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Annual Report 2008

Contents

Letter from the Chairman

2

Group highlights

5

Timeline

8

Lifestyle brands

12

Licences

50

Corporate bodies

57

Group structure

59

Giorgio Armani Group Directors’ report - Giorgio Armani Group

61

Consolidated financial statements as at and for the year ended 31 December 2008

81

Supplementary notes

119

Report of the independent auditors

123

Giorgio Armani S.p.A. Directors' report - Giorgio Armani S.p.A.

127

Financial statements as at and for the year ended 31 December 2008

137

Report of the independent auditors

167

Report of the board of statutory auditors

171

Group boutiques at 31 December 2008

174

Letter from the Chairman In my letter last year, in which I highlighted the extraordinary results achieved in 2007, I concluded by forecasting that although 2008 would be characterised by uncertainty in the markets and the global economy, I looked forward to the future with confidence and with all my usual enthusiasm and energy. As a result of these two factors – confidence and energetic enthusiasm – the economic crisis has only slowed down, rather than interrupted, the Armani Group’s growth, which still shows in 2008 an increase of 1.5% in consolidated turnover, to € 1,620.3 million, equivalent to a 2.4% increase at constant exchange rates. The Group’s wholesale revenues, including licensed products, increase by 6.6% at € 2.5 billion compared to the previous year (+9.5% at constant exchange rates).

These are results of which we are justly proud, even though we are well aware that the global economy has entered into a deep crisis which has affected all sectors, in all countries, and whose symptoms will clearly persist despite the most obvious issues being addressed.

Consumer tastes and social behaviour seem to be altering amidst long- term changes that could affect the social context. The fact that our Group is structured to offer a complete portfolio of brands strategically positioned to reach different levels of consumers in different geographical regions (from the fast fashion of A/X Armani Exchange to the high fashion of Giorgio Armani Privé, our most elite range), allows us to anticipate and meet changes in society and gives us the best opportunity to exploit our full potential.

And although 2008 has been a tough year for the fashion and luxury sectors, we have continued to invest, especially in the retail sector, opening 50 new shops across the world, thus reaching our current total of 539.

This represents a very substantial increase in investments, rising to over € 177 million compared to the € 95 million in 2007, which enabled us not only to increase the number of our stores but also to acquire a further 25% interest in Presidio Holdings Ltd., the joint venture vehicle that controls A/X Armani Exchange.

It is the financial solidity of our company that allowed this. As a matter of fact, our net liquidity remains in line with last year at over € 370 million.

The first few months of 2009 have not been easy and the forecast for the rest of the year sees a further profit reduction in 2009 vs 2008.

However, while searching for obvious production efficiencies and implementing cost cutting measures, we remain convinced that by continuing to pursue our initiatives and concentrating ever more firmly on our strategy, we will continue to strengthen and expand our Brand further. This year we are continuing our store-opening programme. In February we opened our concept store, Armani/Fifth Avenue in New York – a structure that projects the spirit of the city and its location into a retail environment that is profoundly Armani. There we do not just offer a simple sales service, but an emotional, lifestyle environment which helps our clients to enter into contact with the diverse facets of all our product lines. We will also open Giorgio Armani boutiques in Tokyo, Dubai, Doha and Singapore, while Emporio Armani will be opening new stores in Berlin, Singapore, Perth and in various other locations in the Middle East and China.

I am often asked, what is our secret? There is only one, really, I reply: the coherence of our strategy, which focuses our efforts on our long-term future. That is the real challenge which we renew every day.

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Group highlights (in millions of Euros)

2006

2007

2008

Wholesale turnover including licensed products

2,063.9

2,360.8

2,516.9

Revenue

1,474.4

1,596.6

1,620.3

Ebitda

300.4

354.9

303.2

% of revenue

20.4%

22.2%

18.7%

Ebit

246.5

288.5

225.0

% of revenue

16.7%

18.1%

13.9%

Profit before taxation

267.3

309.1

213.5

% of revenue

18.1%

19.4%

13.2%

Profit for the year attributable to the shareholders of the parent % of revenue

131.7 8.9%

218.7 13.7%

128.1 7.9%

583.6

580.1

648.5

Income statement figures

Balance sheet and financial figures Non-current assets Net working capital

187.0

224.5

292.2

Total equity

756.2

927.0

1,040.7

Cash and cash equivalents, net

263.4

373.1

371.8

Cashflow from operating activities

206.1

205.1

175.5

Investments

104.5

94.7

177.1

ROI

18.6%

19.0%

13.2%

ROE

17.4%

23.7%

12.3%

420

471

539

5,039

5,314

5,344

Exclusive boutiques Employees at year end (no.)

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Wholesale turnover including licensed products (in millions of Euros)

Revenue (in millions of Euros)

Ebitda (in millions of Euros)

Cash and equivalents & investiments (in millions of Euros)

Net Invested Capital, Net Cash and Cash Equivalents, Net Equity (in millions of Euros)

Wholesale turnover including licensed products by geographical area (%)

Wholesale turnover including licensed products by product category (%)

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Wholesale turnover including licensed products by brand (%)

Timeline 1970

75. Giorgio Armani and Sergio Galeotti found Giorgio Armani S.p.A. on July 24th.

78. Establishes license agreement with GFT (Gruppo Finanziario Tessile).

79. Establishes Giorgio Armani Corporation USA.

1980

80. Signs license agreement with L'Oreal (formerly H.Rubinstein).

81. Opens the first Emporio Armani store (Milan).

82. Giorgio Armani becomes the first fashion designer after Christian Dior to appear on the cover of ‘Time’ magazine.

Opens first Giorgio Armani boutique (Milan).

86. Opens first Armani Junior store (Milan).

87. Establishes Giorgio Armani Japan through a joint venture.

88. Signs licence agreement with Luxottica Group S.p.A..

89. Opens first Emporio Armani Caffé (London).

Initial acquisition of Simint S.p.A..

1990

90. Acquires share control in Antinea S.r.l..

Initial acquisition of Intai S.p.A..

91. Opens first A|X Armani Exchange store (Soho-New York).

96. Acquires share control in Simint S.p.A..

97. Opens first Giorgio Armani Collezioni freestanding stores (Milan, London, Tokyo).

Opens first Armani Jeans freestanding store (Roma).

Signs licence agreement with Fossil Inc. for the worldwide production and distribution of Emporio Armani watches collection.

98. Acquires share control in Intai S.p.A..

99. Creates new Accessories Division.

Starts e-commerce with www.armaniexchange.com in the United States.

00. Acquires manufacturing facilities of Armani Collezioni men’s line and control of sales and distribution of Armani Collezioni.

2000

Launches Giorgio Armani global web site at www.giorgioarmani.com Establishes Trimil, a joint venture with the Zegna Group (51% Armani, 49% Zegna) for the production and distribution of the Armani Collezioni men’s line.

Opens first Armani/Casa store (Milan).

Opens Armani/Manzoni concept store including Emporio Armani, Armani Jeans, Armani/Casa, Giorgio Armani Parfums, Emporio Armani Caffè, Armani/Nobu, Armani/Fiori, Armani/Libri and Armani/Dolci.

The Solomon R. Guggenheim Museum in New York opens the Giorgio Armani exhibition, curated by Germano Celant and Harold Koda, a study of Giorgio Armani’s work.

The Exhibition opened in Bilbao (2001), Berlin (2003), London (2003), Rome (2004),Tokyo (2005), Shanghai (2006), Milan (2007).

01. Establishes Borgo 21, a joint venture company with Vestimenta S.p.A. for the production and distribution of the men's and women's Giorgio Armani apparel collections.

Opens first Giorgio Armani Accessori freestanding store (Milan).

Opens new worldwide commercial showroom and the new Armani/Teatro designed by Architect Tadao Ando at via Bergognone 59, Milan.

Completes full acquisition of Simint S.p.A..

02. Starts e-commerce with Emporio Armani Watches in the United States.

Completes acquisition of highly-respected Reggio Emiliabased knitwear manufacturer, Deanna S.p.A..

Acquires share control of Guardi S.p.A., four factories specialised in the production of both women's and men's shoes.

Opens Armani/Chater House concept store in Hong Kong, including Giorgio Armani, Emporio Armani, AJ|Armani Jeans, Armani/Casa, Armani/Bar, Armani/Libri, Armani/Fiori and Giorgio Armani Cosmetics areas.

03. Awards Safilo S.p.A. a multi-year license for the worldwide production and distribution of its Giorgio Armani and Emporio Armani eyewear collections, as license with Luxottica S.p.A. expires.

Opens Armani/Fünf Höfe in Munich, the third concept store in the world.

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04. Awards Wolford AG, a multi-year lincense for the worldwide production and distribution of a new line of Giorgio Armani hosiery and bodywear.

Launches EA7 athletic wear and accessories collection.

05. Launches Giorgio Armani Privé couture collection during Paris Haute Couture Week along with Giorgio Armani Privé Jewellery.

Signs long term license with EMAAR Hotels and Resorts LLC for the establishment of worldwide collection of luxury Armani Hotels & Resorts.

Signs joint venture agreement with Como Holdings, Inc. for the worldwide expansion of A|X Armani Exchange brand.

Launches of Giorgio Armani Borgo 21, fine luxury watch.

06. Emporio Armani becomes a launch partner in (PRODUCT) RED, the pioneering initiative founded by Bono and Bobby Shriver to fight AIDS in Africa.

Announces collaboration with Mizuno for new Giorgio Armani and Emporio Armani technical sport shoe collection.

Opens Armani/Casa freestanding store on London’s New Bond Street.

07. Opens Giorgio Armani Boutique on Paris’ Avenue Montaigne.

Opening of the fourth Concept Store Armani/Ginza Tower in Tokyo.

Strategic marketing collaboration between Giorgio Armani and Samsung for the development of premium consumer electronics.

Launch of the Giorgio Armani Skincare line for women and men.

Launch of the Emporio Armani e-commerce site in the United States.

08. Opening of the fifth concept store Armani/Fifth Avenue in New York Opening of Emporio Armani flagship store in Moscow and Beijing.

Launch of his first retail presence in India.

Launch of e-commerce site in Europe.

Launch of Emporio Armani Samsung Mobile, ‘Night Effect’.

Opening of the Giorgio Armani largest boutique in Milan’s Via Montenapoleone.

Launch of Emporio Armani Women’s Underwear in the US.

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Lifestyle brands

Luxury to Order The Giorgio Armani Privé collection is characterised by items made with exclusive fabrics and details, a collection conceived each season to cater to a certain type of client who demands a piece of unique quality, produced according to the standards of haute couture but with the accessibility, ease and modernity that characterises Giorgio Armani’s fashion philosophy.

Giorgio Armani said: “I have always presented a small number of extremely special dresses in my signature prêt-à-porter collections each season in Milan. It therefore seems a natural progression to expand this point of view into the Giorgio Armani Privé collection.”

The Privé world now includes couture, accessories, luxury timepieces, jewellery and fragrances.

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14/15

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The signature prĂŞt-a-porter collection.

Elegant, modern and sophisticated, with a reputation for excellence and superior quality materials, defined by its pure lines and subtle use of colours.

The overarching theme of

Giorgio

Armani boutiques is the creation of an intimate

personal

space,

with

wardrobes and trunks showcasing the season’s collections, where the defining material is brushed silk. The floor, finished with grey flagstones, creates a sophisticated ambience. Gleaming dark ceilings

provide

a

dramatic

yet

comforting effect which is further enhanced by lighting, playing with shadows, to create focal areas. Invisible recessed lamps, transformed into spotlights, trace the contours or aim directly at the garments and objects on display. The boutiques also feature areas dedicated to the new Giorgio Armani Hand Made to Measure service for men, the ultimate in customized luxury. A large wall projection of the current collections adds to the overall effect, blending craftsmanship with modernity in an unexpected way and presenting the perfect surroundings for the world of Giorgio Armani.

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20/21

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Impeccably detailed, this is Giorgio Armani’s diffusion line of fine-tailored clothing, stylish sportswear, evening wear,

outerwear,

accessories

for

furnishings,

and

professionals.

It

embodies Giorgio Armani’s signature elements:

clean

lines

and

subtle

coloration, exclusive fabrics, exceptional attention to detail, fit and finish. Armani Collezioni reflects the latest, most broadly appealing new additions to the vocabulary of Armani style.

Bright, relaxing open spaces, the Armani Collezioni stores create an environment and atmosphere of calculated elegance and

sophistication.

This

approach

provides a variation on the Giorgio Armani boutique aesthetic: this is a space where the attention is completely focused on the clothes. To turn this philosophy into reality, the designer has devised a lighting system to maximise the interior space, providing a warm ambience, with a remarkable luminosity produced by crystals and stainless steel accessories. Even the double counters, lit by glass panels, contribute to the overall effect of a modern, attractive, welcoming environment.

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A

fashion

forward

collection

offering a contemporary range of daywear and eveningwear.

The Emporio Armani stores feature flooring in glossy black granite and ceilings made of alternating panels of stainless steel and marmorino, with recessed lights. A screen projecting the current collections dominates the entrance of the stores. The displays are surrounded by an alternation of black glass and silver fabric. The external faรงade is finished in black glass. The overall impression is of modernity mixed with the essence of Emporio Armani in an unexpected and elegant way to create the perfect surroundings for the products.

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Filippo Magnini

Dedicated to sports enthusiasts, Emporio range

Armani’s

has

been

E A7

sports

designed

to

enhance and protect the body.

Formed

in

developed identit y

2004, a

E A7

powerful

over

the

has brand years,

showcasing the growing technical features of clothes designed for several sports, such as running, tennis, snowboarding, sailing and golf. Ideal both for the gym and outdoors,

the

collection

is

outstanding for its ergonomic cut and breathing, absorbing and waterproof features, making use of natural fibres and light fabrics which are fine but resistant to movements. Clinging wearability ensures

the

Accessories

utmost

comfort.

complete

the

clotheswear range with gym bags fully equipped with detachable pockets, bathrobes and soft fleece work-out towels.

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Armani Jeans expresses Giorgio Armani’s vision of a young, independent, casual lifestyle through a denim based collection with a fashion sensibility.

All lines in the Armani Jeans store curve and flow allowing the materials to dominate and there are no references to classical geometry. The only constant factor is the colour blue which has been used throughout. PVC industrial canvas panels cover the walls which have been mounted in sequence like video frames, using techniques from the worlds of cinema and fashion. Resined stainless steel has been chosen for the floors, while the lighting is provided by plexiglass tubing in turn reflected by gleaming stainless steel mirrors. All furniture and fixtures are in the same materials.

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A|X Armani Exchange was launched in 1991, aimed at a new generation of fast-fashion consumers through an accessible collection offering urban, individual style. A|X Armani Exchange defines a new dress code with a collection that takes its cue from urban lifestyle and music culture.

For the Armani Exchange store, Giorgio Armani has drawn on the warm atmosphere

and

appropriate

to

accessibility, the

casual

sophistication of the A|X consumer.

The store design assumes a fluidity that allows for constantly changing and varied atmospheres to reflect the urban landscape. These spaces are sub-divided

logically

by

shelves

running along the perimeter walls and by aluminum corner receptacles.

Invisible recessed lamps, transformed into spotlights, trace the contours of the store, or aim directly at the garments and objects on display, while versatile light fixtures will appear to blend in with the surrounding space. In this elegant and refined environment of suffused lighting, there exists a perfect harmony between the pure, streamlined fittings and the essentially basic character of the clothes on view.

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Launched in 2006, the Armani Baby range comprises items for infants aged 1 - 9 months and for babies aged 3 - 24 months. Gentleness reigns supreme, and the natural feel of cotton and linen, expertly processed with special washes and dyes, prevails to ensure high comfort.

Both coloured and natural with flowing shapes, Armani Baby is a caring collection designed to dress infants with an eye on practical features. It offers innovative, original combinations in a wide selection of washed denim and jersey with all-over customisation to ensure cool, modern wear.

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The Armani Junior collection is as varied as the lives of the children for whom it was designed combining fashion sensibility with comfort, warmth, and ease with a true ecologically-based product philosophy.

The Armani Junior store offers everything for boys and girls from basic pieces – shirts, sweat-shirts, jeans and chinos to more fashionable items – jackets, dresses, skirts – all of which are produced in natural fabrics that are aimed at safe guarding the environment.

The floor and walls, joined in a curve inspired by a skating ramp, feature alternating panels of light tatami and steel to create a sense of comfort. All the hanging and folded items are positioned on the plexiglass shelves.

Starting with the autumn/winter 2008/09 collection, Giorgio Armani’s proposal for the young has become more articulate and precise. Just like Armani Baby (1 month 2 years), and Armani Junior (2 - 8 years), the teenage collection (8 - 16 years) has a name of its own: Armani Teen. Dedicated to the most difficult and sensitive age group that is beginning to feel grown up and hence demands a more mature “brand name�.

Neither imposing rules nor offering fifteen/sixteen year olds any advice on style, this range offers adolescents clotheswear with a decided, original personality that suits their taste.

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Almost ten years after its foundation, Armani/Casa is a world leader in the luxury furnishings sector. A byword for elegance and style, it stems from Giorgio Armani’s living dream of a warm, harmonious, highly comfortable and sophisticated haven. Furniture and furnishing accessories, objects, lamps and exclusive fabrics are the key points in the Armani/Casa Collection. Kitchen and bath systems subtly merge stylistic features and technology.

Armani/Casa places an Interior Design service at the disposal of those who wish to create the perfect Armani environment. Over the years this service has acquired increasing versatility, focusing its stylistic experience on pleasing the most demanding clients.

Several projects for private residences together with key partnerships with international real estate promoters have been launched to develop the goal of single-minded excellence and exclusivity.

Today Armani/Casa counts 30 flagship stores in leading international cities and about 50 shop-in-shops in 46 countries.

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Armani Hotels & Resorts was formed in 2005, when an agreement focused on the ownership, development and management of an exclusive series of hotels, resorts and residences, located in leading cities and in the most fascinating tourist resorts throughout the world, was undersigned by Giorgio Armani S.p.A. and Emaar properties.

The agreement envisages opening at least seven hotels and three resorts over a ten-year period. The first hotel to be inaugurated will be Armani Hotel Dubai at the Burj Dubai, the world’s highest building, which was constructed by Emaar Properties within the framework of project Downtown Burj Dubai.

Besides the Armani Hotel, the Burj Dubai will offer 144 Armani Residences, which are luxury residential living units designed by Giorgio Armani and fully furnished with a custom-made product range. The second Armani Hotel will open in Via Manzoni, 31 – Milan.

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Licences

A collection for women who want to look good and feel great, who see fashion as a means of expressing freedom and style.

The styles, colours and designs of both the classic and trend collections adopt the seasonal themes featured in the Giorgio Armani collection.

Giorgio Armani Eyewear

Giorgio Armani Leg and Bodywear Giorgio Armani Eyewear is unique thanks to its special attention to detail, quality and avant-garde technology.

This is the way to create unique, but also comfortable and practical

frames. Its

modern elegance comes from simplicity, sobriety, clean and pure shapes.

Giorgio Armani Watches Borgo 21 combines Giorgio Armani’s style with the traditional craftsmanship of Swiss fine watch making. Borgo 21 is available in three variations, in sizes for men and women.

Giorgio Armani Cosmetics condenses all the finely wrought beauty of his fashion aesthetic into a cosmetics line. It’s fashion trasmutated in make-up.

Giorgio Armani Cosmetics

Giorgio Armani Fragrances are inspired by Giorgio

Armani's

vision

of

timeless

elegance, natural elements and the essence of style and seduction.

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Giorgio Armani Fragrances

Emporio Armani Fragrances, the urban lifestyle of a couple: modern complicity, fresh sensations, and electric attraction.

Emporio Armani Fragrances

Emporio Armani Eyewear Emporio Armani Eyewear is an informal but cool and outgoing collection, dedicated to anyone who feels young in mind, confident and wants to make a statement with a personalised style.

A collection for men and women who lead a modern lifestyle and want to dress with a sense of casual sophistication. Emporio Armani Watches reflects this approach with modern shapes and materials balanced with a classic style.

Emporio Armani Watches

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Emporio Armani Jewellery A collection in praise of the linear and the graphic, which possesses the attraction of beautiful materials and implicit references to different cultures.

A/X Armani Exchange eyewear stands out with its easy, youthful style. The powerful logo and unconventional, sexy images catch the eye of young consumers.

Armani Exchange Eyewear

Armani Exchange Watches A/X Armani Exchange watches target today’s young fast fashion consumers. An accessible

collection

that

offers

an

individual style inspired by urban fashion, designed to complete Armani Exchange lifestyle proposals.

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Corporate bodies

Board of directors Chairman and managing director Directors

Giorgio Armani Rosanna Armani Silvana Armani Andrea Camerana Pantaleo Dell’Orco Giovanni Gerbotto

Board of statutory auditors Chairman Standing auditors

Ezio Ferrari Marco Terrenghi Lucia Cambieri

Supplementary auditors

Pierluigi Galbussera Vieri Chimenti

Independent auditors

KPMG S.p.A.

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Group structure

Giorgio Armani S.p.A. Giorgio Armani Holding BV

Giorgio Armani Corporation

Presidio Holdings Ltd 50%

GA Corporation Finance Ltd.

Giorgio Armani Retail Srl

Simint S.p.A.

Intai S.p.A.

Moda Sourcing Co. Srl

Deanna S.p.A.

Guardi S.p.A.

Borgo 21 SA

Giorgio Armani Distribuzione Srl

GA Modefine SA

Trimil S.p.A. 51%

Giorgio Armani Australia Pty Ltd

Confezioni di Matelica S.p.A.

Giorgio Armani Japan Co. Ltd.

GA Yachting Srl Giorgio Armani Hong Kong Ltd

Pallacanestro Olimpia Milano Ssrl

Moda Sourcing Co. Ltd Giorgio Armani India Private LTD 51%

Trimil SA 51%

Trimil Corporation

SIMPLIFIED STRUC TURE AT 31 DECEMBER 2008

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Directors’ report - Giorgio Armani Group

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Directors’ report - Giorgio Armani Group Armani Group in 2008 Macroeconomic scenario The international economy underwent great upheaval in 2008 with many developed countries going into recession and the emerging economies showing visible signs of difficulty.

The international financial crisis, which started in summer 2008 in the US following the default of the high-risk subprime mortgage loans, worsened significantly in the second half of the year, hitting major financial institutions and brokers, and even leading to some of them applying for bankruptcy. The related fear of insolvency spreading to other operators and the possible collapse of the financial systems invoked a generalised decrease in trades on interbank markets, resulting in a widespread fall in share prices. The risk of dangerous and inconsistent tightening of credit conditions and, in general, the paralysis of financial markets, led the European, American and Japanese financial authorities and governments to adopt common urgent and extraordinary measures aimed at ensuring continuity of funding to financial brokers and the economy, extending guarantees on bank deposits and strengthening the financial position of those operators and banks most at risk. The central banks intervened several times injecting unprecedented amounts of liquidity in different ways and also jointly cut interest rates.

The effects of these measures, which initially led to the partial easing of the financial tension, were largely flouted by the fast deterioration of the economic situation of the main international markets. The financial crisis steadily spread to the real economy, adversely affecting household consumer expenditure and companies’ investment decisions and production volumes. In 2008, especially in the last four months of the year, nearly all the main developed economies saw significant contraction in their GDP as well as a widespread loss of confidence in the markets by consumers and businesses. The emerging countries were not immune to the crisis either, and were affected by weak demand in the developed countries as well as capital outflows due to liquidation of investments in equities and bonds by banks and international investment funds.

Currency trends In the first part of 2008, the Euro continued to hold strong against the other major international currencies.

This trend slowly reversed, with the US dollar and the Japanese yen in particular gaining ground against the Euro, mostly in the last quarter of the year.

A comparison with the average figures for 2007 shows that the Japanese Yen appreciated 5.5% while the US dollar depreciated by 7.3% despite its improved performance in the last few months of the year.

With respect to other currencies, the Hong Kong dollar depreciated 7.1%. The worst hit was the British pound which lost 16.4% while the Swiss franc appreciated 3.4%.

2008 highlights Consolidated revenue came to € 1,620.3 million, up 1.5% on the previous year or 2.4% on a like-for-like basis. Gross operating profit (EBITDA) of € 303.2 million equalled 18.7% of revenue, despite the 14.6% decrease on 2007 (€ 354.9 million). Operating profit (EBIT) amounted to € 225.0 million equal to 13.9% of consolidated revenue, down 22% compared to 2007 (€ 288.5 million).

Revenue (in millions of Euros)

Ebitda (in millions of Euros)

The net profit for the year was € 128.1 million against € 218.7 million in 2007, equal to 7.9% of consolidated revenue.

The group made investments of € 177.1 million compared to € 94.7 million in 2007. Its net cash and cash equivalents continued to be excellent at € 371.8 million (2007: € 373.1 million).

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Equity attributable to the shareholders of the parent increased to over € 1,0 billion. At year end, it amounted to € 1,040.4 million compared to € 925.6 million in 2007.

Therefore, the group ended 2008 satisfactorily considering the serious crisis that has extended to the luxury and fashion sector and 2007, when it recorded the best ever results since its set up.

