Separate Financial Statements 2014

PRADA spa
(Hong Kong Stock code: 1913)

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Separate Financial Statements 2014

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IndexCorporate Information
Financial Review
Corporate Governance
Financial Statements
Notes to the Financial Statements
Independent Auditors’ Report
Statutory Auditors’ Report

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Patrizio Bertelli

Miuccia Prada2

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Corporate Information

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Corporate Information

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Registered office

Via A. Fogazzaro, 28
20135 Milan, Italy

Head Office

Via A. Fogazzaro, 28
20135 Milan, Italy

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

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

Company web sitewww.pradagroup.com

Hong Kong Stock Exchange
Identification Number

1913

Board of Directors

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

Audit Committee

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

Remuneration Committee

Gian Franco Oliviero Mattei (Chairman)
Carlo Mazzi
Giancarlo Forestieri

Appointments Committee

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

Board of Statutory Auditors

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

David Terracina (Chairman)
Gian Franco Oliviero Mattei
Franco Bertoli

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Main Shareholder

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

Joint Company Secretaries

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

Authorized Representatives
in Hong Kong

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

Alternate Authorized
Representative to Carlo Mazzi
in Hong Kong

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

Hong Kong Share Registrar

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

Auditor

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

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Financial Review

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Presentation
The Company is the PRADA Group parent company and acts as an operating-holding
company. It operates, directly and through investments in subsidiary and associatecompanies, in manufacturing, distribution, retail, brand and trademark management in
the luxury goods sector.
The Company’s main activities are as follows:––

manufacture of leather goods, clothing, footwear and accessories of all kinds
bearing the Prada, Miu Miu, Car Shoe and Church’s brands;––

worldwide wholesale of leather goods, footwear and clothing bearing the Prada,
Miu Miu and Car Shoe brands;––

retail through company stores and on-line;––

management of investments;––

services provided to Group companies, including:––retail management services regarding preparation of purchasing budgets andselection of product mix, visual displaying and management of stores;––

advertising and promotional services, especially media planning, design
services;––

information technology services regarding the technological infrastructure
and the centralized, integrated management of applications;––engineering services in relation to the opening, refurbishment and maintenanceof stores;––

financial services involving the granting of loans;––

corporate services regarding legal affairs, tax advisory, administration/accounting, human resources, security and logistics consultancy.

The report of the Board of Directors refers to PRADA spa (the “Company”), operational
holding company of the PRADA Group. It is based on the Separate Financial Statements
at January 31, 2015 (financial year 2014), as prepared in accordance with IFRS adopted
by the European Union. The Financial review must be read together with the Financial
statements and the Explanatory notes which form an integral part of the Separate
Financial Statements.
2014 highlights
The international economic environment in which the Group operated in 2014 wasparticularly challenging because of the ongoing economic uncertainty and the politicaland social tension that affected several important markets. Against this background,
there was, generally, a lower contribution from flows of tourists while local demandfollowed different trends on the various markets: there was growth in Japan and theAmericas and decreases in Europe, Italy and Asia Pacific. Nonetheless, Prada Grouphas continued to invest resources in pursuit of its medium/long-term objectives: it has
confirmed the opening of new stores on markets not considered sufficiently covered
although some have been postponed until 2015; it has also launched a number ofcommunications initiatives in order to strengthen brand image and reinforce the link
between customers and the Prada universe. At the same time, in order to safeguard
industrial margins and further increase production know-how, there has been a major
overhaul of certain internal production processes, the effects of which will be visible
from next year. However, as the general situation during the year gradually became
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more complicated than could have been expected, management concluded that itwas essential to implement a series of measures aimed at containing costs at various
income statement levels.
The following tables show some of the key performance indicators for the last two
years.
January 31
2015%

January 31
2014%

Net revenues

2,027,507

100.0%

2,004,115

100.0%

Cost of goods sold(941,628)-46.4%(898,150)-44.8%

Gross margin

1,085,879

53.6%

1,105,965

55.2%

Operating expenses(amounts in thousands of Euro)(572,899)-28.3%(541,635)-27.0%

Interest and other financial income (expenses), net

34,582

1.7%

27,605

1.4%

Income before tax

547,56227.0%

591,935

29.5%

Income tax(162,133)-8.0%(196,361)-9.8%

Net income for the year

385,42919.0%

395,574

19.7%

ROE

25,01%

28,39%

ROI

28,60%

33,84%

ROS

25,30%

28,16%

Depreciation, amortization and impairment

32,444

1.6%

25,911

1.3%

EBIT

512,98025.3%

564,330

28.2%

EBITDA

545,42426.9%

590,241

29.5%

Net revenues for the twelve months ended January 31, 2015 amounted to Euro
2,027.5 million, a 1.2% increase compared to the Euro 2,004.1 million reported forprior year. The increase is thanks to royalties income of Euro 36.8 million, recognizedin the Company’s favor by Fragrance&Skincare SL and Luxottica Group on sales ofcosmetics and eyewear, respectively.
The increase in operating expenses is detailed in the Notes to the Financial Statements,
under Note 24.
EBITDA for the year amounted to Euro 545.4 million, 7.59% down on 2013. The fall in
EBITDA was driven by a decrease in Gross margin and by higher operating expenses.
Net financial income totaled Euro 34.5 million and mainly comprised the following
income and expenses:––

dividend income of Euro 93 million;––

net exchange losses of Euro 29.6 million;––

net interest income of Euro 5.1 million;––

impairment adjustments to investments in subsidiaries for Euro 32 million;––

other financial expenses of Euro 2 million;

The tax charge for the year, represented as a percentage of income before taxation,
was 32% against 33.2% last year. It should be recalled that the 2013 tax rate was
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affected by an extraordinary tax charge of around Euro 22 million and relating to theyears 2012, while extraordinary tax charges of around Euro 3 million relating to the year
2013 were accounted for in 2014.
During the year, the Company did not carry out any unusual operation.
Analysis of the statement of financial position
The following table contains the statement of financial position, as reclassified in orderto provide a better picture of the composition of net invested capital.
January 31
2015

January 31
2014

Non-current assets excluding financial items

1,600,689

1,382,385

Current assets excluding financial assets

1,175,217

886,771

Current liabilities excluding financial liabilities

863,256

542,031

Net working capital

311,961

344,740

Long-term liabilities, including deferred taxation

40,71926,898

Employee benefits

55,87840,112

Provisions for risks

22,85523,266

Net invested capital

1,793,199

1,636,846

Shareholders’ equity

1,607,323

1,541,141

Long-term financial payables(133,200)

117,433

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

319,076(21,728)(amounts in thousands of Euro)Net financial indebtedness

185,876

95,705

1,793,199

1,636,846

Net financial indebtedness/Shareholders’ equity

0.12

0.06

Current assets/Current liabilities

1.36

1.64

Shareholders' equity and net financial indebtedness
Ratios

Net invested capital increased by Euro 156 million (9.6%) because of a Euro 219
million increase in non-current assets as partially countered by the contrasting effects
of a Euro 33 million decrease in net working capital and a Euro 14 million increase inlong-term liabilities. A breakdown of non-current assets, excluding financial items isprovided below:(amounts in thousands of Euro)

January 31
2015

January 31
2014

Property, plant and equipment462,270

317,996

Intangible assets

119,103

114,188

Investments in subsidiaries and associated undertakings

931,599

908,286

Deferred tax assets

50,14533,009Other non-current assets

11,3405,988

Derivative financial instruments, non-current

9,544

1,430

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

16,688

1,488

Total non-current assets, excluding financial items

1,600,689

1,382,385

Percentage of tangible assets already depreciated

0.66

0.59

Property, plant and equipment and Intangible assets show a net increase of around
Euro 149 million. Details of capital expenditure for the period are provided in Notes 7
and 8.
Investments in subsidiaries and associated undertakings show a net increase of Euro 23
million, mainly because of capital injections and acquisitions, as highlighted in Note 9.

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The following table contains a breakdown of Net working capital.
January 31
2015

January 31
2014

Trade receivables

741,907621,096

Inventories

312,797

187,067

Trade payables(640,984)(436,357)

Net operating working capital

413,720

371,806

Derivative financial instruments(amounts in thousands of Euro)(46,229)

8,793

Other receivables from parent, subsidiary, associated companies and related parties

6,357

5,609

Other current assets

35,982

28,380Current tax receivables (payables)

62,642

12,427

Other liabilities to parent, subsidiary, associated companies and related parties(3,768)(7,067)

Other current liabilities(156,743)(75,208)

Other current assets (liabilities), net(101,758)(27,066)

Net working capital

311,961

344,740

The overall decrease in net working capital of Euro 32.8 million is due to a Euro 41.9
million increase in net operating working capital, offset by a Euro 74.7 million increasein other current liabilities, net. In more detail, the fair value of derivative instruments
has passed from a positive figure of Euro 8.8 million to a negative amount of Euro 46.2
million while other current liabilities have increased by Euro 81.5 million. The increasein other current liabilities is due to the increase in payables for investments/capex.
The increase in net operating working capital is due to increases in trade receivables(+Euro 120.8 million) and inventories (+Euro 125.7 million), partially offset by a Euro
204.6 million increase in trade payables.
Net financial position
January 31
2015

January 31
2014

Long term financial payables

129,209134,799

Net financial receivables from parent companies, subsidiaries, associates and relatedparties(262,409)(17,366)

Long term financial payables /(receivables)(133,200)

117,433(amounts in thousands of Euro)Bank overdraft and short term loans

157,972

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

335,283

342,031

Financial receivables from parent company, subsidiaries, associates and relatedparties(46,391)(252,616)

Obligations under finance leases-

498

Cash and cash equivalents(127,788)(126,124)

Short-term financial (receivables) debt

319,076(21,728)

Net financial debt

185,876

95,705

Net financial position, net of payables to parent company and other Group companies

159,393

23,656As at January 31, 2015, the net financial position shows net debt of Euro 185.9 million,
an increase of Euro 90.2 million compared to the previous year.

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Net financial receivables long-term from Group companies have increased by Euro
245 million. The increase is due to new intercompany loans and the renegotiation ofexisting ones which saw some short-term loans transformed into long-term, resulting
in reclassification of the balances in question.
Net short-term third party debt has increased due to utilization of Euro 150 million of a
new revolving line of credit arranged with a syndicate of banks on 1 December 2014.
See Note 11 “Bank overdrafts and short-term loans” for further information about theoperation.
At the reporting date, the Company had additional available lines of credit totaling Euro
397 million (Euro 387 million at January 31 2014).
As shown in the Statement of cash flows, cash flows from operating activities
amounted to Euro 272 million and wholly funded all investing activities for the period(Euro 69 million) as well as contributing towards payment of dividends to shareholders(Euro 281.5 million).
Policy on hedging of financial risks
The Company’s financial risk hedging policies and the effects of the strategies adopted
are described in the Notes to the financial statements.
Research and development
The Company sees the creative process as the first step towards quality.
This unique approach enables the Company to anticipate and set trends, experimenting
with shapes and fabrics, leathers and production techniques.
Research and development activities are aimed at the creation of innovative products
through the search for new or improved materials, the research and definition of designconcepts, the development and production of prototypes.
Relationships and transactions with related parties
Information on relationships and transactions with related parties is provided in Note
27.
Treasury stock
As at January 31, 2015, the Company did not hold any treasury stock.
Significant events during the reporting period
For a review of the most significant events during the reporting period, see the“Corporate information” and “Significant acquisitions and disinvestments” sectionsof the Notes to the financial statements.
Significant events after the reporting period
There are no significant events to report.

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Outlook for 2015
In the first few months of 2015, the financial markets have reacted positively tomonetary policy stimulus, hardening expectations of growth for the real economy.
However, there is still uncertainty on the international luxury goods market because of
local issues on certain markets and the new conditions dictated by the weakening of
the Euro. In this context, the Company is working to contain costs in the short-termand on broader measures that will increase the overall efficiency of the business interms of both the supply chain and productivity.
Proposed allocation of net income for the year
The Board of Directors proposes that the net income for the period of Euro 385,429,083
be allocated as follows:− Euro 281,470,640 to the shareholders as dividends;− Euro 103,958,443 to Retained earnings.

Chief Executive Officer
Patrizio Bertelli

Milan, March 27, 2015

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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 Rules Governing the Listing of
Securities on The Stock Exchange of Hong Kong Limited (the “Listing Rules”).
Compliance with the Code
The Board has reviewed the Company’s corporate governance practices and is satisfied
that such practices have complied with the code provisions set out in the Code for theentire year ended January 31, 2015 (the “Reviewed Period”).
Directors’ securities transactions
The Company has adopted written procedures governing Directors’ securities
transactions on terms no less exacting than the required standard set out in the Model
Code. Specific written acknowledgments have been obtained from each Director toconfirm his/her compliance with the required standard set out in the Model Code andthe Company’s relevant procedures regarding directors’ securities transactions for theduration of the Reviewed Period. There were no incidents of non-compliance during
the Reviewed Period.
The Company has also adopted written procedures governing securities transactions
carried out by the relevant employees who are likely to possess inside information in
relation to the Company and its securities. The terms of these procedures are no lessexacting than the standard set out in the Model Code.
Board of Directors
a. Board Composition
The Board is currently composed of nine Directors, of which five are Executive Directors,
one is a Non-Executive Director and three are Independent Non-Executive Directors.
All Directors have distinguished themselves in their field of expertise and have advised
the Board in the area of their respective specialty, where this is relevant to the businessactivities and strategic development of the Company and the Group. The Company
has maintained both on its own website and on the website of The Stock Exchange
of Hong Kong Limited (the “HKSE”) an updated list of its Directors, identifying theirrespective roles and functions and also specifying if they are an Independent NonExecutive 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 based on
meritocracy and candidates are proposed and selected based on an objective criteria,with due regard for the benefits of diversity within the Board. Diversity in this sense
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.

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The Nomination Committee will discuss any revisions that may be required to ensure
the effectiveness 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
on a regular basis to assess its optimal structure.
b. Board Meetings
During the Reviewed Period, the board held six meetings to discuss the Group’s
overall corporate strategic direction and objectives, assess its operational and financial
performance (including the annual budget, as well as the annual, interim and quarterly
results), and to approve connected transactions and the Group’s main investments andcorporate reorganization plans. The average attendance rate of the Directors for thesesix meetings either in person or through electronic means was 83.3%.
Minutes of the Board meetings are kept by the Group’s Corporate Affairs Director andJoint Company Secretary, Ms. Patrizia Albano. Minutes of the Board meetings and all
the Board Committees meetings are available for inspection by any Director by giving
reasonable notice.

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

Board

Audit
Committee

Remuneration
Committee

Nomination Shareholder’sCommittee
Meeting

Executive Directors
Mr. Carlo MAZZI (Chairman)

6/6

Ms. Miuccia PRADA BIANCHI(Chief Executive Officer)

2/2

2/2

1/1

2/6

0/1

Mr. Patrizio BERTELLI (Chief Executive Officer)

5/6

0/1

Mr. Donatello GALLI (Chief Financial Officer)

6/6

1/1

Ms. Alessandra COZZANI

6/6

1/1

2/6

0/1

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

6/6

6/6

2/2

Mr. Giancarlo FORESTIERI 2

6/6

6/6

2/2

2/2

1/1

Mr. Sing Cheong LIU 3

6/6

6/6

Mr. Antonino PARISI (Chairman)

6/6

6/6

1/1

Mr. Roberto SPADA

4/6

1/6

1/1

Mr. David TERRACINA

5/6

5/6

1/1

Feb 14, 2014

Feb 14, 2014

Apr 1, 2014

Feb 14, 2014

Apr 2, 2014

Apr 1, 2014

Jun 5, 2014

Apr 1, 2014

Jun 5, 2014

Jun 5, 2014

100%

100%

1/1
2/2

1/1

Statutory Auditors

Date(s) of Meeting

May 22, 2014

Sept 19, 2014 Sept 19, 2014

Average Attendance Rate of Directors

Nov 6, 2014

Nov 12, 2014

Dec 5, 2014

Dec 5, 2014

83.3%

100%

66.7%

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

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

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

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

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

monitoring of operating budgets adopted by the Board;•

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

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

to develop and review the Company’s policies and practices on corporate
governance;(ii) to review and monitor the training and continuous professional development of
directors and senior management;(iii) to review and monitor the Company’s policies and practices regarding compliancewith legal and regulatory requirements;(iv) to develop, review and monitor the Code of Conduct, the Organization,
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.

20

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

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

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Auditor’s compensation
The total fees and expenses accrued to Deloitte & Touche S.p.A. and its network for theaudit of the Consolidated financial statements and the Separate financial statements
for the year ended January 31, 2015, together with non-audit services, are illustrated
below:
Fees in thousandsof EuroType of service

Audit Firm

Audit services

Deloitte & Touche spa

480

Other services

Deloitte Network

54

Out of pocket expenses

3

Total fees of audit firm for period ended January 31, 2015

537

b. Remuneration Committee
The Company has established a Remuneration Committee in compliance with the Code.
The primary duties of the Remuneration Committee are to make recommendations to
the Board on the Company’s policy and structure for the remuneration package of
Directors and senior management and the establishment of a formal and transparent
procedure for developing policies on such remuneration. The recommendations of
the Remuneration Committee are then put forward to the Board for consideration
and adoption, where appropriate. The Remuneration Committee consists of two
Independent Non-Executive Directors, Mr. Gian Franco Oliviero Mattei (Chairman) and
Mr. Giancarlo Forestieri and one Executive Director, Mr. Carlo Mazzi.
During the Reviewed Period, the Remuneration Committee held two meetings (withan attendance rate of 100%) mainly to recommend certain updates to the long-term
incentive plan connected to the Group’s results and an increase of the overall amountof the Board’s remuneration. On March 17, 2015, the Remuneration Committee held
one meeting to recommend the Directors’ fee and the Statutory Auditors’ fee to beapproved at the forthcoming shareholders’ general meeting.
Remuneration Policy
The Company compensation policy is aimed at attracting, rewarding and protecting
personnel, who are considered to be key to the success of the Company business.
The Company has an incentive system that links compensation with the annual
performance of the Group, taking into account the Group’s objectives in net sales, aswell as the objectives of each department.
The Company has adopted long term cash incentive plans for senior managers and key
managers for retention purposes, under which the benefit to 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. In addition, technicians of the Company may receive a collection
bonus that is provided to them after the development of a seasonal collection.
The aggregate basic remuneration of the Board is approved by the shareholders
in a general meeting. The additional remuneration of each Director vested withspecial authorities (that is to the Executive Directors and members of the Board’s
Committees) is determined by the Board - having considered the recommendationof the Remuneration Committee and the opinion of the Board of Statutory Auditors.
As an alternative, the shareholders in a general meeting can determine the aggregate
additional remuneration of Directors vested with special authorities and the individual
allocation to each Director will then be decided by the Board.

22

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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, the selection of new Directors andon the succession plans for Directors. The Nomination Committee also assesses theindependence of Independent Non-Executive Directors. The recommendations of theNomination Committee are then put forward to the Board for consideration and, whereappropriate, adoption. The Nomination Committee consists of two Independent NonExecutive Directors, Mr. Gian Franco Oliviero Mattei (Chairman) and Mr. Sing Cheong
Liu and one Executive Director, Mr. Carlo Mazzi.
During the Reviewed Period, the Nomination Committee held two meetings on
February 14, 2014 and April 1, 2014 (with all members attending) to review theadequacy of the structure and composition of the Board, to perform the annual reviewof the independence of the Independent Non-Executive Directors, to propose to theBoard the appointment of Mr. Carlo Mazzi as Chairman in replacement of Ms. Miuccia
Prada Bianchi and the re-election of Ms. Alessandra Cozzani as Director. In addition, theNomination Committee held one meeting on March 26, 2015 to assess and confirm
the independence of the Independent Non-Executive Directors of the Company during
the Reviewed Period and to recommend to the shareholders the current structure of
the Board and the election of nine directors at the forthcoming shareholders’ general
meeting.
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.
Franco Bertoli and Mr. Gian Franco Oliviero Mattei.

