185000000 IT Holding Finance SA

Legal proceedings
Ordinary Course Litigation
We are currently a party to various claims and legal actions that arise in the ordinary course of business. We
believe such claims and legal actions, individually and in the aggregate, will not have a material adverse effect on
our business, financial condition or results of operations.
Tax Litigation
In 1998, a preliminary assessment report relating to 1995, 1996 and 1997, pursuant to which MALO S.p.A.
allegedly realized a higher taxable base for direct tax purposes and transferred prices applied to foreign group
companies, was followed by notices of assessment for 1995 and 1996. MALO S.p.A. filed an appeal with the
relevant judicial authorities. In 2001, a preliminary assessment report was served for 1998, 1999 and 2000 relating
to the same irregularities of the previous years, although no notices of assessment have been issued to date. MALO
S.p.A. has set aside a provision of approximately €3 million for tax risk due to pending litigation.
We estimate Ittierre S.p.A.’s potential risks from existing tax litigation and audits to be approximately €2.4 million.
In particular, Ittierre was the subject of a tax audit in 2004 with regard to the 2001 and 2002 tax years. The
relevant assessment report allegedly found that certain entertainment and housing expenses had been improperly
deducted. We estimate the potential tax exposure related to this assessment is approximately €0.7 million. In
addition, FD, a company that merged with Ittierre in 2001, was subject to a tax audit in 2002 with reference to the
1999 and 2000 tax years. In that case, the relevant assessment report allegedly found that FD in 1999 paid
approximately € 2.6 million as consideration for the early termination of certain options and license agreements
which, according to the tax authorities, should have been subject to VAT payments. The tax authorities assessed a
cost of €1.7 million, which comprised amounts due plus penalties and interest.
Other Pending Litigation
In March 1998, Trussardi S.p.A. brought an action before the Tribunal of Milan claiming a breach by Ittierre S.p.A.
of a license agreement relating to the Trussardi Jeans trademark, which expired in June 1996. In its action,
Trussardi claimed the liquidated damages provided for in the license agreement as well as additional damages of
€50.0 million. In December 2004, the Tribunal of Milan awarded Trussardi S.p.A. €8.3 million plus interest and
court costs of approximately €700,000. Ittierre S.p.A. has appealed this decision and has obtained an injunction
suspending payment of these amounts pending the appeal. Any amount awarded to Trussardi S.p.A., if any, in a
final judgment on this matter would fall within the scope of an indemnity granted to us by PA Investments, which
has made a provision in its accounts in the amount of €3.5 million in respect of this indemnity.
In June 2000, Casor S.p.A. brought an action before the Tribunal of Florence claiming breaches by MAC, the
predecessor of MALO S.p.A., under an alleged five-year license agreement between Casor and MAC regarding the
distribution of clothes covered by the Malo trademark. In this action, Casor has claimed damages of approximately
€3.6 million. The management of MALO S.p.A. believes that no such license agreement was entered with Casor
and that it is unlikely that this dispute will result in an adverse judgment.
In December 2003, Damap S.r.l. brought two separate actions against Ittierre S.p.A. and two of its licensors for
damages allegedly deriving from the breach of a patent on the decorative model of a specific denim processing
used for apparel produced and marketed by Ittierre S.p.A. The amount of the claim is equal to €3.0 million for
each of these actions. We believe that these claims are unfounded and that an unfavorable outcome appears
unlikely. We have also brought cross-claim against the manufacturer of the denim fabric in question.
In April 2004, we disposed of our entire shareholding in Gigli S.p.A. At the time of this disposal, an action was
pending against Gigli S.p.A. brought by a licensee alleging that the license and agency agreement between such
licensee and Gigli S.p.A. was void or voidable and requesting restitution of approximately €5.2 million on account
of royalties, advertising contributions and commissions paid to Gigli S.p.A. and an additional €2.0 million as
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