Significant group activities Distribution Despite the unfavourable economic climate, the Armani Group continued to build on and develop its market segmentation and diversification strategy during 2008. With its portfolio of brands - Giorgio Armani, Emporio Armani, Armani Collezioni, Armani Jeans and A/X Armani Exchange - the Group boasts an imposing presence throughout the retail network, in the luxury, fashion, diffusion, casual and fast fashion segments, respectively.

The competitive scenario differs in each market segment, and the group devotes much attention to positioning each of its lines appropriately, with a focus on the right product, price, communication and distribution channels. Armani products are available around the world, but the Group’s distribution strategies go far beyond merely geographic and marketing diversification. The Armani Group also enjoys a fully balanced system of direct and wholesale distribution activities, as well as company owned and franchised stores.

The Armani Group’s investment objectives were not significantly altered by the crisis facing the international economy. Again this year, as scheduled, large investments were made to develop the distribution network involving the opening of numerous, important stores. In fact, 50 new stores were opened, 15 of which are directly managed. In line with our strategy to increase share in emerging markets, a Giorgio Armani boutique and an Emporio Armani store in New Delhi, India was opened, part of a joint venture with a local partner in October. Other important openings include three stores in Beijing in time for the Olympics in China (one Giorgio Armani boutique and two Emporio Armani stores), as well as an Emporio Armani store in Shenyang and an Emporio Armani store in Melbourne, Australia.

The largest Giorgio Armani boutique in the world was opened in Via Montenapoleone, Milan in September. This prestigious boutique, previously located in Via S. Andrea, has a floor space of 1,300 square metres.

In addition, a second Giorgio Armani boutique in San Paolo, Brazil opened as well as a Giorgio Armani Boutique in Kiev, Ukraine, both managed on a franchising basis. Other Emporio Armani openings in 2008 included the new stores in Moscow, and Harbin, Nanjing, Macau, Urumqi, Qingdao and Wuxi in China, Seoul in South Korea, Almaty in Kazakhstan, Yerevan in Armenia and Dubai in the United Arab Emirates, respectively. New Armani Collezioni stores include those in Shenzhen, Macau and Taiyuan in China. The Group opened Armani Jeans stores in Bahrain and Shenzhen in China. New Armani Junior stores were also inaugurated in Manama, Kiev, Odessa, and Beijing.

Moreover, the Armani Group continued to develop its A/X label during the year opening a record 28 new stores, thus strengthening its market share in the US, Japan as well as in Great Britain, thanks especially to the opening of the flagship store in Regent Street, London.

The group also continued to build up and expand its Armani Casa label (the home collection label), which is sold in 46 countries, with new stores including those in Moscow, Istanbul, Kuala Lumpur and Kuwait City.

At year end, the Armani Group’s retail network counts 539 boutiques, 171 of which are group-owned.

Manufacturing and operations The Group continued its industrial re-engineering process throughout the year by further streamlining different sources. In early 2008, it transferred the design and production activities of Borgo 21 S.p.A. to MSC Italia S.r.l. (formerly Antinea S.r.l.) in order to facilitate the simplification of the group’s operating and management flows.

This did not, however, affect the precise design and manufacturing objectives of the different lines. In addition, the subsidiary Deimutti S.r.l. was merged into Guardi S.p.A..

The careful selection of raw materials and producers continued aimed at further bettering the quality of the group’s products. It focused on developing the production staff’s technical skills and improving the internal management culture.

Furthermore, the group has continued to invest in plant, machinery and IT systems to further boost service level and quality.

Licensing The production and sale of Armani products under licensing agreements by non-group manufacturers is a significant part of Armani group’s development in the lifestyle sector.

The Group has outsourced all the activities relating to non-core business, like perfumes, cosmetics, eyewear, watches, jewellery and mobile phones to specialised non-group companies to ensure that Armani remains a leader in these markets. This provides access to new markets, through innovative and tailored media communications and plans and faster distribution, and leads to a significant financial benefit for the group.

The April launch of “Skin Minerals for Men” was a resounding success and went to number three in the male skin treatment sector in Italy. The Giorgio Armani make-up line also performed well and its lead performer was once again the foundation segment, “Face Fabric”, acclaimed by the media around the world.

The “Emporio Armani Diamonds for Men” fragrance followed in the footsteps of the “Acqua di Giò” and “Code Uomo” fragrances, garnering great success. The latter continues to be the best selling men’s fragrance. Giorgio Armani chose Josh Hartnett as its testimonial to convey self-confidence and the desire for freedom in today’s youth. At sixth place in the world ranking of female fragrances is “Code Donna”, an intense, mysterious and sophisticated seductive perfume from the Armani portfolio.

In fact, “Code Donna”, “Crema Nera” and the Giorgio Armani make-up line continue to attract new consumers thanks to the introduction of innovative shades and the extension of the product range.

Giorgio Armani entered the eyewear market in 1988 revolutionising it with a new perception of eyewear, transforming it into a cult accessory which enhances the wearer’s face and gives character. Twenty years later, the Group presented two evocative historical models which were re-designed for the occasion: the “Giorgio Armani 20th Anniversary Exclusive Edition” eyewear. Limited series of numbered design pieces (1,020 for each series) representing the perfect match between cutting edge technology and good taste, which is Giorgio Armani’s trademark.

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Emporio Armani eyewear continues to be a perfect expression of an innovative and new style, in line with its reference target’s tastes and its focus on quality and value for money. The label is not only aimed at the younger market but all those persons who pick eyewear as an article to amaze others, be at the forefront of fashion and never blend in with the crowd.

The A/X Armani Exchange eyewear line was again very well met in 2008, its second year, thanks to the building up of the prescription eyewear segment, presented for the first time at the end of 2007 and already a reference point in the countries in which it is distributed.

The Emporio Armani watch collection performed well in 2008, including in the e-commerce sector. Its success is due to a careful focus on the adequacy of, and controls over, the distribution channel and a constantly innovative and dynamic product range. The advertising campaigns featuring Kakà as the testimonial worldwide and Aoi Miyazaki in Japan, have been well received.

The A/X Armani Exchange watch line was launched in Autumn in certain strategic markets, largely outperforming the budget forecasts. This new line, alongside Emporio Armani watches, maximises the group’s market segmentation and diversification strategy: A/X aimed at the more “urban-sexy” customers and Emporio Armani at a more fashionable target or customers seeking modern reinterpretations of classic models.

In the area of new business, Armani group and Samsung Electronics, a world consumer electronics leader, launched the first new mobile phone and home entertainment concepts, based on combining Armani taste and Samsung cutting edge technology and the Giorgio Armani and Emporio Armani labels. During the year, the group presented the first collection of Giorgio Armani writing instruments, thanks to the agreement with Tibaldi, the Italian producer set up in 1916.

Other activities and significant transactions In May, the Armani Hotels & Resorts project was presented to the public. This is the result of an agreement entered into by Giorgio Armani S.p.A. and EMAAR Hotels & Resorts LLC in 2005 for the design, development and management of an exclusive chain of luxury hotels, resorts and residences. The first Armani Hotel, slated to open in late 2009, and the first Armani Residences are part of the Burj Dubai (the highest building in the world) construction project of Emaar Properties. The Dubai Armani Hotel will have 160 rooms and suites along with restaurants and a wellness centre in an area of more than 40,000 square metres. In addition to the hotel, the Burj Dubai will feature 144 luxury residences, each designed by Giorgio Armani and completely furnished with a line of products specifically created for this project and part of the Armani/Casa home collection. The Dubai opening will be followed by that of Hotel di Milano in Via Manzoni 31, for which work started in December and is scheduled for completion in 2010. The first Armani Resort will be in Marrakech while the second Armani Residences project has been commenced in Marassi, Egypt.

As part of the joint venture set up with Como Holdings in November 2005 to manage and develop the A/X Armani Exchange brand for young people, the group acquired another 25% of the English-based company Presidio Holdings Ltd. (the licensee of the A/X label) in December as planned. It thus increased its interest in the English company and the joint venture to 50%.

As part of the strategy to consolidate its presence in the emerging markets, the group also entered into a joint venture agreement with DLF Retail Brands Private Limited to develop business in India during the year.

Accordingly, Giorgio Armani India Private Limited was set up in October as an Indian-based company, 51% controlled by the group with the local partner holding the other 49%.

In July 2008, the group acquired 50% of Roma Sportwear S.r.l. from the other quotaholder. It also acquired control of Pallacanestro Olimpia Milano S.s.r.l. during the year, confirming the group’s commitment to the sporting world and to the community.

Income statement Income statement highlights The Group’s income statement highlights for 2008 are as follows:

Wholesale turnover including licensed products Wholesale turnover including licensed products (hereafter wholesale turnover), which reflects sales of Armani-branded products by both group and third-party manufacturers in both 2008 seasons and is shown at the price paid by the distributor, increased by 6.6% (9.5% on a like-for-like basis) to € 2,516.9 million compared to € 2,360.8 million for 2007.

Wholesale turnover by brand Despite the difficulties created by the challenging macroeconomic context, wholesale turnover increased for all group brands in 2008. Turnover from the Giorgio Armani and Emporio Armani brands, which together make up 64% of the total wholesale turnover, grew by 0.5% and 12.7%, respectively, on 2007 (4% and 14.3% on a like-for-like basis).

The A/X Armani Exchange brand’s wholesale turnover saw doubledigit growth of 14.8% (22% on a like-for-like basis). Armani Jeans and Armani Collezioni also saw an increase in their wholesale

Wholesale turnover including licensed products (in millions of Euros)

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turnover of 6.9% and 2.1%, respectively (8% and 5% on a like-forlike basis, respectively).

The Armani Junior brand again performed strongly, with its wholesale turnover increasing by 36.1% (37.4% on a like-for-like basis) to € 47.9 million at year end.

Wholesale turnover by geographical area based on the end market.

The group’s markets all performed well apart from North America, where the economic crisis has hit the USA hardest. This geographical area saw a slight decrease at current rates (-1.2%) in its wholesale turnover but continued to grow on a like-for-like basis (+5.1%).

In Europe, where wholesale turnover accounts for 37% of total volume, it rose by € 66.8 million, or 7.7% (10.8% on a like-forlike basis).

In the Far East and in the Rest of the World, wholesale turnover grew by 17.1% (17.7%) and 13.9% (15.4%) compared to 2007.

Excellent results were achieved in China and Hong Kong, where wholesale turnover increased by 29.7% (33.3% on a like-for-like basis).

Wholesale turnover by product category Group clothing sales, which include shoes, bags and small leather items, totalled € 1,404.9 million, compared to € 1,298.3 million in 2007, up by 8.2% (10.8% on a like-for-like basis) on the previous year. Clothing sales make up 56% of total wholesale turnover.

Sales of perfumes and cosmetics, equal to 26% of wholesale turnover, decreased by € 6.2 million on 2007, or by 0.9% (growth of 1.4% on a like-for-like basis).

Eyewear sales dropped by 10.0% (-7.7% on a like-for-like basis), being the worst hit by the contraction in global demand, while the Watches and Jewellery segments saw their sales increase by 0.7% (+4.5% on a like-for-like basis). They make up 8% and 6% of wholesale turnover, respectively.

Lastly, “Other”, which includes sales of home furnishing accessories, mobile phones and home entertainment products, more than tripled its value on the previous year, mainly due to the excellent results recorded by the new business areas.

Consolidated revenue Consolidated revenue totalled € 1,620.3 million, up by 1.5% (2.4% on a like-for-like basis), on the € 1,596.6 million of the previous year. It may be analysed as follows: Revenue from distribution activities (principally consisting of turnover from 171 group-owned stores in strategic cities around the world and revenue from the sale of goods at wholesale prices on various markets, mainly the US, Japan and China) totalled € 1,484.8 million (2007: € 1,466.2 million), up by 1.3% on the previous year (2.4% on a like-for-like basis). Distribution activities accounted for 91.6% of consolidated revenue in 2008, compared to 91.8% in 2007.

The analysis of geographical areas shows that distribution activities in Europe brought in revenue of € 837.7 million, up by 4.2%, representing 57% of total consolidated revenue, up by 2.9%).

Revenue earned in North America and, mainly the US, which make up 17% of total consolidated revenue, decreased by 13.4% to € 257.2 million (the decrease is more contained at 7.5% on a like-for-like basis). The main underlying reason is the generalised slump in consumption and, as a result, demand in the American market due to the serious economic crisis.

Revenue from the distribution activities in the Far East, which principally comprises Japan and China (including Hong Kong) increased by 8.7% over 2007 (the improvement is less on a like-for-like basis - 7.4% - mainly due to the Yen’s appreciation, mostly in the last quarter of the year) and equals 18% of total consolidated revenue. The Rest of the World’s revenue grew by 6.9% (7.8% on a like-for-like basis) and contributes 8% to the group’s total revenue.

Royalties and design and advertising consultancy fees grew by 2.3% to € 132.3 million versus € 129.3 million in 2007. They equal 8.2% of 2008 consolidated revenue, which is substantially in line with the previous year (8.1%).

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Other key income statement captions Operating profit before amortisation/depreciation and impairment losses (EBITDA) decreased by 14.6% to € 303.2 million from € 354.9 million in 2007. As a percentage of consolidated revenue, gross operating profit came to 18.7%. Operating profit (EBIT) amounted to € 225.0 million (2007: € 288.5 million), and accounted for 13.9% of consolidated revenue (2007: 18.1%). It is shown net of amortisation/depreciation and impairment losses, which totalled € 78.2 million, compared to € 66.4 million in 2007. The downturn in both indicators is partly due to the group’s conservative policy which included the recognition of prudent provisions given the forecasts for 2009 when analysts foresee a further decrease in global demand and consumption.

Net financial income, which includes net exchange rate gains and losses, amounted to € 6.9 million compared to € 20.9 million for 2007. Interest accrued on the group’s significant liquidity available during the year totalled € 13.4 million (€ 11.1 million for 2007). The net exchange rate losses came to € 8.2 million compared to net exchange rate gains of € 7.7 million for 2007. This large reduction, mainly due to the fair value adjustment of the outstanding currency hedges at year end, is of a non-recurring nature and mostly reflects the sudden and extraordinary appreciation of the Yen and the US dollar against the Euro in the last few months of the year.

Net impairment losses on financial assets reflect the fair value adjustment of current financial assets and available-for-sale financial assets. At year end, this adjustment led to an impairment loss of € 18.4 million (€ 16.5 million of which related to a non-recurring item for the fair value adjustment of the group’s investment in Safilo Group S.p.A.) compared to -€ 0.3 million in 2007.

The consolidated net profit for the year totalled € 128.1 million, compared to € 218.7 million in 2007, and represented 7.9% of consolidated revenue (13.7% in 2007).

Financial position Balance sheet and financial highlights The key balance sheet figures are summarised in the following balance sheet which has been reclassified using the layout showing net invested capital and how it is funded by equity and debt. Compared to the mandatory format included in the consolidated financial statements at 31 December 2008, which uses a more conventional presentation by separating net assets and net liabilities and equity, all the non-financial liability captions are classified in the above format as a decrease in invested capital.

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Balance sheet analysis Net working capital may be analysed as follows:

Non-current, non-financial assets, amounted to € 551.2 million at year end, up € 97.4 million on 31 December 2007.

The increase is mainly due to capital expenditure and acquisition of investments from third parties of € 177.1 million, partly offset by amortisation, depreciation and impairment losses of € 78.2 million, fair value

adjustments of non-current financial assets of € 7.3 million and disposals of € 1.3 million.

The rise in net invested capital was fully funded by operations meaning that year-end net cash and cash equivalents are substantially unchanged from the end of 2007.

Equity attributable to the shareholders of the parent, equal to more than 60% of liabilities at 31 December 2008, increased to exceed € 1,0 billion for the first time, confirming the group’s extremely sound financial position.

In detail, equity attributable to the shareholders of the parent came to € 1,040.4 million compared to € 925.6 million at the end of 2007. The € 114.8 million difference is mainly due to the profit for the year of € 128.1 million, only partly offset by the payment of dividends of € 20.0 million.

Cash flows highlights As noted earlier with respect to the group’s balance sheet, net cash and cash equivalents showed a very healthy balance at year end of € 371.8 million, in line with the previous year (€ 373.1 million), while equity investments have almost doubled in value since 2007.

The following table shows the reclassified consolidated cash flow statement, with changes in the opening and closing balances and the free cash flow, ie the cash surplus or shortfall after covering the year’s investing activities.

Net cash flows from operating activities (€ 175.5 million) nearly entirely covered the group’s requirements arising from a largescale investment plan carried out during the year, mainly to acquire property, plant and equipment, intangible assets and minority interests. The free cash flow covers the total dividends paid to shareholders and almost fully offsets the exchange rate losses arising from the unexpected appreciation of the Yen and the US dollar against the Euro, mainly in the last few months of the year.

Investments 2008 investments totalled € 177.1 million compared to € 94.7 million in 2007 and were financed internally for € 70.7 million (2007: € 65.7 million). They included the scheduled strengthening of the distribution network, involving the opening of new stores and the refurbishing of existing ones.

Investments in the Far East (33% of total 2008 investments) included the opening of a Giorgio Armani boutique and three Emporio Armani stores in China.

They were made in Europe and North America to open, inter alia, the prestigious Giorgio Armani boutique in Via Montenapoleone, Milan, relocated from Via S. Andrea, and the use of financing to open the fifth Armani concept store in New York, which took place in February 2009.

The group also opened an Emporio Armani store in Melbourne, Australia.

Other investments worthy of note were made to strategically build up the network of shops-in-shops (Armani Collezioni and Armani Jeans brands).

As programmed, 2008 investments also included the acquisition of investments from minority interests (€ 72.8 million). This included the acquisition of another 25% in the English-based company Presidio Holdings Ltd in December and the other 50% of Roma Sportwear S.r.l. in July.

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The upgrading of equipment used by the manufacturing units cost the group roughly € 6.9 million and took place as part of the programme to improve production efficiency (2007: € 11.0 million).

Investments in property, plant and equipment compromised software and hardware, purchased mainly by the parent to ensure an efficient degree of integration and alignment among the group’s IT systems.

Significant post balance sheet events The fifth Armani concept store was opened in New York (on Fifth Avenue) in February 2009. Together with the stores in Milan, Munich, Hong Kong and Tokyo, the New York store is part of a group of upmarket department stores dedicated exclusively to Armani products. The new concept store has four floors and a total floor space of more than 4,000 square metres. The store is compact and light thanks to its front which is entirely made of glass (50 metres long by 14 metres high).

As well as presenting products from the different group brands, the concept store also houses an Armani restaurant and the first Armani Dolci in the US.

Outlook The international economy is undergoing an exceptionally difficult period and will face in 2009 what many analysts define as the most critical economic crisis since that of 1929. Growth forecasts for the world economy have recently been revised downwards by an additional 3% and the related rate is the slowest since 2002 and includes a drop of 0.5%, the lowest since after the Second World War. International trade grew only 2% in 2008 and is expected to contract by approximately 9% in 2009.

The main western economies are officially in a serious recession and although an about turn is a possibility for the end of the year/start of 2010, this recovery may be exceptionally slow. Forecast 2009 GDP is expected to drop sharply for all the main countries as it is blocked by the continued uncertainties and tensions about the financial markets. Indeed, the financial crisis became even more complicated in early 2009: in addition to the losses on the “toxic” securities (financial assets tied to the US subprime mortgage loans) still on banks’ books, the European countries also have the problem of their exposure to Eastern European countries, hard-hit by their high foreign currency debt. Another worrying factor is that the emerging countries’ economies have been severely slowed with growth rates well below historic performances.

Consumer and business confidence in the market is expected to continue to be very shaky and may deteriorate.

It is not easy to decipher the signs characterising the international economy or to make assumptions about the next year’s performance.

2009 will inevitably be very difficult

for the luxury and fashion sector but the group will continue to believe in its vision and related strategic decisions and to make investments with an eye to the long term. The very strong brand identity and the group’s solid financial position will contribute greatly to overcoming the difficult situation.

Research and development activities Research and development activities are essential for a group like Armani’s which has maintained its leadership position in the fashion sector thanks to its always consistent yet innovative unique design and to its constant attention to excellence in product quality.

In 2008, the group continued its research activities both on fabrics and materials, and in terms of design.

Expenditure of this nature incurred during the year for the development of new products, prototypes and samples was entirely expensed.

Related party transactions Transactions between subsidiaries, associates and related parties take place on an arm’s length basis. The financial statements impact of transactions between consolidated companies is eliminated upon consolidation.

In short, the transactions carried out with the above-mentioned companies relate to the sale of goods, royalty income, provision of services and lease income, purchases of goods and services, lease expense, loans agreed for investments, joint current accounts held to settle intragroup relationships as well as cash pooling services to optimise the management of liquid funds. Further details are given in the notes.

The parent undertakes transactions with other subsidiaries of its shareholder, mainly property leases. During 2008, these transactions generated € 9.5 million. In addition, the group was repaid the € 20.0 million loan which it had granted to Franc S.r.l., another company held by the parent’s shareholder.

Risk management Credit risk The risk that one party to a financial instrument will cause a financial loss for the group by failing to discharge an obligation.

The group is not significantly exposed to credit risks due to the nature of its business and risks are limited to the sales to distributor segment. Trade receivables, most of which are insured, are recognised net of impairment losses, calculated based on the counterparty’s default risk assessed using available information and historical information about counterparty default rates.

Inventories obsolescence risk This risk is closely monitored and managed using a policy of reducing stocks through the group’s factory outlets.

Articles from previous collections are written down to reflect their estimated realisable value through their sale in such outlets.

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Liquidity risk This is the risk that the group will encounter difficulty in meeting obligations associated with financial liabilities.

The group is not exposed to significant liquidity risks. The group companies’ cash flows, financial requirements and liquidity are managed in order to ensure efficient and effective financial resource management.

Market risk This category includes all risks directly or indirectly linked to fluctuations in market prices, including: - currency risk; - interest rate risk; - other price risk, due to the volatility of the price of raw materials used in production.

The group was only exposed to currency and interest rate risks during the year, since the raw materials it uses in its production do not have a market subject to actual fluctuations.

With respect to currency risks, the group’s risk management policy ensures that the Euro amount of the foreign currency receipts for each collection (Spring/Summer, Fall/Winter) is approximately in line with the amount that would be obtained by applying exchange rates used in deciding the price lists.

Accordingly, the group agrees hedges for each foreign currency based on forecast revenue (and costs) volumes using foreign currency forward sale and purchase agreements and currency options. The group does not carry out these transactions for trading purposes and has implemented specific procedures requiring compliance with the prudence criterion.

Interest rate risk management aims to reduce the risk of fluctuations in rates while also minimising the related borrowing cost. This risk is minimal for the group as it does not have large loans and its cash is managed using cash-pooling systems, which means that it does not use its bank credit facilities. Considering the immaterial amounts involved, the group had no interest rate hedges at year end.

Capital management The parent and the group are not subject to capital requirements imposed by third parties.

Other information Human Resources Armani group’s HR culture is based on the involvement and encouragement of its workforce. We believe that attainment of the high quality and service levels, which allow us to rank one of the leaders in our sector, is only thanks to the contribution of each employee.

Our employees are aware that they are part of an organisation based on respect for the individual, transparent decision-making processes and rewarded passion for their work. The underlying tenet of our work

ethic is its ability to attract, motivate and reward its employees and to create opportunities for the most talented of them around the world.

Alignment of individual and company objectives ensures consistency between individual development and business growth, maintaining motivation levels high and creating the synergies required to create value and ensure improvement.

At year end, the group’s employees numbered 5,344, up 30 on the previous year. A breakdown by geographical area shows that 58% of the employees are based in Italy, 9% in the rest of Europe, 14% in North America, 18% in the Far East and the other 1% in the rest of the world.

A breakdown by professional category gives 22% of employees engaged in manufacturing activities, 76% in corporate activities and distribution and the other 2% makes up the management team.

Added value Added value was calculated using the instructions issued by the Study Group for the Social Report whereby the income statement figures are reclassified to show production and the subsequent distribution of added value.

Net added value generated by the group in 2008 amounted to € 519.9 million which was allocated as follows: 53% to employees as remuneration, social security contributions and training, 18% to the public administration in the form of taxes and duties, 4% to shareholders as dividends, 1% to social, cultural and sporting projects and 24% to be reinvested in the company.

Governance Over the last two years, the parent and certain subsidiaries have adopted an Organisational, management and control model and Code of Ethics, which embody their approach to sound business practices. The model will be adopted by all the other group companies during 2009.

The group carries out its business in an ethical, moral and proper manner, pursuing the objectives set out in its by-laws in line with its mission. All parties that work with the group are required to comply with the standards set out in the model when performing activities on its behalf. Specifically, this entails: • compliance with the group’s institutional policies set out in the Code of Ethics; • compliance with regional, national and European legislation or that of the countries in which they operate; • transparent and direct communications with public bodies and other parties with which the group works; • assuming responsibility for one’s actions.

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The requirements of the Code are not of a legal or financial nature but reflect the group’s social and moral commitment. Armani group strives to be an example of transparency and sound business practices and this commitment underpins the adoption of a Code that embodies these principles and conduct standards in dealings with institutions and stakeholders.