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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 on compliance with the principles of proper management
and, in particular, on the adequacy of the organizational, administrative and accounting
structure adopted by the Company and its functioning.
At the shareholders’ general meeting of the Company held on May 22, 2012, theboard of statutory auditors (including the alternate statutory auditors) was appointed
for a term of three financial years. The mandate of the board of statutory auditors will
expire at the forthcoming shareholders’ general meeting called to approve the financial
statements of the Company for the year ended January 31, 2015.
The board of statutory auditors of the Company consists of Mr. Antonino Parisi(Chairman), Mr. Roberto Spada and Mr. David Terracina. The alternate statutory auditors
are Mr. Marco Serra and Mr. Cristiano Proserpio.
Directors’ responsibility and auditors’ responsibility for Separate financial
statements
The Directors are responsible for preparing the Separate financial statements of theCompany for the year ended January 31, 2015 with a view to ensuring such financial
statements give a true and fair view of the state of affairs of the Company itself. In
preparing these Separate financial statements, the Directors have selected suitableaccounting policies and made judgments and estimates that are prudent and reasonable.
The Separate financial statements have been prepared on a going concern basis and inaccordance with International Financial Reporting Standards issued by the International
Accounting Standards Board as adopted by the European Union.
As regards the auditor of the Company, its responsibilities are stated in the auditor’sreport on the Separate financial statements.
Internal control
The Board places great importance on maintaining a sound and effective system ofinternal control to safeguard the shareholders’ investment and the Company’s assets.
The Board is also responsible for assessing the overall effectiveness of the internal
control system including financial, operational and compliance controls and risk
management functions.
The Internal Audit Department provides an independent review of the adequacy andeffectiveness of the internal control system. The audit plan is discussed and agreed
every year with the Audit Committee and then submitted to the Board for approval. In
addition to its agreed annual schedule of work, the Internal Audit Department conducts
other special reviews as required.
The Company’s internal control system has mainly been designed to safeguard theassets of the Company itself, to maintain proper accounting standards, to ensure thatappropriate authority has been given for the performance of acts by the Company,
and to comply with relevant laws and regulations. During the Reviewed Period, no
significant control failings or weaknesses was identified. The Board, through the
Audit Committee, reviewed and is generally satisfied that the internal control system
has functioned effectively throughout the Reviewed Period and is adequate for theCompany and the Group as a whole.

24

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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 theCompany is incorporated in Italy, the Company is of the view that it is in the bestinterests of the Company and is of good corporate governance to maintain Ms. Patrizia
Albano and Ms. Yuen Ying Kwai as the joint company secretaries.
During the Reviewed Period each of Ms. Patrizia Albano and Ms. Yuen Ying Kwai,
respectively, undertook over 15 hours of relevant professional training to update theirskills and knowledge. In addition, both Ms. Albano and Ms. Yuen have attended a
training session held by the Company’s legal advisor (Slaughter and May) relating to
the Listing Rules which lasted for two hours.
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.
c. Making an enquiry to the Board
Enquiries about matters to be put forward to the Board should be directed to the Group
Corporate Affairs Director and Joint Company Secretary by email at corporateaffairs@
pradagroup.com or at the Company’s address: Via A. Fogazzaro n. 28, Milan 20135,
Italy. The Company will not normally deal with verbal or anonymous enquiries.
d. Procedures for a shareholders’ to propose a person for election as Director
The procedures for a shareholder to nominate a person for election as a Director of theCompany are set out in Articles 19.3 and 19.4 of the Company’s By-laws, details of
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.

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Communication with Shareholdersa. Investor relations and communications
The Company endeavors to maintain a high level of transparency when communicatingwith the shareholders and the financial community in general. The Company has
maintained regular dialogue and fair disclosure with institutional shareholders, fundmanagers, research analysts and the finance media. Investor/analysts briefings and oneon-one meetings, roadshows (both domestic and international), investor conferences,site visits and results briefings are conducted on a regular basis in order to facilitatecommunication between the Company, shareholders and the investment community.
The Company strives to ensure effective and timely dissemination of information toshareholders and the investment community at all times and will regularly review thearrangements to ensure its effectiveness.
The Company’s corporate website (www.pradagroup.com) facilitates effective
communications with shareholders, investors and other stakeholders, making
corporate information and other relevant financial and non-financial information
available electronically and on a timely basis. This includes extensive information
about the Group’s performance and activities via the annual report, interim report,press releases, presentations, announcements, circulars to shareholders and noticesof general meetings, etc.
b. Shareholders’ Meetings
The Company strives to maintain an on-going dialogue with its shareholders.
Shareholders are encouraged to participate in general meetings or to appoint proxies
to attend and vote at meetings for and on their behalf if they are unable to attend suchmeetings. The process of the Company’s general meeting is monitored and reviewed
on a regular basis.
The Company uses the shareholders’ general meeting as one of the principal channels
for communicating with the shareholders and to ensure that shareholders’ views arecommunicated to the Board. At the shareholders’ general meeting, each substantiallyseparate issue is proposed and considered by a separate resolution (including theelection of individual directors).
The last shareholders’ general meeting of the Company was held on May 22, 2014 at
the Company’s registered office at Via A. Fogazzaro n. 28, Milan, Italy with a videoconference system located at the registered office of Prada Asia Pacific Limited at 36/F,
Gloucester Tower, The Landmark, 11 Pedder Street, Central, Hong Kong (the “2014
Shareholders’ General Meeting”). The Directors, including the Chairman of the Board,
the Chairman of the Board Committees and the auditor of the Company, Deloitte &Touche S.p.A., attended the 2014 Shareholders’ General Meeting.

26

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

Number of Votes
cast in favour (%)

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

2,380,461,306(100%)

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

2,380,367,806(100%)

3.

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

2,374,261,773(99.74%)

4.

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

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

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

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28

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Financial Statements

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Statement of financial position(amounts in Euro)

Note

January 31
2015

January 31
2014

AssetsCurrent assets
Cash and cash equivalents

1

127,787,969

126,123,838

Trade receivables, net

2741,906,807

621,096,222
187,066,861

Inventories

3

312,796,775

Derivative financial instruments

46,478,732

12,105,390

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

5

52,747,407

258,225,715

Other current assets

6

107,677,969

60,893,239

1,349,395,659

1,265,511,265

Total current assets
Non-current assets
Property, plant and equipment

7462,269,754

317,995,502

Intangible assets

8

119,103,441

114,188,467

Investments in subsidiaries and associated undertakings

9931,598,587

908,286,484

Deferred tax assets

26

50,145,019

33,008,969

Other non-current assets

10

11,340,219

5,987,930

Derivative financial instruments - non current

49,544,294

1,429,929

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

5309,564,076

18,853,083

Total non-current assets

1,893,565,389

1,399,750,364

Total assets

3,242,961,048

2,665,261,630

Liabilities and Shareholders' equity
Current liabilities
Bank overdrafts and short-term loans

11

157,971,753

14,483,151

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

12339,050,737

349,099,419

Trade payables

13

640,984,035

436,357,053

Current tax liabilities

14

9,053,188

20,086,273

Derivative financial instruments

4

52,707,897

3,312,049

Obligations under finance leases

15-

497,996

Other current liabilities

16

156,742,674

75,207,611

1,356,510,283

899,043,552
134,798,714

Total current liabilities
Non-current liabilities
Long-term financial payables

17

129,209,196

Employee benefits

18

55,877,874

40,113,358

Provisions

19

22,854,586

23,266,336

Deferred tax liabilities

26

7,612,430

8,026,936

Other non-current liabilities

20

5,844,170

3,134,227

Derivative financial instruments - non current

4

13,878,544

2,490,485

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

12

Total non-current liabilities
Total liabilities

13,246,795
225,076,851

1,635,638,021

1,124,120,403

Share capital

255,882,400

255,882,400

Other reserves

966,011,544

889,684,522

Net income/(loss) of the year
Shareholders' equity

21

Total liabilities and shareholders’ equity

30

43,850,938
279,127,738

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385,429,083

395,574,305

1,607,323,027

1,541,141,227

3,242,961,048

2,665,261,630

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Income statement
Note

January 31
2015

January 31
2014

Net revenues

22

2,027,507,034

2,004,114,705

Cost of goods sold

23

(941,628,037)(898,149,896)

1,085,878,997

1,105,964,809(amounts in Euro)

Gross Margin
Operating expenses

24(572,898,684)(541,635,323)

Interest and other financial income (expenses), net

2534,582,059

27,605,240

547,562,372

591,934,726(162,133,289)(196,360,421)

385,429,083

395,574,305

January 31
2015

January 31
2014

385,429395,574

Fair value movements recognized in cash flow hedge reserve(43,658)(22,930)

Tax impact of above item

12,006

6,306

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

Income before taxation
Income taxes

26

Net income for the year

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

Items not recycled to P&L:
Gains/ (losses) recognized in actuarial gains/(losses) reserve
Tax impact of above item

340

146

Change in Actuarial reserve less tax impact(2,610)(748)

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

Total comprehensive income for the year

351,167

378,201

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Statement of cash flows(amounts in thousands of Euro)

January 31
2015

January 31
2014

547,562

591,935

32,31725,911

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

127

-

2,140

(69)

Impairment of investments

32,417-

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

Provisions and other non-monetary charges

40,053

21,321

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

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

Trade payables

202,594

42,817

Other current assets and liabilities(15,803)

3,097

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

Cash flows generated from operations

483,939445,917

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

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

Net cash flows generated from operations

272,206

251,526

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

Disposal of property, plant and equipment

3,355

142

(11,588)(11,757)

Changes in statement of financial position:

Cash flow generated (used) from investing activities:

Purchase of intangible assets
Disposal of intangible assets

1,318

-

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

Dividends received

92,982

46,515

Cash flows generated (used) by investing activities(69,125)(45,811)

Dividends paid

(281,470)(230,294)

Change in short-term bank loans

161,476-

3,212

31,557

Cash flows generated (used) by financing activities

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

89,981

28,265

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

New long-term loans to related parties
Repayment of short-term portion of long-term borrowings
New long term borrowings arranged
Cash flow generated (used) by financing activities
Change in cash and cash equivalents net of bank overdraft
Exchange differences(119,136)-

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

1,582(14,293)2(2)

Opening cash and cash equivalents, net of bank overdraft

126,115

140,411

Closing cash and cash equivalents, net of bank overdraft

127,699

126,115

Cash and bank balances

127,788

126,123

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

32

(741)
(12,984)

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(89)

(8)

127,699

126,115

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

Legal
reserve

Other Retained
reserves earnings

Cash
Net
flow income
hedge (loss) for
reserve the year

Balance at January 31
2013

2,558,824,000

255,882

410,047

46,390182,899

189,416

20,304

Allocation of 2012 net
income

-

-

-

4,787

-

283,510

Dividends paid

-

-

-

-

- (230,294)

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

-

-

-

-

-

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

-

-

-

-

-

(749)

-

Balance at January 31
2014

2,558,824,000

255,882

410,047

51,177

182,899

241,883

3,679

Allocation of 2013 net
income

-

-

-

-

-

395,574- (395,574)(3,514)--(3,514)--(281,471)- (31,652)

385,429353,777-(2,610)

Other movements

288,297 1,393,235- (288,297)

-

-

-

(230,294)- (16,625)

395,574

378,949-(749)

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
2015

2,558,824,000

255,882

410,047

51,177

182,899

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Shareholders’equity(2,610)-349,862 (27,973)

395,574 1,541,141-

385,429 1,607,323

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34

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Notes to the Financial Statements

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Corporate information
PRADA spa is a joint-stock company, registered and domiciled in Italy. Its registeredoffice is in via Fogazzaro 28, Milan, Italy. At January 31, 2015, 79.98% of the sharecapital was owned by PRADA Holding spa, an Italian company, while the remaining
shares were floating on the Main Board of the Hong Kong Stock Exchange.
The ultimate indirect shareholders of PRADA Holding spa are Patrizio Bertelli and thePrada family.
In terms of Art. 2497 et seq of the Italian Civil Code, the Company is not subject to the
management and control of any company or entity.
These Financial Statements were approved by the Board of Directors on March 27,
2015.
Basis of preparation
The Financial Statements, comprising the Statement of financial position, Income
statement, Statement of comprehensive income, Statement of cash flows, Statementof changes in shareholders’ equity and Notes to the financial statements, are preparedin compliance with International Financial Reporting Standards (IAS/IFRS) and related
interpretations (SIC/IFRIC) as approved by the European Commission and in force at
the reporting date.
The Financial Statements have been prepared on a going concern basis.
Amendments to IFRS
New standards and amendments issued by the IASB, endorsed by the European
Union and applicable to PRADA spa from February 1, 2014
The following new IFRS and amendments to existing IFRS have been endorsed by
the European Union and are applicable to PRADA spa effective from February 1, 2014.
These changes do not have any significant impact to the Company as of the date ofthese separate financial statements:

36––“IFRIC Interpretation 21 Levies”. This interpretation, effective from annual periods
beginning on or after January 1, 2014, provides guidance on when to recognize
a liability for a levy imposed by a government, both for levies that are accounted
for in accordance with “IAS 37 Provisions, Contingent Liabilities and Contingent
Assets” and those where the timing and amount of the levy is certain.

––

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

––

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

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

––

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

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

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

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

––

Amendments to “IAS 28 Investment in Associates and Joint Ventures”. The
amendments to this Standard, effective at the latest as from the commencement
date of a financial year starting on January 1, 2014, have to be read together with“IFRS 11 Joint Arrangements” and “IAS 27 Separate Financial Statements”. The
standard (as amended in 2011) is to be applied by all entities that are investors withjoint control of, or significant influence over, an investee and defines the equity

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method as a method of accounting whereby the investment is initially recognizedat cost and adjusted thereafter for the post-acquisition change in the investor’sshare of net assets of the investee.
––

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

––

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

New standards and amendments issued by the IASB, endorsed by the European
Union, but not yet applicable to PRADA spa as effective from annual periods
beginning on or after January 1, 201538––

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

––

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

––

Annual improvements to IFRS (2010–2012 Cycle). Such improvements, effective
for annual periods beginning on or after July 1, 2014, impacted:–– “IFRS 2 Share-based Payment”, amending the definition of vesting condition;–– “IFRS 3 Business Combinations”, amending the accounting for contingent
consideration in a business combination;–– “IFRS 8 Operating Segments”, requesting more disclosure when aggregating
operating segments and requiring the reconciliation of the total of thereportable segments’ assets to the entity’s assets;

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––
––
––
––

“IFRS 13 Fair Value Measurement”, clarifying the impact of the standard on
the measurement of short-term receivables and payables;“IAS 16 Property, Plant and Equipment”, amending the revaluation method;“IAS 24 Related Party Disclosure”, amending the definition of key
management personnel;“IAS 38 Intangible Assets”, amending the revaluation method.

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

––“IFRS 14 Regulatory Deferral Accounts”. This Standard, effective for annual
periods beginning on or after January 1, 2016, permits an entity that adopts
IFRS to continue to use, in its first and subsequent IFRS financial statements, its
previous GAAP accounting policies for the recognition, measurement, impairment
and de-recognition of regulatory deferral account balances without specificallyconsidering the requirements of paragraph 11 of IAS 8. This new IFRS describes
regulatory deferral account balances as amounts of expense or income that would
not be recognized as assets or liabilities in accordance with other Standards, butthat qualify to be deferred in accordance with this Standard because the amountis included, or is expected to be included, by the rate regulator in establishing theprice that an entity can charge to customers for rate-regulated goods or services.

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

––

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

––

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

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40

––

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

––

Disclosure Initiative: Amendments to “IAS 1 Presentation of Financial Statements”.
This project is part of the IASB's overall disclosure initiative and it considers
proposals such as:–– adding an explanation in IAS 1 similar to more recent standards explainingthat too much detail can obscure useful information;–– clarifying that materiality applies to the whole financial statements and that
information which is not material need not be presented in the primaryfinancial statements or disclosed in the notes;–– clarifying that some disclosures specified in standards are simply not importantenough to justify separate disclosure for a particular entity;–– making it clear that preparers should exercise professional judgment inpresenting their financial reports;–– remove the perception of a “normal order of presentation” of financial
statements, making it easier for entities to provide more contextual
information;–– reducing restrictions on how accounting policies should be presented,
allowing important accounting policies to be given greater prominence infinancial reports;–– adding additional explanations with examples of how IAS 1 requirements aredesigned to shape financial statements instead of specifying precise terms
that must be used, including whether subtotals of IFRS numbers such as
earnings before interest and tax (EBIT) and earnings before interest, tax,
depreciation and amortisation (EBITDA) should be acknowledged in IAS 1;–– adding a requirement that entities disclose and explain their net debt
reconciliation.
The amendment will be applicable for annual periods beginning on or after 1
January 2016. Earlier application is permitted.

––

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

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

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

As at the date these separate financial statements were prepared, the European Union
has not completed yet the endorsement of the new standards and amendments as
described above.
Financial statements
The Company has prepared the Statement of financial position classifying separately
current and non-current assets and liabilities. The Notes contain more detailed
information with further breakdowns of the items reported in the Statement of
Financial Position.
The Income Statement is classified by destination.
Cash flow information is reported in the Statement of cash flows which forms an
integral part of the Financial Statements.
The accounting policies and the notes are an integral part of the Financial Statements.
Every item in the Statement of financial position, Income statement, Statement ofcash flows and Statement of changes in shareholder’s equity is detailed in the Notes
to the financial statements.
Main accounting policies
Cash and cash equivalents
Cash and cash equivalents are carried in the statement of financial position at nominal
value. Cash equivalents include all highly liquid investments with an original maturity of
three months or less. For the purposes of the cash flow statement only, cash and cash
equivalents comprise cash on hand, bank accounts, deposit accounts.
In the statement of financial position, bank overdrafts and current portions of payables
to banks for medium and long-term loans are included in Bank overdrafts and shortterm loans.
Trade receivables and payables
Trade receivables are carried at nominal amount less the allowance for doubtful
accounts, estimated based on an assessment of all disputed and doubtful balances at
year-end. Bad debts are written off when identified.
Trade payables are recorded at nominal amount.
Transactions denominated in foreign currencies are recorded at the exchange rate as at
the date of the transaction. At the reporting date, transactions denominated in foreign
currencies are translated using the exchange rate as at the reporting date. Gains andlosses arising from the translation are reflected in the income statement.
The transfer of a financial asset to third parties implies its derecognition from thestatement of financial position only if all risks and rewards connected with the financial
asset are substantially transferred. Risks and rewards are considered transferred when
exposure to variability in the present value of future net cash flows associated with theasset changes significantly as a result of the transfer.

