(1) Company representation and powers to carry out any action that is consistent with the Company's business purpose, except for those expressly reserved by law to the Board of Directors and to the Shareholders' Meeting, with limitation on some categories of action.

Key financial data - highlights

Group net revenues for the first nine months of 2005 were 1,288 million euro, compared with 1,253 million euro in the corresponding period of 2004. Apparel segment revenues from third parties amounted to 1,184 million euro, an increase of 2.6% on the figure of 1,153 million euro in the first nine months of 2004. Revenue performance was mainly influenced by the network development policy and product enhancements introduced with the 2005 fall/winter collection. Revenues also benefited from an improved product mix, as well as from initiatives for expanding the network of directly operated stores. The third quarter reported an increase in apparel revenues thanks to the positive rate of re-orders of the 2005 fall/winter collection.

Gross operating income was 43.4% of revenues, compared with 44.7% in the same period of 2004; contribution margin was 36.3%, slightly down compared with 37.7% in the corresponding period of 2004, influenced mostly by the above-mentioned development policies partly offset by more efficient production.

The increase in general and administrative expenses took EBIT (earnings before interest and taxes) to 138 million euro, representing 10.7% of revenues compared with 12.1% in the corresponding period of 2004.

Net income attributable to the Parent Company was 89 million euro, representing 6.9% of revenues, compared with 104 million euro in the first nine months of 2004 (8.3% of revenues).

Shareholders' equity attributable to the Group amounted to 1,237 million euro as of September 30, 2005 (1,206 million euro as of December 31, 2004).

The net financial position reported net debt of 565 million euro, compared with 592 million euro as of September 30, 2004.

The change since the end of 2004 was due to the normal working capital cycle.

The first nine months of 2005 featured a number of important international commercial and licensing agreements. In particular, the Benetton Group signed an agreement with the Boyner group to set up a joint venture to manage and develop manufacturing and retailing activities for Benetton brands in Turkey and some adjacent areas.

On the co-branding front, the Benetton Group and Mattel have formed a worldwide partnership, which will continue until December 31, 2006, for the creation of a girls' clothing line, Barbie loves Benetton. On the license front, a worldwide license for Sisley Casa products was signed between the Benetton Group and Zorlu Holding, one of Turkey's main industrial groups. An exclusive license agreement was also signed with the French company Selective Beauty for the development and worldwide distribution of United Colors of Benetton perfumes.

The Group's net expenditure on operating and financial assets, excluding sales of securities for 118 million euro, amounted to around 79 million euro in the first nine months of 2005.

Gross capital expenditure on operating assets was 70 million euro, in line with the same period of 2004. Most of the expenditure related to the commercial network, with 49 million euro spent on purchasing, modernizing and upgrading stores. Gross capital expenditure on production amounted to 11 million euro and related mainly to Italian manufacturing companies.

Gross capital expenditure on non-current financial assets, totaling around 18 million euro, mostly related to the purchase of a 50% interest in a Turkish company named Benetton Giyim Sanayi A.S. for 6.7 million euro, and to the payment of the balance of 7.5 million euro due on the purchase of 15% of Olimpias S.p.A., completed in February 2004.

The Board of Directors voted on the same date to increase capital stock, for cash, from 236,026,454.30 euro to 240,230,104.40 euro to service the share incentive Plan, issuing 3,233,577 options which confer the right to subscribe to the same number of Company shares, at a price of 8.984 euro. If the approved increase is not fully subscribed within the period set each time for this purpose, then capital will be increased by an amount equivalent to the subscriptions received at the expiry of this period.

These stock options represent an instrument for the medium and long-term motivation and retention of employees and directors, selected from among the top executives of the Company and its subsidiary companies, who hold offices which are considered strategically the most important.

The allocation cycle consists of a four-year period from the grant date during which the options may not be exercised (the so-called vesting period), followed by a five-year period in which the options may be exercised; however, under certain conditions, up to a maximum of 50% of the options granted may be exercised two years after the grant date.

