Luxottica Group, S.p.A. (LUX)

Recent Developments

Acquisitions

On May 27, 2009, we entered into an agreement to acquire 40% of Multiopticas Internacional S.L., a company that currently owns over 390 eyewear stores operating under the GMO, Econoptics and SunPlanet retail brands in Chile, Peru, Ecuador and Colombia.  This transaction, with a fair value of approximately Euro 40 million, is expected to close around the end of June 2009 and marks our entry into the retail business in South America, a region where we already have a solid presence through our wholesale network. Under the agreement, we have a call option for the remaining 60 percent of Multiopticas Internacional S.L.  The call option will be exercisable by us between 2012 and 2014 at a price to be determined on the basis of Multiopticas’s consolidated sales and EBITDA values at the time of the exercise.

On July 31, 2008, we and Ruleplan Limited, a company unaffiliated with us, exchanged all of the ordinary shares in Optika Holdings Limited, or OHL, for ordinary shares of our subsidiary, Sunglass Hut UK Ltd., or SGH UK. The fair value of the OHL shares exchanged was approximately GBP 35 million. Prior to the exchange, OHL was a joint venture owned 50% by us and 50% by Ruleplan Limited. OHL, through its subsidiaries, operated a chain of ophthalmic retail locations throughout the United Kingdom and Ireland under the brand name “David Clulow.” As a result of this transaction, we own, directly and indirectly, 66% of SGH UK and the former stockholders of OHL own 34% of SGH UK. The former stockholders of OHL received a put option to sell their SGH UK shares to us, while we have a call option on their SGH UK shares.

Ray Ban Indian Holdings Offer

In August 2003, the Securities Appellate Tribunal, or SAT, in India upheld the decision of the Securities Exchange Board of India, or SEBI, to require our wholly-owned indirect subsidiary, Ray Ban Indian Holdings, Inc., to make a public offer in India to acquire up to an additional 20 percent of the outstanding shares of RayBan Sun Optics India Ltd., or RayBan Sun Optics. The Supreme Court of India, on December 12, 2006, directed that a public offer be made within 45 days of the order, using April 28, 1999, as the reference date for calculating the offer price. The Supreme Court also directed that interest be paid at the rate of 10 percent per annum for the period between August 27, 1999, and the closing date to all persons who were shareholders of RayBan Sun Optics throughout such period. In April 2007, pursuant to the Supreme Court order and in compliance with the applicable SEBI regulations, we launched a public offer through Ray Ban Indian Holdings, Inc. to acquire up to 4,895,900 shares, representing approximately 20 percent of the equity share capital of RayBan Sun Optics, which we subsequently increased to up to 7,545,200 shares, representing approximately 31 percent of the equity share capital of RayBan Sun Optics. 6,454,280 shares were tendered in the offer, which closed in May 2007.  In June 2007, our stake in RayBan Sun Optics increased to 70.5 percent. We paid total consideration of approximately Euro 13.0 million for the tendered shares.

During 2008, the Company, through Ray Ban Indian Holdings, Inc., announced its intention under SEBI (Delisting of Securities) Guidelines 2003 (the “Guidelines”) to acquire 7,210,554 equity shares comprising 29.46% of the fully paid-up equity share capital from public stockholders of RayBan Sun Optics in order to delist its shares from the Bombay Stock Exchange, or the BSE. The delisting offer made to the stockholders in accordance with the Guidelines opened on August 18, 2008 and closed successfully on August 22, 2008. From August 28, 2008 to September 11, 2008, Ray Ban Indian Holdings, Inc. accepted shares from the remaining public stockholders holding shares in the form of physical share certificates or in certificated form who either could not participate in the bidding process or whose bids were rejected in the bidding process. Through the offer, Ray Ban Indian Holdings, Inc. purchased 4,335,713 shares from public stockholders for approximately Euro 9.1 million (U.S. $13.4 million, including approximately U.S. $0.5 million in transaction costs). Following the delisting offer, BSE approved the delisting of equity shares of RayBan Sun Optics on October 22, 2008.

