Announcement of (I) Connected Transaction: Acquisition of Fratelli Prada S.p.A. (II) Termination of Continuing Connected Transaction: Franchise Agreement with Fratelli Prada

Hong Kong Exchanges and Clearing Limited and The Stock Exchange of Hong Kong Limited take no responsibility for the contents of this announcement, make no representation as to its accuracy or completeness and expressly disclaim any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this announcement.

Registered office at Milan (Italy) Via A. Fogazzaro n. 28,

Registry of Companies of Milan, Monza, Brianza, Lodi (Italy): No. 10115350158

(Incorporated under the laws of Italy as a joint-stock company)

(Stock Code: 1913)

1. 1. 1. CONNECTED TRANSACTION: ACQUISITION OF FRATELLI PRADA S.P.A.
   2. TERMINATION OF CONTINUING CONNECTED TRANSACTION: FRANCHISE AGREEMENT WITH FRATELLI PRADA
2. Acquisition of Fratelli Prada

The Board is pleased to announce that on October 29th, 2019, the Company entered into the Sale and Purchase Agreement with the Sellers, Ms. Miuccia Prada Bianchi and Bellatrix S.p.A., pursuant to which the Company purchased, and the Sellers sold, the Sale Shares in Fratelli Prada at an aggregate consideration of Euro 66 million subject to, and upon, the terms of the Sale and Purchase Agreement.

Ms. Miuccia Prada Bianchi is a Chief Executive Officer, an Executive Director and substantial shareholder of the Company (as defined in the Listing Rules) and is a connected person of the Company. Each of Bellatrix S.p.A. and Fratelli Prada is indirectly controlled by Ms. Miuccia Prada Bianchi and is a connected person of the Company.

As the relevant applicable percentage ratios (as defined in the Listing Rules) in respect of the Acquisition exceed 0.1% but are less than 5%, the connected transaction contemplated under the Sale and Purchase Agreement is subject to the reporting and announcement requirements but is exempt from the independent shareholders' approval requirement under Chapter 14A of the Listing Rules.

II. Termination of Franchise Agreement with Fratelli Prada

Reference is made to the announcement of the Company dated January 25th, 2017 regarding the renewal of the annual caps relating to the Franchise Agreement for the three years ending January 31st, 2020.

Upon the Acquisition, Fratelli Prada has become a wholly-owned subsidiary of the Company and, accordingly, the Company has entered into the Termination

1

Agreement on October 29th, 2019 with Fratelli Prada to terminate the Franchise Agreement with immediate effect.

As disclosed in the Company's IPO Prospectus, the Franchise Agreement constitutes a continuing connected transaction for the Company under Chapter 14A of the Listing Rules. The termination of the Franchise Agreement pursuant to the Termination Agreement is subject to the announcement requirement under Chapter 14A of the Listing Rules.

Background

As disclosed in the Company's prospectus dated June 13th, 2011 (the "IPO Prospectus"), the Prada stores in Milan have historically been operated by companies that are connected to the Prada family.

Against this historical background, on January 28th, 2009 the Company entered into a franchise agreement in relation to the Prada stores based in Milan (the "Franchise Agreement") with five companies that operated the stores and their controlling entity, which all subsequently merged with Fratelli Prada.

The four (4) historical Prada Milan stores operated by Fratelli Prada are based in Galleria Vittorio Emanuele II (Women), Via Montenapoleone nos. 6 (Woman) and 8 (Man) and Via Della Spiga (Accessories) (the "Milan Stores"). Fratelli Prada owns the real estate occupied by the Via Della Spiga store (the "Via Della Spiga Property") and leases the real estate of the other stores from unrelated third parties.

The Franchise Agreement would expire on January 31st, 2024 and could be automatically renewed for a further 15 years until January 31st, 2039.

1. Acquisition of Fratelli Prada

The Board is pleased to announce that on October 29th, 2019, the Company entered into the Sale and Purchase Agreement with the Sellers.

The principal terms of the Agreement are summarized below:

Date :	October 29th, 2019
Parties:	(i)	PRADA S.p.A., as the Buyer
	(ii)	Bellatrix S.p.A., as one Seller
	(iii) Ms. Miuccia Prada Bianchi, as another Seller and,
		together with Bellatrix S.p.A., the Sellers
Subject Matter:	The Buyer purchased and the Sellers sold the Sale Shares
	subject to, and upon, the terms of the Sale and Purchase
	Agreement.
		2

