CSR Report Inditex 2004 by passion desire

Sustainability Report 2004

00_0 Table of contens

01_0 Letter from the Chairman

05_0 14

04_1 Our shareholders 04_2 Communication channels 04_3 Share development

08_0 Society 08_1 08_2 08_3 08_4 08_5 08_6

10_0 44

Our social commitment Community development programmes Emergency programmes Sponsorship and patronage programmes Platforms for dialogue Open to society

Economy 10_1 10_2 10_3 10_4 10_5 10_6 10_7

Basic amounts International expansion Segmented information Inditex format by format Corporate cash flow Indicators of economic performance Further indicators

06_1 Our people 06_2 Our objectives, policies and activities

Suppliers

11_0

09_0

07_0

04_0 Shareholders

06_0 Employees

03_0 Business profile

05_1 Our commitment 05_2 Model for customer relations

02_0 Perspective and strategy

Customers

Environment 36

07_1 Our model of responsibility 07_2 Programmes to verify level of compliance with the Code of Conduct for External Manufacturers and Workshops 07_3 Programmes for the creation of internal and external Social Capital

09_1 09_2 09_3 09_4 09_5

Our model of sustainable growth Strategic plan 2002-2005 Environmental controls Indicator system Relationships with interest groups

Good Governance

11_1 Corporate Governance Structure 11_2 Risk management

12_0 Annexes

102

12_1 GRI Summary 12_2 Independent validation

Sustainability Report INDITEX TABLE OF CONTENTS 3

01_0 Letter from the Chairman

Dear shareholders, Over recent years, many businesses worldwide have considered the need to take on the demands of their surroundings in terms of social and environmental responsibility. This approach has become an important strategy insofar as the business world has understood firstly, the opportunity cost due to not meeting a growing social demand for transparency and secondly, its agreement with the general interests of companies. This does not mean that the vast majority of companies, Inditex included, have not always been concerned about the impact that their activities have had on society, over and above their legitimate economic interests. This concern has been reflected in their human resources policies, in their dealings with business partners, suppliers, organisations and social institutions, and even in their conception of customer relationships. This said Corporate Responsability policies have often taken second place to fulfilling business development targets and, ultimately, creating value for shareholders. Early on, corporate responsibility was limited to a philanthropic expression, generally related to the principles of the company’s main

shareholders and business agents. Later, as a result of the pressure from trade unions, NGOs and citizen groups, during the second half of the 20th Century, companies began to implement an essentially defensive policy. Over the past decade, this has become the doctrine of corporate reputation as a shield against risks due to actions that do not respect general interests. Knowing that this approach was not enough to meet the demands that companies face today, Inditex implemented a responsibility model based on the idea of sustainability. In accordance with the principles that govern our commitment –good faith, dialogue and transparency–, we set up a Code of Conduct that lays the foundations for Inditex’s relationships with interest groups. This Sustainability Report, prepared in accordance with the Global Reporting Initiative recommendations, is a way of expressing this commitment. Perhaps the aspect that sparks off the most interest as far as the sustainability policy is concerned is controlling the supply chain. In this regard, we can state that we are satisfied with the progress made in 2004. Over the course of this year, we have passed 100% of

audits on our supplier database, completing those relating to European companies, Morocco, Peru and Brazil –which represent 70% of our products- and starting the process in Asia. An important feature of this process is applying the methodology developed by the Business Social Compliance Initiative, an organisation of which Inditex is a member and which brings the leading European textile distributors together. The goals of the BSCI include improving the social regulations of the countries that play an important role in textile supply, in collaboration with the suppliers, governments and other parties involved. BSCI also aims to be a forum for members to exchange their knowledge and a meeting point for the latter and consumers. Maximum transparency is guaranteed by the distributors. The philosophy behind our sustainability model actions is to encourage the improvement of the conditions in which trade is carried out in supplier countries, involving governments, business organisations and trade unions, not to mention NGOs, in our shared responsibility. For its part, Inditex believes that this audit process would only be complete with a program of corrective plans that help our business partners

to overcome any failings detected. At the same time, the global approach of our sustainability model is rounded off by setting up social action programs targeted at the environment in which we operate. Special attention is paid to more susceptible groups and action is focused on areas such as education, health or social integration. We feel that this guarantees a more significant contribution towards social transformation and improvement. All of Inditex’s efforts channelled into applying the sustainability model to its activities are based on our double conviction that this approach meets the demands of both the group that forms part of the company –shareholders, business agents and business partners– and those of our customers, with a commitment to quality in terms of our range of products and services. This quality would not be complete without the value-added service that we provide directly to our customers –a keen emphasis on design and attractive prices– and that which we provide to society as a whole through improved social, environmental and business governance practices. Amancio Ortega Gaona Chairman

Sustainability Report INDITEX LETTER FROM THE CHAIRMAN 5

02_0 Perspective and strategy Inditex views Corporate Social Responsibility as a strategic factor within its management procedure. We are convinced that the growth of our organization is closely linked to the economic, social and environmental commitments we establish with all of the different groups we are involved with: our shareholders, customers, employees, suppliers and social players

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2 Shareholders

Our model of sustainability_

Gov ern an c

We believe that we must respect and encourage values of sustainability in all the things we do, formalizing and putting into practice policies and management systems in the three areas in which the company is involved â&#x20AC;&#x201C;social, economic and environmental â&#x20AC;&#x201C; acting according to criteria of transparency, and establishing independent mechanisms for control and evaluation. We believe that our responsibility as a company should be measured by our ability to respond to and anticipate the expectations and demands of our main interest groups. We believe that interest groups form an intrinsic part of our corporate structure, contributing as partners towards our growth. For this reason we have decided to situate our shareholders, employees, suppliers, customers and social players at the very heart of our business.

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Our activities in terms of Social Responsibility have a social, economic and environmental scope, unavoidably involving our interest groups both in establishing goals and commitments, as well as in developing specific programmes. The Corporate Governance model acts as a driving force and guarantee of the model through different bodies and documents.

Sustainability Report INDITEX PERSPECTIVE AND STRATEGY 7

Our commitments_ _with our

shareholders, for transparency and good governance

_with our

costumers, with their needs and espectations

_We eliminated the minimum share requirement to take part in the Annual shareholders’ Meeting

_Extension of our network of stores (322 more)

_New, more accessible corporate website

_Plan for training employees in customer service

_with our

employees,

offering stable, just and quality employment

_ 7,867 new employees

_to

society,

the enviroment,

with a Code of Conduct that guarantees their working conditions

respecting Human Rights and the improvement of economic conditions wherever we carry out our work

with a global policy to respect and protect our natural surroundings

suppliers,

_ 2,620 independent audits carried out in factories in more than 30 countries

_ 70% full-time contracts _Increase in shareholder dividends: of 150%

_ Plan for identifying potential and internal promotion

_ Social involvement projects in the communities where our suppliers’ employees live. Projects in Morocco and Peru

_Stopped selling fur items _Inclusion in the FTSE4Good and Dow Jones Sustainability indexes

_with the

_with our

_Social development programmes in Latin America _Solidarity projects in emergency situations: in Spain (Prestige) and in South-East Asia (tsunami)

_ISO 14.001 Certification in all of distribution centres, factories and head offices _Programme for implanting the sustainable management model in our stores _Reduction of waste and harmful emissions

_ Halve the number of manufacturers in 2005 _ Develop social intervention programmes in our suppliers employees’ communities

_Energy saving plan and investment in renewable energies _Awareness plan: competition amongst employees to choose the mascot

Activities 2004_

Sustainability Report INDITEX PERSPECTIVE AND STRATEGY 9

We believe that the growth of our organization is based on the commitment we have with our interest groups. Through our activity we contribute towards improving the social, economic and environmental conditions of our surroundings. In 2004 our turnover amounted to Euros 5,670 million, an increase of 23% over the previous year. We created 7,867 new jobs, and have entered eight new markets.

03_0 Business profile

Sustainability Report INDITEX BUSINESS PROFILE 11

Oysho 1.3 % Stradivarius 4.3 %

Breakdown of sales by geographical area

Zara Home 0.7 %

Percentage of sales in international / national stores per chain Bershka 9.1 %

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Inditex is the leader of a group of fashion distributors. In 2004, it brought in a consolidated turnover of 5,670 millions of euros and net profit of 628 million euros. Inditex has been listed on the Stock Exchange since 2001 and is one of the largest companies in the world in its industry.

Net profit* No. of stores No. of countries International sales Employees

2004

04/03

2003

2002

2001

2000 CAGR 04/00

5,670

23%

4,599

3,974

3,250

2,615

21%

628

41%

447

438

340

259

25%

2,244

322

1,922

1,558

1,284

1,080

55%

54%

52%

47,046

39,760

32,535

26,724

24,004

Inditex makes its business proposal through eight fashion distribution chains: Zara, Kiddy’s Class, Pull and Bear, Massimo Dutti, Bershka, Stradivarius, Oysho and Zara Home. Zara is the largest chain with the most sales outlets and a broader international presence. It is also the main contributor to the Group’s sales, bringing in 67.4% of the total in 2004.

Zara 67.4 %

Kiddy’s Class 2.1 %

Sales by chain

Millions of euros Format Zara Kiddy’s Class Pull and Bear Massimo Dutti Bershka Stradivarius Oysho Zara Home

weighting (%)

2004

2003

04/03

2004

2003

3,819.6 120.6 378.9 481.3 516.0 241.9 71.7 40.4

3,219.6 89.7 287.9 388.9 395.0 162.0 45.1 10.6

19% 35% 32% 24% 31% 49% 59% 279%

67.4% 2.1% 6.7% 8.5% 9.1% 4.3% 1.3% 0.7%

70.0% 1.9% 6.3% 8.5% 8.6% 3.5% 1.0% 0.2%

23%

100%

5,670.4

4,598.9

We adapt our global fashion concept to each different market

Milan. Italy, 15 december 2004

New York. USA, 15 december 2004

Zara

65.8

34.2

Kiddy's Class

12.8

87.2

Pull and Bear

30.2

69.8

Massimo Dutti

41.9

58.1

Bershka

35.7

64.3

Stradivarius

15.4

84.6

Oysho

31.5

68.5

Zara Home

12.7

87.3

Internacional

The vast majority of the Group’s sales –82.8%- take place in Europe, both in terms of weighting in the home market (representing 45.5% of sales) and the total number of stores (1,943 stores, 86.6% of the total are present in European markets). This region has also seen the highest growth in terms of sales outlets over recent years. Indeed, in 2004 the 91% of new stores (–293)were opened in Europe.

Sales by format

Sales total

2004

At the end of FY2004, Inditex owned 2,244 stores in 56 countries in Europe, America, the Asia-Pacific Region, the Middle East, and Africa. During the year, Inditex increased its number of stores by 322 and began trading in Hungary, Romania, Estonia, Latvia, Lithuania, Hong Kong, Morocco and Panama.

*in millions of euros

São Paulo. Brazil, 15 december 2004

Pull and Bear 6.7 %

Although all the sales formats have individual characteristics as far as target audience, business lines or store design are concerned, all the chains have one characteristic in common: fashion with an emphasis on design, aimed at meeting customer demands and at attractive prices.

Main indicators Turnover*

Massimo Dutti 8.5 %

Nacional

Sales per geographic area

6.7% Rest world

10.5% America

45.5

2004

37.3

Spain

Rest Europe

Inditex sales formats grow largely due to opening stores managed by companies in which Inditex is the sole or the main shareholder. As at 31 January 2005, 88.3% of stores were company-managed and represented 90% of the total sales.

The Group’s main business centres in Spain

Inditex’s business model is characterised by a high degree of vertical integration. Inditex is involved in all the stages of the fashion process: design, manufacture, logistics and distribution to its own stores. It has a flexible structure and a strong customer focus in all its business areas.

Arteixo – A Coruña Inditex head office Zara, Zara Home and Kiddy’s Class head office Zara and Kiddy’s Class logistics centre Production centres

Part of the production process takes place in the Group’s own factories in Galicia and the rest is manufactured by external suppliers. 70% of production comes from Europe and the surrounding area, the rest coming from Asia and, to a lesser degree, from other countries around the world. The closeness factor is extremely important given the structure of the Group’s offer, which is targeted at highly fashionable garments. Production, regardless of its origin, is received at the logistics centres of each chain, from where it is distributed simultaneously to all the stores worldwide on a highly frequent and constant basis.

Sallent de Llobregat – Barcelona Stradivarius head office Stradivarius logistics centre Tordera – Barcelona Massimo Dutti, Bershka and Oysho head office Massimo Dutti, Bershka and Oysho logistics centre

Narón – A Coruña Pull and Bear head office Pull and Bear logistics centre Indipunt (knitwear) Zaragoza Zara logistics centre

Elche - Alicante Tempe head office Tempe logistics centre (footwear)

Sustainability Report INDITEX BUSINESS PROFILE 13

Transparency and active communication with our shareholders, is one of our basic operating principles. Our aim is to provide them with information that is clear, detailed and complete enough to evaluate the Groupâ&#x20AC;&#x2122;s management and its economic and financial results.

04_0 Shareholders 04_1 Our shareholders 04_2 Communication channels 04_3 Share propers

Sustainability Report INDITEX SHAREHOLDERS 15

04_1 Our shareholders At the end of the financial year, Inditex had a total of 88,484 shareholders, of which 84,771 are individuals, and the rest institutions. During FY2004, Inditex changed its regulations for the General Shareholders’ Meeting in order to withdraw the requirement of holding a minimum of 50 shares in order to attend the meeting. Retributions for shareholders via dividends has increased by 150%. The organization has set itself the objective of increasing shareholder dividends from 35% of profits in 2004, to reaching 60% of profits in 2008.

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04_2 Channels of communication

od Go

Shareholder’s office Any private investor is free to visit the Shareholder’s office to obtain detailed information about the development of business and future strategies. Through this channel, the 84,000 individual shareholders may issue any request for information they consider relevant concerning the growth of INDITEX. The Shareholder’s Office is particular relevant when calling and holding the General Shareholders’ Meeting, traditionally held in mid-July at Inditex head office in Arteixo (A Coruña). Precise information and documentation is sent to provide shareholders with sufficient details on the meeting and the contents to be discussed, as well as facilitating their participation in the decision-making process of the main governing body.

Shareholders’ e-mail address: accionistas@inditex.com Shareholders direct line: +34 901 33 02 12

www.inditex.com The corporate website has been adapted to the Transparency Guidelines

Distribution of share capital according to number of shares

Shareholder breakdown

Shareholders 3,713

Individuals Institutions Board of Directors Total

Shares 46,717,257 203,114,730 373,498,413 623,330,400

Individuals shareholders 7.50 % Institutionals shareholders

32.60%

Individuals

88,484 Shareholders

Website The corporate website includes all of the relevant information necessary for Shareholders and Investors, and is aimed at being a method of communication with shareholders, offering them up to date information on all of the significant aspects of their interest. The new Regulations of the Board of Directors includes an expressed regulation on the corporate website, detailing the minimum documentation and information it must contain. Also in FY2004, the corporate website was adapted to comply with the requirements on structure and information detailed in Spanish Law 26/2003 dated 27 July (‘Law on Transparency’) and in Bulletin 1/2004 dated17 March from the Spanish National Stock Market Commission.

Any user entering the corporate website may obtain information on daily and historical share prices, public yearly reports published by Inditex since 1998, all financial information sent to the Stock Market Commission via Regular Public Information, all relevant information sent to the Stock Market Commission, its board of directors and the financial calendar, amongst others. During 2004 the section on Information for Shareholders and Investors of the corporate website (www.inditex.com) received a total of 384,254 ‘hits’. Apart from the corporate website, www.inditex.com, each of Inditex’s trading companies has its own website:

84,771 59.90 %

Institutions Board of Directors

www.zara.com www.pullandbear.com www.massimodutti.com www.bershka.com www.e-stradivarius.com www.oysho.com www.zarahome.com

Sustainability Report INDITEX SHAREHOLDERS 17

Investor Relations Department < 43 financial and stock market bodies publish analytical reports on Inditex shares. We are the third Spanish company in terms of coverage

In 2004 some 500 meetings were held with investors, analysts and investors specialized in Corporate Social Responsibility.

< More than 3,700 institutional shareholders, owning 32.6% of the capital, play a key role in setting share prices and their liquidity.

Appreciation of shares on IBEX 35 from launch on stock exchange (23 May 2001) to 31/1/05: 54.21%.

Relevant information about the growth and development of Inditex is also provided on a quarterly basis from the CNMV (Spanish Stock Market Commission) to the shareholders as a whole, to the financial community and the media, both in Spain and abroad, paying special attention to the economic media. This relevant information includes the Balance Sheet, Profit and Loss Accounts and Management Report. This same procedure is used with information on relevant events that affect the development of business. This corporate information is available immediately via the company’s website, and is distributed to a database of investors and analysts with more than 1,100 entries. In the area of institutional investors, Inditex completes this information with quarterly, freely accessible multiconferences via internet and over the telephone, in order to explain the quarterly results. Other important events are the Presentations of Yearly Results to Analysts and Investors, held in London and Madrid, before an audience of some 60 people. Further presentations are made in the main financial capitals and at visits to the installations. Article 41 of the Regulations of the Board of Directors establishes a series of measures that govern relations with shareholders. In 2005 special efforts have been made within the markets to explain the impact of transition to IFRS (with presentations in London and Madrid on 12 May), as well as to explain the Group’s initiatives in the area of Corporate Social Responsibility.

Activities with Institutional Investors a) Roadshows Every year the Board of Directors offers a series of presentations or ‘roadshows’ at which it presents the results from the first two quarters (Spring-Summer seasons) and for the full financial year (after the Winter season), visiting the world’s main financial capitals. Over two and a half weeks, the main investors have access to the strategic perspective of the management team, mainly through individual meetings. These visits have been used to establish direct contact with more than 200 investors. b) Sectorial conferences Another forum for communication with investors are the sectorial conferences organized by financial institutions, taking part at the main events held throughout Europe, with an average attendance of 50 of the main institutional investors at each. c) One-to-one meetings Apart from the programmed events, a further extensive series of individual meetings are organized with investors every year. In the case of specific demands, visits are organized with investors to a specific country or region. In the last year presentations were offered in Europe’s main financial centres, with more than 100 institutional investors. d) Visits by Investors to the company’s premises A large number of visits were also made by institutional investors to Inditex installations to provide them with more detailed knowledge of our organization, its business model and corporate strategy. Throughout FY2004 meetings were held in different locations with more than 150 institutional investors from all over the world.