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Inventories
Raw materials, work in progress and finished products are recorded at the lowerof acquisition cost, production cost and net realizable value. Cost comprises direct
production costs and those overheads that have been incurred in bringing the inventories
to their present location and condition. Acquisition or production cost is determined ona weighted average basis. Provisions, adjusting the value of the inventory, are madefor slow moving and obsolete inventories and if estimated selling prices are lower thancost.
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 used if derivative financial instruments is 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 portionof the gain or loss on the hedging instrument is recognized in shareholders’ equity.
Accumulated gains or losses are reversed from shareholders’ equity and recordedin the income statement for the period in which the income statement effect of thehedged operation is recorded. Any gain or loss on a hedging instrument (or portion
thereof) which is no longer effective as a cash flow hedge is immediately recorded in
the income statement.
If a hedging instrument or a hedging relationship has expired but the hedged transaction
has not yet occurred, any accumulated gains or losses, recognized in shareholders’equity until then, is recorded in the income statement when the transaction takes
place. If the hedge transaction is no longer expected to take place, any related
cumulative gain or loss outstanding in equity will be recognized immediately in theincome statement.
Derivative instruments designated not to be hedges are recorded at fair value to profit
and loss.
Assets held for sale
A non-current asset is classified as held for sale if its carrying amount will be mainly
recovered through sale rather than through its continued usage.
Assets classified as held for sale are valued at the lower of net book value and fairvalue less any costs to sell.
Property, plant and equipment
Property, plant and equipment are recorded at purchase cost or production cost, including
any charges directly attributable. They are shown net of accumulated depreciation
calculated on the basis of the useful lives of the assets and any impairment losses.
Interest costs on borrowings to finance directly purchase, construction or production
are capitalized to increase the value of the asset. All other borrowing costs are charged
to the Income Statement.
Ordinary maintenance expenses are charged in full to the Income Statement in theyear they are incurred.
Extraordinary maintenance expenses are capitalized if they increase the value or usefullife of the related asset.
The costs included in Leasehold improvements relate to refurbishment work carried

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out on assets not owned by the Company. They are capitalized and amortized basedon the lease agreement, taking account of any renewals. All costs incurred during
the period between the start of refurbishment work and the opening of the store arecapitalized as Leasehold improvements, as they are deemed necessary to bring therelated assets to their working condition in accordance with company guidelines.
Depreciation methods, useful lives and net book values are reviewed annually. The
depreciation rates representing the useful lives are listed below:
Category of property, plant and equipment

Depreciation rate

Buildings

3% -10%

Production plant and equipment
Leasehold improvements

7.5% - 25%
Remaining lease term

Furniture and fittings

12%

Other equipment

15% - 33%

When assets are disposed of, their cost and accumulated depreciation are eliminatedfrom the financial statements and any gains or losses are recognized in the income
statement.
The value of land is stated separately from the value of buildings. Depreciation is only
charged on the value of buildings.
Every year, a test is performed for indications that the value of property, plant andequipment might be impaired. If any such indications are found, an impairment test
is used to estimate the recoverable amount of the asset. The Impairment of assets
paragraph describes the method used to perform the impairment test.
Impairment losses are recorded immediately in the Income Statement.
At every reporting date, the Company will assess whether there is any indication thatan impairment loss recognized in prior periods may no longer apply and should bedecreased. If any such indication exists, the Company will estimate the recoverable
amount of that asset. The recoverable value of the asset shall not exceed the carrying
amount that would have been determined had no impairment loss been recognized forthe asset in prior years.
Reversal of an impairment loss for an asset will be recorded in the Income Statement.
Intangible assets
Only identifiable assets, controlled by the company and capable of producing future
economic benefits are included in intangible assets.
Intangible assets include goodwill, development costs, store lease acquisition costs
and software.
Development costs include expenses incurred to strengthen the brand image throughprojects aimed at developing the store “concept”. The relevant useful life is estimatedbased on the Directors’ understanding and amounts to between three and five years.
Software refers to Information Technology development projects and includes all
internal and external costs incurred to bring the asset into use. IT projects include
costs incurred to acquire licenses as well as the cost of development and installation.
Software is capitalized on condition that it is identifiable, reliably measurable and if it isprobable that the asset will generate future economic benefits.
Store lease acquisition costs represent expenditures incurred to enter into or take overretail store lease agreements. These costs are capitalized and amortized over the lease
term.

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Intangible assets with a determinate useful life are amortized on a straight-line basis
at the following rates:
Category of intangible assets

Amortization rate

Software

10% - 33%

Store lease acquisition costs
Right of usufruct

Shorter of lease term and 10 years
Duration of real right (10 years)

Other intangible assets

20% - 33%

All business combinations included within the scope of IFRS 3 are recorded using
the acquisition method whereby identifiable assets, liabilities and potential liabilities of
the acquired business, which satisfy recognition requirements, are measured at theiracquisition-date fair value.
The difference between the cost of the business combination and the interest acquiredin the net fair value of identifiable assets, liabilities and potential liabilities is recorded
as goodwill. If additional interests in subsidiaries already controlled are acquired, thepositive difference between the acquisition cost and the value of the interest acquired
is recognized in equity.
Goodwill, as an asset that produces future economic benefits but which is notindividually identified and separately measured, is initially recognized at cost.
Goodwill is not amortized but tested for impairment every year to check if its value
has been impaired. If specific events or altered circumstances indicate the possibility
that goodwill has been impaired, the impairment test is performed more frequently. If
goodwill is initially recorded during the current year, the impairment test is performed
before the end of the year.
An impairment loss recorded for goodwill is never reversed in subsequent years.
Impairment of assets
IAS 36 requires an impairment test to be performed on property, plant and equipment,
intangible assets and investments whenever there is an indication of impairment.
Goodwill, investments and other intangible assets with an indefinite useful life andassets not yet available for use are tested for impairment at least once a year.
When the carrying amount of these assets exceeds their value in use or their fair value,
it is reduced accordingly and the impairment is recognized in the Income Statement.
The recoverable amount of the asset is calculated comparing its carrying amount withthe higher of its net selling price (where there is an active market) and its value in use.
Value in use is determined by discounting cash flows expected to arise from the useof the asset or Cash Generating Unit, as well as from the cash flow expected to arise
from its disposal at the end of its useful life.
Cash flow projections are based on budgets and forecasts and on long-term plans(generally 5 years) approved by the management and by the relevant business units.
Cash Generating Units are determined based on the organizational structure andrepresent groups of assets that generate independent cash inflows from continuing
use of the relevant assets.
PRADA’s Cash Generating Units include brands, sales channels and geographical areas.

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Investments
Investments in subsidiaries, associated undertakings and joint ventures are accounted
for under the cost method and periodically tested for impairment. This test is performedat least once a year or whenever there is an indication of impairment.
The valuation method used is the Discounted Cash Flow model, adopting the processdescribed in the Note Impairment of assets. If an impairment loss has to be recognized,
it is charged to the Income Statement in the period in which it is identified. If the reason
for the impairment loss no longer applies, the carrying amount of the investment isrestored but not to more than its original cost. Such reversals are recorded in theincome statement.
Deferred tax assets
Deferred tax assets are amounts of income taxes recoverable in future periods inrelation to:––

deductible temporary differences;––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 timing differences, tax losses
carry-forwards and unused tax credits only to the extent that is probable that taxable
profit will be available in future years against which the deductible timing differences
can be used. Recoverability is reviewed at every year end. Deferred tax assets aremeasured at the tax rates which are expected to apply to the period when the asset isrealized based on tax rates (and tax laws) in force at the reporting date.
Deferred tax assets are not discounted.
Deferred tax assets are recognized through the income statement unless the tax
amount is generated from a transaction or an event directly recognized in equity orfrom a business combination.
Deferred tax assets relating to items credited or debited directly to shareholders’equity are also credited or debited directly to shareholders’ equity.
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 under Obligations under finance leases, current,
while medium and long- term portions are recorded among non-current liabilities under
Obligations under finance leases, non-current.
Non-current financial liabilities
Non-current financial liabilities include payables to banks for medium and long termloans. Bank borrowing includes principal amounts, interest and additional arrangement
costs accruing and due at the balance sheet date even when they are charged at alater date.

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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 costi.e. at the initial amount less principal repayments already made plus or minus theamortization (using the effective interest method) of any difference between that initialamount and the maturity amount.
The effective rate of interest is the rate used to discount payments based on thecontractual term of the loan or on a shorter period, if appropriate.
Employee benefits
Post-employment benefits mainly consist of Italian Staff Leaving Indemnities(hereinafter TFR) which are classed as defined-benefit plans.
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 Company’s obligations.
The actuarial valuation is carried out by an independent actuary using the Projected
Unit Credit Method.
This method considers each period of service provided by the employee as anadditional unit right and measures the actuarial liability on the basis of the matured
years of service only at the date of measurement. This actuarial liability is then remeasured taking into account the relationship between the service years provided by
the employee at the date of measurement and the total years of service expected at
the forecast date of settlement of the benefit. Moreover, this method takes accountof future salary increases, for whatever reason (inflation, career progression and new
employment agreements) until the estimated termination date of the employment
relationship.
Actuarial gains and losses are recognized directly in equity, net of the tax effect.
Other long-term employee benefits are recorded among non-current liabilities andtheir value corresponds to the present value of the defined benefit obligation at thereporting date, adjusted according to the period of the underlying agreement. Like
defined benefit plans, other long term benefits are also valued using the Projected Unit
Credit Method.
Provisions for risks and charges
Provisions for risks and charges cover costs of a determinate nature that were certainor probable but whose amount or due date was uncertain at year end. Provisions are
only recorded when the Company has a legal or constructive obligation as a resultof past events, it is probable that an outflow of resources will be required to settle
the obligation and a reliable estimate of the amount can be made based on available
information.
Where the Company 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

46

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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 an asset or liability in a transaction other than a businesscombination that does not affect the accounting result or the tax result at thetransaction 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 balance sheet date.
Deferred tax liabilities are not discounted.
Deferred tax liabilities are recognized in the income statement unless the tax amountis generated by a transaction or an event directly recognized in equity or by a businesscombination.
Taxation for deferred tax liabilities relating to items credited or debited directly toshareholders’ equity is also credited or debited directly to shareholders’ equity.
The deferred tax provision is only offset against deferred tax assets or when the twoitems refer to the same tax and the same period.
Revenue recognition
Revenues from the sale of goods are recognized in the income statement when:––

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

the amount of the revenues can be reliably measured;––

the Company’s effective 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 ofthe contracts. Royalties under franchise agreements are recorded based on the sales
made by the Company to the franchisees. Cash discounts are recorded as financial
expenses.
Dividends are booked in the income statement when the shareholders’ become
entitled to receive payment.
Accounting for costs
Costs are recorded on an accrual basis. In particular, a cost is immediately recognizedin the income statement when:––an expense does not generate any future economic benefit;––

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

PRADA spa

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Operating leases
Operating leases are recorded in the income statement on a straight-line basis for thewhole lease term.
When calculating the lease term, renewal periods are also considered if provided for by
the agreement and the amount due is known or can be estimated.
Financial expenses
Financial expenses include interest on bank overdrafts, on short and long term loans,financial expenses on finance leases and securitization operations, amortization of
initial costs of loan operations, changes in the fair value of derivatives – insofar as
chargeable to the income statement – and annual interest maturing on the present
value of post-employment benefits.
Income taxes
The provision for income taxes is determined based on a realistic estimate of the tax
charge of each entity included in the tax consolidation, in accordance with the tax rates
and tax laws in force or substantially approved in each country at the reporting date.
Current taxes are recorded in the income statement as an expense. This is except fortaxes deriving from transactions or events directly recognized through shareholders’equity which are directly charged to equity.
Changes of accounting policy, errors and changes in accounting estimates
The accounting policies adopted are only modified from one year to another if thechange is required by an accounting standard or if it provides more reliable and more
relevant information on the effects of operations on the Company’s Statement offinancial position, Income statement or Cash flows.
Changes of accounting policy are applied retrospectively, adjusting the opening balanceof each affected component of equity for the earliest prior period presented. Other
comparative amounts, disclosed for each prior period presented, are also adjusted as if
the new accounting policy had always been applied. A prospective approach is applied
only when it is not possible to restate the comparative information.
The adoption of a new or amended accounting standard is implemented in accordancewith the requirements of the standard itself. If the new standard does not include
specific transition provisions, the change of accounting policy is applied retrospectively
or, if this is not feasible, prospectively.
In the case of material errors, the same approach adopted for changes in accounting
standards described in the previous paragraph shall be followed. Non material errors
are recognized in the income statement in the period in which the error is identified.
The effect of changes in accounting estimates is prospectively recorded in the income
statement for the year the change takes place if it is the only year affected. It is also
reflected in later years if they too are affected by the change.
Financial risk management
The Company’s international activities expose it to a variety of financial risks including
the risk of exchange rate and interest rate fluctuation. The Company’s overall risk
management policy takes account of the volatility of financial markets and seeks tominimize uncertainty regarding cash flow and the resulting potential adverse effects
on its results.
The Company enters into hedging contracts to manage risks arising from exposure to48

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the exchange rate and interest rate risks.
Financial instruments are accounted for based on hedge accounting rules. At the
inception of the hedge contract, the Company formally documents the hedging
relationship assuming that the hedging is effective during the different accounting
periods it is designated for.
Exchange rate risk
The Company’s export sales activities expose it to an exchange rate risk due tofluctuations in the exchange rate of the Euro primarily against the US Dollar, Hong
Kong Dollar, Chinese Renminbi, Japanese Yen and, to a lesser extent, other currencies.
The Corporate Finance Department is responsible for foreign exchange risk hedging
by entering into derivative contracts (forward sale and purchase, options) with third
parties.
In accordance with IAS 39, these hedging contracts are classed as cash flow hedges.
The fair value of the hedging contracts designated as cash flow hedges is recorded
under shareholders’ equity net of the tax effect.
Interest rate risk
The debt taken on by the Company exposes it to an interest rate risk. The Corporate
Finance Department hedges this risk by arranging Interest Rate Swap and Collar
agreements.
The fair value of derivative contracts designated as cash flow hedges is recorded undershareholders’ equity net of the tax effect.
Meanwhile, for non-hedging derivatives qualified as fair value to profit and loss, fairvalue is recorded in full in the income statement.
Use of estimates
In accordance with IAS/IFRS, the preparation of these financial statements requires
the use of estimates and assumptions regarding certain types of assets, liabilities,
revenues and expenses and when valuing contingent assets and liabilities.
Such assumptions relate primarily to transactions and events not settled as of the yearend. Accordingly, upon settlement, the actual results may differ from the estimatedamounts. Estimates and assumptions are periodically reviewed and the effects of any
differences are immediately charged to the Income statement.
Estimates have been used when performing impairment tests, in determining provisions
for risks and charges, the allowance for doubtful accounts, the allowance for obsolete
and slow moving inventories, post-employment benefits, when calculating taxes andmeasuring derivative instruments and securities available for sale. The fair value ofderivatives and securities available for sale is based on market listed prices at thereporting date. The fair value of derivative instruments used to hedge the interest raterisk (IRS) and derivative instruments used to hedge the exchange rate risk (forward
contracts and options) has been determined using one of the valuation platforms inmost widespread use on the market and based on interest rate curves and spot andforward exchange rates at the reporting date.

PRADA spa

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Significant acquisitions and disinvestments
On February 27, 2014, PRM Services S. de RL de CV, a 100% owned subsidiary, wasincorporated in order to sustain commercial activities in Mexico.
On March 14, 2014, PRADA spa acquired 80% of Angelo Marchesi srl, the company
that owns an historic Milanese patisserie founded in 1824. This acquisition wasmade in order to promote and guarantee the strategic strengthening of the brand,
synonymous with quality in the Italian food segment, together with the Prada and
Miu Miu brands, leaders on the luxury goods market, as part of the Group’s global
development program.
On July 2, 2014, PRADA Saudi Arabia was incorporated in order to develop commercial
activities in that country. Prada spa owns 75% of the company.
On August 6, 2014, PRADA Retail South Africa (Pty) ltd, a 100% owned subsidiary,
was incorporated in order to develop commercial activities in that country.
On September 15, 2014, 100% control of PRADA Panama sa was acquired. The
company will operate the retail business in Panama.
On September 25, 2014, 100% control of PRADA Retail Aruba nv was acquired. The
company will operate the retail business in Aruba.
On August 19, 2014, in order to develop industrial activities in Limoges, PRADA spa
and third party Conceria Superior spa incorporated PSC sas with respective interestsof 60% and 40%. After the reporting date, PSC sas changed its name to Tannerié
Limoges sas.

50

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Statement of financial position
1.

Cash and cash equivalents
The following table details the balance at January 31, 2015 and 2014:(amounts in thousands of Euro)

Cash on hand

January 31
2015

January 31
2014

2,176

1,013

Bank deposit accounts

1

40,002

Bank current accounts

125,611

85,109Total cash and cash equivalents

127,788

126,124

See the Statement of cash flows and Financial review for details of cash flows for the
year.
2.

Trade receivables
Trade receivables may be analyzed as follows:(amounts in thousands of Euro)

January 31
2015

January 31
2014

Trade receivables - Third parties

176,102

155,550

Trade receivables - Parent company
Trade receivables - Subsidiaries and associates

140

180

529,255

433,354

Trade receivables - Companies controlled by PRADA Holding spa-

10

Trade receivables - Related companies

36,41032,002

Total trade receivables

741,907621,096

The increase in trade receivables is due to the higher level of retail and wholesale sales.
Trade receivables from related companies refer to sales of finished products to retailcompanies owned by the main shareholders of PRADA Holding spa.
A detailed breakdown of these receivables by debtor is provided in Note 27 “Transactions
with parent, subsidiary, associated and related companies”.
The allowance for doubtful debts was determined on a specific basis considering all
information available at the date the financial statements were prepared in order to bringreceivables in line with their fair value.
January 31
2015

January 31
2014

Trade receivables, gross

180,290

160,434

Allowance for bad and doubtful debts(4,188)(4,884)

Trade receivables, net

176,102

155,550(amounts in thousands of Euro)PRADA spa

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Movements on the allowance for doubtful debts during the year are detailed as follows:(amounts in thousands of Euro)

January 31
2015

January 31
2014

4,884

6,106

Opening balanceContributed upon merger

232

Increases-

600

Utilized(927)(1,822)

Closing amount

4,188

4,884

Gross trade receivables at January 31, 2015 are analyzed by maturity date as follows:3.

(amounts in thousands of Euro)

January 31
2015

Current

Overdue (in days)
1

30

31

60

61

90

91

120

> 120

Trade receivables, third parties

180,290

153,643

10,542

3,827

3,966

2,064

6,248

Trade receivables, parent,
subsidiary and related companies

565,805

372,879

30,61534,84922,344

15,47989,638

Total

746,095

526,522

41,15838,67726,30917,543

95,887(amounts in thousands of Euro)

January 31
2014

Current

1

31

91

120

> 120

Overdue (in days)
30

60

61

90

Trade receivables, third parties

160,434

131,490

8,029

7,025

5,643

2,482

5,766

Trade receivables, parent,
subsidiary and relatedcompanies

465,545

349,316

15,18028,394

17,842

9,483

45,330Total

625,979

480,806

23,20935,41923,485

11,96551,095Inventories
Inventories may be analyzed as follows:
January 31
2015

January 31
2014

Raw materials

101,425

81,177Work in progress

36,19922,831Finished products

238,690

149,683

Allowance for obsolete and slow-moving inventories(63,518)(66,624)

Inventories, net

312,797

187,067(amounts in thousands of Euro)Inventories are valued at weighted average cost.

52

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Movements on the allowance for obsolete and slow moving inventories are analyzed
as follows:(amounts in thousands of Euro)

Raw materials

Finished products

Total

Balance at January 31, 2014

29,37437,25066,624

Reversed as unnecessary(3,000)-(3,000)

-

(106)

(106)

26,374

37,14463,518

Utilized
Balance at January 31, 2015

Changes in the allowance for obsolete and slow moving inventories have beenrecorded to bring the carrying amount of certain inventory categories into line with
their estimated realizable value.
4.

