The financial data set forth below has been extracted without material adjustment from Trevi’s unaudited consolidated financial statements as at and for the six months ended 30 June 2005 and 2006 published by Trevi on its website. 30 June 2006 30 June 2005 (unaudited) (unaudited) (thousands of euro) (IFRS) TOTAL REVENUES************************************************* 314,144 218,491
Changes in inventories of work in progress, semifinished and finished products** 4,644 3,090 Additions to fixed assets by internal production**************************** 2,110 1,166
Other operating revenues*********************************************** 714 0
VALUE OF PRODUCTION******************************************* 321,612 222,747
Use of raw materials and outside services********************************* 225,271 153,253 Other operating expenses*********************************************** 3,284 2,804
VALUE ADDED***************************************************** 93,057 66,690
Payroll and related contributions***************************************** 51,551 43,992
E.B.I.T.D.A.********************************************************* 41,506 22,698
Amortization, depreciation********************************************** 11,594 9,830 Writedowns and provisions********************************************* 1,902 2,415
E.B.I.T.************************************************************* 28,011 10,453
Financial Income (expenses)******************************************** (4,716) (3,815) Net difference from exchange******************************************* (3,505) 3,221 Adjustments to financial assets****************************************** (422) (110) Effect of valuation in associated companies using the equity method*********** 8 0
RESULT BEFORE TAXATION AND MINORITY INTERESTS*********** 19,375 9,749
Income taxes for the year********************************************** 6,525 4,643
Minority interests***************************************************** 388 406
TAXATION
The following is a general description of certain Irish and Italian tax considerations relating to the purchase, ownership, redemption, exchange and disposal of Notes and/or the Trevi Shares. They apply to a holder of Notes only if such holder purchases its Notes in this offering. It is a general summary that does not apply to certain categories of investors and does not purport to be a complete analysis of all tax considerations which may be relevant to a decision to purchase, own or dispose of the Notes and/or the Trevi Shares. It does not discuss every aspect of Irish or Italian taxation that may be relevant to a holder of Notes and/or Trevi Shares if such holder is subject to special circumstances or if such holder is subject to special treatment under applicable law. This summary also assumes that each of the Issuer and the Guarantor is organised and that each of the Issuer’s and the Guarantor’s business will be conducted in the manner outlined in this Prospectus. Changes in the Issuer and/or the Guarantor’s tax residence; organisational structure or the manner in which it conducts its business may invalidate this summary.
Prospective purchasers of Notes should consult their own tax advisers as to the consequences under the tax laws of the country of which they are resident for tax purposes and the tax laws of Ireland and Italy of acquiring, holding and disposing of Notes and receiving payments of interest, principal and/or other amounts under the Notes. This summary is based upon the law as in effect on the date of this Prospectus and is subject to any change in law that may take effect after such date.
Also investors should note that the appointment by an investor in Notes, or any person through which an investor holds Notes, of a custodian, collection agent or similar person in relation to such Notes in any jurisdiction may have tax implications. Investors should consult their own tax advisers in relation to the tax consequences for them of any such appointment.
IRELAND
The following comments are based on existing Irish tax law, including relevant regulations, administrative ruling and practices, as in effect on the date hereof, which may apply to investors who are the beneficial owners of the Notes. Each prospective purchaser should understand that future legislative, administrative and judicial changes could modify the tax consequences described below. This summary is not exhaustive and prospective purchasers are advised to consult their own tax advisers as to the tax consequences of the purchase, ownership and disposition of Notes or the Trevi Shares. In particular it does not address the Irish tax position of a holder of Notes or the Trevi Shares that is either resident or ordinarily resident in Ireland.
Tax treatment of the Notes
Stamp Duty
No stamp duty will arise on the issue of the Notes.
With regard to the transfer of the Notes, no stamp duty will be payable to the extent that title to the Notes passes by the delivery of the relevant bearer instrument.
Where a transfer of Notes is effected by an instrument, a stamp duty charge of 1 per cent. may arise unless the Notes satisfy the terms of a specific exemption from stamp duty on the transfer of ‘‘loan capital’’ or an exemption known as the ‘‘debt factoring exemption exemption’’.