13,538 Million Euros of market capitalization (as of 31 January 2005) 04_3 Progress of shares FY2004 Inditex shares are currently listed on the four Spanish stock exchange indexes through the Mercado Contínuo or ‘Continuous Market’. It is listed on the Ibex 35 index of the Madrid Stock Exchange, on the MSCI Euro, DJ Euro Stoxx and the FTSE Eurotop 300.

Trends of share price 2004 (in euros)

15.66

Over FY2004 Inditex shares appreciated by 38.7%, compared to the appreciation of the IBEX 35 index of 16.3%.

31 January 2005

38.7%

Inditex is present in the main stock market indexes that measure the commitment of companies in terms of Corporate Social Responsibility: the Dow Jones Sustainability Indexes and the FTSE4Good. In the evaluation carried out by SAM (Sustainability Asset Management), a body that evaluates the economic, social and environmental indicators of companies in order for them to be listed on the Dow Jones Sustainability Indexes, Inditex obtained above average results for all of the criteria analyzed.

21.72

31 January 2004

Variation 04/03

14.70

21.72

23 May 2001

31 January 2005

47.7% Variation since initial value

Annual trends Inditex vs. IBEX 35

140

INDITEX

120

IBEX 35

Index 100*

60 31/01/04

02/04

03/04

04/04

05/04

06/04

07/04

08/04

09/04

10/04

11/04

12/04

31/01/05

* Value at 31st. January 2004

Sustainability Report INDITEX SHAREHOLDERS 19

We listen to our customers to anticipate their needs, improving the products and services we offer.

05_0 Customers 05_1 Our commitment 05_2 Customer relations model

Sustainability Report INDITEX CUSTOMERS 21

We work to improve each of the critical factors that define our business: fashion, quality, design and price, to keep strengthening our costumersâ&#x20AC;&#x2122;confidence in our products, and guaranteeing the satisfaction of everyone who shares our outlook on fashion. Thanks to them,

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we have grown. Our stores are increasingly larger, and extended across more countries. We launch new products and extend our services. We listen to their suggestions and adapt our offer according to their needs.

Actions 2004

We have

05_1 Our commitments

eliminated

fur products from our stores In response to the concerns of many of our customers all over the world regarding the use of fur in garments, Inditex has decided to eliminate it from its products in all the world. This measure was fully effective in 100% of our stores from January 2005, and since 22nd September 2004 in Canada, USA, UK, Ireland, France, Belgium, Holland, Luxembourg, Germany, Austria, Switzerland, Italy, Sweden, Norway, Denmark, Finland, Iceland, the Czech Republic, Poland and Slovenia.

Action guidelines Inditex has adopted a full commitment in all of the areas of customers service. A commitment based on two main principles that guide our activities.

Flexibility We adapt to our customers expectations Fashion, despite being a global cultural expression, has an essential component of individual choice. Inditex proposes a wide range of options, so that it is the customer who makes their own decision, according to their tastes and desires.

We continue working on the

Oeko-tex certification

We show

concern We are

responsible Personal customer service

for our

customers

We launch

Customer Service

Personal Tailoring, a

that guarantees full satisfaction Sales do not end with the exchange of a product or service between business and customer. Visiting one of our stores must be in itself a satisfactory experience.

Minimums Campaign

new personalized fitting service

People are one of the most important factor in acheiving this goal.

We listen to our customers and create new products and services

In 2004 Massimo Dutti incorporated the possibility of men having their suits made to measure. An initiative that added even more value to the high quality of the suits sold by the chain, designed for customers seeking a more exclusive product.

We continue to make advances in the certification programme using the Oekotex Standard 100 Certification. In this period we have achieved 24% of certified product for garments for 0 to 16 years of age, guaranteeing the absence of harmful substances throughout all of the production process.

We keep improving to offer you the

We train all of our store teams in Customer Service. An awareness campaign channelled via the internal magazine, and which has had the support of the teams from the sales and marketing network, by offering different training activities throughout the year.

very best service Sustainability Report INDITEX CUSTOMERS 23

05 _2 Customer relations model

The store as the centre of our activities The Inditex Group’s way of understanding the fashion business situates the store as the central hub of our activity. Our store staff receive full training in customer service as an essential value. Store managers are responsible for leading their sales team as representatives of the values, reputation and image of the Company. The comfort of customers and their freedom to choose are the essential principles of our activity. The customer may remain as long as they wish in our store, discovering more about the items on offer and coming into direct contact with the product.

Direct, open relationship

Customer satisfaction

The model for customer attention at stores belonging to the Inditex Group is essentially focused on establishing an open, direct relationship.

The main objective of

we are more accesible In 2004 we re-designed our corporate website, reaffirming our commitment towards offering transparent information by improving access to its contents, using a more intuitive design that meets the most demanding international standards in terms of navigability, accessibility and visual design. Both the corporate website of the Group and those of the different chains are useful tools to help provide our customers with information.

we listen The different chains that belong to the Inditex group have a range of channels open to the public to deal with any request for information, suggestions or complaints they may have. Apart from the personalized service offered in our stores, the group has a series of suggestion forms available for the public. There are also telephone helplines and e-mail services, available via the websites of each chain.

personalized service in a sales outlet is customer satisfaction.

Freedom to choose The store is a dynamic, ever-changing environment. Customers visiting any of our stores who are interested in the fashion items we offer enjoy absolute freedom in their contact with the product.

The managers of our sales outlets, supported by their team,

The store team is fully available at all times, although without interfering in customers choosing and buying items if not requested to do so.

are responsible for offering a fast

2004

and efficient response to their regardless of whether they buy 2003

our products or not. I

845,638 Z 8,063,628

PB 594,457 PB 415,025 MD 430,357 BSK 543,26 STR 264,917 OYS 119,402 Z H 79,333

8% 32.24%

MD 676,084 BSK 794,779 STR 408,820 OYS 1 69,719 Z H 209,755

60%

Throughout 2004 our websites received a total of 12,015,327 hits, 3,704,993 more than in the previous year. Zara’s website continued to be the most visited which represented 67.1% of the total.

38.43%

Others

12%

20%

17.45% Customer attention 1st option

+ + + +

closer quality services solutions

Origin of e-mails received in 2004: 49,305

14000 12000 12000 10000 10000 8000 8000 6000

Quality and price

2nd option

Our customer relations model is focused on the point of sale, where the store team is the main nucleus of customer attention. This Department may be contacted on a Customer Attention freefone number in Spain (900 400 323); via the general telephone number of the Company’s central services (+34 981 185 400); from all of our stores; by mail or e-mail, with the address listed on all of the different corporate websites.

16000 14000

Product/design

11.88%

In the case of Zara, the chain which represents the largest turnover, out of a total of 10,539 forms received, 53.44% referred specifically to customer service matters. Of these, 41.2% (2.324) referred to queries or circumstances directly in relation to the attention received in the store, with the remaining 58.8% being requests for a wide range of information.

16000

Z 5,612,396

Customers choose Zara based on...

All suggestions or complaints are dealt with initially by the store managers and their team. The priority in this case is to offer a correct solution in the most agile manner possible, without turning to other procedures that delay the process. In any event, the customer always has the opportunity – if they consider it necessary – to contact the Customer Attention Department, which is responsible for receiving, evaluating and responding to the requests our customers pass on to us directly.

TOTAL 12,015,327 I 1,002,677

Both the design and product offered by Zara, the chain that represents 67.4% of the Group’s total sales, continue to be the elements most highly valued by its customers.

All of the Group’s websites make it possible to contact the other chains or head offices using a form. In 2004 a total of 49,305 forms were received in this way, all of which were answered personally.

Hits on websites: comparison 03/04

customers’ demands, again

Personalized service

we focus on solutions

www.inditex.com www.zara.com www.pullandbear.com www.massimodutti.com www.bershka.com www.e-stradivarius.com www.oysho.com www.zarahome.com

6000 4000 4000 2000 2000 0

I of e-mails received in 2004: 49,305 Origin 15,678

15,678

BSK Z 11,350 BSK 10,539 Z 11,350 10,539

MD 6,294

6,294

In 2004, the Customer Service Department dealt with more than 3,600 calls directly, representing a monthly average of more than 300 calls. This is a very low number if we Origin of e-mails received in 2004: 49,305sold in consider the large number of products I stores throughout Spain (94.3 million 16000 Zara 15,678 items). This low ratio is the result of the 14000 model for customer relations focused on the BSK with the store team serving as 12000 point of sale, Z 11,350 10,539 the main nucleus of public attention. 10000

PB 1,947

1,947

OYS ZH 1,435 1,405

OYS ZH

1,435 1,405

STR

8000

6,57

STR

6000

MD 6,294

6,57

49,305 contact forms received. In the case of Zara, 42.2% of the queries referred to the attention received in our stores.

4000 In 2004, The Customer Service Department PB dealt with more than1,947 3,600 OYScalls, ZH giving a 2000 direct, personalized response 1,435 1,405 to all of them. STR 6,57

Sustainability Report INDITEX CUSTOMERS 25

We grow alongside the people in our team. An enthusiastic team is a guarantee for our growth. Developing channels for promotion and building relations with our employees based on confidence and innovation is our responsibility.

06_0 Employees

06_1 Our people 06_2 Our objectives, policies and activities

Sustainability Report INDITEX EMPLOYEES 27

The company’s growth determines the principles of our Human Resources policies. Launching new markets, quick decision-making, involving employees or always providing new solutions are some of the current requirements set by the

organisation which we fulfil through targets and dayto-day tasks. Our corporate values and our way of handling people are decisive factors in developing the organisation and ensuring that it goes from strength to strength.

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06_1 Our people

47,046 employees

Sales activities: 88%

20% more than in 2003 and we just keep on growing

Logístics: 5% Central Services: 3% Manufacturing: 4%

Evolution number of employees per activity and totall 50000 40000

% store employees per chain Zara Home 1% Oysho 2%

Kiddy’s Class 3% Stradivarius 5%

30000 Total employees per activity

20000

Massimo Dutti 6%

Inditex employs 47,046 people in 30 countries, 7,867 more than last year. The characteristics of our staff are in line with the characteristics of our business: young people –the average age is 26 years-, who have been working for the company for less than three years –this year we have opened 332 new storesand a female majority in all of our organisation’s areas, with the exception of logistics –where female employees represent 41%-. Females hold 54% of the managerial, technical and administration posts and they also represent 82% of shop managers.

Bershka 10%

10000 Logistics 5%

Pull and Bear 7%

Central services 3%

2004

Zara 68%

who

we are

who we are Young people: Average age: 83.5 % females / 16.5% males

what

we do

20,000 18,000 16,000 14,000

10,000 8,000 6,000 4,000 2,000 0 16

25 year 2002

year 2003

65 year 2004

total

stores

2002

logístics

2003

2004

central services and sites

factories

88 % commercial activity in 30 countries

where

The countries with the highest of employees

26 years old

2001

Our growth in staff is directly proportional to the opening of new stores.

47,046 employees young people

12,000

31/1/04 growth% 03-04

26,719 Spain 3,474 Portugal 3,017 France 1,890 Mexico 1,752 United Kingdom 1,332 Germany 1,326 Grecia 1055 Italy 690 Belgium 640 Venezuela 575 Turkey 499 Brazil 449 United States 436 Canada 433 Japan 370 Chile 386 Holland 340 Ireland 316 Argentina 291 Switzerland 235 Austria 139 Sweden 133 Denmark 112 Uruguay 99 Hungary 107 Czech Republic 73 Luxembourg 69 China & Hong Kong 59 Puerto Rico 30 Norway

21,933 3,265 2,523 1,723 1,449 1,165 1,239 745 629 617 532 470 357 341 314 367 238 65 313 190 179 101 121 110 55 70 9 47 12

21.82 6.40 19.58 9.69 20.91 14.33 7.02 41.61 9.70 3.73 8.08 6.17 25.77 27.86 37.90 0.82 62.18 423.08 0.96 53.16 31.28 37.62 9.92 1.82

47,046

39,179

20,08

Total 28

2000

Stores 88%

31/1/05

The head offices of Inditex and the Group’s chains, logistics centres and factories are all located in Spain. This country also has the most stores (1,321) and employees (26,719). In the overall ranking, Spain is followed by Portugal, France, Mexico, United Kingdom, Germany and Greece.

Factories 4%

94.55 4.29 666.67 25.53 150.00

we are

In 30 of the 56 countries

legal environment attract

link

selectión

hiring

promote professional growth

+ motivate

training development internal promotion

internal communication compensation risk prevention occupational health acknowledgement fringe benefits

social environment

Our objectives, policies and activities Sustainability Report INDITEX EMPLOYEES 29

06_2 Our objectives, policies and activities

we create a

great team

225.000 new candidates

We aim to give the broadest national and international coverage to Inditex‘s job offers in order to ensure that candidates have the fullest access possible, in accordance with the principles of non-discrimination and equal opportunities. Inditex publishes its job vacancies via two channels: the permanent and world-wide job site, accessed through the Group’s company websites, and the media. In 2004, 225,000 candidates from 56 different countries posted their CV spontaneously on our job site, which already has more than half a million active users. This is the main database used in recruitment processes. 1,870 job vacancies were published in newspapers and on the Internet.

flexible job offers

we have

we create multinational management teams we take on

young professionals with strong managerial potential

In collaboration with prestigious Business Schools from different countries, we have devised a program targeted at young people with managerial potential who become involved different areas and projects in our organisation and follow an individual career plan.

attract

Our international expansion policy that prompted us to open 8 new markets in 2004 has also led to the creation of multinational business management teams. At the head offices of the chains and of the Inditex Group in Spain there are employees with 27 different nationalities. Their point of view brings us closer us to the cultural values of each region.

hiring hiring

link

we give

priority to our employees

In the selection processes, priority is given to employees in stores and for promotion logistics centres or central services. If we take Zara España as an example, which is the company with the most employees, 34.5% of the newlycreated posts have been filled by internal promotion in stores and 43.5% in Central Services (sales and product areas). Internal promotion in the group is based on an internal system of publishing vacancies and a program that identifies potential.

we emply

local professionals

As part of our international expansion policy, we entrust management to professionals from each of the countries in which we carry out our business activities. This is because they are familiar with the market, customers and the local culture and values, and we trust in them to adapt our business model and corporate values accordingly.

promote stable employment

We increase stable hiring levels each year. Whereas in 2004 net employment growth was 20%, permanent contracts rose by 24.9 %. This year we have created 25,000 long-term contracts.

70%

more than half of our store manager positions come from promotións

of employees have a long-term contract

recruitment recruitment 30

Sustainability Report INDITEX EMPLOYEES 31

internal communication internal communication we inform on a continuous basis

training training development development focus on customer service we identify employees with potential

Specific programs in 27 countries Helping the business to spot talent among its employees is an ongoing objective of the Human Resources teams. This year, talent-spotting programs have specific programs in been introduced in 27 out of 30 countries. 23.4% of the participants have been given an internal promotion and 54.2% are following an individual training plan. This program aims to develop knowledge and skills and establishes a tracking system and career plan.

27 countries

all

zara employees around the world have completed their training

we provide ongoing training

210.000

hours this year

All the countries have introduced the customer service training program, which is aimed at consolidating one of the factors of our business. Sales management has been intensely involved in the tracking of the program.

We continue to develop ongoing training actions for all job profiles (shop assistants, cashiers, window dressers, manual workers, sales reps, etc), for all activities (logistics, stores, sales) and in a wide range of subject matters, both job-specific and general –languages, computer skills, accountancy, etc.-. The challenge is to improve employability in order to encourage internal promotion.

promote professional growth we promote functional mobility

the logistics managers

are trained we combine different

learning methods

Our training activities are essentially practical. We incorporate new methods to achieve maximum employee participation, such as Blend Learning. All logistics and central services employees receive language and computer training by using the Blend Learning method which combines the advantages of e-learning with a computer and at one’s own pace, and with direct, personal tutors.

in stores

we adapt compensation to the bussines

personal contact model

promotion promotion 32

we encourage

open and direct communication

we incorporate

interactive communication systems

Our internal magazine (IN) allows employees around the world to keep abreast of the business and it brings them closer to our philosophy and values. It is a means of informing, advertising and raising awareness. Four issues were brought out in 2004. There has been an increase in employee participation and international content. This is one of Inditex’s main values and a factor of the management model. The non-hierarchical structure and the focus of the people guarantee direct and almost daily contact with employees and the constant exchange of opinions.

hazards and safety hazards and safety

Taking a global approach, we use several Internet-based communication systems to communicate with the employees of the central services of the chains and of Inditex in Spain and the branches of our subsidiaries. These two interactive applications –Inditexnet and Gesdoc- allow information to be exchanged and resources to be optimised promoting the awarenses of organizational change.

Due to more sales outlets and broader geographical coverage, the sales network in contact with stores has expanded, and a proximity organisation model has been set up with more resources. Permanent contact with shop assistants is one of the functions of this model.

to different employee groups and countries

we guarantee a

safe environment

Our compensation policies aim to provide employees with incentives and recognise their contribution to the business. Variable pay is present in all sales duties (86% of all employees) All the managers and supervisors of an area or duty participate in the management by objectives system.

Looking after the health and safety of employees is our priority. This year’s objective has been to consolidate the Health Supervision area with external resources by developing specific protocols per risk and task. There are two main actions: setting up emergency plans and training the staff of Inditex, the chains and the logistic centres in Spain.

motivate we launch

Knowing the business and face-toface customer contact through working in the stores has been the purpose of a highly ambitious training project during which all the managers of the Zara logistics centres became shop assistants for one week and learnt about other areas of the organisation. This experience was extremely useful, leading to changes in work processes and giving the chance to acknowledge other people’s jobs.

we adapt

financial reward

participation and awareness campaings

During the course of 2004, communication campaigns were developed to involve employees in the organisation’s objectives in terms of: _Customer service (advertising campaign with the minimum customer service requirements in the internal magazine) _Environment (choosing the corporate mascot’s name using the magazine and Intranet). _Solidarity (promoting corporate activities using the magazine) _Sales promotion (customer debit cards, presenting collections,…) _Health and safety

we adapt Our compensation policies aim to provide employees with incentives and to business recognise their contribution to the business. Variable pay is present in all sales duties (86% of all employees) All the managers and supervisors of an area or duty participate in the management by objectives system.

compensation

compensation compensation

we reduce absenteeism and accidents

we promote

health campaigns

We use two indicators to analyse the results of health and safety campaigns: the absenteeism and accident rates. Although the workforce has increased by 21%, absenteeism has dropped by 7.6% (hours lost/hours in contract) and the occupational accident rate by 1.8% (no. of processes/no. of hours worked x 100).

