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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
39
55
67
83
97
103
109
183

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Patrizio Bertelli

Miuccia Prada

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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 618 DOS, 36 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
the creative 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 the brand’s perception alive
through a continuous process of re-invention and innovation. Each step of the process,both inside and outside the company, is carefully monitored in order to guarantee an
excellent 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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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 to come.
Patrizio Bertelli broke new ground in the luxury goods sector, introducing a businessmodel in which he kept direct, internal control over all processes, applying excellent
quality criteria across the entire production cycle. Miuccia Prada's creative talent andavant-garde approach attracted the attention of the global fashion industry, 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 Spiga in
Milan, one of Europe’s key shopping destinations. The new store showcased the new
brand image as it blended traditional elements with a modern architectural 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 trendy,
sophisticated and particularly fashion-forward and aware of avant-garde. Miu Miu now
offers women’s ready-to-wear, bags, accessories, footwear, eyewear and fragrances
and is an important component of the Group’s sales.
Also in 1993, Miuccia Prada and Patrizio Bertelli created “Milano Prada Arte”, thenbecome “Fondazione Prada”, to pursue their interests in art and culture in general.
In 1997 Patrizio Bertelli created 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.
In 1999, the prestigious Church’s brand, established in 1873 in Northampton, became
part of the PRADA Group. The brand, specialized in handmade high-end footwear,
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is a worldwide recognized symbol of top quality British tradition and sophisticatedelegance.
In 2001, the Prada “Epicenter” store, designed in collaboration with Rem Koolhaas,
opened on Broadway, New York. This was the first store of the “Epicenters” project
whose purpose was to rethink the shopping concept with a new approach and to try
out innovative interactions with customers. A second “Epicenter” store was openedin Aoyama, Tokyo, followed by a third, on Rodeo Drive, Beverly Hills in 2004. During
the same year, Prada acquired control of Car Shoe, an historic Italian brand renowned
for its exclusive driving moccasins.
In 2003, Prada entered into a licensing agreement, then renewed in 2012, with the
Italian eyewear manufacturer Luxottica, world leader in the eyewear industry. The
Luxottica Group currently produces and distributes eyewear for the Prada and Miu Miu
brands. That same year, the Group also began its partnership with Spanish cosmetics
manufacturer Puig Beauty & Fashion Group and the first fragrance, Amber, waslaunched at the end of 2004.
In 2006, Miu Miu organized its first fashion show in Paris better to emphasize its own
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 with
two further releases.
The Prada e-store first went online in 2010 while Miu Miu was launched in 2011.
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 March 2014, Prada Spa announced the acquisition of control of the company Angelo
Marchesi Srl, owner of the historical Milanese patisserie founded in 1824, thus marking
the entry into the food segment.
In 2015, the PRADA Group completes the acquisition of the French Tannerie Megisserie
Hervy to further strengthen its integrated production know-how. That same year, the
PRADA Group and Coty Inc. launched the first Miu Miu fragrance. The commercial
development of the Marchesi brand began to take shape in September with the
opening of the first patisserie in via Montenapoleone, Milan.

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2015
Advertising campaign
for Miu Miu Fragrance

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2016
Advertising campaign
for Prada Parfums

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Spring/Summer 2016
Advertising campaign
for Prada

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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 and make them more
recognized and desirable.
Prada
The Prada brand has become one of the most prestigious and widely-recognizedbrands in the fashion and luxury goods industries. Prada is synonymous with thebest of creativity and the Italian manufacturing tradition, sophisticated style andexcellent quality. As one of the most innovative fashion brands, it is capable of redefining “the norm”, always anticipating and often setting new trends. Prada has also
become a recognized symbol of elegance and the very essence of fashion. It has evenoften captured the attention of the world of literature, cinema and art. The brand’s
distinctive originality is built on its innovative approach to style, craftsmanship andquality, characterized by a 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, which now produces men's and women's leather goods,
ready-to-wear, footwear and also operates in the eyewear and fragrance, targets aninternational customer base that is modern, sophisticated, aware of stylistic innovations
and expects craftsmanship of the highest quality. By combining attention to detail andquality with a cutting-edge production and a unique identity style, it aims to make each
Prada product one-of-a-kind.

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Spring/Summer 2016
Advertising campaign
for Prada

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Spring/Summer 2016
Advertising campaign
for Prada Eyewear

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Spring/Summer 2016
Advertising campaign
for Miu Miu

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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 top quality. Miu Miu targets women particularly aware of
the latest fashion trends, driven by a modern spirit of exploration and experimentationin their fashion choices. The independent identity of the Miu Miu brand is enhanced by
the choice to present its own collections, as well as to have the center of the activities
related to communication and marketing, in Paris.

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2015
Advertising campaign
for Church's

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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 with goodyear workmanship. Church’s footwear stands out for its classicalstyle and sophisticated English elegance based on the combination of fine leather andtop quality craftsmanship. Church’s collections are designed to appeal to a discerning,international male and female clientele which appreciates high-quality shoes. They
combine a classical range with more modern collections with all sharing the same top
quality and elegance.
Car Shoe
Car Shoe was founded in 1963 by Gianni Mostile who designed its iconic drivingmoccasins. The brand has since become an iconic Italian classic, known for its technicaldesign originality with high-quality leather and handmade craftsmanship. Car Shoe isa symbol of exclusive but relaxed living with a focus on luxury. Car Shoe products are
ideal for leisure time and informal occasions and the collections are targeted at a sporty
and elegant male and female clientele.
Marchesi 1824
Pasticceria Marchesi, one of Milan’s historic patisseries, was founded in 1824 in thesame location where it operates today. Renowned for its production of the finest quality
patisserie and chocolate, as well as for typical Milanese “Panettone”, the Pasticceria
Marchesi has, over the years, become a favorite meeting point for sophisticatedMilanese people as well as a must-see for visitors to the city. Marchesi represents theperfect marriage of tradition and creativity.

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Pasticceria Marchesi 1824
via Montenapoleone
Milan

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PRADA Group

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Business model
An integrated value chain, essential in order to combine quality with innovation, is at theheart of the success of the Group’s brands. The Group’s business model is based on
the strategic integration of in-house design skill and industrial know-how which enables
the Group to translate its innovative fashion concepts into viable commercial products
while retaining control over technical know-how, quality standards and production costand ensuring flexible capacity.
BuyingSession(Retail)

FashionShows

Style & Design
and ProductDevelopment

Collectionof Orders

Showroom
Presentation

Quality
Control

Sourcing and
Production
Sales
Campaign(Wholesale)

Distribution

Logistic

DesignCreativity 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.
Raw materials and the production process
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 boththe excellence of the material and its exclusive nature. The materials highlight theindependent spirit imbued in all Group products. Before they enter the production
cycle, raw materials are also subject to stringent quality control by internal inspectors
and engineers.
Prada products are made at 14 facilities owned by the Group (12 in Italy,1 in England and
1 in France) and through a network of external sub-contractors which are supplied withthe raw materials, designs and prototypes and are subject to tight checks. This systemenables close control of each stage of the overall production process, maximizing the24

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individual capacities of each facility and guaranteeing the utmost flexibility and highest
quality for each product.
The hardcore of Prada’s production employees has been working with the Group foran average of 20 years. This leads to the highest level of specialization, extensive
knowledge and understanding of the Group DNA and ensures that know-how of
production techniques and core values is handed on smoothly to younger 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.
As the Group has expanded over the years, production sites have either been built tomeet product requirements or acquired from companies already used as suppliers.
The sites acquired have then been modernized or, in some cases, rebuilt. The aim ineach case has been to optimize manufacturing processes and create optimal working
environments that reflect signature Prada aesthetics and quality.
Distribution
The retail network is constantly updated and improved in order to make it easier forcustomers to use and render product displays more effective.
Over the years, the Group has expanded its retail network and it now includes 618 DOS(Directly Operated Stores) in prestigious locations in the main international shopping
destinations, consistently with the identiy, the heritage and the exclusivity of eachbrand. This large network is a real asset for the Group, being an effective platform toshowcase new collections and an essential point of contact with customers. Apartfrom their primary sales function, the DOS are also important means of communication:
genuine brand ambassadors which portray a strong and consistent brand image
worldwide. The directly operated stores also allow the Group to monitor in real time
the progress of sales performance in the various markets for each brand and productcategory.
The wholesale channel (department, multi-brand and franchisee stores) guarantees anumber 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 87.3% of the PRADA Group’s consolidated sales while
the remaining 12.7% 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.
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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 for the entire business model. The
development of the Group bases its competitive advantage on the skills andcommitment of its employees, promoting and rewarding productivity, goal orientationand teamwork.
The Human Resources Department operates in an international environment,cooperating closely with the business areas in order to analyze processes, make themmore efficient and effective and make the most of skills and specific local characteristics
while integrating central and more peripheral parts of the business.
Through a structured and transparent selection process, also based on cooperation withleading universities and fashion schools, the Group seeks constantly and attracts thebest talent on the international employment market. At the same time, the international
dimension of the business provides Prada employees with excellent opportunities towork abroad. These opportunities, together with training and development programs,
help the Group sustain internal growth in managerial and international roles rather thanlooking for external recruitment.
The vast array of different cultures, capabilities, nationalities and religions of theemployees who work in the over 40 countries where the Group is present constitutea source of wealth and progress, as well as creating an affinity with a highly diverse
customer base. Natural respect for equal opportunities within the Group is supportedby the Compensation & Benefit system which is based on rewarding skills and meritwhile ensuring fair treatment for all irrespective of gender, seniority or role. At the sametime, protection of workers’ rights is of key importance as the Group promotes andsupports respect for human rights and laws regarding child and slave labor, as well as
health and safety regulations, throughout the value chain. The Group also cooperates
with Trades Unions to assess possible opportunities to improve the working conditionsof its employees.
The Group’s remuneration policy seeks to attract, reward and retain high-levelprofessionals and skilled managers, as well as to bring management interests intoline with the primary objective of medium/long-term value creation. The common
structure of the remuneration policy, based on a balanced mix of fixed and variable
elements, is adapted locally in accordance with principles of internal fairness andexternal competitiveness. Benchmarking against the external market is guaranteedthanks to surveys performed by firms internationally recognized in the fashion andluxury industry.
The Remuneration Committee oversees the remuneration of our senior management,
taking into account their roles and responsibilities and benchmarking against similar
positions in a panel of companies comparable to Prada in terms of size and complexity.
Environment and territory
The PRADA Group adopts and encourages responsible conduct which contributes
towards the sustainable development of the business and provides examples of goodpractice in the industry where it operates. The Group encourages attention to theinformed development of resources by raising awareness daily among collaborators,
partners and suppliers in order to spread a culture of environmental sustainability.
Reducing land consumption, recovering existing areas and working to redevelop
existing buildings are the guiding principles of the decisions taken “naturally, almost
sub-consciously” in more than thirty years’ industrial development for the Group.
The few new buildings pay close attention to their surrounding areas and fit in, withalmost no disturbance, in their environment. PRADA Group’s production facilities
occupy more than 240,000 square meters including more than 200,000 square meters

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

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PRADA Group

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in Italy and represent the best expression of the Group’s manufacturing tradition as
they harmonize the ability to conserve craftsman skills with state of the art industrial
processes designed to meet the most exacting requirements in terms of productquality and excellence. The recent acquisition of Tannerie Hervy in Limoges (France)is the latest in a line of investments confirming a desire to preserve craft skills in theirplace of origin while integrating them into a production cycle capable of fulfilling theneeds of an international business.
Special projects
Convinced of the need to combine a range of varied creative experiences to ensure thatits style, image and communications activities are renewed and updated constantly,
the PRADA Group has always had strong links with other fields, especially the fields
of art and culture. Interaction with these apparently distant environments has led to
the realization of 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 Koolhaas and Herzog & de Meuron, winnersof the Pritzker Prize (architecture’s “Nobel Prize”), were designed to reinvent and 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, they transcend their function as
stores to house film showings, exhibitions, presentations, debates and other culturalactivities. The collaboration with Rem Koolhaas/AMO, the think-tank of the Office forMetropolitan Architecture, also led to the creation of the Prada Transformer building
which opened in Seoul in 2009: for six months, this multi-dimensional structure housed
an innovative series inter-discipline projects including exhibitions, projections and live
multi-cultural events.
The interests and the passions of Miuccia Prada and Patrizio Bertelli 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.
From 2011 the foundation has presented 5 group shows at its eighteenth-century
Venetian venue, Ca’ Corner della Regina.
In May 2015 Fondazione Prada’s new Milan venue was unveiled. Conceived byarchitecture firm OMA, led by Rem Koolhaas, it is the result of the transformation of a1910’s former industrial compound. Located in Largo Isarco, in the South of Milan, it isdeveloped on an overall surface of 19,000 m². In its new venue, the Fondazione further
develops its multidisciplinary vocation through an articulated exhibition and cultural
events program. From May to December 2015 Fondazione Prada presented theexhibitions “Serial Classic” and “Portable Classic”, both curated by Salvatore Settis,“An Introduction”, “In Part”, “Gianni Piacentino”, “Recto Verso” and “Trittico”. It
also organized the cinema project “Roman Polanski: My Inspirations” and “Atlante delgesto”, a series of choreographic actions conceived by Virgilio Sieni.
Cinema, as a contemporary art form, has also led to creative collaborations between
Prada and internationally renowned directors, resulting in numerous productions
including Thunder 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
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Miu Miu Women’s Tales: a series of short films produced between 2011 and 2015
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.
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 successof the leisure time apparel and footwear lines and as 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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Fondazione Prada
Largo Isarco 2, Milanby architect Rem Koolhaas

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PRADA Group

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PRADA Group Structure
PRADA spa
Milan

Holding/Manufacturing/distribution/services

100%
66.7%

Artisans Shoes srl
Montegranaro
Production

100%

IPI Logistica srl
Milan
services49%

PAC srl in liquidazione
Milan(in liquidation)

Post Development Corp 100%
San Francisco
real estate

60%

Tannerie Limoges sas
Isle
Production

Church Holding UK ltd
Northampton
Holding

PRADA Dongguan
Trading Co ltd
Dongguanservices

100%

100%

100%
Church & Co ltd
Northampton
Manufacturing/
distribution/services

100%
PRADA Far East bv
Amsterdam
sub-Holding/outlet/retail

PRADA Canada Corp
Toronto
distribution/retail

PRADA Hong Kong PD ltd 100%Hong Kong
services

PRADA USA Corp
New York
distribution/services/retail100%

100% PRADA Australia pty ltd
Sydneyretail100%

55%

TRS Hawaii Ilc
Honoluludfs

55%

TRS Guam Partnership
Guam
dfs

100%

PRADA Retail Mexico
S. de R.L. de C.V.
Mexico City
retail100% PRADA Singapore pte ltd
Singaporeretail
100%

100%

55%

PRADA Retail
Malaysia sdn bhd
Kuala Lumpur
retailPRADA Japan Co ltd
TokyoretailTravel Retail Shops
Okinawa kk
Tokyo
dfs

Church’s English Shoes
Switzerland sa
LuganoretailChurch & Co (USA) ltd
New Yorkretail100%

TRS Saipan Partnership
Saipandfs

55%

100% PRADA (Thailand) Co ltd
Bangkokretail100% Church Japan Company ltd
TokyoretailChurch 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
Singaporeretail100%

Church Netherlands bv
Amsterdam
outlet/retail

100%

Church Footwear ab
Stockholm
retail100%

Church Denmark aps
CopenhagenretailChurch’s English Shoes sa 100%
Brussels
retailChurch France sas
ParisretailMacau Branch
Macau
dfs

100%

TRS New Zealand ltd
Wellington
dfs

55%

Church Italia srl
100%
Milan
distribution/retail/services

TRS Singapore pte ltd
Singaporedfs

55%

Church Spain sl
MadridretailPRADA Asia Pacific ltd
100%
Hong Kong
distribution/retail/services

100%

Church Ireland Retail ltd 100%
DublinretailChurch Austria gmbh
Viennaretail100%

Church Footwear(Shanghai) Co ltd
Shanghairetail100%

Macau Branch
Macau
dorMant

100%

Kenon ltd
Londonreal estate

100%

PRADA India Fashion
Private ltd
MumbaidorMant

100% PRADA Vietnam Limited
Liability Company
Hanoi
retail100%

PT PRADA Indonesia
Jakarta
dorMant

PRADA Trading(Shanghai) Co ltd
Shanghai
dorMant
PRADA Fashion Commerce(Shanghai) Co ltd
Shanghairetail100%

Annual Report 2015-15aprile.indd 34

PRADA Sweden ab
Stockholm
retailTaipei BranchTaipeiretail100%

PRADA Group100%

PRADA Taiwan ltd
Hong Kong
services

100%

100%

34

PRADA Korea llc
SeoulretailPRADA Macau Co ltd
MacauretailAnnual Report 2015 - The PRADA Group

15/04/16 15:08

PRADA Hellas
Sole Partner llc
Athensretail100%

80%

100% PRADA Czech Republic sro
PragueretailPRADA Portugal
Unipessoal lda
Lisbonretail100%

Montenapoleone 9 srl
Milan
confectionary

PRADA Stores srl
Milanretail/services

PRADA Emirates llc
Dubai
retail100%

49%

PRADA Kuwait wll
Kuwait City
retail100% PRADA Monte-Carlo sam
MonacoretailPRADA Brasil
100% Importação e Comércio
de Artigos de Luxo ltda
São Paulo
retail100%

PRADA Austria gmbh
Viennaretail100%

PRADA Spain sl
Madridretail100%

PRADA Ukraine llc
Kiev
retail100%

PRADA Kazakhstan llp
Almatyretail100% PRADA Germany gmbh
Munichretail/services

100%

PRADA Maroc (Sarlau)
Casablanca
retail100%

PRADA Denmark aps
Copenhagenretail100%

PRADA Finnish oy
Helsinkiretail100%

PRADA Belgium sprl
Brusselles
retail100%

PRADA Group

Annual Report 2015-15aprile.indd 35

75%
100%

PRADA Company sa
Luxembourg
services

PRADA RetailSouth Africa (pty) ltd
SandtonretailPRADA Retail UK ltd
LondonretailIreland Branch
DublinretailMaroc Branch
Marrakech
retailPRADA Switzerland sa
Luganoretail100%

PRADA Middle East fzco
Jebel Ali Free Zone-Dubai
distribution/services

49%

100%

Swiss Branch
Luganoservices

10%90%

PRADA sa
Luxembourg
tradeMarkPRADA Bosphorus Deri
Mamüller ltd Sirketi
Istanbul
retail

100%

100%

100%

PRADA Rus llc
Moscow
retail100%

60%

Marchesi Angelo srl
Milan
confectionery

100% PRADA Retail France sas
ParisretailPRADA Retail spc
DoharetailPRADA Saudi Arabia ltd
Jeddahretail100%

PRM Services
S. de R.L. de C.V.
Mexico City
services

100%

PRADA Panama sa
Panamaretail100%

PRADA Retail Aruba nv
Aruba
retailAnnual Report 2015 - The PRADA Group

35

15/04/16 15:08

Corporate Information
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 & Executive Director)
Miuccia Prada Bianchi(Chief Executive Officer & Executive Director)
Patrizio Bertelli(Chief Executive Officer & Executive Director)
Alessandra Cozzani(Chief Financial Officer & Executive Director)
Gaetano Micciché(Non-Executive Director)
Stefano Simontacchi(Non-Executive Director appointed on April 8, 2016)
Gian Franco Oliviero Mattei(Independent Non-Executive Director)
Giancarlo Forestieri(Independent Non-Executive Director)
Sing Cheong Liu(Independent Non-Executive Director)
Donatello Galli(Chief Financial Officer & Executive Director)
resigned with effect from February 19, 201636

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)

PRADA Group

Annual Report 2015-15aprile.indd 36

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Supervisory Board(Leg. Decr. 231/2001)

David Terracina (Chairman)
Gian Franco Oliviero Mattei
Franco Bertoli

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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37

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38

PRADA Group

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Financial Review

PRADA Group

Annual Report 2015-15aprile.indd 39

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39

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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, 2016 (year 2015), 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 Statement of Profit or Loss(amounts in thousands of Euro)

RetailWholesaleRoyalties%

twelve months
ended
January 31
2015

3,059,732

86.3%

2,980,891

83.9%

444,61212.5%

532,545

15.0%%

43,427

1.2%

38,260

1.1%

Net revenues

3,547,771

100.0%

3,551,696

100.0%

Cost of goods sold

(980,206)-27.6%(1,001,117)-28.2%

Gross margin

2,567,565

72.4%

2,550,579

71.8%

Operating expenses(2,064,672)-58.2%(1,849,028)-52.1%

EBIT

502,89314.2%

701,551

19.8%

Interest and other financial expenses, net(29,872)-0.9%(34,304)

-1.0%

2,311

0.1%

455

-

Income before taxation

475,332

13.4%

667,702

18.8%

Taxation(141,994)-4.0%(208,484)-5.9%

Net income for the year

333,3389.4%

459,218

12.9%

2,450

0.1%

8,488

0.2%

Net income - Group

330,8889.3%

450,730

12.7%

Depreciation, amortization and impairment

299,8658.5%

252,698

7.1%

EBITDA

802,75822.6%

954,249

26.9%

Dividends from investments

Net income - non-controlling interests

Basic and diluted earnings per share(in Euro per share)40

twelve months
ended
January 31
2016

PRADA Group

Annual Report 2015-15aprile.indd 40

0.129

0.176

Annual Report 2015 - Financial Review

15/04/16 15:08

Key financial information
Key information from the Statementof Profit or Loss(amounts in thousands of Euro)Net revenues
EBITDAEBITDA %EBITEBIT %Net income of the Group
Earnings per share (Euro)

twelvemonthsended
January 31
2016

twelvemonthsended
January 31
2015

twelvemonthsended
January 31
2014

3,547,771

3,551,696

3,587,347

-0.1%

-0.6%

802,758954,249

1,143,186-15.9%-16.2%% change
on January
2015

CAGR %
2013-15

22.6%

26.9%

31.9%

-

-

502,893

701,551

939,237-28.3%-26.8%

14.2%

19.8%

26.2%

-

-

330,888

450,730

627,785-26.6%-27.4%-27.4%

0.129

0.176

0.245

-26.6%

Capital expenditure

336,895

449,735

611,227--

Net operating cash flows

368,465

483,597

769,436-23.8%-30.8%

Average number of employees

12,414

11,962

10,816

3.8%-

January 31
2016

January 31
2015

January 31
2014change at Jan
2016
Vs Jan 2015
101,747

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

665,156

563,409409,774

Net invested capital

3,212,172

2,829,359

2,405,650

382,813

Net financial position surplus/(deficit)(114,795)

188,788295,890(303,583)

Group shareholders’ equity

3,080,340

3,000,737

2,687,554

79,6032015 highlights
The economic environment became tougher for the international luxury goods market
in 2015. Difficult times on Asian markets had a significant impact on sales performancethroughout the region, especially in Hong Kong and Macao where reductions in local
consumption and in the flow of tourism hit harder than elsewhere. At the same time,social and political tensions felt worldwide further contributed to a general decreasein willingness to consume and in tourist flows. Foreign exchange fluctuation also hada significant effect as the competitive advantage produced by the weaker Euro in thefirst half of the year decreased due to instability on financial markets over the summer
period, reducing the flow of Chinese customers in particular.
A swift response to this complicated situation was needed and, bearing in mind its
core commitment to research and innovation, the Group has implemented a series ofmeasures designed to combat pressure on operating profit resulting from the lack ofretail sales growth and the reduction in the wholesale. The main operating processes
in the retail and production areas have been reviewed in order to make them more
efficient and measures to improve the mix of products on sale have been identified.
Prices have also been adjusted to take account of foreign rate market trends and brandpositioning. Last but not least, the range of corrective measures taken has included
action to reduce costs. Nevertheless the Group continued to prefer long-term growthtargets committing resources to activities and projects deemed essential to value
creation. Accordingly, investment in industrial and retail structures has continued,
even though priorities were adjusted during the year. Priority has also been given to
initiatives designed to strengthen brand identity and develop relations with an evermore sophisticated customer base. In this regard, it is worth mentioning, in addition to
the aforesaid sponsorships, directly organized events like the one held to celebrate theopening of the prestigious new freestanding Miu Miu store in Aoyama, Tokyo.
Market response to the Group’s marketing initiatives and commercial decisions
has been positive overall although there have been contrasting results in terms of

PRADA Group

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distribution channel, product category and geographical area. Consolidated net
revenues for the year amounted to Euro 3,547.8 million, broadly in line with 2014 atcurrent exchange rates. The range of measures adopted by management in relation
to business processes and the cost structure have helped limit the reduction in
profitability and the reporting period has ended with Group’s net income of Euro 330.9
million, 9.3% of net revenues; this is down on 2014 when Group’s net income stoodat Euro 450.7 million, or 12.7% of revenues.
Net sales analysis(amounts in thousands of Euro)Net sales of directly operated stores (DOS)Sales to independent customers and franchisees
Royalties
Net revenues, total

twelve months
ended
January 31
2016

twelve months
ended
January 31
2015% change

3,059,732

86.3%

2,980,891

83.9%

2.6%

444,61212.5%

532,545

15.0%-16.5%

43,427

1.2%

38,260

1.1%

13.5%

3,547,771

100.0%

3,551,696

100.0%-0.1%

twelve months
ended
January 31
2015% change

Net sales of directly operated stores (DOS)(amounts in thousands of Euro)

twelve months
ended
January 31
2016

Net sales of directly operated stores (DOS) bygeographical area
Italy

392,79612.8%

354,759

11.9%

10.7%

Europe665,78421.8%

644,819

21.6%

3.3%

Americas410,751

13.4%

391,177

13.1%

5.0%

Asia Pacific

1,080,012

35.3%

1,130,205

37.9%

-4.4%

Japan

403,72113.2%

364,825

12.2%

10.7%

Middle East

103,5213.4%

92,881

3.1%

11.5%

3,147

0.1%

2,225

0.2%

41.4%

3,059,732

100.0%

2,980,891

100.0%

2.6%

Other countries
Total
Net sales of directly operated stores (DOS) by
brand
Prada

2,487,593

81.3%

2,463,155

82.6%

1.0%

Miu Miu

501,667

16.4%

454,968

15.3%

10.3%

Church's

56,194

1.8%

49,012

1.6%

14.7%

Other

14,2780.5%

13,756

0.5%

3.8%

Total

3,059,732

100.0%

2,980,891

100.0%

2.6%

Net sales of directly operated stores (DOS) by
product line
Clothing

541,62717.7%

512,271

17.2%

5.7%

1,919,872

62.7%

1,965,630

65.9%

-2.3%

Footwear

537,49817.6%

448,696

15.1%

19.8%

Other

60,7352.0%

54,294

1.8%

11.9%

Total

3,059,732

100.0%

2,980,891

100.0%

2.6%

Leather goods

Retail channel net sales
Retail sales for the twelve months ended January 31, 2016, amounted toEuro 3,059.7 million, 2.6% up on 2014 at current exchange rates but 5.3%
down at constant exchange rates. The number of Directly Operated Stores(DOS) increased from 594 at January 31, 2015 to 618 at January 31, 2016.

