The Benetton Group Annual Report 1996

The Benetton Group
Annual Report 1996
Benetton Group S.p.A.
Villa Minelli
Ponzano (Treviso), Italy
Capital Stock: Lire 87,276,862,500 fully-paid
Treviso Company Register 4424

Board of Directors
Chairman and Managing Director
Luciano Benetton
Deputy Chairman and Managing Director
Gilberto Benetton
Managing Director
Carlo Gilardi
Directors
Giuliana Benetton
Carlo Benetton
Gianni Mion
Angelo Tantazzi
Pierluigi Bortolussi
Piero L. Frattin
Secretary to the Board
Piero L. Frattin
Board of Statutory Auditors
Chairman
Dino Sesani
Auditors
Filippo Duodo
Fanio Fanti
Alternate Auditors
Giovanni Pietro Cunial
Aldo Laghi
Independent Auditors
Deloitte & Touche S.p.A.

Dear Shareholders,
in 1996 the Benetton Group achieved a series of excellent results. The consolidated net income, in
particular, reached a record level, almost double that of 1990. Over the same period, the stockholders’
equity has more than tripled. For the first time in our history, net indebtedness was reduced to zero and
we ended the year with substantial liquidity. The dividend distributed to shareholders was up more than
18% on the previous year.
As far as the overall organisation of the company is concerned, in addition to implementing an incisive
plan to contain operating costs and to effectively manage financial risks, we continued to make
progress in innovation and flexibility, enabling us to respond rapidly to changes in the market and to
seize new opportunities for development. As a result, despite international stagnation in consumer
spending, we sold three million more items in 1996 than in the previous year. Highest growth was
achieved in some of the main European markets: France, Great Britain and Germany.
Much of this success is undoubtedly due to revolutionary changes in our sales organisation world-wide,
where priority has been given to larger, high quality shops, rather than to the number of outlets. During
1996, we opened several prestigious multi-purpose megastores, for example, in London (Benetton’s
largest store) and in New York, where the outlet on Fifth Avenue occupies one of the city’s finest early
twentieth-century buildings. Results to date confirm that our decision was justified, both in terms of
profitability and the consolidation of the Group’s global image.
Our emphasis on innovation and on achieving the best possible price-quality ratio, starting with the
choice of raw materials, was also a factor in our commercial success during 1996. In particular, our
technically advanced textile 206, combining practically and good looks, found immediate favour with
the public: since it was first introduced, some 8 million items made from this fabric have been sold
around the world.
The Castrette complex, the world’s most advanced integrated production facility in the textile-clothing
sector, has consolidated our manufacturing capacity in Europe and increased our competitiveness
world-wide. Investment in new logistics technology has enabled us to significantly reduce transportation
costs and, above all, to greatly improve the efficiency, speed and quality of our customer service.
We know that we must continue with our efforts, and not content ourselves with the results achieved to
date. We go forward justly satisfied with our past successes, but with the ideas, commitment, team spirit
and openness needed to meet the challenges of the future. We have grown considerably in recent
years. Now we are ready to embark on the next stage of our journey, initiating new phases of
development.

Research & development
Constant monitoring of the customs and trends developing throughout the world enables the Group to
respond promptly and effectively to market requirements. This is combined with a special focus on the
development of raw materials. The adoption of Fabric 206 (texturized polyester) and other innovative
materials has enhanced the comfort and practicality of Benetton garments, making a critical
contribution to their commercial success.
Continuing expansion and the consolidation of the Group’s brands in world markets also depend on
the completeness of the ranges and the spectrum of merchandise available. Furthermore, in a constant
drive to improve the relationship between quality and price, research specialists seek out high-quality
designs which combine affordable prices with an increasingly accurate response to market demand.
Sales organization and markets
Sales improved overall during 1996. The upturn was apparent both in shipments to Group customers
and in their sales to the end customer.
A generalized improvement in the results reported by sales outlets was symptomatic of an increasingly
effective sales organization, combined with the timely delivery of merchandise responsive to market
trends. Inventory turnover accelerated, while end-of-season stocks declined.
In geographic terms, sales rose fastest in Europe. The upswing was apparent in almost all nations,
including markets such as France and Germany, where growth was achieved despite weak consumer
demand overall. Increases were particularly marked in the cases of the '012' and 'Zerotondo'
childrenswear lines, thus confirming the validity of product and distribution policies developed in 1995.
Sales of jackets and other outerwear have also continued to grow, notably among the adult lines.
Expansion of the sales network has continued the program to open larger locations, including
megastores in London (the world’s largest Benetton store), New York, San Francisco, Riyadh and
Barcelona. The megastores offer complete ranges of garments and accessories across all Group
brands, thus consolidating their distinctive character and international image. The sales network is set to
expand further during 1997, with over 350 store openings scheduled world-wide.
Distribution
Following completion of the commissioning phase, the Robostore 2000 system has proved its worth by
optimizing shipment quantities and meeting challenging targets in terms of flexibility and efficiency.
Early achievements include the distribution of up to 10 million garments in just one month, thus ensuring
timely response to market needs.
Automation of garment packing and loading has minimized the use of personnel in operations
involving the heaviest work and greatest risk of human error, while focusing the attention of staff on
administration and control. As a consequence, vehicle waiting times have been cut significantly.
The reduction in handling associated with the automated sorting of delivery batches has also helped to
reduce distribution costs, especially with regard to handling and sorting in the loading bays. The
introduction of new automated systems offset the 1996 rises in freight rates.
Automatic, optimized batching has increased the number of garments per carton and considerably
increased throughput capacity. This, in turn, has improved the ability to handle additional products
and enhanced the effectiveness of the integrated logistics system.
Capital investment
The 1996 program of continuing innovation and modernization of the manufacturing system involved
investment exceeding Lire 80 billion. The latest additions having reached full operational capacity, the
Castrette industrial complex is now among the most modern and advanced of its kind in the world.
Extending over more than 190,000 square meters, this facility fully integrates the productionwarehousing-distribution
cycle.
In the Wool Division, the installation of another five centrifugal dyeing machines and additional dyebaths
improved the layout of the dyeing section. Apart from raising output, this also improved product
quality and workflows.

Manufacturing companies invested substantially, spending more than Lire 35 billion to technologically
upgrade plant and machinery and optimize the efficiency of production processes.
Continuing investment in communications systems based on optical-fiber technology has addressed
the links between the Ponzano and Castrette sites, with the aim of further integrating the orderprocessing,
production, warehousing and shipping stages.
The program to renew the Group's central data-processing equipment has continued, with substantial
enhancements to both processing and storage capacity through the introduction of new-generation
hardware. This investment, in highly competitive market conditions, has generated significant savings in
systems-operating costs.
Investment in applications software focused on manufacturing activities and involved applying new
software development technology to the management of fabric inventories for the Outerwear, Shirt
and Jacket Divisions, and to integration of the transition from samples to full-scale production. The
introduction of new EDI (Electronic Document Interchange) technology also improved the degree of
integration between the Cotton Division and the principal fabric suppliers.
Finance management
Attention throughout the year again focused on the optimization of treasury management and on
insulating the Group from exchange-rate exposures, in market conditions characterized by falling
interest rates and the marked appreciation of the lira.
The level of coordination and financial support for subsidiaries was maintained. Relevant developments
during the final quarter included the progressive start-up of Benetton Gesfin SpA, whose activities
include the centralization of treasury management and control of the Group’s financial exposures.
Constant attention to operating efficiency, combined with the lower cost of money, resulted in a
substantial reduction in financial charges.
The equity in foreign subsidiaries was again hedged against exchange risks, to protect the value of the
Group’s investments abroad.
On December 10, 1996, a US $220-million multi-currency loan was arranged in the domestic market,
coordinated by Banca di Roma SpA and Deutsche Bank SpA. The lending syndicate comprised over 30
leading banks at home and abroad. This 5-year loan, at LIBOR plus 0.20%, was received in lire in
February 1997 and enabled the l993 loan, on less favorable terms, from Istituto Bancario San Paolo di
Torino to be repaid early.
Personnel and organization
The Benetton Group employed 5,973 people at the end of 1996, including 4,358 in Italy, following a net
reduction of 45 during the year. The decrease primarily arose from the rationalization of Japanese
companies, some of which are no longer consolidated.
During 1996, personnel management focused on the related issues of employee mobility and training in
the context of the Group's world-wide expansion plans. The key themes were the constant
development of skills relevant to the Group's global role, and promotion of Benetton's innovative
business culture.
On the industrial relations front, the agreement signed in 1994 was fully implemented with the fixing of
pay rises for the next two years linked to the achievement of objectives and business-efficiency
parameters. This process confirmed the wisdom of adopting this new type of accord, which more
directly addresses the challenges posed by intensifying competition, primarily by creating a link
between the requirements of the Group and the aspirations of employees.
Licensing
The program to expand and extend the reach of the Group's brands continued during 1996. Apart from
the renewal of existing contracts, the year's efforts included preliminary negotiations concerning new
territories and discussions with potential licensees of proven reliability. Expansion targets extend beyond
clothing to new sectors, providing further evidence of the Group's dynamic, international stance. New
ventures must meet established Benetton standards, including an optimal mix of quality, value for
money, innovation and style.
A key event during 1996 was the collaboration agreement with Renault, which supplies the engines for
Benetton's Formula One racing cars. The new accord led to the production of the Benetton Twingo,
which features typical Benetton colors, character and style.

Communication
Communications during the year were closely integrated with social and humanitarian campaigns,
conducted in collaboration with leading humanitarian organizations. The spring/summer '96 campaign,
which used an image of three hearts, was launched in March to coincide with the international
congress of SOS Racism, held to mark UNO's World anti-racism day at the headquarters of Fabrica SpA
on the outskirts of Treviso. Other events included the "I Colori della Pace" (colors of peace) initiative,
which involved junior-school children and their teachers in Italy, France, Belgium, Germany and Spain
in a program of education for peace. The second 1996 campaign, using pictures of the Benetton family
in straightjackets, disseminated an image of offbeat, original entrepreneurial creativity, via Europe's
leading daily newspapers.
Two campaigns were launched in the second semester, based respectively on an image of two horses
(one black, one white), and a wooden spoon. The latter idea was developed with the FAO, to coincide
with the world food summit held in Rome in November. Another important exercise in socially-relevant
communications focused on Corleone, the infamous cradle of the Mafia; young people from the town
featured as models for Benetton's spring-summer '97 catalog, to symbolize Corleone's will for social and
cultural regeneration.
In its second year, Fabrica’s communications academy addressed the theme of "human fears",
mounting an exhibition of images along Venice's Canal Grande and at the Pecci Museum in Prato. The
project also involved extensive collaboration with ARTE, the celebrated Franco-German cultural TV
channel, which broadcast theme-based commercials.
Colors Magazine became a bimonthly publication. Its standing was enhanced by distribution of the
December 1996 issue together with Le Monde, the leading French daily.

Signori Azionisti,
nell’esercizio 1996 il Gruppo Benetton ha raggiunto una serie importante di primati. L’utile netto
consolidato, in particolare, è salito a un livello record: dal 1990 ad oggi è quasi raddoppiato. Il
patrimonio netto, nello stesso arco di tempo, è più che triplicato. L’indebitamento netto, per la prima
volta nella nostra storia, è stato azzerato e l’esercizio si è chiuso con una consistente liquidità di cassa. Il
dividendo distribuito è aumentato di oltre il 18% rispetto allo scorso anno.
Il sistema aziendale nel suo complesso, oltre ad attuare un incisivo piano di contenimento dei costi e
una efficace gestione dei rischi finanziari, ha continuato il suo cammino sulla strada dell’innovazione e
della flessibilità, per interpretare le continue evoluzioni del mercato e per cogliere nuove opportunità di
sviluppo.
Così pur in uno scenario internazionale caratterizzato da costumi stagnanti, nel 1996 abbiamo venduto
tre milioni di capi in più rispetto all’anno precedente. Siamo cresciuti soprattutto in alcuni dei principali
mercati europei, come Francia, Gran Bretagna e Germania.
A questo successo ha sicuramente contribuito l’evoluzione dell’organizzazione commerciale, una vera
e propria rivoluzione a livello globale, che ha portato a privilegiare la crescita dimensionale e
qualitativa dei negozi rispetto alla loro entità numerica. Nel corso del 1996 abbiamo inaugurato alcuni
prestigiosi megastore polivalenti, come quelli di Londra, il più grande negozio Benetton nel mondo, e
New York, che ha sede nella Fifth Avenue, in uno dei più importanti palazzi storici del primo Novecento.
I risultati finora ottenuti hanno confermato la bontà della nostra scelta, sia sotto il profilo della
redditività, sia dal punto di vista del consolidamento dell’immagine e della notorietà internazionale del
Gruppo.
I concetti di innovazione e di attenzione a un ottimale rapporto tra qualità e costo dei prodotti,
applicati a partire dalla ricerca delle materie prime, hanno a loro volta contribuito al felice esito
commerciale del 1996.
Le caratteristiche innovative del tessuto 206, in particolare, hanno immediatamente incontrato il favore
del pubblico: dal momento del suo ingresso nel mercato circa 8 milioni di capi realizzati con questo
tessuto, che unisce il pratico al bello, sono stati venduti in tutto il mondo.
L’entrata a regime del polo tecnologico di Castrette, il centro industriale integrato più avanzato al
mondo nel settore del tessile-abbigliamento, ha consolidato la nostra capacità produttiva in Europa e
ci ha permesso di essere sempre più competitivi a livello globale. Nel sistema logistico gli investimenti in
innovazione hanno reso possibili significativi risparmi nelle spese di trasporto e, soprattutto, un forte
miglioramento nell’efficienza, nella rapidità e nella qualità del servizio ai clienti.
Oggi, ancora una volta, sappiamo di dover andare avanti, senza fermarci sugli importanti risultati
acquisiti.
Ripartiamo con la comprensibile soddisfazione per il lavoro fatto, con le idee, l’impegno, lo spirito di
squadra e l’apertura al futuro che animano il nostro presente. Siamo cresciuti molto in questi ultimi anni.
Ora siamo pronti a intraprendere un’ulteriore tappa del nostro viaggio: a dare il via a ulteriori progetti
di sviluppo.

La ricerca e sviluppo
La costante attenzione all'evoluzione dei costumi e delle tendenze a livello mondiale, che ha
consentito di rispondere al mercato in modo sempre più preciso e puntuale, è stata coniugata con un
particolare impegno nella ricerca e sviluppo delle materie prime. L'utilizzo di materiali innovativi, come
ad esempio il tessuto “206” in poliestere testurizzato, ha conferito ai prodotti un'ulteriore valenza in fatto
di comodità e di praticità di utilizzo, contribuendo in modo determinante al loro successo
commerciale.
Il completamento dell’offerta, sempre più mirata nel numero delle proposte e nel contempo più
allargata nei settori merceologici, è risultato un altro fattore essenziale per l’espansione commerciale e
per il consolidamento dell'immagine dei marchi nei mercati mondiali.
L’obiettivo di un sempre migliore rapporto tra qualità e prezzo ha inoltre impegnato gli specialisti della
ricerca nella selezione di modelli di elevato livello qualitativo, proposti a costi equilibrati e sempre più
aderenti alle richieste di mercato.
L'organizzazione commerciale e i mercati
Il 1996 ha segnato globalmente un netto miglioramento dei risultati di vendita sia verso la propria rete
di clienti, sia di quest’ultima verso il consumatore finale.
La maggiore incisività dell'organizzazione commerciale e la tempestività nel riassortimento degli articoli
di tendenza nei mercati hanno generato un diffuso miglioramento dei risultati dei punti vendita,
associato a un maggiore turn-over dei relativi magazzini e ad una diminuzione del loro livello a fine
stagione.
L’area che ha registrato la maggiore crescita dei volumi di vendita è stata l’Europa. L'incremento ha
riguardato quasi tutti i Paesi, compresi mercati come Francia e Germania, dove lo sviluppo delle
vendite Benetton è avvenuto in controtendenza rispetto a una scarsa dinamicità globale dei consumi.
L'aumento delle vendite è stato particolarmente sensibile nelle linee bambino, 012 e Zerotondo,
confermando la validità delle politiche di prodotto e di distribuzione pianificate fin dall’anno
precedente. Si è inoltre accentuato il trend di crescita delle vendite di confezioni e di capispalla, in
particolare nelle linee adulto.
Per quanto riguarda l’espansione della rete di vendita, è proseguito il programma di aperture di negozi
di grandi superfici, come i megastore aperti a Londra (il più grande negozio Benetton nel mondo), New
York, San Francisco, Riyadh e Barcellona, in grado di offrire le collezioni complete di abbigliamento e
accessori del Gruppo, consolidando anche la personalità e l'immagine internazionale dei marchi. Lo
sviluppo della rete di vendita continuerà anche nel 1997, con la prevista apertura di più di 350 negozi
in tutto il mondo.
La distribuzione
Completata la fase di avviamento, il sistema Robostore 2000 ha dimostrato la sua piena validità,
ottimizzando i volumi di spedizione e raggiungendo elevati obiettivi di flessibilità ed efficienza. Il nuovo
sistema, in particolare, ha consentito di distribuire sino a 10 milioni di capi in un solo mese, permettendo
in tal modo di rispondere con prontezza alle richieste di mercato.
L'automazione delle fasi di imballaggio e caricamento dei capi ha determinato una riduzione al
minimo nell'utilizzo di addetti nelle operazioni più faticose e maggiormente esposte a errori umani, a
favore di funzioni di controllo e gestione, riducendo nel contempo in modo sensibile i tempi di sosta
degli automezzi.
La diminuzione delle movimentazioni, a fronte di un riordino automatizzato delle partite di prodotto, ha
anche permesso di ridurre i costi del processo distributivo, in particolare quelli relativi alle attività di
movimentazione necessarie per lo smistamento delle merci nelle piattaforme di carico. L'utilizzo dei
nuovi sistemi automatizzati ha permesso nel 1996 di compensare gli incrementi tariffari del mercato.
L'automatica e ottimale composizione dei colli, con il conseguente aumento dei capi contenuti, ha
reso possibile anche un notevole incremento della capacità di lavoro, aumentando la potenzialità del
sistema, pronto a sostenere l'ulteriore inserimento di prodotti, e contribuendo a una sempre migliore
gestione del sistema logistico integrato.

Gli investimenti
I programmi di innovazione e aggiornamento del sistema produttivo sono continuati anche nel 1996,
comportando investimenti per oltre 80 miliardi di lire. Con l'entrata in funzione a regime degli ultimi
impianti, il complesso industriale di Castrette è oggi uno dei più moderni e avanzati al mondo, con una
superficie totale coperta di oltre 190.000 metri quadri e un'organizzazione integrata del ciclo
produzione-magazzino-distribuzione.
Presso la Divisione Lana è stato migliorato il lay-out della tintoria con l’installazione di ulteriori cinque
macchine di tintura centrifughe e altri bagni di tintura che hanno consentito, oltre all’incremento della
produzione, anche il miglioramento del prodotto e dei flussi operativi.
Particolarmente significativi gli investimenti effettuati dalle Società manifatturiere per un totale di oltre
35 miliardi di lire, finalizzati al miglioramento del livello tecnologico di impianti e macchinari e
all’ottimizzazione dell’efficienza nel processo produttivo.
Sono proseguiti anche gli investimenti nel sistema di comunicazione, basato su fibre ottiche, che
interconnette le aree di Ponzano e di Castrette, con l’obiettivo di potenziare l’integrazione delle fasi di
evasione degli ordini, produzione, magazzino e spedizioni.
E’ inoltre continuato il rinnovo di tutte le apparecchiature centrali di elaborazione, con un notevole
potenziamento della capacità di elaborazione e di memorizzazione, grazie all'utilizzo di tecnologie
dell’ultima generazione; questi nuovi investimenti, attuati in una situazione di offerta informatica molto
competitiva, hanno permesso di ridurre significativamente i costi di gestione.
Gli investimenti in sistemi applicativi sono stati concentrati nell’area della produzione, applicando
nuove tecnologie di sviluppo sia nella gestione del magazzino tessuti nelle Divisioni Confezioni, Camicie
e Capospalla, sia nell’integrazione fra sviluppo del campionario e produzione. Nuove tecnologie di
comunicazione EDI (Electronic Document Interchange) hanno consentito una migliore integrazione
anche tra la Divisione Cotone e i maggiori fornitori di tessuti.
La gestione finanziaria
Durante l’esercizio 1996 è continuata con particolare attenzione l’attività rivolta all’ottimizzazione della
gestione della tesoreria ed alla protezione dei flussi in divisa dai rischi di cambio, in presenza di un
mercato che ha evidenziato, nel corso dell’anno, la marcata riduzione dei tassi d’interesse ed il
sensibile apprezzamento della lira.
E’ attivamente proseguito il coordinamento ed il supporto finanziario alle società controllate: nel corso
dell’ultimo trimestre, in particolare, si è dato graduale avvio all’attività della Benetton Gesfin S.p.A., il
cui oggetto sociale è, tra l’altro, quello di centralizzare la gestione della tesoreria e dei rischi finanziari
nell’interesse del Gruppo.
La continua attenzione all’efficienza operativa e la contrazione dei tassi hanno consentito di ottenere
una sensibile riduzione degli oneri finanziari.
Il patrimonio netto delle controllate estere è stato oggetto, anche nel 1996, di coperture valutarie al
fine di immunizzare tali investimenti dalla fluttuazione dei cambi.
In data 10 dicembre 1996 è stata perfezionata, sul mercato domestico, un’operazione di finanziamento
multivaluta per 220 milioni di dollari USA, coordinata dalla Banca di Roma S.p.A. e dalla Deutsche Bank
S.p.A.. Al sindacato hanno aderito oltre 30 banche primarie, sia italiane che estere. Il prestito, erogato
in lire nel febbraio 1997, per una durata di 5 anni con un tasso pari al Libor + 0,20%, ha permesso il
rimborso anticipato del finanziamento in lire erogato nel 1993 dall’Istituto Bancario S.Paolo di Torino a
condizioni più onerose.

