Interim Financial Report 2017

PRADA spa
(Hong Kong Stock code: 1913)

الخارجية. وقدْ كان من الممكن أن يكون من الممكن أن يكون من الممكن أن يكون من الممكن أن يكون من الممكن أن يكون من الممكن أن يكون من الممكن أن يكون من الممكن أن يكون من الممكن أن يكون من الممكن أن يكون من الممكن أن يكون من الممكن أن يكون من الممكن أن يكون من الممكن أن يكون من الممكن أن يكون من الممكن أن يكون من الممكن أن يكون من الممكن أن يكون من الممكن أن يكون من الممكن أن يكون من الممكن أن يكون من الممكن أن يكون من الممكن أن يكون من الممكن أن يكون من الممكن أن يكون من الممكن أن يكون من الممكن أن يكون من الممكن أن يكون من الممكن أن يكون من الممكن أن يكون من الممكن أن يكون من الممكن أن يكون من الممكن أن يكون من الممكن أن يكون من الممكن أن يكون من الممكن أن يكون من الممكن أن يكون من الممكن أن يكون من الممكن أن يكون من الممكن أن يكون من الممكن أن يكون من الممكن أن يكون من الممكن أن يكون من الممكن أن يكون من الممكن أن يكون من الممكن أن يكون من الممكن أن يكون من الممكن أن يكون من الممكن أن يكون من الممكن أن يكون من

الخارجية، ومن ثم فإننا ننسب إلى وجود هذه الخسائر التي لا يمكن أن تكون في حالة وجودها، فبعضنا لا يمكن أن يكون في حالة وجودها، بل يمكن أن يكون في حالة وجودها، بل يمكن أن يكون في حالة وجودها، بل يمكن أن يكون في حالة وجودها، بل يمكن أن يكون في حالة وجودها، بل يمكن أن يكون في حالة وجودها، بل يمكن أن يكون في حالة وجودها، بل يمكن أن يكون في حالة وجودها، بل يمكن أن يكون في حالة وجودها، بل يمكن أن يكون في حالة وجودها، بل يمكن أن يكون في حالة وجودها،

Index

The PRADA Group 3
Financial Review 9
Corporate Governance 22
Interim condensed consolidated financial statements 31
Notes to the Interim condensed consolidated financial statements 37

Patrizio Bertelli

Miuccia Prada

PRADA Group
Interim Financial Report 2017

The PRADA Group

PRADA Group
Interim Financial Report 2017 - The PRADA Group
3

PRADA S.p.A. Corporate Information

Registered Office
Via A. Fogazzaro, 28
20135 Milan, Italy

Head Office
Via A. Fogazzaro, 28
20135 Milan, Italy

Place of business in Hong Kong registered under Part 16 of the Hong Kong Companies Ordinance
36/F, Gloucester Tower
The Landmark, 11 Pedder Street
Central, Hong Kong

Company web site
www.pradagroup.com

Hong Kong Stock Exchange Identification Number
1913

Board of Directors
Carlo Mazzi
(Chairman & Executive Director)
Miuccia Prada Bianchi
(Chief Executive Officer & Executive Director)
Patrizio Bertelli
(Chief Executive Officer & Executive Director)
Alessandra Cozzani
(Chief Financial Officer & Executive Director)
Stefano Simontacchi
(Non-Executive Director)
Maurizio Cereda
(Non-Executive Director)
Gian Franco Oliviero Mattei
(Independent Non-Executive Director)
Giancarlo Forestieri
(Independent Non-Executive Director)
Sing Cheong Liu
(Independent Non-Executive Director)

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

Remuneration Committee
Gian Franco Oliviero Mattei (Chairman)
Carlo Mazzi
Giancarlo Forestieri

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

Board of Statutory Auditors
Antonino Parisi (Chairman)
Roberto Spada (Standing member)
David Terracina (Standing member)

Supervisory Board
(Leg. Decr. 231/2001)
David Terracina (Chairman)
Gian Franco Oliviero Mattei
Paolo De Paoli

PRADA Group
Interim Financial Report 2017 - The PRADA Group

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 Peak
Hong 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, 25
20144 Milan, Italy

PRADA Group Structure

PRADA Group

Interim Financial Report 2017 - The PRADA Group

PRADA Group
Interim Financial Report 2017 - The PRADA Group

| 60% | PRADA Middle East fzco
Jebel Ali Free Zone-Dubai
DISTRIBUTION/SERVICES | 100% | PRADA Retail France sas
Paris
RETAIL | 80% | Marchesi Angelo srl
Milan
CONFECTIONERY | 100% | PRADA sa
Luxembourg
TRADEMARK |
| --- | --- | --- | --- | --- | --- | --- | --- |
| 49% | PRADA Emirates IIc
Dubai
RETAIL | 100% | PRADA Monte-Carlo sam
Monaco
RETAIL | 100% | Montenapoleone 9 srl
Milan
CONFECTIONARY | | Swiss Branch
Lugano
SERVICES |
| 49% | PRADA Kuwait wll
Kuwait City
RETAIL | 100% | PRADA Belgium sprl
Brusselies
RETAIL | | | 100% | PRADA Company sa
Luxembourg
SERVICES |
| 100% | PRADA Retail spc
Doha
RETAIL | 100% | PRADA Germany gmbh
Munich
RETAIL/SERVICES | | | | |
| 75% | PRADA Saudi Arabia Itd
Jeddah
RETAIL | 100% | PRADA Austria gmbh
Vienna
RETAIL | | | | |
| 100% | PRADA Retail South Africa (pty) Itd
Sandton
RETAIL | 100% | PRADA Czech Republic sro
Prague
RETAIL | | | | |
| 100% | PRADA Rus IIc
Moscow
RETAIL | 100% | PRADA Far East bv
Amsterdam
RETAIL | | | | |
| 100% | PRADA Ukraine IIc
Kiev
RETAIL | 100% | PRADA Switzerland sa
Lugano
RETAIL | | | | |
| 100% | PRADA Kazakhstan Ilp
Almaty
RETAIL | 100% | PRADA Spain sl
Madrid
RETAIL | | | | |
| 100% | PRADA Brasil
Importação e Comércio de Artigos de Luxo Itda
São Paulo
RETAIL | 100% | PRADA Portugal
Unipessoal Ida
Lisbon
RETAIL | | | | |
| 100% | PRM Services
S. de R.L. de C.V.
Mexico City
SERVICES | 100% | PRADA Hellas
Sole Partner IIc
Athens
RETAIL | | | | |
| 100% | PRADA Panama sa
Panama
RETAIL | 100% | PRADA Bosphorus Deri
Mamúller Itd Sirketi
Istanbul
RETAIL | | | | |
| 100% | PRADA Retail Aruba nv
Aruba
RETAIL | 100% | PRADA Retail UK Itd
London
RETAIL | | | | |
| 100% | PRADA Saint
Barthalamy sarl
Gustavia
RETAIL | | Ireland Branch
Dublin
RETAIL | | | | |
| 100% | PRADA Maroc Sarlau
Casablanca
RETAIL | 100% | PRADA Denmark aps
Copenhagen
RETAIL | | | | |
| | Maroc Branch
Marrakech
RETAIL | 100% | PRADA Finnish oy
Helsinki
RETAIL | | | | |

PRADA Group
Interim Financial Report 2017 - The PRADA Group

Financial Review

PRADA Group
Interim Financial Report 2017 - Financial Review
9

Consolidated Statement of Profit or Loss

(amounts in thousands of Euro)	six months ended July 31 2017 (unaudited)	%	six months ended July 31 2016 (unaudited)	%
Retail	1,442,556	98.2%	1,529,267	98.4%
Royalties	26,080	1.8%	24,905	1.6%
Net Revenues	1,468,636	100.0%	1,554,172	100.0%
Cost of goods sold	(379,995)	-25.9%	(432,231)	-27.8%
Gross Margin	1,088,641	74.1%	1,121,941	72.2%
Operating expenses	(921,804)	-62.7%	(908,240)	-58.4%
EBIT	166,837	11.4%	213,701	13.8%
Interest and other financial expenses, net	(890)	-0.1%	(6,756)	-0.4%
Dividends from investments	357	0.0%	558	0.0%
Income before taxation	166,304	11.3%	207,503	13.4%
Taxation	(50,222)	-3.4%	(62,206)	-4.1%
Net income for the period	116,082	7.9%	145,297	9.3%
Net income - non-controlling interests	340	0.0%	3,374	0.2%
Net income - Group	115,742	7.9%	141,923	9.1%
Depreciation, amortization and impairment	112,716	7.7%	116,290	7.5%
EBITDA	279,553	19.1%	329,991	21.2%
Basic and diluted earnings per share (in Euro per share)	0.045		0.055

PRADA Group
Interim Financial Report 2017 - Financial Review

Key financial information

Key figures from statement of profit or loss (amounts in thousands of Euro)	six months ended July 31 2017 (unaudited)	twelve months ended January 31 2017 (audited)	six months ended July 31 2016 (unaudited)	change % six months 2017 vs six months 2016
Net revenues	1,468,636	3,184,069	1,554,172	-5.5%
EBITDA	279,553	653,448	329,991	-15.3%
EBITDA%	19.1%	20.5%	21.2%	-
EBIT	166,837	431,181	213,701	-21.9%
EBIT%	11.4%	13.5%	13.8%	-
Net income of the Group	115,742	278,329	141,923	-18.4%
Earnings per share (Euro)	0.045	0.109	0.055	-18.4%
Capital expenditure	105,615	251,507	108,085	-
Net operating cash flows	208,156	631,850	266,728	-
Average number of employees	12,094	12,326	12,228	-
Key figures from statement of financial pos. (amounts in thousands of Euro)	July 31 2017 (unaudited)	January 31 2017 (audited)	July 31 2016 (unaudited)	change July 2017 vs January 2017
Net operating working capital	552,685	556,351	674,446	(3,666)
Net invested capital	3,022,362	3,086,089	3,166,777	(63,727)
Net financial position surplus/(deficit)	(223,427)	18,441	(251,727)	(241,868)
Group shareholders' equity	2,776,345	3,080,502	2,894,984	(304,157)

Financial highlights

The net revenues for the six months ended July 31, 2017 were Euro 1,468.6 million, down by 5.5% compared to the same period of last year. The sales performance for the period had conflicting trends, with some markets recovering and others contracting. In terms of profitability, the decline in sales volumes was compensated for by a better mix, especially regarding the ratio of full-price sales to discounted sales. The gross margin benefited from this and improved from the same period of the previous year.

With respect to business initiatives, an important e-commerce plan was introduced for all the Group's brands that include an omnichannel growth strategy focusing on gradual expansion of the online sales channel in terms of merchandising and territorial coverage, plus new versions of the websites. Digital initiatives also involved advertising and communications, with the creation of special content and the acquisition of online space and media tools intended to create synergy among the three distribution channels.

Investments were continued in the manufacturing area to boost internal production volumes, thereby ensuring that a greater number of production processes achieve the high standards that have always characterized the output of the Group's production facilities. The investments of the period also targeted the retail network. The plan to bring Miu Miu stores into line with the brand's new look progressed, and special projects for Prada stores were carried out, such as new store layouts and extension of the "resort" concept to seaside stores.

The recent overhauling of processes and cost structure enabled to keep operating expenses consistent with those of the prior reporting period.

EBIT for the six months ended July 31, 2017 was Euro 166.8 million, or 11.4% of net revenues, down from the Euro 213.7 million, or 13.8% of net revenues, of the same period of the previous year. The Group's net income was Euro 115.7 million, or 7.9% as a percentage of net revenues, whereas it was 9.1% for the same six-month period of 2016.

PRADA Group
Interim Financial Report 2017 - Financial Review

The net operating working capital at July 31, 2017 is Euro 552.7 million, practically unchanged from January 31, 2017. The net financial indebtedness amounts to Euro 223.4 million, after the dividend payment of Euro 307.1 million and a reduction of Euro 40.6 million resulting from the exchange rates fluctuation.

Net Revenues

(amounts in thousands of Euro)	six months ended July 31 2017 (unaudited)	%	six months ended July 31 2016 (unaudited)	%	% change
Net sales	1,442,556	98.2%	1,529,267	98.4%	-5.7%
Royalties	26,080	1.8%	24,905	1.6%	4.7%
Net Revenues	1,468,636	100.0%	1,554,172	100.0%	-5.5%

Net sales analysis

(amounts in thousands of Euro)	six months ended July 31 2017 (unaudited)	%	six months ended July 31 2016 (unaudited)	%	% change
Net sales by geographical area
Europe	553,631	38.4%	599,568	39.2%	-7.7%
Americas	210,370	14.6%	218,492	14.3%	-3.7%
Asia Pacific	462,951	32.1%	461,215	30.2%	0.4%
Japan	164,438	11.4%	191,726	12.5%	-14.2%
Middle East	49,208	3.4%	55,702	3.6%	-11.7%
Other countries	1,958	0.1%	2,564	0.2%	-23.6%
Total Net sales	1,442,556	100.0%	1,529,267	100.0%	-5.7%
Net sales by brand
Prada	1,176,843	81.6%	1,233,596	80.7%	-4.6%
Miu Miu	224,371	15.6%	249,152	16.3%	-9.9%
Church's	33,769	2.3%	39,747	2.6%	-15.0%
Other	7,573	0.5%	6,772	0.4%	11.8%
Total Net sales	1,442,556	100.0%	1,529,267	100.0%	-5.7%
Net sales by product line
Leather goods	826,906	57.3%	893,468	58.4%	-7.4%
Footwear	310,340	21.5%	343,641	22.5%	-9.7%
Clothing	273,766	19.0%	262,395	17.2%	4.3%
Other	31,544	2.2%	29,763	1.9%	6.0%
Total Net sales	1,442,556	100.0%	1,529,267	100.0%	-5.7%
Net sales by channel
Net Sales of Directly Operated Stores (DOS)	1,177,059	81.6%	1,276,587	84.0%	-7.8%
Net Sales to independent customers and franchisees	265,497	18.4%	252,680	16.0%	5.1%
Total Net sales	1,442,556	100.0%	1,529,267	100.0%	-5.7%

Distribution Channels

Retail sales for the six months ended July 31, 2017 were Euro 1,177.1 million, down by 7.8% from the same period of 2016 (-8% at constant exchange rates). Thirteen stores were closed down in the six-month period (4 Prada, 8 Miu Miu and 1 Church's) and six new stores were opened (2 Prada, 2 Miu Miu and 2 Church's).

PRADA Group
Interim Financial Report 2017 - Financial Review

Sales in the wholesale channel grew by 5.1% compared to the same period of the prior year (+4.5% at constant exchange rates), mainly as a result of higher sales to franchisees and primary selected online retailers ("e-tailers").

Markets

The Asia Pacific market reported growth of 0.4% (-0.6% at constant exchange rates). The Greater China region generated net sales of Euro 301.9 million, up by 4.5% at current exchange rates and by 5.2% at constant exchange rates, whereas other countries in the region experienced declines. Overall in the region, sales increased for clothing and leather goods, whereas footwear sales decreased.

Net sales in Europe fell by 7.7% at current exchange rates compared with the same six-month period of the prior year (-6.6% at constant exchange rates). The stronger Euro at the end of the period adversely affected tourist spending. Clothing sales increased, whereas footwear and leather goods sales declined.

Net sales in the American market fell by 3.7% at current exchange rates (-5.8% at constant exchange rates). The product trends in this market were similar to those reported for the European market.

Sales in Japan fell by 14.2% compared with the same period of last year (same decrease at constant exchange rates). The sales in this region were influenced by a decline primarily in local demand, but also in tourist spending.

Net sales in the Middle East region, which suffered from a geopolitical context unfavorable to tourism flows, fell by 11.7% at current exchange rates (-13.1% at constant exchange rates).

Products

Sales of the clothing division rose by 4.3% overall (+4.1% at constant exchange rates), whereas the Miu Miu brand had double-digit sales growth compared with the same six months of the prior year.

Sales of the leather goods division fell by 7.4% overall at current exchange rates (-7.9% at constant exchange rates), with less decline for the Prada brand.

Footwear sales fell by 9.7% at current exchange rates (-9.5% at constant exchange rates), with a trend similar to that of leather goods.

Brands

The net sales of the Prada brand fell by 4.6% at current exchange rates (-5% at constant exchange rates). The Asia Pacific region reported sales in line with those of the same period of last year, whereas the other regions had lower sales.

Miu Miu net sales fell by 9.9% at current exchange rates (-10.2% at constant exchange rates). The decrease was affected by the closing down of 8 shops during the period.

Net sales of the Church's brand fell by 15% mainly as a result of the recent restructuring of the distribution channel. The contraction was concentrated in the European market.

The "other" brand category consists of sales of Marchesi 1824 brand patisserie goods, whose growth is benefiting from the recent expansion plan, and of the Car Shoe brand, which presented a decline for the six-month period.

PRADA Group
Interim Financial Report 2017 - Financial Review

Royalties

In the six months ended July 31, 2017, licensing agreements generated royalty income of Euro 26.1 million, up by 4.7% from the same six-month period of 2016. The increase was attributable largely to the success of the new Prada fragrances.

Number of stores

	as at July 31 2017		as at January 31 2017		as at July 31 2016
	DOS	Franchises	DOS	Franchises	DOS	Franchises
Prada	385	25	387	25	388	23
Miu Miu	165	9	171	9	173	8
Church's	55	-	54	-	54	-
Car Shoe	5	-	5	-	5	-
Marchesi	3	-	3	-	2	-
Total	613	34	620	34	622	31
	as at July 31 2017		as at January 31 2017		as at July 31 2016
---	---	---	---	---	---	---
	DOS	Franchises	DOS	Franchises	DOS	Franchises
Europe	219	4	220	4	224	4
Americas	112	-	113	-	115	-
Asia Pacific	181	25	187	25	184	22
Japan	79	-	78	-	77	-
Middle East and Africa	22	5	22	5	22	5
Total	613	34	620	34	622	31

Operating results

The gross margin for the six months ended July 31, 2017 was Euro 1,088.6 million, or 74.1% of net sales, up by 190 basis points from the same period of the previous year. The profit margin improved as a result of a better sales mix, in terms of the ratio of full-price sales to discounted sales and the effect of exchange rates.

The increase in operating expenses, net of exchange differences of Euro 3.7 million, was attributable primarily to an increase in advertising and communication activities, particularly with digital technology, and a higher cost of labor regarding short-term incentives. All other expense items were in line with those of 2016, a year in which the Group carried out an important cost reduction program.

EBITDA for the six months ended July 31, 2017 was Euro 279.6 million, corresponding to 19.1% of net revenues, a dilution of 210 basis points compared with the same period of last year.

EBIT for the six months ended July 31, 2017 was Euro 166.8 million, or 11.4% of net revenues, compared with Euro 213.7 million, or 13.8% of net revenues, for the same period of last year.

Finance costs benefited from a stronger Euro near the end of the period, which resulted in the recognition of positive exchange differences on financial items. The cost of bank debt, effectively eliminated by such benefit, was nevertheless lower than that of the comparative period due to less average bank debt and lower interest rates.

The effective tax rate of 30% is in line with the same period of last year. The benefit

PRADA Group
Interim Financial Report 2017 - Financial Review

deriving from a lower Italian income tax rate was offset by the less advantageous geographical sources of income.

The Group's net income for the six months amounted to Euro 115.7 million, or 7.9% of net revenues.

Analysis of the statement of financial position

Net invested capital

The following table reclassifies the statement of financial position to provide a better view of net invested capital.

