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STEFANEL GROUP CONSOLIDATED FINANCIAL STATEMENTS

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					STEFANEL GROUP




CONSOLIDATED FINANCIAL STATEMENTS
        AT 31 DECEMBER 2006




                                    1
Stefanel (Reuters: STEP.MI, Bloomberg: STEF IM)

The Stefanel Group, which is listed on the STAR segment of the Milan
Stock Exchange with Giuseppe Stefanel as its Chairman, operates in
the apparel sector through the Stefanel, Interfashion and Hallhuber
business units and, since 2002, in the airport retailing sector through
the Nuance business unit.
The Nuance Group, held 50% by Stefanel SpA, is world leader in the
airport retailing sector, with more than 340 stores located in 56
airports in 16 different countries on 4 continents.




STEFANEL S.P.A. is incorporated under Italian law as a limited
liability company with registered offices in Via Postumia 85, Ponte di
Piave – Treviso.
Share capital: Euro 54,296,744 fully paid
Fiscal code and registration number in the Treviso Companies Register:
01413940261




These consolidated financial statements were approved by the Board of Directors on 14 February 2007.



Issue date: 14 February 2007
This report is available on the Internet at the following address:
www.stefanel.it




                                                                                                       2
Table of Contents

The Stefanel Group

        Directors and officers                                     Page   4
        Group structure                                            Page   5
        Summary consolidated financial and operating information   Page   6
        Subsequent events                                          Page   10
        Outlook for 2007                                           Page   10
        Pro forma consolidated figures                             Page   12

Consolidated financial statements at 31 December 2006 (IFRS)

        Income statement                                           Page   13
        Balance sheet                                              Page   14
        Cash-flow statement                                        Page   16
        Statement of changes in shareholders’ equity               Page   17

Notes to the financial statements                                  Page   18

Supplementary statements

        Statement of changes in property, plant and equipment      Page   48
        Summary of deferred taxation                               Page   49




                                                                               3
STEFANEL GROUP

BOARD OF DIRECTORS

Honorary Chairman                   Elisa Lorenzon

Chairman and Managing Director      Giuseppe Stefanel
Directors                           Giovanna Stefanel
                                    Tito Berna
                                    Enrico Cervellera
                                    Guglielmo Garlato
                                    Mauro Princivalli
                                    Pier Francesco Saviotti

BOARD OF STATUTORY AUDITORS

Chairman                            Giuliano Saccardi
Auditor                             Stefano De Mattia
Auditor                             Michael Eifler

Alternate Auditor                   Giovanni Martucci
Alternate Auditor                   Maura Naponiello

INDEPENDENT AUDITORS                Deloitte & Touche S.p.A.

POWERS OF THE MANAGING DIRECTORS:

Giuseppe Stefanel                   Ordinary and extraordinary administration

INTERNAL CONTROL COMMITTEE

Tito Berna
Guglielmo Garlato
Pier Francesco Saviotti

APPOINTMENTS COMMITTEE

Tito Berna
Guglielmo Garlato
Pier Francesco Saviotti

REMUNERATION COMMITTEE

Tito Berna
Guglielmo Garlato
Pier Francesco Saviotti




                                                                                4
                                                              GRUPPO STEFANEL AL 31 DICEMBRE 2006
                                                            STEFANEL GROUP AS AT DECEMBER 31st 2006

                                                                                         STEFANEL S.P.A.
                                                                                          Ponte di Piave (TV)
                                                                                                 Italy




  STEFBURG MODE GMBH                  STEFANEL UNIVERSAL S.R.L.                     LARA STEFANEL S.A.S.                           INTERFASHION S.P.A.              VICTORIAN S.R.L.
          Linz                               Bucharest                                      Paris                                    Ponte di Piave (TV)            Ponte di Piave (TV)
         Austria                              Romania                                      France                                           Italy                          Italy
          100%                                  65%                                         100%                                           100%                           100%


     STEFPRAHA S.R.O.                  STEFANEL ROMANIA S.R.L.                                                                                                       POLIMODA S.R.L.
          Prague                             Bucharest                                                                         MFG RETAIL COMPAGNIE S.A.S.              Florence
      Czech Republic                          Romania                                                                                     Paris                            Italy
           100%                                 100%                                                                                     France                           1.63%
                                                                                                                                           40%
   STEFANEL ESPANA S.L.                      ST.ARIE' LDA                                                                                                          OMNIA FACTOR S.P.A.
         Madrid                                 Lisbon                                  STOUT S.P.A.                           SWISS FACTORY OUTLET S.A.                  Milan
          Spain                                Portugal                               Ponte di Piave (TV)                               Chiasso                           Italy
          100%                                   75%                                         Italy                                     Switzerland                         5%
                                                                                            100%                                          98%
         SFT A.S.                       STEFANEL HELLAS S.A.                                                                                                           HI - INT S.A.
         Istanbul                             Athens                         STEFANEL INTERNATIONAL HOLDING N.V.                NOEL INTERNATIONAL S.A.                Luxembourg
          Turkey                              Greece                                      Amsterdam                                   Luxembourg                            65%
          99.8%                                100%                                       Netherlands                                     50%
                                                                                             100%
STEFANEL POLONIA SP. Z O.O.            STEFANEL HUNGARY KFT
         Warsaw                              Budapest
          Poland                              Hungary                                         STEFANEL GMBH                             THE NUANCE GROUP A.G.
           100%                                100%                                               Munich                                      Glattbrugg
                                                                                                 Germany                                      Switzerland
 STEFANEL SLOVAKIA S.R.O.                      SFK LTD.                                            100%                                         100%
         Bratislava                              Seoul
      Slovak Republic                           Korea                                                                              NUANCE GLOBAL TRADERS HK LTD.
           100%                                 95.29%
                                                                                        HALLHUBER GMBH                                       Hong Kong
                                                                                             Munich                                            100%
   STEFANEL JAPAN INC.        STEFANEL DE ARGENTINA S.A. (in liquidazione)                  Germany
         Tokyo                              Buenos Aires                                      100%
         Japan                               Argentina
          100%                                 0.75%
                                                                                        STEFANEL HONG KONG LTD.
                                                                                               Hong Kong
                                                                                                  100%



                                                                                 STEFANEL DE ARGENTINA S.A. (in liquidation)
                                                                                              Buenos Aires
                                                                                               Argentina
                                                                                                99.25%




                                                                                                                                                                                          5
SUMMARY OF CONSOLIDATED RESULTS

The year just ended saw all Group companies involved in important processes of change of one type of another.

The Stefanel Business Unit continued to take steps to reposition its brand with a view to turning it into an
"accessible designer label”. A new advertising campaign was launched in August as the second phase of the project;
this was designed to enhance the value of the measures already taken to improve the product, as well as the structure
of the collections.
At the same time, work has continued on reorganising and developing the brand's distribution network with
measures particularly designed to enhance the value of important Italian locations and to expand certain major new
international markets such as Japan, Hungary and Poland, where business under direct management has recently
started up with the opening of 30 stores.
This means that the Company is facing a major change in the product, image and positioning of its main brand,
which inevitably entails a partial change in its reference clientele. The year, and even more so, the season that has
just ended confirms the difficulties that are inherent in such a process of change, but it has also provided some
pointers of a commercial nature (e.g. increase in the average value and in the number of items sold per transaction)
which are in line with the medium-term objectives of this strategy, bearing in mind that it will take a number of
seasons before it gets up to speed.
At the same time, the Company has started a review of its main corporate processes and is evaluating a series of
initiatives of an organisational and operational nature with a view to creating a structural improvement in profit
margins.

The Interfashion Business Unit is successfully continuing to increase its penetration of major markets, while further
improving the level of service provided to customers (in terms of shipping methods and times).
While waiting to know the outcome of negotiations for the renewal of the MFG licence (which runs through to the
2008 spring/summer collection), the company is planning to start up a new activity which can operate alongside or,
if necessary, replace this licence, thereby reducing the potential impact of it not being renewed. Given this situation,
in January 2007, Interfashion began presenting to the business community the plan to launch a new brand called
HIGH, including the fact that it had decided to appoint Claire Campbell, one of the leading designers of
contemporary fashion wear, as its creative director.
The collections, for both men and women, will be positioned at the high end of the market and will be distributed
through selected multibrand boutiques world-wide, starting with the 2007 Autumn/Winter collection.

Steps have also continued to develop the Hallhuber network in Germany, which have permitted this Business Unit to
inaugurate 8 new stores, 2 of them in Austria. The firm is heavily involved in identifying those initiatives of an
organisational and commercial nature that are able to return it as soon as possible to that process of growth with
better profit margins that it showed up until 2005.

As regards the airport retailing business, the period just ended showed itself to be yet another year of transition
which saw the Nuance Group involved in a process of operational improvement and rationalisation of the
concession portfolio. The second half of the year was conditioned by the impact of the stringent security measures
introduced in August. These effectively blocked sales of products containing liquids or gels, causing substantial
drops in sales in certain countries, such as Canada, Great Britain and Australia, precisely in those categories of
goods (perfume, cosmetics and spirits) that have the best margins.

Moreover, in line with the strategy to improve and develop the business in Australia, the Nuance Group won the
new duty free concession at Sydney Airport, a new agreement to extend the existing concession at Cairns
international airport for another 5 years, as well as a new concession in New Zealand to operate at the airport of its
capital, Wellington. The company has also introduced a number of new management positions to guarantee the
improved performances achieved to date in this area.
Last November, the Nuance Group entered a strategic market like India for the first time by winning the concession
to run commercial activities at Bangalore Airport in a joint venture with its local partner Shoppers' Stop. It also
gained a new concession to operate at the Malmo-Sturup Airport, bringing the number of Swedish airports where
Nuance has a presence to 14.

The following summary financial and operating statistics for 2006 are presented on a consistent comparative basis.
These figures report the interest in the Nuance Group using the equity method.




                                                                                                                      6
                                                                                                                4th quarter    4th quarter
Consolidated income statement                    2006                   2005                  Change
                                                                                                                   2006           2005
                                           Euro mn      %.         Euro mn     %.         Euro mn      %.        Euro mn        Euro mn
Total net sales                               298.0     100.0         272.2    100.0          25.8        9.5          70.5           67.2
Cost of sales                               (127.5)     (42.9)      (111.8)    (41.1)       (15.9)       14.2        (30.9)         (26.2)
Gross operating margin                        170.5       57.1        160.4      58.9          9.9        6.2          39.6           41.0
Gains/losses on fixed assets                   11.5        3.8          8.0       2.9          3.5       43.2           8.1          (0.1)
Selling, general & admin. expenses          (153.4)     (51.4)      (132.5)    (48.7)       (20.7)       15.6        (42.1)         (38.3)
EBITDA                                         28.6        9.6         35.9      13.2        (7.3)     (20.5)           5.6            2.6
Depreciation, amortisation and value
adjustments                                  (12.7)      (4.3)       (12.2)     (4.5)        (0.5)        4.1          (3.8)         (4.1)
EBIT                                           15.9        5.3         23.7       8.7        (7.8)     (33.1)            1.8         (1.5)
Financial income and expense                  (7.7)      (2.6)        (7.2)     (2.6)        (0.5)        6.9          (2.0)         (2.0)
Income/expenses from investments              (5.5)      (1.8)        (8.0)     (2.9)          2.5     (31.3)          (0.2)           1.8
Profit (loss) before tax and minority
interests                                       2.7        0.9          8.5       3.1        (5.8)     (68.7)          (0.4)         (1.7)
Taxes                                         (1.7)      (0.6)        (2.6)     (1.0)          0.9     (34.6)            1.2           3.6
Net profit (loss) of the Group and
minority interests                              1.0          0.3        5.9         2.2      (4.9)     (83.8)           0.8            1.9
Net (profit) loss pertaining to minority
interests                                       0.1          0.0        0.1         0.0        0.0        0.0           0.0          (0.1)
Net profit (loss) of the Group                  1.1          0.4        6.0         2.2      (4.9)     (82.4)           0.8            1.8

The results achieved during the year, are described below.

      a 9.5% increase in consolidated revenues. In detail, the Stefanel brand saw its sales increase by 9.7%,
      Interfashion by 21.0%, while Hallhuber's sales declined by 4.7%.

       EBITDA amounted to 28.6 million euro (20.5%) which is 9.6% of sales. The year benefited from proceeds of
      11.5 million euro from the disposal of a number of stores, to be replaced by others, as well as from the sale of
      four buildings (proceeds of 8.0 mn euro in 2005). Partly as a result of higher depreciation, EBIT came to Euro
      15.9 million (5.3% of sales). Net of the above effects, the result reflects lower margins generated by Stefanel
      and Hallhuber Business Units compared with the previous year, only partly offset by the improvement achieved
      by Interfashion. For a better understanding of the performances turned in by these two units to date, it is
      important to highlight the negative impact (Euro 8.0 mn) of higher operating costs in connection with the
      various new store openings and of the performance commissions due under the sale-or-return contracts (around
      Euro 5.5 mn). The new communication campaigns involved higher costs of Euro 3,6 million.
      Holding structure costs came to Euro 2.7 million (2005FY: 3.0 mn).

      Financial charges rose by 0.5 million as a result of the increase in interest rates, while the result from
      investments was negative for Euro 5.5 million (the current method of consolidation at net equity substantially
      reflects the performance of the Nuance Group). It is worth reiterating that last year's results was negative for
      Euro 8.0 million, of which 3.2 derived from current operations, on top of which there was a 4.8 million
      provision for the onerous contract identified in the Copenhagen concession.

      The net result for the year pertaining to the Group, after booking net income taxes of Euro 1.7 million, was a
      profit of 1.1 million, which is 4.9 million lower than in December 2005 (a profit of Euro 6.0 million).




                                                                                                                                          7
The figures for 2006 show consolidated net borrowing of Euro 82.9 million, a decrease of Euro 0.8 million on
December 2005, and a decrease in Group equity of Euro 3.6 million to Euro 101.2 million.

               Sources/Applications                            31.12.2006             31.12.2005              Change

                                                           Euro mn          %       Euro mn        %       Euro mn       %

Net working capital                                               44.7       24.3        42.0       22.3           2.7     6.9
Fixed assets, net                                                139.4       75.7       146.5       77.7         (7.1)   (4.9)
Total capital invested                                           184.1      100.0       188.5      100.0         (4.4)   (2.3)
Shareholders’ equity                                             101.2       55.0       104.8       55.6         (3.6)   (3.4)
Net debt                                                          82.9       45.0        83.7       44.4         (0.8)   (1.0)
Total sources of funds                                           184.1      100.0       188.5      100.0         (4.4)   (2.3)

The measures undertaken to improve working capital management1 helped reduce net working capital from 16.7%
to 14.2% of net sales.

FINANCIAL RISK MANAGEMENT

In accordance with Group policy, it is appropriate for a percentage of the exposure to interest-rate risk to be
transformed into a fixed rate or, in any case, a rate subject to limited variability. The appropriate mix between fixed
and floating rates is usually obtained by converting part of the loans obtained from floating-rate to fixed-rate terms,
by arranging an interest-rate swap, or by maintaining the original floating-rate structure but arranging “caps” and
“floors” capable of containing rate fluctuations within prudent limits.

The Group operates at an international level and is exposed to exchange risk in relation to various currencies
including, in particular, the US dollar. These exchange-rate risks derive principally from the planned purchase of
raw materials and finished products, and from outstanding trade payables.
Group policy involves hedging a significant part of the purchases planned for the coming twelve months. The
exchange-rate risk is hedged by arranging forward contracts and currency options. The majority of these forward
contracts will mature within twelve months of the accounting reference date. However, the derivatives used to hedge
the exposure to interest-rate and exchange-rate risks do not satisfy the technical requirements to qualify for hedge
accounting under IAS 39. Accordingly, all changes in the fair value of these derivatives are reflected in the income
statement.

Forward currency purchases outstanding at period-end total USD 23,150 thousand; they will mature no later than
December 2007 and reflect an average rate of 1.30. Although these transactions have the purpose and characteristics
of exchange-risk hedges, they do not formally comply with hedge accounting rules and, as such, are not classified as
hedging transactions.
The recording of derivative financial instruments in accordance with this standard has involved the recognition of a
financial asset totalling 507 thousand euro at 31 December 2006. This reflects the market prices of these instruments
at the reference date, provided by the banking counterparts that arranged the transactions concerned. To match the
recognition of this asset, financial charges of 507 thousand euro was recorded in the year.

As for liquidity risk, the situation does not look critical at present, having recently gone through an important
process of restructuring the Group's sources of financing, providing it with funding that is in line with requirements
and its cash generating capacity.

As regards credit risk, management is of the opinion that the Group is exposed to normal sector risk and that the
procedures introduced for monitoring customer credit limits and receivables are sufficient to reduce this risk to an
acceptable level.




1
    Closing inventories + Trade receivables - Trade payables
                                                                                                                             8
RELATED PARTY TRANSACTIONS AND ATYPICAL OR UNUSUAL TRANSACTIONS

The principal economic and financial transactions between Group companies and related parties (excluding
intercompany transactions, which have already been eliminated on consolidation) are summarised below.

                                                                                    31.12.2006              31.12.2005
Income from recharges to related parties                                                   127                      70
Proceeds of sale of property                                                            12,300
Costs recharged by related parties                                                       1,477                    1,496
Purchase of industrial and commercial equipment from related
parties                                                                                  6,891                    6,428
Amounts due from related parties for the supply of products                                101                       38
Amounts due to related parties for the supply of products                                3,593                    4,189

The above amounts mainly refer to (i) dealings involving the supply of commercial equipment by Iride S.r.l. (ii) the
rental of premises for commercial and industrial use by Leggenda S.r.l. and (iii) a relationship with Infinas S.p.A.,
an insurance broker. Lastly, the figures shown above concern the sale of the following properties by Victorian S.r.l.
to Leggenda S.r.l. for a total of Euro 12,300,000 plus VAT:

         property in Salgareda (TV), selling price Euro 3,750,000;
         property in Catania, selling price Euro 5,000,000;
         property in Varese, selling price Euro 1,600,000;
         property in Thiene (VI), selling price Euro 1,950,000.

Note that at the same time as the sale, the buying company took over, at the same conditions, the rent contracts
currently in existence with Stefanel S.p.A. and, in particular, those concerning the property in Salgareda (TV),
where the Parent Company has its knitwear production facilities, and the properties in Catania and Varese, which act
as premises for Stefanel-brand stores. The property in Thiene (VI), on the other hand, is being leased to third parties.
The rental payments currently applicable, which have been confirmed, are as follows:

         property in Salgareda (TV), rent of Euro 255,478;
         property in Catania, rent of Euro 372,448;
         property in Varese, rent of Euro 140,306;
         property in Thiene (VI), rent of Euro 177,632.

The reference shareholder for these companies is Giuseppe Stefanel.
All such transactions, including those between the Parent Company and its subsidiaries, between subsidiaries, or
with other related parties form part of the Group's normal operations, although the sale of industrial and commercial
buildings mentioned above can be considered an unusual transaction. As regards potential conflicts of interest, all
such transactions are conducted at arm's length conditions. In particular, note that the sale prices of the above
properties and the economic terms of the related lease contracts were appraised by independent experts.

RESEARCH AND DEVELOPMENT ACTIVITIES

No R&D activities were undertaken by the Stefanel Group during the period under review.




                                                                                                                      9
RECONCILIATION OF THE CONSOLIDATED FINANCIAL STATEMENTS WITH THOSE OF THE
PARENT COMPANY

The following is a reconciliation between the Parent Company's shareholders’ equity and net profit and consolidated
shareholders’ equity and net profit:
                                                                                          2006           Shareholders’
                                                                                           net             equity at
                                                                                          result          31.12.2006
Financial statements of Stefanel SpA                                                           (2,937)            93,744

1) Goodwill/consolidation differences and related amortisation                                       -            6,891
2) Elimination of capitalised gains and related depreciation deriving from intraGroup
disposals                                                                                       6,127                342
3) Effect of stock entries on the allowances for obsolete and slow-moving inventories           2,455              5,934
4) Effect of intercompany profit included in the closing inventories of subsidiaries          (1,974)            (5,916)

5) Effect of applying lease accounting methodology to leasing transactions                      (266)                  -
6) Elimination of intraGroup dividends collected by the Parent Company and other
consolidated companies                                                                        (7,408)                 -
7) Other consolidation entries                                                                  (220)               540
8) Group share of shareholders’ equity and results of consolidated subsidiaries, net of
their carrying value                                                                            5,274             (333)
Total Group interest in consolidated results and shareholders’ equity                           1,051           101,202

SUBSEQUENT EVENTS

Given this situation, in January 2007, Interfashion began presenting to the business community the plan to launch a
new brand called HIGH, including the fact that it had decided to appoint Claire Campbell, one of the leading
designers of contemporary fashion wear, as its creative director.
The collections, for both men and women, will be positioned at the high end of the market and will be distributed
through branches and agents to selected multibrand boutiques world-wide, starting with the 2007 Autumn/Winter
collection. In the first two seasons, the company is counting on sales of at least 15-20 million euro.

In February 2007, the Nuance Group has signed a letter of intent to sell 40% of its operating companies in Australia
and New Zealand to Newrest, a company specialising in the provision of services to the airport sector in 15
countries with annual sales of more than USD 500 million and over 10,000 employees.
The sale, forming part of the turnaround commencing with the renewal of the licence at Sydney airport, will be
completed during the coming weeks.
It is worth remembering that these companies reported a net loss of around Euro 13.3 million in 2005 and Euro 15.3
million in 2006.
The purpose of the partnership is to complement the Nuance organisation and expertise with the experience and
entrepreneurial spirit of Newrest and specifically that of its Managing Director Jonathan Stent-Torriani who had
successfully turned around Nuance's Australian operations in the period 1997-2000 and who will take up the
position of operating Vice Chairman of these companies with effect from 1 February.

OUTLOOK FOR 2007

In the year just ended, the Stefanel Business showed a trend in sales and margins that was lower than our
expectations, discounting the effects of repositioning the brand and opening numerous sales stores which still have
to come up to speed. 2007 is still likely to be affected by these trends, with good growth in sales and better margins,
even if they are still not as good as they could be.

As regards the Interfashion Business Unit, in addition to the traditional activity, namely production and sale of
MFG-brand products, from this year it will also be involved in the launch of the new HIGH brand, which will be
sold starting with the Autumn/Winter 2007 collection. The coming months will still see the company involved in the
process of renewing the licence which is about to expire, to acquire at least one new licence and to manage this
period of change in the best way possible.



                                                                                                                     10
During 2006, the Hallhuber Business Unit showed a relatively weak trend, which it is trying to combat with a series
of measures designed to obtain those improvements in performance able to bring it back to the levels of growth and
profitability that it achieved in 2005. The number of new store openings is expected to be limited in 2007 to ensure a
greater focus on operational management.

Nuance's performance in the second half of the year was affected by the restrictive security measures introduced in
many airports, which effectively annulled any benefit from the numerous initiatives that had been taken. 2007 will
benefit considerably from the close of operations in Denmark, which heavily conditioned the company's
performance in recent years; management's efforts will be focused on relaunching activities in the Australia-New
Zealand region, which is still a critical area, and on renewal of the concessions for Singapore and Antalya, which are
due to expire in the second half of the year, as well as gaining new concessions in strategic areas such as India and
China.

The Stefanel Group is therefore going through a period of profound change. We are laying the bases for a strategy of
growth, though it requires a time horizon that goes beyond the current year. In any case, during 2007, we still expect
the Group to achieve better operating results so as to repeat the absolute values achieved in 2006. Net borrowings
will be slightly up in line with the further investments being planned.




                                                                                                                   11
PRO-FORMA CONSOLIDATED FIGURES

The pro forma consolidated figures of the Stefanel Group at 31 December 2006, compared with the situation at 31
December 2005 when the Nuance business unit (Noel International SA - The Nuance Group A.G) was consolidated
on a proportional basis, are presented below. For further information please refer to page 27.

                                                          Consolidated financial  Elimination of Financial statements of the Pro forma consolidated        Pro forma consolidated      Change in pro-forma
                                                        statements for 2006 (50% effect of valuing   Noel-Nuance sub-        financial statements of the financial statements of the   financial statements
                                                         interest in Noel-Nuance Noel-Nuance at consolidation (interest of Stefanel Group for 2006        Stefanel Group for 2005
                            IAS/IFRS                      valued using the equity     equity       Stefanel S.p.A. = 50%)        (50% proportional           (50% proportional
                                                                  method)                                                      consolidation of Noel-      consolidation of Noel-
                       (In millions of euro)                                                                                          Nuance)                     Nuance)



                                                                   A                     B                     C                      D = A+B+C                       E                          D-E


           Summary pro-forma income statement            Euro mn         %.           Euro mn        Euro mn          %.        Euro mn          %.         Euro mn         %.         Euro mn           %.

Total net sales                                          298,0         100,0                          512,8        100,0         810,8         100,0         768,9        100,0         41,9            5,4
Cost of sales                                           (127,7)        (42,9)                        (240,6)       (46,9)       (368,3)        (45,4)       (344,4)       (44,8)       (23,9)           6,9
Gross profit                                             170,3          57,1                          272,2         53,1         442,5         54,6          424,5         55,2         18,0            4,2
Gains/losses on fixed assets                              11,5          3,8                            0,0           0,0          11,5          1,4           8,0           1,0         3,5            43,2
Selling, general & admin. expenses                      (153,2)        (51,4)                        (255,5)       (49,8)       (408,7)        (50,4)       (378,6)       (49,2)       (30,1)           8,0
EBITDA                                                    28,6          9,6                            16,7          3,3          45,3          5,6          53,9           7,0         (8,6)          (16,0)
Depreciation, amortisation and value adjustments         (12,7)        (4,3)                          (7,5)         (1,5)        (20,2)        (2,5)        (19,2)         (2,5)        (1,0)           5,2
EBIT                                                      15,9          5,3                            9,2           1,8          25,1          3,1          34,7           4,5         (9,6)          (27,8)
Financial income and charges                              (7,7)        (2,6)                          (4,4)         (0,9)        (12,1)        (1,5)        (10,8)         (1,4)        (1,3)          12,0
Income/expenses from investments                          (5,5)        (1,8)            5,5            0,6           0,1           0,6          0,1           0,5           0,1         0,1            20,0
Profit (loss) before tax and minority interests            2,7          0,9             5,5            5,4           1,1          13,6          1,7          24,4           3,2        (10,8)          (44,4)
Taxes                                                     (1,7)        (0,6)                          (3,2)         (0,6)         (4,9)        (0,6)         (4,4)         (0,6)        (0,5)          11,4
Result of continuing business activities                   1,0          0,3             5,5            2,2           0,4           8,7          1,1          20,0           2,6        (11,3)          (56,7)
Result of discontinued activities                          0,0          0,0                           (5,8)         (1,1)         (5,8)        (0,7)        (12,2)         (1,6)        6,4            (52,5)
Net profit (loss) of the Group and minority interests      1,0          0,3             5,5           (3,6)         (0,7)          2,9          0,4           7,8           1,0         (4,9)          (63,4)
Net (profit) loss pertaining to minority interests         0,1          0,0                           (1,9)         (0,4)         (1,8)        (0,2)         (1,8)         (0,2)        0,0             0,0
Net profit (loss) of the Group                             1,1          0,4             5,5           (5,5)         (1,1)          1,1          0,1           6,0           0,8         (4,9)          (82,4)



The pro-forma consolidated financial statements2 report net sales of 810.8 million euro, up 5.4%. EBITDA was
45.3 million euro, 16% lower than last year, whereas EBIT came to 25.1 million euro (2005FY: 34.7 million euro),
reflecting higher amortisation and depreciation charges. The result of continuing business activities totals euro 8.7
million while the loss relating to the Copenhagen concession, treated as a discontinued operation3, comes to euro 5.8
million.


Pro-forma consolidated net debt was 148.4 million euro, having increased by 13.8 million euro compared with the
figure at 31 December 2005 (134.6 million euro).


