Benetton Group 2007 nine-month report

Copy as of 14.nov.07

Benetton Group S.p.A.

Villa Minelli

Ponzano Veneto (Treviso) - Italy

Share capital: Euro 237,478,139.60 fully paid-in

Tax ID/Treviso Company register: 00193320264

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Index The Benetton Group 3 Directors and other officers 4 Disclaimer Key financial data - highlights 6 Directors’ report Results in the first nine months of 2007 7 Investments 8 Supplementary information - Stock option plan - Treasury shares - Relations with the holding company, its subsidiaries and other related parties 9 - Directors - Principal organizational and corporate changes 10 - Significant events after September 30, 2007 - Outlook for the full year 11 Consolidated Group results - Consolidated statement of income 15 - Business segments 18 - Third quarter 2007 21 - Balance sheet and financial position highlights 24 Consolidated financial statements 25 Consolidated statement of income 26 Consolidated balance sheet - Assets 27 Consolidated balance sheet - Shareholders’ equity and liabilities 28 Shareholders’ equity - Statement of changes 29 Consolidated cash flow statement 30 Explanatory notes Summary of main accounting standards and policies 32 Comments on the principal items in the statement of income 36 Comments on the principal asset items 40 Comments on the principal items in shareholders’ equity and liabilities 42 Commentary on the cash flow statement 43 Supplementary information - Financial position 45 - Segment information 47 - Other information 48 Declaration of the manager responsible for preparing the company's financial reports

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The Benetton Group Directors and other officers

Board of Directors (appointed by Shareholders' Meeting on April 26, 2007)

Luciano Benetton (1) Chairman

Carlo Benetton Deputy Chairman

Alessandro Benetton (1) Deputy Chairman

Gerolamo Caccia Dominioni (2) Chief Executive Officer (from 06.01.2007)

Giuliana Benetton Directors

Gilberto Benetton

Luigi Arturo Bianchi

Giorgio Brunetti

Alfredo Malguzzi

Gianni Mion

Robert Singer

Andrea Pezzangora Secretary to the Board

Board of Statutory Auditors

Angelo Casò Chairman

Filippo Duodo Auditors

Antonio Cortellazzo

Marco Leotta Alternate Auditors

Piermauro Carabellese

Independent Auditors

PricewaterhouseCoopers S.p.A.

Powers granted (1) Company representation and power to carry out any action that is consistent with the Company’s purpose, except for those powers

expressly reserved by law to the Board of Directors and to the Shareholders’ Meeting, with restrictions on certain types of action. (2) The Chief Executive Officer has the power to carry out any action relating to the ordinary administration of the Company as well as certain

acts of extraordinary administration subject to limits on amounts.

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Disclaimer This document contains forward-looking statements, specifically in the section entitled "Outlook for the full year", relating to future events and operating, economic and financial results of the Benetton Group. By their nature such forecasts contain an element of risk and uncertainty, because they depend on the occurrence of future events and developments. The actual results may differ, even significantly, from those announced for a number of reasons.

Key financial data - highlights

The Group's financial statements for the first nine months 2007 and comparative periods have been drawn up in

accordance with the International Financial Reporting Standards (IFRS) adopted by the European Union which are in

force at the date of preparing this report. These standards do not differ, in any material respect, from those issued by

the International Accounting Standards Board (IASB), meaning that any application of the latter would not have any

significant effect on the Group's financial statements. Details of the accounting policies and consolidation methods used

for preparing the first-half report can be found in the section containing the Explanatory notes.

Nine months Nine months Full year Key operating data (millions of Euro) 2007 % 2006 % Change % 2006 %

Revenues 1,504 100.0 1,372 100.0 132 9.6 1,911 100.0

Gross operating profit 643 42.8 579 42.2 64 11.2 806 42.2

Contribution margin 539 35.9 481 35.1 58 12.2 669 35.0

EBITDA (A) 234 15.5 203 14.8 31 14.9 276 14.4

Ordinary EBITDA (A) 226 15.0 190 13.9 36 19.0 264 13.8

Operating profit 166 11.1 137 10.0 29 21.3 180 9.4

Net income for the period attributable to the Group 103 6.8 94 6.9 9 9.0 125 6.5

Key financial data (millions of Euro) 09.30.2007 12.31.2006 09.30.2006 Working capital 847 623 755

Assets held for sale 3 7 8

Net capital employed 2,023 1,710 1,773

Net financial indebtedness 650 369 452

Total shareholders' equity 1,373 1,341 1,321

Free cash flow (214) 21 (65)

Net total investments 142 216 103

Share and market data 09.30.2007 12.31.2006 09.30.2006 Basic earnings per share (Euro) 0.56 0.69 0.52

Shareholders' equity per share (Euro) 7.39 7.22 7.14

Price at period end (Euro) 11.90 14.47 13.57

Screen traded price: period high (Euro) 14.82 15.61 13.95

Screen traded price: period low (Euro) 10.77 9.62 9.63

Market capitalization (thousands of Euro) 2,173,838 2,630,909 2,465,013

Average no. of shares outstanding 182,675,492 181,868,467 181,598,100

No. of shares outstanding 182,675,492 182,675,492 182,559,058

Number of personnel 09.30.2007 12.31.2006 09.30.2006 Total employees 8,568 8,894 8,905

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(A) In addition to the standard financial indicators required by IFRS, this document also contains a number of alternative performance indicators for the purposes of allowing a better appreciation of the Group's financial and economic results. These indicators must not, however, be treated as replacing the standard ones required by IFRS. The following table shows how EBITDA and ordinary EBITDA are made up.

Nine months Nine months Full year Key operating data (millions of Euro) 2007 2006 Change 2006

A Operating profit 166 137 29 180

B - of which non-recurring income (7) (11) 4 (1)

C Depreciation and amortization 67 62 5 84

D Other non-monetary costs (impairment and stock options) 1 4 (3) 12

E - of which non-recurring 1 2 (1) 11

F = A+C+D EBITDA 234 203 31 276

G = F+B-E Ordinary EBITDA 226 190 36 264

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Directors’ report Results in the first nine months of 2007

Group net revenues amounted to 1,504 million in the first nine months of 2007, having increased by 132 million

(+9.6%) on the figure of 1,372 million reported in the first nine months of 2006, with most of the growth coming from

the apparel segment.

Apparel segment revenues from third parties came to 1,401 million, an increase of 134 million (+10.6%) on the 2006

nine-month figure of 1,267 million.

This improvement reflected:

- the performance in revenues from the partner-managed network, which benefited from the market's favorable

reception of the collections, from commercial development initiatives and from the contribution of new store

openings;

- the growth in sales by directly operated stores, also thanks to the contribution of the Milano Report partnership in

Italy, consolidated since August 2006.

The main driver of growth was the considerable improvement in sales volumes/mix (+13.2% on the same period in

2006). The appreciation of the euro had a negative impact of 14 million on sales.

The growth in apparel segment sales has related to all the brands. The United Colors of Benetton Adult brand has

obtained positive results with its new fashion collections and with its increasingly segmented offer for all types of

different consumer. For example, the collections for men, a priority for 2007, have been so successful that this range

now accounts for 18% of the brand's total sales, fast approaching the medium-term target of 20%.

The United Colors of Benetton Kids brand has continued to diversify its offer for all age groups. Now is the time to

focus on prenatal and baby wear for the under sixes. The Benetton Baby label has been established for this market,

along with a series of stores which offer stylish but highly practical collections. There are plans to open 50 such stores

in 2008, which will welcome customers in a setting suited to this type of product, with staff who will be specially

trained in serving new mothers.

The trend in orders for the Sisley Spring/Summer 2008 collection is reporting an even better response to the already

excellent public and network reception of the brand’s 2007 collections. The new collection gives even more emphasis

to glamour and fashion, strengthening the brand identity. Given these factors, the Group can step up its expansion,

especially internationally, into consumer segments particularly attracted to fashion products, by being able to offer a

trendy, quality and attractively priced product. The strategy is completed with an accredited network of partners which

has recently been strengthened following the agreement for developing the brand in India in partnership with Trent, a

Tata group retailing company. The Sisley brand is expected to grow by between 8% and 10% in 2007.

A new layout for the Undercolors underwear stores has been successfully introduced. The new Gloss concept, already

introduced in 15 stores, helps show off the different product lines to best effect. Positive results have been obtained

for Fun, the better known line designed for those who prefer cheerful, ironic underwear, and for Clean Sensuality, the

line for women seeking more sensual but elegant underwear.

The process of developing the Playlife brand continues after opening 45 new stores in Italy and other Mediterranean

countries in Spring/Summer 2007 as well as restyling existing stores. The results of repositioning the brand with new

collections and a new store concept are in line with target. The expansion plan now involves pushing the brand

internationally, particularly in Eastern Europe and above all in the former Soviet Union.

Accessories are confirmed as one of the drivers of future growth. The excellent sales results obtained in apparel stores

are also confirmed in the pilot dedicated store in Rome. Plans to open this kind of store in coming months involve not

only increasing volumes but also enlarging the offer by including a series of top-range products.

On a geographical front, the nine months confirm the trend seen in the first half of the year with significant growth on

both mature and emerging markets.

Sales in Europe grew by around 13% on the first nine months of 2006. In this context, it should be noted that the

domestic market saw sales increase by over 10%.

Russia continued to grow apace, closing the first nine months with an increase of 35% on the prior year; in general all

the countries in Eastern Europe and in the former Soviet Union reported significant increases.

There were also positive signs from the Group's priority Asian markets; in addition to performance in China, revenues

in India grew by over 50%. There are over 140 United Colors of Benetton stores in India, while the first stores

dedicated to Kids and Undercolors have been opened recently.

The brand's success has also been confirmed in a recent survey by an independent body which named the United

Colors of Benetton brand as the favorite label of young, demanding Indian consumers.

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Gross operating profit reported a margin of 42.8% on revenues, compared with 42.2% in the corresponding period of

2006. In detail, apparel segment gross operating profit was 623 million, corresponding to a margin of 44.4% on

revenues compared with 44.1% in the same period of 2006, benefiting from operating efficiencies and the weakness of

the dollar, the latter effect offset by currency hedges reported below the operating profit line.

Contribution margin was 539 million compared with 481 million in the first nine months of 2006, representing 35.9%

of revenues compared with 35.1% in the corresponding prior year period.

Operating profit (EBIT) climbed to 166 million, from 137 million in the first nine months of 2006, representing a

margin of 11.1% on revenues, up from 10.0% in the corresponding period of 2006.

Ordinary EBITDA came to 226 million, corresponding to a margin of 15.0% on revenues compared with 13.9% in the

same period of 2006.

Net income for the period attributable to the Group was 103 million compared with 94 million in the first nine

months of 2006, representing virtually the same percentage of revenues as in the corresponding prior year period.

Shareholders' equity attributable to the Group amounted to 1,350 million, up from 1,319 million at December 31,

2006.

Net financial indebtedness amounted to 650 million at period end, compared with 369 million at December 31, 2006

and 452 million at September 30, 2006.

Investments

Gross operating investments came to 164 million in the first nine months of 2007 compared with 117 million in the

corresponding period of 2006.

Most of the expenditure related to the commercial network, with 108 million spent on purchasing, modernizing and

upgrading stores, particularly in Italy, Portugal and France as well as in countries with major development potential like

those in Eastern Europe. Investments in production amounted to 35 million and mainly related to increasing the

capacity of the production centres in Istria (Croatia) and Tunisia and of the hub in Castrette di Villorba (Italy).

The remaining investments amounted to 21 million, most of which in information technology (introduction of SAP

sales management software and installation of SAP applications at foreign subsidiaries).

The divestments of 24 million in the period mostly related to the disposal of retail businesses in Milan, Nantes and

Avignon and of manufacturing plant and machinery.

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Supplementary information

Stock option plan. The first vesting period envisaged by the stock option plan, approved in September 2004 by the

Board of Directors of Benetton Group S.p.A., came to an end in September 2006. As a result, a total of 1,337,519

options became exercisable, meaning that their beneficiaries could subscribe to an equal number of the Company's

shares at a price of Euro 8.984 each up until the plan's end date in September 2013.

Further to a review of the overall structure, scope and principles of the system of incentives, in September 2006

management agreed with the Company to cancel the second "tranche" of the 2004 plan. A total of 1,116,681 options

were exercised in 2006 involving the issue of a corresponding number of shares, causing share capital to increase from

Euro 236,026,454.30 to Euro 237,478,139.60. At September 30, 2007 there were 220,838 unexercised options left.

Details of the rules of this stock option plan can be found under "Codes" in the Corporate Governance/Investor

Relations section of the website www.benettongroup.com/investors/.