42

PRADA Group

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Markets
The Asia Pacific market generated net sales of Euro 1,080 million, remaining the
PRADA Group’s leading market. However, net sales fell by 4.4% at current exchange
rates and by 16.1% at constant exchange rates compared to 2014. Sales in the region
were greatly affected by the downturn recorded in Hong Kong and Macao. The Greater
China area benefited from growth at current exchange rates on the Chinese domestic
market and ended the period with net sales of Euro 705.8 million, down by 8.3% atcurrent exchange rates and by 22% at constant exchange rates.
Net sales in Europe totaled Euro 665.8 million, increasing by 3.3% at current exchange
rates and by 1.8% at constant exchange rates. The flow of travelers from Asia Pacificand the United States, attracted in part by the weak Euro, sustained net sales in 2015,
especially in the first half of the fiscal year.
In Italy, the retail channel generated net sales of Euro 392.8 million, up by 10.7% on
2014. The growth was mainly driven by the flow of travelers and achieved almost
entirely with the same store basis, as just one more DOS was added during the year.
Net sales on the American market totaled Euro 410.8 million with a 5% increase atcurrent exchange rates and an 8.7% decrease at constant exchange rates. The dropin sales at constant exchange rates was determined by the performance of the US
market as the other countries in this commercial area i.e. Canada, Brazil and Mexico
also achieved growth in real terms.
The Japanese commercial area was also boosted by a strong flow of tourists andended the 2015 fiscal year with net sales of Euro 403.7 million, a 10.7% increase onprior year (+3.9% at constant exchange rates).
The Middle East region reported an increase of 11.5% at current exchange rates anda decrease of 5% at constant exchange rates. The entire region suffered from lower
tourist flows.
Products
Footwear recorded net sales of Euro 537.5 million in the retail channel, with growth of
19.8% at current exchange rates and 10.6% at constant exchange rates. This productline achieved sales growth at constant exchange rates in all geographical areas.
The clothing division recorded net sales totaling Euro 541.6 million with a 5.7%
increase at current exchange rates and a 2.5% decrease at constant exchange rates.
Sales growth was achieved in all geographical areas at current exchange rates but onlyin Japan and Europe at constant exchange rates.
Leather goods recorded net sales of Euro 1,919.9 million, down by 2.3% on the figureof Euro 1,965.6 million for the twelve months ended January 31, 2015. At constantexchange rates, sales of this product line decreased by 9.8%. The sales performance ofleather goods was affected by difficult economic conditions in the Asia Pacific region.
BrandsThe Prada brand generated net sales of Euro 2,487.6 million in the retail channel,
reporting a 1% increase at current exchange rates. Footwear and clothing productlines achieved growth, while leather goods recorded a reduction, especially in Asia
Pacific. At constant exchange rates, Prada brand net sales decreased by 6.7%. During
the twelve months under review 29 new DOS were opened while 5 were closed.
Miu Miu recorded net sales of Euro 501.7 million, reporting a 10.3% increase atcurrent exchange rates. The brand achieved growth in all geographical areas. In terms
of product category, clothing sales remained broadly in line with prior year while sales
PRADA Group

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of leather goods and, especially, footwear increased. At constant exchange rates, Miu
Miu recorded net sales growth of 1.3%. During the twelve months under review, 11
new DOS were opened while 7 were closed.
The Church’s brand recorded consolidated net sales of Euro 56.2 million through its
DOS network, a 14.7% increase compared to 2014. The sales increase was achieved
primarily on the European market where there was a steady rate of growth throughout
the year. Three DOS were closed during the twelve months under review.
Other brands mainly includes net sales of the Car Shoe brand, whose performance forthe year was affected by the closure of 3 DOS, as well as the net sales of Marchesi
1824 patisserie products whose impact in absolute terms is still immaterial to theGroup, although it is growing.
Net sales to independent customers and franchisees(amounts in thousands of Euro)

twelve months
ended
January 31
2016

twelve months
ended
January 31
2015% change

Net Sales to independent customers andfranchisees by brandPrada353,46379.5%

432,28281.2%-18.2%Miu Miu

62,64814.1%

71,802

13.5%-12.7%

Church's

26,262

5.9%

25,029

4.7%

4.9%

Other

2,239

0.5%

3,432

0.6%

-34.8%

Total

444,612100.0%

532,545100.0%-16.5%For the Prada and Miu Miu brands deliveries to independent customers and franchisees
reported a reduction in net sales in 2015, mainly as a result of the ongoing selective
strategy in Italy and Europe and, to a lesser extent, the contraction in the South Koreanmarket in relation to the MERS crisis.
In contrast, the Church’s brand reported net sales growth thanks to advances in Japan,
Europe and Italy, even though a decrease was recorded in Asia Pacific.
Royalties
In the twelve months ended January 31, 2016, licensing agreements generated
royalties income of Euro 43.4 million, 13.5% more than in 2014. The increase was due
to higher sales of eyewear and fragrances, also thanks to the launch of the first Miu
Miu fragrance in August.

44

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Number of stores
January 31, 2016
Owned

January 31, 2015

Franchises

Owned

Franchises

Prada

386

26

362

27

Miu Miu

173

10

169

8

Church's

52

-

55

-

Car Shoe

5

-

8

-

Marchesi

2

-

-

-

Total

618

36

594

35

January 31, 2016

January 31, 2015

Owned

Franchises

Owned

Franchises

Italy

54

5

51

6

Europe

167

-

167

3

Americas

117

-

110

-

Asia Pacific

183

26

175

22

Japan

74

-

70

-

Middle East

21

5

17

4

Africa

2

-

4

-

Total

618

36

594

35

Operating results
During the period in response to constant but unforeseeable changes to the economic
environment which slowed down sales in some regions, management identified
a range of measures designed to limit pressure on operating profit. Consequently,
specific measures were adopted in order to make retail and industrial processes more
efficient, contain discretionary costs and postpone certain capital expenditure projects.
Gross margin was Euro 2,567.6 million for the twelve months ended January 31, 2016,
or 72.4% of net sales. The increase in gross margin percentage from 71.8% in prioryear was achieved thanks to effects of industrial efficiencies and price adjustments
made to balance the spreads among countries. Favorable foreign currency trends had
a further positive impact.
twelve months
ended
January 31
2016% of netrevenues

twelve months
ended
January 31
2015% of netrevenues

Product design and development costs

134,272

3.8%

132,583

3.7%

Advertising and communications costs

191,695

5.4%

170,5624.8%

1,517,443

42.8%

1,340,832

37.8%

221,2626.2%

205,0515.8%

2,064,672

58.2%

1,849,028

52.1%(amounts in thousands of Euro)

Selling costs
General and administrative costs
Total Operating expenses

Operating expenses increased as a percentage of net revenues essentially becauseof retail network expansion had a lack of sales growth. In fact, selling costs increased
from Euro 1,340.8 million to Euro 1,517.4 million, or from 37.8% to 42.8% of net
revenues in relation to the fixed costs included in this caption (labor costs, rents anddepreciation).
As part of advertising and communication, which remain essential activities to

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sustain revenues, the Group favored initiatives aimed at strengthening brand identity
e.g. sponsorships, institutional events and special projects, and at supporting therelationships with customers, also through increasingly sophisticated use of the digitalchannel. In this regard, it is worth highlighting the Digital Retail project launched towards
the end of the year and aimed at increasing the customer involvement through direct
and personalized interactions.
Product design and development costs, totaling Euro 134.3 million or 3.8% of net
sales, were in line with prior year.
General and administrative costs were also subject to cost containment measures
although they were, at the same time, affected by certain non-recurring expenses
such as indemnities and onerous leases.
EBITDA for 2015 amounted to Euro 802.8 million, or 22.6% of net sales (compared to26.9% in 2014), while EBIT totaled Euro 502.9 million, or 14.2% of net sales (compared
to 19.8% in 2014). The decrease in EBIT compared to prior year was also due to thehigher incidence of depreciation and amortization.
EBITDA by brandtwelve months
ended January 31, 2016
(amounts in thousands of Euro)

Group

Prada

Miu Miu

Church’s

Other

Net sales

3,504,344

2,841,056

564,315

82,456

16,517

Royalties

43,42737,436

5,984

7

-

3,547,771

2,878,492

570,299

82,463

16,517

EBITDA

802,758

797,453

11,621

3,567(9,883)

EBITDA %

22.6%

27.7%

2.0%

4.3%

-

twelve months
ended January 31, 2015
(amounts in thousands of Euro)

Group

Prada

Miu Miu

Church’s

Other

Net sales

3,513,436

2,895,437

526,770

74,041

17,188

Royalties

38,26034,868

3,378

14

-

3,551,696

2,930,305

530,148

74,055

17,188

EBITDA

954,249

922,644

35,1304,605(8,130)EBITDA %

26.9%

31.5%

6.6%

6.2%

-

Net revenues

Net revenues

The dilution in EBITDA for the PRADA brand is explained by the higher incidence of
operating expenses as the brand’s gross margin improved compared to prior year
thanks to measures taken at Group level in relation to industrial processes and pricing
strategies. At the same time retail network expansion, with an increase in typicalcosts (rent and personnel costs), was not accompanied by sufficient sales growth and
EBITDA fell as a result, although it remained among the highest in the industry.
The profitability of the Miu Miu brand continued to be under pressure as a resultof investments made in order to improve the visibility of the brand through a global
distribution network and support the image with effective communications. Although
Miu Miu achieved sustained revenue growth in 2015, it did not fully absorb the higher
level of operating costs.
The Church’s brand achieved significant sales growth, especially in the retail channel
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where growth on prior year was also achieved on a same store basis and at constantexchange rates. Nonetheless, the brand was less profitable mainly because of nonrecurring operating expenses due to re-organization of the commercial area.
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
2016

January 31
2015

January 31
2014

2,586,841

2,557,198

2,225,451

Trade receivables, net

254,183

346,284

308,405

Inventories, net

692,672

654,545449,903

Trade payables(281,699)(437,420)(348,534)

Net operating working capital

665,156

563,409409,774

Other current assets (excluding items of financial position)

260,983

190,149

132,866

Other current liabilities (excluding items of financial position)(234,496)(411,878)(291,378)

Other current assets/(liabilities), net

26,487(221,729)(158,512)

Provision for risks(69,233)(63,695)(52,660)

Post-employment benefits(69,405)(85,754)(63,279)

Other long-term liabilities(171,364)(159,419)(113,698)

Deferred taxation, net

243,690239,349

158,574

Other non-current assets/(liabilities)(66,312)(69,519)(71,063)

Net invested capital

3,212,172

2,829,359

2,405,650

Shareholder's equity – Group

(3,080,340)(3,000,737)(2,687,554)

Shareholder's equity – Non-controlling interests(17,037)(17,410)(13,986)(3,097,377)(3,018,147)(2,701,540)

Long term financial payables(519,772)(254,462)(207,969)

Short term financial, net surplus/(deficit)

404,977

443,250

503,859

Net financial position surplus/(deficit)(114,795)

188,788295,890(3,212,172)(2,829,359)(2,405,650)

3.6%

n,d,

n,d,

Total consolidated shareholders' equity

Shareholders’ equity and net financial position
Debt to Equity ratio

At January 31, 2016, the Group had a solid balance sheet structure, founded on net
invested capital of Euro 3,212.2 million and financed by net debt of Euro 114.8 million
and Group shareholders’ equity of Euro 3,080.3 million.
At January 31, 2016, net non-current assets, excluding deferred tax assets, amounted
to Euro 2,586.8 million, pretty much in line with January 31, 2015, as capital
expenditure for the year of Euro 336.9 million was almost equal to depreciation andamortization charges. Capital expenditure included Euro 175 million of investments in
the retail network (for both the final stage of the expansion strategy and renewal andrelocation projects), Euro 57.9 million to strengthen production facilities and Euro 104
million in the corporate area. Intangible assets at January 31, 2016, included goodwill
mainly relating to the distribution channels with a total value of Euro 513.2 million.
The impairment test performed in accordance with IFRS at the reporting date did not
identify any impairment of value.
At January 31, 2016, net operating working capital stood at Euro 665.2 million, an
increase of Euro 101.7 million compared to January 31, 2015, because of the higher
level of inventories and lower trade payables, overall. The increase in finished products
related to the different approach to replenishment which started in the last few monthsof 2014, as well as to the lower than expected volume of sales. At the same time,different manufacturing scheduling led to a reduction in trade payables at the end of
the year.

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At January 31, 2016, other current liabilities were equal to other current assets,
eliminating the deficit of Euro 221.7 million recorded at January 31, 2015. This was
mainly due to the settlement of capital expenditure payables, the lower tax liability andthe closure of derivative contracts.
The change in other non-current liabilities, net, was not significant as the increase in
non-monetary liabilities relating to rental contracts was offset by a decrease in longterm benefits in favor of key employees and collaborators due to payments madeduring the year.
Group shareholders’ equity amounted to Euro 3,080.3 million at January 31, 2016.
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 26, 2015).
Net financial position
The following table summarizes the items included in the net financial position.
January 31
2016

January 31
2015

January 31
2014

Bonds

(130,000)(130,000)(130,000)Bank borrowing – non-current(390,475)(125,203)(77,950)

-

-

(19)

Total financial payables – non-current(520,475)(255,203)(207,969)

Financial payables and bank overdrafts - current(270,112)(263,335)(61,909)

Payables to parent company and related parties(4,858)(2,371)(4,130)

(654)

(21)

(524)

Total financial payables – current(275,624)(265,727)(66,563)

Total financial payables(796,099)(520,930)(274,532)

703

741

-

(amounts in thousands of Euro)

Finance lease obligations – non-current

Finance lease obligations – current

Financial receivables from related parties – non-current
Financial receivables from related parties – current

-

11

2,008

Cash and cash equivalents

680,601

708,966

568,414

Total financial receivables and cash and cash equivalents - current

680,601

708,977

570,422

Total financial receivables and cash and cash equivalents

681,304

709,718

570,422

Net financial surplus/(deficit), total(114,795)

188,788295,890

Net financial surplus/(deficit) excluding related party balances(110,640)

190,407

298,011-14.3%

n/a

n/a

NFP/EBITDA ratio

At January 31, 2016, the Group’s net financial position showed a cash deficit of Euro114.8 million. Operating cash flows for the twelve months then ended amounted toEuro 368.5 million and were entirely employed, together with some new bank debt, tofinance capital expenditure (Euro 390 million) and to pay dividends to the shareholdersof PRADA spa (Euro 281.5 million) and to the non-controlling shareholders of thesubsidiaries (Euro 3.2 million).
During 2015, in order to increase its financial flexibility while taking advantage offavorable conditions available on the credit market, the Group arranged new medium/long-term bank loans totaling around Euro 320 million and repaid debt of around Euro
45 million as it fell due. As a result, total bank borrowing increased by Euro 275.2
million in absolute terms but its structure in terms of original currency and interest rate
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also changed: the incidence of Euro borrowing increased from 55% of total at January
31, 2015 to 73%, while fixed rate borrowing – also considering amounts hedged via
derivatives – rose from 42% to 46%. Some of the borrowing requires compliance withcovenants which were fully respected at the reporting date and mainly regard solvency
ratios.
Cash and cash equivalents include bank current accounts used for operational purposesand short-term deposits used to employ cash on a low-risk basis; these cash and cash
equivalents generally belong to Group’s subsidiaries rather than to PRADA spa which,
together with PRADA Japan co ltd, carries most of the consolidated bank debt.
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 because of its operations on an international
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 and on the Group’s results,
cash flows and financial situation.
A significant portion of the Group’s sales is made to customers who purchasegoods during trips abroad. Consequently, unfavorable economic conditions, social or
geopolitical factors resulting in instability and natural disasters which lead to changes
in the flow of travelers or a reduction in the volume of travel have in the past, and couldin future, have a negative impact on the Group’s business and results.
Risks regarding the protection of intellectual property rights
PRADA Group brands have always been associated with beauty, creativity, traditionand excellent quality. Prada’s ability to protect its brands and other intellectual property
rights means safeguarding these fundamental values which form the basis of thesuccess and positioning of the brands on the international luxury goods market.
The Group safeguards and protects its brands, designs, patents and internet sites byregistering and obtaining legal protection for them in all countries around the world.
The Group is actively committed to fighting against all forms of counterfeiting andbreaches of said intellectual property rights and uses rigorous and thorough measures
all around the world. It uses a large team of in-house and third party lawyers to monitor,
analyze and oversee wholesale and retail markets (both on-line and off-line), working
on a daily basis in close collaboration with the relevant authorities, customs officials
and the police.
Risks regarding brand image and recognition
The Group’s success on the international luxury goods market is linked to the image
and distinctiveness of its brands. These features depend on many factors, such as
the style and design of products, the quality of materials and production techniques
used, the image and location of the DOS and the careful selection of partners forlicensed business, as well as on communications activities in terms of public relations,advertising, marketing and Group profile in general.

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Preserving the image and prestige acquired by its brands in the fashion and luxury
sector is an objective which the PRADA Group pursues by very closely checking
every internal and external phase of the value chain, in order constantly to guarantee
undisputed quality and maintain its reputation. This is also achieved by constantly
seeking to innovate in terms of style, product and communications in order to convey
a message ever consistent with the strong identity of the brands.
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 amount (or other operating currency) 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 the parent
company PRADA spa, the Group uses derivative contracts (e.g. Interest Rate Swaps)
in order to convert variable rate debt into fixed rate debt or debt 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 haveplayed an essential role in the development of the Group and who have great experienceof the fashion and luxury goods industry and on Prada’s ability to attract and retain
personnel who are highly capable in terms of design, marketing and merchandising ofproducts.
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 to50

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achievement 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
performance and on the completion of the 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 such

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investments 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.
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 tolegal risks and risks regarding compliance with applicable laws, including:––

the risks associated with 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 failure to comply with the laws and regulations applicableto 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.

The Group involves all of its various divisions and uses specialist external advisors
when necessary in order to ensure that its processes and procedures are swiftly
updated to comply with changes in rules and regulations, reducing the risk of noncompliance to an acceptable level. As well as by Divisional Managers and by audit
activities, monitoring activities are also performed by specific entities and committees
such as the Supervisory Board, the Internal Control Committee and the Industrial
Compliance Committee.

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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.

Information on related party transactions
Information on the Group’s relationships and transactions with related parties isprovided in the Directors’ Report, insofar as required by IFRS, and in the 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 used the following non-IFRS measures:
EBITDA: Earnings Before Interest, 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, shortterm 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.

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The following table shows the calculation of EBITDA and EBIT for the last threereporting periods.
twelve months
ended
January 31
2016

twelve months
ended
January 31
2015

twelve months
ended
January 31
2014

Consolidated net income for the period

333,338

459,218

637,805

Taxes on income

141,994

208,484

285,091

Interest and other financial income/(expense) and dividends frominvestments

27,561

33,84916,341

EBIT (Earnings Before Interest and Taxation)

502,893

701,551

939,237

Depreciation, amortization and impairment

299,865

252,698

203,949

EBITDA (Earnings Before Interest, Taxation, Depreciation andAmortization)

802,758954,249

1,143,186(amounts in thousands of Euro)

Outlook for 2016
Throughout 2015, the luxury goods market had to deal with an economic environment
characterized by volatile financial markets and by heightening geopolitical tension in
many world regions. These conditions are still present and 2016 is again set to beaffected by instability which makes any short-term forecasts uncertain. Bearing this inmind and in order to ensure the Group achieves satisfactory profit levels, management
has implemented a thorough review of all operating processes. The results, in termsof greater efficiency and productivity, will already be apparent in the months to come.
The Group will pay particular attention to new forms and methods of communications
designed to develop a relationship between its brands and an ever larger audience,
maintaining a permanent dialogue involving all of the various parts of the Prada
universe. At the same time, the Group will continue to work towards providing a soundbase for sustainable long-term growth with investments tailored to make the mostof the distinctive features that make its brands unique: excellent product quality with
contemporary and innovative stylistic content and capacity to interpret the desires ofan ever more sophisticated and demanding customers.

Milan, April 8, 2016

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Directors and Senior Management

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Directors
Our Board consists of nine Directors, of whom four are executive Directors, two are
non-executive Directors and three are independent non-executive Directors. The Boardof Directors is appointed for a term of three years.
Chairman
MAZZI, Carlo, aged 69, is the Chairman of the Board, first appointed on February
14, 2014 and most recently re-elected on May 26, 2015. He was first appointed to
the Board in 2004 – who served mainly as Vice Chairman – until his appointment as
Chairman of the Board. 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 “cumlaude” (with praise) in Mechanical Engineering from the Bologna University of Italyin 1971 and obtained a master’s degree in 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 from 1994 to 2000. He was a board memberof 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 Director of IBI S.p.A. - Milan (financial
intermediation ex art. 106 TUB) from 2000 to 2004. He is currently a board memberof 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 (anIT research company responsible for the management of health facilities), 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 of the 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 67, is a Chief Executive Officer of the Company.
She was first appointed as the Chairperson of the Board on November 20, 2003 until
February 14, 2014 and she was most recently re-elected as Executive Director on May
26, 2015. Ms. Prada holds directorships in Prada Holding S.p.A., Bellatrix S.p.A. andLudo S.r.l., which are substantial shareholders of the Company. Ms. Prada received
an Honorary Doctorate from the Royal College of Art (London) in 2000. Ms. Prada is aco-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 in Hong Kong or overseas in the past three years.
BERTELLI, Patrizio, aged 70, is a Chief Executive Officer of the Company. He was first
appointed to the Board on November 20, 2003 and was most recently re-elected as
Executive Director on May 26, 2015. Mr. Bertelli holds directorships in subsidiaries of
the Company. He holds directorship in PABE 1 S.r.l., which is a substantial shareholderof 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 ourGroup 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 listedcompanies in Hong Kong or overseas in the past three years.
COZZANI, Alessandra, aged 53, is the Chief Financial Officer of the Company. She
was first appointed to the Board as Executive Director on December 20, 2013 and she
was re-elected on May 26, 2015. She has been our Investor Relations Director since

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July 2010, responsible for managing financial communication and for relationships
with investment community, and was further appointed as Chief Financial Officer on
February 19, 2016. 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 Administrationfrom 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 CastellettiInternational Transports, the Italian subsidiary of an international logistic company (nowSchenker Group) for five years, most of the time as Finance and Control Director. Ms.
Cozzani is not and has not been a director of any other listed companies in Hong Kongor overseas in the past three years.
Non-Executive Director
MICCICHÈ, Gaetano, aged 65, was first appointed as Non-Executive Director on May
9, 2011 and was most recently re-elected on May 26, 2015. Mr. Miccichè obtaineda degree in Law from University of Palermo (Italy) in 1984 and a master’s degree inBusiness 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
Head of 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 ofGerolimich-Unione Manifatture (holding company with business in various industries),
as General Manager of Santa Valeria S.p.A. (chemical company) and as Managing
Director and General Manager of Olcese S.p.A. (yarn and thread mill company), all ofwhich were listed 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 Vice Chairmanof 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 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 “Cavalieredel Lavoro” by the President of the Republic of Italy. Save as disclosed herein, Mr.
Miccichè is not and has not been a director of any other listed companies in Hong Kongor overseas in the past three years.
SIMONTACCHI, Stefano, aged 45, has been appointed as Non-executive Director of theCompany on April 8, 2016. Mr. Simontacchi has been Managing Partner of BonelliErede
Law Firm, a leading law firm in Italy, since 2013 and has been on the firm’s board
since 2010. His practice focuses on international taxation, transfer pricing, tax planning,private equity, and tax aspects related to real-estate transactions, real-estate and equity
funds, M&A and reorganisations. In addition, Mr. Simontacchi is a member of the EU
Joint Transfer Pricing Forum (which assists and advises the European Commission
on transfer pricing tax matters) and has authored widely on tax law, including for Il
Sole 24 Ore (a leading, daily business newspaper). Mr. Simontacchi obtained a degreewith praise (cum laude) in business administration from L. Bocconi University of Milanin 1995. In 2000, he obtained an Adv. LLM with praise (cum laude) in International
Taxation from Leiden University. In January 2007, Mr. Simontacchi obtained his PhD in
International Taxation from the Faculty of Law of Leiden University. In April 2015, Mr.
Simontacchi was appointed as board member of RCS MediaGroup S.p.A., an Italian
listed company, leader in the newspaper sector. In addition, he has been serving asboard member of Cabara Insurance Broker S.r.l. since 2010 and has been appointed as
President of the Fondazione Ospedale Buzzi since July 2015. Save as disclosed herein,
Mr. Simontacchi has not held any directorship in other listed companies in Hong Kongor overseas in the last three years.

