Annual Report 2014

PRADA spa
(Hong Kong Stock code: 1913)

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Annual Report 2014

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IndexThe PRADA Group
Financial Review
Directors and Senior Management
Directors’ Report
Corporate GovernanceConsolidated Financial Statements
Financial Statements of PRADA spa
Notes to the Consolidated Financial Statements
Independent Auditors’ Report

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3
37
55
67
83
97
103
109
187

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Patrizio Bertelli

Miuccia Prada2

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The PRADA GroupPRADA Group

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The first Prada store,
Galleria Vittorio Emanuele II
Milan

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The PRADA Group
Presentation“For Prada, fashion, luxury and style have always been core aspects of a project that
goes beyond production of clothes, footwear and handbags.
Careful observation and interest in the world, society, and culture are at the coreof Prada’s creativity and modernity. This has pushed Prada beyond the physicallimitations of boutiques and showrooms, leading us to interact with diverse, seemingly
distant worlds, and introduce, very naturally, a new way of creating fashion.”
Miuccia Prada and Patrizio Bertelli
These values have transformed a family business into a major player in the luxury
market worldwide with the Prada, Miu Miu, Church’s and Car Shoe brands.
The Group operates in 70 countries through 594 DOS, 35 franchise operated stores
and a network of selected high-end multi-brand stores and luxury department stores.
Prada’s distinctive features and prestige derive from its particular management of thecreative and production process which allows the Group to offer its customers allaround the world products of unequalled quality, creativity and exclusivity.
A focus on quality permeates every aspect of the Group’s business. The individual
heritage and identity of each brand is rigorously defended with the Group’s designers
and craftsmen being constantly challenged to keep tradition alive through a continuous
process of re-invention and innovation. Each step of the process, both inside andoutside the company, is carefully monitored in order to guarantee uncompromised
quality.
The result is an exclusive relationship between each customer and the Group's brands,
its products, its communications and its stores. This is why customers recognize inPrada’s products something exclusive, important and personal which represents theimage they wish to portray of themselves.

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The first Prada Epicenter Concept Store,
Broadway, New Yorkby architect Rem Koolhaas and Studio OMA

The third Prada Epicenter Concept Store,
Los Angeles, Beverly Hills
by architect Rem Koolhaas and Studio OMA

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The second Prada Epicenter Concept Store,
Aoyama, Tokyo
by architects Herzog & de Meuron

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Prada Store
by architect Roberto Baciocchi

Prada Store
by architect Roberto Baciocchi

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Miu Miu Store
Aoyama, Tokyo
by architects Herzog & De Meuron

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Spring/Summer 2015
Advertising campaign
for Prada

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History of PRADA Group
The Prada brand dates back to the beginning of the last century. In 1913, Mario Prada
opened a luxury store in the Galleria Vittorio Emanuele II in Milan, selling leather
handbags, travelling trunks, beauty cases, refined luxury accessories, jewels andarticles of value. Thanks to its exclusively designed goods, handcrafted using finematerials and sophisticated techniques, Prada rapidly became a reference point foraristocracy and the most elegant members of the haute-bourgeoisie in Europe.
In 1919, Prada became an official supplier to the Italian Royal Family. Since then, Prada
has been able to display the House of Savoy coat of arms and knotted rope design on
its trademark logo.
Over the years, the Prada name gained increasing renown and prestige.
The Group saw a turning point in the development of its activities at the end of theSeventies, when Miuccia Prada, Mario Prada’s granddaughter, launched a partnershipwith Tuscan businessman Patrizio Bertelli. This partnership combined creativity andbusiness ideas laying the foundations of the international expansion that was tocome. Patrizio Bertelli broke new ground in the luxury goods sector, introducing abusiness model in which he kept direct, internal control over all processes, applying
uncompromised quality criteria across the entire production cycle. Miuccia Prada's
creative talent and avant-garde approach attracted the attention of the global fashionindustry, while her ability to look at the world from an unconventional vantage point
allowed her not only to anticipate but, quite often, to set new trends.
In 1977, Patrizio Bertelli set up IPI spa to consolidate the production resources that hehad built up over the previous ten years in the leather goods segment. In the same
year, IPI spa obtained an exclusive license from Miuccia Prada to produce and distributeleather goods bearing the Prada brand name. In the following years, the activities of thetwo families were gradually brought together within a single Group.
In 1983, the Prada family opened a second store in the prestigious Via della Spigain Milan, one of Europe’s key shopping destinations. The new store showcased the
new brand image as it blended traditional elements with a modern and innovativearchitectural setting: a revolution and a true benchmark for luxury retail.
Commencing in 1986, new stores were opened in New York and Madrid, followed by
London, Paris and Tokyo.
In response to the growing appreciation for the offer of Prada products, the women
range was extended from leather goods to include the first footwear collection in 1979
and the first apparel collection as presented in Milan in 1988.
In 1993 Prada made its debut in the men’s segment with its first men’s apparel andfootwear collection. That same year, Miuccia Prada’s creative inspiration led to theestablishment of a new brand – Miu Miu – designed for women who are particularly
fashion-forward and aware of avant-garde, trendy and sophisticated. Miu Miu now
offers women’s ready-to-wear, bags, accessories, footwear and eyewear and is anincreasingly important component of the Group’s sales.
Also in 1993, Miuccia Prada and Patrizio Bertelli created “Milano Prada Arte”, whichsoon became “Fondazione Prada”. The project’s purpose was to gather “the mostchallenging mental provocations of our time” in art, architecture, cinema, philosophy
and culture in general.
In 1997 Patrizio Bertelli creates the “Prada Challenge for the America’s Cup 2000”
sailing team. The Prada’s products for leisure time, with the distinctive “Red Line”,
was launched in 1997 too.

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Spring/Summer 2015
Advertising campaign
for Prada

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In 1999, the prestigious Church’s brand, established in 1873 in Northampton, becomespart of the Prada Group. The brand, specialized in handmade high-end footwear, is aworldwide recognized symbol of top quality British tradition and sophisticated elegance.
In 2001 Prada acquired control of Car Shoe, an historical Italian brand famous for its
exclusive driving moccasins. The same year, the first Prada Epicenter store, designed
in collaboration with Rem Koolhaas, was opened on Broadway, New York. It was thefirst store of the “Epicenters” project, which purpose was to rethink the conceptof shopping with a new approach, and to experiment innovative interactions withcustomers. A second “Epicenter” store was opened in Aoyama, Tokyo, followed by athird, on Rodeo Drive, Beverly Hills in 2004.
In 2003, Prada entered into a licensing agreement, then renewed in 2012, with the Italianeyewear manufacturer Luxottica, world leader in the eyewear industry. The Luxottica
Group currently produces eyewear for the Prada and Miu Miu brands. That same year,
the Group also began its partnership with the Spanish cosmetics manufacturer Puig
Beauty & Fashion Group with the launch, at the end of 2004, of the fragrance Amber.
In 2006, Miu Miu organized its first fashion show in Paris to better emphasize its
identity.
The first Prada Phone by LG was launched in March 2007; it was the world’s first touch
screen cell phone. The successful partnership was renewed in 2008 and in 2011 withfurther two releases.
The Prada e-store first went online in 2010 while Miu Miu was launched in 2011. The
same year, Prada entered into a joint venture with the Al Tayer Insignia llc Group to
develop a Prada and Miu Miu retail network in the Middle East.
On June 24, 2011, 20% of the share capital of PRADA spa was successfully placed on
the Main Board of the Hong Kong Stock Exchange.
In 2013 the Prada Group and Coty Inc announced an exclusive agreement for thecreation, development and distribution of a line of Miu Miu fragrances, marking thebrand’s entrance into the prestige fragrance segment. That same year the team Luna
Rossa Challenge, sponsored by Prada, took part in the 34th edition of the America’s
Cup.
In March 2014, Prada Spa announced the acquisition of control of the company Angelo
Marchesi Srl, owner of the historical Milanese pastry shop founded in 1824. A few
months later, the Group announced the acquisition of the French tannery Tannerie
Megisserie Hervy (now Tanneriè Limoges sas) to further strengthen its integrated
industrial know-how.

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Spring/Summer 2015
Advertising campaign
for Miu Miu

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The Group brands
PRADA Group owns and manages some of the most prestigious luxury brands in theworld. These brands, together with control over the key elements of the value chain,represent key assets for the Group. All of the Group’s activities are geared towards
constantly increasing brand value, in order to raise their profile, recognition and makethem more desirable.
Prada
The Prada brand has become one of the most prestigious and widely-recognized brands
in the fashion and luxury goods industries. Prada represents the best of creativity andthe Italian manufacturing tradition, sophisticated style and uncompromising quality.
As one of the most innovative fashion brands, it is capable of re-defining “the norm”,
always anticipating and often setting new trends. Prada has also become a recognizedsymbol of elegance and the very essence of fashion. It has even often captured theattention of the world of literature, cinema and art. The brand’s distinctive originality
is built on its innovative approach to style, craftsmanship and quality, characterized bya constant research in all sectors: Prada relentlessly applies its creative approach not
only to design development but also to the most innovative production techniques.
Prada has been a sophisticated interpreter of its times and a frontrunner of style andtrends. The Prada brand now produces men's and women's leather goods, ready-towear, footwear and also operates in the eyewear and fragrance, targets an internationalcustomer base that is modern, sophisticated, aware of stylistic innovations and expects
craftsmanship of the highest quality. By combining attention to detail and quality with a
cutting-edge production and a unique identity style, it aims to make each Prada productone-of-a-kind.
Miu Miu
Named after Miuccia Prada’s nickname in her younger years, Miu Miu was created in
1993 as a brand with a different identity from Prada and soon evolved into one of theleading fashion brands in the world, based on the same creativity, quality and culture ofinnovation at the heart of all Group activities. Miu Miu is characterized by its avant-garde,sensual and provocative style, which seeks to evoke a sense of freedom and intimacy
with attention to detail and quality. Miu Miu targets women particularly aware of thelatest fashion trends, driven by a modern spirit of exploration and experimentation in
their fashion choices.
The Group has made major efforts since 2005 to enhance the independent identity of the
Miu Miu brand. The brand’s fashion shows and the nerve center of its communications
and marketing activities have been moved to Paris while international activities andevents have increased and the retail network has expanded swiftly in order to cover all
leading markets. The Miu Miu fragrance, expected to be launched in 2015, is also partof the brand’s development.
Church's
The Church’s brand was founded in 1873 in Northampton, England, by Thomas Churchand his three sons, capitalizing on the historical family experience in the production ofhandmade men’s shoes since 1675. At the beginning of the 20th century, Church’s
began exporting outside of Europe to the United States, Canada and South America
and received the prestigious Queen’s Award for Exports from Queen Elizabeth II in
1965. Church’s remains a recognized leader in the men’s handmade luxury footwear
industry. Church’s footwear stands out for its classical style and sophisticated English
elegance based on the combination of fine leather and top quality craftsmanship.
Church’s collections are designed to appeal to a discerning, international male and

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Spring/Summer 2015
Advertising campaign
for Prada Eyewear

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female clientele who appreciates high-quality shoes, combining a classical range withmodern style collections, both sharing the same top quality and elegance.
Car Shoe
Car Shoe was founded in 1963 by Gianni Mostile whose passion for sports andracing cars led him to design handmade moccasins made from very soft leather andsoles set on tiny rubber studs to improve grip on car pedals. The Car Shoe drivingmoccasins design was awarded a registered patent by the Italian Ministry of Trade andIndustry in 1964, though it has now expired. The brand has since become an iconic
Italian classic, known for its technical-design originality with high-quality leather andhandmade craftsmanship. Car Shoe is a symbol of exclusive and relaxed luxury attitudein mind. Particularly suited for leisure time and informal occasions, Car Shoe products
are targeted at a sporty and elegant male and female clientele.
Business model
Fundamental to the success of the Group’s brands and their consistently high levelof quality and innovation is the ability to operate an integrated value chain. The
strategically integrated business cycle, through the in-house design competence andindustrial capability, allows the Group to translate its innovative fashion concepts into
viable commercial production while retaining control over technical know-how, quality
standards and production cost, whilst maintaining flexible capacity.

BuyingSession(Retail)

FashionShows

Style & Design
and ProductDevelopment

Collectionof Orders

Showroom
Presentation

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Quality
Control

Sourcing and
Production

Sales
Campaign(Wholesale)

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Distribution

Logistic

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Spring/Summer 2015
Advertising campaign
for Miu Miu Eyewear

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Design
Creativity is the first step of the quality process.
Miuccia Prada has the ability to combine intellectual curiosity, the pursuit of new andunconventional ideas, cultural and social interests with a strong sense of fashion. Thishas made it possible to establish in Prada a genuine “in house” design culture, also
based on method and discipline, which guides everyone working in the Prada creative
process.
This unique approach enables Prada always to anticipate and, often set, trends,
continually experimenting with new designs, fabrics, leathers and production
techniques. This experimentation and exchange of ideas are the essential componentsof the design content found in each Group’s product. The time spent at the “drawing
board” and in the “fitting room” on research and stylistic development for the brands
is fundamental in defining each collection: all items of ready-to-wear apparel, footwear
and accessories complement one another and create a well-defined, consistent brandimage.
Miuccia Prada and Patrizio Bertelli’s flair, coupled with their extraordinary charisma,continues to attract talented people from all over the world who want to work withthem in many different creative fields. This results in formidable teams in all aspectsof the creative process: from fashion design to manufacture, from architecture tocommunication and photography, from interior design of the stores to all unique andspecial projects in which the Prada Group is involved.
Sourcing and production
Raw materials are an essential part of product quality, making them a primary concern
in the Prada Group. In many cases, the fabrics and hides are made especially for Prada,in line with stringent technical and style specifications guaranteeing both the excellenceof the material and its exclusive nature. The materials highlight the independent
spirit imbued in all Prada Group products. Before they enter the production cycle,
raw materials are also subject to stringent quality control by internal inspectors andengineers.
Prada products are made at thirteen state-of-the-art facilities owned by the Group (11in Italy,1 in England and 1 in France) and through a network of external sub-contractors,
whom are supplied with the raw materials, designs and prototypes and monitored
by a team of internal inspectors. This system enables close control of each stage ofthe overall production process and maximizes the individual capacities of each facility.
Furthermore, it guarantees highest level of quality for each product as well as maximum
flexibility.
It is worth noting also that the hardcore of Prada’s production employees has beenworking with the Group for an average of 20 years. This leads to the highest level of
specialization, extensive knowledge and understanding of the Group DNA and ensuresthat know-how of production techniques and core values is handed on smoothly toyounger generations.
The Prada Group’s approach to production is therefore based on two key principles:the constant quest for innovation, thereby ensuring skills and expertise continue to
evolve, and an artisan spirit, the legacy core value for production and a unique asset
for each brand.
Throughout the Group’s expansion, production sites have either been built to meetproduct requirements or acquired from companies already used as suppliers. The sites
acquired have then been modernized or, in some cases, rebuilt. The aim in each case has
been to optimize manufacturing processes and create optimal working environments

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2014
Advertising campaign
for Prada Parfums

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that reflect signature Prada aesthetics and quality.
Distribution
Innovation is at the core of Prada's success, with no sector escaping the Group's avantgarde approach, distribution included.
The retail network is constantly revised and updated in order to make it easier forcustomers to use and make product displays more effective.
Over the years, the Group has expanded its retail network and it now includes 594
DOS (Directly Operated Stores) in prestigious locations in the main international
shopping destinations. This large network offers an effective platform to showcase
new collections and is an essential point of contact with customers offering real-time
information on the performance of each product category. Apart from their primarysales function, the DOS are also important means of communication: genuine brandambassadors which portray a strong and consistent brand image worldwide.
The wholesale channel (department and multi-brand stores) guarantees a number
additional of points of sale, selected on the basis of their prestigious location on key
markets and provides a direct and immediate comparison with the competition. In
recent years, this sales channel has been carefully reviewed with the aim of being
more selective in order to achieve consistency with the retail network expansion andto maintain the right positioning and international image of the brands.
The retail channel generates 84.8% of the PRADA Group’s consolidated sales while
the remaining 15.2% comes from the wholesale channel.
Image and communications
Effective communications are key to building and maintaining a unique powerful andconsistent brands image. From fashion shows rich in content and impeccable executed
to award-winning advertising campaigns, Prada and all the Group brands continue
successfully to create an appealing and cutting-edge image that attracts a high quality,international client base and is appreciated by the most demanding of commentatorsand critics.
Strong press coverage, featured prominently on hundreds of covers of the world’s
most important fashion magazines not to mention the most important daily and weekly
publications, contributes towards the visibility of the products of the Group brands.
In-store events help raise the brands’ profile and increase awareness of the mostrecent collections on local markets and, in particular, in leading international cities from
Tokyo to New York and London and from Hong Kong to Shanghai and Beijing.

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Prada industrial Headquarter
Valvigna, Terranuova Bracciolini (AR),by architect Guido Canali

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Human Resources
Human Resources are a fundamental asset across the entire business model. The
development of the Group builds its competitive advantage on the skills and commitmentof its employees, promoting and rewarding pro-activity, goal orientation and teamwork.
The Human Resources Department operates in an international environment,cooperating closely with the areas in order to analyze processes, make them more
efficient and effective and make the most of skills and specific local characteristics
as part of an ongoing process to improve business processes, achieve integration
between central and outlying parts of the business while focusing on the business.
Through a structured and transparent selection process, which is also based oncooperation with the most prestigious universities and fashion schools, the Group
constantly seeks and attracts the best talents in the international employment market.
The Group’s presence on the international market through its four brands offers its
professionals several international working opportunities in addition to the continuous
education and training programs. This can help the Group to support internal growth
in managerial and international roles as the Group’s policy itself promotes internal
over external recruitment. The international scale of the activities is also reflected in
the multitude of different cultures, skills, nationalities and religions which the Group
believes are of strong importance. As a matter of fact, the fourty different nationalities
working for the Group highlights the importance of diversity within the workforce as asource of cultural richness, well-being, creativity, lateral thinking, progress and affinity
with the customer base, which in turns is extremely diverse.
The natural respect for equal opportunities within the Group is supported by thecompensation & benefit system which is based on the promotion of skills and meritwhile ensuring equal treatment of genders seniority and role. At the same time, theprotection of workers’ rights is of preeminent importance as the Group promotes
and endorses the respect for human rights and labor provisions regarding child andinvoluntary labor, as well as health and safety throughout our value chain. The Groupalso collaborates with trade unions to evaluate any opportunity to enhance the working
conditions of our employees.
The Group’s remuneration policy seeks to attract, reward and retain high-levelprofessionals and skilled managers, as well as to align the interests of the managementwith the primary objective of creating value over the medium and long term. The
common structure of the remuneration policy, characterized by a balanced mix of
fixed and variable components, is defined locally in accordance with the principles ofinternal equality and external competitiveness. Comparison with the external market
is ensured by surveys conducted by qualified companies, internationally recognized in
the fashion and luxury sector.
The Remuneration Committee oversees the remuneration of our top management,
taking into account the position and responsibilities assigned and benchmarking
similar positions in a panel of companies comparable with Prada in terms of size andcomplexity.

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The Calzaturificio Lamos facility
Montevarchi, (AR)by architect Guido Canali

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PRADA Group

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Castello Cavalcanti
short film directed by Wes Anderson, 2013

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Special projects
Convinced of the need to combine varied creative experiences to ensure that its style,image and communications activities are renewed and updated constantly, the PradaGroup has always had strong links with other fields, especially the fields of art andculture. Interaction with these apparently distant environments has led to the realizationof special projects which have, over the years, helped define the many facets of the
Prada universe.
Prada’s interest in architecture has gradually taken form with the realization of state-ofthe-art production sites, the refurbishment of former industrial buildings to house newshowrooms and offices and the development of revolutionary concepts to fit out retailpremises. The most high-profile project in the retail sector, known as the Epicenter
Concept Store, was carried out between 2001 and 2004 with the opening of three
exceptional stores in New York, Los Angeles and Tokyo. The epicenters, studied incollaboration with world famous architects Rem Koolhaas and Herzog & de Meuron,
winners of the Pritzker Prize (architecture’s “Nobel Prize”), were designed to reinventand revamp the shopping concept: constantly evolving experimental laboratories
where products, technologies, design and architecture blended perfectly with a vast
range of exclusive services and sensorial experiences. Prada Epicenters soon became
genuine landmarks on a local and international scale. On certain occasions, theytranscend their function as stores to house film showings, exhibitions, presentations,debates and other cultural activities. The collaboration with Rem Koolhaas/AMO, thethink-thank of the Office for Metropolitan Architecture, also led to the creation of the
Prada Transformer building which opened in Seoul in 2009: for six months, this multidimensional structure housed an innovative series of inter-discipline projects including
exhibitions, projections and live multi-cultural events.
Miuccia Prada and Patrizio Bertelli’s interest in contemporary art have led the PRADA
Group to support Fondazione Prada’s activities in the fields of art and culture since 1993.
Fondazione Prada was created as a platform to conceive and develop art exhibitions
along with architecture, cinema and philosophy projects. It staged 24 solo shows in
Milan devoted to Italian and International artists until 2010. Since 2011, the Foundation
has presented four group shows at its Venetian venue, Ca’ Corner della Regina, a 18th
Century palace. Exhibition ‘Art or Sound’ was on view in Venice between June andNovember 2014. The project, curated by Germano Celant, brought together more than
180 artworks and objects from the Renaissance Period until the present day, including
automata and musical machines, paintings and scores, sculptures and installations,rare and surprising musical instruments. Its objective was to explore the ambiguous
relationship between artworks and sound objects. Architecture exhibition “Auguste
Perret: Huits Chefs d’œuvre !/?”, organized by the Economic, Social and Environmental
Council (ESEC) in collaboration with Fondazione Prada at the Palais d'Iéna in Paris,
opened in November 2013 and ran successfully until February 2014. The first phaseof Curate Award, the competition launched by Fondazione Prada and Qatar Museum
Authority to seek out new curatorial talent, was completed in January 2014. AnInternational Jury selected three projects from more than 500 entries. The winners- Michael Wang, Misal Adnan Yıldız and Evelyn Simons – will realize their exhibition
projects in the next two years.
Fondazione Prada’s new Milan venue is scheduled to open in May 2015. Designed
by architecture firm OMA, led by Rem Koolhaas, and situated in Largo Isarco, in theSouth of Milan, it is the result of the transformation of a former industrial compound
dating back to the first decade of the 20th Century. The premises cover a total area of
19,000 sqm and will house an extensive program of exhibitions and cultural events,
thus enabling the Foundation to develop further its multidisciplinary vocation.
Cinema, as a contemporary art form, has also led to creative collaborations withinternationally renowned directors, resulting in numerous productions including Thunder
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Fondazione Prada
Largo Isarco 2, Milanby architect Rem Koolhaas

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PRADA Group

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AC45 Luna Rossa
Cagliari, Sardinia 201530

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Perfect Mind by Jordan and Ridley Scott in 2006, A Therapy by Roman Polanski in
2012, Castello Cavalcanti by Wes Anderson in 2013 and, also, The Miu Miu Women’s
Tales: a series of short films produced between 2011 and 2014 by internationally
famous directors – with different intellectual backgrounds – which explore the female
universe. Miuccia Prada’s passion for this field has also given rise to other projects like
production of costumes for The Great Gatsby by Baz Luhrmann.
In 2013, true to its spirit of innovation, Prada, with Giangiacomo Feltrinelli Editore andLuxottica, launched a literary contest in New York which was then repeated in Milan in
2014. The contest created an independent platform of interest and an unusual search
for literary talent, seeking to explore and exploit personal interpretations of reality as
seen through the metaphor of Prada eyewear.
Moreover, in the field of high level sport, Team Luna Rossa, sponsored by the Group,
has participated as a challenger in the 2000, 2003, 2007 and 2013 editions of theAmerica’s Cup. It won the challengers’ regattas in 2000 and reached the finals in 2007
and 2013. This experience has contributed significantly to the commercial success of
the leisure time apparel and footwear lines and has further spread the Prada imagearound the world, associating the name with the oldest and one of the most prestigious
international sporting events.

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PRADA Group Structure
PRADA spa
Milan

HOLDING/MANUFACTURING/DISTRIBUTION/SERVICES

100%
66.7%

Artisans Shoes srl
Montegranaro
PRODUCTIONPRADA Hong Kong PD ltd 100%Hong KongSERVICES

60%

Pellettieri d’Italia srl
Milan
PRODUCTIONPRADA Dongguan
Trading Co ltd
DongguanSERVICES

100%

IPI Logistica srl
Milan
SERVICES49%

PAC srl in liquidazione
Milan(IN LIQUIDATION)60%

PSC sasIsle
PRODUCTION100%PRADA Far East bv
Amsterdam
SUB-HOLDING/OUTLET/RETAIL

100%

100% PRADA Australia pty ltd
SydneyRETAILPRADA USA Corp
New York
DISTRIBUTION/SERVICES/RETAIL

Post Developement Corp 100%
San Francisco
REAL ESTATE
Church Holding UK ltd
Northampton
HOLDING

100%

100%
Church & Co ltd
Northampton
MANUFACTURING/
DISTRIBUTION/SERVICES100%

PRADA Korea ltd
Seoul
RETAIL

100%

Space USA Corp
New York
OUTLET

100% PRADA Singapore pte ltd
Singapore
RETAIL55%

TRS Hawaii Ilc
Honolulu
DFS

100%

PRADA Retail
Malaysia sdn bhd
Kuala Lumpur
RETAIL55%

TRS Guam Partnership
Guam
DFS

100%

PRADA Japan Co ltd
Tokyo
RETAIL100%

PRADA Retail Mexico
S. de R.L. de C.V.
Mexico CityRETAIL

55%

Travel Retail Shops
Okinawa kk
Tokyo
DFS

Church’s English Shoes
Switzerland sa
LuganoRETAIL

Church & Co (USA) ltd
New York
RETAIL100%

TRS Saipan Partnership
SaipanDFS

55%

100% PRADA (Thailand) Co ltd
Bangkok
RETAIL

100% Church Japan Company ltd
Tokyo
RETAIL

Church UK Retail ltd
Northampton
RETAIL100%

TRS Hong Kong ltd
Hong Kong
DFS

55%

100% PRADA New Zealand ltd
Wellington
RETAIL100%

Church Hong Kong
Retail ltd
Hong Kong
RETAIL100%

100% Church & Co (Footwear) ltd
Northampton
TRADEMARKS
100% Church Singapore pte ltd
Singapore
RETAIL100%

Church Netherlands bv
Amsterdam
OUTLET/RETAIL

100%

Church Footwear ab
Stockholm
RETAIL100%

Church Denmark aps
Copenhagen
RETAIL

Church’s English Shoes sa 100%
Brussels
RETAILPRADA Group

Annual Report 2014 (15 aprile).indd 32

100%

Macau Branch
Macau
DFS

100%

TRS New Zealand ltd
Wellington
DFS

55%

Church Italia srl
100%
Milan
DISTRIBUTION/RETAIL/SERVICESTRS Singapore pte ltd
Singapore
DFS

55%

Church France sas
Paris
RETAIL

Church Spain sl
MadridRETAIL100%

PRADA Asia Paciﬁc ltd
100%
Hong Kong
DISTRIBUTION/RETAIL/SERVICES

Church Ireland Retail ltd 100%
DublinRETAIL
Church Austria gmbh
ViennaRETAIL100%

Church Footwear(Shanghai) Co ltd
Shanghai
RETAIL100%

Macau Branch
Macau
RETAIL
100%

100%

100%

PRADA Sweden ab
Stockholm
RETAIL
Kenon ltd
LondonREAL ESTATEPRADA India Fashion
Private ltd
MumbaiRETAIL

100% PRADA Vietnam Limited
Liability Company
Hanoi
RETAIL100%

PT Prada Indonesia
Jakarta
DISTRIBUTIONPRADA Taiwan ltd
Hong KongSERVICES
Taipei BranchTaipeiRETAIL100%

PRADA Trading(Shanghai) Co ltd
Shanghai
DORMANT

100%

Space Hong Kong ltd
Hong Kong
OUTLET

100%

32

100%

PRADA Canada Corp
Toronto
DISTRIBUTION/RETAILPRADA Fashion Commerce(Shanghai) Co ltd
Shanghai
RETAIL100%

Car ShoeHong Kong ltd
Hong Kong
DORMANT100%

PRADA Macau Co ltd
Macau
RETAIL

Annual Report 2014 - The PRADA Group

15/04/15 18:41

80%
PRADA Hellas
Sole Partner llc
AthensRETAIL100%

100% PRADA Czech Republic sro
PragueRETAIL100%

PRADA Stores srl
Milan
RETAIL/SERVICES

Marchesi Angelo srl
Milan
CONFECTIONERY

100%

100% PRADA Monte-Carlo sam
MonacoRETAIL100%

PRADA Portugal
Unipessoal lda
LisbonRETAIL100%

PRADA Austria gmbh
ViennaRETAIL100%

PRADA Rus llc
Moscow
RETAIL100%

PRADA Spain sl
MadridRETAIL100%

PRADA Bosphorus Deri
Mamüller ltd Sirketi
Istanbul
RETAIL

100% PRADA Germany gmbh
MunichRETAIL/SERVICES60%

PRADA Middle East fzco
Jebel Ali Free Zone-Dubai
DISTRIBUTION/SERVICES100%

PRADA sa
Luxembourg
TRADEMARK
Swiss Branch
LuganoSERVICES

100%PRADA Company sa
Luxembourg
SERVICESPRADA Retail UK ltd
LondonRETAIL49%

PRADA Emirates llc
Dubai
RETAIL

Ireland Branch
DublinRETAIL49%

PRADA Kuwait wll
Kuwait CityRETAILCar Shoe UK ltd
London(IN LIQUIDATION)

100%

100% PRADA Retail France sas
Paris
RETAILPRADA Brasil
100% Importação e Comércio
de Artigos de Luxo ltda
São Paulo
RETAIL100%

PRADA Ukraine llc
Kiev
RETAIL100%

PRADA Kazakhstan llp
AlmatyRETAIL100%

PRADA Maroc (Sarlau)
Casablanca
RETAIL100%

PRADA RetailSouth Africa (pty) ltd
SandtonRETAIL100%

PRADA Retail spc
Doha
RETAIL75%

PRADA Saudi Arabia ltd
JeddahRETAIL100%

PRADA Switzerland sa
LuganoRETAIL100%

PRM Services
S. de R.L. de C.V.
Mexico CitySERVICES

100%PRADA Panama sa
PanamaRETAIL100%

PRADA Retail Aruba nv
Aruba
RETAILPRADA Group

Annual Report 2014 (15 aprile).indd 33

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33

15/04/15 18:41

Corporate Information

34

Registered office

Via A. Fogazzaro, 28
20135 Milan, Italy

Head Office

Via A. Fogazzaro, 28
20135 Milan, Italy

Place of business in Hong Kong
registered under Part 16 of theHong Kong Companies Ordinance

36/F, Gloucester Tower
The Landmark, 11 Pedder Street
Central, Hong Kong

Company web sitewww.pradagroup.com

Hong Kong Stock Exchange
Identification Number

1913

Board of Directors

Carlo Mazzi(Chairman)
Miuccia Prada Bianchi(Chief Executive Officer)
Patrizio Bertelli(Chief Executive Officer)
Donatello Galli(Executive Director)
Alessandra Cozzani(Executive Director)
Gaetano Micciché(Non-Executive Director)
Gian Franco Oliviero Mattei(Independent Non-Executive Director)
Giancarlo Forestieri(Independent Non-Executive Director)
Sing Cheong Liu(Independent Non-Executive Director)

Audit Committee

Gian Franco Oliviero Mattei (Chairman)
Giancarlo Forestieri
Sing Cheong Liu

Remuneration Committee

Gian Franco Oliviero Mattei (Chairman)
Carlo Mazzi
Giancarlo Forestieri

Nomination Committee

Gian Franco Oliviero Mattei (Chairman)
Carlo Mazzi
Sing Cheong Liu

Board of Statutory Auditors

Antonino Parisi (Chairman)
Roberto Spada (Standing member)David Terracina (Standing member)Supervisory Board(Leg. Decr. 231/2001)

David Terracina (Chairman)
Gian Franco Oliviero Mattei
Franco Bertoli

PRADA Group

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Main Shareholder

PRADA Holding S.p.A.
Via A. Fogazzaro, 28
20135 Milan, Italy

Joint Company Secretaries

Patrizia Albano
Via A. Fogazzaro, 28
20135 Milan, Italy
Ying-Kwai Yuen (Fellow member, HKICS)
36/F, Gloucester Tower
The Landmark, 11 Pedder Street
Central, Hong Kong

Authorized Representatives
in Hong Kong

Carlo Mazzi
Via A. Fogazzaro, 28
20135 Milan, Italy
Ying-Kwai Yuen (Fellow member, HKICS)
36/F, Gloucester Tower
The Landmark, 11 Pedder Street
Central, Hong Kong

Alternate Authorized
Representative to Carlo Mazzi
in Hong Kong

Sing Cheong Liu
House 7 Severn Hill
4 Severn Road
The PeakHong Kong

Hong Kong Share Registrar

Computershare Hong Kong Investor
Services Limited
Shops 1712-1716
17th Floor, Hopewell Centre
183 Queen’s Road East
Wanchai, Hong Kong

Auditor

Deloitte & Touche S.p.A.
Via Tortona, 2520144 Milan, Italy

PRADA Group

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35

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36

PRADA Group

Annual Report 2014 (15 aprile).indd 36

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Financial Review

PRADA Group

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37

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The Financial review of the Board of Directors refers to the Group of companies
controlled by PRADA spa (the "Company"), holding company of the Prada Group (the"Group") and is based on the Consolidated financial statements of the Group for thetwelve months ended January 31, 2015 (year 2014), prepared in accordance with IFRS
as adopted by the European Union. The Financial review must be read together with
the Consolidated financial statements and the Notes which form an integral part of theConsolidated financial statements.
Consolidated income statement(amounts in thousands of Euro)

RetailWholesaleRoyalties%

twelve months
ended
January 31
2014

2,980,891

83.9%

2,996,637

83.5%

532,54515.0%

551,570

15.4%%

38,2601.1%

39,140

1.1%

Net revenues

3,551,696

100.0%

3,587,347

100.0%

Cost of goods sold

(1,001,117)-28.2%(938,698)-26.2%

Gross margin

2,550,579

71.8%

2,648,649

73.8%

Operating expenses(1,849,028)-52.1%(1,709,412)-47.7%

EBIT

701,55119.8%

939,237

26.2%

Interest and other financial expenses, net(34,304)-1.0%(17,357)

-0.5%

455

-

1,016

-

Income before taxation

667,70218.8%

922,896

25.7%

Taxation(208,484)-5.9%(285,091)-7.9%

Net income for the year

459,218

12.9%

637,805

17.8%

8,488

0.2%

10,0200.3%

Net income - Group450,730

12.7%

627,785

17.5%

Depreciation, amortization and impairment

252,698

7.1%

203,949

5.7%

EBITDA

954,24926.9%

1,143,186

31.9%

Dividends from investments

Net income - non-controlling interests

Basic and diluted earnings per share(in Euro per share)38

twelve months
ended
January 31
2015

PRADA Group

Annual Report 2014 (15 aprile).indd 38

0.176

0.245

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15/04/15 18:41

Key financial information
Key income statement information(amounts in thousands of Euro)Net revenues
EBITDAEBITDA %EBITEBIT %

twelvemonthsended
January 31
2015

twelvemonthsended
January 31
2014

twelvemonthsended
January 31
2013

3,551,696

3,587,347

3,297,219

-1.0%

3.8%

954,249

1,143,186

1,052,469-16.5%-4.8%% change
on January
2014

CAGR %
2012-14

26.9%

31.9%

31.9%

-

-

701,551

939,237

889,781-25.3%-11.2%

19.8%

26.2%

27.0%

-

-

Income before tax

667,702922,896883,616-27.7%-13.1%Net income of the Group450,730

627,785625,681-28.2%-15.1%

Earnings per share (Euro)

0.176

0.245

0.245

-28.2%-15.2%

Capital expenditure449,735

611,227

351,129--

Net operating cash flows

483,597

769,436759,272-37.1%-20.2%

Average number of employees

11,962

10,816

9,427

10.6%

-

January 31
2015

January 31
2014

January 31
2013

January 2015
less
January 2014

153,635

Key statement of financial position information(amounts in thousands of Euro)Net operating working capital

563,409409,774

317,714

Net invested capital

2,829,359

2,405,650

2,017,844

423,709

Net financial position

188,788295,890

312,648(107,102)3,000,737

2,687,554

2,320,022

313,183

Group shareholders’ equity

2014 highlights
The 2014 ﬁnancial year has ended with consolidated net revenues of Euro 3,551.7
million, down by 1% compared to Euro 3,587.3 million in 2013. At constant exchange
rates, consolidated net revenues have remained almost unchanged because, overall,exchange rates between other currencies and the Euro had a negative impact onsales for a signiﬁcant portion of the year but then made a positive contribution andhelped sales recover in the last few months of the year. Sales in the retail channel– which comprised 594 DOS at January 31, 2015 – were broadly in line with 2013
while wholesale channel sales fell by 3.4% and were again affected by the program ofrationalization and conversion into retail sales.
The international economic environment in which the Group operated in 2014 wasparticularly challenging because of the ongoing economic uncertainty and the politicaland social tension that affected several important markets. Against this background,
there was, generally, a lower contribution from ﬂows of tourists while local demandfollowed different trends on the various markets: there was growth in Japan and theAmericas and decreases in Europe, Italy and Asia Paciﬁc. Nonetheless, Prada Grouphas continued to invest resources in pursuit of its medium/long-term objectives: it has
conﬁrmed the opening of new stores on markets not considered sufﬁciently covered
although some have been postponed until 2015; it has also launched a number ofcommunications initiatives in order to strengthen brand image and reinforce the linkwith customers. At the same time, in order to safeguard industrial margins and further
increase production know-how, there has been a major overhaul of certain internal
production processes, the effects of which will be visible from next year. However, as
the general situation during the year gradually became more complicated than could
have been expected, management concluded that it was essential to implement a
series of measures aimed at containing costs at various income statement levels.

PRADA Group

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39

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The slowdown in the rate of growth and the accompanying increase in costs linked
to retail network expansion has hit operating margins: EBITDA for the twelve months
ended January 31, 2015, was Euro 954.2 million, or 26.9% of net revenues against
31.9% in prior year, and EBIT totaled Euro 701.6 million, or 19.8% of net revenues
against 26.2% in prior year.
After net ﬁnancial expenses of Euro 33.8 million (Euro 16.3 million in 2013) and an
effective tax rate almost in line with prior year (31.2% against 30.9% in 2013), theGroup’s net income amounted to Euro 450.7 million (12.7% of net revenues against
17.5% in 2013).
The capital expenditure for 2014 totaled Euro 449.7 million and was mainly dedicatedto the expansion and renewal of the DOS network and to the acquisition for Euro 61.5
million of a property in Milan already used by the Group as its Corporate Headquarters
under a rental contract.
At January 31, 2015, the Group’s net ﬁnancial position was positive by Euro 188.8
million. In the twelve months then ended, cash ﬂows generated by operating activities
amounted to Euro 483.6 million and were almost entirely employed – together withsome existing cash – to ﬁnance capex and pay dividends to the shareholders of PRADA
spa (Euro 281.5 million) and the non-controlling shareholders of subsidiaries (Euro 9.4
million).

40

PRADA Group

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Net sales analysis(amounts in thousands of Euro)

twelve months
ended
January 31
2015

twelve months
ended
January 31
2014% change

Net sales by geographical area
Italy

553,42915.8%

552,897

15.6%

0.1%

Europe739,100

21.0%

776,494

21.9%

-4.8%

Americas492,15114.0%

487,990

13.8%

0.9%

Asia Pacific1,252,675

35.7%

1,292,753

36.4%

-3.1%

Japan

367,62510.5%

340,784

9.6%

7.9%

Middle East

103,475

2.9%

91,114

2.6%

13.6%

Other countries

4,981

0.1%

6,175

0.1%

-19.3%

3,513,436

100.0%

3,548,207

100.0%

-1.0%

Prada

2,895,437

82.4%

2,943,633

83.0%

-1.6%

Miu Miu

526,770

15.0%

519,142

14.6%

1.5%

Church's

74,041

2.1%

68,6091.9%

7.9%

Car Shoe

11,9350.3%

13,4270.4%-11.1%Total

Net sales by brand

Other

5,253

0.2%

3,396

0.1%

54.7%

Total

3,513,436

100.0%

3,548,207

100.0%-1.0%

Net sales by product line
Clothing

594,75616.9%

581,594

16.4%

2.3%

2,218,032

63.1%

2,332,518

65.7%

-4.9%

Footwear

644,66618.3%

594,586

16.8%

8.4%

Other

55,982

1.7%

39,509

1.1%

41.7%

Total

3,513,436

100.0%

3,548,207

100.0%-1.0%

2,980,891

84.8%

2,996,637

84.5%

-0.5%

532,54515.2%

551,570

15.5%

-3.4%

Total

3,513,436

100.0%

3,548,207

100.0%-1.0%

Net sales

3,513,436

98.9%

3,548,207

98.9%

-1.0%

Royalties

38,2601.1%

39,140

1.1%

-2.2%

3,551,696

100.0%

3,587,347

100.0%-1.0%

Leather goods

Net sales by distribution channelDOS
Independent customers and franchises

Total net revenues

Sales channels
Retail sales for the twelve months ended January 31, 2015, totaled Euro 2,980.9
million, slightly down compared to Euro 2,996.6 million for the previous year. At
constant exchange rates, retail sales were almost unchanged on prior year. A total of
64 new DOS were opened during the year, as driven by the program to convert someindependent retailers in North America and Switzerland into DOS, while ten DOS wereclosed. At January 31, 2015, the total number of DOS had increased to 594. On an
SSSG basis (same number of stores and constant exchange rates), the retail network
performed less well than in prior year, especially in relation to the Asian market andleather goods.
The wholesale channel generated net sales of Euro 532.5 million, a decrease of 3.4%
compared to 2013 (-4.7% at constant exchange rates). This decrease is in line with Groupstrategy which has, for some years, prioritized the development of the retail channel,
and essentially relates to the European and American markets. Nonetheless, it is worth
noting the growth achieved in the wholesale channel in Asia, especially thanks to thestrong performance of DFS which are operated under selected franchising agreements.

PRADA Group

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41

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Markets
In the twelve months ended January 31, 2015, the Asia Paciﬁc market – which
contributed 35.7% of total net sales making it the Group’s largest market – recorded
a 3.1% decrease (-4.5% at constant exchange rates), generating net sales of Euro
1,252.7 million against Euro 1,292.8 million in 2013. Results in the region were hit by
the negative performances recorded in Hong Kong and Macau. The Greater China area
still beneﬁted from growth on the Chinese domestic market and ended the year with
net sales of Euro 774.1 million, a decrease of 6.3% (-7.3% at constant exchange rates).
In the twelve month period, there were 18 new store openings in Asia Paciﬁc, net ofthree closures. In terms of distribution channel, the retail channel recorded a 5.5%
decrease (-6.5% at constant exchange rates) while, as already stated, the wholesalechannel enjoyed double-digit growth, especially thanks to tourist ﬂows in South Korea.
In Europe, net sales totaled Euro 739.1 million, a 4.8% decrease (same decrease atconstant exchange rates) compared to the previous year. Thanks to new store openings
during the year (17 net of one closure), the retail channel limited its net sales decrease
compared to prior year to -1.3% (-1.1% at constant exchange rates). Wholesale results,
already hit by general weakness on the domestic market, were further limited by the
aforementioned strategy of rationalization of independent retailers.
In the twelve months ended January 31, 2015, the Italian market generated total
net sales of Euro 553.4 million, broadly in line with the Euro 552.9 million recorded
in 2013. There was no signiﬁcant difference in the respective performances of thetwo distribution channels, with the retail channel recording a slight decrease and thewholesale channel slight growth.
The American market generated net sales of Euro 492.2 million, slightly up on the Euro
488 million recorded in 2013: +0.9% at actual exchange rates and +0.3% at constantexchange rates. A total of 19 DOS were opened during the year (net of two closures)and the retail channel recorded an overall increase in net sales (+7.7% at actual
exchange rates and +7.2% at constant exchange rates). Meanwhile, the wholesalechannel recorded a double-digit drop in net sales (also because of the aforementioned
program to convert wholesale customers into DOS).
In the twelve months ended January 31, 2015, Japan recorded signiﬁcant growth with
net sales of Euro 367.6 million, a 7.9% increase on prior year (+13.4% at constantexchange rates). The DOS network was rationalized with the closure of three Prada
stores and the opening of a Miu Miu store.
The Middle East market generated net sales totaling Euro 103.5 million, an increaseof 13.6% (+12.2% at constant exchange rates) compared to Euro 91.1 million theprevious year. The excellent performances of footwear in general and the Miu Miu
brand must be highlighted.
Products
The footwear division has recorded net sales of Euro 644.7 million, an 8.4% increase
compared to prior year (+8.1% at constant exchange rates). Footwear sales increased
to 18.3% of consolidated net sales from 16.8% in 2013. With the sole exception of
the North American market where footwear sales fell slightly compared to prior year,
growth was recorded in all geographical areas, solely thanks to the retail channel(+19.1% at actual exchange rates and at constant exchange rates).
Clothing contributed 16.9% of consolidated net sales in 2014 with total net salesof Euro 594.8 million, a 2.3% increase on the Euro 581.6 million reported for 2013(+2.7% at constant exchange rates). The growth was driven by the retail channel
which recorded a 4.4% increase (+4.9% at constant exchange rates). As for footwear,
clothing sales fell in the wholesale channel compared to 2013.
42

PRADA Group

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Leather goods contributed net sales of Euro 2,218 million with a 4.9% decrease
compared to Euro 2,332.5 million in 2013 (-5% at constant exchange rates). The
decrease recorded by this division affected all markets (except Japan) and hit the retailchannel results of the Prada and Miu Miu brands.
BrandsThe Prada brand generated net sales of Euro 2,895.4 million, slightly down on 2013
when its sales totaled Euro 2,943.6 million. The decrease of 1.6% (-1.7% at constantexchange rates) was broadly the same in both the retail and wholesale channels.
From a geographical perspective, the results achieved by each brand in the various
regions were consistent with the performance of the Group as a whole, albeit withsome variances in Italy, where Prada achieved 4.5% net sales growth (Group +0.1%),
and in the Middle East, where Prada grew by 5.4% (Group +13.6%). Meanwhile,
sales performance by brand in terms of product line were exactly in line with Group
performance.
The Miu Miu brand generated net sales of Euro 526.8 million, a 1.5% increase comparedto Euro 519.1 million in 2013 (+1.7% at constant exchange rates). All of the growth
was achieved in the retail channel which recorded a 4% net sales increase (+4.4% atconstant exchange rates). In contrast, the wholesale channel recorded a double-digit
drop in net sales, at both actual exchange rates and constant exchange rates. Except
on the Italian market where there was a significant fall in net sales compared to 2013
and, to a lesser extent, in Europe, the Miu Miu brand enjoyed double-digit growth on
all other markets. As for the Prada brand, the Miu Miu sales trend in terms of productline was wholly in line with the Group trend.
In the twelve months ended January 31, 2015, the Church’s brand contributed
consolidated net sales of Euro 74 million, up by 7.9% from Euro 68.6 million theprevious year (+4.9% at constant exchange rates). The sales growth was driven by
the DOS which, alone, achieved a 14.8% increase (+12% at constant exchange rates).
Meanwhile, the wholesale channel recorded a 3.4% decrease in net sales (-6.8% atconstant exchange rates).
The Car Shoe was hit especially hard by the slump in the wholesale channel. It generated
net sales of Euro 11.9 million, a decrease of 11.1% compared to prior year.
Royalties
In the twelve months ended January 31, 2015, licensing agreements generated royalties
income of Euro 38.3 million, 2.2% less than the Euro 39.1 million recorded in 2013.
The decrease related entirely to revenues under some minor licensing agreements thatwere terminated during the year. Eyewear royalties performed very well with a 6.3%
increase compared to 2013.