2
  The pro-forma consolidated figures have been prepared using the IFRS financial statements of the Stefanel Group at 31 December 2006, in
which the 50% interest in Noel International SA, in turn the owner of 100% of The Nuance Group Ag, has been carried at equity, and the IFRS
financial statements at the same date of Noel International Sa and The Nuance Group Ag. The principal pro-forma adjustments included in the
above table involve reversing from the income statement and balance sheet the effects of carrying the investment in Noel International SA at
equity in the consolidated financial statements of Stefanel S.p.A. at 31 December 2006; the book value of the investment in Noel International
SA, recorded in the financial statements of Stefanel S.p.A. has been eliminated against the related equity interest and the intercompany
receivables, payables, costs and revenues have been eliminated; the column entitled "Sub-consolidation of Noel-Nuance" includes 50% of the
costs and revenues along with 50% of the net financial position reported in the draft financial statements of Noel International SA and The
Nuance Group Ag at 31 December 2006 prepared for approval by their respective boards of directors;

3
  In the interests of comparability, the losses deriving from the Copenhagen and Rome concessions - the latter also expired during the year - have
been reclassified in Nuance's 2005 financial statements.
                                                                                                                                                                                              12
        CONSOLIDATED INCOME STATEMENT FOR THE YEAR ENDED 31 DECEMBER 2006
                        COMPARED WITH THE PREVIOUS YEAR
                                (in thousands of euro)




INCOME STATEMENT                                       Notes      2006        2005


Revenues
 - net sales                                            (1)    294,129      267,382
 - other revenues                                       (2)      3,856        4,854
Total revenues                                                 297,985      272,236
Cost of sales                                           (3)
- materials and subcontract services                           112,722      102,609
- direct labour and related costs                                9,066        6,373
- other manufacturing costs                                     13,294       17,550
- (increase) decrease in inventories                            (7,583)   (14,691)
Total cost of sales                                            127,499      111,841
GROSS PROFIT                                                   170,486      160,395
- (Gains) losses on disposal of fixed assets            (4)    (11,463)     (8,014)
           - of which with related parties                      (6,838)           -
- Selling, general and administrative expenses          (5)    153,350      132,556
           - of which with related parties                       1,349        1,496
EBITDA                                                          28,599       35,853
- Depreciation, amortisation and value adjustments      (6)     12,686       12,172
EBIT                                                            15,913       23,681
- Financial income (expense)                            (7)     (7,764)     (7,234)
           - of which with related parties                       1,143        1,029
- Income (expenses) from investments                    (8)     (5,485)     (7,972)
PROFIT (LOSS) BEFORE TAX                                         2,664        8,475
- Current income taxes                                  (9)      1,743        2,554
- Net profit (loss) pertaining to minority interests             (130)         (83)
NET PROFIT (LOSS) FOR THE PERIOD                                 1,051        6,004


EARNINGS PER SHARE                                              0.0193       0.1111




                                                                                 13
                        CONSOLIDATED BALANCE SHEET AT 31 DECEMBER 2006
                              COMPARED WITH THE PREVIOUS YEAR
                                      (in thousands of euro)




ASSETS                                                              Notes   31.12.2006       31.12.2005
NON-CURRENT ASSETS
Intangible assets                                                    (10)           50,023           46,863
Property, plant and equipment                                        (12)           61,457           63,857
Investment property                                                  (11)                -                373


Investments                                                          (13)           16,255           22,524
Non-current financial receivables and other assets                   (14)           32,036           31,181
           - of which with related parties                                          30,965           30,624


Other non-current receivables and assets                             (15)           17,317           19,268
Deferred tax assets                                                  (16)           13,100           12,387
TOTAL NON-CURRENT ASSETS                                                           190,188          196,453


CURRENT ASSETS
Inventories, net                                                     (17)           69,280           62,457
Trade receivables                                                    (18)           40,274           44,478
Other current Receivables and Assets                                 (19)           20,833           15,868
Cash and cash equivalents                                            (20)           39,131           38,191
Financial receivables                                                                    1                 96
TOTAL CURRENT ASSETS                                                               169,519          161,090


TOTAL ASSETS                                                                       359,707          357,543


1
 : This refers to loans of 30,965 thousand euro to Noel International Sa.




                                                                                                           14
                           CONSOLIDATED BALANCE SHEET AT 31 DECEMBER 2006
                                 COMPARED WITH THE PREVIOUS YEAR
                                         (in thousands of euro)




LIABILITIES AND SHAREHOLDERS' EQUITY                                                   Notes      31.12.2006   31.12.2005
SHAREHOLDERS’ EQUITY:
Share capital                                                                                        54,297       54,297
Legal reserve                                                                                          7,415        6,896
Share premium                                                                                        29,508       29,508
Other reserves                                                                                         8,931        7,892
Net profit (loss) for the period                                                                       1,051        6,004
Total Group equity                                                                         (21)     101,202      104,597


Minority interests                                                                         (22)          43          204
TOTAL SHAREHOLDERS' EQUITY                                                                          101,245      104,801



NON-CURRENT LIABILITIES
Non-current financial liabilities                                                          (26)     123,600       18,886
Retirement benefit obligations and employee termination indemnities                        (23)        7,040        6,741
Other non-current payables and liabilities                                                                 -           3
Provision for risks and charges (non-current)                                              (24)        3,912        3,438
Deferred tax liabilities                                                                   (25)        7,897        8,635
TOTAL NON-CURRENT LIABILITIES                                                                       142,449       37,703


CURRENT LIABILITIES
Current financial liabilities                                                              (26)      30,463      134,212
Trade payables                                                                             (27)      67,679       62,224
             - of which with related parties                                                           3,593        4,189
Other current payables and liabilities                                                     (28)      17,017       16,281
Provision for risks and charges                                                            (24)         854         2,322
TOTAL CURRENT LIABILITIES                                                                           116,013      215,039


TOTAL EQUITY AND LIABILITIES                                                                        359,707      357,543


2
    This refers to trade payables owed to Iride S.r.l. for the supply of store fittings.




                                                                                                                     15
                               CONSOLIDATED CASH FLOW STATEMENT
                                        (in thousands of euro)
                                                                                   2006       2005
Net profit (loss) for the year                                                     1,051      6,004
Net (profit) loss pertaining to minority interests                                 (130)       (83)
Depreciation, amortisation and value adjustments to fixed assets                  12,686     12,269
Effect on the income statement of valuing investments using the equity method       5,535      8,039
Increase (decrease) in deferred tax liabilities                                     (738)      6,135
Decrease (increase) in deferred tax assets                                          (713)    (6,452)
Increase (decrease) in provisions for risks and charges                             (993)      1,618
Increase (decrease) in employee termination indemnities                               299        810
Decrease (increase) in inventories                                                (6,824)   (15,891)
Decrease (increase) in receivables                                                  1,357      8,491
Increase (decrease) in non-financial payables                                       6,178     11,177
A) CASH FLOW GENERATED BY OPERATING ACTIVITIES                                     17,708     32,117

Purchase of intangible assets                                                     (5,961)    (2,386)
Purchase of property, plant and equipment                                        (15,752)   (17,488)
Net retirements of fixed assets                                                     8,479      2,963
Net expenditure on investments                                                       (67)          -
Net expenditure on financial assets                                                 (160)      (441)
B) CASH FLOW GENERATED BY INVESTMENT ACTIVITIES                                  (13,461)   (17,352)

Change in medium/long-term loans                                                  104,714      (244)
Change in amounts due to banks and short-term loans                             (103,749)    (7,012)
Change in other non-current assets                                                  (794)      (625)
C) CASH FLOW GENERATED BY FINANCIAL ASSETS/LIABILITIES                                171    (7,881)

Changes in translation reserves and other changes                                 (1,270)       (17)
Changes in minority interests                                                        (31)         (1)
Application of IAS 32 and 29 from 1 January 2005                                        -      (308)
Increases in capital                                                                    -        148
Dividends distributed                                                             (2,177)    (1,624)
D) CASH FLOW GENERATED BY MOVEMENTS IN SHAREHOLDERS' EQUITY                       (3,478)    (1,802)

E) CHANGE IN CASH AND BANKS (A+B+C+D)                                                940      5,082

F) CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE YEAR                         38,191     33,109

G) CASH AND CASH EQUIVALENTS AT THE END OF THE YEAR (E+F)                         39,131     38,191

H) NET DEBT AT THE BEGINNING OF THE YEAR                                         (83,664)   (96,627)
Breakdown of closing net cash (debt):
Non-current financial assets                                                       32,036    31,181
Current financial assets                                                                1        62
Cash and cash equivalents                                                          39,131    38,191
Due to banks                                                                    (151,470) (150,125)
Due to other providers of finance                                                 (2,593)   (2,973)
I) NET DEBT AT THE END OF THE YEAR (H+E-C)                                       (82,895) (83,664)



                                                                                                  16
                                                STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY
                                           FOR THE PERIODS ENDED 31 DECEMBER 2005 AND 31 DECEMBER 2006
                                                                              (in thousands of euro)




                                                                                           Share        Legal                         Net profit      Total
                                                                             Share        premium      reserve   Translation Other (loss) for the shareholders'
Description                                                                  capital                               reserve   reserves   year         equity
Balance at 31 December 2004                                                  54,149         29,314      6,796         -       7,901       (37)        98,123
 Effect of applying IAS 39                                                                                                    (308)                    (308)
 Allocation of 2004 profit as authorised at the
Shareholders' Meeting held on 22 April 2005:
 - to legal reserve                                                                                     100                   (100)                             -
 - dividends declared                                                                                                        (1,624)                  (1,624)
 - retained earnings                                                                                                           (37)       37                    -
 Increase in share capital on 12 May 2005
upon exercise of stock options                                                148            194                                                       342
 Change in the valuation of investments at equity                                                                   1.847                             1,847
 Change in the translation reserve and other changes                                                                 268       (62)                    206
Net profit for the year                                                                                                                  6,004        6,004
Balance at 31 December 2005                                                  54,297         29,508      6,896       2,115     5,770      6,004       104,590
 Allocation of 2005 profit as authorised at the Shareholders' Meeting held
on 26 April 2006:                                                                                       519                              (519)                  -
 - dividends declared                                                                                                                   (2,171)       (2,171)
 - retained earnings                                                                                                          3,314     (3,314)                 -
 Purchase of treasury shares in portfolio                                                                                      (44)                     (44)
 Change in the valuation of investments at equity                                                                  (1,091)     206                     (885)
 Change in the translation reserve and other changes                                                               (1,503)     (36)                   (1,539)
Cost of cancelling the stock option plan (IFRS 2)                                                                              200                      200
 Net profit (loss) for the year                                                                                                          1,051         1,051
Balance at 31 December 2006                                                  54,297         29,508      7,415       (479)     9,410      1,051       101,202



                                                                                                                                                                    17
           NOTES TO THE STATUTORY FINANCIAL STATEMENTS AS AT 31 DECEMBER 2006
                                 ACCOUNTING POLICIES

DECLARATION OF CONFORMITY, FORM AND CONTENT
The consolidated financial statements for the period from 1 January to 31 December 2006 have been prepared for the
first time in accordance with the International Financial Reporting Standards (IFRS) issued by the International
Accounting Standards Board (IASB). These statements have been prepared in euro and rounded to the nearest thousand,
with comparative figures from the previous year's consolidated financial statements, prepared on a consistent basis.
They comprise the balance sheet, the income statement, the statement of changes in shareholders' equity, the cash flow
statement and these explanatory notes .
These financial statements were approved by the Board of Directors on 14 February 2007, so this is the date on which
publication was authorized.

SCOPE OF CONSOLIDATION
Operating through the Parent Company and its subsidiaries, the Stefanel Group manufactures (both directly and using
non-Group suppliers) and sells own-brand and licensed apparel to retailers and the general public. In addition, it
operates in the Airport Retailing segment via Noel International SA, a 50%-owned company .
The interest held by Stefanel S.p.A. in Noel International SA, which wholly owns The Nuance Group AG, is valued
using the equity method.

The scope of consolidation as of 31 December 2006 includes Stefanel S.p.A., the Parent Company, and those companies
in which Stefanel S.p.A., directly or through its subsidiaries, holds the majority of voting rights or exercises a dominant
influence. The list of these companies is attached to these notes.

Control is defined as the power to determine, directly or indirectly, the financial and operating policies of an entity with
a view to obtaining benefits from its activities. Assessment of the existence of control takes account of the existence and
effect of potential voting rights that could actually be exercised or crystallised by conversion. Subsidiaries are
consolidated from the date on which control commences until the date on which control ceases.
Associated companies are entities over which the Group exercises significant influence with, usually, voting rights of
between 20% and 50%. Investments in associated companies are initially recorded at cost and, subsequently, recorded
using the equity method. This involves recognising the Group's interest in their post-acquisition profits or losses in the
consolidated income statement, while the Group's interest in post-acquisition changes in their shareholders' equity is
recognised as an adjustment to consolidated shareholders' equity. The book value of the equity investment is increased
or decreased to reflect the overall changes arising subsequent to the acquisition date.

CONSOLIDATION PRINCIPLES
The following consolidation principles have been adopted:
a) The assets and liabilities, income and expenses reported in financial statements consolidated on a line-by-line basis
    are included in the Group's financial statements, regardless of the size of the equity investment. Furthermore, the
    carrying value of companies consolidated line-by-line is eliminated against the interest in their shareholders' equity,
    and that portion of shareholders' equity and the net result for the year attributable to minority shareholders is stated
    separately in the consolidated financial statements.
b) Positive differences arising on the elimination of investments against the corresponding equity interest at the time
    of initial consolidation are allocated to the assets and liabilities concerned, while any unapportioned differences are
    classified as goodwill. Consistent with the transition instructions included in IFRS 3, the Group has modified the
    accounting treatment of goodwill to adopt the impairment basis with effect from the transition date. Accordingly,
    from 1 January 2004, the Group has ceased to amortise goodwill which is now subject to an impairment test.
c) Receivables and payables, costs and revenues arising between consolidated companies and gains and losses from
    intercompany transactions are eliminated, as are the effects of mergers or the transfer of business activities between
    companies already included in the scope of consolidation.
d) Minority interests in the shareholders’ equity and results for the year of subsidiary companies are classified
    separately in the "Minority interests" captions of the balance sheet and the income statement.




                                                                                                                         18
TRANSLATION INTO EURO OF FINANCIAL STATEMENTS PREPARED IN FOREIGN CURRENCIES
The individual financial statements of each Group company are prepared in the currency of the principal economy in
which they operate (the functional currency). For consolidation purposes, the financial statements of each foreign entity
are stated in euro, which is the functional currency of the Group and the currency in which the consolidated financial
statements are presented.
The balance sheets of foreign subsidiaries denominated in currencies other than the reporting currency (euro) are
translated using the closing exchange rates. The statement of income is translated using the average exchange rates for
the year.
Differences arising from the translation of opening shareholders' equity using the closing rather than the historical
exchange rates, and of the results for the year using the average rather than the closing exchange rates, are classified
together with "Other reserves" within shareholders' equity.
The exchange rates used for the translation to euro of the financial statements of consolidated companies are reported in
the table below.


                                                                     Exchange rate on Average exchange Exchange rate on
Currency                                                                31.12.06       rate at 31.12.06   31.12.05

Czech koruna                                                              0.03638             0.03529             0.03448
Korean won                                                                0.00082             0.00084             0.00084
Swiss Franc                                                               0.62230             0.63570             0.64305
Turkish lira                                                              0.53650             0.55340             0.62798
Japanese yen                                                              0.00637             0.00685             0.00720
Polish zloty                                                              0.26100             0.25670             0.25907
Hungarian forint                                                          0.00397             0.00379             0.00395
Slovak koruna                                                             0,02900             0,02690             0,02639
Hong Kong dollar                                                          0.09076             0.10250             0.10930

SECTOR INFORMATION
A sector is a separately identifiable part of a Group that supplies a collection of similar products and services (sector of
activity) or supplies products and services in a given economic area (geographic sector). At a primary level, two areas
of activity have been identified within the Stefanel Group, the apparel sector and the airport retailing sector;
information is also provided about holding company costs.
At a secondary level, net sales are analysed by the geographic location of the Group's customers.

ACCOUNTING POLICIES
The accounting policies and principles adopted for the preparation of the consolidated financial statements as of 31
December 2006 are set out below:

Intangible assets - Goodwill
Goodwill is the difference between the purchase price of equity investments and the current value of their identifiable
assets and liabilities at the time of acquisition.
As allowed by IFRS 1 (paragraph 15 and Appendix B), the Group has decided not to apply IFRS 3 in relation to
acquisitions that took place prior to the IFRS transition date. As a consequence, the goodwill arising in relation to the
acquisitions made in prior years has not been recalculated and is reported at the value determined in accordance with the
previous accounting policies, which is stated net of the amortisation accumulated until 31 December 2003 and any
losses deriving from permanent reductions in value.

Other intangible assets
In accordance with IAS 38 – Intangible assets, other purchased or internally-produced intangible assets are recognised
when it is probable that their use will generate future economic benefits, and when their cost can be determined on a
reliable basis.
These assets are valued at purchase or production cost and amortised on a straight-line basis over their estimated useful
lives, if this period can be determined. Intangible assets with an indefinite useful life are not amortised, but are subjected
to an impairment test each year, or more frequently if there is evidence that they may have suffered a loss in value.
This category includes the amounts paid by the Group (key money) to take over contracts relating to directly-managed
stores and stores that are managed by third parties under business rental agreements. These amounts are deemed to




                                                                                                                            19
represent intangible assets with an indefinite useful life and, accordingly, they are not amortised4. Note that "indefinite
useful life" does not mean "infinite useful life", but rather that the period of utility cannot be determined, as explained
IAS 38: With reference to opinions prepared by independent experts, the time limits specified in rental contracts are of
limited significance in this regard. In particular, the tenant is protected by market practice and specific legislation;
additionally, the strategy of Group companies is to expand steadily the network of stores and, usually, to renew rental
contracts prior to their natural expiry dates. Together, these factors have resulted over time in almost complete success
for the Group's renewal policy, steadily enhancing the value of the points of sale compared with the key money paid.
The amounts concerned were subjected to an impairment test at the transition date and are stated at the lower of the
historical cost initially incurred and their recoverable value, defined as the higher of value in use and market value
determined by specific appraisals. Subsequently, these amounts are tested for impairment once a year.

Property, plant and equipment
Property, plant and equipment are stated at purchase or construction cost. Cost includes related charges and a reasonable
allocation of direct and indirect production costs. As an exception to this general principle, the building at Ponte di
Piave housing the Group's headquarters is a strategic asset and its book value has been aligned with the most recent
appraisal, in order to reflect more closely its current market value.

Depreciation is provided on a straight-line basis over the estimated useful lives of the assets concerned:

Description                                                                                     Estimated useful life (years)
Buildings                                                                                                    33
Commercial buildings                                                                                         33
Temporary buildings                                                                                          10
Installations, specific plant and machinery                                                                   8
Shop installations, equipment and furnishings                                                                 7
Industrial equipment                                                                                          4
Furniture and office machines                                                                                 8
Electronic machines                                                                                           5
Lorries and internal transport                                                                                5
Motor vehicles                                                                                                4
Leasehold improvements                                                                               duration of contract

Ordinary maintenance costs are fully expensed as incurred. The cost of improvements is allocated to the assets
concerned and depreciated over their residual useful lives. Land is not depreciated.

Leased assets
Fixed assets acquired under finance leasing contracts are stated at purchase cost net of accumulated depreciation, in
accordance with lease accounting methodology.
These assets are depreciated in the consolidated financial statements using the same criteria adopted in relation to other
property, plant and equipment.
The recognition of these assets also involves recognising the short and medium-term liabilities to the leasing companies
concerned; in addition, the lease instalments are reversed from the leases and rentals caption and the interest charge for
the year is recorded in the financial charges caption.

Permanent losses in value
The book value of the Group's assets is reviewed on every accounting reference date to identify any indications of a
permanent loss in value, in which case an estimate is made of the recoverable value of the assets concerned. A
permanent reduction in value (impairment) occurs and is recorded in the income statement when the book value of an
asset or a cash generating unit exceeds its recoverable value.
Property, plant and equipment and other long-term assets, including goodwill and other intangible assets, are subjected
to impairment tests when events or changed circumstances indicate difficulties in the recoverability of their book value.




4
  “An intangible asset shall be regarded by the entity as having an indefinite useful life when, based on an analysis of
all of the relevant factors, there is no foreseeable limit to the period over which the asset is expected to generate net
cash inflows for the entity”.

                                                                                                                        20
Determination of recoverable value
The recoverable value of non-financial assets is the greater of their net selling price or their value in use. Value in use is
determined by discounting estimated future financial flows to their present value, using a discounting rate that reflects
the current market assessment of the value of money and the risks associated with the type of asset concerned. Where
assets do not generate sufficiently independent financial inflows, the recoverable value of the cash generating unit to
which it belongs is determined.

Writebacks
Writebacks occur when there is a change in the valuations used to determine recoverable value. Writebacks are credited
to the income statement and the book value of the assets concerned is adjusted to reflect their revised recoverable value.
This last amount must not exceed the net book value that would have been reported had these assets not been written
down in prior years.

Investment property
As allowed by IAS 40, property and buildings not used in operations and held to earn rental income are valued at cost,
net of accumulated depreciation and any losses in value recorded.
Investment property is eliminated from the financial statements when sold, or when it becomes permanently unusable
and no economic benefits are expected upon disposal.
Depreciation is provided over the estimated useful lives of these assets which, in this specific case, is 33 years since they
are all industrial buildings.

Non-current financial assets
Investments in non-consolidated subsidiary and associated companies and companies under joint control are valued
using the equity method. The excess of cost over the group's share of shareholders' equity at the time of acquisition is
treated in the way described in point b) of the consolidation principles.
Other investments are valued at cost, as reduced to take account of any permanent losses in value. Their original value is
reinstated in future accounting periods should the reasons for such writedowns no longer apply.
Non-current financial assets consisting of receivables are stated at their estimated realisable value.

Inventories
Inventories are stated at the lower of purchase or production cost, determined using the weighted average cost method,
and their corresponding market value. The market value of raw and ancillary materials is deemed to be their
replacement cost, while the market value of finished and semi-finished products is considered to be their estimated
realisable value, taking into account any manufacturing costs and direct selling costs still to be incurred.
The cost of inventories includes related charges and a reasonable allocation of direct and indirect production costs. The
original value of inventories is reinstated in future accounting periods should the reasons for any writedowns no longer
apply. Obsolete and slow-moving items are written down in relation to their estimated useable or realizable value

Receivables
Receivables are stated at their estimated realizable value. Their maturities and seasonality are reviewed regularly to
avoid unexpected writedowns due to losses.
The nominal value of receivables is adjusted to realisable value via the allowance for doubtful accounts, which is
deducted directly from this caption following a detailed assessment of the individual balances concerned. Where
customers are granted extended payment terms without interest, or when collection is expected over the medium term,
the amounts to be collected are discounted to determine the real value of the sale. The difference between the discounted
value and the amount for collection represents financial income to be recorded on an accruals basis and, where
appropriate, deferred to the accounting period in which collection takes place.

Current financial assets
Financial assets held for sale are stated at their fair value and the related economic effects are reported in the income
statement as “Financial income and expense”.

Provisions for risks and charges
The reserves for risks and charges cover known or likely losses, the timing and extent of which cannot be determined at
year-end. Provisions are only recorded in the balance sheet when there is a legal or implied requirement to employ
economic resources for the settlement of an obligation and the amount concerned can be estimated reliably. Where
significant, the provisions are determined by discounting the estimated future financial flows using an estimated pre-tax
rate that reflects the market's assessment of the current value of money and the specific risks associated with the
liabilities concerned.




                                                                                                                           21
Employee termination indemnities
The provision for employee termination indemnities covers the liability to all employees for termination indemnities
accrued in accordance with current legislation, collective payroll contracts and in-house agreements. This liability is
subject to revaluation using officially-established indices
Employee termination indemnities are calculated on an actuarial basis in accordance with IAS 19 and, in particular,
using the Projected Unit Credit Method. This involves revaluing the amounts accrued at the accounting reference date to
reflect the expected duration of the employment relationships. A reasonable estimate of the benefits already
accumulated by each employee is then made by discounting the revalued amounts using a method based on various
demographic and financial assumptions.
Any actuarial gains and losses that exceed 10% of the discounted value of the defined benefits at the end of the prior
period are recorded in the income statement for the period in which they are identified (“corridor method”).

Employee benefits
In accordance with IFRS 2 – Share-based payments, the total fair value of stock options at the time they are granted is
charged to the income statement as a cost. Any changes in their fair value subsequent to the grant date do not affect the
initial valuation. The remuneration corresponding to the fair value of stock options is recognised as a payroll cost on a
straight-line basis over the period between the grant date and the vesting date, with a corresponding credit directly to
shareholders' equity.

Payables
Payables are stated at nominal value. Any unaccrued interest included in their nominal value at year-end is deferred.

Translation of foreign currency balances
Receivables and payables originally denominated in foreign currencies are translated into euro using the exchange rates
applying at the time of the original transactions. Exchange differences realized upon the collection of receivables or the
settlement of payables denominated in foreign currencies are reflected in the income statement.
Revenues and income, costs and charges relating to foreign currency transactions are recorded using the exchange rates
ruling on the dates the related transactions took place.
At period-end, assets and liabilities denominated in foreign currencies, with the exception of fixed assets, are translated
using the spot rates on that date and the related exchange gains and losses are booked to the income statement. Any net
translation gains are treated as non-distributable reserves until they have been realised.

Bank overdrafts and loans
Loans are initially valued at cost, net of related arrangement expenses. This value is adjusted subsequently to take
account of any differences between initial cost and redemption value over the lives of the loans, using the effective
interest method.
Loans are classified as current liabilities, unless the Group has an unconditional right to defer repayment for at least
twelve months subsequent to the accounting reference date.

Derivatives and accounting for hedging transactions
Group activities are primarily exposed to financial risks from changes in exchange rates and interest rates. The Group
uses derivatives (mainly forward currency contracts) to hedge the risk of exchange rate changes on irrevocable
commitments or expected future transactions (purchase orders). Interest-rate risks relate to bank loans; these risks are
hedged in accordance with Group policy by converting floating-rate debt into fixed-rate loans.
The Group does not trade in derivative instruments.
Derivatives are initially recorded at cost and adjusted to reflect their fair value at each period-end.
Changes in the fair value of derivatives designated to hedge future cash flows relating to the commitments and planned
transactions of the Group are recorded as a direct adjustment of shareholders' equity, providing they satisfy the formal
requirements for hedge accounting and have proved effective. Changes in the fair value of derivatives that are not
classified as hedging instruments are recorded in the income statement for the period in which they take place.




                                                                                                                        22
Revenue recognition
Revenues are stated net of returns, discounts, allowances and rebates, as well as taxes directly related to the sale of
products and the provision of services.
Sales revenues are recognised when the significant risks and benefits of owning the assets have been transferred and the
amount of such revenue can be determined reliably.
Financial revenues are recognised on an accrual basis.

Costs
Costs incurred to prepare advertising campaigns are expensed in the period in which the related campaigns are run,
while other advertising and promotional expenses are charged to the income statement as incurred.
Costs incurred for the design and manufacture of samples are matched with the revenues from the sale of the related
collections and, accordingly, are reflected in the income statement in proportion to the revenues earned.

Financial income
Financial income includes interest on invested funds, exchange gains and income from financial instruments, to the
extent not offset as part of hedging transactions. Interest income is credited to the income statement when earned,
having regard for the effective yield.

Financial expense
Financial expense includes the interest charged on financial payables, determined using the effective interest method,
exchange losses and the losses on derivative financial instruments.
The interest element of finance lease instalments is charged to the income statement using the effective interest method.

Current income taxes
Income taxes include all the taxes levied on the Group's taxable income. Income taxes are charged to the income
statement, except for the tax effect of items credited or debited directly to shareholders' equity, which is also recognised
directly as part of shareholders' equity. Other taxes unrelated to income, such as property and capital taxes, are classified
as operating expenses. Deferred taxes are provided using the full liability method. They are calculated on all timing
differences between the fiscal value of assets and liabilities and their book value in the consolidated financial
statements, with the exception of goodwill that is not tax deductible and the differences deriving from investments in
subsidiary companies, which are not expected to reverse in the foreseeable future. The deferred tax assets arising in
relation to tax losses and unutilised tax credits carried forward are recognised to the extent it is likely that future taxable
income will be sufficient to recover them. Deferred and current tax assets and liabilities are offset against each other
when the income taxes concerned are levied by the same tax authorities and a legal right of offset exists. Deferred tax
assets and liabilities are determined using the tax rates expected to be applicable, in the tax jurisdictions where the
Group operates, when the related timing differences become deductible or taxable.

Dividends
Dividends and the related tax credits are recorded on an accruals basis at the time the right to collect them arises, which
is when they are declared.

Treasury shares
Treasury shares are classified as a direct deduction from shareholders’ equity. The book value of treasury shares and the
revenues deriving from subsequent disposals are recorded as changes in shareholders’ equity.

Earnings Per Share
Basic earnings per share is determined by dividing the net profit or loss attributable to the shareholders of the Parent
Company by the weighted average number of ordinary shares outstanding during the period. Diluted earnings per share
is determined by dividing the net profit or loss attributable to the shareholders of the Parent Company by the weighted
average number of ordinary shares outstanding during the period.

Statement of changes in financial position
The cash flow statement has been prepared using the indirect method. The cash and cash equivalents included in the
cash flow statement reflect the related balance sheet amounts at the accounting reference date. Cash flows denominated
in foreign currencies have been translated using the average exchange rates for the period. Income and costs relating to
interest, dividends collected and income taxes are classified together with the cash flows from operating activities.

Estimates
The preparation of the financial statements and related notes in accordance with IFRS requires management to make
estimates and assumptions that influence the reported values of assets and liabilities, as well as the information
provided in relation to contingent assets and liabilities at the balance sheet date. The final amounts concerned may

                                                                                                                            23
differ from such estimates. The estimates are made to value the intangible and tangible assets subjected to the
impairment tests described above, as well as to make provisions for doubtful accounts, obsolete inventories,
depreciation and amortisation, the writedown of assets, employee benefits, taxation, business restructuring and so on.
These estimates and assumptions are reviewed periodically and the effects of any changes are reflected immediately in
the income statement.




