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Annual Report 2016

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Table of Contents
The PRADA Group
Financial Review
Directors and Senior Management
Directors’ Report
Corporate GovernanceConsolidated Financial Statements
PRADA spa Separate Financial Statements
Notes to the Consolidated Financial Statements
Independent Auditors’ Reports

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43
59
71
87
101
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Patrizio Bertelli

Miuccia Prada2

PRADA Group

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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, quality and style have always been a much vaster enterprise thana simple, endless production of clothing, shoes, handbags.
Observation and curiosity about the world, society, and culture have always been at theheart of Prada’s creativity and modernity; this has pushed Prada past the boundaries
of boutiques and showrooms and has brought us to interact with diverse, seemingly
distant worlds, and to introduce very naturally, almost unconsciously, a new way ofcreating fashion.”
Miuccia Prada and Patrizio Bertelli
These values guide all the activities that over time have transformed a family-run
business into a major player in the luxury market worldwide with the Prada, Miu Miu,
Church’s and Car Shoe brands. With its recent acquisition of Pasticceria Marchesi
1824, the Group has entered the food industry, where it remains positioned at thehighest levels of excellence.
The Group is present in 70 countries through 620 company-owned stores, 34 franchised
stores and a network of selected multi-brand stores and department stores.
Prada's distinctive features and prestige derive from its unique way of managing thecreative and production processes that enables the Group to offer its customers allaround the world products of unparalleled quality, creativity and exclusivity.
A focus on quality permeates every aspect of the Group’s business. The strong
heritage and identity of each brand are scrupulously preserved by the Group’s design
department and craftsmen, who are constantly challenged to keep tradition alive
through a continuous process of reinvention and innovation. Each step of the process,both within and outside the company, is constantly monitored in order to remain true
to the commitment to excellent quality.
The result is an exclusive relationship bonding each customer to the Group’s brands,
products, message and stores. This is because customers recognize in Prada’s
products something exclusive, important and personal, representing the image theywish to portray of themselves and their lifestyle.

PRADA Group

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

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

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

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Prada StoreSaint Barthélemy Island

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PRADA Group

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Prada Store
Plaza 66, Shanghai

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Miu Miu Store
via S. Andrea, Milan

Miu Miu Store
Canton Road, Hong Kong

PRADA Group

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Prada Group history
The Prada brand dates back to the beginning of the last century: in 1913, Mario Prada
opened an exclusive store in the Galleria Vittorio Emanuele II, Milan, selling handbags,
travel trunks, beauty cases, tasteful accessories, jewelry and other luxury items. Thanks
to the innovative design of its goods, created using fine materials and sophisticatedtechniques, Prada rapidly became a favorite of the aristocracy and the most stylish
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 in
its trademark logo.
Over the years, the Prada name gained ever greater renown and prestige.
The turning point for the Group came at the end of the 1970s when Miuccia Prada,
Mario Prada’s granddaughter, partnered with Tuscan entrepreneur Patrizio Bertelli
to combine creativity with business acumen and lay the foundations for the ensuinginternational expansion. Patrizio Bertelli broke new ground in the luxury goods sector
by introducing a business model based on direct, internal control over all processes andapplying strict quality criteria to the entire production cycle. Miuccia Prada's creative
talent attracted international attention due to her innovative approach, inspired by anunconventional outlook on society, enabling her to anticipate - and often set - newfashion and design trends.
In 1977 Patrizio Bertelli founded IPI spa, where he concentrated the production resources
he had built up over ten years in the leather goods industry. In the same year, IPI spa
obtained a license from Miuccia Prada for the exclusive production and distribution of
Prada brand leather goods. In the following years the two family businesses graduallymerged into a single Group.
In 1983 the Prada family opened a second store in prestigious Via della Spiga in Milan,
one of Europe’s key shopping destinations. The store showcased the new brandimage by pairing traditional elements with modern, innovative architecture, thereby
revolutionizing and setting a new standard for luxury retail.
Starting in 1986 new stores were opened in New York and Madrid, followed by London,
Paris and Tokyo.
In response to the growing appreciation of Prada products, the leather goods range was
expanded to include the first women's footwear collection in 1979. The first clothingcollection was launched in Milan in 1988.
In 1993 Prada made its debut in menswear with its first men’s clothing and footwear
collection. That same year, Miuccia Prada’s creative inspiration led to the establishmentof a new brand, Miu Miu, conceived for sophisticated, stylish women who love tostay ahead of fashion trends. Miu Miu now creates women's ready-to-wear apparel,
handbags, accessories, footwear, eyewear and fragrances, and accounts for asignificant share of the Group’s sales.
In 1993 Miuccia Prada and Patrizio Bertelli created “Milano Prada Arte”, subsequently
become “Fondazione Prada”, to pursue their interests and passions in the world of art
and culture.
In 1997 Patrizio Bertelli organized the Prada Challenge sailing team to compete forthe 2000 America’s Cup, and in the same year Prada launched its leisurewear range
featuring the "Linea Rossa" (red line).
In 1999, the Prada Group acquired the classic brand Church’s, founded in 1873 in
Northampton, England. The brand, specialized in high-end handcrafted footwear, is a
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universally recognized symbol of British tradition and sophisticated elegance.
In 2001, the Prada “Epicenter” store, designed by Rem Koolhaas, was opened on
Broadway in New York City. This was the first store of the Epicenters project, whose
purpose was to redefine the shopping concept and try out inventive ways to interact
with customers. A second Epicenter store was opened in Aoyama, Tokyo, followed bya third on Rodeo Drive, Beverly Hills, in 2004. During the same year, Prada acquired
control of Car Shoe, a classic Italian brand renowned for its exclusive driving moccasins.
In 2003, Prada entered into a licensing agreement, renewed in 2012, with Italianeyewear manufacturer Luxottica, a global leader in the eyewear industry. The Luxottica
Group currently produces and distributes eyewear under the Prada and Miu Miu brands.
Also in 2003 the Group partnered with Spanish cosmetics manufacturer Puig Beauty &Fashion Group, launching the first fragrance, Amber, at the end of 2004.
In 2006, Miu Miu moved its fashion show venue to Paris to better represent its brandidentity.
The Prada phone by LG, the world’s first touch screen cellphone, made its debut inMarch 2007. The Prada/LG partnership achieved further success with new releases in2008 and 2011.
The Prada e-store went online in 2010 followed by Miu Miu in 2011.
On June 24, 2011, Prada was successfully listed on the Main Board of the Hong Kong
Stock Exchange.
In March 2014, PRADA spa entered the food industry by acquiring control of Angelo
Marchesi srl, owner of the historical Milanese patisserie founded in 1824.
In 2015 the Prada Group and Coty Inc. introduced the first Miu Miu fragrance. In
September of that year the Marchesi brand was developed on the market with the
opening of a patisserie in via Montenapoleone, Milan.
2016 featured extensive manufacturing investments, leading to the inauguration ofa new leather goods factory and the renovation of five factories in central Italy. The
first construction phase of the new logistics hub for finished products was completed
in Tuscany, Italy, and new retail concepts were implemented for Prada and Miu Miu
stores.

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2016
Advertising campaign
for Miu Miu Fragrance

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2016
Advertising campaign
for Prada Parfums

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Spring/Summer 2017
Advertising campaign
for Prada

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PRADA Group

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The Group's brands
The Prada Group owns and manages some of the most prestigious luxury brands inthe world and works constantly to enhance their value by increasing their visibility,
recognition and appeal. The Group's brands are its most important asset.
Prada
The Prada label has become one of the most prestigious and widely-recognized brands
in the fashion and luxury goods industry. Prada is synonymous with best of Italy's design
and manufacturing tradition, sophisticated style and outstanding quality. As one of themost innovative fashion brands, it is capable of redefining the norm by anticipating andoften setting new trends. In the public mind, Prada has become a symbol of eleganceand the very essence of fashion, even to the point of capturing the attention of theliterary, cinema and art worlds. The Prada brand’s distinctive originality is based on
its innovative approach to style, craftsmanship, quality, and constant research in all
sectors, as it applies its creative approach not only to design development, but also
to the most novel production techniques, to communications and to its distribution
network.
Miuccia Prada has always been a sophisticated interpreter of her times who has stayedahead of styles and trends. The Prada brand, with its collections of men's and women's
leather goods, clothing, footwear, eyewear, and fragrances, targets an international
clientele that is modern, sophisticated, fashion-conscious and appreciative of thehighest quality craftsmanship. By combining attention to detail and quality with cuttingedge products and an exclusive identity, Prada aims to make each product truly unique.

PRADA Group

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Spring/Summer 2017
Advertising campaign
for Prada

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PRADA Group

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Spring/Summer 2017
Advertising campaign
for Prada Eyewear

PRADA Group

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POINT DUME, CALIFORNIANOVEMBER 24-26 2016
BY ALASDAIR McLELLAN

Spring/Summer 2017
Advertising campaign
for Miu Miu

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Miu Miu
Miu Miu, named for Miuccia Prada’s childhood nickname, became a brand in 1993 witha separate identity from Prada. It soon evolved into one of the leading fashion brands
in the world by successfully embodying the same creativity, quality and culture ofinnovation on which all the Group's activities are based. Miu Miu is known for its fashionforward, sensual and provocative style, which seeks to evoke a sense of freedom andintimacy, along with attention to detail and quality. Miu Miu targets fashion-conscious
women driven by a modern spirit of exploration and experimentation in their fashion
choices. The independent identity of the Miu Miu brand is enhanced by its ties to Paris,
where its fashion show venue and marketing and communications center are located.

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2016
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 family's experience acquired in producing
handmade men’s shoes since 1675. In the early 20th century, Church’s began exporting
outside Europe to the United States, Canada and South America, and in 1965 received
from Queen Elizabeth II the prestigious Queen’s Award to Industry for excelling inexports. Church’s is renowned as a leading producer of handmade luxury goodyearwelted footwear. Its products feature a classical style and sophisticated English
elegance based on the combination of fine leather and high-quality craftsmanship. The
Church’s collections are targeted to a high-end, international clientele that appreciates
well-made footwear, and combine a classic range with a more contemporary one, bothof them known for their excellent quality, sophistication and style.
Car Shoe
Car Shoe was founded in 1963 by Gianni Mostile, who designed the iconic drivingmoccasin. The brand has since become an Italian classic, known for its original highperformance design, high-quality leathers and hand craftsmanship. The Car Shoe brandis a symbol of an exclusive, relaxed lifestyle, inspired by luxury. Particularly suited for
leisure time and informal occasions, the Car Shoe collections are targeted to a casual,well-dressed male and female clientele.
Marchesi 1824
Pasticceria Marchesi, one of Milan’s iconic cafes, was founded in 1824 in the same
location where it continues to operate today. Renowned for its finest quality pastries
and chocolate, as well as for typical Milanese “Panettone” Christmas cake, over theyears Pasticceria Marchesi has become a favorite destination for sophisticated locals
and a must-see for visitors to the city. Marchesi is the perfect synthesis of traditionand creativity.

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Pasticceria Marchesi 1824
Galleria Vittorio Emanuele II, Milan24

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PRADA Group

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Business model
The success of the Group's brands is based on the original business model, which
combines an industrial manufacturing process with artisanal skills. This uniqueintegration enables the Group to translate its innovative fashion concepts into viable
commercial products while retaining flexible capacity and technical control over knowhow, quality standards and production costs.

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 talent to combine intellectual curiosity, the pursuit of new andunconventional ideas, and cultural and social interests with a strong sense of fashion.
This has made it possible to establish a genuine design culture, based on method anddiscipline, which guides everyone working within the creative process.
With this unique approach Prada anticipates trends and often sets them, while
continually experimenting with new designs, fabrics, and production techniques.
Experimentation and idea-sharing are the essential components of the design process
throughout the Group. The time spent at the drawing board and in the testing roomon design research and development is fundamental to formulating each collection sothat the clothing, footwear and accessories complement each other and create a welldefined image reflecting the brands.
Miuccia Prada and Patrizio Bertelli’s flair and extraordinary personalities continue toattract talented people from all over the world who desire to work with them in a rangeof creative fields. This results in remarkable teams in all areas of the creative process:from design to manufacturing, from architecture to communications and photography,
from interior store design to all the exclusive special projects in which the Prada Groupis involved.
Raw materials and the production process
Raw materials, an essential part of product quality, are of primary importance for the
Prada Group. In many cases the fabrics and leather are made especially for Prada,
according to stringent technical and style specifications that guarantee both theexcellence of the materials and their exclusive nature, and highlight the independent
spirit imbued in all Group products. Raw materials undergo extreme quality controls byinternal inspectors and experts.
Prada products are made at 21 manufacturing facilities owned by the Group (18 in
Italy, 1 in the United Kingdom, 1 in France and 1 in Romania), and through a networkof contract manufacturers which receive the raw materials, patterns and prototypes
and undergo strict controls. This system enables close oversight of each stage of the
production process, emphasizing the individual capacity of each facility and ensuring
the utmost flexibility and quality for each product.
Production employees have been working for the Prada Group for an average of 20

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years; this ensures an extremely high level of specialization, in-depth knowledge,
harmony with the Group's unique concept, and the seamless transmission of production
techniques and core values to younger generations.
Prada's approach to manufacturing is based on two key principles: the constant quest
for innovation, ensuring the continuous evolution of skills and expertise; and a vocation
for craftsmanship, which is an essential asset for production and a unique distinction
for every brand.
Distribution
The retail network is regularly studied and improved in order to make the stores more
attractive to customers and the product displays more impressive.
Over the years, the Group has expanded its distribution network to 620 Directly Operated
Stores ("DOS") in the most prestigious locations of the major international shopping
destinations, consistent with the image, heritage and exclusivity of each brand. Thisextensive network is a true asset for the Group as it showcases the new collections
and represents an essential contact point with the customer. The DOS go beyond theirprimary sales function as they are also an important means of communication: they are
the true ambassadors of the brand, conveying its image consistently and categorically.
The Directly Operated Stores also allow the Group to monitor in real time the sales
performance of the various markets for each brand and product category.
The wholesale channel (department stores, multi-brand stores, franchisees ande-tailer) provides additional venues selected for prestige of location and enables direct,
immediate comparison with other brands. In recent years, the overhaul of this channel
has gradually reduced the number of accounts, in keeping with the Group’s retailstrategies and brand positioning. In addition, the Group's developments in the digitalworld have recently led to new partnerships with major electronic retailers ("e-tailers").
The retail channel generates 83.9% of the Prada Group’s consolidated sales while thewholesale channel accounts for the remaining 16.1%.

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

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Image and communications
Effective communications are key to building and transmitting a strong image consistent
with the brand identity. From impeccably executed fashion shows rich in content toaward-winning advertising campaigns, Prada and all the Group's brands continue tocreate a captivating, stylish image that is valued particularly by a high-end, international
clientele and by the strictest, most demanding observers and critics.
The primary importance that the Prada Group attaches to innovation is apparent in
the ongoing evolution of its communications projects. The recent decision to focus
its strategy on electronic communications and social media has helped to raise brandprofiles and customer relationships.
Meanwhile, as the media continues to showcase the Group's products on hundreds ofcovers of the world’s leading fashion magazines and in the most influential dailies andweeklies, the visibility of Prada brands keeps growing. Special events also help raise
the brand profiles and boost awareness of the most recent collections in local markets,
especially large cosmopolitan cities.
Human Resources
Human resources are a fundamental asset for the entire business model. The Group's
competitive advantage for growth is based on the skills and diligence of its employees
and on promoting and rewarding productivity, goal orientation and teamwork. The
Human Resources Management team operates in an international environment, working
closely with the other areas in order to analyze and constantly improve the efficiency
and effectiveness of processes, make the most of local skills and specializations, andintegrate central and peripheral areas.
The Group continues to seek and attract the best talent on the international labor market
through a structured, transparent selection process, which includes collaborating withprestigious universities and fashion schools. At the same time, it creates opportunities
for Prada professionals to work abroad.
The vast array of cultures and talent that distinguish employees working in 48 countries
where the Group is directly present is a source of wealth, progress and affinity witha clientele that is also highly diverse. The well-structured Compensation & Benefit
system, based on rewarding skills and merit, can ensure equal treatment with respect
to gender, seniority and roles, and thus also ensure respect for equal opportunity.
Moreover, the protection of workers’ rights is of key importance; throughout the value
chain, the Group promotes and supports respect for human rights and compliance withchild and slave labor laws and health and safety regulations. The Group also cooperates
with trade unions to assess opportunities to improve the working conditions of its
employees.
The Group’s remuneration policy aims to attract, reward and retain high-levelprofessionals and skilled managers, and to bring management's interests into line withthe goal of medium/long-term value creation.
The Remuneration Committee oversees the pay and benefits of senior managers,
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.

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

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PRADA Group

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Environment and territory
The Prada Group adopts and encourages principled behavior that can contribute to thesustainable development of the business and set examples of good practices in theindustry. The Group encourages knowledgeable development through an everyday
policy of increasing the environmental awareness of contractors, the supply chain andbusiness partners so as to spread a culture of environmental sustainability.
Reducing land take, renovating existing structures and working on property
redevelopment have inspired decisions made “naturally, almost sub-consciously” inmore than thirty years of the Group's industrial development.
The few newly constructed buildings fit harmoniously into the local settings. The PradaGroup has approximately 192,000 m2 of factory space, including 175,000 m2 in Italy.
The factories represent the best expression of the Group’s manufacturing tradition
as they harmonize the ability to preserve craft skills with cutting-edge manufacturing
processes designed to meet the most exacting requirements in terms of productquality and excellence.
The decision to locate the various clothing, footwear and leather goods manufacturing
facilities in industrial districts demonstrates the intention to preserve craft skills in theareas and communities where they originated. At the same time, the sizeable recent
investments in manufacturing attest to the renewed commitment to strongly integratethese traditional skills with the demands of production on an international scale.
Special projects
Convinced of the need to blend different creative experiences in order to continuously
renew its style, image and communications, the Prada Group has always had strong
links with other fields, especially art and culture. Interaction with these apparently
distant environments has led to a number of special projects that, over the years, havehelped define the many facets of the Prada world.
Prada’s interest in architecture materialized from the outset in its state-of-the-art
production facilities, the conversion of industrial buildings into new showrooms andoffices, and the development of revolutionary design concepts for retail premises.
The most high-profile project in the retail sector is the "Epicenter Concept Store", acollaboration with world-renowned architects and Pritzer Prize winners Rem Koolhaasand Herzog & de Meuron, carried out between 2001 and 2004 with the opening of
three cutting-edge stores in New York, Los Angeles and Tokyo. In 2015 the Group again
worked with Herzog & de Meuron on the Miu Miu store in Tokyo Aoyama, designed
to be the heart of the Japanese business for the brand. These epicenters along withthe most exemplary flagship stores, such as PRADA Plaza 66 in Shanghai and PRADA
Canton Road in Hong Kong (to name 2016 projects), are designed to reinvent andcontinually revisit the shopping concept: experimental laboratories in constant evolution
where luxury goods, technology, design and architecture combine seamlessly with avast range of exclusive services and sensory experiences.
Since 1993, the interests and passions of Miuccia Prada and Patrizio Bertelli have led
the Prada Group to sponsor Fondazione Prada’s activities in the fields of art and culture.
Fondazione Prada was set up in Milan as a space for contemporary art exhibitions aswell as projects in architecture, cinema and philosophy.
By 2010 it had staged 24 solo shows in Milan devoted to important Italian andinternational artists. Since 2011 the Fondazione has hosted 5 group shows at its venue
in an eighteenth-century Venetian palace in Ca’ Corner della Regina, and in 2016 it
hosted “Belligerent Eyes”, an experimental project dedicated to cinema. In May 2015
Fondazione Prada inaugurated its new permanent facility in Milan, designed by the32

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OMA architects led by Rem Koolhaas. Situated in the southern part of Milan, it wasconverted from a distillery dating back to the early 1900s. The complex has a surface
area of 19,000 m² capable of holding many exhibitions and cultural events, enabling thefoundation to develop its multidisciplinary vocation.
In 2016 it hosted important anthological and retrospective exhibitions dedicatedto international artists, a choreographic performance, and a film festival curated by
Alejandro González Iñárritu. During the year it also continued its educational programfor Children's Academy activities and began the first part of the site-specific project,“Slight Agitation”, with artist Tobias Putrih.
The Osservatorio, Fondazione Prada’s new photography exhibition center in Galleria
Vittorio Emanuele II in Milan, opened in December 2016.
Cinema, as a contemporary form of art, has engaged Prada in creative collaborations
with internationally renowned film directors, leading to productions including Thunder
Perfect Mind directed by Jordan and Ridley Scott (2006), A Therapy directed by Roman
Polanski (2012), Castello Cavalcanti by Wes Anderson (2013) and Past Forward by
Academy Award winner David O. Russell (2016). Miuccia Prada's own personal
interest led to The Miu Miu Women’s Tales, a series of short films in which directors ofinternational fame and different intellectual backgrounds explore the world of women.
In high-profile sports, the Luna Rossa team sponsored by the Group was a challenger
in the America's Cup sailing yacht races in 2000, 2003, 2007 and 2013, winning thechallenger selection regattas in 2000 and reaching the finals in 2007 and 2013. Thishas made a huge contribution to the commercial success of the leisure clothing andfootwear lines and raised visibility around the world by associating the Prada name withthe oldest international sports competition.

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Fondazione Prada
Largo Isarco 2, Milanby architect Rem Koolhaas

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PRADA Group

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Fondazione Prada Osservatorio
Galleria Vittorio Emanuele II, Milan

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PRADA Group

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PRADA Group Structure
PRADA spa
Milan

HOLDING/MANUFACTURING/DISTRIBUTION/SERVICES

100%

100%
66.7%

Artisans Shoes srl
Montegranaro
PRODUCTION100%

IPI Logistica srl
Milan
SERVICES49%

PAC srl in liquidazione
Milan(IN LIQUIDATION)

100% Church & Co (Footwear) ltd
Northampton
TRADEMARKS

60%

Tannerie Limoges sas
Isle
PRODUCTION

TRS Hawaii Ilc
Honolulu
DFS

55%

100% PRADA Singapore pte ltd
Singapore
RETAIL

100%

80%

Pelletteria Ennepi srl
Figline e
Incisa Valdarno
PRODUCTIONTRS Guam Partnership
Guam
DFS

55%

100%

PRADA Retail
Malaysia sdn bhd
Kuala Lumpur
RETAIL

100% Church’s English Shoes sa
Brussels
RETAIL50%

Hipic Prod Impex srl
Sibiu
PRODUCTIONPRADA Retail Mexico
S. de R.L. de C.V.
Mexico CityRETAIL

100%

100%

PRADA Japan Co ltd
Tokyo
RETAIL100%

Church France sas
Paris
RETAIL

100% PRADA Hong Kong PD ltd
Hong KongSERVICES

100%

Church Spain sl
MadridRETAIL

Church Holding UK ltd
Northampton
HOLDING100%
Church & Co ltd
Northampton
MANUFACTURING/
DISTRIBUTION/SERVICES

Church UK Retail ltd
Northampton
RETAILPRADA Far East II bv
Amsterdam
SUB-HOLDINGPRADA Canada Corp
Toronto
DISTRIBUTION/RETAIL

100%

100% Post Development Corp
New York
REAL ESTATE

100% PRADA Australia pty ltd
SydneyRETAIL

100%

100%

PRADA USA Corp
New York
DISTRIBUTION/SERVICES/RETAIL55%

PRADA Dongguan
Trading Co ltd
DongguanSERVICESPRADA Korea llc
Seoul
RETAIL

Travel Retail Shops
Okinawa kk
Tokyo
DFS

TRS Saipan Partnership
SaipanDFS

55%

100% PRADA (Thailand) Co ltd
Bangkok
RETAIL

100% Church Ireland Retail ltd
DublinRETAILTRS Hong Kong ltd
Hong Kong
DFS

55%

100% PRADA New Zealand ltd
Wellington
RETAIL100%

Macau Branch
Macau
DFS

100%

Church Austria gmbh
ViennaRETAIL100%

100% Church Netherlands bv
Amsterdam
RETAILTRS New Zealand ltd
Wellington
DFS

55%

100%

Church Footwear ab
Stockholm
RETAILTRS Singapore pte ltd
Singapore
DFS

55%

100%

Church Denmark aps
Copenhagen
RETAILPRADA Asia Paciﬁc ltd
Hong KongSERVICES/RETAIL

100%

100%

Church’s English Shoes
Switzerland sa
LuganoRETAIL100%

Church Italia srl
Milan
RETAIL/SERVICES

100%

Church & Co (USA) ltd
New York
RETAIL100%

PRADA Trading(Shanghai) Co ltd
Shanghai
DORMANT

100%

Church Hong Kong
Retail ltd
Hong Kong
RETAIL100%

PRADA Fashion Commerce(Shanghai) Co ltd
Shanghai
RETAIL100%

PRADA Macau Co ltd
Macau
RETAIL

100% Church Japan Company ltd
Tokyo
RETAIL100%

PRADA Taiwan ltd
Hong KongSERVICES

100%

100%

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

100% PRADA Vietnam Limited
Liability Company
Hanoi
RETAIL100%

PT PRADA Indonesia
Jakarta
DORMANT

Taipei BranchTaipeiRETAIL

100% Church Singapore pte ltd
Singapore
RETAIL
100%

38

Church Footwear(Shanghai) Co ltd
Shanghai
RETAILPRADA Group

Prada Annual Report 2016_20 apr.indd 38

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20/04/17 18:23

60%

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

100% PRADA Retail France sas
Paris
RETAIL80%

Marchesi Angelo srl
Milan
CONFECTIONERY

100%

Montenapoleone 9 srl
Milan
CONFECTIONARY49%

PRADA Emirates llc
Dubai
RETAIL

100% PRADA Monte-Carlo sam
MonacoRETAIL49%

PRADA Kuwait wll
Kuwait CityRETAIL

100%

100%

75%

PRADA Retail spc
Doha
RETAILPRADA Belgium sprl
Brusselles
RETAIL

100%

100%

PRADA RetailSouth Africa (pty) ltd
SandtonRETAIL

100% PRADA Czech Republic sro
PragueRETAIL100%

PRADA Rus llc
Moscow
RETAIL100%

PRADA Ukraine llc
Kiev
RETAIL100%

PRADA Kazakhstan llp
AlmatyRETAIL100%

PRADA Spain sl
MadridRETAILPRADA Brasil
Importação e Comércio
de Artigos de Luxo ltda
São Paulo
RETAIL100%

PRADA Portugal
Unipessoal lda
LisbonRETAILPRM Services
S. de R.L. de C.V.
Mexico CitySERVICES

100%PRADA Hellas
Sole Partner llc
AthensRETAIL100%

PRADA Bosphorus Deri
Mamüller ltd Sirketi
Istanbul
RETAIL100%

PRADA Retail UK ltd
LondonRETAIL

100%

100%

100%

PRADA Panama sa
PanamaRETAILPRADA Retail Aruba nv
Aruba
RETAIL

100%

100%

PRADA Company sa
Luxembourg
SERVICESPRADA Far East bv
Amsterdam
RETAIL

100% PRADA Switzerland sa
LuganoRETAILPRADA Saint
Barthelemy sarlGustavia
RETAIL100%

PRADA Maroc Sarlau
Casablanca
RETAIL100%

PRADA Denmark aps
Copenhagen
RETAIL

Maroc Branch
Marrakech
RETAIL100%

PRADA Finnish oy
Helsinki
RETAIL

Prada Annual Report 2016_20 apr.indd 39

Swiss Branch
LuganoSERVICESPRADA Austria gmbh
ViennaRETAIL100%

PRADA GroupPRADA sa
Luxembourg
TRADEMARK100% PRADA Germany gmbh
MunichRETAIL/SERVICESPRADA Saudi Arabia ltd
JeddahRETAIL

