FACT SHEETS

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The PRADA Group Industrial activities Raw materials PRADA Group retail distribution channels Licensing agreements and joint ventures PRADA Group figures

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PROFILE OF THE PRADA GROUP Prada was founded in Milan in 1913 by Mario Prada, Miuccia Prada’s grandfather, who opened in the prestigious glass-covered Galleria Vittorio Emanuele II arcade in Milan an exclusive shop selling leather bags, trunks, beauty cases and luxury accessories, soon becoming a favourite port of call for the more elegant and refined members of the European aristocracy and upper classes. In 1919 Prada was appointed Official Supplier to the Italian Royal Household; as such, it was entitled to incorporate the House of Savoy’s coat of arms and knotted rope design into its logo. In the late seventies, Miuccia Prada and Patrizio Bertelli started their collaboration, laying the foundations for the company’s subsequent international development. Patrizio Bertelli is the first in the luxury industry to introduce a new business model, applying uncompromised quality throughout the whole production chain and a constant, careful control over the entire process. Miuccia Prada’s creativity, able to infuse her work with thoughts linked to her day-to-day experiences and observations of the environment in an original innovative way – thus anticipating trends - never transcends the brand’s quality core-value and historic craftsmanship know-how. This skilful balance makes it possible for Prada to become internationally renowned, so much so that it was recognized as one of the 100 brands with the most value in the world (Source: Interbrand). A key attribute of Prada is its capacity for innovation in all areas. Being a pioneer in introducing a new approach in the retail network, Prada is the first to launch a new, revolutionary concept of stores - the so-called Prada Epicenters - designed by internationally acclaimed architects such as Rem Koolhaas and Herzog & de Meuron. An example which was later followed by all the leading brands in the industry. Today the Prada brand includes men’s and women’s leather goods, ready-to-wear and footwear which synthesize an innovative, sophisticated and modern design coupled with the high quality typical of handcrafted products. Prada is also active in the eyewear, fragrance and mobile phone sectors. Prada’s horizons go beyond the confines of fashion: art, architecture, cinema and culture in general are an integral part of the brand’s core values. The Fondazione Prada (Prada Foundation) was established in 1993 to present “the most radical intellectual challenges in contemporary art and culture”. It organizes contemporary art exhibits and other cultural activities that have enjoyed great consensus on an international level. The Prada Transformer in Seoul – designed in collaboration with architect Rem Koolhaas – represents one of the most recent expressions of this approach. On March 28, 2011 the Fondazione Prada announced its new exhibition space in Venice, the Ca’ Corner della Regina, an historic palazzo on the Grand Canal which is going to be restored over a period of six years with the goal of offering to the city of Venice, and beyond, a

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stimulating program of important events in the realm of the Arts. From May 31 to October 2, 2011 Ca’ Corner was opened to the public with its first exhibition documenting the multiple activity of the Fondazione Prada, such as the project for the new permanent space in Milan – designed by architect Rem Koolhaas – to be unveiled in 2013. Prada is part of the PRADA Group, one of the global leading companies in the luxury goods sector, which embodies an original business model that successfully combines industrialised production processes with highly sophisticated workmanship and superb handcrafted goods. The PRADA Group also includes Miu Miu - Miuccia Prada’s vision of an alternative style – a brand with a strong personality, provocative and sophisticated as well as free-spirited and avant-garde; Church’s, one of the world leaders in the luxury footwear industry, established in 1873 in Northampton (Great Britain), and Car Shoe, the first producer of the driving moccasin, characterised by a patent soft sole with rubber studs, established in 1963. The Group manufacturing is concentrated in 11 plants, 10 in Italy and 1 in Great Britain, plus research and development laboratories. Each phase of the production process is closely monitored and directly controlled: from the choice to the purchase of the raw materials (external suppliers included), to the creation of prototypes, through to the planning and coordination of external and internal manufacturing. The Group products are sold in more than 70 countries around the world: besides a selection of luxury department stores and multi-brand stores, the distribution network is composed of 388 (31 January 2012) directly operated stores, a strong point in the international growing process of the brand.