The proportion of options granted that will become effectively exercisable, once the vesting period of four years has passed, will depend on the extent to which specified targets have been met over the vesting period. These targets use EVA (Economic Value Added) as the performance indicator with reference to the 2004/2007 four-year period.

More details are contained in the "Stock option plan Rules" found under "Codes" in the Corporate Governance section of the Company's Investor Relations website (www.benettongroup.com/investors).

These transactions relate mostly to purchases of tax credits and services.

In addition, Italian Group companies have made a group tax election under article 117 et seq of the Tax Consolidation Act DPR 917/86, based on a proposal by the consolidating parent company Edizione Holding S.p.A., which decided to opt for this type of tax treatment on December 30, 2004. The election lasts for three years starting from the 2004 fiscal year. The relationships arising from participation in the group tax election are governed by specific Rules, approved and signed by all participating companies.

The Group has also undertaken some transactions with companies directly or indirectly controlled by, or in any case, under the influence of, managers serving within the Group. The Parent Company's management believes that such transactions were completed at going market rates. The total value of such transactions was not, in any case, significant in relation to the total value of the Group's production. No director, manager, or shareholder is a debtor of the Group.

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

During April, the subsidiary Benetton Manufacturing Holding N.V. formed Benetton Istria D.O.O., a company based in Rijeka, Croatia. This company will start to operate during 2006 as a decentralized production unit.

The process of setting up Shanghai Benetton Trading Company Limited was completed; this joint venture, in which Benetton holds an 85% interest, is located in Shanghai and operates in the retail sector.

In May, Benetton International S.A. purchased 50% of a Turkish company named Benetton Giyim Sanayi A.S. from third parties. This company will perform the manufacturing and distribution activities previously performed under license by the Turkish partner.

At the end of June, again with a view to simplifying corporate structure and also because previous operational requirements no longer exist, Benetton Finance S.A. was absorbed by Benetton International S.A.

With reference to the transfer of tax credits by Edizione Holding S.p.A. to other companies under its control, it is expected that Edizione Holding S.p.A. will grant the Benetton Group's Italian companies their share of the tax credits; payment will be made by December 31, 2005 for a total estimated amount of around 17 million euro.

The process of merging Colors Magazine S.r.l., the publisher of "Colors" magazine, into its parent Fabrica S.p.A. was started in October. This transaction forms part of the ongoing process of streamlining the Benetton Group's organizational and operational structure.

Also in October, the subsidiary Olimpias S.p.A. decided to terminate its industrial activities at the production site in Cassano Magnago (Varese). The reason behind this decision was to bring production capacity into line with the Group's projected lower needs.

The new website called "Benettontalk.com" was inaugurated at the start of November. This on-line experiment in seven languages is a forum for thoughts, ideas and collaboration by all. The first topics addressed were those of the nations, indigenous peoples and languages on their way to extinction.

On the commercial front, emphasis is being placed on developing certain emerging markets, such as China and India, also through agreements with local mass retailers, for the opening of "stores in store" within large stores in the main cities. New initiatives also include the setting up of a new partnership to manage and develop commercial activities on the Turkish market, which has been operational since May 2005.

At the same time, the Group is maintaining its strategic focus on policies for optimizing and making production and organization more efficient relative to the process of manufacturing delocalization, completion of production cycles in overseas sites and savings in overhead costs.

In this context, consolidated revenues for 2005 are expected to be around 1,720 million euro; this estimate takes account of the positive rate of re-orders by the 2005 fall/winter collection reported in the third quarter. EBIT should amount to around 10% of revenues, while net income is expected to be in the region of 6% of revenues.

Nine-month revenues amounted to 1,288 million euro, compared with 1,253 million in the first nine months of 2004, up by 2.8%. Apparel segment revenues from third parties amounted to 1,184 million euro, an increase of 2.6% on the figure of 1,153 million in the first nine months of 2004. Revenue performance was mainly influenced by the policy of developing the commercial network and improving product mix, along with initiatives for expanding the network of directly operated stores. Sales by directly operated stores grew, also as a result of store purchases, especially during the second half of 2004, and of the satisfying growth of business in Korea. The third-quarter increase reflected the positive rate of re-orders of the 2005 fall/winter collection. In the apparel segment, the new Turkish partnership also played an important role, generating 17 million euro in revenues between May and September.

