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As filed with the Securities and
Exchange Commission on June 30, 2003

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SECURITIES AND EXCHANGE COMMISSION


WASHINGTON, D.C. 20549


FORM 20-F


o       REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR
(g) OF THE SECURITIES EXCHANGE ACT OF 1934

OR


þ       ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934


For the Fiscal Year Ended: December 31, 2002


1-14002
(Commission file number)

DE RIGO S.p.A.

(Exact name of registrant as specified in its charter)


DE RIGO S.p.A.

(Translation of registrants name into English)


Italy
(Jurisdiction of incorporation or organization)

Zona Industriale Villanova,
32013 Longarone (BL), Italy
(Address of principal executive offices)

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

|                    |  |                      
|------------------- |  | ---------------------
|                    |  | Name of each exchange
|Title of each class |  | on which registered  

|                                                |  |                         
|----------------------------------------------- |  | ------------------------
|American Depositary Shares                      |  | New York Stock Exchange 
|Ordinary shares with a par value of 0.26 each* |  | New York Stock Exchange*

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.

44,714,255 ordinary shares

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 12 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.

|      |  |     
|----- |  | ----
|Yes þ |  | No o

Indicate by check mark which financial statement item the registrant has elected to follow.

|          |  |          
|--------- |  | ---------
|Item 17 o |  | Item 18 þ

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| |  | Not for trading, but only in connection with the registration of the
American Depositary Shares.
|- |  | ------------------------------------------------------------------------------------------------

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TABLE OF CONTENTS



|                                                                                |                                                                                       |                                                                    |  |  |  |  |  | 
|------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------- | ------------------------------------------------------------------ |  |  |  |  |  | 
|Accounting Principles and Reporting Currency                                   
|Cautionary Statement Regarding Forward-Looking Information                     
|PART I                                                                         
|                                                                                | Item 1. Identity of Directors, Senior Management and Advisors                        
|                                                                                | Item 2. Offer Statistics and Expected Timetable                                      
|                                                                                | Item 3. Key Information                                                              
|                                                                                |                                                                                       | THE DE RIGO GROUP                                                 
|                                                                                |                                                                                       | SELECTED FINANCIAL DATA                                           
|                                                                                |                                                                                       | EXCHANGE RATES                                                    
|                                                                                |                                                                                       | RISK FACTORS                                                      
|                                                                                | Item 4. Information on the Company                                                   
|                                                                                |                                                                                       | HISTORY AND CORPORATE STRUCTURE                                   
|                                                                                |                                                                                       | BUSINESS OVERVIEW                                                 
|                                                                                |                                                                                       | COMPANY STRATEGY                                                  
|                                                                                |                                                                                       | PRODUCTS                                                          
|                                                                                |                                                                                       | DESIGN AND MANUFACTURING                                          
|                                                                                |                                                                                       | MARKETING AND DISTRIBUTION                                        
|                                                                                |                                                                                       | COMPETITION                                                       
|                                                                                |                                                                                       | ITALIAN GOVERNMENT INCENTIVE PROGRAM                              
|                                                                                |                                                                                       | TRADEMARKS                                                        
|                                                                                |                                                                                       | INSURANCE                                                         
|                                                                                |                                                                                       | SEASONALITY AND AVAILABILITY OF RAW MATERIALS                     
|                                                                                |                                                                                       | DESCRIPTION OF PROPERTY                                           
|                                                                                | Item 5. Operating and Financial Review and Prospects                                 
|                                                                                |                                                                                       | CRITICAL ACCOUNTING POLICIES                                      
|                                                                                |                                                                                       | RESULTS OF OPERATIONS                                             
|                                                                                |                                                                                       | Effect of Inflation                                               
|                                                                                |                                                                                       | U.S. GAAP Reconciliation [E&Y for review]                         
|                                                                                |                                                                                       | Liquidity and Capital Resources                                   
|                                                                                |                                                                                       | Contractual Obligations                                           
|                                                                                |                                                                                       | Concentrations of Credit Risk                                     
|                                                                                |                                                                                       | New Accounting Standards                                          
|                                                                                |                                                                                       | Trend Information                                                 
|                                                                                | Item 6. Directors, Senior Management and Employees                                   
|                                                                                |                                                                                       | DIRECTORS AND SENIOR MANAGEMENT                                   
|                                                                                |                                                                                       | COMPENSATION OF DIRECTORS AND SENIOR MANAGEMENT                   
|                                                                                |                                                                                       | EMPLOYEES AND LABOR RELATIONS                                     
|                                                                                | Item 7. Major Shareholders and Related Party Transactions                            
|                                                                                |                                                                                       | MAJOR SHAREHOLDERS                                                
|                                                                                |                                                                                       | RELATED PARTY TRANSACTIONS                                        
|                                                                                | Item 8. Financial Information                                                        
|                                                                                |                                                                                       | CONSOLIDATED FINANCIAL STATEMENTS                                 
|                                                                                |                                                                                       | OTHER FINANCIAL INFORMATION                                       
|                                                                                | Item 9. The Offer and Listing                                                        
|                                                                                |                                                                                       | TRADING MARKETS AND SHARE PRICES                                  
|                                                                                | Item 10. Additional Information                                                      
|                                                                                |                                                                                       | OPTIONS TO PURCHASE SECURITIES FROM REGISTRANT OR ITS SUBSIDIARIES
|                                                                                |                                                                                       | BY-LAWS                                                           
|                                                                                |                                                                                       | MATERIAL CONTRACTS                                                
|                                                                                |                                                                                       | EXCHANGE CONTROLS                                                 
|                                                                                |                                                                                       | TAXATION                                                          
|                                                                                |                                                                                       | DOCUMENTS ON DISPLAY                                              
|                                                                                | Item 11. Quantitative and Qualitative Disclosures about Market Risk                  
|                                                                                |                                                                                       | Risk Analysis                                                     
|                                                                                |                                                                                       | Exchange Rate Risk                                                
|                                                                                |                                                                                       | Interest Rate Risk                                                
|                                                                                |                                                                                       | Changes in Market Risk Exposure Compared to 2001                  
|                                                                                | Item 12. Description of Securities Other than Equity Securities                      
|PART II                                                                        
|                                                                                | Item 13. Defaults, Dividend Arrearages and Delinquencies                             
|                                                                                | Item 14. Material Modifications to the Rights of Security Holders and Use of Proceeds
|                                                                                | Item 15. Controls and Procedures                                                     
|                                                                                | Item 16. [Reserved]                                                                  
|PART III                                                                       
|                                                                                | Item 17. Financial Statements                                                        
|                                                                                | Item 18. Financial Statements                                                        
|                                                                                | Item 19. Exhibits                                                                    
|REPORT OF INDEPENDENT AUDITORS                                                 
|DE RIGO S.p.A. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS                    
|DE RIGO S.p.A. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS                    
|DE RIGO S.p.A. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME              
|DE RIGO S.p.A. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS          
|DE RIGO S.p.A. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF SHAREHOLDERS EQUITY
|DE RIGO S.p.A. and SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS     
|SIGNATURES                                                                     
|Exhibit 8.1                                                                    
|Exhibit 99.1                                                                   



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TABLE OF CONTENTS

|                                                              |                                                 |     |      |    | 
|------------------------------------------------------------- | ----------------------------------------------- | --- | ---- | -- | 
|                                                              |                                                 |     | Page
|Accounting Principles and Reporting Currency                  |                                                 | iii
|Cautionary Statement Regarding Forward-Looking Information    |                                                 | iii
|PART I                                                        |                                                 |     | 1    |   
|Item 1. Identity of Directors, Senior Management and Advisors |                                                 |     | 1    |   
|Item 2. Offer Statistics and Expected Timetable               |                                                 |     | 1    |   
|Item 3. Key Information                                       |                                                 |     | 1    |   
|                                                              | THE DE RIGO GROUP                               |     |      | 1  | 
|                                                              | SELECTED FINANCIAL DATA                         |     |      | 1  | 
|                                                              | EXCHANGE RATES                                  |     |      | 3  | 
|                                                              | RISK FACTORS                                    |     |      | 3  | 
|Item 4. Information on the Company                            |                                                 |     | 8    |   
|                                                              | HISTORY AND CORPORATE STRUCTURE                 |     |      | 8  | 
|                                                              | BUSINESS OVERVIEW                               |     |      | 9  | 
|                                                              | COMPANY STRATEGY                                |     |      | 11 | 
|                                                              | PRODUCTS                                        |     |      | 12 | 
|                                                              | DESIGN AND MANUFACTURING                        |     |      | 14 | 
|                                                              | MARKETING AND DISTRIBUTION                      |     |      | 16 | 
|                                                              | COMPETITION                                     |     |      | 21 | 
|                                                              | ITALIAN GOVERNMENT INCENTIVE PROGRAM            |     |      | 21 | 
|                                                              | TRADEMARKS                                      |     |      | 22 | 
|                                                              | INSURANCE                                       |     |      | 22 | 
|                                                              | SEASONALITY AND AVAILABILITY OF RAW MATERIALS   |     |      | 23 | 
|                                                              | DESCRIPTION OF PROPERTY                         |     |      | 24 | 
|Item 5. Operating and Financial Review and Prospects          |                                                 |     | 24   |   
|                                                              | CRITICAL ACCOUNTING POLICIES                    |     |      | 24 | 
|                                                              | RESULTS OF OPERATIONS                           |     |      | 27 | 
|                                                              | EFFECT OF INFLATION                             |     |      | 37 | 
|                                                              | U.S. GAAP RECONCILIATION                        |     |      | 37 | 
|                                                              | LIQUIDITY AND CAPITAL RESOURCES                 |     |      | 37 | 
|                                                              | CONTRACTUAL OBLIGATIONS                         |     |      | 38 | 
|                                                              | CONCENTRATIONS OF CREDIT RISK                   |     |      | 39 | 
|                                                              | NEW ACCOUNTING STANDARDS                        |     |      | 39 | 
|                                                              | TREND INFORMATION                               |     |      | 40 | 
|Item 6. Directors, Senior Management and Employees            |                                                 |     | 41   |   
|                                                              | DIRECTORS AND SENIOR MANAGEMENT                 |     |      | 41 | 
|                                                              | COMPENSATION OF DIRECTORS AND SENIOR MANAGEMENT |     |      | 43 | 
|                                                              | EMPLOYEES AND LABOR RELATIONS                   |     |      | 44 | 
|Item 7. Major Shareholders and Related Party Transactions     |                                                 |     | 44   |   
|                                                              | MAJOR SHAREHOLDERS                              |     |      | 44 | 
|                                                              | RELATED PARTY TRANSACTIONS                      |     |      | 45 | 

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|                                                                                      |                                                                    |  |      |    | 
|------------------------------------------------------------------------------------- | ------------------------------------------------------------------ |  | ---- | -- | 
|                                                                                      |                                                                    |  | Page
|Item 8. Financial Information                                                         |                                                                    |  | 45   |   
|                                                                                      | CONSOLIDATED FINANCIAL STATEMENTS                                  |  |      | 45 | 
|                                                                                      | OTHER FINANCIAL INFORMATION                                        |  |      | 45 | 
|Item 9. The Offer and Listing                                                         |                                                                    |  | 46   |   
|                                                                                      | TRADING MARKETS AND SHARE PRICES                                   |  |      | 46 | 
|Item 10. Additional Information                                                       |                                                                    |  | 47   |   
|                                                                                      | OPTIONS TO PURCHASE SECURITIES FROM REGISTRANT OR
ITS SUBSIDIARIES |  |      | 47 | 
|                                                                                      | BY-LAWS                                                            |  |      | 48 | 
|                                                                                      | MATERIAL CONTRACTS                                                 |  |      | 53 | 
|                                                                                      | EXCHANGE CONTROLS                                                  |  |      | 53 | 
|                                                                                      | TAXATION                                                           |  |      | 53 | 
|                                                                                      | DOCUMENTS ON DISPLAY                                               |  |      | 57 | 
|Item 11. Quantitative and Qualitative Disclosures About Market Risk                   |                                                                    |  | 57   |   
|                                                                                      | RISK ANALYSIS                                                      |  |      | 58 | 
|                                                                                      | EXCHANGE RATE RISK                                                 |  |      | 58 | 
|                                                                                      | INTEREST RATE RISK                                                 |  |      | 58 | 
|                                                                                      | CHANGES IN MARKET RISK EXPOSURE COMPARED TO 2001                   |  |      | 59 | 
|Item 12. Description of Securities Other than Equity Securities                       |                                                                    |  | 59   |   
|PART II                                                                               |                                                                    |  | 59   |   
|Item 13. Defaults, Dividend Arrearages and Delinquencies                              |                                                                    |  | 59   |   
|Item 14. Material Modifications to the Rights of Security Holders and Use
of Proceeds |                                                                    |  | 59   |   
|Item 15. Controls and Procedures                                                      |                                                                    |  | 59   |   
|Item 16. [Reserved]                                                                   |                                                                    |  | 60   |   
|PART III                                                                              |                                                                    |  | 60   |   
|Item 17. Financial Statements                                                         |                                                                    |  | 60   |   
|Item 18. Financial Statements                                                         |                                                                    |  | 60   |   
|Item 19. Exhibits                                                                     |                                                                    |  | 61   |   

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Accounting Principles and Reporting Currency

Beginning with the fiscal year ended December 31, 2001, De Rigo S.p.A.
(the Company) has published its Consolidated Financial Statements in euros
( or euro), the official common currency of twelve Member States of the
European Union (the EU), including Italy. In this annual report, references
to dollars, U.S.$ or $ are to United States dollars and references to
lire or Lit. are to Italian lire. Amounts stated in dollars, unless
otherwise indicated, have been translated from euros at an assumed rate solely
for convenience and should not be construed as representations that the euro
amounts actually represent such dollar amounts or could be converted into
dollars at the rate indicated. Unless otherwise indicated, such dollar amounts
have been translated from euros at the noon buying rate in The City of New York
for cable transfers in foreign currencies as announced by the Federal Reserve
Bank of New York for customs purposes (the Noon Buying Rate) on December 31,
2002 of $1.0485 per 1.00. Such rate may differ from the actual rates used in
the preparation of the Consolidated Financial Statements included in Item 18
and dollar amounts used in this annual report may differ from the actual dollar
amounts that were translated into euros in the preparation of such financial
statements. For information regarding recent rates of exchange between euros
and dollars and between Italian lire (De Rigos historical reporting currency)
and dollars, see Key InformationSelected Financial Data  Exchange Rates in
Item 3.

Prior to January 1, 2001, the reporting currency of De Rigo S.p.A. and its
consolidated subsidiaries was Italian lire. To facilitate a comparison, the
Consolidated Financial Statements included in Item 18 and all other
lire-denominated financial data for periods prior to January 1, 2001 included
in this annual report have been restated from Italian lire to euros at the
fixed rate as of December 31, 1998 established by the European Central Bank of
Lit. 1,936.27 = 1.00. The comparative balances for prior years now reported
in euros depict the same trends as would have been presented had the Group
continued to report such amounts in Italian lire. The Consolidated Financial
Statements and other financial data for periods prior to January 1, 2001 may
not be comparable to that of other companies reporting in euros if those
companies had restated from a reporting currency other than Italian lire.

The Consolidated Financial Statements included in Item 18 of this annual
report are prepared in conformity with Italian regulations governing financial
statements (Italian GAAP). These principles differ in certain respects from
generally accepted accounting principles in the United States (U.S. GAAP).
See Note 19 of Notes to the Consolidated Financial Statements included in Item
18 of this annual report.




Cautionary Statement Regarding Forward-Looking Information

Except for the historical statements and discussions contained herein,
statements contained in this annual report constitute forward looking
statements within the meaning of Section 27A of the U.S. Securities Act of
1933 and Section 21E of the U.S. Securities Exchange Act of 1934. Forward
looking statements may include words such as expect, estimate, project,
anticipate, should, intend and similar expressions or variations on such
expressions. Any filing of the Company with the U.S. Securities and Exchange
Commission may include forward looking statements. In addition, other written
or oral statements which constitute forward looking statements have been made
and may in the future be made by or on behalf of the Company, including
statements concerning its future operating and financial performance, the
Companys share of new and existing markets, general industry and economic
trends and the Companys performance relative thereto and the Companys
expectation as to requirements for capital expenditures and regulatory matters.
The Companys outlook is predominately based on its interpretation of what it
considers to be the key economic factors affecting its businesses.
Forward-looking statements with regard to the Companys businesses rely on a
number of assumptions concerning future events and are subject to a number of
uncertainties and other factors, many of which are outside the Companys
control, that could cause actual results to differ materially from such
statements, including: the many interrelated factors that affect consumers
confidence, including worldwide demand for

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sunglasses and prescription eyewear; general economic conditions in each
of the Companys markets; legislation, particularly that relating to the
reimbursement of eyewear-related expenses; actions of competitors in the
various industries in which the Company competes; production difficulties,
including capacity and supply constraints and excess inventory levels; labor
relations; interest rates and currency exchange rates; political and civil
unrest; and other risks and uncertainties. The Company disclaims any
obligation to update or revise any forward looking statements, whether as a
result of new information, future events or otherwise.

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PART I




Item 1.Identity of Directors, Senior Management and Advisors

Not applicable.




Item 2.Offer Statistics and Expected Timetable

Not applicable.




Item 3.Key Information




THE DE RIGO GROUP

De Rigo S.p.A., together with its consolidated subsidiaries (the Group
or De Rigo), is a worldwide leader in the design, manufacture and marketing
of high-quality eyewear in the mid- and premium-price categories. As a result
of the acquisition of Dollond & Aitchison Ltd. (D&A) in late 1998 and General
Optica S.a. (General Optica) in early 2000, De Rigo is now one of the largest
optical retailers in Europe. Designed in Italy, the Groups products are
distributed in about 80 countries worldwide, primarily in Europe, Asia and the
Americas.

Unless otherwise specified or required by the context, references to we,
us and our in this annual report are to De Rigo S.p.A. and its consolidated
subsidiaries.




SELECTED FINANCIAL DATA

The following table sets forth selected consolidated financial data for
the periods indicated and is qualified by reference to, and should be read in
conjunction with, the Companys Consolidated Financial Statements and the Notes
thereto included in Item 18 of this annual report and Operating and Financial
Review and Prospects included in Item 5 of this annual report.

The Companys audited consolidated financial statements, from which the
selected consolidated financial data set forth below have been derived, were
prepared in accordance with Italian GAAP, which differ in certain respects from
U.S. GAAP. For a discussion of the principal differences between Italian GAAP
and U.S. GAAP as they relate to the Companys consolidated net income and
stockholders equity, see Note 19 of Notes to the Consolidated Financial
Statements included in Item 18 of this annual report.

Beginning with the fiscal year ended December 31, 2001, the Company has
published its Consolidated Financial Statements in euros. Prior to January 1,
2001, the reporting currency of De Rigo S.p.A. and its consolidated
subsidiaries was Italian lire. To facilitate a comparison, the Consolidated
Financial Statements included in Item 18 and all other lire-denominated
financial data for periods prior to January 1, 2001 included in this annual
report have been restated from Italian lire to euros at the fixed rate as of
December 31, 1998 established by the European Central Bank of Lit. 1,936.27 =
1.00. See Accounting Principles and Reporting Currency preceding Part I of
this annual report.

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|                                          |  |                                                                 |         |              |  |          |         |         |  |      |         |      |  |   |         |  |  |   |         |  |  |             |         | 
|----------------------------------------- |  | --------------------------------------------------------------- | ------- | ------------ |  | -------- | ------- | ------- |  | ---- | ------- | ---- |  | - | ------- |  |  | - | ------- |  |  | ----------- | ------- | 
|                                          |  | Year Ended at December 31,                                     
|                                          |  |                                                                
|                                          |  |                                                                 |         |              |  |          |         |         |  |      |         |      |  |   |         |  |  |   |         |  |  | (thousands 
|                                          |  |                                                                 |         |              |  |          |         |         |  |      |         |      |  |   |         |  |  |   |         |  |  | of dollars,
|                                          |  |                                                                 |         |              |  |          |         |         |  |      |         |      |  |   |         |  |  |   |         |  |  | except per 
|                                          |  |                                                                 |         |              |  |          |         |         |  |      |         |      |  |   |         |  |  |   |         |  |  | Ordinary   
|                                          |  |                                                                 |         |              |  |          |         |         |  |      |         |      |  |   |         |  |  |   |         |  |  | Share and  
|                                          |  |                                                                 |         |              |  |          |         |         |  |      |         |      |  |   |         |  |  |   |         |  |  | ADS        
|                                          |  | (thousands of euros, except per Ordinary Share and ADS amounts) |         | amounts) (1)
|                                          |  | 1998 (2)                                                        |         | 1999 (2)     |  | 2000 (2) |         | 2001(2) |  | 2002 |         | 2002
|                                          |  |                                                                 |         |              |  |          |         |         |  |      |         |     
|INCOME STATEMENT DATA                     |  |                                                                 |         |              |  |          |         |         |  |      |         |      |  |   |         |  |  |   |         |  |  |             |         | 
|Amounts in accordance with Italian GAAP:  |  |                                                                 |         |              |  |          |         |         |  |      |         |      |  |   |         |  |  |   |         |  |  |             |         | 
|Net sales                                 |  |                                                                | 104,988 |              |  |         | 321,555 |         |  |     | 456,602 |      |  |  | 505,250 |  |  |  | 512,459 |  |  | $           | 537,313 | 
|Cost of sales                             |  |                                                                 | 61,161  |              |  |          | 129,561 |         |  |      | 167,613 |      |  |   | 184,293 |  |  |   | 203,208 |  |  |             | 213,064 | 
|Gross profit                              |  |                                                                 | 43,827  |              |  |          | 191,994 |         |  |      | 288,989 |      |  |   | 320,957 |  |  |   | 309,251 |  |  |             | 324,250 | 
|Operating expenses                        |  |                                                                 | 44,879  |              |  |          | 184,617 |         |  |      | 265,307 |      |  |   | 289,897 |  |  |   | 292,524 |  |  |             | 306,711 | 
|Income (loss) from operations             |  |                                                                 | (1,052  | )            |  |          | 7,377   |         |  |      | 23,682  |      |  |   | 31,060  |  |  |   | 16,727  |  |  |             | 17,538  | 
|Income before income taxes                |  |                                                                 | 6,188   |              |  |          | 3,699   |         |  |      | 21,763  |      |  |   | 27,200  |  |  |   | 9,769   |  |  |             | 10,243  | 
|Income taxes                              |  |                                                                 | 1,488   |              |  |          | 2,596   |         |  |      | 6,895   |      |  |   | 6,551   |  |  |   | 46      |  |  |             | 48      | 
|Net income (2)                            |  |                                                                 | 4,609   |              |  |          | 1,406   |         |  |      | 14,136  |      |  |   | 21,217  |  |  |   | 10,645  |  |  |             | 11,161  | 
|Net income per Ordinary Share and ADS (2) |  |                                                                | 0.10    |              |  |         | 0.03    |         |  |     | 0.32    |      |  |  | 0.48    |  |  |  | 0.24    |  |  | $           | 0.25    | 
|Dividends per Ordinary Share and ADS      |  |                                                                | 0.09    |              |  |          |        |         |  |     | 0.12    |      |  |  | 0.13    |  |  |   |        |  |  |             |        | 
|Amounts in accordance with U.S. GAAP:     |  |                                                                 |         |              |  |          |         |         |  |      |         |      |  |   |         |  |  |   |         |  |  |             |         | 
|Net income                                |  |                                                                | 4,368   |              |  |         | 1,565   |         |  |     | 13,282  |      |  |  | 18,249  |  |  |  | 17,145  |  |  | $           | 17,977  | 
|Net income per Ordinary Share             |  |                                                                | 0.10    |              |  |         | 0.04    |         |  |     | 0.30    |      |  |  | 0.41    |  |  |  | 0.38    |  |  | $           | 0.40    | 
|BALANCE SHEET DATA                        |  |                                                                 |         |              |  |          |         |         |  |      |         |      |  |   |         |  |  |   |         |  |  |             |         | 
|Amounts in accordance with Italian GAAP:  |  |                                                                 |         |              |  |          |         |         |  |      |         |      |  |   |         |  |  |   |         |  |  |             |         | 
|Total current assets                      |  |                                                                | 205,512 |              |  |         | 197,831 |         |  |     | 167,277 |      |  |  | 203,401 |  |  |  | 196,329 |  |  | $           | 205,851 | 
|Property, plant and equipment, net        |  |                                                                 | 67,199  |              |  |          | 67,127  |         |  |      | 123,194 |      |  |   | 128,102 |  |  |   | 120,905 |  |  |             | 126,769 | 
|Total assets                              |  |                                                                 | 320,876 |              |  |          | 305,866 |         |  |      | 420,802 |      |  |   | 462,492 |  |  |   | 439,901 |  |  |             | 461,236 | 
|Total current liabilities                 |  |                                                                 | 118,930 |              |  |          | 105,369 |         |  |      | 195,847 |      |  |   | 228,327 |  |  |   | 206,928 |  |  |             | 216,964 | 
|Long-term debt, less current portion      |  |                                                                 | 2,206   |              |  |          | 1,325   |         |  |      | 1,098   |      |  |   | 764     |  |  |   | 696     |  |  |             | 730     | 
|Total shareholders equity                |  |                                                                 | 177,155 |              |  |          | 175,357 |         |  |      | 189,374 |      |  |   | 210,419 |  |  |   | 212,117 |  |  |             | 222,405 | 
|Amounts in accordance with U.S. GAAP:     |  |                                                                 |         |              |  |          |         |         |  |      |         |      |  |   |         |  |  |   |         |  |  |             |         | 
|Total shareholders equity                |  |                                                                | 177,382 |              |  |         | 175,541 |         |  |     | 189,460 |      |  |  | 206,695 |  |  |   | 199,470 |  |  |             | 209,144 | 



---

|(1) |  | The translation of euros into dollars has been made at the rate of
$1.0485 = 1.00, the Noon Buying Rate on December 31, 2002. See
Accounting Principles and Reporting Currency preceding Part I of this
annual report.                                                                                                                                                                                       
|--- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(2) |  | Certain amounts in the Companys Consolidated Statements of Income for
fiscal years ended December 31, 1998, 1999, 2000 and 2001 have been
reclassified to conform with the presentation of these amounts in the
Companys Consolidated Statement of Income for the fiscal year ended
December 31, 2002. See Note 2 of Notes to the Consolidated Financial
Statements included in Item 18 of this annual report.

2



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##### Table of Contents






EXCHANGE RATES

The following table sets forth the Noon Buying Rate for euros expressed in
U.S. dollars per euro (rounded to the nearest one hundredth of a U.S. cent) for
the periods indicated. Amounts for 1998 (before the adoption of the euro) have
been calculated based on the Noon Buying Rates for lire, converted into euro at
the official fixed conversion rate of
1= Lit. 1936.27 and
expressed in U.S. dollars per euro.

|                  |  |      |        |     |  |            |        |               |  |  |        |  |  |  |        | 
|----------------- |  | ---- | ------ | --- |  | ---------- | ------ | ------------- |  |  | ------ |  |  |  | ------ | 
|                  |  | High |        | Low |  | Average(1) |        | At Period End
|                  |  |      |        |     |  |            |        |              
|Year:             |  |      |        |     |  |            |        |               |  |  |        |  |  |  |        | 
|1998              |  |      |       |     |  |            |       |               |  |  | 1.1147 |  |  |  | 1.1707 | 
|1999              |  |      |       |     |  |            |       |               |  |  | 1.0588 |  |  |  | 1.0070 | 
|2000              |  |      |       |     |  |            |       |               |  |  | 0.9207 |  |  |  | 0.9388 | 
|2001              |  |      |       |     |  |            |       |               |  |  | 0.8909 |  |  |  | 0.8901 | 
|2002              |  |      |       |     |  |            |       |               |  |  | 0.9495 |  |  |  | 1.0485 | 
|Month ending:     |  |      |        |     |  |            |        |               |  |  |        |  |  |  |        | 
|December 31, 2002 |  |      | 1.0485 |     |  |            | 0.9927 |               |  |  |       |  |  |  |       | 
|January 30, 2003  |  |      | 1.0861 |     |  |            | 1.0361 |               |  |  |       |  |  |  |       | 
|February 28, 2003 |  |      | 1.0875 |     |  |            | 1.0708 |               |  |  |       |  |  |  |       | 
|March 31, 2003    |  |      | 1.1062 |     |  |            | 1.0545 |               |  |  |       |  |  |  |       | 
|April 30, 2003    |  |      | 1.1180 |     |  |            | 1.0621 |               |  |  |       |  |  |  |       | 
|May 31, 2003      |  |      | 1.1200 |     |  |            | 1.1853 |               |  |  |       |  |  |  |       | 



---

|(1) |  | Average of the Noon Buying Rate for euro for the last business day of
each month in the period.
|--- |  | -----------------------------------------------------------------------------------------------

On
June 26, 2003, the Noon Buying Rate for euros was
1.00 = $1.1429 or
$1.00 = 0.8750.

The above rates are given for information only, and may differ from the
rates used in the preparation of the Companys Consolidated Financial
Statements included in Item 18 of this annual report.




RISK FACTORS

Holders and prospective purchasers of the American Depositary Shares
should consider carefully the factors set forth below, as well as the other
information contained in this filing, in evaluating an investment in the ADSs.

Risk Factors Relating to the Eyewear Industry

|                                                                                                                        
|------------------------------------------------------------------------------------------------------------------------
|The eyewear industry is very sensitive to fluctuations in consumers
disposable income, personal preferences and season.

Our wholesale and manufacturing and retail operations are each subject to
trends affecting the eyewear industry as a whole, as well as factors affecting
individual sectors of the industry in which we participate, including those for
sunglasses, prescription eyewear and fashion eyewear. The eyewear industry is
subject to changes in general economic conditions, which affect disposable
consumer income, as well as to changes in fashion, which affect consumer tastes
and general demand for fashion eyewear. While eyewear has achieved widespread
acceptance as a fashion accessory, and the fashion eyewear  industry has grown significantly in recent years, there can be no
assurance that this growth will continue or that consumer preferences will not
change in a manner that will adversely affect the fashion eyewear

3



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##### Table of Contents



sector, the
eyewear industry as a whole or our business in particular. In addition,
purchases of sunglasses in any given market are subject to fluctuations due to
seasonality. Any event or circumstance resulting in decreased demand for
eyewear generally, or for our products in particular, could adversely affect
our business, operating results and financial condition.

The eyewear industry is highly competitive and we may be unable to
compete successfully.

The eyewear industry is highly competitive. Some of our competitors have
significantly greater financial, distribution and marketing resources, and
significantly greater brand awareness, than we do in certain important markets.
In addition, there can be no assurance that business developments will not
encourage the entrance of other direct competitors into our markets, which may
adversely affect our business, operating results and financial condition.

The development of vision correction alternatives could harm our
business.

Our future success could depend to a significant extent on the
availability and acceptance of vision correction alternatives to prescription
eyeglasses, such as contact lenses and refractive, optical surgery. While we
do not believe that contact lenses and refractive surgery or other vision
correction alternatives will materially adversely impact our business at the
present time, there can be no assurance that technological advances in, or
reductions in the cost of, vision correction alternatives will not occur in the
future, resulting in their more widespread use. Increased use of vision
alternatives could result in decreased use of our prescription eyewear
products, which could have a material adverse impact on our business, results
of operations, financial condition and prospects.

Risk Factors Relating to De Rigo

|                                                                                                                                 
|---------------------------------------------------------------------------------------------------------------------------------
|We may not achieve the expected benefits of acquisitions, joint ventures,
restructurings or other similar corporate transactions.

We have engaged in the past and are likely to engage in the future in
significant corporate transactions, such as acquisitions, joint ventures and
restructurings, the success of which is difficult to predict. In 1999, we
acquired D&A, which is currently completing a significant restructuring
process. In 2000, we acquired General Optica and began operations at our joint
ventures with the Prada Group. There can be no assurance that we will be able
to enter into such transactions in the future or integrate our existing
acquisitions and joint ventures without encountering administrative, technical,
political, financial or other difficulties. There can also be no assurance
that we will be able to carry out any such transactions in accordance with our
plans, or that we will succeed in realizing any potential synergies, cost
savings or other expected benefits.

Our ability to continue to expand our operations through acquisitions will
depend upon our ability to consummate acquisitions on terms acceptable to us.
We face challenges in integrating any acquisition into our businesses and may
need to invest significant capital and resources in the acquired businesses.
Acquisitions of businesses in new markets will also require us to hire and
retain qualified personnel and expose us to uncertainties that are new to us.
In addition, because we may incur additional debt to finance new acquisitions,
our financial expense would increase as we pay interest on that debt.

We may experience design and manufacturing difficulties, causing our
business to suffer.

The mid- and premium-price categories of the prescription eyewear and
sunglasses markets in which we compete are particularly vulnerable to changes
in fashion trends and consumer preferences. Our historical success is
attributable, in part, to our introduction of innovative eyewear designs which
are perceived to represent an improvement over products otherwise available in
the market. Our future success will depend on our continued ability to develop
and introduce such innovative products.

4



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##### Table of Contents



In addition, our future success will also depend on our continued access
to raw materials and manufacturing equipment and processes. Production
difficulties, including capacity and supply constraints and excess inventory
levels, could have a material adverse impact on our business, results of
operations and financial condition. For example, production and supply chain
difficulties at the lens facilities transferred to BBGR in 2001 had a negative
impact on operations in the second half of 2001 and the first half of 2002.
Further, any disruption in the operations in any of our facilities, whether due
to technical or labor difficulties, destruction of or damage to any facility or
other reasons, could have a material adverse effect on our business, results of
operations and financial condition.

|                                                                                                        
|--------------------------------------------------------------------------------------------------------
|We may also experience production, distribution and marketing
difficulties that could harm our business.

The mid- and premium-price categories of the prescription eyewear and
sunglasses markets in which we operate are highly competitive. Management
believes that, in addition to successfully introducing new products, responding
to changes in the market environment and maintaining superior production
capabilities, our ability to remain competitive is highly dependent on our
success in maintaining an efficient distribution network. If we are unable to
maintain an efficient distribution network, our business, results of operations
and financial condition could suffer.

Further, we may be unsuccessful at channeling consumer preferences towards
our products. Our business could be adversely affected by such a failure, in
addition to the substantial advertising and marketing costs incurred by the
failed marketing efforts.

|                                                                                 
|---------------------------------------------------------------------------------
|Our future success depends, in part, on our ability to achieve and manage
growth.

Our business has grown significantly in recent years, particularly as a
result of our acquisition of D&A and General Optica. In order to achieve and
manage our growth effectively, we will be required to increase and streamline
production and implement manufacturing efficiencies where possible, while
maintaining strict quality control and the ability to deliver products to our
customers in a timely and efficient manner. We must also continuously develop
new product designs and features, expand our information systems and
operations, and train and manage an increasing number of management-level and
other employees. If we are unable to manage these matters effectively, our
business, results of operations and financial condition could suffer.

|                                                                                                       
|-------------------------------------------------------------------------------------------------------
|Our business is very dependent on our ability to negotiate and maintain
favorable license arrangements.

We have entered into license agreements that enable us to manufacture and
distribute prescription eyewear and sunglasses principally under the names
Prada, Fendi, Etro, La Perla, Celine, Loewe, Givenchy, Fila Eyes, Onyxand
others. The percentage of our sales attributable to licensed brands has
increased in recent years, accounting for 54.8% of the sales of our wholesale
and manufacturing segment in 2002. These license agreements typically have
terms of between one and five years. We believe that our ability to maintain
and negotiate favorable license agreements or alternative arrangements with
leading designers in the fashion and luxury goods industries is essential
to the branding of our products and, therefore, material to the success of our
business. Accordingly, our inability to negotiate and maintain satisfactory
license arrangements with leading designers could have a material adverse
effect on our business, results of operations and financial condition.

In addition, each of these licensors has final approval over all eyeglass
frames and other products bearing the licensors proprietary marks, and the
frames must meet the licensors general design specifications and quality
standards. Consequently, each licensor may, in the exercise of its approval
rights, delay the distribution of eyeglass frames bearing its proprietary
marks. Accordingly, there can be no assurance that we will not be subject to
delays resulting from disagreements with, or an inability to

5



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##### Table of Contents



obtain approvals
from, our licensors. These delays could materially and adversely affect our
business, operating results and financial condition.

Some of our licenses limit our right to market and sell products with
competing brand names and/or limit the markets in which we are able to use the
licensed brands. We expect that some of the future licenses we obtain will
contain some limitations on competition within market segments. Our growth,
therefore, will be limited to capitalizing on our existing licenses in the
markets for sunglasses and prescription eyewear and to introducing eyewear in
other markets. In addition, there can be no assurance that disagreements will
not arise between us and our licensors regarding whether certain brand-name
lines would be prohibited by the license agreements. Disagreements with
licensors may adversely affect sales of our existing products or prevent us
from introducing new eyewear products in market segments we believe are not
being served by our existing products.

|                                                                                                                                                              
|--------------------------------------------------------------------------------------------------------------------------------------------------------------
|We lost certain tax benefits in September 2001 and April 2003; our
effective income tax rate will therefore increase significantly towards
the statutory rate.

We have historically derived significant benefits from the Italian
governments investment incentive program for the Longarone area implemented as
part of a package of relief measures after the Vajont dam catastrophe in 1963.
In particular, a substantial portion of our income before income taxes has
historically been derived from Dierre S.r.l. (prior to its merger into De Rigo
S.p.A. in January 2002) and, to a much lesser extent, from Quattro Valli
Italian Flair S.r.l., each of which has been entitled to income tax exemptions
under the Vajont Relief Program. The tax exemption from which Dierre benefited
expired in September 2001, and that with regard to Quattro Valli expired in
April 2003. We do not expect new tax benefits to be introduced by the Italian
government relating to operations in the Longarone area or any other area in
Italy where our facilities are currently located. Consequently, we expect our
effective income tax rate to increase significantly towards the statutory rate.

|                                                                                                     
|-----------------------------------------------------------------------------------------------------
|If we are unable to protect our proprietary rights, our business and
financial results may be harmed.

We rely on trade secret, unfair competition, trade dress, trademark and
copyright law to protect our rights to certain aspects of our products,
including product designs, proprietary manufacturing processes and
technologies, product research and concepts and recognized trademarks, all of
which we believe are important to the success of our products and our
competitive position. However, pending trademark applications may not generate
a registered trademark, and any trademark registration that is granted may be
ineffective in thwarting competition and could be held invalid if subsequently
challenged. The actions we take to protect our proprietary rights may be
inadequate to prevent imitation of our products. Our proprietary information
could become known to competitors, and we may not be able to meaningfully
protect our rights to proprietary information. Furthermore, other companies
may independently develop substantially equivalent or better products that do
not infringe on our intellectual property rights, or they could assert rights
in, and ownership of, our proprietary rights. Moreover, the
laws of certain countries do not protect proprietary rights to the same
extent as the laws of the United States.

We devote financial and other resources to defend our proprietary rights.
If the level of potentially infringing activities by others were to increase
substantially, we might have to significantly increase the resources we devote
to protecting our rights. Additionally, an adverse determination in any
dispute involving our proprietary rights could require us to grant licenses to,
or obtain licenses from, third parties, or could prevent us from manufacturing
or selling our products or could subject us to substantial liability. Any of
these possibilities could have a material adverse effect on our business,
results of operations, financial condition and prospects.

6



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##### Table of Contents





| |  | Our business is
subject to risks relating to international sales and exposure to changing
local conditions.
| |  | -----------------------------------------------------------------------------------------------------------

We currently operate in many countries, and therefore, we are subject to
various risks inherent in conducting business internationally, including:
exposure to local economic, political and civil conditions; export and import
restrictions; currency exchange rate fluctuations and currency controls;
changes in government regulations, including those relating to payments for
prescription eyewear; withholding and other taxes on remittances and other
payments by subsidiaries, investment restrictions or requirements; and local
content laws requiring that certain products contain a specified minimum
percentage of domestically-produced components. For example, the recent
appreciation of the euro against the Pound Sterling has reduced the value in
euro terms of the contribution of D&A, our British retail chain, while the
recent economic crisis in Argentina led us to divest our former distribution
subsidiary in that country. The likelihood of such occurrences and their
potential effect on us vary from country to country and are unpredictable, but
may have a significant effect on our business, results of operations, financial
condition and prospects.



| |  | Our future success depends, in part, on attracting and retaining
qualified personnel.
| |  | -------------------------------------------------------------------------------------

Our ability to be competitive will depend, to some degree, on our ability
to attract and maintain highly qualified managerial, manufacturing, sales and
marketing personnel. There can be no assurance that we will be able to
continue to recruit and retain such personnel. In particular, we have been
dependent on certain key management personnel in the past, and the loss of any
of such key personnel may have a material adverse effect on our business,
results of operations and financial condition.



| |  | Since a majority of our outstanding Ordinary Shares are owned by the De
Rigo brothers, they exert significant control over the Company and its
operations.
| |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------

At June 24, 2003, Mr. Ennio De Rigo, the Chairman of the Board of
Directors and the Chief Executive Officer of the Company, and Mr. Walter De
Rigo, a Director of the Company, together owned approximately 73.6% of the
Companys outstanding Ordinary Shares. The De Rigo brothers will continue to
control the election of the members of our Board of Directors and the outcomes
of other matters submitted to a vote of the shareholders. As a result, they
will be able to control the Company and its operations. Because a change of
control would be difficult to achieve without the cooperation of the De Rigo
brothers and our Board of Directors, the holders of the Ordinary Shares and the
ADSs may be less likely to receive a premium for their shares upon a change of
control of our company.

Risk Factors Relating to the American Depositary Shares

Our share price may be volatile.

Our share price is likely to fluctuate in the future due to the volatility
of the stock market in general and a variety of factors, many of which are
beyond our control, including: quarterly variations in actual or anticipated
results of our operations; changes in financial estimates by securities
analysis; actions or announcements by our competitors; regulatory or
legislative actions; market outlook for the fashion sunglasses and prescription
eyewear industry generally; departures of our key personnel; and future sales
of our ADSs.These broad fluctuations may adversely affect the market price of
the ADSs.



| |  | Since most of our assets are located outside of the United States, you
may face difficulties in bringing and enforcing suits against us.
| |  | ----------------------------------------------------------------------------------------------------------------------------------------

Our executive offices and a substantial portion of our assets are located
in Italy. In addition, the De Rigo brothers and all of the members of our
management and Board of Directors are citizens of

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European countries who reside
in Europe. As a result, you may not be able to effect service of process
outside Italy upon the Company, our directors or other key personnel.

We may not pay dividends on the ADSs.

Although dividends may be recommended by our Board of Directors for
approval by shareholders at our annual general meeting, we have paid dividends
only three times in the past seven years.

Future sales of Ordinary Shares or ADSs could depress our share price.

Sales of substantial numbers of Ordinary Shares or ADSs (including shares
issued upon the exercise of stock options) in the public market, or the
perception that such sales could occur, could adversely affect the prevailing
market price of the Ordinary Shares or ADSs or our ability to raise capital
through a public offering of our equity securities.




Item 4.Information on the Company




HISTORY AND CORPORATE STRUCTURE

De Rigo is a worldwide leader in the design, manufacture and marketing of
high-quality eyewear in the mid- and premium-price categories. As a result of
the acquisition of D&A in late 1998 and General Optica in early 2000, De Rigo
is now one of the largest optical retailers in Europe. Designed in Italy, the
Groups products are distributed in about 80 countries worldwide, primarily in
Europe, Asia and the Americas. The Company distributes its products under its
own brand names  Police, Sting, Lozza as well as under the licensed brands
Fendi, FilaEyes, Etro, La Perla, Onyx, Prada, Celine, Loewe, Miu Miu, Helmut
Lang, Jil Sander, Givenchy and Furla.In 2002, the Group recorded net sales of
512.5 million and generated net income of 10.6 million.

The Company was incorporated in 1978 as a società a responsabilità
limitata, or limited liability company, in Limana, Italy. Initially, the
Company operated as a third party contractor for the production of sunglasses,
prescription eyeglass frames, and eyeglass components. By the beginning of the
1980s, the Company began to produce its own lines of sunglasses, and, within a
few years, established itself as one of the leading Italian producers of
sunglasses in the mid- to premium- price categories, with its Policebrand
attaining particular popularity among the younger generation.

In 1992, the Company merged with Argosol S.r.l., another manufacturer of
sunglasses and prescription eyeglass frames that was wholly owned by the De
Rigo brothers. By the early 1990s, and as a result of the acquisition of the
Lozzabrand in 1992, the Company began to produce sunglasses and eyeglass
frames under brand names licensed by renowned fashion houses, such as Fendi,
and soon became one of the world leaders in the mid- to premium price
categories of sunglasses.

In early 1995, the Company was converted to its present form as a società
per azioni, or corporation limited by shares, organized under the laws of the
Republic of Italy. Under its current Statuto, or By-Laws, De Rigo S.p.A. has a
duration of 25 years, expiring on December 31, 2020.

In recent years, the Groups expansion has been focused on its entry into
the retail optical business through its acquisition of D&A in 1998 and General
Optica in 2000 and on the growth of its designer lines, particularly through
the EID joint venture it formed with the Prada Group in 2000 and its 2001
marketing and distribution agreement with the LVMH Fashion Group.

As of June 24, 2003, the Companys principal manufacturing subsidiary is
Quattro Valli Italian Flair S.r.l. (Quattro Valli) which, together with the
Company, designs and manufactures metal and

8



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##### Table of Contents



plastic eyeglass frames for the Group. See Design and
ManufacturingManufacturing. The Groups former manufacturing subsidiary,
Dierre S.r.l. (Dierre), was merged into De Rigo S.p.A. in January 2002. The
Companys distribution subsidiaries are Vogart Line España S.A. (Vogart
España), De Rigo Deutschland GmbH (De Rigo Deutschland), De Rigo France S.a.
(De Rigo France), De Rigo UK Ltd. (De Rigo UK), De Rigo Nederland B.V. (De
Rigo Nederland), De Rigo Hellas A.E.E. (De Rigo Hellas), De Rigo Japan Ltd
Co. (De Rigo Japan) and De Rigo Hong Kong Ltd. (De Rigo HK). These
manufacturing and distribution subsidiaries comprise De Rigos wholesale and
manufacturing segment (Wholesale and Manufacturing). Each of these companies
distribute certain of the Groups eyewear lines in Spain, Germany, France, the
United Kingdom, the Netherlands, Greece, Japan and Hong Kong, respectively.
Eyewear manufactured by De Rigo and sold under the Prada, Miu Miu, Helmut Lang
and Jil Sanderbrand names are distributed worldwide through E.I.D. Eyewear
International Distribution S.A. (EID), a joint venture with Prada in which
the Group holds a 51% interest and which comprises De Rigos EID segment. The
Group also operates as an optical retailer in the United Kingdom through its
subsidiary D&A and in Spain and Portugal through its subsidiary General Optica,
which together form the Groups retail segment (the retail segment). See
Item 5 Operating and Financial Review and Prospects.

Quattro Valli is 100% owned directly by the Company. Vogart España, De
Rigo Deutschland, De Rigo France, De Rigo UK, De Rigo Nederland, De Rigo Hellas
and EID are 59.3%, 100%, 100%, 80%, 100%, 51% and 51% owned directly by the
Company, respectively. The Company indirectly controls 100% of each of D&A and
General Optica through Vantios Ltd. and General Optica Internacional Sa,
respectively; each of these companies is an intermediate holding company that
is 100% owned by the Company. The Company also indirectly controls 90% of De
Rigo Japan and 80% of De Rigo Hong Kong through De Rigo Nederland and 51% of
EID USA LLC through De Rigo USA, a wholly owned subsidiary of the Company that
formerly served as a distribution subsidiary for the U.S. market but is now
only a sub-holding company. Each of these companies is incorporated under the
laws of its principal place of business.

Mr. Ennio De Rigo, the Chairman of the Board of Directors and Chief
Executive Officer of the Company, and Mr. Walter De Rigo, a Director of the
Company, indirectly own 71.5% of the Companys outstanding Ordinary Shares
(primarily through De Rigo Holding B.V. (De Rigo Holding)) and directly hold
2.1% of the Companys outstanding Ordinary Shares.The De Rigo brothers
established De Rigo Holding to hold and manage their interests in the Company
and to make investments in other industrial sectors in which they participate.
See Item 7 Major Shareholders and Related Party Transactions and Note 2 of
Notes to the Consolidated Financial Statements included in Item 18 of this
annual report.