Over and above the actions recommended by legal regulations in force, we promote the improvement of installations and working conditions and we carry out health promotion campaigns. This year an ergonomic study has been conducted on the group’s factories for all posts and specific campaigns for different groups. Campaigns for participation in medical examinations, giving up smoking or donating blood have been posted in all work centres.

health healthan and safety safety Sustainability Report INDITEX EMPLOYEES 33

protecting candidate data

This year we have made an effort to improve our personal data management systems to guarantee the fulfilment of legal requirements and cultural factors in all the countries in which the Group is present, adapting the recruitment tools to these requirements.

hazards safety legislation and

legal environment attract

social dialogue

freedom of association

In Spain we have a Joint Prevention Service, which meets legal regulations. This service covers Occupational Health and Safety, Industrial Hygiene, Psychosociology and Ergonomics. The organisation establishes the relationships with the workers’ representatives in accordance with the frequency and requirements set by Spanish Law.

The right to freedom of association is respected, with employees encouraged to participate in accordance with the legislation of each country. In Spain there are employee representation bodies in almost all companies and provinces. There are a total of 406 representatives including works committees, employee representatives and trade union representatives. In 2004, the majority of the employee representation bodies were re-elected in trade union elections.

promote professional growth + motivate

link

social contribution

we provide

we promote For stores of several chains that are opened in the same shopping centre, we centralise the recruitment process so as to extend the offer to job-seekers. We work with local agencies –employment agencies, organisations and institutions–, thereby promoting employment and local development.

local employements

Employees from all over the world are covered by collective bargaining processes. In Spain, the provincial Collective Agreements apply in the branch of trade, and manufacturers are covered by the General Collective Agreement for the Textiles and Clothing Industry. In Spain for all factory workers an agreement has been signed with the communist labour union Comisiones Obreras, in which, apart from better economic conditions than those established in the Agreement, fringe benefits are introduced. In the Logistics sector, three Agreements have been signed with the Works Committees of Zara Logística (Arteixo), Pull and Bear (Narón) and Plataforma Europa (Zaragoza), which lay down considerably better labour conditions than those established in the applicable provincial Collective Agreements. Listening to employees through the organisation’s open, permanent channels and anticipating expectations and needs prevents any disputes.

we build up

relationships with educational centres

In order to encourage international expansion, we use a development program for young people with managerial potential, in collaboration with Business Schools from different countries. These professionals join our organisation and follow an individual training program. Likewise, we build up relationships with international Fashion Design schools and centres that award qualifications similar to our business profiles. We collaborate in the teaching activity, make company presentations and employ recent graduates in our companies.

students with their first professional experiencie through trainee programmes institutional and international relationships

We develop teaching activities at the training schools near our stores and take on students on work experience. This year, in Spain alone, 822 students took part in the program. This has been an opportunity for them to gain access to their first job.

Regardless of the usual collective bargaining processes, participation and dialogue processes are also held with both the employee representation bodies in the company and with the most representative Trade Unions on an institutional level.

Sustainability Report INDITEX EMPLOYEES 35

We are committed to our suppliers and employees with a Code of Conduct that guarantees dignified working conditions. We have completed more than 2,600 independent audits in factories in more than 30 countries.

07_0 Suppliers

07_1 Our social Responsibility model 07_2 Programmes for checking the degree of Compliance with the Code of Conduct for External Manufacturers and Workshops 07_3 Internal and External Social Capital Creation programmes

Sustainability Report INDITEX SUPPLIERS 37

Inditex has a wide network of external suppliers around the world, who act as business partners by contributing towards the sustained growth of the organization. From the standpoint of shared responsibility and participation, Inditex designs, develops and supervises different programmes aimed at supporting and helping these collectives, and requires full respect for Human Rights in all of their production centres, whether factories or workshops. These are the production chain strengthening programs. These programmes include actions in the factories of the suppliers and through the social and economic development of the communities in which their employees and families live.

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Group production per geographic area (units) Main countries where we produce

North Africa 3% Morocco, Tunisia

Latin America 3% Mexico, Peru, Venezuela, Brazil, Argentina

Non-EU Europe 12% Romania, Turkey, Lithuania, Bulgaria

European Union 59% Spain, Portugal, France, United Kingdom, Italy, Greece

Asia 23% China, India, Bangladesh, Thailand, Cambodia, Vietnam, Pakistan, Indonesia, Sri lanka, South Korea

07_1 Our Social Responsibility model We believe that being citizens of the world implies working actively towards the respect and progress of Human Rights, as defined in the principal conventions of the United Nations. We help our suppliers to implement Inditex’s Code of Conduct for External Suppliers and Workshops. We demand their dedication and regularly verify their level of compliance using independent inspectors, following the guidelines defined by international standards. We believe that the process of implanting these Codes of Conduct has given us the opportunity to make changes that have improved social and working conditions both inside and outside of our suppliers’ factories.

We believe that intervention should not be limited to our suppliers’ factories, but that we should also include the communities in which they are based, in order to transmit and encourage values of solidarity, respect and good citizenship We believe that by working together – distributors, manufacturers and social and trade union organizations – by developing common platforms of standardization for pan-European Codes of Conduct, such as the Business Social Compliance Initiative (BSCI), we have the opportunity to develop an awareness that allows us to produce and at the same time consume goods and services, without this process having a negative effect on other people or environments.

Programmes for checking the degree of Compliance with the Code of Conduct for External Manufacturers and Workshops

Production chain strengthening programmes

Internal and External Social Capital Creation Programmes

Sustainability Report INDITEX SUPPLIERS 39

07_2 Programmes for checking the degree of Compliance with the Code of Conduct for external manufacturers and workshops Inditex requires that all of its suppliers comply with the Code of Conduct for External Manufacturers and Workshops, which it approved in 2001. This code includes a series of basic principles to guarantee respecting the Human Rights of the

BSCI aims and working system 1 Supplier’s awareness Stages

employees of our suppliers’ factories and workshops. In 2004, after auditing, the Group has decided to reduce the number of suppliers, from 2,662 at the start of the financial year, to 1,318 as of 31st. January.

Scope

1,250

During 2004-2005, and to help achieve this goal, the BSCI platform has offered round table working meetings in Belgium, China, India, Peru and Morocco, and in particular Inditex has taken part in activities such as training suppliers in subjects related to the implantation and control of Human Rights, in areas such as Lima in Peru, and Tangier in Morocco, and in

The BSCI principles BSCI provides that all supplies shall comply, as far as possible, with current local, regional and international employment legislation, and in particular with the following Convenants and Declarations:

Inditex is committed to offering full compliance with applicable local legislation in the countries in which its manufacturers operate, particularly in relation to: _Working timetables _Salaries _Social Security payments _Minimum ages for workers _The prohibition of forced labour _Cautionary and disciplinary measures _Freedom of association and collective bargaining _Non-discrimination _Safe and healthy working conditions _Dormitorios _Basic environmental requirements

Inditex is committed to offering full compliance with all international regulations defined in the main Conventions of the International Labour Organization (ILO). www.ilo.org

Other regulations and guidelines: The BSCI also includes: Directive 62 of the ISO/IEC SAI MethodologySocial Accountability 8000 (SA 8000)

The BSCI Code of Conduct

Social audit. First assessment The social audit is aimed at helping the management of Inditex’s suppliers to improve compliance with all applicable employment, social and environmental legislation.

diagnosis of the level of compliance with the Code; secondly, listing a catalogue of improvements that will have to be made via Corrective action plan; and thirdly, it establishes a calendar for putting them into practice and making corrections.

This is the most important part of the BSCI’s verification and standardization process. It firstly involves making a Score

Below is a definition of the main sections of the Code, as well as the respective legislation: 1. Compliance with applicable local and international legislation. Mainly placing special emphasis on compliance with applicable local and sectorial law, as well as the Conventions of the ILO and the United Nations. 2. Freedom of association and the right to collective bargaining. With particular reference to Conventions 87, 98 and 135 of the ILO. 3. Prohibition of discrimination due to sex, age, religion, race, social profile, disability, country of origin, trade union or political affiliation and sexual orientation. With particular reference to Conventions 100 and 111 of the ILO. 4. The right to receive just payment for the work carried out. With particular reference to Conventions 26 and 131 of the ILO. 5. Working timetable. With particular reference to Conventions 1 and 14 of the ILO. 6. Health and safety at work. With particular reference to Convention 155 and recommendation 164 of the ILO. 7. Prohibition of child labour. With particular reference to Conventions 79, 138, 142 and 182 of the ILO. 8. Prohibition of forced labour. With particular reference to Conventions 29 and 105 of the ILO. 9. Compliance with local legislation, or instead with applicable international legislation concerning environmental issues and safety at work.

What does it involve? All of the suppliers participating in the process of standardization and implantation of the BSCI are informed about the scope of the social audit. Information is also passed on to all of the other parties involved – NGO’s, trade unions and non-governmental institutions – that are either directly or indirectly linked with the development of the process.

The supplier prepares for the audit by carrying out a voluntary series of measures and activities that will allow the social audit to be made.

Planned in all the workshops

Business Social Compliance Initiative

the design of training materials and ‘improved working practices’.

Self-assessment

International legislation

2,662

Carried out in 2,662 workshops

National legislation: In March 2003, this association created the Business Social Compliance Initiative (or BSCI) involving diverse business association and an extensive network of retailers, distributors, importers and producers of mainly clothing, accessories, footwear and toys.

2003

Its work has led to a standardized system for the implantation, verification and control of the level of compliance with the Code of Conduct for suppliers of the main European manufacturers.

2004

We subscribe to the BSCI (Business Social) Compliance and methodology Based in Brussels, the Foreign Trade Association was created in 2002 with the aim of firstly creating a pan-European organization charged with developing a Code of Conduct for External Manufacturers and Workshops – according to the SA 8000 methodology – and secondly with designing systems for verifying their level of implantation in factories and workshops by external and independent auditors.

The main objective we share with the BSCI is to bring about gradual and sustainable development in the shape of social and labour improvements in our suppliers’ factories.

Workshops’number

Analysis

2 1

Good Needs to improve

Critical

The audit did not discover any failure to comply with the standards of the BSCI The audit discovered failure to comply with less than 50% of the areas considered as “non-essential” The audit discovered failure to comply with the majority of the areas considered as “essential”

Correctictive action plan

A decision was made to concentrate production in a smaller number of external manufacturers and workshops, going from 2,662 workshops in 2004 to 1,318 in 2005

Six months after the audit, checks are made to ensure that these corrective action plans have been put into effect.

By applying the BSCI standards in the review processes, it is possible to coherently compare the conclusions derived from the different review processes, and to carry out monitoring through the Corrective action plan.

Second social audit

1.318 worshops during 2005-2006 In line with the methodology of the BSCI, the process of verifying the degree of compliance with the Code may only be carried out by external and independent auditors, duly accredited and certified by Social Accountability International (SAI).

Social audits are carried out by independent experts

Number of workshops 2002-2004 Rejected 2005 Operating May 2005 Second audit programmed (With corrective action plan) Start of RSC programme Certified Auditors (SAI) Non-certified Auditors

European Union

Non-EU

North Africa

1,761 -901 860 214

189 -89 100 12

148 -81 67 22

2002 INTERTEK PWC KPMG

2002 INTERTEK

Below is a list of the geographic areas in which audits have been carried out, and the auditors who carried them out. This team will also be responsible for the second audits .

Asia

Latin America

487 -239 248 87

77 -34 43 9

2003 INTERTEK

Totales 2,662 -1,344 1,318 344

2004 INTERTEK IPEDEHP

Sustainability Report INDITEX SUPPLIERS 41

07_3 Internal and External Social Capital Creation Programmes

Peru

Scope Context

15 factories (Lima) with 2,500 employees Lack of trade union representatives. Little knowledge of Human Rights in the factories of Inditex suppliers. Strong community and association bonds outside of the factories Gender discrimination outside of the factories

Involving

IPDEHP Antonio Ruiz de Montoya University Local Peruvian businessmen

respect amongst the workers in the factories of INDITEX’s suppliers, and which in general bring about an increase in their welfare in social and employment terms. External Social Capital means developing new formulas for association and cooperation that increase civic participation in the communities where workers from the factories of Inditex suppliers live together with their families

Creation of internal social capital

Stage 1. 2004-2005

Presentation to the factory directors of Inditex’s RSC strategy, the BSCI initiative, the Code of Conduct for External Manufacturers and Workshops, and the programme for creating social capital.

Stage 2. 2004-2005

Questionnaire to evaluate the internal social capital present in the factories. Identifying and capacitating male and female employees – potential social leaders – who are trusted and relied on by their workmates. Results: _Identification of the factories’ internal social capital index _Selecting social leaders capable of channelling internal demands with regard to Human Rights, and connecting the situation of the factories with the main social organizations of the communities where they live.

Stage 1. 2004-2005

Questionnaire on the human needs of the employees of the factories and their families. Identifying the vulnerability factors that have a negative effect on the Human Development of the employees and their families, giving priority to those having the greatest effect at social and employment level.

Creation of external social capital

Stage 2. 2004-2005

Geographical location of vulnerability factors. The following communities were identified – San Juan de Lurigancho, ATE-Vitarte and San Martín de Porras – and the vulnerability factors, in order to be able to offer an effective and efficient response to their needs.

Stage 3. 2005-2006

Identification and strengthening of social institutions capable of organizing programmes of social investment in order to respond to the vulnerability factors. Results: _Identifying the external social capital index of the social organization. _List of organizations and leaders sufficiently capacitated to deal with the Human Rights demands of the employees and their families in the communities where they live.

1. Providing education on respect and citizenship, developing a strong civil society, with a public and participative voice in the processes of designing and implementing transformational policies that strengthen respect towards Human Rights. 2. A practical way of encouraging collaboration and respect at the same time encouraging the development of cooperative and associative activities inside and outside of our suppliers’ factories. 3. Practising education for the people from the ground up, which trains managers of daily events, as the success or failure of these activities and programmes will largely depend on the existence of a population that is capable of expressing its expectations in terms of co-habitation. 4. Designing instruments and spaces that help to improve the living and health conditions of women employed in complex social and working environments.

Morocco

Creating social capital means:

The Internal and External Social capital Creation Programmes have been designed to help train committed people both inside and outside our suppliers’ factories in Lima and Tangier, who can feel that their fate is linked both to the evolution of their surrounding enviroment and to the improvement of their equals’ social and working conditions.

These are programmes designed to encourage formulas for collaboration, solidarity, respect and good citizenship amongst the employees working in the factories of Inditex’s suppliers – known as internal social capital – and in the communities where their families live – known as external social capital. Internal Social Capital means developing a series of networks which, based on trust and shared beliefs and standards, facilitate cooperation and

Scope Context

15 factories (Tangier) with 4,500 – 5,000 beneficiaries Absence of trade union representatives. Little knowledge of Human Rights inside and outside the factories. Weak associative and community bonds inside and outside of the factories. Gender discrimination inside and outside the factories.

Involving

Intertextil Marroquí (AMITH) Local Moroccan businessmen Moroccan social institutions

Creation of internal social capital

Stage 1. 2002-2005

Presentation to the factory directors of Inditex’s RSC strategy, the BSCI initiative, the Code of Conduct for external manufacturers and workshops, and the action programme.

Stage 2. 2005-2006

Questionnaire to evaluate the internal social capital of the factories. Identifying and capacitating women – potential health promoters – trusted by their co-workers. Results: _Identification of the factories’ internal social capital index _Having health promoters on hand capacitated to: _Develop a health programme for women inside the factories _Implant health awareness programmes in the communities _Collaborate with the main social organizations in the community

Stage 1. 2002-2004

Creation of external social capital

Questionnaire on the human needs of the employees and their families. Identifying the vulnerability factors that have a negative effect on the Human Development of the employees and their families, giving priority to those of greater social-labour importance.

Stage 2. 2002-2004

Geographical location of the vulnerability factors. The following communities in Tangier were identified: Ain Hayani, Mesnada, Mouatina and Ben Kirane, and the vulnerability factors were identified, in order to give an efficient and effective response to their needs.

Stage 3. 2005-2006

Identification and strengthening of social institutions capable of organizing social investment programmes in order to respond to the vulnerability factors.

Internal and external social capital project investment in 2004: 341,142 euros

Results: _Identifying the external social capital index of the social organizations identified. _Community associations are strengthened to respond to the demands for health and services from the communities of the employees and their families.

Sustainability Report INDITEX SUPPLIERS 43

We are committed to Society in the defense of Human Rights and economic development everywhere we work.

08_0 Society

08_1 08_2 08_3 08_4 08_5 08_6

Our social commitment Community development programmes Emergency programmes Sponsorship and patronage programmes Platforms for dialogue Open to Society

Sustainability Report INDITEX SOCIETY 45

m er s

We believe in the duty to Through our sponsorship and patronage Programmes we have worked to provide resources for cultural spaces at national and international level.

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promote culture

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education as a driving social change to build a respect and equality

We believe in force for shared world based on

Through Community Development Programmes we have worked on developing actions that make it possible to train people who feel part of the community and that their future is linked with the collective welfare of their equals in terms of rights and opportunities.

dialogue transparency

We believe in and

We are open to society through a series of channels, to listen to our different interest groups and to share our values and activities with them.

08_1 Our

Social Commitment

We believe in the active For this reason we have concentrated all of our social investment strategy in non-government organizations (NGO’s) capable of developing network cooperation, such as ‘Fe y Alegria’ and programmes the Carolina Foundation in Latin America, and Cáritas and the Red Cross in Spain.

participation of companies in cooperation

We believe in the and

life

right to safety

By taking part in Emergency Programmes we have worked to help the victims of natural disasters, offering them aid immediately after the event and developing short and long-term sustainability programmes.