The textile segment, which suffered from a difficult market situation, reported 76 million euro in revenues from third parties, compared with 79 million euro in the corresponding period of 2004, down by 3%.

Revenues in the other and unallocated segment, which includes only the revenues relating to sports equipment, were 28 million euro, compared with 21 million in the first nine months of 2004.

Cost of sales increased by 36 million euro in absolute terms and represented 56.6% of revenues compared with 55.3% in the first nine months of 2004.

Gross operating income was 559 million euro, representing 43.4% of revenues compared with 44.7% in the first nine months of 2004, influenced by the above-mentioned commercial development policies, offset in part by more efficient production.

Variable selling costs were basically in line with the comparative period at 7.1% of revenues; the reduction in sales commissions benefited from the Group's acquisition of agencies in Italy and Germany during 2004. This reduction was partially offset by the increase in distribution expenses, associated with higher sales in Korea. The contribution margin was 468 million euro, representing 36.3% of revenues. This compares with 472 million euro in the corresponding period of 2004, representing 37.7% of revenues.

General and operating expenses amounted to 330 million euro compared with 320 million euro in the same period of 2004. Payroll and related costs increased by 12.7%, from 7.2% to 7.9% of revenues, due to the expansion of the directly operated stores network, the cost of stock options and a higher proportionate cost for staff incentives. Advertising and promotion costs were 1 million euro higher, with the percentage on revenues largely in line with the previous period.

Depreciation and amortization came to 49 million euro in the first nine months of the year, down from 55 million euro in the comparative period.

Other income and expenses amounted to 137 million euro, an increase of 2.6% on the figure of 134 million euro reported in the comparative period, representing 10.7% of revenues, down from 10.8%. This item includes other overheads, provisions, net operating expenses and other income and expenses.

Other overheads amounted to 61 million euro, staying basically in line with the figure of 59 million euro in the first nine months of 2004 and representing a constant proportion of revenues at 4.7%. Provisions amounted to 20 million euro compared with 18 million euro in the first nine months of 2004. They included 17 million euro for doubtful accounts, bringing the related balance-sheet reserve to 11.5% of trade receivables (10.6% as of September 30, 2004).

Other income and expenses amounted to 57 million euro, like in the corresponding period of 2004, representing 4.4% of revenues compared with 4.6% in the first nine months of 2004. This item reflected a decrease of 10 million in net costs, recognized in the first nine months of 2004, mainly for reorganizing and adjusting certain commercial assets to fair value; it also included an increase of 11 million euro in rental costs relating mainly to the directly operated stores network.

Earnings before interest and taxes were 138 million euro compared with 152 million in the first nine months of 2004, going down from 12.1% to 10.7% of revenues.

Net financial expenses and exchange differences amounted to 1.2% of revenues, staying broadly in line with the prior year; this result reflects the combined effect of a decrease in average borrowings over the period, a smaller impact of interest rates due to the expiry of certain interest rate swaps and a worsening in the foreign currency component.

The tax charge amounted to 33 million euro compared with 35 million euro in the period to September 2004, representing a tax rate of 26.8% compared with 25.5% in the corresponding period of 2004.

Net income for the period attributable to the Group came to 89 million euro, compared with 104 million euro in the first nine months of 2004, representing 6.9% of revenues compared with 8.3% in the corresponding period of 2004.

The business segments are as follows:

For comparative purposes, segment results for the first nine months of 2005 and 2004 and full year 2004 are shown below.

• a decrease of 13 million euro in net costs, recognized in the first nine months of 2004, mainly for reorganizing and adjusting certain commercial assets to fair value;
• an increase of 11 million euro in rental costs relating to the commercial network, particularly retail properties;
• an increase of around 2 million euro in provisions.