(amounts in thousands of Euro)	July 31 2017 (unaudited)	January 31 2017 (audited)	July 31 2016 (unaudited)
Non-current assets (excluding deferred tax assets)	2,529,920	2,599,620	2,561,138
Trade receivables, net	266,795	285,504	314,340
Inventories, net	562,620	526,941	625,482
Trade payables	(276,730)	(256,094)	(265,376)
Net operating working capital	552,685	556,351	674,446
Other current assets (excluding items of financial position)	244,992	275,384	240,832
Other current liabilities (excluding items of financial position)	(194,043)	(224,536)	(223,457)
Other current assets/(liabilities), net	50,948	50,848	17,375
Provision for risks	(77,546)	(82,323)	(70,037)
Post-employment benefits	(60,215)	(67,211)	(64,287)
Other long-term liabilities	(176,799)	(187,322)	(190,609)
Deferred taxation, net	203,369	216,126	238,751
Other non-current assets/(liabilities)	(111,191)	(120,730)	(86,182)
Net invested capital	3,022,362	3,086,089	3,166,777
Shareholder's equity - Group	(2,776,345)	(3,080,502)	(2,894,984)
Shareholder's equity - Non-controlling interests	(22,590)	(24,028)	(20,066)
Total consolidated shareholders' equity	(2,798,935)	(3,104,530)	(2,915,050)
Long-term financial, net surplus/(deficit)	(529,428)	(547,628)	(586,735)
Short-term financial, net surplus/(deficit)	306,001	566,069	335,008
Net financial position surplus/(deficit)	(223,427)	18,441	(251,727)
Shareholders' equity and net financial position	(3,022,362)	(3,086,089)	(3,166,777)
Debt to Equity ratio	7.4%	n/a	8.6%

At July 31, 2017, the consolidated asset and financial structure was based on net invested capital of Euro 3,022.4 million, financed by net debt of Euro 223.4 million and Group equity of Euro 2,776.4 million.

The Euro 69.7 million decrease in non-current assets, consisting primarily of tangible and intangible assets, was due mainly to the Euro 112.7 million depreciation of the period and exchange differences of Euro 49.4 million, net of capital expenditures of Euro 105.6 million. The expenditures included Euro 63.6 million targeted to the retail network to finance numerous projects to renovate store layout in order to further enhance the customer experience. Other capital expenditures totaling Euro 42 million were allotted to the production and logistics structure and to information technology, specifically to implement the omnichannel marketing strategy.

The net operating working capital at July 31, 2017 is Euro 552.7 million, practically unchanged from January 31, 2017:

trade receivables fell by Euro 18.7 million due to exchange differences and differences occurred in the timing of collection of some receivable;
inventory rose by Euro 35.7 million, consisting of Euro 21.3 million for finished products and Euro 14.4 million for raw materials and work in progress. The increase coincides

PRADA Group

Interim Financial Report 2017 - Financial Review

with a retail restocking phase;

trade payables rose by Euro 20.6 million, consistently with the dynamics of the production cycle.

The other current assets (net) are practically unchanged from January 31, 2017 because the Euro 30 million decrease in tax credits was offset by the closing of derivative contracts, a decrease in investment debts and a decrease in payables due to employees.

The other non-current liabilities (net) fell by Euro 9.5 million, mainly as a result of reduced risk provisions and long-term rent and deferred benefit liabilities.

During the six-month period the Group paid Euro 307.1 million in dividends to PRADA spa shareholders. The Group's equity was further reduced by Euro 121.1 million as a result of the weakening of the major foreign currencies against the Euro.

Net financial position

The following table provides details of the Group's net financial position.

| (amounts in thousands of Euro) | July 31
2017
(unaudited) | January 31
2017
(audited) | July 31
2016
(unaudited) |
| --- | --- | --- | --- |
| Bonds | (130,000) | (130,000) | (130,000) |
| Bank borrowing – non-current | (399,428) | (417,628) | (456,735) |
| Total financial payables - non-current | (529,428) | (547,628) | (586,735) |
| Financial payables and bank overdrafts - current, Finance lease obligations - current | (359,206) | (151,211) | (334,741) |
| Payables to parent company and related parties | (4,523) | (4,934) | (5,674) |
| Total financial payables - current | (363,729) | (156,145) | (340,415) |
| Total financial payables | (893,157) | (703,773) | (927,150) |
| Cash and cash equivalents | 669,730 | 722,214 | 675,423 |
| Total financial receivables and cash and cash equivalents | 669,730 | 722,214 | 675,423 |
| Net financial surplus/(deficit), total | (223,427) | 18,441 | (251,727) |
| Net financial surplus/(deficit) excluding related party balances | (218,904) | 23,375 | (246,053) |
| NFP/EBITDA ratio | -37.1% | n/a | -36.2% |

The cash flow generated by operating activities in the six-month period (Euro 208.2 million) enabled to finance the capital expenditures of the period (Euro 105.6 million) and to contribute to the payment of dividends to PRADA spa shareholders (Euro 307.1 million); the remaining portion of the dividends was paid through the use of credit lines. The financial position, net of the aforementioned cash flows, was further reduced by Euro 40.6 million on account of depreciation of the major currencies against the Euro.

In order to benefit from favorable financial market conditions, during the period PRADA spa stipulated a new long-term loan of Euro 200 million with IntesaSanpaolo spa, which is still unused as of July 31, 2017. The total amount of undrawn credit lines at July 31, 2017 is Euro 639 million.

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Interim Financial Report 2017 - Financial Review

Risk factors

Risk factors regarding the international luxury goods market

Economic risks and international business risks

The performance of the luxury goods market is influenced to a large extent by the general economy. Accordingly, the Group's business performance is exposed to global macroeconomic risks due to its international scale.

The international economic environment could adversely affect the demand for the Group's products and access to credit, causing financial difficulties for customers and other parties with which the Group operates. Overall, these factors could have a negative impact on the Group's operations, results, cash flows and financial condition.

A substantial portion of the Group's sales originates from purchases of products by customers on trips abroad. Consequently, unfavorable economic conditions, social or geopolitical situations leading to instability and natural disasters resulting in lower travel volumes have in the past, and could in the future, negatively impact the Group's business and results. At the same time, the global scale of the retail network enables to mitigate the risk that the sales of a particular geographical area could influence significantly the consolidated sales.

Intellectual property risks

The Prada Group's brands have always been associated with beauty, creativity, tradition and excellent quality. Prada's ability to protect its brands and other intellectual property rights means safeguarding these fundamental assets that are responsible for the success of the brands and the brand positioning.

The Group protects its brands, designs, patents and websites by registering them and obtaining legal protection for them in all countries throughout the world. The Group actively opposes all forms of counterfeiting and intellectual property infringement by adopting strong, systematic measures worldwide. The wholesale, retail, online and off-line markets are monitored daily in close collaboration with the relevant authorities, customs agencies and police.

Risks regarding image and brand recognition

The Group's success in the international luxury goods business is linked to the image and distinct character of its brands. These features depend on many factors, such as the style and design of the products, the quality of the materials and production techniques used, the image and locations of DOS, careful selection of licensees, communications activities and the general corporate profile.

Preserving the image and prestige acquired by its brands in the fashion and luxury business is an objective that the Prada Group pursues by monitoring meticulously each internal and external phase of the value chain thus ensuring excellent quality while upholding the Group's reputation. The prestige of the brands is also pursued by innovation in styles, products and communications in order to convey messages that are always consistent with the strong brand identities.

PRADA Group
Interim Financial Report 2017 - Financial Review

Risks regarding ability to anticipate trends and react to shifts in consumer tastes

The Group's success is reliant on its ability to create and define fashion and product trends, and to anticipate shifts in consumer tastes and luxury market trends in a timely manner.

The Group pursues its objective of leading the luxury goods market by stimulating consumer markets and inspiring trends through the creative efforts of its design and product development teams. This business area consists of approximately 1,000 individuals working in the design division, where a mix of nationalities, cultures and talents contribute to creativity, and in the development division, where craft skills combined with solid manufacturing processes enable the Group to continue to compete and keep abreast of emerging consumer trends and lifestyles.

Risks specific to the Prada Group

Strategic risks

The possibility for the Group to improve its business performance depends on the successful implementation of its strategy for each brand, based primarily on the continuous support of the performance of the retail network and its ongoing integration with the digital universe.

The Group provides support to the retail network by offering leather goods, clothing and footwear that reflect the brand positions, accompanied by store management geared toward making the buying experience unique. The performance of the retail channel is also supported by localized marketing initiatives intended to enhance the identity of the brands and the key features of the Group's value chain. Numerous store renovation and restyling projects aim to further expand the capacity to attract customers and create an increasingly exclusive store ambiance.

Risks regarding the importance of key personnel

The Group's success depends on the contribution of key individuals who have played an essential role in the Group's expansion and who have substantial experience in the fashion and luxury goods business, and on Prada's ability to attract and retain people who are qualified in the design, marketing, merchandising and distribution of the products.

The Group considers its management structure to be capable of ensuring business continuity, and has recently implemented a long-term incentive plan to retain key employees so that they will continue to cover the roles essential to the achievement of the challenging objectives that the Group constantly sets itself.

Risks regarding the outsourcing of manufacturing activities

While the Group designs, controls and produces in-house the majority of its prototypes, samples and most sophisticated products, it outsources the production of its other finished products to external manufacturers with appropriate expertise and capacity.

The Group has implemented a strict inspection and quality control process for all outsourced production. Prada contractually requires its contract manufacturers to comply with all laws and regulations on brand ownership and other intellectual property rights, and with collective bargaining agreements concerning labor, social security, the workplace, and occupational health and safety. The Group also requires its contract manufacturers to read the Prada Group Code of Ethics and comply with the principles set forth therein.

PRADA Group
Interim Financial Report 2017 - Financial Review

Credit risk

Credit risk is defined as the risk of financial loss caused by the failure of a counterparty to meet its contractual obligations. The maximum risk to which an entity is exposed is represented by all the financial assets recognized in the financial statements. The Group considers its credit risk to involve primarily trade receivables generated from the wholesale channel and liquid assets. The Group manages credit risk and mitigates the related effects through its business and financial strategies.

With respect to trade receivables, credit risk is managed by monitoring and checking the reliability and solvency of customers. The lack of concentration of the total trade receivables with any one customer and the evenly spread out geographical composition of the receivables mitigate the exposure to credit risk.

With respect to liquid assets, the risk of default substantially relates to bank deposits, which represent the Group's most widely-used financial product for investing its operating cash flows, in keeping with its low-risk policy. Default risk is mitigated by the allocation of cash holdings to bank deposits that are diversified in terms of counterparty, country and currency, and by the consistently short-term period. The residual portion of liquid assets consists of cash and bank accounts. The Group considers no significant risk to exist on these kinds of liquid assets given that they are used for operating activities and business processes and, consequently, the number of third parties involved is fragmented.

Liquidity risk

Cash flow risk refers to difficulty that the Group could have in meeting its financial obligations. The Directors are responsible for managing cash flow risk, whereas the Corporate Finance management, which reports to the CFO, is responsible for optimizing financial resources.

The Directors consider the current funds and credit lines, in addition to those that will be generated by operating and financing activities, to be sufficient for enabling the Group to meet its requirements emerging from investing activities, manage working capital, make punctual loan repayments and pay dividends as planned.

Legal and regulatory risks

The Prada Group operates in a complex regulatory environment and so is exposed to the following legal risks:

risks associated with non-compliance with the Rules Governing the Listing of Securities on the Stock Exchange of Hong Kong or with other laws or regulations in force in Hong Kong that the Company must observe as it is listed on the Stock Exchange of Hong Kong Limited;
risks associated with non-compliance with laws and regulations applicable to the Company due to the listing on the Irish Stock Exchange of the bond notes issued in August 2013;
risks associated with occupational health and safety under Italian Legislative Decree 81/08 and equivalent regulations in force in other countries;
possible legal penalties for wrongful acts pursuant to Italian Law 231/2001 as subsequently amended;
possible events that could adversely affect the reliability of the annual financial statements and the protection of assets;

PRADA Group

Interim Financial Report 2017 - Financial Review

changes in international tax rules applicable in the various countries where the Group operates;
possible manufacturing compliance risks regarding Italian and international laws and regulations for finished goods distributed and raw materials and consumables used.

The Group involves various divisions and uses external experts as necessary to keep its processes and procedures constantly updated in order to comply with changing rules and regulations, thereby reducing legal and regulatory risk to an acceptable level. Monitoring activities are performed by divisional managers, auditors, and special entities and committees such as the Supervisory Board, Internal Control Committee and Industrial Compliance Committee.

Foreign exchange risk

The Group has a vast international presence, and therefore is exposed to the risk that changes in currency exchange rates could adversely impact revenue, costs, margins and profit. In order to hedge the foreign exchange risk, the Group enters into derivative contracts designed to fix the value in Euro (or other functional currency) of the identified future cash flows. The future cash flows consist primarily of inflows of trade and financial receivables and outflows of trade payables. They refer mainly to PRADA spa, the Group's holding company and worldwide distributor of Prada and Miu Miu brand products.

The management of interest rate risk is described in more detail in the Notes to the Interim condensed consolidated financial statements.

Interest rate risk

Interest rate risk is the risk that future cash flows could be affected by interest rate fluctuation. In order to hedge this risk, which refers mainly to PRADA spa, the Group uses derivatives (such as interest rate swaps) to convert variable-rate debt into fixed-rate debt or debt within a specified range of rates.

The management of interest rate risk is described in more detail in the Notes to the Interim condensed consolidated financial statements.

Data processing risk

Data is processed using information systems whose governance model ensures that:

information is adequately protected against the risk of unauthorized access and disclosure (including means to protect personal privacy and proprietary information), improper information modification or destruction (including accidental loss), and use incompatible with the job assigned;
data is processed in accordance with the applicable laws and regulations.

Information on related-party transactions

Information on the Group's transactions and balances with related parties is provided in the Notes to the Interim condensed consolidated financial statements, insofar as required by IFRS, and in the Board of Directors' Financial Review and Corporate Governance Report, insofar as required by the Hong Kong Stock Exchange rules.

Non-IFRS measures

The Group uses certain financial measures ("non-IFRS measures") to measure its business performance and to help readers understand and analyze its statement of financial position. Although they are used by the Group's management, the measures

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Interim Financial Report 2017 - Financial Review

are not universally or legally defined and are not regulated by the IFRS adopted to prepare the Interim condensed consolidated financial statements. Other companies operating in the luxury goods business might use the same measures, but with different calculation criteria, so non-IFRS measures should always be read in conjunction with the related notes, and may not be directly comparable with those used by other companies. In this Interim Financial Report, the Prada Group used the following non-IFRS measures:

EBITDA: Earnings Before Interest, Taxation, Depreciation and Amortization, i.e. "consolidated net income for the period" adjusted to exclude "interest and other financial income/(expense) and dividends from investments", "taxes on income" and "depreciation, amortization and impairment".

EBIT: Earnings Before Interest and Taxation, i.e. "consolidated net income for the period" adjusted to exclude "interest and other financial income/(expense) and dividends from investments" and "taxes on income".

Net Financial Position: Short-term and long-term financial payables due to third and related parties, including lease obligations, net of cash and cash equivalents and short-term and long-term financial receivables due from third and related parties.

Free cash flows: net cash flows generated by operating activities, net of cash flows used in investing activities.

The following table sets forth the EBITDA and EBIT of the reported periods.

(amounts in thousands of Euro)	six months ended July 31 2017 (unaudited)	twelve months ended Jan 31 2017 (audited)	six months ended July 31 2016 (unaudited)
Consolidated net income for the period	116,082	284,189	145,297
Taxes on income	50,222	131,258	62,206
Interest and other fin. income/(expenses) and div. from investments	533	15,733	6,198
EBIT - Earnings Before Interest and Taxation	166,837	431,180	213,701
Depreciation, amortization and impairment	112,716	222,267	116,290
EBITDA	279,553	653,447	329,991

Financial Review Basis of Preparation

The Board of Directors' Financial Review refers to the Group of companies controlled by PRADA spa (the "Company"), operating holding company of the Prada Group (the "Group"), and is based on the Interim condensed consolidated financial statements of the Group for the six months ended July 31, 2017 prepared in accordance with IFRS as adopted by the European Union. This Financial Review must be read in conjunction with the Interim condensed consolidated financial statements and the related Notes, which are an integral part of the latter.

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Interim Financial Report 2017 - Financial Review

Outlook

The complex task of restructuring all operating processes, which is aimed at providing the Group with the tools needed to access an increasingly competitive market, is progressing well; however, more remains to be done.

Having one of the most recognized and most respected international brands, with undisputed leadership in design and innovation, means the Group has to make choices in the pursuit of growth that privilege the preservation of the cultural and stylistic fundamentals that the brand identity is based on.

The positive trends in Ready-to-Wear, which has been growing over many seasons, are confirmed as well as in the new products in the Leather goods segment, which have had an excellent reception in all markets. The Group remains committed to creating a balanced offer in terms of price ranges.

The extensive overhaul of Prada Group’s cost structure creates operating leverage that will allow the Group profits to benefit rapidly from revenue growth. In the meantime, control over investments and net working capital will continue to protect cash generation.

The Group is confident that its action plan is the best way to return to steady growth in revenues and margins, albeit aware that benefits may take longer than expected. The Group’s cash flow and balance sheet remain solid, allowing to focus on value creation for shareholders over a broad time horizon.

Milan, September 8, 2017

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Interim Financial Report 2017 - Financial Review

Corporate Governance

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Interim Financial Report 2017 - Corporate Governance
23

Corporate Governance practices

The Company is committed to maintaining a high standard of corporate governance practices 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, to protect the rights of the Company's shareholders and to enhance shareholder value. The corporate governance model adopted by the Company is in compliance with the applicable 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 the Company's corporate governance practices have complied with the code provisions set out in the Code throughout the six months from February 1, 2017, to July 31, 2017 (the "Reviewed Period").

The Board

The Board of Directors of the Company (the "Board") is responsible for setting up the overall strategy as well as reviewing the operation and financial performance of the Company and the Group.

The Board is composed of nine Directors of which four are executive Directors, two are non-executive Directors and three are independent non-executive Directors.

The Board has established the Audit Committee, the Remuneration Committee and the Nomination Committee. Each Committee is chaired by an independent non-executive director. The written terms of reference of each Committee are of no less exacting terms than those set out in the Code and are available on the websites of the Company and The Stock Exchange of Hong Kong Limited (the "Stock Exchange").

In addition, the Board has established a Supervisory Body under the Italian Legislative Decree 231 of June 8, 2001 (the "Decree").

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 related financial management expertise to discharge the responsibility of the Audit Committee. The membership of the Audit Committee consists of three independent non-executive directors, namely, Mr. Gian Franco Oliviero Mattei (Chairman), Mr. Giancarlo Forestieri and Mr. Sing Cheong Liu. The primary duties of the Audit Committee are to assist the Board in providing an independent view of the effectiveness of the Company's financial reporting process and its internal control and risk management systems, to oversee the external and internal audit processes and the implementation of the Company's risk management functions and to perform other duties and responsibilities as are assigned to the Audit Committee by the Board. During the Reviewed Period, the Audit Committee held four meetings on March 1, 2017, April 6, 2017, April 12, 2017 and June 29, 2017, with an average attendance rate of 92%, mainly to review with the senior management, the Group's internal and external auditors and the board of statutory auditors, significant internal and external audit findings and financial matters, as required under the Committee's terms of reference, and to make relevant recommendations to the Board. The Audit Committee's review covered the audit plan for the year 2017, the findings of the internal auditors, internal controls, risk assessment, annual review of the Group's continuing connected transactions for 2016, tax and legal updates (including litigations)

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Interim Financial Report 2017 - Corporate Governance

and the financial reporting matters (including the annual results for the year 2016, before recommending them to the Board for approval).

