STATUTORY AND CONSOLIDATED FINANCIAL STATEMENTS AT DECEMBER 31ST, 2007 Antichi Pellettieri 2007 Annual report - page 1

ANTICHI PELLETTIERI GROUP - 2007 Annual Report

Antichi Pellettieri 2007 Annual report - page 2

CONTENTS 3 Directors' report 4 Officers 5 Main events in 2007 6 Group performance 8 Distribution network 9 Brand portfolio 10 Group structure 13 Investments and research & development 14 Results 20 Personnel and corporate governance 24 Financial risks 25 Business outlook

26 Consolidated financial statements of the Antichi Pellettieri Group at December 31st, 2007 27 Consolidated balance sheet 29 Consolidated profit and loss account 30 Consolidated IFRS cash flow statement 31 Consolidated statement of changes in shareholders' equity 33 Consolidated balance sheet pursuant to CONSOB Resolution 11519 of July 27th, 2006 35 Consolidated profit and loss account pursuant to CONSOB Resolution 11519 of July 27th, 2006 36 IFRS cash flow statement pursuant to CONSOB Resolution 11519 of July 27th, 2006 37 Notes to the consolidated financial statements 72 Intercompany and related party transactions 73 Consolidated net financial position 76 Annex 1 to the consolidated financial statements: consolidated companies 77 Annex 2 to the consolidated financial statements: companies excluded from the consolidation 78 Annex 3: Map of the consolidation 79 Annex 4: Reconciliation between the parent company's net profit and shareholders’ equity and the corresponding consolidated figures 80 Information pursuant to Art. 80-duodecies of the CONSOB Regulations for Issuers 81 Certification of the consolidated financial statements pursuant to Art. 81-ter of CONSOB Regulation 11971 of May 14th, 1999, as amended

82 Separate financial statements of Antichi Pellettieri SpA at December 31st, 2007 83 Directors' report 83 Results 86 Reconciliation between the parent company's net profit and shareholders’ equity and the corresponding consolidated figures 87 Other information 90 Motions 91 Balance sheet 93 Profit and loss account 94 IFRS cash flow statement 95 Statement of changes in shareholders' equity 96 Balance sheet pursuant to CONSOB Resolution 11519 of July 27th, 2006 98 Profit and loss account pursuant to CONSOB Resolution 11519 of July 27th, 2006 99 IFRS cash flow statement pursuant to CONSOB Resolution 11519 of July 27th, 2006 100 Notes to the financial statements 134 Intercompany and related party transactions 135 Net financial position 141 Certification of the separate financial statements pursuant to Art. 141-ter of CONSOB Regulation 11971 of May 14th, 1999, as amended 142 Appendix – Transition to International Accounting Standards (IAS/IFRS) by Antichi Pellettieri SpA

153 Report of the Board of Statutory Auditors and external auditors' report

Antichi Pellettieri 2007 Annual report - page 3

DIRECTORS' REPORT

The Antichi Pellettieri Group, listed in the Expandi section of the Milan Stock Exchange since June 7th, 2006 and chaired by Giovanni Burani, operates in the leather goods and apparel sectors.

Antichi Pellettieri SpA is an Italian joint-stock company. Its registered office is at Via della Repubblica 82, Cavriago (RE), Italy. Share capital: €11,374,831 fully paid-in. Companies Register of Reggio Emilia; VAT and tax identification no. 04271670962 Under the management and coordination of Mariella Burani Fashion Group SpA

This report can be downloaded from www.antichipellettieri.it.

Antichi Pellettieri 2007 Annual report - page 4

Officers

Board of Directors

Chairman and CEO – Giovanni Burani Managing Director – Giovanni Stella Director – Walter Burani Director - Andrea Burani Director –Riccardo Braccialini Director – Giuseppe Gullo Independent director - Roberto Pilotto

Board of Statutory Auditors

Chairman – Giovanni Grazzini Standing Auditor – Fabrizio Fontanesi Standing Auditor – Pietro Lia

Alternate auditor – Elvira Grazzini Alternate auditor – Gian Marco Pilotti

External auditors

Mazars & Guérard SpA

Antichi Pellettieri 2007 Annual report - page 5

The annual report consists of the consolidated report on operations, consolidated balance sheet, consolidated profit and loss account, consolidated cash flow statement, consolidated statement of changes in shareholders' equity and notes to the consolidated financial statements, and of the parent company's report on operations, balance sheet, profit and loss account, cash flow statement, statement of changes in shareholders' equity and notes.

The financial statements of Antichi Pellettieri SpA and the consolidated financial statements have been prepared in accordance with the International Accounting Standards (IAS/IFRS).

Figures are expressed in thousands of euros (€/000), unless otherwise noted.

MAIN EVENTS IN 2007

On January 15th, Antichi Pellettieri decided to redeem the full €10,994,386 allowable (per regulations and as described in the prospectus) of the €13,992,853 in convertible bonds issued on April 12th, 2006. The total outlay for Antichi Pellettieri was €11,971,291, including the redemption premium and accrued interest. On the same date, again in accordance with the bond regulations and as described in the prospectus, Development Capital decided to convert as of January 31st, 2007 the remaining €2,998,467 in bonds into 503,944 shares of Antichi Pellettieri SpA.

On July 12th, the subsidiary Braccialini Srl acquired 90% of Dadorosa Srl, the worldwide licensee of renowned brand Gherardini.

On July 24th, Braccialini acquired the remaining 10% of Dadorosa from Misaki Shoji Co. Ltd., a leading Japanese luxury goods distributor.

Gherardini, a Florentine label dating to 1885, is admired internationally for the unique style of its innovative collections of handbags, small leather goods, footwear and accessories. DADOROSA Dadorosa Srl is based in Scandicci, near Florence—Italy's premiere leather goods district—and is licensed globally for the production and distribution of the complete range of Gherardini merchandise. It also operates three Gherardini boutiques, in Milan, Florence and Rome. In 2006, Dadorosa grossed €16.8 million and reported EBITDA of €1.4 million, or 8.5% of sales. Export revenues account for 61% of total sales, with 50% generated in the Far East. THE ACQUISITION The full purchase price for Dadorosa is €8.9 million. With net debt of €0.7 million at April 30th, 2007, the enterprise value of Dadorosa is calculated at €9.6 million, resulting in an EV/EBITDA multiple of 6.7x.

Group performance

In 2007 the Antichi Pellettieri Group earned consolidated revenues of €300.2 million, up from €257.5 million in 2006, an increase of 16.6%. Sales growth owes mainly to the existing Group companies, which did well in the New Europe, the Far East and the Middle East, and to the consolidation of the new acquiree Dadorosa.

Antichi Pellettieri 2007 Annual report - page 6

Thanks to the improved sales mix, revenues from own brands came to 86.2% of the total and exports to 61.2%, fueled by sales in emerging markets (Eastern Europe, Russia, the Middle East and the Far East) which now accounts for 40.3% of total turnover.

Revenues from direct distribution channels (directly owned stores [DOS], franchising and multi- brand boutiques that buy directly from Group showrooms) increased, generating 58.7% of consolidated sales.

EBITDA for the year came to €47.8 million, an increase of 36.7% on the 2006 result of €35 million, and amounted to 15.9% of sales (16.6% the previous year). The growth stems from a development strategy based on the constant improvement of the sales mix, through more profitable goods and distribution channels, and from the economies of scale generated by the increase in revenues and volumes.

EBIT rose from €26.1 million in 2006 to €35.9 million for the year (+37.3%), coming in at 11.9% of sales.

The pre tax profit was €27.8 million, an increase of 47.2% on the previous year (€18.9 million).

Net debt at December 31st, 2007 was €64.3 million, reflecting an optimal debt/equity ratio of 0.37.

These results confirm the Group's potential as it continues to reinforce proprietary brands through PR efforts and the opening of single-label boutiques (DOS and franchises) in strategic locations (with a 30.4% increase in revenues compared with 2006), while working to integrate and develop new synergies among the companies that make up the Group.

Net revenues by category

12/31/07 % 12/31/06 % Revenues from own brands 258,828 86.2% 221,908 86.2% Revenues from licensed brands 41,029 13.7% 35,553 13.8% TOTAL 299,857 100% 257,461 100% Royalties 319 0.1% 0 0.0% GRAND TOTAL 300,176 100% 257,461 100%

The international competitive context

The Group's fine results confirm that it is correctly positioned in the accessible luxury sector, which is relatively ignored by most competitors. Antichi Pellettieri's advantage is the way it blends a range of companies to optimize production, distribution and financial synergies, in order to strengthen its hold on traditional markets and penetrate those where it is not yet active.

In the second half of 2007, the international consumer goods industry suffered at the hands of the subprime mortgage crisis. Antichi Pellettieri, thanks to its focus on emerging countries (Russia, Eastern Europe and the Middle East) and its minimal exposure to the U.S. market, achieved excellent growth results and in December enjoyed outstanding sales figures at its directly operated stores. The sales campaigns for spring/summer 2008, conducted from September through November 2007, showed a 20% increase in orders with respect to the same season the previous year. While nurturing its traditional buyers, the Group also brought in several new Antichi Pellettieri 2007 Annual report - page 7 customers. The fact that most of these are based in emerging countries testifies to the great potential still waiting to be tapped in these markets.

Revenues by region

Europe remains the Group's key market, contributing 81.8% of total revenues in 2007. Within the region, growth rates are swift in Eastern European and Russia, which accounted for 26.2% of the total (21% in 2006). Emerging markets in the Far East made up 9.4% of total sales, thanks to major development efforts by the Group in recent years.

12/31/07 % 12/31/06 % Italy 116,485 38.8% 102,919 40.0% Europe 129,002 43.0% 99,427 38.6% Japan 10,054 3.3% 8,059 3.1% North America 11,950 4.0% 12,029 4.7% Rest of Asia 18,219 6.1% 24,291 9.4% Rest of the world 14,147 4.7% 10,736 4.2% TOTAL 299,857 99.9% 257,461 100.0% Royalties 319 0.1% 0 0.0% GRAND TOTAL 300,176 100% 257,461 100%

The distribution network The Group follows a strategy of swift retail expansion in Italy and abroad. Franchising is generally used to penetrate foreign markets, while in Italy proprietary boutiques have been opened in prestigious locations (Braccialini, Biasia, Baldinini and Sebastian in Via Montenapoleone) to give extra visibility to the Group's brands.

Growth for the year was driven by the retail business. Retail creates value for the Group's brands and products, reduces the risks of wholesale distribution, and makes it possible to re-appropriate retail margins while optimizing cash flow.

The Group's distribution network is a strength, and stands out for its variety of formats, stores, sizes and merchandise.

Compared with 59.5% in 2006, 58.7% of distribution took place through direct channels: directly owned stores (DOS), franchises, and customers who buy from the Group's showrooms or directly from the company. The direct distribution network consists of single-label boutiques (directly- owned stores for 9.4% of revenues and franchises for 10.1%), plus multi-label outlets for 39.2% of sales.

In 2007, there was an increase in the number of single-label retail stores, with the opening of 36 new boutiques (9 DOS and 27 franchises).

Antichi Pellettieri 2007 Annual report - page 8

SINGLE-LABEL DISTRIBUTION NETWORK AT DECEMBER 31ST, 2007 176 BOUTIQUES (48 DOS + 128 FRANCHISES)

Italy Germany, Austria, Switzerland Russia & Baltic countries Middle East & rest of the world Far Eastt & Japan Eastern Europe Rest of Europe

Brand extension strategy

The Group's success owes in part to the increasing visibility and recognizability of its brands. In this vein, the Group is pursuing a brand extension strategy by setting up licensing agreements both within the Group (to exploit synergies) and with external partners (to profit from new distribution channels). Some of the major agreements signed during the year were as follows: 1) a five-year license for the production and international distribution by Frangi of Braccialini's beachwear and underwear line; 2) a license for the production and international distribution by Schiapparelli Pikenz of Braccialini fragrance; and 3) a license for the production and international distribution by Facco Corporation of Braccialini and Baldinini jewellery.

Antichi Pellettieri 2007 Annual report - page 9

BRAND PORTFOLIO

Antichi Pellettieri 2007 Annual report - page 10

STRUCTURE OF THE ANTICHI PELLETTIERI GROUP AT DECEMBER 31st, 2007

GROUP COMPANIES

Antichi Pellettieri SpA

Calzaturificio Mafra business unit

This Parma-based unit has been designing, producing and distributing collections of high-quality women's footwear since 1968. Calzaturificio Mafra produces and distributes articles bearing its own brands and under license for Sebastian, The Saddler, Missoni, and Aquascutum.

The label Sebastian, created some 40 years ago and an uncontested leader of the elite footwear market in the 1970s and '80s, was acquired in 1998 by Calzaturificio Mafra—which turned the label around with collections that stand out for design, quality and detail without neglecting fashion content.

The Saddler started out in the 1970s as a casual "day" line for young, fashion-conscious women with an eye for genuine, Italian-made quality. Antichi Pellettieri 2007 Annual report - page 11

The recent opening of a flagship store in Paris has crowned the victory of the "new" Sebastian and is consistent with the strategy of building the brand internationally. Today there are Sebastian boutiques in Milan, Brescia, Reggio Emilia, Parma and Forte dei Marmi, as well as corners in major department stores and in the most prominent shoe stores in Italy and abroad.

Calzaturificio Mario Cerutti business unit

Based in Vigevano, this unit produces and markets high-end women's footwear under the Mario Cerutti label and under license for Mariella Burani. Quality, design, and flawless craftsmanship have been inseparable components of the brand's identity for over 30 years. A well-made product starts with the careful choice of materials, which are worked to the smallest detail by expert hands. Premium leathers and the finest fabrics are selected, hand-cut, sewn and finished with meticulous care.

An innovative production chain is a further guarantee of quality. Collections of tasteful, well- designed footwear in which classic styling and original design are blended into a cohesive image are made for the discerning customer who insists on quality and keeps up with the latest trends and colors.

Braccialini Srl

Braccialini produces accessibly luxury leather goods with its own labels, including Braccialini and Tua by Braccialini, and under license for Vivienne Westwood and Warner Bros.

One of its strengths is the creative capacity to produce 10 to 15 lines per season, all of them original and distinct.

Handbags and other accessories are created by a team of designers and model makers coordinated by Carla Braccialini and her son Massimo; the design staff of the licensors also contribute to collections produced under license. Its primary markets are Italy, the Far East and the Middle East, through 19 single-label DOS and franchise boutiques.

Dadorosa Srl

Dadorosa Srl was founded in 1885 in Scandicci, near Florence—Italy's premiere leather goods district—and is licensed globally for the production and distribution of the complete range of Gherardini merchandise. It also operates three Gherardini boutiques, in Milan, Florence and Rome.

Biasia Francesco SpA

Biasia Francesco SpA of Vicenza has a long manufacturing tradition and outstanding production skills. It is one of the leading makers of handbags and accessories for the accessible luxury market.

The Francesco Biasia brand is recognized worldwide for top-rate quality and excellent value. It has earned a reputation through a distribution network of 24 single-label boutiques (DOS and franchises), located in major fashion districts including Via Montenapoleone in Milan, as well as numerous corners and shop-in-shops at the most elite international department stores.

The company offers a full assortment expressing the modern woman's character, personality, taste and sensuality. From its high-tech headquarters, Biasia Francesco organizes and oversees Antichi Pellettieri 2007 Annual report - page 12 production, distribution and logistics by way of an efficient, qualified workforce using state-of-the- art technologies.

The company's strengths are its leather-working expertise and the creativity required to combine different materials into beautifully accessorized and finished leather goods. In over 30 years of growth, it has created a unique identity while never neglecting the demands of its fashion-forward clientele.

In 2007 it was licensed to produce and distribute men's and women's bags under the Aquascutum brand.

Baldinini Srl

Baldinini produces accessible luxury men's and women's footwear, earning 80% of its revenues from exports (mainly to Eastern Europe). Original materials and shapes set international trends in formal or trendier style.

The company operates 73 single-label boutiques (12 directly and 61 under franchise agreements), located in prime shopping districts in cities around the globe. In Italy, its main location is at Via Montenapoleone 15 in Milan, close to the Baldinini showroom.

Enrico Mandelli SpA

This company is specialized in the production and distribution of accessible luxury leather apparel for men and women under its proprietary brand, Enrico Mandelli. Under license, it also makes and distributes the leather apparel line for Luigi Borrelli. Its greatest strengths are a tradition of workmanship going back four generations, and a design staff of international renown. It has produced under license for brands of the caliber of Luciano Soprani, Basile, Ungaro, Moschino and D&G, and is known for its production methods and product quality.

GFM Industria SpA

GFM Industria, based in Granarolo Faentino (Ravenna), produces luxury apparel under its Ter-et- Bantine label.

Under a license agreement dating from the spring/summer 2005 collection (recently renewed through 2011), it also produces and distributes the Anglomania line for Vivienne Westwood. Thanks to this highly successful arrangement and the excellent performance of the lines manufactured and distributed under its proprietary brands, the company has enjoyed a significant increase in sales.

Coccinelle

Founded by Giacomo Mazzieri in 1978 in Sala Baganza, near Parma, Coccinelle is one of Italy's leading makers of accessible luxury handbags and accessories, which bear its own Coccinelle brand or are made under license for Miss Sixty.

Coccinelle makes up-to-date products with a focus on daytime use. Its latest strategy is to reposition the brand for a more high-end clientele while making its merchandise more suited for other occasions.

It has a distribution network of 48 stores worldwide.

Antichi Pellettieri 2007 Annual report - page 13

INVESTMENTS

During the year Antichi Pellettieri acquired 100% of Dadorosa Srl through its subsidiary Braccialini Srl, as described in the section "Main events in 2007."

Its acquisition policy reflects the goal of diversifying the business while concentrating on the handbags segment.

This policy has not diluted the Group's profitability. As extra capital has been invested, operating income has grown more than proportionally, highlighting a well-balanced pattern of growth.

RESEARCH AND DEVELOPMENT

The Group's R&D activities are typical of the fashion industry.

The constant development of materials (fabrics, leathers and accessories), methods and models for the production of goods that are always original and in step with new trends is a major ingredient of Antichi Pellettieri's success.

The products the Group distributes every season are the result of careful research by brand managers and sales personnel, along with the style department of each Group company, into market trends, customers' needs, and the possibilities offered by new materials. These efforts are backed by studies on pricing, the structure of the sales campaign, and the results of the “sell-in” (sales to shops/department stores/importers) and the “sell-out" (sales to final consumers) of the corresponding prior-year season. This sort of research and analysis is the heart of the prototype creation phase, which leads to the production of sample merchandise.

The Group is also busy improving and streamlining specific production processes, so it can follow through more cost-effectively on the ideas that form the basis of each season's collections.

More specifically, in recent years the Group has begun to invest in the reorganization of the footwear research and design process, from which prototypes and samples are made, and which is therefore the heart of the production chain. This has included the merger of Calzaturificio Mario Cerutti (from December 31st, 2004) and Ma.fra (from December 31st, 2005), in order to centralize the process and put footwear research and design under a single roof.

The Group concentrates on brand development in the form of advertising campaigns targeted specifically to a given clientele, and events celebrating the features that make its products unique.

R&D expenses are recognized in the consolidated profit and loss account the year they are incurred. For 2007, they consist mainly of advertising costs arising from investments in the promotion of new collections.

BALANCE SHEET, PROFIT & LOSS ACCOUNT AND CASH FLOW RESULTS FOR THE ANTICHI PELLETTIERI GROUP

In 2007 the Group acquired and sold some holdings that in some cases have influenced the scope of consolidation and affected the Group's economic and financial results. The consolidated profit and loss account includes Dadorosa Srl, consolidated as from July 1st, 2007.

Antichi Pellettieri 2007 Annual report - page 14

PROFIT AND LOSS ACCOUNT RESULTS

RESTATED PROFIT AND LOSS ACCOUNT (in €/000) note (*) 12/31/07 12/31/06 % change Net revenues (23) 300,176 257,461 16.6%

EBITDA (**) 47,776 34,950 36.7%

EBIT (**) 35,866 26,119 37.3%

Net financial income (charges) (26) - 8,101 - 7,245 11.8%

Pre tax profit (**) 27,765 18,873 47.1%

Net profit 26,373 12,227 115.7% Minority interests in net profit 8,032 2,573 Group share of net profit 18,340 9,654 90.0%

EARNINGS RATIOS EBITDA/Net revenues 15.9% 13.6% EBIT/Net revenues 11.9% 10.1% Pre tax profit/Net revenues 9.2% 7.3% Net profit/Net revenues 8.8% 4.7% Minority interests/Net profit 30.5% 21.0% Group net profit/Net revenues 6.1% 3.7%

(*) In accordance with CONSOB Resolution DEM 6064293 of July 28th, 2006, the main items in the restated accounts are cross-referenced to their counterparts in the standard accounts and to the relevant explanatory note.

(**) Also pursuant to CONSOB Resolution DEM 6064293 of July 28th, 2006, the criteria used to calculate alternative performance indicators are noted below:

Alternative performance indicators

As decided during the transition to International Accounting Standards, the restated profit and loss account shows the following intermediate results not recognized by IAS/IFRS as accounting measures, as they are thought to provide significant information on the Group's performance:

EBITDA: income before taxes, financial income and charges, amortization, depreciation, provisions and asset write-downs charged during the period;

EBIT: income before taxes and financial income and charges;

Pre tax profit: income before taxes.

The consolidated profit and loss account for 2007 closes with a net profit of €26,373K, an increase of €14,146K (+115,7%) with respect to 2006. As a percentage of sales, the net profit rose from 4.7% in 2006 to 8.8% in 2007. The pre-tax profit grew from €18,873K in 2006 to €27,765K (+47.1%). The Group's share of net profit came to €18,340K (+90% on 2006), after minority Antichi Pellettieri 2007 Annual report - page 15 interests of €8,032K. Minority interests in the net profit thus rose from 21% in 2006 to 30.5% in 2007.

The main items in the consolidated profit and loss account are analyzed below.

Net revenues amounted to €300,176K in 2007, an increase of 16.6%.

The main drivers of growth were as follows:

- good performance in emerging luxury markets, namely Russia, Eastern Europe, the Middle East and the Far East;

- an increase in sales through direct wholesale distribution channels, mainly DOS and franchise boutiques;

- the excellent performance of the Baldinini, Francesco Biasia and Braccialini brands;

- the consolidation of Dadorosa.

EBITDA stood at €47,776K, an improvement of €12,826K on 2006 (+36.7%), and amounted to 15.9% of revenues (13.6% the previous year). The absolute increase in EBITDA stems mostly from volume growth and the resulting economies of scale, and from a policy of raising prices and improving the sales mix, which reflects:

- revenues from handbags and footwear accounting for 92.5% of total sales; - revenues from overseas markets making up 61.2% of the total, in particular emerging luxury markets that accounted for 40.3% of the Group's turnover; - revenues from direct distribution channels that now make up 58.7% of the total, including DOS and franchises (19.5% of consolidated sales).

EBIT came to €35,866K, increasing by €9,747K on 2006 (+37.3%), and amounted to 11.9% of revenues (10.1% in 2006).

Net financial charges came to €8,101K, reflecting the optimal management of working capital and shrewd investing in new stores.

Antichi Pellettieri 2007 Annual report - page 16

BALANCE SHEET AND FINANCIAL POSITION

RESTATED BALANCE SHEET note (*) 12/31/07 12/31/06 in €/000 Trade receivables (9) 58,722 48,677 Trade payables (19) (60,038) (45,201) Net trade receivables (payables) - 1,316 3,476 Inventories (8) 57,655 41,506 Operating working capital 56,339 44,982 (9)-(10)-(19)- Other short term assets/liabilities (20) (6,533) (8,638) Net working capital 49,806 36,345 (1)-(2)-(3)-(4)- Fixed assets (6) 243,942 245,760 Post employment benefits (17) (7,946) (8,112) Other non current receivables/payables (7)- (18) 1,519 2,287 Deferred taxes +/- (5)-(16) (48,792) (59,724) Net capital employed 238,529 216,556

Shareholders’ equity (14) 174,180 153,071 Net debt (29) (64,350) (63,485) Net capital employed 238,529 216,556

BALANCE SHEET RATIOS Inventories/Net revenues 19.2% 16.1% Net working capital/Net revenues 16.6% 14.1% Shareholders' equity/Capital employed 73.0% 70.7% Debt/Equity 36.9% 41.5% Debt/EBITDA 134.7% 181.6%

(*) In accordance with CONSOB Resolution DEM 6064293 of July 28th, 2006, the main items in the restated accounts are cross-referenced to their counterparts in the standard accounts and to the relevant explanatory note.

The Group's financial structure features capital employed of €238,529K (€216,556K at December 31st, 2006), funded 73% by net equity (70.7% at the close of 2006) and 27% by debt (29.3% at the close of 2006).

Non current assets, worth €244,012K, were essentially unchanged as the new acquisitions during the year were offset by the collection of long term financial receivables.

Net working capital came to €49,806K, compared with €36,345K at December 31st, 2006, and increased as a percentage of net revenues from 14.1% in 2006 to 16.6%. The main reason for the increase of €13,461K in consolidated net working capital was the rise in inventories, by €16,149K, which in turn was caused by the increase in retail sales as a percentage of total turnover and by the truckers' strikes in December 2007. Inventories thus rose as a percentage of sales, from 16.1% in 2006 to 19.2%. In percentage of revenue terms, inventories and net working capital are in any case at ideal levels. Antichi Pellettieri 2007 Annual report - page 17

Net debt comes to €64,350K, compared with €63,485K at the close of 2006. The increase is due to the debt brought in by Dadorosa Srl and to the price paid for that acquisition, in addition to other investments by Group companies during the year.

Consolidated shareholders’ equity amounts to €174,180K, versus €153,071K at the end of 2006, of which €121,613K pertains to the Group (€105,873K in 2006) and €52,566K is held by minority investors (€47,198K the previous year).

The balance sheet has benefited from the efforts made in 2006 to streamline the corporate structure, which has reduced minorities through the exercise of options at below-market prices.

Key ratios

Below are the key economic and financial ratios for 2007 and the previous year.

Profitability ratios

The following table shows the trend in the main profitability ratios for the years ended December 31st, 2006 and 2007:

2007 2006 ROE 15.1% 9.1% ROCE 15.0% 12.1%

ROE (return on equity) is the ratio of the Group's share of net profit to consolidated shareholders' equity at the close of the year.

ROCE (return on capital employed) is the ratio of EBIT to net capital employed.

All profit indicators show growth in 2007, demonstrating the Group's ability to produce earnings over time.

This is due essentially to the companies' positive results and to the consolidation of Dadorosa Srl.

ROE rose from 9.1% in 2006 to 15.1%, as the profit (+€8,695K) grew at a faster rate than net equity (+€15,740K).

ROCE, at 15.0% in 2007 and 12.1% in 2006, grew as a result of the increase in EBIT from €26,119K to €35,866K (+37.3%), which outpaced a 10.1% rise in net capital employed. In addition to representing overall profitability, this index measures the economic efficiency of the Group's core operations, i.e. its ability to produce income at levels appropriate to the resources employed.

Capital ratios

Financial solidity

The ratios below measure the Group's ability to maintain, over the medium to long term, a steady balance between outgoing cash flows (from the reimbursement of funding) and incoming cash flows (recovery of capital employed), so as not to compromise the economic equilibrium of the business.

Antichi Pellettieri 2007 Annual report - page 18

2007 2006 Equity/non-current assets 71.4% 62.3% Equity + non-current liabilities/non-current assets 113% 121.2%

Liquidity

2007 2006 Current ratio 115.2% 149.2% Quick ratio 74.6% 97%

The current ratio is the ratio of current assets to current liabilities.

The quick ratio is calculated as current assets excluding inventories divided by current liabilities.

In 2006 to 2007 these indices were at ideal levels. The current ratio demonstrates the Group's ability to satisfy short-term financial liabilities using available cash and the conversion of short- term investments, while the quick ratio shows its growing capacity to run the business with current cash or near-cash reserves.