The group companies have accordingly set up supervisory bodies to check compliance with the Model’s requirements. In accordance with the legislative instructions of the Legislative Decree 231/2001, the group has opted for bodies comprising more than one member.

The supervisory bodies report directly to the relevant company’s board of directors in order to ensure their full independence when carrying out their duties.

29 April 2009 CHAIRMAN OF THE BOARD OF DIRECTORS Giorgio Armani

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Consolidated financial statements as at and for the year ended 31 December 2008

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Giorgio Armani S.p.A. and subsidiaries Consolidated balance sheet (in thousands of Euros) ASSETS

Note

31.12.2008

31.12.2007

1

269,543

219,553

143,886 33,249

146,664 34,144

177,135

180,808

101,931 2,588

43,534 9,875

3

104,519

53,409

9

62,456 3,296

63,722 17,740

4

65,752

81,462

5

31,507

44,907

648,456

580,139

6

322,093

250,872

8

249,682 39,849 29,864

229,612 44,098 26,926

7

319,395

300,636

Current financial assets

10

105,427

15,418

Cash and cash equivalents

11

312,566

375,224

TOTAL CURRENT ASSETS

1,059,481

942,150

TOTAL ASSETS

1,707,937

1,522,289

Property, plant and equipment Intangible assets Goodwill Other intangible assets

2 Financial assets Equity-accounted investees Available-for-sale financial assets

Other non-current assets Deferred tax assets Other non-current receivables

Non-current financial assets TOTAL NON-CURRENT ASSETS

Inventories Other current assets Trade receivables Current tax assets Other current receivables

Giorgio Armani S.p.A. and subsidiaries Consolidated balance sheet (in thousands of Euros) EQUITY AND LIABILITIES

Note

31.12.2008

31.12.2007

9,500 294,406 608,303 128,148

9,500 307,847 389,637 218,666

1,040,357 341

925,650 1,398

1,040,698

927,048

35,336 48,696 33,002 31,859 32,321

35,104 39,226 32,328 17,234 66,545

181,214

190,437

279,568 11,903 24,202 12,946 83,274 43,325 30,807

255,965 13,458 31,426 9,040 85,139 9,095 681

486,025

404,804

1,707,937

1,522,289

Equity Share capital Reserves Retained earnings Profit for the year Equity attributable to the shareholders of the parent Minority interests in equity

12

Total equity Non-current liabilities Employee benefits Provisions for risks and charges Deferred tax liabilities Other non-current liabilities Other non-current financial liabilities

13 14 9 15 16

TOTAL NON-CURRENT LIABILITIES Current liabilities Trade payables Payments on account Taxation on profit for the year Current tax liabilities Other current liabilities Current bank loans and overdrafts Other current financial liabilities TOTAL CURRENT LIABILITIES

TOTAL EQUITY AND LIABILITIES

17 18 19 19 20 21 21

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Giorgio Armani S.p.A. and subsidiaries Consolidated income statement (in thousands of Euros) Note Revenue Other income Total

23

2008

2007

1,620,275 19,390

1,596,619 31,879

1,639,665

1,628,498

Costs Raw materials, consumables, supplies and goods Services Use of third party assets Personnel expenses Amortisation/depreciation and impairment losses Impairment losses on receivables Variation in raw materials, consumables, supplies and goods Provisions for risks and charges Other operating costs Total

465,496 468,469 115,501 274,154 78,220 2,764 (10,369) 6,450 14,022 24

Operating profit Financial income and expense Share of profits of equity-accounted investees Other financial income Interest and other financial expense Exchange rate gains and losses

1,414,707

1,339,987

224,958

288,511

1,690 18,421 (5,022) (8,215)

2,067 17,224 (6,094) 7,657 20,854

Total

25

6,874

(Reversals of) impairment losses on financial assets

26

(18,370)

Profit before taxation Income tax expense - current tax expense - deferred tax (income) expense

458,291 443,831 100,712 261,582 66,412 3,814 (25,284) 14,174 16,454

(307)

213,462

309,058

(82,693) (3,069)

(94,986) 4,938

Profit for the year

127,700

219,010

attributable to: Minority interests Shareholders of the parent

448 128,148

(344) 218,666

27 27

Giorgio Armani S.p.A. and subsidiaries Consolidated cash flow statement (in thousands of Euros) Note Opening cash and cash equivalents, net Cash flows from operating activities Profit for the year Amortisation/depreciation and impairment losses Employee benefits, net Profit (loss) attributable to minority interests Increase in the provisions for risks and charges Fair value gains/losses to financial assets Gains on sale of non-current assets, net

1/2

14 3

Total Increase in inventories Increase in current assets Increase in current liabilities Income tax paid

6 7

Total Net cash from operating activities Cash flows used in investing activities Acquisition of property, plant and equipment Acquisition of other intangible assets Increases in guarantee deposits Acquisition of subsidiary net of cash acquired Acquisitions of minority interests Acquisition of other investments

1

3

Total Repayment of loans Proceeds from the sale of property, plant and equipment Fair value losses on derivatives Other net changes

5

2008

2007

373,108

263,359

128,148 78,220 232 (448) 9,470 16,554 (51)

218,666 66,412 (7,914) 344 16,426 (5,496)

232,125

288,438

(71,221) (18,759) 123,316 (89,917)

(29,196) (58,312) 129,215 (125,010)

(56,581)

(83,303)

175,544

205,135

(90,131) (11,791) (2,473) (1,480) (11,049) (60,170)

(81,852) (11,098) (810) (900) -

(177,094)

(94,660)

20,000 1,299 1,082 (4,912) (141,518)

Cash flows used in financing activities Dividends paid Effect of translation differences Net cash flows for the year

(60,149)

(19,998)

(30,001)

(19,998)

(30,001)

(15,310)

(5,236)

(1,282)

Closing cash and cash equivalents, net

23,677 1,082 9,752

109,749

371,826

373,108

2008

2007

Cash and cash equivalents may be analysed as follows:

Cash and cash equivalents Securities Other investments Current bank loans and overdrafts

11 10 10 21

312,566 100,051 2,534 (43,325)

375,224 2,629 4,350 (9,095)

371,826

373,108

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Giorgio Armani S.p.A. and subsidiaries

Statement of changes in equity (in thousands of Euros)

Balance at 1 January 2007

Share capital

Revaluation reserve

Legal reserve

Statutory reserves

Reserve for treasury shares

9,500

342

2,000

590

Accrual to reserves

-

-

-

-

-

164,541

Dividends

-

-

-

-

-

(30,001)

Treasury shares

-

-

-

-

-

-

Change in consolidation area

-

-

-

-

-

-

Fair value

-

-

-

-

-

-

Tax effect on fair value gains and losses

-

-

-

-

-

-

Exchange rate differences

-

-

-

-

-

-

Equity-accounted income and expenses

-

-

-

-

-

-

Profit for the year

-

-

-

-

-

-

9,500

342

2,000

590

Balance at 31 December 2007

(174,500)

Extraordinary reserve

(174,500)

Accrual to reserves

-

-

-

-

-

Dividends

-

-

-

-

-

359,849

494,389 (19,998)

Treasury shares

-

-

-

-

-

-

Change in consolidation area

-

-

-

-

-

-

recognized in profit and loss

-

-

-

-

-

-

Exchange rate differences

-

-

-

-

-

-

Equity-accounted income and expenses

-

-

-

-

-

-

Fair value of available-for-sale financial asset

Profit for the year Balance at 31 December 2008

-

-

-

-

9,500

342

2,000

590

(174,500)

474,391

Translation reserve (11,618)

Profit for the year

Equity attr. to shareholders of the parent

Equity attr. to minority interests

Consolidated equity

422,517

131,661

755,098

1,114

756,212

(32,880)

(131,661)

-

-

Fair value reserve

Other reserves

Retained earnings

115

14,642

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

(30,001)

(60)

(30,061)

-

(9,441)

-

-

-

(9,441)

-

-

2,606

-

-

-

2,606

-

2,606

-

-

-

-

(11,278)

-

(11,278)

-

-

-

(18,113)

-

(18,113)

-

-

218,666

218,666

344

219,010

14,642

389,637

218,666

925,650

1,398

927,048

(218,666)

(11,278) (11,278) (22,896)

(6,835) (6,720)

-

-

1,799

218,666

-

-

-

-

-

1,799

-

-

-

-

-

-

-

-

-

-

-

-

-

(19,998)

(63) (546)

(9,441)

1,799 (20,061) (546)

6,720

-

-

-

6,720

-

6,720

(1,962)

-

-

-

-

(1,962)

-

(1,962)

(1,962)

6,720

-

-

-

4,758

-

4,758

(24,858)

-

-

-

128,148

128,148

-

16,441

608,303

128,148

1,040,357

(448) 341

127,700 1,040,698

86/87

Notes to the consolidated financial statements The company Giorgio Armani S.p.A. (the “parent”) is an Italian-based company with its registered office in Milan. The consolidated financial statements as at and for the year ended 31 December 2008 comprise the separate financial statements of the parent and its subsidiaries (the “group”) as well as the group’s interest in equityaccounted investees. The Group produces and sells products under the Armani label.

A list of the companies included in the consolidation scope is provided in the annex to these notes.

These consolidated financial statements were authorised for issue by the directors on 29 April 2009.

Basis of preparation a) Statement of compliance The 2007 and 2008 consolidated figures and information have been prepared in accordance with the International Financial Reporting Standards (“IFRS”) issued by the International Accounting Standards Board (“IASB”) and endorsed by the European Commission. The acronym IFRS includes the International Accounting Standards (IAS), the International Financial Reporting Standards (IFRS) and all the interpretations issued by the IFRIC (formerly the Standing Interpretations Committee).

Reference should be made to the “New standards applicable for the group as from 2008” section for information on the impact of new standards on the consolidated financial statements.

b) Structure, format and content of the consolidated financial statements The consolidated financial statements comprise a balance sheet, an income statement, a cash flow statement, a statement of changes in equity and these notes. In the balance sheet, assets and liabilities are presented as current and non-current. The income statement has been prepared on a cost nature basis, while the cash flow statement uses the indirect method.

The consolidated financial statements are presented in Euros, the parent’s functional currency. Unless otherwise stated, amounts are expressed in thousands of Euros.

Significant accounting policies The accounting policies set out below have been applied consistently to all periods presented in these consolidated financial statements. Moreover, they have been applied consistently by group entities.

The 2008 financial statements captions are comparable with those of the previous year, which have been reclassified, where necessary.

Basis of consolidation Subsidiaries are entities controlled by the parent. Control exists when the parent has the power to directly or

indirectly govern the financial and operating policies of an entity so as to obtain benefits from its activities. In assessing control, potential voting rights that are exercisable or may be converted are taken into account. The financial statements of subsidiaries are included in the consolidated financial statements from the date that control commences until the date that control ceases.

Associates are those entities in which the group has significant influence, but not control, over the financial and operating policies. Significant influence is assumed to exist when the group owns between 20% and 50% of an entity’s voting rights.

Jointly controlled entities are those entities over which the group has joint control by means of a contract which requires the unanimous approval of financial and strategic management decisions by the controlling parties.

The group’s investments in associates and jointly controlled entities are measured at equity and initially recognised at cost. They include goodwill identified at the acquisition date, net of any cumulative impairment losses.

The consolidated financial statements include the group’s share of the profits or losses of investees, accounted for using the equity method, net of any adjustments necessary to align the investee’s accounting policies with those of the group, from the date that significant influence or joint control commences until the date that significant influence or joint control ceases. When the group’s share of losses exceeds its interest in an investee, the investment’s carrying amount is reduced to nil and a provision for losses of the same amount is set up under the provisions for risks to the extent of the group’s obligation to cover the investee’s losses.

The main consolidation procedures used to prepare these consolidated financial statements are as follows: •

The assets and liabilities of consolidated companies are consolidated on a line-by-line basis, eliminating the carrying amount of consolidated investments against the equity of each investee.

•

The difference between the acquisition cost of the investments and equity of the investees at the acquisition date is allocated, where possible, to the identifiable assets, liabilities and contingent liabilities that satisfy the requirements for separate recognition, as established by IFRS. The residual portion is allocated to “Goodwill”, under intangible assets.

•

Unrealised profits and losses arising from intragroup transactions are eliminated as well as intragroup receivables and payables, dividends and other transactions among consolidated companies. Losses not incurred are eliminated to the extent that there are no indications of impairment.

•

Equity attributable to minority interests of consolidated companies is presented in a specific balance sheet caption, while profit or loss attributable to said minority interests is presented separately in the consolidated income statement.

Foreign currency transactions The financial statements of consolidated companies are prepared using the functional currency of the primary economic environment in which said companies operate. In these financial statements, all transactions carried out in a currency other than the functional currency are translated at the foreign exchange rate ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are translated into the functional currency at the closing exchange rate. Foreign currency gains or losses are recognised in profit or loss. Non-monetary assets and liabilities denominated in foreign currencies that are measured at historical cost are retranslated at the exchange rate at the date of the transaction.

88/89

Income, expenses, assets and liabilities included in the consolidated financial statements are expressed in Euros, the parent’s functional currency.

For consolidation purposes, the financial statements of foreign subsidiaries with a functional currency other than the Euro are translated as follows: assets and liabilities are translated into Euros at the closing rates, while income and expenses are translated at the average exchange rate for the year (roughly the exchange rates ruling at the dates of the transactions); differences arising from the use of different rates are recognised directly in a specific equity reserve.

Exchange rate differences are recognised in profit or loss only upon disposal or sale of the investment to which they relate.

The exchange rates used are as follows: Closing rates 2008 US dollar Hong Kong dollar Swedish krona

Average exchange rates 2007

2008

2007

1.39

1.47

1.47

1.371

10.79

11.48

11.45

10.691

10.87

9.44

9.62

9.250

126.14

164.93

152.45

161.253

British pound

0.95

0.73

0.80

0.684

Australian dollar

2.03

1.65

1.74

1.635

Swiss franc

1.49

1.65

1.59

1.643

67.64

58.021

63.73

56.572

Yen

Indian rupee

Property, plant and equipment Items of property, plant and equipment are measured at cost, including directly attributable costs.

Certain items of property, plant and equipment were subject to revaluation under specific national laws prior to the adoption of IFRS. The revalued cost was considered as the deemed cost at that date. When parts of an item of property, plant and equipment have different useful lives, they are accounted for as separate items of property, plant and equipment.

Leasehold improvements are recognised at cost and depreciated over the shorter of the residual lease term and their estimated useful life.

Land is not depreciated. The following depreciation rates are applied to the other items of property, plant and equipment: Buildings Plant and machinery

3% 7.5 - 30%

Equipment

10 - 15%

Other assets

12 - 25%

Assets acquired during the year are depreciated at half the above rates, which is held to reflect their limited use during the year.

Depreciation methods, useful lives and carrying amounts are assessed at each balance sheet date.

Maintenance and repair costs are recognised directly in the income statement, except when they increase the value of the asset to which they relate. In this case, they are allocated to the relevant asset and depreciated over its residual useful life.

Assets under finance lease are measured at their fair value or, if lower, at the present value of the minimum lease payments, recognising the corresponding financial liability due to the lease companies. Depreciation is charged over their residual useful lives, similarly to other items of property, plant and equipment.

Gains or losses on the sale of property, plant and equipment, ie, the difference between the net sale proceeds and carrying amount, are recognised as other operating income or costs in the income statement.

Intangible assets Goodwill Goodwill arises from the acquisition of subsidiaries as well as the acquisition of certain Armani label production and distribution business. After initial recognition, goodwill is not amortised and is recognised net of any impairment losses, calculated as described below.

Negative goodwill, if any, is recognised immediately in profit or loss.

In respect of acquisitions prior to 1 January 2005, goodwill represents the net carrying amount recognised in the group’s last consolidated financial statements prepared under the previous GAAP (31 December 2004).

In respect of associates, the carrying amount of goodwill is included in that of the investment.

Other intangible assets They are measured at cost only when it is probable that the expected future economic benefits that are attributable to the asset will flow to the group and the cost of the asset can be measured reliably. They are amortised on a systematic basis over their useful lives, except for intangible assets with indefinite useful lives which, like goodwill, are not amortised. They are recognised net of accumulated amortisation and cumulative impairment losses, as described below.

Industrial patents and similar rights are amortised on a straight-line basis over a period of between three to five years.

Commercial goodwill is mainly related to costs incurred to take over leased premises. It is usually amortised on a straight-line basis over ten years.

Research and development expenditure is fully recognised in profit or loss when incurred since its contribution to future collections cannot be measured immediately.

Impairment losses At each reporting date, the group assesses whether there is any indication that a finite-life asset may be impaired. If any such indication exists, the group will estimate the recoverable amount of the asset. The

90/91

recoverable amount of goodwill or other intangible assets with indefinite useful lives is measured at each reporting date or whenever a possible impairment loss emerges as an effect of new events or changes in circumstances. The recoverable amount is the higher of the asset’s fair value less costs to sell and its value in use.

If there is no sale agreement, fair value is based on the amounts expressed by an active market, recent transactions or the best information available.

In assessing value in use, the estimated future pre-tax cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. For an asset that does not generate largely independent cash inflows, the cash-generating unit to which the asset belongs is identified to which the objectively determinable and independent cash flows can be associated. Taking into account its operating structure, the group’s cash-generating units are based on the distribution channels and geographical segments. An impairment loss is recognised in profit or loss if the carrying amount of the asset or the related cash-generating unit to which it is allocated is greater than the recoverable amount. An impairment loss on a cash-generating unit is allocated first to reduce the carrying amount of any goodwill allocated to the cash-generating unit and then to the other assets of the unit pro rata on the basis of the carrying amount of each asset in the unit.

An impairment loss for assets other than goodwill is reversed only to the extent of the impairment losses recognised in prior years, when the reasons for the impairment no longer exist.

Financial assets are tested for impairment at each reporting date to determine whether there is objective indication of impairment. When a fair value loss of an available-for-sale financial asset is recognised directly in equity and there is objective evidence that the asset has undergone impairment, the cumulative fair value loss is reclassified from equity to profit or loss even when the financial asset has not been derecognised. Fair value gains on equity instruments classified as available for sale cannot be recognised in profit or loss as a reversal of previous impairment losses.

Financial instruments i) Equity and debt instruments Held-for-trading financial instruments are classified under current assets and measured at fair value through profit or loss. Transaction costs are recognised in the income statement as incurred.

Financial assets that the group has the positive intention and ability to hold to maturity are measured at cost (being the fair value of the initial consideration paid), increased by the transaction costs. They are subsequently measured at amortised cost.

The other financial instruments held by the group are classified as available for sale and measured at fair value.

Any fair value gain or loss is recognised directly in equity. ii) Derivatives Because of the nature of its activities, at year end, the group is exposed to currency risk arising from contractual obligations and purchase and sale orders denominated in currencies other than the Euro (mainly the US dollar, Japanese yen and British pound). This risk is hedged by entering into cash flow hedges for each currency other than the functional currency. The group uses foreign currency forward sale and purchase contracts and currency options.

In order to mitigate these risks, the group enters into derivatives to hedge specific transactions and complex

exposures, using the instruments available on the market. The group’s derivative financial instruments are not held for trading purposes. Such derivatives are adjusted to fair value at each balance sheet date. Fair value changes in derivatives designated as hedges, which satisfy the formal requirements of IAS 39 and are effective in hedging future cash flows (cash flow hedges) relating to the group’s contractual commitments, are recognised directly in equity. Fair value changes in derivatives which do not satisfy the above requirements are recognised in profit or loss. iii) Trade receivables Trade receivables that have due dates in line with normal current trading terms are initially recognised at fair value and subsequently measured at amortised cost using the effective interest method. Specifically, they are discounted and are recognised at cost, net of any impairment losses. Impairment losses are calculated based on the present value of estimated future cash flows.

iv) Cash and cash equivalents They include cash in hand, on demand bank deposits and all highly liquid risk-free investments which do not have collection fees. They are measured at amortised cost.

v) Other liabilities Financial liabilities, other than derivatives, are measured at amortised cost.

92/93 Trade payables that have due dates in line with normal current trading terms are not discounted and are recognised at amortised cost (being their nominal value).

Inventories Inventories are measured at the lower of cost and net realisable value based on market trends, which is the estimated selling price in the ordinary course of business, less the estimated costs of completion and selling expenses.

Cost is calculated as follows: -

finished goods, made up of unique items, are measured based on the specific identification of cost;

-

work in progress is measured based on production cost, including the use of raw materials, direct labour and indirect production costs, based on the stage of completion at the balance sheet date;

-

all other inventories, grouped in categories of similar items, are measured at weighted average cost.

The carrying amount of any obsolete or slow-moving item is written down based on its future expected use/sale by accruing a specific provision.

Provisions for risks and charges A provision is recognised if the group has a present legal or constructive obligation as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation

and a reliable estimate can be made of the amount of the obligation.

If the effect of the time value of money is material and the settlement date can be reliably estimated, provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the liability.

Employee benefits Short-term employee benefits, such as wages, salaries and social security contributions, paid leave and holidays which fall due within twelve months of the balance sheet date and all other non-monetary benefits are recognised in the year in which the employees render the related service.

Employee benefits paid upon or after the termination of employment through defined benefit plans are recognised over the vesting period. Defined benefit plan liabilities, net of any plan assets, are calculated based on actuarial assumptions and are recognised on an accruals basis in line with the rendering of the services necessary to obtain the benefits; the liability is measured by independent actuaries.

Actuarial gains and losses arising from changes in the underlying assumptions or in the plan conditions are recognised in profit or loss.

Revenue and costs Revenue from the sale of goods and services rendered is recognised if it is probable that the economic benefits associated with the transaction will flow to the group and the amount of revenue can be estimated reliably.

Revenue is presented net of returns, allowances and discounts.

Revenue from the sale of goods is recognised when the risks and rewards of ownership have been transferred to the buyer, while revenue from services rendered is recognised in proportion to the stage of completion of the transaction at the reporting date. In particular, royalties and commissions are recognised based on the relevant contractual conditions, regardless of sale timing of the relevant collection.

Financial income and expense are recognised on an accruals basis, based on the interest accrued on the net amount of the related financial assets and liabilities, using the effective interest method.

Dividend income is recognised on the date that the group’s right to receive payment is established.

Income taxes Current taxes are provided for using a reasonable estimate of the taxable profit for the year as per the legislation enacted or substantially enacted in the relevant country.

Deferred tax assets and liabilities are recognised on the temporary differences between the carrying amount of the assets and liabilities recognised in the consolidated financial statements and their value for tax purposes, based on the tax rates enacted of the countries where consolidated companies are based. Deferred tax assets are only recognised if it is reasonably certain that they will be recovered in the future. Recoverability is reviewed on an annual basis.

The consolidated financial statements also include the tax charge on those profits of subsidiaries that are expected to be distributed to the parent in the future, and which will be subject to taxation at that time.

Repurchase of treasury shares The consideration paid, including directly attributable transaction costs, to repurchase treasury shares is recognised as a deduction from equity.

Use of estimates The preparation of IFRS-compliant financial statements requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, revenue and costs. Estimates and the underlying assumptions are based on past experience and other factors considered reasonable in the circumstances. They are adopted to estimate the carrying amount of assets and liabilities which are not easily inferable from other sources. However, actual results may differ from those included herein.

Such estimates and assumptions are revised on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised when they only affect that period. When the revisions cover current and future periods, the difference is recognised in the period in which the revision is performed and in the related future periods.

Specifically, the areas most affected by estimates are: the measurement of the recoverable amounts of cashgenerating units; the measurement of defined benefit obligations; provisions and contingent liabilities; the measurement of financial instruments; and options on investments.

New standards and interpretations and existing standards applicable for the group as from 2008 The revised IAS 39 and IFRS 7 covering the reclassification of financial assets are applicable from 1 July 2008.

IFRIC 11 - Group and treasury share transactions is applicable to all periods beginning on or after 1 March 2007.

This standard governs application of IFRS 2 - Share-based payments to certain plans which envisage payments based on shares of a group company (e.g., the parent) allocated to employees of other group companies.

These standards are not applicable to the group.

New standards and interpretations not yet adopted A number of new standards, amendments to standards and interpretations which have already been endorsed by the European Union are not yet effective for the year ended 31 December 2008, and have not been applied in preparing these consolidated financial statements: •

IFRS 8 – Operating Segments. This standard requires that segments be identified using the same approach as that for top management internal reporting purposes. It is effective for annual financial statements for periods beginning on or after 1 January 2009, replacing IAS 14 - Segment reporting. It is not applicable to the Group.

The following are revisions of standards and new interpretations not yet endorsed by the European Union: •

IAS 23 - Borrowing costs. The revised version has removed the option that allowed entities to immediately recognise in profit or loss the borrowing costs incurred in connection with assets which usually require a certain period of time before being available for use or sale. In accordance with the transitional provisions, as required, the group will apply it prospectively to borrowing costs for capitalised assets from 1 January 2009.

