2012 Half year financial report

In an appeal pursuant to article 140 of the Consumer's Code, the consumer association Altroconsumo requested the Court of Pisa to order Piaggio to take all necessary measures to recall the first series of the Gilera Runner from the market (manufacture was stopped in 2005), claiming the existence of a design defect in the vehicle tank which would not make it safe. In particular, to support its claims, Altroconsumo reported two fires caused over the years by two accidents in which a first series Gilera Runner was involved and attached crash tests carried out on the same type of motorcycles.
Piaggio opposed the proceedings undertaken by Altroconsumo, opposing the alleged existence of a design defect and hazardous nature of the vehicle, filing a specific technical appraisal. The trial judge rejected the claim, ordering Altroconsumo to pay Piaggio's legal fees. Following the appeal made by Altroconsumo against the first instance ruling, a technical appraisal has been ordered to ascertain the existence of the design defect claimed by Altroconsumo. Appraisal activities, currently underway, should end in October 2012. 

The Canadian Scooter Corp. (CSC), sole distributor of Piaggio for Canada, summoned Piaggio & C. S.p.A., Piaggio Group Americas Inc. and Nacional Motor S.A to appear before the Court of Toronto (Canada) to obtain compensation for damages sustained due to the alleged infringement of regulations established by Canadian law on franchising (the Arthur Wishart Act). A settlement to the dispute is ongoing.

By means of the deed of 3 June 2010, the Company took action to establish an arbitration board through the Arbitration Chamber of Milan, for a ruling against some companies of the Case New Holland Group (Italy, Holland and the US), to recover damages under contractual and non-contractual liability relating to the execution of a supply and development contract of a new family of utility vehicles (NUV). The Arbitration Board was established on 5 October 2010, informing the parties of the terms for filing briefs. Testimonial evidence admitted by the Board was examined on the basis of written statements and on the questioning of witnesses, in a hearing of 20 September 2011. With a ruling filed on 21 November 2011, the Board ordered final briefs to be exchanged and set the final hearing for 15 March 2012, which was subsequently deferred to 24 April 2012. At this hearing, the Arbitration Board reached a decision, which at present has not yet been notified to the parties.

Da Lio S.p.A., by means of a writ received on 15 April 2009, summoned the Company before the Court of Pisa to claim compensation for the alleged damages sustained for various reasons as a result of the termination of supply relationships. The Company appeared in court requesting the rejection of all opposing requests. Da Lio requested a joinder with the opposition concerning the injunction obtained by Piaggio to return the moulds retained by the supplier at the end of the supply agreement. Judgements were considered and a ruling issued pursuant to article 186ter of the Italian Code of Civil Proceedings, on 7 June 2011, ordering Piaggio to pay the sum of Euro 109,586.60, in addition to interest relative to sums which were not disputed. On 14 March 2012 the first preliminary hearing was held, with some of the parties' witnesses being examined; the next hearing, to continue the preliminary investigation, will be held on 5 July 2012.

On 16 June 2011 Elma srl, a Piaggio dealer since 1995, notified the Company of the summary judgement issued by the Court of Pisa to pay 1,340,000 Euro as fees claimed to have been accrued by way of an alleged sole agency agreement for distribution in the Rome area. For the same reasons, Elma by means of a writ received on 26 June 2011 requested a ruling for Piaggio to pay an additional 640,000 Euro as well as damages, estimated as more than 5,000,000 Euro, sustained due to non-compliance by and abuse of the dominant position of the Company; Elma also filed an appeal pursuant to article 700 of the Italian Code of Civil Proceedings for an injunction preventing payment to Piaggio of the guarantees issued to Piaggio in relation to the payment of sums receivable relative to supplies of products to Elma for a total of Euro 430,000.
Piaggio opposed the injunction fully disputing the validity of Elma's claims, requesting notification of termination of the agreement due to severe breach of contract by Elma as well as a ruling for Elma to settle outstanding sums owing, amounting to approximately Euro 966,000.
A ruling was made entirely in favour of Piaggio that in the meantime received payment for the guarantees issued in its favour.
As regards the proceedings, the Judge rejected the temporary enforcement of the injunction issued in favour of Elma, and subsequently forwarded the case to the President of the Court for a hearing concerning the proceedings. The proceedings have been assigned to the Court of Pisa; the next hearing, for establishing times and filing briefs, will be held on 5 July 2012. As regards the case, Elma has also brought a case against a former senior manager of the Company with the Court of Rome: Piaggio appeared in the proceedings, requesting, among others, that the case be moved to the Court of Pisa. On the first hearing, on 20 June 2012, declaring its lack of jurisdiction concerning the case, the Judge forwarded the case to the President of the Court for a new Judge to be assigned.