PRADA Group

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Number of stores
January 31, 2015

January 31, 2014

Owned

Franchises

Owned

Franchises

Prada

362

27

330

24

Miu Miu

169

8

150

8

Church’s

55

-

52

-

Car Shoe

8

-

8

-

Total

594

35

540

32

January 31, 2015
Owned

January 31, 2014

Franchises

Owned

Franchises

Italy

51

6

51

6

Europe

167

3

150

6

Americas

110

-

91

-

Asia Pacific

175

22

157

20

Japan

70

-

72

-

Middle East

17

4

16

-

Africa

4

-

3

-

Total

594

35

540

32

Operating results
Gross margin – net revenue less cost of goods sold – was Euro 2,550.6 million for thetwelve months ended January 31, 2015, or 71.8% of net sales. The decrease in grossmargin percentage from 73.8% in 2013 was essentially due to the different productmix and to unfavorable foreign exchange trends.
EBITDA for the year totaled Euro 954.2 million (26.9% of net revenues), down comparedto Euro 1,143.2 million in 2013 (31.9% of net revenues). Meanwhile, EBIT for the year
also decreased to Euro 701.6 million or 19.8% of net revenues. The decrease was dueto the aforementioned reduction in gross margin as well as to the higher incidence of
operating expenses because of ongoing investment in the retail network and initiatives
aimed at strengthening brand identity and the link with the clientele, above all the“Pradasphere” event in London and Hong Kong.
Net ﬁnancial expenses for the year amounted to Euro 33.8 million. The increase
compared to the Euro 16.3 million recorded in 2013 was due to higher net interest
expenses because of higher average bank borrowing and to higher foreign exchange
losses. The effective tax rate was 31.2%, in line with the rate of 30.9% recorded in
2013.
The ﬁnancial year 2014 has ended with net income attributable to the Group of Euro
450.7 million, or 12.7% of net revenues.

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EBITDA by brandtwelve months
ended January 31, 2015
(amounts in thousands of Euro)

Group

Prada

Miu Miu

Church’s

Car Shoe

Other

Net sales

3,513,436

2,895,437

526,770

74,041

11,935

5,253

Royalties

38,26034,868

3,378

14

-

-

3,551,696

2,930,305

530,148

74,055

11,935

5,253

EBITDA

954,249

922,644

35,130

4,605(7,295)(835)

EBITDA %

26.9%

31.5%

6.6%

6.2%

-

-

twelve months
ended January 31, 2014
(amounts in thousands of Euro)

Group

Prada

Miu Miu

Church’s

Car Shoe

Other

Net sales

3,548,207

2,943,633

519,142

68,60913,427

3,396Royalties

39,14037,127

1,997

16

-

-

Net revenues

3,587,347

2,980,760

521,139

68,625

13,427

3,396

EBITDA

1,143,186

1,054,126

89,322

4,368(4,795)

165

31.9%

35.4%

17.1%

6.4%

-

-

Net revenues

EBITDA %The PRADA brand generated EBITDA of Euro 922.6 million for the twelve months
ended January 31, 2015, 31.5% of net revenues and down by 12.5% compared tothe ﬁgure of Euro 1,054.1 million reported in 2013. Gross margin was affected by aless favorable sales mix in terms of products sold and by the generally negative forex
effect during the year. At the level of operating expenses, major investment in DOS
network expansion eroded proﬁtability while revenue growth slowed down. In linewith the long-term vision for brand positioning, important communications initiatives
were conﬁrmed (e.g. the Pradasphere – an exclusive exhibition which explored thePrada Universe at the exceptional locations of Harrods Knightsbridge in London andCentral Ferry Pier 4 in Hong Kong) and the costs partially offset by measures aimed atcontaining other expenses.
The Miu Miu brand generated EBITDA of Euro 35.1 million for the twelve months ended
January 31, 2015, 6.6% of net revenues and down by 60.7% compared to the ﬁgure ofEuro 89.3 million reported for 2013. For Miu Miu, a fall in gross proﬁt, essentially for thesame reasons stated above for Prada, and the operating expenses generated by retail
network development hit operating proﬁts for the year, also considering moderatesales growth and the relative size of the brand. In 2014, management continued towork on the development of a strong brand identity, opening 19 DOS (net of one
closure), mainly in Asia Paciﬁc, and undertaking communications initiatives (advertising
campaigns, special projects and events) considered strategic for the positioning of thebrand.
The Church’s brand ended 2014 with EBITDA of Euro 4.6 million, a 5.4% increaseon the ﬁgure of Euro 4.4 million reported for 2013. The commercial development of
the brand, driven by SSSG and new openings, generated higher net revenues than inprior year but also led to an increase in costs so the brand was unable to beneﬁt fromoperating leverage in 2014. Advertising and communications expenses also increased
signiﬁcantly in 2014 in order to strengthen the identity of the English brand.

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The Car Shoe brand ended 2014 with negative EBITDA of Euro 7.3 million, a further
deterioration on prior year. Retail growth in 2014 did not make up for the downturn inthe wholesale segment.
Analysis of the statement of financial position
Net invested capital
The following table contains the statement of ﬁnancial position, as reclassiﬁed in orderto provide a better picture of the composition of Net Invested Capital.
(amounts in thousands of Euro)

Non-current assets (excluding deferred tax assets)

January 31
2015

January 31
2014

January 31
2013

1,821,773

2,557,198

2,225,451

Trade receivables, net

346,284

308,405

304,525

Inventories, net

654,545449,903343,802

Trade payables(437,420)(348,534)(330,613)

Net operating working capital

563,409409,774

317,714

Other current assets (excluding items of financial position)

190,149

132,866

165,962

Other current liabilities (excluding items of financial position)(411,878)(291,378)(230,285)

Other current assets/(liabilities), net(221,729)(158,512)(64,323)

Provision for risks(63,695)(52,660)(46,914)

Post-employment benefits(85,754)(63,279)(45,538)

Other long-term liabilities(159,419)(113,698)(85,289)

Deferred taxation, net

239,349

158,574

120,421

Other non-current assets/(liabilities)(69,519)(71,063)(57,320)

Net invested capital

2,829,359

2,405,650

2,017,844

Shareholder's equity – Group(3,000,737)(2,687,554)(2,320,022)

Shareholder's equity – Non-controlling interests(17,410)(13,986)(10,470)(3,018,147)(2,701,540)(2,330,492)

Long-term financial payables(254,462)(207,969)(79,348)

Short-term financial, net surplus/(deficit)

443,250

503,859

391,996

Net financial position surplus/(deficit)

188,788295,890

312,648(2,829,359)(2,405,650)(2,017,844)

n.a.

n.a.

n.a.

Total consolidated shareholders' equity

Shareholders’ equity and net financial position
Debt to Equity ratio

At January 31, 2015, Net invested capital stood at Euro 2,829.4 million, Euro 423.7
million more than reported at January 31, 2014.
At January 31, 2015, non-current assets, excluding deferred tax assets, amounted
to Euro 2,557.2 million, an increase of Euro 331.7 million compared to January 31,
2014. This increase was mainly due to capex of Euro 449.7 million for the year andto the restatement of property, plant and equipment and intangible assets expressedin currencies other than the Euro, increasing their value by around Euro 94 million.
Total capex included Euro 260.9 million to expand and renew the retail network, Euro58.9 million to strengthen production facilities and Euro 129.9 million relating to thecorporate area, Euro 61.5 million of which related to the aforementioned purchaseof the real estate property in Milan. Intangible assets at January 31, 2015, include
assets with an indeﬁnite useful life i.e. goodwill totaling Euro 513.2 million. As requiredby “IAS 36 Impairment of Assets”, these assets were subjected to an impairment
test at the reporting date. The value in use of the CGUs to which the goodwill havebeen allocated, essentially determined using methods based on discounted future
cash ﬂows, did not reveal any impairment. The results of the impairment tests were
further supported by sensitivity tests. More information is provided in the Notes to theConsolidated ﬁnancial statements under Note 16.
Net operating working capital increased by Euro 153.6 million compared to January 31,
2014, to stand at Euro 563.4 million. The increase is due to the net increase of 54 DOS

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compared to prior year as well as to a different replenishment strategy adopted in thelast few months of 2014 in order to improve the retail range. At the reporting date, rawmaterials and ﬁnished products are recorded at estimated realizable amount which is
net of inventory provisions of Euro 64.2 million.
Total other current liabilities, net, increased from Euro 158.5 million at January 31,
2014, to Euro 221.7 million mainly because of the larger negative reporting date fairvalue of derivative instruments used to hedge the exchange risk and because of higher
capex payables which, at January 31, 2015, also included Euro 55 million outstanding
in relation to the purchase of the corporate headquarter ofﬁces.
Other non-current liabilities, net, totaled Euro 69.5 million and remained almost
unchanged compared to January 31, 2014. The increase in non-monetary liabilities fordeferred lease income and long-term employee beneﬁts was offset by an increase indeferred tax assets mainly because of higher temporary differences between the tax
value and consolidated reported value of ﬁnished products.
Group shareholders’ equity amounted to Euro 3,000.7 million at January 31, 2015.
During the year, dividends of Euro 281.5 million were distributed to the PRADA spa
shareholders (as approved by the Annual General Meeting on May 22, 2014, on theﬁnancial statements for the year ended January 31, 2014). The weakening of theEuro towards the end of the reporting period led to the restatement of shareholders’equity expressed in currencies other than the Euro thus generating an increase in thetranslation reserve of Euro 180.4 million.
Net financial position
The following table summarizes the items included in the net ﬁnancial position.
January 31
2015

January 31
2014

January 31
2013(255,203)(207,950)(78,830)

-

(19)

(518)

741

-

-

Long-term financial payables(254,462)(207,969)(79,348)

Short-term financial payables and bank overdrafts(263,335)(61,909)(175,570)

Payables to parent company and related parties(2,371)(4,130)(5,018)

Receivables from parent company and related parties

11

2,008

1,413

Obligations under finance leases

(21)

(524)

(575)

Cash and cash equivalents

708,966

568,414571,746

Short-term financial (payables)/receivables, net of cash and cash
equivalents

443,250

503,859

391,996

Net financial surplus/(deficit)

188,788295,890

312,648

Net financial surplus/(deficit), excluding receivables/(payables) withrelated parties

190,407

298,012316,253

n.a.

n.a.

n.a.

(amounts in thousands of Euro)

Long-term debt
Obligations under finance leases – non-current
Long-term financial receivables due from related parties

NFP/EBITDA ratio

At January 31, 2015, the Group’s net ﬁnancial position showed a cash surplus of Euro
188.8 million. Operating cash ﬂows for the twelve months then ended amounted toEuro 483.6 million and were entirely employed, together with part of the existing cash,
to ﬁnance capital expenditure and to pay dividends to the shareholders of PRADA spa(Euro 281.5 million) and to the non-controlling shareholders of the subsidiaries (Euro
9.4 million). It must be also noted that, during the year, in order to increase its ﬁnancial

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ﬂexibility while taking advantage of favorable conditions available on the credit market,
the Group arranged a new revolving credit facility of Euro 315 million with a syndicate
of banks and Euro 150 million of the facility was utilized at the reporting date.
Risk factors
Risk factors regarding the international luxury goods market
Risks regarding the general state of the economy and the Group’s international
operations
The performance of the luxury goods market greatly depends on general economic
conditions. Therefore, the Group’s proﬁtability and operating performance are exposed
to global macroeconomic risk factors as a consequence of its operations on aninternational scale.
The current international economic environment could have a negative impact on
demand for the Group’s products and reduce access to credit, causing ﬁnancial
problems for customers and other parties with which the Group operates. Overall,these factors could have a negative impact on the business, results, cash ﬂows andthe ﬁnancial condition of the Group.
A signiﬁcant portion of the Group’s sales is made to customers who purchasegoods during trips abroad. Consequently, unfavorable economic conditions (e.g. theglobal ﬁnancial crisis of 2008 and 2009), global political developments (e.g. the war
in Iraq in the spring of 2003), other social or geopolitical factors resulting in unrest,
instability, disorder, civil war or military conﬂict, natural disasters like ﬁres, ﬂooding andearthquakes, or other events (e.g. the events of September 11, 2001, in the UnitedStates or travel advice issued by the World Health Organization in response to Severe
Acute Respiratory Syndrome, “SARS”) which lead to changes in the ﬂow of travelers
or a reduction in the volume of travel have in the past and could in future have anegative impact on the Group’s business and results.
Risks regarding the protection of intellectual property rights
The Group believes that its trademarks and other intellectual property rights arefundamental to its success and market position. Consequently, the Group’s businessis strongly dependent on its ability to protect and defend its trademarks and otherintellectual property rights.
The Group is constantly committed to the international registration and protection of
its trademarks and other intellectual property. It maintains that its trademarks and otherintellectual property rights are adequately protected on major markets by registration
applications, existing registrations and other legal safeguards.
Risks regarding brand image and recognition
The success of the Group on the international luxury goods market is linked to theimage and distinctiveness of its brands. These features depend on many factors, likethe style and design of products, the quality of materials and production techniques
used, the image and location of the Group’s directly operated stores, the carefulselection of licensees for certain product categories and the communications activities
in terms of public relations, advertising, marketing and Group proﬁle in general.
Preservation of the image and prestige acquired by the Group’s brands in the fashionand luxury goods industry is an objective that the Prada Group pursues by closely
monitoring each step of the process, both inside and outside the company, in order toguarantee uncompromised quality. It also engages in a constant search for innovationin terms of style, product and communications in order to ensure that its message isalways consistent with the strong identity of the brands.
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Risks regarding ability to anticipate trends and react to changing customer
preferences
The Group’s success depends on its ability to create and drive market and producttrends while anticipating changes in customer preferences and in the dynamics of theluxury goods market.
The Group pursues its objective of driving the luxury goods market by stimulating
consumer markets and setting trends thanks to the creative efforts of its Design and
Product Development department. This area of the business includes around 900
persons divided between design – where creativity is boosted by a strong mix ofnationalities, cultures and talents – and development – where craft skills combinedwith tried and tested industrial processes ensure that the Group continues to compete
in order to keep up with consumer trends and emerging lifestyles.
Risk factors specific to Prada Group
Risks regarding exchange rate fluctuations
The Group has a vast international presence and is, therefore, exposed to the foreignexchange risk which can negatively impact revenue, costs, margins and proﬁt. In orderto hedge the foreign exchange risk, the Group enters into hedging derivatives designed
to guarantee the Euro (or other operating currency) amount of identiﬁed future cash
ﬂows. These future cash ﬂows mainly regard the collection of trade and ﬁnancial
receivables and the settlement of trade payables. They are mainly concentrated in
PRADA spa, Group holding company and worldwide distributor of Prada and Miu Miu
brand products.
Exchange rate risk management is described in more detail in the Notes to theConsolidated ﬁnancial statements.
Risks regarding interest rate fluctuations
The interest rate risk is the risk that cash outﬂows might vary as a result of interest
rate ﬂuctuation. In order to hedge this risk, which is mainly concentrated in theparent company PRADA spa, the Group uses interest rate swaps and collars. These
instruments convert variable rate loans into ﬁxed rate loans or loans at rates within anegotiated range of rates.
Interest rate risk management is described in more detail in the Notes to theConsolidated ﬁnancial statements.
Risks regarding the importance of key personnel
The Group’s results depend both on the contribution of certain key ﬁgures who
have played an essential role in the development of the Group and who have great
experience of the fashion and luxury goods industry and on Prada’s ability to attract
and retain personnel who are highly capable in terms of the design, marketing andmerchandising of products.
The Group believes it has a management structure capable of guaranteeing theongoing success of the business and has recently implemented a long-term incentive
plan in order to retain key ﬁgures so that they will continue to fulﬁl roles essential toachievement of the challenging objectives that the Group constantly sets itself.
Risks regarding the implementation of strategy
The Group’s ability to increase revenues and improve proﬁtability depends on the
successful implementation of its strategy for each brand. As already stated, thisstrategy is mainly based on continued support and development of retail channel

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performance and on expansion on an international scale.
The Group sustains the operating performance and results of the retail channel byconstantly checking and, if necessary, redesigning the main business processes, also
through localized marketing initiatives that reassert the distinctive strengths of theGroup brands: their strong identity, the close control over the entire value chain, theoverseeing capacity to combine innovation and quality in a short period of time and a
network of stores positioned on the most prestigious shopping streets and the mostimportant international department stores. In order to ensure the success of each new
DOS, the Group carefully assesses market conditions and consumer trends in the new
DOS location. In particular, when entering into new countries, the Group dedicatessigniﬁcant resources to ensuring that sales managers and personnel convey an image
consistent with the identity of the Group brands and a level of service in keeping with
the quality of the products. The utmost attention is also paid to the design and ﬁttingout of the stores themselves so that brand identify is properly represented.
Risks regarding the outsourcing of manufacturing activities
The Group designs, checks and produces in-house most of its prototypes and samples
while outsourcing production of most of its accessories and products to third parties
with the right experience and skills.
The Group has implemented a rigorous inspection and quality control process for all
outsourced production. Prada contractually requires its outsourcers to comply withrules and regulations on brand ownership and other intellectual property rights, with all
the provisions of laws and national collective agreements on labor and social security
rules and with laws and regulations on health and safety in the workplace. It also
requires them to read the Prada Group Code of Ethics and make an undertaking torespect the principles set out in it.
Credit risk
Credit risk is deﬁned as the risk that a counterparty in a transaction causes a ﬁnancial
loss for another entity through failure to fulﬁll its obligations. The maximum risk towhich an entity is potentially exposed is represented by all ﬁnancial assets recordedin the ﬁnancial statements. The Group essentially believes that its credit risk mainly
regards trade receivables generated in the wholesale channel and cash and cash
equivalents. The Group manages the credit risk and reduces its negative effects
through its commercial and ﬁnancial strategy.
On the trade receivables side, credit risk management is performed by controlling andmonitoring the reliability and solvency of customers. At the same time, the fact that the
total receivables balance is not highly concentrated on individual customers, the factthat net sales are evenly spread geographically and the ongoing strategy of selective
reduction of the wholesale customer base (for reasons including the prevention ofparallel distribution) have led to a reduced credit risk.
On the cash and cash equivalents side, the risk of default substantially relates to bankdeposits which is the method most widely used by the Group, also considering its
low-risk policy, to invest the surplus funds generated by operations. The default risk
is mitigated by the allocation of the available funds among different bank deposits
in terms of countries, currencies and banks as well as by the term proﬁle of suchinvestments which is always short-term. The residual signiﬁcant portion of cash andcash equivalents is made up of bank accounts and cash. The Group maintains that there
is no signiﬁcant risk on these kinds of liquid assets as their use is strictly connectedwith the business operations and corporate processes and, as a result, the number ofparties involved is highly fragmented.

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Liquidity risk
The liquidity risk relates to the difﬁculty the Group may have in fulﬁlling its obligations
with regard to ﬁnancial liabilities. The Directors are responsible for managing the liquidity
risk while the Corporate Finance department, reporting to the CFO, is responsible formanaging ﬁnancial resources as well as possible. The Directors believe that the funds
and lines of credit currently available, in addition to those that will be generated byoperating and ﬁnancing activities, will allow the Group to meet its needs resulting frominvesting activities, working capital management, repayment of loans as they fall due
and dividend payments as planned.
Legal and regulatory risks
The Prada Group operates in a complex regulatory environment and is exposed to legalrisks and risks regarding compliance with applicable laws, including:–

the risks associated with the failure to comply with the Rules Governing the
Listing of Securities on the Stock Exchange of Hong Kong or with other laws or
regulations in force in Hong Kong and applicable to the Company following its
listing on the Stock Exchange of Hong Kong Limited;–

the risks associated with the failure to comply with the laws and regulations
applicable to the Company following the listing of the Notes issued on August
2013 on the Irish Stock Exchange;–

the risks associated with health and safety at work in compliance with Italian
Legislative Decree 81/08 and equivalent regulations in other countries;–

possible legal sanctions for wrongful acts pursuant to Law 231/2001, as
subsequently amended;–

the risks associated with antitrust rules in the areas where the Group operates;–

the possibility of events that adversely affect the reliability of annual ﬁnancial
reporting and the safeguarding of Group assets;–changes in international tax rules applicable in the various countries where theGroup operates that could expose the Group to the risk of non-compliance;–

possible industrial compliance risks regarding the conformity of the ﬁnishedgoods distributed and the raw materials and consumables used with Italian andinternational laws and regulations.

By involving all of its various divisions and using external specialist advisors whennecessary, the Group ensures that its processes and procedures are updated to comply
changes in rules and regulations, reducing the risk of non-compliance to an acceptablelevel. As well as by Divisional Managers and by audit activities, monitoring activities
are also carried out by speciﬁc entities and committees such as the Supervisory Board,
the Internal Control Committee and the Industrial Compliance Committee.
Risks regarding data processing
Data is processed using information systems subject to a governance model which
ensures that:–data is adequately protected against the risk of unauthorized access and disclosure(including means for protecting personal privacy and proprietary information),
improper information modiﬁcation or destruction (including accidental loss) andutilization inconsistent with assigned duties;–

data is processed in accordance with applicable laws and regulations.

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Information on relationships and transactions with related parties
Information on the Group’s relationships and transactions with related parties isprovided in the Notes to the Consolidated ﬁnancial statements, insofar as required
by IFRS, and in the Directors’ Report and Corporate Governance Report, insofar as
required by the Hong Kong Stock Exchange Rules.
Non-IFRS measures
The Group uses certain ﬁnancial measures (“non-IFRS measures”) to measure its
operating performance and to help the reader to understand and analyze its statementof ﬁnancial position. Although they are used by Group management, these measures
are not universally or legally deﬁned and are not regulated by IFRS based on which
the Consolidated ﬁnancial statements are prepared. As other companies operating in
the luxury goods segment might utilize the same measures, but based on different
calculation criteria, it is worth noting the fact that said non-IFRS measures should
always be read together with the related notes and may not be suitable for a directcomparison between different companies.
In this Annual Report, the Prada Group has used the following non-IFRS measures:
EBITDA: Earnings Before Interests, Taxation, Depreciation and Amortization, i.e.
“Consolidated net income for the year” adjusted to exclude “Interest and otherﬁnancial income/(expense) and dividends from investments”, “Taxes on income” and“Depreciation, amortization and impairment”.
EBIT: Earnings Before Interest and Taxation, i.e. “Consolidated net income for theyear” adjusted to exclude “Interest and other ﬁnancial income/(expense) and dividends
from investments” and “Taxes on income”.
SSSG: Same Store Sales Growth, i.e. same store sales growth comparing constantexchange rate results of all DOS operational for more than a year and utilizing theeffective number of days of operations for each DOS in the previous year (i.e. only the
number of days in which the DOS were open in both reporting periods).
Net ﬁnancial position: Short-term and long-term ﬁnancial payables towards third parties,
towards related parties and under ﬁnance leases less Cash and cash equivalents,
short-term and long-term ﬁnancial receivables from third parties and related parties.
Free cash ﬂows: net cash ﬂows generated by operating activities less cash ﬂows
utilized in investing activities.
The following table shows the calculation of EBITDA and EBIT for the last threereporting periods.
twelve months
ended
January 31
2015

twelve months
ended
January 31
2014

twelve months
ended
January 31
2013

Consolidated net income for the period

459,218

637,805

633,277

Taxes on income

208,484

285,091

250,339

Interest and other financial income/(expense) anddividends from investments

33,84916,341

6,165

EBIT (Earnings Before Interest and Taxation)

701,551

939,237

889,781

Depreciation, amortization and impairment

252,698

203,949

162,688

EBITDA (Earnings Before Interest, Taxation,
Depreciation and Amortization)

954,249

1,143,186

1,052,469(amounts in thousands of Euro)52

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Outlook for 2015
In the ﬁrst few months of 2015, the ﬁnancial markets have reacted positively tomonetary policy stimulus, raising expectations of growth for the real economy.
However, there is still uncertainty on the international luxury goods market because of
local issues on certain markets and the ongoing volatility of currencies. In this context,
the Group is working to contain costs in the short-term and on broader measures thatwill increase the overall efﬁciency of the business in terms of both the supply chain
and store productivity.

Milan, March 27, 2015

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54

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Directors and Senior Management

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Directors
Our Board consists of nine Directors, of whom five are executive Directors, one is nonexecutive Director and three are independent non-executive Directors. The Board of
Directors is appointed for a term of three years.
Chairman
MAZZI, Carlo, aged 68, is the Chairman of the Board. He was appointed to the Board
first in 2004 and was re-elected as Executive Director on May 22, 2012. Mr. Mazzi
holds directorships in subsidiaries of the Company. He holds directorships in Prada
Holding S.p.A., Bellatrix S.p.A. and Ludo S.r.l., which are substantial shareholders of
the Company. Mr. Mazzi obtained a degree “cum laude” (with praise) in MechanicalEngineering from the Bologna University of Italy in 1971 and obtained a Master’s degreein Business Administration from Bocconi University of Milan in 1976. Mr. Mazzi worked
as a Manager of the Large Corporate department of IMI and San Paolo IMI Bank from1994 to 2000. He was a board member of IBI International Business Advisors Investment
N.V. - Amsterdam; Vice Chairman and Executive Committee Member of IBI Bank AG Zurich; Board Member of IBI Corporate Finance B.V. - Amsterdam; Managing Directorof IBI S.p.A. - Milan (financial intermediation ex art. 106 TUB) from 2000 to 2004. He iscurrently a board member of Chora S.r.l. - Milan (a service company). He was previously
a board member of ABN AMRO S.p.A. - Milan (focused on merchant banking), SAGO
S.p.A. - Florence (an IT research company responsible for the management of healthfacilities), IMILEASE S.p.A. - Rome (a leasing company), Banca di Intermediazione
Mobiliare IMI S.p.A. - Milan (now Banca IMI S.p.A.) (focused on investment banking),
Tecnofarmaci S.p.A. - Pomezia (a research company in the pharmaceuticals industry),
SIM S.p.A. - Rome (focused on project management) and Paros International Insurance
Brokers S.r.l. - Milan (in the insurance brokerage sector). He is currently a member ofthe Remuneration Committee and Nomination Committee. Mr. Mazzi is not and has
not been a director of any other listed companies in Hong Kong or overseas in the past
three years.
Executive Directors
PRADA BIANCHI, Miuccia, aged 66, is a Chief Executive Officer of the Company. She
was appointed as the Chairperson of the Board on November 20, 2003 until February
14, 2014 and she was re-elected as Executive Director on May 22, 2012. Ms. Prada
holds a directorships in Prada Holding S.p.A., Bellatrix S.p.A. and Ludo S.r.l., which aresubstantial shareholders of the Company. Ms. Prada received an Honorary Doctorate
from the Royal College of Art (London) in 2000. Ms. Prada is a co-founder of our Group
along with Mr. Bertelli. Ms. Prada is the wife of Mr. Bertelli, one of our Chief Executive
Officers. Ms. Prada is not and has not been a director of any other listed companies inHong Kong or overseas in the past three years.
BERTELLI, Patrizio, aged 68, is a Chief Executive Officer of the Company. He was first
appointed to the Board on November 20, 2003 and was re-elected as Executive Director
on May 22, 2012. Mr. Bertelli holds directorships in subsidiaries of the Company. He
holds directorship in PA BE 1 S.r.l., which is a substantial shareholder of the Company.
Mr. Bertelli received an honorary degree in Business Economics from the University
of Florence in October, 2000. Mr. Bertelli is a co-founder of our Group along with Ms.
Prada. Mr. Bertelli is the husband of Ms. Prada, one of our Chief Executive Officers.
Mr. Bertelli is not and has not been a director of any other listed companies in Hong
Kong or overseas in the past three years.
GALLI, Donatello, aged 53, is the Chief Financial Officer of the Company. He wasappointed to our Board first on January 21, 2005 and was re-elected as Executive
Director on May 22, 2012. Mr. Galli holds directorships in subsidiaries of the Company.
Mr. Galli received a degree “cum laude” (with praise) in Economics and Banking from

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the University of Siena (Italy) in July, 1986. He started his career as business controller
at Faricerca S.p.A. (now the Angelini Group) (pharmaceutical laboratories and Linesconsumer products business), from 1987 to 1990. Mr. Galli was a financial analyst at
Istituto Mobiliare Italiano S.p.A. from 1990 to 1999 and then Head of the Large Corporate
Division central assessment office of San Paolo IMI S.p.A. until 2000. He was also the
Administration and Finance Director of IBI S.p.A. (now Alerion Clean Power S.p.A., arenewable energy company) from 2000 to 2004 and later joined Enertad S.p.A. (nowERG Renewable S.p.A., a renewable energies company) - both are listed companies
on the Italian Stock Exchange. Mr. Galli is not and has not been a director of any otherlisted companies in Hong Kong or overseas in the past three years.
COZZANI, Alessandra, aged 52, was appointed to the Board as Executive Director
first on December 20, 2013 and she was re-elected on May 22, 2014. She has been
our Investor Relations Director since July 2010, responsible for managing financial
communication and for relationships with investment community. Ms. Cozzani holds
directorships in subsidiaries of the Company. Ms. Cozzani joined our Group in 2000
and has covered different managerial roles within the Finance department. In 2003,
she was appointed as Group Financial Reports Director. Ms. Cozzani obtained a degree“cum laude” (with praise) in Business Administration from the University of Genoa(Italy) in 1988. She started her career as an auditor at Coopers & Lybrand (1989 to
1995). Prior to joining our Group, she worked in Castelletti International Transports,
the Italian subsidiary of an international logistic company (now Schenker Group) for
five years, most of the time as Finance and Control Director. Ms. Cozzani is not andhas not been a director of any other listed companies in Hong Kong or overseas in thepast three years
Non-Executive Directors
MICCICHÈ, Gaetano, aged 64, was appointed as Non-Executive Director first on
May 9, 2011 and was re-elected on May 22, 2012. Mr. Miccichè obtained a degreein Law from University of Palermo (Italy) in 1984 and a master’s degree in Business
Administration from SDA Bocconi University (Italy) in 1985. Mr. Miccichè began his
career in Cassa Centrale di Risparmio delle Provincie Siciliane in 1971 and became Headof Corporate Clients. In 1989 he joined Rodriquez S.p.A., the luxury yachting group, as
Chief Financial Officer. Mr. Miccichè also worked as General Manager of GerolimichUnione Manifatture (holding company with business in various industries), as General
Manager of Santa Valeria S.p.A. (chemical company) and as Managing Director andGeneral Manager of Olcese S.p.A. (yarn and thread mill company), all of which werelisted on the Italian Stock Exchange. Since June 2002, he has been with the Intesa
Sanpaolo Group (formerly Banca Intesa) and currently serves as the General Manager
and Head of Corporate and Investment Banking Division and Chief Executive Officer
of Banca IMI. Furthermore on May 9, 2013, he was appointed to be a member of theManagement Board of Intesa Sanpaolo S.p.A.. Mr. Miccichè is also a board memberof Pirelli & C. S.p.A., a major Italian group which operates in the tyre sector, whose
shares are listed on the Italian Stock Exchange, a board member of ABI Associazione
Bancaria Italiana and a member of the Scientific Committee of the Politecnico of Milan.
On May 31, 2013 he was granted the honorary title of “Cavaliere del Lavoro” by the
President of the Republic of Italy. Save as disclosed herein, Mr. Miccichè is not andhas not been a director of any other listed companies in Hong Kong or overseas in thepast three years.
Independent Non-Executive Directors
MATTEI, Gian Franco Oliviero, aged 69, was appointed as Independent Non-Executive
Director first on May 28, 2009 and was re-elected on May 22, 2012. Mr. Mattei obtained a
Degree in Economics from The Sapienza University of Rome (Italy) in 1970 and becamea Public Chartered Accountant (member of the Registro dei Revisori Contabili) with the
Italian Ministry of Justice in 1995. He has worked as Managing Director (Investment
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Banking) in Credit Suisse, Managing Director (Global Banking & Markets) in The RoyalBank of Scotland, Head of Investment Banking at Sanpaolo IMI and Chairman of Banca
IMI and was previously Head of the Finance Department at the Istituto Mobiliare Italiano
IMI. Mr. Mattei has also been a Board Member of Borsa Italiana. He is Chairman of
Officine CST - Consulting Services & Technology - S.p.A.. Mr. Mattei is currently the
Chairman of the Audit Committee, the Remuneration Committee and the Nomination
Committee. Mr. Mattei is not and has not been a director of any other listed companies
in Hong Kong or overseas in the past three years.
FORESTIERI, Giancarlo, aged 68, was appointed to our Board first on May 31, 2007 andwas re-elected as Independent Non-Executive Director on May 22, 2012. Mr. Forestieri
obtained a degree in Economics and Banking from the University of Siena (Italy) in1970 and obtained a Specialization in Corporate Finance from the Scuola Mattei - ENI
in 1971. From 1988 to the present, Mr. Forestieri has been a Full Professor of Financial
Markets and Institutions at the Bocconi University in Milan. Mr. Forestieri’s professional
experience includes serving as a member of the boards of directors of INA and Assitalia(from 1993 to 1994), Mediofactoring (from 1997 to 1999), Cassa di Risparmio di Parmae Piacenza (from 1996 to 1999 and then from 2003 to 2007 as the chairman of theboard), Banca Intesa (from 1999 to 2006) and as a member of its executive committee(from 2000 to 2006), Alleanza Assicurazioni (from 2001 to 2007), Centrosim (from 1998
to 2003 where he was the chairman of the board) and Crédit Agricole Vita (from 2007
to 2013). Mr. Forestieri is a member of the Italian Scientific Societies in the Fields ofFinance and Management. Mr. Forestieri is currently a member of the Audit Committee
and the Remuneration Committee. Mr. Forestieri is not and has not been a director of
any other listed companies in Hong Kong or overseas in the past three years.
LIU, Sing Cheong, JP, aged 59, was appointed as Independent Non-Executive
Director first on May 9, 2011 and was re-elected on May 22, 2012. He has been the
Chairman of My Top Home (China) Holdings Limited (a Guangzhou-based property
agency and consultancy) since 2005, the Vice Chairman of Guangzhou Pearl River- Hang Cheong Real Estate Consultants Limited (from 1993 to 2008), Chairman ofEvergreen Real Estate Consultants Limited since 2001, Director of HKS Education
Fund Limited (“HKSEF”) since 2005 (HKSEF is a charitable institution which holds
certain % of shares in Hongkong Sales (International) Limited (“HKSI”), an investment
holding, knitwear manufacturing company), and Non-executive Director of HKSI since2005 and its Vice Chairman since April 1, 2012 all of which are private companies. He
has been an independent non-executive director of Swire Properties Limited since2010 (Swire Properties Limited was listed on the Stock Exchange of Hong Kong on
January 18, 2012). Mr. Liu graduated from The Hong Kong Polytechnic in 1979 with an
Advanced Higher Diploma in Surveying and from The Hong Kong University of Scienceand Technology in 1994 with a Master of Business Administration degree. He has
been a fellow of the Royal Institution of Chartered Surveyors since 1994 and the Hong
Kong Institute of Surveyors since 1993. Mr. Liu is currently a member of the Audit
Committee and the Nomination Committee. Save as disclosed above, Mr. Liu is notand has not been a director of any other listed companies in Hong Kong or overseas in
the past three years.

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Senior Management
Our senior management is responsible for the day-to-day management of our businessof the Group.
ANTONACCI, Nicola, aged 51, has been Senior Vice President Prada Retail/Wholesaleof Prada USA Corp. since 2012. Mr. Antonacci is primarily responsible for overseeing
the Group’s commercial operations in the USA and Canada. Mr. Antonacci joined ourGroup in 1996 and covered, until 2010, different managerial roles within the commercial
and the collections development areas. From 2010 to 2011 he worked in Paris, as
Men’s RTW Director for Givenchy. Prior to joining our Group, he worked for Giorgio
Armani S.p.A. and Hermes as store manager and visual merchandiser. Mr. Antonacci is
not and has not been a director of any other listed companies in Hong Kong or overseas
in the past three years.
BERTOLI, Franco, aged 56, has been Group Internal Auditing Director since 2007. He is
primarily responsible for the management of the Group internal control system and tooversee and verify the correct application of procedures within the Group. Mr. Bertoli
obtained a master's degree in Economics and Business from the University of Torino(Italy). He started his career as CFO in Multimedia Pubblicità S.p.A. (1994 – 1998).
Then he worked for almost ten years for the Telecom Group (1998 – 2007), covering
different managerial roles within the Group in Italy and abroad. Mr. Bertoli is not andhas not been a director of any other listed companies in Hong Kong or overseas in thepast three years.
BESIO, Paolo, aged 52, has been Group Tax Director since 2002. He is primarily
responsible for the management of the Group’s strategic tax policy. Mr. Besio obtained
a master's degree in Economics and Business from the University of Genoa (Italy).
Before joining the Group he worked for Pirola Pennuto Zei & Associati, where he acquired
extensive knowledge in corporate tax for domestic and multinational companies withspecialization in international tax, business restructuring and M&A (1998 - 2001). He
is currently a member of various tax committees. Mr. Besio is not and has not been a
director of any other listed companies in Hong Kong or overseas in the past three years.
BOZZI, Bruno, aged 53, has been Prada Women’s Ready to Wear Industrial Division
Director since 2010. Mr. Bozzi is primarily responsible for the manufacturing of thewoman’s ready to wear collection of the Prada brand. He joined our Group in 1996 andundertook managerial roles in the planning and production of ready to wear for both
Prada and Miu Miu brands. In 2009 he was appointed as Knitwear Division Director, arole which he is still covering. Prior to joining the Group he covered different roles in
the production departments of a number of manufacturing companies. Mr. Bozzi is notand has not been a director of any other listed companies in Hong Kong or overseas in
the past three years.
BRINI, Giulio, aged 47, has been Leather Goods Collections Director since 2015. He is
primarily responsible for overseeing the leather goods collections of Prada, Miu Miu and
Car Shoe. Mr. Brini obtained a degree in Economics and Banking from the Universityof Siena (Italy), in 1993. Mr. Brini joined the Group in 1995 and before being appointed
to his current position he covered different managerial roles in the merchandisingplanning and product development of leather goods for the Prada, Miu Miu and Car
Shoe brands. He was appointed as Retail Director of the Prada brand from 2011 to2015 until he was appointed to his current position. Mr. Brini is not and has not been a
director of any other listed companies in Hong Kong or overseas in the past three years.
BUSO, Daniele, aged 47, has been our Prada Men’s Ready to Wear Industrial Division
Director since 2009. Mr. Buso is primarily responsible for the manufacturing of the
men’s ready to wear collection of the Prada brand. He obtained a high school diploma
at Giulio Natta Technical High School in Padova in 1986. Mr. Buso joined our Group in

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2004 as Operations Director for Jil Sander brand and in 2008 was appointed as Linea
Rossa Ready to Wear Operations Director. He started his career in a Venetian fashioncompany before joining Gilmar in 1988. In 2001 he joined the Ferrè Group as Industrial
Director. Mr. Buso is not and has not been a director of any other listed companies inHong Kong or overseas in the past three years.
CANTINO, Stefano, aged 48, has been Group Marketing, Communication andCommercial Development Director since June 2009. He is primarily responsible for theGroup’s communication strategy and global marketing functions. Mr. Cantino obtaineda degree in Political Science from the University of Torino (Italy) in 1993. Mr. Cantino
joined our Group in 1996 and held several managerial roles in the commercial andmarketing areas with Prada, Church’s and Car Shoe, including Alaïa Operations Director,
Car Shoe Commercial Director and Church’s Brand and Retail Director. He was Prada’s
Marketing Director from 2005 to 2009 until he was appointed to his current position.
Mr. Cantino is not and has not been a director of any other listed companies in Hong
Kong or overseas in the past three years.
CARETTA, Fabrizio, aged 49, has been Group Legal Director since 2004. He is primarily
responsible for overseeing and assuring legal protection of the Group mainly concerning
contracts, litigation and real estate. He obtained a degree in Law from the Universityof Torino (Italy) in 1993 and he is admitted to the Italian Bar since 1996. Mr. Caretta
joined our Group in 2000 as Legal Director of Prada Industrial. Prior to joining our Group,
he started his career cooperating with the Italian law firm Studio Tucci. From 1995 to2000 he worked for Fila Sport S.p.A. as Senior Legal Counsel. Mr. Caretta is not andhas not been a director of any other listed companies in Hong Kong or overseas in thepast three years.
CAROLA, Pablo, aged 47, has been Regional Director for Central America and Caribbean
since 2013. Mr. Carola is primarily responsible for overseeing the Group’s commercial
operations in the Central America area, where he covers several managerial roles at
the Company’s subsidiaries. Mr. Carola obtained a University Degree in Business
Administration at Universidad de Politecnica de Catalunya (Spain). He joined the Group
in 2011 to manage human resources of both Miu Miu and Prada stores worldwide.
Prior to joining our Group he worked for almost twelve years as human resources
director at Louis Vuitton. Mr. Carola is not and has not been a director of any otherlisted companies in Hong Kong or overseas in the past three years.
CARRARO, Luca, aged 48, has been Miu Miu Ready to Wear Industrial Division Director
since 2003 and Leatherwear/Furs Ready to Wear Industrial Division Director since2010. He obtained a textile expert high school diploma in Padova (Italy) at Giulio Natta
Technical High School in 1986. He joined our Group in 1999 and undertook several
managerial roles in the planning and production of leatherwear for the Prada brand.
Prior to joining Prada he worked for various ready to wear manufacturing companies
in Italy as production and sample collection manager. Mr. Carraro is not and has notbeen a director of any other listed companies in Hong Kong or overseas in the past
three years.
CATERINI, Ruggero, aged 53, has been Chief Operating Officer and Chief Financial
Officer of Prada USA since 2006. Mr. Caterini is primarily responsible for planning,developing and implementing strategy for operational management of the USA and
Canadian area. Before joining our Group, Mr. Caterini covered different Finance &Administration Executive roles within several multinational companies operating in
the telecommunication sector in Brazil, Greece and Austria. He obtained a University
Degree in Mechanical Engineering at The Sapienza University of Rome (Italy). Mr.
Caterini is not and has not been a director of any other listed companies in Hong Kongor overseas in the past three years.