• 2004 stock option plan

Options New Options expired Options cancelled Options outstanding options Options and not in the period outstanding of which as of granted in exercised in exercised or lost due to termination as of exercisable as of 01.01.2007 the period the period in the period of employment 09.30.2007 09.30.2007 No. of options 220,838 - - - - 220,838 220,838

Allocation ratio (%) 0.121 0.121 0.121

Weighted average exercise price (Euro) 8.984 8.984 8.98

Market price (Euro) 14.47 11.90 11.90

Treasury shares. During the period in question, Benetton Group S.p.A. neither bought nor sold any treasury shares, or

shares or stock in holding companies, either directly or through subsidiaries, trustees or other intermediaries.

Relations with the holding company, its subsidiaries and other related parties. The Benetton Group has trade

dealings with Edizione Holding S.p.A. (the holding company), with subsidiary companies of the same and with other

parties which, directly or indirectly, are linked by common interests with the majority shareholder. Trading relations

with such parties are conducted on an arm's-length basis and using the utmost transparency, in compliance with the

Group Procedure for related party transactions. The total value of such transactions was nonetheless not significant in

relation to the total value of the Group's production. These transactions mostly relate to the purchase and sale of

goods and services.

The Group's Italian companies have elected to file for tax on a group basis as allowed by articles 117 et seq. of the Tax

Consolidation Act DPR 917/86, based on a proposal by the consolidating company Ragione S.A.p.A. di Gilberto

Benetton e C., which decided to opt for this type of tax treatment on June 15, 2007. The election lasts for three years,

starting from the 2007 fiscal year and represents a renewal of the previous election for the 2004-2006 tax period

under Edizione Holding S.p.A. The relationships arising from participation in the group tax election are governed by

specific rules, approved and signed by all participating companies.

Transactions have also taken place between companies directly or indirectly controlled by the Parent Company or

between such companies and the Parent Company itself.

The Parent Company's management considers that such transactions have been conducted on an arm’s length basis.

No Director, manager, or shareholder is a debtor of the Group.

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Directors. Parent Company Directors as of September 30, 2007 were as follows:

Name and surname Date of birth Appointed Office

Luciano Benetton 05.13.1935 1978 Chairman

Carlo Benetton 12.26.1943 1978 Deputy Chairman

Alessandro Benetton 03.02.1964 1998 Deputy Chairman

Gerolamo Caccia Dominioni 01.09.1955 2007 Chief Executive Officer

Giuliana Benetton 07.08.1937 1978 Director

Gilberto Benetton 06.19.1941 1978 Director

Gianni Mion 09.06.1943 1990 Director

Luigi Arturo Bianchi 06.03.1958 2000 Director

Giorgio Brunetti 01.14.1937 2005 Director

Robert Singer 01.30.1952 2006 Director

Alfredo Malguzzi 08.31.1962 2007 Director

Luciano Benetton, Gilberto Benetton, Carlo Benetton and Giuliana Benetton are siblings; Alessandro Benetton is the

son of Luciano Benetton.

Principal organizational and corporate changes. During first quarter 2007, Benetton Real Estate International S.A.

purchased all the share capital in the company Kazan Real Estate Z.A.O. for the purposes of making a real estate

investment in Kazan (Russia) as part of the strategy of expanding trade in Eastern Europe. Benetton Real Estate

International S.A. also set up Benetton Real Estate Azerbaijan L.L.C. and Benetton Real Estate CSH S.r.l. (Moldavia) in

order to have vehicles on hand for making investments in commercial property in these respective regions.

During second quarter 2007, with reference to development of the market in the Far East, Benetton Trading Taiwan

Ltd. was set up with offices in Taipei (Taiwan). This wholly-owned subsidiary of Benetton Manufacturing Holding N.V.

will take over the direct operation of stores in Taiwan, previously managed by a local customer.

Benlim Ltd. (Hong Kong), a partnership between Benetton Asia Pacific Ltd. and a local distributor, subscribed to all the

share capital in Shanghai Sisley Trading Co. Ltd., a company based in Shanghai which will manufacture Sisley products

and directly and indirectly market them in China.

As part of the process of simplifying the Group's corporate structure, Benetton Retail Italia S.r.l. transferred its 50%

interest in Milano Report S.p.A. to Bencom S.r.l.

Benetton Retailing Japan Co. Ltd. was also merged into Benetton Japan Co., Ltd.

The process of winding up Benetton Società di Servizi S.A., a Swiss registered company, was also completed.

During third quarter 2007, Benetton Mexicana S.A. de C.V. was set up as a subsidiary of Benetton Manufacturing

Holding N.V. as part of the commercial development strategy in Mexico.

Lastly, the process of winding up Benetton Slovakia s.r.o. was also completed.

On September 12, 2007 the Parent Company's Board of Directors decided to request the voluntary delisting and

deregistration of the American Depositary Shares (ADS) quoted on the New York Stock Exchange (NYSE), and to

request voluntary deregistration and termination of its reporting obligations under the Securities Exchange Act of

1934. This decision was taken in view of the globalization of financial markets and the internationalization of the Italian

Stock Exchange, and after having seen that the volumes traded on the New York Stock Exchange were very small and

that even the larger US shareholders traded the Benetton stock principally on the Milan Stock Exchange. The

delisting/deregistration process was started after sending the relevant authorities Forms 25 and 15F on October 9 and

22, 2007 respectively.

As a result, the Company no longer has to comply with the reporting requirements relating to the NYSE and SEC

established by US law. All the documentation will continue to be published in English on the Company's website.

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Significant events after September 30, 2007. There have been no significant events since September 30, 2007.

Outlook for the full year. Consolidated revenues for 2007 are expected to be higher than those previously forecast,

with the increase estimated at around 9% thanks to the results of the 2007 collections and the progress in orders for

the Spring/Summer 2008 collections.

EBITDA, before non-recurring items, is expected to grow by over 20%, reporting a margin of more than 15% on

revenues.

Investments for the year should amount to around 300 million, while net financial indebtedness is expected to be

approximately 450 million at the end of the current year.

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Consolidated Group results

Consolidated statement of income. Highlights from the Group's statements of income for the first nine months of

2007 and 2006 and for full year 2006 are presented below; they are based on a reclassification according to the

function of expenses. The percentage changes are calculated with reference to the absolute amounts.

Nine months Nine months Full year (millions of Euro) 2007 % 2006 % Change % 2006 % Revenues 1,504 100.0 1,372 100.0 132 9.6 1,911 100.0

Materials and subcontracted work 753 50.0 686 50.0 67 9.8 962 50.3

Payroll and related costs 62 4.1 61 4.4 1 2.3 81 4.2

Industrial depreciation and amortization 13 0.9 13 1.0 - (4.5) 18 1.0

Other manufacturing costs 33 2.2 33 2.4 - (1.1) 44 2.3

Cost of sales 861 57.2 793 57.8 68 8.5 1,105 57.8

Gross operating profit 643 42.8 579 42.2 64 11.2 806 42.2

Distribution and transport 43 2.9 44 3.2 (1) (1.3) 63 3.3

Sales commissions 61 4.0 54 3.9 7 12.7 74 3.9

Contribution margin 539 35.9 481 35.1 58 12.2 669 35.0

Payroll and related costs 115 7.7 110 8.0 5 4.8 153 8.0

- of which non-recurring expenses - - 1 - (1) (100.0) 2 0.1

Advertising and promotion 48 3.2 52 3.8 (4) (6.7) 72 3.7

Depreciation and amortization 54 3.6 49 3.6 5 10.0 66 3.5

Other expenses and income 156 10.3 133 9.7 23 16.9 198 10.4

- of which non-recurring income (7) (0.5) (12) (0.8) 5 (39.1) (3) (0.2)

General and operating expenses 373 24.8 344 25.1 29 8.5 489 25.6

- of which non-recurring income (7) (0.5) (11) (0.8) 4 (35.6) (1) -

Operating profit (A) 166 11.1 137 10.0 29 21.3 180 9.4

Financial (expenses)/income (21) (1.4) (12) (0.8) (9) 77.7 (18) (0.9)

Net foreign currency hedging (losses)/gains and exchange differences (8) (0.6) (1) (0.1) (7) n.s. (3) (0.2)

Income before taxes 137 9.1 124 9.1 13 10.2 159 8.3

Income taxes 34 2.2 30 2.2 4 11.6 31 1.6

Net income for the period 103 6.9 94 6.9 9 9.8 128 6.7

attributable to: - shareholders of the Parent Company 103 6.8 94 6.9 9 9.0 125 6.5

- minority interests - 0.1 - - - n.s. 3 0.2

(A) Operating profit, before non-recurring items, amounts to 159 million, corresponding to 10.6% of revenues (126 million in the first nine months of 2006 with a margin of 9.2% and 179 million in full year 2006 with a margin of 9.4%).

Group net revenues amounted to 1,504 million in the first nine months of 2007, having increased by 132 million

(+9.6%) on the figure of 1,372 million reported in the first nine months of 2006, with most of the growth coming from

the apparel segment.

Apparel segment revenues from third parties came to 1,401 million, an increase of 134 million (+10.6%) on the 2006

nine-month figure of 1,267 million.

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This improvement reflected:

- the performance in revenues from the partner-managed network, which benefited from the market's favorable

reception of the collections, from commercial development initiatives and from the contribution of new store

openings;

- the growth in sales by directly operated stores, also thanks to the contribution of the Milano Report partnership in

Italy, consolidated since August 2006.

The main driver of growth was the considerable improvement in sales volumes/mix (+13.2% on the same period in

2006). The appreciation of the euro had a negative impact of 14 million on sales.

The growth in apparel segment sales has related to all the brands. The United Colors of Benetton Adult brand has

obtained positive results with its new fashion collections and with its increasingly segmented offer for all types of

different consumer. For example, the collections for men, a priority for 2007, have been so successful that this range

now accounts for 18% of the brand's total sales, fast approaching the medium-term target of 20%.

The United Colors of Benetton Kids brand has continued to diversify its offer for all age groups. Now is the time to

focus on prenatal and baby wear for the under sixes. The Benetton Baby label has been established for this market,

along with a series of stores which offer stylish but highly practical collections. There are plans to open 50 such stores

in 2008, which will welcome customers in a setting suited to this type of product, with staff who will be specially

trained in serving new mothers.

The trend in orders for the Sisley Spring/Summer 2008 collection is reporting an even better response to the already

excellent public and network reception of the brand’s 2007 collections. The new collection gives even more emphasis

to glamour and fashion, strengthening the brand identity. Given these factors, the Group can step up its expansion,

especially internationally, into consumer segments particularly attracted to fashion products, by being able to offer a

trendy, quality and attractively priced product. The strategy is completed with an accredited network of partners which

has recently been strengthened following the agreement for developing the brand in India in partnership with Trent, a

Tata group retailing company. The Sisley brand is expected to grow by between 8% and 10% in 2007.

A new layout for the Undercolors underwear stores has been successfully introduced. The new Gloss concept, already

introduced in 15 stores, helps show off the different product lines to best effect. Positive results have been obtained

for Fun, the better known line designed for those who prefer cheerful, ironic underwear, and for Clean Sensuality, the

line for women seeking more sensual but elegant underwear.

The process of developing the Playlife brand continues after opening 45 new stores in Italy and other Mediterranean

countries in Spring/Summer 2007 as well as restyling existing stores. The results of repositioning the brand with new

collections and a new store concept are in line with target. The expansion plan now involves pushing the brand

internationally, particularly in Eastern Europe and above all in the former Soviet Union.

Accessories are confirmed as one of the drivers of future growth. The excellent sales results obtained in apparel stores

are also confirmed in the pilot dedicated store in Rome. Plans to open this kind of store in coming months involve not

only increasing volumes but also enlarging the offer by including a series of top-range products.

On a geographical front, the nine months confirm the trend seen in the first half of the year with significant growth on

both mature and emerging markets.

Sales in Europe grew by around 13% on the first nine months of 2006. In this context, it should be noted that the

domestic market saw sales increase by over 10%.

Russia continued to grow apace, closing the first nine months with an increase of 35% on the prior year; in general all

the countries in Eastern Europe and in the former Soviet Union reported significant increases.

There were also positive signs from the Group's priority Asian markets; in addition to performance in China, revenues

in India grew by over 50%. There are over 140 United Colors of Benetton stores in India, while the first stores

dedicated to Kids and Undercolors have been opened recently.

The brand's success has also been confirmed in a recent survey by an independent body which named the United

Colors of Benetton brand as the favorite label of young, demanding Indian consumers.