We believe in By participating in different forums supporting the respect of Human Rights at local and as tool of work international level, we have developed activities aimed at bringing about changes in social and labour policies, business practices and ideas and beliefs at different levels and in different realities.

participation

Each project specifies the capital inverted and consumed temporalised in each fiscal year. The content and scope of the project in this chapter is based on the follow-up reports provided by our partners. Web pages are provided to extend information.

Sustainability report INDITEX SOCIETY 47

08_2 Community development programmes Latin America is one of the priority areas of intervention, in countries such as Brazil, Peru, Venezuela and Argentina, through programmes directed by associations and other bodies with extensive experience in the field. Fully aware of our economic and social commitment with the communities in which we operate, we maintain an active participation in different local development programmes in Galicia, the Spanish region in which Inditex has its head offices and concentrates much of its own production. The ‘Unirisco’ entrepreneur programme is just one example.

At Inditex we believe in the defence of education as a Fundamental Human Right and as an intermediary stage towards a greater objective; personal dignity, citizenship and the development of different peoples. In this sense Inditex supports a range of programmes that foster education and learning as formulas to benefit Human Development in the communities connected with our activities.

The Carolina Foundation, created on an initiative by the Spanish Government at the end of 2000 and controlled through the Ministry of Foreign Affairs, is an institution to promote cultural relations and cooperation in the educational and scientific fields between Spain and Latin American countries.

Inditex’s social investment has focused on three areas of activity: Programme of

A programme of grants, extended studies and training teaching teams, who mainly come from this region.

Visitors’ Programmes

Visitors’ programmes aimed at relevant foreign individuals with a future projection in their respective countries.

Grants

Latin America education

as a priority for

development

When we refer to Latin America, we refer to a series of highly diverse nations with major differences between segments of society and the distribution of wealth.

Hispanic culture

In terms of education, it is important to note that:

Latin America Programmes

with two expert partners: In order to intervene in education we have had to provide answers to the following questions: We believe in

education as a driving force for social change

1 What type of people do we want to help educate? We are seeking to educate people whose outlook, in terms of expectations, goes beyond their own individual fortune and that of their immediate surroundings.

2 What model of society are we seeking to build? We believe in training people in values and attitudes that go far beyond mere working instruments. Values and attitudes are instruments of social change, for people individually and as a collective.

3 What framework of reference do we want to use in order to develop our strategy of social investment? Over the last three years,

_ although there has been a significant increase in educational coverage for basic education, this has still not become universal _ although there is a progressive incorporation of pre-school education in public policies, less than 50% of children are educated in schools before the age of five. _ secondary education continues to be affected by the high percentage of children who have to repeat a year or who are forced to leave school, by the system itself. _ if we examine the quality of education given we discover a highly devalued teaching system: educators with insufficient training and poor salaries, meaning that they are unable to dedicate themselves to teaching on a full time basis.

Supporting studies into Hispanic culture and its influence on the world through the Centre for Hispanic and Latin American Studies.

www.feyalegria.org www.entreculturas.org

Entreculturas Fe y Alegría provision by Inditex

2,301,880

The ‘Entreculturas - Fe y Alegría’ Foundation, formed in 2001, supports more than 130 projects and is present in 127 countries in Latin America, Africa and Asia. More than 1,200,000 people have benefited from its programmes.

www.fundacioncarolina.org

Fundación Carolina provision by Inditex

180,212

Since 2001, and in line with the operational framework of Dakar, collaboration between Inditex and Entreculturas has made it possible to interrelate two networks:

business model

Inditex

Fe y Alegría popular education network

Inditex’s distribution and sales chains and the popular education network ‘Fe y Alegría’ that is present in 14 countries in Latin America, and at the same time developing the quality of education in the most vulnerable communities in the countries in which we produce and/or market our products.

Inditex has decided to support an integral improvement plan for educational conditions for vulnerable groups in Venezuela, Peru, Argentina and Brazil.

Sustainability Report INDITEX SOCIETY 49

The programmes of social investment we have financed for the third year running are focused on responding to the objectives of the Dakar Framework for Action, which have taken shape in most cases in extending educational possibilities, training educators and promoting vocational and technical training.

Project evolution and investments

Inditexshares the Objectives ofDakar www.unesco.org

Argentina Brazil Peru Venezuela Central America

Peru Venezuela

1,386,204

2002

Investment by Inditex in Euros

To comprehensively extend and improve

2003

2,139,363

Argentina Brazil Peru Venezuela

1,001,620 used 2003 1,137,743 accrued 2004

Investment by Inditex in Euros

_ Home nursery network in Natal (Brazil).

education in early childhood

2004

2,301,880

1,170,957 used 2004 1,130,923 accrued 2005

Investment by Inditex in Euros

_ Female educators’ network in the Home Nursery Network (Natal, Rio Grande do Norte, Brazil).

1 To ensure that all children, particularly the most disadvantaged, have access to free, compulsory and high quality primary education by 2015

_ Building educational infrastructures for elementary education in

_ Construction of 6 basic education classrooms in northern Argentina. _ Extension and improvement of coverage in marginal areas of Lima (Peru).

Cuzco, Illo, Tacna and Lima (Peru). _ Producing bilingual texts in Cuzco (Peru).

_ Improving educational conditions for 1,200 children in Ilheus (Brazil).

_ Providing educational spaces –classrooms and libraries– for children

_ Full time accompaniment for 200 children between 6 and 12 from marginal areas (Formosa, Argentina). _ Extension of the educational offer for 120 children in marginal areas (Resistencia, Argentina).

and teenagers in different parts of Venezuela.

_ Financing the AVA TAVA Social Promotion Centre: Programme fighting sexual abuse and violence against children (San Miguel, Argentina). _ Improving educational conditions for 1,200 children from the district of Nossa Señora da Vitoria (Ilheus, Brazil). Stage II.

_ Programme for strengthening high social risk sectors (Peru).

To ensure that all the learning needs of young people and adults are satisfied through equal access to education and training, enabling them to have access to a

_ Social and educational support for 190 children and teenage workers. Awareness for families and schools on child labour _ University education for young Peruvians. _ Training and support for 100 community organization leaders.

_ Building and equipping workshops for training young people in Estado Bolívar and Cumaná (Venezuela) _ One hundred young people from Natal -Brazil- at social risk take part in educational and cultural activities

_ Support for the creation of community centres (Rio de Janeiro, Brazil). _ Support for work in defence of the rights of tribes living in the Amazon carried out by the Comisión Pastoral de la Tierra (Brazil). _ Construction and equipping of teaching workshops in poor communities in Oriente

_ Support for more than 200 young people involved in the Community Cultural Centre in (Venezuela).

decent active life

Rio de Janeiro (Brazil).

_ Strengthening educational quality by building and equipping workshops (Venezuela). _ Programme supporting higher education (Peru). _ Programme for creating social capital in the factories of Inditex suppliers and the communities where their workers and families live (Peru).

To increase by 50% the number of literate adults, particularly women, by 2015

4 To

in primary and secondary education for 2005, achieving gender equality to education by 2015

To improve all qualitative aspects of education in order to achieve

What is Dakar? UNESCO defined its commitment towards the international community in a document known as the Dakar Framework for Action, aimed at supporting a worldwide educational strategy entitled Education for All.

remove gender inequalities

_ Teaching proposals in the rural network in Cuzco (Peru).

_ Equal gender opportunities programmes have been included in the social investment programmes that develop the other five objectives of the Dakar Frame work.

_ Programme for strengthening sectors at high social risk (Peru). _ Programme supporting higher education (Peru).

recognised and quantifiable results

mainly in areas related to reading, writing, arithmetic and practical skills

Sustainability Report INDITEX SOCIETY 51

Throughout 2003, following the serious social and economic crisis suffered in recent years, Argentina has slowly set out on the road to recovery. Within this context, projects financed by Inditex have focused on supporting those groups who have directly suffered the consequences of the situation the country has experienced in the last few years, placing specific emphasis on Objective 2 of the Dakar Framework for Action.

In Brazil, Inditex has collaborated in financing social investment projects with a strong community bias, related to Objectives 1,2 and 3 of the Dakar Framework for Action.

470boys and girls Project duration12months Beneficiaries

212,629 144,437 Accrued in 2004-2005 68,192 Provision by Inditex in FY 2004

Dakar Objectives

Argentina

young people, educators and peasant 1,890 children, communities in 27 autonomous districts Project duration12months Provision by Inditex in FY 2004 347,441 Used in 2004 147,008 Accrued in 2004-2005 200,433

Beneficiaries

Used in 2004

Dakar Objectives To comprehensively extend and improve

education in early childhood

Brazil

Organization of the Women’s Teaching Group in the Home Nursery Network (Natal, Rio Grande do Norte) This programme is helping to develop activities to reinforce children’s education in the outskirts of the city with the creation of ‘home nurseries’ and training educators to run them.

Comprehensive mentoring for 200 children of school age (6 to 12) from deprived areas in Formosa To ensure that all children, particularly the most disadvantaged, have access to free, compulsory and high quality primary education by 2015

1 Improving educational conditions for 1,200 children in the district of Nossa Señora da Vitoria (Ilheus). Stage II

To ensure that all children, particularly the most disadvantaged, have access to free, compulsory and high quality primary education by 2015

Formosa is Argentina’s poorest and most marginal province. Some 650,000 people live in the capital who feel that their most basic needs have been ignored for years. For more than 10 years a group of nuns known as the ‘Missionaries of Mary’ have worked in the city, setting up a support programme so that children of school age improve their results, to avoid the high percentage of children who drop out of school or repeat academic years. This programme will form part of the ‘Fe y Alegria’ network. Thanks to

More than 60% of the 20,000 families who live in

this project, work will continue offering educational support that will directly benefit 200 children at

this district have salaries below the basic wage

primary level.

(some 60 Euros). For many children of school age who live in this district, the ‘Fe y Alegría’

Extending the educational offer for 120 children in deprived areas (Resistencia) The district of Alberdi (in the city of

educational centre is a point of reference for them in terms of learning and sharing with others. In

To ensure that all the learning needs of young people and adults are satisfied through equal access to education and training, enabling them to have access to a

Support for creating community centres (Rio de Janeiro)

poverty. The ‘Fe y Alegría’ school offers

AVA TAVA Centre for Social Promotion: a programme fighting sexual abuse and violence against children (San Miguel)

quality education to 390 children, although

In the second peripheral zone of

Marambaia with a capacity to attend to more than

it must be extended to accept all of the

Buenos Aires we find some of the

200 children and young people, together with their

children who need to be educated. The

severest cases of poverty in the

families.

project will help construct two new

whole country. Here an estimated

classrooms, offering the possibility for

88% of the population is poor, and

decent basic education to a further 120

more than half of the children suffer

children.

from malnutrition. In these hostile

Resistencia) is a clear example of the situation suffered by numerous outlying districts in Argentina. Most of its inhabitants are emigrants who have arrived from the countryside, with 70% living in conditions of

decent active life

These centres, situated in communities with very low incomes, represent an alternative of leisure and recreational activities in the face of the urban violence

this second stage of the project, the Centre aims at becoming a point of reference to give impetus to cultural activities in the area, as a meeting point, and a centre offering training in different skills.

ad lack of community areas in the city. For this reason in this financial year Inditex has supported the construction of a new centre in the district of

circumstances, cases of domestic

Supporting work in defence of native peoples in the Amazon carried out by the ‘Comisión Pastoral de la Tierra’ (CPT)

violence and sexual abuse to

The CPT has teams who travel the rivers offering

children flourish. The project is

support to rural communities cut off from the rest

directly focused at fighting this

of society, providing legal experts for indigenous

problem by offering art workshops to

communities to help them register land ownership

prevent episodes of abuse or

and protect themselves against potential violations

violence. A team of psychologists

of Human Rights.

and educators work with the children and their families to prevent incidents of this type being repeated that may have an irreversible effect on the child.

Sustainability Report INDITEX SOCIETY 53

In Venezuela, Inditex has collaborated in financing social investment projects directly related to Objective 3 of the Dakar Framework for Action.

In Peru, Inditex has collaborated in financing social investment programmes directly related to Objectives 3 and 6 of the Dakar Framework for Action.

40,000 Project duration12months Beneficiaries

Dakar Objectives

To ensure that all the learning needs of young people and adults are satisfied through equal access to education and training, enabling them to have access to a

decent active life

To improve all qualitative aspects of education in order to achieve

recognised and quantifiable results mainly in areas related to reading, writing, arithmetic and practical skills

Peru

Approximately 40,000 people (students and teachers in rural and deprived urban areas)

1,020,361 502,585 Accrued in 2004-2005 517,776

840students Project duration12months Beneficiaries

721,449 376,927 Accrued in 2004-2005 344,522

Provision by Inditex in 2004

Used in 2004

Dakar Objectives

Programme for creating social capital in the factories of Inditex suppliers and in the communities where their employees and their families live ‘Entreculturas’ supports the initiative for creating social capital that Inditex has set underway in its production centres in Peru, collaborating through the Peruvian Institute of Human Rights and Peace (IPEDEPH) and the Antonio Ruiz de Montoya University in Lima. This Project focused on designing and creating networks is aimed at allowing its beneficiaries to have a say in the development proposals, and to improve the level of compliance with Human Rights in the locations where Inditex is present. The studies currently underway will lead to a diagnosis of requirements that will be of major use in the planning of new joint projects.

Programme for strengthening high social risk sectors

Support programme for higher education

The aim of the programme is to improve living conditions for children, teenagers and young adults in Cuzco, Ilo, Tacna and Lima, supporting their educational possibilities and free time activities, through four main activities: building educational infrastructures, buying school materials, offering preventative attention and support, and finally the publication and provision of educational materials. The project also supports the rural educational network in the province of Quispicanchi (Cuzco).

This Project includes a grant programme so that 30 students from the poorest areas of Peru who have studied at ‘Fe y Alegría’ centres may receive a total of $650 per term, allowing them to complete degrees at the Antonio Ruiz de Montoya University (UARM). The other part of the project involves setting up a process for ensuring the teaching knowledge of educators at the ‘Fe y Alegría’ centres is brought up to university level. These courses will be designed by the Education faculty of the UARM to be distributed for distance learning. Once validated, a total of 100 teachers at the Fe y Alegría schools in Peru will benefit from the programme.

To ensure that all the learning needs of young people and adults are satisfied through equal access to education and training, enabling them to have access to a

decent active life

Venezuela

Building and equipping didactic workshops in poor communities in eastern Venezuela This project has been designed to reduce the negative effects on education derived from the serious political and administrative crisis in Venezuela that has mainly affected the poorest districts in the large cities. As a result, the construction and subsequent equipping of didactic workshops means that the educational offer for young people from the poorer neighbourhoods is improved, helping them to find jobs.

Improving educational quality by building and equipping workshops Through this project, 2 workshops and 21 classrooms have been provided for the ‘Fe y Alegría’ network in the Andes, Caracas, Central and Guayana regions, making it possible for them to offer training in IT, carpentry, electricity, ironworking, fish farming and agricultural activities.

2,635,769 180,304

Unirisco Project Unirisco is a

Venture Capital Company

authorized by the National Stock Market

Equity Inditex’s holding As of 31st January 2005 a commitment was made for an additional payment of

Spain

500,000

Our internal code of conduct includes in the section

Unirisco operates through temporary and minority

entitled ‘Society’ a clear commitment towards the

capital investments (between

backed by the three Galician universities (A Coruña, Santiago de

development of those communities that are directly or

Compostela and Vigo) with the support of the

distribution or sales. Through Unirisco we continue to

Commission and

region’s main institutions (Caixanova, Banco Pastor, the Caixa Galicia Corporation,

indirectly affected by our activities, either of production, support and finance projects for creating new businesses with the following aims:

30,000 and

300,000, although there is no fixed minimum), in business initiatives that: _ Are clearly

linked to the University, either as a

result of their activities being based on knowledge generated within the university, or as a result of the

Grupo San José, BPI, the R Foundation, Vigo’s

entrepreneurs of the initiative coming from a

Free Port Consortium and Inditex) _ To facilitate the

transfer of ‘know how’ created by

universities to Society in general. _ To stimulate the creation and consolidation of jobs for researchers and university graduates. _ To help create an

entrepreneurial culture within the

universities.

university background. _ Are backed by people

who are wholly committed to their initiative, and with technical

and managerial abilities. _ Are generated in any Spanish

or Portuguese university, although special attention is paid to

projects from Galicia and the north of Portugal. _ Have not yet been formalized or have only been recently created, and which have a

www.unirisco.org

high potential

for growth and profitability.

Sustainability Report INDITEX SOCIETY 55

08_3 Emergency programmes Through its Emergency Programmes, Inditex plays an active role in

helping the victims of natural disasters, offering immediate aid programmes and sustainability in the short and long term. Our involvement goes far beyond financing. We are directly involved in the supervision and joint control of the projects, which are carried out in the field by NGO’s and other institutions. We treat these projects as if they were our own, applying the same criteria of stringency and responsibility we apply to any other project within our organization. Our aim is to help those affected by these disasters to gradually recover their former social and economic conditions.

Inditex has contributed in total to the Singra project

4.000.000 4,000,000

Global provision by Inditex in 2004

1,000,000 Victims

tsunami Helping from the Beginning

Programme

and Contributing towards Mid and Long Term

Development

Singra Prestige

TheSingra Emergency Programme

Victims of the

tsunami The SINGRA Emergency Programme, planned to help alleviate the consequences of the sinking of the oil tanker ‘Prestige’ off the Galician coast, was our first project. Our work will continue for a number of years, as part of a series of programmes.

In 2004 we began a new Emergency Programme, this time aimed at providing aid for the victims of the tsunami that devastated south east asia at the end of 2004.

Sustainability Report INDITEX SOCIETY 57

The sinking of the oil tanker Prestige in November of 2002 close to the Galician

Terra de Soñeira

coastline led to an oil slick of several thousand tons of fuel and residues. This disaster has had serious economic, social and environmental consequences for the area. In March 2004 Inditex established a social intervention plan together with the Red Cross. This was the SINGRA (Singladura) programme, which from October 2003 and until 2007 will work on improving living conditions for the most vulnerable people living in the area of the catastrophe, focusing its activities in three areas: education, society and employment. Our priority is focused on the least attended collectives who are unable to obtain any other types of benefits.