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Independent Non-Executive Directors
MATTEI, Gian Franco Oliviero, aged 70, was first appointed as Independent NonExecutive Director on May 28, 2009 and was most recently re-elected on May 26, 2015.
Mr. Mattei obtained a degree in Economics from The Sapienza University of Rome
(Italy) in 1970 and became a 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 Banking) in Credit Suisse, Managing Director (Global
Banking & Markets) in The Royal Bank 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, theNomination Committee and the Remuneration 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 69, was first appointed to our Board first on May 31,
2007 and was most recently re-elected as Independent Non-Executive Director on
May 26, 2015. Mr. Forestieri obtained a degree in Economics and Banking from the
University of Siena (Italy) in 1970 and obtained a Specialization in Corporate Financefrom 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 theboards of directors of INA and Assitalia (from 1993 to 1994), Mediofactoring (from 1997
to 1999), Cassa di Risparmio di Parma e Piacenza (from 1996 to 1999 and then from2003 to 2007 as the chairman of the board), Banca Intesa (from 1999 to 2006) andas 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 theboard) and Crédit Agricole Vita (from 2007 to 2013 as the chairman of the board). Mr.
Forestieri is a member of the Italian Scientific Societies in the Fields of Finance andManagement. Mr. Forestieri is currently a member of the Audit Committee and theRemuneration Committee. Mr. Forestieri is not and has not been a director of any otherlisted companies in Hong Kong or overseas in the past three years.
LIU, Sing Cheong, JP, aged 60, was first appointed as Independent Non-Executive
Director on May 9, 2011 and was most recently re-elected on May 26, 2015. He has
been the Chairman of My Top Home (China) Holdings Limited, Chairman of Evergreen
Real Estate Consultants Limited since 2001, Director of HKS Education Fund Limited(“HKSEF”) since 2005 (HKSEF is a charitable institution which holds certain percentageof shares in Hongkong Sales (International) Limited (“HKSI”), an investment holding,knitwear manufacturing company), and Non-executive Director of HKSI since 2005 andits Vice Chairman since April 1, 2012 all of which are private companies. He has been
an independent non-executive director of Swire Properties Limited since 2010 (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 Science andTechnology in 1994 with a Master of Business Administration degree. He has been afellow of the Royal Institution of Chartered Surveyors since 1994. Mr. Liu is currently
a member of the Audit Committee and the Nomination Committee. Save as disclosed
above, Mr. Liu 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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Senior Management
Our senior management is responsible for the day-to-day management of our businessof the Group.
ANTONACCI, Nicola, aged 52, has been Regional Director North America since 2015.
Mr. Antonacci is primarily responsible for overseeing the Group’s operations in the USA
and Canada. Mr. Antonacci joined our Group in 1996 and covered, until 2010, different
managerial roles within the commercial and the collections development areas, from2010 to 2015 he served as Senior Vice President Prada Retail/Wholesale of Prada USA.
From 2010 to 2011 he worked in Paris, as Men’s Ready to Wear 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 57, has been Group Internal Auditing Director since 2007.
He is primarily responsible for the management of the Group internal control systemand to oversee and verify the correct application of procedures within the Group. Mr.
Bertoli obtained a master’s degree in Economics and Business from the University ofTurin (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.
BOZZI, Bruno, aged 54, has been Prada Women’s Ready to Wear Industrial Director
since 2010. Mr. Bozzi is primarily responsible for the manufacturing of the woman’s
ready to wear collection of the Prada brand. He joined our Group in 1996 and undertook
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, a role which heis still covering. Prior to joining the Group he covered different roles in the production
departments of a number of manufacturing companies. Mr. Bozzi is not and has notbeen a director of any other listed companies in Hong Kong or overseas in the past
three years.
BUSO, Daniele, aged 48, has been our Prada Men’s Ready to Wear Industrial 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
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 49, has been Group Marketing Director since February
2016. He is primarily responsible for the Group’s communication strategy and global
marketing functions. Mr. Cantino obtained a degree in Political Science from the
University of Turin (Italy) in 1993. Mr. Cantino joined our Group in 1996 and held several
managerial roles in the commercial and marketing 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, andCommunication and Exernal Relation Director from 2009 until he was appointed tohis current position. Mr. Cantino is not and has not been a director of any other listedcompanies in Hong Kong or overseas in the past three years.
CARETTA, Fabrizio, aged 50, has been Group Legal Director since 2004. He is primarily
responsible for overseeing and assuring legal protection of the Group mainly concerning

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contracts, litigation and real estate. He obtained a degree in Law from the University ofTurin (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, hestarted his career cooperating with the Italian law firm Studio Tucci. From 1995 to 2000
he worked for Fila Sport S.p.A. as Senior Legal Counsel. Mr. Caretta is not and has notbeen a director of any other listed companies in Hong Kong or overseas in the past
three years.
CAROLA, Pablo, aged 48, has been Regional Director Iberian Peninsula, North Africa,
Central America and the Caribbeans since 2013. Mr. Carola is primarily responsible
for overseeing the Group’s commercial operations in the Central America area and
Iberian Peninsula 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 other listed companies inHong Kong or overseas in the past three years.
CARRARO, Luca, aged 49, has been Miu Miu Leather and Ready to Wear Industrial
Director since 2003. 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 Pradabrand. Prior to joining Prada he worked for various ready to wear manufacturing
companies in Italy as production and sample collection manager. Mr. Carraro is notand has not been a director of any other listed companies in Hong Kong or overseas in
the past three years.
CATERINI, Ruggero, aged 54, has been Chief Financial Officer North America since2006. Mr. Caterini is primarily responsible for planning, developing and implementing
strategy for operational management of the USA and Canada region. Before joining ourGroup, Mr. Caterini covered different Finance & Administration Executive roles withinseveral 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 Kong or overseas in the past three years.
CHOI, Moonyoung, aged 53, has been General Manager 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 2007 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 50, 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 48, has been Purchasing Fabrics Ready to Wear Industrial
Director. He joined our Group in 1989, and since 1996 he has been responsible forpurchases 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 not
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and has not been a director of any other listed companies in Hong Kong or overseas in
the past three years.
ETHERIDGE, Stephen, aged 57, 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,
a company which 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 Kongor overseas in the past three years.
FAYARD, Pierre, aged 54, 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 51, 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 50, 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, from the
University of Florence (Italy) and a master’s degree in Business Administration “cumlaude” (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 Florence (2002-2005). He worked for eight years for Esselunga Spa in
Milan as IT Director managing the whole group’s Information System. Mr. Greco is notand 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 45, has been General Manager China since 2013. She
is primarily responsible for overseeing the Group’s commercial operations in China,
where she covers several managerial roles at the Company’s subsidiaries. Ms. Lam
obtained a Bachelor degree in BA, Sociology from the Chinese University of HongKong. 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 andhas not been a director of any other listed companies in Hong Kong or overseas in thepast three years.
LOMANTO, Maria Cristina, aged 41, has been Miu Miu General Manager since 2015.
She is primarily responsible for overseeing worldwide operations and strategy of the
Miu Miu brand. Ms. Lomanto obtained a degree in Law from the University of Milan
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(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 and has not been a
director of any other listed companies in Hong Kong or overseas in the past three years.
LUPAS, Domnica Alexandra, aged 43, 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 56, has been the Chief Executive Officer of Prada
Fashion Commerce (Shanghai) since 2014. She is primarily responsible for overseeing
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 thecommercial department, including Prada Worldwide Store Operation Director andPrada 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 oroverseas in the past three years.
MECHERI, Fabrizio, aged 50, has been Footwear Industrial 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’s
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 42, has been General Manager South Asia andAustralia since 2010. She is primarily responsible for overseeing the Group’s commercial
operations in Thailand, Malaysia, Singapore, New Zealand and Australia, 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 51, has been Regional Director for South America since
December 2011 when he joined our Group. He is primarily responsible for overseeing
the Group’s operations in Brazil. Mr. Noschese obtained a master’s 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 Hong62

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Kong or overseas in the past three years.
RASTRELLI, Stefano, aged 53, has been Group Human Resources Director since2013. Mr. Rastrelli obtained a degree in Law, from the University of Naples. He firstjoined the PRADA Group in 2007 to manage the human resources of the Industrial
Departments and subsequently extended also to the Commercial Departments. Prior
to joining our Group he worked for almost twenty years for the Fiat Group, covering
different managerial roles within the Fiat Group for different branches in Italy andabroad (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 directorof any other listed companies in Hong Kong or overseas in the past three years.
ROMANO, Anthony, aged 49, 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 his bachelor’s 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 48, has been Regional Director Japan and Hawaii since February
2004. He is primarily responsible for overseeing the Group’s operations in Japan,
Guam, Saipan and Hawaii area, where he covers several managerial roles at theCompany’s subsidiaries. Mr. Sesia obtained a degree in Business Administration fromthe University Cattolica del 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 listedcompanies in Hong Kong or overseas in the past three years.
SHIH, Li-Lien Louis, aged 46, has been General Manager of Taiwan since February
2011. He is primarily responsible for overseeing the Group’s commercial operations in
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 42, 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’s degree in Business Administration from Columbia Business School, New
York, in 2005 and graduated “cum laude” (with praise) in Business Administration
at University of Genoa in 1998. Prior to joining our Group, he worked for INDITEXGroup covering different managerial roles including as General Manager of Zara Canada(2006 to 2007), Managing Director of Inditex UK and Ireland (2007 to 2009) and, then,Managing Director of Inditex Austria, Hungary, Czech Republic and Slovakia. Prior tothat, he spent 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.

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TOLOMELLI, Armando, aged 50, has been Regional Director 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 the Company’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, he spent
fourteen years working for the Barilla Group, covering various roles including Financing
Office Manager, Divisional Business Controller, Business Controller for South Eastern
Europe, Group Controller of Wasa in Stockholm, Sweden (1999 to 2001), FinanceManager International Business Development of the Bakery Division (2001) andCorporate Controlling Director of Kamps in Düsseldorf, Germany (2002 to 2005). Mr.
Tolomelli is not and has not been a director of any other listed companies in Hong Kongor overseas in the past three years.
ZAMBERNARDI, Fabio, aged 53, has been Group Design Director since November
2002. He is responsible for the collection concept development, overseeing all thestrategic activities related to the coherence between image and product developmentof the collection, as well as supporting the strategic brands image communication ofboth Prada and Miu Miu brands. 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 39, 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
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.

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Company Secretary
ALBANO, Patrizia, aged 62, is the joint company secretary of the Company. Ms.
Patrizia Albano has been the Head of 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 also served asboard member of Cassa di Risparmio di Rimini S.p.A. from April to November 2015.
Ms. Albano is the wife of Mr. Carlo Mazzi, the Chairman 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 50, 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 25 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’s 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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Directors’ Report

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Principal activities and business review
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.
Further discussion and analysis of these activities as required by section 388(2) and
Schedule 5 to the Hong Kong Companies Ordinance, including a review of the businessof the Company, a discussion and analysis of the Group’s performance during the year
and the material factors underlying its results and financial position, a description of therisks and uncertainties facing the Group, and the future development of the business of
the Company, is set out in the Financial Review section of this annual report. Particularsof important events affecting the Company that have occurred since the end of thereporting period is set out in note 44 to the Consolidated financial statements. As
reported in the Announcement published by the Company on February 19, 2016, Mr.
Donatello Galli resigned from the role of Executive Director and Chief Financial Officer
with effect from the same day. The Board of Directors then appointed Ms. Alessandra
Cozzani – already an Executive Director – as the new Chief Financial Officer. On April
8, the Board of Directors also approved the appointment of Mr. Stefano Simontacchi
as Non-Executive Director of the Company with effect from the same day, to fill thecasual vacancy caused by Mr. Galli’s resignation.
These discussions form part of this directors’ report.
Environmental Policies and Performance
The Group strives for continuous improvement in creating value for its stakeholders
by combining economic profitability with employee and customer satisfaction, as well
as respecting ethical and environmental values and maintaining a high standard ofcorporate social responsibility.
The Group is committed to contributing to the sustainability of the environment andcommunity in which it conducts its business and considers this essential to maintainits long-term competitiveness.
To this respect, the Group has continued to work towards improving its infrastructure,energy and materials management, in order to increase energy efficiency and minimize
the impact on the environment. A long-term plan for improving energy efficiency has
been implemented in the last few years, involving all of the Company’s factories andoffices.
In addition, the Group is aware of the importance of the use of natural resources andwaste management and seeks to achieve continuous improvement in environmental
management thanks to the implementation within its organization of procedures thatraises awareness among its employees.
The Group has also always paid great attention to the territories where it operates
and seeks to play a respectful part in local life by contributing to the enhancementof the community, either in the form of certain unique and avant-garde venue or byrehabilitating existing districts. This environmentally-sensitive approach has led theGroup to develop a method in using the least possible amount of ground, restoring
what already existed and working to rehabilitate buildings for new purposes. The
acquisition of the Tannerie Hervy in Limoges (France) represents the latest investment
aimed at preserving the craft skills in the places where they were formed.

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An analysis of the Group’s environmental policies and performance will be included in
the Group’s Social Responsibility Report 2015, which is expected to be published by
mid-2016.
Compliance with the Relevant Laws and Regulations
A key ethical value fundamental to the Group is the compliance with legislativeand regulatory provisions in all countries in which the Group operates. Compliance
procedures are in place to ensure adherence to applicable laws, rules and regulations
in particular, those that have a significant impact on the Group.
The Group’s products are distributed and sold across 70 countries, therefore they haveto comply with all applicable laws, standards and regulations in each of these countries.
To properly address this matter, the Group established an Industrial Compliance
Committee in 2010 to constantly oversee the Group’s products compliance withinternational and local legislative requirements of the manufacturing and distribution
process at a worldwide level.
A detailed analysis of the legal and regulatory risks to which the Group is exposed is
set out in the paragraph headed “Legal and regulatory risks” of the Financial Review
section of this annual report, which forms part of this directors’ report.
Relationships with key stakeholders
The Group’s success also depends on the support from key stakeholders which
comprise employees, customers, suppliers and shareholders.
Employees
The Group is built on people and the enthusiasm, craft skills and intellectual curiosityof the employees of the Group are the indispensable elements which underpin theinnovation and quality of the Group’s products. The Company searches for people thatcan combine these exceptional qualities with the values of the Group.
As at January 31, 2016, the PRADA Group employed 12,414 people, 4% more than
the year before.
The Group’s remuneration policy aims to attract, reward and retain high-levelprofessionals and skilled managers, and to share with the management the interest in
the primary objective of creating value over the medium and long term.
Further analysis on the value of human resources of the Group is set out in the “ThePRADA Group” section to this annual report, while further analysis on the remuneration
policy of the Group is set out in the “Corporate Governance” section of this annual
report, both of which form part of this directors’ report.
Customers
The Group believes that it has a reputation for being leader in style, maker of outstanding
products and providing excellent customer service.
The distinctive features and the prestige of the Group, derived from an original
management of the creative and industrial processes, places the Group itself in aposition to offer customers around the world with uniques products, which represent
an inimitable synthesis of creativity, quality and exclusivity. In addition, the Group
believes that an effective communication is crucial to build and convey an image ofstrong and consistent brand identity.
The result of the Group’s approach to its customers is the unique relationship between
each customer and the Group's brands, its products and its stores.

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Suppliers
The Group regards its relationship with its suppliers - built up through years of day-today collaboration and directed towards continuous improvement - as fundamental to it.
During the financial year ended January 31, 2016, the Group purchased supplies fromapproximately 450 significant raw material vendors and 420 external manufacturers.
Raw materials are a key component of the quality of the Group’s products and therefore
constitute a primary focus for the Group itself. Their procurement process, import, use
and export are carried out in compliance with the most stringent international and local
regulations. Every raw material used in the manufacturing process has a certificate oforigin that attests its geographical origin.
In fact, the Group has always intended to act as a stimulus for its suppliers, not onlyin terms of the excellent quality level required, but also through the promotion of aculture and modus operandi which comply with the highest ethical standards. The
Group thus requires that its suppliers act in a responsible manner and that each ofthem undertakes and acknowledges the Group’s Code of Ethics, which expresses theinalienable rights of employees, proper working conditions, equal opportunity, freedomof association, health insurance coverage and protection of the environment in thecollection of the materials and in the production processes.
In order to achieve the highest quality standards, the Group undergoes a strict process
in selecting its suppliers. The Group’s relationships with suppliers are all aimed atbeing of a long-term nature and are initiated following a selection process, whose strict
parameters are intended to ensure the highest quality standards, with a special focus
on working conditions.
Shareholders
One of the corporate goals of the Group is to enhance corporate value to its
shareholders by granting dividend payouts, taking into account the liquidity positions
and business expansion needs of the Group. Details of the Group’s communication
with its shareholders are set out in the “Corporate Governance” section of this annual
report, which forms part of this directors’ report.
Results and dividends
The results of the Group for the year ended January 31, 2016 are set out in theConsolidated Statement of Profit or Loss.
The Board recommends, for the twelve month period ended January 31, 2016, 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 24, 2016.
The shareholders recorded on the Company’s shareholders register at the openingof business on Tuesday, May 24, 2016, will be allowed to attend and vote at theshareholders’ general meeting of the Company.

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In order to qualify to attend and vote at the shareholders’ general meeting of theCompany, 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 itself, 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 itself,
in any case, no later than 4:30 p.m. (Hong Kong time)/10:30 a.m. (CET time) on
Thursday, May 19, 2016. The Company’s shareholders register (both sections) will
be closed from Friday, May 20, 2016 to Tuesday, May 24, 2016, both days inclusive,
during which period no share transfer can be registered.
Subject to the shareholders’ approving the recommended final dividend, such dividend
will be paid on Monday, June 13, 2016.
The final dividend will be paid to shareholders recorded on the Company’s shareholders
register on Tuesday, May 31, 2016.
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)/10:30 a.m. (CET time) on Monday,
May 30, 2016. The Company’s shareholders register (both sections) will be closed on
Tuesday, May 31, 2016, during which no share transfer can be registered.
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, 2016, the Company’s reserves available for distribution to shareholders
in accordance with the Company’s by-laws amounted to Euro 1,027,081.

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Property, plant and equipment
Details of the movements in the property, plant and equipment of the Group during theyear ended January 31, 2016 (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 Reviewed Period.
Capital gains 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, 2016, 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)
Ms. Alessandra COZZANI (Chief Financial Officer)
Mr. Donatello Galli resigned from the role of Executive Director and Chief Financial
Officer with effect from February 19, 2016
Non-Executive Directors
Mr. Gaetano MICCICHÉMr. Stefano SIMONTACCHI (Mr. Simontacchi has assumed the role with effect from
April 8, 2016)
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 26, 2015, the Boardof Directors was appointed for a term of three financial years. The Board’s mandate will
therefore lapse on the date of the shareholders’ general meeting called to approve thefinancial statements for the year ending January 31, 2018.
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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’ permitted indemnity
There is no permitted indemnity provision in a contract entered into by the Company or
any of its associated corporation that is or was in force during the Reviewed Period anduntil the date when this directors’ report is approved by the Board, which is required tobe disclosed under section 470 of the Hong Kong Companies Ordinance.
Management contract
No contract concerning the management and administration of the whole or any
substantial part of any business of the Company, to which the Company or any of its
subsidiaries was part, was entered into or existed during the Reviewed Period.
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, or is likely to compete, either directly, or indirectly, withthe business of the Company or the Group.
Directors’ interests and short positions in securities
As at January 31, 2016, 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.
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
the capital 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..
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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% (comprisedof 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..
Mr. Patrizio Bertelli is also a director of PABE 1 S.r.l.

The interests of Ms. Miuccia Prada Bianchi and Mr. Patrizio Bertelli in the shares of theCompany as at January 31, 2016 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%

MFH Munich Fashion
Holding GmbH

Registered Share1

As above

100%

PAC S.r.l.
(in liquidation)

Participation Quotas(Euro)

30,600As above100%
49.83%

Mr. Patrizio
Bertelli

Bellatrix S.p.A.

Ordinary Shares

438,460

As above

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%

Fratelli Prada S.p.A.

Ordinary Shares

734,754

As above73.48%

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%

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, 2016, 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, 2016, 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

154,063,010

6.02%

Oppenheimer Developing
Markets Fund

Beneficial owner

128,488,610

5.02%

Harris Associates L.P.

Investment manager

180,009,502

7.03%

128,059,300

5.00%

Name of Shareholder

Harris Associates Investment Trustee (other than a bare
Trust
trustee)

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.
Material interests of Directors and entities connected with a Director intransactions, arrangements and contracts
Save for those contracts disclosed under the section on Continuing ConnectedTransactions below and in Consolidated financial statements Note 39, Transactions
with Related Parties, and Note 38, Remuneration of the Board of Directors, in theopinion of the Directors, no transaction, agreement or contract of significance to theCompany or the Group subsists as at January 31, 2016, or in fact subsisted during
the Reviewed Period in relation to the Company or the Group’s business in which thedirect or indirect interest of a Director or an entity connected with a Director is or wasmaterial.
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 acquire
benefits 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 per
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cent 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,
together with any accrued interest or at par plus accrued interest, in the event thatcertain tax changes occur. The Notes are not rated.
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 January 29, 2013, January 29, 2014, February 27, 2014, April 2,2015 and July 15, 2015, 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
millionRevenue from sales of goods

61.5

Revenue from services

5.0Royalties income

1.7

Purchase of goods by the Group(1.0)

Net transaction amount

67.2(b) 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 term

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of 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(a Chief Executive Officer, an executive director and a substantial shareholderof the Company). The Fratelli Prada Business Management Agreement was
terminated early on March 31, 2015 and with effect from April 1, 2015. Following
the termination, the commercial retail activity in relation to the Galleria Property(being the men’s segment) has been and will continue to be directly managed andoperated by the Company through its subsidiary, Prada Stores S.r.l.. As a result of
the termination, Fratelli Prada S.p.A. has renounced its right, under the Franchise
Agreement (as defined in the above paragraph (a) under heading “Franchise
Agreement – Prada Milan Stores”) to operate and manage the above mentioned
activity.
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.
(c) 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, in relation to the participation of the Luna Rossa sailingteam in the XXXV edition of the America’s Cup (the “Luna Rossa Sponsorship
Agreement”).
In April 2015, Luna Rossa withdrew from the America’s Cup due to the change ofthe rule to downsize the sailing yacht which was resolved without the unanimous
consent of all participants. The Company continued sponsoring the related
activities to be carried out by the Luna Rossa sailing team to further promote
Prada’s name through the sponsorship.
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 24 million.
(d) Lease Agreement and Guarantee for Aoyama Building in JapanOn July 15, 2015, PABE-RE LLC purchased a building in Minami-Aoyama,
Tokyo, Japan (“the Aoyama Building”). Prada Japan Co. Ltd (“Prada Japan”),
the Company’s indirect wholly-owned subsidiary, has been leasing the Aoyama
Building for use as its flagship store in Tokyo since 2004.

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On May 25, 2015, Prada Japan, as lessee, and the former lessor, renewed thelease of the Aoyama Building by entering into a lease agreement for a term of
20 years (the “Lease Agreement”). On the same date, the Company granted aguarantee in favour of the former lessor to guarantee the punctual performance by
Prada Japan of all its obligations under the Lease Agreement (the “Guarantee”).
As a results of purchasing the Aoyama Building, PABE-RE LLC has become thelessor under the Lease Agreement and the beneficiary of the Guarantee grantedby the Company in favour of the former lessor.
PABE-RE LLC is a wholly-owned subsidiary of PABE 1 S.r.l., a substantial
shareholder of the Company, which is directly controlled by Mr. Patrizio Bertelli,a Chief Executive Officer, Executive Director and substantial shareholder of theCompany.
Accordingly, the Lease Agreement and the Guarantee, which were continuingtransactions of the Group, have become continuing connected transactions of theGroup under Chapter 14A of the Listing Rules. The annual cap for the Reviewed
Period for the rent (on a pro-rata basis) to be paid to PABE-RE LLC, or to be accruedby the Company in accordance with applicable accounting rules, under the Lease
Agreement and the Guarantee is JPY 1,113,884,000.
Below is a table setting out the aggregate value for each of the non-exempt continuingconnected transactions for the Reviewed Period:(a) Franchise Agreement – Prada Milan Stores

Continuing
Connected
Transaction(“CCT”)

Accounting
adjustment
to the CCT
following theapplication of“IAS 17 Leases”

Other
Accounting
adjustment
to the CCT
following theapplicationof “IAS 1
Presentationof Financial
Statements”

Total impact on
the income statements for thetwelve months
ended January
31, 2016

Euro million

Euro million

Euro million

Euro million

Revenue from sales of goods

30.3

-

-

30.3

Revenue from services, net

0.6

-

-

0.6

Royalties income

0.9

-

-

0.9

Purchase of goods by the Group

(0.1)

-

-

(0.1)

Net transaction amount

31.7

-

-

31.7

0.9

0.4

-

1.3

0.5

(3.2)

-

(2.7)

18.0

-

(4.4)

13.6

Japanese Yen
millionJapanese Yen
millionJapanese Yen
millionJapanese Yen
million

1,113.87--

1,113.87(b) PPA Business Combination Agreement
Rental income(c) Fratelli Prada Business Management
Agreement
Business management income(d) Luna Rossa Sponsorship Agreement
Sponsorship contribution(e) Lease Agreement and Guarantee for Aoyama
Building
Rent

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

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(iii) in accordance with the relevant agreement governing them on terms that areconsidered 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 January 29, 2013, January 29, 2014, February 27, 2014 and July 15, 2015,
as applicable.
Other than the above non-exempt continuing connected transactions no othertransaction disclosed in the Consolidated financial statements falls under the definitionof “connected transaction” or “continuing connected transaction” contained in
Chapter 14A of the Listing Rules or, where it falls under the definition of “connectedtransaction” or “continuing connected transaction” contained in Chapter 14A of the
Listing Rules, it is exempted from the reporting, annual review, announcement andindependent 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, 2016 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 less than 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.