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CHOI, Moonyoung, aged 52, has been General Manager of Prada Korea since 2007.
She is primarily responsible for overseeing the Group’s commercial operations in
Korea. She started her career at Louis Vuitton, as the first Louis Vuitton Store Manager
in Korea (1991 – 1999). From 1999 to 2002 Ms. Choi worked at Celine Korea, LVMH
Group, as Retail Manager, subsequently becoming Country Manager for Korea. Ms.
Choi is not and has not been a director of any other listed companies in Hong Kong oroverseas in the past three years.
CIABATTI, Maurizio, aged 49, has been Group Engineering Director since 2006. He is
primarily responsible for real estate development, equipment and maintenance of retailstores, corporate offices and production sites. Mr. Ciabatti joined our Group in 1989
and has covered different managerial roles in the maintenance and real estate area and,starting from 2005, in Corporate Engineering. Mr. Ciabatti is not and has not been a
director of any other listed companies in Hong Kong or overseas in the past three years.
D’IPPOLITO, Andrea, aged 47, is Purchasing and Research Ready to Wear Industrial
Division Director. He joined our Group in 1989, and since 1996 he has been responsible
for purchases for the Sample Collection within the Ready to Wear Division and then he
was promoted as Ready to Wear Purchasing Director for all Group brands. Since 2010
he has also overseen the research fabrics, the raw material warehouses (as well as
the Finished Product Quality Control and Repairs Departments). Mr. D’Ippolito is notand has not been a director of any other listed companies in Hong Kong or overseas in
the past three years.
ETHERIDGE, Stephen, aged 56, has been Chief Executive Officer of Church & Co
Ltd. since 2001. He is primarily responsible for the industrial operations of the Church
Group. Prior to this he has covered the role of Chief Executive at Cheaney & Son
Footwear (1995 to 2001), a company which belonged to the Church Group. He started
his career in the Sales Department at John White Footwear Limited UK and increased
his responsibility up to the role of Managing Director (1986 to 1990). From 1990 to
1994 he was Managing Director of SE Marketing for Epic Fashion Footwear Limited, acompany specialized in production and distribution of men’s footwear. Mr. Etheridge is
not and has not been a director of any other listed companies in Hong Kong or overseas
in the past three years.
FAYARD, Pierre, aged 53, has been Regional Director for Middle East and South
Africa since he joined our Group in 2011. He is responsible for overseeing the Group’s
operations in the Middle East area and in South Africa, where he covers several
managerial roles at the Company’s subsidiaries. Mr. Fayard obtained a degree inBusiness Administration from Paris Business School in 1984. Prior to joining our Grouphe worked for almost twelve years for the LVMH Group, covering different managerial
roles at Sephora International, Sephora Middle East, Sephora UK and Sephora Europe.
Mr. Fayard is not and has not been a director of any other listed companies in Hong
Kong or overseas in the past three years.
GOTTI, Aldo Camillo, aged 50, has been Regional Director for France, Belgium and
the Principality of Monaco since 2014. He is responsible for overseeing the Group’s
operations in France, Belgium and the Principality of Monaco area, where he covers
several managerial roles at the Company’s subsidiaries. Mr. Gotti joined our Group in1990 and before being appointed to his current position, he held several managerial
roles in the wholesale, marketing and communication areas of the Prada and Miu
Miu brands, including Miu Miu General Manager. Mr. Gotti is not and has not been a
director of any other listed companies in Hong Kong or overseas in the past three years.
GRECO, Enzo, aged 49, has been Group Information Technology Director since
December 2014. He is primarily responsible for the management of the Group’s
information technology system. Mr. Greco obtained a degree in Mathematics, fromthe University of Florence (Italy) and a Master’s degree in Business Administration cum

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laude (with praise) from SDA Bocconi University in Milan (Italy) in 1996. He started his
career as IT Director for Federazione Toscana BCC in Florence (1997-2001). Later he
was responsible for Outsourcing Application Management Contract in Infogroup Spa,
Bank Group in Firenze (2002-2005). He worked for eight years for Esselunga Spa in
Milano as IT Director managing the whole group’s Information System. Mr. Greco is
not and has not been a director of any other listed companies in Hong Kong or overseas
in the past three years.
LAM, Shun Yan Janice, aged 44, has been General Manager of Prada Fashion
Commerce (Shanghai) since 2013. She is primarily responsible for overseeing theGroup’s commercial operations in China, where she covers several managerial rolesat the Company’s subsidiaries. Ms. Lam obtained a Bachelor degree in BA, Sociology
from the University of Hong Kong. She started her carrier at Jusco Store HK Ltd. (1993–
1995); then she was worked at Chickeeduck Distribution HK Ltd. in China (1999–2003).
Before joining our Group she was Managing Director at Alfred Dunhill China (2006-2012). Ms. Lam is not and has not been a director of any other listed companies inHong Kong or overseas in the past three years.
LANIA, Lanfranco Fabio, aged 48, has been General Manager of Prada Far East B.V.
since 2012. He is primarily responsible for overseeing the financial operations of themain Company’s sub-holding. Mr. Lania joined our Group in 2008 as Administration,
Finance and Control Manager for European retail subsidiaries. Mr. Lania obtained amaster degree in Accounting, Financial Statements and Financial Control at Consorzio
Pavese per gli Studi Post Universitari in 1995, and graduated in Business Administration
at the Luigi Bocconi University of Milan (Italy) in 1994. He started his career at KPMG
Advisory S.p.A. covering different advisory roles (2001 – 2008). Mr. Lania is not andhas not been a director of any other listed companies in Hong Kong or overseas in thepast three years.
LOMANTO, Maria Cristina, aged 40, has been Retail Director for Miu Miu brand since2013. She is primarily responsible for overseeing worldwide the retail strategy andoperations of the Miu Miu brand. Ms. Lomanto obtained a degree in Law from the
University of Milan (Italy) in 1998. She joined our Group in 1994 and before being
appointed to her current position she covered different managerial roles in wholesale,retail and collection merchandising areas. Prior to joining Prada, she worked in Yves
Saint Laurent as Commercial Director for Italy and Switzerland. Ms. Lomanto is not andhas not been a director of any other listed companies in Hong Kong or overseas in thepast three years.
LUPAS, Domnica Alexandra, aged 42, has been Regional Director for Central Europe
since 2012. She is primarily responsible for overseeing the Group’s operations inGermany, Austria, Switzerland and Czech Republic area, where she covers several
managerial roles at the Company’s subsidiaries. Ms. Lupas joined our Group in 1997 andhas covered different managerial roles within the Group. In 2005, she was appointed
as Administration, Finance and Control European Retail Subsidiaries Director. Ms.
Lupas obtained a degree in International Business Administration from the European
Business School in London in 1996. Ms. Lupas is not and has not been a director of any
other listed companies in Hong Kong or overseas in the past three years.
MARSICOLA, Alessandra, aged 55, has been the Chief Executive Officer of Prada
Fashion Commerce (Shanghai) since September 2014. She is primarily responsible foroverseeing the Group’s operations in China. Ms. Marsicola joined our Group in 1991
and before being appointed to her current position she covered different managerial
roles in the commercial department, including Prada Worldwide Store Operation
Director and Prada Retail Director for Prada Japan. From 2006 to 2009, she worked
first as Sales Director for La Rinascente then as Asia Pacific Retail Director for Fendi.
Ms. Marsicola is not and has not been a director of any other listed companies in Hong
Kong or overseas in the past three years.
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MECHERI, Fabrizio, aged 49, has been Footwear Division Director since August 2014.
He is primarily responsible for the manufacturing of the footwear collection for all theGroup’s brands. Mr. Mecheri joined our Group in 1999 and covered different managerial
roles within the industrial area and was then appointed General Manager of Prada
Singapore. Prior to joining our Group, he worked for Salvatore Ferragamo S.p.A. as
production manager for ladies’ footwear. Mr. Mecheri obtained an executive master
degree in Business Administration from Kellogg – HKUST of Hong Kong in 2012, andgraduated in Electronic Engineering at the University of Florence (Italy) in 1992. Hestarted his career at Andersen Consulting S.p.A. as top senior consultant (1993-1996).
Mr. Mecheri is not and has not been a director of any other listed companies in Hong
Kong or overseas in the past three years.
MITCHELL, Mishelle Sandra, aged 41, has been General Manager of Prada Australia
since 2010. She is primarily responsible for overseeing the Group’s commercial
operations in Australia, New Zealand, Thailand, Malaysia and Singapore, where shecovers several managerial roles at the Company’s subsidiaries. Ms. Mitchell joined ourGroup in 2006 and covered different managerial roles within Retail Department. Prior tojoining our Group, she worked at Origins (Estee Lauder) as National Sales & Education
Manager and Marcs as Regional Manager. Ms. Mitchell is not and has not been a
director of any other listed companies in Hong Kong or overseas in the past three years.
NOSCHESE, Marcelo, aged 50, has been Regional Director for South America since
December 2011, when he joined our Group. He is primarily responsible for overseeing
the Group’s soperations in Brazil. Mr. Noschese obtained a master degree in Business
Administration from INSEAD, Fontainebleau, France, in 1992 and graduated in Business
Administration in Getúlio Vargas Foundation São Paulo, Brazil. He started his career at
L’Oréal, as International Development Manager for the Fine Fragrances Division, andthen was appointed as General Manager for the Travel Retail Division in North andSouth America (1992 – 1998). Prior to joining our Group, he worked for LVMH – MoëtHennessy Louis Vuitton as Country Manager for Brazil (2001 – 2004) and for Salvatore
Ferragamo S.p.A., as Regional Development Director for South America (2007 – 2011).
Mr. Noschese is not and has not been a director of any other listed companies in Hong
Kong or overseas in the past three years.
RASTRELLI, Stefano, aged 52, has been Group Human Resources Director since 2013.
Mr. Rastrelli obtained a degree in Law, from the University of Naples. He first joined thePrada Group in 2007 to manage the human resources of the Industrial Departments andsubsequently extended also to the Commercial Departments. Prior to joining our Grouphe worked for almost twenty years for the Fiat Group, covering different managerial
roles within the Fiat Group for different branches in Italy and abroad (Argentina, Brazil).
From 2005 to 2007 Mr. Rastrelli was in Spain as Human Resources Director for GKN
Driveline. Mr. Rastrelli is not and has not been a director of any other listed companies
in Hong Kong or overseas in the past three years.
ROMANO, Anthony, aged 48, has been Regional Director for the South East
Mediterranean area since 2013. Mr. Romano is primarily responsible for overseeing
the Group’s operations in the South East Mediterranean area, where he covers several
managerial roles at the Company’s subsidiaries. After the bachelor degree in Businessin New Zealand, he was employed at Deloitte & Touche and then at Timberland Europe
before working for almost ten years for Calvın Kleın Europe (1995 – 2004) where hebecame C.E.O. and Managing Director. From 2004 to 2007, he was the General
Manager and Company Director of Luna Rossa Challenge for the 2007 America’s Cup.
He was partner of ADR – fashion and sport strategic consultancy company, from 2008
to 2013. Mr. Romano is not and has not been a director of any other listed companies
in Hong Kong or overseas in the past three years.
SESIA, Davide, aged 47, has been President of Prada Japan since February 2004. He is
primarily responsible for overseeing the Group’s operations in Japan, Guam, Saipan and
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Hawaii area, where he covers several managerial roles at the Company’s subsidiaries.
Mr. Sesia obtained a degree in Business Administration from the University Cattolicadel Sacro Cuore of Milan in 1991. He joined our Group in 2000 as Representative
Director and Chief Financial Officer of Prada Japan. Prior to that, he was Chief Financial
Officer and Director of Benetton Japan and Managing Director of Benetton Korea Ltd(1997 - 2000). He started his career in Japan working for several companies from 1992.
Mr. Sesia is not and has not been a director of any other listed companies in Hong Kongor overseas in the past three years.
SHIH, Li-Lien Louis, aged 45, has been General Manager of Taiwan since February
2011. He is primarily responsible for overseeing the Group’s commercial operationsin Taiwan. Mr. Shih joined our Group in 2006 and covered different managerial roles
within Retail Department. He obtained a University Degree in Science, Major in
Environmental Design. Prior to joining our Group, Mr. Shih worked five years for Fendi
Taiwan Ltd. covering different managerial roles within the commercial area. Mr. Shih is
not and has not been a director of any other listed companies in Hong Kong or overseas
in the past three years.
SUTTER, Stefano, aged 41, has been Regional Director for North Europe since
December 2010, when he joined our Group. Mr. Sutter is primarily responsible foroverseeing the Group’s operations in United Kingdom, Ireland and Sweden, where hecovers several managerial roles at the Company’s subsidiaries. Mr. Sutter obtained
a master in Business Administration from Columbia Business School, New York, in2005 and graduated “cum laude” (with praise) in Business Administration at Universityof Genoa in 1998. Prior to joining our Group, he worked for INDITEX Group covering
different managerial roles including as General Manager of Zara Canada (2006 to2007), Managing Director of Inditex UK and Ireland (2007 to 2009) and, then, Managing
Director of Inditex Austria, Hungary, Czech Republic and Slovakia. Prior to that, hespent five years working for Bain & Company Inc.. Mr. Sutter is not and has not been a
director of any other listed companies in Hong Kong or overseas in the past three years.
TOLOMELLI, Armando, aged 49, has been Chief Executive Officer of Prada Asia
Pacific since 2012. Mr. Tolomelli is primarily responsible for overseeing the Group’s
operations in the Asia Pacific region, where he covers several managerial roles at theCompany’s subsidiaries. Prior to this appointment Mr. Tolomelli has been our Group
Controlling Director since joining our Group in July 2005. Prior to joining our Group, hespent fourteen years working for the Barilla Group, covering various roles including
Financing Office Manager, Divisional Business Controller, Business Controller forSouth Eastern Europe, Group Controller of Wasa in Stockholm, Sweden (1999 to2001), Finance Manager International Business Development of the Bakery Division(2001) and Corporate Controlling Director of Kamps in Düsseldorf, Germany (2002 to2005). Mr. Tolomelli is not and has not been a director of any other listed companies inHong Kong or overseas in the past three years.
ZAMBERNARDI, Fabio, aged 52, has been Design Director for the Prada and Miu
Miu brands since November 2002. He is responsible for the collection concept
development, overseeing all the strategic activities related to the coherence between
image and product development of the collection, as well as supporting the strategic
brands image communication. He has been collaborating with the Group since 1981.
He was promoted Shoe Design Director in 1997 and Design Fashion Coordinator in
1999. Mr. Zambernardi is not and has not been a director of any other listed companies
in Hong Kong or overseas in the past three years.
ZENKOVSKAYA, Vera, aged 38, has been Regional Director for the Russian area since2013. Ms. Zenkovskaya is primarily responsible for overseeing the Group operations
in Russia, Kazakhstan and Ukraine, where she covers several managerial roles at theCompany’s subsidiaries. Ms. Zenkovskaya obtained a Foreign Languages Degree at
Language University of Kazakhstan. Prior to joining our Group in 2011 as Russia Country
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Manager, she worked within the beauty sector (L’Oreal, Temtrade) in marketing andretail areas. From 2006 to 2011, she covered several managerial roles in Russia andUkraine for Louis Vuitton. Ms Zenkovskaya is not and has not been a director of any
other listed companies in Hong Kong or overseas in the past three years.
Company Secretary
ALBANO, Patrizia, aged 61, is the joint company secretary of the Company. Ms. Patrizia
Albano has been the Head of Group Corporate Affairs since September 2008 and is
responsible for monitoring general legal compliance. Ms. Albano obtained a degreein Law from the University La Sapienza of Rome in 1979 and was admitted to the
Bar Association (Ordine degli Avvocati di Roma) in 2006. She started her career as an
in-house legal advisor at the Istituto Mobiliare Italiano S.p.A. from 1981 to 1999 andthen worked as Head of the Large Corporate Division central legal office of San Paolo
IMI S.p.A. until 2000. She has also worked as General Counsel of IBI (now Alerion
Clean Power S.p.A.), and as Company Secretary of Risanamento Napoli S.p.A. andFincasa S.p.A., both of which are listed companies on the Italian Stock Exchange. In
2002, Ms. Albano became the General Counsel and Company Secretary of a privatecompany active in services provision, property and facility management and renewableenergy. She then worked at an Italian law firm, Studio Legale Carbonetti, from 2003 to
2007, and also founded her own private practice law firm, Albano Baldassari, in 2007
before joining our Company in 2008. Ms. Albano has been Chairman of the Board of
Statutory Auditors of Artemide Italia S.r.l., a member of the Board of Statutory Auditors
in Artemide Group S.p.A. and Artemide S.p.A. since May 2014, and has been Chairmanof Gruppo Moda, Design e Arredo of Assolombarda (Association of Industrial provincesof Milan, Lodi, Monza and Brianza) since February 2015. Ms. Albano is the wife of Mr.
Carlo Mazzi, the Chairperson of the Board of our Company. Ms. Albano is not and has
not been a director of any other listed companies in Hong Kong or overseas in the past
three years.
YUEN, Ying-kwai, aged 48, is the joint company secretary of the Company. She is
responsible for corporate secretarial duties. Ms. Yuen joined our Group and was
appointed joint company secretary in May 2011. Ms. Yuen has over 20 years of working
experience in the corporate secretariat and compliance areas of sizeable organizations
and professional firms. Prior to joining our Group, she worked with Li & Fung group for
15 years. She first joined in 1995 as company secretary of Li & Fung (1937) Limited until
1999 when she was transferred to Li & Fung Distribution (Management) Limited andappointed as group company secretary in 2000. Ms. Yuen was the company secretary ofIntegrated Distribution Services Group Limited (member of Li & Fung Group) between
2004 and 2011. Ms. Yuen received an Honours Diploma in Company Secretaryshipand Administration from Lingnan College (now known as Lingnan University) in 1988.
Ms. Yuen holds a Master degree in Business Administration (Executive) from City
University of Hong Kong, awarded in 2003. Ms. Yuen has been a fellow of both theHong Kong Institute of Chartered Secretaries and the Institute of Chartered Secretaries
and Administrators, UK since 2001. Ms. Yuen is not and has not been a director of any
other listed companies in Hong Kong or overseas in the past three years.

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66

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Directors’ Report

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Principal activities
PRADA S.p.A. (the “Company”), together with its subsidiaries (the “Group”), is aleading global luxury group in the design, production and distribution of high-end leather
goods, handbags, footwear, apparel, accessories, eyewear and fragrances. Through its
Directly Operated Stores network (the “DOS”) and a selected number of wholesalers,
the Group operates in all major international markets.
The Company is a joint-stock company, incorporated and domiciled in Italy. Its registeredoffice is in Via A. Fogazzaro 28, Milan, Italy.
An analysis of the Group’s performance for the year ended January 31, 2015 byoperating segments is set out in the Financial review and note 8 to the Consolidated
financial statements.
Results and dividends
The results of the Group for the year ended January 31, 2015 are set out in theConsolidated income statements.
The Board recommends, for the twelve month period ended January 31, 2015, a final
dividend of Euro 281,470,640 (or Euro/cents 11 per share). The payments shall bemade:(i) in Euro to the shareholders recorded in the section of the Company’s shareholders
register kept by the Company at its registered office in Milan (Italy), and(ii) in Hong Kong dollars to the shareholders recorded in the section of the Company’s
shareholders register kept in Hong Kong. The relevant exchange rate will be theopening buying T/T rate of Hong Kong dollars to Euros as announced by the Hong Kong
Association of Banks (www.hkab.org.hk) on the day the final dividend is approved by
the shareholders.
The final dividend will be subject to approval by the shareholders at the forthcoming
shareholders’ general meeting of the Company to be held on Tuesday, May 26, 2015.
The shareholders recorded on the Company’s shareholders register at the openingof business on Tuesday, May 26, 2015, will be allowed to attend and vote at theshareholders’ general meeting of the Company. In order to qualify to attend and voteat the shareholders’ general meeting of the Company, all transfers accompanied by therelevant share certificate(s) must be lodged with:(i) the Company’s Hong Kong share registrar, Computershare Hong Kong Investor
Services Limited, at Shops 1712-16, 17th Floor, Hopewell Centre, 183 Queen's Road
East, Wanchai, Hong Kong, if the transfer concerns shares registered in the sectionof the Company’s shareholders register kept by the Company’s Hong Kong shareregistrar itself, or(ii) with the Company’s registered office in Milan (Italy), Via A. Fogazzaro, 28, if thetransfer concerns shares registered in the section of the Company’s shareholders
register kept by the Company itself,
in any case, no later than 4:30 p.m. (Hong Kong time) on Wednesday, May 20, 2015.
The Company’s shareholders register will be closed from Thursday, May 21, 2015 toTuesday, May 26, 2015, both days inclusive, during which no share transfer can beregistered.
Subject to the shareholders’ approving the recommended final dividend, such dividend
will be payable on or about Monday, June 15, 2015.

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The final dividend will be paid to shareholders recorded on the Company’s shareholders
register on Wednesday, June 3, 2015. In order to qualify for the payment of the final
dividend, all transfers accompanied by the relevant share certificate(s) must be lodged
with:(i) the Company’s Hong Kong share registrar, Computershare Hong Kong Investor
Services Limited, at Shops 1712-16, 17th Floor, Hopewell Centre, 183 Queen's Road
East, Wanchai, Hong Kong, if the transfer concerns shares registered in the sectionof the Company’s shareholders register kept by the Company’s Hong Kong shareregistrar, or(ii) the Company’s registered office in Milan (Italy), Via A. Fogazzaro, 28, if the transfer
concerns shares registered in the section of the Company’s shareholders register kept
by the Company,in any case, no later than 4:30 p.m. (Hong Kong time) on Monday, June 1, 2015.
The Company’s shareholders register will be closed from Tuesday, June 2, 2015 to
Wednesday, June 3, 2015, both days inclusive, during which no share transfer can beregistered.
The dividend will be paid net of Italian withholding tax, where applicable. The current
rate of Italian withholding tax applied to applicable dividend payments is 26%.
Five-year financial summary
The five-year financial summary of the Group is set out in Note 41 to the Consolidated
financial statements.
Reserves
Details of the movements in the reserves of both the Group and the Company during
the year are set out in the Consolidated Statement of Changes in Shareholders’ Equity
and in the Statement of Changes in PRADA S.p.A. Equity.
Distributable reserves
As at January 31, 2015, the Company’s reserves available for distribution to shareholders
in accordance with the Company’s by-laws amounted to Euro 894.3 million.
Property, plant and equipment
Details of the movements in the property, plant and equipment of the Group during theyear ended January 31, 2015 (the “Reviewed Period”), are set out in Note 15 to theConsolidated financial statements.
Pre-emptive rights
The Company’s by-laws do not provide for pre-emptive rights.
Purchase, sale or redemption of the Company’s listed securities
Neither the Company nor any of its subsidiaries has purchased, sold or redeemed anyof the Company’s listed securities during the year ended January 31, 2015.

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Capital gain tax in Italy
Capital gains realized on disposals of the Company’s shares may be subject to tax in
Italy. Further details on Italian capital gains taxation have already been reported in theTax Booklet available on the Company’s website www.pradagroup.com.
Subsidiaries
Details of the Company’s subsidiaries as at January 31, 2015, are set out in Note 42 to
the Consolidated financial statements.
Directors
The Directors of the Company during the Reviewed Period and up to the date of thisannual report are:Executive Directors
Mr. Carlo MAZZI (Chairman of the Board)
Ms. Miuccia PRADA BIANCHI (Chief Executive Officer)
Mr. Patrizio BERTELLI (Chief Executive Officer)
Mr. Donatello GALLI (Chief Financial Officer)
Ms. Alessandra COZZANI
Non-Executive Director
Mr. Gaetano MICCICHÉ
Independent Non-Executive Directors
Mr. Gian Franco Oliviero MATTEIMr. Giancarlo FORESTIERI
Mr. Sing Cheong LIU
In accordance with the by-laws of the Company, the Board of Directors is appointed by
the shareholders’ general meeting for a period of up to three financial years. The term
lapses on the date of the shareholders’ general meeting to be called to approve thefinancial statements for the final year of its office. The Directors may be reappointed.
At the shareholders’ general meeting of the Company held on May 22, 2012, the Boardof Directors was appointed for a term of three financial years. The Board’s mandate will
therefore lapse on the date of the forthcoming shareholders’ general meeting called toapprove the financial statements for the year ended January 31, 2015.
Biographical information of Directors
A brief biography on each of the Directors of the Company is set out in the “Directors
and Senior Management” section of this annual report.
Directors’ service contracts
None of the Directors of the Company has or is proposed to have a service contract
with any member of the Group that cannot be terminated within one year without
payment of compensation, other than statutory compensation.
Directors’ interests in competing business
During the Reviewed Period, none of the Directors of the Company, held any interestin a business which competes, either directly, or indirectly, with the business of theCompany or the Group.

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Directors’ interests and short positions in securities
As at January 31, 2015, the Directors of the Company and their associates held thefollowing interests in the shares, underlying shares and debentures of the Company
and its associated corporations (within the meaning of Part XV of the Securities andFutures Ordinance (the “SFO”) as recorded in the register required to be kept by theCompany under Section 352 of the SFO or as otherwise notiﬁed to the Company and
The Stock Exchange of Hong Kong Limited (the “Stock Exchange”) pursuant to theModel Code for Securities Transactions by Directors of Listed Companies (the “Model
Code”) contained in Appendix 10 of the Rules Governing the Listing of Securities on
The Stock Exchange of Hong Kong Limited (the “Listing Rules”):(a) Long positions in shares and underlying shares of the Company
Name of Director

Number of Shares

Nature of Interest

Approximate percentage
of Issued Capital

Ms. Miuccia Prada Bianchi

2,046,470,760(Notes 1 and 2)

Interest of Controlled corporation

80%

Mr. Patrizio Bertelli

2,046,470,760(Notes 1 and 3)

Interest of Controlled corporation80%

Notes:
1. Prada Holding S.p.A. owns approximately 80% of the issued capital in the Company
and is therefore the holding company of the Company. On December 29, 2014,
Prada Holding B.V. was merged by incorporation into Gipafin S.à.r.l. and the lattertransferred its legal seat to Italy and was renamed Prada Holding S.p.A..
2. Ms. Miuccia Prada Bianchi, owns indirectly through Ludo S.r.l., 53.8%(comprised of 438,460 ordinary shares and 100,000 preference shares) of thecapital in Bellatrix S.p.A., which in turn owns 65% (comprised of 1,650 ordinary
shares and 300 preference shares) of the capital in Prada Holding S.p.A.. Ms.
Miuccia Prada Bianchi is therefore deemed under the SFO to be interested in
all the shares registered in the name of Prada Holding S.p.A.. On December
29, 2014, Bellatrix S.à.r.l. transferred its legal seat to Italy and was renamed
Bellatrix S.p.A.. On December 31, 2014, Ludo S.à.r.l. (previously known as
Ludo S.A.) transferred its legal seat to Italy and was renamed Ludo S.r.l..
Ms. Miuccia Prada Bianchi is also a director of Prada Holding S.p.A., Bellatrix S.p.A.
and Ludo S.r.l..
3. Mr. Patrizio Bertelli owns, indirectly through PABE 1 S.r.l., 35% (comprised of
750 ordinary shares and 300 preference shares) of the capital in Prada Holding
S.p.A.. Mr. Patrizio Bertelli is therefore deemed under the SFO to be interested in
all the shares registered in the name of Prada Holding S.p.A.. On November 27,
2014, PABE 2 S.A., PABE 3 S.A. and PABE 4 S.A. were merged by incorporation
into PABE 1 S.à.r.l. (previously known as PABE 1 S.A.), which on December
31, 2014, transferred its legal seat to Italy and was renamed PABE 1 S.r.l..
Mr. Patrizio Bertelli is also a director of PABE 1 S.r.l.

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The interests of Ms. Miuccia Prada Bianchi and Mr. Patrizio Bertelli in the shares of theCompany as at January 31, 2015 are summarized in the following chart:

Miuccia Prada
Bianchi

Patrizio Bertelli

100%

100%

Ludo S.r.l.
53.8%

PABE 1 S.r.l.

Bellatrix S.p.A.
65%

35%

Prada Holding S.p.A.
80%

PRADA S.p.A.

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(b) Long positions in shares and underlying shares of associated corporations:
Name ofDirector

Name of associatedcorporations

Class of shares

Numberof shares

Nature of Interests

Approximate
percentage ofInterests

Ms. Miuccia
Prada Bianchi

Prada Holding S.p.A.

Ordinary Shares

1,650

Controlled Corporation

68.75%

Prada Holding S.p.A.

Preference Shares300

As above

50%

Prapar Corporation

Common Shares

50

As above

100%

EXHL Italia S.r.l.

Participation Quotas(Euro)

15,000As above

100%

MFH Munich Fashion
Holding GmbH

Registered Share1

As above

100%

PAC S.r.l.
(in liquidation)

Participation Quotas(Euro)

30,600As above100%

Mr. Patrizio
Bertelli

Bellatrix S.p.A.

Ordinary Shares

438,460

As above

49.83%

Bellatrix S.p.A.

Preference Shares

100,000

As above

83.34%

Ludo S.r.l.

Ordinary Shares

100,311

Beneficial Owner100%

PRA 1 S.r.l.

Participation Quotas(Euro)

10,000Controlled Corporation

100%

C.I.D. – Cosmetics
International
Distribution Corp.

Common Shares

1

As above100%

Prada Holding S.p.A.

Ordinary Shares

750

Controlled Corporation

31.25%

Prada Holding S.p.A.

Preference Shares300

As above

50%

Prapar Corporation

Common Shares

50

As above

100%

EXHL Italia S.r.l.

Participation Quotas(Euro)

15,000As above

100%

MFH Munich Fashion
Holding GmbH

Registered Share1

As above

100%

PAC S.r.l.
(in liquidation)

Participation Quotas(Euro)

30,600As above100%

C.I.D. – Cosmetics
International
Distribution Corp.

Common Shares

1

As above

100%

Save as disclosed above, as at January 31, 2015, none of the Directors of the Company
or their associates held any interest or short position in the shares, underlying shares
and/or debentures of the Company or any of its associated corporations (within
the meaning of Part XV of the SFO) as recorded in the register required to be kept
under Section 352 of the SFO or as otherwise notiﬁed to the Company and the Stock
Exchange pursuant to the Model Code.

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Substantial shareholders’ interests and short positions in securities
As at January 31, 2015, other than the interests of the Directors of the Company as
disclosed above, the following persons held interests or short positions in the sharesor underlying shares of the Company which fall to be disclosed to the Company under
Section 336 of the SFO:
Capacity

Number of Shares

Approximate percentage
of issued capital

Prada Holding S.p.A.

Legal and beneficial owner

2,046,470,760

80%Bellatrix S.p.A.

Interest of controlled
corporation

2,046,470,76080%

Ludo S.r.l.

Interest of controlled
corporation

2,046,470,760

80%

PABE 1 S.r.l.

Interest of controlled
corporation

2,046,470,760

80%

OppenheimerFunds, Inc

Investment manager

153,708,010

6.01%

Harris Associates L.P.

Investment manager

128,870,000

5.04%

Name of Shareholder

Note:
Prada Holding S.p.A. owns approximately 80% of the issued capital in the Company.
As Ludo S.r.l. owns 53.8% of Bellatrix S.p.A. which in turn owns 65% of Prada Holding
S.p.A. and PABE 1 S.r.l. owns 35% of Prada Holding S.p.A., Bellatrix S.p.A., Ludo S.r.l.
and PABE 1 S.r.l. are all deemed to be interested in the 2,046,470,760 shares of theCompany held by Prada Holding S.p.A..
Share capital
Details of the share capital of the Company during the Reviewed Period are set out inboth the Consolidated Statement of Changes in Shareholders’ Equity and Note 28 to
the Consolidated ﬁnancial statements.
Directors’ interests in contracts
Save for those contracts disclosed under the section on Connected Transactions below
and in Note 39, Transactions with Related Parties, and in Note 38, Remuneration of
the Board of Directors, to the Consolidated ﬁnancial statements, in the opinion of
the Directors, no contract of signiﬁcance to the Company or the Group subsists as atJanuary 31, 2015, or in fact subsisted during the Reviewed Period in relation to theCompany or the Group’s business in which a Director’s interest is or was material.
During the Reviewed Period, there were no arrangements to which the Company or
any of the Company's subsidiaries or holding companies or a subsidiary of any of theCompany's holding companies is a party, these being arrangements whose objects
are, or one of whose objects is, to enable the Directors of the Company to acquirebeneﬁts by means of the acquisition of shares in, or debentures of, the Company.
Issuance of debt securities
Neither the Company nor any of its subsidiaries issued any debt securities during the
Reviewed Period.
As announced on August 1, 2013, the Company issued Euro 130 million 2.75 percent Notes which become due on August 1, 2018 (the “Notes”). The Notes weresubscribed by professional and institutional investors and were settled on August 1,
2013. The Notes were admitted to the ofﬁcial list on the Irish Stock Exchange andwere permitted to trade on its regulated market. The Company may, at its discretion,
redeem the entirety of the Notes at once (but not some only), at any time after theirissuance at an amount equal to their principal amount plus (if applicable) a premium,74

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together with any accrued interest or at par plus accrued interest, in the event thatcertain tax changes occur. The Notes are not rated.
Connected transactions(A) Continuing Connected Transactions
During the Reviewed Period, the Group had the following non-exempt continuingconnected transactions, details of which were disclosed in the Company’s
announcements dated April 27, 2012, January 29, 2013, April 5, 2013, January 29,
2014 and February 27, 2014, respectively:(a) Franchise Agreement – Prada Milan Stores
As disclosed in the Company’s announcement dated January 29, 2014, theCompany was established in 1913 as a family business operating in Milan and has
continued as such since Ms. Miuccia Prada Bianchi and Mr. Patrizio Bertelli began
their cooperation in the late 1970s. Therefore, the Prada stores in Milan havehistorically been operated by companies that are connected to the Prada family.
Against this historical background, on January 28, 2009, the Company enteredinto a franchise agreement in relation to the Prada stores based in Milan (the“Franchise Agreement”) with ﬁve companies that operated the stores and theircontrolling entity, all of which subsequently merged with Fratelli Prada S.p.A. (the“Franchisee”). The Franchisee is a company indirectly controlled by Ms. Miuccia
Prada Bianchi, a Chief Executive Ofﬁcer, an executive director and a substantial
shareholder of the Company. The Franchise Agreement will expire on January 31,
2024 and will be automatically extended for a further 15-year term provided that (i)the Franchisee has met the minimum annual budget for the initial 15-year term; or(ii) the cumulative amount of the purchases made by the Franchisee for the entire
initial 15-year term is at least equal to the sum of the minimum annual budget foreach of the 15 years.
The table below sets out the annual caps for the Reviewed Period of the Franchise
Agreement:
Franchise Agreement – Prada Milan StoresEuro
millionRevenues from sales of goods

53.7

Revenues from services

6.0Royalties income

1.5

Purchase of goods by the Group(1.0)

Net transaction amount

60.2(b) Consulting Agreement with Ms. Miuccia Prada Bianchi
On April 26, 2012, the Company renewed the consultancy agreement with
Ms. Miuccia Prada Bianchi, a Chief Executive Ofﬁcer, an executive director anda substantial shareholder of the Company, which took effect from February 1,
2012, for a term of three years, under which Ms. Miuccia Prada Bianchi continued
acting as a strategic consultant of the Company involved in: (i) identifying andelaborating creative design concepts and styles; (ii) coordinating and supervising
the development of collections and all of the dedicated structures and functions;(iii) deﬁning concepts for fashion shows and supervising their execution and (iv)setting guidelines for branding and advertising campaigns and supervising related
activities.
On April 5, 2013, the Company and Ms. Miuccia Prada Bianchi entered into a
supplemental agreement to amend the consultancy agreement to include a

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variable incentive component in the consideration to be paid to Ms. Miuccia Prada
Bianchi. This is aimed at strengthening the consultancy relationship between theparties.
The revised annual cap for the Reviewed Period for the remuneration payable
to Ms. Miuccia Prada Bianchi, or accruable by the Company in accordance withapplicable accounting rules, under the consultancy agreement as supplemented
on April 5, 2013, is Euro 17 million.
(c) Consulting Agreement with Mr. Patrizio Bertelli
On April 26, 2012, the Company renewed the consultancy agreement with Mr.
Patrizio Bertelli, a Chief Executive Ofﬁcer, an executive director and a substantial
shareholder of the Company, which took effect from February 1, 2012, for a termof three years, under which, Mr. Patrizio Bertelli continued acting as a strategic
consultant of the Company involved in: (i) deﬁning the development of collections
and industrialization processes; (ii) developing the shoes and leather goods
collection and supervising the related structures and (iii) selecting locations for the
new DOS and the refurbishment of existing stores, conceiving store concepts,
deﬁning guidelines and coordinating related project development activities.
On April 5, 2013, the Company and Mr. Patrizio Bertelli entered into a supplemental
agreement to amend the consultancy agreement to include a variable incentive
component in the consideration to be paid to Mr. Patrizio Bertelli. This is aimed atstrengthening the consultancy relationship between the parties.
The revised annual cap for the Reviewed Period for the remuneration payable to
Mr. Patrizio Bertelli, or accruable by the Company in accordance with applicableaccounting rules, under the consultancy agreement as supplemented on April 5,
2013, is Euro 17 million.
(d) Galleria Transaction
The Company was granted the right to use the prestigious premises in the Galleria
Vittorio Emanuele II in Milan, Italy (the “Galleria Property”) by the Municipalityof Milan under a concession agreement for a term of 18 years (the “Concession
Agreement”), in its own capacity and as the representative of Progetto Prada Arte
S.r.l. (“PPA”). In this context, the Company entered into two continuing connectedtransactions.
On January 29, 2013, the Company entered into a business combinationagreement with PPA (the “PPA Business Combination Agreement”) for a termof 18 years. PPA is a company indirectly controlled by Ms. Miuccia Prada Bianchi
and Mr. Patrizio Bertelli (both of whom are Chief Executive Ofﬁcers, executive
directors and substantial shareholders in the Company). Under the PPA Business
Combination Agreement, the Company is granted the right to represent on
exclusively the business cooperation between the Company and PPA vis-à-vis theMunicipality of Milan in all aspects relating to the Concession Agreement and PPA
is bound to pay to the Company the portion of the annual concession fee allocatedto PPA, based on the portion of the Galleria Property used by PPA to carry on its
activities, particularly those considered cultural, on the premises.
On November 29, 2013, the Company entered into a business managementagreement with Fratelli Prada S.p.A., as the franchisee of the Prada retail businessin Milan, to allow the latter to manage the retail activity of the Prada brand in theGalleria Property (the “Fratelli Prada Business Management Agreement”). Fratelli
Prada S.p.A. is a company indirectly controlled by Ms. Miuccia Prada Bianchi (aChief Executive Ofﬁcer, an executive director and a substantial shareholder of theCompany). The Fratelli Prada Business Management Agreement will expire on
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January 31, 2024, provided that, upon the renewal of the Franchise Agreement,
this agreement will also be automatically extended until the expiration of theConcession Agreement.
Given that the duration of both the PPA Business Combination Agreement andthe Fratelli Prada Business Management Agreement is, or will be, longer than
three years, pursuant to Rule 14A.35(1) of the then applicable Listing Rules, an
independent ﬁnancial advisor, namely Somerley Limited, was appointed by theCompany and it conﬁrmed that the duration of each of the above two agreements
is required and is in accordance with normal business practice for this type ofcontracts.
The annual cap for the Reviewed Period of the rent to be paid by PPA to theCompany under the PPA Business Combination Agreement is Euro 1.6 million.
The annual cap for the business management fee to be paid by Fratelli Prada
S.p.A. to the Company under the Fratelli Prada Business Management Agreement
for the Reviewed Period is Euro 5.5 million.
(e) Luna Rossa sponsorship agreement
On February 27, 2014, the Company entered into a sponsorship agreementwith Luna Rossa Challenge S.r.l. a company which is indirectly controlled by Mr.
Patrizio Bertelli, a Chief Executive Ofﬁcer, an executive director and a substantial
shareholder of the Company, for the participation of the Luna Rossa sailingteam in the XXXV edition of the America’s Cup (the “Luna Rossa Sponsorship
Agreement”).
Given that the duration of the Luna Rossa Sponsorship Agreement will be longer
than three years, pursuant to Rule 14A.35(1) of the then applicable Listing
Rules, an independent ﬁnancial advisor, namely Somerley Capital Limited, wasappointed by the Company and it has conﬁrmed that the duration of the Luna
Rossa Sponsorship Agreement is of a duration considered to be normal businesspractice for contracts of this type.
The annual cap for the Reviewed Period of the sponsorship contribution to be paidby the Company to Luna Rossa Challenge S.r.l. under the Luna Rossa Sponsorship
Agreement for the Reviewed Period is Euro 25 million.

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Below is a table setting out the aggregate value for each of the non-exempt continuingconnected transactions for the Reviewed Period:
Total impact on
Accounting
Continuing
the income staadjustment to theConnected
tements for the
CCT following theTransaction
twelve months
application of(“CCT”)
ended January“IAS 17 Leases”
31, 2015(a) Franchise Agreement – Prada Milan Stores

Euro million

Euro million

Euro million

Revenue from sales of goods

36.8

-

36.8

Revenue from services, net

2.3

-

2.3

Royalties income

1.1

-

1.1

Purchase of goods by the Group

(0.1)

-

(0.1)

Net transaction amount

40.1

-

40.1

13.2

-

13.2

12.2

-

12.2

1.0

0.5

1.5

2.3

2.3

4.6

12.6

-

12.6

(b) Consulting Agreement with Ms. Miuccia Prada Bianchi
Annual amount paid to Ms. Miuccia Prada Bianchi
or accrued by the Company(c) Consulting Agreement with Mr. Patrizio Bertelli
Annual amount paid to Mr. Patrizio Bertellior accrued by the Company(d) PPA Business Combination Agreement
Rental income(e) Fratelli Prada Business Management Agreement
Business management income(f) Luna Rossa Sponsorship Agreement
Sponsorship contribution

The Independent Non-executive Directors have reviewed the above non-exempt
continuing connected transactions and conﬁrmed that these have been entered into:(i)in the ordinary and usual course of business of the Company;(ii) either on normal commercial terms or better; and(iii) in accordance with the relevant agreement governing them what terms are
considered fair and reasonable and in the interests of the shareholders of theCompany as a whole.
The Directors of the Company have engaged the auditors to review the above nonexempt continuing connected transactions. The auditors have, based on the work
performed, provided a letter to the Directors of the Company (with a copy provided to
the Stock Exchange) to conﬁrm that nothing has come to their attention that causes
them to believe that the continuing connected transactions:(i)have not been approved by the Company’s Board of Directors;(ii) were not, in all material respects, in accordance with the pricing policies of theGroup if the transaction involve the provision of goods or services by the Group;(iii) were not entered into, in all material respects, in accordance with the terms of therelevant agreements governing such transactions; and(iv) have exceeded the relevant annual limits set out in the Company’s announcements
dated April 27, 2012, January 29, 2013, April 5, 2013, January 29, 2014 andFebruary 27, 2014, as applicable.

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(B) Connected Transactions
During the Reviewed Period, the Group had entered into the following non-exempt
connected transaction, the nature of and reasons for which were disclosed in the
Company’s announcement dated February 27, 2014.
Sponsorship Agreement with Progetto Prada Arte S.r.l.
On February 27, 2014, the Company entered into a new sponsorship agreement with
Progetto Prada Arte S.r.l. (“PPA”) for the organization and promotion of artistic andcultural activities. PPA is indirectly controlled by Ms. Miuccia Prada Bianchi and Mr.
Patrizio Bertelli (both of whom are Chief Executive Ofﬁcers, executive directors andsubstantial shareholders in the Company). The total maximum amount of sponsorshipis Euro 7.94 million.
Other than the above non-exempt continuing connected transactions and non-exempt
connected transaction, no other transaction disclosed in the Consolidated ﬁnancial
statements falls under the deﬁnition of “connected transaction” or “continuingconnected transaction” contained in Chapter 14A of the Listing Rules or, where it falls
under the deﬁnition of “connected transaction” or “continuing connected transaction”
contained in Chapter 14A of the Listing Rules, it is exempted from the reporting,annual review, announcement and independent shareholders’ approval requirements
contained in Chapter 14A of the Listing Rules.
The Company has complied with the disclosure requirements governing “connectedtransactions” or “continuing connected transactions” in accordance with Chapter 14Aof the Listing Rules.
Bank loans and other borrowings
Details of the Group’s bank loans and other borrowings as at January 31, 2015 are set
out in Notes 19 and 24 to the Consolidated ﬁnancial statements.
Major customers and suppliers
The nature of the Group’s activities are such that the percentage of sales or purchases
attributable to the Group’s ﬁve largest customers or suppliers is signiﬁcantly lessthan 30% of the total sales or purchases and the Directors do not consider any one
customer or supplier to have an inﬂuence on the Group.
Retirement benefit schemes
Details of the retirement beneﬁt schemes of the Group are set out in Note 25 to theConsolidated ﬁnancial statements.
Model Code for securities transactions
The Company has adopted the Model Code. Having made speciﬁc enquiries to all
Directors, all have conﬁrmed that they have complied with the standard set out in the
Model Code throughout the Reviewed Period.
Events after the reporting period - if applicable
Details of signiﬁcant events occurring after the reporting date are set out in Note 44 to
the Consolidated ﬁnancial statements.