Turnover ratios

2007 2006 Average collection period 65.8 62.5 Average payment period 93.6 82.6 Inventory turnover 5.2 6.2

The average collection period, which increased slightly in 2007, is very low as it reflects the Group's policy of requiring payment on delivery or even in advance for sales in overseas markets such as Eastern Europe and the Far East.

The average payment period increased due to the Group's growing power to negotiate with suppliers, as a result of the higher volumes managed.

Inventory turnover dipped because of the truckers' strikes in December 2007, which delayed certain shipments to January of the following year.

Financial ratios 2007 2006 Debt ratio 136.9% 141.5% Leverage 139.9% 146.5% Rigidity ratio 66% 78.9%

The debt ratio is calculated as net capital employed divided by shareholders’ equity and expresses the amount of investments made with owners' funds (equity). A ratio of 100% means that net capital employed is fully financed by equity, while a higher value signifies a greater dependence on borrowing.

Leverage is calculated as the ratio of total liabilities to shareholders’ equity. It can be less than, equal to or greater than 100%. Leverage of 100% means that investments have been financed equally by shareholders' equity and debt (current and non-current liabilities).

Antichi Pellettieri 2007 Annual report - page 19

The rigidity ratio is the sum of shareholders' equity and non-current liabilities divided by the sum of shareholders’ equity and total liabilities. A high degree of rigidity (the maximum is 100%) is desirable, since it represents lower short-term commitments for the reimbursement of debt.

REQUIREMENTS OF THE EXPANDI MARKET

The following table shows the earnings and financial requirements stated in Art. 2A.2.1, paragraph 5 of Borsa Italiana regulations and the Group's scores, all of which are acceptable:

Expandi market requirements

EBIT >0 35.866 EUR/mn

Net profit >0 and >€100,000 26.384 EUR/mn

Debt/EBITDA < 4 1.35

TRANSACTIONS WITH RELATED PARTIES, NON-CONSOLIDATED SUBSIDIARIES AND ASSOCIATES

The Antichi Pellettieri Group's related party transactions, as defined in CONSOB Resolution 15519 of July 27th, 2006, are reported in the supplementary profit and loss account and balance sheet and detailed in Note 28.

The Board of Directors of Mariella Burani Fashion Group is represented on Antichi Pellettieri's Board of Directors by the chairman, Giovanni Burani, and by managing directors Walter and Andrea Burani.

All transactions with the above parties fall within the Group's normal sphere of operations and are settled under arm's-length conditions. There are no atypical or unusual transactions.

PERSONNEL

At December 31st, 2007 the Antichi Pellettieri Group had 805 employees, an increase of 51 on the previous year. The higher headcount is due primarily to the consolidation of Dadorosa Srl and to the policy of opening directly operated stores.

12/31/07 12/31/06 Average headcount 2007 Executives 14 17 15 Middle mgmt and white collar 370 346 352 Blue collar 421 391 404 Total 805 754 771

SIGNIFICANT SUBSEQUENT EVENTS

As of this writing, no significant events have taken place since the close of the year.

Antichi Pellettieri 2007 Annual report - page 20

CORPORATE GOVERNANCE

As recommended by CONSOB in its communication DAC/RM/97001574 of February 20th, 1997, and pursuant to the decision reached by the Board of Directors on January 22nd, 2001, information is provided below on the composition of the Board of Directors and on the powers granted to the chairman and the managing directors.

Antichi Pellettieri SpA is administered by a Board of Directors with seven members, two of them executive and five of them non-executive (the latter including one independent director), serving a three-year term of office that will end with approval of the 2008 financial statements. They operate according to the provisions of the Italian Civil Code concerning joint-stock companies.

The Board of Directors is made up as follows:

Chairman and CEO Giovanni Burani Managing Director Giovanni Stella Director Giuseppe Gullo Director Andrea Burani Director Walter Burani Director Riccardo Braccialini Director Roberto Pilotto

The independent director, Roberto Pilotto:

- has no economic dealings with the Company, or with the Group that it heads, significant enough to affect his independence of judgment;

- has no shareholdings and is party to no parallel company agreements that may allow him to exercise any form of control over the Company or its subsidiaries.

Pursuant to Article 23 of the by-laws, the Board of Directors is invested with the broadest powers for managing the company and may take all actions necessary for achieving the corporate purpose, excluding those powers and actions that by law are reserved to the shareholders' meeting.

The resolutions per Art. 2365 (second paragraph) of the Italian Civil Code are within the powers of the Board of Directors.

The Board of Directors may delegate its powers and functions, excluding those reserved to it exclusively by law, to an executive committee or to one or more of its members, determining specific responsibilities and limits and, if more than one director is authorized, whether they shall act on an individual basis or jointly.

The Board of Directors may also establish other committees with specified functions and duties, determining their composition, means of operation and terms for reporting on their work. Such bodies, if appointed, report promptly and in any case at least quarterly to the Board of Directors and Board of Statutory Auditors on their activities, performance, and the operations of economic or financial significance conducted by the company or its subsidiaries and associates; specifically, they report on atypical or unusual transactions, related party transactions, and transactions in which the directors have an interest on their own account or on behalf of third parties. Reporting to the Board of Statutory Auditors takes place during meetings of the Board of Directors, and when particular circumstances suggest, may also take place in the form of a written note addressed to the chairman of the Board of Statutory Auditors.

Antichi Pellettieri 2007 Annual report - page 21

The Board of Directors has granted to Chairman and CEO Giovanni Burani, pursuant to and to the effects of Art. 2381 of the Italian Civil Code, all powers of ordinary and extraordinary administration, with individual signing authority up to the limit of EUR 3,000,000 (three million) per transaction, excepting only those actions that the law or the company's by-laws reserve exclusively to the Board of Directors. In particular, the Board of Directors has exclusive authority for the following: - examining and approving the company's strategic, industrial and financial budgets and statements, and defining the corporate structure of the group that the company heads; - buying, selling, swapping and conveying real estate and property rights in rem; pledging and mortgaging real estate; - incorporating new subsidiaries; assuming, purchasing or disposing of equity investments; buying, selling, swapping and conveying the company's business(es) in whole or in part; - buying, selling, swapping, transferring, or otherwise acquiring or disposing of goods, rights and services and in general assuming obligations, commitments and responsibilities of any kind in an amount, either individually or in combination with related transactions, exceeding EUR 3,000,000 (three million), and amending such agreements, contracts, transactions, obligations, commitments or assumptions of responsibility in a manner that will produce economic effects exceeding the above amount; - appointing chief operating officers, authorizing their powers and determining their compensation; - granting sureties, collateral or unsecured guarantees of any kind in an amount exceeding EUR 3,000,000 (three million) per individual act and, when these are in the interest of parties other than the company or its subsidiaries, in any amount whatsoever; - reviewing and approving transactions with related parties; - ensuring the appropriateness of the organizational and general administrative structure of the company and of the group that it heads, as determined by the authorized bodies. In addition to the above powers that are under the sole authority of the Board of Directors, its powers also include but are not limited to the following, up to the limit of EUR 3,000,000 (three million) established above: - conducting all commercial and financial transactions pertinent to the corporate purpose, and arranging the relative contracts; - opening and closing bank accounts, issuing checks to the order of third parties on available funds and credit lines, contracting credit facilities, credit lines and non-mortgage loans with banks, issuing bills/drafts, making bank transfers, and endorsing credit securities, including bills and drafts, for discount and collection; - engaging in factoring transactions; - buying and selling brands, patents, know-how, company names, and any other intellectual property rights, up to the limit of EUR 3,000,000 (three million) individually or in combination with related transactions; - selling, purchasing or collecting on receivables and paying debts, even if not yet due; demanding payment of any kind due to the company from individuals, associations, businesses, public agencies, or national or foreign government bodies; - giving sureties and other guarantees in the interests of the company and its subsidiaries, up to the limit of EUR 3,000,000 (three million) per operation; - giving and redeeming security deposits and bail, receiving collateral and unsecured guarantees, performing registrations and transfers, and waiving legal mortgages up to the limit of EUR 3,000,000 (three million) per transaction; - signing, terminating and transferring rental agreements of any kind and leasing agreements on assets other than real estate, representing the company at inventories and auctions (court- ordered and otherwise) and in public and private tenders, and intervening in tax agreements and settlements; - making and receiving delegations, novations and tenders and acknowledgements of debt; signing, renewing, rescinding or terminating any contract whatsoever whether named or unnamed; Antichi Pellettieri 2007 Annual report - page 22

- negotiating compromises, designating arbitrators for formal and informal proceedings, appointing and revoking consultants, legal counsel and attorneys-in-fact, taking legal action at any degree of jurisdiction, electing domicile, signing complaints, and representing the company before the tax and administrative authorities; accepting and requesting composition and arrangement with creditors, bankruptcies and temporary receiverships; - conducting any transaction on government securities, collecting from post offices or other locations all bills of exchange, registered mail, insured mail, money orders, packages and packets of any kind; - hiring and terminating employees, including at the executive level; - reporting to the Board of Statutory Auditors on activities performed, operations by the company of economic or financial significance, and transactions presenting conflicts of interest or conducted with related parties; - delegating some of the above powers to third parties and designating proxies and assignees in general for certain acts or categories of act.

The Board of Directors has also authorized director Giovanni Stella to carry out the resolutions of the Board of Directors, taking all ordinary and extraordinary actions approved by the Board itself, and to: - coordinate the commercial and production strategy of the group of subsidiaries operating in the footwear and leather goods sector; - represent the company at the ordinary shareholders' meetings of its holdings, sign agreements for rent, tradeshow registration or set-up or store renewals, for amounts not exceeding EUR 200,000 per contract; - assume and dispose of licenses, perform release transactions, demand and collect from any natural or legal person, fund, public or private agency, bank, region, province, municipality, state treasury, deposit and loan association, railway, post office, telegraph office, prefecture, customs office, or tax office any sum or payment order in national or foreign currency, giving a full receipt therefor; - sign petitions, motions and complaints on any matter, represent the company in all operations with the state, regional, provincial, municipal and independent administrations and with tax offices and customs and currency authorities; - represent the company in all employment and social security relationships, act as plaintiff and defendant before justices of the peace, judges, courts of law, regional administrative courts and special jurisdictions, appointing and revoking legal counsel; - promote any preventive or executive act, petition for and revoke seizures and attachments, hire and fire employees and establish their duties, compensation and all other matters of personnel management; - represent the company in union negotiations and in the courts for labor disputes of any degree, with the power to appoint legal counsel and negotiate settlements for labor issues; - appoint and revoke consultants and free-lance professionals, determining their duties and compensation up to the limit of EUR 250,000 per contract; intervene in bankruptcy judgments, participate in meetings of creditors, tender proof of credit, certify their truthfulness and accuracy, negotiate, accept, sign and reject settlements, give bankrupts the benefits of the law, agree on late payment interest, demand allotments and take part in inventory procedures; - buy, sell and rent moveable goods in general and all other items necessary for pursuing the corporate purpose, with promise of full ratification and approval, and with the registrar exonerated from all liability in the case of the purchase, sale or exchange of moveable assets listed in public registers; arrange for the leasing of registered or unregistered moveable goods, in an amount not exceeding EUR 250,000.00 (two hundred fifty thousand) per contract; - carry out all acts of ordinary administration; prepare and sign correspondence, invoices and in general all documents falling within the company's ordinary administration; - conduct any banking transaction with Cassa di Risparmio di Parma e Piacenza, Banca Intesa, Banca Popolare di Lodi, Banco di Brescia or San Paolo IMI, to include paying collection orders and withdrawals from ordinary and special credit institutions through the issue of checks or in any Antichi Pellettieri 2007 Annual report - page 23 other form, using available funds as well as overdrafts within the credit facilities granted by those institutions; endorsing bills to credit institutions for discount and collection; applying to credit institutions and insurers for guarantees, security deposits and policies in favor of third parties; and signing such application forms and insurance policies.

Equity investments held by directors, statutory auditors and general managers

Pursuant to CONSOB Resolution no. 11971, the directors, the statutory auditors, the general manager, their spouses and their minor children are declared to hold the following shares:

Name Title Company Status No. shares/quotas held at 12/31/07 Director, Giovanni Valter Chairman of the Antichi Pellettieri SpA Full ownership 12,500 Burani Board

Walter Burani Antichi Pellettieri SpA Full ownership 289,777 Director

Andrea Burani Director Antichi Pellettieri SpA Full ownership 20,000

Giuseppe Gullo Director Antichi Pellettieri SpA Full ownership 15,000

Managing Giovanni Stella Antichi Pellettieri SpA Full ownership 250,000 Director Riccardo Director Antichi Pellettieri SpA Full ownership 204,000 Braccialini Riccardo Director Braccialini Srl Full ownership 200 Braccialini Tommaso General Antichi Pellettieri SpA Full ownership 14,500 Cepelli Manager

There are no such shareholdings by members of the Board of Statutory Auditors.

FINANCIAL INSTRUMENTS

The Group does not currently make use of financial instruments.

INFORMATION ON FINANCIAL RISKS

The Group is exposed to various financial risks, as described by category below. Financial risks are managed by the individual companies in coordination with a central risk management unit.

Credit risk

Receivables outstanding at December 31st, 2007 are mainly trade receivables of modest amounts, as discussed in the balance sheet section of the notes.

It is the Group's policy to sell merchandise within set credit limits defined after evaluating customers' creditworthiness.

On the whole, therefore, credit risk is deemed to be very low.

There are no past-due invoices of any significant amount.

Antichi Pellettieri 2007 Annual report - page 24

Liquidity risk

The Group strives to reduce liquidity risk to a minimum, to be assured of obtaining the funds it needs under economical conditions, by maintaining sufficient cash reserves at all times; diversifying its fund-raising methods; obtaining adequate credit lines; and making sure its future liquidity situation is in line with business plans. Management believes that the funds and credit lines currently available, along with the cash flow generated by operations, will be sufficient to meet the Group's needs.

Market risk a) Interest rate risk

Interest rate risk stems from medium/long-term loans contracted under variable-rate conditions. The current policy is to stay within the variable rate range while monitoring the slope of interest rate curves. b) Exchange rate risk

At December 31st, 2007 there were no significant receivables or payables exposed to exchange rate risk. c) Price risk

The Group is exposed to fluctuations in the price of raw materials. Its policy is to hedge that risk, where possible, by arranging medium-term agreements with suppliers and maintaining adequate levels of stocks.

BUSINESS OUTLOOK FOR THE ANTICHI PELLETTIERI GROUP

On the basis of sales and orders for the early months of the year, performance in 2008 should be in line with forecasts, with revenues and EBITDA enjoying double-digit growth. Management is working to streamline and synergize Group activities, with a view to achieving full control of the production chain and a vertically integrated structure.

One specific goal is to increase the Group's market shares in emerging regions such as Russia, Eastern Europe, the Middle East and the Far East.

Thus, 2008 will be devoted to exploiting synergies among Group companies by developing cross- selling initiatives for clothing, footwear and accessories and working on the "cross-fertilization" of the Group's many proprietary brands.

Other plans are to arrange new licensing agreements for brand development, expand the direct distribution network, scale up investments in communications, and launch new collections.

Because the retail business is key to the Group's strategy, retail investment will be a cornerstone of growth in coming years, and will be carried out selectively and synergistically with the current set-up.

Finally, cross-fertilization of retail competencies among the different components of the Group will be a crucial factor in leveraging the brands' potential in strategic markets.

Giovanni Burani Chairman of the Board of Directors Antichi Pellettieri 2007 Annual report - page 25

ANTICHI PELLETTIERI GROUP - Consolidated financial statements at December 31st, 2007

Antichi Pellettieri 2007 Annual report - page 26

CONSOLIDATED BALANCE SHEET (*) in €/000 December note December December 31st, ASSETS 31st, 2007 31st, 2006 2005 Non current assets Property, plant and equipment (1) 26,160 24,029 19,257 Intangible assets (2) 209,452 206,563 135,924 Investment property (3) 1,664 1,664 1,664 Investments (4) 2,827 3,018 11 Long term financial assets available for sale 0 0 0 Deferred tax assets (5) 5,573 6,108 1,441 Long term derivatives 0 0 0 Other long term financial receivables (6) 3,839 10,345 12,048 Long term trade and other receivables (7) 4,759 7,023 72 Total 254,274 258,750 170,417

Non current assets held for sale

Current assets Inventories (8) 57,655 41,507 26,688 Short term trade and other receivables (9) 68,586 58,401 37,891 Current tax assets (10) 6,950 3,273 3,215 Other short term financial receivables (11) 18,710 2,758 1,000 Short term financial assets available for sale (12) 0 0 10 Short term derivatives 0 0 0 Negotiable securities recognized at fair value 0 0 0 Cash and cash equivalents (13) 11,703 12,578 10,373 Total 163,604 118,517 79,177 Total assets 417,878 377,267 249,594

(*) Pursuant to CONSOB Resolution 15519 of July 27th, 2006, the effects of related party transactions on the consolidated financial statements are shown in the schedule reported below and are also described in Note 28. Antichi Pellettieri 2007 Annual report - page 27

CONSOLIDATED BALANCE SHEET (CONTINUED) in €/000 December note December 31st, December 31st, 31st, SHAREHOLDERS' EQUITY AND LIABILITIES 2007 2006 2005 Shareholders’ equity (14) Capital issued 11,352 11,226 10,000 Share premium reserve 39,919 37,046 0 Other reserves 52,002 47,946 53,460 Profit for the period 18,340 9,655 4,094 Total 121,613 105,873 67,554

Minority interests 52,566 47,198 31,262

Total shareholders' equity 174,179 153,071 98,816

Non current liabilities Long term loans and borrowing (15) 36,069 66,237 37,163

Long term derivatives 0 0 0 Deferred tax liabilities (16) 54,365 65,833 45,372 Post employment benefits (17) 5,614 6,995 4,717 Long term provisions (17) 2,332 1,116 587 Other non current liabilities (18) 3,240 4,596 0 Total 101,620 144,777 87,839 Current liabilities Short term trade and other payables (19) 76,371 62,275 41,606 Current tax liabilities (20) 7,014 4,560 3,411 Short term loans and borrowings (21) 58,694 12,584 17,917 Short term derivatives (22) 0 0 5 Short term provisions 0 0 0 Total 142,079 79,419 62,939 Total liabilities 417,878 377,267 249,594

Antichi Pellettieri 2007 Annual report - page 28

CONSOLIDATED PROFIT AND LOSS ACCOUNT (*) in €/000 note 2007 2006 2005 Net revenues (23) 300,176 257,461 153,653

(24) Change in inventory of finished product and works in progress 11,084 4,549 4,094 Raw materials and consumables (24) (138,349) (116,878) (74,233) Cost of labor (24) (29,252) (27,214) (15,709) Other operating expenses (24) (95,883) (82,968) (47,477) Depreciation, amortization and write-downs (25) (11,910) (8,832) (4,931) Financial income (26) 443 283 321 Financial charges (26) (7,723) (7,729) (6,379) Profit (loss) from foreign exchange transactions (26) (821) 99 361

(26) Income from equity-accounted associates 0 102 Profit (loss) from assets held for sale (26) 0 0 (159) Pre tax profit 27,765 18,873 9,541

Tax (27) (1,393) (6,646) (4,620)

After tax profit 26,372 12,227 4,921

Minority interests 8,032 2,572 827

Net profit 18,340 9,655 4,094 No. shares outstanding (excluding treasury shares) 45,408,134 44,903,763 10,000,000 Earnings per share 0.58 0.27 0.49

(*) Pursuant to CONSOB Resolution 15519 of July 27th, 2006, the effects of related party transactions on the consolidated financial statements are shown in the schedule reported below and are also described in Note 28.

Antichi Pellettieri 2007 Annual report - page 29

CONSOLIDATED CASH FLOW STATEMENT in €/000

12/31/07 12/31/06 1 - Opening balance 4,981 -426

2 - Cash flow generated (absorbed) by operating activities Pre tax profit (loss) 27,765 18,873 Depreciation, amortization and write-downs 11,910 8,832 Net change in provisions for risks and employee benefits -166 2,808 Net financial charges 8,101 7,347 (Capital gains) / capital losses on disposal of property, plant and equipment -73 41 TOTAL 47,537 37,901

Net change in working capital -27,840 -31,144

TOTAL -27,840 -31,144 3 - Cash flow generated (absorbed) by investing activities Net change in: - intangible assets -2,667 -3,248 - property, plant and equipment -4,226 -3,682 - financial assets 192 -3,007

TOTAL -6,701 -9,937 4 - Cash flow generated (absorbed) by financing activities Increase in capital and reserves (*) 516 5,951 proceeds from capital increase 0 23,310 Receipt (repayment) of loans -6,395 31,350 Net financial charges -8,101 -7,347 Dividends paid to third parties -5,780 0 Change in scope of consolidation (**) -5,785 -44,677 TOTAL -25,545 8,587 5 - Net cash flow for the period -12,549 5,407 6 - Closing balance -7,568 4,981

(*) Includes the sale of 27% of Mandelli SpA and profits/losses from the trading of treasury shares.

(**) Includes changes in tangible and intangible assets, specifically goodwill, arising from the change in the scope of consolidation. The amount shown for 2007 refers to the consolidation of Dadorosa. This item does not include working capital entries.

Antichi Pellettieri 2007 Annual report - page 30

CHANGES IN CONSOLIDATED SHAREHOLDERS’ EQUITY FOR THE YEARS ENDED DECEMBER 31ST, 2006 AND DECEMBER 31ST, 2007 in €/000

equity reserves contributions Share capitalShare Legalreserve Treasuryshares Parent company Parent retainedearnings Group net equity Otherreserves and Minoritycapital and Minorityprofit (loss) Totalshareholders' Net Net profit fortheyear extraordinaryreserve Minorityinterests in shareholders' equity Share premiumreserve Reserve forshareholder

Balance at 12/31/04 10,000 0 0 5,036 0 29,090 0 4,343 48,469 36,062 459 36,521 84,990 Chg. in scope of cons.

Treasury shares

Increases 15,000 369 4,094 19,463 827 827 20,290

Decreases (378) (378) (6,086) (6,086) (6,464)

Reclassifications

Profit allocation 201 3,812 330 (4,343) 0 459 (459) 0 0

Dividends paid

Balance at 12/31/05 10,000 0 201 20,036 3,812 29,411 0 4,094 67,554 30,435 827 31,262 98,816 Chg. in scope of cons. (2,305) (2,305) 13,363 13,363 11,058

Reclassifications 14,985 (14,985) 0 0

Treasury shares (23) (86) (827) (936) (936)

Increases 1,249 22,061 8,595 9,655 41,560 2,573 2,573 44,133

Decreases 0 0

Profit allocation 80 1,531 2,483 (4,094) 0 827 (827) 0 0

Balance at 12/31/06 11,226 37,046 281 5,051 5,343 38,098 (827) 9,655 105,873 44,625 2,573 47,198 153,071 Chg. in scope of cons. (a) 2,503 2,503 (1,433) (1,433) 1,070 Reclassifications (b) 126 2,873 (2,999) 0 0

Treasury shares (c) 8 8 8

Incr. / Decr. (d) (562) 18,340 17,778 8,032 8,032 25,810

Dividends paid (832) (3,717) (4,549) (1,231) (1,231) (5,780)

Profit allocation 196 9,459 (9,655) 0 2,573 (2,573) 0 0

Balance at 12/31/07 11,352 39,919 477 5,051 4,511 42,782 (819) 18,340 121,613 44,534 8,032 52,566 174,179 Antichi Pellettieri 2007 Annual report - page 31

(a) Partial disposal of Enrico Mandelli SpA and consolidation of Dadorosa Srl; for details see the notes to the financial statements.

(b) Changes in shareholders' equity due to the partial conversion of the bond loan into shares, as discussed in the directors' report and the notes to the 2006 consolidated financial statements.

(c) Treasury shares at December 31st, 2007 amounted to €842K and consisted of 91,190 ordinary shares, of which the par value (€0.25 each) has been deducted from share capital and the remainder allocated to a separate equity reserve.

(d) Changes in shareholders' equity as a result of gains and losses from the trading of treasury shares.

Antichi Pellettieri 2007 Annual report - page 32

CONSOLIDATED BALANCE SHEET pursuant to CONSOB Resolution 15519 of July 27th, 2006 in €/000 Of which: Of which: December related December related note 31st, parties (see 31st, parties (see ASSETS 2007 Note 28) 2006 Note 28) Non current assets Property, plant and equipment 26,160 (1) 24,029 Intangible assets 209,452 (2) 206,563 Investment property 1,664 (3) 1,664 Investments 2,827 (4) 3,018 Long term financial assets available for sale 0 0 Deferred tax assets 5,573 (5) 6,108 Long term derivatives 0 0 Other long term financial receivables 3,839 (6) 3,762 10,345 10,235 Long term trade and other receivables 4,759 (7) 7,023 6,100 Total 254,274 258,750

Non current assets held for sale

Current assets Inventories 57,655 (8) 41,507 Short term trade and other receivables 68,586 (9) 4,760 58,401 5,947 Current tax assets 6,950 (10) 3,273 Other short term financial receivables 18,710 (11) 8,674 2,758 2,111 Short term financial assets available for sale 0 (12) 0 Short term derivatives 0 0 Negotiable securities recognized at fair value 0 0

Cash and cash equivalents 11,703 (13) 12,578 Total 163,604 118,517

Total assets 417,878 377,267

Antichi Pellettieri 2007 Annual report - page 33

CONSOLIDATED BALANCE SHEET (continued) pursuant to CONSOB Resolution 15519 of July 27th, 2006 in €/000 Of which: Of which: related related note parties parties (see December (see December Note 28) SHAREHOLDERS' EQUITY AND LIABILITIES 31st, 2007 Note 28) 31st, 2006 Share capital and reserves (14) Capital issued 11,352 11,226 Share premium reserve 39,919 37,046 Other reserves 52,002 47,946 Net profit for the period 18,340 9,655 Total 121,613 105,873

Minority interests 52,566 47,198

Total shareholders' equity 174,179 153,071

Non current liabilities Long term loans and borrowing 36,069 (15) 3,275 66,237 3,045

Long term derivatives 0 0 Deferred tax liabilities 54,365 (16) 65,833 Post employment benefits 5,614 (17) 6,995 Long term provisions 2,332 (17) 1,116 Other non current liabilities 3,240 (18) 3,208 4,596 4,583 Total 101,620 144,777 Current liabilities Short term trade and other payables 76,371 (19) 838 62,275 1,980 Current tax liabilities 7,014 (20) 4,560 Short term loans and borrowings 58,694 (21) 12,584

Short term derivatives 0 (22) 0 Short term provisions 0 0 Total 142,079 79,419 Total liabilities 417,878 377,267

Antichi Pellettieri 2007 Annual report - page 34

CONSOLIDATED PROFIT AND LOSS ACCOUNT pursuant to CONSOB Resolution 15519 of July 27th, 2006 in €/000 Of Of which: which: related related parties note parties (see (see Note 28) 2007 Note 28) 2006 Net revenues 300,176 (23) 7,202 257,461 5,811 Change in inventory of finished product and works in progress 11,084 (24) 4,549 Raw materials and consumables (138,349) (24) (232) (116,878) (4) Cost of labor (29,252) (24) (27,214) Other operating expenses (95,883) (24) (1,795) (82,968) (560) Depreciation, amortization and write-downs (11,910) (25) (286) (8,832) Financial income 443 (26) 18 283

(26) Financial charges (7,723) (937) (7,729) (54) Profit (loss) from foreign exchange transactions (821) (26) 99

(26) Income from equity-accounted associates 0 102 Profit (loss) from assets held for sale 0 (26) 0 Pre tax profit 27,765 18,873

Tax (1,393) (27) (6,646)

After tax profit 26,372 12,227

Minority interests 8,032 2,572

Net profit 18,340 9,655 No. shares outstanding 45,408,134 44,903,763 Earnings per share 0.58 0.27

Antichi Pellettieri 2007 Annual report - page 35

CONSOLIDATED CASH FLOW STATEMENT pursuant to CONSOB Resolution 15519 of July 27th, 2006

in €/000

of which related 2007 parties 1 - Opening balance 4,981

2 - Cash flow generated (absorbed) by operating activities Pre tax profit (loss) 27,765 Depreciation, amortization and write-downs 11,910 286 Net change in provisions for risks and employee benefits -166 Net financial charges 8,101 919 (Capital gains) / capital losses on disposal of non current assets -73 TOTAL 47,537

- Net change in working capital 27,840 6,145

- TOTAL 27,840 3 - Cash flow generated (absorbed) by investing activities Net change in: - intangible assets -2,667 - property, plant and equipment -4,226 - financial assets 192

TOTAL -6,701 4 - Cash flow generated (absorbed) by financing activities Increase in AP capital and reserves for gains/losses on treasury shares 516 Proceeds from capital increase 0 Receipt (repayment) of loans -6,395 -3,215 Net financial charges -8,101 -919 Dividends paid -5,780 -2,406 Change in scope of consolidation -5,785 - TOTAL 25,545 - 5 - Net cash flow for the period 12,549 6 - Closing cash -7,568

Antichi Pellettieri 2007 Annual report - page 36

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AT DECEMBER 31ST, 2007

ACCOUNTING POLICIES AND PRINCIPLES OF CONSOLIDATION

Group activities

The Antichi Pellettieri Group, through the parent company and its subsidiaries (also referred to as "the Group"), produces and distributes accessible luxury footwear, handbag and accessory collections worldwide under its own brands and under license for renowned international designers. Production is partly internal and partly outsourced; distribution takes place through an extensive sales network in Italy and abroad consisting of stores owned by group companies and third parties.