The Companys registered office and the Groups principal executive
offices are located at Zona Industriale Villanova, No. 12, 32013 Longarone
(BL), Italy, approximately 110 kilometers north of Venice and 15 kilometers
north of Belluno in the Veneto region of northeast Italy. The telephone number
of the Companys principal executive office is (39)(0437) 77 77.




BUSINESS OVERVIEW

De Rigo is a worldwide leader in the design, manufacture and marketing of
high-quality eyewear in the mid- and premium-price categories. The Group
divides its activities into three distinct segments:



| |  |  | Wholesale and Manufacturingconsists of the design, manufacturing,
marketing and distribution of high-quality eyewear to opticians in
Italy and to independent distributors and opticians through the Groups
distribution subsidiaries abroad. This segment furnishes eyewear to
the Groups other business units, to which the wholesale and
manufacturing segment makes sales at prices that include a markup
designed to compensate the unit for its manufacturing activity.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

9



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| |  |  | Retailconsists of the sale of prescription eyeglasses, fashion
sunglasses and other optical products through the network of stores
operated by the Groups two retail chains, D&A, a leading retailer in
the British optical market, and General Optica, the leading optical
chain in Spain, which also has a presence in Portugal.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | EIDis the Groups joint-venture with the Prada Group, which
conducts product development, marketing and distribution activities
related to the Groups Prada-branded eyewear.                                                                                                                                                      

The following table sets forth De Rigos sales by business segment for
each of the years indicated.

Sales by Business Segment
(in millions of euros)

|                            |  |      |        |      |  |      |        |   |  |  |        |  
|--------------------------- |  | ---- | ------ | ---- |  | ---- | ------ | - |  |  | ------ | -
|                            |  | 2000 |        | 2001 |  | 2002
|                            |  |      |        |      |  |     
|Wholesale and Manufacturing |  |      | 105.1 |      |  |      | 133.2 |   |  |  | 141.1 |  
|Retail                      |  |      | 340.1  |      |  |      | 358.4  |   |  |  | 359.6  |  
|EID                         |  |      | 23.6   |      |  |      | 32.1   |   |  |  | 31.2   |  
|Intersegment Eliminations   |  |      | (12.2  | )    |  |      | (18.4  | ) |  |  | (19.4  | )
|                            |  |      |        |      |  |      |        |   |  |  |        |  
|Total                       |  |      | 456.6 |      |  |      | 505.3 |   |  |  | 512.5 |  

The following table sets forth the percentage of the sales of the
wholesale and manufacturing segment attributable to sales of De Rigos owned
brands and licensed brands (including Pradaproducts marketed by EID) for each
of the years indicated.

Sales of Owned Brands and Licensed Brands by Wholesale and Manufacturing Segment

|                |  |      |       |      |  |      |       |   |  |  |       |  
|--------------- |  | ---- | ----- | ---- |  | ---- | ----- | - |  |  | ----- | -
|                |  | 2000 |       | 2001 |  | 2002
|                |  |      |       |      |  |     
|Owned brands    |  |      | 54.1  | %    |  |      | 47.9  | % |  |  | 42.1  | %
|Licensed brands |  |      | 41.2  | %    |  |      | 48.9  | % |  |  | 54.8  | %
|Other           |  |      | 4.7   | %    |  |      | 3.2   | % |  |  | 3.1   | %
|                |  |      |       |      |  |      |       |   |  |  |       |  
|Total           |  |      | 100.0 | %    |  |      | 100.0 | % |  |  | 100.0 | %

The following table sets forth sales of the prescription eyewear and
sunglasses marketed by the Group (in units, and as a percentage of unit sales
of eyewear) in each of the years indicated:

Unit Sales of Eyewear Marketed by De Rigo
(in thousands)

|                                |  |      |       |      |  |      |       |   |  |  |       |  |  |  |       |   |  |  |       |  |  |  |       |  
|------------------------------- |  | ---- | ----- | ---- |  | ---- | ----- | - |  |  | ----- |  |  |  | ----- | - |  |  | ----- |  |  |  | ----- | -
|                                |  | 2000 |       | 2001 |  | 2002
|                                |  |      |       |      |  |     
|Sunglass Unit Sales             |  |      | 2,882 |      |  |      | 53.4  | % |  |  | 3,109 |  |  |  | 54.6  | % |  |  | 3,040 |  |  |  | 55.3  | %
|Prescription
Eyewear Unit Sales |  |      | 2,513 |      |  |      | 46.6  | % |  |  | 2,582 |  |  |  | 45.4  | % |  |  | 2,457 |  |  |  | 44.7  | %
|                                |  |      |       |      |  |      |       |   |  |  |       |  |  |  |       |   |  |  |       |  |  |  |       |  
|Total Unit Sales                |  |      | 5,395 |      |  |      | 100.0 | % |  |  | 5,691 |  |  |  | 100.0 | % |  |  | 5,497 |  |  |  | 100.0 | %

In 2002, sales in Europe accounted for 90.5% of the Groups total net
sales, with 2.3% of the total being attributable to sales in the Americas and
the remaining 7.2% to sales in the rest of the world. The following table sets
forth the Groups net sales by geographic region during each of the periods
indicated.
See also Note 17 of Notes to the Consolidated Financial Statements
included in Item 18 of this annual report.

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Net Sales by Geographic Region
(in millions of euros)

|                  |                 |  |        |        |      |  |      |       |   |  |        |        |  |  |      |       |   |  |        |        |  |  |      |       |  
|----------------- | --------------- |  | ------ | ------ | ---- |  | ---- | ----- | - |  | ------ | ------ |  |  | ---- | ----- | - |  | ------ | ------ |  |  | ---- | ----- | -
|                  |                 |  | 2000   |        | 2001 |  | 2002
|                  |                 |  |        |        |      |  |     
|Europe            |                 |  | 414.9 |        |      |  | 90.8 | %     |   |  | 453.2 |        |  |  | 89.7 | %     |   |  | 463.9 |        |  |  | 90.5 | %    
|Americas          |                 |  | 14.5   |        |      |  | 3.2  | %     |   |  | 17.6   |        |  |  | 3.5  | %     |   |  | 12.0   |        |  |  | 2.3  | %    
|Rest of the World |                 |  | 27.2   |        |      |  | 6.0  | %     |   |  | 34.5   |        |  |  | 6.8  | %     |   |  | 36.6   |        |  |  | 7.2  | %    
|                  |                 |  |        |        |      |  |      |       |   |  |        |        |  |  |      |       |   |  |        |        |  |  |      |      
|                  | Total net sales |  |        | 456.6 |      |  |      | 100.0 | % |  |        | 505.3 |  |  |      | 100.0 | % |  |        | 512.5 |  |  |      | 100.0 | %

De Rigo maintains a presence in more than 80 countries and its products
are sold in more than 40,000 stores.

The Groups eyewear is sold by independent opticians, retail optical
chains (including the Groups own D&A and General Optica) and stores
specializing in glasses and eyewear products, including in several markets,
chain stores specializing in sunglasses such as Sunglass Hut. The Groups
designer eyewear is sold in the relevant designer boutiques, and, in some
cases, in well-known department stores such as Harrods, Selfridgesand House of
Fraserin the United Kingdom and Galleries Lafayetteand Printempsin France.




COMPANY STRATEGY

Management believes that De Rigos position within the mid-to premium
price categories of the eyewear market benefits from the following competitive
strengths.



| |  | Brand prestige.De Rigo distributes its products under brand names
that management believes benefit from high customer recognition and
significant prestige in its principal markets. The brand names
employed by the Company include owned brand names, such as Police,
Stingand Lozza- which rely on innovative design, product quality and
an effective marketing policy in order to build brand awareness - and
highly regarded designer brand names licensed to the Group by some of
the worlds best known fashion houses.                                                                                                                                                                                                         
|- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| 
| |  | Design originality.De Rigo particularly targets customers attentive
to design and fashion trends, and believes its products are
characterized by particularly original and innovative designs that are
carefully tuned to consumer preferences. Management believes that the
Groups stylistic innovations have established its collections as a
point of reference for the entire industry, while maintaining the
specific identity of each of its brands.                                                                                                                                                                                                                                                                             
| 
| |  | Tailored distribution.De Rigo tailors its distribution strategy to
reflect local market conditions. In Italy, the Group distributes its
products directly through its network of sales representatives. In
most of its other principal markets, De Rigo has developed a network
of distribution subsidiaries which it controls. In the United
Kingdom, Spain and Portugal, the Company has also developed a wide
network of retail stores. Management believes that its direct control
of the distribution network in its major markets allows the Group to
improve margins while enhancing the image and the prestige of the
Groups products through careful selection of points of sale and a
focus on post-sale customer assistance.
| 
| |  | Integrated production.De Rigos production process is generally
highly automated, though selected processes also include handicraft
techniques. We have developed a long term relationship with our
principal suppliers, enabling us to quickly react to changes in market
demand while
keeping tight control over the quality of materials and individual
production steps used by outside suppliers in their manufacturing
processes.                                                                                                                                                                                                                                                                                                 

De Rigo seeks to build on these competitive advantages in achieving
managements principal strategic objectives, which include:

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| |  |  | Expansion in the mid- to premium-price eyewear categories.De Rigo
plans to expand its presence in the mid- and premium-price segments of the
markets for sunglasses and prescription eyeglass frames - which management
believes offer the most attractive profit margins - by capitalizing on the
quality of the products it markets under both the Groups owned brand names and
licensed designer brand names. To achieve this goal, the Company intends to:
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|  |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Strengthen its brand portfolio. De Rigo intends to strengthen
its current brand portfolio by increasing the visibility of its owned
brand names, especially Policeand Sting,principally through the use
of internationally-recognized spokespersons in advertising, while at
the same time consolidating its relationship with the leading fashion
houses that currently license designer brand names to the Group. De
Rigo also intends to enlarge its brand portfolio by entering into new
licensing arrangements with other prestigious fashion houses and
launching new brands of its own.
|  |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| |  | Expand distribution. De Rigo intends to expand its
distribution channels in markets that the Company believes offer the
greatest demand for designer mid- and premium-price eyewear,
primarily in Europe, North America, and the Far East. To do so, the
Company expects to form new distribution subsidiaries in certain
markets while further developing its existing subsidiaries in others.                                                                                                                                                                                               
|  |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| |  | Invest in production. In order to achieve managements goals
of increasing efficiency, reducing costs, and enhancing the
technological features of its products while continuing to maintain
its high standards of quality, the Company plans to continue to
invest in the production process, with a particular focus on
automation and the use of innovative new materials.                                                                                                                                                                                                                 



| |  |  | Expansion in the retail market.De Rigo plans to continue to expand its
presence in the retail eyewear sector, focusing on sales of prescription
eyeglass frames and sunglasses produced by De Rigo or other manufacturers and
of contact lenses. To achieve this goal, the Company intends to:
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|  |  |                                                                                                                                                                                                                                                                                                                                                                               
|- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Enhance its existing stores. De Rigo intends to enhance many
of its existing retail stores, in order to increase its penetration
of local markets and better present to consumers the quality of its
eyewear collections.                                                                                                                                                     
|  |  |                                                                                                                                                                                                                                                                                                                                                                               
| |  | Open new stores. De Rigo intends to continue to expand the D&A
and General Optica store networks to achieve greater geographical
coverage in key areas through directly managed stores or franchised
stores.                                                                                                                                                                  
|  |  |                                                                                                                                                                                                                                                                                                                                                                               
| |  | Pursue acquisitions. De Rigo will continue to pursue
acquisitions and other strategic transactions that management
believes would afford the Company attractive opportunities to
continue its geographic expansion by enhancing or establishing its
retail presence in those countries in which such a strategy is
compatible with the Companys current distribution network.




PRODUCTS

The Companys product portfolio is divided into owned brands and designer
lines of prescription eyeglass frames and sunglasses. The Companys
traditional lines are produced under well-established brand names owned by De
Rigo and feature conventional and fashion-conscious styles. De Rigos designer
lines are produced under brand names used by the Company under license
agreements or other arrangements and incorporate more contemporary and
fashion-forward styling. The Groups D&A and General Optica retail
subsidiaries also sell traditional and designer eyewear produced by third
parties.

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De Rigo manufactures over 2,500 models of sunglasses and prescription
eyeglass frames. Historically, De Rigo concentrated primarily on the design,
production and sale of high-quality, fashionable sunglasses. Sunglasses
manufactured by the Group represented 53.3% of the Groups unit sales of
eyewear in 2002 compared with 52.7 % in 2001, with Group-manufactured
prescription eyewear representing 27.4 % and 25.1% of unit sales, respectively.
Sales of eyewear bearing brands that do not belong to the Group through the
retail segment represented the remaining 19.3% and 22.2% of De Rigos unit
sales of eyewear in 2002 and 2001. Generally, the eyewear sold under each of
the Groups brands, both its owned brands and those licensed from third
parties, include collections of both sunglasses and prescription eyewear. The
Groups two core brands, Policeand Sting, represented approximately 32.8% and
33.6% of its total eyewear unit sales in 2002 and 2001, whereas De Rigos
designer lines as a group represented approximately 34.2% and 22.4% of total
unit sales.

Owned Brands

Eyewear bearing the Groups owned brands, and conceived and realized by De
Rigo, are sold in all of its principal markets. A detailed description of the
Groups most noteworthy owned brands, Police, Sting, and Lozza, follows.

Police.The first of the Groups core brands, Police, was created with the
goal of selling an entire range of sunglass models associated with a single
strong brand image, introducing in Europe a product based on a depiction of an
aggressive urban American lifestyle. In 1996, De Rigo revamped the Police
line in order to shift its target market from aggressive urban young adults to
more mature adults (ages 25 to 40) with higher discretionary spending power.
In recent years, the Company has continued to invest money in communicating
this shift worldwide. Since 1999, Bruce Willis has served as the spokesperson
for the Policebrand in all markets outside the U.S., Canada and Japan. The
brands latest publicity campaign in all markets outside the U.S. and Canada
features George Clooney, who wears both Policeeyeglasses and sunglasses. In
addition, David Beckham, the Manchester United and England soccer star, served
as the spokesman for the Policesunglass campaign in the United Kingdom and
Japan (the latter in connection with 2002 World Cup).

Sting.This brand, which also has an aggressive image, was conceived
and designed for the youth market (ages 14 to 24). The line is characterized
by a large number of models ranging from very minimalist frames and matte
colors to brightly colored and elaborate shapes to suit various tastes.
Together with the Policebrand, Stingenabled De Rigo to develop the
fashion-conscious teenage and young adult market, particularly in Italy.
Gabriel Batistuta, the Inter Milan and Argentina soccer star, is currently
serving as the spokesman for the latest Stingadvertising campaign.

Lozza.The Lozzabrand, the oldest eyewear brand in Italy, offers a wide
range of traditional and classic eyeframes. The brand targets the
stylistically more conservative adult market (age 40 and older).

Licensed Brands

The Group also manufactures and sells eyewear under each of the following
designer brands pursuant to license agreements or other arrangements covering
the relevant brands and trademarks. The Groups license agreements have terms
ranging from one to five years. The following is a brief description of each of
the major designer brand names currently marketed by De Rigo.

Celine.A collection that is designed to be useful, yet glamorous, based
on a modern aesthetic that is embodied in luxurious detailing that is
identifiable, yet subtle.

Etro.The Etrocollections embody an innovative vision of the tradition
originating in the Etrophilosophy: sophisticated details and exquisite
workmanship reflected in high fashion shapes and materials. The line is aimed
at demanding customers in a wide range of age groups.

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Fendi.A collection of high-premium priced designer eyewear. Models are
generally characterized by simplicity and clean forms.

Fila Eyes.A brand comprised primarily of sports/fashion sunglasses and
sports shields. FilaEyesaims to satisfy a broad range of different tastes and
needs, from lightweight, curved-wrap, metal-framed models to resistant,
high-performance models.

Furla.A worldwide leading brand in the bridge market. Furla products are
characterised by an essential and distinctive style. The collections reveal a
careful interpretation of trends and are created paying great attention to the
needs of a modern international woman.

Givenchy.A modern, yet timeless, collection for women and men, tailored
for the fashion conscious and cosmopolitan Givenchycustomer.

Helmut Lang.The distinguishing characteristics of the Helmut Lang
collection are exclusive, minimalist design and the use of sophisticated
materials. The collection is characterized by its clean lines and modern
spirit.

Jil Sander.The Jil Sandercollection embodies a modern approach while
remaining faithful to its retro inspiration. Highlights include special
materials and technical components that are specially manufactured in Japan.

La Perla.A collection designed for the sophisticated woman, the details
of which have been conceived to reflect fascination and femininity.

Loewe.A luxurious modern collection for women and men inspired by
Mediterranean culture.

Miu Miu.The Miu Miucollection is a lively, cheerful line designed for
free spirits who move with confidence in the dynamic world of international
metropolitan fashion.

Onyx.A brand created to meet the fashion needs of teenagers. A youthful
and trendy collection of well-constructed designs that can give the wearer a
wide variety of looks at affordable prices.

Prada.The Pradaeyewear manufactured and sold by the Group is firmly
grounded in Pradas unique fashion heritage. Highly sophisticated styling and
production techniques have helped Pradas products attain worldwide prominence
and master craftsmanship remains a primary focus of the modern Prada company.
Prada bases its success on a global vision of fashion in a full, creative,
productive
context. With Prada, there is no single correct style for any occasion,
only an open-minded regard of styles and materials, with reinvention and
transformation of meaning according to context.




DESIGN AND MANUFACTURING

Every year, the Group introduces two new collections for each of its owned
and licensed brands: one for eyeglasses launched in May in conjunction with
MIDO (the major world eyewear exposition in Milan), and one for sunglasses each
summer. Both collections include new models, as well as the models that
enjoyed the greatest success the previous year. In 2002, new models
represented roughly 65% of each collection. It takes about 10 months to
develop a new collection, a process that includes design, creation of
prototypes, and production.

Design

The Group believes that its competitive strengths include the variety of
its models designs and the breadth of its prescription eyewear and sunglasses
product lines. The design team responsible for this

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broad array of styles
includes approximately 20 members, consisting of designers and prototype
engineers; De Rigos design team also collaborates with external designers.
Working very closely with the Groups marketing team, which monitors demand for
the Groups current models as well as general style trends in eyewear, the
designers devise new styles utilizing novel forms, materials, and colors. In
developing new collections for the Groups licensed brand names, the De Rigo
design team works in close contact with the designers own creative staff, who
make suggestions based on the current styles of the designers clothing and
accessories, thus ensuring aesthetic coherence among the designers various
collections.

The Groups design capacity derives from the use by its design team of
computer-aided design/computer-aided manufacturing, or CAD/CAM, technology
in the design and prototype manufacturing phases. Although the design team,
aided by the CAD/CAM system, designs and produces prototypes of many new models
each month, only a selected number of new models are chosen to be added to the
Groups collections each year. Its sophisticated CAD/CAM system enables the
Group to design and produce a fully working metal prototype in under 24 hours,
and to produce four to five metal prototypes per day. The CAD/CAM system also
streamlines the conversion from prototype to production. For example, for the
production of metal sunglass or eyeglass frames, the Group makes its own
detailed metal molds, which are inscribed by computer-controlled mills using
the data stored in the CAD/CAM system. For the production of plastic frames,
the automated plastic milling machines used by the Group are programmed by
inputting the data stored on the CAD/CAM system.

Manufacturing

The primary materials utilized in the production of eyeglass frames are
metal and plastic (or a combination thereof). Metal sheets and threads are the
primary raw materials used to manufacture metal frames. The unpolished frames
subsequently undergo galvanizing and coloring processes during which the frames
assume the latest colors of the new collection. The final touches, including
the mounting of the lenses, take place at the finishing center. Plastic frames
can be manufactured through a pantographic or injection process. In the case
of the former, an acetate sheet is cut, folded, and polished to form the front
of the frame and the two temple pieces. In the case of the latter, granular
plastic is injected into special moulds. The front of the frame and temple
pieces are usually colored before being sent to the finishing center.

The Group uses high-quality raw materials in the manufacture of its
products. In the manufacture of its fashion sunglasses, the Group uses high
quality lenses produced by several major lens
manufacturers. These lenses provide 100% protection from all ultraviolet
rays, are impact resistant and are certified to be in compliance with the
health and safety standards prescribed by the U.S. Food and Drug Administration
(21 C.F.R. §801.410) and the European Union (Directive 89/686/CEE).

The Groups manufacturing facilities are located primarily in the Belluno
area in northeast Italy, the region in which most of Italys eyewear industry
is based. In Limana, De Rigo operates two manufacturing facilities for the
production of metal frames, while at Longarone, it owns one facility for the
galvanization and coloring of metal frames and another for production of
pantographic plastic frames. The facility for pantographic plastic frames at
Longarone also serves as the finishing center for all of the Groups optical
products (including the products of subcontractors).

Many aspects of the manufacturing process have been automated, including
the production of metal and plastic frame components and the galvanization of
metal eyeglass frames. In a traditionally labor-intensive sector, De Rigo has
invested in the design and creation of new proprietary robotics and machinery
to automate manufacturing tasks, to increase efficiency and to maintain high
quality. However, some manufacturing steps, such as coloring and finishing,
are still done by hand.

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De Rigo puts particular emphasis on the quality of its products, beginning
with the inspection of the raw materials and components and continuing with
quality control and process control procedures throughout all manufacturing
stages, whether carried out internally or externally by subcontractors. At the
end of the production process, all frames are individually inspected. Less
than 2% of frames manufactured by the Group have even minor defects at the
finishing stage. If any minor defects are detected, frames are repaired or
replaced. Despite the high degree of automation of the Groups production
processes, its quality control is for the most part performed manually.

De Rigo maintains flexibility and capacity in manufacturing by using
specialized subcontractors for various production functions (production of
frame components and details, galvanizing and coloration, assembly, finishing
and production of accessories). Typically, the Group supplies subcontractors
with the primary material and components so as to optimize quality control.
Moreover, Group technicians regularly visit the subcontractors facilities to
monitor production quality and verify the promptness of deliveries. In 2002,
the Group produced approximately 70% of its production requirements internally,
the same percentage as in 2001. In 2003, the Group expects again to
subcontract approximately 25% to 35% of its production requirements to third
parties.




MARKETING AND DISTRIBUTION

Marketing

As a result of the Groups recent expansion and its increased focus on
designer brands and retail operations, management has decided to increase De
Rigos marketing expenditures, while at the same time integrating and
redefining the Groups various marketing activities so as to meet the
challenges of an increasingly competitive global market. In doing so,
management is working to transform De Rigos marketing operation from one
traditionally focused on sales support activity such as point of sale material
and consumer advertising into an increasingly strategic part of the Group that
is focused on brand management. The necessary integration of marketing
activities, including the selection of the frames to be included in each
brands collection, is followed by the development and implementation of a
strategy focused on the correct positioning of each of the Groups brands in
each of the Groups markets around the world, with differentiated distribution
and pricing.

Wholesale and Manufacturing.The Groups marketing team monitors the
development of the collections, a task that includes the selection of the
frames to be included in each brands collection, the
development and implementation of a strategy focused on the correct
positioning of each of the Groups brands in each of the Groups markets around
the world, and pricing based on the nature of specific markets, including the
degree of awareness of a particular brand in that market.

In Italy, De Rigo advertises its products in the principal fashion
publications and magazines of national interest and sometimes on billboards and
television. De Rigo also provides opticians with promotional and marketing
material, including posters, show cards and displays. Outside of Italy, the
Group uses similar channels and exercises a similar degree of control over its
marketing message in those countries in which it operates through affiliated
distribution subsidiaries. In contrast, in countries where the Group operates
through independent distributors, De Rigo generally defers to the judgment of
those distributors as to which of the Groups products should be marketed in
the areas they cover. In some cases, however, De Rigo takes part in planning
the independent distributors marketing budget, and, after approving the
budget, contributes towards the distributors marketing expenses. EID also
uses a number of the marketing methods developed by the wholesale and
manufacturing segment.

Retail.D&A and General Opticas marketing consists of national
television, radio and print media in their respective home markets. The
individual retail stores themselves are responsible for campaigns to attract
customers to a particular retail store. In this manner, the stores generate
direct contact with the client base and develop personal rapport with
customers, with the ultimate goal of

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educating customers about new products and
services and encouraging more frequent replacement of eyewear. D&A and General
Optica also maintain and periodically update extensive customer databases,
which currently contain information on approximately 8 million and 3 million
clients and potential clients, respectively.

Distribution

The Group distributes its manufactured products through its network of
sales representatives in Italy and the countries in which its distribution
subsidiaries are based, through independent distributors and through the D&A
and General Optica retail stores in the United Kingdom, Spain and Portugal
(which also sell eyewear from other manufacturers). De Rigo is present in over
80 countries and its products are sold in over 40,000 retail stores. As part of
its strategy, the Group maintains strict control over its distribution network.
The Groups eyewear lines are sold through independent opticians, optical
retail chains and optical specialty stores, including, in certain markets,
sunglass specialty chains such as Sunglass Hut. In addition, the Groups
fashion sunglass lines are sold in certain markets through major department
stores with large optical departments, such as Harrods, Selfridgesand House of
Fraserin England and Galleries Lafayetteand Printempsin France. In order to
preserve the integrity of its brand images, the Group encourages sales of its
eyewear exclusively through quality retail stores at suggested manufacturers
retail prices, makes every lawful effort to prevent discounting of its products
and discourages any manner of sale that would degrade its products brand
images.

Wholesale and Manufacturing Segment

Italy.In the fragmented Italian retail eyewear market, the Group
distributes its products through its network of sales representatives, who
currently have an aggregate of approximately 6,000 customers selling through
roughly 7,200 points of sale. As of December 31, 2002, the Group had
approximately 68 sales representatives in Italy. Each sales representative is
assigned to a particular territory within Italy for which he is the exclusive
representative for some of the Groups eyewear lines. Customers either order
eyewear from their sales representatives or directly from the Group. Each
sales representative works exclusively for the Group and is paid on a
commission basis for sales from their respective territories.

The Group believes that this method of distribution has been effective,
particularly with respect to its Policeand Stingbrands, and has enabled the
Group to achieve a high degree of penetration of the Italian market.

ExportDistribution SubsidiariesThe Groups distribution subsidiaries
represent an important element of its distribution strategy. The Group
believes that distributing through its own subsidiaries in certain markets
enables it to manage better the image of its brands, its sales efforts in these
markets and its customer service activities. The Group generally seeks to
establish distribution subsidiaries only in markets where it believes that
direct control would be most effective in implementing its marketing strategy.
As of December 31, 2002, there were distribution subsidiaries in Germany,
Spain, France, the Netherlands, the United Kingdom, Greece, Japan and Hong
Kong.

The distribution subsidiaries have the exclusive right to distribute the
Groups brands within a designated territory. As of December 31, 2002, the
Groups distribution subsidiaries employed approximately 99 sales
representatives, of whom 29 were compensated on a combined salary and
commission basis, with the others compensated solely on a commission basis.

ExportIndependent DistributorsOutside of Italy, the United Kingdom,
Spain, Portugal and countries in which the Group has distribution subsidiaries,
the Group sells its sunglasses and prescription eyeglass frames through
independent distributors in approximately 70 countries. Pursuant to
distribution agreements with the Group, these distributors also have the
exclusive right to sell certain of the Groups lines in designated territories.
A distributor may sell one or more of the Groups lines within its territory,

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depending on the terms of the relevant distribution arrangement. The Group
maintains close contact with the independent distributors in order to monitor
sales in the relevant markets. Almost all orders for eyewear are given to the
Group by the distributor, and the Group ships the ordered goods to the
distributor, who then delivers them to the retailer. Prices of the Groups
exported products generally are fixed in euro and vary from market to market,
subject to adjustment for shipping costs and customs duties.

The sales of the Groups wholesale and manufacturing segment, including
sales to the other segments, totalled 141.1 million (or 27.5% of total net
sales) in 2002, as compared with sales of 133.2 million (or 26.4% of total net
sales) in 2001.

EID: Prada Joint Venture

In 1999, De Rigo and the Prada Group agreed to create a joint venture for
the manufacture and distribution of Prada-brand eyeglass frames and sunglasses.
Central to the joint venture was the incorporation of a new company, Eyewear
International Distribution SA (EID), that is owned 51% by De Rigo and 49% by
Prada. The new company seeks to take advantage of the specialized expertise of
its two parent companies: the creation of collections, positioning of products,
and broad marketing strategies are the responsibility of Prada, while De Rigo
is responsible for the actual production (creation of prototypes and subsequent
manufacture) of the collections. Major business decisions (including adoption
of a business plan) require the approval of both parties. The continued
existence of the joint venture is linked to the periodic renewal of the Prada
brand license to EID.

EID sells eyewear bearing the Prada, Miu Miu, Jil Sander, and Helmut Lang
brands. Its distribution strategy is based on the principle of using only the
most select retail distributors. EID relies on national networks of employees
who select retail stores for the sale of Pradaeyewear products. Among the
criteria considered in the selection of retail stores is a stores location,
the tastefulness of its window displays, and the quality of its customer
assistance.

EID develops relationships with retailers not only through direct visits,
trade fairs, and national expositions, but also through trunk shows, held in
Prada showrooms and boutiques (or other prestigious locations), targeting a
limited number of retailers operating in the area. Limiting the number of
retail stores who are authorized to sell Pradaeyewear products allows EID to
continue to closely monitor all aspects of the process.

In addition to the sale of prescription eyewear frames, EID also sells
sunglasses through Prada boutiques, retailers of Pradaproducts, and several
renowned department stores including Neiman Marcus, Saks, Bergdorf Goodman,
Harrods, and Selfridges. For post-sale customer assistance in particular
markets, EID relies on its foreign subsidiaries and several of De Rigos own
distribution subsidiaries.

EIDs sales, including sales to the other segments, totalled 31.2 million
(or 6.1% of total net sales) in 2002, as compared to sales of 32.1 million (or
6.4% of total net sales) in 2001.

Retail Segment

The Groups retail segment comprises D&A, with stores throughout the
United Kingdom and General Optica, with stores in Spain and Portugal.

Dollond & Aitchison

In December 1998, the Group acquired 100% of the British optical chain
Dollond & Aitchison. D&A is arguably the longest established optical chain in
the world (having been founded in 1750). D&A

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operates a retail network
throughout the United Kingdom that was comprised of 232 company-owned stores
(including 23 optical megastores) and 146 franchised stores at June 1, 2003.

Retail sales through D&A totalled 236.2 million in 2002 and comprised
46.1% of the Groups total net sales, as compared with sales of 247.7 million
(or 49.0% of total sales) in 2001. In 2002, D&A sales of De Rigo products
(almost exclusively eyeglass frames) accounted for approximately 22.9% of D&As
total revenues from eyeglass sales, from18.9% in 2001. In 2001, the most recent
year for which market share data is available, D&As owned retail network had a
share* of 8.1% of the British optical market based on value of products sold;
its share of this market rose to 9.8% if its franchised stores were included.
In 2001, D&As estimated share of the British market for contact lenses and
solutions by value reached approximately 24.3%.

D&As service is focused on providing professional eye examinations and on
assisting customers in choosing eyeglass frames and lenses. In the United
Kingdom, D&As main competitors tend to center their marketing on one hour
service or on price. Market research commissioned by D&A found (i) that
customers fundamentally feel unattractive wearing spectacles and uncomfortable
when buying them; (ii) that customers want honest, straight-forward advice on
what suits them; and (iii) that customers want outstanding value for money in
terms of pricing, quality and after-sales service. On the basis of these
findings, D&A formulated a marketing strategy that focused on customer service,
cultivating an exemplary level of service that has earned D&A the honor of a
Royal Appointment.

In order to improve its assistance of customers in choosing eyeglasses,
D&A (together with well-known consultants in the field) developed the Styleeyes
and Computereyesservices. Styleeyesadapts techniques in aesthetic consulting
typically used in the cosmetics industry to identify the shape and color of
frames that best match the customers face. Computereyesallows the consumer to
see on a computer
screen how he or she would look wearing different eyeglass frames. The
quality of service offered by D&A professionals is regularly monitored through
the use of customer satisfaction forms filled out by clients. This evaluative
process constitutes the base of the incentive program for company employees
working at its retail stores.

Management believes that D&As presence throughout the United Kingdom has
enabled it to earn wide recognition of its brand name and the concomitant image
of quality and innovation. In order to further develop its customer
relationships, D&A established the Contact Lenses by Postservice, which
provides periodic mail deliveries of contact lenses to D&As clients. This
service, the only one of its kind in the United Kingdom offering a wide range
of products from different suppliers, has allowed D&A to increase customer
loyalty significantly while at the same time providing a readily available
channel for direct marketing. Contact Lenses by Posthas also enabled D&A to
broaden its share of the contact lenses market by reaching consumers in the
18-40 age group, as well as consumers above the age of 40 who typically use
eyeglasses. As of June 1, 2003, roughly 185,000 clients are active customers
in the program, and D&A believes that Contact Lenses by Postcontinues to offer
significant potential for growth.

D&A is completing a restructuring of its business in order to better
compete in the British optical market. This restructuring process includes the
refocusing of the D&A brand; the restructuring of its branch network;
reorganizing the supply chain so as to optimize the efficiency of purchasing
and inventory management; re-engineering D&As information technology system;
and reviewing and repositioning of the products and services D&A offers its
customers.

The
refocusing of the D&A brand name - a strategy designed to enable D&A
to reach a wider range of consumers with greater disposable income - is focused
on improving D&As assistance in helping customers choose optical products
within its retail stores. In working towards this goal, D&A has



---

|* |  | All market share data relating to D&A in this annual report is taken from the
European Optical Industry Handbook 2001/2002.
|- |  | ---------------------------------------------------------------------------------------------------------------------------

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concentrated
on building a professional and customer-sensitive culture, re-engineered its
employee compensation structure to include performance-based incentives -
especially for store employees -expanded training to reach all members of the
D&A organization, and introduced new management techniques.

The restructuring of the network of stores has brought with it the
conversion of less-strategic company-owned retail stores into franchise retail
stores, as well as the consolidation of retail stores within the same regional
market into more central stores with heightened competitive viability.

As part of its restructuring, D&A has divested its manufacturing
facilities, selling all of the assets of its two lens laboratories to BBGR
Ltd., a wholly owned subsidiary of Essilor International SA, the worlds
largest lens manufacturer, and transferring all related employees to BBGR in
July 2001. The agreement with BBGR also includes a long-term supply
arrangement that is expected to allow the parties to develop mutual synergies
along the lens supply chain - an agreement D&A believes will significantly
reduce its operating costs now that initial supply chain-related difficulties
appear to have been resolved.

The underlying strategy of this comprehensive ongoing effort incorporates
a focus on customers, colleagues and the way D&A does business, with the goal
of achieving D&As mission of becoming the best optical retailer in the United
Kingdom. The program focuses on changing the way D&A had traditionally
operated by paying increased attention to the quality of central management,
while at the same time introducing a clear mission and performance-related
culture among the staff of the stores that make up the branch network. As of
December 31, 2002, 2,437 individuals were employed by D&A.

General Optica

General Optica has been the leading company in the Spanish optical sector
since it was founded in 1955. In February 2000, General Optica became part of
the De Rigo Group. See Note 3 of Notes to the Consolidated Financial Statements
included in Item 18 of this annual report.

At June 1, 2003, General Opticas network of stores consists of 136
directly owned stores in Spain, 9 in Portugal and 11 stores in Spain under
franchising agreements. Although the name General Optica is well known
throughout Spain thanks to its long tradition in the sector, its retail stores
are primarily located in northern and eastern Spain, particularly Catalonia and
the Basque Country. General Opticas recent policy expansion has increased its
presence in new areas of Spain, as well as those in which it previously
maintained only a minimal presence. General Optica retail stores share a
common storefront and interior design, rendering them easily recognizable to
consumers. Typically, General Optica stores are positioned in the principal
shopping districts of major Spanish cities. As in the case of D&A, management
believes that General Opticas success is based on the professionalism of its
staff, the quality and variety of its products and services and a comprehensive
program of guarantees designed to ensure customer satisfaction. In contrast to
D&A, General Optica offers service within an hour for certain styles of frames
in some of its stores located in shopping malls.

General Optica posted sales of 123.4 million (or 24.1% of the Groups
total net sales) during 2002, as compared with sales of 110.6 million (or
21.9% of total sales) in 2001.

In recent years, General Optica has renewed and expanded its network of
establishments considerably. In particular, General Optica has demonstrated
its ability to adapt by introducing a new store concept that is notably more
spacious and attractive than its predecessors, with a modern, bright,
minimalist design that is intended to set the standard for opticians of the
future. This new type of store has a more modern, open, interactive air, in
which prominence is given to a large display of frames and sunglasses,
providing customers with what General Optica believes they want: the
opportunity to look at, try on and choose products in complete freedom. In an
effort to expand its range of services and monitor

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the interest of its
customers in laser eye correction surgery, General Optica has established a
consultation service in certain of its stores in collaboration with local laser
surgery clinics.

General Optica benefits from a highly qualified team of professionals who
receive ongoing training, employing more than 1,200 dedicated individuals who
can offer customers excellent service.

The stores that form part of General Opticas retail network employ
management software designed to provide high levels of quality and speed in
their delivery of services. This information system is capable of identifying
trends in customer demand, so that the range of products on offer in the stores
may be quickly adapted to customer needs.

As a company that is expanding, General Optica plans to acquire or open
additional new stores in the Iberian peninsula within the next three years,
seeking to further consolidate the leading position that it holds in Spain.
General Optica estimates that it had a market share of approximately 10.9% in
the Spanish optical market in 2001, based on value of products sold.

General Optica also has established itself as a company that is sensitive
to the needs of the communities it serves. Through campaigns conducted in its
network of eyecare centers, it has succeeded in increasing awareness of
eye-related problems in Spain and Portugal, collecting used glasses for
distribution to underprivileged groups and providing support for collaborative
ophthalmology projects in developing countries, which have received recognition
from important national organizations.




COMPETITION

De Rigo believes that its quality of products, its control over all
aspects of production, its range of designer brand names, and its carefully
selected network of distributors position the Company to compete successfully
in the mid- to premium-price categories of the eyewear product market.

The eyewear industry is highly competitive and fragmented. As the Group
has historically marketed its products primarily in Italy and the rest of
Europe and Asia, it competes with different companies in different markets.
The Group believes that its principal competitors in its major geographic
markets include Luxottica (Chanel, Vogue, Persol, Versace, Ray Ban, Killer Loop
and Revobrands), Oakley (Oakleybrand), Safilo (Gucci, Diesel, Dior, Armani
and Polobrands), Marchon (Calvin Kleinand Donna Karanbrands) and Marcolin
(Dolce & Gabbanaand Replaybrands).

In the retail distribution markets of the United Kingdom, Spain, and
Portugal, De Rigo competes against national and international chains as well as
independent opticians. Among the chain stores, the Group believes that its
principal competitors are Specsaver, Boots the Optician, and Vision Expressin
the United Kingdom, Visionlaband Optica2000 in Spain, and Multiopticasin
Portugal.




ITALIAN GOVERNMENT INCENTIVE PROGRAM

In November 1963, the Italian Government introduced the Vajont Relief
Program for the Longarone area as part of a package of relief measures enacted
shortly after the Vajont dam catastrophe that devastated the area. Two of the
Groups companies, Dierre (which was merged into De Rigo S.p.A. in January
2002) and Quattro Valli, have located their registered offices and facilities
in Longarone and have historically benefited from the Vajont Relief Program.
See Risk Factors - We lost all tax benefits in September 2001 and in April
2003; our effective income tax rate will therefore increase significantly
towards the statutory rate.

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Tax Benefits

The Vajont Relief Program provided that new businesses located in the
areas affected by the Vajont dam catastrophe would receive a ten-year
exemption, beginning on the date of commencement of their operations, from the
national corporate income tax (Imposta sui Redditi delle Persone Giuridiche, or
IRPEG, currently levied at a 36% rate) and the local income tax (Imposta
Locale sui Redditi, or ILOR, then levied at a 16.2% rate). The programs tax
benefits were repealed in December 1993. However, the Italian Government
specified that those companies that had already accrued the right to the tax
exemptions as of January 1, 1994, which include Dierre and Quattro Valli, would
continue to enjoy the tax exemptions through the expiration of their respective
ten-year periods. In 1998, the Italian Government eliminated the ILOR tax
along with certain other minor taxes, replacing them with the new Regional Tax
on Productive Activities (Imposta Regionale sulle Attività Produttive or
IRAP), which is currently levied at a 4.25% rate. Companies that had
benefited from an exemption from ILOR continue to enjoy equivalent tax benefits
with respect to the new IRAP tax. See Note 11 of Notes to the Consolidated
Financial Statements included in Item 18 of this annual report.

Dierres ten-year exemption was granted in 1992, covering income earned
during the period beginning September 2, 1991 and ending September 1, 2001.
Quattro Vallis exemption was granted in 1994 and covers income earned from
April 21, 1993 to April 20, 2003. The Group does not expect that new tax
benefits will be introduced by the Italian Government with respect to
operations in the Longarone area or the other areas where its facilities are
currently located.




TRADEMARKS

The Groups products are sold under the Police, Stingand Lozzabrand
names, which have been registered as trademarks of the Company in substantially
all of the principal markets in which they are used by the Group. In Spain,
however, the Policename is registered to another manufacturer of sunglasses
and, as a result, the Group markets its Policemodels in Spain under the name
Vogart. Management believes that its established brand identities and
trademarks are an important part of its strategy. See Company Strategy.

The Group also sells products pursuant to license agreements or other
arrangements under the following trademarks: Fendi, Fila Eyes, Etro, La Perla,
Miu Miu, Helmut Lang, Jil Sander, Onyx, Prada, Celine, Loewe, Givenchyand
Furla.De Rigos license agreements have terms ranging from one to five years,
and some of the licenses limit De Rigos right to market and sell products with
competing brand names and/or limit the markets in which it is able to use the
licensed brands. Group has no reason to expect that any of these license
agreements or arrangements will be terminated by the party granting the license
upon their expiration. However, the Group believes that early termination or
non-renewal of some or all of its license agreements or arrangements could have
a material adverse effect on the Groups operations, since sales of eyewear
under such brand names and trademarks represent a material percentage of the
Groups net sales. See Risk Factors  Our business is very dependent on our
ability to negotiate and maintain favorable license arrangements. in Item 3
and Products.




INSURANCE

The Group maintains insurance against a number of risks. The Group
insures against loss or damage to its facilities, against theft, loss or damage
to its products while they are in transit to customers when transportation is
the Groups responsibility and against general liability to third parties.
Although the Group does not cover 100% of these risks, management believes that
the Groups present level of insurance is adequate in light of its past
experience.

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SEASONALITY AND AVAILABILITY OF RAW MATERIALS

In 2002, 55.3% of the Groups unit sales consisted of sunglasses, for
which the peak sales period at the wholesale level is during the first four
months of the year. Historically, this factor has tended to cause the Group to
record a higher proportion of its revenues during the first half of the year.
However, the increase over time in the percentage of the Groups sales
represented by prescription frames, which are not subject to seasonal peaks,
has mitigated and is expected to continue to mitigate the seasonality of the
Groups sales as a whole. The seasonality of sales of sunglasses and the
timing of the launch of new fashion collections has generally had the effect of
increasing the Groups marketing expenses during the second and third quarters
of the year.

Generally, the raw materials and components used in the Groups products
are available in sufficient supply from a number of suppliers. However,
certain products with innovative fashion content, such as lenses with
innovative coatings or coloring, or unusual materials, such as special types of
plastics produced only for the Group, are not generally available from a number
of alternative sources. Any interruption of supply from the Groups current
sources of such products could therefore produce delays in production.

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DESCRIPTION OF PROPERTY

The general location, use and approximate size of the principal properties
used by the Group as of December 31, 2002 are set forth below.

|                            |  |                                                                    |  |                    |        | 
|--------------------------- |  | ------------------------------------------------------------------ |  | ------------------ | ------ | 
|                            |  |                                                                    |  | Total Area        
|Location                    |  | Use                                                                |  | (in square meters)
|                            |  |                                                                    |  |                   
|Longarone (BL), Italy       |  | Group headquarters,
manufacturing facility and
distribution center |  |                    | 16,946 | 
|Longarone (BL), Italy       |  | Manufacturing facility                                             |  |                    | 1,972  | 
|Longarone (BL), Italy       |  | EID Italia distribution center                                     |  |                    | 1,680  | 
|Limana (BL), Italy          |  | Manufacturing facility                                             |  |                    | 5,878  | 
|Limana (BL), Italy          |  | Manufacturing facility                                             |  |                    | 850    | 
|Barcelona, Spain            |  | Distribution center                                                |  |                    | 368    | 
|Barcelona, Spain            |  | General Optica head office                                         |  |                    | 2,139  | 
|Barcelona, Spain            |  | General Optica warehouse                                           |  |                    | 523    | 
|Barcelona, Spain            |  | General Optica warehouse                                           |  |                    | 1,640  | 
|Barcelona, Spain            |  | General Optica warehouse                                           |  |                    | 2,612  | 
|Barcelona, Spain            |  | General Optica training center                                     |  |                    | 820    | 
|Korschenbroich, Germany     |  | Distribution center                                                |  |                    | 410    | 
|Korschenbroich, Germany     |  | Warehouse                                                          |  |                    | 100    | 
|Bellignat, France           |  | Distribution center                                                |  |                    | 491    | 
|Hoofddorp, The Netherlands  |  | Distribution center                                                |  |                    | 200    | 
|Watford, United Kingdom     |  | Distribution center                                                |  |                    | 281    | 
|Athens, Greece              |  | Distribution center                                                |  |                    | 350    | 
|Birmingham, United Kingdom  |  | D&A head office                                                    |  |                    | 1,593  | 
|Birmingham, United Kingdom  |  | Training center                                                    |  |                    | 924    | 
|Birmingham, United Kingdom  |  | Distribution center                                                |  |                    | 2,435  | 
|Bioggio-Lugano, Switzerland |  | EID head office                                                    |  |                    | 443    | 
|Hong Kong, China            |  | Distribution center                                                |  |                    | 35     | 

At December 31, 2002, the Group also owned and operated 232 retail stores
with an average retail area of 95 square meters in the United Kingdom and of
136 retail stores in Spain and 9 retail stores in Portugal, which have an
average retail area of 253 square meters. As of the same date, D&A owned a
freehold interest in 48 of its properties and General Optica owned a freehold
interest in 35 of its properties. Almost all of the Groups other retail
properties (as well as the land on which its owned stores are located) are
leased. All of the listed properties located in Italy are owned by the Group,
except the smaller of the two manufacturing facilities in Limana, which is
leased from third parties. All of the listed properties located outside Italy
and the United Kingdom are leased by the Group pursuant to long-term leases,
except for the distribution center in Korschenbroich, Germany, which is owned
by the distribution subsidiary in Germany in which the Group has a 100%
interest.

The Group believes that its current facilities are suitable for its needs
and are well-maintained. See Design and ManufacturingManufacturing. De
Rigo completed construction of a new plant in Longarone in January 2002.




Item 5.Operating and Financial Review and Prospects




CRITICAL ACCOUNTING POLICIES

The following discussion of the Groups results of operations and
liquidity and capital resources in respect of the fiscal years ended December
31, 2000, 2001 and 2002 is based on the Companys audited Consolidated
Financial Statements and the related Notes thereto included in Item 18 of this
annual report. These financial statements have been prepared in accordance
with Italian GAAP, which

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differ in certain respects from U.S. GAAP. For a
discussion of the principal differences between Italian GAAP and U.S. GAAP as
they relate to the Groups consolidated net income and shareholders equity,
see Note 19 of Notes to the Consolidated Financial Statements included in Item
18 of this annual report.

De Rigos reported financial condition and results of operations are
sensitive to accounting methods, assumptions and estimates that underlie the
preparation of the financial statements. De Rigo bases its estimates on
historical experience and on various other assumptions, the results of which
form the basis for making judgments about the carrying values of assets and
liabilities that are not readily apparent from other sources.