The Audit Committee also held a meeting on September 5, 2017 to update on internal audit and risk management activities (attendance rate of 100%) and held a meeting on September 8, 2017 (attendance rate of 67%) to review the interim results for the period ended July 31, 2017, before recommending them to the Board for approval.

Remuneration Committee

The Company has established a Remuneration Committee in compliance with the Code. In compliance with Listing Rule 3.25, the Remuneration Committee is chaired by an independent non-executive director and comprises of a majority of independent non-executive directors. 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, where appropriate, adoption. 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 on April 11, 2017 and June 29, 2017, with an attendance rate of 100% to review and recommend certain updates to the long term incentive plan for executives and Directors and to review the management by objectives plan for the Company's executives.

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 the nomination of directors and to make recommendations to the Board on the structure, size and composition of the Board itself, on the selection of new Directors and on the succession plans for Directors. The Nomination Committee also assesses the independence of independent non-executive directors. The recommendations of the Nomination Committee are then put forward to the Board for consideration and, where appropriate, adoption. The Nomination Committee consists of two independent non-executive directors, Mr. Gian Franco Oliviero Mattei (Chairman) and Mr. Sing Cheong Liu, and one executive director, Mr. Carlo Mazzi. During the Reviewed Period, the Nomination Committee held one meeting on April 11, 2017, with an attendance rate of 100% to perform the annual review of the independence of independent non-executive directors.

Board of Statutory Auditors

Under Italian law, the 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 law, regulations and the By-laws, as well as on its 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.

The board of statutory auditors of the Company consists of Mr. Antonino Parisi (Chairman), Mr. Roberto Spada and Mr. David Terracina. The alternate statutory auditors are Ms. Stefania Bettoni and Mr. Cristiano Proserpio. During the Reviewed Period, the board of statutory auditors attended two Board meetings of the Company on April 12, 2017 and June 29, 2017. They also attended the Board meeting of the Company on September 8, 2017.

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25

Supervisory Body

In compliance with the Decree, the Company has established a supervisory body whose primary duty is to ensure the functioning, effectiveness and enforcement of the Company's Model of Organization, adopted by the Company pursuant to the Decree. The supervisory body consists of three members appointed by the Board selected among qualified and experienced individuals, including independent non-executive directors, qualified auditors, executives or external individuals. The supervisory body consists of Mr. David Terracina (Chairman), Mr. Gian Franco Oliviero Mattei and Mr. Paolo De Paoli.

Dividends

The Company may distribute dividends subject to the approval of the shareholders in a shareholders' general meeting.

No dividends have been declared or paid by the Company in respect of the Reviewed Period.

On April 12, 2017, the Board of the Company recommended the payment of a final dividend for the financial year 2016 of Euro/cents 12 per share in the capital of the Company, representing a total dividend of Euro 307,058,880. The Shareholders approved the distribution and payment of this dividend at the shareholders' general meeting of the Company held on May 31, 2017. The dividend was paid on June 20, 2017.

Change in Information of Directors Pursuant to Listing Rule 13.51B(1)

Pursuant to Rule 13.51B(1) of the Listing Rules, there was no change in information of Directors since the Company's 2016 Annual Report.

Directors' Securities Transactions

The Company has adopted written procedures governing Directors' securities transactions on terms no less exacting than the standard set out in the Model Code for Securities Transactions by Directors of Listed Issuers as set out in Appendix 10 of the Listing Rules (the "Model Code"). Specific written confirmations have been obtained from each Director to confirm his/her compliance with the required standard set out in the Model Code and the Company's relevant procedures regarding Directors' securities transactions for the Reviewed Period. There was no incident of non-compliance during the Reviewed Period.

The Company has also adopted written procedures governing securities transactions carried out by relevant employees who are likely to be in possession of inside information in relation to the Company and its securities. The terms of these procedures are no less exacting than the standard set out in the Model Code.

PRADA Group
Interim Financial Report 2017 - Corporate Governance

Purchase, Sale, or Redemption of the Company's Listed Securities

Neither the Company nor any of its subsidiaries has purchased, sold or redeemed any of the Company's listed securities during the Reviewed Period.

Directors' interests and short positions in securities

As at July 31, 2017, the Directors of the Company and their associates held the following interests in the shares, underlying shares and debentures of the Company and its associated corporations (within the meaning of Part XV of the Securities and Futures Ordinance ("SFO")) as recorded in the register required to be kept by the Company under Section 352 of the SFO or as otherwise notified to the Company and the Stock Exchange pursuant to the Model Code:

(a) Long positions in shares and underlying shares of the Company

Name of Director	Number of Shares	Nature of Interest
Ms. Miuccia Prada Bianchi	2,046,470,760
(Notes 1 and 2)	Interest of Controlled corporation	80%
Mr. Patrizio Bertelli	2,046,470,760
(Notes 1 and 3)	Interest of Controlled corporation	80%

Notes:

Prada Holding S.p.A. owns approximately 80% of the issued capital in the Company and is therefore the holding company of the Company.
Ms. Miuccia Prada Bianchi, owns indirectly through Ludo S.r.l. 53.8% (comprised of 438,460 ordinary shares and 100,000 preference shares) of the capital in Bellatrix S.p.A., which in turn owns 65% (comprised of 1,650 ordinary shares and 300 preference shares) of the capital in Prada Holding S.p.A.. Ms. Miuccia Prada Bianchi is therefore deemed under the SFO to be interested in all the shares registered in the name of Prada Holding S.p.A.. Ms. Miuccia Prada Bianchi is also a director of Prada Holding S.p.A., Bellatrix S.p.A. and Ludo S.r.l..
Mr. Patrizio Bertelli owns, indirectly through PABE 1 S.r.l. 35% (comprised of 750 ordinary shares and 300 preference shares) of the capital in Prada Holding S.p.A.. Mr. Patrizio Bertelli is therefore deemed under the SFO to be interested in all the shares registered in the name of Prada Holding S.p.A.. Mr. Patrizio Bertelli is also a director of PABE 1 S.r.l..

PRADA Group
Interim Financial Report 2017 - Corporate Governance

The deemed interests of Ms. Miuccia Prada Bianchi and Mr. Patrizio Bertelli in the shares of the Company as at July 31, 2017 are summarized in the following chart:

PRADA Group

Interim Financial Report 2017 - Corporate Governance

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

Name of Director	Name of associated corporations	Class of shares	Number of shares	Nature of Interests	Approximate percentage of Interests
Ms. Miuccia Prada Bianchi	Prada Holding S.p.A.	Ordinary Shares	1,650	Controlled Corporation	68.75%
	Prada Holding S.p.A.	Preference Shares	300	As above	50%
	Prapar Corporation	Common Shares	50	As above	100%
	MFH Munich Fashion Holding GmbH	Registered Share	1	As above	100%
	PAC S.r.l. (in liquidation)	Participation Quotas (Euro)	30,600	As above	100%
	Bellatrix S.p.A.	Ordinary Shares	438,460	As above	49.83%
	Bellatrix S.p.A.	Preference Shares	100,000	As above	83.34%
	Ludo S.r.l.	Ordinary Shares	100,311	Beneficial Owner	100%
	PRA 1 S.r.l.	Participation Quotas (Euro)	10,000	Controlled Corporation	100%
	C.I.D. – Cosmetics International Distribution Corp.	Common Share	1	As above	100%
	Fratelli Prada S.p.A.	Ordinary Shares	734,754	As above	73.48%
	Petranera S.r.l.	Participation Quotas (Euro)	2	As above	100%
	PABE-RE LLC	Capital Contribution (JPY)	1,000,000	As above	100%
Mr. Patrizio Bertelli	Prada Holding S.p.A.	Ordinary Shares	750	Controlled corporation	31.25%
	Prada Holding S.p.A.	Preference Shares	300	As above	50%
	Prapar Corporation	Common Shares	50	As above	100%
	MFH Munich Fashion Holding GmbH	Registered Share	1	As above	100%
	PAC S.r.l. (in liquidation)	Participation Quotas (Euro)	30,600	As above	100%
	C.I.D. – Cosmetics International Distribution Corp.	Common Share	1	As above	100%
	PABE-RE LLC	Capital Contribution (JPY)	1,000,000	As above	100%

Save as disclosed above, as at July 31, 2017, none of the Directors of the Company or their associates held any interest or short position in the shares, underlying shares and debentures of the Company or any of its associated corporations (within the meaning of Part XV of the SFO) as recorded in the register required to be kept under Section 352 of the SFO or as otherwise notified to the Company and the Stock Exchange pursuant to the Model Code.

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29

Substantial shareholders' interests and short positions in securities

As at July 31, 2017, other than the interests of the Directors of the Company as disclosed above, the following persons held interests in the shares or underlying shares of the Company which fall to be disclosed to the Company under Section 336 of the SFO:

Name of Shareholder	Capacity	Number of Shares	Approximate percentage of issued capital
Long Positions
Prada Holding S.p.A.	Legal and beneficial owner	2,046,470,760	80.00%
Bellatrix S.p.A.	Interest of controlled corporation	2,046,470,760	80.00%
Ludo S.r.l.	Interest of controlled corporation	2,046,470,760	80.00%
PABE 1 S.r.l.	Interest of controlled corporation	2,046,470,760	80.00%
OppenheimerFunds, Inc.	Beneficial owner	150,723,710	5.89%
	Beneficial owner (1,704,720)
	Investment manager (1,025,300)
JPMorgan Chase & Co.	Trustee (other than a bare trustee) (7,178)	128,182,809	5.00%
	Custodian corporation / approved lending agent (125,445,611)
Short Positions
JPMorgan Chase & Co.	Beneficial owner	481,024	0.01%
Lending Pool
JPMorgan Chase & Co.	Custodian corporation / approved lending agent	125,445,611	4.90%

Note:

Prada Holding S.p.A. owns approximately 80% of the issued capital in the Company. As Ludo S.r.l. owns 53.8% of Bellatrix S.p.A. which in turn owns 65% of Prada Holding S.p.A. and PABE 1 S.r.l. owns 35% of Prada Holding S.p.A., Bellatrix S.p.A., Ludo S.r.l. and PABE 1 S.r.l. are all deemed to be interested in the 2,046,470,760 shares held by Prada Holding S.p.A..

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Interim Financial Report 2017 - Corporate Governance

Interim condensed consolidated financial statements

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Interim Financial Report 2017 - Interim condensed consolidated financial statements
31

Consolidated statement of financial position

(amounts in thousands of Euro)	Note	July 31 2017 (unaudited)	January 31 2017 (audited)
Assets
Current assets
Cash and cash equivalents	6	669,730	722,214
Trade receivables, net	7	266,795	285,504
Inventories, net	8	562,620	526,941
Derivative financial instruments - current	9	20,416	7,045
Receivables from, and advance payments to, related parties - current	10	9,425	14,964
Other current assets	11	215,150	253,375
Total current assets		1,744,136	1,810,043
Non-current assets
Property, plant and equipment	12	1,490,151	1,542,684
Intangible assets	13	915,913	921,800
Associated undertakings	14	9,311	11,775
Deferred tax assets	32	237,478	247,266
Other non-current assets	15	111,925	123,361
Derivative financial instruments - not current	9	2,620	-
Total non-current assets		2,767,398	2,846,886
Total Assets		4,511,534	4,656,929
Liabilities and total Shareholders' Equity
Current liabilities
Short-terms financial payables and bank overdrafts	16	359,206	151,211
Payables to related parties - current	17	5,058	5,542
Trade payables	18	276,730	256,094
Tax payables	19	49,737	65,467
Derivative financial instruments - current	9	11,320	13,634
Other current liabilities	20	132,451	144,827
Total current liabilities		834,502	636,775
Non-current liabilities
Long-term financial payables	21	529,428	547,628
Post-employment benefits	22	60,215	67,211
Provision for risk and charges	23	77,546	82,323
Deferred tax liabilities	32	34,109	31,140
Other non-current liabilities	24	169,436	179,072
Derivative financial instruments - not current	9	7,363	8,250
Total non-current liabilities		878,097	915,624
Total liabilities		1,712,599	1,552,399
Share capital		255,882	255,882
Total other reserves		2,381,085	2,401,500
Translation reserve		23,636	144,791
Net income for the period		115,742	278,329
Equity attributable to owners of the Group	25	2,776,345	3,080,502
Equity attributable to Non-controlling interests	26	22,590	24,028
Total Equity		2,798,935	3,104,530
Total Liabilities and Total Equity		4,511,534	4,656,929
Net current assets		909,634	1,173,268
Total assets less current liabilities		3,677,032	4,020,154

PRADA Group

Interim Financial Report 2017 - Interim condensed consolidated financial statements

Consolidated Statement of Profit or Loss

(amounts in thousands of Euro)	Note	six months ended July 31 2017 (unaudited)	%	six months ended July 31 2016 (unaudited)	%
Net Revenues	27	1,468,636	100.0%	1,554,172	100.0%
Cost of goods sold	28	(379,995)	-25.9%	(432,231)	-27.8%
Gross Margin		1,088,641	74.1%	1,121,941	72.2%
Operating expenses	29	(921,804)	-62.7%	(908,240)	-58.4%
EBIT		166,837	11.4%	213,701	13.8%
Interest and other financial expenses, net	30	(890)	-0.1%	(6,756)	-0.4%
Dividends from investments	31	357	0.0%	558	0.0%
Income before taxation		166,304	11.3%	207,503	13.4%
Taxation	32	(50,222)	-3.4%	(62,206)	-4.1%
Net income for the period		116,082	7.9%	145,297	9.3%
Net income - Non-controlling interests	26	340	0.0%	3,374	0.2%
Net income - Group	25	115,742	7.9%	141,923	9.1%
Basic and diluted earnings per share (in Euro per share)	33	0.045		0.055

PRADA Group

Interim Financial Report 2017 - Interim condensed consolidated financial statements

Consolidated statement of cash flows

(amounts in thousands of Euro)	six months ended July 31 2017 (unaudited)	six months ended July 31 2016 (unaudited)
Income before taxation	166,303	207,503
Profit or loss adjustments
Depreciation and amortization from continuing operations	108,334	112,703
Impairment of property, plant and equipment and intangible assets	4,382	3,588
Non-monetary financial (income) expenses	(12,487)	118
Other non-monetary charges	9,899	1,517
Balance Sheet changes
Other non-current assets and liabilities	(10,799)	(9,841)
Trade receivables, net	13,134	(57,234)
Inventories, net	(54,017)	68,426
Trade payables	25,265	(16,554)
Other current assets and liabilities	(16,932)	3,318
Cash flows from operating activities	233,082	313,544
Interest paid, net – third parties	(7,318)	(8,464)
Taxes paid	(17,608)	(38,352)
Net cash flows from operating activities	208,156	266,728
Purchases of property, plant and equipment and intangible assets	(103,869)	(114,335)
Disposals of property, plant and equipment and intangible assets	841	708
Dividends from investments	-	575
Transactions with Non-controlling shareholders	(1,275)	-
Business combination	-	(1,623)
Net cash flow utilized by investing activities	(104,303)	(114,675)
Dividends paid to shareholders of PRADA spa	(307,059)	(281,471)
Dividends paid to non-controlling shareholders	(451)	(369)
New loans from related companies	-	1,000
Repayment of short term portion of long term borrowings - third parties	(26,909)	(46,550)
Arrangement of long-term borrowings – third parties	8,668	120,000
Change in short-term borrowings – third parties	218,623	51,038
Share capital increases by non-controlling shareholders of subsidiaries	89	109
Cash flows generated/(utilized) by financing activities	(107,039)	(156,243)
Change in cash and cash equivalents, net of bank overdrafts	(3,186)	(4,190)
Foreign exchange differences	(49,686)	(986)
Opening cash and cash equivalents, net of bank overdraft	722,214	680,595
Closing cash and cash equivalents, net of bank overdraft	669,342	675,419
Cash and cash equivalents	669,730	675,423
Bank overdraft	(388)	(4)
Closing cash and cash equivalents, net of bank overdraft	669,342	675,419

PRADA Group

Interim Financial Report 2017 - Interim condensed consolidated financial statements

Consolidated statement of changes in Shareholders' equity (amounts in thousands of Euro, except number of shares)

(amounts in thousands of Euro)	Number of shares	Share Capital	Translation Reserve	Share premium reserve	Cash flow hedge reserve	Actuarial Reserve	Fair Value Available for sale Reserve	Other reserves	Total Other Reserves	Equity
										Net income	Equity attributable to owners of Group	Non-controlling interests	Total Equity
Balance at January 31, 2016 (audited)	2,558,824,000	255,882	138,547	410,047	(7,100)	(8,161)	933	1,959,304	2,355,023	330,888	3,080,340	17,037	3,097,377
Allocation of 2015 net income	-	-	-	-	-	-	-	330,888	330,888	(330,888)	-	-	-
Dividends	-	-	-	-	-	-	-	(281,471)	(281,471)	-	(281,471)	(369)	(281,840)
Transactions with non-controlling interests	-	-	-	-	-	-	-	(1,283)	(1,283)	-	(1,283)	(249)	(1,532)
Capital injection in subsidiaries	-	-	-	-	-	-	-	-	-	-	-	109	109
Comprehensive income for the six months (recyclable to P&L)	-	-	(27,645)	-	(14,130)	-	(486)	-	(14,616)	141,923	99,662	3,538	103,200
Comprehensive income for the six months (not recyclable to P&L)	-	-	-	-	-	(2,264)	-	-	(2,264)	-	(2,264)	-	(2,264)
Balance at July 31, 2016 (unaudited)	2,558,824,000	255,882	110,902	410,047	(21,230)	(10,425)	447	2,007,438	2,386,277	141,923	2,894,984	20,066	2,915,050
Dividends	-	-	-	-	-	-	-	-	-	-	-	(337)	(337)
Share Capital Increase	-	-	-	-	-	-	-	-	-	-	-	905	905
Transactions with non-controlling interests	-	-	-	-	-	-	-	(725)	(725)	-	(725)	529	(196)
Comprehensive income for the six months (recyclable to P&L)	-	-	33,889	-	13,333	-	(2,103)	-	11,230	136,406	181,525	2,863	184,388
Comprehensive income for the six months (not recyclable to P&L)	-	-	-	-	-	4,718	-	-	4,718	-	4,718	2	4,720
Balance at January 31, 2017 (audited)	2,558,824,000	255,882	144,791	410,047	(7,897)	(5,707)	(1,656)	2,006,713	2,401,500	278,329	3,080,502	24,028	3,104,530
Allocation of 2016 net income	-	-	-	-	-	-	-	278,329	278,329	(278,329)	-	-	-
Dividends	-	-	-	-	-	-	-	(307,059)	(307,059)	-	(307,059)	(451)	(307,510)
Transactions with non-controlling interests	-	-	-	-	-	-	-	-	-	-	-	335	335
Capital injection in subsidiaries	-	-	-	-	-	-	-	-	-	-	-	89	89
Comprehensive income for the six months (recyclable to P&L)	-	-	(121,155)	-	10,212	-	(1,903)	4	8,313	115,742	2,900	(1,411)	1,489
Comprehensive income for the six months (not recyclable to P&L)	-	-	-	-	-	2	-	-	2	-	2	-	2
Balance at July 31, 2017 (unaudited)	2,558,824,000	255,882	23,636	410,047	2,315	(5,705)	(3,559)	1,977,987	2,381,085	115,742	2,776,345	22,590	2,798,935

PRADA Group

Interim Financial Report 2017 - Interim condensed consolidated financial statements

Consolidated statement of comprehensive income

(amounts in thousands of Euro)	six months ended July 31 2017 (unaudited)	twelve months ended January 31 2017 (audited)	six months ended July 31 2016 (unaudited)
Net income for the period – Consolidated	116,082	284,190	145,297
A) Items recyclable to P&L:
Change in Translation Reserve	(122,894)	6,784	(27,480)
Tax impact	-	-	-
Change in Translation Reserve less Tax Impact	(122,894)	6,784	(27,480)
Change in Cash Flow Hedge reserve	13,477	(914)	(18,080)
Tax impact	(3,265)	117	3,950
Change in Cash Flow Hedge reserve less Tax Impact	10,212	(797)	(14,130)
Change in Fair Value reserve	(2,475)	(3,452)	(648)
Tax impact	572	863	162
Change in Fair Value reserve less Tax Impact	(1,903)	(2,589)	(486)
B) Items not recycled to P&L:
Change in Actuarial reserve	-	3,277	(2,409)
Tax impact	-	(821)	145
Change in Actuarial reserve less Tax Impact	-	2,456	(2,264)
Consolidated comprehensive income for the period	1,497	290,044	100,937
Comprehensive income for the period - Non Controlling Interests	(1,411)	6,403	3,538
Comprehensive income for the period - Group	86	283,641	97,399

The accounting policies and the notes are an integral part of the consolidated financial statements.