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The textile segment reported 68 million in revenues from third parties, down 4.2% due to growing demand for yarn

and textiles from markets with cheaper labor costs.

Revenues in the other and unallocated segment, which include sports equipment sales, came to 35 million, reporting

an increase of 1 million on the first nine months of 2006.

Cost of sales increased by 68 million to 861 million, representing 57.2% of revenues compared with 57.8% in the

corresponding period of 2006. The individual segments reported the following trends in the cost of sales:

- apparel: cost of sales amounted to 779 million compared with 709 million in the corresponding period of 2006, with

the increase mostly due to the major growth in sales volumes; improved production efficiency and exchange rate

trends helped bring down the cost of sales margin to 55.6% from 55.9% in the first nine months of 2006;

- textile: cost of sales decreased by 16 million, with the margin down to 89.2% of revenues from 90.2% in the same

period of 2006;

- other and unallocated: cost of sales increased by 1 million, with the margin of 95.9% on revenues staying virtually the

same as in the corresponding period of 2006.

Gross operating profit confirmed its recovery by reporting a margin of 42.8% compared with 42.2% in the first nine

months of 2006. Trends in the individual segments were as follows:

- apparel: gross operating profit amounted to 623 million, representing 44.4% of revenues compared with 44.1% in

the corresponding period of 2006, having benefited from operating efficiencies and the weakness of the dollar, the

latter effect offset by currency hedges reported below the operating profit line;

- textile: gross operating profit was 19 million, representing 10.8% of revenues compared with 9.8% in the first nine

months of 2006;

- other and unallocated: gross operating profit reported a margin of 4.1% compared with 4.2% in the corresponding

prior year period.

Selling costs (distribution, transport and sales commissions) amounted to 104 million compared with 98 million in the

first nine months of 2006, representing 6.9% of revenues relative to 7.1% in the corresponding prior year period; this

increase was associated with higher apparel segment sales.

Contribution margin was 539 million compared with 481 million in the first nine months of 2006, representing 35.9%

of revenues compared with 35.1% in the corresponding prior year period. The individual segments reported the

following trends in contribution margin:

- apparel: contribution margin came to 524 million compared with 467 million in the corresponding period of 2006,

while increasing from 36.8% to 37.4% of revenues;

- textile: contribution margin was 13 million, representing 7.3% of revenues up from 6.3% in the corresponding prior

year period;

- other and unallocated: contribution margin represented 3.7% of revenues compared with 3.9% in the corresponding

prior year period.

General and operating expenses amounted to 373 million, up from 344 million in the first nine months of 2006, and

accounted for 24.8% of revenues compared with 25.1% in the corresponding prior year period; the absolute increase

in these expenses was partly due to expansion of the direct channel. The individual segments reported the following

trends in general and operating expenses:

- apparel: these expenses rose by 29 million to 366 million, representing 26.1% of revenues compared with 26.5% in

the corresponding comparative period, reflecting expansion of the direct channel and particularly the consolidation

of Milano Report;

- textile: these expenses amounted to 7 million, representing 4.2% of revenues, virtually the same as in the first nine

months of 2006;

- other and unallocated: these expenses represented a net positive 0.7% of revenues due to the recognition of non-

recurring income compared with 2.5% in the same period of 2006.

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General and operating expenses are discussed in more detail below:

• Non-industrial payroll and related costs increased by 5 million to 115 million, accounting for 7.7% of revenues, down

on the corresponding period of 2006. Analysis of these costs by individual segment shows that the increase was

attributable to the apparel segment as a result of expanding the direct commercial network.

• Advertising and promotion costs were down to 48 million from 52 million in the corresponding comparative period of

2006, while decreasing from 3.8% to 3.2% of revenues; it should be noted that the second half of 2006 included the

costs of the Group's fortieth anniversary celebration.

• Non-industrial depreciation and amortization were 5 million higher at 54 million due to investments entering service in

the period; these charges represented 3.6% of revenues, largely the same as in the prior year comparative period.

• Other income and expenses amounted to 156 million, corresponding to 10.3% of revenues compared with 9.7% in

the first nine months of 2006. This line item includes non-industrial general costs, additions to provisions, net operating

expenses and other expenses and income, details of which are as follows:

- non-industrial general costs amounted to 76 million, having increased by 9 million on the first nine months of 2006

due to a rise in costs for electricity and gas, routine maintenance and cleaning, other services and Directors' fees;

these costs represented 5.1% of revenues, up from 4.9% in the first nine months of 2006;

- additions to provisions, amounting to 12 million in the first nine months of 2006, came to 14 million this year, of

which 11 million for doubtful accounts (9 million in the first nine months of 2006);

- net operating and other expenses increased from 54 million in the first nine months of 2006 to 66 million this year,

representing 4.4% of revenues compared with 3.9% in the prior year. The largest item included in the 2007 nine-

month figure refers to 57 million in net rental expense (net of rental income), which reported an increase of 4

million attributable to the apparel segment. Net capital gains realized on fixed asset disposals came to 9 million, of

which 7 million classified as non-recurring mostly in relation to the sale of a retail business in Milan and of the Kästle

trademark.

Operating profit was 166 million compared with 137 million in the first nine months of 2006, reporting an increase in

margin from 10.0% to 11.1%; operating profit in the individual segments was as follows:

- the apparel segment reported 158 million in operating profit compared with 130 million in the first nine months of

2006, with the margin rising from 10.3% to 11.3%;

- the textile segment reported 6 million in operating profit, with the margin improving to 3.1% from 2.1% in the

corresponding period of 2006;

- the other and unallocated segment reported an operating profit margin of 4.4% compared with 6.4% in the first nine

months of 2006.

The increase of 9 million in net financial expenses was largely due to the rise in interest rates and average

indebtedness over the period following the growth in volumes and higher investments. Net foreign currency hedging

losses and exchange differences were 7 million higher than in the first nine months of 2006 due to the appreciation of

the euro and particularly due to hedges taken out at the end of 2006 against US dollar purchases in 2007.

The tax charge amounted to 34 million compared with 30 million in the corresponding period of 2006, representing a

tax rate of 24.5%, up from 24.2% in the corresponding period of 2006.

Net income for the period attributable to the Group was 103 million compared with 94 million in the first nine

months of 2006, representing basically the same percentage of revenues as in the corresponding prior year period.

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The average number of employees in each segment during the period was as follows:

- apparel: 7,165 (of whom 3,603 in the retail channel), compared with 6,746 (of whom 3,476 in the retail channel) in

the first nine months of 2006;

- textile: 1,317 compared with 1,453 in the corresponding period of 2006;

- other and unallocated: 249 compared with 244 in the first nine months of 2006.

Business segments. The Group's activities are divided into three segments in order to provide the basis for effective

administration and decision-making, and to supply representative and significant information about company

performance to financial investors.

The business segments are as follows:

- apparel, represented by casualwear, carrying the United Colors of Benetton, Undercolors and Sisley brands, and

leisurewear, with the Playlife and Killer Loop brands. The information and results relating to the real estate

companies are also included in this segment;

- textile, consisting of production and sales activities for raw materials (fabrics, yarns and labels), semi-finished products

and industrial services;

- other and unallocated, includes activities relating to sports equipment produced for third parties by a Group

manufacturing company.

For comparative purposes, segment results for the first nine months of 2007 and 2006 and full year 2006 are shown

below. • Segment results – first nine months 2007 Other and (millions of euro) Apparel Textile unallocated Eliminations Consolidated

Revenues from third parties 1,401 68 35 - 1,504

Inter-segment revenues 1 109 - (110) -

Total revenues 1,402 177 35 (110) 1,504

Cost of sales 779 158 34 (110) 861

Gross operating profit 623 19 1 - 643

Selling costs 99 6 - (1) 104

Contribution margin 524 13 1 1 539

General and operating expenses 366 7 - - 373

- of which non-recurring income (6) - (1) - (7)

Operating profit 158 6 1 1 166

Depreciation and amortization 57 9 1 - 67

Other non-monetary costs (impairment and stock options) 1 - - - 1

EBITDA 216 15 2 1 234

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• Segment results – first nine months 2006 Other and (millions of euro) Apparel Textile unallocated Eliminations Consolidated

Revenues from third parties 1,267 71 34 - 1,372

Inter-segment revenues 1 122 - (123) -

Total revenues 1,268 193 34 (123) 1,372

Cost of sales 709 174 33 (123) 793

Gross operating profit 559 19 1 - 579

Selling costs 92 7 - (1) 98

Contribution margin 467 12 1 1 481

General and operating expenses 337 8 (1) - 344

- of which non-recurring income (9) - (2) - (11)

Operating profit 130 4 2 1 137

Depreciation and amortization 51 11 - - 62

Other non-monetary costs (impairment and stock options) 4 - - - 4

EBITDA 185 15 2 1 203

• Segment results – full year 2006

Other and (millions of euro) Apparel Textile unallocated Eliminations Consolidated

Revenues from third parties 1,772 95 44 - 1,911

Inter-segment revenues 2 159 - (161) -

Total revenues 1,774 254 44 (161) 1,911

Cost of sales 993 230 41 (159) 1,105

Gross operating profit 781 24 3 (2) 806

Selling costs 130 9 - (2) 137

Contribution margin 651 15 3 - 669

General and operating expenses 479 10 - - 489

- of which non-recurring income 1 - (2) - (1)

Operating profit 172 5 3 - 180

Depreciation and amortization 69 14 1 - 84

Other non-monetary costs (impairment and stock options) 12 - - - 12

EBITDA 253 19 4 - 276

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• Apparel segment results

Nine months Nine months Full year

(millions of euro) 2007 % 2006 % Change % 2006 % Revenues from third parties 1,401 1,267 134 10.6 1,772

Inter-segment revenues 1 1 - 10.2 2

Total revenues 1,402 100.0 1,268 100.0 134 10.6 1,774 100.0

Cost of sales 779 55.6 709 55.9 70 9.9 993 56.0

Gross operating profit 623 44.4 559 44.1 64 11.5 781 44.0

Selling costs 99 7.0 92 7.3 7 7.4 130 7.3

Contribution margin 524 37.4 467 36.8 57 12.3 651 36.7

General and operating expenses 366 26.1 337 26.5 29 8.7 479 27.0

- of which non-recurring expenses/(income) (6) (0.4) (9) (0.7) 3 (37.1) 1 0.1

Operating profit 158 11.3 130 10.3 28 21.5 172 9.7

EBITDA 216 15.4 185 14.6 31 16.9 253 14.3

• Textile segment results

Nine months Nine months Full year

(millions of euro) 2007 % 2006 % Change % 2006 % Revenues from third parties 68 71 (3) (4.2) 95

Inter-segment revenues 109 122 (13) (10.6) 159

Total revenues 177 100.0 193 100.0 (16) (8.2) 254 100.0

Cost of sales 158 89.2 174 90.2 (16) (9.3) 230 90.5

Gross operating profit 19 10.8 19 9.8 - 1.5 24 9.5

Selling costs 6 3.5 7 3.5 (1) (6.9) 9 3.5

Contribution margin 13 7.3 12 6.3 1 6.1 15 6.0

General and operating expenses 7 4.2 8 4.2 (1) (8.7) 10 4.1

- of which non-recurring expenses/(income) - - - 0.2 - (100.0) - 0.1

Operating profit 6 3.1 4 2.1 2 35.6 5 1.9

EBITDA 15 8.2 15 7.7 - (2.9) 19 7.5

• Other and unallocated segment results

Nine months Nine months Full year

(millions of euro) 2007 % 2006 % Change % 2006 % Revenues from third parties 35 34 1 3.3 44

Inter-segment revenues - - - - -

Total revenues 35 100.0 34 100.0 1 3.3 44 100.0

Cost of sales 34 95.9 33 95.8 1 3.4 41 94.2

Gross operating profit 1 4.1 1 4.2 - (0.4) 3 5.8

Selling costs - 0.4 - 0.3 - 31.7 - 0.5

Contribution margin 1 3.7 1 3.9 - 3.1 3 5.3

General and operating expenses - (0.7) (1) (2.5) 1 (70.8) - (1.1)

- of which non-recurring income (1) (3.3) (2) (5.7) 1 (41.6) (2) (4.4)

Operating profit 1 4.4 2 6.4 (1) (29.8) 3 6.4

EBITDA 2 6.1 2 8.3 - (23.9) 4 8.3

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Third quarter 2007

3rd quarter 3rd quarter (millions of euro) 2007 % 2006 % Change % Revenues 514 100.0 474 100.0 40 8.6

Materials and subcontracted work 261 50.8 242 51.1 19 7.9

Payroll and related costs 19 3.7 18 3.8 1 6.2

Industrial depreciation and amortization 4 0.8 4 1.0 - (9.7)

Other manufacturing costs 10 1.8 11 2.2 (1) (9.9)

Cost of sales 294 57.1 275 58.1 19 6.8

Gross operating profit 220 42.9 199 41.9 21 11.1

Distribution and transport 14 2.9 14 3.0 - 3.9

Sales commissions 22 4.2 19 3.9 3 17.7

Contribution margin 184 35.8 166 35.0 18 11.0

Payroll and related costs 35 6.9 38 8.0 (3) (6.2)

- of which non-recurring expenses - - 1 0.1 (1) (100.0)

Advertising and promotion 14 2.8 18 3.7 (4) (18.3)

Depreciation and amortization 19 3.6 17 3.5 2 11.3

Other expenses and income 57 11.0 45 9.6 12 23.8

- of which non-recurring income - (0.1) (7) (1.4) 7 (95.7)

General and operating expenses 125 24.3 118 24.8 7 6.1

- of which non-recurring income - (0.1) (6) (1.3) 6 (95.2)

Operating profit (A) 59 11.5 48 10.2 11 22.9

Financial (expenses)/income (8) (1.7) (5) (1.0) (3) 86.6

Net foreign currency hedging (losses)/gains and exchange differences (4) (0.7) (2) (0.4) (2) 87.3

Income before taxes 47 9.1 41 8.8 6 12.9

Income taxes 13 2.4 12 2.6 1 3.0

Net income for the period 34 6.7 29 6.2 5 17.1

attributable to: - shareholders of the Parent Company 33 6.4 30 6.5 3 6.6

- minority interests 1 0.3 (1) (0.3) 2 n.s.

