185000000 IT Holding Finance SA

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IT HOLDING S.p.A. Notes to the consolidated financial statements for the year ended December 31, 2002 • the sale of the perfume business in March 2004; • the sale of Romeo Gigli and Gentryportofino brands. As a consequence of the above described strategic refocusing and of the persistent crisis in the industry the amount of Euro 29,214 thousand related to the trademark “Gigli” and the amount of Euro 23,182 thousand related to goodwill arising a certain past acquisitions were written down in 2003. The Romeo Gigli trademark was written off in full to take into account the economic impact of the sale which took place on April, 27, 2004. Goodwill arising on consolidation was written down for reasons of prudence, since current market prospects do not ensure its recovery with sufficient certainty or within reasonable timeframes. Certain industrial groups that once issued corporate bonds as a means of financing have been recently declared in states of insolvency. This has turned the public against outstanding bonds and led it to view with unusual and understandable scrutiny the prospective ability of issuers to fulfill their commitments at maturity. The IT Holding Group plans to repay the Ferré bond maturing in May 2005 by taking the following measures: • strategic refocusing which should generate a recovery in profitability in the short term; • improvement in the management of working capital, despite the substantial stability of the volume of operations; • investment control. Most of the investments required to relaunch the Ferré brands were completed before the end of the year; • the sale of non-strategic business activities, which led to the sale of the perfume business in March 2004, generating Euro 31.5 million; • the sale of Romeo Gigli and Gentryportofino brands which had a negative impact on profitability. Furthermore, with the assistance of banks, the Group is currently planning transactions to refinance a portion of the Euro 200 million bond maturing in 2005. This should sustain business management and development, while preventing the timing of the above events from creating financial tension. March 2004 • March 6, 2004 marked the official opening of the GF Ferré boutique in Rome, owned by a business partner of the Group. The space covers 150 square meters and will showcase the young men’s and women’s apparel and accessories collections, presented to the public and the press in June 2003. The apparel, accessories, eyewear, and perfume collections are gathered under the GF Ferré and Gianfranco Ferré brands. They target two distinct groups of customers: young people and adults in general. These two brands are the result of an image and product streamlining project as part of the brand relaunch plan. • On March 18, 2004, Professor Claudio Demattè unexpectedly passed away. He had served as director of the holding company, bringing his excellent qualifications, expertise and experience to the board. The company regrets the loss of Professor Demattè, whose personal and professional qualities were much admired. • Also on March 18, 2004, the owned Gianfranco Ferré boutique officially opened in Munich. The space covers 350 square meters and is furnished in line with the store concept previously applied to the directly operated stores in Milano, Paris, Cannes, Capri, and Porto Cervo. It will showcase the Gianfranco Ferré men’s and women’s collections from Spring/Summer 2004. This investment is part of the Ferré relaunch plan, whereby the most important showrooms are renovated and the product range coordinated and expanded. • On March 25, 2004, IT HOLDING S.p.A. sold its 90% shareholding in IBEX 2001 S.p.A. to I.C.R.—Industrie Cosmetiche Riunite S.p.A., owned by Mr. Roberto Martone. Together with shareholder Mr. Roberto Martone, IBEX 2001 S.p.A. controls ITF S.p.A., which was set up in September 2001 to develop and distribute perfumes and cosmetics under brands licensed by the IT Holding Group and third parties. At the time of the sale, ITF S.p.A. had 25-year license agreements with certain IT Holding Group companies. For IT HOLDING S.p.A., the transaction is in line with its strategy of focusing on the core business, comprised of the apparel and accessories collections of owned and licensed brands. Furthermore, the proceeds from the sale have made the Group more F- 111
IT HOLDING S.p.A. Notes to the consolidated financial statements for the year ended December 31, 2002 financially flexible. The sale took place following negotiations between the parties. A merchant bank confirmed the sales price of Euro 31,5 million in its appraisal. The consideration was paid upon signature of the sales contract. This sale generated a capital gain of approximately Euro 22,8 million in the 2004 consolidated financial statements. Lastly, IT HOLDING S.p.A. has not provided for any changes in its or its subsidiaries’ directors’ fees following the above transaction. • In first quarter 2004, FERRÉ FINANCE S.A. repurchased “Ferré Finance 7% 05/05” bonds it had issued and cancelled them, for a total of Euro 25 million. April 2004 • On April 19, 2004, the Gianfranco Ferré boutique in New York was reopened. Owned by IT CLINTON Llc., it covers more than 400 square meters and will sell the men’s and women’s apparel collections, along with the complete range of accessories, underwear, beachwear, eyewear, and perfumes. The look of the space is elegant and unique, in line with the new GF Ferré store concept, which is the key element in the brand’s current development strategy. • On April 27, 2004, IT HOLDING S.p.A. transferred its 100% investment in GIGLI S.p.A. to Immobiliare Esse S.r.l. This was also a way to transfer total control of V2I HOLDING S.A., and, consequently, 80% of the share capital in the Luxembourg subsidiaries. These companies own all