The selection of critical accounting policies, the judgments and other
uncertainties affecting application of those policies and the sensitivity of
reported results to changes in conditions and assumptions are factors to be
considered when reviewing De Rigos financial statements and the following
discussion of its results of operations and liquidity and capital resources.
De Rigo believes the following critical accounting policies involve the most
significant judgments and estimates used in the preparation of the Consolidated
Financial Statements included in Item 18 of this annual report.

Accounting for Long-lived Assets.Property, plant and equipment and
purchased intangible assets other than goodwill are recorded at acquisition
cost. If such assets are acquired in a business combination, the purchase price
is allocated to the estimated fair value of the acquired property, plant and
equipment and intangible assets. Property, plant and equipment and intangible
assets are depreciated or amortized on a straight-line basis over their
estimated useful lives.

Property, plant and equipment are valued at acquisition or construction
cost, less accumulated depreciation. Construction costs include directly
allocable costs, an appropriate allocation of material and production overhead
and interest accruing during the construction related to debt specifically
associated with the related construction project.

Accounting for long-lived assets and intangible assets involves the use of
estimates for determining the fair value at the acquisition date for assets
acquired in a business combination, and the useful lives of the assets over
which the costs of acquiring these assets are charged to the statement of
operations. The useful lives of long-lived assets are subject to such
variables as technological feasibility, obsolescence, changes in consumer
demand and strategic management decisions.

When an impairment in the value of assets occurs, nonscheduled write-downs
are made. The Company assesses the impairment of identifiable intangibles and
long-lived assets whenever there is reason to believe that the carrying value
may exceed the fair value and where a permanent impairment in value is
anticipated. The determination of impairments of long-lived and intangible
assets involves the use of estimates, which include but are not limited to the
cause, the expected timing and the amount of the impairment. Impairment is
based on a broad measure of factors. In evaluating assets for impairment, the
Company typically considers, among other things, technological obsolescence,
discontinuance of services, changes in market prices, significant negative
industry or economic trends, significant
underperformance relative to expected historical or project future
operating results and other changes in circumstances that may indicate
impairment.

To assess impairment of property, plant and equipment and amortizing
intangible assets for U.S. GAAP purposes, the Company uses the guidance
outlined in SFAS 144, Accounting for the Impairment or Disposal of Long-Lived
Assets. If, based on the analysis described above, management has concluded that
impairment indicators exist, the Company will initially review for possible
impairment by assessing the undiscounted cash flows expected to be derived from
the asset or group of assets, comparing the lowest level of total expected
undiscounted cash flow to the carrying value. If the carrying value of the
asset or the group of assets exceeds the sum of the undiscounted cash flows,
an impairment is considered to exist. An impairment charge is assessed by
comparing the assets fair value to the carrying value. Fair

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value can be
calculated by a number of different approaches, including discounted cash flow,
comparables, market valuations or quoted market prices. The process and steps
required to assess the possible impairments of assets, including the
identification of possible impairment indicators, assessing undiscounted cash
flows, selecting the appropriate discount rate, the calculation of the weighted
average cost of capital and the discounts or premiums inherent in market prices
requires a substantial amount of management discretion and judgment. If actual
results differ from these estimates, or if the Company adjusts these estimates
in future periods, operating results could be significantly affected.

Valuation of Goodwill.Goodwill resulting from business combinations is
amortized on a straight-line basis over its estimated useful life.

The determination of goodwill is dependent on the allocation of the
purchase price to the tangible and intangible assets acquired and liabilities
assumed. Such allocation is often based on judgmental factors and estimates of
fair values for assets that may not have a readily determinable market value.
In addition, the useful life assigned to goodwill is an estimate based on the
judgment of management at the time of acquisition. The estimated useful life
is subject to adjustment if facts and circumstances indicate that the assets
economic life has been affected by other variables, including technological
feasibility, competitive factors and contractual rights.

Nonscheduled write-downs are provided when an impairment in the value of
goodwill occurs. De Rigo reviews on a regular basis the performance of its
subsidiaries. When there is reason to believe that the goodwill arising from
the acquisition of a business is impaired and that the impairment is of a
permanent nature, the Company compares the carrying amount of that subsidiary
or business to its fair value. The determination of the fair value of a
subsidiary involves extensive use of estimates. Methods commonly used by the
Company for valuations include discounted cash flow methods, comparable market
multiples and quoted stock market prices, if available. Factors affecting
estimated fair values typically include discount rates, future cash flows,
growth rates, weighted average cost of capital, market prices and control
premiums. These estimates, including the methodologies used, are important in
determining fair value and ultimately the amount of any goodwill impairment.

As of January 1, 2002 the Company adopted the requirements of SFAS 142,
Goodwill and Other Intangible Assets, and as a result the Company has ceased
amortization of goodwill and indefinite lived intangible assets for U.S. GAAP
purposes. The requirements of SFAS 142 include that goodwill be tested for
impairment at least annually (and between annual tests when certain triggering
events occur) using a two-step methodology. The first step screens for
potential impairment at the reporting unit level, while the second step
measures the impairment, if any. Under U.S. GAAP, the quoted market price of
an asset, if available, should be used. If not available, then other valuation
techniques, including discounted cash flow, comparables, etc., are acceptable.
The selection of the various assumptions that are necessary to arrive at the
fair value of a reporting unit, including the assumptions used in the
underlying business plans, require substantial management judgment and
discretion. If actual results differ from these
estimates, or if the Company adjusts these estimates in future periods,
operating results could be significantly affected.

Allowance for Doubtful Accounts.The Company makes ongoing estimates
relating to the collectibility of accounts receivable and to maintain a reserve
for estimated losses resulting from the inability of customers to make required
payments. In determining the amount of the reserve, management considers the
historical level of credit losses and makes judgments about the
creditworthiness of significant customers based on ongoing credit evaluations.
This ongoing evaluation considers such factors such as the overall economic
climate, regional strengths and weaknesses, legal rights and historical
relations, among others. Historically, losses from uncollectible accounts have
not exceeded the reserves. Since management cannot predict future changes in
the financial stability of customers, actual future losses from uncollectible
accounts may differ from the estimates. If the financial condition of the
customers were to deteriorate, resulting in their inability to make payments, a
larger reserve might be

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required. In the event the Company determined that a
smaller or larger reserve was appropriate, a credit or a charge to selling and
administrative expense would be recorded in the period in which such
determination is made.

Deferred Taxes.The Company is required to estimate its income taxes in
each of the jurisdictions in which it operates. This process involves a
jurisdiction-by-jurisdiction estimation of actual current tax exposure and the
assessment of the temporary differences resulting from differing treatment of
items, such as accruals and amortization, among others, for tax and financial
reporting purposes. These differences result in deferred tax assets and
liabilities, which are included within the Company's consolidated balance sheet.
The Company must assess in the course of its tax planning process the ability
of the Company and its subsidiaries to obtain the benefit of deferred tax
assets based on expected future taxable income and available tax planning
strategies. If in managements judgment, the deferred tax assets recorded will
not be recovered, a valuation allowance is recorded to reduce the deferred tax
asset.

Significant management judgment is required in determining the Companys
provision for income taxes, deferred tax assets, deferred tax liabilities and
valuation allowances to reflect the potential inability to fully recover
deferred tax assets. The analysis is based on the estimates of taxable income
in the jurisdictions in which the Company operates and the period over which
the deferred tax assets and liabilities will be recoverable. If actual results
differ from these estimates, or if the Company adjusts these estimates in
future periods, the Company may need to establish an additional valuation
allowance that could adversely affect the Companys financial position and
results of operations.

Under U.S. GAAP, the Company assesses the recoverability of tax assets
based on the criteria of more likely than not, that is, a probability of
recoverability just over 50%. The probability assessment requires significant
judgment regarding the timing of future book and tax reversals, which could be
materially different from the actual results.

Inventory obsolescenceThe Company has adopted uniform policies across the
business to assist management in the identification, valuation and treatment of
inventory that is not current or could otherwise be considered obsolete. The
identification of this inventory is subject to certain judgments, such as the
aging profile of the inventory, the estimated selling prices of the inventory
in an other than retail environment, the estimated costs to dispose of the
inventory, the overall impact on the associated brand of disposing of the
inventory off retail price and the requirement of our licensing and branding
agreements to maintain replacement inventory. Our ability to manage our
inventory levels, and thus our overall requirements for an obsolescence
reserve, are also highly dependent on several factors, some of which are not in
our control, such as the overall economic environment, changes in tastes and
fashion trends and of the market pressure. Management responds to these
factors and others on an ongoing basis, adjusting procurement, delivery and
manufacturing schedules on a continual basis in order to maintain an
optimum balance between inventory, sales and forecasts. Changes to these
assumptions or responses could require an increase or decrease in the inventory
reserves in the future, resulting in additional expense or income being
recognized in the income statement.

Other Significant Estimates.The application of Italian GAAP requires
management to make other estimates and assumptions. For example, as discussed
in more detail in Note 12 of the Consolidated Financial Statements included in
Item 18 of this annual report, accounting for pension and other post-retirement
and post-employment benefits requires estimates of future returns on plan
assets and expected increases in compensation levels.




RESULTS OF OPERATIONS

Summary

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The following table sets forth certain income statement data expressed as
a percentage of the Groups consolidated net sales for the periods indicated:

|                              |  |                         |       |      |  |      |       |  |  |  |       | 
|----------------------------- |  | ----------------------- | ----- | ---- |  | ---- | ----- |  |  |  | ----- | 
|                              |  | Year Ended December 31,
|                              |  |                        
|                              |  | 2000                    |       | 2001 |  | 2002
|                              |  |                         |       |      |  |     
|Net sales                     |  |                         | 100.0 |      |  |      | 100.0 |  |  |  | 100.0 | 
|Cost of sales                 |  |                         | 36.7  |      |  |      | 36.5  |  |  |  | 39.6  | 
|Gross profit                  |  |                         | 63.3  |      |  |      | 63.5  |  |  |  | 60.4  | 
|Operating expenses            |  |                         | 58.1  |      |  |      | 57.4  |  |  |  | 57.1  | 
|Income (loss) from operations |  |                         | 5.2   |      |  |      | 6.1   |  |  |  | 3.3   | 
|Income taxes                  |  |                         | 1.5   |      |  |      | 1.3   |  |  |  | 0.0   | 
|Net income                    |  |                         | 3.1   |      |  |      | 4.2   |  |  |  | 2.1   | 

Distribution Channels

Net sales consist primarily of (i) retail sales by the Group to customers
of its British optical retail chain D&A and its Iberian optical retail chain
General Optica; (ii) sales by the Group to opticians in Italy, and through its
distribution subsidiaries located in major European markets and the Americas to
retailers in those markets; (iii) export sales by the Group to independent
distributors; and (iv) sales by EID, the Groups joint-venture with the Prada
Group for the distribution of Prada-branded eyewear, to opticians, independent
distributors and the Prada retail network in major markets worldwide.

Retail sales made by D&A and General Optica, subsidiary sales and direct
sales to opticians, due to the various markups included in such sales, generate
a greater contribution to net sales than that of sales to independent
distributors. Retail sales are made at prices that include the retailer
markup. Subsidiary sales are made at prices that include the customary
distributor markup, taking into account commissions paid to the distribution
subsidiaries sales representatives. Sales to opticians are made at prices
that include a markup that takes into account commissions paid to the Groups
sales representatives in Italy. Sales to independent distributors, however,
are made at prices that exclude distributor and retailer markups. Sales made
by EID include the distributor markup, while the manufacturing markup is
included in the intercompany sales made by the wholesale and manufacturing
segment to EID. As a result, changes the relative contributions of the various
distribution channels to net sales will affect the average price per unit sold
by the Group. For example, an increase in the proportion of sales to
independent distributors will result in a decrease in the average price per
unit sold, while an increase in the proportion of subsidiary sales will result
in an increase in the average price per unit sold. Conversely, the Groups
cost of sales per unit is unaffected by the distribution channels through which
such units are sold. Consequently, changes in the relative contributions of
the distribution channels to net sales will affect the Groups gross margin.
However, operating expenses are higher for retail sales, subsidiary sales
and sales to opticians than for sales to independent distributors, since
operating expenses include commissions, advertising and promotion expenses,
other selling expenses and general and administrative expenses. Thus, while
the gross margin on retail sales, subsidiary sales and sales to opticians may
be significantly higher than the gross margin on sales to independent
distributors, this difference in gross margin does not translate into a
comparable difference in profitability. Accordingly, management believes that
the Groups operating margin, which is net of both cost of sales and operating
expenses, is more indicative of the profitability of the Groups sales.

Business Segments

For financial reporting purposes, the Group divides its activities into
three main business segments: (i) Wholesale and Manufacturing; (ii) Retail; and
(iii) EID.

Wholesale and Manufacturingconsists of the design, manufacturing,
marketing and distribution of high-quality eyewear to opticians in Italy and to
independent distributors and opticians through the

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Groups distribution
subsidiaries abroad. This segment furnishes eyewear to the Groups other
business units, to which the wholesale and manufacturing segment makes sales at
prices that include a markup designed to compensate the unit for its
manufacturing activity.

Retailconsists of the sale of prescription eyeglasses, fashion sunglasses
and other optical products through the network of stores operated by the
Groups two retail chains, D&A, a leading retailer in the British optical
market, and General Optica, the leading optical chain in Spain, which also has
a presence in Portugal.

EIDis the Groups joint-venture with the Prada Group, which conducts
product development, marketing and distribution activities related to the
Groups Prada-branded eyewear.

Tax Benefits and New Tax Laws

The Groups results for fiscal years 2000, 2001 and 2002 were
significantly and favorably affected by tax benefits available under the Vajont
Relief Program. Two of the Groups subsidiaries, Dierre (which was merged into
De Rigo S.p.A. in January 2002) and Quattro Valli, have benefited from full
exemptions from Italian corporate income tax (IRPEG) and partial exemptions
from the local income tax (IRAP) under this program. A substantial portion
of the Groups income before income taxes during 2000 and 2001 was derived from
Dierre, whose tax exemption expired in September 2001, while Quattro Vallis
tax exemption remained in effect through April 2003. Consequently, De Rigos
effective income tax rate is expected to increase significantly towards the
statutory rate. See Risk Factors - We lost certain tax benefits in September
2001 and in April 2003; our effective income tax rate will therefore increase
significantly towards the statutory rate. in Item 3.

The Italian statutory tax rate for 2000 was 41.25%, comprised of a 37%
national corporate income tax (IRPEG) and a 4.25% Regional Tax on Productive
Activities (IRAP). A new tax law was enacted in December 2000 and effective
January 1, 2001, reduced the IRPEG tax rate from 37% in 2001, 36% in 2002 and
35% for 2003. In 2002, a new tax law was approved that further reduced the
IRPEG tax rate for 2003 to 34%.

The Company decreased its Italian deferred tax assets and liabilities as
of December 31, 2000 to reflect the changes in the tax law enacted in December
2000 and 2002. The effect of applying the enacted tax rates in 2000 to
existing temporary differences was to increase income tax expense by
less than 0.1
million. In
addition, in 2002, the Company recognized deferred taxes on temporary
differences of its tax exempt companies.

In 2001, the Italian government enacted an investment tax incentive law
with the goal of encouraging capital investments and other expenditures.
Companies are eligible to deduct from their otherwise taxable income up to 50%
of the amount by which their qualifying capital and other expenditures in fixed
assets (both tangibles and specified intangibles) made in the second half of
2001 and during 2002 exceed the average of their investments in such assets
during the five previous years. The incentive law also applies to certain
expenses incurred in connection with the training of personnel. Application of
the incentives results in a one time current deduction from taxable income and
neither increases nor decreases the tax basis of the relevant assets used in
computing future tax deductions for depreciation and amortization relating to
the deductions granted. As a result of these incentives, the Company
recognized a benefit of 0.2 million in each of 2002 and 2001.

In accordance with a Italian government decree enacted in 1997 to
encourage investment, the Dual Income Tax (DIT) was introduced. In accordance
with the decree, a portion of the Companys income subject to IRPEG is taxed at
the reduced rate of 19% instead of the statutory rates noted above. The
relevant portion of the Groups taxable income (amounting to 4.7 million in
2001) is computed by applying a specific interest rate, fixed annually by the
Government and currently equal to 6%, to the net

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increase in the Companys net
equity during the period from December 31, 1996 through December 31, 2001. The
application of DIT allowed the Company to decrease its current income taxes by
0.8 million in 2001, while De Rigo was not able to benefit from this incentive
in 2002. Deferred taxes on temporary differences at December 31, 2002 and 2001
are accounted for at the tax rate expected to occur in the year of reversal,
taking into consideration the enacted IRPEG rates, the expected applicable
effect of the DIT benefit and the enacted IRAP tax rate.

See Note 11 of Notes to the Consolidated Financial Statements included in
Item 18 of this annual report, Risk Factors in Item 3 and  Italian
Government Investment Incentive Program  Tax Benefits in Item 4.

Recent Developments

First Quarter Sales Results.The Group posted net sales of 139.9 million
in the quarter ending March 31, 2003, a 2.0% decrease as compared with the same
period last year.

De Rigo reports net sales and revenues on a consolidated basis as well as
sales results for each of its three principal business segments: Wholesale and
Manufacturing, Retail and EID. In calculating its consolidated net sales and
revenues, De Rigo has eliminated intercompany sales among the Groups business
segments, as detailed in the following table:

Sales by business segment
(in millions of euros, except percentages)

|                                  |                  |   |          |      |          |   |          |      |                 |  |                |      |                   |   |         |     |         |   |       |      |  |  |       |      |  
|--------------------------------- | ---------------- | - | -------- | ---- | -------- | - | -------- | ---- | --------------- |  | -------------- | ---- | ----------------- | - | ------- | --- | ------- | - | ----- | ---- |  |  | ----- | ---- | -
|                                  |                  |   |          |      |          |   |          |      |                 |  |                |      |                   |   | 1Q 2003 |     | 1Q 2003 |   |       |      | 
|                                  |                  |   |          |      |          |   |          |      |                 |  |                |      |                   |   |         |     |         |   |       |      | 
|                                  |                  |   | 1Q 2002  |      | 1Q 2003  |   |          |      |                 |  | Effect of      |      |                   |   |         |     |         |   |      
|                                  |                  |   |          |      |          |   |          |      |                 |  | application of |      | Sales at constant |   |         |     |        
|                                  |                  |   | Reported |      | Reported |   |          |      |                 |  | constant       |      | exchange rates    |   |         |     |        
|                                  |                  |   | sales    |      | sales    |   | % change |      | exchange rates* |  | (Non-GAAP)     |      | % change         
|                                  |                  |   |          |      |          |   |          |      |                 |  |                |      |                  
|Wholesale & Manufacturing         |                  |  | 45.4     |      |          |  | 41.5     |      |                 |  | -8.6           | %    |                   |  | 0.6     |     |         |  | 42.1  |      |  |  | -7.3  | %   
|Retail                            |                  |   | 94.4     |      |          |   | 94.5     |      |                 |  | +0.1           | %    |                   |   | 5.5     |     |         |   | 100.0 |      |  |  | +5.9  | %   
|                                  | - D&A            |   |          | 62.2 |          |   |          | 61.8 |                 |  |                | -0.6 | %                 |   |         | 5.5 |         |   |       | 67.3 |  |  |       | +8.2 | %
|                                  | - General Optica |   |          | 32.2 |          |   |          | 32.7 |                 |  |                | +1.6 | %                 |   |         | 0.0 |         |   |       | 32.7 |  |  |       | +1.6 | %
|E.I.D                             |                  |   | 8.6      |      |          |   | 8.7      |      |                 |  | +1.2           | %    |                   |   | 0.0     |     |         |   | 8.7   |      |  |  | +1.2  | %   
|Elimination of Intercompany Sales |                  |   | -5.6     |      |          |   | -4.8     |      |                 |  | -14.3          | %    |                   |   | 0.0     |     |         |   | -4.8  |      |  |  | -14.3 | %   
|                                  |                  |   |          |      |          |   |          |      |                 |  |                |      |                   |   |         |     |         |   |       |      |  |  |       |     
|Consolidated net sales            |                  |  | 142.8    |      |          |  | 139.9    |      |                 |  | -2.0           | %    |                   |  | 6.1     |     |         |  | 146.0 |      |  |  | +2.2  | %   
|                                  |                  |   |          |      |          |   |          |      |                 |  |                |      |                   |   |         |     |         |   |       |      |  |  |       |     



---

| |  | *)     In order to provide a measure of exchange rate fluctuations on the Groups
sales results, De Rigo has also calculated its sales
in euro terms for the first quarter of 2003 on the basis of same exchange
rates used to calculate sales for the first quarter of 2002. The table above
presents a reconciliation of the constant exchange rate figures with the
Groups consolidated net sales under Italian GAAP, with the difference
between the two figures reported as the effect of application of constant
exchange rates. The Company believes that these non-GAAP financial measures
provide useful information to both management and investors by allowing a
comparison of sales performance on a consistent exchange rate basis. The De
Rigo Groups method of calculating sales performance excluding the impact of
changes in exchange rates may differ from methods used by other companies.
| |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Consolidated net sales

The Groups consolidated net sales of 139.9 million for the first quarter
of 2003 were broken down as follows: eyewear sales of 70.9 million, lens sales
of 37.6 million, contact lens sales of 18.7 million, and other sales and
revenues of 12.7 million, as compared with sales of 72.5 million, 38.3
million, 18.4 million and 13.6 million, respectively, for the first quarter
last year.

As detailed in the table appearing above, foreign currency translation
differences had a negative effect on consolidated net sales, which rose by 2.2%
on a constant exchange rate basis. These differences primarily related to the
translation into Euro of sales made in Pounds Sterling and Japanese Yen, as the
average exchange rates for these currencies during the first quarter of 2003
were less favorable than those during the same period last year.

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Analyzing consolidated
net sales by geographic area, net sales in Europe decreased by 4.2% to 124.1
million, primarily reflecting the strengthening of the Euro against the Pound
Sterling and weak demand in certain markets., particularly Italy. Net sales in
the Americas decreased by 20.0% to 3.2 million, primarily due to lower unit
sales by the Groups wholesale and manufacturing segment. Net sales in the Rest
of the World increased by 36.5% to 12.6 million, primarily as a result of
increased unit sales in the Far East region, notwithstanding the unfavorable
trend in Japanese Yen exchange rates.

The overall result in consolidated net sales reflected the contribution of
the Groups three principal business segments:

Wholesale and Manufacturing

Wholesale and Manufacturing sales amounted to 41.5 million, a decrease of
8.6% as compared with 45.4 million posted in the same period last year.

The decrease in Wholesale and Manufacturing sales was primarily due to a
decline of unit sales in certain European markets, primarily in Italy, as well
as seasonal effects, as sales in some European markets that had taken place in
the first quarter of 2002 were delayed until the second quarter this year.
Foreign currency translation differences accounted for 1.3 percentage points of
the overall decrease.

The weakness in certain European and American markets was partially
counterbalanced by strong growth in the Rest of the World area, in which the
segment posted a 53.5% sales increase that was driven by very good results in
the Far East that were primarily attributable to higher sales of the Groups
luxury/designer brands.

Retail

Net sales through retail companies amounted to 94.5 million, an increase
of 0.1% as compared with sales of 94.4 million in the same period last year.

Net sales of D&A, the Groups British retail chain, totalled 61.8
million, a decrease of 0.6%, as compared with sales of 62.2 million posted in
the same period last year, reflecting the decline in the value of the Pound
Sterling against the euro. In Sterling terms, D&As sales increased by 8.2%,
and management believes that the increase in Sterling terms was particularly
satisfactory, as it was achieved in a British market that was characterized by
an overall reduction in demand. This success was primarily due to D&As
aggressive marketing activity and substantial improvements in level of service
provided by the lens plants sold to BBGR, following completion of their
restructuring process. At March 31, 2003, D&A operated a network of 233 owned
shops and 145 franchised shops.

General Optica, the Groups Spanish retail company, reported sales of
32.7 million, an increase of 1.6% as compared to sales of 32.2 million last
year. The 1.6% increase was achieved on top of a 13.4% sales increase posted in
the first quarter last year. Management believes that the company has
continued to gain market share in a generally flat Spanish market and expects
that this trend will continue throughout the year as General Optica continues
to implement its expansion plan. At March 31, 2003, General Optica operated a
network of 140 owned shops and 7 franchised shops.

EID

Net sales at EID increased by 1.2% to 8.7 million from 8.6 million
posted in the first quarter of 2002, reflecting an increase of 19.8% in unit
sales. The increase is particularly notable given that fact that the sales
results for the first quarter of 2002 represented an increase of 41.0% compared
with the same period of 2001.

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The increase in unit sales continues to reflect the impact of EIDs new
distribution organization, which is primarily focused on sales agents in Europe
and independent distributors outside of Europe. The implementation of the new
distribution organization began during the second quarter of 2002. The new
structure resulted in a decline in the units average prices as the percentage
of sales made through independent distributors increased: as a result of these
factors sales revenues increased, but at a slower pace than volumes.

2002 compared to 2001

Net sales.De Rigo posted consolidated net sales of 512.5 million in
2002, an increase of 1.4%, as compared with sales of 505.3 million in 2001.
The sales results of the Group and each of its segments are summarized in the
tables appearing in Business Overview in Item 4 Information on the Company
above.

The increase in net sales primarily reflected strong price growth in the
Groups wholesale and manufacturing segment, particularly in the premium-priced
segment of the market, and General Optica, the Iberian retail optical chain
acquired by the Group in February 2000.

The Groups consolidated net sales of 512.5 million for 2002 were broken
down as follows: eyewear sales of 245.3 million, lens sales of 138.7 million,
contact lens sales of 76.5 million, and other sales and revenues of 51.9
million, as compared with sales of 234.6 million, 148.3 million, 69.5
million and 52.9 million, respectively, in 2001.

Total unit sales decreased by 3.4% to 5,497,130. Unit sales of sunglasses
decreased by 2.2% and accounted for 55.3% of the Groups overall unit sales,
having represented 54.6% of unit sales in 2001. Unit sales of prescription
frames decreased by 4.8%, and accounted for 44.7% of the Groups overall unit
sales, having represented 45.4% of those sales in 2001.

Net sales by business segment

Wholesale and Manufacturing sales, including sales to the other segments,
increased by 5.9% to 141.1 million from 133.2 million in 2001.

The 2002 sales results of the wholesale and manufacturing segment were
influenced by a difficult market environment in certain markets such as
Singapore,
Italy and Germany.

The
negative impact of this factor was more than offset by very strong
sales results in a number of other markets, including Japan, the United
Kingdom, France and Korea, and by De Rigos continuing success in the
premium-priced segment of the market, as sales of the Groups licensed brands
increased by approximately 23% as compared with last year.

Sales through retail companies, including sales to the other segments,
amounted to 359.6 m, an increase of 0.3% as compared with sales of 358.4
million in the fiscal year 2001.

Sales of Dollond & Aitchison (D&A), the Groups British retail chain,
totalled 236.3 million, a decrease of 4.6%, as compared with sales of 247.6
million in 2001. These decreases reflected a difficult retail environment for
sales of optical frames in the United Kingdom and were primarily a

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consequence
of certain disruptions and delays in service due to changes in the supply chain
for lenses being implemented by Essilors subsidiary BBGR. BBGR purchased D&As
assembly factories in 2001 and these changes in the supply chain are designed
to ensure that D&A receives the highest quality lenses. In the last quarter of
2002, the level of service at the lens plants sold to BBGR improved
significantly, reducing delivery lead-times to the Groups customers.

Sales of franchised shops totalled 62.9 million, a decrease of
approximately 1.4 % compared to 2001. At December 31, 2002, D&A operated a
network of 233 owned shops and 147 franchised shops.

General Optica, the Groups Spanish retail company, reported sales of
123.4 million, an increase of 11.6% as compared to sales of 110.6 million in
2001, reflecting a 8.5% growth in same-store sales per working day, an increase
in sales of sunglasses and the contribution of new stores opened within the
last year. At December 31, 2002, General Optica operated a network of 140
owned shops and 5 franchised shops, having begun to implement a new strategy of
opening franchised shops in smaller Spanish cities and towns in which a direct
investment in company-owned stores would not be likely to produce reliably high
returns.

Total unit sales at EID continued to grow, increasing by 37.3% as compared
with 2001. The increase in volumes sold reflects the effect of EIDs new
distribution organization, which is primarily focused on sales agents in Europe
and independent distributors outside of Europe. The implementation of this new
structure resulted in a significant decline in the units average prices, as
the percentage of sales made through independent distributors increased. As a
result, sales at EID declined by 2.8% to 31.2 million from 32.1 million in
2001.

Net sales by geographic region.Analyzing consolidated net sales by
geographic area, net sales in Europe increased by 2.4% to 463.9 million,
primarily reflecting increased wholesale sales in a number of European markets,
including France, Greece and the United Kingdom (notwithstanding the difficult
retail environment for optical frames that negatively affected the retail
segments results in that country), as well as strong sales growth at General
Optica. Net sales in the Americas decreased by 31.4% to 12.0 million,
primarily due to the recent economic crisis in Argentina and lower sales at EID. Net
sales in the Rest of the World increased by 6.1% to 36.6 million, primarily
reflecting increased sales in the Far East region.

Cost of sales.Cost of sales increased by 10.3% to 203.2 million or 39.6%
of total net sales, in 2002, from 184.3 million, or 36.5% of net sales, in
2001. The increase in cost of sales in absolute terms and as a percentage of
total sales was attributable to the growth in net sales, especially those of
higher margin luxury/designer eyewear, as well as to manufacturing
inefficiencies in the launch of some new brands collections at the beginning
of the year.

Operating expenses.Operating expenses increased by 0.9% to 292.5
million, or 57.1% of total net sales, in 2002, as compared to 289.9 million,
or 57.4% of net sales, in 2001. Operating expenses increased at a lower rate
than net sales primarily due to the cost-containment efforts of D&A and to the
increased proportion of overall sales accounted for by the wholesale and
manufacturing segment, which benefits from proportionally lower operating
expenses than the Groups other segments.

Commissionsdecreased by 1.8% to 16.4 million, or 3.2% of total net
sales, in 2002, from 16.7 million, or 3.3% of net sales, in 2001, primarily
due to a decline in commissions paid by EID to the Prada Group for the sales of
Pradaeyewear through the Prada Groups network of stores following the
restructuring of the EID distribution system noted above. The effects of this
decline on the overall result was partially offset by increased commissions
paid as a result of the continuing success of the Contact Lenses by Post mail
order program operated by D&A, for which the Company pays commissions to
franchisees.

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Advertising and promotion expensesdecreased by 1.7% to 34.9 million, or
6.8% of total net sales in 2002, from 35.5 million, or 7.0% of net sales, in
2001. The decrease reflected the fact that advertising expenses in the
wholesale and manufacturing segment in 2001 had included those relating to the
launch of certain new luxury/designer brands and the new Policeadvertising
campaign. Advertising expenses also increased at D&A, which increased its
marketing activities in the last quarter of the year.

Other selling expensesincreased by 1.5% to 203.0 million, or 39.6% of
total net sales, in 2002, from 200.0 million, or 39.6% of net sales, in 2001.
Selling expenses increased in absolute terms at all of the Groups business
segments except at D&A, and rose in particular at General Optica as a result of
its opening of new stores. The decrease at D&A reflected its on-going cost
reduction efforts.

General and administrative expensesincreased by 1.6% to 38.3 million, or
7.5% of total net sales, in 2002, from 37.7 million, or 7.5% of net sales, in
2001. The increase in general and administrative expenses in absolute terms
was primarily attributable to higher provisions for doubtful accounts in the
wholesale and manufacturing segment following a perceived deterioration in
market conditions in certain countries, as well as higher personnel costs at
General Optica.

Income from operations.Income from operations decreased by 46.3% to 16.7
million, or 3.3% of total net sales, in 2002, from 31.1 million, or 6.2% of
net sales, in 2001. The decrease in the Groups operating income was primarily
attributable to the lower operating results of D&A (which recorded operating
profit of 1.5 million in 2002, as compared with 12.3 million in 2001, net of
goodwill amortization of 1.6 million and 1.7 million, respectively), and the
wholesale and manufacturing segment (which recorded operating profit of 7.2
million in 2002, as compared with 11.8 million in 2001, net of goodwill
amortization of 0.3 million and 0.3 million, respectively). The decline in
income from operations in the wholesale and manufacturing segment, both in
absolute terms and as a percentage of sales, was primarily attributable to
lower gross margins reflecting the cost factors discussed above.

Other income (expenses).Financial and other items contributed net
expenses of 6.9 million in 2002, as compared to net expenses of 3.9 million
in 2001. Net financial expenses in 2002 totalled 3.4 million, compared to net
financial expenses of 3.2 million in 2001. Net other expenses of 3.6
million, as compared to net other expenses of 0.7 million in 2001, accounted
for the remainder of the total net result in 2002 mainly due to exchange rate
losses and expenses related to special corporate projects.

Income taxes.Income taxes amounted to 0.1 million in 2002, as compared
with 6.6 million in 2001. The Groups income was taxed at an effective rate
of 0.01% in 2002, as compared with an effective rate of 24.1% in 2001. The
decrease in the effective tax rate was primarily due to the recognition of
deferred tax assets on tax relief granted to the Group in connection with the
expiration of certain tax incentives.

Net income.Net income decreased by 50.0% to 10.6 million in 2002 from
21.2 million in 2001 and represented 2.1% of net sales, as compared with 4.2%
last year.

Earnings per share.Earnings per share were 0.24 on a weighted average
total of 44.7 million outstanding shares, a decrease of 50.0% as compared with
0.48 in 2001.

2001 compared to 2000

Net sales.De Rigo posted consolidated net sales of 505.3 million in
2001, an increase of 10.7%, as compared with sales of 456.6 million in 2000.

The increase in net sales primarily reflected strong growth in the Groups
wholesale and manufacturing segment, particularly in the premium-priced segment
of the market, and the contributions

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of EID, which only began operations in the
first quarter of 2000, and General Optica, the Iberian retail optical chain
acquired by the Group in February 2000.

The Groups consolidated net sales of 505.3 million for 2001 were broken
down as follows: eyewear sales of 234.6 million, lens sales of 148.3 million,
contact lens sales of 69.5 million, and other sales and revenues of 52.9
million, as compared with sales of 202.7 million, 140.6 million, 61.7
million and 51.6 million, respectively, in 2000.

Total unit sales increased by 5.5% to 5,691,000. Unit sales of sunglasses
increased by 7.9% and accounted for 54.6% of the Groups overall unit sales,
having represented 53.4% of unit sales in 2000. Unit sales of prescription
frames increased by 2.7%, and accounted for 45.4% of the Groups overall unit
sales, having represented 46.6% of those sales in 2000.

Net sales by business segment

Wholesale and Manufacturing sales, including sales to the other segments,
increased by 26.7% to 133.2 million, as compared with sales of 105.1 million
in 2000. The increase reflected the success of the Groups strategy of
developing a strong presence in the premium-priced segment of the market, as
sales of the Groups luxury/designer brands rose by 70.1% in euro terms and by
30.5% in units. The growth in sales was particularly strong in a number of
European markets and in the Far East, reflecting the contribution of De Rigos
three new distribution subsidiaries in Japan, Hong Kong and Singapore, and was
also a consequence of increased sales made by the wholesale and manufacturing
segment to EID and to the Groups retail companies.

Net sales through retail companies, including sales to the other segments,
amounted to 358.4 million, an increase of 5.4%, as compared with sales of
340.1 million in 2000.

Net sales of D&A, the Groups British retail chain, totalled 247.8
million in 2001, an increase of 1.2% as compared with sales of 244.9 million
in 2000. Excluding the effect of foreign currency translation differences,
D&As sales increased by approximately 3.2%. Same-store sales increased by
3.7% in 2001, reflecting the positive results of D&As restructuring actions in
a retail environment marked by aggressive competition. Sales of franchised
shops totalled 63.8 million, reflecting the success of D&As program of
converting underperforming company-owned shops into franchised stores. At the
end of 2001, D&A operated a network of 236 owned shops and 149 franchised
shops, as compared to 238 owned shops and 148 franchised shops at the end of
last year.

General Optica, the Groups Iberian retail company, posted sales of 110.6
million during 2001. Same-store sales were up by 2.6% for 2001, after a strong
fourth quarter in which the company posted same-store sales growth of 11.2%. In
2000, General Optica posted net sales of 95.2 million during the eleven months
in which it was consolidated by De Rigo following its acquisition in February.
At the end of 2001, General Optica operated a network of 140 owned shops,
having opened 14 new shops during 2001. Since its acquisition by the De Rigo
Group, General Optica has opened 28 new shops.

Sales through EID, the joint venture with the Prada Group, including sales
to the other segments, increased by 36.0% to 32.1 million, as compared to
sales of 23.6 million in 2000.

Net sales by geographic region.Analyzing the Groups net sales in 2001 by
geographic area, net sales in Europe increased by 9.2% to 453.2 million,
primarily as a result of sales growth in the wholesale and manufacturing
segment, the consolidation of General Optica for a full year and sales of
Prada-branded eyewear. Net sales in the Americas increased by 21.3% to 17.6
million, primarily reflecting growth in the wholesale and manufacturing segment
and sales of Prada-branded eyewear in the United States market. Net sales in
the Rest of the World posted an increase of 26.8% to 34.5 million, primarily

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due to the opening of the new distribution subsidiaries in the Far East and
increased sales of Prada-branded eyewear.

Cost of sales.Cost of sales increased by 10.0% to 184.3 million or 36.5%
of total net sales, in 2001, from 167.6 million, or 36.7% of net sales, in
2000. The increase in cost of sales in absolute terms was attributable to the
growth in net sales, while the slight decline in cost of sales as a percentage
of total sales was primarily attributable to increased sales of higher margin
luxury/designer eyewear.

Operating expenses.Operating expenses increased by 9.3% to 289.9
million, or 57.4% of total net sales, in 2001, as compared to 265.3 million,
or 58.1% of net sales, in 2000. Operating expenses increased at a lower rate
than net sales primarily due to the cost-containment efforts of D&A and to the
increased proportion of overall sales accounted for by the wholesale and
manufacturing segment, which benefits from proportionally lower operating
expenses than the Groups other segments.

Commissionsincreased by 31.5% to 16.7 million, or 3.3% of total net
sales, in 2001, from 12.7 million, or 2.8% of net sales, in 2000, primarily
due to increased commissions paid by EID to the Prada Group for the sales of
Pradaeyewear through the Prada Groups network of stores, and as a result of
the continuing success of the Contact Lenses by Post mail order program
operated by D&A, for which the Company pays commissions to franchisees.

Advertising and promotion expensesincreased by 12.3% to 35.5 million, or
7.0% of total net sales in 2001, from 31.6 million, or 6.9% of net sales, in
2000, as advertising expenses in the wholesale and manufacturing segment
increased as a result of the launch of certain new luxury brands and the new
Policeadvertising campaign. Advertising expenses also increased at General
Optica, reflecting a significantly increased emphasis on the launch of new
sunglass collections. The impact of these increases was partially offset by
lower advertising expenses in D&A, which shifted its focus towards direct mail
promotions.

Other selling expensesincreased by 8.5% to 200.0 million, or 39.6% of
total net sales, in 2001, from 184.3 million, or 40.4% of net sales, in 2000.
Selling expenses increased in absolute terms at all of the Groups business
segments, and in particular at General Optica as a result of its opening of new
stores, although the rate of increase was particularly low at D&A, reflecting
its on-going cost reduction efforts.

General and administrative expensesincreased by 2.7% to 37.7 million, or
7.5% of total net sales, in 2001, from 36.7 million, or 8.0% of net sales, in
2000. The decrease in general and administrative expenses as a percentage of
net sales was primarily attributable to D&As cost control measures.

Income from operations.Income from operations increased by 31.2% to 31.1
million, or 6.2% of total net sales, in 2001, from 23.7 million, or 5.2% of
net sales, in 2000. The increase in the Groups operating income was primarily
attributable to the positive operating results of the wholesale and
manufacturing segment (which recorded operating profit of 11.8 million in
2001, as compared with 7.7 million in 2000, net of goodwill amortization of
0.3 million and 0.6 million, respectively), and retail segment (which
recorded operating profit of 18.9 million in 2001, as compared with 15.5
million in 2000, net of goodwill amortization of 6.2 million and 5.8 million,
respectively). The growth in income from operations in the wholesale and
manufacturing segment , both in absolute terms and as a percentage of sales,
was primarily attributable to the growth in net sales and a higher gross margin
that reflected increased sales of premium-priced eyewear. The growth in income
from operations at the retail segment, in absolute terms and as a percentage of
sales, was primarily due to the improved profitability of D&A, which increased
its operating profit by 43.0%, reflecting the success of its restructuring
program.

Other income (expenses).Financial and other items contributed net
expenses of 3.9 million in 2001, as compared to net expenses of 1.9 million
in 2000. Net financial expenses in 2001 totalled 3.2

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million, compared to net
financial expenses of 3.1 million in 2000. Net other expenses of 0.7
million, as compared to net other income of 1.2 million in 2000, accounted for
the remainder of the total net result in 2001. The Group was negatively
affected by the on-going economic crisis in Argentina, as its Argentine
subsidiary posted non-operating expenses of 1.2 million in 2001, as compared
with non-operating expenses of 0 in 2000.

Income taxes.Income taxes amounted to 6.6 million in 2001, as compared
with 6.9 million in 2000. The Groups income was taxed at an effective rate
of 24.1% in 2001, as compared with an effective rate of 31.7% in 2000. The
decrease in the effective tax rate was primarily due to the higher portion of
earnings attributable to Italian companies that benefited from favorable tax
treatment

Net income.Net income increased by 50.4% to 21.2 million in 2001 from
14.1 million in 2000 and represented 4.2% of net sales, as compared with 3.1%
last year

Earnings per share.Earnings per share were 0.48 on a weighted average
total of 44.6 million outstanding shares, an increase of 50.0% as compared with
0.32 in 2000.




Effect of Inflation

Management believes that the impact of inflation was not material to the
Groups net sales or income from operations in any of the years ended December
31, 2000, 2001 and 2002.




U.S. GAAP Reconciliation

The Groups consolidated net income determined in accordance with U.S.
GAAP would have been 17.1 million, 18.2 million and 13.3 million for the
years ended December 31, 2002, 2001 and 2000, respectively, as compared with
net income of 10.6 million, 21.2 million and 14.1 million, respectively, for
the same periods, as determined under Italian GAAP. The principal difference
affecting the determination of net income in each of 2000 and 2001 related to
the different treatment under U.S. GAAP of certain stock option expenses and
intangible assets and deferred charges, as well as the Groups revaluation of
certain trademarks in 2001. Differences in goodwill depreciation principles
under Italian GAAP and U.S. GAAP following the Groups adoption of SFAS 144
impacted the results for 2002.

The Groups total assets determined in accordance with U.S. GAAP would
have been 443.1 million and 458.2 million at December 31, 2002 and 2001,
respectively, as compared with 439.9 million and 462.5 million, respectively,
under Italian GAAP. Shareholders equity determined in accordance with U.S.
GAAP would have been 199.5 million and 206.7 million at December 31, 2002 and
2001, respectively, as compared with 212.1 million and 210.4 million,
respectively, under Italian GAAP.

For a discussion of the principal differences between Italian GAAP and
U.S. GAAP as they relate to the Groups consolidated net income and
shareholders equity, including the effect of the adoption of new accounting
principles, see Note 19 of Notes to the Consolidated Financial Statements
included in Item 18 of this annual report.




Liquidity and Capital Resources

De Rigos cash flow from operating activities increased from 20.4 million
in 2001 to 22.1 million in 2002, primarily as a result of decreased
inventories and lower growth of accounts receivable related to the strong
growth of its wholesale and manufacturing segment.

The Company relies primarily on funds from operations to finance its
working capital needs, including the financing of its inventories and
receivables. It also maintains unsecured short-term lines of

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credit with
Italian banks, which have no set term and are payable upon demand. At December
31, 2001 and 2002, the Group had unsecured short-term bank lines of credit
aggregating approximately 99,677 and 167,324, respectively. At December 31,
2001 and 2002, approximately 51,409 and 82,144, respectively, were available
for further borrowings. At December 31, 2001 and 2002, the weighted average
interest rates for the short-term lines of credit were 4.71% and 3.99%,
respectively. Amounts outstanding under these lines of credits are payable upon
demand.

At December 31, 2002, the Company had negative net working capital of
10.6 million, as compared to negative 24.9 million at December 31, 2001. The
increase in net working capital was primarily attributable to the increase of
accounts receivable and of deferred taxes assets as well as to a strong
reduction in the Tax payable and bank borrowings.

In 2002, cash used in investing activities was equal to 16.5 million, as
compared to 26.3 million in 2001, reflecting lower capital expenditures at
both General Optica, which opened fewer new stores, and D&A, which reduced its
expenditures on refitting stores.

Capital expenditures in 2002 were 16.1 million, as compared to 25.0
million in 2001, and were primarily attributable to the refitting of the major
flagship stores by General Optica, investments made at D&A for the refitting of
shops and the on-going analysis of the implementation of a new branch
information system, as well as the expansion of the capacity of certain of the
Groups manufacturing plants in Italy. Capital expenditures were financed
principally with funds from operations.

The Group expects to incur capital expenditures of approximately 25
million in 2003, essentially for the refitting of existing shops in Spain and
the United Kingdom, the opening of new shops in Spain and the implementation of
the infrastructure for the new management information system in the Group. The
Group believes that the financial resources available to it from funds from
operations, cash on hand and short-term investments held by the Group will be
sufficient to meet the Groups capital expenditure requirements in 2003.

As of December 31, 2002 and 2001, the Groups ratio of long-term debt to
shareholders equity was 0.3% and 0.4%, respectively. The decrease in this
ratio between 2002 and 2001 reflects the increase in the level of the Groups
retained earnings. A portion of the 2001 Groups long-term debt consists of
subsidized loans under the Vajont Relief Program. See Note 9 of Notes to the
Consolidated Financial Statements included in Item 18 of this annual report.

The Groups liquidity needs could increase in the event of an extended
economic slowdown or recession that would reduce cash flow from operations and
would impair the ability of the Groups distributors and retail customers to
meet their payment obligations.

In 2002, the Group again engaged in certain hedging transactions to manage
risks relating to foreign currency exchange rates. See Note 19 of Notes to the
Consolidated Financial Statements included in Item 18 of this annual report and
Quantitative and Qualitative Disclosures About Market Risk in Item 11.

De Rigo does not engage in the use of special purpose entities for
off-balance sheet financing or any other purpose which results in assets or
liabilities not being reflected in De Rigos consolidated financial statements,
nor does it engage in any off-balance sheet financing through other means.




Contractual Obligations

The following table sets forth the contractual obligations and commercial
commitments of the Group with definitive payment terms which will require
significant cash outlays in the future, as of December 31, 2002:

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Payments Due by Period
(in millions of euros)

|                                   |  |       |       |        |  |           |      |           |  |               |      |  |  |   |      |  |  |   |      | 
|---------------------------------- |  | ----- | ----- | ------ |  | --------- | ---- | --------- |  | ------------- | ---- |  |  | - | ---- |  |  | - | ---- | 
|                                   |  |       |       |        |  | Less than |      |           |  |               |      |  |  |   |      |  |  |  
|Contractual Obligations            |  | Total |       | 1 year |  | 2-3 years |      | 4-5 years |  | After 5 years
|                                   |  |       |       |        |  |           |      |           |  |              
|Operating Leases                   |  |       | 186.1 |        |  |           | 27.2 |           |  |               | 49.9 |  |  |   | 40.2 |  |  |   | 68.8 | 
|Unconditional
Purchases            |  |       | 1.1   |        |  |           | 1.1  |           |  |               | 0.0  |  |  |   | 0.0  |  |  |   | 0.0  | 
|                                   |  |       |       |        |  |           |      |           |  |               |      |  |  |   |      |  |  |   |      | 
|Total Contractual Cash
Obligations |  |      | 187.2 |        |  |          | 28.3 |           |  |              | 49.9 |  |  |  | 40.2 |  |  |  | 68.8 | 

D&A leases property, computer hardware and cars and General Optica leases
property under non-cancellable operating leases. At December 31, 2002 the
future lease payments under these operating leases totalled approximately
182.4 million.

See Note 19 of Notes to the Consolidated Financial Statements included in
this Annual Report.

