognised in the income statement. When their fair value cannot be reliably determined, shareholdings in other companies are valued at cost adjusted for reductions in value, if any, and their effect is recognized in the income statement. At the date of each annual report, the Group verifies if there is any indication of permanent value reduction for equity investments and makes the appropriate adjustments, as described above.

1.8 Medium-long term financial assets

Financial assets are initially carried at their nominal value, representative of the fair value, and later recognized at the lower between the book value and the estimated sale value.

2. Non-current assets held for sale

Assets or groups of assets and liabilities whose value will be recovered mainly through sale rather than ongoing use are recognised separately from other assets and liabilities in the balance sheet. Non-current assets or groups of assets and liabilities held for sale are recognized at the lower between the book value and the fair value net of the costs of sale.

3.1 Inventory

Inventory of raw materials, semi-finished goods and finished goods is carried at the lower between the cost of purchase or production and the estimated net realizable value, using the average weighted cost criteria to determine the cost. The stock valuation includes direct material and labour costs and indirect costs (variable and fixed), due to production.

3.2 Trade receivables 3.3 Other receivables

Trade receivables due within standard business terms and other operating receivables (other receivables) are not discounted and are carried at nominal value net of any write-downs. The adjustment to the estimated realizable value is recognised in special adjustment reserves.

3.4 Short-term financial assets and cash and cash equivalents

Financial assets held for trading are recognized at the fair value shown in the income statement. Cash and cash equivalents are made up of cash in hand, i.e. cash that is readily available or on a very short term, successfully, and without collection expenses. A financial asset (or, if applicable, a portion of a financial asset or portion of a group of similar financial assets) is cancelled from the balance sheet when:  

66

Marzotto Group Consolidated financial statements

the rights to receive financial flows from the asset expired; the Group has transferred the right to receive financial flows from the asset or has taken over the contractual obligation to pay them fully and without delay to a third party and (a) it has basically transferred all risks and benefits of the ownership of the financial asset or (b) it has not transferred nor retained basically all risks and benefits of the asset, but it has transferred the control of the same.

Valuation criteria 5.1 Long-term provisions

[Notes to the consolidated financial statements] Provisions to long-term reserves are recognized when there is a legal or implicit obligation towards a third party and it is likely that there will be an outlay of resources the amount of which can be reliably estimated. If the effect is significant, the provisions are determined by discounting the expected future financial flows at a pre-tax discount rate that reflects the current market value of the cost of money in relation to time. When the amount is discounted, the increase in the provision due to the passing of time is recognised as a financial charge. Defined contribution plans Defined contribution plans are post-employment benefits plans on which basis the entity pays fixed contributions to a separate entity and shall have no legal or implicit obligation to pay additional contributions. The contributions to be paid into defined contribution plans are recorded as a cost in the result of the period in which they are incurred. Contributions paid in advance are recorded amongst assets to the extent to which the advance payment will determine a reduction in future payments or a refund. Defined benefits plans The amount payable for staff termination indemnity comes under the scope of defined benefits pension plans, which are plans based on the working life of employees and on the remuneration received by the employee during a pre-determined period of service. More specifically, the liability relating to the staff termination indemnity of staff is booked at its actuarial value, insofar as it can be classified as employee benefits due according to a defined provision plan. The booking of defined provision plans requires an estimate using actuarial techniques of the amount of the provisions accrued by employees in exchange for his work during the current and previous years, and the discounting of these provisions in order to determine the current value of the company’s commitments (IAS 19). According to Law no. 296/06, effective from 30 June 2007, the staff termination indemnities accrued after 01 January 2007 must be paid in an appropriate treasury fund opened with INPS (National Institute for Social Protection) or, according to the instructions of the employee, to the selected fund. With these payments, the item relating to staff termination indemnities is no longer affected by accruals, contrary to staff termination indemnities accrued by 31 December 2006, which therefore come under the scope of defined benefits pension plans. In June 2012, IAS 19 was amended to provide for the recording of changes to actuarial gains/losses of defined benefits plans and, therefore, including employee termination indemnities, amongst items of the statement of comprehensive income, as from 01 January 2013. The Group has decided to apply this amendment early, as from the financial statements as of 31 December 2012.

Marzotto Group Consolidated financial statements

67

68

Valuation criteria

[Notes to the consolidated financial statements]

5.4 Medium/long-term financial payables

Financial liabilities, except for derivatives, are initially carried at fair value net of directly attributable transaction costs. They are later measured using the actual interest rate method.

6. Non-current liabilities held for sale

The groups of assets and liabilities whose value will be recovered mostly through sale rather than through the continuous use are shown separately from other assets and liabilities in the balance sheet. The groups of non-current assets and liabilities classified as held for sale are shown at the lower between the book value and the fair value net of sale’s costs.

7.1 Trade payables and other payables

Trade payables due within standard business terms, and other operating payables, are not discounted and are carried at nominal value.

7.2 Short-term financial payables

Financial liabilities, except for derivatives, are carried at fair value net of directly attributable transaction costs.

Derivative financial instruments

Derivatives are carried at fair value. They are designated as hedging instruments when the relationship between the derivative and the underlying instrument is formally documented and the effectiveness of the hedge, which is verified periodically, is adequate. When the derivatives cover the risk of change in fair value of the underlying instruments (fair value hedge), they are carried at fair value, and the difference is recognised in the income statement; consistently, the underlying instruments are adjusted to reflect the change in fair value associated with the hedged risk, and the difference is also recognised in the income statement. When derivatives cover the risk of changes in cash flows from the underlying instruments (cash flow hedge), the changes in fair value are initially recognised in the shareholders’ equity and later in the income statement, consistently with the effects produced by the hedging transaction. Changes in the fair value of derivatives that do not satisfy the conditions for being qualified as hedges are recognised in the income statement.

Translation of items in foreign currency

The financial statements of each consolidated company are prepared using the currency of the economy in which the company operates. In such cases, all transactions in currencies other than the unit of account are recorded at the exchange rate prevailing on the transaction date. Monetary assets and liabilities denominated in currencies other than the unit of account are later adjusted by the exchange rate prevailing at the end-date of the accounting period.

Contributions

Contributions from both government agencies and private third parties are carried at fair value when there is the reasonable certainty that they will be received and the prescribed conditions for obtaining them are satisfied. Contributions received for specific expenses are recognised among other liabilities and credited to the income statement on a straight-line basis throughout the same period in which the related costs accrue. Contributions received for specific assets, the value of which is stated among tangible and intangible assets, are shown among liabilities and credited in the income statement in relation to the depreciation period for the assets to which they refer. Contributions during the accounting period are fully recognised in the income statement at the time the conditions for recognizing them are satisfied.

Fair value

The fair values used to prepare the financial statements, referred to the valuation of term purchases and sale of foreign currency and to foreign exchange options, were established based on the rates from the banking system.

Marzotto Group Consolidated financial statements

Valuation criteria

[Notes to the consolidated financial statements]

8. Revenues

Depending on the type of transaction, revenues are recognised based on specific criteria indicated below:  revenues from the sale of goods are recognised when the significant risks and benefits of ownership are transferred to the purchaser (typically at the time of shipment);  revenues for services provided are recognised based on the status of completion basis of the assets.

15. Net financial expense

Financial revenues and expense are recognised on the basis of accrued interest on the net value of the relevant financial assets and liabilities using the actual interest rate.

16. Dividends

Dividends are recognised when the right to receive payment is established. Dividends payable to third parties are shown as changes in net equity on the date they are approved by the shareholders’ meeting of the parent company.

20. Taxes

Current income taxes for the financial year are determined based on estimates of taxable income and according to law. Deferred and advance income taxes are calculated on the temporary differences between the recorded asset values and the respective recognized values for tax purposes, applying the tax rate in effect at the date the temporary difference will be reversed, calculated on the basis of the tax rates provided by the law or substantially in force at the accounting reference date. The asset entry for advance tax payments is made when recovery is likely, that is when it is estimated that in the future there will be taxable amounts sufficient to recover the asset. The ability to recover assets for advance tax payments is reassessed at the end of each accounting period. In addition deferred tax receivables and payables are set aside following the adjustments made, upon consolidation, to the financial statements of the companies of the Group.

29. Base profit per share

The profit per share is calculated dividing the profit attributable to the holders of ordinary shares of the parent company by the weighted average of the outstanding ordinary shares during the period.

Use of estimates

In application of IFRS, preparing the consolidated financial statements requires the use of estimates and assumptions that affect the values of balance sheet assets and liabilities and the relevant information, as well as potential assets and liabilities at the reference date. Estimates and their underlying assumptions are based on past experience and on other factors that are deemed reasonable in each case. Actual results may differ from these estimates. Estimates and assumptions are reviewed periodically and the effects of each change are reflected in the income statement. A significant discretionary valuation is required from the Administrators to establish the amount of deferred tax assets that may be posted. They have to estimate the likely time of occurrence and the amount of future profit subject to tax as well as a planning strategy for future taxes. Estimates are also used to record provisions for bad debt, for inventory obsolescence, amortization and depreciation, employee benefits, provisions for risks and charges. At the date of each annual report, the Group verifies if there’s any indication of permanent value reduction for all non-financial assets. Goodwill and other intangible assets with an indefinite useful life are subject to review each year to identify any decrease in value. The recoverable value of non-current assets is typically established in reference to the use value, based on the present value of financial flows expected from the continuous use of the asset. This verification involves also the choice of an adequate discount rate to calculate the present value of the expected financial flows.

Marzotto Group Consolidated financial statements

69

Other information

Tax consolidation

[Notes to the consolidated financial statements] Effective from the year 2008, Marzotto S.p.A., Immobili e Partecipazioni S.r.l., Linificio e Canapificio Nazionale S.r.l. and Licana S.p.A. in liquidation have all agreed to the Domestic Tax Consolidation, the parent company for it is Wizard S.r.l. These companies subsequently renewed their adhesion to the specified tax consolidation. Since 2009 also the following subsidiaries are part of the Domestic Tax Consolidation: Biella Manifatture Tessili S.r.l., Ambiente Energia S.r.l. and Le Cotonerie S.r.l. (formerly Immobiliare Isola S.r.l.), renewed for the three years 2012-2014. Adhesion to the tax consolidation of Wizard S.r.l. is governed by a specific regulation in force for the entire period for which the option is valid. Economic relations for the tax consolidation are regulated as follows:  



subsidiaries which have positive taxable income for the years concerned pay Wizard S.r.l. the greater tax due by it; companies consolidated with negative taxable income receive compensation amounting to 100% of the tax saving achieved on a group level from Wizard S.r.l. This compensation is due when effectively used by Wizard S.r.l.; if Wizard S.r.l. and the subsidiaries should not renew the Domestic Tax Consolidation option, or if the requirements to continue to apply it should be forfeited prior to the end of the three years for which the option is valid, the tax losses that can be reported as resulting from the declaration are allocated proportionally to the companies that produced them.

Early termination of the tax consolidation agreement or failure to renew it shall not have any penalty for the participating companies.

All figures in the consolidated balance sheet, the consolidated statement of period profit/(loss) and other items of the consolidated comprehensive income statement, the consolidated cash flow statement and the table of changes in consolidated shareholders’ equity, as well as in the notes, are expressed in thousands of euros. For an easier comparison, the previous year figures have been reclassified as needed, and adequate information has been provided. Please refer to the Report on Operations for further information regarding:  main events of the 2014 financial year;  events after the close of the financial year;  foreseeable development of operations;  risk factors (IFRS 7);  other relevant information on operating performance and the balance sheet structure.

70

Marzotto Group Consolidated financial statements

Balance sheet

[Notes to the consolidated financial statements] Following the adoption of the new accounting standard IFRS 11, the Group has altered the criteria used to book and state joint ventures or joint arrangements, which as from this year are consolidated using the equity method. As a result of this change, the equity and economic balances are not directly comparable with those of last year. Please refer to the above tables for a reconciliation of the balances given. The tables below are in thousands of euros.

1.1) Property, plant and machinery 1.2) Civil buildings

Amounts to:

2014

2013

106,829

102,074

Change 4,755

broken down as follows: A)

B)

C)

D)

E)

F) Tangible

Description

Civil

Industrial

Plant

Industrial

Other

fixed assets

land and

land and

and

and comm.

tangible

under cons./

buildings

buildings

machinery

equipment

fixed assets

advances

Total

Original cost (at exchange rate of 31/12)

1,336

113,537

262,385

10,039

13,131

3,274

403,702

Depreciation funds

(134)

(61,689)

(218,260)

(9,417)

(12,128)

=

(301,628)

1,202

51,848

44,125

622

1,003

3,274

102,074

Balances as of 31.12.2013 Movements during the year: Original cost: acquisitions

294

2,113

7,895

592

820

5,589

17,303

exchange rate differences

=

(588)

(719)

(13)

(49)

(27)

(1,396)

change in scope of consolidation

=

6

466

1

1

8

482

other reclassifications

=

=

=

12

(12)

=

=

disposals

=

=

(5,160)

(212)

(901)

=

(6,273)

Depreciation funds: depreciation for the year exchange rate differences disposals Total movements for the year

=

(2,376)

(9,439)

(322)

(314)

=

(12,451)

(2)

259

740

10

44

=

1,051

=

=

4,947

209

883

=

6,039

292

(586)

(1,270)

277

472

5,570

4,755

Original cost (at exchange rate of 31/12)

1,630

115,068

264,867

10,419

12,990

8,844

413,818

Depreciation funds

(136)

(63,806)

(222,012)

(9,520)

(11,515)

=

(306,989)

1,494

51,262

42,855

899

1,475

8,844

106,829

Balances as of 31.12.2014

The main changes relate to the acquisitions made by Marzotto S.p.A. (6,101 thousand euros), Ambiente Energia S.r.l. (594 thousand euros), Novà Mosilana a.s. (4,978 thousand euros), Biella Manifatture Tessili S.r.l. (2,752 thousand euros), Linificio Group (808 thousand euros) and other Group companies. The sale of assets during the year involved booking net capital gains gross of tax of 93 thousand euros (of which gains of 108 thousand euros and losses of 15 thousand euros). As of 31 December 2014, the fixed assets of the subsidiary Filature de Lin Filin S.A. (Tunisia), consolidated on a line-by-line basis, were encumbered by mortgages to guarantee a bank loan of 3,000 thousand euros.

Marzotto Group Consolidated financial statements

71

Balance sheet

[Notes to the consolidated financial statements]

1.3) Goodwill, trademarks and other intangible assets

2014 Amounts to:

2013

9,415

Change

6,592

2,823

made up as follows:

Description (1)

A)

B)

C)

Research,

Ind. patent

Concessions,

D)

E)

F) Intangible

development

and

licenses,

Other

and

intellectual

trade-marks

intangible

being

advertising

property

and

fixed

developed and

costs

rights

similar rights

assets

advances

Goodwill

fixed assets

Total

=

4,975

4,497

167

460

84

10,183

Depreciation funds

=

(3,108)

(209)

(1)

(273)

=

(3,591)

Balances as of 31.12.2013

=

1,867

4,288

166

187

84

6,592

Original cost

Movements during the year: Original cost: acquisitions

=

327

13

=

10

86

436

exchange rate differences

=

(10)

=

=

1

(14)

(23)

disposals/depreciations

=

=

=

=

(2)

=

(2)

change in scope of consolidation

=

1

2,900

=

=

=

2,901

reversal due to amort. being completed

=

(14)

=

=

=

=

(14)

Amortisation: for the year

=

(470)

(11)

=

(17)

=

(498)

exchange rate differences

=

7

=

=

=

=

7

disposals/depreciations

=

=

=

=

2

=

2

reversal due to amort. being completed

=

14

=

=

=

=

14

Total movements for the year

=

(145)

2,902

=

(6)

72

2,823

Original cost (1)

=

5,279

7,410

167

469

156

13,481

Depreciation funds

=

(3,557)

(220)

(1)

(288)

=

(4,066)

Balances as of 31.12.2014

=

1,722

7,190

166

181

156

9,415

1. Original cost of the assets being depreciated.

Concessions, licences, trademarks and similar rights include the values of the Guabello trademarks for 2,300 thousand euros, Tallia di Delfino for 1,170 thousand euros, the value of the velvet trademarks “Redaelli Velluti”, “Redaelli 1893”, “Niedieck”, “Christoph Andreae” and of the Marzotto Group trademark. During the year, the parent company Marzotto S.p.A. acquired the Lanerossi brand from Filivivi S.r.l., as part of the Wool Yarns business reorganisation described above, for 2,900 thousand euros. The trademarks, which are considered intangible assets with an undefined useful life, are not amortised but rather are regularly impairment tested in compliance with IAS 36. The impairment test on the trademarks value is performed establishing their use value according to the method of comparable royalty rates. The cash flows are discounted at a discount rate equal to the current interest rate without market risk, in relation to a time frame consistent with the duration of flows (10 years), plus the risk coefficient specific to the activity. The impairment tests performed at the end of 2014 have not shown any significant indication of lasting reduction in value for trademarks.

72

Marzotto Group Consolidated financial statements

Balance sheet

[Notes to the consolidated financial statements] Goodwill includes 167 thousand euros for the purchase of the “Logistics Services” business unit of Piovene. In compliance with international accounting standards, this item is not subject to amortisation, but rather to annual impairment testing. This analysis is carried out by comparing the book value of goodwill with the greater of the value in use and fair value. During the first months of 2015 there were no significant events to lead us to believe that the financial statements value suffered a permanent reduction in value. However, the estimate of the recoverable value of the CGU is discretionary and subject to the use of estimates by the management. In fact, there are several factors connected to the difficult market situation which may require a new calculation of the value of goodwill. The Group will monitor closely the circumstances and events which may cause a new assessment of losses of value. Research and development expenses paid during the year, pertaining to product innovation and applications for the rationalization of production and logistics, have been charged to the income statement.

Marzotto Group Consolidated financial statements

73

Balance sheet

[Notes to the consolidated financial statements]

1.4) Equity investments

2014

Amounts to:

2013

20,497

Change

21,416

(919)

made up as follows:

Description Original cost Adjustment to equity Balances as of 31.12.2013

A)

B)

C)

D)

Ratti

Mascioni

Mediterranean

Pettinatura di

Group

Group

Wool Ind.

Verrone

Sub total

10,402

4,034

2,027

1,527

4,558

(605)

(571)

34

17,990 3,416

14,960

3,429

1,456

1,561

21,406

Movements during the year: Original cost: acquisitions

=

=

=

=

=

devaluation

=

(3,328)

=

=

(3,328)

914

=

(262)

105

757 (912)

Adjustment to equity:

=

accrued pro-quota profit/(loss) pro-quota dividends paid in 2014

(912)

=

=

=

effect of change in shareholders' equity

(166)

(101)

(11)

=

(278)

(164)

(3,429)

(273)

105

(3,761)

10,402

706

2,027

1,527

14,662

4,394

(706)

(844)

139

2,983

14,796

=

1,183

1,666

17,645

Total movements for the year Original cost Adjustment to equity Balances as of 31.12.2014

Description

E)

F)

Uab

Tintoria di

Lietvilna

G)

Verrone S.r.l.

Uab Linestus

Total

Original cost

=

=

91

Adjustment to equity

=

=

(81)

18,081 3,335

Balances as of 31.12.2013

=

=

10

21,416

Movements during the year: Original cost: acquisitions

4,250

515

=

4,765

devaluation

(2,140)

(385)

=

(5,853)

281

(130)

(6)

902 (912)

Adjustment to equity:

=

accrued pro-quota profit/(loss) pro-quota dividends paid in 2014

=

=

=

457

=

=

179

Total movements for the year

2,848

=

(6)

(919)

Original cost

2,110

130

91

16,993

738

(130)

(87)

3,504

2,848

=

4

20,497

effect of change in shareholders' equity

Adjustment to equity Balances as of 31.12.2014

The above table shows the shares held by the Group in joint ventures and affiliates. Please note that as from FY 2014, in compliance with the reference standard (IFRS 11), the Group adopts the equity method for booking joint ventures with Ratti S.p.A. (held 33.36%), Uab Lietvilna (held 50%), Tintoria di Verrone S.r.l. (held 50%) and Uab Linestus (held 50%). The Group has equity investments in the affiliated companies Mascioni S.p.A. (held 28.35%), Mediterranean Wool Industries Co. S.A.E. (held 30%) and Pettinatura di Verrone S.r.l. (held 15%), also assessed using the equity method. The period adjustment reflects the measurement using the equity method of the above equity investments. 74

Marzotto Group Consolidated financial statements

Balance sheet

[Notes to the consolidated financial statements]

1.5) Other investments

2014 Amounts to:

1.6) Other medium/long-term receivables

2013 114

2014 Amounts to:

Change 114

2013 436

=

Change 506

(70)

made up as follows: Due from Tax Authorities

214

10

204

Other receivables

222

496

(274)

Total

436

506

(70)

Other medium/long-term receivables, of 436 thousand euros, include receivables due from the tax authorities for 214 thousand euros and receivables due from third parties for 222 thousand euros. The first relate to tax receivables for investments in new instrumental assets (pursuant to Art. 18 of Italian Decree-Law no. 91 of 24 June 2014), which can be used to offset three annual instalments of equal amount as from 01 January of the second tax period after that during which the investment was made. The second are mainly related to caution deposits paid-in by the Group companies to third parties.

1.7) Deferred tax assets

2014 Amounts to:

2013

20,763

Change

21,921

(1,158)

made up as follows: Depreciation of inventory

2,455

2,588

(133)

Depreciation of receivables

1,775

1,869

(94)

Accrual for risks and charges

5,475

5,329

146

712

972

(260)

Forex Tax losses

7,926

8,381

(455)

Other temporary differences

2,420

2,782

(362)

20,763

21,921

(1,158)

Total

The table above gives details of the items involved by temporary differences on which prepaid tax assets have been calculated. Said receivables relate for 14,180 thousand euros from the parent company, for comments of which reference should be made to the notes. The remaining deferred tax assets refer mainly to the temporary difference recognised by Biella Manifatture Tessili S.r.l. (2,953 thousand euros), by Novà Mosilana for 329 thousand euros and by the Linificio e Canapificio Nazionale S.r.l. Group for 3,046 thousand euros. Taking into consideration the Italian regulations on the unlimited carry forwards of tax losses, the forecast of the business performance and the participation in the Domestic Tax Consolidation of the parent company Wizard S.r.l. of the Italian companies of the Group, the Administrators have decided to record the advance taxation in connection with the losses that may be carried forward by the Companies.

1.8) Medium/long-term financial receivables

2014 Amounts to:

2013

Change

373

105

268

Guarantee deposits (financial)

373

105

268

Total

373

105

268

made up as follows:

Marzotto Group Consolidated financial statements

75

Balance sheet

[Notes to the consolidated financial statements]

2. Assets held for sale/discontinued operations

The item includes the equity investment in the affiliate Aree Urbane S.r.l. in liquidation, fully impaired in previous years. Reference is made to the information given in the Report on Operations.

3.1) Inventory Amounts to:

2014

2013

108,306

103,623

Change

4,683

and can be broken down as follows: Raw, ancillary and consumable materials

35,351

31,864

3,487

Unfinished, semi-finished goods and work in progress

34,422

35,817

(1,395)

Finished products and goods for resale

38,533

35,942

2,591

108,306

103,623

4,683

Total

Warehouse inventory is indicated at the lower between the purchase or production cost, determined using the weighted average cost method, and the estimated net sale value, as indicated in point 3.1 of the valuation criteria. In this regard, please note that the Group companies implement a disposal procedure for obsolete products, mainly seasonal fashion items that have been left unsold, using stock sales; goods that are still held as inventories at year end are suitably written-down, bringing their value into line with their presumed realisation value. Inventories shows a net increase of 4,683 thousand euros on last year. The breakdown and change in the item is as follows:  inventories in the Fabrics sector for 94,154 thousand euros (88,930 thousand euros as of 31 December 2013);  inventories in the Linen Yarns sector for 14,152 thousand euros (14,693 thousand euros as of 31 December 2013).

76

Marzotto Group Consolidated financial statements

Balance sheet

[Notes to the consolidated financial statements]

3.2) Trade receivables

2014 Amounts to:

2013

66,447

Change

65,119

1,328

and refers to: 2014 Amount

2013 %age

Amount

%age

Active customers receivables

68,424

100.0

67,305

– Bad debt provision

(4,732)

(6.9)

(4,744)

(7.0)

= Net active customers receivables

63,692

93.1

62,561

93.0

2,836

100.0

2,708

100.0

(2,102)

(74.1)

(2,250)

(83.1)

734

25.9

458

16.9

2,021

100.0

2,100

100.0

Total face value of receivables

73,281

100.0

72,113

100.0

– Bad debt provision

(6,834)

(9.3)

(6,994)

(9.7)

Net receivables from customers

66,447

90.7

65,119

90.3

Bad debt – Bad debt provision = Net bad debt Due from affiliates

100.0

Trade receivables total 66,447 thousand euros, net of the provision for doubtful debt of 6,834 thousand euros (provision of 6,994 thousand euros at 31 December 2013). The value of the provision booked is considered appropriate in terms of bringing the nominal value of receivables in line with that presumed to be realised and is coherent with the provisions of the reference accounting standard. Said provision has been determined by performing a timely analysis of all positions suggesting a risk of doubtful recovery and of all positions relating to disputed receivables, considering the current market position. This item books an increase of 1,328 thousand euros, proportionally less than the increase in business volumes achieved in the period. This factor is due to both careful credit management policies aimed at optimising the customer loan policy, the speeding up of collection and compliance with contractual due dates and a greater value of receivables transferred on a without recourse basis. In order to provide complete information, please note that as of the reporting date, the total impact of the transfer of receivables without recourse is 32,161 thousand euros (27,936 thousand as of 31 December 2013), of which 22,528 thousand with effect on trade receivables (19,124 thousand at end 2013). We believe that the book value of the trade receivables reflects their fair value. Trade receivables by geographical area are shown in the table below:

Italy Towards clients

35,966

Other North America European Countries 18,482 4,071

Other Countries

Asia

Total

2,686

10,055

Towards affiliates

1,200

719

=

=

102

71,260 2,021

Gross receivables

37,166

19,201

4,071

2,686

10,157

73,281

Trade receivables due from affiliates and joint control companies refer to: 2014 Filivivi Group Tintoria di Verrone S.r.l. Uab Lievilna Mediterranean Wool Industries CO. S.A.E. Ratti Group Mascioni S.p.A. Total

2013 =

Change

1,355

(1,355)

9

=

9

719

=

719

102

80

22

1,137

663

474

54

2

52

2,021

2,100

(79)

Trade receivables due from affiliates and joint ventures result from business relations and are subject to regular market conditions. Marzotto Group Consolidated financial statements

77

Balance sheet

[Notes to the consolidated financial statements]

3.3) Other receivables

2014 Amounts to:

2013

19,635

Change

16,320

3,315

made up as follows: Due from Tax Authorities Other receivables

6,036

8,726

(2,690)

12,660

6,132

6,528

939

1,462

(523)

19,635

16,320

3,315

Accrued income and prepaid expenses Total

The amount of the item Other receivables is 19,635 thousand euros; below are the main items comprising this value. Receivables due from tax authorities refer to: 2014

2013

Change

Added value tax

2,728

2,157

571

Other taxes and interest

3,308

6,569

(3,261)

Total

6,036

8,726

(2,690)

In detail, Receivables due from tax authorities for VAT, 2,728 thousand euros, are 508 thousand euros for the Linificio Group, 922 thousand euros for the parent company, 646 thousand euros for Novà Mosilana a.s., 95 thousand euros for Sametex Spol s r.o, 124 thousand euros for AB Liteksas, 278 thousand euros for Biella Manifatture Tessili S.r.l., 75 thousand euros for Ambiente Energia S.r.l. and 80 thousand euros for other group companies. Other tax and interest, of 3,308 thousand euros, includes receivables for IRAP, IRES and other receivables due from the tax authorities. During the year, the item recorded a reduction of 3,261 thousand euros, mainly relating to the use to offset against other amounts payable to the tax authorities, of which 355 thousand euros for the balance due to the tax authorities for the dividend stripping dispute (described below). Other receivables amount to 12,660 thousand euros and mainly include receivables due from the parent company Wizard S.r.l. as a result of the adhesion of some Group companies to the tax consolidation for approximately 4,465 thousand euros, receivables due from employees for 727 thousand euros and receivables for advances to suppliers in the amount of 6,175 thousand euros. The period increase, of 6,528 thousand euros, is related for 6,079 thousand euros to the greater value of advances paid, used to offset the debt in the next few months. Accrued income and deferred expenses come to 939 thousand euros and mainly relate to the deferral of insurance costs.

78

Marzotto Group Consolidated financial statements

Balance sheet

[Notes to the consolidated financial statements]

3.4) Short term financial assets and cash and cash equivalents

Amounts to:

2014

2013

Change

20,075

68,883

(48,808)

Due from affiliates

1,237

4,870

(3,633)

Other financial receivables

2,100

146

1,954

16,709

63,744

(47,035)

29

123

(94)

20,075

68,883

(48,808)

and refers to: Financial assets

Cash Bank and post-office accounts Cash and cash equivalent on hand Total

The total amount of the Group’s Short-term financial assets and cash and cash equivalents is 20,075 thousand euros, as compared with 68,883 thousand euros last year. More specifically, short-term financial assets include financial receivables due from affiliates for 1,237 thousand euros due from Mediterranean Wool Industries Co. S.A.E. for 987 thousand euros and from UAB Lietvilna for 250 thousand euros. The period change is for -2,000 thousand euros due to collections on the loan disbursed to Filivivi S.r.l. in previous years and sold during the year to the company’s current owner, for 117 thousand euros to the adjustment of the receivable in dollars due from the affiliate MWI and 250 thousand euros to the receivable due in respect of the subsidiary UAB Lietvilna. Liquid funds come to 16,738 thousand euros (63,867 thousand euros in 2013) and include temporary funds available on bank accounts and amounts held as cash for future use. The significant reduction booked during the period, as compared with last year, is reflected in an equally significant reduction of debt to the credit system, as shown below. The values stated can be converted readily into cash and are subject to insignificant risk of value. We believe that the book value of the cash and cash equivalents and short-term financial assets is in line with their fair value as of the reporting date.