Accounting standards

The consolidated financial statements at December 31st, 2007 are presented in thousands of euros (€/000) and are compared with those from the previous year, prepared using the same policies. The financial statements have been prepared in accordance with the International Accounting Standards (IAS/IFRS) published by the International Accounting Standards Board (IASB) and approved by the European Union.

Pursuant to European Regulation no. 1606 of July 19th, 2002, starting with the year 2005 the Antichi Pellettieri Group decided to adopt the IAS/IFRS published by the IASB and approved by the European Union for the preparation of consolidated financial statements. The term IAS/IFRS encompasses the International Accounting Standards (IAS), the International Financial Reporting Standards (IFRS), and all interpretations published by the IFRIC (formerly the Standing Interpretations Committee). In addition, the Group has elected to apply IAS 32 and IAS 39 as from January 1st, 2005.

The consolidated financial statements consist of the balance sheet, profit and loss account, statement of changes in shareholders' equity, cash flow statement prepared using the indirect method, and these notes. The accounts have been drawn up according to the historical cost principle, with the exception of the valuation of land and buildings, for which fair value (determined during the transition to IAS/IFRS) has been used in place of cost. In addition, these notes include the profit and loss account and balance sheet of the parent company Antichi Pellettieri SpA, which were prepared in accordance with the IAS/IFRS issued by the IASB and approved by the European Union, as of December 31st, 2007.

The financial statements have been audited by Mazars & Guérard SpA.

Form and content of the consolidated financial statements

The scope of consolidation at December 31st, 2007 includes the parent company, Antichi Pellettieri SpA, and the companies of which it directly or indirectly holds the absolute majority of share capital or voting rights.

Antichi Pellettieri 2007 Annual report - page 37

The list of consolidated companies is reported in Annex 1.

The figures used for the consolidation were taken from the balance sheets and profit and loss accounts drawn up by the directors of the individual subsidiaries. Where necessary, they have been adjusted and restated to bring them into line with international accounting standards and with the accounting policies used throughout the Group.

With respect to December 31st, 2006, the scope of consolidation has changed as follows:

- on July 1st, 2007, Dadorosa Srl was acquired as a wholly-owned subsidiary of Braccialini Srl and is now consolidated on a line-by-line basis.

Below are the main effects of the business combination referring to Dadorosa Srl on the consolidated financial statements:

(in €/000)

Company: Dadorosa Srl

Price paid: 9,024

Shareholders' equity: 3,818

Fair value assets: 0

Fair value company: 3,818

Goodwill 5,206

- on December 27th, 2007, Antichi Pellettieri SpA sold 27% of Enrico Mandelli SpA, which remains under AP's control.

The financial statement items have been valued on a general going-concern basis using prudent, accrual-based accounting principles.

Antichi Pellettieri 2007 Annual report - page 38

PRINCIPLES OF CONSOLIDATION

The most significant consolidation principles adopted for the preparation of the consolidated financial statements are as follows:

The assets and liabilities of subsidiaries are consolidated on a line-by-line basis and the carrying value of investments held by the parent company and other consolidated subsidiaries is eliminated against the relative shareholders' equity account.

Upon first-time consolidation, the difference between the price paid for a company and the Group's interest in the current value of the net assets acquired is recorded as goodwill. Any negative goodwill is booked to the profit and loss account as of the date of acquisition.

Minority interests in shareholders’ equity are recorded separately in the balance sheet. The profit and loss account has a separate line for minority interests in the net result.

Income, expenses, assets and liabilities arising from transactions between consolidated companies have been eliminated, as have intercompany profits and losses.

A reconciliation between the parent company's shareholders’ equity and profit and the corresponding consolidated figures is provided as Annex 4.

SEGMENT REPORTING (IAS 14)

A segment is a distinguishable component of a group that provides a set of related products and services (business segment) or that provides products or services within a particular economic environment (geographical segment). For the Antichi Pellettieri Group, the primary reporting format refers to its two main business segments: i) handbags & footwear and ii) apparel, but due to the insignificance of the apparel sector with respect to total revenues, the notes focus more on sales of own brands and licensed brands. The secondary reporting format is by geographical segment.

ACCOUNTING POLICIES

The accounting standards and policies used to prepare the consolidated financial statements at December 31st, 2007 are reported below.

Restatement of business combinations pursuant to IFRS 1 (First-time Adoption) and IFRS 3

The Antichi Pellettieri Group has decided to apply IFRS 3 (Business Combinations) retroactively, as the business combinations in question were acquired in order to build a vertically integrated group for the accessible luxury market.

This has made it possible to recognize specific intangible assets (mainly brands) and generic intangibles (goodwill) at fair value, at the date of acquisition of the companies making up the combinations. Antichi Pellettieri 2007 Annual report - page 39

In order to represent the values of intangibles more precisely, the Group's appraiser used the layer valuation method, essentially for the objectivity of the assumptions on which it is based. That method:  uses rates derived from market analysts (IAS/IFRS requirement)  values intangibles according to their actual contribution to EBITDA (generally increasing over time);  reflects a general going concern valuation, thereby recognizing the brands' ability to progressively self finance growth. The results of this method have been checked against those of two others used in the sector, i.e. the royalties rate and multiples methods as applied to comparable transactions, which confirmed the strong reliability of the chosen system.

Layer valuation considers intangible assets as a whole, on the basis of their ability to: – provide an exclusive competitive advantage; – contribute to results ("intangibles income," i.e. the income earned on top of the "normal" earnings attributable to current and non-current assets).

Effect of IFRS 1

The restatement of business combinations pursuant to IFRS 3 led to the reversal of goodwill for those combinations. The purchase cost was then eliminated against the Group's portion of shareholders' equity adjusted by the fair value of reported intangibles, net of deferred taxes and minority interests.

The elimination gave rise to the following two circumstances: - where the acquisition cost was higher than the Group's portion of adjusted shareholders' equity, goodwill was recognized as an asset and valued at cost; - where the acquisition cost was lower than the Group's portion of adjusted shareholders' equity, the difference was charged to the profit and loss account and raised net equity by the same amount in the following year.

Deferred taxes are considered to be a notional element that decrease in proportion to amortization.

Intangible assets

Intangible assets are identifiable, non-monetary assets without physical substance that are controlled by the company and liable to produce future economic benefits. They are initially recorded at purchase cost (which corresponds to fair value in the case of business combinations), usually determined as the price paid for the acquisition including expenses directly attributable to the preparation phase, or at production value, if the conditions are met for capitalizing the expense of internally generated assets.

After their first-time reporting, intangible assets are booked at cost net of accumulated amortization and impairment, in accordance with IAS 36 (Impairment). Costs incurred for intangible assets after they are purchased are only capitalized to the extent that they increase the assets' future economic prospects; all other costs are recorded in the profit and loss account for the year they are incurred. Antichi Pellettieri 2007 Annual report - page 40

Intangible assets with finite useful lives

Intangible assets with finite useful lives, primarily brands, are amortized on a straight-line basis over 40 years starting from the time they are available for use. The recoverability of the residual book value is verified through impairment testing if there are objective signs of impairment. Also included in this category are software programs not constituting an integral part of the hardware, in which case the expense is added to the value of the tangible asset. Software is normally amortized over a period not exceeding three years. The directors review intangibles' estimated useful lives at the close of every year.

Research costs are charged to the profit and loss account for the period in which they are incurred.

The main amortization rates are as follows:

Category Years Patents and intellectual property rights 3 Concessions and licenses 20 Brands 40 Other intangible assets 5

Intangible assets with indefinite useful lives

Intangible assets with indefinite useful lives are not amortized, but undergo impairment testing (IAS 36) once a year or whenever there are signs of impairment. The item "Goodwill" contains the difference between the purchase price of an investment and the fair value of its net identifiable assets as of the acquisition date (IFRS 3).

Property, plant and equipment

Property, plant and equipment are recognized originally at cost, including directly attributable ancillary expenses. The company has no such assets built internally.

After their first-time recognition, these assets are booked at cost less accumulated depreciation and impairment. As an exception to that rule, land and buildings are recorded at their latest appraisal value, which is deemed to be closer to their fair value. No depreciation is charged on land.

The main depreciation rates are as follows:

Category Years Industrial buildings 40 Plant and machinery 6 - 8 Industrial and commercial equipment 4 Other fixed assets 4 - 8 Antichi Pellettieri 2007 Annual report - page 41

The residual value and useful lives of the assets are reviewed at least every year-end. Regardless of existing depreciation, whenever impairment is determined on the basis of IAS 36 (see "Asset impairment," below), the asset is written down accordingly; the impairment loss is reversed in subsequent years if the reasons for the write-down cease to apply. Ordinary maintenance costs are fully expensed as incurred. Improvement expenditure is allocated to the related assets and depreciated over their residual useful lives.

Assets acquired under finance leases are stated at their fair value at the start of the lease and the capital portion of the lease installments is recorded as a liability; the goods are depreciated on the same basis as similar assets. If an asset is sold and leased back under a financial leasing agreement, any capital gain from the sale is deferred and recorded on an accruals basis. Specific information is provided when the asset is leased back under an operating lease.

Asset impairment

The carrying values of tangible and intangible assets are reviewed whenever clear signs from inside or outside the company indicate that an asset or group of assets (known as a cash generating unit or CGU) may have been impaired.

Goodwill, other intangible assets with indefinite useful lives, and intangible assets not in use must undergo impairment testing at least once a year, and in any case whenever there are signs of possible impairment.

The impairment test consists of comparing the asset's or CGU's carrying value with its recoverable amount, the latter defined as the higher of its fair value (net of any selling expenses) and its value in use. Value in use is calculated by discounting the asset's or CGU's expected future net cash flows. If the difference between the carrying value and recoverable amount is negative, the asset or CGU is written down accordingly.

The conditions and procedures for restoring the value of previously written down assets (barring goodwill, which can never be written back), are those established by IAS 36.

Investment property

As permitted by IAS 40, investment property (land and buildings held to earn rent and not for production or administrative purposes) is carried at fair value, taken as the market value determined periodically through external appraisal.

Investment property is eliminated from the balance sheet on disposal, or when it is permanently withdrawn from use and no future economic benefits are expected from its disposal.

Antichi Pellettieri 2007 Annual report - page 42

Financial assets

All financial assets are measured initially at cost, which corresponds to the consideration paid including transaction costs (e.g. consulting fees, duty stamps, and fees imposed by the regulatory authorities).

The classification of financial assets determines their subsequent valuation, as follows: - financial assets held for trading: these are recorded at fair value, unless fair value cannot be reliably determined, in which case they are recognized at cost less any impairment. Gains and losses pertaining to these assets are recorded in the profit and loss account; - held-to-maturity investments, loans receivable and other financial receivables: these are recognized at cost, less amortization and any write-downs for impairment. Gains and losses pertaining to these assets are recorded in the profit and loss account when the investment is removed at maturity or in the case of permanent impairment; - available-for-sale financial assets: these are booked at fair value, and gains and losses arising from subsequent valuations are recognized in shareholders’ equity. If the fair value of such assets cannot be reliably determined, they are valued at cost less any impairment.

If it is no longer appropriate to classify an investment as "held to maturity," due to a change of strategy or to the impossibility of maintaining it until it matures, it must be reclassified as "available for sale" and re-measured at fair value. The difference between carrying value and fair value remains incorporated within shareholders’ equity until the asset is sold or otherwise disposed, at which time it must be recognized to profit or loss.

Investments in subsidiaries not consolidated on a line-by-line basis, because they were not yet operational or were in liquidation as of the reporting date, and investments in associated companies are carried at cost. Equity investments of less than 20% in other companies are also recognized at cost and written down in the event of permanent impairment. The original value of these investments is reinstated in future accounting periods should the reasons for such write-downs no longer apply.

Inventories

Inventories are valued at the lower of purchase or production cost (determined according to weighted average cost) and market value, which is defined as the replacement cost for raw and ancillary materials and estimated realizable value for finished and semifinished products, taking account of any manufacturing costs or direct selling expenses still to be incurred. Cost includes the portion of ancillary expenses and direct and indirect production costs that can be reasonably attributed to the inventories. Write-downs are reversed in subsequent periods if the reasons no longer apply. Obsolete and slow-moving inventories are written down according to the likelihood of their being used or sold. Their original value is restored in subsequent periods if the reasons for the write-down cease to apply.

Trade receivables

Receivables are stated at their estimated realizable value, i.e. at their face value net of any write-downs for estimated losses. They are regularly examined in terms of expiry and seasonal patterns to prevent write-downs for unexpected losses. Any non current receivables Antichi Pellettieri 2007 Annual report - page 43 that include an implicit interest component are discounted to present value using an appropriate market rate. Trade receivables include accruals and deferrals for costs and income common to two or more years, whose amount varies over time, in accordance with the matching principle.

Cash and cash equivalents

Cash is defined as funds held to meet short term cash commitments that are easily liquidated and convertible into a known amount, and that bear little or no risk of losing value. Cash equivalents are mainly temporary excess funds invested in highly liquid instruments (less than three months' maturity at the time of purchase).

General provisions

Provisions are made only when there is a current obligation for the future outflow of economic resources as a consequence of past events, the outflow is likely to be required, and its amount can be estimated with reasonable precision. The amount provided is the best estimate of the sum required to settle the current obligation in full, discounted at a pre-tax rate that reflects the current time value of money.

Provisions for restructuring expenses are reported if the group has a detailed restructuring plan that it has communicated to the interested parties.

For contracts whose execution involves inevitable costs that exceed the presumed economic benefits of the agreements, the current contractual obligation is recorded on the same basis as a standard provision.

If the effect is significant, provisions are calculated by discounting the estimated future cash flows at a pre-tax rate, so as to reflect the time value of money and the specific risks of the liability.

Provision for employee severance indemnities

Until December 31st, 2006 the provision for employee severance indemnities (trattamento di fine rapporto, or TFR) qualified as a defined benefit plan and fell within the scope of IAS 19 (Employee Benefits). The amount recorded was subject to actuarial valuation in the form of the Projected Unit Credit method, which discounted the obligation at an interest rate reflecting the market yield on high quality corporate bonds of comparable maturity. The calculation concerned accrued severance indemnities for service already rendered, and incorporated assumptions about future salary increases.

Actuarial gains and losses were recorded in the profit and loss account for the period in question.

The treatment of this provision was changed by Law 296 of December 27th, 2006 (the 2007 Finance Act) and by subsequent decrees and regulations issued during the course of 2007. As a result, companies with 50 or more employees must now treat TFR as a defined benefit Antichi Pellettieri 2007 Annual report - page 44 plan only for amounts accrued before January 1st, 2007 that have not yet been settled as of the date the financial statements are prepared. Amounts accrued later qualify as a defined contribution plan.

The Group has reported the accounting effects at December 31st, 2007 of the changes made to the treatment of the employee severance provision. Specifically, it has remeasured the accrued provision and performed the resulting curtailment. The effects of the new accounting standard are described in Note 17.

Trade payables

Payables are recognized at face value. The interest included in long term debt is recorded separately using a suitable market rate.

Financial liabilities

These are entered for the first time at fair value, net of transaction costs, and subsequently at amortized cost.

Translation of foreign currency balances

Receivables and payables expressed originally in foreign currency are recognized at the exchange rates in effect when they arose. Exchange gains or losses realized during the year are included in the profit and loss account. Revenues, income, costs and expenses relating to foreign currency transactions are booked at the exchange rates in effect on the transaction date. At period end, foreign currency receivables and payables are recorded at the period-end spot exchange rate and the resulting gains or losses are recognized to profit or loss.

Bank overdrafts and loans

Loans are initially valued at cost, net of ancillary expenses. That amount is adjusted in subsequent periods to reflect the difference between initial cost and the reimbursement value throughout the duration of the loan, using the actual interest rate method. Loans are classified as current liabilities, unless the group is unconditionally entitled to defer their full repayment by at least 12 months following the reporting date.

Derivatives and hedging transactions

The group's activities are exposed to financial risks from changes in interest rates and, to a minor degree, in exchange rates. Interest rate risks stem from bank loans, particularly from medium/long-term loans with variable interest rates.

The current policy is to stay within the variable rate range while monitoring the slope of interest rate curves.

The short term portion of debt is associated with working capital and thus does not represent interest rate risk. Antichi Pellettieri 2007 Annual report - page 45

The Group does not use derivatives for trading purposes. Derivatives are initially recognized at cost, and adjusted to fair value in subsequent periods.

Fair value hedges of specific assets and liabilities are recorded among assets or liabilities, as appropriate; the derivative and its underlying security are recognized at fair value, and their changes in value (which tend to offset one another) are charged to profit and loss.

Cash flow hedges are recognized as assets (liabilities); the derivative is recorded at fair value, and changes in value pertaining to the effective hedging component are booked directly to an equity reserve, which is released to profit and loss when the cash flows of the underlying security materialize.

Derivatives for the management of interest rate and exchange rate risk that cannot be formally classified as hedging tools for IFRS purposes are recognized as financial assets/liabilities, with changes in value charged to the profit and loss account.

Income recognition

Income is recognized net of returns, discounts, rebates and premiums, and net of taxes directly related to the sale of goods and the rendering of services. Sales revenues are recognized when the company has transferred the significant risks and advantages of owning the product, and is reasonably assured of being paid in full. Sales by directly operated stores are recognized when the customer pays for the merchandise.

Service revenues are recorded with reference to the rate of completion of the job as of the reporting date. Revenues are recognized in the period when the service is rendered, on the basis of the percentage of completion method. If the results of the service cannot be reliably estimated, the income is recognized only in proportion to the costs that can be recovered. This method appropriately discloses the activities performed and the economic results achieved during the period.

Interest income is recognized on an accruals basis, taking account of the effective yield of the asset to which it refers.

Royalties are booked on an accruals basis according to the substance of contractual agreements.

Dividends are recognized when the right to their receipt arises, which corresponds with the date their distribution is approved.

Costs

Costs and expenses are recognized on an accruals basis.

Antichi Pellettieri 2007 Annual report - page 46

The cost of planning and producing sample merchandise is linked to revenues from the sale of the corresponding collection, and thus recognized in the profit and loss account in proportion to the revenues earned.

Tax

Income taxes shown in the profit and loss account include current and deferred taxes. Income taxes are generally recorded in the profit and loss account, except when they pertain to items directly charged from or credited to shareholders' equity, in which case the tax effect is reflected in the net equity balance.

Other taxes not related to income, such as those on property and capital, are booked to operating expenses.

Deferred taxes are provided for according to the balance sheet liability method. They are calculated on all temporary differences between the accounting and tax value of an asset or liability, with the exception of non-deductible goodwill and differences deriving from investments in subsidiaries that are not expected to reverse in the foreseeable future. Deferred tax assets on business losses and unused tax credits eligible to be carried forward are recognized in proportion to the likelihood of earning enough future taxable income for these to be recovered.

Current and deferred tax assets and liabilities are offset against one another when income taxes are charged by the same authority and when offsetting is allowed by law. Deferred tax assets and liabilities are calculated at the tax rates expected to be in force under the systems of the countries where the Group operates when the temporary differences are realized or reversed.

Treasury shares

Treasury shares are posted to a separate net equity reserve. Their carrying value and the proceeds from their subsequent sale are recorded as movements in shareholders' equity.

Earnings per share

Basic earnings per share is calculated by dividing the profit or loss attributable to the parent company's shareholders by the weighted average number of ordinary shares outstanding during the period. Diluted earnings per share is calculated by dividing the profit or loss attributable to the parent company's shareholders by the weighted average shares outstanding, factoring in possible share dilution, for example from stock option plans.

Management of financial risks

The Group is especially attentive to financial risks; it monitors these continuously and manages them by avoiding exposure to currencies other than the euro. Its financial risks, in fact, are minimal. Antichi Pellettieri 2007 Annual report - page 47

In 2007 the Group did not use derivatives generating either premium income or expense.

OTHER INFORMATION

Statement of cash flows

The statement of cash flows prepared by the Antichi Pellettieri Group as required by IAS 7, following the indirect method, illustrates the Group's ability to generate cash and cash equivalents. Cash equivalents are defined as short-term, highly liquid investments that are readily convertible to known amounts of cash and subject to an insignificant risk of changes in value. Therefore, an investment normally qualifies as a cash equivalent when it has a short maturity, of three months or less from the purchase date.

Bank overdrafts are generally considered to be financing activities, except when they are repayable on demand and form an integral part of cash management, in which case they are included as a component of cash and cash equivalents.

According to IAS 7, the statement of cash flows must show separately the flows generated by operating activities, investing activities and financing activities:

 cash flow from operating activities: these are primarily derived from the principal revenue- producing activities and are reported using the indirect method, whereby profit is adjusted for the effects of transactions of a non-cash nature (not involving inflows or outflows of cash);

 cash flow from investing activities: investing activities are shown separately because, among other reasons, the resulting cash flows represent investments/disposals carried out with the aim of generating future income and cash flows;

 cash flow from financing activities: these are activities that result in changes in the size and composition of net equity and borrowings.

Use of estimates

The preparation of the year-end financial statements and notes in accordance with IFRS requires management to make estimates and assumptions that affect the carrying values of assets and liabilities and the information on contingent assets and liabilities as of the reporting date. Actual results may differ. Estimates are used to value assets subject to impairment testing, as described earlier, and to provide for losses on receivables, obsolescence, amortization and depreciation, employee benefits, taxes, and other provisions and reserves. Estimates and assumptions are reviewed on a regular basis and any changes are reflected immediately in profit or loss.

Financial statement reporting With reference to CONSOB Resolution 15519 of July 27th, 2006 on financial statement reporting, a supplementary profit and loss account and balance sheet showing significant Antichi Pellettieri 2007 Annual report - page 48 related party transactions have been added so as to not to compromise the overall legibility of the financial statements.

Antichi Pellettieri 2007 Annual report - page 49

INFORMATION ON THE BALANCE SHEET

ASSETS

1. Property, plant and equipment

Property, plant and equipment increased from €24,029K at December 31st, 2006 to €26,160K at December 31st, 2007 (+€2,131K) and are shown net of accumulated depreciation.

They are made up as follows:

In €/000

ope ope of Disposals 12/31/06 12/31/07 Net Net value at Net value at Investments Depreciation consolidation Other changes Change in sc Change in reserves Land and buildings 18,239 1,239 (1) (424) 0 0 0 19,053 Plant and machinery 975 367 (147) (297) 112 1,010 Industrial and commercial equipment 445 157 (409) (314) 284 106 269 Other assets 4,228 2,471 (786) (1,443) 614 97 5,181 Assets under construction and advances 142 505 647 TOTAL 24,029 4,739 (1,343) (2,478) 1,010 203 0 26,160

The main investments for the year are as follows: purchase of land by Baldinini Srl adjacent to its factory in San Mauro Pascoli, in view of the expansion of its production unit; purchase and replacement of furniture, fittings and electronic machines used chiefly at sales outlets (classified as “other assets”); certain leasehold improvements (also classified as "other assets") for the renovation of a leased building on the premises of GFM Industrie SpA to meet that company's need for additional production space; and the replacement of plant and machinery at various Group companies.

Costs for leasehold improvements are amortized over the remainder of the lease.

2. Intangible assets

Intangible assets went from €206,563K at the close of 2006 to €209,452K at December 31st, 2007, rising by €2,889K. Movements during the year are as follows:

Antichi Pellettieri 2007 Annual report - page 50

In €/000

lue at pairment Additions Disposals 12/31/06 12/31/07 Decrease in Net Net va Net value at accum. amort. of consolidation Change in scope Amortization/Im Goodwill 57,365 2,078 (1,372) 5,253 63,324 Patents 0 0 Concessions, licenses and brands 148,332 1,525 (4,621) (11) 5 3 145,233 Other intangible assets 866 737 (634) (74) 895 TOTAL 206,563 4,340 (5,255) (1,457) 5 5,256 209,452

Assets with indefinite useful lives

Goodwill

The heading “Goodwill” includes consolidation differences, residual goodwill from the consolidation of acquired companies, and key money, valued at cost.

The increase with respect to 2006 concerns key money for the purchase of new stores by Braccialini, Baldinini and Coccinelle. The change in the scope of consolidation refers to the inclusion of Dadorosa. Disposals pertain to key money for stores sold off.

Assets with finite useful lives

Concessions, licenses, brands and similar rights

These are specific intangible assets, mostly brands (recognized upon the restatement of business combinations and recorded at the fair value they possessed at that time), along with a small component made up of software licenses.

Through appraisals carried out in relation to all business combinations in accordance with IFRS 3, a new value has been recognized for some intangible assets that did not figure in the balance sheets of acquired companies at the time of purchase.

The increase for the year is explained by the purchase of brands and software licenses.

Other intangible assets

This item refers chiefly to expenses incurred by Coccinelle for equipment used to modernize stores it holds under lease, which Coccinelle has an option to redeem when the leasing contract expires.

Antichi Pellettieri 2007 Annual report - page 51

Impairment testing (IAS 36)

The fair value of intangible assets is tested for impairment (recoverable amount) using the layer valuation method, the result of which is taken as value in use. Layer valuation considers intangible assets as a whole, on the basis of their ability to:

– provide an exclusive competitive advantage; – contribute to results ("intangibles income," i.e. the income earned on top of the "normal" earnings attributable to current and non-current assets).

In the layer valuation method, the company is treated as a portfolio of business assets, featuring different degrees of profitability and specificity (defined as the asset's ability to contribute to earnings in an original form that is difficult to reproduce).

The more specific the asset, the greater its profitability: assets of low specificity correspond to low profitability, and so forth.

Thus, under normal conditions of asset use: – companies with a lower intensity of specific assets are expected to be less profitable; – companies with a high intensity of specific assets are expected to be more profitable. The converse is: – Highly profitable companies should have a considerable wealth of specific assets (intangibles).

The layer valuation method is based on the following steps:

1. Grouping of assets by specificity and measurement of the company's low and medium specificity assets; 2. Direct calculation of the "normal" income produced by the low and medium specificity assets; 3. Indirect (residual) calculation of intangibles income; 4. Estimate of high specificity assets (intangibles).

The following layers are thus identified:

Layer I: Low specificity/highly replaceable assets (net working capital), associated with a discount rate rf (risk free) in the valuation;

Layer II: Assets of medium specificity/medium replaceability (non current assets + tax shield of debt), associated with a rate rb (borrowing rate) in the valuation;

Layer III: Assets of high specificity/low replaceability (intangible resources and goods), associated with a rate ri (differential) in the valuation.

Antichi Pellettieri 2007 Annual report - page 52

It follows that the residual calculation of intangibles income occurs indirectly by using a rate ri that is differentiated according to the business unit to which the given legal entity (CGU) belongs.