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Commitments and contingencies
Details of capital commitments and contingent liabilities of the Group as at January
31, 2015 are set out in Notes 40 and 26 respectively to the Consolidated ﬁnancial
statements.
Sufficiency of public float
At the time the Company was listed, the Stock Exchange granted a waiver from strict
compliance with Rule 8.08(1) of the Listing Rules (the “Public Float Waiver”). Pursuant
to the Public Float Waiver, the Company must at all times maintain a minimum public
ﬂoat of 20%. Based on the information that is available to the Company and within theknowledge of the Directors, the Company has maintained an amount of public ﬂoat as
approved by the Stock Exchange and as permitted under the Listing Rules as at thedate of this annual report.
Directors’ responsibilities for the Consolidated financial statements
The Directors are responsible for the preparation of the Consolidated ﬁnancial
statements for the year which ended January 31, 2015, with a view to ensuring such
Consolidated ﬁnancial statements give a true and fair view of the state of affairs of
the Group. In preparing these Consolidated ﬁnancial statements, the Directors haveselected suitable accounting policies, made judgments and estimates that are prudent
and reasonable, and prepared the Consolidated ﬁnancial statements on a going concern
basis and in accordance with International Financial Reporting Standards issued by
the International Accounting Standards Board as adopted by the European Union. The
Directors are responsible for keeping proper accounting records for safeguarding theassets of the Company and the Group.
Auditor
The Consolidated ﬁnancial statements and the Separate ﬁnancial statements of theCompany were audited by Deloitte & Touche S.p.A.. Under Italian company law,
the auditor is appointed and its remuneration is resolved every three years by theshareholders of the Company in a general meeting, on the basis of a proposal from theBoard of statutory auditors.
On April 13, 2012, the Stock Exchange granted to the Company a waiver from strict
compliance with Rule 13.88 of the Listing Rules, which requires the appointmentof an auditor at each annual general meeting to hold ofﬁce until the next annual
general meeting. As a consequence, the Company’s auditor will be appointed and its
remuneration determined every three years at the shareholders’ general meeting of
the Company under the applicable Italian laws.
On April 5, 2013, the Board had resolved, in accordance with the recommendation
received from the Board of statutory auditors and the Audit Committee, to propose aresolution at the shareholders’ general meeting of the Company held on May 23, 2013,
to appoint Deloitte & Touche S.p.A. as the auditor of the Company for the relevant
three year-term and to ﬁx its remuneration.
The shareholders’ general meeting of the Company held on May 23, 2013 resolved
to appoint Deloitte & Touche S.p.A. as the auditor of the Company for a term of threeﬁnancial years and to ﬁx its remuneration at Euro 472,000 for each ﬁnancial year of
its three-year term, as consideration for performing the audit of the Separate ﬁnancial
statements and the Consolidated ﬁnancial statements, an amount included in the overall
annual remuneration of Euro 1,605,000 for Deloitte & Touche S.p.A. and its networkin respect of the provision of audit services to the Group as a whole. The auditor’sannual remuneration shall be subject to adjustment in accordance with changes in therelevant applicable laws or additional requirements for the audit services as well as

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the annual upward adjustment linked to index of ISTAT – the Italian National Institutefor Statistics. The auditor’s mandate lapses on the date of the shareholders’ general
meeting to be called to approve the ﬁnancial statements for the year ending January
31, 2016.

By order of the Board

Carlo Mazzi
ChairmanMarch 27, 2015

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82

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Corporate Governance

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Corporate governance practices
The Company is committed to maintaining a high standard of corporate governancepractices as part of its commitment to effective corporate governance. The corporate
governance model adopted by the Company consists of a set of rules and standards
aimed toward establishing efﬁcient and transparent operations within the Group, toprotect the rights of the Company’s shareholders and to enhance shareholder value.
The corporate governance model adopted by the Company is in compliance with theapplicable regulations in Italy, as well as the principles of the Corporate Governance
Code (the “Code”) contained in Appendix 14 of the Listing Rules.
Compliance with the Code
The Board has reviewed the Company’s corporate governance practices and issatisﬁed that such practices have complied with the code provisions set out in theCode, for the entire Reviewed Period (i.e. the year ended January 31, 2015). This
Corporate Governance Report summarizes the way in which the Company has applied
the principles and implemented the code provisions contained in the Code for theduration of the Reviewed Period.
Directors’ securities transactions
The Company has adopted written procedures governing Directors’ securities
transactions on terms no less exacting than the required standard set out in the Model
Code. Speciﬁc written acknowledgments have been obtained from each Director to
conﬁrm his/her compliance with the required standard set out in the Model Code andthe Company’s relevant procedures regarding directors’ securities transactions for theduration of the Reviewed Period. There were no incidents of non-compliance during
the Reviewed Period.
The Company has also adopted written procedures governing securities transactions
carried out by the relevant employees who are likely to possess inside information in
relation to the Company and its securities. The terms of these procedures are no lessexacting than the standard set out in the Model Code.
Directors’ interests as at January 31, 2015, in the shares of the Company and its
associated corporations (within the meaning of Part XV of the SFO) are set out in the
Directors’ Report.
Board of Directors
a. Board Composition
The Board is currently composed of nine Directors, of which ﬁve are Executive
Directors, one is a Non-Executive Director and three are Independent Non-Executive
Directors. All Directors have distinguished themselves in their ﬁeld of expertise andhave advised the Board in the area of their respective specialty, where this is relevantto the Group’s business activities and strategic development. Biographical details of
the Directors and their relationships, where applicable, are set out in the Directors andSenior Management section of this annual report. The Company has maintained bothon its own website and on the website of the Stock Exchange an updated list of its
Directors, identifying their respective roles and functions and also specifying if they arean Independent Non-Executive Director.
With a view to achieving a sustainable and balanced development, the Company
has viewed diversity at the Board level as an essential element in supporting theattainment of its strategic objectives and its development. The Board diversity policy
has been considered and adopted by the Board. All Board appointments are basedon meritocracy and candidates are proposed and selected based on objective criteria,with due regard for the beneﬁts of diversity within the Board. Diversity in this sense

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encompasses a wide range of factors, including but not limited to gender, age, culturaland educational background, professional experience, skills and knowledge. The ﬁnal
selection is based on merit and the contribution which the candidates can bring to theBoard.
The Nomination Committee has been delegated the overall responsibility for
implementing and monitoring the application of the board diversity policy. The
Nomination Committee will discuss any revisions that may be required to ensure theeffectiveness of the board diversity policy and will recommend any such revisions to
the Board for its consideration and approval. The Board will review its composition ona regular basis to assess its optimal structure.
b. Board Meetings
During the Reviewed Period, the Board held six meetings to discuss the Group’s
overall corporate strategic direction and objectives, assess its operational and ﬁnancial
performance (including the annual budget, as well as the annual, interim and quarterly
results) and to approve connected transactions and the Group’s main investments andcorporate reorganization plans. The average attendance rate of the Directors for thesesix meetings either in person or through electronic means was 83.3%.
Minutes of the Board meetings are kept by the Group’s Corporate Affairs Director andJoint Company Secretary, Ms. Patrizia Albano. Minutes of the Board meetings andall Board Committee meetings are available for inspection by any Director by giving
reasonable notice.

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c. Board Attendance
The details of attendance at Board meetings, Committee meetings and shareholders’general meeting held during the Reviewed Period are set out in the following table:
Directors

Board

Audit
Committee

Remuneration
Committee

Nomination Shareholder’sCommittee
Meeting

Executive Directors
Mr. Carlo MAZZI (Chairman)

6/6

Ms. Miuccia PRADA BIANCHI(Chief Executive Officer)

2/2

2/2

1/1

2/6

0/1

Mr. Patrizio BERTELLI (Chief Executive Officer)

5/6

0/1

Mr. Donatello GALLI (Chief Financial Officer)

6/6

1/1

Ms. Alessandra COZZANI

6/6

1/1

2/6

0/1

Non-Executive Directors
Mr. Gaetano MICCICHÉ

Independent Non-Executive Directors
Mr. Gian Franco Oliviero MATTEI 1

6/6

6/6

2/2

Mr. Giancarlo FORESTIERI 2

6/6

6/6

2/2

Mr. Sing Cheong LIU 3

6/6

6/6

2/2

1/1
1/1

2/2

1/1

Statutory Auditors
Mr. Antonino PARISI (Chairman)

6/6

6/6

1/1

Mr. Roberto SPADA

4/6

1/6

1/1

Mr. David TERRACINA

5/6

5/6

1/1

Feb 14, 2014

Feb 14, 2014

April 1, 2014

Feb 14, 2014

Apr 2, 2014

Apr 1, 2014

June 5, 2014

Apr 1, 2014

June 5, 2014

June 5, 2014

100%

100%

Date(s) of Meeting

May 22, 2014

Sept 19, 2014 Sept 19, 2014

Average Attendance Rate of Directors

Nov 6, 2014

Nov 12, 2014

Dec 5, 2014

Dec 5, 2014

83.3%

100%

66.7%

Notes:
1: Chairman of Audit Committee, Remuneration Committee and Nomination Committee
2: Member of Audit Committee and Remuneration Committee
3: Member of Audit Committee and Nomination Committee

Ms. Miuccia Prada Bianchi, Chief Executive Ofﬁcer of the Company, was absent for
four of the Board meetings due to prior commitments concerning fashion shows. Prior
to the relevant Board meeting being held, she rendered her views and comments toall the Board members through the Chairman.
d. Roles and Responsibilities
The Board is vested with full powers for the ordinary and extraordinary managementof the Company. The Board has the power to perform all acts it deems advisablefor the successful implementation and attainment of the Company’s corporate
purposes, except for those acts reserved by laws or by the By-laws for resolution ata shareholders’ general meeting. In particular, the Board is responsible for setting up
the overall strategy as well as reviewing the operation and ﬁnancial performance of theCompany and the Group. The Board reserves for its own consideration and decision
all matters concerning the overall Group strategy, major acquisitions and disposals,
annual budgets, as well as annual, interim and quarterly results, approval of majortransactions, connected transactions and any other signiﬁcant operational and ﬁnancial
matters.

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All Board members have been provided with monthly updates prepared by the
Executive Directors with the support of the management in order to give a balanced
and comprehensive assessment of the performance, position and prospects of both
the Company and the Group, in sufﬁcient detail to enable the Board as a whole andeach Director to discharge his/her duties.
The Executive Directors are responsible for the day-to-day management of theCompany and to make operational and business decisions within the control anddelegation framework of the Company.
The types of decisions delegated by the Board to the management include:•

the preparation of annual, interim and quarterly results for the approval of theBoard prior to publication;•

execution of business strategy and other initiatives adopted by the Board;•

monitoring of operating budgets adopted by the Board;•

implementation of adequate systems of internal controls and risk management
procedures; and•compliance with relevant statutory requirements, rules and regulations.

e. Non-Executive Directors
The Non-Executive Directors, including the Independent Non-executive Directors,
provide the Company with diversiﬁed skills, expertise, qualiﬁcations as well as varied
backgrounds and perspectives. They participate in the Board and Board Committees(including Audit Committee, Remuneration Committee and Nomination Committee)
meetings to bring independent and objective opinions, advice and judgment on
important issues relating to the Company’s strategy, policy, ﬁnancial performance, andtake the lead on matters where potential conﬂicts of interests arise. They also attend
the shareholders’ general meetings of the Company to understand the views of theshareholders. They make a positive contribution to the development of the Company’s
strategy and policy through independent, constructive and informed comments.
f. Independent Non-executive Directors
The independence of the Independent Non-executive Directors has been assessedin accordance with the applicable Listing Rules. Each Independent Non-Executive
Director meets the independence guidelines set out in Rule 3.13 of the Listing Rules
and provided the Company with the annual conﬁrmation as to his independence. Thiswas further conﬁrmed by the review of the Nomination Committee made on March
26, 2015. None of the Independent Non-Executive Directors of the Company has any
business or ﬁnancial interest in the Company or its subsidiaries and they continue tobe considered independent by the Company.
g. Liability Insurance for the Directors
The Company has arranged appropriate liability insurance to indemnify its Directors fortheir liabilities arising out of all corporate activities. The insurance coverage is reviewed
on an annual basis.
h. Directors’ Training
Each Director, after his/her appointment, is provided with a comprehensive, formal
and tailored induction program to ensure that he/she has a proper understanding of
the key areas of business operations and practices of the Company, as well as his/her
responsibilities under the relevant laws, rules and regulations.
All Directors are encouraged to participate in continuous professional training to develop
and refresh their knowledge and skills. In this respect, during the Reviewed Period,
Directors received regular updates on changes to and developments of the Group’s
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business and on the latest development of the laws, rules and/or regulations relating
to Directors’ duties and responsibilities. In addition, all Directors attended an in-houseseminar conducted by the Joint Company Secretaries covering primarily the new
regime of connected transactions. These initiatives are taken to ensure the Directors’
awareness of the latest corporate governance practices and that their contribution to
the Board remains informed and relevant.
Directors are requested to provide records of the continuous training they havereceived during the Reviewed Period to the Group Corporate Affairs Director and Joint
Company Secretary, Ms. Patrizia Albano.
Chairman and Chief Executive Officers
The Chairman is Mr. Carlo Mazzi and the Chief Executive Ofﬁcers are Ms. Miuccia Prada
Bianchi and Mr. Patrizio Bertelli. The role of the Chairman is separate from that of the Chief
Executive Ofﬁcers. The Chairman is vested with the power to represent the Company
and is responsible for ensuring that the Board is functioning properly and adhering to good
corporate governance practices and procedures. The Chief Executive Ofﬁcers, supportedby the other Executive Directors and senior management, are responsible for managing
the Company’s business, including the implementation of major strategies and otherinitiatives adopted by the Board. The Chief Executive Ofﬁcers are husband and wife.
Appointment of Directors
At the shareholders’ general meeting of the Company held on May 22, 2012, theBoard (including the Non-Executive Directors) were appointed for a term of threeﬁnancial years. The mandate of all the current Directors will lapse on the date of theforthcoming shareholders’ general meeting called to approve the ﬁnancial statementsof the Company for the year ended January 31, 2015.
As per the Company’s By-laws, the Directors may be re-appointed.
Corporate Governance Functions of the Board
The Board is responsible for determining and supervising the application of theCompany’s appropriate corporate governance policies and ensuring its compliancewith the provisions of the Code. The Board’s role in this regard is:(i)

to develop and review the Company’s policies and practices on corporate
governance;(ii) to review and monitor the training and continuous professional development of
directors and senior management;(iii) to review and monitor the Company’s policies and practices regarding compliancewith legal and regulatory requirements;(iv) to develop, review and monitor the Code of Conduct, the Organisation,
Management and Control Model (adopted pursuant to Italian Legislative decree
no. 231 of June 8, 2001) and the Company’s procedures applicable to employees
and directors;(v) to review the Company’s compliance with the Code and disclosure of such in the
Corporate Governance Report; and(vi) to perform any other corporate governance duties and functions set out by the
Listing Rules or other applicable rules, for which the Board shall be responsible.

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During the Reviewed Period, the Board considered the following corporate governancematters:(i)

reviewed connected transactions of the Company;(ii) reviewed the level of compliance with the Code;(iii) reviewed the effectiveness of the internal control and risk management systems of
the Company through the Internal Control Department and the Audit Committee;(iv) approved the Group’s main investments and corporate reorganization plans.
Board Committees
The Board has established the Audit Committee, the Remuneration Committee and theNomination Committee. Each Committee is chaired by an Independent Non-Executive
Director. Each of the Committees’ terms of reference is available on both the websiteof the Company and the Stock Exchange. The terms of reference in respect of eachCommittee are of no less exacting than those terms set out in the Code.
In addition, the Board has established a supervisory body under the Italian Legislative
Decree no. 231 of June 8, 2001.
a. Audit Committee
The Company has established an Audit Committee in compliance with Rule 3.21 of
the Listing Rules where at least one member possesses appropriate professional
qualiﬁcations in accounting or possesses related ﬁnancial management expertise todischarge the responsibility of the Audit Committee. The membership of the Audit
Committee consists of three Independent Non-Executive Directors, namely, Mr. Gian
Franco Oliviero Mattei (Chairman), Mr. Giancarlo Forestieri and Mr. Sing Cheong Liu.
The primary duties of the Audit Committee are to assist the Board in providing an
independent view of the effectiveness of the Company’s ﬁnancial reporting process
and its internal control and risk management systems, to oversee the external audit
process, the internal audit process and to perform any other duties and responsibilities
as are assigned to it by the Board.
During the Reviewed Period, the Audit Committee held six meetings (with anattendance rate of 100%) mainly to review with senior management, the Group’s
internal and external auditor and the board of statutory auditors, the signiﬁcant internaland external audit ﬁndings and ﬁnancial matters as required under the Committee’s
terms of reference. The Audit Committee’s review covers the audit plans as wellas the ﬁndings of both the internal and the external auditors, internal controls, risk
assessment, annual review of the continuing connected transactions of the Group, tax
updates and ﬁnancial reporting matters (including the annual results for the year ended
January 31, 2014, the ﬁrst quarter results as of April 30, 2014, the interim ﬁnancial
results as of July 31, 2014 and third quarter results as of October 31, 2014, before
recommending them to the Board for approval).
The Audit Committee has also held a meeting on March 26, 2015, to review the annual
results for the year ended January 31, 2015, before recommending it to the Board forapproval.

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Auditor’s compensation
The total fees and expenses accrued in favor of Deloitte & Touche S.p.A. and its
network for the audit of the ﬁnancial statements ended January 31, 2015 and January
31, 2014, together with non-audit services, are illustrated below:
Type of service

Audit Firm

Provided to

twelve months
ended
January 31
2015

twelve months
ended
January 31
2014

Audit services

Deloitte & Touche spa

PRADA spa

480

473

Audit services

Deloitte & Touche spa

Subsidiaries

174

209

Audit services

Deloitte Network

Subsidiaries

1,210

1,047

1,864

1,729

-

175

Total audit fees accruing

Comfort letter forbonds of Euro 130
millionDeloitte Network/
Deloitte & Touche spa

Tax advisory

Deloitte Network/
Deloitte & Touche spa

PRADA spa

14

26

Tax advisory

Deloitte Network

Subsidiaries

181

235

Certificates of sale

Deloitte Network/
Deloitte & Touche spa

Subsidiaries

24

9

Other

Deloitte Network

PRADA spa andsubsidiaries

60

30

Total non-audit fees accruing

279

475

Out of pocket expenses

50

74

2,193

2,278

PRADA spa

Total independent auditors’ compensation accruing

The total amount of the fees accruing for audit services increased from Euro 1,729
thousand for 2013 to Euro 1,864 thousand for 2014. The increase was mainly due to
new appointments to provide services to newly incorporated companies and becauseof application of contractually agreed parameters (e.g. inﬂation-linked increases).
b. Remuneration Committee
The Company has established a Remuneration Committee in compliance with the Code.
The primary duties of the Remuneration Committee are to make recommendations to
the Board on the Company’s policy and structure for the remuneration package of
Directors and senior management and the establishment of a formal and transparent
procedure for developing policies on such remuneration. The recommendations of
the Remuneration Committee are then put forward to the Board for consideration
and adoption, where appropriate. The Remuneration Committee consists of two
Independent Non-Executive Directors, Mr. Gian Franco Oliviero Mattei (Chairman) and
Mr. Giancarlo Forestieri and one Executive Director, Mr. Carlo Mazzi.
During the Reviewed Period, the Remuneration Committee held two meetings (withan attendance rate of 100%) mainly to recommend certain updates to the long-term
incentive plan connected to the Group’s results and an increase of the overall amountof the Board’s remuneration. On March 17, 2015, the Remuneration Committee held
one meeting to recommend the Directors’ fee and the Statutory Auditors’ fee to beapproved at the forthcoming shareholders’ general meeting.
Remuneration Policy
The Group’s compensation policy is aimed at attracting, rewarding and protecting its
personnel, who are considered to be key to the success of the Group’s business.

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The Group has an incentive system that links compensation with the annual performanceof the Group itself, taking into account the Group’s objectives in net sales, as well as
the objectives of each department.
The Group has adopted long term cash incentive plans for senior managers and key
managers for retention purposes, under which the beneﬁt of a senior manager or a key
manager under the incentive plan would vest subject to the achievement by the Groupof one or more economic objectives and his/her presence within the Group at the endof a three-year period.
Other incentive schemes speciﬁc to sales staff are also in place, and techniciansof the Group may receive a collection bonus that is provided to them following thedevelopment of a seasonal collection.
The aggregate basic remuneration of the Board is approved by the shareholders
in a general meeting. The additional remuneration of each Director vested withspecial authorities (that is to the Executive Directors and members of the Board’s
Committees) is determined by the Board - having considered the recommendationof the Remuneration Committee and the opinion of the Board of Statutory Auditors.
As an alternative, the shareholders in a general meeting can determine the aggregate
additional remuneration of Directors vested with special authorities and the individual
allocation to each Director will then be decided by the Board.
Under the current compensation arrangements, the Executive Directors receive
compensation in the form of fees, salaries and other beneﬁts, discretionary bonuses
and/or other incentives, including non-monetary beneﬁts and other allowances andcontributions such as to retirement beneﬁts schemes. The Non-Executive Directors(including Independent Non-Executive Directors) receive compensation in the form offees, salaries and contributions to retirement beneﬁts scheme, as the case may be. No
Director is allowed to approve his/her own remuneration.
c. Nomination Committee
The Company has established a Nomination Committee in compliance with the Code.
The primary duties of the Nomination Committee are to determine the policy for thenomination of Directors and to make recommendations to the Board regarding thestructure, size and composition of the Board itself, on the selection of new Directors
and on the succession plans for Directors. The Nomination Committee also assesses
the independence of Independent Non-Executive Directors. The recommendations of
the Nomination Committee are then put forward to the Board for consideration and,
where appropriate, adoption. The Nomination Committee consists of two Independent
Non-Executive Directors, Mr. Gian Franco Oliviero Mattei (Chairman) and Mr. Sing
Cheong Liu and one Executive Director, Mr. Carlo Mazzi.
During the Reviewed Period, the Nomination Committee held two meetings on
February 14, 2014 and April 1, 2014 (with all members attending) to review theadequacy of the structure and composition of the Board, to perform the annual reviewof the independence of the Independent Non-Executive Directors, to propose to theBoard the appointment of Mr. Carlo Mazzi as Chairman in replacement of Ms. Miuccia
Prada Bianchi and the re-election of Ms. Alessandra Cozzani as Director. In addition, theNomination Committee held one meeting on March 26, 2015, to assess and conﬁrm
the independence of the Independent Non-Executive Directors of the Company during
the Reviewed Period and to recommend to the shareholders the current structure of
the Board and the election of nine directors at the forthcoming shareholders’ general
meeting.

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d. Supervisory Body
In compliance with Italian Legislative Decree no. 231 of June 8, 2001, the Company
has established a supervisory body whose primary duty is to ensure the functioning,
effectiveness and enforcement of the Company’s Model of Organization, adopted by
the Company pursuant to the Decree. The supervisory body consists of three members
appointed by the Board selected among qualiﬁed and experienced individuals,
including Independent Non-Executive Directors, qualiﬁed auditors, executives orexternal individuals. The supervisory body consists of Mr. David Terracina (Chairman),
Mr. Franco Bertoli and Mr. Gian Franco Oliviero Mattei.
Board of statutory auditors
Under Italian law, a joint-stock company is required to have a board of statutory auditors,
appointed by the shareholders for a term of three ﬁnancial years, with the authority
to supervise the Company on its compliance with the applicable laws, regulations
and the By-laws, as well as compliance with the principles of proper management
and, in particular, on the adequacy of the organizational, administrative and accounting
structure adopted by the Company and its functioning.
At the shareholders’ general meeting of the Company held on May 22, 2012, theboard of statutory auditors (including the alternate statutory auditors) was appointed
for a term of three ﬁnancial years. The mandate of the Board of Statutory Auditors will
expire at the forthcoming shareholders’ general meeting called to approve the ﬁnancial
statements of the Company for the year ended January 31, 2015.
The board of statutory auditors of the Company consists of Mr. Antonino Parisi(Chairman), Mr. Roberto Spada and Mr. David Terracina. The alternate statutory auditors
are Mr. Marco Serra and Mr. Cristiano Proserpio.
Directors’ responsibility and auditors’ responsibility for Consolidated financial
statements
The Directors are responsible for preparing the Consolidated ﬁnancial statementsof the Company for the year ended January 31, 2015 with a view to ensuring such
Consolidated ﬁnancial statements give a true and fair view of the state of affairs of
the Group. In preparing these Consolidated ﬁnancial statements, the Directors haveselected suitable accounting policies and made judgments and estimates that are
prudent and reasonable. The Consolidated ﬁnancial statements have been preparedon a going concern basis and in accordance with International Financial ReportingStandards issued by the International Accounting Standards Board as adopted by theEuropean Union.
As regards the auditor of the Company, its responsibilities are stated in the auditor’sreport on the Consolidated ﬁnancial statements.
Internal control
The Board places great importance on maintaining a sound and effective system ofinternal control to safeguard the shareholders’ investment and the Company’s assets.
The Board is also responsible for assessing the overall effectiveness of the internal
control system including ﬁnancial, operational and compliance controls and risk
management functions.
The Internal Audit Department provides an independent review of the adequacy andeffectiveness of the internal control system. The audit plan is discussed and agreed
every year with the Audit Committee and then submitted to the Board for approval. In
addition to its agreed annual schedule of work, the Internal Audit Department conducts
other special reviews as required.

92

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The Group’s internal control system has mainly been designed to safeguard the assetsof the Group itself, to maintain proper accounting standards, to ensure that appropriate
authority has been given for the performance of acts by the Company, and to comply
with relevant laws and regulations. During the Reviewed Period, no signiﬁcant control
failings or weaknesses was identiﬁed. The Board, through the Audit Committee,
reviewed and is generally satisﬁed that the internal control system has functioned
effectively throughout the Reviewed Period and is adequate for the Group as a whole.
Joint Company Secretaries
The Company has appointed Ms. Patrizia Albano and Ms. Yuen Ying Kwai as jointcompany secretaries of the Company.
Given that the headquarter of the Company is located outside Hong Kong and theCompany is incorporated in Italy, the Company is of the view that it is in the bestinterests of the Company and is of good corporate governance to maintain Ms. Patrizia
Albano and Ms. Yuen Ying Kwai as the joint company secretaries.
During the Reviewed Period, each of Ms. Patrizia Albano and Ms. Yuen Ying Kwai,
respectively, undertook over 15 hours of relevant professional training to update theirskills and knowledge. In addition, they have attended a training session held by theCompany’s legal advisor (Slaughter and May) relating to the Listing Rules which lasted
for two hours.
Their biographies are set out in the Directors and Senior Management section.
Shareholders’ Rights
a. Convening of the shareholders’ general meeting at the shareholders’ request
Pursuant to Article 14.2 of the Company’s By-Laws, a shareholders’ general meetinghas to be called by the Board when requested by shareholders representing at least
one-twentieth of the Company’s share capital, provided that the request mentions theitem(s) to be discussed at the meeting. If there is an unjustiﬁed delay in calling themeeting by the Board, action will be taken by the board of statutory auditors.
b. Putting forward proposals at shareholders’ general meeting
Pursuant to Articles 14.4 and 14.5 of the Company’s By-Laws, shareholders who,
individually or jointly, own or control at least one-fortieth of the Company’s sharecapital may request in writing for additions to be made to the list of items on theagenda, within ten days as of the notice of call of a shareholders’ general meeting,by setting out the proposed additions (ﬁve days in the circumstances indicatedunder the second paragraph of Article 14.4). The proposals should be directed to
the Group Corporate Affairs Director and Joint Company Secretary by email at
corporateaffairs@pradagroup.com or at the Company’s address: Via A. Fogazzaro n.
28, Milan 20135, Italy.
c. Making an enquiry to the Board
Enquiries about matters to be put forward to the Board should be directed to the Group
Corporate Affairs Director and Joint Company Secretary by email at corporateaffairs@
pradagroup.com or at the Company’s address: Via A. Fogazzaro n. 28, Milan 20135,
Italy. The Company will not normally deal with verbal or anonymous enquiries.
d. Procedures for a shareholders to propose a person for election as Director
The procedures for a shareholder to nominate a person for election as a Director of
the Company are set out in Articles 19.3 and 19.4 of the Company’s By-laws, detailsof which have been disclosed in the Company’s announcement dated March 30, 2012.

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Constitutional Documents
During the Reviewed Period, there was no change to the Company’s constitutional
documents.
Communication with Shareholdersa. Investor relations and communications
The Company endeavors to maintain a high level of transparency when communicatingwith the shareholders and the ﬁnancial community in general. The Company has
maintained regular dialogue and fair disclosure with institutional shareholders, fundmanagers, research analysts and the ﬁnance media. Investor/analysts brieﬁngs and oneon-one meetings, roadshows (both domestic and international), investor conferences,site visits and results brieﬁngs are conducted on a regular basis in order to facilitatecommunication between the Company, shareholders and the investment community.
The Company strives to ensure effective and timely dissemination of information toshareholders and the investment community at all times and will regularly review thearrangements to ensure its effectiveness.
The Company’s corporate website (www.pradagroup.com) facilitates effective
communications with shareholders, investors and other stakeholders, making
corporate information and other relevant ﬁnancial and non-ﬁnancial information
available electronically and on a timely basis. This includes extensive information
about the Group’s performance and activities via the annual report, interim report,press releases, presentations, announcements, circulars to shareholders and noticesof general meetings, etc.
b. Shareholders’ Meetings
The Company strives to maintain an on-going dialogue with its shareholders.
Shareholders are encouraged to participate in general meetings or to appoint proxies
to attend and vote at meetings for and on their behalf if they are unable to attend suchmeetings. The process of the Company’s general meeting is monitored and reviewed
on a regular basis.
The Company uses the shareholders’ general meeting as one of the principal channels
for communicating with the shareholders and to ensure that shareholders’ views arecommunicated to the Board. At the shareholders’ general meeting, each substantiallyseparate issue is proposed and considered by a separate resolution (including theelection of individual directors).
The last shareholders’ general meeting of the Company was held on May 22, 2014
at the Company’s registered ofﬁce at Via A. Fogazzaro n. 28, Milan, Italy with a videoconference system located at the registered ofﬁce of Prada Asia Paciﬁc Limited at 36/F,
Gloucester Tower, The Landmark, 11 Pedder Street, Central, Hong Kong (the “2014
Shareholders’ General Meeting”). The Directors, including the Chairman of the Board,
the Chairman of the Board Committees and the auditor of the Company, Deloitte &Touche S.p.A., attended the 2014 Shareholders’ General Meeting.

94

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Separate resolutions were proposed at the 2014 Shareholders’ General Meeting
relating to each issue and the voting results of such resolutions were disclosed in
the announcement of the Company dated May 22, 2014. The number of votes cast in
favour of each resolution (and the corresponding percentage level) are set out below:
Ordinary Resolutions proposed at the 2014 Shareholders’ General Meeting1.

Number of Votes
cast in favour (%)

To approve the Audited Separate Financial Statements, which show a
net income of Euro 395,574,305, and the Audited Consolidated Financial
Statements of the Company for the year ended January 31, 2014 together
with the Reports of the Board of Directors, the Board of Statutory Auditors
and the Independent Auditors

2,380,461,306(100%)

To approve the allocation of the net income for the year ended January 31,
2014 as follows: (i) Euro 281,470,640 to Shareholders as a final dividend, inparticular to declare and distribute a final dividend of Euro 11 cents per shareto be paid on or about Friday, June 20, 2014; (ii) Euro 114,103,665 to retained
earnings

2,380,367,806(100%)

3.

To elect Ms. Alessandra COZZANI as a Director of the Company for a term
expiring on the date of the shareholders’ general meeting called to approve
the financial statements for the year ending January 31, 2015.

2,374,261,773(99.74%)

4.

To approve the aggregate compensation of the Directors for the financial
year ending January 31, 2015 in the overall amount of Euro 3,400,000, of
which: Euro 360,000 will be Directors’ fee, Euro 2,880,000 will be additional
fees to be paid to Executive Directors and Euro 160,000 will be fees formembers of the Board’s committees.

2,175,379,270(91.38%)2.

All resolutions put to the shareholders at the 2014 Shareholders’ General Meetingwere duly passed. Computershare Hong Kong Investor Services Limited, theCompany’s Hong Kong share registrar, acted as scrutineer for the vote taking at the2014 Shareholders’ General Meeting.
c. Corporate Communications
IIn order to increase efﬁciency in communication with shareholders and to contributeto environmental protection, the Company has made arrangements from September
2011 to ascertain how its shareholders wish to receive corporate communications.
Shareholders have the right to choose the language, either in English or Chinese, orboth, and means of receipt of the corporate communications, in printed form or byelectronic means through the Company’s website at www.pradagroup.com.

PRADA Group

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96

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Consolidated Financial Statements

PRADA Group

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97

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Consolidated statement of financial position(amounts in thousands of Euro)

Note

January 31
2015

January 31
2014

AssetsCurrent assets
Cash and cash equivalents

9708,966

568,414

Trade receivables, net

10346,284

308,405

Inventories, net

11654,545449,903

Derivative financial instruments – current

12

6,287

13,984

Receivables from and advance payments to parent company
and other related parties – current

13

3,240

5,993

Other current assets

14

Total current assets

180,633

114,897

1,899,955

1,461,596

Non-current assets
Property, plant and equipment

15

1,474,218

1,230,192

Intangible assets

16

943,304

901,289

Associated undertakings

17

30,52921,186

Deferred tax assets

35

280,983

201,245

Other non-current assets

18

91,35369,867

Derivative financial instruments - non current

12

1,106

1,430

Receivables from and advance payments to parent company
and other related parties – non-current

13

17,4291,487

Total non-current assets

2,838,922

2,426,696

Total Assets

4,738,877

3,888,292

61,909Liabilities and Shareholders’ Equity
Current liabilities
Bank overdrafts and short-term loans

19263,335

Payables to parent company and other related parties – current

20

3,083

4,894

Trade payables

21

437,420

348,534

Tax payables

22

133,914132,145

Derivative financial instruments - current

1256,772

3,803

Obligations under finance leases - current
Other current liabilities

23

Total current liabilities

21

524

220,480

154,666

1,115,025

706,475

255,203207,950

Non-current liabilities
Long-term financial payables

24

Obligations under finance leases non-current
Post-employment benefits25

19

85,754

63,279Provision for risks and charges

26

63,69552,660

Deferred tax liabilities

35

41,63442,671Other non-current liabilities

27

128,752

98,982Derivative financial instruments non-current

12

17,283

1,469

Payables towards parent company andother related parties-non-current

20

13,384

13,247

Total non-current liabilities
Total Liabilities

605,705

480,277

1,720,730

1,186,752

Share capital

255,882

255,882

Other reserves

2,163,129

1,853,325

Translation reserve

130,996(49,438)

Net income for the year

450,730

627,785

Total Shareholders’ Equity – Group28

3,000,737

2,687,554

Shareholders’ Equity – Non-controlling interests

29

17,41013,986

4,738,877

3,888,292

Total Liabilities and Shareholders’ Equity

Net current assets
Total assets less current liabilities

98-

PRADA Group

Annual Report 2014 (15 aprile).indd 98

784,930

755,121

3,623,852

3,181,817

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Consolidated income statement(amounts in thousands of Euro)

Note

twelvemonthsended
January 31
2015%

twelvemonthsended
January 31
2014%

Net revenues

30

3,551,696

100.0%

3,587,347

100.0%

Cost of goods sold31

(1,001,117)-28.2%(938,698)-26.2%

2,550,579

71.8%

2,648,649

73.8%(1,849,028)-52.1%(1,709,412)-47.7%

701,55119.8%

939,237

26.2%

Gross margin

Operating expenses

32

EBIT

Interest and other financial income/(expenses), net

33(34,304)-1.0%(17,357)-0.5%

Dividends from investments

34

455

-

1,016

-

667,70218.8%

922,89625.7%(208,484)-5.9%(285,091)-7.9%

Net income for the year from continuing operations

459,218

12.9%

637,805

17.8%

Net income for the year

459,218

12.9%

637,805

17.8%

8,488

0.2%

10,0200.3%

450,730

12.7%

627,785

17.5%

Income before taxes

Taxation

35

Net income – Non-controlling interests

29

Net income – Group

Basic and diluted earnings per share (in Euro pershare)PRADA Group

Annual Report 2014 (15 aprile).indd 99

36

0.176

Annual Report 2014 - Consolidated Financial Statements

0.245

99

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Consolidated statement of cash flows(amounts in thousands of Euro)

Income before taxation

twelve months
ended
January31
2015

twelve months
ended
January 31
2014

667,702922,896248,647

198,857

Income Statement adjustments
Depreciation and amortization
Impairment of property, plant and equipment and intangible assets

4,051

5,093

Non-monetary financial (income)/expenses

33,84422,015

Other non-monetary charges

13,67736,918Other non-current assets and liabilities(30,050)(16,285)

Trade receivables, net(23,667)(5,857)

Inventories, net(173,306)(103,550)

Balance Sheet changes

Trade payables

80,42020,443

Other current assets and liabilities(33,089)(17,934)

Cash flows from operating activities

788,229

1,062,596

Interest paid, net – third parties(9,892)(10,740)

Taxes paid

(294,740)(282,420)

Net cash flows from operating activities

483,597

769,436

Purchases of property, plant and equipment and intangible assets(361,624)(549,364)

Disposals of property, plant and equipment and intangible assets

-

-

455

1,015

Proceeds of investments held for sale
Business combination(7,701)-

Net cash flows utilized by investing activities(368,870)(548,349)

Dividends paid to shareholders of PRADA spa(281,471)(230,294)

Dividends paid to non-controlling shareholders(9,378)(6,634)

Repayment of loans to related companies(2,211)(899)

Repayment of loans by related companies

2,000

1,397

New loans to related companies(741)(2,000)(40,676)(162,479)

Arrangement of long-term borrowings – third parties

77,856

176,773

Change in short-term borrowings – third parties

195,469

4,299

Repayment of short term portion of long term borrowings - third parties

Share capital increases by non-controlling shareholders of subsidiaries

2,125

40

Cash flows generated/(utilized) by financing activities(57,027)(219,797)

Change in cash and cash equivalents, net of bank overdrafts

57,7001,292

Foreign exchange differences

82,874(4,714)

Opening cash and cash equivalents, net of bank overdraft568,299571,722

Closing cash and cash equivalents, net of bank overdraft

708,873

568,300

Cash and cash equivalents

708,966

568,414

Bank overdraft
Closing cash and cash equivalents, net of bank overdraft

100

PRADA Group

Annual Report 2014 (15 aprile).indd 100

(93)

(114)

708,873

568,300

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Statement of changes in consolidated shareholders’ equity(amounts in thousands of Euro, except for number of shares)
Equity(amounts inthousands ofEuro)

Balance atJanuary 31, 2013

Number ofsharesCash
Share
Share Translation
flow Actuarial
premium
Capitalreservehedge reserve
reserve
reserve

2,558,824,000 255,882(42,288)

410,047

20,148(6,470)

Fair
Value
Available
for sale
Reserve

Other
reserves

5,486 1,051,536 1,480,747

Allocation of2012 net income

-

-

-

-

-

-

-

Dividends

-

-

-

-

-

-

- (230,294)

Capital injection
in subsidiaries

-

-

-

-

-

-

-

Comprehensive
income for theyear (recyclable
to P&L)--(7,150)- (16,449)-

Comprehensive
income for theyear (notrecyclable to P&L)

-

-

-

-

-

(4,982)

2,558,824,000 255,882(49,438)410,047

3,699(11,452)

Balance atJanuary 31, 2014

625,681

Net
incomefor year625,681 2,320,022

625,681 (625,681)

-

Total
Equity10,470 2,330,492--(230,294)-(230,294)

-

-

-

-

40

40

(1,378)-(17,827)

627,785

602,808

10,110612,918--(4,982)-(4,982)-(4,982)

4,108 1,446,923 1,853,325

Allocation of2013 net income

-

-

-

-

-

-

-

Dividends

-

-

-

-

-

-

- (281,471)

Acquisition ofMarchesi Angelo
srl

-

-

-

-

-

-

-

Capital injection
in subsidiaries

-

-

-

-

-

-

Comprehensive
income for theyear (recyclable
to P&L)--180,434- (39,022)

Comprehensive
income for theyear (notrecyclable to P&L)

-

-

-

2,558,824,000 255,882

130,996

Balance atJanuary 31, 2015

Total
other
reserves

EquityattribuNontable toconowners trollingof the interests
Group627,785

627,785 2,687,554

627,785 (627,785)-(6,634) (236,928)

13,986 2,701,540--(281,471)-(281,471)(2,466)(2,466)-(2,466)107(2,359)

-

-

-

-

-

2,125

2,125

-

7,007

-

(32,015)450,730

599,149

10,573609,722-(2,029)--(2,029)-(2,029)(3)(2,032)410,047 (35,323)(13,481)-

11,115 1,790,771 2,163,129

450,730 3,000,737(9,378) (290,849)

17,410 3,018,147

Under Italian law, the Company is required to allocate a portion of its net income tonon-distributable reserves and to provide additional information on the distribution of
earnings for the period, Note 37.

PRADA Group

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101

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Statement of consolidated comprehensive income(amounts in thousands of Euro)Net income for the period – Consolidated

twelve months
ended
January 31
2015

twelve months
ended
January 31
2014459,218

637,805

182,519(7,057)A) Items recyclable to P&L:

Change in Translation reserve
Tax impact--

Change in Translation reserve less tax impact

182,519(7,057)

Change in Cash Flow Hedge reserve(52,817)(22,755)

Tax impact

13,795

6,306

Change in Cash Flow Hedge reserve less tax impact(39,022)(16,449)

Change in Fair Value reserve

9,343(1,837)

Tax impact(2,336)459

Change in Fair Value reserve less tax impact

7,007(1,378)(2,338)(6,403)B) Item not recyclable to P&L:

Change in Actuarial reserve
Tax impact

306

1,418

Change in Actuarial reserve less tax impact(2,032)(4,985)

Consolidated comprehensive income for the period

607,690

607,936

Comprehensive income for the period – Non-controlling Interests

10,570

10,110Comprehensive income for the period – Group597,120

597,826

The accounting policies and the notes constitute an integral part of the Consolidated
ﬁnancial statements.