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

January 31
2014

Financial assets regarding derivative instruments, current

6,479

12,105

Financial liabilities regarding derivative instruments, current(52,708)(3,312)

Net carrying amount(46,229)

8,793

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

January 31
2014

Financial assets regarding derivative instruments, non-current

9,544

1,430

Financial liabilities regarding derivative instruments, non-current(13,879)(2,490)Net carrying amount(4,334)(1,060)The difference between assets and liabilities under derivative financial instruments(current and non-current) is detailed as follows:(amounts in thousands of Euro)

Forward contracts
Options
Interest rate swap – cash flow hedge

January 31
2015

January 31
2014

IFRS7
Category

5,864

5,039

Level II

38

5,402

Level II--

Level IIInterest rate swap – fair value to profit and loss

10,121

3,094

Level II

Positive fair value

16,023

13,535

Forward contracts(19,570)(1,633)

Level II

Options(34,287)(1,364)

Level IIInterest rate swap – cash flow hedge(2,965)(55)

Level IIInterest rate swap – fair value to profit and loss

(9,764)(2,750)Level II

Negative fair value(66,586)(5,802)

Net carrying amount(50,563)

7,733

PRADA spa

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All of the derivative instruments reported in the financial statements at January 31,2015 can be classified as Level II of the fair value hierarchy proposed by IFRS 7. The
Company has not entered into any derivative contracts that may be classed as Level
I or III.
The fair values of derivatives arranged to hedge interest rate risks (IRS) and ofderivatives arranged to hedge exchange rate risks (forward contracts and options) havebeen determined utilizing one of the valuation platforms in most widespread use on
the financial market and are based on the interest rate curves and on spot and forward
exchange rates at the reporting date.
The Company entered into the financial derivative contracts in the course of its risk
management activities in order to hedge financial risks connected with exchange rateand interest rate fluctuations.
Foreign exchange rate transactions
The international nature of the Company’s activities expose its cash flows – especiallythose relating to sales - to exchange rate volatility. In order to hedge this risk, theCompany enters into options and forward sale and purchase agreements so as toguarantee the value in Euro of identified cash flows.
Expected future cash flows mainly regard the collection of trade receivables andsettlement of trade payables. The most important currencies in terms of hedged
amounts are: U.S. Dollar, Hong Kong Dollar, Japanese Yen, GB Pound, Swiss Franc,
Korean Won and Chinese Renminbi.
The notional amounts of the derivative contracts, designated as foreign exchange
risk hedges (as translated at the European Central Bank exchange rate at January 31,2015), are stated below.
Contracts in place at January 31, 2015 to hedge projected future trade cash flows:
Forwardpurchase
contracts

Options

Forward sale
contracts

Hong Kong Dollar

182,117

28,661-

210,778

US Dollar

197,258-(59,651)

137,607(Amounts in thousands of Euro)

January 31
2015

Currency

Chinese Renmimbi

99,237

33,692(24,349)

108,580

Japanese Yen

22,017

91,824(5,493)

108,348

GB Pound55,252

38,610(11,290)

82,572-

67,326-

67,326

Korean Won-

18,283(8,063)

10,220

Other

Swiss Franc

17,74967,984(24,533)

61,200

Total

573,630

346,380(133,379)

786,631

All contracts in place as at January 31, 2015 will mature by January 31, 2016.

54

PRADA spa

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Contracts in place at January 31, 2014 to hedge projected future trade cash flows:(Amounts in thousands of Euro)

Options

Forwardcontracts

January 31
2014

Currency
US Dollar

115,789

37,733

153,522

Hong Kong Dollar

59,541111,938

171,479

Japanese Yen

40,976

43,79984,775

GB Pound

58,90336,282

95,185Chinese Renminbi

39,671-

39,671-47,73847,738Others4,167

78,524

82,692

Total

319,048

356,014675,062

Korean Won

All contracts in place as at January 31, 2014 matured by January 31, 2015.
Contracts in place at January 31, 2015 and 2014 to hedge projected future financial
cash flows:
January 31
2015

January 31
2014

Brazilian Real25,138

6,716

GB Pound

21,116

6,088

Swiss Franc

5,088

-

Russian Rouble

9,384

6,283

-

1,405

60,725

20,493(amounts in thousands of Euro)
Forward Contracts
Currency

US Dollar
Total

A liquidity analysis on the maturity dates of these derivative contracts is included inthese Notes in the Information on Financial Risks section.
All contracts in place at the reporting date were entered into with leading financial
institutions and the Company does not expect any default by these institutions.
Interest rate transactions
The Company enters into Interest Rate Swaps agreements (IRS) in order to hedge therisk of interest rate fluctuations regarding several loans payable. The key features of the
IRS agreements in place as at January 31, 2015 and January 31, 2014 are summarized
as follows:
Contract

Currency

Notional
amountInterest
rate

Maturity
date

January 31
2015

IRS

Euro/000

600

2.210%

01/07/2015

(6)

IRS

Euro/000

55,0001.46%

23/05/2030

2,959

Hedged loan –lending institution

AmountExpiryMPS

600

07/2015

Intesa-Sanpaolo

55,00005/2030

Hedged loan –lending institution

AmountExpiryFair value

Total IRS – Cash flow hedge(2,953)Contract

Currency

Notional
amountInterest
rate

Maturity
date

January 31
2014

IRS

Euro/000

3,750

1.545%

02/06/2014(22)

Intesa-Sanpaolo

3,750

06/2014IRS

Euro/000

1,800

2.210%

01/07/2015

(33)

MPS

1,800

07/2015

Fair value

Total IRS – Cash flow hedge(55)

The IRS convert the variable interest rates applying to a series of loans into fixed
PRADA spa

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interest rates. These agreements have been arranged with leading financial institutions
and the Company does not expect them to default.
Under applicable regulations all of the derivatives in place at the reporting date meetthe requirements for designation as cash flow hedges.
During the previous year, the Company entered into an IRS agreement, in relation
to loans arranged by a UK subsidiary and signed an IRS agreement with the samecharacteristics with said subsidiary. These contracts have been accounted for as nonhedging instruments (fair value to profit and loss):
Contract

Currency

Notional
amountInterest
rate paid

Interest
rate
received

Maturity
date

January 31
2015

January 31
2014

Fair value
Euro/000Fair value
Euro/000Counterparty

IRS

GBP/000

60,0002.778%

Libor
GBP/365

31/01/2029(9,764)(198)

Unicredit

IRS

GBP/000

60,000Libor
GBP/365

2.83%

31/01/2029

10,121541

Kenon Ltd

357

343

Total IRS – Fair value to profit and loss

Movements on the cash flow hedge reserve included in shareholders’ equity, before
tax effects, since February 1, 2014, may be analyzed as follows:(amounts in thousands of Euro)
Closing balance at January 31 2013
Change in fair value, recognized in Equity
Change in fair value, charged to Income Statement
Closing balance at January 31 2014

28,006
8,971(31,902)
5,075

Change in fair value, recognized in Equity(67,805)

Change in fair value, charged to Income Statement

24,147

Closing balance at January 31 2015

38,583

Changes in the reserve that are charged to the Income Statement are recorded
under Interest and other financial income/(expense)”, net or as operating income andexpenses depending on the nature of the underlying transaction.
Information on financial risks
Capital Management
The Company’s capital management strategy is intended to safeguard the Group’s
ability to continue to guarantee a return to shareholders, protect the interests of otherstakeholders and respect covenants, while maintaining an adequate, balanced capital
structure.

56

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Categories of financial assets and liabilities according to IAS 39
Financial assets
Financial assets at January 31, 2015

Loans andreceivables

Derivative financial
instruments

Total

Note

Cash and cash equivalents

127,788

127,7881

Trade receivables, net

741,907741,9072

16,023

4

46,391

5

Derivative financial instruments

16,023Financial receivables from parent,
subsidiary and associated companies andrelated parties

46,391

Total

916,085

16,023932,108

Loans andreceivables

Derivative financial
instruments

Total

Financial assets at January 31, 2014

Note

Cash and cash equivalents

126,124

126,1241

Trade receivables, net

621,096

621,0962

13,535

4

252,616

5

Derivative financial instruments

13,535

Financial receivables from parent,
subsidiary and associated companies andrelated parties

252,616

Total

999,836

13,535

1,013,371

Loans andreceivables

Derivative financial
instruments

Total

Note

Financial liabilities
Financial liabilities at January 31, 2015

Financial payables - third party

287,181

287,18111, 17

Financial payables - parent, subsidiary andassociated companies and related parties

335,283

335,28312

Trade payables

640,984

640,984

13

66,586

66,586

4

1,263,447

66,5861,330,034

Loans andreceivables

Derivative financial
instruments

Total

Note

Derivative financial instruments
Total

Financial liabilities at January 31, 2014

Financial payables - third party

149,282

149,282

11, 17

Financial payables - parent, subsidiary andassociated companies and related parties

342,031

342,03112

Trade payables

436,357

Derivative financial instruments
Total

927,670

436,357

13

5,803

5,803

4

5,803

933,473

Fair Value
The reported amount of derivative instruments, where assets or liabilities, is equal totheir fair value, as explained here in Note 4.
The reported amount of financial assets reasonably approximates their fair value.
The reported amount of financial liabilities, excluding the bonds, reasonably approximates
their fair value.

PRADA spa

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The bonds, reported at an amount of Euro 129 million (nominal amount of Euro 130
million as adjusted by Euro 0.8 million under the amortized cost method), are included
under financial liabilities. Their fair value, calculated based on the official Irish Stock
Exchange listing as at January 31, 2015 is equal to Euro 136.3 million.
Credit risk
Credit risk is defined as the risk that a counterparty in a transaction, by not fulfilling
its obligations, causes a financial loss for another entity. The maximum risk to which
an entity is potentially exposed is represented by all financial assets recorded in thefinancial statements.
The Directors believe that the Company’s credit risk essentially regards trade receivables
generated by sales to independent customers in the wholesale channel.
The Company manages the credit risk and reduces its negative effects through its
commercial and financial strategy. Credit risk management is performed by controllingand monitoring the reliability and solvency of customers and is carried out by theGroup’s Commercial Departments.
At the same time, the fact that the total receivables balance is not highly concentrated
on individual customers and the fact that net sales are evenly spread around the world
lead to a reduced risk of financial losses.
The expected loss on bad and doubtful receivables at the reporting date is entirely
covered by the allowance for doubtful accounts.
Movements on the allowance for doubtful accounts are shown in Note 2. Trade
receivables.
Liquidity risk
The liquidity risk relates to the difficulty the Company may face in fulfilling its obligations
with regard to financial liabilities. The Directors are responsible for managing theliquidity risk while the Group Corporate Finance Department, reporting to the CFO, is
responsible for managing financial resources.
The Directors believe that the funds and lines of credit currently available, in addition to
those that will be generated by operating and financing activities, will allow the Company
to meet its needs resulting from investing activities, working capital management andrepayment of loans as they fall due. This can be achieved without using all available
fund and surplus resources can thus be used to pay dividends.
At January 31, 2015, the Company had unused and available bank borrowing facilities
totaling Euro 397 million.

58

PRADA spa

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The following table details the maturity of financial liabilities, showing the earliest dateon which the Company could be called upon to make payment (worst-case scenario).
Financial liabilities under derivative financial instruments
morethan 3years

Future contractual cash
flows at Jan. 31, 2015

6 mthsor less

6 to 12mths

1 to 2years

2 to 3
years(24,027)(8,632)(10,772)(4,041)

(581)

-

-

-

-

-

-

-

(31,887)(18,059)(13,828)

-

-

-

-

-

-

-

-

-

Interest rate swaps(2,848)

14

(345)

(642)

(548)

(1,327)

Net value(58,762)(26,678)(24,945)(4,682)(1,130)(1,327)

Future contractual cash
flows at Jan. 31, 2014

6 mthsor less

6 to 12mths

1 to 2years

2 to 3years

more
than 3years

Cash outflows(60,457)(32,549)(27,908)---

Cash inflows

58,962

31,825

27,138---Cash outflows(6,235)(1,795)(4,440)---Cash inflows

5,740

1,648

4,091

-

-

-

303

(894)

(795)

(1,188)

(566)

3,747

(1,686)(1,765)(1,914)(1,188)

(566)

3,747

(amounts in thousands of Euro)

Forward contracts designatedas cash flow hedges
Cash outflows
Cash inflows
Other contracts designated as
cash flow hedges
Cash outflows
Cash inflows(amounts in thousands of Euro)

Forward contracts designatedas cash flow hedges

Other contracts designated as
cash flow hedges

Interest rate swaps
Net value

PRADA spa

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59

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Financial liabilities(amounts inthousands of Euro)

FutureReported
contractual
amount at
cash flows at
January 31
January 31
2015
2015

upon
request6 mthsor less

6 to 12mths

1 to 2years

2 to 3years

3 to 4years

more
than 4years

Financial payables tobanks

287,972

363,92189

153,472

8,428

7,995

7,985

137,984

47,968Financial payables tosubsidiaries parent
company and relatedparties

365,750

368,850

99,454804

237,335353

16,943

13,962-

Total

653,722732,771

99,543

154,275

245,763

8,348

24,928151,946

47,968FutureReported
contractual
amount at
cash flows at
January 31
January 31
2014
2014

upon
request6 mthsor less

6 to 12mths

1 to 2years

2 to 3years

3 to 4years

4 to 5years(amounts inthousands of Euro)

Obligations underfinance leases

498

504

-

88

416

-

-

-

-

Financial payables tobanks

150,171

166,400

-

9,419

6,813

9,435

3,575

3,575

133,575

Financial payables tosubsidiaries parent
company and relatedparties

342,031

342,031

342,031

-

-

-

-

-

-

Total

492,700

508,935

342,031

9,507

7,229

9,435

3,575

3,575

133,575

Exchange rate risk
The exchange rate risk to which the Company is exposed depends on foreign currency
fluctuation against the Euro.
The exchange rate risk mainly involves the risk that the cash flows of the Group’s
distribution company will fluctuate as a result of changes in exchange rates. The mostimportant currencies for the Company are: the U.S. Dollar, Hong Kong Dollar, JapaneseYen, Swiss Franc, Chinese Renminbi and British Pound.
Exchange rate risk management is one of the risk management activities carried out
by the Company’s centralized Treasury Department.
The following table shows the sensitivity of the Company’s net income and shareholders’equity to a range of fluctuation in the main foreign currencies against Euro, based on
the statement of financial position at January 31, 2015.
Euro --> + 10%(amounts in thousands of Euro)GB PoundHong Kong Dollar

Positive/ (negative)
effect on net income

Euro --> - 10%

Positive/ (negative)
Positive/ (negative)
Positive/ (negative)
effect on
effect on
effect on net income
shareholders’ equity
shareholders’ equity

287

5,095

69

(7,276)

10,26721,450(9,127)(30,954)

Japanese Yen

(445)

7,823

1,916

(10,085)

Chinese Renminbi

553

9,849

(36)

(13,407)

US Dollar(5,745)

2,027

9,629

(7,575)

Others(2,895)

8,553

4,115

(10,805)

Total

2,022

54,797

6,566(80,102)

The total impact on shareholders’ equity (positive by Euro 54.8 million and negative byEuro 80.1 million) is the sum of the effect on the income statement and on the cash
60

PRADA spa

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flow hedge reserve of an hypothetical strengthening/weakening of the Euro against
other currencies. The effects on net income and shareholders’ equity are stated before
the effect of taxation.
Management considers this sensitivity analysis purely indicative, as it is based on the
period end exposure which might not reflect the effects actually generated during theyear.
Interest rate risk
The Company is exposed to the risk of interest rate fluctuations mainly with regard to theinterest charges on its financial indebtedness. The interest rate risk is managed as partof the risk management activities carried out by the centralized Treasury Department.
The following table shows the sensitivity of the Company’s net income and shareholders’equity to a shift in the interest rate curve in relation to its financial position as at January
31, 2015.

(amounts in thousands of Euro)

Shift ininterest rate
curve

Positive/
Positive/(negative)(negative)
effect on net
effect on
income for shareholders’
the period
equityShift ininterest rate
curve

Positive/
Positive/(negative)(negative)
effect on net
effect on
income for shareholders’
the period
equityEuro+ 0.50%

(486)

1,742

-0.50%

485(1,860)

GB Pound+ 0.50%94

94- 0.50%

(94)

(94)

Hong Kong Dollar+ 0.50%

(496)

(496)

- 0.50%496

496

US Dollar+ 0.50%59

59- 0.50%

(59)

(59)

Other currencies+ 0.50%278

278- 0.50%

(278)

(278)

(550)

1,677

550

(1,796)Total

The total impact on shareholders’ equity is the sum of the effect of an hypothetical shift
in the interest rate curve on the income statement and on shareholders’ equity. The
effects on the above-mentioned items are stated before the tax effect.
The sensitivity analysis was based on the period end net financial position so it might
not reflect the actual exposure to the interest rate risk during the year. Therefore, thisanalysis should be considered as indicative only.
5.

Financial receivables and other receivables from parent, subsidiary and associatedcompanies and related parties
Short term receivables from parent companies and other companies are analyzed asfollows:
January 31
2015

January 31
2014

Financial receivables

46,391

252,616

Other receivables

6,357

5,610

Financial receivables and other receivables – due within a year

52,747258,226(amounts in thousands of Euro)

Financial receivables include correspondence current accounts of Euro 16.6 million andshort-term loans of Euro 29.8 million which bear interest and form part of the Group’s
centralized treasury management.
A detailed breakdown of the balance is provided in Note 27.

PRADA spa

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Long term receivables from parent companies and other companies are detailed asfollows:
January 31
2015

January 31
2014

Financial receivables

292,877

17,366

Prepaid Sponsorship expenses

12,379-Other receivables

4,309

1,487

309,564

18,853(amounts in thousands of Euro)

Financial receivables and other receivables – due after more than a year

Financial receivables include the capital element of loans to subsidiaries due after morethan a year.
The increase compared to prior year is due to new intercompany loans and therenegotiation of existing ones, resulting in the transformation of some amounts fromshort-term to long-term and the reclassification of these balances.
Prepaid sponsorship expenses regard costs relating to future periods, already paid
to Luna Rossa Challenge srl, for the participation of the Luna Rossa sailing team in
America’s Cup XXXV which will be held in Bermuda in 2017.
Other receivables refer to deferred rental income from Fratelli Prada spa and Progetto
Prada in compliance with IAS 17 “Leases”. See Note 27 for a description of theoperation and details by counterparty.
6.

Other current assets
Other current assets are detailed as follows:
January 31
2015

January 31
2014

VAT and other tax receivables

71,89632,513

Other current assets

4,395

5,338

Prepayments and accrued income

31,38723,042

Total other current assets

107,678

60,893(amounts in thousands of Euro)Tax receivables include VAT receivables of Euro 32.1 million and current income tax
receivables of Euro 38.2 million.
Other current assets include advances paid towards services and advances to suppliers.
Prepayments and accrued income include the following prepaid expenses: design,
advertising campaign and fashion show costs totaling Euro 18 million; software
assistance costs of Euro 3 million; industrial property rental costs of Euro 3.8 million;
deferred costs on loans of Euro 1.1 million; insurance costs of Euro 0.8 million andother costs of Euro 4.5 million. Prepaid design costs mainly includes costs incurred todevelop collections that will generate revenue the following year.

62

PRADA spa

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7.