The benefits of layer valuation

1. Uses rates derived from market analysts (IAS/IFRS requirement);

2. Values intangibles according to their actual contribution to EBITDA (generally increasing over time);

3. reflects a general going concern valuation, thereby recognizing the brands' ability to progressively self finance growth, and therefore expresses the intangibles' actual value in use.

3. Investment property

The balance of €1,664K represents the fair value at December 31st, 2007 of an investment property in San Mauro Pascoli (Rimini), owned by Baldinini Srl.

4. Investments

These decreased from €3,018K at December 31st, 2006 to €2,827K (-€191K); changes during the year were as follows:

In €/000

Valueat Valueat 12/31/07 12/31/06

Equity investments in non-consolidated subsidiaries 0 10 Equity investments in associates 2,815 2,997 Equity investments in other companies 12 11 Total 2,827 3,018

Equity investments in non-consolidated subsidiaries" shows a balance of zero due to the write-off of Leather Designer Srl (liquidated and struck from the Companies Register on August 14th, 2007). The balance shown previously represented the company's share capital.

Movements in equity investments in associates are shown below:

Equity investments in associates 12/31/07 12/31/06 Change Sebastian Srl 0 2,997 (2,997) SLG Srl 2,815 0 2,815 Total 2,815 2,997 (182) Antichi Pellettieri 2007 Annual report - page 53

Sebastian Srl, held 50% by Antichi Pellettieri, was liquidated on November 30th, 2007. Sebastian was previously carried at equity, i.e. by replacing the cost value recognized in the parent company's balance sheet with the corresponding portion of net equity, including the profit or loss for the year. The net proceeds from the company's liquidation, €2,811K, were used to acquire a 50% interest in SLG Srl, incorporated on October 24th, 2007 as part of a project to reorganize the brands and retail sector of Antichi Pellettieri SpA.

The difference between the Group's interest in the net equity of SLG and the proceeds of the Sebastian liquidation (€186K) was charged to the profit and loss account under “writedowns of equity investments.”

Equity investments in non-consolidated subsidiaries and associates

SLG Srl, formed on October 24th, 2007 and held 50%, has not been consolidated due to its recent incorporation and essentially dormant status at the close of the financial year.

An annex to these notes provides a list of companies consolidated on a line-by-line basis, of other subsidiaries and their reasons for non-consolidation, and of associated companies.

5. Deferred tax assets

The Group's deferred tax assets went from €6,108K at December 31st, 2006 to €5,573K at December 31st, 2007, decreasing by €535K.

The balance refers chiefly to the tax effect calculated on the elimination of intangible assets that are not recognized under IAS/IFRS, and to tax effects calculated on provisions and expenses deductible in future years ("temporary differences").

In €/000

Details of deferred tax assets 2007 2006 Change Expenses deductible in subsequent years and other temporary diff. 3,117 1,637 1,480

IAS and consolidation effect 2,456 4,471 (2,015)

Total 5,573 6,108 (535)

Of the total decrease, €482K refers to the change in the IRES (corporate income tax) rate from 33% to 27.5%, which entailed a recalculation of deferred tax assets.

Antichi Pellettieri 2007 Annual report - page 54

6. Other long term financial receivables

These went from €10,345K at the close of 2006 to €3,839K, a decrease of €6,506K.

In detail:

In €/000

Other long term financial receivables 12/31/07 12/31/06 Change Related party receivables 3,762 10,235 (6,473) Due from others 77 110 (33) Total 3,839 10,345 (6,506)

Related party receivables at December 31st, 2006 concerns Revedi SpA, in connection with the February 2004 spin-off of Design & Licenses SpA, which gave rise to the founding of the former Pellettieri Holding Srl. Of the total amount, €3,045K was collected during the half-year, and the remaining €7,190K was transferred to the controlling company Mariella Burani Fashion Group SpA when Revedi was sold from the MBFG Group. For further details see Note 28.

Related party receivables at the close of 2007 consist of contractual receivables maturing beyond one year, due to Antichi Pellettieri SpA for the sale of interests in subsidiaries during the course of 2006. The amount is shown net of discounting to present value, calculated at market rates. For details see Note 28.

7. Long term trade and other receivables

These decreased from €7,023K at December 31st, 2006 to €4,759K at December 31st, 2007 (-€2,264K. Receivables are shown net of discounting to present value, calculated at market rates, and refer to credits with barter companies maturing beyond one year. For additional information, see the notes to the parent company's financial statements.

CURRENT ASSETS

8. Inventories

These increased by €16,148K, from €41,507K at December 31st, 2006 to €57,655K, due mainly to the seasonal nature of sales as explained in the Directors' Report. Inventories can be broken down as follows:

Antichi Pellettieri 2007 Annual report - page 55

In €/000

Inventories 12/31/07 12/31/06 Change Raw and ancillary materials and consumables 21,660 15,808 5,852 Works in progress and semi-finished products 4,685 2,352 2,333 Finished goods and goods for sale 31,310 23,347 7,963 TOTAL 57,655 41,507 16,148

9. Short term trade and other receivables

These rose from €58,401K at the close of 2006 to €68,586K, increasing by €10,185K due primarily to the rise in revenues. Details are as follows:

In €/000

Current receivables 12/31/07 12/31/06 Change

Gross trade receivables 55,189 43,802 11,387 Trade receivables with related parties 4,760 5,947 (1,187) Total gross trade receivables 59,949 49,749 10,200 Reserve for doubtful accounts (1,227) (1,072) (155) Total net trade receivables 58,722 48,677 10,045 Other receivables 2,885 4,261 (1,376) Accrued income and prepayments 6,979 5,463 1,516 Total 68,586 58,401 10,185

Total gross trade receivables - These increased by €10,200K with respect to December 31st, 2006, largely because of the increase in revenues.

See Note 28 for information on related party receivables.

No receivables posted as assets are due beyond five years.

Since December 2006, the Antichi Pellettieri Group has been participating in a securitization transaction initiated by Mariella Burani Fashion Group SpA, in which the sellers include Biasia Francesco SpA, Braccialini Srl, and Coccinelle SpA.

The transaction is structured so that receivables can be sold by the participating companies, and by any other Group companies that decide to join, within a maximum time frame of 7.5 years. It is described in full in the notes to the 2006 consolidated financial statements.

The total fair value of the receivables factored at December 31st, 2007 that are still outstanding, hence not yet due, is €11,850K. Antichi Pellettieri 2007 Annual report - page 56

The provision for doubtful accounts, concerning estimated losses on both short and medium/long term receivables, showed the following movements for the year:

In €/000

Opening balance at January 1st, 2007 (1,072) Change in scope of consolidation (9) Additions (713) Utilizations 567 Closing balance at December 31st, 2007 (1,227)

The provision for doubtful accounts is calculated on the basis of specific case-by-case assessments, supplemented by historical analyses of losses, in relation to how long the receivable has been outstanding, the type of action taken for its recovery, and the status of the account (ordinary, contested, etc.). Trade receivables are broken down by region in the following table:

In €/000

Balance at Balance at Region 12/31/07 12/31/06 Italy 31,245 28,785 rest of Europe 14,653 12,662 Japan 1,538 313 rest of Far East 5,415 2,879 USA 2,697 3,796 Rest of the world 4,401 1,314 Total 59,949 49,749

Other receivables – These decreased by €1,376K with respect to December 31st, 2006 and are made up of advances to suppliers, employee advances, insurance reimbursements due and miscellaneous receivables.

Accrued income and prepayments - These increased by €1,516K with respect to the previous year and are made up as follows:

In €/000

12/31/07 12/31/06 Change

Accrued income 2 1 1

Prepayments 6,977 5,462 1,515 Total 6,979 5,463 1,516

Antichi Pellettieri 2007 Annual report - page 57

Most prepayments refer to the deferral of design and style consulting costs incurred by the various companies for future collections. Most of the difference with respect to 2006 is explained by higher design and prototype costs generated by the increase in sales and the acquisition of new licenses. 10. Current tax assets

Tax credits rose from €3,273K at December 31st, 2006 to €6,950K at the close of the year. The increase of €3,677K refers mostly to the higher credits for VAT paid on purchases. The increase also reflects the consolidation of Dadorosa Srl, for €575K.

In €/000

Current tax assets 12/31/07 12/31/06 Change VAT credits 5,680 2,847 2,833 Advances paid on direct taxes 1,270 426 844 Total 6,950 3,273 3,677

11. Other short term financial receivables

This item rose from €2,758K at the close of 2006 to €18,710K a year later, increasing by €15,952K. Of the total increase:

- €4,076K refers to the transfer to the controlling company Mariella Burani Fashion Group SpA of the financial receivable from the affiliate Revedi SpA (originally amounting to €7,190K), as described earlier in Note 6. The transfer agreement calls for the receivable to be settled within 12 months. See Note 28 for details of receivables with related parties;

- €9,700K is due by third parties to Antichi Pellettieri SpA for the sale of Enrico Mandelli SpA shares, as mentioned above; according to the terms of the contract, payment is due by the end of 2008;

- the remainder is due to Antichi Pellettieri SpA from related parties, mostly for the sale of interests in subsidiaries during the course of 2006; these were originally classified as long term trade receivables but are now due within 12 months (by the end of 2008). See Note 28 for details of receivables with related parties.

12. Short term financial assets available for sale

There were no short term assets available for sale at December 31st, 2007.

Antichi Pellettieri 2007 Annual report - page 58

13. Cash and cash equivalents

This item decreased from €12,578K at the close of 2006 to €11,703K (-€875K).

In €/000

12/31/07 12/31/06 Change Bank and post office deposits 11,481 12,319 (838) Checks 16 74 (58) Cash and valuables on hand 206 185 21 TOTAL 11,703 12,578 (875)

LIABILITIES AND SHAREHOLDERS' EQUITY

14. Shareholders' equity

At December 31st, 2007 the parent company's share capital, fully subscribed and paid in, amounted to €11,374,831 and was made up of 45,499,324 ordinary shares of par value €0.25 each. Net of treasury shares held at the close of the period, the share capital came to €11,352K.

For further information, see the statement of changes in consolidated shareholders' equity.

The reconciliation between the parent company's shareholders' equity and profit and the corresponding consolidated figures is provided in Annex. 4.

Shareholders' equity items are as follows:

12.31.07 12.31.06 in €/000

Share capital 11,352 11,226 ( *) ( *)

Share premium reserve 39,919 37,046

Other reserves:

Legal reserve 477 281

Reserve for shareholder contributions 5,051 5,051

Extraordinary reserve 4,511 5,343

Other reserves and retained earnings 42,782 38,098

Treasury shares (819) (827) (*) (*)

Antichi Pellettieri 2007 Annual report - page 59

Total other reserves 54,876 47,946

Group's share of profit (loss) for the year 18,340 9,655

Group shareholders' equity 121,613 105,873

Minority interests in reserves 44,534 44,625

Minority interests in profit (loss) for the year 8,032 2,573

Total minority interests 52,566 47,198

Total shareholders' equity 174,179 153,071

(*)

Treasury shares at December 31st, 2007 amounted to €842K and consisted of 91,190 ordinary shares, of which the par value (€0.25 each) has been deducted from share capital and the remainder allocated to a separate equity reserve.

For information on the classification of reserves and their eligibility for distribution, see the notes to the separate financial statements (attached).

NON CURRENT LIABILITIES

15. Long term loans and borrowing

These decreased from €66,237K to €36,069K at December 31st, 2007 (-€30,168K). The item can be broken down as follows:

In €/000

12/31/07 12/31/06 Change Beyond 12 months Due to banks 32,692 52,092 (19,400) Leasing installments due 102 106 (4) Convertible bond loan 0 10,994 (10,994) Related party payables 3,275 3,045 230 Due to other sources of finance 0 0 0 Total 36,069 66,237 (30,168)

The principal reasons for the change are as follows:

- A new long term loan, due to termination of the convertible bond loan outstanding at December 31st, 2006, for €11,000K.

- Reclassification to short term financial payables of the two bullet loans from MCC and Bipop Carire, which mature in October 2008, for €28,000K. Antichi Pellettieri 2007 Annual report - page 60

Due to banks

The following tables show bank loans outstanding at the close of the year, by lender, borrower, and current and long term portion:

In €/000

Remaining Long term Lender Borrower balance Current Portion portion

Banca Intesa Mediocredito Braccialini 1,053 211 842 Banca Intesa Mediocredito Braccialini 1,509 300 1,209 MCC Antichi Pellettieri 14,000 14,000 - Bipop Carire Antichi Pellettieri 14,000 14,000 - Bipop Carire Antichi Pellettieri 8,750 2,500 6,250 Unicredit Antichi Pellettieri 15,416 3,596 11,820 Banca Intesa San Paolo Antichi Pellettieri 910 - 910 Banca Intesa Mediocredito Antichi Pellettieri 375 250 125 Banca Agricola Mantovana Antichi Pellettieri 2,732 557 2,175 Banca Fortis Antichi Pellettieri 4,750 1,000 3,750 Banca Nazionale del Lavoro Biasia Francesco 1,111 444 667 Banca Popolare di Vicenza Biasia Francesco 325 325 - Banca Antonveneta Biasia Francesco 1,330 352 978 Bipop Carire Biasia Francesco 1,226 283 943 Efibanca Biasia Francesco 1,714 571 1,143 Banca Intesa San Paolo GFM 409 95 314 Banca Popolare di Ravenna GFM - - - Banca Nazionale del Lavoro Baldinini 560 160 400 Banca Intesa San Paolo Baldinini 765 244 521 Banca Popolare Italiana Baldinini 25 25 - Cassa di Risparmio PR e PC Coccinelle 631 307 324 Cassa Risparmio della Spezia Coccinelle 522 201 321

Total 72,113 39,421 32,692

In €/000

Antichi Pellettieri 2007 Annual report - page 61

At December 31st, 2006 Borrower Remaining balance Current Portion Long term portion Banca Intesa Mediocredito Braccialini 1,263 211 1,052 MCC Antichi Pellettieri 14,000 0 14,000 Bipop Carire Antichi Pellettieri 14,000 0 14,000 Bipop Carire Antichi Pellettieri 10,000 1,250 8,750 Unicredit Antichi Pellettieri 5,000 600 4,400 Banca Intesa Antichi Pellettieri 900 0 900 Banca Intesa Mediocredito Antichi Pellettieri 625 250 375 Banca Nazionale del Lavoro Biasia Francesco 1,556 448 1,108 Banca Popolare di Vicenza Biasia Francesco 380 182 198 Banca Popolare di Vicenza Biasia Francesco 253 123 130 Banca Antonveneta Biasia Francesco 1,500 174 1,326 Bipop Carire Biasia Francesco 1,500 274 1,226 Efibanca Biasia Francesco 2,000 286 1,714 Banca Popolare di Ravenna GFM 107 107 0 Intesa Sanpaolo GFM 500 92 408 Banca Nazionale del Lavoro Baldinini 720 160 560 Banca Intesa Baldinini 1,000 234 766 Banca Popolare Italiana Baldinini 133 106 27 Cassa Risparmio PR e PC Coccinelle 926 296 630 Cassa Risparmio della Spezia Coccinelle 716 194 522

Total 57,079 4,987 52,092

Convertible bond loan

On April 12th, 2006, Antichi Pellettieri SpA issued the convertible bond loan “Antichi Pellettieri 2006-2009 convertibile" for €13,992,853, paying 2.25% annual interest, by resolution of the extraordinary shareholders' meeting of April 3rd, 2006 which had authorized the bond loan and an increase in capital for the generation of shares to service the conversion. Reserved to the company Development Capital, the loan involved a maximum of 13,992,853 bonds, nominal value €1 each, convertible into ordinary Antichi Pellettieri shares with no right of pre- emption pursuant to Article 2441, paragraph 5 of the Italian Civil Code.

On December 19th, 2006 the company exercised its right to redeem €10,994,386 in advance (the maximum allowed by the bond regulations).

Again in accordance with the regulations, redemption took place on January 15th, 2007 with the payment of principal, interest accrued at the annual rate of 2.25%, and the redemption premium of €790,000.

On January 2nd, 2007, Development Capital exercised its right to convert the remaining 2,998,467 bonds into ordinary shares of par value €1 each. The conversion, in accordance with regulations, took place on January 31st.

Related party payables

The year end balance of €3,275K refers primarily to amounts due by the parent company for the purchase of interests in subsidiaries during the course of the previous year. The amount is Antichi Pellettieri 2007 Annual report - page 62 shown net of discounting to present value, calculated at market rates. Names and other details are provided in Note 28.

The balance at December 31st, 2006 (€3,045K), representing the amount owed by the parent company to Design & Licenses for the acquisition from D&L of the investment in Ex-Antichi Pellettieri by Sacap SpA (merged into Pellettieri Holding SpA, now the parent company), was settled in full during the year.

Covenants on debt outstanding at December 31st, 2007 (per CONSOB announcement DEM/6064293 of July 28th, 2006)

Bank loans

The covenants that must be respected on loans outstanding at December 31st, 2007 are as follows:

In €/000

Remaining balance Borrower Lender at 12.31.07 Covenant (i) Debt/EBITDA<4.4x - Debt/equity <2.1x (ii) Debt/EBITDA<3x - Antichi Pellettieri SpA Bipop Carire 8,750 Debt/equity <1X (iii) Debt/EBITDA<4.4x - Antichi Pellettieri SpA Unicredit 15,416 Debt/equity <2.1x (iii) Debt/EBITDA<4.4x - Antichi Pellettieri SpA Banca Fortis 4,750 Debt/equity <2.1x

Banca Intesa Mediocredito Property mortgage €3.5 Braccialini Srl SpA 1,053 million (iii) Debt/<1.9 - Biasia SpA Efibanca SpA 1,714 Debt/EBITDA <2.9 (iii) Equity>€6,5 mn - Banca Nazionale del Debt/equity<1 - Biasia SpA Lavoro SpA 1,111 Debt/EBITDA <2 key: (i) Failure to respect this covenant will entitle Bipop Carire to demand early reimbursement of the loan; (ii) If this covenant is not respected, 30% of ordinary Coccinelle SpA shares must be pledged to Bipop Carire; (iii) Failure to respect these covenants will result in termination of the contract.

For a better understanding of the Antichi Pellettieri Group's position with respect to the principal covenants in question, note that the debt/EBITDA ratio for the year is 1.33x (the covenants refer to EBITDA for a full 12 months) and the debt/equity ratio is 0.36x, calculated on the basis of financial statement figures at December 31st, 2007.

Antichi Pellettieri 2007 Annual report - page 63

16. Deferred tax liabilities

These went from €65,833K to €54,365K, a decrease of €11,468K.

The balance refers essentially to the tax effect calculated on the increase in intangible assets due to the recognition of specific intangibles (brands) upon application of IFRS 3.

Of the total decrease, €9,675K refers to the change in the IRES (corporate income tax) rate from 33% to 27.5%, which entailed a recalculation of deferred tax liabilities, and to amortization charged on the higher value attributed to specific intangibles (brands).

In €/000

Details of deferred tax liabilities 2007 2006 Change Installment capital gains and other temporary diff. 3,156 4,227 (1,071) Use of IFRS 3 44,586 54,365 (9,779) Use of IAS 16 3,961 4,755 (794) Use of IAS 38 2,506 2,478 28 Use of IAS 17 and other 156 8 148 Total 54,365 65,833 (11,468)

17. Post employment benefits and other provisions

This item is made up as follows:

In €/000

Total at Total at 12/31/07 12/31/06 Change Employee severance benefits 5,614 6,995 (1,381) Retirement benefits 1,762 1,116 646 Other non current provisions 570 0 570 Total 7,946 8,111 (165)

The provision for employee severance indemnities (TFR) was the subject of important legislative changes in 2007, as discussed in the Accounting Policies section of the notes. As a result of these changes, the present value of the existing liability has gone down, to the benefit of the profit and loss account.

Movements during the period are shown below:

Antichi Pellettieri 2007 Annual report - page 64

In €/000

Balance12/31/06at Provisions forthe year Use Other movements Balance12/31/07at

Severance indemnities 6,995 571 (857) (1,095) 5,614

Retirement benefits 1,116 695 (268) 219 1,762 Other non current provisions 0 570 570

Total 8,111 1,836 (1,125) (876) 7,946

Retirement benefits refer mainly to agents' leaving indemnities (fondo indennità risoluzione rapporto, or FIRR) and indemnities for agents due upon termination by the company (fondo indennità supplettiva di clientela or FISC), both of which increased due to the rise in revenues. They also include a small amount for the directors' leaving indemnities that are provided by some Group companies.

"Other non current provisions" cover contractual and commercial risks that are likely to give rise to a liability, although amount and timing are unknown.

18. Other long term liabilities

These went from €4,596K to €3,240K, a decrease of €1,356K.

In detail:

In €/000

12/31/07 12/31/06 Change Trade payables 32 13 19 Other payables 3,208 4,583 (1,375) Total 3,240 4,596 (1,356)

The €3,208K shown above consists of contractual payables due by Group companies to Mariella Burani Fashion Group SpA, whose maturities exceed 12 months. The amount is shown net of discounting to present value, calculated at market rates. Details are provided in Note 28.

For the previous year, the €4,583K was a related party payable of which part has been reimbursed, according to the repayment schedule, and the rest has been reclassified to long term loans and borrowing. See note 15 for details. Antichi Pellettieri 2007 Annual report - page 65

CURRENT LIABILITIES

19. Trade and other payables

This item can be broken down as follows:

In €/000

Within 12 Beyond 12 Total at Total at months months 12/31/07 12/31/06 Change Trade payables 59,200 59,200 43,221 15,979

Related party payables 838 838 1980 (1,142) Total trade payables 60,038 0 60,038 45,201 14,837 Advances 5,145 5,145 3,214 1,931 Accrued liabilities and deferred income 1,036 1,036 1,561 (525) Due to social security institutions 1,796 1,796 1,300 496 Other payables 8,356 8,356 10,999 (2,643) Total 76,371 0 76,371 62,275 14,096

Of the total change of €14,096K, €3,842K refers to the consolidation of Dadorosa Srl and the rest to the increase in business.

Advances from customers consist of down payments that the companies require of their foreign customers before merchandise is shipped. This policy reduces the commercial risk of doing business in Eastern Europe.

Trade payables are broken down by region in the following table:

In €/000

Balance at Balance at Region 12/31/07 12/31/06 Italy 52,901 40,251 rest of Europe 4,862 3,965 Japan 351 80 rest of Far East 1,109 474 USA 322 290 Rest of the world 493 141 Total 60,038 45,201

Accrued liabilities and deferred income - This item refers to costs pertaining to the year that will be incurred in 2008.

Antichi Pellettieri 2007 Annual report - page 66

Due to social security institutions – The amount shown is the face value of social security charges to be paid on employee income.

Other payables - In detail:

In €/000

12/31/07 12/31/06 Change Directors' fees due 468 299 169 Due to employees 2,909 2,666 243 Due to others 4,979 8,034 (3,055) Total 8,356 10,999 (2,643)

Payables to employees include December paychecks and deferred compensation. Payables to others consist mainly of commissions accrued and not paid.

20. Current tax liabilities

These increased from €4,560K at the close of 2006 to €7,014K at December 31st, 2007 (+€2,454K).

The balance includes income tax, indirect taxes, and taxes withheld by Group companies in their capacity as withholding agents. Most of the change stems from the increase in taxable income, and to a lesser degree from the consolidation of Dadorosa Srl.

21. Short term loans and borrowings

These increased from €12,584K at December 31st, 2006 to €58,694K (+€46,110K).

The item can be broken down as follows:

In €/000

12/31/07 12/31/06 Change Within 12 months Due to banks: - account borrowings and short term credit 19,273 7,597 11,676 - current portion of loans 39,421 4,987 34,434 Related party payables 0 0 0 Total 58,694 12,584 46,110

Antichi Pellettieri 2007 Annual report - page 67

Due to banks – These are account borrowings, short term credit, and the portion of mortgage and other long term loans that is due within 12 months. Details are provided in the section on long term loans and borrowing (Note 15).

22. Short term derivatives

No Group company has used derivative instruments.

INFORMATION ON THE PROFIT AND LOSS ACCOUNT

23. Revenues

Revenues by segment

Revenues from sales and services increased by €42,715K with respect to the previous year (+16.6%). Revenues are broken down below by business segment and geographical segment:

Net revenues by category

In €/000

12/31/07 % 12/31/06 % Revenues from own brands 258,828 86.2% 221,908 86.2% Revenues from licensed brands 41,029 13.7% 35,553 13.8% TOTAL 299,857 100% 257,461 100% Royalties 319 0.1% 0 0.0% GRAND TOTAL 300,176 100% 257,461 100%

Net revenues by geographical segment

In €/000

12/31/07 % 12/31/06 % Italy 116,485 38.8% 102,919 40.0% Europe 129,002 43.0% 99,427 38.6% Japan 10,054 3.3% 8,059 3.1% North America 11,950 4.0% 12,029 4.7% Rest of Asia 18,219 6.1% 24,291 9.4% Rest of the world 14,147 4.7% 10,736 4.2% TOTAL 299,857 99.9% 257,461 100.0% Royalties 319 0.1% 0 0.0% GRAND TOTAL 300,176 100% 257,461 100% Antichi Pellettieri 2007 Annual report - page 68

24. Production costs

These are broken down in the table below:

In €/000

Change 12/31/07 % 12/31/06 % Change %

Raw materials and consumables 138,349 46.1% 116,878 45.4% 21,471 18.4% Change in inventories (11,084) -3.7% (4,549) -1.8% (6,535) 143.7% Costs relating to employee benefits 29,252 9.7% 27,214 10.6% 2,038 7.5% Cost of services 79,242 26.4% 69,663 27.1% 9,579 13.8% Rentals, leasing and royalties 13,896 4.6% 10,884 4.2% 3,012 27.7% Other operating expenses 2,083 0.7% 2,310 0.9% (227) -9.8% Other extraordinary costs 662 0.2% 111 0.0% 551 Total 252,400 84.1% 222,511 86.4% 29,889 13.4%

These increased by 13.4% with respect to the previous year. The change is closely correlated with the higher turnover achieved during the year, and with the consolidation of Dadorosa Srl.

Raw and ancillary materials and consumables

These consist mainly of leathers, linings, fabrics, yarns, soles and inner soles, heels, and accessories, plus the purchase of goods for resale (marketed products) and packaging. They rose by 18.4%. As mentioned earlier, the increase is closely correlated with the higher turnover achieved during the period and the consolidation of Dadorosa. Consumption as a percentage of revenues (including the change in inventories) is consistent with the rise in business.

Cost of labor

Costs relating to employee benefits include wages and salaries, social security charges, the provision for severance indemnities and other payroll expenses. The cost of labor increased by 7.5%, due as much to the increase in headcount as to merit /cost of living raises. Labor costs for the year were also augmented by non-recurring costs for leaving incentives, and by the consolidation of Dadorosa Srl.

Cost of services

The cost of services consists primarily of utilities, consulting, commissions, advertising, travel, insurance, outsourcing, directors' and statutory auditors' fees, maintenance, and transport costs. This item increased by 3.9%, reflecting the rise in business volumes and the consolidation of Dadorosa.

Antichi Pellettieri 2007 Annual report - page 69

Rentals, leasing and royalties

These are comprised mainly of royalties paid, building rent and sundry rental costs. The increase of 27.7% was caused, once again, by the rise in turnover (including new license contracts) and the consolidation of Dadorosa.

Other operating expenses

Most of the reduction on the previous year is explained by the impairment of receivables and the out-of-period expenses the Group had recognized at December 31st, 2006.

Other extraordinary costs

The increase for the year stems mainly from the costs Coccinelle incurred to close its subsidiary Coccinelle Germany, which is now in liquidation.

25. Depreciation, amortization and write-downs In detail:

In €/000

12/31/07 12/31/06 Change

Depreciation 2,478 2,219 259 Amortization 5,255 4,792 463 Provisions and write-downs 4,177 1,821 2,356 Total 11,910 8,832 3,078

Amortization includes €3,986K in relation to the new valuation of brands, determined upon application of IFRS 3 (Business Combinations).

The breakdown of amortization and depreciation by asset category is provided in the section on non current assets.

