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Gucci Group NV – ‘20FR12B’ on 7/31/03

On:  Thursday, 7/31/03, at 8:13am ET   ·   Accession #:  1047469-3-25628   ·   File #:  1-14000

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  As Of                Filer                Filing    For·On·As Docs:Size              Issuer               Agent

 7/31/03  Gucci Group NV                    20FR12B                6:754K                                   Merrill Corp/New/FA

Document/Exhibit                   Description                      Pages   Size 

 1: 20FR12B     Registration of Securities of a Foreign Private     HTML    529K 
                          Issuer                                                 
 2: EX-1        Underwriting Agreement                              HTML    102K 
 3: EX-12.2     Statement re: Computation of Ratios                 HTML     18K 
 4: EX-12.3     Statement re: Computation of Ratios                 HTML     12K 
 5: EX-12.4     Statement re: Computation of Ratios                 HTML     12K 
 6: EX-12.5     Statement re: Computation of Ratios                 HTML      9K 

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 20-F

/ / REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934
or
/x/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended January 31, 2003
Or
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission file number: 0-29572

Gucci Group N.V.
(Exact name of Registrant as specified in its charter)

Rembrandt Tower Amstelplein 1
HA 1096 Amsterdam
The Netherlands
(Address of principal executive offices)

Securities registered or to be registered pursuant to Section 12(b) of the Act:

Securities registered or to be registered pursuant to Section 12(g) of the Act:
None
(Title of Class)

Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act:
None
(Title of Class)

Indicate the number of outstanding shares of each of the issuer's classes of capital or common stock as of the close of the period covered by the annual report:

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding twelve months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Indicate by check mark which financial statements item the registrant has elected to follow:

TABLE OF CONTENTS

i

Table of Contents
(Continued)

ii

PART I

ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS

        Not Applicable.

ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE

        Not Applicable.

ITEM 3. KEY INFORMATION

        Gucci Group (the "Group"; the "Company") is one of the world's leading multi-brand luxury goods companies. Through its brands, Gucci, Yves Saint Laurent, Sergio Rossi, Boucheron, Roger & Gallet, Bottega Veneta, Bédat & Co., Alexander McQueen, Stella McCartney and Balenciaga, the Group designs, produces and distributes high-quality personal luxury items, including ready-to-wear, handbags, luggage, small leather goods, shoes, timepieces, jewelry, ties and scarves, eyewear, perfume, cosmetics and skincare products. The Group's retail network includes directly operated stores throughout the world, while wholesale includes franchise stores and points of sale in select duty free, department and specialty stores.

        The Company's operating activities are divided into five segments: (1) Gucci Fashion and Accessories; (2) Gucci Group Watches; (3) Yves Saint Laurent; (4) YSL Beauté; and (5) Other Operations. A detailed discussion of the Company's businesses appears in the Report of the Management Board, pages 63-81, in the 2002 Annual Report to Shareholders ("2002 Annual Report"), incorporated by reference herein.

•

Gucci Fashion and Accessories produces and distributes leather goods (handbags; small leather goods; luggage), ready-to-wear, shoes, ties and scarves and jewelry. All merchandise is produced nearly exclusively in Italy and is sold primarily through directly operated stores as well as through limited wholesale distribution channels including mono-brand franchise stores, fine travel retailers and luxury department and specialty stores throughout the world. Gucci's licensees manufacture and distribute eyewear and perfume.



•

Gucci Group Watches produces in Switzerland and distributes globally Gucci, Yves Saint Laurent, Bédat & Co. and Boucheron brand watches. Gucci Group Watches operates distribution affiliates in major markets and sells to a select number of national distributors and high-end watch and department stores around the world.



•

Yves Saint Laurent products include principally women's and men's ready-to-wear, leather goods and shoes sold under the Rive Gauche label. Yves Saint Laurent distributes through directly operated and franchised stores throughout the world and through points of sale in select department and specialty stores. Yves Saint Laurent licenses the rights to manufacture and distribute certain products, including men's apparel, accessories and eyewear.



•

YSL Beauté manufactures and distributes Yves Saint Laurent brand perfumes and cosmetics, Roger & Gallet brand toiletries, Alexander McQueen and Stella McCartney brand fragrances as well as perfumes under license for Oscar de la Renta, Van Cleef & Arpels and Fendi and, as of 2003, for Ermenegildo Zegna. YSL Beauté is fully integrated, with manufacturing facilities in France and 17 distribution

1

affiliates. YSL Beauté sells to select department and specialty stores and duty free retailers and uses distributors to reach the smaller markets not covered by its affiliates.

•

Other Operations include individually less material businesses. The segment is comprised of Sergio Rossi, Boucheron, Bottega Veneta, Emerging Brands and Industrial Operations.



•

Sergio Rossi is a leading Italian designer, producer and distributor of luxury women's footwear. In addition to women's shoes, Sergio Rossi produces and distributes handbags and men's footwear. Sergio Rossi sells through directly operated stores, franchisees, and points of sale in select department and specialty stores.



•

Boucheron products include fine jewelry (haute joaillerie; joaillerie; and bijoux), prestige watches and perfumes. Boucheron sells jewelry exclusively through directly operated stores, including its flagship store on Place Vendôme in Paris, and timepieces through both its directly operated stores and select department and specialty stores. As of 2003, YSL Beauté manages all aspects of Boucheron perfume activities, including marketing, distribution and the coordination of the international subsidiaries and distributors. The image of Boucheron perfumes continues to be managed by Boucheron's management and design team in coordination with the development of jewelry and watches.



•

Bottega Veneta is a leading Italian designer, producer and distributor of luxury leather goods, shoes and ready-to-wear. Bottega Veneta's principal product lines include women's handbags and sacks, of which the woven intrecciato is the most well-known. Starting in 2003, Bottega Veneta has granted a license for eyewear.



•

The Group's Emerging Brands include Stella McCartney, Alexander McQueen and Balenciaga. Smaller than the Group's other brands, these businesses sell primarily women's ready-to-wear and accessories through select department and specialty stores and a limited number of directly operated stores. In 2003, YSL Beauté will produce and distribute Stella McCartney and Alexander McQueen perfumes.



•

Industrial Operations include principally four Italian shoe producers, two leather tanneries and a jewelry manufacturing facility. These businesses supply products and raw materials to the Group and third parties and provide expertise in strategically important product areas.

2

A. Selected Financial Data

        Certain selected financial data is set forth on pages 6 and 7 of the Company's 2002 Annual Report. The revenue and earnings data for 2002, 2001 and 2000 and the balance sheet data at January 31, 2003 and January 31, 2002 are derived from the Audited Consolidated Financial Statements in the 2002 Annual Report. The revenue, earnings and balance sheet data related to prior years are derived from Audited Consolidated Financial Statements in previously published annual reports. As of February 1, 2002 the Company adopted the Euro as its reporting currency (see note 3 to the Audited Consolidated Financial Statements in the 2002 Annual Report).

        IAS—Selected Financial Data 2002-1998¹ (€² million, except per share and share amounts)

U.S. GAAP—Selected Financial Data 2002-1998¹ (€² million, except per share and share amounts)

(1)

Fiscal years 2002, 2001, 2000, 1999 and 1998 ended on January 31, 2003, 2002, 2001, 2000 and 1999, respectively.

(2)

The Company changed its reporting currency to the Euro from the US Dollar on February 1, 2002. In order to facilitate comparisons between the Group's financial statements before and after January 31, 2002, the Group translated previous years' US Dollar balances to the Euro.

(3)

Fully diluted weighted average number of common shares.

(4)

Total assets net of total liabilities.

(*)

Because the Euro came into effect as of January 1, 1999, it is not possible to translate the Group's fiscal 1998 statement of income into Euros from US Dollars using the year average €/US$ rate. However, to

3

facilitate comparisons with subsequent years, the fiscal year 1998 statement of income was translated into Euros using the January 1999 month average, US$ 1.1608 to € 1.000.

        The selected financial data should be read in conjunction with the Company's Consolidated Financial Statements and Notes (prepared on the basis described in Note 3 to the Consolidated Financial Statements) appearing on pages 116 through 183 of the 2002 Annual Report and in conjunction with the Report of the Management Board appearing on pages 52 through 115 of the 2002 Annual Report.

        The Company's Consolidated Financial Statements have been prepared in accordance with International Accounting Standards ("IAS"), which in certain respects differ from United States Generally Accepted Accounting Principles ("U.S. GAAP"). The principal differences between IAS and U.S. GAAP in relation to the Gucci Group as well as the reconciliation of the Company's net income and shareholders' equity to U.S. GAAP from IAS are presented in Note 23 to the Consolidated Financial Statements appearing on pages 166 to 176 of the 2002 Annual Report.

Exchange Rate Information

        The Company changed its reporting currency to the Euro from the US Dollar on February 1, 2002. The selected financial data contained in the 20-F related to the first quarter of 2003 (for the period ended April 30, 2003) is denominated in Euro.

        The noon buying rate certified by the Federal Reserve Bank of New York for customs purposes in New York City for cable transfers (the "Noon Buying Rate") payable in Euro on July 1, 2003 was US$ 1.1580 to € 1.000. The following table shows the high and low Noon Buying Rate for the periods and dates indicated, expressed in US Dollars per one Euro:

US Dollars per one Euro

        The following table shows the year-end and average exchange rates for the calendar year 1998 through 2002, expressed in US Dollars per one Euro:

US Dollars per one Euro

(1)

Spot Rate on January 4, 1999, the first trading day of the Euro as a defined currency.

(2)

Not applicable: the Euro was defined as a currency on January 1, 1999.

        The Gucci Group has provided these rates solely for informational purposes. The rates should not be construed as a representation that Euro amounts actually represent US Dollar amounts indicated or that Euro amounts could have been, or could be, converted into US Dollars at the rate indicated or at any other rate. The Gucci Group did not necessarily use these rates to prepare its first quarter 2003 Euro-denominated consolidated financial statements.

B. Capitalization and Indebtedness

        Not Applicable.

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C.    Reasons for the Offer and Use of Proceeds

        Not Applicable.

D.    Risk Factors

        Shareholders should consider carefully the following risk factors relating to the business of the Company, together with the information and financial data set forth elsewhere in this Form 20-F.

Brand recognition and image are crucial to the Company's success.

        The Company's financial performance in the luxury goods market is influenced by the success of its brands, which, in turn, depends on factors such as product design, the distinct character of the products, the materials used to make the products, the image of the Company's stores, communication activities, including advertising, public relations and marketing and general corporate profile.

The Company is dependent on its trademarks, and its products are the subject of counterfeit reproduction.

        The Company's business is highly dependent on its ability to protect and promote its trademarks and other propriety rights. Accordingly, the Company devotes substantial resources to the establishment and protection of its trademarks on a worldwide basis. The Company believes that its trademarks are adequately supported by applications for registrations, existing registrations and other legal protections in its principal markets. However, the Company cannot exclude the possibility that its intellectual property rights may be substantially challenged by others or that the Company may be unable to register its trademarks or otherwise adequately protect them in some jurisdictions.

        Furthermore, the luxury goods market is subject to numerous instances of product counterfeiting and other trademark infringements. A significant presence of counterfeit products on the market can negatively impact both the sales and the brand image of a luxury goods manufacturer. If any of the Company's products are the subject of widespread counterfeit production or other similar trademark infringements, the Company's business, financial condition and results of operations could be adversely affected.

The Company's success is dependent on its ability to lease quality store locations at competitive prices.

        Approximately half of the Company's revenues, and the predominant portion of the Gucci Division's revenues are made through a distribution network consisting of directly operated stores. The Company leases the vast majority of such stores. Accordingly, the success of the Company's operations in part is dependent on the Company's ability to secure affordable, long-term leases and to secure renewals of such leases. Furthermore, the Company's stores are located in areas typically associated with the sale of luxury goods. Such properties are generally highly sought after, and the Company faces intense competition from other companies for these locations. Although the Company believes that its current leases can be renewed on acceptable terms, no assurance can be given that the Company will be able to successfully negotiate lease renewals on existing stores or to obtain similar terms for new stores, and the failure to do so could have an adverse effect on the Company's business, financial condition and results of operations.

The luxury goods market is affected by adverse economic conditions and declines in international travel.