Il personale e l'organizzazione
La popolazione del Gruppo Benetton, a fine 1996, era di 5.973 persone, di cui 4.358 in Italia. Rispetto al
31 dicembre 1995, si riscontra una diminuzione netta di 45 unità, dovuta principalmente alla
razionalizzazione delle attività delle società giapponesi e al conseguente deconsolidamento di alcune
di esse.
Nel 1996 l'attività di gestione delle risorse umane ha seguito i percorsi paralleli della mobilità e della
formazione, per rispondere alle esigenze derivanti dall'espansione dell'attività nel mondo e, nel
contempo, operare per la continua evoluzione della qualità professionale delle persone, secondo
criteri di carattere internazionale e di adesione all'innovativa cultura imprenditoriale del Gruppo.
Sul versante delle relazioni industriali, nel corso del 1996 è stato completato l'accordo sottoscritto nel
1994 attraverso la definizione di incrementi salariali collegati a obiettivi e parametri di efficienza
aziendale validi per il secondo biennio di durata, confermando la validità della scelta di una cultura
contrattuale nuova, più consapevole delle esigenze imposte dalla crescente competizione, che ha
soprattutto saputo coniugare le esigenze dell'impresa con quelle del personale.
Le licenze
E' continuato nel corso del 1996 il programma di espansione e diffusione dei marchi per mezzo non solo
della conferma di contratti esistenti, ma anche con l'avvio di contatti per lo sviluppo in nuovi territori o
di accordi con nuovi licenziatari selezionati e di riconosciuta affidabilità. L'obiettivo di espansione è
stato rivolto non solo al tradizionale settore dell'abbigliamento, ma anche a nuovi settori, confermando
lo stile dinamico ed internazionale del Gruppo, in coerenza con gli standard aziendali, come il
rapporto ottimale tra qualità e prezzo, innovazione e immagine.
Va senz'altro menzionata la collaborazione con il Gruppo Renault, già fornitore dei motori per le
vetture del team di Formula Uno, che ha portato alla realizzazione della nuova automobile Twingo
Benetton , "vestita" con i colori, il carattere e lo stile tipici del Gruppo.
La comunicazione
Nel corso del 1996 l'attività di comunicazione si è svolta in stretta integrazione con iniziative di carattere
sociale e umanitario, realizzate in collaborazione con autorevoli organizzazioni umanitarie. La
campagna istituzionale primavera-estate 1996, con l'immagine dei tre cuori, è uscita in parallelo alla
riunione dei rappresentanti internazionali di SOS Racisme, tenutasi a marzo nella sede di Fabrica S.p.A.,
nei pressi di Treviso, in occasione della giornata mondiale contro il razzismo indetta dall'ONU. Un'altra
iniziativa, “I colori della Pace”, ha coinvolto bambini e insegnanti delle scuole elementari di Italia,
Francia, Belgio, Germania e Spagna in un programma di educazione alla pace. La seconda
campagna 1996, con l'immagine della famiglia Benetton in camicia di forza, ha diffuso un'immagine di
originale creatività imprenditoriale, fuori dagli schemi, sui maggiori quotidiani europei.
Nella seconda parte dell'anno sono partite due campagne: l'immagine dei due cavalli, uno bianco
l'altro nero, e quella del cucchiaio di legno, realizzata espressamente per la FAO, in occasione del
Vertice Mondiale sull'Alimentazione, tenutosi in novembre a Roma. Un altro importante evento di
comunicazione allargata ai temi della società civile ha riguardato la scelta di Corleone, conosciuta
come culla del fenomeno mafioso, e dei suoi giovani quali protagonisti del catalogo della collezione
Benetton per la primavera-estate 1997, per testimoniare la volontà di rinascita sociale e culturale della
città siciliana.
I progetti di Fabrica S.p.A., la scuola di comunicazione giunta al secondo anno di attività, hanno
riguardato il tema delle “Paure dell'uomo”, con una mostra di immagini tenutasi a Venezia, lungo il
Canal Grande, e presso il Museo Pecci di Prato, e una collaborazione continuativa con ARTE, il famoso
canale televisivo culturale franco-tedesco, per la realizzazione di spot tematici.
La rivista Colors, è diventata bimestrale e nel mese di dicembre ha ottenuto un'importante attestazione
di stima, uscendo in allegato all'autorevole quotidiano francese Le Monde.

Consolidated financial statements
as of December 31, 1996

Financial Highlights
Operating results
(Amounts in accordance with Italian GAAP)
(Billions of Lire)
1996 % 1995 %
Total Sales 2,871.1 100.0 2,939.1 100.0
Cost of Sales 1,716.6 59.8 1,721.3 58.6
Gross Margin 1,154.5 40.2 1,217.8 41.4
Income from Operations 401.7 14.0 443.8 15.1
Net income 245.7 8.6 220.3 7.5
Financial position and data per share (Billions of Lire, except per share amount)
(Amounts in accordance with Italian
GAAP)
1996 1995
Working Capital 1,512.3 1,551.1
Fixed Assets, net 592.3 618.0
Total Assets 3,864.3 3,837.1
Net Borrowing/ (liquidity) (133.0) 139.7
Stockholders' Equity 1,820.8 1,657.0
(Approximate amounts in accordance with US GAAP
Stockholders' Equity 1,824.0 1,624.1
Net Income 287.9 238.5
Earnings per Share (I) 1,650.0 1,366.0
Cash Dividend per Share (I) 500.0 400.0
(I) Since each ADS represents two Ordinary Shares, the ADS financial data may be computed by multiplying per
share data by two.

The Benetton Group
The Benetton Group achieved a number of important firsts in 1996. Consolidated net income reached a
record level, net borrowings were turned into a substantial cash surplus (for the first time in the Group's
history) and, as a consequence, net financial charges were a negligible percentage of consolidated
revenues. These highly significant results derive from continuous innovations that have enhanced the
Group’s business systems combined, in recent years, with incisive action to contain both fixed and
variable costs.
Consolidated net income amounted to Lire 246 billion, an improvement of 11.5% with respect to 1995.
Net financial charges of Lire 12.6 billion compare with Lire 46.6 billion in 1995. Self-financing amounted
to Lire 668 billion. Net liquidity of Lire 133 billion follows an improvement of Lire 273 billion during the
year, despite the payment of dividends totaling about Lire 80 billion in 1996. Operating capital has
fallen by almost Lire 150 billion, from Lire 1,285 billion to Lire 1,137 billion, while consolidated stockholders'
equity of Lire 1,821 billion is 10% higher than at the end of 1995.
Consolidated revenues of Lire 2,871 billion (Lire 2,939 billion in 1995) were influenced by the marked
appreciation of the lira against major currencies (over 8% on average), as well as by the disposal and
consequent deconsolidation of certain businesses no longer considered strategic to the optimization of
the Group’s commercial and distribution systems.
Volume rose by almost 4% overall. Substantial growth was achieved within the EU, notably in France,
the UK, Spain, Portugal and Germany, as well as in Eastern Europe and some parts of the Middle East.
Despite the appreciation of the lira, gross margin has remained at more than 40%, while operating
income was 14% of revenues.
The ongoing development and renewal of the retail network has contributed to the rise in the volume
of products sold. Work continued in 1996 with, in particular, the opening of new megastores in London
(the world’s largest Benetton store), New York, San Francisco, Barcelona, Moscow and Riyadh. These
stores offer complete ranges of clothing and accessories covering all Benetton brands, thereby
consolidating public awareness and the Group's image.
On the industrial front, work was completed on the Castrette manufacturing facilities, which are
currently the most advanced of their kind in the world. Investment in innovation has also focused on
applying the latest technology to data processing and applications systems and, above all, to the
continual enhancement of integrated logistics. Here, new automated systems have considerably
improved efficiency and the speed of customer service, while reducing transport expenses by more
than Lire 10 billion. This raises the net savings achieved in 1996 to almost Lire 45 billion, as a result of
projects to reorganize and optimize activities in various sectors of the business, and in certain markets
such as Japan.
The Group Parent, Benetton Group SpA, reported net income of around Lire 125 billion, representing
5.9% of revenues. These were 5% higher than in 1995, following growth in the volume of garments sold
despite the appreciation of the lira against export currencies. The cost of sales rose by Lire 133 billion,
reflecting the increased volume of production and normal cost inflation.
Rises in selling, general and administrative expenses mainly reflected prudent provisions against business
risks (notably credit collection), and higher agents' commissions under a policy designed to enhance
the effectiveness of distribution arrangements while expanding the sales network.
Income from operations, Lire 259 billion, was 12.2% of revenues. Careful management of the exchange
exposures specifically associated with commercial activities resulted in net gains of Lire 141 billion, partly
due to the strengthening of the lira.
The self-financing generated during the year, Lire 387 billion, was particularly significant to the treasury
position.

Total sales
(in billions of lire)
Gross margin
(% on net sales)
Income from operations
(% on net sales)
Net income
(in billions of lire)
3000
2000
1000
50%
30%
10%
0%
20%
15%
10%
5%
0%
250
200
150
100
50
0
0
2059 2304 2513 2751 2788 2939 2871
1990 1991 1992 1993 1994 1995 1996
36.2 38.1 39.2 42.2 41.2 41.4 40.2
1990 1991 1992 1993 1994 1995 1996
12.9 13.5 14.2 14.8 13.9 15.1 14.0
1990 1991 1992 1993 1994 1995 1996
133 165 185 208 210 220 246
1990 1991 1992 1993 1994 1995 1996

Management’s discussion and analysis of financial condition
and results of operations
Results of Operations
The following table sets forth certain items in billions of Lire and their respective percentages of total
revenue for the years indicated. Comparisons in this table and in the following sections are based upon
financial statement amounts derived under Italian GAAP and upon the international format financial
information presented in the Selected Financial Data and in appendix 3 of the Consolidated Financial
Statements.
Year Ended December 31,
1994 1995 1996
Total revenue 2,788 100% 2,939 100% 2,871 100%
Gross margin 1,149 41.2% 1,218 41.4% 1,155 40.2%
Selling, general and
administrative expenses 760 27.3% 774 26.3% 753 26.2%
Income from operations 389 13.9% 444 15.1% 402 14.0%
Net income 210 7.5% 220 7.5% 246 8.6%
Benetton's results are seasonal, with revenues from Fall/Winter season sales higher than those from
Spring/Summer season sales. During the 1994 to 1996 period, approximately 50% of Benetton's orders
related to Fall/Winter collections, 45% to Spring/Summer collections and 5% to "flash" collections.
1996 compared to 1995
Consolidated revenues of Lire 2,871 billion (Lire 2,939 billion in 1995) were influenced by the marked
appreciation of the lira against other major currencies (over 8% on average), as well as by the disposal
and consequent deconsolidation of certain businesses no longer considered strategic to the
optimization of the Group’s commercial and distribution systems.
A generalized improvement in the results reported by sales outlets was symptomatic of an increasingly
effective sales organization, combined with the timely delivery of merchandise responsive to market
trends. Inventory turnover accelerated, while end-of-season stocks declined.
In geographic terms, sales rose most significantly in Europe. The upswing was apparent in almost all
nations, including markets such as France and Germany, where growth was achieved despite weak
consumer demand overall. Increases were particularly marked in the cases of the '012' and 'Zerotondo'
childrenswear lines, thus confirming the validity of product and distribution policies developed in 1995.
Sales of jackets and other outerwear have also continued to grow, notably among the adult lines.
The reduction in revenues, despite a substantial 4% rise in sales volumes compared with 1995, was
caused by the appreciation of the lira against the principal foreign currencies used by the Group. The
resulting erosion of revenues was compounded by the translation into lire of the results reported by
foreign subsidiaries. This effect is clearly correlated with and offset by the net gain from currency
management, which reflects hedging arrangements designed to manage the Group’s exposure to
exchange rate volatility.
Other revenues in 1996 were Lire 168.4 billion against Lire 171.5 billion in 1995, and mainly derived from
sponsorship agreements related to the Formula I Championship and manufacturing sales and services
provided to third parties. Despite normal cost inflation, the cost of sales declined by Lire 4.7 billion in
1996.
Despite the appreciation of the lira, gross margin has remained at more than 40%, while operating
income was 14% of revenues.

Continuing commitment to cost containment is evidenced by an overall reduction in selling and
general expenses, both in absolute and percentage terms. Specifically:
– Selling expenses rose by around Lire 7 billion or 0.4% of revenues. Following completion of the
commissioning phase, the Robostore 2000 system has proved its worth by optimizing shipment
quantities and meeting challenging targets in terms of flexibility and efficiency. Early achievements
include the distribution of up to 10 million garments in just one month, thus ensuring timely response
to market needs.
? Automation of garment packing and loading has minimized the use of personnel in operations
involving the heaviest work and greatest risk of human error, while focusing the attention of staff on
administration and control. As a consequence, vehicle waiting times have been cut significantly.
? The reduction in handling associated with the automated sorting of delivery batches has also
helped to reduce distribution costs, especially with regard to handling and sorting in the loading
bays. The introduction of new automated systems offset the 1996 rises in freight rates.
? Automatic batching has optimized the number of garments per carton and considerably increased
throughput capacity. This, in turn, has improved the ability to handle additional products and
enhanced the effectiveness of the integrated logistics system.
? Agents' commissions increased by Lire 17 billion, however, reflecting the Company’s use of incentives
to promote the expansion of the sales and distribution network.
– Advertising and sponsorship expenditure declined to 3.5% of revenues (from 4.1% in 1995), with a
reduction in absolute terms of around Lire 18 billion.
– General and administrative expenses decreased by Lire 34 billion, thus saving about 1% of revenues.
In greater detail, the payroll was Lire 16 billion lower than in 1995, following reorganization measures
affecting manufacturing and other companies, combined with the closure of the Cosmetics Group
and the divestment of Japanese companies no longer strategic to the sales and distribution network.
Reorganization projects in various business sectors, coupled with the reorganization of operations
among the Japanese subsidiaries and elsewhere, generated overall savings of around Lire 13 billion
in general overhead expenditure. The levels of depreciation and operating expenditure were similar
to those in 1995.
– Provisions increased by around Lire 24 billion, reflecting a prudent approach to supplementing the
allowance for doubtful accounts, the reserve for legal disputes and the agents' leaving indemnity
reserve.
The ratio of operating income to revenues declined slightly to 14% from 15.1% in 1995, despite the
adverse effect deriving from the appreciation of the lira.
Attention throughout the year again focused on the optimization of treasury management and on
insulating the Group from exchange-rate exposures, in market conditions characterized by falling
interest rates and the marked appreciation of the lira. The level of coordination and financial support
for subsidiaries was maintained. Relevant developments during the final quarter included the
progressive start-up of Benetton Gesfin S.p.A., whose activities include the centralization of treasury
management and control of the Group’s financial exposures. Constant attention to operating
efficiency, combined with the lower cost of money, resulted in a substantial reduction in financial
charges. The equity in foreign subsidiaries was again hedged against exchange risks, to protect the
value of the Group’s investments abroad.
The net exchange gain of Lire 117 billion (Lire 46 billion in 1995) included in financial income and
expense (Note 27) was derived from the translation of receivables and payables denominated in
foreign currency using year-end exchange rates, coupled with the overall effect of exchange hedges
and differences arising from cash receipts and payments denominated in foreign currencies.
The substantial reduction in the Group's average borrowings resulted in a further decline in financial
charges, which were at an extremely modest level in both absolute and percentage terms. In
particular, net financial charges of Lire 12.6 billion were just 0.4% of revenues.
The increase in “other expenses, net” reflected the prudent provisions to reserves discussed in the Notes
to the Consolidated Financial Statements.
The effective tax rate, based on income before income taxes and minority interests, amounted to
45.2%.
Net income improved by 11.5% to 8.6% of revenues from 7.5% in 1995.
The Group employed 5,973 people at the end of 1996, compared with 6,018 as of December 31, 1995.

Net capital employed
Net working capital
(in billions of lire)
Net indebtedness
(in billions of lire)
Stockholders' equity
(in billions of lire)
Cash flows
Net income
(in billions of lire)
2000
1000
500
400
300
200
100
-100
-200
0
0
2000
1500
1000
500
800
600
400
200
0
0
868 953 1315 1552 1851 1836 1712
653 655 880 1122 1269 1285 1137
1990 1991 1992 1993 1994 1995 1996
171 325 425 303 140 -133
1991 1992 1993 1994 1995 1996
587 717 923 1063 1504 1657 1821
1990 1991 1992 1993 1994 1995 1996
338 425 458 594 526 614 668
133 165 185 208 210 220 246
1990 1991 1992 1993 1994 1995 1996

Consolidated financial statements
as of December 31, 1995 and 1996

Consolidated balance sheet as of December 31, 1995 and 1996
Assets
B FIXED ASSETS
I Intangible fixed assets
(in millions of Lire) (Thousands
of US $) (1)
12/31/95 12/31/96 12/31/96
1 start-up and expansion expenses 17,349 11,458 7,543
2 research, development and advertising expenses 867 819 539
3 industrial patents and intellectual property rights 1,021 1,408 927
4 concessions, licenses, trademarks and similar rights 11,289 10,417 6,858
5 goodwill and consolidation differences 18,164 21,516 14,165
6 assets in course of formation and advance payments 3,340 3,101 2,041
7 other intangible fixed assets 22,626 31,789 20,928
Total intangible fixed assets 74,656 80,508 53,001
II Tangible fixed assets
1 real estate 354,687 340,414 224,104
2 plant and machinery 192,883 179,251 118,006
3 industrial and commercial equipment 3,919 5,931 3,904
4 other assets 60,342 60,912 40,100
5 assets under construction and advances to suppliers 6,186 5,758 3,791
Total tangible fixed assets 618,017 592,266 389,905
III Financial fixed assets
1 equity investments in:
(a) subsidiary companies 39,991 39,098 25,740
(b) associated companies 4,253 1,653 1,088
(d) other companies 2,907 2,490 1,639
Total equity investments 47,151 43,241 28,467
2 financial receivables due from:
(a) subsidiaries
- within 12 months 336 - -
- beyond 12 months 749 - -
Total financial receivables due from subsidiaries 1,085 - -
(d) third parties
- within 12 months 10,192 5,223 3,438
- beyond 12 months 34,162 14,976 9,859
Total financial receivables due from third parties 44,354 20,199 13,297
Total financial receivables 45,439 20,199 13,297
3 other securities 130,778 71,042 46,769
Total financial fixed assets 223,368 134,482 88,533
TOTAL FIXED ASSETS 916,041 807,256 531,439
(1) Exchange rate: US $ 1 = Lire 1,519 as of December 31, 1996.
The accompanying notes to consolidated financial statements are an integral part of these consolidated statements.