Withholding Tax and Deposit Interest Retention Tax
Interest on the Notes that are in bearer form that are quoted on a recognised stock exchange and held in Euroclear and/or Clearstream, Luxembourg (and thus qualify for the ‘‘quoted Eurobond exemption’’) may be paid free of withholding tax and deposit interest retention tax by the Issuer.
Encashment Tax
Encashment tax may arise in respect of Notes that constitute quoted Eurobonds (as defined above). Where interest payments are made in respect of such notes by an Irish collection agent, encashment tax at the standard rate of income tax (currently 20 per cent.) will arise unless the person beneficially owning the Note and entitled to the interest thereon is not resident in Ireland and has provided the appropriate declaration to the relevant person. Where interest payments are made by or through a collection agent outside Ireland, no encashment tax arises. In the case of Notes that are not quoted Eurobonds, and are issued by the Issuer, no encashment tax arises. Encashment tax will not arise by virtue of the clearing of a cheque, or the arranging for the clearing of a cheque, by a banker.
Income Tax
Holders of Notes who:
(a) are neither resident nor ordinarily resident in Ireland and who do not carry on a trade in Ireland through a branch or agency; and
(b) who receive interest exempt from withholding tax pursuant to the quoted Eurobond exemption (as defined above);
will not be subject to Irish income tax or corporation tax on that interest provided they are persons tax resident in an EU Member State (other than Ireland) or in a county with which Ireland has a double taxation agreement. Accordingly, such holders of Notes who are not tax resident in an EU Member State (other than Ireland) or in a country with which Ireland has a double taxation agreement may be subject to Irish income tax of 20 per cent. on that interest if the notes are regarded as Irish situate property unless they fall within one of the other exemptions detailed below.
Capital Gains Tax
Capital gains arising on the disposal of the Notes by a holder of Notes who is neither resident nor ordinarily resident in Ireland will not be subject to Irish capital gains tax unless the Notes are used for the purposes of a trade carried on in Ireland through a branch or agency.
Capital Acquisitions Tax
A gift or inheritance comprising of Notes will only be within the charge to Irish capital acquisitions tax if either (1) the disponer or the donee/successor in relation to the gift or inheritance is resident or ordinarily resident in Ireland or, in certain circumstances, if the disponer is domiciled in Ireland irrespective of his residence or that of the donee/successor on the relevant date or (2) if the Notes are Irish situate property.
Notes which are in bearer form will be regarded for Irish capital acquisitions tax purposes as being situated in Ireland only if the bearer certificate in relation to such Notes is located in Ireland at the time of the gift or inheritance.
Tax treatment of the Shares
No Irish tax issues arise by reason only of the beneficial ownership of the Trevi Shares by a person who is not Irish tax resident or ordinarily resident and who does not hold the shares as part of a trade carried on in Ireland through a branch or agency.
ITALY
The statements herein regarding taxation are based on the laws in force in Italy as of the date of this Prospectus and are subject to any changes in law occurring after such date, which changes could be made on a retroactive basis. The following summary does not purport to be a comprehensive description of all the tax considerations which may be relevant to a decision to purchase, own or dispose of the Notes or the Trevi Shares and does not purport to deal with the tax consequences applicable to all categories of investors, some of which (such as dealers in securities or commodities) may be subject to special rules. A bill of law was presented by the Government to the Italian Parliament on 4 October 2006 for a delegation to be granted to the same Government to issue, within six months of the entering into force of the bill of law, one or more legislative decrees introducing a general reform of the Italian tax treatment of financial income and capital gains of a financial nature. The guidelines provided by the bill of law for this purpose include the adoption of a common rate of tax not to exceed a maximum of twenty per cent. for all the relevant withholding and substitutive tax regimes. The legislative decree to be issued by the Government within six months from the entry in force of the delegation law may provide for a deferral of effectiveness of the new tax regime of up to one year after the issue of the same legislative decree. Prospective purchasers of the Notes are advised to consult their own tax advisers concerning the overall tax consequences of their ownership of the Notes or the Trevi Shares.