        Downturns in general economic conditions or uncertainties regarding future economic prospects historically have affected adversely sales by luxury good companies, including Gucci Group sales. Accordingly, such downturns or uncertainties in the future could have a material adverse effect on the Company's business, financial condition or results of operations. Levels of consumer confidence are largely dependent on changes in disposable income and perceptions of and reactions to economic events, such as currency devaluation that

5

make luxury goods more expensive, changes in levels of unemployment and taxation and the risks of inflation or deflation. Since the Company distributes its products internationally, a significant decline in the general economy or in consumers' attitudes in a region—Europe, particularly Italy, France and the United Kingdom; the United States; Japan; and certain Asian markets, particularly Hong Kong, Taiwan and South Korea—also could have a material adverse impact on the Company. A substantial amount of the Company's sales are generated by customers travelling abroad, particularly from Japan, other Asian countries, Europe and the United States. Consequently, adverse economic conditions, global political developments (such as the war in Iraq in the Spring of 2003) or other events (such as the travel advisories issued by the World Health Organization in connection with Severe Acute Respiratory Syndrome ("SARS")) that result in a shift in travel patterns or a decline in travel volumes also could adversely affect the Company's financial results.

The Company must anticipate trends and respond to changing consumer preferences.

        The Company's success also depends in part upon its ability to originate and define product and fashion trends as well as anticipate and respond to changing consumer preferences and fashion trends in a timely manner. Although the Company attempts to stay abreast of emerging lifestyle and consumer preferences affecting its products, any sustained failure by the Company to identify and respond to such trends could result in significant excess inventories for some products and missed opportunities with others. Consequently, the Company is dependent in part upon the continuing favorable market response to the creative efforts of the design teams of Gucci and Yves Saint Laurent, headed by Tom Ford, the Creative Director of the Company, as well as the creative and product development teams of the other divisions.

The Company relies on third party manufacturers.

        Although the Company is intensively involved in all aspects of the design and manufacture of most of its merchandise, it does not own all of its manufacturing facilities. Therefore, the Company is dependent upon independent third parties for the production of components and the assembly of certain products, including leather goods, shoes, ready-to-wear and watches. See Item 4.B.5: "Business Overview—Production". The Company's products not produced at owned manufacturing facilities are manufactured to its specifications primarily by Italian and Swiss manufacturers, and Gucci's quality inspectors regularly visit suppliers' production facilities to ensure quality. Nevertheless, the inability of a manufacturer to ship orders of the Company's products in a timely manner or to meet the Company's quality standards could cause the Company to miss the delivery date requirements of its customers for those items, which could result in cancellation of orders, refusal to accept deliveries or a reduction in sales, any of which could have a material adverse effect on the Company's business, financial condition and results of operations.

The Company relies upon certain key personnel and upon its ability to find skilled personnel.

        The Company's success depends to a significant degree upon the efforts and abilities of certain members of senior management, including Domenico De Sole, the Company's President and CEO, and Tom Ford, the Company's Creative Director. The loss of the services of Mr. De Sole, Mr. Ford or one or more other members of the Company's senior management or design team, and any negative market or industry perception arising from such loss, could have a material adverse effect on the Company's business, financial condition and results of operations.

        In addition, the Company relies on its ability to hire, train and retain skilled personnel to participate in the design, marketing, merchandising and sales of its products. No assurance can be given that the Company will be able to continue to attract a sufficient number of such skilled personnel. Any inability to hire, train and retain such personnel could adversely affect the Company's growth.

The Company's future performance could be affected by its multi-brand acquisition strategy.

6

        The Company's financial success depends to a significant degree upon management's ability to generate growth and profitability from each Group brand and to integrate newly-acquired companies into the Group's structure such that these businesses achieve satisfactory levels of revenues, earnings and cash flows.

The Company is sensitive to interest rate fluctuations.

        Changes in interest rates—particularly European, US, Swiss and Japanese rates—could affect materially the Company's interest income and expense. The Company has a substantial net cash position. Declines in global interest rates—particularly European and US rates—could affect adversely the Company's net interest income through lower interest income. After the planned return of capital on October 2, 2003, (see "Subsequent Events" on page 176 of the 2002 Annual Report), the Company may be in a net debt position such that increases in prevailing interest rates could have an adverse effect on the Company.

The Company is subject to currency rate fluctuations.

        The Company operates in many parts of the world and, as a result, its business can be affected by fluctuations in exchange rates. While the Company engages in foreign exchange hedging activities, it does not hedge long-term foreign exchange risks for cash flows, nor is it permitted by IAS and U.S. GAAP to hedge its cost of sales. The Company's business and financial results therefore could be adversely affected by fluctuations in exchange rates particularly if any such exchange rate movements persist. The Company changed its reporting currency to the Euro from the US Dollar on February 1, 2002. Consequently, as from this date the most significant exchange rate risk to which the Company is exposed is potential weakness of currencies in which a significant portion of its revenues are denominated—such as the US Dollar, the Japanese Yen, the English Pound, the Swiss Franc and the Korean Won—compared to the Euro.

The Company is subject to various legal regimes.

        As a Company that distributes its products in many countries, the Company's business is subject to various risks beyond its control, such as changes in laws and policies affecting trade and investment (including trademark protection) and the instability of foreign economies and governments. The Company has taken applicable laws and regulations into account in seeking to structure its business on a global basis, including to achieve tax and operational efficiencies. Changes in such laws or regulations, including with respect to taxation, could adversely affect the Company's operations and financial results.

The Company faces intense competition.

        The Company faces substantial competition in all product lines and markets in which it competes. The Company competes with well-known, high quality international luxury goods brands such as Armani, Bulgari, Cartier, Chanel, Christian Dior, Ferragamo, Hermès, Louis Vuitton, Prada, international prestige perfume, cosmetic and skincare groups such as Esteé Lauder, l'Oréal and Shiseido as well as a large number of other international and regional purveyors of some or all of the types of products distributed by the Company.

The Company's shareholders may have difficulties in enforcing their rights abroad.

        The Company's corporate affairs are governed by its Articles of Association and Dutch law. Under the Company's Articles of Association, adoption of the Company's annual accounts by the shareholders discharges the members of the Management Board and the Supervisory Board from liability in respect of the exercise of their duties during the fiscal year concerned, unless an explicit reservation is made by the shareholders and subject to certain exceptions provided under Dutch law, including exceptions relating to the liability of members of Management Boards and Supervisory Boards upon bankruptcy of a Company and general principles of reasonableness and fairness. Under Dutch law, this discharge does not extend to matters not disclosed to shareholders.

        The executive offices and a substantial portion of the assets of the Company are located outside the United States. In addition, certain of the members of management, the Management Board and the Supervisory

7

Board of the Company are residents of jurisdictions outside the United States. As a result, it may be difficult for the Company's shareholders to effect service of process within the United States upon the Company, members of management, the Management Board or the Supervisory Board of the Company, or to enforce outside the United States judgments obtained against such persons in U.S. courts, or to enforce in U.S. court judgments obtained against such persons in courts in jurisdictions outside the United States, in each case, in any action, including actions predicated upon the civil liability provisions of the U.S. securities laws. In addition, it may be difficult for the Company's shareholders to enforce, in original actions brought in courts in jurisdictions located outside the United States, rights predicated upon the U.S. securities laws.

The Company is subject to potential tax audits.

        The Company operates in many countries and is therefore subject to the risk of tax audits and assessments in each of these countries. The Company seeks to manage its tax affairs in compliance with all applicable laws. However, it is possible that authorities may disagree with positions taken by the Company, and consequently the Company may be exposed to tax assessments in excess of amounts provided in the financial statements for tax liabilities.

Cautionary Statement Regarding Forward Looking Statements.

        Under the safe harbor provisions to the U.S. Private Securities Litigation Reform Act of 1995, the Company cautions investors that any forward-looking statements of projections made by the Company, including those made in this document, are subject to risks and uncertainties that may cause actual results to differ materially from those projected.

        Statements that are not historical facts, including statements about the Company's and management's beliefs and expectations, are forward-looking statements. Words and phrases such as "expects", "anticipates", "intends", "plans", "believes", "seeks", "estimates", "are comfortable with", and variations of these words and similar expressions are intended to identify forward-looking statements. These statements are based on current plans, estimates and projections, and therefore investors should not place undue reliance on them. Forward-looking statements speak only as of the date they are made, and the Company undertakes no obligation to update publicly any of them in light of new information or future events.

        Forward-looking statements involve inherent risks and uncertainties. The Company cautions investors that a number of important factors could cause actual results to differ materially from those anticipated in any forward-looking statement. For a detailed description of these factors, see Item 3.D: "Risk Factors" above.

8

ITEM 4.    INFORMATION ON THE COMPANY

A.    History and Development of the Company

1.    Corporate Information

2.    Significant Historical Events

Gucci Group traces its origins to Guccio Gucci who, in 1923, established a shop in Florence, Italy to sell exclusive Gucci brand leather goods designed and produced by skilled local artisans. In the period preceding the Second World War, the business expanded, and the Company opened stores in Rome and Milan. In the post war period, under the guidance of Guccio Gucci's sons, the Company entered important new markets—the United States; Europe; Asia—while becoming further reputed as a luxury leather goods house. The following is a brief summary of significant historical events:

9

        In the first quarter of 2003 (the period ended April 30, 2003), the Company did not make any material acquisition.

        In 2002, the Group made a number of immaterial acquisitions, including certain Italian shoe and jewelry production facilities as well as the minority interest in Gucci Taiwan, for a total consideration of € 29.5 million.

        In 2001, the Gucci Group acquired for a total consideration of € 245.9 million the following companies and assets:

•

Bottega Veneta: On February 26, 2001, the Group acquired 66.7% of the share capital of Bottega Veneta Sarl and in July 2001, the Group acquired an additional 11.8% of the share capital of Bottega Veneta Sarl, raising its interest in the company to 78.5%.



•

Di Modolo: On March 1, 2001, the Group acquired 100% of the share capital of Di Modolo Associates, a watch design studio, and Di Modolo SA, a small production Company.



•

Stella McCartney: On April 9, 2001, the Group announced a 50%-50% partnership with Stella McCartney in Stella McCartney Limited.



•

FJ Benjamin: On July 3, 2001, the Group announced the acquisition of the remaining 35% stake in Gucci Australia Pty Ltd held by its joint venture partner FJ Benjamin Holdings Ltd.



•

Alexander McQueen: In July 2001 the Group finalized its partnership with Alexander McQueen through the acquisition of a 51% interest in Birdswan Solutions Ltd.



•

Balenciaga: In July 2001, the Group acquired 91% of the share capital of Balenciaga S.A.



•

Caravel Pelli Pregiate: In August 2001, the Group acquired 51% of Caravel Pelli Pregiate, a high-quality, precious skin tannery.



•

Calzaturificio Regain: In August 2001, the Group acquired 70% of Calzaturificio Regain S.p.A, a designer and producer of fine men's footwear.

10

•

Other industrial activities: In the second half of 2001 the Group acquired interests in several other small industrial companies specialized in footwear and leather goods.

3.     Capital Expenditures and Divestitures

        The Group's investments in tangible and intangible fixed assets totaled € 340.6 million in 2002 (excluding € 17.3 million for property, operated under lease arrangements in 2002, on which the Group has the option to purchase). Investments in tangible and intangible fixed assets totaled € 341.9 million in 2001 and € 285.9 million in 2000. In the first quarter of 2003, the Group's capital expenditures totaled € 91.3 million, including a € 63.7 million investment to purchase land as the site for the Group's future Japanese headquarters in Tokyo Ginza, which when completed in 2005 will house a 10,000 square foot Gucci flagship. The Group has temporarily financed the project primarily through short-term Japanese yen denominated borrowings and is currently exploring alternative long-term financing solutions.

        The budgeted investment in tangible and intangible assets in 2003 is approximately € 240 million, of which approximately € 100 million is for store openings, refurbishment and expansions and € 63.7 million for the aforementioned investment in Tokyo Ginza.

        Management notes that the opportunity to buy or lease strategically important real estate for stores or other activities may cause actual capital expenditures for 2003 or future years to exceed the budgeted level. Management expects investments in tangible and intangible assets, which should decline in 2003, to further fall in 2004 as most of the expensive stores necessary for the future development of each of the Company's brands will have opened by the end of 2003. (See "Liquidity and Capital Resources" section of the Management Discussion and Analysis, pages 94-97 of the 2002 Annual Report, which is an exhibit hereto.)

Capital Expenditures by Segment 2002-2000 (€ million)

        Gucci Fashion and Accessories' capital expenditures totaled € 94.2 million in 2002, € 201.8 million in 2001 and € 140.1 million in 2000, of which investments in store openings, expansions and refurbishment were € 70.2 million in 2002, € 108.7 million in 2001 and € 84.2 million in 2000.

        Gucci Group Watches capital expenditures totaled € 23.6 million in 2002, € 8.5 million in 2001 and € 21.5 million in 2000. In 2001, Gucci Group Watches' capital investment was for production and distribution, while in 2002 Gucci Group Watches entered into a lease (with option to purchase the property), for its headquarters and warehouse facility in Neuchâtel.