For the six months following the date of delisting, in accordance with the Guidelines, Ray Ban Indian Holdings, Inc. provided a final opportunity to the remaining stockholders to tender their shares for a period of six months on the same terms and conditions as the delisting. During such period, which ended April 22, 2009, Ray Ban Indian Holdings, Inc. purchased 1,239,195 shares from public stockholders for approximately Euro 2.9 million. Upon transfer of the remaining tendered shares, Ray Ban Indian Holdings, Inc. will own 93.32% of the equity shares of RayBan Sun Optics.

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Recent Developments

Acquisitions

On November 14, 2007, we completed the acquisition of Oakley, a worldwide leader in the design, development, manufacture, distribution and marketing of performance optics products, including market-leading premium sunglasses, prescription eyewear, goggles and electronically-enabled eyewear.  As part of the merger, we acquired all of the outstanding shares of Oakley for a cash purchase price of U.S.$29.30 per share, together with the purchase of all outstanding options and other equity rights at the same price per share less the exercise price. The total purchase price was approximately U.S.$2.1 billion (approximately Euro 1.6 billion).  In addition to Oakley-branded optics products, Oakley’s eyewear portfolio also includes the Eye Safety Systems, Mosley Tribes, Oliver Peoples and Paul Smith Spectacles brands. Oakley also offers an array of Oakley-branded apparel, footwear, watches and accessories. We also acquired retail locations through Oakley, including Oakley Stores and Vaults, Sunglass Icon, The Optical Shop of Aspen, Oliver Peoples and Bright Eyes. We believe Oakley’s principal strength is its ability to develop products that demonstrate superior performance and aesthetics through proprietary technology, manufacturing processes and styling.

During the second quarter of 2007, we completed the acquisitions of two prominent specialty sun chains in South Africa, with a total of 65 stores, for approximately Euro 10 million. The two acquisitions represent an important step in the expansion of our sun retail presence worldwide.

In February 2007, we completed the acquisition of the retail optical business of D.O.C Optics, comprising approximately 100 stores located primarily in the Midwest United States, for approximately U.S.$110 million in cash. We have since rebranded the acquired stores as either “LensCrafters” or “Pearle Vision.”

Ray Ban Indian Holdings Offer

On August 29, 2003, the Securities Appellate Tribunal, or SAT, in India upheld the decision of the Securities Exchange Board of India to require our subsidiary Ray Ban Indian Holdings, Inc. to make a public offer in India to acquire up to an additional 20 percent of the outstanding shares of RayBan Sun Optics India Ltd. (“RayBan Sun Optics”).  The Supreme Court of India, by an order dated December 12, 2006, directed that a public offer be made within 45 days of the order, using April 28, 1999 as the reference date for calculating the offer price.  The Supreme Court also directed that interest be paid at the rate of 10 percent per annum for the period between August 27, 1999 and the closing date to all persons who were shareholders of RayBan Sun Optics throughout such period. On April 25, 2007, pursuant to the December 12, 2006 Supreme Court order and in compliance with Regulation 10 and 12 of Chapter III of the SEBI Regulations 1997, we launched a public offer through our subsidiary, Ray Ban Indian Holdings, Inc., to acquire up to 4,895,900 shares, representing approximately 20 percent of the equity share capital of RayBan Sun Optics, which we subsequently increased to up to 7,545,200 shares, representing approximately 31 percent of the equity share capital of RayBan Sun Optics.  6,454,280 shares were tendered in the offer, which closed on May 14, 2007.  Effective upon the entry of the share transfers in the share register on June 26, 2007, our stake in RayBan Sun Optics increased to 70.5 percent. We paid total consideration of approximately Euro 13.0 million for the tendered shares.

RayBan Sun Optics is listed on the Bombay Stock Exchange. We acquired our initial interest in RayBan Sun Optics in connection with the purchase of the RayBan eyewear business from Bausch & Lomb in 1999.