C CURRENT ASSETS
I Inventories
(in millions of Lire) (Thousands
of US $) (1)
12/31/95 12/31/96 12/31/96
1 raw materials, other materials and consumables 178,542 181,207 119,294
2 work in progress and semimanufactured products 139,110 122,500 80,645
4 finished goods and goods for resale 186,558 106,500 70,112
5 advance payments to suppliers 2,153 1,085 714
Total inventories 506,363 411,292 270,765
II Accounts receivable
1 trade receivables
- within 12 months 1,237,358 1,245,928 820,229
- beyond 12 months 731 10,708 7,049
Total trade receivables 1,238,089 1,256,636 827,278
2 subsidiary companies 7,585 3,604 2,373
3 associated companies 54 1,501 988
5 other receivables
- within 12 months 157,735 81,071 53,371
- beyond 12 months 1,347 920 606
Total other receivables 159,082 81,991 53,977
Total accounts receivable 1,404,810 1,343,732 884,616
III Financial assets not held as fixed assets
5 Treasury shares - 719 473
6 other securities 290,081 659,300 434,036
7 other financial receivables 127,244 4,399 2,896
8 differentials on forward transactions:
- within 12 months 74,647 71,735 47,225
- beyond 12 months 6,244 3,268 2,151
Total differentials on forward transactions 80,891 75,003 49,376
Total financial assets not held as fixed assets 498,216 739,421 486,781
IV Liquid funds
1 bank and post office deposits 430,067 485,070 319,335
2 checks 28,011 13,148 8,656
3 banknotes and coins 541 694 457
Total liquid funds 458,619 498,912 328,448
TOTAL CURRENT ASSETS 2,868,008 2,993,357 1,970,610
D ACCRUED INCOME AND PREPAID EXPENSES 53,030 63,649 41,902
TOTAL ASSETS 3,837,079 3,864,262 2,543,951
(1) Exchange rate: US $ 1 = Lire 1,519 as of December 31, 1996.
The accompanying notes to consolidated financial statements are an integral part of these consolidated statements.

Consolidated balance sheet as of December 31, 1995 and 1996
Liabilities and stockholders' equity
A STOCKHOLDERS' EQUITY
(in millions of Lire) (Thousands
of US $) (1)
12/31/95 12/31/96 12/31/96
I Capital stock 87,277 87,277 57,457
II Additional paid-in capital 472,661 472,661 311,166
III Revaluation reserves 45,028 46,202 30,416
IV Legal reserve 17,455 17,455 11,491
V Reserves for treasury shares held - 719 473
VII Other reserves 814,282 950,880 625,991
IX Net income for the year 220,255 245,642 161,713
Group interest in stockholders' equity 1,656,958 1,820,836 1,198,707
Minority interests 38,863 24,603 16,197
TOTAL STOCKHOLDERS' EQUITY 1,695,821 1,845,439 1,214,904
B RESERVES FOR RISKS AND CHARGES
2 taxation 7,650 7,926 5,218
3 other 82,151 55,529 36,556
TOTAL RESERVES FOR RISKS AND CHARGES 89,801 63,455 41,774
C RESERVE FOR EMPLOYEE
TERMINATION INDEMNITIES 58,736 62,521 41,159
D ACCOUNTS PAYABLE
1 bonds
- within 12 months - 34,986 23,032
- beyond 12 months 279,527 235,775 155,218
Total bonds 279,527 270,761 178,250
2 convertible bonds repayable beyond 12 months 300 300 197
3 due to banks
- within 12 months 730,024 804,787 529,813
- beyond 12 months 204,069 80,543 53,024
Total due to banks 934,093 885,330 582,837
4 due to other providers of finance
- within 12 months 10,910 13,369 8,801
- beyond 12 months 16,519 15,262 10,048
Total due to other providers of finance 27,429 28,631 18,849
5 advances from customers 2,771 2,975 1,959
6 trade payables 517,298 540,043 355,525
7 securities issued
- within 12 months 10,019 6,055 3,986
- beyond 12 months 1,811 708 466
Total securities issued 11,830 6,763 4,452
8 due to subsidiary companies 2,227 2,523 1,661
9 due to associated companies 385 205 135
11 due to the tax authorities 98,574 48,982 32,246
12 due to social security and welfare institutions 16,441 16,675 10,978
13 other payables
- within 12 months 31,713 28,567 18,806
- beyond 12 months 2,123 1,909 1,257
Total other payables 33,836 30,476 20,063
TOTAL ACCOUNTS PAYABLE 1,924,711 1,833,664 1,207,152
(1) Exchange rate: US $ 1 = Lire 1,519 as of December 31, 1996.
The accompanying notes to consolidated financial statements are an integral part of these consolidated statements.

E ACCRUED EXPENSES AND DEFERRED INCOME
(in millions of Lire) (Thousands
of US $) (1)
12/31/95 12/31/96 12/31/96
1 accrued expenses and deferred income 67,423 58,793 38,705
2 premiums on bond issues 587 390 257
TOTAL ACCRUED EXPENSES
AND DEFERRED INCOME 68,010 59,183 38,962
TOTAL LIABILITIES
AND STOCKHOLDERS' EQUITY 3,837,079 3,864,262 2,543,951
DISCLOSURE OF:
COMMITMENTS, CONTINGENCIES
AND MEMORANDUM ACCOUNTS
Guarantees given
Guarantees 12,979 10,560 6,952
Endorsements 970 - -
Other 148 1,144 753
Secured guarantees given
To secure recorded payables - mortgages 69,991 91,171 60,020
Purchase commitments - 1,418 933
Sale commitments - 7,130 4,694
Guarantees received
Notes lodged by third parties 20 20 13
Guarantees given by third parties 19,198 7,845 5,165
Other
Securities to be sold forward 9,645 - -
Currency to be sold forward 5,674,873 3,744,604 2,465,177
Currency to be purchased forward 3,204,780 2,050,226 1,349,721
Restricted receivables 8,133 25,474 16,770
Notes presented for discount 4,412 8,893 5,855
TOTAL COMMITMENTS, CONTINGENCIES
AND MEMORANDUM ACCOUNTS 9,005,149 5,948,485 3,916,053
(1) Exchange rate: US $ 1 = Lire 1,519 as of December 31, 1996.
The accompanying notes to consolidated financial statements are an integral part of these consolidated statements.

Consolidated statements of income for the years ended December 31, 1995 and 1996
A VALUE OF PRODUCTION
(in millions of Lire) (Thousands
of US $) (1)
1995 1996 1996
1 Revenues from sales and services 2,939,134 2,871,108 1,890,131
2 Changes in work in progress, semi-manufactured
products and finished goods (9,814) (81,220) (53,469)
4 Capitalization of internal work 2,292 3,608 2,375
5 Other income and revenues 25,427 18,669 12,290
TOTAL VALUE OF PRODUCTION 2,957,039 2,812,165 1,851,327
B PRODUCTION COSTS
6 Raw material, other materials, consumables
and goods for resale 924,736 790,437 520,367
7 Services received 1,017,756 1,035,382 681,621
8 Leases and rentals 44,729 37,561 24,727
9 Payroll and related costs:
a wages and salaries 241,934 229,049 150,790
b social security contributions 76,182 77,474 51,003
c employee termination indemnities 17,114 13,752 9,053
e other costs 2,036 1,353 891
Total payroll and related costs 337,266 321,628 211,737
10 Amortization, depreciation and writedowns:
a amortization of intangible fixed assets 19,248 18,461 12,153
b depreciation of tangible fixed assets 81,741 76,451 50,330
d writedown of current receivables and of liquid funds 60,839 78,304 51,550
Total amortization, depreciation and writedowns 161,828 173,216 114,033
11 Changes in raw materials, other materials,
consumables and goods for resale (28,221) (2,825) (1,860)
12 Provisions to risk reserves 7,357 13,638 8,978
14 Other operating costs 51,350 49,162 32,365
TOTAL PRODUCTION COSTS 2,516,801 2,418,199 1,591,968
DIFFERENCE BETWEEN VALUE AND
COST OF PRODUCTION 440,238 393,966 259,359
C FINANCIAL INCOME AND EXPENSE
15 Income from equity investments 11,891 6,223 4,097
16 Other financial income:
a from receivables held as financial fixed assets
- subsidiary companies 94 75 50
- other companies 506 506 333
600 581 383
b from securities held as financial fixed assets
not representing equity investments 17,141 15,821 10,415
c from securities included among current assets
not representing equity investments 27,663 24,635 16,218
d Financial income other than the above
- subsidiary companies 586 227 149
- associated companies - 6 4
- other companies 544,741 504,835 332,347
545,327 505,068 332,500
Total other financial income 590,731 546,105 359,516
17 Interest and other financial expense 593,008 448,435 295,217
TOTAL FINANCIAL INCOME AND EXPENSE 9,614 103,893 68,396

D ADJUSTMENTS TO FINANCIAL ASSETS
(in millions of Lire) (Thousands
of US $) (1)
1995 1996 1996
18 Revaluations:
a of equity investments 445 171 112
c of securities included among current assets
not representing equity investments - 155 102
Total revaluations 445 326 214
19 Writedowns:
a of equity investments 5,807 1,406 926
c of securities included among current assets
not representing equity investments 3,118 417 274
Total writedowns 8,925 1,823 1,200
TOTAL ADJUSTMENTS TO FINANCIAL ASSETS (8,480) (1,497) (986)
E EXTRAORDINARY INCOME AND EXPENSE
20 Income:
- gains on disposals 2,652 7,318 4,818
- other 14,210 9,216 6,067
Total income 16,862 16,534 10,885
21 Expense:
- losses on disposals 3,673 2,030 1,337
- taxes relating to prior years 508 61 40
- other 42,958 53,638 35,311
Total expense 47,139 55,729 36,688
TOTAL EXTRAORDINARY INCOME AND EXPENSE (30,277) (39,195) (25,803)
RESULTS BEFORE INCOME TAXES 411,095 457,167 300,966
22 Current income taxes 188,659 206,638 136,036
Income before minority interests 222,436 250,529 164,930
Income attributable to minority interests (2,181) (4,887) (3,217)
26 NET INCOME FOR THE YEAR 220,255 245,642 161,713
(1) Exchange rate: US $ 1 = Lire 1,519 as of December 31, 1996.
The accompanying notes to consolidated financial statements are an integral part of these consolidated
statements.

Statement of changes in consolidated stockholders’ equity
for the years ended December 31, 1994, 1995, and 1996
Surplus from Other reserves
Additional monetary and Net income
(in millions of Lire)
Capital paid-in revaluation retained for Total
Stock capital of assets earnings the year
BALANCES AS OF DECEMBER 31, 1993 81,777 186,661 46,222 540,580 208,038 1,063,278
Allocation of 1993 net income to reserves - - - 208,038 (208,038) -
Capital increase 5,500 286,000 - - - 291,500
Dividends distributed, as approved at the
stockholders' meeting held on May 25, 1994 - - - (67,203) - (67,203)
Effect of deconsolidating subsidiary
companies
Differences arising from the translation of
- - (1,106) 1,106 - -
foreign currency financial statements - - - 6,361 - 6,361
Net income for the year - - - - 210,220 210,220
BALANCES AS OF DECEMBER 31, 1994 87,277 472,661 45,116 688,882 210,220 1,504,156
Allocation of 1994 net income to reserves - - - 210,220 (210,220) -
Dividends distributed, as approved at the
stockholders' meeting held on April 27, 1995 - - - (69,821) - (69,821)
Transfer to extraordinary reserve
of a part of surplus following the
monetary revaluation of assets - - (88) 88 - -
Differences arising from the translation of
foreign currency financial statements - - - 2,368 - 2,368
Net income for the year - - - - 220,255 220,255
BALANCES AS OF DECEMBER 31, 1995 87,277 472,661 45,028 831,737 220,255 1,656,958
Allocation of 1995 net income to reserves - - - 220,255 (220,255) -
Dividends distributed, as approved at the
stockholders' meeting held on April 30, 1996 - - - (74,185) - (74,185)
Monetary revaluation of fixed assets
carried out by a Spanish subsidiary in
accordance with local legislation - - 1,174 - - 1,174
Differences arising from the translation of
foreign currency financial statements - - - (8,753) - (8,753)
Net income for the year - - - - 245,642 245,642
BALANCES AS OF DECEMBER 31, 1996 87,277 472,661 46,202 969,054 245,642 1,820,836
Balances as of December 31, 1996
(thousands of US $) (1) 57,457 311,166 30,416 637,955 161,713 1,198,707
(1) Exchange rate: US $ 1 = Lire 1,519 as of December 31, 1996.
The accompanying notes to consolidated financial statements are an integral part of these consolidated statements.

Statement of changes in minority interests
for the year ended December 31, 1996
(in millions of Lire)
Capital and Net Total
reserves income
BALANCES AS OF DECEMBER 31, 1995 36,682 2,181 38,863
Allocation of 1995 net income 2,181 (2,181) -
Capital stock increase 156 - 156
Purchase of equity investments (1,825) - (1,825)
Disposal of equity investments and companies in liquidation (11,245) - (11,245)
Deconsolidation of companies (587) - (587)
Dividends distributed (4,812) - (4,812)
Translation differences (834) - (834)
Net income for the year - 4,887 4,887
BALANCES AS OF DECEMBER 31, 1996 19,716 4,887 24,603

Statements of consolidated cash flows for the years ended
December 31, 1994, 1995 and 1996 (in millions of Lire) (Thousands
Cash flows from operating activities
of US $) (1)
1994 1995 1996 1996
Income before minority interests 207,189 222,436 250,529 164,930
Depreciation and amortization 95,612 100,989 94,912 62,483
Amortization of deferred charges on long-term loans 1,832 2,033 4,596 3,026
Provision for collection losses and other non-cash charges 82,537 84,615 103,616 68,213
Provision/(utilization) of exchange fluctuations reserve (7,400) (4,139) 9,137 6,015
Extraordinary provision for contingencies - 25,398 19,236 12,664
Provision for income taxes 150,554 188,659 206,638 136,035
Losses (gains) on disposal of assets, investments, net 4,579 13,877 7,695 5,066
Payment of termination indemnities and use of other reserves (9,271) (19,547) (28,523) (18,777)
Self-financing 525,632 614,321 667,836 439,655
Payment of taxes (250,458) (149,553) (175,755) (115,704)
Increase in accounts receivable (100,768) (106,688) (112,045) (73,762)
(Increase) decrease in other operating receivables (69,621) 28,301 (9,450) (6,221)
(Increase) decrease in inventories (47,988) (17,202) 79,169 52,119
(Decrease) increase in accounts payable (18,338) 13,670 22,286 14,671
(Decrease) increase in other operating payables and accruals 37,101 (14,006) (12,908) (8,498)
Increase in operating capital (199,614) (95,925) (32,948) (21,691)
Net cash flows from operating activities 75,560 368,843 459,133 302,260
Cash flows from investing activities
Purchase of new consolidated subsidiaries (21,701) (17,994) (16,926) (11,143)
Purchase of tangible fixed assets (108,952) (120,605) (81,061) (53,365)
Investment in intangible fixed assets (32,580) (16,068) (29,788) (19,610)
Sales of tangible fixed assets 24,344 26,381 30,191 19,876
Disposal of intangible fixed assets 1,754 650 4,530 2,982
Net change in investment-related receivables and payables (2,512) 660 1,842 1,213
Net cash used in investing activities (139,647) (126,976) (91,212) (60,047)
Cash flows from other investing activities
Purchase of investments (358) (8,318) (3,429) (2,257)
Purchase of investments to be consolidated (29,613) (11,269) (18,781) (12,364)
Sales of investments 24,463 7,793 3,987 2,624
(Increase) decrease in other financial assets (6,614) (1,464) 19,610 12,910
Net cash used in other investing activities (12,122) (13,258) 1,387 913
Payment of dividends (80,200) (75,719) (78,997) (52,006)
Net financing (requirement) surplus (156,409) 152,890 290,311 191,120
(1) Exchange rate: US $ 1 = Lire 1,519 as of December 31, 1996.

Cash flows from financing activities
(in millions of Lire) (Thousands
of US $) (1)
1994 1995 1996 1996
Change in stockholders' equity 300,767 4,900 1,384 911
Change in short-term borrowing (158,270) 99,378 253,564 166,928
Proceeds from issuance of long-term debt 56,422 52,703 36,498 24,028
Repayment of long-term debt (147,932) (75,937) (358,931) (236,294)
Change in securities held as fixed assets (133,784) (1,069) 58,301 38,381
Increase in other financial assets (2,588) (11,361) (4,933) (3,248)
Decrease in other financial assets 2,871 17,854 12,017 7,911
Assets leased to third parties 77,006 156 174 115
Decrease in lease financing (6,340) 1,883 2,261 1,488
Net cash provided (used) by financing activities (11,848) 88,507 335 220
Effect of translation adjustments (1,510) (15,217) 40,978 26,977
Net increase (decrease) in cash and cash equivalents (2) (169,767) 226,180 331,624 218,317
Cash and cash equivalents of newly acquired and disposed
of subsidiaries, net (5,442) (5,768) (4,876) (3,210)
Effect of translation adjustment on cash and cash equivalents 5,419 12,257 (39,362) (25,913)
Cash and cash equivalents at the beginning of the year 813,065 643,275 875,944 576,659
Cash and cash equivalents at the end of the year 643,275 875,944 1,163,330 765,853
Supplemental disclusures of cash flow information:
Cash paid during the year for interest expense 234,492 156,156 183,590 120,862
The "Payment of taxes" and "Change in other operating receivables" captions are stated net of tax credits totaling Lire 60,855
million, which were transferred within the Group in order to reduce the payment of outstanding taxes and advances.
(1) Exchange rate: US $ 1 = Lire 1,519 as of December 31, 1996.
(2) Cash and cash equivalents include liquid funds, other securities and other financial receivables considered financial assets
not held as fixed assets.
The accompanying notes to consolidated financial statements are an integral part of these consolidated statements.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
AS OF DECEMBER 31, 1995 AND 1996
The consolidated financial statements have been prepared in conformity with Chapter III of
Decree 127/1991 of April 9, 1991, which implements the EC VII Directive. The notes to the consolidated
financial statements explain, analyze and, in some cases, supplement the data reported on the face of
the financial statements and include information required by article 38 and other provisions of
Decree 127/1991. Additional information is also provided in order to present a true and fair view of the
financial and operating position of the Group, even where this is not required by specific legislation.
In order to assist the reader of the financial statements in understanding the Group’s financial
performance during the three year period ended December 31, 1996, the Group has presented in
appendix 3 the consolidated statements of income for each of the three years in the period ended
December 31, 1996 and in appendix 2 the consolidated balance sheets as of December 31, 1995 and
1996 in a format consistent with an international format.
Unless otherwise specified, amounts indicated in these notes are expressed in millions of Italian Lire.
1. Activities of the Group
Benetton Group S.p.A. the Parent Company, and its subsidiary companies (collectively the "Group")
primarily manufacture and market fashion apparel in wool, cotton and woven fabrics.
The manufacture of finished articles from raw materials is primarily undertaken in Italy, partly within the
Group and partly using subcontractors, whereas marketing is carried out through an extensive sales
network both in Italy and abroad. This network consists of sales representatives and specialty stores that
are almost exclusively independently owned.
2. Form and content of the consolidated financial statements
The consolidated financial statements and related notes have been translated into English from the
original version in Italian. They have been prepared in accordance with the accounting principles
established by the Italian Accounting Profession, which may differ in certain respects from the principles
generally accepted in other countries.
The consolidated financial statements of the Group include the financial statements as of
December 31, 1996 of Benetton Group S.p.A. and all the Italian and foreign companies in which the
parent company holds, directly or indirectly, the majority of the voting rights. They also include the
accounts of some 50%-owned companies over which the Group exercises a dominant influence. The
companies included within the scope of consolidation are listed in appendix 1.
The financial statements utilized for the consolidation are those prepared for approval at the
stockholders' meetings. The financial statements of foreign subsidiaries have been reclassified, where
necessary, for consistency with the format adopted by the parent company.
The consolidated financial statements have been adjusted to comply with the accounting policies laid
down by Decree 127/1991, those recommended by the Italian Accounting Profession and, in the
absence thereof, by those established by the International Accounting Standards Committee (I.A.S.C.),
consistently applied throughout the Group. In addition, the financial statements of minor subsidiaries
located in highly inflationary countries are adjusted to reflect changes in the purchasing power of the
local currencies.