PRADA Group
Interim Financial Report 2017 - Interim condensed consolidated financial statements

PRADA Group
Interim Financial Report 2017 - Notes to the Interim condensed consolidated financial statements

Notes to the Interim condensed consolidated financial statements

1. General information

PRADA spa (the "Company"), together with its subsidiaries (jointly the "Group"), is listed on the Hong Kong Stock Exchange (HKSE code: 1913). It is one of the world leaders in the luxury goods sector where it operates with the Prada, Miu Miu, Church's and Car Shoe brands in the design, production and distribution of luxury handbags, leather goods, footwear, apparel and accessories. The Group also operates in the eyewear and fragrance industries under specific licensing agreements stipulated with industry leaders, and with the recent acquisition (2014) of Pasticceria Marchesi 1824, it has made its entry into the food industry, where it is positioned at the highest levels of quality.

The Group's products are sold in 70 countries worldwide through a network that included 613 Directly Operated Stores (DOS) at July 31, 2017 and a selected network of luxury department stores, independent retailers, franchise stores and on-line distributors (e-tailers).

The Company is a joint-stock company, registered and domiciled in Italy. Its registered office is in via Fogazzaro 28, Milan, Italy. At the date of these unaudited Interim condensed consolidated financial statements, 79.98% of the share capital is owned by PRADA Holding spa, a company domiciled in Italy, while the remaining shares are floating on the Main Board of the Hong Kong Stock Exchange.

The Interim condensed consolidated financial statements were approved and authorized for issue by the Board of Directors of PRADA spa on September 08, 2017.

2. Basis of preparation

The unaudited Interim condensed consolidated financial statements of the Prada Group for the six months ended July 31, 2017, including the "Consolidated statement of financial position", the "Consolidated Statement of Profit or Loss", the "Consolidated statement of comprehensive income", the "Consolidated statement of cash flows", the "Consolidated statement of changes in Shareholders' equity" and the "Notes to the Interim condensed consolidated financial statements", have been prepared in accordance with the "IAS 34 Interim Financial Reporting".

These Interim condensed consolidated financial statements should be read together with the Consolidated financial statements of the Prada Group for the twelve months ended January 31, 2017 that were prepared in accordance with the International Financial Reporting Standards ("IFRSs") issued by the International Accounting Standards Board ("IASB") as endorsed by the European Union.

At the date of presentation of these Interim condensed consolidated financial statements, there were no differences between IFRSs as endorsed by the European Union and applicable to the Prada Group and those issued by the IASB.

IFRSs also refer to all International Accounting Standards ("IAS") and all interpretations of the International Financial Reporting Interpretations Committee ("IFRIC"), previously called the Standing Interpretations Committee ("SIC").

The Group has prepared the Interim condensed consolidated statement of financial position presenting separately current and non-current assets and liabilities. All the details needed for an accurate and complete information are provided in the Notes to the Interim condensed consolidated financial statements. The Consolidated statement of profit or loss is classified by destination. The cash flow information is provided in the Consolidated statement of cash flows which has been prepared under the indirect method.

The Interim condensed consolidated financial statements have been prepared on a

PRADA Group

Interim Financial Report 2017 - Notes to the Interim condensed consolidated financial statements

going concern basis and are presented in Euro which is also the functional currency of PRADA spa.

In accordance with IFRSs, the preparation of consolidated financial statements requires management to make estimates and assumptions when determining the values of certain types of assets, liabilities, revenues and costs and when assessing contingent assets and liabilities.

3. New IFRS and amendments to IFRS

New standards and amendments issued by the IASB, endorsed by the European Union and applicable to the Prada Group from February 1, 2017.

No new principles have been adopted by the European Union, therefore the IFRS standards adopted in the preparation of this document are the same as those used in the preparation of the Consolidated financial statements as at January 31, 2017.

New standards and amendments issued by the IASB, endorsed by the European Union but not yet applicable to the Prada Group as effective for financial years beginning on January 1, 2018.

New standards	Effective date for the Prada Group	EU endorsement status
IFRS 9 Financial Instruments	January 1, 2018	Endorsed on November 2016
IFRS 15 Revenues from Contracts with Customers	January 1, 2018	Endorsed on September 2016

New Standards, changes and operational guidelines issued by the IASB, not yet endorsed by the European Union at the date of this Interim consolidated financial statements.

New standards	Effective date for the Prada Group	EU endorsement status
IFRS 14 Regulatory Deferral Accounts	January 1, 2016 (*)	Not yet endorsed
IFRS 16 Leases	January 1, 2019	Not yet endorsed
IFRS 17 Insurance Contracts	January 1, 2021	Not yet endorsed
Amendments to existing standards	Effective date for the Prada Group	EU endorsement status
---	---	---
IFRS 10 and IAS 28: Sale or assignment of assets	February 1, 2016	Not yet endorsed
IAS 12 Recognition of Deferred Tax Assets for Unrealised Losses	January 1, 2017 (*)	Not yet endorsed
IAS 7 Statement of Cash Flows	January 1, 2017 (*)	Not yet endorsed
2014-2016 Cycle that impacted IFRS 1, IAS 28, IFRS12	January 1, 2017 (*)	Not yet endorsed
Clarification on IFRS 15 Revenues from Contracts with Customers	January 1, 2018	Not yet endorsed
IFRS 2 Share-based Payments	January 1, 2018	Not yet endorsed
IAS 40 Investment Property	January 1, 2018	Not yet endorsed
IFRIC 22 Interpretation on transactions involving an advance in foreign currency	January 1, 2018	Not yet endorsed
IFRIC 23 Interpretation regarding the accounting of income taxes	January 1, 2019	Not yet endorsed

(*) Changes issued by the IASB effective from January 1, 2017 (IFRS 14, IAS 12, IFRS 7, Cycle 2014-2016) have not yet terminated the EU approval process on July 31, 2017. However, the Directors consider their impact not material.

At the date of this Consolidated financial statements, the Directors did not finish the necessary analyzes to estimate the impacts of the new standards, changes and operating guidelines not yet applicable to the Prada Group. However, in view of the significance of commercial lease contracts for the Group, it is reasonable to conclude that the impact of "IFRS 16 Leases" will be material.

PRADA Group

Interim Financial Report 2017 - Notes to the Interim condensed consolidated financial statements

Acquisitions and incorporation of companies

On April 7, 2017, PRADA Far East II bv, a company entirely owned by PRADA spa, concluded the process of transferring its registered office from the Netherlands to Italy and changed its name into PRADA Far East II srl; it will be soon merged into PRADA spa.

On April 18, 2017, the parent company PRADA spa acquired a further 30% stake in Hipic Prod Impex srl, bringing its ownership to 80%.

On May 1, 2017, PRADA Hong Kong P.D. Limited was incorporated into PRADA Asia Pacific Limited.

Operating segments

"IFRS 8 Operating Segments" requires that detailed information be provided for each operating segment that makes up the business. An operating segment is defined as a business division whose operating results are regularly reviewed by top management in order to allocate appropriate resources to the segment and assess its performance.

Because of the Group's matrix-based organizational structure (whereby responsibility is assigned cross-functionally in relation to brands, products, distribution channels and geographical areas), the complementary nature of the various brands' production processes and the many relationships between the different business divisions, it is not possible to designate operating segments as defined by IFRS 8 since the top management is only provided with the financial performance on a Group-wide level. For this reason, the business is considered a single operating segment as this better represents the specific characteristics of the Prada Group business model.

The detailed information given below on net revenues by distribution channel, brand, geographical area and product, as well as non-current assets by geographical area, is also provided in the Financial Review together with additional comments.

Net Revenues

(amounts in thousands of Euro)	six months ended July 31 2017 (unaudited)	%	six months ended July 31 2016 (unaudited)	%	% change
Net Sales	1,442,556	98.2%	1,529,267	98.4%	-5.7%
Royalties	26,080	1.8%	24,905	1.6%	4.7%
		0
Net Revenues	1,468,636	100%	1,554,172	100.0%	-5.5%

PRADA Group
Interim Financial Report 2017 - Notes to the Interim condensed consolidated financial statements

Net sales analysis

(amounts in thousands of Euro)	six months ended July 31 2017 (unaudited)	%	six months ended July 31 2016 (unaudited)	%	% change
Net sales by geographical area
Europe	553,631	38.4%	599,568	39.2%	-7.7%
Americas	210,370	14.6%	218,492	14.3%	-3.7%
Asia Pacific	462,951	32.1%	461,215	30.2%	0.4%
Japan	164,438	11.4%	191,726	12.5%	-14.2%
Middle East	49,208	3.4%	55,702	3.6%	-11.7%
Other countries	1,958	0.1%	2,564	0.2%	-23.6%
Total Net Sales	1,442,556	100.0%	1,529,267	100.0%	-5.7%
Net sales by brand
Prada	1,176,843	81.6%	1,233,596	80.7%	-4.6%
Miu Miu	224,371	15.6%	249,152	16.3%	-9.9%
Church's	33,769	2.3%	39,747	2.6%	-15.0%
Other	7,573	0.5%	6,772	0.4%	11.8%
Total Net Sales	1,442,556	100.0%	1,529,267	100.0%	-5.7%
Net sales by product line
Leather goods	826,906	57.3%	893,468	58.4%	-7.4%
Footwear	310,340	21.5%	343,641	22.5%	-9.7%
Clothing	273,766	19.0%	262,395	17.2%	4.3%
Other	31,544	2.2%	29,763	1.9%	6.0%
Total Net Sales	1,442,556	100.0%	1,529,267	100.0%	-5.7%
Net Sales by channel
Net Sales of Directly Operated Stores (DOS)	1,177,059	81.6%	1,276,587	84.0%	-7.8%
Net Sales to independent customers and franchisees	265,497	18.4%	252,680	16.0%	5.1%
Total Net Sales	1,442,556	100.0%	1,529,267	100.0%	-5.7%

Geographical information

The following table reports the carrying amount of the Group's non-current assets by geographical area, as requested by "IFRS 8 Operating Segments" for entities, like the Prada Group, that have a single reportable segment.

(amounts in thousands of Euro)	July 31 2017 (unaudited)	January 31 2017 (audited)
Europe	1,995,732	1,940,111
USA	145,692	210,183
Asia Pacific	253,637	307,035
Japan	92,805	99,559
Middle East	27,299	29,469
Africa	2,281	3,030
Total	2,517,446	2,589,387

The total amount of Euro 2,517 million (Euro 2,589 million at January 31, 2017) relates to the Group's non-current assets excluding, as requested by IFRS 8, those relating to financial instruments, deferred tax assets and pension fund surplus.

PRADA Group
Interim Financial Report 2017 - Notes to the Interim condensed consolidated financial statements

6. Cash and cash equivalents

Cash and cash equivalents are detailed as follow:

| (amounts in thousands of Euro) | July 31
2017
(unaudited) | January 31
2017
(audited) |
| --- | --- | --- |
| Cash on hand | 36,864 | 42,449 |
| Bank deposit accounts | 437,938 | 459,965 |
| Bank current accounts | 194,928 | 219,800 |
| Total | 669,730 | 722,214 |

Bank deposits accounts are broken down by currency as follows:

| (amounts in thousands of Euro) | July 31
2017
(unaudited) | January 31
2017
(audited) |
| --- | --- | --- |
| Renmimbi | 94,092 | 67,960 |
| US Dollar | 206 | 34,626 |
| Korean Won | 20,137 | 54,629 |
| Hong Kong Dollar | 313,755 | 293,644 |
| Other currencies | 9,748 | 9,106 |
| Total bank deposit accounts | 437,938 | 459,965 |

Bank current accounts are broken down by currency as follows:

| (amounts in thousands of Euro) | July 31
2017
(unaudited) | January 31
2017
(audited) |
| --- | --- | --- |
| Euro | 44,097 | 109,606 |
| US Dollar | 66,746 | 50,224 |
| Korean Won | 1,065 | 1,374 |
| Hong Kong Dollar | 4,603 | 6,056 |
| GB Pound | 8,101 | 5,947 |
| Other currencies | 70,316 | 46,593 |
| Total bank current accounts | 194,928 | 219,800 |

At July 31, 2017, bank current accounts and deposit accounts generated interest income between 0% and 8.3% per annum (between 0% and 9.4% at January 31, 2017).

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

PRADA Group
Interim Financial Report 2017 - Notes to the Interim condensed consolidated financial statements

7. Trade receivables, net

Trade receivables are detailed as follows:

| (amounts in thousands of Euro) | July 31
2017
(unaudited) | January 31
2017
(audited) |
| --- | --- | --- |
| Trade receivables - third parties | 255,210 | 268,223 |
| Provision for doubtful debts | (6,483) | (6,654) |
| Trade receivables related parties | 18,068 | 23,935 |
| Total | 266,795 | 285,504 |

Trade receivables fell by Euro 18.7 million due to exchange differences and differences occurred in the timing of collection of some receivables. Trade receivables from related parties mainly refer to the sale of finished products to Fratelli Prada spa, a related company and franchisee of the Prada Group.

Movements during the period in the provision for doubtful debts are as follows:

| (amounts in thousands of Euro) | July 31
2017
(unaudited) | January 31
2017
(audited) |
| --- | --- | --- |
| Opening Balance | 6,654 | 6,546 |
| Exchange differences | (182) | (78) |
| Increases | 390 | 578 |
| Utilization | (356) | (190) |
| Reversals | (23) | (202) |
| Closing Balance | 6,483 | 6,654 |

The following table contains a summary, by due date, of total receivables before the allowance for doubtful debts at the reporting date:

| (amounts in thousands of Euro) | July 31
2017
(unaudited) | Not
overdue | Overdue (in days) | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- |
| | | | 1 ≤ 30 | 31 ≤ 60 | 61 ≤ 90 | 91 ≤ 120 | ≥ 121 |
| Trade receivables | 273,278 | 238,441 | 10,712 | 6,823 | 4,436 | 1,544 | 11,322 |
| Total | 273,278 | 238,441 | 10,712 | 6,823 | 4,436 | 1,544 | 11,322 |
| (amounts in thousands of Euro) | January 31
2017
(audited) | Not
overdue | Overdue (in days) | | | | |
| | | | 1 ≤ 30 | 31 ≤ 60 | 61 ≤ 90 | 91 ≤ 120 | ≥ 121 |
| Trade receivables | 292,158 | 226,210 | 22,631 | 16,259 | 5,766 | 3,193 | 18,099 |
| Total | 292,158 | 226,210 | 22,631 | 16,259 | 5,766 | 3,193 | 18,099 |

PRADA Group
Interim Financial Report 2017 - Notes to the Interim condensed consolidated financial statements

The following table contains a summary, by due date, of trade receivables less the allowance for doubtful accounts at the reporting date:

| (amounts in thousands of Euro) | July 31
2017
(unaudited) | Not
overdue | Overdue (days) | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- |
| | | | 1 ≤ 30 | 31 ≤ 60 | 61 ≤ 90 | 91 ≤ 120 | ≥ 121 |
| Trade receivables less provision
for doubtful debts | 266,795 | 238,322 | 10,712 | 6,823 | 4,436 | 1,544 | 4,958 |
| Total | 266,795 | 238,322 | 10,712 | 6,823 | 4,436 | 1,544 | 4,958 |
| (amounts in thousands of Euro) | January 31
2017
(audited) | Not
overdue | Overdue (days) | | | | |
| | | | 1 ≤ 30 | 31 ≤ 60 | 61 ≤ 90 | 91 ≤ 120 | ≥ 121 |
| Trade receivables less provision
for doubtful debts | 285,504 | 225,905 | 22,613 | 16,259 | 5,766 | 3,193 | 11,768 |
| Total | 285,504 | 225,905 | 22,613 | 16,259 | 5,766 | 3,193 | 11,768 |

8. Inventories, net

Inventories are analyzed as follows:

| (amounts in thousands of Euro) | July 31
2017
(unaudited) | January 31
2017
(audited) |
| --- | --- | --- |
| Raw materials | 107,613 | 103,679 |
| Work in progress | 36,853 | 26,368 |
| Finished products | 465,370 | 444,049 |
| Provision for obsolete and slow moving inventories | (47,216) | (47,155) |
| Total | 562,620 | 526,941 |

The inventory increased from Euro 526.9 million to Euro 562.6 million. The difference of Euro 35.7 million consisted of Euro 21.3 million of finished products and Euro 14.4 million of raw materials and work in progress. The increase coincides with a retail restocking phase.

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, 2017 (audited)	25,676	21,479	47,155
Exchange differences	-	(73)	(73)
Increase	-	261	261
Utilization	-	(127)	(127)
Balance at July 31, 2017 (unaudited)	25,676	21,540	47,216

PRADA Group

Interim Financial Report 2017 - Notes to the Interim condensed consolidated financial statements

9. Derivative financial instruments: assets and liabilities

Derivative financial instruments: assets and liabilities, current and non-current portion.

| (amounts in thousands of Euro) | July 31
2017
(unaudited) | January 31
2017
(audited) |
| --- | --- | --- |
| Financial assets regarding derivative instruments - current | 20,416 | 7,045 |
| Financial assets regarding derivative instruments – non-current | 2,620 | - |
| Total Financial Assets - Derivative financial instruments | 23,036 | 7,045 |
| Financial liabilities regarding derivative instruments – current | (11,320) | (13,634) |
| Financial liabilities regarding derivative instruments – non-current | (7,363) | (8,250) |
| Total Financial Liabilities - Derivative financial instruments | (18,683) | (21,884) |
| Net carrying amount - current and non-current portion | 4,353 | (14,839) |

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

| (amounts in thousands of Euro) | July 31
2017
(unaudited) | January 31
2017
(audited) | IFRS7
Category |
| --- | --- | --- | --- |
| Forward contracts | 21,256 | 6,168 | Level II |
| Options | 1,780 | 877 | Level II |
| Positive Fair Value | 23,036 | 7,045 | |
| Forward contracts | (7,692) | (10,865) | Level II |
| Options | (62) | (134) | Level II |
| Interest rate swaps | (10,929) | (10,885) | Level II |
| Negative Fair Value | (18,683) | (21,884) | |
| Net carrying amount – current and non-current | 4,353 | (14,839) | |

All of the above derivative instruments are qualified as Level II of the fair value hierarchy proposed by IFRS 7. The Group has not entered into any derivative contracts that may be qualified as Level I or III.