                                                                                                                    24
                            COMMENTS ON THE PRINCIPAL INCOME STATEMENT CAPTIONS

Performance by business segment

The Group operates principally in two areas of business, namely:
    the production and sale of apparel in Italy and abroad under various brand names, some proprietary (Stefanel and
    Hallhuber) and some under license (MFG of Marithè & Francois Girbaud via the Interfashion business unit). The
    distribution structure of the Stefanel brand has undergone major changes in the course of recent seasons, with a
    significant growth in the importance of the retail channel;
    airport retailing through "The Nuance Group A.G.". By contractual agreement, the Group exercises joint control
    over this business and, as such, the Group's interest is recorded in the consolidated financial statements using the
    equity method as part of the holding business unit.

In order to guarantee appropriate information about the profitability and financial performance of the business unit
referred to above, this report includes the key economic and financial information of The Nuance Group A.G (see page
27), as well as an estimate of the key economic and financial parameters that would have been reported had that group
been consolidated on a proportional basis (see page 12).


APPAREL SECTOR

The results of the apparel sector are summarised below:
                                                                                                                   4th quarter   4th quarter
    Income Statement Apparel                        2006                      2005                Change
                                                                                                                      2006          2005
                                           Euro mn           %       Euro mn           %      Euro mn      %        Euro mn       Euro mn
Total net sales                             298.0          100.0      272.2          100.0     25.8       9.5         70.5          67.2
Cost of sales                              (127.5)         (42.8)    (111.8)         (41.1)   (15.7)     14.1        (30.8)        (26.2)
Gross profit                                170.5           57.2      160.4           58.9     10.1       6.2         39.7          41.0
Gains/losses on fixed assets                 4.2             1.4       8.0             2.9     (3.8)    (47.2)         0.8          (0.1)
Selling, general & admin. expenses         (150.6)         (50.5)    (129.5)         (47.6)   (21.1)     16.2        (41.2)        (36.9)
EBITDA                                      24.1             8.1      38.9            14.3    (14.8)    (38.0)        (0.7)          4.0
Depreciation, amortisation and value
adjustments                                (12.7)          (4.3)      (12.2)         (4.5)     (0.5)     4.1         (3.8)         (4.2)
EBIT                                        11.4            3.8        26.7           9.8     (15.3)    (57.2)       (4.5)         (0.2)
Financial income and expense                (3.3)          (1.1)       (3.1)         (1.1)     (0.2)     6.5         (0.6)         (0.9)
Income/expenses from investments             0.1            0.0         0.1           0.0       0.0      0.0         (0.3)          0.1
Profit (loss) before tax and minority
interests                                    8.2            2.8       23.7            8.7     (15.5)    (65.7)       (5.1)         (1.0)
Taxes                                       (1.7)          (0.6)      (2.6)          (1.0)     0.9      (34.6)        1.2           3.6
Net profit (loss) of the Group and
minority interests                          6.5             2.2        21.1           7.8     (14.6)    (69.6)       (3.9)          2.6
Net (profit) loss pertaining to minority
interests                                   0.1             0.0         0.1           0.0      0.0       0.0          0.0          (0.1)
Net profit (loss) of the Group              6.6             2.2        21.2           7.8     (14.6)    (69.2)       (3.9)          2.5

Net sales rose by 25.8 million euro (+9.5%) to 298.0 million euro. This improvement was thanks to positive
contributions by Stefanel and Interfashion.
The sales of Interfashion (+21.0%) confirm the upward trend established in recent seasons. Hallhuber's negative
performance (-4.8%) is partly explained by the failure to replace an important store whose lease expired. The 5.0%
increase in the fourth quarter is an improvement in the trend compared with the previous months. In order to combat
this trend the business is focusing its efforts on presenting collections that satisfy consumers better, both in terms of
fashion and price.
Also in light of the new store openings, the growth of 4.8% posted by the Stefanel brand in fourth quarter 2006 (+
9.7% for the year) is below expectations and confirms the need to handle this period of repositioning as delicately as
possible.

Net sales in the apparel sector                                  31.12.2006             31.12.2005               Change                     %
Stefanel                                                              164.5                   150.0                14.5                    9.7
Hallhuber                                                              53.2                    55.8                (2.6)               (4.7)


                                                                                                                                            25
Interfashion                                                       80.3                 66.4                  13.9                 21.0
Net sales                                                        298.0                 272.2                  25.8                   9.5

Segmentation of the sales by Stefanel, Interfashion and Hallhuber, split by geographical area, is shown in note 1 below
on Net Sales.

EBITDA
The apparel sector's operating result prior to depreciation, amortisation and writedowns (EBITDA) comes to 24.1
million euro (2005FY: 38.9 million euro), representing 8.1% of net sales.
The Stefanel Business Unit reports an EBITDA of euro 5.0 million with a decrease of 13.3 million (2005FY: euro 18.3
mn) and Interfashion one of euro 15.7 million (+ 1.9 mn), while Hallhuber shows a contraction of euro 3.5 million to
euro 3.3 million. In the case of the Stefanel business, these results reflect lower income of 4.7 million euro caused by
the sale, due to replacement, of a number of non-strategic stores. From a strictly commercial point of view, given that
growth derives almost entirely from the new stores, the positive effect of these higher sales is more than offset by the
increase in operating costs of the new stores (around euro 8.0 mn), whose performances are still well below their
potential; in addition, there were higher advertising costs for the launch of the new campaign (euro 3.6 million).

Depreciation and amortisation
Further to the major investment in enlarging and improving the distribution network, depreciation and amortisation
charges have climbed to 12.7 million euro (2005FY: 12.2 million euro).

Operating income
As a result of the trends described above, operating profit (EBIT) is 57.2% lower than last year. In particular, the
operating profit for 2006, 11.4 million euro, is 15.3 million lower than in December 2005. Following financial charges
of 3.3 million euro, the profit before tax and minority interests totals 8.2 million euro.

Net profit (loss)
After charging net income taxes pertaining to the Group of euro 1.7 million, as explained in greater detail in the
relevant note (page 31), the net result of the apparel sector is a profit of euro 6.6 million (euro 21.2 in 2005).


HOLDING5
           Income Statement Holding                             2006                           2005                    Change

                                                              Euro mn                      Euro mn                     Euro mn
Gains/losses on fixed assets                                     7.2                          0.0                        7.2
Selling, general & admin. expenses                              (2.7)                        (3.0)                       0.3
EBITDA                                                           4.5                         (3.0)                       7.5
Depreciation, amortisation and value adjustments                 0.0                          0.0                        0.0
EBIT                                                             4.5                         (3.0)                       7.5
Financial income and expense                                    (4.5)                        (4.1)                      (0.4)
Income/expenses from investments                                (5.5)                        (8.1)                       2.6
Profit (loss) before tax and minority interests                 (5.5)                       (15.2)                       9.7
Taxes                                                            0.0                          0.0                        0.0
Net profit (loss) of the Group and minority interests           (5.5)                       (15.2)                       9.7
Net (profit) loss pertaining to minority interests               0.0                          0.0                        0.0
Net profit (loss) of the Group                                  (5.5)                       (15.2)                       9.7

The capital gains relate to the sale of a property portfolio to a related entity, as explained in page 45 below in the
section on related party transactions.



5
  This caption includes the costs of the “Chairman's Office” and “General Management”, as well as those of administrative activities
associated with the financial consolidation process, Group financial management and the management of senior human resources.
This distinction is purely for managerial and organisational purposes, since the Parent Company, Stefanel S.p.A., continues to act in
the dual role of both holding company and operating company for Stefanel-brand activities. The table of holding structure costs also
includes the financial charges deriving from that part of the debt that is in excess of the apparel business unit financing requirement.



                                                                                                                                     26
Holding structure costs, as conventionally defined, amount to 2.7 million euro in 2006, almost 0.5 million euro higher
than in 2005 (2.2 million euro net of the provision). The increase is substantially attributable to the higher costs
incurred for the incorporation and coordination of the new affiliates and for cancellation of the stock option plan.
In the same period, the financial charges amounted to 4.5 million euro. This was 0.4 million euro higher due to an
increase in interest rates, only partly offset by the better conditions obtained on re-negotiation of the medium-term
loan.

Results from Investments
The 50% interest in Noel International SA, which wholly owns The Nuance Group AG carried at equity, reports a loss
of 5.5 million euro (2005FY: - 8.1 million euro), of which 5.1 million euro related to the Nuance Group and 0.4 million
euro to its parent company Noel International SA.
The performance of this business is described in detail in the following section.


INFORMATION ON THE NUANCE GROUP

In order to ensure an adequate level of disclosure regarding the results and financial position of this important business
unit, and to supplement the information provided by the pro forma consolidated figures (see page 12), the key financial
and operating figures are discussed below.

In 2006 Nuance reports a 3.4% increase in sales, but lower margins than in 2005. While this reflects significant
improvements in the performance of certain subsidiaries operating in countries like Switzerland, Hong Kong and the
United States, these were offset by the negative performance of the operations in Denmark and Australia, whose results
were ever more penalised by the rising proportion of concession costs.
The year was heavily conditioned by the impact of the more stringent security measures introduced on 10 August.
These measures, which effectively discouraged sales of products containing liquids and/or gel, while creating
considerable confusion as to how they should be applied, provoked significant drops in sales of certain product
categories such as perfume, cosmetics and spirits, all with higher profit margins.

Nuance continued to implement at all group companies the measures foreseen in the "best selling" project, which is
designed to boost sales.

Moreover, in line with the strategy to improve and develop the business in Australia, the Nuance Group won the new
duty free concession at Sydney Airport, Australia's largest in terms of passenger traffic.
In the same area of the world, this important operation was accompanied by a new agreement to extend the existing
concession at Cairns international airport, the fifth largest in terms of passenger traffic in Australia, for another 5
years, as well as a new concession in New Zealand to operate at the airport of its capital, Wellington.
Last November, the Nuance Group entered a strategic market like India for the first time by winning the concession to
run commercial activities at Bangalore Airport in a joint venture with its local partner Shoppers' Stop.
Lastly, it has been awarded a new concession to operate until 31 December 2010 in Malmo-Sturup Airport, which with
1.8 million passengers is Sweden's third largest airport. This brings to 14 the number of airports where Nuance has a
presence in Sweden.
It is also worth repeating that the duty free concessions at Copenhagen Airport (11% of sales) and Vancouver Airport
(3.0% of sales) will expire at the end of February 2007.

For ease of understanding, the figures shown below reflect the amounts pertaining to the Stefanel Group (i.e. 50% of
the results of the Nuance Group); the figures are expressed in euro and have been prepared under IAS/IFRS. Note that
in the breakdowns of operating costs that follow (both for 2006 and 2005), the subsidiary operating in Denmark has
been shown separately in the consolidated income statement as a discontinued operation, so as to highlight the results
of this activity and the impact of closing it down. This classification has been adopted because it is the treatment
recommended by IFRS no. 5 “Discontinued Operations”, which requires the results of such operations to be shown
separately in the income statement, as well as their assets and liabilities in the balance sheet.




                                                                                                                        27
                  Income statement
                                                             FY 2006                 FY 2005                Change
                  The Nuance Group
                                                        Euro mn        %.       Euro mn        %.       Euro mn      %.
Total net sales
                                                            512.8      100.0         496.7     100.0         16.1       3.2
Cost of sales
                                                          (240.6)      (46.9)      (232.6)     (46.8)        (8.0)      3.5
Gross profit
                                                            272.2        53.1        264.1       53.2          8.1      3.1
Selling, general & admin. expenses
                                                          (255.2)      (49.8)      (246.1)     (49.5)        (9.1)      3.7
EBITDA
                                                             17.0         3.3         18.0        3.6        (1.0)    (5.5)
Depreciation, amortisation and value adjustments
                                                             (7.7)      (1.5)         (7.0)     (1.4)        (0.6)      8.8
EBIT
                                                               9.4        1.8         11.0        2.2        (1.6)   (14.7)
Financial income and expense
                                                             (4.4)      (0.9)         (3.6)     (0.7)        (0.8)     22.7
Income/expenses from investments
                                                               0.8        0.2           0.5       0.1          0.3     49.9
Profit (loss) before tax and minority interests
                                                               5.8        1.1           8.0       1.6        (2.2)   (27.1)
Taxes
                                                             (3.2)      (0.6)         (1.8)     (0.4)        (1.4)     77.6
Result of continuing business activities
                                                               2.6        0.5           6.2       1.2        (3.6)   (57.6)
Result of discontinued activities
                                                             (5.8)      (1.1)       (12.2)      (2.5)          6.4   (52.6)
Net profit (loss) of the Group and minority interests
                                                             (3.2)      (0.6)         (6.0)     (1.2)          2.8   (47.4)
Net (profit) loss pertaining to minority interests
                                                             (1.9)      (0.4)         (1.9)     (0.4)        (0.0)      1.6
Net profit (loss) of the Group
                                                             (5.1)      (1.0)         (7.9)     (1.6)          2.8   (35.6)

Net sales by the Nuance Group during 2006 pertaining to the Stefanel Group amount to 512.8 million euro, which is
3.2% higher than in 2005 (496.7 million euro).

EBITDA is 17.0 million euro, staying broadly in line with last year's figure (2005FY: 18.0 million euro). This result
reflects the higher proportion of concession costs reported by certain operations that were only partly offset by
improvements in operational management.
EBIT was positive (9.4 million euro) though 1.6 million euro down on last year (2005FY: 11.0 million euro).

After deducting 4.4 million euro in financial charges and 3.2 million euro in taxes (2005FY: 1.8 million euro), the net
result was positive for 2.6 million euro (2005FY: 6.2 million euro). The increase of 0.8 million euro in financial
expense is due to the rise in interest rates.

The net result of the Group is a loss of 5.1 million (a loss of 7.9 million in 2005) after recording the result of
discontinued operations, namely a loss of 5.8 million euro, and the loss pertaining to minority interests of 1.9 million
euro.

                     Net debt                                               (amounts in euro mn)
                    31.12.2006                                                      65.5
                    31.12.2005                                                      51.0
                     Change                                                        (14.5)

The net debt of the Noel-Nuance group is 65.5 million euro, up 14.5 million euro since 31 December 2005 (51.0
million euro).. This position is the result of a gross indebtedness on the part of the business unit of euro 103.9 million
(of which 31.0 mn in the form of intercompany loans granted by the shareholders) and cash and cash equivalents which
at the year-end amounted to euro 38.4 mn.




                                                                                                                          28
COMMENTS ON THE PRINCIPAL INCOME STATEMENT CAPTIONS

1. Total net sales - sales by geographical area

Foreign sales represented 59.7% of the total.

                                             Business               Business               Business
                                             Stefanel             Interfashion             Hallhuber                Total net sales
EUROPE
Italy                                     97.9           60.1%   20.8            26.5%      -            0.0%      118.7          40.3%
Europe - EU (excl. Italy)                 30.4           18.7%   48.9            62.2%   52.2           99.1%      131.5          44.8%
Europe - non-EU (excl. Eastern Europe)    10.9            6.7%    2.9             3.7%    0.5            0.9%       14.3              4.9%
Eastern Europe                             6.9            4.2%    2.6             3.3%      -            0.0%        9.5              3.2%
Total Europe                             146.1           89.7%   75.2            95.7%   52.7          100.0%      274.0          93.2%
OTHER
Far East                                   1.4            0.9%    0.6             0.8%      -            0.0%        2.0              0.7%
Middle East                                0.6            0.4%    0.3             0.4%      -            0.0%        0.9              0.3%
North America                              0.6            0.4%    1.7             2.2%      -            0.0%        2.3              0.8%
South America                              0.1            0.1%      -             0.0%      -            0.0%        0.1              0.0%
Other countries                           14.0            8.6%    0.8             1.0%      -            0.0%       14.8              5.0%
Total other countries                     16.7          10.3%     3.4            4.3%       -           0.0%        20.1              6.8%



Total net sales                          162.8          100.0%   78.6        100.0%      52.7          100%        294.1         100.0%

2. Other revenues
This caption is analyzed in the table below. "Other" principally relates to the recovery of expenses incurred on behalf of
third parties.

                                                                                                            2006                   2005
Sale of raw materials                                                                                        762                    779
Royalties and commission income                                                                            1,899                  1,637
Other                                                                                                     1,195                  2,438
Total                                                                                                     3,856                  4,854


3. Cost of sales
The increase in the cost of materials and subcontract services is explained by the growth in sales.
                                                                                                           2006                  2005
- materials and subcontract services                                                                    112,722                102,609
- direct labour and related costs                                                                          9,066                 6,373
- other manufacturing costs                                                                               13,294                17,550
- (increase) decrease in inventories                                                                     (7,583)              (14,691)
Total cost of sales                                                                                     127,499                111,841

4. Gains/losses on disposal of fixed assets
The gains realised during the year amount to 12,431 thousand euro and refer for 4,525 thousand euro to the sale, due to
replacement, of certain non-strategic stores in Italy and abroad, and for 7,236 thousand euro to the sale of certain
buildings as better described below, in the section on related party transactions. The losses of 968 thousand euro relate
to the sale of other company assets.




                                                                                                                                       29
5. Selling, general and administrative expenses
The cost of services, 153,350 thousand euro, is analysed below.

                                                                                                   2006              2005
Personnel costs                                                                                 45,667            40,525
Rental expense, net                                                                             37,398            32,718
Royalties and commission expense                                                                 7,926             6,931
Distribution expenses                                                                            3,197             3,004
Advertising expenses                                                                            10,788             6,318
Other selling expenses                                                                          15,858            10,515
Consultancy, legal expenses, auditing                                                            8,064             7,629
Utilities                                                                                        4,133             3,311
Maintenance                                                                                      2,537             2,022
Provisions to the allowance for doubtful accounts                                                2,638             2,434
Travel and entertainment                                                                         2,698             2,576
Emoluments of directors and officers                                                             1,645             1,531
Other expenses                                                                                  10,801            13,042
Total                                                                                          153,350           132,556

The rise in payroll costs and rents are attributable to the increased number of directly managed Stefanel stores in Italy
(+3) and, above all, abroad (+27). Personnel costs include figurative costs resulting from cancellation of the stock option
plan (euro 200 thousand)
The advertising investments made as part of the process of repositioning the Stefanel brand amounted to euro 6.1
million, an increase of 3.6 million on the previous year.
The rise in other selling expenses is strictly connected with services provided to Stefanel franchisees for managing
stores under a sale-or-return contract, which increased by 54.
Other expenses refer principally to costs for insurance (1,338 thousand euro), commissions on credit cards (1,139
thousand euro), cleaning and surveillance (1,397 thousand euro), and stationery and printed matters (1,351 thousand
euro).

Personnel
The changes in employee numbers during the period 2006, are analysed below, by grade.

                                                                                                          Average for the
                                          31.12.2005    Recruits          Leavers          31.12.2006          year
Managers                                      19           3                 (3)               19               19
Supervisors                                    53         17                 (6)               64               59
Clerical and sales staff                     1,467        481              (362)              1,586           1,527
Foremen                                       716         94                 (5)               805             761
Workers                                       156         20                (12)               164             160
Total                                        2,411        615              (388)              2,638           2,525

The net increase in the number of employees is mainly due to the growth in the number of directly managed stores.

6. Depreciation, amortisation and value adjustments
Details of these costs can be found in the subsequent notes on property, plant and equipment and intangible assets.

7. Financial income (expense)

Interest and other financial income
                                                                                                   2006               2005
Bank interest income                                                                               126                 83
Interest charged to customers                                                                       45                 75
Income relating to interest rate hedges                                                          2,033                638
Other income                                                                                     1,710              2,271
Total                                                                                            3,914              3,067




                                                                                                                        30
The increase in income relating to interest rate hedges reflects the effectiveness of the hedging transactions carried out;
further details are given in the section on derivatives.
“Other income” mostly refers to interest on loans to Noel International Sa and on tax refunds receivable by the Parent
Company.

Interest and other financial charges
Interest and other financial charges amount to 11,678 thousand euro, as analysed in the table below.

                                                                                                   2006               2005
Bank interest:
- current account overdrafts and notes presented with recourse and short-term payables             512              6,234
- long-term loans                                                                                7,020                773
Interest on other payables                                                                         492              1,908
Charges relating to interest rate hedges                                                         1,836                805
Sundry charges                                                                                   1,818                581
Total                                                                                           11,678             10,301

The increase in charges relating to interest rate hedges is linked to the higher amount of capital being hedged and this
effect has to be taken together with the income item mentioned previously (see also the section on derivatives).

8. Income and expenses from investments
This caption mainly includes the effect of valuing at equity the investment in Noel International SA, the Nuance Group's
holding company.
In 2006, the investment held in Noel-Nuance produced a negative result of 5,512 thousand euro. Additional information
on the results of the Nuance Group is provided in earlier schedules describing the performance of the various sectors of
business.

9. Income taxes
The following table provides a breakdown of the tax charge by type of tax:

Current taxes                                                                                      2006              2005

IRAP                                                                                               2,445             2,440
IRES                                                                                               5,334             4,867
Income deriving from the world-wide group tax return                                             (4,140)           (2,628)
Current income taxes                                                                               (301)               251
Total current taxes                                                                                3,338             4,930
Deferred taxes
Deferred tax assets:
from timing differences                                                                          (2,934)           (7,983)
reversals of deferred tax assets                                                                   3,724             1,546
from tax losses                                                                                  (1,360)             (264)
Deferred tax liabilities :
from timing differences                                                                              960             6,384
reversals of deferred tax liabilities                                                            (1,985)           (2,059)
Total deferred tax liabilities                                                                   (1,595)           (2,376)
Total taxes                                                                                        1,743             2,554

The decrease in corporate income taxes in 2006 compared with the same period of the previous year comes from the
increase in income deriving from the group tax return, amounting to euro 4,140 thousand, which comes from offsetting
the tax losses of the foreign subsidiaries included in the group tax filing with the taxable income made by Interfashion
SpA.




                                                                                                                        31
The following table is a reconciliation of the theoretical and effective tax burden.

                                                                                  IRES      IRAP     TOTAL
Profit (loss) before tax                                                          2,664
Taxable income - IRAP                                                                       54,970
Standard rate                                                                       33%     4.25%
Theoretical tax                                                                    (880)   (2,336)    (3,216)
Tax effect on add-backs                                                         (12,534)     (768)   (13,302)
Tax effect on deductions                                                          12,220       694     12,914
Tax on taxable income                                                            (1,194)   (2,410)    (3,604)
Other adjustments:
Effect of 5.25% IRAP regional split                                                          (35)        (35)
Other                                                                                                     301
Total current taxes                                                                                   (3,338)
Deferred tax liabilities on temporary differences, carry-forward
losses and other differences                                                                            1,595
Effective net tax                                                                                     (1,743)




                                                                                                          32
                        COMMENTS ON THE PRINCIPAL BALANCE SHEET CAPTIONS

10. Goodwill and other intangible assets
The following table analyses intangible assets at 31 December 2006 in comparison with the situation at the end of 2005:



                                                                                          Other
                                                       Intellectual                   intangible
                                                    property rights      Goodwill         assets   Key money        Total
Opening net book value                                       1,495          6,891            123       38,354      46,863
Additions                                                    1,010              0              0        4,951       5,961
Amortisation charge                                          (709)              0           (51)            0       (760)
Decreases for disposals and retirements                           0             0              0      (1,850)     (1,850)
Other changes                                                     0             0           (15)            0        (15)
Writedowns                                                        0             0              0        (175)       (175)
Exchange differences                                            (1)             0              0            0          (1)
Closing net book value                                       1,795          6,891             57       41,280      50,023

No intangible assets have been generated internally.

Goodwill
The goodwill paid on the purchase of the investment in Hallhuber GmbH amounts to 6,891 thousand euro at 31
December 2006 and has been subjected to an impairment test. This test involved estimating its recoverable value in use
by examining the forecast cash flows of the stores in the Hallhuber retail network. Furthermore, the market value of this
business, as reflected in recent acquisition proposals received by the Group, is considerably higher than its book value,
including the related goodwill.

Key money
The key money recorded in the consolidated financial statements is treated as an intangible asset with an indefinite useful
life which, accordingly, is not subject to amortisation. Book value represents the lower of the historical cost initially
incurred and realisable value, resulting from the asset's estimated value in use or specific appraisals commissioned by the
Group. This value is tested for impairment in accordance with IAS 36. The increase in the period is attributable to the
acquisition of new stores in Italy, particularly in Turin, Milan and Florence. The market value of the Group's key money
based on recent estimates by independent experts is, overall, a good deal higher than the figures shown in the balance
sheet.


11. Investment property
After the sale of the industrial building in Thiene (not used for business purposes), no other property investments were
made during the year.




                                                                                                                       33
12. Property, plant and equipment

The following table shows the net book value of property, plant and equipment at 31 December 2006, compared with
the equivalent value at the end of the previous year.

                                                                                         31.12.2006          31.12.2005
Land and buildings                                                                           14,972              21,116
Plant and machinery                                                                           7,035               7,092
Other assets                                                                                 39,450              35,649
Total                                                                                        61,457              63,857

The changes with respect to the prior year relate to:

                                                                                                              31.12.2006
Additions                                                                                                        15,752
Decreases for disposals and retirements                                                                         (6,307)
Depreciation charge                                                                                            (11,107)
Exchange differences                                                                                              (118)
Writedowns                                                                                                         (41)
Decreases for impairment                                                                                          (604)
Other changes                                                                                                        25
Total                                                                                                           (2,400)

“Other assets” is made up of:
                                                                                          31.12.2006         31.12.2005
Electronic machines                                                                           1,203                892
Furniture and fixtures                                                                       13,603             11,628
Leasehold improvements                                                                       13,399             12,912
Lorries and internal transport                                                                  879                948
Commercial and industrial equipment                                                           9,515              7,744
Other                                                                                           851              1,525
Total                                                                                         39,450             35,649

During the year, gross investments were made for a total of euro 21,713 thousand, of which euro 15,752 thousand in
property, plant and equipment, mainly in connection with the operating of stores and the refurbishing of other stores
selling Stefanel (euro 10,149 thousand) and Hallhuber (euro 3,852 thousand) brand products. Depreciation and
amortisation charges for the period amount 11,867 thousand euro, of which 11,107 thousand relate to property, plant
and equipment.
Impairment testing carried out when preparing financial statements to verify the existence of losses, led to a writedown
of property, plant and equipment of 603 thousand euro.
Details of changes in property, plant and equipment is reported in the attachment to these notes.




                                                                                                                     34
13. Investments
The following is a list of the companies included in the scope of consolidation and those valued using alternative
methods.
COMPANIES CONSOLIDATED ON A LINE-BY-LINE BASIS


            Name of company                 Registered office     Curr-     Share capital           % Group
                                                                  ency                              ownership


                                                                                                31.12.2006 31.12.2005
PARENT COMPANY
STEFANEL S.p.A.                                                  Euro             54,296,744             -          -


ITALIAN SUBSIDIARIES
Interfashion S.p.A.                   Ponte di Piave (TV)        Euro              3,600,000          100         100
Stout S.p.A.                          Ponte di Piave (TV)        Euro              1,938,000          100         100
Victorian S.r.l.                      Ponte di Piave (TV)        Euro                516,000          100         100
FOREIGN SUBSIDIARIES
Stefanel España S.L.                  Madrid – Spain             Euro              4,760,600           100        100
Lara Stefanel S.a.s.                  Paris - France             Euro              3,050,000           100        100
Stefanel GmbH                         Munich - Germany           Euro              1,600,000           100        100
Stefanel International Holding N.V.   Amsterdam - Holland        Euro             11,751,000          100         100
Stefanel Romania S.r.l.               Bucharest - Romania        RON               1,791,480           100        100
Stefburg Mode GmbH                    Linz - Austria             Euro                363,364           100        100
Stefpraha S.r.o.                      Prague, Czech Republic     CSK               5,000,000           100        100
Sfk Ltd.                              Seoul - Korea              KRW           9,550,000,000         95.29      95.29
Stefanel Universal S.r.l.             Bucharest - Romania        RON                   2,200            65         65
Hallhuber GmbH                        Munich - Germany           Euro              1,300,000           100        100
Stefanel Fashion Turkey A.S.          Istanbul - Turkey          TRY               8,252,000          99.8       99.8
S.T. Ariè Lda                         Lisbon - Portugal          Euro                124,700            75         75
Stefanel Japan Inc.                   Tokyo - Japan              JPY              95,000,000           100        100
Stefanel Hungary Kft.                 Budapest - Hungary         HUF              45,420,000          100         100
Stefanel Polonia Sp. Z o.o.           Warsaw - Poland            PLN                 680,000          100         100
Stefanel Hellas S.A.                  Athens - Greece            Euro              1,050,000          100         100
Stefanel Slovakia S.r.o.              Bratislava - Slovakia      SKK                 200,000          100           -
Stefanel Hong Kong Ltd.               Hong Kong                  HK$               2,500,000          100           -


INVESTMENTS VALUED USING OTHER METHODS


COMPANIES CARRIED AT EQUITY
                                                                                                     % held

                                                                 Curr-         Share
Name of company                       Registered office          ency          capital          31.12.2006 31.12.2005


Noel International S.A.               Luxembourg                 Euro            18,000,000            50          50


As already mentioned, the Group has a 50% interest in Noel International S.A. which wholly owns The Nuance Group
AG. Under the terms of the current governance agreement, this is an entity under joint control. In view of the
significance of this investment, additional information has been provided (page 27 of this document) in line with the
economic and financial disclosures presented in prior years.




                                                                                                                  35
Note that in addition to the investment relationship, there are also intercompany loan contracts signed by The Nuance
Group A.G. and its holding company Noel International Sa and therefore between this company and the parent company
Stefanel S.p.A., as explained in note 14 below.