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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.
Commitments and contingencies
Details of capital commitments and contingent liabilities of the Group as at January
31, 2016 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, 2016, 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
the assets of the Company and the Group. The non-executive director appointed on
April 8, 2016, having been duly informed about the principles and criteria underlying
the preparation of the Consolidated financial statements of the Company for the year
ended January 31, 2016, has duly acknowledged them.
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.
At the shareholders’ general meeting of the Company held on May 23, 2013, it was
resolved that Deloitte & Touche S.p.A. be appointed as the auditor of the Company
for a term of three financial years. Accordingly, the auditor’s mandate will expire at
the forthcoming shareholders’ general meeting to be convened for the approval of thefinancial statements of the Company for the year ended January 31, 2016.

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On April 8, 2016, the Board had resolved, in accordance with the recommendations
received from the Board of statutory auditors and the Audit Committee, to proposea resolution at the forthcoming shareholders’ general meeting of the Company to reappoint Deloitte & Touche S.p.A. as the auditor of the Company for the relevant three
year-term and to fix its remuneration.
By order of the Board
Carlo Mazzi
Chairman

April 8, 2016

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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, 2016). 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 toconfirm 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, 2016, 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 four are Executive
Directors, two are Non-Executive Directors 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 81.5%.
Minutes of the Board meetings are kept by the Group 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

1/1

1/1

2/6

0/1

Mr. Patrizio BERTELLI (Chief Executive Officer)

4/6

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

6/6

8/8

2/2

Mr. Giancarlo FORESTIERI 2

6/6

6/8

2/2

1/1

1/1

Mr. Sing Cheong LIU 3

6/6

7/8

Mr. Antonino PARISI (Chairman)

6/6

8/8

1/1

Mr. Roberto SPADA

5/6

6/8

1/1

Mr. David TERRACINA

4/6

5/8

1/1

1/1
1/1

1/1

Statutory Auditors

Date(s) of Meeting

Mar 27, 2015

Feb 26, 2015

Mar 17, 2015

May 26, 2015

Mar 26, 2015

May 26, 2015

Mar 26, 2015

May 26, 2015

100%

66.7%

June 12, 2015 June 12, 2015
July 10, 2015

Sept 15, 2015

Sept 15, 2015 Nov 13, 2015
Dec 15, 2015

Dec 14, 2015
Dec 15, 2015
Jan 22, 2016

Average Attendance Rate of Directors

81.5%

87.5%

100%

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 April
8, 2016. 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 todevelop and refresh their knowledge and skills. In this respect, during the Reviewed
Period, Directors received regular updates on changes to and developments of the
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Group’s 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-house seminar conducted by the Joint Company Secretaries covering primarily
the ESG reporting obligations and amendment of the Code: risk management andinternal control. These initiatives are taken to ensure the Directors’ awareness of thelatest 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 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 26, 2015, theBoard (including the Non-Executive Directors) was appointed for a term of threefinancial years. The mandate of all the current Directors will lapse on the date of
the shareholders’ general meeting called to approve the financial statements of theCompany for the year ended January 31, 2018.
The Board is empowered under the Company’s by-laws to appoint any person as a
Director to fill a casual vacancy.
On February 19, 2016, the Nomination Committee and the Board accepted
the resignation of Mr. Donatello Galli, the former Executive Director and Chief
Financial Officer of the Company, and on the same day, the Nomination Committee
recommended and the Board approved the appointment of Ms. Alessandra Cozzani,
an existing Executive Director with the additional role as the Chief Financial Officer.
On April 8, 2016, the Nomination Committee recommended and on the same date,the Board approved, the appointment of Mr. Stefano Simontacchi as Non-Executive
Director of the Company with effect from April 8, 2016, to fill the casual vacancy
caused by Mr. Galli’s resignation. Mr. Stefano Simontacchi’s appointment as NonExecutive Director will be subject to election by the shareholders at the forthcoming
shareholders’ general meeting and his mandate as Non-Executive Director if so electedshall lapse at the same time as the other current Directors.
Under 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
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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 Ethics, 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.
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 eight meetings (with anattendance rate of 87.5%) 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, 2015, the first quarter results as of April 30, 2015, the interim financial

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results as of July 31, 2015 and third quarter results as of October 31, 2015) before
recommending them to the Board for approval.
The Audit Committee has also held a meeting on April 8, 2016, to review the annual
results for the year ended January 31, 2016, before recommending it to the Board forapproval.
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, 2016 and January
31, 2015, together with non-audit services, are illustrated below:
Type of service

Audit Firm

Provided to

twelve months
ended
January 31,
2016

twelve months
ended
January 31,
2015

Audit services

Deloitte & Touche spa

PRADA spa

485

480

Audit services

Deloitte & Touche spa

Subsidiaries

162

174

Audit services

Deloitte Network

Subsidiaries

1,294

1,210

1,941

1,864

Total audit fees accruing
Other advisory services
Other advisory services

Deloitte Network

PRADA spa

880

14Deloitte Network

PRADA spa andsubsidiaries

247

265

1,127

279

99

50

3,167

2,193

Total non-audit fees accruing
Out of pocket expenses
Total independent auditor’s compensation accruing

The total amount of the fees accruing for audit services increased from Euro 1,864
thousand for 2014 to Euro 1,941 thousand for 2015. 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). The
other advisory services amounting to Euro 880 thousand provided by Deloitte Network
to PRADA spa mainly relate to advisory services to support the transformation ofhuman resources processes, to the organization process aimed at creating a Data
Warehouse and some customer segmentation activities.
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 longterm incentive plan connected to the Group’s results, the proposed allocation of theaggregate basic remuneration of the Board to the directors and of the aggregate basic
remuneration of the Board of the Statutory Auditors (which were both approved by theshareholders at the general meeting on May 26, 2015) and the proposed allocation of

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the additional remuneration of the directors vested with special authorities (that is tothe executive directors and members of the Board’s committees).
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.
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 recommendation of
the Remuneration Committee and the opinion of the Board of Statutory Auditors.
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 one meeting, to assessand confirm the independence of the Independent Non-Executive Directors of theCompany for 2014 financial year and to recommend to the shareholders the current
structure of the Board and the re-election of all the directors of the Company at theshareholders’ general meeting held on May 26, 2015.
On February 19, 2016, the Nomination Committee (with all members attending) and theBoard accepted the resignation of Mr. Donatello Galli, the former Executive Director andChief Financial Officer of the Company, and on the same day, the Nomination Committee
recommended and the Board approved the appointment of Ms. Alessandra Cozzani,
an existing Executive Director with the additional role as the Chief Financial Officer.

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On April 8, 2016, the Nomination Committee recommended and on the same date, theBoard approved the appointment of Mr. Stefano Simontacchi as Non-Executive Directorof the Company with effect from April 8, 2016, to fill the casual vacancy caused by
Mr. Galli’s resignation. In addition, the Nomination Committee recommended to theshareholders the election of Mr. Stefano Simontacchi as Non-Executive Director at theforthcoming shareholders’ general meeting. The Nomination Committee also assessedand confirmed the independence of the Independent Non-Executive Directors of theCompany for the Reviewed Period.
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 26, 2015, 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 shareholders’ general meeting called to approve the financial statementsof the Company for the year ended January 31, 2018.
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 Ms. Stefania Bettoni 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, 2016 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 non-executive director appointed on April 8, 2016, having
been duly informed about the principles and criteria underlying the preparation of
the Consolidated financial statements of the Company for the year ended January
31, 2016, has duly acknowledged them. The Consolidated financial statements havebeen prepared 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.
As regards the auditor of the Company, its responsibilities are stated in the auditor’sreport on the Consolidated financial statements.

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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.
To better control its activities in moving toward achievement of the establishedobjectives, the Group has adopted the “Enterprise Risk Management – Integrated
Framework” as reference method to identify and deal with specific risks arising outof the continuous changes which affect the regulatory framework and the Group’s
operations.
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. In particular the Board is generally
satisfied of the adeguacy of resources, staff qualifications and experience, training
programme and budget of the Company’s accounting and financial reporting function.
Joint Company Secretaries
The Company has appointed Ms. Patrizia Albano and Ms. Yuen Ying Kwai as jointcompany secretaries. Given that the headquarter of the Company is located outside
Hong Kong and the Company is incorporated in Italy, the Company is of the view that
it is in the best interests of the Company and is of good corporate governance tomaintain 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 share

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capital may request in writing for additions to be made to the list of items on theagenda, within ten days from the notice of call for a shareholders’ general meeting, bysetting out the proposed additions (five days in advance 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.
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).
94

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The last shareholders’ general meeting of the Company was held on May 26, 2015
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 “2015
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 2015 Shareholders’ General Meeting.
Separate resolutions were proposed at the 2015 Shareholders’ General Meeting
relating to each issue and the voting results of such resolutions were disclosed in
the announcement of the Company dated May 26, 2015. The number of votes cast in
favour of each resolution (and the corresponding percentage level) are set out below:
Brief summary of the Ordinary Resolutions passed at the 2015 Shareholders’
General Meeting

Number of Votes
cast in favour (%)

1.

To approve the Audited Separate Financial Statements and the Audited
Consolidated Financial Statements of the Company for the year ended
January 31, 2015 together with the Reports of the Board of Directors, theBoard of Statutory Auditors and the Independent Auditors.

2,437,083,011(99.90%)2

To approve the allocation of the net income for the year ended January 31,2015 to Shareholders as a final dividend of Euro 11 cents per share and toretained earnings.

2,437,083,011(99.90%)3.

To approve the Board of Directors will consist of nine Directors and will be
appointed for a term of three financial years.

2,436,935,534(99.90%)

4.

To re-elect Mr. Carlo MAZZI as Director of the Company.

2,427,022,857(99.49%)5.

To re-elect Ms. Miuccia PRADA BIANCHI as Director of the Company.

2,427,704,847(99.52%)

6.

To re-elect Mr. Patrizio BERTELLI as Director of the Company.

2,428,032,347(99.53%)

7.

To re-elect Mr. Donatello GALLI as Director of the Company.

2,429,336,549(99.59%)8.

To re-elect Ms. Alessandra COZZANI as Director of the Company.

2,436,308,549(99.87%)

9.

To re-elect Mr. Gaetano MICCICHÈ as Director of the Company.

2,229,312,499(91.39%)10.

To re-elect Mr. Gian Franco Oliverio MATTEI as Director of the Company.

2,428,902,675(99.57%)

11.

To re-elect Mr. Giancarlo FORESTIERI as Director of the Company.

2,436,796,211(99.89%)12.

To re-elect Mr. Sing Cheong LIU as Director of the Company.

2,436,373,736(99.87%)

13.

To re-elect Mr. Carlo MAZZI as Chairman of the Board of Directors.

2,419,333,786(99.18%)14.

To approve the aggregate basic remuneration of the Board of Directors for
its three-year term.

2,249,876,629(92.23%)15.

To re-elect Mr. Antonino PARISI as effective member of the Board of
Statutory Auditors of the Company for a term of three financial years.

2,417,340,311(99.09%)16.

To re-elect Mr. Roberto SPADA as effective member of the Board of Statutory
Auditors of the Company for a term of three financial years.

2,409,119,099(98.76%)17.

To re-elect Mr. David TERRACINA as effective member of the Statutory
Auditors of the Company for a term of three financial years.

2,417,340,311(99.09%)18.

To elect Ms. Stefania BETTONI as alternate statutory auditor of the Company
for a term of three financial years.

2,417,340,311(99.09%)19.

To re-elect Mr. Cristiano PROSERPIO as alternate statutory auditor of theCompany for a term of three financial years.

2,417,340,311(99.09%)20.

To approve the aggregate remuneration of the Board of Statutory Auditors
for its three-year term.

2,437,083,011(99.90%)23.

To elect as Chairman of the Board of Statutory Auditors for a term of threefinancial years.

Mr. Antonino PARISI
2,358,402,644(96.68%)All resolutions put to the shareholders at the 2015 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 the2015 Shareholders’ General Meeting.

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c. Corporate Communications
In 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.

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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
2016

January 31
2015

AssetsCurrent assets
Cash and cash equivalents

9680,601

708,966

Trade receivables, net

10254,183

346,284
654,545

Inventories

11692,672

Derivative financial instruments – current

12

11,682

6,287

Receivables from, and advance payments to, related parties - current

13

19,6293,240

Other current assets

14

Total current assets

229,671

180,633

1,888,438

1,899,955

Non-current assets
Property, plant and equipment

15

1,517,779

1,474,218

Intangible assets

16

932,238

943,304

Associated undertakings

17

17,35430,529Deferred tax assets

35

280,572

280,983
91,353

Other non-current assets

18

113,954

Derivative financial instruments - non current

12

721

1,106

Receivables from, and advance payments to, related parties – non-current

13

5,499

17,429Total non-current assets

2,868,117

2,838,922

Total Assets

4,756,555

4,738,877

263,335

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

19

270,112

Payables to related parties - current

20

5,244

3,083

Trade payables

21

281,699

437,420

Tax payables

22

80,744

133,914

Derivative financial instruments - current

12

11,09556,772

Obligations under finance leases - current
Other current liabilities

23

Total current liabilities

654

21

142,271

220,480

791,819

1,115,025
255,203

Non-current liabilities
Long-term financial payables

24

520,475

Post-employment benefits

25

69,40585,754

Provision for risks and charges

26

69,233

63,695

Deferred tax liabilities

35

36,882

41,634

Other non-current liabilities

27

161,317

128,752

Derivative financial instruments non-current

12

10,047

17,283

Payables to related parties – non-current

20-

13,384

Total non-current liabilities
Total Liabilities
Share capital
Total other reserves

98

867,359

605,705

1,659,178

1,720,730

255,882

255,882

2,355,023

2,163,129

Translation reserve

138,547

130,996

Net income for the year

330,888

450,730

Equity attributable to owners of Group

28

3,080,340

3,000,737

Equity attributable to Non-controlling interests

29

17,037

17,410Total Equity

3,097,377

3,018,147

Total Liabilities and Total Equity

4,756,555

4,738,877

Net current assets

1,096,619

784,930

Total assets less current liabilities

3,964,736

3,623,852

PRADA Group

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Consolidated Statement of Profit or Loss

Note

twelvemonthsended
January 31
2016%

Net revenues

30

3,547,771

Cost of goods sold

31

(980,206)(amounts in thousands of Euro)

Gross margin
Operating expenses

32

EBIT

twelvemonthsended
January 31
2015%

100.0%

3,551,696

100.0%-27.6%(1,001,117)-28.2%

2,567,565

72.4%

2,550,579

71.8%(2,064,672)-58.2%(1,849,028)-52.1%

502,89314.2%

701,551

19.8%

Interest and other financial income/(expenses), net

33(29,872)-0.9%(34,304)-1.0%

Dividends from investments

34

2,311

0.1%

455

-

475,332

13.4%

667,70218.8%(141,994)-4.0%(208,484)-5.9%

333,3389.4%

459,218

12.9%

2,450

0.1%

8,488

0.2%

330,8889.3%

450,730

12.7%

Income before taxes
Taxation

35

Net income for the year from continuing operations
Net income – Non-controlling interests

29

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

Annual Report 2015-15aprile.indd 99

36

0.129

Annual Report 2015 - Consolidated Financial Statements

0.176

99

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

Income before taxation

twelve months
ended
January31
2016

twelve months
ended
January 31
2015

475,332

667,702

290,408

248,647

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

9,457

4,051

Non-monetary financial (income) expenses

22,10433,844

Other non-monetary charges

33,877

13,677

Other non-current assets and liabilities(59,806)(30,050)

Trade receivables, net

91,047(23,667)

Inventories, net(63,656)(173,306)

Trade payables(155,339)

80,420

Other current assets and liabilities(15,916)(33,089)

Cash flows from operating activities

627,508

788,229

Interest paid, net – third parties(13,583)(9,892)

Taxes paid

(245,460)(294,740)

Net cash flows from operating activities

368,465

483,597

Purchases of property, plant and equipment and intangible assets(393,905)(361,624)

Disposals of property, plant and equipment and intangible assets

3,353

-

Dividends from investments

1,315

455

Investment in associated undertaking(2,138)-

Balance Sheet changes

Transactions with Non-controlling shareholders

(750)

-

-

(7,701)

Net cash flows utilized by investing activities(392,125)(368,870)

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

Dividends paid to non-controlling shareholders(3,229)(9,378)

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

Repayment of loans by related companies

-

2,000

New loans to related companies

-

(741)

Business combination

New loans from related companies

2,379

-

Repayment of short term portion of long term borrowings - third parties(45,391)(40,676)

Arrangement of long-term borrowings – third parties

192,444

77,856

Change in short-term borrowings – third parties

125,082

195,469

Share capital increases by non-controlling shareholders of subsidiaries

409

2,125

Cash flows generated/(utilized) by financing activities(9,777)(57,027)

Change in cash and cash equivalents, net of bank overdrafts(33,437)

57,700Foreign exchange differences

5,158

82,874

Opening cash and cash equivalents, net of bank overdraft

708,873

568,299

Closing cash and cash equivalents, net of bank overdraft

680,594

708,873

Cash and cash equivalents

680,601

708,966

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

100

PRADA Group

Annual Report 2015-15aprile.indd 100

(7)

(93)

680,594

708,873

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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, 2014

Number ofshares

Fair
Cash
Value
Share
Share Translation
flow Actuarial
Avaipremium
Capitalreservehedge reserve
lable
reserve
reservefor sale
Reserve

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

3,699(11,452)

Other
reserves

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(recycled to P&L)--

180,434- (39,022)

Comprehensive
income for theyear (not recycled
to P&L)---2,558,824,000 255,882

130,996

Balance atJanuary 31, 2015

Total
other
reserves

627,785

Net
incomefor year

EquityEquity attribuattributable
table toNonowners
conof the trollingGroup interestss

627,785 2,687,554

627,785 (627,785)

-

Total
Equity13,986 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

Allocation of2014 net income

-

-

-

-

-

-

-

Dividends

-

-

-

-

-

-

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

Share capitalincrease

-

-

-

-

-

-

-

-

-

-

-

409

409

Transactions
with Noncontrollingshareholders

-

-

-

-

-

-

-

(726)

(726)

-

(726)

(39)

(765)

Comprehensive
income for theyear(recycled to P&L)

-

-

7,551

-

28,223- (10,182)-

18,041

330,888356,480

2,479

358,959

Comprehensive
income for theyear (not recycled
to P&L)

-

-

-

-

-

5,320

-

5,320

-

5,320

6

5,326

2,558,824,000 255,882

138,547410,047(7,100)(8,161)

Balance atJanuary 31, 2016

PRADA Group

Annual Report 2015-15aprile.indd 101-

450,730

450,730 (450,730)

933 1,959,304 2,355,023

Annual Report 2015 - Consolidated Financial Statements-

330,888 3,080,340--(3,228) (284,699)

17,037 3,097,377

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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
2016

twelve months
ended
January 31
2015

333,338

459,218

7,580

182,519A) Items recycled to P&L:
Change in Translation reserve
Tax impact

-

-

7,580

182,519

Change in Cash Flow Hedge reserve

38,907(52,817)

Tax impact(10,684)

13,795

Change in Cash Flow Hedge reserve less tax impact

28,223(39,022)

Change in Fair Value reserve(13,576)

9,343

3,394

(2,336)(10,182)

7,007

Change in Actuarial reserve

6,526(2,338)Tax impact(1,200)306

Change in Actuarial reserve less tax impact

5,326(2,032)364,285

607,690

2,485

10,570361,800

597,120

Change in Translation reserve less tax impact

Tax impact
Change in Fair Value reserve less tax impactB) Item not recycled to P&L:

Consolidated comprehensive income for the period
Comprehensive income for the period – Non-controlling Interests
Comprehensive income for the period – GroupThe accounting policies and the notes constitute an integral part of the Consolidated
financial statements.

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Financial Statements of PRADA spa

PRADA Group

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PRADA spa Statement of financial position
January 31
2016

January 31
2015

Cash and cash equivalents

157,110

127,788

Trade receivables, net

538,558

741,907

Inventories

320,717

312,797

Derivative financial instruments

11,276

6,479

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

95,481

52,747(amounts in thousands of Euro)
AssetsCurrent assets

Other current assets

158,867

107,678

Total current assets

1,282,009

1,349,396

Property, plant and equipment

555,913462,270

Intangible assets

125,837

119,103

Associated undertakings

945,527

931,599

Deferred tax assets

36,78150,145

Other non-current assets

16,452

11,340Derivative financial instruments - non current

7,546

9,544

Non-current assets

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

330,164

309,564

Total non-current assets

2,018,220

1,893,565

Total assets

3,300,229

3,242,961

Bank overdrafts and short-term loans

207,574

157,972

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

53,856

339,051

Trade payables

587,422640,984

Liabilities and Shareholders' equity
Current liabilities

Current tax liabilities

9,071

9,053

Derivative financial instruments

9,218

52,708

Obligations under financial leases

654-

Other current liabilities

92,664

156,742

Total current liabilities

960,459

1,356,510

Long-term debt, net of current portion

371,729

129,209

Post-employment benefits

37,86255,878Provisions

25,50322,855

Deferred tax liabilities

4,845

7,612

Other non-current liabilities

17,257

5,844

Derivative financial instruments - non current

9,839

13,879269,566

43,851

Non-current liabilities

Financial payables and other payables to parent company, subsidiaries, associates
and related parties
Total non-current liabilities
Total liabilities

104

736,601

279,128

1,697,060

1,635,638

Share capital

255,882

255,882

Other reserves

1,098,866

966,012Net income of the year

248,421385,429

Shareholders' equity

1,603,169

1,607,323

Total Liabilities & Shareholders’ Equity

3,300,229

3,242,961

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PRADA spa Statement of Profit or Loss
twelve months
ended
January 31
2016

twelve months
ended
January 31
2015

Net revenues

1,914,781

2,027,507

Cost of goods sold(890,721)(941,628)

Gross Margin

1,024,060

1,085,879

Selling, general and administrative expenses(682,777)(572,899)

7,570

34,582

Income before tax

348,853

547,562

Income taxes(100,432)(162,133)

Net income for the year

248,421385,429

twelve months
ended
January 31
2016

twelve months
ended
January 31
2015

248,421385,429

Change in cash flow hedge reserve

38,711(43,658)

Tax effect(10,645)

12,006

Change in Cash Flow Hedge reserve after tax effect

28,066(31,652)830(2,950)(amounts in thousands of Euro)Interest and other financial income (expenses), net

PRADA spa Statement of comprehensive income(amounts in thousands of Euro)Net income for the year
Items recycled to P&L:

Items not recycled to P&L:
Gains/ (losses) recognized in actuarial gains/(losses) reserve
Tax effect

-

340

830

(2,610)Net gains (losses) recognized directly in equity

28,896(34,262)

Total comprehensive income

277,317351,167

Change in actuarial reserve after tax effect

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

twelve months
ended
January 31
2016

twelve months
ended
January 31
2015

348,853

547,562

41,77932,317

Cash flows from operating activities:
Income before taxation
Adjustments for:
Depreciation and amortization
Impairment of fixed assets

615

127

Losses/(gains) on disposal of non-current assets

(22)

2,140

Impairment of investments

28,79332,417

Non-monetary financial (income) expenses(47,947)(98,110)

Provisions and other non-monetary expenses

24,25140,053

Balance sheet adjustments for:
Trade receivables, net

197,322(115,213)

Inventories, net(30,345)(124,724)

Trade payables(54,139)

202,594

Other current assets and liabilities(36,800)(15,803)

Other non-current assets and liabilities(1,623)(19,421)

Cash flows generated by operations

470,737

483,939

Interest paid

(7,862)(6,988)

Income taxes paid

(147,325)(204,745)

Net cash flows generated by operations

315,550

272,206

Purchase of property, plant and equipment(174,164)(100,331)

Disposal of property, plant and equipment

-

3,355

(24,429)(11,588)

Cash flows generated (utilized) by investing activities:

Purchase of intangible assets
Disposal of intangible assets

97

1,318

Investments in subsidiaries(13,161)(54,861)

Dividends received
Cash flows generated (used) by investing activities

42,03992,982(169,618)(69,125)

Cash flows generated (utilized) by financing activities:
Dividends paid

(281,470)(281,470)

Change in bank borrowing - current

49,125

161,476

Change in intercompany loans - current(48,629)

3,212

Loans repaid by subsidiaries

25,09589,981Loans made to subsidiaries(118,700)(160,973)

Long-term loans repaid by/(made to) related parties
Repayment of current portion of long term borrowings(741)(7,636)(12,984)

New long term borrowings

265,654-

Cash flows generated (used) by financing activities(116,523)(201,499)

29,4091,582

Change in cash and cash equivalents net of bank overdraft
Exchange differences(1)2

Opening cash and cash equivalents, net of bank overdraft

127,699

126,115

Closing cash and cash equivalents, net of bank overdraft

157,107

127,699

Cash and bank balances

157,110

127,788

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

106

38

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(3)

(89)

157,107

127,699

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

Legal
reserve

Other Retained
reserves earnings

Balance at January 31
2014

2,558,824,000

255,882

410,047

51,177

182,899

241,883

Allocation of 2013 net
income

-

-

-

-

-

395,574

Dividends paid

-

-

-

-

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

Other movements

-

-

-

-

-

-

-

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

-

-

-

-

-

- (31,652)

385,429353,777

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

-

-

-

-

-

-

(2,610)

Balance at January 31
2015

2,558,824,000

255,882

410,047

51,177

182,899

Allocation of 2014 net
income

-

-

-

-

-

Dividends paid

-

-

-

-

- (281,471)

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

-

-

-

-

-

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

-

-

-

-

Balance at January 31
2016

2,558,824,000

255,882

410,047

51,177PRADA Group

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3,679-

Shareholders’equity395,574 1,541,141- (395,574)

349,862 (27,973)

385,429

Net
income-385,429 1,607,323- (385,429)

-

-

-

(281,471)-

28,066248,421276,487

-

830

-

-

830

182,899454,65093

248,421 1,603,169

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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 618 Directly Operated
Stores (DOS) at January 31, 2016, 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 April 8, 2016.