The fair values of derivatives arranged to hedge interest rate risks (IRS) and of derivatives arranged to hedge exchange rate risks (forward contracts and options) have been determined utilizing one of the valuation platforms in most widespread use on the financial market and are based on the interest rate curves and on spot and forward exchange rates at the reporting date.

The Group entered into the financial derivative contracts in the course of its risk management activities in order to hedge financial risks connected with exchange and interest rate fluctuation.

Foreign exchange rate transactions

The cash flows resulting from the Group's international activities are exposed to exchange rate volatility. In order to hedge this risk, the Group enters into options and forward sale and purchase agreements so as to guarantee the value in Euro (or in other currencies of the various Group companies) of identified cash flows. Expected future cash flows mainly regard the collection of trade receivables, settlement of trade

PRADA Group
Interim Financial Report 2017 - Notes to the Interim condensed consolidated financial statements

payables and financial cash flows.

At the reporting date, the notional amounts of the derivative contracts designated as foreign exchange risk hedges (as translated at the European Central Bank exchange rate at July 31, 2017) were as stated below.

Contracts in place as at July 31, 2017 to hedge projected future trade cash flows.

(amounts in thousands of Euro)	Options	Forward sale contracts	Forward purchase contracts (*)	July 31 2017 (unaudited)
Currency
Swiss Franc	-	5,810	(2,646)	3,164
GB Pound	-	37,408	(5,212)	32,196
Hong Kong Dollar	10,153	29,477	(63,617)	(23,987)
Japanese Yen	-	46,261	-	46,261
Korean Won	-	37,549	-	37,549
Chinese Renminbi	-	72,184	-	72,184
US Dollar	11,512	63,528	(11,537)	63,503
Other	-	51,457	-	51,457
Total	21,665	343,674	(83,012)	282,327

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

Contracts in place as at July 31, 2017 to hedge projected future financial cash flows.

(amounts in thousands of Euro)	Options	Forward sale contracts	Forward purchase contracts (*)	July 31 2017 (unaudited)
Currency
Swiss Franc	-	50,180	-	50,180
GB Pound	-	21,404	(1,275)	20,129
Japanese Yen	-	32,691	-	32,691
US Dollar	-	9,273	(54,149)	(44,876)
Other	-	5,760	-	5,760
Total	-	119,308	(55,424)	63,884

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

Contracts in place as at January 31, 2017 to hedge projected future trade cash flows.

(amounts in thousands of Euro)	Options	Forward sale contracts	Forward purchase contracts (*)	January 31 2017 (audited)
Currency
Swiss Franc	-	12,936	(12,370)	566
GB Pound	-	73,050	(22,537)	50,513
Hong Kong Dollar	17,978	47,581	(66,586)	(1,027)
Japanese Yen	-	95,949	(26,174)	69,775
Korean Won	-	53,906	-	53,906
Chinese Renminbi	-	96,255	(43,149)	53,106
US Dollar	63,226	111,576	(112,136)	62,666
Other	-	99,366	(38,200)	61,166
Total	81,204	590,619	(321,152)	350,671

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

PRADA Group

Interim Financial Report 2017 - Notes to the Interim condensed consolidated financial statements

Contracts in place as at January 31, 2017 to hedge projected future financial cash flows.

(amounts in thousands of Euro)	Options	Forward sale contracts	Forward purchase contracts (*)	January 31 2017 (audited)
Currency
Swiss Franc	-	53,431	-	53,431
Brazilian Real	-	895	(895)	-
GB Pound	-	22,229	-	22,229
Japanese Yen	-	34,771	-	34,771
US Dollar	-	10,112	(59,042)	(48,930)
Other	-	9,919	-	9,919
Total	-	131,357	(59,937)	71,420

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

All contracts in place as at July 31, 2017 mature within 12 months, except for some forward contracts to hedge future financial cash flows expiring after July 31, 2018 and whose notional net amount is Euro 45.8 million (wholly consisting of forward sale contracts).

All contracts in place at the reporting date were entered into with major financial institutions and the Group expects none of them to default.

PRADA Group

Interim Financial Report 2017 - Notes to the Interim condensed consolidated financial statements

Interest rate transactions

The Group enters into Interest Rate Swaps agreements (IRS) in order to hedge the risk of interest rate fluctuations in relation to several bank loans. The key features of the IRS agreements in place as at July 31, 2017 and January 31, 2017 are summarized as follows:

Interest Rate Swap (IRS) Agreement					Hedged loan
Contract	Currency	Notional amount	Interest rate	Maturity date	July 31 2017 (unaudited)	Currency	Lending institution	Amount
					(amounts in thousands of Euro)
IRS	Euro/000	47,667	1.457%	May-30	(2,217)	Euro/000	Intesa-Sanpaolo	47,667
IRS	Euro/000	60,000	0.105%	Mar-19	(399)	Euro/000	Unicredit	60,000
IRS	Euro/000	90,000	0.013%	Feb-21	(191)	Euro/000	Unicredit	90,000
IRS	Euro/000	100,000	0.250%	Jun-21	(465)	Euro/000	CR Firenze	100,000
IRS	GBP/000	56,400	2.778%	Jan-29	(7,478)	GBP/000	Unicredit	56,400
IRS	Yen/000	1,800,000	1.360%	Mar-20	(179)	Yen/000	Mizuho	2,100,000
Total					(10,929)
Interest Rate Swap (IRS) Agreement					Hedged loan
---	---	---	---	---	---	---	---	---
Contract	Currency	Notional amount	Interest rate	Maturity date	January 31 2017 (audited)	Currency	Lending institution	Amount
					(amounts in thousands of Euro)
IRS	Euro/000	49,500	1.457%	May-30	(2,563)	Euro/000	Intesa-Sanpaolo	49,500
IRS	Euro/000	60,000	0.105%	Mar-19	(470)	Euro/000	Unicredit	60,000
IRS	Euro/000	90,000	0.013%	Feb-19	(300)	Euro/000	Unicredit	90,000
IRS	GBP/000	57,300	2.828%	Jan-29	(7,294)	GBP/000	Unicredit	57,300
IRS	Yen/000	250,000	1.875%	Mar-17	(11)	Yen/000	Mizuho	250,000
IRS	Yen/000	2,100,000	1.360%	Mar-20	(247)	Yen/000	Mizuho	2,100,000
Total					(10,885)

The IRS agreements convert the variable interest rates applying to a series of loans into fixed interest rates. These agreements have been arranged with leading financial institutions and the Group does not expect them to default.

10. Receivables from, and advance payments to, related parties

Receivables from, and advances to, related parties current are detailed below:

(amounts in thousands of Euro)	July 31 2017 (unaudited)	January 31 2017 (audited)
Prepaid sponsorships	3,259	8,741
Prepaid Expenses & Accrued Income	6,166	6,223
Receivables from and advances to related parties - current	9,425	14,964

The prepaid sponsorships refer to the amount paid to Luna Rossa Challenge srl under agreements in effect as at July 31, 2017. Additional information on related party transactions is provided in Note 36.

PRADA Group
Interim Financial Report 2017 - Notes to the Interim condensed consolidated financial statements

11. Other current assets

Other current assets are detailed as follows:

| (amounts in thousands of Euro) | July 31
2017
(unaudited) | January 31
2017
(audited) |
| --- | --- | --- |
| VAT | 44,183 | 48,582 |
| Income tax and other tax receivables | 74,082 | 117,244 |
| Other asset | 23,887 | 27,218 |
| Prepayments | 65,682 | 55,676 |
| Deposits | 7,316 | 4,655 |
| Total | 215,150 | 253,375 |

Other assets

Other assets are detailed as follows:

| (amounts in thousands of Euro) | July 31
2017
(unaudited) | January 31
2017
(audited) |
| --- | --- | --- |
| Advertising contributions under license agreements | 6,478 | 5,072 |
| Advances to suppliers | 3,133 | 1,353 |
| Incentives for retail investments | 7,251 | 12,171 |
| Advances to employees | 918 | 807 |
| Other receivables | 6,107 | 7,815 |
| Total | 23,887 | 27,218 |

Prepayments

Prepayments are detailed as follows:

| (amounts in thousands of Euro) | July 31
2017
(unaudited) | January 31
2017
(audited) |
| --- | --- | --- |
| Rental costs | 26,985 | 21,038 |
| Insurance | 3,272 | 2,447 |
| Design Costs | 11,901 | 13,182 |
| Fashion shows and advances on advertising campaigns | 7,284 | 3,888 |
| Amortized costs on loans | 938 | 1,077 |
| Other | 15,302 | 14,044 |
| Total | 65,682 | 55,676 |

Prepaid design costs mainly include costs incurred for the conception and realization of collections that will generate revenue after the reporting period.

Deposits

Deposits mainly include guarantee deposits paid under commercial lease agreements.

PRADA Group
Interim Financial Report 2017 - Notes to the Interim condensed consolidated financial statements

12. Property, plant and equipment

The changes in the historical cost and accumulated depreciation are set forth below:

(amounts in thousands of Euro)	Land and buildings	Production plant and machinery	Leasehold improvements	Furniture & fittings	Other tangibles	Assets under construction	Total
Historical cost	752,702	167,863	1,380,474	433,346	172,926	75,790	2,983,101
Accumulated depreciation	(96,178)	(130,876)	(872,603)	(250,502)	(90,258)	-	(1,440,417)
Net carrying amount at January 31, 2017 (audited)	656,524	36,987	507,871	182,844	82,668	75,790	1,542,684
(amounts in thousands of Euro)	Land and buildings	Production plant and machinery	Leasehold improvements	Furniture & fittings	Other tangibles	Assets under construction	Total
Historical cost	744,474	171,540	1,324,693	420,306	171,812	96,981	2,929,806
Accumulated depreciation	(101,802)	(134,195)	(857,373)	(253,351)	(92,934)	-	(1,439,655)
Net carrying amount at July 31, 2017 (unaudited)	642,672	37,345	467,320	166,955	78,878	96,981	1,490,151

The changes in the carrying amount during the six months ended July 31, 2017 are as follows:

(amounts in thousands of Euro)	Land and buildings	Production plant and machinery	Leasehold improvements	Furniture & fittings	Other tangibles	Assets under construction	Total historical cost
Balance at January 31, 2017 (audited)	656,524	36,987	507,871	182,844	82,668	75,790	1,542,684
Additions	3,465	4,446	22,872	8,394	2,034	50,390	91,601
Depreciation	(8,128)	(3,893)	(57,708)	(17,468)	(5,285)	-	(92,482)
Disposals	(8)	(471)	(155)	(202)	(5)	-	(841)
Exchange differences	(9,194)	(47)	(25,668)	(7,594)	(571)	(2,177)	(45,251)
Other movements	13	323	22,678	2,702	117	(27,011)	(1,178)
Impairment	-	-	(2,570)	(1,721)	(80)	(11)	(4,382)
Balance at July 31, 2017 (unaudited)	642,672	37,345	467,320	166,955	78,878	96,981	1,490,151

The additions of the period are mainly related to the retail network to revamp the store layout in order to further enhance the customer experience.

The asset impairment of Euro 4.3 million refers to stores closures for strategic purposes (thirteen stores were closed down in the six-month period) and renovations.

PRADA Group
Interim Financial Report 2017 - Notes to the Interim condensed consolidated financial statements

13. Intangible assets

The historical cost and accumulated amortization are set forth below:

(amounts in thousands of Euro)	Trademarks	Goodwill	Store Lease Acquisitions	Software	Development costs and other intangibles	Assets in progress	Total
Historical cost	392,205	547,460	216,951	100,099	63,320	27,767	1,347,802
Accumulated depreciation	(143,761)	(28,863)	(127,965)	(75,000)	(50,413)	-	(426,002)
Net carrying amount at January 31, 2017 (audited)	248,444	518,597	88,986	25,099	12,907	27,767	921,800
(amounts in thousands of Euro)	Trademarks	Goodwill	Store Lease Acquisitions	Software	Development costs and other intangibles	Assets in progress	Total
Historical cost	390,554	547,604	211,606	108,178	62,910	31,756	1,352,608
Accumulated depreciation	(148,129)	(29,335)	(129,919)	(78,332)	(50,980)	-	(436,695)
Net carrying amount at July 31, 2017 (unaudited)	242,425	518,269	81,687	29,846	11,930	31,756	915,913

The changes in the carrying amount during the six months ended July 31, 2017 are as follows:

(amounts in thousands of Euro)	Trademarks	Goodwill	Store Lease Acquisitions	Software	Development costs and other intangibles	Assets in progress	Total
Balance at January 31, 2017 (audited)	248,444	518,597	88,986	25,099	12,907	27,767	921,800
Additions	1,156	-	-	3,793	418	8,647	14,014
Amortization	(5,519)	-	(5,211)	(3,718)	(1,403)	-	(15,851)
Disposals	-	-	-	-	-	-	-
Exchange differences	(1,656)	(328)	(2,089)	(15)	(1)	(22)	(4,111)
Other movements	-	-	1	4,687	9	(4,636)	61
Balance at July 31, 2017 (unaudited)	242,425	518,269	81,687	29,846	11,930	31,756	915,913

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

(amounts in thousands of Euro)	July 31 2017 (unaudited)	January 31 2017 (audited)
Miu Miu	145,896	148,661
Church's	83,851	87,429
Prada	3,579	3,660
Other	9,099	8,694
Total	242,425	248,444

No impairment was recognized for the Group's trademarks during the period. "Other" consists of trademark registration costs plus the Car Shoe and Luna Rossa trademarks.

"Key money" includes intangible assets recognized in respect of costs incurred by the Group to stipulate or take over leases for retail premises in prestigious locations.

PRADA Group
Interim Financial Report 2017 - Notes to the Interim condensed consolidated financial statements

The total capital expenditure for tangibles and intangibles in the six months ended July 31, 2017 was Euro 105.6 million, as broken down below.

(amounts in thousands of Euro)	July 31 2017 (unaudited)	January 31 2017 (audited)
Retail	63,566	151,218
Production and logistics	42,049	100,289
Total	105,615	251,507

Impairment test

As required by "IAS 36 Impairment of Assets" goodwill with an indefinite useful life is not amortized. Instead, it is tested for impairment at least once a year. As at July 31, 2017 goodwill amounted to Euro 518.3 million, detailed by Cash Generating Unit (CGU) as follows:

(amounts in thousands of Euro)	July 31 2017 (unaudited)	January 31 2017 (audited)
Italy Wholesale	78,355	78,355
Asia Pacific and Japan Retail	311,936	311,936
Italy Retail	25,850	25,850
Germany and Austria Retail	5,064	5,064
United Kingdom Retail	9,300	9,300
Spain Retail	1,400	1,400
France and Monaco Retail	11,700	11,700
North America Retail and Wholesale	48,000	48,000
Production Division	10,169	10,169
Church's	8,520	8,848
Marchesi Angelo	7,975	7,975
Total	518,269	518,597

No evidence emerged during the period under review to suggest any indication of impairment. However, as value in use is measured based on estimates, the Group cannot guarantee that the value of goodwill or other intangible assets will not be impaired in the future.

14. Associated undertakings

(amounts in thousands of Euro)	July 31 2017 (unaudited)	January 31 2017 (audited)
Investment available for sale	9,272	11,749
Other investments	39	26
Total	9,311	11,775

The investments available for sale regard a 4.88% stake in Sitoy Group Holdings ltd, a company listed on the Hong Kong Stock Exchange as at July 31, 2017. The value of the investment was measured at fair value in line with the official quoted share price (Level I of the fair value hierarchy according to "IFRS 7 Financial Instruments: Disclosures"). The fair value decrease of Euro 2.5 million compared to January 31, 2017 was recognized in a specific equity reserve, net of the related tax effect (Euro 0.5 million). In 2017, the Group accounted for net dividends from Sitoy Group Holdings totaling HKD 3 million (Euro 0.4 million).

PRADA Group

Interim Financial Report 2017 - Notes to the Interim condensed consolidated financial statements

15. Other non-current assets

Other non-current assets are detailed as follows:

| (amounts in thousands of Euro) | July 31
2017
(unaudited) | January 31
2017
(audited) |
| --- | --- | --- |
| Guarantee deposits | 68,986 | 77,007 |
| Deferred rental income | 14,098 | 16,807 |
| Pension fund surplus | 9,854 | 10,233 |
| Other long-term assets | 18,987 | 19,314 |
| Total | 111,925 | 123,361 |

Guarantee deposits are analyzed below by nature and maturity:

| (amounts in thousands of Euro) | July 31
2017
(unaudited) | January 31
2017
(audited) |
| --- | --- | --- |
| Nature: | | |
| Stores | 62,977 | 71,680 |
| Offices | 4,908 | 3,943 |
| Warehouses | 112 | 116 |
| Other | 989 | 1,268 |
| Total | 68,986 | 77,007 |
| (amounts in thousands of Euro) | | July 31
2017
(unaudited) |
| Maturity: | | |
| By 31.07.2019 | | 20,907 |
| By 31.07.2020 | | 16,804 |
| By 31.07.2021 | | 6,273 |
| After 31.07.2021 | | 25,002 |
| Total | | 68,986 |

16. Short-term financial payables and bank overdrafts

| (amounts in thousands of Euro) | July 31
2017
(unaudited) | January 31
2017
(audited) |
| --- | --- | --- |
| Bank overdrafts and commercial lines of credit | 389 | - |
| Short-term bank loans | 296,463 | 80,626 |
| Current portion of long term loans | 62,653 | 70,506 |
| Deferred costs on loans | (529) | (364) |
| Financial lease | 230 | 443 |
| Total | 359,206 | 151,211 |

The increase in short-term bank loans is attributable primarily to the drawdown for Euro 140 million of the revolving credit facility stipulated by PRADA spa in 2014 with a banking syndicate, and to the drawdown of some bilateral uncommitted credit facilities. The revolving credit facility is subject to covenants based on the results of PRADA spa's consolidated financial statements. Specifically, the net debt-to-EBITDA ratio must not exceed 3 and the EBITDA-to-interest coverage ratio must exceed 4. Both covenants were complied with as at July 31, 2017.

In addition to the above credit facilities, the short-term bank loans as at July 31, 2017

PRADA Group
Interim Financial Report 2017 - Notes to the Interim condensed consolidated financial statements

consist of a Euro 30 million loan granted to PRADA spa by Mitsubishi Bank of Tokyo, and credit lines granted to PRADA Japan co ltd, for a total equivalent value of Euro 50.9 million. Some of the credit lines contain covenants based on the results of PRADA Japan co ltd's financial statements, all of which were complied with as at July 31, 2017.

Mortgage loans

The current portion of long-term loans includes Euro 3.7 million (Euro 3.7 million as at January 31, 2017) regarding a mortgage loan stipulated by IntesaSanpaolo for PRADA spa in 2014 and disbursed in 2015. The collateral securing this loan is the building in Milan used for the Group's headquarters. The non-current portion of the loan amounts to Euro 44 million (Note 24).