•

IFRIC 13 - Customer loyalty programmes which is aimed at entities that grant its customers award credits as part of the sale transaction. It is not expected to have a significant impact on the consolidated financial statements.

94/95

•

Revised IAS 1 - Presentation of financial statements (2007), which introduces the term “total comprehensive income”, being the changes in equity during the period other than those determined by transactions carried out by the owners. Entities may present a single statement of comprehensive income, which shows the income statement and all changes in equity due to non-owners, or two separate statements (the income statement and statement of comprehensive income). The revised standard will impact the 2009 consolidated financial statements.

•

Amendments to IAS 32 - Financial instruments: recognition and IAS 1 - Presentation of financial statements - puttable financial instruments and instruments with obligations that arise upon settlement require that these instruments and those that put the entity under an obligation to deliver a proportional share of its net assets to another party only upon liquidation be classified as equity instruments when they meet certain conditions. These amendments, which become mandatory for the group from the 2009 consolidated financial statements with retrospective application, will not impact it.

•

In January 2008, the IASB published a revised IFRS 3 - Business combinations. The main changes made to this standard are summarised below:

-

The definition of “company assets” has been extended

-

The contingent consideration will be measured at fair value with any subsequent changes in fair value being recognised in profit or loss.

-

Transaction costs, other than those for the issue of shares and debt instruments, will be recognised in profit or loss when incurred.

-

In the case of acquisition of control in which the parent already had a minority interest, it measures the previously held investment at fair value, recognising any gains or losses in profit or loss.

-

Minority interests are measured, on a case-by-case basis, at fair value or on a proportionate basis considering the identified assets and liabilities of the acquiree.

Revised IFRS 3, adoption of which will be mandatory for the group beginning from the 2010 consolidated financial statements, will be applied on a prospective basis. Therefore, it will not affect the corresponding figures for the previous years.

•

Revised IAS 27 - Consolidated and separate financial statements (2008) provides for the recognition of changes in the shareholder structure of a subsidiary when the entity does not lose control in equity. In the case of loss of control when the entity maintains an investment, this is measured at fair value on the date control ceases to exist and the related income or expense is recognised in profit or loss. The amendments to IAS 27, which become mandatory for the group beginning from the 2010 consolidated financial statements, will not have a significant impact on the consolidated financial statements.

•

The amendments to IFRS 2 - Share-based payments - Vesting conditions and cancellations clarify the vesting conditions, introduce the conditions which are not considered of a vesting nature and establish that such conditions are reflected in fair value at the grant date. They also define the accounting treatment of such conditions and related cancellations. The amendments to IFRS 2 will be mandatory for the group beginning from the 2009 consolidated financial statements on a retrospective basis and will not impact its consolidated financial statements.

•

IFRIC 14 on IAS 19 - The limit on a defined benefit asset, minimum funding requirements and their interaction sets out general guidelines for the definition of the limit set by IAS 19 for recognition of plan assets and explains the accounting effects of any minimum funding requirements. This interpretation will not affect the group’s consolidated financial statements.

Acquisitions of subsidiaries and minority interests Business combinations In August 2008, the group acquired 80% of Pallacanestro Olimpia Milano S.s.r.l., a professional basketball team which plays in the Italian Serie A1 league (the top Italian league), paying € 1,549 thousand. Following nonsubscription of the share capital increase approved in October 2008 by the minority interests, the group became the sole quotaholder in December 2008. The subsidiary has contributed to the consolidated results by a loss for the year of € 3.9 million.

The effect of the acquisition on the group’s assets and liabilities is as follows: (in thousands of Euros)

Pre-acquisition

Group share

Adjustments

Acquisition

carrying amounts

of carrying

for fair value

date amounts

amounts

measurement

Property, plant and equipment Intangible assets Financial assets Trade receivables Cash and cash equivalents Financial liabilities Deferred tax liabilities Provisions for risks and other liabilities Trade and other payables

7

6

-

6

85

68

-

68

71

57

-

57

1,207

966

-

966

68

-

85 (1,440) -

(1,152) -

-

68 (1,152) -

(631)

(505)

-

(505)

(5,030)

(4,024)

-

(4,024)

96/97

Net identifiable assets and liabilities Goodwill generated by the acquisition Consideration paid Cash and cash equivalents acquired Cash flows used

(5,646)

(4,517)

-

(4,517) 6,064 (1,548) 68 (1,480)

The pre-acquisition carrying amounts were determined using the IFRS applicable immediately before the acquisition. The carrying amounts of the identified assets, liabilities and contingent liabilities assumed equal their estimated fair value.

Goodwill was tested for impairment. Reference should be made to the note on Goodwill for further information.

Acquisition of minority interests In July 2008, the group acquired an additional 50% of Roma Sportwear S.r.l. for € 11.0 million, thus obtaining full control thereof. The carrying amount of the subsidiary’s net assets in the consolidated financial statements at the acquisition date was € 2.1 million. The group recognised a decrease in the minority interests of € 0.5 million and goodwill of € 9.9 million, subsequently tested for impairment.

Notes to the main asset captions 1. Property, plant and equipment Changes in property, plant and equipment during 2008 are analysed below: (in thousands of Euros)

Land and

Leasehold

Plant and Industrial and

Electronic

Furniture

Other

Assets

buildings

improve-

machinery commercial

office

and

assets

under

equipment

equipment

fittings

79,024

58,146

10,331

2,197

10,017

12,733

461

41,310

2,418

903

2,852

14,072

ments Balance at 31.12.06 Additions Disposals, net Depreciation

-

(122)

(16,389)

(3,386)

(1,125)

(3,750)

(4,945)

(4,810)

(12,712)

Other net changes

(7)

Balance at 31.12.07 Additions Disposals, net Depreciation

Balance at 31.12.08

(890)

16

(131)

8

(486)

(526)

19,847

4,825

21,556

36,156

20,554

(54,371)

(10,617)

(3,182)

(12,767)

(14,465)

(11,613)

(88)

(15,312)

(29)

(352)

(17)

(1,329)

(253)

213,414 81,852 (18,107)

-

(38,454)

-

(14,032)

(4,036) 25,846

(5,119) 361,841

-

(125,161)

-

-

(17,127)

74,730

70,410

9,201

1,291

8,772

20,362

8,941

25,846

219,553

3,674

26,433

1,974

1,541

3,878

11,154

24,246

17,230

90,131

(4,199) -

Impairment losses

-

140,093

-

Accumulated depreciation

(342)

92,964

Reclassifications

Cost at 31.12.08

43

-

(18,146)

Impairment losses Other net changes

13,804

(355)

(15,778)

Impairment losses

6,032

(211)

(88)

Accumulated depreciation

16,331

(178)

(4,660)

Cost at 31.12.07

construction 24,634

(599)

Impairment losses

Total

(53)

(128)

(276)

(51)

(89)

(293)

(28)

(15,024)

(2,740)

(1,267)

(4,014)

(6,388)

(9,278)

(28)

(73)

(774)

(6,746) 7,911

(66)

-

(7,621)

24,870

310

56

2,221

844

465 18,238

21,479

6,626

25,401

49,238

70,486

(69,395)

(13,357)

4,449

(16,781)

(20,853)

(20,891)

(88)

(22,058)

(29)

(90)

(2,103)

8,093

-

-

174,310

82,857

(42,910)

-

96,585

(380) 1,797

8,530

26,282

(1,299)

-

-

(22,345)

74,152

(434)

(24,870)

11,689 462,362

-

(168,071)

-

-

(24,748)

49,594

18,238

269,543

The additions relate to the companies managing stores, in particular foreign branches which made investments approximating € 49.9 million and European distribution companies which invested € 20.8 million, mainly to fit out new boutiques and refurbish existing ones. In 2008, Armani group continued to increase its international sales network with the opening of 50 boutiques, including 15 that are group-owned. 2008 additions include the opening of a Giorgio Armani boutique and three Emporio Armani stores in China and an Emporio Armani store in Australia. The opening of the prestigious Giorgio Armani boutique in Via Montenapoleone, Milan, relocated from Via S. Andrea, was an important event as was the use of financial resources to open the fifth Armani concept store (in February 2009). The cost of the latter store are recognised under Assets under construction.

The group has adopted a more prudent approach when measuring the estimated realisable value of certain of its subsidiaries’ assets due to the difficulties created by the complex international economic situation. The “Impairment losses” line reflects the adjustment to the prudently measured recoverable amount of investments in non-current assets made by the subsidiaries Giorgio Armani Corporation and Giorgio Armani Retail - French Branch, which had not been fully depreciated at the end of 2008, using the discounted cash flow method. This method estimates future cash flows based on available plans, that usually cover five years up to a maximum equal to the residual lease term, and applying a 5% discount rate. The impairment losses have been recognised in profit or loss under “Amortisation/depreciation and impairment losses”.

During the year, no impairment loss recognised in prior years was reversed.

“Reclassifications” include the reclassification of the carrying amount of the yacht owned by Giorgio Armani Yachting, under construction at the end of 2007 and which became operative during the year.

“Other net changes” mainly include the exchange rate loss arising from the unexpected appreciation of the Japanese yen and the US dollar against the Euro in the last few months of the year.

“Land and buildings” include a revaluation of € 489 thousand carried out in previous years on assets still owned by the group at 31 December 2008 in accordance with Law no. 413/91.

2. Intangible assets Changes in intangible assets during 2008 are analysed below: (in thousands of Euros)

Balance at 31.12.06

Goodwill

Industrial

Licences,

Commercial

Assets under

patents and

trademarks

goodwill

development

similar rights

and similar rights

1,554

422

23,287

1,830 3,531

144,647

Additions

-

844

264

2,645

Amortisation

-

(813)

(340)

(4,542)

Impairment losses

(2,500)

Other net changes

4,517

318

146,664

1,853

16,029

1,405

Balance at 31.12.07 Additions Amortisation

-

-

(889)

(1) 380 297 (391)

-

7,464

179,203

3,813

11,098

(4,793)

(10,488)

-

(42)

-

(1,451)

1,375

4,886

21,083

3,868

6,959

180,808

22

5,062

(4,718)

-

(12,357)

-

-

(434)

Other net changes

(6,450)

338

223

(2,124)

(5,239)

2,707

509

13,829

3,691

143,886

Total

128

Impairment losses Balance at 31.12.08

Other

-

(2,542)

5,004

27,820

(8,899)

(14,898)

-

(12,791)

9,449

(3,803)

12,513

177,135

“Goodwill” includes the excess cost paid with respect to the portion of net assets acquired as part of the acquisition process of business units and investments.

The additions that relate to “Goodwill” are the result of the acquisitions carried out during the year. The group acquired 50% of Roma Sportwear S.r.l. from the other quotaholder and acquired full control of Pallacanestro Olimpia Milano S.s.r.l.

“Assets under development” mainly include the reclassifications to “Other” of assets which became operative during the year.

“Other net changes” principally include the reclassifications from “Assets under development” to other captions to reflect the fact that said assets became operative during the year. They also include the effect of the translation of foreign companies’ financial statements into the parents’ functional currency. Other net changes related to “Goodwill” are a negative € 6.5 million mainly due to the year-end fair value adjustment of the forward purchase option for the shares of Trimil SA and Trimil S.p.A. from the minority shareholders.

In order to test goodwill for impairment (and, therefore, to check that goodwill was not recognised at an amount exceeding the recoverable amount), the individual companies that were acquired and their subsidiaries were considered as cash-generating units.

98/99

At 31 December 2008, goodwill was allocated as follows: (in thousands of Euros)

31.12.2008

Simint Spa Trimil Spa e Trimil S.A. MSC Italia Borgo 21 S.A. Guardi Spa Other companies

44,735 38,915 23,936 17,390 11,026 7,884

Total

143,886

The recoverable amount was estimated using the discounted cash flow method, which provides for estimating future cash flows and applying an adequate discount rate, which, in this case, approximated 5%.

The cash flows for impairment testing purposes were estimated based on the budgets and five-year business plans prepared by the individual group companies.

The impairment test gave rise to the prudent recognition of an impairment loss on the goodwill arising from the acquisition of investments in Roma Sportwear S.r.l. and Pallacanestro Olimpia Milano S.s.r.l. of € 6.3 million and € 6.1 million, respectively.

3. Financial assets This caption may be analysed as follows: (in thousands of Euros)

31.12.2008

31.12.2007

Equity-accounted investees Available-for-sale financial assets

101,931 2,588

43,534 9,875

Total

104,519

53,409

Disposals

31.12.2008

Changes in individual captions are as follows: (in thousands of Euros)

31.12.2007

Additions

Equity-accounted investees: Presidio Holdings Ltd

43,534

61,860

(3,463)

101,931

Total

43,534

61,860

(3,463)

101,931

“Equity-accounted investees” include the 50% interest in Presidio Holdings Ltd., a joint venture set up in November 2005 to manage and develop the A/X Armani Exchange label all over the world. The addition for the year is mainly due to payment of € 60,170 thousand to acquire the additional 25% in December 2008.

At 31 January 2009 (its balance sheet date), Presidio Holdings Ltd showed consolidated equity of US$ 73.0 million, assets of US$ 201.7 million, revenue of US$ 406.2 million and a profit for the period of US$ 5.0 million.

The carrying amount of the investment includes goodwill of € 75.7 million generated during its acquisition. The group receives royalties from this company for use of its label. (in thousands of Euros)

31.12.2007

Additions

Disposals

31.12.2008

Available-for-sale financial assets: Safilo Group S.p.A. Consorzio Canapa Italia

9,873 2

-

(7,286) (1)

2,587 1

Total

9,875

-

(7,287)

2,588

The 1.5% investment in Safilo Group S.p.A., recognised as an available-for-sale financial asset, was adjusted to its fair value based on the stock market prices. As required by IAS 39, given its impairment loss, the cumulative impairment loss recognised in profit or loss (€ 16.5 million) includes the amount previously recognised in equity.

4. Other non-current assets This caption may be analysed as follows: (in thousands of Euros)

31.12.2008

31.12.2007

Deferred tax assets Other non-current receivables

62,456 3,296

63,722 17,740

Total

65,752

81,462

31.12.2008

31.12.2007

Tax receivables Trade receivables Other receivables Prepayments and accrued income - third parties

642 1,238 96 1,320

9,137 3,205 3,746 1,652

Total

3,296

17,740

Deferred tax assets Reference should be made to note 9 for additional information.

Other non-current receivables This caption may be analysed as follows: (in thousands of Euros)

Reference should be made to note 8 for a detailed analysis of “Trade receivables”.

“Tax assets”, comprising non-current receivables due from the tax authorities of the countries in which the group operates, may be broken down as follows: (in thousands of Euros)

31.12.2008

31.12.2007

VAT claimed for reimbursement Non-current tax receivables

642

6,640 2,497

Total

642

9,137

VAT claimed for reimbursement, mainly relating to the Parent, was fully reimbursed during the year.

5. Non-current financial assets This caption may be broken down as follows: (in thousands of Euros)

31.12.2008

31.12.2007

Guarantee deposits Loans Other

30,791 74 642

24,816 20,000 91

Total

31,507

44,907

100/101

At 31 December 2008, “Guarantee deposits” mainly relate to payments made by Giorgio Armani Japan Co. Ltd. and Giorgio Armani Hong Kong Limited for deposits for the lease of commercial areas. The increase is due to the opening of new stores in the Far East during the year.

“Loans” decreased by € 20.0 million, due to repayment of the loan granted by GA Corporation Finance Ltd to Franc S.r.l., which is owned by the shareholder of the parent.

Non-current financial assets may be analysed by due date as follows: (in thousands of Euros)

31.12.2008

31.12.2007

From 1 to 5 years After 5 years

7,022 24,485

25,085 19,822

Total

31,507

44,907

6. Inventories This caption may be analysed as follows: (in thousands of Euros)

31.12.2008

31.12.2007

Gross balance

Provision for obsolescence

Net balance

Gross balance

Provision for obsolescence

Net balance

Raw materials, consumables and supplies Semi-finished products Finished goods

55,616 34,471 367,225

(19,134) (160) (115,925)

36,482 34,311 251,300

61,940 38,684 248,677

(20,419) (4) (78,004)

41,520 38,680 170,672

Total net balance

457,312

(135,219)

322,093

349,300

(98,428)

250,872

The increase in closing inventories over the previous year is due to greater volumes of goods stored by production companies and certain retail companies, mainly as a result of cyclical trends.

Changes in the provision for obsolescence are set out below: (in thousands of Euros)

31.12.2007

Increases

Decreases

Exchange rate gains (losses)

31.12.2008

Raw materials, consumables and supplies Semi-finished products Finished goods

20,419 4 78,004

9,979 156 36,295

(11,265) (7,138)

8,764

19,133 160 115,926

Total net balance

98,428

46,430

(18,403)

8,764

135,219

The accrual to the provision for obsolescence has been recognised in the income statement under “Variation in raw materials, consumables, supplies and goods”.

7. Other current assets This caption may be analysed as follows: (in thousands of Euros)

31.12.2008

31.12.2007

Trade receivables Current tax assets Other current receivables

249,682 39,849 29,864

229,612 44,098 26,926

Total

319,395

300,636

Reference should be made to note 8 for information on trade receivables.

Current tax assets At 31 December 2008, the amounts due from the tax authorities of the countries in which the group operates totalled € 39.8 million (31 December 2007: € 44.1 million). They may be analysed as follows: (in thousands of Euros)

31.12.2008

31.12.2007

Current tax assets: VAT receivables Current tax receivables Withholdings Total

37,684

31,384

350

11,182

1,815

1,532

39,849

44,098

Current tax assets decreased by € 4.3 million on 2007, mainly due to the parent’s smaller tax credits at year end.

The parent and its Italian subsidiaries, except for Trimil S.p.A., Confezioni di Matelica S.p.A. and Giorgio Armani Yachting S.r.l., participate in the domestic tax consolidation scheme.

Other current receivables At year end, this caption may be analysed as follows: (in thousands of Euros)

102/103 31.12.2008

31.12.2007

Other current receivables: Prepayments and accrued income - third parties

13,543

9,939

Other receivables

16,321

16,987

Total

29,864

26,926

31.12.2008

31.12.2007

1,782

2,446

348

549

2,130

2,995

3,686

1,355

“Prepayments and accrued income” may be analysed as follows: (in thousands of Euros) Accrued income - within one year: Interest Other

Prepayments - within one year: Leases Insurance Other

Total

816

934

6,911

4,655

11,413

6,944

13,543

9,939

“Other current receivables” of € 16.3 million mainly include amounts due from employees and advances to suppliers.

8. Trade receivables This caption may be analysed as follows: (in thousands of Euros)

31.12.2008 Due within one year

31.12.2007

Due after one year

Total, net

Due within one year

Due after one year

Total, net

4,106

249,293

Trade receivables

267,180

3,341

270,521

245,187

Provision for bad debts

(17,498)

(2,103)

(19,601)

(15,575)

Total

249,682

1,238

250,920

229,612

(901) 3,205

(16,476) 232,817

Trade receivables, which include € 3.3 million (before impairment losses) due after one year, comprise royalties of € 17.6 million. The residual amount is mainly related to the sale of goods. There is no specific concentration of receivables as the group’s exposure to credit risk is allocated over a large number of customers. During the year, trade receivables increased by approximately € 20 million on 31 December 2007, mainly due to the increase in the turnover of industrial companies. The caption includes € 9.2 million of royalties invoiced by the parent.

The increase in the above receivables did not generate significant changes in the credit risk. € 0.5 million was used from the provision for bad debts, while additional accruals of € 2.8 million were recognised in the related income statement caption.

Credit risk, ie, the risk that one party to a financial instrument will cause a financial loss for the group by failing to discharge an obligation, is immaterial for the group. As shown in the following table, receivables more than 180 days overdue represent a tiny percentage of the total receivables: (in thousands of Euros)

31.12.2008

Current trade receivables overdue by up to 30 days

81,479

Current trade receivables overdue by between 31 and 90 days

37,425

Current trade receivables overdue by between 91 and 180 days

8,420

Current trade receivables overdue by between 181 and 360 days

10,233

Current trade receivables more than 360 days overdue

3,413

Overdue trade receivables

140,970

Trade receivables due within one year

80,459

Trade receivables due after one year

49,092

Trade receivables due

129,551

Total

270,521

The following table gives a breakdown of trade receivables by geographical segment: (in thousands of Euros)

Italy

31.12.2008

31.12.2007

Due within one year

Due after one year

Total, net

Due within one year

Due after one year

Total, net 92,134

102,120

2,432

104,552

88,537

3,597

Europe (excluding Italy)

72,423

419

72,842

58,489

422

58,911

North America

38,746

-

38,746

43,430

-

43,430

Far East

39,224

490

39,714

18,711

87

18,798

Other

14,667

-

14,667

36,020

-

36,020

267,180

3,341

270,521

245,187

4,106

249,293

Total

9. Deferred tax assets and liabilities At the balance sheet date, net deferred tax assets totalled € 29,454 thousand, broken down as follows: (in thousands of Euros)

31.12.2008

31.12.2007

Deferred tax assets Deferred tax liabilities

62,456 (33,002)

63,722 (32,328)

Total

29,454

31,394

Deferred tax income and expense recognised in profit or loss include the impairment losses on the Japanese group company’s deferred tax assets of € 9.2 million.

The tax rate expected in the years in which the deferred tax assets will reverse was applied in calculating the future tax effects, taking into account the current tax legislation of each relevant country and any amendments known to date.

The following table shows the main items comprising deferred tax assets and liabilities: (in thousands of Euros)

31.12.2008 Assets Liabilities

31.12.2007 Assets Liabilities

Inventories Receivables Provisions for risks Property, plant and equipment Intangible assets Investments Financial assets Other

25,800 6,149 8,736 4,310 4,556 499 3,366 9,040

6,535 116 10,867 12,341 3,143

34,090 4,129 9,188 2,563 4,951 800 (534) 8,535

(81) 6,631 2,524 10,451 12,842 (39)

Total

62,456

33,002

63,722

32,328

31.12.2008

31.12.2007

Securities Other investments Derivatives Other financial assets

100,051 2,534 2,842

2,629 4,350 8,439 -

Total

105,427

15,418

10. Current financial assets “Current financial assets” may be analysed as follows: (in thousands of Euros)

“Securities”, amounting to € 100,051 thousand (31 December 2007: € 2,629 thousand) include Euro bonds of Italian issuers adjusted to fair value.

“Other investments” reflect the fair value of 200,000 Luxottica S.p.A. shares at 31 December 2008.

Derivatives and sensitivity analysis Because of the nature of its activities, the group is exposed to currency risk arising from contractual obligations and purchase and sale orders denominated in currencies other than the Euro (mainly the US dollar, Japanese yen and British pound).

This risk is hedged by entering into cash flow hedges for each currency other than the functional currency.

104/105

The group uses foreign currency forward sale and purchase agreements and currency options; they are not used for trading purposes and are adjusted to fair value at each balance sheet date. In 2007 and 2008, this adjustment was recognised in profit or loss, under “Exchange rate gains and losses” since not all the formal hedge accounting requirements established by IAS 39 were met.

Foreign currency forward sale agreements Notional in foreign currency

Notional in Euro

Fair value

Dollaro US

307,082

214,026

(12,517)

Japanese yen

10,210,695

70,833

(8,767)

British pound

34,355

42,677

7,902

8,100

5,475

593

333,011

(12,789)

Canadian dollar Total

At year end, the net fair value loss on foreign currency forward sale agreements totalled € 12,789 thousand (net fair value gain of € 9,038 thousand in 2007), including gains of € 8,485 thousand and losses of € 21,284 thousand recognised in profit or loss as exchange rate losses.

Foreign currency forward purchase agreements Notional in foreign currency

Notional in Euro

Fair value

27,500

20,355

(450)

20,355

(450)

US dollars Total

At year end, the net fair value loss on foreign currency forward purchase agreements totalled € 450 thousand (net fair value loss of € 599 thousand in 2007).

Foreign currency options

US dollars

Notional in foreign currency

Notional in Euro

Fair value

3,140

2,256

(353)

2,256

(353)

Total

At year end, the net fair value loss on foreign currency options totalled € 353 thousand; the group had no such agreements in 2007.

Sensitivity analysis The balance sheet captions expressed in foreign currency have been identified for sensitivity analysis purposes.

The potential effects of fluctuations in the relevant closing exchange rates to translate such captions into Euros have been taken into account to estimate the potential effects on actual results.

A 5% increase or decrease in the exchange rates would not have a significant effect on the consolidated financial statements.

11. Cash and cash equivalents This caption includes the present cash amount on hand, invested at market rates, broken down as follows: (in thousands of Euros)

31.12.2008

31.12.2007

Bank and postal accounts

154,959

165,639

Term deposits

156,158

203,100

217

2,526

1,232

3,959

312,566

375,224

Cheques Cash and cash equivalents Total

Term deposits of € 156.2 million (31 December 2007: € 203.1 million) are due within two months. Bank and postal accounts and term deposits bear market interest rates. Cash pooling arrangements are in place within the group.