Marzotto Group Consolidated financial statements

79

Balance sheet

4. Shareholders’ equity

[Notes to the consolidated financial statements] Shareholders’ equity as of 31 December 2014 comes to 110,027 thousand euros, an increase of 10,731 thousand euros on last year, following the total comprehensive result of 13,351 thousand euros, offset by the negative change recorded in reserves for 2,068 thousand euros, as described below.

Share capital Number of Shares Ordinary shares Total

Share capital

Share capital

at 31.12.2013

change

Share capital at 31.12.2014

65,005,047

=

65,005,047

65,005,047

=

65,005,047

As of 31 December 2014, Share capital fully subscribed and paid-in was 65,005 thousand euros. No change took place during the period examined.

Legal reserve Balances equity as of 31 December 2013

15,000

+/- change

=

Total

15,000

The Legal reserve was not changed during the year.

Conversion reserve Balances equity as of 31 December 2013

3,391

+/- change

(570)

Total

2,821

The Conversion reserve totals 2,821 thousand euros and records a reduction of 570 thousand euros by virtue of the exchange differences deriving from the conversion into euros of the financial statements of the consolidated companies carried in foreign currencies.

Fair value reserve 2014

2013

Change

Cash flow hedging/other

(1,137)

(1,819)

682

Total

(1,137)

(1,819)

682

In order to face exchange rate risks involved in purchases and sales in other currencies, the Group carries out operations to establish in advance the exchange rates on estimated volumes (cash flow hedging). In particular, the Group uses the following instruments:  foreign currency loans;  forward sales and purchases in foreign currency;  foreign currency options at fixed exchange rates. These operations come under the scope of “cash flow hedges” insofar as they are stipulated to cover a risk of change in cash flows deriving both from an existing asset or liability and a future operation. As established by international accounting standards, the portion of the gain or loss relating to the measurement of such derivatives (mark to market) has been booked net of the tax effect, amongst the items of the statement of comprehensive income, as the effectiveness of the cover guaranteed by these financial instruments has been proven.

80

Marzotto Group Consolidated financial statements

Balance sheet

[Notes to the consolidated financial statements] The fair value reserve includes the fair value of said operations, net of the tax effect, which as of the reporting date comes to a negative 1,137 thousand euros. The gain or loss recorded under shareholders’ equity is booked to the income statement when the operation hedged affects it.

Other reserves and profits carried forward 2014 Reserve viz. art. 55 Pres. Decree 917/86 Capital grants

2013

Change

=

88

(88)

62

62

=

Realignment reserve viz. Law 342/2000

=

563

(563)

Revaluation reserve

=

6,357

(6,357) (36,538)

Profit carried forward

(18,927)

17,611

Other reserves

5,381

5,381

=

IAS 19 reserve (1)

(430)

481

(911)

32,111

20,060

12,051

Difference of Companies consolidated on a line-by-line basis Difference of Companies consolidated on an equity basis Total

(3,210)

822

(4,032)

14,987

51,425

(36,438)

Below is a reconciliation of shareholders’ equity and the result of the parent company with the corresponding consolidated values: 2014 Income Marzotto S.p.A. Elimination of shareholdings consolidated line-by-line Valuations at equity Intercompany dividends Elimination of intercompany capital gains Other Total

Marzotto Group Consolidated financial statements

2013

Net equity

Income

Net equity

1,789

60,437

(47,574)

60,093

16,295

50,942

26,209

49,838

6,652

3,442

(1,361)

(560)

(13,056)

=

(11,436)

=

1,580

(4,475)

496

(9,665)

91

(319)

(40)

(410)

13,351

110,027

(33,706)

99,296

81

Balance sheet

[Notes to the consolidated financial statements]

5.1) Long-term provisions

Amounts to:

2014

2013

30,460

Change

30,678

(218)

and refer to: 2014

2013

due to

Change

Provision for staff term.indemnities Amounts to:

Accruals

Utilisation

Exch. Diff.

Change area

11,261

10,717

544

2,742

(2,198)

=

=

Marzotto S.p.A.

8,241

7,625

616

1,886

(1,270)

=

=

B.M.T. S.r.l.

2,242

2,240

2

703

(701)

=

=

Ambiente Energia S.r.l.

152

149

3

33

(30)

=

=

AB Liteksas

101

100

1

1

=

=

=

Linificio Group

525

603

(78)

119

(197)

=

=

and refer to:

Staff termination indemnity reflects the indemnity calculated in accordance with current legislation, accrued by employees as of 31 December 2006 and which will be liquidated upon his leaving. Where specific conditions apply, it may be partially advanced to the employee during the course of his working life. The staff termination indemnities, calculated according to the current law, is treated from an accounting point of view as a defined benefit and as such it is recalculated at the end of each period according to a statistic-actuarial criteria which takes into account also the effects of the financial actualization. This liability has been calculated according to the actuarial criteria of the “Unitary Credit Method” which “considers each working period as the source of one additional unit of right to the benefits and measures each unit separately to calculate the final obligation”. The following parameters are used: annual discounting rate 3.0%, annual inflation rate 1.8%. The booking of employee benefits is in accordance with IAS 19 for defined benefits plans; the company has decided to apply the amendments made by IAS 19 early, as from the financial statements as of 31 December 2012, with the consequent noting of changes in actuarial gains/losses amongst other items of the statement of comprehensive income, whilst financial gains/losses are noted on the income statement. According to Law no. 296/06, effective from 30 June 2007, the staff termination indemnities accrued after 01 January 2007 must be paid in an appropriate treasury fund opened with INPS (National Institute for Social Protection) or, according to the instructions of the employee, to the selected fund. With these payments, the item for staff termination is no longer affected by provisions.

Pension Amounts to:

2014

2013 717

Change 757

The provision refers to a partially reversible supplementary retirement fund set up in favour of a former director of the Company. In previous years, the provision was recalculated following the death of the primary beneficiary, recording the excess part on the income statement and discounting the remaining value of the annuity according to the actuarial tables used for the secondary beneficiary.

82

Marzotto Group Consolidated financial statements

(40)

Balance sheet

[Notes to the consolidated financial statements] due to

2014

2013

Change

18,482

19,204

(722)

5,162

(5,884)

=

=

Agents' severance pay provision

4,237

4,081

156

212

(56)

=

=

Legal risk fund

3,249

3,386

(137)

10

(147)

=

=

Restructuring and relocation provisions

3,250

3,273

(23)

250

(273)

=

=

Tax provisions

1,562

1,562

=

=

=

=

=

Other provisions for risk/charges

6,184

6,902

(718)

4,690

(5,408)

=

=

Other provisions Amounts to:

Accruals

Utilisation

Exch. Diff.

Ch. area

and refer to:

Provisions made for risks and charges during the year refer to the best estimate prepared by the management of the potential liabilities connected with current legal disputes. Where applicable, their estimate considers the opinion of the legal advisors and other experts, previous experience in the history of the company and other subjects in similar situations and the company’s intention as regards taking further action. Below are comments on the main provisions booked. The agents’ indemnity reserve has been allocated to cover potential liabilities from the termination of agency contracts. The reserve was adjusted to take into account foreseeable potential liabilities in connection with contracts existing at the end of the financial year. This provision has been calculated on the basis of the provisions of law in force as of the reporting date and the period changes consider the expected future cash flows. The litigation risk reserve is allocated to cover liabilities that may arise from litigation or other disputes. It includes an estimate of charges from litigation arising during the year and a review of the provisions for the estimate of cases which arose in previous years, updated based on the indications of our internal and external legal experts. The restructuring and relocation provisions are allocated mainly to offset planned charges and costs related to the industrial reorganisation plan of some production operations. The period provision includes costs estimated in connection with the downsizing of certain business units. The tax provision includes accruals made to cover losses that may be incurred by the company in connection with tax liabilities. Among other provisions for risks and charges are included foreseeable risks following operations in relation to the company Aree Urbane S.r.l., in addition to expenses in reference to the former Praia a Mare factory. Reference is made to the Report on Operations for more information.

Marzotto Group Consolidated financial statements

83

Balance sheet

[Notes to the consolidated financial statements]

5.2) Other medium-long term payables

Amounts to:

2014

2013

Change

261

431

(170)

254

422

(168)

7

9

(3)

261

431

(170)

and refers to: Payables due to Inland Revenue Payables due to social security institutions Total

The item mainly includes the amount payable to the tax authorities of the Tunisian subsidiary Filin, partially extinguished during the period.

5.3) Deferred tax liabilities

2014 Amounts to:

2013

Change

3,139

3,757

(618)

3,129

3,580

(451)

10

177

(167)

3,139

3,757

(618)

and can be broken down as follows: Tangible and intangible assets differences Other temporary differences Total

This item includes deferred taxes reported by the consolidated companies, mainly attributable to the difference between depreciation and amortisation based on tax rates and on the useful life of the asset.

5.4) Medium/long term financial payables

2014 Amounts to:

2013

Change

7,374

337

7,037

and can be broken down as follows: Secured financing received Non-secured financing received Other medium/long-term debt Total

=

326

(326)

7,363

=

7,363

11

11

=

7,374

337

7,037

Medium/long-term financial payables are financial liabilities due to banks and other lenders beyond twelve months. As of the reporting date, the portion due within twelve months is reclassified to current financial liabilities. The debt stated, of 7,374 thousand euros, refers for 3,782 thousand euros to the portion due beyond the year of the variable-rate unsecured loan (for a nominal figure of 5,000 thousand euros), stipulated by the parent company, for 3,581 thousand euros to the portion due beyond the year of the variable rate unsecured loan (nominal figure of 5,000 thousand euros) stipulated by Biella Manifatture Tessili S.r.l. and for 11 thousand euros to interest-bearing caution deposits.

84

Marzotto Group Consolidated financial statements

Balance sheet

[Notes to the consolidated financial statements]

6) Non-current liabilities held for sale

Amounts to:

2014

2013 =

Change 575

(575)

The balance stated at 31 December 2013 is related to the equity measurement of the affiliate Filivivi sold during the year.

7.1) Trade payables and other payables

2014

2013

126,052

112,562

13,490

96,626

77,045

19,581

772

775

(3)

Amounts to:

Change

and can be broken down as follows: Trade payables Trade payables due to affiliates Advance payments received Payables due to Inland Revenue Payables due to social security institutions Payables due to employees Other payables

910

565

345

4,319

10,834

(6,515)

3,696

3,545

151

11,823

11,489

334

6,437

6,079

358

=

374

(374)

Other payables due to affiliates Accrued liabilities and deferred income Total

1,469

1,856

(387)

126,052

112,562

13,490

Trade payables are due within the year and pertaining to debts for the purchase of goods and services.

Payables due to affiliates and joint control companies refer to: 2014

2013

Change

Mediterranean Wool Industries

225

225

=

Pettinatura di Verrone

315

279

36

Uab Lietvilna

30

=

30

Tintoria di Verrone S.r.l.

10

=

10

=

214

(214)

Ratti Group

Filivivi Group

192

57

135

Total

772

775

(3)

Advance payments from customers are advances received from customers on supplies.

Marzotto Group Consolidated financial statements

85

Balance sheet

[Notes to the consolidated financial statements] Payables due to tax authorities can be broken down as follows: 2014 Taxes withheld

2013

Change

2,220

2,326

Income taxes

992

1,745

(753)

Regional manufacturing tax

304

583

(279)

Value added tax

5

106

(101)

797

6,074

(5,277)

4,319

10,834

(6,515)

Other amounts due to Inland Revenue Total

(106)

Other payables due to tax authorities, in the amount of 4,319 thousand euros, book a reduction of 6,515 thousand euros. The most significant change is due to the liquidation of the residual debt for the dividend stripping dispute, paid off on 28 January 2014. Payables due to social security institutions refer to: 2014 INPS ENASARCO Other Italian institutions Foreign social security agencies Total

2013

Change

2,593

2,465

8

9

(1)

556

593

(37)

539

478

61

3,696

3,545

151

Payables due to social security institutions reflect non-matured positions at the end of the financial year, regularly paid upon maturity. The item “Due to other institutions” includes amounts due to supplementary retirement funds.

86

Marzotto Group Consolidated financial statements

128

Balance sheet

[Notes to the consolidated financial statements] Payables due to employees can be broken down as follows:

2014 December salaries paid in January

21

29

(8)

8,872

8,333

539

573

601

(27)

11,823

11,489

334

Miscellaneous amounts due Total

Change

2,526

Staff termination indemnities paid after year-end Deferred salaries

2013

2,357

(170)

Other third party payables includes 400 thousand euros a payable due to Appia S.r.l. as compensation for the debt/credit positions of Marzotto S.p.A., Biella Manifatture Tessili S.p.A. (formerly F.lli Tallia di Delfino S.p.A.) and Appia S.r.l. Sundry third party payables also includes the fair value measurement of forward contracts hedging exchange rates, for 2,397 thousand euros. Accrued liabilities and deferred income include 966 thousand euros contributions on capital account, resolved by local public entities in favour of the subsidiary Filature De Lin Filin S.A.

7.2) Short-term financial payables

2014 Amounts to:

2013

95,577

Change

159,037

(63,460)

and can be broken down as follows: Trade advances received Non-secured financing received

3,755

12,329

(8,574)

89,555

142,708

(53,153)

Secured financing received Other amounts due to third parties Total

=

=

=

2,266

4,000

(1,734)

95,577

159,037

(63,460)

As of the reporting date, other payables include the residual amounts due for the purchase of the equity investment Uab Lietvilna for 2,000 thousand euros.

Net financial position Amounts to:

2014

2013

(82,503)

(90,386)

Change 7,883

and can be broken down as follows: 1.8 Long term financial receivables 3.4 Current financial assets 5.4 Long term financial payables 7.2 Current financial payables Total

373

105

268

20,075

68,883

(48,808)

(7,374)

(337)

(7,037)

(95,577)

(159,037)

63,460

(82,503)

(90,386)

7,883

The cash flow generated from operations has enabled an improvement to be made of 7,883 thousand euros in the net financial position, taking net debt to 82,503 thousand euros.

Marzotto Group Consolidated financial statements

87

Balance sheet

Contractual commitments and guarantees (memorandum accounts)

[Notes to the consolidated financial statements] Memorandum accounts and commitments at 31 December 2014 are commented below:

“Guarantees to third parties” were given:       

by the parent company in favour of the subsidiary Biella Manifatture Tessili S.r.l. for 34,000 thousand euros for lines of credit; by the parent company in favour of the subsidiary Biella Manifatture Tessili S.r.l. for 14,200 thousand euros for transfers of receivables without recourse; by the parent company in favour of the subsidiary Linificio e Canapificio Nazionale S.r.l. for 7,000 thousand euros for transfers of receivables without recourse; by the parent company in favour of the subsidiary Sametex Spol s r.o for 2,000 thousand euros as a guarantee of loans; by the parent company in favour of Mediterranean Wool Industries Co. S.A.E., as a guarantee of loans granted for 1,650 thousand euros; in favour of the parent company as a guarantee for service contracts for 8 thousand euros and for miscellaneous securities for 19 thousand euros; in favour of other subsidiaries/affiliated companies to guarantee miscellaneous securities for 532 thousand euros.

“Guarantees received from third parties” were given:  

in favour of the subsidiaries/affiliates for 273 thousand euros as a guarantee for miscellaneous securities; in favour of the parent company as a guarantee for trade receivables for 217 thousand euros and for miscellaneous securities for 64 thousand euros.

The “Foreign currency/interest rates hedging contracts” refer to contracts for term purchase for 51,913 thousand euros and contracts for term sale for 21,711 thousand euros. As of 31 December 2014, the commitments for contracts for the term sale of foreign currency (on receivables, orders received and future orders) were 23,770 thousand US dollars, for a total value of 17,545 thousand euros, 379 thousand GBP, for a total value of 464 thousand euros, 513,800 thousand JPY, for a total value of 3,702 thousand euros. Contracts for the term purchase of foreign currency were 1,105,000 thousand Czech crowns, for a total value of 36,868 thousand euros and 22,700 thousand Australian dollars for a total value of 15,045 thousand euros. The fair value of the contracts for the term sale and purchase of foreign currency at the end of the period, negative and equal to 2,366 thousand euros, was established based on the quotes given by the banks. There are also existing option contracts to hedge currency exchange risks for notional 2,920 thousand USD, for a total value of 2,174 thousand euros and 120,000 thousand JPY for a total value of 884 thousand euros, for which the fair value is 203 thousand euros.

88

Marzotto Group Consolidated financial statements

Income statement

[Notes to the consolidated financial statements]

8. Net revenues

Net revenues by sector are detailed below: 2014 Fabrics

2013

% change

288,739

264,732

Linen yarns

40,365

37,070

8.9

Other operations

15,127

16,932

(10.7)

(10,875)

(12,970)

(16.2)

333,356

305,764

9.0

Eliminations/adjustments Total

9.1

Net revenues went from 305,764 thousand euros to 333,356 thousand euros, totalling an increase of 9.0% on last year. This positive change is mainly due to the recovery of demand on the Group’s reference markets. Reference is made to the Report on Operations for a detailed analysis of the business volume trends booked by the Group.

The item “Net revenues” includes the following other revenues: 2014 Amounts to:

2013

% change

15,367

15,916

(3.4)

666

1,219

(45.4)

and refers to: Real estate income Contribution to operating expenses Other revenues and miscellaneous income Total

251

228

10.1

14,450

14,469

(0.1)

15,367

15,916

(3.4)

The item Other revenues and miscellaneous income mainly refers to the sale of semi-finished goods, manufacturing and other ordinary services provided.

9. Cost of goods sold

2014 Amounts to:

2013

% change

(256,499)

(241,552)

6.2

Raw materials consumption

(95,966)

(101,953)

(5.9)

Third party production

(15,323)

(10,713)

43.0

In house manufacturing

(85,022)

(82,072)

3.6

Purchase of finished and semi-finished products

(34,592)

(22,518)

53.6

1,168

1,162

0.5

(2,578)

(1,935)

33.2

and refers to:

Change in stock of finished and semi-finished products Commercial exchange differences Other logistic and industrial costs Total

(24,186)

(23,523)

2.8

(256,499)

(241,552)

6.2

The increase seen in the cost of goods sold is related to the improved turnover booked in 2014.

Marzotto Group Consolidated financial statements

89

Income statement

[Notes to the consolidated financial statements] Trade exchange rate differences are detailed below: Trade exchange rate differences Amounts to:

2014

2013

(2,578)

(1,935)

1,263

(931)

(3,465)

(3,679)

% change 33.2

and refers to: Exchange rate on cash from customers in foreign currency Exchange rate gains on payments to suppliers in foreign currency Exchange rate on extinguishing of trade financing in foreign currency Total

11. Marketing and product development costs

Amounts to:

Losses, write-down, accounts receivables Product research and development Advertising, marketing and public relations Other fixed sales and marketing costs Total

90

Marzotto Group Consolidated financial statements

2,675 (1,935)

33.2

2014

2013

(35,673)

(33,896)

% change 5.2

(11,787)

(10,392)

13.4

(1,529)

(1,471)

4.0

(11,333)

(10,735)

5.6

(2,532)

(2,522)

0.4

and refers to: Variable sales costs

12. General and administrative costs

(376) (2,578)

Amounts to:

(8,492)

(8,776)

(3.2)

(35,673)

(33,896)

5.2

2014

2013

(19,505)

(18,436)

% change 5.8

Income statement

[Notes to the consolidated financial statements]

13. Other income and expense

Amounts to:

2014

2013

(6,110)

% change

(19,195)

(68.2)

and refers to: Gain on disposal of tangible and intangible assets

138

654

Loss on disposal of tangible and intangible assets

(71)

(12)

Extraordinary charges for industrial plan

(1,001)

(302)

Allocation/use to legal risk fund and future charges

(4,607)

(9,316)

Allocation/use to restructuring and relocation fund

(250)

(263)

=

(9,096)

Charges "Dividend Stripping" Contingent assets/liabilities Other income/charges Total other income/charges

614

672

(933)

(1,532)

(6,110)

(19,195)

(68.2)

The net balance of extraordinary management shows expenses for 6,110 thousand euros, which are juxtaposed with 19,195 thousand euros in 2013. In detail:

Marzotto Group Consolidated financial statements



the provisions made for Extraordinary charges on the business plan, for 1,001 thousand euros, relate to costs for the reorganisation and increased efficiency of production departments, as well as to charges connected with decommissioned plants and areas;



the allocation/use of the legal risk fund includes legal charges and expenses relating to current lawsuits expected to be incurred in the forthcoming years, as well as uses made during the year;



dividend stripping charges includes the write-down of the receivable due from Valentino Fashion Group S.p.A., deriving from the dividend stripping dispute, as described in the Report on Operations;



contingent assets/liabilities refer mostly to amounts recovered from bad debts and provision set aside erroneously in previous years.

91

Income statement

[Notes to the consolidated financial statements]

14. Operating income

2014 Amounts to:

2013

15,569

% change

(7,315)

n.c.

22,684

14,619

55.2

351

(2,733)

n.c.

(7,487)

(19,715)

(62.0)

21

514

(95.9)

15,569

(7,315)

n.c.

and refers to: Fabrics Linen yarns Other operations Eliminations/Adjustments Total

The above table shows how in FY 2014, the Group achieved a clear improvement in all businesses in which it is present, due to the general recovery of the market, particularly the export market, and the operative and strategic choices made. Below are the details on labour costs and depreciation and amortisation included in the operating income calculation. Labour costs:

Amounts to:

2014

2013

(75,803)

(72,082)

% change

(59,740)

(56,613)

5.5

(6,824)

(6,118)

11.5

(9,239)

(9,351)

(1.2)

(75,803)

(72,082)

5.2

5.2

and refers to: Fabrics Linen yarns Other operations Total

The number of active employees had the following trend: Year End Staff 31.12.2014 Blue-collar workers White-collar workers Managers Total

Average

31.12.2013

% change

2014

2013

% change

2,516

2,381

5.7

2,458

2,386

3.0

595

589

1.0

598

588

1.7

35

33

6.1

35

32

9.4

3,146

3,003

4.8

3,091

3,006

2.8

Amortisation and depreciation was as follows:

Amounts to:

2014

2013

(12,949)

(13,031)

and refers to: amortization of intangible fixed assets depreciation of tangible fixed assets

92

Marzotto Group Consolidated financial statements

(498)

(627)

(12,451)

(12,404)

% change (0.6)

Income statement

[Notes to the consolidated financial statements]

15. Net financial expenses

Amounts to:

2014

2013

(3,031)

% change

(4,819)

(37.1)

and refers to: Financial income Interests received from affiliates Interests received from banks Interests received from other

29

20

45.0

503

1,385

(63.7)

15

42

(63.8)

434

74

>100.0

981

1,522

(35.5)

(2,449)

(3,912)

(37.4)

=

(24)

n.c.

Bank charges

(704)

(776)

(9.3)

Exchange rate losses on financial transactions

(522)

(973)

(46.4)

Other financial charges

(338)

(656)

(48.5)

Total financial charges

(4,012)

(6,341)

(36.7)

Total

(3,031)

(4,819)

(37.1)

Exchange rate gains on financial transactions Total financial income Financial charges Interests payable to banks Interests payable to other creditors

The balance of financial operations as of 31 December 2014 is negative for 3,031 thousand euros, improving by 1,788 thousand euros. The positive change is basically due to three factors: the lesser negative impact of the financial change difference (for 811 thousand euros), a reduction in net interest expense due to banks (for 144 thousand euros) and a reduction in the weight of bank commission and other financial expense (for 318 thousand euros). To complete the information, please note that interest income from affiliated companies related to Mediterranean Wool Industries for 22 thousand euros, to Uab Lietvilna for 3 thousand euros and to Uab Linestus for 4 thousand euros.

16. Dividends from unconsolidated shareholdings and valuations to equity

2014 Amounts to:

2013

% change

1,163

(329)

Emittente Titoli S.p.A.

=

4

Total dividends

=

4

n.c.

and refer to: Dividends n.c.

Valuations to equity Mascioni S.p.A.

=

(1,394)

Ratti Group

914

1,050

Uab Linestus

(6)

(20)

Pettinatura di Verrone S.r.l.

105

31

Uab Lietvilna

281

=

Tintoria di Verrone S.r.l.

(131)

=

Total valuations to equity

1,163

(333)

n.c.

Total

1,163

(329)

n.c.

The above investment is measured according to the equity method; consequently, its book value has been aligned to equity, incorporating the period results.

Marzotto Group Consolidated financial statements

93

Income statement

[Notes to the consolidated financial statements]

18. Other financial income and expenses

Amounts to:

2014

2013

% change

3,025

(14,441)

6,475

=

Write down receivable Aree Urbane

=

(14,695)

Gain on sale of securities

=

172

(130)

65

>100%

and refers to: Capital gain on sale of Filivivi S.r.l.

Adjustment TFR IAS 19 Devaluation Mascioni S.p.A. shareholding

(3,328)

=

8

17

3,025

(14,441)

Other income Total

>100%

The balance of Other financial income and expenses, of 3,025 thousand euros, mainly includes the capital gain realised from the sale of the investment (equal to 50%) in the company Filivivi S.r.l. in February 2015, for 6,475 thousand euros, and the full impairment of the equity investment in the affiliate Mascioni S.p.A., for 3,328 thousand euros. Last year, the net balance of this item was negative for 14,441 thousand euros, mainly in connection with the impairment of the receivable due to the parent company from the affiliate Aree Urbane in liquidation.

20. Income taxes

2014 Amounts to:

2013

% change

(3,375)

(4,566)

(4,157)

(4,068)

(26.1)

and refer to: Current taxes Deferred taxes receivable

(651)

313

777

(712)

Deferred taxes payable Taxes prior years Total

657

(99)

(3,375)

(4,566)

(26.1)

Estimated taxes for 2014 are negative for 3,375 thousand euros; the ratio to income before taxes is 20.2%. As regards deferred tax, in addition to that recorded on the financial statements of the parent company Marzotto S.p.A. and the other companies included in the consolidation area, please note that deferred tax effects are recorded on entries made during consolidation, where applicable, including adjustments to adapt the period book values (prepared in compliance with the accounting standards of the country where the subsidiary is based) to the IFRS adopted by the European Union. The reconciliation of the theoretical tax rate with the effective tax rate on income before taxes is set out in the table below. 2014 Amount Theoretical taxes

(4,600)

27.5

7,399

27.5

451

(2.7)

114

0.4

IRAP Taxes on losses for the year Taxes on non-deductible capital losses

(26,904)

5

=

4

=

(2,037)

12.2

(2,312)

(8.6)

(795)

4.8

(1,136)

(4.2)

(1,109)

6.6

(7,025)

(26.1)

Taxes prior years

(657)

3.9

(99)

(0.4)

Other differences

5,367

(32.1)

(1,511)

(5.6)

(3,375)

20.2

(4,566)

(17.0)

Total taxes

Consolidated financial statements

%age

16,726

Tax on utilization of fiscal lossess

Marzotto Group

Amount

Pre-tax profit Taxes on the taxable amount at a reduced tax rate

94

2013 %age

Income statement

22. Net result of assets held for disposal

[Notes to the consolidated financial statements] 2014 Amounts to:

2013 =

% change

(2,236)

n.c.

The above result basically refers to the economic operations achieved in FY 2013 by the Filivivi Group, whose equity investment was sold this year.

Marzotto Group Consolidated financial statements

95

Other information

Shareholdings held directly or indirectly by the parent company

[Notes to the consolidated financial statements] Below is the list of shareholdings in which the parent company directly or indirectly holds more than 10% of the voting shares as of 31 December 2014. All shareholdings represent ownership:

% group Company name

Head office

Direct investor

Biella Manifatture Tessili S.r.l.

Milan (I)

Marzotto S.p.A.

100.00%

100.00%

Le Cotonerie S.r.l.

Milan (I)

Marzotto S.p.A.

100.00%

100.00%

Ambiente Energia S.r.l.

Schio (I)

Marzotto S.p.A.

100.00%

100.00%

Marzotto Wool Manufacturing S.r.l.

Valdagno (VI)

Marzotto S.p.A.

100.00%

100.00%

Marzotto Lab S.r.l.

Valdagno (VI)

Marzotto S.p.A.

100.00%

100.00%

Sametex spol s r.o

Kraslice (CZ)

Marzotto S.p.A.

100.00%

100.00%

Girmes International G.m.b.h.

Nettetal (DE)

Marzotto S.p.A.

100.00%

100.00%

Marzotto Textiles Czech Republic s. r.o.

Praga (CZ)

Marzotto S.p.A.

100.00%

100.00%

Aree Urbane S.r.l. in liquidation

Milan (I)

Marzotto S.p.A.

32.50%

32.50%

UAB Lietvilna

Kaunas (LT)

Marzotto S.p.A.

50.00%

50.00%

Tintoria di Verrone S.r.l.

Verrone (I)

Marzotto S.p.A.

50.00%

50.00%

owned

Pettinatura di Verrone S.r.l.

Verrone (I)

Marzotto S.p.A.

15.00%

15.00%

Mediterranean Wool Industries Co. S.A.E.

Sadat City (ET)

Marzotto S.p.A.

30.00%

30.00%

Mascioni S.p.A.

Milan (I)

Marzotto S.p.A.

28.35%

28.35%

Marzotto Textile N.V.

Amsterdam (NL)

Marzotto S.p.A.

100.00%

100.00%

Marzotto Int. Trad. (Shanghai) Co. Ltd.

Shanghai (RPC)

Marzotto Textile N.V.

100.00%

100.00%

Marzotto Textiles USA Inc.

Wilmington (USA)

Marzotto Textile N.V.