(A) Operating profit before non-recurring items amounts to 59 million, representing a margin of 11.4% on revenues (42 million in third

quarter 2006 with a margin of 8.9%).

Group net revenues amounted to 514 million in third quarter 2007, having increased by 40 million (+8.6%) on the

figure of 474 million reported in the corresponding period of 2006.

Apparel segment revenues from third parties came to 486 million, an increase of 44 million (+9.9%) on the 2006

third-quarter figure of 442 million. This segment benefited from:

- the performance in revenues to the partner-managed network, which benefited from the market's favorable

reception of the collections and from commercial development initiatives, as well as from the contribution of newly-

opened stores;

- the growth in sales by directly operated stores, also thanks to the contribution of the Milano Report partnership in

Italy, consolidated since August 2006, meaning that the inconsistency of quarter-on-quarter comparison refers to just

the month of July.

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The main driver of growth was the considerable improvement in sales volumes/mix (+10.9% on the same period in

2006). The appreciation of the euro negatively impacted sales by 3 million.

Gross operating profit confirmed its recovery after increasing by 21 million to 220 million and reporting a margin of

42.9% compared with 41.9% in the same period of 2006. In detail, gross operating profit in the apparel segment

amounted to 215 million, representing 44.2% of revenues compared with 43.7% in the same period of 2006, having

benefited from operating efficiencies and the weakness of the dollar, the latter effect offset by currency hedges

reported below the operating profit line.

Selling costs (distribution, transport and sales commissions) amounted to 36 million, having increased by 3 million on

third quarter 2006 and representing 7.1% of revenues compared with 6.9% in the corresponding prior year period.

Contribution margin was 184 million, representing 35.8% of revenues up from 35.0% in the corresponding prior year

period.

General and operating expenses amounted to 125 million, up from 118 million in the same period of 2006, and

accounted for 24.3% of revenues compared with 24.8% in the corresponding prior year period; this increase also

reflects expansion of the direct channel and particularly the consolidation of Milano Report.

Operating profit rose by 11 million to 59 million, reporting a margin of 11.5% compared with 10.2% in third quarter

2006.

Net financial expenses came to 8 million, 3 million higher than in third quarter 2006, largely due to the rise in interest

rates and average indebtedness over the period following the growth in volumes and higher investments. Net foreign

currency hedging losses and exchange differences were 2 million higher than in the comparative period at 4 million,

due to appreciation of the euro and particularly due to currency hedges taken out at the end of 2006 against US dollar

purchases in 2007.

Net income for the quarter attributable to the Group increased by 3 million on the same period in 2006 to 33 million,

representing 6.4% of revenues compared with 6.5% in third quarter 2006.

• Segment results – 3rd quarter 2007 Other and (millions of euro) Apparel Textile unallocated Eliminations Consolidated

Revenues from third parties 486 16 12 - 514

Inter-segment revenues - 27 - (27) -

Total revenues 486 43 12 (27) 514

Cost of sales 271 40 12 (29) 294

Gross operating profit 215 3 - 2 220

Selling costs 35 1 - - 36

Contribution margin 180 2 - 2 184

General and operating expenses 123 2 - - 125

- of which non-recurring income - - - - -

Operating profit 57 - - 2 59

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• Segment results – 3rd quarter 2006

Other and (millions of euro) Apparel Textile unallocated Eliminations Consolidated

Revenues from third parties 442 18 14 - 474

Inter-segment revenues 1 34 - (35) -

Total revenues 443 52 14 (35) 474

Cost of sales 249 48 13 (35) 275

Gross operating profit 194 4 1 - 199

Selling costs 32 2 - (1) 33

Contribution margin 162 2 1 1 166

General and operating expenses 117 2 (1) - 118

- of which non-recurring expenses/(income) (4) - (2) - (6)

Operating profit 45 - 2 1 48

• Apparel segment results

3rd quarter 3rd quarter

(millions of euro) 2007 % 2006 % Change % Revenues from third parties 486 442 44 9.9

Inter-segment revenues - 1 (1) 35.7

Total revenues 486 100.0 443 100.0 43 9.9

Cost of sales 271 55.8 249 56.3 22 8.9

Gross operating profit 215 44.2 194 43.7 21 11.1

Selling costs 35 7.1 32 7.0 3 12.2

Contribution margin 180 37.1 162 36.7 18 10.9

General and operating expenses 123 25.3 117 26.5 6 4.7

- of which non-recurring income - (0.1) (4) (0.9) 4 (92.9)

Operating profit 57 11.8 45 10.2 12 27.0

• Textile segment results

3rd quarter 3rd quarter

(millions of euro) 2007 % 2006 % Change % Revenues from third parties 16 18 (2) (9.8)

Inter-segment revenues 27 34 (7) (21.2)

Total revenues 43 100.0 52 100.0 (9) (17.3)

Cost of sales 40 92.2 48 92.4 (8) (17.5)

Gross operating profit 3 7.8 4 7.6 (1) (14.6)

Selling costs 1 4.1 2 3.4 (1) 2.9

Contribution margin 2 3.7 2 4.2 - (28.5)

General and operating expenses 2 4.7 2 4.3 - (11.5)

- of which non-recurring expenses - - - 0.1 - (100.0)

Operating profit - (1.0) - (0.1) - n.s.

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• Other and unallocated segment results

3rd quarter 3rd quarter

(millions of euro) 2007 % 2006 % Change % Revenues from third parties 12 14 (2) (8.7)

Inter-segment revenues - - - -

Total revenues 12 100.0 14 100.0 (2) (8.7)

Cost of sales 12 93.7 13 95.1 (1) (10.1)

Gross operating profit - 6.3 1 4.9 (1) 19.1

Selling costs - 0.5 - 0.3 - 59.1

Contribution margin - 5.8 1 4.6 (1) 16.6

General and operating expenses - 2.2 (1) (12.2) 1 n.s.

- of which non-recurring income - - (2) (14.9) 2 n.s.

Operating profit - 3.6 2 16.8 (2) (80.2)

Balance sheet and financial position highlights. The most significant elements of the balance sheet and financial

position, compared with December 31 and September 30, 2006 are as follows:

(millions of euro) 09.30.2007 12.31.2006 Change 09.30.2006

Working capital 847 623 224 755

- Trade receivables 796 627 169 736

- Inventories 352 331 21 324

- Trade payables (339) (403) 64 (333)

- Other operating receivables/(payables) (A) 38 68 (30) 28

Assets held for sale 3 7 (4) 8

Property, plant and equipment and intangible assets (B) 1,110 1,027 83 963

Non-current financial assets (C) 25 21 4 20

Other assets/(liabilities) (D) 38 32 6 27

Net capital employed 2,023 1,710 313 1,773

Net financial indebtedness (E) 650 369 281 452

Total shareholders' equity 1,373 1,341 32 1,321

(A) Other operating receivables and payables include VAT receivables and payables, sundry receivables and payables, holding company

receivables and payables, receivables due from the tax authorities, deferred tax assets, accruals and deferrals, payables to social security institutions and employees, receivables and payables for fixed assets purchases etc.

(B) Property, plant and equipment and intangible assets include all categories of assets net of the related accumulated depreciation, amortization, and impairment losses.

(C) Non-current financial assets include unconsolidated investments and guarantee deposits paid and received. (D) Other assets/(liabilities) include the retirement benefit obligations, the provisions for legal and tax risks, the provision for sales agent

indemnities, other provisions, current income tax liabilities and deferred tax assets in relation to the company reorganization carried out in 2003.

(E) Net financial indebtedness includes cash and cash equivalents and all short and medium/long-term financial assets and liabilities, as reported in the detailed statement discussed in the Explanatory notes.

Working capital was 92 million higher than at September 30, 2006, reflecting the combined effect of:

- an increase in trade receivables, associated, albeit less than proportionately, with the growth in sales volumes;

- a growth in inventories due to a different segmentation of collections and the management of "evergreen" items.

Apart from the changes in working capital discussed above, net capital employed increased by 158 million, mainly

reflecting the growth in investments in property, plant and equipment and intangible assets.

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Net capital employed was 313 million higher than at December 31, 2006, mainly as a result of a cyclical growth in

working capital and the net increase in property, plant and equipment and intangible assets following 164 million in

gross operating investments during the period. Most of the expenditure related to the commercial network, which

benefited from 108 million in investments. Investments in production, amounting to 35 million, mainly related to

increasing the capacity of the production centres in Istria (Croatia) and Tunisia and of the hub in Castrette di Villorba

(Italy).

The remaining investments amounted to 21 million, most of which in information technology (introduction of SAP

sales management software and installation of SAP applications at foreign subsidiaries). The Group's net financial indebtedness is discussed in detail in the Explanatory notes. Cash flows during the first nine months of 2007 are summarized below with comparative figures for the same period of last year:

Nine months Nine months (millions of euro) 2007 2006 Cash flow provided/(used) by operating activities (72) 38

Cash flow used by investing activities (142) (103)

Free cash flow (214) (65)

Cash flow provided/(used) by financing activities of which:

- dividends paid (69) (64)

- net change in sources of finance 174 31

Cash flow provided/(used) by financing activities 105 (33)

Net decrease in cash and cash equivalents (109) (98)

Operating activities used 72 million in cash flows, having provided 38 million in cash flows in the first nine months of

2006, particularly reflecting the larger amount of cash absorbed by working capital due to:

- an increase in trade receivables and inventories associated not only with the growth in sales volumes but also with

the different segmentation of collections and the management of "evergreen" items;

- a decrease in trade payables due to the higher proportion of purchases of goods for resale and of transport costs

with shorter-than-average terms of payment.

Cash flow used by investing activities mainly related to investments in the commercial network, in developing the

production centres in Istria (Croatia) and Tunisia and the hub in Castrette di Villorba (Italy) and in information

technology; divestments in the period mostly related to the disposal of retail businesses in Milan, Nantes and Avignon

and of manufacturing plant and machinery.

Further information of an economic and financial nature is provided in the Explanatory notes to the consolidated financial

statements.