Five priority areas have been established in the most affected areas: Bergantiños, Fisterra, Terra de Soneira and O Barbanza in the province of La Coruña, and the area of O Morrazo in Pontevedra. The first results have already taken shape in a long list of projects, from the creation of businesses and associations, to direct aid being given to individuals (looking for work, training, support, etc.) Inditex has made 4,000,000 available for this project.

Fisterra _ Adapting houses for the sick and elderly in Fisterra. _ A forestry engineering company in Cee. _ Creating a community radio station in Corcubión. _ Supporting the hostelry sector in Corcubión. _ Workshops on the environment, education of values and study techniques for young people in secondary schools in Cee. _ Radio programme offering employment openings in stations on the Costa da Morte. _ Adapting houses for the sick or elderly and a bed-lending service.

101Collaborating companies

_ A computer company in Vimianzo. _ Recovering the collective memory of those who work at sea. _ A course to transmit knowledge for craftsmen and women in Vimianzo. _ Supporting the ‘Cherinkas’ youth association. _ Creating a centre for associations in Camariñas. _ Setting up a centre for social intervention for children in vulnerable situations. _ First aid courses throughout the whole region.

109 Projects 53 Courses Offered

1,291 Students 187 Jobs filled

37 Future

entrepeneurs

11 Companies founded

701 People guided and informed

Bergantiños _ Associations of ‘Redeiras’ dedicated to the repair of fishing nets and tackle (Laxe and Porto do Son). _ Searching for new cash crops in the area of Traba and strengthening agricultural resources in (Laxe). _ Improving the working conditions of female shellfish gatherers in Baldaio. _ Boosting tourism for the port of Laxe School garden project in Laxe.

The

Sustainable results

Singra emmergency programme www.singra.org

Ferrol

Who do

Malpica de Bergantiños Ponteceso

_Children and young people _The unemployed _The elderly The beneficiaries _Women we work with? _Associations

Coristanco

Camariñas

1 Vimianzo

A CORUÑA

Cee

3 Corcubión

Lugo

Fisterra

O Barbanza

Chronology November 2002

December 2002

March 2003

October 2003

September 2003

January 2004

The disaster. The tanker “Prestige” sinks close to the Galician coast. Immediate action taken by the Red Cross: boats helping set up barriers, setting up posts for logistical support. Support also offered to volunteers, giving out food, water, and providing medical services.

The oil slick extends all the way down to the south of Galicia. The barriers and sanitary controls must be extended as far south as Vigo and as far north as Cedeira. Inditex’s Board of Directors gives its approval to providing aid to those affected.

Inditex and the Red Cross sign a financing agreement which leads to the Singra project. The project is designed, and the headquarters and personnel are chosen.

The Singra Project gets underway with an initial stage of contacting the institutions in each of the five affected areas in order to establish a networking system. The employment service for those affected is established.

A coordination office is created in each of the areas with a team of professionals – career advisors, social workers, educators and sociocultural workers, dedicated to the project on a full-time basis.

Start of the programme offering consultancy and economic aid for entrepreneurs and the full range of projects.

Red Cross A Coruña Coordination

A Laracha

Laxe

Santiago de Compostela

Carnota 4

Muros _ A sculpture company in Ribeira. _ A nursery in Muros. 4 Boiro _ Preventive programmes for Alzheimer in Ribeira. A Pobra do Caramiñal _ Work by students in Ribeira with seamen. Ribeira _ Pedagogical information on fish species with the Mar de Lira association, in O Barbanza. _ Child welfare service for the children of shellfish gatherers and women working at sea. Bueu _ Support network for immigrants. _ Repairing houses for elderly or disabled people. Cangas _ Supporting the Association of Net Repairers of Porto do Son.

Rianxo

Pontevedra 5 Ourense

O Morrazo _ Gas fitting and plumbing course. _ Cognitive stimulation workshops for the elderly. _ Supporting the work of associations in O Morrazo. _ Creation of the Association of Net Repairers of Bueu. _ Programmes for the prevention of Alzheimer in Cangas.

Sustainability Report INDITEX SOCIETY 59

In December 2004 Indonesia, India, Thailand and Sri Lanka suffered the effects of a tsunami

Indonesia

that devastated the region, an unprecedented catastrophe that left thousands of dead and missing in its wake, and millions of people homeless and without any type of income. Inditex joined the international aid campaign with a donation of 1,000,000, which the Spanish charity organization Cรกritas materialized as technical support to those affected in the region. Cรกritas is a recognized NGO with a well-established trajectory in managing emergency projects, and with previous experience in the affected areas. The solidarity of Inditex was especially offered to the families of suppliers with businesses in the affected areas, through a series of specific aid projects that will take shape throughout 2005.

Work is underway on offering primary health care to those who have lost

India During the initial stage of the emergency, Cรกritas dealt with some 125,000 people, organizing

their homes and means of support. Many people were already living in highly precarious situations before the tsunami. The emergency stage will continue for several months.

100 humanitarian camps and offering temporary accommodation, basic foodstuffs, medical attention, drinking water and sanitary services. The reconstruction plan, which will be rolled out next 30 months, includes offering personalized attention to all those whose basic needs have not been covered, and those who remain in refugee camps, as well as executing programmes for building houses, reconstructing drinking water pipelines and sewage systems, supporting public health projects and distributing school materials to a total of 34,500 families.

Thailand Work is underway to deal with the most vulnerable victims: fishing communities who have lost their source of income. The plan is aimed at guaranteeing the basic

and psychological needs of some 3,000 people, and distributing emergency aid for 9 months to some 1,000 people considered at particular risk, while rehabilitation programmes are being organized.

Sri Lanka Once the humanitarian aid effort had been established and all primary needs covered, refugee camps were established for those who had lost everything and who could not demonstrate ownership of their properties. In order to carry out its programmes, Cรกritas Sri Lanka has 1,000 community groups. The reconstruction plan has been divided into two stages: the first, lasting throughout 2005, will cover basic needs such as

accommodation, drinking water, schools and sanitation for 33,000 families: the second, which will focus on building houses, will directly benefit some 21,000 families.

www.caritas.org

The emergency programme

in South-East-Asia

India

Sri Lanka Indonesia

Tailandia

Intervention plans: from the emergency to the reconstruction In the most affected areas (Indonesia, Thailand, India and Sri Lanka) the regional delegations of Cรกritas who were already operating in the region started to offer humanitarian aid immediately, supported on the ground by some 5,000 volunteers. Initial efforts were focused on setting up temporary shelters, distributing essential items, food and drinking water, as well as offering medical and psychological assistance

Sustainability Report INDITEX SOCIETY 61

08_4 Sponsorship and patronage programmes Through its Sponsorship and Patronage Programmes, Inditex makes social investments aimed at supporting different initiatives in the field of the innovation and promotion of culture. As in the previous year, the Sponsorship and Patronage Commission comprised of Inditex’s Chairman and

08_5 Platforms for dialogue

General Secretary, the Director of Corporate Social Responsability and the Director of Corporate Communications, has been responsible for dealing with the different requests for support received at corporate level, and supervising investments made in the selected projects.

Sharing and encouraging activities aimed at promoting Corporate Social Responsibility is also one of our aims. We consider that participating in dialogue, encouraging debate and promoting models of corporate responsibility, their principles, aims and methodology is also a way of contributing towards society. Inditex takes an active role in national and international forums, and is at the forefront of a series of a range of initiatives.

Promotional activities Amount:

75,000

With the aim of sharing our experiences in the field of Corporate Social Responsibility with other organizations and institutions, we have played an active role in numerous forums organized by bodies of recognized prestige:

inSpain The Business and Society

Foundation (Madrid), Esade (Barcelona), Spanish Accountancy and Administration Association, AECA (Madrid), IESE (Barcelona), the Corporate Reputation Forum (Madrid), the Alternatives Foundation (Madrid), the Tecnomoda Foundation (Madrid), and the European Transatlantic Business Forum (Barcelona) inLatin

America The Ruiz de Montoya University (Lima, Peru) and the Andrés Bello Catholic University (Caracas, Venezuela)

Helping Promote

culture and encourage innovation

Art collection founding

In 2004, and as part of our strategy for social investments in this area, a total of 57,070 were dedicated to collaborations with the following institutions:

Platforms for dialogue

european workgroups and the

Participation in

development

standardisation and verification models of

_Serralves Foundation www.serralves.pt _Modern Art Collection Valladolid Museum of Modern Art

Patio Herreriano Investments in other

educational spaces

During this financial year we have played an active role in different activities raising awareness of and promoting the BSCI initiative in Spain, France, Morocco and Peru.

Amount:

8,000

www.museopatioherreriano.com

As part of our collaboration with other cultural institutions, we have financed a wide range of initiatives, the most important of which include:

_ The Galician Symphony Orchestra www.sinfonicadegalicia.com _ Sala Tiflológica www.aytolacoruna.es _ Prince of Asturias Foundation www.fpa.es _ Cantábile Musical and Cultural Association http://usuarios.lycos.es/cantabile _ Albéniz Foundation www.fundacionalbeniz.com _ Historical Archive of the Diocese of Santiago de Compostela

Nations’ Global Compact, and has contributed towards publicising its 10 principles in Spain. We are currently members of the UN Global Compact executive committee in Spain. This platform brings together Spanish multinational companies, SMSE’s, trade unions, associations, public bodies and institutions. It is an initiative for ethical commitment so that companies throughout the world adopt the

Investment:

669,726

Inditex was the first Spanish company to join the United

10 principles of conduct and action as an integral part of Promoting the UN Global Compact in Spain

their strategy and operations, with regard to Human Rights, employment and the environment.

www.unglobalcompact.org

www.archicompostela.org

Sustainability Report INDITEX SOCIETY 63

08_6 Open to Society. Spain 65%

Inditex has made a commitment to transparency when carrying out its activity. This commitment is aimed at transmitting a true external image, not only fulfilling its obligations to market regulations, but also the requirements of its Corporate

Liability Policy with all of the interest groups with which it is involved.

The media is the main channel of transmitting information between companies and the general public, and plays a decisive role in developing our transparency policy. Inditex assumes its responsibility with the media as an independent and critical mediator that is also committed to the principle of transparency. Inditex’s relations with the media are through its Corporate Communication Department. This corporate department maintains constant and fluid contact with journalists in more than 60 countries.

Inditex keeps in close contact with the media, different bodies and institutions with one of its main objectives being an ‘open door’ policy towards educational institutions such as Universities and Business Schools.

Corporate information

Financial reports

Espansion and development of business

Press releases distributed in 2004

In 2004, the Corporate Communication Department sent out a total of 42 press releases and other company-related news, and answered more than 5,000

The media

Japan 7% Germany 3,5% France 3,5% UK 10,5%

Visits to our headquarters

Scandinavia 3,5% Mexico 3,5%

Companies

Media

Educational institutions

Bodies and institutions

Inditex opens its doors to society. The policy of approaching and opening up to different target audiences took off in 2004 with more than 150 visits to our sites. Apart from the media, this policy is aimed at national and international educational centres, organisations and all kinds of institutions, and of course the business world.

Hong Kong 3,5%

Visits by the media

Visits from educational centres Secondary education Higher education/Spain Higher education/international Vocational training

56% 18% 7% 18%

public bodies

and institutions

other organizations

requests for information via media all around the world, more than 70% from international media. In 2004, more than 20,000 press releases on the Group appeared in the press and on the radio and television in the countries where Inditex has the most number of stores.

Germany 7,5%

France 7,4%

Portugal 8,7%

Holland 6,2%

UK 24,7%

Greece 3,8%

Italy 6,3%

Turkey 4,9%

Information about Inditex published in the written press 31% Spain

Belgium 3,7% Switzerland 3,6% Others 7,8% USA 2,3%

Denmark 3,5% Mexico 2,5% Austria 2,4%

Rest of world 69%

We develop stable links with different non-government organizations who share our objectives for sustainable social, economic and environmental development. We trust in their experience in managing projects in order to bring our support projects to fruition in the field. They serve as objective validators of our social audits, and as collaborating partners in emergency programmes.

One of the most significant activities in this financial year was the creation of the Inditex Chair at the University of La Coruña. Its purpose is to foster and promote the study and development of Corporate Social Responsibility, viewed as the commitment businesses have to apply criteria of good governance, sustainable social development and protection of the environment.

Universities and business schools As far as collaboration with the educational media is concerned, Inditex gives priority to Spanish and foreign universities and business schools. The interest shown by this field in analysing our group’s business model has been met by Inditex, which has contributed to preparing educational material and case studies, and has given speeches at conferences and seminars, for example as part of the XX World Garment Industry Convention organized by the

Apparel Federation (IAF)

Sweden 2,4% Japan 2,3%

The UK, Portugal, Germany, France and Italy are the countries that have shown most interest in Inditex, representing 54.6% of all reports in the media outside of Spain.

Sustainability Report INDITEX SOCIETY 65

Guaranteeing the sustainable growth of our business reducing to the minimum our environmental impact by optimizing the consumption of resources and the creation of waste materials.

09_0 Environment

09_1 09_2 09_3 09_4 09_5

Our sustainable growth model Strategic plan 2002-2005 Environmental management Indicatorâ&#x20AC;&#x2122;s System Relationships with interest groups

Sustainability Report INDITEX ENVIROMENT 67

Development during FY2004 has allowed us to consolidate our sustainable growth strategy in all areas of activity: products, own factories, suppliers, distribution, stores and raising staff awareness. In some of these areas, we have anticipated the goals set for 2005.

So |2 fi l e |6 o r p s 1 Business Go lier 9 up p | S 5 my 4 Employees | no E co 8 nt l

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7 Environme

09_1 Our sustainable growth model

In the case of our industrial centres (chain head offices, own factories and logistics centres) we have fully introduced and certified our Environmental Management System, in accordance with the ISO 14001 standard. Consolidating this environmental management and control model has allowed us to achieve an important victory: breaking the link between growth and waste generation, which is without a doubt the basis of sustainable development. We have also made considerable progress in achieving the Oeko-tex certificate for our products, which in 2004 reached 24% of clothing for children aged 0 to 16 years. Furthermore, as far as our products are concerned, the foundations have been laid to develop a Life Cycle Assessment program for textiles, as part of a R&D project with the University of Santiago de Copostela. This will enable us in the future to work towards optimising our consumption of resources for each product that we manufacture. We have also taken an important step forwards as far as raising awareness and management are concerned. Firstly, we have completed direct training (on-line or traditional) of the staff of our chain head offices, logistics centres and factories. Secondly, the

joint effort from different departments last year has allowed us to set up an innovative and original training course that will provide traditional training for all the employees of our stores in Spain during the course of 2005. We will base this on using a new sustainable mascot and releasing the company’s magazine. Important actions taken during the year have included controlling our emissions, especially greenhouse gases. We have made substantial progress on supplier evaluations, and we have continued to increase our energy efficiency. In this respect, we have dedicated 2004 to optimising the use of wind and solar energy, and to planning new facilities for 2005. Having marked out these paths, our work during 2005 will be focused on completing actions relating to suppliers and stores, and to optimising our consumption of resources and waste generation. This will allow us to consolidate our sustainable growth model, and will be the basis for developing improvement actions over the years to come as far as the international expansion of our activity is concerned.

Head office

Deputy chaiman Enviroment Manager

Head offices of chain and logistics centres

Stores

Chain managers

Factories

Factory managers

Environmental policy We believe that the development of Inditex’s activity should include a set of sustainable development criteria, which guarantee the proper management of resources and environmental protection, as well as meeting society’s needs. In order to put the above into practice, we undertake to fulfil and enforce the following principles, which form our environmental policy:

HR Dept Legal Dept

Enviromental Representatives

Enviromental Mngmnt Systems certified in accordance with UNE ISO 14001 _Legislative control _Operational control (waste, atmosphere, water) _Liability control _Cost control

MA Dept Head of stores

Enviroment Management model in stores

Training

Enviroment indicators system

Enviromental Representatives

Enviromental Mngmnt Systems certified in accordance with UNE ISO 14001 _Legislative control _Operational control (waste, atmosphere, water) _Liability control _Cost control

1. We undertake to consider the environment factor when planning and developing our activities and those of our business partners, encouraging the environmental awareness of our staff, suppliers and society in general. 2. We undertake to fulfil the environmental regulations that apply to our activities, as well as any other obligations laid down. We will endeavour to prevent pollution and reduce the environmental impact of our activities to the minimum. 3. We work towards continuously improving our Management System, thereby increasing its efficiency and ensuring a more efficient consumption of resources. 4. We undertake to inform all of our employees and society about this policy, establishing a fluid communication policy with the authorities, local communities and agencies.

These principles apply to all of Inditex’s companies and work centres, being established under an Environmental Management System in accordance with the ISO 14001 standard at the Inditex’s head office, logistics centre and factory in Arteixo, and in the factories in Narón and Ferrol, all in A Coruña; as well as in the head offices and logistics centres of Zara, Zara Home and Kiddy´s Class chains in Arteixo; Pull and Bear in Narón; Massimo Dutti, Bershka, Oysho and Kettering in Tordera; Stradivarius in Cabrianes and in the Plataforma Europa in Zaragoza, all of which are in Spain.

Action and improvement plans

José María Castellano Ríos Deputy Chairman

Sustainability Report INDITEX ENVIRONMENT 69

09_2 Strategic plan 2002-2005

Complying with the goal set in 2003, we have implanted the Sustainable Store Management Model, carrying out internal environmental audits in 40% of our stores in Spain, and a further series of evaluations in all of the countries in which we operate.