License Agreements

On April 17, 2008, we signed a long-term exclusive license agreement for the design, production and worldwide distribution of sunglasses under the luxury lifestyle brand Stella McCartney. The agreement, which will begin on January 1, 2009, is for an initial term of six years, automatically renewable for an additional five-year term. The first collection will be launched in the summer of 2009. Stella McCartney first introduced her eyewear line in 2003. She will continue to personally follow each step of the creative process, together with the Luxottica design and product team.

On January 30, 2008, we signed a new license agreement with Chanel.  This marks the further extension of a long-term relationship between the two companies, which started in 1999 with the launch of Chanel’s first eyewear collections and now seeks to capture the additional growth opportunities for this exclusive and iconic luxury fashion brand.

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Recent Developments

Acquisitions

On June 20, 2007, we announced that we entered into a definitive merger agreement with Oakley, a worldwide specialist in sport performance optics with brands including Dragon, Eye Safety Systems, Fox Racing, Mosley Tribes, Oliver Peoples and Paul Smith Spectacles, and retail chains including Bright Eyes, Oakley Stores, Sunglass Icon and The Optical Shop of Aspen. As part of the merger, we will acquire all of the outstanding shares of Oakley for a cash purchase price of U.S.$29.30 per share, together with the purchase of all outstanding options and other equity rights at the same price per share less the exercise price. The total purchase price will be approximately U.S.$2.1 billion (approximately Euro 1.6 billion). The transaction is expected to close in the second half of 2007 and is subject to certain conditions, including regulatory approvals.

In February 2007, we completed the acquisition of the retail optical business of D.O.C Optics, comprising approximately 100 stores located primarily in the midwest United States, for approximately U.S.$110 million in cash. We expect to rebrand the acquired stores as “LensCrafters” and “Pearle Vision.”

During the second quarter of 2007, we  completed the acquisitions of two prominent specialty sun chains in South Africa, with a total of 65 stores, for approximately Euro 10 million. The two acquisitions represent an important step in the expansion of our sun retail presence worldwide.

Ray Ban Indian Holdings Offer

On August 29, 2003, the Securities Appellate Tribunal, or SAT, in India upheld the decision of the Securities Exchange Board of India to require our subsidiary Ray Ban Indian Holdings, Inc. to make a public offer in India to acquire up

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to an additional 20 percent of the outstanding shares of RayBan Sun Optics India Ltd. (“RayBan Sun Optics”).  The Supreme Court of India, by an order dated December 12, 2006, directed that a public offer be made within 45 days of the order, using April 28, 1999 as the reference date for calculating the offer price.  The Supreme Court also directed that interest be paid at the rate of 10 percent per annum for the period between August 27, 1999 and the closing date to all persons who were shareholders of RayBan Sun Optics throughout such period. On April 25, 2007, pursuant to the December 12, 2006 Supreme Court order and in compliance with Regulation 10 and 12 of Chapter III of the SEBI Regulations 1997, we launched a public offer through our subsidiary, Ray Ban Indian Holdings, Inc., to acquire up to 4,895,900 shares, representing approximately 20 percent of the equity share capital of RayBan Sun Optics, which we subsequently increased to up to 7,545,200 shares, representing approximately 31 percent of the equity share capital of RayBan Sun Optics.  6,454,280 shares were tendered in the offer, which closed on May 14, 2007.  Effective upon the entry of the share transfers in the share register on June 26, 2007, our stake in RayBan Sun Optics increased to 70.5 percent. We paid total consideration of approximately Euro 13.0 million for the tendered shares. RayBan Sun Optics is listed on the Bombay Stock Exchange. We acquired our interest in RayBan Sun Optics in connection with the purchase of the RayBan eyewear business from Bausch & Lomb in 1999.

Sale of Things Remembered

In September 2006, we completed the sale of Things Remembered, a personalized gift retail chain based in the United States, for consideration with an approximate value of U.S.$200 million.  This business, which had been acquired in October 2004 through the acquisition of Cole, was non-core for us.