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Industrial activities In all its production activities, PRADA Group successfully combines an industrial approach with the spirit of handcrafted workmanship and outstanding quality in its manufacturing processes. Equally important is the Group’s constant quest for excellence and innovation in materials, processes and organisation. Production activities are (sub)divided into three sectors - bags and accessories, ready-towear and footwear - coordinated centrally from the Terranuova Bracciolini offices in Tuscany. The production is concentrated in 10 plants located in various Regions throughout Italy and also work with expert external suppliers. Another plant, located in Northampton, Great Britain, is dedicated to the production of Church’s footwear. Each phase of the production process is directly controlled by Prada: from choice to purchasing of raw materials (external suppliers included), to the creation of prototypes, through to the planning and coordination of external and internal manufacturing. The continuous development of internal know-how is the best possible guarantee of Prada’s commitment to product innovation and production process improvement. The spirit and values of craftsmanship, however, remain at the heart of all manufacturing processes and represent a unique asset of all PRADA Group brands. The PRADA Group’s production plants are concentrated entirely within PRADA spa (with the exception of Northampton) and originate from both an internal development and acquisitions of former suppliers over the last ten years. Fully modernised, often with the addition of new plants built by leading architects such as Guido Canali (the Levanella, Arezzo and Montegranaro, Ascoli Piceno plants) and Studio Cerri & Associati with Vittorio Gregotti (Piancastagnaio, Siena factory), all were designed to optimise manufacturing processes yet preserve and enhance the spirit of traditional craftsmanship that was their original raison d’être and still motivates their workforce. Group Logistics Logistic services for the distribution of finished products are organised over 5 central warehouse facilities, including 4 in Italy and 1 in Great Britain and are managed by a forwarding agent within the Group that coordinates all post-production phases, including customs procedures and bureaucratic matters. The Logistics Department supervises acceptance of products arriving from the Group industrial sites subsequently ensuring shipping and computer automated tracking of goods from the moment they leave the warehouse to final delivery, as well as the quality control by means of a specific structure.

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Raw materials Prada places the utmost importance on raw materials that determine the quality of the production process. The acquisition of raw materials is entrusted to an internal structure within the company that only chooses suppliers offering maximum quality. This criterion knows no compromise. In many cases, the raw materials are exclusively produced for the PRADA Group, on the basis of rigorous and specific requirements of both the style department and the acquisitions department. This not only guarantees that the materials used to make each product are of the highest quality, but also ensures their exclusivity, underlining the strong identity of all Prada products. Before being used for production, the raw materials pass strict quality controls by the company’s technicians and inspectors. The raw materials fall into two categories: hides and fabrics.

Hides Hides have always been the basis of the success of the Prada brand, and are an integrated part of its almost centennial history. In 1919, just five years after the opening of the original Prada store in Galleria Vittorio Emanuele (1913), Mario Prada was appointed as Official Supplier to the Italian Royal Household. The know-how developed by Mario Prada, regarding the choice of different quality hides, as well as tanneries most suitable for treating a particular type of leather, are an intrinsic part of the company’s heritage that Mario Prada passed on, and that subsequent generations have been able to preserve. For Prada’s creation of leather goods, bags, accessories, but also items from clothing collections, Prada uses around 2,2 million square metres of different varieties of leather a year. Before being sent to the various production centres, the hides are subjected to a further quality test that takes into account a whole range of requirements in order to supply the different production centres with the most appropriate leather for a specific product. The tanneries are selected not only because of their high quality of workmanship, but also due to their capacity to keep up with the style department’s quest for creative innovation. Many Italian tanneries are very avant-garde, especially for the treatment of fine leathers such as python and crocodile. The tanning of hides is an ancient process, and in many respects, still executed by hand. There are many variables (temperature, water, air, humidity, type of leather, etc), therefore in Italy separate production departments naturally came into existence to cater for the different
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tanning processes as not all techniques can be practised everywhere. Thus, a consolidated tradition for a specific type of workmanship, developed through time. The high quality of the hides has traditionally allowed Prada – and still does - to highlight the natural appearance of the leather, avoiding chemical products or sprays, thus leaving intact the natural patina and softness of the individual leather. This enhances the natural ageing process, which, through time, only adds style and elegance to the finished product.