100.00%

100.00%

100.00%

100.00%

100.00%

100.00%

100.00%

100.00%

99.97%

99.97%

100.00%

100.00%

Marzotto Wool Fabrics B.V. Novà Mosilana a.s. Marzotto Blankets B.V. AB Liteksas Linificio e Canapificio Nazionale S.r.l.

Amsterdam (NL)

Marzotto S.p.A.

Brno (CZ)

Marzotto Wool Fabrics B.V.

Amsterdam (NL)

Marzotto S.p.A.

Kaunas (LT)

Marzotto Blankets B.V.

Milan (I)

Marzotto S.p.A.

Filature de Lin Filin S.A.

Chbedda (TN)

Linificio e Canapificio Nazionale S.r.l.

100.00%

100.00%

UAB Lietlinen

Kaunas (LT)

Linificio e Canapificio Nazionale S.r.l.

100.00%

100.00%

UAB Linestus

Kaunas (LT)

UAB Lietlinen

50.00%

50.00%

Licana S.p.A. in liquidation

Fara Gera d’Adda (I)

Linificio e Canapificio Nazionale S.r.l.

100.00%

100.00%

Lin Naturel S.A.

Chbedda (TN)

Linificio e Canapificio Nazionale S.r.l.

100.00%

100.00%

33.36%

33.36%

Ratti S.p.A.

96

% owned

Guanzate (I)

Marzotto S.p.A.

Creomoda S.a.r.l.

Soussa (TN)

Ratti S.p.A.

95.00%

31.70%

Ratti USA Inc.

New York (USA)

Ratti S.p.A.

100.00%

33.36%

Ratti Int. Trading (Shanghai) Co. Ltd

Shanghai (RPC)

Ratti S.p.A.

100.00%

33.36%

Textrom S.r.l.

Cluj - Napoca (RO)

Ratti S.p.A.

100.00%

33.36%

Marzotto Group Consolidated financial statements

Other information

[Notes to the consolidated financial statements]

Related parties

It is in the economic interest of the parent company to carry out operations with related parties, to realize the existing synergies within the Group, especially with reference to the integration of production and sales, the efficient use of the acquired knowledge, the rationalization of the use of central structures and financial resources. All relations with subsidiaries, affiliated companies and related parties, both those relating to the exchange of goods and services and to financial operations, are governed by normal market conditions. The relations with subsidiaries have been eliminated from the consolidated financial statements. The relations with affiliated companies are shown in the financial statements and the relevant notes.

Directors and Statutory Auditors

Amounts paid to the Directors and Statutory Auditors of the Marzotto Group: Office (thousands of euro)

Directors

Remuneration

Auditors 879

Total 70

949

Other information

During the financial year there were no atypical or unusual transactions.

Events after the date of these financial statements

During the period following 31 December 2014, no events are recorded as worthy of note or potentially able to significantly influence the data contained in this document, over and above that reported in the paragraph entitled “Significant events after the close of the year” in the Report on Operations.

Segment reporting

The tables below provide segment reporting information.

Marzotto Group Consolidated financial statements

97

Other information

Segment reporting 2014

[Notes to the consolidated financial statements] (thousands of euro) Segment reporting Income statment

Fabrics

Other revenues Inter-sector revenues

Linen

Other

yarns

operations

Eliminations

Total

278,366

39,037

5,079

10,874

333,356

10,373

1,328

10,048

(21,750)

=

Totale revenues

288,739

40,365

15,127

(10,876)

333,356

Sector costs

(266,056)

(40,017)

(22,614)

10,900

(317,787)

(10,096)

(1,747)

(1,558)

454

(12,948)

(245)

(240)

(84)

=

of which depreciation & amortization of which other non monetary costs Operating income

(569)

22,684

348

(7,487)

24

=

=

=

=

(3,031) 1,163

Financial charges net

15,569

Dividends from non cons. equity invest. and valuation to equity

=

=

=

=

Other financial income/charges

=

=

=

=

3,025

Pre-tax profit

=

=

=

=

16,726

Taxes

=

=

=

=

(3,375)

Net profit

=

=

=

=

13,351

Net profit/loss for discontinued operations

=

=

=

=

=

Net profit (before minority shareholders)

=

=

=

=

13,351

Minority shareholders

=

=

=

=

=

Net profit

=

=

=

=

13,351

Linen

Other

yarn

operations

Eliminations

Segment reporting Balance sheet

Fabrics

Assets by segment

46,048

141,362

(97,210)

331,831

Equity investments in affiliated companies

=

=

20,611

=

20,611

Non-allocated assets

=

=

=

=

20,448

241,631

46,048

161,973

(97,210)

372,890

Total assets Shareholders' equity Liabilities by segment Non-allocated liabilities Total liabilities and shareholders' equity Investments

Information by

98

Marzotto Group Consolidated financial statements

Total

241,631

=

=

=

=

110,027

122,252

14,517

24,071

(929)

159,912

=

=

=

=

102,951

122,252

14,517

24,071

(929)

372,890

14,255

823

2,661

=

17,739

Other Europ.

North

Countries

America

107,325

160,457

17,091

37,176

11,307

333,356

Fixed assets

257,447

96,980

68

593

17,802

372,890

Investments

9,525

7,823

=

=

391

17,739

geographical area

Italy

Revenues

Other Asia

Countries

Total

Other information

Segment reporting 2013

[Notes to the consolidated financial statements] (thousands of euro) Segment reporting Income statment

Fabrics

Other revenues Inter-Sector revenues

Linen

Other

yarns

operations

Eliminations

Total

262,432

35,522

7,889

(79)

305,764

2,300

1,548

9,043

(12,891)

=

Total revenues

264,732

37,070

16,932

(12,970)

305,764

Sector costs

(250,113)

(39,803)

(36,647)

13,484

(313,079)

(10,002)

(2,051)

(1,434)

457

(13,031)

(675)

(269)

=

94

(850)

14,619

(2,733)

(19,715)

514

(7,315)

=

=

=

=

(4,819)

of which depreciation & amortisation of which other non monetary costs Operating income Financial charges net Dividends from non cons. equity invest. and valuation to equity

=

=

=

=

(329)

Other financial income/charges

=

=

=

=

(14,441)

Pre-tax profit

=

=

=

=

(26,904)

Taxes

=

=

=

=

(4,566)

Net profit

=

=

=

=

(31,470)

Net profit/loss for discontinued operations

=

=

=

=

(2,236)

Net profit (before minority shareholders)

=

=

=

=

(33,706)

Minority shareholders

=

=

=

=

Net profit

=

=

=

=

Linen

Other

yarns

operations

Eliminations

Segment reporting Balance sheet

Fabrics

Assets by segment

= (33,706)

Total

229,398

49,398

168,630

(131,156)

316,269

Equity investments in affiliated companies

=

=

21,416

=

21,416

Non-allocated assets

=

=

=

=

68,988

229,398

49,398

190,046

(131,156)

406,673

Total assets Shareholders' equity Liabilities by segment Non-allocated liabilities Total liabilities and shareholders' equity Investments

Information by

=

=

=

=

99,296

106,707

12,887

29,867

(1,458)

148,003

=

=

=

=

159,374

106,707

12,887

29,867

(1,458)

406,673

14,140

767

1,413

=

16,320

Other Europ.

North

Countries

America

100,678

144,577

11,192

36,803

12,514

305,764

Fixed assets

262,450

130,228

60

269

13,666

406,673

Investments

8,140

7,732

=

=

448

16,320

geographical area

Italy

Revenues

Other Asia

Countries

Total

Valdagno (VI), 26 March 2015 For the Board of Directors The Managing Director

Marzotto Group Consolidated financial statements

99

[Report of indipendent Auditors]

101

Annual Report 2014

General information Marzotto group Report on the Group’s operations Consolidated financial statements

Marzotto S.p.A.  Report on the Company’s operations Company financial statements

Sole 24 Ore” del 5 aprile 2007

Si ha motivo di ritenere che l’Assemblea si terrà in seconda convocazione il 9 maggio 2007 alle ore 10.00 in Milano, Via Palestro n. 2, presso lo Spazio Eventi del “Centro Svizzero”.

103

[Subsidiaries and affiliated companies - 31 december 2014] Marzotto S.p.A.

50.00% [1]

Tintoria di Verrone S.r.l.

Biella Manifatture Tessili S.r.l.

100.00%

50.00% [1]

Uab Lietvilna

Le cotonerie S.r.l.

100.00%

Ambiente Energia S.r.l.

100.00%

Sametex spol. s r.o

100.00%

100.00%

Linificio e Canapificio Naz.le S.r.l. Filature De Lin Filin S.A.

100.00%

Girmes Intern. GmbH

100.00%

Lin Naturel S.A.

100.00%

Marzotto Textiles Czech Republic s.r.o.

100.00%

Licana S.p.A. (in liquidation)

100.00%

Marzotto Wool Man. S.r.l.

100.00%

Uab Lietlinen

100.00%

Marzotto Lab S.r.l.

100.00%

Marzotto Textile N.V.

100.00%

50.00%

Uab Linestus

33.36% [1]

Ratti S.p.A.

100.00%

Marzotto Int.Trading Shanghai Ltd

100.00%

Marzotto Textiles Usa Inc.

Creomoda S.a.r.l.

95.00%

Ratti Usa Inc.

100.00%

Ratti Int.Trading (Shanghai) Co.Ltd

100.00%

Novà Mosilana a.s.

S.C. Textrom S.r.l.

100.00%

Marzotto Blankets BV

Marzotto Wool Fabrics BV

100.00%

100.00%

100.00%

99.79%

AB Liteksas Mascioni S.p.A.

28.35%

Aree Urbane S.r.l. (in liquidation)

32.50%

Mediterranean Wool Ind. S.A.E.

30.00%

Pettinatura di Verrone S.r.l.

15.00%

Subsidiaries companies Affiliated companies [1] Consolidated using the equity method

104

Marzotto S.p.A. Report on the Company’s operations

[Key events of FY 2014] Shareholders, The financial statements for the year ended on 31 December 2014 submitted herewith for your approval close recording income of Euro 189,038 thousand and a profit of Euro 1,789 thousand. Marzotto S.p.A.’s financial statements have been prepared in compliance with the International Financial Reporting Standards (IAS/IFRS) and the related interpretations by the International Accounting Standards Board (IASB), approved by the European Commission and incorporated in Italian law by Italian Legislative Decree 38/2005. We would refer you to the explanatory notes for comments on the results of the financial statements. Below, please find the information on the company’s position and future prospects, as well as that required by current legislation. Before moving onto discussing the business of the Company in FY 2014, we would first note the key events that took place in the year just ended and this year.

Group reorganisation

As part of a revision of the Marzotto Group organisational model involving the restructuring of the production units and Italian and foreign investments according to their industrial vocation, on 06 November 2014, the parent company Marzotto S.p.A. established the companies Marzotto Wool Manufacturing S.r.l. and Marzotto Lab S.r.l. Later, by notary’s deed of 15 December 2014 and with legal and accounting effect as from 01 January 2015, the Company increased its share capital by conferring the following businesses: 

the “wool” business unit and related investments owned to the company Marzotto Wool Manufacturing S.r.l.;



the “linen, cotton, fabric furnishing and velvets” business unit and related investments owned to Marzotto Lab S.r.l.

The activities carried out during the year examined by the newly-established companies was mainly focused on initiating all the tax, customs, social security, insurance and financial-related procedures and activities required and necessary to make the company fully operative as of 01 January 2015, the date on which the conferral made by Marzotto S.p.A. took effect.

Mascioni S.p.A.

In relation to the continued difficult economic-financial position of the affiliate Mascioni S.p.A., the parent company considered it reasonable to fully impair the value of the investment previously registered. This operation entailed the registration of an expense of Euro 4 million in “other financial income and expense”.

Business restructuring Wool Yarns

During the year, the Wool Yarns business was organised. In the early months of the year this resulted in, on the one hand, the sale of the investment (held 50%) in the affiliate Filivivi S.r.l. and, on the other, its purchase of certain assets strictly related to the Wool Yarns business unit. More specifically, the main stages in which the operation took place are described below:

Marzotto S.p.A. Report on the Company’s operations



Marzotto S.p.A. acquired the Lanerossi trademark from Filivivi S.r.l., which has the right to use it granted by virtue of a licence agreement;



Marzotto S.p.A. acquired a portion of the Lithuanian carding plant, by acquiring a 50% stake in the share capital of Uab Lietvilna;



Marzotto S.p.A. acquired the “top dye” business unit of Piovene Rocchette;



Marzotto S.p.A. acquired 50% of the company Tintoria di Verrone S.r.l., the company to which Filivivi S.r.l. had conferred the business unit for the cone dying and wool tops treatment processes;



Marzotto S.p.A. sold off its investment in Filivivi S.r.l. to the other shareholder, which now holds 100% of it. The buyer also undertook to repay the shareholder loan disbursed in previous years by Marzotto to the former affiliate.

105

[Key events of FY 2014] Dividend stripping

During FY 2010, in relation to the dispute against sentence no. 78/2010 issued by the 4th chambers of the Regional Tax Commission of Venezia-Mestre on 21/09/2010, Marzotto S.p.A. has been notified of an entry in the tax litigation list and the pertaining payment request for a total of Euro 28.2 million, subsequently reduced to 16.2 thanks to the steps taken by the competent Bodies based on appeals presented by the involved Corporations, namely Marzotto S.p.A. and, by virtue of the partial proportional spin-off of July 2005, Valentino Fashion Group S.p.A., jointly and respectively 1/3 and 2/3 of said liability towards the tax authority. In January 2014, Marzotto S.p.A. and Valentino Fashion Group S.p.A. stipulated a settlement agreement to define, amongst other aspects, their joint liability to make payment of said tax notice and the lawsuit in question. Under this agreement, Marzotto S.p.A. paid the residual tax payable as a lump sum, thereby benefiting from the 2014 Stability Law, releasing Valentino Fashion Group S.p.A. from its obligations, which, in turn, waived all claims made against Marzotto S.p.A., abandoning all civil proceedings brought before the Court of Milan. Said dispute against sentence no. 78/2010 is still pending in Cassation.

Praia dispute

Beginning in 1999, some former employees and heirs of former employees at the Praia a Mare plant filed a motion with the Attorney General through the Court of Paola, seeking criminal action against the persons in charge of the plant from the 1960s through 2004, allegedly for functional omissions that, because of work safety conditions there, would have been the cause of death and serious health problems to some employees. After the Judge of the same Court rejected three requests by the Examining Judge to close the case, in October 2009 and February 2010, the prosecution issued notices of completion of preliminary investigations, also for environmental crimes. In March 2011 Marzotto S.p.A. was served the summons, pursuant to Art. 83 of the Italian Code of Criminal Procedure, of the responsible officer who, according to the ordinary proceedings, even if he did not commit crime, is jointly responsible for the payment of damages, if any. In November 2013, by agreement with ENI S.p.A. (jointly obliged as previous owner), all financial claims lodged by natural persons involved in the criminal proceedings and all those who had taken civil action, were settled. By sentence of the Court of Paola, read out in the hearing of 19 December 2014, the full acquittal of all defendants was ruled, because the events do not exist. It was also established that the external area of the Praia a Mare plant, overlooking the sea, was to be returned, the area on which, by virtue of the order of the mayor of January 2007, Marzotto S.p.A. will be completing the characterisation works started some time previous and thereafter suspended by virtue of interim measures.

106

Marzotto S.p.A. Report on the Company’s operations

[Report on the Company’s operations] The table below contains summaries of the Company’s main income statement, balance sheet and financial position items for the year ended on 31 December 2014.

(in millions of euro)

2014

2013

Net revenues

189.0

174.8

14.2

+ 8.1%

1.6

2.5

>100.0%

2.7

+ 52.9%

48.0

n.c.

49.4

n.c.

Profit from core businesses (1) % of net revenues

4.1 2.2% 7.8

5.1

4.1%

2.9%

Income before taxes

0.6

% of net revenues

0.3%

% of net revenues

change %

0.9%

EBITDA (2) % of net revenues

Net income

change

(47.4) (27.1%)

1.8

(47.6)

0.9%

(27.2%)

1.9

3.8

(1.9)

Net employed capital

138.2

142.6

(4.4)

- 3.1%

Net financial position

77.7

82.5

(4.8)

- 5.8%

2.4

+ 68.6%

Net working capital

Investments for the period Active staff: persons

5.9

3.5

716

722

2014

2013

(6)

- 0.8%

change

ROI

2.9%

1.0%

1.9%

ROE

3.0%

-56.0%

59.0%

ROS

2.2%

0.9%

1.3%

Debt/Equity

128.4%

137.3%

-8.8%

Financial coverage rate of assets

220.6%

230.7%

-10.2%

Inventory rotation index Number of days of credit to clients

- 50.0%

83

88

-5

113

123

-10

Legend: ROI: Operating results / Average invested capital ROE: Net results / Average shareholders’ equity ROS: Operating results / Net revenues Borrowing / Equity: Net financial position / Shareholders’ equity Rate of financial coverage of fixed assets: Fixed assets + ML term funds / Shareholders’ equity + ML term financial debt Stock rotation index: Net inventory / Cost of goods sold x 360 days Credit days to customers: Gross trade receivables / Net revenues x 360 days (1). Revenues from sales and services – Operating costs (2). Result of ordinary operations + Ordinary depreciation and amortisation

Marzotto S.p.A. Report on the Company’s operations

107

[Report on the Company’s operations] Income statement

The income statement is summarized below. 2014

(in millions of euro)

189.0

Cost of sales

(148.1)

(78.3%)

(138.9)

Gross income

40.9

21.7%

35.9

20.5%

R&D and marketing costs

(22.1)

(11.7%)

(20.2)

(11.6%)

General and administrative costs

(14.7)

(7.8%)

(14.1)

(8.0%)

4.1

2.2%

1.6

0.9%

Profit from core businesses

100.0%

174.8

100.0% (79.5%)

Non-recurring income/(charges)

(5.8)

(3.1%)

(19.5)

(11.1%)

Operating income

(1.7)

(0.9%)

(17.9)

(10.2%)

Net financial charges

(2.3)

(1.2%)

(3.1)

(1.8%)

8.7

4.6%

7.2

(4.1)

(2.2%)

Dividends Other financial income/charges Result from valuation of investments held for sale Income before taxes

Net revenues

2013

Net revenues

(26.6)

4.1% (15.2%)

=

=

(7.0)

(4.0%)

0.6

0.3%

(47.4)

(27.1%)

Taxes

1.2

0.6%

(0.2)

(0.1%)

Net income

1.8

0.9%

(47.6)

(27.2%)

The net revenues achieved by the Company in FY 2014 record an increase of 8.1% on last year, going from Euro 174.8 million to Euro 189.0 million. The business sector that made the greatest contribution to this improvement is the textile sector, which booked +8.5%, or Euro 14.2 million in terms of value. As concerns the outlet geographic area, the Company enjoys a positive trend on all its main markets. In detail, the sales made on the domestic market record +6.5%, those in other European countries come in at +4.7%, and increases are also seen in sales in Asia, with +2.6%. We should mention the doubling of business volumes achieved on the North American market, Euro +5.8 million in value. Below is a breakdown according to sector and geographical area:

by sector

(in millons of euro)

Fabrics Wool yarns Other Operations Aggregate total Inter-company sales Total of which: Italy of which: Other markets

by geographical area

(in millions of euro)

Report on the Company’s operations

167.0

2.1

1.1%

=

=

11.7

6.2%

13.3

7.6%

195.0

103.2%

180.3

103.1%

(6.0)

(3.2%)

189.0

100.0%

57.7 131.3

(5.5)

95.5%

(3.1%)

174.8

100.0%

30.5%

54.2

31.0%

69.5%

120.6

69.0%

2014

2013

57.7

30.5%

54.2

31.0%

Other European Countries

91.3

48.3%

87.2

49.9%

North America

11.6

6.2%

5.8

3.3%

Asia

19.5

10.3%

19.0

10.9%

Total

Marzotto S.p.A.

2013 95.9%

Italy

Other Countries

108

2014 181.2

8.9

4.7%

8.6

4.9%

189.0

100.0%

174.8

100.0%

[Report on the Company’s operations] Result from ordinary operations

The increase in the volume of business is reflected on the Company’s core business, which has improved strongly on the data totalled last year, coming in at Euro 4.1 million (2.2% on net revenues) as compared with Euro 1.6 million (0.9% of net revenues) in 2013. The pursuit of the rationalisation of the industrial and production structure, undertaken during previous years, helped towards the achievement of this result, giving rise to an intensification of synergies and consolidation of the logistics/commercial network in order to obtain an improvement in the quality of service and a limitation of costs, to become more competitive on the outlet markets.

Non-recurring income and charges

As of the reporting date, the net balance of non-recurring operations is negative for Euro 5.8 million and mainly includes: 



provisions made for business plan expenses for approximately Euro 0.7 million, allocated against costs for reorganisations and efficiency drives of production departments and expenses connected with decommissioned areas and plants; expenses for the Praia dispute, for approximately Euro 4.6 million, against costs incurred during the year and other legal charges and expenses forecast for the coming years.

The change on last year is Euro +13.7 million, mainly relating to the impairment of Euro 9.1 million booked in FY 2013 for the receivable due to the parent company from Valentino Fashion Group S.p.A., by virtue of a settlement agreement stipulated by the parties in January 2014, as described amongst the year’s events in this Report.

Net financial expenses

In FY 2014, the Company booked net financial expense for Euro 2.3 million, as compared with financial expense for Euro 3.1 million last year (an improvement of 0.8 million). This change is mainly due to the joint effect of the reduction of net financial debt and the decline in interest rates.

Dividends from investees

Dividends collected by the parent company in 2014 from subsidiaries and joint ventures amount to Euro 8.7 million, against dividends collected for Euro 7.2 million last year. In detail, dividends collected relate (for 4.3 million) to the foreign subsidiaries Novà Mosilana (Czech Republic) and AB Liteksas (Lithuania), received by the direct parent company (until 30 September 2014), Marzotto Textile NV, for Euro 3.5 million to the Italian subsidiary Biella Manifatture Tessili S.r.l. and for Euro 0.9 million to the subsidiary under joint control, Ratti S.p.A.

Other financial income and charges

The balance of other financial income and charges, which is negative for 4.1 million, mainly consists of the write-down of the equity investment in Mascioni S.p.A. for Euro 4.0 million. This item is compared with a 2013 balance that was negative for Euro 26.6 million, which included Euro 14.7 million in impairment of the financial receivable due from the affiliate Aree Urbane S.r.l. in liquidation and Euro 11.9 million the impairment of the investment in Linificio and Canapificio Nazionale S.r.l., in line with the regulations laid down by IAS 39 (impairment loss).

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109

[Report on the Company’s operations] Income taxes

Starting from FY 2008, the companies Marzotto S.p.A., Immobili e Partecipazioni S.r.l., Linificio e Canapificio Nazionale S.r.l. and Licana S.p.A. (in liquidation) and starting from FY 2009, Biella Manifatture Tessili S.r.l. (formerly Tallia di Delfino S.p.A.), Le Cotonerie S.r.l. (formerly Immobiliare Isola S.r.l.) and Ambiente Energia S.r.l. chose the national tax consolidation regime, for which the parent company is the holding Wizard S.r.l., and its effects are reflected in the results as of 31 December 2014. The balance of tax operations for the period is positive for Euro 1.2 million (-0.2 million as of 31 December 2013).

Net result

The above analysis reveals a positive net period result for Euro 1.8 million as compared with a negative result for Euro 47.6 million for FY 2013. The year examined therefore archives a positive change of 49.4 million, detailed below: (in millons of euro)

change in profit from core businesses change in non-recurring income (charges) change in net financial charges change in income from shareholdings change in other financial income (charges) change in Result from valution of investments held for sale Total change in income taxes Total changes versus the comparison period

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Marzotto S.p.A. Report on the Company’s operations

2.5 13.7 0.8 1.5 22.5 7.0 48.0 1.4 49.4

[Report on the Company’s operations] Company’s balance sheet and financial position

The Company’s balance sheet and financial position is summarized in the table below, compared with the corresponding amounts as of 31 December 2013:

31.12.2014

31.12.2013

Net trade receivable

56.0

56.6

Other receivables

12.7

6.3

Inventory

34.3

33.9

Commercial suppliers

(87.2)

(71.1)

Other payables

(13.9)

(21.9)

1.9

3.8

(in millions of euro)

A) Net working capital B) Assets/liabilities held for sale Receivables beyond 12 months Equity investments Tangible fixed assets Intangible fixed assets

=

5.9

14.3

14.8

111.3

113.1

30.2

27.4

5.3

2.5

C) Net fixed assets

161.1

157.8

D) Employees severance fund, reserves, and other non-financial M/L term payables

(22.9)

(22.6)

E) Deferred taxes reserve F) Invested capital net of current liabilities (A+B+C–D-E)

(1.9)

(2.3)

138.2

142.6

91.0

142.9

(14.6)

(57.9)

Covered by: Short-term financial payables Cash and short-term financial receivables Medium/long term financial payables

3.8

=

Medium/long term financial receivables

(2.5)

(2.5)

G) Net borrowing

77.7

82.5

H) Net equity

60.5

60.1

138.2

142.6

I) Total (G+H) as in F

Net invested capital

Invested capital, net of current liabilities, is Euro 138.2 million, down Euro 4.4 million on end 2013. This change particularly relates to the changes made in net working capital (down Euro 1.9 million), in assets held for sale (down Euro 5.9 million) and in net fixed assets (up Euro 3.3 million). As regards assets held for sale, last year this item included the value of the equity investment in Filivivi S.r.l., booked at its presumed realisation value. If we analyse the changes recorded to fixed assets, equal to +3.3 million, we should connect this with: - the net decrease in the value of the equity investments (for Euro -1.8 million) following the full impairment of the 28.35% investment in Mascioni S.p.A., partially offset by the purchase of the 50% stake in Uab Lietvilna and by the purchase of the 50% stake in Tintoria di Verrone; - the net increase in the value of tangible and intangible fixed assets (for Euro +5.6 million) against an increase in investments, partly offset by the ordinary amortisation/depreciation process.

Net financial debt

The Company’s net financial debt records an improvement on last year, going from net debt of 82.5 million to net debt of Euro 77.7 million.

Shareholders’ equity

As of the reporting date, the Company’s shareholders’ equity totalled Euro 60.5 million, after having booked a positive result for Euro 1.8 million. To aid comprehension of the Company’s equity position, we should point out that the index measuring the ratio of own funds and net invested capital has increased, going from 42.1% at end 2013 to 43.8% at end 2014.

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111

[Equity investments] Investments

Below are the main news and information on the performance of subsidiaries and affiliates. The relations with controlled and affiliated Companies and with related parties are presented in the financial statements and the relevant commentary notes.

Linificio and Canapificio Nazionale Group

2014 saw the world linen market record a strengthened demand, also due to the significant increase in emerging markets and India and China in particular. The success enjoyed on these markets is due to both the promotional efforts made of the product by leading operators on the markets (in particular, Jaya Shree in India) and the correct value for money boasted by the linen fibre in 2014. This year’s aim is to further strengthen turnover and margins, exploiting the opportunities offered up by a market that looks to be favourable, through a further recovery of production efficiency and investments aimed at increasing production capacity in Lithuania and quality in Tunisia. The main figures of the Linificio and Canapificio Nazionale Group of 2014 are shown below.

(in milioni di euro)

2013

40.4

% of net revenues

change

change %

37.1

3.3

+ 8.9%

0.3

(2.5)

2.8

n.c.

0.7%

(6.7%)

7.4% 3.1

n.c. n.c.

Operating income

0.4

(2.7)

% of net revenues

1.0%

(7.3%)

Group net income

0.2

(3.8)

4.0

31.5

36.4

(4.9)

0.8

0.8

0.0

Consolidated net invested capital Investment for the period Active staff at 31 December: persons

Net revenues

2014

Consolidated net revenues (1) Profit from core businesses

895

776

- 13.5% + 0.0% + 15.3%

119

The year just ended shows an increase in net revenues of 8.9%, with a volume of turnover that comes in at Euro 40.4 million. As regards the quantities listed on the market, we note a +11.5% for linen yarns and -13.7% for linen fabrics. Sales made on the domestic market account for 51% of the total volume for the Linen Yarns business and still show signs of weakness, with a decrease in terms of turnover of Euro 1.1 million (-5.1%). Other European countries, which account for 39.6% of volumes, have instead shown clear signs of recovery, archiving an increase of Euro 2.8 million (+21.2%). The same positive trend is seen in Asia, where the Company realised greater revenues in the amount of Euro 1.9 million, more than double last year’s result (+126.7%).

by geographical area

2014

(in millions of euro)

2013

Italy

20.6

51.0%

21.7

58.5%

Other European countries

16.0

39.6%

13.2

35.6%

North America

0.1

0.2%

0.2

0.5%

Asia

3.4

8.4%

1.5

4.0%

Other countries

0.3

0.8%

0.5

1.4%

40.4

100.0%

37.1

100.0%

Total

(1). Including revenues towards other sectors of the Group for 1.1 million (2014) and 1.5 million (2013).

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[Equity investments] Operating income

The increased revenues are reflected on core business, which reverses its sign from last year, recording a positive Euro 0.3 million (negative EBIT for -2.5 million as of 31 December 2013), thereby booking total growth of Euro 2.8 million. The pursuit of the rationalisation of the industrial and production structure, undertaken during previous years, helped towards the achievement of this result, giving rise to an intensification of synergies with the Marzotto Group and consolidation of the logistics/commercial network in order to improve the quality of service and limit costs, to become more competitive on the outlet markets.