        Yves Saint Laurent capital expenditures totaled € 59.2 million in 2002, € 45.2 million in 2001 and € 17.1 million in 2000, the major part of which was for store openings, expansions and refurbishment.

        YSL Beauté's capital expenditures totaled € 24.9 million in 2002, € 20.6 million in 2001 and € 14.4 million in 2000 and were principally for production and distribution (including point of sale displays for cosmetics).

        The capital expenditures for the Group's Other Operations totaled € 122.7 million in 2002 and € 48.8 million in 2001. The increase in capital expenditures in 2002 was due primarily to significant investments in stores at the newly acquired companies, in particular Boucheron, Bottega Veneta and the Emerging Brands.

        Corporate capital expenditures totaled € 33.3 million in 2002, € 17.0 million in 2001 and € 88.0 million in 2000. Corporate capital investments include the purchase of property in strategically important locations in which

11

the Group will open stores for one or more of its brands. The Company purchased a property in Venice in 2001 and in Milan in 2000.

Divestitures and Public Takeovers

        The Company made no material divestitures in 2002, 2001 or 2000.

        With the exception of the public offer by PPR to occur in March-April 2004, the Company is not aware of any public takeover offers by third parties in respect of the Company's shares.

B.    Business Overview

1.     Objectives and Strategy

•    Group

        Management's primary objective is to create value for the Company's shareholders. Management believes that stock price performance is a critical measure of shareholder value creation and that systematic increases in the Group's revenues, earnings, cash flow and return on investment are catalysts for stock price appreciation. Management believes that it can achieve growth in the Group's revenue, earnings, cash flow and return on investment by properly managing the Company's current businesses and judiciously acquiring and developing other leading brands in the luxury industry. The Company believes that proper management of a luxury goods brand entails distinct high quality merchandise, controlled distribution—often through directly operated stores—systematic communication and solid execution. Management considers an acquisition of a luxury brand on the basis of price, the value and potential of the trademark, the tradition and history of the brand, the quality of the individual(s) associated with the brand and the ability of the Gucci Group through its management and infrastructure to increase the value of the acquired business.

•    Gucci Fashion and Accessories

        Management's objective is to reinforce Gucci's position as a leading luxury fashion, leather goods and accessories house. To achieve this, Gucci will continue to offer only exclusive, high quality products, limit sales to its own directly operated stores, franchisees and select department and specialty stores and invest systematically in communication.

•    Gucci Group Watches

        Management's objective is that each brand achieve a leading position in its niche of the luxury watch market.

        Gucci:    Management's objective is to re-position the Gucci brand into a higher niche in the watch market by limiting points of sale to select wholesale doors and moving the product mix up market. The average retail sales price of a Gucci-brand watch was approximately US$ 350 in 1998 and US$ 685 in 2002. Management aims to further elevate the average retail sales price going forward.

        Yves Saint Laurent:    Management's objective is to develop a range of watches in the coming years that reflects the revitalized image of the Yves Saint Laurent name. The Group introduced its first Yves Saint Laurent watch line in mid-2002, retailing at an entry price point of approximately US$ 1,400 and limited to the most select wholesale doors.

        Boucheron:    Management's objective is to augment the watch collection in coordination with the overall re-launch of the Boucheron brand. In 2001, the product offering consisted of three core lines, the rectangular Reflet, the circle Solis and the square Diamond. Management has extended the product offering of the Reflet line and in April 2003 it presented two new watches at the Basel Watch Fair: the MEC, a classic men's watch, and the Reflet Grosgrain, a new version of the Reflet.

12

        Bédat & Co.:    Management's objective is to substantially increase the size of the Bédat & Co. business in the premium segment of the luxury watch market. Until 2001, distribution of Bédat & Co. was primarily in the United States. In 2002 Gucci Group Watches extended Bédat & Co. distribution in Europe and Japan.

•    Yves Saint Laurent

        Management's objective is to rebuild Yves Saint Laurent into a leading luxury fashion and accessories brand through distinct and outstanding merchandise, controlled distribution and a clearly defined image.

        Management believes that in the past excessive licensing, product proliferation, irregular product quality and excessive distribution damaged the Yves Saint Laurent brand. Management therefore is rehabilitating Yves Saint Laurent through close control over brand image, high product quality and consistency and reinforced retail and wholesale distribution. Since becoming part of the Gucci Group, Yves Saint Laurent has re-acquired control of strategic product categories (women's ready-to-wear; watches and jewelry; women's shoes), presented critically acclaimed ready-to-wear and accessory collections, increased the number of directly operated stores from 15 (January 31, 2000) to 52 (April 30, 2003), established strong relationships with leading department and specialty stores and significantly increased communication.

•    YSL Beauté

        Management's objective is to reinforce YSL Beauté's position as a leading prestige perfume and cosmetics company. YSL Beauté aims to reinforce Yves Saint Laurent's market share and image in the prestige perfume and cosmetics industry and believes it can accomplish this through rigorous control of distribution, enhanced product packaging and promotion (especially core lines, such as Opium, Paris and Kouros) and the launch of new products (such as the new men's fragrance M7, introduced in 2002). YSL Beauté plans to develop Roger & Gallet through the introduction of new products. YSL Beauté also will build its licensed brands business, in large part through license contracts signed with Stella McCartney, Alexander McQueen and Zegna in 2001. In Spring 2003, YSL Beauté launched the first fragrances for Alexander McQueen, Kingdom, and Ermenegildo Zegna, Essenza di Zegna, while it plans to launch the first fragrance of Stella McCartney, Stella, in September 2003.

•    Other Operations

        Sergio Rossi:    Management's objective is to develop Sergio Rossi's business through the newly opened directly operated stores in Europe, the United States and Japan, extension of its wholesale network as well as through greater presence in handbags and men's shoes.

        Boucheron:    Management's objective is to increase substantially Boucheron's business through a greater breadth in product (jewelry, watches and fragrances), increased communication and a roll-out of directly operated and franchised stores. Management also aims to increase and improve the Boucheron perfume and cosmetics business through the aforementioned integration with YSL Beauté.

        Bottega Veneta:    Management's objective is to reinforce Bottega Veneta's position in the premium leather goods market through an enlarged product offering (which draws on the brand's tradition of high quality elegance and prestige), the introduction of certain men's and women's leather and knitwear ready-to-wear items, select enlargement of the retail and wholesale distribution network and increased communication.

        Emerging Brands:    Management's objective is to develop each of the emerging brands—Stella McCartney; Alexander McQueen; Balenciaga—in the fashion and luxury goods market through enlarged ready-to-wear and accessory collections, increased communication and the progressive roll-out of directly operated stores and points of sale in leading department and specialty stores.

2.    Products

•    Gucci Division

13

Revenues 2002-2000 (€ million)

(1)

Includes silks as well as eyewear and perfumes sold through directly operated stores.

        A summary of the Gucci Division's revenues by product category, as well as by distribution channel and geographic market, is presented on page 64 of the 2002 Annual Report.

•    Gucci Fashion and Accessories

        Fashion and accessory products include leather goods, women's and men's ready-to-wear, shoes, jewelry and ties and scarves as well as eyewear and fragrances, which are produced and distributed under license. Gucci presents new collections for each of its product categories on a seasonal basis and in line with the fashion industry collection calendars. The collections encompass a broad range of new designs, Gucci classics and updated best sellers. Gucci balances its product mix between core categories, between men and women's merchandise and between iconic design elements (e.g. logo; horsebit; bamboo) and fashion-oriented merchandise. The Company may discontinue or re-interpret designs that have reached lifecycle maturity or become inconsistent with the brand image. The Company also uses innovative designs and materials to offer distinct merchandise, and it maintains stringent quality standards by closely monitoring design, product development, manufacturing and distribution.

        Leather Goods (handbags; small leather goods; luggage):    The Company's original business, leather goods remain the largest and most important Gucci product. Leather goods incorporate a variety of hides—cow hide, pigskin, precious leathers as well as canvas and man-made material are offered in different colors and constructions. Gucci offers one of the largest assortments of prestige handbags in the market, and the best selling designs often are carried over from one season to the next. Small leather goods consist of women's and men's wallets, card cases, belts and cosmetic cases and incorporate many of the same materials, colors and constructions used in handbags. Luggage comprises suitcases, garment bags, duffel bags, briefcases, travel-bags and a large assortment of modern lifestyle products such as messenger bags.

        Shoes:    Shoe collections include fashion-oriented as well as traditional styles and range from the classic moccasin to dress shoes, sneakers, boots and sandals. The horse-bit loafer, a Gucci classic, has been in the collection since its inception. New interpretations incorporating new materials, colors, shapes and constructions are introduced each year. These signature moccasins are some of the best selling styles in the collection and are symbolic of Gucci footwear.

        Ready-to-Wear:    Gucci presents four women's and two men's ready-to-wear collections as well as a Cruise collection annually. Ready-to-wear serves to unify and promote the brand image and is the platform from which the accessory and footwear collections are designed. Women's clothing incorporates a full range of products including tailoring, dresses, sportswear, evening and lingerie. The men's collections encompass tailored clothing, furnishings, sportswear and underwear.

        Jewelry:    Gucci offers contemporary design jewelry in a variety of materials, including gold and sterling silver. Pieces may include precious and semi-precious stones, and many are signature styles such as "Icon", the design family that includes a signature "GG" insignia ring. Gucci sells jewelry in its directly operated stores and to franchisees as well as to a select number of wholesale doors.

14

        Ties and Scarves:    Gucci develops annually two collections, plus one Cruise collection, of printed and woven silk ties. These include fashion-oriented and classic styles designed in conjunction with the men's ready-to-wear collections. Gucci also annually offers four seasons of scarves and shawls (in silk, chiffon, wool, cashmere and velvet) designed in fashion-oriented and classic styles that complement the women's ready-to-wear and accessory collections.

        Eyewear:    Gucci brand eyewear is produced and distributed under license by Safilo S.p.A. ("Safilo"). See Item 4.B.8: "Business Overview—Licensing Agreements". Gucci eyewear is distributed in all major markets, including Europe, the United States, Japan and the rest of Asia.

        Perfumes:    Gucci brand perfumes are produced and distributed by Wella A.G. ("Wella"). The collection includes Gucci (launched 2002) as well as Envy (launched 1997), Envy for Men (launched 1998), Rush (launched 1999), Rush for Men (launched 2000) and Rush 2 (launched 2001).

•    Gucci Group Watches

Revenues 2002-2000 (€ million)

(1)

Includes interdivisional sales.

(2)

Other brands include Yves Saint Laurent, Boucheron and Bédat & Co. watch sales, also included in the discussion of Yves Saint Laurent and Other Operations sales by product.

        Gucci Group Watches includes Gucci, Yves Saint Laurent, Boucheron and Bédat & Co. brand watches. Each watch brand offers a selection of quartz and/or mechanical watches and clocks designed with a variety of materials, including gold, silver and stainless steel as well as precious and semi-precious stones.

        Gucci watches combine outstanding Swiss craftsmanship with the same modern design aesthetic found in the brand's products. To further enhance its positioning in the luxury segment, in 2002 Gucci launched a number of new models. In 2002, Gucci Group Watches sold approximately 510,000 units of Gucci brand watches.

        Yves Saint Laurent launched its first watch line, Rive Gauche, in May 2002. Boucheron watches include the Reflet, Solis and Diamant lines as well as the MEC automatic watch launched at the Basle Watch Fair in April 2003. Bédat & Co., a distinct, contemporary and exclusive watch brand, offers a small number of models, with retail prices ranging from € 1,300 up to € 30,000 for the most exclusive models.

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•    Yves Saint Laurent

Revenues 2002-2000 (€ million)

        A summary of Yves Saint Laurent's revenues by product category, as well as by distribution channel and geographic market, is presented on page 71 of the 2002 Annual Report.

        The Yves Saint Laurent product offering consists of women's and men's ready-to-wear and accessories. Women's ready-to-wear, sold exclusively under the Rive Gauche label, consists of two annual collections, Spring/Summer and Fall/Winter, and a Cruise collection. Yves Saint Laurent expanded its product offering to leather goods, shoes, as well as watches and costume jewelry in 2002. Safilo has produced and distributed Yves Saint Laurent brand eyewear under license since the beginning of 2002.

•    YSL Beauté

Revenues 2002-2000 (€ million)

        A summary of Yves Saint Laurent's revenues by product category, as well as by geographic market, is presented on page 74 of the 2002 Annual Report.