Provisions and write-downs, at €4,177K, mainly consist of: - the impairment of at-risk receivables (mostly trade receivables); - the impairment of obsolete raw materials and slow-moving finished products, chiefly by Coccinella SpA, whose value has been adjusted according to their potential for use and estimated realizable value; - provisions for potential contractual liabilities, mostly with respect to sales representatives.

Antichi Pellettieri 2007 Annual report - page 70

26. Financial income and charges

Net financial charges of €8,101K (an increase of €856K) are detailed below:

In €/000

12/31/07 12/31/06 Change

Financial income 443 283 160 Financial charges (7,723) (6,939) (784) Premium for early reimbursement of bond loan (790) 790 Financial income (charges) (7,280) (7,446) 166

Exchange gains / losses (821) 99 (920) Income / losses from equity accounted associates 0 102 (102) Losses on assets held for sale 0 Total (8,101) (7,245) (856)

Net financial charges increased by €856K on the previous year due to the rise in interest rates, and in very small part to the consolidation of Dadorosa Srl.

Net foreign exchange losses were generated mainly by commercial transactions in U.S. dollars and also include the differences arising from the translation of foreign currency receivables and payables at the exchange rates in effect at year end.

27. Income tax

Income tax, at €1,393K, increased by €5,253K with respect to 2006 and is made up of €13,369K in current taxes less €11,976K in net deferred tax assets. Current taxes increased because of the significant rise in income, although this was offset by the reduction in deferred taxes, which were recalculated to reflect the rate change mentioned in Note 16 ("Deferred tax liabilities").

28. Related party transactions

For the Antichi Pellettieri Group, the vast majority of related party transactions are with direct and indirect subsidiaries of Mariella Burani Fashion Group SpA, which are settled to under arm's length conditions in consideration of the nature of the goods and services involved.

The effects of these transactions on individual financial statement items at December 31st, 2007, as shown in the supplementary profit and loss account and balance sheet and in the notes to the individual items, are summarized in the following tables:

Antichi Pellettieri 2007 Annual report - page 71

(in €/000)

Non Dep., Short term M/L term Current Current current M/L term Raw Other amort. & Financial loans loans trade trade trade loans material operating write- charges Related party receivable receivable receivables payables payables payable Revenues costs costs downs (income) Design & Licenses SpA 10 79

Facco Corporation 39 125 49 60 75

Jaya Srl 7 9 22

Jeanine Sarl 7 38

Long Wave SpA 5 10 Mariella Burani Retail Srl 337 622

Mariella Fashion Spagna 4

MBFG SpA 4,353 2,309 604 3,208 2,309 31 330 764

Oversystem Srl 20

René Lezard GmbH 216 839

Sedoc Srl 9 109

Seta Srl 78 141 Total MBFG SpA Group companies 4,353 - 2,908 838 3,208 - 3,870 232 625 - 784 Other related parties:

Andrea Mandelli 962

BDH NV 159

Bettina Srl 70

Biasia UK LTD 637 632 428

Braccialini UK LTD 423 191 89 (18)

Business 2 42

David Agus 1,525 1,400

Don Gil GmbH (0) 56

Francesco Biasia 3,116

Leather Designer Srl 153

M A M Srl 92

Manuela Arcari 1,525 1,400

Revedi SpA 869 - 2,316 702

Revedi SA 161 443

Sebastian Srl 231 286

SLG SRL 211 33 Total Group companies and other related parties 8,674 3,762 4,760 838 3,208 3,275 7,202 232 1,795 286 919 Total amount reported 18,710 3,839 68,586 76,371 3,240 36,069 300,176 138,349 95,883 11,910 7,280 % of total amount reported 46.4% 98.0% 6.9% 1.1% 99.0% 9.1% 2.4% 0.2% 1.9% 2.4% 12.6%

Antichi Pellettieri 2007 Annual report - page 72

29. Net financial position

Pursuant to the CONSOB announcement of July 28th, 2006 and CESR's recommendations of February 10th, 2005 for the consistent implementation of the European Commission’s Regulation on Prospectuses, we report the Antichi Pellettieri Group's net financial position at December 31st, 2007:

In €/000

of which of which related related 12/31/07 parties 12/31/06 parties (see Note (see Note 28) 28) A Cash on hand 206 259 B Bank account balances 11,497 12,319 C D Cash and cash equivalents (A+B) 11,703 0 12,578 0

E Current financial receivables 18,710 8,674 2,758 2,111

F Current bank borrowings 19,273 7,597

G Current portion of medium/long term debt 39,421 4,987

H Other current financial payables

I Current debt (F+G+H) 58,694 0 12,584 0

J Net current debt (I-E-D) 28,281 (8,674) (2,752) (2,111)

K Medium/long term bank debt 32,692 52,197

L Bonds 0 10,995

M Other non current debt 3,377 3,275 3,045 3,045

N Medium/long term debt (K+L+M) 36,069 3,275 66,237 3,045

O IFRS net debt (N + J) 64,350 (5,399) 63,485 934

P Treasury shares (842) (850)

Q Operating net debt (O + P) 63,508 (5,399) 62,635 934

Antichi Pellettieri 2007 Annual report - page 73

30. Significant non-recurring events and operations

Pursuant to CONSOB's announcement of July 28th, 2006, we report that no significant, non- recurring operations were carried out by the Antichi Pellettieri Group during the period under review.

31. Atypical or unusual transactions

Pursuant to CONSOB's announcement of July 28th, 2006, we report that the Antichi Pellettieri Group undertook no atypical or unusual transactions during the period, as defined in the announcement itself.

32. Significant subsequent events

Information on significant events taking place since the close of the year is provided in a separate section of this report.

OTHER INFORMATION

Workforce

Information on the workforce is provided in a separate section of the directors' report.

Fees due to directors and statutory auditors

Details of fees due for 2007 to directors and statutory auditors of the parent company for their service at Antichi Pellettieri SpA and at other consolidated companies are provided in the "Other information" section of the notes to the parent company's financial statements.

SCOPE OF CONSOLIDATION

The following are attached to these notes:

• list of companies consolidated on a line-by-line basis pursuant to Art. 26 of Legislative Decree 127/91 and CONSOB Resolution 11971 of May 14th, 1999 (as amended) (Annex 1);

• list of other equity investments in non-consolidated subsidiaries and associates (Annex 2);

• map of the consolidation (Annex 3);

• reconciliation between the parent company's shareholders' equity and net profit and the corresponding consolidated figures (Annex 4). Antichi Pellettieri 2007 Annual report - page 74

ANTICHI PELLETTIERI SpA Head office: Via della Repubblica 82, 42025 Cavriago (RE), Italy – Share capital €11,374,831 fully paid-in.

Annex 4 to the notes to the financial statements at December 31st 31/12/2007

List of companies consolidated on a line-by-line basis pursuant to Art. 26 of Legislative Decree 127/91 and CONSOB Resolution 11971 of May 14th, 1999 (as amended) (Art. 126 of the Regulations):

Company name Registered Share capital Shareholder % % office held consoli- dated Currency Amount % % San Mauro BALDININI SRL EUR 93,000 ANTICHI PELLETTIERI SpA 60.0 60.0 Pascoli (RN)

BIASIA FRANCESCO SpA Dueville (VI) EUR 600,000 ANTICHI PELLETTIERI SpA 86.0 86.0

Pontassieve BRACCIALINI SRL EUR 40,000 ANTICHI PELLETTIERI SpA 80.0 80.0 (FI) Sala Baganza COCCINELLE SPA EUR 4,000,000 ANTICHI PELLETTIERI SpA 51.0 51.0 (PR) Sala Baganza COCCINELLE STORE SRL EUR 90,000 COCCINELLE SpA 100.0 51.0 (PR)

COCCINELLE STORE Nice, France EUR 8,000 COCCINELLE SPA 100.0 51.0 FRANCE S.A.

COCCINELLE Dusseldorf, EUR 127,823 COCCINELLE SPA 100.0 51.0 DEUTSCHLAND GMBH Germany

DADOROSA SRL Scandicci (FI) EUR 1,000,000 BRACCIALINI SRL 100.0 80.0

Granarolo GFM INDUSTRIA SpA EUR 1,428,600 ENRICO MANDELLI SpA 80.0 37.70 Faentino (RA)

LEATHER APPAREL SRL Cavriago (RE) EUR 10,000 ANTICHI PELLETTIERI SpA 88.0 88.0

ANTICHI PELLETTIERI SpA 4.0 ENRICO MANDELLI SpA Merate (LC) EUR 945,000 47.12 LEATHER APPAREL SRL 49.0 Companies valued using other methods NONE (*)

(*) The company SEBASTIAN Srl, held 50% Antichi Pellettieri SpA and consolidated at equity in 2006, was liquidated on November 30th, 2007.

Antichi Pellettieri 2007 Annual report - page 75

ANTICHI PELLETTIERI SpA Head office: Via della Repubblica 82, 42025 Cavriago (RE), Italy – Share capital €11,374,831 fully paid-in.

Annex 4 to the notes to the financial statements at December 31st 31/12/2007

List of other equity investments in subsidiaries and associates

Company name Registered Share capital Shareholder % held office Currency Amount SLG SRL Parma (PR) EUR 10,000 ANTICHI PELLETTIERI SpA 50.0

Reasons for exclusion:

This company was founded on October 24th, 2007 is currently immaterial. It will be consolidated from 2008.

Antichi Pellettieri 2007 Annual report - page 76

ANTICHI PELLETTIERI SpA Head office: Via della Repubblica 82, 42025 Cavriago (RE), Italy – Share capital €11,374,831 fully paid-in.

Annex 3 to the notes to the financial statements at December 31st, 2007

Map of the consolidation

NORITIES

SpA SpA SRL COCCINELLE SPA BRACCIALINI SRL DIRECTCONTROL ENRICOMANDELLI LEATHERAPPAREL DIRECTMI ANTICHI PELLETTIERI CONSOLIDATION BALDININI SRL 60 60 40 60 ENRICO MANDELLI SpA 4 49 53 47 47.12 COCCINELLE SPA 51 51 49 51

COCCINELLE STORE SRL 100 100 0 51 COCCINELLE STORE FRANCE S.A. 100 100 0 51 COCCINELLE DEUTSCHLAND GMBH 100 100 0 51 BRACCIALINI SRL 80 80 20 80 GFM INDUSTRIA SpA 80 80 20 37.7 BIASIA FRANCESCO SpA 86 86 14 86 DADOROSA SRL 100 100 0 80 LEATHER APPAREL SRL 88 88 12 88

Antichi Pellettieri 2007 Annual report - page 77

ANTICHI PELLETTIERI SpA Head office: Via della Repubblica 82, 42025 Cavriago (RE), Italy – Share capital €11,374,831 fully paid-in.

Annex 4 to the notes to the financial statements at December 31st, 2007

Reconciliation between the parent company's shareholders' equity and net profit and the corresponding consolidated figures

Consolidated shareholders' equity and the group net profit for the year ended December 31st, 2007 are reconciled with those of the parent company as follows:

Profit reconciliation Equityreconciliation

Per parent company's financial statements 89,910 5,104 Reversal of carrying value of equity investments (42,225) 15,872 Recognition of specific intangibles IFRS 3 161,453 (4,080) Reversal of inter-group warehouse margins (727) (132) Inter-group capital gains on the disposal of assets (149) 0 Capitalization of fixed assets 0 0 Elimination of inter-group dividends 0 (2,707) Deferred taxes (48,754) 9,569 Leasing IAS 17 50 13 Intangible assets IAS 38 507 1,210 Inventories 0 0 Actuarial calculation of benefits IAS 19 682 1,269 Property, plant and equipment IAS 16 12,614 (151) Current/non current trade receivables and payables 818 506 Share of profit from companies consolidated at net equity (102) Total pre-consolidation adjustments 84,269 21,268 Minority shareholders' equity 52,566 8,032 Group shareholders' equity 121,613 18,340

Total shareholders' equity 174,179 26,372

This report, made up of the consolidated balance sheet, consolidated profit and loss account, notes, and comments on performance and events during the period, provides a fair and truthful representation of the Group's equity, net financial position and results, and corresponds with the parent company's books of account and the information submitted by the companies included in the scope of consolidation.

Giovanni Burani Chairman of the Board of Directors

Cavriago, March 20th, 2008 Antichi Pellettieri 2007 Annual report - page 78

Appendix Information pursuant to Art. 149-duodecies of the CONSOB Regulations for Issuers

The following chart, prepared in accordance with Art. 149-duodecies of the CONSOB Regulations for Issuers, shows the fees pertaining to 2007 for external auditing and for services other than auditing rendered by the accounting firm. No services were provided by other entities belonging to its network.

In €/000

service provider fees for 2007 Auditing Mazars & Guérard SpA 65,242 Antichi Pellettieri

Auditing Mazars & Guérard SpA 249,613 subsidiaries

Other services Mazars & Guérard SpA 59,900

Total 374,755

Antichi Pellettieri 2007 Annual report - page 79

Certification of the consolidated financial statements pursuant to Art. 81-ter of CONSOB Regulation 11971 of May 14th, 1999, as amended

We, the undersigned, Giovanni Burani as chairman and CEO and Daniele Bardini as financial reporting officer of Antichi Pellettieri SpA, hereby certify, including in accordance with Art. 154-bis, paras. 3 and 4 of Legislative Decree 58 of February 24th, 1998:

• the adequacy of in relation to the characteristics of the business; and • the Company's due compliance with the administrative and accounting procedures for the preparation of the consolidated financial statements during the course of 2007.

We also certify that the consolidated financial statements at December 31st, 2007:

a) correspond to the ledgers and accounting entries; b) having been prepared in accordance with the International Accounting Standards and International Financial Reporting Standards (IAS/IFRS) adopted by the European Union and with the measures enacted in compliance with Art. 9 of Legislative Decree 38/2005, provide, to the best of our knowledge, a fair and truthful disclosure of the financial status and performance of Antichi Pellettieri SpA and of the companies included in the consolidation.

Cavriago (Reggio Emilia), March 20th, 2008

Giovanni Burani Chairman and CEO

Daniele Bardini Financial Reporting Officer

Antichi Pellettieri 2007 Annual report - page 80

ANTICHI PELLETTIERI SpA - Separate financial statements at December 31st, 2007

Antichi Pellettieri 2007 Annual report - page 81

DIRECTORS' REPORT

For the parent company, the year ended December 31st, 2007 closed with a net profit of €5,104K, up from €3,913K the previous year. Net revenues for Antichi Pellettieri SpA increased by €2,858K, from €26,098K in 2006 to €28,956K, for a pre tax profit of €3,593K.

BALANCE SHEET, PROFIT & LOSS ACCOUNT AND CASH FLOW RESULTS

The balance sheet, profit & loss account and cash flow results of the parent company Antichi Pellettieri SpA show the effects of the acquisition of majority holdings and the sale of minority interests during the year.

The main transactions of this kind in 2007 were as follows: - the incorporation of Sebastian Leather Group Srl, held 50%; - the disposal of 27% of Enrico Mandelli SpA shares to Mario Cerutti Srl.

RESULTS

RESTATED PROFIT AND LOSS ACCOUNT

(€/000)

note (*) 12/31/07 12/31/06 Change % Net revenues (20) 28,956 26,098 11.0%

EBITDA (**) 6,851 5,832 17.5%

EBIT (**) 5,926 4,782 23.9%

Net financial income (charges) (23) - 2,332 - 1,754 33.0%

Pre tax profit (**) 3,593 3,027 18.7%

Net profit 5,104 3,913 30.4%

EARNINGS RATIOS EBITDA/Net revenues 23.7% 22.3% EBIT/Net revenues 20.5% 18.3% Pre tax profit/Net revenues 12.4% 11.6% Net profit/Net revenues 17.6% 15.0%

(*) In accordance with CONSOB Resolution DEM 6064293 of July 28th, 2006, the main items in the restated accounts are cross-referenced to their counterparts in the standard accounts and to the relevant explanatory note. (**) Also pursuant to CONSOB Resolution DEM 6064293 of July 28th, 2006, the criteria used to calculate alternative performance indicators are noted below. Antichi Pellettieri 2007 Annual report - page 82

Alternative performance indicators

As decided during the transition to International Accounting Standards, the restated profit and loss account shows the following intermediate results not recognized by IAS/IFRS as accounting measures, as they are thought to provide significant information on MBFG's performance:

EBITDA: income before taxes, financial income and expenses, amortization, depreciation, provisions and asset write-downs charged during the period;

EBIT: income before taxes and financial income and expenses;

Pre tax profit: income before taxes;

The main items in the profit and loss account are analyzed below.

Net revenues in 2007 amounted to €28,956K, an increase of 11% on 2006, due primarily to the good performance of brands and in particular of the collections produced at the Vigevano factory.

EBITDA stood at €6,851K, an improvement of €1,020K on 2006, and amounted to 23.7% of revenues (22.3% the previous year). The rise in EBITDA stems mainly from the reduction in other operating costs in relation to Antichi Pellettieri's activities as a holding company.

EBIT came to €5,926K, increasing by €1,144K on 2006, and amounted to 20.5% of revenues (18.3% the previous year).

The increase in EBIT, too, is explained by the reduction in other operating costs from activities as a holding company, and by the decrease in amortization, depreciation and write- downs, which in 2006 included a provision for doubtful accounts against the subsidiary Leather Designer (in liquidation).

Net financial charges came to €2,332K, an increase of €1,754K due mainly to the rise in interest rates on loans.

Income tax for the year was a positive €1,511K (versus a positive €886K in 2006), mostly through the use of deferred taxes and the benefits of the group tax election.

Antichi Pellettieri 2007 Annual report - page 83

RESTATED BALANCE SHEET

(€/000)

note (*) 12/31/07 12/31/06

Trade receivables (8) 4,763 5,624 Trade payables (17) (7,469) (5,675) Net trade receivables (payables) (2,706) (51) Inventories (7) 3,989 3,005 Operating working capital 1,283 2,954 (8)-(9)-(17)- Other short term assets/liabilities (18) 3,556 1,646 Net working capital 4,839 4,600 Fixed assets (1)-(2)-(3)-(5) 133,632 138,228 Post employment benefits and other non current provisions (15) (544) (810) Other non current receivables/payables (6)-(16) 4 5,275 Deferred taxes +/- (4)-(14) (2,127) (2,641) Net capital employed 135,803 144,652

Shareholders’ equity (12) 89,910 89,909 Net debt (26) (45,892) (54,743) Net capital employed 135,803 144,652

BALANCE SHEET RATIOS Inventories/Net revenues 13.8% 11.5% Net working capital/Net revenues 16.7% 17.6% Shareholders' equity/Capital employed 66.2% 62.2% Debt/Equity 0.51 0.61 Debt/EBITDA 6.70 9.39

(*) In accordance with CONSOB Resolution DEM 6064293 of July 28th, 2006, the main items in the restated accounts are cross-referenced to their counterparts in the standard accounts and to the relevant explanatory note.

The financial structure of Antichi Pellettieri SpA features total capital employed of €135,803K (€144,652K at December 31st, 2006), funded 66.2% by net equity (62.2% at the close of 2006) and 33.8% by debt (37.8% at the close of 2006). Non current assets, worth €133,623K, decreased by €4,596K because of the collection of long term loans receivable.

Net working capital comes to €4,838K, showing little change on the previous year's €4,600K. The slight increase reflects the rise in revenues.

Net debt stands at €45,892K, versus €54,743K at the close of 2006, for a debt/equity ratio of 0.51. This is an improvement on the previous year's ratio of 0.61, despite the investments carried out during the year. Antichi Pellettieri 2007 Annual report - page 84

RECONCILIATION BETWEEN THE PARENT COMPANY'S NET PROFIT AND SHAREHOLDERS' EQUITY AND THE CORRESPONDING CONSOLIDATED FIGURES

In accordance with the CONSOB announcement of July 28th, 2006, below is the reconciliation between the consolidated net profit and shareholders’ equity at December 31st, 2006 and the corresponding figures for Antichi Pellettieri SpA.

(€/000)

Profit Equity reconciliation reconciliation

Per parent company's financial statements 89,910 5,104 Reversal of carrying value of equity investments (42,225) 15,872 Recognition of specific intangibles IFRS 3 161,453 (4,080) Reversal of inter-group warehouse margins (727) (132) Inter-group capital gains on the disposal of assets (149) 0 Capitalization of fixed assets 0 0 Elimination of inter-group dividends 0 (2,707) Deferred taxes (48,754) 9,569 Leasing IAS 17 50 13 Intangible assets IAS 38 507 1,210 Inventories 0 0 Actuarial calculation of benefits IAS 19 682 1,269 Property, plant and equipment IAS 16 12,614 (151) Current/non current trade receivables and payables 818 506 Share of profit from companies consolidated at net equity (102) Total pre-consolidation adjustments 84,269 21,268 Minority shareholders' equity 52,566 8,032 Group shareholders' equity 121,613 18,340

Total shareholders' equity 174,179 26,372

Antichi Pellettieri 2007 Annual report - page 85

OTHER INFORMATION

RELATED PARTY TRANSACTIONS

Antichi Pellettieri SpA's related party transactions, as defined in CONSOB Resolution 15519 of July 27th, 2006, are reported in the supplementary profit and loss account and balance sheet and detailed in Note 25.

The Board of Directors of Mariella Burani Fashion Group is represented on Antichi Pellettieri's Board of Directors by the chairman, Giovanni Burani, and by managing directors Walter and Andrea Burani.

All transactions with the above parties fall within the Group's normal sphere of operations and are settled under arm's-length conditions. There are no atypical or unusual transactions.

INVESTMENTS

Investments in fixed assets in 2007 came to €92K and went mainly toward the purchase of plant, machinery and equipment. Investments in intangible assets came to €1 million and refer almost exclusively to the purchase of the brand The Saddler. See the notes to the financial statements for further details.

During the year, the following changes were made to equity investments, producing an overall decrease of €2,421K:

- sale of a 27% interest in Enrico Mandelli SpA to Mario Cerutti Srl; - liquidation of Leather Designer Srl and Sebastian Srl; - formation of SLG Srl.

RESEARCH AND DEVELOPMENT

In 2007, the company pursued its ongoing strategy of product and process innovation, and to that end researched, developed and produced its own collections.

TREASURY SHARES

In accordance with Article 2357 of the Italian Civil Code, the annual general meeting of April 20th, 2007 authorized the purchase of treasury shares up to a limit of 10% of the share capital. At December 31st, 2007 the company held 91,190 such shares (0.2% of the share capital), worth a total of €842K.

In order to stabilize performance of the stock, 1,864,522 shares were purchased during the year for €18,316K and 1,864,949 shares were sold for €18,324K.

Antichi Pellettieri 2007 Annual report - page 86

SIGNIFICANT SUBSEQUENT EVENTS

As of this writing, no significant events have taken place since the close of the year

GROUP TAX ELECTION

On June 18th, 2007 Antichi Pellettieri SpA, as parent company, opted for the group tax election allowed by Articles 116 et seq. of Presidential Decree 917/86 for the years 2007, 2008 and 2009.

Further information is provided in the notes.

BUSINESS OUTLOOK

On the basis of turnover in early 2008 and the results of the spring/summer sales campaign, performance in 2008 should be in line with budget forecasts, with revenues and EBITDA on the rise.

Management is working to streamline and synergize Group activities, with a view to achieving full control of the production chain and a vertically integrated structure.

In 2008 the company will focus on exploiting synergies by developing cross-selling initiatives for clothing, footwear and accessories and working on the "cross-fertilization" of the Group's various proprietary brands.

FINANCIAL INSTRUMENTS

The company does not currently make use of financial instruments.

INFORMATION ON FINANCIAL RISKS

The company is exposed to various financial risks, as described by category below. Financial risks are managed directly by Antichi Pellettieri SpA in coordination with the MBFG Group's central risk management unit.

Credit risk

Receivables outstanding at December 31st, 2007 are due mainly from Group companies. Most amounts due from third parties are trade receivables of modest amounts, as discussed in the balance sheet section of the notes.

It is the company's policy to sell merchandise within set credit limits defined after evaluating customers' creditworthiness. On the whole, therefore, credit risk is deemed to be very low.

There are no past-due invoices of any significant amount.

Antichi Pellettieri 2007 Annual report - page 87

Liquidity risk

The company strives to reduce liquidity risk to a minimum, to be assured of obtaining the funds it needs under economical conditions, by: maintaining sufficient cash reserves at all times; diversifying its fund-raising methods; obtaining adequate credit lines; and making sure its future liquidity situation is in line with business plans.

Management believes that the funds and credit lines currently available, along with the cash flow generated by operations, will be sufficient to meet the Company's needs.

Market risk a) Interest rate risk

Interest rate risk stems from medium/long-term loans contracted under variable-rate conditions. The current policy is to stay within the variable rate range while monitoring the slope of interest rate curves. b) Exchange rate risk

At December 31st, 2007 there were no significant receivables or payables exposed to exchange rate risk. c) Price risk

The company is exposed to fluctuations in the price of raw materials. Its policy is to hedge that risk, where possible, by arranging medium-term agreements with suppliers and maintaining adequate levels of stocks.

Antichi Pellettieri 2007 Annual report - page 88

MOTIONS

Shareholders,

We submit for your approval the financial statements at December 31st, 2007, prepared on an IFRS-compliant basis, which close with a net profit of €5,104,192.

The Board of Directors proposes allocating that profit as follows:

- €1,793,578 to the legal reserve, raising its balance to 20% of the share capital; - to the shareholders, a dividend of €0.11 per share gross of withholding tax required by law and excluding the treasury shares held by the Company, using the remaining profit and unallocated earnings up to a maximum of €1,694,312.

We invite you to resolve as follows:

- to approve the financial statements at December 31st, 2007 with a net profit of €5,104,192, along with the directors' report on operations;

- to allocate the net profit of €5,104,192 as follows:

- €1,793,578 to the legal reserve, raising its balance to 20% of the share capital; - to the shareholders, a dividend of €0.11 per share gross of withholding tax required by law and excluding the treasury shares held by the Company, using the remaining profit and unallocated earnings up to a maximum of €1,694,312.