Invested capital

At the end of FY 2014, invested capital, net of operating liabilities, comes to Euro 31.5 million, as compared with the 36.4 million of 31 December 2013. The decline recorded (Euro 4.9 million) is mainly due to the reduction of operating capital (for Euro 3.9 million) and the reduction in fixed assets (for Euro 1.7 million); these are partially offset by the lowering of long-term funds (for 0.7 million). The main change is therefore connected with the decline recorded by operating capital on last year, mainly in respect of a different invoicing time and careful credit monitoring and management, pursuing an increasingly focussed policy for the award of clients and management of collection times with respect to agreed contractual due dates. The trend of current assets is carefully monitored by the Group in order to improve its financial position. The change booked to net fixed assets is closely linked to period investments (Euro 0.8 million), offset by the normal amortisation/depreciation process. Please note that this year was also affected by factoring operations. More specifically, as of the reporting date, the impact deriving from the transfer of receivables without recourse comes to Euro 1.0 million, in line with the disposal implemented last year (Euro 1.1 million).

Net financial position

The Group’s net financial position is positive, as a consequence of a positive change of Euro 5.1 million, going from a debt of 0.1 million to liquid funds of Euro 5.0 million. The financial improvement is seen from the combined effect, of opposite sign, of the following factors: • reduction of the short-term financial debt in the amount of Euro 6.7 million; • reduction in financial assets for Euro 1.6 million; and is mainly due to the cash flow generated by current business operations, positive for Euro 5.1 million.

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113

[Equity investments] Shareholdings in subsidiaries

Below is a summary on the shareholdings in other subsidiaries:

Marzotto Wool Manufacturing S.r.l.

The Company was established on 06 November 2014 with its registered office in Valdagno (VI) and is a full subsidiary of Marzotto S.p.A., to which the parent company conferred, in December 2014, the “Wool” business unit and related investments in Nova Mosilana (through the investment in Marzotto Wool Fabrics B.V.), in Biella Manifatture Tessili S.r.l and in Tintoria di Verrone S.r.l. (the latter with a 25% stake). With the establishment of Marzotto Wool Manufacturing S.r.l., the aim is to concentrate the control and coordination of all activities operating in the wool fabrics sector in a single company, thereby creating a Group that looks to be the world leader of its reference sector. The activities carried out during the year by the Company was mainly focused on initiating all the tax, customs, social security, insurance and financial-related procedures and activities required and necessary to make the company fully operative as of 01 January 2015, the date on which the conferral made took effect.

Marzotto Lab S.r.l.

The Company was established on 06 November 2014 with its registered office in Valdagno (VI) and is a full subsidiary of Marzotto S.p.A., to which the parent company conferred, in December 2014, the “Linen, Cotton, Textile Furnishings, Velvets and Yarns” business and the related investments in AB Liteksas (through the direct parent company Marzotto Blankets B.V.), in Linificio e Canapificio Nazionale S.r.l., in Uab Lietvilna, in Sametex spol s r. o, in Girmes G.m.b.H. and in Tintoria di Verrone S.r.l. (the latter with a 25% stake). The aim, for Marzotto Lab S.r.l. too, is to bring the various non-wool fabrics activities under a single umbrella, mainly consisting of the wool yarns, fabrics and linen yarns, cotton, velvet and furnishing fabrics business. The activities carried out during the period by the subsidiary was mainly focused on initiating all the tax, customs, social security, insurance and financial-related procedures and activities required and necessary to make the company fully operative as of 01 January 2015, the date on which the conferral made took effect.

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[Equity investments] Biella Manifatture Tessili S.r.l. (formerly Tallia di Delfino S.p.A.)

The Company’s aim is to deal with all commercial, industrial and financial, equity and property operations relating to the purchase and main and accessory processing of wools and all textile fibre activities. The Company acquisition process began in July 2008 and was completed in January 2010, when the parent company became a Sole Shareholder. Thereafter, in April 2011, a share capital increase was resolved, which was fully subscribed, by means of the conferral of the business unit referred to as “Lanifici Biellesi”, corresponding to the Guabello and Marlane business. This operation has concentrated the textile activities of the Marzotto Group around the Biella area in one single corporate hub, to take advantage of all possible actions to increase the system as a whole. In operative terms, the operation enabled completion of the synergies initiated in relation to the industrial, logistic, managerial and human resource processes. Thanks to the relevant synergies existing between Guabello, Marlane and Tallia, there’s a structural and functional bond between them which ensures competitive and efficiency advantages for the respective products which, since they are complementary, have enabled us to offer the market a complete range of “Made in Biella” articles. At the same time, the operation has enabled us to seize the opportunities to enhance and better develop the different brands, creating a strong group in its size, strengthened by belonging to the wool district and therefore benefiting for the quality and product recognition typical of the Made in Biella, exploiting the added value deriving from the fact that it is part of the wool-making district par excellence. The Company closes 2014 with net profits of Euro 6.6 million, showing a clear improvement on last year, despite the difficult economic outlook that characterised the main markets of interest, and the Italian market in particular, where the decline in consumption of the reference merchandise has been significant. Biella Manifatture Tessili S.r.l records an increase in turnover on last year, going from Euro 89.5 million in 2013 to Euro 98.3 million in 2014 (+9.8%), improving the already high margins. More specifically, the result of core business totalled Euro 10.8 million, with an incidence on turnover of 10.9%; last year, this result came to Euro 6.1 million, with an incidence of 6.8%. This performance therefore confirms the value of the unitary management, within the Company, of three very different, differentiated brands, with entirely independent market positions.  Marlane with a product typical of the Biella area, of the “diffusion” segment;  Guabello in the medium-high segment, with a collection that is attentive to style rules;  Tallia di Delfino with a tailored, yet modern collection that expresses a recognisable, exclusive luxury. By virtue of the above reorganisation operations, as from 01 January 2015, the Company is a direct subsidiary of Marzotto Wool Manufacturing S.r.l.

Marzotto Textile NV

The Company, established on 19 April 2005 following the spin-off of Marzotto International N.V., directly controls Marzotto International Trading Shanghai Co. Ltd (a commercial representation company established in 2005 to monitor the markets of the Far East) and Marzotto Textiles Usa Inc. (a company established on 02 January 2008 to carry out commercial activities on the North American area markets for the fabrics and furnishing sector) and until October 2014, also controlled Novà Mosilana a.s. (in the Czechoslovakian Republic and operating in wool fabrics) and AB Liteksas (in Lithuania and operating in furnishing fabrics). In this year, the Company was spun-off with the simultaneous conferral of the investment of Novà Mosilana a.s. in the newly-established Marzotto Wool Fabrics BV and of the investment of AB Liteksas in the newly-established Marzotto Blankets BV. As from 01 January 2015, by virtue of the Group reorganisation as described above, the Company is held on equal terms by Marzotto Wool Manufacturing S.r.l. and Marzotto Lab S.r.l.

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115

[Equity investments] Sametex spol. s r.o

The Czechoslovakian company acquired by Marzotto S.p.A. on 01 August 2012 under the scope of a strategic choice aimed at entering the Velvet business produces velvet fabrics for the international market. The Company was subjected to bankruptcy proceedings early 2012 after long-standing economic and financial difficulties connected with the events of the Italian parent company “Redaelli Tessuti S.r.l in liquidazione e concordato preventivo”. Previous years were mainly characterised by the pursuit of the restructuring business with a view to launching its normal operations. This year, the Company has increased business volumes, showing a 42.3% increase, even if profitability remains negative. By virtue of the above reorganisation operations, as from 01 January 2015, the Company is a full subsidiary of Marzotto Lab S.r.l.

Marzotto Textiles Czech Republic s.r.o.

The Czechoslovakian company was established on 10 June 2013 and provides technical consultancy service.

Girmes International G.m.b.H

Girmes was acquired by Marzotto under the scope of the “Velvet project”; it distributes velvet fabrics internationally. As part of the rationalisation undertaken to restore economic management conditions for the activities relating to the new Velvet business, the rationalisation and simplification of the logistic and distribution activities of Girmes was evaluated in order to exploit the synergies that the existing Italian structures can allow in the mentioned areas. As from FY 2013, Girmes provides representation and commercial intermediation for the parent company Marzotto S.p.A. By virtue of the above conferrals, as from 01 January 2015, the Company is a full subsidiary of Marzotto Lab S.r.l.

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[Equity investments] Shareholdings in affiliates Ratti S.p.A. Share capital Euro 11,115,000

Below is a summary on the shareholdings in other affiliated companies:

Equity investments no. of shares owned Marzotto S.p.A. book value

2014

2013

33.36%

33.36%

9,125,000

9,125,000

10.4 euro/millions

10.4 euro/millions

In 2010, Marzotto S.p.A. acquired a 33.36% investment in Ratti S.p.A., a company listed on the Milan stock exchange and based in Guanzate (CO); together with other parties, it operates joint control. Ratti S.p.A. operates in the silk sector, producing and marketing printed, solid-colour or yarn-dyed fabrics for clothing and furnishing and develops and distributes finished products, mainly men’s and women’s accessories. During FY 2014, the Ratti Group booked revenues of 100.9 million (-1.8% on the 102.8 million of FY 2013), a core business result of 7.4 million (+23% on the 6.0 million of 2013) and a net result of 2.7 million (3.1 million in 2013). At the shareholders’ meeting called for this coming 23 April there will be a proposal to distribute, against the profit for the year, a 0.10 euro dividend per share, for a total of Euro 2,735,000 (the portion pertaining to Marzotto is Euro 912,500). In application of the reference accounting standards, the equity investment was measured as equity and its values were therefore adjusted accordingly.

Tintoria di Verrone S.r.l. Share capital Euro 100,000

2014

2013

Equity investments

50.00%

=

no. of shares owned

1

=

0.1 euro/millions

=

Marzotto S.p.A. book value

The Company was established on 02/01/2014 and is based in Verrone (BI). It is held equally by Marzotto S.p.A. and Filivivi S.r.l. In 2014, Tintoria di Verrone S.r.l. recorded revenues of Euro 6.4 million and a negative result of Euro 0.5 million. In application of the reference accounting standards, the equity investment was measured as equity and its values were therefore adjusted accordingly. As from 01 January 2015, by virtue of the reorganisation described above, the 50% share held by Marzotto S.p.A. was conferred 25% to Marzotto Wool Manufacturing S.r.l. and the remaining 25% to Marzotto Lab S.r.l.

Uab Lietvilna Share capital Ltl 15,710,900

2014

2013

Equity investments

50.00%

=

no. of shares owned

1

=

2.1 euro/millions

=

Marzotto S.p.A. book value

Company based in Kaunas (Lithuania) and up until 2013 controlled by Filivivi S.r.l.; as from 2014, it is controlled equally by Marzotto S.p.A. and Fraver S.p.A. Uab Lietvilna prepares, weaves and dyes carded yarn for knitwear. In 2014, it recorded revenues of Euro 16.1 million (+5.3% on 2013), a core business result of 0.7 million (+23.5%) and a positive net result of 0.6 million (+27.1%). In application of the reference accounting standards, the equity investment was measured as equity and its values were therefore adjusted accordingly. By virtue of the above conferrals, as from 01 January 2015, the Company is a full subsidiary of Marzotto Lab S.r.l.

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117

[Equity investments] Mediterranean Wool Industries CO. S.A.E. (ET) Share capital U$ 10,000,000

Equity investments no. of shares owned Marzotto Spa book value

2014

2013

30.00%

30.00%

30,000

30,000

2.0 euro/millions

2.0 euro/millions

In FY 2010, Marzotto S.p.A. acquired 30% of the capital of Mediterranean Wool Industries Co (MWI) S.A.E., a company incorporate in Egypt whose business purpose is the processing of textile fibres (combing, carbonization, other processes) at a newly built factory in Sadat City (Egypt); this is the result of a cooperation agreement with the Schneider group, an important and well known player in the industry. The factory full capacity operation was postponed to the end of 2011 due to the country’s socialpolitical situation, in view of which Marzotto has decided to undertake a five year insurance policy to protect the Group from any possible negative impact which may arise mainly from expropriation actions, currency restrictions, wars and civil unrest. In FY 2014, the Company recorded a negative economic result. In application of the reference accounting standards, the equity investment was measured as equity and its values were therefore adjusted accordingly. By virtue of the above conferrals, as from 01 January 2015, the Company is a full subsidiary of Marzotto Wool Manufacturing S.r.l.

Mascioni S.p.A. (MI) Share capital Euro 5,000,000

2014

2013

Equity investments

28.35%

28.35%

no. of shares owned

283,500

283,500

=

4.0 euro/millions

Marzotto S.p.A. book value

The 2014 draft financial statements of the affiliate Mascioni S.p.A., leader on the international markets in high-end fabric enhancing production, recorded a loss of Euro 3.2 million (loss of Euro 4.9 million in 2013). Turnover comes in at Euro 46.6 million, up 1.2% on last year. Net financial debt has worsened slightly, going from 7 million in 2013 to 6.6 million this year. In application of the reference accounting standards, the equity investment was measured as equity and its values were therefore adjusted accordingly to incorporate the period loss. In relation to the continued difficult economic-financial position of the affiliate, the parent company considered it reasonable to fully impair the value of the equity investment previously booked. This operation entailed the registration of an expense of Euro 4 million in “other financial income and expense”.

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[Equity investments] Aree Urbane S.r.l. (MI) Share capital Euro 100,000

Equity investments Marzotto S.p.A. book value

2014

2013

32.50%

32.50%

0.0

0.0

The company was established in October 2002 as part of a project aimed at increasing the value and therefore the sale appeal of some real estate properties held by Marzotto S.p.A. It has been placed in liquidation in August 2010 following the failed share capital increase proposed by its shareholders. In November 2012, Marzotto S.p.A. and the shareholders Prelios and Telecom stipulated an agreement aimed at defining the guidelines of conduct to be held in restoring “Aree Urbane S.r.l. in liquidation” to performing status; these involved achieving a prior agreement with the banks chosen to refinance the past-due debt of Aree Urbane. Last year, as this condition was not met, the shareholders decided to proceed with an “orderly” liquidation of Aree Urbane, as there was no further interest in pursuing the business. The parent company therefore believed it reasonable to fully impair the value of the equity investment.

Pettinatura di Verrone S.r.l. Share capital Euro 3,000,000

Equity investments no. of shares owned Marzotto S.p.A. book value

2014

2013

15.00%

15.00%

1

1

1.5 euro/millions

1.5 euro/millions

In September 2012, together with Loro Piana and Ermenegildo Zegna, Marzotto acquired a 15% share in Pettinatura di Verrone, a Biella-based company specialised in super-fine, cashmere and vicuña wool combing, heading the Schneider group, which controls it with a 55% share. Focusing on a high quality product, Pettinatura di Verrone targets a niche market that does not directly suffer the competition of the companies based in emerging countries, at the same time striving to optimise the value of “Made in Italy”. The 2014 draft financial statements of the affiliate show net revenues of Euro 8.4 million, making for an improvement on last year (revenues of Euro 7.8 million in 2013) and a net result of Euro +0.7 million (result of +0.2 million in 2013). In application of the reference accounting standards, the equity investment was measured as equity and its values were therefore adjusted accordingly. By virtue of the above conferrals, as from 01 January 2015, the Company is a full subsidiary of Marzotto Wool Manufacturing S.r.l.

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119

[Other information] Employees

As of 31 December 2014 the active employees of the Company were 727, compared to 726 the previous year. Year-end staff

31.12.2014

2014

2013

Fabrics

616

86.0%

609

84.3%

637

86.0%

610

Other Operations

100

14.0%

113

15.7%

104

14.0%

112

15.5%

Total

716

100.0%

722

100.0%

741

100.0%

722

100.0%

Laid off/dismissed Total

Industrial relations

Average staff

31.12.2013

11

4

3

3

727

726

744

725

84.5%

January 2014 saw consultation resume with the Trade Unions and Union Representatives for the renewal of the Company Supplementary Agreement (2nd level contract) in relation to the plant of Sondrio, Fabrics Division of Sondrio and Nuova TessilBrenta. The agreement was reached on 07 March 2014 and is valid until 31 December 2014. The “Piovene Dyes and Yarns” business unit, formerly part of the affiliate Filivivi S.r.l., has been incorporated into Marzotto S.p.A. with effect as from 02 January 2014. This BU included all plants, machinery, assets and staff of the dye area, reconditioning and some complementary offices based in Piovene Rocchette (VI). More specifically, 23 people were transferred and included in the Marzotto S.p.A. workforce, of whom 14 classified as blue-collar workers and 9 as white-collar workers/middle management. On 28 October 2014, an agreement to extend flexible working hours for production staff in the plant of Valdagno, GMF Fabrics Division, was signed with the Trade Unions and Union Representatives. On 19 November 2014, the union report on the closure and discontinuation of the “Dyes and Yarns” unit of Piovene Rocchette was signed at the Provincial Administration of Vicenza - Work and Education Sector. By virtue of this agreement, on 01 December 2014, the employed staff, totalling 20 people of whom 11 are blue-collar and 9 white-collar/middle management, found themselves suspended from work and assigned to the extraordinary redundancy fund (CIGS). On 10 December 2014, as part of the plan to manage surplus staff assigned to CIGS (as envisaged in the agreement of 19 November mentioned and regarding the “Dyes and Yarns” unit of Piovene Rocchette), mobility proceedings were concluded with union agreement for 16 workers (6 whitecollar/middle management and 10 blue-collar), of which 12 had already been assigned to CIGS. This procedure also regarded the Warehouse and Logistics unit, again based in Piovene Rocchette, for the remaining 4 surplus workers, 2 blue-collar and 2 white-collar. On 20 November 2014, a trade union agreement concluded the mobility proceedings regarding the Valdagno plant (GMF Division and Central Staff) up to a maximum of 25 people, of whom 4 whitecollar and 21 blue-collar workers. By virtue of these proceedings, a total of 17 surplus workers have been made redundant and assigned to mobility in connection with pensions, of whom 16 blue-collar and 1 white-collar. December saw a start-up of union consultations pursuant to Art. 47 of Italian Law no. 428/90 in relation to the corporate reorganisation of Marzotto S.p.A. and in particular the sale of the business units to the newly-established “Marzotto Wool Manufacturing S.r.l.” and “Marzotto Lab S.r.l.”. On 11 and 17 December, the above reports were drafted in Vicenza. The reorganisation and sales were envisaged with effect as from 01 January 2015.

120

Marzotto S.p.A. Report on the Company’s operations

[Other information] Training and development of human resources

Marzotto considers continuous training a key factor to increase and keep up-to-date its managers’ skills and technical knowledge of its collaborators. In 2014, Marzotto S.p.A. invested 620 hours in training (apart from training on safety), using interprofessional funds such as Fondimpresa and Fondirigenti. Marzotto has further developed the “Young Project”, the route involving the inclusion of young graduates in the Operations and Sales areas. Thanks to this, today the Group benefits from the presence of 10 engineers hired. The “Looking for Designers” project has also been launched, including 9 young designers in the Group and involving all the major international fashion and design schools. These young men and women have been included in the Group’s style offices and participated in technical training to better understand the various stages and techniques of production. Marzotto has continued to invest in the development of individual and community competences and performance: alongside interventions aimed at the individual (masters, specialisation courses), specific training programmes have also been organised involving some strategic communities for the business (sales area, fashion designers and “young talents”). More specifically, all the first and second lines of the Marzotto Group have been involved in an assessment and evaluation of skills, which has affected around 50 people in the various business units. These assessments have enabled a map to be prepared of the current skills available and potential to be developed to face up to the market challenges. A 36-hour finance course was then organised for non-specialists that involved 25 young members of the Group and investigated matters relating to the financial system, management accounting and the related dynamics of the business organisation. Another matter on which Marzotto has worked is leadership and in particular collaborator management: a training intervention has been organised that involved 32 assistants and heads of the weaving, finishing, dyes and quality control departments of the Valdagno plant, for a total of 16 hours, in which they shared the importance of strengthening awareness of oneself and one’s role, as well as consolidating communication skills and the development of trust with collaborators. In 2014, the main training initiatives were as follows:  training in accordance with the State-Regions agreement, Italian Legislative Decree no. 81/08, involving 24 employees in Valdagno and 35 in Sondrio on all levels;  course for workers operating forklift trucks for 27 employees of Valdagno and 24 of Sondrio;  course for workers in charge of operating mobile elevating working platforms for 4 employees of Valdagno;  fire-fighting course for 52 employees of Valdagno and 19 of Sondrio and training of first aid operators for another 34 people in Valdagno;  course for appointed persons in accordance with Italian Legislative Decree of 09 April 2008 and State-Regions agreement no. 221 of 21/12/2011 for 2 employees in Valdagno and 1 in Sondrio;  “confined spaces: managerial, technical and operative needs from Italian Presidential Decree no. 177/11” course for 19 employees of Valdagno;  update course for workers’ safety representatives in accordance with the State-Regions agreement, Italian Legislative Decree no. 81/08 for 3 employees of Valdagno and 2 of Sondrio. In 2014, 24 young men and women were included on training contracts in various functional areas of the Marzotto plants.

Marzotto S.p.A. Report on the Company’s operations

121

[Other information] Research and development

Research and development activities referred mostly to research and technology innovation to improve the quality standards of the production processes, research into innovative products, both in terms of style and technology and materials, and improvement of the flexibility of customer service. The main actions undertaken were as follows. Marzotto – GMF Division The Division continued its research into developing new fabrics with special blends for the application on the clothing market with significant increases in the technical/technological contents. More specifically, fabrics have been developed with unique designs, wind-proof and water-proof properties, double elasticised and informal models with a vintage flavour as well as new three-coat fabrics with a “wetsuit” effect. Marzotto – Blankets Division Research concentrated on the creation of new product ranges based on the use of the very best natural fibres (such as cashmere, baby alpaca, silk, wool and linen) and on the combination of new materials, products able to satisfy the needs for practicality, comfort and design. Marzotto – Estethia/GB Conte Division Business is focused on the development of new solutions seeking to create new product ranges. More specifically:         

new, more constructed, compact shuttle fabrics; new wool imitation fabrics; new fabrics with metallic yarn inserts; new printed fabrics; new cotton-based fabrics that are extremely light with far finer thread counts; new linen-based fabrics characterised by new treatments and finishes; new jersey fabrics characterised by three-dimensional effects and depth; new fabrics coupled with jersey, that are very fine and light; new, innovative dye and finishing treatments for the development of unique délavé effects.

Marzotto – Tessuti Sondrio Division Research and development carried out by the division related to solutions for the development of highly specialised fabrics with great comfort and fit, suitable for use in both new and traditional contexts.

122

Marzotto S.p.A. Report on the Company’s operations

[Other information] Risk factors (IFRS 7)

The Company acts to identify and assess risk, thereafter implementing procedures for managing any risk factors that may influence company results. Below, we will analyze the risk factors distinguishing between external (contextual) risks and internal (processing) risks.

External risks (contextual risks)

Risks connected with the economic outlook The Company products are addressed to markets subject to demand cycles and are influenced by the general economic trend. Major downturns in consumption levels can have a considerable impact on the Company’s economic, equity and financial position. In order to mitigate the possible negative impact, the Company has a flexible structure, outsourcing part of production and splitting sales over a fleet of clients diversified according to products/trademarks and markets. Risks related to competition in the sectors of the Company’s operations The Company operates in a competitive environment; it is possible that the competition pressure due to a drop in demand translates to pressure on prices. Part of the product offered by the Company, especially in the more basic part, is interchangeable with products offered by our main competitors and therefore, in such cases, price is a significant sales factor. Should there be a particularly significant drop in volume and/or sale prices, the Company believes that there are actions that can be taken to cut its own cost structure, in order in minimize the possible negative effects on the economic, financial and equity situation.

Internal risks (processing risks)

Risks related to financing sources and liquidity risk The effects of the possible turmoil in the global financial system could represent a risk factor in relation to the possibility of obtaining further financial means at the current conditions. However, the Company believes that the present debt structure, in particular the availability of lines committed in the medium/long term, the financial resources immediately available (deposits) and the lines of credits not used will limit the negative impacts of a possible difficulty in obtaining credit. Credit risk Credit risk is the risk that a customer or one of the parties in a financial instrument may cause a financial loss by not complying with its obligation and it pertains mainly to trade receivables and financial investments of the Company. The commercial credit risk is essentially reduced also in view of the type of customers, which are diversified and not significantly concentrated in the new outlet markets. Through a specific department, the Company adopts procedures for verifying the credit rating of its customers when they request extended payments. Exposure is regularly monitored and suitable action is taken to combat delays, minimise exposure and reduce the risk of loss. The credit risk is also hedged using suitable insurance cover. As concerns the financial credit risk, the Company limits its exposure to credit risk by investing exclusively in high liquidity securities and only with high credit rating parties. The book value of financial assets represents the maximum exposure of the Company to the credit risk. At the end of the year the exposure was as follows: (thousands of euro)

Marzotto S.p.A. Report on the Company’s operations

2014

2013

Financial assets available for sale

=

=

Financial assets at fair value carried on Income statement

=

=

Financing and credits

71,215

65,389

Cash and cash equivalents on hand

14,622

57,901

Other

98

98

Total

85,935

123,388

123

[Other information] Trade receivables aging at the date of the financial statements was: 2014 (thousands of euro) Current

gross

2013 fund

gross

fund

28,654

(2,020)

27,328

(2,178)

Overdue from 0 to 90 days

5,617

(235)

5,919

(273)

Overdue over 90 days

1,414

(846)

585

(801)

35,685

(3,101)

33,832

(3,252)

Total

Interest rate risk The Company is exposed to the risk of volatility of interest rates associated both with liquid funds and loans. The effects of the possible turmoil, already experienced in the banking system, could potentially represent a risk in relation to the cost of obtaining the financial resource. The considerable reduction of the reference rates has offset more than proportionally the average increase in the spreads recognized to the financing banking institutions in the recent past. The Company constantly monitors this risk and we do not believe that this risk is significant in terms of possible effects. Exchange rate risk The Company also operates on markets not using the euro and is therefore potentially subject to changes in exchange rates. Considering the Company’s exposure to exchange rates fluctuations in foreign currency operations, we carry out hedging operations to determine the exchange rate based on estimates of sales and purchases volumes and the currency exchange rate considered when the price lists are prepared. Specifically, the Company uses the following hedging instruments:  foreign currency loans;  forward sales and purchases in foreign currency;  foreign currency options at fixed exchange rates. These hedging instruments are agreed upon with highest rated banks. The Company does not enter into forward or optional exchange rate contracts for speculative purposes. The hedged cash flows are expected within the financial year. With reference to the most significant currencies, the table below shows the Company exposure to the exchange rate risk at the date of the financial statements. 2014 (thousands of euro) Trade receivables Short term financial assets and cash and cash equivalents Trade payables Total

124

Marzotto S.p.A. Report on the Company’s operations

Usd

2013 Czk

Usd

Czk

10,385

436,558

10,460

367,152

1,750

104,591

7,577

147,448

(2,513)

(752,810)

(3,536)

(679,449)

9,622

(211,661)

14,501

(164,849)

[Other information] Environmental risk and safety The Company manages the environmental risk and safety with suitable staff training according to new legislation and by introducing systems to prevent and improve health and safety at work. In terms of safety, the Company invests constantly in protecting and ensuring the safety of the workplace, both inside and outside the production facilities. The organization is constantly committed to respecting environmental standards in compliance with the environmental regulations in force in each local area in reference to the specific activities. New investments are been considered, also in view of the environmental impact, the potential savings in resources and energy consumption during operations as well as the reduction of total waste material produced. Please note that under the scope of its business, no damages have been caused to the environment, nor have any sanctions applied for environmental crimes and/or damages. Please also note that there have been no incidents at work that were sufficiently severe as to cause grievous bodily harm or permanent injury to staff. Price risk The Company is exposed to the risk of changes in the prices of the raw materials and auxiliary materials used in production. This risk mainly lies in the difficulty in rapidly transferring any increase in the cost of provisioning to sale prices and in the need to keep sufficient stocks in order to constantly supply the production process. In order to cope with these risks, when preparing the budget and connected economic planning, the Management defines net requirements, which are covered by placing orders with suppliers in order to stabilise the price of raw materials and auxiliary materials. Adoption of organizational model pursuant to Italian Legislative Decree no. 231 of 08 June 2001 Activities continue on updating the organizational model adopted previously in order to prevent crimes from being committed by mapping out sensitive areas and associated risks, defining training/communication processes and defining a disciplinary/sanction system. Considering the type of production and the financial structure, there are no other significant risks.

Marzotto S.p.A. Report on the Company’s operations

125

[Significant events after the close of the year] As from 01 January 2015, the Marzotto Group reorganisation took effect, as had been implemented by notary’s deed of 15 December 2014 and is described in the paragraph on “Significant events of 2014”. On 26 March 2015, the Company resolved to move the registered office from Milan to Valdagno (VI). At the date of this document, there are no further significant events to report after the close of the year.

126

Marzotto S.p.A. Report on the Company’s operations

[Proposals to the shareholders’ meeting] Shareholders,

We invite you to approve the presented financial statements and propose to carry the period profits of Euro 1,788,634.70 forward. After allocating the losses of previous years, net of profits carried forward, we have a total of Euro 23,226,327.85.

Valdagno (VI), 26 March 2015 FOR THE BOARD OF DIRECTORS THE MANAGING DIRECTOR

Marzotto S.p.A. Report on the Company’s operations

127

Annual Report 2014

General information Marzotto group Report on the Group’s operations Consolidated financial statements

Marzotto S.p.A. Report on the Company’s operations

 Company financial statements

Sole 24 Ore” del 5 aprile 2007

Si ha motivo di ritenere che l’Assemblea si terrà in seconda convocazione il 9 maggio 2007 alle ore 10.00 in Milano, Via Palestro n. 2, presso lo Spazio Eventi del “Centro Svizzero”.