        Yves Saint Laurent Perfume and Cosmetics:    The Yves Saint Laurent product offering includes women's fragrances, men's fragrances, make-up and skincare. The women's fragrance portfolio includes best sellers Opium and Paris as well as the recently launched Nu (introduced in 2001). The men's fragrance portfolio includes best sellers Kouros as well as M7, launched in 2002. Make-up includes approximately 25 product lines from four categories: foundation; lip stick; eyeliner and mascara; and nail polish. The make-up collection includes the traditional Rouge Eclat line as well as the prestige Ligne Intense line, launched in 2002. The skincare range includes face hydrating nourishing and cleansing products and body hydrating and firming lines.

        Roger & Gallet:    The Roger & Gallet product offering includes eau de Cologne, eau de toilette, perfumed soaps, and shower gels. Most sales are in France, though other European markets, such as Italy, Germany, Spain and the UK also account for a portion of turnover. In 2002, Roger & Gallet launched an eau de toilette, White Reseda, and a fragrant soap, Ginger.

        Licensed Brands:    YSL Beauté holds the license to manufacture and distribute perfumes and cosmetics for Oscar de la Renta, Van Cleef & Arpels, and Fendi. The principal Oscar de la Renta lines are the fragrances Oscar and Oscar for Men; in 2002 Oscar de la Renta launched the women's fragrance Intrusion. The main Van Cleef & Arpels line is the perfume First; in 2002 Van Cleef & Arpels launched the women's fragrance Murmure. The main Fendi fragrances are Fendi Donna and Theorema Donna. YSL Beauté launched

16

Essenza di Zegna for Ermenegildo Zegna in Spring 2003. Also in 2003, YSL Beauté will launch new fragrances for two of the Group's Emerging Brands: Alexander McQueen's first fragrance, Kingdom, was launched in March 2003; Stella McCartney's first fragrance, Stella, will be launched in September 2003. In 2003, YSL Beauté assumed full control of the production and distribution of Boucheron fragrances, which include Bague, Jaipur and Initial. In the course of 2004 and 2005, YSL Beauté has the right to take control of the production and distribution of Balenciaga fragrances.

•    Other Operations

Revenues 2002-2000 (€ million)

(1)

Sergio Rossi; Boucheron; Bottega Veneta; Stella McCartney; Alexander McQueen; Balenciaga; Bédat & Co.; Industrial Operations.

(2)

Sergio Rossi; Boucheron; Bédat & Co.

        Sergio Rossi:    Over three-quarters of Sergio Rossi's revenues are derived from women's shoes, which are positioned in the upper segment of the luxury shoe market. Sergio Rossi also sells exclusive handbags and men's shoes.

        Boucheron:    Boucheron sells exclusive jewelry and timepieces as well as fragrances. Jewelry includes exclusive individual items of haute joiallerie (priced in excess of US$ 50,000), limited volume items of joiallerie (priced in the US$ 10,000 to US$ 50,000 range) and bijoux pieces (retailing for less than US$ 10,000). In 2002, Boucheron launched the first new jewelry collection created under new management, Beauté Dangereuse, and continued development of a new collection of accessibly priced jewelry and a new line of haute joiallerie and jewelry, Not Bourgeois, which will be launched during 2003.

        Bottega Veneta:    Bottega Veneta's product offering includes prestige leather goods, including handbags, small leather goods and luggage, as well as shoes, ready-to-wear and gift items.

        Emerging Brands:    The product offering of Stella McCartney, Alexander McQueen and Balenciaga is principally women's ready-to-wear. These companies are working with other Gucci Group production facilities and licensees to enhance their ready-to-wear collections and to develop collections of leather goods, shoes, eyewear and fragrances.

3. Seasonality

•    Gucci Fashion and Accessories

        Gucci Fashion and Accessories usually generates a somewhat higher proportion of annual retail sales in the period preceding Christmas, and as a result, its fourth quarter revenues and profitability are typically greater than that of other quarters.

•    Gucci Group Watches

        Gucci Group Watches, a wholesale business, usually ships new products in the months following the Basel Watch Fair that takes place in March/April. However, the business ships continuously over the course of the year and, as a result, is not highly seasonal, though sales in the months of September, October and early November tend to be higher because of the Christmas season.

•    Yves Saint Laurent

        Yves Saint Laurent's directly operated stores generate a somewhat higher proportion of annual sales in the period proceeding Christmas.

•    YSL Beauté

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YSL Beauté usually ships to retailers a high proportion of product in the months preceding Christmas (August through November, particularly for fragrances), and as a result, its third quarter sales and operating profits are typically much greater than those of other quarters.

•    Other Operations

        Sergio Rossi:    Sergio Rossi's retail sales tend to be greater in the months when each store's product collections are introduced, mainly in February/March and September/October.

        Boucheron:    Boucheron usually generates a high proportion of jewelry sales in the period before Christmas and the New Year. As a result the business' second half revenues and profitability are typically greater than those of the first half of the year.

        Bottega Veneta:    Bottega Veneta usually generates a somewhat higher proportion of annual retail sales in the period preceding Christmas, and as a result, its second half revenues are typically greater than those of the first half.

        Emerging Brands:    The Emerging Brands usually generate a somewhat higher proportion of annual retail sales in the period preceding Christmas, and as a result, its fourth quarter revenues and profitability are typically greater than that of other quarters.

4. Design

        Management believes creative control is a critical ingredient for the success of a luxury brand, and as a result the Group maintains in-house the design responsibilities for all its brands.

•    Gucci Fashion and Accessories

        Tom Ford, Gucci's Creative Director, is responsible for the overall image of the Gucci brand. In addition to developing the product collections, Mr. Ford oversees communication campaigns and store designs, which are critical elements in the Gucci image. Mr. Ford and his design team work in close cooperation with the product category managers to develop well-defined collections that establish the feel, direction and image of the Gucci brand.

•    Gucci Group Watches

        Tom Ford oversees the development of the Gucci and Yves Saint Laurent brand watch collections. Boucheron watches are designed in coordination with development of jewelry collections by the brand's creative team. Bédat & Co. executives, in particular Christian Bédat, are responsible for brand image and product design at Bédat & Co. Gucci Group Watches usually introduces new watch styles for each of its brands at the Basel (Switzerland) Watch Fair, which takes places in the Spring.

•    Yves Saint Laurent

        Tom Ford, Yves Saint Laurent's Creative Director, is responsible for the overall image of the Yves Saint Laurent brand. In addition to developing the product collections for Yves Saint Laurent, Mr. Ford oversees communication campaigns and store designs—responsibilities similar to those he holds at Gucci.

•    YSL Beauté

        As Creative Director of Yves Saint Laurent, Tom Ford works closely with senior executives at YSL Beauté to define the Yves Saint Laurent image in perfume and cosmetics. Roger & Gallet executives are responsible for the brand image and product design at Roget & Gallet. YSL Beauté works in cooperation with Oscar de la Renta, Van Cleef & Arpels and Fendi in designing products for these licensed brands. YSL Beauté also works closely with the creative directors and executives from Stella McCartney, Alexander McQueen and Ermenegildo Zegna in the development of licensed products for their brands.

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•    Other Operations

        Sergio Rossi:    Sergio Rossi is the brand's Creative Director. Mr. Rossi and other senior executives at the company are responsible for brand image and product design.

        Boucheron:    Solange Azagury-Partridge, Boucheron's Creative Director, is responsible for brand image and product design.

        Bottega Veneta:    Tomas Maier, the Creative Director, is responsible for brand image and product design. He has significantly revamped the product offering introducing luxurious new leather goods and ready-to-wear based on the brand's strong aesthetic tradition, as well as supervised the development of a new store format.

        Emerging Brands:    The Creative Directors—Stella McCartney, Alexander McQueen and Nicolas Ghesquière (for Balenciaga)—are responsible for product design and brand image for their respective brands.

5.    Production

•    Gucci Fashion and Accessories

        While Gucci retains responsibility for product design and prototype development, the Company employs third parties to manufacture most merchandise. Gucci subcontracts production in order to achieve manufacturing flexibility and a lean cost structure. Eyewear and perfume are produced by licensees. See Item 4.B.8: "Business Overview—Licensing Agreements".

        Gucci obtains raw materials from a number of suppliers and believes that it has sufficient sources of such materials. Management believes that price fluctuations for certain commodities (i.e. leather) does not affect profits substantially given Gucci's high gross margin and normal ability to increase prices to offset rises in raw material costs. Gucci maintains warehouse facilities in Florence to stock both raw materials—for the production of leather goods—and finished goods. Gucci Fashion and Accessories maintains additional warehouse facilities in Switzerland, the United States, Japan, Hong Kong, France, the United Kingdom and Italy.

        Gucci closely supervises and monitors each of its sub-contractors in order to maintain high product quality standards. All of the suppliers of leather goods, ready-to-wear, shoes and silks are located in Italy. (Certain men's suits are manufactured in Swiss facilities owned and operated by the Company's exclusive men's ready-to-wear supplier, Ermenegildo Zegna S.p.A.) Gucci has not experienced any significant difficulty in receiving an adequate supply of these products.

        Leather Goods:    Third party suppliers, most of which are located near Florence, produce the majority of handbags, luggage and small leather goods, with the Company producing in-house only certain precious skin (ostrich or alligator) items. Gucci maintains a close and symbiotic relationship with its leather goods suppliers, the most significant of which are included in the company's "Project Partners" and work exclusively for the Group. In 2001 the Company acquired two tanneries specializing in precious skins and intermediate stage leather in order to better assure the supply and quality of its leather, and to improve cost control.

        Shoes:    Third party suppliers, most of which are located near Florence, produce most of Gucci's footwear. In 2001 Gucci built a state-of-the-art footwear prototype facility which permits improved control over product design, development and quality. Since early 2002 the Company acquired control of several shoe production companies, with the aim to increase Gucci's know-how and production expertise in footwear and provide the Company the means to extend the product range and increase the consistency of fit and comfort as well as the quality of Gucci shoes. Gucci will continue to employ third party suppliers to manufacture a portion of its shoes.

        Women's ready-to-wear:    Gucci develops prototypes of women's ready-to-wear products in a facility in Novara, Italy and supervises the production of women's apparel by subcontractors located primarily in the north of Italy.

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        Silks:    Third party suppliers, located primarily in the silk producing province of Como, Italy, produce Gucci's ties and scarves.

        Jewelry:    Third party suppliers, located primarily in Tuscany, Italy, as well as one majority owned production and prototype facility located near Milan, Italy, produce Gucci's jewelry.

•    Gucci Group Watches

        Gucci Group Watches sources watch components from suppliers in Switzerland and, to a lesser extent, in the European Union and the Far East, and coordinates the assembly of all of its timepieces from Neuchâtel, Switzerland. Gucci Group Watches has strong relationships with its suppliers, the majority of which have worked with the company for many years. Gucci Group Watches has experienced neither meaningful increases in component prices nor difficulty in obtaining components for the assembly of timepieces in recent years. In order to assure high quality standards, Gucci Group Watches provides extensive technical assistance and guidance to its suppliers. Watch components undergo strict quality controls prior to and after assembly. Bédat & Co. sources watch components from a select number of mainly Swiss-based suppliers and coordinates the assembly of its timepieces from Geneva, Switzerland.

•    Yves Saint Laurent

        Yves Saint Laurent produces the women's Rive Gauche ready-to-wear line at its facility in Angers, France and also sources products from third party suppliers based in Italy. Yves Saint Laurent men's Rive Gauche tailored ready-to-wear is produced under a supply agreement with a third party. Gucci produces leather goods for Yves Saint Laurent, while Sergio Rossi coordinates the development and manufacturing of Yves Saint Laurent brand footwear. Gucci Group Watches owns the license to produce and distribute Yves Saint Laurent timepieces and jewelry and commenced manufacturing these items in 2002. Other Yves Saint Laurent accessories are produced under license. Over the course of 2002, Yves Saint Laurent virtually completed its process of eliminating unwanted product lines.

•    YSL Beauté

        YSL Beauté sources materials from a number of suppliers. YSL Beauté has experienced neither meaningful increases in raw material prices nor difficulty in obtaining these materials in recent years. YSL Beauté produces fragrances, make-up, skincare and toiletries at plants near Paris, France. The Lassigny facility produces principally Yves Saint Laurent and licensed brand products, while the Bernay facility produces mainly Roger & Gallet merchandise, as well as licensed products. YSL Beauté production facilities manufacture and ship approximately 100 million units of finished products per annum and have ample capacity to allow the business to expand in the coming years. YSL Beauté maintains warehouse facilities at its production sites in France as well as in Hong Kong, Singapore, Japan, New Zealand, Austria, Switzerland, and Italy. YSL Beauté utilizes other Gucci Group warehouse facilities in the United States and elsewhere.

