VALENTINO FASHION GROUP : LE CONSEIL D'ADMINISTRATION APPROUVE LE RAPPORT ANNUEL DE 2006

(*) +12.5% on like-for-like brands marketed

Main contributors to the 2006 performance of all brands were the brand extension and the increase in the directly operated stores (DOS).

In particular:

- sales of the women's collections reached €420 million, rising by 36% (Boss +69%, Valentino +15%, Marlboro Classics +52%, M Missoni +39%);

- sales of footwear and leather accessories increased by 27% to €211 million (Boss +28%, Valentino Garavani +34%);

- the expansion of the directly operated stores network, 76 new openings during the year, supported a 28% rise of sales. With €302 million, the ratio of direct sales to consolidated sales thus rose from 14% in 2005 to 15% in 2006. Directly operated stores were 284 at year's end.

In 2006 sales showed a positive development trend on all markets.

(EUR millions)	2006	2005	Var %
Italy	209.0	188.1	11.1
Germany	355.8	324.2	9.7
Other European Countries	780.0	670.0	16.4
Americas	343.6	295.1	16.4
Asia	180.2	164.5	9.5
Other countries	31.7	27.4	15.7
Total products and services	1,900.3	1,669.3	13.8
Royalties	63.0	58.7	7.3
Total	1,963.3	1,728.0	13.6

EBIT

Year's EBIT was €230.4 million (11.7% on sales), up by 18.0% on €195.2 million in 2005 (11.3% on sales), thanks to progress reported by all brands. In detail:

(EUR millions)	2006	2005	Var. %
Hugo Boss	184.4	162.9	13.2
Valentino	31.3	27.4	14.2
Marlboro Classics/other brands	19.7	15.0	31.3
Other and elisions	(5.0)	(10.1)
Total	230.4	195.2	18.0

Pre-tax result

Pre-tax result was €216.9 million, increased by 19.4% on €181.6 million in 2005.

Taxes

Taxes amounted to €59.7 million in the year 2006, with a 27.5% impact on pre-tax profit (21.2% in 2005). 2005 tax rate benefited from the extraordinary effect of the revaluation of some assets made pursuant to Italian Budget Law. The adjusted tax rate would have been 30.3% of pre-tax profit.

Net income

Consolidated net income, including income attributable to minority

shareholders, was €157.2 million (2005: €143.2 million), a 9.8% increase. After considering last year's fiscal extraordinary effects, net income would have risen by 24.2% on 2005[2] adjusted income (€126.6 million).

Group net income

Net income attributable to the Parent Company's shareholders was €95.2 million, 5.2% higher than in the previous year (€90.5 million), while the positive change would be equal to 28.8% if compared with 2005 Group's adjusted[3] net income (€73.9 million).

Staff

Group's employees were 10,988 at 31st December 2006, against 9,844 at 2005 year's end. The staff increase was mainly attributable to Hugo Boss expansion of in-house production capacity and logistics, as well as the to direct retail development.

Investments

Year's investments amounted to €118.9 million (2005: €95.1 million). The most significant were projects relating to the direct retail business and distribution network, Hugo Boss extension of production capacity and expansion of some operating sites, as well as the upgrade of the Group's information technology.

Net financial debt

Group's net financial debt was €340.9 million as at 31st December 2006, against €333.5 million at last year's end and €392.9 million as at 30th September 2006.

VALENTINO FASHION GROUP S.P.A. [4]

Sales

The Parent Company's sales amounted to €251.4 million.

Net income

Net income was €41.0 million.

Net financial debt

Valentino Fashion Group S.p.A. net financial debt was €233.4 million as at 31st December 2006.

Shareholders' equity

The Parent Company's shareholders' equity amounted to €240.4 million at 2006 year's end.

PROJECTIONS FOR 2007

In 2007, Valentino Fashion Group will continue to register organic growth at a sustained pace along the lines set in 2006: development of the women's lines, the footwear and accessories collections, and direct retail.