Giovanni Burani Chairman of the Board of Directors

Antichi Pellettieri 2007 Annual report - page 89

BALANCE SHEET AT DECEMBER 31st, 2007 (*) in EUR December note December December 31st, ASSETS 31st, 2007 31st, 2006 2005 Non current assets Property, plant and equipment (1) 1,352,710 1,395,889 1,369,533 Intangible assets (2) 36,395,936 35,435,372 35,437,254 Investment property 0 0 0 Investments (3) 84,741,746 87,162,410 45,693,560 Long term financial assets available for sale 0 0 0 Deferred tax assets (4) 839,895 1,509,961 419,964 Long term derivatives 0 0 0 Other long term financial receivables (5) 11,141,470 14,235,000 10,235,000 Long term trade and other receivables (6) 334,025 9,858,481 0 Total 134,805,782 149,597,113 93,155,311

Non current assets held for sale Assets held for sale

Current assets Inventories (7) 3,988,756 3,005,134 2,337,715 Short term trade and other receivables (8) 11,182,381 11,600,779 8,359,693 Current tax assets (9) 1,145,972 260,835 730,643 Other short term financial receivables (10) 22,185,357 1,560,511 101,988 Short term financial assets available for sale 0 0 0 Short term derivatives 0 0 0 Negotiable securities recognized at fair value 0 0 0 Cash and cash equivalents (11) 1,429,697 2,845,551 7,154,439 Total 39,932,163 19,272,810 18,684,478 Total assets 174,737,945 168,869,923 111,839,789

(*) Pursuant to CONSOB Resolution 15519 of July 27th, 2006, the effects of related party transactions on the consolidated financial statements of Antichi Pellettieri S.p.A. are shown in the schedule reported below and are also described in Note 25. Antichi Pellettieri 2007 Annual report - page 90

BALANCE SHEET AT DECEMBER 31st, 2007 (CONTINUED) in EUR December 31st, December 31st, December 31st, note SHAREHOLDERS' EQUITY AND LIABILITIES 2007 2006 2005 Shareholders’ equity (12) Share capital 11,352,034 11,225,941 10,000,000 Capital reserves 68,829,454 69,136,445 38,584,041 Retained earnings 9,728,821 9,546,553 6,442,756 Total 89,910,309 89,908,939 55,026,797

Non current liabilities Long term loans and borrowing (13) 28,370,037 56,464,709 30,140,000 Long term derivatives 0 0 0 Deferred tax liabilities (14) 2,967,331 4,150,754 4,846,418 Post employment benefits (15) 462,517 737,753 715,247 Long term provisions (15) 81,111 72,604 13,591 Other non current liabilities (16) 330,475 4,583,000 0 Total 32,211,471 66,008,820 35,715,256 Current liabilities Short term trade and other payables (17) 8,927,297 8,176,731 8,722,241 Current tax liabilities (18) 2,551,574 2,089,433 1,976,136 Short term loans and borrowings (19) 41,137,294 2,686,000 10,399,359 Short term derivatives 0 0 0 Short term provisions 0 0 0 Total 52,616,165 12,952,164 21,097,736 Total liabilities 174,737,945 168,869,923 111,839,789

Antichi Pellettieri 2007 Annual report - page 91

PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED DECEMBER 31st, 2007 (*) in euros Note 2007 2006 2005 Revenues (20) 28,956,112 26,097,173 21,279,827 Change in inventory of finished product and works in progress (21) 847,368 664,962 32,763 Raw materials and consumables (21) (10,011,855) (7,843,736) (6,280,072) Cost of labor (21) (3,999,091) (4,280,877) (3,004,037) Other operating expenses (21) (8,941,258) (8,805,981) (6,170,318) Depreciation, amortization and write-downs (22) (925,347) (1,049,953) (208,716) Financial income (23) 2,577,331 2,769,243 713,396 Financial charges (23) (4,896,927) (4,513,936) (2,516,794) Profit (loss) from foreign exchange transactions (23) (12,842) (9,562) 33,983

Income from equity-accounted associates 0 0 0 Profit (loss) from assets held for sale 0 0 0 Pre tax profit 3,593,491 3,027,333 3,880,032

Tax (24) 1,510,701 885,462 (1,618,968)

Net profit 5,104,192 3,912,795 2,261,064

(*) Pursuant to CONSOB Resolution 15519 of July 27th, 2006, the effects of related party transactions on the consolidated financial statements of Antichi Pellettieri S.p.A. are shown in the schedule reported below and are also described in Note 25.

Antichi Pellettieri 2007 Annual report - page 92

CASH FLOW STATEMENT in €/000

2007 2006 2005 1 - Opening balance 2,259 4,042 12

2 - Cash flow generated (absorbed) by operating activities Pre tax profit (loss) 3,593 3,027 3,880 Depreciation, amortization and write-downs 925 1,050 195 Net change in provisions for risks and employee benefits -266 81 222 Net financial charges 2,332 1,754 1,769 (Capital gains)/losses from disposal of property, plant & equipment 0 -15 -3 TOTAL 6,584 5,897 6,063

Net change in working capital 5,295 -10,190 6,506

TOTAL 5,295 -10,190 6,506 3 - Cash flow generated (absorbed) by investing activities Net change in: - intangible assets -1,021 -55 -12,907 - property, plant and equipment -85 -136 -242 - dividends received 2,321 2,769 582 - financial assets 2,420 -41,469 1,204

TOTAL 3,635 -38,891 -11,363 4 - Cash flow generated (absorbed) by financing activities Change in share capital and reserves -555 6,935 15,026 proceeds from capital increase 0 23,310 0 Receipt (repayment) of loans -11,822 15,679 -9,851 Dividends paid -4,549 Financial charges -4,653 -4,523 -2,351 TOTAL -21,579 41,401 2,824 5 - Net cash flow for the period -6,065 -1,783 4,030 6 - Closing balance -3,806 2,259 4,042

Antichi Pellettieri 2007 Annual report - page 93

STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY in €/000

Share capitalShare Capitalreserves Treasuryshares Retainedearnings Revaluationreserve Net Net profit fortheyear Shareholders’equity

IAS balance at 01/01/05 10,000 23,584 0 143 0 4,013 37,740

Increases (956) (956)

Profit allocation 4,013 (4,013) 0

Increases 15,000 26 3,217 18,243

Balance at 12/31/05 10,000 38,584 0 4,182 0 2,261 55,027

Decreases (23) (86) (827) (936)

Increases 1,249 30,553 103 3,913 35,818

Profit allocation 2,261 (2,261) 0

Balance at 12/31/06 11,226 69,137 0 6,460 (827) 3,913 89,909

Dividends (4,549) (4,549)

Incr. / decr. 126 328 (1,016) 8 5,104 4,550

Profit allocation 3,913 (3,913) 0

Balance at 12/31/07 11,352 68,829 0 5,444 (819) 5,104 89,910 (*) (*)

(*) Treasury shares at December 31st, 2007 amounted to €842K and consisted of 91,190 ordinary shares, of which the par value (€0.25 each) has been deducted from share capital and the remainder allocated to a separate equity reserve.

Antichi Pellettieri 2007 Annual report - page 94

BALANCE SHEET AT DECEMBER 31st, 2007 pursuant to CONSOB Resolution 15519 of July 27th, 2006 in €/000

Of which: Of which: related related note parties parties (see note (see note ASSETS 12/31/07 25) 12/31/06 25) Non current assets Property, plant and equipment 1,353 (1) 1,396 Intangible assets 36,396 (2) 35,435 Investment property 0 0 Investments 84,742 (3) 87,162 Long term financial assets available for sale 0 0 Deferred tax assets 840 (4) 1,510 Long term derivatives 0 0 Other long term financial receivables 11,141 (5) 11,141 14,235 14,235 Long term trade and other receivables 334 (6) 9,858 9,753 Total 134,806 149,596

Non current assets held for sale Assets held for sale

Current assets Inventories 3,989 (7) 3,005 Short term trade and other receivables 11,182 (8) 5,482 11,601 7,268 Current tax assets 1,146 (9) 261 Other short term financial receivables 22,185 (10) 12,242 1,561 1,000 Short term financial assets available for sale 0 0 Short term derivatives 0 0 Negotiable securities recognized at fair value 0 0

Cash and cash equivalents 1,430 (11) 2,846 Total 39,932 19,274

Total assets 174,738 168,870

Antichi Pellettieri 2007 Annual report - page 95

BALANCE SHEET AT DECEMBER 31st, 2007 (CONTINUED) pursuant to CONSOB Resolution 15519 of July 27th, 2006 in €/000

of which: of which: related related note parties parties (see note (see note SHAREHOLDERS' EQUITY AND LIABILITIES 12/31/07 25) 12/31/06 25) Share capital and reserves (12) Share capital 11,352 11,226 Capital reserves 68,829 69,137 Retained earnings 9,729 9,546 Total 89,910 89,909

Non current liabilities Long term loans and borrowing 28,370 (13) 3,275 56,464 3,045

Long term derivatives 0 0 Deferred tax liabilities 2,967 (14) 4,151 Post employment benefits 463 (15) 738 Long term provisions 81 (15) 73 Other non current liabilities 331 (16) 331 4,583 4,583 Total 32,212 66,009 Current liabilities Short term trade and other payables 8,927 (17) 969 8,177 1,584 Current tax liabilities 2,552 (18) 2,089 Short term loans and borrowings 41,137 (19) 2,686

Short term derivatives 0 0 Short term provisions 0 0 Total 52,616 12,952 Total liabilities 174,738 168,870

Antichi Pellettieri 2007 Annual report - page 96

PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED DECEMBER 31st, 2007 pursuant to CONSOB Resolution 15519 of July 27th, 2006 in €/000

of which: of which: related related note parties parties (see note (see note 2007 25) 2006 25) Net revenues 28,956 (20) 3,459 26,098 5,142

Change in inventory of finished product and works in progress 847 665 Raw materials and consumables (10,012) (21) (117) (7,844) (58) Cost of labor (3,999) (21) (4,281) Other operating expenses (8,941) (21) (762) (8,806) (375) Depreciation, amortization and write-downs (925) (22) (286) (1,050) (728) Financial income 2,577 (23) 2,512 2,769 2,674 Financial charges (4,897) (23) (1,152) (4,514) (679) Profit (loss) from foreign exchange transactions (13) (23) (10)

Income from equity-accounted associates 0 0 Profit (loss) from assets held for sale 0 0 Pre tax profit 3,593 3,027

Tax 1,511 (24) 886

Net profit for the year 5,104 3,913

Antichi Pellettieri 2007 Annual report - page 97

CASH FLOW STATEMENT pursuant to CONSOB Resolution 15519 of July 27th, 2006

in €/000

of which related 2007 parties 1 - Opening cash 2,259

2 - Cash flow generated (absorbed) by operating activities Pre tax profit (loss) 3,593 Amortization, depreciation and write-downs 925 286 Net change in provisions for risks and employee benefits -266 Net financial charges 2,332 961 (Capital gains) / capital losses on disposal of non current assets 0 TOTAL 6,584

Net change in working capital 5,295 11,255

TOTAL 5,295 3 - Cash flow generated (absorbed) by investing activities Net change in: - intangible assets -1,021 - property, plant and equipment -85 - dividends received 2,321 2,321 - financial assets 2,420

TOTAL 3,635 4 - Cash flow generated (absorbed) by financing activities Increase in AP capital and reserves for gains/losses on treasury shares -555 Proceeds from capital increase 0 - Receipt (repayment) of loans 11,822 -17,671 Net financial charges -4,549 -961 Dividends paid -4,653 -2,406 - TOTAL 21,579 5 - Net cash flow for the period -6,065 6 - Closing balance -3,806

Antichi Pellettieri 2007 Annual report - page 98

NOTES TO THE SEPARATE FINANCIAL STATEMENTS AT DECEMBER 31st, 2007

Operations

Antichi Pellettieri SpA is an Italian joint-stock company with registered office and headquarters at Via della Repubblica 82, Cavriago (RE), Italy. Its share capital amounts to €11,374,831.00 fully paid-in and it is listed in the Companies Register of Reggio Emilia (tax identification no. 04271670962). It produces footwear collections and distributes them worldwide under its own brands and under license for renowned international designers. Production is partly internal, at the Company's factories in Parma and Vigevano, and partly outsourced; distribution takes place through an extensive retail network in Italy and abroad consisting of proprietary stores and franchises.

Antichi Pellettieri SpA is also the parent company that holds, directly or through other sub- holding companies, the investments making up the Antichi Pellettieri Group.

Accounting standards

The financial statements of Antichi Pellettieri SpA at December 31st, 2007 are presented in thousands of euros (€/000) and are compared with those from the previous year, prepared using the same policies. The financial statements have been prepared in accordance with the International Accounting Standards (IAS/IFRS) published by the International Accounting Standards Board (IASB) and approved by the European Union.

The term IAS/IFRS encompasses the International Accounting Standards (IAS), the International Financial Reporting Standards (IFRS), and all interpretations published by the IFRIC (formerly the Standing Interpretations Committee).

Pursuant to European Regulation no. 1606 of July 19th, 2002, starting with the year 2005 the Antichi Pellettieri Group decided to adopt the IAS/IFRS published by the IASB and approved by the European Union for the preparation of consolidated financial statements.

The first separate financial statements compliant with IFRS were closed at December 31st, 2006, with the application of IFRS 1 (First Time Adoption of International Financial Reporting Standards).

They are presented for comparison with the 2007 financial statements. Thus, an annex to this document ("Transition to IFRS") provides all information needed to grasp the full impact of conversion to the new standards, as required by IFRS 1. Please consult that section for figures concerning the date of transition to the new standards (January 1st, 2005 and December 31st, 2005).

The reconciliations for 2005 have been drawn up according to the accounting standards in effect at the time they were prepared. Any changes to these principles may affect the 2005 IFRS figures and the reconciliations drawn up according to IFRS 1.

Antichi Pellettieri 2007 Annual report - page 99

The financial statements consist of the balance sheet, profit and loss account, statement of changes in shareholders' equity, cash flow statement prepared using the indirect method, and these notes.

They have been drawn up according to the historical cost principle, with the exception of the valuation of land, buildings and some securities, for which fair value (determined during the transition to IAS/IFRS) has been used in place of cost.

The financial statements have been audited by Mazars & Guérard SpA.

Management and coordination

The Company belongs to the Mariella Burani Fashion Group, which is in charge of management and coordination through its parent company Mariella Burani Fashion Group (MBFG) SpA. Below are key figures from MBFG SpA's latest approved financial statements, in accordance with Civil Code Art 2497-bis.

Mariella Burani Fashion Group SpA in €/000

ASSETS 12/31/06 Non current assets Property, plant and equipment 3,032 Intangible assets 4,698 Investments 93,111 Deferred tax assets 19,854 Long term trade and other receivables 2,630 Total 123,325

Current assets Inventories 22,151 Short term trade and other receivables 29,717 Current tax assets 3,003 Other short term financial receivables 100,798 Short term financial assets available for sale 19,773 Negotiable securities recognized at fair value 6,919 Cash and cash equivalents 14,266 Total 196,628

Total assets 319,953

Antichi Pellettieri 2007 Annual report - page 100

Mariella Burani Fashion Group SpA in €/000

SHAREHOLDERS' EQUITY AND LIABILITIES 12/31/06 Share capital and reserves Capital issued 15,366 Share premium reserve 70,358 Other reserves (13,151) Net profit for the period 52,674 Total shareholders' equity 125,246

Non current liabilities Long term loans and borrowing 129,017 Long term derivatives 543 Deferred tax liabilities 16 Long term provisions 3,415 Total 132,991 Current liabilities Short term trade and other payables 29,190 Current tax liabilities 697 Short term loans and borrowings 31,772 Short term provisions 56 Total 61,716

Total liabilities 319,953

PROFIT AND LOSS ACCOUNT 12/31/06 Revenues 151,667 Change in inventory of finished product and works in progress (10,877) Raw materials and consumables 29,933 Cost of labor 10,400 Other operating expenses 38,469 Depreciation, amortization and write-downs 11,532 Financial income 3,878 Financial charges 10,374 Profit (loss) from foreign exchange transactions 5 Pre tax profit 43,965

Income tax (8,710)

Net profit 52,674

Antichi Pellettieri 2007 Annual report - page 101

Accounting policies

The accounting principles and policies used to prepare the financial statements at December 31st, 2007 are reported below.

Intangible assets

Intangible assets are identifiable, non-monetary assets without physical substance that are controlled by the company and liable to produce future economic benefits. They are initially recorded at purchase cost, usually determined as the price paid for the acquisition including expenses directly attributable to the preparation phase, or at production value, if the conditions are met for capitalizing the expense of internally generated assets. After their first-time reporting, intangible assets are booked at cost net of accumulated amortization and impairment, in accordance with IAS 36 (Impairment). Costs incurred for intangible assets after they are purchased are only capitalized to the extent that they increase the assets' future economic prospects; all other costs are recorded in the profit and loss account for the year they are incurred.

Intangible assets with finite useful lives

Intangible assets with finite useful lives, primarily brands, are amortized on a straight-line basis over their estimated useful lives, starting from the time they are available for use. The recoverability of the residual book value is verified through impairment testing if there are objective signs of impairment.

Also included in this category are software programs not constituting an integral part of the hardware, in which case the expense is added to the value of the tangible asset. Software is normally amortized over a period not exceeding five years. The directors review intangibles' estimated useful lives at the close of every year.

Research costs are charged to the profit and loss account for the period in which they are incurred.

Amortization is charged on a straight-line-basis over the assets' estimated useful lives:

Category Years Patents and intellectual property rights 3 Concessions, licenses and brands 40 Software and other intangible assets 5

Antichi Pellettieri 2007 Annual report - page 102

Intangible assets with indefinite useful lives

Intangible assets with indefinite useful lives are not amortized, but undergo impairment testing (IAS 36) once a year or whenever there are signs of impairment. The item "Goodwill" contains the difference between the purchase price of an investment and the fair value of its net identifiable assets as of the acquisition date (IFRS 3).

Property, plant and equipment

Property, plant and equipment are recognized originally at cost, including directly attributable ancillary expenses. The company has no such assets built internally.

After their first-time recognition, these assets are booked at cost less accumulated depreciation and impairment. As an exception to that rule, land and buildings are recorded at their latest appraisal value, which is deemed to be closer to their fair value. No depreciation is charged on land.

The main depreciation rates are as follows:

Category Rate Buildings 3.00% Machinery 17.5% Production plant 12.5% EDP machines 20.0% Industrial and commercial equipment 20.0% and 25.0% Furniture and fittings 12.0% Molds and dies 20.0% Vehicles 25.0% Alarm systems 30.0%

The residual value and useful lives of the assets are reviewed at least every year-end. Regardless of existing depreciation, whenever impairment is determined on the basis of IAS 36 (see "Asset impairment," below), the asset is written down accordingly; the impairment loss is reversed in subsequent years if the reasons for the write-down cease to apply. Ordinary maintenance costs are fully expensed as incurred. Improvement expenditure is allocated to the related assets and depreciated over their residual useful lives.

Assets acquired under finance leases are stated at their fair value at the start of the lease and the capital portion of the lease installments is recorded as a liability; the goods are depreciated on the same basis as similar assets. If an asset is sold and leased back under a financial leasing agreement, any capital gain from the sale is deferred and recorded on an accruals basis. Specific information is provided when the asset is leased back under an operating lease.

Antichi Pellettieri 2007 Annual report - page 103

Asset impairment

The carrying values of tangible and intangible assets are reviewed whenever clear signs from inside or outside the company indicate that an asset or group of assets (known as a cash generating unit or CGU) may have been impaired.

Goodwill, other intangible assets with indefinite useful lives, and intangible assets not in use must undergo impairment testing at least once a year, and in any case whenever there are signs of possible impairment.

The impairment test consists of comparing the asset's or CGU's carrying value with its recoverable amount, the latter defined as the higher of its fair value (net of any selling expenses) and its value in use. Value in use is calculated by discounting the asset's or CGU's expected future net cash flows. If the difference between the carrying value and recoverable amount is negative, the asset or CGU is written down accordingly.

The conditions and procedures for restoring the value of previously written down assets (barring goodwill, which can never be written back), are those established by IAS 36.

Financial assets

All financial assets are measured initially at cost, which corresponds to the consideration paid including transaction costs (e.g. consulting fees, duty stamps, and fees imposed by the regulatory authorities).

The classification of financial assets determines their subsequent valuation, as follows: - financial assets held for trading: these are recorded at fair value, unless fair value cannot be reliably determined, in which case they are recognized at cost less any impairment. Gains and losses pertaining to these assets are recorded in the profit and loss account; - held-to-maturity investments, loans receivable and other financial receivables: these are recognized at cost, less amortization and any write-downs for impairment. Gains and losses pertaining to these assets are recorded in the profit and loss account when the investment is removed at maturity or in the case of permanent impairment; - available-for-sale financial assets: these are booked at fair value, and gains and losses arising from subsequent valuations are recognized in shareholders’ equity. If the fair value of such assets cannot be reliably determined, they are valued at cost less any impairment.

If it is no longer appropriate to classify an investment as "held to maturity," due to a change of strategy or to the impossibility of maintaining it until it matures, it must be reclassified as "available for sale" and re-measured at fair value. The difference between carrying value and fair value remains incorporated within shareholders’ equity until the asset is sold or otherwise disposed, at which time it must be recognized to profit or loss.

Equity investments in subsidiaries are valued at cost, adjusted in the event of permanent impairment. Equity investments of less than 20% in other companies are also recognized at cost and written down in the event of permanent impairment. The original value of these investments is reinstated in future accounting periods should the reasons for such write- downs no longer apply. Antichi Pellettieri 2007 Annual report - page 104

Inventories

Inventories are valued at the lower of purchase or production cost (determined according to weighted average cost) and market value, which is defined as the replacement cost for raw and ancillary materials and estimated realizable value for finished and semifinished products, taking account of any manufacturing costs or direct selling expenses still to be incurred. Cost includes the portion of ancillary expenses and direct and indirect production costs that can be reasonably attributed to the inventories. Write-downs are reversed in subsequent periods if the reasons no longer apply. Obsolete and slow-moving inventories are written down according to the likelihood of their being used or sold. Their original value is restored in subsequent periods if the reasons for the write-down cease to apply.

Receivables

Receivables are stated at their estimated realizable value, i.e. at their face value net of any write-downs for estimated losses. They are regularly examined in terms of expiry and seasonal patterns to prevent write-downs for unexpected losses. Any non current receivables that include an implicit interest component are discounted to present value using an appropriate market rate. Trade receivables include accruals and deferrals for costs and income common to two or more years, whose amount varies over time, in accordance with the matching principle.

Cash and cash equivalents

Cash is defined as funds held to meet short term cash commitments that are easily liquidated and convertible into a known amount, and that bear little or no risk of losing value. Cash equivalents are mainly temporary excess funds invested in highly liquid instruments (less than three months' maturity at the time of purchase).

General provisions

Provisions are made only when there is a current obligation for the future outflow of economic resources as a consequence of past events, the outflow is likely to be required, and its amount can be estimated with reasonable precision. The amount provided is the best estimate of the sum required to settle the current obligation in full, discounted at a pre-tax rate that reflects the current time value of money.

For contracts whose execution involves inevitable costs that exceed the presumed economic benefits of the agreements, the current contractual obligation is recorded on the same basis as a standard provision.

If the effect is significant, provisions are calculated by discounting the estimated future cash flows at a pre-tax rate, so as to reflect the time value of money and the specific risks of the liability.

Antichi Pellettieri 2007 Annual report - page 105

Reserve for severance indemnities

Until December 31st, 2006 the provision for employee severance indemnities (trattamento di fine rapporto, or TFR) qualified as a defined benefit plan and fell within the scope of IAS 19 (Employee Benefits). The amount recorded was subject to actuarial valuation in the form of the Projected Unit Credit method, which discounted the obligation at an interest rate reflecting the market yield on high quality corporate bonds of comparable maturity. The calculation concerned accrued severance indemnities for service already rendered, and incorporated assumptions about future salary increases.

Actuarial gains and losses were recorded in the profit and loss account for the period in question.

The treatment of this provision was changed by Law 296 of December 27th, 2006 (the 2007 Finance Act) and by subsequent decrees and regulations issued during the course of 2007. As a result, companies with 50 or more employees must now treat TFR as a defined benefit plan only for amounts accrued before January 1st, 2007 that have not yet been settled as of the date the financial statements are prepared. Amounts accrued later qualify as a defined contribution plan.

The Company has reported the accounting effects at December 31st, 2007 of the changes made to the treatment of the employee severance provision. Specifically, it has remeasured the accrued provision and performed the resulting curtailment. The effects of the new accounting standard are described in Note 15.

Payables

Payables are recognized at face value. The interest included in long term debt is recorded separately using a suitable market rate.

Financial liabilities

These are entered for the first time at fair value, net of transaction costs, and subsequently at amortized cost.

Translation of foreign currency balances

Receivables and payables expressed originally in foreign currency are recognized at the exchange rates in effect when they arose. Exchange gains or losses realized during the period are included in the profit and loss account. Revenues, income, costs and expenses relating to foreign currency transactions are booked at the exchange rates in effect on the transaction date. At period end, foreign currency receivables and payables are recorded at the period-end spot exchange rate and the resulting gains or losses are recognized to profit or loss.

Bank overdrafts and loans

Loans are initially valued at cost, net of ancillary expenses. That amount is adjusted in Antichi Pellettieri 2007 Annual report - page 106 subsequent periods to reflect the difference between initial cost and the reimbursement value throughout the duration of the loan, using the actual interest rate method. Loans are classified as current liabilities, unless the company is unconditionally entitled to defer their full repayment by at least 12 months following the reporting date.

Derivatives and hedging transactions

The company's activities are exposed to financial risks from changes in interest rates and, to a minor degree, in exchange rates. Interest rate risks stem from bank loans; to hedge them, it is the company's policy to convert part of its long term payables from floating to fixed interest rates. The short term portion of debt is associated with working capital and thus does not represent interest rate risk. The company does not use derivatives for trading purposes. Derivatives are initially recognized at cost, and adjusted to fair value in subsequent periods.

Fair value hedges of specific assets and liabilities are recorded among assets or liabilities, as appropriate; the derivative and its underlying security are recognized at fair value, and their changes in value (which tend to offset one another) are charged to the profit and loss account.

Cash flow hedges are recognized as assets (liabilities); the derivative is recorded at fair value, and changes in value pertaining to the effective hedging component are booked directly to an equity reserve, which is released to profit and loss when the cash flows of the underlying security materialize.

Derivatives for the management of interest rate and exchange rate risk that cannot be formally classified as hedging tools for IFRS purposes are recognized as financial assets/liabilities, with changes in value charged to the profit and loss account.

Income recognition

Income is recognized net of returns, discounts, rebates and premiums, and net of taxes directly related to the sale of goods and the rendering of services.

Sales revenues are recognized when the company has transferred the significant risks and advantages of owning the product, and is reasonably assured of being paid in full. Sales by directly operated stores are recognized when the customer pays for the merchandise.

Service revenues are recorded with reference to the rate of completion of the job as of the reporting date. Revenues are recognized in the period when the service is rendered, on the basis of the percentage of completion method. If the results of the service cannot be reliably estimated, the income is recognized only in proportion to the costs that can be recovered. This method appropriately discloses the activities performed and the economic results achieved during the period.

Interest income is recognized on an accruals basis, taking account of the effective yield of the asset to which it refers.

Antichi Pellettieri 2007 Annual report - page 107

Dividends are recognized when the right to their receipt arises, which corresponds with the date their distribution is approved.

Costs

Costs and expenses are recognized on an accruals basis. Specifically, expenses for the production of advertising campaigns are charged to the profit and loss account the year the campaigns are presented, while other advertising and promotional costs are recognized the year they are incurred. The cost of planning and producing sample merchandise is linked to revenues from the sale of the corresponding collection, and thus recognized in the profit and loss account in proportion to the revenues earned.

Tax

The income tax charge for the year is calculated on the basis of current laws. Income taxes are generally recorded in the profit and loss account, except when they pertain to items directly charged from or credited to shareholders' equity, in which case the tax effect is reflected in the net equity balance. Income taxes shown in the profit and loss account include current and deferred taxes.

Other taxes not related to income, such as those on property and capital, are booked to operating expenses.

Deferred taxes are provided for according to the balance sheet liability method. They are calculated on all timing differences between the accounting and tax value of an asset or liability, with the exception of non-deductible goodwill.

Deferred tax assets on business losses and unused tax credits eligible to be carried forward are recognized in proportion to the likelihood of earning enough future taxable income for these to be recovered.

Current and deferred tax assets and liabilities are offset against one another when income taxes are charged by the same authority and when offsetting is allowed by law.

On June 28th, 2007, Antichi Pellettieri SpA and its subsidiaries opted for the group tax election for a further three-year period, pursuant to Arts. 116 et seq. of the Italian Tax Code.

The companies participating in the group tax election at the close of 2007 are Braccialini Srl, Baldinini Srl, Biasia Francesco SpA, and Leather Apparel Srl. As the consolidating company, Antichi Pellettieri SpA determines a single taxable base for the participating Group companies and either pays the amount due or retains the tax credit, as applicable, so it can offset taxable income against losses within a single tax return.

Each company that has opted for the group tax election transfers its taxable income to the consolidating company. Antichi Pellettieri SpA then books a receivable due from the company for the amount of corporate income tax (IRES) paid, or a payable due to the company if it has reported a fiscal loss, in the amount of the IRES paid on the portion of loss offset at the Group level, according to the rules in place for the companies participating in the system. Antichi Pellettieri 2007 Annual report - page 108

Treasury shares Treasury shares are posted to a separate net equity reserve. Their carrying value and the proceeds from their subsequent sale are recorded as movements in shareholders' equity.

Earnings per share

Basic earnings per share is calculated by dividing the profit or loss attributable to the shareholders by the weighted average number of ordinary shares outstanding during the period. Diluted earnings per share is calculated by dividing the profit or loss attributable to the parent company's shareholders by the weighted average shares outstanding, factoring in possible share dilution, for example from stock option plans.