The significant differences between the Group's policies and accounting principles generally accepted
in the United States, along with the related adjustments to consolidated net income and equity, are
described in Note 32.
A reconciliation between stockholders' equity and net income as reported in the statutory financial
statements of the parent company, Benetton Group S.p.A., and the consolidated stockholders' equity
and net income of the Group is presented within the note on stockholders' equity (notes 19 and 20).
3. Principles of consolidation
The most significant consolidation principles adopted in the preparation of the consolidated financial
statements are as follows:
(a) The assets and liabilities of subsidiary companies are consolidated on a line-by-line basis and the
carrying value of investments held by the parent company and other consolidated subsidiaries is
eliminated against the related stockholders' equity accounts.
(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 of the subsidiary. Any excess arising upon consolidation is accounted for as a
"consolidation adjustment" and is classified as "Goodwill and consolidation differences". Negative
differences are classified within the caption "Reserve for risks and charges arising on consolidation" if
they reflect estimated future losses, otherwise, they are classified as part of the "Consolidation
reserve" within stockholders' equity. Goodwill is amortized over its estimated useful life.
(c) Intercompany receivables and payables, costs and expenses, and all significant transactions
between consolidated companies, including the intra-Group payment of dividends, are eliminated.
Unrealized intercompany profits and gains and losses arising from transactions between Group
companies are also eliminated.
(d) The minority stockholders' interests in the net assets and results for the year of consolidated
subsidiaries is classified separately as "Minority interests" in the consolidated balance sheet and as
“Income/(losses) attributable to minority interests” in the consolidated statement of income.
(e) The financial statements of foreign subsidiaries, including those operating in countries with hyperinflationary
economies, are translated into Italian Lire using year-end exchange rates for balance
sheet items and average exchange rates for the year for statement of income items. Differences
arising from the translation into Lire of foreign currency financial statements are reflected directly in
consolidated stockholders' equity.
The value of the stockholders' equity of foreign subsidiaries is hedged against exchange risks, mainly
through the forward sale of currency. Any exchange differences arising from such capital hedging
operations are classified as "Translation differences" and therefore adjust consolidated equity.
Since 1994 the difference between the spot and forward exchange rates relating to these capital
hedges is recorded as part of "Other financial income" within the statement of income (see note 27).

4. Accounting policies
The accounting policies adopted in the preparation of the consolidated financial statements are
consistent with those applied by the Parent Company, as summarized below:
Intangible fixed assets
These are recorded at purchase cost, including related charges.
Trademarks are stated at registration or purchase cost, as revalued as of December 31, 1983, in
accordance with the provisions of Law 72 of March 19, 1983. The related revaluation surplus was
credited to a specific stockholders' equity reserve. The amount is stated net of accumulated
amortization, which is generally provided over twenty years.
Intangible fixed assets are written down in cases where, regardless of the amortization accumulated,
there is a permanent loss in value. The value of such assets is reinstated in future accounting periods
should the reasons for such writedowns no longer apply.
Costs deferred in connection with expansion projects and other deferred charges are amortized on a
straight-line basis over the period they are expected to benefit, which is generally five years. Patents are
amortized over three years.
Goodwill and consolidation differences are amortized over ten years.
Tangible fixed assets
These are recorded at purchase or construction cost, as adjusted in certain circumstances through the
application of specific monetary revaluation laws. Cost includes related charges and direct or indirect
expenses reasonably attributable to the individual assets. Tangible fixed assets transferred within the
Group as of December 31, 1980, were recorded at appraised values.
The principal Italian Group companies restated the majority of their assets as of December 31, 1983 in a
monetary revaluation in accordance with the provisions of Law 72 of March 19, 1983. These companies
were also obliged by Law 413 of December 30, 1991 to revalue their real estate holdings.
In 1996, a Spanish subsidiary restated its tangible fixed assets by Lire 1,210 million in a monetary
revaluation in accordance with local legislation (Royal Decree 2607/96).
Depreciation is computed on a straight-line basis using rates considered to reflect the estimated useful
lives of tangible fixed assets. Half the annual depreciation rates are charged in the year the assets enter
service.
Tangible fixed assets are written down in cases where, regardless of the depreciation accumulated,
there is a permanent loss in value. The value of such assets is reinstated in future accounting periods
should the reasons for such writedowns no longer apply.
The principal depreciation rates applied by consolidated companies are as follows:
Buildings 3%
Plant and machinery 8% - 17.5%
Industrial and commercial equipment 25%
Furniture, furnishings and electronic
machines
12% - 20%
Vehicles 20% - 25%
Aircraft 5%
Ordinary maintenance costs are expensed as incurred. Costs that significantly improve or extend the
life of an asset are capitalized and depreciated over its life.
Assets acquired under finance leases are stated at their fair value at the start of the lease and the
capital portion of the lease installments is recorded as a liability. Such assets are depreciated over their
economic useful lives on the same basis as other tangible fixed assets.

Financial fixed assets
Investments in subsidiaries not consolidated on a line-by-line basis, together with those in associated
companies, are accounted for on an equity basis, as adjusted, where significant, to eliminate the
Group's share of unrealized intercompany profits. The difference between the cost and the net equity
of investments at the time they were acquired is allocated on the basis described in paragraph (b) of
the consolidation principles. Equity investments of less than 20% in other companies are stated at cost,
as written down where there is a permanent loss in value.
The original value of these investments is reinstated in future accounting periods should the reasons for
such writedowns no longer apply.
Assets leased to third parties are recorded using lease accounting methodology. This involves
eliminating the related fixed asset and accumulated depreciation accounts and recording the
outstanding capital element of lease contracts as an asset. The excess of lease charges over the cost of
the related asset is recognized as interest income on an accrual basis.
Receivables included among financial fixed assets are stated at their estimated realizable value.
Other securities held as financial fixed assets are stated at cost, as written down where there is a
permanent loss in value, taking into account any accrued issue premiums and discounts.
Inventories
Inventories are stated at the lower of purchase or manufacturing cost, generally determined on a
weighted average cost basis, or their market or net realizable value.
Manufacturing cost includes raw materials and all direct or indirect production-related expenses.
The calculation of estimated realizable value includes any manufacturing costs to be incurred and
direct selling expenses. Obsolete and slow-moving inventories are written down to their useful or net
realizable value.
Accounts receivable and payable
Accounts receivable and payable are stated at face value. Receivables are recorded at their
estimated realizable value, net of appropriate allowances for doubtful accounts determined on a
prudent basis.
Other securities not held as fixed assets
Such securities are stated at the lower of purchase cost or market value at the balance sheet date.
The original value of these investments is reinstated in future accounting periods should the reasons for
such writedowns no longer apply.
Securities acquired subject to resale commitments represent the temporary investment of funds and are
classified among other financial receivables and recorded at cost, which includes accrued interest. The
difference between the spot and forward prices of such securities is accounted for as interest income
and recognized as income on an accruals basis.
Accruals and deferrals
These are recorded to match costs and revenues in the accounting periods to which they relate.
Reserves for risks and charges
These reserves cover known or likely losses, the timing and amount of which cannot be determined at
year-end. Provisions reflect the best estimate of losses to be incurred based on the information
available.
Use of estimates
The preparation of financial statements in conformity with generally accepted accounting principles
requires management to make estimates and assumptions that affect the reported amounts of assets
and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements
and the reported amounts of revenues and expenses during the reporting period. Actual results could
differ from those estimates.

Reserve for employee termination indemnities
This reserve represents the liability of Italian companies within the Group for indemnities payable upon
termination of employment, accrued in accordance with labor laws and labor agreements in force.
This liability is subject to annual revaluation using officially-established indices.
Transactions in foreign currencies
Transactions in foreign currencies are recorded using the exchange rates in effect at the transaction
dates. Exchange gains or losses realized during the year are included in the consolidated statement of
income. Foreign currency receivables and payables not hedged are reviewed using year-end
exchange rates. A resulting net loss is credited to the exchange fluctuation reserve, which is classified
among reserves for risks and charges-other, and debited to other financial expense in the consolidated
statement of income. No adjustment is recorded for resulting net gains. Hedged receivables are not
restated if no further exchange gains or losses would arise on collection.
Income and expense relating to forward exchange contracts that hedge identifiable foreign currency
assets, liabilities or contractual obligations are reflected in the consolidated statement of income upon
expiration.
Income relating to forward exchange contracts that were subsequently renegotiated are recorded in
the consolidated statement of income in the year in which the renegotiation occured (Note 11).
The value of forward contracts not hedging identifiable foreign currency assets, liabilities or contractual
obligations are reviewed at year-end with reference to the difference between the forward exchange
rates applicable to the contract at the balance sheet date and the contracted forward rates. Any net
losses identified are charged to the consolidated statement of income.
Refer to Note 27 for income and expense amounts recorded in the consolidated statement of income
related to the above transactions.
Fair value of financial instruments
Financial instruments consist primarily of investments in cash, marketable securities, accounts
receivable, accounts payable, debt obligations, forward exchange contracts, interest rate swap
agreements and forward rate agreements.
The fair value of debt obligations was estimated by discounting cash flows using interest rates currently
available. The carrying amounts and estimated fair value of these obligations at December 31, 1996
were Lire 370,357 million and Lire 375,267 million, respectively.
Fair value of forward exchange contracts are discussed in Note 24. The interest rate swap agreements
and forward rate agreements expire within three months and therefore their carrying value
approximates fair value. The carrying value of remaining financial instruments approximates fair value
due to the short-term and/or variable rate nature of these instruments.
Revenue recognition
Revenues from product sales are recognized at the time of shipment to the customer, which represents
the moment when ownership passes.
Expense recognition
Expenses are recorded in accordance with the matching principle. Advertising costs are charged to
income in the year in which they are incurred.

Income taxes
Current income taxes are provided by each consolidated company on the basis of a reasonable
estimate of their tax liability for the year, in accordance with applicable local regulations.
The consolidated financial statements also include a provision for deferred taxes principally arising from
the reversal of excess depreciation, from lease accounting adjustments and from gains on the disposal
of tangible fixed assets. Deferred taxes are provided net of tax assets deriving from tax payments that
will be recoverable when timing differences reverse and from consolidation adjustments. Deferred taxes
are also provided on certain equity reserves in consideration of possible future dividend distributions
within the Group, given the liquidity available.
Provision is not made for possible income taxes on monetary revalutation reserves which are
permanently reinvested or for the potential deferred tax asset related to tax loss carry forwards.
Cash flows
The statement of consolidated cash flows provides information by type of flow and activity. Readily
marketable securities are treated as cash equivalents. This statement has been prepared in
accordance with the accounting principles discussed in Note 2. The Group does not believe any
material differences exist between this format and a format in accordance with United States Generally
Accepted Accounting Principles.
Financial statements and information expressed in US dollars
The financial statements are presented in Italian Lire and, for 1996, are also presented in US dollars solely
for the convenience of the reader, at the year end exchange rate of US $ 1 = Lire 1,519, which was the
noon buying rate of the US Federal Reserve Bank as of December 31, 1996, the last business day of the
year.
No representation is made that Lire amounts have been, could have been, or could be converted into
US dollars at that or any other rate.

OTHER INFORMATION
5. Purchase of subsidiary companies and disposal of associated companies
1994
Benetton International N.V. acquired for £.11,000,000 (approximately Lire 28,000 million) full control over
Benetton Engineering Ltd. from a subsidiary of Edizione Holding S.p.A.. The acquired company owns a
50% stake in TWR Group Ltd., which has been treated as a subsidiary since the Benetton Group controls
the majority of voting rights at ordinary meetings. TWR Group Ltd. principally designs and develops
prototype racing cars.
Among Group companies in Italy, the interest in Azimut S.p.A., a company involved in the shirt and
blouse production and distribution activities, was increased from 50% to 75%. The same reorganization
involved the disposal to third parties of the Group’s interests (50% in both cases) in Altana Uno S.p.A.
and Columbia S.p.A., non-operating companies whose shirt-sector activities had previously been
transferred to Azimut S.p.A..
Texcontrol S.p.A. added to its manufacturing capacity by acquiring 100% of F.T. Srl, based in Follina
(Treviso), a company specializing in the dyeing of wool fabrics. Two newly-formed wholly-owned
subsidiaries also commenced operations under business rental agreements: Finitex S.p.A. specializes in
the dyeing and printing of woven fabrics, and Tessuti di Pordenone S.p.A. is active in weaving.
Galli Filati S.p.A., which manufactures and distributes carded woolen yarns, expanded by acquiring a
plant in Caserta that specializes in the processing of this type of yarn.
The Group increased from 50% to 90% its investment in Benetton Group Japan K.K..
1995
In pursuit of increasing efficiency among the manufacturing subsidiaries of the Group, Manifatture
Stefani S.p.A. acquired from Texcontrol S.p.A. 100% of Finitex S.p.A. and 100% of Tessuti di Pordenone
S.p.A..
Maglificio Fontane S.p.A., now 75% owned by Benetton Group, acquired a 81% controlling interest in
Maglifici Re.Mo. S.p.A. and took over this company’s activities in the processing of woolen knitwear.
Maglifici Re.Mo. S.p.A. has since ceased operating.
Benetton Group increased its 75% holding in Azimut S.p.A. to 100%, via the purchase from third parties of
the remaining shares, and started direct production and distribution of shirts and blouses.
Galli Filati S.p.A., completed the acquisition of 100% of the capital stock of Filma S.p.A., based in
Valdagno (Vicenza), thereby adding the manufacture and processing of worsted woolen yarns to its
range of activities.
In the context of the program to strengthen and diversify the wool sector production cycle, Galli
Filati S.p.A. also purchased a 50%-interest in the capital stock of Spiller S.p.A., based in Schio (Vicenza),
which is active in raw materials and in wool and mixed-fiber fabrics.
The Group's international development plans have also targeted new geographic areas, particularly
Tunisia, where Benetton Tunisia S.a.r.l., a wholly-owned subsidiary, has begun the production of an
initially limited range of products, and Oporto (Portugal), where Benetton Lda., another wholly-owned
subsidiary, has been formed for manufacturing and distribution purposes.
An additional 50% of the capital stock of United Colors of Benetton do Brasil S.A. was acquired in
December 1995 with a view to strengthen management control of the Group's production and
marketing structure in Brazil.

Benetton International N.V. has sold its holdings in Benetton Bosphorus Casual Wear A.S. (50%-interest)
and in Benetton Sweden A.B..
The Group also sold its interests in Benetton Chu-Shikoku Co. Ltd., Kyushu Benetton Co. Ltd., Tohoku
Benetton Co. Ltd. and Benetton Chubu Co. Ltd., all marketing companies, as part of the corporate
restructuring taking place in Japan.
1996
In early 1996 the Group increased from 90% to 100% its investment in Benetton Group Japan K.K..
Developments in the continuing process of reorganizing the Group structure included transferring the
interest in Calzaturificio di Varese S.p.A., a company quoted on the over-the-counter market, to Benfin
S.p.A., a wholly-owned subsidiary of Benetton Group S.p.A.. This interest was increased during the first
semester of 1996 from 63.08% to 85.92%, through the purchase of a (22.84%) holding from Edizione
Holding S.p.A.. Following receipt of the necessary official approvals, Benfin S.p.A. launched a Public
Offer to purchase the remaining 14.08% of the subsidiary's capital stock. The Company increased its
interest to 96.988%, giving rise to an obligatory "residual" Public Offer in 1997, after which, the interest has
been increased to 98.539%. As a result Calzaturificio di Varese S.p.A. will be cancelled from stock's
official quotation.
Azimut S.p.A., in 1996 has been merged into the Parent Company.
In addition, attention is drawn to the following:
– start of operations by Benetton Gesfin S.p.A., as part of the reorganization of financial services
provided to Group companies;
– sale to third parties by Benetton Group Japan K.K. of 50% and 60% interests in, respectively, K.K. Via
Veneto (formerly Benetton Kanto K.K.) and Benetton Kansai K.K.;
– sale to third parties by United Colors of Benetton do Brasil S.A. of its entire, 100% investment in Unirio
Comercio De Roupas Ltda.;
– liquidation of United Agency K.K. and Benetton (Hong Kong) Ltd..
Benetton International N.V. entered into an agreement to sell Benetton Engineering Ltd. in December
1996. The sale is subject to receipt by the company, from the buyer, of the purchase price.

COMMENTS ON THE PRINCIPAL ASSET CAPTIONS
(in millions of Lire)
FIXED ASSETS
6. Intangible fixed assets
This caption consists of the following:
12-31-1995 12-31-1996
Gross Net Gross Net
Start-up and expansion expenses 30,752 17,349 27,940 11,458
Research and development expenses 1,413 867 1,333 819
Industrial patents and intellectual
property rights
Licenses, trademarks and similar rights 22,149 11,289 22,486 10,417
Goodwill 1,016 622 2,435 1,875
Consolidation differences 20,274 17,542 24,505 19,641
Total goodwill and consolidation
differences
Assets in course of formation and
advance payments
Expenses related to bond issues
and loans
Costs for the purchase and
development of software
1,505
21,290
3,340
11,671
12,623
1,021
18,164
3,340
6,903
5,593
2,615
26,940
3,101
7,322
13,023
1,408
21,516
Other 23,926 10,130 29,058 22,020
Total other intangible fixed assets
48,220 22,626
3,101
2,751
7,018
49,403 31,789
Total 128,669 74,656 133,818 80,508
Start-up and expansion expenses relate to capital stock increase costs of approximately Lire 7,600
million (Lire 10,000 million as of December 31, 1995). The residual balance principally relates to
corporate reorganization costs, as well as expenses incurred in prior years to launch the "Fabrica"
project.
Research and development expenses reflect the capitalization of costs incurred for the development of
new products.
As indicated above, the parent company revalued the original cost of a trademark during 1983, as
allowed by Law 72 of March 19, 1983. The monetary revaluation, Lire 4,430 million, was allocated to the
Group's principal brandname.
Consolidation differences amounting to Lire 19,641 million reflect the residual goodwill arising on the
consolidation of the investments in Calzaturificio di Varese S.p.A.; Azimut S.p.A.; Filma S.p.A., owned by
Galli Filati S.p.A.; Spiller S.p.A., owned by Stefani S.p.A.; Benetton Group Japan K.K.; Benetton
Engineering Ltd.; Benetton Retail (1988) Ltd., and United Colors of Benetton do Brasil S.A.. Consolidation
differences are amortized over ten years, which is considered appropriate since this is consistent with
the accounting policies currently applied in the sector in which Group companies operate.
"Other" mainly comprises leasehold improvements.

7. Tangible fixed assets
Tangible fixed assets, amounting to Lire 592,266 million, are stated net of accumulated depreciation
totaling Lire 519,285 million.
Additions, totaling Lire 81,061 million, mainly concern:
– plant and machinery purchased by Italian manufacturing companies to improve the efficiency of
their production processes;
– completion of site works at the Castrette di Villorba industrial complex;
– better layout of the dyeing departments at Castrette, with the installation of highly sophisticated
machinery that has improved workflows.
Sales and retirements, Lire 26,955 million, concern:
– sale of buildings and plant at the Camisano Vicentino and Resana factories;
– replacement of machinery used by Italian and French manufacturing companies with more
technologically-advanced units.
The depreciation charge for the year was Lire 76,451 million.
The unamortized revaluations of tangible fixed assets still held as of December 31, 1996, recorded in
accordance with Laws 72 of March 19, 1983, and 413 of December 30, 1991, net of retirements and
disposals, amount to Lire 2,225 million and Lire 23,037 million, respectively. In 1996, a Spanish subsidiary
restated its tangible fixed assets by Lire 1,210 million in a monetary revaluation in accordance with local
legislation (Royal Decree 2607/96).
Certain of the Group's tangible fixed assets are pledged as security for long-term loans from banks and
other providers of finance. The outstanding balance of such loans is Lire 89,360 million as of
December 31, 1996. Other tangible fixed assets are subject to reservation of title clauses that secure
residual loans totaling Lire 1,811 million.
Other assets include the following acquired under finance leases:
12-31-1995 12-31-1996
Real estate 9,950 13,341
Plant and machinery 11,372 12,590
Other assets 407 314
Less: accumulated depreciation (3,219) (4,180)
Total 18,510 22,065
Outstanding capital payments due to lessors as of December 31, 1996, classified as amounts due to
leasing companies, are reported in the Note 22 "Due to other providers of finance".
The Group has not significant operating leases.