100%

100%

Ireland Branch
DublinRETAIL

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20/04/17 18:24

PRADA S.p.A. 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)
Stefano Simontacchi(Non-Executive Director appointed first on April 8,2016 and confirmed on May 24, 2016)
Maurizio Cereda(Non-Executive Director appointed on May 24, 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, 2016
Gaetano Micciché(Non-Executive Director) resigned with effect from
April 15, 201640

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

PRADA Group

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Board of Statutory Auditors

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

David Terracina (Chairman)
Gian Franco Oliviero Mattei
Paolo De Paoli

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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42

PRADA Group

Prada Annual Report 2016_20 apr.indd 42

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Financial Review

PRADA Group

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43

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Consolidated Statement of Profit or Loss
twelve months
ended
January 31
2017%

twelve months
ended
January 31
2016%

Net Sales

3,139,290

98.6%

3,504,344

98.8%

Royalties

44,7791.4%

43,427

1.2%

Net revenues

3,184,069

100.0%

3,547,771

100.0%

Cost of goods sold(894,957)-28.1%(980,206)-27.6%

Gross margin

2,289,112

71.9%

2,567,565

72.4%

Operating expenses(1,857,931)-58.4%(2,064,672)-58.2%

EBIT

431,18113.5%

502,893

14.2%

Interest and other financial expenses, net(18,003)-0.6%(29,872)

-0.9%

2,252

0.1%

2,311

0.1%

Income before taxation

415,430

13.0%

475,332

13.4%

Taxation(131,240)-4.1%(141,994)-4.0%

Net income for the year

284,190

8.9%

333,338

9.4%

5,861

0.2%

2,450

0.1%

278,3298.7%

330,888

9.3%(amounts in thousands of Euro)Dividends from investments

Net income - Non-controlling interests

Net income - Group

Basic and diluted earnings per share (in Euro pershare)

44

0.109

0.129

Depreciation, amortization and impairment

222,267

7.0%

299,865

8.5%

EBITDA

653,44820.5%

802,758

22.6%

PRADA Group

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Key financial information
Key figures from statement of profit or loss
(amounts in thousands of Euro)Net revenues

twelve months
ended
January 31
2017

twelve months
ended
January 31
2016

twelve months
ended
January 31
2015% change
on January
2016

3,184,069

3,547,771

3,551,696-10.3%EBITDA

653,448

802,758954,249-18.6%EBITDA %

20.5%

22.6%

26.9%

-

431,181502,893

701,551-14.3%EBIT
EBIT %Net income of the Group
Earnings per share (Euro)

13.5%

14.2%

19.8%

-

278,329

330,888

450,730-15.9%-15.9%

0.109

0.129

0.176

Capital expenditure

251,507

336,895

449,735-

Net operating cash flows

631,850

368,465

483,597-

Average number of employees

12,326

12,414

11,962-January 31
2017

January 31
2016

January 31
2015change at
Jan 31, 2017
Vs Jan 31, 2016

Key figures from statement of financial position(amounts in thousands of Euro)Net operating working capital
Net invested capital
Net financial position surplus/(deficit)
Group shareholders’ equity

556,351

665,156

563,409(108,805)

3,086,089

3,212,172

2,829,359(126,083)

18,441(114,795)

188,788

133,2363,080,502

3,080,340

3,000,737

162

2016 highlights
2016 was a challenging year for the Prada Group, as it made concrete plans for branddevelopment and launched an overhaul of its main operating processes.
This transition phase coincides with the completion of the long-term plan for thegeographical expansion of its retail network and the beginning of efforts to streamline
operations and achieve an innovative form of integration with the digital universe. The
business climate was mired in uncertainty, due to ongoing geopolitical tensions ofglobal impact, as well as new events that have suddenly altered economic balances
around the world. Meanwhile, the stabilization of some currency trends paved the way
for a recovery in domestic consumption, as in China and Russia, although growth inthese markets has not yet compensated for the decrease in cross-border tourism.
Against this backdrop, the Group took the initiative on several fronts, starting as always
from the development of new products that stand out for their innovative style andoutstanding quality. New items were designed for Prada and Miu Miu in every category,particularly leather goods, with the creation of new, iconic handbag designs as well as
special editions. With the same dedication, the Group also focused on store renovation
with a view to enhancing the shopping experience. The massive restyling program
launched during the year has begun to create more intimate, exclusive environments,
updated to meet Prada's and Miu Miu's new aesthetic guidelines.
The recent redeﬁnition of the Group's digital strategy, with the formation of a highly
qualiﬁed team, is the foundation of a new global vision whereby brands will beempowered to express their full potential. These efforts will generate sustainablegrowth based on product quality, strong innovation, and distribution/communication
channels that permanently evolve in line with the habits of new generations ofconsumers.
Moreover, in 2016 the Group made some industrial changes under a three-year plan
adopted in 2015, which aims to strengthen control over the production process by
insourcing some of the most delicate phases. These investments will help preserve
PRADA Group

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45

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the craftsmanship at the heart of the Group's business model, while underscoring its
ties to the Italian community and the sustainability of its manufacturing cycle.
Finally, efforts to streamline facilities and simplify processes took the form of new,transversal projects involving every unit and department while strengthening the cost
reduction targets identiﬁed in 2015.
As for performance, cost-cutting programs managed to keep proﬁtability from being
further diluted by the decline in retail sales. The year closed with EBIT of Euro 431.2
million, or 13.5% of net revenues, while the Group's share of net income came to Euro
278.3 million (8.7% of net revenues).
The ﬁnancial objectives set by the Group helped optimize working capital management;
the resulting increase in operating cash ﬂow brought the net ﬁnancial position topositive territory by the end of the year.
Net revenues(amounts in thousands of Euro)

twelve months
ended
January 31
2017

twelve months
ended
January 31
2016% change

Net Sales

3,139,290

98.6%

3,504,344

98.8%

Royalties

44,7791.4%

43,4271.2%

3.1%

3,184,069

100%

3,547,771

100%-10.3%

twelve months
ended
January 31
2016% change

Net revenues-10.4%Net sales analysis(amounts in thousands of Euro)

twelve months
ended
January 31
2017

Net Sales by geographical area
Europe1,190,149

37.9%

1,292,121

36.9%

-7.9%

Americas458,925

14.6%

525,424

15.0%-12.7%

Asia Pacific993,21431.6%

1,158,174

33.0%-14.2%

Japan

388,892

12.4%

407,398

11.6%

-4.5%

Middle East

103,417

3.3%

115,444

3.3%-10.4%

Other countries

4,693

0.1%

5,783

0.2%

-18.8%

3,139,290

100.0%

3,504,344

100.0%-10.4%

Prada

2,528,129

80.5%

2,841,056

81.1%-11.0%Miu Miu

515,176

16.4%

564,315

16.1%

-8.7%

Church's

80,3782.6%

82,456

2.4%

-2.5%

Total

Net Sales by brandOther

15,6070.5%

16,517

0.4%

-5.5%

Total

3,139,290

100.0%

3,504,344

100.0%-10.4%Net Sales by product line
Leather goods

1,803,762

57.5%

2,103,24160.0%-14.2%

Footwear

678,79721.6%

725,987

20.7%

-6.5%

Clothing

599,56319.1%

612,249

17.5%

-2.1%

Other

57,1681.8%

62,867

1.8%

-9.1%

Total

3,139,290

100.0%

3,504,344

100.0%-10.4%Net Sales of direct operated stores (DOS)2,634,923

83.9%

3,059,732

87.3%-13.9%

504,36716.1%

444,612

12.7%

13.4%

3,139,290

100.0%

3,504,344

100.0%-10.4%

Sales to Independent customers and franchisees
Total

46

PRADA Group

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Distribution channels
Retail sales for the twelve months ended January 31, 2017 were lower by 13.9% atcurrent exchange rates and by 13.1% at constant exchange rates. The trend for theperiod shows a less marked decline during the second half of the ﬁscal year, especiallyin the ﬁnal months. The number of Directly Operated Stores, with 28 openings
and 26 closures, rose from 618 at January 31, 2016 to 620 at the reporting date.
Sales in the wholesale channel were up by 13.4% at current exchange rates
and by 14.6% at constant rates. Growth in this channel was due primarily
to the new partnerships with leading online "e-tailers" around the world.
Markets
Net sales in the Asia Paciﬁc market were down by 14.2% at current exchange rates
and by 12.1% at constant exchange rates. Mainland China had a substantial impact on
the region's performance, suffering a double-digit decline in the ﬁrst six months, thengradually recovering and resuming growth late in the year. In the second half of theperiod South Korea reported recovery for sales to franchisees.
Net sales in Europe decreased by 7.9% at current exchange rates and by 5.2% atconstant exchange rates. The decline in tourism, as a result of the terrorist attacks,
had an especially signiﬁcant impact on sales in France although the trend showedsigniﬁcant signs of improvement during the ﬁnal quarter. Performance was particularly
valuable in Russia, which enjoyed double-digit growth, and in the UK, where a ﬁrst-halfdecline was successfully reversed and the year ended with a solid growth rate. The
wholesale channel in Europe beneﬁted from the new partnerships forged with on-line
distributors during the year.
Net sales in the Americas fell by 12.7% at current exchange rates and by 12% atconstant rates. Net sales in the United States were down in both channels, while Brazil
and Mexico reported growth, as did Canada during the second half of the year.
Net sales in the Japanese region decreased by 4.5% at current exchange rates and by
12.8% at constant exchange rates. The stronger Yen discouraged tourism from China.
In the Middle East, sales decreased by approximately 10.4% at both current andconstant exchange rates.
Products
Leather goods showed a decrease of 14.2% at current exchange rates and 14% atconstant exchange rates, although the trend was more moderate in the second half. In
absolute terms, the declines were most severe in Hong Kong, France and the UnitedStates.
The downturn for footwear was less steep (-6.5% at current exchange rates and -4.5%
at constant exchange rates), though the trends in terms of region and timing weresimilar to those of leather goods.
Net sales of the clothing were in line with the previous year (-2.1% at current exchange
rates and -0.8% at constant exchange rates), with a decline in the ﬁrst six months
followed by growth in the second half of the ﬁscal year.

PRADA Group

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Brands
Sales of Prada brand products decreased by 11% at current exchange rates andby 10.3% at constant exchange rates, with a greater decline for leather goods andfootwear, which however lessened during the year.
Miu Miu sales were down by 8.7% at current exchange rates and by 8.3% at constantexchange rates. The improvement in the second half of the fiscal year was especiallyvisible for footwear and clothing, both of which increased.
Sales of Church's brand products decreased by 2.5% at current exchange rates, butgrew by 5.8% at constant exchange rates, reporting real growth in Italy and the UK.
The heading "Other brands" mainly includes Car Shoe sales, which decreased due toclosures in 2015 in Singapore, London and Hong Kong, and sales of patisserie goods
by Marchesi 1824, which showed both organic growth and growth through expansion.
Royalties
In 2016, licensing agreements generated royalties of Euro 44.8 million, an increase of
3.1% with respect to 2015. The royalty growth was attributable primarily to the launchof Miu Miu's first fragrance.
Number of stores
January 31, 2017

January 31, 2016

Owned

Franchises

Franchises

Prada

387

25

386

26

Miu Miu

171

9

173

10

Church's

54

-

52

-

Car Shoe

5

-

5

-

Marchesi

3

-

2

-

Total

620

34

618

36

January 31, 2017

48

Owned

January 31, 2016

Owned

Franchises

Owned

Franchises

5

Europe

220

4

221

Americas

113

-

117

-

Asia Pacific

187

25

183

26

Japan

78

-

74

-

Middle East

20

5

21

5

Africa

2

-

2

-

Total

620

34

618

36

PRADA Group

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Operating results
The gross margin came to 71.9% of net revenues, down slightly from the previous
ﬁscal year due mainly to a less favorable sales mix in terms of distribution channel andproduct category.
The operating expenses of 2016 were lower than those of 2015 by Euro 206.7 million,or 10%. This reﬂects measures to optimize key processes, a decline in variable
costs, and lower depreciation and amortization as explained in greater detail below.
In particular, advertising and communication costs fell, although they remained 5.4%of net revenues, as a result of less spending in the traditional media, as well as lower
sponsorship costs.
(amounts in thousands of Euro)

twelve months
ended
January 31
2017% of netrevenues

twelve months
ended
January 31
2016% of netrevenues

3.8%

Product design and development costs

125,258

3.9%

134,272

Advertising and communications costs

172,549

5.4%

191,695

5.4%

1,383,337

43.4%

1,517,443

42.8%

176,787

5.7%

221,2626.2%

1,857,931

58.4%

2,064,672

58.2%

Selling costs
General and administrative costs

Total Operating expenses

For the twelve months ended January 31, 2017, EBITDA was Euro 653.5 million or
20.5% of net sales, falling by 210 basis points in comparison with 2015, when it
amounted to 22.6% of revenues.
During the ﬁscal year, management reviewed the estimated useful life of certain tangible
and intangible ﬁxed assets in order to better represent their use in business processes,
principally within the retail area. This change in estimates reduced depreciation andamortization by Euro 64 million in the consolidated statement of proﬁt or loss.
EBIT came to Euro 431.2 million, a reduction of Euro 71.7 million with respect to 2015.
As a percentage of net revenues, EBIT fell from 14.2% to 13.5%.
Finance charges decreased from Euro 27.6 million in 2015 to Euro 15.8 million. The
decrease was inﬂuenced by lower exchange losses on ﬁnancial items and, to a minor
degree, the combination of higher interest income thanks to the more efﬁcient use of
cash and lower interest expense due to lower average debt and interest rates.
The effective tax rate was 31.6%, up slightly from the 29.9% of 2015, essentiallyfollowing to a less favorable geographical distribution of the taxable income in 2016.
The Group's net income of the 2016 was Euro 278.3 million, or 8.7% of net revenues,
compared with the Euro 330.9 million or 9.3% achieved in 2015.

PRADA Group

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Analysis of the statement of financial position
Net invested capital
The following table reclassiﬁes the statement of ﬁnancial position to provide a betterview of net invested capital.
(amounts in thousands of Euro)

Non-current assets (excluding deferred tax assets)

January 31
2017

January 31
2016

January 31
2015

2,557,198

2,599,620

2,586,841

Trade receivables, net

285,504

254,183

346,284

Inventories, net

526,941

692,672

654,545

Trade payables(256,094)(281,699)(437,420)

Net operating working capital

556,351

665,156

563,409

Other current assets (excluding items of financial position)

275,384

260,983

190,149

Other current liabilities (excluding items of financial position)(224,536)(234,496)(411,878)

Other current assets/(liabilities), net

50,84826,487(221,729)

Provision for risks(82,323)(69,233)(63,695)

Post-employment benefits(67,211)(69,405)(85,754)

Other long-term liabilities(187,322)(171,364)(159,419)

Deferred taxation, net

216,126

243,690239,349

Other non-current assets/(liabilities)(120,730)(66,312)(69,519)

Net invested capital

3,086,089

3,212,172

2,829,359

Shareholder's equity – Group

(3,080,502)(3,080,340)(3,000,737)

Shareholder's equity – Non-controlling interests(24,028)(17,037)(17,410)(3,104,530)(3,097,377)(3,018,147)

Long-term financial payables(547,628)(519,772)(254,462)

Short-term financial, net surplus/(deficit)

566,069

404,977

443,250

Net financial position surplus/(deficit)

18,441(114,795)

188,788(3,086,089)(3,212,172)(2,829,359)

n/a

3.6%

n/a

Total Consolidated shareholders' equity

Shareholders’ equity and net financial position
Net Debt to Consolidated equity ratio

As of January 31, 2017, the Group has net invested capital of Euro 3,086.1 million, a
positive net ﬁnancial position of Euro 18.4 million and equity attributable to the Groupof Euro 3,080.5 million.
Non-current assets, consisting essentially of property, plant, equipment and intangible
assets, increased from Euro 2,586.8 million to Euro 2,599.6 million, mainly due tocapital expenditure (Euro 251.5 million) less depreciation, amortization and impairment(Euro 222.3 million).
Capital expenditure was allocated for Euro 151.2 million to many projects in theretail area to expand, relocate and renovate stores. Investments in the retail network
also included the initial projects of the restyling plan intended to bring Prada and
Miu Miu stores into line with the Group's new aesthetic guidelines. The remaining
capital expenditure of Euro 100.3 million concerned the corporate and manufacturing
divisions. Indeed, several manufacturing projects in Italy ﬁnalized at strengthening
control over the production cycle were completed in the ﬁscal year: the inaugurationof a new leather goods manufacturing facility, the upgrading of various factories, andthe purchase of two former contract manufacturers (one in Italy and one in Romania).
In addition, the Group opened the ﬁrst of three tranches to serve as its new logisticalhub for ﬁnished products.
The decrease in net working capital was due essentially to a reduction in ﬁnishedproduct inventories that was achieved by improving the timing of manufacturing
activities and revising the strategies for replenishing the stores.
Other current assets, net, increased by Euro 24.4 million due chieﬂy to lower tax
payables, the termination of derivative contracts and other receivables.
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Other non-current liabilities, net, increased by Euro 54.4 million essentially as a resultof lower deferred tax assets on retail inventories and greater deferred rent liabilities.
During the ﬁscal year the Group paid dividends to PRADA spa shareholders in theamount of Euro 281.5 million.
Net financial position
The following table provides details of the Group’s net ﬁnancial position.
(amounts in thousands of Euro)

January 31
2017

January 31
2016

January 31
2015

Bonds

(130,000)(130,000)(130,000)Bank borrowing – non-current(417,628)(390,475)(125,203)

Total financial payables – non-current(547,628)(520,475)(255,203)

Financial payables and bank overdrafts - current(151,211)(270,766)(263,356)

Payables to parent company and related parties(4,934)(4,858)(2,371)

Total financial payables – current(156,145)(275,624)(265,727)

Total financial payables(703,773)(796,099)(520,930)

-

703

741

Financial receivables from related parties – non-current

Financial Receivables from related parties – current

-

-

11

Cash and cash equivalents

722,214680,601

708,966

Total financial receivables and cash and cash equivalents - current

722,214680,601

708,977

Total financial receivables and cash and cash equivalents

722,214681,304

709,718

Net financial surplus/(deficit), total

18,441(114,795)

188,788

Net financial surplus/(deficit) excluding related party balances

23,375(110,640)

190,407n/a-14.3%

n/a

Net Financial Position/EBITDA ratio

As of January 31, 2017, the net ﬁnancial position is positive and amounting to Euro
18.4 million, compared with the net indebtedness of Euro 114.8 million as of January
31, 2016. Working capital management made a signiﬁcant contribution to operating
cash ﬂow, which enabled the Group to pay dividends to shareholders, self-ﬁnance its
capital expenditure and reduce indebtedness.
In 2016, thanks in part to favorable credit market conditions, the Group took out Euro
120 million in new medium/long-term loans that further reduced the average borrowing
rate while extending maturities. Together with the cash surplus generated during theyear, the new loans made it possible to repay some Euro 80 million of long-term loansat their natural maturity and to settle short-term credit lines totaling some Euro 138
million.
The total amount of undrawn lines of credit at January 31, 2017 is Euro 662 million.

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Risk factors
Risk factors regarding the international luxury goods market
Economic risks and international business risks
The performance of the luxury goods market is inﬂuenced to a large extent by thegeneral economy. Accordingly, the Group’s business performance is exposed to global
macroeconomic risks due to its international scale.
The international economic environment could adversely affect the demand for theGroup’s products and access to credit, causing ﬁnancial difﬁculties for customers
and other parties with which the Group operates. Overall, these factors could have anegative impact on the Group's operations, results, cash ﬂows and ﬁnancial condition.
A substantial portion of the Group’s sales originates from purchases of products bycustomers on trips abroad. Consequently, unfavorable economic conditions, social
or geopolitical situations leading to instability, and natural disasters resulting in lower
travel volumes have in the past, and could in the future, negatively impact the Group’sbusiness and results. At the same time, the global scale of the retail network enables
to mitigate the risk that the sales of a particular geographical area could inﬂuencesigniﬁcantly the consolidated sales.
Intellectual property risks
The Prada Group's brands have always been associated with beauty, creativity,
tradition and excellent quality. Prada’s ability to protect its brands and other intellectual
property rights means safeguarding these fundamental assets that are responsible forthe success of the brands and the brand positioning.
The Group protects its brands, designs, patents and websites by registering them andobtaining legal protection for them in all countries throughout the world. The Group
actively opposes all forms of counterfeiting and intellectual property infringement byadopting strong, systematic measures worldwide. The wholesale, retail, online andoff-line markets are monitored daily in close collaboration with the relevant authorities,
customs agencies and police.
Risks regarding image and brand recognition
The Group’s success in the international luxury goods business is linked to the image
and distinct character of its brands. These features depend on many factors, suchas the style and design of the products, the quality of the materials and production
techniques used, the image and locations of DOS, careful selection of licensees,
communications activities and the general corporate proﬁle.
Preserving the image and prestige acquired by its brands in the fashion and luxury
business is an objective that the Prada Group pursues by monitoring meticulously eachinternal and external phase of the value chain to constantly ensure undisputed quality
and uphold its reputation, and by constantly pursuing innovation in styles, products
and communications in order to convey messages that are always consistent with thestrong brand identities.
Risks regarding ability to anticipate trends and react to shifts in consumer tastes
The Group’s success is reliant on its ability to create and deﬁne fashion and producttrends, and to anticipate shifts in consumer tastes and luxury market trends in a timely
manner.
The Group pursues its objective of leading the luxury goods market by stimulating
consumer markets and inspiring trends through the creative efforts of its design and

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product development teams. This business area consists of approximately 1,000
individuals working in the design division, where a mix of nationalities, cultures andtalents contribute to creativity, and in the development division, where craft skills
combined with solid manufacturing processes enable the Group to continue tocompete and keep abreast of emerging consumer trends and lifestyles.
Risk factors specific to PRADA Group
Strategic risks
The possibility for the Group to improve its business performance depends on the
successful implementation of its strategy for each brand, based primarily on thecontinuous support and development of retail sales.
The Group provides support to the retail network by offering leather goods, clothing
and footwear that reﬂect the brand positions, accompanied by store management
geared toward making the buying experience unique. The performance of the retailchannel is also supported by localized marketing initiatives intended to enhance theidentity of the brands and the key features of the Group's value chain. Numerous
store renovation and restyling projects aim to further expand the capacity to attract
customers and create an increasingly exclusive store ambiance.
Meanwhile, in completing its international expansion, the Group carefully assesses
market conditions and consumer trends in areas where new DOS openings are
considered in order to ensure the success of each new DOS. When entering into
countries for the ﬁrst time, the Group dedicates substantial resources to make certainthat sales managers and staff portray an image consistent with the identity of theGroup brands and provide customer service in line with the quality of the products.
Risks regarding the importance of key personnel
The Group’s success depends on the contribution of key individuals who have played
an essential role in the Group's expansion and who have substantial experience inthe fashion and luxury goods business, and on Prada’s ability to attract and retain
people who are qualiﬁed in the design, marketing, merchandising and distribution of
the products.
The Group considers its management structure to be capable of ensuring business
continuity, and has recently implemented a long-term incentive plan to retain key
employees so that they will continue to cover the roles essential to the achievementof the challenging objectives that the Group constantly sets itself.
Risks regarding the outsourcing of manufacturing activities
While the Group designs, controls and produces in-house the majority of its prototypes,
samples and most sophisticated products, it outsources the production of its otherﬁnished products to external manufacturers with appropriate expertise and capacity.
The Group has implemented a strict inspection and quality control process for all
outsourced production. Prada contractually requires its contract manufacturers tocomply with all laws and regulations on brand ownership and other intellectual property
rights, and with collective bargaining agreements concerning labor, social security, theworkplace, and occupational health and safety. The Group also requires its contract
manufacturers to read the PRADA Group Code of Ethics and comply with the principles
set forth therein.

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Credit risk
Credit risk is deﬁned as the risk of ﬁnancial loss caused by the failure of a counterparty
to meet its contractual obligations. The maximum risk to which an entity is exposedis represented by all the ﬁnancial assets recognized in the ﬁnancial statements. The
Group considers its credit risk to involve primarily trade receivables generated from thewholesale channel and liquid assets. The Group manages credit risk and mitigates therelated effects through its business and ﬁnancial strategies.
With respect to trade receivables, credit risk is managed by monitoring and checking
the reliability and solvency of customers. The lack of concentration of the total tradereceivables with any one customer and the evenly spread out geographical compositionof the receivables mitigate the exposure to credit risk.
With respect to liquid assets, the risk of default substantially relates to bank deposits,
which represent the Group's most widely-used ﬁnancial product for investing its
operating cash ﬂows, in keeping with its low-risk policy. Default risk is mitigated by theallocation of cash holdings to bank deposits that are diversiﬁed in terms of counterparty,
country and currency, and by the consistently short-term period. The residual portion ofliquid assets consists of cash and bank accounts. The Group considers no signiﬁcantrisk to exist on these kinds of liquid assets given that they are used for operating
activities and business processes and, consequently, the number of third parties
involved is fragmented.
Liquidity risk
Cash ﬂow risk refers to difﬁculty that the Group could have in meeting its ﬁnancial
obligations. The Directors are responsible for managing cash ﬂow risk, whereas
the Corporate Finance management, which reports to the CFO, is responsible for
optimizing ﬁnancial resources.
The Directors consider the current funds and credit lines, in addition to those that will
be generated by operating and ﬁnancing activities, to be sufﬁcient for enabling theGroup to meet its requirements emerging from investing activities, manage working
capital, make punctual loan repayments and pay dividends as planned.
Legal and regulatory risks
The PRADA Group operates in a complex regulatory environment and so is exposed to
the following legal risks:

54–

risks associated with non-compliance 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 that the Company must observe as it is listed on the Stock
Exchange of Hong Kong Limited;–risks associated with non-compliance with laws and regulations applicable to theCompany due to the listing on the Irish Stock Exchange of the bond notes issuedin August 2013;–

risks associated with occupational health and safety under Italian Legislative
Decree 81/08 and equivalent regulations in force in other countries;–

possible legal penalties for wrongful acts pursuant to Italian Law 231/2001 as
subsequently amended;–possible events that could adversely affect the reliability of the annual ﬁnancial
statements and the protection of assets;

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–changes in international tax rules applicable in the various countries where theGroup operates;–

possible manufacturing compliance risks regarding Italian and international laws
and regulations for ﬁnished goods distributed and raw materials and consumables
used.

The Group involves various divisions and uses external experts as necessary to keep
its processes and procedures constantly updated in order to comply with changing
rules and regulations, thereby reducing legal and regulatory risk to an acceptablelevel. Monitoring activities are performed by divisional managers, auditors, and special
entities and committees such as the Supervisory Board, Internal Control Committee
and Industrial Compliance Committee.
Foreign exchange risk
The Group has a vast international presence, and therefore is exposed to the riskthat changes in currency exchange rates could adversely impact revenue, costs,
margins and proﬁt. In order to hedge the foreign exchange risk, the Group enters into
derivative contracts designed to ﬁx the value in Euro (or other functional currency) of
the identiﬁed future cash ﬂows. The future cash ﬂows consist primarily of inﬂows oftrade and ﬁnancial receivables and outﬂows of trade payables. They refer mainly to
PRADA spa, the Group's holding company and worldwide distributor of Prada and Miu
Miu brand products.
The management of interest rate risk is described in more detail in the Notes to theConsolidated Financial Statements.
Interest rate risk
Interest rate risk is the risk that future cash ﬂows could be affected by interest rate
ﬂuctuation. In order to hedge this risk, which refers mainly to PRADA spa, the Group
uses derivatives (such as interest rate swaps) to convert variable-rate debt into ﬁxedrate debt or debt within a speciﬁed range of rates.
The management of interest rate risk is described in more detail in the Notes to theConsolidated Financial Statements
Data processing risk
Data is processed using information systems whose governance model ensures that:–

information is adequately protected against the risk of unauthorized access anddisclosure (including with means to protect personal privacy and proprietary
information), improper information modiﬁcation or destruction (including accidental
loss), and use incompatible with the job assigned;–

data is processed in accordance with the applicable laws and regulations.