Amount of Commitment Expiration Per Period
(in millions of euros)

|                             |  |               |      |           |  |           |     |           |  |               |     |  |  |   |     |  |  |   |     | 
|---------------------------- |  | ------------- | ---- | --------- |  | --------- | --- | --------- |  | ------------- | --- |  |  | - | --- |  |  | - | --- | 
|                             |  | Total Amounts |      | Less than |  |           |     |           |  |               |     |  |  |   |     | 
|Contractual Obligations      |  | Committed     |      | 1 year    |  | 2-3 years |     | 4-5 years |  | After 5 years
|                             |  |               |      |           |  |           |     |           |  |              
|Other Commercial Commitments |  |               | 16.4 |           |  |           | 5.9 |           |  |               | 9.1 |  |  |   | 1.4 |  |  |   | 0.0 | 
|                             |  |               |      |           |  |           |     |           |  |               |     |  |  |   |     |  |  |   |     | 
|Total Commercial Commitments |  |              | 16.4 |           |  |          | 5.9 |           |  |              | 9.1 |  |  |  | 1.4 |  |  |  | 0.0 | 

The Groups commercial commitments arise relate to royalties due under its
arrangements with certain designers for the use of their trademarks in the
production of fashion eyewear eyeglasses and to its marketing contracts with
actors and athletes serving as spokespersons for the Groups products. At
December 31, 2002, the minimum future payments arising out of these agreements
were approximately 10.8 million under the royalty arrangements,  5.6 million
for advertising expenses, and 0.1 million under other marketing contracts.




Concentrations of Credit Risk

Financial instruments that potentially subject the Group to concentration
of credit risks consist principally of cash investments and trade accounts
receivable. The Group maintains cash and cash equivalents and short-term
investments with financial institutions located in Italy. The Company selects
only financial institutions with high credit standards for use in its
investment strategies. Concentration of credit risks and the risk of
accounting loss with respect to trade receivables is generally limited due to
the large number of the Companys end customers and the diversity of the
geographic areas in which the customers are located. The Company generally
does not require collateral with respect to sale orders, but it may require
collateral and bank guarantees with respect to certain customers.

No individual customer represented 10% or more of sales in any of the
years ended December 31, 2000, 2001 and 2002.




New Accounting Standards

For a
discussion of the impact of the Groups adoption of new
accounting standards on its results of
operations under U.S. GAAP, see Note 19(q) of Notes to the Consolidated
Financial Statements included in Item 18 of this annual report.

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Trend Information

The Group competes in the eyewear market as a whole, and in several
individual sectors of that market, including those for sunglasses, prescription
eyewear and fashion eyewear. De Rigo believes that the most significant
consumer-related trends in these markets that may affect its business include
the following:



| |  |  | Consumers are increasingly attracted by products with higher
fashion content.                                                                                                                                                                                                        
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | Consumers are also increasingly attracted by eyewear
incorporating more sophisticated technological features and high
quality components, particularly those capable of increasing eye
protection (sunglasses lenses) and great comfort (progressive lenses
and multi-coated lenses).
|
| |  |  | Products bearing brands with high customer appeal have become
synonymous with technology, quality and style. Customers rely on
recognized brands to simplify their purchase decision.                                                                                                
|
| |  |  | The average age of the population in De Rigos primary markets is
increasing and, as a result, the number of people wearing spectacles
in those markets is increasing.                                                                                                               
|
| |  |  | Sunglasses and spectacles are becoming more popular, even in
countries with lower average per capita spending power.                                                                                                                                                                 
|
| |  |  | Expected increases in personal income levels could reduce the
current length of the replacement cycle for eyewear in certain of the
Companys more developed markets.                                                                                                                
|
| |  |  | Increased use of, and exposure to, computers, televisions and
similar instruments tends to have a negative effect on consumers
vision.                                                                                                                                              
|
| |  |  | Although laser surgery vision correction procedures are becoming
more common, particularly in the United Kingdom and United States, the
high cost and sometimes limited effectiveness are limiting their use.                                                                        

De Rigo believes that the impact of these factors can be seen in a number
of current developments in the eyewear industry, including the following:



| |  |  | Consumers are increasingly inclined toward purchasing sunglasses
with higher fashion content, particularly if they bear a designer
brand. Sunglasses have essentially become a fashion accessory.                                              
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | The increased attractiveness of designer-brand sunglasses
incorporating high technology and high quality components, including
progressive and multi-coated lenses, is resulting in an increase in
the average retail price for sunglasses.    
|
| |  |  | Higher disposable income and a perceived need for security and
protection are increasingly causing consumers to own more than one
pair of spectacles or sunglasses.                                                                            
|
| |  |  | The desire for feeling better about ones appearance is leading
to an increased percentage of consumers owning both contact lenses and
spectacles; this trend is particularly evident in the United Kingdom,
Northern Europe and United States.

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| |  |  | The increasing importance of fashion content is reducing the
length of the replacement cycle for sunglasses.                                                       
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | Increased use of laser surgery techniques could reduce the need
for prescription eyewear, while increasing the use of sunglasses among
the same group of consumers.




Item 6.Directors, Senior Management and Employees




DIRECTORS AND SENIOR MANAGEMENT

The following table sets forth the names of the members of the Board of
Directors and the senior management of the Company and each of its principal
operating companies. The term of appointment of the current directors expires
upon approval by the Companys shareholders of its financial statements for the
year ending December 31, 2003. The senior management of the Company and its
subsidiaries are appointed by the Board of Directors of the respective company
and serve at the discretion thereof.

|                         |  |     |    |                               |  |                                                                |  | 
|------------------------ |  | --- | -- | ----------------------------- |  | -------------------------------------------------------------- |  | 
|Name                     |  | Age |    | Position within Group/Company
|                         |  |     |    |                              
|Ennio De Rigo            |  |     | 63 |                               |  | Chairman of the Board of Directors and Chief Executive Officer
|Emiliana De Meio De Rigo |  |     | 59 |                               |  | Vice Chairman of the Board of Directors                       
|Walter De Rigo           |  |     | 71 |                               |  | Director                                                      
|Michele Aracri           |  |     | 46 |                               |  | Director and Managing Director                                
|Luigi Arsellini          |  |     | 73 |                               |  | Outside Director (1)                                          
|Claudio Dematté          |  |     | 61 |                               |  | Outside Director                                              
|Enrico Valdani           |  |     | 54 |                               |  | Outside Director                                              
|Massimo De Rigo          |  |     | 34 |                               |  | Head of Design Department                                     
|Maurizio Dessolis        |  |     | 37 |                               |  | Chief Financial Officer                                       
|Adriano De Sandre        |  |     | 47 |                               |  | Head of Manufacturing Operations                              
|Jordi Fontcuberta        |  |     | 47 |                               |  | Managing Director, General Optica                             
|Russel Hardy             |  |     | 42 |                               |  | Managing Director, Dollond & Aitchison                        
|Giovanni Moretti         |  |     | 40 |                               |  | Head of Sales Department                                      
|Bruno Palmegiani         |  |     | 53 |                               |  | Design Manager                                                
|Giovanni Pivetta         |  |     | 38 |                               |  | Head of Marketing                                             
|Mario Sommavilla         |  |     | 55 |                               |  | Chief Administrative Officer                                  



---

|(1) |  | Mr. Arsellini resigned from the Board in May 2003 and has not been
replaced.
|--- |  | ----------------------------------------------------------------------------

Mr. Ennio De Rigo has been Chief Executive Officer of the Company since
1980. Mr. De Rigo held the title of Sole Director of the Company from 1980
until March 1995, when he became Chairman of the Board of Directors.

Mrs. Emiliana De Meio De Rigo has been Sales Manager of the Company since
1980. She became Vice Chairman of the Board of Directors in 1995.

Mr. Walter De Rigo has been a Director of the Company since 1995. He is
Chairman of the Board and Chief Executive Officer of Surfrigo S.r.l., a
manufacturer of commercial refrigerators wholly owned by the De Rigo brothers,
and is a Director of Impresa Edile F.lli De Rigo S.r.l., a construction company
wholly owned by the De Rigo brothers. From May 2000 through June 2001, he has
served as President of the Associazione degli Industriali della Provincia di
Belluno, the industrial association for the province of Belluno. In June 2001,
Mr. De Rigo was elected to the Italian Senate.

Mr. Michele Aracri has been Managing Director of the Company since early
1995. Prior to 1995, Mr. Aracri held the position of Chief of Operations of
the Company.

Mr. Luigi Arsellini was an Outside Director of the Company from September
1995 through May 2003, at which time he resigned from the Board of Directors.
Until November 1999 he was Chief

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Executive Officer of Ceramica Dolomite S.p.A.
and Managing Director of Holding Blue Circle Home Product B.V. He was formerly
Chairman and Chief Executive Officer of ARMCO Moly Cop S.p.A., a subsidiary of
ARMCO Inc., in Udine, Italy. Until May 2000 he was President of the
Associazione degli Industriali della Provincia di Belluno, the industrial
association for the province of Belluno and a member of the board of Directors
of Confindustria, the national industrial association. He also was until 1998
President of the Associazione dellIndustria del Veneto, the industrial
association for the Veneto region.

Professor Claudio Dematté has been an Outside Director of the Company
since September 1995. He is a Full Professor of Economics of Financial
Intermediaries at L. Bocconi University in Milan and from 1997 to 2002 he has
been chairman of SDA Bocconi Business School. He has also been Chairman of the
Board of Directors of FS-Ferrovie dello Stato and Chairman of the Board of
Directors of CARIME Bank. Until June 1994, Professor Dematté was Chairman of
the Board of Directors of RAI-Radio Televisione Italiana. Currently he is
Chairman of the Board of Directors of BTB, Banca di Trento e Bolzano. He is
also a member of the Board of Directors of several other companies, including
Winterthur Assicurazioni S.p.A. and Natuzzi S.p.A. The author of a large
number of publications, Prof. Dematté also writes on current topics in the
major Italian economic journals, and he is Chief Editor of Economia &
Management, the scientific business review of SDA Bocconi.

Professor Enrico Valdani has been an Outside Director of the Company since
September 2001. He is a Full Professor of Business Administration and
Strategic Marketing at L. Bocconi University in Milan and a Senior Professor at
the SDA Bocconi Business School. In addition to his academic activities,
Professor Valdani was a partner in a major consulting group and in 1992 founded
a consulting company that is currently one of the leading firms in Italy. He
is a member of the executive boards of a number of Italian companies and of the
advisory boards of a number of management journals. He has attended the
Graduate School of Business Administration at Harvard University and served as
a Visiting Scholar at the University of Southern California, and is an
appreciated author of many books and articles.

Mr. Massimo De Rigo has been the Head of the Design Department of the
Company since October 2000.

Mr. Adriano De Sandre has been the Head of Manufacturing Operations of the
Company since May 1999. From 1987 to 1999, he was Manufacturing Planning
Manager and Operating Director of SAFILO, one of Italys leading optical
companies.

Mr. Maurizio Dessolis has been Chief Financial Officer of the Company
since March 1993. He is also Managing Director of De Rigo Holding.

Mr. Jordi Fontcuberta has been the Managing Director of General Optica
since 2000, having previously served as the Chief Administrative Officer of
General Optica. Trained as an auditor with Andersen, before joining General
Optica in 1997, Mr. Fontcuberta served as Finance Director for Bacardi-Martini
Spain and Chief Executive Officer of Benton Bowles Spanish operations.

Mr. Russel Hardy has been the Managing Director of Dollond & Aitchison
since 1996. Before joining D&A, he was the Trading Director  Fresh Foods of
Safeway Stores plc, a British consumer goods retail chain.

Mr. Giovanni Moretti joined the Group in 2001 as Head of Sales in the
wholesale and manufacturing segment. From 1996 to March 2001, he served as
Sales Manager of the Procond Elettronica division of GE Power Controls, a
member of the General Electric Group and one of Europes leading manufacturers
of electronic controls.

Mr. Bruno Palmegiani has been Design Manager of the Company since 1994.
From 1980 to 1994, he was a Senior Designer at the Company.

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Mr. Giovanni Pivetta was International Marketing Director of Diadora from
1992 to 1997 and European Marketing Director of The North Face from 1997 to
1999. He joined the Company as Head of the Marketing Department in late 1999.

Mr. Mario Sommavilla has been Chief Administrative Officer of the Company
since December 1994. From 1980 through November 1994, he was Chief
Administrative Officer at Industria Elettrica Indel S.p.A., a producer of metal
alloys.

Mrs. Emiliana De Meio De Rigo is the wife of Mr. Ennio De Rigo, Chairman
of the Board and Chief Executive Officer of the Company. Mr. Walter De Rigo
and Mr. Ennio De Rigo are brothers. Mr. Massimo De Rigo is the son of Mr.
Ennio De Rigo and Mrs. Emiliana De Meio De Rigo. Mr. Maurizio Dessolis is the
son-in-law of Mr. Ennio De Rigo and Mrs. Emiliana De Meio De Rigo. There are
no other family relationships among the directors and senior management of the
Company.

Board of Statutory Auditors

Under Italian law, in addition to electing the Board of Directors, the
Companys ordinary shareholders meeting also elects a Board of Statutory
Auditors (Collegio Sindacale). The Statutory Auditors are elected for a term
of three years, may be re-elected for successive terms and may be removed only
for cause and with the approval of a competent court. Each member of the Board
of Statutory Auditors must provide certain evidence that he is in good standing
and meets certain professional standards. The Board of Statutory Auditors is
required to verify that the Company (i) complies with applicable law and its
By-laws, (ii) respects the principles of correct administration, (iii)
maintains adequate organizational structure, internal controls and
administrative and accounting systems and (iv) adequately instructs its
subsidiaries to transmit information relevant to its disclosure obligations.

The following table sets forth the names of the three members of the
current Board of Statutory Auditors and its alternate members and their
respective positions. The current Board of Statutory Auditors was elected for
a three-year term at the annual meeting of shareholders on May 24, 2001 to
serve until the date of the annual meeting of shareholders that will approve
the accounts for the fiscal year ending December 31, 2003.

|                                |  |                             |  | 
|------------------------------- |  | --------------------------- |  | 
|Name                            |  | Title                      
|                                |  |                            
|Dr. Mario Bampo                 |  | Chairman                   
|Dr. Fanio Fanti                 |  | Statutory Auditor          
|Dr. Dino Sesani                 |  | Statutory Auditor          
|Rag. Galeazzo Osvaldo DAmbrosi |  | Alternate Statutory Auditor
|Rag. Sergio Bonacin             |  | Alternate Statutory Auditor




COMPENSATION OF DIRECTORS AND SENIOR MANAGEMENT

Aggregate compensation paid by the Company and its subsidiaries to the
directors and senior management named above as a group was approximately 1.8
million in 2002, excluding the accrual for termination indemnities required by
Italian law. In addition, such senior managers have been granted options in
respect of a total of 619,000 Ordinary Shares pursuant to the stock option plan
described in Item 10. Additional Information Options to Purchase Securities
from Registrant or Subsidiaries. The directors of the Company are not
eligible to receive options under such plan.

As of June 24, 2003, the directors and senior managers listed in Item 6 as
a group (other than Messrs. Ennio De Rigo, Walter De Rigo and Michele Aracri)
owned significantly less than 1% of the outstanding Ordinary Shares of De Rigo
S.p.A. See Item 7. Major Shareholders for information on the shareholdings
of Messrs. De Rigo, De Rigo and Aracri.

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EMPLOYEES AND LABOR RELATIONS

As of December 31, 2002, the Group had approximately 4,700 employees
worldwide, of which approximately 3,330 were sales employees (including 2,150
at D&A and 950 at General Optica), 770 were manufacturing employees and 600
were employed at central offices. The Group had approximately 4,850 employees
at December 31, 2001. The majority of the Groups sales employees are located
in the United Kingdom and Spain, while the majority of its manufacturing
employees are located in Italy. Substantially all of the Companys Italian
employees and certain of its manufacturing employees in the United Kingdom are
covered by collective bargaining agreements. None of the Groups facilities in
Italy is operated on a closed shop basis. The Group believes that it has
excellent relations with its employees and has not experienced any significant
work stoppages.

Employment agreements in Italy are generally collectively negotiated
between the national association of companies within a particular industry and
the representative national union. Individual companies must enter into
contracts with their employees based on the relevant collective agreement. The
most recent national collective bargaining agreement covering all of the
Groups manufacturing employees in Italy was entered into as of July 1, 2000,
and will expire on December 31, 2003. In addition to the national collective
bargaining agreement, the Group usually enters into separate local contracts
with the labor unions representing its employees.

Italian law provides that, upon termination of employment, employees are
entitled to receive certain indemnity payments based on their length of
employment. As of December 31, 2002, the Group had accrued 5.7 million in
respect of such termination indemnity liabilities, such reserves being equal to
the amounts required by Italian law.

D&A operates a defined benefit Final Pensionable Salary Scheme for
certain of its eligible employees. The benefits are based on years of service
and the employees compensation during a period up to the last seven years of
employment. Contributions are intended to provide not only for benefits
attributed to service to date but also for those expected to be earned in the
future. The prepaid benefit costs will be realized through lower future
contributions as differences occur between the funding and expensing of the
pension plan, or as a result of a combination of these events. Contributions
made by D&A to the defined contribution plan are based on a percentage of
employee compensation. Pension expense recognized for the contribution plan
amounted to 5.4 million in 2002. This plan was under-funded by 35.9 million
at December 31, 2002. See Note 12 of Notes to the Consolidated Financial
Statements included in Item 18 of this annual report.

General Optica has defined benefit plans covering certain of its
executives that are not currently funded. The benefits covered differ
depending on the beneficiary. The present value of these benefit obligations
was 2.7 million at December 31, 2002. The net decrease in the benefit
obligation of 0.8 million during 2002 represents the net periodic benefit cost
recognized of 0.3 million for the twelve months ended December 31, 2002 less
the benefits paid during that period, which amounted to 1.1 million. See Note
12 of Notes to the Consolidated Financial Statements included in Item 18 of
this annual report.




Item 7.Major Shareholders and Related Party Transactions




MAJOR SHAREHOLDERS

The following table summarizes the holdings of those shareholders who hold
5% or more of the Ordinary Shares or are directors or senior managers of the
Company as of the dates indicated.

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|                                    |  |               |            |            |  |               |      |            |  |               |            |            |  |  |      |   |  |  |            |  |  |  |      |  
|----------------------------------- |  | ------------- | ---------- | ---------- |  | ------------- | ---- | ---------- |  | ------------- | ---------- | ---------- |  |  | ---- | - |  |  | ---------- |  |  |  | ---- | -
|                                    |  |               |            |            |  |               |      |            |  | As of June 1, |            |            |  |  |      |   |  | 
|                                    |  | 2003          |            | 2002       |  | 2001         
|                                    |  |               |            |            |  |              
|                                    |  | No. of Shares |            | % of Class |  | No. of Shares |      | % of Class |  | No. of Shares |            | % of Class
|                                    |  |               |            |            |  |               |      |            |  |               |            |           
|Ennio De Rigo and
Walter De Rigo(1) |  |               | 32,922,000 |            |  |               | 73.6 | %          |  |               | 32,801,600 |            |  |  | 73.4 | % |  |  | 34,473,600 |  |  |  | 77.3 | %
|Prada                               |  |               | 2,225,000  |            |  |               | 5.0  | %          |  |               | 2,225,000  |            |  |  | 5.0  | % |  |  | 0          |  |  |  |      |  
|Michele Aracri                      |  |               | 870,000    |            |  |               | 1.9  | %          |  |               | 870,000    |            |  |  | 1.9  | % |  |  | 800,000    |  |  |  | 1.8  | %



---

|(1) |  | Includes shares held directly and those held through De Rigo Holding and another company controlled by Messrs. Ennio
De Rigo and Walter De Rigo. At June 1, 2003, June, 1, 2002 and June 1, 2001, De Rigo Holding held 31,869,500, 31,869,500,
and 33,600,000 Ordinary Shares, respectively, and the other company held 135,000, 78,500 and 0 Ordinary Shares,
respectively. None of these Ordinary Shares possess any special voting rights.
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

In February 1999, De Rigo Holding (the Companys controlling shareholder)
entered into an agreement with Prada Luxembourg s.a.r.l. pursuant to which De
Rigo Holding granted Prada Luxembourg s.a.r.l a series of three options with
respect to a portion of De Rigo Holdings interest in the Companys share
capital, with the maximum aggregate amount of Ordinary Shares being subject to
such options being equal to approximately 15% of the Companys share capital.
See Note 19(j) of Notes to the Consolidated Financial Statements included in
Item 18 of this annual report. On June 18, 2001, Prada Luxembourg s.a.r.l
exercised one of the three options, and subsequently purchased 2,225,000
Ordinary Shares of De Rigo S.p.A. (equal to approximately 5% of the Companys
outstanding share capital) for total consideration of $13.4 million. The two
remaining options have expired without being exercised.




RELATED PARTY TRANSACTIONS

Certain of the Companys facilities in Longarone and Limana were
constructed in the years 1992 through 2001 by Impresa Edile F.lli De Rigo
S.r.l., a construction company which is wholly owned by the De Rigo Brothers.
The related construction costs through December 31, 2002, which have been
capitalized as buildings, amounted to 2.4 million. For additional details on
transactions by the Group with affiliated companies, including those between
EID and the Prada Group, see Note 18 of Notes to the Consolidated Financial
Statements included in Item 18 of this annual report.




Item 8.Financial Information




CONSOLIDATED FINANCIAL STATEMENTS

Please refer to Item 18. Financial Statements.




OTHER FINANCIAL INFORMATION

Export Sales

Export sales from Italy, which totalled approximately 92.1 million in
2002, as compared with 89.9 million in 2001, represented 17.9% of the Groups
net sales (17.9% in 2001).

Legal Proceedings

The Group is involved from time to time in various claims and litigation
incidental to the ordinary course of its business, including various
governmental and administrative proceedings. Management does
not believe that the outcome of any pending claim or proceedings is likely
to have a material adverse effect on the Company.

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Dividend Policy

Dividends may be recommended by the Companys Board of Directors for
approval by shareholders at the Companys annual general meeting, which is
normally held in April or May and must be held by June 30 of each year. Under
Italian law and the Companys By-laws, no interim dividends may be approved or
paid.

At the annual general meeting held on May 30, 2003, the Companys
shareholders approved the recommendation of the Board of Directors that no
dividend be paid in respect of the fiscal year ended December 31, 2002.

For the fiscal years ended December 31, 1998, 2000 and 2001, the Company
paid dividends of 0.09, 0.12 and 0.13 per Ordinary Share to holders of
record as of June 4, 1999, of June 4, 2001 and June 6, 2002, respectively.

For the fiscal year ended December 31, 1999, the Company did not pay any
dividends.




Item 9.The Offer and Listing




TRADING MARKETS AND SHARE PRICES

De Rigos Ordinary Shares (in the form of American Depositary Shares
(ADSs)) are listed on the New York Stock Exchange (the NYSE) under the
symbol DER. Neither the Companys Ordinary Shares nor its ADSs are listed on
a securities exchange outside the United States. The Bank of New York is the
Companys Depositary for purposes of issuing the American Depositary Receipts
(ADRs) evidencing ADSs. Each ADS represents one Ordinary Share.

Trading in the ADSs on the NYSE commenced on October 20, 1995. The
following table sets forth, for the periods indicated, the high and low closing
prices per ADS as reported by the NYSE.

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|                  |  |                     |   |  |     |  |       |  |  |   |   |  |  |  |       | 
|----------------- |  | ------------------- | - |  | --- |  | ----- |  |  | - | - |  |  |  | ----- | 
|                  |  | Price Range of ADSs |  
|                  |  | High                |   |  | Low | 
|                  |  |                     |   |  |     | 
|1998:             |  |                     |   |  |     |  |       |  |  |   |   |  |  |  |       | 
|First Quarter     |  | $                   | 9 |  |     |  | 15/16 |  |  | $ | 6 |  |  |  | 1/8   | 
|Second Quarter    |  | $                   | 8 |  |     |  | 3/4   |  |  | $ | 5 |  |  |  | 15/16 | 
|Third Quarter     |  | $                   | 6 |  |     |  | 1/8   |  |  | $ | 3 |  |  |  | 1/2   | 
|Fourth Quarter    |  | $                   | 6 |  |     |  | 13/16 |  |  | $ | 3 |  |  |  | 3/8   | 
|1999:             |  |                     |   |  |     |  |       |  |  |   |   |  |  |  |       | 
|First Quarter     |  | $                   | 8 |  |     |  | 3/8   |  |  | $ | 4 |  |  |  | 15/16 | 
|Second Quarter    |  | $                   | 7 |  |     |  | 3/8   |  |  | $ | 5 |  |  |  | 5/8   | 
|Third Quarter     |  | $                   | 6 |  |     |  | 1/4   |  |  | $ | 4 |  |  |  | 15/16 | 
|Fourth Quarter    |  | $                   | 6 |  |     |  | 1/16  |  |  | $ | 4 |  |  |  | 15/16 | 
|2000:             |  |                     |   |  |     |  |       |  |  |   |   |  |  |  |       | 
|First Quarter     |  | $                   | 6 |  |     |  | 5/8   |  |  | $ | 5 |  |  |  | 1/8   | 
|Second Quarter    |  | $                   | 6 |  |     |  | 5/8   |  |  | $ | 5 |  |  |  |      | 
|Third Quarter     |  | $                   | 9 |  |     |  |      |  |  | $ | 6 |  |  |  | 3/8   | 
|Fourth Quarter    |  | $                   | 8 |  |     |  | 3/4   |  |  | $ | 6 |  |  |  | 7/8   | 
|2001:             |  |                     |   |  |     |  |       |  |  |   |   |  |  |  |       | 
|First Quarter     |  | $                   | 9 |  |     |  |      |  |  | $ | 7 |  |  |  | 5/32  | 
|Second Quarter    |  | $                   | 8 |  |     |  | 13/16 |  |  | $ | 7 |  |  |  | 49/64 | 
|Third Quarter     |  | $                   | 8 |  |     |  | 21/32 |  |  | $ | 5 |  |  |  | 3/32  | 
|Fourth Quarter    |  | $                   | 6 |  |     |  | 19/32 |  |  | $ | 5 |  |  |  | 35/64 | 
|2002:             |  |                     |   |  |     |  |       |  |  |   |   |  |  |  |       | 
|First Quarter     |  | $                   | 7 |  |     |  | 49/64 |  |  | $ | 4 |  |  |  | 35/64 | 
|Second Quarter    |  | $                   | 7 |  |     |  | 61/64 |  |  | $ | 5 |  |  |  | 19/32 | 
|Third Quarter     |  | $                   | 5 |  |     |  | 45/64 |  |  | $ | 3 |  |  |  | 29/64 | 
|Fourth Quarter    |  | $                   | 4 |  |     |  | 61/64 |  |  | $ | 3 |  |  |  |      | 
|Month Ended       |  |                     |   |  |     |  |       |  |  |   |   |  |  |  |       | 
|January 31, 2003  |  | $                   | 4 |  |     |  | 13/64 |  |  |   | 3 |  |  |  | 23/32 | 
|February 28, 2003 |  | $                   | 4 |  |     |  | 3/32  |  |  |   | 3 |  |  |  | 13/64 | 
|March 30, 2003    |  | $                   | 3 |  |     |  | 27/32 |  |  |   | 3 |  |  |  | 3/8   | 
|April 30, 2003    |  | $                   | 3 |  |     |  | 15/16 |  |  |   | 3 |  |  |  | 5/32  | 
|May 31, 2003      |  | $                   | 3 |  |     |  | 21/32 |  |  |   | 3 |  |  |  | 19/64 | 

As of
June 26, 2003, 44,714,255 Ordinary Shares were outstanding. As of
the same date, there were outstanding 9,514,195 ADSs (equivalent to the same
number of Ordinary Shares). The share equivalent of the outstanding ADSs was
equal to 21.3% of the total number of outstanding Ordinary Shares of the
Company.




Item 10.Additional Information




OPTIONS TO PURCHASE SECURITIES FROM REGISTRANT OR ITS SUBSIDIARIES

In May 1999, the Board of Directors of De Rigo S.p.A. adopted a new stock
option plan (the 1999 Option Plan) whereby the Board was authorized to grant
options to purchase up to 2,325,000 Ordinary Shares to be issued by the Company
in four annual tranches as part of a capital increase that had been approved by
the shareholders in connection with the adoption of the 1999 Option Plan. The
options, which could have been granted to eligible executives of De Rigo S.p.A.
and its Italian and foreign subsidiaries, were exercisable at a purchase price
of $6.00 per Ordinary Share during the 30-day period following the annual
meeting of shareholders that approved the Companys financial statements for
the year in respect of which the grant of options has been made. Between June
and July 1999, the Board had
approved the grant of options in respect of 2,325,000 Ordinary Shares to
approximately 20 executives of the Group; a total of 250,000 of these options
lapsed during 1999 due to employee resignations.

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At an extraordinary shareholders meeting held on November 17, 2000, the
shareholders approved a new stock option plan (the 2000 Option Plan) to
replace the 1999 Option Plan. Holders of options under the 1999 Option Plan
have all agreed to convert their grants under the 1999 Option Plan into grants
under the new plan. Between January 1, 2000 and November 17, 2000, 225,000
options granted under the 1999 Option Plan lapsed due to employee resignations,
leaving options in respect of 1,850,000 ordinary shares outstanding as of
November 17, 2000. Under the terms of the 2000 Option Plan, a total of 851,000
options (in respect of an equivalent number of Ordinary Shares) were granted
(the 1,850,000 options outstanding under the old plan were converted into
options under the 2000 Option Plan at a ratio of 0.46 new options for each
option held) at an exercise price of U.S$ 1.00 per share, which was less than
the fair value of the stock at the grant date, and the term of the existing
grants was extended by one year. On November 17, 2000, the Companys
shareholders approved a capital increase of 338,000 to allow for the issuance
of up to 1,300,000 Ordinary Shares upon the exercise of options granted under
the 2000 Stock Option Plan. On the same date, an additional 348,400 options
were granted to approximately nine executives at an exercise price of U.S.$
1.00 per share. The number of options that may be exercised by a holder in any
given period varies according to the performance of the Companys ADSs during
the relevant period. In accordance with the 2000 Option Plan, the Company has
registered all Ordinary Shares as to which such options may be exercised with
the U.S. Securities and Exchange Commission, so as to facilitate resales of
such Ordinary Shares in the form of ADSs.

At December 31, 2002, a total of 846,621 options were outstanding, a total
of 214,255 options having been exercised and 138,524 options having been
forfeited.

For additional information on these stock options, see Note 13 of Notes to
the Consolidated Financial Statements included in Item 18 of this annual
report.




BY-LAWS

The following is a summary of certain information concerning the Companys
shares and By-laws (Statuto) and of Italian law applicable to companies whose
shares are not listed in a regulated market in the European Union, as in effect
at the date of this annual report. The summary contains all the information
that the Company considers to be material regarding the shares but does not
purport to be complete and is qualified in its entirety by reference to the
By-laws or Italian law, as the case may be.

General

As of June 24, 2003, the issued and outstanding share capital of the
Company consists of 44,714,255 Ordinary Shares, par value euro 0.26 per share.
The redenomination of the Ordinary Shares from lire into euro was approved by
the Companys shareholders on May 24, 2001. All the issued and outstanding
shares are fully paid, non-assessable and in registered form.

The Company is registered with the Companies Registry of Belluno at n.
2671, with its registered office at Zona Industriale Villanova, No. 12, 32013
Longarone (BL), Italy.

As set forth in Article 4 of the By-laws, the Companys corporate purpose
is the design, production, marketing and sale of eyewear, eyewear production
machinery and components and/or accessories, and other activities in the
eyewear or related sectors. The Company is generally authorized to take any
actions necessary or useful to achieve its corporate purpose, with the
exclusion of investment services and other financial activities reserved by
Italian law to authorized entities.

Authorization of Shares

Additional shares may be authorized in connection with capital increases
approved by the Companys shareholders in an extraordinary meeting, but this
authorization would generally be given

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only after recommendation by the
Companys board of directors. On November 17, 2000, the Companys shareholders
approved a capital increase of 338,000 to allow for the issuance of up to
1,300,000 Ordinary Shares upon the exercise of options granted under the 2000
Stock Option Plan. As of June ...., 2003, no such new shares had been issued
and fully paid.

Form and Transfer of Shares

Ordinary shares are transferable by endorsement of the share certificate
by or on behalf of the registered holder, with such endorsement either
authenticated by a notary in Italy or elsewhere or by a broker-dealer or a bank
in Italy. The transferee must request the Company to enter his name in the
register in order to establish his rights as a stockholder as against the
Company.

Dividend Rights

Payment of annual dividends is proposed by the board of directors and is
subject to the approval of the shareholders at the annual shareholders
meeting, which is normally held in late April and under Italian law must be
held by June 30 of each year (i.e. within six months from the end of the fiscal
year). Before dividends may be paid out of the Companys declared net income
of each year, an amount equal to 5% of such net income must be allocated to the
Companys legal reserve until such reserve is at least equal to one-fifth of
the par value of the Companys issued share capital. If the Companys capital
is reduced as a result of accumulated losses, dividends may not be paid until
the capital is reconstituted or reduced by the amount of such losses. The
Company may pay dividends out of available retained earnings from prior years,
provided that after such payment, the Company will have a legal reserve at
least equal to the legally required minimum. No interim dividends may be
approved or paid.

Dividends will be paid in the manner and on the date specified in the
shareholders resolution approving their payment (usually by wire transfer
within 30 days of the annual general meeting). Dividends which are not
collected within five years of the date on which they become payable are
forfeited to the benefit of the Company. Holders of ADSs will be entitled to
receive payments in respect of dividends on the underlying shares through The
Bank of New York, as ADR depositary, in accordance with the deposit agreement
relating to the ADRs.

Voting Rights

As a registered shareholder, the Depositary (or its nominee) will be
entitled to vote the Ordinary Shares underlying the ADSs. The Deposit
Agreement requires the Depositary (or its nominee) to accept voting
instructions from holders of ADSs and to execute such instructions to the
extent permitted by law. Neither Italian law nor the Companys By-laws limit
the right of non-resident or foreign owners to hold or vote the shares.

Board of Directors

Pursuant to the Companys By-laws, the Companys board of directors must
consist of three to nine individuals. The board of directors is elected at a
shareholders meeting for a period of no more than three years. If the shares
of the Company are listed on an Italian regulated market, proposals for the
election of directors must be filed with the Company at least 10 days prior to
the shareholders meeting convened for the election of such directors. The
directors, who may but are not required to be
shareholders of the Company, may be re-appointed for successive terms. In
accordance with the By-laws, the board of directors has complete power of
ordinary and extraordinary administration of the Company and in particular may
perform all acts it deems advisable for the achievement of the Companys
corporate purposes, except for the actions reserved by applicable law or the
By-laws to a vote of the shareholders at an ordinary or extraordinary
shareholders meeting.

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In the event the shareholders meeting has not already appointed a
chairman (presidente) and one or more vice-chairmen to replace the chairman
when he is absent or unavailable, the board of directors must appoint the
chairman and may appoint one or more vice-chairmen. The chairman of the board
of directors and, in his absence, the vice-chairmen and the managing directors,
if any, are severally the legal representatives of the Company. The board of
directors may delegate certain powers to one or more managing directors
(amministratori delegati), determine the nature and scope of the delegated
powers of each director and revoke such delegation at any time. However, in
accordance with Italian law and the By-laws, the board of directors may not
delegate certain of its responsibilities, including the approval of the draft
financial statements, increases in the amount of the Companys share capital or
the issuance of debentures (if any such power has been delegated to the board
of directors by vote of the extraordinary shareholders meeting) and the
calling of ordinary or extraordinary shareholders meetings. The board of
directors may also appoint a general manager (direttore generale) and one or
more senior managers (direttori) who report directly to the board and confer
powers for single acts or categories of acts to employees of the Company or
persons unaffiliated with the Company.

Meetings of the board of directors are called five days in advance by
registered letter or, in case of necessity, one day in advance, by fax or
telegram. Meetings may be called by the chairman on his own initiative and
must be called upon the request of the managing director, two directors or two
statutory auditors.

Meetings may be held in person, or by video-conference or tele-conference,
in any member state of the European Union. The quorum for meetings of the
board of directors is a majority of the directors in office. Resolutions are
adopted by the vote of a majority of the directors present at the meeting. In
case of votes being equal, the vote of the chairman will prevail.

Under Italian law, directors having a conflicting interest with the
company regarding a proposed resolution must inform the other directors about
the conflict and abstain from voting on the resolution. Resolutions adopted in
breach of this rule may be challenged by dissenting or absent directors or the
statutory auditors, and conflicted directors may be held liable for damages to
the Company resulting from a resolution adopted in breach of this rule.

Under Italian law, directors may be removed from office at any time by the
vote of shareholders at an ordinary shareholders meeting although, if removed
in circumstances where there was no just cause, such directors may have a claim
for indemnification against the Company. Directors may resign at any time by
written notice to the board of directors and to the chairman of the board of
statutory auditors. The board of directors must appoint substitute directors
to fill vacancies arising from removals or resignations, subject to the
approval of the board of statutory auditors, to serve until the next ordinary
shareholders meeting. If at any time a majority of the then current members
of the board of directors resign or otherwise cease to be directors, the
remaining members of the board of directors (or the board of statutory auditors
if all the members of the board of directors have resigned or ceased to be
directors) must promptly call an ordinary shareholders meeting to appoint the
new directors.

In general, the remuneration of directors is determined at a shareholders
meeting, failing which it is determined by the board of directors. The board
of directors, after consultation with the board of
statutory auditors, may determine the remuneration of directors that
perform management or other special services for the Company, such as the
managing director.

Statutory Auditors

Under Italian law, in addition to electing the board of directors, the
Companys shareholders elect a board of statutory auditors (Collegio
Sindacale). At ordinary shareholders meetings of the Company, the statutory
auditors are elected by majority vote for a term of three years. If the shares
of the Company

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are listed on a regulated market of a Member State of the
European Union, statutory auditors are to be elected through a list voting
mechanism.

Statutory auditors may be re-elected for successive terms and may be
removed only for cause and with the approval of a competent court. Each member
of the board of statutory auditors must provide certain evidence that he is in
good standing and meets certain professional standards.

The Companys By-laws currently provide that the board of statutory
auditors shall consist of three statutory auditors and two alternate statutory
auditors (who are automatically substituted for a statutory auditor who resigns
or is otherwise unable to serve).

The Companys board of statutory auditors is required to meet at least
once each quarter. In addition, the statutory auditors of the Company must be
present at meetings of the Companys board of directors and shareholders
meetings. The statutory auditors may decide to call a meeting of the
shareholders, the board of directors, ask information on the management of the
Company to the directors, carry out inspections and verifications at the
Company and exchange information with the Companys external auditors. Any
shareholder may submit a complaint to the board of statutory auditors regarding
facts that such shareholder believes should be subject to scrutiny by the board
of statutory auditors, which must take any complaint into account in its report
to the shareholders meeting. If shareholders collectively representing 5% of
the Companys share capital submit such a complaint, the board of statutory
auditors must promptly undertake an investigation and present its findings and
any recommendations to a shareholders meeting (which must be convened
immediately if the complaint appears to have a reasonable basis and there is an
urgent need to take action). The board of statutory auditors may report to the
competent court serious breaches of the duties of the directors.

Meetings of Shareholders

Shareholders are entitled to attend and vote at ordinary and extraordinary
shareholders meetings. Votes may be cast personally or by proxy.
Shareholders meeting may be called by the Companys board of directors (or the
board of statutory auditors) and must be called if requested by holders of at
least 20% of the issued and outstanding shares, or, if the shares of the
Company are listed on a regulated market of a Member State of the European
Union, at least 10% of the issued and outstanding shares of the Company (in
which case, however, the board of directors may refuse to call the meeting if
it believes that calling such a meeting conflicts with the Companys interest;
any dispute arising from such a refusal must be resolved by the competent
court).

The Company may hold general meetings of shareholders at its registered
office in Limana, Belluno, or elsewhere within Italy, following publication of
notice of the meeting in the Gazzetta Ufficiale at least 15 days before the
date fixed for the meeting. The Depositary will mail to all record holders of
ADSs a notice containing a summary of all information contained in any notice
of a shareholders meeting received by the Depositary.

The annual accounts of the Company must be presented to the general
meeting for the approval of the shareholders within four months after the end
of the fiscal year or, if the board of directors determines that a delay in
such presentation is necessary, within six months after the end of such fiscal
year.

To attend any meeting, shareholders must, at least five days prior to the
date fixed for the meeting, lodge their share certificates at the offices of
the Company or with such banks as may be specified in the notice of meeting, in
exchange for an admission ticket for the meeting. Owners of ADRs may make
special arrangements with the Depositary for the beneficial owners of such ADRs
to attend shareholders meetings, but not to vote at or formally address such
meetings. The procedures for making such arrangements will be specified in the
notice of such meeting to be mailed by the Depositary to the owners of ADRs.

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Shareholders may appoint proxies by delivering in writing an appropriate
instrument of appointment to the Company. Directors, auditors and employees of
the Company or of any of its subsidiaries or any bank may not be proxies and
any one proxy cannot represent more than ten shareholders. A separate proxy
must be provided for each meeting. Share certificates may be retrieved
following the meeting.

The quorum for an ordinary meeting of shareholders is 50% of the Ordinary
Shares outstanding, and resolutions are carried by the majority of Ordinary
Shares present. At an adjourned ordinary meeting, no quorum is required, and
the resolutions are carried by the majority of Ordinary Shares present.

Certain matters, such as amendments to the By-laws, an increase in share
capital, the issuance of debentures and the waiver of preemptive rights may
only be affected at an extraordinary general meeting, at which special voting
rules apply. Resolutions at an extraordinary meeting are carried by a majority
of the outstanding Ordinary Shares. At an adjourned extraordinary meeting,
resolutions are carried by the majority of more than one-third of the
outstanding Ordinary Shares. In addition, certain matters (such as a change in
purpose or form of the company, the transfer of its registered office outside
Italy, its liquidation prior to the date se forth in its By-laws and the
issuance of the preferred shares) always require the affirmative vote of the
majority of the outstanding Ordinary Shares. If the shares of the Company are
listed on a regulated market of a Member State of the European Union (i) the
quorum required at an extraordinary shareholders meeting on first, second and
third call will be more than 50%, one-third and one-fifth, respectively, of the
issued and outstanding shares of the Company; and (ii) resolutions of an
extraordinary shareholders meeting will require the approval of at least
two-thirds of the holders of shares present or represented at such meeting.

Preemptive Rights

Pursuant to Italian law, holders of Ordinary Shares are entitled to
subscribe for issuance of shares, debentures convertible into shares and rights
to subscribe for shares in proportion to their holdings, unless such issues are
for non-cash consideration or preemptive rights or are waived or limited by an
extraordinary resolution adopted by the affirmative vote of holders of more
than 50% of the Ordinary Shares (whether at an extraordinary or adjourned
extraordinary meeting) and such waiver or limitation is required in the
interest of the Company. There can be no assurance that the holders of ADS may
be able to exercise fully any preemptive rights.

Liquidation Rights

Pursuant to Italian law and subject to the satisfaction of the claims of
all other creditors, shareholders are entitled to a distribution in liquidation
that is equal to the nominal value of their shares (to the extent available out
of the net assets of the Company). Holders of preferred shares, if any such
shares are issued in the future by the Company, would be entitled to a
priority right to any such distribution from liquidation up to their par value.
Thereafter, all shareholders would rank equally in their claims to the
distribution or surplus assets, if any. Shares rank pari passu among
themselves in liquidation.

Purchase of Shares by the Company

The Company may purchase in the aggregate up to 10% of its Ordinary Shares
at any time and from time to time, subject to certain conditions and
limitations provided by Italian law, including that the purchase be approved by
the shareholders general meeting and that the Company may only repurchase
fully paid-in shares. There is currently an authorization from the
shareholders for the Company to purchase up to 10% of the outstanding shares,
which is valid until May 2005. The Company has not yet repurchased any shares
pursuant to this authorization.

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Notification of the Acquisition of Shares

In accordance with Italian anti-trust laws, the Italian anti-trust
authority is required to prohibit the acquisition of control in a company which
would thereby create or strengthen a dominant position in the domestic market
or a significant part thereof and which would result in the elimination or
substantial reduction, on a lasting basis, of competition, provided that
certain turnover thresholds are exceeded. However, if the turnover of the
acquiring party and the company to be acquired exceed certain other monetary
thresholds, the anti-trust review of the acquisition falls within the exclusive
jurisdiction of the European Commission.

Minority Shareholders Rights

Any shareholder may, within three months, challenge any resolution on
which he did not vote or in respect of which he dissented on the basis that it
was not adopted in conformity with applicable law or the By-laws of the
Company. Directors and statutory auditors may also challenge shareholders
resolutions on this basis.

Each shareholder may bring to the attention of the board of statutory
auditors facts or acts which are deemed wrongful. If such shareholders
represent more than 5% of the share capital of the Company (or, if the shares
of the Company are listed on a regulated market of a Member State of the
European Union, 2%), the board of statutory auditors must investigate without
delay and report its findings and recommendations to the shareholders meeting.
Shareholders representing more than 10% of the Companys share capital (or, if
the shares of the Company are listed on a regulated market of a Member State of
the European Union, 5%) have the right to report major irregularities to the
relevant court.




MATERIAL CONTRACTS

The Company has not entered into any material contract, other than
contracts entered into in the ordinary course of business, during the two years
immediately preceding the publication of this annual report.




EXCHANGE CONTROLS

Currently, there are no Italian exchange controls that would affect the
payment of dividends or other remittances to holders of the ADSs or Ordinary
Shares who reside outside Italy. The Company is not aware of any plans by the
Italian government to institute any exchange controls that would affect the
payment of dividends or other remittances to holders of ADSs or Ordinary Shares
who reside outside
Italy. Neither Italian law nor the Companys By-laws limit the right of
nonresident or foreign owners to hold or vote the Ordinary Shares or the ADSs.




TAXATION

The following is a summary of certain U.S. federal income and Italian tax
matters. The summary does not purport to be a comprehensive description of all
of the tax considerations that may be relevant to a decision to purchase or
hold Ordinary Shares or ADSs. In particular, the summary deals only with
beneficial owners who will hold Ordinary Shares or ADSs as capital assets and
does not address the tax treatment of a beneficial owner who owns 10% or more
of the voting shares of the Company. The summary does not discuss the
treatment of Ordinary Shares or ADSs that are held in connection with a
permanent establishment or fixed base through which a non-resident beneficial
owner carries on business or performs personal services in Italy.

The summary is based upon tax laws and practice of the United States and
Italy as in effect on the date of this annual report, which are subject to
change. Investors and prospective investors in Ordinary

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Shares or ADSs should
consult their own advisors as to the U.S., Italian or other tax consequences of
the purchase, beneficial ownership and disposition of ADSs, including, in
particular, the effect of any state, local or other national tax laws.

For purposes of the summary, beneficial owners of ADSs who are considered
residents of the United States for purposes of the current income tax
convention between the United States and Italy (the Income Tax Convention),
and are not subject to an anti-treaty shopping provision that applies in
limited circumstances, are referred to as U.S. owners. Beneficial owners who
are citizens or residents of the United States, corporations organized under
U.S. law, and U.S. partnerships, estates or trusts (to the extent their income
is subject to U.S. tax either directly or in the hands of partners or
beneficiaries) generally will be considered to be residents of the United
States under the Income Tax Convention. Special rules apply to U.S. owners
that are also residents of Italy. A new tax treaty to replace the current
Income Tax Convention was signed on August 25, 1999, but has not yet been
ratified. The new treaty would not change significantly the provisions of the
current Income Tax Convention that are discussed below (except that it would
clarify the availability of benefits to certain tax-exempt organizations).
These laws are subject to change, possibly on a retroactive basis.

For purposes of the Income Tax Convention and the United States Internal
Revenue Code of 1986, beneficial owners of ADRs evidencing ADSs will be treated
as the beneficial owners of the Ordinary Shares represented by those ADSs.

Taxation of Dividends

Italian Tax Considerations.Italian law provides for the withholding of
income tax at a 27% rate on dividends paid by Italian companies to shareholders
who are not residents of Italy for tax purposes. Reduced rates (normally 15%)
may apply to non-resident shareholders who are entitled to, and comply with
procedures for claiming, benefits under an income tax convention.