COMPANIES CARRIED AT COST

                                                                                                       % held

                                                                               Share
Name of company                    Registered office           Currency        capital           31.12.2006      31.12.2005


Omnia Factor S.p.A.                Milan - Italy               Euro                4,000,000              5               5
Polimoda s.r.l.                    Florence - Italy            Euro                  588,000           1.63            1.63
M.F.G. Retail Compagnie S.A.S.     Paris - France              Euro                   50,000             40              40
Stefanel de Argentina S.A.
in liquidation                     Buenos Aires - Argentina    ARS                 1,000,000            100            100
Swiss Factory Outlet S.A.          Chiasso - Switzerland       CHF                   100,000             98             98

The subsidiaries Stefanel de Argentina and Swiss Factory Outlet have been excluded from consolidation since they are
no longer relevant having ceased to do business. Had they been carried at equity this would not have involved any
significant changes in their valuation relative to the valuation at cost actually adopted.
Similarly, the associated company M.F.G. Retail Compagnie S.A.S., the investment in which is held by the subsidiary
Interfashion S.p.A., has been recorded at cost since the equity valuation would not have been significantly different.

The following commercial companies were formed during the fourth quarter and, since they are not yet operational, they
have not been included within the scope of consolidation:

NEWLY-FORMED AND NON-CONSOLIDATED COMPANIES

                                                                                                       % held

                                                                               Share
Name of company                     Registered office          Currency        capital           31.12.2006      31.12.2005


HI–INT S.A.                         Luxembourg                 Euro                  50,000                65               -

The following table reports the changes during the period:

                                                              31.12.2005      Increases        Decreases        31.12.2006
Noel International S.A.                                           22,271              -          (6,419)            15,852
Omnia Factor S.p.A.                                                  204              -                -               204
Polimoda s.r.l.                                                       20              -                -                20
M.F.G. Retail Compagnie S.A.S.                                        20              -                -                20
Stefanel de Argentina S.A. in liquidation                              3              -                -                 3
Swiss Factory Outlet                                                   -             87                -                87
Hi-Int SA                                                              -             68                -                68
Other                                                                  6              -              (5)                 1
Total                                                             22,524           155           (6,424)            16,255

The decrease in the value of the investment in Noel International SA reflects a valuation of the Nuance Group using the
equity method. In particular, this valuation involved a charge for the year of euro 5,535 thousand and a direct reduction
in shareholders' equity of euro 884 thousand deriving from the change in the translation reserve and other movements
affecting equity.

The newly-established company Hi-Int S.A. is the owner of the new HIGH trademark, for which a licence contract has
been stipulated with Interfashion S.p.A. which will handle its launch and development.




                                                                                                                       36
14. Non-current financial receivables and other assets
Long-term financial assets amount to 32,036 thousand euro at 31 December 2006. This balance is analysed as follows:



                                                                                            31.12.2006          31.12.2005
Medium-term loan in favour of Noel International SA                                             30,965              30,624
Derivatives at fair value                                                                          751                 121
Other                                                                                              320                 436
Total                                                                                           32,036              31,181

The contractual terms of the loan agreements signed by The Nuance Group AG significantly restrict that company's
ability to transfer funds to its parent, Noel International SA, and therefore to Stefanel S.p.A., whether in the form of
dividends or the repayment of intercompany loans and/or finance, including the related interest.

15. Other non-current receivables and assets
                                                                                             31.12.2006         31.12.2005
Due from the tax authorities - medium term                                                       12,002             12,968
Guarantee deposits                                                                                2,722              2,562
Due from customers beyond one year                                                                2,577              3,617
Other                                                                                                16                121
Total                                                                                            17,317             19,268

In prior years, Stefanel S.p.A. signed two contracts for the sale with recourse of reclaimed tax credits totalling 10,317
thousand euro. These receivables were eliminated from the assets reported in the balance sheet in accordance with the
accounting policies applied at the time. As allowed by IFRS 1, such receivables have not been reinstated since the
disposals took place prior to 1 January 2004. Note that in October the Company received a rebate from the Tax
Authorities of a first tranche of euro 500 thousand of capital and euro 264 thousand of interest.

16. Deferred tax assets
Deferred tax assets totalling 13,100 thousand euro, of which 8,745 thousand euro have been recorded in relation to the
tax losses of the Parent Company, which will be offset against its taxable income for the current year.
In addition, Italian subsidiaries have also recorded deferred tax assets in relation to their deductible timing differences.
These receivables have been booked because there is reasonable certainty that they will be recovered, given the ability of
the individual companies to generate taxable income based on updated forecasts.

17. Inventories
Inventories are analyzed as follows:

                                                                                             31.12.2006         31.12.2005
Raw, ancillary and consumable materials (at cost)                                                 6,669               6,457
Work in process and semifinished products (at cost)                                              11,447              12,318
Finished products and goods for resale (at cost)                                                 61,780              53,401
Gross value                                                                                      79,896              72,176
Less: Writedown                                                                                (10,616)             (9,719)
Net value                                                                                        69,280              62,457

The increase in inventories is mainly due to the conversion of many franchising relationships into sale-or-return
contracts, as discussed above, as well as the increase in the number of directly managed stores in Italy and abroad.
All. obs. goods                                                                   Other                    All. obs. goods
as of 31.12.2005                       Writedowns          Utilizations        adjustments                as of 31.12.2006
9,719                                    6,741                (5,836)               (8)                             10,616




                                                                                                                        37
18. Trade receivables
Trade receivables amount to 40,274 thousand euro and have been adjusted to their estimated realisable value by means
of an allowance for doubtful accounts.
                                                                                          31.12.2006       31.12.2005
Due from third parties within one year                                                        40,173           44,322
Due from associated companies within one year                                                     101             156
Total current receivables                                                                     40,274           44,478

This allowance, totalling 13,790 thousand euro (14,925 thousand euro at 31 December 2005), covers estimated losses on
disputed and/or overdue receivables.

                                                            Gross value          Allowance for doubtful    Net value
                                                                                       accounts
Due from customers within one year                            54,064                   (13,790)             40,274

These receivables include trade notes and bank receipts totalling 5,824 thousand euro not yet due at period-end, either
held in portfolio or presented for collection or advances with recourse.
Receivables subject to collection beyond the normal trade terms allowed to customers have been discounted using an
annual rate of 4.995%. This process reduced the reported value of receivables by 1,301 thousand euro with respect to
their nominal value.
These receivables are also stated after making a provision to a specific allowance (totalling 2,062 thousand euro at 31
December 2006) against potential returns and/or credit notes that might be required as part of the trading relationship
with customers.

Changes in the allowance for doubtful accounts:

Balance at 31.12.2005                                                                                           14,925
Provision                                                                                                        2,693
Utilisation                                                                                                     (3,828)
Balance at 31.12.2006                                                                                           13,790

19. Other current receivables and assets

                                                                                         31.12.2006         31.12.2005
VAT recoverable                                                                               2,292              3,117
Advances to suppliers and agents                                                              2,936              1,461
Advances to employees                                                                            87                 77
Amounts due from social security institutions                                                   164                172
Insurance compensation for damages                                                              390                346
Other receivables                                                                             1,500                964
Total other receivables                                                                       7,369              6,137

Accrued income:
  - Insurance policies                                                                              8                  5
  - Interest on loans                                                                               0                  1
  - Other                                                                                          28                161
Total accrued income                                                                               36                167
Prepaid expenses:
  - Insurance policies                                                                            546               82
  - Rentals and leases                                                                          2,341            2,342
  - Advertising                                                                                 1,487            1,018
  - Sample costs                                                                                7,323            5,287
  - Other                                                                                       1,731              835
Total prepaid expenses                                                                         13,428            9,564
Total                                                                                          20,833           15,868


                                                                                                                     38
The VAT recoverable reflects the Group VAT position at the end of December. None of the receivables is due beyond
five years.

Prepaid sample costs refer to the deferral of part of the costs relating to the design and production of samples for the
Spring/Summer 2007 and Autumn/Winter 2007/2008 collections for which the corresponding sales revenue has not yet
been earned. No accrued income or prepaid expenses have a duration of more than five years.

There were four outstanding interest-rate hedges at the year-end relating to a medium-term loan for 80,374 million euro,
corresponding to 70.0% of the remainder of the loan.
Although these instruments have the purpose and characteristics of hedges, they do not fully satisfy all the formal and
informal requirements to qualify for hedge accounting as envisaged by IAS 39. Accordingly, all the changes in the fair
value of such instruments are reflected in the income statement. The recording of derivative financial instruments has
involved the recognition of a financial asset totalling 751 thousand euro at 31 December 2006. This reflects the market
prices of these instruments at the reference date, provided by the banks that arranged the transactions concerned. To
match the recognition of this asset, financial income of 751 thousand euro was recorded in the period.


20. Cash and cash equivalents
The total cash and cash equivalents held by the Group amount to 39,131 thousand euro (38,191 thousand euro at
31.12.2005) and relate to temporary liquidity held on bank current accounts for future use.
                                                                                          31.12.2006         31.12.2005
Cash                                                                                            5,807             3,301
Bank accounts                                                                                 33,324             34,890
Total                                                                                         39,131             38,191




                                                                                                                     39
              COMMENTS ON THE PRINCIPAL BALANCE SHEET CAPTIONS - LIABILITIES

21. Shareholders' equity
Share capital as of 31 December 2006 amounts to euro 54,296,744, represented by 54,196,998 ordinary shares and
99,746 non convertible saving shares, par value 1 euro each.
The legal reserve amounts to 7,415 thousand euro, while the Parent Company's share premium is 29,508 thousand euro.

No deferred taxes have been provided in relation to this revaluation reserve, which is partially in suspense for tax
purposes, because at present the Group has no plans to carry out any transactions that would give rise to such taxation.

Stefanel S.p.A. holds 113,201 treasury shares, of which 112,000 are ordinary shares and 1,201 non-convertible savings
shares.


                                                 Number of       Nominal        % Share         Carrying        Average unit
                                                  ordinary        value         capital          value             value
                                                   shares
Balance as of 01.01.2006                             100,000          100.00          0.1842          383.20           3.832
Purchases                                             12,000           12.00            0.02            43.8            3.65
Sales                                                      0            0.00           0.000            0.00           0.000
Writedowns                                                 0            0.00           0.000            0.00           0.000
Writebacks                                                 0            0.00           0.000            2.00           0.000
Balance as of 31.12.2006                              112,000         112.00           0.206            355.1          3.171

The articles of association grant the following rights and privileges to non-convertible savings shares:
Art. 5) (abstract) Savings shares have the same rights as other shares upon the distribution of reserves.
Art. 19) Net profit is allocated as follows:
     5% (five percent) to the legal reserve, until this reserve has reached an amount equal to at least one-fifth of share
     capital;
     the savings shares earn a dividend of up to 7.5% (seven point five percent) of their par value; if in any one year the
     savings shares are allocated a dividend of less than 7.5% (seven point five percent) of their par value, the difference
     is added to the preferred dividend declared in the following two years;
     unless the Shareholders' Meeting decides otherwise, any residual earnings are split between all of the shares in the
     form of dividends, in such a way that the savings shares earn a total dividend that is 3% (three percent) of their par
     value higher than the dividend allocated to the ordinary shares.
If and on the basis allowed by law, the company may distribute advance dividends. Dividends shall be paid on the basis
and with the timing established each year at the Shareholders' Meeting and any uncollected dividends shall lapse in
favour of the Company's reserves on the expiry of five years from the date on which they became payable.

EPS
At 31 December 2006, basic earnings per share amounts to 0.0193 and is determined by dividing the net profit or loss
attributable to the shareholders of the parent company by the weighted average number of ordinary shares in circulation
during the period .

EPS (diluted)
Based on the above, diluted EPS is the same as the basic EPS.


22. Minority interests
The shareholders’ equity attributable to minority interests amounts to 43 thousand euro and pertains to the minority
shareholders in SFK Ltd, Seoul - South Korea, SFT A.S., Istanbul - Turkey, Stefanel Universal S.A., Bucharest -
Romania, St. Ariè - Lisbon-Portugal.




                                                                                                                         40
23. Employee termination indemnities
These amount to 7,040 thousand euro and reflect the indemnities accrued at period end by the employees of Group
companies in accordance with current legislation.

Opening net book value                                                                                              6,741
Increases for provision of the year and transfers                                                                   1,655
Decreases for payment of indemnities, advances and transfers                                                      (1,356)
Closing net book value                                                                                              7,040

The Group has decided to use the "corridor method" to value its employee termination indemnities, which makes it
possible to ignore recognising any actuarial gains and losses that are less than 10% of the present value of the defined
benefit obligation. As a result of applying this method, actuarial losses totalling 1,402 thousand euro have not been
recorded at 31 December 2006.
In addition, the Group has decided to classify the interest element of the charge relating to employee defined-benefit
plans as a financial charges of 290 thousand euro.

Employee benefits
Information concerning the stock option plans
The Extraordinary Shareholders' Meeting of 21 December 2005 authorised a cash increase in capital, in one or more
tranches, up to a maximum of Euro 3,000,000 by issuing up to 3,000,000 ordinary shares of par value Euro 1 each,
excluding option rights, to be reserved for exercising the options to subscribe Stefanel ordinary shares to be assigned:
    - for Euro 1,600,000 to the Managing Director;
    - for Euro 60,000 to other directors and/or collaborators holding particular positions within the Company and/or
        subsidiaries, and
    - for Euro 1,340,000 to the Company's managers.
The meeting of the Board of Directors held at the end of the Shareholders' Meeting approved the first cycle of allocation
for a total of 900,000 subscription rights, identifying the names of the beneficiaries, the related quantities, the
subscription price (3,985 euro, which is the average official price of the Stefanel stock on the Electronic Equity Market
(MTA) for the month prior to the grant date of the purchase rights), all within the terms laid down by the Shareholders'
Meeting.
Exercising options is totally voluntary and will be possible between 1.5.2007 and 31.12.2012; as regards 100% of the
options assigned to the Managing Director and 50% of all the options assigned to the other beneficiaries, the ability to
exercise the options is also subject to achieving certain economic performance targets related to consolidated EBITDA,
which will be defined by the Board of Directors.

With reference to the stock option plan mentioned above, the members of management assigned shares during the first
cycle and the Company agreed to cancel this assignment and to suspend further assignments until such time that the
whole structure of the incentive scheme can be revised.
As a result of this decision, the value of the options that have been cancelled was booked to the income statement for the
year with a contra-entry to shareholders' equity for euro 200 thousand.


24. Provisions for risks and charges
The provisions for risks and charges total 4,766 thousand euro, as analysed in the table below.


                                                      Balance at                                              Balance at
                                                      31.12.2005         Provisions        Utilizations       31.12.2006
Reserve for legal disputes                                     729               104               (103)             730
Reserve for agents' leaving indemnities                     2,709                580               (107)           3,182
Total medium/long-term provisions                           3,438                684               (210)           3,912
Other provisions for risks and charges -
current portion                                             2,322                181              (1,649)            854
Total short-term provisions                                 2,322                181              (1,649)            854

The provision for agents' termination indemnities is recorded in accordance with legal requirements and collective
agreements, and is determined with reference to an estimate of future payments based, in part, on historical experience.
Since these payments may be made over the medium-long term, the provision has been discounted in accordance with
IAS 37, by applying a discounting rate equal to the Group's average cost of money to the expected cash flows. The


                                                                                                                       41
decrease in other short-term provisions is due to the utilisation of 800 thousand euro of the commercial sector
restructuring provision and 750 thousand euro for expenses incurred in relation to contractual undertakings regarding
the licence-holder MFG.

Legal disputes
A legal dispute has arisen in relation to the termination of certain commercial relationships. Considering the opinion of
legal counsel, the Group believes that the outcome of this legal action might favour the counterpart and, accordingly, at
31 December 2006 a provision of 730 thousand euro has been recorded to cover the potential loss.

Tax position
tax disputes pending at the balance sheet date are described below :
     On 2 March 2004, the Venice Tax Office for the Veneto Region initiated a general tax and accounting audit at the
     Parent Company for the 2001 tax year. This audit was carried out as part of an annual programme of inspections at
     larger taxpayers. It was completed on 14 May 2004 with the preparation of an audit report. The main point that the
     Tax Office contested was the deductibility of part of the lease instalments for the stores rented to third-party
     customers under business lease agreements, claiming an alleged violation of art. 75.5, DPR 917/1986 (principle of
     inherence and non-profitability). On July 13, 2004, Stefanel S.p.A. filed a defence brief demonstrating the
     illegitimacy and lack of foundation of these allegations. Subsequently, on 29 December 2005, the Treviso Tax
     Office issued a notice of assessment, basically confirming the disputed matters previously brought up by the Venice
     Regional Tax Office. The Company has appealed against this decision. The Parent Company already set up a
     provision of 110 thousand euro against this dispute last year. This provision takes account of the fact that the
     disputed adjustments will be offset against taxable income.
     With regard to the assessments received by Lara Stefanel S.a.s., a French subsidiary, concerning VAT and corporate
     taxes for the years 1995-99, based on the alleged existence of a permanent establishment in France in connection
     with its fiscal representation of and agency transactions with Interfashion S.p.A., the company has contested the
     arguments used by the tax inspectors with reasoned observations, asking for the assessments to be cancelled. The
     authorities have agreed to this in relation to VAT, while the situation in relation to direct taxes remains under
     discussion. No specific provisions have been considered necessary in respect of this dispute since no significant
     liabilities are believed to arise for the Group upon settlement.


25. Deferred tax liabilities
Deferred tax liabilities amount to 7,897 thousand euro and are determined by timing differences that will become taxable
in future years. A total of 1,985 thousand euro in deferred tax liabilities reversed during the year, mostly due to the
taxation of prior year capital gains from the sale of buildings of 960 thousand euro.


26. Financial liabilities

Amounts due to banks total 154,063 thousand euro, as shown in the table below.

Maturities (in years)                                   Within 1          Within 5          Beyond 5               Total
Bank overdrafts                                            2,973                  0                 0              2,973
Loans                                                     26,975             85,827            35,695            148,497
Finance lease instalments                                    515              2,007                71              2,593
Total                                                     30,463             87,834            35,766            154,063

Forward currency purchases outstanding at period-end total USD 23.150 thousand; they will mature no later than
December 2007 and reflect an average rate of 1.30. Although these transactions have the purpose and characteristics of
exchange-risk hedges, they do not formally comply with hedge accounting rules and, as such, are not classified as
hedging transactions.
Accounting for derivative financial instruments in accordance with this standard involved recognising a financial
liability of 507 thousand euro at 31 December 2006. This reflects the market price of these instruments at the balance
sheet date, provided by the banking counterparties that arranged the transactions. To match the recognition of this
liability, financial charges of 507 thousand euro was recorded in the year .




                                                                                                                      42
The Group has outstanding finance lease contracts in relation to motor vehicles, lorries and Shima looms.


                                                               Minimum payments due            Present value of minimum
                                                                                                     payments due
                                                                  31.12.2006      31.12.2005      31.12.2006   31.12.2005
Finance lease instalments:                                                647           688              515          565
due within one year                                                     2,248         2,135            2,008        1,865
due within five years                                                      42           557               71          542
due beyond five years                                                   2,937         3,380            2,594        2,972
Less future financial charges                                           (343)         (408)
Present value of payables for financial lease                           2,594         2,972
Payables due within one year                                                                           (515)        (565)
Payables due beyond twelve months                                                                      2,079        2,407

Lines of credit obtained from banks for various purposes by Group companies, i.e. including the various loans
mentioned here, total around 310 million euro.

                                  Mortgages/loans                                              31-12-2006      31-12-2005

Loan from Cassa di Risparmio di Venezia repayable on 16-01-2006                                                      2,500
Mortgage loan from Banca Intesa S.p.A. repayable on 31-07-2007                                                       1,999
Mortgage loan from Banca per il Leasing Italease S.p.A. repayable on 01-12-2014                                      3,872
Mortgage loan from Banca per il Leasing Italease S.p.A. repayable on 01-01-2015                                      3,828
Mortgage loan from Mediocredito del F.V.G. - B.n.l. repayable on 31-03-2014                         8,279            9,123
Mortgage loan from Mediocredito del F.V.G. repayable on 31-12-2015                                  2,488
Mortgage loan from Intesa BCI – UBI and B.ca Antoniana - repayable on 31-12-2012                                    91,364
Mortgage loan from B.ca Antoniana, Intesa BCI - UBI - repayable on 30-06-2013                     127,044
Mortgage loan from Bnl - Efibanca - B.ca Pop. di Lodi repayable on 17-03-2009                                       27,856
Loan from Banco Popolare di Verona e Novara repayable on 31-12-2011                                 9,875
Loan from Unicredit B.ca d'Impresa repayable on 19-01-2006                                                           1,500
Loan from Unicredit B.ca d'Impresa repayable on 12-01-2006                                                           2,000
Loan from Banca Antoniana Pop. Veneta repayable on 10-01-2006                                                        2,000
Loan from B.ca Pop. Di Verona e Novara repayable on 07-02-2006                                                       1,500
Loan from B.ca Pop. Di Verona e Novara repayable on 07-02-2006                                                       1,000
Loan from B.ca Pop. Di Vicenza repayable on 05-02-2006                                                               1,500
Total loans obtained by Italian Group companies                                                   147,686          150,042
Loan from Banco Internacional de Credito                                                                                42
Loan received by Stefanel Gyim Ticaret                                                                811
Total loans obtained by foreign Group companies                                                        811               42
Total loans obtained                                                                               148,497         150,084
Less: non-current portion                                                                        (121,522)         (16,478)
Total loans repayable within one year                                                              26,975          133,606

Mortgage loan from Mediocredito del Friuli-Venezia Giulia S.p.A.
This ten-year loan, originally for 10 million euro, was granted to Victorian S.r.l., a subsidiary, by a syndicate of banks
comprising Mediocredito del Friuli-Venezia Giulia S.p.A. and Banca Nazionale del Lavoro S.p.A. and is secured by
mortgages on a building owned by the company; it bears interest at a floating rate of Euribor plus a spread of 1.30 %.

Mortgage loan from Mediocredito del Friuli-Venezia Giulia S.p.A.
This ten-year loan, originally for 2.5 million euro, was granted to Victorian S.r.l., a subsidiary, by Mediocredito del
Friuli-Venezia Giulia S.p.A. and is secured by mortgages on a building owned by the company; it bears interest at a
floating rate of Euribor plus a spread of 1.30 %.




                                                                                                                      43
Loan from Banca Antonveneta – Banca Intesa – Unicredit Banca d’Impresa - repayable on 30-09-2013
On 12 July 2006, Stefanel S.p.A. agreed a medium-term loan for a total of up to 150 million euro with Banca
Antonveneta S.p.A., Banca Intesa S.p.A. and Unicredit Banca d’Impresa S.p.A. acting as Mandated Lead Arrangers and
Underwriters. Stefanel S.p.A. has allocated the 115 million euro that make up the amortising portion, with final due date
on 31 December 2013, to repay all of the medium-term debt currently outstanding. The other 35 million, structured on a
revolving basis with due dates from 31 December 2012 to 31 December 2013, will go to finance working capital and the
investment plan. Efibanca, Banca Nazionale del Lavoro and Monte di Paschi di Siena had also joined the loan syndicate.
The loan includes financial covenants in line with market practice for similar types of operations, which involve
substantial compliance with the economic and balance sheet objectives laid down in the 2006-2008 Three-Year Strategic
Plan (expressed in terms of net financial position/EBITDA, net financial position/net equity and EBITDA/financial
charges); In addition, this loan involves the usual covenants required for transactions of this type, such as those regarding
asset disposal, pari passu, restrictions on the grant of guarantees, cross default etc. The loan bears floating rate interest at
Euribor plus a spread that varies according to the Company's performance, currently 1.30% for tranche A for an original
amount of euro 115 million. As regards the revolving structures, the spread is 0.65% for tranche B (of maximum euro 20
million) and 0.85% for tranche C (of maximum euro 15 million).

Loan from Banco Popolare di Verona e Novara repayable on 31-12-2011
On 28 December 2006 Stefanel S.p.A. stipulated a loan with Banco Popolare di Verona e Novara with a duration of 5
years with quarterly amortisation from 31-03-2007, for an amount of euro 10 million, to be used for penetration of
foreign markets, backed by SACE under the agreement that it has with the bank. The loan bears floating-rate interest at
Euribor plus a spread of 0.90%.


27. Trade payables
Amounts due to suppliers total 67,679 thousand euro, up by 5,455 thousand euro with respect to 31 December 2005. No
payables are due beyond 1 year.


28. Other current payables and liabilities
                                                                                                 31.12.2006         31.12.2005
Other payables:
Due to the tax authorities                                                                            2,936               3,919
Due to social security institutions                                                                   1,770               1,951
Advances from customers                                                                               1,739               1,459
Other                                                                                                 9,756               5,341
Total other payables                                                                                 16,201              12,670

Accrued expenses:
- Insurance premiums                                                                                    123                 124
- Interest                                                                                              279               2,816
- Other accrued expenses                                                                                 82                 103
Total accrued expenses                                                                                  484               3,043
Deferred income :
- Rental income                                                                                          84                   -
- Other deferred income                                                                                 248                 568
Total deferred income                                                                                   332                 568
Total                                                                                                17,017              16,281

The amounts due to tax authorities refer to the provisions for the period for IRAP, IRES and other current taxes.
The payables due to others mainly include VAT liabilities (euro 2,685 thousand) and amounts due to employees (euro
4,078 thousand) in relation to the December payroll, together with their accrued holiday entitlements.
Amounts due to social security institutions relate to the liability for employer and employee contributions payable.




                                                                                                                            44
Commitments and contingencies

Guarantees given
The Stefanel Group has the following contingent liabilities at 31 December 2006:
        guarantees for commercial rental contracts totalling 8,878 thousand euro;
        following the sale of the building in Catania and the possible exercise of the pre-emption right by a public
        entity, a guarantee has been given to the buyer for euro 6,000 thousand;
        allocation of certain land and buildings to secure its portion of the loan;
        secured guarantees totalling 20,000 thousand euro represented by mortgages on buildings owned by Victorian
        Srl, in particular:
        o at Ponte di Piave with a value of 16,000 thousand euro securing the loan from Mediocredito del Friuli
             Venezia Giulia S.p.A. of 10,000,000 euro, repayable on 31/03/2014;
        o at Ponte di Piave with a value of 4,000 thousand euro securing the loan from Mediocredito del Friuli
             Venezia Giulia S.p.A. of 2,500,000 euro, repayable on 31/12/2015;

Recourse risks
As mentioned in relation to tax credits, in prior years (1990-1991) the parent company Stefanel S.p.A. signed two
contracts for the sale with recourse of reclaimed tax credits for a total of 10,317 thousand euro. These receivables were
eliminated from the assets reported in the balance sheet in accordance with the accounting policies applied at the time.
As allowed by IFRS 1, such receivables have not been reinstated since the disposals took place prior to 1 January 2005.
As already mentioned in the previous point 15, in October 2006 the Company received a rebate from the Tax
Authorities of a first tranche of euro 500 thousand of capital and euro 264 thousand of interest.

Related party transactions and unusual or atypical transactions

The principal economic and financial transactions between Group companies and related parties (excluding
intercompany transactions, which have already been eliminated on consolidation) are summarised below.
                                                                                         31.12.2006   31.12.2005
Income from recharges to related parties                                                         127          70
Proceeds of sale of property                                                                  12,300
Costs recharged by related companies                                                           1,477       1,496
Purchase of industrial and commercial equipment from related parties                           6,891       6,428
Amounts due from related parties for the supply of products                                      101          38
Amounts due to related parties for the supply of products                                      3,593       4,189

The above amounts mainly refer to (i) dealings involving the supply of commercial equipment by Iride S.r.l. (ii) the
rental of premises for commercial and industrial use by Leggenda S.r.l. and (iii) a relationship with Infinas S.p.A., an
insurance broker.. Lastly, the figures shown above concern the sale of the following properties by Victorian S.r.l. to
Leggenda S.r.l. for a total of Euro 12,300,000 plus VAT:

         property in Salgareda (TV), selling price Euro 3,750,000;
         property in Catania, selling price Euro 5,000,000;
         property in Varese, selling price Euro 1,600,000;
         property in Thiene (VI), selling price Euro 1,950,000.

Note that at the same time as the sale, the buying company took over, at the same conditions, the rent contracts currently
in existence with Stefanel S.p.A. and, in particular, those concerning the property in Salgareda (TV), where the Parent
Company has its knitwear production facilities, and the properties in Catania and Varese, which act as premises for
Stefanel-brand stores. The property in Thiene (VI), on the other hand, is being leased to third parties. The rental
payments currently applicable, which have been confirmed, are as follows:

         property in Salgareda (TV), rent of Euro 255,478;
         property in Catania, rent of Euro 372,448;
         property in Varese, rent of Euro 140,306;
         property in Thiene (VI), rent of Euro 177,632.

The reference stockholder for these companies is Giuseppe Stefanel.
All such transactions, including those between the Parent Company and its subsidiaries, between subsidiaries, or with
other related parties form part of the Group's normal operations, although the sale of industrial and commercial


                                                                                                                       45
buildings mentioned above can be considered an unusual transaction. As regards potential conflicts of interest, all such
transactions form part of the Group's normal operations and are conducted at arm's length conditions. In particular, note
that the sale prices of the above properties and the economic terms of the related lease contracts were appraised by
independent experts.