Information on related-party transactions
Information on the Group’s transactions and balances with related parties is provided
in the Notes to the Consolidated Financial Statements, insofar as required by IFRS, andin the Board of Directors' Financial Review and Corporate Governance Report, insofar
as required by the Hong Kong Stock Exchange rules.

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Non-IFRS measures
The Group uses certain ﬁnancial measures (“non-IFRS measures”) to measure its
business performance and to help readers understand and analyze its statement ofﬁnancial position. Although they are used by the Group's management, the measures
are not universally or legally deﬁned and are not regulated by the IFRS adopted toprepare the Consolidated Financial Statements. Other companies operating in theluxury goods business might use the same measures, but with different calculation
criteria, so non-IFRS measures should always be read in conjunction with the related
notes, and may not be directly comparable with those used by other companies.
The PRADA Group used the following non-IFRS measures in this Annual Report:
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 the year”
adjusted to exclude “interest and other ﬁnancial income/(expense) and dividends frominvestments” and “taxes on income”.
Net Financial Position: Short-term and long-term ﬁnancial payables due to third andrelated parties, including lease obligations, net of cash and cash equivalents and shortterm and long-term ﬁnancial receivables due from third and related parties.
Free cash ﬂows: net cash ﬂows generated by operating activities, net of cash ﬂows
used in investing activities.
The following table sets forth the EBITDA and EBIT of the past three ﬁscal years.
twelve months
ended
January 31
2017

twelve months
ended
January 31
2016

twelve months
ended
January 31
2015

Consolidated net income for the period

284,190

333,338

459,218

Taxes on income

131,240

141,994

208,484

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

15,751

27,561

33,849EBIT (Earnings Before Interest and Taxation)

431,181502,893

701,551

Depreciation, amortization and impairment

222,267

299,865

252,698

EBITDA (Earnings Before Interest, Taxation, Depreciation andAmortization)

653,448

802,758954,249(amounts in thousands of Euro)

Financial Review Basis of Preparation
The Board of Directors' Financial Review refers to the Group of companies controlledby PRADA spa (the "Company"), operating 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, 2017 (ﬁscal year 2016), prepared in accordancewith IFRS as adopted by the European Union. This Financial Review must be read in
conjunction with the Consolidated Financial Statements and the related Notes, which
are an integral part of the latter.

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Outlook
The Group will leverage on its unique heritage and creativity to continue to deliver
unparalleled innovation and quality. The omni-channel experience will be intensiﬁed
with enhanced online presence and in-store digital environment. This action plan,
coupled with a streamlined cost structure, puts the Group in a strong position toconvert future revenue into proﬁtability.

Milan, April 12, 2017

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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 70, 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 68, 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 71, 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 54, 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 Directors
SIMONTACCHI, Stefano, aged 46, has been appointed as Non-executive Director of
the Company on April 8, 2016 and re-elected on May 24, 2016. Mr. Simontacchi has
been Managing Partner of BonelliErede Law Firm, a leading law firm in Italy, since 2013and 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 realestate 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 andadvises the European Commission on transfer pricing tax matters) and has authoredwidely on tax law, including for Il Sole 24 Ore (a leading, daily business newspaper).
Mr. Simontacchi obtained a degree with praise (cum laude) in business administrationfrom L. Bocconi University of Milan in 1995. In 2000, he obtained an Adv. LLM withpraise (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 as board member of Cabara Insurance Broker S.r.l. since2010 and has been appointed as Chairman of the Fondazione Ospedale Buzzi since
July 2015. Save as disclosed herein, Mr. Simontacchi has not held any directorship inother listed companies in Hong Kong or overseas in the last three years.
CEREDA, Maurizio, aged 53, has been appointed as Non-Executive Director of theCompany on May 24, 2016. Since 2015, Mr. Cereda’s practice focuses on providing
consultancy services to entrepreneurs, family offices, companies and financial
institutions. Since 2015, he has also been founding partner and board member of FIEE
(Fondo Italiano per l’Efficienza Energetica) Sgr S.p.A. Mr. Cereda obtained a degree inbusiness economics from L. Bocconi University of Milan in 1989. Mr. Cereda has been
serving as board member of various companies listed on the Italian Stock Exchange
including Technogym S.p.A. (since 2016), SAVE S.p.A. (since 2015), Enervit S.p.A. (since2007), and other Italian companies, and Foundation “Istituto Europeo di Oncologia”(since 2011). Mr. Cereda started his career as an analyst in the equity capital markets
division in Rasfin S.p.A. and then he worked fifteen years at Mediobanca S.p.A., till his
appointment as deputy general manager and head of corporate finance covering large
corporate clients, a role that he covered from 2007 to 2015. From 2007 to 2014, he wasa board member of Mediobanca S.p.A., and from 2006 to 2014, he was also a board
member of Ansaldo STS S.p.A., both companies listed on the Italian Stock Exchange.
Save as disclosed herein, Mr. Maurizio Cereda has not held any directorship in any
other listed companies in Hong Kong or overseas in the last three years.

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Independent Non-Executive Directors
MATTEI, Gian Franco Oliviero, aged 71, 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 70, was first appointed to the 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 2016, Mr. Forestieri has been a
Full Professor of Financial Markets and Institutions at the Bocconi University in Milan.
Mr. Forestieri’s professional experience includes serving as a member of the boardsof directors of INA and Assitalia (from 1993 to 1994), Mediofactoring (from 1997 to1999), 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 61, 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, allof which are private companies. He has been an independent non-executive directorof 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 and Technology in 1994 with a Master of Business
Administration degree. He has been a fellow of the Royal Institution of Chartered
Surveyors since 1994. Mr. Liu is currently a member of the Audit Committee and theNomination 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 53, 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 developmentareas. Mr. Antonacci, from 2012 to 2015 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 notand has not been a director of any listed companies in Hong Kong or overseas in thepast three years.
BOZZI, Bruno, aged 55, 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 listed companies in Hong Kong or overseas in the past three
years.
BUSO, Daniele, aged 49, 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 listed companies in Hong
Kong or overseas in the past three years.
CANTINO, Stefano, aged 50, has been Group Strategic Marketing Director since
February 2016 and has been appointed as General Manager for France and the Principalityof Monaco in 2017. He is primarily responsible for the Group’s communication strategy
and global marketing functions and for overseeing the Group’s operations in France
and the Principality of Monaco. Mr. Cantino obtained a degree in Political Science fromthe 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 andChurch’s Brand and Retail Director. He was Prada’s Marketing Director from 2005
to 2009, and Communication and External Relations Director from 2009 until 2016.
Mr. Cantino is not and has not been a director of any listed companies in Hong Kongor overseas in the past three years.
CAROLA, Pablo, aged 49, has been Regional Director Iberian Peninsula and North Africa
since 2013. Mr. Carola is primarily responsible for overseeing the Group’s commercial
operations in the Iberian Peninsula and in North Africa areas, 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 directorof any listed companies in Hong Kong or overseas in the past three years.

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CARRARO, Luca, aged 50, 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 listed companies in Hong Kong or overseas in thepast three years.
CHOI, Moonyoung, aged 54, has been General Manager Prada Korea since 2007. She isprimarily 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 notand has not been a director of any listed companies in Hong Kong or overseas in thepast three years.
CLARK, Sophie, aged 44, has been the General Manager Prada Australia since 2016.
She is primarily responsible for overseeing the Group’s commercial operations
in Australia and New Zealand. Ms. Clark graduated from Sydney's exclusive
Kincoppal-Rose Bay School. Ms. Clark had an extensive career at leading Department
store David Jones in Sydney (1999 – 2016) where she most recently held the positionof General Manager Womenswear. Prior to this Ms. Clark was the General Manager
for Accessories, Shoes and Luxury brands as well as holding several buying manage
positions across the divisions. Ms. Clark was elected as a judge for the prestigious
International Woolmark Fashion Awards in Milan 2014, Bejing 2015 and New York2016. Ms. Clark is not and has not been a director of any listed companies in Hong
Kong or overseas in the past three years.
COVIELLO, Letizia, aged 49, has been Group Tax Director since March 2016. She
joined Prada in 1998 in the Tax Department. She is primarily responsible for overseeing
all Group strategic tax matters. Ms. Coviello obtained a Degree in Economics from the
University La Sapienza in Rome in 1991 followed by a Tax Specialization Master at
Ipsoa in Milan. Before joining the Group she worked for a Legal Firm, Studio Simonellie Associati in Milan and afterwards as Tax Senior Assistant in the Fiscal Department
at Eni Spa, in Milan. Ms. Coviello is not and has not been a director of any listedcompanies in Hong Kong or overseas in the past three years.
DE PAOLI, Paolo, aged 40, has been Group Internal Auditing Director since July 2016.
He is primarily responsible for the appropriateness of the control systems and the risk
management and the application of procedures, to ensure protection against risks at
Group level. Mr. De Paoli obtained a degree in Economics at Bocconi University. After
spending 5 years in KPMG Spa as Supervising Senior, he joined Prada in 2008, first
as Internal Audit Manager, than as Administration and Finance Manager for Emea andNew Markets. Mr. De Paoli is not and has not been a director of any listed companies
in Hong Kong or overseas in the past three years.
D’IPPOLITO, Andrea, aged 49, 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 theFinished Product Quality Control and Repairs Departments. Mr. D’Ippolito is not andhas not been a director of any listed companies in Hong Kong or overseas in the past
three years.
ETHERIDGE, Stephen, aged 58, has been appointed as Chairman of Church Holding
UK ltd. in 2017. He has been primarily responsible for the industrial operations of the64

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Church Group since 2011. 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’sfootwear. Mr. Etheridge is not and has not been a director of any listed companies inHong Kong or overseas in the past three years.
FAYARD, Pierre, aged 55, 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 listed companies in Hong Kong oroverseas in the past three years.
GOTTI, Aldo Camillo, aged 52, has been Prada Marketing Director since 2016. He is
primarily responsible for the communication strategy, the wholesale and e-commerceof the Prada brand. Mr. Gotti joined our Group in 1990 and before being appointed tohis current position, he held several managerial roles in the wholesale, marketing andcommunication areas of the Prada and Miu Miu brands, including Miu Miu General
Manager. In 2014 he was appointed as Regional Director for France and the Principalityof Monaco, responsible for overseeing the Group’s operations in such area. Mr. Gotti
is not and has not been a director of any listed companies in Hong Kong or overseas
in the past three years.
GRECO, Enzo, aged 51, 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 listed companies in Hong Kong or overseas in thepast three years.
LAM, Shun Yan Janice, aged 46, 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 Hong Kong.
She started her career at Jusco Store HK Ltd. (1993–1995); then she was worked at
Chickeeduck Distribution HK Ltd. in China (1999–2003). Before joining our Group she
was Managing Director at Alfred Dunhill China (2006 -2012). Ms. Lam is not and has
not been a director of any listed companies in Hong Kong or overseas in the past three
years.
LOMANTO, Maria Cristina, aged 42, 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(Italy) in 1998. She joined our Group in 2006 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
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a director of any listed companies in Hong Kong or overseas in the past three years.
LUPAS, Domnica Alexandra, aged 44, 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
listed companies in Hong Kong or overseas in the past three years.
MARSICOLA, Alessandra, aged 57, has been appointed as Retail Development Director
for Japan and Asia in 2017. She is primarily responsible for the development of the retailbusiness of both Prada and Miu Miu brands in Japan and Asia. Ms. Marsicola joined
our Group in 1991 and before being appointed to her current position she covered
different managerial roles in the commercial department, including Prada Worldwide
Store Operation Director and Prada Retail Director for Prada Japan. In 2014 she wasappointed as Chief Executive Officer of Prada Fashion Commerce (Shanghai),responsible
for overseeing the Group’s operations in China. 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 listed companies in Hong Kong oroverseas in the past three years.
MECHERI, Fabrizio, aged 51, has been Footwear Industrial Director since August
2014. He is primarily responsible for the manufacturing of the footwear collection for
all the Group’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, and graduated in Electronic Engineering at the University of Florence (Italy) in
1992. He started 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 listed companies inHong Kong or overseas in the past three years.
NOSCHESE, Marcelo, aged 52, has been Regional Director for South America since
December 2011, when he joined our Group, and for Central America and Carribean
since 2017. He is primarily responsible for overseeing the Group’s operations in SouthAmerica, Central America and Carribean. Mr. Noschese obtained a master’s degree inBusiness Administration from INSEAD, Fontainebleau, France, in 1992 and graduatedin 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, and then was appointed as General Manager for the Travel Retail Divisionin North and South America (1992 – 1998). Prior to joining our Group, he worked for
LVMH – Moët Hennessy Louis Vuitton as Country Manager for Brazil (2001 – 2004) andfor 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 listed companies
in Hong Kong or overseas in the past three years.
RASTRELLI, Stefano, aged 54, 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 director
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of any listed companies in Hong Kong or overseas in the past three years.
ROMANO, Anthony, aged 50, has been Regional Director for the South East
Mediterranean area since 2013 and has been appointed as Chief Executive Officerof Church & Co Ltd. in 2017. Mr. Romano is responsible for overseeing the Group’s
operations in the South East Mediterranean area, where he covers several managerial
roles at the Company’s subsidiaries. Mr. Romano is also responsible for overseeing the
Church Group and Car Shoe brand operations. 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 listed companies in Hong
Kong or overseas in the past three years.
SESIA, Davide, aged 49, 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 Administrationfrom the 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
listed companies in Hong Kong or overseas in the past three years.
SUTTER, Stefano, aged 43, 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 listed companies in Hong Kong or overseas in the past three
years.
TOLOMELLI, Armando, aged 51, 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 listed companies in Hong Kong oroverseas in the past three years.
ZAMBERNARDI, Fabio, aged 54, 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 of
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both 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 listed companies inHong Kong or overseas in the past three years.
ZENKOVSKAYA, Vera, aged 40, 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
listed companies in Hong Kong or overseas in the past three years.

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Company Secretary
ALBANO, Patrizia, aged 63, 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 degree in Law fromthe 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 and then 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. and Fincasa 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 private company active inservices provision, property and facility management and renewable energy. She thenworked 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 ourCompany 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 Chairman of Gruppo Moda,
Design e Arredo of Assolombarda (Association of Industrial provinces of Milan, Lodi,
Monza and Brianza) since February 2015. Ms. Albano also served as board member ofCassa di Risparmio di Rimini S.p.A. from April to November 2015 and Mediacontech
S.p.A. from June to December 2016. Ms. Albano is the wife of Mr. Carlo Mazzi, theChairman of the Board of our Company. Ms. Albano is not and has not been a directorof any other listed companies in Hong Kong or overseas in the past three years.
YUEN, Ying-kwai, aged 51, 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
and appointed as group company secretary in 2000. Ms. Yuen was the company
secretary of Integrated Distribution Services Group Limited (member of Li & Fung
Group) between 2004 and 2011. Ms. Yuen received an Honours Diploma in Company
Secretaryship and 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 beena fellow of both the Hong Kong Institute of Chartered Secretaries (“HKICS”) and theInstitute of Chartered Secretaries and Administrators, UK since 2001. Ms. Yuen has
been a member of the Membership Committee of HKICS since 2016 and was the pastmember of the Company Secretaries Panel of HKICS (2012 – 2015). Ms. Yuen is notand has not been a director of any other listed companies in Hong Kong or overseas in
the past three years.

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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. These
discussions form part of this directors’ report.
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.
Environmental Policies and Performance
The Group aims to a 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.
Environmental protection is of primary interest to the Group, which feels responsible
for engaging in and cultivating virtuous behaviors that contribute to its sustainablegrowth and are examples of good practices.The main direct impact of the Group'sbusiness originates from the use of energy for offices, factories, logistics centers andstores in the various parts of the world. The objective is to reach higher levels of energy
efficiency and continuously pursue new ways to reduce waste.
In the last few years a long-term plan for improving energy efficiency has been
implemented, involving all of the Company’s factories and offices. In fact, the Grouphas continued to work towards improving its infrastructure, energy and materials
management in order to minimize the impact on the environment.
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 enhancement
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of 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 whatalready existed and working to rehabilitate buildings for new purposes. The opening in2016 of the latest industrial site outside Florence dedicated to the production of leather
bags is another example of a recovery and building renovation of what was a former
factory producing Christmas decorations that the Group acquired back in 2014.
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.
The average number of employees for the twelve months ended January 31, 2017 was
12,326 people, almost the same as 2015 financial year.
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.
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.
The Group has a diverse range of raw materials suppliers and external manufacturers.
About 90% of them are located in the European Union and mainly in Italy.
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.

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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.
An analysis of the Group’s environmental policies and performance and of therelationships with key stakeholders (employees, customers, suppliers and shareholders)will be included in the Group’s Social Responsibility Report 2016, which is expected tobe published by mid-2017.
Results and dividends
The results of the Group for the year ended January 31, 2017 are set out in theConsolidated Statement of Profit or Loss.
The Board recommends, for the twelve month period ended January 31, 2017, a final
dividend of Euro 307,058,880 (or Euro/cents 12 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 Wednesday, May 31,
2017. The shareholders recorded on the Company’s shareholders register on Friday,
May 26, 2017, will be allowed to attend and vote at the shareholders’ general meetingof the Company.
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 share
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registrar 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 25, 2017. The Company’s shareholders register (both sections) will beclosed from Friday, May 26, 2017 to Wednesday, May 31, 2017, 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 Tuesday, June 20, 2017.
The final dividend will be paid to shareholders recorded on the Company’s shareholders
register on Wednesday, June 7, 2017.
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 Tuesday,June 6, 2017. The Company’s shareholders register (both sections) will be closed on
Wednesday, June 7, 2017, 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, 2017, the Company’s reserves available for distribution to shareholders
in accordance with the Company’s by-laws amounted to Euro 976.6 million.
Property, plant and equipment
Details of the movements in the property, plant and equipment of the Group during theyear ended January 31, 2017 (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.
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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 from the sale in an Italian company by shareholders resident inHong Kong are no longer subject to taxation in Italy, applying as of January 1, 2016.
Further details on Italian capital gains taxation have already been reported in the Tax
Booklet available on the Company’s website www.pradagroup.com.
Subsidiaries
Details of the Company’s subsidiaries as at January 31, 2017, 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 with effect from February 19, 2016)
Non-Executive Directors
Mr. Stefano SIMONTACCHI (assumed the role with effect from April 8, 2016 and was
re-elected at the AGM on May 24, 2016)
Mr. Maurizio CEREDA (elected at the AGM on May 24, 2016)
Mr. Gaetano MICCICHÉ (resigned from the role with effect from April 15, 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.
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.

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Management contract
No contract concerning the management and administration of the whole or any
substantial part of any business of the Company, that it is not a contract of service
with any Director or any person engaged in full-time employment of the Company, towhich 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, 2017, 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..
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..

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The interests of Ms. Miuccia Prada Bianchi and Mr. Patrizio Bertelli in the shares of theCompany as at January 31, 2017 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%

Bellatrix S.p.A.

Ordinary Shares

438,460

As above

49.83%

Bellatrix S.p.A.

Preference Shares

100,000

As above

83.34%

Ludo S.r.l.

Ordinary Shares

100,311

Beneficial Owner100%

PRA 1 S.r.l.

Participation Quotas(Euro)

10,000Controlled Corporation

100%

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

Common Shares

1

As above100%

Fratelli Prada S.p.A.

Ordinary Shares

734,754

As above73.48%

Petranera S.r.l.

Participation Quotas(Euro)

2

As above100%

Prada Holding S.p.A.

Ordinary Shares

750

Controlled Corporation

31.25%

Prada Holding S.p.A.

Preference Shares300

As above

50%

Prapar Corporation

Common Shares

50

As above

100%

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 above100%

Mr. Patrizio
Bertelli

Save as disclosed above, as at January 31, 2017, 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, 2017, 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

2,046,470,76080%

Investment manager

150,723,710

5.89%

137,241,300

5.36%

Beneficial owner

2,488,000

0.09%

Custodian Corporation/
approved lending agent

134,642,111

5.26%

Name of Shareholder

Long Positions

OppenheimerFunds, Inc

Beneficial owner (2,592,011)

JPMorgan Chase & Co.

Trustee (other than a baretrustee) (7,178)
Custodian corporation/
approved lending agent(134,642,111)

Short Positions
JPMorgan Chase & Co.
Lending Pool
JPMorgan Chase & Co.

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, 2017, 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 acquire80

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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 percent Notes which become due on August 1, 2018 (the “Notes”). The Notes weresubscribed by professional and institutional investors and were settled on August 1,
2013. The Notes were admitted to the ofﬁcial list on the Irish Stock Exchange andwere permitted to trade on its regulated market. The Company may, at its discretion,
redeem the entirety of the Notes at once (but not some only), at any time after theirissuance at an amount equal to their principal amount plus (if applicable) a premium,
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, July
15, 2015, and April 8, 2016, 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 Stores
Revenue from sales of goods

59.7

Revenue from services

5.0Royalties income

1.7

Purchase of goods by the Group(1.0)

Net transaction amount

65.4

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(b) Galleria Transaction
On January 29, 2013, the Company entered into a Business Combination Agreementwith Progetto Prada Arte S.r.l. (“PPA”) to satisfy the requirements imposed by the
Municipality of Milan before the granting to the Company of the right to use theGalleria Property in Milan, Italy. PPA is a company indirectly controlled by Ms.
Miuccia Prada Bianchi and Mr. Patrizio Bertelli (both Chief Executive Ofﬁcers,
executive directors and substantial shareholders of the Company).
In early 2016 the Company - in agreement with PPA - formally asked the Municipalityof Milan to fully replace PPA in the management of the entire Galleria Property.
Having obtained the approval of the Municipality of Milan, the Company and PPA
have mutually agreed to terminate the PPA Business Combination Agreement.
As disclosed in the Company's announcement dated April 8, 2016, the Company
entered into a termination agreement with PPA to terminate the Business
Combination Agreement with effect from the same date. Neither party is required
to pay any penalty or compensation to the other party in respect of the earlytermination of the Business Combination Agreement.
Following the termination, the Company may from time to time grant to otherentities, on a temporary basis, the right to use a portion of the Galleria Property toarrange exhibitions or organise other artistic and cultural events, in promoting andsponsoring the Prada brand image.
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.
(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 9 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.
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”).

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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 paid to PABE-RE LLC, or accrued by the Company in accordancewith applicable accounting rules, under the Lease Agreement and the Guarantee
is JPY 2,040,703,000.
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 profit orloss
for the twelve
months ended
January 31,
2017Euro million

Euro million

Euro million

Euro million

Revenue from sales of goods

21.1

-

-

21.1

Revenue from services, net

(0.5)

-

-

(0.5)

Royalties income

0.6

-

-

0.6

Purchase of goods by the Group

(0.5)

-

-

(0.5)

Net transaction amount

20.7

-

-

20.7

0.2

(1.6)

-

(1.4)

0

-

11.7

11.7

Japanese Yen
millionJapanese Yen
millionJapanese Yen
millionJapanese Yen
million2,040.70--

2,040.70(b) PPA Business Combination Agreement
Rental income(c) Luna Rossa Sponsorship Agreement
Sponsorship contribution(d) 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 Group;(ii) either on normal commercial terms or better; and(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.

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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 involved 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, July 15, 2015, andApril 8, 2016, 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, 2017 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, 2017 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, 2017, with a view to ensuring such
Consolidated ﬁnancial statements give a true and fair view of the state of affairs of
the Group. In preparing these Consolidated ﬁnancial statements, the Directors haveselected suitable accounting policies, made judgments and estimates that are prudent
and reasonable, and prepared the Consolidated ﬁnancial statements on a going concern
basis and in accordance with International Financial Reporting Standards issued by
the International Accounting Standards Board as adopted by the European Union. The
Directors are responsible for keeping proper accounting records for safeguarding theassets of the Company and the Group.
Auditor
The Consolidated ﬁnancial statements and the Separate ﬁnancial statements of theCompany were audited by Deloitte & Touche S.p.A.. Under Italian company law,
the auditor is appointed and its remuneration is resolved every three years by theshareholders of the Company in a general meeting, on the basis of a proposal from theBoard of statutory auditors.
On April 13, 2012, the Stock Exchange granted to the Company a waiver from strict
compliance with Rule 13.88 of the Listing Rules, which requires the appointment of
an auditor at each annual general meeting to hold ofﬁce until the next annual general
meeting. As a consequence, the Company’s auditor is appointed and its remuneration
determined every three years at the shareholders’ general meeting of the Company
under the applicable Italian laws.
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 propose aresolution at the shareholders’ general meeting of the Company on May 24, 2016 (the“2016 AGM”) to appoint Deloitte & Touche S.p.A. as the auditor of the Company forthe relevant three year-term and to ﬁx its remuneration.
At the 2016 AGM, it was resolved to appoint Deloitte & Touche S.p.A. as the auditor(“revisore legale dei conti”) of the Company for a term of three ﬁnancial years (ﬁnancial
year ended January 31, 2017 to ﬁnancial year ending January 31, 2019), ending on thedate of the shareholders’ general meeting called to approve the ﬁnancial statements
for the last year of the auditor’s appointment and to approve its remuneration of EuroPRADA Group

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487,000, for each ﬁnancial year of its three-year term, for the provision to the Companyof the audit of the Separate ﬁnancial statements and the Consolidated ﬁnancial
statements, which is included in the overall annual remuneration of Euro 1,868,794 forDeloitte & Touche S.p.A. and its network in respect of provision of audit services to theGroup as a whole. The auditor’s annual remuneration shall be subject to adjustment
in accordance with changes in relevant applicable laws or in the requirements for theaudit services as well as the annual adjustment linked to the changes in CPI - consumer
price index.
By order of the Board
Carlo Mazzi
Chairman

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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, 2017). This
Corporate Governance report summarizes the way in which the Company has applied
the principles and implemented the code provisions contained in the Code for theduration of the Reviewed Period.
Directors’ securities transactions
The Company has adopted written procedures governing Directors’ securities
transactions on terms no less exacting than the required standard set out in the Model
Code. Speciﬁc written acknowledgments have been obtained from each Director to
conﬁrm his/her compliance with the required standard set out in the Model Code andthe Company’s relevant procedures regarding directors’ securities transactions for theduration of the Reviewed Period. There were no incidents of non-compliance during
the Reviewed Period.
The Company has also adopted written procedures governing securities transactions
carried out by the relevant employees who are likely to possess inside information in
relation to the Company and its securities. The terms of these procedures are no lessexacting than the standard set out in the Model Code.
Directors’ interests as at January 31, 2017, 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 and interim 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 88.7%.
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 Shareholders’Committee
Meeting

Executive Directors
Mr. Carlo MAZZI (Chairman)

6/6

Ms. Miuccia PRADA BIANCHI (Chief Executive
Officer)

5/6

5/5

3/3

1/1
0/1

Mr. Patrizio BERTELLI (Chief Executive Officer)

5/6

1/1

Ms. Alessandra COZZANI (also apppointed
Chief Financial Officer on February 19, 2016)

6/6

1/1

Mr. Donatello GALLI (Chief Financial Officer
resigned effective February 19, 2016)

0/1

n/a

Mr. Stefano SIMONTACCHI (appointed on
April 8, 2016)

4/4

1/1

Mr. Maurizio CEREDA (appointed on
May 24, 2016)

4/4

1/1

Mr. Gaetano MICCICHÉ (resigned effective
April 15, 2016)

0/2

n/a

Non-Executive Directors

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

6/6

4/4

5/5

Mr. Giancarlo FORESTIERI 2

6/6

4/4

5/5

Mr. Sing Cheong LIU 3

5/6

4/4

3/3

1/1
1/1

3/3

1/1

Statutory Auditors
Mr. Antonino PARISI (Chairman)

6/6

4/4

1/1

Mr. Roberto SPADA

4/6

2/4

1/1

Mr. David TERRACINA

5/6

3/4

1/1

Date(s) of MeetingFeb 19, 2016

Apr 8, 2016

April 4, 2016

Feb 19, 2016

Apr 8, 2016

Jun 30, 2016 May 24, 2016

Apr 8, 2016

May 24, 2016

June 30, 2016 Aug 26, 2016 June 29, 2016 May 4, 2016
Aug 26, 2016

Jan 20, 2017

Jan 20, 2017

Jan 20, 2017
Jan 31, 2017

Jan 27, 2017
Average Attendance Rate of Directors

88.7%

100%

100%

100%

88.8%

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 Committeed. 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, the Group’s strategic objectives,
major acquisitions and disposals, annual budgets, as well as annual and interim results,
approval of major transactions, connected transactions and any other signiﬁcant
operational and ﬁnancial matters. The Board is also responsible for evaluating the90

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effectiveness of the risk management and internal control systems on an ongoingbasis.
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 and interim results for the approval of the Board prior to
publication;
execution of business strategy and other initiatives adopted by the Board;
monitoring of operating budgets adopted by the Board;
designing, implementing and monitoring the risk management and the internal
controls systems; andcompliance 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
11, 2017. 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 (i.e. Mr.
Carlo Mazzi, Ms. Miuccia Prada Bianchi, Mr. Patrizio Bertelli Ms. Alessandra Cozzani,
Mr. Stefano Simontacchi, Mr. Maurizio Cereda, Mr. Gian Franco Oliviero Mattei, Mr.
Giancarlo Forestieri and Mr. Sing Cheong Liu) attended an in-house seminar conductedby the Joint Company Secretaries covering the latest amendment of the Code: risk
management and internal control and ESG reporting obligations. These initiatives aretaken to ensure the Directors’ awareness of the latest corporate governance practices
and that their contribution to the Board remains informed and relevant.
Directors are requested to provide records of the continuous training they havereceived during the Reviewed Period to the Group Corporate Affairs Director and Joint
Company Secretary, Ms. Patrizia Albano.
Chairman and Chief Executive Officers
The Chairman is Mr. Carlo Mazzi and the Chief Executive Ofﬁcers are Ms. Miuccia Prada
Bianchi and Mr. Patrizio Bertelli. The role of the Chairman is separate from that of the Chief
Executive Ofﬁcers. The Chairman is vested with the power to represent the Company
and is responsible for ensuring that the Board is functioning properly and adhering to good
corporate governance practices and procedures. The Chief Executive Ofﬁcers, supportedby the other Executive Directors and senior management, are responsible for managing
the Company’s business, including the implementation of major strategies and otherinitiatives adopted by the Board. The Chief Executive Ofﬁcers are husband and wife.
Appointment of Directors
At the shareholders’ general meeting of the Company held on May 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 ending 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, until the ﬁrst shareholders’ general meeting held
after his appointment.
Before the shareholders’ general meeting of the Company on May 24, 2016 (the “2016
AGM”) the Company received a notice from Prada Holding S.p.A., its substantial
shareholder, proposing that Mr. Stefano Simontacchi be re-elected as a Director of
the Company at the 2016 AGM. The appointment of Mr. Stefano Simontacchi as NonExecutive Director was also recommended by the Nomination Committee.
The Company also received a notice from Prada Holding S.p.A proposing that Mr.
Maurizio Cereda be elected as a Director of the Company at the 2016 AGM to ﬁll thecasual vacancy caused by the resignation of Mr. Gaetano Miccichè, rendered witheffect from April 15, 2016. The appointment of Mr. Maurizio Cereda as Non-Executive
Director was also recommended by the Nomination Committee.