129

Financial statements

[Balance sheet of the Company] 31.12.2014

(thousands of euro)

Partial

31.12.2013

Total

Partial

Total

1. Non-current assets 1.1 Property, plant and machinery

28,644

26,216

1.2 Civil buildings

1,494

1,200

1.3 Goodwill, trademarks and other intangible assets

5,333

2,498

111,333

113,107

1.5 Other investments 1.6 Long-term receivables 1.7 Deferred tax assets 1.8 Long-term financial receivables third parties Long-term financial receivables subsidiaries and affiliates

110

43

14,180

14,738

51 2,400

Total non-current assets 2. Non-currents assets held for sale

55 2,451

2,400

2,455

163,545

160,257

=

5,900

3. Current assets 3.1 Inventories 3.2 Trade receivables third parties Trade receivables subsidiaries and affiliates 3.3 Other receivables third parties Other receivables subsidiaries and affiliates 3.4 Current financial assets, cash and cash equivalents third parties Current financial assets, cash and cash equivalents subs. and affiliates

34,348 32,584 23,391

55,975

8,789 3,890

Total current assets

26,028

56,608

4,409 12,679

7,530 7,092

33,913 30,580

1,874

6,283

46,952 14,622

10,949

57,901

117,624

154,705

281,169

320,862

4.1 Share capital and reserves

58,648

107,667

4.2 Income/(Loss) for the year

1,789

(47,574)

Total assets 4. Shareholders' equity

Shareholders' equity

60,437

60,093

24,366

24,074

5. Non-current liabilities 5.1 Long-term provisions 5.2 Other long-term payables 5.3 Deferred tax liabilities

=

=

443

787

5.4 Long-term financial payables

3,793

11

Total non-current liabilities

28,602

24,872

6. Current liabilities 6.1 Trade payables and other payables third parties Trade payables and other payables subsidiaries and affiliates 6.2 Current financial payables third parties Current financial payables subsidiaries and affiliates Total current liabilities

130

68,443 32,683

61,246 101,126

81,872 9,132

31,796

93,042

130,471 91,004

12,384

142,855

192,130

235,897

Total shareholders' equity and liabilities

281,169

320,862

Net (financial debt)/cash

(77,724)

(82,510)

Marzotto S.p.A. Financial statements

Financial statements

[Statement of period income/(loss) and other items of the Company’s statement of comprehensive income] Year 2014

(thousand euro) 7.

Amount

Net revenues third parties

%age

Amount

%age

178,661

94.5

161,753

10,377

5.5

13,048

7.5

Total net revenues

189,038

100.0

174,801

100.0

8.

(123,563)

(65.4)

(110,055)

(63.0)

(24,532)

(13.0)

(28,871)

(16.5)

Gross income

40,943

21.7

35,875

20.5

10. R&D and marketing costs

(22,143)

(11.7)

(20,203)

(11.6)

11. General and administrative costs

(14,715)

(7.8)

(14,060)

(8.0)

(5,808)

(3.1)

(19,500)

(11.1)

(1,723)

(0.9)

(17,888)

(10.2)

(2,226)

(1.2)

(3,425)

(2.0)

Net revenues subsidiaries and affiliates Cost of sales third parties Cost of sales subsidiaries and affiliates 9.

Year 2013

12. Other income and charges 13. Operating income 14. Net financial charges third parties Net financial charges subsidiaries and affiliates 15. Dividends 16. Valuation of equity investments held for sale 17. Other financial income and charges 18. Income before taxes 19. Taxes 21. Fair Value adjustments 22. Other adjustments

(1)

(1)

Items that will be reclassified subsequently to profit and loss 23. IAS 19 adjustments

(25)

=

282

8,728

4.6

7,175

4.1

=

=

(7,015)

(4.0)

(4,114) 640

20. Net income

(1)

Items that will not be reclassified subsequently to profit and loss 24. Total comprehensive income for the period

92.5

0.2

(2.2)

(26,530)

(15.2)

0.3

(47,401)

(27.1)

1,149

0.6

(173)

(0.1)

1,789

0.9

(47,574)

(27.2)

1,380

0.7

(2,204)

(1.3)

2

=

=

=

1,382

0.7

(2,204)

(1.3)

(302)

(0.1)

243

0.1

(302)

(0.1)

243

0.1

(49,535)

(28.3)

2,869

1.5

1. Components recognized in equity.

Marzotto S.p.A. Financial statements

131

Financial statements

[Cash flow statement of the Company]

(thousands of euro) Income before taxes Amortisation, depreciation and inpairment Change in provisions Gain/(losses) on disposal of fixed assets Net profit/(loss) from discontinued operations Change in inventories Change in trade receivables and other receivables third parties Change in trade receivables and other receivables subsidiaries and affiliates Change in trade payables and other payables third parties

20113 1,789

(47,574)

8,040

15,434

(64)

(464)

(150)

(131)

= (334) (6,520)

7,015 (1,371) 9,994

621

(2,702)

8,472

14,648

Change in trade payables and other payables subsidiaries and affiliates

887

4,646

Change in long-term other financial receivables and payables

(65)

(15,646)

12,676

(16,151)

Operating cash flow (A) Investments in intangible and tangible fixed assets Disposals in intangible and tangible fixed assets Investments in equity investments Disposals of other equity investments Cash flow from investments (B) Translation exchange differences and other equity changes (C) Extraordinary operations (D) Cash flow before dividends (A+B+C+D)

(5,951)

(3,493)

191

190

(4,785)

(723)

5,900

40

(4,645)

(3,986)

= (3,250)

(446) =

4,781

(20,583)

Dividends paid

=

=

Increase in share capital of Parent Company

=

=

4,781

(20,583)

Change in net financial position Change in long-term financial payables Change in current financial payables third parties Change in current financial payables subsidiaries and affiliates

3,787

=

(48,599)

(9,593)

(3,252)

7,841

Change in long-term financial receivables third parties

4

6

Change in long-term financial receivables subsidiaries and affiliates

=

14,330

Extraordinary operations

=

=

(43,279)

(7,999)

Cash and current financial assets - beginning of the period

57,901

65,900

Cash and current financial assets - end of the period

14,622

57,901

Total Change in current financial assets, cash and cash equivalent

132

2014

Marzotto S.p.A. Financial statements

Financial statements

[Statement of changes in shareholders’ equity of the Company] Reserve viz. Revalua-

Total

Fair

art.55

Profits

Income

shareholders'

Share

tion

Legal

value

Pr.Dec.

Capital

IAS 19

Sundry

carried

for the

(in thousand euro)

capital

reserve

reserve

reserve

917/86

grants

reserve

reserves

forward

year

Balances as of 31.12.2012

65,005

6,357

15,000

53

130

7,339

88

62

13,142

Net income for the year 2013 Other total profit/(losses)

(1)

Total other income/charges Changes in capital

(2,204) =

=

=

(2,204)

2,854 (47,574)

(47,574)

(47,574)

(49,535)

243 =

=

243

(2)

equity 110,030 (1,961)

=

=

44

(446)

(402)

Allocation of net income: carried forward Balances as of 31.12.2013

65,005

6,357

15,000

(2,151)

88

62

373

7,383

2,854

(2,854)

=

15,550

(47,574)

60,093

1,789

1,789

1,789

2,869

Net income for the year 2014 Other total profit/(losses)

(1)

Total other income/charges

1,380 =

=

=

1,380

(300) =

=

(300)

Other changes

1,080 =

=

(2,525)

(2,525)

Allocation of net income: cover losses

(6,357)

(88)

(563)

carried forward Balances as of 31.12.2014

65,005

=

15,000

(771)

=

62

73

4,295

(22,223)

29,231

(18,343)

18,343

= =

(25,016)

1,789

60,437

1. Profits and Losses of the Comprehensive Income Statement recognized in Shareholders’ Equity. 2. Reverse stock split.

Marzotto S.p.A. Financial statements

133

Introduction

[Notes to the Company’s financial statements]

General information

Marzotto S.p.A. is a joint stock company with sole shareholder, established in Italy. The Company mainly manufactures and distributes wool fabrics at its plants in Valdagno (VI), velvet in Guanzate (CO) and cotton fabrics in Sondrio. It is a key player in the textile industry. The Company also coordinates the operations of Italian and foreign subsidiaries and of qualified subcontractors. The distribution logistics business performed on behalf of the Group companies and third parties are concentrated at the Piovene Rocchette (VI) plant. The core business of Marzotto S.p.A. is presented in the Report on Operations.

Management and coordination activities

Marzotto S.p.A. is subject to the management and coordination of Trenora S.r.l. (Valdagno); below please find the summary of the basic data from the last approved financial statements.

Balance sheet (thousands of euro) B) Fixed assets C) Current assets

30.06.2014 52,402 5,642

D) Accruals and deferrals Total assets

30.06.2014

2 58,046

A) Shareholders' equity D) Accounts payable

51,421 6,625

E) Accruals and deferrals Total liabilities

Income statements

= 58,046 30.06.2014

(thousands of euro) A) Value of production B) Cost of goods sold Difference between value and cost of goods sold (A+B)

8 (119) (111)

C) Financial income and charges

=

D) Adjustment to value of financial assets

=

E) Other income and charges Income before taxes (A+B+C+D+E)

= (111)

Income taxes Profit (loss) for the year

= (111)

Publication

To represent the results of the Group as a whole, the Company, who holds controlling interests, has prepared together with the separate financial statements the Group’s consolidated financial statements. These financial statements were approved by the Board of Directors on 26 March 2015. Publication will take place in accordance with the law.

Financial statements

The financial statements consist of the balance sheet, the statement of period profit/(loss) and other items of the statement of comprehensive income, the comprehensive income statement, the cash flow statement, the statement of changes in shareholders’ equity and the relevant explanatory notes. With regard to the presentation of the financial statements, the Company has made the following choices:

134

Marzotto S.p.A. Financial statements



for the balance sheet we have indicated separately current and non-current assets and current and non-current liabilities. Current assets are expected to be realized, transferred or consumed during the regular operating cycle of the Company; current liabilities are expected to be paid off during the regular operating cycle of the Company or in the twelve months following the close of the period;



for the statement of period profit/(loss) and other items of the statement of comprehensive income, costs are allocated according to their intended purpose;



for the cash flow statement we have used the indirect method.

Introduction

Accounting principles

[Notes to the Company’s financial statements] Marzotto S.p.A.’s financial statements for FY 2014 have been prepared in compliance with the International Financial Reporting Standards (IAS/IFRS) and the related interpretations by the International Accounting Standards Board (IASB), approved by the European Commission and incorporated in Italian law by Italian Legislative Decree 38/2005. The accounting principles adopted are comparable to those used as of 31 December 2013, except for the adoption of the following new or revised IFRS or IFRIC: 

IAS 27 - Separate financial statements (revised in 2011) Following the new IFRS 10 and IFRS 12, what remains of IAS 27 is limited to accounting for investments in subsidiaries, joint ventures and affiliates in separate financial statements. The amendments are applicable retrospectively for annual periods beginning on 01 January 2014.



IAS 28 - Investments in affiliates (revised in 2011) Following the new IFRS 11 and IFRS 12, IAS 28 was renamed “Investments in affiliates and joint ventures”, and it describes the application of the equity method for joint ventures, in addition to affiliates. The amendments are applicable for annual periods beginning on 01 January 2014.



IAS 32 - Offsetting financial assets and liabilities The changes clarify the meaning of “currently has a legally enforceable right of set-off”. The changes also clarify the application of the offsetting criterion of IAS 32 in the event of regulation systems (such as, for example, centralised offsetting rooms), which apply gross, non-simultaneous settlement mechanisms. These changes should not affect the Group’s financial position or results and shall come into force for years starting on 01 January 2014 or thereafter.



IFRS 12 - Disclosure of interests in other entities IFRS 12 includes all of the disclosures that were previously in IAS 27 related to consolidated financial statements, as well as all of the disclosures that were previously included in IAS 31 and IAS 28. These disclosures relate to an entity’s interests in subsidiaries, joint arrangements, affiliates and structured entities. A number of new disclosures are also required. This principle is effective for annual periods beginning on or after 01 January 2014.



IAS 32 - Financial instruments: presentation The IASB has issued some amendments to IAS 32 to clarify the application of some criteria for offsetting the financial assets and liabilities present in IAS 32. The amendments apply retrospectively for years starting on or after 01 January 2014. The first application of these amendments has no effect.



IAS 36 - Impairment of assets The IAS has issued an amendment to IAS 36, which regulates the disclosure to be provided on the value that can be recovered on assets that have not been impaired, if this amount is based on the fair value net of the costs of sale. The changes apply retroactively from the years that started on 01 January 2014. The adoption of this amendment has no effect on the disclosure.

As of the date of this Report, moreover, the competent bodies of the European Union have not yet completed the approval process necessary for the adoption of the following accounting standards and amendments: 

Marzotto S.p.A. Financial statements

on 12 November 2009, the IASB published standard IFRS 9 - Financial instruments; the same standard was then re-issued in October 2010 and amended in November 2013. The standard regards the classification, recognition and valuation of financial assets and liabilities as well as hedge accounting; it aims to replace IAS 39 - Financial instruments: recognition and measurement for these matters. With the November 2013 amendments, in addition to other changes, the IASB also eliminated the date of the first compulsory adoption of the standard, previously fixed at 01 January 2015. This date will be re-introduced with the publication of a complete standard, upon conclusion of the project on IFRS 9;

135

Introduction

136

Marzotto S.p.A. Financial statements

[Notes to the Company’s financial statements] 

on 20 May 2013, the IASB issued IFRIC 21 - Levies, an interpretation of IAS 37 - Provisions, contingent liabilities and contingent assets. The interpretation provides clarifications on the recording of liabilities for the payment of tax other than income taxes;



on 21 November 2013, the IASB published some minor amendments to IAS 19 - Employee benefits, entitled “Defined benefits plans”: Employee contributions”. These amendments seek to simplify the accounting treatment of contributions made by employees or third parties (in specific cases) to defined benefits plans. The amendments apply retrospectively for years starting as from 1 July 2014 and early adoption is permitted;



on 12 December 2013, the IASB issued a set of amendments to the IFRS (Annual Improvements to IFRSs - 2010-2012 Cycle and Annual Improvements to IFRSs - 2011-2013 Cycle). Amongst others, the most significant issues discussed in these amendments are: the definition of conditions for accrual in IFRS 2 - Share-based payments, the grouping of operating segments in IFRS 8 - Operating segments and the definition of managers with strategic responsibilities in IAS 24 - Related party disclosures, the exclusion from the scope of application of IFRS 3 Business combinations, of all types of joint arrangements (as defined in IFRS 11 - Joint arrangements) and some clarifications on the exceptions to the application of IFRS 13 - Fair value measurement.

Valuation criteria

[Notes to the Company’s financial statements]

Valuation criteria

The most significant valuation standards adopted in preparing the financial statements are indicated below:

1.1 Real estate, plants and machinery 1.2 Civil real estate

Real estate, plants and machinery are carried at historical cost, including directly attributable accessory costs. Land, both vacant and annexed to civil or industrial buildings, has not been amortized since its useful life is indefinite. Some assets that had been revaluated in previous periods are shown at the revaluated amount, considered their deemed cost on the transition date to IAS. Maintenance and repair expenses that do not increase the value or prolong the remaining useful life of assets are recognized as expenses in the period in which they are incurred. Tangible assets are shown net of accumulated depreciation and any reductions in value, determined in accordance with the methods described below. Depreciation is straight-line, based on the estimated useful life of the asset. The estimated useful life of the main real estate, plants and machinery is as follows: Land Civil buildings Industrial buildings Plants and machinery: - Textile - Corrosive environment textile - Other Industrial and commercial equipment Other assets: - Electronic office machines - Office furniture and fixtures - Vehicles

undefined 33 years/undefined 10/33 years 8 years 5/6 years 7/25 years 4/7 years 5 years 7/8 years 4 years

1.3 Goodwill, trademarks and other intangible assets

Intangible assets with a “finite useful life” are recognised at cost, determined according to the methods prescribed for tangible assets, and shown net of accumulated amortization and any permanent reductions in value, determined according to the methods described below. Intangible assets with “indefinite useful life” (e.g. trademarks) are not amortized.

Value reduction

The Company verifies, at each financial statements’ date, if there is any indication of lasting reduction in value for all assets. If these indications exist, an estimate is prepared of the value that can be recovered on the asset, i.e. the greater of the fair value of an asset or cash generating unit, less the costs of sale, and its use value. In determining its use value, estimated future cash flow is discounted to current value, using a gross tax rate that reflects current market appraisals of the value of the money and specific risks of the asset. A reduction in value is recognized in the income statement when the book value of the asset, or of the related cash generating unit, to which it is allocated, is greater than the estimated realizable value. Reductions in value are written back if the reasons for the devaluation are no longer present.

1.5 Shareholdings

Shareholdings in controlled, jointly controlled and affiliated companies that represent lasting investments are shown at the cost of acquisition or establishment, insofar as it is representative of the fair value. The Company verifies, at each financial statements’ date, if there is any indication of lasting reduction in value for all shareholdings as compared with the value at which they were first booked. Shareholdings in controlled, jointly controlled and affiliated companies that represent lasting investments therefore maintain the value at which they were first booked, unless impairment is recorded. Shareholdings in other companies are valued at fair value, charging any profits or losses directly to shareholders’ equity. At the time of their sale, such accumulated profits and losses are recognised in the income statement. When their fair value cannot be reliably determined, shareholdings in other companies are valued at cost adjusted for reductions in value, with the difference recognized in the income statement.

Marzotto S.p.A. Financial statements

137

Valuation criteria

[Notes to the Company’s financial statements] In particular, shareholdings in subsidiary and affiliated companies are impairment tested at least once a year; this test requires an estimate of the value that can be recovered on the asset, namely the greater of the fair value of an asset or cash generating unit, less the costs of sale, and its use value.

1.8 Medium-long term financial assets

Financial assets are initially carried at the value sustained, representative of the fair value, and later recognized at the lower between the book value and the estimated sale value (IAS 39).

2. Non-current assets held for sale

Assets or groups of assets and liabilities whose value will be recovered mainly through sale rather than ongoing use are recognised separately from other assets and liabilities in the balance sheet. Non-current assets or groups of assets and liabilities held for sale are recognised at the lower between the book value and the fair value net of the costs of sale.

3.1 Inventory

Inventory of raw materials, semi-finished goods and finished goods is carried at the lower between the cost of purchase or production and the estimated net realizable value, using the average weighted cost criteria to determine the cost. The stock valuation includes direct material and labour costs and indirect costs (variable and fixed), due to production.

3.2 Trade receivables 3.3 Other receivables

Trade receivables due within standard business terms and other operating receivables (other receivables) are not discounted and are carried at nominal value net of any write-downs (fair value). The adjustment to the estimated realizable value is recognised in a special adjustment reserve.

3.4 Short-term financial assets and cash and cash equivalents

Financial assets held for trading are recognized at the fair value shown in the income statement. Cash and cash equivalents are made up of cash in hand, i.e. cash that is readily available or on a very short term, successfully, and without collection expenses. A financial asset (or, if applicable, a portion of a financial asset or portion of a group of similar financial assets) is cancelled from the balance sheet when:

5.1 Long-term provisions

138

Marzotto S.p.A. Financial statements



the rights to receive financial flows from the asset expired;



the Company has transferred the right to receive financial flows from the asset or has taken over the contractual obligation to pay them fully and without delay to a third party and (a) it has basically transferred all risks and benefits of the ownership of the financial asset or (b) it has not transferred nor retained basically all risks and benefits of the asset, but it has transferred the control of the same.

Provisions to long-term reserves are recognized when there is a legal or implicit obligation towards a third party and it is likely that there will be an outlay of resources the amount of which can be reliably estimated. If the effect is significant, the provisions are determined by discounting the expected future financial flows at a pre-tax discount rate that reflects the current market value of the cost of money in relation to time. When the amount is discounted, the increase in the provision due to the passing of time is recognised as a financial charge.

Valuation criteria

[Notes to the Company’s financial statements] Defined contribution plans Defined contribution plans are post-employment benefits plans on which basis the entity pays fixed contributions to a separate entity and shall have no legal or implicit obligation to pay additional contributions. The contributions to be paid into defined contribution plans are recorded as a cost in the result of the period in which they are incurred. Contributions paid in advance are recorded amongst assets to the extent to which the advance payment will determine a reduction in future payments or a refund. Defined benefits plans The amount payable for staff termination indemnity comes under the scope of defined benefits pension plans, which are plans based on the working life of employees and on the remuneration received by the employee during a pre-determined period of service. More specifically, the liability relating to the staff termination indemnity of staff is booked at its actuarial value, insofar as it can be classified as employee benefits due according to a defined provision plan. The booking of defined provision plans requires an estimate using actuarial techniques of the amount of the provisions accrued by employees in exchange for his work during the current and previous years, and the discounting of these provisions in order to determine the current value of the company’s commitments (IAS 19). According to Law no. 296/06, effective from 30 June 2007, the staff termination indemnities accrued after 01 January 2007 must be paid in an appropriate treasury fund opened with INPS (National Institute for Social Protection) or, according to the instructions of the employee, to the selected fund. With these payments, the item relating to staff termination indemnities is no longer affected by accruals, contrary to staff termination indemnities accrued by 31 December 2006, which therefore come under the scope of defined benefits pension plans. In June 2012, IAS 19 was amended to provide for the recording of changes to actuarial gains/losses of defined benefits plans and, therefore, including employee termination indemnities, amongst items of the statement of comprehensive income, as from 01 January 2013. The Company has decided to apply this amendment early, as from the financial statements as of 31 December 2012.

5.4 Medium/long-term financial payables

Financial liabilities, except for derivatives, are initially carried at fair value net of directly attributable transaction costs. They are later measured using the actual interest rate method.

6.1 Trade payables and other payables

Trade payables due within standard business terms, and other operating payables, are not discounted and are carried at nominal value.

6.2 Short-term financial payables

Financial liabilities, except for derivatives, are carried at fair value net of directly attributable transaction costs.

Marzotto S.p.A. Financial statements

139

Valuation criteria

140

[Notes to the Company’s financial statements]

Derivative financial instruments

Derivatives are carried at fair value. They are designated as hedging instruments when the relationship between the derivative and the underlying instrument is formally documented and the effectiveness of the hedge, which is verified periodically, is adequate. When the derivatives cover the risk of change in fair value of the underlying instruments (fair value hedge), they are carried at fair value, and the difference is recognised in the income statement; consistently, the underlying instruments are adjusted to reflect the change in fair value associated with the hedged risk, and the difference is also recognised in the income statement. When derivatives cover the risk of changes in cash flows from the underlying instruments (cash flow hedge), the changes in fair value are initially recognised in the shareholders’ equity and later in the income statement, consistently with the effects produced by the hedging transaction. Changes in the fair value of derivatives that do not satisfy the conditions for being qualified as hedges are recognised in the income statement.

Translation of items in foreign currency

Transactions in foreign currencies are recorded at the exchange rate prevailing on the day of the transaction. At the closing date, trade and financial receivables and payables are adjusted to the exchange rate at end of the year. The instruments used to hedge the exchange rate risk, in relation to specific assets and liabilities or groups of assets and liabilities, are shown in the income statement on an accrual basis.

Contributions

Contributions from both government agencies and private third parties are carried at fair value when there is the reasonable certainty that they will be received and the prescribed conditions for obtaining them are satisfied. Contributions received for specific expenses are recognised among other liabilities and credited to the income statement on a straight-line basis throughout the same period in which the related costs accrue. Contributions received for specific assets, whose value is stated among tangible and intangible assets, are shown among liabilities and credited in the income statement in relation to the depreciation period for the assets to which they refer. Contributions during the accounting period are fully recognised in the income statement at the time the conditions for recognizing them are satisfied.

Fair value

The fair values used to prepare the financial statements, referred to the valuation of term purchases and sale of foreign currency and to foreign exchange options, were established based on the rates from the banking system.

Marzotto S.p.A. Financial statements

Valuation criteria

[Notes to the Company’s financial statements]

7. Revenues

Depending on the type of transaction, revenues are recognised based on specific criteria indicated below:  revenues from the sale of goods are recognised when the significant risks and benefits of ownership are transferred to the purchaser (typically at the time of shipment);  revenues for services provided are recognised based on the status of completion basis of the assets.

14. Net financial expense

Financial revenues and expense are recognised on the basis of accrued interest on the net value of the relevant financial assets and liabilities using the actual interest rate.

15. Dividends

Dividends are recognised when the right to receive payment is established. Dividends payable to third parties are shown as changes in net equity on the date they are approved by the shareholders’ meeting.

19. Taxes

Current income taxes for the financial year are determined based on estimates of taxable income and according to law. Deferred and advance income taxes are calculated on the temporary differences between the recorded asset values and the respective recognized values for tax purposes, applying the tax rate in effect at the date the temporary difference will be reversed, calculated on the basis of the tax rates provided by the law or substantially in force at the accounting reference date. The asset entry for advance tax payments is made when recovery is likely, that is when it is estimated that in the future there will be taxable amounts sufficient to recover the asset. The ability to recover assets for advance tax payments is reassessed at the end of each accounting period.

Use of estimates

In application of IFRS, preparing the financial statements requires the use of estimates and assumptions that affect the values of balance sheet assets and liabilities and the relevant information, as well as potential assets and liabilities at the reference date. The estimates and assumptions are made by the directors with the support of the company functions and, where appropriate, by independent specialists; they are revised regularly, booking the effects of each change to the income statement. Actual results may differ from these estimates. Estimates and assumptions are reviewed periodically and the effects of each change are reflected in the income statement. A significant discretionary valuation is required from the Administrators to establish the amount of deferred tax assets that may be posted. They have to estimate the likely time of occurrence and the amount of future profit subject to tax as well as a planning strategy for future taxes. Estimates are also used to record provisions for bad debt, for inventory obsolescence, amortization and depreciation, employee benefits, provisions for risks and charges.

Permanent value reduction

The Company verifies, at each financial statements’ date, if there is any indication of lasting reduction in value for all fixed assets. A reduction of value exists when the book value of an asset or cash generating unit exceeds its recoverable value, which is the greater of its fair value less the costs of sale and its value in use. Fair value, less the costs of sale, is calculated on the basis of data available on binding sales made between free, independent parties, of similar assets or observable market prices, less the greater costs relating to the disposal of the asset. The calculation of the value in use is based on a discounted cash flow model. Cash flow is obtained from the business plans approved by the Board of Directors, which represent the best estimate as can be prepared by the Company of the economic conditions envisaged during the period of the plan. The plan forecasts normally cover a time frame of three financial years. The long-term growth rate used (g) in order to estimate the end value of the asset is, for reasons of prudence, less than the long-term growth rate of the sector, country or market of reference. This verification involves also the choice of an adequate discount rate to calculate the present value of the expected financial flows.

Marzotto S.p.A. Financial statements

141

Valuation criteria

Tax consolidation

[Notes to the Company’s financial statements] Effective from the year 2008, Marzotto S.p.A., Immobili e Partecipazioni S.r.l., Linificio e Canapificio Nazionale S.p.A. and Licana S.p.A. in liquidation have all agreed to the Domestic Tax Consolidation, the parent company for it is Wizard S.r.l. Since 2009 also the following subsidiaries are part of the Domestic Tax Consolidation: Biella Manifatture Tessili S.r.l., Ambiente Energia S.r.l. and Le Cotonerie S.r.l. (formerly Immobiliare Isola S.r.l.). Adhesion to the tax consolidation of Wizard S.r.l. is governed by a specific regulation in force for the entire period for which the option is valid. Economic relations for the tax consolidation are regulated as follows:  subsidiaries which have positive taxable income for the years concerned pay Wizard S.r.l. the greater tax due by it;  companies consolidated with negative taxable income receive compensation amounting to 100% of the tax saving achieved on a group level from Wizard S.r.l. This compensation is due when effectively used by Wizard S.r.l.;  if Wizard S.r.l. and the subsidiaries should not renew the Domestic Tax Consolidation option, or if the requirements to continue to apply it should be forfeited prior to the end of the three years for which the option is valid, the tax losses that can be reported as resulting from the declaration are allocated proportionally to the companies that produced them. Early termination of the tax consolidation agreement or failure to renew it shall not have any penalty for the participating companies.

Other information

To prepare the financial statements for printing and to make them easier to read, all figures in the balance sheet, the statement of period profit/(loss) and other items of the comprehensive income statement, the income statement, the cash flow statement and the table of changes in shareholders’ equity, as well as in the notes, are expressed in thousands of euros. For an easier comparison, the previous year figures have been reclassified as needed, and adequate information has been provided. Please refer to the Report on Operations for further information regarding:  main events of the 2014 financial year;  events after the close of the financial year;  foreseeable development of operations (IFRS 7);  other relevant information on operating performance and the balance sheet structure.

142

Marzotto S.p.A. Financial statements

Balance sheet

[Notes to the Company’s financial statements] The tables below are in thousands of euros.