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Consolidated financial statements

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Consolidated statement Nine months Nine months Full yearof income (thousands of Euro) 2007 2006 2006 Notes

Revenues 1,503,830 1,371,624 1,910,975 1

Materials and subcontracted work 752,785 685,804 961,600 2

Payroll and related costs 62,180 60,763 81,175 3

Industrial depreciation and amortization 12,914 13,526 18,209 5

Other manufacturing costs 32,471 32,826 43,749

Cost of sales 860,350 792,919 1,104,733

Gross operating profit 643,480 578,705 806,242

Distribution and transport 43.266 43,825 63,690

Sales commissions 60,730 53,888 73,952

Contribution margin 539,484 480,992 668,600

Payroll and related costs 115,119 109,817 153,500 3

- of which non-recurring expenses - 625 2,108

Advertising and promotion 48,257 51,714 71,537 4

Depreciation and amortization 53,816 48,904 66,031 5

Other expenses and income 156,011 133,429 198,000 6

- of which non-recurring income (6,949) (11,419) (2,890)

General and operating expenses 373,203 343,864 489,068

- of which non-recurring income (6,949) (10,794) (782)

Operating profit 166,281 137,128 179,532

Share of income/(loss) of associated companies 44 52 83

Financial (expenses)/income (21,320) (12,000) (17,723)

Net foreign currency hedging (losses)/gains and exchange differences (8,203) (1,089) (2,560)

Income before taxes 136,802 124,091 159,332

Income taxes 33,475 29,994 31,376 7

Net income for the period attributable to: 103,327 94,097 127,956

- shareholders of the Parent Company 102,936 94,422 124,914

- minority interests 391 (325) 3,042

Basic earnings per share (Euro) 0.56 0.52 0.69

Diluted earnings per share (Euro) 0.56 0.52 0.68

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Consolidated balance sheet (thousands of Euro) 09.30.2007 12.31.2006 09.30.2006 Notes- Assets Other non-current assets

Property, plant and equipment 8

Land and buildings 640,941 611,317 562,483

Plant, machinery and equipment 67,626 67,484 61,328

Furniture, fittings and electronic devices 59,874 54,600 42,950

Vehicles and aircraft 10,660 10,501 10,356

Assets under construction and advances 43,153 10,376 25,447

Leased assets 5,410 7,886 7,805

Leasehold improvements 45,250 42,350 41,413

872,914 804,514 751,782

Intangible assets 9

Goodwill and other intangible assets of indefinite useful life 28,458 28,458 27,465

Intangible assets of finite useful life 208,516 194,152 183,457

236,974 222,610 210,922

Other non-current assets

Investments 3,684 2,445 1,933 10

Guarantee deposits 24,567 21,947 22,368

Medium/long-term financial receivables 5,448 3,461 4,054 11

Other medium/long-term receivables 29,244 48,331 58,363 12

Deferred tax assets 168,350 172,446 168,137 13

231,293 248,630 254,855

Total non-current assets 1,341,181 1,275,754 1,217,559

Current assets

Inventories 352,519 330,706 324,515 14

Trade receivables 788,009 610,131 727,082 15

Tax receivables 30,281 35,523 29,917 16

Other receivables, accrued income and prepaid expenses 94,939 81,034 65,095 17

Financial receivables 25,280 40,474 28,508 18

Cash and banks 75,984 180,738 99,220 19

Total current assets 1,367,012 1,278,606 1,274,337

Assets held for sale 3,224 7,035 7,916 20

TOTAL ASSETS 2,711,417 2,561,395 2,499,812

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Consolidated balance sheet (thousands of Euro) 09.30.2007 12.31.2006 09.30.2006 Notes- Shareholders’ equity Shareholders' equity and liabilities

Shareholders’ equity attributable to the Group 21

Share capital 237,478 237,478 237,327

Additional paid-in capital 65,155 65,155 64,260

Fair value and hedging reserve (2,040) (2,396) (751)

Other reserves and retained earnings 946,117 893,570 907,381

Net income for the period 102,936 124,914 94,422

1,349,646 1,318,721 1,302,639

Minority interests 23,484 22,288 18,707

Total shareholders' equity 1,373,130 1,341,009 1,321,346

Liabilities

Non-current liabilities

Medium/long-term loans 399,560 341 223 22

Other medium/long-term payables 43,574 25,244 35,597 23

Lease financing 2,865 5,244 6,981 24

Retirement benefit obligations 51,320 53,434 53,420 25

Other medium/long-term provisions and liabilities 27,892 27,545 28,081 26

525,211 111,808 124,302

Current liabilities

Trade payables 338,840 403,345 333,075 27

Other payables, accrued expenses and deferred income 107,524 104,214 127,419 28

Current income tax liabilities 9,464 8,445 12,490 29

Other current provisions and liabilities 3,264 4,884 4,580 30

Current portion of lease financing 3,393 4,036 4,853

Current portion of medium/long-term loans 68 500,222 500,305

Financial payables and bank loans 350,523 83,432 71,442 31

813,076 1,108,578 1,054,164

Total liabilities 1,338,287 1,220,386 1,178,466

TOTAL SHAREHOLDERS' EQUITY AND LIABILITIES 2,711,417 2,561,395 2,499,812

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Shareholders’ equity Additional Fair value Other reserves Currency

- Statement of changes Share paid-in and hedging and retained translation Net Minority

(thousands of Euro) capital capital reserve earnings reserve income/(loss) interests Total

Balances as of 01.01.2006 236,026 56,574 123 850,052 7,262 111,873 13,050 1,274,960

Carryforward of 2005 net income - - - 111,873 - (111,873) - -

Dividends distributed as approved

by Ordinary Shareholders'

Meeting of May 9, 2006 - - - (61,730) - - - (61,730)

Exercise of stock options 1,301 7,686 - - - - - 8,987

Stock options - - - 1,883 - - - 1,883

Changes in the period (IAS 39) - - (874) - - - - (874)

Allocation of shareholders' equity

to minority interests arising

under a business combination - - - - - - 422 422

Allocation of surplus value to

capitalized deferred charges (IFRS 3) - - - - - - 8,269 8,269

Dividends distributed

to minority shareholders - - - - - - (2,159) (2,159)

Differences arising on Euro

translation of financial statements

of foreign consolidated companies - - - - (1,959) - (550) (2,509)

Net income for the period - - - - - 94,422 (325) 94,097

Balances as of 09.30.2006 237,327 64,260 (751) 902,078 5,303 94,422 18,707 1,321,346

Exercise of stock options 151 895 - - - - - 1,046

Changes in the period (IAS 39) - - (1,645) - - - - (1,645)

Allocation of shareholders' equity

to minority interests arising

under a business combination - - - - - - (256) (256)

Allocation of surplus value to

capitalized deferred charges (IFRS 3) - - - - - - (911) (911)

Payments for future capital increases - - - - - - 1,500 1,500

Valuation of put option held

by minority shareholders - - - (12,820) - - - (12,820)

Differences arising on Euro

translation of financial statements

of foreign consolidated companies - - - - (991) - (119) (1,110)

Net income for the period - - - - - 30,492 3,367 33,859

Balances as of 12.31.2006 237,478 65,155 (2,396) 889,258 4,312 124,914 22,288 1,341,009

Carryforward of 2006 net income - - - 124,914 - (124,914) - -

Changes in the period (IAS 39) - - 356 - - - - 356

Dividends distributed as approved

by Ordinary Shareholders'

Meeting of April 26, 2007 - - - (67,590) - - - (67,590)

Dividends distributed

to minority shareholders - - - - - - (982) (982)

Payments for share capital

and future capital increases - - - - - - 2,117 2,117

Differences arising on Euro

translation of financial statements

of foreign consolidated companies - - - - (4,777) - (330) (5,107)

Net income for the period - - - - - 102,936 391 103,327

Balances as of 09.30.2007 237,478 65,155 (2,040) 946,582 (465) 102,936 23,484 1,373,130

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Consolidated cash flow Nine months Nine monthsstatement (thousands of Euro) 2007 2006

Operating activities

Net income for the period attributable to the Group and minority interests 103,327 94,097

Income taxes expense 33,475 29,994

Income before taxes 136,802 124,091

Adjustments for:

- depreciation and amortization 66,730 62,430

- net capital (gains)/losses and non-monetary items (8,160) (5,588)

- net provisions charged to statement of income 15,336 11,255

- use of provisions (6,926) (22,238)

- exchange differences 8,203 1,090

- share of (income)/losses of associated companies (44) (52)

- net financial expenses/(income) 21,320 12,000

Cash flow from operating activities before changes in working capital 233,261 182,988

Cash flow from changes in working capital (268,028) (109,684)

Payment of taxes (6,488) (13,743)

Net interest paid/received (22,671) (19,201)

Exchange differences (8,203) (1,738)

Cash flow provided/(used) by operating activities (72,129) 38,622

Investing activities

Operating investments (155,448) (120,017)

Operating divestments 18,501 29,854

Business combinations (1,821) (13,622)

Sale of investments - 10

Operations in non-current financial assets (3,118) 146

Cash flow used by investing activities (141,886) (103,629)

Financing activities

Net change in other sources of finance 173,901 31,275

Payment of dividends (68,572) (63,814)

Cash flow provided/(used) by financing activities 105,329 (32,539)

Net decrease in cash and cash equivalents (108,686) (97,546)

Cash and cash equivalents at the beginning of the period 179,219 196,327

Translation differences and other movements 92 439

Cash and cash equivalents at the end of the period (A) 70,625 99,220

(A) Includes Euro 5,359 thousand in current account overdrafts.

The Explanatory notes (pages 30 through 48) are to be considered an integral part of this report.

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Explanatory notes Group activities Benetton Group S.p.A. (the "Parent Company") and its subsidiary companies (hereinafter also referred to as the "Group") primarily manufacture and market fashion apparel in wool, cotton and woven fabrics, as well as leisurewear. The manufacture of finished articles from raw materials is undertaken partly within the Group and partly using subcontractors, whereas selling is carried out through an extensive commercial network both in Italy and abroad, consisting mainly of stores operated and owned by third parties. The legal headquarters and other such information are shown on the last page of this document. The Parent Company is listed on the Milan, Frankfurt and New York stock exchanges. On September 12, 2007 the Parent Company's Board of Directors decided to request the voluntary delisting and deregistration of the American Depositary Shares (ADS) quoted on the New York Stock Exchange (NYSE), and to request voluntary deregistration and termination of its reporting obligations under the Securities Exchange Act of 1934. This decision was taken in view of the globalization of financial markets and the internationalization of the Italian Stock Exchange, and after having seen that the volumes traded on the New York Stock Exchange were very small and that even the larger US shareholders traded the Benetton stock principally on the Milan Stock Exchange. The delisting/deregistration process was started after sending the relevant authorities Forms 25 and 15F on October 9 and 22, 2007 respectively. As a result, the Company no longer has to comply with the reporting requirements relating to the NYSE and SEC established by US law. All the documentation will continue to be published in English on the Company's website. Form and content of the consolidated financial statements Starting from the 2006 nine-month report, the Group has classified its statement of income by function of expense rather than by nature of expense as in the past. This modification has been made to present the consolidated financial statements and interim financial reports on the same basis as that used by the Group's Directors and management and by the financial community to analyze the Benetton business. It should also be noted that the statement of income format used for the consolidated financial statements and interim financial reports of the Benetton Group differs from the one used by Benetton Group S.p.A. for its individual annual financial statements. This is because this Company principally acts as a financial holding company and provider of services to its subsidiaries. The consolidated financial statements of the Group include the financial statements as of September 30 of Benetton Group S.p.A. and all Italian and foreign companies in which the Parent Company holds, directly or indirectly, the majority of the voting rights. The consolidated financial statements also include the accounts of certain companies in which the Group's interest is 50%, or less, and over which it exercises a significant influence such that it has control over them. In particular: a. Benetton Korea Inc., since the effective voting rights held by Benetton total 51% of all voting rights; b. Benetton Giyim Sanayi ve Ticaret A.S. (a Turkish company), since the licensing and distribution agreements grant

Benetton a dominant influence over the company, as well as the majority of risks and rewards linked to its business activities;

c. Milano Report S.p.A., a company which manages stores, mainly in Lombardy, selling Benetton-branded products, insofar as most of the risks and rewards of the business are attributable to Benetton itself by virtue, amongst others, of the margins earned on sales;

d. New Ben GmbH, a German company, which manages stores selling Benetton-branded products, insofar as the shareholder agreement gives Benetton the right to appoint the majority of the company's Directors. In addition, most of the risks and rewards of the business are attributable to Benetton;

e. Benlim Ltd., a company based in Hong Kong 50% controlled by Benetton Asia Pacific Ltd. set up for the purpose of manufacturing Sisley products under license in China and marketing and distributing them in this country through Shanghai Sisley Trading Co. Ltd., a Chinese company wholly-owned by Benlim Ltd. Benlim Ltd. has been consolidated because most of the risks and rewards of its business and that of its subsidiary are attributable to Benetton. In particular, the licensing and distribution agreements between the parties give the Group a dominant influence over these companies;

f. Shanghai Sisley Trading Co. Ltd., 50% controlled by the Group by virtue of the arrangements described in the previous point.

Financial statements of subsidiaries have been reclassified, where necessary, for consistency with the format adopted by the Parent Company. Such financial statements have been adjusted so that they are consistent with the reference international accounting and financial reporting standards. These financial statements have been prepared on a "going concern" basis, matching costs and revenues to the accounting periods to which they relate. The reporting currency is the Euro and all values have been rounded to thousands of Euro, unless otherwise specified.