                                                                                                                      46
REMUNERATION OF DIRECTORS, STATUTORY AUDITORS AND GENERAL MANAGERS

The following is a breakdown of the remuneration earned by Directors, Statutory Auditors and General Managers for
their activities on behalf of Stefanel S.p.A,, and in other group companies, in accordance with article 78 of CONSOB
Regulation 11971/99 and subsequent amendments.

Amounts in euro

    Individual                       Description of office                                   Remuneration
 Name and surname            Position covered            Duration         Emoluments       Fringe    Bonuses      Other
                                                                            for the        benefits    and     remuneration
                                                                           position                   other
                                                                                                    incentives

Elisa Lorenzon          Honorary Chairman             1.1.06-31.12.06          100,000
Giuseppe Stefanel       Chairman of the Board of
                        Directors and Managing
                        Director                      1.1.06-31.12.06          868.000
Giovanna Stefanel       Director                      1.1.06-31.12.06           18,000
Tito Berna              Director                      1.1.06-31.12.06           28,000
Enrico Cervellera       Director                      1.1.06-31.12.06           25,342
Guglielmo Garlato       Director                      1.1.06-31.12.06           25,836
Mauro Princivalli       Director                      1.1.06-31.12.06           18,000                                280,220 (*)
Pier Francesco          Director
Saviotti                                              1.1.06-31.12.06           27,219
Giuliano Saccardi       Chairman of the Board of
                        Statutory Auditors            1.1.06-31.12.06           44,571
Stefano De Mattia       Auditor                       1.1.06-31.12.06           17,829
Michael Eifler          Auditor                       1.1.06-31.12.06           17,143

(*) euro 269,720 for legal services rendered by Mauro Princivalli (of which euro 66,938 billed on his behalf by the law offices of
Mazzoli – Princivalli - D’Alesio) and euro 10,500 for acting as a director in a subsidiary company.
These financial statements give a true and fair view of the Company's assets and liabilities, financial position and results
for the year, and correspond to the accounting records.

Ponte di Piave, 14 February 2007

                                                               For the Board of Directors
                                                                      The Chairman
                                                                    Giuseppe Stefanel




                                                                                                                               47
48
                                                                       STEFANEL GROUP

                                                       CHANGES IN DEFERRED TAX ASSETS AND LIABILITIES
                                                DURING THE PERIODS ENDED 31 DECEMBER 2006 AND 31 DECEMBER 2005
                                                                      (in thousands of euro)



                                                                          2006               2006                2005               2005                2006/2005

                                                                       Amount of                              Amount of
                                                                       temporary                              temporary                                Change in tax
                                                                       differences         Tax effect         differences         Tax effect              effect

Reserve for deferred taxes

- Gains to be taxed                                                              (1.144)             (426)              (3.912)            (1.457)               1.031

- Other temporary differences (for IRES and IRAP)                             (17.852)           (6.650)             (19.972)              (7.440)                  790

- Other temporary differences (IRES)                                             (1.348)             (445)               (808)                 (267)               (178)

- Effect of group tax filing system                                               (464)              (153)               (752)                 (248)                   95

- Effect of consolidation entries on the year                                    (1.423)             (530)                                                         (530)

Total reserve for deferred taxes                                              (22.231)           (8.204)             (25.444)              (9.412)               1.208

Total deferred tax liabilities offset against deferred tax assets                                       307                                     777                (470)

Total reserve for deferred taxes                                                                 (7.897)                                   (8.635)                  738

Deferred tax assets

- Losses to be offset against future taxable income                               9.420              3.109               5.300                 1.749             1.360

- Taxed provisions (for IRES and IRAP)                                           14.807              5.515              13.727                 5.113                401

- Taxed provisions (for IRES)                                                     8.617              2.844              11.444                 3.777               (933)

- Other temporary differences (for IRES and IRAP)                                 3.426              1.276               3.033                 1.273                   3

- Other temporary differences (IRES )                                             2.008                 663              3.356                 1.108               (445)

- Effect of consolidation entries on the year                                                                               436                 144                (144)

Total deferred tax assets                                                        38.278             13.407              37.296             13.164                   242

Total deferred tax assets offset against deferred tax liabilities                                    (307)                                     (777)                470

Total deferred tax assets                                                                           13.100                                 12.387                   712

TOTAL DEFERRED TAX ASSETS AND LIABILITIES                                        16.047              5.203              11.852                 3.752             1.451




                                                                                                                                                              49
23/04/2007




STEFANEL S.p.A.




   STATUTORY FINANCIAL STATEMENTS
         AT 31 DECEMBER 2006
Stefanel (Reuters: STEP.MI, Bloomberg: STEF IM)



STEFANEL S.P.A. is incorporated under Italian law as a limited
liability company with registered offices in Via Postumia 85, Ponte di
Piave – Treviso.
Share capital: Euro 54,296,744 fully paid
Treviso Companies Register no. 01412940261



The Stefanel Group, which is listed on the STAR segment of the Milan
Stock Exchange with Giuseppe Stefanel as its Chairman, operates in
the apparel sector through the Stefanel, Interfashion and Hallhuber
business units and, since 2002, in the airport retailing sector through
the Nuance business unit.
The Nuance Group, held 50% by Stefanel SpA, is world leader in the
airport retailing sector, with more than 340 stores located in 56
airports in 16 different countries on 4 continents.




These financial statements were approved by the Board of Directors on 14 February 2007.



Issue date: 14 February 2007
This report is available on the Internet at the following address:
www.stefanel.it



                                                                                          2
Table of Contents

Stefanel S.p.A.

        Directors and officers                                              Page   4
        Group structure                                                     Page   5
        Summary financial and operating information                         Page   6
        Subsequent events                                                   Page   9
        Outlook for 2007                                                    Page   9
        Proposals of the Board of Directors                                 Page   10

Financial statements at 31 December 2006 prepared in accordance with IFRS

        Income statement                                                    Page   11
        Balance sheet                                                       Page   12
        Cash-flow statement                                                 Page   14
        Statement of changes in shareholders’ equity                        Page   15

Notes to the financial statements                                           Page   16

Supplementary statements

        Statement of changes in property, plant and equipment               Page   41
        Changes in investments                                              Page   42
        List of investments                                                 Page   43
        Details of balance sheet transactions with subsidiary
        and associated companies                                            Page   44
        Details of income statement transactions with subsidiary
        and associated companies                                            Page   46
        Summary of deferred taxation                                        Page   47




                                                                                        3
STEFANEL S.p.A.

BOARD OF DIRECTORS

Honorary Chairman                   Elisa Lorenzon

Chairman and Managing Director      Giuseppe Stefanel
Directors                           Giovanna Stefanel
                                    Tito Berna
                                    Enrico Cervellera
                                    Guglielmo Garlato
                                    Mauro Princivalli
                                    Pier Francesco Saviotti

BOARD OF STATUTORY AUDITORS

Chairman                            Giuliano Saccardi
Auditor                             Stefano De Mattia
Auditor                             Michael Eifler

Alternate Auditor                   Giovanni Martucci
Alternate Auditor                   Maura Naponiello

INDEPENDENT AUDITORS                Deloitte & Touche S.p.A.

POWERS OF THE MANAGING DIRECTORS:

Giuseppe Stefanel                   Ordinary and extraordinary administration

INTERNAL CONTROL COMMITTEE

Tito Berna
Guglielmo Garlato
Pier Francesco Saviotti

APPOINTMENTS COMMITTEE

Tito Berna
Guglielmo Garlato
Pier Francesco Saviotti

REMUNERATION COMMITTEE

Tito Berna
Guglielmo Garlato
Pier Francesco Saviotti




                                                                                4
                                                              GRUPPO STEFANEL AL 31 DICEMBRE 2006
                                                            STEFANEL GROUP AS AT DECEMBER 31st 2006

                                                                                         STEFANEL S.P.A.
                                                                                          Ponte di Piave (TV)
                                                                                                 Italy




  STEFBURG MODE GMBH                 STEFANEL UNIVERSAL S.R.L.                      LARA STEFANEL S.A.S.                           INTERFASHION S.P.A.              VICTORIAN S.R.L.
          Linz                              Bucharest                                       Paris                                    Ponte di Piave (TV)            Ponte di Piave (TV)
         Austria                             Romania                                       France                                           Italy                          Italy
          100%                                 65%                                          100%                                           100%                           100%


     STEFPRAHA S.R.O.                 STEFANEL ROMANIA S.R.L.                                                                                                        POLIMODA S.R.L.
          Prague                             Bucharest                                                                         MFG RETAIL COMPAGNIE S.A.S.              Florence
      Czech Republic                         Romania                                                                                      Paris                            Italy
           100%                                100%                                                                                      France                           1.63%
                                                                                                                                           40%
   STEFANEL ESPANA S.L.                      ST.ARIE' LDA                                                                                                          OMNIA FACTOR S.P.A.
         Madrid                                 Lisbon                                 STOUT S.P.A.                            SWISS FACTORY OUTLET S.A.                  Milan
          Spain                                Portugal                              Ponte di Piave (TV)                                Chiasso                           Italy
          100%                                   75%                                        Italy                                      Switzerland                         5%
                                                                                           100%                                           98%
         SFT A.S.                       STEFANEL HELLAS S.A.                                                                                                           HI - INT S.A.
         Istanbul                             Athens                        STEFANEL INTERNATIONAL HOLDING N.V.                 NOEL INTERNATIONAL S.A.                Luxembourg
          Turkey                              Greece                                     Amsterdam                                    Luxembourg                            65%
          99.8%                                100%                                      Netherlands                                      50%
                                                                                            100%
STEFANEL POLONIA SP. Z O.O.            STEFANEL HUNGARY KFT
          Warsaw                             Budapest
          Poland                              Hungary
                                                                                              STEFANEL GMBH                             THE NUANCE GROUP A.G.
           100%                                100%
                                                                                                  Munich                                      Glattbrugg
                                                                                                 Germany                                      Switzerland
 STEFANEL SLOVAKIA S.R.O.                      SFK LTD.                                            100%                                         100%
         Bratislava                              Seoul
      Slovak Republic                           Korea                                                                              NUANCE GLOBAL TRADERS HK LTD.
           100%                                 95.29%                                                                                       Hong Kong
                                                                                        HALLHUBER GMBH
                                                                                             Munich                                            100%
   STEFANEL JAPAN INC.        STEFANEL DE ARGENTINA S.A. (in liquidation)                   Germany
         Tokyo                             Buenos Aires                                       100%
         Japan                              Argentina
          100%                                0.75%
                                                                                        STEFANEL HONG KONG LTD.
                                                                                               Hong Kong
                                                                                                  100%



                                                                                 STEFANEL DE ARGENTINA S.A. (in liquidation)
                                                                                              Buenos Aires
                                                                                               Argentina
                                                                                                99.25%
INTRODUCTION

Under the corporate reorganisation started last year and still being completed, the Parent Company Stefanel S.p.A,
acts both as the holding company for the Group and as an operating company, even if only for the Stefanel business
unit.


Operations

The Stefanel Business Unit continued to take steps to reposition its brand with a view to turning it into an
"accessible designer label”. A new advertising campaign was launched in August as the second phase of the project;
this was designed to enhance the value of the measures already taken to improve the product, as well as the structure
of the collections.
At the same time, work has continued on reorganising and developing the brand's distribution network with
measures particularly designed to enhance the value of important Italian locations and to expand certain major new
international markets such as Japan, Hungary and Poland, where business under direct management has recently
started up.
This means that the Company is facing a major change in the product, image and positioning of its main brand,
which inevitably entails a partial change in its reference clientele. The year, and even more so, the season that has
just ended confirms the difficulties that are inherent in such a process of change, but it has also provided some
pointers of a commercial nature (e.g. increase in the average value and in the number of items sold per transaction)
which are in line with the medium-term objectives of this strategy, bearing in mind that it will take a number of
seasons before it gets up to speed.
At the same time, the Company has started a review of its main corporate processes and is evaluating a series of
initiatives of an organisational and operational nature with a view to creating a structural improvement in profit
margins.

Holding company activities

In addition to the strategic coordination activities normally carried out by the Parent Company, as mentioned earlier,
a greater contribution by the central administrative-financial organisation is now providing additional support to the
operating companies, especially those set up recently.

Investment portfolio

The Interfashion Business Unit is successfully continuing to increase its penetration of major markets, while further
improving the level of service provided to customers (in terms of shipping methods and times).
While waiting to know the outcome of negotiations for the renewal of the MFG licence (which runs through to the
2008 spring/summer collection), the company is planning to start up a new activity which can operate alongside or,
if necessary, replace this licence, thereby reducing the potential impact of it not being renewed. Given this situation,
in January 2007, Interfashion began presenting to the business community the plan to launch a new brand called
HIGH, including the fact that it had decided to appoint Claire Campbell, one of the leading designers of
contemporary fashion wear, as its creative director.
The collections, for both men and women, will be positioned at the high end of the market and will be distributed
through a network of branches and agents to selected multibrand boutiques world-wide, starting with the 2007
Autumn/Winter collection.

Steps have also continued to develop the Hallhuber network in Germany, which have permitted this Business Unit to
inaugurate 8 new stores, 2 of them in Austria. The firm is heavily involved in identifying those initiatives of an
organisational and commercial nature that are able to return it as soon as possible to that process of growth with
better profit margins that it showed up until 2005.

As regards the airport retailing business, the period just ended showed itself to be yet another year of transition
which saw the Nuance Group involved in a process of operational improvement and rationalisation of the
concession portfolio. The second half of the year was conditioned by the impact of the stringent security measures
introduced in August. These effectively blocked sales of products containing liquids or gels, causing substantial
drops in sales in certain countries, such as Canada, Great Britain and Australia, precisely in those categories of
goods (perfume, cosmetics and spirits) that have the best margins.
Moreover, in line with the strategy to improve and develop the business in Australia, the Nuance Group won the
new duty free concession at Sydney Airport, a new agreement to extend the existing concession at Cairns
international airport for another 5 years, as well as a new concession in New Zealand to operate at the airport of its
capital, Wellington. The company has also introduced a number of new management positions to guarantee the
improved performances achieved to date in this area.
Last November, the Nuance Group entered a strategic market like India for the first time by winning the concession
to run commercial activities at Bangalore Airport in a joint venture with its local partner Shoppers' Stop. It also
gained a new concession to operate at the Malmo-Sturup Airport, bringing the number of Swedish airports where
Nuance has a presence to 14.


The following summary financial and operating statistics for 2006 are presented on a consistent comparative basis.

        Income statement of Stefanel S.p.A.                   2006                   2005                   Change
                      (in millions of euro)            Euro mn         %.      Euro mn        %.      Euro mn      %.
Total net sales                                         137.8        100.00    118.3        100.00      19.5       16.5
Cost of sales                                           (73.3)       -53.2%    (58.2)       -49.2%    (15.1)       26.0
Gross operating margin                                    64.5        46.8%      60.1        50.8%        4.4        7.3
(Gains)/losses on fixed assets                              3.7         2.7%       8.3         7.0%     (4.6)    (55.4)
Selling, general & admin. expenses                      (58.0)       -42.1%    (49.1)       -41.5%      (8.9)      18.1
EBITDA                                                    10.2          7.4%     19.3        16.3%      (9.1)    (47.2)
Depreciation, amortisation and value adjustments          (6.4)        -4.6%     (6.5)        -5.5%       0.1      (1.5)
EBIT                                                        3.8         2.7%     12.8        10.8%      (9.0)    (70.3)
Financial income and expense                              (6.1)        -4.4%     (5.7)        -4.8%     (0.4)        7.0
Income/expenses from investments                          (5.7)        -4.1%       0.4         0.3%     (6.1)      93.0
Profit (loss) before tax                                  (8.0)        -5.8%       7.5         6.3%   (15.6)    (206.7)
Taxes                                                       5.1         3.7%       2.9         2.5%       2.2      75.9
Net profit (loss) of the Group                            (2.9)        -2.1%     10.4          8.8%   (13.3)    (127.9)

The results achieved during 2006, are described below,

        a 16.5% increase in sales: in particular, the directly managed stores and those under a sale-or-return contract
        turned in a 34.7% increase in sales;

        against this positive trend in revenues, the gross operating margin suffered a decline of around 4 percentage
        points (from 50.8% in 2005 to 46.8% in 2006), mainly because of higher writedowns of finished products
        inventory and changes in the processes for inserting goods into both the stores and the outlet channel. During
        2006, these results include 3.7 million euro in gains on the sale, due to replacement, of a number of non-
        strategic stores (8.3 million euro in 2005). Selling expenses as a percentage of sales have stayed more or less
        the same, reflecting the increase in commissions paid under the sale-or-return contracts and higher advertising
        expenditure(2.7 million euro). As a result, EBITDA amounts to 10.2 million euro (-47.2%). Net operating
        income comes to 3.8 million euro (-70.3%). Holding company costs1 amount to euro 2.7 million, slightly
        more than in 2005 (euro 2.2 million), because of higher costs for coordination of the new affiliates and the
        total cost of renouncing the stock option plan (euro 0.2 million) which had to be booked during the period;

        the result from investments is negative for 5.7 million euro, 6.1 million euro lower than last year because of
        higher writedowns; the effect of higher average debt and the increase in interest rates was substantially offset
        by hedging transactions and better terms on medium-term loans.

        the pre-tax result is a loss of euro 8.0 million, whereas the Group's net result,, after booking positive net
        current and deferred taxes of euro 5.1 million, is a loss of 2.9 million, a decrease of 13.3 million compared
        with the previous year.




1
  In particular, this caption includes the cost centres regarding the “Chairman” and “General Management”, as well
as part of the cost of administration and finance, Group control, information systems and personnel management.
                                                                                                                           7
The figures for 2006 show consolidated net borrowings of euro 98.6 million, an increase of 12.6 million compared
with December 2005 and a decrease of euro 5.0 million in shareholders' equity, which amounts to Euro 93.7 million.
The Debt/Equity ratio comes to 1.05 (0.87 in December 2005).


             Sources/Applications of funds                31.12.2006            31.12.2005              Change
                                                        Euro mn         %     Euro mn         %     Euro mn       %
Net working capital                                       63.3         32.9     54.9         29.7     8.4        15.3
Fixed assets, net                                        129.0         67.1    129.8         70.3    (0.8)       (0.6)
Total capital invested                                   192.3         100     184.7         100      7.6         4.1
Shareholders’ equity                                      93.7         48.7     98.7         53.4    (5.0)       (5.0)
Net debt                                                  98.6         51.3      86          46.6    12.6        14.6
Total sources of funds                                   192.3         100     184.7         100      7.6         4.1

Net working capital remains more or less stable in absolute terms, at euro 50.8 million versus euro 49.8 million at 31
December 2005, but improving as a percentage of sales, falling from 42% in December 2005 to 37% at 31
December 2006. Net inventories have stayed the same, whereas trade receivables from third parties have fallen by
7.8 million.
Gross capital expenditure in 2006 amounted to euro 10.5 million, almost entirely for the acquisition of new stores
(key money) and renovation of store fittings.

FINANCIAL RISK MANAGEMENT

In accordance with Company policy, it is appropriate for a percentage of the exposure to interest-rate risk to be
transformed into a fixed rate or, in any case, a rate subject to limited variability. The appropriate mix between fixed
and floating rates is usually obtained by converting part of the loans obtained from floating-rate to fixed-rate terms,
by arranging an interest-rate swap, or by maintaining the original floating-rate structure but arranging “caps” and
“floors” capable of containing rate fluctuations within prudent limits.

The Company operates at an international level and is exposed to exchange risks in relation to various currencies
including, in particular, the US dollar. These exchange-rate risks derive principally from the planned purchase of
raw materials and finished products, and from outstanding trade payables.
Group policy involves hedging a significant part of the purchases planned for the coming twelve months. The
exchange-rate risk is hedged by arranging forward contracts and currency options. The majority of these forward
contracts will mature within twelve months of the accounting reference date. However, the derivatives used to hedge
the exposure to interest-rate and exchange-rate risks do not satisfy the technical requirements to qualify for hedge
accounting under IAS 39. Accordingly, all changes in the fair value of these derivatives are reflected in the income
statement.

As for liquidity risk, the situation does not look critical at present, having recently gone through an important
process of restructuring the Company's sources of financing, providing it with funding that is in line with
requirements and its cash generating capacity.

As regards credit risk, management is of the opinion that the Company is exposed to normal sector risk and that the
procedures introduced for monitoring customer credit limits and receivables are sufficient to reduce this risk to an
acceptable level.


TRANSACTIONS WITH SUBSIDIARY AND ASSOCIATED COMPANIES

The Company has commercial and financial relationships with its subsidiaries and associates, which are regulated at
normal market conditions. Details of such transactions and balances are given in an attachment to these financial
statements.




                                                                                                                         8
RELATED PARTY TRANSACTIONS AND ATYPICAL OR UNUSUAL TRANSACTIONS

The economic and financial balances between the company and related parties are as follows.
                                                                                        31.12.2006         31.12.2005
Income earned                                                                                  163                 70
Costs recharged                                                                              1,465              1,456
Purchase of shop fittings                                                                    3,066              3,676
Amounts due from related parties for the supply of products                                    137                 38
Amounts due to related parties for the supply of products                                    2,339              2,418

The above amounts usually refer to dealings involving the supply of commercial equipment and shop fittings by
Iride S.r.l. and the rental of premises for commercial use from Leggenda S.p.A (euro 1,410 thousand). There is also
a relationship with Infinas S.p.A., an insurance broker. The reference shareholder for these companies is Giuseppe
Stefanel.
All such transactions form part of the Group's normal operations and are conducted at arm's length conditions.
There were no atypical and/or unusual transactions during the period.


RESEARCH AND DEVELOPMENT ACTIVITIES

No R&D activities were undertaken by Stefanel S.p.A. during the period under review.


SUBSEQUENT EVENTS

Given this situation, in January 2007, Interfashion began presenting to the business community the plan to launch a
new brand called HIGH, including the fact that it had decided to appoint Claire Campbell, one of the leading
designers of contemporary fashion wear, as its creative director.
The collections, for both men and women, will be positioned at the high end of the market and will be distributed
through branches and agents to selected multibrand boutiques world-wide, starting with the 2007 Autumn/Winter
collection. In the first two seasons, the company is counting on sales of at least 15-20 million euro.

In February 2007, the Nuance Group has signed a letter of intent to sell 40% of its operating companies in Australia
and New Zealand to Newrest, a company specialising in the provision of services to the airport sector in 15
countries with annual sales of more than USD 500 million and over 10,000 employees.
The sale, forming part of the turnaround commencing with the renewal of the licence at Sydney airport, will be
completed during the coming weeks.
It is worth remembering that these companies reported a net loss of around Euro 13.3 million in 2005 and Euro 15.3
million in 2006.
The purpose of the partnership is to complement the Nuance organisation and expertise with the experience and
entrepreneurial spirit of Newrest and specifically that of its Managing Director Jonathan Stent-Torriani who had
successfully turned around Nuance's Australian operations in the period 1997-2000 and who will take up the
position of operating Vice Chairman of these companies with effect from 1 February.


OUTLOOK FOR 2007

In the year just ended, the Stefanel Business showed a trend in sales and margins that was lower than our
expectations, discounting the effects of repositioning the brand and opening numerous sales stores which still have
to come up to speed. 2007 is still likely to be affected by these trends, with good growth in sales and better margins,
even if they are still not as good as they could be. Particular attention will be paid to managing working capital,
inventories in particular, from which clear signs of improvement are expected.

As regards the Interfashion Business Unit, in addition to the traditional activity, namely production and sale of
MFG-brand products, from this year it will also be involved in the launch of the new HIGH brand, which will be
sold starting with the Autumn/Winter 2007 collection. The coming months will still see the company involved in the
process of renewing the licence which is about to expire, to acquire at least one new licence and to manage this
period of change in the best way possible.


                                                                                                                     9
During 2006, the Hallhuber Business Unit showed a relatively weak trend, which it is trying to combat with a series
of measures designed to obtain those improvements in performance able to bring it back to the levels of growth and
profitability that it achieved in 2005. The number of new store openings is expected to be limited in 2007 to ensure a
greater focus on operational management.

Nuance's performance in the second half of the year was affected by the restrictive security measures introduced in
many airports, which effectively annulled any benefit from the numerous initiatives that had been taken. 2007 will
benefit considerably from the close of operations in Denmark, which heavily conditioned the company's
performance in recent years; management's efforts will be focused on relaunching activities in the Australia-New
Zealand region, which is still a critical area, and on renewal of the concessions for Singapore and Antalya, which are
due to expire in the second half of the year, as well as gaining new concessions in strategic areas such as India and
China.

The Stefanel Group is therefore going through a period of profound change. We are laying the bases for a strategy of
growth, though it requires a time horizon that goes beyond the current year. In any case, during 2007, we still expect
the Parent Company to achieve a positive bottom line with net borrowings slightly up in line with the further
investments being planned.


UPDATE OF THE SECURITY PLANNING DOCUMENT

Pursuant to art. 26 of attachment B to Decree 196/2003, the so-called "Personal Data Protection Code", the
Company has updated by 31 March 2007 the security planning document, as required by art. 34 of the Code.


PROPOSALS OF THE BOARD OF DIRECTORS

Shareholders,

You are invited to approve:

      the financial statements as of 31 December 2006, together with the related Directors’ report on operations for
      the period ended 31 December 2006, as submitted;
      coverage of the loss of euro 2,936,994 out of retained earnings.

At the Shareholders' Meeting called to approve the financial statements at 31 December 2006, the shareholders will
also be asked to vote on the appointment of the Board of Statutory Auditors and the Independent Auditors, as both
terms of office are due to expire, as well as to approve renewal of the authorisation to the Board of Directors to buy
and sell treasury shares, after revoking the previous one.