•    Other Operations

        Sergio Rossi:    Sergio Rossi produces approximately half of its footwear at its factories in San Mauro Pascoli (near Rimini), Italy. Subcontractors, most of which work principally or exclusively for Sergio Rossi and which are located in the Emilia Romagna region of Italy, produce the remaining half of Sergio Rossi footwear. A new production, warehouse and administrative facility in San Mauro Pascoli—inaugurated in Spring 2003—provides the Company additional space for product development, production and warehousing as well as administration.

        Boucheron:    Boucheron produces its haute joiallerie pieces in its workshop in Place Vendôme in Paris. Boucheron subcontracts production of its joiallerie and bijoux lines to a select numbers of suppliers located in France and Italy. Boucheron sources timepieces from a select number of Swiss-based suppliers and from Gucci Group Watches, which since early 2001 assembles and distributes Boucheron watches under license.

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        Bottega Veneta:    Bottega Veneta develops prototypes in-house at its facility in Vicenza (Veneto), Italy and subcontracts production to third parties, mostly located in the Veneto region of Italy.

        Emerging Brands:    The companies develop prototypes in-house using the infrastructure of the Group's ready-to-wear and accessories facilities and subcontract production to third party suppliers located in Italy and France.

6.    Distribution

•    Gucci Division

(1)

Wholesale includes sales to select duty free, department and specialty stores.

•    Gucci Fashion and Accessories

        The Gucci Fashion and Accessory distribution network consists of directly operated stores, franchised stores as well as points of sale in duty-free boutiques and select department and specialty stores. During the first quarter 2003, Gucci Fashion and Accessories generated € 296.1 million in revenues. In 2002, Gucci Fashion and Accessories generated € 1,067.2 million in retail sales (€ 1,162.6 million in 2001 and € 1,120.3 million in 2000) and € 267.8 million in wholesale revenues (€ 298.8 million in 2001 and € 253.5 million in 2000). Segment revenues in 2002 also included € 47.6 million in royalty income (€ 51.4 million in 2001 and € 43.8 million in 2000).

        Directly operated stores are Gucci Fashion and Accessories' primary distribution channel. This permits Gucci to be in touch with its consumers and respond rapidly to demand. In addition, this permits the company to realize high margins by capturing the production, distribution and retailing components of the value chain. Directly operated stores also allow management to observe in real time sell-out trends and to be present in strategically and economically significant markets. In the course of the last several years, Gucci has expanded its directly operated stores network while simultaneously reducing the number of franchise stores.

(1)

Wholesale doors includes select duty free, department and specialty stores.

        Directly Operated Stores:    Gucci's directly operated stores numbered 180 on April 30, 2003; 174 on January 31, 2003; 163 on January 31, 2002 and 143 on January 31, 2001. As of April 30, 2003, Gucci operated "flagships" (large stores in strategically important cities) in Rome, Florence, Milan, Paris, London, New York, Beverly Hills, Ala Moana, Honolulu, Aoyama Tokyo, Shinjuku Tokyo, Osaka and Hong Kong. In April 2003 Gucci announced the purchase of property in Ginza Tokyo, on which a Gucci flagship is scheduled to open in 2005 after the construction of a new building.

        In 2002 the Company opened 19 stores (5 in Europe, including a flagship on Avenue Montaigne in Paris; 5 in the United States, including important stores on Madison Avenue in New York and in Honu Hawaii; 6 in

21

Japan; and 3 in non-Japan Asia, including a flagship in Taipei). Gucci closed 8 stores in 2002. Selling square footage in directly-operated stores was 504,039 on January 31, 2003, compared to 422,488 on January 31, 2002. As a result of the decrease in retail sales globally, the increased selling surface as well as Euro appreciation vis-a-vis the US Dollar and Japanese yen, Gucci's sales per square foot (as calculated using the weighted average square footage during the year) declined to € 2,347 in 2002 from € 3,162 in 2001.

(1)

Stores designated as "small" have 1,000 square feet or less of selling space. Stores designated as "medium" have over 1,000 but less than 4,000 square feet of selling space, while "large" stores have 4,000 square feet of selling space or more.

        Gucci's strategy is to improve store productivity, while developing a local clientele business through product assortment, merchandising, customer service and prompt delivery. Gucci maintains a continuous renovation program to ensure its stores are maintained to standards that correctly showcase the brand's image and allow proper and adequate presentation of the product range. In 2002, Gucci opened a 7,000 square foot flagship store on Madison Avenue in New York and a 7,500 square foot store on Avenue Montaigne in Paris, which have raised Gucci's profile in these two important markets. The enlarged, 16,000 square foot store on via Montenapoleone in Milan, which opened fully in November 2002, stands as the brand's global flagship. In addition, in April 2003 Gucci moved its London Bond Street store to a 7,500 square foot location.

        Franchises:    The number of franchise boutiques was 31 as of January 31, 2003 (32 as of January 31, 2002). The franchise stores' merchandise, image, window display and service standards are closely monitored for consistency with Gucci's directly operated stores. The Company's franchise stores are generally in smaller cities or in markets where the Company believes it may not have sufficient local expertise or where, for legal or other reasons, it would be impractical to establish directly operated stores.

        In general, Gucci's franchise agreements provide for the right to operate a specified number of Gucci stores in specified locations and require the franchisee to sell exclusively Gucci products purchased from Gucci and licensed products purchased from Gucci's licensees. The Company's franchise agreements have a limited duration, with an initial term generally not in excess of three years, and stipulate the conditions of operation and merchandise assortments. Gucci also provides detailed guidelines for store fittings, fixtures, merchandising, advertising and marketing programs.

        Duty-Free Boutiques:    Gucci's duty-free boutiques provide an important sales channel for certain of its core products, particularly handbags, small leather goods, ties and scarves. The Company's duty-free distributors operate under short-term contractual arrangements. The fittings and fixtures are generally consistent with Gucci's other distribution channels to ensure uniformity of image.

        Department and Specialty Stores:    As of April 30, 2003, Gucci was present in 89 department and specialty store locations in the United States (including principally doors in Saks Fifth Avenue, Neiman Marcus and Bergdorf Goodman) and in approximately 410 points of sale in multi-brand specialty stores in Europe. Limited distribution of certain product lines (other than leather goods and shoes) is made through a number of additional department and specialty stores. Stringent operating standards for all department and specialty stores are maintained for decor design, retail price guidelines, merchandising mix, visual merchandising and MIS requirements.

•    Gucci Group Watches

        Including sales to Gucci Fashion and Accessories, Gucci Group Watches generated revenues of € 208.2 million in 2002 compared to € 236.3 million in 2001 and € 238.5 million in 2000. Gucci Group Watches

22

distributes directly to fine jewelry and watch stores and department stores in most major markets including Western Europe, the United States, Japan and Hong Kong. In other markets, the Timepieces segment sells through third party distributors. During 2002 Gucci Group Watches continued to implement its strategy to close inappropriate points of sale and opened better quality doors. The Gucci Group watch brands are sold through approximately 5,700 points of sale worldwide.

•    Yves Saint Laurent

        On April 30, 2003, Yves Saint Laurent had 52 directly operated stores (including flagships on Rue Faubourg St. Honoré in Paris, Madison Avenue in New York, via Montenapoleone in Milan, Sloane Street in London and Omotesando Aoyama in Tokyo). Management has opened second stores in key locations in New York and Rome in Spring 2003 and plans to open stores in Beverly Hills, London and Hong Kong by the Fall of 2003.

        Yves Saint Laurent also is present in leading European, US and Asian department and specialty stores. Many points of sale in these select retailers are shops-in-shop, the format of which permits Yves Saint Laurent to create a boutique-like environment. The number of "three wall" shops-in-shop in leading US and European specialty stores numbered approximately 30 at the end of 2002 and is expected to increase to approximately 50 by the end of 2003.

        Yves Saint Laurent licensees distribute through doors in department and specialty stores in Europe and the United States.

•    YSL Beauté

        YSL Beauté distributes through affiliates in 17 countries and through wholesale agents and distributors in countries where no affiliates operate. YSL Beauté has a selective distribution policy and its products are limited to dedicated counters and space in upscale perfumeries, department and specialty stores and duty free stores. In 2002, YSL Beauté completed its restructuring program begun in mid-2000, in which it terminated known grey market sales of Yves Saint Laurent brand fragrances and cosmetics and reduced by approximately 6,000 the number of points of sale to 16,000 worldwide. Management also restructured key distribution affiliates, reducing headcount, putting in place new regional managers and establishing business practices designed to support the long-term success of YSL Beauté's brands.

•    Other Operations

        Sergio Rossi:    On April 30, 2003, Sergio Rossi had 40 directly operated stores as well as points of sale in fine department and specialty stores.

        Boucheron:    On April 30, 2003, Boucheron had 25 directly operated stores (including flagships in Paris, Place Vendôme, Milan via Montenapoleone, London Bond Street and Tokyo Ginza). Boucheron watches and fragrances are sold in a select number of doors and fine department and specialty stores.

        Bottega Veneta:    On April 30, 2003, Bottega Veneta had 58 directly operated stores and points of sale in fine department and specialty stores. Management plans to increase substantially the number of directly operated stores and grow its presence with key wholesale accounts in the coming years.

        Emerging Brands:    Among the Emerging Brands Alexander McQueen and Stella McCartney opened stores in lower Manhattan in Fall 2002. This Spring, each opened a store in London, Alexander McQueen on Bond Street, Stella McCartney just off Bond Street. Balenciaga opened a New York store on 22nd Street in February 2003. Alexander McQueen opened a shop in Milan off via Montenapoleone in June 2003. Each of the brands also significantly strengthened their positions with selective specialty retailers, particularly in the United States. Management plans to continue to open a select number of directly operated stores in key luxury markets and develop wholesale distribution for each of the Emerging Brands in the coming years.

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7. Marketing

•    Gucci Fashion and Accessories

        For Gucci Fashion and Accessories, communication activities—including advertising, fashion shows, public relations, special events and store window displays—are managed on a centralized basis. Gucci's marketing strategy is designed to maintain a high profile and consistent visibility, on an international, national and local level, to enable Gucci to strengthen continually its position as a leading worldwide luxury goods brand.

        Gucci's total advertising and communications expenditures (including Gucci Fashion and Accessories and Gucci Timepieces) were € 79.9 million (5.2% of revenues) in 2002, € 100.2 million (5.9% of revenues) in 2001 and € 102.2 million (6.3% of revenues) in 2000. Management believes that the 2002 level of expenditures, in combination with the amounts spent by licensees on marketing and with the significant editorial coverage from fashion shows and public relations, generates a level of public exposure for Gucci that adequately supports the brand's long-term revenue and profit growth.

        Gucci's franchise partners are required to spend an amount not less than 5% of their total annual purchases from Gucci on local communications. The eyewear and perfume licensees are required to spend not less than between 4% and 5% of net sales on Gucci advertising and marketing.

        The Company advertises primarily in national and international fashion, lifestyle and business magazines, with newspapers used for store openings and short-term marketing objectives. Gucci co-ordinates its advertising campaigns with its franchisees and licensees. In markets where Gucci does not operate its own stores, the Company provides materials developed for its worldwide campaign to its franchisees and duty free distributors. The Company has the right to review and approve all advertising and marketing programs and materials of its licensees. In addition to advertising, the Company uses catalogs to market directly to existing and prospective customers.

        Gucci has its own team of public relations professionals based in London, Milan, New York, Paris, Tokyo, Seoul, Hong Kong, and Taipei, who are supplemented with select outside professionals. Gucci's public relations efforts target the fashion press, such as national fashion magazines and trade publications, offering Gucci products for photographic shoots and providing up-to-date product information. Each year, the Company stages four ready-to-wear fashion shows in Milan: two women's and two men's. These present opportunities for the Company to assert its style and quality leadership and to obtain coverage and endorsements from the fashion press.

•    Gucci Group Watches

        Gucci Timepieces requires third party distributors to spend certain amounts on advertising and communication for Gucci brand watches. Yves Saint Laurent began communication activities for its watch lines (introduced to the trade in June 2002) in the fall of 2002. Boucheron began communication activities for its revamped and expanded watch collection in the fall of 2002. Bédat & Co. maintains regular communication activities, principally magazine advertisements and special events.

•    Yves Saint Laurent

        Yves Saint Laurent manages centrally from Paris all its marketing and communication activities. Communication includes advertising (mainly print), fashion shows, store window displays and public relations events. Each year, the company stages four ready-to-wear fashion shows in Paris: two women's and two men's. Yves Saint Laurent strictly controls the marketing activities of its licensees. Yves Saint Laurent spent € 36.5 million in communication in 2002 compared to € 32.6 million in 2001, and management plans to maintain a similar level of investment in 2003.