The 2017 current portion of long-term loans includes Euro 2.2 million (Euro 2.1 million as at January 31, 2017) regarding a mortgage loan granted to Kenon Ltd by Unicredit Group in 2014 and secured by a mortgage on a building in Old Bond Street, London, used by the Group for one of the most strategically positioned Prada stores in the world. The non-current portion of the loan amounts to Euro 60.9 million (Note 24).

Short-term bank loans and the current portion of long-term loans are analyzed by currency as follows:

(amounts in thousands of Euro)	July 31 2017 (unaudited)	January 31 2017 (audited)
Euro	276,273	63,280
Japanese Yen	79,199	84,915
Other Currencies	3,594	3,380
Total	359,066	151,575
Bank overdraft	529	-
Amortized costs on loans	(389)	(364)
Total	359,206	151,211

The Group generally borrows at variable interest rates and manages the risk of interest rate fluctuations by using hedging instruments (Note 9).

Considering the hedges in place at the reporting date, 39% of the current portion of medium/long-term loans regarded fixed-rate loans (39% as at January 31, 2017), and 61% regarded variable-rate loans (61% as at January 31, 2017).

The total amount of unused credit lines at July 31, 2017 is Euro 639 million.

17. Payables to related parties – current

The current portions due to related parties are presented below:

(amounts in thousands of Euro)	July 31 2017 (unaudited)	January 31 2017 (audited)
Financial payables	4,524	4,934
Other payables	534	608
Payables to related parties – current	5,058	5,542

The financial payables due to related parties regard two interest-free loans granted by the non-controlling shareholders of the Group's subsidiaries in the Middle East (Note 36).

PRADA Group
Interim Financial Report 2017 - Notes to the Interim condensed consolidated financial statements

18. Trade payables

Trade payables are detailed as follows:

(amounts in thousands of Euro)	July 31 2017 (unaudited)	January 31 2017 (audited)
Trade payables - third parties	266,962	241,901
Trade payables - related parties	9,768	14,193
Total	276,730	256,094

Trade payables rose by Euro 20.6 million, consistently with the dynamics of the production cycle.

The following table summarizes trade payables by maturity date:

(amounts in thousands of Euro)	July 31 2017 (unaudited)	Not overdue	Overdue (in days)
			1 ≤ 30	31 ≤ 60	61 ≤ 90	91 ≤ 120	≥121
Trade payables	276,730	251,090	13,618	3,315	1,064	734	6,909
Total	276,730	251,090	13,618	3,315	1,064	734	6,909
(amounts in thousands of Euro)	January 31 2017 (audited)	Not overdue	Overdue (in days)
			1 ≤ 30	31 ≤ 60	61 ≤ 90	91 ≤ 120	≥121
Trade payables	256,094	221,125	15,884	4,670	2,955	582	10,878
Total	256,094	221,125	15,884	4,670	2,955	582	10,878

19. Tax payables

Tax payables are detailed as follows:

(amounts in thousands of Euro)	July 31 2017 (unaudited)	January 31 2017 (audited)
Current income taxes	23,464	31,990
VAT and other taxes	26,273	33,477
Total	49,737	65,467

The Group recognizes current tax liabilities of Euro 24 million as at July 31, 2017 (Euro 32 million as at January 31, 2017) against tax credits of Euro 74 million (Euro 117.2 million as at January 31, 2017), as reported in Note 11.

PRADA Group
Interim Financial Report 2017 - Notes to the Interim condensed consolidated financial statements

20. Other current liabilities

Other current liabilities are detailed as follows:

| (amounts in thousands of Euro) | July 31
2017
(unaudited) | January 31
2017
(audited) |
| --- | --- | --- |
| Payables for capital expenditure | 46,557 | 56,639 |
| Accrued expenses and deferred income | 20,386 | 18,636 |
| Other payables | 65,508 | 69,552 |
| Total | 132,451 | 144,827 |

Other payables are detailed as follows:

| (amounts in thousands of Euro) | July 31
2017
(unaudited) | January 31
2017
(audited) |
| --- | --- | --- |
| Short-term benefits for employees and other personnel | 53,005 | 57,608 |
| Customer advances | 6,433 | 5,782 |
| Returns from customers | 3,911 | 4,087 |
| Other | 2,159 | 2,075 |
| Total | 65,508 | 69,552 |

21. Long-term financial payables

The long-term financial payables are as follows:

| (amounts in thousands of Euro) | July 31
2017
(unaudited) | January 31
2017
(audited) |
| --- | --- | --- |
| Long-term bank borrowings | 398,418 | 416,491 |
| Bonds | 130,000 | 130,000 |
| Deferred costs on loans | (1,146) | (1,135) |
| Obbligations under financial lease | 2,156 | 2,272 |
| Total | 529,428 | 547,628 |

In order to take advantage of the favorable financial market conditions, during the first half of 2017 PRADA spa signed a new long-term loan agreement with Banca Intesa, which is undrawn as at July 31, 2017.

The Group generally borrows at variable interest rates and manages the risk of interest rate fluctuations through hedging agreements (Note 9).

Long-term loans are made up of fixed-rate loans for a portion equal to 77% (78% as at January 31, 2017), while the remaining 23% regard variable-rate loans (22% as at January 31, 2017).

PRADA Group
Interim Financial Report 2017 - Notes to the Interim condensed consolidated financial statements

The long-term borrowings as at July 31, 2017, excluding financial lease obligations and amortized costs, are set forth below:

Borrower	amount in thousands of Euro	Loan currency	Lender	Expiry date	Interest rate (1)
PRADA spa	130,000	Euro	Bonds	Aug-18	2.75%
PRADA spa	60,000	Euro	Unicredit	Mar-19	0.76%
PRADA spa	44,000	Euro	Intesa SanPaolo	May-30	2.74%
PRADA spa	40,000	Euro	Intesa SanPaolo	Feb-19	0.61%
PRADA spa	60,000	Euro	Monte dei Paschi di Siena	Dec-18	0.32%
PRADA spa	8,333	Euro	Intesa SanPaolo	Dec-18	0.60%
PRADA spa	90,000	Euro	Unicredit	Feb-21	0.96%
PRADA spa	10,000	Euro	Banca Popolare di Milano	Mar-19	0.71%
PRADA Japan Co. Ltd	9,252	Japanese Yen	Mizuho Bank	Mar-20	1.36%
PRADA Japan Co. Ltd	3,084	Japanese Yen	MUFG	Mar-20	0.81%
PRADA Japan Co. Ltd	1,542	Japanese Yen	Sumitomo Mitsui Trust	Mar-20	1.18%
Kenon Ltd	60,892	GB Pound	Unicredit	Jan-29	4.48%
Tannerie Limoges sas	2,500	Euro	BNP Paribas	Jan-24	1.20%
Pelletteria Ennepi srl	125	Euro	Mediocredito Italiano	Jun-19	2.50%
Hipic Prod Impex srl	21	Euro	BRD –Société Generale	Feb-19	4.50%
Prada Middle East	8,669	US Dollar	ENBD	Feb-22	3.20%
Total	528,418

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

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

Borrower	amount in thousands of Euro	Loan currency	Lender	Expiry date	Interest rate (1)
PRADA spa	130,000	Euro	Bonds	Aug-18	2.75%
PRADA spa	60,000	Euro	Unicredit	Mar-19	0.76%
PRADA spa	45,833	Euro	Intesa SanPaolo	May-30	2.74%
PRADA spa	40,000	Euro	Intesa SanPaolo	Feb-19	0.61%
PRADA spa	60,000	Euro	Monte dei Paschi di Siena	Dec-18	0.38%
PRADA spa	16,667	Euro	Intesa SanPaolo	Dec-18	0.60%
PRADA spa	90,000	Euro	Unicredit	Feb-21	0.96%
PRADA spa	15,000	Euro	Banca Popolare di Milano	Mar-19	0.71%
PRADA Japan Co. Ltd	1,968	Japanese Yen	Syndicate loan	Jul-18	0.91%
PRADA Japan Co. Ltd	12,301	Japanese Yen	Mizuho Bank	Mar-20	1.36%
PRADA Japan Co. Ltd	4,100	Japanese Yen	MUFG	Mar-20	0.81%
PRADA Japan Co. Ltd	2,050	Japanese Yen	Sumitomo Mitsui Trust	Mar-20	1.18%
PRADA Japan Co. Ltd	820	Japanese Yen	SMBC	Mar-18	0.46%
Kenon Ltd	64,456	GB Pound	Unicredit	Jan-29	4.48%
Church & Co. Ltd	581	GB Pound	HSBC	May-18	1.88%
Tannerie Limoges sas	2,500	Euro	BNP Paribas	Jan-24	1.20%
Pelletteria Ennepi srl	188	Euro	Mediocredito Italiano	Jun-19	2.55%
Hipic Prod Impex srl	27	Euro	BRD –Société Generale	Feb-19	4.50%
Total	546,491

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

PRADA Group

Interim Financial Report 2017 - Notes to the Interim condensed consolidated financial statements

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

(amounts in thousands of Euro)	July 31 2017 (unaudited)	January 31 2017 (audited)
Secured	113,240	116,046
Unsecured	776,671	581,577
Total	889,911	697,623

Other than PRADA spa, no Group company had issued any debt securities at the end of the reporting date.

22. Post-employment benefits

(amounts in thousands of Euro)	July 31 2017 (unaudited)	January 31 2017 (audited)
Post-employment benefits	45,674	46,779
Other long-term employee benefits	14,541	20,432
Total liabilities for long-term benefits	60,215	67,211
Post-employment benefit (pension plan surplus)	9,854	10,233
Net liabilities for long-term benefits	50,361	56,978

The net balance of long-term employee benefits as at July 31, 2017 is Euro 50.4 million (Euro 57 million as at January 31, 2017), and all the benefits are classified as defined benefit plans.

The post-employment benefits consist of Euro 23.3 million (Euro 24.3 million in 2016) in liabilities accounted for by Italian companies and Euro 22.4 million by the foreign subsidiaries (Euro 22.5 million in 2016).

The following table shows movements on liabilities for post-employment benefits in the six months ended July 31, 2017:

(amounts in thousands of Euro)	Defined Benefit Plans in Italy (TFR)	Defined Benefit Plans in other countries (including Japan)	Pension Funds UK	Other long-term employee benefits	Total
Balance at January 31, 2017 (audited)	24,251	22,528	(10,233)	20,432	56,978
Current service cost	198	1,349	-	3,010	4,557
Actuarial (gains)/losses	-	-	-	6	6
Benefits paid	(1,180)	(54)	-	(8,683)	(9,917)
Exchange differences	-	(1,418)	379	(335)	(1,374)
Other Movements	-	-	-	111	111
Balance at July 31, 2017 (unaudited)	23,269	22,405	(9,854)	14,541	50,361

PRADA Group
Interim Financial Report 2017 - Notes to the Interim condensed consolidated financial statements

23. Provisions for risks and charges

Movements on provisions for risks and charges are summarized as follows:

(amounts in thousands of Euro)	Provision for litigation	Provision for tax disputes	Other provisions	Total
Balance at January 31, 2017 (audited)	1,788	24,905	55,630	82,323
Exchange differences	(43)	(96)	(3,462)	(3,601)
Reversals	(351)	(51)	(73)	(475)
Utilized	(2)	-	(2,665)	(2,667)
Increases	152	20	1,794	1,966
Balance at July 31, 2017 (unaudited)	1,544	24,778	51,224	77,546

Provisions represent the Directors' best estimate of maximum contingent liabilities at the reporting date. In the Directors' opinion and based on the information available to them as supported by the opinions of independent experts, the total amount provided for risks and charges is reasonable considering the liabilities that might arise. During the six months ended July 31, 2017, there were no significant developments regarding litigation ongoing at January 31, 2017. Moreover, no new contingencies requiring significant adjustment to the provisions for risks and charges reported at July 31, 2017 emerged.

24. Other non-current liabilities

Other non-current liabilities amount to Euro 169.4 million (Euro 179.1 million as at January 31, 2017). They mainly regard liabilities to recognize, on a straight-line basis, commercial lease costs.

25. Equity attributable to the owners of the Group

Group shareholders' equity is as follows:

(amounts in thousands of Euro)	July 31 2017 (unaudited)	January 31 2017 (audited)
Share capital	255,882	255,882
Share premium reserve	410,047	410,047
Other reserves	1,977,987	2,006,713
Actuarial reserve	(5,705)	(5,707)
Fair value reserve	(3,559)	(1,656)
Cash flow hedge reserve	2,315	(7,897)
Translation reserve	23,636	144,791
Net profit (loss)	115,742	278,329
Total	2,776,345	3,080,502

Share capital

As at July 31, 2017, approximately 80% of PRADA spa' share capital is owned by PRADA Holding spa and the remainder is listed on the Main Board of the Hong Kong Stock Exchange.

Share premium reserve

The share premium reserve of Euro 410 million did not change from that of January 31, 2017.

60
PRADA Group
Interim Financial Report 2017 - Notes to the Interim condensed consolidated financial statements

Translation reserve

The changes in this reserve result from the translation into Euro of the foreign currency financial statements of consolidated companies. The reserve decreased from the Euro 144.8 million at January 31, 2017 to Euro 23.6 million. The negative change of Euro 121.1 million was mainly due to the strengthening of the Euro against the Hong Kong Dollar and the US Dollar.

Other reserves

The other reserves amount to Euro 1,978 million as at July 31, 2017. They decreased by Euro 28.7 million from January 31, 2017 was due to the allocation of the previous fiscal year's profit (Euro 278.3 million), net of the dividends distributed to PRADA spa shareholders (Euro 307.1 million).

Net income for the period

The Group's net income for the six months ended July 31, 2017 was Euro 115.7 million (Euro 278.3 million for the twelve months ended January 31, 2017).

Capital gains tax in Italy

Capital gains realized from the sale in an Italian company by shareholders resident in Hong Kong are no longer subject to taxation in Italy, applying as at January 1, 2016.

Further details on Italian capital gains taxation have already been reported in the Tax Booklet available on the Company's website www.pradagroup.com.

26. Equity attributable to Non-controlling interests

The following table shows movements on the Shareholders' equity of Non-controlling interests during the periods ended July 31, 2017 and January 31, 2017.

| (amounts in thousands of Euro) | July 31
2017
(unaudited) | January 31
2017
(audited) |
| --- | --- | --- |
| Opening Balance | 24,028 | 17,037 |
| Translation differences | (1,752) | 540 |
| Dividends | (451) | (706) |
| Net result for the period | 340 | 5,861 |
| Actuarial reserve | | 2 |
| Capital injection in subsidiaries | 89 | 1,014 |
| Transactions with non-controlling shareholders | 335 | 280 |
| Closing balance | 22,590 | 24,028 |

27. Net revenues

Consolidated net revenues are mainly generated by sales of finished products and are stated net of returns and discounts.

| (amounts in thousands of Euro) | six months
ended July 31
2017
(unaudited) | six months
ended July 31
2016
(unaudited) |
| --- | --- | --- |
| Net sales | 1,442,556 | 1,529,267 |
| Royalties | 26,080 | 24,905 |
| Total | 1,468,636 | 1,554,172 |

A breakdown of net sales by brand, distribution channel, geographical area and product is provided in the Financial review.

28. Cost of goods sold

Cost of goods sold is analyzed as follows:

(amounts in thousands of Euro)	six months ended July 31 2017 (unaudited)	six months ended July 31 2016 (unaudited)
Purchases of raw materials and production costs	365,403	297,339
Logistic costs, duties and insurance	68,843	65,404
Change in inventories	(54,251)	69,488
Total	379,995	432,231

The cost of goods sold decreased from 27.8% to 25.9% of net revenues mainly following a favorable sales mix in terms of ratio of full-price sales to discounted sales and the effect of exchange rates.

29. Operating expenses

Operating costs are analyzed as follows:

(amounts in thousands of Euro)	six months ended July 31 2017 (unaudited)	% of net revenues	six months ended July 31 2016 (unaudited)	% of net revenues
Product design and development costs	66,786	4.5%	63,703	4.1%
Advertising and promotion expenses	82,587	5.6%	75,984	4.9%
Selling expenses	679,606	46.3%	678,158	43.6%
General and administrative costs	92,825	6.3%	90,395	5.8%
Total	921,804	62.7%	908,240	58.4%

The detail of the operating expenses was restated compared to the 2016 Interim Report so as to provide a better representation of the results of the revision of short-term incentives to employees.

The increase in operating expenses, net of exchange differences of Euro 3.7 million, was attributable primarily to an increase in advertising and communication activities, particularly with digital technology, and a higher cost of labor regarding the aforementioned revision in 2016 of short-term incentives. All other expense items were in line with those of 2016, a year in which the Group carried out an important cost reduction program.

The following table shows the depreciation, amortization and impairment costs, labor costs and rental costs included in operating costs.

(amounts in thousands of Euro)	six months ended July 31 2017 (unaudited)	six months ended July 31 2016 (unaudited)
Depreciation, amortization and impairment	105,789	109,733
Labour Cost	279,735	273,749
Variable rent	161,511	168,941
Fixed rent	153,827	148,627
Total	700,862	701,050

PRADA Group

Interim Financial Report 2017 - Notes to the Interim condensed consolidated financial statements

30. Interest and other financial income/(expenses), net

Interest and other financial income/(expenses), net are analyzed as follows:

(amounts in thousands of Euro)	six months ended July 31 2017 (unaudited)	six months ended July 31 2017 (unaudited)
Interest expenses on borrowings	(7,157)	(7,722)
Interest income	2,882	2,008
Interest income/(expenses) IAS 19	-	(89)
Exchange gains/(losses) - realized	(2,372)	2,943
Exchange gains/(losses) - unrealized	6,638	(2,615)
Other financial income/(expenses)	(881)	(1,281)
Total	(890)	(6,756)

31. Dividends from investments

As at July 31, 2017, the Group held a 4.88% interest (unchanged on prior year) in Sitoy Group Holdings Ltd, a company listed on Hong Kong Stock Exchange (HK: 1023). During these six months of 2017 the dividends accrued from said company amounted to Euro 357 thousand (Euro 558 thousand in the same period of last year).

32. Taxation

Income taxes have the following composition:

(amounts in thousands of Euro)	six months ended July 31 2017 (unaudited)	six months ended July 31 2017 (unaudited)
Current taxation	52,771	49,047
Deferred taxation	(2,549)	13,159
Income taxes	50,222	62,206

The effective tax rate of 30% is in line with the same period of last year. The benefit deriving from a lower Italian income tax rate was offset by the less advantageous geographical sources of income.