Under the Income Tax Convention, dividends derived and beneficially owned
by U.S. owners are subject to Italian tax at a reduced rate of 15%. However,
the amount initially made available to the Depositary for payment to U.S.
owners will reflect withholding at the 27% rate. U.S. owners who comply with
the certification procedures described below may then claim an additional
payment of 12% of the dividend (representing the difference between the 27%
rate and the 15% rate, and referred to herein as a treaty refund). The
certification procedure will require U.S. owners (i) to obtain from the U.S.
Internal Revenue Service a form of certification required by the Italian tax
authorities with respect to each
dividend payment (Form 6166) unless a previously filed certification will
be effective on the dividend payment date (such certificates are effective
until March 31 of the year following submission); (ii) to produce a statement
whereby the U.S. owner represents to be a U.S. resident individual or
corporation and does not maintain a permanent establishment in Italy; and (iii)
to set forth other required information. The time for processing requests for
certification by the U.S. Internal Revenue Service normally is six to eight
weeks. Accordingly, in order to be eligible for the procedure described below,
U.S. owners should begin the process of obtaining certificates as soon as
possible after receiving instructions from the Depositary on how to claim a
treaty refund.

The Depositarys instructions will specify certain deadlines for
delivering to the Depositary the documentation required to obtain a treaty
refund, including the certification that the U.S. owners must obtain from the
U.S. Internal Revenue Service. In the case of ADSs held by U.S. owners through
a broker or other financial intermediary, the required documentation should be
delivered to such financial intermediary for transmission to the Depositary. In
all other cases, the U.S. owners should deliver the required documentation
directly to the Depositary.

The Company and the Depositary have agreed that if the required
documentation is received by the Company on or within 30 days after the
dividend payment date (the First Delivery Date) and, in the

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reasonable
judgment of the Company, such documentation satisfies the requirements for a
refund by the Company of Italian withholding tax under the Income Tax
Convention and applicable law, the Company will within 45 days thereafter pay
the treaty refund to the Depositary for the benefit of the U.S. owners entitled
thereto. If the Company does not receive a U.S. owners documentation within
30 days after the dividend payment date, such U.S. owner may for a period of 15
days continue to claim a treaty refund by delivering the required documentation
to the Depositary. The Depositary will deliver such documentation within 15
days of the First Delivery Date (the Final Delivery Date), but the Company
will not necessarily pay the treaty refund to the Depositary within 45 days of
the First Delivery Date. If the Company does not receive the required
documentation during this additional period, or if in the Companys judgment
the documentation fails to satisfy the requirements of Italian law for any
reason, U.S. owners will not be entitled to receive any amounts from the
Company and instead must claim the treaty refund directly from the Italian tax
authorities. U.S. residents seeking refunds from the Italian tax authorities
have encountered extensive delays and incurred related expenses. The
procedures described in this paragraph may be modified or withdrawn if the
Company determines that its participation in the refund practice is no longer
lawful or practical.

Italian law provides an alternative mechanism under which non-resident
shareholders can claim a refund of up to four-ninths of Italian withholding
taxes on dividend income, by proving to the Italian tax authorities that the
dividend income was subject to income tax in the jurisdiction of residence of
such holder in an amount at least equal to the total refund claimed. U.S.
owners should consult their own tax advisers with respect to the availability
of these refunds, which traditionally have been paid only after extensive
delays.

Distributions of profits in kind will be subject to withholding tax. In
that case, prior to receiving the distribution, the owner will be required to
provide the Company with the funds to pay the relevant withholding tax.
Distribution of additional shares issued upon capitalization of reserves to
beneficial owners with respect to their ADSs that are made as part of a pro
rata distribution to all shareholders of the Company generally will not be
subject to Italian tax. However, such additional shares will reduce the tax
basis of each single share for the calculation of the capital gains tax.

United States Tax Considerations.The gross amount of any dividends (that
is, the amount before reduction for Italian withholding tax) paid to a U.S.
owner generally will be subject to U.S. federal income taxation as foreign
source dividend income, regardless of whether the tax refund is obtained, and
will not be eligible for the dividends received deduction allowed to
domestic corporations. Dividends paid in euros will be includible in the
income of such U.S. owners in a U.S. dollar amount calculated by reference to
the exchange rate in effect on the day the dividends are received by the
Depositary or the custodian. If the Depositary or the custodian converts the
euros into dollars on the day it receives them, U.S. owners generally should
not realize foreign currency gain or loss in respect of the dividend income.
U.S. owners who receive a treaty refund may be required to recognize foreign
currency gain or loss, which will be treated as ordinary gain or loss, to the
extent the amount of the treaty refund (in dollars) received by the U.S. owner
differs from the U.S. dollar equivalent of the euro amount of the treaty refund
on the date the dividends were received by the Depositary or the custodian.
Italian withholding tax at the 15% rate will be treated as a foreign income tax
which U.S. owners may elect to deduct in computing their taxable income or,
subject to the limitations on foreign tax credits generally, credit against
their United States federal income tax liability. Dividends will generally
constitute foreign-source passive income or financial services income for
U.S. tax purposes. Subject to certain exceptions for short-term and hedged
positions, the U.S. dollar amount of dividends received by an individual in
respect of our shares or ADSs after December 31, 2002 and before January 1,
2009 is subject to taxation at a maximum rate of 15%. You should consult your
own tax adviser regarding the availability of the reduced dividend tax rate in
the light of your own particular circumstances.

Foreign tax credits may not be allowed for withholding taxes imposed in
respect of certain short-term or hedged positions in securities or in respect
of arrangements in which a U.S. owners expected

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economic profit is
insubstantial. U.S. owners should consult their own advisers concerning the
implications of these rules in light of their particular circumstances.

Distributions of additional shares to U.S. owners with respect to their
ADSs that are made as part of a pro rata distribution to all shareholders of
the Company generally will not be subject to U.S. federal income tax.

A beneficial owner of Ordinary Shares or ADSs that is, with respect to the
United States, a foreign corporation or a nonresident alien individual
generally will not be subject to U.S. federal income tax on dividends received
on Ordinary Shares or ADSs, unless such income is effectively connected with
the conduct by the beneficial owner of a trade or business in the United
States.

Taxation of Capital Gains

Italian Tax Considerations.Italian capital gains tax (CGT) normally is
imposed on gains realized by non-resident holders upon the transfer or sale of
shares whether located within or outside Italy. More specifically, a 27% CGT
will be levied on gains realized on the disposal of a qualified shareholding.
A qualified shareholding is constituted by Ordinary Shares or ADSs and/or
rights representing more than five percent of a listed companys total share
capital or more than two percent of its share capital voting in the ordinary
shareholders meeting. However, under domestic law, an exemption applies to
gains realized on the disposal of non-qualified shareholdings in an Italian
company the shares of which are listed on a regulated market, such as De Rigo,
even when such shareholdings are held in Italy. A non-qualified shareholding
is constituted by an interest in De Rigo which does not reach the thresholds
described above.

Furthermore, pursuant to the Income Tax Convention, a U.S. owner will not
be subject to Italian CGT unless such U.S. owner has a permanent establishment
or fixed base in Italy to which Ordinary Shares or ADSs are effectively
connected. To this end, U.S. residents that sell Ordinary Shares or ADSs and
claim benefits under the Income Tax Convention may be required to produce
appropriate documentation establishing that the above mentioned conditions of
non-taxability of the capital gains pursuant to the Convention have been
satisfied. Other countries have executed income tax conventions
with Italy providing for similar treatment of Italian CGT. No CGT will be
imposed on the deposit or withdrawal of Ordinary Shares in return for ADSs.

United States Tax Considerations.Gain or loss realized by a U.S. owner
on the sale or other disposition of Ordinary Shares or ADSs will be subject to
U.S. federal income taxation as capital gain or loss in an amount equal to the
difference between the U.S. owners adjusted basis in the Ordinary Shares or
the ADSs and the amount realized on the disposition (or its dollar equivalent,
determined at the spot rate on the date of disposition, if the amount realized
is denominated in a foreign currency). Such gain or loss will generally be
long term capital gain or loss if the U.S. owner holds the Ordinary Shares or
ADSs for more than one year. The net amount of long-term capital gain
recognized by an individual holder after May 5, 2003 and before January 1, 2009
generally is subject to taxation at a maximum rate of 15%. The net long-term
capital gain recognized by an individual holder before May 6, 2003 generally is
subject to taxation at a maximum rate of 20%. Deposits and withdrawals of
Ordinary Shares by U.S. owners in exchange for ADSs will not result in the
realization of gain or loss for U.S. federal income tax purposes.

A beneficial owner of Ordinary Shares or ADSs that is, with respect to the
United States, a foreign corporation or a nonresident alien individual will not
be subject to U.S. federal income tax on gain realized on the sale of Ordinary
Shares or ADSs, unless (i) such gain is effectively connected with the conduct
by the beneficial owner of a trade or business in the United States or (ii) in
the case of gain realized by an individual beneficial owner, the beneficial
owner is present in the United States for 183 days or more in the taxable year
of the sale and certain other conditions are met.

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Other Italian Taxes

Estate and Gift Tax. As of October 25, 2001, the Italian estate and gift
tax has been abolished and consequently any transfer of shares or ADSs
occurring by reason of death or gift as of that date is no longer subject to
any Italian estate and gift tax.

However, should a gift of Ordinary Shares or ADSs for a value exceeding 
180,759.91 (the Threshold) occur and the relationship between the donor and
the beneficiary not qualify for the exemption regime applicable to gifts made
in favor of certain family members (e.g., spouse, parents, children,
grandchildren), a registration tax of  129.11 would be due insofar as the gift
agreement is either executed or registered in Italy. The materiality threshold
is increased to  516,456.91 in case the beneficiary is either underage (i.e.,
younger than 18) or a person with a handicap recognized pursuant to applicable
law.

Transfer Tax.An Italian transfer tax is normally payable on the transfer
of shares in an Italian company. The transfer tax will not be payable with
respect to any transfer of Ordinary Shares or ADSs involving non-Italian
residents concluded either on a regulated market or with the intervention of a
bank or an investment services company.




DOCUMENTS ON DISPLAY

Copies of De Rigo S.p.A.s Statutomay be examined at its registered
office at Zona Industriale Villanova, No. 12, 32013 Longarone (BL), Italy.

De Rigo S.p.A. also files reports, including annual reports on Form 20-F,
periodic reports on Form 6-K and other information with the Securities and
Exchange Commission pursuant to the rules and regulations of the SEC that apply
to foreign private issuers. You may read and copy any materials filed with the
SEC at its Public Reference Room at 450 Fifth Street, N.W., Washington, D.C.
20459. You may obtain information on the operation of the Public Reference
Room by calling the SEC at 1-800-SEC-
0330. You may also read and copy any materials we file with the SEC at
the regional offices of the SEC located at 233 Broadway, New York, New York,
10279, and at Citicorp Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661.




Item 11.Quantitative and Qualitative Disclosures about Market Risk

The De Rigo Group is exposed to market risks from fluctuations in foreign
currency exchange and interest rates. The exposure to foreign currency risk
arises principally in connection with the geographical distribution of the
Groups sales and retail activities, which generally results in the Group
generating revenues from its operations and sales outside of the euro zone in
currencies other than the euro that are in excess of its costs denominated in
such currencies, which are primarily incurred with respect to its operations
located in such countries, and, to a lesser extent, with respect to non-euro
denominated inputs used by its operations in the euro zone. As a result, the
depreciation of the euro relative to other currencies generally has a positive
effect on net sales and operating income, while the appreciation of the euro
has adverse effects on net sales and operating income. Similarly, changes in
interest rates affect the Groups net income by increasing or decreasing
borrowing costs and investment income. Prior to the acquisition of D&A in
December 1998, substantially all of the Groups costs and revenues were
denominated in lire or other currencies of countries participating in the third
stage of European Monetary Union, as almost all of its production facilities
were in Italy or other participating Member States and its prices were
generally denominated in lire (except for sales to its distribution
subsidiaries), so the average price per unit and operating margins were not
significantly affected by foreign currency exchange rate fluctuations. Since
December 1998, the Groups exposure to non-euro currencies increased, due to
the fact that D&As costs and revenues are almost exclusively denominated in
Pounds Sterling. The Groups acquisition of General Optica in February 2000
did not have a similar

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impact on its risk profile, as both Spain and Portugal
are participating in the euro. The Group also makes significant purchases of
raw materials and components denominated in U.S. dollars, and therefore is
exposed to fluctuations in the exchange rate between the U.S. dollar and the
euro.

The Group regularly assesses its exposure and generally seeks to manage
these market risks, principally through the use of forward exchange contracts
and foreign currency options to hedge certain firm sales/purchases commitments,
anticipated but not yet committed sales/purchases and investments in debt
securities denominated in currencies other than the euro. The Group has adopted
a series of guidelines regarding the management of exchange rate and interest
rate exposure. De Rigos policy allows off-balance sheet financial instruments
to be used only for managing exchange and interest rates risks connected to
monetary flows and assets and liabilities, and not for speculative purposes.

Net foreign exchange losses recognized in the Groups consolidated
statements of income for 2001 and 2002 amounted to 0.1 million and less than
0.5 million, respectively. For additional information on the Groups
financial instruments, see Note 19 to Notes to the Consolidated Financial
Statements included in Item 18 of this annual report.




Risk Analysis

The De Rigo Group monitors foreign exchange risk, interest rate risk and
related hedge positions using a variety of analytical techniques including
market value and sensitivity analysis. The following analyses assume
instantaneous parallel shifts in exchange rates and interest rate yield curves.
For options which are instruments with non-linear returns, sensitivity
analysis models considering the year-end market volatility are employed.




Exchange Rate Risk

At December 31, 2002, the potential loss in fair value of the financial
instruments with exposure to exchange rate risk with regard to non-euro
currencies, principally those relating to the Pound Sterling and U.S. dollar,
primarily financial assets and liabilities denominated in such currencies and
derivative instruments such as foreign forward exchange contracts and currency
options, resulting from a hypothetical 10% change in relevant foreign currency
exchange rates would be approximately  1.2 million. This sensitivity analysis
assumes an unfavorable and instantaneous 10% fluctuation in the relevant
exchange rates and is generally based on rates at the end of the year for the
relevant currencies against the euro, the Groups reporting currency.

As consistently and simultaneously unfavorable movements in all relevant
exchange rates are unlikely, these assumptions may overstate the impact of
exchange rate fluctuations on such financial instruments. In addition, this
calculation does not include trade receivables and trade payables and
anticipated cash flows related to the underlying business transactions.
Management believes that it is reasonable to expect that the above movement in
foreign exchange rates would produce an opposite economic impact on the
underlying business transactions for which such financial instruments are used.




Interest Rate Risk

Although the Group uses derivative instruments to manage its interest rate
risk exposure, it does not attempt to hedge its interest rate risks completely.
As a result, the Groups results could be affected with regard to changes in
interest rates relates to the changes in the values of its floating rate assets
and liabilities. The potential loss in fair value of such assets and
liabilities held at December 31, 2002, resulting from a hypothetical,
instantaneous and unfavorable change of 10% in interest rate levels applicable
to such financial assets and liabilities would be approximately  0.1 million.

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Despite the Groups program to manage exchange rate and interest rate
risk, there can be no assurance that exchange rate or interest rate
fluctuations will not adversely affect the Groups results of operations, cash
flows, financial conditions or relative price competitiveness in the future.
Moreover, as with all hedging instruments, there are risks associated with the
use of derivative instruments and other risk management tools. Although the
use of such hedging instruments provides a certain degree of protection from
certain fluctuations in currency exchange and interest rates, the Group may
potentially lose benefits resulting from other fluctuations in currency
exchange and interest rates as a result of using such instruments.




Changes in Market Risk Exposure Compared to 2001

The Groups policy on financial risk management has not changed from the
preceding year. However, the characteristics and the mix of the Groups
financial instruments with exposure to interest rate and foreign exchange rate
risk at December 31, 2002 have changed substantially from the preceding year.
See Note 19 to Notes to the Consolidated Financial Statements included in Item
18 of this annual report.




Item 12.Description of Securities Other than Equity Securities

Not applicable.




PART II




Item 13.Defaults, Dividend Arrearages and Delinquencies

None.




Item 14.Material Modifications to the Rights of Security Holders and Use of Proceeds

None.




Item 15.Controls and Procedures

Within the 90 days prior to the date of this report, the Company carried
out an evaluation under the supervision and with the participation of the
Companys management, including the Chief Executive Officer and Chief Financial
Officer, of the effectiveness of the design and operation of the Companys
disclosure controls and procedures. There are inherent limitations to the
effectiveness of any system of disclosure controls and procedures, including
the possibility of human error and the circumvention or overriding of the
controls and procedures. Accordingly, even effective disclosure controls and
procedures can only provide reasonable assurance of achieving their control
objectives. Based upon and as of the date of the Companys evaluation, the
Chief Executive Officer and Chief Financial Officer concluded that the
disclosure controls and procedures are effective to provide reasonable
assurance that information required to be disclosed in the reports the Company
files and submits under the Exchange Act is recorded, processed, summarized and
reported as and when required. There were no significant changes in the
Companys internal controls or in other factors that could significantly affect
these controls subsequent to the date of their evaluation.

59



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Item 16.[Reserved]




PART III




Item 17.Financial Statements

Not applicable.




Item 18.Financial Statements

60



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Index to Financial Statements and Schedule filed with this Report

|                                                                                                       |  |      |     | 
|------------------------------------------------------------------------------------------------------ |  | ---- | --- | 
|                                                                                                       |  | Page
|                                                                                                       |  |     
|Report of Independent Auditors                                                                         |  |      | F-1 | 
|Consolidated Balance Sheets as of December 31, 2001 and 2002                                           |  |      | F-2 | 
|Consolidated Statements of Income for the Years Ended December 31, 2000, 2001 and 2002                 |  |      | F-4 | 
|Consolidated Statements of Cash Flows for the Years Ended December 31, 2000, 2001 and
2002             |  |      | F-5 | 
|Consolidated Statements of Shareholders Equity for the Years Ended December 31, ,
2000, 2001 and 2002 |  |      | F-6 | 
|Notes to the Consolidated Financial Statements                                                         |  |      | F-7 | 




Item 19.Exhibits

Index to Exhibits filed with this Report

|     |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|---- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|1.1  |  | By laws of De Rigo
S.p.A., incorporated by reference to the Annual Report on
Form 20-F filed by De Rigo S.p.A. with the Securities and
Exchange Commission on June 30, 2002, file number 1-14002.                                                                                                                                                                                                                                                                                      
|     |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|1.2  |  | The total amount of long-term debt securities of De Rigo S.p.A.
authorized under any instrument does not exceed 10% of the total assets of
the Group on a consolidated basis. De Rigo S.p.A. hereby agrees to
furnish to the Securities and Exchange Commission upon request a copy of
any instrument defining the rights of holders of long-term debt of the
registrant or of its subsidiaries for which consolidated or unconsolidated
financial statements are required to be filed.
|     |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|8.1  |  | List of subsidiaries of the registrant.                                                                                                                                                                                                                                                                                                                                                                                                                                                
|     |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|99.1 |  | Certification pursuant to Section  906 of the Sarbanes-Oxley
Act of 2002.                                                                                                                                                                                                                                                                                                                                                                                                          

61



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REPORT OF INDEPENDENT AUDITORS

To the Shareholders of
De Rigo S.p.A.

We have audited the accompanying consolidated balance sheets of De Rigo S.p.A.
and subsidiaries as of December 31, 2001 and 2002, and the related
consolidated statements of income, shareholders equity and cash flows for
each of the three years in the period ended December 31, 2002. These
financial statements are the responsibility of the Companys management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on
a test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits provide
a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of De Rigo S.p.A.
and subsidiaries as of December 31, 2001 and 2002, and the consolidated
results of their operations and their cash flows for each of the three years
in the period ended December 31, 2002, in conformity with Italian accounting
principles, which differ in certain respects from those followed in the United
States (see Note 19 of the Notes to Consolidated Financial Statements).

Padua, Italy
May 12, 2003

F - 1



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DE RIGO S.p.A. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands of Euro (), unless otherwise noted)

|                                        |                                                                                                            |  |         |                      |   |              |         |         |   |  |         | 
|--------------------------------------- | ---------------------------------------------------------------------------------------------------------- |  | ------- | -------------------- | - | ------------ | ------- | ------- | - |  | ------- | 
|                                        |                                                                                                            |  |         |                      |   | December 31,
|                                        |                                                                                                            |  |         |                      |   |             
|                                        |                                                                                                            |  |         |                      |   | 2001         |         | 2002   
|                                        |                                                                                                            |  |         |                      |   |              |         |        
|ASSETS                                  |                                                                                                            |  |         |                      |   |              |         |        
|Current assets:                         |                                                                                                            |  |         |                      |   |              |         |        
|                                        | Cash and cash equivalents                                                                                  |  |         | 24,975               |   |              |         | 21,028  |  
|                                        | Investment in debt securities                                                                              |  |         | 1,796                |   |              |         | 1,907   |  
|                                        | Accounts receivable, trade, net of allowances
for doubtful accounts of  5,501 in 2001
and  6,976 in 2002 |  |         | 70,869               |   |              |         | 80,414  |  
|                                        | Inventories (Note 4)                                                                                       |  |         | 73,285               |   |              |         | 59,338  |  
|                                        | Deferred income taxes (Note 11)                                                                            |  |         | 6,453                |   |              |         | 13,178  |  
|                                        | Prepaid expenses and other current assets (Note 5)                                                         |  |         | 26,023               |   |              |         | 20,464  |  
|                                        |                                                                                                            |  |         |                      |   |              |         |        
|                                        |                                                                                                            |  |         | Total current assets |   |              | 203,401 |         |   |  | 196,329 | 
|Property, plant and equipment (Note 9): |                                                                                                            |  |         |                      |   |              |         |        
|                                        | Land                                                                                                       |  |         | 18,223               |   |              |         | 17,877  |  
|                                        | Buildings                                                                                                  |  |         | 56,098               |   |              |         | 56,513  |  
|                                        | Machinery and equipment                                                                                    |  |         | 24,621               |   |              |         | 24,739  |  
|                                        | Office furniture and equipment                                                                             |  |         | 78,141               |   |              |         | 84,442  |  
|                                        | Construction in progress                                                                                   |  |         | 1,841                |   |              |         | 280     |  
|                                        |                                                                                                            |  |         |                      |   |              |         |        
|                                        |                                                                                                            |  | 178,924 |                      |   |              | 183,851 |        
|                                        | Less: Accumulated depreciation                                                                             |  |         | (50,822              | ) |              |         | (62,946 | )
|                                        |                                                                                                            |  |         |                      |   |              |         |        
|Property, plant and equipment, net      |                                                                                                            |  | 128,102 |                      |   |              | 120,905 |        
|Goodwill and intangible assets (Note 6) |                                                                                                            |  | 123,615 |                      |   |              | 114,707 |        
|Other non current assets (Note 7)       |                                                                                                            |  | 7,374   |                      |   |              | 7,960   |        
|                                        |                                                                                                            |  |         |                      |   |              |         |        
|TOTAL ASSETS                            |                                                                                                            |  | 462,492 |                      |   |              | 439,901 |        
|                                        |                                                                                                            |  |         |                      |   |              |         |        

See accompanying notes

F - 2



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DE RIGO S.p.A. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands of Euro (), unless otherwise noted)

|                                           |                                                               |                                                                                                                                                                                                                                     |                                                          |                            |        |              |         |       |        |         |         | 
|------------------------------------------ | ------------------------------------------------------------- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | -------------------------------------------------------- | -------------------------- | ------ | ------------ | ------- | ----- | ------ | ------- | ------- | 
|                                           |                                                               |                                                                                                                                                                                                                                     |                                                          |                            |        | December 31,
|                                           |                                                               |                                                                                                                                                                                                                                     |                                                          |                            |        |             
|                                           |                                                               |                                                                                                                                                                                                                                     |                                                          |                            |        | 2001         |         | 2002 
|                                           |                                                               |                                                                                                                                                                                                                                     |                                                          |                            |        |              |         |      
|LIABILITIES AND SHAREHOLDERS EQUITY       |                                                               |                                                                                                                                                                                                                                     |                                                          |                            |        |              |         |      
|Current liabilities:                       |                                                               |                                                                                                                                                                                                                                     |                                                          |                            |        |              |         |      
|                                           |                                                               |                                                                                                                                                                                                                                     | Short-term bank borrowings (Note 8)                      |                            |        | 90,050       |         |       |        | 85,180  |        
|                                           |                                                               |                                                                                                                                                                                                                                     | Current portion of long-term debt (Note 9)               |                            |        | 493          |         |       |        | 218     |        
|                                           |                                                               |                                                                                                                                                                                                                                     | Accounts payable, trade                                  |                            |        | 81,722       |         |       |        | 76,323  |        
|                                           |                                                               |                                                                                                                                                                                                                                     | Due to related parties (Note 18)                         |                            |        | 340          |         |       |        |        |        
|                                           |                                                               |                                                                                                                                                                                                                                     | Commissions payable                                      |                            |        | 1,845        |         |       |        | 1,553   |        
|                                           |                                                               |                                                                                                                                                                                                                                     | Income taxes payable                                     |                            |        | 10,252       |         |       |        | 3,334   |        
|                                           |                                                               |                                                                                                                                                                                                                                     | Deferred income taxes (Note 11)                          |                            |        | 10,544       |         |       |        | 8,347   |        
|                                           |                                                               |                                                                                                                                                                                                                                     | Accrued expenses and other current liabilities (Note 10) |                            |        | 33,081       |         |       |        | 31,973  |        
|                                           |                                                               |                                                                                                                                                                                                                                     |                                                          |                            |        |              |         |      
|                                           |                                                               |                                                                                                                                                                                                                                     |                                                          | Total current liabilities  |        |              | 228,327 |       |        |         | 206,928 | 
|                                           | Termination
indemnities and other employee benefits (Note 12) |                                                                                                                                                                                                                                     |                                                          | 8,704                      |        |              |         | 8,926 |       
|                                           | Deferred income taxes (Note 11)                               |                                                                                                                                                                                                                                     |                                                          | 2,401                      |        |              |         | 2,726 |       
|                                           | Long-term debt, less current portion (Note 9)                 |                                                                                                                                                                                                                                     |                                                          | 764                        |        |              |         | 696   |       
|                                           | Other non-current liabilities (Note 14)                       |                                                                                                                                                                                                                                     |                                                          | 11,877                     |        |              |         | 8,508 |       
|Shareholders equity (Note 15):            |                                                               |                                                                                                                                                                                                                                     |                                                          |                            |        |              |         |      
|                                           |                                                               | Capital stock, authorized 45,800,000 ordinary shares par value
0.26 Euro per share at December 31, 2001 and 2002. Issued and
outstanding ordinary shares at December 31, 2001 and 2002 were
44,651,403 and 44,714,255, respectively |                                                          |                            | 11,609 |              |         |       | 11,626 |        
|                                           |                                                               |                                                                                                                                                                                                                                     | Additional paid-in capital                               |                            |        | 54,439       |         |       |        | 54,490  |        
|                                           |                                                               |                                                                                                                                                                                                                                     | Retained earnings                                        |                            |        | 138,095      |         |       |        | 142,935 |        
|                                           |                                                               |                                                                                                                                                                                                                                     | Foreign currency translation adjustments                 |                            |        | 1,239        |         |       |        | (1,971  | )      
|                                           |                                                               |                                                                                                                                                                                                                                     | Revaluation reserve                                      |                            |        | 5,037        |         |       |        | 5,037   |        
|                                           |                                                               |                                                                                                                                                                                                                                     |                                                          |                            |        |              |         |      
|                                           |                                                               |                                                                                                                                                                                                                                     |                                                          | Total shareholders equity |        |              | 210,419 |       |        |         | 212,117 | 
|                                           |                                                               |                                                                                                                                                                                                                                     |                                                          |                            |        |              |         |      
|TOTAL LIABILITIES AND SHAREHOLDERS EQUITY |                                                               |                                                                                                                                                                                                                                     | 462,492                                                  |                            |        |              | 439,901 |      
|                                           |                                                               |                                                                                                                                                                                                                                     |                                                          |                            |        |              |         |      

See accompanying notes

F - 3



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DE RIGO S.p.A. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME

(In thousands of Euro (), unless otherwise noted)

|                                    |  |                                  |         |      |  |      |         |   |  |  |         |  
|----------------------------------- |  | -------------------------------- | ------- | ---- |  | ---- | ------- | - |  |  | ------- | -
|                                    |  | For the years ended December 31,
|                                    |  |                                 
|                                    |  | 2000                             |         | 2001 |  | 2002
|                                    |  |                                  |         |      |  |     
|NET SALES (Note 17)                 |  |                                  | 456,602 |      |  |      | 505,250 |   |  |  | 512,459 |  
|COST OF SALES                       |  |                                  | 167,613 |      |  |      | 184,293 |   |  |  | 203,208 |  
|                                    |  |                                  |         |      |  |      |         |   |  |  |         |  
|GROSS PROFIT                        |  |                                  | 288,989 |      |  |      | 320,957 |   |  |  | 309,251 |  
|COSTS AND EXPENSES                  |  |                                  |         |      |  |      |         |   |  |  |         |  
|Commissions                         |  |                                  | 12,664  |      |  |      | 16,724  |   |  |  | 16,381  |  
|Advertising and promotion expenses  |  |                                  | 31,622  |      |  |      | 35,479  |   |  |  | 34,854  |  
|Other selling expenses              |  |                                  | 184,294 |      |  |      | 199,956 |   |  |  | 203,011 |  
|General and administrative expenses |  |                                  | 36,727  |      |  |      | 37,738  |   |  |  | 38,278  |  
|                                    |  |                                  |         |      |  |      |         |   |  |  |         |  
|                                    |  |                                  | 265,307 |      |  |      | 289,897 |   |  |  | 292,524 |  
|                                    |  |                                  |         |      |  |      |         |   |  |  |         |  
|INCOME FROM OPERATIONS              |  |                                  | 23,682  |      |  |      | 31,060  |   |  |  | 16,727  |  
|OTHER (INCOME) EXPENSES             |  |                                  |         |      |  |      |         |   |  |  |         |  
|Interest expense                    |  |                                  | 5,428   |      |  |      | 4,182   |   |  |  | 4,025   |  
|Interest income                     |  |                                  | (2,329  | )    |  |      | (982    | ) |  |  | (633    | )
|Other (income) expenses, net        |  |                                  | (1,180  | )    |  |      | 660     |   |  |  | 3,566   |  
|                                    |  |                                  |         |      |  |      |         |   |  |  |         |  
|                                    |  |                                  | 1,919   |      |  |      | 3,860   |   |  |  | 6,958   |  
|                                    |  |                                  |         |      |  |      |         |   |  |  |         |  
|INCOME BEFORE INCOME TAXES          |  |                                  | 21,763  |      |  |      | 27,200  |   |  |  | 9,769   |  
|INCOME TAXES (Note 11)              |  |                                  | 6,895   |      |  |      | 6,551   |   |  |  | 46      |  
|                                    |  |                                  |         |      |  |      |         |   |  |  |         |  
|INCOME BEFORE MINORITY INTERESTS    |  |                                  | 14,868  |      |  |      | 20,649  |   |  |  | 9,723   |  
|MINORITY INTERESTS (Note 18)        |  |                                  | 732     |      |  |      | (568    | ) |  |  | (922    | )
|                                    |  |                                  |         |      |  |      |         |   |  |  |         |  
|NET INCOME                          |  |                                  | 14,136  |      |  |      | 21,217  |   |  |  | 10,645  |  
|                                    |  |                                  |         |      |  |      |         |   |  |  |         |  

See accompanying notes

F - 4



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##### Table of Contents






DE RIGO S.p.A. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands of Euro (), unless otherwise noted)

|                                                   |                                                                                     |                                                                                                             |         |                                                         |          |      |         |        |         |      |         |      |         |   |         |  
|-------------------------------------------------- | ----------------------------------------------------------------------------------- | ----------------------------------------------------------------------------------------------------------- | ------- | ------------------------------------------------------- | -------- | ---- | ------- | ------ | ------- | ---- | ------- | ---- | ------- | - | ------- | -
|                                                   |                                                                                     |                                                                                                             |         |                                                         |          | 2000 |         | 2001   |         | 2002
|                                                   |                                                                                     |                                                                                                             |         |                                                         |          |      |         |        |         |     
|Cash flows from operating activities               |                                                                                     |                                                                                                             |         |                                                         |          |      |         |        |         |      |         |     
|                                                   |                                                                                     | Net income                                                                                                  |         |                                                         | 14,136   |      |         |        | 21,217  |      |         |      | 10,645  |  
|                                                   |                                                                                     | Adjustments
to reconcile net income to net cash provided by operating activities                            |         |                                                         |          |      |         |        |         |      |         |      |         |  
|                                                   |                                                                                     |                                                                                                             |         | Depreciation                                            |          |      | 18,014  |        |         |      | 18,829  |      |         |   | 18,339  |  
|                                                   |                                                                                     |                                                                                                             |         | Amortization                                            |          |      | 8,914   |        |         |      | 9,009   |      |         |   | 9,213   |  
|                                                   |                                                                                     |                                                                                                             |         | Provision for doubtful accounts                         |          |      | 3,001   |        |         |      | 851     |      |         |   | 2,821   |  
|                                                   |                                                                                     |                                                                                                             |         | Provision for inventory obsolescence                    |          |      | 1,341   |        |         |      | 4,223   |      |         |   | 4,480   |  
|                                                   |                                                                                     |                                                                                                             |         | Gain on sale of investments in debt securities          |          |      | (460    | )      |         |      | (86     | )    |         |   | (111    | )
|                                                   |                                                                                     |                                                                                                             |         | Deferred income taxes                                   |          |      | (10,387 | )      |         |      | (3,320  | )    |         |   | (8,479  | )
|                                                   |                                                                                     |                                                                                                             |         | Other, non-cash items                                   |          |      | (177    | )      |         |      | (36     | )    |         |   | 622     |  
|                                                   |                                                                                     |                                                                                                             |         | Provision for termination indemnities and pension costs |          |      | 5,107   |        |         |      | 5,655   |      |         |   | 8,103   |  
|                                                   |                                                                                     |                                                                                                             |         | Minority interest in income                             |          |      | 732     |        |         |      | (568    | )    |         |   | (922    | )
|                                                   |                                                                                     | Changes in operating assets and liabilities:                                                                |         |                                                         |          |      |         |        |         |      |         |      |         |  
|                                                   |                                                                                     |                                                                                                             |         | Accounts receivable                                     |          |      | (10,486 | )      |         |      | (14,518 | )    |         |   | (14,945 | )
|                                                   |                                                                                     |                                                                                                             |         | Inventories                                             |          |      | (6,510  | )      |         |      | (24,669 | )    |         |   | 6,698   |  
|                                                   |                                                                                     |                                                                                                             |         | Accounts payable                                        |          |      | 19,120  |        |         |      | 22,518  |      |         |   | (3,451  | )
|                                                   |                                                                                     |                                                                                                             |         | Income taxes payable                                    |          |      | 5,220   |        |         |      | (4,320  | )    |         |   | (6,666  | )
|                                                   |                                                                                     |                                                                                                             |         | Value added tax                                         |          |      | 634     |        |         |      | (1,113  | )    |         |   | 1,799   |  
|                                                   |                                                                                     |                                                                                                             |         | Other  net                                             |          |      | (207    | )      |         |      | (7,519  | )    |         |   | (150    | )
|                                                   |                                                                                     | Payments of termination of indemnities and pension contributions                                            |         |                                                         | (5,146   | )    |         |        | (5,750  | )    |         |      | (5,656  | )
|                                                   |                                                                                     |                                                                                                             |         |                                                         |          |      |         |        |         |      |         |     
|                                                   |                                                                                     |                                                                                                             |         | Net cash provided by operating activities               |          |      | 42,846  |        |         |      | 20,403  |      |         |   | 22,340  |  
|                                                   |                                                                                     |                                                                                                             |         |                                                         |          |      |         |        |         |      |         |     
|Cash flows from investing activities               |                                                                                     |                                                                                                             |         |                                                         |          |      |         |        |         |      |         |     
|                                                   | Acquisition of General Optica (GO), net of cash acquired (Note 3)                   |                                                                                                             |         | (155,785                                                | )        |      |         |       |         |      |         |     |        
|                                                   | Acquisition of minority interests in Dierre, De Rigo France and De
Rigo Deutschland |                                                                                                             |         |                                                        |          |      |         | (3,678 | )       |      |         | (304 | )      
|                                                   | Net
proceeds from sale of Ranieri Argentina and Vogart S.r.l.                       |                                                                                                             |         |                                                        |          |      |         |       |         |      |         | 386  |        
|                                                   | Cash refund of taxes   subsidiary acquired in 1998-Vantios/D&A                     |                                                                                                             |         | 10,743                                                  |          |      |         |       |         |      |         |     |        
|                                                   |                                                                                     | Proceeds from sale of assets held for sale on GO acquisition                                                |         |                                                         | 50,355   |      |         |        |        |      |         |      |        |  
|                                                   |                                                                                     | Additions to property, plant and equipment                                                                  |         |                                                         | (25,446  | )    |         |        | (24,989 | )    |         |      | (16,075 | )
|                                                   |                                                                                     | Proceeds from disposal of equipment and other assets                                                        |         |                                                         | 2,864    |      |         |        | 2,127   |      |         |      | 1,354   |  
|                                                   |                                                                                     | Additions to intangible assets                                                                              |         |                                                         | (2,742   | )    |         |        | (3,343  | )    |         |      | (2,086  | )
|                                                   |                                                                                     | Proceeds from sale of investments in debt securities                                                        |         |                                                         | 30,241   |      |         |        | 3,544   |      |         |      |        |  
|                                                   |                                                                                     |                                                                                                             |         |                                                         |          |      |         |        |         |      |         |     
|                                                   |                                                                                     |                                                                                                             |         | Net cash used in investing activities                   |          |      | (89,770 | )      |         |      | (26,339 | )    |         |   | (16,725 | )
|                                                   |                                                                                     |                                                                                                             |         |                                                         |          |      |         |        |         |      |         |     
|Cash flows from financing activities               |                                                                                     |                                                                                                             |         |                                                         |          |      |         |        |         |      |         |     
|                                                   |                                                                                     | Net change in short-term borrowings from lines of credit                                                    |         |                                                         | 7,654    |      |         |        | 38,867  |      |         |      | (3,241  | )
|                                                   |                                                                                     | Proceeds from short-term borrowings under credit facilities                                                 |         |                                                         | 150,000  |      |         |        | 36,592  |      |         |      |        |  
|                                                   |                                                                                     | Repayment of short-term borrowings under credit facilities and
obligations to sellers of acquired companies |         |                                                         | (123,388 | )    |         |        | (64,817 | )    |         |      |        |  
|                                                   |                                                                                     | Capital contribution(s) by minority interest(s)                                                             |         |                                                         |         |      |         |        | 733     |      |         |      |        |  
|                                                   |                                                                                     | (Repayments) of borrowings from related parties                                                             |         |                                                         | 1,069    |      |         |        | (735    | )    |         |      |        |  
|                                                   |                                                                                     | Proceeds from long-term debt                                                                                |         |                                                         |         |      |         |        |        |      |         |      | 151     |  
|                                                   |                                                                                     | Repayment of long-term debt and non current liability                                                       |         |                                                         | (1,093   | )    |         |        | (287    | )    |         |      | (494    | )
|                                                   |                                                                                     | Share capital increase                                                                                      |         |                                                         |         |      |         |        | 174     |      |         |      | 68      |  
|                                                   |                                                                                     | Payment of dividends                                                                                        |         |                                                         |         |      |         |        | (5,179  | )    |         |      | (5,805  | )
|                                                   |                                                                                     |                                                                                                             |         |                                                         |          |      |         |        |         |      |         |     
|                                                   |                                                                                     |                                                                                                             |         | Net cash provided (used) by financing activities        |          |      | 34,242  |        |         |      | 5,348   |      |         |   | (9,321  | )
|                                                   |                                                                                     |                                                                                                             |         |                                                         |          |      |         |        |         |      |         |     
|Effect of exchange rate changes on cash            |                                                                                     |                                                                                                             | 96      |                                                         |          |      | 93      |        |         |      | (241    | )   
|                                                   |                                                                                     |                                                                                                             |         |                                                         |          |      |         |        |         |      |         |     
|Increase (decrease) in cash and cash equivalents   |                                                                                     |                                                                                                             | (12,586 | )                                                       |          |      | (495    | )      |         |      | (3,947  | )   
|Cash and cash equivalents at beginning of the year |                                                                                     |                                                                                                             | 38,056  |                                                         |          |      | 25,470  |        |         |      | 24,975  |     
|                                                   |                                                                                     |                                                                                                             |         |                                                         |          |      |         |        |         |      |         |     
|Cash and cash equivalents at end of the year       |                                                                                     |                                                                                                             | 25,470  |                                                         |          |      | 24,975  |        |         |      | 21,028  |     
|                                                   |                                                                                     |                                                                                                             |         |                                                         |          |      |         |        |         |      |         |     
|Supplemental disclosures:                          |                                                                                     |                                                                                                             |         |                                                         |          |      |         |        |         |      |         |     
|                                                   |                                                                                     | Interest paid                                                                                               |         |                                                         | 2,223    |      |         |        | 4,038   |      |         |      | 3,871   |  
|                                                   |                                                                                     |                                                                                                             |         |                                                         |          |      |         |        |         |      |         |     
|                                                   |                                                                                     | Income taxes paid                                                                                           |         |                                                         | 12,160   |      |         |        | 14,930  |      |         |      | 18,147  |  
|                                                   |                                                                                     |                                                                                                             |         |                                                         |          |      |         |        |         |      |         |     

See accompanying notes

F - 5



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##### Table of Contents






DE RIGO S.p.A. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS EQUITY
For the years ended December 31, 2000, 2001 and 2002
(In thousands of Euro (), unless otherwise noted)

|                                               |  |         |        |         |  |            |        |             |  |             |         |          |  |         |        |   |  |  |       |  |  |  |         |  
|---------------------------------------------- |  | ------- | ------ | ------- |  | ---------- | ------ | ----------- |  | ----------- | ------- | -------- |  | ------- | ------ | - |  |  | ----- |  |  |  | ------- | -
|                                               |  |         |        |         |  |            |        |             |  |             |         |          |  | Foreign |        |   |  |  |       |  |  | 
|                                               |  |         |        |         |  | Additional |        |             |  |             |         | currency |  |         |        |   |  |  |       | 
|                                               |  | Share   |        | paid-in |  | Retained   |        | translation |  | Revaluation |         |          |  |        
|                                               |  | Capital |        | capital |  | earnings   |        | adjustments |  | reserve     |         | Total   
|                                               |  |         |        |         |  |            |        |             |  |             |         |         
|Balance at December 31, 1999                   |  |         | 11,491 |         |  |            | 54,305 |             |  |             | 107,999 |          |  |         | 610    |   |  |  | 952   |  |  |  | 175,357 |  
|Foreign currency translation
adjustments       |  |         |        |         |  |            |        |             |  |             |         |          |  |         | (119   | ) |  |  |       |  |  |  | (119    | )
|Net income for 2000                            |  |         |        |         |  |            |        |             |  |             | 14,136  |          |  |         |        |   |  |  |       |  |  |  | 14,136  |  
|                                               |  |         |        |         |  |            |        |             |  |             |         |          |  |         |        |   |  |  |       |  |  |  |         |  
|Balance at December 31, 2000                   |  |         | 11,491 |         |  |            | 54,305 |             |  |             | 122,135 |          |  |         | 491    |   |  |  | 952   |  |  |  | 189,374 |  
|Foreign currency translation
adjustments       |  |         |        |         |  |            |        |             |  |             |         |          |  |         | 748    |   |  |  |       |  |  |  | 748     |  
|Share capital increase                         |  |         |        |         |  |            |        |             |  |             |         |          |  |         |        |   |  |  |       |  |  |  |         |  
|- exercise of 151,403 stock
options            |  |         | 40     |         |  |            | 134    |             |  |             |         |          |  |         |        |   |  |  |       |  |  |  | 174     |  
|- translation of share capital
into Euro       |  |         | 78     |         |  |            |        |             |  |             | (78     | )        |  |         |        |   |  |  |       |  |  |  |        |  
|Revaluation of trademarks,
net of tax of  958 |  |         |        |         |  |            |        |             |  |             |         |          |  |         |        |   |  |  | 4,085 |  |  |  | 4,085   |  
|Net income for 2001                            |  |         |        |         |  |            |        |             |  |             | 21,217  |          |  |         |        |   |  |  |       |  |  |  | 21,217  |  
|Dividends paid                                 |  |         |        |         |  |            |        |             |  |             | (5,179  | )        |  |         |        |   |  |  |       |  |  |  | (5,179  | )
|                                               |  |         |        |         |  |            |        |             |  |             |         |          |  |         |        |   |  |  |       |  |  |  |         |  
|Balance at December 31, 2001                   |  |         | 11,609 |         |  |            | 54,439 |             |  |             | 138,095 |          |  |         | 1,239  |   |  |  | 5,037 |  |  |  | 210,419 |  
|Foreign currency translation
adjustments       |  |         |        |         |  |            |        |             |  |             |         |          |  |         | (3,210 | ) |  |  |       |  |  |  | (3,210  | )
|Share capital increase                         |  |         |        |         |  |            |        |             |  |             |         |          |  |         |        |   |  |  |       |  |  |  |         |  
|- exercise of 2,736 stock
options              |  |         | 17     |         |  |            | 51     |             |  |             |         |          |  |         |        |   |  |  |       |  |  |  | 68      |  
|Net income for 2002                            |  |         |        |         |  |            |        |             |  |             | 10,645  |          |  |         |        |   |  |  |       |  |  |  | 10,645  |  
|Dividends paid                                 |  |         |        |         |  |            |        |             |  |             | (5,805  | )        |  |         |        |   |  |  |       |  |  |  | (5,805  | )
|                                               |  |         |        |         |  |            |        |             |  |             |         |          |  |         |        |   |  |  |       |  |  |  |         |  
|Balance at December 31, 2002                   |  |         | 11,626 |         |  |            | 54,490 |             |  |             | 142,935 |          |  |         | (1,971 | ) |  |  | 5,037 |  |  |  | 212,117 |  
|                                               |  |         |        |         |  |            |        |             |  |             |         |          |  |         |        |   |  |  |       |  |  |  |         |  

See accompanying notes

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##### Table of Contents






DE RIGO S.p.A. and SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(expressed in thousands of Euro (), except as otherwise indicated)
For the years ended December 31, 2000, 2001 and 2002

1. BACKGROUND AND ORGANIZATION

De Rigo S.p.A. is incorporated in Italy, and on December 31, 2001 and 2002
was 73.5% and 73.6% owned by the De Rigo Brothers, respectively. On December
31, 2002 71.5% was indirectly owned through De Rigo Holding B.V. and another
related company and 2.1% directly owned. The remaining 26.4% was owned as
follows:

|                  |  |  |      |  
|----------------- |  |  | ---- | -
|Managing Director |  |  | 1.9  | %
|Prada             |  |  | 5.0  | %
|Publicly owned    |  |  | 19.5 | %
|                  |  |  |      |  
|                  |  |  | 26.4 | %
|                  |  |  |      |  

The amount publicly-owned and 1.8% of the amount directly and indirectly owned
by the Managing Director and the De Rigo Brothers is traded on the New York
Stock Exchange in the form of American Depositary Shares (each American
Depositary Share represents one Ordinary Share) under the symbol DER.

The principal activities of the De Rigo S.p.A. and its subsidiaries (the
Company or the Group) include the design, manufacture, distribution,
marketing and retailing of premium-priced fashion sunglasses and prescription
eye glass frames and the sale of eyeglass lenses. Information on the Groups
operations by business segment and the expiration dates of its tax exemption
grants are disclosed in Notes 17 and 11, respectively.

Effective January 1, 2002 the Company changed its reporting currency from
Italian Lire to Euro. All financial data for prior periods have been restated
in Euro at the official fixed exchange rate of Lit. 1,936.27 =  1.00.

2. SIGNIFICANT ACCOUNTING POLICIES

Principles of consolidation

All majority-owned subsidiaries are consolidated.