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Mr. Stefano Simontacchi and Mr. Maurizio Cereda were elected as Directors of theCompany at the 2016 AGM and each of their mandate will expire at the same time as
the other current Directors (i.e. on the date of the shareholders’ general meeting to
be convened for the approval of the ﬁnancial statements of the Company for the year
ending January 31, 2018).
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
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;
and(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 to

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discharge 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, the implementation of the Company’s risk
management functions and to perform any other duties and responsibilities as are
assigned to it by the Board.
During the Reviewed Period, the Audit Committee held four meetings (with anattendance rate of 100%) mainly to review with senior management, the Group’s
internal and external auditor and the board of statutory auditors, the signiﬁcant internaland external audit ﬁndings and ﬁnancial matters as required under the Committee’s
terms of reference and make relevant recommendations to the Board. The Audit
Committee’s review covers the audit plans as well as the ﬁndings of both the internal
and the external auditors, internal controls, risk assessment, annual review of thecontinuing connected transactions of the Group, tax updates and ﬁnancial reporting
matters (including the annual results for the year ended January 31, 2016 and theinterim ﬁnancial results as of July 31, 2016) before recommending them to the Board
for approval.
The Audit Committee has also held two meetings on April 6 and 12, 2017, to review
the annual results for the year ended January 31, 2017, before recommending it to theBoard for approval.
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, 2017 and January
31, 2016, together with non-audit services, are illustrated below:
Type of service

Audit Firm

Provided to

twelve months
ended
January 31,
2017

twelve months
ended
January 31,
2016

Audit services

Deloitte & Touche spa

PRADA spa

514

485

Audit services

Deloitte & Touche spa

Subsidiaries

173

162

Audit services

Deloitte Network

Subsidiaries

1,194

1,294

1,881

1,941

1,045

880

216

247

1,261

1,127

81

99

3,223

3,167

Total audit fees accruing

Other advisory services
Other advisory services

Deloitte Network

PRADA spa

Deloitte Network

PRADA spa andsubsidiaries

Total non-audit fees accruing

Out of pocket expenses

Total independent auditor’s compensation accruing

Other advisory services for Prada S.p.A. mainly relate to services to assist theCompany with the production of a new website, with processes aimed at creating adata warehouse and in developing its customer cluster analysis.

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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 ﬁve meetings (withan attendance rate of 100%) mainly to recommend certain updates regarding thelong-term incentive plan connected to the Group’s results and the management by
objectives incentives for the 2016 ﬁnancial year.
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. SingPRADA Group

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Cheong Liu and one Executive Director, Mr. Carlo Mazzi.
During the Reviewed Period, the Nomination Committee held three meetings (with anattendance rate of 100%), to assess and conﬁrm the independence of the Independent
Non-Executive Directors of the Company for 2015 ﬁnancial year and to recommend to
the shareholders the election of Mr. Stefano Simontacchi and Mr. Maurizio Cereda as
directors of the Company at the shareholders’ general meeting held on May 24, 2016.
On April 11, 2017, the Nomination Committee assessed and conﬁrmed the
independence of the Independent Non-Executive Directors of the Company 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 or external
individuals. The supervisory body consists of Mr. David Terracina (Chairman), Mr. Gian
Franco Oliviero Mattei and Mr. Paolo De Paoli.
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 ending 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, 2017 with a view to ensuring such
Consolidated ﬁnancial statements give a true and fair view of the state of affairs of
the Group. In preparing these Consolidated ﬁnancial statements, the Directors haveselected suitable accounting policies and made judgments and estimates that are
prudent and reasonable. The Consolidated ﬁnancial statements have been preparedon a going concern basis and in accordance with International Financial ReportingStandards issued by the International Accounting Standards Board as adopted by theEuropean Union.
In addition the Board is generally satisﬁed of the adequacy of resources, staff
qualiﬁcations and experience, training program and budget of the Company’s
accounting and ﬁnancial reporting function during the Reviewed Period.

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As regards the auditor of the Company, its responsibilities are stated in the auditor’sreports on the Consolidated ﬁnancial statements.
Internal control and risk management
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 the relevant laws and regulations.
To better control its activities in moving toward the achievement of the establishedobjectives, the Group has adopted the “Enterprise Risk Management – Integrated
Framework” as reference method to identify, evaluate and manage the speciﬁc risks
arising out of the continuous changes which affect the regulatory framework and theGroup’s operations.
The Board places great importance on maintaining a sound and effective system ofrisk management and internal control to safeguard the shareholders’ investment andthe Company’s assets.
The Board has acknowledged its responsibility for the risk management and internal
control systems - including ﬁnancial, operational and compliance controls functions and for the ongoing monitoring and review of their effectiveness. Such systems aredesigned to manage rather than eliminate risks and are aimed at providing reasonable
and not absolute assurance against material misstatement or loss.
The management with the support of the Internal Audit Department has been grantedby the Board with the responsibility on the process to identify, evaluate and manage
the risk factors that may affect the Group’s operations and to resolve material internal
control defects in the event such defects arise.
The Internal Audit Department provides an independent review of the adequacy andeffectiveness of the internal control and the risk management systems. The audit planis discussed and agreed every year by 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. The risk assessment
documents are periodically updated by the Internal Audit Department - with thesupport of the management - then reviewed by the Audit Committee and submitted to
the Board for the relevant approval.
The Board has received a speciﬁc conﬁrmation from the relevant management of theCompany on the effectiveness of the Company’s risk management and the internal
control systems throughout the Reviewed Period.
During the Reviewed Period, no signiﬁcant control failings or weaknesses wereidentiﬁed.
The Board - also through the support of the Audit Committee – has been reviewing on
an ongoing basis (with the same frequency as regular Board meetings were held) andis generally satisﬁed that the internal control and the risk management systems havefunctioned effectively and have been adequate for the Group as a whole, throughout
the Reviewed Period.
Moreover, the Board is generally satisﬁed of the adequacy of resources, staff
qualiﬁcations and experience, training program and budget of the Company’s internal
audit and risk management function during the Reviewed Period.

PRADA Group

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Inside Information
The Company handles and disseminates inside information in accordance with therequirements of the Securities and Futures Ordinance and the Listing Rules.
With regard to the procedures and internal controls for the handling and disseminationof inside information, the Company:–

has adopted certain policies to ensure potential inside information is captured andconﬁdentiality is maintained until timely and proper disclosure is made (the “Policy
on Inside Information”);–

has made available on the Company’s intranet the Policy on Inside Information inorder to ensure immediate access to it by all the Group’s staff;–

has included in the procedures governing Directors and relevant employees aprohibition on dealing in the Company’s shares whilst in possession of inside
information; and–has authorized only the Executive Directors and few selected members ofmanagement to act as spokespersons and respond to external enquiries.

In addition, the Board has established an Inside Information Committee, which
comprises the Chairman, the Chief Executive Ofﬁcer, Mr. Patrizio Bertelli, and the
Chairman of the Audit Committee. The Inside Information Committee has beendelegated with the power to assess, if necessary, any potential inside information, andto keep all other Directors timely informed about its decisions.
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
their skills and knowledge. 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 capital
may request in writing for additions to be made to the list of items on the agenda,
within ten days from the notice of call for a shareholders’ general meeting, by settingout the proposed additions (ﬁve days in advance in the circumstances indicated under
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.

98

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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 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 one-on-one meetings, roadshows, investor conferences, site visits and results
brieﬁngs are conducted on a regular basis in order to facilitate communication
between the Company, shareholders and the investment community. The Company
strives to ensure effective and timely dissemination of information to shareholders andthe investment community at all times and will regularly review the arrangements toensure its effectiveness.
The Company’s corporate website (www.pradagroup.com) facilitates effective
communications with shareholders, investors and other stakeholders, making
corporate information and other relevant ﬁnancial and non-ﬁnancial information
available electronically and on a timely basis. This includes extensive information
about the Group’s performance and activities via the annual report, interim report,press releases, presentations, announcements, circulars to shareholders and noticesof general meetings, etc.
b. Shareholders’ Meetings
The Company strives to maintain an on-going dialogue with its shareholders.
Shareholders are encouraged to participate in general meetings or to appoint proxies
to attend and vote at meetings for and on their behalf if they are unable to attend suchmeetings. The process of the Company’s general meeting is monitored and reviewed
on a regular basis.
The Company uses the shareholders’ general meeting as one of the principal channels
for communicating with the shareholders and to ensure that shareholders’ views arecommunicated to the Board. At the shareholders’ general meeting, each substantiallyseparate issue is proposed and considered by a separate resolution (including theelection of individual directors).
The 2016 AGM of the Company was held on May 24, 2016 at the Company’s
registered ofﬁce at Via A. Fogazzaro n. 28, Milan, Italy with a video-conference 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 Directors, including the
Chairman of the Board, the Chairman of the Board Committees and the auditor of theCompany, Deloitte & Touche S.p.A., attended the 2016 AGM.

PRADA Group

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Separate resolutions were proposed at the 2016 AGM relating to each issue and thevoting results of such resolutions were disclosed in the announcement of the Company
dated May 24, 2016. The number of votes cast in favour of each resolution (and thecorresponding percentage level) are set out below:
Brief summary of the Ordinary Resolutions passed at the 2016 AGM
1.

2.

Number of Votes
cast in favour (%)

To approve the Audited Separate Financial Statements and the Audited
Consolidated Financial Statements of the Company for the year ended
January 31, 2016 together with the Reports of the Board of Directors, theBoard of Statutory Auditors and the Independent Auditors.

2,427,147,145(100.00%)

To approve the distribution of the net income for the year ended January 31,
2016 to Shareholders and the utilization of retained earnings, in the form of a
final dividend of Euro 11 cents per share.

2,427,147,245(100.00%)

3.a) To elect Mr. Stefano SIMONTACCHI as a Non-Executive Director of theCompany.

2,422,431,868(99.81%)3.b) To elect Mr. Maurizio CEREDA as a Non-Executive Director of the Company.

2,426,174,275(99.96%)

4.

To appoint Deloitte & Touche S.p.A. as the auditor (“revisore legale dei
conti”) of the Company for a term of three financial years and to approve its
remuneration.

2,426,572,255(99.98%)All resolutions put to the shareholders at the 2016 AGM were duly passed.
Computershare Hong Kong Investor Services Limited, the Company’s Hong Kongshare registrar, acted as scrutineer for the vote taking at the 2016 AGM.
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.

100

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Consolidated Financial Statements

PRADA Group

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101

20/04/17 18:24

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

Note

January 31
2017

January 31
2016

AssetsCurrent assets
Cash and cash equivalents

9722,214680,601

Trade receivables, net

10285,504

254,183
692,672

Inventories, net

11526,941

Derivative financial instruments – current

12

7,045

11,682

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

13

14,964

19,629Other current assets

14

Total current assets

253,375

229,671

1,810,043

1,888,438

Non-current assets
Property, plant and equipment

15

1,542,684

1,517,779

Intangible assets

16

921,800

932,238

Associated undertakings

17

11,775

17,354

Deferred tax assets

35

247,266

280,572
113,954

Other non-current assets

18

123,361

Derivative financial instruments - non current

12

-

721

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

13

-

5,499

Total non-current assets

2,846,886

2,868,117

Total Assets

4,656,929

4,756,555

270,766

Liabilities and Shareholders’ Equity
Current liabilities
Short-term financial payables and bank overdraft

19

151,211

Payables to related parties – current

20

5,542

5,244

Trade payables

21

256,094

281,699

Tax payables

22

65,46780,744

Derivative financial instruments - current

12

13,634

11,095

Other current liabilities

23

Total current liabilities

144,827

142,271

636,775

791,819

520,475

Non-current liabilities
Long-term financial payables

24

547,628

Long-term employee benefits

25

67,211

69,405

Provision for risks and charges

26

82,323

69,233

Deferred tax liabilities

35

31,14036,882Other non-current liabilities

27

179,072

161,317

Derivative financial instruments non-current

12

Total non-current liabilities

Total Liabilities

Share capital
Total other reserves

102

8,250

10,047

915,624

867,359

1,552,399

1,659,178

255,882

255,8822,401,500

2,355,023

Translation reserve

144,791

138,547

Net income for the year

278,329

330,888

Equity attributable to owners of Group

28

3,080,502

3,080,340

Equity attributable to Non-controlling interests

29

24,02817,037

Total Equity

3,104,530

3,097,377

Total Liabilities and Total Equity

4,656,929

4,756,555

Net current assets

1,173,268

1,096,619

Total assets less current liabilities

4,020,154

3,964,736

PRADA Group

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Consolidated Statement of Profit or Loss

Note

twelvemonthsended
January 31
2017

Net revenues

30

Cost of goods sold31

(amounts in thousands of Euro)

Gross margin

Operating expenses

32

EBIT

%

twelvemonthsended
January 31
2016%

3,184,069

100.0%

3,547,771

100.0%(894,957)-28.1%(980,206)-27.6%

2,289,112

71.9%

2,567,565

72.4%(1,857,931)-58.4%(2,064,672)-58.2%

431,18113.5%

502,893

14.2%

Interest and other financial income/(expenses), net

33(18,003)-0.6%(29,872)-0.9%

Dividends from investments

34

2,252

0.1%

2,311

0.1%

415,430

13.0%

475,332

13.4%(131,240)-4.1%(141,994)-4.0%

284,190

8.9%

333,338

9.4%

Income before taxes

Taxation

35

Net income for the year

Net income – Non-controlling interests

29

5,861

0.2%

2,450

0.1%

Net income – Group

28

278,3298.7%

330,888

9.3%

Basic and diluted earnings per share (in Euro pershare)36

0.109

PRADA Group

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Annual Report 2016 - Consolidated Financial Statements

0.129

103

20/04/17 18:24

Consolidated statement of cash flows
twelve months
ended
January31
2017

twelve months
ended
January 31
2016415,430

475,332

Depreciation and amortization from continuing operations

212,052

290,408

Impairment of property, plant and equipment and intangible assets

10,2159,457

Non-monetary financial (income) expenses

15,307

22,104

Other non-monetary charges

17,04033,877

Other non-current assets and liabilities(16,640)(59,806)

Trade receivables, net(27,655)

91,047

Inventories, net

170,549(63,656)

Trade payables(amounts in thousands of Euro)

Income before taxation
Profit or loss adjustments

Balance Sheet changes(25,630)(155,339)

Other current assets and liabilities

3,499(15,916)

Cash flows from operating activities

774,167

627,508

Interest paid, net – third parties(12,693)(13,583)

Taxes paid

(129,624)(245,460)

Net cash flows from operating activities

631,850

368,465

Purchases of property, plant and equipment and intangible assets(227,623)(393,905)

Disposals of property, plant and equipment and intangible assets

2,608

3,353

Dividends from investments

2,252

1,315

Investment in associated undertaking-(2,138)Transactions with Non-controlling shareholders

-

(750)

Business combination(3,564)-

Net cash flow utilized by investing activities(226,327)(392,125)

Dividends paid to shareholders of PRADA spa(281,471)(281,471)(706)(3,229)Dividends paid to non-controlling shareholders
New loans from related companies
Repayment of short term portion of long term borrowings - third parties

2,379(79,129)(45,391)

Arrangement of long-term borrowings – third parties

122,500

192,444

Change in short-term borrowings – third parties(138,426)

125,082

Share capital increases by non-controlling shareholders of subsidiaries

1,014

409

(376,218)(9,777)

Change in cash and cash equivalents, net of bank overdrafts

29,305(33,437)

Foreign exchange differences

12,314

5,158

Opening cash and cash equivalents, net of bank overdraft

680,595

708,873

Closing cash and cash equivalents, net of bank overdraft722,214680,594

Cash and cash equivalents

722,214680,601

Cash flows generated/(utilized) by financing activities

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

104-

PRADA Group

Prada Annual Report 2016_20 apr.indd 104-(7)722,214680,594

Annual Report 2016 - Consolidated Financial Statements

20/04/17 18:24

Consolidated Statement of Changes in Equity (amounts in thousands of Euros,
except number of shares)
Equity(amounts inthousands ofEuro)

Number ofsharesShare
Share Translation
premium
Capitalreserve
reserve

Balance at
2,558,824,000 255,882
January 31, 2015

130,996

Fair
Cash
Value
flow Actuarial
Avaihedge reserve
lable
reservefor sale
Reserve

410,047 (35,323) (13,481)

Otherreserves

Total
other
reserves

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

Net
incomefor year

EquityEquity attribuattributable
table toNonowners
conof the trollingGroup interestss

450,730 3,000,737

Total
Equity17,410 3,018,147

Allocation of2014 net income

-

-

-

-

-

-

-

Dividends

-

-

-

-

-

-

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

Share capitalincrease

-

-

-

-

-

-

-

-

-

-

-

409

409

Transactions with
Non-controllingshareholders

-

-

-

-

-

-

-

(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

Balance at
2,558,824,000 255,882
January 31, 2016

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

450,730

450,730 (450,730)

933 1,959,304 2,355,023-

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

17,037 3,097,377

Allocation of2015 net income

-

-

-

-

-

-

-

Dividends

-

-

-

-

-

-

- (281,471) (281,471)- (281,471)(706) (282,177)

Share capitalincrease

-

-

-

-

-

-

-

-

-

-

-

1,014

1,014

Transactions with
Non-controllingshareholders

-

-

-

-

-

-

-

(2,008)(2,008)-(2,008)280(1,728)Comprehensive
income for theyear (recycled to
P&L)

-

-

6,244

-

(797)

- (2,589)-(3,386)278,329

281,187

6,401

287,588

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

-

-

-

-

-

-

2,454

-

2,454

2

2,456

Balance at
2,558,824,000 255,882
January 31, 2017

144,791

410,047(7,897)PRADA Group

Prada Annual Report 2016_20 apr.indd 105

2,454

-

330,888

330,888 (330,888)(5,707) (1,656) 2,006,713 2,401,500

Annual Report 2016 - Consolidated Financial Statements-

278,329 3,080,502--

24,028 3,104,530

105

20/04/17 18:24

Consolidated Statement of Comprehensive Income(amounts in thousands of Euro)Net income for the period – Consolidated

twelve months
ended
January 31
2017

twelve months
ended
January 31
2016284,190

333,338

6,784

7,580

A) Items recycled to P&L:

Change in Translation reserve
Tax impact--

Change in Translation reserve less tax impact

6,784

7,580

Change in Cash Flow Hedge reserve(914)

38,907

Tax impact

117(10,684)

Change in Cash Flow Hedge reserve less tax impact(797)

28,223(3,452)(13,576)

Change in Fair Value reserve
Tax impact
Change in Fair Value reserve less tax impact

863

3,394

(2,589)(10,182)B) Item not recycled to P&L:

Change in Actuarial reserve

3,277

6,526

Tax impact(821)(1,200)Change in Actuarial reserve less tax impact

2,456

5,326

290,044364,285

6,403

2,485

283,641

361,800

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 are an integral part of the consolidated ﬁnancial
statements.

106

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20/04/17 18:24

PRADA spa Separate Financial Statements

PRADA Group

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107

20/04/17 18:24

PRADA spa Statement of Financial Position
January 31
2017

January 31
2016

Cash and cash equivalents

112,783

157,110

Trade receivables, net

626,308

538,558

Inventories, net

222,026

320,717

8,408

11,276

119,937

95,481(amounts in thousands of Euro)
AssetsCurrent assets

Derivative financial instruments
Financial receivables and other receivables from parent company,
subsidiaries, associates and related parties
Other current assets

158,662

158,867

Total current assets

1,248,124

1,282,009

Property, plant and equipment

640,960

555,913

Intangible assets

171,932

125,837

1,047,465

945,527

Deferred tax assets

31,66236,781Other non-current assets

19,245

16,452Derivative financial instruments - non current

6,031

7,546

112,161

330,164

Total non-current assets

2,029,456

2,018,220

Total assets

3,277,580

3,300,229

Short-term financial payables and bank overdraft

62,871

208,228

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

309,854

53,857

Trade payables

744,134

587,422

Current tax liabilities

10,5999,071

Derivative financial instruments

11,806

9,218

Non-current assets

Associated undertakings

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

Liabilities and Shareholders' equity
Current liabilities

Other current liabilities

81,826

92,664

Total current liabilities

1,221,090

960,459

Long-term debt, net of current portion

456,497371,729

Long-term employee benefits

35,84537,862

Provisions for risks and charges

31,01125,503

Non-current liabilities

Deferred tax liabilities

3,980

4,845

Other non-current liabilities

20,11017,257

Derivative financial instruments - non current

7,608

9,839

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

13,879269,566

Total non-current liabilities
Total liabilities

108

568,930

736,601

1,790,020

1,697,060

Share capital

255,882

255,882

Other reserves

1,048,323

1,098,866

Net income of the year

183,355

248,421

Shareholders' equity

1,487,560

1,603,169

Total Liabilities & Shareholders’ Equity

3,277,580

3,300,229

PRADA Group

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PRADA spa Statement of Profit or Loss
twelve months
ended
January 31
2017

twelve months
ended
January 31
2016

Net revenues

1,583,750

1,914,781

Cost of goods sold(722,605)(890,721)

Gross Margin851,144

1,024,060

Selling, general and administrative expenses(amounts in thousands of Euro)(651,437)(682,777)

Interest and other financial income (expenses), net

48,032

7,570

Income before tax

247,739

348,853

Income taxes(64,384)(100,432)

Net income for the year

183,355

248,421

twelve months
ended
January 31
2017

twelve months
ended
January 31
2016

183,355

248,421PRADA spa Statement of comprehensive income(amounts in thousands of Euro)Net income for the year

Items recycled to P&L:

Change in cash flow hedge reserve
Tax effectChange in Cash Flow Hedge reserve after tax effect(2,236)

38,711541(10,645)(1,695)28,066(755)

830

Items not recycled to P&L:

Gains/ (losses) recognized in actuarial gains/(losses) reserve
Tax effectChange in actuarial reserve after tax effectTotal comprehensive income

PRADA Group

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Annual Report 2016 - PRADA spa Separate Financial Statements

46

-

(709)

830

180,951

277,317109

20/04/17 18:24

PRADA spa Statement of cash flows
twelve months
ended
January 31
2017

twelve months
ended
January 31
2016247,739

348,853

Depreciation and amortization

47,437

41,779Impairment of fixed assets

1,404

615

112

(22)

(amounts in thousands of Euro)

Cash flows from operating activities:
Income before taxation
Adjustments for:Losses/(gains) on disposal of non-current assets
Impairment of investments

24,32828,793Non-monetary financial (income) expenses(76,698)(47,947)

Provisions and other non-monetary expenses

11,512

24,251

Balance sheet adjustments for:
Trade receivables, net(126,128)

197,322

Inventories, net

114,861(30,345)

Trade payables

157,028(54,139)

Other current assets and liabilities(6,705)(36,800)

Other non-current assets and liabilities(8,528)(1,623)

Cash flows generated by operations

386,362

470,737

Interest paid

(9,488)(7,862)

Income taxes paid

(54,769)(147,325)

Net cash flows generated by operations

322,105

315,550

Purchase of property, plant and equipment(80,022)(174,164)

Disposal of property, plant and equipment

2,456

-

(13,568)(24,429)

Cash flows generated (utilized) by investing activities:

Purchase of intangible assets
Disposal of intangible assets-

97

Investments in subsidiaries(49,243)(13,161)

Dividends received

80,73942,039Cash flows generated (used) by investing activities(59,638)(169,618)

Dividends paid

(281,469)(281,470)

Change in bank borrowing - current(148,841)

49,125

14,034(48,629)

Cash flows generated (utilized) by financing activities:

Change in intercompany loans - current
Loans repaid by subsidiaries-

25,095Loans made to subsidiaries(15,394)(118,700)

Long-term loans repaid by/(made to) related parties
Repayment of current portion of long term borrowings
New long term borrowings

38(7,636)

95,102

265,654

Cash flows generated (used) by financing activities(306,791)(116,523)

Change in cash and cash equivalents net of bank overdraft(44,324)

29,409Exchange differences

(1)

(1)

Opening cash and cash equivalents, net of bank overdraft

157,107

127,699

Closing cash and cash equivalents, net of bank overdraft

112,783

157,107

Cash and bank balances

112,783

157,110

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

110

(436)

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PRADA S.p.A. Statement of Changes in Equity (amounts in thousands of Euros,
except number of shares)(amounts in thousandsof Euro)Number ofsharesSharecapitalSharepremium
reserve

Legal
reserve

Other Retained
reserves earnings

Balance at January 31
2015

2,558,824,000

255,882

410,047

51,176

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

Allocation of 2015 net
income--Dividends paid-

Other Movements-

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

Cash
flow
hedge
reserve

349,862 (27,973)

385,429

Net
incomeShareholders’equity385,429 1,607,323- (385,429)

-

-

-

(281,471)-

28,066248,421276,487

-

830

-

-

830

51,176

182,899454,650

93

-

-

-

248,421---- (281,471)--(281,471)

-

-

-

-

(15,089)--(15,089)

-

-

-

-

-

-

(1,695)

183,355

181,661

-

-

-

-

-

(709)

-

-

(709)

Balance at January 31
20172,558,824,000

255,882

410,047

51,176

182,899405,803(1,602)PRADA Group

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248,421 1,603,169- (248,421)-

183,355 1,487,560

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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 in theeyewear and fragrance industries under speciﬁc licensing agreements stipulated withindustry leaders, and with the recent acquisition (2014) of Pasticceria Marchesi 1824,
it has made its entry into the food industry, where it is positioned at the highest levelsof quality.
The Group’s products are sold in 70 countries worldwide through a network that
included 620 Directly Operated Stores (DOS) at January 31, 2017, and a selectnetwork of luxury department stores, independent retailers, franchise stores and online distributors (e-tailer).
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 12, 2017.