2.

Basis of preparation
The Consolidated financial statements of the PRADA Group as at January 31, 2016,
including the “Consolidated statement of financial position”, the “Consolidated
Statement of Profit or Loss”, 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” have been prepared in accordance with the International Financial
Reporting Standards (“IFRS”) issued by the International Accounting Standards Board(“IASB”) and as endorsed 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 Statement of Profit or Loss is classified bydestination. The cash flow information is provided in the Consolidated statement ofcash 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.

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3.

New IFRS and 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, 2015
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,
2015. These changes do not have any significant impact on the Group as of the dateof these consolidated financial statements:––

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”. The IASB has amended therequirements in IAS 19 for contributions from employees or third parties that arelinked to a service.

––

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, endorsed by the European
Union, but not yet applicable to the PRADA Group as effective from annual
periods beginning on or after January 1, 2016––

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 amortization 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

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with the guidance in “IFRS 11 Joint Arrangements”. In addition, the acquirer
shall disclose the information required by IFRS 3 and other IFRSs for businesscombinations. An entity shall apply that amendment in annual periods beginningon or after January 1, 2016.
––

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;–– 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 amortization (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 “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.

New standards and amendments issued by the IASB, but not yet endorsed by
the European Union––

112"IFRS 16 Leases". This new standard will replace the actual "IAS 17 Leases".
Under this new standard, the lessee will record a right-of-use assets and therelated financial liability. The asset, recorded in the balance sheet of the lessee,
will result in the recording of interest expense and will be depreciated over its
useful life. The financial liability is initially measured at the present value of the
future lease payments over the term of the lease, discounted at the implicit
interest rate of the lease if it can be reasonably determined. If this implicit rate
was not readily determinable, the lessee must use its incremental borrowing rate.

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Also in the new standard, as already happened with the application of the current
IAS 17, the lessors are required to classify the lease on the basis of their nature(operating or financial). If the agreement transfers substantially all the risks andrewards the appropriate classification is the finance lease, otherwise it will bean operating lease. For finance leases a lessor recognizes finance income overthe lease term, based on a pattern reflecting a constant periodic rate of returnon the net investment. A lessor recognizes operating lease payments as income
on a straight-line basis or, if more representative of the pattern in which benefit
from use of the underlying asset is diminished, another systematic basis.
The standard provides for exceptions to the recognition of a finance lease (opting
for the accounting of an operating leases), related to the duration of the contract(less than 12 months, without purchase options) and the amount of the leased asset(low value like for example the cost of personal computers or small office items).
The new standard "IFRS 16" will be effective for annual periods beginning on
or after January 1, 2019. Earlier application is permitted if the company has
simultaneously applied the "IFRS 15 Revenue from contracts with customers”.
––“IFRS 15 Revenue from contracts with Customers”. The core principle of IFRS
15, effective for annual periods beginning on or after January 1, 2018 (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.

––

Amendments to IAS 12 "Recognition of Deferred Tax Assets for Unrealized
Losses": the changes are related to the recognition of deferred taxes on unrealized
losses, clarifying the following aspects:–– Unrealized losses on debt instruments measured at fair value and measured atcost for tax purposes give rise to a deductible temporary difference regardlessof whether the debt instrument's holder expects to recover the carrying amountof the debt instrument by sale or by use.
–– The carrying amount of an asset does not limit the estimation of probable futuretaxable profits.
–– Estimates for future taxable profits exclude tax deductions resulting from thereversal of deductible temporary differences.
–– An entity assesses a deferred tax asset in combination with other deferred tax
assets. Where tax law restricts the utilization of tax losses, an entity would
assess a deferred tax asset in combination with other deferred tax assets ofthe same type.
These amendments are applicable for annual periods beginning on or after January
1, 2017. Early application is permitted.

––

Amendments to "IAS 7 Cash flow statement": These changes should enable agreater understanding and measurement of liabilities arising from financing
activities, including changes in cash flows and non-monetary changes (such as
the gain or loss on foreign exchange). To achieve this objective, the IASB requiresthat the main changes in liabilities arising from financing activities are reported in
the explanatory notes (as necessary), such as:–– changes in cash flows;–– changes arising from the acquisition or loss of subsidiaries or other businesses;

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–– the effect of changes in foreign exchange rates;–– changes in fair value and other changes.
These amendments are applicable for annual periods beginning on or after January
1, 2017––“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
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.

––

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.

––

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.

As at the date of these Consolidated financial statements, the Directors have notcompleted the analysis necessary to assess the impacts of the new standards,
amendments and operational guides not yet applicable to the PRADA Group. However,in relation to the significance that rental contracts for commercial premises do havefor the Group, it is reasonable to conclude that the impact of ''IFRS 16 Leasing" will bematerial.
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
control ceases.
Joint ventures and associated undertakings are consolidated using the equity method.

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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, 2016, and January 31, 2015, in accordancewith IFRS, are as follows:––

the separate 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 arethose closed at the reporting 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 Statement of Profit
or Loss;––

on business combinations, the difference between the acquisition cost ofinvestments acquired and the corresponding share of shareholders’ equity at
the date of acquisition is allocated, if positive, to assets, liabilities and contingent
liabilities based on their fair value at the date of acquisition. Any residual positive
amount is accounted for as goodwill while any negative amount is charged to theincome 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; In business combinations
achieved in stages, the Group remeasures its previously held equity interest in
the acquiree at its acquisition date fair value and recognizes the resulting gain or
loss, if any, in income statements.

––

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 tocover 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

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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
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 substantially

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transferred 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

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

Improvements to leasehold industrial properties

lease term

Furniture and fittings

10% - 20%

Other equipment

6% - 33%

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

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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 recorded in 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.
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.
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 acquired
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in 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 thehistorical 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.
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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.
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.

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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.
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. Like
defined benefit plans, other long-term benefits are also valued using the Projected Unit
Credit Method.

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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.
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 expenses.

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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.
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.
Changes of accounting policies, errors and changes of estimates
The accounting policies adopted change from one year to the next only if the change isrequired by an accounting standard or if it helps provide more reliable and meaningful
information on the impact of operations on the entity’s statement of financial position,
income statement or cash flows.
Changes of accounting policy are accounted for retroactively with the effect allocatedto the opening equity of the earliest of the periods presented. The other comparative
amounts reported for each prior periods are also adjusted as if the new policy had
been applied from the outset. A prospective approach is adopted only when it would
be impracticable to restate the comparative information.
The application of a new or amended accounting standard is accounted for as requested

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by the standard itself. If the standard does not regulate the transition method, thechange is accounted for on a retroactive basis or, if impracticable, on a prospective
basis.
Material errors are treated on the same basis as changes of accounting policy as
described above. Non-material errors are corrected through the income statement forthe period in which the error was identified.
Changes of accounting estimates are accounted for prospectively in the income
statement for the year in which the change is made if it only affects the income
statement for that year, or in the income statement for the year in which the change ismade and in subsequent periods if they are also affected by the change.
Financial risk management
The international nature of the business means that the Group is exposed to a rangeof financial risks including the risk of foreign exchange and interest rate fluctuation.
In light of the volatile nature of the financial markets, the Group’s risk management
activities aim to reduce uncertainty over cash flows and the resulting potential negative
effects on its results.
The Group enters into hedging contracts to manage the risks resulting from foreignexchange rate and interest rate fluctuation.
Financial instruments are accounted for based on the hedge accounting rules
established by “IAS 39 Financial instruments: recognition and measurement”. At
the outset of the hedge, the Group formally documents the hedging relationship andassumes that the hedge will be effective for each of the reporting periods for which itis designated.
Use of estimates
In accordance with IFRS, preparation of these Consolidated Financial Statements
requires the use of estimates and assumptions when determining certain types ofassets, liabilities, revenues and costs and when assessing contingent assets andliabilities.
These assumptions refer, first of all, to operations and events not settled at the end of
the period. Therefore, upon payment, the actual outcome may differ from the estimatedamounts. Estimates and assumptions are reviewed periodically and the effects of eachchange are immediately recorded in the income statement.
Estimates are used for impairment tests, when determining provisions for risks andcharges, the provision for bad debts, the inventory obsolescence provision, postemployment benefits, the tax computation and measurement of derivatives.
The fair value of securities available for sale is based on market price at the reporting
date. The fair value of derivatives used to hedge the interest rate risk (IRS) and theforex risk (forward contracts and options) is determined using one of the valuation
methods in most widespread use on the market and is based on the interest rate curveand on spot and forward exchange rates at the reporting date.
7.

Acquisitions and incorporation of companies
On February 1, 2015 Space USA Corp was merged into PRADA USA Corp and SpaceHK ltd was amalgamated into PRADA Asia Pacific ltd.
On March 31, 2015, PCS sas changed its name to Tannerie Limoges sas.
On April 22, 2015, Montenapoleone 9 srl was incorporated by PRADA spa and Marchesi

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Angelo srl, with ownership interests of 90% and 10%, respectively, in order to develop
the commercial business of the Marchesi brand.
On May 19, 2015, PRADA spa incorporated PRADA Denmark aps in order to develop
its commercial activities in Denmark.
On May 19, 2015, Car Shoe UK Limited was liquidated.
On June 5, 2015, Car Shoe Hong Kong Ltd was cancelled from the local register ofcompanies.
On November 9, 2015, PRADA spa incorporated PRADA Finnish Oy in order to develop
its commercial activities in Finland.
In 2015, PRADA spa acquired the remaining 40% of the quota capital of Pellettieri d’Italia
srl. On November 24, 2015, Pellettieri d’Italia srl was merged through incorporation
into Prada spa.
On December 4, 2015, PRADA spa incorporated PRADA Belgium SPRL in order todevelop its commercial activities in Belgium.
8.

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, 2016

twelve months
ended January 31, 2015

Net sales of directly operated stores (DOS)3,059,732

86.3%

2,980,891

83.9%

2.6%

444,61212.5%

532,545

15.0%-16.5%Net Sales to independent customers and franchisees
Royalties
Net revenues, total% change

43,427

1.2%

38,260

1.1%

13.5%

3,547,771

100.0%

3,551,696

100.0%-0.1%

twelve months
ended January 31, 2015

% change

Net sales of directly operated stores (DOS)(amounts in thousands of Euro)

twelve months
ended January 31, 2016

Net sales of DOS by geographical area
Italy

392,79612.8%

354,759

11.9%

10.7%

Europe665,78421.8%

644,819

21.6%

3.3%

Americas410,751

13.4%

391,177

13.1%

5.0%

Asia Pacific

1,080,012

35.3%

1,130,205

37.9%

-4.4%

Japan

403,72113.2%

364,825

12.2%

10.7%

Middle East

103,5213.4%

92,881

3.1%

11.5%

3,147

0.1%

2,225

0.1%

41.4%

3,059,732

100.0%

2,980,891

100.0%

2.6%

Prada

2,487,593

81.3%

2,463,155

82.6%

1.0%

Miu Miu

501,667

16.4%

454,968

15.3%

10.3%

Church's

56,194

1.8%

49,012

1.6%

14.7%

Other

14,2780.5%

13,756

0.5%

3.8%

Total

3,059,732

100.0%

2,980,891

100.0%

2.6%

Other countries
Total
Net sales of DOS by brandNet sales of DOS by product line
Clothing

541,62717.7%

512,271

17.2%

5.7%

1,919,872

62.7%

1,965,630

65.9%

-2.3%

Footwear

537,49817.6%

448,696

15.1%

19.8%

Other

60,7352.0%

54,294

1.8%

11.9%

Total

3,059,732

100.0%

2,980,891

100.0%

2.6%

twelve months
ended January 31, 2015

% change

Leather goods

Net sales to independent customers and franchisees(amounts in thousands of Euro)

twelve months
ended January 31, 2016

Net Sales to independent customers and franchiseesby brand

126

Prada

353,46379.5%

432,28281.2%-18.2%Miu Miu

62,64814.1%

71,802

13.5%-12.7%

Church's

26,262

5.9%

25,029

4.7%

4.9%

Other

2,239

0.5%

3,432

0.6%

-34.8%

Total

444,612100.0%

532,545100.0%-16.5%PRADA Group

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EBITDA by brandtwelve months
ended January 31, 2016
(amounts in thousands of Euro)

Group

Prada

Miu Miu

Church’s

Other

Net sales

3,504,344

2,841,056

564,315

82,456

16,517

Royalties

43,42737,436

5,984

7

-

3,547,771

2,878,492

570,299

82,463

16,517

EBITDA

802,758

797,453

11,621

3,567(9,883)

EBITDA %

22.6%

27.7%

2.0%

4.3%

-

twelve months
ended January 31, 2015
(amounts in thousands of Euro)

Group

Prada

Miu Miu

Church’s

Other

Net sales

3,513,436

2,895,437

526,770

74,041

17,188

Royalties

38,26034,868

3,378

14

-

3,551,696

2,930,305

530,148

74,055

17,188

EBITDA

954,249

922,644

35,1304,605(8,130)EBITDA %

26.9%

31.5%

6.6%

6.2%

-

Net revenues

Net revenues

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 the
PRADA Group, that have a single reportable segment.
(amounts in thousands of Euro)

January 31
2016

January 31
2015

Italy

829,524

745,492

Europe1,108,104

1,141,285

Americas220,403

220,495

Asia Pacific295,089

299,947

Japan

91,264

108,707

Middle East

30,85432,474Africa

3,808

5,919

Total

2,579,046

2,554,319

The total amount of Euro 2,579 million (Euro 2,554.3 million at January 31, 2015) relates
to the Group’s non-current assets excluding, as requested by IFRS 8, those relating tofinancial instruments, deferred tax assets and pension fund surplus.

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9.

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

January 31
2016

January 31
2015

Cash on hand

46,29044,470Bank deposit accounts

357,159

415,481

Bank current accounts

277,152

249,015

Total

680,601

708,966

At January 31, 2016, bank current accounts and deposit accounts generated interest
income of between 0% and 9.3% per annum (between 0.0% and 3.25% at January
31, 2015).
10. Trade receivables, net
Trade receivables are detailed as follows:(amounts in thousands of Euro)

January 31
2016

January 31
2015

Trade receivables – third parties

235,718

317,147

Allowance for bad and doubtful debts(6,546)(7,784)

Trade receivables – related parties

25,011

36,921

Total

254,183

346,284

The decrease in trade receivables from third parties is due to a reduction in sales toindependent customers and third party franchisees.
Trade receivables from related parties mainly refer to the sale of finished products to
Fratelli Prada spa, a related company and franchisee of the PRADA Group. During theyear, Prada spa took over management of the Prada store in Galleria Vittorio EmanueleII, Milan from Fratelli Prada Spa. Further information on related party transactions isprovided in Note 39.
The allowance for doubtful debts 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
2016

January 31
2015

7,784

10,432

Change in scope of consolidation
Exchange differences

-

17

(47)

463

Increases

128

418

109

Utilized(1,321)(3,173)

Reversals

(288)

(64)

Closing balance

6,546

7,784

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11. Inventories, net
Inventories are analyzed as follows:
January 31
2016

January 31
2015

Raw materials

107,782

106,843

Work in progress

20,92540,786

Finished products

614,423

571,115

Allowance for obsolete and slow moving inventories(50,458)(64,199)

Total

692,672

654,545(amounts in thousands of Euro)

The increase in finished products relates to the different approach to replenishment
which started in the last few months of 2014, as well as to the lower than expectedvolume of sales.
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.
Movements on the allowance for obsolete and slow moving inventories are analyzed
as follows:(amounts in thousands of Euro)

Balance at January 31, 2015

Raw
materials

Finished
Products

Total

26,79837,40164,199Exchange differences

1

(4)

(3)

Increases

-

108

108

Reversals---

Utilization(42)(13,804)(13,846)

26,757

23,70150,458

Balance at January 31, 2016

The allowance for obsolete finished products decreased following the scrapping ofitems already written-off in prior years.
12. Derivative financial instruments: assets and liabilities
Derivative financial instruments: assets and liabilities, current portion.
January 31
2016

January 31
2015

11,682

6,287

721

1,106

Total Financial Assets - Derivative financial instruments

12,403

7,393

Financial liabilities regarding derivative instruments – current(11,095)(56,772)

Financial liabilities regarding derivative instruments – non-current(10,047)(17,283)

Total Financial Liabilities - Derivative financial instruments(21,142)(74,055)

Net carrying amount – current and non-current portion(8,739)(66,662)(amounts in thousands of Euro)

Financial assets regarding derivative instruments – current
Financial assets regarding derivative instruments – non-current

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The net carrying amount of derivative financial instruments, current and non-current
combined, is as follows:
January 31
2016

January 31
2015

IFRS7
Category

Forward contracts

10,094

7,355

Level II

Options

2,309

38

Level II

Positive fair value

12,403

7,393

Forward contracts(5,854)(26,901)

Options(2,479)(34,287)

Level IIInterest rate swaps(12,809)(12,867)

Level II

Negative fair value(21,142)(74,055)

Net carrying amount – current and non-current(8,739)(66,662)(amounts in thousands of Euro)Level II

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 fluctuation.
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 31, 2016) were as stated below.

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Contracts in place at January 31, 2016 to hedge projected future trade cash flows.
(amounts in thousands of Euro)

Options

Forward sale
contracts (*)

Forward purchase
contracts (*)

January 31
2016

Currency
Hong Kong Dollar

99,881-(38,248)

61,633

US Dollar

145,421

21,063(74,789)

91,695Chinese Renminbi

11,837

121,849(43,643)

90,043

Japanese Yen

53,61153,875(7,561)

99,925

GB Pound

57,322

21,463(22,615)

56,170

Korean Won-

46,451-46,451

Swiss Franc-

15,210(8,674)

6,536

Other currencies

14,21286,445(18,144)

82,513

Total

382,284

366,356(213,674)

534,966(*) Positive figures represent forward sales, negative figures represent forward purchases of currency

Contracts in place at January 31, 2016 to hedge projected future financial cash flows.
Options

Forward sale
contracts

Forward purchase
contracts

January 31
2016

Swiss Franc-

64,340(6,910)57,430Brazilian Real

-

8,331

-

8,331

GB Pound-

49,915(6,544)43,371

Japanese Yen-

24,499-24,499US Dollar-

10,875(58,150)(47,275)

Other-

10,258(3,621)

6,637

Total

-

168,218(75,225)

92,993(amounts in thousands of Euro)
Currency

All of the contracts in place at January 31, 2016 are scheduled to mature within 12
months, except for several forward contracts to hedge future financial cash flows
which mature after January 31, 2017 and whose notional net amount is Euro 31.1
million (wholly consisting of forward sale contracts).
Contracts in place at January 31, 2015 to hedge projected future trade cash flows.
Options

Forward sale
contracts (*)

Forward purchase
contracts (*)

January 31
2015

Hong Kong Dollar

182,117

US Dollar

197,258

28,661-

210,778-(59,651)

Chinese Renminbi

137,607

99,237

33,692(24,349)

108,580

Japanese Yen

22,017

91,824(5,493)

108,348

GB Pound(amounts in thousands of Euro)

Currency

55,252

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

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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

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.

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Interest rate transactions
The Group enters into Interest Rate Swaps agreements (IRS) in order to hedge the riskof interest rate fluctuations in relation to several bank loans. The key features of the
IRS agreements in place as at January 31, 2016 and January 31, 2015 are summarized
as follows:
Interest Rate Swap (IRS) Agreement
Contract

Currency

Notional
amountInterest
rate

Hedged loan

Maturity January 31
date
2016

Currency

Lending
institution

AmountExpiry(3,299)Euro/000IntesaSanpaolo

53,16705/2030(amounts inthousandsof Euro)
IRS

Euro/000

53,1671.457%

23/05/2030

IRS

Euro/000

60,0000.105%

09/03/2019(653)

Euro/000

Unicredit

60,00002/2019IRS

GBP/000

58,8802.828%

31/01/2029(8.450)

GBP/000

Unicredit

58,88001/2029

IRS

Yen/000

750,000

1.875%

31/03/2017(57)

Yen/000

Mizuho750,000

03/2017

IRS

Yen/000

2,700,000

1.360%

31/03/2017(350)

Yen/000

Mizuho2,700,000

03/2020

Currency

Lending
institution

AmountExpiryEuro/000

MPS

600

07/201555,00005/2030

Total(12,809)

Interest Rate Swap (IRS) Agreement
Contract

Currency

Notional
amountInterest
rate

Hedged loan

Maturity January 31
date
2015
(amounts inthousandsof Euro)

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

IRS

Euro/000

IRS
IRS
Total

(12,867)

The 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, 2014, may be analyzed as follows:(amounts in thousands of Euro)
Closing balance at January 31, 2014
Change in the translation reserve

5,155
32

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

Change in fair value, charged to Income Statement

25,416

Closing balance at January 31, 2015

(47,630)

Change in the translation reserve-

Change in fair value, recognized in Equity(10,564)

Change in fair value, charged to Income Statement

49,471

Closing balance at January 31, 2016

(8,723)

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.

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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 IFRS 7
Financial assets(amounts in thousands of Euro)

Loans,
receivables
and financial
investments

Derivative financial
instruments

Total

Note

Cash and cash equivalents

680,601-

680,601

9

Trade receivables, net

254,183-

254,183

10

Derivative financial instruments-

12,403

12,40312

Financial receivables – non-current

703

-

703

13

Investment available for sale

15,201-

15,201

17

Total at January 31, 2016

950,688

12,403

963,091Loans,
receivables
and financial
investments

Derivative financial
instruments

Total(amounts in thousands of Euro)

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 – non-current

741

-

741

13

Financial receivables - current

11

-

11

13

Investment available for sale

28,777-

28,77717

1,084,779

7,393

1,092,172

Loans andpayablesDerivative financial
instruments

Total

Note

Total at January 31, 2015

Financial liabilities(amounts in thousands of Euro)

Financial payables

795,445-795,445

19, 20, 24

Trade payables

281,699-281,699

21

Obligations under finance leases

654

-

654

Derivative financial instruments-

21,142

21,142

Total at January 31, 2016

1,077,798

21,142

1,098,940(amounts in thousands of Euro)

Loans andpayablesDerivative financial
instruments

Total

Note

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

Total at January 31, 2015

134

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 1)
as explained in Note 17.
The Bonds, classified under financial payables, are reported at a net amount of Euro
129.4 million (nominal amount of Euro 130 million as adjusted by Euro 0.6 million
following application of the amortized cost method). Their fair value, as determinedbased on the official listed price on the Irish Stock Exchange at January 31, 2016, isEuro 136.9 million (Euro 136.3 million at January 31, 2015). All other financial liabilities
are reported at an amount that approximates their fair 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 believes that the Group’s credit risk
mainly regards trade receivables generated in the wholesale channel and cash andcash 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” paragraph of the Financial review in this 2015 Annual Report.
Trade receivables
The following table contains a summary of total receivables by due date before theallowance for doubtful debts:
Overdue (in days)

January 31
2016

Not
overdue1

Trade receivables

260,729

217,808

17,077

6,848

Total

260,729

217,808

17,077

6,848

January 31
2015

Not
overdue1

Trade receivables

354,068

283,878

28,279

11,202

Total

354,068

283,878

28,279

11,202(amounts in thousands of Euro)(amounts in thousands of Euro)PRADA Group

Annual Report 2015-15aprile.indd 135

30

31

60

61

90

91

120

> 120

5,257

3,400

10,339

5,257

3,400

10,339120> 120

10,0293,840

16,84010,0293,840

16,840Overdue (in days)
30

31

60

61

90

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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
2016

Not
overdue1

Trade receivables less allowancefor doubtful accounts

254,183

217,327

17,077

6,848

Total

254,183

217,327

17,077

6,848(amounts in thousands of Euro)

January 31
2015

Not
overdue1

Trade receivables less allowancefor doubtful accounts

346,284

283,137

28,279

11,202

Total

346,284

283,137

28,279

11,202

30

31

60

61

90

91

120

> 120

5,257

3,400

4,274

5,257

3,400

4,274

120

> 120

10,029

3,840

9,797

10,029

3,840

9,797

Overdue (in days)
30

31

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
2016

January 31
2015

Euro

24,100-US Dollar

36,39337,365

Korean Won

17,44344,924

Hong Kong Dollar

228,529

319,387

Other currencies

50,694

13,805

Total bank deposit accounts

357,159

415,481

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
January 31
2016

January 31
2015

Euro

154,807

127,917

US Dollar

52,83051,074

Korean Won

1,535

3,924

Hong Kong Dollar

4,724

5,465

GB Pound

10,103

5,420

Other currencies

53,15355,215

Total bank current accounts

277,152

249,015(amounts in thousands of Euro)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.

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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 the Group Corporate Finance department, reporting to the CFO, 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, 2016, the Group had a total of Euro 497.8 million of available unused
credit facilities (Euro 445.3 million at January 31, 2015).
The following table summarizes trade payables by maturity date:
Overdue (days)

January 31
2016

Not
overdue1

Trade payables

281,699

246,525

16,418

10,190

Total

281,699

246,525

16,418

10,190January 31
2015

Not
overdue1

31

Trade payables

437,420392,284

21,893

10,967

Total

437,420392,284

21,893

10,967(amounts in thousands of Euro)(amounts in thousands of Euro)

30

31

60

61

90

91

120

> 120

1,912

670

5,984

1,912

670

5,984

120

> 120

1,936

1,424

8,916

1,936

1,424

8,916

Overdue (days)
30

60

61

90

91

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

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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,
2016

6 mthsor less

6 to 12mths

1 to 2years

2 to 3years

3 to 4years

more than
4 years(5,863)(2,548)(2,966)

(349)

-

-

-

-

-

-

-

-

-

-

(5,863)(2,548)(2,966)

(349)

-

-

-

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)

-

-

Net cash flows(outflows/inflows)(31,887)(18,059)(13,828)

-

-

-

-

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

(581)

-

-

(amounts in thousands of Euro)

Forward contracts designated as
cash flow hedges
Net cash flows(outflows/inflows)
Options designated as cash flow
hedgesNet cash flows(outflows/inflows)
Net amount(amounts in thousands of Euro)

Forward contracts designated as
cash flow hedges
Net cash flows(outflows/inflows)
Options designated as cash flow
hedges138

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Financial liabilities under derivative financial instruments (Interest rate swaps)
At January 31, 2016, the expected cash flows were all negative (same as in prior year).