•    YSL Beauté

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YSL Beauté manages centrally from Paris all the division's marketing and communication activities. Under the artistic direction of Tom Ford, the Company manages the marketing and communication activities of the Yves Saint Laurent brand. YSL Beauté invests considerably in point of sale display and communications as well as print advertising. The Company provides its affiliates and retailers the materials necessary for point-of-sale advertising, promotion and product launches. YSL Beauté's total advertising and communications expenditures were € 115.2 million (21.0% of revenues) in 2002, € 113.7 million (21.9% of revenues) in 2001 and € 124.0 million (21.2% of revenues) in 2000. Management expects YSL Beauté to spend between 20% to 25% of revenues on communication in 2003.

•    Other Operations

        Sergio Rossi; Boucheron; Bédat & Co., Bottega Veneta, Emerging Brands:    The companies manage centrally from their respective headquarters their marketing and communication activities. For each brand, communication consists principally of print advertising (mainly in lifestyle and business publications) and public relations.

8. Licensing Agreements and Government Regulations

Licensing Agreements

        The business model of Gucci Group is to control, as much as possible, the design manufacture, promotion, distribution and sale of products bearing any of its registered trademarks. Subsisting Gucci Group licenses are for fragrance and eyewear. The Gucci eyewear license with Safilo S.p.A. is the most significant.

        Due to the specialist nature of production and distribution of eyewear, Gucci and several other brands of the Group have licensed, or are in discussions to license, eyewear to Safilo S.p.A. a leading Italian manufacturer and distributor of fashion eyewear that serves as a licensee for brands including Giorgio Armani, Christian Dior, Ralph Lauren, Gianfranco Ferré, Valentino and Max Mara.

        Safilo distributes the Gucci line through its own sales branches which in turn distribute to specialized optical stores, Gucci directly operated stores, franchisees, department stores and duty-free boutiques.

Government Regulations

        The Company is not constricted by any material government regulations.

9. Trademarks

•    Group

        The Group's trademarks are widely used in product marketing and are themselves frequently incorporated into product designs. In view of the importance of the trademarks to its business, the Company has a policy to prosecute trademark infringement vigorously. The Group believes that the actions taken by it to prosecute infringement and control counterfeiting have been generally successful. However, it is impossible to estimate the extent of any counterfeiting, the amount of lost revenue or the extent of any other damages suffered by the Group's companies as a result of counterfeiting.

        The Group systematically takes action against third parties that attempt to register marks that the Company believes to be confusingly similar to its trademarks. To bring such cases to its attention, the Company employs an international surveillance service that monitors trademark filings around the world.

        The Company is not party to any material litigation involving its trademarks, and there are no material restrictions on the Company's ability to use its trademarks.

•    Gucci Fashion and Accessories

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Gucci's trademarks consist principally of the name "Gucci", logos that incorporate the name "Gucci" or the interlocking letters "GG", the Gucci crest and the Gucci green-red-green stripe. The trademarks are owned by Gucci and registered or are the subject of pending applications in international product classes covering leather goods, clothing and footwear, perfumes and cosmetics, eyewear, watches and jewelry in the United States, Italy, Japan and Gucci's other principal markets. The Company believes that all material trademark registrations are valid and current, and that all licenses have either been recorded or applications have been filed to record such licenses where required to avoid forfeiture of the Company's trademarks in the Company's principal markets.

•    Gucci Group Watches

        Gucci:    The trademark for Gucci watches is held by Guccio Gucci S.p.A.

        Bédat & Co.:    Bédat & Co. markets its products under its proprietary trademark incorporating the name "Bédat & Co.". These trademarks have been registered in various graphic forms around the world, including a number of countries in Europe, Asia, Australia, North America and Latin America.

•    Yves Saint Laurent

        Yves Saint Laurent: Yves Saint Laurent's trademarks consist of the name "Yves Saint Laurent", the words associated "Rive Gauche", the logotype "YSL" and the YSL four red and pink squares. The trademarks are owned by Yves Saint Laurent and subsidiaries of the Group and are registered internationally in the relevant product classes covering all its products worldwide.

•    YSL Beauté

        Yves Saint Laurent Parfums holds the trademarks for Yves Saint Laurent brand perfumes, make-up and skincare, Roger & Gallet brand perfumes, toilet soaps and toiletries, and manufactures and distributes under license fragrances and related items for Van Cleef & Arpels, Oscar de la Renta and Fendi, as well as for Ermenegildo Zegna.

        Yves Saint Laurent Parfums' trademarks consist principally of the name "Yves Saint Laurent" and the "YSL" logo which are affixed on all products of each line. The main fragrance lines' trademarks (feminine lines: "Nu", "Rive Gauche", "Opium", "YSL Paris", "Yvresse", "Baby Doll"; masculine lines: "M7", "Yves Saint Laurent Pour Homme", "Kouros" "Body Kouros", "Jazz", "Live Jazz") are owned by Yves Saint Laurent Parfums and registered or subject to pending applications in international product class 3 covering perfumes, make-up and skincare worldwide. Moreover, all Yves Saint Laurent skincare and make-up products are identified by various names, which are owned, filed and registered as trademarks when and where it is possible and/or necessary.

        Roger & Gallet's trademarks consist principally of the name "Roger & Gallet" and the logo "R&G", which are affixed on all products. The names of the main fragrance lines ("Jean-Marie Farina", "Jean-Marie Farina Extra Vieille", "Open Roger & Gallet", "Eau pour Soi", "Eau de Thé Vert", "L'Homme Essentiel", "White Reseda") are owned by Roger & Gallet and registered or subject to pending applications in international product class 3 covering cosmetics, toilet soaps, toiletries and perfumes, worldwide.

        The house trademarks of the perfumes manufactured and distributed under license (Oscar de la Renta, Van Cleef & Arpels, Fendi and Ermenegildo Zegna) are registered worldwide or quasi worldwide (in countries where the products are or shall be sold) in the name of the licensors in international product class 3 covering cosmetics, make-up and/or perfumes. The main fragrance lines' trademarks are registered in the name of the licensees except when it is necessary (for local legal constraints, for example) to file and register these names in association with the house trademarks.

        YSL Beauté distributes "Kingdom" by Alexander McQueen, "Stella" by Stella McCartney and Boucheron's fragrances. These trademarks are owned as set out below in Other Operations.

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        Furthermore, YSL Beauté usually files applications for patents and designs when possible and/or necessary.

•    Other Operations

        Sergio Rossi:    Sergio Rossi markets its products primarily under its proprietary trademark incorporating the name "Sergio Rossi". The trademark has been registered in various graphic forms around the world, including a number of countries in Europe, Asia, Australia, North America and Latin America.

        Boucheron:    Boucheron markets its products primarily under its proprietary trademark incorporating the name "Boucheron". The trademark has been registered in various graphic forms around the world, including a number of countries in Europe, Asia, Australia, North America and Latin America.

        Bottega Veneta:    Bottega Veneta markets its products primarily under its proprietary trademark incorporating the name "Bottega Veneta". The trademark has been registered in various countries around the world.

        Emerging Brands:    Alexander McQueen markets its products primarily under its proprietary trademark incorporating the name "Alexander McQueen". The trademark has been registered and is continuing to be registered in various countries around the world. Stella McCartney markets its products primarily under its proprietary trademark incorporating the name "Stella McCartney". The trademark has been registered in various countries around the world. Balenciaga markets its products primarily under its proprietary trademark incorporating the name "Balenciaga". The trademark has been registered in various countries around the world.

10. Competition

•    Group

        The level and nature of competition differs among the Group's brands and product categories. Management believes its brands are leading names in the luxury goods industry, and consequently, are well positioned to compete. Management believes the Group's companies compete on the basis of brand image, product design and quality, product assortment and distribution quality (store and door location as well as image) and execution.

•    Gucci Fashion and Accessories

        Gucci competes with a number of well-known and established luxury goods brands, including Chanel, Christian Dior, Dolce & Gabbana, Hermès, Ferragamo, Louis Vuitton and Prada, as well as with a large number of regional purveyors of prestige leather goods, ready-to-wear, footwear and watches.

•    Gucci Group Watches

        Gucci and Yves Saint Laurent watches compete principally with watches offered by leading international fashion brands. Boucheron and Bédat & Co. compete principally with leading prestige watch and jewelry brands, including Bulgari, Cartier and Rolex.

•    Yves Saint Laurent

        Yves Saint Laurent competes in the same luxury industry niche as Gucci, and consequently faces many of the same competitors as Gucci.

•    YSL Beauté

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YSL Beauté competes with a number of international, prestige cosmetics groups—or multinational groups with important prestige cosmetics activities—including Chanel, Estée Lauder, L'Oréal, LVMH, Procter & Gamble, Shiseido and Unilever.

•    Other Operations

        Sergio Rossi:    Sergio Rossi competes in the luxury footwear market against such prestige shoe brands as Jimmy Choo and Manolo Blahnik as well as fashion and accessory brands like Chanel, Ferragamo, Gucci and Prada.

        Boucheron:    Boucheron competes with a number of international, prestige jewelers, including principally Cartier, Bulgari, Van Cleef & Arpels and Tiffany. Boucheron also competes against lesser known, regional jewelers and purveyors of premium, non-branded jewelry.

        Bottega Veneta:    Management is positioning Bottega Veneta to compete at the high-end of the luxury leather goods market against brands such as Hermès as well as against brands such as Gucci, Louis Vuitton and Chanel.

        Emerging Brands:    Alexander McQueen, Stella McCartney and Balenciaga compete against young contemporary designer brands as well as against large, established fashion and accessory brands.

11. Legal Proceedings

        In the ordinary course of its business, the Company is a party to various claims and legal actions (including actions relating to the use of the Company's trademarks) which the Company believes are routine in nature and incidental to the operation of its business. In the opinion of management, based upon inquiries of counsel and a review of pending litigation matters, including amounts in controversy, the resolution of all such pending claims and actions will not have a material adverse effect upon the consolidated financial position or results of operations of the Company.

        The Company has several outstanding assessments by fiscal authorities in various countries. The Company believes that the final settlements are not likely to have a material adverse effect on the Company's financial condition or operating results.

12. Settlement of the LVMH Litigation

        In January 1999, LVMH—Moët Hennessy Louis Vuitton ("LVMH") made an uninvited acquisition of 34.4% of the common shares of the Company (20,154,985 shares). In February 1999, the Company issued 20,154,985 shares to an Employee Stock Ownership Plan ("ESOP"). Following litigation with respect to the ESOP, on March 19, 1999, the Company entered into a Strategic Investment Agreement ("SIA") with PPR pursuant to which the Company issued 39,007,133 common shares to Societé Civile de Gestion Financière Marothi ("Marothi"), a wholly owned subsidiary of PPR, in exchange for approximately US$ 3 billion. LVMH challenged the strategic alliance in court in The Netherlands. On September 10, 2001, the Company, PPR and LVMH entered into a comprehensive settlement of the legal actions pending on that date.

        The Settlement Agreement provided for the purchase by PPR of 8,579,337 common shares, representing approximately 8.6% of the Company's then outstanding share capital, from LVMH at a price of US$ 94.00 per common share.

        Pursuant to the Settlement Agreement, PPR, LVMH and the Company dismissed all pending litigation, claims and actions relating to, inter alia, the shareholdings of LVMH or PPR in the Company, the acquisitions of such shareholdings or the granting of options to Company management. The Settlement Agreement also provided for the payment of a special cash dividend of US$ 7.00 per common share to benefit all Gucci Group shareholders, except PPR.

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        Pursuant to the Settlement Agreement, PPR has agreed to commence an offer to purchase all of the Company's issued and outstanding common shares (the "Offer") at a price of US$ 101.50 (the "Offer Price") per common share (or such reduced price as may be authorized by the directors, in the event of a special dividend—see "subsequent events" on page 176 of the 2002 Annual Report) on March 22, 2004. If, immediately prior to the expiration of the Offer Period, the common shares not tendered in the Offer and the common shares issuable upon exercise of outstanding options granted to employees of the Company to purchase common shares constitute less than the greater of (1) 15% of the then-outstanding common shares and (2) 15 million common shares, PPR will provide a subsequent offering period of no less than 10 days following its acceptance for payment of common shares tendered in the initial offering period (the "Subsequent Offering Period").

        Under a simultaneously executed Amended and Restated Strategic Investment Agreement among the Company and PPR and Marothi ("Restated SIA", discussed below), until the Offer, PPR is allowed to acquire additional common shares of the Company only if, as a result of such purchase shareholders other than PPR own no less than the greater of (i) 30% of the issued and outstanding common shares and (ii) 30 million common shares.

        PPR may delay the commencement of the Offer for a maximum of six months upon the occurrence of a force majeure event, but only for so long as the force majeure event exists and the existence of such event is confirmed by a majority of the independent directors.

