General Information 2

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1 2014 ANNUAL REPORT

2 General Information 2

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4 General Information 2

5 Table of Contents Table of Contents GENERAL INFORMATION... 5 CORPORATE BOARDS AND AUDITORS...7 SHARE CAPITAL AND OWNERSHIP...8 MARCOLIN GROUP STRUCTURE AS AT DECEMBER 31, MARCOLIN GROUP STRUCTURE AS AT MARCH 27, THE MARCOLIN GROUP THE GROUP'S FINANCIAL HIGHLIGHTS GROUP REPORT ON OPERATIONS BUSINESS PERFORMANCE INCOME STATEMENT HIGHLIGHTS SALES REVENUES STATEMENT OF FINANCIAL POSITION HIGHLIGHTS MARCOLIN S.P.A. REPORT ON OPERATIONS INCOME STATEMENT HIGHLIGHTS SALES REVENUES STATEMENT OF FINANCIAL POSITION HIGHLIGHTS SUBSIDIARIES AND JOINT VENTURES ASSOCIATES MAIN RISKS AND UNCERTAINTIES TO WHICH THE GROUP AND THE COMPANY ARE EXPOSED OTHER INFORMATION SUBSEQUENT EVENTS AND BUSINESS OUTLOOK NOTICE OF CALLING TO GENERAL MEETING PROPOSED RESOLUTION CONSOLIDATED FINANCIAL STATEMENTS OF THE MARCOLIN GROUP CONSOLIDATED STATEMENT OF FINANCIAL POSITION INCOME STATEMENT AND STATEMENT OF COMPREHENSIVE INCOME CONSOLIDATED STATEMENT OF CHANGES IN EQUITY CONSOLIDATED STATEMENT OF CASH FLOWS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS ANALYSIS OF CONSOLIDATED FINANCIAL POSITION INDEPENDENT AUDITORS' REPORT ON THE CONSOLIDATED FINANCIAL STATEMENTS MARCOLIN S.P.A FINANCIAL STATEMENTS STATEMENT OF FINANCIAL POSITION INCOME STATEMENT AND STATEMENT OF COMPREHENSIVE INCOME STATEMENT OF CHANGES IN EQUITY STATEMENT OF CASH FLOWS NOTES TO THE SEPARATE FINANCIAL STATEMENTS INDEPENDENT AUDITORS' REPORT ON THE SEPARATE FINANCIAL STATEMENTS BOARD OF STATUTORY AUDITORS' REPORT RECLASSIFIED FINANCIAL STATEMENTS OF SUBSIDIARIES SIGNIFICANT RESOLUTIONS PASSED AT GENERAL MEETING

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7 Marcolin Group GENERAL INFORMATION MARCOLIN S.p.A. Headquarters, Executive Management and Business Offices in Z.I. Villanova, Longarone (Belluno) Share Capital Euro 32,312, Fully Paid In R.E.A n Tax and Companies Register n. BL VAT n Single-Member Company Tel Fax

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9 Marcolin Group CORPORATE BOARDS AND AUDITORS Board of Directors 1 Vittorio Levi Giovanni Zoppas Antonio Abete Francesco Capurro Cirillo Coffen Marcolin Roberto Ferraresi Violaine Odile Marie Grison Emilio Macellari Frédéric Jaques Mari Stévenin Franck Raymond Temam Raffaele Roberto Vitale Chairman C.E.O. and General Manager Director Director Director Director Director Director Director Director Director Board of Statutory Auditors 1 David Reali Mario Cognigni Diego Rivetti Alessandro Maruffi Rossella Porfido Chairman Acting Auditor Acting Auditor Alternate Auditor Alternate Auditor Internal Audit Committee 2 Vittorio Levi Roberto Ferraresi Cirillo Coffen Marcolin Chairman Internal Auditor Internal Auditor Supervisory Body 2 Federico Ormesani David Reali Cirillo Coffen Marcolin Chairman Supervisor Supervisor Independent Auditors 3 PricewaterhouseCoopers S.p.A Term of office ends on the date of the Shareholders Meeting called to approve the annual financial statements for the year ended December 31, 2015 (according to Shareholders Resolution of April 30, 2013). 2 Board of Directors' appointment of April 30, Term of engagement: 2013, 2014 and 2015 (according to Shareholders Resolution of April 30, 2013). 7

