The objectives, principles, tasks, and authorities relating to financial management are set out in the mandatory Group-internal, treasury guidelines.

Group companies are financed either by utilizing liquidity surpluses from other corporate units in cash pools or through Group borrowings. This internal financing mechanism serves to minimize debt finance volumes of the HUGO BOSS Group and positively impacts net interest result.

The external financing relates to a borrower’s note amounting to EUR 25 million as of December 31, 2006, which falls due in December 2007.

In addition, the Group used bank credit lines to cover short-term financial requirements as well as liquidity reserves. The Group has at its disposal approved credit lines of EUR 314 million, EUR 122 million of which had been utilized as of the end of the year. Thus, an additional EUR 192 million was available as liquidity reserve. The conditions for short-term bank credit lines are based on the creditworthiness of the HUGO BOSS Group as established by internal bank rankings. The HUGO BOSS Group has been classified as Investment Grade under this system. HUGO BOSS enjoys favorable conditions in the financial markets due to this very good to good credit rating.

Dependence on interest rate developments is minimal due to the low debt finance level. Nevertheless, interest rate swaps and interest rate caps and floors are utilized where needed to limit interest rate risks.

The methods employed by the HUGO BOSS Group for hedging against exchange rate fluctuations are explained here.