Notes to the main liabilities captions 12. Equity Equity items and related changes are described below: Share capital - At 31 December 2008, the fully subscribed and paid up share capital is divided into 10,000,000 ordinary shares with a nominal value of € 1 each. It amounts to € 9,500,000, net of the nominal amount of the treasury shares, broken down as follows:

106/107

(in thousands of Euros)

31.12.2008

Share capital subscribed and paid up

10,000

Nominal value of treasury shares in portfolio

(500)

Share capital at 31.12.08

9,500

Reserves - They may be analysed as follows: (in thousands of Euros) Revaluation reserves Legal reserve Statutory reserves

31.12.2008

31.12.2007

342

342

2,000

2,000

590

590

Extraordinary reserve

474,391

494,389

Translation reserve

(24,858)

(22,896)

Fair value reserve Other

16,441

(6,720) 14,642

468,906

482,347

Share premium on the net amount of treasury shares in portfolio

(174,500)

(174,500)

Total

294,406

307,847

Revaluation reserves - At 31 December 2008, they totalled € 342 thousand as required by Law no. 72/1983.

The translation reserve comprises the differences arising from the application of different exchange rates to the balance sheet and income statement during translation of financial statements of non-Euro zone foreign subsidiaries into Euros.

The fair value reserve includes fair value gains and losses on available-for-sale financial assets (investment in Safilo) recognised at their recoverable amount. It has a nil balance following the impairment losses that arose from the related tests.

Share premium on the net amount of treasury shares in portfolio – It relates to the premium paid in 2006 exceeding the nominal amount of repurchased treasury shares, which account for 5% of the parent’s share capital.

13. Employee benefits Changes of the year are as follows: (in thousands of Euros)

31.12.2008

31.12.2007

Balance at 1 January

35,104

43,018

Current service costs

8,058

4,327

36

1,459

Interest cost Benefits paid

(7,862)

(13,700)

Balance at 31 December

35,336

35,104

The liability for post-employment benefits, net of advances paid, is similar to a defined benefit plan obligation.

However, the changes introduced by the 2007 finance act, effective from 1 January 2007 for entities with more than 50 employees, significantly modified legislation governing the Italian post-employment benefits.

Following such changes, the group: -

considered the benefits accruing from 1 January 2007 as part of a defined contribution plan, regardless of whether the employee opted to transfer the benefits to a complementary pension fund or the treasury fund of the Italian Social Security Institution (INPS);

-

considered the benefits vested up to 31 December 2006 as part of a defined benefit plan, which requires an actuarial computation, however excluding the future salary increase variable.

The liability for post-employment benefits has been calculated by an external actuary using the projected unit credit method.

The main assumptions used in the actuarial valuation are as follows: Annual discount rate

5.50%

Annual inflation rate

2.00%

Overall annual salary increase rate

4.00%.

14. Provisions for risks and charges This caption may be analysed as follows: (in thousands of Euros)

31.12.2008

31.12.2007

30,439

25,677

7,788

6,749

Provision for returns

10,469

6,800

Total

48,696

39,226

Provision for future risks Provision for agents’ leaving indemnity

The € 9,470 thousand increase in this caption is mainly due to prudently higher accruals made for the provision for returns.

The provision for future risks, set up to cover probable liabilities arising from litigation and other charges, increased over the previous year. This is due to the revision of current risk estimates.

The parent has made no accruals for risks in these consolidated financial statements in connection with the findings of a tax inspection concluded by the Tax Police - Milan Tax Police Department on 26 October 2007, covering 2005 direct and indirect taxes. This decision was taken since the parent had not received any tax assessment report at the balance sheet date and also because it believes there are grounds for defending its position. (in thousands of Euros) Provision for future risks

31.12.2007

Increases

Decreases

31.12.2008 30,439

25,677

6,658

(1,896)

Provision for agents’ leaving indemnity

6,749

1,039

-

7,788

Provision for returns

6,800

7,990

(4,321)

10,469

39,226

15,687

(6,217)

48,696

31.12.2008

31.12.2007

Accrued expenses and deferred income

20,888

16,833

Other liabilities

10,667

-

304

401

31,859

17,234

Total net balance

15. Other non-current liabilities This caption may be analysed as follows: (in thousands of Euros) Other non-current liabilities:

Non-current tax liabilities Total

“Accrued expenses and deferred income” comprise the recognition of lease payments on a straight-line basis over the lease term. The increase is mainly due to new leases agreed by the US subsidiary during the year.

“Other liabilities” mainly include renovation costs incurred by Giorgio Armani Japan for the Ginza building during the year.

16. Other non-current financial liabilities At 31 December 2008, this caption may be analysed as follows: (in thousands of Euros) Options for minority interests Other Total

31.12.2008

31.12.2007

32,321

52,584

-

13,961

32,321

66,545

The decrease in “other non-current financial liabilities” includes € 20.2 million for the fair value loss on the forward purchase option for shares agreed with the minority shareholders of Trimil SA and Trimil S.p.A. and the reclassification of the balance of “Other” (loan granted by Itochu Corporation to Giorgio Armani Japan) to current financial liabilities as it is to be repaid by the end of 2009.

108/109

A breakdown of this caption by due date is as follows: (in thousands of Euros) 2010

32,321

Total

32,321

17. Trade payables Trade payables totalled € 279.6 million (31 December 2007: € 256.0 million) and relate exclusively to commercial transactions.

The following table gives a breakdown of trade payables by geographical segment at 31 December 2008: (in thousands of Euros)

31.12.2008

31.12.2007

Italy Europe (excluding Italy) North America Far East Rest of the world

174,201 26,304 13,600 47,836 17,627

172,411 27,570 10,742 29,997 15,244

Total

279,568

255,965

18. Payments on account This caption of € 11.9 million (31 December 2007: € 13.5 million) mainly comprises contractually agreed customer advances.

19. Current tax liabilities At year end, the caption was comprised as follows: (in thousands of Euros)

31.12.2008

31.12.2007

Taxation on profit for the year VAT payable Other

24,202 2,277 10,669

31,426 1,444 7,596

Total

37,148

40,466

Current tax liabilities mainly include the amounts payable (net of advances paid) to the tax authorities of the countries in which the group operates on profit for 2008 and other payables.

20. Other current liabilities This caption may be analysed as follows: (in thousands of Euros)

31.12.2008

31.12.2007

Other current payables Sums payable to social security institutions Accrued expenses and deferred income

40,409 12,312 30,553

39,672 11,414 34,053

Total

83,274

85,139

Like for 2007, “Other current payables” include amounts due to personnel, mainly for untaken holidays and bonuses.

The balance of “Sums payable to social security institutions” (€ 12,311 thousand; 31 December 2007: € 11,414 thousand), relates to contributions to be paid to such institutions by both the companies and employees in respect of December 2008 remuneration and paid, in accordance with the law, in January 2009. The caption also includes the portion of the payable for contributions on accrued holidays, untaken leave and additional months’ pay.

Accrued expenses and deferred income At year end, this caption may be analysed as follows: (in thousands of Euros)

31.12.2008

31.12.2007

Accrued expenses: Personnel expenses

7,625

6,486

16,756

19,629

24,381

26,115

Royalties and advertising contributions

4,257

7,788

Other

1,915

150

6,172

7,938

30,553

34,053

31.12.2008

31.12.2007

Current bank loans and overdrafts

43,325

9,095

Fair value of derivatives

13,592

-

Other

17,215

681

Total

74,132

9,776

Other

Deferred income:

Total

21. Other current financial liabilities At year end, this caption was comprised as follows: (in thousands of Euros)

“Current bank loans and overdrafts” mainly consist of two credit facilities agreements for GA Japan (€ 14.3 million) and GA Corporation (€ 20.4 million) which bear interest at market rates (0.93% and 1.36%, respectively).

“Other” include the loan given by Itochu Corporation to Giorgio Armani Japan of € 16,543 thousand (2007: € 13,890 thousand).This loan was classified as a non-current financial liability in 2007 and its objective is to secure the guarantee deposits paid by the Japanese subsidiary to third parties, should the latter default at the repayment date.

The other current financial liabilities also include the liability arising from the fair value adjustment of currency hedges at year end.

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22. Guarantees and commitments Personal guarantees given This caption may be analysed as follows at year end: (in thousands of Euros) Sureties given by banks and insurance companies to VAT offices Sureties given by banks to third parties

Total

31.12.2008

31.12.2007

5,305

6,087

16,600

4,712

21,905

10,799

21,905

10,799

“Sureties given by banks and insurance companies to VAT offices” increased, following the issue of letters of credit of € 11.6 million by Simint.

Commitments Several subsidiaries have agreed binding lease agreements which expire after 2010. At year end, the total commitment for such leases is approximately € 514.5 million with an average annual commitment over the next five years of approximately € 57.9 million.

Future lease payments in respect of the above agreements are as follows: (in thousands of Euros) 2009

67,645

2010

63,247

2011

57,706

2012 subsequent years

53,417 272,800 514,815

With respect to Presidio Holdings Ltd., in which the group holds a 50% interest, and especially the joint venture agreement with Como Holdings which has an expiry date of 31 December 2025, the agreement provides that the group will acquire all the Presidio Holdings Ltd shares at a price equal to their acquisition date fair value. The parent has a call option for shares not exceeding 25% of the share capital of the company which will manage the Armani Hotels which, as of the date of these financial statements, are wholly owned by third parties. The price will substantially equal their fair value.

Notes to the main income statement captions 23. Revenue a. Revenue Revenue from the sale of goods and the rendering of services may be analysed as follows: (in thousands of Euros)

2008

2007

Revenue from the sale of goods Royalties and design and advertising consultancy fees Other revenue

1,467,457 132,256 20,562

1,453,071 129,296 14,252

Total

1,620,275

1,596,619

(in thousands of Euros)

2008

2007

Italy Europe (excluding Italy) North America Far East Rest of the world

439,974 481,650 295,305 274,501 128,845

426,816 458,057 335,611 252,530 123,605

1,620,275

1,596,619

Revenue increased by approximately € 23.6 million on the previous year, up 1.5%.

A breakdown by geographical segment, based on the end market, is as follows:

Total

Reference should be made to the directors’ report for information on the group’s performance.

b. Other income In 2008, other income totalled € 19,390 thousand. It may be analysed as follows: (in thousands of Euros)

2008

2007

Other non-financial revenue and income Gains on the sale of operating assets used in normal activities Prior year income and higher than estimated costs

14,228 51 5,111

24,070 5,528 2,281

Total

19,390

31,879

“Other income” decreased significantly on the previous year, mainly due to the fact that the 2007 balance included more positive non-recurring income items.

24. Costs Raw materials, consumables, supplies and goods These amount to € 465.5 million (2007: € 458.3 million), equal to 28.7% of net revenue, in line with 2007.

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Services These amount to € 468.5 million (2007: € 443.8 million), equal to 28.9% of net revenue (2007: 27.8%). The balance includes advertising expenses and costs to promote the group’s image, outsourcing, consultancy fees, insurance costs, travel expenses, etc.

Costs for services may be analysed as follows: (in thousands of Euros)

2008

2007

Outsourcing Utilities and services Consultancies Transport and sales duties Insurance Sales commissions Advertising Other services

132,738 29,427 34,145 69,706 7,797 22,572 117,402 54,682

124,096 34,388 25,137 69,686 4,485 17,501 99,243 69,295

Total

468,469

443,831

The largest increase in costs for services is due to costs for advertising and consultancies, mainly incurred by the parent and Modefine S.A..

Use of third party assets The balance of € 115.5 million (2007: € 100.7 million) mainly consists of lease payments made by the group’s commercial companies. The increase is largely due to higher lease costs incurred by the American subsidiary (€ 5.8 million), Giorgio Armani Hong Kong (€ 1.5 million) and Giorgio Armani Japan (€ 1.1 million).

Personnel expenses These total € 274.2 million (2007: € 261.6 million) and account for 16.9% of net revenue, slightly down over the previous year. With respect to 2007, wages and salaries of the group production personnel increased as a consequence of the hiring of new personnel and normal labour cost trends.

Personnel expenses incurred by the group in 2007 and 2008 may be analysed as follows: (in thousands of Euros)

2008

2007

Wages and salaries Social security charges Employee benefits Other costs

211,737 47,891 10,018 4,508

205,394 45,675 4,327 6,185

Total

274,154

261,582

2008

2007

Management White collars Blue collars Foreign company employees

89 1,826 1,188 2,280

90 1,798 1,184 1,991

Total

5,383

5,075

The average workforce underwent the following changes during the year:

The increase in the average workforce mainly related to the retail area in the Far East following the opening of new stores.

Amortisation/depreciation and impairment losses Reference should be made to the paragraphs relating to property, plant and equipment and intangible assets.

Other operating costs These total € 14.0 million (2007: € 16.5 million)

25. Financial income and expense The share of profits of equity-accounted investees of € 1,690 thousand (2007: € 2,067 thousand) arises from the application of the equity method to the investment held in Presidio Holdings Limited.

Other income and expense includes the following items: (in thousands of Euros)

2008

2007

Other financial income: - income from securities included under current assets

431

170

17,990

17,054

Interest and other financial expense

(5,022)

(6,094)

Exchange rate gains and losses

(8,215)

Totale

5,184

- other income

7,657 18,787

“Income from securities included under current assets” of € 431 thousand (2007: € 170 thousand) relates to dividends collected on securities classified as current financial assets. The net balance of “Other income” and “Interest and other financial expense” is in line with the previous year. “Exchange rate gains and losses” decreased sharply due to the fair value measurement of the currency hedges at year end. This drop is mostly due to the unexpected and extraordinary appreciation of the Yen and the US dollar against the Euro in the last quarter of the year.

26. (Reversals of) impairment losses on financial assets Impairment losses include the fair value loss on financial assets and totalled € 18,370 thousand, which includes the impairment losses on the 1.5% investment in Safilo Group S.p.A. of € 16,554 thousand.

27. Income tax expense Income tax expense totalled € 85,762 thousand (2007: € 90,048 thousand). This caption may be analysed as follows: (in thousands of Euros) Current tax expense Deferred tax (income) expense Total

2008

2007

82,693

94,986

3,069

(4,938)

85,762

90,048

Deferred tax is measured as described in the section on the accounting policies. The 2008 tax rate was 40.2% (2007: 29.1%).

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The reconciliation between the theoretical tax rate used to calculate the income tax expense (equal to the Italian tax rate of 31.4%) and the group’s effective tax rate is as follows: 2008

2007

Theoretical tax rate

31.4%

37.3%

Tax effect of non-deductible costs

12.6%

5.9%

(10.2%)

(14.1%)

Effects of the different rates applied by foreign subsidiaries Effects of the decrease in deferred tax assets Effective tax rate

6.4%

0%

40.2%

29.1%

28. Other information Fees of the directors and statutory auditors The fees paid to the directors and statutory auditors of the parent, including those due for duties performed for other consolidated companies, are set out below:

Directors Statutory auditors

2008

2007

2,491 290

2,975 380

Subsequent events The fifth Armani concept store was opened in New York (on Fifth Avenue) in February 2009. Together with the stores in Milan, Munich, Hong Kong and Tokyo, the New York store is part of a group of upmarket department stores dedicated exclusively to Armani products. The new concept store has four floors and a total floor space of more than 4,000 square metres. The store is compact and light thanks to its front which is entirely made of glass (50 metres long by 14 metres high).

As well as presenting products from the different group labels, the concept store also houses an Armani restaurant and the first Armani Dolci in the US. Related party transactions Transactions between subsidiaries, associates and related parties take place on an arm’s-length basis. The financial statements impact of transactions between consolidated companies is eliminated upon consolidation.

In short, the transactions carried out with the above-mentioned companies relate to the sale of goods, royalty income, provision of services and lease income, purchases of goods and services, lease expense, loans raised for investments, joint current accounts held to settle intragroup relationships as well as cash pooling services to optimise the management of liquid funds.

The parent undertakes transactions with other subsidiaries of its shareholder, mainly property leases. During 2008, these transactions amounted to € 9.5 million. In addition and as disclosed in note 5, the group was repaid the € 20.0 million loan which it had granted to Franc S.r.l., another company held by the parent’s shareholder.

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Supplementary notes

118/119

Consolidation area Companies consolidated on a line-by-line basis at 31 december 2008 % of holding Name

Registered office

Parent Giorgio Armani Spa Giorgio Armani Retail Srl Alia Srl Intai Spa Factory Store Spa Factory Outlet Holland B.V. Moda Sourcing Company Srl Deanna Spa Guardi Spa Giorgio Armani Distribuzione Srl Immobiliare Fondazione Capocotta Srl GA Corporation Finance Ltd. Giorgio Armani Holding B.V. Simint Spa Giorgio Armani Hong Kong Limited Moda Sourcing Co., Ltd Giorgio Armani Shangai Trading Co. Trimil Spa (*) Confezioni di Matelica Spa (*) Trimil S.A. (*) Trimil Corporation (*) Trimil Canada Corporation (*) Borgo 21 S.A. Giorgio Armani Maximilianstrasse GmbH G.A. Waterloo 28 S.A. Giorgio Armani Australia Pty Ltd. Giorgio Armani Corporation Giorgio Armani Japan Co. Ltd. GA Modefine S.A. GA Yachting Srl Giorgio Armani India Private Limited Pallacanestro Olimpia Milano Ssrl Emporio Armani USA, Inc. 1450 Fourteen Fifty Partnership EA Las Vegas, Inc. Grant Eatery, Inc. Newbury Eatery, Inc.

Milan Milan Milan Milan Milan Roermond Milan S. Martino in Rio (RE) Fossò (VE) Milan Rome Dublin, Ireland Amsterdam, Olanda Modena Hong Kong Hong Kong Shangai Settimo Torinese (TO) Settimo Torinese (TO) Mendrisio, Switzerland New York, USA Toronto, Canada Mendrisio, Switzerland Munich, Germany Brussels, Belgium Sydney, Australia New York, USA Tokyo, Japan Mendrisio, Switzerland Milan New Delhi Milan Delaware, USA New York, USA Delaware, USA Delaware, USA Delaware, USA

(1) Held by Giorgio Armani Retail Srl. (2) Held by Intai Spa. (3) Held by Giorgio Armani Holding B.V..

(4) Held by Giorgio Armani Hong Kong Limited.

(5) Held by Giorgio Armani Corporation.

(6) Held by Emporio Armani USA Inc..

(7) Held by Trimil Spa. (8) Held by Trimil S.A..

(9) Held by Trimil Corporation. (*) Companies for which there is an option on minority interests.

Currency

EUR EUR EUR EUR EUR EUR EUR EUR EUR EUR EUR EUR EUR EUR HKD HKD USD EUR EUR CHF USD CAD CHF EUR EUR AUD USD JPY CHF EUR INR EUR USD USD USD USD USD

Share capital

Direct

Indirect

10,000,000 32,620,000 6,000,000 5,200,000 260,000 500,000 520,000 2,500,000 11,252,964 103,400 300,000 5,200,000 4,500,000 24,275,795 160,000,000 100,000 2,100,000 13,500,000 7,800,000 6,000,000 11,000,000 25,000,000 5,000,000 2,000,000 10,300,000 8,977,618 253,150,000 2,500,000 20,000,000 20,000,000 3,000,000 100 337,000 1,000 1,000 1,000

100,0% 100,0% 100,0% 100,0% 99,5% 73,0% 99,9999% 100,0% 100,0% 0,12% 51,0% 0,18% 43,26% 100,0% 100,0% -

100,0% 100,0% 100,0% 100,0% 10,0% 0,0001% 99,88% 100,0% 100,0% 51,0% 51,0% 51,0% 51,0% 100,0% 100,0% 99,82% 100,0% 56,74% 100,0% 100,0% 51% 100,0% 50,0% 100,0% 100,0% 100,0%

(1) (1) (2) (3)

(1) (3)

(3) (3) (4) (7) (3) (8) (9) (3) (3) (3) (3) (3) (3) (3) (3) (5) (6) (6) (6) (6)

Investments measured using the equity method at 31 december 2008 % of holding Name

Registered office

Presidio Holdings Ltd

London, UK

Currency

Share capital

Direct

Indirect

USD

7,200

25%

25%

(1)

(1) Held by Giorgio Armani Holding B.V..

120/121

Victoria Beckham

Report of the independent auditors

122/123

124/125

Directors’ report - Giorgio Armani S.p.A.

126/127

Directors’ report In 2008, Giorgio Armani S.p.A. revenues totalled € 204.2 million (2007: € 196.2 million), up by 4.1%. The operating loss (the difference between production revenues and cost) amounted to € 0.2 million, compared to an operating profit of € 4.7 million in 2007. The net profit for the year came in at € 71.2 million (2007: € 52.7 million), after taxes of € 7.2 million (2007: € 9.7 million).

Financial performance and results Profit and loss account The company’s key profit and loss account figures are as follows: (in millions of Euros) Wholesale turnover Turnover from sales and services EBITDA Operating profit (loss) Net financial income Adjustments to financial assets Pre-tax profit Net profit for the year

2008

2007

2,516.9 204.2 8.5 (0.2) 112.2 (33.6) 78.4 71.2

2,360.8 196.2 13.0 4.7 65.7 (8.1) 62.4 52.7

In 2008, wholesale turnover, which reflects sales of Armani-label products by both group and third-party manufacturers and is shown at the factory price, increased by 6.6%, reaching € 2,516.9 million, compared to € 2,360.8 million in 2007.

2008 revenues grew by € 8.0 million and may be analysed as follows: (in millions of Euros)

2008

2007

Royalties and design consultancy fees Revenues from advertising consultancy fees Revenues from the sale of goods

112.7 86.2 5.3

55.2% 42.2% 2.6%

104.6 85.1 6.5

53.3% 43.4% 3.3%

Total

204.2

100.0%

196.2

100.0%

The rise in royalties and design consultancy fees (+7.7%) and advertising consultancy fees (+1.3%) reflects growth in sideline turnover.

EBITDA decreased from € 13.0 million for 2007 to € 8.5 million. Such reduction counters the € 8.0 million rise in revenues (as shown above) and is due to the € 12.5 million increase in operating costs, principally attributable to: •

higher costs for services, mainly due to the increase in advertising investments (€ 10.1 million);

•

increased personnel expenses (€ 1.1 million).

EBIT amounted to a negative € 0.2 million, compared to a positive € 4.7 million in the previous year. With amortisation and depreciation totalling € 8.7 million (2007: € 8.3 million), the decrease is in line with the reduction in EBITDA. Net financial income amounted to € 112.2 million (2007: € 65.7 million). Dividends of € 112.9 million were collected during the year, compared to € 65.1 million in 2007.

The net balance of adjustments to financial assets was a negative € 33.6 million (2007: - € 8.1 million), related to the write-down of the investments in the subsidiaries Pallacanestro Olimpia Milano S.s.r.l. (€ 11.1 million), Giorgio Armani Retail S.r.l. (€ 6.3 million) and Giorgio Armani Corporation (€ 3.4 million) and in Safilo Group S.p.A. (€ 12.8 million).

The net profit for the year came to € 71.2 million versus € 52.7 million in 2007, after taxes of € 7.2 million (2007: € 9.7 million). The increase in the net profit for the year was mainly due to the larger dividends collected compared to the previous year.

Financial position Giorgio Armani S.p.A.’s main balance sheet figures at year end are summarised in the following reclassified balance sheet. (in millions of Euros)

31.12.2008

31.12.2007

Net fixed assets

550.4

525.4

Net current assets

(40.0)

(6.5)

Employees’ leaving entitlement

(10.1)

(11.5)

8.4

(49.9)

Net financial position (indebtedness)

Net equity

508.7

457.5

508.7

457.5

508.7

457.5

Net fixed assets rose by € 25.0 million to € 550.4 million on 31 December 2007. The increase was mainly due to the acquisitions and capitalisations of investments, described in the section on “Significant transactions”, of € 117.4 million, partly offset by the € 33.6 million write-downs of investments (described earlier) and repayment of e 61.9 million by the subsidiary GA Corporation Finance Limited for the capital injection.

Net current assets may be analysed as follows: (in millions of Euros) Inventory Trade receivables Trade payables Provisions for risks and charges Other current liabilities (net of other current assets)

31.12.2008

31.12.2007

4.6

4.5

43.4

51.3

(27.9)

(21.7)

(8.4)

(8.4)

(51.7)

(32.2)

(40.0)

(6.5)

The company’s net financial position amounted to € 8.4 million at year end, compared to net financial indebtedness of € 49.9 million at 31 December 2007. The summarised cash flow statement is as follows. (in millions of Euros)

2008

2007

Opening net financial indebtedness

(49.9)

(17.0)

Cash flows from operating activities

145.9

17.7

Cash flows used in investing activities

(67.6)

(20.6)

Cash flows used in financing activities

(20.0)

(30.0)

58.3

(32.9)

8.4

(49.9)

Net cash flows of the year Closing net financial position (indebtedness)

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Cash flows from operating activities totalled € 145.9 million. Cash flows used in investing activities mainly related to investments in intangible and tangible fixed assets (€ 12.1 million) and acquisitions of investments (€ 117.4 million) offset by repayment of a capital injection granted to the subsidiary GA Corporation Finance Ltd in previous years (€ 61.9 million). Cash flows used in financing activities related to the payment of a dividend of € 20.0 million.