The fabrics The PRADA Group annually uses approximately 4 million metres of fabric per year, varying in type (silks, wools, cottons, linens, technical fabrics etc) and percentage, according to the season and the collection. As mentioned, a vast majority of these fabrics, such as printed silks, are made exclusively for the different brands of the Group, based on drawings, style, and other factors specifically requested by the design department for each collection. Some of the workmanship is avant-garde and the fruit of intense research and development in collaboration with the top fabric producers. This ongoing research has allowed Prada to open new horizons in the field of fashion and luxury, creating and anticipating new trends. Quality and innovation, as well as the respect for tradition, have always been the values Prada has subscribed to. While consistently adopting a cutting-edge approach in the experimenting new production techniques, new technologies and new fabrics, Prada has been able to harmonise this innovative approach while maintaining its very strong ties with tradition for craftsmanship and manual processes. Prada was the first label back in 1978 to use a particular type of nylon made of a fine, twisted weave, appearing as precious as silk, obtained through a special chassis. A new fabric trend was thus created in the world of fashion. Prada's approach is that technology should serve ideas and creativity and not vice versa. Therefore, technology applied to fabrics is not necessarily associated with futuristic fabrics or designs: in fact, in the majority of cases most up-to-date technologies serve to reproduce luxury quality and traditional colour, prints, etc, to achieve enhanced quality and precision processes.

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Retail distribution channels Prada, Miu Miu, Church’s and Car Shoe products are sold through two distribution channels: - the retail channel, represented by the single-brand stores (including the three Epicentres) directly operated by the company, which currently account for approximately 77,9% of sales; - the independent channel of multi-brand stores, department stores and franchises (socalled wholesale). This distribution solution enables the Group to have a presence in the most exclusive points-of-sale which are either single-brand or multi-brand worldwide. The Group’s commercial strategy is based on a selective analysis of the potential of individual markets, an innovative approach and rigorous control of display and presentation criteria, and a continuous search for original sales concepts. Prada has always pioneered new solutions combining design, architecture, and technology to create environments that not only encourage sales but also communicate its unique strong brand identity and the cultural influences and values of the Prada world in a consistent and homogeneous way. Towards the end of the nineties, Prada decided to redefine the concept of shopping and enlisted the help of pioneering architects of international renown, Rem Koolhaas and Herzog & de Meuron, recent winners of the prestigious Pritzker Prize. The result of this partnership was the creation of the Prada Epicenters: areas and buildings which have rapidly acquired landmark status both locally and internationally. Prada’s Epicentres have not only transformed the concept of shopping but have also fused it with cutting edge technology and a multitude of cultural stimuli, offering customers a whole range of unique experiences and exclusive services. There are currently three Prada Epicentres: one in SoHo, New York (designed by Rem Koolhaas in 2001); another in Aoyama, Tokyo (Herzog & de Meuron, 2003); and the third in Beverly Hills, Los Angeles (also by Rem Koolhaas, 2004). Directly operated stores, including the three Epicentres, are designed, constructed and managed in accordance with precise guidelines: location chosen are among the most prestigious and the personnel is selected and trained to provide customers with an exclusive treatment. This type of store contributes to maintaining a very close relationship with customers, providing immediate information about the market trend. Moreover, direct-sale stores also provide very valuable support for the brand, acting as true ambassadors communicating the Prada image consistently and uniformly all over the world.