PRADA Group
Interim Financial Report 2017 - Notes to the Interim condensed consolidated financial statements

The changes in deferred tax assets and liabilities are set forth below:

(amounts in thousands of Euro)	six months ended July 31 2017 (unaudited)	twelve months ended January 31 2017 (audited)
Opening balance	216,126	243,690
Exchange differences	(12,956)	5,746
Deferred tax on acquisitions	-	463
Deferred taxes on derivative instruments recorded in equity (cash flow hedges)	(2,693)	117
Deferred taxes on post-employment benefits recorded in equity (reserve for actuarial differences)	-	(821)
Other movements	517	2,524
Deferred taxes for the period in income statement	2,375	(35,593)
Closing balance	203,369	216,126

Deferred tax assets and liabilities are analyzed by nature as follows:

(amounts in thousands of Euro)	July 31, 2017 (unaudited)		January 31, 2017 (audited)
	Deferred tax assets	Deferred tax liabilities	Deferred tax assets	Deferred tax liabilities
Inventories	108,339	-	108,560	-
Receivables and other assets	549	1,420	462	1,417
Useful life of non-current assets	51,951	8,728	55,124	8,712
Deferred taxes due to acquisitions	-	15,170	-	16,957
Provision for risks / accrued expenses	48,637	717	54,945	816
Non-deductible / taxable charges/income	8,129	2,566	11,096	448
Tax loss carryforwards	5,606	-	3,561	-
Derivative financial instruments	1,390	2,718	1,885	-
Long term employee benefits	8,220	1,676	9,395	1,740
Other	4,657	1,114	2,238	1,050
Total	237,478	34,109	247,266	31,140

33. Earnings and Dividends per share

Earnings per share basic and diluted

Earnings per share are calculated by dividing the net income attributable to shareholders by the weighted average number of ordinary shares in issue.

	six months ended July 31 2017 (unaudited)	six months ended July 31 2016 (unaudited)
Group net income in Euro	115,741,559	141,923,268
Weighted average number of ordinary shares in issue	2,558,824,000	2,558,824,000
Earnings per share in Euro, calculated on weighted average number of shares	0.045	0.055

Dividends per share

During the six months ended July 31, 2017, the Company distributed dividends of Euro 307,058,880, as approved by the Shareholders' Meeting held on May 31, 2017 to approve the financial statements for the year ended January 31, 2017.

PRADA Group

Interim Financial Report 2017 - Notes to the Interim condensed consolidated financial statements

34. Additional information

The average headcount by functional area is as follows:

(number of employees)	six months ended July 31 2017 (unaudited)	six months ended July 31 2016 (unaudited)
Production	2,552	2,170
Product design and development	996	1,000
Advertising and Communications	125	119
Selling	7,479	7,925
General and administrative services	942	1,014
Total	12,094	12,228

Employee remuneration

Employee remuneration by functional area is as follows:

(amounts in thousands of Euro)	six months ended July 31 2017 (unaudited)	six months ended July 31 2016 (unaudited)
Production	59,070	53,666
Product design and development	34,845	34,122
Advertising and Communications	7,365	6,517
Selling	196,109	194,889
General and administrative services	41,416	38,221
Total	338,805	327,415

Employee remuneration by functional nature is as follows:

(amounts in thousands of Euro)	six months ended July 31 2017 (unaudited)	six months ended July 31 2016 (unaudited)
Wages and salaries	255,790	246,363
Post-employment benefits and other long-term benefits	16,213	12,512
Social contributions	54,456	53,785
Other	12,346	14,755
Total	338,805	327,415

PRADA Group
Interim Financial Report 2017 - Notes to the Interim condensed consolidated financial statements

Distributable reserves of parent company PRADA spa

| (amounts in thousands of Euro) | July 31, 2017
(unaudited) | Possible utilization | Distributable amount | Summary of utilization in the last three years | |
| --- | --- | --- | --- | --- | --- |
| | | | | Coverage of losses | Distribution of dividends |
| Share Capital | 255,882 | | - | - | - |
| Share premium reserve | 410,047 | A, B, C | 410,047 | - | - |
| Legal reserve | 51,176 | B | - | - | - |
| Other reserves | 182,899 | A, B, C | 182,899 | - | - |
| Retained earnings | 282,100 | A, B, C | 261,584 | - | 844,410 |
| Cash flow hedge reserve | 8,728 | | - | - | - |
| Distributable amount | | | 854,530 | | 844,410 |

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

Under Italian Civil Code Article 2431, the share premium reserve is fully distributable because the amount of the legal reserve is at least 20% of share capital. A non-distributable portion of retained earnings amounting to Euro 20,516 thousand refers to restricted reserves under Legislative Decree 38/2005, Article 7.

PRADA Group
Interim Financial Report 2017 - Notes to the Interim condensed consolidated financial statements

Exchange rates

The exchange rates against the Euro used to consolidate Statements of financial position and Statement of Profit or Loss prepared in other currencies as at July 31, 2017 are shown below:

Currency	Average rate six months ended July 31 2017	Average rate six months ended July 31 2016	Rate at July 31 2017	Rate at January 31 2017
UAE Dirham	4.029	4.112	4.307	3.905
Australian Dollar	1.444	1.509	1.471	1.420
Brazilian Real	3.488	4.008	3.676	3.354
Canadian Dollar	1.454	1.469	1.462	1.406
Swiss Franc	1.082	1.095	1.136	1.067
Czech Koruna	26.635	27.042	26.079	27.021
Danish Kronor	7.437	7.446	7.436	7.434
GB Pound	0.864	0.792	0.894	0.861
Hong Kong Dollar	8.536	8.692	9.160	8.344
Indonesian Rupiah	14,615.598	14,873.898	15,625.050	14,363.560
Japanese Yen	122.852	122.404	129.700	121.940
Korean Won	1,243.630	1,312.197	1,315.970	1,244.760
Kuwait Dinar	0.334	0.337	0.354	0.328
Kazakhstan Tenge	348.484	382.878	384.830	347.200
Macau Pataca	8.792	8.953	9.435	8.594
Mexican Peso	20.678	20.326	20.862	22.286
Malaysian Ringgit	4.783	4.532	5.021	4.761
New Zealand Dollar	1.541	1.630	1.567	1.471
Panamanian Balboa	1.097	1.120	1.173	1.075
Qatari Riyal	4.008	4.078	4.302	3.931
Chinese Renminbi	7.518	7.338	7.890	7.397
Romanian Leu	4.548	4.488	4.559	4.503
Russian Ruble	63.585	76.390	70.464	64.430
Saudi Riyal	4.113	4.199	4.398	4.034
Swedish Kronor	9.608	9.334	9.542	9.451
Singapore Dollar	1.530	1.531	1.592	1.520
Thai Baht	37.759	39.492	39.051	37.793
Turkish Lira	3.956	3.260	4.131	4.063
Taiwan Dollar	33.413	36.449	35.480	33.666
Ukrainian Hryvna	29.105	28.616	30.396	28.828
US Dollar	1.097	1.120	1.173	1.076
Vietnamese Dong	24,495.588	24,496.816	26,342.000	23,807.500
South African Rand	14.427	16.910	15.372	14.444

PRADA Group
Interim Financial Report 2017 - Notes to the Interim condensed consolidated financial statements

35. Remuneration of Board of Directors

Remuneration of the PRADA spa Board of Directors for the six months ended July 31, 2017

(amounts in thousands of Euro)	Directors' fees	Remuneration and other benefits	Bonuses and other incentives	Benefits in kind	Pension, healthcare and TFR contributions	July 31 2017 (unaudited)
Carlo Mazzi	1,510	-	-	37	3	1,550
Miuccia Prada Bianchi	6,335	-	-	-	-	6,335
Patrizio Bertelli	6,335	-	-	-	-	6,335
Alessandra Cozzani	25	135	21	35	63	280
Stefano Simontacchi	25	-	-	-	1	26
Maurizio Cereda	25	-	-	-	1	26
Gian Franco Oliviero Mattei	75	-	-	-	-	75
Giancarlo Forestieri	35	-	-	-	6	41
Sing Cheong Liu	35	-	-	-	8	43
Total	14,399	135	21	72	82	14,710

Remuneration of the PRADA spa Board of Directors for the six months ended July 31, 2016

(amounts in thousands of Euro)	Directors' fees	Remuneration and other benefits	Bonuses and other incentives	Benefits in kind	Pension, healthcare and TFR contributions	July 31 2016 (unaudited)
Carlo Mazzi	510	-	-	39	8	557
Miuccia Prada Bianchi	6,000	-	-	-	-	6,000
Patrizio Bertelli	6,000	-	-	-	-	6,000
Alessandra Cozzani	25	100	-	7	68	200
Stefano Simontacchi	13	-	-	-	-	13
Maurizio Cereda	8	-	-	-	-	8
Gian Franco Oliviero Mattei	75	-	-	-	-	75
Giancarlo Forestieri	35	-	-	-	5	40
Sing Cheong Liu	35	-	-	-	7	42
Total	12,701	100	-	46	88	12,935

PRADA Group
Interim Financial Report 2017 - Notes to the Interim condensed consolidated financial statements

36. Related party transactions

The Group enters into transactions with parties that can be qualified as related according to "IAS 24 Related Party Disclosures". These transactions mainly refer to the sale and purchase of goods, supply of services, the granting and receipt of loans as well as sponsorship, lease and franchise agreements. These transactions take place on an arm's length basis.

The following tables show the impact of related party transactions in terms of statement of financial position balances at the reporting date and the total of transactions with an income statement impact.

Statement of financial position amounts at July 31, 2017 (unaudited)

(amounts in thousands of Euro)	Trade receivables, net	Receivables from related parties – current	Receivables from related parties – non current	Trade payables	Payables to related parties – current	Payables to related parties – non current	Other current liabilities, Other LT liabilities
DFS Hawaii	-	-	-	513	-	-	-
DFS New Zealand Limited	-	-	-	10	-	-	-
DFS Venture Singapore (Pte) Limited	-	-	-	22	24	-	-
DFS Cotai limitada	38	-	-	223	431	-	-
Rubaiyat Modern Lux.Pr.Co.Ltd	-	-	-	-	2,238	-	-
STICHTING Prada (ex Stichting Fondazione Prada)	1	-	-	-	-	-	-
Progetto Prada Arte Srl	3	-	-	-	-	-	-
Luna Rossa Challenge 2013 srl	140	3,259	-	13	62	-	-
Chora srl	-	5,848	-	259	-	-	-
Peschiera Immobiliare srl	-	89	-	-	-	-	-
Premiata srl	157	-	-	584	-	-	-
Le Mazza srl	276	-	-	429	-	-	-
Friuli 64 srl	-	-	-	90	-	-	-
Conceria Superior spa	9	-	-	4,911	-	-	-
Perseo srl	306	-	-	985	-	-	-
Al Tayer Group LLC	-	-	-	2	-	-	-
Al Tayer Insignia LLC	602	-	-	15	2,285	-	-
Danzas LLC	-	-	-	6	10	-	(81)
Al Tayer Trends	13	-	-	-	-	-	-
Al Sanam Rent a Car LLC	-	-	-	1	-	-	-
Prapar Corporation	-	-	-	-	-	-	-
PRADA HOLDING spa	39	-	-	-	-	-	-
FRATELLI Prada spa	16,480	118	-	1,665	8	-	-
PRA 1 srl	-	111	-	39	-	-	-
Other	4			1
Members of the Board of Directors of PRADA spa	-	-	-	-	-	-	4,263
Relatives of members of the Board of Directors	-	-	-	-	-	-	378
Total	18,068	9,425	-	9,768	5,058	-	4,560

PRADA Group
Interim Financial Report 2017 - Notes to the Interim condensed consolidated financial statements

Statement of financial position amounts at January 31, 2017 (audited)

(amounts in thousands of Euro)	Trade receivables, net	Receivables from related parties – current	Receivables from related parties – non current	Trade payables	Payables to related parties – current	Payables to related parties – non current	Other current liabilities, Other LT liabilities
STICHTING Prada (ex Stichting Fondazione Prada)	(1)	-	-	-	-	-	-
Progetto Prada Arte srl	-	-	-	(3)	-	-	-
Al Tayer Group LLC	-	-	-	1	-	-	-
Al Tayer Insignia LLC	-	-	-	20	2,492	-	-
Danzas LLC - UAE	-	-	-	11	20	-	-
DFS Hawaii	-	-	-	618	-	-	-
DFS New Zealand Limited	-	-	-	25	-	-	-
DFS Venture Singapore (Pte) Limited	-	-	-	53	-	-	-
Luna Rossa Challenge 2013 Srl	129	8,741	-	11	55	-	-
Chora Srl	-	5,848	-	2,203	-	-	-
DFS Cotai limitada	11	-	-	313	526	-	-
Al Tayer Trends	14	-	-	-	-	-	-
Al Sanam Rent a Car LLC	-	-	-	2	-	-	-
Peschiera Immobiliare srl	-	88	-	-	-	-	-
Premiata srl	10	-	-	423	-	-	-
Le Mazza srl	134	-	-	412	-	-	-
Friuli 64 srl	-	-	-	152	-	-	-
SPELM SA	-	78	-	-	-	-	-
Conceria Superior spa	32	-	-	8,290	-	-	-
PRADA HOLDING S.P.A.	788	-	-	-	-	-	-
Fratelli Prada spa	22,770	118	-	1,184	8	-	-
PRA 1 srl	-	91	-	95	-	-	-
Perseo srl	48	-	-	384	-	-	-
Rubaiyat Modern Lux.Pr.Co.Ltd	-	-	-	(1)	2,441	-	-
Members of the Board of Directors of PRADA spa	-	-	-	-	-	-	3,433
Relatives of members of the Board of Directors	-	-	-	-	-	-	340
Total	23,935	14,964	-	14,193	5,542	-	3,773

PRADA Group
Interim Financial Report 2017 - Notes to the Interim condensed consolidated financial statements

Statement of profit or loss for the six months ended July 31, 2017 (unaudited)

(amounts in thousands of Euro)	Net revenues	Cost of goods sold	General, admin. & selling costs (income)	Royalties income
DFS Hawaii	-	-	1,705	-
DFS Hong Kong Limited	-	-	2	-
DFS New Zealand Limited	-	-	66	-
DFS Venture Singapore (Pte) Limited	-	-	132	-
DFS Cotai limitada	-	-	2,307	-
SPELM SA	-	-	270	-
Luna Rossa Challenge 2013 srl	-	-	5,984	-
Chora Srl	-	-	1,099	-
Peschiera Immobiliare srl	-	-	277	-
Premiata srl	-	624	333	-
Le Mazza srl	-	659	-	-
Conceria Superior spa	4	12,953	22	-
Perseo srl	-	1,119	-	-
PABE	-	-	9,243	-
Al Tayer Group LLC	-	-	10	-
Al Tayer Insignia LLC	643	-	113	-
Danzas LLC	-	330	20	-
Al Sanam Rent a Car LLC	-	-	6	-
PRADA HOLDING spa	-	-	(36)	-
FRATELLI Prada spa	15,347	227	1,237	458
PRA 1 srl	-	-	672	-
Relative of PRADA spa Director	-	-	381	-
Total	15,994	15,912	24,619	458

PRADA Group
Interim Financial Report 2017 - Notes to the Interim condensed consolidated financial statements

Statement of profit or loss for the six months ended July 31, 2016 (unaudited)

(amounts in thousands of Euro)	Net revenues	Cost of goods sold	General, admin. & selling costs (income)	Royalties income	Interest income	Interest expense
Progetto Prada Arte srl	-	-	(1)	-	-	-
Progetto Prada Arte Srl (Galleria)*	-	-	624	-	-	-
Al Tayer Group LLC	-	-	21	-	-	-
Al Tayer Insignia LLC	-	-	125	-	-	-
Danzas LLC – UAE	-	282	23	-	-	-
DFS Hawaii	-	-	2,159	-	-	-
DFS New Zealand Limited	-	-	119	-	-	-
DFS Venture Singapore (Pte) Limited	-	-	143	-	-	-
Luna Rossa Challenge 2013 srl	2	-	5,822	-	-	-
Al Tayer Motors	-	-	5	-	-	-
Chora Srl	-	-	888	-	-	32
DFS Cotai limitada	-	-	2,191	-	-	-
Al Sanam Rent a Car LLC	-	-	5	-	-	-
Peschiera Immobiliare srl	-	-	270	-	-	-
Premiata srl	-	583	-	-	-	-
Le Mazza srl	-	536	-	-	-	-
Friuli 64 srl	-	-	285	-	-	-
SPELM SA	-	-	228	-	-	-
Conceria Superior spa	191	6,219	27	-	-	-
PRADA HOLDING spa	-	-	(129)	-	-	-
Fratelli Prada spa	14,097	385	(280)	428	-	-
Petranera srl	-	-	(2)	-	-	-
PABE-RE LLC	-	-	8,336	-	-	-
PRA 1 srl	-	-	584	-	-	-
Perseo srl	-	1,339	-	-	-	-
Relatives of PRADA spa Directors	-	-	311	-	-	-
Total	14,290	9,344	21,754	428	-	32

(*) This amount includes non-monetary expense in the form of derecognition of deferred rental income of Euro 816 thousand recognized in previous years in relation to Progetto Prada Arte srl in application of "IAS 17 Leases" to the temporary business partnership contract between PRADA spa and Progetto Prada Arte srl (such contract was terminated on April 8, 2016).

The foregoing tables report information on transactions with related parties in accordance with IAS 24, "Related Party Disclosures". The following transactions with related parties fall within the scope of application of the Hong Kong Stock Exchange Listing Rules.

The transactions with related party "PABE-RE LLC" refer to the transaction between PABE-RE LLC and Prada Japan in relation to the lease for the Aoyama buildings in Tokyo. The transactions reported for the six months ended July 31, 2017 are regulated by Chapter 14A of the Listing Rules because they are considered continuing connected transactions subject to disclosure, but they are exempt from the independent shareholders' approval requirement. As required by the Listing Rules, comprehensive disclosure of those continuing connected transactions is contained in PRADA spa's Announcement dated July 15, 2015 ("Prada Aoyama") and May 26, 2017 ("Miu Miu Aoyama").

The transactions with related party "Fratelli Prada spa – franchising" refer to transactions between the Company and Fratelli Prada spa in relation to the franchising agreement for the Prada stores in Milan. The transactions reported for the six months ended July 31, 2017 are regulated by Chapter 14A of the Listing Rules because they are considered continuing connected transactions subject to disclosure, but they are

PRADA Group

Interim Financial Report 2017 - Notes to the Interim condensed consolidated financial statements

exempt from the independent shareholders' approval requirement. As required by the Listing Rules, comprehensive disclosure of those continuing connected transactions is contained in PRADA spa's Announcement dated January 25, 2017.

The transactions with related party Luna Rossa Challenge srl for the six months ended July 31, 2017 are regulated by Chapter 14A of the Listing Rules because they are considered continuing connected transactions subject to disclosure, but they are exempt from the independent shareholders' approval requirement. As required by the Listing Rules, comprehensive disclosure of those continuing connected transactions is contained in PRADA spa's Announcement dated February 27, 2014.

Apart from the non-exempt continuing connected transactions and non-exempt connected transactions reported in Note 36, no transaction reported in the 2017 Interim condensed consolidated financial statements meets the definition of "connected transaction" or "continuing connected transaction" contained in Chapter 14A of the Hong Kong Stock Exchange Listing Rules or, if it does meet the definition of "connected transaction" or "continuing connected transaction" according to Chapter 14A, it is exempt from the announcement, disclosure and independent shareholders' approval requirements laid down in Chapter 14A.

PRADA Group
Interim Financial Report 2017 - Notes to the Interim condensed consolidated financial statements

37. Commitments

Operating leases

At July 31, 2017, and January 31, 2017, operating lease commitments, by maturity date, are as follows:

(amounts in thousands of Euro)	six months ended July 31 2017 (unaudited)	twelve months ended January 31 2017 (audited)
Within a year	723,618	459,520
After between one year and five years	1,187,248	1,268,394
After more than five years	767,125	1,274,402
Total	2,677,991	3,002,316

The amounts recognized in the profit or loss in relation to lease agreements were as follows:

(amounts in thousands of Euro)	six months ended July 31 2017 (unaudited)	six months ended July 31 2016 (unaudited)
Fixed minimum lease payments	155,076	149,790
Variable lease payments	161,511	168,941
Total	316,587	318,731

Some Group companies are required to pay lease expenses based on a fixed percentage of net sales.