We have advanced in standardizing our Environmental Management System, anticipating our objectives for 2005 by incorporating in this financial year all of our industrial centres, company head offices and logistics centres. * Audits in all centres, factories and logistics centres. * Audits in supplier centres. * Pilot audit in stores

2. Audit plan for fulfilment of environmental legislation in all centres

2001

2002

1. Develop a plan to control environmental parameters and follow-up indicators

2003

2. Encourage external communication with parties involved

Audits in all stores in Spain

2004

2005

Environmental control of all parameters waste, emissions, GHG*, dumping, energy consumption...) in all centres (Dec.2004)

2001

Indicators for all stores in Spain

2002

2003

1. Promote, raise awareness and provide internal training on sustainability

2004

Development of Internal Communication Plan with support of Sustainable Mascot

2005

Traditional Training Plan for store employees in Spain

Lines of action

Strategies

Meetings with local administrations in towns where Inditex is present

Evaluate, control, and guarantee fulfilment of environmental legislation in all work centres

Introduce management practices that allow improved environmental behaviour and increased energy efficiency

Strategies

Transmit internally and externally Inditexâ&#x20AC;&#x2122;s environmental commitment and effort, involving all staff in this commitment

Incorporate the environment factor in all strategies and actions

Lines of action

Renewable energy plan in Plataforma Europa

2005

Improved Environmental Management System adapted to new ISO 14001:2004 standard

1. Assess replacement alternatives for raw energy material. Renewable energy sources

Breaking link between business growth and waste generation

2004

2003

Oeko-tex certificate for all clothing for children between 0 - 16 years

2002

2001

Strategies

Lines of action

Product Life Cycle Assessment PLan to integrate the environment factor

1. Implement a global sustainability indicators system

Management of Chain Indicators in corporate Intranet

Software for sustainability indicators management

2005

2. Eco-efficiency studies in processes and work centres

2004

2003

Integrate environment factor in distribution process of logistics suppliers

2002

2001

2. Integrate economic, environmental and social factors, and develop environmental and sustainability reports

We offer training and awareness programmes for all of our working teams at our head offices, logistical centres and factories in environmental issues. (*) GHG= Green House Gases

Sustainability Report INDITEX ENVIRONMENT 71

09_3 Environmental management

In Anticipating the goal set for 2005, we have integrated all the industrial centres, chain head offices and logistics centres into the Environmental Management System, all of them achieving the ISO 14001 certificate (the Plataforma Europa in Zaragoza and the fashion designer company Kettering in Tordera achieved this in 2004). Our aim for 2005 is to adapt the entire System to the ISO 14001:2004 standard. This will guarantee that 100% of our management, manufacturing and distribution processes are carried out with a high level of environmental control.

During 2004 we incorporated the certification system in Plataforma Europa and Kettering offering compliance with the ISO 1400 standard, guaranteeing the sustainable development of our activity in 100% of our working processes.

Environmental Requirements Evaluation of Logistics Suppliers: _Environmental Commitment and Policy _Types and characteristics of methods of transport _Atmospheric emission levels, especially GHG _Management of waste generated during maintenance operations

100%

suppliers fulfil environmental requirements, especially control of GHG

100% Logistics Centres with ISO 14001 100% of stores comply with the Enviromental Management Model

sites With suppliers All of our internal and external suppliers have agreed to follow the Code of Conduct that guarantees good environmental practices.

24% product certified with

We optimize to the maximum the capacity and routes used by our transportation systems, thereby reducing enviromental impact

Estimate of GHG emissions by air transportation suppliers1,019 T CO2 Estimate of GHG emissions by road transporters suppliers

12,319 T CO2 50,000,000 hangers

Environmental Requirements Evaluation Industrial Subcontractors: _Environmental Commitment and Policy _Atmospheric emission levels, especially GHG

All of our internal and external suppliers have agreed to follow the Code of Conduct that guarantees good environmental practices.

100% of suppliers fulfil environmental

legislation and good practice, by signing the Code of Conduct for External Manufactures and Workshops

_Management of waste generated during maintenance operations

Oeko-tex ( 0 -16 years)

training With the aim of encouraging participation and awareness of employees, we have designed a sustainable mascot that will be used to boost all of Inditex’s sustainable initiatives, both those that the company promotes and those promoted by the employees. Its name “Grindi” is a combination of green and Inditex, and it was chosen by holding an international competition for all employees through the company’s magazine. The training programs have continued developing, with the result that 100% of the staff of head offices, logistics centres and factories have been trained on environmental issues.

Sustainable management criteria are applied to stages of the cycle, including the introduction of the ISO 14001 standard in all logistics centres, the evaluation of suppliers and their commitment to the environment, and the proper environmental management of store employees. All the above is based on an intense awareness campaign and training.

distribution

reused

product

In line with our commitment to protect the environment and the health of our customers, we have continued to make progress on the Oeko-tex Standard 100 certificate program for all clothing worn by children aged 2 to 16 years (this was guaranteed for 02 years in 2003), guaranteeing this for 24% of our products by the end of 2004.

Our textile distribution cycle covers all the processes from when we receive the garments from the manufacturers at our logistics centres, including distribution to our stores via aeroplane or lorry, and the subsequent management of returned projects from the stores, also via lorry.

As planned, during 2004 the Sustainable Store Management Model was introduced, which is based on the four lines of action set in 2003 with the following results: _Legislative evaluation has been established at a local and regional level for 75% of stores in Spain. _The legal requirements regarding waste, containers and packaging have been evaluated for 100% of the countries in which we have a presence. _Specific Environmental Management and Occupational Health and Safety training manuals have been developed to train store employees in Spain using the traditional method, which represents 55% of the Group’s stores. _Internal environmental audits have been conducted on 40% of stores in Spain, assessing energy and water consumption indicators and integrating these in the Sustainability Indicators System. _A new waste collection program has been introduced in stores, which will improve the control of waste management and generation, previously through municipal collection systems.

stores All of the store staff working in Spain have received specific training in relation to Environmental Management and Occupational Health and Safety

Sustainability Report INDITEX ENVIRONMENT 73

Comparativo de evolución anual de emisiones atmosféricas en centros fabriles y logísticos

We have implanted the Indicators System in all of our stores

Comparison of annual evolution of air emissions in factories and logistics centres Absolute data of emissions in t/year

Relative data in terms of no. of items manufactured

T/year

09_4 Indicators System

500 441.895

On closing FY2003, the Indicators System has given us data from the past three-year period which show the trends taking place in the field of environmental management.

marketing), except where waste is concerned, in which data is only given on waste generation in head offices, logistics centres and factories (what we call industrial centres).

0.002

The indicators show data that reflect our overall activity (manufacture, distribution and in-store

As planned in 2004, the indicators system was introduced in the stores of all our chains. This has given us data on the energy and water consumption of each of these. As far as waste is concerned, the complex nature of controlling it has forced us to conduct a pilot waste management and collection experiment in 50 stores in Spain. The results have been successful. In 2005, this plan will be extended to the 1,349 stores in Spain, which will give us direct waste management data for 55% of Inditex’s stores world-wide.

0.00187

SO2

SO2 300

0.00114

NOx

0.001

176.145 131.51

0.00007

0.00004

0.00003

0 2001

2002

2003

0.00035 0.00019 0.00001

0.00034

4.378

10.189

0.00063

0.0005

69.22 10.887

NOx

0.00105

0.00072

123.569 97.179

100 14.46

0.0015

250.149 208.48

200

As in past years, we continue to present the data in relative (*) (the number of items put on the market) and absolute terms, since we believe that this gives a better picture of the real situation. Given the growth in our production, the relative indicators allow us to assess our environmental efficiency, showing whether we reduce our environmental impact for each item put on the market.

T.year/ no. items

400

2001

2004

2002

2003

2004

Number of garments commercialized 181,935,742

236,201,643

278,976,771 2001 2002 347,596,458 2003 2004

Air emissions indicators Air emissions are controlled according to the source (our own or external) and our ability to control generation thereof. We carry out a thorough control and a minimisation and energy efficiency plan for our sources (cogeneration plants and boilers for our factories and logistics centres). This includes

Greenhouse gas emissions (GGE) using renewable energy sources which allow us to considerably reduce our emission levels. At present, the electricity system does not enable us to control external sources (electricity network). We are therefore channelling all of our efforts into improving the energy efficiency of our facilities, especially our stores.

As far as controlling and generating GGEs is concerned, we have made progress on the accurate calculation both of direct and indirect emissions, estimating which are generated by the transport activities of our logistics suppliers. We have included the estimate of the emissions

*Industrial centres: 226,660

250,000 200,000 T/year

T CO2

Concept

CO2 Emissions

150,000

Natural gas consumption

15,127

Propane consumption

Gas-oil consumption

5,677

Electricity consumption

10,903

Total for industrial centres

31,733

71,000

100,000

*Transport: 13,338

Emissions caused by transport

13,338

Total for transport

13,338

50,000

The energy efficiency and emissions control plan has allowed us to reduce emissions linked to combustion processes, both in absolute and relative terms.

that could be caused by electricity consumption in stores. The reduction of emissions in factories is based on increased energy efficiency and the considerable increase in generating our own renewable energy sources.

a Tr

44,540

31,733

2003

*Stores: Electricity consumption in stores

226,660

Total for stores

226,660

TOTAL

271,371

tre

ria

2004

2002

(*) The ratio has been calculated by using the following formula: Ratio= (absolute value of the year/number of garments put on the market during the year) x 1000. The value used in the ratios are: Number of garments commercialized: 2001: 181,935,742, 2002: 236,201,643, 2003: 278,976,771, 2004: 347,596,458

Includes head office, and all of Inditex’s factories: (Choolet, Denllo, Fios, Glencare, Goa, Hampton, Indipunt, Jema, Kenner, Nikole, Samlor, Sircio, Stear, Trisko, Zintura, Inditex Cogeneración) and the head offices and logistics centres of Zara, Zara Home, Kiddy´s Class, Pull and Bear, Bershka, Oysho, Massimo Dutti and Stradivarius. All emission sources undergo strict and frequent controls by an authorised inspection company, each in accordance with the parameters established by legislation in force. The data shown here has been taken from the analysis of these reports.

Sustainability Report INDITEX ENVIRONMENT 75

Comparison of annual urban or similar waste generation

Despite the growth in the last three years, with the opening of 960 stores and 17 new countries, increasing our number of garments by 72.5%, the creation of industrial waste has increased by 65%

Relative data in terms of number of items manufactured

Absolute data 1,293,840 589,465 393,337

2004

3.72 1.70 1.13

2004 5,191,590

14.93 5.50

1,913,205

4.78

1,334,751 265,012 339,040

2003

0.94 1.21

2003

7.97 7.39

2,224,782 2,063,764

6.40

1,513,430 192,050 189,400

2002

0.81 0.80

2002

10.46 10.04

2,472,221 2,373,420

12.90

2,347,056

Waste indicators

2001

124,356 41,307

2001

0.68 0.22 8.05 8.98

1,465,469 1,635,200

The significant increase in waste generation shown by the graphs is explained by Inditexâ&#x20AC;&#x2122;s considerable growth in 2004 and above all since the Plataforma Europa logistics centre has been working at full capacity. A high volume of products from factories and workshops abroad is received and distributed at this centre, which generates large amounts of cardboard and plastic.

sustained growth over the last three years, which has even allowed us to break the link between business growth and waste generation. This proves a considerable effort in terms of control, efficiency and recycling, based on a significant reduction in generating other types of waste (hazardous, urban, etc).

Other urban waste

Wood

Cardboard and paper

Plastic

Kg/Mil items

Textile waste

The waste is classified in accordance with the European Waste Catalogue (EWC) and its transposition into national and regional legislation.

Comparison of annual hazardous waste generation

Our work over the years to come will be focussed on maintaining this sustainable growth.

In spite of this growth as a result of increased activity, we have managed to maintain

800,000 1,600,000 2,400,000 3,200,000 4,000,000 4,800,000 Kg

Comparison of annual hazardous waste generation

Kg 16,000

Evolution of industrial waste generation

14,000

Evolution of industrial waste generation

12,000

10,000

9,000,000

2001

8,000

8,000,000

Total

6,000

7,000,000

Cardboard and paper

4,000

Textile waste

2,000

6,000,000

2002 2004 2002 2001

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Wood 3,000,000

rie s

Plastic 4,000,000

at er ia l

Other urban waste

5,000,000

2003 2004

2003

RPs

2,000,000

Destination of waste according to type and treatment type 1,000,000

The last stage of our Waste Plan is recycling, as shown in the following graph.

0 Dec. 2001

Dec. 2002

Dec. 2003

Dec. 2004 55.25% 55.25%

Comparison of garments put on the market with total industrial waste generated

Comparison of items put on the market with total industrial waste generated

24.6 % Total garments put on market

Other urban waste sent to treatment plant and

4.19% 24.6 %

compost Other urban waste sent to treatment plant and compost

4.19%

18.1%

Total garments put on market

29.8%

Wood sent to recycling plant

18.1%

Total Waste from industrial centres

Wood sent to recycling plant

29.8%

Plastic sent to recycling plant

Total Waste from industrial centres

Plastic sent to recycling plant

50.3% Three-year increase of garments: 72.5%

16.7%

6.27% 6.27% 50.3% Three-year increase of garments: 72.5%

Three-year increase of waste: 65%

16.7%

and paperplant sent to recycling plant Cardboard andCardboard paper sent to recycling

Textile waste sent Textile waste sent to recycling plant to recycling plant

Three-year increase of waste: 65%

Dec. 2001

Dec. 2002

Dec. 2003

Hazardous waste sent to authorised waste Hazardous waste sent to authorised waste treatment planttreatment plant

13.77%

Dec. 2004 Dec. 2001

Dec. 2002

Dec. 2003

13.77% Dec. 2004 0.16%

0.16% 20.36%

20.36%

Sustainability Report INDITEX ENVIRONMENT 77

09_5 Relationships with interest groups

Energy consumption indicators Annual evolution of energy consumption (includes factories and stores world-side)

The increased use of our own renewable energy sources has allowed us to reduce energy generated from fossil fuels.

The 2005 plan envisages new renewable energy facilities that will make it possible to continue with this trend.

Renewable energy

2002

2003

Kwh

500,000,000 400,000,000 300,000,000 200,000,000 100,000,000 0

1,803,000 kwh

2001

Official communication channels have been established for all these groups, in order to answer their demands or queries, as shown at the end of this Sustainability Report.

Electricity (public network)

4,278,489 kwh

492,738,250 447,267,982 295,574,280 Table I: Environmental aspects according to interest group

233,007,223

Shareholders

2001

2004

The analysis of our environmental impact with interest groups has enabled us to identify and meet their main environmental needs.

2002

2003

2004

Control of environment risks of the business

Administration Cogeneration gas consumption Tep 8,000 6,000

4,000

10,000 5,684

5,517

6,472

Customers

7,650 5,936 3,728

4,000

2,000

1,848

2,000

0 2001

8,000 6,000

2,273

Fulfilment of environmental legislation

Gas-oil consumption

Tep

0 2002

2003

2004

2001

2002

2003

Lack of local environmental problems Continuous improvement in eco-efficiency Fulfilment of regulations and standards for environmental quality of product

2004

Community Control and reduction of impacts locally and on nearby towns Application of environmental criteria to suppliers

Water consumption and use In the case of factories and logistics centres, the waste consumption data are taken from direct consumption measurements and from supplier bills (public supply networks). In the case of stores, the data is obtained by sampling supplier bills for a group of stores and extrapolating them to the total stores.

Following the considerable effort to optimise consumption in 2003, work in 2004 consisted of consolidating the practices established.

Employees Facilities and training to fulfil the commitment to the environment

Suppliers Defining environmental criteria Targets for their actions and technical support

115,016 m3 115,884 m3 161,790 m3

2004 2003 2002

Wastewater from all of our sites is dumped into sewage systems, with the relevant administrative authorisation in all cases. Frequent analyses are conducted to guarantee

compliance with applicable legislation, not requiring specific treatment processes in any case due to the low level of pollution.

Sustainability Report INDITEX ENVIRONMENT 79

Our activity contributes towards the social-economic development of the communities we interact with. We open new work centres, generate business opportunities and invest in development plans.

10_0 Economy

10_1 10_2 10_3 10_4 10_5 10_6 10_7

Basic scope International expansion Segmented information Inditex format by format Corporate cash flow Indicators of economic performance Extra indicators

Sustainability Report INDITEX ECONOMY 81

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10_2 International expansion

In 2004, Inditex kept up the expansion of its sales formats both in terms of the number of establishments and the number of markets in which it is present. At the year-end, Inditex had 2,244 stores in 56 countries, 322 more than a year earlier. The increase in turnover rose to 23% and net profit increased by 41%. Like-forlike sales grew by 9%.

o Go

During 2004, Inditex’s first stores were opened in Morocco, Hong Kong, Hungary, Romania, Panama, Estonia, Latvia and Lithuania. The proportion of sales in franchised stores stayed at 10%.

2003

2004 Format Zara Kiddy's Class Pull and Bear Massimo Dutti Bershka Stradivarius Oysho Zara Home Total

Company-managed

Franchises

Total

Company-managed

Franchises

Total

649 129 333 228 295 183 102 62

74 – 38 98 7 44 2 –

723 129 371 326 302 227 104 62

567 103 314 199 247 154 74 26

59 – 36 98 6 37 2 –

626 103 350 297 253 191 76 26

1,981

263

2,244

1,684

238

1,922

Own and franchised stores

10_1 Basic scope With a view to projecting a faithful and clear image of the economic dimension of Inditex’s activities, this chapter of the 2004 Sustainability Report will describe Inditex main economic indicators. These indicators include the data relating to FY2004, as well as comparisons with previous financial years. As in previous years, the company’s cash-flow is also presented, prepared in accordance with the classification of the flows by interest group and by the financial nature thereof. Almost all of the data given is taken from Inditex’s consolidated financial statements, management report or Inditex books.

Financial evolution over recent years TACC Description

2004

2003

2002

2001

2000

04/00

* Results: Sales Interanual variation

5,670.4 23%

4,598.9 16%

3,974.0 22%

3,249.8 24%

2,614.7 28%

21%

EBITDA Interanual variation

1,239.7 42%

873.5 1%

868.1 23%

704.5 35%

521.5 27%

24%

EBIT Interanual variation

925.2 48%

627.0 -5%

659.5 27%

517.5 36%

379.9 28%

25%

Attributed net profit Interanual variation

628.1 41%

446.5 2%

438.1 29%

340.4 31%

259.2 27%

25%

Equity Interanual variation

2,502.7 19%

2,105.9 20%

1,761.3 19%

1,486.2 27%

1,170.9 31%

21%

Balance total Interanual variation

4,209.2 20%

3,510.4 16%

3,013.8 16%

2,588.6 23%

2,107.6 19%

19%

508.1

268.3

245.6

57.5

(50.6)

2,244

1,922

1,558

1,284

1,080

322

364

274

204

158

55%

54%

52%

11%

27%

23%

27%

26%

25%

* Balance:

Inditex’s 2004 annual accounts (from 1 February 2004 to 31 January 2005) have been prepared in accordance with the generally accepted accounting standards and principles in Spain and have been audited by KPMG, which issued a report without reservations that has been published together with these annual accounts and the consolidated management report in a separate document, entitled Inditex 2004 Annual Report.