(amounts in thousands of Euro)

Futurecontractual
cash flows
at Jan. 31,
2016

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

(13,738)(1,407)(1,495)(2,702)(2,169)(1,630)(4,335)

Net amount(13,738)(1,407)(1,495)(2,702)(2,169)(1,630)(4,335)(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 amount(14,511)(918)(1,235)(2,224)(1,828)(1,545)(6,761)

Financial liabilities(amounts in thousands of Euro)

Obligations under financeleasesFinancial liabilities – third
parties (without deferred costs
on loans)
Financial liabilities – relatedpartiesTotal(amounts in thousands of Euro)

Obligations under financeleasesFinancial liabilities – third
parties (without deferred costs
on loans)
Financial liabilities – relatedparties
Total

Carrying
Futureamount at
contractualJan. 31, cash flows at
2016 Jan. 31, 2016

654

654

792,514

838,880

4,858

4,858

798,026

844,392

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

21

21

520,477

564,962

2,371

2,371

522,869

567,354

on 6 mths 6 to 12
demand or less
mths

-

436

218

7 245,138

32,422

-

2,404

2,454

7 247,97835,094

on 6 mths 6 to 12
demand or lessmths-

1 to 2years

2 to 3years

3 to 4years

more
than 4
years

-

-

-

-

74,172 241,190 116,508 129,443---

74,172 241,190 116,508 129,443

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

29,530

-

-

-

-

-

33,685 141,546

91,605

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

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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 U.S.
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, 2016.
Euro strengthens by 5%(amounts in thousands of Euro)

Effect on
net income

Euro weakens by 5%

Effect on
shareholders’equityEffect on
net income

Effect on
shareholders’equityGB Pound(1,103)

1,403

598

(1,190)Hong Kong Dollar

2,946

3,583

(1,883)(4,575)(3,557)

806

4,158

1,130

US Dollar

Japanese Yen(3,655)

(577)

4,177

(73)

Chinese Renminbi(7,581)(1,890)

8,220

2,027

Other currencies(5,047)

1,353

6,798

(702)

Total

(13,634)

8,030

19,040(8,070)

The total impact on shareholders’ equity (Euro 8 million positive and Euro 8 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 Euro against
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.

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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 a hypothetical shift in the interest rate curve in relation to the Group companies’ financial
position as at January 31, 2016.
Shift in interest rate curve(amounts in thousands of Euro)+0.50%-0.50%

Effect on
net income

Effect on
shareholders’equityEuro(64)

GB Pound(262)

Japanese Yen
Total

Effect on
net income

Effect on
shareholders’equity2,913

68(3,020)

3,088

(248)

(3,475)

(7)

217

7

(217)

(333)

6,218

(173)

(6,712)The total impact on Shareholders’ equity (positive impact of Euro 6.2 million andnegative impact of Euro 6.7 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, related parties, current and noncurrent
Receivables from, and advances to, related parties current are detailed below:
January 31
2016

January 31
2015

Financial receivables-

11

Prepaid sponsorship

13,626-

Other receivables and advances

6,003

3,229

Receivables from and advances to related parties - current

19,6293,240(amounts in thousands of Euro)

Receivables from, and advances to, related parties non-current are detailed below:
January 31
2016

January 31
2015

Prepaid sponsorship

3,164

12,379Deferred rental income – long-term

1,632

4,309

703

741

5,499

17,429(amounts in thousands of Euro)

Loans
Receivables from and advances to related parties – non-current

Prepaid sponsorship, current and non-current, regards the amount paid to Luna Rossa
Challenge srl in compliance with agreements in force at January 31, 2016.
Deferred rental income – long term has been recorded in application of “IAS 17 Leases”
which requires rental income to be recognized on a straight-line basis.
PRADA Group

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Further information on related party transactions is provided in Note 39.
14. Other current assets
Other current assets are detailed as follows:
January 31
2016

January 31
2015

VAT

59,91756,934

Income tax and other tax receivables

100,838

53,307

Other assets

12,242

11,454

Prepayments

51,86354,642

Deposits

4,811

4,296

229,671

180,633January 31
2016

January 31
2015(amounts in thousands of Euro)

Total

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

Advertising contributions under license agreements

721

916

Advances to suppliers

1,282

2,351

Incentives for retail investments

4,628

3,950

Advances to employees

694

849

Other receivables

4,917

3,388

Total

12,242

11,454The Group granted an authorized loan for an aggregate amount of Euro 3.9 million, outof which Euro 1.9 million in other receivables and Euro 2 million reported under noncurrent assets.
Prepayments
Prepayments are detailed as follows:
January 31
2016

January 31
2015

Rental costs

19,391

18,741

Insurance

2,510

2,380

Design costs

13,914

14,629Fashion shows and advances on advertising campaigns

3,416

3,752

198

3,922

Amortized costs on loans

1,020

1,286

Other

11,414

9,932

Total

51,86354,642(amounts in thousands of Euro)

Consulting

Prepaid 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.

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15. Property, plant and equipment
Changes in historical cost and accumulated depreciation in the last three years areshown below:(amounts in thousands of Euro)Land andbuildings

Production
plant andmachinery

Leaseholdimprovements

Furniture& fittings

Othertangibles

Assetsunderconstruction

Total
historicalcost

Historical cost

440,557

122,395

950,401

315,112

129,490

109,358

2,067,313

Accumulated depreciation(49,880)(102,116)(463,174)(161,684)(60,267)-(837,121)

Net carrying amountat January 31, 2014

390,677

20,279487,227

153,428

69,223

109,358

1,230,192

Historical cost

539,914132,086

1,172,742

385,326

140,851

212,866

2,583,784

Accumulated depreciation(61,974)(110,910)(659,440)(206,665)(70,578)-(1,109,566)

Net carrying amountat January 31, 2015

477,940

21,176513,302

178,661

70,273

212,866

1,474,218

Historical cost

718,020

148,645

1,289,672

431,639

166,561

96,7442,851,281

Accumulated depreciation(78,189)(119,954)(810,955)(243,952)(80,452)-(1,333,502)

Net carrying amountat January 31, 2016

639,831

28,691

478,717

187,687

86,10996,744

1,517,779

Changes in net carrying amount during the twelve months ended January 31, 2016
were as follows:(amounts in thousands of Euro)

Balance at January 31, 2015

Land andbuildings

Production
plant andmachinery

Leaseholdimprovements

Furniture& fittings

Othertangibles

AssetsTotal histounderrical cost
construction

477,940

21,176513,302

178,661

70,273

212,866

1,474,218

Additions60,34915,70997,55553,271

8,145

68,472

303,501

Depreciation(15,798)(10,199)(168,866)(46,978)(11,522)-(253,363)

Disposals

1(79)(2,565)

(519)

(102)

(89)

(3,353)

Exchange differences(2,585)(21)(5,286)(3,147)(244)(1,127)(12,410)

Other movements

119,924

2,168

50,5809,069

19,635(183,210)

18,166-(63)(6,003)(2,670)

(76)

(168)

(8,980)639,831

28,691

478,717

187,687

86,10996,744

1,517,779

Impairment
Balance at January 31, 2016

Additions to Land and buildings mainly includes the investment in the art museum
and cultural center managed by Fondazione Prada and designed by architect Rem
Koolhaas. The remaining additions regard industrial facilities in order to increase the
manufacturing capacity.
Additions to “Production plant and equipment” mainly refer to purchases of equipmentused in production processes.
Additions to “Leasehold improvements”, “Furniture and fittings” and “Assets underconstruction” are largely explained by the strategy to expand and refurbish the Group’s
retail network.
Other tangible assets includes the historical archive of finished products which
embodies the identity and the legacy of the Group brands and is a constant source ofinspiration.
The impairment adjustments recorded in 2015 relate to projects for the relocation and
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renewal of retail premises, as well as to the closure of a few stores.
Total capital expenditure in the retail channel for the twelve months ended January 31,
2016 is summarized as follows:(amounts in thousands of Euro)

January 31
2016

January 31
2015

New stores

113,986

155,576of which stores already opened during the year

66,229102,493of which stores opening soon

47,75753,083Purchases, refurbishment and relocation of existing stores

61,033

105,367

Total Retail capital expenditure

175,019

260,943

At January 31, 2016 all of the Group’s land outside Hong Kong was owned on a freeholdbasis.
There were not interest expenses capitalized during the year.
16. Intangible assets
Changes in historical cost and accumulated amortization in the last three years areshown below:(amounts in thousands of Euro)

144

TradeStore Lease
Goodwillmarks
Acquisitions

SoftwareDevelopment
costs andother
intangibles

Assets inprogressTotal
historicalcost

Historical cost

394,686

534,470

180,455

74,24564,884

5,343

1,254,083

Accumulated amortization(111,773)(30,097)(101,461)(63,608)(45,855)-(352,794)

Net carrying amountat January 31, 2014

282,913504,373

78,994

10,63719,0295,343

901,289

Historical cost

402,604

545,054

227,81378,77565,011

18,813

1,338,070

Accumulated amortization(125,372)(31,840)(121,321)(67,947)(48,286)-(394,766)

Net carrying amountat January 31, 2015

277,232

513,214

106,492

10,82816,725

18,813

943,304

Historical cost

401,503544,388236,655

86,75564,981

26,2481,360,530

Accumulated amortization(136,265)(31,170)(139,145)(71,718)(49,994)-(428,292)

Net carrying amountat January 31, 2016

265,238

513,218

97,51015,037

14,987

26,248932,238PRADA Group

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Changes in net carrying amount during the twelve months ended January 31, 2016
were as follows:(amounts in thousands of Euro)

Trademarks

Goodwill

Store Lease
Acquisitions

SoftwareDevelopment
costs andother
intangibles

Assets inprogress

Total Net
carrying
amountBalance at January 31, 2015

277,232

513,214

106,492

10,82816,725

18,813

943,304

376

337

693

6,834

71

25,08333,394(11,528)-(19,272)(3,998)(2,016)-(36,814)Additions
Amortization
Disposals
Exchange differences--(1,928)

(97)

-

-

(2,025)

(842)

(173)

(3,564)

(78)

-

(65)

(4,722)Other movements--

15,634

1,551

207(17,583)(191)

Impairment

-

(160)

(545)

(3)

-

-

(708)

265,238

513,218

97,51015,037

14,987

26,248932,238

Balance at January 31, 2016

The net carrying amount of Trademarks at the reporting date is analyzed in the following
table:
January 31
2016

January 31
2015

Miu Miu

154,236

159,811Church's

97,323

102,502

Prada

3,823

3,985

Other

9,856

10,934

Total

265,238

277,232(amounts in thousands of Euro)No impairment losses were recorded in relation to the Group’s trademarks in the year
ended January 31, 2016. “Other” includes trademark registration costs plus the Car
Shoe and Luna Rossa trademarks.
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
for retail premises in the most prestigious retail locations worldwide. The increases
recorded during the year regard lease agreements in Europe.
Total capital expenditure on Property, plant and equipment and Intangible assets forthe twelve months ended January 31, 2016 was Euro 336.9 million, as analyzed below:
January 31
2016

January 31
2015

Retail

175,019

260,943

Production and logistics

57,84958,927

Corporate

104,027

129,865

Total

336,895

449,735(amounts in thousands of Euro)PRADA Group

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Impairment test
As required by “IAS 36 Impairment of Assets” goodwill with an indefinite useful life is
not amortized. Instead, it is tested for impairment at least once a year. As at January
31, 2016, Goodwill amounted to Euro 513.2 million, detailed by Cash Generating Unit
(CGU) as follows:(amounts in thousands of Euro)

January 31
2016

January 31
2015

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 Monaco Retail

11,70011,700

North America Retail and Wholesale

48,00048,000

Production division

3,667

3,492

Church’s

9,971

10,142

Marchesi Angelo

7,975

7,975

513,218

513,214Total

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 theperformance of certain retail businesses during the year, CGUs other than those shown
above were also 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 2016 budget, as prepared by Head Office. Prudently, no business development
has been forecast after 2017. This means that no new store openings have been
included in the period from 2017 to 2020 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, 2016, the WACC used
for discounting purposes was in a range between 5% and 15.5% (between 5.9%
and 19.8% at January 31, 2015). The WACC has been calculated ad hoc for each
CGU subject to impairment taking into account specific parameters of the geographic
area: market risk premium and sovereign bond yield. The rate of growth “g” used to
calculate the WACC was in a range between 0% and 10%, in light of the different
inflation and growth 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.
Some 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 showed that the valuation obtained
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using the DCF method was reasonable.
When the calculation of value in use under the DCF method did not produce reasonable
results, it was deemed appropriate to run the impairment test applying fair value-based
valuation methods (e.g. market multiples method or royalties method).
None of the impairment tests performed as at January 31, 2016 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 undertaking(amounts in thousands of Euro)

January 31
2016

January 31
2015

Investment in associated undertaking

2,138

1,738

Investment available for sale

15,201

28,77715

1417,35430,529Other investments
Total

At January 31, 2015, Investment in associated undertaking included a 49% interest
in Pac srl (in liquidation), an unlisted company based in Italy. During the year, theliquidation process of said entity was almost completed, although some formalities
had not yet been concluded at year end. Accordingly, at January 31, 2016, the value ofthe investment was written off.
At January 31, 2016, the caption includes a 40% interest acquired in a company
specializing in production of wallets, travel items, bags and small leather goods. The
investment was initially recognized at historical cost but has now been measured
under the equity method.
Investment available for sale regards a 4.88% stake in the share capital of Sitoy Group
Holdings ltd, a company listed on Hong Kong Stock Exchange at January 31, 2016. The
value of the investment has been restated at fair value in line with the official quoted
share price on the Hong Kong Stock Exchange (Level I of the fair value hierarchy per
IFRS 7 “Financial Instruments: Disclosures”). The negative change of Euro 13.6 million
in fair value compared to January 31, 2015 has been recognized in a specific equity
reserve, net of the taxation effect (Euro 3.4 million). In 2015, the Group accrued net
dividends totaling HKD 19.8 million (Euro 2.3 million) from Sitoy Group Holdings.
18. Other non-current assets
Other non-current assets are detailed as follows:
January 31
2016

January 31
2015

Guarantee deposits

73,97470,004

Deferred rental income

13,716

9,056

Pension fund surplus

7,778

2,515

Other long-term assets

18,486

9,778

Total

113,954

91,353(amounts in thousands of Euro)At January 31, 2016, Other non-current assets includes Euro 7.8 million representing
the actuarial valuation of the pension plans the Group has in the United Kingdom (Note25).

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Guarantee deposits are analyzed below by nature and maturity:
January 31
2016

January 31
2015

Stores

68,576

66,568

Offices

4,076

2,175

(amounts in thousands of Euro)Nature:Warehouses

180

182

Other

1,142

1,079

Total

73,97470,004January 31
2016(amounts in thousands of Euro)

Maturity:
By 31.01.2018

13,958

By 31.01.2019

9,449

By 31.01.2020

17,350

By 31.01.2021

14,765After 31.01.2021

18,452

Total

73,974

19. Short-term financial payables and bank overdrafts(amounts in thousands of Euro)

January 31
2016

Bank overdrafts and commercial lines of credit

January 31
2015

7

93

Short-term bank loans

216,522

221,639

Current portion of long term loans

54,04342,074

(460)

(471)

270,112263,335

Deferred costs on loans
Total

Short-term financial payables mainly include loan of Euro 125 million on the revolving
line of credit of Euro 315 million arranged by PRADA spa in 2014 with a syndicate ofbanks. The revolving line of credit is subject to compliance with several covenants
determined based on the PRADA spa Consolidated financial statements. Specifically,
the ratio between total net bank borrowing and EBITDA must not exceed 3 and theratio between EBITDA and total net interest expenses must exceed 4. Both covenants
were respected at January 31, 2016.
Short-term financial payables also includes two loans of Euro 30 million each, arrangedby PRADA spa with Mitsubishi Bank of Tokyo e Societè Generale and repayable in thefirst half of 2016.
Short-term bank loans also include committed lines of credit arranged by PRADA Japanco ltd which are also subject to a series of covenants based on the financial statementsof PRADA Japan co ltd; the covenants were respected in full at January 31, 2016. The
total amount of these loans at January 31, 2016 was Euro 26.8 million.
The current portion of long-term bank loans includes an amount of Euro 3.7 million at
January 31, 2016 (zero at January 31, 2015) regarding a mortgage loan approved by
IntesaSanpaolo for PRADA spa in 2014 and disbursed in 2015. This loan is secured bya mortgage on the Milan property used as the Group’s Headquarters.

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At January 31, 2016, the current portion of long-term bank loans also includes Euro 2
million (Euro 1.6 million at January 31, 2015) regarding a loan arranged by subsidiary
Kenon Ltd with Unicredit Group in 2014 and secured by a mortgage on a property on
Old Bond Street London which the Group uses as one of the most strategic Prada
stores in the world.
Short-term bank loans and the current portion of long-term loans are analyzed bycurrency as follows:
January 31
2016

January 31
2015

Euro

207,631

157,883

Japanese Yen

50,76973,571-

24,477

Other currencies

12,165

7,782

Total

270,565

263,713(amounts in thousands of Euro)

Chinese Renminbi

The Group mainly borrows at variable rates of interest and manages the interest raterisk by entering into hedging agreements as described in Note 12.
Considering hedges in place at the reporting date, some 34% of the current portion of
medium/long term loans consisted of fixed rate loans (15% at January 31, 2015) withvariable rate loans making up the remaining 66% (85% at January 31, 2015).
Financial payables 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 related parties – current and non-current
The current portion of payables to related parties are detailed as follows:(amounts in thousands of Euro)

Financial payables

January 31
2016

January 31
2015

4,858

2,371

386

712

5,244

3,083

Other payables
Payables to related parties - current

Financial payables to related parties regard two interest-free loans from the noncontrolling shareholders of the Group’s subsidiaries in the Middle East. A breakdownof payables to parent company and other related parties is provided in Note 39.
The non-current portion of payables to related parties is detailed as follows:
January 31
2016

January 31
2015

Other payables-

13,384

Payables to related parties – non-current-

13,384(amounts in thousands of Euro)

Following the transaction with the non-controlling interests of subsidiary Pellettieri
D’Italia in the first half of 2015, Fin-reta srl is no longer a related party but a third
party. Consequently, the related payables have been reclassified to “Other non-current
liabilities”.

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21. Trade payables
Trade payables are detailed as follows:
January 31
2016

January 31
2015

Trade payables – third parties

266,701

410,402

Trade payables – related parties

14,99827,018

Total

281,699

437,420(amounts in thousands of Euro)

The decrease in trade payables is mainly due to the different manufacturing planning
adopted at the end of the year.
22. Tax payables
Tax payables are detailed as follows:
January 31
2016

January 31
2015

Current income taxes

49,70097,007

VAT and other taxes

31,04436,907

Total

80,744

133,914(amounts in thousands of Euro)The Group has passed from a net current income tax payable of Euro 43.7 million at
January 31, 2015 to a net current income tax receivable of Euro 48.1 million (at January
31, 2016, tax receivables of Euro 97.8 million exceeded tax payables and provisions ofEuro 49.7 million).
23. Other current liabilities
Other current liabilities are detailed as follows:(amounts in thousands of Euro)

January 31
2016

January 31
2015

Payables for capital expenditure

54,132

128,346

Accrued expenses and deferred income

16,37917,354

Other payables

71,76074,780Total

142,271

220,480

The decrease in payables for capital expenditure is mainly explained by settlement of
the final balance of Euro 55 million due for the purchase of the Milan property used as
the Group’s Headquarters.
Other payables are detailed as follows:
January 31
2016

January 31
2015

Short term benefits for employees and other personnel

58,53360,332Customer advances

4,563

4,725

Returns from customers

5,488

7,813

Other

3,176

1,910

Total

71,76074,780(amounts in thousands of Euro)150

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24. Long-term financial payables
Long-term financial payables are analyzed as follows:
January 31
2016

January 31
2015Long-term bank borrowings

391,942

126,671

Bonds

130,000

130,000

Deferred costs on loans(1,467)(1,468)

Total

520,475

255,203(amounts in thousands of Euro)

During the year, in order to increase its financial flexibility while taking advantage offavorable conditions available on the credit market, the Group arranged new medium/long-term bank loans as follows:- Euro 90 million from Intesa Sanpaolo, Euro 60 million from Monte dei Paschi diSiena and Euro 60 million from Unicredit; these loans are subject to compliance with anumber of covenants based on the PRADA spa Consolidated financial statements. The
covenants were all respected at January 31, 2016.
- Bilateral loans totaling JPY 5 billion from several Japanese banks, as detailed in thetable below.
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’s Headquarters.
The loan was disbursed in 2015 in the amount of Euro 55 million and is repayable inequal installments from November 2015.
The Group mainly borrows at variable rates of interest and manages the interest raterisk by entering into hedging agreements as described in Note 12.
At the reporting date, some 66% of non-current loans were at fixed rates of interest(83% at January 31, 2015) with variable rate loans making up the remaining 34% (17%at January 31, 2015).

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Details of long-term borrowing at January 31, 2016 are provided below:
Amount inthousandsof EuroBorrower

Loan currency

LenderExpiry date

Interest rate
(1)

PRADA spa

130,000

Euro

Bonds

08/20182.750%PRADA spa

60,000Euro

Unicredit

03/20190.755%PRADA spa

49,500Euro

Intesa SanPaolo

05/2030

2.737%PRADA spa

40,000Euro

Intesa SanPaolo

02/20190.608%PRADA spa

60,000Euro

Monte dei Paschi di Siena

12/2018

0.558%PRADA spa

33,334Euro

Intesa SanPaolo

12/20180.600%PRADA Fashion CommerceLtd

20,889ChineseRenminbi

Mizuho12/2018

3.915%PRADA Japan Co. Ltd

1,890Japanese Yen

Mizuho Bank

03/20171.875%PRADA Japan Co. Ltd

5,444

Japanese Yen

Syndicate loan

07/2018

1.057%PRADA Japan Co. Ltd

18,147

Japanese Yen

Syndicate loan

01/2018

1.057%PRADA Japan Co. Ltd

15,879Japanese Yen

Mizuho Bank

03/2020

1.360%PRADA Japan Co. Ltd

5,293

Japanese Yen

MUFG

03/20200.810%PRADA Japan Co. Ltd

2,647

Japanese Yen

Sumitomo Mitsui Trust

03/2020

1.180%PRADA Japan Co. Ltd

1,966Japanese Yen

SMBC

03/20180.455%

Kenon Ltd74,990

GB PoundUnicredit

01/20294.477%

Church & Co. ltd

1,963

GB Pound

HSBC

05/2018

2.026%

Total

521,942(1) the interest rates include the effect of any interest rate risk hedging transactions

Details of long-term borrowing at January 31, 2015 are provided below:
Amount inthousandsof EuroBorrower

PRADA spa

130,000

Loan currency

LenderExpiry 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

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

The Bonds are reported at a net amount of Euro 129.4 million (nominal amount of Euro
130 million as adjusted by Euro 0.6 million following application of the amortized cost
method). Their fair value at January 31, 2016 - as determined based on the official
listed price on the Irish Stock Exchange – is Euro 136.9 million.
All bank borrowing is analyzed by security profile as follows:(amounts in thousands of Euro)

January 31
2016

January 31
2015

Secured130,119

85,685

Unsecured

662,395

434,792

Total

792,514

520,477

All of the loans are analyzed by maturity date in the Liquidity Risk section of Note
12 on Liquidity risk. Other than PRADA spa, no Group company had issued any debt
securities at the end of the current year or previous year.
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25. Post-employment benefits
January 31
2016

January 31
2015

Post-employment benefits

44,57945,638Other long-term employee benefits

24,826

40,116

Total liabilities for long term benefits

69,40585,754Post-employment benefit (pension plan surplus)

7,778

2,515

Net liabilities for long term benefits

61,627

83,239(amounts in thousands of Euro)

Post-employment benefits
Liabilities and assets for post-employment benefits reported at January 31, 2016
totaled Euro 44.6 million, net (Euro 45.6 million at January 31, 2015) and all wereclassed as defined benefit plans. The pension plan surplus relates to Group companies
operating in the United Kingdom. It amounted to Euro 7.8 million at January 31, 2016
compared to Euro 2.5 million at January 31, 2015. This item is included in Other noncurrent assets, Note 18.
Post-employment benefits includes Euro 24.1 million (Euro 26.2 million at January 31,2015) of liabilities recorded in the financial statements of Italian companies and Euro
20.5 million reported by non-Italian companies (Euro 19.4 million at January 31, 2015).
The Italian liabilities for post-employment benefits regard the “Trattamento di Fine
Rapporto” (hereinafter “TFR” i.e. staff leaving indemnity), a deferred employee benefit
that must be paid by Italian businesses and is linked to length of working life andremuneration received. The present value of the liability as reported was determinedprojecting the benefit, accruing under Italian law at the reporting date, to the futuredate when the employment relationship will be terminated and discounting it at thereporting date using the actuarial “Projected Unit Credit Method (PUCM)”.
The following table shows movements on liabilities for post-employment benefits inthe year ended January 31, 2016.