In a writ received on 29 May 2007, Gammamoto S.r.l. in liquidation, a former Aprilia licensee in Rome, brought a case against the Company before the Court of Rome for contractual and non-contractual liability. The Company opposed the injunction fully disputing the validity of Gammamoto’s claims and objecting to the lack of jurisdiction of the Judge in charge. The Judge, accepting the petition formulated by the Company, declared its lack of jurisdiction with regards to the dispute. Gammamoto appealed against the ruling on the grounds of lack of jurisdiction at the Court of Cassation, which ruled that the Court of Venice, already indicated in the ruling of the Court of Rome, had jurisdiction. Gammamoto has continued proceedings through the Court of Venice and the first hearing of the prosecution was held on 16 May 2012. In this hearing, the parties requested the admission of preliminary briefs and the Judge, after making its decision, admitted testimonial evidence and evidence for examination requested by the parties, establishing the hearing for the preliminary investigation on 12 November 2012.

Leasys–Savarent S.p.A., summoned to appear before the Court of Monza by Europe Assistance in relation to the rental supply of Piaggio vehicles to the Italian Postal System, summoned the Company as a guarantee, also filing for damages against Piaggio for alleged breach of the supply agreement. The Court of Monza declared its lack of jurisdiction concerning the applications filed against Piaggio, and Leasys-Savarent summoned Piaggio to appear before the Court of Pisa. The trial was suspended while awaiting the resolution of the dispute pending before the Court of Monza, which turned down the application of Leasys-Savarent. Leasys-Savarent continued proceedings through the Court of Pisa, applying only for damages against Piaggio. On the hearing of 5 October 2011, the parties requested the admission of preliminary briefs and the Judge deferred its decision. After making its decision, the Judge admitted some of the testimonial evidence requested and rejected the request for a Court-appointed expert. The hearing for the examination of witnesses, established for 26 June 2012, was deferred to 20 March 2013, as agreed by the parties, that are evaluating the possibility of settling the case.

Following the appeal made by the Company pursuant to article 700 of the Italian Code of Civil Proceedings, the Court of Naples, as a precautionary measure, issued an injunction against LML Italia S.r.l., a company distributing models of scooters in Italy manufactured by LML India Ltd, preventing it from using the “Piaggio”, “Vespa” and “Vespa PX” brands on its sales information, advertising and promotional materials, stating that the continual matching of LML products with the Vespa manufactured by Piaggio constituted grounds for unfair competition. This ruling was also confirmed in an appeal. Piaggio therefore initiated proceedings with the Court of Naples to obtain damages for the unlawful use of Piaggio marks and for acts of unfair competition adopted by LML. The case has been adjourned to 6 December 2011 for specification of the pleadings. A ruling is therefore pending. LML India, in turn, referring to the arbitration clause in settlement agreements signed with Piaggio in 1999 to end the joint venture established in India, summoned the Company to appear before an arbitration board in Singapore to obtain compensation for alleged damages sustained by LML India due to the effect of legal action taken by Piaggio against LML Italia. Arbitration ruled against all applications submitted by LML India. The arbitration board subsequently ruled that LML India pay the Company's legal fees and the procedure to quantify the amount is ongoing.

The amounts allocated by the Company for the potential risks deriving from the current dispute appear to be consistent with the predictable outcome of the disputes.

As regards tax claim rulings involving the Parent Company Piaggio & C S.p.A., two appeals are ongoing against two tax assessments notified to the Company and relative to the 2002 and 2003 tax years respectively. These assessments originate from an audit conducted by the Inland Revenue Office in 2007 at the Company's offices, following information filed in the Formal Notice of Assessment issued in 2002 following a general audit.

As concerns the assessments, a ruling in the first instance in favour of the Company was made for both the 2002 and 2003 tax years. The Inland Revenue Office has appealed against both rulings.

With reference to the 2002 tax year, the Regional Tax Tribunal confirmed the local ruling in favour of the company. As regards the 2003 tax year, a date still has to be set for the hearing.

For both cases, the Company has not considered it necessary to allocate provisions, in view of the positive opinions expressed by consultants appointed as counsel.

The main tax disputes of other Group companies concern P&D S.p.A. in liquidation and Piaggio Vehicles PVT Ltd.

More specifically, and with reference to P&D S.p.A., a dispute arose in relation to the tax assessment issued by the Inland Revenue Office for the 2002 tax year concerning VAT based on the assessment made in 1999, with an outcome in favour of the company and was completed in favour of the company with judgement in the second instance becoming final.

As regards Piaggio Vehicles PVT Ltd, several disputes concerning different tax years from 1998 to 2010 are ongoing relative to direct and indirect tax assessments. The Indian company has partly paid the contested amounts, as required by local laws, and these will be paid back when proceedings are successfully concluded in its favour. As regards claims for which it has not paid any sums, and considering positive opinions expressed by consultants appointed as counsel, it has not made provisions in the financial statements for the contested amounts.

As concerns disputes relative to other Group Companies, Piaggio France S.A. decided to consult the Commision, a body that may be consulted prior to the litigation stage. Considering the positive indications from advisors, the Company did not consider it necessary to make allocations for risks arising from this notice.