Net equity amounted to € 508.7 million at year end, compared to € 457.5 million at the end of the previous year.

The increase is due to the net profit for the year of € 71.2 million, partially offset by € 20.0 million in dividends paid.

Financial indicators Certain financial indicators are set out below and commented on to give a more complete view of the company’s position.

31.12.2008

31.12.2007

ROE

Net profit for the year / Net equity

14.0%

11.5%

Debt/equity ratio

Liabilities / Net equity

0.51

0.55

Current ratio

Current assets / current liabilities

1.18

1.20

As can be seen, the company’s profitability has improved with an increase in ROE due to the higher net profit.

The company’s financial position has also improved, shown by the reduction in the debt/equity ratio (which was already very positive in 2007). The company continues to be well able to cover its current financial commitments with a current ratio of 1.18, in line with that of the previous year.

There are no non-financial indicators that would give a clearer view of the company’s results of operations.

Significant transactions The following transactions were carried out in 2008: •

acquisition from the indirectly controlled Giorgio Armani Maximillianstrasse GmbH and GA Waterloo 28 SA of their investments in Giorgio Armani Retail S.r.l. (5.886% and 2.146%, respectively) for considerations of € 4.4 million and € 1.6 million, respectively. This meant that the company now has 100% direct control of the latter subsidiary;

•

acquisition of 50% of Roma Sportwear S.r.l. becoming the sole quotaholder; this transaction cost € 11.0 million; Roma Sportwear S.r.l. was merged into Giorgio Armani Retail S.r.l. in December;

•

acquisition of 80% of Pallacanestro Olimpia Milano S.s.r.l. for € 1.5 million; following non-subscription of the quota capital increase approved in October 2008 by the other quotaholders, the company became the sole quotaholder in December 2008. It subsequently recapitalised the subsidiary injecting € 10.4 million, € 8.4 million before 31 December 2008 and € 2.0 million in January 2009;

•

acquisition of 25% of the English-based company Presidio Holdings Ltd. paying US$ 77.8 million (€ 60.4 million); another 25% is held by the wholly-owned subsidiary Giorgio Armani Holding B.V.;

•

injection of € 28.0 million to Giorgio Armani Yachting S.r.l.;

•

repayment of € 61.9 million by GA Corporation Finance Limited, previously recognised as a share capital injection.

In order to streamline the group’s structure, the following transactions took place during the year involving

wholly-owned subsidiaries: •

merger of Deimutti Compagnia dei Cuoi S.r.l. into Guardi S.p.A;

•

merger of Borgo 21 S.p.A. into its parent MSC S.r.l. (formerly called Antinea S.r.l).

Performance of the main subsidiaries The key figures of the main group companies are as follows: MSC S.r.l. (formerly Antinea S.r.l.), which is wholly owned, produces men’s and women’s clothing for the Giorgio Armani and Emporio Armani labels and women’s clothing for the Armani Collezioni label. Its turnover amounted to € 231.0 million (2007: € 145.7 million) and its net profit for the year came in at € 19.1 million (2007: € 15.5 million). As noted, Borgo 21 S.p.A. was merged into MSC S.r.l. in July with effect from 1 January 2008. The 2007 pro forma consolidated financial statements of MSC S.r.l. and Borgo 21 S.p.A. are as follows: turnover of € 224.6 million and net profit for the year of € 20.5 million.

Intai S.p.A., which is indirectly wholly owned, produces, inter alia, ties, scarves, underwear, beachwear and leather accessories. It also holds the licence for the Armani Casa line. This company reported revenues of € 144.4 million (2007: € 119.5 million). Its net profit for the year amounted to € 9.2 million (2007: € 7.5 million).

The wholly-owned Simint S.p.A. produces casual clothing under the Armani label. Its turnover for 2008 was € 338.1 million (2007: € 349.9 million) and its net profit for the year totalled € 50.2 million (2007: € 44.0 million).

Trimil S.p.A. is 51% owned and sells men’s clothing under the Armani Collezioni label in Italy. In 2008, revenues amounted to € 22.3 million (2007: € 21.5 million) and the net profit for the year came in at € 0.9 million, in line with the previous year.

Confezioni di Matelica S.p.A., which is 51% indirectly owned, produces men’s clothing under the Armani Collezioni label. The financial statements as at and for the year ended 31 December 2008 show sales of € 52.1 million (2007: € 55.2 million) and a net profit for the year of € 0.4 million (2007: € 2.3 million).

Guardi S.p.A., which is wholly owned, produces men’s and women’s footwear as well as bags and small leather objects. It reported 2008 revenues of € 95.3 million (2007: € 54.9 million) and a net loss for the year of € 1.2 million (2007: net profit of € 0.4 million). As noted, Deimutti Compagnia dei Cuoi S.r.l. was merged into it in December. The 2007 pro forma consolidated financial statements of the two companies showed turnover of € 98.9 million and a net profit for the year of € 1.6 million.

Deanna S.p.A., also wholly owned, produces men’s and women’s knitwear. It reported revenues of € 71.5 million in 2008 (2007: € 50.8 million) and a net profit for the year of € 6.2 million (2007: € 2.5 million).

Borgo 21 SA, which is indirectly wholly owned, sells clothing under the Giorgio Armani line. This company reported revenues of SwF 148.8 million (€ 93.7 million) in 2008 and a net profit for the year of SwF 20.6 million (€ 13.0 million), compared to revenues of SwF 215.0 million and a net profit for the year of SwF 67.6 million in 2007. As part of the group streamlining process, the company, whose licences expired with completion of the 2008 collections, was put into liquidation. GA Modefine SA has taken on the marketing of the Giorgio Armani line products.

Trimil S.A., which is 51% indirectly owned, sells men’s clothing under the Armani Collezioni label. In 2008, this company reported revenues of SwF 213.9 million (€ 134.7 million), compared to SwF 221.7 million in 2007. Its net

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profit for the year amounted to SwF 23.0 million (€ 14.5 million), up from SwF 22.9 million in the previous year.

GA Modefine S.A. is indirectly wholly owned. It manages, protects, uses and develops Armani labels in all countries other than Italy and sells Armani label clothing and related accessories. This company reported revenues of SwF 995.1 million in 2008 (€ 626.9 million) and a net profit for the year of SwF 202.6 million (€ 127.6 million), compared to revenues of SwF 865.8 million and a net profit for the year of SwF 204.5 million in 2007.

Giorgio Armani Distribuzione S.r.l., which is 99.5% owned, acts as a sales agent for certain group licensees.

In 2008, revenues reached € 37.7 million from € 35.3 million in the previous year. It reported a net profit for the year of € 15.8 million, compared to € 12.6 million in 2007.

Giorgio Armani Retail S.r.l. is wholly owned and reported revenues of € 173.3 million in 2008, compared to € 172.3 million in 2007, and a net loss for the year of € 13.2 million, versus a net loss of € 13.5 million in the previous year. The company manages group-owned stores in Italy, France, Germany, Belgium, Sweden and England.

Giorgio Armani Japan Co. Ltd., which is indirectly wholly owned, manages group-owned stores and Armani label product distribution activities in Japan. Revenues totalled JPY 27.6 billion (€ 181.0 million), down by 2.5% in local currency. In 2008, it reported a net loss for the year of JPY 4.5 billion (€ 29.5 million), compared to a net loss of JPY 0.7 billion in 2007.

Giorgio Armani Hong Kong Ltd., indirectly 100% owned, manages group-owned stores and the distribution of products under the Armani label in China and Hong Kong. This company reported revenues of HK$ 1,060.4 million (€ 92.6 million), up 42.6% in local currency. The net loss for the year amounted to HK$ 46.2 million (€ 4.0 million), compared to a net profit of HK$ 46.4 million in 2007.

Giorgio Armani Corporation, which is indirectly wholly owned, manages group-owned stores and restaurants in the US and the distribution activities of certain lines under the Armani label in that market. 2008 consolidated revenues amounted to US$ 262.8 million (€ 178.7 million) compared to US$ 274.4 million in the previous year.

This company reported a net loss for the year of US$ 43.3 million (€ 29.4 million), compared with a net loss for the previous year of US$ 28.4 million.

Related party transactions Giorgio Armani S.p.A. performs commercial, financial and service transactions at normal market conditions with its subsidiaries. The main transactions of the year may be summarised as follows: (in millions of Euros)

2008

2007

Turnover from sales and services Other revenues Financial income

142.1 7.3 5.6

130.9 7.0 3.2

155.0

141.1

10.6 11.3 6.3

11.8 6.6 3.6

28.2

22.0

Purchases of goods Services and other operating costs Financial charges

Turnover from sales and services principally relates to royalties and design and advertising consultancy fees invoiced to Simint S.p.A. (€ 34.9 million), GA Modefine S.A. (€ 23.0 million), Trimil S.A. (€ 15.4 million), Intai S.p.A. (€ 16.8 million), MSC S.r.l. (€ 16.8 million), Borgo 21 S.A. (€ 11.6 million), Guardi S.p.A. (€ 8.3 million),

Presidio International Inc. (€ 4.2 million), Trimil S.p.A. (€ 2.7 million), Presidio Holdings Ltd. (€ 2.0 million) and Deanna S.p.A. (€ 1.9 million).

Other revenues include € 4.4 million for the recharging of services costs to subsidiaries and € 1.4 million of lease income from subsidiaries.

Financial income and charges relate to the joint current account and cash pooling arrangements with the Italian subsidiaries and the loan granted by the subsidiary GA Corporation Finance Ltd. Purchases of goods mainly refer to finished goods and samples purchased from Guardi S.p.A. (€ 3.6 million), MSC S.r.l. (€ 2.8 million), Giorgio Armani Retail S.r.l. (€ 1.7 million), Intai S.p.A. (€ 1.1 million) and Simint S.p.A. (€ 0.5 million).

Services mostly relate to the recharging of advertising and promotional costs incurred by Giorgio Armani Japan Co. Ltd. (€ 2.0 million) and Giorgio Armani Corporation (€ 3.3 million) on the company’s behalf, sponsorship costs for Pallacanestro Olimpia Milano S.s.r.l. (€ 1.5 million), recharges for services from Giorgio Armani Hong Kong Ltd. (€ 1.0 million) and recharges for sundry services and personnel expenses incurred by Giorgio Armani Corporation (€ 0.9 million).

Transactions involving investments are described in the section on the “Significant transactions”. Intercompany receivables and payables, guarantees given on behalf of group companies and dividends received are discussed in the notes to the financial statements. The notes also include disclosure of the annual fees due to company directors and statutory auditors. Finally, the caption “Use of third party assets” includes lease costs totalling € 9.5 million (2007: € 8.3 million) paid to companies owned by the company’s shareholder.

Significant post-balance sheet events On 30 March 2009, the deed for the merger of the subsidiary Giorgio Armani Holding B.V. into Giorgio Armani S.p.A. was drawn up. The transaction is part of the ongoing group streamlining project and is effective with third parties from 1 April 2009.

Reference should be made to the directors’ report on the consolidated financial statements for information on the group.

Outlook Based on the figures available for the first few months of 2009, the company’s performance should again be positive, notwithstanding the difficult market context.

Secondary offices As required by article 2428 of the Italian Civil Code, as well as its registered office in Via Borgonuovo 11, Milan, the company has secondary offices in Via Borgonuovo 18 and 21, Via Borgognone 46, 59 and 61, Via dei Giardini 2, Via Valtellina 65 and Via Columella 36, all in Milan. It also has offices in Strada provinciale per Bregnano 12 in Vertemate con Minoprio (CO), Via Provinciale della Pioda in Cadorago (CO) and Via Rivara 1 in Cigognola (PV).

Treatment of personal data In compliance with the requirements of legislation governing the treatment of personal data (Legislative decree no. 196 of 30 June 2003), the company has updated the data protection document covering how “sensitive” data is to be treated in its IT systems.

132/133

Research and development activities In 2008, the company continued significant research activities both on fabrics and materials, and in terms of design for the creation of new models. These activities were aimed at providing manufacturing companies with assistance in producing new collections. Costs of this nature incurred during the year (mainly personnel expenses) were entirely expensed.

Own shares At year end, the company held 500,000 own shares, comprising 5% of its share capital. The carrying amount of these shares, which have a nominal value of â‚Ź 1 each, totalled â‚Ź 175.0 million. A reserve of the same amount has been created under net equity.

Main risks and uncertainties Credit risk The risk that one party to a financial instrument will cause a financial loss for the company by failing to discharge an obligation.

Most of the company’s business dealings are with subsidiaries and it is exposed to credit risk only in transactions with third parties, comprised of a small number of customers with which it has licensing or franchising agreements (except for a few immaterial positions), and it constantly monitors their solvency.

Liquidity risk This is the risk that the company will encounter difficulty in meeting obligations associated with financial liabilities.

The company is not exposed to any specific liquidity or cash flow risks. It enjoys a sound and positive financial structure and heads a group with a positive financial position. It also has cash pooling arrangements in place with subsidiaries to optimise cash management.

Market risk This category includes all risks directly or indirectly linked to fluctuations in market prices, including: - currency risk; - interest rate risk; The company is exposed to currency risk on revenues and costs invoiced in foreign currency (mainly US dollars).

For the most part, this risk was hedged during the year through forward currency purchase agreements.

At year end, the company has a positive net financial position. It has financial payables due solely to subsidiaries, mostly offset by credit positions as part of the group cash pooling system. Therefore, it is not exposed to interest rate risks.

The environment and the workforce There are no particular issues with respect to the environment, considering the company’s activities, nor with its employees.

Proposal to the shareholders’ meeting Dear shareholders, we ask you to approve these financial statements, which were prepared within 180 days of year end as provided for by the company’s by-laws, and to allocate the net profit for the year of € 71,246,932 to the extraordinary reserve.

29 April 2009 CHAIRMAN OF THE BOARD OF DIRECTORS Giorgio Armani

134/135

Financial statements as at and for the year ended 31 December 2008

136/137

Giorgio Armani S.p.A. Balance sheet (€) ASSETS A)

Share capital proceeds to be received

B)

Fixed assets I. Intangible fixed assets 6) Assets under development and payments on account 7) Other II.

III.

Tangible fixed assets 1) Land and buildings 2) Plant and machinery 3) Industrial and commercial equipment 4) Other assets Financial fixed assets 1) Investments: a) subsidiaries b) associates c) other 2) Financial receivables: d) from others due after one year 4) Own shares: – nominal amount – premium

Total fixed assets C)

Current assets I. Inventory 1) Raw materials, consumables and supplies 4) Finished goods II.

Crediti 1) Trade receivables: – due within one year – due after one year From subsidiaries: – due within one year 3) From associates: – due within one year 4-bis) Tax receivables: – due within one year – due after one year

31.12.2008

31.12.2007

–

–

1,730,307 9,312,988

2,705,009 5,989,071

11,043,295

8,694,080

309,925 475,442 359,376 3,143,515

102,629 354,656 386,822 2,913,589

4,288,258

3,757,696

296,864,233 60,417,346 2,621,614

322,524,164 15,380,562

165,044

24,434

500,000 174,500,000

500,000 174,500,000

535,068,237

512,929,160

550,399,790

525,380,936

191,953 4,360,003

231,718 4,282,018

4,551,956

4,513,736

13,880,302 -

21,922,139 500,000

13,880,302

22,422,139

143,586,864

102,548,364

2,218,644

-

9,298,356 632,698

6,156,536 7,859,472

9,931,054

14,016,008

5,583,110 5,012,509

4,727,311 4,572,844

10,595,619

9,300,155

442,635

941,945

442,635

941,945

180,655,118

149,228,611

2)

4-ter) Deferred tax assets: – due within one year – due after one year 5)

III.

IV.

From others: – due within one year

Current financial assets 3) Other investments Liquid funds 1) Bank and postal deposits 2) Cheques on hand 3) Cash-in-hand and cash equivalents

Total current assets D)

Prepayments and accrued income 1) Accrued income 2) Prepayments

Total TOTAL ASSETS

2,515,200

2,515,200

2,515,200

2,515,200

25,382,089 1,508 230,333

21,565,702 5,300 151,615

25,613,930

21,722,617

213,336,204

177,980,164

8,157,098

201,070 5,653,561

8,157,098

5,854,631

771,893,092

709,215,731

Balance sheet (â‚Ź) LIABILITIES A)

Net equity I Share capital IV Legal reserve V Reserve for own shares in portfolio VII Other reserves IX Net profit for the year

Total B)

Provisions for risks and charges 3) Other provisions

Total C) D)

Employees' leaving entitlement

31.12.2008

31.12.2007

10,000,000 2,000,000 175,000,000 250,509,572 71,246,932

10,000,000 2,000,000 175,000,000 217,856,819 52,650,253

508,756,504

457,507,072

8,440,153

8,440,153

8,440,153

8,440,153

10,090,547

11,467,487

199 20,197,059 139,377,799 7,701,616 2,760,062

15,777,971 146,817,033 3,176,603 2,678,230

6,961,053 2,986,872

4,767,353 1,904,665

Payables 5) 6) 8) 11) 12) 13)

Bank loans and borrowings Trade payables Payables to subsidiaries Tax payables Social security charges payable Other payables: - due within one year - due after one year

9,947,925

6,672,018

179,984,660

175,121,855

1,560,171 63,061,057

2,849,998 53,829,166

64,621,228

56,679,164

771,893,092

709,215,731

31,12,2008

31.12.2007

Personal guarantees given to third parties on behalf of subsidiaries Personal guarantees given to third parties Risks and commitments

163,455,050 2,633,421 117,120,727

20,379,050 1,266,746 74,631,496

Total

283,209,198

96,277,292

Total E)

Accrued expenses and deferred income 1) Accrued expenses 2) Deferred income

Total TOTAL LIABILITIES

MEMORANDUM AND CONTINGENCY ACCOUNTS

138/139

Giorgio Armani S.p.A. Profit and loss account (â‚Ź)

A)

Production revenues 1) Turnover from sales and services 5) Other revenues and income

Total B)

Production cost 6) Raw materials, consumables, supplies and goods 7) Services 8) Use of third party assets 9) Personnel expenses: a) wages and salaries b) social security contributions c) employees' leaving entitlement e) other costs

10)

11) 12) 14)

Amortisation, depreciation and write-downs: a) amortisation of intangible fixed assets b) depreciation of tangible fixed assets d) write-downs of current receivables and liquid funds Change in raw materials, consumables, supplies and goods Provisions for risks Other operating costs

Total

Financial income and charges 15) Income from investments in subsidiaries 16) Other financial income: c) from securities classified as current assets d) other income - from subsidiaries - from others

17)

Interest and other financial charges: - from subsidiaries - other

17bis) Net exchange rate losses Total D)

204,244,519 11,631,857

196,210,141 11,000,252

215,876,376

207,210,393

18,708,253 116,354,776 12,828,443

20,370,246 106,231,796 11,903,396

37,691,369 11,658,754 2,873,046 730,975

37,159,625 11,604,715 2,952,453 153,797

52,954,144

51,870,590

6,972,137 1,710,666

6,302,404 1,978,569

2,552,990 366,506 3,596,105

1,790,552 (1,369,705) 3,404,171

(167,644)

Adjustments to financial assets 19) Write-downs of investments

Extraordinary income and expense 20) Income 21) Expense

Net extraordinary income (expense) Pre-tax profit 22)

Income taxes, current and deferred: - current taxes - deferred taxes

4,728,374 65,071,062

464,448

170,223

5,620,641 1,052,402

3,159,550 1,705,634

7,137,491

5,035,407

(6,348,899) (59,506)

(3,621,158) (48,206)

(6,408,405)

(3,669,364)

(1,429,260)

(744,960) 65,692,145

(33,551,480)

(8,067,970)

(33,551,480)

(8,067,970)

-

-

-

-

78,439,792

62,352,549

(8,488,324) 1,295,464 (7,192,860)

Net profit for the year

202,482,019

112,859,090

112,158,916

Total adjustments E)

2007

216,044,020

Operating profit (loss) C)

2008

71,246,932

(10,550,478) 848,182 (9,702,296) 52,650,253

Giorgio Armani S.p.A. Cash flow statement (in thousands of Euros) 2008 Opening net financial indebtedness Operating activities Net profit for the year Amortisation and depreciation Write-downs of fixed assets taken to profit or loss Accrual for employees' leaving entitlement Utilisation of employees' leaving entitlement Net write-downs of investments Net gains on sale of fixed assets

(49,877)

(16,983)

71,247 8,682 467 313 (1,690) 33,551 (7)

52,650 8,281 603 (1,143) 8,068 (12)

112,563 Increase in inventory Decrease (increase) in current receivables (Increase) decrease in financial receivables Increase in prepayments and accrued income Increase (decrease) in trade payables Increase (decrease) in other payables Increase in accrued expenses and deferred income Utilisation of deferred tax liabilities Total Investing activities Investments in intangible fixed assets Investments in tangible fixed assets Investments in financial fixed assets Subsidiary's repayment of capital injections Proceeds from sale of fixed assets Total Financing activities Payment of dividends Total Net cash flows for the year Closing net financial position (indebtedness)

2007

(38) 10,928 (141) (2,303) 4,419 12,521 7,942 -

68,447 (1,370) (7,880) 224 (292) (1,764) (42,825) 3,599 (399)

145,891

17,740

(9,788) (2,285) (117,411) 61,861 53

(6,616) (1,135) (13,027) 145

(67,570)

(20,633)

(19,998)

(30,001)

(19,998)

(30,001)

58,323

(32,894)

8,446

(49,877)

Net financial position (indebtedness) is composed as follows: 2008 Liquid funds Securities Financial receivables from subsidiaries Financial payables to subsidiaries Closing net financial position (indebtedness)

25,614 2,515 106,383 (126,066) 8,446

2008 21,723 2,515 64,028 (138,143) (49,877)

140/141

Notes to the financial statements as at and for the year ended 31 December 2008 Format and contents of the financial statements The financial statements have been drawn up in accordance with the requirements of the Italian Civil Code and consist of the balance sheet (prepared in accordance with the format provided for in article 2424 of the Italian Civil Code), the profit and loss account (article 2425 of the Italian Civil Code) and these notes. A cash flow statement has also been prepared for the purposes of providing more complete information.

The scope of the notes is to describe, analyse and, in certain cases, provide additional information on the financial statements captions. These notes include the information required by applicable legislation. In addition, they provide all complementary information considered necessary to give a true and fair view of the company’s financial position and results for the year even if not specifically requested by law. Furthermore, as the company holds significant investments in Italy and abroad, it has prepared consolidated financial statements as at and for the year ended 31 December 2008 in accordance with the International Financial Reporting Standards (IFRS) issued by the International Accounting Standards Board (IASB) and endorsed by the European Commission.

The financial statements captions are comparable with those of the previous year, which have been adequately reclassified, where necessary. The notes provide figures in thousands of Euros, unless otherwise indicated.

Reference should be made to the directors’ report for information on the company’s performance during the year, significant subsequent events and transactions with related parties.

Accounting policies The most significant accounting policies applied in the preparation of the financial statements at 31 December 2008, in accordance with article 2426 of the Italian Civil Code, are described below. They comply with the accounting principles promulgated by the Italian Accounting Profession (Consiglio Nazionale dei Dottori Commercialisti e dei Ragionieri) and the Italian Accounting Standard Setter (Organismo Italiano di Contabilità, “OIC”). They are applied on a going concern basis and are consistent with those adopted in previous years.

Intangible fixed assets Intangible fixed assets are stated at cost and amortised systematically in line with their residual income generating potential. Assets with a recoverable amount that is less than their carrying amount at year end are written down accordingly. They are reinstated to their original value if the reasons for the write-down no longer exist, except in the case of goodwill and deferred charges.

Leasehold improvements are amortised over the shorter of the residual lease term and their estimated useful life, which is estimated to be an average of five years.

Software is stated at purchase cost and amortised over three years.

Deferred charges related to development of Duty Free Shops are amortised over the related franchising contract term.

Tangible fixed assets Tangible fixed assets are stated at purchase cost, including related charges.

They are depreciated systematically using the following rates: Buildings

3%

Plant

15%

Alarm systems

25 – 30%

Equipment

10 – 15%

Electronic equipment

20 – 25%

Furniture and fittings

12 – 15%

Cars and vehicles

20 – 25%

Assets acquired during the year are depreciated at half the above rates, which is held to reflect their limited use during the year.

Assets with a recoverable amount that is less than their carrying amount at year end are written down accordingly. They are reinstated to their original value if the reasons for the write-down no longer exist.

Maintenance and repair costs are expensed, unless they increase the productivity or useful life of the assets to which they relate, in which case they are allocated to the assets and depreciated over their useful economic life.

Investments Investments are stated at subscription or acquisition cost, including capital injections. Investments with a carrying amount which is greater than that calculated using the equity method are adjusted if this difference reflects impairment. The investments are reinstated to their original value if the reasons for the write-down are no longer valid.

Inventory Inventory is stated at the lower of cost and net realisable value. Cost is calculated using the annual weighted average cost method. Obsolete or slow-moving items are written down to reflect their possible use or realisation, through a provision specific for this caption.

Receivables and payables Receivables are stated at their estimated realisable value. Payables are stated at their nominal value.