102

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Financial Statements of PRADA spa

PRADA Group

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103

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PRADA spa Statement of financial position
January 31
2015

January 31
2014

Cash and cash equivalents

127,788

126,124

Trade receivables, net

741,907621,096

Inventories

312,797

187,067(amounts in thousands of Euro)
AssetsCurrent assets

Derivative financial instruments

6,479

12,105

Financial receivables and other receivables from parent company, subsidiaries,
associates and related parties

52,747258,226

Other current assets

107,678

60,893

Total current assets

1,349,396

1,265,511

Property, plant and equipment462,270

317,996

Intangible assets

119,103

114,188

Associated undertakings

931,599

908,287

Deferred tax assets

50,14533,009Other non-current assets

11,3405,988

Derivative financial instruments - non current

9,544

1,430

Non-current assets

Financial receivables and other receivables from parent company, subsidiaries,
associates and related parties

309,564

18,853

Total non-current assets

1,893,565

1,399,751

Total assets

3,242,961

2,665,262

Bank overdrafts and short-term loans

157,972

14,483Financial payables and other payables to parent company, subsidiaries,
associates and related parties

339,051

349,100

Trade payables

Liabilities and Shareholders' equity
Current liabilities

640,984

436,357

Current tax liabilities

9,053

20,086

Derivative financial instruments

52,7083,312

Obligations under financial leases-

498

Other current liabilities

156,742

75,208

Total current liabilities

1,356,510

899,044

Long-term financial payables

129,209134,799

Employee benefits

55,87840,114

Provisions

22,85523,266

Deferred tax liabilities

7,612

8,027

Other non-current liabilities

5,844

3,134

Derivative financial instruments - non current

13,8792,490

Financial and other payables to parent company, subsidiaries,
associates and related parties

43,851

13,247

Non-current liabilities

Total non-current liabilities

104

279,128225,077

Total liabilities

1,635,638

1,124,121

Share capital

255,882

255,882

Other reserves

966,012889,685

Net income of the year

385,429395,574

Shareholders' equity

1,607,323

1,541,141

Total Liabilities & Shareholders’ Equity

3,242,961

2,665,262

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PRADA spa Income statement
twelve months
ended
January 31
2015

twelve months
ended
January 31
2014

Net revenues

2,027,507

2,004,115

Cost of goods sold(941,628)(898,150)

Gross Margin

1,085,879

1,105,965

Selling, general and administrative expenses(amounts in thousands of Euro)(572,899)(541,635)Interest and other financial income (expenses), net

34,582

27,605

Income before tax

547,562

591,935

Income taxes(162,133)(196,361)

Net income for the year

385,429395,574

twelve months
ended
January 31
2015

twelve months
ended
January 31
2014

385,429395,574

Change in cash flow hedge reserve(43,658)(22,930)

Tax effect

12,006

6,305

Change in Cash Flow Hedge reserve after tax effect(31,652)(16,625)(2,950)(894)

PRADA spa Statement of comprehensive income(amounts in thousands of Euro)Net income for the year

Items recyclable to P&L:

Items not recyclable to P&L:

Gains/ (losses) recognized in actuarial gains/(losses) reserve
Tax effect

340

146

Change in actuarial reserve after tax effect(2,610)(748)

Net gains (losses) recognized directly in equity(34,262)(17,373)

Total comprehensive income

351,167

378,201

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PRADA spa Statement of cash flows(amounts in thousands of Euro)

twelve months
ended
January 31
2015

twelve months
ended
January 31
2014

547,562

591,935

32,31725,911

Cash flows generated from operations:
Income before taxation
Adjustments for:
Depreciation and amortization
Impairment of fixed assets
Losses/(gains) on disposal of fixed assets

127

-

2,140

(69)

Impairment of investments

32,417-

Non-monetary financial (income)/expenses(98,110)(44,367)

Provisions and other non-monetary charges

40,053

21,321

Trade receivables, net(115,213)(157,831)

Inventories, net(124,724)(33,423)

Trade payables

202,594

42,817

Other current assets and liabilities(15,803)

3,097

Other non-current assets and liabilities(19,421)(3,474)

Cash flows generated from operations

483,939445,917

Interest paid, net(6,988)(4,482)

Income taxes paid, net(204,745)(189,909)

Net cash flows generated from operations

272,206

251,526

Purchase of property, plant and equipment(100,331)(60,375)

Disposal of property, plant and equipment

3,355

142

(11,588)(11,757)

Changes in statement of financial position:

Cash flow generated (used) from investing activities:

Purchase of intangible assets
Disposal of intangible assets

1,318

-

Investments in subsidiaries(54,861)(20,336)

Dividends received

92,982

46,515

Cash flows generated (used) by investing activities(69,124)(45,811)

Dividends paid

(281,470)(230,294)

Change in short-term bank loans

161,476-

3,212

31,557

Cash flows generated (used) by financing activities:

Change in short-term intercompany loans
Repayment of loans from subsidiaries

89,981

28,265

Disbursement of loans to subsidiaries(160,973)(60,400)

New long-term loans to related parties
Repayment of short-term portion of long-term borrowings
New long term borrowings arranged
Cash flow generated (used) by financing activities

Change in cash and cash equivalents net of bank overdraft
Exchange differences(119,136)-

130,000(201,499)(220,008)

1,582(14,293)2(3)Opening cash and cash equivalents, net of bank overdraft

126,115

140,411

Closing cash and cash equivalents, net of bank overdraft

127,699

126,115

Cash and bank balances

127,788

126,124

Bank overdraft
Closing cash and cash equivalents, net of bank overdraft

106

(741)
(12,984)

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(89)

(9)

127,699

126,115

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Statement of changes in shareholders’ equity - PRADA spa(amounts in thousands of Euro, except for number of shares)(amounts in thousandsof Euro)Number ofsharesSharecapitalSharepremium
reserve

Legal
reserve

Other Retained
reserves earnings

Cash
flow
hedge
reserveNet
incomeBalance at January 31
2013

2,558,824,000

255,882

410,047

46,390182,899

189,416

20,304

288,297 1,393,235

Allocation of 2012 net
income

-

-

-

4,787

-

283,510

Dividends paid

-

-

-

-

- (230,294)

Comprehensive income
for the year
(recyclable to P&L)

-

-

-

-

-

Comprehensive income
for the year
(not recyclable to P&L)

-

-

-

-

-

(749)

-

Balance at January 31
2014

2,558,824,000

255,882

410,047

51,177

182,899

241,883

3,679

Allocation of 2013 net
income

-

-

-

-

-

395,574

Dividends paid

-

-

-

-

- (281,471)--(281,471)

Other movements

-

-

-

-

-

-

-

(3,514)Comprehensive income
for the year
(recyclable to P&L)

-

-

-

-

-

- (31,652)

385,429353,777

Comprehensive income
for the year
(not recyclable to P&L)

-

-

-

-

-

-

(2,610)

Balance at January 31
2015

2,558,824,000

255,882

410,047

51,177

182,899

PRADA Group

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Shareholders’equity---(230,294)- (16,625)

395,574

378,949-(749)(3,514)(2,610)395,574 1,541,141- (395,574)-

349,862 (27,973)-

385,429 1,607,323

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108

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Notes to the Consolidated Financial Statements

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1.

General information
PRADA spa (the “Company”), together with its subsidiaries (jointly the “Group”), islisted on the Hong Kong Stock Exchange (HKSE code: 1913). It is one of the world
leaders in the luxury goods sector where it operates with the Prada, Miu Miu, Church’s
and Car Shoe brands in the design, production and distribution of luxury handbags,
leather goods, footwear, apparel and accessories. The Group also operates, under
speciﬁc licensing agreements, in the eyewear and fragrances. Its products are soldin 70 countries worldwide through a network that included 594 Directly Operated
Stores (DOS) at January 31, 2015, and a select network of luxury department stores,
independent retailers and franchise stores.
The Company is a joint-stock company, registered and domiciled in Italy. Its registeredofﬁce is in via Fogazzaro 28, Milan, Italy. At the date of these Consolidated ﬁnancial
statements, 79.98% of the share capital was owned by PRADA Holding spa, a company
domiciled in Italy, while the remaining shares were ﬂoating on the Main Board of theHong Kong Stock Exchange.
The Consolidated ﬁnancial statements were approved and authorized for issue by the
Board of Directors of PRADA spa on March 27, 2015.

2.

Basis of preparation
The Consolidated ﬁnancial statements of the PRADA Group as at January 31, 2015,
including the “Consolidated statement of ﬁnancial position”, the “Consolidated
income statement”, the “Statement of consolidated comprehensive income”, the“Consolidated statement of cash ﬂows”, the “Statement of changes in consolidated
shareholders’ equity” and the “Notes to the consolidated ﬁnancial statements” havebeen prepared in accordance with the International Financial Reporting Standards(“IFRS”) issued by the International Accounting Standards Board (“IASB”) and asendorsed by the European Union.
At the date of presentation of these Consolidated ﬁnancial statements, there were nodifferences between IFRS as endorsed by the European Union and applicable to the
PRADA Group and those issued by the IASB.
IFRS also refers to all International Accounting Standards (“IAS”) and all interpretationsof the International Financial Reporting Interpretations Committee (“IFRIC”), previously
called the Standing Interpretations Committee (“SIC”).
The Group has prepared the Consolidated statement of ﬁnancial position presenting
separately current and non-current assets and liabilities. All the details needed foran accurate and complete information are provided in the Notes to the consolidated
ﬁnancial statements. The Consolidated income statement is classiﬁed by destination.
The cash ﬂow information is provided in the Consolidated statement of cash ﬂows
which has been prepared under the indirect method.
The Consolidated ﬁnancial statements have been prepared on a going concern basis
and are presented in Euro which is also the functional currency of PRADA spa.

110

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3.

Amendments to IFRS
New standards and amendments issued by the IASB, endorsed by the European
Union and applicable to the Prada Group from February 1, 2014
The following new IFRS and amendments to existing IFRS have been endorsed by theEuropean Union and are applicable to the PRADA Group effective from February 1,
2014. These changes do not have any signiﬁcant impact to the Group as of the date ofthese consolidated ﬁnancial statements:–“IFRIC Interpretation 21 Levies”. This interpretation, effective from annual periods
beginning on or after January 1, 2014, provides guidance on when to recognize
a liability for a levy imposed by a government, both for levies that are accounted
for in accordance with “IAS 37 Provisions, Contingent Liabilities and Contingent
Assets” and those where the timing and amount of the levy is certain.

–

Amendments to “IAS 36 Impairment of Assets”. The objective of the amendments
made to this standard, effective from annual periods beginning on or after January
1, 2014, is to clarify that the scope of the disclosures of information about therecoverable amount of assets, where that amount is based on fair value less costsof disposal, is limited to impaired assets. The amendments also requires more
disclosure about the recoverable amount of any cash-generating unit for which
the carrying amount of goodwill or intangible assets with indeﬁnite useful lives
allocated to that unit is signiﬁcant in comparison with the entity’s total carrying
amount of goodwill or intangible assets with indeﬁnite useful lives.

–

Amendments to “IAS 39 Financial Instruments: Recognition and Measurement”.
Such amendments provides relief from discontinuing hedge accounting whennovation to a central counterparty following the introduction of a new law or
regulation of a derivative designated as a hedging instrument meets certain
criteria. Such amendments are required to apply for annual periods beginning on
or after January 1, 2014.

–“Investment Entities”, meant as a group of amendments to IFRS 10, IFRS 12
and IAS 27. “IFRS 10 Consolidated Financial Statements” has been amended
in order to better reﬂect the business model of investment entities. It requiresthat investment entities measure their subsidiaries at fair value through proﬁt orloss account rather than consolidate them. “IFRS 12 Disclosure of Interests in
Other Entities” has been amended in order to require speciﬁc disclosure aboutsuch subsidiaries of investment entities. The amendments to “IAS 27 Separate
Financial Statements” also removed the option for investment entities to measureinvestments in certain subsidiaries either at cost or at fair value in their separateﬁnancial statements. The Amendments are applicable to the Prada Group at thelatest as from the commencement date of a ﬁnancial year starting on January 1,
2014.

–

Transition Guidance (amendments to IFRS 10, IFRS 11 and IFRS 12). The objectiveof the amendments is to clarify the IASB’s intention when ﬁrst issuing the transition
guidance in “IFRS 10 Consolidated Financial Statements”. The amendments also
provide additional transition relief in IFRS 10, “IFRS 11 Joint Arrangements” and“IFRS 12 Disclosure of Interests in Other Entities”, limiting the requirement toprovide adjusted comparative information to only the preceding comparative
period. Furthermore, for disclosures related to unconsolidated structured entities,
the amendments remove the requirement to present comparative information for
periods before IFRS 12 is ﬁrst applied. The Amendments are applicable to thePrada Group at the latest as from the commencement date of a ﬁnancial year
starting on January 1, 2014.

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112

–

“IFRS 10 Consolidated Financial Statements”. This new Standard, applicable to
the Prada Group at the latest as from the commencement date of a ﬁnancial year
starting on January 1, 2014, grounds on previous version of “IAS 27 Consolidated
and Separate Financial Statements” and provide more guidance for the presentationand preparation of consolidated ﬁnancial statements. It enforces the deﬁnition ofcontrol as basis for determining which entities have to be consolidated. It alsosupersedes “IAS 27 Consolidated and Separate Financial Statements” and “SIC
12 Consolidation – Special Purpose Entities”.

–“IFRS 11 Joint Arrangements”. This new Standard, applicable to the Prada Groupat the latest as from the commencement date of a ﬁnancial year starting on January
1, 2014, establishes principles for ﬁnancial reporting to entities that are parties to a
joint arrangement and supersedes “IAS 31 Interests in Joint Ventures” and “SIC
13 Jointly Controlled Entities - Non-monetary Contributions by Ventures’”. The
IFRS 11 provides guidelines to determine the type of joint arrangement in which
an entity is involved (joint operation or joint venture) by assessing its rights andobligations and to account for those rights and obligations in accordance with thattype of joint arrangement.

–“IFRS 12 Disclosure of Interests in Other Entities”. This new standard, applicableto the Prada Group at the latest as from the commencement date of a ﬁnancial
year starting on January 1, 2014, applies to entities that have an interest in a
subsidiary, a joint arrangement, an associate or an unconsolidated structured
entity. It requires the entity to disclose information that enable users of its ﬁnancial
statements to evaluate the nature of, and risks associated with, its interests inother entities as well as the effects of those interests on its ﬁnancial position,ﬁnancial performance and cash ﬂows.

–

Amendments to “IAS 28 Investment in Associates and Joint Ventures”. The
amendments to this Standard, effective at the latest as from the commencement
date of a ﬁnancial year starting on January 1, 2014, have to be read together with“IFRS 11 Joint Arrangements” and “IAS 27 Separate Financial Statements”. The
standard (as amended in 2011) is to be applied by all entities that are investors withjoint control of, or signiﬁcant inﬂuence over, an investee and deﬁnes the equity
method as a method of accounting whereby the investment is initially recognizedat cost and adjusted thereafter for the post-acquisition change in the investor’sshare of net assets of the investee.

–

Amendments to “IAS 27 Separate Financial Statements”. The amendments tothis standard followed the issue of “IFRS 10 Consolidated Financial Statements”,“IFRS 11 Joint Arrangements”, “IFRS 12 Disclosure of Interests in Other Entities”
and the amendments to “IAS 28 Investment in Associates and Joint Ventures”
and prescribe the accounting and disclosure requirements for investments in
subsidiaries, joint ventures and associates when an entity prepares separateﬁnancial statements. Such amendments are applicable to the Prada Group at thelatest as from the commencement date of a ﬁnancial year starting on January 1,
2014.

–

Amendments to “IAS 32 Financial Instruments: Presentation”. The amendments
made to this Standard, effective from annual periods beginning on or after January
1, 2014, and to be applied retrospectively, clarify the criterion to be followed whenan entity currently has legally enforceable right to set off the ﬁnancial assets andﬁnancial liabilities.

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New standards and amendments issued by the IASB, endorsed by the European
Union, but not yet applicable to the Prada Group as effective from annual periods
beginning on or after January 1, 2015–

Annual improvements to IFRS (2011–2013 Cycle). Such improvements impacted:– “IFRS 1 First-time Adoption of IFRS”, clarifying the meaning of “effective
IFRS”;– “IFRS 3 Business Combinations”, clarifying that the IFRS does not apply to theaccounting for the formation of a joint arrangement;– “IFRS 13 Fair Value Measurement”, clarifying the application of the IFRS toﬁnancial assets and ﬁnancial liabilities with offsetting positions in market risks
or counterparty credit risk;– “IAS 40 Investment Property”, clarifying the interrelationship between IFRS 3
and IAS 40 when classifying property as investment property or owner-occupied
property.

–

Amendments to “IAS 19 Employee Beneﬁts”. IASB has amended therequirements in IAS 19 for contributions from employees or third parties thatare linked to a service. If the amount of the contributions is independent of thenumber of years of service, an entity is permitted to recognize such contributions
as a reduction in the service cost in the period in which the related service isrendered, instead of attributing the contributions to the periods of service. If theamount of the contributions is dependent on the number of years of service, an
entity is required to attribute those contributions to periods of service using thesame attribution method required by paragraph 70 of IAS 19 for the gross beneﬁt(i.e. either using the plan’s contribution formula or on a straight-line basis). An
entity shall apply those amendments for annual periods beginning on or after July
1, 2014, retrospectively in accordance with “IAS 8 Accounting Policies, Changes
in Accounting Estimates and Errors”. Earlier application is permitted. If an entity
applies those amendments for an earlier period, it shall disclose that fact.

–

Annual improvements to IFRS (2010–2012 Cycle). Such improvements, effective
for annual periods beginning on or after July 1, 2014, impacted:– “IFRS 2 Share-based Payment”, amending the deﬁnition of vesting condition;– “IFRS 3 Business Combinations”, amending the accounting for contingent
consideration in a business combination;– “IFRS 8 Operating Segments”, requesting more disclosure when aggregating
operating segments and requiring the reconciliation of the total of the reportablesegments’ assets to the entity’s assets;– “IFRS 13 Fair Value Measurement”, clarifying the impact of the standard on themeasurement of short-term receivables and payables;– “IAS 16 Property, Plant and Equipment”, amending the revaluation method;– “IAS 24 Related Party Disclosure”, amending the deﬁnition of key management
personnel;– “IAS 38 Intangible Assets”, amending the revaluation method.

New standards and amendments issued by the IASB, but not yet endorsed by
the European Union–“IFRS 9 Financial instruments”. This Standard will replace “IAS 39 Financial
Instruments: Recognition and Measurement” in its entirety. An entity shall apply
this Standard for annual periods beginning on or after January 1, 2018, with earlier
application permitted. Such replacement project has been divided into three main
phases, namely the measurement of ﬁnancial assets and ﬁnancial liabilities, theimpairment methodology and the hedge accounting.

–“IFRS 14 Regulatory Deferral Accounts”. This Standard, effective for annual
periods beginning on or after January 1, 2016, permits an entity that adopts

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IFRS to continue to use, in its ﬁrst and subsequent IFRS ﬁnancial statements, its
previous GAAP accounting policies for the recognition, measurement, impairment
and de-recognition of regulatory deferral account balances without speciﬁcallyconsidering the requirements of paragraph 11 of IAS 8. This new IFRS describes
regulatory deferral account balances as amounts of expense or income that would
not be recognized as assets or liabilities in accordance with other Standards, butthat qualify to be deferred in accordance with this Standard because the amountis included, or is expected to be included, by the rate regulator in establishing theprice that an entity can charge to customers for rate-regulated goods or services.

114–“IFRS 15 Revenue from contracts with Customers”. The core principle of IFRS
15, effective for annual periods beginning on or after January 1, 2017 (earlier
application is permitted), is that an entity recognizes revenue to depict thetransfer of promised goods or services to customers in an amount that reﬂects
the consideration to which the entity expects to be entitled in exchange for those
goods or services. An entity should recognize revenue in accordance with thatcore principle by applying the following steps: identify the contract, identify theperformance obligations in the contract, determine the transaction price, allocate
the transaction price to the performance obligations in the contract and recognize
revenue when the entity satisﬁes a performance obligation.

–

Amendment to IAS 16 and IAS 38 “Clariﬁcation of Acceptable Methods ofDepreciation and Amortization”. The IASB amended “IAS 16 Property, Plant
and Equipment” and “IAS 38 Intangible assets” clarifying that, even though
the selection of an amortisation methodology involves the use of judgement, arevenue-based method is not considered to be an appropriate manifestation of
consumption for depreciating an asset. An entity shall apply those amendments
prospectively for annual periods beginning on or after January 1, 2016.

–

Amendment to “IFRS 11 Accounting for Acquisitions of Interests in Joint
Operations”. This amendment requires the acquirer of an interest in a joint
operation in which the activity constitutes a business, as deﬁned in “IFRS 3
Business Combinations”, to apply all of the principles on business combinations
accounting in IFRS 3 and other IFRSs except for those principles that conﬂict withthe guidance in IFRS 11 Joint Arrangements. In addition, the acquirer shall disclose
the information required by IFRS 3 and other IFRSs for business combinations. An
entity shall apply that amendment in annual periods beginning on or after January
1, 2016.

–

Amendments to IFRS 10, IFRS 12 and IAS 28. “IFRS 10 Consolidated Financial
Statements” has been amended to conﬁrm that the exemption from preparing
consolidated ﬁnancial statements set out in paragraph 4(a) of IFRS 10 is available
to a parent entity that is a subsidiary of an investment entity. This because aninvestment entity may measure all of its subsidiaries at fair value through proﬁt orloss in accordance with paragraph 31 of IFRS 10. Those amendments are applicablefor annual periods beginning on or after January 1, 2016. Earlier application ispermitted, providing disclosure.

–

Disclosure Initiative: Amendments to “IAS 1 Presentation of Financial Statements”.
This project is part of the IASB's overall disclosure initiative and it considers
proposals such as:– adding an explanation in IAS 1 similar to more recent standards explaining that
too much detail can obscure useful information;– clarifying that materiality applies to the whole ﬁnancial statements and that
information which is not material need not be presented in the primary ﬁnancial
statements or disclosed in the notes;– clarifying that some disclosures speciﬁed in standards are simply not importantenough to justify separate disclosure for a particular entity;

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– making it clear that preparers should exercise professional judgment inpresenting their ﬁnancial reports;– remove the perception of a “normal order of presentation” of ﬁnancial
statements, making it easier for entities to provide more contextual information;– reducing restrictions on how accounting policies should be presented, allowing
important accounting policies to be given greater prominence in ﬁnancial
reports;– adding additional explanations with examples of how IAS 1 requirements aredesigned to shape ﬁnancial statements instead of specifying precise terms thatmust be used, including whether subtotals of IFRS numbers such as earnings
before interest and tax (EBIT) and earnings before interest, tax, depreciation
and amortisation (EBITDA) should be acknowledged in IAS 1;– adding a requirement that entities disclose and explain their net debt
reconciliation.
The amendment will be applicable for annual periods beginning on or after January
1, 2016. Earlier application is permitted.
–

Annual Improvements to IFRSs (2012–2014 Cycle). Such improvements, effective
for annual periods beginning on or after January 1, 2016, impacted:– “IFRS 5 Non-current Assets Held for Sale and Discontinued Operations”,
changing the methods of disposal.
– “IFRS 7 Financial Instruments: Disclosures”, applying disclosure requirements
to a servicing contract.
– “IAS 19 Employee Beneﬁts”, clarifying the discount rate to be used for actuarial
assumption.
– “IAS 34 Interim Financial Reporting”.

–

Amendments to IFRS 10 and IAS 28: Sale or Contribution of Assets between
an Investor and its Associate or Joint Venture. The amendments address a
conﬂict between the requirements of “IAS 28 Investments in Associates andJoint Ventures” and “IFRS 10 Consolidated Financial Statements” and clarify
that in a transaction involving an associate or joint venture the extent of gain orloss recognition depends on whether the assets sold or contributed constitute abusiness. They are effective for annual periods beginning on or after January 1,
2016, with earlier application being permitted.

–

Amendments to “IAS 27 Separate Financial Statements”. The amendments
reinstate the equity method as an accounting option for investments in subsidiaries,
joint ventures and associates in an entity's separate ﬁnancial statements. The
amendments are effective for annual periods beginning on or after January 1,
2016, with earlier application being permitted.

As at the date these Consolidated ﬁnancial statements were prepared, the European
Union has not completed yet the endorsement of the new standards and amendments
as described above.
4.

Scope of consolidation
The consolidated ﬁnancial information comprises the accounts of PRADA spa and the
Italian and foreign companies over which the Company directly or indirectly exercises
control. An investor controls an investee when it is exposed, or has rights, to variable
returns from its involvement with the investee and has the ability to affect those
returns through its power over the investee.
The companies in which the Group has more than 50% of the voting rights or that arecontrolled by the Group in some other way are consolidated on a line by line basis asfrom the date the Group acquired control and are no longer consolidated from the date

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control ceases.
Joint ventures and associated undertakings are consolidated using the equity method.
Associated undertakings are those in which the Group has a signiﬁcant inﬂuence but
does not exercise effective control.
Signiﬁcant inﬂuence is deﬁned as the power to participate in the ﬁnancial and operating
policy decisions of the investee but is not control or joint control of those policies.
A list of the companies included in the Consolidated ﬁnancial statements is provided
in Note 42.
5.

Basis of consolidation
The main consolidation criteria applied when preparing the consolidated ﬁnancial
statements for the years ended January 31, 2015, and January 31, 2014, in accordancewith IFRS, are as follows:116–

the ﬁnancial statements of PRADA spa are prepared under IFRS and those of its
subsidiaries are adjusted, as necessary, to comply with IFRS accounting standards
and with the standards applied throughout the Group. The ﬁnancial statements
used to prepare the consolidated ﬁnancial information are those closed at thereporting date;–assets and liabilities, costs and revenues of controlled companies are fully included
on a line-by-line basis in the Consolidated ﬁnancial statements irrespective of
the percentage held. The book value of equity investments, directly or indirectly
owned by the holding company, is eliminated against the corresponding portion ofshareholders’ equity of the companies in which the interest is held;–

for companies consolidated on a line-by-line basis that are not 100% owned byshareholders of the holding company, the share of the net equity and net results
for the year of non-controlling interests are disclosed as “Shareholders’ equity Non-controlling interests” in the Consolidated statement of ﬁnancial position and“Net income - Non-controlling interests” in the Consolidated income statement;–

the difference between the acquisition cost of investments acquired after thedate of ﬁrst-time application of IFRS (January 1, 2004) and the corresponding
share of shareholders’ equity at the date of acquisition is allocated, if positive, toassets, liabilities and contingent liabilities based on their fair value at the date ofacquisition. Any residual positive amount is accounted for as goodwill while any
negative amount is charged to the income statement immediately. The positive
difference between the acquisition cost of an additional stake in a controlled
company and the value of the interest acquired is directly recognized in equity
reserves;–

at the date of the ﬁrst time application, goodwill was stated at deemed cost less any
impairment losses. Deemed cost was calculated based on the difference between
the amount paid for the investment and the relevant net equity. Goodwill arisingfrom various acquisitions is not amortized but tested annually for impairment. Any
impairment in the value of goodwill is charged to the income statement;–

proﬁts and losses, assets and liabilities of joint ventures and associatedundertakings are accounted for using the equity method. According to thismethod, investments in joint ventures and associated undertakings are recordedin the statement of ﬁnancial position at cost, and adjusted to account for any
changes in the companies’ net equity post acquisition, less any impairment of
the investment value. Losses exceeding the interest of the shareholders of theholding company are recorded only if the Group has undertaken an obligation to

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cover them. The excess of the acquisition cost of the investment over the interestof the holding company shareholders in the net fair value of identiﬁable assets
and liabilities acquired and contingent liabilities is recorded as goodwill. Goodwill
is included in the book value of the investment and tested for impairment. If thecost is lower than the holding company shareholders’ interest in the fair value ofidentiﬁable assets, liabilities and contingent liabilities, the difference is recorded in
the income statement for the year of acquisition;

6.

–

during the consolidation process, receivables and payables, costs and revenues
arising from transactions between entities included in the scope of consolidation
are fully eliminated. Any unrealized gains or losses generated by transactions
between the Group’s consolidated companies and included in inventories andﬁxed assets at the balance sheet date are also eliminated. Unrealized losses are
eliminated unless the transaction provides evidence of an impairment of the asset
transferred. In this case, the transferred asset is adjusted for impairment;–

dividends paid by consolidated companies are also eliminated from the income
statement and added to prior year retained earnings if, and to the extent that, they
have been drawn from the latter;–the ﬁnancial statements of subsidiary companies are prepared in their respective
local currency. The statement of ﬁnancial position is translated into Euro using theyear end exchange rate, whereas the income statement is translated using the
average exchange rate for the year. Translation differences arising on conversionof the statement of ﬁnancial position, using the exchange rate at the start of theperiod and the exchange rate at the end of the period, and translation differences
arising on conversion of the income statement using the average rate for the period
and the rate at the end of the period are recorded as a translation reserve in the
consolidated shareholder’s equity until disposal of the investment. The translation
reserve in consolidated shareholder’s equity represents translation differences
recorded as from ﬁrst time application on January 1, 2004. When preparing theConsolidated statement of cash ﬂows, the cash ﬂows of subsidiary companies aretranslated using the average rate for the period;–

the reporting currency used to prepare the Consolidated ﬁnancial statements isthe Euro. All amounts are stated in thousands of Euro unless otherwise stated.

Main accounting policies
Cash and cash equivalents
Cash and cash equivalents are carried in the statement of ﬁnancial position at nominal
amount. Cash equivalents include all highly liquid investments with an original maturityof three months or less.
For the purposes of the cash ﬂow statement only, cash and cash equivalents comprise
cash on hand, bank accounts and deposit accounts. In the statement of ﬁnancial
position, bank overdrafts and current portions of payables to banks for medium andlong-term loans are included in Bank overdrafts and short-term loans.
Trade receivables and payables
Trade accounts receivable are carried at nominal amount less the provision for doubtful
accounts, estimated based on an assessment of all disputed and doubtful balances at
the reporting date. Bad debts are written off when identiﬁed.
Trade accounts payable are recorded at nominal amount.
Transactions denominated in foreign currency are recorded at the exchange rate as at
the date of the transaction. At the reporting date, transactions denominated in foreign
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currencies are translated using the exchange rate as at the reporting date. Gains andlosses arising from the translation are reﬂected in the income statement.
The transfer of a ﬁnancial asset to third parties implies its derecognition from thestatement of ﬁnancial position only if all risks and rewards connected with the ﬁnancial
asset are substantially transferred. Risks and rewards are considered substantiallytransferred when exposure to variability in the present value of future net cash ﬂows
associated with the asset changes signiﬁcantly as a result of the transfer.
Inventories
Raw materials, work in progress and ﬁnished products are recorded at the lowerof acquisition cost, production cost and net realizable value. Cost comprises direct
production costs and those overheads that have been incurred in bringing the inventories
to their present location and condition. Acquisition or production cost is determined ona weighted average basis. Provisions, adjusting the value of the inventory, are made forslow moving, obsolete inventories and if the estimated selling price is lower than cost.
Assets held for sale
A non-current asset is classiﬁed as held for sale if its carrying amount will be mainly
recovered through sale rather than through its continued usage. Assets held for sale
are valued at the lower of net book value and fair value less any costs to sell.
Property, plant and equipment
Property, plant and equipment are recorded at purchase cost or production cost, including
any charges directly attributable. They are shown net of accumulated depreciation
calculated on the basis of the useful lives of the assets and any impairment losses.
Interest costs on borrowings to ﬁnance directly purchase, construction or production
are capitalized to increase the value of the asset. All other borrowing costs are charged
to the income statement.
Ordinary maintenance expenses are charged in full to the income statement for theyear they are incurred.
Extraordinary maintenance expenses are capitalized if they increase the value or usefullife of the related asset.
The costs included under leasehold improvements relate to refurbishment work carriedout on assets not owned by the Group.
All costs incurred during the period between the start of refurbishment work and theopening of the store are capitalized as leasehold improvements, as they are deemednecessary to bring the related assets to their working condition in accordance withcompany guidelines. The relevant construction or refurbishment period ranges fromsix to eighteen months depending on the type of store/work.
Depreciation methods, useful lives and net book values are reviewed annually.
The depreciation rates representing the useful lives are listed below:
Category of Property, plant and equipment

Depreciation rate or period

Buildings

3% - 10%

Production plant and equipment
Improvements to leasehold retail properties

118

7.5% - 25%
shorter of lease term and 10 years

Improvements to leasehold industrial properties

lease term

Furniture and fittings

10% - 20%

Other equipment

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When assets are sold or disposed of, their cost and accumulated depreciation are
eliminated from the ﬁnancial statements and any gains or losses are recognized in theincome statement.
The value of land is stated separately from the value of buildings. Depreciation is only
charged on the value of buildings.
Every year, a test is performed for indications that the value of property, plant andequipment has been impaired. If any such indications are found, an impairment test
is used to estimate the recoverable amount of the asset. The impairment loss isdetermined by comparing the carrying value of the asset with its recoverable value,
which means the higher of the fair value of the asset less costs to sell and its value inuse.
Fair value is determined based on the best information available to reﬂect the amountthat could be obtained from the disposal of the asset at the reporting date.
Value in use is an estimate of the present value of future cash ﬂows expected to derivefrom the asset tested for impairment.
Impairment losses are recorded immediately in the income statement.
At every reporting date, the Group will assess whether there is any indication thatan impairment loss recognized in prior periods may no longer apply and should bedecreased. If any such indication exists, the Group will estimate the recoverable
amount of that asset. The recoverable value of the asset shall not exceed the carrying
amount that would have been determined if no impairment loss had been recognized
for the asset in prior years. Reversal of an impairment loss for an asset will be recordedin the income statement.
Intangible assets
Only identiﬁable assets, controlled by the company and capable of producing future
economic beneﬁts are included in intangible assets. Intangible assets include
trademarks, licenses, store lease acquisition costs, software, development costs andgoodwill.
Trademarks are recorded at cost or at the value attributed upon acquisition and include
the cost of trademark registration in the various countries in which the Group operates.
The Directors estimate a useful life of between 20 and 40 years for trademarks. This
assumes there are no risks or limitations on control over their use. Every trademark is
tested for impairment whenever indicators of impairment emerge.
The useful life of trademark registration costs is estimated to be 10 years.
Software refers to Information Technology development projects and includes all
internal and external costs incurred to bring the asset into use. IT projects include
costs incurred to acquire licenses as well as costs of development and installation.
Software is capitalized on condition that it is identiﬁable, reliably measurable and if it isprobable that the asset will generate future economic beneﬁts.
Store lease acquisition costs represent expenditures incurred to enter into or takeover retail store lease agreements. These costs are capitalized and amortized over the
shorter period of the lease term or 10 years.

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Intangible assets with a deﬁnite useful life are amortized on a straight-line basis at thefollowing rates:
Category of intangible assets

Amortization rate or period

Trademarks

2.5% - 10%

Store lease acquisition costs

Shorter of lease term and 10 years

Software

10% - 33%

Development costs and other intangible assets

10% - 33%

All business combinations included within the scope of IFRS 3 are recorded using theacquisition method whereby identiﬁable assets, liabilities and potential liabilities of theacquired business are measured at their acquisition-date fair value.
The difference between the cost of the business combination and the interest acquiredin the net fair value of identiﬁable assets, liabilities and potential liabilities is recorded
as goodwill. If additional interests in subsidiaries already controlled are acquired, thepositive difference between the acquisition cost and the value of the interest acquired
is recognized in equity.
Goodwill, as an asset that produces future economic beneﬁts but which is notindividually identiﬁed and separately measured, is initially recognized at cost.
Goodwill is not amortized but tested for impairment every year to check if its value has
been impaired. If speciﬁc events or altered circumstances indicate the possibility that
goodwill has been impaired, the impairment test is performed more frequently.
For impairment test purposes, goodwill acquired in a business combination shall be,from the acquisition date, allocated to each of the acquirer’s cash generating units
that are expected to beneﬁt from the synergies of the combination. Cash Generating
Units are determined based on the organizational structure of the Group and represent
groups of assets that generate independent cash inﬂows from continuing use of therelevant assets. The Prada Group’s Cash Generating Units include trademarks, sales
channels and geographical areas.
The cash generating units to which goodwill has been allocated are tested for
impairment annually and, whenever there is an indication of impairment, the carrying
value of the cash generating unit is compared with their recoverable amount.
Recoverable amount is the higher of fair value less costs to sell and value in use, ascalculated based on an estimate of the future cash ﬂows expected to derive fromthe cash generating unit tested for impairment. Cash ﬂow projections are based onbudget, forecast and on long-term business plans (generally ﬁve years) prepared by the
management of the relevant business units.
An impairment loss is recorded in the income statement for the period whenever therecoverable amount of the cash generating unit is lower than its book value.
An impairment loss recorded for goodwill is never reversed in subsequent years.
Investments
Investments in associated undertakings and joint ventures are accounted for under theequity method of accounting.
Under the equity method of accounting, investments are initially recognized at cost.
The carrying amount is later increased or decreased to reﬂect the parent company’s
share of net assets of the investee. The proﬁt or loss of the investor includes theinvestor’s share of the proﬁt or loss of the investee. Any goodwill included in the120

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historical cost of the investment is tested annually for impairment.
Dividends received from the investee company reduce the carrying amount of theinvestment.
The reporting date of associated undertakings is the same as the parent company.
If a subsidiary or associated undertaking uses accounting policies other than IFRS,
adjustments are made to bring its accounting policies into line with those of the parent
company.
If the parent company’s share of the losses made by an associated undertaking or
joint venture exceeds the carrying amount of the investment in the associate or joint
venture, the parent company will recognize a liability for additional losses only to theextent that it has incurred legal or constructive obligations on behalf of the associateundertaking or joint venture.
Other investments and marketable securities
Investments that are acquired principally for the purpose of generating a proﬁt fromshort-term ﬂuctuations in price are classiﬁed as ﬁnancial investments. They areincluded in current assets and stated at fair value through proﬁt and loss.
Investments intended to be held for an indeﬁnite period of time that may be solddepending on liquidity requirements, are classiﬁed as available-for-sale and stated atfair value recognized through other comprehensive income. These assets are included
in non-current assets unless the Directors intend to hold them for less than twelve
months from the reporting date, in which case they are included in current assets.
All purchases and sales of investments are recognized on the trade date, which means
the date that the Group commits to purchase or sell the asset. Purchase cost includes
all transaction costs. Realized and unrealized gains and losses arising from changes
in the fair value of trading investments are included in the income statement, while
those regarding investments available-for-sale are included in shareholders’ equity inthe period in which they arise.
Deferred tax assets
Deferred tax assets are amounts of income taxes recoverable in future periods inrelation to deductible temporary differences and carryforward of unused tax losses.
Deductible temporary differences are differences between the carrying amount ofan asset or liability in the statement of ﬁnancial position and its tax value which, in
determining taxable income for future years, will result in deductible amounts when
the carrying amount of the asset or liability is realized or settled.
Deferred tax assets are recognized for all deductible temporary differences, tax
losses carried-forward and unused tax credits only to the extent that is probable thattaxable income will be available in future years against which the deductible temporary
differences can be used. Recoverability is reviewed at every year end. Deferred tax
assets are measured at the tax rates which are expected to apply to the period when
the asset is realized based on tax rates (and tax laws) that have been enacted or
substantively enacted at the reporting date.
Deferred tax assets are not discounted.
Deferred tax assets are recognized through the income statement unless the tax
amount is generated from a transaction or an event directly recognized in equity orfrom a business combination.

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Taxation for deferred tax assets relating to items credited or debited directly toshareholders’ equity is also credited or debited directly to shareholders’ equity.
Derivative financial instruments
Derivative ﬁnancial instruments that hedge interest rate risk and exchange rate risk
exposure are recorded based on hedge accounting rules.
Hedging contracts are designated as cash ﬂow hedges. Hedge accounting treatment
is allowed if derivative ﬁnancial instruments are designated as a hedge of the exposure
to changes in future cash ﬂows of a recognized asset or liability or a highly probabletransaction and which could affect proﬁt or loss. In this case, the effective portion of
the gain or loss on the hedging instrument is recognized in shareholders’ equity.
Accumulated gains or losses are reversed from shareholders’ equity and recordedin the income statement for the period in which the income statement effect of thehedged operation is recorded.
Any gain or loss on a hedging instrument (or portion thereof) which is no longer
effective as a cash ﬂow hedge is immediately recorded in the income statement. If thehedged transaction is no longer expected to take place, any related cumulative gain orloss outstanding in equity will be recognized in the income statement.
Non-current financial liabilities
Non-current ﬁnancial liabilities include payables to banks for medium and long-termloans. Bank borrowing includes principal amounts, interest and additional arrangement
costs accrued and due at the balance sheet date even when they are charged at a later
date.
Non-current ﬁnancial liabilities are initially recorded at fair value on the transaction dateless transaction costs which are directly attributable to the acquisition.
After initial recognition, non-current ﬁnancial liabilities are valued at amortized cost,which means at the initial amount less principal repayments already made plus orminus the amortization (using the effective interest method) of any difference between
that initial amount and the maturity amount.
Post-employment benefits
Post-employment beneﬁts mainly consist of Italian Trattamento Fine Rapporto, a staff
leaving indemnity qualiﬁed as deﬁned beneﬁt plan according to “IAS 19 Employee
beneﬁts”.
Deﬁned beneﬁt plans are recognized using actuarial techniques to estimate the amountof the obligations resulting from employee service in the current and past periods anddiscounting it to determine the present value of the Group’s obligations.
The present value of the obligations is determined by an independent actuary using the
Projected Unit Credit Method.
This method considers each period of service provided by the employee as anadditional unit right and measures the actuarial liability on the basis of the matured
years of service only at the date of measurement. This actuarial liability is then remeasured taking into account the relationship between the service years provided by
the employee at the date of measurement and the total years of service expected at
the forecast date of settlement of the beneﬁt. Moreover, this method takes accountof future salary increases, for whatever reason (inﬂation, career progression and new
employment agreements), until the estimated termination date of the employment
relationship.

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The cost of deﬁned beneﬁt plans, accrued during the year and recorded in the income
statement under labor costs, is equal to the sum of the average present value of rights
accrued in favor of employees for service during the current period. The annual interest
accrued on the present value of the Group’s obligation at the beginning of the year, as
calculated adopting the previous year discount rate of future outﬂows used to estimate
the liability at the reporting date, is recorded under interest and other ﬁnancial income/(expenses).
Actuarial gains and losses are recognized directly in equity, net of the tax effect.
Other long-term employee beneﬁts are recorded among non-current liabilities andtheir value corresponds to the present value of the deﬁned beneﬁt obligation at thereporting date, adjusted according to the period of the underlying agreement. Likedeﬁned beneﬁt plans, other long-term beneﬁts are also valued using the Projected Unit
Credit Method.
Provisions for risks and charges
Provisions for risks and charges cover costs of a known nature, that were certainor probable but whose amount or due date was uncertain at year end. Provisions
are only recorded when the Group has a legal or constructive obligation as a resultof past events, it is probable that an outﬂow of resources will be required to settle
the obligation and a reliable estimate of the amount can be made based on available
information.
Where the Group expects reimbursement of a charge that has been provided for (e.g.
under an insurance policy) the reimbursement is recognized as a separate asset but
only when the reimbursement is certain.
Deferred tax liabilities
Deferred tax liabilities are amounts of income taxes due in future periods in respect oftaxable temporary differences.
Taxable temporary differences are differences between the carrying amount of an asset
or liability in the statement of ﬁnancial position and its tax base which, in determining
the taxable income for future years, will result in taxable amounts when the carrying
amount of the asset or liability is recovered or settled.
Deferred tax liabilities are recognized for all taxable timing differences except whenliability is generated by the initial recognition of goodwill or the initial recognition of anasset or liability in a transaction other than a business combination that does not affectthe accounting result or the tax result at the transaction date.
Deferred tax liabilities are measured at the tax rates which are expected to apply tothe period when the liability is settled, based on tax rates (and tax laws) that have beenenacted or substantively enacted at the reporting date.
Deferred tax liabilities are not discounted.
Taxation for deferred tax liabilities relating to items credited or debited directly toshareholders’ equity is also credited or debited directly to shareholders’ equity.
The deferred tax provision is only offset against deferred tax assets or when the twoitems refer to the same tax and the same period.

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Revenue recognition
Revenues from the sale of goods are recognized in the income statement when:–

the signiﬁcant risks and rewards of ownership are transferred to the buyer;–

the value of the revenues can be reliably measured;–

all control over the goods sold has ceased;–

the economic beneﬁts generated by the transaction will probably be enjoyed by
the Company;–

the costs pertaining to the transaction can be reliably measured.

Royalties are accounted for based on sales made by the licensees and the terms of thecontracts. Cash discounts are recognized as ﬁnancial charges.
Costs are recorded on an accrual basis. In particular, a cost is immediately recognizedin the income statement when:–an expense does not generate any future economic beneﬁt;–

the future economic beneﬁts do not qualify or cease to qualify as assets forrecognition in the statement of ﬁnancial position;–a liability is incurred and no asset has been recognized.

Operating leases
Operating leases are recorded in the income statement on a straight-line basis forthe whole lease term. When calculating the lease term, renewal periods are also
considered if provided for by the agreement and the amount due is known.
Store opening costs
Costs incurred during the pre-opening period of new or refurbished retail stores arecharged to the income statement when incurred, except for those capitalized asleasehold improvements. Upon closure of a store, the net book value of the leasehold
improvements, less the expected recoverable amount, is charged to the income
statement.
Interest expenses
Interest expenses include interest on bank overdrafts, on short and long term loans,ﬁnancial charges on ﬁnance leases and securitization operations, amortization of initialcosts of loan operations, changes in the fair value of derivatives – insofar as chargeable
to the income statement – and annual interest maturing on the present value of postemployment beneﬁts.
Income taxes
The provision for income taxes is determined based on a realistic estimate of the tax
charge of each consolidated entity, in accordance with the tax rates (and tax laws) thathave been enacted or substantially enacted at the reporting date.
Current taxes are recorded in the income statement as an expense. This is except fortaxes deriving from transactions or events directly recognized through shareholders’equity which are directly charged to equity.

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Earnings per share
Basic earnings per share are calculated by dividing net proﬁt pertaining to the holding
company shareholders by the weighted average number of ordinary shares.
Changes of accounting policy, errors and changes in accounting estimates
The accounting policies adopted are only modiﬁed from one year to another if thechange is required by an accounting standard or if it provides more reliable and more
relevant information on the effects of operations on the entity’s statement of ﬁnancial
position, income statement or cash ﬂows.
Changes of accounting policy are applied retrospectively, adjusting the opening balanceof each affected component of equity for the earliest prior period presented. Other
comparative amounts, disclosed for each prior period presented, are also adjusted as if
the new accounting policy had always been applied. A prospective approach is applied
only when it is not possible to restate the comparative information.
The adoption of a new or amended accounting standard is implemented in accordancewith the requirements of the standard itself. If the new standard does not include
speciﬁc transition provisions, the change of accounting policy is applied retrospectively
or, if this is not feasible, prospectively.
In case of material errors, the same approach adopted for changes in accounting
standards described in the previous paragraph shall be followed. Non material errors
are recognized in the income statement in the period in which the error is identiﬁed.
The effect of changes in accounting estimates are prospectively recorded in theincome statement for the year the change takes place if it is the only year affected. It
is also reﬂected in later years if they too are affected by the change.
Financial risk management
The Group is exposed to ﬁnancial risks such as interest rate risk and exchange raterisk as a result of the international scale of its operations. The Group’s overall risk
management policy takes account of the volatility of ﬁnancial markets and seeks tominimize uncertainty regarding cash ﬂows and the resulting potential adverse effects
on its results.
The Group enters into hedging contracts to manage risks arising from the exposure to
the exchange rates and interest rates ﬂuctuations.
Financial instruments are accounted for based on hedge accounting rules set by “IAS
39 Financial instruments: recognition and measurement”. At the inception of thehedge contract, the Group formally documents the hedging relationship assuming thatthe hedging is effective during the different accounting periods it is designated for.
Use of estimates
In accordance with IFRS, the preparation of these consolidated ﬁnancial statements
requires the use of estimates and assumptions regarding certain types of assets,
liabilities, revenues and expenses as well as contingent assets and liabilities.
Such assumptions relate primarily to transactions and events not settled as of the yearend. Accordingly, upon settlement, the actual results may differ from the estimatedamounts. Estimates and assumptions are periodically reviewed and the effects of any
difference is immediately charged to the income statement.
Estimates have been used when performing the impairment tests, in determining
provisions for risks and charges, the allowance for doubtful accounts, the allowance

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for obsolete and slow moving inventories, post-employment beneﬁts and whencalculating taxes and valuing securities available for sale.
The fair value of derivatives and securities available for sale is based on market prices
at the reporting date. The fair value of derivative instruments used to hedge interest
rate risks (IRS) and those used to hedge the exchange rate risk (forward contracts andoptions) is determined using one of the valuation platforms most widely accepted on
the market and is based on interest rate curves and on spot and forward exchange
rates at the reporting date.
7.