The financial statements used for the consolidation are those prepared for
approval by the shareholders of the respective companies forming part of the
De Rigo Group. Such financial statements are adjusted, where necessary, to
conform with the Companys accounting policies that are in conformity with the
accounting principles established by the National Councils of the Italian
Accounting Profession (Italian GAAP).

All significant intercompany transactions and balances are eliminated.
Unrealized intercompany profits and the gains and losses arising from
transactions between Group companies are also eliminated.

Use of estimates

The preparation of the financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.

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DE RIGO S.p.A. and SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(expressed in thousands of Euro (), except as otherwise indicated)
For the years ended December 31, 2000, 2001 and 2002

Foreign currency translation

The financial statements of foreign subsidiaries expressed in foreign
currencies are translated into Euro using the year-end exchange rate for
balance sheet items and the average exchange rate for the year for statement
of income items. The translation differences resulting from the changes in
exchange rates from year to year have been reported separately as a component
of shareholders equity.

Foreign currency transactions

Monetary assets and liabilities denominated in foreign currencies have been
recorded at the exchange rate in effect at the date of the transaction; such
assets and liabilities denominated in foreign currencies are remeasured at the
prevailing rate at the balance sheet date, taking into consideration the
hedging contracts, and any resulting unrealized losses are charged to income
and unrealized gains are credited to income, except those unrealized gains
related to the remeasurement of non current assets and liabilities. Such
unrealized gains are deferred until realized.

Cash equivalents

The Company considers all highly liquid investments with a maturity of three
months or less when purchased to be cash equivalents.

Investments in debt securities

The Companys financial investments in debt securities are stated at the lower
of cost or market.

Accounts receivable

Accounts receivable are carried at their net realizable value. The allowance
for doubtful accounts is estimated based on the aging of accounts receivable
balances and historical write-off experience. Accounts receivable are
written-off when they are considered finally uncollectible and collection
efforts have ceased.

Inventories

Inventories are carried at the lower of cost or market using the weighted
average cost method.

Property, plant and equipment

Property, plant and equipment is recorded at either historical cost or
revalued amounts. The Company revalued certain assets in years prior to 1992
to fair value, in accordance with the provisions of Italian law. The
applicable revaluation laws contained provisions limiting the amount of any
such revaluation to the fair value of the respective assets. The adjustments
resulting from these reevaluations have been recorded as a component of
shareholders equity.

Depreciation of property, plant and equipment is computed on the historical
cost or revalued basis of the relevant asset, using the straight-line method
over the estimated useful lives of the related assets, as follows:

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DE RIGO S.p.A. and SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(expressed in thousands of Euro (), except as otherwise indicated)
For the years ended December 31, 2000, 2001 and 2002

|                                |  |                                     |  | 
|------------------------------- |  | ----------------------------------- |  | 
|Buildings                       |  | 33-50 years                        
|Machinery and equipment         |  | 4-10 years                         
|Office, furniture and equipment |  | 4-8 years                          
|Leasehold improvements          |  | lesser of useful life or lease term

Goodwill

Goodwill represents the excess of the purchase price paid over the fair value
assigned to tangible and identifiable intangible assets less the fair value
assigned to liabilities assumed. Amortization is provided on a straight line
basis over 5 to 20 years, the estimated future periods to be benefited. On an
annual basis, management evaluates recorded goodwill for potential impairment.

Intangible assets

Intangible assets are recorded at either historical cost or revalued amounts
and are amortized, using the straight-line method, over 5 to 10 years. In
2001 the Company revalued certain trademarks to fair value, in accordance with
applicable Italian law. The applicable revaluation laws contain provisions
limiting the amount of any such revaluation to the fair value of the
respective assets. The adjustments resulting from these revaluations have
been recorded as a revaluation reserve that is reported as a separate
component of shareholders equity. The taxes payable on these revaluations
were charged to the revaluation reserve.

Income taxes

Income taxes are provided by each entity included in the consolidation in
accordance with the applicable local laws. Deferred income taxes are
accounted for under the liability method and reflect the tax effects of all
significant temporary differences between the tax basis of assets and
liabilities and their reported amounts in the financial statements and tax
loss carry forwards (NOLs). Valuation allowances are provided against deferred
tax assets for amounts that are not expected to be realized. The Company has
considered future taxable income and ongoing prudent and feasible tax planning
strategies in assessing the need for the valuation allowance. However, if the
Company were to determine that it would be able to realize its deferred tax
assets in the future in excess of its net recorded amount, an adjustment to
the deferred tax asset would increase income in the period such determination
was made. Likewise, should the Company determine that it would not be able to
realize all or part of its net deferred tax asset in the future, an adjustment
to the deferred tax asset would be charged to income in the period such
determination was made.

Investment tax credits and tax deductions

Investment tax credits and investment tax deductions are accounted for as
a reduction in current income taxes in the year in which the credit arises or
the deduction is taken.

Revenue recognition

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DE RIGO S.p.A. and SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(expressed in thousands of Euro (), except as otherwise indicated)
For the years ended December 31, 2000, 2001 and 2002

Revenues from the sale of products are recorded upon shipment, which is
generally when title passes. It is not the Companys policy to accept
returns; however in specific cases returns are accepted. For the Companys
retail operations revenues are recognized upon consummation of sales to
customers.

Derivative products

The Company uses derivative products to manage its exposure to fluctuations in
interest rates and in foreign currency exchange rates relating to certain
receivables and payables. The derivative products used by the Company are
primarily interest rate swap, foreign currency forward contracts and to a
limited extent foreign currency option contracts. Discounts or premiums on
forward contracts (the difference between the current spot exchange rate and
the forward exchange rate at the inception of the contract) and the time value
on premiums on option contracts (the portion of the option contracts value
attributable to the period until expiration), are amortized to expense over
the life of the contract using the straight-line method.
Derivatives, that are not designated as hedges, are recorded on the balance
sheet at fair value.
Unrealized gains related to the remeasurement at fair value of the long term
derivative contracts are deferred until realized.

From 1998 to the fourth quarter of 2000, the Company used forward foreign
exchange contracts in the British Pound to reduce its exposure to foreign
currency risk from its net investment in its subsidiary in the United Kingdom
that was acquired in 1998, and any gains and losses, net of related taxes,
resulting from such contracts were included in the cumulative translation
adjustment, a separate component of shareholders equity.

Advertising and promotion

Advertising costs are charged to earnings the first time the advertisement
appears. Media (TV and print advertisement) placement costs are charged to
earnings in the month the advertisement first appears.
The Company has sponsorship agreements with certain movie stars and athletes
that are generally cancelable only for cause. The Companys accounting for
these sponsorship contracts is based upon the specific contract provisions.
Generally, sponsorship payments are expensed uniformly over the term of the
agreement, provided that certain periodic future performance obligations
exist.

Statements of cash flows

Short-term borrowings arise primarily under the Groups short-term lines of
credit with its banks. These short-term obligations are payable on demand.
The cash flows from these items are included under the caption Net change in
short-term borrowings in the Consolidated Statements of Cash Flows.

Reclassifications

Certain amounts in the financial statements in 2000 and 2001 have been
reclassified to conform with the 2002 presentation.

3. BUSINESS ACQUISITIONS AND DISPOSALS

2000 Acquisitions

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DE RIGO S.p.A. and SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(expressed in thousands of Euro (), except as otherwise indicated)
For the years ended December 31, 2000, 2001 and 2002

On February 2, 2000 the Company acquired all of the outstanding shares of
General Optica International S.A. (GO) for a total cash consideration price
of  162,118. GO, which is headquartered in Barcelona, Spain sells
prescription eyeglasses and fashion sunglasses through its optical retail
outlets throughout Spain and Portugal. The Company financed the acquisition
from proceeds received under a short-term line of credit described in Note 8.

The GO acquisition was recorded under the purchase method of accounting, and
accordingly, the results of operations of GO for the period from February 2,
2000 are included in the accompanying consolidated statement of income for the
year ended December 31, 2000 and 2001. The total cost of the acquisition,
amounting to  162,118, was allocated to assets acquired and liabilities
assumed based on their fair values at the date of the acquisition, and the
excess of the cost of the acquisition over the fair value of the net assets
acquired was allocated to goodwill, which is being amortized in accordance
with the Companys accounting policy. Immediately after the acquisition,
the net assets of Salmoiraghi Viganò (SV)  (GOs wholly-owned Italian
retail subsidiary in Italy), were sold for a cash consideration of  50,355.
In the purchase price allocation, the fair value of these assets were
allocated to assets held for sale, and a deferred tax liability was provided
for the capital gain tax to be paid on the gain to be recognized for tax
purposes.

The allocation of the business costs of the acquisitions is summarized as
follows:

|                                                                                           |  |  |         |  
|------------------------------------------------------------------------------------------ |  |  | ------- | -
|Current assets, including cash                                                             |  |  | 16,533  |  
|Property, plant and equipment                                                              |  |  | 51,185  |  
|Intangibles                                                                                |  |  | 2,681   |  
|Assets held for sale                                                                       |  |  | 50,355  |  
|Other non current assets                                                                   |  |  | 1,531   |  
|Current liabilities                                                                        |  |  | (22,883 | )
|Long-term liabilities                                                                      |  |  | (5,933  | )
|Net deferred tax liabilities                                                               |  |  | (19,770 | )
|                                                                                           |  |  |         |  
|Fair value of net assets of entities acquired                                              |  |  | 73,699  |  
|Excess of cost of acquisitions over equity in fair value of net
assets acquired  Goodwill |  |  | 88,419  |  
|                                                                                           |  |  |         |  
|Cost of acquisition                                                                        |  |  | 162,118 |  
|                                                                                           |  |  |         |  
|Less cash acquired                                                                         |  |  | (6,333  | )
|                                                                                           |  |  |         |  
|Cash expenditure for the acquisition                                                       |  |  | 155,785 |  
|                                                                                           |  |  |         |  

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DE RIGO S.p.A. and SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(expressed in thousands of Euro (), except as otherwise indicated)
For the years ended December 31, 2000, 2001 and 2002

2001 Acquisitions

On January 31, 2001, September 11, 2001 and June 30, 2001 the Group acquired
the outstanding 45% and 2% minority interests of its subsidiaries De Rigo
France and Dierre and a 10% minority interest of De Rigo Deutschland for cash
consideration of  1,223,  2,503 and  256, respectively. The acquisitions
have been accounted for under the purchase method. Prior to the acquisitions of
these outstanding minority interests the Company was fully consolidating their
results. The excess of the purchase prices paid over the corresponding portion
of the fair values assigned to tangible and identifiable intangible assets less
the fair value assigned to liabilities assumed, amounted to  640,  218 and 
278, respectively, and has been allocated to goodwill, which is being amortized
over 5 years on a straight-line basis.

2002 Acquisitions and disposals

On June 25, 2002, the Group sold its 51% interest in Ranieri Argentina for a
cash consideration of  367 realizing a gain of  78. The recent economic
crisis in Argentina led the Group to divest its former distribution subsidiary
in that country.

On July 24, 2002, the Group acquired the outstanding 40% minority interests of
its subsidiary De Rigo Deutschland for cash consideration of  51. The
acquisition has been accounted for under the purchase method. Prior to the
acquisition of this outstanding minority interest the Company held 60% of the
outstanding shares and was fully consolidating its results. The excess of the
purchase prices paid over the corresponding portion of the fair values assigned
to tangible and identifiable intangible assets less the fair value assigned to
liabilities assumed, amounted to  401 and has been allocated to goodwill,
which is being amortized over 5 years on a straight-line basis.

4.     INVENTORIES

Inventories consisted of the following:

|                           |  |              |        |      |  |  |        | 
|-------------------------- |  | ------------ | ------ | ---- |  |  | ------ | 
|                           |  | December 31,
|                           |  |             
|                           |  | 2001         |        | 2002
|                           |  |              |        |     
|Raw materials and supplies |  |              | 10,362 |      |  |  | 11,586 | 
|Semi-finished goods        |  |              | 8,594  |      |  |  | 3,577  | 
|Finished goods             |  |              | 54,329 |      |  |  | 44,175 | 
|                           |  |              |        |      |  |  |        | 
|                           |  |              | 73,285 |      |  |  | 59,338 | 
|                           |  |              |        |      |  |  |        | 

Inventories are net of allowances for obsolete and slow moving items of 
18,909 and  21,927 at December 31, 2001 and 2002, respectively.

5.     PREPAID EXPENSES AND OTHER CURRENT ASSETS

Prepaid expenses and other current assets consisted of the following:

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DE RIGO S.p.A. and SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(expressed in thousands of Euro (), except as otherwise indicated)
For the years ended December 31, 2000, 2001 and 2002

|                                                                   |  |              |        |      |  |  |        | 
|------------------------------------------------------------------ |  | ------------ | ------ | ---- |  |  | ------ | 
|                                                                   |  | December 31,
|                                                                   |  |             
|                                                                   |  | 2001         |        | 2002
|                                                                   |  |              |        |     
|Prepaid shop rentals                                               |  |              | 4,695  |      |  |  | 4,855  | 
|Prepaid pension benefit costs (Note 12)                            |  |              | 5,647  |      |  |  | 2,152  | 
|Cash deposits held in escrow for payment of
note payable (Note 10) |  |              | 613    |      |  |  |       | 
|Value added tax receivable                                         |  |              | 5,613  |      |  |  | 3,799  | 
|Income tax receivable                                              |  |              | 3,557  |      |  |  | 5,251  | 
|Advances to suppliers and agents                                   |  |              | 947    |      |  |  | 1,076  | 
|Franchise prepayments                                              |  |              | 610    |      |  |  | 846    | 
|Prepaid taxes                                                      |  |              | 542    |      |  |  | 638    | 
|Other                                                              |  |              | 3,799  |      |  |  | 1,847  | 
|                                                                   |  |              |        |      |  |  |        | 
|                                                                   |  |              | 26,023 |      |  |  | 20,464 | 
|                                                                   |  |              |        |      |  |  |        | 

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DE RIGO S.p.A. and SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(expressed in thousands of Euro (), except as otherwise indicated)
For the years ended December 31, 2000, 2001 and 2002

6.     GOODWILL AND INTANGIBLE ASSETS

Goodwill and intangible assets consisted of the following:

|                                                                                           |                  |  |              |         |      |  |         |         | 
|------------------------------------------------------------------------------------------ | ---------------- |  | ------------ | ------- | ---- |  | ------- | ------- | 
|                                                                                           |                  |  | December 31,
|                                                                                           |                  |  |             
|                                                                                           |                  |  | 2001         |         | 2002
|                                                                                           |                  |  |              |         |     
|Goodwill, net of accumulated
amortization of  14,998 in 2001 and                          |                  |  |              |         |      |  |         |        
|                                                                                           |  20,241 in 2002 |  |              | 111,113 |      |  |         | 103,253 | 
|Trademarks, net of accumulated amortization
of  1,206 in 2001 and  1,808 in 2002         |                  |  | 5,479        |         |      |  | 4,918   |        
|Other intangibles, net of accumulated amortization
of  9,789 in 2001 and  11,661 in 2002 |                  |  | 7,023        |         |      |  | 6,536   |        
|                                                                                           |                  |  |              |         |      |  |         |        
|                                                                                           |                  |  | 123,615      |         |      |  | 114,707 |        
|                                                                                           |                  |  |              |         |      |  |         |        

In accordance with Italian tax law n. 448 dated December 28, 2001, at the end
of 2001, the Company revalued certain of its trademarks from  436 to  5,479.
This revaluation was subject to a tax in the amount of  958, which is
payable over three years. The carrying value of the trademark assets was
adjusted to the revalued amounts of  5,479, the amount of the revaluation was
credited to a separate component of shareholders equity (revaluation reserve)
net of the tax liability recognized that is attributable to the revaluation
reserve. No provision has been made for the tax to be paid upon distribution
of the revaluation reserve because management does not intend to distribute
the revaluation reserve arising from this revaluation.

7.     OTHER NON CURRENT ASSETS

Other non-current assets consisted of the following:

|                                                              |  |              |       |      |  |  |       | 
|------------------------------------------------------------- |  | ------------ | ----- | ---- |  |  | ----- | 
|                                                              |  | December 31,
|                                                              |  |             
|                                                              |  | 2001         |       | 2002
|                                                              |  |              |       |     
|Prepaid pension benefit costs (Note 12)                       |  |              | 1,775 |      |  |  | 2,644 | 
|Advance payment of withholding tax on termination
indemnities |  |              | 173   |      |  |  | 123   | 
|Income tax receivable                                         |  |              | 3,620 |      |  |  | 3,435 | 
|Deferred income taxes                                         |  |              | 429   |      |  |  | 536   | 
|Other                                                         |  |              | 1,377 |      |  |  | 1,222 | 
|                                                              |  |              |       |      |  |  |       | 
|                                                              |  |              | 7,374 |      |  |  | 7,960 | 
|                                                              |  |              |       |      |  |  |       | 

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DE RIGO S.p.A. and SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(expressed in thousands of Euro (), except as otherwise indicated)
For the years ended December 31, 2000, 2001 and 2002

8.     SHORT-TERM BANK BORROWINGS

Short-term bank borrowings consisted of:

|                                                           |  |              |        |      |  |  |        | 
|---------------------------------------------------------- |  | ------------ | ------ | ---- |  |  | ------ | 
|                                                           |  | December 31,
|                                                           |  |             
|                                                           |  | 2001         |        | 2002
|                                                           |  |              |        |     
|Borrowings under lines of credit payable on demand         |  |              | 48,268 |      |  |  | 85,180 | 
|Borrowings under lines of credit expiring within
18 months |  |              | 41,782 |      |  |  |       | 
|                                                           |  |              |        |      |  |  |        | 
|                                                           |  |              | 90,050 |      |  |  | 85,180 | 
|                                                           |  |              |        |      |  |  |        | 

Borrowings under lines of credit payable on demand

At December 31, 2001 and 2002, the Group had unsecured short-term bank lines
of credit aggregating approximately  99,677 and  167,324, respectively. At
December 31, 2001 and 2002, approximately  51,409 and  82,144, respectively,
were available for further borrowings. At December 31, 2001 and 2002, the
weighted average interest rates for the short-term lines of credit were 4.71%
and 3.99%, respectively. Amounts outstanding under these lines of credits are
payable upon demand.

Borrowings under credit agreements and lines of credit expiring within
eighteen months

During 2001, the credit facilities originally obtained to finance the
acquisitions of Vantios/D&A and General Optica International (GO) were
renegotiated. A portion of these credit facilities was converted into a line of
credit payable on demand and another portion was converted into lines of credit
expiring within 18 months. During 2002, the credit facilities
expiring within 18 months were transformed into lines of credit payable on demand.

9.     LONG-TERM DEBT

Long-term debt consists of the following:

|                                      |                                                                                                                                                                                                                    |  |              |     |      |  |  |   | 
|------------------------------------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ |  | ------------ | --- | ---- |  |  | - | 
|                                      |                                                                                                                                                                                                                    |  | December 31,
|                                      |                                                                                                                                                                                                                    |  |             
|                                      |                                                                                                                                                                                                                    |  | 2001         |     | 2002
|                                      |                                                                                                                                                                                                                    |  |              |     |     
|Subsidized by the Italian Government: |                                                                                                                                                                                                                    |  |              |     |      |  |  |  
|                                      | - Mortgage loan payable to bank, bearing
interest at an effective annual rate of 4.4%,
payable yearly through the year 2002,
subsidized under the Government program for
investment in the disaster area of Vajont |  |              | 345 |      |  |  |  | 

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##### Table of Contents



|                                                                                                         |                                                                                                                                                                                                                |  |              |     |      |  |      |     | 
|-------------------------------------------------------------------------------------------------------- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------ | --- | ---- |  | ---- | --- | 
|                                                                                                         |                                                                                                                                                                                                                |  | December 31,
|                                                                                                         |                                                                                                                                                                                                                |  |             
|                                                                                                         |                                                                                                                                                                                                                |  | 2001         |     | 2002
|                                                                                                         |                                                                                                                                                                                                                |  |              |     |     
|                                                                                                         | - Mortgage loan payable to bank, bearing
interest at an effective annual rate of 1.0875%
for first three year and 2.61% for remaining 10
years, payable yearly from the year 2003
through the year 2012        |  |              | 386 |      |  |      | 386 | 
|Subsidized by the European Investment Bank:                                                              |                                                                                                                                                                                                                |  |              |     |      |  |      |    
|                                                                                                         | - Mortgage loan payable to bank, bearing
variable interest at 3 month Euribor rate plus
1.00% differential payable yearly from 1998
through 2005 (4.26% and 3.88% at December 31,
2001 and 2002, respectively) |  |              | 387 |      |  |      | 290 | 
|Mortgage loan payable to banks bearing interest at
annual rates of 5% to 6%, due in installments to 2004 |                                                                                                                                                                                                                |  | 139          |     |      |  | 87   |    
|Mortgage loan payable to banks bearing interest at
annual rates of 5.20%, due in installments to 2004    |                                                                                                                                                                                                                |  |             |     |      |  | 151  |    
|                                                                                                         |                                                                                                                                                                                                                |  |              |     |      |  |      |    
|Total long-term debt                                                                                     |                                                                                                                                                                                                                |  | 1,257        |     |      |  | 914  |    
|Less: current portion                                                                                    |                                                                                                                                                                                                                |  | (493         | )   |      |  | (218 | )  
|                                                                                                         |                                                                                                                                                                                                                |  |              |     |      |  |      |    
|                                                                                                         |                                                                                                                                                                                                                |  | 764          |     |      |  | 696  |    
|                                                                                                         |                                                                                                                                                                                                                |  |              |     |      |  |      |    

The interest paid by the Italian Government amounted to  112,  45 and  26
in 2000, 2001 and 2002, respectively. These subsidies reduced the effective
interest rates applicable to these loans from 14.51% to 4.90% and from 14.4%
to 4.4%, respectively. The subsidy on the European Investment Bank loan
eliminates the 0.75% differential reducing the effective interest rate to the
3 month Euribor rate plus 0.25%.

The mortgage loans are secured by liens on property, plant and equipment that
have a carrying value of approximately  3,311 at December 31, 2002. The
maturities of long-term debt over the next five years as at December 31, 2002
are as follows:

|           |  |  |     | 
|---------- |  |  | --- | 
|2003       |  |  | 218 | 
|2004       |  |  | 204 | 
|2005       |  |  | 172 | 
|2006       |  |  | 76  | 
|2007       |  |  | 38  | 
|Thereafter |  |  | 206 | 
|           |  |  |     | 
|Total      |  |  | 914 | 
|           |  |  |     | 

10.     ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES

Accrued expenses and other current
liabilities consist of the following:

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DE RIGO S.p.A. and SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(expressed in thousands of Euro (), except as otherwise indicated)
For the years ended December 31, 2000, 2001 and 2002

|                                                           |                     |  |              |     |      |  |        |   | 
|---------------------------------------------------------- | ------------------- |  | ------------ | --- | ---- |  | ------ | - | 
|                                                           |                     |  | December 31,
|                                                           |                     |  |             
|                                                           |                     |  | 2001         |     | 2002
|                                                           |                     |  |              |     |     
|Salaries payable and related social security contributions |                     |  | 12,966       |     |      |  | 12,965 |  
|Employee taxes withheld                                    |                     |  | 3,140        |     |      |  | 3,493  |  
|Customer advances                                          |                     |  | 2,826        |     |      |  | 2,029  |  
|Property expense accruals                                  |                     |  | 773          |     |      |  | 1,093  |  
|VAT taxes payable                                          |                     |  | 2,477        |     |      |  | 2,515  |  
|Warranty provision                                         |                     |  | 1,901        |     |      |  | 708    |  
|Payables to sellers in respect of business acquisitions:   |                     |  |              |     |      |  |        |  
|                                                           | Ranieri acquisition |  |              | 613 |      |  |        |  | 
|Taxes on revaluation reserve                               |                     |  | 319          |     |      |  | 330    |  
|Other accrued expenses                                     |                     |  | 8,066        |     |      |  | 8,840  |  
|                                                           |                     |  |              |     |      |  |        |  
|                                                           |                     |  | 33,081       |     |      |  | 31,973 |  
|                                                           |                     |  |              |     |      |  |        |  

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DE RIGO S.p.A. and SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(expressed in thousands of Euro (), except as otherwise indicated)
For the years ended December 31, 2000, 2001 and 2002

11.     INCOME TAXES

Income before income taxes and the provision for income taxes consist of the
following:

|                            |                |       |       |        |         |      |       |        |        |   |    |        |        |  
|--------------------------- | -------------- | ----- | ----- | ------ | ------- | ---- | ----- | ------ | ------ | - | -- | ------ | ------ | -
|                            |                |       |       | 2000   |         | 2001 |       | 2002  
|                            |                |       |       |        |         |      |       |       
|Income before income taxes: |                |       |       |        |         |      |       |        |        |   |    |       
|                            | Italy          |       |       | 2,926  |         |      |       | 8,958  |        |   |    | 1,299  |       
|                            | United Kingdom |       |       | 10,100 |         |      |       | 13,167 |        |   |    | 2,072  |       
|                            | Spain          |       |       | 9,160  |         |      |       | 7,079  |        |   |    | 8,864  |       
|                            | Other          |       |       | (423   | )       |      |       | (2,004 | )      |   |    | (2,466 | )     
|                            |                |       |       |        |         |      |       |        |        |   |    |       
|                            |                | Total |       |        | 21,763  |      |       |        | 27,200 |   |    |        | 9,769  |  
|                            |                |       |       |        |         |      |       |        |        |   |    |       
|Provision for income taxes: |                |       |       |        |         |      |       |        |        |   |    |       
|Current:                    |                |       |       |        |         |      |       |        |        |   |    |       
|                            | Italy          |       |       | 939    |         |      |       | (599   | )      |   |    | 1,749  |       
|                            | United Kingdom |       |       | 2,971  |         |      |       | 3,622  |        |   |    | 1,764  |       
|                            | Spain          |       |       | 12,940 |         |      |       | 6,437  |        |   |    | 4,459  |       
|                            | Other          |       |       | 432    |         |      |       | 411    |        |   |    | 553    |       
|                            |                |       |       |        |         |      |       |        |        |   |    |       
|                            |                | Total |       |        | 17,282  |      |       |        | 9,871  |   |    |        | 8,525  |  
|Deferred:                   |                |       |       |        |         |      |       |        |        |   |    |       
|                            | Italy          |       |       | (2,303 | )       |      |       | (1,670 | )      |   |    | (8,014 | )     
|                            | United Kingdom |       |       | 1,252  |         |      |       | 1,294  |        |   |    | (153   | )     
|                            | Spain          |       |       | (9,139 | )       |      |       | (3,099 | )      |   |    | (311   | )     
|                            | Other          |       |       | (197   | )       |      |       | 155    |        |   |    | (1     | )     
|                            |                |       |       |        |         |      |       |        |        |   |    |       
|                            |                | Total |       |        | (10,387 | )    |       |        | (3,320 | ) |    |        | (8,479 | )
|                            |                |       |       |        |         |      |       |        |        |   |    |       
|Total tax provision         |                |       | 6,895 |        |         |      | 6,551 |        |        |   | 46 |       
|                            |                |       |       |        |         |      |       |        |        |   |    |       

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DE RIGO S.p.A. and SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(expressed in thousands of Euro (), except as otherwise indicated)
For the years ended December 31, 2000, 2001 and 2002

A reconciliation between the Italian statutory tax rates and the consolidated
effective tax rates is as follows:

|                                                                              |                           |                                         |        |      |     |      |        |      |        |   |       |        |       |  
|----------------------------------------------------------------------------- | ------------------------- | --------------------------------------- | ------ | ---- | --- | ---- | ------ | ---- | ------ | - | ----- | ------ | ----- | -
|                                                                              |                           |                                         |        | 2000 |     | 2001 |        | 2002
|                                                                              |                           |                                         |        |      |     |      |        |     
|Tax @ Italian statutory rate of 41.25% in 2000 and
40.25% in 2001 and 2002    |                           |                                         | 8,977  |      |     |      | 10,948 |      |        |   | 3,932 |       
|Tax savings from Italian subsidiaries operating in a tax
exempt area          |                           |                                         | (3,132 | )    |     |      | (3,816 | )    |        |   | (1    | )     
|Investment tax credit and deductions                                          |                           |                                         |        |      |     |      | (209   | )    |        |   | (245  | )     
|Italian gains on business disposal                                            |                           |                                         |       |      |     |      |       |      |        |   | (123  | )     
|Effect of a change in tax rate:                                               |                           |                                         |        |      |     |      |        |      |        |   |       |       
|                                                                              | - in Italy                |                                         |        | 61   |     |      |        |     |        |   |       | (7,042 | )    
|                                                                              | - Italian Dual Income Tax |                                         |        |     |     |      |        | (801 | )      |   |       |       |      
|                                                                              | - other countries         |                                         |        |     |     |      |        |     |        |   |       | 16     |      
|Effect of different tax rates of foreign jurisdictions                        |                           |                                         | (2,525 | )    |     |      | (2,202 | )    |        |   | (785  | )     
|Tax benefit of NOLs of subsidiaries not recognized                           |                           |                                         | 183    |      |     |      | 1,348  |      |        |   | 1,026 |       
|Amortization of goodwill                                                      |                           |                                         | 2,417  |      |     |      | 2,380  |      |        |   | 2,384 |       
|Effect of tax provision on distribution of dividend from
foreign subsidiaries |                           |                                         | 132    |      |     |      | 218    |      |        |   |      |       
|Other permanent differences:                                                  |                           |                                         |        |      |     |      |        |      |        |   |       |       
|                                                                              | - Italy                   |                                         |        |      |     |      |        |      |        |   |       |        |      
|                                                                              |                           | IRPEG                                   |        |      | (12 | )    |        |      | (1,953 | ) |       |        | (459  | )
|                                                                              |                           | IRAP  (primarily payroll and interest) |        |      | 794 |      |        |      | 915    |   |       |        | 1,413 |  
|                                                                              | - Other countries         |                                         |        |     |     |      |        | (277 | )      |   |       | (70    | )    
|                                                                              |                           |                                         |        |      |     |      |        |      |        |   |       |       
|Provision for income taxes                                                    |                           |                                         | 6,895  |      |     |      | 6,551  |      |        |   | 46    |       
|                                                                              |                           |                                         |        |      |     |      |        |      |        |   |       |       
|Effective consolidated tax rate                                               |                           |                                         | 31.7   | %    |     |      | 24,1   | %    |        |   | 0.5   | %     
|                                                                              |                           |                                         |        |      |     |      |        |      |        |   |       |       

The Italian statutory tax rate for 2000 was 41.25%, comprised of a 37%
national corporate income tax (IRPEG) and a 4.25% Regional Tax on Productive
Activities (IRAP). A new tax law was enacted in December 2000 to be
effective January 1, 2001 with the effect of reducing the IRPEG tax rate from
37% to 36% for the years 2001 and 2002 and from January 1, 2003 to reduce the
tax rate to 35%. In 2002, a new tax law was approved with the effect of
reducing the IRPEG tax rate for 2003 to 34%.

The Company decreased its Italian deferred tax assets and liabilities as of
December 31, 2000 to reflect the change in the tax law enacted in December 2000
and 2002. The effect of applying the enacted tax rates in 2000 to existing
temporary differences was to increase income tax expense by  61. In 2002, the
Company recognized, as a change in tax rate, deferred taxes on temporary
differences of the tax exempt companies.

The 2001 Italian investment tax incentive law was enacted in order to encourage
capital investments and other expenditures in Italy. Companies are able to
reduce their taxable income by up to 50% of the excess of new qualifying
capital and other expenditures made in the second half of 2001 and in the year
2002 in fixed assets (tangibles and specified intangibles) over the average of
the investments made in such assets during the five prior years. The incentive
law also applies to certain expenses incurred in connection with the training
of the companies

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DE RIGO S.p.A. and SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(expressed in thousands of Euro (), except as otherwise indicated)
For the years ended December 31, 2000, 2001 and 2002

personnel. The incentive results in a current one time deduction and neither
increases nor decreases the tax bases of the assets to compute future tax
deductions for depreciation and amortization relating to investment deductions
granted. As a result, in 2001 and 2002 the Company recognized a benefit from
the investment deductions of  209 and  245, respectively.

In accordance with a law decree enacted in 1997 to foster the capitalization of
the companies, the Dual Income Tax (DIT) was introduced. In accordance with
such law decree, a portion of the Companys taxable income that is subject to
IRPEG taxes was taxable at the reduced rate of 19% instead of the enacted IRPEG
rates reported above. Such portion of the taxable income amounting to  4,711
in the year 2001 was computed applying a specific interest rate, fixed by the
Government and equal to 6%, to the net increase in the Companys net equity
occurred from December 31, 1996 to December 31, 2001. The Company decreased its
current taxes for the application of DIT by  801 in 2001. Deferred taxes on
temporary differences at December 31, 2002 and 2001 are accounted for at the
tax rate expected to occur in the year of reversal, taking into consideration
the enacted IRPEG rates, the expected applicable effect of the DIT benefit and
the enacted IRAP tax rate.

Two subsidiaries of the Company that operate in the Longarone area are
entitled to income tax exemptions from both national corporate income taxes
and local income taxes under the Vajont Relief Program that the Italian
Government implemented under an incentive program for the Longarone area as
part of a package of relief measures after the Vajont dam catastrophe in 1963.
One of the exemptions expired in September 2001 and the other will expire in
April 2003.

Tax years for the constituent companies in the Group are open from 1996 and
are subject to review by the pertinent tax authorities. Management and its
legal advisors do not believe that any significant liabilities will arise from
future tax reviews.

12.     EMPLOYEE BENEFITS

Italian companies in the Group recognized employee benefit costs in accordance
with Italian severance pay statutes and certain foreign subsidiaries
recognized pension costs related to their pension plans. The total expense
for employee benefits recognized for each of the three years in the period
ended December 31, 2002 are summarized as follows:

|                                                 |  |      |       |      |  |      |       |  |  |  |       | 
|------------------------------------------------ |  | ---- | ----- | ---- |  | ---- | ----- |  |  |  | ----- | 
|                                                 |  | 2000 |       | 2001 |  | 2002
|                                                 |  |      |       |      |  |     
|Italian termination indemnities                  |  |      | 1,108 |      |  |      | 1,323 |  |  |  | 1,437 | 
|Defined benefit plan of Vantios/D&A              |  |      | 2,953 |      |  |      | 2,733 |  |  |  | 5,407 | 
|Defined benefit plans of GO                      |  |      | 212   |      |  |      | 437   |  |  |  | 257   | 
|Defined benefit plan of other countries          |  |      | 68    |      |  |      | 358   |  |  |  | 197   | 
|Defined contribution plans of Vantios/D&A and GO |  |      | 766   |      |  |      | 804   |  |  |  | 805   | 
|                                                 |  |      |       |      |  |      |       |  |  |  |       | 
|                                                 |  |      | 5,107 |      |  |      | 5,655 |  |  |  | 8,103 | 
|                                                 |  |      |       |      |  |      |       |  |  |  |       | 

The liabilities reported in the balance sheet at December 31, 2001 and 2002
pertaining to these employee benefits are summarized as follows:

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DE RIGO S.p.A. and SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(expressed in thousands of Euro (), except as otherwise indicated)
For the years ended December 31, 2000, 2001 and 2002

|                                         |  |      |       |      |  |  |       | 
|---------------------------------------- |  | ---- | ----- | ---- |  |  | ----- | 
|                                         |  | 2001 |       | 2002
|                                         |  |      |       |     
|Italian termination indemnities          |  |      | 4,775 |      |  |  | 5,681 | 
|Defined benefit plans of GO              |  |      | 3,475 |      |  |  | 2,653 | 
|Defined benefit plans of other countries |  |      | 454   |      |  |  | 592   | 
|                                         |  |      |       |      |  |  |       | 
|                                         |  |      | 8,704 |      |  |  | 8,926 | 
|                                         |  |      |       |      |  |  |       | 

Additional information with respect to the Italian termination indemnities and
pension plans of companies within the Group is provided below:

Liabilities for Italian Termination Indemnities

The liability for termination indemnities relates to the Companys employees
at its Italian operations. In accordance with the Italian severance pay
statutes, an employee benefit is accrued for service to date and is payable
immediately upon separation. The termination indemnity liability is
calculated in accordance with local civil and labor laws based on each
employees length of service, employment category and remuneration. The
termination liability is adjusted annually by a cost of living index provided
by the Italian Government. There is no funding requirement associated with
the liability. The liability recorded in the balance sheet is the amount that
the employee would be entitled to if the employee separates immediately. The
provisions charged to earnings for 2000, 2001 and 2002 were  1,108,  1,323
and  1,437, respectively.

Defined Benefit and Pension plans

Vantios/D&A, an entity acquired on December 2, 1998, has a defined benefit
pension plan covering substantially all of its employees that is funded. The
benefits are based on years of service and the employees compensation during
a period up to the last seven years of employment. Contributions are intended
to provide not only for benefits attributed to service to date but also for
those expected to be earned in the future. At the date of acquisition the
projected benefit obligation for service rendered to date and the value of the
plan assets were stated at fair value and the amount of plan assets in excess
of the projected benefit obligation was recorded as a prepaid pension cost.

The following tables summarize the components of net benefit expense
recognized in the consolidated income statement for the year ended December
31, 2000, 2001 and 2002 and the funded status and amounts recognized in the
consolidated balance sheets at December 31, 2001 and 2002.

Components of net periodic benefit cost for years ended December 31, are as
follows:

|                                                      |  |      |         |      |  |      |         |   |  |  |        |  
|----------------------------------------------------- |  | ---- | ------- | ---- |  | ---- | ------- | - |  |  | ------ | -
|                                                      |  | 2000 |         | 2001 |  | 2002
|                                                      |  |      |         |      |  |     
|Service benefit-cost: benefits earned during the year |  |      | 4,922   |      |  |      | 4,824   |   |  |  | 5,089  |  
|Interest cost on projected benefit obligation         |  |      | 8,860   |      |  |      | 8,522   |   |  |  | 9,383  |  
|Expected return on plan assets                        |  |      | (10,829 | )    |  |      | (10,613 | ) |  |  | (9,860 | )
|Amortization of unrecognized gain/loss                |  |      |        |      |  |      |        |   |  |  | 795    |  
|                                                      |  |      |         |      |  |      |         |   |  |  |        |  
|Net periodic benefit cost                             |  |      | 2,953   |      |  |      | 2,733   |   |  |  | 5,407  |  
|                                                      |  |      |         |      |  |      |         |   |  |  |        |  

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DE RIGO S.p.A. and SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(expressed in thousands of Euro (), except as otherwise indicated)
For the years ended December 31, 2000, 2001 and 2002

The cost of providing benefits under the plan is determined using the
projected unit credit actuarial valuation method. The principal weighted
average assumptions used in making the actuarial valuations are as follows:

|                               |  |      |      |      |  |      |      |   |  |  |      |  
|------------------------------ |  | ---- | ---- | ---- |  | ---- | ---- | - |  |  | ---- | -
|                               |  | 2000 |      | 2001 |  | 2002
|                               |  |      |      |      |  |     
|Discount rate                  |  |      | 5.75 | %    |  |      | 6.00 | % |  |  | 5.75 | %
|Expected return on plan assets |  |      | 6.75 | %    |  |      | 7.00 | % |  |  | 6.50 | %
|Rate of compensation increase  |  |      | 4.00 | %    |  |      | 3.50 | % |  |  | 3.30 | %

Funded status of the pension plan is as presented in the tables below:

|                                                                                  |                                         |  |              |         |      |  |         |         |  
|--------------------------------------------------------------------------------- | --------------------------------------- |  | ------------ | ------- | ---- |  | ------- | ------- | -
|                                                                                  |                                         |  | December 31,
|                                                                                  |                                         |  |             
|                                                                                  |                                         |  | 2001         |         | 2002
|                                                                                  |                                         |  |              |         |     
|Accumulated benefit obligation                                                    |                                         |  | 144,125      |         |      |  | 141,122 |        
|Fair value of plan assets                                                         |                                         |  | 144,782      |         |      |  | 123,751 |        
|                                                                                  |                                         |  |              |         |      |  |         |        
|Excess (deficit) of fair value of plan assets over accumulated
benefit obligation |                                         |  | 657          |         |      |  | (17,371 | )      
|                                                                                  |                                         |  |              |         |      |  |         |        
|Changes in projected benefit obligation                                           |                                         |  |              |         |      |  |         |        
|                                                                                  | At beginning of year                    |  |              | 145,490 |      |  |         | 162,366 |  
|                                                                                  | Service cost                            |  |              | 4,824   |      |  |         | 5,089   |  
|                                                                                  | Interest cost                           |  |              | 8,522   |      |  |         | 9,383   |  
|                                                                                  | Plan participants contributions        |  |              | 1,801   |      |  |         | 1,574   |  
|                                                                                  | Actuarial gain                          |  |              | 1,442   |      |  |         | (4,071  | )
|                                                                                  | Benefits paid                           |  |              | (3,714  | )    |  |         | (3,865  | )
|                                                                                  | Foreign currency translation adjustment |  |              | 4,001   |      |  |         | (10,753 | )
|                                                                                  |                                         |  |              |         |      |  |         |        
|                                                                                  | Benefits obligation at the end of year  |  |              | 162,366 |      |  |         | 159,723 |  
|                                                                                  |                                         |  |              |         |      |  |         |        

Change in plan assets

(invested primarily in United Kingdom stocks and bonds)

|                                               |  |      |         |      |  |  |         |  
|---------------------------------------------- |  | ---- | ------- | ---- |  |  | ------- | -
|                                               |  | 2001 |         | 2002
|                                               |  |      |         |     
|Fair value of plan assets at beginning of year |  |      | 154,783 |      |  |  | 144,782 |  
|Actual returns on assets  gain (loss)         |  |      | (15,340 | )    |  |  | (12,961 | )
|Companys contributions                        |  |      | 3,586   |      |  |  | 3,165   |  
|Plan participants contributions               |  |      | 1,801   |      |  |  | 1,574   |  
|Benefits paid                                  |  |      | (3,714  | )    |  |  | (3,865  | )
|Foreign currency translation adjustments       |  |      | 3,666   |      |  |  | (8,944  | )
|                                               |  |      |         |      |  |  |         |  
|Fair value of plan assets at end of year       |  |      | 144,782 |      |  |  | 123,751 |  
|                                               |  |      |         |      |  |  |         |  

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##### Table of Contents



DE RIGO S.p.A. and SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(expressed in thousands of Euro (), except as otherwise indicated)
For the years ended December 31, 2000, 2001 and 2002

|                                                     |                                                             |  |         |        |  |  |         |        |  
|---------------------------------------------------- | ----------------------------------------------------------- |  | ------- | ------ |  |  | ------- | ------ | -
|Funded status of the plan over-funded (under-funded) |                                                             |  | (17,584 | )      |  |  | (35,972 | )     
|                                                     | Unrecognized actuarial (gain) loss on return on
plan assets |  |         | 23,123 |  |  |         | 44,735 |  
|                                                     | Unrecognized actuarial gain in benefit obligations          |  |         | 1,442  |  |  |         | (3,935 | )
|                                                     | Foreign currency translation adjustments                    |  |         | 441    |  |  |         | (32    | )
|                                                     |                                                             |  |         |        |  |  |         |       
|Prepaid benefit cost                                 |                                                             |  | 7,422   |        |  |  | 4,796   |       
|                                                     |                                                             |  |         |        |  |  |         |       

The amount of the prepaid benefit cost has been classified in the consolidated
balance sheets at December 31, 2001 and 2002 as: prepaid current asset of 
5,647 and  2,152, respectively, and non-current asset of  1,775 and  2,644,
respectively. The prepaid benefit costs will be realized through lower future
contributions as differences occur between the funding and expensing of the
pension plan, or as a result of a combination of these events.

GO, an entity acquired in 2000, has defined benefit plans covering certain
executives that are not funded at December 31, 2002. The present value of the
benefit obligations at December 31, 2001 and 2002 was  3,475 and  2,653,
respectively. The net benefit costs accrued in 2001 and 2002 were  437 and 
257, respectively and the benefits paid in 2001 and 2002 were  316 and 
1,079, respectively. The principal weighted average assumptions used in making
the actuarial valuations at December 31, 2001 and 2002 were a discount rate of
5% for both 2001 and 2002 and rate of compensation increase of 3.5% for 2001
and 2.5% for 2002.

Defined Contribution Plans

Vantios/D&A and GO make contributions to defined contribution plans that are
based on a percentage of employee compensation. The amounts of pension
expense recognized for those plans in 2000, 2001, and 2002 were  766,  804
and  805, respectively.

13. STOCK OPTIONS

At an extraordinary shareholders meeting held on May 4, 1999 the Board of
Directors was authorized to grant stock options for 2,325,000 shares to
certain key employees, and the Board was also authorized to increase the
Companys authorized and issued share capital by up to 2,600,000 shares in the
event such options were exercised. During 1999 the Board granted options for
2,325,000 shares with an exercise price of U.S.$ 6.00 per share, which was
slightly more than the fair market price of the shares on the date of the
grant of the options. During 1999, options for 250,000 shares lapsed due to
employee resignations. At December 31, 1999 the 2,075,000 options granted and
outstanding were exercisable from 2000 through 2003.

At an extraordinary shareholders meeting held on November 17, 2000 a new
stock option plan was approved to replace the plan implemented in 1999. The
option holders in that plan all accepted conversion to the plan approved in
the year 2000. Between January 1, 2000 and November 17, 2000, 225,000 options
lapsed due to employee resignations, leaving options for 1,850,000 shares
outstanding as of November 17, 2000. Under the terms of the new plan 851,000
options were granted (the 1,850,000 existing options were converted in the
ratio of .46 new options for each option held) at an exercise price of U.S$
1.00 per share, which was less than the fair value of the stock at the grant
date, and the life of the awards was extended by one year. Also, on November
17, 2000, an additional 348,400 options were granted at an exercise price of
U.S.$ 1.00 per share. At the same

F - 23



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##### Table of Contents



DE RIGO S.p.A. and SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(expressed in thousands of Euro (), except as otherwise indicated)
For the years ended December 31, 2000, 2001 and 2002

shareholders meeting the authorized share
capital increase was reduced to 1,300,000 shares. In 2002 no additional
options were granted, 62,852 options were exercised and 73,664 options were forfeited. At
December 31, 2002 there were 846,621 options outstanding, which are
exercisable as indicated in the following table:

|      |  |                  |         | 
|----- |  | ---------------- | ------- | 
|Year  |  | Number of shares
|      |  |                 
|2003  |  |                  | 583,121 | 
|2004  |  |                  | 263,500 | 
|      |  |                  |         | 
|Total |  |                  | 846,621 | 
|      |  |                  |         | 

The maximum number of options set forth in the above schedule may be exercised
if the Companys stock reaches more than U.S.$ 10.00. If the stock price
during the exercise period falls between $ 6.25 and $ 10.00 per share 20% to
90% may be exercised and none of the options may be exercised in the period in
the event the share price is below U.S.$ 6.25. Any options not exercised in
any year may be carried forward and exercised in a subsequent year providing
the stock price recovers. All options must be exercised by the end of the
year 2004.

14. OTHER NON-CURRENT LIABILITIES

Other non-current liabilities consisted of the following:

|                                                                                                                                            |  |              |        |      |  |  |       | 
|------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------ | ------ | ---- |  |  | ----- | 
|                                                                                                                                            |  | December 31,
|                                                                                                                                            |  |             
|                                                                                                                                            |  | 2001         |        | 2002
|                                                                                                                                            |  |              |        |     
|Minority interests                                                                                                                          |  |              | 2,363  |      |  |  | 1,329 | 
|Accrual for expected losses on contractual obligation
for shops of a subsidiary that were closed and
non-operating prior to its acquisition |  |              | 3,753  |      |  |  | 3,058 | 
|Tax on revaluation of trademarks reserve                                                                                                    |  |              | 639    |      |  |  | 330   | 
|Agents termination indemnity                                                                                                                |  |              | 1,132  |      |  |  | 1,322 | 
|Other                                                                                                                                       |  |              | 3,990  |      |  |  | 2,469 | 
|                                                                                                                                            |  |              |        |      |  |  |       | 
|                                                                                                                                            |  |              | 11,877 |      |  |  | 8,508 | 
|                                                                                                                                            |  |              |        |      |  |  |       | 

15. SHAREHOLDERS EQUITY

Italian law requires that 5% of a companys net income be retained as a legal
reserve, until such reserve equals 20% of share capital. Included in retained
earnings are legal reserves of  2,213 and  2,391 at December 31, 2001 and
2002, respectively, pertaining to the Groups Italian companies. This reserve
is not available for distribution.