Foreign currency transactions and captions Foreign currency transactions are translated into Euros using the exchange rate ruling on the transaction date.

Exchange rate gains and losses arising during the year are recorded in the profit and loss account. Receivables and payables due within one year in non-Euro zone currencies are converted into Euros using the closing rate.

Any resulting exchange rate gains or losses are credited or debited, respectively, to the profit and loss account.

Any net unrealised gain from the translation is recognised in a specific reserve until realised.

142/143

Foreign currency fixed assets are converted into Euros at the exchange rate ruling at the date of acquisition or at the year-end rate, if lower and if the reduction is considered permanent.

Profits and losses on forward contracts for the purchase and sale of foreign currency are stated on the basis of the difference between the exchange rate ruling at year end and that ruling on the date of the contract, while the relevant premium or discount is recognised on an accruals basis.

Marketable securities These are stated at the lower of acquisition (or subscription) cost and realisable value based on market trends.

If the reasons for writing the securities down to realisable value are no longer valid, they are reinstated to acquisition cost.

Liquid funds These are stated at their nominal value.

Prepayments and accrued income, accrued expenses and deferred income These captions are recognised on an accruals basis. They relate to portions of costs and income that pertain to two or more years. Prepayments and deferred income relating to sales revenues from collections and the relevant costs, such as royalty income and fashion show costs, are recognised on an accruals basis depending on the period in which the collections are sold on the end market.

Provisions for risks and charges These provisions are set up to cover certain or probable losses or payables of a specific nature, the due date or amount of which are unknown at year end. The accruals are made on a best estimate basis when the financial statements are prepared.

Employees’ leaving entitlement This provision comprises the payable matured to employees in accordance with legislation and ruling national labour contracts.

Income taxes Current taxes are calculated using ruling rates and regulations. Deferred tax assets and liabilities are recognised based on the tax rates that will be applicable when the temporary differences between the carrying amounts of assets and liabilities and their value for tax purposes reverse. Deferred tax assets are only recognised if it is reasonably certain that they will be recovered in the future. The only case in which deferred tax liabilities are not recognised is if it is unlikely that they will become payable.

Revenues, income, costs and charges Revenues, income, costs and charges are recognised on an accruals basis, recognising prepayments, accruals and deferrals. Revenues from royalties and design and advertising consultancy fees and costs for events and advertising are accounted for on an accruals basis depending on the period in which the collections are sold on the end market.

Dividends Dividends are accounted for in the year in which they are approved.

Memorandum and contingency accounts Guarantees are recorded at the foot of the balance sheet at their nominal amount. Commitments are accounted for in line with the company’s actual obligation at the balance sheet date.

Purchase options on investments are not recognised, but are disclosed in the notes.

Other information Waivers pursuant to article 2423.4 and article 2423-bis of the Italian Civil Code 144/145 No waivers pursuant to the above articles have been made in the 2008 financial statements.

Disclosures on the fair value of financial instruments These notes provide the disclosures required by article 2427-bis about financial instruments.

Italian tax consolidation system In 2007, the company renewed its option for the Italian consolidation tax system for the three-year period from 2007-2009, as tax consolidator. In its renewal notification, it gave details on the consolidated group subsidiaries.

Transactions arising from participation in the tax consolidation system are governed by a “Domestic tax consolidation system agreement”. Participation in this system entails a higher/lower sum payable to taxation authorities as a result of the subsidiaries’ transfer of taxable/tax-deductible income/losses net of any payments on account paid thereby.

Notes to the main assets captions Fixed assets As required by Law no. 72/83, it should be noted that the following fixed assets are stated at acquisition cost and have never been subjected to either monetary or economic revaluations.

Intangible fixed assets Variations of the year may be analysed as follows: Opening balance

(in thousands of Euros) Assets under development Other: - leasehold improvements - owned software - software licences - deferred charges

Historical cost 2,705 35,513 3,256 15,947 5,209

Changes

Acc. Balance at amort. 31.12.2007 (34,892) (2,905) (11,665) (4,474)

Additions

Reclassifications

2,705

4,940

(5,915)

621 351 4,282 735

1,015 252 3,126 455

14 5,434 5,448

Total other

59,925

(53,936)

5,989

4,848

Total

62,630

(53,936)

8,694

9,788

(467)

Closing balance Amortisation

Historical cost

Acc. amort.

Balance at 31.12.2008

-

1,730

-

1,730

(323) (432) (5,858) (359)

36,542 3,508 24,507 5,664

(35,215) (3,337) (17,523) (4,833)

1,327 171 6,984 831

(6,972)

70,221

(60,908)

9,313

(6,972)

71,951

(60,908)

11,043

Assets under development of € 1,730 thousand mainly relate to costs for the ongoing centralisation of the group’s IT systems and for preliminary work to redevelop the leased areas in Via Bergognone 46, Milan.

The € 1,015 thousand increase in leasehold improvements refers to work carried out on leased properties, mainly to reorganise and transfer certain offices and units. The increases of € 252 thousand in owned software and of € 3,126 thousand in software licences mainly relate to investments in the new accounting management system (Oracle) used by the company and certain of its subsidiaries and for which the company acts as IT provider. Deferred charges mostly relate to the costs of setting up airport Duty Free Shops.

Intangible fixed assets have never been written down.

Tangible fixed assets The caption, which amounts to € 4,288 thousand, increased by € 530 thousand on 31 December 2007.

Variations of the year may be analysed as follows: Opening balance

(in thousands of Euros)

Historical cost

Land and buildings Plant and machinery Industrial and commercial equipment Other assets: - furniture, fittings and machines - electronic equipment - cars and vehicles - cash registers - assets worth less than € 516.45

Changes

Acc. Balance at Additions deprec. 31.12.07

Disinvestments cost Acc. dep.

104 2,133 1,555

(1) (1,778) (1,168)

103 355 387

216 254 110

(2) (3)

7,084 9,537 599 14 1,256

(6,488) (7,414) (405) (14) (1,256)

596 2,123 194 -

350 1,149 203 3 -

(49) (1,491) (83) -

Total other assets

18,490

(15,577)

2,913

1,705

Total

22,282

(18,524)

3,758

2,285

(1) 3

Closing balance Depreciation

Historical cost

Acc. Balance at deprec. 31.12.08

(9) (131) (138)

320 2,385 1,662

(10) (1,910) (1,303)

310 475 359

11 1,487 83 -

(368) (967) (97) -

7,385 9,195 719 17 1,256

(6,845) (6,894) (419) (14) (1,256)

540 2,301 300 3 -

(1,623)

1,581

(1,432)

18,572

(15,428)

3,144

(1,628)

1,583

(1,710)

22,939

(18,651)

4,288

Additions amount to € 2,285 thousand. The € 216 thousand increase in land and buildings mainly refers to the costs of registering the purchase of the Via Bergognone 59 property following the company’s exercise of the purchase option in 2007. This property was leased in 1999. If the transaction had been recognised using the financial method, the carrying amount of the property, net of accumulated depreciation (€ 10.2 million and € 2.9 million, respectively, at 31 December 2008) would have been recognised under assets, and depreciation of the year would have been € 0.3 million higher. Considering the related tax effect, net equity and net profit for the year would have been € 5.0 million higher and € 0.2 million lower, respectively.

Other additions mainly relate to the work to upgrade the systems in Via Bergognone 59, warehouse equipment, displays of the Duty Free Shop Development Unit, furniture and fittings for the premises in Via Bergognone 46, new hardware and vehicles for the head office.

Tangible fixed assets have never been written down.

Financial fixed assets This caption, totalling € 535,068 thousand, rose by € 22,139 thousand on 31 December 2007, due to the events which are described below for each caption.

146/147

Investments Investments in subsidiaries amount to € 296,864 thousand, showing a decrease of € 25,660 thousand on 31 December 2007. Variations of the year are as follows: (in thousands of Euros)

31.12.2007

Increases

Reclassifications

Decreases

Write-downs

31.12.2008

Simint S.p.A. Giorgio Armani Yachting S.r.l.

Giorgio Armani Retail S.r.l.

Guardi S.p.A. Trimil S.p.A. GA Corporation Finance Limited Giorgio Armani Corporation Giorgio Armani Holding B.V. Deanna S.p.A. Pallacanestro Olimpia Milano Ssrl Immobiliare Fondazione Capocotta S.r.l.

M.S.C. S.r.l. (formerly Antinea S.r.l.)

Giorgio Armani Distribuzione S.r.l.

Giorgio Armani Hong Kong Limited G.A. Waterloo 28 S.A. Deimutti Compagnia dei Cuoi S.r.l.

Roma Sportwear S.r.l.

158,221 20,000 34,943 13,106 12,127 67,026 6,751 3,327 2,500 550 527 103 30 6 3,300 7

28,000 6,000 25 11,916 3 11,049

11,056 3,303 (3,303) (11,056)

(61,861) -

(6,293) (3,411) (11,088) -

158,221 48,000 45,706 16,409 12,152 5,165 3,340 3,327 2,500 828 550 527 103 30 6 -

Total

322,524

56,993

-

(61,861)

(20,792)

296,864

The investments in Giorgio Armani Corporation, Pallacanestro Olimpia Milano S.s.r.l., Giorgio Armani Retail S.r.l., Guardi S.p.A. and G.A. Waterloo 28 S.A. are stated net of write-downs of € 50,715 thousand, € 11,088 thousand, € 6,293 thousand, € 4,644 thousand and € 13 thousand, respectively.

Investments in subsidiaries showed the following variations during the year: -

capital injection of € 28,000 thousand to the subsidiary Giorgio Armani Yachting S.r.l.;

-

acquisition of 5.886% and 2.146% from the indirectly controlled subsidiaries Giorgio Armani Maximillianstrasse GmbH and GA Waterloo 28 SA, respectively, of Giorgio Armani Retail S.r.l. for € 4,400 thousand and € 1,600 thousand, respectively, thus giving Giorgio Armani S.p.A. 100% control of Giorgio Armani Retail S.r.l. (the price was determined by an independent appraisal);

-

acquisition of 50% of Roma Sportwear S.r.l., thus becoming the sole quotaholder, paying € 11,049 thousand.

In December, the subsidiary was merged into Giorgio Armani Retail S.r.l.. The company wrote-down its investment in the latter subsidiary by € 6,293 thousand considering the future profitability forecasts for the merged company;

-

merger of Deimutti Compagnia dei Cuoi S.r.l. into Guardi S.p.A.;

-

acquisition of 80% of Pallacanestro Olimpia Milano S.s.r.l. in August. Following non-subscription of the quota capital increase approved in October 2008 by the other quotaholders, Giorgio Armani S.p.A. became the sole quotaholder in December 2008. The transaction entailed expenditure of € 11,916 thousand. The investment was then written down by € 11,088 thousand to reflect the subsidiary’s impairment losses, bringing its carrying amount into line with that given using the equity method;

-

repayment of € 61,861 thousand by the Irish company GA Corporation Finance Limited for a capital injection made in previous years;

-

write-down of € 3,411 thousand of the investment in Giorgio Armani Corporation to take account of the subsidiary’s impairment losses. This meant that its carrying amount was in line with the amount given using the equity method,

-

€ 25 thousand of the increase in the Trimil S.p.A. investment relates to transaction costs incurred for its acquisition in 2007.

The following table shows the information required by article 2427 of the Italian Civil Code for each subsidiary.

Reference should be made to the annex to the consolidated financial statements for a complete list of investments, including those in indirectly controlled subsidiaries.

Amounts in thousands of Euros unless otherwise indicated

Reg. office

Simint S.p.A. GA Yachting S.r.l.

Giorgio Armani Retail S.r.l.

Guardi S.p.A. Trimil S.p.A. GA Corporation Finance Limited Giorgio Armani Corporation Giorgio Armani Holding B.V. Deanna S.p.A. Pallacanestro Olimpia Milano S.s.r.l.

Immobiliare Fondazione Capocotta S.r.l.

M.S.C. S.r.l.

Giorgio Armani Distribuzione S.r.l.

Giorgio Armani Hong Kong Limited G.A. Waterloo 28 S.A.

Modena Milan Milan Fossò (VE) Settimo Torinese (TO) Ireland USA Usd/000 The Netherlands S.Martino in Rio (RE) Milan Rome Milan Milan H.Kong Hkd/000 Belgium

Currency

Share/ quota capital

Net equity at 31.12.2008

24,276 20,000 32,620 11,253 13,500 5,200 8,978 4,500 2,500 3,000 300 520 103 160,000 2,000

122,448 47,956 26,384 11,588 16,936 14,099 8,707 376,689 9,484 828 2,746 40,514 17,571 13,675 1,594

Net profit % of (loss) for direct 2008 ownership 50,197 (2,657) (13,223) (1,170) 876 5,854 (29,456) 197,094 6,223 (3,907) 38 19,109 15,801 (4,033) 987

100.0 100.0 100.0 100.0 51,0 99.9999 38.37 100.0 100.0 100.0 73.0 100.0 99.5 0.12 0.18

Total investments in subsidiaries

% of indirect ownership

Share of equity

Carrying amount

0.0001 61.63 10.0 99.88 99.82

122,448 47,956 26,384 11,588 8,637 14,099 3,340 376,689 9,484 828 2,005 40,514 17.483 16 3

158,221 48,000 45,706 16,409 12,152 5,165 3,340 3,327 2,500 828 550 527 103 30 6

296.864

The following should be considered for those investments that have a carrying amount greater than that which would be obtained by applying the equity method: -

Simint S.p.A. shows a sound, positive financial position and results for the year. It distributes dividends each year, as can be seen in the caption “Income from investments”. Application of the equity method gives an amount of € 139,687 thousand.

-

If measured at equity, the investment in Giorgio Armani Retail S.r.l. has a carrying amount of € 49,265 thousand, greater than its historical cost. The subsidiary has investments, buildings and commercial goodwill with market values considerably higher than their carrying amounts, as confirmed by the independent appraisal in December 2008, which justifies the amount recognised in the financial statements.

-

During the year, Guardi S.p.A. restructured its business flows and completed the ongoing integration with the group company Deimutti Compagnia dei Cuoi S.r.l., which merged into it in December. Although its 2008 profit is less positive than that for 2007, the company is expected to be able to effectively counter the negative market situation and recover its carrying amount in the medium term. Measurement at equity gives an amount of € 12,258 thousand.

-

Trimil S.p.A. has been steadily profitable. It wholly owns Confezioni di Matelica S.p.A., a production company that is also profitable and that owns significant manufacturing infrastructure. Measurement at equity gives an amount of € 12,112 thousand.

Investments in associates come to € 60,417 thousand. Variations are detailed below: (in thousands of Euros)

31.12.2007

Increases

Decreases

31.12.2008

Presidio Holdings Ltd.

-

60,417

-

60,417

Total

-

60,417

-

60,417

In December, the company acquired 1,000 shares of the English-based company Presidio Holdings Ltd. after exercising its call option (equal to 25% thereof) paying US$ 77.8 million (€ 60.4 million). The wholly-controlled Giorgio Armani Holding B.V. owns another 25%.

148/149

Other investments total € 2,622 thousand. Variations are detailed below: (in thousands of Euros)

31.12.2007

Increases

Safilo Group S.p.A.

15,381

-

Decreases (12,759)

31.12.2008 2,622

Total

15,381

-

(12,759)

2,622

Given the market performance of the Safilo share, the investment was written down by € 12,759 thousand during the year, as the company held it to be impaired. Its market value at year end, based on stock exchange prices, amounted to € 2,622 thousand after the write-down. The carrying amount of the investment in Safilo S.p.A. is stated net of write-downs of € 18,503 thousand.

Financial receivables This caption of € 165 thousand (31 December 2007: € 24 thousand) includes guarantee deposits due between one and five years. Their fair value matches their carrying amount..

Own shares The company holds 500,000 own shares, with a nominal value of € 1 each, comprising 5% of the share capital.

They are stated at a carrying amount of € 175,000 thousand. This caption is unchanged with respect to the previous year. In accordance with the provisions of article 2357-ter of the Italian Civil Code, when the own shares were recognised, the company set up an unavailable reserve of the same amount under net equity.

Current assets Inventory The balance of € 4,552 thousand (31 December 2007: € 4,514 thousand) is detailed as follows: (in thousands of Euros) Raw materials, consumables and supplies Provision for obsolescence Total

Finished goods Provision for obsolescence

Total

31.12.2008

31.12.2007

956 (764)

1,155 (923)

192

232

18,549 (14,189)

14,984 (10,702)

4,360

4,282

4,552

4,514

Inventory mainly relates to clothing for the historical archive, fashion shows, showrooms and photo shoots. The increase in finished goods and goods (sample items and accessories) is due, inter alia, to the increase in inventories of Armani Privé clothing and accessories.

Variations in the provision relate to the € 3,328 thousand accrual of the year to write down items belonging to previous collections. These provisions were not used during the year.

Receivables This caption, amounting to € 180,655 thousand, increased by € 31,427 thousand on 2007. It may be analysed as follows: (in thousands of Euros)

31.12.2008

31.12.2007

Trade receivables From subsidiaries From associates Tax receivables Deferred tax assets From others

13,880 143,587 2,218 9,931 10,596 443

22,422 102,548 14,016 9,300 942

Total

180,655

149,228

There are no receivables due after five years.

Trade receivables Trade receivables of € 13,880 thousand mainly relate to the invoicing of royalties, design and advertising consultancy fees and, to a lesser extent, sales of goods. They are shown net of the provision for bad debts of € 6,750 thousand (31 December 2007: € 4,197 thousand).

Variations in the provision for bad debts are as follows:

(in thousands of Euros) Opening balance Accrual Utilisation Closing balance

Untaxed provision

Taxed provision

Total

534

3,663

4,197

88 -

2,465 -

2,553 -

622

6,128

6,750

The 31 December 2007 balance included receivables of € 154 thousand and € 674 thousand due from Presidio Holdings Ltd. and its subsidiary Presidio International Inc., respectively. They have been reclassified to “From associates” in 2008 following the company’s acquisition of 25% of Presidio Holdings Ltd.

Receivables from subsidiaries This caption, amounting to € 143,587 thousand, increased by € 41,039 thousand on the previous year end. It includes trade receivables relating to royalties, the sale of goods and provision of services, and financial receivables relating to joint current accounts which bear interest at the one-month Euribor increased by a spread of 0.5%. Receivables classified as “Other” in the table relate to tax payables transferred by subsidiaries participating in the Italian tax consolidation system (€ 7,685 thousand). Reference should be made to the note on tax receivables for details.

150/151

They may be detailed as follows: 31.12.2008 (in thousands of Euros)

trade

financial

31.12.2007 other

trade

financial

other

Simint S.p.A.

5,936

-

1,035

6,255

-

3,755

Intai S.p.A.

4,850

15,436

1,821

4,708

3,423

1,599

GA Modefine S.A.

4,235

-

-

3,015

-

-

Moda Sourcing Company S.r.l.

2,523

17,356

2,057

1,083

15,727

1,900

Guardi S.p.A.

2,268

13,229

-

1,569

-

-

Giorgio Armani Retail S.r.l.

2,089

37,671

33

2,928

19,940

67

Trimil SA

1,849

-

-

2,304

-

-

Deanna S.p.A.

1,487

4,241

1,512

668

-

230

Borgo 21 SA

1,114

-

-

1,592

-

-

999

-

1,262

725

-

330

Giorgio Armani Distribuzione S.r.l.

Giorgio Armani Japan Co. Ltd

413

-

-

507

-

-

Factory Store S.p.A.

378

10,114

-

376

6,154

1,052

Trimil S.p.A.

364

8,328

-

279

7,899

-

Giorgio Armani Hong Kong Ltd

310

-

-

167

-

-

Alia S.r.l.

278

-

-

339

-

-

Giorgio Armani Corporation

206

-

-

744

-

-

Giorgio Armani India Private Ltd.

102

-

-

-

-

-

31

-

-

16

6,000

-

-

-

-

843

4,877

649

GA Yachting S.r.l.

Deimutti Compagnia dei Cuoi S.r.l.

Borgo 21 S.p.A.

-

-

-

615

-

-

Imm. Fondazione Capocotta S.r.l.

-

8

-

-

-

81

52

-

-

124

8

-

29,484

106,383

7,720

28,857

64,028

9,663

Others Total

Receivables from associates These receivables relate to royalties and design consultancy services provided to Presidio Holdings Ltd. (€ 1,347 thousand) and its subsidiary Presidio International Inc. (€ 871 thousand).

Tax receivables Tax receivables of € 9,931 thousand (31 December 2007: € 14,016 thousand) include: (in thousands of Euros)

31.12.2008

31.12.2007

Tax receivables due within one year: VAT IRAP IRES

8,074 1,224 -

3,768 2,389

Total

9,298

6,157

22 296 315

6,640 296 923

633

7,859

9,931

14,016

after one year: VAT to be reimbursed Tax to be reimbursed Interest to be reimbursed Total Total tax receivables

The VAT receivable increased by € 4,306 thousand, mainly due to the rise in VAT-exempt turnover from royalties and design consultancy and advertising fees. The company is part of the group VAT system with its subsidiaries Giorgio Armani Retail S.r.l., Alia S.r.l. and Giorgio Armani Distribuzione S.r.l. The IRAP receivable of € 1,224 thousand relates to the higher advances paid during the year (€ 2,907 thousand) compared to the tax payable for the year.

Tax receivables due after one year comprise refund claims. As it is not known when the refunds will take place, the amounts have been shown as due after one year. The company received € 6,640 thousand in 2008 as a refund for a VAT credit as well as € 704 thousand of interest on the claimed taxes.

Deferred tax assets Deferred tax assets amount to € 10,595 thousand (31 December 2007: € 9,300 thousand), including € 5,583 thousand which the company expects to recover after one year.

The tax rate applied for the recognition of deferred tax assets is 27.5% for IRES purposes and 3.9% for IRAP purposes.

The main temporary differences giving rise to the recognition of deferred tax assets are as follows.

Temporary differences (in thousands of Euros)

Deferred tax assets

31.12.2008

31.12.2007

31.12.2008

31.12.2007

Provision for inventory obsolescence

B

14,953

11,625

4,695

3,650

Taxed provision for bad debts

A

6,128

3,663

1,685

1,007

Maintenance costs

B

5,642

4,369

1,772

1,372

Entertainment expenses

B

2,626

4,104

824

1,289

Provision for other risks and charges

B

2,440

2,440

766

766

Income realised for tax purposes

A

152

1,612

42

443

Other

A

2,950

2,809

811

773

34,891

30,622

10,595

9,300

Total

Legend: A: IRES only B: IRES and IRAP

Receivables from others This caption, amounting to € 443 thousand, decreased by € 499 thousand on 2007. It may be analysed as follows: (in thousands of Euros)

31.12.2008

31.12.2007

Credit notes to be received from suppliers

55

391

Receivables from employees

98

242

Other

290

309

Total

443

942

The amounts are due within one year. The balance is shown net of a provision for bad debts - other of € 2,108 thousand, unchanged from 31 December 2007.

152/153

Information on receivables by geographical area A breakdown of receivables by geographical area is as follows:

(in thousands of Euros)

Europe

Rest

(excluding

of the

Italy

Italy)

USA

world

Trade receivables

2,963

3,211

1,981

5,725

13,880

From subsidiaries

135,108

7,445

208

826

143,587 2,218

From associates

-

1,347

871

-

9,931

-

-

-

9,931

10,596

-

-

-

10,596

443

-

-

-

443

159,041

12,003

3,060

6,551

180,655

Tax receivables Deferred tax assets From others Total

Total

Current financial assets Other investments This caption includes 200,000 Luxottica S.p.A. shares (0.15%), worth € 2,515 thousand, unchanged with respect to 31 December 2007. The investment’s market value at year end amounts to € 2,553 thousand, based on stock exchange prices.

Liquid funds Liquid funds total € 25,614 thousand (31 December 2007: € 21,723 thousand), up by € 3,891 thousand. The company has cash pooling arrangements with some of its subsidiaries, regulated at market rates.

Prepayments and accrued income At 31 December 2008, this caption, amounting to € 8,157 thousand, increased by € 2,303 thousand on the previous year end.

It may be analysed as follows: (in thousands of Euros) Accrued income Prepayments: Advertising expenses Fashion show expenses Lease and expenses Other

Total

31.12.2008

31.12.2007

-

201

5,541 1,828 566 222

3,723 1,384 427 119

8,157

5,653

8,157

5,854

Advertising and fashion show expenses include costs incurred during the year for the 2009 collections. The increase is due to higher advertising outlays to promote the label.

Notes to the main liability captions Net equity This caption increased by € 22,649 thousand on 31 December 2007, as a result of the variations detailed below:

(in thousands of Euros) Balance at 31.12.06

Share

Legal

Reserve for own

Other

Net profit for

capital

reserve

shares in portfolio

reserves

the year

Total

10,000

2,000

175,000

78,717

169,141

434,858

(169,141)

Allocation to reserves

-

-

-

169,141

Distribution of dividends

-

-

-

(30,001)

Net profit for the year

-

-

-

-

52,650

52,650

10,000

2,000

175,000

217,857

52,650

457,507

Balance at 31.12.07

-

(30,001)

Allocation to reserves

-

-

-

52,650

Distribution of dividends

-

-

-

(19,998)

Net profit for the year

-

-

-

-

71,247

71,247

10,000

2,000

175,000

250,509

71,247

508,756

Balance at 31.12.08

(52,650) -

(19,998)

Share capital, which is fully subscribed and paid up at 31 December 2008, is divided into 10,000,000 ordinary shares with a nominal value of € 1 each.