Acquisitions and incorporation of companies
On February 5, 2014, PRADA Switzerland sa acquired from third parties 100% of
the share capital of Burgerhaus Zurich sa (PRADA Zurich ag) in order to develop thebusiness in Switzerland. On November 3, 2014, PRADA Zurich ag merged with PRADA
Switzerland sa with retroactive effect from August 1, 2014.
On February 27, 2014, the Group incorporated PRM Services S. de RL de CV in orderto sustain its commercial activities in Mexico. The Group owns 100% of the company.
On March 13, 2014, the Group incorporated Church Denmark aps in order to develop
its commercial activities in Denmark. The Group owns 100% of the company.
On March 14, 2014, PRADA spa acquired 80% of Angelo Marchesi srl, the company
that owns an historic Milanese patisserie founded in 1824. This acquisition was made inorder to promote and guarantee the strategic strengthening of the brand, synonymouswith quality in the Italian food segment, together with the Prada and Miu Miu brands,
leaders on the luxury goods market, as part of the Group’s global development program.
On July 2, 2014, the Group incorporated PRADA Saudi Arabia in order to develop its
commercial activities in that country. The Group owns 75% of the company.
On August 6, 2014, the Group incorporated PRADA Retail South Africa (Pty) ltd inorder to develop its commercial activities in that country. The Group owns 100% of
the company.
On August 19, 2014, in order to develop industrial activities in Limoges, PRADA spa
and third party Conceria Superior spa incorporated PSC sas with respective interestsof 60% and 40%. After the reporting date, PSC sas changed its name to Tannerié
Limoges sas.
On September 9, 2014, the Group incorporated PRADA Vietnam Limited Liability
Company in order to develop its commercial activities in that country. The Group owns
100% of the company.
On September 15, 2014, PRADA Panama sa, a company registered in Panama, became
part of the Group. The company will operate the retail business in Panama and is 100%controlled by PRADA spa.
On September 25, 2014, PRADA Retail Aruba nv, a company registered in Aruba,
became part of the Group. The company will operate the retail business in Aruba andis 100% controlled by PRADA spa.
On October 15, 2014, PT Prada Indonesia was incorporated with retroactive effectfrom February 3, 2014 in order to develop the commercial business in that country.
The Group owns 100% of the company.
On January 22, 2015, Prada Macau Co. Ltd was incorporated in order to reorganize
retail activities in that country.

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Marchesi Angelo srl
On March 14, 2014, the Group acquired 80% of Marchesi Angelo srl, owner of thehistoric Milanese patisserie founded in 1824. The acquisition was intended to increase
the value of the "Pasticceria Marchesi" brand, synonymous with quality in the Italianculinary industry, bringing it together with Prada and Miu Miu, leading brands in theluxury goods market, as part of the development of the Group all around the world. The
net cash-out for the acquisition was Euro 7.7 million i.e. the net difference between theconsideration paid of Euro 8.4 million and the cash surplus of Euro 0.7 million includedin the equity acquired.
(amounts in thousands of Euro)

fair value of net assets acquired

Cash

8.

707

Property, plant and equipment

88

Other current assets/(liabilities)(53)

Other non-current assets/(liabilities)(210)

Net assets acquired532

Non-controlling interests (measured in proportion to net assets acquired)(107)

Consideration paid

8,400

Goodwill

7,975

Operating segments“IFRS 8 Operating Segments” requires that detailed information be provided for each
operating segment that makes up the business. An operating segment is intended asa business division whose operating results are regularly reviewed by top management
so that they can make decisions about the resources to be allocated to the segment
and assess its performance.
The Group’s matrix-based organizational structure - whereby responsibility is assigned
cross-functionally in relation to brands, products, distribution channels and geographicalareas, together with the complementary nature of the production processes of thevarious brands and the many relationships between the different business segments– means that operating segments that meet the IFRS 8 definition cannot be identified,
as top management is only provided with income statement results on a Group-widelevel. For this reason, the business has been considered as a single operating segment
as this better represents the specific characteristics of the PRADA Group businessmodel.
Detailed information on net revenues by brand, geographical area, product anddistribution channel, as well as EBITDA by brand and non-current assets by geographicalarea are provided below. Information on net revenues is also reported in the Financial
review where it is accompanied by further comments.

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Net sales analysis(amounts in thousands of Euro)

twelve months
ended January 31, 2015

twelve months
ended January 31, 2014

% change

Net sales by geographical area
Italy

553,42915.8%

552,897

15.6%

0.1%

Europe739,100

21.0%

776,494

21.9%

-4.8%

Americas492,15114.0%

487,990

13.8%

0.9%

Asia Pacific1,252,675

35.7%

1,292,753

36.4%

-3.1%

Japan

367,62510.5%

340,784

9.6%

7.9%

Middle East

103,475

2.9%

91,114

2.6%

13.6%

Other countries

4,981

0.1%

6,175

0.1%

-19.3%

3,513,436

100.0%

3,548,207

100.0%

-1.0%

Prada

2,895,437

82.4%

2,943,633

83.0%

-1.6%

Miu Miu

526,770

15.0%

519,142

14.6%

1.5%

Church's

74,041

2.1%

68,6091.9%

7.9%

Car Shoe

11,9350.3%

13,4270.4%-11.1%Total

Net sales by brand

Other

5,253

0.2%

3,396

0.1%

54.7%

Total

3,513,436

100.0%

3,548,207

100.0%-1.0%

Net sales by product line
Clothing

594,75616.9%

581,594

16.4%

2.3%

2,218,032

63.1%

2,332,518

65.7%

-4.9%

Footwear

644,66618.3%

594,586

16.8%

8.4%

Other

55,982

1.7%

39,509

1.1%

41.7%

Total

3,513,436

100.0%

3,548,207

100.0%-1.0%

2,980,891

84.8%

2,996,637

84.5%

-0.5%

532,54515.2%

551,570

15.5%

-3.4%

Total

3,513,436

100.0%

3,548,207

100.0%-1.0%

Net sales

3,513,436

98.9%

3,548,207

98.9%

-1.0%

Royalties

38,2601.1%

39,140

1.1%

-2.2%

3,551,696

100.0%

3,587,347

100.0%-1.0%

Leather goods

Net sales by distribution channelDOS
Independent customers and franchises

Total net revenues

128

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EBITDA by brandtwelve months
ended January 31, 2015
(amounts in thousands of Euro)

Group

Prada

Miu Miu

Church’s

Car Shoe

Other

Net sales

3,513,436

2,895,437

526,770

74,041

11,935

5,253

Royalties

38,26034,868

3,378

14

-

-

3,551,696

2,930,305

530,148

74,055

11,935

5,253

EBITDA

954,249

922,644

35,130

4,605(7,295)(835)

EBITDA %

26.9%

31.5%

6.6%

6.2%

-

-

twelve months
ended January 31, 2014
(amounts in thousands of Euro)

Group

Prada

Miu Miu

Church’s

Car Shoe

Other

Net sales

3,548,207

2,943,633

519,142

68,60913,427

3,396Royalties

39,14037,127

1,997

16

-

-

Net revenues

3,587,347

2,980,760

521,139

68,625

13,427

3,396

EBITDA

1,143,186

1,054,126

89,322

4,368(4,795)

165

31.9%

35.4%

17.1%

6.4%

-

-

Net revenues

EBITDA %The PRADA brand generated EBITDA of Euro 922.6 million for the twelve months
ended January 31, 2015, 31.5% of net revenues and down by 12.5% compared to
the figure of Euro 1,054.1 million reported in 2013. Gross margin was affected by aless favorable sales mix in terms of products sold and by the generally negative forex
effect during the year. At the level of operating expenses, major investment in DOS
network expansion eroded profitability while revenue growth slowed down. In linewith the long-term vision for brand positioning, important communications initiatives
were confirmed (e.g. the Pradasphere – an exclusive exhibition which explored thePrada Universe at the exceptional locations of Harrods Knightsbridge in London andCentral Ferry Pier 4 in Hong Kong) and the costs partially offset by measures aimed atcontaining other expenses.
The Miu Miu brand generated EBITDA of Euro 35.1 million for the twelve months ended
January 31, 2015, 6.6% of net revenues and down by 60.7% compared to the figure ofEuro 89.3 million reported for 2013. For Miu Miu, a fall in gross profit, essentially for thesame reasons stated above for Prada, and the operating expenses generated by retail
network development hit operating profits for the year, also considering moderatesales growth and the relative size of the brand. In 2014, management continued towork on the development of the strong brand identity, opening 19 DOS (net of one
closure), mainly in Asia Pacific, and undertaking communications initiatives (advertising
campaigns, special projects and events) considered strategic for the positioning of thebrand.
The Church’s ended 2014 with EBITDA of Euro 4.6 million, a 5.4% increase on the figureof Euro 4.4 million reported for 2013. The commercial development of the brand, driven
by SSSG and new openings, generated higher net revenues than in prior year but also
led to an increase in costs so the brand was unable to benefit from operating leveragein 2014. Advertising and communications expenses also increased significantly in 2014
in order to strengthen the identity of the English brand.

PRADA Group

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The Car Shoe brand ended 2014 with negative EBITDA of Euro 7.3 million, a further
deterioration on prior year. Retail growth in 2014 did not make up for the downturn inthe wholesale segment.
Geographical information
The following table reports the carrying amount of the Group’s non-current assets bygeographical area, as requested by “IFRS 8 Operating Segments” for entities, like thePrada Group, that have a single reportable segment.
(amounts in thousands of Euro)

January 31
2015

January 31
2014

Italy

745,492

569,176

Europa1,141,285

1,054,397

Americas220,495

198,453

Asia Pacific299,947

260,175

Japan

108,707

102,628

Middle East

32,47433,873

Other countries

5,919

5,319

2,554,319

2,224,021

Total

The total amount of Euro 2,554.3 million (Euro 2,224 million at January 31, 2014) relates
to the Group’s non-current assets excluding, as requested by IFRS 8, those relating tofinancial instruments, deferred tax assets and, at January 31, 2015 only, surplus arisingfrom a pension benefit scheme (at January 31, 2014, said surplus was zero).
9.

Cash and cash equivalents
Cash and cash equivalents are detailed as follows:(amounts in thousands of Euro)

January 31
2015

January 31
2014

Cash on hand

44,47035,541

Bank deposit accounts

415,481342,399

Bank current accounts

249,015

190,474

Total

708,966

568,414

At January 31, 2015, bank current accounts and deposit accounts generated interest
income of between 0% and 3.25% per annum (between 0.0% and 2.50% at January
31, 2014).
10. Trade receivables, net
Trade receivables are detailed as follows:(amounts in thousands of Euro)

January 31
2015

January 31
2014

Trade receivables – third parties

317,147

288,504

Allowance for bad and doubtful debts(7,784)(10,432)

Trade receivables – related parties

36,92130,333

Total

346,284

308,405

The increase in trade receivables from third parties is mainly due to the higher level ofreceivables from department stores denominated in currencies other than the Euro.

130

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Trade receivables from related parties includes an amount of Euro 29.3 million (Euro25.5 million at January 31, 2014) essentially arising from sales of ﬁnished products
and royalties, as provided by the franchising agreement with Fratelli Prada spa, a retailcompany owned by the majority shareholders of parent company PRADA Holding spa.
Trade receivables from related parties also includes a total of Euro 1.5 million due
from Fratelli Prada srl and Progetto Prada Arte srl and regarding chargebacks for theirutilization of premises in Galleria Vittoria Emanuele II which PRADA spa holds under aconcession agreement with the Municipality of Milan. Further information on related
party transactions is provided in Note 39.
The allowance for doubtful accounts was determined on a speciﬁc basis considering all
information available at the date the ﬁnancial statements were prepared. It is revised
periodically to bring receivables as close as possible to their fair value.
Movements during the period were as follows:(amounts in thousands of Euro)

Opening balance

January 31
2015

January 31
2014

10,432

11,547

Change in scope of consolidation

17-

Exchange differences

463

55

Increases
Uses
Reversals

Closing balance

109

830

(3,173)(1,922)

(64)

(78)

7,784

10,432January 31
2015

January 31
2014

11. Inventories, net
Inventories are analyzed as follows:(amounts in thousands of Euro)

Raw materials

106,843

85,333Work in progress

40,78628,424

Finished products

571,115

403,473

Allowance for obsolete and slow moving inventories(64,199)(67,327)

Total

654,545449,903

The increase in inventories is generally due to the 54 more DOS (net) than at January
31, 2014, and to a different replenishment strategy adopted in the last few months of2014 in order to improve the retail range.
Materials being worked upon by third parties are included in raw materials. Work inprogress includes materials at the production stage with PRADA spa, other production
companies included in the scope of consolidation and third party sub-contractors.

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Movements on the allowance for obsolete and slow moving inventories are analyzed
as follows:Rawmaterials

Finished
Products

Total

29,78037,54767,327

Exchange differences

9

27

36

Increases

9

61

70

Reversals(3,000)(234)(3,234)

Utilization

-

-

-

26,79837,40164,199(amounts in thousands of Euro)

Balance at January 31, 2014

Balance at January 31, 2015

The allowance for obsolete and slow moving inventories has been adjusted to bring thevalue of inventories into line with their estimated realizable amount.
12. Derivative financial instruments: assets and liabilities
Derivative financial instruments: assets and liabilities, current portion.
January 31
2015(amounts in thousands of Euro)

January 31
2014

Financial assets regarding derivative instruments

6,287

13,984

Financial liabilities regarding derivative instruments(56,772)(3,803)

Net carrying amount – current(50,485)

10,181

Derivative financial instruments: assets and liabilities, non-current portion.
January 31
2015(amounts in thousands of Euro)

January 31
2014

Financial assets regarding derivative instruments

1,106

1,430

Financial liabilities regarding derivative instruments(17,283)(1,469)Net carrying amount – non current(16,177)(39)

The net carrying amount of derivative financial instruments, current and non-current
taken together, consists of the following:
January 31
2015

January 31
2014

IFRS7
Category

7,355

8,582

Level II

38

5,402

Level II-

1,430

Level II

Positive fair value

7,393

15,414

Forward contracts(26,901)(1,990)

Options(34,287)(1,364)

Level IIInterest rate swaps(12,867)(1,918)

Level II

Negative fair value(74,055)(5,272)

Net carrying amount – current and non-current(66,662)

10,142(amounts in thousands of Euro)

Forward contracts
Options
Interest rate swaps

132

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Level II

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All of the above derivative instruments are qualified as Level II of the fair value hierarchy
proposed by IFRS 7. The Group has not entered into any derivative contracts that may
be qualified as Level I or III.
The fair values of derivatives arranged to hedge interest rate risks (IRS) and ofderivatives arranged to hedge exchange rate risks (forward contracts and options) havebeen determined utilizing one of the valuation platforms in most widespread use on
the financial market and are based on the interest rate curves and on spot and forward
exchange rates at the reporting date.
The Group entered into the financial derivative contracts in the course of its risk
management activities in order to hedge financial risks connected with exchange andinterest rate fluctuations.
Foreign exchange rate transactions
The cash flows resulting from the Group’s international activities are exposed to
exchange rate volatility. In order to hedge this risk, the Group enters into options andforward sale and purchase agreements so as to guarantee the value in Euro (or inother currencies of the various Group companies) of identified cash flows. Expected
future cash flows mainly regard the collection of trade receivables, settlement of trade
payables and financial cash flows. The most important currencies in terms of hedged
amounts are: Hong Kong Dollar, US Dollar, Japanese Yen, GB Pound, Korean Won,
Swiss Franc and Chinese Renminbi.
At the reporting date, the notional amounts of the derivative contracts designated as
foreign exchange risk hedges (as translated at the European Central Bank exchange
rate at January 30, 2015) were as stated below.
Contracts in place at January 31, 2015, to hedge projected future trade cash flows.
Options

Forward sale
contracts (*)

Hong Kong Dollar

182,117

US Dollar

197,258

Chinese Renminbi

99,237(amounts in thousands of Euro)

Forward purchase
contracts (*)

January 31
2015

28,661-

210,778-(59,651)

137,607

33,692(24,349)

108,580

Currency

Japanese Yen

22,017

91,824(5,493)

108,348

GB Pound55,252

38,610(11,290)

82,572

Korean Won-

71,430-71,430Swiss Franc-

18,283(8,063)

10,220

Other currencies

17,74972,756(24,533)

65,972

Total

573,630

355,256(133,379)

795,507(*) Positive figures represent forward sales, negative figures represent forward purchases of currency

Contracts in place at January 31, 2015, to hedge projected future financial cash flows.
Options

Forward sale
contracts

Forward purchase
contracts

January 31
2015

Swiss Franc

-

66,979(15,082)

51,897

Brazilian Real-25,138-25,138

GB Pound-

22,633(1,518)

21,115

Japanese Yen-

18,335-

18,335US Dollar

-

3,538

(56,172)(52,634)

Other-

10,934-

10,934

Total-

147,557(72,772)

74,785(amounts in thousands of Euro)
Currency

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All of the contracts in place at January 31, 2015, are due to mature within 12 months,
except for several forward contracts to hedge future financial cash flows which mature
after January 31, 2016, and whose notional net amount is Euro 74.7 million (forward
sale contracts of Euro 83.6 million and forward purchase contracts of Euro 8.9 million).
Contracts in place at January 31, 2014, to hedge projected future trade cash flows.
(amounts in thousands of Euro)

Options

Forward sale
contracts

Forward purchase
contracts (*)

January 31
2014

Currency
US Dollar

115,789

37,733(51,050)

102,472

Hong Kong Dollar

59,541111,938-

171,479

Japanese Yen

40,976

43,799(18,099)

66,676

GB Pound

58,90336,282-

95,185-60,346-60,346Chinese Renminbi

39,672

9,533-

49,205

Other

4,167

84,642(4,920)83,889Total

319,048384,273(74,069)

629,252

Korean Won(*) Positive figures represent forward sales, negative figures represent forward purchases of currency

Contracts in place as at January 31, 2014, to hedge projected future ﬁnancial cash
ﬂows.
Options

Forward sale
contracts

Forward purchase
contracts

January 31
2014

GB Pound-

79,138-79,138US Dollar-

48,387-

48,387

Japanese Yen-

29,248-29,248Other-

15,989-15,989

Total-

172,762-

172,762(amounts in thousands of Euro)

Currency

All contracts in place at January 31, 2014, expired during the year.
All contracts in place at the reporting date were entered into with leading ﬁnancial
institutions and the Group does not expect any default by these institution. A liquidity
analysis on the maturity dates of these derivative contracts is included in these Notes
in the Information on ﬁnancial risks section.

134

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Interest rate transactions
The Group enters into Interest Rate Swaps agreements (IRS) in order to hedge therisk of interest rate ﬂuctuations in relation to several bank loans. The key featuresof the IRS agreements in place as at January 31, 2015, and January 31, 2014, aresummarized as follows:
Interest Rate Swap (IRS) Agreement
Contract

Currency

Notional
amountInterest
rate

Hedged loan

Maturity January 31
date
2015

Lending
institution

AmountExpiryEuro/000

MPS

600

07/201555,00005/2030

Currency

fair value
.000
IRS

Euro/000

600

2.210%

01/07/2015(6)55,0001.457%

23/05/2030(2.959)Euro/000IntesaSanpaolo

GBP/000

60,0002.828%

31/01/2029(9,764)

GBP/000

Unicredit

60,00001/2029

Yen/000

1,250,000

1.875%

31/03/2017(138)

Yen/000

Mizuho1,250,000

03/2017

Currency

Lending
institution

AmountExpiryEuro/000

MPS

1,800

07/20153,750

06/2014IRS

Euro/000IRSIRSInterest Rate Swap (IRS) Agreement
Contract

Currency

Notional
amountInterest
rate

Hedged loan

Maturity January 31
date
2014
fair value
.000

IRS

Euro/000

1,800

2.210%

01/07/2015

(33)

3,750

1.545%

02/06/2014(23)

Euro/000IntesaSanpaolo

GBP/000

60,0002.778%

31/01/2029(198)

GBP/000

Unicredit

60,00001/2029

Yen/000

1,750,000

1.875%

31/03/2017(194)

Yen/000

Mizuho1,750,000

03/2017

IRS

Euro/000IRSIRSThe IRS agreements convert the variable interest rates applying to a series of loans
into ﬁxed interest rates. These agreements have been arranged with leading ﬁnancial
institutions and the Group does not expect them to default.
Movements on the cash ﬂow hedge reserve included in Group shareholders’ equity,
before tax effects, since February 1, 2013, may be analyzed as follows:(amounts in thousands of Euro)

Balance at January 31, 2013

Change in the translation reserve
Change in fair value, recognized in Equity
Change in fair value, charged to Income Statement

Balance at January 31, 2014

Change in the translation reserve

27,9045
9,148(31,902)

5,155

32

Change in fair value, recognized in Equity(78,233)

Change in fair value, charged to Income Statement

25,416

Balance at January 31, 2015

(47,630)

Changes in the reserve that are charged to the Income Statement are recorded underInterest and other ﬁnancial income/(expense), net or as operating income and expenses
depending on the nature of the underlying.

PRADA Group

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Information on financial risks
Capital management
The Group’s capital management strategy is intended to safeguard its ability to continue
to guarantee a return to shareholders, protect the interests of other stakeholders andrespect covenants, while maintaining an adequate, balanced capital structure.
Categories of financial assets and liabilities according to IAS 39
Financial assets(amounts in thousands of Euro)

Loans andreceivables

Derivative financial
instruments

Total

Note

Cash and cash equivalents

708,966-

708,966

9

Trade receivables, net

346,284-

346,284

10

Derivative financial instruments

-

7,393

7,393

12

Financial receivables – long-term

741

-

741

13

Financial receivables – short-term
Investment available for sale

Total at January 31, 2015

(amounts in thousands of Euro)

11

-

11

13

28,777-

28,77717

1,084,779

7,393

1,092,172

Loans andreceivables

Derivative financial
instruments

Total

Note

Cash and cash equivalents

568,414-

568,4149

Trade receivables, net

308,405-

308,40510-

15,414

15,41412

Financial receivables – short-term

Derivative financial instruments

2,008

-

2,008

13

Investment available for sale

19,434-

19,43417

Total at January 31, 2014

898,261

15,414

913,675

Loans andpayablesDerivative financial
instruments

Total

Note

Financial liabilities(amounts in thousands of Euro)

Financial payables

520,908-

520,90819, 20, 24

Trade payables

437,420-

437,420

21

Obligations under finance leases

21

-

21

Derivative financial instruments-

74,05574,055

958,349

74,055

1,032,404

Loans andpayablesDerivative financial
instruments

Total

Note

Total at January 31, 2015

(amounts in thousands of Euro)

Financial payables

273,992-

273,992

19, 20, 24

Trade payables

348,534-

348,534

21

Obligations under finance leases

543

-

543

Derivative financial instruments

-

5,272

5,272

623,069

5,272

628,341

Total at January 31, 2014

136

12

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Fair Value
The reported amount of derivative instruments, whether they are assets or liabilities,
reﬂects their fair value, as explained in this Note.
The carrying amount of cash and cash equivalents, ﬁnancial receivables and tradereceivables, as adjusted for impairment where necessary, approximates their estimatedrealizable value and, hence, fair value.
The reported amount of the Investment available for sale reﬂects its fair value (level I)
as explained in Note 17.
The Bonds, classiﬁed under ﬁnancial payables, reported at a net amount of Euro 129
million (nominal amount of Euro 130 million as adjusted by Euro 1 million following
application of the amortized cost method). Their fair value, as determined based on
the ofﬁcial listed price on the Irish Stock Exchange at January 31, 2015, is Euro 136.3
million. All other ﬁnancial liabilities are reported at an amount that approximates theirfair value.
Credit risk
Credit risk is deﬁned as the risk that a counterparty in a transaction, by not fulﬁlling
its obligations, causes a ﬁnancial loss for another entity. The maximum risk to which
an entity is potentially exposed is represented by all ﬁnancial assets recorded in theﬁnancial statements. However, management essentially believes that the Group’s
credit risk mainly regards trade receivables generated in the wholesale channel andcash and cash equivalents. The Group manages the credit risk and reduces its negative
effects through its commercial and ﬁnancial strategy, as also explained under the
Information on Risk factors included in the Financial review of this 2014 Annual Report.
Trade receivables
The following table contains a summary of total receivables before the allowance for
doubtful debts at the reporting date:
Overdue (in days)

January 31
2015

Current

Trade receivables

354,068

283,878

28,279

11,202

Total

354,068

283,878

28,279

11,202January 31
2014

Current1

31

Trade receivables

318,837

262,213

20,331

9,817

Total

318,837

262,213

20,331

9,817(amounts in thousands of Euro)(amounts in thousands of Euro)PRADA Group

Annual Report 2014 (15 aprile).indd 137

1

30

31

60

61

90

91

120

> 120

10,0293,840

16,84010,0293,840

16,840

120

> 120

6,446

3,633

16,397

6,446

3,633

16,397

Overdue (in days)
30

60

61

90

Annual Report 2014 - Notes to the Consolidated Financial Statements

91

137

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The following table contains a summary, by due date, of trade receivables less theallowance for doubtful accounts at the reporting date:
Overdue (in days)(amounts in thousands of Euro)

January 31
2015

Current

Trade receivables less allowancefor doubtful accounts

346,284

283,137

28,279

11,202

Total

346,284

283,137

28,279

11,202(amounts in thousands of Euro)

January 31
2014

Current1

31

Trade receivables less allowancefor doubtful accounts

308,405

261,862

20,331

9,817

Total

308,405

261,862

20,331

9,817

1

30

31

60

61

90

91

120

> 120

10,029

3,840

9,797

10,029

3,840

9,797

120

> 120

6,213

3,633

6,549

6,213

3,633

6,549

Overdue (in days)
30

60

61

90

91

At the reporting date, the expected loss on doubtful receivables was fully coveredby the allowance for doubtful receivables. Movements on the allowance for doubtfulreceivables are shown in Note 10.
Bank deposit accounts and bank current accounts
Bank deposit accounts are broken down by currency as follows:(amounts in thousands of Euro)

January 31
2015

Euro
US Dollar

January 31
2014-

40,00037,36531,992

Korean Won

44,92450,880Hong Kong Dollar

319,387

190,458

Other currencies

13,80429,069Total bank deposit accounts

415,480

342,399

The Group seeks to mitigate the default risk on bank deposit accounts by allocating
available funds to several accounts that differ in terms of currency, country and bank;these investments are always short-term in nature.
Bank current accounts(amounts in thousands of Euro)

January 31
2015

January 31
2014

Euro

127,917

93,690US Dollar

51,07446,532

Korean Won

3,924

3,083

Hong Kong Dollar

5,465

5,112

GB Pound

5,420

5,934

Other currencies

55,21536,123

Total bank current accounts

249,015

190,474

The Group maintains that there is no signiﬁcant risk regarding bank current accounts astheir use is strictly connected with the business operations and corporate processes
and, as result, the number of parties involved is fragmented.

138

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Liquidity risk
The liquidity risk relates to the difﬁculty the Group may have in fulﬁlling its obligations
with regard to ﬁnancial liabilities. The Directors are responsible for managing theliquidity risk while Finance Direction is responsible for managing ﬁnancial resources
as well as possible.
The Directors believe that the funds and lines of credit currently available, in addition to
those that will be generated by operating and ﬁnancing activities, will allow the Groupto meet its needs resulting from investing activities, working capital management,
repayment of loans as they fall due and payment of dividends.
At January 31, 2015, the Group had a total of Euro 445.3 million of available unused
credit facilities (Euro 454.3 million at January 31, 2014).
The following table summarizes trade payables by maturity date:
Overdue (days)

January 31
2015

Current

Trade payables

437,420392,284

21,893

10,967

Total

437,420392,284

21,893

10,967January 31
2014

Current1

31

Trade payables

348,534

314,375

17,261

8,524

Total

348,534

314,375

17,261

8,524(amounts in thousands of Euro)(amounts in thousands of Euro)

1

30

31

60

61

90

91

120

> 120

1,936

1,424

8,916

1,936

1,424

8,916

120

> 120

2,099

1,086

5,189

2,099

1,086

5,189

Overdue (days)
30

60

61

90

91

The following paragraph show the maturity of ﬁnancial liabilities based on the earliest
date on which the Group could be called upon to make payment (worst-case scenario).

PRADA Group

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Financial liabilities under derivative financial instruments (Forward contracts
and options)
As required by IFRS 7, the following tables show ﬁnancial liabilities under forward
contracts and options where a negative cash ﬂow is expected at the reporting date.
The cash ﬂows shown below have not been discounted and differ from the amounts
included in the table of derivative ﬁnancial instruments (current and non-current)
presented at the start of this section.
Futurecontractual
cash flows
at Jan. 31,
2015

6 mthsor less

6 to 12mths

1 to 2years

2 to 3years

3 to 4years

more than
4 years(30,820)(12,093)(11,238)(6,908)

(581)

-

-

Cash net outflows(31,887)(18,059)(13,828)

-

-

-

-

Net value(62,707)(30,152)(25,066)(6,908)

(581)

-

-

Futurecontractual
cash flows
at Jan. 31,
2014

6 mthsor less

6 to 12mths

1 to 2years

2 to 3years

3 to 4years

more than
4 years

Cash outflows(138,507)(98,211)(40,296)

-

-

-

-

Cash inflows

135,754

96,43739,317----(amounts in thousands of Euro)

Forward contracts designated as
cash flow hedges
Cash net outflows

Options designated as cash flow
hedges(amounts in thousands of Euro)

Forward contracts designated as
cash flow hedges

Options designated as cash flow
hedges140

Cash outflows(6,235)(1,795)(4,440)

-

-

-

-

Cash inflows(5,740)(1,649)(4,091)

-

-

-

-

Net value(14,728)(5,218)(9,510)

-

-

-

-

PRADA Group

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Financial liabilities under derivative financial instruments (Interest rate swaps)
In contrast to the above, for interest rate swap cash ﬂow hedges only, the following
tables show expected positive and negative cash ﬂows. At January 31, 2015, theexpected cash ﬂows were all negative while, at the previous reporting date, a positive
cash ﬂow was expected for derivatives maturing after more than four years.

(amounts in thousands of Euro)

Futurecontractual
cash flows
at Jan. 31,
2015

6 mthsor less

6 to 12mths

1 to 2years

2 to 3years

3 to 4years

more than
4 years

Interest rate swap cash flow
hedge

(14,511)(918)(1,235)(2,224)(1,828)(1,545)(6,761)

Net value(14,511)(918)(1,235)(2,224)(1,828)(1,545)(6,761)(amounts in thousands of Euro)

Futurecontractual
cash flows
at Jan. 31,
2014

6 mthsor less

6 to 12mths

1 to 2years

2 to 3years

3 to 4years

more than
4 years

Interest rate swap cash flow
hedge

66

(953)

(842)

(1,275)

(603)

(150)

3,889

Net value

66

(953)

(842)

(1,275)

(603)

(150)

3,889

Financial liabilities(amounts in thousands of Euro)

Carrying
Futureamount at
contractualJan. 31, cash flows at
2015 Jan. 31, 2015

Obligations under financeleases21

21

Financial liabilities – third
parties

520,477

564,962

Financial liabilities – relatedparties

2,371

2,371

522,869

567,354

Total(amounts in thousands of Euro)

Carrying
Futureamount at
contractualJan. 31, cash flows at
2014 Jan. 31, 2014

on 6 mths 6 to 12
demand or lessmths-

1 to 2years

2 to 3years

3 to 4years

more
than 4
years

-

-

-

33,685 141,546

91,60514

7-

4 244,667

23,92529,530

2,371

-

-

4 247,052

23,932

on 6 mths 6 to 12
demand or less
mths

-

-

-

-

29,53033,685 141,546

91,605

1 to 2years

2 to 3years

3 to 4years

more
than 4years--

Obligations under financeleases

543

551

-

103

429

19

-

Financial liabilities – third
parties272,180

292,566

103

44,69021,441

40,101

23,156

Financial liabilities – relatedparties

4,130

4,130

-

-

4,130

-

-

276,853

297,247103

44,79326,00040,12023,156

Total

26,519 136,556--

26,519 136,556

Some of the above ﬁnancial liabilities are subject to compliance with covenants, as
described in Note 24.

PRADA Group

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Exchange rate risk
The exchange rate risk to which the Group is exposed depends on foreign currency
ﬂuctuation, mainly against the Euro. It is largely concentrated in PRADA spa.
For PRADA spa, the exchange rate risk mainly involves the risk that the cash ﬂows
from retail and distribution activities will ﬂuctuate as a result of changes in exchange
rates. The most important currencies in terms of hedging for the Group are: the US
Dollar, Hong Kong Dollar, Japanese Yen, GB Pound and Chinese Renminbi. Exchange
rate risk exposure for subsidiary companies is generated by cash ﬂows in currencies
other than their reporting currency.
The following table shows the sensitivity of the Group’s net income and Shareholders’equity to a range of hypothetical ﬂuctuation in the main foreign currencies against
Euro, based on the Group statement of ﬁnancial position at January 31, 2015.
Euro strengthens by 10%(amounts in thousands of Euro)

Effect on
net income

Euro weakens by 10%

Effect on
shareholders’equityEffect on
net income

Effect on
shareholders’equityGB Pound

(433)

4,375

949

(6,397)

Hong Kong Dollar

222

11,405

3,151(18,676)

Japanese Yen(1,801)

6,467

2,074

(9,927)US Dollar(6,157)

1,614

12,771(4,434)Chinese Renminbi(11,804)(2,509)15,068

1,697

Other currencies(13,811)(2,414)

3,133(11,718)

Total(33,784)(18,938)

37,146(49,455)

The total impact on shareholders’ equity (Euro 18.9 million negative and Euro 49.5
million negative) is the sum of the theoretical effect on the income statement and on
the cash ﬂow hedge reserve of an hypothetical strengthening/weakening of the Euroagainst other currencies.
The effects on the above-mentioned items are stated before the tax effect. The
sensitivity analysis is based on the period end exposure which might not reﬂect theeffects actually generated during the year and for this reason it must be consideredmerely indicative.

142

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Interest rate risk
The PRADA Group is exposed to the risk of interest rate ﬂuctuations mainly with regard
to the interest expenses on the debt carried by parent company PRADA spa and someof its subsidiaries. Management of this risk falls within the scope of the risk management
activities the Group carries out through its centralized Corporate Finance department.
The following table shows the sensitivity of the Group’s net result and Shareholders’equity to an hypothetical shift in the interest rate curve in relation to the Group companies’
ﬁnancial position as at January 31, 2015.
Shift in interest rate curve+0.50%(amounts in thousands of Euro)
Effect on
net income-0.50%
Effect on
shareholders’equityEffect on
net income

Effect on
shareholders’equity

Euro

(777)

1,450

777

(1,569)GB Pound

(391)

3,402

391

(3,402)

Hong Kong Dollar

1,624

1,624

(1,624)(1,624)

Japanese Yen

(500)

(453)

501

454

US Dollar

379

379

(379)

(379)

Other currencies

420

420

(420)

(420)

Total

755

6,822

(754)

(6,940)

The total impact on Shareholders’ equity (positive impact of Euro 6.8 million andnegative impact of Euro 6.9 million) should be considered as the sum of the theoreticaleffect of an hypothetical shift in the interest rate curve on the income statement andon the cash ﬂow hedge reserve. The effects on the above-mentioned items are stated
before the tax effect.
The sensitivity analysis was based on the period end net ﬁnancial position so it might
not reﬂect the actual exposure to the interest rate risk during the year. Therefore, thisanalysis should be considered as merely indicative.
13. Receivables from and advance payments to parent company and other relatedparties, current and non-current
Receivables from and advances to parent company and other related parties aredetailed below:
January 31
2015

January 31
2014

Financial receivables – other related companies

11

2,008

Other receivables - PRADA Holding spa and subsidiaries

5392

Other receivables and advance payments – other related companies

3,224

3,593

Receivables from and advance payments to parent company and otherrelated parties - current

3,240

5,993

(amounts in thousands of Euro)

The ﬁnancial receivables from other related companies of Euro 2 million reported at
January 31, 2014 were collected during the year from Luna Rossa Challenge 2013 srl.

PRADA Group

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Other receivables and advance payments due from other related companies, amounting
to Euro 3.2 million at January 31, 2015, mainly refer to advance payments made to
related party Chora srl in fulﬁlment of obligations under the consulting agreement
signed with PRADA spa.
(amounts in thousands of Euro)

January 31
2015

January 31
2014

Prepaid sponsorship

12,379-Deferred rental income – long-term

4,309

1,487

741

-

17,429

1,487

Loans

Receivables from and advance payments to parent company
and other related parties – non-current

Prepaid sponsorship refers to the amount paid to Luna Rossa Challenge srl – andrelating to future reporting periods – for participation of the Luna Rossa Sailing Team in
the XXXV Edition of the America’s Cup which will be held in Bermuda in 2017.
Deferred rental income – long term has been recorded in relation to Fratelli Prada spa
and Progetto Prada Arte srl in application of “IAS 17 Leases” which requires rental
income to be recognized on a constant basis.
Further information on related party transactions is provided in Note 39.
14. Other current assets
Other current assets are detailed as follows:(amounts in thousands of Euro)

January 31
2015

January 31
2014

VAT

56,934

39,250

Income tax and other tax receivables

53,307

14,062Other assets

11,454

13,470Prepayments and accrued income

54,642

42,375

Deposits

4,296

5,740

180,633

114,897

January 31
2015

January 31
2014

916

1,293

Total

Other assets
Other assets are detailed as follows:(amounts in thousands of Euro)

Advertising contributions under license agreements
Advances to suppliers

2,351

3,184

Incentives for retail investments

3,950

3,645

Advances to employees

144

849

695

Other receivables

3,388

4,653

Total

11,454

13,470PRADA Group

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Prepayments and accrued income
Prepayments and accrued income are detailed as follows:
January 31
2015

January 31
2014

Rental charges

18,741

15,875

Insurance

2,380

1,931

Design costs

14,62913,997

Fashion shows and advances on advertising campaigns

3,752

2,585

(amounts in thousands of Euro)

Sponsorship-

142

Consulting

3,922

498

Amortized costs on loans

1,286

973

Other

9,932

6,374

Total

54,642

42,375Prepaid design costs mainly include costs incurred for the conception and realization ofcollections that will generate revenue the following year.
Deposits
Deposits mainly include guarantee deposits paid under commercial lease agreements.
15. Property, plant and equipment
Changes in the historical cost of Property, plant and equipment during the year ended
January 31, 2015, and in prior year are as follows:
Land andbuildings

Production
plant andmachinery

Leaseholdimprovements

Furniture& fittings

Othertangibles

AssetsTotal
under historicalconstruction
cost

Balance at January 31, 2013

252,917

112,098

762,837

250,581

93,832

105,505 1,577,770

Additions

175,197

10,710215,784

70,42732,17955,499

Disposals

(15)

(789)

(1,060)

(789)

(857)

(130)

(3,640)Exchange differences

4,574

346

(21,741)(4,419)(649)(1,759)(23,648)

Other movements

7,884

48

25,951

8,384

6,071

(49,113)

(775)

-

(18)

(31,370)(9,072)(1,086)(644)(42,190)

440,557

122,395

950,401

315,112

129,490(amounts in thousands of Euro)

Impairment

Balance at January 31, 2014

Change in scope of
consolidation

559,796

109,358 2,067,313

-

185

-

100

101

-

386

Additions

78,4749,189

109,969

47,027

9,733

129,570

383,962

Disposals(1,418)(580)(1,096)(2,707)(766)(1,655)(8,222)

Exchange differences

20,655

777

106,797

27,952

2,788

7,900

166,869

Other movements

1,646

121

22,7296,389

257(32,016)

(874)

-

(1)

(16,058)(8,547)

(752)

(291)

(25,649)

539,914132,086

1,172,742

385,326

140,851

Impairment

Balance at January 31, 2015

PRADA Group

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145

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Changes in accumulated depreciation of Property, plant and equipment during the year
ended January 31, 2015, and in prior year are as follows:
Land andbuildings

Production
plant andmachinery

Leaseholdimprovements

Furniture& fittings

Othertangibles

Total accum.
Deprec.

Balance at January 31, 2013

41,337

94,650389,794140,271

54,419720,471

Depreciation

168,753(amounts in thousands of Euro)

7,931

7,926

112,932

31,9008,064

Disposals

(10)

(754)

(977)

(231)

(775)

(2,747)

Exchange differences

100

312

(8,623)(2,535)(409)(11,155)

Other movements

522

-

(846)

(41)

(6)

(371)

-

(18)

(29,106)(7,680)(1,026)(37,830)

49,880102,116

463,174

161,684

60,267

837,121

-

143

-

80

78

301

Impairment

Balance at January 31, 2014

Change in scope of
consolidation
Depreciation

9,483

8,525

146,006

39,451

9,997

213,462

Disposals

(745)

(549)

(632)

(2,161)(664)(4,751)

Exchange differences

3,356

703

65,433

14,474

1,608

85,574

Other movements

-

(27)

(478)

23

(21)

(503)

Impairment-(1)(14,063)(6,886)(687)(21,637)

61,974110,910

659,440

206,665

70,5781,109,567

Balance at January 31, 2015

Changes in the net book value of Property, plant and equipment in the year ended
January 31, 2015, and in prior year are as follows:
Land andbuildings

Production
plant andmachinery

Leaseholdimprovements

Furniture& fittings

Othertangibles

Assetsunderconstruction

Total net
book
value

Balance at January 31, 2013

211,580

17,448373,043

110,310

39,413

105,505

857,299

Additions

175,197

10,710215,784

70,42732,17955,499559,796

Depreciation(7,931)(7,926)(112,932)(31,900)(8,064)(amounts in thousands of Euro)

Disposals- (168,753)

(5)

(35)

(83)

(558)

(82)

(130)

(893)

Exchange differences

4,474

34

(13,118)(1,884)(240)(1,759)(12,493)

Other movements

7,362

48

26,797

8,425

6,077

(49,113)

(404)

-

-

(2,264)(1,392)

(60)

(644)

(4,360)390,677

20,279487,227

153,428

69,223

-

42

-

19

24

-

85

129,570

383,961

Impairment

Balance at January 31, 2014

Change in scope of
consolidation
Additions

78,4739,189

109,969

47,027

9,733

Depreciation(9,483)(8,525)(146,006)(39,452)(9,997)

Disposals

109,358 1,230,192- (213,463)

(672)

(31)

(465)

(546)

(103)

(1,655)(3,472)

Exchange differences

17,29974

41,365

13,478

1,180

7,900

81,296

Other movements

1,646

148

23,2076,367

277(32,016)

(371)

-

-

(1,995)(1,660)

(64)

(291)

(4,010)477,940

21,176513,302

178,661

70,273

Impairment

Balance at January 31, 2015

212,866 1,474,218

Additions to land and buildings include Euro 61.5 million for the purchase of a property
situated in Milan and used as the Corporate Headquarters. The remainder consists offacilities purchased to improve manufacturing activities.