        LVMH and the Company would have the right to seek monetary damages from PPR if it fails to honor its obligations under the Settlement Agreement. In addition, LVMH and the Company are each entitled to seek specific performance of the agreement, including an injunction to require PPR to commence the Offer and purchase the common shares in accordance with the terms of the Settlement Agreement. The Settlement Agreement does not confer any rights or remedies upon any person or entity other than Gucci Group, LVMH and PPR.

        Under the Restated SIA, in the event that PPR fails to commence and complete the Offer in accordance with the terms set forth in the Settlement Agreement, which are reiterated in the Restated SIA, a majority of the independent directors shall have the ability to seek specific performance, sue for damages and/or distribute a stock dividend for each issued and outstanding common share not owned by PPR so that as a result of such stock dividend, PPR's share ownership shall be reduced to 42% of the issued and outstanding common shares. In the event the Independent Directors cause the Company to distribute a stock dividend, the number of Supervisory Board members nominated by PPR would be reduced by one member, the composition of the Strategic and Financial Committee would be three independent directors and two PPR Directors and PPR would be prohibited from acquiring additional common shares unless it did so pursuant to a public offer for all of the outstanding common shares which was recommended to the Company's shareholders by the independent directors.

        PPR agreed that until the later of the expiration of the Offer Period and the completion of the Subsequent Offering Period and for so long as no less than the greater of (1) 15% of the outstanding common shares and (2) 15 million common shares remain outstanding, it will use its best efforts to cause the Company to maintain the listing of the common shares on the NYSE and the Euronext Amsterdam stock exchange.

        On December 17, 2001, LVMH sold 11,565,648 common shares, representing 11.5% of Gucci's then outstanding share capital, to Crédit Lyonnais for a purchase price of US$ 89.6381 per common share (or an aggregate purchase price of US$ 1,036,722,345). Upon consummation of the sale, LVMH no longer beneficially owned any shares of the Company.

13. The amended and restated Strategic Investment Agreement

        As noted above (see Settlement of the LVMH Litigation), as part of the settlement, the Company and PPR and Marothi entered into a restated Strategic Investment Agreement ("Restated SIA"). Apart from

29

reiterating some of the financial features of the Settlement Agreement, the Restated SIA amends the corporate governance provisions of the existing Strategic Investment Agreement.

        The Restated SIA provides for an equal number of PPR Directors and independent directors. Pursuant to a request by PPR, the majority of independent directors agreed to reduce the Supervisory Board to eight members and Mr. Charles Mackay resigned as a member of the Supervisory Board, effective November 9, 2001. The Restated SIA provides that an independent director serve as the Chairman of the Supervisory Board (subject to the prior approval of the Strategic and Financial Committee).

        Until the consummation of the Offer, the Supervisory Board will be comprised of four independent directors and four PPR directors. Following the consummation of the Offer, PPR will have the ability to expand the Supervisory Board of the Company by one member and nominate such additional member following at least 15 days' notice to the independent directors. During such notice period, the Chairman of the Supervisory Board will schedule a meeting of the Supervisory Board, and PPR will consult with the independent directors. If the decision is taken to expand the Supervisory Board, a shareholders' meeting will be noticed promptly and the matter will be submitted to shareholders of the Company for a vote.

        The restated SIA provides that the PPR Directors may not vote on any matter as to which a majority of the independent directors determine that PPR has a conflict of interest (subject to arbitration by PPR).

        The Supervisory Board will continue to maintain the Strategic and Financial Committee, consisting of three PPR Directors and two independent directors. The Strategic and Financial Committee will discuss and approve certain matters prior to their submission to the full Supervisory Board for approval, including the Company's strategic plan; certain investments, strategic acquisitions and dispositions; certain capital expenditures and incurrence of debt outside the ordinary course of business; changes in the Company's capital structure; any amendment to the Company's Articles of Association or the rules of the Supervisory Board; any legal mergers, demergers, spinoffs, dissolutions and applications relating to bankruptcy or reorganizations and the appointment of the Chairman of the Supervisory Board. Managing Directors will be nominated by the independent directors and approved by the Strategic and Financial Committee. If not approved by the Strategic and Financial Committee, the matters described above must be approved by at least 75% of the members of the Supervisory Board then in office in order to take effect.

        The Restated SIA provides that prior to December 31, 2004, PPR may not sell or transfer any common shares except with the prior consent of a majority of the independent directors, except to its affiliates under certain conditions and except in connection with a public offer for 100% of the common shares by a third party which offer has been recommended to the Company's shareholders by the Supervisory Board. After December 31, 2004, PPR may sell or transfer common shares following due consultation with the independent directors.

        The Restated SIA also includes certain non-competition provisions, assurances of the Company's independence, a commitment to support the existing manufacturing operations and employee base and a commitment not to solicit Company employees. Before PPR and its affiliates can carry on a competing business in the fashion clothing and luxury goods industry, apart from the activities conducted by the PPR Group as of the date of the Restated SIA, such competing business must first be presented to the Company in accordance with the terms of the Restated SIA.

        In the event of sales or transfers by PPR of common shares following December 31, 2004, the governance arrangements described above are subject to certain modifications.

        The Restated SIA terminates on the earliest of:

        (1)   March 19, 2009;

        (2)   the date following the consummation of the Offer such that fewer than the greater of (a) 15% of the then-outstanding common shares and (b) 15 million common shares are held by shareholders other than PPR and its affiliates;

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        (3)   such time prior to March 19, 2009 as PPR consummates a tender offer, other than the Offer, for 100% of the then-outstanding common shares, which is recommended to the shareholders by a majority of the Independent Directors; or

        (4)   such time as the Settlement Agreement ceases to be in full force and effect other than pursuant to the terms thereof, provided that in such case PPR, the Company and Marothi shall agree to be bound by the initial Strategic Investment Agreement.

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C. Organizational Structure

        The table below includes the principal Group companies organized by segment (Gucci Fashion and Accessories; Gucci Group Watches; Yves Saint Laurent; YSL Beauté; Other Operations) and by activity (holding; industrial; service; distribution affiliate) as of July 1, 2003. See Note 25 to the Consolidated Financial Statements, "Consolidated Companies", pages 177 to 183 of the 2002 Annual Report and Exhibit 8.1 herein, for a complete list of Group companies.

Note: Birdswan Solutions Ltd is the holding company for Alexander McQueen.

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D. Plant, Property and Equipment

•    Group

        The Group's property, plant and equipment consists principally of production, warehouse facilities and office buildings as well as certain retail stores in strategically important locations.

        Most of the Group's stores are leased on an operating lease basis and therefore are not part of the Group's tangible fixed assets. The leases for these stores contain terms and conditions that the Company believes were in line with market practice at the time they were entered into. The leases periodically are subject to renewal and, while the Group believes that its current leases can be renewed on acceptable terms, no assurance can be given with respect to renewals or that disputes with the owners of the leased properties will not arise. (See Report of the Management Board on page 100 in the 2002 Annual Report for information on the present value of operating lease commitments.)

        The Company opens new stores when it finds appropriate space and determines that there is a market for its products in the location. The Company's stores are located in areas typically associated with the sale of luxury goods. Such properties are generally highly sought after, and the Company faces intense competition from other companies for these locations. The Company finances the opening of new stores through existing working capital. The Group's factories and warehouses operate at high standards, and there are no environmental issues concerning their operations.

Plant, Property and Equipment (net book value) (€ million)

        The net book value of the Group's property, plant and equipment was € 961.1 million as of April 30, 2003.

•    Gucci Fashion and Accessories

        Gucci Fashion and Accessories rents most of its stores and warehouse facilities through long-term lease contracts.

        Gucci Fashion and Accessories owns its principal design, manufacturing, warehouse and administrative offices in Scandicci (Florence, Italy); a property on Bond Street in London; and its showroom in Florence (Italy).

        Gucci Fashion and Accessories owns properties which house its stores and offices in New York and Florence, and its stores in Rome, Venice, Portocervo (Italy), Cannes (France) and Seoul (South Korea). On April 10, 2003, Gucci Group announced it had acquired an important property in the Ginza district of Tokyo, one of the most prestigious and fast growing areas for luxury goods in Japan. The Company plans to build a new 10,000 square foot Gucci flagship store in Spring 2005, as well as approximately 40,000 square foot of office space for Gucci Group Japan's headquarters as well as common space and parking areas after having terminated a tenant's lease and demolishing the building currently on the site. The Company is exploring the possibility of leasing this property through a sale and leaseback arrangement with independent third parties.

        Management believes that Gucci has sufficient production facilities and warehouse space to meet its current business needs and may consider adding additional prototype facilities and/or warehouse space depending on

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business trends and the cost of such investments. Similarly, Gucci may consider purchasing additional real estate for its stores depending on the strategic importance, location and cost of such properties.

•    Gucci Group Watches

        Luxury Timepieces International leases its principal office and warehouse facilities in Neuchâtel (Switzerland) and owns production facilities in La Chaux-de-Fonds (Switzerland) and office and warehouse facilities in Markham, Ontario (Canada). Bédat & Co. leases its principal offices in Geneva (Switzerland). Management believes that the Gucci Group Watches organization has sufficient office and warehouse space to meet its current and foreseeable business needs.

•    Yves Saint Laurent

        Yves Saint Laurent rents its principal design showrooms and administrative offices in Paris and owns its manufacturing factories in Angers (France). It uses Group warehouse facilities for its distribution.

•    YSL Beauté

        YSL Beauté owns two manufacturing and warehousing facilities near Paris. The Lassigny plant produces mainly Yves Saint Laurent products, while the Bernay plant produces mainly Roger & Gallet and licensed brand merchandise. All other YSL Beauté's warehouse facilities are rented. Management believes that YSL Beauté has sufficient production and warehouse space to meet its current and foreseeable business needs.

•    Other Operations

        In April 2003 Sergio Rossi opened a new administrative, manufacturing and warehouse complex in San Mauro Pascoli (Italy). Sergio Rossi plans to move all operations to the new complex. Boucheron leases its administrative offices and haute joiallerie workshop in Paris. Bottega Veneta owns its administrative and product development facilities in Vicenza (Italy). Alexander McQueen owns the building and land which houses the corporate and design headquarters in London. Stella McCartney and Balenciaga lease administrative offices and design showrooms in London and Paris. The Group owns its outlet store facility in Leccio (Italy). The Company's industrial activities—Italian jewelry and shoe producers and leather tanneries—own two manufacturing facilities.

•    Corporate

        The Company leases corporate offices in Amsterdam and London and owns a property on via Monte Napoleone in Milan in which it has offices and intends to open stores and showrooms in the future. The Company also owns a warehouse in Bioggio (Switzerland) as well as administrative and warehouse facilities in Cadempino (Switzerland).

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ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS

A.    Operating Results

        Reference is made to the following information: the "Consolidated Financial Statements", appearing on pages 116 through 121 of the 2002 Annual Report; the "Notes to the Consolidated Financial Statements", appearing on pages 122 through 183 of the 2002 Annual Report; and the "Report of the Management Board" appearing on pages 52 through 115 of the 2002 Annual Report. Certain non-GAAP measures listed on page 54 of the 2002 Annual Report have been reconciled to US GAAP in Item 10.L in accordance with Regulation G.

B.    Liquidity and Capital Resources

        Reference is made to the information captioned in the "Liquidity and Capital Resources" appearing on pages 94 through 97 of the 2002 Annual Report. Certain non-GAAP measures listed on page 54 of the 2002 Annual Report have been reconciled to US GAAP in Item 10.L in accordance with Regulation G.

C. Research and Development, Patents and Licenses

        As a multi-brand luxury goods Company that generates most revenues from leather goods, fragrances, ready-to-wear, shoes, watches and cosmetics, research and development is principally in the area of product design and development, in which the Group spent € 104 million, € 90 million and € 66 million in 2002, 2001 and 2000, respectively. As a proportion of revenues, product design and development costs averaged 2-4% in the 2002-2000 period. At YSL Beauté research and development costs for new products—mainly skincare and make-up products—were stable at approximately € 8 million in 2002, 2001 and 2000.

D. Trend Information

•    Group

        In a press release filed with the SEC on July 2, 2003 on Form 6-K, the Group announced its financial results for the first quarter ended April 30, 2003. The following is a brief summary of the Group's first quarter 2003 results:

—

revenues were € 567.1 million (compared to € 607.6 million in the first quarter of 2002);



—

operating profit before goodwill and trademark amortization was € 5.8 million (compared to € 51.1 million in the first quarter of 2002);



—

operating loss, after goodwill and trademark amortization of € 30.2 million, was € 24.4 million (compared to a € 20.4 million operating profit in the first quarter of 2002);



—

net income was € 1.2 million (compared to € 35.5 million in the first quarter of 2002).