At July 31, 2017 and January 31, 2017, future rental income under current operating leases for properties owned by the Group is analyzed by maturity as follows:

(amounts in thousands of Euro)	six months ended July 31 2017 (unaudited)	twelve months ended January 31 2017 (audited)
Within a year	4,812	4,739
After between one year and five years	15,854	16,479
After more than five years	817	2,071
Total	21,483	23,289

Other commitments

At July 31, 2017, the Group has no significant binding purchase commitments.

PRADA Group
Interim Financial Report 2017 - Notes to the Interim condensed consolidated financial statements

Historical Statement of Profit or Loss and Statement of financial position highlights

(amounts in thousands of Euro)	January 31 2017	January 31 2016	January 31 2015	January 31 2014	January 31 2013
Net revenues	3,184,069	3,547,771	3,551,696	3,587,347	3,297,219
Gross margin	2,289,112	2,567,565	2,550,579	2,648,649	2,376,541
Operating income (EBIT)	431,181	502,893	701,551	939,237	889,781
Group net income	278,329	330,888	450,730	627,785	625,681
Total assets	4,656,929	4,756,555	4,738,877	3,888,292	3,385,279
Total liabilities	1,552,399	1,659,178	1,720,730	1,186,752	1,054,787
Total Group shareholders' equity	3,080,502	3,080,340	3,000,737	2,687,554	2,320,022

Consolidated Companies

Entity	Local currency	Share Capital (/000)	% Interest	Registered office and principal country of operation	Date of incorporation/establishment	Main Business
Italy
PRADA Spa	EUR	255,882		Milan, IT		Holding Group/Manufacturing/Distribution
Artisans Shoes Srl (*)	EUR	1,000	66.7	Montegranaro,IT	2/9/1977	Manufacturing
IPI Logistica Srl (*)	EUR	600	100	Milan, IT	1/26/1999	Services
Pelletteria Ennepi Srl (*)	EUR	93	80	Figline e Incisa Valdarno, IT	12/1/2016	Manufacturing
Church Italia Srl	EUR	51	100	Milan, IT	1/31/1992	Services/Retail
Marchesi Angelo Srl (*)	EUR	23	80	Milan, IT	7/10/2013	Confectionary
Montenapoleone 9 Srl (*)	EUR	1,000	100	Milan, IT	4/22/2015	Confectionary

PRADA Group
Interim Financial Report 2017 - Notes to the Interim condensed consolidated financial statements

Company	Local currency	Share Capital (/000)	% Interest	Registered office and principal country of operation	Date of incorporation/establishment	Main Business
Europe
---	---	---	---	---	---	---
PRADA Retail UK Ltd	GBP	5,000	100	London, UK	1/7/1997	Retail
PRADA Germany GmbH	EUR	215	100	Munich, GE	3/20/1995	Retail/Services
PRADA Austria GmbH	EUR	40	100	Vienna, AT	3/14/1996	Retail
PRADA Spain SI	EUR	240	100	Madrid, ES	5/14/1986	Retail
PRADA Retail France Sas	EUR	4,000	100	Paris, FR	10/10/1984	Retail
PRADA Hellas Sole Partner Llc (*)	EUR	2,850	100	Athens, GR	12/19/2007	Retail
PRADA Monte-Carlo Sam	EUR	2,000	100	Monte-Carlo, FR	5/25/1999	Retail
PRADA Sa (*)	EUR	31	100	Luxembourg, LU	7/29/1994	Trademarks/Services
PRADA Company Sa	EUR	3,204	100	Luxembourg, LU	4/12/1999	Services
PRADA Far East Bv (*)	EUR	20	100	Amsterdam, NL	3/27/2000	Retail
PRADA Far East Bv II (*)	EUR	10	100	Amsterdam, NL	3/27/2000	Sub-Holding
Church Denmark Aps	DKK	50	100	Copenhagen, DK	3/13/2014	Retail
Church Holding UK Ltd (*)	GBP	78,126	100	Northampton, UK	7/22/1999	Sub-Holding
Church France Sas	EUR	241	100	Paris, FR	6/1/1955	Retail
Church UK Retail Ltd	GBP	1,021	100	Northampton, UK	7/16/1987	Retail
Church's English Shoes Switzerland Sa	CHF	100	100	Lugano, CH	12/29/2000	Retail
Church & Co. Ltd	GBP	2,811	100	Northampton, UK	1/16/1926	Sub-Holding/Manufacturing/Distribution
Church & Co. (Footwear) Ltd	GBP	44	100	Northampton, UK	3/6/1954	Trademarks
Church English Shoes Sa	EUR	75	100	Brussels, BE	2/25/1963	Retail
PRADA Czech Republic Sro (*)	CZK	2,500	100	Prague, CZ	6/25/2008	Retail
PRADA Portugal Unipessoal Lda (*)	EUR	5	100	Lisbon, PT	8/7/2008	Retail
PRADA Rus Llc (*)	RUB	250	100	Moscow, RU	11/7/2008	Retail
Church Spain SI	EUR	3	100	Madrid, ES	5/6/2009	Retail
PRADA Bosphorus Deri Mamuller Ltd Sirketi (*)	TRY	73,000	100	Istanbul, TR	2/26/2009	Retail
PRADA Ukraine Llc (*)	UAH	240,000	100	Kiev, UA	10/14/2011	Retail
Church Netherlands Bv	EUR	18	100	Amsterdam, NL	7/7/2011	Retail
Church Ireland Retail Ltd	EUR	50	100	Dublin, IE	11/20/2011	Retail
Church Austria GmbH	EUR	35	100	Vienna, AT	1/17/2012	Retail
Prada Sweden Ab	SEK	500	100	Stockholm, SE	12/18/2012	Retail
Church Footwear Ab	SEK	100	100	Stockholm, SE	12/18/2012	Retail
Prada Switzerland Sa (*)	CHF	24,000	100	Lugano, CH	9/28/2012	Retail
Prada Kazakhstan Llp (*)	KZT	500,000	100	Almaty, KZ	6/24/2013	Retail
Kenon Ltd	GBP	84,000	100	London, UK	2/7/2013	Real Estate
Tannerie Limoges Sas (*)	EUR	955	60	Isle, FR	8/19/2014	Manufacturing
Prada Denmark Aps (*)	DKK	26,000	100	Copenhagen, DK	5/19/2015	Retail
Prada Finnish Oy (*)	EUR	2	100	Helsinki, FI	11/9/2015	Retail
Prada Belgium Sprl (*)	EUR	800	100	Brussels, BE	12/4/2015	Retail
Hipic Prod Impex Srl	RON	200	50	Sibiu, RO	4/15/2016	Manufacturing

PRADA Group

Interim Financial Report 2017 - Notes to the Interim condensed consolidated financial statements

76
PRADA Group
Interim Financial Report 2017 - Notes to the Interim condensed consolidated financial statements

Entity	Local currency	Share Capital (/000)	% Interest	Registered office and principal country of operation	Date of incorporation/establishment	Main Business
Americas
PRADA USA Corp. (*)	USD	152,211	100	New York, US	10/25/1993	Distribution/Services/Retail
TRS Hawaii Llc	USD	400	55	Honolulu, US	11/17/1999	Duty-Free Stores
PRADA Canada Corp. (*)	CAD	300	100	Toronto, CA	5/1/1998	Distribution/Retail
Church & Co. (USA) Ltd	USD	85	100	New York, US	9/8/1930	Retail
Post Development Corp (*)	USD	45,138	100	New York, US	2/18/1997	Real Estate
PRADA Retail Mexico, S. de R.L. de C.V. (*)	MXN	269,058	100	Mexico City, MX	7/12/2011	Retail
PRADA Brasil Importação e Comércio de Artigos de Luxo Ltda (*)	BRL	210,000	100	Sao Paulo, BR	4/12/2011	Retail
PRM Services S. de R.L. de C.V. (*)	MXN	7,203	100	Mexico City, MX	2/27/2014	Services
PRADA Panama Sa (*)	PAB	30	100	Panama, PA	9/15/2014	Retail
PRADA Retail Aruba Nv (*)	USD	2,012	100	Oranjestad, AW	9/25/2014	Retail
PRADA St. Barthelemy Sarl (*)	EUR	1,220	100	Gustavia, BL	4/1/2016	Retail
Asia-Pacific and Japan
PRADA Asia Pacific Ltd	HKD	3,000	100	Hong Kong, HK	9/12/1997	Retail/Services
PRADA Taiwan Ltd	TWD	3,800	100	Hong Kong, HK	9/16/1993	Retail
PRADA Retail Malaysia Sdn. Bnd.	MYR	1,000	100	Kuala Lumpur, MY	1/23/2002	Retail
TRS Hong Kong Ltd	HKD	500	55	Hong Kong, HK	2/23/2001	Duty-Free Stores
PRADA Singapore Pte Ltd	SGD	1,000	100	Singapore, SG	10/31/1992	Retail
TRS Singapore Pte Ltd	SGD	500	55	Singapore, SG	8/8/2002	Duty-Free Stores
PRADA Korea Llc	KRW	8,125,000	100	Seoul, KR	11/27/1995	Retail
PRADA (Thailand) co Ltd	THB	372,000	100	Bangkok, TH	6/19/1997	Retail
PRADA Japan co Ltd	JPY	1,200,000	100	Tokyo, JP	3/1/1991	Retail
TRS Guam Partnership	USD	1,095	55	Guam, GU	7/1/1999	Duty-Free Stores
TRS Saipan Partnership	USD	1,405	55	Saipan, MP	7/1/1999	Duty-Free Stores
TRS New Zealand ltd	NZD	100	55	Wellington, NZ	11/4/1999	Duty-Free Stores
PRADA Australia Pty Ltd	AUD	13,500	100	Sydney, AU	4/21/1997	Retail
PRADA Trading (Shanghai) co Ltd	RMB	1,653	100	Shanghai, CN Limited Liability Company	2/9/2004	Retail
TRS Okinawa KK	JPY	10,000	55	Tokyo, JP	1/21/2005	Duty-Free Stores
PRADA Fashion Commerce (Shanghai) co Ltd	RMB	474,950	100	Shanghai, CN Limited Liability Company	10/31/2005	Retail
Church Japan Company Ltd	JPY	31,525	100	Tokyo, JP	4/17/1992	Retail
Church Hong Kong Retail Ltd	HKD	1,000	100	Hong Kong, HK	6/4/2004	Retail
Church Singapore Pte. Ltd	SGD	500	100	Singapore, SG	8/18/2009	Retail
Prada Dongguan Trading Co., Ltd	RMB	8,500	100	Dongguan, CN Limited Liability Company	11/28/2012	Services
Church Footwear (Shanghai) Co., Ltd	RMB	21,900	100	Shanghai, CN Limited Liability Company	12/5/2012	Retail
Prada New Zealand Ltd	NZD	3,500	100	Wellington, NZ	7/5/2013	Retail
PRADA Vietnam Limited Liability Company	VND	66,606,570	100	Hanoi City, VN	9/9/2014	Retail
PT PRADA Indonesia	IDR	3,023,844	100	Jakarta, ID	10/15/2014	Dormant/Distribution
PRADA Macau Co Ltd	MOP	25	100	Macau, MO	1/22/2015	Retail

Entity	Local currency	Share Capital (/000)	% Interest	Registered office and principal country of operation	Date of incorporation/establishment	Main Business

Middle East

PRADA Middle East Fzco (*)	AED	18,000	60	Jebel Ali Free Zone, AE	5/25/2011	Distribution/Services
PRADA Emirates Llc (**)	AED	300	49	Dubai, AE	8/4/2011	Retail
PRADA Kuwait Wll (**)	KWD	50	49	Kuwait city, KW	9/18/2012	Retail
PRADA Retail Spc (*)	QAR	15,000	100	Doha, QA	2/3/2013	Retail
PRADA Saudi Arabia Ltd (*)	SAR	26,666	75	Jeddah, SA	7/2/2014	Retail

Other countries

PRADA Maroc Sarlau (*)	MAD	95,000	100	Casablanca, MA	11/11/2011	Retail
PRADA Retail South Africa pty Ltd (*)	ZAR	50,000	100	Sandton, ZA	9/6/2014	Retail

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

Companies not included in scope of consolidation

Company	Percentage direct interest at July 31, 2017	Percentage direct interest at January 31, 2017	Note	Consolidation method
PAC Srl (in liquidation)	49.00	49.00	Associate	Equity method

40. Disclosures regarding non-controlling interests

The financial information of companies not entirely controlled by the Group is provided below, as required by IFRS 12. The amounts are stated before the consolidation adjustments.

Financial statements at July 31, 2017:

Company	Percentage interest held	Local currency	Total assets	Total equity	Net revenues	Net income/ (loss) for the period	Dividends paid to non-controlling shareholders
Artisans Shoes S.r.l.	67.00	EUR	28,913	8,179	30,818	1,215	451
TRS Hawaii LLC	55.00	USD	5,647	3,360	5,945	(154)	-
TRS Hong Kong Ltd	55.00	HKD	81	70	-	(4)	-
TRS Singapore Pte Limited	55.00	SGD	2,261	1,929	1,002	161	-
TRS Guam	55.00	USD	7,167	6,429	4,988	697	-
TRS Saipan	55.00	USD	3,108	2,826	1,524	267	-
TRS New Zealand Pty. Ltd	55.00	NZD	2,025	1,563	412	59	-
TRS Okinawa	55.00	JPY	7,231	5,480	4,318	467	-
TRS MACAU	55.00	MOP	17,064	11,030	12,547	1,366	-
Prada United Arab Emirates	49.00	AED	44,869	(13,116)	21,318	(3,750)	-
Prada Middle East FZCO	60.00	AED	80,899	48,699	29,192	4,247	-
Prada Kuwait	49.00	KWD	18,343	115	11,263	(403)	-
Prada Saudi Arabia	75.00	SAR	16,963	4,134	7,866	(1,135)	-
Marchesi Angelo Srl	80.00	EUR	1,495	294	904	(340)	-
Tannerie Limoges S.A.S.	60.00	EUR	8,419	236	3,463	(135)	-
Hipic Prod Impex Srl	80.00	RON	2,029	(1,329)	-	(234)	-
Pelletteria Ennepi S.r.l.	80.00	EUR	6,703	1,952	-	21	-

() This is a non-controlling shareholder's statement.
(*) Company is not entitled to any of its principal companies or entities in the same period.

PRADA Group
Interim Financial Report 2017 - Notes to the Interim condensed consolidated financial statements

Financial statements at January 31, 2017:

Company (amounts in thousands)	Percentage interest held	Local currency	Total assets	Total equity	Net revenues	Net income/ (loss) for the period	Dividends paid to non-controlling shareholders
Artisans Shoes Srl	67.00	EUR	25,728	8,318	51,034	1,368	369
TRS Hawaii Llc	55.00	USD	6,288	4,109	16,898	(303)	-
TRS Hong Kong	55.00	HKD	674	598	-	(127)	-
TRS Singapore	55.00	SGD	3,347	2,824	3,320	508	-
TRS Guam Partnership	55.00	USD	7,848	6,775	12,906	2,078	-
TRS Saipan Partnership	55.00	USD	3,421	3,021	3,985	697	-
TRS New Zealand Ltd	55.00	NZD	3,292	2,359	2,301	234	-
TRS Okinawa KK	55.00	JPY	814,110	653,268	1,222,107	137,782	337
TRS Hong Kong branch in Macau	55.00	MOP	163,842	91,979	215,538	34,067	-
PRADA Emirates Llc	49.00	AED	158,897	(41,388)	190,807	(25,943)	-
PRADA Middle East fzco	60.00	AED	276,994	192,653	202,910	27,675	-
Prada Kuwait Wll	49.00	KWD	6,052	175	7,946	92	-
PRADA Saudi Arabia Ltd	75.00	SAR	75,102	22,858	57,574	(8,713)	-
Marchesi Angelo Srl	80.00	EUR	2,445	636	3,091	(284)	-
Tannerie Limoges Sas	60.00	EUR	8,305	290	2,914	(581)	-
Hipic Prod Impex Srl	50.00	RON	6,753	(4,997)	-	(2,762)	-
Pelletaria Ennepi S.r.l.	80.00	EUR	6,406	1,931	-	29	-

There were no significant restrictions on the Group's ability to access or use assets and settle liabilities as of the reporting date.

41. Subsequent Events

No significant events occurred after the reporting period.

PRADA Group

Interim Financial Report 2017 - Notes to the Interim condensed consolidated financial statements

الخارجية، ومن ثم فإننا نريد أن نكون في حالة من الخسارة، فبمجرد أن نكون في حالة من الخسارة، نكون في حالة من الخسارة، فبمجرد أن نكون في حالة الخسارة، نكون في حالة الخسارة، فبمجرد أن نكون في حالة الخسارة، فبمجرد أن نكون في حالة الخسارة، فبمجرد أن نكون في حالة الخسارة، فبمجرد أن نكون في حالة الخسارة، فبمجرد أن نكون في حالة الخسارة، فبمجرد أن نكون في حالة الخسارة، فبمجرد أن نكون في حالة الخسارة، فبمجرد أن نكون في حالة الخسارة، فبمجرد أن نكون في حالة الخسارة، فبمجرد أن نكون في حالة الخسارة، فبمجرد أن نكون في حالة الخسارة، فبمجرد أن نكون في حالة الخسارة، فبمجرد أن نكون في حالة الخسارة،

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PRADA S.p.A. — Interim / Quarterly Report 2017

50262_rns_2017-10-10_db010fba-c621-445e-a277-58ee3412da85.pdf

Interim Financial Report 2017

Index

PRADA S.p.A. Corporate Information

Key financial information

Financial highlights

Net Revenues

Net sales analysis

Distribution Channels

Markets

Products

Brands

Royalties

Number of stores

Operating results

Analysis of the statement of financial position

Net invested capital

Net financial position

Risk factors

Risk factors regarding the international luxury goods market

Economic risks and international business risks

Intellectual property risks

Risks regarding image and brand recognition

Risks regarding ability to anticipate trends and react to shifts in consumer tastes

Risks specific to the Prada Group

Strategic risks

Risks regarding the importance of key personnel

Risks regarding the outsourcing of manufacturing activities

Credit risk

Liquidity risk

Legal and regulatory risks

Foreign exchange risk

Interest rate risk

Data processing risk

Information on related-party transactions

Non-IFRS measures

Financial Review Basis of Preparation

Outlook

Corporate Governance practices

Compliance with the Code

The Board

Audit Committee

Remuneration Committee

Nomination Committee

Board of Statutory Auditors

Supervisory Body

Dividends

Change in Information of Directors Pursuant to Listing Rule 13.51B(1)

Directors' Securities Transactions

Purchase, Sale, or Redemption of the Company's Listed Securities

Directors' interests and short positions in securities

(a) Long positions in shares and underlying shares of the Company

Notes:

Substantial shareholders' interests and short positions in securities

Notes to the Interim condensed consolidated financial statements

1. General information

2. Basis of preparation

3. New IFRS and amendments to IFRS

Geographical information

6. Cash and cash equivalents

7. Trade receivables, net

8. Inventories, net

9. Derivative financial instruments: assets and liabilities

Foreign exchange rate transactions

Interest rate transactions

10. Receivables from, and advance payments to, related parties

11. Other current assets

Other assets

Prepayments

Deposits

12. Property, plant and equipment

13. Intangible assets

Impairment test

14. Associated undertakings

15. Other non-current assets

16. Short-term financial payables and bank overdrafts

Mortgage loans

17. Payables to related parties – current

PRADA S.p.A. Interim / Quarterly Report 2017