Net financial position

Stores: Number of stores at year-end Net openings Number of stores with stores opened

Other information: % of sales in international stores Variation of like-for-like sales ROE ROCE Number of employees

40%

32%

41%

39%

34%

47,046

39,760

32,535

26,724

24,004

*millions of euros

Sustainability Report INDITEX ECONOMY 83

Country Andorra Arab Emirates Bahrain Belgium Cyprus Ireland Israel Jordan Kuwait Lebanon Malta Mexico Poland Portugal Qatar Saudia Arabia Spain

Franchised stores 3 16 3 16 10 1 25 5 11 7 5 17 7 39 4 26 34

Country

Franchised stores

Dominican Republic El Salvador Estonia Finland Holland Iceland Latvia Lithuania Luxembourg Malaysa Morocco Panama Roamnia Russia Singapore Slovakia Slovenia

1 1 1 3 1 1 1 1 1 3 2 1 2 4 3 1 2

TOTAL: 263

Sales in stores controlled by Inditex or franchised stores List of sales in own and franchised stored 2004 Format

Franchises 10 %

Zara

Zara remains the format with the highest international presence: almost 80% of its net openings in 2004 took place outside Spain, and international sales exceeded 65.8% of the total, the highest percentage out of all the chains. The following table shows the markets in which Zara has started its activity over recent years.

91%

92%

Kiddy's Class

100%

Pull and Bear

91%

Massimo Dutti

68%

32%

65%

35%

Bershka

98%

97%

Stradivarius

82%

18%

80%

20%

Oysho Zara Home Company or joint management 90 %

2003

Company-managed Franchise Company-managed Franchise

Total

98%

100%

90%

10%

90%

10%

New markets 2004

2003

2002 Companymanaged

2001

Companymanaged

Franchises

Companymanaged

Hong Kong

Morocco

Sweden

Russia

Italy

Finland

Holland

Hungary

Panama

Ireland

Malaysia

Switzerland

Malta

Luxembourg Czech Republic

Franchises

Romania

Slovenia

Singapore

Estonia

Jordan

Dominican Republic

Latvia

Companymanaged

2000

Franchises Iceland

Companymanaged

Franchises

Denmark

Andorra

Austria

Qatar

El Salvador

Lithuania 8 new countries

6 new countries

7 new countries

4 new countries

Sustainability Report INDITEX ECONOMY 85

Importance of each format in terms of turnover

10_3 Segmented information

Kiddy’s Class 2,1 % Pull and Bear 6.7 %

The different level of development of each of Inditex’s formats is represented both by their sales volume and their weighting in the Group, and by the level of internationalisation reached, as shown in the following tables and graphs.

Massimo Dutti 8.5 %

Bershka 9.1 % Zara 67.4 % Stradivarius 4.3 % Oysho 1.3 %

Zara Home 0.7 %

Sales by format Specific weighting

millions of euros 2003

Var % 04/03

2004

2003

3,819.6

3,219.6

19%

67.4%

70.0%

Kiddy’s Class

120.6

689.7

35%

2.1%

1.9%

Pull and Bear

378.9

287.9

32%

6.7%

6.3%

Massimo Dutt

48.3

388.9

24%

8.5%

Bershk

516.0

395.0

31%

9.1%

8.6%

Stradivarius

241.9

162.0

49%

4.3%

3.5%

Oysho

71.7

45.1

59%

1.3%

1.0%

Zara Home

40.4

10.6

279%

0.7%

0.2%

Sales total

5,670.4

4,598.9

100.0%

23%

Percentage of sales in international/national stores per chain 2004

All the formats have a clear international focus. The percentage of sales in stores in Spain and abroad of each format over the last two years is as follows:

10_3_1 Seasonal nature of business in 2004

Bershka

35.7

64.3

Stradivarius

15.4

84.6

Oysho

31.5

68.5

Zara Home

12.7

87.3

International

EBIT per quarter 03/04

Sales per quarter 03/04

National

32%

58.1

35%

41.9

34% 32%

53.9%

Massimo Dutti

16%

54.5%

69.8

14%

Total

30.2

20%

63.5% 13.4% 31.0% 40.9% 33.8% 16.6% 35.1% 8.5%

Pull and Bear

17%

65.8% 12.8% 30.2% 41.9% 35.7% 15.4% 31.5% 12.7%

87.2

30%

Zara Kiddy's Class Pull and Bear Massimo Dutti Bershka Stradivarius Oysho Zara Home

12.8

30%

2003

Kiddy's Class

28%

2004

34.2

27%

Format

65.8

22%

Percentage of sales in international stores

Zara

The percentage of sales and the year’s profit in each quarter of the year is not uniform. The seasonal nature of sales, due to the effect that climate has on sales habits, generates a higher proportion of sales and the majority of the year’s profit during the second half of the year. This second half (from 1 August to 31 January) coincides with the Autumn-Winter Season in the Northern Hemisphere where the vast majority of Inditex’s sales outlets are located.

21%

Zara

2004

21% 21%

Format

(%)

2004

2003

Sustainability Report INDITEX ECONOMY 87

Var Zara Net sales EBIT operation profit EBIT margin Stores ROCE (%)

(*) Antes de Fondo de Comercio

Massimo Dutti

04/03

3,819.6

3,219.6

19%

Net sales

647.8

476.1

36%

EBIT operation profit

17.0%

14.8%

723

626

38%

33%

EBIT margin 97

Var 04/03

481.3

388.9

24%

75.1

60.1

25%

15.6%

15.5%

Stores ROCE (%)

Pull and Bear

Kiddyâ&#x20AC;&#x2122;s Class

Var 04/03

378.9%

287.9

32%

EBIT operation profit

6.2

8.9

198%

14.8%

6.6%

371

350

44%

16%

Net sales EBIT operation profit EBIT margin Stores ROCE (%)

Net sales EBIT margin

ROCE (%)

89.7

35%

21.7

18.0

21%

18.0%

20.0%

129 61%

103

297 56%

80%

Inditex Net sales

10_4 Inditex format by format

EBIT operation profit

Data before botton of commerce

EBIT margin Stores ROCE (%)

EBIT operation profit EBIT margin Stores ROCE (%)

71.1

45.1

59%

EBIT operation profit

15.6

2.1

633%

21.8%

4.7%

EBIT margin Stores ROCE (%)

Net sales

104 52%

76 7%

EBIT operation profit EBIT margin

Stores ROCE (%)

322

n/a

ROCE (%)

253

Stores

302

EBIT margin

Stradivarius

1,922

40%

n/a

14.5%

Var 04/03

2,244

(4.5%)

16.0%

13.6%

0.8%

EBIT operation profit

48%

16.3%

279%

Net sales

44%

Oysho

23%

627.0

10.6

31%

57.3

46%

4,598.9

925.2

(O.5)

395.0

82.5

52%

5,670.4

0.3

516. 0

Var 04/03

40.4

Zara Home

Net sales

Var 04/03

Bershka

Var 04/03

120.6

Stores 21

326 50%

Var 04/03

241.9

162.0

49%

38.9

4.4

784%

16.1%

2.7%

227

191

43%

Sustainability Report INDITEX ECONOMY 89

10_5 Corporate cash flow Bearing in mind the targets of the cash flow generated during the year, we have established the companyâ&#x20AC;&#x2122;s cash flow over the last two years, as well as the variation between the two.

FY 2004*

FY 2003 *

Variation % 04/03

10_6 Economic indicators Net cash received for sale of products and services

5,674.2

4,601.5

23%

Flow received from investments made

14.4

11.8

22%

Cash received for sales of assets

18.8

16.3

15%

5,707.4

4,629.6

23%

Total value-added flow Distribution of value-added flow

Growth

Employee wages

821.4

678.2

21%

Tax payments

247.5

157.4

57%

Debt return

(22.3)

27.8

n.a.

Dividends paid out to shareholders

220.2

89.3

147%

Cash withheld for future growth

288.6

(19.6)

n.a.

2004

5,670.4

23%

2003

4,598.9

16%

3,974.0

2002 3,249.8

2001

External payments made for purchasing goods and raw materials

2,636.2

2,293.0

15%

External payments made for services rendered and investments

1,509.0

1,403.5

5,700.6

4,629.6

23%

24%

2,614.7

2000

22%

28%

*In million of euros

Sales indicators 10_6_1 Sales by geographical area

Distribution of value-added flow

Employee wages 14 %

Tax payments 4% Debt return 0% Dividends paid out to shareholders 4% External payments made for services rendered and investments 26 %

2004

The strategy to strengthen the Groupâ&#x20AC;&#x2122;s commercial presence in European markets has led to an increase in the percentage that this continent represents of the overall sales. This has risen to 82.8% of the total, compared to 81.6% in 2003. The reduction in the percentage of the American continent is due to the weakening of the currencies in these countries during FY2004.

America 11.7%

Rest of world 6.7%

America 10.5%

2004

2003

Spain 46.1%

Cash withheld for future growth 5% Rest of Europe 37.3% External payments made for purchasing goods and raw materials 46 % Spain 45.5%

Rest of Europe 35.5%

Sustainability Report INDITEX ECONOMY 91

Rest of world 1 %

America 6 %

10_6_2 Cost of sales and gross margin Percentage of consolidated net sales 2004

53.5%

2003

50.1%

2002

51.5%

2001

51.9%

2000

51.2%

10_6_4 Geographical distribution of staff in 2004 2004

Spain 61 %

Rest of Europe 32%

* In million of euros

Descrition

2004

2003

Var% 04/03

Fixed and variable salaires

649.1

532.0

22.0%

Inditex national insurance contributions

172.3

146.2

17.9%

Staff costs total

821.4

678.2

21.1%

*Million of euros

10_6_3 Collection and payment periods The following tables show the average period of collection from customers and payment to suppliers. The reduced collection period is due to most of the sales being made in company-managed stores in which customers pay by cash or credit cards. The payment periods are in line with the standards for the industry and have not undergone significant changes over recent years.

10_6_5 Providers of capital Description Final balance of debtors for sales and services Turnover Debtors turnover from sales Average collection period (days)

Description Final balance of trade creditors

2004

2003

2002

2001

2000

134.8

129.5

97.7

95.9

71.0

5,670.4

4,598.9

3,974.0

3,249.8

2,614.7

42.0

35.5

40.7

33.9

36.8

2004

2003

2002

2001

2000

784.2

652.9

510.3

426.3

322.9

Sales cost for year

2,636.2

2,293.0

1,926.2

1,563.1

1,277.0

Operating costs for year

1,794.5

1,432.5

1,179.7

982.3

816.2

Total costs generated by trade creditors

4,430.7

3,725.5

3,105.8

2,545.3

2,093.2

5.65

5.71

6.09

5.97

6.5

Supplier balance costs Average collection period (days)

At the last two year-ends, Inditex had a positive new cash position, that is, the balance in its favour was higher than the debts held with financial institutions. However, Inditex has credit transactions granted by the financial system, although many of the authorised limits were not available. With regard to the total risk allowed as at 31 January 2005, the main providers of Inditexâ&#x20AC;&#x2122;s capital are:

Institution

% of risk allowed

SPAIN

25%

SCH

SPAIN

18%

BNP

FRANCE

SPAIN

HOLLAND

CAIXA GALICIA FORTIS

Nationality

BBVA

Sustainability Report INDITEX ECONOMY 93

10_7 Extra indicators 10_6_6 Reserve variations

10_7_1 Like-for-like sales

The following table shows the variation of Inditexâ&#x20AC;&#x2122;s reserves (consolidated group) during FY2004:

Increase of like-for-like sales 2004 First half Second half

Item

Balance 01/02/2004

Paid-in capital Unrestricted reserves of parent company Restritec reserves of parent company Revaluation reserves

Additions

Reductions

Transfers

Dividends

Balance31/01/2005

20,379

852,582

(11,550)

841,032

18,945

1,692

799,755

4,747

(1,470)

238,999

1,042,031

Full year

2003

2002

2001

2000

12%

13%

10%

(2%)

10%

11%

Reserves in consolidated companies due to global and proportional integration Reserves in companies accounted for by the equity method Conversion differences

(540)

(129)

(75)

(486)

(126,817)

3,893

(20,518)

0,911

(142,531)

FY2003 resuts

446,451

(228,285)

(218,166)

FY2004 resuts

628,130

2,012,447

636,899

(21,988)

(218,166)

2,409,192

Total

10_7_2 Stock turnover 10_6_7 Taxes paid

Description Sales cost

Tax on profit accrued in 2004

Rest of world 3%

2004

2003

2002

2001

2000

2,636.2

2,293.0

1,926.2

1,563.1

1,277.0

Initial stock

486.4

382.4

353.8

245.0

188.5

Final stock

514.0

486.4

382.4

353.8

245.0

Average stock

500.2

434.4

368.1

299.4

216.7

Turnover (times)

5.3

5.2

5.9

Turnover (days)

America 7%

10_7_3 Working capital Rest of Europe 22%

2004

Spain 68 %

In 2004, as in previous years, Inditex had a negative working capital, as a result of the

periods of lower sales collections compared to periods of payment to suppliers.

million of euros 2004

2003

Stock

514.0

486.4

Debtors

282.5

328.9

Accurued expenses

12.3

9.3

Short-term creditors

(1,208.1)

(1,011.2)

(399.3)

(186.6)

Working capital

Sustainability Report INDITEX ECONOMY 95

We believe in transparency as a strategic management and good governance tool. We encourage shareholders to take part in the organisationâ&#x20AC;&#x2122;s decisions, under the one-share one-vote equality principle. The removal of the minimum share requirement to attend General Meetings was approved by Inditex at its General Meeting in 2004.

11_0 Good Governance

11_1 Corporate Governance Structure 11_2 Risk Management

Sustainability Report INDITEX GOOD GOVERNANCE 97

This section summarises the information contained in the Corporate Governance Report, which is published jointly with this Sustainability Report.

m er s

11_1 Corporate Governance structure us t o

Board of Directors

4 Employees |

7 Environment

l ie up p

| rs

no Eco

ie ty

c So

go ve rn

rofi

1 Business p

le |

a Sh

ho ld

9th June 2005

The Corporate Governance Report, which received Board approval on 9th June 2005, was prepared following the guidelines and requirements contained in the texts gradually introduced by the good governance rulings

Amancio Ortega Gaona

Carlos Espinosa de los Monteros Bernaldo de Quirós

Domanial Executive Director

Founding member and Chairman of Inditex. He incorporated Confecciones Goa, S.A in 1972 and created Zara España, S.A. in 1975. He is 68 years old.

José María Castellano Ríos

Executive Director

He is the Deputy Chairman of the Board and its Executive Committee, and CEO of Inditex since 1997. He has a PhD in Economics and Business Studies, and is a Professor of Financial Economics and Accounting at La Coruña Economics and Business Studies Faculty and a Scholar at the Royal Academy of Economics and Business studies. He is currently a Member of the Board of Fadesa, S.A. and La Voz de Galicia, S.A. He is 57 years old.

Irene Ruth Miller

Independent Director

She has been an Independent Director since April 2001. She has a Science Degree and a Master’s Degree in Chemistry. In 1993 she was appointed Financial Director of Barnes & Noble, where she also served as Executive Deputy Chairman and Board Member. She is currently the CEO of Akim, Inc. She is 53 years old.

He has been an Independent Director since May 1997. He has a Degree in Law and Business Studies, and is a State Economist and Sales Engineer (Técnico Comercial y Economista del Estado). He has an MBA from Northwestern University. He has been Chairman of Iberia and AVIACO. He is currently Chairman of the Board of Daimler Chrysler España, Fraternidad – Muprespa and González Byass, S.A., and Board Member of Acciona, S.A. He is 61 years old.

Juan Manuel Urgoiti López de Ocaña GARTLER, S.L.

• Spanish Law 44/2002 of 22 November 2002 (Financial Law - Ley Financiera), • Spanish Law 26/2003 of 17 July 2003 (Transparency Law - Ley de Transparencia) • Order ECO/3722/2003 of 26 December 2003 and Circular 1/2004 of 17 March 2004 of the Spanish

Pablo Isla Álvarez de Tejera

Independent Director

He has been an Independent Director since January 1993. He has a Degree in Law. He is currently President of the Banco Gallego bank, Deputy Chairman of Acciona, S.A., Board Member of Necso, S.A. and member of Citigroup Global Markets’ European Advisory Council. He is 65 years old.

Domanial Director

Represented by Flora Pérez Marcote

issued in our legal system and business culture: • Olivencia Commission and Aldama Report

Independent Director

Executive Director José Luis Vázquez Mariño

He has been Chief Executive Officer of Inditex since June 2005. He was appointed by the Board of Directors by cooptation to fill the vacancy left by independent Director Fred Langhammer, who resigned from his Board Member position on 8th June 2005. He has a Degree in Law and is a legal representative of the State. He was Chairman of the Board and Joint Chairman of the Altadis Group from July 2000 to May 2005. He is 41 years old.

National Securities Market Commission (Comisión

Francisco Luzón López

Independent Director

He has been an Independent Director since March 2005. He was appointed director by the Board of Directors, by cooptation, to fill the vacancy left by Executive Director Juan Carlos Rodríguez Cebrián, who resigned from his position as Board Member on 11th February 2005. He has a degree in Economics and Business Studies and is currently a Board Member of the Banco Pastor bank and La Voz de Galicia, S.A. He is 60 yeas old.

He has been an Independent Director since February 1997. He has a degree in Economics and Business Studies. He was President of the Banco Exterior de España bank from 1988 to 1996, and is currently in charge of the Banco Santander Central Hispano bank’s Latin America area. He is 57 years old.

Nacional del Mercado de Valores, CNMV), implementing the above mentioned Transparency Law. The Report is being released into the market due to its relevant fact status, following notification to the CNMV in accordance with the provisions of article 82 of Spanish Law 24/1988 of 28 July 1988 on the Securities Market

Antonio Abril Abadín

Executive Director

He has been General Secretary of the Board since January 1993, and of the Executive Committee since its creation. He has been a director since December 2002. He has a Degree in Law and is a legal representative of the State. He joined Inditex as Manager of the Legal Department in 1989. He is currently a Member of the Board of Banco Gallego, S.A. He is 47 years old.