146

PRADA Group

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Additions to Production plant and machinery mainly relate to purchases of equipment
for use in manufacturing processes.
The increases in leasehold improvements, furniture and ﬁxture and Assets underconstruction were mostly explained by the Group’s strategy of retail network expansion
and renovation.
Total capital expenditure in the retail channel for the twelve months ended January 31,
2015, is summarized as follows:
January 31
2015(amounts in thousands of Euro)Stores opened during the yearof which stores already opened during the yearof which stores opening soon

January 31
2014

155,576

241,804

102,493

190,52153,08351,283Purchases, refurbishment and relocation of existing stores

105,367

279,740

Total retail capital expenditure

260,943

521,544

The impairment adjustments recorded in 2014 essentially relate to several projects forthe relocation and renewal of retail premises.
At January 31, 2015, and January 31, 2014, all of the Group’s land outside Hong Kong
was owned on a freehold basis.
Interest expenses capitalized during the year totaled Euro 20,000 and was allocated tothe additions to “Land and Buildings”.
16. Intangible assets
Changes in the historical cost of Intangible assets during the year ended January 31,
2015, and in prior year are as follows:(amounts in thousands of Euro)

Trademarks

Goodwill

Store Lease
Acquisitions

SoftwareDevelopment
costs andother
intangible
assetsAssets inprogressTotal
historicalcost

Balance at January 31, 2013

390,889533,291

155,445

68,32045,5808,230

1,201,755

-

-

-

-

-

-

-

616

-

21,816

3,927

20,1294,943

51,431

Change in scope of consolidation
Additions
Disposals

-

-

(380)

-

-

(14)

(394)

Exchange differences

3,301

1,179

(133)

(58)

-

(113)

4,176

Other movements

(121)

-

4,400

2,622

288

(7,386)

(197)

-

-

(693)

(566)

(1,113)(317)(2,689)394,685

534,470

180,455

74,24564,884

5,343

1,254,082

Impairment

Balance at January 31, 2014

Change in scope of consolidation

-

7,975

22,0652

1-30,043

Additions494-

14,677

3,164

177

17,13335,645

Disposals

-

(711)

-

(21)

(52)

(1)

(785)

7,425

2,650

9,043

763

2

57

19,940

Other movements

-

670

1,829

629

-

(3,678)(550)

Impairment

-

-

(256)

(7)

-

(41)

(304)

402,604

545,054

227,81378,77565,012

18,813

1,338,071

Exchange differences

Balance at January 31, 2015

PRADA Group

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Changes in the accumulated amortization of Intangible assets during the year ended
January 31, 2015, and in prior year are as follows:(amounts in thousands of Euro)

Trademarks

Goodwill

Store Lease
Acquisitions

SoftwareBalance at January 31, 2013

99,78429,304

89,68260,332

Change in scope of consolidation
Amortization

Development
costs and
Total
other accumulated
intangible amortization
assets43,903

323,005

-

-

-

-

-

-

11,060-12,614

3,505

2,925

30,104

-

-

(291)

-

-

(291)

Exchange differences

Disposals

1,031

793

40

(15)

-

1,849

Other movements

(103)

-

110

(28)

103

82

-

-

(694)

(186)

(1,076)(1,956)

111,772

30,097

101,461

63,60845,855352,793

Impairment

Balance at January 31, 2014

Change in scope of consolidation
Amortization

-

-

-

-

-

-

11,0971

17,950

3,655

2,481

35,184

Disposals

-

(711)

-

(15)

(52)

(778)

2,503

1,782

2,727

707

2

7,721

Other movements

-

671

(561)

(1)

1

110

Impairment

-

-

(256)

(7)

-

(263)

125,372

31,840121,32167,94748,287394,767

Exchange differences

Balance at January 31, 2015

Changes in the net book value of Intangible assets during the year ended January 31,
2015, and in prior year are as follows:(amounts in thousands of Euro)

Trademarks

Balance at January 31, 2013

291,105

503,987

Change in scope of consolidation
Additions
Amortization
Disposals
Exchange differences
Other movements
Impairment

Balance at January 31, 2014

Change in scope of consolidation
Additions
Amortization
Disposals

65,763Development
costs andSoftwareother
intangible
assets7,988

Assets in
Total netprogress book value

1,677

8,230

878,750

-

-

-

-

-

-

-

616

-

21,816

3,927

20,1294,943

51,431(11,060)-(12,614)(3,505)(2,925)-(30,104)

-

-

(89)

-

-

(14)

(103)

2,270

386

(173)

(43)

-

(113)

2,327

(18)

-

4,290

2,650

185

(7,386)

(279)

-

-

1

(380)

(37)

(317)

(733)

282,913504,373

78,994

10,63719,0295,343

901,289

30,043-

7,975

22,065

2

1

-

494

-

14,677

3,166

177

17,13335,647(11,097)(1)(17,950)(3,655)(2,482)-(35,185)

-

-

-

(7)

-

(1)

(8)

4,922

867

6,316

57

-

57

12,219Other movements

-

-

2,390

628

-

(3,678)(660)

Impairment

-

-

-

-

-

(41)

(41)

277,232

513,214

106,492

10,82816,725

18,813

943,304

Exchange differences

Balance at January 31, 2015

148

Store Lease
Goodwill
Acquisitions

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The net book value of Trademarks is broken down as follows:
January 31
2015

January 31
2014

Miu Miu

159,811

165,386

Church's

102,502

101,480

Luna Rossa

4,169

5,150

Car Shoe

5,237

5,437

Prada

3,985

4,148

Other

1,528

1,312

Total

277,232

282,913(amounts in thousands of Euro)No impairment losses were recorded in relation to the Group’s trademarks in the year
ended January 31, 2015. Trademark registration costs are included in Other.
Store lease acquisition costs (key-money) includes intangible assets recognized in
respect of costs incurred by the Group to enter into or take over lease agreements forretail premises in the most prestigious retail locations worldwide. The increases andchange in the period of consolidation recorded during the year regard lease agreements
Europe.
Total capital expenditure on Property, plant and equipment and Intangible assets forthe twelve months ended January 31, 2015, was Euro 449.7 million.
The following table contains a summary of total additions to Property, plant andequipment and Intangible assets for each business area.
January 31
2015

January 31
2014

Retail260,943

521,545

Production and logistics

58,92733,482

Corporate

129,865

56,200

Total

449,735

611,227(amounts in thousands of Euro)PRADA Group

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Impairment test
As required by “IAS 36 Impairment of Assets”, goodwill, being an asset with indeﬁnite
useful life, is not amortized. Instead, it is tested for impairment at least once a year.
As at January 31, 2015, goodwill amounted to Euro 513.2 million, detailed by Cash
Generating Unit (CGU) as follows:(amounts in thousands of Euro)

January 31
2015

January 31
2014

Italy Wholesale

78,35578,355Asia Pacific and Japan Retail311,936

311,936

Italy Retail25,85025,850Germany and Austria Retail

5,064

5,064

United Kingdom Retail

9,300

9,300

Spain Retail

1,400

1,400

France and Monte Carlo Retail

11,70011,700

North America Retail and Wholesale

48,00048,000

Production division

3,492

3,492

Church’s

10,142

9,276

Marchesi Angelo

7,975

-

513,214504,373

Total

The Group does not recognize any intangible assets with an indeﬁnite useful life otherthan goodwill. At the same time, IAS 36 requires an entity to assess at each reporting
date whether there is any indication that any assets may be impaired. In light of theirperformance during the year, certain retail CGU were tested for impairment.
The method used to identify the recoverable value (value in use) is based on the
Discounted expected free Cash-Flow (hereafter “DCF”) generated by the assets
directly attributable to the business to which the goodwill or the trademark subject toimpairment have been allocated (Cash Generating Unit). Value in use is calculated as
the sum of the present value of future free cash-ﬂows expected from the business plan
projections prepared for each CGU and the present value of the operating activities ofthe sector at the end of the business plan period (terminal value).
The business plans cover a period of ﬁve years and have been constructed on the basisof the 2015 budget, as prepared by Head Ofﬁce. Prudently, no business development
has been forecasted after 2015. This means that no new store openings have been
included in the period from 2016 to 2019 and prudent trends in the wholesale channel
have been applied.
The discount rate used to discount cash ﬂows was calculated using the weighted
average cost of capital (WACC). For the year ended January 31, 2015, the WACC used
for discounting purposes was in a range between 5.9% and 19.8% (between 6% and14.3% at January 31, 2014). The WACC has been calculated ad hoc for each CGU
subject to impairment taking into account the country speciﬁc parameters: market
risk premium and sovereign bond yield. The rate of growth “g” used to calculate the
WACC was in a range between 0% and 9%, in light of the different inﬂation andgrowth outlooks in the various countries. However, the prevalent rate of growth was
1.5% and it may be considered prudent given the general average rate of growth
expected for the luxury goods market and the speciﬁc rate of growth expected for
PRADA Group at the reporting date.
Certain sensitivity analyses were carried out to ensure that changes in the main
assumptions (WACC and “g” growth rate) did not signiﬁcantly affect the impairment
test results. The outcome of these simulations reasonably supported the valuation
obtained through the DCF method.

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When the calculation of value in use through the DCF method did not lead to reasonable
results, it was deemed appropriate to run the impairment test through the application ofvaluations methods based on the fair value (e.g. market multiples method or royalties
method).
None of the impairment tests performed as at January 31, 2015 identiﬁed any
impairment losses. However, as value in use is measured based on estimates, theGroup cannot guarantee that the value of goodwill or other intangible assets will not
be impaired in future.
17. Associated undertakings(amounts in thousands of Euro)

January 31
2015

January 31
2014

Investment in associated undertaking

1,738

1,738

Investment available for sale

28,777

19,43414

14

30,52921,186

Other investments

Total

Investment in associated undertaking regards a 49% interest in Pac srl (in liquidation),an unlisted company based in Italy, which has been measured under the equity method.
Investment available for sale regards the 4.88% stake in the share capital of Sitoy
Group Holdings ltd, a company listed on Hong Kong Stock Exchange that operates on
the Asian market in the production of leather bags and other products. In accordancewith IAS 39 “Financial instruments: measurement and impairment”, the investment
was initially recognized at cost and subsequently restated at fair value in line with theofﬁcial quoted share price on the Hong Kong Stock Exchange as at January 31, 2015
(Level I of the fair value hierarchy per “IFRS 7 Financial Instruments: Disclosures”).
Changes to fair value compared to January 31, 2014 – positive by Euro 9.3 million –have been recognized in a speciﬁc equity reserve, net of the taxation effect (Euro 2.3
million). In 2014, the Group collected net dividends from Sitoy Group Holdings totaling
HKD 4.9 million (Euro 0.5 million).
18. Other non-current assets
Other non-current assets are detailed as follows:
January 31
2015

January 31
2014

Guarantee deposits

70,004

57,158Deferred rental income

9,056

6,923

Pension fund surplus

2,515

-

Other long-term assets

9,778

5,786

Total

91,35369,867(amounts in thousands of Euro)At January 31, 2015, Other receivables included Euro 2.5 million representing theactuarial valuation of the pension plans the Group has in the United Kingdom (Note 25).

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Guarantee deposits are analyzed below by nature and maturity:
January 31
2015

January 31
2014

Stores66,56854,140

Offices

2,175

2,080

(amounts in thousands of Euro)Nature:Warehouses

182

163

Other

1,079

775

Total

70,004

57,158January 31
2015(amounts in thousands of Euro)

Maturity:
By 31.01.2016

15,646

By 31.01.2017

5,596

By 31.01.2018

6,407

By 31.01.2019

16,847After 31.01.2020

25,508Total

70,004

19. Bank overdrafts and short-term loans(amounts in thousands of Euro)

January 31
2015

Bank overdrafts and commercial lines of credit

January 31
2014

93

114

Short-term bank loans

221,639

21,845Current portion of long term loans

42,07440,416

(471)

(466)

263,335

61,909Deferred costs on loans

Total

On December 1, 2014, PRADA spa arranged a new revolving line of credit of Euro
315 million – expiring in December 2019 – with a pool of banks. This loan replaced theprevious revolving facility which was due to expire in May 2016 and was arranged inorder to sustain the business’s financial cycle, taking advantage of favorable conditions
available on the credit market while guaranteeing the Group financial flexibility for alonger period. At January 31, 2015, the outstanding amount on the loan facility was
Euro 150 million and it was reported under “Short-term bank loans”.
The pool Euro loan is subject to compliance with several covenants determined basedon the PRADA spa Consolidated financial statements. Specifically, the ratio between
total net bank borrowing and EBITDA must not exceed 3 and the ratio between EBITDA
and total net interest expenses must exceed 4. The covenants were respected at
January 31, 2015.
Short-term bank loans also include committed lines of credit of PRADA Japan co ltd
which are subject to a series of covenants based on the financial statements of PRADA
Japan that were fully respected at January 31, 2015.
The current portion of long-term bank loans includes Euro 0.6 million regarding a loanarranged by PRADA spa with the Monte dei Paschi di Siena Group in 2008. This loan issecured by a mortgage on a real estate property in Tuscany used for R&D activities. The
current portion of long-term loans also includes the mortgage loan provided by Cassa di
Risparmio Parma e Piacenza to PRADA spa in 2008 and reported at Euro 5.2 million at
152

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January 31, 2015. Security for this loan consists of a mortgage on a real estate property
in Tuscany used by the Group for leather goods division logistics activities.
Short-term bank loans and the current portion of long-term borrowings by currency are
analyzed as follows:
January 31
2015

January 31
2014

Euro

157,883

14,484

Japanese Yen

73,57130,375Chinese Renminbi

24,477

13,391Other currencies

7,782

4,011

263,71362,261(amounts in thousands of Euro)

Total

The Group generally borrows at variable rates of interest and manages the risk ofinterest rate fluctuation by entering into hedging agreements as described in Note 12.
Considering hedges in place at the reporting date, some 15% of the current portion of
medium/long term loans consisted of fixed rate loans (23% at January 31, 2014) withvariable rate loans making up the remaining 85% (77% at January 31, 2014).
Bank borrowings are stated net of amortized costs incurred to arrange the loans (Euro
0.5 million short term and Euro 1.5 million medium/long term).
20. Payables to parent company and other related parties – current and non-current
The current portion of payables to parent company and other related parties may bedetailed as follows:(amounts in thousands of Euro)

January 31
2015

Other payables – PRADA Holding spa and subsidiaries
Financial payables – other related companies

-

136

2,371

4,130

712

628

3,083

4,894

Other payables – other related companies

Total

January 31
2014

Financial payables towards other related parties, totaling Euro 2.4 million at January
31, 2015, include an interest-free loan provided by Al Tayer, the non-controllingshareholder of PRADA Middle East fzco, according to the number of shares held by itin said company. The loan was partially repaid during the year. Details of payables tothe parent company and other related parties are provided in Note 39.
The non-current portion of payables to parent company and other related parties may
be detailed as follows:
January 31
2015

January 31
2014

Other payables – other related companies

13,384

13,247

Payables to parent company and other related parties – non-current

13,384

13,247(amounts in thousands of Euro)

Other payables to other related companies include the amount due to Fin-Reta srl in
relation to the establishment of rights of usufruct (residual period nine years) to a realestate property in Tuscany, Italy and the business party to the rental agreement for
said property which the Group is using as part of its retail network expansion. The

PRADA Group

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payable reported at January 31, 2015 represents the present value of future paymentsdue. Details of payables to parent companies and other related parties are provided in
Note 39.
21. Trade payables
Trade payables are detailed as follows:
January 31
2015

January 31
2014

Trade payables – third parties

410,977

337,807

Trade payables – related parties

26,443

10,727

Total

437,420

348,534(amounts in thousands of Euro)

The increase in trade payables is essentially due to the intensiﬁcation of manufacturing
activity in the last few months of the year in order to sustain a different strategy of retailchannel replenishment. A breakdown of trade payables to related parties is provided
in Note 39.
22. Tax payables
Tax payables are detailed as follows:
January 31
2015

January 31
2014

Current income taxes

97,007101,018

VAT and other taxes

36,907

31,127

Total

133,914132,145(amounts in thousands of Euro)Net of current income tax receivables (Euro 53.3 million – Note 14), current income
tax payables total Euro 43.7 million at January 31, 2015 (Euro 87 million at January 31,2014).
23. Other current liabilities
Other current liabilities are detailed as follows:(amounts in thousands of Euro)

January 31
2015

January 31
2014

Payables for capital expenditure

128,346

70,848

Accrued expenses and deferred income

17,354

10,842Other payables

74,78072,976

Total

220,480

154,666

Payables for capital expenditure include liabilities as at January 31, 2015, for capital
expenditure for Property, plant and equipment and Intangible assets. The amountincludes Euro 55 million due for the purchase of the property in Milan used as theCompany’s headquarter. On June 23, 2014, PRADA spa signed a long-term loan
agreement with Intesa Sanpaolo for the aforementioned amount; the loan will be
disbursed in 2015.

154

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Other payables are detailed below:
January 31
2015

January 31
2014

Short term benefits for employees and other personnel

60,332

57,817

Customer advances

4,725

5,298

Returns from customers

7,813

8,300

Other

1,910

1,561

Total

74,78072,976

January 31
2015

January 31
2014(amounts in thousands of Euro)

24. Long-term financial payables
Long-term ﬁnancial payables are analyzed below:(amounts in thousands of Euro)

Long-term bank borrowings

126,671

79,805

Bonds

130,000

130,000

Deferred costs on loans(1,468)(1,855)

Total

255,203207,950

The increase in long-term bank borrowings is mainly due to a new loan of GBP 60
million (Euro 79.8 million at January 31, 2015) arranged by subsidiary Kenon Limitedwith Unicredit Group. The loan is secured by a mortgage. The repayment plan, due
to expire on January 31, 2029, provides for rising installments from April 2015. The
covenant (loan to value) to which the loan is subject was respected at January 31,
2015.
The Group generally borrows at variable rates of interest and manages the risk ofinterest rate ﬂuctuation by entering into hedging agreements as described in Note 12.
At the reporting date, some 83% of long-term loans consisted of ﬁxed rate loans (67%
at January 31, 2014) with variable rate loans making up the remaining 17% (33% at
January 31, 2014).
Details of long-term borrowings at January 31, 2015, are provided below:
Borrower

PRADA spa

Amount inthousandsof EuroLenderExpiry date

Interest rate
(1)

Euro

Bonds

08/20182.750%PRADA Middle East FZCO

4,105

US Dollar

ENBD

09/2016

3.155%PRADA Japan. Co. Ltd

5,636

Japanese Yen

Mizhuo Bank

03/20171.875%PRADA Japan Co. Ltd

3,757

Japanese Yen

Sumitomo Mitsui Trust

08/20160.680%PRADA Japan Co. Ltd

9,017

Japanese Yen

Syndicate loan

07/2018

1.059%PRADA Japan Co. Ltd

22,543

Japanese Yen

Syndicate loan

01/2018

1.059%

Kenon Ltd78,285

GB PoundUnicredit

01/20294.477%

Church and co. ltd

3,328

GB Pound

HSBC

05/2018

2.060%

Total

130,000

Loan currency

256,671(1) the interest rates include, where applicable, the effect of any interest rate risk hedging transactions

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Details of long-term borrowing at January 31, 2014 are provided below:
Amount inthousandsof EuroBorrower

Loan currency

LenderExpiry date

Interest rate
(1)

PRADA spa

130,000

Euro

Bonds

08/20182.750%PRADA spa

600

Euro

Monte dei Paschi di Siena

07/2015

3.310%PRADA spa

5,202

Euro

Cariparma

08/20151.290%PRADA Middle East FZCO

9,254

US Dollar

ENBD

09/2016

3.811%PRADA Japan. Co. Ltd

9,049

Japanese Yen

Mizhuo Bank

03/20171.875%PRADA Japan Co. Ltd

5,068

Japanese Yen

Sumitomo Mitsui Trust

08/20160.708%PRADA Japan Co. Ltd

12,162

Japanese Yen

Syndicate loan

07/2018

1.117%PRADA Japan Co. Ltd

26,063

Japanese Yen

Syndicate loan

01/2018

1.117%PRADA Fashion Commerce(Shanghai) co limited

9,155

ChineseRenminbi

Mizuho Bank

11/2015

6.150%PRADA Fashion Commerce(Shanghai) co limited

2,034

ChineseRenminbi

Intesa SanPaolo

06/2015

6.027%

Church and co. ltd

1,218

GB Pound

HSBC

05/2018

2.020%

Total

209,805(1) the interest rates include, where applicable, the effect of any interest rate risk hedging transactions

On June 23, 2014, PRADA spa arranged with Intesa Sanpaolo Group a long-term loan
secured by a mortgage on the property in Milan used as the Group Head Ofﬁce. The
loan will be disbursed in 2015 in the amount of Euro 55 million and is repayable in equal
installments from November 2015.
The loan from Sumitomo Mitsui Trust Bank is subject to compliance with a number ofparameters based on the statutory ﬁnancial statements of PRADA Japan co ltd – theparameters were respected in full at January 31, 2015.
The Bonds, classiﬁed under ﬁnancial payables, reported at a net amount of Euro 129
million (nominal amount of Euro 130 million as adjusted by Euro 1 million following
application of the amortized cost method). Their fair value, as determined based on
the ofﬁcial listed price on the Irish Stock Exchange at January 31, 2015, is Euro 136.3
million.
All bank borrowing is analyzed by security proﬁle as follows:(amounts in thousands of Euro)

January 31
2015

January 31
2014

Secured85,685

12,137

Unsecured

434,792

260,043

Total

520,477

272,180

All of the loans are analyzed by maturity date in the section of Note 12 on Liquidity risk.
Other than PRADA spa, no Group company had issued any debt securities at the endof the current year or previous year.

156

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25. Post-employment benefits
January 31
2015(amounts in thousands of Euro)

January 31
2014

Post-employment benefits

45,63839,568Other long term employee benefits

40,11623,711

Total liabilities for long term benefits

85,754

63,279Post-employment benefit (pension plan surplus)

2,515

-

Net liabilities for long term benefits

83,23963,279Post-employment benefits
Liabilities and assets for post-employment beneﬁts reported at January 31, 2015
totaled a net amount of Euro 45.6 million (Euro 39.6 million at January 31, 2014) andall were qualiﬁed as deﬁned beneﬁt plans. The pension plan surplus relates to Group
companies operating in the United Kingdom. It amounted to Euro 2.5 million at January
31, 2015 against zero at January 31, 2014. This item is included in Other non-current
assets, Note 18.
The balance includes Euro 26.2 million (Euro 23.9 million at January 31, 2014) of
liabilities recorded in the ﬁnancial statements of Italian companies and Euro 19.4 million
reported by non-Italian companies (Euro 15.7 million at January 31, 2014). The Italianliabilities for post-employment beneﬁts regard the “Trattamento di Fine Rapporto”(hereinafter “TFR” i.e. staff leaving indemnity), a deferred employee beneﬁt that mustbe paid by Italian businesses and is linked to length of working life and remuneration
received. The present value of the liability as reported was determined projecting the
beneﬁt, accruing under Italian law at the reporting date, to the future date when theemployment relationship will be terminated and discounting it at the reporting dateusing the actuarial “Projected Unit Credit Method (PUCM)”.
The following table shows movements on liabilities for post-employment beneﬁts inthe year ended January 31, 2015.

(amounts in thousands of Euro)

Balance at January 31, 2014

DefinedBenefit Plans
in Italy (TFR)

DefinedBenefit Plans
abroad(including
Japan)

PensionFunds in UK

Other
long-term
employeebenefits

Total

23,892

15,676-23,711

63,279Acquisitions

268

-

-

-

268

Current service cost

205

3,093

359

13,151

16,808Interest expenses (income)

75

204

(65)

186

400

Actuarial (gains)/losses

3,422

776

(1,867)(1,092)

1,239

Benefits paid

(1,597)(1,210)-(795)(3,602)Contributions

-

-

(784)

-

(784)

Exchange differences

-

834

(158)

734

1,410

Other movements

-

-

-

4,221

4,221

26,265

19,373(2,515)

40,116

83,239Balance at January 31, 2015

Other movements shows the opening balance and amounts allocated for social
contributions on other long-term liabilities which, effective from these ﬁnancial
statements, are stated together with the main liability.

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The actuarial gains and losses are determined as follows:
DefinedBenefit Plans
in Italy (TFR)

DefinedBenefit Plans
in JapanPensionFunds in UK

3,572

648

(1,231)

Actuarial adjustments due to(a) Changes in financial assumptions(b) Changes in other assumptions(e.g. demographic assumptions, remuneration increases)(c) Other

Actuarial (Gains)/losses

98

128

(636)

(248)

-

-

3,422

776

(1,867)The current service cost and the interest cost/(revenue) were recognized throughincome statement. For Other long-term employee beneﬁts only, actuarial differenceswere also recognized through the income statement. The TFR liability was determinedbased on an independent appraisal by Federica Zappari, an Italian registered actuary(no 1134) of Ordine Nazionale degli Attuari. The technical part of the computation was
based on an historical analysis of the data. For the demographic assumptions, variables
such as the likelihood of death, early retirement and resignation, dismissal, expiry of
employment contract, advance payment on leaving indemnities and supplementary
pension schemes were considered.
Post-employment beneﬁts of non-Italian companies are stated net of the surplus on
pension plans relating to Group companies operating in the United Kingdom which
provide pension services for their employees. As at January 31, 2015, these pension
plans had a fair value of Euro 2.5 million (net surplus of zero as at January 31, 2014).
The fair value of the assets was determined based on the appraisal provided byindependent actuary Scottish Widows. They are analyzed as follows:(amounts in thousands of Euro)

January 31
2015

January 31
2014

Fair value of plan assets

69,41354,060Fair value of plan liabilities(63,591)(50,454)

Pension plan surplus

5,822

3,606

Restrictions on recognition of surplus applied during actuarial valuation of the plan

(3,307)(3,606)

Net surplus

2,515

-

At the reporting date pension plan assets, along with the expected rates of return,were as follows:
January 31
2015

January 31
2014

Equities

24,991

24,179Alternatives

5,927

5,406

Bonds

36,80021,714

Cash

1,695

2,761

Total

69,41354,060(amounts in thousands of Euro)158

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The main actuarial assumptions utilized at January 31, 2015 are as follows:
Defined Benefit
Plans in Italy(TFR)

January 31, 2015

Average duration of plan (years)
Discount ratePensionFunds in UK

Defined Benefit
Plans in Japan

12.3

15.0

16.3

0.93%

3.00%

1.01%

Average increase in remuneration

1.80%

1.80%

3.01%

Rate of inflation

1.00%

1.60%

N/A

The main actuarial assumptions utilized at January 31, 2014 are as follows:
Defined Benefit
Plans in Italy(TFR)

January 31, 2014

Average duration of plan (years)
Discount ratePensionFunds in UK

Defined Benefit
Plans in Japan

11.2

16.0

15.8

2.50%

4.50%

1.39%

Average increase in remuneration

1.86%

2.40%

3.01%

Rate of inflation

1.50%

2.20%

N/A

The discount rate used to value the deﬁned beneﬁt plans was determined on the basisof the yield on bonds with an AA rating and a maturity date similar to that of the plansin question.
A sensitivity analysis performed on the main actuarial assumptions applied at January
31, 2015 i.e. discount rate, remuneration increases and rate of inﬂation. It did not show
any signiﬁcant variation in the liability except for the sensitivity analysis performed on
the interest rate curve which should that a 50 basis point increase or decrease would
lead to an increase or decrease in the Group’s total DBO of up to Euro 6.6 million (i.e.
6.5% of the liability currently reported).
Payments expected in relation to the above plans in the years following these ﬁnancial
statements are shown below:
January 31
2016

January 31
2017

January 31
2018

January 31
2019

After
January 31
2019Defined Benefit Plans in Italy (TFR)

1,870

1,430

1,199

1,222

23,701

Pension Funds UK

2,487

2,507

2,532

2,614

17,687

Defined Benefit Plans Japan

1,666

1,718

1,812

1,716

21,160

6,023

5,655

5,543

5,552

62,548The contributions expected for the 2015 ﬁscal year are as follows:
twelve months
ended
January 31, 2016

Defined Benefit Plans in Italy (TFR)
Pension Funds UK

625

Defined Benefit Plans Japan

3,002

3,627

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Other long-term employee benefits
Other long-term employee beneﬁts come under the IAS 19 category “Other longterm employee beneﬁts” and relate to long-term retention and performance plans
recognized in favor of Group employees. As at January 31, 2015, their actuarial
valuation, obtained using the Projected Unit Cost Method, was Euro 40.1 million (Euro23.7 million as at January 31, 2014), as determined based on an independent actuarial
appraisal. The increase in 2014 regards new beneﬁts granted. Some Euro 13.4 millionof the long-term beneﬁts at January 31, 2015 is recognized in favor of related parties(Euro 8.3 million as at January 31, 2014).
26. Provisions for risks and charges
Movements on provisions for risks and charges are summarized as follows:(amounts in thousands of Euro)

Balance at January 31, 2014

Provision
for litigation

Provision fortax disputes

Other
provisions

Total

1,400

22,72428,536

52,6604,211

Exchange differences

79

10

4,122

Reclassifications

152

-

(152)

-

Reversals

(210)

(171)

(637)

(1,018)

Utilized

(210)

-

(652)

(862)

Increases

665

2,974

5,065

8,704

1,876

25,53736,282

63,695

Balance at January 31, 2015

Provisions represent the Directors’ best estimate of maximum contingent liabilities.
In the Directors’ opinion and based on the information available to them as supportedby the opinions of independent experts at the reporting date, the total amountprovided for risks and charges is reasonable considering the liabilities that might arise.
Provision for tax disputes
The Group’s main tax disputes are reported below.
On December 30, 2005, PRADA spa (for companies incorporated into PRADA spa,
Genny spa and Byblos spa, the respective sellers of the “Genny” and “Byblos”
businesses) received two notices of tax assessment for VAT purposes for the 2002
ﬁscal year. The assessments regarded the sales of the “Genny” and “Byblos”
businesses which the authorities sought to treat as sales of the respective brands.
The amount assessed was about Euro 21 million. The Company successfully appealed
at the ﬁrst and second levels of appeal. The Tax Authority then announced its appeal
to the Supreme Court of Cassation against which the Company submitted a counterappeal. No further developments took place in 2014.
On August 4, 2006, PRADA spa (for IPI Italia spa, a company incorporated into it andthe seller of the “Genny” business), received a demand for VAT penalties totaling Euro
5.7 million for the year 2002 in relation to its alleged failure to issue a “self-invoice”
for the value of the “Genny” brand. Even though it submitted its defensive arguments
against this claim, on October 9, 2007, the Company received a request for penalties
against which it ﬁled appeals at two levels but was unsuccessful with both. Finally,
the Company then made a further appeal to the Supreme Court of Cassation against
which the Tax Authority ﬁled its own counter appeal. No further developments took
place in 2014.
In May 2012, the Italian Customs Authority began an audit of PRADA spa on the 20072011 tax years and with reference to the method used to value imported products

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in speciﬁc circumstances; PRADA spa provided all of the documentation requested.
It is worth noting that, in March 2012 the Company applied to the Central Italian
Customs Authority in Rome for a ruling on the same issue and, in 2013, it submitted
two explanatory statements to the Public Prosecutor and the Customs Head Ofﬁce.
The customs authorities have suspended their judgment until the criminal proceedings
have been completed. Even though, in August and September 2014, PRADA spa
received two amended notices of assessment from the customs authorities in relation
to 2010 and, after January 31, 2015, it also received demands for payment of theadditional duties assessed in relation to the said tax year, the Directors do not believethat any provision need be made. Indeed, the company has submitted its comments inrelation to the amended notices of assessment and has ﬁled a request for suspensionof collection of the demand for payment. It shall also ﬁle an appeal by the legallyrequired deadline.
In October 2012, 2013 and 2014, the Italian Tax Authorities rejected PRADA spa’s
request not to apply the Italian Controlled Foreign Companies rules (CFC) to its Dutch
sub-holding company PRADA Far East bv for the tax years from 2010 to 2013. In orderto reduce the risk of application of additional penalties in case of assessment, PRADA
spa paid some Euro 64 million, including Euro 42 million recorded in the 2012 income
statement and Euro 22 million in the 2013 income statement (under taxation). The tax
charge recognized in the 2014 income statements amounted to some Euro 4 million.
The amounts paid followed the “ravvedimento operoso” procedure (or voluntary
settlement of dispute) and represented the taxes due in Italy by PRADA spa on the
taxable income of PRADA Far East bv. The tax due for 2013 was not paid due to thecredit arising from payments made on account. In October 2012, 2013, 2014 and in
May 2014, the Italian tax authorities also declared inadmissible the requests ﬁled by
PRADA spa for the tax years from 2010 to 2014 not to apply CFC rules to other Groupcountries operating in countries on the ﬁscal black list. In January 2013, 2014, 2015
and in July 2014, PRADA spa ﬁled appeals to the Rome Provincial Tax Commission in
relation to the rejection of its requests regarding PRADA Far East bv and the declarationof inadmissibility of its petitions regarding the other “black list” companies; it also
requested the reimbursement of the amounts paid in relation to PRADA Far East bv.
In February 2014, the French tax authorities commenced an inspection of PRADA
Retail France for Direct Tax and VAT purposes for the 2010, 2011 and 2012 tax years.
The inspection was completed in July 2014 and, in October 2014, the tax authorities
ﬁnalized its proposed adjustment to the declared taxable income which the company
accepted and recognized in full in the ﬁnancial statements by creating a provision forEuro 2.6 million.
Except where there is an express statement that no provision has been made, theDirectors, supported by the opinion of their tax advisors, believe that the provisions
totaling Euro 25.5 million carried at January 31, 2015 in respect of the tax disputes
described above represents the best estimate of the obligations that the Group could
be called upon to fulﬁll.
Provision for litigation
The provision for litigation amounted to Euro 1.9 million at January 31, 2015 and mainly
regarded disputes with suppliers, former employees of the Group and government
authorities in relation to social contributions.
Other provisions for risks
Other provisions for risks amounted to Euro 36.3 million as at January 31, 2015 andmainly related to contractual obligations to return commercial premises held underlease agreements in their original state.

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27. Other non-current liabilities
Other non-current liabilities amounted to Euro 128.8 million (Euro 99 million as atJanuary 31, 2014). They mainly regarded liabilities to be recognized on a straightline basis in relation to commercial lease costs. The increase is substantially due toexpansion of the retail network.
28. Shareholders’ equity - GroupThe Group’s shareholders’ equity is as follows:
January 31
2015

January 31
2014

Share Capital

255,882

255,882

Share premium reserve

410,047410,047

Other reserves

1,790,771

1,446,923

Actuarial reserve(13,481)(11,452)

Fair value reserve

11,115

4,108

Cash flow hedge reserve(35,323)

3,699

Translation reserve

130,996(49,438)

Net income for the period

450,730

627,785

3,000,737

2,687,554(amounts in thousands of Euro)

Total

Share capital
At January 31, 2015, some 80% of the share capital of PRADA spa was held by PRADA
Holding spa while the remainder was ﬂoating on the Main Board of the Hong Kong
Stock Exchange.
Share premium reserve
The share premium reserve of Euro 410 million is unchanged compared to January 31,
2014.
Translation reserve
Movements on this reserve relate to the translation of foreign currency ﬁnancial
statements of consolidated companies. The reserve passed from a negative ﬁgure ofEuro 49.4 million at January 31, 2014 to a positive Euro 131 million at January 31, 2015.
The main reason for this change (Euro 180.4 million) lies in the constant strengthening,
especially in the second half of the year, of the Hong Kong Dollar, the US Dollar and the
GB Pound which have gained 16.5%, 16.4% and 8.6%, respectively, against the Euro
compared to the opening exchange rates.
Other reserves
At January 31, 2015, other reserves amounted to Euro 1,791 million. They increasedby Euro 344 million compared to January 31, 2014 due to allocation of net income forthe previous year (Euro 627.8 million), net of the distribution of dividends to PRADA
spa shareholders (Euro 281.5 million).
Net income for the year
The Group’s net income for the year amounted to Euro 450.7 million (Euro 627.8 million
for the twelve months ended January 31, 2014).

162

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Capital gain tax in Italy
Capital gains realized on disposals of shares in the Company may be subject to tax
in Italy. Further details of Italian capital gains taxation are provided in the Tax Booklet
available on the Company’s website (www.pradagroup.com).
29. Shareholders’ equity – non-controlling interests
The following table shows movements on the Shareholders’ equity of Non-controlling
Interests during the years ended January 31, 2015 and January 31, 2014.
(amounts in thousands of Euro)

Opening balance

January 31
2015

January 31
2014

13,986

10,470Translation differences

2,085

93

Dividends(9,378)(6,634)

Net income for the year

8,488

10,020

(3)

(3)

2,125

40

107

-

17,41013,986

Actuarial reserve
Capital injection in subsidiaries
Acquisition of Marchesi Angelo srl

Closing balance

The capital injection into subsidiaries by non-controlling shareholders, amounting toEuro 2.1 million, regards Pellettieri d’Italia Srl (Euro 0.3 million), Prada Saudi Arabia ltd(Euro 1.3 million) and PSC sas (Euro 0.5 million).
30. Net revenues
Consolidated net revenues are mainly generated by sales of products and are stated
net of returns and discounts.
twelve months
ended
January 31
2015

twelve months
ended
January 31
2014

Net sales

3,513,436

3,548,207

Royalties

38,26039,1403,551,696

3,587,347(amounts in thousands of Euro)

Total

A breakdown of net revenues by brand, distribution channel, geographical area andproduct is provided in the Financial review.
Licensing contracts generated royalties income of Euro 38.3 million in the twelve
months ended January 31, 2015, 2.2% down on the Euro 39.1 million recorded in prioryear, entirely as a result of the absence of revenues from minor licenses terminatedduring the year. Eyewear performed very well with a 6.3% increase compared to 2013.

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31. Cost of goods soldCost of goods sold is analyzed as follows:
twelve months
ended
January 31
2015

twelve months
ended
January 31
2014

Purchases of raw materials and production costs

971,527

848,675

Logistics costs, duties and insurance

204,112

193,095

Change in inventories(174,522)(103,072)

Total

1,001,117

938,698(amounts in thousands of Euro)In absolute terms, cost of goods sold increased from Euro 938.7 million in 2013 to Euro
1,001.1 million in 2014. It also increased as a percentage of net revenues, from 26.2% in2013 to 28.2% in 2014. The resulting decrease on gross margin is essentially due to thedifferent product mix as well as to unfavorable average foreign exchange trends.
32. Operating expenses
Operating expenses are analyzed as follows:(amounts in thousands of Euro)

twelve months
ended
January 31
2015% of netrevenues

twelve months
ended
January 31
2014% of netrevenues

Product design and development costs

132,583

3.7%

129,807

3.6%

Advertising and communications costs

170,5624.8%

171,9664.8%

1,340,832

37.8%

1,212,065

33.8%

205,051

5.8%

195,574

5.5%

1,849,028

52.1%

1,709,412

47.7%

Selling costs
General and administrative costs

Total

Operating expenses increased from Euro 1,709.4 million in 2013 to Euro 1,849 million
in 2014, an 8.2% increase. As a percentage of net revenues, they rose from 47.7% in2013 to 52.1%.
Product design and development costs and Advertising and communications costs
remained practically unchanged on 2013. Total Advertising and communications costsof Euro 170.6 million are the result of a combination of the decision to continue toinvest in commercial initiatives aimed at strengthening brands and the relationshipwith the clientele and actions aimed at containing costs in order to reduce pressure
on margins.
Selling costs increased from Euro 1,212.1 million in 2013 to Euro 1,340.8 million in2014 mainly as a result of the constant expansion and renewal of the DOS network. As
a percentage of net revenues, these costs rose from 33.8% to 37.8%.
General and administrative costs, which include costs relating to the business support
structure, increased from Euro 195.5 million to Euro 205.1 million and rose from 5.5%
to 5.8% of net revenues.

164

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As required by “IAS 1 Presentation of financial statements”, the following table shows
the depreciation, amortization and impairment costs, labor costs and rental costs
included in operating costs.
twelve months
ended
January 31
2015

twelve months
ended
January 31
2014

Depreciation, amortization and impairment

240,655

192,681

Labor cost

542,042493,602

Variable rent

312,011

297,550

Fixed rent

261,003245,498

1,355,711

1,229,331(amounts in thousands of Euro)Total

33. Interest and other financial income /(expenses), net
Interest and other financial income/(expenses), net may be analyzed as follows:(amounts in thousands of Euro)

twelve months
ended
January 31
2015

twelve months
ended
January 31
2014

Interest expenses on borrowings(12,891)(9,548)Interest expenses IAS 19

(400)

(12)

Interest income

3,314

3,576

Exchange gains / (losses) – realized

8,854(9,128)Exchange gains/ (losses) – unrealized(30,045)

1,448

Other financial income / (expenses)(3,136)(3,693)

Total(34,304)(17,357)

Interest expenses on borrowings have increased compared to 2013 because of higher
average bank borrowing. At the same time, notwithstanding higher average levels of
liquidity, interest income has decreased because of lower rates of remuneration thanin prior year, especially on the low-risk investments made in accordance with Group
guidelines for the investment of liquidity. Exchange losses mainly refer to fluctuationin the Euro exchange rate against the US Dollar, the HK Dollar and the Swiss Franc in
relation to financial positions outstanding at the reporting date.
34. Dividends from investments
As at January 31, 2015, the Group held a 4.88% interest (unchanged on prior year) in
Sitoy Group Holdings ltd, a company listed on Hong Kong Stock Exchange (HK: 1023).
In 2014, the dividends collected from said company amounted to Euro 455 thousand(Euro 1,016 thousand in 2013).

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35. Income taxes
Income taxes are analyzed as follows:(amounts in thousands of Euro)

twelve months
ended
January 31
2015

twelve months
ended
January 31
2014

Current taxation

252,712

320,176

Deferred taxation(44,228)(35,085)

Income taxes

208,484

285,091

In absolute terms, the tax burden for the year is lower than in prior year (down fromEuro 285.1 million to Euro 208.5 million) but it in line with prior year in terms of total
income taxes as a percentage of income before taxation (from 30.9% in 2013 to 31.2%
in 2014).
The following table shows a reconciliation between the effective tax rate of the Groupand the theoretical tax rate of the parent company PRADA spa:
twelve months
ended January 31
2015(amounts in thousands of Euro)Group weigthed average theoretical tax rate

27.2%

Non taxable/deductible income and expenses

1.5%

Tax effect of utilization of tax losses carried forward-0.2%

Prior year taxes

0.9%

Withholding taxes

1.8%

Group effective tax rate

31.2%

Movements on net deferred tax assets and deferred tax liabilities are shown in thefollowing table:
twelve months
ended
January 31
2015

twelve months
ended
January 31
2014

158,574

120,421

Exchange differences

21,549(4,763)

Deferred taxes on derivative instruments recorded in equity (cash flow hedges)

13,795

6,303

306

1,418

(amounts in thousands of Euro)

Opening balance

Deferred taxes on post-employment benefits recorded in equity (reserve for actuarial
differences)
Other movements

166

897

110

Deferred taxes for the period in income statement

44,22835,085

Closing balance

239,349

158,574PRADA Group

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The following table shows deferred tax assets and liabilities classiﬁed by nature:
January 31, 2015
(amounts in thousands of Euro)Deferred tax
assetsInventories

January 31, 2014

Deferred tax
liabilities

Deferred tax
assetsDeferred tax
liabilities

137,815-

95,240130

Receivables and other assets

506

1,541

451

1,582

Useful life of non-current assets

54,47813,24846,197

13,249-21,787-

22,666

Provision for risks / accrued expenses

47,6272,436

37,4562,151

Non-deductible / taxable charges/income

10,896

1,795

6,752

370

Tax loss carryforwards

5,411

-

6,945

-

Derivative financial instruments

12,577

-

81

1,396

Long term employee benefits

10,041

507

7,364

151

Other

1,632

320

759

976

Total

280,983

41,634201,245

42,671

Deferred taxes due to acquisitions

Tax loss carryforwards at January 31, 2015 are analyzed below:
twelve months
ended
January 31,
2015(amounts in thousands of Euro)

Expiring within 5 years

9,173

Expiring after 5 years

41,696

Available for carry forward with no time limit

65,065

Total tax loss carryforwards

115,934

The Directors have updated their assessment of deferred tax assets recognized on tax
losses carry-forwards taking account of the general macroeconomic environment anddevelopments regarding the business activities of each subsidiary.
36. Earnings and Dividends per share
Earnings per share
Earnings per share are calculated by dividing the net income attributable to shareholders
by the weighted average number of ordinary shares in issue.
twelve months
ended
January 31
2015Group net income in Euro
Weighted average number of ordinary shares in issue

Earnings per share in Euro, calculated on weighted average number of shares

twelve months
ended
January 31
2014

450,730,284

627,784,659

2,558,824,000

2,558,824,000

0.176

0.245

Dividends per share
The Board of Directors of PRADA spa has proposed a ﬁnal dividend of Euro 281,470,640(or Euro 11 cents per share) for the twelve months ended January 31, 2015.
During the year ended January 31, 2015, the Company distributed dividends of Euro
281,470,640, as approved by the Shareholders’ Meeting held on May 22, 2014 toapprove the ﬁnancial statements for the year ended January 31, 2014.

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The payment of the dividends and the related Italian withholding tax liability (Euro 11.3
million), arising from the application of the Italian ordinary withholding tax rate to thewhole amount of dividends paid to beneﬁcial owners of the Company shares held
through the Hong Kong Central Clearing and Settlement System, was completed by
January 31, 2015.
Details of the dividends paid in the last three years are provided below:
Financial statements ended
January 31,
2014

Financial statements ended
January 31,
2013

Financial statements ended
January 31,
2012

Total dividends paid (Euro)

281,470,640

230,294,160

127,941,200

Dividends per Share (Euro)

0.11

0.09

0.05

Date of approval by Shareholders’ Meeting

22/05/2014

23/05/2013

22/05/2012

Date of payment

June 2014

June 2013

June 2012

37. Additional information
The average headcount by functional area in twelve months ended January 31, 2015
and January 31, 2014 was as shown below:(number of employees)

Production

twelve months
ended
January 31
2015

twelve months
ended
January 31
2014

2,013

1,897

Product design and development

973

903

Advertising and Communications

115

113

7,866

7,000

995

903

11,962

10,816

Selling
General and administrative services

Total

Employee remuneration
Employee remuneration by functional area for the twelve months ended January 31,2015 and January 31, 2014 is analyzed below:(amounts in thousands of Euro)168

twelve months
ended
January 31
2015

twelve months
ended
January 31
2014

Production

96,90590,343

Product design and development

66,78361,350Advertising and Communications

12,066

12,274

Selling

376,724

338,239

General and administrative services

86,46981,739

Total

638,947

583,945PRADA Group

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Employee remuneration by nature for the twelve months ended January 31, 2015, andJanuary 31, 2014, is analyzed below:
twelve months
ended
January 31
2015

twelve months
ended
January 31
2014

Wages and salaries

482,826440,254

Post-employment benefits

29,10527,991Social contributions

104,544

94,543

Other

22,472

21,157

Total

638,947

583,945(amounts in thousands of Euro)Distributable reserves of parent company PRADA spa(amounts in thousands of Euro)

January 31
2015

Possibleutilization

Amountdistributable

410,047

Share capital

255,882

Share premium reserve

410,047

A, B, C

Legal reserve

51,177B

Other reserves

182,899

A, B, C

182,899

Retained earnings

349,862

A, B, C

301,373

Cash flow hedge reserve(27,973)

Distributable amount

Summary of utilizationin the last three years
Coverage oflossesDistribution ofdividends-

393,235

894,319393,235

A share capital increase
B coverage of losses
C distributable to shareholders

Pursuant to Article 2431 of the Italian Civil Code, the share premium reserve is fully
distributable only when the legal reserve reaches an amount equal to 20% of sharecapital. A non-distributable portion of retained earnings amounting to Euro 20,516
million refers to restricted reserves under Art. 7 of Legislative Decree 38/2005 while afurther decrease of Euro 27,973 million is equal to the negative value of the Cash ﬂow
hedge reserve.