Tax treatment of the Notes
Taxation of Interest
Legislative Decree No. 239 of 1 April 1996 (‘‘Decree 239’’), as subsequently amended, provides for the applicable regime with respect to the tax treatment of interest, premium and other income (including the
difference between the redemption amount and the issue price) from notes issued, inter alia, by non-Italian resident issuers, falling within the category of bonds (obbligazioni) or debentures similar to bonds (titoli similari alle obbligazioni).
Italian resident Noteholders
Pursuant to Decree 239, an imposta sostitutiva equal to 12.5 per cent. in relation to Notes issued for an original duration of not less than 18 months is applied on any payment of interest concerning Notes issued by non-Italian resident issuers if payments are made to (i) an Italian individual not engaged in an entrepreneurial activity to which the Notes are connected (unless the individual has opted for the application of the ‘‘risparmio gestito’’ regime — see under ‘‘Capital gains tax’’ below), (ii) an Italian non-commercial partnership, (iii) an Italian non- commercial private or public institution, or (iv) an Italian investor exempt from Italian corporate income taxation. Such withholding is applied by an authorised Italian resident Intermediary. In case the Noteholders described under (i) or (iii) above are engaged in an entrepreneurial activity to which the Notes are connected, the imposta sostitutiva applies as a provisional tax.
Where an Italian resident Noteholder is a company or similar commercial entity and the Notes are deposited with an authorised intermediary, interest, premium and other income from the Notes will not be subject to imposta sostitutiva, but must be included in the relevant Noteholder’s annual income tax return and are therefore subject to general Italian corporate taxation (and, in certain circumstances, subject to the ‘‘status’’ of the Noteholder, also to IRAP — the regional tax on productive activities).
Early Redemption
Without prejudice to the above provisions, in the event that Notes having an original maturity of at least 18 months are redeemed, in full or in part, prior to 18 months from their issue date, Italian resident Noteholders will be required to pay, by way of a withholding to be applied by the Italian intermediary responsible for payment of interest or the redemption of the Notes, an amount equal to 20 per cent. of the interest and other amounts accrued up to the time of the early redemption.
Non-Italian resident Noteholders
No Italian imposta sostitutiva is applied on payments to a non-Italian resident Noteholder of interest or premium relating to the Notes issued by a non-Italian resident issuer provided that, if such Notes are held in Italy, the non- Italian resident Noteholder declares to be non-Italian resident according to Italian tax regulations.
Payments made by an Italian resident guarantor
With respect to payments on the Notes made to certain Italian resident Noteholders by an Italian resident guarantor, in accordance with one interpretation of Italian tax law, any payment of liabilities equal to interest and other proceeds from the Notes may be subject to a provisional withholding tax at a rate of 12.5 per cent., pursuant to Presidential Decree No. 600 of 29 September 1973, as subsequently amended. In case of payments to non- Italian resident Noteholders, the withholding tax may be applied at (i) 12.5 per cent. if the payment is made to non-Italian resident Noteholders other than those mentioned under (ii); or (ii) 27 per cent. if payments are made to non-Italian resident Noteholders who are resident in a country which is a ‘‘tax haven’’ (as defined and listed in Ministerial Decree 23 January 2002, as amended from time to time). Double taxation treaties entered into by Italy may apply allowing for a lower (on, in certain cases, nil) rate of withholding tax. In accordance with another interpretation, any such payment made by the Italian resident guarantor will be treated, in certain circumstances, as a payment by the relevant issuer and will thus be subject to the tax regime described in the previous paragraphs of this section.
Capital gains tax
Gains from the redemption of the Notes
Any gain resulting from the redemption of the Notes would be treated as part of taxable income if received by an Italian company or a similar commercial entity including an Italian permanent establishment of a foreign entity to which the Notes are connected.