(amounts in thousands of Euro)

Balance at January 31, 2015

DefinedBenefit Plans
in Italy (TFR)

DefinedBenefit Plans
in othercountries(including
Japan)

PensionFunds in UK

Other
long-term
employeebenefits

Total

26,265

19,373(2,515)

40,116

83,239

-

557

533

8,230

12,409Acquisitions

557-

Current service cost

168

3,478

Interest expenses (income)

28

182

(195)

52

67

(975)

(530)

(5,025)(341)(6,871)

Benefits paid

(1,937)(2,104)Contributions-

Exchange differences-

105

Other movements

-

(31)

24,106

20,473

Actuarial (gains)/losses

Balance at January 31, 2016

PRADA Group

Annual Report 2015-15aprile.indd 153(23,289)(27,330)

(906)

-

(906)

330

(9)

426

67

36

24,826

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

DefinedBenefit Plans
in OtherCountries(including
Japan)

PensionFunds in UK

1,015

(266)

(1,019)

(40)

796

6,044

-

-

-

975

530

5,025

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

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 determined based 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 thedemographic 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, 2016, these pension
plans had a fair value of Euro 7.8 million (net surplus of Euro 2.5 million as at January
31, 2015). The fair value of the assets was determined based on the appraisal provided
by independent UK-registered actuary Scottish Widows. They are analyzed as follows:(amounts in thousands of Euro)

January 31
2016

January 31
2015

Fair value of plan assets

62,256

69,413

Fair value of plan liabilities(54,478)(63,591)

7,778

5,822

-

(3,307)

7,778

2,515

January 31
2016

January 31
2015

Equities

26,82924,991

Alternatives

7,729

5,927

Bonds

26,95636,800

Cash

742

1,695

Total

62,256

69,413Pension plan surplus
Restrictions on recognition of surplus applied during actuarial valuation of the plan
Net surplus

At the reporting date, the main pension plan assets were as follows:(amounts in thousands of Euro)154

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The main actuarial assumptions utilized at January 31, 2016 are as follows:
Defined Benefit
Plans in Italy(TFR)

January 31, 2016

Average duration of plan (years)

PensionFunds in UK

Defined Benefit
Plans in Japan

11.5

15.0

16.5

1.57%

3.80%

0.87%

Average increase in remuneration

1.80%

2.00%

3.01%

Rate of inflation

1.50%

1.80%

N/A

Discount rate

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)

PensionFunds 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

Discount rate

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, 2016 i.e. discount rate, remuneration changes 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 5.8 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
2017

January 31
2018

January 31
2019

January 31
2020

After
January 31
2020

Defined Benefit Plans in Italy (TFR)

1,637

1,164

1,222

1,255

24,029Pension Funds UK

2,445

2,464

2,489

2,569

17,386

Defined Benefit Plans Japan

1,651

1,761

1,674

1,644

23,200

5,733

5,389

5,385

5,468

64,615The contributions expected for the 2016 fiscal year are as follows:
twelve months
ended
January 31, 2017
Defined Benefit Plans in Italy (TFR)
Pension Funds UK

397

Defined Benefit Plans Japan

2,830
3,227

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Other long-term employee benefits
Other long-term employee benefits come under the IAS 19 category “Other long-term
employee benefits” and relate to long-term retention and performance plans in favorof Group employees. As at January 31, 2016, their actuarial valuation, obtained using
the Projected Unit Cost Method, was Euro 24.8 million (Euro 40.1 million as at January
31, 2015), as determined based on an independent actuarial appraisal. The decrease
compared to January 31, 2015 mainly relates to benefits paid during the year (Euro23.3 million) while the amount relating to new plans is Euro 8.2 million.
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, 2015

Provision
for litigation

Provision fortax disputes

Other
provisions

Total

1,876

25,53736,282

63,695(164)

Exchange differences

(1)

2

(165)

Reclassifications

70

(70)

-

-

Reversals

(101)

(264)

(228)

(593)

Utilized(247)(2,613)(3,324)(6,184)

Increases

444

254

11,781

12,4792,041

22,84644,346

69,233

Balance at January 31, 2016

Provisions for risks and charges represent the Directors’ best estimateof maximum contingent liabilities. In the Directors’ opinion and based on
the information available to them, as also supported by the opinions of
independent experts at the reporting date, the total amount provided for risks
and charges is reasonable considering the contingent liabilities that could arise.
Provision for tax disputes
Details of the Group’s main tax disputes are provided 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 2002 fiscal
year. The assessments regarded the sales of the “Genny” and “Byblos” businesses
which the authorities requalified as sales of the respective brands. The amountassessed was about Euro 21 million. The Company successfully appealed at thefirst and second levels of appeal. The Tax Authority then announced its appeal to theSupreme Court of Cassation against which the Company submitted a counter appeal.
There were no further developments in 2015.
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, theCompany then made a further appeal to the Supreme Court of Cassation against which
the Tax Authority filed its own counter appeal. There were no further developments in
2015.
In May 2012, the Italian Customs Authority began an audit of PRADA spa for 20072011 tax years with reference to the method used to evaluate imported products in

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specific circumstances. This audit led to the detection of customs irregularities subject
to administrative and criminal penalties; PRADA spa provided all of the documentation
requested. 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 completion of the criminal
proceedings which were discontinued in 2015. Even though, in 2014 and 2015, PRADA
spa received two amended notices of assessment from the customs authorities inrelation to customs duties (and related demands for payment), the Directors do notbelieve that any provision need be made. Indeed, the Company has submitted its
comments in relation to the amended notices of assessment issued in 2014 and in
relation to those issued in 2015. Moreover, after its petition for suspension of thedemand for payment was rejected, Prada spa has paid the tax demands issued in themeantime while also filing the necessary appeals by the legally required deadlines.
In October 2012, October 2013 and October 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 order to reduce the risk of application of additional penalties in case of
assessment, PRADA spa paid some Euro 67 million, including Euro 42 million recordedin the 2012 income statement, Euro 22 million in the 2013 income statement and Euro
3 million in the 2014 income statement (under taxation). The amounts paid represented
the taxes due in Italy by PRADA spa on the taxable income of PRADA Far East bv. In
October 2012, October 2013, May 2014 and October 2014, the Italian tax authorities
also declared inadmissible the requests filed by PRADA spa for the tax years from 2010
to 2013 not to apply CFC rules to other Group countries operating in black list countries.
In January 2013, January 2014, July 2014 and January 2015, 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 declaration of inadmissibility of its petitions
regarding the other “black list” companies; it also requested the reimbursement of theamounts paid in relation to PRADA Far East bv. In October 2015, the Italian tax authorities
approved Prada spa’s request for the non-application of CFC rules for 2014 in relation
to Group subsidiaries operating in black list countries; this decision is effective from2014 onwards upon condition that there are no significant changes to the structure of
the companies involved. As for the Dutch sub-holding company PRADA Far East bv,
the CFC ruling for the non-application of the CFC legislation was not submitted for thetax year 2014 due to the absence of the legal regulatory requirements to qualify said
sub-holding as a CFC company. Consequently, no tax costs resulting from CFC rules
have been recorded for said company in the 2015 income statement.
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. Between August 2015 and November 2015, after the French tax
authorities gave their final confirmation of the amount due, the company made thenecessary payments and released the provision that had been created.
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 22.8 million carried at January 31, 2016 in respect of the tax disputes
described above represents the best estimate of the obligations that the Group could
be called upon to fulfill.

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Provision for litigation
The provision for litigation amount to Euro 2 million at January 31, 2016 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 amount to Euro 44.3 million as at January 31, 2016 andmainly related to contractual obligations to return commercial premises held underlease agreements in their original state. The increase of the year is mainly related toonerous leases.
27. Other non-current liabilities
Other non-current liabilities amount to Euro 161.3 million (Euro 128.8 million as atJanuary 31, 2015). They mainly regarded liabilities to be recognized on a straight-line
basis in relation to commercial lease costs.
28. Shareholders’ equity - Group
Group shareholders’ equity is as follows:
January 31
2016

January 31
2015

Share Capital

255,882

255,882

Share premium reserve

410,047410,047

Other reserves

1,959,304

1,790,771

Actuarial reserve(8,161)(13,481)

Fair value reserve933

11,115

Cash flow hedge reserve(7,100)(35,323)

Translation reserve

138,547

130,996

Net income for the period

330,888

450,730

3,080,340

3,000,737(amounts in thousands of Euro)

Total

Share capital
At January 31, 2016, some 80% of the share capital of PRADA spa was held by PRADA
Holding spa while the remainder was listed 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,
2015.
Translation reserve
Movements on this reserve relate to the translation of foreign currency financial
statements of consolidated companies. The reserve passed has increased from Euro131 million at January 31, 2015 to Euro 138.5 million. The positive change of Euro
7.6 million is mainly due to the strengthening of the Hong Kong Dollar and the US
Dollar which have gained 3% and 3.4%, respectively, against the Euro. Meanwhile, theweakening of the Russian Ruble and Korean Won against the Euro has had a negative
impact on the translation reserve.

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Other reserves
At January 31, 2016, other reserves amount to Euro 1,959 million. They increased byEuro 168.5 million compared to January 31, 2015. The increase was mainly related toallocation of net income for the previous year (Euro 450.7 million) less the distributionof 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 330.9 million (Euro 450.7 million
for the twelve months ended January 31, 2015).
Capital gains 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-controllinginterests during the years ended January 31, 2016 and January 31, 2015.
(amounts in thousands of Euro)

Opening balance

January 31
2016

January 31
2015

17,41013,986

Translation differences

29

2,085

Dividends(3,228)(9,378)Net income for the year

2,450

8,488

Actuarial reserve
Capital injection in subsidiaries
Acquisition of Marchesi Angelo srl
Transactions with non-controlling shareholders
Closing balance

6

(3)

409

2,125

-

107

(39)

-

17,037

17,410

The Capital injection in subsidiaries, amounting to Euro 0.4 million, refers to Pellettieri
d’Italia Srl. In 2015, the remaining non-controlling interests (40%) in said company
were acquired and it was merged through incorporation into direct parent PRADA spa.
30. Net revenues
Consolidated net revenues are mainly generated by sales of finished products and arestated net of returns and discounts.
twelve months
ended
January 31
2016

twelve months
ended
January 31
2015

Net sales

3,504,344

3,513,436

Royalties

43,42738,2603,547,771

3,551,696(amounts in thousands of Euro)

Total

A breakdown of net revenues by brand, distribution channel, geographical area andproduct is provided in the Financial Review.

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31. Cost of goods soldCost of goods sold is analyzed as follows:
twelve months
ended
January 31
2016

twelve months
ended
January 31
2015

Purchases of raw materials and production costs

858,481

971,527

Logistics costs, duties and insurance

180,944

204,112

Change in inventories(59,219)(174,522)

Total

980,206

1,001,117(amounts in thousands of Euro)

Cost of goods sold decreased from 28.2% of net revenues in 2014 to 27.6% in 2015.
The improvement was achieved thanks to the effects of industrial efficiencies and priceadjustments made to balance the spreads among countries. The favorable trend of
foreign currencies had a further positive impact.
32. Operating expenses
Operating costs are analyzed as follows:(amounts in thousands of Euro)

twelve months
ended
January 31
2016% of netrevenues

twelve months
ended
January 31
2015% of netrevenues

Product design and development costs

134,272

3.8%

132,583

3.7%

Advertising and communications costs

191,695

5.4%

170,5624.8%

1,517,443

42.8%

1,340,832

37.8%

221,2626.2%

205,0515.8%

2,064,672

58.2%

1,849,028

52.1%

Selling costs
General and administrative costs
Total

During the period in response to constant but unforeseeable changes to the economic
environment which slowed down sales in some regions, management identified a
range of measures designed to limit pressure on operating profit. Consequently,
specific measures were adopted in order to make retail and industrial processes more
efficient, contain discretionary costs and postpone certain capital expenditure projects.
Operating expenses increased as a percentage of net revenues essentially becauseof retail network espansion had a lack of sales growth. In fact, selling costs increased
from Euro 1,340.8 million to Euro 1,517.4 million, or from 37.8% to 42.8% of net
revenues in relation to the fixed costs included in this caption (labor costs, rents anddepreciation).
As part of advertising and communication, which remain essential activities to sustain
revenues, the Group favored initiatives aimed at strengthening brand identity e.g.
sponsorships, institutional events and special projects and at supporting the relationships
with customers, also through increasingly sophisticated use of the digital channel.
In this regard, it is worth highlighting the Digital Retail project launched towards theend of the year and aimed at increasing the customer involvement through direct andpersonalized interactions.
Product design and development costs, totaling Euro 134.3 million or 3.8% of net
sales, were in line with prior year.
General and administrative costs were also subject to cost containment measures
although they were, at the same time, affected by certain non-recurring expenses such

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as indemnities and onerouse leases.
The following table shows the depreciation, amortization and impairment costs, laborcosts and rental costs included in operating costs.
twelve months
ended
January 31
2016

twelve months
ended
January 31
2015

Depreciation, amortization and impairment

268,165

240,655

Labor cost

599,865

542,042

Variable rent

359,093

312,011

Fixed rent

301,189

261,003

1,528,312

1,355,711(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
2016

twelve months
ended
January 31
2015

Interest expenses on borrowings(14,779)(12,891)

Interest expenses IAS 19
Interest income

(44)

(400)

3,816

3,314

Exchange gains / (losses) – realized

3,221

8,854

Exchange gains/ (losses) – unrealized(17,489)(30,045)

Other financial income / (expenses)(4,597)(3,136)

Total(29,872)(34,304)

Interest expenses on borrowings have increased compared to 2014 because of higher
average bank borrowing during the year.
34. Dividends from investments
As at January 31, 2016, 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 2015, the dividends accrued from said company amounted to Euro 2,311 thousand(Euro 455 thousand in 2014).

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

twelve months
ended
January 31
2016

twelve months
ended
January 31
2015

Current taxation

158,157

252,712Deferred taxation(16,163)(44,228)

Income taxes

141,994

208,484

In absolute terms, the tax burden for the year is lower than in prior year (down fromEuro 208.5 million to Euro 142 million). Total income taxes have also decreased as apercentage of profit before taxation (from 31.2% in 2014 to 29.9% in 2015) because ofa different geographical distribution of taxable income and tax losses.
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
2016(amounts in thousands of Euro)

Weighted average tax rate of the Group

28.1%

Costs and revenues not taxable/deductible

0.1%

Effect of utilization of tax loss carryforwards

0.3%

Prior year taxes-1.1%

Withholdings

2.5%

Effective tax rate of Group

29.9%

Movements on net deferred tax assets and deferred tax liabilities are shown in thefollowing table:(amounts in thousands of Euro)

Opening balance
Exchange differences

twelve months
ended
January 31
2015

239,349

158,574

528

21,549Deferred taxes on derivative instruments recorded in equity (cash flow hedges)(10,684)

13,795

Deferred taxes on post-employment benefits recorded in equity (reserve for actuarial
differences(1,200)306

Other movements

162

twelve months
ended
January 31
2016

(466)

897

Deferred taxes for the period in income statement

16,16344,228

Closing balance

243,690239,349

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The following table shows deferred tax assets and liabilities classified by nature:
January 31, 2016
(amounts in thousands of Euro)Deferred tax
assetsInventories

January 31, 2015

Deferred tax
liabilities

Deferred tax
assetsDeferred tax
liabilities

140,922-

137,815-

Receivables and other assets

386

1,616

506

1,541

Useful life of non-current assets

60,255

9,848

54,47813,248-20,725-21,787

Provision for risks / accrued expenses

49,611

2,561

47,6272,436

Non-deductible / taxable charges/income

12,653446

10,896

1,795

Tax loss carryforwards

3,809

-

5,411

-

Derivative financial instruments

1,800

35

12,577-

Long term employee benefits

9,268

1,401

10,041

507

Other

1,868

250

1,632

320

Total

280,572

36,882

280,983

41,634

Deferred taxes due to acquisitions

Tax loss carryforwards at January 31, 2016, including those already accrued in theGroup financial statements, are analyzed below:(amounts in thousands of Euro)

January 31, 2016

Expiring within 5 years

12,401

Expiring after 5 years

36,616

Available for carryforward with no time limit

72,629Total tax loss carryforwards

121,646

The Directors have updated their assessment of deferred tax assets recognized on
tax loss carryforwards taking account of the general macroeconomic environment anddevelopments regarding the business activities of each Group company.
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
2016Group 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
2015

330,888,425

450,730,284

2,558,824,000

2,558,824,000

0.129

0.176

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, 2016.
During the year ended January 31, 2016, the Company distributed dividends of Euro
281,470,640, as approved by the Shareholders’ Meeting held on May 26, 2015 toapprove the financial statements for the year ended January 31, 2015. Payment of
the dividends and the related Italian withholding tax liability (Euro 11.3 million), arisingfrom the application of the Italian ordinary withholding tax rate to the full amount of
PRADA Group

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dividends paid to beneficial owners of the Company shares held through the Hong
Kong Central Clearing and Settlement System, was completed by January 31, 2016.
Details of the dividends paid in the last three years are provided below:
Financial statements ended
January 31,
2015

Financial statements ended
January 31,
2014

Financial statements ended
January 31,
2013

Total dividends paid (Euro)

281,470,640

281,470,640

230,294,160

Dividends per Share (Euro)

0.11

0.11

0.09

Date of approval by Shareholders’ Meeting

26/05/2015

22/05/2014

23/05/2013

Date of payment

June 2015

June 2014

June 2013

37. Additional information
The average headcount by functional area in twelve months ended January 31, 2016
and January 31, 2015 was as shown below:
twelve months
ended
January 31
2016

twelve months
ended
January 31
2015

Production

2,114

2,013

Product design and development

1,038

973

Advertising and Communications

119

115

Selling

8,129

7,866

General and administrative services

1,014

995

Total

12,414

11,962(number of employees)

Employee remuneration
Employee remuneration by functional area for the twelve months ended January 31,
2016 and January 31, 2015 is analyzed below:
twelve months
ended
January 31
2016

twelve months
ended
January 31
2015

Production

102,714

96,905

Product design and development

67,60866,783Advertising and Communications

13,157

12,066

Selling

418,931376,724

General and administrative services

100,133

86,469

Total

702,543638,947(amounts in thousands of Euro)164

PRADA Group

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Employee remuneration by nature for the twelve months ended January 31, 2016, andJanuary 31, 2015 is analyzed below:
twelve months
ended
January 31
2016

twelve months
ended
January 31
2015

Wages and salaries

527,975

482,826

Post-employment benefits and other long-term benefits

32,985

29,105Social contributions

109,191

104,544

Other

32,392

22,472

Total

702,543638,947(amounts in thousands of Euro)Distributable reserves of parent company PRADA spa(amounts in thousands of Euro)

January 31
2016

Possibleutilization

Distributableamount410,047

Share Capital

255,882

Share premium reserve

410,047

A, B, C

Legal reserve

51,176B

Other reserves

182,899

A, B, C

182,899

Retained earnings

454,651

A, B, C434,135

Cash flow hedge reserve

Summary of utilizationin the last three years
Coverage oflossesDistribution ofdividends-

588,530

93

Distributable amount

1,027,081

588,530

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

Under Italian law (art. 2431 of Italian Civil Code), the share premium reserve is fully
distributable as the legal reserve has reached an amount equal to 20% of share capital.
The non-distributable portion of Retained earnings, Euro 20,516 million, refers to
restricted reserves under Article 7 of Legislative Decree 38/2005.

PRADA Group

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Exchange rates
The exchange rates against the Euro used to consolidate statements of financial
position and Statement of Profit or Loss prepared in other currencies as at January 31,
2016 and January 31, 2015 are shown below:
Currency

Average ratein prior year

Closing rate

Opening rate

US Dollar

1.103

1.313

1.092

1.131

Canadian Dollar

1.429

1.460

1.536

1.432

GB Pound

0.725

0.801

0.764

0.751

Swiss Franc

1.067

1.203

1.114

1.047

Australian Dollar

166

Average rate

1.486

1.464

1.539

1.454

Korean Won

1,259.326

1,383.862

1,318.600

1,246.540

Japanese Yen

133.080133.531140.037132.250

Hong Kong Dollar

8.557

10.179

8.510

8.764

Singapore Dollar

1.525

1.669

1.555

1.529

Thai Baht

38.10042.61438.97337.055

Taiwan Dollar

35.20139.90936.57235.582

Russian Ruble

68.75253.42082.84779.925

Czech Koruna

27.21327.56627.02627.797

Macau Pataca

8.813

10.484

8.764

9.027

Chinese Renminbi

6.966

8.106

7.181

7.064

New Zealand Dollar

1.603

1.590

1.679

1.557

Malaysian Ringgit

4.378

4.320

4.530

4.110

Turkish Lira

3.070

2.882

3.237

2.758

Brazilian Real

3.799

3.108

4.429

3.011
16.838Mexican Peso

17.811

17.58820.005

UAE Dirham

4.053

4.821

4.011

4.152

Ukrainian Hryvna

24.92016.33127.42318.28310.837

Moroccan Dirham

10.811

11.14510.767

Kuwait Dinar

0.333

0.375

0.332

0.334

Danish Kronor

7.460

7.453

7.463

7.444

Swedish Kronor

9.341

9.144

9.348

9.361

Kazakhstani Tenge

262.094238.559397.880209.180

Qatari Riyal

4.019

4.780

3.952

4.127

Indian Rupee

71.27480.06774.10470.113

Saudi Riyal

4.139

4.924

4.095

4.252

South African Rand

14.50914.29817.49313.103

Vietnamese Dong

23,961.811

27,822.140

23,922.500

24,308.000

Indonesian Rupiah

14,901.001

15,602.414

14,967.640

14,342.100

PRADA 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, 2016 and January 31, 2015,
together with non-audit services, are illustrated below:
Type of service

Audit Firm

Provided to

twelve months
ended
January 31,
2016

twelve months
ended
January 31,
2015

Audit services

Deloitte & Touche spa

PRADA spa

485

480

Audit services

Deloitte & Touche spa

Subsidiaries

162

174

Audit services

Deloitte Network

Subsidiaries

1,294

1,210

1,941

1,864

Total audit fees accruing
Other advisory services
Other advisory services

Deloitte Network

PRADA spa

880

14Deloitte Network

PRADA spa andsubsidiaries

247

265

1,127

279

99

50

3,167

2,193

Total non-audit fees accruing
Out of pocket expenses
Total independent auditor’s compensation accruing

The Other advisory services amounting to Euro 880 thousand provided by the Deloitte
Network to PRADA spa mainly relate to advisory services to support the analysis of
Human Resources data management, to the organization process aimed at creating a
Data Warehouse and some customer segmentation activities.
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, 2016(amounts in thousands of Euro)

Directors’fees

Remunerationand otherbenefits

Bonusesand other
incentives

Benefits inkind

Pension,healthcare
and TFR
contributions

January 31,
2016

Carlo Mazzi

1,020

-

-

83

16

1,119

Miuccia Prada Bianchi

10,561

2,675

-

-

21

13,257
13,332

Patrizio Bertelli

10,561

1,500

1,250

-

21

Donatello Galli

50

407

208

40

186

891

Alessandra Cozzani

50

190

97

13

94

444

Gaetano Micciché

46

-

-

-

-

46

Gian Franco Oliviero Mattei

147

-

-

-

13

160

Giancarlo Forestieri

70

-

-

-

11

81

Sing Cheong Liu

70

-

-

-

15

85

22,575

4,772

1,555

136

377

29,415

TotalePRADA Group

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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

January 31,
2015

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.

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, 2016, and the remaining three of the five highest paid
individuals in the period ended January 31, 2015, was as follows:
twelve months
ended
January 31
2016

twelve months
ended
January 31
2015

Remuneration and other benefits

10,644

9,463

Bonuses and other incentives

1,607

2,245

Non-monetary benefits

218

181

Pension/social security, healthcare and TFR contributions

397

361

12,866

12,250(amounts in thousands of Euro)Total

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

168

twelve months
ended
January 31
2016

twelve months
ended
January 31
2015

Less than HKD 12,500,000--

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

1

1Total individuals

3

3

PRADA Group

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Remuneration of Senior Managers
The remuneration of Senior Managers was as follows:
twelve months
ended
January 31
2016

twelve months
ended
January 31
2015

Remuneration and other benefits

19,872

17,968Bonuses and other incentives

5,207

5,691

Non-monetary benefits

1,458

2,421

Pension/social security, healthcare and TFR contributions

3,159

3,141

Total

29,69629,221(amounts in thousands of Euro)The Senior Managers at January 31, 2016 are 31, while they were 35 in prior year.
The remuneration of the Senior Managers fell into the following ranges:(amounts in Hong Kong Dollars)

twelve months
ended
January 31
2016

twelve months
ended
January 31
2015

Less than HKD 4,000,000

66between HKD 4,000,000 and HKD 8,000,000

21

25

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

33between HKD 16,000,000 and HKD 50,000,000--

More than HKD 50,000,000

1

1Total Senior Managers

31

35

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 the impact of related party transactions in terms of statementof financial position balances at the reporting date and the total of transactions with anincome statement impact.

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Statement of financial position amounts at January 31, 2016

(amounts in thousands of Euro)

Receivables Receivablesfrom andfrom andadvances
advancesTradeto parent
to parent
receivables companies companies
and related and relatedparties –parties –current non current

PayablesPayablesto parent
to parent
Trade companies companies
payables and related and relatedparties –parties –current non current

Other
Liabilities

STICHTING Prada (ex Stiching
Fondazione Prada)

(1)

-

-

-

-

-

-

Progetto Prada Arte Srl

(12)

-

703

(503)

-

-

-

Progetto Prada Arte Srl(Galleria) (*)

1,632

HMP Srl

8

-

-

-

-

-

-

Al Tayer Group LLC

-

-

-

4

-

-

-

Al Tayer Insignia LLC

-

-

-

21

2,455

-

-

Danzas LLC - UAE

-

-

-

-

37

-

-

DFS Hawaii

-

-

-

660

-

-

-

DFS New Zealand Limited

-

-

-

35

-

-

-

DFS Venture Singapore (Pte)
Limited

-

-

-

44

-

-

-

Luna Rossa Challenge 2013 Srl

56

13,626

3,164

7

26

-

-

Al Tayer Motors

-

-

-

1

-

-

-

Secva Srl

-

5,848

-

4,279

-

-

-

DFS DFS Cotai limitada

54

-

-

905

-

-

-

Al Tayer Trends

14

-

-

-

-

-

-

Al Sanam Rent a Car LLC

-

-

-

2

-

-

-

Peschiera Immobiliare srl

-

-

-

64

-

-

-

Premiata Srl

63

-

-

476

-

-

-

La Mazza srl

63

-

-

823

-

-

-

Friuli 64 srl

-

-

-

152

-

-

-

SPELM SA

-

75

-

-

-

-

-

Conceria Superior S.p.A.