2.

Basis of preparation
The Consolidated ﬁnancial statements of the Prada Group as at January 31, 2017,
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” havebeen prepared in accordance with the International Financial Reporting Standards(“IFRSs”) issued by the International Accounting Standards Board (“IASB”) and asendorsed by the European Union.
At the date of presentation of these Consolidated ﬁnancial statements, there were nodifferences between IFRSs as endorsed by the European Union and applicable to the
PRADA Group and those issued by the IASB.
IFRSs 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, 2016.
Amendments to existing standards

Effective Date for the
PRADA GroupEU endorsement status

IAS 16 and IAS 38 Clarification of Acceptable Methodsof Depreciation and Amortization

February 1, 2016

Endorsed on
December 2015

IFRS 11 Accounting for Acquisitions of Interests
in Joint Operations

February 1, 2016

Endorsed on
November 2016

Disclosure Initiative: Amendments to“IAS 1 Presentation of Financial Statements”

February 1, 2016

Endorsed on
December 2015

2012–2014 Cycle that impacted IFRS 5,
IFRS 7, IAS 19, IAS 34

February 1, 2016

Endorsed on
December 2015

These changes above did not have signiﬁcant impacts on these Consolidated Financial
Statements.
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 beginningon or after January 1, 2017.
New standards

Effective Date for the
PRADA Group

Date ofEU endorsement

IFRS 9 Financial instruments

February 1, 2018

Endorsed on
November 2016

IFRS 15 Revenue from contracts with Customers

February 1, 2018

Endorsed on
September 2016

New standards and amendments issued by the IASB, but not yet endorsed by theEuropean Union.
New standards

Effective Date for the
PRADA Group

Date ofEU endorsement

IFRS 14 Regulatory Deferral Accounts

February 1, 2016

Not yet endorsed

IFRS 16 Leases

February 1, 2019

Not yet endorsed

Amendments to existing standards

Effective Date for the
PRADA Group

Date ofEU endorsement

IFRS 10 and IAS 28: Sale or Contribution of Assets between
an Investor and its Associate or Joint Ventureindefinitely deferred

Not yet endorsed

IAS 12 Recognition of Deferred Tax Assets for Unrealized Losses

February 1, 2017

Not yet endorsed

IAS 7 Cash flow statement

February 1, 2017

Not yet endorsed

2014–2016 Cycle that impacted IFRS 1, IAS 28, IFRS 12

February 1, 2017

Not yet endorsed

Clarification to IFRS 15 revenue from contracts with customers

February 1, 2018

Not yet endorsed

IFRS 2 Classification and measurement of Share-based Payment

February 1, 2018

Not yet endorsed

IAS 40: Transfer of Investment Property

February 1, 2018

Not yet endorsed

IFRIC interpretation 22 Foreign Currency Transactions
and Advance consideration

February 1, 2018

Not yet endorsed

As at the date of these Consolidated ﬁnancial statement the Directors have notyet completed 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 Leases" will bematerial.

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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.
Associated undertakings are consolidated using the equity method. Associatedundertakings 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 to prepare these Consolidated ﬁnancial
statements are as follows:116–

the separate ﬁnancial statements of PRADA spa (“holding company”) are prepared
under IFRS and those of its subsidiaries are adjusted, as necessary, to comply withIFRS accounting standards and with the standards applied throughout the Group.
The ﬁnancial statements used to prepare the consolidated ﬁnancial information
are those 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 by
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-controllinginterests” 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 thedate of acquisition is allocated, if positive, to the identiﬁable assets acquired andliabilities assumed 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 the proﬁt or loss 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 proﬁt or loss;–

the acquisition cost of an investment or an activity which does not constitute abusiness, and which therefore does not constitute a business combination, is

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allocated to the individual assets acquired and liabilities assumed based on theirfair value at the acquisition date;6.

–

proﬁts and losses, assets and liabilities of associated undertakings are accounted
for using the equity method. According to this method, investments in associatedundertakings are recorded in the statement of ﬁnancial position at cost, andadjusted to account for any changes in the companies’ net equity post-acquisition,less any impairment of the investment value. Losses exceeding the interestof the shareholders of the holding company are recorded only if the Group has
undertaken an obligation to cover them. The excess of the acquisition cost of
the investment over the interest of the holding company in the net fair valueof acquired assets and liabilities assumed is recorded as goodwill. Goodwill is
included in the book value of the investment and tested for impairment. If the costis lower than the holding company’s interest in the fair value of identiﬁable assets,
liabilities and contingent liabilities, the difference is recorded in the proﬁt or loss
for the year of acquisition;–

during the consolidation process, receivables and payables, costs and revenues
arising from transactions between entities included in the scope of consolidation
are fully eliminated. Unrealized gains or losses generated by transactions between
the Group’s consolidated companies and included in inventories and ﬁxed assets
at the balance sheet date are also eliminated, if any. 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 proﬁt orloss and added to prior year retained earnings if, and to the extent that, they havebeen 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
the year end exchange rate, whereas the proﬁt or loss 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 proﬁt or loss using the average rate for the period
and the rate at the end of the period are recorded as a translation reserve inthe consolidated shareholder’s equity until disposal of the investment. The
translation reserve in consolidated shareholder’s equity represents translationdifferences recorded as from ﬁrst time application on January 1, 2004. When
preparing the Consolidated statement of cash ﬂows, the cash ﬂows ofsubsidiary companies are translated using the average rate for the period.
Exchange differences arising on a monetary item qualiﬁed as a net investment in
a foreign operation are initially recognized in the currency translation reserve andreleased to proﬁt or loss upon disposal of the investment;–

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 shortterm maturity.
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
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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 proﬁt or loss.
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 indirect that have been incurred in bringing the inventories
to their present location and condition. Acquisition or production cost is determined on aweighted average basis. Provisions, adjusting the value of the inventory, are made for slow
moving, obsolete inventories or if, in the end, the estimated selling price is lower than cost.
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.
Ordinary maintenance expenses are charged in full to the proﬁt or loss for the year
they are incurred. Extraordinary maintenance expenses are capitalized if they increase
the value or useful life of the related asset.
The costs included under leasehold improvements relate to refurbishment work carriedout on premises, mainly commercial, 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 Machinery

Depreciation rate or period

Buildings

2.5% - 10%

Production plant and equipment

4% - 25%

Improvements to leased retail premises

Shorter of lease term (*) and useful life

Improvements to leased industrial and corporate premises

Shorter of lease term (*) and useful life

Furniture and fixture retail

Shorter of lease term (*) and useful life

Furniture and fixture corporate and industrial

7% - 25%

Other tangible fixed assets

4% - 50%(*) the lease term includes the renewal period when the exercise of the option is deemed reasonably certain

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 the
proﬁt or loss. If a rental agreement is terminated in advance with respect to the original
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lease term, the residual useful life of property, plant and equipment allocated on it isadjusted consistently.
The value of land is stated separately from the value of buildings. Depreciation is only
charged on the value of buildings.
Every year, a test is performed for indications that the value of property, plant andequipment has been impaired. If any such indications are found, an impairment test
is used to estimate the recoverable amount of the asset. The impairment loss isdetermined by comparing the carrying value of the asset with its recoverable value,
which means the higher of the fair value of the asset less costs to sell and its value inuse.
Fair value is determined based on the best information available to reﬂect the amountthat could be obtained from the disposal of the asset at the reporting date.
Value in use is an estimate of the present value of future cash ﬂows expected to derivefrom the asset tested for impairment.
Impairment losses are recorded immediately in the proﬁt or loss.
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 take overretail store lease agreements.
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 useful life

Software

10% - 33%

Development costs and other intangible assets

10% - 33%(*) the lease term includes the renewal period when the exercise of the option is deemed reasonably certain

If a rental agreement is terminated in advance with respect to the original lease term,
the residual useful life of store lease acquisition allocated on it is adjusted consistently.
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.

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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.
The carrying amount of CGUs tested for impairment is represented by the net invested
capital, made up of goodwill, other intangible, tangible assets, net working capital andother current and non current assets and liabilities.
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.
An impairment loss is recorded in the proﬁt or loss 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.
Assets held for sale
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.
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 proﬁt or loss unless the tax amountis generated from a transaction or an event directly recognized in equity or from abusiness combination.

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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 proﬁt or loss for the period in which the proﬁt or loss effect of the hedged
operation is recorded.
Any gain or loss on a hedging instrument (or portion thereof) which is no longer
effective as a cash ﬂow hedge is immediately recognized in the proﬁt or loss. If thehedged transaction is no longer expected to take place, any related cumulative gain orloss outstanding in equity will be recognized in the proﬁt or loss.
Non-current financial liabilities
Non-current ﬁnancial liabilities include payables to banks for medium and long-termloans and notes.
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.
Actuarial gains and losses are recognized directly in equity, net of the tax effect.
Other long-term employee beneﬁts are recorded among non-current liabilities andtheir value corresponds to the present value of the deﬁned beneﬁt obligation at thereporting date, adjusted according to the period of the underlying agreement. Likedeﬁned beneﬁt plans, other long-term beneﬁts are also valued using the Projected Unit
Credit Method.
Provisions for risks and charges and contingent assets
Provisions for risks and charges cover costs of a known nature, that were certain orprobable but whose amount or due date was uncertain at year end. Provisions arerecorded following a legal or constructive obligation as a result of past events andwhen it is probable that an outﬂow of resources will be required.

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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.
Deferred tax liabilities are recognized through the proﬁt or loss unless the tax amountis generated from a transaction or an event directly recognized in equity or from abusiness combination.
Revenue recognition and cost recognition
Revenues from the sale of goods are recognized in the proﬁt or loss 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. Financial discounts are recognized as ﬁnancial expenses.
Costs are recorded on an accrual basis. In particular, a cost is immediately recognizedin the proﬁt or loss 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 proﬁt or loss on a straight-line basis for the wholelease term. When calculating the lease term, renewal periods are also considered if
provided for by the agreement and the amount due is known.

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Obligations under finance leases
Fixed assets acquired under ﬁnance leases are recorded at the lower of market value
and the present value of future payments due under the lease agreement on the dateof the transaction and are depreciated based on their useful life.
Short-term portions of obligations related to discounted future lease payments arerecorded among current liabilities, while medium and long-term portions are recorded
among non-current liabilities.
Store opening costs
Costs incurred during the pre-opening period of new or refurbished retail stores arecharged to the proﬁt or loss when incurred, except for those capitalized as leasehold
improvements. If a store is closed in advance with respect to the initial estimate of
the lease term, the net book value of the leasehold improvements, less the expected
recoverable amount, is charged to the proﬁt or loss.
Interest expenses
Interest expenses include interest on bank overdrafts, on short and long term loans,ﬁnancial charges on ﬁnance leases, amortization of initial costs of loan operations,changes in the fair value of derivatives – insofar as chargeable to the proﬁt or loss – andannual interest maturing on the present value of post-employment 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 in each country at the reporting date.
Current taxes are recorded in the proﬁt or loss as an expense. This is except for taxes
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 the holding
company 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,
proﬁt or loss 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 requestedby 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 proﬁt or loss for theperiod in which the error was identiﬁed.

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Changes of accounting estimates are accounted for prospectively in the proﬁt or loss
for the year in which the change is made if it only affects the proﬁt or loss for that year,
or in the proﬁt or loss for the year in which the change is made and in subsequent
periods if they are also affected by the change.
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 profit or loss.
Estimates are used also for impairment tests, when determining provisions for risks
and charges, the provision for bad debts, the inventory obsolescence provision, postemployment benefits, the tax computation, measurement of derivatives and useful lifeof property, plant and equipment and intangible assets.
In the current year the Directors reviewed, in accordance with the applicable accounting
standards, the useful lives of some depreciable fixed assets, in particular with reference
to the retail area:
Retail area
Category ofdepreciable asset

useful life used until
January 31, 2016useful life usedfrom February 1, 2016

Improvements to leased retail premises

shorter of lease termand 10 years

shorter of lease term*and useful life

Furniture and fixtures in retail leased premises

5 – 10 years

shorter of lease term*and useful life

Storelease acquisition

shorter of lease termand 10 years

shorter of lease term*and useful life(*) the lease term includes the renewal period when the exercise of the option is deemed reasonably certain

The Prada Group has amassed experience in the development and management ofretail premises under its long-term expansion plan and continuous improvements inpractices and processes. The experience and information accumulated over the years
and the completion of the long-term plan for the geographical expansion of the retail
network, led management to consider the 10-year limit as no longer representativeof the useful life of improvements made to retail premises, taking into account that asignificant part of them are represented by structural works. In fact, the average life ofa store exceeds ten years and the benefits from improvements made to retail spaceand from the furniture and fixtures installed there continue to flow to the Group until
the store is closed down.
February 1, 2016 has been conventionally identified as the date on which theaforementioned accounting estimates were changed. The extension of the useful lives
affected profit or loss of the current and the following four years as follows:
TwelveTwelveTwelveTwelveTwelvemonths ended months ended months ended months ended months ended
January 31
January 31
January 31
January 31
January 31
2017
2018
2019
2020
2021

Value in Euro thousands

Higher/(Lower) depreciation

124

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7.

Mergers and acquisitions
During the fiscal year, the direct, wholly-owned subsidiary PRADA Stores srl was
merged into PRADA spa with a retroactive effective date of February 1, 2016 foraccounting and tax purposes.
On April 15, 2016 PRADA spa acquired a 50% stake in Hipic Prod Impex srl (Romania),
a former contract manufacturer of the Group. Under the purchase agreements, theGroup acquired de facto control of the company (as defined by IFRS 10, "Consolidated
Financial Statements"), so the company is consolidated with the other subsidiaries also
taking into consideration the group’s commitment to purchase a further 30% stake.
Goodwill of Euro 3.8 million was recognized on the acquisition, against negative equityof Euro 0.5 million.
On May 20, 2016, the Group increased its ownership of subsidiary Montenapoleone 9
srl from 98% to 100%.
On November 15, 2016 the Macau branch of PRADA Asia Pacific Limited wasderegistered, having previously transferred its operations to another subsidiary.
On November 30, 2016, subholding company PRADA Far East II bv was demerged
from PRADA Far East bv, which remains in charge of the retail activities. The spin-off
was part of a broader plan to simplify the corporate structure, which will soon include
the absorption of PRADA Far East II bv into the parent PRADA spa.
On December 1, 2016 PRADA spa acquired control of Pelletteria Ennepì srl (Italy) byincreasing its ownership from 40% to 80%. Goodwill of Euro 2.4 million was recognizedon the acquisition, against equity of Euro 1.5 million.

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 defined as abusiness division whose operating results are regularly reviewed by top management
in order to allocate appropriate resources to the segment and assess its performance.
Because of the Group’s matrix-based organizational structure (whereby responsibility
is assigned cross-functionally in relation to brands, products, distribution channels
and geographical areas), the complementary nature of the various brands' production
processes and the many relationships between the different business divisions, it is
not possible to designate operating segments as defined by IFRS 8 since the top
management is only provided with the financial performance on a Group-wide level.
For this reason, the business is considered a single operating segment as this better
represents the specific characteristics of the Prada Group business model.
The detailed information given below on net revenues by distribution channel, brand,
geographical area and product, as well as non-current assets by geographical area, isalso provided in the Financial Review together with additional comments.
Net revenues(amounts in thousands of Euro)

twelve months
ended January 31, 2017

twelve months
ended January 31, 2016

Net Sales

3,139,290

98.6%

3,504,344

98.8%

Royalties

44,7791.4%

43,4271.2%

3.1%

Net revenues

3,184,069

100%

3,547,771

100%-10.3%PRADA Group

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Net sales analysis
twelve months
ended January 31, 2017

twelve months
ended January 31, 2016

Europe1,190,149

37.9%

1,292,121

36.9%

-7.9%

Americas458,925

14.6%

525,424

15.0%-12.7%

Asia Pacific993,21431.6%

1,158,174

33.0%-14.2%

Japan

388,892

12.4%

407,398

11.6%

-4.5%

Middle East

103,417

3.3%

115,444

3.3%-10.4%(amounts in thousands of Euro)% change

Net Sales by geographical area

Other countries

4,693

0.1%

5,783

0.2%

-18.8%

3,139,290

100.0%

3,504,344

100.0%-10.4%

Prada

2,528,129

80.5%

2,841,056

81.1%-11.0%Miu Miu

515,176

16.4%

564,315

16.1%

-8.7%

Church's

80,3782.6%

82,456

2.4%

-2.5%

Other

15,6070.5%

16,517

0.4%

-5.5%

Total

3,139,290

100.0%

3,504,344

100.0%-10.4%Total

Net Sales by brand

Net Sales by product line
Leather goods

1,803,762

57.5%

2,103,24160.0%-14.2%

Footwear

678,79721.6%

725,987

20.7%

-6.5%

Clothing

599,56319.1%

612,249

17.5%

-2.1%

Other

57,1681.8%

62,867

1.8%

-9.1%

Total

3,139,290

100.0%

3,504,344

100.0%-10.4%Net Sales of direct operated stores (DOS)2,634,923

83.9%

3,059,732

87.3%-13.9%

504,36716.1%

444,612

12.7%

13.4%

3,139,290

100.0%

3,504,344

100.0%-10.4%

Sales to Independent customers and franchisees
Total

Geographical information
The following table reports the carrying amount of the Group’s non-current assets bygeographical area, as required by IFRS 8, "Operating Segments" for entities like the
PRADA Group that have a single reportable segment.
January 31
2017

January 31
2016

Europe1,940,111

1,937,628

America

210,183

220,403

Asia pacific

307,035

295,089

Japan

99,55991,264

Middle East

29,46930,854Africa

3,030

3,808

Total

2,589,387

2,579,046(amounts in thousands of Euro)

The total of Euro 2,589.4 million (Euro 2,579 million as of January 31, 2016) covers
the Group’s non-current assets with the exception of derivative financial instruments,
deferred tax assets and the pension fund surplus, as required by IFRS 8.

126

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9.

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

January 31
2017

January 31
2016

Cash on hand

42,44946,290Bank deposit accounts

459,965

357,159

Bank current accounts

219,800

277,152

Total

722,214680,601

As of January 31, 2017, bank current accounts and deposits generated interest incomeof between 0% and 9.4% per annum (between 0.0% and 9.3% at January 31, 2016).
10. Trade receivables, net
Trade receivables are detailed below:(amounts in thousands of Euro)

January 31
2017

January 31
2016

Trade receivables – third parties

268,223

235,718

Allowance for bad and doubtful debts(6,654)(6,546)

Trade receivables – related parties

23,93525,011

Total

285,504

254,183

Trade receivables increased by Euro 31.3 million, in line with the growth of thewholesale channel.
Trade receivables from related parties refer primarily to sales of ﬁnished products to
Fratelli Prada spa, an afﬁliate and franchisee of the Prada Group. Further details of
related party transactions are provided in Note 39.
The allowance for doubtful debts was estimated analytically, using all information
available at the time the ﬁnancial statements were prepared, in order to align thereceivables as closely as possible to their estimated realizable value.
The changes during the ﬁscal year were as follows:
January 31
2017

January 31
2016

6,546

7,784

Exchange differences

(78)

(47)

Increases

578

418

Reversals(202)(1,321)

Utilization

(190)

(288)

Closing balance

6,654

6,546

(amounts in thousands of Euro)

Opening balance

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11. Inventories, net
Inventories can be broken down as follows:
January 31
2017

January 31
2016

Raw materials

103,679

107,782

Work in progress

26,36820,925

Finished products

444,049

614,423

Allowance for obsolete and slow moving inventories(47,155)(50,458)

Total

526,941

692,672(amounts in thousands of Euro)The reduction in ﬁnished products was achieved by improving the timing of
manufacturing activities and revising the strategies for replenishing the stores.
Materials being processed by third parties are included in raw materials. Work inprogress refers to goods being manufactured by PRADA spa, other manufacturing
companies included in the scope of consolidation and contract manufacturers.
The changes in the allowance for obsolete and slow-moving inventories are as follows:(amounts in thousands of Euro)

Balance at January 31, 2016

Raw
materials

Finished
Products

Total

26,757

23,70150,458

(4)

43

39

Increases

Exchange differences-

1, 6591,659

Reversals(1,000)-(1,000)Utilization(77)(4,488)(4,565)

-

564

564

25,676

21,47947,155

Other movements

Balance at January 31, 2017

The allowance for obsolete finished products decreased due to the scrapping of items
written down in prior years.
12. Derivative financial instruments: assets and liabilities
Derivative financial instruments: assets and liabilities, current and non-current portions.
(amounts in thousands of Euro)

Financial assets regarding derivative instruments - current

January 31
2017

January 31
2016

7,045

11,682

-

721

7,045

12,403Financial assets regarding derivative instruments – non-current

Total Financial Assets - Derivative financial instruments

128

Financial liabilities regarding derivative instruments – current(13,634)(11,095)

Financial liabilities regarding derivative instruments – non-current(8,250)(10,047)

Total Financial Liabilities - Derivative financial instruments(21,884)(21,142)

Net carrying amount – current and non-current portion(14,839)(8,739)PRADA Group

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The carrying amount of the derivatives, both the current and non-current portion, has
the following composition:
January 31
2017

January 31
2016

IFRS7
Category

6,168

10,094

Level II

876

2,309

Level II

Positive fair value

7,044

12,403Forward contracts(10,865)(5,854)(133)(2,479)Level IIInterest rate swaps(10,885)(12,809)

Level II

Negative fair value(21,883)(21,142)

Net carrying amount – current and non-current(14,839)(8,739)(amounts in thousands of Euro)

Forward contracts
Options

Options

Level II

All of the above derivative instruments are qualified as Level II in the fair value hierarchy
recommended by IFRS 7. The Group has not entered into any derivative contracts
classifiable 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 according to one of the most widely used valuation platforms on thefinancial 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 derivative contracts in the course of its risk management
activities, in order to hedge financial risks stemming from exchange rate and interest
rate fluctuation.