8. Financial fixed assets
Equity investments
As of the balance sheet date, equity investments not consolidated on a line-by-line basis are as follows:
Subsidiary companies:
12-31-1995 12-31-1996
% Group
ownership
Book value % Group
ownership
Book value
- T.W.R. Group Ltd. 50% 36,399 50% 38,260
- Other minor investments - 3,592 - 838
Associated companies:
- Texmantova S.p.A. 21.73% 4,253 - -
- Other minor investments - - - 1,653
Other companies - 2,907 - 2,490
Total 47,151 43,241
Investments in subsidiary companies, amounting to Lire 39,098 million, include Lire 38,260 million relating
to T.W.R. Group Ltd., which is carried on an equity basis since it operates in a sector dissimilar to that of
the rest of the Group. The inclusion of this company within the scope of the consolidation would have
distorted the consolidated financial statements to the point where they would not have provided a true
and fair view of the financial and operating position of the Group. The balance, Lire 838 million, relates
to other minor subsidiary companies, mainly foreign trading companies, that are carried at cost since
they are either not yet operating or are in liquidation at the balance sheet date.
Benetton International N.V. entered into an agreement to sell Benetton Engineering Ltd. in December
1996. The sale is subject to receipt by the company, from the buyer, of the purchase price.
This subsidiary, which owns 50% of T.W.R. Group Ltd., is wholly owned by Benetton International N.V. The
agreed sale price, £stg. 16,000,000, will generate a gain of £stg. 858,000 with respect to the original cost
incurred, plus related interest at market rates.
Other investments primarily represent minority interests in Japanese retail companies.
Equity investments are analyzed in detail in an attachment.
The 21.73% interest in Texmantova S.p.A. was judged no longer relevant to Group's diversification
strategy and was accordingly sold.
Financial receivables
Financial receivables consist of the following:
Financial receivables:
Balance Maturities (in years) Balance
12-31-1995 Within 1 1 to 5 Beyond 5 12-31-1996
- due within 12 months 10,019 4,170 - - 4,170
- due beyond 12 months 3,355 - 1,629 15 1,644
Assets leased to third parties:
- due within 12 months 173 1,053 - - 1,053
- due beyond 12 months 1,054 - - - -
Guarantee deposits 29,753 - - 13,332 13,332
Total 44,354 5,223 1,629 13,347 20,199
Financial receivables earn interest at market rates.

Assets leased to third parties
This caption relates to an industrial building leased to United Optical S.p.A..
As is customary, the lessee is responsible for maintenance, insurance and other operating costs.
The capital in the above leases is determined as follows:
Remaining lease payments, net of
12-31-1995 12-31-1996
residual purchase option 408 96
Value of residual purchase option 1,000 1,000
Less: unearned interest income (181) (43)
Total 1,227 1,053
The entire capital financed, Lire 1,053 million, will be collected when the lease contract expires in 1997.
Guarantee deposits
Guarantee deposits, Lire 13,332 million, include Lire 10,982 million in connection with the lease of real
estate used by Japanese subsidiaries.
Other securities held as financial fixed assets
This caption comprises:
Long-term Government bonds (BTP)
maturing in 1998 at 10.5%
Treasury Certificates cum Option (CTO)
maturing in 1997 at 12.5% p.a.
12-31-1995 12-31-1996
Book value Face value Book value Face value
80,012
50,000
80,000
50,000
50,490
20,000
50,000
20,000
Other securities 766 765 552 552
Total 130,778 130,765 71,042 70,552
These securities mainly represent the investment of liquidity by Benetton International N.V..
The long-term bonds (B.T.P.) held at December 31, 1995, together with Treasury Certificates (CTO) with a
nominal value of Lire 30,000 million, were repaid on maturity during 1996. At the same time, the
company acquired long-term bonds (B.T.P.), maturing in 1998, with a nominal value of Lire 50,000
million.
These are stated at purchase cost, as adjusted by the accrued issue discount of Lire 305 million.
Other securities comprise bonds issued by public agencies and others.
Since these securities will be held until maturity, they are classified among financial fixed assets. Their
carrying value, taking into account any related hedging transactions (asset swaps), approximates their
market value.

CURRENT ASSETS
9. Inventories
Inventories, Lire 411,292 million (Lire 506,363 million as of December 31, 1995), recorded net of the
related inventory writedown reserve, consist of the following:
Raw materials, other materials and
consumables
Work in progress and semimanufactured
products
12-31-1995 12-31-1996
4,501 5,292
Finished goods 9,652 5,738
Total 15,453 12,980
The valuation of closing inventories at average cost is not appreciably different from their valuation at
current purchase cost.
10. Accounts receivable
Trade receivables
As of December 31, 1996, trade receivables amount to Lire 1,256,636 million, of which approximately
Lire 788,000 million are denominated in foreign currency (approximately Lire 821,900 million as of
December 31, 1995).
Open forward exchange contracts as of December 31, 1996 are used to hedge receivables totaling
Lire 349,550 million and firm orders worth Lire 393,184 million at year-end exchange rates.
Trade receivables also include Lire 139,733 million (Lire 148,280 million as of December 31, 1995) of bank
receipts and notes deposited with financial institutions for collection.
Additionally, this account includes approximately Lire 424,000 million relating to sales for the
spring/summer season. In accordance with normal conditions of sale, the payment terms for the above
amount commence from April 1997.
The allowance for doubtful accounts as of December 31, 1996 amounts to Lire 168,883 million
(Lire 169,935 million as of December 31, 1995).
A prudent assessment of the specific and generic collection risks associated with receivables
outstanding at year-end has resulted in suitable additional provisions to take account of the aging of
certain balances and the difficult economic conditions in a number of markets.
Lire 79,356 million was released from the allowance for doubtful accounts to cover losses during the
year, while provisions for 1996 amounted to Lire 78,304 million compared with Lire 60,839 million in 1995.
Amounts receivable from subsidiary and associated companies, Lire 1,501 million and Lire 3,604 million,
respectively, mainly relate to trade and financial receivables due from companies not consolidated on
a line-by-line basis.
Other receivables
As of December 31, 1996, other receivables include: VAT recoverable from the tax authorities in the
amount of Lire 36,703 million (Lire 48,222 million as of December 31, 1995); tax credits, in the amount of
Lire 16,257 million (Lire 68,377 million as of December 31, 1995); and other amounts due from the tax
authorities totalling Lire 8,790 million (Lire 24,128 million as of December 31, 1995).
1,300
1,950

11. Financial assets not held as fixed assets
Treasury shares
This caption relates to shares of the Company’s stock acquired during the year by Benetton Group
S.p.A., as resolved at the ordinary stockholders' meeting held on April 30, 1996. A total of 43,500 shares
were purchased during September and October 1996 for Lire 719 million. No similar transactions
occured in 1995.
Other securities
This caption comprises:
Long-term Government bonds (BTP), as of
December 31, 1996, maturing through 1998 and
1999, at interest rates between 8.5% and 10.5%
Consorzio di Credito per le Opere Pubbliche
bonds, as of December 31, 1996, maturing
through 1999 and 2002, at interest rates between
6.1% and 13.4%
European Investment Bank bonds in Italian Lire,
as of December 31, 1996, maturing in 2000 and
2002, at interest rates between 8.5% and 11.25%
IBRD bonds in Italian Lire, as of December 31,
1996, maturing through 1998 and 2002, at interest
rates between 10.4% and 11.63%
ENEL bonds, maturing in 2001 and 2002, at
interest rates of 11.7% and 10.63%
Italian State Railway bonds, maturing in 2000 and
2002, at interest rates of 7.25% and 8.05%
Treasury Certificates (CCT), as of December 31,
1996, maturing in 2001, at floating interest rates
French Treasury bills (BTAN), matured in 1996, at
an interest rate of 9%
12-31-1995 12-31-1996
Book value Face value Book value Face value
74,794
48,329
15,934
6,564
-
-
79,667
58,476
75,000
47,000
14,955
6,274
-
-
80,000
58,214
368,807
134,490
37,822
6,906
44,678
12,399
50,690
-
350,000
128,100
33,375
6,325
41,700
12,000
50,000
Other 6,317 6,279 3,508 3,508
Total 290,081 287,722 659,300 625,008
These securities have been written down by Lire 417 million to reflect their market value, determined on
the basis of average stockmarket prices for the month of December.
"Other" includes various securities, reflecting the temporary deployment of liquidity by subsidiary
companies.
Other financial receivables
This caption includes:
12-31-1995 12-31-1996
Short-term financing 117,244 4,399
Amounts due on repurchase agreements 10,000 -
Total 127,244 4,399
Short-term loans to employ liquidity and the repurchase agreements arranged at the end of 1995 were
closed out in January 1996. The amount outstanding as of December 31, 1996 reflects short-term
financing granted by subsidiary companies to third parties operating on behalf of the Group.
-

Differentials on forward transactions
During 1996, as in prior years, the parent company sold forward the proceeds of future sales in order to
optimize the management of exchange risk. In particular, forward contracts and other currency
hedges have been put in place with maturities in 1997 and 1998.
The value of these commitments, including the positions opened in 1995, is reflected among the
"Commitments, contingencies and memorandum accounts". Part of these contracts, totaling Lire 1,332
billion, were subsequently renegotiated and the related positive differentials amounting to Lire 68,759
million are recorded within "Other financial income". Lire 65,491 million of such gains will be collected in
1997 and Lire 3,268 million in 1998. The residual balance, Lire 6,244 million, reflects the differentials
emerging from similar positions opened in 1995, which will be collected in 1997. Such differentials, being
highly liquid, are classified among current assets.
12. Liquid funds
This caption consists of:
12-31-1995 12-31-1996
Current account deposits (Lire) 35,586 56,880
Current account deposits (foreign
currency)
157,262 151,504
Time deposits (Lire) 150,414 182,694
Time deposits (foreign currency) 86,805 93,992
Checks 28,011 13,148
Banknotes and coins 541 694
Total 458,619 498,912
Average interest rates reflect market returns for the various currencies concerned.
The balances as of December 31 reflect temporary high liquidity due to significant year-end receipts
from customers.
13. ACCRUED INCOME AND PREPAID EXPENSES
This caption is analyzed as follows:
Accrued income:
12-31-1995 12-31-1996
- financial income 33,900 36,525
- other income 3,041 527
Total accrued income
Prepaid expenses:
36,941 37,052
- financial charges 5,175 17,992
- rentals and leasing charges 4,028 4,104
- advertising and sponsorships 2,748 1,414
- other expenses 4,138 3,087
Total prepaid expenses
16,089 26,597
Total 53,030 63,649
Accrued financial income mainly relates to interest deriving from temporary investments.
Prepaid financial charges mainly relate to deferred charges arising from the valuation by Benetton
International N.V. of warrants attached to the Lire 200,000 million bond.

COMMENTS ON THE PRINCIPAL LIABILITY AND EQUITY CAPTIONS
(in millions of Lire)
STOCKHOLDERS' EQUITY
14. Capital stock
The capital stock of Benetton Group S.p.A. is represented by 174,553,725 issued and fully-paid ordinary
shares, par value Lire 500 each. The 1980 spinoff reserve and part of the monetary revaluation reserves
were capitalized by Benetton Group S.p.A. in prior years by the issue of stock dividends.
Capital stock, issued and fully-paid, amounts to Lire 87,276,862,500.
15. Additional paid-in capital
This caption is unchanged with respect to the prior year.
16. Revaluation reserves
This caption reflects the residual amount of revaluation reserves established in accordance with the
provisions of Law 72 of March 19, 1983, together with the net surplus following the revaluation in
accordance with Law 413/91 of December 30, 1991, and the monetary revaluation of tangible fixed
assets by a Spanish subsidiary, in accordance with local legislation (Royal Decree 2607/96).
Taxation has not been provided in respect of these reserves or of those capitalized, since, at this time,
the conditions which would give rise to such taxation are not expected to occur.
17. Legal reserve
This caption is unchanged with respect to the prior year.
18. Reserve for treasury shares held
This balance, Lire 719 million, derives from the reclassification pursuant to article 2357-ter of the Italian
Civil Code of part of the extraordinary reserve, following the 1996 acquisition of treasury shares during
the year by Benetton Group S.p.A..
19. Other reserves
As of December 31, 1996, this caption amounts to Lire 950,880 million (Lire 814,282 million as of
December 31, 1995) and includes:
– Lire 174,877 million relating to other reserves of the parent company (Lire 112,947 million as of
December 31, 1995);
– Lire 6,947 million relating to the cumulative translation adjustment generated by translating the foreign
currency financial statements of companies consolidated on a line-by-line basis;
– Lire 769,056 million representing the additional equity of consolidated companies with respect to their
carrying value, together with other consolidation entries.
The first of the schedules which follow reconciles the stockholders' equity and net income of Benetton
Group S.p.A. with the corresponding consolidated amounts; the second lists the equity in consolidated
subsidiaries attributable to minority stockholders.

Reconciliation of the stockholders' equity and net income of Benetton Group S.p.A. with the
corresponding consolidated amounts
Per Benetton Group S.p.A.
financial statements
Group share of net income and stockholders'
equity of consolidated subsidiaries, net of
their carrying value
Elimination of dividends paid by
consolidated subsidiaries
Allocation to fixed assets of the difference
between the purchase price and the equity
of new subsidiaries at the time they were
acquired and related depreciation
Reversal of accelerated depreciation
considering the useful lives of fixed assets
and of intercompany gains on disposal of
tangible fixed assets, net of the related tax
effect
Application of finance lease accounting,
taking account of the related tax effect
Recognition of deferred tax assets, net of
deferred taxes on any future distribution of
reserves from subsidiaries to the parent
company
Elimination of intercompany profits included
in the inventory of consolidated subsidiaries,
net of the related tax effect
Adjustment to reflect the equity value of
associated companies
Stockholders'
equity
865,839
633,701
12-31-1995 12-31-1996
-
94,369
11,441
10,219
62,489
(19,675)
(6,386)
Net
income
136,834
164,196
(64,255)
(12,041)
(367)
(1,801)
25
(7,345)
Stockholders’
equity
916,978
781,898
-
76,688
10,213
9,894
38,871
(12,512)
Net
income
125,325
344,181
(187,967)
(13,781)
(1,231)
(325)
(23,601)
Net effect of other consolidation entries 4,961 5,525 (3,725) (5,673)
Per Group's consolidated financial
statements
1,656,958
(516)
220,255
2,531
1,820,836
7,163
1,551
245,642

Minority interests
As of December 31, 1996 and 1995, minority interests in consolidated subsidiaries are as follows:
Italian subsidiaries:
12-31-1995 12-31-1996
Calzaturificio di Varese Group 36.92% 3.012%
Azimut Group 25% -
Socks & Accessories Benetton (S.A.B.) Group 50% 50%
Stefani Group 22% 22%
Texcontrol Group 18.125% 18.125%
Foreign subsidiaries:
Benetton Group Japan K.K. 10% -
K.K. Via Veneto 11.333% 50%
Beijing Benetton Fashion Co. Ltd. 50% -
Benetton China Japan K.K. 31% 9%
United Agency K.K. 14% -
Benetton Shoes Japan K.K. 50% 50%
Bene Moda K.K. 50% 50%
Benetton Egypt S.A.E. 50% 50%
DCM Benetton India Ltd. 50% 50%
Benetton Time S.A. 48% 48%
Colorben Comercio de Roupas Ltda. 50% -
Benetton Kansai K.K. 10% -

20. RESERVES FOR RISKS AND CHARGES
Taxation reserve
This reserve comprises:
12-31-1995 12-31-1996
Reserve for fiscal risks 7,650 7,782
Deferred taxes:
- Italian companies - 8,780
- Foreign companies - (8,636)
Total deferred taxes - 144
Total 7,650 7,926
The reserve for fiscal risks prudently covers contingent liabilities which may arise on the final settlement
of outstanding disputes with the tax authorities.
Deferred taxes represent differences between financial statement values and tax bases of assets and
liabilities. Deferred tax liabilities (assets) are as follows:
Tax effect of eliminating intercompany
profits
Tax effect of provisions and costs that will
become deductible in future accounting
periods
Deferred taxes arising on the reversal of
accelerated depreciation and the
application of finance lease accounting
Deferred taxes on gains taxable over a
number of accounting periods
Deferred taxes on the partial distribution of
the reserves of foreign subsidiaries to the
parent company
12-31-1995 12-31-1996
(17,113) (11,588)
(72,103)
43,673
19,331
4,400
(48,402)
43,824
18,061
Other 6,822 (6,151)
Total (14,990) 144
Taxes that would be due upon the distribution of reserves have not been provided for, since the
transactions which would determine such taxation are not expected to occur.
The tax benefit of substantial loss carry-forwards accumulated by certain Italian and foreign
consolidated companies will be recorded only when realized.
Other reserves
This caption is analyzed as follows:
4,400
12-31-1995 12-31-1996
Reserve for contingencies 32,532 44,346
Agents' leaving indemnity reserve 9,284 10,104
Exchange fluctuation reserve 40,335 1,079
Total 82,151 55,529
The reserve for contingencies has increased following the use of around Lire 7 billion and covers risks
which may arise from current legal disputes.
These include claims from German and French customers concerning, in particular, the effect of
Benetton advertising campaigns. The judgements handed down so far have been favorable to the
Group.

With regard to the dispute with Eco Swiss China Time Ltd. and Bulova Corp., ongoing legal procedures
seek to quash or overturn the arbitration award of June 23, 1995, which ordered Benetton
International N.V. to pay compensation of US$ 23.7 million to Eco Swiss China Time Ltd. and US$ 2.8
million to Bulova Corp., together with costs and the related interest.
Stockholders will remember that in 1986, Benetton International N.V., a subsidiary of Benetton
Group S.p.A., signed a license contract with Eco Swiss China Time Ltd. (the licensee) and Bulova Corp.
(colicensee) for the use of the Benetton trademark in the timepiece sector. The duration of the contract
was eight years and therefore expired in 1994.
Significant problems in the relationship with Eco Swiss China Time Ltd. began to emerge at the end of
1989, such that, in 1991, Benetton International N.V. sent that company a letter notifying its intention to
terminate the contract. The grounds indicated by Benetton were essentially that:
– royalties were not being paid, or were inadequate;
– the license was effectively being sublicensed to a subsidiary company of Eco Swiss China Time Ltd.;
– the company refused to accept its share of the audit fees incurred by Arthur Andersen;
– a number of group companies had gone bankrupt (including Eco Swiss S.p.A., the European
subholding of the Eco Swiss Group).
Eco Swiss China Time Ltd. and Bulova Corp. did not accept the termination of the contract and, on the
basis of an arbitration clause, took the case to arbitration in the Netherlands.
Benetton International N.V. presented two appeals against the award: the first, based on the merits of
the case, requesting that the award be quashed, and the second, raising objections based on legal
grounds, that the award be overturned.
Benetton International N.V., having previously applied for a stay of execution, obtained through the
courts a temporary stay in regard to Eco Swiss China Time Ltd., pending the decision of the competent
tribunals on the questions indicated above.
On March 21, 1997, the Supreme Court in The Hague accepted the petition by Benetton
International N.V. and remitted the case for consideration by the European Court of Justice in
Luxembourg. This decision has had favorable consequences for Benetton International N.V., since it also
resulted in the adjournment of proceedings before the Supreme Court in The Hague concerning a
request by Eco Swiss China Time Ltd. to lift the stay of execution on the payment of the arbitration
award.
This positive result encourages Benetton International N.V. in the defense of its case and interests. Any
risks which could emerge from the final outcome of proceedings are adequately covered by existing
provisions.
The agents' leaving indemnity reserve was created in prior years and is prudently maintained to reflect
contingencies associated with the interruption of agency contracts in certain circumstances covered
by Italian law. The provision of an additional Lire 9,282 million during 1996 follows utilizations during the
year.
The exchange fluctuation reserve reflects the net effect of adjusting the unhedged foreign currency
receivables and payables of Italian companies in the Group using year-end exchange rates.
21. RESERVE FOR EMPLOYEE TERMINATION INDEMNITIES
Movements in this reserve during the year were as follows:
Balance as of January 1, 1996 58,736
Provision for the year 13,752
Indemnities paid during the year (9,995)
Other movements 28
Balance as of December 31, 1996 62,521
"Other movements" reflect the opening balances of companies acquired during 1996.
Related provisions charged in expense in 1994 and 1995 were Lire 13,595 million and Lire 17,114 million
respectively.