The reserve for own shares in portfolio, which amounts to € 175,000 thousand, relates to 5% of the share capital, which the company acquired in 2006 following the shareholders’ approval on 18 July 2006.

154/155

A breakdown of net equity showing the availability and possible use of reserves is set out below: Summary of utilisations in 2006 - 2008 (in thousands of Euros)

Amount

Share capital

Possibility

Available

Distributable

of use

portion

portion

for dividends

other

-

-

-

-

10,000

Income-related reserves Legal reserve

2,000

B

2,000

-

-

-

Reserve for own shares in portfolio

175,000

-

-

-

-

-

Extraordinary reserve

250,509

A-B-C

250,509

250,509

149,999

-

Net profit for the year

71,247

A-B-C

71,247

71,247

-

-

323,756

321,756

149,999

-

Total

508,756

Legend: A: For share capital increases B: For loss coverage C: For dividends

Provisions for risks and charges The provision for other risks and charges amounts to € 8,440 thousand and is unchanged with respect to the previous year end. It was set up to cover contingent liabilities related to litigation pending at the balance sheet date and risks considered probable.

In October 2007, the Tax Police concluded its assessment of 2005 direct and indirect taxes. The preliminary

assessment report includes costs that the police declared non-deductible totalling € 2,979 thousand. At the date of these financial statements, the company has not received any notice of assessment. To this end, it has not made any accruals for risks, as it awaits further developments and believes it can dispute the findings.

Employees’ leaving entitlement This caption amounts to € 10,090 thousand, down by € 1,377 thousand on the previous year end. It is detailed as follows: (in thousands of Euros) Opening balance Accruals

2008

2007

11,467

12,007

2,873

2,952

Utilisation

(4,250)

(3,492)

Closing balance

10,090

11,467

The payable is adjusted to reflect estimated future liabilities based on legislation and contracts. The balance shows the company’s actual payable at year end to employees in service at that date, net of advances paid.

Following the pension reform (Law no. 296 of 27 December 2006 in connection with the 2007 Finance Act), the company transferred € 2,560 thousand of accrued employees’ leaving entitlement recognised in the profit and loss account to the Treasury Fund set up by INPS (the Italian social security institution) and to other pension funds, as per employees’ requests.

Payables These total € 179,985 thousand, up by € 4,863 thousand on 31 December 2007. They are comprised as follows: (in thousands of Euros) Trade payables

31.12.2008

31.12.2007

20,197

15,778

139,378

146,817

Tax payables

7,702

3,176

Social security charges payable

2,760

2,679

Other payables

9,948

6,672

179,985

175,122

Payables to subsidiaries

Total

There are no payables due after five years.

Trade payables Trade payables amount to € 20,197 thousand at 31 December 2008, up by € 4,419 thousand on the previous year end.

Payables to subsidiaries Payables to subsidiaries amount to € 139,378 thousand, down € 7,439 thousand on 31 December 2007.

The most significant balances are detailed below.

31.12.2008 (in thousands of Euros)

Trade

Financial

31.12.2007 Other

Trade

Financial

Other

Giorgio Armani Corporation

1,333

-

-

1,868

-

-

MSC S.r.l.

1,328

-

-

263

-

-

Giorgio Armani Japan

1,306

-

-

1,194

-

-

Giorgio Armani Hong Kong Limited

1,156

-

-

37

-

-

Guardi S.p.A.

1,125

-

399

468

500

7

Alia S.r.l.

394

3,044

520

342

1,391

513

Giorgio Armani Retail S.r.l.

385

-

4,430

376

-

2,261

Intai S.p.A.

339

-

-

122

-

-

Simint S.p.A.

181

626

-

225

6,798

-

Trimil S.p.A.

76

-

-

44

-

-

Deanna S.p.A.

19

-

-

9

880

-

Giorgio Armani Distribuzione S.r.l.

14

9,162

-

3

5,118

-

Giorgio Armani Australia Pty

5

-

-

90

-

-

Factory Store S.r.l.

2

-

223

10

-

-

Giorgio Armani Finance Limited

-

105,020

-

-

80,000

-

Confezione di Matelica S.p.A.

-

6,410

-

-

8,334

-

Borgo 21 S.p.A.

-

-

-

782

35,122

-

Pallacanestro Olimpia Milano S.s.r.l.

-

1,804

-

-

-

-

Imm. Fondazione Capocotta S.r.l.

-

-

65

-

-

-

12

-

-

58

-

2

7,675

126,066

5,637

5,891

138,143

2,783

Other Total

Trade payables relate to the purchase of goods and services. They grew by € 1,784 thousand on the previous year end.

Financial payables amount to € 126,066 thousand and include € 21,046 thousand relating to joint current accounts (31 December 2007: € 58,143 thousand), bearing interest at the one-month Euribor rate plus a spread of 0.5% and a € 105,020 thousand loan (31 December 2007: € 80,000 thousand) granted by GA Corporation Finance Limited and bearing interest at the three-month Euribor rate plus a spread of 0.5%.

Other payables total € 5,637 thousand and relate to the transfer of tax losses for the year from subsidiaries participating in the tax consolidation system. Reference should be made to the note to “Tax payables” for further information.

Tax payables These amount to € 7,702 thousand (31 December 2007: € 3,176 thousand) and are detailed as follows: (in thousands of Euros)

31.12.2008

31.12.2007

IRES

5,731

-

IRPEF

1,971

2,243

IRAP

-

933

Total

7,702

3,176

Tax payables for IRES amount to € 5,731 thousand. € 3,683 thousand relates specifically to Giorgio Armani S.p.A. (31 December 2007: tax receivables of € 9,204 thousand) and € 2,048 thousand (31 December 2007: € 6,815 thousand) relates to the transfer of tax receivables and payables from subsidiaries participating in the Italian tax consolidation system.

156/157

They may be detailed as follows: Company

Taxable base

IRES (27.5%)

Advances and withholdings

Tax receivable (payable) transferred by

Receivable from (payable to) subsidiary

subsidiary Simint S.p.A.

76,728

(21,100)

20,065

(1,035)

1,035

MSC S.r.l.

34,137

(9,388)

7,331

(2,057)

2,057

Giorgio Armani Distribuzione S.r.l.

24,870

(6,839)

5,579

(1,260)

1,260

Intai S.p.A.

19,802

(5,445)

3,624

(1,821)

1,821

Deanna S.p.A.

11,369

(3,127)

1,615

(1,512)

1,512

2,037

(560)

783

223

52

(14)

79

65

(65)

399

399

(399)

Factory Store S.p.A. Imm. Fondazione Capocotta S.r.l.

Guardi S.p.A. Alia S.r.l.

Giorgio Armani Retail S.r.l.

Total

-

-

(223)

(1,892)

520

-

520

(520)

(14,779)

4,065

365

4,430

(4,430)

(2,048)

2,048

(41,888)

39,840

IRPEF payables mainly include withholdings (€ 1,885 thousand) on wages and salaries and fees to consultants paid in December 2008.

Social security charges payable This caption, amounting to € 2,760 thousand, increased by € 82 thousand on the previous year. It comprises amounts due to social security institutions for contributions due by both the company and employees on December 2008 wages and salaries paid in January 2009, as per the relevant legislation. It also includes the part of contributions accrued on holidays and leave not yet taken. The balance mainly consists of € 2,206 thousand (31 December 2007: € 2,139 thousand) due to INPS..

Other payables This caption may be analysed as follows: (in thousands of Euros)

31.12.2008

31.12.2007

Payables to employees

6,489

6,544

Other

3,459

128

Total

9,948

6,672

Payables to employees comprise accruals made during the year for holidays accrued but not yet taken and incentive bonuses, which increased on the previous year end. They include € 2,454 thousand due after one year.

“Other” includes € 2,080 thousand due to Pallacanestro Olimpia Milano S.s.r.l. for the unpaid quota capital increase resolved on 28 October 2008 and € 248 thousand to settle the company’s acquisition of 80% thereof.

It also comprises € 533 thousand due to the other quotaholder for the acquisition of 50% of Roma Sportwear S.r.l. due before 31 December 2010.

Information on payables by geographical area A breakdown of payables by geographical area is as follows: Europe (excluding (in thousands of Euros)

Italy

Rest of the

Italy)

USA

world

Total

Trade payables

13,866

3,662

1,280

1,389

20,197

Payables to subsidiaries

30,376

105,207

1,333

2,462

139,378

Tax payables

7,702

-

-

-

7,702

Social security charges payable

2,760

-

-

-

2,760

Other payables Total

9,948

-

-

-

9,948

64,652

108,869

2,613

3,851

179,985

Accrued expenses and deferred income At 31 December 2008, this caption is detailed as follows: (in thousands of Euros) Accrued expenses: Personnel-related expenses Accrued interest expense Other

Deferred income: Royalties and advertising contributions - subsidiaries - third parties

Total

31.12.2008

31.12.2007

1,457 17 86

1,482 1,265 103

1,560

2,850

40,668 22,393

32,310 21,519

63,061

53,829

64,621

56,679

The increase in deferred income is mainly due to the growth in turnover from royalties and advertising and design consultancy fees pertaining to future years.

Accrued expenses and deferred income relating to after one year total â‚Ź 1,232 thousand. No amounts relate to after five years.

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Memorandum and contingency accounts At 31 December 2008, commitments and risks taken on by the company are detailed below:

(in thousands of Euros) Personal guarantees given to third parties on the behalf of subsidiaries Personal guarantees given to third parties

31.12.2008

31.12.2007

163,455

20,379

2,633

1,267

Risks and commitments

117,121

74,631

Total

283,209

96,277

Personal guarantees given to third parties on the behalf of subsidiaries include: -

a letter of patronage for US$ 30 million (€ 20,556 thousand) granted to Intesa San Paolo on behalf of the subsidiary Giorgio Armani Corporation;

-

a guarantee given to the US-based company 717 GFC, LLC, lessor of the premises on Fifth Avenue, New York used by the subsidiary Giorgio Armani Corporation. The guarantee provides that the company will pay the lease instalments on its subsidiary’s behalf should it not be able to do so. At year end, the guarantee, which expires in 2023, establishes a total minimum commitment for Giorgio Armani Corporation of US$ 197.5 million (€ 141,899 thousand), equal to the amount guaranteed by Giorgio Armani S.p.A. at that date.

Personal guarantees given to third parties consist of the following sureties: -

a surety of € 2,286 thousand to the Milan VAT office to guarantee the refunded VAT credit (31 December 2007: € 842 thousand);

-

a surety of € 221 thousand for utilities (31 December 2007: € 254 thousand);

-

€ 121 thousand given to the lessors of leased buildings (31 December 2007: € 141 thousand);

-

€ 5 thousand to others (31 December 2007: € 30 thousand).

Risks and commitments relate to: -

€ 97,361 thousand for lease contracts (31 December 2007: € 74,631 thousand) expiring after 2009 with an average annual commitment of € 10,507 thousand for the next five years;

-

US$ 27,500 thousand for forward currency sales (2007: nil) with a year-end balance of € 19,760 thousand due between January and July 2009. The transactions existing at year end have a negative fair value of € 512 thousand.

Other information The minority interests in Trimil SA and Trimil S.p.A. are subject to call and put options held by the company and minority shareholders, respectively. Furthermore, the company has another purchase option for not more than 25% of the two companies that will manage the Armani Hotels, which are currently fully owned by third parties.

Notes to the main profit and loss account captions Production revenues Turnover from sales and services This caption, amounting to € 204,245 thousand, increased by € 8,035 thousand on 2007. It may be analysed as follows: (in thousands of Euros) Royalties and design consultancy fees Advertising consultancy fees Turnover from sales and services Total

2008

2007

112,683

104,572

86,265

85,094

5,297

6,544

204,245

196,210

The increase in royalties and design consultancy fees (+7.7%) and in advertising consultancy fees (+1.3%) reflects growth in sideline turnover, discussed in the directors’ report, to which reference should be made.

A breakdown by geographical area is as follows: (in thousands of Euros) Italy

2008

2007

107,781

104,388

Europe (excluding Italy)

62,221

58,974

USA

22,991

24,048

Other

11,252

8,800

204,245

196,210

(in thousands of Euros)

2008

2007

Sundry services

4,391

5,388

Sundry sales

3,951

2,930

Prior year income

1,850

1,269

Lease income

1,432

1,401

Gains

8

12

Total

11,632

11,000

Total

Other revenues and income This caption, which decreased by € 632 thousand on 2007, is detailed as follows:

Production cost Raw materials The cost of raw materials and consumables totals € 18,708 thousand (2007: € 20,370 thousand), down by € 1,662 thousand, partly due to reduced purchases of fabrics for the Armani Privè line. The balance includes € 10,607 thousand incurred with subsidiaries.

Reference should be made to the directors’ report for details.

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Services Costs for services amount to € 116,355 thousand in 2008, showing an increase of € 10,124 thousand on 2007 (€ 106,231 thousand). They are detailed as follows: (in thousands of Euros)

2008

2007

Advertising, publicity, photo shoots and fashion shows

78,838

67,849

Travel and other personnel costs

11,484

13,405

Advisory services and label protection

8,429

7,260

Utilities, cleaning, security and space preparation services

7,073

8,444

Other sundry services

4,342

3,473

Maintenance and repairs

3,615

3,239

Directors' and statutory auditors' fees

2,574

2,561

116,355

106,231

Total

The increase in services is mainly due to larger investments in advertising and publicity during the year. Services include € 10,893 thousand incurred with subsidiaries.

Use of third party assets This caption amounts to € 12,828 thousand (2007: € 11,903 thousand), and is mainly comprised of the lease and related expenses for the company’s offices in Via Borgonuovo and Via Bergognone 46, Milan.

This caption includes € 50 thousand incurred with subsidiaries.

Personnel expenses Personnel expenses amount to € 52,954 thousand (2007: € 51,870 thousand), and are equal to 25.9% of turnover (2007: 26.4%). The € 1,084 thousand increase is mainly due to the rise in remuneration, including the variable part.

The average workforce underwent the following changes during the year: 2008 Managers White collars Blue collars Total

2007

42

42

429

432

27

30

498

504

Write-downs of current receivables During the year, the company accrued € 2,553 thousand to cover trade receivables which it does not expect to recover.

Other operating costs Other operating costs amount to € 3,596 thousand (2007: € 3,404 thousand) and mainly relate to prior year items arising on adjustments to royalties and contributions of previous years. They include € 378 thousand incurred with subsidiaries.

Financial income and charges Income from investments This caption amounts to € 112,859 thousand, showing an increase of € 47,788 thousand. It is detailed as follows: (in thousands of Euros)

2008

2007

43,883 38,139 15,000 12,537 2,300 500 500

38,281 13,000 11,940 1,850 -

112,859

65,071

Income from investments: dividends from subsidiaries Simint S.p.A. GA Corporation Finance Ltd MSC S.r.l. (formerly Antinea S.r.l.)

Giorgio Armani DistribuzioneS.r.l.

Deanna S.r.l.

Deimutti Compagnia dei Cuoi S.r.l.

Roma SportwearS.r.l.

Total

Other financial income Financial income from financial receivables classified as fixed assets, securities classified as current assets and other income total € 7,137 thousand, up by € 2,102 thousand on 2007. This caption is mainly comprised of interest income on joint current accounts held with subsidiaries amounting to € 5,627 thousand.

Interest and other financial charges Interest and other financial charges total € 6,408 thousand and relate entirely to interest expense on joint current accounts held with subsidiaries, amounting to € 6,349 thousand. This caption increased by € 2,739 thousand on the previous year, mainly due to the increase in payables to the subsidiary GA Corporation Finance Ltd..

Net exchange rate losses Net exchange rate losses amount to € 1,429 thousand, compared to € 745 thousand in 2007. They include gains of € 2,178 thousand (€ 166 thousand of which was not realised at year end) and losses of € 3,607 thousand (€ 717 thousand of which was not realised at year end).

Adjustments to financial assets Adjustments to financial assets amount to € 33,551 thousand and relate to write-downs of investments in Giorgio Armani Corporation (€ 3,411 thousand), Giorgio Armani Retail S.r.l. (€ 6,293 thousand) and Pallacanestro Olimpia Milano S.s.r.l. (€ 11,088 thousand). They also comprise write-downs of € 12,759 thousand to adjust the carrying amount of the investment in Safilo Group S.p.A. to fair value.

Income taxes Taxation on profit for the year, amounting to € 7,193 thousand, decreased by € 2,509 thousand on 2007.

It comprises current taxes of € 8,488 thousand (2007: € 10,550 thousand) and net deferred tax income of € 1,295 thousand (2007: € 848 thousand).

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The main differences between the taxable income in the financial statements and the taxable income for IRES purposes are shown below (in thousands of Euros): Tax base Pre-tax profit

Tax

78,440

Theoretical tax charge (27.5%)

21,571

Temporary differences deductible or taxable in future years: Accruals to taxed provisions

5,793

Costs deductible in future years

3,584

Unrealised income from investments taxed in advance Total

152 9,529

Reversal of temporary differences from previous years: Dividends taxed in previous years

(1,612)

Entertainment expenses and maintenance costs

(2,638)

Release of deductible costs in the year

(1,012)

Total

(5,262)

Differences that will not reverse in future years: Untaxed dividends

(107,657)

Write-downs of investments

33,551

Non-deductible costs

16,145

Total Tax base

(57,961) 24,746

IRES charge for the year:

6,805

The main differences between the “Operating loss� and taxable profit for IRAP purposes are as follows (in thousands of Euros): Tax base Operating loss

Tax

(168)

Irrelevant costs for IRAP purposes

55,508

Total

55,340

Theoretical tax charge (3.90%)

2,158

Reversal of temporary differences from previous years: Entertainment expenses and maintenance costs

(2,638)

Total

(2,638)

Differences that will not reverse in future years: Non-deductible costs Tax wedge

3,224 (12,769)

Total

(9,545)

Tax base

43,157

IRAP charge for the year

1,683

IRES charge for the year

6,805

Total current income taxes for the year

8,488

Other information The directors’ and statutory auditors’ fees are shown below (the fees exclude any remuneration received as employees): (in thousands of Euros)

2008

2007

Directors

2,465

2,452

109

109

Statutory auditors

These financial statements, composed of a balance sheet, a profit and loss account and these notes, give a true and fair view of the company’s financial position and results and are consistent with the accounting records.

164/165

Report of the independent auditors

166/167

168/169

Report of the board of statutory auditors

170/171

Report of the board of statutory auditors to the shareholders’ meeting in accordance with article 2429 of the Italian Civil Code Dear shareholders We have examined the financial statements as at and for the year ended 31 December 2008, consisting of a balance sheet, profit and loss account and notes thereto, together with the report prepared by the board of directors, as well as the related consolidated financial statements, prepared in accordance with the IFRS issued by the International Accounting Standards Board (IASB) and endorsed by the European Commission.

The financial statements show a net profit for the year of € 71,246,932.00.

During the year, we performed our duties in compliance with the provisions of the Italian Civil Code and the Code of Conduct for statutory auditors issued by the Italian Accounting Profession.

The audit company, KPMG S.p.A., was engaged to carry out the audit pursuant to article 2409-bis of the Italian Civil Code.

We have: •

checked compliance with the law and by-laws and that correct management practices have been followed;

•

taken part in the shareholders’ and board of directors’ meetings held in compliance with relevant statutory, legislative and regulatory requirements; we can reasonably confirm that the decisions taken comply with the law and the by-laws, are not obviously imprudent or risky or represent a potential conflict of interest and do not compromise the integrity of the company’s assets;

•

obtained regular information from the directors and managers on the general trend of operations and outlook, as well as on significant transactions, in terms of size or nature, carried out by the company. We can reasonably confirm that the activities carried out comply with the law and the by-laws and are not obviously imprudent or risky and do not represent a potential conflict of interest or go against the decisions taken by the shareholders or compromise the integrity of the company’s assets;

•

met the audit company; nothing to report arose;

•

obtained information on and monitored the adequacy of the company’s organisational structure, including through the gathering of information from area managers; nothing to report arose;

•

checked and monitored the adequacy of the administrative and accounting systems, as well as the latter’s ability to accurately reflect operations, by obtaining information from area managers, the audit company and examining company documentation; nothing to report arose.

No significant events arose during the above activities that should be mentioned in this report.

We have examined the separate and consolidated financial statements as at and for the year ended 31 December 2008. As we are no longer required to perform a detailed check of the content of the financial statements, we can however confirm that our checks on their general structure and their general compliance with the law in terms of their format and structure have not given rise to particular issues to be reported.

We checked the correctness and completeness of the notes and directors’ report, which include all the disclosures required by current legislation and give a full picture of the company’s position and results.

As far as we are aware, in preparing the financial statements, the directors have not availed themselves of the waivers pursuant to articles 2423.4 and 2423-bis of the Italian Civil Code.

We checked that the financial statements are consistent with the information we obtained following the completion of our duties; nothing to report arose.

Also considering the findings of the audit company, which will be included in its reports on the separate and consolidated financial statements, we propose that the shareholders approve the separate and consolidated financial statements as at and for the year ended 31 December 2008, as well as the directors’ proposal for the allocation of the net profit for the year.

We thank you for the trust placed in us and would like to remind you that our term of office expires with the approval of the 2008 financial statements.

Milan, 14 May 2009 The board of statutory auditors Ezio Ferrari Lucia Cambieri Marco Terrenghi

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Armani group Group boutiques at 31 December 2008 Giorgio Armani (49) Europe/Middle East (15) - Italy (7): Bologna, Florence, Milan, Naples, Portofino, Rome, Turin.

Switzerland (1): Zurich. France (2): Paris, Saint Tropez. Belgium (1): Brussels. Germany (3): D端sseldorf, Frankfurt, Munich. Ukraine (1): Kiev.

Americas (13) - USA (13): Bal Harbour, Boston, Chicago, Costa Mesa, Las Vegas, Los Angeles, Manhasset, New York, Palm Beach, San Francisco, Atlanta, Houston, Dallas.

Asia/Pacific (21) - Japan (15): Osaka (2), Tokyo (8), Nagoya, Fukuoka, Kobe, Hiroshima, Yokohama.

Australia (2): Sydney, Melbourne. China (3): Beijing, Shanghai, Hong Kong. India (1): New Delhi.

Armani Collezioni (9) Europe/Middle East (5) - Italy (2): Milan (2). France (3): Paris (3).

Asia/Pacific (4) - Japan (4): Tokyo, Osaka (2), Nagoya.

Emporio Armani (53) Europe/Middle East (18) - Italy (9): Bologna, Florence, Forte dei Marmi, Milan, Naples, Riccione, Rimini, Rome, Turin. Switzerland (2): Basel, Zurich. France (4): Paris (2), Nice, Cannes. Belgium (2): Brussels, Antwerp. Sweden (1): Stockholm.

Americas (11) - USA (10): New York (2), Boston, Costa Mesa, San Francisco, Los Angeles, Honolulu, Las Vegas, Houston, Bal Harbour. French Antilles (1): Saint Barth.

Asia/Pacific (24) - Japan (15): Fukuoka, Hiroshima, Kobe, Kyoto, Nagoya, Osaka (2), Sapporo, Tokyo (6), Matsuyama. China (6): Hong Kong (3), Shenyang, Beijing (2). Australia (2): Sydney, Melbourne.

India (1): Delhi

Armani Jeans (5) Europe/Middle East (3) - Italy (3): Milan, Rome (2).

Asia/Pacific (2) - Japan (2): Tokyo (2).

Armani Junior (1) Europe/Middle East (1) - Italy (1): Milan.

Armani Casa (8) Europe/Middle East (4) - Italy (2): Milan (2). France (1): Paris. Great Britain (1): London.

Americas (2) - USA (2): Los Angeles, New York.

Asia/Pacific (2) - China (1): Hong Kong. Japan (1): Tokyo.

Armani Fiori (1) Europe/Middle East (1) - Italy (1): Milan.

Giorgio Armani Accessori (10) Europe/Middle East (2) - Italy (1): Milan. France (1): Paris.

Asia/Pacific (8) - Japan (8): Tokyo (6), Chiba, and Osaka.

Emporio Armani Accessori (2) Asia/Pacific (2) - China (1): Hong Kong. Japan (1): Tokyo.

Emporio Armani Caffè (3) Europe/Middle East (2) - Italy (1): Milan. France (1): Paris.

Americas (1) - USA (1): San Francisco.

Armani Nobu (1) Europe/Middle East (1) - Italy (1): Milan.

Armani Dolci (3) Asia/Pacific (3) - China (2): Shanghai, Hong Kong. Japan (1): Tokyo.

174/175

www.giorgioarmani.com Š 2009 Giorgio Armani SpA. Via Borgonuovo 11, Milano. Printed in Italy