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Foreign exchange 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 of identified
cash flows in Euro (or in other currencies used locally). Estimated future cash flows
mainly regard the collection of trade receivables, the settlement of trade payables andfinancial cash flows.
At the reporting date, the notional amounts of the derivative contracts designated as
foreign exchange risk hedges (translated at the European Central Bank exchange rateof January 31, 2017) were as listed below.
Contracts in effect as of January 31, 2017 to hedge projected future trade cash flows.
Options

Forward sale
contracts (*)

Forward purchase
contracts (*)

Swiss Franc

-

12,936(12,370)566

GB Pound-

73,050(22,537)

50,513(amounts in thousands of Euro)

January 31
2017

Currency

Hong Kong Dollar

17,97847,581(66,586)(1,027)

Japanese Yen-

95,949(26,174)

69,775

Korean Won-

53,906-53,906Chinese Renminbi-

96,255(43,149)

53,106US Dollar

63,226

111,576(112,136)

62,666

Other-

99,366(38,200)

61,166

Total

81,204590,619(321,152)

350,671(*) Positive figures represent forward sales, negative figures represent forward purchases of currency

Contracts in effect as of January 31, 2017 to hedge projected future financial cash flows.
Options

Forward sale
contracts (*)

Forward purchase
contracts (*)

January 31
2017

Swiss Franc-

Brazilian Real-53,431-53,431

895(895)

GB Pound--

22,229-22,229Japanese Yen-

34,771-

34,771US Dollar-

10,112(59,042)(48,930)

Other

-

9,919

-

9,919

Total

-

131,357(59,937)

71,420(amounts in thousands of Euro)
Currency(*) Positive figures represent forward sales, negative figures represent forward purchases of currency

Contracts in effect as of 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-(38,249)

61,633

US Dollar

145,421

21,062(74,789)

91,695Chinese Renminbi

11,837

121,849(43,643)

90,043

Japanese Yen

53,61153,875(7,561)

99,924

GB Pound

57,322

21,463(22,615)

56,171

Korean Won-

46,451-46,451

Swiss Franc-

15,210(8,674)

6,536

Other currencies

14,21286,445(18,144)

82,514

Total

382,284

366,355(213,675)

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

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Contracts in effect as of 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(*) Positive figures represent forward sales, negative figures represent forward purchases of currency

All contracts in place at January 31, 2017 will mature within 12 months, except for someforward contracts to hedge future ﬁnancial cash ﬂows which mature after January 31,
2018 and whose notional net amount is Euro 45.9 million (wholly consisting of forward
sale contracts).
All contracts in place at the reporting date were entered into with major ﬁnancial
institutions and the Group expects none of them to default. A liquidity analysis of thederivative contracts' maturities is provided in the ﬁnancial risks section of these Notes.
Interest rate transactions
The Group enters into interest rate swaps (IRS) in order to hedge the risk of interest rate
ﬂuctuations in relation to various bank loans. The key features of the IRS agreements
in place at January 31, 2017 and January 31, 2016 are summarized below:
Interest Rate Swap (IRS) Agreement
Contract

Currency

Notional
amountInterest
rate

Hedged loan

Maturity January 31
date
2017

Currency

Lending
institution

AmountExpiry(amounts inthousandsof Euro)
IRS

Euro/000

49,5001.457%

23/05/2030(2,563)

Euro/000IntesaSanpaolo

49,50005/2030

IRS

Euro/000

60,0000.105%

09/03/2019(470)

Euro/000

Unicredit

60,00003/2019

IRS

Euro/000

90,0000.013%

09/02/2021(300)

Euro/000

Unicredit

90,00002/2019IRS

GBP/000

57,3002.828%

31/01/2029(7,294)

GBP/000

Unicredit

57,30001/2029

IRS

Yen/000

250,000

1.875%

31/03/2017(11)

Yen/000

Mizuho250,000

03/2017

IRS

Yen/000

2,100,000

1.360%

30/03/2020(247)

Yen/000

Mizuho2,100,000

03/2020

Currency

Lending
institution

AmountExpiry(3,299)Euro/000IntesaSanpaolo

53,16705/2030

Total(10,885)

Interest Rate Swap (IRS) Agreement
Contract

Currency

Notional
amountInterest
rate

Hedged loan

Maturity January 31
date
2016
(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

60,00003/2019IRS

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

Total(12,809)

The IRS convert the variable interest rates on bank loans into ﬁxed interest rates. They
have been arranged with major ﬁnancial institutions and the Group does not expect

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them to default.
Changes in the reserve that are charged to proﬁt or loss are recognized as interest andother ﬁnancial income/(expense) or as operating income or expenses, depending on
the nature of the underlying transaction.
Information on financial risks
Capital management
The Group’s capital management strategy is intended to safeguard its ability toguarantee a return to shareholders, protect the interests of other stakeholders andcomply with loan covenants, while maintaining a viable and 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

722,214-722,2149

Trade receivables, net

285,504-

285,504

10

Derivative financial instruments
Investment available for sale

Total at January 31, 2017

(amounts in thousands of Euro)

-

7,045

7,045

12

11,749-11,74917

1,019,467

7,045

1,026,512

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 andpayablesDerivative financial
instruments

Total

Note

19, 20, 24

Financial liabilities(amounts in thousands of Euro)

Financial payables

703,772-

703,772

Trade payables

256,094-

256,094

21-

21,884

21,884

12

959,866

21,884

981,750

Loans andpayablesDerivative financial
instruments

Total

Note

19,20,24

Derivative financial instruments

Total at January 31, 2017

(amounts in thousands of Euro)

Financial payables

795,445-795,445

Trade payables

281,699-281,699

21-

21,142

21,14212

1,077,144

21,142

1,098,286

Derivative financial instruments

Total at January 31, 2016132

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Fair Value
The reported amount of derivative instruments, whether 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 their fair value.
The reported amount of investments available for sale corresponds to its fair value(Level I), as explained in Note 17.
The fair value of the bond loan at January 31, 2017 is Euro 134.3 million.
All other ﬁnancial liabilities are carried at an amount that approximates their fair value.
Credit risk
Credit risk is deﬁned as the risk of ﬁnancial loss caused by the failure of a counterparty
to meet its contractual obligations. The maximum risk to which an entity is exposed isrepresented by all the ﬁnancial assets recognized in the ﬁnancial statements.
Management considers its credit risk to regard primarily the trade receivables
generated from the wholesale channel and its cash holdings, and mitigates the related
effects through speciﬁc business and ﬁnancial strategies, as explained in the section
describing risk factors in the Financial Review.
Trade receivables
The table below summarizes trade receivables by due date, before the allowance for
doubtful debts:
Overdue (in days)

January 31
2017

Not
overdue1

Trade receivables

292,158

226,210

22,631

16,259

Total

292,158

226,210

22,631

16,259January 31
2016

Not
overdue1

31

Trade receivables

260,729

217,808

17,077

6,848

Total

260,729

217,808

17,077

6,848(amounts in thousands of Euro)(amounts in thousands of Euro)PRADA Group

Prada Annual Report 2016_20 apr.indd 133

30

31

60

61

90

91

120

> 120

5,766

3,193

18,099

5,766

3,193

18,099

120

> 120

5,257

3,400

10,339

5,257

3,400

10,339Overdue (in days)
30

60

61

90

Annual Report 2016 - Notes to the Consolidated Financial Statements

91

133

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This table summarizes trade receivables by due date after the allowance for doubtful
debts:
Overdue (in days)(amounts in thousands of Euro)

January 31
2017

Not
overdue1

Trade receivables less allowancefor doubtful accounts

285,504

225,905

22,613

16,259

Total

285,504

225,905

22,613

16,259(amounts in thousands of Euro)

January 31
2016

Not
overdue1

31

Trade receivables less allowancefor doubtful accounts

254,183

217,327

17,077

6,848

Total

254,183

217,327

17,077

6,848

30

31

60

61

90

91

120

> 120

5,766

3,193

11,768

5,766

3,193

11,768

120

> 120

5,257

3,400

4,274

5,257

3,400

4,274

Overdue (in days)
30

60

61

90

91

As of the reporting date, the expected loss on receivables is fully covered by theallowance for doubtful debts. The changes in that allowance are presented in Note 10.
Bank current accounts and deposits
Bank deposits are broken down by currency as follows:
January 31
2017

January 31
2016

Renmimbi

67,96040,532US Dollar

34,62636,393

Korean Won

54,62917,443

Hong Kong Dollar

293,644

228,529

Other currencies

9,106

34,262459,965

357,159(amounts in thousands of Euro)

Total bank deposit accounts

The Group aims to reduce the default risk on bank deposits by allocating available funds
to multiple accounts that differ by currency, country and bank; these investments arealways short-term in nature.
Bank current accounts
January 31
2017

January 31
2016

Euro

109,606

154,807

US Dollar

50,224

52,830

Korean Won

1,374

1,535

Hong Kong Dollar

6,056

4,724

GB Pound

5,947

10,103

Other currencies

46,59353,153

Total bank current accounts

219,800

277,152(amounts in thousands of Euro)The Group considers no signiﬁcant risk to exist on bank current accounts given that
their use is strictly connected with operating activities and business processes and,
consequently, the number of parties involved is fragmented.

134

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Liquidity risk
Liquidity risk refers to the difﬁculty the Group could have in meeting its ﬁnancial
obligations. The Directors are responsible for managing liquidity risk, while the CFO isin charge of optimizing the management of ﬁnancial resources.
Directors believe that the funds and credit lines currently available, in addition to thosethat will be generated by operating and ﬁnancing activities, will enable the Groupto meet its ﬁnancial requirement arising from investing activities, working capitalmanagement, punctual loan reimbursment and dividends payments as planned.
As of January 31, 2017, undrawn cash credit lines of Euro 662 million (Euro 497.8
million as of January 31, 2016) were available at banks.
An aging analysis of the trade payables is set forth below:
Overdue (days)

January 31
2017

Not
overdue1

Trade payables

256,094

221,125

15,884

4,670

Total

256,094

221,125

15,884

4,670

January 31
2016

Not
overdue1

Trade payables

281,699

246,525

16,418

10,190

Total

281,699

246,525

16,418

10,190(amounts in thousands of Euro)(amounts in thousands of Euro)

30

31

60

61

90

91

120

> 120

2,955

582

10,878

2,955

582

10,878

120

> 120

1,912

670

5,984

1,912

670

5,984

Overdue (days)
30

31

60

61

90

91

The maturities of the ﬁnancial liabilities according to the earliest date on which theGroup could be required to pay (worst case scenario) are presented in the following
tables.

PRADA Group

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Financial liabilities under derivative financial instruments (forward contracts andoptions)
As required by IFRS 7, the following tables show the ﬁnancial liabilities under forward
contracts and options where a negative cash ﬂow is expected at the reporting date.
Futurecontractual
cash flows
at Jan. 31,
2017

6 mthsor less

6 to 12mths

1 to 2years

2 to 3years

3 to 4years

more than
4 years

Net cash flows(outflows/inflows)(10,864)(6,270)(4,022)

(572)

-

-

-

Net amount(10,864)(6,270)(4,022)

(572)

-

-

-

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

Net cash flows(outflows/inflows)(5,863)(2,548)(2,966)

(349)

-

-

-

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

(349)

-

-

-

(amounts in thousands of Euro)

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

Forward contracts designated as
cash flow hedges

Financial liabilities under derivative financial instruments (Interest rate swaps)
As in the prior ﬁscal year, the anticipated cash ﬂows from interest rate swaps as ofJanuary 31, 2017 were all negative.

136(amounts in thousands of Euro)

Futurecontractual
cash flows
at Jan. 31,
2017

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

(12,044)(1,554)(1,486)(2,522)(1,801)(1,207)(3,474)

Net amount(12,044)(1,554)(1,486)(2,522)(1,801)(1,207)(3,474)(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)PRADA Group

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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
2017 Jan. 31, 2017

2,715

3,220

696,079

735,887

4,934

4,934

703,728744,041

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

on 6 mths 6 to 12
demand or less
mths

-

380

161

1 to 2years

2 to 3years

3 to 4years

more
than 4
years

304

323

323

1,729

- 110,503

46,096 241,720 123,007

-

4,934

-

- 110,883-

51,191 242,024 123,330

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

14,650 199,911--

14,973 201,640

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

Some of the above ﬁnancial liabilities are subject to compliance with covenants, as
described in Note 24.
Exchange rate risk
The exchange rate risk to which the Group is exposed is largely concentrated with
PRADA spa, and results from ﬂuctuation of foreign currencies against the Euro.
For PRADA spa, the foreign exchange risk substantially consists of the risk that cash
ﬂows from retail and distribution activities could ﬂuctuate as a result of changes inexchange rates. In terms of exposure, the most important currencies for the Group are
the U.S. Dollar, Hong Kong Dollar, Japanese Yen, GB Pound and Chinese Renminbi. The
foreign exchange risk for subsidiaries is generated mostly by cash ﬂows in currencies
other than their accounting currency.
The following table shows the sensitivity of the consolidated net income and net equity toa range of hypothetical ﬂuctuations in the main foreign currencies against the Euro, basedon the statement of ﬁnancial position of the Group’s companies at January 31, 2017.
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(1,231)

1,341

1,361

(1,482)

Hong Kong Dollar

1,433

3,818

(1,665)(4,126)

Japanese Yen(1,075)

3,026

(909)

(5,441)US Dollar(4,699)

1,418

2,875

(2,049)Chinese Renminbi(7,062)(3,161)

7,806

3,495

Other currencies(9,689)(2,734)

9,327

1,641

Total

(22,323)

3,707

18,795(7,962)PRADA Group

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The total impact on equity (increase of Euro 3.7 million and decrease of Euro 8.0 million)is the sum of the theoretical effect on the statement of proﬁt or loss and on the cash
ﬂow hedge reserve of a hypothetical appreciation/depreciation of the Euro against theother currencies.
The effects on the ﬁnancial statement items are presented above before taxes. The
sensitivity analysis is based on currency exposure at the end of the period, which might
not reﬂect the actual exposure during the year. For this reason it is purely indicative.
Interest rate risk
The Prada Group is exposed to interest rate ﬂuctuations mainly with regard to interest
expense on the medium/long-term debt of the parent company, PRADA spa, and ofsome of its subsidiaries. Managing this risk falls within the scope of the risk management
activities carried out by the CFO.
The following table shows the sensitivity of the consolidated net result and net equity to ahypothetical shift in the interest rate curve in relation to the statement of ﬁnancial positionof the Group’s companies at January 31, 2017.
Interest rate curve shift(amounts in thousands of Euro)+0.50%
Impact on net
resultEuro-0.50%
Impact on net
equityImpact on net
resultImpact on net
equity(1,823)(6,025)

1,762

6,049

Great Britain Pound(96)(2,797)

127

2,827

Hong Kong Dollar

1,499

1,499

(1,499)(1,499)Japanese Yen

(493)

(621)

492

621

US Dollar

375

375

(375)

(375)

Other currencies

864

864

(864)

(864)

Total

326

(6,705)

(357)

6,759

The total impact on equity (decrease of Euro 6.7 million and increase of Euro 6.8 million)is the sum of the theoretical effect on the statement of proﬁt or loss and on the cash
ﬂow hedge reserve of a hypothetical upward/downward shift in the interest rate curve.
The effects on the ﬁnancial statement items are presented above before taxes.
The sensitivity analysis is based on net ﬁnancial position at the end of the period,
which might not reﬂect actual exposure to interest rate risk during the year. For thisreason it is purely indicative.
Other risks
Risks factors affecting the international luxury goods market and those speciﬁc to thePrada Group other than liquidity risk, credit risk, foreign exchange rate risk and interest
rate risk are disclosed in the Financial Review.

138

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13. Receivables from, and advance payments to, related parties – current andnon-current
The current portions are as follows:
January 31
2017

January 31
2016

Prepaid sponsorship

8,741

13,626

Other receivables and advances

6,223

6,003

Receivables from and advances to related parties - current

14,964

19,629January 31
2017

January 31
2016

Prepaid sponsorship

-

3,164

Deferred rental income – long-term

-

1,632

Loans

-

703

Receivables from and advances to related parties – non-current

-

5,499

(amounts in thousands of Euro)The non-current portions are as follows:(amounts in thousands of Euro)

The prepaid sponsorships refer to the amount paid to Luna Rossa Challenge srl underagreements in effect as of January 31, 2017.
Additional information on related party transactions is provided in Note 39.
14. Other current assets
The other current assets are set forth below:(amounts in thousands of Euro)

January 31
2017

January 31
2016

VAT

48,582

59,917

Income tax and other tax receivables

117,244

100,838

Other assets

27,21812,242

Prepayments

55,67651,863

Deposits

4,655

4,811

253,375

229,671

January 31
2017

January 31
2016

Total

Other assets
The other assets are detailed below:(amounts in thousands of Euro)

Advertising contributions under license agreements

5,072

721

Advances to suppliers

1,353

1,282

Incentives for retail investments

12,171

4,628

Advances to employees

807

694

Other receivables

7,815

4,917

Total

27,21812,242As of January 31, 2017 the Group had an authorized loan receivable of Euro 2 million,
recognized within the Other receivables.

PRADA Group

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Prepayments
Prepayments are detailed as follows:
January 31
2017

January 31
2016

Rental costs

21,03819,391

Insurance

2,447

2,510

Design costs

13,182

13,914

Fashion shows and advances on advertising campaigns

3,888

3,416

Amortized costs on loans

1,077

1,020

Other

14,044

11,612

Total

55,67651,863(amounts in thousands of Euro)

The prepaid design costs consist primarily of costs incurred to design collections thatwill generate revenue the following year.
Deposits
The deposits refer primarily to security deposits paid under commercial leases.
15. Property, plant and equipment
The changes in the historical cost and accumulated depreciation of the past three
years are set forth below:(amounts in thousands of Euro)

140

Land andbuildings

Production
plant andmachinery

Leaseholdimprovements

Furniture& fittings

Othertangibles

Assetsunderconstruction

Total

212,866

2,583,784

Historical cost

539,914132,086

1,172,742

385,326

140,851

Accumulated depreciation(61,974)(110,910)(659,440)(206,665)(70,578)

Net carrying amountat January 31, 2015

477,940

21,176513,302

178,661

70,273

212,866- (1,109,566)

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

Historical cost752,702167,863

1,380,474

433,346

172,926

75,7902,983,101

Accumulated depreciation(96,178)(130,876)(872,603)(250,502)(90,258)-(1,440,417)

Net carrying amountat January 31, 2017

656,524

36,987

507,871

182,844

82,66875,7901,542,684

PRADA Group

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The changes in the carrying amount for the reporting period are as follows:(amounts in thousands of Euro)

Balance at January 31, 2016

Change in scope of
consolidation

Land andbuildings

Production
plant andmachinery

Leaseholdimprovements

Furniture& fittings

Othertangibles

Assetsunderconstruction

Total net
carrying
amount639,831

28,691

478,717

187,687

86,10996,744

1,517,779

3,819

1,279

256

110

12

-

5,476

Additions30,155

12,720107,451

29,251

10,96931,313

221,859

Depreciation(15,637)(7,559)(111,997)(33,548)(14,643)-(183,384)

Disposals(1,562)

(110)

(133)

(656)

(114)

(34)

(2,609)Exchange differences(18,412)(117)

10,129

618

266

(89)

(7,605)

Other movements

18,3302,096

28,4763,963

241(51,734)

1,372

-

(13)

(5,028)(4,581)

(172)

(410)

(10,204)

656,524

36,987

507,871

182,844

82,66875,7901,542,684

Impairment

Balance at January 31, 2017

The change in consolidation perimeter refers to the acquisition of Hipic Prod Impex srl
and Pelletteria Ennepì srl.
The additions regarded mainly investments in the retail and manufacturing areas. The
Group completed important enlargement and renovation projects for stores during
the reporting period, including the PRADA stores in Hong Kong (Canton Road) and
Shanghai (Plaza 66), within a strategy of continuing evolution of stores. The stores
opened in the period were 28 and covered missing strategic location only, such as
Zurich, and balanced the 26 closures incurred.
The asset impairment of Euro 10.2 million refers to stores closures for strategic
purposes.
The increase in “production plant and machinery” refers mainly to purchases ofequipment used in manufacturing processes.
The increases in “leasehold improvements”, “furniture and ﬁttings” and “assets
under construction” result from the strategy to expand and revamp the Group’s retail
network.
The total capital expenditures in the retail channel for the twelve months ended January
31, 2017 are set forth below:(amounts in thousands of Euro)

New stores

January 31
2017

January 31
2016

78,665

113,986of which project completed during the year

68,082

66,229of which projects next to be completed

10,58347,757Purchases, refurbishment and relocation of existing stores

72,553

61,033

Total Retail capital expenditure

151,218

175,019

As of January 31, 2017, all the land owned by the Group, excluding land in Hong Kong,
was freehold property.
In the current year Directors reviewed the useful lives of some depreciable ﬁxed
assets, in particular with reference to the retail area. Information about this change inestimates, including the impact on proﬁt or loss, is reported in Note 6.

PRADA Group

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16. Intangible assets
The historical cost and accumulated amortization of the past three years are set forth
below:(amounts in thousands of Euro)

TradeStore Lease
Goodwillmarks
Acquisitions

SoftwareDevelopment
costs andother
intangibles

Assets inprogress

Total

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

26,248932,238

Historical cost392,205

547,460

216,951

100,099

63,32027,767

1,347,802

Accumulated amortization(143,761)(28,863)(127,965)(75,000)(50,413)-(426,002)

Net carrying amountat January 31, 2017

248,444518,597

88,98625,09912,907

27,767

921,800

The changes in the carrying amount for the reporting period are as follows:(amounts in thousands of Euro)

Trademarks

Goodwill

Store Lease
Acquisitions

SoftwareDevelopment
costs andother
intangibles

Assets inprogress

Total net
carrying
amountBalance atJanuary 31, 2016

265,238

513,218

97,51015,037

14,987

26,248932,238

Change in scope of consolidation
Additions
Amortization
Disposals
Exchange differences

-

6,239

-

11

53

-

6,303

305

262

-

9,010

83

8,209

17,869(11,141)-(10,624)(5,728)(1,177)-(28,670)

-

-

-

(3)

-

-

(3)

(5,958)(1,123)

1,787

33

-

55

(5,206)

Other movements

-

-

314

6,740

(1,038)(6,738)(722)

Impairment

-

1

(1)

(1)

(1)

(7)

(9)

248,444518,597

88,98625,09912,907

27,767

921,800

Balance atJanuary 31, 2017

The carrying amount of trademarks at the reporting date is broken down in the following
table:
January 31
2017

January 31
2016

Miu Miu

148,661

154,236

Church's

87,42997,323

Prada

3,660

3,823

Other

8,694

9,856

Total

248,444265,238(amounts in thousands of Euro)No impairment was recognized for the Group's trademarks during the period. "Other"

142

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consists of trademark registration costs plus the Car Shoe and Luna Rossa trademarks.
"Key money" includes intangible assets recognized in respect of costs incurred by theGroup to stipulate or take over leases for retail premises in prestigious locations.
The total capital expenditure for tangibles and intangibles in the twelve months ended
January 31, 2017 was Euro 251.5 million, as broken down below:
January 31
2017

January 31
2016

Retail151,218

175,019

Production and logistics

54,96057,849Corporate

45,329104,027

Total

251,507

336,895(amounts in thousands of Euro)In the current year Directors reviewed the useful lives of some depreciable ﬁxed
assets, in particular with reference to the retail area. Information about this change inestimates, including the impact on proﬁt or loss, is reported in Note 6.
Impairment test
As required by IAS 36, "Impairment of Assets,” intangible assets with indeﬁnite useful
lives are not amortized, but undergo impairment testing at least once per year. The
Group reports no intangible assets with indeﬁnite useful lives other than goodwill.
As of January 31, 2017, goodwill amounted to Euro 518.6 million, detailed by cash
generating unit (CGU) as follows:(amounts in thousands of Euro)

January 31
2017

January 31
2016

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

10,1693,667

Church’s

8,848

9,971

Marchesi Angelo

7,975

7,975

518,597513,218

Total

IAS 36 requires an entity to assess at each reporting date whether there are indications
that any assets may be impaired. In light of the performance 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 amount (value in use) involves discounting
the projected cash ﬂows produced by the CGU to which goodwill has been allocated(the discounted cash ﬂow or DCF method). Value in use is the sum of the present valueof future cash ﬂows expected from the business plan projections prepared for each
CGU and the present value of the related operating activities at the end of the businessplan period (terminal value).
The business plans cover a period of ﬁve years and have been constructed on the basisof the 2017 budget, as prepared by management. Prudently, no business development
was forecast after 2018, meaning also that the projected performance of assets

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existing at January 31, 2017 does not signiﬁcantly improve during the years of theplan. Moreover, growth assumptions for the wholesale channel were also prudent.
The rate used to discount cash ﬂows was calculated using the weighted average
cost of capital (WACC). For the year ended January 31, 2017, the WACC used for
discounting purposes was in a range between 4.5% and 14.4% (between 5% and15.5% at January 31, 2016). The WACC was calculated ad hoc for each CGU subject toimpairment testing, considering parameters speciﬁc to the geographical area: market
risk premium and sovereign bond yield. The “g” rate of growth used to calculate the
WACC was between 0% and 11%, in light of the different inﬂation and growth outlooksin the various countries. However, the prevalent growth rate was 1.5%, which can beconsidered prudent given the general average growth expected for the luxury goods
market and the speciﬁc growth rate projected for the PRADA Group at the reporting
date.
Some sensitivity analyses were carried out to ensure that changes in the main
assumptions did not signiﬁcantly affect the impairment test results. The outcomeof these simulations showed that the result obtained through the DCF method was
reasonable.
When the calculation of value in use under the DCF method did not produce reasonable
results, impairment testing used methods based on fair value (e.g. market multiples
or royalties method).
None of the impairment tests performed at January 31, 2017 identiﬁed any impairment
losses. However, since value in use is measured on the basis of estimates, the Group
cannot guarantee that the value of goodwill, other intangible and material assets will
not be impaired in the future.
17. Associated undertaking(amounts in thousands of Euro)

January 31
2017

Investment in associated undertaking
Investment available for sale

-

2,138

11,74915,20126

15

11,775

17,354

Other investments

Total

January 31
2016

As of January 31, 2016 the investments in associates referred to a 40% stake inPelletteria Ennepì srl, a company specialized in the production of small leather goods.
During 2016 the Group purchased an additional 40% stake therein and began toconsolidate the company on a line-by-line-basis.
The investments available for sale regard a 4.88% stake in Sitoy Group Holdings ltd,
a company listed on the Hong Kong Stock Exchange as of January 31, 2017. The
value of the investment was restated at fair value in line with the ofﬁcial quoted shareprice (Level I of the fair value hierarchy according to IFRS 7 “Financial Instruments:
Disclosures”). The fair value decrease of Euro 3.5 million compared to January 31,
2016 was recognized in a speciﬁc equity reserve, net of the related tax effect (Euro
0.9 million). In 2016, the Group accounted for net dividends from Sitoy Group Holdings
totaling HKD 19 million (Euro 2.3 million).

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18. Other non-current assets
Other non-current assets are detailed as follows:
January 31
2017

January 31
2016

Guarantee deposits

77,00773,974

Deferred rental income

16,807

13,716

Pension fund surplus

10,233

7,778

Other long-term assets

19,314

18,486

Total

123,361

113,954(amounts in thousands of Euro)

The other non-current assets as of January 31, 2017 include Euro 10.2 million
representing the actuarial valuation of the Group's pension plans in the United Kingdom(Note 25).
The guarantee deposits are set forth below by type and maturity:
January 31
2017

January 31
2016

Stores

71,68068,576

Offices

3,943

4,076

(amounts in thousands of Euro)Nature:Warehouses

116

180

Other

1,268

1,142

Total

77,00773,974January 31
2017(amounts in thousands of Euro)

Maturity:
By 31.01.2018

14,390

By 31.01.2019

19,556

By 31.01.2020

16,168

By 31.01.2021

3,076

After 31.01.2021

23,817

Total

77,007

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

January 31
2017Bank overdrafts and commercial lines of credit

January 31
2016

-

7

Short-term bank loans

80,626

216,522

Current portion of long term loans

70,50654,043

Deferred costs on loans

(364)

(460)

Financial lease

443

654

151,211

270,766

Total

The change in short-term financial payables is attributable primarily to the full repayment
in the period of the debt related to the Euro 315 million revolving credit facility stipulatedby PRADA spa in 2014 with a banking syndicate and drawn for Euro 125 million as ofJanuary 31, 2016. This credit facility remains virtually subject to covenants based on

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the results of PRADA spa's consolidated financial statements. Specifically, the net
debt-to-EBITDA ratio must not exceed 3 and the EBITDA-to-interest coverage ratio
must exceed 4. Both covenants were complied with as of January 31, 2017.
The short-term financial payables as of January 31, 2017 consist of a Euro 30 million
loan granted to PRADA spa by Mitsubishi Bank of Tokyo, and credit lines granted to
PRADA Japan co ltd, for a total equivalent value of Euro 50.4 million. Some of thecredit lines contain covenants based on the results of PRADA Japan co ltd's financial
statements, all of which were complied with as of January 31, 2017.
Mortgage loans
The current portion of long-term loans includes Euro 3.7 million (Euro 3.7 million as ofJanuary 31, 2016) regarding a mortgage loan stipulated by IntesaSanpaolo for PRADA
spa in 2014 and disbursed in 2015. The collateral securing this loan is the building in
Milan used for the Group’s headquarters. The non-current portion of the loan amounts
to Euro 45.8 million (Note 24).
The 2017 current portion of long-term loans includes Euro 2.1 million (Euro 2.0 million
as of January 31, 2016) regarding a mortgage loan granted to Kenon Ltd by Unicredit
Group in 2014 and secured by a mortgage on a building in Old Bond Street, London,
used by the Group for one of the most strategically positioned Prada stores in theworld. The non-current portion of the loan amounts to Euro 64.3 million (Note 24).
Short-term bank loans, current portions of long-term loans and current obligations on
finance leases are broken down by currency in the table below:
January 31
2017

January 31
2016

Euro

63,280208,285

Japanese Yen

84,91550,769Other currencies

3,380

12,165

151,575

271,219(amounts in thousands of Euro)

Total

Bank overdraft
Amortized costs on loans

Total

-

7

(364)

(460)

151,211

270,766

The Group generally borrows at variable interest rates and manages the risk of interest
rate fluctuations by using hedging agreements, as described in Note 12.
Considering the hedges in place at the reporting date, 39% of the current portion of
medium/long term loans regarded fixed-rate loans (34% as of January 31, 2016), and
61% regarded variable-rate loans (66% as of January 31, 2016).
Financial payables are stated net of the related transaction costs (Euro 0.4 million for
short-term payables and Euro 1.1 million for medium/long-term payables).