Ponte di Piave, 14 February 2007

                                                         For the Board of Directors
                                                                  The Chairman
                                                                Giuseppe Stefanel




                                                                                                                   10
                                                 STEFANEL S.p.A.

    INCOME STATEMENT FOR THE YEAR ENDED 31 DECEMBER 2006 COMPARED WITH THE
                                PREVIOUS YEAR
                                    (in euro)




INCOME STATEMENT                                                   Notes          2006          2005


Revenues
 - net sales                                                        (1)    135,923,118   116,119,835
           - of which with related parties                                  36,734,881   25,371,427
 - other revenues                                                   (2)      1,934,228     2,155,224
           - of which with related parties                                    608,424       640,392
Total revenues                                                             137,857,346   118,275,059
Cost of sales
- materials and subcontract services                                        58,609,295    53,242,479
           - of which with related parties                                   2,291,108     2,835,904
- direct labour and related costs                                            6,114,745     7,634,278
- other manufacturing costs                                                  7,994,213     7,528,568
           - of which with related parties                                    331,185       387,266
- (increase) decrease in inventories                                          631,755    (10,182,923)
Total cost of sales                                                 (3)     73,350,008    58,222,402
GROSS PROFIT                                                                64,507,338    60,052,657
- (Gains) losses on disposal of fixed assets                        (4)    (3,745,816)    (8,262,557)
- Selling, general and administrative expenses                      (5)     58,027,508    48,993,552
           - of which with related parties                                   1,494,750     2,005,133
EBITDA                                                                      10,225,646    19,321,662
- Depreciation, amortisation and value adjustments                  (6)      6,448,275     6,475,013
EBIT                                                                         3,777,371    12,846,649
- Financial income (expense)                                        (7)    (6,115,692)    (5,746,616)
           - of which with related parties                                   1,527,056     1,553,280
- Income (expenses) from investments                                (8)    (5,746,591)       419,748
           - of which with related parties                                   7,407,662    11,046,254
PROFIT (LOSS) BEFORE TAX                                                   (8,084,912)     7,519,781
- Current income taxes                                              (9)    (5,147,918)    (2,865,588)
NET PROFIT (LOSS) FOR THE YEAR                                             (2,936,994)    10,385,369




                                                                                                  11
                                                 STEFANEL S.p.A.

  BALANCE SHEET AS OF 31 DECEMBER 2006 AND COMPARISON WITH THE PREVIOUS YEAR
                                     (in euro)




ASSETS                                                             Notes    31.12.2006    31.12.2005
NON-CURRENT ASSETS
Intangible assets                                                  (10)     39,176,468    36,786,212
Property, plant and equipment                                      (11)     21,857,647    23,373,532
                       - of which with related parties                       3,065,670     3,675,571


Investments                                                        (12)     56,596,686    57,814,095
Non-current financial receivables and other assets                 (13)     31,928,875    31,132,584
                      - of which with related parties                       31,001,446    30,659,865


Other non-current receivables and assets                           (14)     16,496,541    18,547,640
Deferred tax assets                                                (15)      8,744,823     8,497,764
TOTAL NON-CURRENT ASSETS                                                   174,801,040   176,151,827


CURRENT ASSETS
Inventories, net                                                   (16)     26,192,165    26,823,920
Trade receivables                                                  (17)     62,998,356    60,273,120
                       - of which with related parties                      39,519,564    28,975,660
Other current Receivables and Assets                               (18)     18,061,932    13,358,493
           - of which with related parties                                   7,815,703     4,970,327
Cash and cash equivalents                                          (19)     13,740,866    19,936,733
Current financial receivables and other assets                      (20)    26,428,295    20,381,907
                      - of which with related parties                       26,428,295    20,319,443
TOTAL CURRENT ASSETS                                                       147,421,614   140,774,173


TOTAL ASSETS                                                               322,222,654   316,926,000




                                                                                                 12
                                                STEFANEL S.p.A.

  BALANCE SHEET AS OF 31 DECEMBER 2006 AND COMPARISON WITH THE PREVIOUS YEAR
                                     (in euro)




LIABILITIES AND SHAREHOLDERS' EQUITY                              Notes    31.12.2006    31.12.2005
SHAREHOLDERS’ EQUITY:
Share capital                                                              54,296,744    54,296,744
Legal reserve                                                               7,415,409     6,896,141
Share premium                                                              29,508,199    29,508,199
Other reserves                                                              5,460,681   (2,390,386)
Net profit (loss) for the year                                            (2,936,994)    10,385,369
TOTAL SHAREHOLDERS' EQUITY                                        (21)     93,744,039    98,696,067


NON-CURRENT LIABILITIES
Non-current financial liabilities                                 (25)    113,970,476     3,347,508
Employee termination indemnities                                  (23)      5,528,446     5,388,180
Other non-current payables and liabilities                                         0
Provision for risks and charges (non-current)                     (22)      1,406,199     1,202,189
Deferred tax liabilities                                          (24)      6,941,327     8,778,667
TOTAL NON-CURRENT LIABILITIES                                             127,846,448    18,716,544


CURRENT LIABILITIES
Current financial liabilities                                     (25)     54,294,860   152,290,056
            - of which with related parties                                25,899,963    19,526,548
Trade payables                                                    (26)     38,032,311    37,347,595
            - of which with related parties                                 2,835,839     2,893,916
Other current payables and liabilities                            (27)      8,159,164     8,947,576
            - of which with related parties                                  691,221       652,068
Provision for risks and charges                                   (22)       145,832       928,162
TOTAL CURRENT LIABILITIES                                                 100,632,167   199,513,389


TOTAL EQUITY AND LIABILITIES                                              322,222,654   316,926,000




                                                                                                 13
                                        CASH FLOW STATEMENT
                                           (in thousands of euro)
                                                                        2006       2005

Net profit (loss) for the year                                        (2,937)     10,385
Depreciation, amortisation and value adjustments to fixed assets        6,448      6,475
Increase (decrease) in deferred tax liabilities                       (1,837)      6,135
Decrease (increase) in deferred tax assets                              (247)    (5,718)
Increase (decrease) in provisions for risks and charges                 (579)        917
Increase (decrease) in employee termination indemnities                   140        552
Decrease (increase) in inventories                                        632   (10,183)
Decrease (increase) in receivables                                    (5,922)      5,539
Increase (decrease) in non-financial payables                           (104)      5,499
A) CASH FLOW GENERATED BY OPERATING ACTIVITIES                        (4,406)     19,601

Purchase of intangible assets                                         (4,948)    (2,116)
Purchases of property, plant and equipment                            (5,546)    (8,079)
Net retirements of fixed assets                                         3,174      2,376
Net expenditure on investments                                          1,217      3,216
Net expenditure on financial assets                                      (20)      (111)
B) CASH FLOW GENERATED BY INVESTMENT ACTIVITIES                       (6,123)    (4,714)

Change in medium/long-term loans                                      110,623     42,810
Change in amounts due to banks and short-term loans                 (103,436)   (26,652)
Change in other non-current assets                                      (839)   (30,783)
C) CASH FLOW GENERATED BY FINANCIAL ASSETS/LIABILITIES                  6,348   (14,625)

Changes in translation reserves and other changes                         156        194
Application of IAS 32 and 29 from 1 January 2005                            -      (308)
Increases in capital                                                        -        148
Dividends distributed                                                 (2,171)    (1,624)
D) CASH FLOW GENERATED BY MOVEMENTS IN SHAREHOLDERS'
EQUITY                                                                (2,015)    (1,590)

E) CHANGE IN CASH AND BANKS (A+B+C+D)                                 (6,196)    (1,328)

F) CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE YEAR             19,937     21,265

G) CASH AND CASH EQUIVALENTS AT THE END OF THE YEAR (E+F)             13,741     19,937


H) NET DEBT AT THE BEGINNING OF THE YEAR                             (86,009)   (99,306)
Breakdown of closing net cash (debt):
Non-current financial assets                                           31,913    31,012
Current financial assets                                                    -        62
Cash and cash equivalents                                              13,741    19,937
Due to banks                                                        (139,867) (133,260)
Due to other providers of finance                                     (2,499)   (2,851)
Financial payables/receivables to/from consolidated companies         (1,841)     (909)
I) NET DEBT AT THE END OF THE YEAR (H+E-C)                           (98,553) (86,009)




                                                                                      14
                                                                                  STEFANEL S.P.A.
                                                          STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
                                                         DURING THE PERIODS ENDED 31 DECEMBER 2006 AND 2005
                                                                                  (in thousands of euro)


                                                                                                   Share                                                  Net profit        Total
                                                                                      Share       premium    Revalu-ation Legal      Other Retained      (loss) for the shareholders'
Description                                                                           capital                  reserves   reserve   reserves earnings        year          equity
Balance as of 31 December 2004                                                        54,149        29,314      1,511      6,796    (12,890)   3,458         7,563         89,901
Effect of applying IAS 39                                                                                                             (308)                                 (308)
Allocation of 2004 profit as authorised at the Shareholders' Meeting held on 22
April 2005:
- to legal reserve                                                                                                          100                             (100)             -
- dividends declared                                                                                                                                       (1,624)         (1,624)
- retained earnings                                                                                                                             269         (269)             -
Reclassification of difference in IFRS result for 2004                                                                                         5,570       (5,570)            -

Increase in share capital on 12 May 2005 upon exercise of stock options                148           194                                                                    342
Net profit for the year                                                                                                                                    10,385          10,385
Balance as of 31 December 2005                                                        54,297        29,508      1,511      6,896    (13,198)   9,297       10,385          98,696
Allocation of 2005 profit as authorised at the Shareholders' Meeting held on 26
April 2006:
- to legal reserve                                                                                                          519                             (519)             -
- dividends declared                                                                                                                                       (2,171)         (2,171)
- to exchange gains reserve (undistributable)                                                                                        396                    (396)             -
- retained earnings                                                                                                                             7,299      (7,299)            -
- proposed sale/purchase of treasury shares                                                                                          5,000     (5,000)                        -
Purchase of treasury shares                                                                                                           (44)                                   (44)
Cost of cancelling the stock option plan (IFRS 2)                                                                                     200                                    200
Net profit (loss) for the year                                                                                                                             (2,937)         (2,937)
Balance as of 31 December 2006                                                        54,297        29,508      1,511      7,415    (7,646)    11,596      (2,937)         93,744
         NOTES TO THE STATUTORY FINANCIAL STATEMENTS AS AT 31 DECEMBER 2006
                               ACCOUNTING POLICIES

DECLARATION OF CONFORMITY, FORM AND CONTENT
The financial statements for the period from 1 January to 31 December 2006 have been prepared in accordance with
the International Financial Reporting Standards (IFRS) issued by the International Accounting Standards Board
(IASB). These statements have been prepared in euro and rounded to the nearest thousand, with comparative figures
from the previous year's financial statements, prepared on a consistent basis. They comprise the balance sheet, the
income statement, the statement of changes in shareholders' equity, the cash flow statement and these explanatory
notes. The financial statements have been prepared on an historical cost basis, except for certain monetary
revaluations recorded in prior years.
These financial statements were approved by the Board of Directors on 14 February 2007, so this is the date on
which publication was authorised.

ACCOUNTING POLICIES
The accounting policies and principles adopted for the preparation of the financial statements as of 31
December 2006 are reported below:

Financial statements
As regards the discretion allowed by IAS 1 in choosing formats for the balance sheet and income statement, we
decided to adopt a balance sheet format that separated current and non-current assets and liabilities, and an income
statement format that shows revenues and cost of sales, which we consider more representative of our operations.

Other intangible assets
In accordance with IAS 38 – Intangible assets, other purchased or internally-produced intangible assets are
recognised when it is probable that their use will generate future economic benefits, and when their cost can be
determined on a reliable basis.
These assets are valued at purchase or production cost and amortised on a straight-line basis over their estimated
useful lives, if this period can be determined. Intangible assets with an indefinite useful life are not amortised, but
are subjected to an impairment test each year, or more frequently if there is evidence that they may have suffered a
loss in value.
This category includes the amounts paid by the Company (key money) to take over contracts relating to directly-
managed stores and stores that are managed by third parties under business rental agreements. These amounts are
deemed to represent intangible assets with an indefinite useful life and, accordingly, they are not amortised. Note
that "indefinite useful life" does not mean "infinite useful life"2, but rather that the period of utility cannot be
determined, as explained in IAS 38. With reference to opinions prepared by independent experts, the time limits
specified in rental contracts are of limited significance in this regard.

The fact that the tenant is protected by market practice and specific legislation has to be taken into consideration; in
addition, Company strategy is to steadily expand the network of stores and, usually, to renew rental contracts prior
to their natural expiry dates. Together, these factors have resulted over time in almost complete success for the
Group's renewal policy, steadily enhancing the value of the points of sale compared with the key money paid.
The amounts concerned were subjected to an impairment test at the transition date and are stated at the lower of
historical cost or the market value determined by specific appraisals. Subsequently, these amounts are tested for
impairment once a year.




2
  “An intangible asset shall be regarded by the entity as having an indefinite useful life when, based on an analysis
of all of the relevant factors, there is no foreseeable limit to the period over which the asset is expected to generate
net cash inflows for the entity”.
Property, plant and equipment
Property, plant and equipment are stated at purchase or construction cost. Cost includes related charges and a
reasonable allocation of direct and indirect production costs.
Depreciation is provided on a straight-line basis over the estimated useful lives of the assets concerned:

Description                                                                                  Estimated useful life
Buildings                                                                                             33
Commercial buildings                                                                                  33
Temporary buildings                                                                                   10
Installations, specific plant and machinery                                                            8
Shop installations, equipment and furnishings                                                          7
Industrial equipment                                                                                   4
Furniture and office machines                                                                          8
Electronic machines                                                                                    5
Lorries and internal transport                                                                         5
Motor vehicles                                                                                         4
Leasehold improvements                                                                        duration of contract

Ordinary maintenance costs are fully expensed as incurred. Maintenance costs which enhance the value of assets are
allocated to such assets and depreciated over their residual useful lives. Land is not depreciated.

Leased assets
Fixed assets acquired under finance leasing contracts are stated at purchase cost net of accumulated depreciation, in
accordance with lease accounting methodology.
These assets are depreciated in the consolidated financial statements using the same criteria adopted in relation to
other property, plant and equipment.
The recognition of these assets also involves recognition of the short and medium-term liabilities to the leasing
companies concerned; in addition, the lease instalments are reversed from the leases and rentals caption and the
interest charge for the period is recorded as a financial expense.

Permanent losses in value
The book value of the Company's assets is reviewed on every accounting reference date to identify any indications
of a permanent loss in value, in which case an estimate is made of the recoverable value of the assets concerned. A
permanent reduction in value (impairment) occurs and is recorded in the income statement when the book value of
an asset or a cash generating unit exceeds its recoverable value.
Property, plant and equipment and other long-term assets, including goodwill and other intangible assets, are
subjected to impairment tests when events or changed circumstances indicate difficulties in the recoverability of
their book value.

Determination of recoverable value
The recoverable value of non-financial assets is the greater of their net selling price or their value in use. Value in
use is determined by discounting estimated future financial flows to their present value, using a pre-tax discounting
rate that reflects the current market assessment of the value of money and the risks associated with the type of asset
concerned. Where assets do not generate sufficiently independent financial inflows, the recoverable value of the
cash generating unit to which it belongs is determined.

Writebacks
Writebacks occur when there is a change in the valuations used to determine recoverable value. Writebacks are
credited to the income statement and the book value of the assets concerned is adjusted to reflect their revised
recoverable value. This last amount must not exceed the net book value that would have been reported had these
assets not been written down in prior years.

Financial fixed assets
Investments are valued at cost, as reduced to take account of any permanent losses in value. The original value is
reinstated in future accounting periods if the reasons for the writedowns no longer apply.
Financial assets consisting of receivables are stated at their estimated realizable value.




                                                                                                                     17
Inventories
Inventories are stated at the lower of purchase or production cost, determined using the weighted average cost
method, and their corresponding market value. The market value of raw and ancillary materials is deemed to be their
replacement cost, while the market value of finished and semi-finished products is considered to be their estimated
realisable value, taking into account any manufacturing costs and direct selling costs still to be incurred.
It includes related charges and any reasonably attributable direct and indirect production costs. The original value of
inventories is reinstated in future accounting periods should the reasons for any writedowns no longer apply.
Obsolete and slow-moving items are written down in relation to their estimated useable or realizable value.

Receivables
Receivables are stated at their estimated realisable value. Their maturities and seasonality are reviewed regularly to
avoid unexpected writedowns due to losses.
The nominal value of receivables is adjusted to realisable value via the allowance for doubtful accounts, which is
deducted directly from this caption following a detailed assessment of the individual balances concerned. Where
customers are granted extended payment terms without interest, or when collection is expected over the medium
term, the amounts to be collected are discounted to determine the real value of the sale. The difference between the
discounted value and the amount for collection represents financial income to be recorded on an accruals basis and,
where appropriate, deferred to the accounting period in which collection takes place.

Current financial assets
Financial assets held for sale are stated at their fair value and the related economic effects are reported in the income
statement as “Financial income and expense”.

Provisions for risks and charges
These reserves cover known or likely losses, the timing and extent of which cannot be determined at year-end.
Provisions are only recorded in the balance sheet when there is a legal or implied requirement to employ economic
resources for the settlement of an obligation and the amount concerned can be estimated reliably. Where significant,
the provisions are determined by discounting the estimated future financial flows using an estimated pre-tax rate that
reflects the market's assessment of the current value of money and the specific risks associated with the liabilities
concerned.

Employee termination indemnities
The provision for employee termination indemnities covers the liability to all employees for termination indemnities
accrued in accordance with current legislation, collective payroll contracts and in-house agreements. This liability is
subject to revaluation using officially-established indices.
Employee termination indemnities are calculated on an actuarial basis in accordance with IAS 19 and, in particular,
using the Projected Unit Credit Method. This involves revaluing the amounts accrued at the accounting reference
date to reflect the expected duration of the employment relationships. A reasonable estimate of the benefits already
accumulated by each employee is then made by discounting the revalued amounts using a method based on various
demographic and financial assumptions.
Any actuarial gains and losses that exceed 10% of the discounted value of the defined benefits at the end of the prior
period are recorded in the income statement for the period in which they are identified (“corridor method”).

Employee benefits
In accordance with IFRS 2 – Share-based payments, the total fair value of stock options at the time they are granted
is charged to the income statement as a cost. Any changes in their fair value subsequent to the grant date do not
affect the initial valuation. The remuneration corresponding to the fair value of stock options is recognised as a
payroll cost on a straight-line basis over the period between the grant date and the vesting date, with a corresponding
credit directly to shareholders' equity. As required by IFRS 2, the explanatory notes provide detailed information
about the outstanding stock option plans.

Payables
Payables are stated at nominal value. Any interest included in their nominal value but not yet accrued at period-end
is deferred.

Translation of foreign currency balances
Receivables and payables originally denominated in foreign currencies are translated into euro using the exchange
rates applying at the time of the original transactions. Exchange differences realised upon the collection of
receivables or the settlement of payables denominated in foreign currencies are reflected in the income statement.
Revenues and income, costs and charges relating to foreign currency transactions are booked at the exchange rate
ruling on the date the transaction is carried out.
                                                                                                                   18
At period-end, assets and liabilities denominated in foreign currencies are translated using the spot rates on that date
and the related exchange gains and losses are booked to the income statement. Any net translation gains are treated
as non-distributable reserves until they have been realised.

Bank overdrafts and loans
Loans are initially valued at cost, net of related arrangement expenses. This value is adjusted subsequently to take
account of any differences between initial cost and redemption value over the lives of the loans, using the effective
interest method.
Loans are classified as current liabilities, unless the Company has an unconditional right to defer repayment for at
least twelve months subsequent to the accounting reference date.

Derivatives and accounting for hedging transactions
Company's activities are primarily exposed to financial risks from changes in exchange rates and interest rates. The
Company uses derivatives (mainly forward currency contracts) to hedge the risk of exchange rate changes on
irrevocable commitments or expected future transactions (purchase orders). Interest-rate risks relate to bank loans;
these risks are hedged in accordance with Company policy by converting floating-rate debt into fixed-rate loans.
The Company does not trade in derivative instruments.
Derivatives are initially recorded at cost and adjusted to reflect their fair value at each period-end.
Changes in the fair value of derivatives designated to hedge future cash flows relating to the commitments and
planned transactions of the Group are recorded as a direct adjustment of shareholders' equity, providing they satisfy
the formal requirements for hedge accounting and have proved effective. Changes in the fair value of derivatives
that are not classified as hedging instruments are recorded in the income statement for the period in which they take
place.

Revenue recognition
Revenues are stated net of returns, discounts, allowances and rebates, as well as taxes directly related to the sale of
products and the provision of services.
Sales revenues are recognised when the significant risks and benefits of owning the assets have been transferred and
the amount of such revenue can be determined reliably.
Financial revenues are recognized on an accrual basis.

Costs
Costs incurred to prepare advertising campaigns are expensed in the period in which the related campaigns are run,
while other advertising and promotional expenses are charged to the income statement as incurred.
The costs of designing and manufacturing samples are matched with the sales revenues generated by the related
collections and, accordingly, are charged to the income statement in proportion to the revenues earned.

Financial income
Financial income includes interest on invested funds, exchange gains and income from financial instruments, to the
extent not offset as part of hedging transactions. Interest income is credited to the income statement when earned,
having regard for the effective yield.

Financial expense
Financial expense includes the interest charged on financial payables, determined using the effective interest
method, exchange losses and the losses on derivative financial instruments.
The interest element of finance lease instalments is charged to the income statement using the effective interest
method.

Current income taxes
Income taxes include all the taxes levied on the Company's taxable income. Income taxes are charged to the income
statement, except for the tax effect of items credited or debited directly to shareholders' equity, which is also
recognised directly as part of shareholders' equity.
Account is also taken of the results for tax purposes of all of the Italian and foreign subsidiaries that take part in the
national and world-wide tax filing system.
Deferred taxes are provided using the full liability method. They are calculated on all timing differences between the
fiscal value of assets and liabilities and their book value in the financial statements.

The deferred tax assets arising in relation to tax losses and unutilised tax credits carried forward are recognised to
the extent it is likely that future taxable income will be sufficient to recover them.


                                                                                                                       19
Dividends
Dividends are recorded at the time the right to collect them arises, which is when they are declared.

Treasury shares
Treasury shares are classified as a direct deduction from shareholders’ equity. The book value of treasury shares and
the revenues deriving from subsequent disposals are recorded as changes in shareholders’ equity.

Financial position
The cash flow statement has been prepared using the indirect method. The cash and cash equivalents included in the
cash flow statement reflect the related balance sheet amounts at the accounting reference date. Cash flows
denominated in foreign currencies have been translated using the average exchange rates for the period. Income and
costs relating to interest, dividends collected and income taxes are classified together with the cash flows from
operating activities. The effect on the cash flow statement of the transition to international financial reporting
standards was minimal, except for the related impact on the various balance sheet and income statement captions,
which is described in more detail in Appendix A. In particular, as envisaged by IFRS 1 (para. 27), the tax credits
sold with recourse in prior years totalling 9,829 thousand euro have not been recognised as assets.

Estimates
The preparation of the financial statements and related notes in accordance with IFRS requires management to make
estimates and assumptions that influence the reported values of assets and liabilities, as well as the information
provided in relation to contingent assets and liabilities at the balance sheet date. The final amounts concerned may
differ from such estimates. The estimates are made to value the intangible and tangible assets subjected to the
impairment tests described above, as well as to make provisions for doubtful accounts, obsolete inventories,
depreciation and amortisation, the writedown of assets, employee benefits, taxation, business restructuring and other
allowances and reserves. These estimates and assumptions are reviewed periodically and the effects of any changes
are reflected immediately in the income statement.




                                                                                                                  20
                     COMMENTS ON THE PRINCIPAL INCOME STATEMENT CAPTIONS

1. Total net sales

Revenues from sales increased by 19,803 thousand euro.
This change is mainly due to the increase in sales achieved by the network of directly-managed stores in Italy (euro
2,137 thousand) and by stores with sale-or-return contracts (euro 14,958 thousand), as well as the rise in sales to
affiliates (euro 8,823 thousand) and to new foreign customers in franchising (euro 387 thousand). This effect is
partly offset by the decline in sales to stores in franchising (euro 9,665 thousand) in Italy.

                                                                                2006                           2005
Revenues from the sale of core products and services to
third parties                                                                 99,188                         90,749
Revenues from the sale of core products and services to
related parties                                                               36,735                         25,371
Total                                                                        135,923                        116,120

Revenues by geographical area

Foreign sales represent about 30% of the total.
                                                                              2006                            2005
Italy                                                                        95,287                          84,769
EEC                                                                          21,249                          18,962
Rest of Europe                                                               19,387                          12,389
Total                                                                       135,923                         116,120

2. Other revenues

This caption is analysed in the table below. "Other" principally relates to the recovery of expenses incurred on
behalf of third parties.

                                                                               2006                            2005
Sale of raw materials to third parties                                           625                             788
Sale of raw materials to related parties                                           1                              83
Royalties and commission income from third parties                               440                             461
Royalties and commission income from related parties                             488                             492
Other sales to third parties                                                     261                             266
Other sales to related parties                                                   119                              65
Total                                                                          1,934                           2,155

3. Cost of sales
                                                                               2006                            2005
materials and subcontract services                                           58,609                           53,242
             - of which with related parties                                   2,291                           2,836
direct labour and related costs                                                6,115                           7,634
other manufacturing costs                                                      7,994                           7,529
            - of which with related parties                                      331                            387
(increase) decrease in inventories                                               632                        (10,183)
 Total cost of sales                                                         73,350                           58,222

The increase in cost of sales is mainly attributable to changes in the processes of inserting goods sent to customers
and affiliates.



                                                                                                                  21
4. Gains and losses

The net balance of gains and losses totals 3,746 thousand euro. More precisely, net losses at 31 December 2006
amount to euro 139 thousand and are due to the disposal of cars and motor vehicles (euro 40 thousand), sales of
specific manufacturing machinery (euro 15 thousand) and sundry shop fittings and equipment (euro 84 thousand).
Gains, on the other hand, total euro 3,885 thousand and arise from sales of cars and motor vehicles of euro 10
thousand, shop fittings and equipment of euro 5 thousand, specific manufacturing machinery of euro 264 thousand
and the sale of businesses of euro 3,606 thousand.

5. Selling, general and administrative expenses

The cost of services, 58,028 thousand euro, is analysed below.
                                                                                                2006                2005
Personnel costs                                                                               16,274              15,162
Rental expense, net                                                                           13,795               11,937
Royalties and commission expense                                                               2,452                2,329
Distribution expenses                                                                          1,702                1,520
Advertising expenses                                                                           4,297                1,641
Other selling expenses                                                                         8,799                3,141
Consultancy, legal expenses, auditing                                                          2,304                1,117
Utilities                                                                                      1,806                1,509
Maintenance                                                                                    1,336                 937
Provisions to the allowance for doubtful accounts                                              2,500                2,383
Travel and entertainment                                                                       1,084                 986
Emoluments of directors and officers                                                           1,172                1,155
Out-of-period income from recovery of bankruptcy receivables                                  (1,018)                (54)
Other expenses                                                                                 1,525                5,231
Total                                                                                         58,028              48,994

The increase in payroll costs is due to the higher number of directly managed Stefanel stores. This figure also
includes the figurative cost of cancelling the first cycle of the stock option plan in accordance with IFRS 2 (euro 200
thousand).
The rise in other selling expenses is strictly connected with services provided to Stefanel franchisees for managing
stores with sale-or-return contracts.
Other expenses refer principally to costs for insurance, commissions on credit cards, out-of-period expense, cleaning
and surveillance.
Advertising expenses have increased by euro 2,656 compared with the previous year, because of the company's
brand repositioning policy.

Personnel
The changes in employee numbers during the period, are analyzed below, by grade.
                                                                                                              Average for
                                                      31.12.2005     Recruits      Leavers       31.12.2006      the year
Managers                                                       10          1            (2)               9           10
Supervisors                                                     24         4            (3)             25            25
Clerical and sales staff                                       592       248         (237)              603          598
Foremen                                                          4         0             0                4            4
Workers                                                        105         2            (6)             101          103
Total                                                          735       255         (248)              742          740




                                                                                                                      22
6. Depreciation, amortisation and value adjustments
                                                                                                2006             2005
Amortisation of intangible assets                                                                 533             694
Depreciation of property, plant and equipment                                                   5,134           5,275
Writedowns of fixed assets                                                                        781             506
Total                                                                                           6,448           6,475


7. Financial income and charges

Interest and other financial income

                                                                                                 2006           2005
Bank interest income                                                                               39              39
Interest income on intercompany a/c                                                               218             180
Interest charged to third-party customers                                                          10              17
Interest income from related parties                                                               36              36
Income relating to interest rate hedges                                                         1,641             638
Interest income on loans to related parties                                                     1,993           1,658
Other income                                                                                      810           1,129
Total                                                                                           4,747           3,697

“Interest income on loans to related parties” mainly refer to interest on loans granted to Noel International SA (euro
1,142 thousand) and to interest income on loans to subsidiary companies for euro 851 thousand.
“Other income” also include the financial effect of discounting receivables of euro 476 thousand.

Interest and other financial charges

Interest and other financial charges amount to euro 10,763 thousand, as shown in the table below.

                                                                                                 2006           2005
Bank interest:
- on intercompany a/c                                                                             719             321
- current account overdrafts and notes presented with recourse                                    256           5,251
- long-term loans                                                                               6,217           1,908
Interest on other payables                                                                        410             716
Charges relating to interest rate hedges                                                        1,836             805
Sundry charges                                                                                  1,425             443
Total                                                                                          10,863           9,444

The decrease in interest expense on current account overdrafts was caused by reclassification of medium/long-term
loans, which in the balance sheet at 31 December 2005 had been booked to short-term exposure, together with the
related financial charges.

The caption “interest on other payables” includes interest from discounting termination indemnities of 234 thousand
euro and interest due under leasing contracts of 148 thousand euro.

The caption “sundry charges” includes amortisation of financial charges on medium/long-term loans for euro 957
thousand and gains, net of the related losses, on interest-rate derivatives for euro 568 thousand.


8. Income and expenses from investments

Income from investments refers to the dividends paid out of the year earnings by the subsidiaries Interfashion
S.p.A., Victorian S.r.l., Stefanel Universal, for a total of 7,408 thousand euro. It also includes the dividends
distributed by Omnia Factor S.p.A. of 50 thousand euro.


                                                                                                                   23
The expenses consist of writedowns on investments in subsidiaries of 13,204 thousand euro, as detailed in note 12
below.


9. Income taxes

Current taxes
Current taxes include IRAP of euro 1,356 thousand and income of euro 4,140 thousand which is the net balance
from offsetting the fiscal results of Stefanel S.p.A. and Interfashion S.p.A., which also files for tax in Italy on a
group basis, with the fiscal results of the foreign companies that file for tax on a world-wide group basis.

Deferred taxes
Following the results achieved during the year and in relation to management's estimate of taxable income in future
years, deferred tax assets and liabilities - for the purposes of both IRES and IRAP, where applicable - have been
booked on temporary differences and tax losses incurred in previous years have been included for the portion that
will probably be used.
In detail, the deferred tax assets amount to euro 2,324 thousand, of which euro 1,485 thousand is made up of carry-
forward tax losses from prior years, whereas the deferred tax liabilities amount to euro 56 thousand.

                                                                                                2006           2005
Current taxes
IRAP                                                                                            1,356         1,400
Income from group tax filing                                                                  (4,140)        (2,628)
Corporate income taxes                                                                          (279)              5
Total                                                                                         (3,063)        (1,223)
Deferred tax assets:
from timing differences                                                                         (839)        (6,294)
reversals of deferred tax assets                                                                2,077            575
from tax losses generated in prior years                                                      (1,485)              -
Deferred tax liabilities:
from timing differences                                                                            56          6,135
reversals of deferred tax liabilities                                                         (1,894)        (2,059)
Total                                                                                         (2,085)        (1,643)
Total taxes                                                                                   (5,148)        (2,866)



The following table is a reconciliation of the theoretical and effective tax burden.
                                                                                    IRES       IRAP         TOTAL
Profit (loss) before tax                                                           (8,085)
Taxable income - IRAP                                                                        30,608
Standard rate                                                                         33%     4.25%
Theoretical tax                                                                      2,668   (1,301)           1,367
Tax effect on add-backs                                                            (9,060)     (441)         (9,501)
Tax effect on deductions                                                             6,627       421           7,048
Tax effect of world-wide group tax filing                                            3,905                     3,905
Tax on taxable income                                                                4,140   (1,321)           2,819
Other adjustments:
Effect of 5.25% IRAP regional split                                                             (35)            (35)
Other                                                                                                            279
Total current taxes                                                                                            3,063
Deferred tax liabilities on temporary differences, carry-forward losses and
other differences                                                                                              2,085
Effective net tax                                                                                              5,148



                                                                                                                  24
                        COMMENTS ON THE PRINCIPAL BALANCE SHEET CAPTIONS

10. Intangible assets

The following table analyses intangible assets at 31 December 2006 compared with the situation at the end of 2005,
with the changes that took place during the year.