Property, plant and equipment
Changes in the historical cost of Property, plant and equipment during the year ended
January 31, 2015 and in prior year are as follows:(amounts in thousands of Euro)

Balance at January 31, 2013Land andbuildings

Production
plant andmachinery

Leaseholdimprovements

FurnitureOther& fittings equipment

AssetsTotal
under historicalconstruction
cost

191,602100,840

42,69837,27060,027

46,168Additions

5,511

10,320

9,155

4,467

4,512

26,157

60,121

Disposals

(15)

(727)

(36)

-

(576)

(8)

(1,362)

1,815

48

3,090

613

-

(5,566)

-

-

(18)

-

(1)

(379)

(2)

(400)

Balance at January 31, 2014

198,912110,462

54,90942,34963,584

66,749536,965

Additions

78,130

8,777

7,478

2,762

3,947

70,924

172,018

Disposals(1,418)(562)(1,394)(1,884)(679)(1,443)(7,381)Other movements

1,908

273

1,557

2,424

141

(3,136)

3,167

-

(1)

(116)

-

-

(37)

(155)

277,532

118,948

62,43345,651

66,993133,057

704,614

Other movements
Impairment

Impairment
Balance at January 31, 2015

478,605

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

Production
plant andmachinery

Leaseholdimprovements

Furniture& fittings

Other
equipment

Total
accumulated
depreciation

Balance at January 31, 2013

25,45084,62323,991

26,04539,331

199,441

Depreciation

4,573

7,568

2,951

2,468

3,655

21,215

(10)

(693)

(12)

-

(574)

(1,289)(amounts in thousands of Euro)

Disposals

-

(18)

-

(1)

(379)

(397)

Balance at January 31, 2014

Impairment

30,013

91,482

26,93028,512

42,033218,969

Depreciation

5,665

8,138

4,422

2,732

4,120

25,076

Disposals

(746)

(531)

(812)

(1,422)(622)(4,132)Other movements

-

115

676

1,614

96

2,500

Impairment

-

(1)

(68)

-

-

(69)

34,932

99,202

31,14831,43545,627242,344

Balance at January 31, 2015

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

Balance at January 31, 2013Land andbuildings

Production
plant andmachinery

Leaseholdimprovements

FurnitureOther& fittings equipment

Assetsunderconstruction

Total
net book
value
279,164

166,152

16,217

18,707

11,224

20,696

46,168Additions

5,511

10,320

9,155

4,467

4,512

26,157

60,121

Depreciation(4,573)(7,568)(2,951)(2,468)(3,655)-(21,215)(75)

Disposals
Other movements
Balance at January 31, 2014

(5)

(34)

(24)

-

(2)

(10)

1,815

48

3,090

613

-

(5,566)-

168,899

18,981

27,978

13,837

21,551

66,749317,996

Additions

78,130

8,777

7,478

2,762

3,947

70,924

172,018

Depreciation(5,665)(8,138)(4,422)(2,732)(4,120)-(25,076)

Disposals

(672)

(31)

(582)

(463)

(58)

(1,443)(3,248)Other movements

1,908

158

881

811

45

(3,136)

667

-

-

(48)

-

-

(37)

(86)

242,600

19,746

31,285

14,21521,366

133,057

462,270

Impairment
Balance at January 31, 2015

At January 31, 2015, Land and buildings included capitalized interest expenses of Euro
1.2 million.

PRADA spa

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63

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Additions to Land and buildings include around Euro 64 million for the purchase ofa property in Milan used as offices and workshops and where the Company has its
registered offices. On June 23, 2014, PRADA spa signed an agreement with Intesa
SanPaolo Group for a long-term loan secured on said property. The loan will be
disbursed during 2015 in the amount of Euro 55 million.
The increases in Production plant and machinery mainly related to purchases ofequipment for use in the manufacturing processes.
The increase in leasehold improvements regards the refurbishment of leased industrial
and commercial property.
Additions to Assets under construction, totaling Euro 71 million, mainly include Euro 39
million of capex on a real estate property in Milan and Euro 11 million on properties in
Tuscany that were purchased during the year but are not yet ready for use.
8.

Intangible assets
Changes in the historical cost of Intangible assets during the year ended January 31,2015 and in prior year are as follows:
Other
intangible
assetsTrademarks

Balance at January 31, 2013

6,820

2,102

1,360

Additions

19,013

-

1,845

-

-

25,8332,102

Additions

168

Disposals(273)

Other movements(amounts in thousands of Euro)

Other movements
Balance at January 31, 2014

Impairment
Balance at January 31, 2015

Goodwill

Assets inprogressTotal
historicalcost

56,66985,425

2,286

154,662

3,584

-

896

25,338

-

2,236

-

(2,236)-

3,205

62,48985,425947

180,000

-

7,630

2,782

-

1,513

12,093-(1,400)

(16)

(671)

-

(2,360)

273

-

1,400

633

671

(628)

2,348

-

-

-

-

-

(41)

(41)

26,001

2,102

10,83565,88785,425

1,791

192,041

Store Lease
SoftwareAcquisitions

Changes in the accumulated amortization of Intangible assets during the year ended
January 31, 2015 and in prior year are as follows:
Other
intangible
assetsTrademarks

Store Lease
SoftwareAcquisitions

Balance at January 31, 2013

6,312

2,098

198

Amortization for year

1,268

1

207

Balance at January 31, 2014

7,580

2,099

Amortization

2,125

Disposals(174)(amounts in thousands of Euro)

Other movements
Balance at January 31, 201564

PRADA spa

Separate Financial Statements 2014 (final 15 aprile).indd 64

Goodwill

Total accumulated
amortization

49,2033,303

61,115

3,221

-

4,696

405

52,4243,303

65,811

1

1,789

3,325

-

7,240

-

(187)

(10)

(671)

(1,042)

161

-

93

3

671

928

9,692

2,100

2,101

55,742

3,303

72,938Separate Financial Statements 2014 - Notes to the Financial Statements

15/04/15 18:42

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

Balance at January 31, 2013

Other
intangible
assetsTrademarks

Store Lease
SoftwareAcquisitions

Goodwill

Assets in
Total netprogress book value

508

4

1,162

7,465

82,1222,286

Additions

19,013

-

1,845

3,584

-

896

25,338

Amortization(1,268)

(1)

(207)

(3,221)--(4,697)

Other movements
Balance at January 31, 2014
Additions

93,547

-

-

-

2,236

-

(2,236)-

18,2533

2,800

10,064

82,122

946

114,188

168

-

7,630

2,782

-

1,513

12,093(2,125)(1)(1,789)(3,325)--(7,240)

Disposals(98)-(1,213)(6)--(1,317)

Other movements

112

-

1,306

630

-

(628)

1,420

-

-

-

-

-

(41)

(41)

16,3102

8,734

10,14582,123

1,790

119,103

Amortization

Impairment
Balance at January 31, 2015

The increase in store lease acquisitions (“key money”) regards the consideration paid
to Librerie Feltrinelli srl to take over the lease for premises in Galleria Vittorio EmanueleII, adjacent to those already used under a concession from the Municipality of Milan.
Other movements and the disposals for the year represent, respectively, the amounts
contributed upon the merger with Car Shoe Italia on February 1, 2014 and the transferof the retail business by Car Shoe Italia to PRADA Stores, at carrying amounts, prior tothe merger with PRADA spa.
Goodwill
Goodwill amounted to Euro 82.1 million at January 31, 2015 and included Euro 78.3
million relating to sales and distribution activities in Italy. As required by IAS 36, goodwill
with an indefinite useful life is not amortized but tested for impairment at least oncea year.
The method used to determine recoverable value (value in use) is based on the
discounted expected free cash-flow generated by the assets directly attributable tothe business to which the goodwill has been allocated (Cash Generating Unit).
Value in use is calculated as the sum of the present value of future free cash-flows
expected from the business plan projections prepared for each CGU and the present
value of the operating activities of the sector at the end of the business plan period(terminal value).
The business plans cover a period of five years and the discount rate used to discountcash flows is calculated using the weighted average cost of capital approach (WACC).
The weighted average cost of capital used for discounting purposes was 9.77%. A
sensitivity analysis was performed to ensure that changes in the main assumptions(WACC and “g” growth rate) did not significantly affect the coverage results. The
outcome of this simulation did not highlight any indication that values in use could havebeen lower than the carrying amount.
The impairment test performed as at January 31, 2015 did not identify any impairment
losses.

PRADA spa

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9.

Investments(amounts in thousands of Euro)
Investments in subsidiaries and associated undertakings
Other investments
Total

January 31
2015

January 31
2014

931,586

908,27413

13

931,599

908,286

Investments in subsidiaries and associated undertakings at January 31, 2015 and 2014
are analyzed as follows:(amounts in thousands of Euro)

Note

January 31
2014

Increases

2,706

0

2,000

-

108,8280108,828

Decreases

January 31
2015

Investments in subsidiaries:
Artisans Shoes srl
Car Shoe Italia srl(1)

Church Holding UK plc
IPI Logistica srl

2,706
2,000

-

1,798

0

1,798

Marchesi Angelo Srl

(2)

0

8,617

8,617

Pellettieri d’Italia srl

(3)

164

437

601

Post Development Corp.

54,807-54,807PRADA Bosphorus Deri Mamuller Limited Sirketi

17,592-

4,056

13,536

17,583

12,996

12,726

17,853

Prada Canada Corp.

5,086

-

-

5,086

PRADA Czech Republic sro

1,894

-

-

1,894

PRADA Brazil Importaçao e Comercio de Artigos
de Luxo ltda

(4)

PRADA Far East bv

383,590--

383,590

PRADA Hellas Single Partner Limited Liability Company

1,764

-

-

1,764

PRADA Hong Kong P.D. limited

1,120

-

-

1,120

PRADA Kazakhstan llp

(5)

2,411

2,979

-

5,390

PRADA Maroc sarlau

(6)

7,535

2,426

6,295

3,667

2,069

-

-

2,069

-

1,760

-

1,760

955

-

-

955

-

1,623

-

1,623
1,794

PRADA Middle East Fzco
Prada Panama sa(7)

PRADA Portugal. Unipessoal lda
Prada Retail Aruba nv(8)Prada Retail South Africa pty ltd

(9)

-

1,794

-

Prada Retail SPC

(10)

3,041

-

-

3,041

23,267-

6,466

16,801

23,315--23,315

0

3,935

-

3,935

80,237--80,23736,177PRADA Rus llc
PRADA sa
PRADA Saudi Arabia ltd(11)

PRADA Stores srl
PRADA Switzerland sa

16,147

20,030-PRADA Ukraine llc

(12)

2,868

-

2,868

PRADA USA Corp.

145,759-

145,759-

PRM Services S. De R.L. de CV

(13)

-

407

407

Tannerie Limoges sas

(14)

-

720

720

Space Caffè srl

(15)

-

-

-

Investments in associated undertakings:
PAC srl - in liquidation

1,738

Investments in other entities
Total

66

PRADA spa

Separate Financial Statements 2014 (final 15 aprile).indd 66

1,738

13
908,286

57,724-

13

34,411

931,599

Separate Financial Statements 2014 - Notes to the Financial Statements

15/04/15 18:42

Investments were tested for impairment and impairment losses of Euro 32 million
were identified at January 31, 2015, as follows:(amounts in thousands of Euro)

January 31
2015

PRADA Bosphorus Deri Mamuller Limited Sirketi(4,056)PRADA Brazil Importaçao e Comercio de Artigos de Luxo ltda

(12,726)PRADA Ukraine llc(2,868)PRADA Rus llc(6,466)PRADA Maroc sarlau(6,295)

Total(32,411)This test is performed at least once a year or whenever there is an indication ofprobable impairment.
Note:(1) on November 1, 2014, the Company absorbed subsidiary Car Shoe Italia srl withbackdated effect from February 1, 2014;(2) on March 14, 2014, the Company acquired 80% of Marchesi Angelo srl, owner ofthe historic Milanese patisserie which was founded in 1824. This acquisition wasmade in order to promote and guarantee the strategic strengthening of the brand,
synonymous with quality in the Italian food segment, together with the Prada and
Miu Miu brands, leaders on the luxury goods market, as part of the Group’s global
development program.
(3) this amount relates to the injection of capital into the subsidiary by waiving
receivables of Euro 437 thousand;(4) during the year, share capital increases of Brazilian Real 40 million (Euro 12,996
thousand) were subscribed and paid;(5) during the year, a share capital increase of Euro 2,979 thousand was paid;(6) this amount regards the recapitalization of the subsidiary in December by waiving
receivables of Euro 2,426 thousand;(7) Panamanian company Sederia El Dragon was acquired on August 4, 2014 (andrenamed PRADA Panama sa) in order to develop the retail business in Panama;(8) Prada Retail Aruba nv was incorporated on September 12, 2014 in order to develop
the retail business in Aruba; the amount of Euro 1,623 thousand represents capital
injections paid;(9) PRADA Retail South Africa pty ltd was incorporated during the year. The amountrepresents share capital of 25 million Rand that was subscribed and paid;(10) the amount represents the injection of capital during the year into PRADA Retailspc, a 100% owned subsidiary based in Doha;(11) 75% owned subsidiary PRADA Saudi Arabia was incorporated on July 2, 2014 with
its registered office in Jeddah. The remaining 25% is held by Rubaiyat Company
for Industry & Trade Ltd;
(12) this amount mainly regards the recapitalization of PRADA Switzerland sa in
November with the waiver of receivables of CHF 24,100 thousand;(13) 100% owned subsidiary PRM Services S. De R.L. de CV was incorporated during
the year in Mexico;

PRADA spa

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(14) French company PSC sas, owned 60% by PRADA spa and 40% by Conceria
Superior spa, was incorporated on August 19. The company, since renamed
Tannerie Limoges SAS, will acquire the business of long-established tanner
Tannerie Mégisserie Hervy in Isle, near Limoges;(15) by means of a notarial deed dated December 17, 2014, Space Caffè srl was merged
through incorporation into the Company with accounting effects backdated to
February 1, 2014.
Additional information on subsidiaries and associated undertakings:(Amounts in currency /000)

Artisans Shoes srl
Church Holding UK plc

Share
CapitalLatest net
income /(loss)

EURO

1,000

3,064

9,990

66.70%

GBP

78,126546

122,408

100.00%100.00%Carrying
amountLocal
currency

2,706
108,828

Share% interest
holders’
heldequity

IPI Logistica srl

1,798

EURO

600

28

2,560

Marchesi Angelo Srl

8,617

EURO

23

212

744

80.00%

Pellettieri d’Italia srl

601

EURO

100

(1,021)(926)

60.00%

Post Development Corp.

54,807

USD

45,138(1,337)78,020100.00%PRADA Bosphorus Deri Mamuller Limited Sirketi

13,536TRY

41,000(2,146)

24,627100.00%PRADA Brazil Importaçao e Comercio de Artigos
de Luxo ltda

17,853

BRL

87,000(1,478)35,642100.00%Prada Canada Corp.

5,086

CAD

300

2,706

36,644100.00%PRADA Czech Republic sro

1,894

CZK

2,500

200

24,763100.00%PRADA Far East bv

383,590EURO2078,310457,864100.00%

1,764

EURO

2,850

(25)

973

100.00%PRADA Hong Kong P.D. limited

1,120

HKD

11,0001,495

14,128100.00%PRADA Kazakhstan llp

5,390

KZT

1,130,000(144,820)

743,404

100.00%100.00%PRADA Hellas Single Partner Limited Liability
Company

PRADA Maroc sarlau

3,667

MAD

95,000(5,976)37,175PRADA Middle East Fzco

2,069

AED

18,00033,639115,03960.00%

Prada Panama sa

1,760

USD

30

96

2,096

100.00%

955

EURO

5

232

2,119

100.00%

1,623

AWG

2,011

61

2,072

100.00%PRADA Portugal. Unipessoal lda
Prada Retail Aruba nv
Prada Retail South Africa pty ltd

1,794

ZAR

25,000(1,428)23,572100.00%Prada Retail SPC

3,041

QAR

15,0005,995

17,662100.00%PRADA Rus llc

16,801PRADA sa

23,315RUB

250(152,505)

87,98199.90%

EURO

31

15,615276,331100.00%Prada Saudi Arabia ltd

3,935

SAR

26,666(3,233)23,43375.00%PRADA Stores srl

80,237EURO

520

18,77927,709100.00%PRADA Switzerland sa

36,177

CHF

24,000(2,424)20,069100.00%PRADA Ukraine llc-

UAH

30,000(46,781)(54,451)

100.00%PRADA USA Corp.

145,759

USD

152,211

16,381

243,479

100.00%PRM Services S. De R.L. de CV

407

MXN

7,203

3,954

11,157100.00%Tannerie Limoges sas

720

EURO

60

(426)

774

60.00%

1,738

EURO

31

(9)

3,839

49.00%

PAC srl - in liquidation (1)931,586
1) Figures at 31/12/2012

The amounts shown are those reported for consolidation purposes before theresolutions by the respective Boards of Directors approving the financial statements
and could well differ from the final version.

68

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10. Other non-current assets
Other non-current assets may be analyzed as follows:
January 31
2015

January 31
2014

Advances and payments on account

2,831

1,962

Long-term prepaid expenses

2,720

2,619

Other financial receivables

3,900

-

Other tax receivables

700

558

Sundry other long-term receivables

652

571

Long-term guarantee deposits

537

278

11,3405,988(amounts in thousands of Euro)

Total

Long-term prepaid expenses refer to the portion of stamp duty paid on the Galleria
Vittorio Emanuele II concession fees which relates to future reporting periods.
Other long-term receivables include Euro 0.6 million relating to insurance policies inrespect of staff leaving indemnity liabilities towards several employees.
11. Bank overdrafts and short-term loans
January 31
2015(amounts in thousands of Euro)

January 31
2014

Bank overdrafts

89

8

Short-term loans

150,106

123

7,777

14,361(1)(9)

157,972

14,483Current portion of long term loans
Deferred costs on loans
Bank overdrafts and short-term loans

On December 1, 2014, PRADA spa arranged a new revolving line of credit of Euro 315
million – expiring in December 2019 – with a syndicate of banks. This loan replaced theprevious revolving facility which was due to expire in May 2016 and was arranged inorder to sustain the business’s financial cycle, taking advantage of favorable conditions
available on the credit market while guaranteeing the Group financial flexibility for alonger period. At January 31, 2015, the outstanding amount on the loan facility was
Euro 150 million and it was reported under “Short-term bank loans”.
The syndicated Euro loan is subject to compliance with several covenants determinedbased on the PRADA spa consolidated financial statements. Specifically, the ratio
between total net bank borrowing and EBITDA cannot exceed 3 and the ratio between
EBITDA and total net interest expenses must not exceed 4. Loans are stated net ofcosts incurred to arrange new loans.
The current portion of long-term borrowings is analyzed as follows:
600

Euro/000

July 2015

3.310%

Cariparma

Monte dei Paschi di Siena

5,202

Euro/000

August 2015

1.290%

Interests accrued

1,975Euro/000

July-August 2015

The long-term loan received from Banca Monte dei Paschi di Siena in 2008 is secured
by a mortgage on a property in Tuscany used as offices and R&D workshops.
The long-term loan received from Cassa di Risparmio Parma e Piacenza in 2008 is
secured by a mortage on a property in Tuscany where the Company is centralizing its
leather goods division logistics activities.

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12. Financial payables and other payables to parent, subsidiary and associatedcompanies and related parties
Current payables to parent, subsidiary and associated companies and related parties
are analyzed as follows:(amounts in thousands of Euro)

Financial payables

January 31
2015

January 31
2014

335,283

342,031

3,768

7,068

339,051

349,099

Other payables
Total payables due within a year

Other payables include sundry interest-free payables to subsidiaries.
See Note 27 for a detailed breakdown of the balance by creditor.
Non-current payables to parent, subsidiary and associated companies and relatedparties are analyzed as follows:(amounts in thousands of Euro)

January 31
2015

January 31
2014

Financial payables

30,467-

Payables to related parties for investments

13,384

13,247

Total payables due after more than a year

43,851

13,247

Payables to related parties for investments represents the present value of theoutstanding payable towards Fin-Reta srl for the granting of a right of usufruct to acommercial property and related business unit.
13. Trade payables
Trade payables may be analyzed as follows:
January 31
2015

January 31
2014

Trade payables - third parties

301,457

229,909

Trade payables - related parties

318,494

200,257

Trade payables – subsidiary and associated companies

21,033

6,190

Total

640,984

436,356(amounts in thousands of Euro)

The increase in trade payables is essentially due to the intensification of manufacturing
activity in the last few months of the year in order to sustain the strategy of retailchannel replenishment.
Trade payables to related parties regard purchases of finished products from retailcompanies owned by the main shareholders of PRADA Holding spa.
A detailed breakdown by creditor is shown in Note 27 Transactions with parent,
subsidiary and associated companies and related parties.