License Agreements

In December 2006, we signed a 10-year license agreement for the design, manufacturing and worldwide distribution of ophthalmic and sun collections under the Tiffany & Co. brand. The launch of the first collection is expected in early 2008. The distribution of the Tiffany collections will start with Tiffany’s own stores as well as through certain of our other distribution channels in North America, Japan, Hong Kong, South Korea, key Middle East markets and Mexico, and will extend over time to additional markets and through new distribution channels.

Credit Agreement

In February 2007, we exercised an option included in the Amended Euro 1,130 Million and U.S.$325 Million Credit Facility to extend the maturity date of Tranches B and C to March 2012.  For additional information, see Note 9 to our Consolidated Financial Statements included in Item 18 of this annual report.

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Recent Developments

License Agreements

On October 7, 2005, we announced the signing of a 10-year license agreement for the design, production and worldwide distribution of prescription frames and sunglasses under the Burberry name. The first Burberry eyewear collections under the agreement will be presented in October 2006.

On February 27, 2006, we announced the signing of a 10-year license agreement for the design, production and worldwide distribution of prescription frames and sunglasses under the Polo Ralph Lauren name. Performance under the agreement will commence on January 1, 2007.

Retail Acquisitions

On July 7, 2005, we announced that our subsidiary, SPV Zeta S.r.l., had entered into an agreement to acquire 100 percent of the equity interest in Beijing Xueliang Optical Technology Co. Ltd. for a purchase price of Chinese Renminbi (“RMB”) 169 million (approximately Euro 17 million), plus RMB 40 million (approximately Euro 4 million) in assumed liabilities. Xueliang Optical had unaudited sales for the 2004 fiscal year of RMB 102 million (approximately Euro 10 million). Xueliang Optical has 79 stores in Beijing. The Company completed the acquisition in April 2006.

On October 4, 2005, we announced that our subsidiary, SPV Eta S.r.l., had entered into an agreement to acquire 100 percent of the equity interests in Ming Long Optical, the largest premium optical chain, based on number of stores, in the province of Guangdong, China, with 133 stores, for a purchase price of RMB 290 million (approximately Euro 29 million). As a result, we will become  the leading operator of premium optical stores in China based on the number of stores, with a total of 278 locations in two of the top premium optical markets in Mainland China, as well as in Hong Kong, the most important market in Asia for luxury goods. Completion of the transaction remains subject to customary approvals by the relevant Chinese governmental authorities. The Company currently anticipates receiving such approvals by July 2006.

On May 18, 2006, we announced that we had entered into agreement to acquire Shoppers Optical, a 74-store Canadian-based optical chain owned by King Optical Group Inc. Once the transaction is completed, we will manage a total of 268 optical stores in Canada. Shoppers Optical operates across eight of Canada’s provinces. Twenty-six of Shoppers Optical’s stores are in the province of Ontario, where nearly 40 percent of the Canadian population lives. In addition, this acquisition will bring into the organization the first full-service Canada-based central lens finishing lab with anti-reflective coating capability. The closing of the transaction, which is subject to customary closing conditions, is expected to take place at the end of June 2006.

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In June 2006, we announced that we plan to acquire 100 percent of the equity interest in Modern Sight Optics, a leading premium optical chain that operates a total of 28 stores in Shanghai, China, for total consideration of RMB 140 million (approximately Euro 14 million). Completion of the transaction is subject to customary approvals by the relevant Chinese governmental authorities. We expect to receive such approvals by the end of 2006.

Retail Expansion through Franchising

In June 2006, we announced a five-year franchising agreement with Azal Group that will expand our Sunglass Hut chain by up to 50 stores in the Middle East by 2008. Azal Group has operations in the Middle East and Europe and has a franchise portfolio of over 30 brands, including some of the industry’s most recognizable brands.