                                                               Intellectual
                                                            property rights          Key money                  Total
Opening net book value at 31.12.2005                                  1,209               35,577              36,786
Additions                                                               247                4,701                4,948
Amortisation charge                                                   (533)                    -                (533)
Decreases for disposals and retirements                                   -              (1,850)              (1,850)
Writedowns                                                                -                (175)                (175)
Closing net book value at 31.12.2006                                    923              38,253               39,176

As part of the process of rationalising and developing the commercial network, certain businesses that were no
longer profitable were sold for 6,017 thousand euro. No intangible assets have been generated internally.

Key money
The key money recorded in the financial statements is treated as an intangible asset with an indefinite useful life
which, accordingly, is not subject to amortisation. Book value represents the lower of the historical cost incurred or
the market value determined by appraisals obtained by the Group. The amounts concerned were subjected to an
impairment test in accordance with IAS 36.
The increases during the year, 4,701 thousand euro, refer principally to the commercial activities acquired in Milan,
Turin and Florence.
The decreases are related to sales and disposals of businesses in Florence during the year.


11. Property, plant and equipment

The following table shows the net book value of property, plant and equipment at 31 December 2006, compared
with the equivalent value at the end of the previous year.

                                                                                      31.12.2006          31.12.2005
Land and buildings                                                                            59                  40
Plant and machinery                                                                        4,085               4,664
Industrial and commercial equipment                                                          805                 432
Leased assets                                                                              2,586               3,061
Leasehold improvements                                                                     8,421               8,870
Other assets                                                                               5,902               6,307
Total                                                                                     21,858              23,374

“Land and buildings” consist of one type of asset, which is temporary buildings.

“Leased assets” include:
                                                                                      31.12.2006          31.12.2005
Leased specific plant                                                                      2,209               2,576
Leased lorries and internal transport                                                        148                 145
Leased motor vehicles                                                                        229                 340
Total                                                                                      2,586               3,061




                                                                                                                   25
“Other tangible assets” consist of:
                                                                                    31.12.2006           31.12.2005
Furniture and office machines                                                                93                  142
Shop fittings                                                                             5,300                5,809
Electronic machines                                                                         414                  316
Motor vehicles (company owned)                                                               95                   40
Total                                                                                     5,902                6,307

"Shop fittings” include advance payments of 77 thousand euro towards fittings for the shop in Rome due to be
opened in April 2007.
The following table summarises the movements that took place during the year in property, plant and equipment:
these are shown net of accumulated depreciation which amounts to 44,148 thousand euro at 1 January 2006 and
44,909 thousand euro at 31 December 2006.

The changes with respect to the prior year relate to:
                                                                                                         31.12.2006
Increases                                                                                                      5,546
Net decreases                                                                                                (1,412)
Depreciation                                                                                                 (5,134)
Impairment                                                                                                     (516)
Total                                                                                                        (1,516)

Investments made during the period are mainly in specific plant and machinery to improve the efficiency of the
production process, furniture and fittings for the sales network to furnish the Company's own shops and to
restructure and modernise those that are not owned.
Disposals during the year principally concern the disposal of furniture, fittings and equipment no longer useable
following the closure of certain points of sale and the writedown of leasehold improvements for the same reason.
At 31 December 2006, we carried out an impairment test in accordance with IAS 36, which led to a writedown of
516 thousand euro of sales network assets, both at directly managed and third-party managed stores.
Details in changes in property, plant and equipment is reported in the attachment to these notes.


12. Investments

Details of investments and their movements during the year are provided in the attachments to these notes.
This caption has also been subject to adjustments and writedowns for permanent losses in value as a result of
decreases in certain subsidiaries’ shareholders' equity. The following is a list of the investments written down and
the amounts concerned:

 Writedowns                                                                                                   2006
 Stefanel Hellas S.A.                                                                                           389
 Stefanel Hungary Kft                                                                                           341
 Stefanel Japan Inc.                                                                                          1,232
 Stefanel International Holding N.V.                                                                          1,637
 S.F.K. Ltd                                                                                                   1,606
 S.T. Ariè Lda                                                                                                  211
 Stefburg Mode GmbH                                                                                           1,016
 Stefpraha S.r.o.                                                                                               544
 Stefanel Polonia Sp. Z o.o.                                                                                    680
 Stefanel Romania S.r.l.                                                                                        378
 Stefanel Slovakia Sro                                                                                          265
 Stefanel Espana S.L.                                                                                         1,260
 Stefanel Fashion Turkey A.S.                                                                                 3,645
 Total                                                                                                       13,204


                                                                                                                 26
Writedowns of the investments were carried out by comparing their net book value with the corresponding portion
of shareholders' equity, translated at the exchange rates ruling on 31 December 2006, as the losses made by the
subsidiaries are considered permanent.
As regards the investment held in Noel International S.A., an associated company, and through it in The Nuance
Group A.G,, it was decided that no writedown had to be made as Stefanel's share of the loss, euro 6,419 thousand, is
not considered permanent. When measuring the value of the investment, reference was made to IAS 27 and
paragraph 33 of IAS 28, which provide indications on how to determine the value in use of significant
shareholdings. This valuation is supported by calculations made using both the discounted cash flow (DCF) method
and the market multiples method.


13. Non-current financial receivables and other assets

Long-term financial assets amount to 31,929 thousand euro at 31 December 2006. This balance is analysed as
follows:
                                                                                31.12.2006     31.12.2005
Medium-term loan in favour of Noel International SA                                  30,965        30,624
Derivatives at fair value                                                               751           121
Receivables for interest income on guarantee deposit with related parties                36               -
Other                                                                                   177            388
Total                                                                                31,929        31,133

The loans granted to Noel International S.A. bear interest at market rates (6-month Euribor plus a spread of 1.25%).
The contractual terms of the loan agreements signed by The Nuance Group AG significantly restrict that company's
ability to transfer funds to its parent, Noel International SA, and therefore to Stefanel S.p.A., whether in the form of
dividends or as repayment of intercompany loans received, be it capital or interest.
There were four outstanding interest-rate hedges at the year-end relating to a medium-term loan for 80,374 million
euro, corresponding to 70.0% of the remainder of the loan.
Although these instruments have the purpose and characteristics of hedges, they do not fully satisfy all the formal
and informal requirements to qualify for hedge accounting as envisaged by IAS 39. Accordingly, all the changes in
the fair value of such instruments are reflected in the income statement. The recording of derivative financial
instruments in accordance with this standard has involved the recognition of a financial asset totalling 751 thousand
euro at 31 December 2006. This reflects the market prices of these instruments at the reference date, provided by
the banking counterparts that arranged the transactions concerned. To match the recognition of this asset, financial
income of 568 thousand euro was recorded in the period.


14. Other non-current receivables and assets

                                                                                            31.12.2006      31.12.2005
Due from the tax authorities - medium term                                                      11,939          12,970
Guarantee deposits                                                                               1,980           1,960
Due from customers beyond one year                                                               2,577           3,618
Total                                                                                           16,496          18,548

The amounts receivable from the tax authorities mainly include receivables of amounts for which reimbursement has
been requested for around euro 938 thousand, receivables arising from the tax return for which reimbursement has
not yet been requested, euro 5,962 thousand, and interest on receivables for which reimbursement has been
requested and which were transferred with recourse to third parties, euro 5,039 thousand. With reference to the
transfer of such receivables, in prior years (1990-1991), Stefanel S.p.A. signed two contracts for the sale with
recourse of reclaimed tax credits totalling 9,829 thousand euro. These receivables were eliminated from the assets
reported in the balance sheet in accordance with the accounting policies applied at the time. As allowed by IFRS 1,
these receivables have not been reinstated since the disposals took place prior to 1 January 2004. Note that in
October the Company received a rebate from the Tax Authorities of a first tranche of euro 500 thousand of capital
and euro 264 thousand of interest.




                                                                                                                     27
15. Deferred tax assets

Deferred tax assets have been booked for a total of 8,745 thousand euro, considering the results achieved during the
year and management's estimate of taxable income in future years for the purposes of both IRES and IRAP, where
applicable, on temporary differences and tax losses incurred in previous years have been included for the portion
that will probably be used. Details are provided in an attachment.


16. Inventories

This caption is analyzed below:
                                                                                          31.12.2006      31.12.2005
Raw, ancillary and consumable materials (at cost)                                               1,590           1,611
Work in process and semifinished products (at cost)                                             5,896           6,862
Finished products and goods for resale (at cost)                                               21,593          20,295
Gross value                                                                                    29,079          28,768
Less: Writedown                                                                               (2,887)         (1,944)
Net value                                                                                      26,192          26,824

The value of inventories of raw materials and work in process has decreased by euro 987 thousand with respect to
the previous year thanks to a purchasing policy that better reflects the goods being sold.
The gross value of finished products inventory, on the other hand, increased by euro 1,298 thousand. This change is
the combined effect of a reduction in the inventories of seasons no longer being sold and an increase in stock for the
2006 Autumn/Winter season.
The latter (currently on sale in the shops) has risen by euro 1,572 thousand compared with the previous year in
stores with sale-or-return contracts due to a revision of the shop network in Italy (with many switching from
franchising to sale-or-return contracts). However, comparing these inventories based on the same number of stores
(both direct and sale-or-return), they are 8% lower than the previous year.
The 2007 Spring/Summer season does not show significant changes compared with the prior year.
Application of product clearance policies via Stout S.p.A., a subsidiary that specialises in the outlet management,
has reduced the value of unsold finished products.

Valuation of inventories at current costs would not have led to significant differences compared with weighted
average cost.

Changes in the allowance for obsolete and slow-moving goods during the year are analyzed below:
Allowance for obsolete and                                                           Allowance for obsolete and
slow-moving goods                            Provision         Utilization              slow-moving goods as of
as of 31.12.2005                                                                                     31.12.2006
1,444                                          2,198             (1,400)                                  2,242


17. Trade receivables

Trade receivables are stated at their estimated realisable value of 62,998 thousand euro, following a further
provision of 2,500 thousand euro to the allowance for doubtful accounts. The allowance for doubtful accounts
amounts to 10,499 thousand euro (10,957 thousand euro as of 31 December 2005). This reserve is made up of a
specific reserve to cover estimated losses on positions in dispute and overdue receivables. The above receivables are
also stated net of provisions for returns and/or credit notes amounting to 1,247 thousand euro at 31 December 2006,
that may be recorded as part of commercial relations with customers. Receivables subject to collection beyond the
normal trade terms allowed to customers have been discounted using an annual rate of 4.995%. This process has
reduced the reported value of receivables by 1,211 thousand euro with respect to their nominal value.

                                                                                    Allowance for
                                                                                       doubtful
                                                                        Gross value   accounts          Net value
Due from customers within one year                                          73,497       (10,499)           62,998



                                                                                                                   28
These receivables include trade notes and bank receipts totalling 5,278 thousand euro not yet due at period-end,
either held in portfolio or presented for collection or advances with recourse.

                                                                                        31.12.2006      31.12.2005
Due from third parties within one year                                                      23,478          31,299
Due from subsidiary companies                                                               39,495          28,818
Due from associated companies within one year                                                   16             156
Current receivables from related parties                                                         9               -
Total current receivables                                                                   62,998          60,273

Receivables due from third parties decrease by 7,821 thousand euro, as a result of the combined effect of a new and
improved system of credit management and conversion of certain franchises to the new sale-or-return contract which
is similar to direct management.
Receivables from subsidiaries have risen by euro 10,677 thousand because of an increase in supplies, especially in
the case of Stefanel GmbH.

Changes in the allowance for doubtful accounts:

Balance at 31.12.2005                                                                                       10,957
Provision                                                                                                    2,500
Decreases for utilisation                                                                                  (2,958)
Balance at 31.12.2006                                                                                      10,499

The allowance for returns and credit notes, shows the following changes during the year:

Balance at 31.12.2005                                                                                        1,701
Provision                                                                                                    1,216
Utilisation                                                                                                (1,670)
Balance at 31.12.2006                                                                                        1,247


18. Other current receivables and assets

                                                                                        31.12.2006      31.12.2005
VAT recoverable                                                                                 91           1,173
Advances to suppliers and agents                                                             2,189           1,251
Advances to employees                                                                           18              18
Amounts due from social security institutions                                                  153             167
Insurance compensation for damages                                                             257             196
Other receivables                                                                            7,668           5,133
Total receivables                                                                           10,376           7,938

Accrued income:                                                                                  27             38
Prepaid expenses:
  - Insurance policies                                                                          468             25
  - Rentals and leases                                                                        2,502          2,143
  - Advertising                                                                               1,005            103
  - Sample costs                                                                              3,403          2,941
  - Other                                                                                       281            170
Total prepaid expenses                                                                        7,659          5,382
Total accrued income and prepaid expenses                                                     7,686          5,420
Total other current receivables assets                                                       18,062         13,358

The VAT credit of euro 91 thousand consists of German VAT for which reimbursement has been requested.
The caption “advances to suppliers” has increased mainly because of advances paid for the purchase of a business.
                                                                                                                29
"Other current receivables" include an amount of 5,334 thousand euro for the transfer of corporate income tax
(IRES) based on the national group tax filing system together with the subsidiary Interfashion S.p.A., 2,372
thousand euro for the payment of VAT for December by the subsidiary Victorian S.r.l. and 17 thousand euro for
charges accrued in the last quarter with the subsidiary Interfashion S.p.A.
There are no receivables due beyond five years.

Prepaid sample costs reflect the deferral of sample design and production costs relating to the 2007 Spring/Summer
and 2007/2008 Fall/Winter collections, and to the production of the 2007 Spring/Summer collection, for which the
corresponding sales revenues have not yet been earned. There are no medium/long-term accrued income or prepaid
expenses.


19. Cash and cash equivalents

The total cash and cash equivalents held by the Company amount to 13,741 thousand euro (19,937 thousand euro at
31 December 2005) and relate to temporary liquidity held on bank current accounts for future use.

                                                                                            31.12.2006      31.12.2005
Cash                                                                                             1,390             155
Bank accounts                                                                                   12,351          19,782
Total                                                                                           13,741          19,937


20. Current financial receivables and other assets

                                                                                            31.12.2006      31.12.2005
Loans granted to subsidiaries - principal                                                       18,719          15,308
Loans granted to subsidiaries - interest                                                         2,370           1,668
Loans to associated companies - interest                                                             -              34
Intercompany current account                                                                     5,339           3,310
Short-term financial assets from derivative instruments                                              -              62
Total current financial receivables                                                             26,428          20,382

This item refers to short-term loans granted to foreign affiliates to cover temporary liquidity requirements.




                                                                                                                   30
                       COMMENTS ON THE PRINCIPAL BALANCE SHEET CAPTIONS - LIABILITIES

21. Shareholders' equity

The share capital as of 31 December 2006 amounts to euro 54,296,744, represented by 54,196,998 ordinary shares
and 99.746 saving shares with par value of 1 each.
The legal reserve amounts to euro 7,415 thousand. The share premium reserve of the Parent Company totals euro
29,508 thousand.

Dividends distributed during the period amounted to 2,171 thousand euro. This represented a dividend of 0.04 euro
per ordinary share and 0.075 euro per non-convertible savings share.

The table below analyzes the availability of equity reserves at 31 December 2006.

                                                                                  STEFANEL S.P.A.
                                                                  STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY
                                                                               AT 31 DECEMBER 2006
                                                                                (in thousands of euro)




                                                                           POSSIBLE              PORTION AVAILABLE UNAVAILABLE
                                                 AMOUNT                                                                                                    RESTRICTED               UNRESTRICTED
                                                                             USES                 FOR ALLOCATION     PORTION
                                                                                                                                                            PORTION                   PORTION


Share capital                                              54.297

Income reserves:

Legal reserve (*)                                           7.415                B                                                            7.415

Reserve for transition to IFRS                            (13.198)

Reserve for exchange gains on valuation                       396              A, B                                     396                                                 396

Reserve for purchase of treasury shares                     4.956                                                                             4.956                       4.956

Reserve for stock options                                     200                                                                               200                         200

Retained earnings (accumulated losses (**                  11.596             A, B, C                                11.596                                                                        11.596

Capital reserves:

Share premium reserve                                      29.508              A, B                                  29.508                                             29.508

Revaluation reserves (***)                                  1.511            A, B, C                                  1.511                                                                         1.511

Net income (loss) for the year                             (2.937)

Total                                                       93.744                                                   43.011                  12.571                     35.060                     13.107

Key:
A: to increase share capital
B: to cover losses
C: to distribute to shareholders

(*) Pursuant to art. 2431 c.c., the entire amount of these reserves can only be distributed if the legal reserve has reached the limit established by art. 2430 c.c.
(**) Note that the reserve for retained earnings includes euro 4,023 thousand of tax amortisation on key money charged in 2004.
(***) Pursuant to art. 2445. 2 and 3 c.c., if the reserve is used to cover losses, no dividend can be distributed until the reserve has been reconstituted or reduced by an extraordinary shareholders'
meeting.




No deferred taxes have been provided in relation to this revaluation reserve, which is partially in suspense for tax
purposes, because at present the Group has no plans to carry out any transactions that would give rise to its taxation.

Stefanel S.p.A. holds 113,201 treasury shares, of which 112,000 are ordinary shares and 1,201 non-convertible
savings shares.



                                                                                                                                                                                                          31
                                               Number of         Nominal      % Share        Carrying        Average
                                                ordinary          value       capital         value         unit value
                                                  shares
Balance as of 01.01.2006                         100,000          100.00       0.1842          383.20          3.832
Purchases                                        12,000           12.00         0.02            43.8           3.65
Sales                                               0              0.00        0.000            0.00           0.000
Writedowns                                          0              0.00        0.000            0.00           0.000
Writebacks                                          0              0.00        0.000            2.00           0.000
Balance as of 31.12.2006                         112,000          112.00       0.206           355.1           3.171

The articles of association grant the following rights and privileges to non-convertible savings shares:
Art. 5) (abstract) Savings shares have the same rights as other shares upon the distribution of reserves.
Art. 19) Net profit is allocated as follows:
          5% (five percent) to the legal reserve, until this reserve has reached an amount equal to at least one-fifth of
          share capital;
          the savings shares earn a dividend of up to 7.5% (seven point five percent) of their par value; if in any one
          year the savings shares are allocated a dividend of less than 7.5% (seven point five percent) of their par
          value, the difference is added to the preferred dividend declared in the following two years;
          unless the Shareholders' Meeting decides otherwise, any residual earnings are split between all of the shares
          in the form of dividends, in such a way that the savings shares earn a total dividend that is 3% (three
          percent) of their par value higher than the dividend allocated to the ordinary shares.
If and on the basis allowed by law, the company may distribute advance dividends. Dividends shall be paid on the
basis and with the timing established each year at the Shareholders' Meeting and any uncollected dividends shall
lapse in favour of the Company's reserves on the expiry of five years from the date on which they became payable.


22. Reserves for future risks and charges (current and non-current portion)

The provisions for risks and charges total 1,552 thousand euro, as analysed in the table below.
                                                     Balance at        Provisions        Utilisation         Balance at
                                                     31.12.2005                                              31.12.2006
Reserve for legal disputes                                      633              54                  0              687
Reserve for agents' leaving indemnities                         569             255             (105)               719
Total medium/long-term provisions                              1,202            309             (105)             1,406
Other provisions for risks and charges -
current portion                                                 928              36             (818)               146
Total short-term provisions                                     928              36             (818)               146

The provision for agents' termination indemnities is recorded in accordance with legal requirements and collective
agreements, and is determined with reference to an estimate of future payments based, in part, on historical
experience. Since these payments may be made over the medium-long term, the provision has been discounted in
accordance with IAS 37, by applying a discounting rate equal to the Stefanel's average cost of money to the
expected cash flows.
Discounting at 31 December 2006 is worth euro 110 thousand, with an adjustment to the income statement for the
year of 169 thousand euro.
“Other provisions for risks and charges – current” consist of a risk provision for a tax dispute of euro 110 thousand
and a provision for discount coupons of euro 36 thousand.

Legal disputes
A legal dispute has arisen in relation to the termination of certain commercial relationships. Considering the opinion
of legal counsel, the Stefanel S.p.A. believes that the outcome of this legal action might favour the other party and,
accordingly, a provision has been recorded to cover the potential loss of 687 thousand euro.

Tax position
Tax litigation pending at the end of the year is as follows:

                                                                                                                       32
On 2 March 2004, the Venice Tax Office - Veneto Regional Management initiated a general tax and accounting
audit at the Company for the 2001 tax year. This audit was carried out as part of an annual programme of inspections
at larger taxpayers. It was completed on 14 May 2004 with the preparation of an audit report. The main point that the
Tax Office contested was the deductibility of part of the lease instalments for the points of sale rented to third-party
customers under business lease agreements, claiming an alleged violation of art. 75.5, DPR 917/1986 (principle of
inherence and non-profitability). On 13 July 2004, Stefanel S.p.A. filed a defence brief demonstrating the
illegitimacy and lack of foundation of these allegations. On 28 September 2005, the Tax Office sent the Company
notice of assessment no. 844030300473, which reiterated the allegations made by the inspectors in the audit report.
With this document, the Tax Office adjusted the tax losses incurred during the year, assessed higher IRAP and higher
VAT, as well as imposing fines.
On 16 November 2005 Stefanel S.p.A. filed a petition requesting a negotiated settlement pursuant to art.6.2 of
Decree 218/97. On 29 December 2005, the Treviso Tax Office issued a notice of assessment, basically confirming
the disputed matters previously brought up by the Venice Regional Tax Office and the Company has appealed
against this decision. On 24 January 2007, as a result of our appeal, the position was discussed before the Tax
Commission; we are still waiting for the sentence to be announced
As regards this dispute, the Company decided that it was prudent to make a provision of 110 thousand euro, bearing
in mind that the losses that have been adjusted will be offset against taxable income for the year.


EMPLOYEE BENEFITS

Employee benefits
Information concerning the stock option plans
The Extraordinary Shareholders' Meeting of 21 December 2005 authorised a cash increase in capital, in one or more
tranches, up to a maximum of Euro 3,000,000 by issuing up to 3,000,000 ordinary shares of par value Euro 1 each,
excluding option rights, to be reserved for exercising the options to subscribe Stefanel ordinary shares to be
assigned:
    - for Euro 1,600,000 to the Managing Director;
    - for Euro 60,000 to other directors and/or collaborators holding particular positions within the Company
         and/or subsidiaries, and
    - for Euro 1,340,000 to the Company's managers.
The meeting of the Board of Directors held at the end of the Shareholders' Meeting approved the first cycle of
allocation for a total of 900,000 subscription rights, identifying the names of the beneficiaries, the related quantities,
the subscription price (3,985 euro, which is the average official price of the Stefanel stock on the Electronic Equity
Market (MTA) for the month prior to the grant date of the purchase rights), all within the terms laid down by the
Shareholders' Meeting.

With reference to the stock option plan mentioned above, the members of management assigned shares during the
first cycle and the Company agreed to cancel this assignment and to suspend further assignments until such time that
the whole structure of the incentive scheme can be revised.
As a result of this decision, the value of the options that have been cancelled was booked to the income statement for
the year with a contra-entry to shareholders' equity for euro 200 thousand.


23. Employee termination indemnities

This amounts to 5,528 thousand euro and includes indemnities accrued at period end by the employees in
accordance with the provisions of law.

Opening net book value                                                                                             5,388
Increases for provision of the year and transfers                                                                  1,290
Decreases for payment of indemnities, advances and transfers                                                     (1,150)
Closing net book value                                                                                             5,528

The Company has decided to use the corridor method, which means that the actuarial gains and losses determined
using this method are not recognised unless they exceed 10% of the present value of this defined benefit obligation
As a result of applying this method, actuarial losses of 1,124 thousand euro were not recorded at 31 December 2006.
In addition, the Company has decided to classify the interest element of the charge relating to employee defined-
benefit plans as a financial expense, with a consequent increase in financial expense of euro 234 thousand.


                                                                                                                       33
24. Deferred tax liabilities

Deferred tax liabilities amount to 6,941 thousand euro and are determined by timing differences that will become
taxable in future years. A total of 1,894 thousand euro in deferred tax liabilities reversed during the year, mostly due
to the taxation of prior year capital gains from the sale of buildings.

                                                Balance at                                                  Balance at
                                                31.12.2005             Provisions         Reversals         31.12.2006
Deferred tax liabilities                             8,779                     56           (1,894)              6,941


25. Financial liabilities (current and non-current portion)

Amounts due to banks total 168,265 thousand euro, as shown in the table below.

                                                               Within 1       Within 5       Beyond 5            Total
Bank overdrafts                                                   2,947              0              0            2,947
Loans                                                           24,965         80,671          31,283          136,919
Finance lease instalments                                           482          1,946             71            2,499
Payables for intercompany c-a                                   25,900               0              0           25,900
Total                                                           54,294         82,617          31,354          168,265

Forward currency purchases outstanding at period-end total USD 23.150 thousand; they will mature no later than
December 2007 and reflect an average rate of 1.30. Although these transactions have the purpose and characteristics
of exchange-risk hedges, they do not formally comply with hedge accounting rules and, as such, are not classified as
hedging transactions.
The recording of derivative financial instruments in accordance with this standard has involved the recognition of a
financial liability totalling 507 thousand euro at 31 December 2006. This reflects the market prices of these
instruments at the reference date, provided by the banks that arranged the transactions concerned. To match the
recognition of this liability, financial charges of 507 thousand euro was recorded in the year.

The Company has outstanding finance lease contracts in relation to motor vehicles, lorries and Shima looms. They
are detailed below:

                                                             Minimum payments due    Present value of minimum
                                                                                             payments
                                                                                                due
                                                               31.12.2006 31.12.2005 31.12.2006       31.12.2005
Finance lease instalments:
due within one year                                                   609           625           482              504
due within five years                                               2,183         2,071         1,946            1,806
due beyond five years                                                  42           557            71              542
                                                                    2,834         3,253         2,499            2,852

Less future financial charges                                       (335)         (401)
Present value of payables for financial lease                       2,499         2,852
Payables due within one year                                                                    (482)            (504)
Payables due beyond twelve months                                                               2,017            2,348

Lines of credit obtained by the Company from banks for various purposes total about 136,919 million euro, net of
the loans already mentioned.




                                                                                                                     34
The outstanding loans are detailed below:

                                                                                    Maturity     Balance         Balance
                                                                                                     as of           as of
                            Mortgages/loans                                                    31.12.2006      31.12.2005
Loan from Cassa di Risparmio di Venezia                                           16.01.2006                        2,500
Mortgage loan from Banca Intesa S.p.A.                                            31.07.2007                        1,999
Mortgage loan from Intesa BCI - UBI and B.ca Antoniana                            31.12.2012                       91,365
Mortgage loan from B.ca Antoniana, Intesa BCI - UBI                               30.06.2013       127,044
Mortgage loan from Bnl - Efibanca - B.ca Pop. di Lodi                             17.03.2009                       27,856
Mortgage loan from Banco Popolare di Verona e Novara                              31.12.2011         9,875
Loan from Unicredit B.ca d'Impresa                                                19.01.2006                        1,500
Loan from Unicredit B.ca d'Impresa                                                12.01.2006                        2,000
Loan from Banca Antoniana Pop. Veneta                                             01.01.2006                        2,000
Loan from B.ca Pop. Di Verona e Novara                                            07.02.2006                        1,500
Loan from B.ca Pop. Di Verona e Novara                                            07.02.2006                        1,000
Loan from B.ca Pop. Di Vicenza                                                    05.02.2006                        1,500
Total loans obtained                                                                               136,919        133,220
Less: non-current portion                                                                          111,954          1,000
Total loans repayable within one year                                                               24,965        132,220

Loan from Banca Antonveneta – Banca Intesa – Unicredit Banca d’Impresa - maturity 30-06-2013
On 12 July 2006, Stefanel S.p.A. agreed a medium-term loan for a total of up to 150 million euro with Banca
Antonveneta S.p.A., Banca Intesa S.p.A. and Unicredit Banca d’Impresa S.p.A. acting as Mandated Lead Arrangers
and Underwriters. Stefanel S.p.A. has allocated the 115 million euro that make up the amortizing portion, with final
due date on 30 June 2013, to repay all of the medium-term debt currently outstanding. The other 35 million,
structured on a revolving basis with due dates from 31 December 2012 to 31 December 2013, will go to finance
working capital and the investment plan. Efibanca, Banca Nazionale del Lavoro and Monte di Paschi di Siena had
also joined the loan syndicate. The loan includes financial covenants in line with market practice for similar types of
operations, which involve substantial compliance with the economic and balance sheet objectives laid down in the
2006-2008 Three-Year Strategic Plan. In addition, this loan involves the usual covenants required for transactions of
this type, such as those regarding asset disposal, pari passu, restrictions on the grant of guarantees, cross default etc..
The loan bears floating rate interest at Euribor plus a spread that varies according to the Company's performance,
currently 1.30% for tranche A for an original amount of euro 115 million. As regards the revolving structures, the
spread is 0.65% for tranche B (of maximum euro 20 million) and 0.85% for tranche C (of maximum euro 15
million).