2

-

-

3,083

-

-

-

PRADA HOLDING S.P.A.

502

-

-

-

-

-

-

24,118

-

-

1,496

322

-

-

PRA 1 S.r.l.

-

80

-

144

-

-

-

Perseo srl

21

-

-

1,222

-

-

-

Rubaiyat Modern Lux.Pr.Co.Ltd

123

-

-

2,083

2,404

-

-

Members of the Board of Directorsof PRADA spa

-

-

-

-

-

-

2,652

Relatives of members of the Boardof Directors

-

-

-

-

-

-

72

25,011

19,6295,499

14,998

5,244

-

2,724

Fratelli Prada SpA

Total at January 31, 2016(*)The non-current receivable of Euro 1,632 thousand recognized in relation to Progetto Prada Arte srl represents deferred
rental income upon application of “IAS 17 Leases” to the temporary business partnership between PRADA spa and Progetto
Prada Arte srl.

170

PRADA Group

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Statement of financial position amounts at January 31, 2015

(amounts in thousands of Euro)

Receivables Receivablesfrom andfrom andadvances
advancesTradeto parent
to parent
receivables companies companies
and related and relatedparties –parties –current non current

PayablesPayablesto parent
to parent
Trade companies companies
payables and related and relatedparties –parties –current non current

Other
Liabilities

DFS 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

-

-

-

-

DFS Cotai ltd
DFS New Zealand ltd
F.lli PRADA spa (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

-

13,384-Pelletteria Reta srl

-

15

-

38

13

-

-

Other

2

-

-

5

1

-

-

160

5

-

1

-

-

-

Members of the Board of Directorsof PRADA spa

-

-

-

-

-

-

143

Relatives of members of the Boardof Directors

-

-

-

-

-

-

432

36,921

3,240

17,42926,443

3,083

13,384575

PRADA Holding spa

Total at January 31, 2015(*)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 Prada
spa.
(**)The non-current receivable of Euro 1,135 thousand recognized in relation to Progetto Prada Arte srl represents deferred
rental income upon application of “IAS 17 Leases” to the temporary business partnership between PRADA spa and Progetto
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 Progetto Prada Arte srl in compliance with temporary business partnership between PRADA spa andProgetto Prada Arte srl.

PRADA Group

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Statement of Profit or Loss for the twelve months ended January 31, 2016

(amounts in thousands of Euro)STICHTING Prada (ex Stiching
Fondazione Prada)
Progetto Prada Arte Srl

Netrevenues

Cost ofgoods soldGeneral,admin.
& sellingcosts(income)Royalties
incomeInterest
incomeInterest
expense

16

-

(152)

-

-

-

-

459

(242)

-

19

-

Progetto Prada Arte Srl (Galleria)(**)(1,318)

HMP Srl

-

-

13

-

-

-

Al Tayer Group LLC

-

-

48

-

-

-

Al Tayer Insignia LLC

-

43

359

-

-

-

Danzas LLC - UAE

-

981

125

-

-

-

Al Tayer Travels

-

6

42

-

-

-

(2)

-

4,436

-

-

-

DFS New Zealand Limited

-

-

300

-

-

-

DFS Venture Singapore (Pte)
Limited

-

-

316

-

-

-

Luna Rossa Challenge 2013 Srl-

DFS Hawaii

18-

13,544--Al Tayer Motors

-

-

8

-

-

-

Secva Srl

-

-

2,605

-

-

1

DFS DFS Cotai limitada

-

-

6,170

-

-

-

Al Sanam Rent a Car LLC

-

-

11

-

-

-

Peschiera Immobiliare srl

-

-

522

-

-

-

Premiata Srl

-

3,156

1

-

-

-

La Mazza srl

-

2,032

16

-

-

-

Fin_Reta Srl

-

-

125

-

-

-

Pelletteria Reta srl

-

17

51

-

-

-

Friuli 64 srl

-

-

718

-

-

-

SPELM SA

-

-

468

-

-

-

Gran Caffè snc

-

7

1

-

-

-

Rubaiyat Modern Lux. Prod. Ltd

-

-

(858)

212

-

-

Conceria Superior S.p.A.

-

22,750

130

-

-

-

PRADA HOLDING S.P.A.

-

-

(347)

-

-

-

30,349

125

(558)

908

-

-

Fratelli Prada SpA (franchising)
Fratelli Prada (galleria) (*)-

PRA 1 S.r.l.

-

-

1,187

-

-

-

PABE-RE LLC.

-

-

8,342

-

-

-

Perseo srl

-

1,154

-

-

-

-

Rubaiyat Modern Lux.Pr.Co.Ltd

6,621

6,443

(23)

-

-

-

Relative of PRADA spa Director

-

-

742

-

-

-

37,002

37,17339.459

1,120

19

1

Total at January 31, 2016

2,677(*) This amount contains non-monetary income in the form of deferred rental income of Euro 3,174 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 387 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.

172

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Statement of Profit or Loss for the twelve months ended January 31, 2015
(amounts in thousands of Euro)Net
revenues

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

-

-

(129)

-

-

-

Other subsidiaries of 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

-

-

-

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 PRADA spa Director

-

-

652

-

-

-

36,85828,67736,457

1,283

22

152

Total at 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.

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 “PABE-RE LLC” refer to the transaction between
PABE-RE LLC and Prada Japan in relation to the rental contract for the Aoyama Building
PRADA Group

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in Tokyo. The transactions reported for the twelve months ended January 31, 2016 fallwithin the scope of application of Chapter 14A of the Hong Kong Stock Exchange
Listing Rules as they were qualified as continuing connected transactions subject
to reporting and disclosure but exempted from independent shareholders’ approvalrequirements. As requested by the Listing Rules, comprehensive disclosure of thesecontinuing connected transactions is contained in the PRADA spa Announcement
dated July 15, 2015.
The transactions with related party “Fratelli Prada spa – franchising” refer totransactions between the PRADA Group and Fratelli Prada spa in relation to thefranchising agreement regarding the Prada stores in Milan. The transactions reported
for the twelve months ended January 31, 2016 fall within the scope of application ofChapter 14A of the Hong Kong Stock Exchange 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 iscontained in the PRADA spa Announcement dated January 29, 2014 while a summary
update is reported in the Corporate Governance section of this 2015 Annual Report.
The transactions with related party “Fratelli Prada spa – Galleria” refer to thetransactions between the PRADA Group and Fratelli Prada spa in relation to thebusiness management agreement over the use by the latter of part of the Galleria
Vittorio Emanuele II property in Milan to conduct retail business. The transactions
reported refer to the period from February 1 to April 1, 2015, following the terminationagreement signed by the parties on March 31, 2015, details of which were reported in
the Prada spa Announcement of April 2, 2015.
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
the temporary business partnership agreement regarding the use by the latter of partof the Galleria Vittorio Emanuele II property in Milan to carry out cultural activities.
The transactions reported for the twelve months ended January 31, 2016 fall within
the scope of application of Chapter 14A of the Hong Kong Stock Exchange 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 2015 Annual Report.
The transactions with related party Luna Rossa Challenge 2013 srl reported forthe twelve months ended January 31, 2016 fall within the scope of application ofChapter 14A of the Hong Kong Stock Exchange Listing Rules as they were qualified
as connected transactions subject to reporting and announcement but exempted fromthe independent shareholders’ approval requirement. As requested by the Listing
Rules, comprehensive disclosure of these connected transactions was included in
the PRADA spa Announcements dated February 27, 2014 while a summary update isreported in the Corporate Governance section of this 2015 Annual Report.
Other than the “non-exempt continuing connected transactions”, the “non-exempt
connected transactions”, no other transaction reported in the 2015 Consolidated
financial statements falls under the definition of “connected transaction” or “continuingconnected transaction” provided by Chapter 14A of the Hong Kong Stock Exchange
Listing Rules or, if it does fall under the definition of “connected transaction” or“continuing connected transaction” in terms of said Chapter 14A, is exempt from
reporting, disclosure and independent shareholders’ approval requirements again
under Chapter 14A.

174

PRADA Group

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40. Commitments
Operating leases
At January 31, 2016 and January 31, 2015, operating lease commitments by maturity
date were as follows:(amounts in thousands of Euro)Within a year

twelve months
ended
January 31
2016

twelve months
ended
January 31
2015

435,241

406,528

After between one year and five years

1,218,665

1,228,000

After more than five years

1,053,674

850,197

Total

2,707,580

2,484,725

Operating lease commitments for the 2015 reporting period include Euro 2,636 million
regarding lease agreements for retail premises (Euro 2,398 million for 2014).
The increase in operating lease commitments is mainly due to the expansion of theretail network.
The amounts recorded in the income statement in relation to lease agreements forthe twelve months ended January 31, 2016 and January 31, 2015 are shown below:(amounts in thousands of Euro)

twelvemonthsended
January 31
2016

twelvemonthsended
January 31
2015

Fixed minimum lease expenses

303,451

261,003

Variable lease expenses

359,093

312,011

Total

662,544573,014

Some Group companies are required to pay lease expenses based on a fixed percentageof net sales.
At January 31, 2016 and January 31, 2015, future rental income under current operatingleases for properties owned by the Group was analyzed by maturity as follows:
twelve months
ended
January 31
2016

twelve months
ended
January 31
2015

Within a year

6,776

13,471After between one year and five years

23,70950,277After more than five years

19,28695,427

Total

49,771

159,175(amounts in thousands of Euro)

The decrease in future rental income mainly regards the termination of the business
management agreement between PRADA spa and the related party Fratelli Prada asreported in Note 39.

PRADA Group

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Other commitments
At January 31, 2016, the Group had no significant binding purchase commitments.
41. Historical Statement of Profit or Loss and statement of financial position
highlights
January 31
2016

January 31
2015

January 31
2014

January 31
2013

January 31
2012

Net revenues

3,547,771

3,551,696

3,587,347

3,297,219

2,555,606

Gross margin

2,567,565

2,550,579

2,648,649

2,376,541

1,828,025

Operating income (EBIT)

502,893

701,551

939,237

889,781

628,935

Group net income

330,888

450,730

627,785625,681431,929

Total assets

4,756,555

4,738,877

3,888,292

3,385,279

2,943,568

Total liabilities

1,659,178

1,720,730

1,186,752

1,054,787

1,112,601

Total Group shareholders’ equity

3,080,340

3,000,737

2,687,554

2,320,022

1,822,743(amounts in thousands of Euro)176

PRADA Group

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42. Consolidated companies
Local
currency

Company

Sharecapital%(000s
interestof localcurrency)

Registeredoffice andprincipal
country ofoperations

Date ofincorporation/ Main businessestablishment

ItalyGroup Holding /Production/Distribution

PRADA Spa

EUR

255,882

Milan, IT

Artisans Shoes Srl (*)

EUR

1,000

66.70

Montegranaro, IT

09/02/1977

Production

IPI Logistica Srl (*)

EUR

600

100.00Milan, IT

26/01/1999

Services

PRADA Stores Srl (*)

EUR

520

100.00Milan, IT

11/04/2001

Retail/ Services

Church Italia Srl

EUR

51

100.00Milan, IT

31/01/1992

Distribution/Retail

Marchesi Angelo Srl (*)

EUR

23

80.00

Milan, IT

10/07/2013

Confectionary

Montenapoleone 9 Srl (*)

EUR

250

98.00

Milan, IT

22/04/2015

Confectionary

PRADA Retail UK Ltd

GBP

5,000

100.00London, UK

07/01/1997

RetailPRADA Germany Gmbh

EUR

215

100.00

Munich, GE

20/03/1995

RetailPRADA Austria Gmbh

EUR

40

100.00Vienna, AT

14/03/1996

RetailEuropePRADA Spain Sl

EUR

240

100.00Madrid, ES

14/05/1986

RetailPRADA Retail France Sas

EUR

4,000

100.00Paris, FR

10/10/1984

RetailPRADA Hellas Sole Partner
Llc (*)

EUR

2,850

100.00Athens, GR

19/12/2007

RetailPRADA Monte-Carlo Sam

EUR

150

100.00Monte-Carlo,FR

25/05/1999

Retail

29/07/1994

Trademark Owner/
Services

PRADA Sa (*)

EUR

31

100.00

Luxembourg,
LU

PRADA Company Sa

EUR

3,204

100.00

Luxembourg,
LU

12/04/1999

Service

PRADA Far East Bv (*)

EUR

20

100.00Amsterdam,
NL

27/03/2000

Sub-Holding

Church Denmark Aps

DKK

50

100.00Copenhagen,
DK

13/03/2014

Retail

22/07/1999

Sub-Holding

Church Holding UK Ltd (*)

GBP78,126100.00

Northampton,
UK

Church France Sas

EUR

241

100.00Paris, FR

01/06/1955

Retail

16/07/1987

RetailChurch UK Retail Ltd

GBP

1,021

100.00

Northampton,
UK

Church’s English Shoes
Switzerland Sa

CHF

100

100.00

Lugano, CH

29/12/2000

Retail

16/01/1926

Sub-Holding/Production/ Distribution

06/03/1954

Trademark Owner

Church & Co. Ltd

GBP

2,811

100.00

Northampton,
UK

Church & Co. (Footwear) Ltd

GBP

44

100.00

Northampton,
UK

Church English Shoes Sa

EUR

75

100.00Brussels, BE

25/02/1963

RetailPRADA Czech Republic Sro (*)

CZK

2,500

100.00Prague, CZ

25/06/2008

RetailPRADA Portugal
Unipessoal Lda (*)

EUR

5100.00Lisbon, PT

07/08/2008

RetailPRADA Rus Llc (*)

RUB

250

100.00

Moscow, RU

07/11/2008

RetailChurch Spain Sl

EUR

3

100.00Madrid, ES

06/05/2009

RetailPRADA Bosphorus Deri
Mamuller Ltd Sirketi (*)

TRY41,000100.00Istanbul, TR

26/02/2009

RetailPRADA Ukraine Llc (*)

UAH

30,000100.00Kiev, UA

14/10/2011

Retail07/07/2011

RetailChurch Netherlands Bv

EUR

18

100.00Amsterdam,
NL

Church Ireland Retail Ltd

EUR

50

100.00Dublin, IE

20/11/2011

RetailChurch Austria Gmbh

EUR

35

100.00Vienna, AT

17/01/2012

RetailPrada Sweden Ab

SEK

500

100.00Stockholm, SE

18/12/2012

RetailChurch Footwear Ab

SEK

100

100.00Stockholm, SE

18/12/2012

RetailPRADA Group

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Localcurrency

Company

Sharecapital%(000s ofinterest
local
currency)

Registeredoffice andprincipal
country ofoperations

Date ofincorporation/ Main businessestablishment

EuropePrada Switzerland Sa (*)

CHF

24,000100.00

Lugano, CH

28/09/2012

RetailPrada Kazakhstan Llp (*)

KZT500,000

100.00

Almaty, KZ

24/06/2013

RetailKenon Ltd

GBP

84,000100.00London, UK

07/02/2013

Real Estate

Tannerie Limoges Sas (*)

EUR

1,200

60.00

Isle, FR

19/08/2014

Production

Prada Denmark Aps (*)

DKK

50

100.00Copenhagen, DK

19/05/2015

RetailPrada Finnish Oy (*)

EUR

2.5

100.00Helsinki, FI

09/11/2015

RetailPrada Belgium Sprl (*)

EUR

800

100.00Brussels, BE

04/12/2012

RetailPRADA USA Corp. (*)

USD

152,211100.00

New York, US

25/10/1993

Services/Distribution/
RetailAmericas

TRS Hawaii Llc

USD

400

55.00

Honolulu, US

17/11/1999

Duty-free stores

PRADA Canada Corp. (*)

CAD

300

100.00Toronto, CA

01/05/1998

Distribution/Retail

Church & Co. (USA) Ltd

USD

85

100.00

New York, US

08/09/1930

Retail100.00San Francisco,US

18/02/1997

Real estate

12/07/2011

RetailPost Development Corp (*)

USD

45,138PRADA Retail Mexico, S. de
R.L. de C.V. (*)

MXN

142,058

100.00

Mexico City,MX

PRADA Brasil Importação e
Comércio de Artigos de Luxo
Ltda (*)

BRL

87,000100.00

Sao Paulo, BR

12/04/2011

Retail

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

MXN

7,203

100.00

Mexico City, MX

27/02/2014

Services

PRADA Panama Sa (*)

PAB

30

100.00Panama, PA

15/09/2014

RetailPRADA Retail Aruba Nv (*)

USD

2,012

100.00

Oranjestad, AW

25/09/2014

RetailPRADA Asia Pacific Ltd

HKD

3,000

100.00Hong Kong, HK

12/09/1997

Retail /Distribution/
Services

PRADA Taiwan Ltd

TWD

3,800

100.00Hong Kong, HK

16/09/1993

RetailPRADA Retail Malaysia Sdn. Bnd.

MYR

1,000

100.00

Kuala Lumpur,MY

23/01/2002

RetailAsia-Pacific and JapanTRS Hong Kong

HKD

500

55.00

Hong Kong, HK

23/02/2001

Duty-free stores

PRADA Singapore Pte Ltd

SGD

1,000

100.00Singapore, SG

31/10/1992

RetailTRS Singapore Pte Ltd

SGD

500

55.00

Singapore, SG

08/08/2002

Duty-free stores

PRADA Korea Llc

KRW

8,125,000

100.00Seoul, KR

27/11/1995

RetailPRADA (Thailand) co Ltd

THB

372,000

100.00

Bangkok, TH

19/06/1997

RetailPRADA Japan co Ltd

JPY

1,200,000

100.00Tokyo, JP

01/03/1991

RetailTRS Guam Partnership

USD

1,095

55.00

Guam, GU

01/07/1999

Duty-free stores

TRS Saipan Partnership

USD

1,405

55.00

Saipan, MP

01/07/1999

Duty-free stores

TRS New Zealand ltd

NZD

100

55.00

Wellington, NZ

04/11/1999

Duty-free stores

PRADA Australia Pty Ltd

AUD

10,500100.00

Sydney, AU

21/04/1997

Retail09/02/2004

RetailPRADA Trading (Shanghai)co LtdRMB

1,653

100.00Shanghai, CN
Limited Liability
Company

TRS Okinawa KK

JPY

10,000

55.00

Tokyo, JP

21/01/2005

Duty-free stores

100.00Shanghai, CN
Limited Liability
Company

31/10/2005

RetailPRADA Fashion Commerce(Shanghai) co Ltd

178

RMB

474,950

Church Japan co Ltd

JPY

31,525100.00Tokyo, JP

17/04/1992

RetailChurch Hong Kong Retail Ltd

HKD

1,000

100.00Hong Kong, HK

04/06/2004

RetailChurch Singapore Pte. Ltd

SGD

500

100.00Singapore, SG

18/08/2009

RetailPRADA Hong Kong P.D. Ltd (*)

HKD

11,000100.00Hong Kong, HK

15/12/2011

Service company

Prada Dongguan Trading Co., Ltd

RMB

8,500

100.00

Dongguan, CN
Limited Liability
Company

28/11/2012

Service company

Church Footwear (Shanghai)Co., Ltd

RMB

21,900100.00Shanghai, CN
Limited Liability
Company

05/12/2012

RetailPrada New Zealand Ltd

NZD

3,500

100.00Wellington, NZ

05/07/2013

RetailPRADA India Fashion Private Ltd

INR

100

100.00

Mumbai, IN

30/09/2013

RetailPRADA Group

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Sharecapital%(000s ofinterest
local
currency)

Registeredoffice andprincipal
country ofoperations

VND

10,641,570

Hanoi City, VN

PT PRADA Indonesia

IDR

3,023,844

100.00

Jakarta, ID

15/10/2014

Distribution

PRADA Macau Co Ltd

MOP

25

100.00Macau, MO

22/01/2015

RetailPRADA Middle East Fzco (*)

AED

18,00060.00

Jebel Ali Free
Zone, AE

25/05/2011

Distribution/Services

PRADA Emirates Llc (**)

AED

300

49.00

Dubai, AE

04/08/2011

Retail50

49.00

Kuwait city,
KW

18/09/2012

RetailLocal
currency

Company

PRADA Vietnam Limited
Liability Company

100.00Date ofincorporation/ Main businessestablishment
09/09/2014

RetailMiddle East

PRADA Kuwait Wll (**)

KWD

PRADA Retail Spc (*)

QAR

15,000100.00Doha, QA

03/02/2013

RetailPRADA Saudi Arabia Ltd (*)

SAR

26,66675.00

Jeddah, SA

02/07/2014

RetailPRADA Maroc Sarlau (*)

MAD

95,000100.00Casablanca,
MA

11/11/2011

RetailPRADA Retail South Africa pty
Ltd (*)

ZAR

50,000100.00

Sandton, ZA

06/09/2014

RetailOther countries(*) Company owned directly by PRADA spa(**) Company consolidated based on definition of control per IFRS 10

Companies not included in scope of consolidation:
Percentage directinterest as atJanuary 31, 2016

Percentage directinterest as atJanuary 31, 2015

Note

Consolidation
methodPAC Srl (in liquidation)

49.00

49.00

Associate

Equity method

Pelletteria Ennepì Srl

40.00

-

Associate

Equity method

Company

During the year PAC srl has almost completed the liquidation of the above mentioned
company, although some formalities had not yet been concluded at year end.
Accordingly, at January 31, 2016, the value of the investment was written off asreported in Note 17.
In 2015, PRADA spa acquired 40% of the quotas of Pelletteria Ennepì srl, a company
specializing in production of wallets, travel items, bags and small leather goods. At
January 31, 2016, the investment in this company was measured using the equity
method.

PRADA Group

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43. Information on Non-Controlling Interests in the Group
Financial information on the companies not entirely controlled by the Group is provided
below, as required by IFRS 12. The amounts below are stated before consolidation
adjustments:
Financial statements at January 31, 2016:
Company(amounts in thousands)

Percentage
interest heldLocal
currency

Total
assetsTotalequityNet
revenues

Net
income/(loss) for
year

Dividends
paid to noncontrollingshareholders
1,018

Artisans Shoes Srl

67.00

EUR

27,556

8,059

56,9801,126

TRS Hawaii Llc

60.00

USD

8,486

4,413

17,153(581)-

TRS Hong Kong Ltd

55.00

HKD

978

797

-

(91)

22,500TRS Singapore Pte Limited

55.00

SGD

3,012

2,315

3,669

498

-

TRS Guam

55.00

USD

6,000

4,697

12,536(1,069)-TRS Saipan

55.00

USD

2,982

2,324

5,925

681

-

TRS New Zealand Pty Ltd

55.00

NZD

2,625

2,125

3,407

466

-

TRS Okinawa

55.00

JPY

928,706

611,917

1,615,184

226,390-

TRS Hong Kong Macau

55.00

MOP

104,465

57,987325,079

45,175-

Prada United Arab Emirates

49.00

AED

175,547(15,445)

224,236(35,096)-

Prada Middle East FZCO

60.00

AED

319,288

170,885

289,841

55,846-

Prada Kuwait

49.00

KWD

6,031

(403)

8,537

(486)

-

Prada Saudi Arabia

75.00

SAR

110,618

16,67221,011(6,762)-

Marchesi Angelo Srl

80.00

EUR

1,865

920

3,380

175

-

Montenapoleone 9 Srl

98.00

EUR

2,584

(1,149)1,533(2,149)-Tannerie Limoges S.A.S.

60.00

EUR

5,281

108

610

(666)

-

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

Compared to the financial statements for the period ended January 31, 2015,
information regarding Pellettieri d’Italia srl is no longer provided because, in 2015,
the Group acquired the remaining non-controlling interests (40%). Later in 2015, thecompany in question was merged through incorporation into direct parent PRADA spa.
Financial statements at January 31, 2015:
Net
income/(loss) for
year

Dividends
paid to noncontrollingshareholders

75,439

3,064

510

-

(1,021)-

4,994

20,514

1,073

-

1,067

889

-

(168)

63,000

SGD

2,795

1,818

3,929

535

900

USD

7,448

5,766

16,070

1,000

1,375

55.00

USD

2,440

1,643

7,315

1,211

450

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 branchin 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(amounts in thousands)

Percentage
interest heldLocal
currency

Total
assetsTotalequityNet
revenues

Artisans Shoes Srl

67.00

EUR

36,868

9,990

Pellettieri d’Italia Srl

60.00

EUR

490

(926)

TRS Hawaii Llc

55.00

USD

8,748

TRS Hong Kong

55.00

HKD

TRS Singapore

55.00

TRS Guam Partnership

55.00

TRS Saipan Partnership
TRS New Zealand ltd(*) 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.
180

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
As reported in the Announcement published by the Company on February 19, 2016,
Director Donatello Galli resigned from the role of Executive Director and CFO witheffect from the same day. The Board of Directors then appointed Alessandra Cozzani– already an Executive Director– as the new CFO. On April 8, 2016, the Board also
approved the appointment of Mr. Stefano Simontacchi as Non-Executive Director of
the Company with effect from the same day, to fill the casual vacancy caused by Mr.
Galli’s resignation.

PRADA Group

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182

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Independent Auditors’ Report

PRADA Group

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184

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PRADA Group

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