Retained earnings which could be available for distribution to shareholders
are those recorded by the Groups constituent companies in their individual
financial statements. Such retained earnings amount in aggregate to  212,124
and  234,629 at December 31, 2001 and 2002, respectively.

F - 24



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##### Table of Contents



DE RIGO S.p.A. and SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(expressed in thousands of Euro (), except as otherwise indicated)
For the years ended December 31, 2000, 2001 and 2002

No provision has been made in 2001 for income taxes on the following components of
shareholders equity related to undistributed earnings of Italian
companies merged into De Rigo S.p.A. effective from January 1,
2002:



|a. |  | Undistributed earnings of taxable
Italian subsidiaries, amounting to
 324 because tax credits arising from income taxes paid by the
subsidiaries will be utilized to offset any tax payable when
dividends are distributed.                                                                                                                                                                                               
|-- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|b. |  | Undistributed earnings of
tax-exempt Italian subsidiaries, amounting to
 81,861 are not
subject to taxation in case of distribution as the companies have
paid the substitute equalization tax of 5.6% which has freed these
reserves.                                                                                                                                                                                    
|  
|c. |  | Undistributed earnings of
tax-exempt Italian subsidiaries, amounting to
 26,598 that would
be subject to taxes of
 9,571 in case of
distribution; no taxes have been provided because it is the
Companys policy to recognize any tax to be paid as an expense
in the period in which the dividend distribution is made.
Additionally, it is not managements intent to pay any dividends
from these tax exempt earnings.

No provision has been made in 2001 and
2002 for income taxes on the following components of
shareholders equity:



|a. |  | Revaluation reserve not affected
by the equalization tax amounting to
 952 that would be
subject to taxes of
 343, since no
provision is required under current Italian GAAP.                                                                                                                                                                                                                                                                    
|-- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|b. |  | Undistributed earnings of
Spanish subsidiaries, amounting to
 7,187 and
 15,906 in
2001 and 2002, respectively, would be subject to taxes of
 335 and
 625 in 2001
and 2002, respectively, in case of distribution and undistributed
earnings of British subsidiaries, amounting to
 46,417 and
 57,841 in
2001 and 2002, respectively, would be subject to taxes of
 836 and
 983 in 2001
and 2002, respectively, in case of distribution.

16. COMMITMENTS AND CONTINGENCIES

Lease commitments

Vantios/D&A leases property, computer hardware and cars and GO leases property
under non-cancellable operating leases. Other lease commitments relate to the
rental of buildings by the distribution subsidiaries. Rental expense for the
years 2000, 2001 and 2002 amounted to approximately  28,459,  25,610 and 
26,316, respectively. At December 31, 2002 the future lease payments under
such operating leases are as follows:

|           |  |             |         |    |  |       |        |       |  |  |       |  |  |  |         | 
|---------- |  | ----------- | ------- | -- |  | ----- | ------ | ----- |  |  | ----- |  |  |  | ------- | 
|Year       |  | Vantios/D&A |         | GO |  | Other |        | Total
|           |  |             |         |    |  |       |        |      
|2003       |  |             | 21,972  |    |  |       | 4,360  |       |  |  | 906   |  |  |  | 27,238  | 
|2004       |  |             | 21,677  |    |  |       | 3,817  |       |  |  | 774   |  |  |  | 26,268  | 
|2005       |  |             | 19,589  |    |  |       | 3,231  |       |  |  | 773   |  |  |  | 23,593  | 
|2006       |  |             | 18,057  |    |  |       | 2,554  |       |  |  | 764   |  |  |  | 21,375  | 
|2007       |  |             | 16,490  |    |  |       | 1,927  |       |  |  | 433   |  |  |  | 18,850  | 
|Thereafter |  |             | 65,054  |    |  |       | 3,621  |       |  |  | 90    |  |  |  | 68,765  | 
|           |  |             |         |    |  |       |        |       |  |  |       |  |  |  |         | 
|Total      |  |             | 162,839 |    |  |       | 19,510 |       |  |  | 3,740 |  |  |  | 186,089 | 
|           |  |             |         |    |  |       |        |       |  |  |       |  |  |  |         | 

Royalty Agreements

The Group has agreements with certain designers for the use of their
trademarks in the production of fashion eyewear. Such agreements require the
Company to pay royalties at various percentages of net sales and in one case a
flat fee. Certain royalty agreements expire in 2003, 2004, 2005 and 2006.
Others are renewable at the option of either party.

Royalty expenses were  4,901,  6,838 and  7,410 in 2000, 2001 and 2002,
respectively.

The future minimum payments for royalties and advertising expenses as stated
in royalties contracts are the following:

|      |  |           |        |             |  |  |       | 
|----- |  | --------- | ------ | ----------- |  |  | ----- | 
|Year  |  | Royalties |        | Advertising
|      |  |           |        |            
|2003  |  |           | 3,487  |             |  |  | 2,358 | 
|2004  |  |           | 3,668  |             |  |  | 1,441 | 
|2005  |  |           | 2,567  |             |  |  | 1,456 | 
|2006  |  |           | 1,033  |             |  |  | 376   | 
|      |  |           |        |             |  |  |       | 
|Total |  |           | 10,755 |             |  |  | 5,631 | 
|      |  |           |        |             |  |  |       | 

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DE RIGO S.p.A. and SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(expressed in thousands of Euro (), except as otherwise indicated)
For the years ended December 31, 2000, 2001 and 2002

Sponsorship agreements




The Group has agreements with soccer
players, expiring in 2003. The
future minimum payments on those contracts in effect at December 31, 2002
amount to  78.




Litigation

The Company is involved in legal proceedings arising in the normal course of
business. Management believes that, based on advice of legal counsel, the
outcome of these proceedings will not have any material adverse effect on the
Companys financial statements.

17. SEGMENT INFORMATION

The Companys business consists of designing, manufacturing, distributing and
selling premium price sunglasses and prescription eyeglass frames and lenses.
Prior to its acquisition of Vantios in the United Kingdom at the end of 1998
and General Optica in 2000, the Company was not engaged in retailing activities
and until 2001 it managed its business through individual companies on a
geographic basis. In 2001, the Company formalized the change in its management
to manage its business through three business divisions. For comparative
analysis purposes, the Company is presenting its segment information for 2000
on the basis of the business divisions used in presenting the segment
information for 2001 and 2002.

Management utilizes more than one measurement and multiple types of data to
measure segment performance and to allocate resources to business divisions.
However, the most heavily relied upon measurements are consistent with the
Companys consolidated financial statements and, accordingly, are reported on
the same basis herein. Management evaluates the performance of its segments
and allocates resources to them based primarily on actual and expected
operating profitability. Intersegment sales are generally accounted for at
prices comparable to those for sales to unaffiliated customers, and are
eliminated in consolidation. The accounting policies of the segments are
substantially the same as those described in the summary of significant
accounting policies described in Note 2.

Certain items relate to the Companys headquarters operations and are not
allocated to the segments. These primarily include the net cost of the
Companys interest expense and other items. Management views interest income
and expense as corporate financing costs and not as a cost of a particular
business segment. In addition, income taxes are not viewed internally on a
segment basis but rather as a cost of the taxing jurisdiction in which the
relevant individual companies operate.

Wholesale and manufacturing:the Company distributes its manufactured products
through its network of sales representatives in Italy and the countries in
which its distribution subsidiaries are based, through independent
distributors, and through the D&A and General Optica retail stores in the
United Kingdom, Spain and Portugal.

Retailing:the Companys retailing segment consists of the optical chains D&A
and General Optica, which are located in the United Kingdom and Spain and
Portugal, respectively.

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DE RIGO S.p.A. and SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(expressed in thousands of Euro (), except as otherwise indicated)
For the years ended December 31, 2000, 2001 and 2002

EID:The Companys EID segment distributes Prada-branded eyewear exclusively
through a network of joint venture subsidiaries with Prada.

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DE RIGO S.p.A. and SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(expressed in thousands of Euro (), except as otherwise indicated)
For the years ended December 31, 2000, 2001 and 2002

|                                                            |  |               |         |           |  |     |         |       |  |  |        |  |  |  |         | 
|----------------------------------------------------------- |  | ------------- | ------- | --------- |  | --- | ------- | ----- |  |  | ------ |  |  |  | ------- | 
|                                                            |  | Wholesale and |         |           |  |     |         |       |  |  |        |  |  | 
|2000                                                        |  | Manufacturing |         | Retailing |  | EID |         | Total
|                                                            |  |               |         |           |  |     |         |      
|Sales to third parties                                      |  |               | 93,076  |           |  |     | 340,085 |       |  |  | 23,441 |  |  |  | 456,602 | 
|                                                            |  |               |         |           |  |     |         |       |  |  |        |  |  |  |         | 
|Intersegment sales                                          |  |               | 12,045  |           |  |     |        |       |  |  | 136    |  |  |  | 12,181  | 
|                                                            |  |               |         |           |  |     |         |       |  |  |        |  |  |  |         | 
|Income from operations before
depreciation and amortization |  |               | 12,219  |           |  |     | 36,666  |       |  |  | 1,725  |  |  |  | 50,610  | 
|Depreciation                                                |  |               | 3,348   |           |  |     | 13,658  |       |  |  | 1,008  |  |  |  | 18,014  | 
|Amortization of goodwill                                    |  |               | 585     |           |  |     | 5,774   |       |  |  |       |  |  |  | 6,359   | 
|Amortization of other intangibles                           |  |               | 592     |           |  |     | 1,761   |       |  |  | 202    |  |  |  | 2,555   | 
|                                                            |  |               |         |           |  |     |         |       |  |  |        |  |  |  |         | 
|Income (loss) from operations                               |  |               | 7,694   |           |  |     | 15,473  |       |  |  | 515    |  |  |  | 23,682  | 
|                                                            |  |               |         |           |  |     |         |       |  |  |        |  |  |  |         | 
|Identifiable long-lived assets                              |  |               | 19,701  |           |  |     | 231,253 |       |  |  | 2,571  |  |  |  | 253,525 | 
|                                                            |  |               |         |           |  |     |         |       |  |  |        |  |  |  |         | 
|Total assets                                                |  |               | 122,523 |           |  |     | 284,992 |       |  |  | 13,287 |  |  |  | 420,802 | 
|                                                            |  |               |         |           |  |     |         |       |  |  |        |  |  |  |         | 
|Capital expenditures and acquisitions                       |  |               | 2,988   |           |  |     | 178,293 |       |  |  | 2,692  |  |  |  | 183,973 | 
|                                                            |  |               |         |           |  |     |         |       |  |  |        |  |  |  |         | 

|                                                            |  |               |         |           |  |     |         |       |  |  |        |  |  |  |         | 
|----------------------------------------------------------- |  | ------------- | ------- | --------- |  | --- | ------- | ----- |  |  | ------ |  |  |  | ------- | 
|                                                            |  | Wholesale and |         |           |  |     |         |       |  |  |        |  |  | 
|2001                                                        |  | Manufacturing |         | Retailing |  | EID |         | Total
|                                                            |  |               |         |           |  |     |         |      
|Sales to third parties                                      |  |               | 114,920 |           |  |     | 358,349 |       |  |  | 31,981 |  |  |  | 505,250 | 
|                                                            |  |               |         |           |  |     |         |       |  |  |        |  |  |  |         | 
|Intersegment sales                                          |  |               | 18,267  |           |  |     | 16      |       |  |  | 137    |  |  |  | 18,420  | 
|                                                            |  |               |         |           |  |     |         |       |  |  |        |  |  |  |         | 
|Income from operations before
depreciation and amortization |  |               | 16,008  |           |  |     | 40,846  |       |  |  | 2,044  |  |  |  | 58,898  | 
|Depreciation                                                |  |               | 3,339   |           |  |     | 14,042  |       |  |  | 1,448  |  |  |  | 18,829  | 
|Amortization of goodwill                                    |  |               | 261     |           |  |     | 6,156   |       |  |  |       |  |  |  | 6,417   | 
|Amortization of other intangibles                           |  |               | 598     |           |  |     | 1,789   |       |  |  | 205    |  |  |  | 2,592   | 
|                                                            |  |               |         |           |  |     |         |       |  |  |        |  |  |  |         | 
|Income (loss) from operations                               |  |               | 11,810  |           |  |     | 18,859  |       |  |  | 391    |  |  |  | 31,060  | 
|                                                            |  |               |         |           |  |     |         |       |  |  |        |  |  |  |         | 
|Identifiable long-lived assets                              |  |               | 27,984  |           |  |     | 228,313 |       |  |  | 2,794  |  |  |  | 259,091 | 
|                                                            |  |               |         |           |  |     |         |       |  |  |        |  |  |  |         | 
|Total assets                                                |  |               | 158,233 |           |  |     | 285,580 |       |  |  | 18,679 |  |  |  | 462,492 | 
|                                                            |  |               |         |           |  |     |         |       |  |  |        |  |  |  |         | 
|Capital expenditures and acquisitions                       |  |               | 11,281  |           |  |     | 18,874  |       |  |  | 1,855  |  |  |  | 32,010  | 
|                                                            |  |               |         |           |  |     |         |       |  |  |        |  |  |  |         | 

|                                                            |  |               |         |           |  |     |         |       |  |  |        |   |  |  |         | 
|----------------------------------------------------------- |  | ------------- | ------- | --------- |  | --- | ------- | ----- |  |  | ------ | - |  |  | ------- | 
|                                                            |  | Wholesale and |         |           |  |     |         |       |  |  |        |   |  | 
|2002                                                        |  | Manufacturing |         | Retailing |  | EID |         | Total
|                                                            |  |               |         |           |  |     |         |      
|Sales to third parties                                      |  |               | 121,709 |           |  |     | 359,605 |       |  |  | 31,145 |   |  |  | 512,459 | 
|                                                            |  |               |         |           |  |     |         |       |  |  |        |   |  |  |         | 
|Intersegment sales                                          |  |               | 19,390  |           |  |     | 2       |       |  |  | 96     |   |  |  | 19,488  | 
|                                                            |  |               |         |           |  |     |         |       |  |  |        |   |  |  |         | 
|Income from operations before
depreciation and amortization |  |               | 11,472  |           |  |     | 32,237  |       |  |  | 570    |   |  |  | 44,279  | 
|Depreciation                                                |  |               | 2,992   |           |  |     | 14,135  |       |  |  | 1,212  |   |  |  | 18,339  | 
|Amortization of goodwill                                    |  |               | 273     |           |  |     | 6,134   |       |  |  |       |   |  |  | 6,407   | 
|Amortization of other intangibles                           |  |               | 1,020   |           |  |     | 1,522   |       |  |  | 264    |   |  |  | 2,806   | 
|                                                            |  |               |         |           |  |     |         |       |  |  |        |   |  |  |         | 
|Income (loss) from operations                               |  |               | 7,187   |           |  |     | 10,446  |       |  |  | (906   | ) |  |  | 16,727  | 
|                                                            |  |               |         |           |  |     |         |       |  |  |        |   |  |  |         | 
|Identifiable long-lived assets                              |  |               | 26,758  |           |  |     | 214,900 |       |  |  | 1,914  |   |  |  | 243,572 | 
|                                                            |  |               |         |           |  |     |         |       |  |  |        |   |  |  |         | 
|Total assets                                                |  |               | 152,468 |           |  |     | 256,772 |       |  |  | 30,661 |   |  |  | 439,901 | 
|                                                            |  |               |         |           |  |     |         |       |  |  |        |   |  |  |         | 
|Capital expenditures and acquisitions                       |  |               | 3,466   |           |  |     | 13,525  |       |  |  | 1,170  |   |  |  | 18,161  | 
|                                                            |  |               |         |           |  |     |         |       |  |  |        |   |  |  |         | 

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DE RIGO S.p.A. and SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(expressed in thousands of Euro (), except as otherwise indicated)
For the years ended December 31, 2000, 2001 and 2002

An analysis of sales and long-lived assets by both geographic area and segment
is the following:

|                                               |  |               |        |           |  |     |         |       |  |  |        |  |  |  |         | 
|---------------------------------------------- |  | ------------- | ------ | --------- |  | --- | ------- | ----- |  |  | ------ |  |  |  | ------- | 
|                                               |  | Wholesale and |        |           |  |     |         |       |  |  |        |  |  | 
|2000                                           |  | Manufacturing |        | Retailing |  | EID |         | Total
|                                               |  |               |        |           |  |     |         |      
|Sales to third parties by geographic area      |  |               |        |           |  |     |         |       |  |  |        |  |  |  |         | 
|Italy and other European countries             |  |               | 63,271 |           |  |     | 340,085 |       |  |  | 11,586 |  |  |  | 414,942 | 
|Americas                                       |  |               | 10,474 |           |  |     |        |       |  |  | 3,984  |  |  |  | 14,458  | 
|Rest of the world                              |  |               | 19,331 |           |  |     |        |       |  |  | 7,871  |  |  |  | 27,202  | 
|                                               |  |               |        |           |  |     |         |       |  |  |        |  |  |  |         | 
|Total                                          |  |               | 93,076 |           |  |     | 340,085 |       |  |  | 23,441 |  |  |  | 456,602 | 
|                                               |  |               |        |           |  |     |         |       |  |  |        |  |  |  |         | 
|Long-lived assets based on a physical
location |  |               |        |           |  |     |         |       |  |  |        |  |  |  |         | 
|Italy and other European countries             |  |               | 18,733 |           |  |     | 231,253 |       |  |  | 2,410  |  |  |  | 252,396 | 
|Americas                                       |  |               | 968    |           |  |     |        |       |  |  | 161    |  |  |  | 1,129   | 
|Rest of the world                              |  |               |       |           |  |     |        |       |  |  |       |  |  |  |        | 
|                                               |  |               |        |           |  |     |         |       |  |  |        |  |  |  |         | 
|Total                                          |  |               | 19,701 |           |  |     | 231,253 |       |  |  | 2,571  |  |  |  | 253,525 | 
|                                               |  |               |        |           |  |     |         |       |  |  |        |  |  |  |         | 

Retailing includes sales to third parties amounting to  95,232 and  244,853
in Spain and the UK, respectively. Long-lived assets for retailing amount to 
143,745 and  87,508 in Spain and the UK, respectively.

|                                               |  |               |         |           |  |     |         |       |  |  |        |  |  |  |         | 
|---------------------------------------------- |  | ------------- | ------- | --------- |  | --- | ------- | ----- |  |  | ------ |  |  |  | ------- | 
|                                               |  | Wholesale and |         |           |  |     |         |       |  |  |        |  |  | 
|2001                                           |  | Manufacturing |         | Retailing |  | EID |         | Total
|                                               |  |               |         |           |  |     |         |      
|Sales to third parties by geographic area      |  |               |         |           |  |     |         |       |  |  |        |  |  |  |         | 
|Italy and other European countries             |  |               | 75,761  |           |  |     | 358,349 |       |  |  | 19,096 |  |  |  | 453,206 | 
|Americas                                       |  |               | 13,039  |           |  |     |        |       |  |  | 4,495  |  |  |  | 17,534  | 
|Rest of the world                              |  |               | 26,120  |           |  |     |        |       |  |  | 8,390  |  |  |  | 34,510  | 
|                                               |  |               |         |           |  |     |         |       |  |  |        |  |  |  |         | 
|Total                                          |  |               | 114,920 |           |  |     | 358,349 |       |  |  | 31,981 |  |  |  | 505,250 | 
|                                               |  |               |         |           |  |     |         |       |  |  |        |  |  |  |         | 
|Long-lived assets based on a physical
location |  |               |         |           |  |     |         |       |  |  |        |  |  |  |         | 
|Italy and other European countries             |  |               | 26.319  |           |  |     | 228,313 |       |  |  | 2,544  |  |  |  | 257,176 | 
|Americas                                       |  |               | 515     |           |  |     |        |       |  |  | 250    |  |  |  | 765     | 
|Rest of the world                              |  |               | 1,150   |           |  |     |        |       |  |  |       |  |  |  | 1,150   | 
|                                               |  |               |         |           |  |     |         |       |  |  |        |  |  |  |         | 
|Total                                          |  |               | 27,984  |           |  |     | 228,313 |       |  |  | 2,794  |  |  |  | 259,091 | 
|                                               |  |               |         |           |  |     |         |       |  |  |        |  |  |  |         | 

Retailing includes sales to third parties amounting to  110,630 and  247,719
in Spain and the UK, respectively. Long-lived assets for retailing amount to 
146,192 and  80,345 in Spain and the UK, respectively.

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##### Table of Contents



DE RIGO S.p.A. and SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(expressed in thousands of Euro (), except as otherwise indicated)
For the years ended December 31, 2000, 2001 and 2002

|                                               |  |               |         |           |  |     |         |       |  |  |        |  |  |  |         | 
|---------------------------------------------- |  | ------------- | ------- | --------- |  | --- | ------- | ----- |  |  | ------ |  |  |  | ------- | 
|                                               |  | Wholesale and |         |           |  |     |         |       |  |  |        |  |  | 
|2002                                           |  | Manufacturing |         | Retailing |  | EID |         | Total
|                                               |  |               |         |           |  |     |         |      
|Sales to third parties by geographic area      |  |               |         |           |  |     |         |       |  |  |        |  |  |  |         | 
|Italy and other European countries             |  |               | 82,590  |           |  |     | 359,605 |       |  |  | 21,679 |  |  |  | 463,874 | 
|Americas                                       |  |               | 9,343   |           |  |     |        |       |  |  | 2,622  |  |  |  | 11,965  | 
|Rest of the world                              |  |               | 29,776  |           |  |     |        |       |  |  | 6,844  |  |  |  | 36,620  | 
|                                               |  |               |         |           |  |     |         |       |  |  |        |  |  |  |         | 
|Total                                          |  |               | 121,709 |           |  |     | 359,605 |       |  |  | 31,145 |  |  |  | 512,459 | 
|                                               |  |               |         |           |  |     |         |       |  |  |        |  |  |  |         | 
|Long-lived assets based on a physical
location |  |               |         |           |  |     |         |       |  |  |        |  |  |  |         | 
|Italy and other European countries             |  |               | 26,369  |           |  |     | 214,900 |       |  |  | 1,914  |  |  |  | 243,183 | 
|Americas                                       |  |               |        |           |  |     |        |       |  |  |       |  |  |  |        | 
|Rest of the world                              |  |               | 389     |           |  |     |        |       |  |  |       |  |  |  | 389     | 
|                                               |  |               |         |           |  |     |         |       |  |  |        |  |  |  |         | 
|Total                                          |  |               | 26,758  |           |  |     | 214,900 |       |  |  | 1,914  |  |  |  | 243,572 | 
|                                               |  |               |         |           |  |     |         |       |  |  |        |  |  |  |         | 

Retailing includes sales to third parties amounting to  123,366 and  236,239
in Spain and the UK, respectively. Long-lived assets for retailing amount to 
141,743 and  73,157 in Spain and the UK, respectively.

18. RELATED PARTY TRANSACTIONS AND MINORITY INTERESTS

Related Party Transactions Certain of the Companys facilities in Longarone
and Limana were constructed in the years 1992 through 2002 by Impresa Edile
F.lli De Rigo S.r.l., a construction company which is wholly owned by the De
Rigo Brothers. The related construction costs through December 31, 2002,
which have been capitalized as buildings amounted to  2,418.

In the year 2000, Eyewear International Distribution (EID), a 51% owned
subsidiary that distributes sunglasses and eyeglasses under the Prada name,
started operations. The Prada Group owns the remaining 49% interest in EID.
During the years 2000, 2001 and 2002, EID had commercial transactions with
companies within the Prada Group. These transactions were represented by
sales amounting to  5,008,  5,862 and  2,787, and paid management fees,
royalties and commissions amounting to  3,805,  7,857 and  4,089 in 2000,
2001 and 2002, respectively. Interest paid by EID on a loan from the Prada
Group amounted in 2000 and 2001 to  51 and  19, respectively. In addition,
in 2002, EID accounted for  119 rental expenses in relation to the rental of
a building in Longarone from Surfrigo, a company owned by the De Rigo
brothers.

The amounts due to related parties reported in the consolidated balance sheet
at December 31, 2000 and 2001 are:

|                                                                                                     |  |      |       |      |  |  |       | 
|---------------------------------------------------------------------------------------------------- |  | ---- | ----- | ---- |  |  | ----- | 
|                                                                                                     |  | 2001 |       | 2002
|                                                                                                     |  |      |       |     
|Due to related parties                                                                               |  |      |       |      |  |  |       | 
|Unsecured non-interest bearing loan to subsidiary in
Argentina from the Ranieri Group (U.S.$300,000) |  |      | 340   |      |  |  |      | 
|                                                                                                     |  |      |       |      |  |  |       | 
|                                                                                                     |  |      | 340   |      |  |  |      | 
|                                                                                                     |  |      |       |      |  |  |       | 
|Rental payables to Surfrigo  included in accounts payable                                           |  |      |      |      |  |  | 25    | 
|                                                                                                     |  |      |       |      |  |  |       | 
|Trade payables to PRADA  included in accounts payable, trade                                        |  |      | 5,844 |      |  |  | 3,940 | 
|                                                                                                     |  |      |       |      |  |  |       | 
|Trade receivables from PRADA  included in accounts
receivable trade                                 |  |      | 1,082 |      |  |  | 2,771 | 
|                                                                                                     |  |      |       |      |  |  |       | 

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DE RIGO S.p.A. and SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(expressed in thousands of Euro (), except as otherwise indicated)
For the years ended December 31, 2000, 2001 and 2002

Minority Interests- The credit to income in 2002 of  922 primarily relates
to losses of EID and De Rigo Deutschland.

19. RECONCILIATION TO ACCOUNTING PRINCIPLES GENERALLY ACCEPTED IN THE UNITED STATES OF AMERICA

The Companys accounting policies are in accordance with Italian GAAP, which
differs in certain respects from accounting principles generally accepted in
the United States of America (U.S. GAAP). Differences that have a
significant effect on consolidated net income and shareholders equity are as
follows:



|(a) |  | Sale of the Companys
shares to the Managing Director In October
1994, the De Rigo brothers granted an option offering 3% of the Ordinary
Shares they held in the Company to its Managing Director. Under Italian
GAAP, this transaction was considered a transaction between shareholders
and therefore not reported in the consolidated financial statements.
Under U.S. GAAP, the benefit (measured by the difference between the fair
value of the stock, to which the option refers, and the exercise price)
received of  9,554 by the Managing Director from the transaction was
required to be reported as a charge to 1994 income. Consequently, in the
reconciliations of shareholders equity as at December 31, 2000, 2001 and
2002 the amount of  9,554 was recorded as a charge to retained earnings
with an offsetting credit of  9,554 to additional paid in capital.                                                                               
|--- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(b) |  | Revaluation of assets prior to
1992 Certain assets were revalued by
the Company and two of its Italian subsidiaries to amounts in excess of
historical cost. These revaluations, which were either authorized or
required by Italian law, are permissible under Italian GAAP.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|   
|    |  | Assets revalued under Italian GAAPare depreciated over their remaining
useful lives based on their revalued basis. U.S. GAAPdoes not permit
the revaluation of such assets. Accordingly, the increases in
shareholders equity and the related increase in depreciation expense
occurring as a result of such revaluations have been reversed in the
accompanying reconciliation for all periods presented.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|   
|    |  | No deferred tax liabilities have been provided for on the revaluation
reserve mentioned in Note 15 point (a), as such liabilities are not
required to be provided for in accordance with U.S. GAAP, because these
revaluations were all made prior to December 15, 1992, the effective
date for applying existing U.S. accounting standards with respect to
accounting for income taxes.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|   
|(c) |  | Revaluation of trademarks in
2001 Under Italian GAAPit is permitted
to recognize the revaluation of assets for financial accounting purposes
as well as for tax purposes and to recognize as a charge to revaluation
reserve the amount of the tax liability recorded that is to be paid over
3 years. Under U.S. GAAPsuch revaluations are not recognized in the
financial statements and the tax charge is not recorded as a charge to
retained earnings, but the tax effects of the revaluation are recognized.
Accordingly, in the U.S. GAAP reconciliation adjustments have been made
to: (a) reverse the revaluation of trademarks made in 2001 against
trademarks and the revaluation reserve; and (b) recognize the tax effects
of the revaluation by (i) reclassifying the charge to revaluation reserve
for tax payable on the revaluation to the current tax provision, (ii)
recognizing a deferred tax asset and a credit to the deferred tax
provision to

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DE RIGO S.p.A. and SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(expressed in thousands of Euro (), except as otherwise indicated)
For the years ended December 31, 2000, 2001 and 2002



|    |  | record the tax
effects of the temporary difference between the Italian tax basis and
the U.S. book basis of the trademarks that was created by the
revaluation; (iii) recognizing a deferred tax liability and a charge to
the deferred tax provision to record the tax to be paid upon
distribution of the revaluation reserve recorded in the Italian
financial statements and (iv) reverse the amortization of trademarks
revaluation. The net tax benefit resulting from the revaluation
permitted by the applicable tax law was recognized in the income
statement for 2001, the year in which the revaluation was made.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|--- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(d) |  | Goodwill amortization- Italian GAAP requires that goodwill related to
assets be amortized over the assets estimated economic life. In June
2001, the FASB issued SFAS 142 Goodwill and Other Intangible
Assets,
effective for fiscal years beginning after December 15, 2001. SFAS 142
changed the accounting for goodwill from an amortization method to an
impairment-only approach based on the supposition that goodwill is not a
wasting asset that requires periodic cost allocation. Thus,
amortization of goodwill, including goodwill recorded in past business
combinations and amortization of intangibles with an indefinite life,
ceased upon adoption of SFAS 142. The Company adopted the provisions of
SFAS 142 effective January 1, 2002. The Company completed the SFAS 142
transitional impairment test during the second quarter of 2002 and
concluded that there was no impairment of goodwill at that time, as the
fair value of its reporting units exceeded their carrying amounts as of
January 1, 2002. Therefore, the second step of the transitional
impairment test required under SFAS 142 was not necessary.
|   
|    |  | As required under SFAS 142, the Company performed the required
impairment testing as of December 31, 2002. Based on that assessment,
it was determined that no impairments existed in the reporting units
identified.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|   
|    |  | The Companys 2001 and 2000 results of operations do not reflect the
provisions of SFAS 142. Had the Group adopted SFAS 142 as of January 1,
2000, the net income and basic and diluted net income per share would
have been the adjusted pro forma amounts indicated below:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   

|                                                    |  |                            |        |      |  |  |        | 
|--------------------------------------------------- |  | -------------------------- | ------ | ---- |  |  | ------ | 
|                                                    |  | 2000                       |        | 2001
|                                                    |  |                            |        |     
|                                                    |  | (thousands of Euro, except
|                                                    |  | per share amounts)        
|Net income for the year under U.S. GAAP             |  |                            | 13,282 |      |  |  | 18,249 | 
|Adjustment for amortization of goodwill, net of tax |  |                            | 6,396  |      |  |  | 6,407  | 
|                                                    |  |                            |        |      |  |  |        | 
|Adjusted net income                                 |  |                            | 19,678 |      |  |  | 24,656 | 
|                                                    |  |                            |        |      |  |  |        | 
|Reported Basic EPS per share and ADS                |  |                            | 0.30   |      |  |  | 0.41   | 
|Reported Diluted EPS per share and ADS              |  |                            | 0.30   |      |  |  | 0.40   | 
|Adjusted Basic EPS per share and ADS                |  |                            | 0.44   |      |  |  | 0.55   | 
|Adjusted Diluted EPS per share and ADS              |  |                            | 0.44   |      |  |  | 0.55   | 



| |  | The estimated aggregate
amortisation expense of Trademarks and Other intangible assets for
each of the five succeeding fiscal years is indicated below:
| |  | -------------------------------------------------------------------------------------------------------------------------------------------------------



|     |  |  |       | 
|---- |  |  | ----- | 
|Year |  | 
|     |  | 
|2003 |  |  | 2,093 | 
|2004 |  |  | 1,665 | 
|2005 |  |  | 806   | 
|2006 |  |  | 606   | 
|2007 |  |  | 530   | 

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DE RIGO S.p.A. and SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(expressed in thousands of Euro (), except as otherwise indicated)
For the years ended December 31, 2000, 2001 and 2002



|(e) |  | Public offering expenses The expenses incurred in connection with the
public offering of October 1995 were capitalized under Italian GAAPand
are being amortized over a five year period. Under U.S. GAAP, such
expenses are deducted from additional paid-in capital, net of the
estimated tax benefits to be received.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|--- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(f) |  | Stock Options  Under Italian GAAP,the Companys stock option plan does
not result in recognizing compensation expense in the Companys statement
of income at either at the date of the grant to employees or at the date
when such options are exercised. Under U.S. GAAP, the Company has
elected to continue to account for its compensation expense for its stock
based compensation plan using the intrinsic value method in accordance
with the provisions of APB 25, Accounting for Stock Issued to
Employees. Under FIN 44, Accounting for Certain Transactions Involving
Stock Compensation, the modifications made in the plan in the year 2000
to reduce the exercise price to an amount less than fair value at date of
grant and to modify the terms for exercising the options require that the
awards be accounted for as a variable plan under APB 25, which requires
remeasurement of the intrinsic value of the award from the date of the
modification to the date the award is exercised, is forfeited, or expires
unexercised.The Company has adopted the disclosure requirements of FASB
No. 123, Accounting for Stock-based Compensationas amended by SFAS No.
148, Accounting for Stock-Based Compensation  Transition and
Disclosures When compensation expense has been recorded in accordance
with APB 25, FASB Nos. 123 and 148 require pro-forma disclosure of what
net income and earnings per share would have been had the Company also
adopted FASB No. 123 for recording compensation expense.                                                                                                                                                                                                                                                                                                                                   
|   
|(g) |  | Call and put arrangements for sale by De Rigo B.V. to Prada of
unregistered shares in the Company In connection with establishing in
July 1999 a subsidiary that uses the Prada trademarks, the Company
entered into an agreement with Prada whereby (i) Prada has an option to
acquire, at any time between April 30, 2001 to June 30, 2001, 5% of the
unregistered shares that De Rigo B.V. owns in the Company at an agreed
upon price per share and (ii) De Rigo B.V. has a put arrangement that
gives it the right to require Prada to buy the same number of shares in
the Company at the agreed upon price per share within the same time
frame. Under Italian GAAPthe fair value of the options granted to Prada
is considered a transaction between shareholders and therefore is not
reported in the financial statements. Under U. S. GAAP,the fair value of
the options granted is required to be accounted for as an intangible
asset by the Company. Consequently, in the reconciliation of
shareholders equity as at December 31, 1999 and net income for the year
then ended, the fair value of the options granted in the amount of  465
has been recorded as an intangible asset with an offsetting credit to
additional paid in capital, and amortization of the intangible asset
(which is being amortized over five years) in the amount of  97 has been
recorded as an expense. The arrangements whereby Prada may acquire an
additional 10% of the Companys unregistered capital stock is contingent
upon Prada renewing the existing licensing agreements with the Companys
subsidiary, EID for an additional stipulated number of years. Under U.S.
GAAP, the fair value of the options granted will be recognized as an
intangible asset to be amortized over the period of the licensing
agreement when such license agreements are renewed.
|   
|(h) |  | Deferred charges In 2002 the Group deferred certain consulting
expenses related to production activity and will amortize these amounts
over five years under Italian GAAP. Under US GAAP, these expenses would have been charged to income
when incurred. The accompanying reconciliation reflects the adjustment
to expense these amounts.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 

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DE RIGO S.p.A. and SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(expressed in thousands of Euro (), except as otherwise indicated)
For the years ended December 31, 2000, 2001 and 2002



|(i) |  | Additional deferred taxeswere provided on U.S. GAAP adjustments (b),
(e), (f), (g), (h), (j) and (n).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|--- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(j) |  | Pensions- The Group maintains a defined benefit pension plan for
substantially all U.K. employees of Vantios/D&A. Under Group accounting
policies the recognition of a minimum pension liability is not required.
Under SFAS 87, it is a requirement that companies must recognize as a
minimum liability for any unfunded accumulated benefit obligation. The
impact of this minimum pension liability is to increase long-term
obligations and decrease shareholders equity. No adjustment was
necessary in 2000 and 2001, as the plan did not have an unfunded
accumulated benefit obligation.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|   
|(k) |  | Earnings per Share  Italian GAAPdoes not require disclosure of
earnings per share. Under U.S. GAAP,earnings per share are calculated
and presented in accordance with FASB No. 128 Earnings Per Share. FASB
No. 128 requires dual presentation of basic and diluted earnings per
share for all periods presented. Basic earnings per share is computed by
dividing income of the entity by the weighted average number of ordinary
shares outstanding for the period. Basic earnings per share excludes
shares held in treasury or any shares held in escrow pending release upon
the occurrence of specified economic events. Diluted earnings per share
reflects the potential dilution that could occur if securities or other
contracts to issue ordinary shares were exercised or converted into
ordinary shares or resulted in the issuance of ordinary shares that then
shared in the earnings of the entity. At December 31, 2000, 2001 and
2002, unexercised stock options to purchase 1,199,400, 983,137 and
846,621 shares, respectively, were outstanding. These securities could
potentially dilute basic EPS in the future and the number of incremental
shares computed by the treasury stock method were considered in the
computation of diluted earnings per share and per ADS for the years 2000,
2001 and 2002.
|   
|(l) |  | Comprehensive income  Italian GAAPdoes not require the presentation of
comprehensive income. Under U.S. GAAP, FASB No. 130 Comprehensive
Income: Financial Statement Presentation,which was adopted by the
Company in December 1998,requires disclosure of comprehensive income,
which is defined as the change in net assets of a business enterprise
during a period from transactions and events and circumstances from non
owner sources.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|   
|(m) |  | Unrealized foreign exchange gains  Under Italian GAAP, unrealized
gains arising from re-measurement of non current assets and liabilities
denominated in foreign currency are deferred until realized. Under U.S.
GAAP, such unrealized gains or losses are recognized in income currently.
No U.S. GAAP adjustments were required in 2000, 2001 and 2002.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|   
|(n) |  | Marketable securities Under Italian GAAP, marketable securities are
carried at the lower of cost or market value. If securities are
written-down, the original value of these investments is reinstated in
future accounting periods should the reasons for such writedowns no
longer apply. For US GAAP purposes, the Company has applied the
provisions of Statement of Financial Accounting Standards 115,
Accounting for Certain Investment in Debt and Equity Securities (SFAS
115). Under SFAS 115, the Company classifies its marketable securities
as available for sale. Unrealized gains and losses for securities
classified as available for sale are included in shareholders equity
until the securities are sold or otherwise considered to be permanently
impaired. The effects of SFAS 115 on net income and shareholders equity
have been reflected in the reconciliation. The fair value of marketable
securities as of December 31, 2002 is
1,907.                                                                                                                                                                                                                                                                                                                                                        

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##### Table of Contents



DE RIGO S.p.A. and SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(expressed in thousands of Euro (), except as otherwise indicated)
For the years ended December 31, 2000, 2001 and 2002



|    |  | No adjustments were made for U.S. GAAP financial reporting purposes at
December 31, 2000 and 2001 because the fair values of such securities
approximated their carrying basis on an Italian GAAP basis.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(o) |  | Impairment of Long-Lived Assets
Prior to 2002 the Company applied SFAS 121
Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed Of,to all long-lived
assets, including goodwill. That statement required impairment losses
to be recorded on long-lived assets used in operations when
indicators of impairment were present and the future undiscounted
cash flows estimated to be generated by those assets were less than
the assets carrying amount. Impairment was the amount by which
the carrying value exceeds its fair value. No indicators of
impairment were present in the year 2001. In 2000 impairment
indicators were present in goodwill arising from the acquisition of
Ranieri Argentinu S.A. As a result of the Companys
analysis, the full amount of goodwill was charged to expense during
the year.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|   
|    |  | Effective January 1, 2002,
the company changed its method of accounting for long-lived assets,
including goodwill.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|   
|    |  | In August 2001, the FASB issued SFAS 144 Accounting for the Impairment
of Long-Lived Assets which addresses financial accounting and reporting
for the impairment or disposal of long-lived assets. The Statement
applies to certain long-lived assets, including those reported as
discontinued operations, and develops one accounting model for
long-lived assets to be disposed of by sale. SFAS 144 supersedes SFAS
121 Accounting for the Impairment of Long-lived Assets and for
Long-lived Assets to be Disposed Of, and APB 30, Reporting the Results
of Operations  Reporting the Effects of Disposal of a Segment of a
Business, and Extraordinary, Unusual and Infrequently Occurring Events
and Transactions, for the disposal of a segment. The Company adopted
the provisions of SFAS 144 effective January 1, 2002.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   
|    |  | SFAS 144 requires that long-lived assets to be disposed of by sale
be measured at the lower of carrying amount or fair value less cost to
sell, whether reported in continuing operations or in discontinued
operations. The new statement also changes the measurement criteria for
discontinued operations. SFAS 144 also broadens the reporting of
discontinued operations to include the disposal of a component of an
entity, provided that the operations and cash flows of the component will
be eliminated from the ongoing operations of the entity and the entity
will not have any significant continuing involvement in the operations
of the component. The Statement does not apply to investments in equity
investees. No write-downs of long-lived assets were recorded under SFAS
144 in 2002.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|   
|(p) |  | Derivative financial
instruments Under Italian GAAP,derivatives used
to hedge assets, liabilities and commitments are accounted for at fair
value, with unrealized gains and losses at the balance sheet date
recorded through earnings. If the derivative is not used for hedging
purposes, or the hedge is not effective, the realized and unrealized
gains and losses are recognized in the income statement immediately.
Effective January 1, 2001, the Group adopted SFAS 133, Accounting for
Derivative Instrument and Hedging Activities (SFAS 133), and the
corresponding amendments and interpretations to this Statement. The
Statement requires that all derivative financial instruments be
recognized in the financial statements and are to be measured at fair
value regardless of the purpose or intent of holding them. If the
derivative is designated as a fair value hedge, changes in the fair value
of the derivative and of the hedged item attributable to the hedged risk
are recognized in net earnings (loss). If the derivative is designated
as a cash flow hedge, the effective portions of the change in the fair
value of the derivative are recorded in other comprehensive income
(OCI) and are recognized in net earnings (loss) when the hedged item
affects operations. Ineffective portions of changes in the fair value of
cash flow hedge are to be recognized in net earnings (loss) prior to the
contracts expiration. If the derivative used in an economic hedging
relationship is not designated in an accounting hedging relationship,

F-35



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##### Table of Contents



DE RIGO S.p.A. and SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(expressed in thousands of Euro (), except as otherwise indicated)
For the years ended December 31, 2000, 2001 and 2002



|    |  | changes in the fair value of the derivative are recognized in the
statement of operations through the life of the contract.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|--- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|    |  | The Companys derivative financial instruments at December 31, 2000
consisted of foreign currency forward exchange contracts that would have
qualified as hedges. However, since the Company did not formally
designate their hedging relationships anew and document their risk
management strategies, such derivatives did not qualify as hedges as of
January 1, 2001. Accordingly, under the provisions of FASB No. 133,
all changes in the fair value of such derivative instruments subsequent
to January 1, 2001 were recognized in the current income for the year.
In implementing FASB No. 133, the Company did not record any transition adjustment.                                                                                                                                                                                                                                                                                                                                      
|   
|    |  | The Company did not formally designate derivative contracts entered into
during the year ended December 31, 2001 and 2002 as fair value or cash
flow hedges. Accordingly, as required by FASB No. 133, the fair value
of such contracts have been recorded on the balance sheet until the
contracts are settled, and all changes in fair value of the derivative
instruments since the date of the derivative contracts have been
recognized in the current income for the year. Since under Italian GAAP
all derivatives outstanding at December 31, 2001 and 2002 were accounted
for as ineffective hedges, no adjustment was required to comply with the
requirements of FASB No. 133.                                                                                                                                                                                                                                                                                                            
|   
|(q) |  | Consolidation of Ranieri Argentina S.A. The Company sold its 51% interest in Ranieri Argentina S.A. in June 2002. For Italian GAAP purposes, the sale was effective retroactive to January 1, 2002. Therefore, the results of operations through the date of sale were not consolidated in the consolidated statement of operations of the Company. US GAAP requires that the results of operations be consolidated through the date of sale. The Company
 has reviewed the impact on the US GAAP figures that would result
from consolidation and determined that the impact on sales, cost of sales, other operating costs, and other non-operating costs is not significant.                                                                                                                                                                                                                                                                                                                     
|   
|(r) |  | New accounting standards In future periods the Company will be obliged
to adopt certain new standards and interpretations of US GAAP. The
following represents those statements that are applicable to the business
of the Company and that could have an impact on future results and
financial position.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|   
|    |  | In November 2002, the FASB issued FIN 45, Guarantors Accounting and
Disclosure Requirements for Guarantees, Including Indirect Guarantees of
Indebtedness of Others (FIN 45). The Interpretation requires expanded
disclosure to be made in the guarantors financial statements in regards
to the guarantees and obligations under certain agreements. It also
requires that a guarantor recognize, as of the inception of the
guarantee, a liability for the fair value of the obligation undertaken
in issuing the guarantee. The disclosure requirements of FIN 45 are
effective for financial statement periods ending after December 15, 2002
and have therefore been applied in the accompanying financial
statements. The recognition requirements of FIN 45 are applicable for
guarantees issued or modified after December 31, 2002. The Company does
not anticipate any impact on its results of operations, financial position
and cash flows as a result of the adoption of FIN 45.
|   
|    |  | In January 2003, the FASB issued Interpretation No. 46, Consolidation of
Variable Interest Entities, an interpretation of Accounting Research
Bulletin No. 51(the Interpretation). The Interpretation requires the
consolidation of entities in which an enterprise absorbs a majority of
the entitys expected losses, receives a majority of the entitys
expected residual returns, or both, as a result of ownership,
contractual or other financial interests in the entity. Currently,
entities are generally consolidated by an enterprise when it has a
controlling financial interest through ownership of a majority voting
interest in the entity. The Group will begin applying the provisions of
this new announcement effective January 1, 2004 on a prospective basis and
does not anticipate any impact on its results of operations, financial
position and cash flows.                                                                                                             
|   
|    |  | In June 2001, the FASB issued SFAS 143, Accounting for Asset Retirement
Obligations,which addresses the financial accounting and reporting for
obligations associated with the retirement of tangible long-lived assets
and the associated asset retirement costs. This standard applies to
legal obligations associated with the retirement of long-lived assets
that result from the acquisition, construction,                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  

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##### Table of Contents



DE RIGO S.p.A. and SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(expressed in thousands of Euro (), except as otherwise indicated)
For the years ended December 31, 2000, 2001 and 2002



| |  | development or normal
use of the asset. SFAS 143 requires that the fair value of a liability
for an asset retirement obligation be recognized in the period in which
it is incurred if a reasonable estimate of fair value can be made. The
fair value of the liability is added to the carrying amount of the
associated long- lived asset and is depreciated over the assets useful life. The
liability is accreted to its present value each period through charges
to operating expense. If the obligation is settled for other than the
carrying amount of the liability, a gain or loss on settlement is
recognized. The Company was required to adopt the provisions of
SFAS 143, effective January 1, 2003. To accomplish this, the Company
must identify all legal obligations for asset retirement obligations, if
any, and determine the fair value of these obligations on the date of
adoption. The determination of fair value is complex and will require
gathering market information and the development of cash flow models.
Additionally, the Company will be required to develop processes to track
and monitor these obligations. The Company has not completed its
assessment of the impact SFAS 143 will have on its results of
operations, financial position and cash flows.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  | In July 2002, the FASB issued SFAS 146, Accounting for Costs Associated
with Exit or Disposal Activities(SFAS 146), which addresses
financial accounting and reporting for costs associated with exit or
disposal activities, which effectively nullifies EITF 94-3, Liability
Recognition for Certain Employee Termination Benefits and Other Costs to
Exit Activity Including Certain Costs Incurred in a Restructuring(EITF
94-3).The principal differences between SFAS 146 and EITF 94-3
relates to SFAS 146s requirements for recognition of a liability for a
cost associated with an exit or disposal activity. SFAS 146 requires
that a liability for a cost associated with an exit or disposal activity
be recognized when the liability is incurred. Under EITF 94-3, a
liability for an exit cost was recognized at the date of an entitys
commitment to an exit plan. A fundamental conclusion reached by the
FASB in this new Statement is that an entitys commitment to a plan, in
and of itself, does not create an obligation that meets the definition
of a liability. Therefore, this Statement eliminates the definition and
requirements for recognition of exit costs in EITF 94-3. This Statement
also establishes that fair value is the objective for initial
measurement of the liability. SFAS 146 also changes the accounting
recognition of one-time termination benefits, requiring that those costs
be recognized over the period of the employees service beyond a minimum
retention period. Under EITF 94-3, these costs were accrued upfront
when all the criteria of EITF 94-3 were met. The effective date for the
new Statement is January 1, 2003, with earlier adoption allowed. The
Company will apply the provisions of the Statement as of January 1,
2003.
|
| |  | In December 2002, the FASB issued SFAS 148 Accounting for Stock-Based
Compensation  Transition and Disclosure an Amendment of SFAS 123
(SFAS 148).The new Statement is applicable to those entities that
decide to adopt the fair value stock based compensation as their primary
accounting policy, as opposed to APB 25. The Company has adopted the
additional disclosure requirements of SFAS 148.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|
| |  | On April 30, 2003, the FASB issued Statement of Financial Accounting
Standards 149, Amendment of Statement 133 on Derivative Instruments and
Hedging Activities.This Statement is intended to result in more
consistent reporting of contracts as either freestanding derivative
instruments subject to SFAS 133 in its entirety, or as hybrid
instruments with debt host contracts and embedded derivative features.
SFAS 149 amends SFAS 133 as a result of:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|
| |  | - Decisions previously made as part of the Derivatives Implementation
Group (DIG) process;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|
| |  | - Changes made in connection with other Board projects dealing with
financial instruments;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|
| |  | - Deliberations in connection with issues raised in relation to the
application of the definition of a derivative.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|
| |  | In particular it clarifies:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     

F-37



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##### Table of Contents



DE RIGO S.p.A. and SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(expressed in thousands of Euro (), except as otherwise indicated)
For the years ended December 31, 2000, 2001 and 2002



| |  | - The meaning of an initial net investment that is smaller than would be
required for other types of contracts that would be expected to have a
similar response to changes in market factors";                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  | - The meaning of underlying;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|
| |  | - The characteristics of a derivative that contains financing components.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|
| |  | SFAS 149 does not amend the definition of a derivative, however,
SFAS 149 does clarify the definition of a derivative by focusing on the
meaning of the characteristic an initial net investment that is smaller
than
would be required for other types of contracts that would be expected to
have a similar response to changes in market factors. SFAS 149
explains that smaller means smaller by more than a nominal amount.