Management of financial risks

The company is especially attentive to financial risks; it monitors these continuously and manages them by avoiding exposure to currencies other than the euro.

During the year, the Company did not use derivatives generating either premium income or expense.

OTHER INFORMATION

Statement of cash flows

The statement of cash flows prepared by Antichi Pellettieri SpA as required by IAS 7 illustrates the Company's ability to generate cash and cash equivalents. Cash equivalents are defined as short-term, highly liquid investments that are readily convertible to known amounts of cash and subject to an insignificant risk of changes in value. Therefore, an investment normally qualifies as a cash equivalent when it has a short maturity, of three months or less from the purchase date.

Bank overdrafts are generally considered to be financing activities, except when they are repayable on demand and form an integral part of cash management, in which case they are included as a component of cash and cash equivalents.

According to IAS 7, the statement of cash flows must show separately the flows generated by operating activities, investing activities and financing activities:

 cash flow from operating activities: these are primarily derived from the principal revenue- producing activities and are reported using the indirect method, whereby profit is adjusted for the effects of transactions of a non-cash nature (not involving inflows or outflows of cash);  cash flow from investing activities: investing activities are shown separately because, among other reasons, the resulting cash flows represent investments/disposals carried out with the aim of generating future income and cash flows;  cash flow from financing activities: these are activities that result in changes in the size and composition of net equity and borrowings. Antichi Pellettieri 2007 Annual report - page 109

Use of estimates The preparation of the year-end financial statements and notes in accordance with IFRS requires management to make estimates and assumptions that affect the carrying values of assets and liabilities and the information on contingent assets and liabilities as of the reporting date. Actual results may differ. Estimates are used to value assets subject to impairment testing, as described earlier, and to provide for losses on receivables, obsolescence, amortization and depreciation, employee benefits, taxes, and other provisions and reserves. Estimates and assumptions are reviewed on a regular basis and any changes are reflected immediately in profit or loss.

Antichi Pellettieri 2007 Annual report - page 110

INFORMATION ON THE BALANCE SHEET

ASSETS

1. Property, plant and equipment

Property, plant and equipment decreased from €1,396K at December 31st, 2006 to €1,353K (-€43K) and are shown net of accumulated depreciation.

They are made up as follows:

In €/000

dep. Disposals 12/31/06 12/31/07 Net Net value at Net value at Investments Depreciation Other changes

Decrease in accum. Land and buildings 1,070 (35) 1,035 Plant and machinery 110 68 (30) (35) 24 137 Industrial and commercial equipment 9 7 (4) 12 Other assets 207 17 (13) (55) 13 169 Assets under construction and advances 0 0 TOTAL 1,396 92 (43) (129) 37 0 1,353

The main investments during the year were as follows: the purchase of machinery for the automation of footwear production (under “plant and machinery”); and under "other assets," the purchase of furniture and EDP machines, and the replacement of owned and leased company cars which are classified as assets under IAS because all of the risks and benefits of ownership are borne by the company that uses the vehicles).

The heading "land and buildings" refers to the plant at Via Gambolina 10 in Vigevano, with an estimated useful life of 33 years.

2. Intangible assets

Intangible assets rose by €961K with respect to December 31st, 2006 (from €35,435K to €36,396K) and showed the following movements:

Antichi Pellettieri 2007 Annual report - page 111

In €/000

irment Additions 12/31/06 12/31/07 Net Net value at Net value at Other changes

Amortization/Impa Goodwill 34,614 34,614 Patents 0 0 Concessions, licenses and brands 821 1,021 (60) 1,782 Other intangible assets 0 0 TOTAL 35,435 1,021 (60) 0 36,396

Assets with indefinite useful lives

Goodwill

This item covers the residual deficits, not otherwise allocated, from the various mergers and absorptions carried out in 2004 and 2005 between Pellettieri Holding SpA (now Antichi Pellettieri SpA) and the companies Sacap SpA, Calzaturificio Mario Cerutti Srl and Ma.fra Srl.

Assets with finite useful lives

Concessions, licenses, brands and similar rights

This item refers to the proprietary brands Andrea Pfister and The Saddler, which are recognized at cost (representative of their fair value), and to a small extent to software.

The increase for the year pertains to the acquisition of the brand The Saddler and of software programs.

3. Investments

Investments rose from €87,162K to €84,742K (+€2,420K for the year).

They refer to the value of equity investments held by the Company at December 31st, 2007. Details of those investments and changes during the year are summarized below.

Antichi Pellettieri 2007 Annual report - page 112

In €/000

Value at Direct subsidiaries Registered office % held Balance at Increases Decreases 12/31/07 (A) Difference 31.12.2006 Baldinini Srl San Mauro Pascoli (RN) 60% 8,191 0 0 8,191 0 Biasia Francesco SpA Dueville (VI) 86% 19,992 0 0 19,992 0 Braccialini Srl Pontassieve (FI) 80% 13,941 0 0 13,941 0 Coccinelle SpA Sala Baganza (PR) 51% 38,349 0 0 38,349 0 Enrico Mandelli SpA Merate (LC) 4% 2,675 0 (2,330) 345 (2,330) Leather Designer Srl Cavriago (RE) 100% 10 0 (10) 0 (10) Leather Apparel Srl Cavriago (RE) 88% 1,109 0 0 1,109 0 Sebastian Srl Parma 50% 2,895 0 (2,895) 0 (2,985) SLG Srl Parma 50% 2,815 0 2,815 2,815 Total 87,162 2,815 (5,235) 84,742 (2,510)

In €/000

Group's Share Shareholders’ Profit/loss share of Difference Note Direct subsidiaries Registered office % held capital equity at for the net equity (A-B) 12.31.07 year (B) gross of profit/loss San Mauro Pascoli Baldinini Srl (RN) 60% 93 3,006 5,113 4,871 3,320 (*)

Biasia Francesco SpA Dueville (VI) 86% 600 6,440 3,231 8,317 11,675 (*)

Braccialini Srl Pontassieve (FI) 80% 40 4,086 3,703 6,231 7,710 (*)

Coccinelle SpA Sala Baganza (PR) 51% 4,000 19,417 1,451 10,643 27,706 (*)

Enrico Mandelli SpA Merate (LC) 4% 945 3,997 476 179 166 (*)

Leather Apparel Srl Cavriago (RE) 88% 10 1,108 48 1,017 92 (*)

SLG Srl Parma 50% 10 5,630 0 2,815 0

(*) the difference is explained by the higher intrinsic value of the company's net equity with respect to its book value.

The following notes concern the changes taking place in 2007:

- On October 24th, 2007, the company SLG Srl was formed with share capital of €10,000; on November 27th it received €2,810K from Antichi Pellettieri SpA as a contribution for a future capital increase.

- On November 30th, 2007, Sebastian Srl closed its statement of realization and liquidation and ceased to operate.

- On December 28th, 2007, 27% of Enrico Mandelli SpA was sold to Mario Cerutti Srl for €9,700K. The price will be paid by the close of 2008.

Antichi Pellettieri 2007 Annual report - page 113

Other companies

Equity investments also include Antichi Pellettieri's interests in Cercal Scrl and Conai Srl, both valued at cost for €0.268K.

4. Deferred tax assets

Deferred tax assets dropped from €1,510K to €840K at December 31st, 2007, decreasing by €670K, of which €363K was charged to profit and loss.

Below are the calculation details at the close of 2007 and 2006.

In €/000

Temporary Rate Tax charged Temporary Rate Tax charged Diff. diff. at effect to diff. at effect to 12/31/07 12/31/06

IAS 38 - Intangible assets 264 31.40 83 P&L 452 37.25 168 P&L -85 % %

IAS 19 - Provision for employee -64 27.50 -18 P&L 70 33.00 23 P&L -41 severance indemnities % %

Provision for agents' indemnities 62 31.40 20 P&L 53 37.25 20 P&L 0 % %

Taxed provision for doubtful accounts 182 27.50 50 P&L 803 33.00 265 P&L -215 % %

Employee bonus provision 0 27.50 0 P&L 300 33.00 99 P&L -99 % %

Tax provision for inventory impairment 136 31.40 43 P&L 0 31.40 0 P&L 43 % %

Expenses deductible in future years 17 31.40 5 P&L 26 37.25 10 P&L -5 (entertainment, maintenance, appraisals) % %

Tax losses carried forward 270 27.50 74 P&L 270 33.00 89 P&L -15 % %

Provision for IAS non current financial 196 27.50 54 P&L 0 0 P&L 54 asset impairment %

Membership fees deductible on a cash 1 31.40 0.3 0 0 P&L 0.3 basis %

Subtotal 1,064 311 P&L 1,974 674 P&L -363

Listing expenses charged to 1,683 31.40 529 Equity 2,244 37.25 836 Equity -307 shareholders' equity % %

Total 2,747 840 4,218 1,510 -670

Antichi Pellettieri 2007 Annual report - page 114

5. Other long term financial receivables

These fell from €14,235K to €11,141K at December 31st, 2007, a decrease of €3,094K. They consist of receivables from related parties (see Note 25 for details).

6. Long term trade and other receivables

These increased from €9,858K to €334K at December 31st, 2007 (+€9,524K).

Of the total,, €331K refers to the partial purchase of a credit from the controlling company Mariella Burani Fashion Group SpA, due from Argent Trading International. In this arrangement, known technically as an "asset purchase credit" (APC), the amount will be offset against invoices issued by third parties as partial payment for services or goods received. The credit is shown net of discounting to present value, calculated at market rates.

The remaining balance of €3K refers to security deposits paid to utilities.

CURRENT ASSETS

7. Inventories

These rose from €3,005K to €3,989K (+€984K for the year). The increase refers primarily to finished and semifinished products, in connection with the rise in orders received. Inventories can be broken down as follows:

In €/000

Inventories 12/31/07 12/31/06 Change Raw and ancillary materials and consumables 939 697 242 Works in progress and semi-finished products 344 257 87 Special order works in progress 0 0 0 Finished goods and goods for sale 2,706 2,051 655 Advances 0 0 0 TOTAL 3,989 3,005 984

8. Short term trade and other receivables

These decreased from €11,601K to €11,182K at December 31st, 2007 (-€419K), in connection with related party transactions, as discussed in Note 25. In detail:

Antichi Pellettieri 2007 Annual report - page 115

In €/000

Current receivables 12/31/07 12/31/06 Change Gross trade receivables 2,310 823 1,487 Trade receivables with related parties 2,650 4,900 (2,250) Total gross trade receivables 4,960 5,723 (763) Reserve for doubtful accounts (197) (99) (98) Total net trade receivables 4,763 5,624 (861) Tax credits from group tax election - related parties 2,832 2,368 464 Other receivables 913 907 6 Accrued income and prepayments 2,674 2,702 (28) Total other receivables 6,419 5,977 442 Total 11,182 11,601 (419)

Trade receivables

These increased by €1,487K with respect to December 31st, 2006, as a result of the rise in sales.

Changes in the provision for doubtful accounts are shown below:

In €/000

Balance at 12/31/06 (99) Additions (197) Utilizations 99 Balance at 12/31/07 (197)

The provision for doubtful accounts is calculated on the basis of specific case-by-case assessments, supplemented by historical analyses of losses, in relation to how long the receivable has been outstanding, the type of action taken for its recovery, and the status of the account (ordinary, contested, etc.). Trade receivables are broken down by region in the following table:

In €/000

Balance at Balance at Region 12/31/07 12/31/06 Italy 3,690 5,384 rest of Europe 744 105 Japan 21 41 rest of Far East 20 7 USA 110 72 rest of the world 375 114 Total 4,960 5,723 Antichi Pellettieri 2007 Annual report - page 116

Other receivables

This item rose by €6K with respect to December 31st, 2006 and consists chiefly of advances paid to suppliers and to a small degree of sundry receivables.

Accrued income and prepayments

These decreased by €28K with respect to the previous year and are made up as follows:

In €/000

12/31/07 12/31/06 Change

Accrued income 0 0 0

Prepayments 2,674 2,702 (28) Total 2,674 2,702 (28)

Prepayments are amounts paid by the Company during the year that pertain to subsequent years, such as design and styling costs incurred for future collections.

9. Current tax assets

Tax credits rose from €261K to €1,146K at December 31st, 2007 (+€885K).

In €/000

Current tax assets 12/31/07 12/31/06 Change VAT credits 1,146 225 921 Overpayments of IRAP advances 0 36 (36) Total 1,146 261 885

10. Other short term financial receivables

These increased from €1,561K to €22,185K at December 31st, 2007 (+€20,624K).

Of the total increase:

- €4,076K refers to the transfer to Mariella Burani Fashion Group SpA of the receivable due from the affiliate Revedi SpA, originally amounting to €7,190K. The transfer agreement calls for the receivable to be settled within 12 months. See Note 25 for details of receivables with related parties;

Antichi Pellettieri 2007 Annual report - page 117

- €9,700K consists of contractual receivables due by third parties to Antichi Pellettieri SpA for the purchase of interests in subsidiaries; according to the terms of these contracts, payment is due by the end of 2008;

- €4,905K is due from Braccialini Srl for a short term loan granted at market interest rates for the acquisition of Dadorosa Srl. See Note 25 for details of receivables with related parties.

- the remainder is due to Antichi Pellettieri SpA from related parties, mostly for the sale of interests in subsidiaries during the course of 2006; these were originally classified as long term trade receivables but are now due within 12 months (by the end of 2008). See Note 25 for details of receivables with related parties.

11. Cash and cash equivalents

At €1,430K, these decreased by €1,416K with respect to December 31st, 2006 (€2,846K) and refer chiefly to bank account balances.

In €/000

12/31/06 12/31/06 Change Bank and post office deposits 1,415 2,836 (1,421) Cash and valuables on hand 15 10 5 TOTAL 1,430 2,846 (1,416)

LIABILITIES

12. SHAREHOLDERS' EQUITY

Share capital

At December 31st, 2007 the share capital, fully subscribed and paid in, amounted to €11,374,831 and was made up of 45,499,324 shares of par value €0.25 each. Net of the par value of treasury shares held at the close of the year, the share capital amounts to €11,352K.

Movements in shareholders' equity; availability of reserves and eligibility for distribution

The following table shows shareholders' equity components by origin and by possibility for use and distribution:

Antichi Pellettieri 2007 Annual report - page 118

In €/000

Type Amount at Amount at Eligible for Amount 12.31.06 additions transfers 12.31.07 use (*) available and reductions

Share capital 11,226 126 11,352

Capital reserves:

Share premium reserve 37,046 2,871 39,918 A,B,C 39,918 (**)

Reserve for future capital increases 15 15 A

Merger surplus 18,548 18,548 A,B,C 18,548 (***)

Reserve for shareholder contributions 5,036 5,036 A,B,C 5,036

Listing expenses charged to shareholders' equity (1,760) (181) (1,941) (1,941)

Restricted reserve from fair value accounting 10,252 (2,998) 7,253

Subtotal: 69,137 2,871 (3,179) 68,829 61,561

Retained earnings

Legal reserve 281 196 477 B

Extraordinary reserve 5,343 (832) 4,511 A,B,C 4,511

Retained earnings unavailable 836 (380) 456 B for distribution

Subtotal before treasury 6,460 196 (1,212) 5,444 4,511 shares and profit/loss

Treasury shares (827) 8 (819) (819)

Net profit (loss) for the period 3,913 5,104 (3,913) 5,104

Subtotal including treasury shares and profit/loss 9,546 5,300 (5,117) 9,729

Total 89,909 8,297 (8,296) 89,910 65,253

(*) key: A: for capital increases; B: for loss coverage; C: for dividend payments

Antichi Pellettieri 2007 Annual report - page 119

(**) The share premium reserve will be available for distribution when the legal reserve amounts to 20% of the share capital. It may be used freely for all other purposes.

(***) Directly distributable on a tax-free basis.

Summary of utilizations in the past three years:

The extraordinary reserve has been used in the amount of €832K, for dividend payments during the course of 2007.

The financial statements at December 31st, 2006 were approved by the annual general meeting of April 20th, 2007, which voted to allocate the 2006 net profit of €3,913K as follows: €196K to the legal reserve and the remaining €3,717K to ordinary dividends. The AGM also approved an additional dividend of €0.02 per share, for a further €832K, using the extraordinary reserve for this purpose.

Treasury shares

In accordance with IAS 39, the value of treasury shares has been deducted from net equity. This item refers to shares of Antichi Pellettieri SpA acquired in accordance with the shareholders' resolution of April 20th, 2007, which authorized the purchase of shares amounting to a maximum of 10% of the share capital in accordance with Civil Code Art. 2357. At December 31st, 2007 the company held 91,190 such shares (0.2% of the share capital), worth a total of €842K.

In order to stabilize performance of the stock, 1,864,522 shares were purchased during the year for €18,316K and 1,864,949 shares were sold for €18,324K.

The trading of treasury shares during the year produced financial income of €30K and financial charges of €413K.

Earnings per share

Basic earnings per share in 2007 came to €0.11, calculated by dividing the profit attributable to the Company's shareholders by the number of ordinary shares outstanding, thus excluding treasury shares.

NON CURRENT LIABILITIES

13. Long term loans and borrowing

This item fell from €56,464K to €28,370K, a decrease of €28,094K for the year. The item can be broken down as follows:

Antichi Pellettieri 2007 Annual report - page 120

In €/000

12/31/07 12/31/06 Change

Beyond 12 months Due to banks 25,030 42,425 (17,395) Convertible bond loan 0 10,994 (10,994) Leasing installments due 65 65 Related party payables 3,275 3,045 230 Total 28,370 56,464 (28,094)

The principal reasons for the change are as follows :

- A new long term loan, due to termination of the convertible bond loan outstanding at December 31st, 2006, for €11,000K.

- Reclassification to short term financial payables of the two bullet loans from MCC and Bipop Carire, which mature in October 2008, for €28,000K.

Due to banks

The following tables show bank loans outstanding at December 31st, 2007 and December 31st, 2006 by lender, borrower, and current and long term portion:

In €/000 Remaining Long term Lender Borrower balance Current Portion portion

MCC Antichi Pellettieri 14,000 14,000 - Bipop Carire Antichi Pellettieri 14,000 14,000 - Bipop Carire Antichi Pellettieri 8,750 2,500 6,250 Unicredit Antichi Pellettieri 15,416 3,596 11,820 Banca Intesa San Paolo Antichi Pellettieri 910 - 910 Banca Intesa Mediocredito Antichi Pellettieri 375 250 125 Banca Agricola Mantovana Antichi Pellettieri 2,732 557 2,175 Banca Fortis Antichi Pellettieri 4,750 1,000 3,750

Total 60,933 35,903 25,030

Antichi Pellettieri 2007 Annual report - page 121

In €/000

At December 31st, 2006

Borrower Remaining balance Current Portion Long term portion MCC Antichi Pellettieri 14,000 0 14,000 Bipop Carire Antichi Pellettieri 14,000 0 14,000 Bipop Carire Antichi Pellettieri 10,000 1,250 8,750 Unicredit Antichi Pellettieri 5,000 600 4,400 Banca Intesa Antichi Pellettieri 900 0 900 Banca Intesa Mediocredito Antichi Pellettieri 625 250 375

Total 44,525 2,100 42,425

Convertible bond loan

On April 12th, 2006, Antichi Pellettieri SpA issued the convertible bond loan “Antichi Pellettieri 2006-2009 convertibile" for €13,992,853, paying 2.25% annual interest, by resolution of the extraordinary shareholders' meeting of April 3rd, 2006 which had authorized the bond loan and an increase in capital for the generation of shares to service the conversion. Reserved to the company Development Capital, the loan involved a maximum of 13,992,853 bonds, nominal value €1 each, convertible into ordinary Antichi Pellettieri shares with no right of pre- emption pursuant to Article 2441, paragraph 5 of the Italian Civil Code.

On December 19th, 2006 the company exercised its right to redeem €10,994,386 in advance (the maximum allowed by the bond regulations).

Again in accordance with the regulations, redemption took place on January 15th, 2007 with the payment of principal, interest accrued at the annual rate of 2.25%, and the redemption premium of €790,000.

On January 2nd, 2007, Development Capital exercised its right to convert the remaining 2,998,467 bonds into ordinary shares of par value €1 each. The conversion, in accordance with regulations, took place on January 31st.

Related party payables

The year end balance of €3,275K refers primarily to amounts due by the parent company for the purchase of interests in subsidiaries during the course of the previous year. The amount is shown net of discounting to present value, calculated at market rates. Names and other details are provided in Note 25.

The balance at December 31st, 2006 (€3,045K), representing the amount owed by the parent company to Design & Licenses for the acquisition from D&L of the investment in Ex-Antichi Pellettieri by Sacap SpA (merged into Pellettieri Holding SpA, now the parent company), was settled in full during the year.

Antichi Pellettieri 2007 Annual report - page 122

Covenants on debt outstanding at December 31st, 2007 (per CONSOB announcement DEM/6064293 of July 28th, 2006)

Bank loans

The covenants that must be respected on loans outstanding at December 31st, 2007 are as follows:

In €/000

Remaining balance Borrower Lender at 12.31.07 Covenant (i) Debt/EBITDA<4.4x - Debt/equity <2.1x (ii) Debt/EBITDA<3x - Antichi Pellettieri SpA Bipop Carire 8,750 Debt/equity <1X (iii) Debt/EBITDA<4.4x - Antichi Pellettieri SpA Unicredit 15,416 Debt/equity <2.1x (iii) Debt/EBITDA<4.4x - Antichi Pellettieri SpA Banca Fortis 4,750 Debt/equity <2.1x

key:

(i) Failure to respect this covenant will entitle Bipop Carire to demand early reimbursement of the loan;

(ii) If this covenant is not respected, 30% of ordinary Coccinelle SpA shares must be pledged to Bipop Carire;

(iii) Failure to respect these covenants will result in termination of the contract.

For a better understanding of the Antichi Pellettieri Group's position with respect to the principal covenants in question, note that the debt/EBITDA ratio for the year is 1.33x (the covenants refer to EBITDA for a full 12 months) and the debt/equity ratio is 0.36x, calculated on the basis of financial statement figures at December 31st, 2007.

14. Deferred tax liabilities

These went from €4,151K to €2,967K at December 31st, 2007, a decrease of €1,184K.

Below are the calculation details at the close of 2007 and 2006.

Antichi Pellettieri 2007 Annual report - page 123

In €/000

Amount Tax rate Tax Amount Tax Tax temp. diff. effect temp. rate effect 12/31/07 (%) charged diff. (%) charged Diff. to 12/31/06 to

IAS 17 – Leasing 3 31.40% 1 P&L 4 37.25% 1 P&L 0

Goodwill - Schedule EC 5,423 31.40% 1,703 P&L 4,284 37.25% 1,596 P&L 107

Installment revenues - remaining 4,023 31.40% 1,263 P&L 37.25% 2,554 P&L -1,291 balance 6,855

Other - -

Total 9,449 2,967 11.143 4,151 -1,184

15. Post employment benefits and other provisions

This item is made up as follows:

In €/000

Total at Total at 12/31/07 12/31/06 Change Employee severance indemnities 463 738 (275) Retirement benefits 81 73 8 Total 544 811 (267)

The provision for employee severance indemnities (TFR) was the subject of important legislative changes in 2007, as discussed in the Accounting Policies section of the notes. As a result of these changes, the present value of the existing liability has gone down, to the benefit of the profit and loss account.

Movements during the period are shown below:

In €/000

Openingbalance Provisions Utilizations Other movements Closingbalance

Employee severance 738 22 (163) (134) 463

Retirement benefits 73 8 81

Total 811 30 (163) (134) 544 Antichi Pellettieri 2007 Annual report - page 124

16. Other long term liabilities

This item fell from €4,583K to €331K, a decrease of €4,252K for the year.

The balance shown at December 31st, 2007 refers entirely to the amount due to Mariella Burani Fashion Group SpA for the transaction described in Note 6. For details see Note 25.

CURRENT LIABILITIES

17. Trade and other payables

These rose from €8,177K to €8,927K at December 31st, 2007 (+€750K). For further information on related party transactions, see Note 25.

The item can be broken down as follows:

In €/000

Within 12 Beyond 12 Total at Total at months months 12/31/07 12/31/06 Change Trade payables 6,500 6,500 4,091 2,409 Related party payables 969 969 1,584 (615) Total trade payables 7,469 7,469 5,675 1,794 Accrued liabilities and deferred income 652 652 1,378 (726) Due to social security institutions 179 179 145 34 Other 627 627 979 (352) Total other payables 1,458 0 1,458 2,502 (1,044) Total 8,927 0 8,927 8,177 750

Trade payables cover the amounts due for the supply of raw materials and services and are due within one year.

They are broken down by region in the following table:

In €/000

Balance at Balance at Region 12/31/07 12/31/06 Italy 6,473 5,600 rest of Europe 760 75 Japan 5 0 rest of Far East 22 0 USA 1 0 rest of the world 208 0 Total 7,469 5,675 Antichi Pellettieri 2007 Annual report - page 125

Accrued liabilities and deferred income

This item refers to costs pertaining to the year that will be incurred in 2008.

Due to social security institutions

These are stated at face value and consist of the social security taxes due on employee wages and salaries.

Other payables

In detail:

In €/000

12/31/07 12/31/06 Change Directors' fees due 221 194 27 Due to statutory auditors 54 57 (3) Due to employees 245 602 (357) Due to others 107 126 (19) Total 627 979 (352)

Payables to employees include December paychecks and deferred compensation.

18. Current tax liabilities

These increased from €2,089K at December 31st, 2006 to €2,552K (+€463K for the year).

The balance includes income tax, indirect taxes, and taxes withheld by Group companies in their capacity as withholding agents.

As mentioned under “taxes” in the accounting policies section, on June 18th, 2007 the Company and its subsidiaries, in accordance with Arts. 116 et seq. of the Italian Tax Code, opted for the group tax election for the period 2007-2009 (subject to renewal).

The taxes due under the group tax election amount to €2,184K, while the remaining current tax payables of €368K consist mainly of personal income tax (IRPEF) due.

19. Short term loans and borrowings

These rose from €2,686K to €41,137K at December 31st, 2007 (+€38,451K).

The item can be broken down as follows: Antichi Pellettieri 2007 Annual report - page 126

In €/000

12/31/06 12/31/06 Change Within 12 months Due to banks: - account borrowings and short term credit 5,234 586 4,648 - loans (portion due within 12 months) 35,903 2,100 33,803 Related party payables 0 0 Total 41,137 2,686 38,451

Due to banks

These are account borrowings, short term loans, and the portion of mortgage and other long term loans that is due within 12 months. Details are provided in the section on long term loans and borrowing.

Antichi Pellettieri 2007 Annual report - page 127

INFORMATION ON THE PROFIT AND LOSS ACCOUNT

20. Revenues

Revenues by segment

Revenues from sales and services increased by €2,859K with respect to the previous year (+11.0%). Revenues are broken down below by business segment and geographical segment:

Net revenues by category

In €/000

2007 % of 2006 % of % BRAND total total growth Revenues from own brands 25,412 87.8% 22,646 86.8% 21.3% Sales of licensed brands 3,544 12.2% 3,452 13.2% 32.1% TOTAL NET REVENUES 28,956 100.0% 26,098 100% 11.0%

Net revenues by geographical segment

In €/000

REGION 2007 % of 2006 % of total total Italy 13,403 46.3% 15,273 58.5% Europe 11,529 39.8% 7,352 28.2% Japan 263 0.9% 292 1.1% North America 1,544 5.3% 1,243 4.8% Rest of Asia 491 1.7% 634 2.4% Rest of the world 1,726 6.0% 1,304 5.0% TOTAL 28,956 100.0% 26,098 100.0%

Antichi Pellettieri 2007 Annual report - page 128

21. Production costs

These are broken down in the table below:

In €/000

Change 2007 % 2006 % Change %

Raw materials and consumables 10,012 34.6% 7,844 30.1% 2,168 27.6% Costs relating to employee benefits 3,999 13.8% 4,281 16.4% (282) -6.6% Cost of services 6,800 23.5% 6,647 25.5% 153 2.3% Rentals, leasing and royalties 1,986 6.9% 1,827 7.0% 159 8.7% Other operating expenses 37 0.1% 69 0.3% (32) -46.4% Other extraordinary costs 118 0.4% 263 1.0% (145) -55.1% Total 22,952 79.3% 20,931 80.2% 2,021 9.7%

These increased by 9.7% with respect to the previous year. The increase is closely correlated with the higher turnover achieved during the period.