70

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Total trade payables are summarized below by maturity date.
(amounts in thousands of Euro)

January 31
2015

Current

Overdue (days)
1

30

31

60

61

90

91

120

> 120

Trade payables - third parties

301,457

275,618

16,259

4,516

1,038

463

3,563

Trade payables - related parties

21,033

20,550

68

194

13

0

208

Trade payables - subsidiary andassociated companies

318,494

296,346

3,326

3,264

1,668

3,616

10,274

Total

640,984

592,513

19,653

7,974

2,720

4,079

14,045January 31
2014

Current

120

> 120

(amounts in thousands of Euro)

Overdue (days)
1

30

31

60

61

90

91

Trade payables - third parties

229,909

209,181

11,084

4,859

1,463

435

2,887

Trade payables - related parties

6,190

6,019

-

140

-

-

31

Trade payables - subsidiary andassociated companies

200,257

172,048

7,805

4,060

2,572

1,355

12,417

Total

436,356

387,248

18,889

9,059

4,035

1,790

15,335

14. Current tax liabilities
Current tax liabilities are detailed as follows:(amounts in thousands of Euro)

January 31
2015

January 31
2014

Current taxes on income

-

8,463

VAT and other taxes

4,178

4,196

Social security and pension contribution liabilities

4,875

7,427

Total

9,053

20,086

VAT and other taxes refers to withholding taxes on employee remuneration andprofessional fees and to VAT liabilities arising from e-commerce sales in EU countries.
15. Obligations under finance leases
The decrease in obligations under finance leases is due to installment payments madeas due under finance leases in place at January 31, 2014.
16. Other current liabilities
Other current liabilities may be analyzed as follows:
January 31
2015

January 31
2014

Payables to employees

28,61829,226

Provision for returned goods

34,336

26,942

Payables for capex

92,784

18,316

Other payables

382

490

Deferred income

622

233

156,743

75,208(amounts in thousands of Euro)

Total

Payables to employees include wages and salaries, 13th and 14th months’ salaries,
accrued holidays and productivity bonuses.

PRADA spa

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The provision for returned goods is created to cover identifiable future liabilities for
returns whose amount and due date was not known at the reporting date. The amountof the provision was estimated on the basis of historical/statistical data and on forecastsof the number of items sold that could be returned in future.
“Payables for capital expenditure” include liabilities as at January 31, 2015 for capital
expenditure described in Notes 7 and 8 on Property, plant and equipment and Intangible
assets. The amount includes Euro 55 million, due to Beni Stabili for the balance of thepurchase price of the property in Milan used as the Company’s headquarters offices.
On June 23, 2014, PRADA spa signed a long term loan agreement with Intesa Sanpaolo
for the aforementioned amount; the loan will be disbursed in 2015.
Other payables includes advances of Euro 0.2 million received from customers andsundry payables of Euro 0.1 million.
17. Long-term financial payables
Long-term financial payables are analyzed below.
(amounts in thousands of Euro)

Bonds

January 31
2015

January 31
2014

130,000

130,000

Long term bank borrowings

-

5,802

(791)

(1,003)

129,209134,799

Deferred costs on long term loans
Total

Long-term financial payables at January 31, 2015 are analyzed as follows:
Amounts in Euro/000

Principal

Loan currency

LenderMaturity
dateInterest rate
(1)

PRADA spa

130,000

Euro

Bonds

August 2018

2.750%

Total

130,000(1) Interest rates include the effect of any interest rate risk hedging transactions

Long-term financial payables at January 31, 2014 are analyzed below:
Amounts in Euro/000

Principal

Loan currency

LenderMaturity
dateInterest rate
(1)

PRADA spa

130,000

Euro

Bonds

August 2018

2.750%PRADA spa

600

Euro

Monte dei Paschi di Siena

July 2015

3.310%PRADA spa

5,202

Euro

Cariparma

August 2015

1.290%

Total

135,802(1) Interest rates include the effect of any interest rate risk hedging transactions

An analysis of these payables by maturity date is provided in Note 4.
The bonds are listed on the Irish Stock Exchange and mature interest at a fixed rate.
At January 31, 2015, the fair value of the bonds payable was Euro 136.3 million while
the carrying amount was Euro 129 million i.e. the amortized cost.
On June 23, 2014, PRADA spa arranged with Intesa-Sanpaolo Group a long-term loan
secured by a mortgage on the property in Milan used as the Group Head Office. The
loan will be disbursed in 2015 in the amount of Euro 55 million and will be repayable inequal installments from November 2015.

72

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18. Employee benefits
January 31
2015

January 31
2014

Post-employment benefits

22,214

20,329Other long term employee benefits

33,664

19,784

Total

55,87840,113(amounts in thousands of Euro)

Post-employment benefits
Liabilities for post-employment benefits totaled Euro 22.2 million at January 31, 2015,
regarded the TFR liability and were all classified as defined benefit plans.
The TFR liability was determined using the “Projected Unit Credit Method” byindependent expert Federica Zappari, an Italian registered actuary (no 1134) of Ordine
Nazionale degli Attuari. The main actuarial assumptions made in the years of appraisal
shown were as follows:
January 31
2015(amounts in thousands of Euro)

January 31
2014

Average duration of plan (years)

11.1

11.1

Discount rate

0.9%

2.5%

Inflation rate

1.0%

1.5%

The discount rate used to value the defined benefit plans was determined on the basisof the yield on bonds with an AA rating and a maturity date similar to that of the plansin question.
The actuarial gains and losses are determined as follows:
Defined Benefit Plans(TFR)
Actuarial adjustments due to(a) Changes in financial assumptions

3,090(b) Changes in other assumptions (e,g, demographic assumptions, remuneration increases)

89(c) Other(229)

Actuarial (Gains)/losses

2,950

The sensitivity analysis performed on the main actuarial assumptions applied at January
31, 2015 highlighted that an increase or decrease of 50 basis points in the parameters(discount rate, rate of inflation, likelihood of termination of employment relationshipand percentage of advances on TFR) would have an impact of less than 5% on the
total amount of the obligations. Consequently, the result of the test was considered
not material in terms of possible impact on the financial statements.
Payments expected in relation to the TFR liability in the years following these financial
statements are shown below:(amounts in thousands of Euro)

2015

2016

2017

2018

After 2018

Defined Benefit Plans (TFR)

1,558

1,203

1,002

1,017

19,822PRADA spa

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Finally, the following table shows movements on liabilities for post-employment
benefits in the period ended January 31, 2015:(amounts in thousands of Euro)
Balance at January 31 2014

20,329Current service costs

53

Financial expenses

64

Increase due to merger

223

Transfers(86)

Actuarial (Gains)/Losses

2,950

Indemnities paid

(1,319)Balance at January 31 2015

22,214

Other long-term employee benefits
Other long-term employee benefits were qualified into the IAS 19 category “Other
long-term employee benefits” and relate to long-term retention and performance plans
recognized in favor of Company employees. As at January 31, 2015, their actuarial
valuation, obtained using the Projected Unit Cost Method, was Euro 33.7 million (Euro19.8 million as at January 31, 2014). This valuation was performed by independentactuary Federica Zappari.
Movements on other long-term employee benefits in the twelve months ended
January 31, 2015 are shown below:(amounts in thousands of Euro)

Other long-term benefits

Balance at January 31 2014

19,784

Increases

14,278

Utilization for payments(506)

Employee transfers

108

Balance at January 31 2015

33,664

Some Euro 8.3 million of the long-term benefits reported at January 31, 2015 relates
to the Directors of the Company.
19. Provisions for risks and charges
Movements on provisions for risks and charges are summarized as follows:
Provision for
litigation

Provision fortax disputes

Other
provisions

Total

351

21,733

1,182

23,266

Increases

204

32

236

Increases due to mergers

359

-

359

(amounts in thousands of Euro)

Balance at January 31 2014

Utilization

-

-

-

Reversals

(530)

(477)

(1,007)

21,766

737

22,855

Balance at January 31 2015

351

Provisions represent the Directors’ best estimate of maximum contingent liabilities. In
the Directors’ opinion and based on the information available to them as supported by
the opinions of independent experts at the reporting date, the total amount provided forrisks and charges is reasonable considering the contingent liabilities that might arise.

74

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Provision for tax disputes
On December 30, 2005, PRADA spa (for companies incorporated into PRADA spa,
Genny spa and Byblos spa, the respective sellers of the “Genny” and “Byblos”
businesses) received two notices of tax assessment for VAT purposes for the 2002
fiscal year. The assessments regarded the sales of the “Genny” and “Byblos”
businesses which the authorities sought to treat as sales of the respective brands.
The amount assessed was about Euro 21 million. The Company successfully appealed
at the first and second levels of appeal. The Tax Authority then announced its appeal
to the Supreme Court of Cassation against which the Company submitted a counterappeal. No further developments took place in 2014.
On August 4, 2006, PRADA spa (for IPI Italia spa, a company incorporated into it andthe seller of the “Genny” business), received a demand for VAT penalties totaling Euro
5.7 million for the year 2002 in relation to its alleged failure to issue a “self-invoice”
for the value of the “Genny” brand. Even though it submitted its defensive arguments
against this claim, on October 9, 2007, the Company received a request for penalties
against which it filed appeals at two levels but was unsuccessful with both. Finally,
the Company then made a further appeal to the Supreme Court of Cassation against
which the Tax Authority filed its own counter appeal. No further developments took
place in 2014.
In October 2012, October 2013 and October 2014, the Italian Tax Authorities rejected
PRADA spa’s request not to apply the Italian Controlled Foreign Companies rules (CFC)
to its Dutch sub-holding company PRADA Far East bv for the tax years from 2010
to 2013. In order to reduce the risk of application of additional penalties in case of
assessment, PRADA spa paid some Euro 64 million, including Euro 42 million recordedin the 2012 income statement and Euro 22 million in the 2013 income statement.
The amounts paid followed the “ravvedimento operoso” procedure (or voluntary
settlement of dispute) and represented the taxes due in Italy by PRADA spa on the
taxable income of PRADA Far East bv – a total of Euro 42 million for 2010 and 2011 anda total of Euro 22 million for 2012. The tax due for 2013 was not paid due to the credit
arising from payments made on account. In October 2012, October 2013, May 2014
and October 2014, the Italian tax authorities also declared inadmissible the requests
filed by PRADA spa for the tax years from 2010 to 2014 not to apply CFC rules toother Group countries operating in countries on the fiscal black list. In January 2013,
January 2014 and January 2015, PRADA spa filed appeals to the Rome Provincial Tax
Commission in relation to the rejection of its requests regarding PRADA Far East bv
and the declaration of inadmissibility of its petitions regarding the other “black list”
companies; it also requested the reimbursement of the amounts paid in relation to
PRADA Far East bv.
In May 2012, the Italian Customs Authority began an audit of PRADA spa on the 20072011 tax years and with reference to the method used to value imported products inspecific circumstances. This audit led to the detection of customs irregularities subject
to administrative and criminal penalties; PRADA spa provided all of the documentation
requested. It is worth noting that, in March 2012 the Company applied to the Central
Italian Customs Authority in Rome for a ruling on the same issue and, in 2013, it
submitted two explanatory statements to the Public Prosecutor and the Customs
Head Office. The customs authorities have suspended their judgment until thecriminal proceedings have been completed. Even though, in August and September
2014, PRADA spa received two amended notices of assessment from the customs
authorities in relation to 2010 and, after January 31, 2015, it also received demands forpayment of the additional duties assessed in relation to the said tax year, the Directors
do not believe that any provision need be made. Indeed, the company has submitted
its comments in relation to the amended notices of assessment and has filed a request
for suspension of collection of the demand for payment. It shall also file an appeal by

PRADA spa

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the legally required deadline.
Except where there is an express statement that no provision has been made, theDirectors, supported by the opinion of their tax advisors, believe that the provisions
totaling Euro 21.7 million carried at January 31, 2015 in respect of the tax disputes
described above represents the best estimate of the obligations that the Company
could be called upon to fulfill.
Provision for litigation
This provision represents the Directors’ assessment of litigation risks at the end of
financial year 2014.
There were no significant developments in relation to ongoing litigation during 2014.
Other provisions
Other provisions for risks amounted to Euro 0.7 million as at January 31, 2015 andrelated to obligations to return premises under lease agreements in their original state.
20. Other non-current liabilities
Other non-current liabilities amount to Euro 5.8 million and regard liabilities to berecognized on a straight-line basis in relation to concession fees for the premises inGalleria Vittorio Emanuele II in Milan and rental costs for stores in S. Elpidio a Mare andNoventa di Piave.
21. Shareholders’ equity
Shareholders’ equity is analyzed as follows:
January 31
2015

January 31
2014

Share capital

255,882

255,882

Other reserves

966,012889,685

Net income for the period

385,429395,574

Total shareholders’ equity

1,607,323

1,541,141(amounts in thousands of Euro)

Share capital
At January 31, 2015, some 80% of the share capital of PRADA spa was held by PRADA
Holding spa while the remainder was floating on the Main Board of the Hong Kong
Stock Exchange.
Share premium reserve
The share premium reserve is unchanged compared to January 31, 2014.
Dividends
During the twelve months ended January 31, 2015, the Company distributed dividendsof Euro 281.5 million, as approved by the Annual General Meeting held on May 22, 2014
to approve the financial statements for the year ended January 31, 2014. Payment of
the dividends was completed by January 31, 2015.
Retained earnings
As shown in the “Statement of changes in shareholders’ equity”, retained earnings
decreased by Euro 3.5 million as a result of the merger with Car Shoe Italia srl which
was accounted for as a “business combination under common control”, excluding
76

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application of IFRS3. This amount represents the difference between the acquisition
cost of the investment as at January 31, 2014 of Euro 2 million and the negative
shareholders’ equity of the merged company of Euro 1.5 million.
Availability of shareholders’ equity(amounts in thousands of Euro)

January 31
2015

Possibleutilization

Amountdistributable

410,047

Share capital

255,882

Share premium reserve

410,047

A, B, C

Legal reserve

51,177B

Other reserves

182,899

A, B, C

182,899

Retained earnings

349,862

A, B, C

301,373

Cash flow hedge reserve(27,973)

Distributable amount

Summary of utilizationin the last three years
Coverage oflossesDistribution ofdividends-

393,235

894,319393,235

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

Pursuant to Article 2431 of the Italian Civil Code, the share premium reserve is fully
distributable only when the legal reserve reaches an amount equal to 20% of sharecapital.
A non-distributable portion of retained earnings amounting to Euro 20,516 million
refers to restricted reserves under Art. 7 of Legislative Decree 38/2005 while a further
decrease of Euro 27,973 million is equal to the negative value of the Cash flow hedge
reserve.
Income statement
22. Net revenues
Net revenues are mainly generated by sales of finished products and are stated netof returns and discounts. Net sales for the year ended January 31, 2015 amounted toEuro 1,988 million, 0.64% less than in prior year (Euro 2,001 million in 2013).
Royalties income of Euro 36.8 million was earned by the Company from Fragrance andSkincare sl and Luxottica Group on sales of cosmetics and eyewear, respectively. See
the Financial Review for comments on the effects of the contracts.
January 31
2015

January 31
2014

Net sales

1,987,923

2,000,828

Royalties

39,584

3,287

2,027,507

2,004,115

January 31
2015

January 31
2014

Purchases of raw materials and production costs

942,289

817,173

Logistics costs, duties and insurance

110,128

104,241

Change in inventories(110,790)(23,264)

Total

941,628

898,150(amounts in thousands of Euro)Net revenues

23. Cost of goods soldCost of goods sold is analyzed as follows:(amounts in thousands of Euro)PRADA spa

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Cost of goods sold has increased by Euro 43.5 million in absolute terms because ofa different product mix and unfavorable average foreign exchange trends. Compared
to prior year, cost of goods sold has increased from 44.8% of net revenues to 46.4%.
24. Operating expenses
Operating expenses may be summarized as follows:(amounts in thousands of Euro)

January 31
2015

January 31
2014

Advertising and communications costs

122,895

76,915

Product design and development costs

116,207

118,511

Selling costs

264,070

281,723

General and administrative costs

69,72764,486

Operating expenses

572,899541,635

Advertising and communications costs include expenses incurred to develop advertising
campaigns and organize fashion shows and other events plus overheads attributable
to this area of the business. The increase compared to prior year mainly relates to thecost of sponsorship of Luna Rossa Challenge Srl and Project Prada Arte, as well as todonations to various entities including Stiching Fondazione Prada.
Product design and development costs include both the design phase – i.e. researchand testing of shapes, fabrics, leather and production techniques plus definition of thedesign concept - and the product development phase, involving planning of products,
production of prototypes and manufacture of the products themselves. Product designand development costs decreased by Euro 2.3 million compared to 2013.
Selling costs decreased by Euro 17.7 million mainly as a result of two factors:•

a decrease of Euro 188 million in royalties due to PRADA sa for brand licences;•

net expenses of Euro 145 million resulting from participation in the profits andlosses of the retail companies.

See the Financial review for more comments.
The “Additional information” section contains an income statement reclassified bynature.
25. Net interest and other financial income/(expenses)
January 31
2015

January 31
2014

Interest income / (expenses), net

5,129(2,149)Exchange gains / (losses) - realized(2,209)(7,583)

Exchange gains / (losses) – unrealized(27,379)(7,647)

Dividends

92,982

46,515

Other financial income / (expenses)(33,940)(1,531)

Total

34,582

27,605(amounts in thousands of Euro)Net interest income, amounting to Euro 5.1 million represents the difference between
total interest income of Euro 15.3 million (Euro 6.7 million in 2013) and interest
expenses of Euro 10.2 million (Euro 8.9 million in 2013).
The increase in net interest income is consistent with the reduction in debt.