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Consolidation criteria

The method of consolidation adopted for the preparation of the consolidated financial statements is as follows:

a. Consolidation of subsidiary companies’ financial statements according to the line-by-line method, with elimination of

the carrying value of the shareholdings held by the Parent Company and other consolidated companies against the

relevant shareholders’ equity.

b. When a company is consolidated for the first time, any positive difference emerging from the elimination of its

carrying value on the basis indicated in a. above, is allocated, where applicable, to the assets and liabilities of the

subsidiary. The excess of the cost of acquisition over the net assets is recorded as "Goodwill and other intangible

assets of indefinite useful life". Negative differences are recorded in the statement of income as income.

c. Intercompany receivables and payables, costs and revenues, and all significant transactions between consolidated

companies, including the intragroup payment of dividends, are eliminated.

Unrealized intercompany profits and gains and losses arising from transactions between Group companies are also

eliminated.

d. Minority interests in shareholders’ equity and the result for the period of consolidated subsidiaries are classified

separately as "Minority interests" under shareholders’ equity and as "Income attributable to minority interests" in the

consolidated statement of income.

e. The financial statements of foreign subsidiaries are translated into Euro using period-end exchange rates for assets

and liabilities and average exchange rates for the period for the statement of income. Differences arising from the

translation into Euro of foreign currency financial statements are reflected directly in consolidated shareholders'

equity as a separate component.

Accounting standards and policies

Application of IFRS. The Group's financial statements for first nine months of 2007 and comparative periods have

been drawn up in accordance with the International Financial Reporting Standards (IFRS) adopted by the European

Union and in force at the date of preparing this report; more specifically, as required by IAS 34 (Interim Financial Reporting) a condensed reporting format has been adopted. These standards do not differ, in any material respect,

from those issued by the International Accounting Standards Board (IASB), meaning that any application of the latter

would not have any significant effect on the Group's financial statements.

The Group's consolidated quarterly financial statements have been prepared using the same accounting policies and

methods as those used for the last annual financial statements; there are no new material IFRSs or amendments

thereto that have come into effect from 2007.

The Group carries out activities that as a whole do not involve significant seasonal or cyclical variations in total sales

during the year.

When preparing the interim financial report, the Group must nonetheless make estimates and assumptions that affect

the amount of revenues, costs, assets and liabilities and the disclosures relating to contingent assets and liabilities at the

interim balance sheet date. If in the future such estimates and assumptions, which are based on the Group's best

judgement, should differ from the actual circumstances, they should be amended as appropriate in the period in which

such circumstances have changed.

In addition, some of these estimation processes, particularly the more complex ones such as determining any

impairment losses on non-current assets, are usually carried out completely only at the time of drawing up the annual

financial statements, when all the necessary information is available, unless there is evidence of impairment requiring an

immediate evaluation of the related losses. Similarly, the actuarial valuations needed to determine the "Retirement benefit obligations" are usually prepared only at

the time of drawing up the annual financial statements. Nonetheless, as from first half 2007 the Benetton Group has

started to recognize the accounting implications of the amendments to the statutory rules governing the "Provision for

employee termination indemnities" introduced by Italian Law no. 296 of December 27, 2006 ("2007 Finance Act") and

subsequent decrees and regulations issued in the first few months of 2007; details of these effects can be found in the

note on "Retirement benefit obligations".

Income taxes have been recognized in the quarterly report using the best estimate of the weighted average rate

expected for the entire year.

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Comments on the principal items in the statement [1] Revenues of income

Nine months Nine months (thousands of Euro) 2007 2006 Sales of core products 1,422,870 1,293,928

Miscellaneous sales 63,188 53,795

Royalty income 7,770 9,006

Other revenues 10,002 14,895

Total 1,503,830 1,371,624

Sales of core products are stated net of discounts.

Miscellaneous sales relate mainly to sports equipment produced for third parties by a subsidiary in Hungary, as well as

the sale of semi-finished products and sample items.

Other revenues refer mainly to the provision of services such as processing, cost recharges and miscellaneous services

including the development of advertising campaigns.

Information on the individual segments can be found in the section entitled "Supplementary information – Segment

information".

Sales of core products, by brand

Nine months Nine months (thousands of Euro) 2007 2006 United Colors of Benetton 1,080,914 973,409

Sisley 252,700 233,293

Playlife 18,912 15,717

Killer Loop 9,353 6,846

Other sales 60,991 64,663

Total 1,422,870 1,293,928

The United Colors of Benetton brand also includes Euro 405,462 thousand in sales by the UCB Kids brand (Euro

361,267 thousand in the first nine months of 2006) and Euro 58,765 thousand in sales by the Undercolors brand

(Euro 53,263 thousand in the corresponding period of 2006). "Other sales" include sales of fabrics and yarns.

Cost of sales

• [2] Materials and subcontracted work

This includes Euro 598,262 thousand (Euro 474,211 thousand in the first nine months of 2006) in costs for the

purchase of materials and Euro 154,523 thousand (Euro 211,593 thousand in the first nine months of 2006) in costs

for subcontracted work.

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General and operating expenses

• [3] Payroll and related costs

An analysis of the Group's payroll and related costs is presented below, including industrial ones classified as part of

the cost of sales, and those relating to directly operated stores classified as part of general and operating expenses.

Nine months 2007

Industrial wages, Non-industrial Advertising division salaries and salaries and salaries and (thousands of Euro) related costs related costs related costs Total Wages and salaries 45,040 88,767 854 134,661

Social security contributions 15,846 22,572 256 38,674

Provision for retirement benefit obligations 407 1,318 51 1,776

Stock option costs - - - -

Other payroll and related costs 887 2,462 - 3,349

Total 62,180 115,119 1,161 178,460

Nine months 2006

Industrial wages, Non-industrial Advertising division salaries and salaries and salaries and (thousands of Euro) related costs related costs related costs Total Wages and salaries 43,527 85,148 792 129,467

Social security contributions 13,921 19,187 235 33,343

Provision for retirement benefit obligations 2,826 2,780 35 5,641

Stock option costs - 1,883 - 1,883

Other payroll and related costs 489 819 - 1,308

Total 60,763 109,817 1,062 171,642

The number of employees is analyzed by category below:

Period 09.30.2007 12.31.2006 average Management 103 95 99

White collar 4,669 4,788 4,729

Workers 2,397 2,386 2,392

Part-timers 1,399 1,625 1,511

Total 8,568 8,894 8,731

• [4] Advertising and promotion

Advertising and promotion costs amount to Euro 48,257 thousand (Euro 51,714 thousand in the first nine months of

2006) and reflect the costs incurred for developing advertising campaigns for the Group and also for third-party

customers.

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• [5] Depreciation and amortization

The Group's depreciation and amortization charges for the period, including the industrial ones reported in the cost of

sales, are analyzed as follows:

Nine months 2007

Industrial depreciation Non-industrial depreciation (thousands of Euro) and amortization and amortization Total Depreciation of property, plant and equipment 12,806 34,156 46,962

Amortization of intangible assets 108 19,660 19,768

Total 12,914 53,816 66,730

Nine months 2006

Industrial depreciation Non-industrial depreciation (thousands of Euro) and amortization and amortization Total Depreciation of property, plant and equipment 13,296 30,595 43,891

Amortization of intangible assets 230 18,309 18,539

Total 13,526 48,904 62,430

• [6] Other expenses and income

Nine months Nine months (thousands of Euro) 2007 2006 Non-industrial general costs 76,167 67,654

Other operating expenses/(income) 70,792 63,909

Additions to provisions 13,747 12,044

Other expenses/(income) (4,695) (10,178)

Total 156,011 133,429

Non-industrial general costs

Nine months Nine months (thousands of Euro) 2007 2006 Other services 16,240 14,091

Consulting and advisory fees 9,188 9,053

Rental and hire costs 8,822 8,173

Travel and entertainment costs 7,112 7,087

Maintenance and cleaning 6,460 4,436

Electricity and gas 6,414 4,944

Directors and Statutory Auditors 4,810 4,109

Sundry purchases 4,518 4,902

Telephone and postage expenses 4,166 3,585

Insurance 3,277 3,279

Banking services 1,978 1,911

Surveillance and security 1,698 1,389

Other 1,484 695

Total 76,167 67,654

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Other operating expenses/(income)

Nine months Nine months (thousands of Euro) 2007 2006 Operating expenses

- rental expense 105,990 84,901 - indirect taxes and duties 7,397 7,037 - other operating expenses 15,250 11,713

Total operating expenses 128,637 103,651

Operating income:

- rental income (49,301) (32,462)

- reimbursements and compensation payments (1,432) (2,769)

- other operating income (7,112) (4,511)

Total operating income (57,845) (39,742)

Total 70,792 63,909

Additions to provisions

Nine months Nine months (thousands of Euro) 2007 2006 Addition to provision for doubtful accounts 10,936 8,582

Addition to provision for sales agent indemnities 1,500 1,500

Addition to provision for legal and tax risks 1,311 1,962

Total 13,747 12,044

Other expenses/(income)

Nine months Nine months (thousands of Euro) 2007 2006 Other expenses:

- donations 2,244 1,943

- out-of-period expenses 1,659 1,562

- losses on disposal 1,045 892

- impairment of property, plant and equipment and intangible assets 602 2,602

- costs for expected obligations 199 491

- other sundry expenses 2,529 3,946

Total other expenses 8,278 11,436

Other income:

- gains on disposals of property, plant and equipment and intangible assets (9,726) (10,373)

- out-of-period income (2,246) (3,948)

- release of provisions (386) (6,921)

- other sundry income (615) (372)

Total other income (12,973) (21,614)

Total (4,695) (10,178)

[7] Income taxes

Income taxes calculated for the period amount to Euro 33,475 thousand, representing a tax rate of 24.5%.

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Comments on the Non-current assets

principal asset items

• [8] Property, plant and equipment

The gross amount, accumulated depreciation and impairment and related net book value of the Group's property,

plant and equipment are analyzed below:

09.30.2007 12.31.2006 Accumulated Accumulated depreciation depreciation (thousands of Euro) Gross and impairment Net Gross and impairment Net Land and buildings 781,679 140,738 640,941 743,635 132,318 611,317

Plant, machinery and equipment 310,493 242,867 67,626 300,579 233,095 67,484

Furniture, fittings and electronic devices 179,970 120,096 59,874 164,945 110,345 54,600

Vehicles and aircraft 23,475 12,815 10,660 23,140 12,639 10,501

Assets under construction and advances 43,153 - 43,153 10,376 - 10,376

Leased assets 9,547 4,137 5,410 13,265 5,379 7,886

Leasehold improvements 141,024 95,774 45,250 139,998 97,648 42,350

Total 1,489,341 616,427 872,914 1,395,938 591,424 804,514

Investments in property, plant and equipment in the period, totaling Euro 127,126 thousand, mainly related to:

- acquisitions of properties for commercial use and the modernization and refurbishment of stores for the purposes of

expanding the retail network, particularly in Eastern Europe, Italy and Portugal;

- plant, machinery and equipment purchased to boost production and distribution efficiency, particularly in Istria

(Croatia), Tunisia and Italy;

- the purchase of store furniture and fittings.

Leasehold improvements mainly refer to the cost of restructuring and modernizing stores belonging to third parties.

Except for the recognition of Euro 409 thousand in net impairment losses, there have been no other signs in the first

nine months of this year indicating any potential impairment of property, plant and equipment; this is why, in

compliance with IAS 36, no impairment testing has been carried out at September 30, 2007.

• [9] Intangible assets

The gross amount, accumulated amortization and impairment and related net book value of the Group's intangible

assets are analyzed below:

09.30.2007 12.31.2006 Accumulated Accumulated amortization amortization (thousands of Euro) Gross and impairment Net Gross and impairment Net Goodwill and other intangible assets of indefinite useful life 40,952 12,494 28,458 40,952 12,494 28,458 Industrial patents and intellectual property rights 6,341 3,022 3,319 3,683 2,880 803 Concessions, licenses, trademarks and similar rights 62,475 44,591 17,884 69,118 50,931 18,187

Deferred charges 237,791 85,750 152,041 219,780 78,180 141,600 Others 79,449 44,177 35,272 74,156 40,594 33,562

Total 427,008 190,034 236,974 407,689 185,079 222,610

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A total of Euro 36,502 thousand was invested in intangible assets during the period, most of which relating to the

acquisition of retail businesses in Italy and France and to the development and implementation of SAP sales

management software and the installation of SAP applications at foreign subsidiaries.