1.1) Property, plant and machinery 1.2) Civil building

2014 Amounts to:

2013

30,138

Change

27,416

2,722

broken down as follows: A)

B)

C)

D)

E)

F) Tangible

Description

Civil

Industrial

Plant

Industrial

Other

fixed assets

land and

land and

and

and comm.

tangible

under cons./

buildings

buildings

machinery

equipment

fixed assets

advances

Total

Original cost

1,334

40,193

112,001

3,582

4,482

595

162,187

Depreciation funds

(134)

(27,799)

(99,199)

(3,333)

(4,306)

=

(134,771)

1,200

12,394

12,802

249

176

595

27,416

5,619

Balances as of 31.12.2013 Movements during the year: Original cost:

294

830

2,783

325

179

1,208

reclassification

acquisitions

=

=

=

12

(12)

=

=

extraordinary operations

=

6

466

1

1

8

482

gross disposal

=

=

(933)

(7)

(5)

=

(945)

depreciation for the year

=

(882)

(2,257)

(138)

(60)

=

(3,337)

gross disposal

=

=

899

3

1

=

903

294

(46)

958

196

104

1,216

2,722

Depreciation funds:

Total movements for the year Original cost

1,628

41,029

114,317

3,913

4,645

1,811

167,343

Depreciation funds

(134)

(28,681)

(100,557)

(3,468)

(4,365)

=

(137,205)

1,494

12,348

13,760

445

280

1,811

30,138

Balances as of 31.12.2014

Tangible fixed assets as of 31 December 2014 come to 30,138 thousand euros. During the year, these recorded increases in the amount of 6,101 thousand euros (of which 482 thousand euros relating to the acquisition of the Piovene business unit), and reductions in the amount of 3,379 thousand euros (of which 3,337 thousand euros for amortisation/depreciation). In detail, the period increases relate to the following categories of assets:

Marzotto S.p.A. Financial statements



Civil land and buildings for 294 thousand euros. The investment refers to construction and other works carried out on civil buildings in Sondrio;



Industrial land and buildings for 830 thousand euros. Said expenses refer to operations to increase value and other improvements to the logistics building and depot of Piovene for 400 thousand euros, to interventions to make-safe and bring up to standard, for 138 thousand euros, to interventions on the portion of the industrial building of Valdagno relating to the canteen area for 135 thousand euros and to other works to increase value for 157 thousand euros;



Plants and machinery for 2,783 thousand euros. These capitalisations refer to revamping interventions on the yarns warehouse for 98 thousand euros, to purchases of plants and machinery to prepare for weaving and weaving for approximately 707 thousand euros, for the finishing department for approximately 683 thousand euros, to investments in the automatic dye dosage plant for 223 thousand euros, to improvements and interventions on the Piovene building for 295 thousand euros, to operations to make-safe and bring up to legal standard, energy saving interventions and other minor investments for 777 thousand euros;

143

Balance sheet Valuation criteria

[Notes to the Company’s financial statements] 

Industrial and commercial equipment for 325 thousand euros. These charges relate to investments in the textile departments for 198 thousand euros and 127 thousand euros to the purchase of shelving for the building used as a depot and for logistics, in Piovene;



Other tangible assets for 179 thousand euros, include 9 thousand euros electronic data processing machines, 14 thousand euros vehicles, 30 thousand euros office machinery, 54 thousand euros in furniture and furnishings and 72 thousand euros, internal means of transport;



Fixed assets in progress for 1,208 thousand euros. The increases refer to the purchase of plants and machinery of significant unitary value (such as warping and twisting machines) and for which, as of the reporting date, installation had not yet been completed. Work in progress last year has been reclassified to the relevant categories.

In addition to the above, on 02 January 2014 the Company also booked increases in the amount of 482 thousand euros in relation to the Piovene Dye business unit. As regards the year’s net reductions of 3,379 thousand euros, these refer to the disposal of assets for 42 thousand euros and the ordinary amortisation/depreciation process for 3,337 thousand euros. To complete this information, please note that with the sale of assets, the Company realised net capital gains of approximately 154 thousand euros, of which 129 thousand euros with regards to Group companies.

As of 31 December 2014 the fixed assets of the Company were not encumbered by mortgages or third party liens.

144

Marzotto S.p.A. Financial statements

Balance sheet

[Notes to the Company’s financial statements]

1.3) Goodwill, trademarks and other intangible assets

2014 Amounts to:

Change 2,498

2,835

made up us follows:

Description Original cost

2013

5,333

(1)  

Accumulated depreciation Balances as of 31.12.2013

A)

B)

Ind. patent

Concessions,

C)

D)

E) Intangible

and

licenses,

Other

intellectual

trade-marks

intangible

being

property

and

fixed

developed

rights

similar rights

assets

and advances

Goodwill

fixed assets

Total

3,224

791

167

100

67

4,349

(1,642)

(209)

=

=

=

(1,851)

1,582

582

167

100

67

2,498

Movements during the year: Original cost: acquisitions

314

13

=

=

6

333

extraordinary operatations

=

2,900

=

=

=

2,900

disposals/depreciations

=

=

=

=

=

=

(387)

(11)

=

=

=

(398)

=

=

=

=

=

= 2,835

Amortisation: for the year disposals/depreciations Total movements for the year Original cost (1)   Depreciation funds Balances as of 31.12.2014

(73)

2,902

=

=

6

3,538

3,704

167

100

73

7,582

(2,029)

(220)

=

=

=

(2,249)

1,509

3,484

167

100

73

5,333

1. Original cost of the assets still being depreciated.

Intangible fixed assets as of 31 December 2014 came to 5,333 thousand euros and recorded a change of 2,835 thousand euros on the previous year (of which -398 thousand euros for period amortisation). The main increases were related to the following categories:  

Industrial patent rights and rights to use intellectual works for 314 thousand euros, mainly software and EDP applications; Concessions, licences, trademarks and similar rights for 2,913 thousand euros, of which 2,900 thousand euros relate to the purchase of the Lanerossi trademark from Filivivi S.r.l.

Goodwill relates to the acquisition of the “Logistics Services” business unit of Piovene in 2011. Fixed assets in progress record a net change of 6 thousand euros, the values given at 31 December 2013 have been almost entirely allocated to the relevant categories. Research and development expenses paid during the year, pertaining to product innovation and applications for the rationalization of production and logistics, have been charged to the income statement.

Marzotto S.p.A. Financial statements

145

Balance sheet

[Notes to the Company’s financial statements]

1.5) Equity investments

2014 Amounts to:

2013

111,333

Change

113,107

(1,774)

made up as follows:

Description Original cost Adjust. for permanent decrease in value Balances as of 31.12.2013

A)

B)

C)

Shareholdings

Shareholdings

Shareholdings

in

in

in other

Subsidiaries

Associates

companies

Total

95,019

17,990

149

113,158

=

=

(51)

(51)

95,019

17,990

98

113,107

4,785

Movements during the year: Original cost: acquisitions

20

4,765

=

disposal

=

=

=

=

devaluation

=

(6,559)

=

(6,559)

20

(1,794)

=

(1,774)

95,039

16,196

149

111,384

=

=

(51)

(51)

95,039

16,196

98

111,333

Total movements for the year Original cost Adjust. for permanent decrease in value Balances as of 31.12.2014

The investments are intended to be strategic and long-term for the company and are measured, in compliance with the principle of continuity of measurement criteria, at purchase or subscription cost. Equity investments are valued in application of IAS 36 (Impairment of assets), on which basis the Company verifies to see if there is any indication of permanent loss of value by the assets. At each reporting date, the Company tests for impairment of financial assets or groups of financial assets. A financial asset or group of financial assets should be considered as subject to impairment if, and only if, there is objective evidence of loss of value as a result of one or more events that took place after the initial recording (when a loss event occurs) and this loss event has an impact, which can be reliably estimated, on the future cash flows estimated for the financial asset or group of financial assets. The evidence of loss of value can be represented by indicators such as financial difficulties, the incapacity to cope with obligations, insolvency in paying interest or making major payments, by debtors or a group of debtors; the probability of default or subjection to another form of financial reorganisation, and where the data that can be observed shows that there is a measurable decline in estimated future cash flows, such as changes of contexts or economic conditions connected with obligations. Equity investments, which comes to 111,333 thousand euros, records a net reduction of 1,774 thousand euros, in connection with the following period transactions:    

146

Marzotto S.p.A. Financial statements

purchase of a 50% share in the capital of Uab Lietvilna for 4,250 thousand euros; purchase of a 50% share in the capital of Tintoria di Verrone S.r.l. for 515 thousand euros; establishment of Marzotto Wool Manufacturing S.r.l. and payment of the share capital of 10 thousand euros. For more details, please refer to the Report on Operations; establishment of Marzotto Lab S.r.l. and payment of the share capital of 10 thousand euros. For more details, please refer to the Report on Operations;

Balance sheet

[Notes to the Company’s financial statements] 



impairment with direct recording under equity, of part of the purchase price of Uab Lietvilna and Tintoria di Verrone S.r.l., for a total of 2,525 thousand euros, in accordance with the provisions of the reference legislation for the business combination of entities under common control; impairment of the investment in the share capital of the affiliate Mascioni S.p.A., held 28.35% for 4,034 thousand euros. The Company believes that the losses suffered by the affiliate are a symptom of a permanent loss of value and has therefore chosen to prudently impair the value booked accordingly.

To complete this information, please note that during the year, the Company sold off its 50% share in the capital of Filivivi S.r.l. for 5,900 thousand euros. Last year, this value had been recorded under “Assets held for sale”.

1.6) Other medium/long-term receivables

2014 Amounts to:

2013 110

Change 43

67

65

made up as follows: Amount due from tax authorities

65

=

Other receivables

45

43

2

110

43

67

Total

Other medium/long-term receivables, of 110 thousand euros, include the caution deposits paid both this year and during previous years.

1.7) Deferred tax assets

2014 Amounts to:

2013

Change

14,180

14,738

(558)

Depreciation of inventories

1,302

1,379

(77)

Depreciation of receivables

819

899

(80)

Accrual for risk and charges

4,670

4,409

261

583

972

(389) (181)

made up as follows:

Fair value of forward operations on exchange rates Tax losses

4,891

5,072

Other temporary differences

1,915

2,007

(92)

14,180

14,738

(558)

Total

The item refers to deferred tax assets (prepaid taxes) due beyond the year. Taking into consideration the recent regulations on the unlimited carry forwards of tax losses, the forecast of the business performance and the participation in the Domestic Tax Consolidation of the subsidiary Wizard S.r.l., the Administrators have decided to record part of the advance taxation in connection with the losses that may be carried forward. Deferred tax credits allocated against these temporary differences correspond to the proportion that can reasonably be recovered.

Marzotto S.p.A. Financial statements

147

Balance sheet

[Notes to the Company’s financial statements]

1.8) Medium/long-term financial receivables

Amounts to:

2014

2013

Change

2,451

2,455

(4)

2,400

2,400

=

51

55

(4)

2,451

2,455

(4)

made up as follows: Receivables due from subsidiaries Guarantee deposits (financial) Total

Medium/long-term financial receivables amount to 2,451 thousand euros, of which 2,400 thousand euros relate to loans granted to the subsidiary Sametex Spol s r.o.

2. Non-current assets held for sale

Non-current assets held for sale included the sales value of the equity investment held in Filivivi S.r.l. of 5,900 thousand euros. The portion was sold to Fraver S.p.A. late February 2015, which therefore acquired full control.

3.1) Inventory

2014 Amounts to:

2013

34,348

33,913

Change 435

and can be broken down as follows: 5,047

4,671

376

Unfinished and semi-finished goods and work in progress

Raw, ancillary and consumable materials

10,229

11,121

(892)

Finished products and goods for resale

19,072

18,121

951

34,348

33,913

435

Total

Warehouse inventory is indicated at the lower between the purchase or production cost, determined using the weighted average cost method, and the estimated net sale value. In this regard, please note that the Company implements a disposal procedure for obsolete products, mainly seasonal fashion items that have been left unsold, using stock sales; goods that are still held as inventories at year end are suitably written-down, bringing their value into line with their presumed realisation value. Inventories, of 34,348 thousand euros, are more or less in line with end 2013.

148

Marzotto S.p.A. Financial statements

Balance sheet

[Notes to the Company’s financial statements]

3.2) Trade receivables

2014 Amounts to:

2013

55,975

Change

56,608

(633)

and refer to: 2014

2013

Amounts

%ge

Amounts

%ge

Active customers receivables

34,602

100.0

32,713

100.0

– Bad debt provision

(2,236)

(6.5)

(2,236)

(6.8)

= Net active customers receivables

32,366

93.5

30,477

93.2

Bad debt

1,083

100.0

1,119

100.0

– Bad debt provision

(865)

(79.9)

(1,016)

(90.8)

= Net bad debt Receivables from subsidiaries Receivables from parent Receivables from affiliates Receivables from associated

218

20.1

103

9.2

21,344

100.0

23,871

100.0

26

100.0

=

=

2,021

100.0

2,100

100.0

=

100.0

57

=

59,076

100.0

59,860

100.0

– Bad debt provision

(3,101)

(5.2)

(3,252)

(5.4)

Net trade receivables

55,975

94.8

56,608

94.6

Total face value of receivables

Trade receivables total 55,975 thousand euros, net of the provision for doubtful debt of 3,101 thousand euros (provision of 3,252 thousand euros at 31 December 2013). The value of the provision booked is considered appropriate in terms of bringing the nominal value of receivables in line with that presumed to be realised and is coherent with the provisions of the reference accounting standard. Said provision has been determined by performing a timely analysis of all positions suggesting a risk of doubtful recovery and of all positions relating to disputed receivables, considering the current market position. The reduction in trade receivables with respect to last year, despite the increased turnover volumes achieved and the difficult economic-financial context, is the consequence of both careful credit management policies adopted with the aim of optimising the customer facility policy and related credit classes, the speeding up of collection and compliance with contractual due dates and a greater value of receivables transferred on a without recourse basis. As of the reporting date, the total impact of the transfer of receivables without recourse is 19,025 thousand euros (16,813 thousand as of 31 December 2013), of which 12,059 thousand with effect on trade receivables (11,434 thousand at end 2013). We believe that the book value of the trade receivables reflects their fair value.

Trade receivables by geographic area is as follows: Other European Countries

Italy Towards customers

Total

8,837

2,974

1,380

5,343

35,685

4,631

16,618

=

95

=

21,344

26

=

=

=

=

26

Towards affiliates

1,200

719

=

=

102

2,021

Gross receivables

23,008

26,174

2,974

1,475

5,445

59,076

Towards parent

Financial statements

Other Countries

Asia

17,151

Towards subsidiaries

Marzotto S.p.A.

North America

149

Balance sheet

[Notes to the Company’s financial statements] Trade receivables due from subsidiaries refer to: 2014 Novà Mosilana a.s.

2013

Change

15,723

13,712

2,011

746

771

(25)

95

=

95

=

1

(1) 1

AB Liteksas Marzotto Int. Trading Shanghai Marzotto Textile NV Le Cotonerie S.r.l. Ambiente Energia S.r.l. Marzotto Textiles Czech Republic s.r.o. Sametex spol s r. o

2

1

76

74

2

=

3

(3)

148

1,172

(1,024)

Girmes International G.m.b.h.

1

54

(53)

Marzotto Wool Fabrics S.r.l.

1

=

1

Marzotto Lab S.r.l. Biella Manifatture Tessili S.r.l.

1

=

1

4,053

7,714

(3,661)

Linificio group Total

498

369

129

21,344

23,871

(2,527)

Trade receivables due from affiliates and joint ventures refer to: 2014

2013

Change

Filivivi group

=

1,355

Tintoria di Verrone S.r.l.

9

=

9

719

=

719

1,137

663

474

102

80

22

54

2

52

2,021

2,100

(79)

Uab Lietvilna Ratti group Mediterranean Wool Industry Co. S.A.E. Mascioni S.p.A. Totale

(1,355)

Trade receivables due from affiliates and joint ventures result from business relations and are subject to regular market conditions. As described above, in February 2014 the investment held in the capital of Filivivi S.r.l. was sold, hence all debt and credit, cost and revenue transactions, have been indicated as a third party in the data as of 31 December 2014.

150

Marzotto S.p.A. Financial statements

Balance sheet

[Notes to the Company’s financial statements]

3.3) Other receivables

2014 Amounts to:

2013

Change

12,679

6,283

6,396

1,885

2,143

(258)

10,370

3,544

6,826

made up as follows: Due from Tax Authorities Other receivables Accrued income and prepaid expenses Total

424

596

(172)

12,679

6,283

6,396

Receivables due from tax authorities refer to: 2014

2013

Change

Added value tax

922

226

696

Income taxes

373

373

=

Interest due

35

35

=

Credits for taxes withheld

13

28

(15)

Other items Total

542

1,481

(939)

1,885

2,143

(258)

Income taxes, equal to 373 thousand euros, refer to a request for reimbursement submitted in previous years.

Other receivables refer to: 2014

2013

Change

Due from State pension funds

150

92

Due from employees

450

419

31

3,768

1,874

1,894

Other receivables from parent companies Other receivables from associates Other receivables Total

58

11

=

11

5,991

1,159

4,832

10,370

3,544

6,826

Other receivables due from the parent company, Wizard S.r.l., derive from the Domestic Tax Consolidation. The most significant change relates to “Other receivables due from third parties” and comes to 4,832 thousand euros. This change mainly relates to a greater receivable for advances paid to foreign suppliers. The positions that were open as of 31 December were closed in the early months of FY 2015.

Marzotto S.p.A. Financial statements

151

Balance sheet

[Notes to the Company’s financial statements]

3.4) Short term financial assets and cash and cash equivalents

Amounts to:

2014

2013

14,622

Change

57,901

(43,279)

and refers to: Financial assets Due from subsidiaries

5,855

6,079

(224)

Due from associates

1,237

4,870

(3,633)

Other financial receivables

2,003

3

2,000

5,513

46,936

(41,423)

Cash Bank and post-office accounts Cash and cash equivalent on hand Total

14

13

1

14,622

57,901

(43,279)

Financial receivables due from subsidiaries refer to: 2014 Marzotto Textile N.V. Novà Mosilana a.s.

=

218 112

980

=

12

(12)

Girmes International G.m.b.h.

(218)

150

150

=

4,331

2,614

1,717 (51)

Ambiente Energia S.r.l.

=

51

273

=

273

9

2,922

(2,913)

5,855

6,079

(224)

Marzotto Wool Fabrics B.V. Biella Manifatture Tessili S.r.l. Total

Change

1,092

Marzotto Textiles USA Inc. Sametex spol s r. o

2013

Financial receivables due from subsidiaries include giro accounts held at market conditions.

Financial receivables due from affiliates refer to: 2014 Filivivi S.r.l.

2013

Change

=

4,000

Mediterranean Wool Industries Co. S.A.E.

987

870

117

Uab Lietvilna

250

=

250

1,237

4,870

(3,633)

Total

(4,000)

The total amount of the Company’s Short-term financial assets and cash and cash equivalents is 14,622 thousand euros, as compared with 57,901 thousand euros last year. Short-term financial assets include financial receivables due from subsidiaries for 5,855 thousand euros and financial receivables due from affiliates for 1,237 thousand euros. The change made to the receivable due from Mediterranean Wool Industries, of 117 thousand euros, relates to the adjustment of the balance in dollars at the spot year-end rate. Liquid funds come to 5,527 thousand euros (46,949 thousand euros in 2013) and include temporary funds available on bank accounts and amounts held as cash for future use. The significant reduction booked during the period, as compared with last year, is reflected in an equally significant reduction of debt to the credit system, as shown below. The values stated can be converted readily into cash and are subject to insignificant risk of value. Reference is made to the statement of cash flows for details of the funds and uses that gave rise to the change in availability as of 31 December 2014.

152

Marzotto S.p.A. Financial statements

Balance sheet

4. Shareholders’ equity

[Notes to the Company’s financial statements] Shareholders’ equity as of 31 December 2014 comes to 60,437 thousand euros, an increase of 344 thousand euros on last year, following the positive net period result of 1,789 thousand euros, offset by the negative change recorded in reserves for 1,445 thousand euros, as described below.

Share Capital Number of Shares Ordinary shares Total

Share capital

Share capital

Share capital

at 31.12.2013

change

at 31.12.2014

65,005,047

=

65,005,047

65,005,047

=

65,005,047

As of 31 December 2014, Share capital fully subscribed and paid-in was 65,005 thousand euros. No change took place during the period examined. Revaluation reserves Balances equity as of 31 December 2013 +/- change

6,357 (6,357)

Total

=

The value adjustment, of 6,357 thousand euros as of 31 December 2013, was fully used during the year to cover 2014 losses, as per the meeting resolution of 29 April 2014. Legal reserve Balances equity as of 31 December 2013

15,000

+/- change Total

= 15,000

The Legal reserve, equal to 15,000 thousand euros, was unchanged during the year. To face exchange rate risks involved in purchases and sales in other currencies, the company carries out operations to establish in advance the exchange rates on estimated volumes (cash flow hedging). In particular, the Company uses the following instruments:  foreign currency loans;  forward sales and purchases in foreign currency;  foreign currency options at fixed exchange rates. These operations come under the scope of “cash flow hedges” insofar as they are stipulated to cover a risk of change in cash flows deriving both from an existing asset or liability and a future operation. As established by international accounting standards, the portion of the gain or loss relating to the measurement of such derivatives (mark to market) has been booked net of the tax effect, amongst the items of the statement of comprehensive income, as the effectiveness of the cover guaranteed by these financial instruments has been proven. The fair value reserve includes the fair value of said operations, net of the tax effect, which as of the reporting date comes to 771 thousand euros (negative for 2,151 thousand euros as of 31 December 2013). The gain or loss recorded under shareholders’ equity is booked to the income statement when the operation hedged affects it.

Marzotto S.p.A. Financial statements

153

Balance sheet

[Notes to the Company’s financial statements] Other reserves Reserve viz. art. 55 Pres. Decree 917/86

2014

2013

Change

=

88

62

62

=

=

563

(563)

IAS 19 reserve

73

373

(300)

Merger surplus

44

44

=

FTA reserve

(239)

(239)

=

Capital contribution reserve

4,490

7,015

(2,525)

Capital grants Realignment reserve viz. Law 342/2000

Profits carried forward Total

(88)

(25,016)

15,550

(40,566)

(20,586)

23,456

(44,042)

The Conferral reserve, deriving from the conferral of the business unit of the Schio (VI) purification plant to Ambiente Energia S.r.l. during the year, recorded a reduction of 2,525 thousand euros. This change is related to the reduction in the value of the equity investments in Tintoria di Verrone S.r.l. and Uab Lietvilna, acquired by the former affiliate Filivivi S.r.l.

154

Marzotto S.p.A. Financial statements

Balance sheet

[Notes to the Company’s financial statements]

Civil and tax regulations to which share capital and reserves outstanding at 31 December 2014 are subject to, in case of reimbursement Capital

Capital and

Total amount

reserves which

reserves which

of reserves

represent

are not income

and undistributed

income

for the Company

profits

for the Company

or Shareholder

Descrizione

Total

Share capital

5,792

884

58,329

65,005

Legal reserve

15,000

=

=

15,000

(771)

=

=

(771)

Capital grants

62

=

=

62

IAS 19 reserve

71

=

=

71

(239)

=

=

(239)

Fair value reserve

FTA reserve Merger surplus Capital contribution reserve Profits carried forward Total

44

=

=

44

4,490

=

=

4,490

(25,014)

=

=

(25,014)

(565)

884

58,329

58,648

Following the demerger operation carried out in the 2010 tax period, the tax values of the shareholders equity are different than the financial statements values; in particular the tax value of the share capital is higher, by 10,850 thousand euros, compared to the value shown on the table above, while other reserves show a lower tax value.

Capital and reserves with tax constraints

Capital and reserves with statutory constraints

The equity constraint as of 31 December 2014 can be broken down as follows: 

the equity constraint for IRES purposes amounts to 703 thousand euros, consisting of the tax reversal made in 2004 and higher tax amortisation than accounting amortisation in 2007.

Possibility Description

12/31/2014

of use

Share capital

65,005

Legal reserve

15,000

AB

Capital grants

62

AB

Fair value reserve

(771)

FTA reserve

(239)

IAS 19 reserve Merger surplus Capital contribution reserve Profits carried forward Total

71 44

ABC

4,490

ABC

(25,014) 58,648

A: for capital increase B: to cover losses C: for distribution to shareholders

Marzotto S.p.A. Financial statements

155

Balance sheet

[Notes to the Company’s financial statements]

5.1) Long-term provisions

Amounts to:

2014

2013

24,366

Change

24,074

292

and refer to:

Provision for staff termination indemnities Amounts to:

2014

2013

Change

8,241

7,624

617

Accrual in income statement

1,886

1,991

(105)

Disbursements for terminations

(412)

(240)

(172)

Disbursements for advances

(250)

(532)

282

0.50% contributions on accruals for the year

(128)

(117)

(11)

Transfer to other reserves/other companies

(233)

the change is due to:

(1,631)

(1,398)

Transfer to tax authorities for personal income taxes ("IRPEF")

(22)

(26)

4

Extraordinary operations

669

=

669

Adjustment as per IAS 19

505

(381)

886

Total

617

(703)

1,320

Staff termination indemnity reflects the indemnity calculated in accordance with current legislation, accrued by employees as of 31 December 2006 and which will be liquidated upon his leaving. Where specific conditions apply, it may be partially advanced to the employee during the course of his working life. The staff termination indemnities, calculated according to the current law, is treated from an accounting point of view as a defined benefit and as such it is recalculated at the end of each period according to a statistic-actuarial criteria which takes into account also the effects of the financial actualization. This liability has been calculated according to the actuarial criteria of the “Unitary Credit Method” which “considers each working period as the source of one additional unit of right to the benefits and measures each unit separately to calculate the final obligation”. The following parameters are used: annual discounting rate 3.0%, annual inflation rate 1.8%. The booking of employee benefits is in accordance with IAS 19 for defined benefits plans; the company has decided to apply the amendments made by IAS 19 early, as from the financial statements as of 31 December 2012, with the consequent noting of changes in actuarial gains/losses amongst other items of the statement of comprehensive income, whilst financial gains/losses are noted on the income statement. According to Law no. 296/06, effective from 30 June 2007, the staff termination indemnities accrued after 01 January 2007 must be paid in an appropriate treasury fund opened with INPS (National Institute for Social Protection) or, according to the instructions of the employee, to the selected fund. With these payments, the item for staff termination is no longer affected by provisions.

Pension Amounts to:

2014 717

2013 757

Change (40)

The provision refers to a partially reversible supplementary retirement fund set up in favour of a former director of the Company. Last year, the provision was recalculated following the death of the primary beneficiary, recording the excess part on the income statement and discounting the remaining value of the annuity according to the actuarial tables used for the secondary beneficiary.

156

Marzotto S.p.A. Financial statements

Balance sheet

[Notes to the Company’s financial statements] 2014

2013

15,408

15,693

Agents' severance pay provision

2,315

Legal risk fund

2,663

Restructuring and relocation provisions

3,250

due to

Change

Other provisions Amounts to:

Accrual

Utilization

(285)

4,946

2,230

85

2,783

(120)

3,000

250

Other

(5,231)

=

125

(40)

=

=

(120)

=

250

=

=

and refers to:

Tax provisions

1,474

1,474

=

=

=

=

Other provisions for risk/charges

5,706

6,206

(500)

4,571

(5,071)

=

Provisions made for risks and charges during the year refer to the best estimate prepared by the management of the potential liabilities connected with current legal disputes. Where applicable, their estimate considers the opinion of the legal advisors and other experts, previous experience in the history of the company and other subjects in similar situations and the company’s intention as regards taking further action. Below are comments on the main provisions booked. The agents’ indemnity reserve has been allocated to cover potential liabilities from the termination of agency contracts. The reserve was adjusted to take into account foreseeable potential liabilities in connection with contracts existing at the end of the financial year. This provision has been calculated on the basis of the provisions of law in force as of the reporting date and the period changes consider the expected future cash flows. The litigation risk reserve is allocated to cover liabilities that may arise from litigation or other disputes. It includes an estimate of charges from litigation arising during the year and a review of the provisions for the estimate of cases which arose in previous years, updated based on the indications of our internal and external legal experts. The restructuring and relocation provisions are allocated mainly to offset planned charges and costs related to the industrial reorganisation plan of some production operations. The period provision includes costs estimated in connection with the downsizing of certain business units. Among other provisions for risks and charges are included foreseeable risks following operations in relation to the company Aree Urbane S.r.l., in addition to expenses in reference to the former Praia a Mare factory. Reference is made to the Report on Operations for more information.

Marzotto S.p.A. Financial statements

157

Balance sheet

5.3) Deferred tax liabilities

[Notes to the Company’s financial statements] 2014 Amounts to:

2013

Change

443

787

(344)

Tangible and intangible assets differences

456

435

21

Other temporary differences

(13)

352

(365)

Total

443

787

(344)

and can be broken down as follows:

This item includes deferred taxes reported by the Company, mainly attributable to the difference between depreciation and amortisation based on tax rates and on the useful life of the asset.

5.4) Medium/long term financial payables

2014 Amounts to:

2013

3,793

Change 11

3,782

and can be broken down as follows: Secured financing received Non-secured financing received Due to other lenders Total

=

=

=

3,782

=

3,782

11

11

=

3,793

11

3,782

Medium/long-term financial payables are financial liabilities due to banks and other lenders beyond twelve months. October saw the Company stipulate a variable-rate unsecured loan of 5,000 thousand euros; the portion due beyond the year is 3,782 thousand euros. The contract envisages repayment of the amount borrowed by means of the payment of six-monthly instalments in arrears, to be paid on 30/06 and 31/12 of each year, with the first instalment due on 30/06/2015 and the last on 31/12/2018. The instalments include the portion for the repayment of the principal amount and interest share, at variable rate, calculated on the residual debt. There are no debts backed by collateral over company assets.

158

Marzotto S.p.A. Financial statements

Balance sheet

6.1) Trade payables and other payables

[Notes to the Company’s financial statements] 2014 Amounts to:

2013

101,126

Change

93,042

8,084

and can be broken down as follows: Trade payables

54,378

39,935

14,443

Trade payables due to subsidiaries

31,903

30,266

1,637

772

775

(3)

=

6

(6)

111

189

(78) (5,371)

Trade payables due to affiliates Trade payables due to associated Advance payments received Payables due to Inland Revenue

1,981

7,352

Payables due to social security institutions

2,054

1,971

83

Payables due to employees

7,615

7,285

330

Other payables

(2,021)

2,151

4,172

Other payables due to parent companies

8

=

8

Other payables due to affiliates

=

748

(748)

Other payables due to associated

=

1

(1)

153

342

(189)

101,126

93,042

8,084

Accrued liabilities and deferred income Total

The balance of Trade payables and other payables, which comes to 101,126 thousand euros as of 31 December 2014, records an increase of 8,084 thousand euros. The main change relates to the increase in trade payables due to third parties, mainly connected with different procurement timing as compared with the same period of 2013. Trade payables are all due within the next year. Trade payables due to subsidiaries refer to: 2014 Novà Mosilana a.s. AB Liteksas

1,783

1,265

518

257

89

168

Marzotto Textiles USA Inc.