rights to the Romeo Gigli brand (created by the designer of the same name) and all related elements, subject to domestic and international filing and applications. On the same date that IT HOLDING S.p.A. signed the sales contract, it also signed a licensing agreement with GIGLI S.p.A., taking effect January 1, 2004, making the latter licensee, with the power to sublicense, the exclusive use, production, and sale of Romeo Gigli brand products. The duration of the licensing agreement is ten years, and it is renewable for another ten with respect to eyewear (through the subsidiary ALLISON S.p.A.), perfumes and cosmetics (manufactured and distributed by ITF S.p.A.), and timewear. GIGLI S.p.A. is not required to pay royalties, but only meet specific commitments in terms of advertising investments. The sale of the Romeo Gigli is in line with the Group’s strategy of focusing on strategic businesses with high growth potential. The price was Euro 1,000.00 and the sale generated a capital loss of Euro 4,747 thousand, which, for the most part, reflects this company’s net loss for the period. • On April 30, 2004, M.A.C.—Manifatture Associate Cashmere S.p.A.'s sale of the Gentryportofino brand to Elizabeth Mambrini S.r.l. was finalized. The sale was made for Euro 3,750 thousand and did not have any significant effects on the consolidated statement of income. • On April 30, 2004, GENTRYPORTOFINO S.p.A. sold the business activity in Genova, Via Pierluigi Bagnasco to Elizabeth Mambrini S.r.l. The business object of the activity sold was the design, production and sale of various products and ready-to wear and knitwear lines under the Gentryportofino label. The sale was made for Euro 470 thousand and did not have any significant effects on the consolidated statement of income. May 2004 • On May 6, 2004 the shareholders of IT HOLDING S.p.A. appointed Carlo Giovanni Mammola Director to replace Mr. Claudio Demattè, who had passed away. Mr. Mammola, who teaches at the Università Bocconi of Milano and is Managing Director of Bank of America Capital Partners Europe, qualifies as an independent director on the basis of the definition given in the Code of Conduct for Listed Companies. • On May 21, 2004, ALLISON S.p.A. acquired the entire share capital of ALLISON UK Ltd, based in London. The acquired company will handle the distribution of eyewear products on the UK market, to boost the Group’s commercial presence in that country. June 2004 • On June 1, 2004, ALLISON EYEWEAR Inc. (100% owned by ALLISON S.p.A.) was contributed to the newco ALLISON USA Inc., with share capital of USD 4 million. In proportion to the attributed contribution value of F- 112
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CONFIDENTIAL Rule 144A Global Note
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Definitions In this annual report:
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• risks related to our principal
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Our Strategic Refocusing Program Du
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manufacturing of our products to th
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income tax on a consolidated basis
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(3) Net working capital is defined
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We must anticipate trends and respo
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We are subject to significant restr
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event of a foreclosure on the secur
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• avoid or invalidate all or a po
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a maximum of two years); (ii) a pro
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• pursuant to article 445 of the
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Our Company DESCRIPTION OF BUSINESS
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Versus is a medium-priced fashion b
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in print (fashion magazines and new
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We maintain a close working relatio
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Licensor and Brands Gianni Versace
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Legal proceedings Ordinary Course L
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OPERATING AND FINANCIAL REVIEW AND
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each year, when payments to our sup
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Income taxes In 2004, we incurred a
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Facilities and bank overdraft facil
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• €150.0 million principal amou
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Contractual obligations The followi
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An impairment loss in respect of go
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Salvatore Vicari has been a directo
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PRINCIPAL SHAREHOLDERS The table be
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invoiced to us by Pavia e Ansaldo -
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The Board of Directors IT Holding S
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REPORT OF THE AUDITORS The Board of
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IT HOLDING S.p.A. CONSOLIDATED BALA
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Acquisition of Subsidiary During 20
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IT HOLDING S.P.A. NOTES TO THE CONS
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IT HOLDING S.p.A. Notes to the cons
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185000000 IT Holding Finance SA

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