"Goodwill and other intangible assets of indefinite useful life" consist of consolidation differences and residual amounts

of goodwill arising on the consolidation of acquired companies.

"Intangible assets of finite useful life" include:

- "Concessions, licenses, trademarks and similar rights", which include the net book value of the following brands:

"United Colors of Benetton", "Sisley" and "Killer Loop";

- "Deferred charges", mainly consisting of costs associated with the acquisition of commercial activities, which are

amortized over the term of the related lease agreements (with the exception of French "fonds de commerce" which

are amortized over 20 years). This line item also includes costs incurred for the early vacation of third party

premises, as well as expenses for taking over property and business leases, which are amortized over the term of the

related lease contracts;

- "Other", mainly consisting of costs relating to the purchase and development of software for implementation, the

purchase of computer programs and applications and the value of assets under development and advances.

There have been no signs in the first nine months of this year indicating any potential impairment of intangible assets;

this is why, in compliance with IAS 36, no impairment testing has been carried out at September 30, 2007.

• Other non-current assets

[10] Investments. Investments in subsidiary and associated companies relate mainly to commercial companies not

included in the consolidation because they were not yet operational or were in liquidation at the balance sheet date.

Investments in other companies are stated at cost and refer to minority stakes in a number of companies in Italy, Japan,

Korea and Switzerland.

[11] Medium/long-term financial receivables. This line item refers to the long-term portion of financial receivables,

which earn interest at market rates.

[12] Other medium/long-term receivables. This line item, totaling Euro 29,244 thousand, includes Euro 13,440

thousand in receivables due from Ragione S.A.p.A. di Gilberto Benetton e C. for current taxes, calculated on taxable

losses, as allowed in the rules governing participation in the group tax election for Italian companies. This line item also

includes Euro 7,907 thousand in customer trade receivables, Euro 3,201 thousand in receivables due for fixed asset

disposals and Euro 2,088 thousand in recoverable VAT, while the remainder relates to other sundry receivables.

[13] Deferred tax assets. The Group offsets deferred tax assets against deferred tax liabilities for Italian companies

that have made the group tax election and for foreign subsidiaries to the extent legally allowed in their country of

origin. This balance is mostly attributable to taxes paid in advance as a result of differences in calculating the

amortizable/depreciable base of assets. The associated deferred tax assets have been recognized on the basis of the

Group's future expected profitability following its reorganization in 2003. The balance also includes deferred tax assets

recognized on provisions and costs already reported in the financial statements that will become deductible for tax in

future periods.

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Current assets

[14] Inventories. Inventories, totaling Euro 352,519 thousand (Euro 330,706 thousand at December 31, 2006), are

shown net of the related write-down provision.

The valuation of closing inventories at weighted average cost is not appreciably different from their value at current

purchase cost.

[15] Trade receivables. Trade receivables, net of the related provision for doubtful accounts, amount to Euro 788,009

thousand (Euro 610,131 thousand at December 31, 2006). The provision for doubtful accounts amounts to Euro

65,754 thousand (Euro 69,757 thousand at December 31, 2006) and has been determined on the basis of a prudent

assessment of the risks associated with outstanding receivables at period end.

Trade receivables also include Euro 1,918 thousand in amounts due from associated and related companies and Euro

147 thousand due from the holding company Edizione Holding S.p.A.

A total of Euro 16,667 thousand in receivables not yet due had been factored without recourse at September 30,

2007 (Euro 26,065 thousand at December 31, 2006).

[16] Tax receivables. This balance includes:

(thousands of Euro) 09.30.2007 12.31.2006 VAT recoverable 22,813 27,735

Tax credits 6,771 6,021

Other tax receivables 697 1,767

Total 30,281 35,523

[17] Other receivables, accrued income and prepaid expenses

(thousands of Euro) 09.30.2007 12.31.2006 Other receivables:

- other 55,498 41,791

- receivables from holding and related companies 21,513 24,314

Total other receivables 77,011 66,105

Accrued income:

- rental income and operating leases 923 128

- other income 190 1,039

Total accrued income 1,113 1,167

Prepaid expenses:

- rental expense and operating leases 9,937 8,954

- Directors' emoluments 1,409 -

- taxes and duties 1,958 1,165

- other operating costs 1,337 1,836

- insurance policies 1,096 477

- rental and hire costs 735 427

- advertising and sponsorships 343 903

Total prepaid expenses 16,815 13,762

Total 94,939 81,034

Other receivables, which total Euro 77,011 thousand (Euro 66,105 thousand at December 31, 2006), mostly refer to:

- receivables from holding and related companies of which Euro 21,483 thousand due from Edizione Holding S.p.A. in

relation to the group tax election for Italian companies;

- Euro 17,186 thousand in receivables associated with the future establishment of a partnership serving the Group's

commercial development in Iran;

- Euro 14,685 thousand in advances to various suppliers;

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- Euro 8,323 thousand in receivables for fixed asset disposals;

- Euro 1,648 thousand in advances given to employees;

- Euro 912 thousand in receivables from social security institutions.

[18] Financial receivables. This line item mostly refers to:

- short-term loans as well as the current portion of long-term loans to third parties;

- positive differentials on forward exchange contracts, mainly relating to the adjustment to period-end rates of

outstanding hedges against economic, transaction and translation exchange risks;

- interest on loans and derivatives, particularly those relating to interest rate risk.

[19] Cash and banks

(thousands of Euro) 09.30.2007 12.31.2006 Bank and post office current accounts in Euro 29,545 40,670

Checks 24,801 60,992

Bank current accounts in other currencies 21,018 29,649

Time deposits 7 47,994

Cash in hand 613 1,433

Total 75,984 180,738

The time deposits are liquid funds belonging to the finance companies and the Parent Company. Average interest

rates reflect market returns for the various currencies concerned. The amount of checks is the result of customer

payments, received in the last few days of the reporting period.

[20] Assets held for sale. This line item reports, at the lower of net book value and fair value less costs to sell, the

value of the factory in Pedimonte, which is no longer operating after commencing plans to restructure the textile

sector at the end of 2005. Assets reporting a net book value of Euro 3,810 thousand at December 31, 2006 were sold

during the first nine months of the year. These assets related to plant and machinery at Cassano Magnago, a retail

business in Milan and a property in Ponzano Veneto. These disposals generated a net capital gain of Euro 6,539

thousand. During the first nine months of 2007 fixed assets with a net book value of Euro 1,276 thousand relating to

retail businesses belonging to a Portuguese subsidiary were classified in this line item and also sold.

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Comments on the principal Shareholders' equity

items in shareholders’

equity and liabilities

• [21] Shareholders’ equity attributable to the Group

The Shareholders' Meeting of Benetton Group S.p.A. resolved on April 26, 2007 to pay a dividend of Euro 0.37 per

share, totaling Euro 67,590 thousand; this dividend was paid on May 4, 2007.

Changes in shareholders' equity during the period are detailed in the statement of changes contained in the

"Consolidated financial statements" section.

Liabilities

• Non-current liabilities

[22] Medium/long-term loans. This line item includes the long-term portion of loans received from third parties,

meaning the portion due beyond 2007. It particularly includes Euro 400 million in loans obtained under three financing

arrangements agreed by Benetton Group S.p.A. on September 7, 2007 with as many banks: Euro 150 million from

Intesa Sanpaolo S.p.A., Euro 150 million from UniCredit Banca d’Impresa S.p.A. and Euro 100 million from BNL S.p.A.

(BNP Paribas Group). The three loans have a five-year term and carry interest of one, two, three or six-month Euribor

plus a spread ranging between 20 and 50 basis points depending on the ratio between net financial position and

EBITDA. The loans call for compliance with two financial covenants, observance of which will be verified every six

months on the basis of the consolidated financial statements, namely:

- minimum ratio of 4 between EBITDA and net financial expenses;

- maximum ratio of 3.5 between net financial position and EBITDA.

These loans also carry other covenants by Benetton Group S.p.A. and, in some cases, by other Group companies, that

are typically used in international finance. A summary of such covenants can be found in the comments on financial

position contained in the "Supplementary information" section.

[23] Other medium/long-term payables. This line item includes Euro 31,350 thousand in amounts owed to Ragione

S.A.p.A. di Gilberto Benetton e C. for current taxes calculated on taxable income, as required by the rules governing

participation in the group tax election for Italian companies. This line item also includes recognition of the value

attributed to the put options held by minority shareholders in Group subsidiaries, guarantee deposits received,

payables for fixed asset purchases, and sundry other payables.

[24] Lease financing. This line item comprises Euro 2,865 thousand in lease financing repayable after more than one

year.

[25] Retirement benefit obligations. These refer to provisions for post-employment benefit plans relating to Group

employees, of which Euro 48,811 thousand relates to provisions for employee termination indemnities (TFR) reported

by the Group's Italian companies. The actuarial valuations of TFR at September 30, 2007 reflect the effects of the

revised treatment of the same under Italy's Finance Act for 2007 passed on December 27, 2006, and subsequent

decrees and regulations issued in the first few months of 2007. Under these amendments:

- TFR accruing from January 1, 2007, both in the case of opting for its payment into a supplementary pension scheme

or into the Treasury Account at INPS (Italy's social security agency), is treated like payments into a Defined

Contribution Plan and accounted for accordingly;

- TFR accruing up to December 31, 2006 continues to be treated like a Defined Benefit Plan and accounted for in

accordance with the provisions of IAS 19 for this type of plan. However, further to the changes in TFR accruing from

2007, it has been necessary to carry out a new actuarial valuation in order to exclude the component relating to

future salary increases. This recalculation entailed recognizing Euro 1,419 thousand in income in the statement of

income in June 2007. This amount has been deducted from the provision for retirement benefit obligations for the

period and consists of the curtailment effect, less the actuarial gains and losses previously unrecognized as a result of

using the corridor method.

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[26] Other medium/long-term provisions and liabilities. This line item includes Euro 19,679 thousand in provisions for sales agent indemnities, Euro 6,295 thousand in provisions for legal and tax risks, as well as Euro 1,918 thousand in provisions made in past years for the closure of a number of directly operated stores.

• Current liabilities [27] Trade payables. These represent the Group's liabilities for the purchase of goods and services amounting to Euro 338,840 thousand. [28] Other payables, accrued expenses and deferred income

(thousands of Euro) 09.30.2007 12.31.2006 Other payables:

- payables for the purchase of fixed assets 34,542 25,992

- other payables due to holding and related companies 14,967 19,838

- other payables due to employees 21,366 19,056

- other payables due to third parties 10,485 9,389

- payables due to social security and welfare institutions 7,359 8,608

- other payables due to tax authorities 4,639 7,533

- VAT 5,069 5,561

Total other payables 98,427 95,977

Accrued expenses:

- lease installments 4,427 4,762

- other expenses 1,832 922

- consulting and other fees 247 42

Total accrued expenses 6,506 5,726

Deferred income:

- rental income 2,002 1,826

- revenue from concession of rights 562 637

- other income 27 48

Total deferred income 2,591 2,511

Total 107,524 104,214

"Other payables due to holding and related companies" represent the current portion of the amounts owed to Edizione Holding S.p.A. under the group tax election for Italian companies. "Other payables due to third parties" include remuneration owed to directors, guarantee deposits received, non-trade related payables as well as the liability representing the valuation of put options held by minority shareholders in Group subsidiaries. [29] Current income tax liabilities. Current income tax liabilities represent the amount payable by the Group for current year income tax, stated net of taxes paid in advance, tax credits and withholding taxes. [30] Other current provisions and liabilities. This line item relates to the Group's provisions against legal and tax disputes or contingent liabilities that it expects to be resolved or settled within one year. The provision for legal and tax risks mostly refers to legal disputes likely to be settled in the short term. Other provisions mostly refer to the costs to be incurred by the Group in 2007 for the closure of certain stores. [31] Financial payables and bank loans. These mainly refer to: - short-term loans from third parties; - negative differentials on forward exchange contracts, mainly relating to the adjustment to period-end rates of

outstanding hedges against economic, transaction and translation exchange risks; - interest on loans and derivatives, particularly those relating to interest rate risk; - bank loans and overdrafts.

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Commentary on the Cash flow from operating activities before changes in working capital amounted to Euro 233,261 thousand in the first

cash flow statement nine months of 2007, compared with Euro 182,988 thousand in the comparative period, reflecting the improvement

of some Euro 31 million in EBITDA; furthermore, cash flow in 2006 was affected by the use and release during the

period of provisions made in prior years against the cost of closing certain stores.