Definitions of the various categories of Director:

Executive Directors: They perform management responsibility tasks within the Company.

Domanial Directors: They are the holders or representatives of the holders of significant shareholdings in the Company’s share capital.

Independent Directors: Prestigious professionals with no links to the executive team or to significant shareholders, who meet the necessary conditions to ensure their impartiality and objectivity.

Members:

10 Meetings 2004:

(Ley del Mercado de Valores). The Report may be read on the Inditex corporate website at http://www.inditex.com, among other places.

Members of the Committees and their duties

Inditex’s Corporate Governance practices are included

9th June 2005

Nominations and Remuneration Committee Members

Audit and Control Committee

Office

and regulated in detail through the company's various regulatory instruments: the Company’s Articles of

Members

Executive Committee

Association, Board and General Board of Shareholders’ Regulations, and the Internal Rules of Conduct relating to Securities Markets. In addition, Inditex has created a Social Council which will be the company’s advisory body for Corporate Social Responsibility issues. Its By-Law received Board approval in December 2002. Inditex also has an Ethical Code of Conduct for the Group, which has also received Board approval. The above company rules have been amended several times to adapt them to corporate governance recommendations and conclusions and to incorporate them into the new transparency, information and investment protection obligations introduced by the Financial and Transparency Laws and their implementing

Members

Office

Amancio Ortega Gaona Chairman José María Castellano Ríos Deputy Chairman Pablo Isla Álvarez de Tejera* Board Member Antonio Abril Abadín Board Member Secretary Carlos Espinosa de los Monteros Bernaldo de Quirós Board Member Francisco Luzón López Board Member Juan Manuel Urgoiti López de Ocaña Board Member José Luis Vázquez Mariño* Board Member Duties: It has all the Board’s powers save for those which cannot be delegated either by law or under the Articles of Association and those which are necessary for the responsible exercise of the Board’s general supervisory function.

regulations.

Members::

8 Meetings 2004:

Francisco Luzón López Carlos Espinosa de los Monteros Bernaldo de Quirós Irene Ruth Miller Juan Manuel Urgoiti López de Ocaña José Luis Vázquez Mariño*

Office Chairman Board Member Board Member Board Member Board Member

Antonio Abril Abadín acts as a Non-Audit and Control Committee Member Secretary.

Duties: • To report at General Meetings on any issues raised by shareholders at such meetings on matters concerning them. • To propose to the Board the appointment of the external financial auditors who will check the annual accounts. Such appointments are then submitted to a vote at a General Meeting of Shareholders. • To supervise the internal audit services. • To be familiar with the financial information process and the Company’s internal control systems.

Members::

5 Meetings 2004:

Carlos Espinosa de los Monteros Bernaldo de Quirós Francisco Luzón López Irene Ruth Miller Juan Manuel Urgoiti López de Ocaña José Luis Vázquez Mariño*

Chairman Board Member Board Member Board Member Board Member

Antonio Abril Abadín acts as a Non-Appointments and Remuneration Committee Member Secretary.

Duties: • To formulate appointment proposals for Board Members and to internal offices of the Board of Directors. • To propose to the Board possible members for each Committee. • To formulate the criteria to be followed for selecting the Company’s senior managers, and to inform of the appointment or removal of such managers. • To inform the Board, on an annual basis, of the performance assessment and remuneration of the Company’s senior managers and directors, and particularly of the CEO.

Members::

Meetings 2004:

(*) since 9th June 2005

Sustainability Report INDITEX GOOD GOVERNANCE 99

Risk map

These pages contain a brief summary of the strategic and operational risks, and of the main action plans designed to reduce their potential impact, as detailed in the 2004 Corporate Governance Report.

INTERNAL

EXTERNAL

Strategic

11_2 Risk Management It includes details of the most relevant risks, specifying the assessment and control systems set up to mitigate their potential impact:

1 Business environment 2 Regulations 3 Image and reputation

•

4 Human resources 5 Operations 6 Financial 7 Information for decision making 8 Technology and information systems 9 Governance and management

• •

external

internal

1 Business environment:

4 Human Resources:

Risks caused by external factors related to the Group’s activities.

Lack of staff motivation and loyalty, or excessive staff turnover.

The impact related to the Group’s potential inability to adapt to the environment/market in which it operates, and to the Group's eventual inability to keep up with, and respond to, the evolution of its objective market. This involves making decisions to enter new markets and countries and to launch new business lines, which helps spread the risk.

Risks derived from inappropriate human resource flexibility, an inadequate working environment and excessive reliance on key personnel.

Operational

•

• •

• • • •

• •

Risk management in the Inditex Group is based on the following principles: _ it is an instrument aimed at providing reasonable security in the achievement of the Group’s aims _ it is the responsibility of each and every one of the Organisation’s members _ it is an integrated system which focuses control activities on the prevention of relevant risks The identification and assessment of the Group’s risks is represented on a "risk map”.

Risk is reduced by carrying out a feasibility analysis in each new market. The business model also increases the effectiveness and efficiency of the existing markets and business lines, supplementing growth with the growth of the current business.

In financial year 2004 we continued making progress in this process. The Inditex “risk map” was updated and a new risk classification system was defined. The distinction between strategic and operational risks has been kept in this new classification system.

2 Regulations:

The Human Resources Department is continually selecting and recruiting new staff. It has implemented specific systems to

reconcile employee performance quality with job exchangeability. Loyalty programmes and training are examples of actions which prevent these risks.

5 Operations: Basic business activities, from designing the idea to selling the finished product in shops. Examples of this include failing to hit the right design in collections, and bad supply management.

Inditex reduces its exposure to this risk by means of a manufacture and supply system which ensures reasonable flexibility of response to unforeseen changes in demand. This requires a high turnover of the finished product. Before each campaign, the different Departments set the maximum initial supply levels twice a week (in the case of Zara) shop orders.

Compliance with the various laws and regulations. The diversity of existing legal systems and the complexity involved in managing multiple legal realities simultaneously. The Legal, Tax and Employment departments coordinate with the various managers and external legal advisors of each country or geographic area. The Corporate Responsibility Department carries out social audits with independent professionals who master the local language and local employment and environmental law.

6 Financial: Monetary asset management and administration.

7 Decision-making information: Adequate information at all levels.

Although these risks are relatively insignificant, Inditex regularly reviews the management information provided to the various managers.

8 Technology and information systems: 3 Imagen y reputación:

Technical infrastructure with effective information management.

Direct influence on the way the Group’s customers, employees, shareholders and suppliers, and society in general, see the Group.

Risk of inadequate technology infrastructure. Technology system reliability is essential to the Group’s activities.

Potential breach of Corporate Governance and Social Responsibility issues. Breach of the Group’s ethical code would also involve a breach of Social Responsibility issues. The Corporate Communication Department is responsible for managing communications with third parties.

100

The IT Department keeps constant control of the systems' rationalisation and coherence.

9 Governance and management: This affects the Company’s governance This affects the Company’s governance. It includes significant risks such as the potential lack of adequate management and leadership. The management structure has been redesigned in order to be able to successfully respond to new scenarios. The

appointment policy is supervised by the Appointments and Remuneration Commission, which is comprised solely of independent directors.

Sustainability Report INDITEX GOOD GOVERNANCE 101

This Report has been produced according to the Reporting Guide GRI 2002 (www.globalreporting.org), as specified in the Independent Report prepared by SGS, June 2005.

12_0 Annexes

12_1 GRI Summary 12_2 Independent Report

102

Sustainability Report INDITEX ANNEXES 103

Pages

12_1 Summary of GRI Indicators Pages

Chapters

02_0

01_0

3.9 Basis for the identification and selection of stakeholders

8 and 9

02_0

3.10 Approaches to stakeholder’s consultation

17 and 18 25 41 63

04_2 05_2 07_2 08_5

3.11 Type of information generated by stakeholder consultations

17 and 18 25 41 63

04_2 05_2 07_2 08_5

3.12 Use of the information obtained

17 and 18 25 41 63

04_2 05_2 07_2 08_5

1.VISION AND STRATEGY 1.1 Statement of the organisation’s vision and strategy regarding its contribution to sustainable development

1.2 Chairman’s statement

Chapters

COMMITMENT WITH STAKEHOLDERS

2.PROFILE ORGANISATION´S PROFILE 2.1 Name of the reporting organisation

12 and 13

03_0

2.2 Main products and/or services

12 and 13

03_0

2.3 Operational structure of the organization

12 and 13

03_0

3.13 Explanation of whether and how the precautionary approach or principle addressed by the organisation

10_1

2.4 Description of the major divisions, operating companies, subsidiaries and joint ventures

12 and 13

03_0

3.14 Externally developed commitments or other voluntary initiatives that the organisation supports

56-62

08_3

10_2

3.15 Membership in business and industrial associations and / or national and international advocacy organisations

08_5

03_0

3.16 Policies for managing upstream and downstream impacts

47-55

08_1

3.17 Reporting organisation’s approach to managing indirect economic, environmental and social impacts resulting from its activities

4 6 40

01_0 02_0 07_3

3.18 Major decisions during the reporting period regarding the location of, or changes in, operations

N/A

3.19 Programmes and procedures pertaining to economic, environmental and social performance

91-95

10_6

10_1

74-78

09_4

01_0

07_2

02_0

10_1

02_0

68-72

09_0

40 and 41

07_2

12 and 13

03_0

82-89

10_1

84-86

10_3

10_6

EC.3 Costs of all goods, materials and services purchased

92 and 95

10_6

EC.4 Percentage of the contracts paid in accordance with agreed terms, excluding agreed penalty arrangements

10_6

EC.6 Distribution to providers of capital

10_6

EC.7 Increase / Decrease in retained earnings

10_6

EC.8 Total sum of taxes of all types paid, broken down by country

10_6

EC.9 Subsidies received, broken down by country EC.10 Donations to community, civil society or other groups, in cash and in kind donations, broken down per type of group

(3)

N/A

08_1

2.5 Countries in which the organisation’s operations are located

10_2

2.6 Nature of ownership; legal form

04_0

2.7 Nature of markets served

03_0

82 - 89

10_2

03_3

2.8 Scale of the reporting organisation 2.9 List of stakeholders, key attributes of each and relationship to the company

82 4 and 5 7 8 and 9

GLOBAL POLICIES AND MANAGEMENT SYSTEMS

3.20 Status of certification pertaining to economic, environmental management systems

SCOPE OF THE REPORT 2.10 Contact person(s) for matters related to the Report

Back flat

2.11 Reporting period for information provided

Front flat

2.12 Date of most recent previous Report

108

2.13 Boundaries of Report and any specific limitations on scope

Front flat

2.14 Significant changes in size, structure, ownership, products/services that have occurred since the previous Report

(1)

4. INDICATORS OF ECONOMIC PERFORMANCE 12_0

EC.1 Net sales N/A

2.15 Basis for reporting on joint Reports, partially owned subsidiaries and other situations that could affect comparability from period to period

102

2.16 Description of any re-statements of information provided in previous reports reasons

N/A

2.17 Decisions to not apply GRI principles in the preparation of the Report

102

12_0

2.18 Criteria used in the accounting of economic, environmental and social costs and benefits

10_0

40 and 41

07_2

09_1

N/A

01_0

102

12_0

2.21 Policy and current practice with regard to providing independent mechanisms for the verification of the Report

109

12_2

2.22 Means by which report users can obtain additional information

16 and 17

04_0

24 and 25

05_2

12_0

REPORT´S PROFILE

2.19 Changes with respect to previous years in the measurement methods 2.20 Policies and internal practices to guarantee the completeness and accuracy the information presented in the Report

CLIENTS

EC.2 Geographic breakdown of markets

SUPPLIERS

Back flat

3.GOVERNANCE STRUCTURE AND MANAGEMENT SYSTEMS

EMPLOYEES EC.5 Total salary costs broken down by country or region

CAPITAL SUPPLIERS

ADMINISTRATION

5. INDICATORS OF ENVIRONMENTAL PERFORMANCE

STRUCTURE AND GOVERNMENT

RAW MATERIALS

3.1 Governance structure and management systems

98 and 99

11_1

EN.1 Total raw material used other than water, by type

77 and 78

09_4

3.2 Percentage of the board of directors that are independent, executive directors

98 and 99

11_1

EN.2 Percentage of raw materials used which are wastes derived from sources external to the reporting organisation

09_4

3.3 Process for determining the expertise board members need to guide the strategic direction of the organisation in matters such as environmental and social opportunities risks

98 and 99

11_1

3.4 Board-level processes for overseeing the identification and management of economic, environmental and social opportunities and risks

09_4

11_1

EN.3 Direct energy use, segmented by primary sources

98 and 99

EN.4 Indirect energy use

09_4

EN.5 Total water use

09_4

(4)

N/A

3.5 Linkage between executive compensation and achievement of financial and financial goals

(2)

N/A

3.6 Organisational structure and key individual responsible for oversight, implementation and audit of economic, environmental and social policies

98 and 99

11-1

3.7 Mission and value statement, internally developed codes of conduct and policies relevant to economic, environmental and social performance and the status of implementation

4 6 and 7 36,40 and 41 69 98

01_0 02_0 07_0 09_1 11_1

16-19

04_0

3.8 Mechanisms for shareholders to provide recommendations to the Board of Directors

(1) Data on corporate acquisitions available in the 2004 Annual Report, edited jointly with this Sustainability Report for 2004 (2) Data available in the 2004 Corporate Governance Report,

ENERGY

WATER

BIODIVERSITY EN.6 Location and size of land owned, rented or managed in biodiversity-rich habitats EN.7 Analysis of the main impacts on biodiversity associated with activities or products in terrestrial, fresh water and marine environments

(3) Immaterial figure (4) See Sustainability Report for 2003, page 132

edited jointly with this Sustainability Report for 2004

104

Sustainability Report INDITEX ANEXOS 105

EMISSIONS, SPILLAGE AND WASTE

Pages

Chapters

EN.8 Green house gas emissions

09_4

EN.9 Use and emission of ozone-depleting substances

09_4

EN.10 NOx, SOx and other significant air emissions, by type

09_4

EN.12 Total amount of waste, broken down by type and destination

76 and 77

09_4

EN.12 Significant discharges to water, by type

N/A

EN.13 Significant spillage of chemicals, oils and fuels, expressed in total figures and volume

09_4

EN.14 Significant environmental impact of principal products and service

72 and 73

09_3

EN.15 Percentage of the weight of the products sold that is reclaimable at the end of the products’ useful life and percentage that is actually reclaimed

(5)

N/A

(6)

N/A

LA.1 Breakdown of workforce

28 and 29

06_1

LA.2 Net employment creation and average turnover broken down broken down by country

06_1

LA.3 Percentage of employees represented by trade unions broken down geographically or percentage of employees covered by collective bargaining agreements by countries

06_2

LA.4 Policy and procedures of information, consultation and negotiation with employees on the changes in the company’s operations

06_2

LA.5 Methods for registration and notification of occupational accidents and diseases

06_2

LA.6 Description of the joint committee on health and safety

06_2

LA.7 Absentee, accident and occupational injury and lost day rates and number of work-related fatalities

06_2

LA.8 Description of policies and programmes on HIV/AIDS

(7)

N/A

06_2

07_2

11_1

HR.1 List of policies and guidelines as regards human rights relevant to the operations

40 and 41

07_2

HR.2 Evidence that impacts on human rights are taken into consideration when investing or choosing suppliers

40 and 41

07_2

HR.3 List of the policies for evaluating the action on human rights in the supply chain.

40 and 41

07_2

No discrimination HR.4 List of the global policies dedicated to preventing all forms of discrimination in operations

40 and 41

07_2

40 and 41

07_2

40 and 41

07_2

40 and 41

07_2

(8)

N/A

(9)

N/A

(9)

N/A

PR.1 Description of the policy on customer health and safety during the use of products / services

09_3

PR.2 Description of policies and mechanisms for compliance referring to product information and labelling

(5)

N/A

(5)

N/A

12_2 Independent Report

PRODUCTS AND SERVICES

COMPLIANCE EN.16 Incidents of and fines associated with non-compliance with applicable international agreements and local regulations associated with environmental matters

6. INDICATORS OF SOCIAL PERFORMANCE WORK PRACTICES AND DECENT WORK Work

Relationship company / employees

Health and safety

Training and education LA.9 Average of hours of training per year per employee Diversity and opportunity LA.10 Description of equal opportunities policies and programmes

LA.11 Composition of senior management departments and corporate governance bodies including the female / male ratio or other indicators of diversity Strategy and management

Freedom of association and collective bargaining HR.5 Analysis on the policy of freedom of association and the extent of its application (apart from the local laws) Child labour HR.6 Presentation of the policy of rejection of child labour Forced and compulsory labour HR.7 Presentation of the policy of rejection of forced and compulsory labour SOCIETY Community SO.1 Description of policies to manage impacts on communities in the regions affected by the activities Corruption SO.2 Description of compliance policies as regards corruption and bribes, directed at both the organisation and employees Political contributions SO.3 Description of policy and management systems / procedures, and compliance mechanisms dedicated to political lobbying and contributions PRODUCT RESPONSIBILITY Health and safety of customers

Respect for intimacy PR.3 Description of policies and compliance mechanisms concerning customer privacy

(5) Data not available (6) Inditex was not sanctioned in financial years 2003 and 2004 for any failure to comply with internationally applicable agreements or local legislation in relation to environmental issues (7) Not put into effect in this financial year, 2004 (8) The evolution of Inditex’s business model does not produce any significant negative impact (9) In accordance with the stipulations of the International Chamber of Commerce, the anticorruption policy will be published in the financial year 2005

106

Sustainability Report INDITEX ANEXOS 107

This Sustainability Report 2004 is printed on chlorine-free paper and has been manufactured following environmentally friendly processes ©June 2005, Inditex S.A. All rights reserved Legal Deposit: C-1486/2004 Inditex S.A. Edificio Inditex Avda. de la Diputación, s/n. 15142 Arteixo A Coruña, Spain The Sustainability Report 2003, printed on June 2003, is the previous Report published by the company

108