22. ACCOUNTS PAYABLE
The composition of and significant changes in this account group during the year are set out below:
Bonds
These consist of the following:
– EuroLire bond, guaranteed by Benetton Group S.p.A., issued on July 29, 1993, by the Dutch subsidiary
Benetton International N.V., for Lire 200,000 million, bearing interest at 4.5% payable annually and
repayable in 1998. The bonds carried 2,520,000 warrants, each giving the holder the right to receive,
at the option of the Company’s management, either (i) one Ordinary Share which the Company
would have to purchase in the stock market, or (ii) an amount in Lire equal to the closing price of one
Ordinary Share on the Milan Stock Exchange (“MSE”). These warrants were exercised at their maturity,
on July 29, 1996.
? ?The net cost of servicing the warrants, about Lire 38,300 million, is recognized on an accrual basis that
reflects the accumulation of interest. The charge for 1996 amounts to about Lire 5,700 million.
– Bonds totaling LuxF 750 million (Lire 35,775 million at the December 31, 1996 exchange rate) were
issued in 1994, by the subsidiary company, Benetton Finance, at a unit price of LuxF 102.25, repayable
on August 4, 1999. Following an operation linked to an interest-rate swap, the bond bears interest at
floating rates which, at year-end, was 8.8%. The bond is guaranteed by Benetton Group S.p.A. and
listed on the Luxembourg Bourse.
– Bond issued on January 27, 1992, by Benetton España S.L. for Ptas 3,000,000,000, equivalent to
Lire 34,986 million at the December 31, 1996 exchange rate. This bond, bearing interest at an annual
rate of 12.10%, was repaid in full on January 27, 1997.
Convertible bonds
– Ten-year bond, issued in 1988 by a Stefani Group company for Lire 300 million. This bond is convertible
at par from January 1, 1998.
Due to banks
Amounts due to banks at the balance sheet date are classified as follows:
12-31-1995 12-31-1996
Current account overdrafts 50,029 34,030
Import/export advances 71,221 53,810
Lines of credit, advances on receivables
and other short-term loans 446,753 698,194
Long-term loans:
- due within 12 months 162,021 18,753
- due beyond 12 months 204,069 80,543
Total 934,093 885,330
Long-term loans include Lire 21,078 million and Lire 153,250 million due beyond five years as of
December 31, 1996 and 1995, respectively.
Amounts due to banks include around Lire 89,296 million secured by mortgages on tangible fixed assets.
Group companies had the following lines of credit available at the balance sheet date: Lire 204 billion
for current account overdrafts, and Lire 4,068 billion for advances on import/export transactions, the
negotiation of trade notes and other short-term loans.
The weighted-average interest rates at year end are as follows:
- Overdrafts 9.58%
- Import/export advances 5.62%
- Advances against receivables and bank receipts 8.31%
- Other short-term borrowings 7.00%

Long-term loans from banks outstanding as of December 31, 1996 and 1995 are as follows:
Loan from Efibanca (Ente Finanziario Interbancario S.p.A.) and the
European Investment Bank, disbursed in two tranches, at annual
interest rates of 8.375% and 7.755%, repayable in semiannual
installments in arrears through 2003, secured by mortgages on real
estate
Loan from Efibanca (Ente Finanziario Interbancario S.p.A.) at an
annual interest rate of 9.75%, repayable in full on April 9, 1997
Loans from Efibanca (Ente Finanziario Interbancario S.p.A.) at an
annual interest rate of 7.93%, repayable from 1998 through 2005,
secured by mortgages on real estate
Loans from Fondo Rotazione Iniziative Economiche at annual
interest rates between 6% and 8%, repayable in semiannual
installments through 2004, secured by mortgages on real estate
Loan from IMI (Istituto Mobiliare Italiano), at a floating interest rate
(7.40% at year end), repayable from 1999 through 2003, secured by
mortgages on real estate
12-31-1995 12-31-1996
50,000
10,000
-
5,079
-
47,274
10,000
5,500
9,746
21,000
Other Lire loans secured by mortgages on real estate 3,144 2,463
Multicurrency loan obtained from an international banking
syndicate for ECU 100,000,000, at floating interest rates that depend
on the currencies chosen, repaid on February 6, 1996
Loan from Istituto Bancario San Paolo di Torino S.p.A., London
branch, with the backing of leading international banks, at an
annual interest rate of 8.487%, repayable in semiannual installments
in arrears through 2003 but repaid early
Loans from Mediocredito delle Venezie at annual interest rates
between 8.25% and 11.5%, secured by mortgages on real estate
and liens on machinery, repaid in 1996
Loans from Friulia at annual interest rates between 7% and 10%,
repaid in 1996
Other foreign currency loans obtained by foreign consolidated
companies, secured by mortgages on real estate
152,191
136,282
Total long-term loans 366,090 99,296
Less - Current portion (162,021) (18,753)
Long-term loans, net of current portion 204,069 80,543
The non-current portions of these loans as of December 31, 1996 fall due as follows:
1998 12,106
1999 16,754
2000 15,349
2001 15,256
2002 and beyond 21,078
1,340
368
7,686
-
-
-
-
3,313
80,543

Due to other providers of finance
Amounts due at the balance sheet date to other providers of finance are analyzed below:
12-31-1995 12-31-1996
Commercial paper 361 -
Other short-term loans 307 4,002
Long-term loans:
- due within 12 months 7,096 5,647
- due beyond 12 months 5,549 2,605
Due to leasing companies:
- due within 12 months 3,146 3,720
- due beyond 12 months 10,970 12,657
Total 27,429 28,631
Long-term loans obtained from other providers of finance outstanding as of December 31, 1996 and
1995 are as follows:
Loans from suppliers of machinery, repayable in
installments over 24 months
12-31-1995 12-31-1996
11,601
Other Lire loans 417 417
Other foreign currency loans obtained by foreign
consolidated companies, secured by mortgages on real
estate
Total long-term loans 12,645 8,252
Less: Current portion (7,096) (5,647)
Long-term loans, net of current portion 5,549 2,605
The non-current portions of these loans as of December 31, 1996 fall due as follows:
1998 2,246
1999 33
2000 36
2001 39
2002 and beyond 251
The non-current portions of amounts due to leasing companies as of December 31, 1996 fall due as
follows:
1998 3,431
1999 3,117
2000 1,918
2001 1,437
2002 and beyond 2,754
627
7,771
64
2,605
12,657

Notes payable
These amount to Lire 6,763 million (Lire 11,830 million as of December 31, 1995) and include Lire 1,811
million of assisted loans under the Sabatini Law (Law 1329 of November 28, 1965) for the purchase of
tangible fixed assets (Lire 5,429 million as of December 31, 1995).
The maturities of such assisted loans as of December 31, 1996 are as follows:
1997 1,136
1998 543
1999 132
Due to subsidiary and associated companies
Amounts due to subsidiary and associated companies, Lire 2,523 million and Lire 205 million,
respectively, mainly comprise trade payables to companies not consolidated on a line-by-line basis.
Due to tax authorities
This caption is analyzed as follows:
Income taxes payable:
1,811
12-31-1995 12-31-1996
- Italian companies 57,670 15,337
- Foreign companies 12,627 12,345
Total income taxes payable 70,297 27,682
VAT payable 5,895 5,844
Other amounts due to tax authorities 22,382 15,456
Total 98,574 48,982
Income taxes payable are stated net of taxes paid in advance and all tax credits and withholdings
that would reduce the tax liability.
Due to social security and welfare institutions
This balance totals Lire 16,675 million (Lire 16.441 million as of December 31, 1995) and reflects both the
Group and employee contributions payable to these institutions at year-end.
Other payables
Other payables, totaling Lire 30,476 million, include Lire 19,415 million due to employees (Lire 20,175
million as of December 31, 1995) and other non-trading payables of Lire 11,061 million (Lire 13,661 million
as of December 31, 1995).
Accounts payable beyond five years are not included in this caption.

23. ACCRUED EXPENSES AND DEFERRED INCOME
This caption comprises the following:
12-31-1995 12-31-1996
Accrued expenses:
- financial charges 51,896 32,786
- other charges 3,432 1,914
Total accrued expenses 55,328 34,700
Deferred income:
- financial income 1,528 6,623
- sponsorships 9,337 17,003
- other income 1,230 467
Total deferred income 12,095 24,093
Premiums on bond issues 587 390
Total 68,010 59,183
Deferred financial income mainly reflects interest deriving from hedging transactions arranged by
Benetton International N.V. in connection with warrants attaching to the Lire bond discussed in note 22.
24. COMMITMENTS, CONTINGENCIES, MEMORANDUM ACCOUNTS
These mainly include currency to be sold or purchased forward.
This account group records the Lire value of commitments deriving from hedging contracts outstanding
at the balance sheet date.
In response to the volatility in exchange rates in the economic environment, the Group has
implemented a strategy to manage the exposure of exchange rate fluctuations on consolidated
operations.
The Group principally utilizes forward exchange contracts to fulfill this strategy only with substantial and
creditworthy multinational financial institutions. Therefore, there are no risks of counterparty
nonperformance nor the economic consequences of counterparty nonperformance associated with
these contracts.
For the most part, the caption reflects transactions opened to hedge foreign currency receivables, firm
orders and future sales. Some of those covering future sales were subsequently renegotiated by
entering opposite transactions. Other transactions were entered into to hedge the exchange risk on
capital invested by Group companies.
The estimated fair values and relating contract amounts of the Group’s financial instruments at
December 31, 1996 are as follows (in millions of lire):
Forward contracts: Fair value Contract amounts
Sell currency 3,462,987 3,744,604
Buy currency 1,912,543 2,050,226
Notional amount
Forward rate agreements 100,000
Interest rate swaps 328,751
Forward exchange contracts expire from January 1997 through May 1998. Included in forward
contracts, sell and buy currencies are respectively Lire 1,552,285 million and Lire 459,544 million of
contracts that hedge identifiable foreign currency assets, liabilities, contractual obligations or foreign
investments in subsidiary companies.
The interest rate swap agreements and forward rate agreements expire within three months and
therefore their carrying value approximates fair value.
Purchase commitments include contracts to acquire tangible fixed assets.
Sale commitments relate to a subsidiary company's contract to sell retail premises.

COMMENTS ON THE PRINCIPAL STATEMENT
OF INCOME CAPTIONS
(in millions of Lire )
25. VALUE OF PRODUCTION
Revenues from sales and services
Revenues from sales of products and services are detailed below:
1995 1996
Sales of core products 2,724,372 2,666,418
Miscellaneous sales 50,601 45,205
(Discounts) (7,388) (8,938)
Royalty income 13,642 15,124
Miscellaneous revenues 157,907 153,299
Total 2,939,134 2,871,108
Miscellaneous revenues mainly reflect manufacturing, advertising and promotion services rendered to
third parties.
Information by geographic area
The following information is provided by geographic area:
1994
Italy Europe The Other Inter- Consoli-
(excluding Americas countries company dated
Italy) (c) (d) transactions
Net sales and other revenues (a) 882,744 1,019,478 227,302 658,148 - 2,787,672
Operating income (a) 151,153 175,040 (19,318) 93,841 (11,976) 388,740
Identifiable assets (b) 2,291,554 810,637 163,094 271,880 - 3,537,165
1995
Net sales and other revenues (a) 1,011,727 1,034,665 208,459 684,283 - 2,939,134
Operating income (a) 195,568 182,529 (23,737) 112,833 (23,390) 443,803
Identifiable assets
(b)
1996
2,633,545 825,485 143,331 234,718 - 3,837,079
Net sales and other revenues (a) 1,064,201 1,004,175 192,450 610,282 - 2,871,108
Operating income (a) 214,529 110,184 (13,806) 85,060 5,714 401,681
Identifiable assets (b) 2,372,025 1,177,212 147,046 167,979 - 3,864,262
The appreciation of the Lira by more than 8% on average with respect to the principal operating
currencies had an adverse influence on 1996 Group revenues.
(a) Amounts principally determined by destination.
(b) By geographic location.
(c) Operating income in the Americas includes in operating results, Lire 2,409 million of loss in 1996 (Lire 15,961
million in 1995 and Lire 5,800 million in 1994) arising from Cosmetics Group; therefore it includes Lire 3,583 million of
loss in 1996 (Lire 6,486 million in 1995 and Lire 8,083 million in 1994), arising from subsidiaries operating in countries
with hyper-inflationary economies.
(d) Identifiable assets in the Americas include the financial assets of Benetton Finance N.V., located in the Dutch
Antilles, amounting to Lire 64,380 million as of December 31, 1996 (Lire 37,322 and 16,053 million respectively in
1995 and 1994).

Sales of core products, by business category
1995 1996
Clothing 2,259,385 2,191,326
Fabrics and yarns 193,059 226,621
Footwear 98,533 82,353
Accessories 158,887 149,105
Cosmetics 14,508 17,013
Total 2,724,372 2,666,418
Notwithstanding a rise in volume by about 4%, as discussed earlier, sales of clothing were adversely
influenced by the appreciation of the Lira against the principal export currencies.
Core product sales, by brand
1995 1996
Benetton 1,657,136 1,548,463
012, Zerotondo and 999 502,379 565,934
Sisley 321,555 308,709
Other sales 243,302 243,312
Total 2,724,372 2,666,418
26. PRODUCTION COSTS
Purchasing costs
This caption consists of the following:
1995 1996
Raw materials and finished goods 859,981 729,512
Other materials 30,025 29,383
Sundry purchases - advertising 2,212 3,295
Other purchases 34,261 29,921
(Discounts and rebates) (1,743) (1,674)
Total 924,736 790,437
Services received
This caption consists of the following:
1995 1996
Subcontracted work 572,893 590,555
Transport and distribution 56,969 46,797
Commission expense 114,994 132,629
Advertising and promotion 116,538 97,516
Other services 156,362 167,885
Total 1,017,756 1,035,382
The drop in advertising and promotion costs is due, in particular, to the discontinuance of advertising in
the cosmetics sector beginning in 1996.
Other services mainly include power costs, maintenance costs, consultancy and other fees, insurance
premiums and personnel travel expenses.

Payroll and related costs
The decrease in payroll and related costs, Lire 15,600 million, is mainly due to the reorganization of
production and commercial activities. This includes the closure of the Cosmetics group and the disposal
of a number of Japanese marketing companies that were no longer considered strategic.
Group personnel are listed below, by category:
1996
Average
for the year
Managerial personnel 98 109
Clerical personnel 2,120 2,134
Factory personnel 3,501 3,542
Part-time personnel 254 211
Total 5,973 5,996
The fall in the number of employees (6,018 as of December 31, 1995) is primarily due to reorganizing the
activities of Japanese companies and the resulting deconsolidation of a number of these companies.
Amortization, depreciation and writedowns
Amortization and depreciation are analyzed below, by asset category:
Amortization of intangible fixed assets
Amortization of start-up and expansion
expenses
Amortization of research, development and
advertising expenses
Amortization of industrial patents and
intellectual property rights
Amortization of licenses, trademarks and
similar rights
1995 1996
Amortization of goodwill 147 313
Amortization of consolidation differences 1,616 2,760
Amortization of costs for the purchase and
development of software
Amortization of other charges 3,236 3,125
Total 19,248 18,461
Depreciation of tangible fixed assets
7,219
273
82
1,775
4,900
6,205
251
496
1,771
3,540
1995 1996
Depreciation of real estate 12,259 12,725
Depreciation of plant and machinery 51,125 46,926
Depreciation of equipment 2,250 1,977
Depreciation of other assets 14,093 12,998
Depreciation of assets acquired under
finance leases
Total 81,741 76,451
2,014
1,825

Writedowns
The "Writedown of current receivables and of liquid funds", Lire 78,304 million, reflects a prudent
provision to the allowance for doubtful accounts. This is discussed in more detail in the note on trade
accounts receivable.
Other operating costs
This caption consists of the following:
Emoluments to Directors and Statutory
Auditors
1995 1996
15,241 14,205
Indirect taxation 16,042 14,295
Losses on disposal of fixed assets 2,400 3,336
Losses on receivables 6,033 7,805
Other general expenses 11,634 9,521
Total 51,350 49,162
Indirect taxation includes capital taxes amounting to Lire 7,370 million in 1996 and Lire 7,689 million in
1995.
Emoluments earned during the year by the Directors and Statutory Auditors of the parent company
total around Lire 7,400 million and Lire 366 million, respectively.
27. FINANCIAL INCOME AND EXPENSE
Income from equity investments
This balance, Lire 6,223 million (Lire 11,891 million in 1995), includes Lire 5,948 million (Lire 10,349 million in
1995) of interest income on tax credits deriving from dividends distributed by consolidated subsidiaries.
Other financial income
This caption consists of the following:
From receivables held as financial fixed assets:
1995 1996
– assets leased to third parties 142 124
– other receivables held as financial fixed assets 458 457
Total 600 581
From securities held as financial fixed assets, not
representing equity investments
From securities included among current
assets not representing equity investments
Financial income other than the above:
17,141
27,663
15,821
24,635
– interest income from subsidiary companies 586 227
– interest income from associated companies - 6
– interest income from trade and other receivables 5,961 3,751
– interest income from banks 21,979 27,005
– miscellaneous financial income 59,900 71,285
– exchange gains and income from currency
456,901 402,794
management
Total 545,327 505,068
Total 590,731 546,105

As discussed in note 3, other financial income includes approximately Lire 21,200 million (around
Lire 24,100 million in 1995) of exchange gains on capital hedging transactions, representing the
differentials between spot and forward exchange rates.
This caption also includes:
– positive differentials on interest rate swaps and forward rate agreements, approximately Lire 41,300
million (approximately Lire 18,100 million in 1995);
– premiums collected on options and income deriving from the adjustment of warrant-related
transactions linked to the Lire 200,000 million bond issued by Benetton International N.V. (Note 22),
approximately Lire 3,300 million (around Lire 8,400 million in 1995);
– income from currency swaps, approximately Lire 4,700 million (around Lire 8,600 million in 1995).
Interest and other financial expense
This caption consists of the following:
1995 1996
Interest expense on bonds 17,042 17,012
Interest expense on bank current accounts 10,464 5,362
Interest expense on import/export advances 5,003 3,992
Interest expense on advances against
receivables
6,879 10,528
Interest expense on short-term loans 25,845 31,421
Interest expense on long-term bank loans 30,792 19,720
Interest expense on loans from other providers of
finance
Miscellaneous financial expense 80,897 70,878
Exchange losses and charges from currency
management
5,142
410,944
3,942
285,580
Total 593,008 448,435
Exchange losses are considerably lower than exchange gains.
Miscellaneous financial expense mainly includes:
– negative differentials on interest rate swaps, around Lire 11,200 million (around Lire 25,600 million in
1995);
– the current portion of charges deriving from the valuation of warrants and of premiums paid for
options, amounting to approximately Lire 9,000 million (around Lire 17,000 million in 1995);
– charges on currency swaps, approximately Lire 20,000 million (around Lire 19,500 million in 1995);
– discounts allowed on the early settlement of trade receivables, approximately Lire 6,600 million
(around Lire 7,000 million in 1995);
– bank charges and commission of approximately Lire 5,100 million (around Lire 6,200 million in 1995).
28. EXTRAORDINARY INCOME AND EXPENSE
Income
This caption includes:
1995 1996
Gains on disposals 2,652 7,318
Other income:
- Out-of-period income 7,653 5,101
- Other extraordinary income 6,557 4,115
Total 16,862 16,534

Expense
This caption includes:
1995 1996
Losses on disposals 3,673 2,030
Taxes relating to prior years 508 61
Other expense:
- Donations 3,892 4,768
- Out-of-period expense 4,930 11,455
- Other extraordinary expense 34,136 37,415
Total 47,139 55,729
Out-of-period expense includes credit notes issued to customers for rebates and the return of goods
supplied in prior years, as well as charges incurred by Benetton Formula Ltd. in relation to T.W.R. Group
Ltd..
Other extraordinary expense includes compensation payments made to customers against accident
and theft claims, charges in relation to settlements of various types, and provisions to the reserve for
contingencies which may arise from current legal disputes.
Income taxes
The provision for income taxes includes the following amounts (in millions of Lire):
Current:
1994 1995 1996
Italian companies 137,132 189,365 171,676
Foreign companies 14,379 15,427 17,817
Deferred:
Italian companies (3,658) (10,953) 18,051
Foreign companies 2,701 (5,180) (906)
Total 150,554 188,659 206,638
The effective tax rate on income before taxes and minority interests is 45.2% (45.9% in 1995 and 42.1% in
1994).
This is less than the ordinary Italian tax rate, primarily due to the effect of the lower rates applicable to
the earnings of certain foreign subsidiaries, the use of tax loss carry-forwards and the receipt of taxexempt
income.
The reconciliation of the effective tax rate is as follows:
1994 1995 1996
Italian statutory tax rate 53.2% 53.2% 53.2%
Aggregate effect of different taxation of
foreign subsidiaries (15.8%) (10.0%) (12.3%)
Effect of writing down of the cost of
consolidated investments (5.7%) (8.8%) (5.9%)
Effect of losses from consolidated subsidiaries 14.0% 15.1% 9.5%
Tax exempt income (0.8%) (1.2%) (2.3%)
Tax effect of loss carry-forwards (4.4%) (0.3%) (0.5%)
Other, net 1.6% (2.1%) 3.5%
Effective tax rate 42.1% 45.9% 45.2%
See note 20 for composition of deferred tax assets and liabilities.