Consideration:	The aggregate consideration payable by the Buyer for the
	Sale Shares is Euro 66 million (Euro 64,784,516.98 is
	payable to Bellatrix S.p.A. and Euro 1,215,483.02 is
	payable to Ms. Miuccia Prada Bianchi) and shall be paid
	by the Buyer to the Sellers in cash in three tranches as
	follows: (i) Euro 22,670,000.00 simultaneously with the
	execution of the Sale and Purchase Agreement, (ii) Euro
	22,670,000.00 by January 10, 2020 and (iii) Euro
	20,660,000.00 by January 10, 2021.
	The consideration will be funded by internal resources of
	the Group.
	The consideration for the Sale Shares was arrived at after
	arm's length negotiations between the Buyer and the
	Sellers, taking into account the fair value of the Sale
	Shares as estimated by the Valuer in the Valuation Report
	and the adjustment based on the change in the net cash
	and financial receivables of Fratelli Prada (from
	September 30th, 2018 to September 30th, 2019).
	The fair value of the Sale Shares was estimated by the
	Valuer to be in the range between Euro 67.4 million and
	Euro 72.9 million, based on a sum-of-the-parts approach
	made up of the following items: (i) the valuation of the Via
	Della Spiga Property made by the Property Valuer; (ii) the
	Valuation and (iii) the net cash and the financial
	receivables of around Euro 11.9 million, as recorded in
	Fratelli Prada's books as at September 30th, 2018.
	The market value of the Via Della Spiga Property was
	estimated as at November 22nd, 2018 by the Property
	Valuer at around Euro 46.7 million (being Euro 33.7
	million net of pro-forma taxes) adopting an income-based
	approach. The market value of the Via Della Spiga
	Property was estimated by the Property Valuer as the gross
	rent produced, capitalized at a specific rate of return
	depending on the characteristic of the property itself.
	The enterprise value of the retail business was estimated
	as at September 30th, 2018 by the Valuer in a range
	between Euro 21.8 million and Euro 27.4 million and it
	was determined based on the discounted future estimated
	cash flows expected from the operation of the Milan Stores
	(assuming the extension of the Franchise Agreement until
	2039)(the "Valuation"). Therefore, the use of an income
	approach, which involves the calculation of discounted
	future estimated cash flows constitutes a profit forecast
	3

under Rule 14.61 of the Listing Rules (the "Profit Forecast").

For the purpose of complying with Rules 14.62 of the Listing Rules, the principal assumptions upon which the Profit Forecast was based are as follows:

General assumptions:

• the information provided by the Seller with regard to the valuation are complete, accurate and reliable;
• the sources from which public and statistical information were obtained for the valuation are reputable, accurate and reliable;
• there will be no material changes in the political, legal, economic, social, financial or real estate conditions and taxation laws in Milan, Italy where the Milan Stores operate which will materially affect the cash-flows attributable to the Milan Stores;
• the market trends and conditions where the Milan Stores operate will be in line with the economic forecasts of the luxury goods sector in general.

Specific assumptions:

• the Franchise Agreement is extended until 2039;
• the Compound Annual Growth Rate of the revenues from the retail business for the financial years ending 2019 to 2025 is estimated to be approximately 4.5% and 2% for the financial years ending 2026 to 2039. The adoption of the growth rates has been made with reference to a number of factors, including but not limited to, historical results, market projections and business targets;
• the gross margin from the retail business is estimated to be approximately 45% of the revenues, based on historical average gross margin ratio of Fratelli Prada;
• the capital expenditures are estimated on the basis of the expected investments for store refurbishment, considering no changes in the stores perimeter;
• the working capital indicators are estimated to be aligned with historical average indicators;

4

• the income taxes are calculated considering the tax rate currently applicable in Italy;
• the residual value of the business at year-end 2039 is estimated to be equal to the value of Fratelli Prada's net assets (excluding the Via Della Spiga Property) at said date;
• the discount rate adopted to calculate the discounted future estimated projected cash flows using Capital Assets Pricing Model ("CAPM")-based cost of equity is approximately 9%. A number of factors have been considered in the CAPM, including but not limited to
• 1. risk free rate; (ii) equity risk premium; (iii) an additional size risk premium; (iv) beta, a measure of non-diversifiable risk, of a number of comparable companies; and (v) applicable cost of debt.

The Board has reviewed the principal assumptions upon which the Profit Forecast was based and is of the view that the Profit Forecast was made after due and careful enquiry.

The Company's auditors, Deloitte & Touche S.p.A. ("Deloitte"), have confirmed that they have reviewed the calculations of the discounted future estimated cash flows upon which the valuation of the retail business prepared by the Valuer was based and for which no accounting policies have been adopted in its preparation.

A letter from the Board and a report from Deloitte are included in the appendices to this announcement for the purpose of Rule 14.62 and Rule 14A.68(7) of the Listing Rules.

Information of the Group and the Sellers

The Group

The Group forms one of the world's most prestigious fashion luxury goods groups and the Company is the worldwide exclusive licensee of the design, development, manufacture, advertising, promotion and distribution of the PRADA, MIU MIU, CAR SHOE trademarks and, through a subsidiary, of the CHURCH'S trademark.

5