Changes in working capital used Euro 268,028 thousand in cash flow (Euro 109,684 thousand in the first nine months

of 2006), mostly reflecting:

- the increase in trade receivables, associated, albeit less than proportionately, with the growth in sales volumes;

- the growth in inventories due to a different segmentation of collections and the management of "evergreen" items;

- the decrease in trade payables due to the higher proportion of purchases of goods for resale and of transport costs

with shorter-than-average terms of payment.

It should also be noted that there was a considerable improvement in receivables collection during the first nine

months of 2006, with the target level of performance now almost achieved.

Operating activities used Euro 72,129 thousand in cash flows, having provided Euro 38,622 thousand in cash flows in

the 2006 comparative period.

Cash flow used by investing activities increased to Euro 141,886 thousand from Euro 103,629 thousand in the first

nine months of 2006, mainly due to the higher amount of operating investments in the first nine months of 2007.

These investments mainly related to the commercial network, development of the production centres in Istria

(Croatia) and Tunisia and of the hub in Castrette di Villorba (Italy) and to information technology. Divestments in the

period mostly related to the disposal of retail businesses, including one in Milan, and of manufacturing plant and

machinery.

Cash flow provided by financing activities included the payment of Euro 67,590 thousand in dividends to the

shareholders of Benetton Group S.p.A., the payment of Euro 982 thousand in dividends to minority shareholders of

subsidiary companies and the net change in other sources of finance of Euro 173,901 thousand.

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Supplementary information Financial position

Net financial indebtedness amounts to Euro 649,697 thousand, analyzed as follows:

(thousands of Euro) 09.30.2007 12.31.2006 Change 09.30.2006 Cash and banks 75,984 180,738 (104,754) 99,220

A Liquid assets 75,984 180,738 (104,754) 99,220

B Current financial receivables 25,280 40,474 (15,194) 28,508

Current portion of indebtedness (68) (500,222) 500,154 (500,305)

Financial payables, bank loans and lease financing (353,916) (87,467) (266,449) (76,295)

C Current financial indebtedness (353,984) (587,689) 233,705 (576,600)

D = A+B+C Current net financial indebtedness (252,720) (366,477) 113,757 (448,872)

E Non-current financial receivables 5,448 3,461 1,987 4,054

Bank loans (399,560) (341) (399,219) (223)

Lease financing (2,865) (5,244) 2,379 (6,981)

F Non-current financial indebtedness (402,425) (5,585) (396,840) (7,204)

G = E+F Non-current net financial indebtedness (396,977) (2,124) (394,853) (3,150)

H = D+G Current financial indebtedness (649,697) (368,601) (281,096) (452,022)

Most of the balance reported in "Cash and banks" refers to ordinary current accounts and short-term or overnight bank deposits, with Euro 24,801 thousand relating to checks received from customers at the end of September 2007.

Financial payables, bank loans and lease financing mostly consist of short-term payables to the banking system: Euro

205 million drawn down against uncommitted credit lines and Euro 100 million drawn down against the committed

credit line of Euro 500 million maturing in June 2010. This facility carries interest of one, two, three or six-month

Euribor plus a spread ranging between 27.5 and 60 basis points depending on the ratio between net financial position

and EBITDA, and calls for compliance with three financial covenants, observance of which is verified every six months

on the basis of the consolidated financial statements, namely: - minimum ratio of 4 between EBITDA and net financial expenses; - maximum ratio of 3.5 between net financial position and EBITDA; - maximum ratio of 1 between net financial position and equity.

Bank loans mostly refer to three five-year loans totaling Euro 400 million, of which Euro 150 million from Intesa

Sanpaolo S.p.A., Euro 150 million from UniCredit Banca d’Impresa S.p.A. and Euro 100 million from BNL S.p.A. (BNP

Paribas Group). These loans carry interest of one, two, three or six-month Euribor plus a spread ranging between 20

and 50 basis points depending on the ratio between net financial position and EBITDA, and call for compliance with

two financial covenants, observance of which is verified every six months on the basis of the consolidated financial

statements, namely: - minimum ratio of 4 between EBITDA and net financial expenses; - maximum ratio of 3.5 between net financial position and EBITDA.

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Both the committed credit facility of Euro 500 million and the loans totaling Euro 400 million also carry other covenants by Benetton Group S.p.A. and, in some cases, by other Group companies, that are typically used in international finance, amongst which: a. negative pledge clauses, which require any existing or future secured guarantees over assets in relation to lending

transactions, bonds and other instruments of credit to be extended to the above transactions on an equal footing; b. pari passu clauses, under which no obligations may be taken on that are senior to those assumed in the two

transactions described above; c. periodic reporting obligations; d. cross default clauses, which entitle the lender to demand immediate repayment of the sums lent in the event of

certain types of default by other financial instruments issued by the Group; e. restrictions on major asset disposals; f. other clauses generally found in transactions of this kind. These covenants are nevertheless subject to several exceptions and restrictions. There are no relationships of a financial nature with the consolidating companies Edizione Holding S.p.A. and Ragione S.A.p.A. di Gilberto Benetton e C.

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Segment information

• Segment results – first nine months 2007

Other and (millions of Euro) Apparel Textile unallocated Eliminations Consolidated

Revenues from third parties 1,401 68 35 - 1,504

Inter-segment revenues 1 109 - (110) -

Total revenues 1,402 177 35 (110) 1,504

Cost of sales 779 158 34 (110) 861

Gross operating profit 623 19 1 - 643

Selling costs 99 6 - (1) 104

Contribution margin 524 13 1 1 539

General and operating expenses 366 7 - - 373

- of which non-recurring income (6) - (1) - (7)

Operating profit 158 6 1 1 166

• Segment results – first nine months 2006

Other and (millions of Euro) Apparel Textile unallocated Eliminations Consolidated

Revenues from third parties 1,267 71 34 - 1,372

Inter-segment revenues 1 122 - (123) -

Total revenues 1,268 193 34 (123) 1,372

Cost of sales 709 174 33 (123) 793

Gross operating profit 559 19 1 - 579

Selling costs 92 7 - (1) 98

Contribution margin 467 12 1 1 481

General and operating expenses 337 8 (1) - 344

- of which non-recurring expenses/(income) (9) - (2) - (11)

Operating profit 130 4 2 1 137

• Apparel segment results

Nine months Nine months

(millions of Euro) 2007 % 2006 % Change % Revenues from third parties 1,401 1,267 134 10.6

Inter-segment revenues 1 1 - 10.2

Total revenues 1,402 100.0 1,268 100.0 134 10.6

Cost of sales 779 55.6 709 55.9 70 9.9

Gross operating profit 623 44.4 559 44.1 64 11.5

Selling costs 99 7.0 92 7.3 7 7.4

Contribution margin 524 37.4 467 36.8 57 12.3

General and operating expenses 366 26.1 337 26.5 29 8.7

- of which non-recurring income (6) (0.4) (9) (0.7) 3 (37.1)

Operating profit 158 11.3 130 10.3 28 21.5

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• Textile segment results

Nine months Nine months

(millions of Euro) 2007 % 2006 % Change % Revenues from third parties 68 71 (3) (4.2)

Inter-segment revenues 109 122 (13) (10.6)

Total revenues 177 100.0 193 100.0 (16) (8.2)

Cost of sales 158 89.2 174 90.2 (16) (9.3)

Gross operating profit 19 10.8 19 9.8 - 1.5

Selling costs 6 3.5 7 3.5 (1) (6.9)

Contribution margin 13 7.3 12 6.3 1 6.1

General and operating expenses 7 4.2 8 4.2 (1) (8.7)

- of which non-recurring expenses/(income) - - - 0.2 - (100.0)

Operating profit 6 3.1 4 2.1 2 35.6

• Other and unallocated segment results

Nine months Nine months

(millions of Euro) 2007 % 2006 % Change % Revenues from third parties 35 34 1 3.3

Inter-segment revenues - - - -

Total revenues 35 100.0 34 100.0 1 3.3

Cost of sales 34 95.9 33 95.8 1 3.4

Gross operating profit 1 4.1 1 4.2 - (0.4)

Selling costs - 0.4 - 0.3 - 31.7

Contribution margin 1 3.7 1 3.9 - 3.1

General and operating expenses - (0.7) (1) (2.5) 1 (70.8) - of which non-recurring income (1) (3.3) (2) (5.7) 1 (41.6)

Operating profit 1 4.4 2 6.4 (1) (29.8)

The number of employees in each segment is detailed below:

Period 09.30.2007 12.31.2006 average Apparel 7,044 7,287 7,165

Textile 1,285 1,348 1,317

Other and unallocated 239 259 249

Total 8,568 8,894 8,731

Information by geographical area

• Revenues by geographical area and business segment

Rest of The Rest of (thousands of Euro) Italy % Europe % Americas % Asia % the world % Total Apparel 654,388 89.6 549,873 96.6 42,636 99.2 147,890 96.7 6,170 74.4 1,400,957

Textile 43,257 5.9 19,363 3.4 348 0.8 3,066 2.0 2,128 25.6 68,162

Other and unallocated 32,633 4.5 34 - - - 2,044 1.3 - - 34,711

Total revenues nine months 2007 730,278 100.0 569,270 100.0 42,984 100.0 153,000 100.0 8,298 100.0 1,503,830

Total revenues nine months 2006 654,087 497,895 50,276 163,750 5,616 1,371,624

Change 76,191 71,375 (7,292) (10,750) 2,682 132,206

Revenues are allocated according to the geographical area in which customers are located.

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Other information

Relations with the holding company, its subsidiaries and other related parties. The Group's relations with related

parties are discussed more fully in the Directors’ report.

Non-recurring events and significant transactions. As required by CONSOB Circular DEM/6064293 of July 28, 2006,

the impact on the income statement of the Group's non-recurring events and transactions has resulted in net income

of Euro 6,949 thousand in the first nine months of 2007 (Euro 10,794 thousand in the first nine months of 2006), of

which Euro 7,358 thousand relating to capital gains mostly earned on the disposal of a retail business in Milan and of

the Kästle trademark and Euro 409 thousand in net impairment losses recognized against the value of property, plant

and equipment.

Atypical and/or unusual transactions. As required by the CONSOB Circular dated July 28, 2006, the Group has not

undertaken any atypical and/or unusual transactions, meaning those whose significance/materiality, nature of the

counterparties, purpose, method of determining the transfer price and timing, might give rise to doubts as to: the

fairness/completeness of the information contained in the financial statements, conflicts of interest, the safekeeping of

assets and interests of minority shareholders.

Business combinations. Acquisitions of companies, carried out solely for the purpose of obtaining the ownership of

properties, are not treated like business combinations.

Significant events after September 30, 2007. There have been no significant events since September 30, 2007.

Contingent liabilities. The Group has an estimated Euro 34 million in contingent liabilities associated with ongoing

legal disputes. The Group does not consider it necessary to make any provision against such liabilities because it

believes the likelihood of any outlay to be remote.

In addition, the subsidiary Benind S.p.A. has been in dispute since April 2007 with the Italian customs authorities which

could give rise to a liability of approximately Euro 6.5 million, plus as yet unquantified penalties. Benetton Group's

management considers that it is unlikely that any sum will be paid in respect of this dispute and so has made provision

just for the associated legal costs.

The subsidiary Bencom S.r.l. has had a partial tax inspection in recent months by the Tax Police for tax years 2004-

2005-2006 in relation to IRES (Italian corporate income tax), IRAP (Italian regional business tax) and VAT. The related

report, received on October 18, raises issues regarding the alleged evasive nature of permanent establishments set up

abroad upon the introduction of the "Tremonti" reform and the partial deductibility of sponsorship costs paid to

amateur sports associations. After an initial review, the Company's Board of Directors considers the matters raised to

be unsubstantiated and so has decided not to make any provision against tax contingencies, also on the strength of

authoritative external professional advice.

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The manager responsible for preparing the company's financial reports, Emilio Foà, declares, pursuant to paragraph 2

of article 154-bis of the Consolidated Law on Finance, that the accounting information contained in this document

corresponds to the document results, books and accounting records.

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Corporate information

Headquarters

Benetton Group S.p.A.

Villa Minelli

31050 Ponzano Veneto (Treviso) - Italy

Tel. +39 0422 519111

Legal data

Share capital: Euro 237,478,139.60 fully paid-in

R.E.A. (Register of Commerce) no. 84146

Tax ID/Treviso Company register: 00193320264

Media & communications department

E-mail: info@benetton.it

Tel. +39 0422 519036

Fax +39 0422 519930

Investor relations

E-mail: ir@benetton.it

Tel. +39 0422 519412

Fax +39 0422 519740

www.benettongroup.com