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Exchange rates
The exchange rates against the Euro used to consolidate statements of ﬁnancial
position and income statements prepared in other currencies as at January 31, 2015,
and January 31, 2014.
Currency

Average ratein prior year

Closing rate

Opening rate

US Dollar

1.313

1.331

1.131

1.352

Canadian Dollar

1.460

1.382

1.432

1.513

GB Pound

0.801

0.849

0.751

0.821

Swiss Franc

1.203

1.231

1.047

1.222

Australian Dollar

170

Average rate

1.464

1.399

1.454

1.552

Korean Won

1,383.862

1,457.043

1,246.540

1,464.230

Japanese Yen

140.037131.593133.080138.130

Hong Kong Dollar

10.17910.3258.764

10.479Singapore Dollar

1.669

1.670

1.529

1.728

Thai Bath42.61441.22537.05544.599Taiwan Dollar

39.90939.62335.58240.945

Russian Ruble

53.42042.80279.92547.748Czech Koruna

27.56626.14827.79727.500Macau Pataca

10.484

10.6359.027

10.812Chinese Renminbi

8.106

8.165

7.064

8.192

New Zealand Dollar

1.590

1.625

1.557

1.668

Malaysian Ringgit

4.320

4.223

4.110

4.525

Turkish Lira

2.882

2.587

2.758

3.074

Brazilian Real

3.108

2.911

3.011

3.283

Mexican Peso17.58817.05616.83818.161UAE Dirham

4.821

4.889

4.152

4.964

Ukrainian Hryvna

16.331

10.63918.28310.877
11.214

Moroccan Dirham

11.14511.182

10.837

Kuwait Dinar

0.375

0.378

0.334

0.382

Danish Kronor

7.453

7.458

7.444

7.462

Swedish Kronor

9.144

8.669

9.361

8.851

Kazakhstani Tenge

238.559203.031209.180

210.750

Qatari Riyal

4.780

4.846

4.127

4.923

Indian Rupee

80.06778.94670.11384.688PRADA Group

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Independent auditors’ compensation
The total fees and expenses accrued in favor of Deloitte & Touche spa and its network
for the audit of the ﬁnancial statements ending January 31, 2015, and January 31,
2014, together with non-audit services, are illustrated below:
Type of service

Audit Firm

Provided to

twelve months
ended
January 31,
2015

twelve months
ended
January 31,
2014

Audit services

Deloitte & Touche spa

PRADA spa

480

473

Audit services

Deloitte & Touche spa

Subsidiaries

174

209

Audit services

Deloitte Network

Subsidiaries

1,210

1,047

1,864

1,729

Total audit fees accruing

Comfort letter forbonds of Euro 130 million

Deloitte Network/
Deloitte & Touche spa

PRADA spa-

175

Tax advisory

Deloitte Network/
Deloitte & Touche spa

PRADA spa

14

26

Tax advisory

Deloitte Network

Subsidiaries

181

235

Certificates of sale

Deloitte Network/
Deloitte & Touche spa

Subsidiaries

24

9

Other

Deloitte Network

PRADA spa andsubsidiaries

60

30

Total non-audit fees accruing

279

475

Out of pocket expenses

50

74

2,193

2,278

Total independent auditors’ compensation accruing

The total amount of the fees accruing for audit services increased from Euro 1,729
thousand for 2013 to Euro 1,864 thousand for 2014. The increase was mainly due to
new appointments to provide services to newly incorporated companies and becauseof application of contractually agreed parameters (e.g. inﬂation-linked increases).
38. Remuneration of Board of Directors, five highest paid individuals and Senior
Managers
Remuneration of the PRADA spa Board of Directors for the year ended January
31, 2015(amounts in thousands of Euro)

Directors’fees

Remunerationand otherbenefits

Bonusesand other
incentives

Benefits inkind

Pension,healthcare
and TFR
contributions

Total

Carlo Mazzi

1,020

-

-

84

24

1,128

Miuccia Prada Bianchi

1,000

10,7002,502 (*)-

21

14,223
13,265Patrizio Bertelli

1,000

6,000

6,244 (*)-

21

Donatello Galli

40

411

155

38

193

837

Alessandra Cozzani

40

178

80

13

96

407

Gaetano Micciché

40

-

-

-

-

40

Gian Franco Oliviero Mattei

140

-

-

-

13

153

Giancarlo Forestieri

60

-

-

-

9

69

Sing Cheong Liu

60

-

-

-

12

72

3,400

17,289

8,981

135

389

30,194Total(*) Bonuses and other incentives includes Other long-term benefits in favor of Patrizio Bertelli and Miuccia Prada Bianchi for an
amount of Euro 2,494 thousand and Euro 2,501 thousand, respectively. As required by IAS 19, the amounts shown reflect theeffects of an actuarial valuation. Further information on Other long-term benefits is provided in Note 25.

PRADA Group

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Remuneration of the PRADA spa Board of Directors for the year ended January
31, 2014(amounts in thousands of Euro)

Carlo Mazzi

Directors’fees

Remuneration
Bonusesand otherand otherbenefits incentives (*)

Benefits inkind

Pension,healthcare
and TFR
contributions

Total

302

-

-

82

13

397

Miuccia Prada Bianchi

1,000

9,700

4,057 (*)-

20

14,77715,011

Patrizio Bertelli

1,000

6,000

7,991 (*)-

20

Donatello Galli

40

306

205

38

175

764

Alessandra Cozzani

3

170

108

13

97

391

Gaetano Micciché

40

-

-

-

-

40

Gian Franco Oliviero Mattei

140

-

-

-

12

152

Giancarlo Forestieri

60

-

-

-

9

69

Sing Cheong Liu

60

-

-

-

11

71

Marco Salomoni

55

-

-

-

-

55

2,700

16,176

12,361

133

357

31,727

Total(*) Bonuses and other incentives includes Other long-term benefits in favor of Patrizio Bertelli and Miuccia Prada Bianchi for an
amount of Euro 3,.991 thousand and Euro 4,057 thousand, respectively. As required by IAS 19, the amounts shown reflect theeffects of an actuarial valuation. Further information on Other long-term benefits is provided in Note 25.

The “Remuneration and other beneﬁts” and “Bonuses and incentives” of Chief
Executive Ofﬁcer Miuccia Prada Bianchi for the twelve months ended January 31, 2015,
fall within the scope of application of Chapter 14A of the Listing Rules as it has been
qualiﬁed as a continuing connected transaction subject to reporting and disclosure but
exempted from independent shareholders’ approval requirements. As requested by
the Listing Rules, comprehensive disclosure of this continuing connected transaction
was included in the PRADA spa Announcements dated April 27, 2012, and April 5,
2013, while a summary update is reported in the Corporate Governance section of this2014 Annual Report.
The “Remuneration and other beneﬁts” and “Bonuses and incentives” of Chief
Executive Ofﬁcer Patrizio Bertelli for the twelve months ended January 31, 2015, fallwithin the scope of application of Chapter 14A of the Listing Rules as it has been
qualiﬁed as a continuing connected transaction subject to reporting and disclosure but
exempted from independent shareholders’ approval requirements. As requested by
the Listing Rules, comprehensive disclosure of this continuing connected transaction
was included in the PRADA spa Announcements dated April 27, 2012, and April 5,
2013, while a summary update is reported in the Corporate Governance section of this2014 Annual Report.

172

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Remuneration of the five highest paid individuals
The Group’s ﬁve highest paid individuals include two Directors for both years. The total
remuneration of the remaining three of the ﬁve highest paid individuals in the twelve
months ended January 31, 2015, and the remaining three of the ﬁve highest paid
individuals in the period ended January 31, 2014, was as follows:
twelve months
ended
January 31
2015

twelve months
ended
January 31
2014

Remuneration and other benefits

9,463

8,311

Bonuses and other incentives

2,245

3,625

(amounts in thousands of Euro)

Non-monetary benefits

181

147

Pension/social security, healthcare and TFR contributions

361

343

12,25012,426Total

The remuneration of the ﬁve highest paid individuals fell into the following ranges:(amounts in Hong Kong Dollars)

twelve months
ended
January 31
2015

twelve months
ended
January 31
2014

Less than HKD 12,500,000--

Between HKD 12,500,000 and HKD 20,000,00022More than HKD 50,000,000

1

1Total individuals

33

twelve months
ended
January 31
2015

twelve months
ended
January 31
2014

Remuneration and other benefits

17,96815,529Bonuses and other incentives

5,691

7,573

Non-monetary benefits

2,421

2,197

Pension/social security, healthcare and TFR contributions

3,141

3,329

Total

29,221

28,628

Remuneration of Senior Managers
The remuneration of Senior Managers was as follows:(amounts in thousands of Euro)

There were 35 Senior Managers at January 31, 2015, one fewer than the total of 36 at
January 31, 2014.

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The remuneration of the Senior Managers fell into the following ranges:(amounts in Hong Kong Dollars)

twelve months
ended
January 31
2015

twelve months
ended
January 31
2014

Less than HKD 4,000,000

68between HKD 4,000,000 and HKD 8,000,000

25

23

between HKD 8,000,000 and HKD 16,000,000

34between HKD 16,000,000 and HKD 50,000,000--

More than HKD 50,000,000

1

1Total Senior Managers

35

36

39. Related party transactions
The Group enters into transactions with parties that can be qualiﬁed as related
according to “IAS 24 Related Party Disclosures”. These transactions mainly refer tothe sale and purchase of goods, supply of services, the granting and receipt of loans
as well as sponsorship, lease and franchise agreements. These transactions take place
on an arm’s length basis.
The following tables show details of related party transactions for each item in theStatement of ﬁnancial position and in the Income statement. They show amounts
relating to each related party and the total amount relating to each line item.

174

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Statement of financial position amounts at January 31, 2015

(amounts in thousands of Euro)PRADA Holding bv
Other payables – other companies
controlled by PRADA Holding bv
EXHL Italia srl

Trade
receivables

Receivablesfrom andadvancesto parent
companies
and relatedparties –current

Receivablesfrom andadvancesto parent
companies
and relatedparties –non current

Tradepayables

160

5

-

1

-

-

-

-

-

-

-

-

PayablesPayablesto parent
to parent
companies
companies
and related
and relatedparties – parties – noncurrent
current

-

-

-

-

-

-

36,761

3,235

17,42926,442

3,083

13,384DFS Hawaii

-

-

-

707

-

-

DFS Venture Singapore pte ltd

-

-

-

57

-

-

89

-

-

1,478

-

-

-

-

-

49

-

-

29,291

-

-

2,639

322

-

912

-

3,174

-

-

-

Al Tayer Travels

-

-

-

51

-

-

Al Tayer Insignia llc

-

-

-

88

2,371

-

Al Tayer Logistics

-

-

-

-

-

-

Al Tayer Motors

-

-

-

1

-

-

Al Tayer Trends

13

-

-

-

-

-

Danzas llc UAE

-

-

-

27

112

-

Rubaiyat Modern Lux Prod ltd

2,342

-

-

-

-

-

Luna Rossa Challenge 2013 NZ ltd

1,294

-

-

-

-

-

721

11

12,379

154

21

-

-

-

-

-

-

-

Stiching Fondazione Prada

526

25

-

36

32

-

Stiching Prada

354

-

-

-

-

-

Progetto Prada Arte srl

355

88

741

1,784

211

-

Progetto Prada Arte srl (Galleria)(**) (****)

566

-

1,135

-

-

-

Other related partiesDFS Cotai ltd
DFS New Zealand ltd
F.lli Prada srl (franchising)F.lli Prada spa (Galleria) (*) (***)

Luna Rossa Challenge 2013 srl
Aati Contracs

HMP srl

8

-

-

-

-

-

PRA 1 srl

-

90

-

75

-

-

Premiata srl

182

-

-

2,211

-

-

Friuli 64 srl

-

-

-

151

-

-

SPELM sa

-

-

-

183

-

-

La Mazza srl

105

-

-

867

-

-

Conceria Superior spa

1

-

-

12,418--Peschiera Immobiliare srl

-

82

-

-

-

-

Chora srl

-

2,924

-

3,233

-

-

FinReta srl

-

-

-

190

-

13,384Pelletteria Reta srl

-

15

-

38

13

-

Other

2

-

-

5

1

-

Members of the Board of Directorsof PRADA spa

-

-

-

143

-

-

Relative of a Director of
PRADA spa

-

-

-

432

-

-

Total at January 31, 2015

36,921

3,240

17,42927,0183,083

13,384(*) The non-current receivable of Euro 3,174 thousand recognized in relation to Fratelli Prada spa represents deferred rental
income upon application of “IAS 17 Leases” to the business management agreement between PRADA spa and Fratelli Pradaspa.
(**) The non-current receivable of Euro 1,135 thousand recognized in relation to Progeto Prada Arte srl represents deferred
rental income upon application of “IAS 17 Leases” to the temporary business partnership between PRADA spa and Progeto
Prada Arte srl.
(***) The receivable of Euro 912 thousand represents the business management fee due by Fratelli Prada spa to PRADA spa
for the conduct of retail business in the premises in Galleria Vittorio Emanuele II, Milan, under the business managementagreement between Fratelli Prada spa and PRADA spa.
(****) The receivable of Euro 566 thousand represents the portion of rental expenses for use of the premises in Galleria Vittorio
Emanuele II, Milan, by Progeto Prada Arte srl in compliance with temporary business partnership between PRADA spa andProgeto Prada Arte srl.

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Statement of financial position amounts at January 31, 2014

Tradereceivables

Receivablesfrom andadvancesto parent
companies
and relatedparties –current

Receivablesfrom andadvancesto parent
companies
and relatedparties –non current

Tradepayables

PRADA Holding bv

-

356

-

-

136

-

Other payables – other companies
controlled by PRADA Holding bv

-

36

-

-

-

-

Prapar Corporation

-

-

-

-

-

-

EXHL Italia srl

-

36

-

-

-

-

30,333

5,601

1,487

10,727

4,758

13,247DFS Hawaii

-

-

-

775

-

-

DFS Venture Singapore pte ltd

-

-

-

81

-

-

25

-

-

1,766

-

-

-

-

-

63

-

-

F.lli Prada spa (franchising)

25,457

1

-

2,379

323

-

F.lli Prada spa (Galleria)(*) (***)

1,335

-

851

-

-

-

-

-

-

11

-

-

Al Tayer Insignia llc

18

-

-

32

4,130

-

Al Tayer Logistics

-

-

-

-

-

-

Al Tayer Motors

-

-

-

2

-

-

Al Tayer Trends

11

-

-

-

-

-

Al Tayer Group llc

-

3

-

32

-

-

Danzas llc UAE

-

-

-

-

127

-

1,299

-

-

-

-

-

164

2,008

-

154

21

-

Aati Contracs

-

-

-

-

-

-

Stiching Fondazione Prada

-

625

-

-

61

-

Stiching Prada

-

206

-

-

-

-

Progetto Prada Arte srl

-

2,492

-

-

81

-

876

-

637

-

-

-

(amounts in thousands of Euro)

Other related partiesDFS Cotai ltd
DFS New Zealand ltd

Al Tayer Travels

Luna Rossa Challenge 2013 NZ ltd
Luna Rossa Challenge 2013 srl

Progetto Prada Arte srl (Galleria)(**) (****)

PayablesPayablesto parent
to parent
companies
companies
and related
and relatedparties – parties – noncurrent
current

Gipafin sarl

-

6

-

-

-

-

Granello sa

-

166

-

-

-

-

HMP srl

-

8

-

-

-

-

Prada America’s Cup srl

-

-

-

-

-

-

PRA 1 srl

983

-

-

-

-

-

Premiatasrl

94

-

-

1,951

-

-

La Mazza srl

71

-

-

511

-

-

Calzaturificio Mazza Graziano

-

-

-

61

-

-

Peschiera Immobiliare srl

-

81

-

-

-

-

Secva srl

-

-

-

2,707

-

-

PRADA Arte bv

-

-

-

-

-

-

140

-

13,247

FinReta srl
Pelletteria Reta srl

61

13

-

Other

-

5

-

1

2

-

Members of PRADA spa Board of
Directors

-

-

-

143

-

Relative of a Director of PRADA spa

-

-

-

341

-

-

30,333

5,993

1,487

11,211

4,894

13,247

Total al January 31, 2014(*) The non-current receivable of Euro 851 thousand recognized in relation to Fratelli Prada spa represents deferred rental
income upon application of “IAS 17 Leases” to the business management agreement between PRADA spa and Fratelli Pradaspa.
(**) The non-current receivable of Euro 637 thousand recognized in relation to Progeto Prada Arte srl represents deferred
rental income upon application of “IAS 17 Leases” to the temporary business partnership between PRADA spa and Progeto
Prada Arte srl.
(***) The receivable of Euro 1,335 thousand represents the business management fee due by Fratelli Prada spa to PRADA
spa for the conduct of retail business in the premises in Galleria Vittorio Emanuele II, Milan, under the business managementagreement between Fratelli Prada spa and PRADA spa.

176

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(****) The receivable of Euro 876 thousand represents the portion of rental expenses for use of the premises in Galleria Vittorio
Emanuele II, Milan, by Progeto Prada Arte srl in compliance with temporary business partnership agreement between PRADA
spa and Progeto Prada Arte srl

Income statement for the twelve months ended January 31, 2015
Net
revenues

Cost ofgoods soldGeneral,admin.
& sellingcosts(income)Royalties
incomeInterest
incomeInterest
expensePRADA Holding spa

-

-

(129)

-

-

-

Other companies controlled by
PRADA Holding spa

-

-

(6)

-

-

-

EXHL Italia

-

-

(6)

-

-

-

Other related parties

36,85828,67735,940

1,283

22

152

F.lli Prada spa (franchising)

36,84895(2,264)

1,116

-

-

F.lli Prada spa (Galleria) (*)--(4,645)---

Danzas llc

-

1,272

215

-

-

-

DFS Hawaii

-

-

4,503

-

-

-

DFS New Zealand ltd

-

-

474

-

-

-

Rubaiyat Modern Lux Prod ltd--(2,172)167--

DFS Cotai ltd

-

-

8,338

-

-

-

DFS Venture Singapore pte ltd

-

-

304

-

-

-

Al Tayer Travels

-

13

431

-

-

-

Al Tayer Group llc

-

-

30

-

-

-

Al Tayer Insignia llc

-

77

268

-

-

-

Al Tayer Motors

-

-

2

-

-

-

Al Sanam Rent a Car llc

-

-

8

-

-

-

(amounts in thousands of Euro)

Chora srl

-

-

3,156

-

-

15

Luna Rossa Challenge 2013 NZ ltd

-

-

6

-

-

-

Luna Rossa Challenge 2013 srl

8-

12,157-

3-

HMP srl

-

-

35

-

-

-

Stiching Fondazione Prada

-

-

6,700

-

-

-

Progetto Prada Arte srl

2

229

(435)

-

19

-

Progetto Prada Arte srl(sponsorship)

-

-

7,940

-

-

-

Progetto Prada Arte srl (Galleria)
(**)

-

-

(1,517)---Peschiera Immobiliare srl

-

-

505

-

-

-

Premiata srl

-

5,786

-

-

-

-

La Mazza srl

-

1,715

3

-

-

-

SPELM sa

-

-

242

-

-

-

Friuli 64 srl

-

-

690

-

-

-

PRA 1 srl

-

-

797

-

-

-

LUDO srl

-

-

(3)

-

-

-

Conceria Superior spa-

18,730

34

-

-

-

Fin_Reta srl (***)

-

531

120

-

137

Pelletteria Reta srl

-

220

9

-

-

-

Other

-

9

9

-

-

-

Relative of Director of PRADA spa

-

-

652

-

-

-

36,85828,67736,457

1,283

22

152

Total al January 31, 2015(*) This amount contains non-monetary income in the form of deferred rental income of Euro 2,324 thousand recognized inrelation to Fratelli Prada spa in application of “IAS 17 Leases” to the business management agreement between PRADA spa
and Fratelli Prada spa(**) This amount includes non-monetary income in the form of deferred rental income of Euro 498 thousand recognized inrelation to Progetto Prada Arte srl in application of “IAS 17 Leases” to the temporary business partnership contract between
PRADA spa and Progetto Prada Arte srl(***) The interest expense represents the expense for the year as calculated with the effective interest rate applied to thediscounted long-term liability agreed to establish the right of usufruct

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Income statement for the twelve months ended January 31, 2014
(amounts in thousands of Euro)Net
revenues

General,Cost ofadmin. &goods sold selling costs(income)Royalties
incomeInterest
incomeInterest
expensePRADA Holding bv

-

-

(70)

-

-

-

Other companies controlled by
PRADA Holding bv

-

-

(6)

-

-

-

Other related parties

47,872

10,60753,410

1,424

10

78

F.lli Prada spa (franchising)

47,986973(3,621)

1,424

-

-

F.lli Prada spa (Galleria) (*)--(2,186)---

Danzas llc

-

1,133

96

-

-

-

DFS Hawaii

EXHL Italia

(6)

(1)

-

4,644

-

-

-

DFS New Zealand ltd

-

-

572

-

-

-

DFS Australia pty ltd

-

-

-

-

-

-

DFS Cotai ltd

-

-

8,533

-

-

-

DFS Venture Singapore pte ltd

-

-

504

-

-

-

Al Tayer Travels

-

3

330

-

-

-

Al Tayer Group llc

-

-

46

-

-

-

Al Tayer Insignia llc

-

78

129

-

-

-

Al Tayer Trends

-

39

146

-

-

-

Al Tayer Logistics

-

-

14

-

-

-

Al Tayer Motors

-

-

5

-

-

-

Al Sanam Rent a Car llc

-

-

13

-

-

10

Secva srl

-

-

2,734

-

-

Luna Rossa Challenge 2013 NZ ltd

1

(15)

30,277---Luna Rossa Challenge 2013 srl sl

(115)

-

2,331

-

-

-

HMP srl

-

-

242

-

2

-

Stiching Fondazione Prada

2

-

3,582

-

-

-

Progetto Prada Arte srl(sponsorship)

-

(32)

5,056

-

-

-

Progetto Prada Arte srl(Galleria) (**)--

(1,510)---Peschiera Immobiliare srl

-

-

497

-

8

-

Premiata srl

-

6,222

-

-

-

-

Calzaturificio Mazza Graziano

-

-

600

-

-

-

La Mazza srl

-

1,746

3

-

-

-

Gipafin sarl

-

-

(35)

-

-

-

PRADA Arte bv

-

-

(5)

-

-

-

PRA 1 srl

-

-

354

-

-

-

Fin_Reta srl (***)

-

248

58

-

68

Pelletteria Reta srl
Other
Relative of Director of PRADA spa

Total at January 31, 2014

-

213

1

-

-

-

(1)

(1)

-

-

-

-

-

-

734

-

-

-

47,872

10,60754,068

1,424

10

78

(*) This amount contains non-monetary income in the form of deferred rental income of Euro 851 thousand recognized inrelation to Fratelli Prada spa in application of “IAS 17 Leases” to the business management agreement between PRADA spa
and Fratelli Prada spa(**) This amount includes non-monetary income in the form of deferred rental income of Euro 637 thousand recognized inrelation to Progetto Prada Arte srl in application of “IAS 17 Leases” to the temporary business partnership contract between
PRADA spa and Progetto Prada Arte srl(***) The interest expense represents the expense for the year as calculated with the effective interest rate applied to thediscounted long-term liability agreed to establish the right of usufruct

The above tables report information on transactions with related parties in accordancewith “IAS 24 Related Party Disclosures”. As stated below, some of these transactions
fall within the application of the Hong Kong Stock Exchange Listing Rules.
The transactions with related party “Fratelli Prada spa – franchising” refer to transactions
between the Prada Group and Fratelli Prada spa in relation to the franchising agreement

178

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regarding the Prada stores in Milan. The transactions reported for the twelve months
ended January 31, 2015, fall within the scope of application of Chapter 14A of the Listing
Rules as they were qualiﬁed as continuing connected transactions subject to reportingand disclosure but exempted from independent shareholders’ approval requirements.
As requested by the Listing Rules, comprehensive disclosure of these continuingconnected transactions is contained in the PRADA spa Announcement dated January
29, 2014, while a summary update is reported in the Corporate Governance section ofthis 2014 Annual Report.
The transactions with related party “Fratelli Prada spa – Galleria” refer to the transactions
between the Prada Group and Fratelli Prada spa in relation to the business managementagreement over the use by the latter of part of the Galleria Vittorio Emanuele property
in Milan to conduct retail business. The transactions reported for the twelve months
ended January 31, 2015, fall within the scope of application of Chapter 14A of the Listing
Rules as they were qualiﬁed as continuing connected transactions subject to reportingand disclosure but exempted from independent shareholders’ approval requirements.
As requested by the Listing Rules, comprehensive disclosure of these continuingconnected transactions was included in the PRADA spa Announcement dated January
29, 2013, while a summary update is reported in the Corporate Governance section ofthis 2014 Annual Report.
The transactions with related party “Progetto Prada Arte srl - Galleria” refer to thetransactions between the Prada Group and Progetto Prada Arte srl in relation to thetemporary business partnership agreement regarding the use by the latter of part of
the Galleria Vittorio Emanuele property in Milan to carry out cultural activities. The
transactions reported for the twelve months ended January 31, 2015, fall within thescope of application of Chapter 14A of the Listing Rules as they were qualiﬁed ascontinuing connected transactions subject to reporting and disclosure but exemptedfrom independent shareholders’ approval requirements. As requested by the Listing
Rules, comprehensive disclosure of these continuing connected transactions was
included in the PRADA spa Announcement dated January 29, 2013, while a summary
update is reported in the Corporate Governance section of this 2014 Annual Report.
The transactions with related party “Progetto Prada Arte srl - Sponsorship” refer tothe transactions between the Prada Group and Progetto Prada Arte srl in performanceof the sponsorship agreement for cultural activities to be carried out by the latter.
The transactions reported for the twelve months ended January 31, 2015, fall within
the scope of application of Chapter 14A of the Listing Rules as they were qualiﬁed
as connected transactions subject to reporting and disclosure but exempted fromindependent shareholders’ approval requirements. As requested by the Listing Rules,
comprehensive disclosure of these continuing connected transactions was included in
the PRADA spa Announcement dated February 27, 2014, while a summary update isreported in the Corporate Governance section of this 2014 Annual Report.
The transactions with related party Luna Rossa Challenge 2013 srl reported for the twelve
months ended January 31, 2015, fall within the scope of application of Chapter 14Aof the Listing Rules as they are qualiﬁed as continuing connected transactions subject
to reporting and announcement but exempted from the independent shareholders’approval requirement. As requested by the Listing Rules, comprehensive disclosure ofthese connected transactions was included in the PRADA spa Announcements dated
February 27, 2014, while a summary update is reported in the Corporate Governancesection of this 2014 Annual Report.
Unlike the “non-exempt continuing connected transactions”, “non-exempt connectedtransactions” and the “Remuneration of the two CEO” as reported in Note 38, no othertransaction reported in the Consolidated ﬁnancial statements falls under the deﬁnitionof “connected transaction” or “continuing connected transaction” provided by Chapter
14A of the Listing Rules or, if it does fall under the deﬁnition of “connected transaction”
PRADA Group

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or “continuing connected transaction” in terms of said Chapter 14A, is exempt from
reporting, disclosure and independent shareholders’ approval requirements again
under Chapter 14A.
40. Commitments
Operating leases
At January 31, 2015, and January 31, 2014, operating lease commitments by maturity
date were as follows:(amounts in thousands of Euro)Within a year
After between one year and five years
After more than five years

Total

twelve months
ended
January 31
2015

twelve months
ended
January 31
2014

406,528

321,342

1,228,000

981,601

850,197874,0732,484,725

2,177,016

Operating lease commitments for the 2014 reporting period included Euro 2,398
million regarding lease agreements for retail premises (Euro 2,095 million for 2013).
The increase in operating lease commitments is mainly due to increases in countries
that use currencies other than the Euro.
The amounts recorded in the income statement in relation to lease agreements forthe twelve months ended January 31, 2015, and January 31, 2014, are shown below:(amounts in thousands of Euro)

twelvemonthsended
January 31
2015

twelvemonthsended
January 31
2014

Fixed minimum lease expenses

261,003247,814

Variable lease expenses

312,011

297,550

Total

573,014545,364

Some Group companies are required to pay lease charges based on a ﬁxed percentageof net sales.
At January 31, 2015, and January 31, 2014, future rental income under current operatingleases for properties owned by the Group was analyzed by maturity as follows:(amounts in thousands of Euro)

twelve months
ended
January 31
2015

twelve months
ended
January 31
2014

Within a year

13,471

13,303After between one year and five years

50,277

49,770After more than five years

95,427105,094

Total

159,175

168,167

Future rental income mainly regards income from related company Fratelli Prada spa
under the business management agreement between it an PRADA spa.

180

PRADA Group

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Finance leases
Property, plant and equipment includes the following assets held under ﬁnance leases:
twelve months
ended
January 31
2015

twelve months
ended
January 31
2014

Land and buildings

-

7,836

Furniture and fittings--

Other tangibles

2367

Accumulated depreciation(21)(1,728)2

6,175(amounts in thousands of Euro)Total

The decrease in Land and buildings held under ﬁnance leases is due to payment of
the purchase option price on land and buildings previously held under a ﬁnance lease.
Other commitments
At January 31, 2015, the Group had no signiﬁcant binding purchase commitments.
41. Comparative income statement and statement of financial position information
January 31
2015

January 31
2014

January 31
2013

January 31
2012

January 31
2011

Net revenues

3,551,696

3,587,347

3,297,219

2,555,606

2,046,651

Gross margin

2,550,579

2,648,649

2,376,541

1,828,025

1,387,888

Operating income (EBIT)

701,551

939,237

889,781

628,935

418,387

Group net income

450,730

627,785625,681431,929

250,819

Total assets

4,738,877

3,888,292

3,385,279

2,943,568

2,366,015

Total liabilities

1,720,730

1,186,752

1,054,787

1,112,601

1,155,877

Total Group shareholders’ equity

3,000,737

2,687,554

2,320,022

1,822,743

1,204,350(amounts in thousands of Euro)PRADA Group

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42. Consolidated companies
Local
currency

Company

Sharecapital%(000s
interestof localcurrency)

RegisteredofficeDate ofincorporation/ Main businessestablishment

Italy
Production/
Distribution/ Group
Holding company

PRADA spa

EUR

255,882

Artisans Shoes srl (*)

EUR

1,000

66.70

Montegranaro,
Italy

09/02/1977

IPI Logistica srl (*)

EUR

600

100.00Milan, Italy

26/01/1999

Service company

11/04/2001

Retail/sub holding
company

PRADA Stores srl (*)

EUR

Milan, Italy

520

100.00Milan, Italy

Production

Church Italia srl

EUR

51

100.00Milan, Italy

31/01/1992

Distribution/Retail

Pellettieri d’Italia srl (*)

EUR

100

60.00

Milan, Italy

10/07/2013

Production

Marchesi Angelo srl (*)

EUR

23

80.00

Milan, Italy

10/07/2013

Service company Patisserie

PRADA Retail UK ltd

GBP

5,000

100.00London, UK

07/01/1997

RetailPRADA Germany gmbh

EUR

215

100.00

Munich,Germany

20/03/1995

RetailPRADA Austria gmbh

EUR

40

100.00Vienna, Austria

14/03/1996

RetailPRADA Spain sa

EUR

240

100.00Madrid, Spain

14/05/1986

RetailPRADA Retail France sas

EUR

4,000

100.00Paris, France

10/10/1984

RetailPRADA Hellas Single Partner
Limited Liability Company (*)

EUR

2,850

100.00Athens, Greece

19/12/2007

Retail25/05/1999

RetailService company/
Trademark ownerEurope182

PRADA Monte-Carlo sam

EUR

150

100.00Monte-Carlo,
MonacoPRADA sa (*)

EUR

31

100.00

Luxembourg

29/07/1994

PRADA Company sa

EUR

3,204

100.00

Luxembourg

12/04/1999

Service company

PRADA Far East bv (*)

EUR

20

100.00Amsterdam,
Netherlands

27/03/2000

Sub-holding company/
Service company /RetailChurch Denmark aps

DKK

50

100.00Copenhagen,Denmark

13/03/2014

RetailChurch Holding UK plc (*)

GBP

78,126100.00

Northampton,UK

22/07/1999

Sub-holding company

Church France sas

EUR

241

100.00Paris, France

01/06/1955

RetailChurch UK Retail ltd

GBP

1,021

100.00

Northampton,
UK

16/07/1987

RetailChurch’s English Shoes
Switzerland sa

CHF

100

100.00

Lugano,Switzerland

29/12/2000

RetailChurch & Co. ltd

GBP

2,811

100.00

Northampton,
UK

16/01/1926

Sub-holding company/
Production andDistribution

Church & Co. (Footwear) ltd

GBP

44

100.00

Northampton,
UK

06/03/1954

Trademark ownerChurch English Shoes sa

EUR

75

100.00Brussels,
Belgium

25/02/1963

RetailPRADA Czech Republic sro (*)

CZK

2,500

100.00Prague, Czech
Rep.

25/06/2008

RetailPRADA Portugal. Unipessoal
lda (*)

EUR

5

100.00Lisbon,Portugal

07/08/2008

Retail07/11/2008

RetailPRADA Rus llc (*)

RUR

250

100.00

Moscow,
RussiaChurch Spain sl

EUR

3

100.00Madrid, Spain

06/05/2009

RetailPRADA Bosphorus Deri
Mamuller Ticaret Limited
Sirketi (*)

TRY41,000100.00Istanbul,
Turkey26/02/2009

RetailPRADA Ukraine llc (*)

UAH

30,000100.00Kiev, Ukraine

14/10/2011

Retail07/07/2011

Retail20/11/2011

RetailChurch Netherlands bv

EUR

18

100.00Amsterdam,
Netherlands

Church Ireland Retail ltd

EUR

50

100.00Dublin, Ireland

PRADA Group

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CompanyLocalcurrency

Sharecapital%(000s ofinterest
local
currency)

EUR

35

RegisteredofficeDate ofincorporation/ Main businessestablishment

EuropeChurch Austria gmbh
Prada Sweden AB

SEK

500

100.00Vienna, Austria

17/01/2012

Retail100.00Stockholm,
Sweden

18/12/2012

Retail18/12/2012

Retail28/09/2012

RetailChurch Footwear AB

SEK

100

100.00Stockholm,
SwedenPrada Switzerland sa (*)

CHF

24,000100.00Geneva,Switzerland

Prada Kazakhstan llp (*)

KZT1,130,000

100.00

Almaty,Kazakhstan

24/06/2013

RetailKenon Limited

GBP

84,000100.00London, UK

07/02/2013

Real estate company

PSC sas (*)

EUR

60

60.00

Isle, France

19/08/2014

Production

PRADA USA Corp. (*)

USD

152,211100.00

New York,
U.S.A

25/10/1993

Services / Distribution/
RetailSpace USA Corp.

USD

301

100.00

New York,
U.S.A.

15/02/1994

RetailTRS Hawaii llc

USD

400

55.00

Honolulu, U.S.A.

17/11/1999

Duty-free stores

01/05/1998

Distribution/Retail

Americas

PRADA Canada Corp. (*)

CAD

300

100.00Toronto,CanadaChurch & Co. (USA) ltd

USD

85

100.00

New York,
U.S.A.

08/09/1930

Retail18/02/1997

Real estate company

Post Development corp (*)

USD

45,138100.00

New York,
U.S.A.

PRADA Retail Mexico,
S. de R.L. de C.V.

MXN

142,058

100.00

Mexico City,
Mexico12/07/2011

RetailPRADA Brasil Importação e
Comércio de Artigos de Luxo
Ltda. (*)

BRL

87,000100.00

Sao Paulo,
Brazil12/04/2011

Retail

PRM Services S. de R.L. de
C.V. (*)

MXN

7,203

100.00

Mexico City,
Mexico27/02/2014

Services

PRADA Panama sa (*)

PAB

30

100.00Panama,Rep. di Panama

15/09/2014

RetailPRADA Retail Aruba (*)

USD

2,012

100.00

Oranjestad,Aruba

25/09/2014

RetailPRADA Asia Pacific ltd

HKD

3,000

100.00Hong Kong

12/09/1997

Retail /Distribution/
Services

Asia-Pacific and Japan

PRADA Taiwan ltd

TWD

3,800

100.00Hong Kong

16/09/1993

RetailSpace HK ltd

HKD

1,000

100.00Hong Kong

25/02/1993

RetailPRADA Retail Malaysia Sdn.
Bnd.

MYR

1,000

100.00

Kuala Lumpur,
Malaysia

23/01/2002

RetailTRS Hong Kong

HKD

500

55.00

Hong Kong

23/02/2001

Duty-free stores

PRADA Singapore Pte ltd

SGD

1,000

100.00Singapore

31/10/1992

RetailTRS Singapore

SGD

500

55.00

Singapore

08/08/2002

Duty-free stores

PRADA Korea ltd

KRW

8,125,000

100.00Seoul, Korea

27/11/1995

RetailPRADA (Thailand) co ltd

THB

372,000

100.00

Bangkok,Thailand19/06/1997

RetailPRADA Japan co ltd

JPY

1,200,000

100.00Tokyo, Japan

01/03/1991

RetailTRS Guam Partnership

USD

1,095

55.00

Guam

01/07/1999

Duty-free stores

TRS Saipan Partnership

USD

1,405

55.00

Saipan01/07/1999

Duty-free stores

04/11/1999

Duty-free stores

TRS New Zealand ltd

NZD

100

55.00

Wellington,
New Zealand

PRADA Australia Pty ltd

AUD

10,500100.00

Sydney, Australia

21/04/1997

RetailPRADA Trading (Shanghai)co ltdRMB

1,653

100.00Shanghai, China

09/02/2004

RetailTRS Okinawa KK

JPY

10,000

55.00

Tokyo, Japan

21/01/2005

Duty-free stores

31/10/2005

Retail

17/04/1992

RetailPRADA Fashion Commerce(Shanghai) co ltd

RMB

274,950

100.00Shanghai,
China

Church Japan co ltd

JPY

31,525100.00Tokyo, Japan

PRADA Group

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Localcurrency

Company

Sharecapital%(000s ofinterest
local
currency)

RegisteredofficeDate ofincorporation/ Main businessestablishment

Asia-Pacific and Japan
Church Hong Kong Retail ltd

HKD

1,000

100.00Hong Kong

04/06/2004

RetailChurch Singapore Pte. ltd

SGD

500

100.00Singapore

18/08/2009

RetailCar Shoe Hong Kong ltd

HKD

3,000

100.00Hong Kong

26/02/2010

RetailPRADA Hong Kong P.D. ltd (*)

HKD

11.000100.00Hong Kong

15/12/2011

Service company

28/11/2012

Service company

Prada Dongguan Trading Co.,
Ltd

RMB

8,500

100.00

Dongguan,
China

Church Footwear (Shanghai)Co., Ltd

RMB

21.900100.00Shanghai,China

05/12/2012

RetailPrada New Zealand ltd

NZD

3,500

100.00Wellington,
New Zealand

05/07/2013

RetailPRADA India Fashion Private
ltd

INR

100

100.00

Mumbai, India

30/09/2013

RetailPRADA Vietnam Limited
Liability Company

VND

10,641,570

100.00Hanoi City,
Vietnam

09/09/2014

RetailPRADA Indonesia

IDR

3,023,844

100.00

Jakarta,Indonesia

15/10/2014

Distribution

PRADA Macau Co ltd

MOP-

100.00Macau

22/01/2015

Retail

AED

18,00060.00

Jebel Ali Free
Zone, Dubai

25/05/2011

Distribution/Services

Middle East
PRADA Middle East fzco (*)
PRADA Emirates llc (**)

AED

300

49.00

Dubai

04/08/2011

RetailPrada Kuwait wll (**)

KWD

50

49.00

Kuwait City

18/09/2012

RetailPrada Retail SPC (*)

QAR

15,000100.00Doha

03/02/2013

RetailPrada Saudi Arabia ltd (*)

AED

26,66675.00

Jeddah02/07/2014

RetailMAD

95,000100.00Casablanca,
Morocco

11/11/2011

Retail100.00

Sandton,South Africa

06/09/2014

RetailOther countries
PRADA Maroc sarlau (*)
PRADA Retail South Africa pty

ZAR

25,000(*) Company owned directly by PRADA spa(**) Company consolidated based on definition of control per IFRS 10

Companies not included in scope of consolidation:
Company

PAC srl (in liquidation)184

PRADA Group

Annual Report 2014 (15 aprile).indd 184

Percentage directinterest as atJanuary 31, 2015

Percentage directinterest as atJanuary 31, 2014

Note

Consolidation
method

49.00

49.00

Associate

Equity method

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43. Information on Non-Controlling Interests
Financial information on the Non-Controlling Interests in the Group is provided below,
in accordance with IFRS 12. The values below reported are befor the consolidation
adjustments.
Financial statements for the year ended January 31, 2015:
Subsidiary(amounts in thousands)

dividends not
net distributed toresult ofnonthe year
controllinginterests

ownership

local
currency

total
assetstotal netequitynet
revenues

Artisans Shoes srl

67.00

EUR

36,8689,990

75,4393,064

510

Pellettieri d’Italia srl

60.00

EUR

490

(926)

-

(1,021)-TRS Hawaii llc

55.00

USD

8,748

4,994

20,514

1,073-

TRS Hong Kong

55.00

HKD

1,067

889

-

(168)

63,000TRS Singapore

55.00

SGD

2,795

1,818

3,929

535

900

TRS Guam Partnership

55.00

USD

7,448

5,766

16,070

1,000

1,375

TRS Saipan Partnership

55.00

USD

2,440

1,643

7,315

1,211

450

TRS New Zealand ltd

55.00

NZD

2,299

1,659

5,291

905

585

TRS Okinawa KK

55.00

JPY

713,380

383,617

1,491,121

178,948

90,000TRS Hong Kong
Branch in Macau

55.00

MOP

144,425

64,312555,432

125,399-

PRADA Emirates llc (*)

49.00

AED

189,768

19,652258,920(2,253)-PRADA Middle East fzco

60.00

AED

282,303

115,039

268,481

33,639-

Prada Kuwait wll (*)

49.00

KWD

6,523

83

8,633

57

-

Marchesi Angelo srl

80.00

EUR

1,601

744

2,479

212

-

PSC sas

60.00

EUR

1,402

774

-

(426)

-

(*) Company consolidated based on definition of control per IFRS 10

Financial statements for the year ended January 31, 2014:
Subsidiary(amounts in thousands)

dividends not
net distributed toresult ofnonthe year
controllinginterests

ownership

local
currency

total
assetstotal netequitynet
revenues

Artisans Shoes srl

67.00

EUR

28,698

8,459

64,571

1,532

352

Pellettieri d’Italia srl

60.00

EUR

413

(633)

1,581

(733)

-

TRS Hawaii llc

55.00

USD

8,268

3,920

21,5581,410-

TRS Hong Kong

55.00

HKD

1,101

1,056

-

(69)

47,672TRS Singapore

55.00

SGD

4,168

3,282

7,286

1,445

-

TRS Guam Partnership

55.00

USD

8,839

7,266

14,386

1,939

900

TRS Saipan Partnership

55.00

USD

2,115

1,431

7,551

1,451

450

TRS New Zealand ltd

55.00

NZD

2,845

2,054

6,735

1,435

-

TRS Okinawa KK

55.00

JPY

680,707405,6131,232,215

122,539

67,500TRS Hong Kong
Branch in Macau

55.00

MOP

170,087

83,113647,003

124,998-

PRADA Emirates llc (*)

49.00

AED

199,549

21,905272,362

5,276-

PRADA Middle East fzco

60.00

AED

280,382

81,399268,048

41,935-

Prada Kuwait wll (*)

49.00

KWD

7,227

26

8,386

72

-

(*) Company consolidated based on definition of control per IFRS 10

At the date of these consolidated financial statements, there were no significant
restrictions on the Group’s ability to access or utilize its assets and settle its liabilities.
As described in Note 7, on March 14, 2014, the Group acquired 80% of Marchesi
Angelo srl. Under agreements between the parties, the remaining 20% non-controllinginterest has been recorded under the Group’s equity reserves in the amount of Euro2,5 million.

PRADA Group

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In 2011, PRADA spa and Al Tayer Insignia llc signed an agreement with the objective ofdeveloping the PRADA and MIU MIU brands in the retail business in the Middle East.
The agreement gives PRADA spa a call option on up to 20% of the share capital of
PRADA Middle East Fzco. At the reporting date, PRADA spa is not reasonably certainthat it can estimate the likelihood that the option will be exercise and, therefore,
measure the fair value of the option.
44. Events after the reporting period
Nothing significant to report.

186

PRADA Group

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Independent Auditors’ Report

PRADA Group

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188

PRADA Group

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PRADA Group

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