185000000 IT Holding Finance SA

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We operate an 8,000 square meter warehouse and automated distribution center located in premises adjacent to our main production facility in Pettoranello di Molise, Italy, which is used to inspect, package, consolidate and ship our products throughout the world. The distribution center has a shipping capacity of 95,000 units per day and is equipped with a bar code scanning and automated handling system that is integrated with our management information system. In order to ensure the quality of our products, we do not permit finished goods to be shipped directly from contractors to our customers, but rather take delivery of all finished goods at our warehouses, so that our employees may carry out inspection procedures prior to packaging and shipment to customers. We inspect, package, consolidate and ship our Gianfranco Ferré first-line products through the use of another 2,500 square meter warehouse and automated distribution center located in Bologna, Italy. Our Malo sales and distribution structure comprises our warehouse located in Campi Bisenzio, showrooms in Milan, Düsseldorf, New York, Osaka, Tokyo and Seoul, 17 directly operated Malo brand boutiques, 27 franchised Malo brand boutiques and a network of wholesalers that distribute Malo products to prestigious department stores and multi-brand boutiques in the world. We also operate two factory outlets in Italy, in Campi Bisenzio and Serravalle Scrivia, and two in the United States, in Woodbury Commons, New York and Clinton, Connecticut. We dispose of most of our end-of-season overstocks at discounted prices through our factory outlet stores. In addition, from time to time, we engage specialized distribution agents to dispose of overstocks outside of our principal markets pursuant to stringent restrictions on the timing and location of such disposals. Our overstock disposals, which typically amount to approximately 2% to 3% of our net sales each season, usually enable us to recover our production costs on such items. We make use of a sophisticated management information system to support the design, sourcing, manufacturing, marketing and distribution functions of our business. Our management information system allows the monitoring of, among other things, manufacturing and delivery schedules, raw material and finished goods inventories, client accounts receivable, order flow and sales to clients. As a result, our management is able to react promptly to changing fashion trends, order volumes, and problems in the production process. In addition, our management information system has permitted us to automate certain stages of the prototype development process and to achieve real time information flows across our design and manufacturing functions with respect to changes in product specifications. We have also adopted a custom-designed “groupware” software package that enables, among other things, simultaneous access to product prototype computer files by multiple users. We have also integrated our information system with the information systems of our principal contractors, fabric suppliers and clients in order to enable us to receive real time data with respect to the status of production, shipments and orders. Licenses and other intellectual property Trademarks and Trade Names. As of the date of this annual report, the principal owned trademarks or trade names of our core apparel and accessories business were Gianfranco Ferré, Ferré, GF Ferré, Malo and Extè. These trademarks and trade names are registered in the countries in which we sell our relevant apparel and accessories products. Licenses. We have license agreements with several companies pursuant to which our young lines and accessories businesses produce, distribute and market their products. The table below sets forth the brands licensed, geographic areas covered and expiration dates of the license agreements for our principal brands: 32
Licensor and Brands Gianni Versace S.p.A. VERSUS VERSACE and VERSACE JEANS COUTURE Dolce & Gabbana S.p.A. D&G DOLCE & GABBANA IGA Finance B.V. JUST CAVALLI E.C. S.p.A. C'N'C' CoSTUME NATIONAL Territory First Granted Renewed Expiration (1) Exclusive worldwide license, excluding Korea, India, certain Asian countries and dutyfree shops Exclusive worldwide license, excluding Japan and certain dutyfree shops Exclusive worldwide license Exclusive worldwide license (non-exclusive for Japan) (1) The expiration dates listed are subject to the early termination provisions contained in our licence agreements, as summarized below. 33 November 1998 for Versus; April 1990 for Versace Jeans Couture March 20, 2002 December 31, 2007 comprehensive of 10 sale seasons June 1993 May 29, 2002 Upon completion of 2006/2007 Fall- Winter season July 1999 July 4, 2002 June 2003 December 30, 2010 June 30, 2009 comprehensive of 10 sale seasons ending with the 2009 Spring- Summer season The license agrements require us to make royalty payments based on percentage of sales, subject to guaranteed minimum payments. These agreements provide certain minimum required expenditures for advertising and promotional activities, and all of our advertising, promotional and public relations activities relating to our licensed brands are subject to approval by the relevant licensor. Versus. Our license to use the Versus brand was granted pursuant to an agreement with Gianni Versace S.p.A. and expires on December 31, 2007. It was first granted to us in November 1988 and was subsequently renewed on March 20, 2002 under the agreement governing our current license. In addition to granting us the exclusive right to produce Versus and Versus Versace-branded apparel and accessories on a worldwide basis, our Versus license also grants us the right to distribute such products throughout the world, with the exception of China, Japan, Korea, India and certain other Asian countries and duty-free shops. Gianni Versace S.p.A. remains responsible for designing each of the collections produced under these brands, and has retained the right to advertise Versus and Versus Versace-branded products worldwide. Gianni Versace S.p.A. may, however, require us to conduct such marketing and promotion in the territories where we are required to distribute these products. Our Versus license agreement may be terminated by Gianni Versace S.p.A. in the event the control of the licensee changes and passes to a third-party. Versace Jeans Couture. Our license to use the Versace Jeans Couture brand was granted pursuant to an agreement with Gianni Versace S.p.A. and expires on December 31, 2007. It was first granted to us in April 1990 and was subsequently renewed on March 20, 2002 under the agreement governing our current license. The terms of this agreement are substantially similar to those that grant us the right to use the Versus and Versus Versace brands described above. Our Versace Jeans Couture license agreement may be terminated by Gianni Versace S.p.A. in the event the control of the licensee changes and passes to a third party. D&G Dolce & Gabbana. Our license to use the D&G Dolce & Gabbana brand was granted pursuant to an agreement with Dolce & Gabbana S.p.A. and expires upon the completion of the 2006/2007 Fall-Winter collection. It was first granted to us in June 1993 and was subsequently renewed on May 29, 2002 under the agreement governing our current license. In addition to granting us the exclusive right to produce D&G Dolce & Gabbana apparel and accessories on a worldwide basis, this license also grants us the right to distribute and sell D&G Dolce & Gabbana products throughout the world, with the exception of Japan and certain duty-free shops. In addition to
Page 1 and 2: CONFIDENTIAL Rule 144A Global Note
Page 3 and 4: Definitions In this annual report:
Page 5 and 6: • risks related to our principal
Page 7 and 8: Our Strategic Refocusing Program Du
Page 9 and 10: manufacturing of our products to th
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Page 13 and 14: (3) Net working capital is defined
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Page 27 and 28: Our Company DESCRIPTION OF BUSINESS
Page 29 and 30: Versus is a medium-priced fashion b
Page 31 and 32: in print (fashion magazines and new
Page 33: We maintain a close working relatio
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Page 43 and 44: Income taxes In 2004, we incurred a
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Page 47 and 48: • €150.0 million principal amou
Page 49 and 50: Contractual obligations The followi
Page 51 and 52: An impairment loss in respect of go
Page 53 and 54: Salvatore Vicari has been a directo
Page 55 and 56: PRINCIPAL SHAREHOLDERS The table be
Page 57 and 58: invoiced to us by Pavia e Ansaldo -
Page 59 and 60: The Board of Directors IT Holding S
Page 61 and 62: REPORT OF THE AUDITORS The Board of
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