1,667

88

74

14

1,980

2,062

(82)

132

527

(395)

3

=

3

117

145

(28)

Girmes International G.m.b.h. Ambiente Energia S.r.l. Biella Manifatture Tessili S.r.l. Linificio group Total

Change

25,589

Marzotto International Trading (Shanghai) Co. Ltd Sametex spol s r. o

2013

27,256

287

515

(228)

31,903

30,266

1,637

Trade payables due to affiliates and joint ventures refer to: 2014 Ratti group

2013

Change

192

57

Uab Lietvilna

30

=

135 30

Tintoria di Verrone S.r.l.

10

=

10 36

Pettinatura di Verrone S.r.l.

315

279

Mediterranean Wool Industry Co. S.A.E.

225

225

=

=

214

(214)

772

775

(3)

Filivivi group Total

Advance payments from customers, equal to 111 thousand euros, are advances received from customers on supplies.

Marzotto S.p.A. Financial statements

159

Balance sheet

[Notes to the Company’s financial statements] Payables due to tax authorities can be broken down as follows: 2014 Regional manufacturing tax Withholding taxes

Change 569

(478)

1,447

1,565

(118)

Other amounts due Total

2013 91 443

5,218

(4,775)

1,981

7,352

(5,371)

Payables due to tax authorities come to 1,981 thousand euros. The main change is related to the extinguishing of the residual amount due for dividend stripping, paid in January 2014 in the amount of 4,781 thousand euros; this had previously been booked to Other payables due to tax authorities. Payables due to social security institutions refer to: 2014 INPS for current taxes

2013

Change 120

1,669

1,549

INPS early pensions and redundancy

2

10

(8)

ENASARCO for current taxes

6

8

(2)

377

404

(27)

2,054

1,971

83

Due to other institutions Total

Payables due to social security institutions reflect non-matured positions at the end of the financial year, regularly paid upon maturity. The position “Due to other institutions” includes amounts due to supplementary retirement funds. Payables due to employees can be broken down as follows: 2014 December salaries paid in January

2013

Change

1,139

4

13

(9)

Deferred salaries for vacation days accrued and not taken

2,125

1,874

251

Deferred salaries for other deferrals

3,724

3,804

(80)

499

455

44

7,615

7,285

330

Staff termination indemnities paid after year-end

Other items Total

Said debt positions mainly refer to salaries and wages for December, to accrued holiday entitlement not yet taken and other deferred remuneration.

160

Marzotto S.p.A. Financial statements

124

1,263

Balance sheet

[Notes to the Company’s financial statements] Other payables refer to: 2014

2013

Change

Down payments

=

100

(100)

Other payables due to associated companies

=

1

(1)

Other payables due to parent companies

8

=

8

Other payables due to affiliates

=

748

(748)

Other amounts due to third parties

2,151

4,072

(1,921)

Total

2,159

4,921

(2,762)

The item Other payables due to affiliates refers to the amount due from Filivivi S.r.l. (tax transparency). As previously explained, the Company was sold during the year. Other payables due to third parties, in the amount of 2,151 thousand euros as of 31 December 2014, book a reduction of 1,921 thousand euros. The change made mainly relates to the repayment of an amount due to Appia S.r.l. (for 400 thousand euros) and to the amount payable deriving from the fair value measurement of currency contracts (for approximately 1,313 thousand euros).

6.2) Short-term financial payables

2014 Amounts to:

2013

Change

91,004

142,855

(51,851)

1,654

6,971

(5,317)

and can be broken down as follows: Trade advance payments received Non-secured financing received

78,218

123,500

(45,282)

Payables due to subsidiaries

9,132

12,384

(3,252)

Other amounts due to third parties

2,000

=

2,000

91,004

142,855

(51,851)

Total

Financial payables due to subsidiaries refer to: 2014 AB Liteksas

2013

Change

3,480

4,664

(1,184)

=

11

(11) (9)

Sametex spol s r. o Novà Mosilana a.s.

=

9

Marzotto Textiles USA Inc.

1

=

1

161

=

161

Ambiente Energia S.r.l. Linificio group

5,490

7,700

(2,210)

Total

9,132

12,384

(3,252)

The table below gives the breakdown of net financial debt.

Net financial position

2014

2013

(77,724)

(82,510)

4,786

2,451

2,455

(4)

cash and cash equivalents

14,622

57,901

(43,279)

5.4 Long term financial payables

(3,793)

(11)

(3,782)

(91,004)

(142,855)

51,851

(77,724)

(82,510)

4,786

Amounts to:

Change

and can be broken down as follows: 1.8 Long term financial receivables 3.4 Current financial assets,

6.2 Current financial payables Total

Marzotto S.p.A. Financial statements

161

Balance sheet

Contractual commitments and guarantees (memorandum accounts)

[Notes to the Company’s financial statements] Memorandum accounts and commitments at 31 December 2014 are commented below:

“Guarantees to subsidiary and affiliated Companies” were given:     

in favour of the subsidiary Biella Manifatture Tessili S.r.l. for 34,000 thousand euros for lines of credit; in favour of the subsidiary Biella Manifatture Tessili S.r.l. for 14,200 thousand euros for transfers of receivables without recourse; in favour of the subsidiary Linificio e Canapificio Nazionale S.r.l. for 7,000 thousand euros for transfers of receivables without recourse; in favour of the subsidiary Sametex Spol s r.o. for 2,000 thousand euros as a guarantee of loans; in favour of Mediterranean Wool Industries Co. S.A.E., as a guarantee of loans granted for 1,650 thousand euros.

“Guarantees to third parties” were given: 

in favour of the Company as a guarantee for service contracts for 8 thousand euros and for miscellaneous securities for 19 thousand euros.

“Guarantees received from third parties” were given: 

in favour of the Company as a guarantee for trade receivables for 217 thousand euros and for miscellaneous securities for 64 thousand euros.

The “Foreign currency/interest rates hedging contracts” refer to contracts for term purchase for 51,913 thousand euros and contracts for term sale for 11,842 thousand euros. As of 31 December 2014, the commitments for contracts for the term sale of foreign currency (on receivables, orders received and future orders) were 15,620 thousand US dollars, for a total value of 11,534 thousand euros, 36,300 thousand JPY, for a total value of 264 thousand euros, 35 thousand GBP, for a total value of 44 thousand euros. Contracts for the term purchase of foreign currency were 1,005,000 thousand Czech crowns, for a total value of 36,868 thousand euros and 22,700 thousand Australian dollars for a total value of 15,045 thousand euros. The fair value of the contracts for the term sale and purchase of foreign currency at the end of the period, negative and equal to 1,823 thousand euros, was established based on the quotes given by the banks. There are also existing option contracts to hedge currency exchange risks for notional 1,420 thousand USD, for a total value of 1,057 thousand euros and a notional 20,000 thousand JPY for a total value of 147 thousand euros, for which the fair value is negative for 106 thousand euros.

162

Marzotto S.p.A. Financial statements

Income statement

[Notes to the Company’s financial statements]

7. Net revenues

The table below gives the breakdown of Net revenues according to business sector. 2014 Fabrics Wool Yarns

2013

% change

181,187

166,982

8.5

2,132

=

n.c. (12.6)

Other operations

11,670

13,358

Cancellations/adjustments

(5,951)

(5,539)

7.4

189,038

174,801

8.1

Total

The sales made by the Company during the year come in at 189,038 thousand euros and record an increase of 8.1% on last year (174,801 thousand euros). For more comments on the trend of sales, please refer to the paragraph on the Company’s economic performance in the Report on Operations.

The item “Net revenues” includes the following other revenues: Other revenues Amounts to:

2014

2013

12,857

% change

14,596

(11.9)

(72.5)

and refers to: Real estate income Other revenues and miscellaneous income Total

212

771

12,645

13,825

(8.5)

12,857

14,596

(11.9)

The item Other revenues and miscellaneous income mainly refers to the sale of semi-finished goods, manufacturing and other ordinary services provided.

8. Cost of goods sold

2014 Amounts to:

2013

% change

(148,095)

(138,926)

6.6

and refers to: Raw materials consumption

(37,565)

(45,194)

(16.9)

Third party production

(9,338)

(6,407)

45.7

In house manufacturing

(26,129)

(24,558)

6.4

Purchase of finished and semi-finished products

(60,611)

(52,283)

15.9

Change in stock of finished and semi-finished products Commercial exchange rate differences Other logistic and industrial costs Total

58

3,006

(98.1)

(3,075)

(2,406)

27.8

(11,435)

(11,084)

3.2

(148,095)

(138,926)

6.6

This item comes to 148,095 thousand euros and totals an increase of 6.6%. The change is basically linked to the improved volume of business archived in 2014.

Marzotto S.p.A. Financial statements

163

Income statement

[Notes to the Company’s financial statements] Trade exchange rate differences are detailed below: Commercial exchange rate differences Amounts to:

2014

2013

% change

(3,075)

(2,406)

607

(1,783)

(3,489)

(4,387)

27.8

and refers to: Exchange rate on cash from customers in foreign currency Exchange rate on payments to suppliers in foreign currency Exchange rate on the extinguishing of trade financing in foreign currency Total

(193)

3,764

(3,075)

(2,406)

27.8

This item can be broken-down as follows:

10. Marketing and product development costs

Amounts to:

Losses and write-down of trade debtors, business information

(20,203)

% change

(6,729)

(5,721)

17.6

(677)

(761)

(11.0) 8.8

9.6

Product research and development

(7,691)

(7,070)

Advertising, marketing and public relations

(1,593)

(1,561)

2.0

Other fixed sales and marketing costs

(5,453)

(5,090)

7.1

(22,143)

(20,203)

9.6

2014

2013

(14,715)

(14,060)

2014

2013

Total

12. Other income and expenses

2013

(22,143)

and refer to: Variable sales costs

11. General and administrative costs

2014

Amounts to:

Amounts to:

% change 4.7

% change

(5,808)

(19,500)

155

130

(70.2)

and refers to: Disposal of tangible and intangible assets Loss on disposal of investment Extraordinary charges for industrial plan

Financial statements

(275)

(250)

=

Allocation/use to legal risk fund and future charges

(4,571)

(9,316)

Charges "Dividend Stripping"

=

(9,096)

Contingent assets/liabilities

422

292

Other income/charges

Marzotto S.p.A.

=

(659)

Allocation/use to restructuring and relocation fund

Total other income/charges

164

(5)

(900)

(1,235)

(5,808)

(19,500)

(70.2)

Income statement

[Notes to the Company’s financial statements] The table below provides a breakdown of operating income by business segment.

13. Operating income

2014 Amounts to:

2013

% change

(1,723)

(17,888)

(90.4)

Fabrics

6,696

2,509

n.c.

Wool Yarns

(224)

=

n.c.

and refers to:

Other operations

(8,195)

(20,397)

(59.8)

Total

(1,723)

(17,888)

(90.4)

Below are the details on labour costs and depreciation and amortisation included in the operating income calculation.

Labour costs

Amounts to:

2014

2013

(37,453)

(35,379)

% change 5.9

6.3

and refers to: Wages and salaries

(26,698)

(25,108)

Social security contributions

(8,249)

(7,817)

5.5

Staff termination indemnities

(1,905)

(1,915)

(0.5)

(93)

(83)

12

(508)

(456)

11.4

Pension funds and similar liabilities Other labour costs

The table above gives the costs directly relating to employees. Salaries and wages also include labour costs for temporary staff.

The number of active employees had the following trend: Year End Staff 31.12.2014

Average

31.12.2013

% change

2014

2013

% change

Blue-collar workers

442

445

(0.7)

454

447

1.6

White-collar workers

259

257

0.8

264

253

4.3

26

24

8.3

26

25

4.0

727

726

0.1

744

725

2.6

Managers Total

Amortisation and depreciation was as follows: Ammortization Amounts to:

2014 (3,735)

2013 (3,535)

% change 5.7

and refers to: amortization of intangible fixed assets depreciation of tangible fixed assets

Marzotto S.p.A. Financial statements

(398)

(402)

(3,337)

(3,133)

165

Income statement

[Notes to the Company’s financial statements]

14. Net financial expenses

Amounts to:

2014

2013

% change

(2,251)

(3,143)

(28.4)

142

303

(53.1)

and refer to: Financial income Interest received from subsidiaries Interest received from affiliates Interest received from banks Other financial income Total financial income

25

68

(63.2)

357

959

(62.8)

14

80

(82.5)

538

1,410

(61.8)

Financial charges Interest payable to subsidiaries

(192)

(89)

+ 100.0

(1,956)

(3,630)

(46.1)

Bank services

(432)

(415)

4.1

Other financial charges

(209)

(419)

(50.1)

Total financial charges

(2,789)

(4,553)

(38.7)

Total

(2,251)

(3,143)

(28.4)

Interest payable to banks

Interest received from subsidiaries is detailed as follows: 2014 Amounts to:

2013

% change

142

303

(53.1)

Biella Manifatture Tessili S.r.l.

2

67

(97.0)

Ambiente Energia S.r.l.

=

8

n.c.

Linificio group

=

33

n.c.

and refers to:

Marzotto Textile N.V. Sametex spol s r. o

4

3

33

127

102

24.5

Girmes International G.m.b.h.

3

3

0.0

Novà Mosilana a.s.

6

86

(93.0)

Marzotto Textiles USA Inc. Total

=

1

n.c.

142

303

(53.1)

Interest received from affiliates: 2014 Amounts to:

2013

% change

25

68

(63.2)

10.0

and refers to: Mediterranean Wool Industries Co. S.A.E.

22

20

Uab Lietvilna

3

=

n.c.

Filivivi S.r.l.

=

48

n.c.

25

68

(63.2)

Total

166

Marzotto S.p.A. Financial statements

Income statement

[Notes to the Company’s financial statements] Interest payable to subsidiaries: 2014 Amounts to:

2013

% change

(192)

(89)

+ 100.0

and refers to: Biella Manifatture Tessili S.r.l.

(11)

=

n.c.

Novà Mosilana a.s.

(7)

=

n.c.

Ambiente Energia S.r.l.

(5)

=

n.c.

(106)

(5)

>100.0

Linificio group AB Liteksas Total

15. Dividends from investees

(63)

(84)

(25.0)

(192)

(89)

+ 100.0

2014 Amounts to:

2013

% change

8,728

7,175

Marzotto Textile N.V.

4,315

4,262

Biella Manifatture Tessili S.r.l.

3,500

2,000

913

913

21.6

and refers to: Dividends from subsidiary companies

Dividends from affiliated companies Ratti S.p.A. Dividends from other companies Wool Street Investments Pty Ltd. Total dividends

16. Result from the measurement of equity investments held for sale

=

=

8,728

7,175

2014 Amounts to:

21.6

2013 =

% change

(7,015)

n.c.

and refers to: Filivivi S.r.l.

=

(7,015)

n.c.

Total

=

(7,015)

n.c.

Last year, this item included the adjustment booked to align the book value of the equity investment in Filivivi S.r.l. with the value of assumed realisation.

17. Other financial income and charges

2014 Amounts to:

2013

% change

(4,114)

(26,530)

=

(14,695)

(88)

47

(84.5)

and refers to: Discount of receivable from Aree Urbane S.r.l. Adjustement TFR IAS 19 Write down equity investment Mascioni S.p.A. Write down equity investment Linificio e Can. Nazionale S.r.l. Other financial income Total

(4,034)

=

=

(11,899)

8

17

(4,114)

(26,530)

(84.5)

Other financial income and charges, in the amount of 4,114 thousand euros as of 31 December 2014, books an improvement of 22,416 thousand euros on end 2013. This difference is mainly caused by two operations implemented last year: the write-down of the investment in the subsidiary Linificio S.r.l. (for 11,899 thousand euros) and the write-down of a financial receivable due from the affiliate Aree Urbane (for 14,695 thousand euros). The period provision of 4,114 thousand euros is related for 88 thousand euros to the adjustment to employee severance indemnity in application of the standard IAS 19 and 4,034 thousand euros to the impairment of the equity investment in the affiliate Mascioni S.p.A.

Marzotto S.p.A. Financial statements

167

Income statement

[Notes to the Company’s financial statements]

19. Income taxes

2014 Amounts to:

2013

% change

1,149

(173)

Current taxes

101

(1,621)

Deferred taxes receivable

(19)

1,749

Deferred taxes payable

391

(138)

Previous years taxes

676

(163)

1,149

(173)

>100.0

and refers to:

Total

>100.0

Estimated taxes for 2014 are positive for 1,149 thousand euros, taking into account the posting of deferred tax assets, as mentioned under point 1.7, and prior year taxes. The reconciliation of the theoretical tax rate with the effective tax rate on income before taxes is set out in the table below. 2014 Amount Pre-tax profit

%age

(47,401)

(176)

(27.5)

13,035

(27.5)

2,280

356.3

1,874

(4.0)

(1,109)

(173.3)

(12,226)

25.8

IRAP Previous years taxes Taxes for other differences Total taxes

Financial statements

Amount

Taxes for exempt dividends World Domestic Consolidation

Marzotto S.p.A.

%age

640

Theoretical taxes Write-off of non-deductibles

168

2013

1,282

200.3

(182)

0.4

(1,178)

(184.1)

(1,406)

3.0 0.4

676

105.6

(163)

(626)

(97.8)

(1,105)

2.3

1,149

179.5

(173)

0.4

Other information

Related parties

[Notes to the Company’s financial statements] It is in the economic interest of the single participating entities to carry out operations with related parties. All relations with subsidiaries, affiliated companies and related parties, both those relating to the exchange of goods and services and to financial operations, are governed by normal market conditions. The relations with subsidiary and affiliated companies are shown in the financial statements and the relevant notes. The tables below detail the equity and economic values of the transactions performed with affiliated companies and subsidiaries as of 31 December 2014.

Receivables and payables existing with Group Companies as at 31 December 2014 Receivables Company Biella ManifattureTessili S.r.l.

Trade

Other

Payables

Financial

Total

Trade

Other

Financial

Total

4,053

=

9

4,062

117

=

=

117

Marzotto Wool Manufacturing S.r.l.

1

=

=

1

=

=

=

=

Marzotto Lab S.r.l.

1

=

=

1

=

=

=

= 164

Ambiente Energia S.r.l. Marzotto Fabrics B.V. Novà Mosilana a.s. AB Liteksas

76

=

=

76

3

=

161

=

=

273

273

=

=

=

=

15,723

=

1,092

16,815

27,256

=

=

27,256

746

=

=

746

1,783

=

3,480

5,263

95

=

=

95

257

=

=

257

=

=

=

=

88

=

1

89

148

=

6,731

6,879

1,980

=

=

1,980

Girmes International G.m.b.h.

1

105

150

256

132

=

=

132

Le Cotonerie S.r.l.

2

=

=

2

=

=

=

=

Linificio group

498

=

=

498

287

8

5,490

5,785

Uab Lietvilna

719

=

250

969

30

=

=

30

Marzotto Int. Tr. Shanghai Co. Ltd Marzotto Textiles U.S.A. Inc. Sametex spol s r. o

Tintoria di Verrone S.r.l. Ratti group Mascioni S.p.A. Pettinatura di Verrone S.r.l. Mediterranean Wool Industries

9

=

=

9

10

=

=

10

1,137

6

=

1,143

192

=

=

192

54

11

=

65

=

=

=

=

=

=

=

=

315

=

=

315

102

=

987

1,089

225

=

=

225

Trenora S.r.l.

8

=

=

8

=

=

=

=

Wizard S.r.l.

18

3,768

=

3,786

=

=

=

=

23,391

3,890

9,492

36,773

32,675

8

9,132

41,815

Total

Marzotto S.p.A. Financial statements

169

Other information

[Notes to the Company’s financial statements] Revenues, income, costs and charges with the Group Companies for the year 2014 Revenues and other income

Company Biella Manifatture Tessili S.r.l.

Services

Finance

Costs and charges Total

Products

Services

Finance

Total

2,787

=

2

2,789

(31,753)

111

11

(31,631)

225

=

=

225

7

5

5

17

=

=

4

4

=

=

=

=

Novà Mosilana a.s.

843

=

6

849

40,144

126

7

40,277

AB Liteksas

649

=

=

649

2,348

17

63

2,428

94

=

=

94

=

257

=

257

=

=

=

=

=

365

=

365

721

=

127

848

10,163

170

=

10,333

=

=

3

3

50

377

=

427

Linificio group

1,592

=

=

1,592

799

99

106

1,004

Uab Lietvilna

1,070

=

3

1,073

158

=

=

158

10

=

=

10

146

=

=

146

2,290

=

=

2,290

166

144

=

310

=

=

22

22

1,191

=

=

1,191

Ambiente Energia S.r.l. Marzotto Fabrics B.V.

Marzotto Int. Tr. Shanghai Co. Ltd Marzotto Textiles U.S.A. Inc. Sametex spol s r. o Girmes International G.m.b.h.

Tintoria di Verrone S.r.l. Ratti group Mediterranean Wool Industries Mascioni S.p.A.

76

=

=

76

=

=

=

=

Pettinatura di Verrone S.r.l.

=

=

=

=

1,079

=

=

1,079

Trenora S.r.l.

7

=

=

7

=

=

=

=

Wizard S.r.l.

=

13

=

13

=

=

=

=

10,364

13

167

10,544

24,498

1,671

192

26,361

Total

170

Products

Marzotto S.p.A. Financial statements

Other information

[Notes to the Company’s financial statements] Transactions with other related parties mainly refer:

Receivables and payables existing with related companies as at 31 December 2014 Receivables Company

Trade

Immobili e Partecipazioni S.r.l.

Other 50

Payables

Financial =

Total =

Trade 50

Other =

Financial 1

Total =

1

Revenues, income, costs and charges with related Companies for the year 2014 Revenues and other income Company Immobili e Partecipazioni S.r.l.

Directors and Statutory Auditors

Products 86

Services

Finance =

Costs and charges Total

=

Products 86

Services =

Finance =

Total =

=

Remuneration paid to the Directors and Statutory Auditors of Marzotto S.p.A.

Office (thousand of euro) 2014 remuneration

Independent Auditors

Directors

Auditors

Total

674

66

740

Remuneration due for the financial year for services provided by the Independent Auditors Company (thousand of euro) Auditing services

Marzotto S.p.A. Financial statements

Marzotto S.p.A. 63

Subsidiaries 190

Total 253

171

Other information

172

[Notes to the Company’s financial statements]

Atypical/unusual operations

During FY 2014, the Company has implemented no atypical and/or unusual operations.

Events after the date of these financial statements

During the period following 31 December 2014, no events are recorded as worthy of note or potentially able to significantly influence the data contained in this document, over and above that reported in the paragraph entitled “Significant events after the close of the year” in the Report on Operations.

Marzotto S.p.A. Financial statements

Investments

[Notes to the Company’s financial statements]

The Company’s direct and indirect investments

Below is the list of shareholdings in which Marzotto S.p.A. directly or indirectly holds more than 10% of the voting shares as of 31 December 2014. All shareholdings represent ownership:

% direct

% Marzotto S.p.A.

owned

owned

Company name

Head office

Direct investor

Biella Manifatture Tessili S.r.l.

Milan (I)

Marzotto S.p.A.

100.00%

100.00%

Le Cotonerie S.r.l.

Milan (I)

Marzotto S.p.A.

100.00%

100.00%

Ambiente Energia S.r.l.

Schio (I)

Marzotto S.p.A.

100.00%

100.00%

Marzotto Wool Manufacturing S.r.l.

Valdagno (VI)

Marzotto S.p.A.

100.00%

100.00% 100.00%

Marzotto Lab S.r.l.

Valdagno (VI)

Marzotto S.p.A.

100.00%

Sametex spol s r. o

Kraslice (CZ)

Marzotto S.p.A.

100.00%

100.00%

Girmes International G.m.b.h.

Nettetal (DE)

Marzotto S.p.A.

100.00%

100.00% 100.00%

Marzotto Textiles Czech Republic s. r.o.

Praga (CZ)

Marzotto S.p.A.

100.00%

Pettinatura Verrone S.r.l.

Verrone (I)

Marzotto S.p.A.

15.00%

15.00%

UAB Lietvilna

Kaunas (LT)

Marzotto S.p.A.

50.00%

50.00%

Tintoria di Verrone S.r.l.

Verrone (BI)

Marzotto S.p.A.

50.00%

50.00%

Aree Urbane S.r.l.

Milan (I)

Marzotto S.p.A.

32.50%

32.50%

Mascioni S.p.A.

Milan (I)

Marzotto S.p.A.

28.35%

28.35%

Mediterranean Wool Industries Co. S.A.E.

Sadat City (ET)

Marzotto S.p.A.

30.00%

30.00%

Marzotto Textile N.V. Marzotto Textiles USA Inc.

Amsterdam (NL) Wilmington (USA)

Marzotto S.p.A. Marzotto Textile N.V.

100.00% 100.00%

100.00% 100.00%

Marzotto Inter. Tr. (Shanghai) Co. Ltd.

Shanghai (RPC)

Marzotto Textile N.V.

Marzotto Wool Fabrics B.V.

Amsterdam (NL)

Marzotto S.p.A.

Nová Mosilana a.s.

Brno (CZ)

Marzotto Textile N.V.

Marzotto Blankets B.V.

Amsterdam (NL)

Marzotto S.p.A.

AB Liteksas

Kaunas (LT)

Marzotto Textile N.V.

Linificio e Canapificio Nazionale S.r.l. Filature de Lin Filin S.A.

Milan (I) Chbedda (TN)

UAB Lietlinen UAB Linestus

100.00%

100.00%

100.00%

100.00%

100.00%

100.00%

100.00%

100.00%

99.97%

99.97%

Marzotto S.p.A. Linificio e Canapificio N. S.r.l.

100.00% 100.00%

100.00% 100.00%

Kaunas (LT)

Linificio e Canapificio N. S.r.l.

100.00%

100.00%

Kaunas (LT)

UAB Lietlinen

Licana S.p.A. in liquidazione

Fara Gera d'Adda (I)

Lin Naturel S.A. Ratti S.p.A. Creomoda S.a.r.l.

50.00%

50.00%

Linificio e Canapificio N. S.r.l.

100.00%

100.00%

Chbedda (TN)

Linificio e Canapificio N. S.r.l.

100.00%

100.00%

Guanzate (I) Sousse (TN)

Marzotto S.p.A. Ratti S.p.A.

33.36% 95.00%

33.36% 31.70%

Ratti USA Inc.

New York (USA)

Ratti S.p.A.

100.00%

33.36%

Ratti Int. Trading (Shanghai) Co. Ltd

Shanghai (RPC)

Ratti S.p.A.

100.00%

33.36%

Textrom S.r.l.

Cluj - Napoca (RO)

Ratti S.p.A.

100.00%

33.36%

At the end of these notes we provide further details on the shareholdings held by the Company.

Marzotto S.p.A. Financial statements

173

Investments

[Notes to the Company’s financial statements]

(thousands of euro)

Situation as at 31.12.2013 Number

Description Marzotto Textile N.V.

Changes during the year 2014

Nominal

Pro-quota

Net

Number

of shares

%

value

net

book

of shares

owned

owned

of share

value

(+/–)

100

100.00

equity

(1)

AdjustIncreases

Decreases

ments

45

73,699

34,897

=

=

(34,745)

= =

Marzotto Wool Fabrics B.V.

=

=

=

=

=

18,000

28,321

=

Marzotto Blankets B.V.

=

=

=

=

=

18,000

6,424

=

=

1,000

27,181

14,879

=

=

=

=

Biella Manifatture Tessili S.r.l.

1,000,000

100.00

Le Cotonerie S.r.l.

1

100.00

15

15

41

=

=

=

=

Ambiente Energia S.r.l.

1

100.00

100

7,641

8,010

=

=

=

=

Marzotto Wool Manufacturing S.r.l.

=

=

=

=

=

1

10

=

=

Mrzotto Lab S.r.l.

=

=

=

=

=

1

10

=

=

Marzotto Textiles Czech Rep. S. r.o.

1

100.00

7

14

8

=

=

=

= =

Sametex spol s r. o

1

100.00

13,665

4,867

753

=

=

=

Girmes International G.m.b.h.

1

100.00

800

(816)

117

=

=

=

=

27,648,000

100.00

27,648

36,283

36,315

=

=

=

=

43,280

148,884

95,020

36,002

34,765

(34,745)

=

283,500

28.35

1,417

5,300

4,034

=

=

(4,034)

=

Aree Urbane S.r.l. in liquidazione

1

32.50

33

(7,276)

=

=

=

=

=

Pettinatura di Verrone S.r.l.

1

15.00

450

635

1,526

=

=

=

=

UAB Lietvilna

=

=

=

=

=

1

4,250

(2,140)

=

Tintoria di Verrone S.r.l.

=

=

=

=

=

1

515

(385)

=

10,402

13,673

10,402

=

=

=

=

Linificio e Canapificio Nazionale S.r.l.  Shareholdings in subsidiaries Mascioni S.p.A.

Ratti S.p.A.

9,125,000

Mediterranean Wool Industries Co. S.A.E.

33.36

30,000

30.00

2,027

1,508

2,027

=

=

=

=

1

50.00

7,500

(266)

5,900

(1)

=

(5,900)

=

21,829

13,574

23,889

1

4,765

(12,459)

=

Società Editrice Il Mulino S.p.A.

70,500

3.00

35

46

66

=

=

=

=

Next Technology Tecnotessile S.r.l.

19,968

1.58

10

8

10

=

=

=

=

Alto Tirreno Cosentino S.p.A. (in liquid.)

12,500

5.06

12

24

14

=

=

=

=

687

5.00

6

89

6

=

=

=

=

2,270

0.01

1

3

1

=

=

=

=

1

11.11

1

1

1

=

=

=

=

65

171

98

=

=

=

=

65,174

162,629

119,007

36,003

39,530

(47,204)

=

Filivivi S.r.l. Shareholding in affiliates

Sobifils S.p.A. Fil. Tess. Tollegno S.p.A. Consorzio Ivrea Energia (in liquid.) Shareholdings in other companies Total equity investments 1.