78

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Other financial expenses represent impairment adjustments to investments in
subsidiaries, following impairment tests.
The net exchange losses for the twelve months ended January 31, 2015 were due toexchange rate volatility, as already described in the Financial Review.
26. Income taxes
Income taxes for the twelve months ended January 31, 2015 and January 31, 2014 areanalyzed as follows:
January 31
2015

January 31
2014

Current taxation

163,070

174,095

Prior year taxation

3,423

22,355

Deferred taxation(4,360)

(90)

Total

162,133

196,360(amounts in thousands of Euro)

The decrease in current income taxes in absolute terms is essentially due to the
reduction in income before taxation. As a percentage of income before taxation,
the tax burden decreased from 33.2% to 32%. We recall that income taxes include
the extraordinary tax charges of Euro 3 million in 2014 and Euro 22 million in 2013,
as described in Note 19 and regarding the rejection by the Italian Tax Authorities of
PRADA spa’s request not to apply the Italian Controlled Foreign Companies rules (CFC)
to its Dutch sub-holding company PRADA Far East bv.
Movements on net deferred tax assets and deferred tax liabilities are shown below:
January 31
2015(amounts in thousands of Euro)

Opening balance, net

24,982

Deferred taxes for the period

17,550

Closing balance, net

42,532The deferred tax assets and deferred tax liabilities recorded at the end of the reporting
period and at the end of the prior period are shown below and classified based on thenature of the line item to which they relate:
Deferred tax assets, net(amounts in thousands of Euro)

Employee benefits – defined
benefit plans

January 31
2015

January 31
2014

IncomeStatement
effectEffect frommergerEquityeffect

607

(151)

(418)

-

(340)

-

Inventories

19,791

20,767

976

Property, plant and equipment(4,482)(4,890)(408)

Intangible assets

-

(100)

(8)

155

(62)

-

Provisions for risks and charges

11,188

8,908(1,560)(719)-

Allowance for doubtful debts(1,331)(1,378)

13

(60)

-

Derivative instruments

10,610(1,396)--(12,006)

Other temporary differences

6,248

3,130

(3,118)

Total

42,532

24,982(4,360)(841)(12,346)

PRADA spa

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The following table shows the reconciliation between the effective tax rate and thetheoretical tax rate:(amounts in thousands of Euro)

IRES

Eff. IRES
rate

IRAP

Eff. IRAP
rate

Total tax

Total Eff.
rate

Theoretical tax on income before
taxation

150,579

27.50%

21,5073.93%

172,086

31.43%

Dividends exempted-(24,292)-4.44%(24,292)-4.44%

Impairment of investments

8,913

1.63%

Aid to economic growth (ACE)(5,800)-1.06%

Rejection of petition not to apply
rules on CFC

3,232

Non-deductible donations
Deduction of costs allocatedto OCI

8,913

1.63%

(5,800)-1.06%

0.59%

3,232

0.59%

2,349

0.43%

2,349

0.43%

(80)

-0.01%(80)-0.01%--

Other permanent differences

80

1.62%

150

0.04%

230

1.67%

Adjustments in annual tax
return/“UNICO”

506

0.09%

(314)

-0.06%

192

0.04%

0

5,303

0.97%

5,303

0.97%

135,487

26.35%

26,646

4.88%

162,133

31.23%

4,195

0.78%

165

0.03%

4,360

0.81%

139,682

27.13%

26,811

4.91%

166,49332.05%

Differences between
pre-tax income and net valueof production
Taxes for period
Temporary differences
Current taxation

27. Transactions with parent, subsidiary and associated companies and relatedparties
The Company enters into commercial and financial transactions with companies
owned by entities that directly or indirectly control PRADA spa (related parties). Detailsof the amounts reported in the financial statements resulting from transactions withrelated parties are summarized in the table below.
The said transactions mainly refer to the sale of goods, commercial services, loans
granted and received. These transactions take place on an arm’s length basis on thesame economic terms as transactions with third parties.
The transactions with related party Fratelli Prada spa include transactions between
PRADA spa and Fratelli Prada spa in relation to the franchising agreement regarding
the Prada stores in Milan. The transactions reported for the twelve months ended
January 31, 2015 fall within the scope of application of Chapter 14A of the Hong
Kong Stock Exchange Listing Rules as they were qualified as continuing connectedtransactions subject to reporting and disclosure but exempted from independent
shareholders’ approval requirements. As requested by the Listing Rules, comprehensive
disclosure of these continuing connected transactions is contained in the PRADA spa
Announcement dated January 29, 2014 while a summary update is reported in the
Corporate Governance section.
The transactions with related party “Fratelli Prada spa – Galleria” refer to thetransactions between PRADA spa and Fratelli Prada spa in relation to the business
management agreement over the use by the latter of part of the Galleria Vittorio
Emanuele II property in Milan to conduct retail business. The transactions reported
for the twelve months ended January 31, 2015 fall within the scope of application ofChapter 14A of the Hong Kong Stock Exchange Listing Rules as they were qualified ascontinuing connected transactions subject to reporting and disclosure but exemptedfrom independent shareholders’ approval requirements. As requested by the Listing
Rules, comprehensive disclosure of these continuing connected transactions was
included in the PRADA spa Announcement dated January 29, 2013 while a summary
update is reported in the Corporate Governance section.
80

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The transactions with related party “Progetto Prada Arte srl - Galleria” refer to thetransactions between PRADA spa and Progetto Prada Arte srl in relation to the temporary
business partnership agreement regarding the use by the latter of part of the Galleria
Vittorio Emanuele II property in Milan to carry out cultural activities. The transactions
reported for the twelve months ended January 31, 2015 and January 31, 2014 fall within
the scope of application of Chapter 14A of the Hong Kong Stock Exchange Listing
Rules as they were qualified as continuing connected transactions subject to reportingand disclosure but exempted from independent shareholders’ approval requirements.
As requested by the Listing Rules, comprehensive disclosure of these continuingconnected transactions was included in the PRADA spa Announcement dated January
29, 2013 while a summary update is reported in the Corporate Governance section.
The transactions with related party “Progetto Prada Arte srl” include the transactions
between PRADA spa and Progetto Prada Arte srl in relation to the sponsorshipagreement for cultural activities to be carried out by the latter. The transactions reported
for the twelve months ended January 31, 2015 fall within the scope of application ofChapter 14A of the Hong Kong Stock Exchange Listing Rules as they were qualified ascontinuing connected transactions subject to reporting and disclosure but exemptedfrom independent shareholders’ approval requirements. As requested by the Listing
Rules, comprehensive disclosure of these continuing connected transactions was
included in the PRADA spa Announcement dated February 27, 2014 while a summary
update is reported in the Corporate Governance section.
The transactions with related party Luna Rossa Challenge 2013 srl reported for thetwelve months ended January 31, 2015 refer to sponsorship of the Luna Rossa sailingteam and its participation in the America’s Cup Edition XXXV. They fall within the scopeof application of Chapter 14A of the Hong Kong Stock Exchange Listing Rules as they
were qualified as continuing connected transactions subject to reporting and disclosure
but exempted from independent shareholders’ approval requirements. As requestedby the Listing Rules, comprehensive disclosure of these continuing connectedtransactions was included in the PRADA spa Announcement dated February 27, 2014
while a summary update is reported in the Corporate Governance section.
Unlike the “non-exempt continuing connected transactions” and “non-exempt
connected transactions” described above, no other transaction reported in these
Financial Statements falls under the definition of “connected transaction” or“continuing connected transaction” provided by Chapter 14A of the Hong Kong Stock
Exchange Listing Rules or, if it does fall under the definition of “connected transaction”
or “continuing connected transaction” in terms of said Chapter 14A, is exempt from
reporting, disclosure and independent shareholders’ approval requirements again
under Chapter 14A.

PRADA spa

Separate Financial Statements 2014 (final 15 aprile).indd 81

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81

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Statement of financial position(amounts in thousands of Euro)

Trade
receivables

Tradereceivables

Jan 31, 2015

Trade
payablesJan 31, 2015

Jan 31, 2014

Parent company

140

180

-

-

PRADA Holding bv

-

180

-

-

PRADA Holding spa

140

-

-

-

529,255

433,354

318,494

200,257477

570

27,241

18,970Car Shoe Hong Kong Ltd

0

68

-

-

Car Shoe Italia Srl

-

9,845

-

48

Subsidiaries and associates
Artisans Shoes Srl

Car Shoe Sa

-

0

-

-

Car Shoe Singapore Pte. Ltd

-

24

-

21

Car Shoe UK Ltd

0

35

(0)

Church Footwear (Shanghai) Co. Ltd

7

83

-

-

Church & Co. (USa) Ltd

20

82

1

670

Church & Co. Plc

19,36913,152

1,101

Church Austria Gmbh

129

66

-

-

Church Denmark Aps

46

-

-

-

Church English shoes Sa
Church Footwear Ab

2

4

-

-

159

135

-

-

Church France Sa

122

62

-

-

Church Holding UK Plc

367

366

-

-

Church Hong Kong Retail Ltd

186

114

-

-

1

3

-

12

Church Ireland Retail Ltd
Church Italia Srl

1,458

715

45

Church Japan Co., Ltd

5

43

-

-

Church Netherlands Bv

183

165

-

-

Church Singapore Pte Ltd

167

116

-

-

Church Spain Sl

38

27

-

0

Church UK Retail Ltd

1,005

797

8

Church's English Shoes Sw.Sa

28

36

6

-

IPI Logistica Srl

594

890

3,162

13,350Kenon Ltd.

(1)

7

-

-

Marchesi Angelo srl

-

-

10

264

Pellettieri d'Italia Srl

37

15

1,248

Post Development Corp.

3

0

-

-

PRADA (Thailand) Co.,Ltd

688

973

214

28

111,02955,854

11,587

2,906

524

476

663

62

PRADA Austria Gmbh

3,421

3,539

1,059

126

PRADA Bosphorus Deri Mamuller Limited Sirketi

3,137

7,431

5,224

174

PRADA Asia Pacific Ltd
PRADA Australia Pty. Ltd

PRADA Brasil Importaçao e Comercio de Artigos deLuxo Ltda

4,789

4,254

16,337-PRADA Canada Corp.

2,350(2,609)

2,674

147

PRADA Company Sa

(10)

32

-

-

PRADA Czech Republic Sro

755

820

611

495

PRADA Dongguan Trading Co. Ltd

57

10

349

326

PRADA Emirates Llc (1)

1,153

1,144

23

35

PRADA Far East Bv

3,139

3,091

1,058

7

PRADA Fashion Commerce (Shanghai) Co. Ltd

17,363

13,446

31,431252

PRADA Germany Gmbh

1,658

15,120

9,189

3,050

PRADA Hellas S. Ltd

126

1,515

122

67

PRADA Hong Kong P.D. Ltd

201

126

280

348

PRADA India Fashion Private Ltd.

82

Jan 31, 2014

Trade
payables

19

0

-

-

PRADA Japan Co., Ltd

22,48548,921

1,208

726

PRADA Kazakhstan Llp

5,613

4,671

556

15

PRADA spa

Separate Financial Statements 2014 (final 15 aprile).indd 82

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15/04/15 18:42

(amounts in thousands of Euro)

Trade
receivables

TradereceivablesTradepayablesTradepayablesJan 31, 2015

Jan 31, 2014

Jan 31, 2015

Jan 31, 2014

PRADA Korea Ltd

15,848

1,095

394

66

PRADA Kuwaitt Wll

559

415

-

3

PRADA Maroc Sarlau

2,599

3,129

3,675

540

PRADA Middle East Fzco

21,29414,005

1,069

767

PRADA Montecarlo Sam

(376)

1,946

1,816

214

PRADA New Zealand Pty ltd

260

112

375

-

PRADA Panama, S.a.

279

-

268

702

PRADA Portugal, Unipessoal Lda

2,612

1,870

249

PRADA Retail Aruba N.v.

2,165

-

380

-

PRADA Retail France Sas

20,58524,012

14,598

7,105

PRADA Retail Malaysia Sdn

101

233

71

(0)

PRADA Retail Mexico S. de r.l.

6,970

3,277

4,967

617

312

-

222

-

PRADA Retail Spc

PRADA Retail South Africa (Pty) Ltd

2,954

843

27

-

PRADA Retail UK Ltd

28,584

20,290

6,742

3,013

PRADA Rus Llc

8,312

12,405

4,088

1,994

PRADA Sa135,719

15,903

28,346

29,204PRADA Saudi Arabia Ltd.

199

-

-

-

PRADA Singapore Pte, Ltd

275

686

14,816

11

PRADA Spain Sa

10,461

10,625420

497

PRADA Stores Srl

44,45057,947

7,964

2,101

PRADA Sweden Ab

(762)

1,513

262

170

PRADA Switzerland Sa

5,252

512

1,381

30

PRADA Taiwan Ltd Taipei

564

448

5,038

-

PRADA Ukraine Llc

3,261

3,094

991

(3)

PRADA Usa Corp.

3,885

91,73447,474

101,632PRADA Vietnam Limited Liability Company

822

-

858

-

Prm Services, S. de R.l. de CV

133

-

-

-

Tannerie Limoges sas

425

-

-

-

-

16

-

1

24

39

0

-

-

449

-

120

24,507

16,759

5,947

826

136

142

-

-

1,190

615

1,669

922

Space Caffè Srl
Space Hong Kong Ltd
Space Sa
Space Usa Corp.
TRS Guam Boutique
TRS Hawaii Llc
TRS Hong Kong Ltd

10

4

-

-

TRS Hong Kong Ltd - Macau

366

174

0

-

TRS New Zealand Pty. Ltd

28

6

-

-

TRS Okinawa Kk

746

539

103

252

TRS Saipan Boutique

55

26

-

-

TRS Singapore Pte Limited

57

2

-

-

Company controlled by PRADA Holding spa

-

10

-

-

EXHL Italia Srl

-

10

-

-

PRADA spa

Separate Financial Statements 2014 (final 15 aprile).indd 83

Separate Financial Statements 2014 - Notes to the Financial Statements

83

15/04/15 18:42

(amounts in thousands of Euro)

Related parties

Trade
receivables

TradereceivablesTradepayablesTradepayablesJan 31, 2014

Jan 31, 2015

Jan 31, 2014

Jan 31, 2015

36,41032,002

21,033

6,191

Chora Srl

-

-

3,233

2,707

Conceria Superior spa

1-

12,226-

Fin-Reta Srl

-

(0)

-

90

29,261

25,434

2,617

2,363

912

1,335

-

-

-

-

2

-

F.lli Prada spa
F.lli Prada spa - Galleria (2)Gran Caffè snc
HMP Srl
Le Mazza Srl
Luna Rossa Challenge 2013 NZ Ltd
Luna Rossa Challenge Srl

8

8

-

-

105

71

867

511

1,278

1,284

-

-

721

164

154

154
5

Pelletteria Reta Srl

-

-

-

PRA 1 Srl

-

983

75

-

336

1,008

1,781

19

Progetto Prada Arte Srl
Progetto Prada Arte Srl – Galleria (3)Rubaiyat Modern Lux. Prod. Ltd
Stiching Fondazione PRADA
Others (4)
Total

566

906

-

-

2,342

-

-

-

880

810

-

-

-

-

78

341

565,805

465,545

339,527

206,449

Note:(1) Company consolidated on basis of definition of control expressed in IFRS 10(2) Amount represents consideration for premises occupied by Fratelli Prada spa in the property in Galleria Vittorio Emanuele II, Milan,
under the business management agreement between PRADA spa and Fratelli Prada spa.
(3) Amount represents recharged portion of rental costs for premises occupied by Progetto Prada Arte srl at Galleria Vittorio Emanuele II
in Milan, on the basis of temporary business partnership agreement between PRADA spa and Progetto Prada Arte srl.
(4) Relative of a director.

84

PRADA spa

Separate Financial Statements 2014 (final 15 aprile).indd 84

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(amounts in thousands of Euro)

Financialreceivables

Other
receivables

Financialreceivables

Other
receivables

Jan 31, 2015

Jan 31, 2015

Jan 31, 2014

Jan 31, 2014

Parent company

-

-

-

48

PRADA Holding bv

-

-

-

48

PRADA Holding spa

-

-

-

-

Subsidiaries and associates

338,526

3,173

269,982

5,378

Artisans Shoes srl

5,420

1,304

2,305

1,703

Car Shoe Italia srl

-

-

-

1

Church & Co. plc

2,206

-

2,207

-

Church Holding UK plc

1,522

-

1,620

-

Church Italia srl

-

179

-

2,452

IPI Logistica srl

-

10

-

596

Pellettieri d'Italia srl

-

2

-

-

PRADA Asia Pacific ltd

-

65

-

1

PRADA Australia Pty. ltd

-

-

-

-

PRADA Austria gmbh

7,003

-

-

-

PRADA Bosphorus Deri Mamuller Limited Sirketi

12,793

-

5,688

-

PRADA Brasil Importaçao e Comercio de Artigos de Luxo Ltda

24,083-

14,768-PRADA Czech Republic sro

1,571

-

1,569

-

-

3

-

-

PRADA Germany gmbh

17,345

116

7,305

-

PRADA Hellas S. ltd

2,003

-

2,287

-

470

84

1,149

80

PRADA Dongguan Trading Co. Ltd

Prada Hong Kong P.D. Ltd.
PRADA Kazakhstan Llp

-

-

-

478

PRADA Maroc Sarlau

5,667

-

5,679

-

PRADA Middle East Fzco

3,556

-

6,195

-

PRADA Montecarlo sam.

4,238

-

702

-

PRADA Portugal, Unipessoal lda

1,895

-

1,867

-

PRADA Retail Aruba N.v.

-

327

-

-

PRADA Retail France sas

60,684-

26,206-PRADA Retail Mexico S. de r.l.

-

3

-

-

PRADA Retail South Africa (Pty) Ltd

-

45

-

-

PRADA Retail Spc

-

-

2,436

47

PRADA Retail UK

17,594

-

6,954

0

PRADA Rus LLC

17,205-24,2200

PRADA Sa

-

125

9,344

2

PRADA Saudi Arabia Ltd.

-

6

-

-

PRADA Singapore Pte, ltd

-

24

-

0

PRADA Spain sa

16,141-

15,9230

PRADA Stores srl

127,357795

125,2848

PRADA Switzerland Sa

5,141

1

-

-

PRADA Ukraine Llc.

4,632

1

3,587

1

PRADA USA Corp.

-

18

-

7

Prm Services, S. de R.l. de CV

-

4

-

-

Tannerie Limoges sas

-

60

-

-

Space Caffè srl

-

-

64

0

Space sa

-

-

2,624

-

Controlled by PRADA Holding spa

-

-

-

27

EXHL Italia srl

-

-

-

27

PRADA spa

Separate Financial Statements 2014 (final 15 aprile).indd 85

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85

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(amounts in thousands of Euro)

Related parties

Financialreceivables

Other
receivables

Financialreceivables

Other
receivables

Jan 31, 2015

Jan 31, 2015

Jan 31, 2014

Jan 31, 2014
1,644

741

19,871-Chora srl

-

2,924

-

-

F.lli Prada spa

-

-

-

1

F.lli Prada spa - Galleria (1)

-

3,174

-

851

Luna Rossa Challenge Srl-

12,379--Peschiera Immobiliare srl

-

82

-

81

PRA 1 Srl

-

90

-

-

Progetto Prada Arte srl

-

88

-

74

741

1,134

-

637

339,267

23,044

269,982

7,097

Progetto Prada Arte srl – Galleria (2)
Total

Note:
(1) This amount is a non monetary receivable for deferred rental income due from Fratelli Prada spa following application of“IAS 17 Leases” to the business management agreement between PRADA spa and Fratelli Prada spa(2) Other receivables are non monetary receivable for deferred rental income due from Progetto Prada Arte srl following
application of “IAS 17 Leases” to the temporary business partnership contract between PRADA spa and Progetto Prada Arte srl.
Financial receivables, referred to the investment in the premises in Galleria Vittorio Emanuele II, earn interest at a rate of 2.5%
and will last for the concession period.

86

PRADA spa

Separate Financial Statements 2014 (final 15 aprile).indd 86

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(amounts in thousands of Euro)

Subsidiaries and associates

FinancialpayablesOtherpayablesFinancialpayablesOtherpayablesJan 31, 2015

Jan 31, 2015

Jan 31, 2014

Jan 31, 2014
6,950

365,690

3,497

342,031

Artisans Shoes srl

-

161

-

312

Car Shoe Italia srl

-

-

-

1,795

Church Italia srl

-

57

-

190

IPI Logistica srl

465

3

1,367

24

-

372

-

-

22,044129

21,855107

Pellettieri d'Italia srl
Post Development Corp.
PRADA Austria Gmbh

-

-

50

-

PRADA Dongguan Trading Co. Ltd

-

61

-

4

236,625-

223,786

PRADA Germany gmbh

PRADA Far East bv

2,689

-

1,996

-

PRADA Retail France sas

6,692

-

1,487

-

PRADA Retail UK
PRADA sa
PRADA Stores srl

0

-

28

-

96,9591,573

91,279

1,572
2,921

-

1,140

-

PRADA Switzerland Sa

18

-

-

-

PRADA USA Corp.