        The luxury goods industry faced a uniquely challenging environment during the first quarter of 2003 and particularly in March and April, with the war in Iraq and the outbreak of SARS in Asia having had a devastating impact worldwide. The situation was exacerbated by the strong revaluation of the Euro, which cut tourism and tourists' purchasing power in Europe. The resulting sharp decline in travel and consumer confidence led to reduced traffic and sales in Gucci Group stores, particularly in flagships in major tourist destinations. Group revenues declined in the first quarter primarily as a result of lower sales at the Gucci Division. The decline in Group operating profit before goodwill and trademark amortization owed to lower earnings at the Gucci Division as well as greater losses at YSL Beauté and the Other Operations.

•    Gucci Division

        Gucci Division revenues were € 320.4 million, compared to € 371.2 million (-13.7%). The combination of negative economic and political events in the quarter led to lower revenues in most of Gucci's major markets.

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Sales were down in most product categories, with the exception of jewelry (+18.4%) which continued to benefit from the increasing breadth, quality and unit prices of the collection. The steep decline in travel and tourism negatively affected sales of leather goods and watches, which also suffered from the current severe depression in the fine watch business worldwide.

        Gucci maintained a high gross margin, 70.4%, compared to 70.1%. Management reduced operating expenses to € 160.9 million from € 166.5 million and maintained communication expenses at the prior year's level, approximately € 22 million. The operating margin before goodwill amortization was 20.2% (€ 64.8 million) compared to 25.3% (€ 93.8 million). The operating profit, after goodwill and trademark amortization of € 3.3 million, was € 61.5 million, compared to € 89.3 million.

•    Yves Saint Laurent

        Yves Saint Laurent revenues were € 32.9 million, compared to € 33.1 million. As the weight of Yves Saint Laurent's business in Europe is higher than for many luxury brands, the effect of the slowdown in Europe was particularly severe. The operating loss before goodwill and trademark amortization was € 21.5 million, compared to € 19.7 million. The operating loss, after goodwill and trademark amortization of € 5.8 million, was € 27.3 million, compared to € 25.4 million.

        Retail sales resumed growth in the months of May and June. Management expects the strong Fall/Winter collection as well as the expansion of the retail network to support sales growth in the second half of 2003. In June, Yves Saint Laurent inaugurated an important store on 57^th Street, off Fifth Avenue, in New York and an accessory-only store in an excellent location on via Condotti in Rome. In early Fall it will open flagship stores in Beverly Hills (Rodeo Drive), Hong Kong (Canton Road) and London (Bond Street).

•    YSL Beauté

        YSL Beauté sales were € 140.9 million compared to € 142.6 million in 2002. During the first quarter, YSL Beauté launched Kingdom for Alexander McQueen and Essenza di Zegna for Zegna, while preparing the introduction of Stella, the first Stella McCartney fragrance, this Fall.The start-up and communication expenses to launch the new fragrances were the principal factors causing YSL Beauté to incur a € 7.0 million operating loss before goodwill and trademark amortization, compared to an operating profit before goodwill and trademark amortization of € 3.0 million. The operating loss, after goodwill and trademark amortization of € 10.2 million, was € 17.2 million, compared to € 7.3 million.

•    Other Operations

        Revenues were € 81.5 million compared to € 67.2 million.

        The operating loss before goodwill and trademark amortization was € 20.3 million compared to € 15.7 million, an increase due primarily to the costs associated with the development of the Group's emerging brands (Stella McCartney, Alexander McQueen, and Balenciaga), Boucheron and Bottega Veneta.

        The operating loss, after goodwill and trademark amortization of € 10.9 million, was € 31.2 million, compared to € 25.4 million.

        Boucheron generated growth thanks to good performance from the Place Vendome flagship and the Japanese shops-in-shop. The company presented a strong new watch model at the Basel Watch Fair in April 2003. Bottega Veneta continued to achieve exceptional growth. Each of the emerging brands—Stella McCartney; Alexander McQueen; Balenciaga—produced strong revenue growth in the quarter. Collectively, revenues more than doubled. Balenciaga opened a store in lower Manhattan in February, while Alexander McQueen and Stella McCartney each opened a store in London this Spring. Alexander McQueen launched a women's fragrance, Kingdom, in March, whereas Stella McCartney's first fragrance, Stella, was presented to the press in June.

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•    Other Items

        During the first quarter, the Group purchased 3,203,987 of its own shares for an aggregate cost of € 281.6 million.

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ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES

A. Directors and Senior Management

Supervisory Board

        Under Dutch law and the Articles of Association of the Company, the management of the Company is entrusted to the Management Board under the supervision of the Supervisory Board. The Supervisory Board advises the Management Board and is responsible for supervising the policies pursued by the Management Board and the general course of affairs of the Company and its business. In fulfilling their duties, the members of the Supervisory Board must serve the interests of the Company and its business.

        The Supervisory Board consists of such number of members as may be determined by the shareholders, with a minimum of three members. Pursuant to the Restated SIA, PPR is entitled to nominate four of the eight members of the Supervisory Board and the remaining four directors, one of whom acts as Chairman, must be independent. Ms. Barbizet, Mr. Marteau, Mr. Pinault and Mr. Weinberg were nominated for election to the Supervisory Board by PPR and the other four members are independent.

        The members of the Supervisory Board are elected by the shareholders for a term commencing on the day following the Annual General Meeting of shareholders (which, under Dutch law, must be held within six months after the close of the fiscal year) up to and including the day of the AGM of Shareholders in the next fiscal year. Nominations of candidates to fill vacancies may be made by a holder or holders of 10% or more of the outstanding Shares and/or by the Supervisory Board. At present, the Supervisory Board consists of the following eight members:

Members of the Supervisory Board (July 1, 2003):

(1)

Member of Audit Committee

(2)

Member of Remuneration Committee

        Adrian D. P. Bellamy    is a member of the Supervisory Board and serves as its Chairman and as a member of its Remuneration Committee and its Audit Committee. Mr. Bellamy is Executive Chairman of The Body Shop International PLC, Chairman of Reckitt Benckiser plc, Director of Gap Inc., Director of The Robert Mondavi Corporation, Director of Williams-Sonoma, Inc. Mr. Bellamy was Chairman and Chief Executive Officer of DFS Group Limited, a specialty retailer. He is 61 years of age.

        Patricia Barbizet    is a member of the Supervisory Board. Ms. Barbizet is Chief Executive Officer of Artemis S.A. In addition, Ms. Barbizet is Chairman of the Supervisory Board of PPR. Ms. Barbizet is also a member of the boards of several operating companies affiliated with Artemis S.A. and Pinault Printemps Redoute ("PPR"), respectively. She is 48 years of age.

        Aureliano Benedetti    is a member of the Supervisory Board and serves as a member of its Audit Committee. Mr. Benedetti currently serves as the Chairman of the board of directors of Cassa di Risparmio di Firenze SpA, Centro Vita Assicurazioni SpA, Eptaconsors SpA. In addition, Mr. Benedetti is Vice Chairman of the Board of Directors and the Executive Committee of A.B.I. (Italian Banking Association).

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He also serves as a member of the Board of directors of several industrial and financial companies. He is 67 years of age.

        Reto F. Domeniconi    is a member of the Supervisory Board. He has been a director of Nestle S.A. from 1996, when he stepped down as Executive Vice President in charge of Finance, Control and Administration (a position he had held since 1985) until 2001. Dr. Domeniconi is also a member of the boards of directors of several international industrial and financial companies. He is 67 years of age.

        Patrice Marteau    is a member of the Supervisory Board. Mr. Marteau has been Corporate Secretary and Chief Financial Officer of PPR since 1995, when he stepped down as Corporate Secretary and Chief Financial Officer of FNAC, a PPR subsidiary. Prior to joining the PPR group, Mr. Marteau, among other things, served as Executive Vice President, Asia Pacific Region, responsible for the development and management of operating units, and as Corporate Controller with Danone. Prior to joining Danone in 1984, he held several financial accounting positions with Pechiney. He is 55 years of age.

        François Henri Pinault    is a member of the Supervisory Board. Mr. Pinault is General Partner and Manager of Financière Pinault (parent of Artemis S.A.). In addition, Mr. Pinault is Managing Director of Artemis S.A. and a member of the Supervisory Board of PPR. He is also a member of the Board of several operating companies affiliated with Artemis S.A. and PPR. He is 40 years of age.

        Karel Vuursteen    is a member of the Supervisory Board, Chairman of its Audit Committee, and a member of its Remuneration Committee. Mr. Vuursteen is Ex-Chairman of the Executive Board of Heineken N.V. He also serves as a director of AB Electrolux, Randstad Holding N.V., Ahold N.V., Akzo Nobel N.V., and ING Group N.V. In addition, Mr. Vuursteen is Vice Chairman of the Supervisory Board of Nyenrode University. Prior to joining Heineken in 1991, Mr. Vuursteen served as Chief Executive Officer of Philips Lighting Company, North America, a subsidiary of Philips Electronics N.V. He is 61 years of age.

        Serge Weinberg    is a member of the Supervisory Board and serves as a member of its Remuneration Committee. Mr. Weinberg is Chief Executive Officer and Chairman of the Management Board of PPR since 1995. Between 1990 and 1995, he served as Chief Executive Officer of Compagnie Française de l'Afrique Occidentale, a major trading company which later merged with the Pinault group, and, subsequently, Rexel. Prior to joining the PPR group in 1990, Mr. Weinberg served as President and CEO of Havas Tourisme and as Executive Director and member of the Board of Pallas Finance. Mr. Weinberg is also a member of the Board of several operating companies affiliated with PPR and a member of AFEP (Association Française des Entreprises Privées). He is 52 years of age.

        There is no family relationship among any of the above-named Supervisory Board members of the Company.

Management Board

        The management of the Company is entrusted to the Management Board under the supervision of the Supervisory Board. The Articles of Association provide that the Supervisory Board may from time to time adopt written policies (directiereglement) governing the internal organization of the Management Board, including directions to the Management Board concerning the general financial, economic, social and personnel policies of the Company. In addition, the Articles of Association provide that the Supervisory Board may specify by resolution certain actions by the Management Board that require its prior approval. The Supervisory Board adopted such a resolution on October 23, 1995 and amended it on March 19, 1999. As a result, the matters which must be approved by the Supervisory Board include, among others:

•

the strategic plan for the Company;



•

the capital expenditure and advertising and communications budgets;



•

the grant or amendment of any material license of a Gucci trademark;



•

the establishment of or changes to the Company's primary credit facility; and

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•

the forwarding of the annual audited financial statement of the Company to the shareholders.

        The shareholders also have the power to specify actions of the Management Board that require shareholder approval; to date, no shareholder resolution limiting the powers of the Management Board has been adopted.

        The Management Board consists of such number of members as may be determined by the Supervisory Board. Members of the Management Board are elected by the shareholders for a term commencing on the day following the annual general meeting of shareholders (which, under Dutch law, must be held within six months after the close of the fiscal year) up to and including the day of the annual general meeting of shareholders in the next fiscal year. Nominations of candidates to fill vacancies may be made by the Supervisory Board. The current members of the Management Board are:

Members of the Management Board (July 1, 2003):

        There is no family relationship between the three above-named Management Board members of the Company.

Management Committee and Executive Officers

        As a legal matter, the Management Committee and the executive officers of the Company support the Management Board in its management of the Company. In practice, the Management Committee and the executive officers and the Management Board share management responsibilities.

Members of the Management Committee (July 1, 2003):

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Executive Officers of the Company (July 1, 2003):

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        Domenico De Sole is President, Chief Executive Officer and Chairman of the Management Board of Gucci Group, and a member of the Board of Directors of certain of the Company's operating subsidiaries. From October 1994 until his appointment as Chief Executive Officer in 1995, Mr. De Sole was the Chief Operating Officer of the Gucci Group. From 1984 to 1994, Mr. De Sole was President and Chief Executive Officer of Gucci America, Inc., Gucci's largest retail subsidiary. Mr. De Sole is also a member of the Board of Directors of Procter and Gamble and Bausch & Lomb.

        Aart Cooiman is a member of the Company's Management Board. He is also an executive of "Staten" Trust en Administratiekantoor.

        Tom Ford is Creative Director and Vice-Chairman of the Management Board of Gucci Group and the Chief Designer for the Gucci and Yves Saint Laurent brands. Mr. Ford began his career with the Company in 1990 as Gucci's chief women's ready-to-wear designer, before becoming Design Director. Mr. Ford was the Design Director of Perry Ellis Women's America Division from 1988 to 1990 and Senior Designer of Cathy Hardwick from 1986 to 1988.