Where an Italian resident Noteholder is (i) an individual not engaged in an entrepreneurial activity to which the Notes are connected, (ii) a non-commercial partnership, (iii) a non-commercial private or public institution, any gain realised by the Noteholder would be subject to an imposta sostitutiva, currently levied at the rate of 12.5 per cent. Noteholders may set-off losses with gains. Alternative tax regimes are contemplated if the Notes are
managed by authorised intermediaries on behalf of the Italian resident Noteholder (such as the ‘‘risparmio amministrato’’ and the ‘‘risparmio gestito’’ regimes).
Capital gains realised by non-Italian resident Noteholders from the redemption of Notes traded on regulated markets are not subject to the imposta sostitutiva.
Capital gains realised by non-Italian resident Noteholders from the redemption of Notes not traded on regulated markets and held in Italy are not subject to the imposta sostitutiva, provided that the effective beneficiary: (i) is resident in a country which allows for a satisfactory exchange of information with Italy; or
(ii) is an international entity or body set up in accordance with international agreements which have entered into force in Italy; or
(iii) is a Central Bank or an entity which manages the official reserves of a foreign State; or
(iv) is an institutional investor which is resident in a country which allows for a satisfactory exchange of information with Italy, even if it does not possess the status of a taxpayer in its own country of residence. If the conditions above are not met, capital gains realised by non-Italian resident Noteholders from the redemption of Notes not traded in regulated markets and held in Italy are subject to the imposta sostitutiva at the current rate of 12.5 per cent. However, non-Italian resident Noteholders that may benefit from a double taxation treaty with Italy providing that capital gains realised upon the redemption of notes are to be taxed only in the country of tax residence of the recipient will not be subject to imposta sostitutiva on any capital gains realised upon the redemption of the Notes.
Gains realised by non-Italian resident Noteholders from the redemption of Notes issued by a non-Italian resident issuer are not subject to Italian taxation, provided that the Notes are held outside Italy.
Gains from the sale and exchange of Notes
Any gain resulting from the sale or exchange of the Notes would be treated as part of taxable income if received by an Italian company, an Italian permanent establishment of a foreign entity to which the Notes are connected and by any other taxpayer subject to corporate income tax (and, in certain circumstance, subject to the ‘‘status’’ of the Noteholder, also to IRAP — the regional tax on productive activities).
Under article 67 of Presidential Decree no. 917 of 22 December 1986 (the Italian Income Tax Code, or ITC), gains from the sale against compensation of bonds embedding the right to convert into or else obtain shares are to be classified in two different categories:
(a) Qualifying Gains: all gains from the sale against compensation of Notes which entitle the holder to exchange into or else claim an amount of shares — other than savings shares — or other equity participation which would grant the exercise of more than 2 per cent. or 20 per cent. of the voting rights of a company or a participation to the equity greater than 5 per cent. or 25 per cent., respectively for listed and unlisted shares; (b) Non-qualifying Gains: all gains different from Qualifying Gains.
For the purpose of the above, the thresholds that determine the characterisation of a gain as a Qualifying Gain are verified in relation to all sales and exchanges occurred in any 12 months.
For the purpose of the determination of the gain in case of an exchange, the compensation is deemed to be represented by the fair value of the shares and any other asset received, which must be valued according to the provision of article 9 of the ITC. In the case of listed shares, fair value is determined as the simple average of prices recorded in the month preceding the disposal.
Where an Italian resident Noteholder is (i) an individual not engaged in an entrepreneurial activity to which the Notes are connected, (ii) a non-commercial partnership, (iii) a non-commercial private or public institution: — any Non-qualifying Gain realised by the Noteholder would be subject to a substitute tax (imposta
sostitutiva), currently levied at the rate of 12.5 per cent. Noteholders may set-off losses with gains. Alternative tax regimes are contemplated if the Notes are managed by authorised intermediaries on behalf of the Italian resident Noteholder (such as the ‘‘risparmio amministrato’’ and the ‘‘risparmio gestito’’ regimes); — all Qualifying Gains obtained within each fiscal year would be reduced by 60 per cent. and compensated with any corresponding losses reported in the same period, the difference being subject to progressive individual income tax, if positive, or available for carry-forward in the following four fiscal years for compensation of future positive gains of the same kind, if negative.