29. TRANSACTIONS WITH RELATED PARTIES
The Benetton Group engages in commercial and financial transactions with subsidiaries of Edizione
Holding S.p.A. (the ultimate parent company) and other companies which, either directly or indirectly,
are linked by common interests with the ultimate parent company.
The conditions of such transactions are fully consistent with those applied in the ordinary course of
business.
The effect of such transactions is summarized below:
1995 1996
Accounts receivable 11,800 6,018
Accounts payable 4,800 2,639
Purchase of raw materials 8,900 9,452
Other costs and services 22,900 22,770
Sales of products 10,100 7,325
Services provided and other income 3,600 5,260
30. LEGAL MATTERS
Benetton has been a party to a number of lawsuits, primarily with customers, arising in the normal
course of business.
In particular, Benetton has been a party to a number of lawsuits with French and German customers
alleging a drop in sales caused by Benetton's advertising campaigns and refusing to pay for goods
supplied on a regular basis. So far, all judgements rendered by German and French Courts have been
in favour of Benetton. An additional provision of Lire 4,000 million has nonetheless been prudently
recorded to cover risks which might arise from these legal disputes. The amount is considered adequate
in view of the above legal pronouncements and because the amounts due by these customers have
been written down to their estimated realisable value in the 1996 consolidated financial statements.
Benetton International N.V. ("BINV") is a party to various disputes with Eco Swiss China Time Ltd. ("Eco")
and Bulova Corporation ("Bulova"), arising from a trademark licensing agreement entered into by the
companies in 1986. The agreement provided for the manufacture and sale by Eco of timepieces
carrying the Benetton and Bulova trademarks. BINV attempted to terminate the agreement in 1991,
prior to its expiration date in 1994, but an arbitral tribunal in The Netherlands subsequently held that it
was not entitled to do so. In June 1995, the tribunal awarded Eco approximately US$ 23.7 million and
Bulova US$ 2.8 million, together with interest and costs. (Also see note 20 to the Consolidated Financial
Statements).
BINV has challenged the awards in two separate proceedings in the courts of the Netherlands. The
merits of the challenges have still not been finally determined by the Netherlands courts, although a
District Court has initially denied one of them. This order is currently on appeal. In the interim, after
previously denying a stay in one of the two proceedings, the Court of Appeal of the Hague on March
28, 1996, granted a stay of enforcement in the other proceeding of the principal award made to Eco.
The principal ground of the Court of Appeal’s decision was that the 1986 licensing agreement was void
and unenforceable as a matter of the competition law of the European Union. The award made to
Bulova had previously been paid by BINV, although it is subject to recovery if BINV ultimately prevails
on the merits of its challenges to the arbitral awards. In March 1997 the Supreme Court in The Hague, in
the context of the stay proceedings, referred to the European Court of Justice in Luxembourg five
preliminary questions of EU Competition Law, thus suspending the stay proceedings. BINV anticipates
that the full merits of its various challenges to the awards, including the application of European Union
competition law, will be the subject of lengthy additional proceedings in the Netherlands courts.

As those proceedings continue, a separate arbitral proceeding initiated by BINV is pending in The
Hague. BINV contends in this second arbitral proceeding both that it satisfied any obligations it may
have had to negotiate in good faith regarding an extension of the 1986 licensing agreement and that it
is entitled to substantial awards of compensatory and other damages from Eco and Bulova regarding
conduct occurring during and since the expiration of that agreement. BINV submitted its Statement of
Claim on April, 1996 and Eco and Bulova subsequently asserted substantial counterclaims for damages.
A hearing on the preliminary questions of the applicability of art. 85 of the EU Treaty and choice of law
took place in December 1996 and the parties are waiting for a decision by the arbitral panel. BINV also
anticipates that the arbitral proceedings will continue for a lengthy period.
31. SUBSEQUENT EVENTS
In March 1997, Benetton Group S.p.A. entered into a collaboration agreement with the Inditex Group,
one of Spain's largest garment manufacturer-distributors with an extensive network of directly-operated
stores in its local and other European markets. An equal joint venture to be formed under the accord
will market garments bearing the Zara label in Italy, via a new chain of retail stores.
At a meeting held on April 29, 1997 the stockholders authorized the Board of Directors (pursuant to
Article 2420 of the Italian Civil Code and Article 7 of the Articles of Association) to issue bonds up to a
maximum of Lire 500 billion, both in the Italian and international markets. The proceeds of the issue,
which may take place on one or more occasions over three years, are to be applied to possible
investments and reformulating the Group’s debt program. The Board was authorized to determine the
rate of interest and the term (up to a maximum of 7 years).
At the same meeting the shareholders resolved upon a one-for-twenty-five bonus share issue, which will
be carried out at the end of June 1997. This issue will raise the paid-in capital from Lire 87,276,862,500 to
Lire 90,767,937,000 and the issued shares from No. 174,553,725 to No. 181,535,874.

32. RECONCILIATION TO GENERALLY ACCEPTED ACCOUNTING PRINCIPLES IN THE UNITED
STATES
The Group's accounting policies that differ significantly from accounting principles generally accepted
in the United States of America (“US”) are described below:
Differences which have an effect on net income and Stockholders' equity
(a) Revaluation of Fixed Assets and Trademarks
In 1991 and prior years, certain categories of property, plant and equipment and trademarks were
revalued to amounts in excess of historical cost.
This procedure, which was authorized by Italian law, was allowed under Italian accounting practice to
give consideration to the effects of local inflation.
Revaluations were credited to stockholders' equity and revalued assets are depreciated over their
remaining useful lives. Accounting principles in the US do not permit the revaluation of such assets.
The reconciliation to accounting principles in the US eliminates the effect of the revaluation.
As of December 31, 1996, the residual gross amount of revaluation was Lire 13,683 million for fixed assets
and Lire 4,430 million for trademarks.
Surplus from monetary revaluation of assets reserve, amounting to Lire 46,202 million, represents the
original revaluation effected in accordance with Italian and Spanish Law and still subject to taxation in
case of distribution.
The 1991 revaluation resulted in an asset revaluation of Lire 27,104 million for legal and tax purposes and
a Lire 4,030 million revaluation for consolidated financial reporting purposes (considering the partial
offsetting of the revaluation with the reversal of excess depreciation on the same fixed assets reflected
as adjustment in the consolidated financial statements and prior years consolidating entries related to
purchase price allocation). In order to maintain a record of the amount of asset revaluation for legal
and tax purposes, Lire 23,074 million was transferred from other reserves to "surplus from monetary
revaluation of assets".
In 1996, a Spanish subsidiary restated its tangible fixed assets by Lire 1,210 million in a monetary
revaluation in accordance with local legislation (Royal Decree 2607/96).
The increase in surplus from monetary revaluation of assets reserve, amounting to Lire 1,174 million,
represent the original net revaluation effected in accordance with Spanish Law.
The Lire 8,848 million adjustment in the reconciliation of stockholders' equity represents the remaining
excess of revaluations for financial reporting purposes and differs from the 46,202 million Lire "surplus
from monetary revaluation of assets" in the statement of stockholders’ equity because:
a) Revaluations made for legal purposes (and subject to taxation in case of distribution)
?? but not for consolidated financial reporting purposes, as noted above.
b) Depreciation on the revalued assets.
c) Sales of revalued assets.
(b) Purchases and Sales with Parent Company
The Group has entered into several significant purchases and sales of companies with its parent,
Edizione Holding S.p.A., and an affiliate of Edizione. The prices paid were based upon independent
appraisal. The Group recorded the assets of purchased businesses at their acquisition value. Goodwill
was charged directly to consolidated equity. In the case of sales transactions, the difference between
carrying value and selling price was reflected as a gain in the accompanying financial statements.
Under US generally accepted accounting principles, transactions between members of a "controlled
group" should not result in gains or losses, or increases in asset carrying values. Accordingly, gains
recognized on these transactions have been reversed in the accompanying reconciliation.

Generally accepted US accounting principles also require the use of a method of accounting,
consistent with "pooling of interests" accounting, for acquisitions and dispositions between members of
a "controlled group" if the amounts involved are material.
The accompanying reconciliation has not been restated to reflect these transactions as a "pooling of
interests" as the net aggregate effect of the transactions is not material.
(c) Accounting for Goodwill
Up to 1992, goodwill on investments acquired was charged or credited to stockholders' equity at the
date of purchase. This policy differs from US generally accepted accounting principles which require
that such differences be reflected as an asset in the balance sheet of the acquiring company and then
amortized over a period not in excess of 40 years.
The adjustment in the accompanying reconciliation has been made to recognize the goodwill on
acquisitions from third parties made in 1990 and prior years originally amounting to Lire 7,330 million.
Goodwill is being amortized over a 10 year period, corresponding to the estimated useful lives of the
underlying assets acquired.
(d) Deferred Charges
The Group has deferred certain taxes paid on capital stock increases and stock exchange listing costs
and is amortizing these amounts over 5 years. Under US generally accepted accounting principles,
these taxes and listing costs would have been considered to be a reduction of the proceeds received
and charged to capital stock or additional paid-in capital. The accompanying reconciliation reflects
the adjustment to follow US generally accepted accounting principles.
(e) Foreign Currency Translation
Since 1989, the Group's policies and procedures with respect to the translation of financial statements
of foreign subsidiaries operating in hyper-inflationary economies, have been in conformity with the
requirements of Statement of Financial Accounting Standards No. 52.
Group accounting policies state that long term debts denominated in a foreign currency are translated
using the exchange rate at the balance sheet date, with losses included in the determination of net
income and unrealized net gains deferred.
In addition the accompanying reconciliation in 1994 provides the cumulative effect on net income for
US GAAP of change in accounting for premiums on forward contracts entered into in order to hedge
investments in foreign subsidiaries (note 3).
The Company has forward contracts maturing in 1997 and 1998 in order to hedge future sales in foreign
currencies for a total amount of Lire 657 billion. Since such contracts do not hedge firm commitments,
they are to be considered as anticipatory hedging and, under US GAAP, accounted for as speculative
transactions, using the mark to market valuation (“m.t.m.”).
Such valuation results in a net unrealized gain of Lire 3.0 billion before taxes at December 31, 1996, (Lire
13.6 billion as of December 31,1995). At December 31,1994 the “m.t.m.” of anticipatory hedging resulted
in a net loss (Lire 2.3 billion) and in accordance with Italian GAAP was reflected in the consolidated
financial statements. Therefore at December 31, 1994 the “m.t.m.” was consistent with US GAAP .

(f) Accounting for Deferred Income Taxes
The Group provides for deferred income taxes on timing differences between book and taxable
income which are expected to become payable or recoverable in the foreseeable future using the
liability method.
The accompanying reconciliation reflects the tax effects related to reconciling adjustments.
In 1992, Statement of Financial Accounting Standards No. 109 "Accounting for Income Taxes" was issued
in the US and was adopted by the Group in the year 1993.
The deferred tax methodology required under US GAAP differs in certain circumstances from the
deferred income tax methodology under Italian GAAP due to different treatment of tax assets mainly
deriving from tax loss carry-forward.
Under the terms of a law approved in December 1996, the Italian government is obliged to issue by
November 1997 one or more legislative decrees introducing a new Regional Tax on Businesses and
Professional Activities. Although all the rules applicable to this new tax are not set out in the above Law,
it does contain certain guidelines to which the government is obliged to adhere. The new tax will
substitute several existing taxes, including ILOR (locale income tax). It is expected to become effective
from the 1998 tax period. The Company has adjusted deferred tax assets in its Italian financial
statements for this anticipated change. Under US GAAP the measurement of current and deffered tax
liabilities and assets is based on provisions of the enacted tax law; the effects of future changes in tax
laws or rates are not anticipated. The following tables include a reconciling item of approximately Lire
19 billion related to this anticipated change.
(g) Net Income per Share
Under Italian accounting principles, earnings per share are not required to be disclosed. The
approximate net income per share amounts, based on income determined in accordance with
accounting principles generally accepted in the US as shown in the accompanying reconciliation,
have been calculated based on the average number of shares outstanding.
(h) Marketable securities
Under Italian GAAP, marketable securities are carried at the lower of cost or market value. Under US
GAAP, effective with fiscal years beginning after December 15, 1993, companies are required to adopt
Statement of Financial Accounting Standards No. 115, “Accounting for Certain Investment in Debt and
Equity Securities (SFAS 115)”, which changes the accounting for investments in marketable securities
from a lower of cost or market methodology to a fair market value methodology. Under this
methodology, the Company would classify its marketable securities as available for sale; however, the
effect of SFAS 115 on net income and shareholder’s equity is not significant.
(i) Treasury shares
Under Italian GAAP, the purchase by a Company of its own stock is accounted for as an investment
and the establishment of a separate reserve within stockholders’ equity. Since the Company’s intent
with respect to this stock is short term, they have been classified as marketable securities in the Italian
balance sheet. Under US GAAP this purchase is accounted for as treasury stock and presented as a
reduction of stockholders’ equity in the balance sheet.
Differences which have an effect on the format of the financial statements
The Group’s balance sheet and income statement format is in accordance with Italian reporting
requirements and differs from the financial statement format typically followed under the requirements
of US GAAP. The Group has included in appendix 2 and 3 financial statements prepared in accordance
with Italian GAAP but reclassified to follow an international financial statement presentation format.

The following tables summarize the significant adjustments to consolidated net income and
stockholders' equity which would be required if accounting principles generally accepted in the US had
been applied instead of those established or adopted by the Italian Accounting Profession.
Net income:
(Millions of Lire)(1)
(Thousands
of US $) (1) (2)
1994 1995 1996 1996
Net income as reported in the consolidated
statements of income 210,220 220,255 245,642 161,713
Items increasing (decreasing) reported income:
Reduction in depreciation and amortization of
fixed assets and trademarks as a consequence of
the elimination of revaluation, including impact
of disposals
Adjustment related to acquisitions and
dispositions of companies under common control
5,160
13,695
475
9,435
476
10,502
Amortization of goodwill (1,052) (1,989) (733) (483)
Adjustment of deferred charges 2,831 2,831 2,831 1,864
M.t.m. gain deriving from adjustment to conform
anticipatory hedging transactions to SFAS 52
-
13,643
Accounting for deferred income tax 1,492 2,605 29,281 19,276
Tax effect of reconciling adjustments (5,376) (8,774) (3,045) (2,004)
Net income before cumulative effect of change
in accounting for premiums on capital hedging
Cumulative effect of change in accounting for
premiums on capital hedging
Net income in accordance with accounting
principles generally accepted in the US
Income per share before cumulative effect
of accounting change
Cumulative effect of change in accounting for
premiums on capital hedging
Net income per share amounts in accordance
with accounting principles generally accepted in
the US
(1) Except per share data, which are in Lire and US $.
226,970
9,200
236,170
(2) Exchange rate: US $ 1 = Lire 1,519 as of December 31, 1996.
1,307
53
1,360
238,481
-
238,481
1,366
-
1,366
2,981
287,935
-
287,935
1,650
-
1,650
313
6,914
1,963
189,556
-
189,556
1.09
-
1.09

Stockholders' equity:
Balance as reported in the consolidated balance
sheets
Items increasing (decreasing) stockholders' equity:
Elimination of revaluations of fixed assets and
trademark net of related depreciation and
amortization
Adjustments related to acquisitions and
dispositions of companies under common control
Year Ended December 31,
(Millions of Lire)
(Thousands
of US $) (1)
1994 1995 1996 1996
1,504,156 1,656,958 1,820,836 1,198,707
(8,625)
(64,222)
(8,150)
(55,434)
(8,848)
(49,289)
(5,825)
(32,448)
Reinstatement of goodwill previously written-off 4,991 3,002 2,269 1,494
Adjustment of deferred charges (11,325) (8,494) (5,663) (3,728)
M.t.m. gain deriving from adjustment to conform
anticipatory hedging transactions to SFAS 52
-
13,643
16,624
10,944
Accounting for deferred income tax 20,988 23,593 52,874 34,808
Treasury shares - - (719) (473)
Tax effect of reconciling adjustments
Balance in accordance with accounting principles
generally accepted in the US
7,766 (1,008) (4,053) (2,669)
1,453,729
(1) Exchange rate: US $ 1 = Lire 1,519 as of December 31, 1996.
1,624,110
1,824,031
1,200,810

Differences which do not have an effect on net income and stockholders’ equity
(J) Amortization of License
As discussed in Note 4 the Group is not amortizing certain license costs, as the amounts will be fully
recoverable upon disposal of the underlying assets.
Under US generally accepted accounting principles, such amounts would be amortized over the life of
the license. No adjustment has been made for this item in the accompanying reconciliation, as the
amounts involved are not significant.
(K) Transactions in foreign currencies
As discussed in Note 4, the Group records income, relating to forward exchange contracts that were
subsequently renegotiated, on the date of renegotiation.
Under US GAAP, only the m.t.m. at the balance sheet date would be recorded in the consolidated
statement of income. No adjustment has been made for this item in the accompanying reconciliation,
as the amounts are not deemed material.
(l)Purchases and Sales with Parent Company
As mentioned in section (b) of Note 32, under US GAAP transaction between a “controlled group”
should not result in gains or losses, or increases in asset carrying values. During 1996, the Group
purchased Benetton Gesfin S.p.A. (formely Schemaventi S.p.A.) from Edizione Holding S.p.A. and third
parties.
The Group recorded a deferred tax asset related to the excess of purchase price over net equity (Lire
2,495 million). In the US GAAP stockholder’s equity reconciliation, the Group has reduced stockholder’s
equity for the amount of the excess related to Edizione Holding. The remaining amount (Lire 1,057
million) related to third parties shoud be classified as goodwill and not a deferred tax asset for US GAAP.
(m) Traslation differences
The Group has recorded an additional deferred tax liability (Lire 484 million) for translation differences
arising from the current year translation of foreign deferred taxes. A deferred tax liability would not be
recorded under US GAAP.