Raw and ancillary materials and consumables

These consist mainly of leathers, linings, fabrics, yarns, soles and inner soles, heels, and accessories, plus the purchase of goods for resale (marketed products) and packaging. They rose by 27.6%, net of the change in inventories. As mentioned earlier, the increase is strictly correlated with the higher turnover achieved during the period.

Cost of labor

Costs relating to employee benefits include wages and salaries, social security charges, the provision for severance indemnities and other payroll expenses. The cost of labor decreased by €282K due to a series of factors. In 2006 it included extraordinary expenses for the IPO process and for leaving incentives.

Cost of services

The cost of services consists primarily of utilities, consulting, commissions, advertising, travel, insurance, outsourcing, directors' and statutory auditors' fees, maintenance, and transport costs. They increased by 2.3%, due mainly to the higher turnover, associated with the greater outsourcing of the production process.

Rentals, leasing and royalties

These are comprised mainly of royalties paid, building rent and sundry rental costs. They rose by 8.7%, due in equal part to the higher turnover and the acquisition of new license agreements. Antichi Pellettieri 2007 Annual report - page 129

Other operating expenses

These are of negligible amount.

22. Depreciation, amortization and write-downs

In detail:

In €/000

12/31/07 12/31/06 Change

Depreciation 129 125 4 Amortization 60 57 3 Provisions and write-downs 736 868 (132) Total 925 1,050 (125)

The breakdown of amortization and depreciation by asset category is provided in the section on non current assets.

Provisions and write-downs, at €736K, mainly consist of: - the impairment of at-risk receivables (mostly trade receivables); - the impairment of obsolete raw materials and slow-moving finished products, whose value has been adjusted according to their potential for use and estimated realizable value; - provisions for potential contractual liabilities, mostly with respect to sales representatives.

23. Financial income and charges

Net financial charges of €2,333K (an increase of €578K) are detailed below:

In €/000

2007 2006 Change

Dividends from subsidiaries 2,321 2,674 (353) Other financial income 256 95 161 Financial charges (4,897) (3,724) (1,173) Premium for early reimbursement of bond loan 0 (790) 790 Financial income (charges) (2,320) (1,745) (575)

Exchange gains/losses (13) (10) (3) Total (2,333) (1,755) (578)

Antichi Pellettieri 2007 Annual report - page 130

"Other financial income" increased by €161K as a result of interest received from the subsidiary Braccialini Srl, for a loan granted at market interest rates to finance the acquisition of Dadorosa Srl. See Note 10 for details.

Financial charges rose by €1,173K, due primarily to the increase in market rates over the past 12 months, and to the carry over of loans taken out for the acquisition of Coccinelle SpA.

Net foreign exchange losses were generated mainly by commercial transactions and also include the differences arising from the translation of foreign currency receivables and payables at the exchange rates in effect at year end.

24. Income tax

Income tax produced a net gain of €1,511K (increasing by €625K with respect to the previous year) and consists of regional business tax (IRAP) due of €192K, gains from the use of deferred tax liabilities of €1,184K (see Note 14 for details), costs from the use of deferred tax assets of €363K (Note 4), and other net gains (including from the group tax election) of €882K.

Deferred tax assets have been recognized as they are reasonably certain to be enjoyed as a result of future taxable income.

Below is a reconciliation between the ordinary IRES and IRAP rates and the actual rates applied:

In €/000

RECONCILIATION BETWEEN THE EFFECTIVE AND THEORETICAL TAX RATE

12/31/07 12/31/06 Theoretical income taxes 1,186 999 Changes (+ or -) Tax-deferred components 935 935 Tax-exempt or excluded income -2,770 -2,160 Other (taxed provisions and non-deductible costs net of utilizations and other untaxable provisions) 366 517 Deductible components charged to equity -185 -295 Off-balance sheet deductible components -376 -376 Adjustments for group tax election -37 -7 Effect of deferred tax assets 363 -254 Effect of deferred tax liabilities -1,183 -420 Current and deferred income tax shown in the financial statements (excluding IRAP) -1,702 -1,061 IRAP 192 176 Current and deferred income tax shown in the financial statements -1,510 -885 Antichi Pellettieri 2007 Annual report - page 131

25. Related party transactions

For Antichi Pellettieri SpA, the vast majority of related party transactions are with its own direct and indirect subsidiaries and with the direct and indirect subsidiaries of Mariella Burani Fashion Group SpA. They are settled to under arm's length conditions in consideration of the nature of the goods and services involved.

The effects of these transactions on individual financial statement items at December 31st, 2007, as shown in the supplementary profit and loss account and balance sheet and in the notes to the individual items, are summarized in the following tables:

In €/000

Dep., Non M/L amort. Short term M/L term current Current Current term Other & Financial financial loans trade trade trade loans Raw operating write- charges Related party receivables receivable payables receivables payables payable Revenues materials costs downs (income) Baldinini Srl 1,420 6 2 (495) Braccialini Srl 4,905 526 15 48 (976) Coccinelle SpA 386 80 (51) Design & Licenses SpA 21 Enrico Mandelli SpA 3,479 (92) Francesco Biasia SpA 955 21 159 37 (643) Jeanine Sarl 7 27 Leather Apparel Srl 3,900 83 90 Long Wave SpA 1 6 Mariella Burani FG SpA 4,076 331 2,245 469 2,263 26 197 744 Mariella Burani Retail Srl 154 279 René Lezard GmbH 175 716 Sedoc Srl 9 32 Total MBFG SpA Group companies 8,981 7,379 331 5,482 969 - 3,459 117 428 - (1,513) Other related parties: Andrea Mandelli 962

BDH NV 159 Bettina Srl 70 David Agus 1,525 1,400 Francesco Biasia 3,116 Leather Designer Srl 153 Manuela Arcari 1,525 1,400

Sebastian Srl 231 286 SLG SRL 211 33 Total Group companies and other related parties 12,242 11,141 331 5,482 969 3,275 3,459 117 762 286 (1,360) Antichi Pellettieri 2007 Annual report - page 132

Total amount reported 22,185 11,141 331 11,182 8,927 28,370 28,956 10,012 8,941 925 2,320 % of total amount reported 55.2% 100.0% 100.0% 49.0% 10.9% 11.5% 11.9% 1.2% 8.5% 30.9% -58.6%

26. Net financial position

Pursuant to the CONSOB announcement of July 28th, 2006 and CESR's recommendations of February 10th, 2005 for the consistent implementation of the European Commission’s Regulation on Prospectuses, we report the net financial position of Antichi Pellettieri SpA at December 31st, 2007:

In €/000

of which of which related related 12/31/07 parties 12/31/06 parties (see note (see note 25) 25) A Cash on hand 15 10 B Other cash equivalents Bank account balances 1,415 2,836

D Cash and cash equivalents (A+B) 1,430 0 2,846 0

E Current financial receivables 22,185 12,242 1,561 1,000

F Current bank borrowings 5,235 586

G Current portion of medium/long term debt 35,902 2,100

H Other current financial payables 0 0

I Current debt (F+G+H) 41,137 0 2,686 0

J Net current debt (I-E-D) 17,522 (12,242) (1,720) (1,000)

K Medium/long term bank debt 25,030 42,425

L Bonds 0 10,994

M Other non current debt 3,340 3.275 3,045 3,045

N Medium/long term debt (K+L+M) 28,370 3,275 56,464 3,045

O IFRS net debt (N + J) 45,892 8,967 54,745 2,045

P Treasury shares (842) (850)

Q Operating net debt (O + P) 45,050 8,967 53,895 2,045

Antichi Pellettieri 2007 Annual report - page 133

27. Significant non-recurring events and operations

Pursuant to CONSOB's announcement of July 28th, 2006, note that no significant, non- recurring operations were carried out by Antichi Pellettieri SpA during the year.

28. Atypical or unusual transactions

Pursuant to CONSOB's announcement of July 28th, 2006, note that Antichi Pellettieri SpA undertook no atypical or unusual transactions in 2007, as defined in the announcement itself.

29. Significant subsequent events

No events worthy of note have taken place since the close of 2007.

OTHER INFORMATION

Average headcount by category

Antichi Pellettieri SpA had an average headcount of 108 employees in 2007, as shown below:

12/31/07 12/31/06 Blue collar 72 73 Middle management & white collar 33 33 Executives 3 3 Total 108 109

Antichi Pellettieri 2007 Annual report - page 134

Equity investments held by directors, statutory auditors and general managers

Pursuant to CONSOB Resolution no. 11971, the directors, the statutory auditors, the general manager, their spouses and their minor children are declared to hold the following shares:

Name Title Company Status No. shares/quotas held at 12/31/06 Director, Giovanni Valter Antichi Pellettieri Chairman of the Full ownership 12,500 Burani SpA Board Antichi Pellettieri Walter Burani Full ownership 289,777 Director SpA Antichi Pellettieri Andrea Burani Director Full ownership 20,000 SpA Antichi Pellettieri Giuseppe Gullo Director Full ownership 15,000 SpA Managing Antichi Pellettieri Giovanni Stella Full ownership 250,000 Director SpA Riccardo Antichi Pellettieri Director Full ownership 204,000 Braccialini SpA Riccardo Director Braccialini Srl Full ownership 200 Braccialini Tommaso General Antichi Pellettieri Full ownership 14,500 Cepelli Manager SpA

There are no such shareholdings by members of the Board of Statutory Auditors.

Antichi Pellettieri 2007 Annual report - page 135

Fees paid to directors, statutory auditors, general managers, and executives with strategic responsibilities (per Art. 78 of CONSOB Regulation 11971/99)

In €/000

Other Other Office held in End of incentives remuneration Name 2007 Term of office term (*) Emoluments (**) (***) Total Director, Chairman of 01/01 - Giovanni Burani the Board 12/31/07 2009 200 55.2 255.2

01/01 - Andrea Burani Director 12/31/07 2009 50 57.7 107.7

01/01 - Walter Burani Director 12/31/07 2009 50 0 50.0

Managing 01/01 - Giovanni Stella Director 12/31/07 2009 300 50 350.0

01/01 - Roberto Pilotto Director 12/31/07 2009 30 30.0

01/01 - Riccardo Braccialini Director 12/31/07 2009 60 298.7 358.7

01/01 - Giuseppe Gullo Director 12/31/07 2009 50 50.0

Auditor, Chairman of the Board of 01/01 - Giovanni Grazzini Stat. Aud. 12/31/07 2009 19.2 19.2

01/01 - Fabrizio Fontanesi Auditor 12/31/07 2009 12.8 12.8

01/01 - Pietro Lia Auditor 12/31/07 2009 12.8 12.8

Executives with strategic responsibilities 176.3 52.5 228.8

(*) when the annual general meeting approves the previous year's financial statements. (**) no other incentives applying in 2007. (***) including fees for positions held at subsidiaries and executives' salaries; not including employer's share of social security taxes.

Other comments

- There are no receivables or payables concerning transactions that involve a reconveyance obligation for the buyer;

- There are no receivables or payables due beyond five years; Antichi Pellettieri 2007 Annual report - page 136

- There is no capital earmarked for specific business transactions;

- There are no payables secured by collateral on company assets;

- As required by law, we report that the Company has met all obligations concerning the Security Policy Document.

- Stock options: At the annual general meeting of March 2nd, 2006, the shareholders voted to authorize the purchase and sale of treasury shares, including for the possible assignment of stock options to directors and employees of the Company, its subsidiaries and its parent. However, no stock option plans had been approved at the close of 2007 or as of this writing.

Disclosure per Art. 10 of Law 72/1983

Pursuant to Art. 10 of Law 72 of March 19th, 1983, we report below the cost value and amount of revaluations carried out on buildings and equity investments.

Buildings in euros

Economic revaluation pursuant to Arts. 2504 bis and 2426 of the Italian Civil Code due to merger effective 12.31.04 of ex-Calzaturificio Mario Cerutti Srl: 1,113,061

Total 1,113,061

Equity investments

Economic revaluation pursuant to Arts. 2504 bis and 2426 of the Italian Civil Code due to merger effective 07.01.04 of ex-Antichi Pellettieri SpA:

Braccialini Srl 7,032,919

Baldinini Srl 745,722

Biasia Francesco SpA 4,011,586

Enrico Mandelli SpA 266,928

Total 12,057,155

Regarding assets held at the close of the year, no other revaluations for monetary equalization or other valuations departing from the rules of Civil Code Art. 2426 have been carried out in addition to those stated above. Antichi Pellettieri 2007 Annual report - page 137

This report, made up of the financial statements, notes, and comments on performance and events during the period, provides a fair and truthful representation of the Company's equity, net financial position and results, and corresponds with its books of account.

Giovanni Burani Chairman of the Board of Directors

Cavriago, March 20th, 2008

Antichi Pellettieri 2007 Annual report - page 138

Certification of the separate financial statements pursuant to Art. 81-ter of CONSOB Regulation 11971 of May 14th, 1999, as amended

We, the undersigned, Giovanni Burani as chairman and CEO and Daniele Bardini as financial reporting officer of Antichi Pellettieri SpA, hereby certify, including in accordance with Art. 154-bis, paras. 3 and 4 of Legislative Decree 58 of February 24th, 1998:

• the adequacy of in relation to the characteristics of the business; and • the Company's due compliance with the administrative and accounting procedures for the preparation of the separate financial statements during the course of 2007.

We also certify that the separate financial statements at December 31st, 2007:

c) correspond to the ledgers and accounting entries; d) having been prepared in accordance with the International Accounting Standards and International Financial Reporting Standards (IAS/IFRS) adopted by the European Union and with the measures enacted in compliance with Art. 9 of Legislative Decree 38/2005, provide, to the best of our knowledge, a fair and truthful disclosure of the financial status and performance of Mariella Burani Fashion Group SpA and of the companies included in the consolidation.

Cavriago (Reggio Emilia), March 20th, 2008

Giovanni Burani Chairman and CEO

Daniele Bardini Financial Reporting Officer

Antichi Pellettieri 2007 Annual report - page 139

Appendix - Transition to international accounting standards (IFRS) by the company Antichi Pellettieri SpA

Pursuant to European Regulation no. 1606 of July 19th, 2002, starting with the year 2005 the Antichi Pellettieri Group has adopted the IAS/IFRS issued by the International Accounting Standards Board (IASB) for the preparation of consolidated financial statements. On the basis of Italian law implementing the EU regulation, the financial statements of the parent company Antichi Pellettieri SpA reflect those standards starting with business year 2006.

This Appendix reconciles the net profit and shareholders’ equity according to Italian GAAP with the net profit and shareholders’ equity according to IFRS for the earlier periods presented for the sake of comparison, as required by IFRS 1 (First-time Adoption).

The information was compiled in the context of the transition to IFRS and for preparation of the financial statements of Antichi Pellettieri SpA at December 31st, 2006 in accordance with the IFRS approved by the European Union. It does not include all of the schedules, comparative data and notes that would be necessary for thorough disclosure, on an IFRS- compliant basis, of the company's financial situation and results at December 31st, 2005.

Also, because the information has been compiled for the sole purpose of transitioning to IFRS and drawing up the first complete set of financial statements (at December 31st, 2006) that reflect the IFRS ratified by the European Commission, it lacks the comparative data and notes that would be required for a thorough representation of Antichi Pellettieri SpA's financial situation and results in accordance with IAS/IFRS.

First-Time Adoption of IFRS

As required by IFRS 1 (First-time Adoption of International Financial Reporting Standards), this appendix describes the principles used to prepare the opening IFRS balance sheet at January 1st, 2005, the main differences with respect to the Italian GAAP used to compile financial statements until December 31st, 2005, and reconciliations between the figures originally published in accordance with Italian GAAP and the corresponding figures restated on an IFRS-compliant basis. The balance sheets and profit and loss accounts for 2005 have been prepared in accordance with IFRS 1, on the basis of the International Financial Reporting Standards applicable as from January 1st, 2006 and published by December 31st, 2005.

General principles

The 2005 accounts were prepared in accordance with the International Financial Reporting Standards (IFRS) in effect up to this time, and constitute the figures published for comparison in the financial statements at December 31st, 2006.

The opening balance sheet at January 1st, 2005 reflects the following differences with respect to the financial statements at December 31st, 2004, prepared according to Italian accounting policies: Antichi Pellettieri 2007 Annual report - page 140

• all assets and liabilities whose recognition is mandatory under IFRS, including those not required by Italian GAAP, have been recorded and valued on an IFRS-compliant basis; • all assets and liabilities that were recognized in accordance with Italian GAAP but that are not allowed by IFRS have been eliminated; • some items have been restated in accordance with IFRS.

These adjustments are reflected in the shareholders’ equity figure as of the first-time adoption of IFRS (January 1st, 2005).

The reconciliations of balance sheet figures at January 1st and December 31st, 2005 and the reconciliations of profit and loss account results for 2005, along with the relative explanatory notes, have been fully audited.

The audit report, prepared by Mazars & Guérard, is available together with the half-year accounts at June 30th, 2006.

Exemptions taken

Antichi Pellettieri has opted to take certain exemptions offered by IFRS 1 (First-Time Adoption of International Financial Reporting Standards). Below are the applicable exemptions and mention of those taken in the opening balance sheet:

 employee benefits: the Company has decided to recognize all actuarial gains and losses accumulated at January 1st, 2005 and not to use the "corridor" approach.

Antichi Pellettieri 2007 Annual report - page 141

IAS/IFRS balance sheet of Antichi Pellettieri SpA at January 1st, 2005 and December 31st, 2005; IAS/IFRS profit and loss account of Antichi Pellettieri SpA for the half-year ended June 30th, 2005 and the year ended December 31st 2005

Below are the balance sheets at January 1st and December 31st, 2005 and the profit and loss accounts for the half-year to June 30th, 2005 and full-year 2005, which present:

• figures according to Italian GAAP, restated in IAS/IFRS format; • adjustments to comply with IAS/IFRS.

Balance sheet at January 1st, 2005

BALANCE SHEET: ANTICHI PELLETTIERI SpA Italian GAAP IAS IAS/IFRS Note adjustments reclassified (in €/000) IAS ASSETS

Non current assets Property, plant and equipment 1,261 1,261 1 Intangible assets 22,327 262 22,589 2 Investment property 0 0 Investments 46,897 46,897 Long term financial assets available for sale 0 0 Deferred tax assets 113 279 392 3 Long term derivatives Other long term financial receivables 10,235 10,235 Long term trade and other receivables 0 0 Total non current assets 80,833 541 81,374

Non current assets held for sale Assets held for sale

Current assets Inventories 945 945 Short term trade and other receivables 9,870 9,870 Current tax assets 647 647 Other short term financial receivables 2 2 Short term financial assets available for sale 0 0 Short term derivatives Negotiable securities recognized at fair value 0 0 Cash and cash equivalents 615 615 Total current assets 12,079 0 12,079 TOTAL ASSETS 92,912 541 93,453

Antichi Pellettieri 2007 Annual report - page 142

Balance sheet at January 1st, 2005

BALANCE SHEET: ANTICHI PELLETTIERI SpA Italian GAAP IAS IAS/IFRS Note adjustments reclassified (in €/000) IAS LIABILITIES AND SHAREHOLDERS' EQUITY

Shareholders' equity Capital issued 10,000 10,000 Share premium reserve 0 0 0 Other reserves 27,597 143 27,740 Total Group net equity 37,597 143 37,740

Non current liabilities Long term loans and borrowing 35,411 35,411 Long term derivatives 0 0 Deferred tax liabilities 2,810 367 3,177 4 Post employment benefits 476 31 507 5 Long term provisions 0 0 Other non current liabilities 0 0 Total non current liabilities 38,697 398 39,095

Current liabilities Short term trade and other payables 2,410 2,410 Current tax liabilities 197 197 Short term loans and borrowings 14,011 14,011 Short term derivatives 0 0 Short term provisions 0 0 Total current liabilities 16,618 0 16,618 TOTAL LIABILITIES 92,912 541 93,453

Antichi Pellettieri 2007 Annual report - page 143

Balance sheet at December 31st, 2005

BALANCE SHEET: ANTICHI PELLETTIERI SpA Italian GAAP IAS IAS/IFRS Note adjustments reclassified (in €/000) IAS ASSETS

Non current assets Property, plant and equipment 1,342 28 1,370 1 Intangible assets 34,093 1,344 35,437 2 Investment property 0 0 Investments 45,693 45,693 Long term financial assets available for sale 0 0 Deferred tax assets 105 315 420 3 Long term derivatives Other long term financial receivables 10,235 10,235 Long term trade and other receivables 0 0 Total non current assets 91,468 1,687 93,155

Non current assets held for sale Assets held for sale

Current assets Inventories 2,338 2,338 Short term trade and other receivables 8,359 8,359 Current tax assets 731 731 Other short term financial receivables 102 102 Short term financial assets available for sale 0 0 Short term derivatives Negotiable securities recognized at fair value 0 0 Cash and cash equivalents 7,154 7,154 Total current assets 18,684 0 18,684 TOTAL ASSETS 110,152 1,687 111,839

Antichi Pellettieri 2007 Annual report - page 144

Balance sheet at December 31st, 2005

BALANCE SHEET: ANTICHI PELLETTIERI SpA Italian GAAP IAS IAS/IFRS Note adjustments reclassified (in €/000) IAS LIABILITIES AND SHAREHOLDERS' EQUITY

Shareholders' equity Capital issued 10,000 10,000 Share premium reserve 0 0 0 Other reserves 44,208 819 45,027 Total shareholders' equity 54,208 819 55,027

Non current liabilities Long term loans and borrowing 30,140 30,140 Long term derivatives 0 0 Deferred tax liabilities 4,033 813 4,846 4 Post employment benefits 660 55 715 5 Long term provisions 14 14 Other non current liabilities 0 0 Total non current liabilities 34,847 868 35,715

Current liabilities Short term trade and other payables 8,722 8,722 Current tax liabilities 1,976 1,976 Short term loans and borrowings 10,399 10,399 Short term derivatives 0 0 Short term provisions 0 0 Total current liabilities 21,097 0 21,097 TOTAL LIABILITIES 110,152 1,687 111,839

Antichi Pellettieri 2007 Annual report - page 145

Profit and loss account at June 30th, 2005

PROFIT AND LOSS ACCOUNT ANTICHI PELLETTIERI SpA Italian GAAP IAS IAS/IFRS Note adjustments reclassified IAS

Revenues 3,064 3,064 Other operating income 49 49 Total revenues 3,113 0 3,113

Change in inventory of finished product and works in progress 443 443 Raw materials and consumables (1,640) (1,640) Cost of labor (1,174) (1,174) 6 Other operating expenses (1,816) (3) (1,819) 7 EBITDA (1,074) (3) (1,077) Depreciation, amortization and write-downs (693) 649 (44) 8 EBIT (1,767) 646 (1,121)

Financial income 102 0 102 Financial charges (620) 0 (620) Profit (loss) from foreign exchange transactions 0 0 Profit (loss) from assets held for sale 0 0 Pre tax profit (loss) (2,285) 646 (1,639)

Income tax 953 (270) 683 9

Net loss (1,332) 376 (956)

Antichi Pellettieri 2007 Annual report - page 146

Profit and loss account at December 31st, 2005

PROFIT AND LOSS ACCOUNT ANTICHI PELLETTIERI SpA Italian GAAP IAS IAS/IFRS Note adjustments reclassified IAS

Revenues 14,023 14,023 Other operating income 7,255 7,255 Total revenues 21,278 0 21,278

Change in inventory of finished product and works in progress 33 33 Raw materials and consumables (6,280) (6,280) Cost of labor (3,001) (3) (3,004) 6 Other operating expenses (5,852) (331) (6,183) 7 EBITDA 6,178 (334) 5,844 Depreciation, amortization and write-downs (1,572) 1,377 (195) 8 EBIT 4,606 1,043 5,649

Financial income 713 0 713 Financial charges (2,516) 0 (2,516) Profit (loss) from foreign exchange transactions 34 0 34 Profit (loss) from assets held for sale 0 0 Pre tax profit 2,837 1,043 3,880

Income tax (1,226) (393) (1,619) 9

Net profit 1,611 650 2,261 Antichi Pellettieri 2007 Annual report - page 147

Notes on the main IAS/IFRS adjustments made to the balance sheets at January 1st, 2005 and December 31st, 2005

Below are some comments on the main adjustments made to balance sheet figures as of the beginning and end of 2005.

Assets

1. Property, plant and equipment (+€0K at January 1st, 2005 and +€28K at December 31st, 2005). Adjustments due to:  Treatment of finance leases according to IAS 17 - the value of property, plant and equipment is increased to reflect the fair value recognition of the assets leased. This has increased shareholders’ equity at December 31st, 2005 by €18K, including the tax effect.

2. Intangible assets (+€262K at January 1st, 2005 and +€1,344K at December 31st, 2005). Adjustments due to:

 Reversal of capitalized costs - on the basis of Italian GAAP, Antichi Pellettieri had capitalized certain costs that are not allowed by IAS/IFRS. These consist of some start-up and expansion costs, advertising costs, and deferred charges. The reversals have decreased this item by €722K as of the transition date and by €810K at December 31st, 2005.

 Goodwill: €984K as of the transition date and €2,154K at December 31st, 2005. The adjustments reflect the reversal of amortization that should not be charged in accordance with IAS/IFRS.

3. Deferred tax assets (+€279K at January 1st, 2005 and +€315K at December 31st, 2005). These adjustments reflect tax effects on differences between Italian GAAP and IAS/IFRS.

Liabilities

4. Deferred tax assets (+€367K at January 1st, 2005 and +€813K at December 31st, 2005). These adjustments reflect tax effects on differences between Italian GAAP and IAS/IFRS.

5. Post employment benefits (+€31K at January 1st, 2005 and +€55K at December 31st, 2005). These stem from the use of the actuarial method to account for the provision for employee severance indemnities and the recognition of the current actuarial value of the liability.

Adjustments to the profit and loss account

6. Cost of labor (+€3K at December 31st, 2005). The increase in the cost of labor was caused essentially by the actuarial method of recognizing employee severance indemnities.

7. Other operating expenses (+€3K at June 30th, 2005 and +€331K at December 31st, 2005). The increase in this item is due almost exclusively to the elimination of capitalized costs booked to intangible assets that are not allowed by IAS/IFRS. Antichi Pellettieri 2007 Annual report - page 148

8. Depreciation, amortization and write-downs (-€649K at June 30th, 2005 and -€1,377K at December 31st, 2005). The decrease was caused essentially by the reversal of amortization on goodwill and on intangible assets that do not meet the requirements of IAS/IFRS.

9. Deferred taxes (+€270K at June 30th, 2005 and +€393K at December 31st, 2005). . The change reflects the tax effects of adjustments to profit and loss account items.

Reconciliation of shareholders’ equity

To supplement the above reconciliations of balance sheet and profit and loss account figures, below is the reconciliation of shareholders' equity at January 1st, 2005 and December 31st, 2005 and of the 2005 net profit, along with reference to the applicable notes.

2005 2005 mber31st, equity equity equity account account Shareholders' Shareholders' Shareholders' Profit and loss Profit and loss Dece June30th, 2005 January 1st,2005 atDecember 31st, Note atJune 30th,2005 ITALIAN GAAP 37,597 36,265 54,208 (1,332) 1,611

Adjustments: - intangible assets: 2

Reversal of intangible assets (722) (641) (810) 81 (88) Reversal of goodwill amortization 984 1,549 2,154 565 1,170

- property, plant & equipment, investment properties 1 0 0 28 0 (36)

- post employment benefits 5 (31) (31) (55) (3) Deferred tax effect of adjustments 3-4 (88) (358) (498) (270) (393)

Total adjustments net of tax effects 143 519 819 376 650

IAS/IFRS 37,740 36,784 55,027 (956) 2,261