The sizable wholesale backlog and the direct retail performance in the first two months support expectations and our projection for significant revenue growth – at comparable exchange rates – in 2007. Management also expects to improve profitability in 2007, with operating and before-tax income rising more than proportionally to the increase in turnover. Chairman Antonio Favrin of Valentino Fashion Group S.p.A. says, "We are encouraged by these results: the combination of the prestigious fashion & luxury brand portfolio ensures the Group huge opportunities for growth through brand extension. The hallmarks of our brands are volume and innovative forms of communication, expressing modernity, the joy of living, style, and also art and culture: this will be the engine of growth for us in the major markets, to increasingly capture the attention and favour of new consumers. We are present throughout the world with a highly advanced integrated distribution and logistics platform.. With major investment and deep passion, we have built systems, organisational structure, and innovation to compete in distribution and to respond to consumers' new desires. These will be the key points in our development strategy."

DIVIDEND DISTRIBUTION

The Board of Directors will propose that the Shareholders' Meeting approve a dividend distribution totalling €48.2 million (€37.1 million in 2006), to be paid on 24th May 2007 (coupon detachment date: 21st May 2007) equal to €0.65 for each of 74,106,302 ordinary shares.

CALL FOR ORDINARY SHAREHOLDERS' MEETING

The Board of Directors has resolved to call an Ordinary Shareholders' Meeting for 10 May 2007 on first call and 11 May 2007 on second call, to adopt resolutions on the following agenda: 1) resolutions pursuant to art. 2364, points 1 and 2, of the Italian Civil Code; 2) extension of the Independent Auditors' mandate to adjust duration of the term to that prescribed by art. 159, paragraph 4, of Italian Legislative Decree 24 February 1998, no. 58, as amended by Italian Legislative Decree 29 December 2006, no. 303.

******

This press release is available on the Company's website: www.valentinofashiongroup.com

For further information: Investor Relations Tel. 02/62491442 e-mail: [email protected]

Consolidated income statement

Income statement

Income statement
	2006		2005		Change	Ch. in %
(millions of euro)
Net sales	1.963,3	100,00%	1.728,0	100,00%	235,3	13,60%
Cost of goods sold	(1.006,9)	-51,30%	-910	-52,70%	-96,9	-10,60%
Gross profit	956,4	48,70%	818	47,30%	138,4	16,90%
Product research and development costs	-56	-2,80%	-47	-2,70%	-9	-19,10%
Advertising, marketing and promotion costs	-142,7	-7,30%	-128,1	-7,40%	-14,6	-11,40%
Selling and distribution costs	-370	-18,80%	-307,7	-17,80%	-62,3	-20,20%
General and administrative costs	-144,4	-7,40%	-133,6	-7,70%	-10,8	-8,10%
Operating income	243,3	12,40%	201,6	11,70%	41,7	20,70%
Other non-recurring (costs)/revenues	-12,9	-0,70%	-6,4	-0,40%	-6,5	n.s
EBIT	230,4	11,70%	195,2	11,30%	35,2	18,00%
Net financial income/(charges)	-13,5	-0,70%	-13,6	-0,80%	0,1	0,70%
Income before taxes	216,9	11,00%	181,6	10,50%	35,3	19,40%
Taxes	-59,7	-3,00%	-38,4	-2,20%	-21,3	-55,50%
Net income before minorities	157,2	8,00%	143,2	8,30%	14	9,80%
Minority interest	-62	-3,20%	-52,7	-3,10%	-9,3	-17,60%
Group net income	95,2	4,80%	90,5	5,20%	4,7	5,20%

Note: Valentino Fashion Group S.p.A. is the beneficiary company of the partial proportional demerger, effective from 1st July 2005, of the apparel business of Marzotto S.p.A. As a consequence, in order to allow a homogenous comparison of the year 2006 financial and economic results with those of the previous year, pro-forma accounts for the year 2005 have also been prepared.