For subsidiary and affiliated companies, the net equity attributable to Marzotto is shown in the Parent Company's Financial Statements, or in the consolidated Financial Statements if prepared.

174

Gross book value

Marzotto S.p.A. Financial statements

[Notes to the Company’s financial statements]

Investments

Situation as of 31.12.2014 Number Net equity as at

Nominal

Pro-quota

Net

of shares

%

value

net

book

owned

owned

of shares

equity

(1)

value

Description

Dec. 2014

100

100.00

45

269

152

Marzotto Textile N.V.

Dec. 2014

18,000

100.00

18

52,708

28,321

Marzotto Wool Fabrics B.V.

Dec. 2014

18,000

100.00

18

12,127

6,424

Marzotto Blankets B.V.

Dec. 2014

1,000,000

100.00

1,000

30,247

14,879

Biella Manifatture Tessili S.r.l.

Dec. 2014

1

100.00

15

11

41

Le Cotonerie S.r.l.

Dec. 2014

1

100.00

100

7,507

8,010

Ambiente Energia S.r.l. Marzotto Wool Manufacturing S.r.l.

Dec. 2014

1

100.00

10

(23)

10

Dec. 2014

1

100.00

10

(10)

10

Marzotto Lab S.r.l.

Dec. 2014

1

100.00

7

33

8

Marzotto Textiles Czech Rep. s.r.o.

Dec. 2014

1

100.00

13,665

3,412

753

Sametex spol s r. o

Dec. 2014

1

100.00

800

(353)

117

Girmes International G.m.b.h.

Dec. 2014

27,648,000

100.00

27,648

36,487

36,315

Linificio e Canapificio Nazionale S.r.l.

43,336

142,415

95,040

Shareholdings in subsidiaries

Dec. 2014

283,500

28.35

1,417

4,306

=

Mascioni S.p.A.

Dec. 2010

1

32.50

33

(7,276)

=

Aree Urbane S.r.l. in liquidazione

Dec. 2014

1

15.00

450

636

1,526

Pettinatura di Verrone S.r.l.

Dec. 2014

1

50.00

4,550

2,848

2,110

UAB Lietvilna

Dec. 2014

1

50.00

100

245

130

Tintoria di Verrone S.r.l.

Dec. 2014

9,125,000

33.36

10,402

13,509

10,402

Ratti S.p.A.

Dec. 2014

30,000

30.00

2,027

1,414

2,027

Mediterranean Wool Industries Co. S.A.E.

Dec. 2014

=

=

=

=

Filivivi S.r.l.

18,979

15,682

16,195

Shareholding in affiliates

Dec. 2013

70,500

3.00

35

46

66

Società Editrice Il Mulino S.p.A.

Dec. 2013

19,968

1.58

10

8

10

Next Technology Tecnotessile S.r.l.

Dec. 2011

12,500

5.06

12

24

14

Alto Tirreno Cosentino S.p.A. (in liquidazione)

Dec. 2013

687

5.00

6

89

6

Sobifils S.p.A.

Dec. 2013

2,270

0.01

1

5

1

Fil. Tess. Tollegno S.p.A.

Dec. 2012

1

11.11

=

1

1

1

Consorzio Ivrea Energia (in liquidazione)

65

173

98

Shareholdings in other companies

62,380

158,270

111,333

Total equity investments

Valdagno (VI), 26 March 2015 FOR THE BOARD OF DIRECTORS THE MANAGING DIRECTOR

Marzotto S.p.A. Financial statements

175

[Report of indipendent Auditors]

177

[Report of the Board of Statutory Auditors] MANIFATTURA LANE GAETANO MARZOTTO E FIGLI S.p.A. Share Capital Euro 65,005,047 – Registered office in Valdagno, Largo S. Margherita n.1 Registered at the Vicenza Companies Register no. 00166580241 REPORT OF THE BOARD OF STATUTORY AUDITORS TO THE SHAREHOLDERS’ MEETING PURSUANT TO ARTICLE 2429, PARAGRAPH 2, CIVIL CODE Shareholder, we hereby report on the supervisory activities performed during the tax year ended on 31 December 2014, as provided by the law and the guidelines issued by the Board of Certified Public Accountants and Accounting Experts. The auditing is the exclusive scope of the Independent Auditors Reconta Ernst & Young S.p.A.

Supervisory activities We supervised on the compliance with the law and the By-laws and the correct administration principles. We have attended the Shareholders’ meetings and the meetings of the Board of Directors, and we confirm that based on the available information, we have not found any law or by-laws violation, nor any operation that was clearly imprudent, risky, in potential conflict of interest, or such as to jeopardize the company’s assets. We have collected from the Directors and the Management, during the meetings, information on the performance of operations, its foreseeable evolution, as well as on the most relevant operations in reference to size or characteristics, performed by the Company and, based on the information obtained, we don’t have any special remark. We have met with the company in charge of auditing the financial statements, and we have not obtained data or information that should be mentioned in this report. In performing its duties as Supervisory Board, no critical issues emerged worthy of report here. We have gathered knowledge and supervised, to the best of our competence, on the adequacy and the functioning of the company’s organization, also by obtaining information from each subject in charge and we have no particular remark on this matter. We have gathered knowledge and supervised, to the best of our competence, on the adequacy and the functioning of the company’s book-keeping and accounting system, as well as of its reliability to correctly portray the operations of the company, by obtaining information from each subject in charge, from the company in charge of auditing the accounts and the corporate books, and we have no particular remark on this matter. We have not received any claim pursuant to article 2408 of the Civil Code and we have not issued any opinion. During the supervisory activity, as described above, there were no atypical or unusual operations with third parties or related parties and we have been informed of any other significant fact such as to require to be mentioned in this report.

178

[Report of the Board of Statutory Auditors] Financial statements We have examined the draft financial statements for the year ended on 31 December 2014, prepared according to the IAS/IFRS accounting principles, made available to us pursuant to article 2429 of the Civil Code, concerning which we report the following. Since we are not responsible for auditing of the financial statements, we have supervised on their general setup, on their general compliance with the law as concerns its formation and structure and in this regard we have no remarks. We have verified that the financial statements correspond to the facts and information we have obtained in the performance of our duties and in this regard we have no remarks. We have verified the compliance with the law in relation to the preparation of the report on operations and in this regard we have no special remark. To the best of our knowledge, the Directors, in preparing the financial statements, have not infringed the provisions of the law pursuant to article 2423, paragraph four, of the Civil Code. In reference to the Group consolidated Financial statements as of 31 December 2014, the Statutory Auditors acknowledge that your Company, holding controlling interests, has presented this document, which has been prepared according to international accounting principles. Conclusions Given all of the above, and taking into account the information received from Reconta Ernst & Young S.p.A. and the report they have prepared pursuant to article 14 of Law Decree 39/2010 there are no remarks or reservations, and we therefore see no reason not to approve the financial statements for the period ended on 31 December 2014, nor have any objections to the proposed resolutions submitted by the Board of Directors for the allocation of the period result. We remind you that with the approval of the financial statements as of 31 December 2014 our term of office expires and, therefore, we invite you to pass a resolution in this regard.

Valdagno, 13 April 2015 the Board of Statutory Auditors Dott. Michele Paolillo – Chairman Dott. Franco Corgnati Dott. Federico Giorgione

Signed on the original

179

Balance Sheets

[Reclassified financial statements of subsidiaries] Marzotto Int. Novà Mosilana a.s.

AB Liteksas

(thousands Czk)

(thousands Ltl)

2014

2013

2014

Trading Shanghai Ltd (thousands Cny)

2013

2014

2013

1. Non-current assets 1.1 Property, plant and equipment

879,442

854,667

17,271

16,829

37

=

=

=

=

=

=

2,434

936

36

69

=

=

1.4 Investments valued at equity

=

=

=

=

=

=

1.5 Other investments

=

=

=

=

=

=

1.6 Long-term receivables

=

=

=

=

=

=

1.7 Deferred tax assets

9,125

9,078

243

226

=

=

1.8 Long-term financial receivables

1,008

1,027

=

=

=

=

892,009

865,708

17,550

17,124

37

44

=

=

=

=

=

=

3.1 Inventories

712,912

709,332

7,576

6,908

2,211

1,813

3.2 Trade receivables

810,046

738,893

8,740

6,635

1,174

789

3.3 Other receivables

49,973

68,750

833

754

857

110

1.2 Civil real estate 1.3 Goodwill, trademarks and other intangible assets

Total non-current assets 2. Non-current assets held for sale

44

3. Current assets

3.4 Current financial assets, cash and cash equivalent

103,376

49,390

16,328

19,390

1,348

875

1,676,307

1,566,365

33,477

33,687

5,590

3,587

2,568,316

2,432,073

51,027

50,811

5,627

3,631

4.1 Share capital and reserves

1,448,830

1,441,439

41,967

41,837

1,464

1,398

4.2 Income/(Loss) for the year

120,085

113,215

2,088

2,490

115

69

=

=

=

=

=

=

1,568,915

1,554,654

44,055

44,327

1,579

1,467

5.1 Long-term reserves

=

=

821

1,031

=

=

5.2 Other long-term payables

=

=

=

=

=

= =

Total current assets Total assets 4. Net shareholders' equity

4.3 Non controlling interests Total shareholders' equity 5. Non-current liabilities

5.3 Deferred tax liabilities

48,051

43,064

=

=

=

5.4 Long-term financial payables

=

=

=

=

=

=

Total non-current liabilities

48,051

43,064

821

1,031

=

=

781,077

698,366

6,151

5,453

4,048

2,164

6. Current liabilities 6.1 Trade payables and other payables 6.2 Current financial payables Total current liabilities Total shareholders' equity and liabilities

Net financial debt

180

Summary of the financial statementes of subsidiaries

170,273

135,989

=

=

=

=

951,350

834,355

6,151

5,453

4,048

2,164

2,568,316

2,432,073

51,027

50,811

5,627

3,631

16,328

19,390

1,348

875

(65,889)

(85,572)

Income statements

[Reclassified financial statements of subsidiaries] 3.4528 Novà Mosilana a.s.

AB Liteksas

(thousands Czk)

(thousands Ltl)

2014 7. 9.

Marzotto Int.

2013

2014

Trading Shanghai Ltd (thousands Cny)

2013

2014

2013

Net revenues

3,189,868

2,897,767

39,799

39,921

4,528

6,117

8.

(2,994,386)

(2,708,078)

(35,661)

(34,746)

(3,757)

(5,154)

Cost of sales

Gross income 10. Product development and marketing costs 11. General and administrative costs 12. Other income and charges

13. Operating income 14. Net financial charges Dividends from non-consolidated equity 15. investments and valuations to equity 16. Other financial income and charges 17. Income before taxes 18. Taxes 19. Net income

195,482

4,138

5,175

771

963

(9,303)

(8,016)

(1,035)

(1,277)

(629)

(879)

(36,700)

(38,000)

(1,062)

(1,025)

=

=

55

1,984

175

(119)

=

12

149,534

145,657

2,216

2,754

142

96

(2,281)

(3,661)

210

297

2

2

=

=

=

=

=

=

=

=

=

=

=

=

147,253

141,996

2,426

3,051

144

98

(27,168) (before non controlling interests)

20. Income attrib. to non controlling interests 21. Net income

Summary of the financial statements of subsidiaries

189,689

(29)

(29)

120,085

113,215

(28,781)

2,088

(338)

2,490

(561)

115

69

=

=

=

=

=

=

120,085

113,215

2,088

2,490

115

69

181

Balance Sheets

[Reclassified financial statements of subsidiaries] Ambiente Energia Marzotto Textile NV

S.r.l.

(thousands Euro) 2014

Linificio e Canapificio Nazionale

(thousands Euro)

2013

2014

(*)

(thousands Euro)

2013

2014

2013

1. Non-current assets 1.1 Property, plant and equipment

=

=

7,089

7,283

12,731

1.2 Civil real estate

=

=

15

15

=

=

1.3 Goodwill, trademarks and other intangible assets

=

=

1,336

1,437

230

261

1.4 Investments valued at equity 1.5 Other investments

13,626

=

=

=

=

5

11

299

73,942

=

=

13

13

1.6 Long-term receivables

=

=

1

1

107

387

1.7 Deferred tax assets

=

=

18

7

3,046

3,512

1.8 Long-term financial receivables

=

=

12

12

273

=

299

73,942

8,471

8,755

16,405

17,810

=

=

=

=

=

=

3.1 Inventories

=

=

=

=

14,152

14,694

3.2 Trade receivables

=

=

1,476

1,372

12,781

13,505

Total non-current assets 2. Non-current assets held for sale 3. Current assets

3.3 Other receivables

7

6

99

332

2,905

3,312

3.4 Current financial assets, cash and cash equivalent

2

4

387

440

8,271

10,118

Total current assets Total assets

9

10

1,962

2,144

38,109

41,629

308

73,952

10,433

10,899

54,514

59,439

7,641

7,889

36,273

40,060

4. Net shareholders' equity 4.1 Share capital and reserves

(3,989)

69,507

4.2 Income/(Loss) for the year

4,258

4,192

=

=

=

269

73,699

5.1 Long-term reserves

=

5.2 Other long-term payables

=

5.3 Deferred tax liabilities

213

(3,777)

=

=

=

7,507

7,641

36,486

36,283

=

158

160

1,156

1,594

=

=

=

261

431

=

=

1,757

1,530

17

36

5.4 Long-term financial payables

=

=

=

=

=

326

Total non-current liabilities

=

=

1,915

1,690

1,434

2,387

39

35

1,011

1,517

13,083

10,826

=

218

=

51

3,511

9,943

39

253

1,011

1,568

16,594

20,769

308

73,952

10,433

10,899

54,514

59,439

399

401

5,033

4.3 Non controlling interests Total shareholders' equity

(134)

(248)

5. Non-current liabilities

6. Current liabilities 6.1 Trade payables and other payables 6.2 Current financial payables Total current liabilities Total shareholders' equity and liabilities

Net financial debt

2 (*) Consolidated financial statements.

182

Summary of the financial statements of subisdiaries

(214)

(151)

Income statements

[Reclassified financial statements of subsidiaries] Linificio e Canapificio

Ambiente Energia Marzotto Textile NV

S.r.l.

(thousands Euro) 2014 7. 9.

Nazionale

(thousands Euro)

(thousands Euro)

2013

2014

(*)

2013

2014

2013

Net revenues

=

=

4,012

4,124

40,375

37,064

8.

=

=

(3,354)

(3,593)

(33,991)

(33,983)

Gross income

=

=

658

6,384

3,081

10. Product development and marketing costs

=

=

(58)

(2)

(3,797)

(3,335)

(61)

(56)

(133)

(116)

(2,313)

(2,245)

=

=

(112)

(99)

(61)

(56)

355

(3)

(14)

Cost of sales

11. General and administrative costs 12. Other income and charges 13. Operating income 14. Net financial charges Dividends from non-consolidated equity 15. investments and valuations to equity

4,322

16. Other financial income and charges 17. Income before taxes (before non controlling interests)

(*)

Summary of the financial statements of subsidiaries

(217)

314

351

(2,716)

(17)

(83)

(696)

(7)

(19)

=

=

=

=

=

4,192

349

297

(11) 250

2 (3,429)

=

=

(483)

(545)

(37)

4,258

4,192

(134)

(248)

213

(3,777)

=

=

=

=

=

=

4,258

4,192

(134)

(248)

213

(3,777)

20. Income attrib. to non controlling interests 21. Net income

=

77

4,258

18. Taxes 19. Net income

4,262

(6)

531

(348)

Consolidated financial statements

183

Balance Sheets

[Reclassified financial statements of subsidiaries] Biella Manifatture Marzotto Textiles USA

Tessili S.r.l.

(thousands Usd)

(thousands Euro)

2014

2013

2014

Le Cotonerie S.r.l. (thousands Euro)

2013

2014

2013

1. Non-current assets 1.1 Property, plant and equipment

1

1

15,703

14,020

=

1.2 Civil real estate

=

=

=

1,088

=

= =

1.3 Goodwill, trademarks and other intangible assets

=

=

2,536

2,543

=

=

1.4 Investments valued at equity

=

=

=

=

=

=

1.5 Other investments

=

=

3

3

=

=

1.6 Long-term receivables

=

=

218

75

=

=

1.7 Deferred tax assets

=

=

3,698

3,821

=

=

1.8 Long-term financial receivables

=

=

1

1

=

=

Total non-current assets

1

1

22,159

21,551

=

=

=

=

=

=

=

=

=

=

29,530

26,380

=

=

108

102

15,531

15,711

=

=

2. Non-current assets held for sale 3. Current assets 3.1 Inventories 3.2 Trade receivables 3.3 Other receivables 3.4 Current financial assets, cash and cash equivalent Total current assets

=

=

863

2,880

4

4

82

81

2,574

10,748

11

14

190

183

48,498

55,719

15

18

191

184

70,657

77,270

15

18

4.1 Share capital and reserves

169

146

22,914

22,923

15

20

4.2 Income/(Loss) for the year

23

21

6,461

3,994

(4)

(5)

=

=

=

=

=

=

191

167

29,375

26,917

11

15

5.1 Long-term reserves

=

=

4,398

4,471

=

=

5.2 Other long-term payables

=

=

=

=

=

=

5.3 Deferred tax liabilities

=

=

523

652

=

=

Total assets 4. Net shareholders' equity

4.3 Non controlling interests Total shareholders' equity 5. Non-current liabilities

5.4 Long-term financial payables

=

=

3,581

=

=

=

Total non-current liabilities

=

=

8,502

5,123

=

= 3

6. Current liabilities 6.1 Trade payables and other payables 6.2 Current financial payables Total current liabilities Total shareholders' equity and liabilities

Net financial debt

184

Summary of the financial statements of subsidiaries

1

=

31,711

30,360

4

(1)

17

1,069

14,870

=

=

(0)

17

32,780

45,230

4

3

191

184

70,657

77,270

15

18

83

64

(2,075)

(4,121)

11

14

Income statements

[Reclassified financial statements of subsidiaries] Biella Manifatture Marzotto Textiles Usa

Tessili S.r.l.

(thousands Usd)

(thousands Euro)

2014 7.

Net revenues

2014

477

448

=

=

Gross income

477

10. Product development and marketing costs

(453)

8. 9.

2013

Cost of sales

=

(73,965)

(69,557)

=

=

448

24,223

19,957

=

=

(311)

(10,330)

(10,702)

=

=

(118)

(3,377)

(2,760)

(6)

(5)

=

5

23

24

(1)

(3)

(406)

=

=

=

16. Other financial income and charges 17. Income before taxes 18. Taxes 19. Net income (before non controlling interests) 20. Income attrib. to non controlling interests 21. Net income

Summary of the financial statements of subsidiaries

2013

89,514

=

Dividends from non-consolidated equity 15. investments and valuations to equity

2014

98,188

12. Other income and charges 14. Net financial charges

(thousands Euro)

2013

11. General and administrative costs 13. Operating income

Le Cotonerie S.r.l.

=

=

23

21

=

=

23

21

(209) 10,307

(31)

=

201

=

=

6,696

(6)

(5)

(700)

=

=

=

=

=

188

=

=

(6)

(5)

9,870

6,184

(3,409)

(2,190)

2

=

6,461

3,994

(4)

(5)

=

=

=

=

=

=

23

21

6,461

3,994

(4)

(5)

185

Balance Sheets

[Reclassified financial statements of subsidiaries] Girmes International

Marzotto Textile

Sametex Spol s r.o

G.m.b.h.

Czech Rep.

(thousands Czk)

(thousands Euro)

(thousands Czk)

2014

2013

2014

2013

2014

2013

1. Non-current assets 1.1 Property, plant and equipment

280,071

244,838

17

8

=

=

=

=

=

=

=

109

332

1

2

(9)

=

1.4 Investments valued at equity

=

=

=

=

=

=

1.5 Other investments

=

=

=

=

=

=

1.2 Civil real estate 1.3 Goodwill, trademarks and other intangible assets

=

1.6 Long-term receivables

=

=

=

=

=

=

1.7 Deferred tax assets

=

=

=

=

=

=

1.8 Long-term financial receivables

=

=

=

=

=

=

280,180

245,170

17

9

(9)

=

=

=

=

=

=

=

3.1 Inventories

95,957

76,246

=

=

=

=

3.2 Trade receivables

55,075

56,796

216

516

876

1,023

Total non-current assets 2. Non-current assets held for sale 3. Current assets

3.3 Other receivables

3,799

4,008

41

30

16

53

3.4 Current financial assets, cash and cash equivalent

9,823

13,070

64

42

1,485

633

Total current assets

164,654

150,120

320

588

2,377

1,709

444,834

395,290

338

597

2,368

1,709

4.1 Share capital and reserves

133,474

177,999

(265)

(668)

318

107

4.2 Income/(Loss) for the year

(38,841)

(44,525)

(88)

(148)

603

270

Total assets 4. Net shareholders' equity

4.3 Non controlling interests

=

=

=

=

=

=

94,633

133,474

(353)

(816)

921

377

5.1 Long-term reserves

=

=

45

80

=

=

5.2 Other long-term payables

=

=

=

=

=

=

5.3 Deferred tax liabilities

=

=

=

=

=

=

Total shareholders' equity 5. Non-current liabilities

5.4 Long-term financial payables

63,320

90,417

=

=

=

=

Total non-current liabilities

63,320

90,417

45

80

=

= 1,332

6. Current liabilities 6.1 Trade payables and other payables 6.2 Current financial payables Total current liabilities Total shareholders' equity and liabilities

Net financial debt

186

Summary of the financial statements of subsidiaries

50,176

74,134

496

633

1,447

236,705

97,265

150

700

=

=

286,881

171,399

646

1,333

1,447

1,332

444,834

395,290

338

597

2,368

1,709

(290,202)

(174,612)

(86)

(658)

1,485

633

Income statements

[Reclassified financial statements of subsidiaries] Girmes International

7. 9.

Marzotto Textile

Sametex Spol s r.o

G.m.b.h.

Czech Rep.

(thousands Czk)

(thousands Euro)

(thousands Czk)

2014

2013

Net revenues

289,251

191,831

8.

(299,004)

(205,896)

Gross income

(9,753)

(14,065)

488

765

10. Product development and marketing costs

(2,552)

(3,551)

(449)

(717)

(20,860)

(21,982)

(134)

(444)

(139)

(292)

12

258

(33,304)

(39,890)

(83)

(138)

(5,537)

(4,635)

(5)

(11)

(10)

=

=

=

=

=

Cost of sales

11. General and administrative costs 12. Other income and charges 13. Operating income 14. Net financial charges Dividends from non-consolidated equity 15. investments and valuations to equity 16. Other financial income and charges 17. Income before taxes 18. Taxes 19. Net income

(before non controlling interests)

20. Income attrib. to non controlling interests 21. Net income

Summary of the financial statements of subsidiaries

2014

2013

488 =

2014

2013

2,785

12,362

5,812

(2,019)

(10,495)

(5,334)

1,867

478

=

=

(1,254)

(201)

=

=

613

277 (7) =

=

=

=

=

=

=

(38,841)

(44,525)

(88)

(148)

603

270

=

=

=

=

=

=

(38,841)

(44,525)

(88)

(148)

603

270

= (38,841)

=

=

=

=

=

(44,525)

(88)

(148)

603

270

187

Balance Sheets

[Reclassified financial statements of subsidiaries] Marzotto Wool Marzotto Fabrics BV

Marzotto Blankets BV

(thousands Euro)

(thousands Euro)

2014

2013

2014

Manufacturing S.r.l. (thousands Euro)

2013

2014

2013

1. Non-current assets 1.1 Property, plant and equipment

=

=

=

=

=

=

1.2 Civil real estate

=

=

=

=

=

=

1.3 Goodwill, trademarks and other intangible assets

=

=

=

=

=

=

1.4 Investments valued at equity

=

=

=

=

=

=

52,981

=

12,127

=

=

=

1.5 Other investments 1.6 Long-term receivables

=

=

=

=

=

=

1.7 Deferred tax assets

=

=

=

=

=

=

1.8 Long-term financial receivables

=

=

=

=

=

=

52,981

=

12,127

=

=

=

=

=

=

=

=

=

3.1 Inventories

=

=

=

=

=

=

3.2 Trade receivables

=

=

=

=

=

=

Total non-current assets 2. Non-current assets held for sale 3. Current assets

3.3 Other receivables

=

=

=

=

7

=

3.4 Current financial assets, cash and cash equivalent

=

=

=

=

10

=

Total current assets Total assets

=

=

=

=

17

=

52,981

=

12,127

=

17

=

52,712

=

4. Net shareholders' equity 4.1 Share capital and reserves 4.2 Income/(Loss) for the year 4.3 Non controlling interests Total shareholders' equity

=

12,127

=

10

(4)

=

=

=

(33)

=

=

=

=

=

=

52,708

=

12,127

=

(23)

=

=

5. Non-current liabilities 5.1 Long-term reserves

=

=

=

=

=

=

5.2 Other long-term payables

=

=

=

=

=

= =

5.3 Deferred tax liabilities

=

=

=

=

=

5.4 Long-term financial payables

=

=

=

=

=

=

Total non-current liabilities

=

=

=

=

=

=

6. Current liabilities 6.1 Trade payables and other payables 6.2 Current financial payables Total current liabilities Total shareholders' equity and liabilities

Net financial debt

188

Summary of the financial statements of subsidiaries

=

=

=

=

40

=

273

=

=

=

=

=

273

=

=

=

40

=

52,981

=

12,127

=

17

=

=

=

=

10

=

(273)

Income statements

[Reclassified financial statements of subsidiaries] Marzotto Wool Marzotto Fabrics BV

Marzotto Blankets BV

(thousands Euro)

(thousands Euro)

2014 7. 9.

2013

2014

Manufacturing S.r.l. (thousands Euro)

2013

2014

2013

Net revenues

=

=

=

=

=

8.

=

=

=

=

=

=

Gross income

=

=

=

=

=

=

10. Product development and marketing costs

=

=

=

=

=

=

11. General and administrative costs

=

=

=

=

12. Other income and charges

=

=

=

=

=

=

Cost of sales

13. Operating income 14. Net financial charges Dividends from non-consolidated equity 15. investments and valuations to equity 16. Other financial income and charges 17. Income before taxes 18. Taxes 19. Net income

(before non controlling interests)

20. Income attrib. to non controlling interests 21. Net income

Summary of the financial statements of subsidiaries

(33)

=

=

=

=

=

=

(33)

=

(4)

=

=

=

=

=

=

=

=

=

=

=

=

=

=

=

=

=

(4)

=

=

=

(33)

=

=

=

=

=

=

=

(4)

=

=

=

(33)

=

=

=

=

=

=

=

(4)

=

=

=

(33)

=

189

Balance Sheets

[Reclassified financial statements of subsidiaries] Marzotto Lab S.r.l. (thousands Euro) 2014

2013

2014

1. Non-current assets 1.1 Property, plant and equipment

=

=

1.2 Civil real estate

=

=

1.3 Goodwill, trademarks and other intangible assets

=

=

1.4 Investments valued at equity

=

=

1.5 Other investments

=

=

1.6 Long-term receivables

=

=

1.7 Deferred tax assets

=

=

1.8 Long-term financial receivables

=

=

Total non-current assets

=

=

=

=

3.1 Inventories

=

=

3.2 Trade receivables

=

=

3.3 Other receivables

4

=

2. Non-current assets held for sale 3. Current assets

3.4 Current financial assets, cash and cash equivalent

10

=

14

=

14

=

4.1 Share capital and reserves

10

=

4.2 Income/(Loss) for the year

(20)

=

Total current assets Total assets 4. Net shareholders' equity

4.3 Non controlling interests Total shareholders' equity

=

=

(10)

=

5. Non-current liabilities 5.1 Long-term reserves

=

=

5.2 Other long-term payables

=

=

5.3 Deferred tax liabilities

=

=

5.4 Long-term financial payables

=

=

Total non-current liabilities

=

=

6. Current liabilities 6.1 Trade payables and other payables 6.2 Current financial payables Total current liabilities

190

24

=

=

=

24

=

Total shareholders' equity and liabilities

14

=

Net financial debt

10

=

Summary of the financial statements of subsidiaries

2013

2014

2013

Income statements

[Reclassified financial statements of subsidiaries] Marzotto Lab S.r.l. (thousands Euro) 2014

7.

Net revenues 8.

9.

Cost of sales

Gross income 10. Product development and marketing costs 11. General and administrative costs 12. Other income and charges

2013 =

2014

=

=

=

=

=

=

(20)

=

=

=

(20)

=

14. Net financial charges

=

=

Dividends from non-consolidated equity 15. investments and valuations to equity

=

=

13. Operating income

16. Other financial income and charges 17. Income before taxes 18. Taxes 19. Net income

(before non controlling interests)

20. Income attrib. to non controlling interests 21. Net income

Summary of the financial statements of subsidiaries

2013

2014

2013

=

=

=

(20)

=

=

=

(20)

=

=

=

(20)

=

191

[Summary of the main resolutions of the Shareholder’s Meeting] The Shareholder’s meeting, on 22 june 2015 has adopted the following resolutions: - to approve Marzotto S.p.A. Financial Statements and Report of operation dated 31 December 2014, and also the Financial Statements and Report of operations of Marzotto group; - to carry the period profits of Euro 1,788,634.70 forward. After allocating the losses of previous years, net of profits carried forward, we have a total of Euro 23,226,327.85. Vicenza, 22 june 2015

193

Marzotto S.p.A. Subject to Trenora S.r.l. management and coordination activities Tax ID,V.A.T. registration number and Companies Register 00166580241 Registered (as per resolution dated 26 March 2015) and Administrative office: Largo S. Margherita 1 36078 Valdagno (VI) Tel. +39 0445 429411

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