SFAS 149 is effective for contracts entered into or modified after June
30, 2003, and hedging relationships designated after June 30, 2003. The
adoption of SFAS 149 is not expected to have a material impact on the
Company.
|
| |  | In May 2003, the FASB issued SFAS 150 Accounting for Certain Financial
Instruments with Characteristics of Both Liabilities and Equity(SFAS
150), the new accounting standard for certain types of freestanding
financial instruments and disclosure regarding possible alternatives to
settling financial instruments. The Group does not anticipate any impact
on its results of operations, financial position and cash flows as a result
of the adoption of the Statement.                                                                                                                                                                                    
|
| |  | The Statement is effective for all financial instruments entered
into or modified after May 31, 2003 and is otherwise effective at the
beginning of the first interim period after June 15, 2003.                                                                                                                                                                                                                                                                                                                                                                                                                                                                     

The following tables summarize those adjustments to consolidated net income
and shareholders equity that would be required if U.S. GAAP had been applied
instead of Italian GAAP.

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##### Table of Contents



DE RIGO S.p.A. and SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(expressed in thousands of Euro (), except as otherwise indicated)
For the years ended December 31, 2000, 2001 and 2002

NET INCOME for the years ended December 31,

|                                                                                                                                                                                                                                                   |  |                                                                                    |            |           |   |           |            |      |       |   |            |   |      |  
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ---------------------------------------------------------------------------------- | ---------- | --------- | - | --------- | ---------- | ---- | ----- | - | ---------- | - | ---- | -
|                                                                                                                                                                                                                                                   |  |                                                                                    |            | 2000      |   | 2001      |            | 2002
|                                                                                                                                                                                                                                                   |  |                                                                                    |            |           |   |           |            |     
|Net income as reported per the consolidated statements of income                                                                                                                                                                                   |  |                                                                                    | 14,136     |           |   |           | 21,217     |      |       |   | 10,645     |  
|Adjustments required for U.S. GAAP
reporting purposes:                                                                                                                                                                                             |  |                                                                                    |            |           |   |           |            |      |       |   |            |  
|(b) Elimination of depreciation relating to
revaluation of certain assets prior to
1992                                                                                                                                                            |  |                                                                                    | 13         |           |   |           | 13         |      |       |   | 13         |  
|(c) Recognize tax effects on reversal of
trademark revaluation at end of 2001                                                                                                                                                                      |  |                                                                                    |            |           |   |           |            |      |       |   |            |  
|                                                                                                                                                                                                                                                   |  | (i) charge substitute tax to current
tax provision rather than revaluation
reserve |            |           |  |           |            |      | (958  | ) |            |   |     |  
|                                                                                                                                                                                                                                                   |  | (ii) recognize deferred tax asset on
trademark revaluation                         |            |           |  |           |            |      | 2,030 |   |            |   | (294 | )
|                                                                                                                                                                                                                                                   |  | (iii) recognize deferred tax liability on revaluation reserve on Italian basis     |            |           |  |           |            |      | (857  | ) |            |   |     |  
|                                                                                                                                                                                                                                                   |  | (iv) Reversal of amortization of
trademarks revaluation                            |            |           |  |           |            |      |      |   |            |   | 504  |  
|(d) Reversal of goodwill amortization                                                                                                                                                                                                              |  |                                                                                    |           |           |   |           |           |      |       |   | 6,407      |  
|(f) Recognize stock compensation expense in
accordance with APB No. 25, net of
credit of  169 in 2001 for the
reversal of stock option expense
recorded in prior periods on options
forfeited by the employees that left
the Company in that year |  |                                                                                    | (756       | )         |   |           | (3,243     | )    |       |   |           |  
|(g) Amortization of intangible asset in
respect of Pradas 5% options                                                                                                                                                                              |  |                                                                                    | (97        | )         |   |           | (97        | )    |       |   | (97        | )
|(h) Deferred charges                                                                                                                                                                                                                               |  |                                                                                    |           |           |   |           |           |      |       |   | (178       | )
|(n) Marketable securities available for sale                                                                                                                                                                                                       |  |                                                                                    |            |           |   |           |            |      |       |   | (111       | )
|(i) Deferred income taxes on (b), (g), (h)
and (n) above after considering change
in tax rate on deferred tax for (b) in
2000 and 2002                                                                                                             |  |                                                                                    | (14        | )         |   |           | 144        |      |       |   | 256        |  
|                                                                                                                                                                                                                                                   |  |                                                                                    |            |           |   |           |            |      |       |   |            |  
|Net income in accordance with U.S. GAAP                                                                                                                                                                                                            |  |                                                                                    | 13,282     |           |   |           | 18,249     |      |       |   | 17,145     |  
|                                                                                                                                                                                                                                                   |  |                                                                                    |            |           |   |           |            |      |       |   |            |  
|Earnings per share and per ADS:                                                                                                                                                                                                                    |  |                                                                                    |            |           |   |           |            |      |       |   |            |  
|Numerator for basic earnings and diluted earnings per share and
per ADS:                                                                                                                                                                           |  |                                                                                    |            |           |   |           |            |      |       |   |            |  
|Net income (in Euro thousands)                                                                                                                                                                                                                     |  |                                                                                    | 13,282     |           |   |           | 18,249     |      |       |   | 17,145     |  
|                                                                                                                                                                                                                                                   |  |                                                                                    |            |           |   |           |            |      |       |   |            |  
|Denominator                                                                                                                                                                                                                                        |  |                                                                                    |            |           |   |           |            |      |       |   |            |  
|Denominator for basic earnings per share and per ADS  weighted
average shares and ADS shares                                                                                                                                                      |  |                                                                                    | 44,500,000 |           |   |           | 44,590,060 |      |       |   | 44,688,415 |  
|Effects of dilutive employee stock options                                                                                                                                                                                                         |  |                                                                                    | 130,709    |           |   |           | 952,129    |      |       |   | 701,097    |  
|Denominator for diluted earnings per share and per ADS  adjusted
weighted average shares and ADS                                                                                                                                                  |  |                                                                                    | 44,630,709 |           |   |           | 45,542,189 |      |       |   | 45,389,512 |  
|                                                                                                                                                                                                                                                   |  |                                                                                    |            |           |   |           |            |      |       |   |            |  
|Basic earnings per share and per ADS                                                                                                                                                                                                               |  | 0.30 Euro                                                                          |            | 0.41 Euro |   | 0.38 Euro
|                                                                                                                                                                                                                                                   |  |                                                                                    |            |           |   |           |            |      |       |   |            |  

F-39



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##### Table of Contents



DE RIGO S.p.A. and SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(expressed in thousands of Euro (), except as otherwise indicated)
For the years ended December 31, 2000, 2001 and 2002

|                                       |  |           |   |           |  |           |  |           |  |  |  |  |  | 
|-------------------------------------- |  | --------- | - | --------- |  | --------- |  | --------- |  |  |  |  |  | 
|Diluted earnings per share and per ADS |  | 0.30 Euro |   | 0.40 Euro |  | 0.38 Euro
|                                       |  |           |   |           |  |           | 
|Dividends per share and per ADS        |  |           |  |           |  | 0.12 Euro |  | 0.13 Euro
|                                       |  |           |   |           |  |           | 

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##### Table of Contents



DE RIGO S.p.A. and SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(expressed in thousands of Euro (), except as otherwise indicated)
For the years ended December 31, 2000, 2001 and 2002

SHAREHOLDERS EQUITY at December 31,

|                                                             |                                                                                                                                                              |  |         |        |      |  |         |        |   |  |         |        |  
|------------------------------------------------------------ | ------------------------------------------------------------------------------------------------------------------------------------------------------------ |  | ------- | ------ | ---- |  | ------- | ------ | - |  | ------- | ------ | -
|                                                             |                                                                                                                                                              |  | 2000    |        | 2001 |  | 2002   
|                                                             |                                                                                                                                                              |  |         |        |      |  |        
|Balance as reported in the consolidated financial
statements |                                                                                                                                                              |  | 189,374 |        |      |  | 210,419 |        |   |  | 212,117 |       
|Adjustments required for U.S. GAAP reporting purposes:       |                                                                                                                                                              |  |         |        |      |  |         |        |   |  |         |       
|(a)                                                          | Decrease in retained earnings as a result
of the charge to income for additional
compensation paid in 1994 by
shareholders to Managing Director              |  |         | (9,554 | )    |  |         | (9,554 | ) |  |         | (9,554 | )
|                                                             | and concurrent increase in additional
paid-in capital                                                                                                        |  |         | 9,554  |      |  |         | 9,554  |   |  |         | 9,554  |  
|(b)                                                          | Elimination of revaluations of certain
assets prior to 1992, net of accumulated
depreciation of  652,  665 and  678
in 2000, 2001, and 2002 respectively. |  |         | (300   | )    |  |         | (287   | ) |  |         | (274   | )
|(c)                                                          | Elimination of revaluation of trademarks
in 2001                                                                                                             |  |         |       |      |  |         | (5,043 | ) |  |         | (4,539 | )
|(d) Reversal of goodwill amortization                        |                                                                                                                                                              |  |        |        |      |  |        |        |   |  | 6,407   |       
|(e)                                                          | Elimination of amortization of offering
expenses, deferred for Italian purposes                                                                              |  |         | 2,128  |      |  |         | 2,128  |   |  |         | 2,128  |  
|(e)                                                          | Offering expenses less estimated tax
benefits of  1,030 in 2000, 2001 and
2002 charged to paid in capital                                                   |  |         | (1,098 | )    |  |         | (1,098 | ) |  |         | (1,098 | )
|(f)                                                          | Reduce retained earnings for amount of
stock compensation                                                                                                    |  |         | (756   | )    |  |         | (3,999 | ) |  |         | (3,999 | )
|(f)                                                          | Increase additional paid in capital for
accretion resulting from stock
compensation expense                                                                  |  |         | 756    |      |  |         | 3,999  |   |  |         | 3,999  |  
|(g)                                                          | Increase in additional paid in capital
as a result of recording the fair value
of Pradas 5% options on the total
outstanding share capital                  |  |         | 465    |      |  |         | 465    |   |  |         | 465    |  
|(g)                                                          | Decrease in retained earnings as a result
of the charge to income for amortization
of the intangible asset arising on the
valuation of Pradas 5% options    |  |         | (194   | )    |  |         | (291   | ) |  |         | (388   | )
|(h) Deferred charges                                         |                                                                                                                                                              |  |        |        |      |  |        |        |   |  | (178    | )     
|(j) Recognition of minimum pension liability                 |                                                                                                                                                              |  |        |        |      |  |        |        |   |  | (22,137 | )     
|(n)                                                          | Reduce retained earning for marketable
securities                                                                                                            |  |         |       |      |  |         |       |   |  |         | (111   | )
|(n)                                                          | Increase Other Comprehensive Income
related to unrealized gains on
marketable securities                                                                     |  |         |       |      |  |         |       |   |  |         | 111    |  
|(i)                                                          | Recognition of deferred income taxes on
(b), (e), (g), (h) and (j) above                                                                                     |  |         | (915   | )    |  |         | (771   | ) |  |         | 5,987  |  
|(i)                                                          | Tax effect on elimination of trademarks                                                                                                                      |  |         |        |      |  |         |        |   |  |         |        |  

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##### Table of Contents



DE RIGO S.p.A. and SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(expressed in thousands of Euro (), except as otherwise indicated)
For the years ended December 31, 2000, 2001 and 2002

|                                                     |                                                                                |  |         |   |  |  |         |       |  |  |         |       | 
|---------------------------------------------------- | ------------------------------------------------------------------------------ |  | ------- | - |  |  | ------- | ----- |  |  | ------- | ----- | 
|                                                     | revaluation in 2001 (c) above, after
considering change in tax rate in 2002
to |  |         |   |  |  |         |       |  |  |         |       | 
|                                                     | (i) recognize deferred tax asset on                                            |  |         |   |  |  |         |       |  |  |         |       | 
|                                                     | revalued assets                                                                |  |         |  |  |  |         | 2,030 |  |  |         | 1,736 | 
|                                                     | (ii) recognize deferred tax liability                                          |  |         |   |  |  |         |       |  |  |         |       | 
|on revaluation reserve on Italian basis              |                                                                                |  |        |   |  |  | (857    | )     |  |  | (756    | )    
|                                                     |                                                                                |  |         |   |  |  |         |       |  |  |         |      
|Balance at December 31, in accordance with U.S. GAAP |                                                                                |  | 189,460 |   |  |  | 206,695 |       |  |  | 199,470 |      
|                                                     |                                                                                |  |         |   |  |  |         |       |  |  |         |      

Shareholders Equity

Due to operating losses incurred by a subsidiary through December 31, 1993,
the Company, pursuant to Italian legal requirements, has eliminated losses
reported for Italian GAAP purposes amounting to  2,195 against additional
paid in capital by the former shareholders of the subsidiary. For U.S. GAAP
financial reporting purposes, such operating losses would be reflected as a
reduction of consolidated retained earnings, and the amount of capital used to
eliminate such losses would be reflected as additional paid-in capital.

The components of shareholders equity at December 31, 2001 and 2002 are as
follows:

|                           |  |         |         |             |  |      |         |      |  |  |         |  |  |  |  | 
|-------------------------- |  | ------- | ------- | ----------- |  | ---- | ------- | ---- |  |  | ------- |  |  |  |  | 
|                           |  | Italian |         |             |  |      |         | U.S.
|2001                       |  | GAAP    |         | Adjustments |  | GAAP
|                           |  |         |         |             |  |     
|Share capital              |  |         | 11,609  |             |  |      |        |      |  |  | 11,609  | 
|Additional paid-in-capital |  |         | 54,439  |             |  |      | 15,115  |      |  |  | 69,554  | 
|Retained earnings          |  |         | 138,095 |             |  |      | (13,802 | )    |  |  | 124,293 | 
|Other comprehensive income |  |         | 1,239   |             |  |      |        |      |  |  | 1,239   | 
|Revaluation reserves       |  |         | 5,037   |             |  |      | (5,037  | )    |  |  |        | 
|                           |  |         |         |             |  |      |         |      |  |  |         | 
|                           |  |         | 210,419 |             |  |      | (3,724  | )    |  |  | 206,695 | 
|                           |  |         |         |             |  |      |         |      |  |  |         | 

|                           |  |         |         |             |  |      |         |      |  |  |         |  
|-------------------------- |  | ------- | ------- | ----------- |  | ---- | ------- | ---- |  |  | ------- | -
|                           |  | Italian |         |             |  |      |         | U.S.
|2002                       |  | GAAP    |         | Adjustments |  | GAAP
|                           |  |         |         |             |  |     
|Share capital              |  |         | 11,626  |             |  |      |        |      |  |  | 11,626  |  
|Additional paid-in-capital |  |         | 54,490  |             |  |      | 11,737  |      |  |  | 66,227  |  
|Retained earnings          |  |         | 142,935 |             |  |      | (3,924  | )    |  |  | 139,011 |  
|Other comprehensive income |  |         | (1,971  | )           |  |      | (15,423 | )    |  |  | (17,394 | )
|Revaluation reserves       |  |         | 5,037   |             |  |      | (5,037  | )    |  |  |        |  
|                           |  |         |         |             |  |      |         |      |  |  |         |  
|                           |  |         | 212,117 |             |  |      | (12,647 | )    |  |  | 199,470 |  
|                           |  |         |         |             |  |      |         |      |  |  |         |  

Pro-forma Disclosures for Business Acquisitions

Acquisitions made in 2000

The following unaudited pro-forma information for the De Rigo Group gives
effect to the GO acquisition made on February 2, 2000 as if it had occurred on
January 1, 2000. The pro forma effect of the Groups acquisition of minority
interests in certain subsidiaries in 2001 and 2002 was not material.

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DE RIGO S.p.A. and SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(expressed in thousands of Euro (), except as otherwise indicated)
For the years ended December 31, 2000, 2001 and 2002

|                                                                |  |           |            | 
|--------------------------------------------------------------- |  | --------- | ---------- | 
|                                                                |  | 2000     
|                                                                |  |          
|Net sales                                                       |  |           | 464,229    | 
|                                                                |  |           |            | 
|Net income in accordance with U.S. GAAP                         |  |           | 13,262     | 
|                                                                |  |           |            | 
|Basic net income per share and ADS
in accordance with U.S. GAAP |  | 0.30 Euro
|                                                                |  |           |            | 
|Weighted average number of shares outstanding during the year   |  |           | 44,500,000 | 
|                                                                |  |           |            | 

All of the unaudited pro-forma information presented in this note has been
prepared only for comparative purposes and does not purport to be indicative
of the results of operations which actually would have resulted had the
acquisitions occurred on the date indicated, or which may result in the
future.

Pro-forma Information Regarding Net Income and Earnings Per Share and Per ADS
required by FASB No. 123

FASB No. 123 requires that when APB 25 is applied in computing compensation
cost for stock based compensation that pro forma information as to net income
and earnings per share be presented as if the Company had accounted for its
employee stock based compensation in accordance with FASB No. 123.

The fair value of each stock option granted is estimated on the grant date
using the Black-Scholes option pricing model with the following
weighted-average assumptions:

|                         |  |           |     |  
|------------------------ |  | --------- | --- | -
|Employee stock options   |  | 2000 Plan
|                         |  |          
|Expected life of option  |  | 4 years  
|Risk free interest rates |  |           | 4.5 | %
|Volatility               |  |           | .20 | %
|Dividend yield           |  |           | 0   | %

The weighted average estimated fair value of the options granted during fiscal
2000 amounted to  8,971. As disclosed in Note 13; the options granted in
1999 were cancelled in connection with adoption of the stock option plan
approved in 2000.

The Black Scholes option valuation model was developed for use in estimating
the fair value of traded options which have no vesting restrictions and are
fully transferable. In addition, option valuation models require the input of
highly subjective assumptions including the expected stock price volatility.
Because the Companys employee stock options have characteristics
significantly different from those of traded options, and because changes in
the subjective input assumptions can materially affect the fair value
estimate, in managements opinion, the existing models do not necessarily
provide a reliable single measure of the fair value of its employee stock
options.

For purposes of pro-forma disclosures, the estimated fair value of the options
is amortized to expense over the options vesting period.

Had compensation costs related to the options granted in 2000, 2001 and 2002
been based on the fair value at the grant dates, consistent with the provision
of FASB No. 123, the Companys net earnings and earnings per share

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DE RIGO S.p.A. and SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(expressed in thousands of Euro (), except as otherwise indicated)
For the years ended December 31, 2000, 2001 and 2002

would have decreased to the pro-forma amounts indicated below for the years
ended December 31, 2000, 2001 and 2002.

|                                                                                                         |  |      |        |      |  |      |        |   |  |  |        |  
|-------------------------------------------------------------------------------------------------------- |  | ---- | ------ | ---- |  | ---- | ------ | - |  |  | ------ | -
|                                                                                                         |  | 2000 |        | 2001 |  | 2002
|                                                                                                         |  |      |        |      |  |     
|Net income applicable to
ordinary shareholders:                                                          |  |      |        |      |  |      |        |   |  |  |        |  
|As reported on a U.S. GAAP basis                                                                         |  |      | 13,282 |      |  |      | 18,249 |   |  |  | 17,145 |  
|Add: Stock based compensation
expense recognized under
intrinsic value method                            |  |      | 756    |      |  |      | 3,243  |   |  |  |       |  
|Deduct: Total stock-based
employee compensation expense
determined under fair value
based for all awards |  |      | (789   | )    |  |      | (3,773 | ) |  |  | (772   | )
|                                                                                                         |  |      |        |      |  |      |        |   |  |  |        |  
|Pro-forma on a U.S. GAAP basis                                                                           |  |      | 13,249 |      |  |      | 17,719 |   |  |  | 16,373 |  
|                                                                                                         |  |      |        |      |  |      |        |   |  |  |        |  

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##### Table of Contents



DE RIGO S.p.A. and SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(expressed in thousands of Euro (), except as otherwise indicated)
For the years ended December 31, 2000, 2001 and 2002

Basic and diluted income per share and per ADS:

|        |             |  |           |  |           |  |           |  |  |  |  |  | 
|------- | ----------- |  | --------- |  | --------- |  | --------- |  |  |  |  |  | 
|        |             |  | 2000      |  | 2001      |  | 2002     
|        |             |  |           |  |           |  |          
|Basic   |             |  |           |  |           |  |           |  |  |  |  | 
|        | As reported |  | 0.30 Euro |  | 0.41 Euro |  | 0.38 Euro
|        | Pro-forma   |  | 0.30 Euro |  | 0.40 Euro |  | 0.37 Euro
|Diluted |             |  |           |  |           |  |           |  |  |  |  | 
|        | As reported |  | 0.30 Euro |  | 0.40 Euro |  | 0.38 Euro
|        | Pro-forma   |  | 0.30 Euro |  | 0.39 Euro |  | 0.36 Euro

The effects of applying SFAS No. 123 in this pro forma disclosure should not
be interpreted as being indicative of future effects.

Transactions in stock options, including the modification of the plan in the
year 2000, are presented in the following summary of the Companys stock
option activity during the years ended December 31, 2000, 2001 and 2002:

|                                                                                                          |  |                      |            |                  |  |  |           | 
|--------------------------------------------------------------------------------------------------------- |  | -------------------- | ---------- | ---------------- |  |  | --------- | 
|                                                                                                          |  | Shares under Options |            | Weighted average
|                                                                                                          |  |                      |            | Exercise Price  
|                                                                                                          |  |                      |            |                  |  | 
|Outstanding at January 1, 2000                                                                            |  |                      | 2,000,000  |                  |  |  | U.S.$6.00 | 
|Options forfeited due to resignations                                                                     |  |                      | (150,000   | )                |  |  | U.S.$6.00 | 
|Options cancelled due to modification of plan                                                             |  |                      | (1,850,000 | )                |  |  | U.S.$6.00 | 
|Options granted under modification of plan
(l,850,000 options for 46 shares (850,000
shares under option) |  |                      | 851,000    |                  |  |  | U.S.$1.00 | 
|Options granted                                                                                           |  |                      | 348,400    |                  |  |  | U.S.$1.00 | 
|Options exercised                                                                                         |  |                      |           |                  |  |  |           | 
|Options forfeited                                                                                         |  |                      |           |                  |  |  |           | 
|                                                                                                          |  |                      |            |                  |  |  |           | 
|Outstanding at December 31, 2000                                                                          |  |                      | 1,199,400  |                  |  |  | U.S.$1.00 | 
|Options granted                                                                                           |  |                      |           |                  |  |  |           | 
|Options exercised                                                                                         |  |                      | (151,403   | )                |  |  | U.S.$1.00 | 
|Options forfeited                                                                                         |  |                      | (64,860    | )                |  |  | U.S.$1.00 | 
|                                                                                                          |  |                      |            |                  |  |  |           | 
|Outstanding at December 31, 2001                                                                          |  |                      | 983,137    |                  |  |  | U.S.$1.00 | 
|Options granted                                                                                           |  |                      |           |                  |  |  |           | 
|Options exercised                                                                                         |  |                      | (62,852    | )                |  |  | U.S.$1.00 | 
|Options forfeited                                                                                         |  |                      | (73,664    | )                |  |  | U.S.$1.00 | 
|                                                                                                          |  |                      |            |                  |  |  |           | 
|Outstanding at December 31, 2002                                                                          |  |                      | 846,621    |                  |  |  | U.S.$1.00 | 
|                                                                                                          |  |                      |            |                  |  |  |           | 
|Exercisable at December 31, 2002                                                                          |  |                      | 319,621    |                  |  |  | U.S.$1.00 | 
|                                                                                                          |  |                      |            |                  |  |  |           | 

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DE RIGO S.p.A. and SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(expressed in thousands of Euro (), except as otherwise indicated)
For the years ended December 31, 2000, 2001 and 2002

Investments in debt securities

All debt securities are classified as available-for-sale and U.S GAAP
adjustments were made in 2002 to adjust the carrying basis to their fair
values. No U.S GAAP adjustments were required at December 31, 2000 and 2001
because the carrying basis on an Italian GAAP basis approximated the fair
value of the assets. The contractual maturities of these investments as of
December 31, 2002 are in the year 2009.

Comprehensive Income

The components of accumulated other comprehensive income for a U.S. GAAP
financial statements presentation as of December 31, 2000, 2001 and 2002 are as
follows:

|                                                                               |  |               |        |           |  |               |         |                     |  |  |     |   |  |  |         |  
|------------------------------------------------------------------------------ |  | ------------- | ------ | --------- |  | ------------- | ------- | ------------------- |  |  | --- | - |  |  | ------- | -
|                                                                               |  | Currency      |        |           |  |               |         | Unrealized Gains on |  |  |     |  
|                                                                               |  | Translation   |        |           |  |               |         | Available-for-Sale  |  |  |     |  
|                                                                               |  | Adjustments   |        | Pension   |  | Securities    |         |                     |  | 
|                                                                               |  | per financial |        | minimum   |  | per
U.S. GAAP |         |                     |  | 
|                                                                               |  | statements    |        | liability |  | adjustments   |         | Total              
|                                                                               |  |               |        |           |  |               |         |                    
|Balance at December 31, 1999                                                   |  |               | 610    |           |  |               |        |                     |  |  |    |   |  |  | 610     |  
|Currency translation adjustments                                               |  |               | (119   | )         |  |               |        |                     |  |  |    |   |  |  | (119    | )
|                                                                               |  |               |        |           |  |               |         |                     |  |  |     |   |  |  |         |  
|Balance at December 31, 2000                                                   |  |               | 491    |           |  |               |        |                     |  |  |    |   |  |  | 491     |  
|Currency translation adjustment                                                |  |               | 748    |           |  |               |        |                     |  |  |    |   |  |  | 748     |  
|                                                                               |  |               |        |           |  |               |         |                     |  |  |     |   |  |  |         |  
|Balance at December 31, 2001                                                   |  |               | 1,239  |           |  |               |        |                     |  |  |    |   |  |  | 1,239   |  
|Currency translation adjustment                                                |  |               | (3,210 | )         |  |               |         |                     |  |  |     |   |  |  | (3,210  | )
|Unrealized gains on securities                                                 |  |               |        |           |  |               |         |                     |  |  |     |   |  |  |         |  
|Recognition of pension minimum
liability                                       |  |               |        |           |  |               | (22,137 | )                   |  |  | 111 |   |  |  | (22,026 | )
|Deferred taxes on pension
minimum liability and
unrealized gains on securities |  |               |       |           |  |               | 6,641   |                     |  |  | (38 | ) |  |  | 6,603   |  
|                                                                               |  |               |        |           |  |               |         |                     |  |  |     |   |  |  |         |  
|Balance at December 31, 2002                                                   |  |               | (1,971 | )         |  |               | (15,496 | )                   |  |  | 73  |   |  |  | (17,394 | )
|                                                                               |  |               |        |           |  |               |         |                     |  |  |     |   |  |  |         |  

Comprehensive income for each of the three years in the period ended December
31, 2002 is as follows:

|                                                                               |  |      |        |      |  |      |        |  |  |  |         |  
|------------------------------------------------------------------------------ |  | ---- | ------ | ---- |  | ---- | ------ |  |  |  | ------- | -
|                                                                               |  | 2000 |        | 2001 |  | 2002
|                                                                               |  |      |        |      |  |     
|Net income per U.S. GAAP reconciliation                                        |  |      | 13,282 |      |  |      | 18,249 |  |  |  | 17,145  |  
|Change in currency translation adjustment                                      |  |      | (119   | )    |  |      | 748    |  |  |  | (3,210  | )
|Unrealized gains on securities                                                 |  |      |       |      |  |      |       |  |  |  | 111     |  
|Minimum pension liability                                                      |  |      |       |      |  |      |       |  |  |  | (22,137 | )
|Deferred taxes on minimum pension
liability and unrealized gains on securities |  |      |       |      |  |      |       |  |  |  | 6,603   |  
|                                                                               |  |      |        |      |  |      |        |  |  |  |         |  

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##### Table of Contents



DE RIGO S.p.A. and SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(expressed in thousands of Euro (), except as otherwise indicated)
For the years ended December 31, 2000, 2001 and 2002

|                     |  |      |        |      |  |      |        |  |  |  |        |  
|-------------------- |  | ---- | ------ | ---- |  | ---- | ------ |  |  |  | ------ | -
|                     |  | 2000 |        | 2001 |  | 2002
|                     |  |      |        |      |  |     
|Comprehensive income |  |      | 13,163 |      |  |      | 18,997 |  |  |  | (1,488 | )
|                     |  |      |        |      |  |      |        |  |  |  |        |  

Income Taxes

Components of deferred income tax assets and liabilities were:

|                                     |                                   |  |              |        |      |  |         |       | 
|------------------------------------ | --------------------------------- |  | ------------ | ------ | ---- |  | ------- | ----- | 
|                                     |                                   |  | December 31,
|                                     |                                   |  |             
|                                     |                                   |  | 2001         |        | 2002
|                                     |                                   |  |              |        |     
|Total deferred tax assets            |                                   |  | 8,554        |        |      |  | 22,229  |      
|Total deferred tax liabilities       |                                   |  | (13,184      | )      |      |  | (11,591 | )    
|                                     |                                   |  |              |        |      |  |         |      
|Net assets (liabilities)             |                                   |  | (4,630       | )      |      |  | 10,638  |      
|                                     |                                   |  |              |        |      |  |         |      
|Of which:                            |                                   |  |              |        |      |  |         |      
|Current deferred tax assets          |                                   |  | 2,699        |        |      |  | 9,936   |      
|Non-current deferred tax assets      |                                   |  | 5,855        |        |      |  | 12,293  |      
|Current deferred tax liabilities     |                                   |  |             |        |      |  |        |      
|Non-current deferred tax liabilities |                                   |  | (13,184      | )      |      |  | (11,591 | )    
|Detailed as follows:                 |                                   |  |              |        |      |  |         |      
|                                     | Italian GAAP financial statements |  |              | (6,063 | )    |  |         | 2,641 | 
|                                     | U.S. GAAP adjustments             |  |              | 1,433  |      |  |         | 7,997 | 
|                                     |                                   |  |              |        |      |  |         |      
|Net assets (liabilities)             |                                   |  | (4,630       | )      |      |  | 10,638  |      
|                                     |                                   |  |              |        |      |  |         |      

Principal items comprising net deferred income tax assets were as follows:

|                                                                   |  |  |              |   |      |  |        |   | 
|------------------------------------------------------------------ |  |  | ------------ | - | ---- |  | ------ | - | 
|                                                                   |  |  | December 31,
|                                                                   |  |  |             
|                                                                   |  |  | 2001         |   | 2002
|                                                                   |  |  |              |   |     
|Equalization tax on dividends                                      |  |  | (350         | ) |      |  | (210   | )
|Tax revaluation on certain assets, net of accumulated
depreciation |  |  | 113          |   |      |  | 298    |  
|Allowance for doubtful accounts                                    |  |  | 49           |   |      |  | 1,293  |  
|Inventory obsolescence                                             |  |  | 1,848        |   |      |  | 6,691  |  
|Intercompany profits in inventory                                  |  |  | 802          |   |      |  | 1,952  |  
|Accumulated accelerated depreciation                               |  |  | (683         | ) |      |  | (495   | )
|Pension asset                                                      |  |  | (1,974       | ) |      |  | (1,286 | )
|Property cost accruals                                             |  |  | 914          |   |      |  | 150    |  
|Book revaluation of certain assets                                 |  |  | (9,320       | ) |      |  | (8,844 | )
|Trademark revaluation of assets                                    |  |  | 2,030        |   |      |  | 1,736  |  
|Tax on revaluation reserve for trademark revaluation               |  |  | (857         | ) |      |  | (756   | )
|Net operating loss carry forwards (NOL)                            |  |  | 5,598        |   |      |  | 5,484  |  

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##### Table of Contents



DE RIGO S.p.A. and SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(expressed in thousands of Euro (), except as otherwise indicated)
For the years ended December 31, 2000, 2001 and 2002

|                                      |                             |  |              |        |      |  |        |        |  
|------------------------------------- | --------------------------- |  | ------------ | ------ | ---- |  | ------ | ------ | -
|                                      |                             |  | December 31,
|                                      |                             |  |             
|                                      |                             |  | 2001         |        | 2002
|                                      |                             |  |              |        |     
|Pension minimum liability             |                             |  |             |        |      |  | 6,641  |       
|Agents termination indemnity          |                             |  |             |        |      |  | 501    |       
|Investments devaluation               |                             |  |              |        |      |  | 282    |       
|Other                                 |                             |  | 2,431        |        |      |  | 2,563  |       
|                                      |                             |  |              |        |      |  |        |       
|Net deferred tax assets (liabilities) |                             |  | 601          |        |      |  | 16,000 |       
|Less:                                 |                             |  |              |        |      |  |        |       
|                                      | Valuation allowance on NOLs |  |              | (5,231 | )    |  |        | (5,362 | )
|                                      |                             |  |              |        |      |  |        |       
|Net deferred tax assets (liabilities) |                             |  | (4,630       | )      |      |  | 10,638 |       
|                                      |                             |  |              |        |      |  |        |       

At December 31, 2002, the Companys subsidiaries in the United States had a
net operating loss carry forward (NOL) of  10,768 which will expire from
2010 thru 2017. Utilization of that NOL is limited to future earnings of the
U.S. subsidiaries. For financial reporting purposes a valuation allowance has
been recognized for the full amount of this NOL. Net operating loss carry
forwards (NOLs) of other foreign subsidiaries amounted to  5,248 at December
31, 2002 which will expire from 2003. A valuation allowance of  1,593 has
been provided against this amount.

Tax savings resulting from income derived from operations in Italian tax
exempt areas generated a per share benefit of 0.07 Euro and 0.09 Euro,
respectively in the years 2000, 2001. Tax savings resulting from
income derived from operations in Italian tax exempt areas generated
less than 0.01 Euro per share benefit in the year 2002.

Financial instruments

Derivative products

At December 31, 2001 the Company had outstanding forward exchange contracts to
buy  1,065 for GBP Sterling 670,000; in addition, the Company purchased
foreign currency put options to sell Japanese Yen 650,000,000 and sold call
options to buy Japanese Yen 850,000,000 at the exchange rate of 113.25 Yen
per Euro which were still outstanding at December 31, 2001.

At December 31, 2002 the Company had outstanding forward exchange contracts to
buy US$ 1,070,000 ( 1,020) for GBP Sterling 704,547; none of the foreign
exchange contracts have maturities that exceed one year. In addition, at the
same date the Company had an interest rate swap agreement to convert the
variable interest rate on bank borrowings totaling  20,000 to a fixed
interest rate of 3.3%. This interest rate swap agreement will expire in
January 2005.

None of the foreign exchange contracts or foreign currency options have
maturities that exceed one year.

As of December 31, 2001 and 2002, total unrealized gain (loss) on these
derivatives amounted to  (16) and  (343), respectively, and has been
included in the consolidated statements of income as the derivatives were
considered ineffective hedges.

Foreign exchange gains and losses

F-48



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DE RIGO S.p.A. and SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(expressed in thousands of Euro (), except as otherwise indicated)
For the years ended December 31, 2000, 2001 and 2002

The net foreign exchange gains and (losses) recognized in the consolidated
statement of income for 2000, 2001 and 2002 amounted to  (1,854),  (79) and
 (656), respectively.

Concentration of Credit Risks

Financial instruments that potentially subject the Group to concentration of
credit risks consist principally of cash investments and trade accounts
receivable. The Group maintains cash and cash equivalents and short-term
investments with financial institutions located in Italy. The Company selects
only financial institutions with high credit standards for use in its
investment strategies. Concentration of credit risks and the risk of
accounting loss with respect to trade receivables is generally limited due to
the large number of the Companys end customers and the diversity of the
geographic areas in which the customers are located. The Company generally
does not require collateral with respect to sale orders, but it may require
collateral and bank guarantees with respect to certain customers.

No individual customer represented 10% or more of sales in any of the years
ended December 31, 2000, 2001 and 2002.

Fair Value of Financial Instruments

The following methods and assumptions were used by the Company in estimating
its fair value disclosure for financial instruments.

Cash and cash equivalents  The carrying amount of cash and cash equivalents
reported in the balance sheet by the Company approximates their fair value due
to the short duration of these investments.

Investment in debt securities  The carrying amount of investments in debt
securities based on the lower of cost or market approximates their fair value
as these were valued based on quoted prices.

Accounts receivable and payable    The carrying amount of receivables and
payables approximates their fair value because of the short maturity of these
instruments.

Short-term debt  The carrying amount of the Companys borrowings under its
short-term credit arrangements approximates their fair value because of the
short maturity of these instruments.

Long-term debt  Certain of the Groups long-term loans are subsidized by
government entities in Italy. The government entities pay a portion of these
entities interest charges thereby reducing the Companys interest rate to
below market. The fair value of these loans have been determined as being
equal to the carrying amount of the loans, as all companies with investments
in the same region where the Company has its investments are entitled to such
benefits.

Foreign currency exchange contracts and options    The carrying value
approximates fair value based on exchange rates at December 31, 2001 and 2002.

F-49



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DE RIGO S.p.A. and SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(expressed in thousands of Euro (), except as otherwise indicated)
For the years ended December 31, 2000, 2001 and 2002

Interest rate swap agreements  The carrying value approximates fair value
based on interest rates at December 31, 2002.

F-50



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DE RIGO S.p.A. and SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(expressed in thousands of Euro (), except as otherwise indicated)
For the years ended December 31, 2000, 2001 and 2002

Valuation and Qualifying Accounts

The following table summarizes the changes in accounts receivable, inventory
allowances and deferred tax assets for each of the three years in the period
ended December 31, 2002:

|                              |                                    |                     |  |            |        |             |  |              |       |  |  |           |      |        |  |  |  |                   |  |        |        |   |  |        |        | 
|----------------------------- | ---------------------------------- | ------------------- |  | ---------- | ------ | ----------- |  | ------------ | ----- |  |  | --------- | ---- | ------ |  |  |  | ----------------- |  | ------ | ------ | - |  | ------ | ------ | 
|                              |                                    |                     |  |            |        |             |  | Charged to   |       |  |  |           |      |        |  |  |  |                   |  |        |        |   |  |       
|                              |                                    |                     |  | Balance at |        | costs and   |  | Acquisitions |       |  |  |           |      |        |  |  |  | Balance at end of
|Description                   |                                    | beginning of period |  | expenses   |        | (disposals) |  |              |       |  |  | Deduction |      | period
|                              |                                    |                     |  |            |        |             |  |              |       |  |  |           |      |       
|Year
ended December 31, 2000  |                                    |                     |  |            |        |             |  |              |       |  |  |           |      |        |  |  |  |                   |  |        |        |   |  |       
|Deducted from asset accounts: |                                    |                     |  |            |        |             |  |              |       |  |  |           |      |        |  |  |  |                   |  |        |        |   |  |       
|                              | Allowance for doubtful accounts    |                     |  | 6,362      |        |             |  | 3001         |       |  |  |          |      |        |  |  |  |                   |  | (3,209 | )      |   |  | 6,154  |       
|                              | Reserve for inventory obsolescence |                     |  | 15,335     |        |             |  | 1,341        |       |  |  |          |      |        |  |  |  |                   |  | (1,535 | )      |   |  | 15,141 |       
|                              | Valuation allowance on NOLs        |                     |  | 4,171      |        |             |  | 96           |       |  |  |          |      |        |  |  |  |                   |  |       |        |   |  | 4,267  |       
|                              |                                    |                     |  |            |        |             |  |              |       |  |  |           |      |        |  |  |  |                   |  |        |        |   |  |       
|                              |                                    | Total               |  |            | 25,868 |             |  |              | 4,438 |  |  |           |     |        |  |  |  |                   |  |        | (4,744 | ) |  |        | 25,562 | 
|                              |                                    |                     |  |            |        |             |  |              |       |  |  |           |      |        |  |  |  |                   |  |        |        |   |  |       
|Year ended December 31, 2001  |                                    |                     |  |            |        |             |  |              |       |  |  |           |      |        |  |  |  |                   |  |        |        |   |  |       
|Deducted from asset accounts: |                                    |                     |  |            |        |             |  |              |       |  |  |           |      |        |  |  |  |                   |  |        |        |   |  |       
|                              | Allowance for doubtful accounts    |                     |  | 6,154      |        |             |  | 851          |       |  |  |          |      |        |  |  |  |                   |  | (1,504 | )      |   |  | 5,501  |       
|                              | Reserve for inventory
obsolescence |                     |  | 15,141     |        |             |  | 4,223        |       |  |  |          |      |        |  |  |  |                   |  | (455   | )      |   |  | 18,909 |       
|                              | Valuation allowance on NOLs        |                     |  | 4,267      |        |             |  | 964          |       |  |  |          |      |        |  |  |  |                   |  |       |        |   |  | 5,231  |       
|                              |                                    |                     |  |            |        |             |  |              |       |  |  |           |      |        |  |  |  |                   |  |        |        |   |  |       
|                              |                                    | Total               |  |            | 25,562 |             |  |              | 6,038 |  |  |           |     |        |  |  |  |                   |  |        | (1,959 | ) |  |        | 29,641 | 
|                              |                                    |                     |  |            |        |             |  |              |       |  |  |           |      |        |  |  |  |                   |  |        |        |   |  |       
|Year ended December 31, 2002  |                                    |                     |  |            |        |             |  |              |       |  |  |           |      |        |  |  |  |                   |  |        |        |   |  |       
|Deducted from asset accounts: |                                    |                     |  |            |        |             |  |              |       |  |  |           |      |        |  |  |  |                   |  |        |        |   |  |       
|                              | Allowance for doubtful accounts    |                     |  | 5,501      |        |             |  | 2,820        |       |  |  | (150      | )    |        |  |  |  |                   |  | (1,195 | )      |   |  | 6,976  |       
|                              | Reserve for inventory
obsolescence |                     |  | 18,909     |        |             |  | 4,480        |       |  |  | (164      | )    |        |  |  |  |                   |  | (1,298 | )      |   |  | 21,927 |       
|                              | Valuation allowance on NOLs        |                     |  | 5,231      |        |             |  | 131          |       |  |  |          |      |        |  |  |  |                   |  |       |        |   |  | 5,362  |       
|                              |                                    |                     |  |            |        |             |  |              |       |  |  |           |      |        |  |  |  |                   |  |        |        |   |  |       
|                              |                                    | Total               |  |            | 29,641 |             |  |              | 7,431 |  |  |           | (314 | )      |  |  |  |                   |  |        | (2,493 | ) |  |        | 34,265 | 
|                              |                                    |                     |  |            |        |             |  |              |       |  |  |           |      |        |  |  |  |                   |  |        |        |   |  |       



---

|(a) |  | Amounts charged to other accounts result from foreign currency translation
adjustments reflected in the equity section of the balance sheet.
|--- |  | --------------------------------------------------------------------------------------------------------------------------------------------

F-51



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SIGNATURES

The registrant hereby certifies that it meets all of the requirements of
filing on Form 20-F and has duly caused and authorized the undersigned to sign
this annual report on its behalf.

| |  |                                                  
| |  | -------------------------------------------------
| |  | De Rigo S.p.A.                                   
| |  |                                                  
| |  | (Registrant)                                     
| |  |                                                  
| |  | /s/ Ennio De Rigo                                
| |  |                                                  
| |  | Ennio De Rigo                                    
| |  | Chairman of the Board and Chief Executive Officer

Date: June 30, 2003





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CERTIFICATIONS

I, Ennio De Rigo certify that:



|1. |  | I have reviewed this annual report on Form 20-F of De Rigo S.p.A.;                                                                                                                                                                                                                                                      
|-- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|2. |  | Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this annual report;
|  
|3. |  | Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of
the registrant as of, and for, the periods presented in this annual
report;                   
|  
|4. |  | The registrants other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and
have:                                                                                                  



| | a) |  | designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this annual report is
being prepared;
| | -- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | b) |  | evaluated the effectiveness of the registrants disclosure controls
and procedures as of a date within 90 days prior to the filing date of
this annual report (the Evaluation Date); and                                                                                                  
|
| | c) |  | presented in this annual report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;                                                                                                                        



|5. |  | The registrants other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrants auditors and the audit
committee of the registrants board of directors (or persons performing
the equivalent function):
|-- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | a) |  | all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrants ability to
record, process, summarize and report financial data and have
identified for the registrants auditors any material weakness in
internal controls; and
| | -- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | b) |  | any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrants
internal controls; and                                                                                                                                      





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|6. |  | The registrants other certifying officers and I have indicated in this
annual report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and
material weaknesses.
|-- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Ennio De Rigo
Chief Executive Officer
June 30, 2003





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##### Table of Contents



I, Maurizio Dessolis,certify that:



|1. |  | I have reviewed this annual report on Form 20-F of De Rigo S.p.A.;                                                                                                                                                                                                                                                      
|-- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|2. |  | Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this annual report;
|  
|3. |  | Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of
the registrant as of, and for, the periods presented in this annual
report;                   
|  
|4. |  | The registrants other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and
have:                                                                                                  



| | a) |  | designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this annual report is
being prepared;
| | -- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | b) |  | evaluated the effectiveness of the registrants disclosure controls
and procedures as of a date within 90 days prior to the filing date of
this annual report (the Evaluation Date); and                                                                                                  
|
| | c) |  | presented in this annual report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;                                                                                                                        



|5. |  | The registrants other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrants auditors and the audit
committee of the registrants board of directors (or persons performing
the equivalent function):
|-- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | a) |  | all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrants ability to
record, process, summarize and report financial data and have
identified for the registrants auditors any material weakness in
internal controls; and
| | -- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | b) |  | any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrants
internal controls; and                                                                                                                                      





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|6. |  | The registrants other certifying officers and I have indicated in this
annual report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and
material weaknesses.
|-- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Maurizio Dessolis
Chief Financial Officer
June 30, 2003