Consolidated balance sheet

Balance sheet
(millions euro)	31.12.06	31.12.05	Change
Trade receivables	264,1	242,9	21,2
Other receivables	84,9	73	11,9
Inventories	391	349,1	41,9
Trade payables and other liabilities	-372,5	-337,8	-34,7
Net working capital	367,5	327,2	40,3
Other non-recurring assets1	120,3	109,8	10,5
Investments	0,4	0,4	-
Net tangible fixed assets	285,9	253,3	32,6
Intangible fixed assets	96	87	9
Goodwill and trademarks	304,2	303,7	0,5
Medium/long-term assets	806,8	754,2	52,6
Non-current liabilities and provision	-114,8	-85,3	-29,5
Deferred taxes provision	-51,2	-47,6	-3,6
Net invested capital	1.008,3	948,5	59,8
Short-term financial liabilities	174,2	191,1	-16,9
Cash & cash equivalents and short-term financial assets	-66,6	-75,6	9
Medium/long-term financial liabilities	233,3	218,4	14,9
Medium/long-term financial assets	-	-0,4	0,4
Net financial debt	340,9	333,5	7,4
Minority interest	246,2	234,8	11,4
Group net equity	421,2	380,2	41
Financing of net invested capital	1.008,3	948,5	59,8

Income statement of Valentino Fashion Group S.p.A.

Income statement
	2006		2005
(millions of euro)
Net sales	251,4	100,00%	124,3	100,00%
Cost of goods sold	-169,8	-67,50%	-81,9	-65,90%
Gross profit	81,6	32,50%	42,4	34,10%
Product research and development costs	-7	-2,80%	-3,3	-2,60%
Advertising, marketing and promotion costs	-7,7	-3,10%	-4,2	-3,40%
Selling and distribution costs	-35,2	-14,00%	-16,6	-13,40%
General and administrative costs	-21	-8,40%	-9,6	-7,70%
Operating income	10,7	4,20%	8,7	7,00%
Other non-recurring (costs)/revenues	-1	-0,40%	-2,5	-2,00%
EBIT	9,7	3,80%	6,2	5,00%
Net financial income/(charges)	-7,2	-0,40%	-1,9	-1,50%
Dividends from consolidated participations	40,9	16,40%	30,2	24,30%
Income before taxes	43,4	17,30%	34,5	27,80%
Taxes	-2,4	-1,00%	3,6	2,90%
Net income	41	16,30%	38,1	30,70%

Note: Valentino Fashion Group S.p.A. is the beneficiary company of the partial proportional demerger, effective from 1st July 2005, of the apparel business of Marzotto S.p.A. As a consequence, any comparison with the previous year are not significant as the figures for the year 2005 mainly referred to the second year half.

Balance sheet of Valentino Fashion Group S.p.A.

Balance sheet
(millions euro)	31.12.06	31.12.05
Trade receivables	100,5	91,7
Other receivables	7,3	5,3
Inventories	52,3	40,3
Trade payables and other liabilities	-102,1	-93,7
Net working capital	58	43,6
Other non-recurring assets1	13,8	14,1
Investments	395,5	395,5
Net tangible fixed assets	13,6	11,5
Intangible fixed assets	9,2	9,3
Medium/long-term assets	432,1	430,4
Non-current liabilities and provision	-15,6	-16,2
Deferred taxes provision	-0,7	-0,8
Net invested capital	473,8	457
Short-term financial liabilities	-202,9	-214
Cash & cash equivalents and short-term financial assets	10	10
Medium/long-term financial liabilities	-159,5	-136,1
Medium/long-term financial assets	119	119
Net financial debt	233,4	221,1
Net equity	240,4	235,9
Financing of net invested capital	473,8	457

[1] 2006 consolidated figures are compared with 2005 pro-forma ones, as the Group has been operational since 1st July 2005.
[2] Net income (2005 annual accounts: €143.2 million) – 2005 extraordinary positive effect (€16.6 million)
[3] Group net income (2005 annual accounts: €90.5 million) – 2005 extraordinary positive effect (€16.6 million)
[4] As per the reasons stated above, a comparison with previous year's results is not available