Ladies and Gentlemen,

The global economy expanded somewhat faster in 2006 than in the year before with growth totaling approximately 5%. In the European Union, where we generate more than 60% of our sales, the overall economy also increased in comparison with 2005, rising by 2.7%.

The world fashion market also experienced stronger growth in 2006 than in previous years with a rise of 4%. Markets in the USA and Asia again outpaced European markets. The German fashion market saw a slight improvement of 1%, reversing a declining trend that had held since the mid-nineties.

Even compared with the rising trend on global and local markets, growth of HUGO BOSS AG was extremely dynamic. Group sales increased by 14% to EUR 1.5 billion, and net income rose by 19% to EUR 129 million. Foreign sales increased 16% to make up 77% of total sales. Germany remains our largest single market, contributing 23% to our business. Sales in Germany grew 9%.

The double-digit growth experienced by the Group in the past three years is also reflected in the rise in our employee numbers. At the end of fiscal 2006 HUGO BOSS had 8,441 full-time equivalents, an increase of approximately 1,500 since 2004. Nearly 360 new jobs were created in this period in Germany alone.

Good performance continued in fiscal 2006 in areas of key significance for the Group’s development: directly operated stores (DOS), women’s fashion, and shoes and leather accessories.

In September 2006, we opened our 1,000th HUGO BOSS store in the world in Shanghai, our very first retail location in the People’s Republic of China. Another crucial contribution to the positive sales trend was made by the accelerated expansion of sales via the Group’s directly operated stores, with 65 new locations in 2006 resulting in an increase of 39%. The share of DOS sales rose to 13% of total sales in 2006, increasing to EUR 192 million.

Performance of BOSS Womenswear was very encouraging again in 2006. The two womenswear lines under the core BOSS brand, BOSS Black and BOSS Orange, a leisure-oriented line launched on the market in fiscal 2006, increased a total of 69% to EUR 162 million (2005: EUR 96 million). Based on this significant growth in sales, the share of the womenswear segment in total Group sales rose to 11% (2005: 7%).

On top of these achievements, the Group expanded its collection of shoes and leather accessories. This product segment is of particular significance for the women‘s clothing business. Sales growth of 28% to EUR 151 million (2005: EUR 118 million) testifies to the increasing significance of these product groups.

Sales in the menswear segment, including the HUGO brand, increased by 10% to EUR 1,333 million in 2006 (2005: EUR 1,214 million), with sales of BOSS Menswear rising 11% to a total of EUR 1,186 million (2005: EUR 1,072 million). The BOSS Selection line, which covers the high-end segment of the market, continued to grow dynamically. In fiscal 2006, BOSS Selection grew by 62%, generating sales of EUR 33 million in its third year after market launch (2005: EUR 21 million).

The HUGO brand improved on its leading position in key fashion markets with a sales gain of 9%, from EUR 125 million to EUR 136 million in fiscal 2006.

We are convinced that 2007 will be another successful year for HUGO BOSS. We plan to continue increasing our market shares in all key markets and for all product segments, setting new records in sales and earnings.

On behalf of the entire Managing Board, I wish to thank all our employees for their continued efforts and extraordinary commitment, as well as our shareholders, customers and business partners for their confidence and support.

Bruno Sälzer
Chair of the Managing Board