Litigation Settlement

On August 31, 2005, we agreed with the plaintiffs in the previously disclosed action commenced in May 2001 (the “Action”) pending in the U.S. District Court for the Eastern District of New York relating to its acquisition of Sunglass Hut to a full and final settlement and release (the “Settlement”) of all claims made in the Action. In the Action, the plaintiffs’ principal claim was that certain payments made to the former Chairman of SGHI under a consulting, non-disclosure and non-competition agreement violated the “best price” rule under U.S. securities laws. The Settlement was approved by the Court, and final judgment has been entered dismissing the case with prejudice.

California Vision Health Care Service Plan Lawsuit

In March 2002, an individual commenced an action in the California Superior Court for the County of San Francisco against Luxottica Group S.p.A. and certain of our subsidiaries, including LensCrafters, Inc. and EYEXAM of California, Inc. The plaintiff, along with a second plaintiff named in an amended complaint, seeks to certify this case as a class action.  The claims have been partially dismissed.  The remaining claims, against LensCrafters, EYEXAM and EyeMed Vision Care, LLC, allege various statutory violations relating to the confidentiality of medical information, the operation of LensCrafters’ stores in California, including violations of California laws governing relationships among opticians, optical retailers, manufacturers of frames and lenses and optometrists, false advertising and other unlawful or unfair business practices. The action seeks unspecified damages, disgorgement and restitution of allegedly unjustly obtained sums, statutory damages, punitive damages and injunctive relief, including an injunction that would prohibit defendants from providing eye examinations or other optometric services at LensCrafters stores in California. In May 2004, the trial court stayed all proceedings in the case pending the California Supreme Court’s decision in a case against Cole and its subsidiaries expected to address certain legal questions related to the issues presented in this case. On June 12, 2006, the California Supreme Court rendered its decision in that case, ruling that optical stores such as those operated by Cole must comply with Sections 655 and 2556 of the California Business and Professions Code.  It is expected that plaintiffs will now seek to resume their prosecution of this action.  Although we believe that our operational practices in California comply with California law, an adverse decision in this action or the suit against Cole might cause LensCrafters, EYEXAM and EyeMed to modify or close certain activities in California. Further, LensCrafters, EYEXAM and EyeMed might be required to pay damages and/or restitution, the amount of which might have a material adverse effect on our operating results, financial condition and cash flow.

People v. Cole

In February 2002, the State of California commenced an action in the California Superior Court for the County of San Diego against Cole and certain of its subsidiaries, including Pearle Vision, Inc. and Pearle Vision Care, Inc. The claims allege various statutory violations related to the operation of Pearle Vision Centers in California including violations of California laws governing relationships among opticians, optical retailers, manufacturers of frames and lenses and optometrists, false advertising and other unlawful or unfair business practices. The action seeks disgorgement and restitution of allegedly unjustly obtained sums, civil penalties and injunctive relief, including an injunction that would prohibit defendants from providing eye examinations or other optometric services at Pearle Vision Centers in California. In July 2002, the trial court entered a preliminary injunction to enjoin defendants from certain business and advertising practices. Both Cole and the State of California appealed that decision. On November 26, 2003, the Court of Appeal issued an opinion in which it stated that because California law prohibited Pearle Vision from providing eye examinations and other optometric services at Pearle Vision Centers, the trial court should have enjoined Pearle Vision from advertising the availability of eye examinations at Pearle Vision Centers.  The appellate court also ruled in Cole’s favor with respect to charging dilation fees, which ruling partially lifted the preliminary injunction with respect to these fees that had been imposed in July 2002.  On March 3, 2004, the California Supreme Court granted Cole’s petition for review of the portion of the appellate court’s decision stating that California law prohibited defendants from providing eye examinations and other optometric services at Pearle Vision Centers.  The appellate court’s decision directing the trial court to enjoin Pearle Vision from advertising these activities was stayed pending the Supreme Court’s resolution of the issue.  On June 12, 2006, the California Supreme Court affirmed the Court of Appeal’s prior decision, and held that optical stores such as those operated by Cole must comply with Sections 655 and 2556 of the California Business and Professions Code.  The matter will now be remanded to the trial court for further proceedings to determine if, in fact, Cole’s operations comply with those laws.  In addition, the preliminary injunction previously issued to enjoin advertising of the availability of eye examinations at Pearle Vision Centers, may soon become operative.  Although we believe that Cole’s operational practices in California comply with California law, an adverse decision in this action may compel Cole and its subsidiaries to modify or close certain activities in California. Further, Cole and its subsidiaries might be required to pay civil penalties and/or restitution, the amount of which might have a material adverse effect on our operating results, financial condition and cash flow.