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20. Payables to related parties – current
The current portions due to related parties are presented below:(amounts in thousands of Euro)

Financial payables

January 31
2017

January 31
2016

4,934

4,858

608

386

5,542

5,244

Other payables

Payables to related parties - current

The financial payables due to related parties regard two interest-free loans granted by
the non-controlling shareholders of the Group’s subsidiaries in the Middle East. The
payables due to related parties are analyzed in Note 39.
21. Trade payables
Trade payables are detailed as follows:
January 31
2017

January 31
2016

Trade payables – third parties

241,901

266,701

Trade payables – related parties

14,193

14,998

Total

256,094

281,699

January 31
2017

January 31
2016

Current income taxes

31,99049,700

VAT and other taxes

33,47731,044

Total

65,46780,744(amounts in thousands of Euro)

22. Tax payables
The tax payables are detailed hereunder:(amounts in thousands of Euro)The Group recognizes current tax liabilities of Euro 32 million as of January 31, 2017
(Euro 49.7 million as of January 31, 2016) against tax credits of Euro 117.2 million (Euro100.8 million as of January 31, 2016), as reported in Note 14.
23. Other current liabilities
The other current liabilities are as follows:(amounts in thousands of Euro)

January 31
2017

January 31
2016

Payables for capital expenditure

56,63954,132

Accrued expenses and deferred income

18,636

16,379Other payables

69,552

71,760Total

144,827

142,271

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The other payables are detailed as follows:
January 31
2017

January 31
2016

Short term benefits for employees and other personnel

57,60858,533Customer advances

5,782

4,563

Returns from customers

4,087

5,488

Other

2,075

3,176

Total

69,552

71,760January 31
2017

January 31
2016Long-term bank borrowings

416,491

391,942

Bonds

130,000

130,000

Deferred costs on loans(1,135)(1,467)

Financial lease – non current

2,272

-

547,628

520,475(amounts in thousands of Euro)

24. Long-term financial payables
The long-term ﬁnancial payables are as follows:(amounts in thousands of Euro)

Total

In the ﬁrst half of 2016 the Group took out two new medium/long-term loans of Euro 90
million and Euro 30 million from Unicredit and Banca Popolare di Milano, respectively.
The loans contain covenants referring to the results of PRADA spa's consolidated
ﬁnancial statements; such covenants were fully complied with as of January 31, 2017.
The Group generally borrows at variable interest rates and manages the risk of interest
rate ﬂuctuations through hedging agreements, as described in Note 12.
Long-term loans are made up of ﬁxed-rate loans for a portion equal to 78% (66% asof January 31, 2016), while the remaining 22% regard variable-rate loans (34% as ofJanuary 31, 2016).

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The long-term borrowings as of January 31, 2017, excluding ﬁnancial lease obligations
and amortized costs, are set forth 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

45,833Euro

Intesa SanPaolo

05/2030

2.737%PRADA spa

40,000Euro

Intesa SanPaolo

02/20190.608%PRADA spa

60,000Euro

Monte dei Paschi di Siena

12/20180.377%PRADA spa

16,667

Euro

Intesa SanPaolo

12/20180.600%PRADA spa

90,000Euro

Unicredit

02/20210.963%PRADA spa

15,000Euro

Banca Popolare di Milano

03/20190.710%PRADA Japan Co. Ltd

1,968

Yen giapponese

Syndicate loan

07/2018

0.906%PRADA Japan Co. Ltd

12,301

Yen giapponese

Mizuho Bank

03/2020

1.360%PRADA Japan Co. Ltd

4,100

Yen giapponese

MUFG

03/20200.810%PRADA Japan Co. Ltd

2,050

Yen giapponese

Sumitomo Mitsui Trust

03/2020

1.180%

820

Yen giapponese

SMBC

PRADA Japan Co. Ltd
Kenon Ltd64,456

Church & Co. ltd

581

03/20180.455%

Sterlina britannica Unicredit

01/20294.477%

Sterlina britannica HSBC

05/20181.880%

01/20241.200%

Tannerie Limoges sas

2,500

Euro

BNP Paribas

Pelletteria Ennepi srl

188

Euro

Mediocredito Italiano

06/20192.550%

Hipic Prod Impex srl

27

Euro

BRD –Societè Generale

02/20194.500%

Total

546,491(1) the interest rates include the effect of interest rate risk hedges, if any

The long-term borrowings as of January 31, 2016, excluding ﬁnancial lease obligations
and amortized costs, were set forth 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 Commerce Ltd

20,889Renminbi cinese Mizuho

12/2018

3.915%PRADA Japan Co. Ltd

1,890

Yen giapponese

Mizuho Bank

03/20171.875%PRADA Japan Co. Ltd

5,444

Yen giapponese

Syndicate loan

07/2018

1.057%PRADA Japan Co. Ltd

18,147

Yen giapponese

Syndicate loan

01/2018

1.057%PRADA Japan Co. Ltd

15,879

Yen giapponese

Mizuho Bank

03/2020

1.360%PRADA Japan Co. Ltd

5,293

Yen giapponese

MUFG

03/20200.810%PRADA Japan Co. Ltd

2,647

Yen giapponese

Sumitomo Mitsui Trust

03/2020

1.180%PRADA Japan Co. Ltd

1,966

Yen giapponese

SMBC

03/20180.455%

Kenon Ltd74,990

Sterlina britannica Unicredit

01/20294.477%

Church & Co. ltd

1,963

Sterlina britannica HSBC

05/2018

2.026%

Total

521,942(1) the interest rates include the effect of interest rate risk hedges, if any

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The secured and unsecured portions of the bank borrowings are set forth below:
January 31
2017

January 31
2016

Secured116,046

130,119

Unsecured581,577

662,395

Total

697,623

792,514(amounts in thousands of Euro)All loans are set forth by maturity in the section on cash ﬂow risk in Note 12. Apart fromPRADA spa, no Group company issued debt securities during the current or previous
reporting period.
25. Long-term employee benefits(amounts in thousands of Euro)

January 31
2017

January 31
2016

Post-employment benefits

46,77944,579Other long term employee benefits

20,432

24,826

Total liabilities for long term benefits

67,211

69,405Pension plan surplus (note 18)

10,233

7,778

Net liabilities for long term benefits

56,97861,627

Post-employment benefits
The net balance of long-term employee beneﬁts as of January 31, 2017 is Euro 57
million (Euro 61.6 million at January 31, 2016), and all the beneﬁts are classiﬁed asdeﬁned beneﬁt plans.
The post-employment beneﬁts consist of Euro 24.3 million (Euro 24.1 million in 2015)
in liabilities accounted for by Italian companies and Euro 22.5 million by the foreignsubsidiaries (Euro 20.5 million in 2015). The Italian liabilities regard the “Trattamento diFine Rapporto” (“TFR”, or staff leaving indemnities), a deferred beneﬁt for employees
which is mandatory for Italian businesses and is based on the employees' lengthof service and pay. The present value of the liability recognized was determined byprojecting the amount accrued as of January 31, 2017 under Italian law to the estimatedfuture date of employment termination, discounting it to the present value at the same
reporting date using the “Projected Unit Credit Method (PUCM)”.

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The following table presents the changes in long-term employee beneﬁts in the ﬁscal
year ended January 31, 2017.

(amounts in thousands of Euro)

Balance at January 31, 2016

DefinedBenefit Plans
in Italy (TFR)

DefinedBenefit Plans
in othercountries(including
Japan)

PensionFunds in UK

Other
long-term
employeebenefits

Total

24,106

20,473(7,778)24,826

61,627

Acquisitions

995

-

-

-

995

Current service cost

196

3,638

385

7,124

11,343

Interest expenses (income)

3

181

(285)

53

(48)

827

(1,124)(2,974)(2,623)(5,894)

Benefits paid

(1,876)(2,269)-(9,134)(13,279)

Contributions

-

-

(594)

-

(594)

Exchange differences

-

1,629

1,013

70

2,712

Other movements

-

-

-

116

116

24,251

22,528(10,233)

20,432

56,978

DefinedBenefit Plans
in Italy (TFR)

DefinedBenefit Plans
in OtherCountries(including
Japan)

PensionFunds in UK(a) Changes in financial assumptions

867

674

(11,806)(b) Changes in other assumptions(e.g. demographic assumptions, remuneration increases)(40)(1,798)

8,832

-

-

-

827

(1,124)(2,974)

Actuarial (gains)/losses

Balance at January 31, 2017

The actuarial gains and losses are as follows:(amounts in thousands of Euro)

Actuarial adjustments due to(c) Other

Actuarial (gains)/losses

The current service cost and interest expense/(income) are recognized in the statementof proﬁt or loss. The actuarial differences for "other long-term employee beneﬁts" arealso recognized in the statement of proﬁt or loss.
The TFR liability was measured on the basis of an independent appraisal by Federica
Zappari, an Italian actuary, member (n. 1134) of the Ordine Nazionale degli Attuari(Italian Society of Actuaries). The technical basis was processed using statistical
data, whereas the demographic assumptions used variables such as probability ofdeath, probabilities of retirement and resignations, probability of dismissals, contract
expiration, leaving indemnity advances and supplementary pension schemes.
The post-employment beneﬁts of non-Italian companies are stated net of the pension
plan surplus attributable to Group companies operating in the United Kingdom that
supply pension services to their employees. As of January 31, 2017, the fair value ofsuch pension plans is Euro 10.2 million, whereas on January 31, 2016 the plan had a
net surplus of Euro 7.8 million.

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The fair value of the plan assets was determined by the independent actuaries of
Scottish Widows. It is detailed below:
January 31
2017(amounts in thousands of Euro)

January 31
2016

Fair value of plan assets

65,84662,256

Fair value of plan liabilities(55,613)(54,478)

Pension plan surplus

10,233

7,778

The composition of the main plan assets on the reporting date was as follows:
January 31
2017

January 31
2016

Equities

23,56526,829Alternatives

9,753

7,729

Bonds

25,62926,956

Cash

6,899

742

Total

65,84662,256(amounts in thousands of Euro)

The main actuarial assumptions used as of January 31, 2017 are as follows:
Defined Benefit
Plans in Italy(TFR)

January 31, 2017

PensionFunds in UK

Defined Benefit
Plans in Japan

Average duration of plan (years)

10.6

15.4

14.8

Average increase in remuneration

1.80%

2.32%

3.37%

Rate of inflation

1.20%

2.32%

n/a

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

January 31, 2016

Average duration of plan (years)
Discount ratePensionFunds 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

The discount rate used to measure deﬁned beneﬁt plans was determined on the basisof yields on bonds with an AA rating and a maturity date similar to that of the plans.
With respect to the January 31, 2017 liability, sensitivity analysis was performed on themain actuarial variables such as discount rate, salary changes and inﬂation rate. The
analysis did not result in signiﬁcant changes in the liability, except for the sensitivity
analysis conducted on the interest rate curve, which showed that a 50 basis point
increase or decrease would lead to a Euro 6 million (6.5% of the current liability)
increase or decrease in the Group’s total deﬁned beneﬁt obligation ("DBO").

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The following plan payments are expected in subsequent periods:
January 31
2018

January 31
2019

January 31
2020

January 31
2021

After
January 31
2021

Defined Benefit Plans in Italy (TFR)

1,683

1,285

1,249

1,269

23,171

Pension Funds UK

2,114

2,175

2,255

2,260

16,083

Defined Benefit Plans Japan

2,254

2,168

2,115

2,137

20,792

Total plan payments

6,051

5,628

5,619

5,666

60,046The contributions expected for the 2017 ﬁscal year are as follows:
twelve months
ended
January 31, 2018

Defined Benefit Plans in Italy (TFR)-

Pension Funds UK

304

Defined Benefit Plans Japan

3,000

Total contributions expected

3,304

Other long-term employee benefits
The other long-term employee beneﬁts meet the IAS 19 deﬁnition of long-term
employee beneﬁts and refer to retention and performance-based programs for
employees. Their actuarial valuation as of January 31, 2017, using the Projected Unit
Credit Method, resulted in Euro 20.4 million (Euro 24.8 million as at January 31, 2016),
according to an independent actuarial appraisal. The decrease compared to January
31, 2016 is attributable mainly to beneﬁts paid during the ﬁscal year (Euro 9.1 million),whereas the amount relating to new plans is Euro 7.1 million.
26. Provisions for risks and charges
The changes in the provisions for risks and charges are as follows:(amounts in thousands of Euro)

Balance at January 31, 2016

Provision
for litigation

Provision fortax disputes

Other
provisions

Total

2,041

22,84644,346

69,233

Exchange differences

(10)

(1)

522

511

Reversals

(145)

(289)

(41)

(475)

Utilized

(231)

(80)

(1,761)(2,072)

Increases

133

2,429

12,564

15,126

1,788

24,90555,63082,323

Balance at January 31, 2017

The provisions for risks and charges represent management’s best estimate of the
maximum amount of potential liabilities. According to management based on theinformation available, and in the opinion of independent experts, the total amountallocated for risks and charges at the reporting date is adequate in respect of theliabilities that could arise from them.

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Tax disputes
The Group’s main tax disputes are described hereunder.
On December 30, 2005, PRADA spa received two VAT assessment notices for tax year
2002, regarding the sale of two business divisions reclassiﬁed as sales of trademarks.
The amount assessed was approximately Euro 21 million. The Company ﬁled thedispute and obtained successful outcomes in the ﬁrst and second-instance courts.
The Italian tax authorities appealed at the Court of Cassation, and the case is currently
waiting to be heard at the Supreme Court.
On August 4, 2006, PRADA spa received a claim for VAT penalties of Euro 5.7 million
regarding its alleged failure to issue a self-invoice for the value of a trademark acquiredin 2002 with the related business division. The Company, which ﬁled the dispute andobtained unsuccessful outcomes in the ﬁrst and second-instance courts, has lodged
an appeal at the Court of Cassation and the case is currently waiting to be heard at theSupreme Court.
In its previous annual reports, the Group provided exhaustive disclosure of theaccounting and tax effects of the Italian tax authorities' dismissal of PRADA spa’s
petition to not apply the Italian Controlled Foreign Company rules to its Dutch subholding company, PRADA Far East bv, and of the inadmissibility of the petitions ﬁled
with the same authorities regarding other subsidiaries of the Group operating incountries with privileged tax systems ("black list" countries) for years 2010 to 2013.
There were no signiﬁcant developments in 2016.
In 2012 the Italian Customs Authorities launched an investigation on the tax periods
from 2007 to 2011 against PRADA spa which resulted in the following years (including2016) in notices of assessment on the 2010 tax period for a total of taxes and interest
amounting to Euro 0.4 million at the reporting date. PRADA spa appealed against theseﬁndings. During the year there were no further signiﬁcant developments.
According to management, supported by the opinion of tax advisers, the Euro 24.9
million provision recognized for the tax disputes reported above as of January 31, 2017
represents the best estimate of the obligations that the Group could be required tosettle.
Legal disputes
The Euro 1.8 million provision for litigation as of January 31, 2017 refers to disputes
with suppliers, former employees and government authorities regarding social security
contributions.
Other risk provisions
The other risk provisions amount to Euro 55.6 million as of January 31, 2017 and referprimarily to contractual obligations to restore leased commercial properties to original
conditions.
27. Other non-current liabilities
The other non-current liabilities amount to Euro 179.1 million (Euro 161.3 million
as of January 31, 2016) and consist primarily of liabilities recognized to account forcommercial lease costs on a straight-line basis.

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28. Equity attributable to owners of the GroupThe equity attributable to owners of the Group is set forth below:
January 31
2017

January 31
2016

Share Capital

255,882

255,882

Share premium reserve

410,047410,047

Other reserves

2,006,713

1,959,304

Actuarial reserve(5,707)(8,161)

Fair value reserve(1,656)933

Cash flow hedge reserve(7,897)(7,100)Translation reserve

144,791

138,547

Net income for the period

278,329

330,888

3,080,502

3,080,340(amounts in thousands of Euro)

Total

Share capital
As of January 31, 2017, approximately 80% of PRADA spa' share capital is owned by
PRADA Holding spa and the remainder is listed on the Main Board of the Hong Kong
Stock Exchange.
Share premium reserve
The share premium reserve of Euro 410 million did not change from that of January
31, 2016.
Translation reserve
The changes in this reserve result from the translation into Euros of the foreign currency
ﬁnancial statements of consolidated companies. The reserve increased from the Euro138.5 million at January 31, 2016 to Euro 144.8 million. The Euro 6.3 million increase
was largely attributable to the appreciation of the Hong Kong Dollar, U.S. Dollar andRussian Ruble against the Euro, net of the decrease due to the depreciation of the
British pound sterling.

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Other reserves
The other reserves amount to Euro 2,006.7 million as of January 31, 2017. They
increased by Euro 47.4 million from January 31, 2016 due mainly to the allocation of
the previous ﬁscal year's proﬁt (Euro 330.9 million), net of the dividends distributed to
PRADA spa shareholders (Euro 281.5 million).
Net income for the year
The Group’s net income for the twelve months ended January 31, 2017 was Euro
278.6 million (Euro 330.9 million for the twelve months ended January 31, 2016).
Capital gains tax in Italy
Capital gains realized from the sale in an Italian company by shareholders resident inHong Kong are no longer subject to taxation in Italy, applying as of January 1, 2016.
Further details on Italian capital gains taxation have already been reported in the Tax
Booklet available on the Company’s website www.pradagroup.com.
29. Equity attributable to non-controlling interests
The following table sets forth the changes in the non-controlling interests as of January
31, 2017 and January 31, 2016.
(amounts in thousands of Euro)

Opening balance

January 31
2017

January 31
2016

17,037

17,410Translation differences

540

29

Dividends(706)(3,228)Net income for the period

5,861

2,450

Actuarial reserve
Capital injection in subsidiaries

2

6

1,014

409

280

(39)

24,02817,037

Transactions with non-controlling shareholders

Closing balance

The capital contributions to subsidiaries, Euro 1 million, refer primarily to therecapitalization of PRADA Saudi Arabia Ltd (Euro 0.9 million).
The transactions with non-controlling shareholders refer to the equity owned by third
parties pursuant to Prada spa's purchase of quotas in Pelletteria Ennepì Srl and Hipic
Prod Impex Srl.
30. Net revenues
The consolidated net revenues are generated primarily by sales of ﬁnished products,
and are stated net of returns and discounts.
twelve months
ended
January 31
2017

twelve months
ended
January 31
2016

Net sales

3,139,290

3,504,344

Royalties

44,77943,427

3,184,069

3,547,771(amounts in thousands of Euro)Total

The Financial Review describes the net revenues by distribution channel, geographicalarea, brand and product.
156

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31. Cost of goods sold
The cost of goods sold has the following composition:
twelve months
ended
January 31
2017

twelve months
ended
January 31
2016

Purchases of raw materials and production costs

595,256

858,481

Logistics costs, duties and insurance

130,383

180,944

Change in inventories

169,318(59,219)

Total

894,957

980,206(amounts in thousands of Euro)The cost of goods sold increased from 27.6% of net revenues to 28.1% due to a lessfavorable sales mix in terms of distribution channel and product.
32. Operating expenses
The operating costs are detailed below:(amounts in thousands of Euro)

twelve months
ended
January 31
2017% of netrevenues

twelve months
ended
January 31
2016% of netrevenues

Product design and development costs

125,258

3.9%

134,272

3.8%

Advertising and communications costs

172,549

5.4%

191,695

5.4%

1,383,337

43.4%

1,517,443

42.8%

176,787

5.7%

221,2626.2%

1,857,931

58.4%

2,064,672

58.2%

Selling costs
General and administrative costs

Total

The operating expenses of 2016 were lower than those of 2015 by Euro 206.7 million,or 10%. This reflects measures to optimize key processes, a decline in variable
costs, and lower depreciation and amortization as explained in greater detail below.
In particular, advertising and communication costs fell, although they remained 5.4%of net revenues, as a result of less spending in the traditional media, as well as lower
sponsorship costs.
The following table set forth depreciation, amortization and impairment, the cost oflabor and rent expense classified as operating expenses.
twelve months
ended
January 31
2017

twelve months
ended
January 31
2016

Depreciation, amortization and impairment

209,018

268,165

Labor cost

567,944599,865

Variable rent

343,393

359,093

Fixed rent

302,200

301,189

1,422,555

1,528,312(amounts in thousands of Euro)

Total

PRADA Group

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33. Interest and other financial income/(expense), net
Interest and other financial income/(expenses), net is presented below:(amounts in thousands of Euro)

twelve months
ended
January 31
2017

twelve months
ended
January 31
2016

Interest expenses on borrowings(14,282)(14,779)

Interest income / (expenses) IAS 19
Interest income

48

(44)

4,575

3,816

Exchange gains / (losses) – realized

9,783

3,221

Exchange gains / (losses) – unrealized(15,068)(17,489)

Other financial income / (expenses)(3,059)(4,597)

Total(18,003)(29,872)

Finance charges decreased from Euro 29.9 million in 2015 to Euro 18 million. The
decrease was influenced by lower exchange losses on financial items and, to a minor
degree, the combination of higher interest income thanks to the more efficient use of
cash and lower interest expense due to lower average debt and interest rates.
34. Dividends from investments
As of January 31, 2017, the Group owns a 4.88% stake (unchanged from prior fiscal
year) in Sitoy Group Holdings ltd, a company listed on the Hong Kong Stock Exchange(HK: 1023). In 2016, the Group accounted for dividends of Euro 2,252 thousand fromthat company (Euro 2,311 thousand in 2015).
35. Taxation
Income taxes have the following composition:(amounts in thousands of Euro)

twelve months
ended
January 31
2017

twelve months
ended
January 31
2016

Current taxation

95,647

158,157

Deferred taxation

35,593(16,163)

Total

131,240

141,994

The reconciliation between the Group's theoretical tax rate and its effective tax rate ispresented in the table below:(amounts in thousands of Euro)

158

twelve months
ended January 31
2017

Weighted average tax rate of the Group

27.1%

Costs and revenues not taxable/deductible

0.4%

Effect of utilization of tax loss carryforwards

0.8%

Prior year taxes

2.0%

Withholdings

1.3%

Effective tax rate of Group

31.6%

PRADA Group

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The changes in deferred tax assets and liabilities are set forth below:(amounts in thousands of Euro)

Opening balance

twelve months
ended
January 31
2017

twelve months
ended
January 31
2016

243,690239,349

5,746

528

Exchange differences
Deferred tax on acquisitions

463-

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

117(10,684)

Deferred taxes on post-employment benefits recorded in equity (reserve for actuarial
differences)(821)(1,200)

Other movements

2,524

(466)

Deferred taxes for the period in profit or loss

(35,593)

16,163

Closing balance

216,126

243,690

Deferred tax assets and liabilities are classiﬁed by type hereunder:
January 31, 2017
(amounts in thousands of Euro)Inventories

Deferred tax
assetsJanuary 31, 2016

Deferred tax
liabilities

Deferred tax
assetsDeferred tax
liabilities

108,560-

140,922-

Receivables and other assets

462

1,417

386

1,616

Useful life of non-current assets

55,124

8,712

60,255

9,848-

16,957-

20,725

Provision for risks / accrued expenses

54,945816

49,611

2,561

Non-deductible / taxable charges/income

11,096448

12,653446

Tax loss carryforwards

3,561

-

3,809

-

Derivative financial instruments

1,885

-

1,800

35

Long term employee benefits

9,395

1,740

9,268

1,401

Other

2,238

1,050

1,868

250

Total

247,266

31,140280,572

36,882

Deferred taxes due to acquisitions

Tax loss carryforwards as of January 31, 2017, including those already recognized in
the Group's ﬁnancial statements, are detailed below:(amounts in thousands of Euro)

January 31, 2017

Expiring within 5 years

8,689

Expiring after 5 years

30,090Available for carryforward with no time limit

84,558

Total tax loss carryforwards

123,337

The Group's management updated the deferred tax assets recognized on tax loss
carryforwards taking into consideration the macroeconomic scenario and the businessdevelopments of each of the Group’s company.

PRADA Group

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36. Earnings and Dividends per share
Earnings per share basic and diluted
Earnings per share are calculated by dividing the net income attributable to theshareholders of the Parent company by the weighted average number of ordinary
shares outstanding.
twelve months
ended
January 31
2017Group net income in Euro
Weighted average number of ordinary shares in issue

twelve months
ended
January 31
2016278,328,814

330,888,425

2,558,824,000

2,558,824,000

0.109

0.129

Basic and Diluted rarnings per share in Euro, calculated on weighted average
number of shares

Dividends per share
The Board of Directors of PRADA spa has proposed a ﬁnal dividend of Euro 307,058,880(or Euro 0.12 per share) for the twelve months ended January 31, 2017.
During the year ended January 31, 2017, the Company distributed dividends of Euro
281,470,640, as approved by Shareholders at the General Meeting held on May 24,
2016 to approve the ﬁnancial statements for the year ended January 31, 2016.
The dividends and the related Italian withholding tax (Euro 14.6 million), determined byapplying the ordinary Italian tax rate to the entire amount of the dividends distributed
to the beneﬁcial owners of the Company's shares held through the Hong Kong Central
Clearing and Settlement System, were paid by January 31, 2017.
The dividends paid in the past three years are detailed hereunder:
Financial statements ended
January 31,
2016

Financial statements ended
January 31,
2015

Financial statements ended
January 31,
2014

Total dividends paid (Euro)

281,470,640

281,470,640

281,470,640

Dividends per Share (Euro)

0.11

0.11

0.11

Date of approval by Shareholders’ Meeting

24/05/2016

26/05/2015

22/05/2014

Date of payment

June 2016

June 2015

June 2014

37. Additional information
The average number of employees by business division for the twelve months ended
January 31, 2017 and January 31, 2016 is presented below:(number of employees)

Production

twelve months
ended
January 31
2017

twelve months
ended
January 31
2016

2,544

2,114

Product design and development

989

1,038

Advertising and Communications

117

119

7,690

8,129

986

1,014

12,326

12,414

Selling
General and administrative services

Total

160

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Employee remuneration
The employee remuneration by business division for the twelve months ended January
31, 2017 and January 31, 2016 is presented below:
twelve months
ended
January 31
2017

twelve months
ended
January 31
2016

Production

109,200

102,714

Product design and development

81,66067,608Advertising and Communications

14,46813,157

Selling396,217

418,931

General and administrative services

75,599100,133

Total

677,144702,543(amounts in thousands of Euro)

The types of employee remuneration for the twelve months ended January 31, 2017
and January 31, 2016 are presented below:
twelve months
ended
January 31
2017

twelve months
ended
January 31
2016

Wages and salaries

510,317527,975

Post-employment benefits and other long-term benefits

29,57432,985Social contributions

107,031

109,191

Other

30,22232,392

Total

677,144702,543(amounts in thousands of Euro)Distributable reserves of the Parent company, PRADA spa(amounts in thousands of Euro)

January 31
2017

Possibleutilization

DistributableamountSummary of utilizationin the last three years
Coverage oflossesDistribution ofdividends

Share Capital

255,882

Share premium reserve

410,047

A, B, C

410,047--

Legal reserve

51,176B---

Other reserves

182,899

A, B, C

182,899--

Retained earnings

405,803

A, B, C383,684-

793,235

Cash flow hedge reserve(1,602)---

976,630-

793,235

Distributable amountA share capital increase
B coverage of losses
C distributable to shareholders

Under Italian Civil Code Article 2431, the share premium reserve is fully distributablesince the amount of the legal reserve is equal to or exceeds 20% of share capital.
Under Italian Legislative Decree 38/2005, Article 7, Euro 22.2 million of the retained
earnings is not distributable.