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Prada manages the independent shops and department stores channel based on selective distribution and a well-defined strategy of control aimed at maintaining outstanding quality and high volumes, ensuring consistency in merchandising and monitoring sales performance. Franchise shops are located in specific markets where this form of retail is imposed by local legislation or custom, and entail partnerships with local entrepreneurs with an excellent knowledge of the relevant market. The wholesale channel, besides ensuring the brand benefits by a series of shop windows in particularly significant positions in key markets, enables a direct and immediate comparison to be made with the competitor brands. Therefore, the sales trend through the independent channel represents a very useful indicator of the consumer trends and brand strength.

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Licences and joint ventures

Eyewear In 2000 the PRADA Group developed its first Prada and Miu Miu branded sunglasses, and in 2003 it signed a licence agreement with Luxottica Group, a world leader in eyewear. Under the creative supervision of Miuccia Prada and Patrizio Bertelli, Prada coordinates the conception, design, styling and communications for all collections, while Luxottica has exclusive worldwide rights to the production and distribution of Prada and Miu Miu sunglasses and eyeglasses. Not only is this an important business agreement, but it is also an excellent example of comprehensive cooperation – in creativity, style, production and distribution - between two of Italy’s foremost industrial groups. Fragrances In 2003, an agreement was entered into with Puig Beauty & Fashion Group, one of the world’s largest producers of cosmetics and fragrances, creating a joint venture for the production, distribution and development of Prada perfumes. Here, too, Prada is actively involved in the various phases of product, creation and development as well as communications, while responsibility for production and worldwide distribution is in the experienced and highly qualified hands of Puig. In 2004, after lengthy and thorough research by Miuccia Prada in cooperation with some of the most qualified noses in the world, Amber - the first Prada perfume for women - was created. Greeted with unanimous critical and public acclaim, Prada Amber perfume has enjoyed encouraging commercial success in all markets where it has been presented. In 2006 Prada unveiled its first men’s fragrance, Prada Amber Pour Homme, marking the birth of the first Made in Prada perfumes family under the amber scent. A new perfume for women, Infusion d’Iris, was launched in 2007, which was the key to developing a series of complementary, innovative and personal products for bodycare and for the home. From this new pillar a collection of limited edition fragrances was derived: the Ephemeral Infusion Collection that includes Infusion de Fleur d’Oranger, Infusion de Tubéreuse and Infusion de Vétiver. In 2011, Prada Candy, the third pillar of the Prada fragrances, is launched. A new perfume for women that highlights the funny aspect of the brand also in the beauty sector.

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Mobile telephones In 2006, the PRADA Group entered into an agreement with LG Electronics, one of the world leaders in mobile telecommunications technology, to develop an “innovative and iconic” mobile telephone. By leveraging their respective skills, Prada and LG explored all of the product's aspects together, both in terms of the contents (for example: software, user interface and music), and in terms of the presentation (from the design to the packaging): the partnership created the “Prada Phone by LG”, a unique, sophisticated and elegant telephone, the first in the world to have an interface that is completely touch screen. The “Prada Phone by LG” was launched in March 2007 in Italy, Great Britain, France and Germany, and subsequently on the principal Asian markets and in Latin America. The product's high qualitative and innovative content enables a significant commercial success to be achieved, with more than 1,000,000 mobile telephones sold. In October 2008 Prada and LG launch the second phone, another quantum leap in mobile phone innovation and design, thanks to ultra-thin keyboard and new enhanced technological features. In December 2011, Prada and LG unveiled the partnership’s latest smartphone, the Prada phone by LG 3.0 that combines Prada’s distinctive style with LG’s innovative technology, including one of the biggest and brightest screens in the world with 4.3inch and 800-nit screen.

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THE PRADA GROUP’S FIGURES

4

the number of brands: Prada, Miu Miu, Church’s and Car Shoe.

11

the number of production plants, 10 in Italy and 1 (Church’s) in Great Britain.

70

the number of countries where Prada products are sold.

388

the number of directly-operated stores (31 January 2012).

3,514

the number of direct employees in Italy (at Jan. 31, 2011).

7,855

the total number of direct employees worldwide (at Jan. 31, 2011).

2,555 million

net revenues in FY 2011 in Euros.

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