Cole SEC Investigation

Following Cole’s announcement in November 2002 of the restatement of its financial statements, the SEC began an investigation into Cole’s previous accounting. The SEC subpoenaed various documents from Cole and deposed numerous former officers, directors and employees of Cole. During the course of this investigation the SEC staff had indicated that it intended to recommend that a civil enforcement action be commenced against certain officers and directors of Cole but not against Cole. Cole was obligated to advance reasonable attorneys’ fees incurred by current and former officers and directors who were involved in the SEC investigation subject to undertakings provided by such individuals. Cole has insurance available with respect to a portion of these indemnification obligations. In March 2006, the SEC staff indicated that it had concluded its investigation and that, contrary to its earlier indication, it would not be recommending that an enforcement action be commenced against anyone in connection with the investigation.

Amended Credit Agreement

On March 10, 2006, we and our subsidiary Luxottica U.S. Holdings Corp. (“U.S. Holdings”) and the bank group parties to their three-Tranche credit agreement signed on June 3, 2004, agreed to amend the outstanding credit agreement. The amended agreement reduces the interest margin as defined in the agreement, extends the termination date of Tranches B and C to five years from the date the amendment was signed, gives the option at the end of the first and second anniversaries to extend the termination for additional one-year periods and increases the borrowing capacity of Tranche C to Euro 725.0 million from Euro 335.0 million.

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Recent Developments

License Agreements

On July 1, 2004, we signed a licensing agreement for the design, production and worldwide distribution of Adrienne Vittadini prescription frames and sunglasses. The term of the agreement is three and a half years. For 2005, the distribution will focus mostly in North America.

On October 7, 2004, we announced that we signed a licensing agreement for the design, production and worldwide distribution of Dolce & Gabbana and D&G Dolce & Gabbana prescription frames and sunglasses (the “DG Products”). The initial term of the agreement is five years, which will begin on January 1, 2006 with an automatically renewable extension for an additional five years upon meeting certain targets. We recently were authorized to partially start the distribution and manufacturing of the DG Products on October 1, 2005.

On January 1, 2005, we began our production and distribution of Donna Karan and DKNY prescription frames and sunglasses. The initial term of the license agreememt is five years and is renewable for an additional five years through December 2014. The collections will be available worldwide to Donna Karan Collection and DKNY accounts and select specialty sun and optical stores. They will also be sold in Donna Karan Collection and DKNY domestic and international free standing boutiques.

On January 12, 2005, we renewed the licensing agreement for the design, production and worldwide distribution of Brooks Brothers prescription frames and sunglasses for five years through December 31, 2009.

Our ADR Repurchase Plans

On March 25, 2004, one of our two authorized ADR repurchase plans expired. The first plan allowed our subsidiary Luxottica U.S. Holdings Corp., or U.S. Holdings, or any of its subsidiaries, to repurchase up to 11,500,000 ADRs, representing 2.5 percent of our authorized and issued capital, over the 18-month period commencing on September 25, 2002. Our other authorized ADR repurchase plan provides for the repurchase of up to an additional 10,000,000 ADRs, representing 2.2 percent of our authorized and issued share capital, over the 18-month period commencing on March 20, 2003. As of September 30, 2004, both repurchase programs expired, with U.S. Holdings having repurchased 6,434,786 ADRs at an aggregate purchase price of approximately Euro 70.0 million.

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