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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 31,2017 and January 31, 2016 are shown below:
Currency

Average ratein prior year

Closing rate

Opening rate

US Dollar

1.105

1.103

1.076

1.092

Canadian Dollar

1.455

1.429

1.406

1.536

GB Pound

0.827

0.725

0.861

0.764

Swiss Franc

1.088

1.067

1.067

1.114

Australian Dollar

162

Average rate

1.478

1.486

1.420

1.539

Korean Won

1,280.125

1,259.326

1,244.760

1,318.600

Japanese Yen

132.250

119.817133.531121.940

Hong Kong Dollar

8.574

8.557

8.344

8.510

Singapore Dollar

1.525

1.525

1.520

1.555

Thai Baht

38.91538.10037.79338.973

Taiwan Dollar

35.49135.20133.66636.572

Russian Ruble

72.62768.75264.43082.847

Czech Koruna

27.03427.21327.02127.026

Macau Pataca

8.831

8.813

8.594

8.764

Chinese Renminbi

7.365

6.966

7.397

7.181

New Zealand Dollar

1.575

1.603

1.471

1.679

Malaysian Ringgit

4.587

4.378

4.761

4.530

Turkish Lira

3.403

3.070

4.063

3.237

Brazilian Real

3.782

3.799

3.354

4.429
20.005

Mexican Peso

20.92417.81122.286

UAE Dirham

4.058

4.053

3.950

4.011

Ukrainian Hryvna

28.48824.92028.82827.42310.767

Moroccan Dirham

10.85010.811

10.761

Kuwait Dinar

0.334

0.333

0.328

0.332

Danish Kronor

7.443

7.460

7.437

7.463

Swedish Kronor

9.489

9.341

9.451

9.348

Kazakhstani Tenge

375.115262.094347.200

397.880

Qatari Riyal

4.024

4.019

3.931

3.952

Indian Rupee

74.30771.27472.80174.104

Saudi Riyal

4.144

4.139

4.034

4.095

South African Rand

16.01914.50914.44417.493

Vietnamese Dong

24,251.317

23,961.811

23,807.500

23,922.500

Indonesian Rupiah

14,650.814

14,901.001

14,363.560

14,967.640

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Independent auditor fees
The total fees and expenses accrued for Deloitte & Touche spa and its network forauditing the ﬁnancial statements of the ﬁscal years ending January 31, 2017 andJanuary 31, 2016, and for other non-audit services, are presented below:
Type of service

Audit Firm

Provided to

twelve months
ended
January 31,
2017

twelve months
ended
January 31,
2016

Audit services

Deloitte & Touche spa

PRADA spa

514

485

Audit services

Deloitte & Touche spa

Subsidiaries

173

162

Audit services

Deloitte Network

Subsidiaries

1,194

1,294

1,881

1,941

Total audit fees accruing

Other advisory services

Deloitte Network

PRADA spa

1,045

880

Other advisory services

Deloitte Network

Subsidiaries

216

247

1,261

1,127

81

99

3,223

3,167

Total non-audit fees accruing

Out of pocket expenses

Total independent auditor’s compensation accruing

Other advisory services for Prada spa mainly relate to services to assist the Company
with the production of a new website, with processes aimed at creating a data
warehouse and in developing its customer cluster analysis.
38. Remuneration of Board of Directors, five highest paid individuals and Senior
Managers
Remuneration of PRADA spa Board of Directors for fiscal year ended January 31, 2017
(amounts in thousands of Euro)

Directors’fees

Remunerationand otherbenefits

Bonusesand other
incentives

Benefits inkind

Pension,healthcare
and TFR
contributions

January 31,
2017

Carlo Mazzi

1,020

-

-

74

22

1,116

Miuccia Prada Bianchi

12,368

-

-

-

22

12,390Patrizio Bertelli

12,368

-

-

-

22

12,390

Alessandra Cozzani

50

215

110

13

90

478

Stefano Simontacchi

42

-

-

-

-

42

Maurizio Cereda

33

-

-

-

-

33
163

Gian Franco Oliviero Mattei

150

-

-

-

13

Giancarlo Forestieri

70

-

-

-

11

81

Sing Cheong Liu

70

-

-

-

15

85

26,171

215

110

87

195

27,778Total

Mr. Donatello Galli resigned with effect on Feb. 19, 2016, and received during the year
ended Jan. 31, 2017 a total remuneration of Euro 1.9 million. Mr. Gaetano Miccichè
resigned with effect on Apr. 15, 2016, and received during the year ended Jan. 31,
2017 a total remuneration of Euro 9 thousands.

PRADA Group

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Remuneration of PRADA spa Board of Directors for fiscal 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

Total

Remuneration of five highest paid individuals
The Group’s ﬁve highest paid individuals included three Directors for 2016 and two
Directors for 2015. The total remuneration of the remaining two highest paid individuals
in the twelve months ended January 31, 2017, and the remaining three highest paid
individuals in the twelve months ended January 31, 2016, is set forth below:
twelve months
ended
January 31
2017

twelve months
ended
January 31
2016

Remuneration and other benefits

9,972

10,644

Bonuses and other incentives

2,093

1,607

(amounts in thousands of Euro)

Non-monetary benefits

230

218

Pension/social security, healthcare and TFR contributions

23

397

12,31812,866Total

The remuneration range of the ﬁve highest paid individuals is as follows:(amounts in Hong Kong Dollars)

164

twelve months
ended
January 31
2017

twelve months
ended
January 31
2016Less than HKD 8,000,000--

Between HKD 8,000,000 and HKD 20,000,000

12More than HKD 50,000,000

1

1Total individuals

2

3

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Senior Manager remuneration
The remuneration of the Senior Managers is as follows:
twelve months
ended
January 31
2017

twelve months
ended
January 31
2016

Remuneration and other benefits

16,87819,872

Bonuses and other incentives

4,812

5,207

Non-monetary benefits

2,067

1,458

Pension/social security, healthcare and TFR contributions

1,935

3,159

Total

25,692

29,696(amounts in thousands of Euro)

There were 25 Senior Managers as of January 31, 2017, and 31 Senior Managers asof January 31, 2016.
The remuneration range of the Senior Mangers is as follows:(amounts in Hong Kong Dollars)

twelve months
ended
January 31
2017

twelve months
ended
January 31
2016Less than HKD 4,000,000

66

fra HKD 4,000,000 e HKD 8,000,000

16

21

fra HKD 8,000,000 e HKD 16,000,000

1

3

fra HKD 16,000,000 e HKD 50,000,000

1-maggiore di HKD 50,000,000

1

1Total individuals

25

31

39. Related party transactions
The Group carries out transactions with companies classiﬁable as related parties
according to IAS 24, "Related Party Disclosures”. The transactions regard mainly salesof goods, supplies of services, loans, sponsorships, leases and franchise agreements.
The transactions take place on an arm’s length basis.
The following tables present the effect of related-party transactions on the consolidated
ﬁnancial statements in terms of statement of ﬁnancial position balances at the reporting
date and total transactions affecting the statement of proﬁt or loss.

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Statement of financial position balances as of January 31, 2017

(amounts in thousands of Euro)STICHTING Prada (ex Stiching
Fondazione Prada)TradepayablesPayablesPayablesto related
to relatedparties parties –current non current

Other
Liabilities

(1)

-

-

-

-

-

-

Progetto Prada Arte Srl

-

-

-

(3)

-

-

-

Al Tayer Group LLC

-

-

-

1

-

-

-

Al Tayer Insignia LLC

-

-

-

20

2,492

-

-

Danzas LLC - UAE

-

-

-

11

20

-

-

DFS Hawaii

-

-

-

618

-

-

-

DFS New Zealand Limited

-

-

-

25

-

-

-

DFS Venture Singapore (Pte)
Limited

-

-

-

53

-

-

-

Luna Rossa Challenge 2013 Srl

129

8,741

-

11

55

-

-

-

5,848

-

2,203

-

-

-

DFS DFS Cotai limitada

11

-

-

313

526

-

-

Al Tayer Trends

14

-

-

-

-

-

-

Al Sanam Rent a Car LLC

-

-

-

2

-

-

-

Peschiera Immobiliare srl

-

88

-

-

-

-

-

Premiata Srl

10

-

-

423

-

-

-

Le Mazza srl

134

-

-

412

-

-

-

Friuli 64 srl

-

-

-

152

-

-

-

SPELM SA

-

78

-

-

-

-

-

Conceria Superior S.p.A.

32

-

-

8,290

-

-

-

PRADA HOLDING S.P.A.

788

-

-

-

-

-

-

22,770

118

-

1,184

8

-

-

PRA 1 S.r.l.

-

91

-

95

-

-

-

Perseo srl

48

-

-

384

-

-

-

Rubaiyat Modern Lux.Pr.Co.Ltd

-

-

-

(1)

2,441

-

-

Members of the Board of Directorsof PRADA spa

-

-

-

-

-

-

3,433

Relatives of members of the Boardof Directors

-

-

-

-

-

-

340

23,935

14,964-

14,193

5,542

-

3,773

Chora Srl

Fratelli Prada SpA

Total at January 31, 2017

166

Receivables Receivables
from, andfrom, andTradeadvances
advances
receivables to, related to, relatedparties –parties –current non current

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Statement of financial position balances as of January 31, 2016

(amounts in thousands of Euro)

Receivables Receivables
from, andfrom, andTradeadvances
advances
receivables to, related to, relatedparties –parties –current non current

TradepayablesPayablesPayablesto related
to 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

-

-

-

Chora 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 due from Progetto Prada Arte srl represented the deferred rent income
recognized pursuant to the application of IAS 17, "Leases" to the temporary business partnership of PRADA spa and Progetto
Prada Arte srl.

PRADA Group

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Statement of profit or loss transactions for the twelve months ended January
31, 2017(amounts in thousands of Euro)

Progetto Prada Arte Srl

Netrevenues

Cost ofgoods sold--

Progetto Prada Arte Srl (*)

General,admin.
& sellingcosts(income)Royalties
incomeInterest
incomeInterest
expense

(193)

-

-

-

1,632

HMP Srl

-

-

(1)

-

-

-

Al Tayer Group LLC

-

-

33

-

-

-

Al Tayer Insignia LLC

-

-

256

-

-

-

Danzas LLC - UAE

-

510

63

-

-

-

DFS Hawaii

-

-

4,461

-

-

-

DFS New Zealand Limited

-

-

214

-

-

-

DFS Venture Singapore (Pte)
Limited

-

-

286

-

-

-

Luna Rossa Challenge 2013 Srl

2-11,683---Al Tayer Motors

-

-

9

-

-

-

Chora Srl

-

-

2,508

-

-

32

DFS DFS Cotai limitada

-

-

4,504

-

-

-

Al Sanam Rent a Car LLC

-

-

11

-

-

-

Peschiera Immobiliare srl

-

-

540

-

-

-

Premiata Srl

-

1,137

-

-

-

-

Le Mazza srl

-

925

-

-

-

-

Friuli 64 srl

-

-

677

-

-

-

SPELM SA

-

-

459

-

-

-

Conceria Superior S.p.A.

313

13,409

70

-

-

-

PRADA HOLDING S.P.A.

-

-

(232)

-

-

-

21,015

477

529

635

-

-

PRA 1 S.r.l.

-

-

1,139

-

-

-

Petranera S.r.l.- equity

-

-

(2)

-

-

-

PABE-RE LLC.

--

17,032---

Perseo srl

-

2,596

-

-

-

-

Pelletteria Ennepì S.r.l.

-

-

-

-

-

-

Relative of PRADA spa Director

-

-

776

-

-

-

21,33019,05446,454635-

32

Fratelli Prada SpA

Total at January 31, 2017(*) Pursuant to the application of IAS 17, "Leases”, the amount contains a non-monetary cost for the derecognition of deferred
rent of Euro 1,632 thousand with Progetto Prada Arte srl recognized pursuant to the termination dated April 8, 2016 of thetemporary business partnership agreement between PRADA spa and Progetto Prada Arte.

168

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Statement of profit or loss transactions for the twelve months ended January
31, 2016(amounts in thousands of Euro)STICHTING Prada (ex Stiching
Fondazione Prada)
Progetto Prada Arte Srl

Netrevenues

General,Cost ofadmin. &goods sold selling costs(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

-

-

-

Chora 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.

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The foregoing tables report information on transactions with related parties inaccordance with IAS 24, "Related Party Disclosures". The following transactions withrelated parties fall within the scope of 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 lease for the Aoyama Building inTokyo. The transactions reported for the twelve months ended January 31, 2017
are regulated by Chapter 14A of the Listing Rules because they are considered
continuing connected transactions subject to disclosure, but they are exempt fromthe independent shareholders' approval requirement. As required by the Listing Rules,
comprehensive disclosure of those continuing connected transactions is contained in
PRADA spa's Announcement dated July 15, 2015.
The transactions with related party “Fratelli Prada spa – franchising” refer to transactions
between the Company and Fratelli Prada spa in relation to the franchising agreement
for the Prada stores in Milan. The transactions reported for the twelve months ended
January 31, 2017 are regulated by Chapter 14A of the Listing Rules because they
are considered continuing connected transactions subject to disclosure, but they are
exempt from the independent shareholders' approval requirement. As required by the
Listing Rules, comprehensive disclosure of those continuing connected transactions iscontained in PRADA spa's Announcement dated January 29, 2014.
The transactions with related party “Progetto Prada Arte srl - Galleria” refer to thetransactions between the Company and Progetto Prada Arte srl in relation to thetemporary business partnership agreement for Progetto Prada Arte srl's use of partof the Galleria Vittorio Emanuele II property in Milan to hold cultural events. The
transactions regard the period from February 1, 2016 to April 8, 2016 pursuant to thetermination agreement signed by the parties on the same date, the details of which arereported in PRADA spa's Announcement dated April 8, 2016.
The transactions with related party Luna Rossa Challenge srl for the twelve months
ended January 31, 2017 are regulated by Chapter 14A of the Listing Rules because they
are considered continuing connected transactions subject to disclosure, but they are
exempt from the independent shareholders' approval requirement. As required by the
Listing Rules, comprehensive disclosure of those continuing connected transactions iscontained in PRADA spa's Announcement dated February 27, 2014.
Apart from the non-exempt continuing connected transactions and non-exempt
connected transactions reported in Note 38, no transaction reported in the 2016
consolidated ﬁnancial statements meets the deﬁnition of “connected transaction” or“continuing connected transaction” contained in Chapter 14A of the Hong Kong Stock
Exchange Listing Rules or, if it does meet the deﬁnition of “connected transaction” or“continuing connected transaction” according to Chapter 14A, it is exempt from theannouncement, disclosure and independent shareholders’ approval requirements laid
down in Chapter 14A.

170

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40. Commitments
Operating leases
The operating leases in effect as of January 31, 2017 and January 31, 2016 are set
forth below by maturity:(amounts in thousands of Euro)Within a year

twelve months
ended
January 31
2017

twelve months
ended
January 31
2016459,520435,241

After between one year and five years

1,268,394

1,218,665

After more than five years

1,274,402

1,053,674

Total

3,002,316

2,707,580

The operating lease commitments for ﬁscal year 2016 include Euro 2,736 million
regarding leases for retail premises (Euro 2,636 million for 2015).
The difference is due mainly to the increase in commitments in countries whose
currency differs from the Euro.
The lease amounts recognized in the statement of proﬁt or loss for the twelve months
ended January 31, 2017 and January 31, 2016 are presented below:(amounts in thousands of Euro)

twelvemonthsended
January 31
2017

twelvemonthsended
January 31
2016

Fixed minimum lease expenses

304,490

303,451

Variable lease expenses

343,393

359,093

Total

647,883

662,544

Some Group companies are required to pay rent based on a ﬁxed percentage of net
sales.
The future rental incomes under the operating leases are set forth below by maturity:(amounts in thousands of Euro)

twelve months
ended
January 31
2017

twelve months
ended
January 31
2016

Within a year

4,739

6,776

After between one year and five years

16,47923,709After more than five years

2,071

19,286

Total

23,28949,771The decrease in future rental income is mainly due to the termination of lease contracts
with related parties.
Other commitments
The Group had no signiﬁcant binding purchase commitments as of January 31, 2017.

PRADA Group

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41. Financial trend
January 31
2017

January 31
2016

January 31
2015

January 31
2014

January 31
2013

Net revenues

3,184,069

3,547,771

3,551,696

3,587,347

3,297,219

Gross margin

2,289,112

2,567,565

2,550,579

2,648,649

2,376,541

Operating income (EBIT)

431,181502,893

701,551

939,237

889,781Group net income

278,329

330,888

450,730

627,785625,681

Total assets

4,656,929

4,756,555

4,738,877

3,888,292

3,385,279

Total liabilities

1,552,399

1,659,178

1,720,730

1,186,752

1,054,787

Total Group shareholders’ equity

3,080,502

3,080,340

3,000,737

2,687,554

2,320,022(amounts in thousands of Euro)172

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42. Consolidated companies
Local
currency

Company

Sharecapital%(000s
interestof localcurrency)

Registeredoffice andprincipal
country ofoperations

Date ofincorporation/ Main businessestablishment

Italy
PRADA Spa

EUR

255,882

Artisans Shoes Srl (*)

EUR

1,000

66.70

IPI Logistica Srl (*)

EUR

600

Group Holding /Production/
Distribution

Milan, IT
Montegranaro,IT

09/02/1977

Production

100.00Milan, IT

26/01/1999

Services

01/12/2016

Production

Pelletteria Ennepì Srl (*)

EUR

93

80.00

Figline e Incisa
Valdarno, IT

Church Italia Srl

EUR

51

100.00Milan, IT

31/01/1992

Services/Retail

Marchesi Angelo Srl (*)

EUR

23

80.00

Milan, IT

10/07/2013

Confectionary

Montenapoleone 9 Srl (*)

EUR

1,000

100.00Milan, 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

Retail/Services

PRADA 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

Retail25/05/1999

RetailPRADA Monte-Carlo Sam

EUR

2,000

100.00Monte-Carlo,FR

PRADA Sa (*)

EUR

31

100.00

Luxembourg,
LU

29/07/1994

Trademark Owner/
Services

PRADA Company Sa

EUR

3,204

100.00

Luxembourg,
LU

12/04/1999

Services

PRADA Far East Bv (*)

EUR

20

100.00Amsterdam,
NL

27/03/2000

Retail27/03/2000

Sub-Holding

13/03/2014

RetailPRADA Far East Bv II (*)

EUR

10

100.00Amsterdam,
NL

Church Denmark Aps

DKK

50

100.00Copenhagen,
DK

Church Holding UK Ltd (*)

GBP78,126100.00

Northampton,UK

22/07/1999

Sub-Holding

Church France Sas

EUR

241

100.00Paris, FR

01/06/1955

RetailChurch UK Retail Ltd

GBP

1,021

100.00

Northampton,
UK

16/07/1987

RetailChurch’s English Shoes
Switzerland Sa

CHF

100

100.00

Lugano, CH

29/12/2000

RetailChurch & Co. Ltd

GBP

2,811

100.00

Northampton,
UK

16/01/1926

Sub-Holding /Production /Distribution

Church & Co. (Footwear) Ltd

GBP

44

100.00

Northampton,
UK

06/03/1954

Trademark Owner

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

5

100.00Lisbon, 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 (*)

TRY

73,000100.00Istanbul, TR

26/02/2009

RetailPRADA Ukraine Llc (*)

UAH

30,000100.00Kiev, UA

14/10/2011

RetailChurch Netherlands Bv

EUR

18

100.00Amsterdam,
NL

07/07/2011

RetailChurch Ireland Retail Ltd

EUR

50

100.00Dublin, IE

20/11/2011

RetailPRADA Group

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Localcurrency

Company

Sharecapital%(000s ofinterest
local
currency)

Registeredoffice andprincipal
country ofoperations

Date ofincorporation/ Main businessestablishment

EuropeChurch 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 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

873

60.00

Isle, FR

19/08/2014

Production

Prada Denmark Aps (*)

DKK

20,412100.00Copenhagen,
DK

19/05/2015

RetailPrada Finnish Oy (*)

EUR

2.5

100.00Helsinki, FI

09/11/2015

RetailPrada Belgium Sprl (*)

EUR

800

100.00Brussels, BE

04/12/2015

RetailHipic Prod Impex Srl (**)

RON

200

50.00

Sibiu, RO

15/04/2016

Production

PRADA USA Corp. (*)

USD

152,211100.00

New York, US

25/10/1993

Services/Distribution/
RetailTRS 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

Americas

Church & Co. (USA) Ltd

USD

85

100.00

New York, US

08/09/1930

RetailPost Development Corp (*)

USD

45,138100.00

New York, US

18/02/1997

Real estate

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

MXN

269,058

100.00

Mexico City,MX

12/07/2011

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

BRL

210,000

100.00

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

Service company

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 St. Barthelemy Sarl (*)

EUR

1,220

100.00

Gustavia, BL

01/04/2016

RetailAsia-Pacific and Japan174

PRADA Asia Pacific Ltd

HKD

3,000

100.00Hong Kong, HK

12/09/1997

Retail/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

RetailTRS Hong Kong Ltd

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

13,500100.00

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

31/10/2005

Retail

17/04/1992

RetailPRADA Fashion Commerce(Shanghai) co Ltd

RMB

474,950

100.00Shanghai,CNLimited Liability
Company

Church Japan Company Ltd

JPY

31,525100.00Tokyo, JP

PRADA Group

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CompanyLocalcurrency

Sharecapital%(000s ofinterest
local
currency)

Registeredoffice andprincipal
country ofoperations

Date ofincorporation/ Main businessestablishment

Asia-Pacific and Japan
Church Hong Kong Retail Ltd

HKD

1,000 100.00

Hong Kong, HK

04/06/2004

Church Singapore Pte. Ltd

SGD

500 100.00

Singapore, SG

18/08/2009

RetailRetailPRADA Hong Kong P.D. Ltd (*)

HKD

11,000 100.00

Hong 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

21,900 100.00

Shanghai, CN
Limited Liability Company

05/12/2012

RetailPrada New Zealand Ltd

NZD

3,500 100.00

Wellington, NZ

05/07/2013

RetailPRADA India Fashion Private
Ltd

INR

100 100.00

Mumbai, IN

30/09/2013

RetailPRADA Vietnam Limited
Liability Company

VND

66,606,570 100.00

Hanoi City, VN

09/09/2014

RetailPT PRADA Indonesia

IDR

3,023,844 100.00

Jakarta, ID

15/10/2014

Dormant/Distribution

PRADA Macau Co Ltd

MOP

25 100.00

Macau, MO

22/01/2015

RetailJebel Ali Free
Zone, AE

25/05/2011

Distribution/Services

Middle East
PRADA Middle East Fzco (*)

AED

18,00060.00

PRADA Emirates Llc (**)

AED

300

49.00

Dubai, AE

04/08/2011

RetailPRADA Kuwait Wll (**)

KWD

50

49.00

Kuwait city,
KW

18/09/2012

RetailPRADA 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

Unconsolidated companies
Company

PAC Srl (in liquidation)

PRADA Group

Prada Annual Report 2016_20 apr.indd 175

Percentage directinterest at
January 31, 2017

Percentage directinterest at
January 31, 2016

Note

Consolidation
method

49.00

49.00

Associate

Equity method

Annual Report 2016 - Notes to the Consolidated Financial Statements

175

20/04/17 18:24

43. Disclosures regarding non-controlling interests
The financial information of companies not entirely controlled by the Group is provided
below, as required by IFRS 12. The amounts are stated before the consolidation
adjustments:
Financial statements for fiscal year ended January 31, 2017:

Company

Percentage
interest heldLocal
currency

Total
assetsTotalequityNet
revenues

Net
income/(loss) for
year

Dividends
paid to noncontrollingshareholders(amounts inEuro
thousands)

Artisans Shoes Srl

66.70

EUR

25,728

8,318

51,034

1,368

369

TRS Hawaii Llc

55.00

USD

6,288

4,109

16,898(303)-

TRS Hong Kong

55.00

HKD

674

598

-

(127)

-

TRS Singapore

55.00

SGD

3,347

2,824

3,320

508

-

TRS Guam Partnership

55.00

USD

7,848

6,775

12,906

2,078-

TRS Saipan Partnership

55.00

USD

3,421

3,021

3,985

697

-

TRS New Zealand Ltd

55.00

NZD

3,292

2,359

2,301

234

-

TRS Okinawa KK

55.00

JPY

814,110653,268

1,222,107

137,782337

TRS Hong Kongbranch in Macau

55.00

MOP

163,842

91,979215,538

34,067-PRADA Emirates Llc

49.00

AED

158,897(41,388)

190,807(25,943)-PRADA Middle East fzco

60.00

AED

276,994

192,653

202,910

27,675-

Prada Kuwait Wll

49.00

KWD

6,052

175

7,946

92

-

PRADA Saudi Arabia Ltd

75.00

SAR

75,10222,85857,574(8,713)-

Marchesi Angelo Srl

80.00

EUR

2,445

636

3,091

(284)

-

Tannerie Limoges Sas

60.00

EUR

8,305

290

2,914

(581)

-

Hipic Prod Impex Srl

50.00

RON

6,753

(4,997)-(2,762)-Pelletteria Ennepì S.r.l.

80.00

EUR

6,406

1,931

-

29

-

Dividends
paid to noncontrollingshareholders(amounts inEuro
thousands)

1,018

Financial statements for fiscal year ended January 31, 2016:

Company

176

Percentage
interest heldLocal
currency

Total
assetsTotalequityNet
revenues

Net
income/(loss) for
year

Artisans Shoes Srl

66.70

EUR

27,556

8,059

56,9801,126

TRS Hawaii Llc

55.00

USD

8,486

4,413

17,153(581)-

TRS Hong Kong

55.00

HKD

978

797

-

(91)

22,500TRS Singapore

55.00

SGD

3,012

2,315

3,669

498

-

TRS Guam Partnership

55.00

USD

6,000

4,697

12,536(1,069)-TRS Saipan Partnership

55.00

USD

2,982

2,324

5,925

681

-

TRS New Zealand Ltd

55.00

NZD

2,625

2,125

3,407

466

-

TRS Okinawa KK

55.00

JPY

928,706

611,917

1,615,184

226,390-

TRS Hong Kongbranch in Macau

55.00

MOP

104,465

57,987325,079

45,175-PRADA Emirates Llc

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 Wll

49.00

KWD

6,031

(403)

8,537

(486)

-

PRADA Saudi Arabia Ltd

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 Sas

60.00

EUR

5,281

108

610

(666)

-

PRADA Group

Prada Annual Report 2016_20 apr.indd 176

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20/04/17 18:24

There were no significant restrictions on the Group’s ability to access or use assets andsettle liabilities as of the reporting date.
In 2011, PRADA spa and Al Tayer Insignia llc stipulated an agreement to develop the
PRADA and MIU MIU brands in the Middle East retail business. The agreement gives
PRADA spa a call option exercisable on up to 20% of PRADA Middle East Fzco's sharecapital. PRADA spa's management was not reasonably certain that it could estimate
the likelihood that the option will be exercised, hence the economic value of the option
as of the reporting date cannot be measured.
44. Subsequent events
No significant events occurred after the reporting period.

PRADA Group

Prada Annual Report 2016_20 apr.indd 177

Annual Report 2016 - Notes to the Consolidated Financial Statements

177

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178

PRADA Group

Prada Annual Report 2016_20 apr.indd 178

Annual Report 2016 - Notes to the Consolidated Financial Statements

20/04/17 18:24

Independent Auditors’ Reports

PRADA Group

Prada Annual Report 2016_20 apr.indd 179

Annual Report 2016 - Independent Auditors' Reports

179

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The Independent Auditors’ Reports included in this Annual Report are in two different
formats taking in account that the new auditing standards on the audit report included
in International Standards on Auditing (ISAs) have not yet been adopted in the Italianjurisdiction. Specifically, in Italy, where the Company is domiciled, the Independent
Auditors’ report is issued for statutory purposes in accordance with ISA Italia pursuant
to art. 14 of Italian Legislative Decree no39 of January 27, 2010, while in accordance
to the regulations applicable in Hong Kong, where the Company’s shares are listed on
the Main Board of the Hong Kong Stock Exchange, the Independent Auditors’ report isissued in accordance with International Standards on Auditing (ISAs).

180

PRADA Group

Prada Annual Report 2016_20 apr.indd 180

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PRADA Group

Prada Annual Report 2016_20 apr.indd 181

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181

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182

PRADA Group

Prada Annual Report 2016_20 apr.indd 182

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PRADA Group

Prada Annual Report 2016_20 apr.indd 183

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183

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184

PRADA Group

Prada Annual Report 2016_20 apr.indd 184

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PRADA Group

Prada Annual Report 2016_20 apr.indd 185

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185

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186

PRADA Group

Prada Annual Report 2016_20 apr.indd 186

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PRADA Group

Prada Annual Report 2016_20 apr.indd 187

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187

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