Loan from Banco Popolare di Verona e Novara maturity 31-12-2011
On 28 December 2006 Stefanel S.p.A. stipulated a loan with Banco Popolare di Verona e Novara with a duration of
5 years with quarterly amortisation from 31-03-2007, for an amount of euro 10 million, to be used for penetration of
foreign markets, backed by SACE under the agreement that it has with the bank. The loan bears floating-rate interest
at Euribor plus a spread of 0.90%.


26. Trade payables

Amounts due to suppliers total 38,032 thousand euro, as detailed below: No payables are due beyond 1 year.

                                                                                               31.12.2006      31.12.2005
Current payables to third parties                                                                  35,196          34,454
Current payables to subsidiaries                                                                      476             463
Payables to associated companies                                                                       21              14
Payables to related parties                                                                         2,339           2,417
Total                                                                                              38,032          37,348

                                                                                                                        35
27. Other current payables and liabilities

                                                                                          31.12.2006     31.12.2005
Due to tax authorities                                                                         2,200          1,312
Due to social security institutions                                                            1,086          1,111
Advances from customers                                                                          146            200
Advances from customers to associated companies                                                    -             73
Other                                                                                          4,390          3,436
Total payables                                                                                 7,822          6,132

Accrued expenses:
- Insurance premiums                                                                              13               3
- Interest                                                                                       119           2,658
- Other accrued expenses                                                                          72               5
Total accrued expenses                                                                           204           2,666
Deferred income:
- Rental income                                                                                   84               -
- Other deferred income                                                                           49             150
Total deferred income                                                                            133             150
Total accrued expenses and deferred income                                                       337           2,816
Total other current payables and liabilities                                                   8,159           8,948

The amounts due to the tax authorities (euro 2,200 thousand) includes a net liability for IRAP for the year (euro
1,356 thousand) which is offset by the advances already paid (euro 1,400 thousand), in addition to which there is a
liability of euro 1,194 thousand for IRES deriving from the net balance of the national and world-wide group tax
filing and other tax payables (IRPEF and Enasarco withholdings) of euro 1,050 thousand.
Amounts due to social security institutions refer to the liability accrued by the Company and by employees.
Amounts due to others mainly comprise amounts due to employees totalling 2,335 thousand euro in relation to the
December payroll, together with their accrued holiday entitlements and the amounts due to subsidiaries for the VAT
filing (691 thousand euro) and for the group VAT filing (1,234 thousand euro).


COMMITMENTS AND CONTINGENCIES

Guarantees given
Stefanel has guarantees for commercial rental contracts totalling 3,174 thousand euro at 31 December 2006.

Recourse risks
As mentioned in relation to tax credits, in prior years (1990-1991) Stefanel S.p.A. signed two contracts for the sale
with recourse of reclaimed tax credits totalling 9,829 thousand euro. These receivables were eliminated from the
assets reported in the balance sheet in accordance with the accounting policies applied at the time. As allowed by
IFRS 1, these receivables have not been reinstated since the disposals took place prior to 1 January.


RELATED PARTY TRANSACTIONS

The economic and financial balances between the company and related parties, net of intraGroup transactions, are as
follows.

                                                                                          31.12.2006     31.12.2005
Income earned                                                                                    163             70
Costs recharged                                                                                1,465          1,456
Purchase of shop fittings                                                                      3,066          3,676
Amounts due from related parties for the supply of products                                      137             38
Amounts due to related parties for the supply of products                                      2,339          2,418
                                                                                                                  36
The above amounts usually refer to dealings involving the supply of commercial equipment and shop fittings by
Iride S.r.l. and the rental of premises for commercial use from Leggenda S.p.A. (1,410 thousand euro). There is also
a relationship with Infinas S.p.A., an insurance broker. The reference shareholder for these companies is Giuseppe
Stefanel.
All such transactions form part of the Group's normal operations and are conducted at arm's length conditions. There
were no atypical and/or unusual transactions during the period.




                                                                                                                 37
INVESTMENTS HELD BY THE DIRECTORS, STATUTORY AUDITORS, GENERAL MANAGERS AND
MANAGERS WITH STRATEGIC RESPONSIBILITIES

In accordance with the provisions of article 79 of CONSOB Resolution 11971/1999 and subsequent amendments,
the following details are provided regarding the interests in Stefanel S.p.A. or its subsidiaries held by directors,
statutory auditors, general managers and managers with strategic responsibilities, their spouses (unless legally
separated) and minor children, whether directly or via subsidiaries, trust companies or other intermediaries.

  Name and                 Ownership              Company              Shares at      Number of Number of                Shares at       % of share
  surname                                                             31.12.2005        shares  shares sold             31.12.2006        capital
                                                                                      purchased                                           held (*)

Giuseppe
             Direct                             Stefanel S.p.A.            355,387          -               -                 355,387           0.66
Stefanel
Chairman and
             Indirect - Ordinary
Managing                                        Stefanel S.p.A.        26,984,770       395,627             -           27,380,397(1)          50.52
             shares
Director

                  Indirect - savings shares     Stefanel S.p.A.             18,754          -               -                18,754(2)          0.03

                  Indirect - Treasury
                                                Stefanel S.p.A.            100,000      12,000              -                 112,000           0.21
                  shares - Ordinary
                  Indirect - Treasury
                                                Stefanel S.p.A.               1,201         -               -                    1,201               -
                  shares - Savings
Total                                                                  27,460,112       407,627             -             27,867,739           51.42
Giovanna
                  Direct                        Stefanel S.p.A.          2,358,092          -               -               2,358,092           4.35
Stefanel

Director          Indirect                      Stefanel S.p.A.          6,297,924          -               -            6,297,924(3)          11.62

Total                                                                    8,656,016          -               -               8,656,016          15.97
(*) This percentage is calculated as the ratio between the voting rights that can be exercised by holders of the ordinary shares and the share capital
  represented by ordinary shares. Share capital totals euro 54,296,744 and is made up of 54,196,998 ordinary shares and 99,746 savings shares
  with par value of euro 1 each.
(1) = 8,200,000 via a trust company, 3,286,182 and 15,827,965 held via subsidiaries 66,250 held by spouse (including 50,000 held by spouse
        indirectly via a subsidiary)
(2) = 18,754 held via a subsidiary
(3) = 6,297,924 held via a trust company




                                                                                                                                                  38
APPOINTMENTS OF DIRECTORS IN OTHER QUOTED COMPANIES, FINANCE COMPANIES,
BANKS, INSURANCE COMPANIES AND OTHER LARGE BUSINESSES

Name                      Appointment in Stefanel S.p.A.                   Other appointments

Giuseppe Stefanel         Chairman and Director.           Banca Antonveneta S.p.A.- Managing Director
                                                           The Nuance Group A.G.- Director
                                                           Finpiave International S.A.- Director
                                                           Finpiave S.p.A. - Chairman of the Board of Directors
                                                           CO.GE.I. S.p.A. - Sole Director
Giovanna Stefanel         Director                         -
Tito Berna                Director                         Finpiave S.p.A. - Managing Director
                                                           Infinas S.p.A.- Director
Enrico Cervellera         Director                         Ferrero S.p.A.- Director
                                                           Seat Pagine Gialle S.p.A. - Chairman of the Board of
                                                           Statutory Auditors
                                                           Interpump Group S.p.A. - Chairman of the Board of
                                                           Statutory Auditors
                                                           Egidio Galbani S.p.A. - Chairman of the Board of
                                                           Statutory Auditors
                                                           Brembo S.p.A. - Auditor
                                                           Big S.r.l. - Chairman of the Board of Statutory
                                                           Auditors
                                                           Gruppo Galbani S.p.A. - Chairman of the Board of
                                                           Statutory Auditors
                                                           Luxottica Group S.p.A. - Auditor
                                                           Tamburi Investment Partners S.p.A. - Auditor
Guglielmo Garlato         Director                         -
Mauro Princivalli         Director                         Infinas S.p.A.- Director
Pier Francesco Saviotti   Director                         Tod’s S.p.A. - Director
                                                           Linificio e Canapificio Nazionale S.p.A. -
                                                           Director
                                                           Telecom Italia Media S.p.A.- Director
                                                           Value Partners S.p.A.- Director
                                                           F.C. Internazionale Milano S.p.A.- Director




                                                                                                             39
REMUNERATION OF DIRECTORS, STATUTORY AUDITORS AND GENERAL MANAGERS

The following is a breakdown of the remuneration earned by Directors, Statutory Auditors and General Managers
for their activities on behalf of Stefanel S.p.A, and in other group companies, in accordance with article 78 of
CONSOB Regulation 11971/99 and subsequent amendments.

Amounts in euro

    Individual                       Description of office                                  Remuneration
 Name and surname           Position covered            Duration          Emoluments       Fringe    Bonuses          Other
                                                                            for the        benefits    and           remune-
                                                                           position                   other           ration
                                                                                                    incentives

Elisa Lorenzon          Honorary Chairman             1.1.06-31.12.06          100,000
Giuseppe Stefanel       Chairman of the Board
                        of Directors and
                        Managing Director             1.1.06-31.12.06          868,000
Giovanna Stefanel       Director                      1.1.06-31.12.06           18,000
Tito Berna              Director                      1.1.06-31.12.06           28,000
Enrico Cervellera       Director                      1.1.06-31.12.06           25,342
Guglielmo Garlato       Director                      1.1.06-31.12.06           25,836
Mauro Princivalli       Director                      1.1.06-31.12.06           18,000                               280,220 (*)
Pier Francesco          Director
Saviotti                                              1.1.06-31.12.06           27,219
Giuliano Saccardi       Chairman of the Board
                        of Statutory Auditors         1.1.06-31.12.06           44,571
Stefano De Mattia       Auditor                       1.1.06-31.12.06           17,829
Michael Eifler          Auditor                       1.1.06-31.12.06           17,143

(*) euro 269,720 for legal services rendered by Mauro Princivalli (of which euro 66,938 billed on his behalf by the law offices of
Mazzoli – Princivalli - D’Alesio) and euro 10,500 for acting as a director in a subsidiary company.
These financial statements give a true and fair view of the Company's assets and liabilities, financial position and
results for the year, and correspond to the accounting records.

Ponte di Piave, 14 February 2007

                                                               For the Board of Directors
                                                                        The Chairman
                                                                        Giuseppe Stefanel




                                                                                                                               40
Supplementary statements


                                                                     STEFANEL S.P.A.
                                      STATEMENT OF CHANGES IN PROPERTY, PLANT AND EQUIPMENT AS AT 31 DECEMBER 2006
                                                                   (in thousands of Euro)

                                                                           PROPERTY, PLANT AND EQUIPMENT

                                                     Opening balance                                    Changes in the year                                        Closing balance
                                        Historical    Accumulated    Balance as of                Retirements,       Depreciation      Impairment    Historical     Accumulated      Balance as of
                                                                                     Purchases
                                          cost        depreciation     01.01.06                       net               charge            test         cost         depreciation       31.12.06
Property, plant and equipment
Land and buildings                             989             (949)           40            30               -                 (11)            -         1.020              (961)             59
Plant and machinery                         13.332           (8.668)         4.664         829             (321)             (1.086)           (1)       11.561            (7.476)          4.085
Industrial and commercial equipment          2.309           (1.877)          432          549              (22)               (130)          (24)        2.712            (1.907)            805
Leased assets                                3.607             (546)         3.061         176             (211)               (440)                      3.453              (867)          2.586
Leasehold improvements                      19.830          (10.960)         8.870        1.947            (420)             (1.650)         (326)       20.536           (12.115)          8.421
Other assets                                27.455          (21.148)         6.307        2.015            (438)             (1.817)         (165)       27.485           (21.583)          5.902
Total                                       67.522          (44.148)        23.374        5.546          (1.412)             (5.134)         (516)        66.767          (44.909)         21.858
Supplementary statements
                                                                       STEFANEL S.P.A.
                                                  STATEM ENT OF CHANGES IN INVESTM ENTS AT 31 DECEM BER 2006
                                                                     (in thousands of Euro)

                                                              INVESTM ENTS IN SUBSIDIARY AND ASSOCIATED COM PANIES
                                                          Opening balance                              Changes in the year                                             Closing balance
                                                                                       Historical cost         ance for writedowns and risks on inves

                                                          Allowance                                                                                                   Allowance
                                                              for                                                                                                         for
                                                          writedown                                                                                                   writedown
                                                          s and risks                                                                                                 s and risks
                                                              on                                                                                                          on
                                               Historical investment Balance as of                                                                         Historical investment    Balance as of
                                                 cost          s       31.12.05      Increases   Decreases    Total     Increases   Decreases   Total        cost          s          31.12.06
Subsidiary com panies:
 Victorian S.r.l.                                20.081       (2.447)       17.634         -             -         -           -            -         -      20.081       (2.447)          17.634
 Stout S.p.A.                                     1.963         (694)        1.269       578             -       578                        -         -       2.541         (694)            1.847
 Interfashion S.p.A.                              3.639            -         3.639         -             -         -           -            -         -       3.639            -             3.639
 Tindareo S.r.l.                                      -            -             0         -             -         -           -            -          0           -            0                0
 Stefanel International Holding N.V.             55.876      (53.437)        2.439         -             -         -      (1.637)           -    (1.637)     55.876      (55.074)              802
 Stefanel Universal S.r.l.                          531         (531)            -         -             -         -           -                      -         531         (531)                -
 S.F.K. Ltd                                       5.841       (5.539)          302         -             -         -      (1.606)           -    (1.606)      5.841       (7.145)          (1.304)
 Lara Stefanel Sas                                8.311       (4.016)        4.295         -             -         -                        -         -       8.311       (4.016)            4.295
 Stefburg M ode GmbH                              2.574       (2.521)           53                       -         -      (1.016)           -    (1.016)      2.574       (3.537)            (963)
 Stefpraha S.r.o.                                   339         (653)        (314)        510            -       510        (544)                  (544)        849       (1.197)            (348)
 Stefanel Espana S.L.                             5.466       (2.613)        2.853        200            -       200      (1.260)                (1.260)      5.666       (3.873)            1.793
 Stefanel Fashion Turkey A.S.                     3.758       (2.864)          894      9.633            -     9.633      (3.645)           -    (3.645)     13.391       (6.509)            6.882
 S.T. Ariè Lda                                    2.122         (869)        1.253          -            -         -        (211)           -      (211)      2.122       (1.080)            1.042
 Stefanel Romania S.r.l.                            216         (322)        (106)        665                    665        (378)                  (378)        881         (700)              181
 Italur Trading S.A. in liquidation                   -            -             -          -                      -           -            -         -            -           -                 -
 Stefanel de Argentina S.A. in liquidation            3            -             3          -            -         -           -            -         -           3            -                 3
  Swiss Factory Outlet                               92           (5)           87          -            -         -                        -         -          92           (5)               87
  Stefanel Hungary Kft                              182         (144)           38         80            -        80        (341)           -      (341)        262         (485)            (223)
  Stefanel Japan Inc.                               903         (709)          194                       -         -      (1.232)           -    (1.232)        903       (1.941)          (1.038)
  Stefanel Polonia Sp. Z o.o.                       170          (36)          134                       -         -        (680)           -      (680)        170         (716)            (546)
  Stefanel Hellas S.A.                              800         (156)          644       250             -       250        (389)           -      (389)      1.050         (545)              505
 Stefanel Slovakia Sro                                                           -         8                       8        (265)                  (265)          8         (265)            (257)
 Hi-Int S.A.                                                                     -        68                      68                                  -          68            -                68
 Associated com panies:                                            -             -                                 -                                  -            -           -                 -
 Noel International S.A.                         24.000       (1.728)       22.272          -            -         -                        -         -      24.000       (1.728)           22.272
 Total subsidiaries and associated companies     136.867     (79.284)       57.583     11.992            -    11.992     (13.204)           -   (13.204)     148.859     (92.488)           56.371
 Investm ents in other com panies                                                                                  -
 Other companies                                    231            -           231         -            (5)       (5)          -            -         -         226            -              226
 TOTAL INVESTM ENTS                             137.098      (79.284)       57.814    11.992            (5)   11.987     (13.204)           -   (13.204)    149.085      (92.488)          56.597
                                                                                                                                                                                                    42
Supplementary statements
                                                                                  STEFANEL S.P.A.
                                                           LIST OF INVESTMENTS IN SUBSIDIARY AND ASSOCIATED COMPANIES
                                                                               AT 31 DECEMBER 2006

                                                                                                      Result for the year                Shareholders’ equity
                                                                                                                       (in thousands of Euro)
                                                                                                                                                                           %         Carrying
                                                                                Share capital        Total          Interest           Total            Interest          held
                   Name                           Registered office    Curren                       amount                            amount                               %          value
Subsidiary companies:
Victorian S.r.l.                            Ponte di Piave (TV)        Euro               516.000        1.596            1.596             19.991              19.991     100,00      17.634
Stout S.p.A.                                Ponte di Piave (TV)        Euro             1.938.000           66               66              1.913               1.913     100,00       1.847
Interfashion S.p.A.                         Ponte di Piave (TV)        Euro             3.600.000        8.798            8.798             14.013              14.013     100,00       3.639
Stefanel International Holding N.V.         Amsterdam - Netherlands    Euro            11.751.000       (2.495)          (2.495)            (1.117)             (1.117)    100,00         802
Stefanel Universal S.r.l.                   Bucharest - Romania        ROL             22.000.000            69              45                 (1)                 (1)     65,00           -
S.F.K. Ltd                                  Seoul - Korea              JPY          9.550.000.000       (1.716)          (1.635)            (1.369)             (1.304)     95,29           -
Lara Stefanel Sas                           Paris - France             Euro             3.050.000           13               13              4.309               4.309     100,00       4.295
Stefburg Mode GmbH                          Linz - Austria             Euro               363.364       (1.016)          (1.016)              (963)               (963)    100,00           -
Stefpraha S.r.o.                            Prague - Czech Republic    CSK             15.250.000         (515)            (515)              (348)               (348)    100,00           -
Stefanel Fashion Turkey A.S.                Istanbul - Turkey          TRL      8.252.000.000.000       (2.116)          (2.112)             6.896               6.882      99,80       6.882
S.T.Ariè Lda                                Lisbon - Portugal          Euro               124.700         (281)            (211)             1.390               1.043      75,00       1.042
Stefanel Espana S.L.                        Barcelona - Spain          Euro             4.405.569       (1.260)          (1.260)             1.793               1.793     100,00       1.793
Stefanel Romania S.r.l.                     Bucharest - Romania        ROL          2.237.700.000         (376)            (376)               181                 181     100,00         181
Stefanel de Argentina S.A. in liquidation   Buenos Aires - Argentina   ARS              1.000.000             -               -                  -                   -       0,75           3
Swiss Factory Outlet S.a.                   Chiasso - Switzerland      CHF                100.000             -               -                 87                  85      98,00          87
Stefanel Hungary Kft                        Budapest - Hungary         HUF             45.420.000         (330)            (330)              (223)               (223)    100,00           -
Stefanel Japan Inc.                         Tokyo - Japan              JPY            115.000.000       (1.301)          (1.301)            (1.038)             (1.038)    100,00           -
Stefanel Polonia Sp. Z o.o.                 Warsaw - Poland            PLN                680.000         (669)            (669)              (546)               (546)    100,00           -
Stefanel Hellas S.A.                        Athens - Greece            Euro               800.000         (389)            (389)               505                 505     100,00         505
Stefanel Slovakia Sro                       Bratislava - Slovakia      SKK                200.000         (244)            (244)              (257)               (257)    100,00           -
Hi-Int S.A.                                 Luxembourg                 Euro                50.000             -               -                  -                   -      65,00          68
Associated companies:
Noel International S.A.                     Luxembourg                 Euro            18.000.000      (11.024)          (5.512)            31.704          15.852           50,00     22.272
Grand total                                                                                            (13.190)          (7.547)           76.920           60.770                     61.050
Supplementary statements

                                                                   STEFANEL S.p.A.

                    Details of year-end balances between Parent Company and subsidiary and associated companies as of 31.12.2006
                                                                (in thousands of Euro)

Year-end balances                         Non-current financial receivables and
                                                                                       Trade receivables                Other current receivables
                                                      other assets
                                                31.12.2005             31.12.2006     31.12.2005           31.12.2006     31.12.2005          31.12.2006
Subsidiary companies:
STEFBURG MODE GMBH                                         -                    -          1,681               3,439                -                     -
STEFPRAHA S.R.O.                                           -                 51              708                 926                -                     -
STEFANEL ESPANA S.L.                                    12                  601              372               1,040                -                     -
SFT A.S.                                                23                      -          6,716               1,478                -                     -
STEFANEL POLONIA SP. ZO.O.                                 -                454              193               1,290                -                     -
STEFANEL SLOVAKIA S.R.O.                                   -                339                 -                249                -                     -
STEFANEL JAPAN INC.                                    327                1,871               49                 571                -                     -
STEFANEL UNIVERSAL S.R.L.                                  -                    -            303                 543                -                     -
STEFANEL ROMANIA S.R.L.                                915                1,615            1,515               2,820                -                     -
ST. ARIE' LDA                                        1,322                1,373            1,310               1,437                -                     -
STEFANEL HELLAS S.A.                                       -                364                 -                  8                -                     -
STEFANEL HUNGARY KFT                                    81                   85              112                 237                -                     -
SFK LTD.                                               566                      -          5,822               6,933                -                     -
LARA STEFANEL S.A.S.                                       -                    -            601               1,485                -                     -
STOUT S.P.A.                                         3,315                5,339            1,115               1,878                -                     -
STEFANEL INTERNATIONAL HOLDING N.V.                 12,546               13,100              156                 752                -                     -
STEFANEL HONG KONG LTD                                     -                 51                 -                 57                -                     -
STEFANEL GMBH                                        1,165                1,185            7,232              13,747                -                     -
INTERFASHION S.P.A.                                     14                      -            914                 606          4,867                 5,351
SWISS FACTORY OUTLET S.A.                                  -                   -              -                    -                -                     -
VICTORIAN S.R.L.                                           -                    -           19                     -             103                 2,372
HI - INT S.A.                                              -                   -              -                    -                -                     -
Total companies subsidiaries                        20,286               26,428        28,818                 39,496          4,970                 7,723
Associated companies:
NUANCE GROUP                                        30,658               30,965           156                     16               -                     -
TOTAL YEAR-END BALANCES                             50,944               57,393        28,974                 39,512          4,970                 7,723


                                                                                                                                                         44
Supplementary statements
                                                                 STEFANEL S.p.A.

                    Details of year-end balances between Parent Company and subsidiary and associated companies as of 31.12.2006
                                                                (in thousands of Euro)

                                                                                                                                    Other current payables and
Year-end balances                                         Current financial liabilities                  Trade payables
                                                                                                                                             liabilities
                                                            31.12.2005                    31.12.2006   31.12.2005   31.12.2006    31.12.2005             31.12.2006
Subsidiary companies:
STEFBURG MODE GMBH                                                    -                            -            -             -            -                      -
STEFPRAHA S.R.O.                                                      -                            -            -             -            -                      -
STEFANEL ESPANA S.L.                                                  -                            -            -             -            -                      -
SFT A.S.                                                              -                            -            -             -            -                      -
STEFANEL POLONIA SP. ZO.O.                                            -                            -            -             -            -                      -
STEFANEL SLOVAKIA S.R.O.                                              -                            -            -             -            -                      -
STEFANEL JAPAN INC.                                                   -                            -            -             -            -                      -
STEFANEL UNIVERSAL S.R.L.                                             -                            -            -             -            -                      -
STEFANEL ROMANIA S.R.L.                                               -                            -        (174)          (22)            -                      -
ST. ARIE' LDA                                                         -                            -          (1)          (83)            -                      -
STEFANEL HELLAS S.A.                                                  -                            -            -             -            -                      -
STEFANEL HUNGARY KFT                                                  -                            -            -             -            -                      -
SFK LTD.                                                              -                            -            -             -            -                      -
LARA STEFANEL S.A.S.                                                  -                            -            -             -            -                      -
STOUT S.P.A.                                                          -                            -            -          (31)        (116)                    (3)
STEFANEL INTERNATIONAL HOLDING N.V.                                   -                            -            -             -            -                      -
STEFANEL HONG KONG LTD                                                -                            -        (300)             -            -                      -
STEFANEL GMBH                                                         -                            -            -         (340)            -                      -
INTERFASHION S.P.A.                                            (14,807)                     (19,158)          (2)             -        (463)                  (688)
SWISS FACTORY OUTLET S.A.                                             -                            -            -             -            -                      -
VICTORIAN S.R.L.                                                (4,720)                      (6,742)           14             -            -                      -
HI - INT S.A.                                                         -                            -            -             -            -                      -
Total companies subsidiaries                                   (19,527)                     (25,900)        (463)         (476)        (579)                  (691)
Associated companies:
NUANCE GROUP                                                      -                            -             (14)          (21)         (73)                  -
TOTAL YEAR-END BALANCES                                        (19,527)                     (25,900)        (477)         (497)        (652)                  (691)
Supplementary statements
                                                           STEFANEL S.p.A.

                           Detail of economic transactions with subsidiary and associated companies during 2006
                                                           (in thousands of Euro)

Economic transactions                                                      REVENUES                                     COSTS
                                                                       31.12.2006           31.12.2005            31.12.2006    31.12.2005
Subsidiary companies:
STEFBURG MODE GMBH                                                         1,958                1,931                      -             -
STEFPRAHA S.R.O.                                                             669                  282                      -             -
STEFANEL ESPANA S.L.                                                         677                  694                      -             -
SFT A.S.                                                                   8,389                4,718                      -             -
STEFANEL POLONIA SP. ZO.O.                                                 1,180                  154                      -             -
STEFANEL SLOVAKIA S.R.O.                                                     219                    -                      -             -
STEFANEL JAPAN INC.                                                          850                  118                      -             -
STEFANEL UNIVERSAL S.R.L.                                                    689                  764                      -             -
STEFANEL ROMANIA S.R.L.                                                    2,548                1,343                (2,384)       (3,041)
ST. ARIE' LDA                                                              2,928                3,003                  (293)         (104)
STEFANEL HELLAS S.A.                                                          14                    -                      -             -
STEFANEL HUNGARY KFT                                                         214                  114                      -             -
SFK LTD.                                                                   2,186                2,511                      -           (6)
LARA STEFANEL S.A.S.                                                         875                  761                      -             -
STOUT S.P.A.                                                               7,493                4,759                   (25)          (29)
STEFANEL INTERNATIONAL HOLDING N.V.                                        1,149                  598                      -             -
STEFANEL HONG KONG                                                            58                    -                      -             -
STEFANEL GMBH                                                              6,693                5,860                  (157)         (300)
HALLHUBER GMBH                                                                29                    -                      -             -
INTERFASHION S.P.A.                                                        8,367               11,100                  (428)         (240)
SWISS FACTORY OUTLET S.A.                                                      -                    1                      -             -
VICTORIAN S.R.L.                                                             500                  562                (2,116)       (2,057)
Total companies subsidiaries                                              47,685               39,273                (5,403)       (5,777)
Associated companies:
NUANCE GROUP                                                               1,205                1,299                   (26)          (28)
TOTAL YEAR-END BALANCES                                                   48,890               40,572                (5,429)       (5,805)



                                                                                                                                             46
Supplementary statements

                                                                 STEFANEL S.p.A.
                                  STATEMENT OF CHANGES IN THE RESERVE FOR DEFERRED TAX ASSETS AND LIABILITIES
                                          FOR THE PERIODS ENDED 31 DECEMBER 2006 AND 31 DECEMBER 2005
                                                               (in thousands of Euro)

                                                                                    2006                                2005
                                                                    Taxable                               Taxable
                                                                    income             Rate    Tax        income          Rate     Tax
                                                                   31/12/2006           %      effect    31/12/2005        %      effect    Change

Deferred tax assets

- Losses to be offset against future taxable income                       9,000       33.00%     2,970          4,500    33.00%     1,485       1,485

- Taxed provisions (for IRES and IRAP)                                    5,268       37.25%     1,962          5,291    37.25%     1,971            (9)

- Taxed provisions for Ires purposes                                      5,976       33.00%     1,972          8,323    33.00%     2,747       (775)

- Other temporary differences (IRES and IRAP)                             3,208       37.25%     1,195          6,161    37.25%     2,295      (1,100)

- Other temporary differences (IRES)                                      1,956       33.00%       646                   33.00%                      646

Total deferred tax assets                                                25,408                  8,745        24,275                8,498            247

Deferred tax liabilities

- Gains to be taxed                                                             -     37.25%                  (3,584)    37.25%   (1,335)       1,335

- Other temporary differences (IRES and IRAP)                          (17,655)       37.25%   (6,576)       (19,429)    37.25%   (7,238)            661

- Other temporary differences (IRES)                                    (1,106)       33.00%     (365)          (625)    33.00%     (206)       (158)

Total deferred tax liabilities                                         (18,761)                (6,941)       (23,638)             (8,779)       1,838

TOTAL DEFERRED TAX ASSETS AND LIABILITIES                                 6,647                  1,804           637                (281)       2,085




                                                                                                                                                     47

				
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