198

-

166

10

Space Caffè srl

-

-

-

14

Space sa

-

-

18

-

Related parties-

13,655-

13,365

Fin-Reta Srl-

13,384-

13,247F.lli Prada spa

-

8

-

8

Luna Rossa Challenge srl

-

21

-

21

Progetto Prada Arte srl

-

211

-

59

Stiching Fondazione PRADA

-

32

-

30

365,690

17,152342,031

20,341

Total(amounts in thousands of Euro)

Other liabilities
January 31, 2015

January 31, 2014

Members of the Board of Directors

143

143

Others (1)

354

263

Note:
(1) Relative of a Director

PRADA spa

Separate Financial Statements 2014 (final 15 aprile).indd 87

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87

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Income Statement(amounts in thousands of Euro)

Subsidiaries and associates

Net
Revenues

Cost ofgoods soldJan 31, 2015

Jan 31, 2014

Cost ofgoods soldJan 31, 2015

Jan 31, 2014

1,441,947

1,452,483

93,923

106,171

Artisans Shoes Srl--

75,01264,042Car Shoe Italia Srl

-

7,474

-

(258)

Church & Co. Plc

6,637

4,432

1,217

1,517

Church Italia Srl

2,488

1,846

-

-

IPI Logistica Srl

-

-

3,586

35,1971,480

Pellettieri d'Italia Srl

-

-

7,238

PRADA (Thailand) Co.,Ltd

-

-

(1)

-

600,221555,126

1,049

1,062

PRADA Asia Pacific Ltd
PRADA Australia Pty. Ltd
PRADA Austria Gmbh

-

-

-

2

15,963

19,621

6(0)(0)

PRADA Bosphorus Deri Mamuller Limited Sirketi

8,371

9,479

11

PRADA Canada Corp.

21,811

17,359(0)-

PRADA Czech Republic Sro

3,093

4,311

(0)

-

PRADA Dongguan Trading Co. Ltd

-

-

1,796

326

921

1,018

7

(0)

21,735

17,826

-

-

-

-

10

7

PRADA Germany Gmbh

35,41043,99922(1)

PRADA Hellas S. Ltd

1,528

2,666

6

(0)

PRADA Emirates Llc (1)PRADA Far East Bv
PRADA Fashion Commerce (Shanghai) Co. Ltd

PRADA Hong Kong P.D. Ltd.

-

-

1,618

1,719

PRADA Japan Co., Ltd

118,546

116,940

580

513

PRADA Kazakhstan Llp

2,507

2,823

-

-

-

-

386

238

PRADA Korea Ltd
PRADA Kuwait Wll

395

408

-

-

PRADA Maroc Sarlau

1,263

1,066

-

(21)

PRADA Middle East Fzco

43,142

41,123(16)

PRADA Montecarlo Sam

2,010

4,981

-

-

PRADA Portugal, Unipessoal Lda

5,913

5,495

6

(0)

PRADA Retail Aruba N.v.

720

-

-

-

PRADA Retail France Sas

70,683

97,883

198

(1)

-

-

16

-

2,843

943

-

(0)

PRADA Retail Malaysia Sdn
PRADA Retail Mexico S. de r.l.
PRADA Retail Spc

(14)

-

(0)

(0)

PRADA Retail UK Ltd

105,053

105,116390(2)

PRADA Rus Llc

13,277

14,790

12

8

539

-

60

(20)
(0)

PRADA Singapore Pte, Ltd
PRADA Spain Sa

14,68015,1896

PRADA Stores Srl

25,347

66,348

22

11

89

1,870

(0)

(0)

PRADA Sweden Ab
PRADA Switzerland Sa

18,510

-

27

(0)

-

-

(2)

0

PRADA Ukraine Llc

1,065

1,275

-

-

PRADA Usa Corp.

215,072

197,367

662

352

PRADA Taiwan Ltd Taipei

PRADA Vietnam Limited Liability Company
Space Caffè Srl
Space Hong Kong Ltd
Space Sa

88

Net
Revenues

623

-

-

-

-

-

-

1

64

-

-

-

-

12,609--Space USa Corp.

67,932

69,219--TRS Hawaii Llc

8,639

7,945

-

-

TRS Okinawa Kk

4,871

3,936

-

-

PRADA spa

Separate Financial Statements 2014 (final 15 aprile).indd 88

Separate Financial Statements 2014 - Notes to the Financial Statements

15/04/15 18:42

(amounts in thousands of Euro)

Related parties
Conceria Superior spa
F.lli Prada spa

Net
Revenues

Net
Revenues

Cost ofgoods soldJan 31, 2015

Jan 31, 2014

38,11837,942

Cost ofgoods soldJan 31, 2015

Jan 31, 2014

48,132

20,477

1,858-

18,476-48,247

17

1
1,744

Le Mazza Srl

-

-

1,715

Luna Rossa Challenge 2013 NZ

-

1

-

-

Luna Rossa Challenge Srl

8

(115)

-

113

Pelletteria Reta Srl

-

-

9

Progetto Prada Arte Srl

1

-

260

-

167

-

-

-

1,480,066

1,500,616

114,400

108,029

Rubaiyat Modern Lux. Prod. Ltd
Total

PRADA spa

Separate Financial Statements 2014 (final 15 aprile).indd 89

Separate Financial Statements 2014 - Notes to the Financial Statements

89

15/04/15 18:42

(amounts in thousands of Euro)Parent company

Operatingexpenses

Jan 31, 2015

Jan 31, 2014

Interest andother financial
income(expenses), net

Interest andother financial
income(expenses), net

Jan 31, 2015

Jan 31, 2014

(69)

(55)

-

-

PRADA Holding Bv

-

(55)

-

-

PRADA Holding spa

(69)

-

-

-

144,058

136,523

105,501

47,973

2,990

2,647

22

19

Artisans Shoes Srl – dividends paid

-

-

1,022

705

Car Shoe Hong Kong Ltd

0

(12)

-

-

Car Shoe Italia Srl-(2,234)--

Subsidiaries and associates
Artisans Shoes Srl

Car Shoe Singapore Pte. Ltd

-

(42)

-

-

Car Shoe UK Ltd

-

(29)

-

-

Church & Co. (USa) Ltd

(28)

(86)

-

-

(1,086)(1,036)63

25

Church Austria Gmbh

(63)

(19)

-

-

Church Denmark Aps

(44)

-

-

-

Church & Co. Plc

Church English shoes Sa

(8)

(8)

-

-

Church Footwear (Shanghai) Co. Ltd

(18)

(119)

-

-

Church Footwear Ab

(25)

(118)

-

-

Church France Sa

(98)

(118)

-

-

Church Holding UK Plc

(1)

(50)

46

20

Church Hong Kong Retail

(64)

(78)

-

(78)

Church Japan Co., Ltd

(12)

(81)

-

(81)

Church Ireland Retail Ltd

(8)

(9)

-

-

(783)

(629)

-

-

Church Netherlands Bv

(18)

(118)

-

-

Church Singapore Pte Ltd

(58)

(15)

-

-

Church Italia Srl

Church Spain Sl

(11)

(2)

-

-

Church UK Retail Ltd

(200)

(222)

-

-

Church's Eng. Shoes Sw.Sa

(33)

(49)

-

-

IPI Logistica Srl

150

312

-

809

IPI Logistica Srl – dividends paid

-

-

959

Kenon Ltd

(2)

(7)

1,712

-

Marchesi Angelo Srl

9

-

-

-

Pellettieri d'Italia Srl

396

-

-

-

Post Development Corp.

(3)

-

(250)

(191)

PRADA (Thailand) Co.,Ltd

(662)

(800)

-

-

PRADA Asia Pacific Ltd(16,305)(8,799)(8)-

PRADA Australia Pty. Ltd

(217)

(829)

-

2

PRADA Austria Gmbh

(372)

(772)

3

(10)

PRADA Bosphorus Deri Mamuller Limited Sirketi

3,040(2,147)

1,080

506

PRADA Brasil Importaçao e Comercio de Artigos deLuxo Ltda

14,463(1,481)

2,948

832

PRADA Canada Corp.

(195)

(588)

-

-

PRADA Company Sa

(0)

(20)

-

21

PRADA Czech Republic Sro

(168)

(217)

56

PRADA Dongguan Trading Co. Ltd

(65)

(10)

-

-

PRADA Emirates Llc (1)

(835)

(875)

-

(3,226)PRADA Far East Bv

(497)

(535)

67,777PRADA Fashion Commerce (Shanghai) Co. Ltd

22,822(8,482)--PRADA Germany Gmbh

(2,271)(1,490)124

12PRADA Hellas S. Ltd

(447)

(574)

69

29

PRADA Hong Kong P.D. Ltd

1,514

1,636

63

6

(19)

(0)

-

-

(7,269)(7,539)--PRADA India Fashion Private Ltd
PRADA Japan Co., Ltd

90

Operatingexpenses

PRADA spa

Separate Financial Statements 2014 (final 15 aprile).indd 90

Separate Financial Statements 2014 - Notes to the Financial Statements

15/04/15 18:42

(amounts in thousands of Euro)PRADA Kazakhstan Llp
PRADA Korea Ltd

Operatingexpenses

Interest andother financial
income(expenses), net

Operatingexpenses

Interest andother financial
income(expenses), net

Jan 31, 2015

Jan 31, 2014

Jan 31, 2015

83

(1,312)-

Jan 31, 2014-

(17,060)(2,854)--PRADA Kuwait Wll

(286)

(264)

-

-

PRADA Maroc Sarlau

1,850

(742)

78

65

PRADA Middle East Fzco

(1,142)(1,225)--PRADA Montecarlo Sam

275

(254)

97

10

PRADA New Zealand Pty Ltd

227

(88)

-

-

PRADA Panama, S.a.

(6)

-

-

29

PRADA Portugal, Unipessoal Lda

(689)

(614)

35

PRADA Retail Aruba N.v.

(72)

-

-

-

PRADA Retail France Sas

9,008

2,344

1,001

76

PRADA Retail Malaysia Sdn

(223)

(563)

-

-

PRADA Retail Mexico S. de r.l.

3,537

(248)

-

-

(80)

-

-

-

PRADA Retail Spc

PRADA Retail South Africa (Pty) Ltd(2,951)

(746)

95

15

PRADA Retail UK

5,872(2,728)224

100

PRADA Rus Llc

290(2,368)

2,240

1,635

38,941

214,278

(155)

(161)

-

-

20,00045,000PRADA SaPRADA Sa – dividends paid
PRADA Saudi Arabia Ltd.

(196)

-

-

-

PRADA Singapore Pte, Ltd

12,949(1,323)-170

PRADA Spain Sa(1,481)(2,244)613

PRADA Stores Srl(5,718)

-

4,550

-

PRADA Sweden Ab(73)(1,323)--PRADA Switzerland Sa(2,585)(2,244)613

170

PRADA Taiwan Ltd Taipei

3,465

(944)

-

-

PRADA Ukraine Llc

655

(424)

222

61

PRADA Usa Corp.

87,327(11,171)--

PRADA Vietnam Limited Liability Company

698

-

-

-

Prm Services, S. de R.l. de CV

(156)

-

-

-

Tannerie Limoges sas

(17)

-

-

1

Space Caffè Srl
Space Hong Kong Ltd
Space Sa

-

(20)

-

(56)

(67)

-

-

-

(352)

-

8

Space USA Corp.

(731)

(955)

-

-

TRS Guam Boutique

(153)

(191)

-

-

TRS Hawaii Llc

(225)

(239)

-

-

(6)

(4)

-

-

TRS Hong Kong Ltd
TRS Hong Kong Ltd - Macau

(430)

(319)

-

-

TRS New Zealand Pty. Ltd

(29)

(22)

-

-

TRS Okinawa Kk

(130)

(55)

-

-

TRS Saipan Boutique

(57)

(26)

-

-

TRS Singapore Pte Limited

(66)

(19)

-

-

Companies controlled by PRADA Holding spa

(6)

(6)

-

-

EXHL Italia Srl

(6)

(6)

-

-

PRADA spa

Separate Financial Statements 2014 (final 15 aprile).indd 91

Separate Financial Statements 2014 - Notes to the Financial Statements

91

15/04/15 18:42

Interest andother financial
income(expenses), net

Interest andother financial
income(expenses), net

Jan 31, 2014

Jan 31, 2015

Jan 31, 2014

22,890(2,390)

(133)

(77)

3,156

2,734

(15)

(11)

Operatingexpenses

Operatingexpenses

Jan 31, 2015
Related parties
Chora Srl(amounts in thousands of Euro)

Conceria Superior spa

34

-

-

-

Fin-Reta Srl (2)

120

58

(137)

(68)

F.lli Prada spa
F.lli Prada spa - Galleria (3)(362)(1,731)--(4,645)(2,186)--

Gran Caffè snc

4

-

-

-

HMP Srl

35

242

-

2

Le Mazza Srl

3

3

-

-

Luna Rossa Challenge 2013 NZ Ltd

6

(686)

-

-

12,157

(39)

-

-

(0)

1

-

-

Luna Rossa Challenge Srl
Pelletteria Reta Srl
Peschiera Immobiliare Srl

505

497

-

-

PRA 1 Srl

797

354

-

-

Progetto Prada Arte Srl

7,506

(495)

-

-

Progetto Prada Arte Srl – Galleria (4)(1,517)(1,509)19-

Rubaiyat Modern Lux. Prod. Ltd(2,172)---

Stiching Fondazione PRADA

6,700

(368)

-

-

563

734

-

-

166,874

134,071

105,368

47,896

Others (5)Total

Notes:(1) Company consolidated on basis of definition of control expressed in IFRS 10(2) The interest expense represents the expense for the year, calculated at the effective rate of interest, applied to the discounted
long-term debt which relates to the acquisition of rights of usufruct(3) Amount includes non-monetary deferred rental income of Euro 2,324 thousand recognized in relation to Fratelli Prada spa
following application of “IAS 17 Leases” to the business management agreement between PRADA spa and Fratelli Prada spa(4) Amount includes non-monetary deferred rental income of Euro 497 thousand recognized in relation to Progetto Prada
Arte srl following application of “IAS 17 Leases” to the temporary business partnership agreement between PRADA spa andProgetto Prada Arte. The interest is earned on the financial receivable relating to the investment in the premises in Galleria
Vittorio Emanuele II.
(5) Relative of a Director

92

PRADA spa

Separate Financial Statements 2014 (final 15 aprile).indd 92

Separate Financial Statements 2014 - Notes to the Financial Statements

15/04/15 18:42

Commitments
Guarantees given
Guarantees given relate to:––sureties of Euro 26 million in favor of third parties on behalf of Group companies––

comfort letters for Euro 241 million issued to banks on behalf of subsidiaries

Operating leases
As at January 31, 2015, operating lease and concession fee commitments were broken
down by due date as follows:
January 31
2015

January 31
2014

Due within a year

19,266

20,799Due between one and five years

67,951

74,962

Due after more than five years

101,212111,981

Total commitments for operating lease/concession fees

188,429

207,742(amounts in thousands of Euro)

Rental/lease income commitments are shown by due date as follows:(amounts in thousands of Euro)

January 31
2015

January 31
2014

Due within a year

8,388

8,726

Due between one and five years

32,12833,025Due after more than five years

87,421

95,369Total rental/lease income commitments

127,937

137,120

Other commitments
At January 31, 2015, PRADA spa and Al Tayer Insignia llc were party to an agreement
signed in 2011 with the objective of developing the Prada and Miu Miu brands in theretail business in the Middle East. The agreement grants PRADA spa a call option on
up to 20% of the share capital of PRADA Middle East Fzco. As indicated by Paragraph
46 of IAS 39, an entity must measure financial assets, including derivatives, at fairvalue, except for investments in equity instruments that do not have a market pricelisted on an active market and whose fair value cannot be reliably measured. PRADASpA management believes that, at the reporting date, the above option fell under thecircumstances described by IAS 39 and, consequently, its fair value cannot be reliably
measured.
Additional information
Remuneration of the Board of Directors(amounts in thousands of Euro)

January 31
2015

Directors’ fees

3,400

Remuneration and other benefits

17,289Bonuses and other incentives

8,981

Benefits in kind

135

Pension, healthcare and TFR contributions

389

Total

PRADA spa

Separate Financial Statements 2014 (final 15 aprile).indd 93

30,194

Separate Financial Statements 2014 - Notes to the Financial Statements

93

15/04/15 18:42

Fees of Deloitte & Touche Spa
The fees of independent audit firm Deloitte & Touche spa for the statutory audit of
PRADA spa (audit of the Separate and Consolidated Financial Statements, checks thatthe accounting records are properly maintained and operations are correctly reflectedin the accounting records) amounted to Euro 0.5 million.
The following table shows the fees paid to Deloitte & Touche spa and its network forthe audit of the financial statements for the period ended January 31 2015 and forother non-audit services:
Fees in thousandsof EuroType of service

Audit Firm

Audit services

Deloitte & Touche spa

480

Other services

Deloitte network

54

Out of pocket expenses

3

Total fees of audit firm for period ended January 31, 2015

537

Income statement by nature
January 31
2015(amounts in thousands of Euro)Net revenues

2,282,447

Change in inventories

92,307Purchases of raw materials and finished goods

762,374

Labor costs

227,700

Amortization, depreciation and impairment

32,444

Other operating expenses

839,256

EBIT

512,980

Interest income (expenses), net

5,129

Exchange gains (losses) - realized(2,209)Exchange gains (losses) - unrealized(27,379)

Dividends

92,982Other financial income (expenses)(33,940)

Interest and other financial income (expenses)

34,582

Income before taxation

547,562

Taxation

162,133

Net income for the period

385,429

Headcount
The average headcount by business division at January 31, 2015 and 2014 is shown
below:(no of employees)

Production

January 31
2014

1,349

1,302

Product design and development

932

872

Communications

54

56

Selling595

573

General and administrative services

529

506

3,458

3,309

Total

94

January 31
2015

PRADA spa

Separate Financial Statements 2014 (final 15 aprile).indd 94

Separate Financial Statements 2014 - Notes to the Financial Statements

15/04/15 18:42

Employee remuneration
Employee remuneration in the periods ended January 31, 2015 and January 31, 2014is analyzed by business division as follows:
January 31
2015

January 31
2014

Production

70,90767,600

Product design and development

63,481

58,836

Communications

6,453

6,933

Selling

41,00938,752

General and administrative services

45,85046,428

Total

227,700

218,549(amounts in thousands of Euro)PRADA spa

Separate Financial Statements 2014 (final 15 aprile).indd 95

Separate Financial Statements 2014 - Notes to the Financial Statements

95

15/04/15 18:42

96

PRADA spa

Separate Financial Statements 2014 (final 15 aprile).indd 96

Separate Financial Statements 2014 - Notes to the Financial Statements

15/04/15 18:42

Independent Auditors’ Report

PRADA spa

Separate Financial Statements 2014 (final 15 aprile).indd 97

Separate Financial Statements 2014 - Independent Auditors' Report97

15/04/15 18:42

98

PRADA spa

Separate Financial Statements 2014 (final 15 aprile).indd 98

Separate Financial Statements 2014 - Independent Auditors' Report

15/04/15 18:42

PRADA spa

Separate Financial Statements 2014 (final 15 aprile).indd 99

Separate Financial Statements 2014 - Independent Auditors' Report99

15/04/15 18:42

100

PRADA spa

Separate Financial Statements 2014 (final 15 aprile).indd 100

Separate Financial Statements 2014 - Independent Auditors' Report

15/04/15 18:42

Statutory Auditors' Report

PRADA spa

Separate Financial Statements 2014 (final 15 aprile).indd 101

Separate Financial Statements 2014 - Statutory Auditors' Report101

15/04/15 18:42

102

PRADA spa

Separate Financial Statements 2014 (final 15 aprile).indd 102

Separate Financial Statements 2014 - Statutory Auditors' Report

15/04/15 18:42

PRADA spa

Separate Financial Statements 2014 (final 15 aprile).indd 103

Separate Financial Statements 2014 - Statutory Auditors' Report

103

15/04/15 18:42

104

PRADA spa

Separate Financial Statements 2014 (final 15 aprile).indd 104

Separate Financial Statements 2014 - Statutory Auditors' Report

15/04/15 18:42

PRADA spa

Separate Financial Statements 2014 (final 15 aprile).indd 105

Separate Financial Statements 2014 - Statutory Auditors' Report

105

15/04/15 18:42