Appendix 1

Companies and Groups included within the scope of
consolidation as of December 31, 1996
Name of the company Location Currency Capital Group
Companies and Groups consolidated on a line-by-line basis:
Parent company
Benetton Group S.p.A. Ponzano Veneto (TV) Lit. 87,276,862,500
Italian Subsidiaries
stock interest
Benfin S.p.A. Ponzano Veneto (TV) Lit. 90,000,000,000 100%
. Calzaturificio di Varese Group Ponzano Veneto (TV) Lit. 8,808,569,580 96.988%
. Stefani Group Grumolo delle Abbadesse (VI) Lit. 600,000,000 78%
. Texcontrol Group Ponzano Veneto (TV) Lit. 17,000,000,000 81.875%
. Galli Filati Group Prato (FI) Lit. 4,000,000,000 100%
Bencom S.p.A. Ponzano Veneto (TV) Lit. 3,000,000,000 100%
. Benair S.p.A. Ponzano Veneto (TV) Lit. 3,000,000,000 100%
Fabrica S.p.A. Ponzano Veneto (TV) Lit. 8,000,000,000 100%
. Colors Magazine S.r.l. Ponzano Veneto (TV) Lit. 199,000,000 100%
Benetton Fashion S.p.A. Ponzano Veneto (TV) Lit. 70,000,000,000 100%
. Socks & Accessories Benetton (S.A.B.) Group Sesto Fiorentino (FI) Lit. 1,000,000,000 50%
Benlog S.p.A. Ponzano Veneto (TV) Lit. 27,400,000,000 100%
Benetton Gesfin S.p.A. Ponzano Veneto (TV) Lit. 80,000,000,000 100%
Foreign subsidiaries
Benetton U.S.A. Corp. Delaware US $ 34,654,000 100%
. Benetton Retail Corp. Delaware US $ 1,301,000 100%
Benetton Holdings N.V. Amsterdam f. 45,434,000 100%
. Benetton Cosmetici Holding S.A. Lugano SwF 8,050,000 100%
. Benetton Cosmetici S.A. Lugano SwF 50,000 100%
. Benetton Cosmétiques France S.A. Paris F 28,050,000 100%
. Benetton Cosmetics Corp. New York US $ 3,500,000 100%
. Benetton Group Japan K.K. Tokyo Yen 400,000,000 100%
. Benetton Japan K.K. Tokyo Yen 400,000,000 100%
. Benetton Shoes Japan K.K. Tokyo Yen 60,000,000 50%
. Bene Moda K.K. Tokyo Yen 60,000,000 50%
. Benetton China Japan K.K. Tokyo Yen 50,000,000 91%
. K.K. Via Veneto Tokyo Yen 232,500,000 50%
. Benetton Argentina S.A. Buenos Aires $Arg 500,000 100%
. Benetton Mexico S.A. de C.V. Mexico City N$ 27,740,000 100%
. Egyptian European Clothing Manufacturers S.A.E. Alexandria LE 4,000,000 50%
. DCM Benetton India Ltd. New Delhi Rs. 80,000,000 50%
. Benetton (Far East) Ltd. Hong Kong Hk $ 51,000,000 100%
. United Colors of Benetton do Brasil S.A. Sao Josè dos Pinhais R$ 19,707,528 100%
. Colorben Comercio de Roupas Ltda. Sao Paulo R$ 5,000 100%
. Colors Brasil Roupas Ltda. Rio de Janeiro R$ 1,000 100%
. Novaben Comercio de Roupas Ltda. Rio de Janeiro R$ 50,000 100%

Name of the company Location Currency Capital Group
stock interest
Benetton International N.V. Amsterdam f. 244,260,000 100%
. Benetton Finance N.V. Curaçao US $ 26,000 100%
. Benetton Finance S.A. Luxembourg Lit. 1,000,000,000 100%
. Benetton France Trading S.a.r.l. Troyes F 240,000,000 100%
. Benetton France S.A. Troyes F 40,000,000 100%
. Benetton Realty France S.A. Troyes F 272,000,000 100%
. Catys S.a.r.l. Troyes F 410,040 100%
. Benetton España S.L. Castellbisbal Ptas. 100,000,000 100%
. Benetton S.A. Castellbisbal Ptas. 200,000,000 100%
. Benetton Lda. Maia Esc 20,000,000 100%
. Benetton (U.K.) Ltd. London £ 52,334 100%
. Benetton Formula Ltd. London £ 3,900,000 100%
. Benetton Retail (1988) Ltd. London £ 10,000,000 100%
. Benetton Società di Servizi S.A. Lugano SwF 50,000 100%
. Benetton do Brasil Textil Ltda. Sao Josè dos Pinhais R$ 10,405 100%
. United Colors Communication S.A. Lugano SwF 1,000,000 100%
. Benetton Services S.A. Lugano SwF 1,400,000 100%
. Benetton Korea Inc. Seoul W 110,000,000 100%
. Benetton Time S.A. Luxembourg US $ 300,000 52%
. Benetton Engineering Ltd. Enstone £ 12,342,000 100%
. Benetton Tunisia S.a.r.l. Akouda At 303,900 100%
Investments carried at equity:
. Benetton Kansai K.K. Osaka Yen 110,000,000 40%
. Beijing Benetton Fashion Co. Ltd. Beijing Y 3,797,620 50%
. Shanghai Benetton Ltd. Shanghai Y 2,780,000 54.6%
. Benetime Japan K.K. Tokyo Yen 10,000,000 24%
. T.W.R. Group Ltd. Kidlington £ 20,000,000 50%
. Benetton Central Europe Ltd. Warsaw Zloty 4,224,000 100%
. Benetton China Holdings Ltd. Hong Kong US $ 2,600,000 50%
Investments in subsidiaries and associated companies carried at cost:
. Azfin International B.V. Amsterdam f. 40,000 100%
. Benetton Australia Pty. Ltd. Sidney $A 1,000 100%

Consolidated balance sheets as of Appendix 2
December 31, 1995 and 1996
(reclassified for an international format) (in millions of Lire) (Thousands
of US $) (1)
Assets 12/31/95 12/31/96 12/31/96
Current Assets
Cash 458,619 498,912 328,448
Marketable securities 400,092 680,019 447,675
Differentials on forward transactions 80,891 75,003 49,377
Financial receivables 141,324 12,173 8,014
Assets leased to third parties 173 1,053 693
Accounts receivable
Trade receivables 1,410,432 1,416,312 932,398
Other receivables 158,510 81,071 53,371
Less - Allowance for doubtful accounts (169,935) (168,883) (111,180)
1,399,007 1,328,500 874,589
Inventories 506,363 411,292 270,765
Prepayments and accrued income 53,030 63,649 41,902
Total current assets 3,039,499 3,070,601 2,021,463
Investments and other non-current assets
Investments 47,151 43,241 28,467
Securities held as fixed assets 20,767 51,042 33,602
Guarantee deposits 29,753 13,332 8,777
Financial receivables 4,104 1,644 1,082
Other non current receivables 2,078 11,628 7,655
Assets leased to third parties 1,054 - -
Fixed assets
104,907 120,887 79,583
Land and buildings 447,822 439,877 289,583
Plant, machinery and equipment 505,931 523,913 344,906
Office furniture, furnishings and electronic equipment 65,656 67,635 44,526
Vehicles and aircraft 47,931 48,123 31,681
Construction in progress and advances for fixed assets 6,186 5,758 3,791
Finance leases 21,729 26,245 17,278
Less - Accumulated depreciation (477,238) (519,285) (341,860)
Intangible assets
618,017 592,266 389,905
Licenses and trademarks 12,310 11,825 7,785
Deferred charges 62,346 68,683 45,215
74,656 80,508 53,000
Total assets 3,837,079 3,864,262 2,543,951
(1)Exchange rate: US $ 1 = Lire 1,519 as of December 31, 1996.
The accompanying notes to consolidated financial statements are an integral part of these consolidated statements.

(in millions of Lire) (Thousands
of US $) (1)
Liabilities and stockholders' equity 12/31/95 12/31/96 12/31/96
Current liabilities
Bank loans 568,003 786,034 517,468
Bonds - 34,986 23,032
Short-term loans 668 4,002 2,635
Current portion of long-term loans 172,735 25,536 16,811
Current portion of lease financing 3,146 3,720 2,449
Accounts payable 528,624 550,665 362,518
Other payables and accruals 144,899 125,725 82,768
Reserve for income taxes 70,297 27,682 18,224
Total current liabilities 1,488,372 1,558,350 1,025,905
Long-term liabilities
Bonds 279,827 236,075 155,415
Long-term loans, net of current portion 211,429 83,823 55,183
Other long-term liabilities 2,123 1,942 1,279
Lease financing 10,970 12,657 8,332
Reserve for termination indemnities 58,736 62,521 41,159
Reserve for deferred income taxes - 144 95
Other reserves 89,801 63,311 41,679
652,886 460,473 303,142
Minority interests in consolidated subsidiaries 38,863 24,603 16,197
Stockholders' equity
Capital stock 87,277 87,277 57,457
Additional paid-in capital 472,661 472,661 311,166
Surplus from monetary revaluation of assets 45,028 46,202 30,416
Other reserves and retained earnings 816,037 962,107 633,382
Translation differences 15,700 6,947 4,573
Net income for the year 220,255 245,642 161,713
1,656,958 1,820,836 1,198,707
Total liabilities and stockholders' equity 3,837,079 3,864,262 2,543,951
(1) Exchange rate: US $ 1 = Lire 1,519 as of December 31, 1996.
The accompanying notes to consolidated financial statements are an integral part of these consolidated statements.

Consolidated statements of income for the years ended December 31, 1994, 1995 and 1996
Appendix 3
(reclassified for an international format) (in millions of Lire) (Thousands
Revenue
of US $) (1)
1994 1995 1996 1996
Net sales 2,640,752 2,767,585 2,702,685 1,779,253
Other revenues 146,920 171,549 168,423 110,877
Cost of sales
2,787,672 2,939,134 2,871,108 1,890,130
Material and net change in inventories 804,809 872,790 809,982 533,234
Payroll and related cost 160,619 171,687 172,412 113,504
Subcontract work 562,863 549,958 616,189 405,654
Industrial depreciation 54,428 59,226 56,759 37,366
Other manufacturing costs 56,335 67,631 61,231 40,310
1,639,054 1,721,292 1,716,573 1,130,068
Gross margin 1,148,618 1,217,842 1,154,535 760,062
Selling, general and administrative expenses
Payroll and related cost 160,242 165,579 149,216 98,233
Distribution and transport 56,007 56,969 46,797 30,808
Sales commission 107,301 114,994 132,629 87,313
Advertising and promotion 132,803 119,993 101,638 66,911
Depreciation and amortization 41,184 41,763 38,153 25,117
Other expenses 262,341 274,741 284,421 187,242
759,878 774,039 752,854 495,624
Income from operation 388,740 443,803 401,681 264,438
Other (income) expenses
Foreign currency (gain) loss, net 3,194 (45,957) (117,214) (77,165)
Interest income (188,646) (131,422) (142,292) (93,675)
Interest expense 229,449 178,062 154,913 101,983
Other (income) expense, net (13,000) 32,025 49,107 32,329
30,997 32,708 (55,486) (36,528)
Income before taxes and minority interests 357,743 411,095 457,167 300,966
Income taxes 150,554 188,659 206,638 136,036
Income before minority interests 207,189 222,436 250,529 164,930
Minority interests (3,031) 2,181 4,887 3,217
Net income 210,220 220,255 245,642 161,713
(1) Exchange rate: US $ 1 = Lire 1,519 as of December 31, 1996.
The accompanying notes to consolidated financial statements are an integral part of these consolidated statements.

Valuation and qualifying accounts
As of December 31, 1994, 1995 and 1996
Description Balance at
Beginning
of Period
Additions
Charged to
Profit/Loss
Deducted in the Balance Sheets from the assets to which it applies:
Allowance for doubtful accounts
SCHEDULE VIII
(in millions of Lire)
Other(1) Deductions Balance at
1994 150,084 66,888 (1,818) (41,878) (2) 173,276
1995 173,276 60,839 (3,389) (60,791) (2) 169,935
1996 169,935 78,304 (4,763) (74,593) (2) 168,883
Inventory valuation reserve
1994 16,252 5,036 1,008 (8,327) 13,969
1995 13,969 12,291 (420) (10,387) 15,453
1996 15,453 9,382 (1,827) (10,027) 12,981
Other reserves
- Exchange fluctuation reserve
1994 55,561 12,187 1 (21,819) 45,930
1995 45,930 6,285 (4) (11,876) 40,335
1996 40,335 14,366 (102) (53,520) 1,079
- Risk reserve
1994 7,099 5,360 (1,147) (4,987) 6,325
1995 6,325 30,517 (1,218) (3,092) 32,532
1996 32,532 23,046 (3,516) (7,716) 44,346
- Taxation reserve
1994 7,580 50 - - 7,630
1995 7,630 - 20 - 7,650
1996 7,650 130 63 (61) 7,782
- Reserve for agents’ termination indemnities
1994 9,219 272 (840) (254) 8,397
1995 8,397 2,239 - (1,352) 9,284
1996 9,284 9,282 - (8,462) 10,104
- Total other reserves
1994 79,459 17,869 (1,986) (27,060) 68,282
1995 68,282 39,041 (1,202) (16,320) 89,801
1996 89,801 46,824 (3,555) (69,759) 63,311
(1) Represents balances of acquired companies, transfers from other reserve accounts and the effect of translation adjustment.
(2) Represents write-offs of uncollectible accounts.
End of
Period

REPORT OF THE BOARD OF STATUTORY AUDITORS
ON THE CONSOLIDATED FINANCIAL STATEMENTS
To the Stockholders of Benetton Group S.p.A., the Parent Company,
As part of our duties pursuant to Article 41 of Decree 127/91, we have examined the consolidated
financial statements of the Benetton Group as of December 31, 1996, which report net income of
Lire 245,642 million, total assets of Lire 3,864,262 million, total liabilities of Lire 2,018,823 million,
stockholders’ equity of Lire 1,845,439 million, and memorandum accounts totaling Lire 5,948,485 million,
together with the Report on Operations.
Based on the information and documentation received from the Directors and Management, we
confirm the following:
a) Examination of the consolidated financial statements
1. Our examination was performed in accordance with the law that regulates consolidated financial
statements, with the standards of conduct recommended by the Italian accounting profession and
with generally-accepted accounting principles. The financial statements were audited by Deloitte &
Touche S.p.A., who have not communicated to us any censurable matters concerning the Parent
Company or any of its subsidiaries.
2. The financial statements of the subsidiary and associated companies included within the scope of
consolidation were examined, as required by the law, by their respective Boards of Statutory Auditors
and Independent Auditors. We have not been informed by the independent auditors or any other
party of irregularities of any kind in relation to such financial statements.
3. In our opinion, the abovementioned consolidated financial statements reflect the accounting
records of the Parent Company and the information received from subsidiary companies, and have
been prepared in conformity with the principles of consolidation and the criteria for establishing the
scope of consolidation laid down in Decree 127/91. The instructions contained in Articles 32 and 38
of the Decree mentioned have also been respected. Accordingly, taken as a whole, the
consolidated financial statements fairly present the financial position of the Benetton Group as of
December 31, 1996, and its results for the year then ended.
b) Examination of the Report on Operations
1. We have examined the report of the Directors on the results of operations that accompanies the
consolidated financial statements, in order to verify compliance with Article 40 of Decree 127/91 and
determine its consistency with such statements pursuant to Article 41 of the same Decree.
2. On the basis of the work we performed, the Board of Statutory Auditors believes that the Report on
Group Operations is properly presented and is consistent with the consolidated financial statements.
Ponzano Veneto, April 7, 1997
THE BOARD OF STATUTORY AUDITORS
Dino Sesani
Fanio Fanti
Filippo Duodo

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
BENETTON GROUP S.P.A.
We have audited the accompanying consolidated balance sheet of BENETTON GROUP S.p.A. (an
Italian Corporation) and subsidiaries as of December 31, 1995 and 1996 and the related consolidated
statements of income, changes in stockholders’ equity and cash flows for the two years then ended.
These financial statements are the responsibility of the Company’s management. Our responsibility is to
express an opinion on these financial statements based on our audit. We did not audit the financial
statements of certain subsidiaries, which financial statements represented 8 percent of total
consolidated assets as of December 31, 1996 and 7 percent of total consolidated revenues for the year
then ended. The financial statements of these subsidiaries were audited by other independent auditors
whose reports have been furnished to us, and our opinion, insofar as it relates to the amounts included
in the consolidated financial statements for those entities, is based solely on the reports of the other
auditors.
We conducted our audit in accordance with auditing standards generally accepted in the United
States of America. Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material misstatements. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement presentation. We believe
our audit provides a reasonable basis for our opinion.
In our opinion, based on our audit and the reports of other auditors, the consolidated financial
statements referred to above present fairly, in all material respects, the consolidated financial position
of BENETTON GROUP S.p.A. and subsidiaries as of December 31, 1995 and 1996, and the results of their
operations and their cash flows for the two years ended December 31, 1996, in conformity with the
accounting principles established or adopted by the Italian Law and the Italian Accounting Profession.
The accounting principles referred to above vary in certain respects from accounting principles
generally accepted in the United States of America. A description of the significant differences and the
adjustments required to conform consolidated net income and stockholders’ equity for the two years
ended December 31, 1996, to generally accepted accounting principles in the United States are set
forth in Note 32 to the consolidated financial statements.
Our audit comprehended the translation of Italian Lire amounts into U.S. dollar amounts and, in our
opinion, such translation has been made in conformity with the basis stated in Note 4. Such U.S. dollar
amounts are presented solely for the convenience of international readers.
Treviso, Italy
April 8, 1997
DELOITTE & TOUCHE S.p.A.

Information for Stockholders Informazioni agli Azionisti
Corporate Headquarters Sede
Benetton Group S.p.A. Benetton Group S.p.A.
Villa Minelli Villa Minelli
31050 Ponzano (TV) 31050 Ponzano (TV)
Italy Italy
Capital Stock: Lire 90,767,937,000 fully paid Cap. Soc.. Lit. 90.767.937.000 i.v.
Registered No. 4424 Treviso R.I. di Treviso n. 4424
Tel.: (39) 0422-4491 Tel.: (39) 0422-4491
Stock Exchange Listings Borse Valori
Benetton Group S.p.A. stock is listed
Il Titolo Benetton Group S.p.A.
on the following Stock Exchanges: Milan, è quotato alle Borse Valori di Milano,
Frankfurt, New York (symbol BNG) and is Francoforte, New York ed è trattato alla
admitted for trading on the Stock Exchange SEAQ di Londra
Automated Quotation System (SEAQ
International) in London.
Rapporti con gli investitori
Ufficio Rapporti con gli investitori
Benetton Group S.p.A.
Villa Minelli
31050 Ponzano (TV)
Italia
Tel.: (39) 0422-449412
Investor Relations
Investor Relations Office
Benetton Group S.p.A.
Villa Minelli
31050 Ponzano (TV)
Italy
Tel.: (39) 0422-449412
Assemblea Annuale
e Pagamento dei Dividendi
Annual Meetings L’assemblea annuale degli azionisti si tiene
and Payment of Dividends presso la sede della società normalmente
Annual meetings of stockholders are held at in aprile.
Company’s Headquarters normally in April. I dividendi vengono pagati generalmente
Dividends are paid usually about the middle
of May.
intorno alla metà di maggio.
Depositario per gli ADR
Stock Transfer Agent
Per possesori ADR:
For holders of ADRs:
Morgan Guaranty Trust Company
Morgan Guaranty Trust Company
60 Wall Street
60 Wall Street
New York, New York 10260
New York, New York 10260
U.S.A.
U.S.A.
Documentazione per gli Azionisti
Reports available to Stockholders
Sono disponibili gratuitamente:
The following reports may be obtained Bilancio
without charge:
Relazione semestrale
Annual Report
Eventuali richieste possono essere inoltrate a:
Half-Year Report.
Ufficio Relazioni con gli Azionisti
Requests should be addressed to:
Segreteria della Società
Stockholder Relations
Benetton Group S.p.A.
Corporate Secretary’s Office
Villa Minelli
Benetton Group S.p.A.
31050 Ponzano (TV)
Villa Minelli
31050 Ponzano (TV)
Italia
Italy
Società di Revisione
Deloitte & Touche S.p.A.
Independent Accountants
Viale della Repubblica, 22
Deloitte & Touche S.p.A. 31020 Fontane di Villorba - (TV)
Viale della Repubblica, 22
31020 Fontane di Villorba - (TV)
Italy
Italy