10 General Information SHARE CAPITAL AND OWNERSHIP In 2013 Marcolin S.p.A. ("Marcolin") and the direct parent company, Cristallo S.p.A. ("Cristallo"), a company indirectly controlled by investment funds managed by PAI Partners, were involved in a reverse merger whereby Cristallo was incorporated into Marcolin. In December 2012 Cristallo purchased from Marcolin's former shareholders 48,842,131 shares representing % of Marcolin S.p.A.'s share capital, for a price of 4.25 euros per share (with a total payment of euro 207,579,057), financed with a short-term credit facility (for euro 87,500,000) and equity for euro 160,740,000 (from the financial resources made available by the sole shareholder, Marmolada S.p.A., through the subscription and payment of two subsequent capital increases with additional paid-in capital). As a result of the change of control, since Marcolin was listed on the electronic share market (Mercato Telematico Azionario - MTA) segment of the Italian stock exchange, Cristallo had to launch a mandatory full public tender offer ("Offer") under Legislative Decree 58/1998 ("T.U.F." Consolidated Finance Act) Articles 102 and 106, first paragraph, as subsequently integrated and amended, and under the Issuers' Regulations, for a maximum of 13,297,244 ordinary Marcolin shares representing % of Marcolin S.p.A. s share capital (the offering prospectus was approved with Consob Resolution n of December 21, 2012). The acceptance period began on January 7, 2013 and ended on February 1, On the closing date of the Offer, 10,367,974 shares (corresponding to % of the public offer and % of the subscribed paid-in share capital of Marcolin) were tendered. Those shares, added to the Marcolin shares already owned by Cristallo S.p.A. and the treasury shares (681,000, corresponding to 1.096% of capital), resulted in Cristallo owning 59,891,105 shares, equal to % of the Issuer's share capital, on the Offer payment date of February 8, Therefore, under Consolidated Finance Act Article 108, first paragraph, the legal conditions were present for the obligation to buy, and right to buy, the remaining 2,248,260 outstanding shares not tendered into the Offer, corresponding to 3.618% of the Issuer's share capital. In accordance with the offering memorandum and the notice published on February 7, 2013, and in compliance with Article 41, paragraph 6 of CONSOB's Issuer Regulations, the Bidder applied the joint procedure to execute the obligation to buy and the right to buy, and thus to buy the remaining Marcolin shares, for a total joint procedure price of euro 9,555, As a result of those events, Cristallo owned 100% of Marcolin's share capital. Therefore, under Borsa Italiana Provision n of February 7, 2013, the delisting of the Issuer's shares from the electronic share market was arranged for February 14, Cristallo financed the procedure (for euro 53,619,037) with liquid resources of euro 29,669,093 and additional equity of euro 27,300,000, again made available by the sole shareholder, Marmolada S.p.A., through another capital increase. During the year, procedures for the merger of Cristallo into Marcolin commenced within the scope of an extensive reorganization and optimization plan for the business, industrial and strategic purposes of the Group of which Cristallo and Marcolin are part. In contrast to a direct merger, the reverse merger enabled Marcolin to retain its own business and legal relationships, with significant savings in terms of costs and organizational demands. The main objective of the merger, which was part of the reorganization and restructuring plan described in the public offering prospectus, was to shorten the chain of command in order to improve flexibility and operational efficiency, reduce corporate and administrative expenses, and rationalize the financial indebtedness involving the Group companies, and thus achieve greater financial stability. The merger, expressly required under financing agreements, was a condition for the medium/long-term credit facilities foreseen under the Senior Term and Revolving Facilities Agreement of October 14, 2012, as those credit facilities could be issued solely upon the effective completion of the merger. Since Cristallo used bank loans to finance the original acquisition of Marcolin (indebtedness that was assumed by the surviving company), the merger is legally defined as a "merger as a result of acquisition with debt", so the procedures set forth in Italian Civil Code 2501-bis and 2501-quinquies were followed. On June 26, 2013, Marcolin S.p.A.'s Board of Directors presented the plan of merger through absorption of Cristallo S.p.A. into Marcolin S.p.A., and the Directors' Report on the merger plan prepared in accordance with the Italian Civil Code; on July 8, 2013 Marcolin's Extraordinary General Meeting approved the merger plan as well as new By-Laws that used the current text of the absorbed entity. 4 The price of euro 4.25 per share corresponds to the contractual value of Marcolin's shares for Cristallo's acquisition in December Since this procedure follows a mandatory public tender offer, in compliance with Consolidated Finance Act Article 108, third paragraph, the price offered for each remaining share was the public offer price, i.e. euro 4.25 for each of the remaining outstanding shares. 8

11 Marcolin Group The deed of merger was stipulated on October 28, 2013 and became effective for tax, accounting and legal purposes on the same date. The merger took place by assigning the shares of the surviving company, originally owned by the absorbed entity (98.9% of the share capital), to Marmolada S.p.A., Cristallo's sole shareholder. Since the remaining 1.1% consisted of treasury shares, the transaction did not require any swap ratio. The merger resulted in the cancellation of all Cristallo's shares, as the Marcolin shares were assigned to the sole shareholder, Marmolada, except for the treasury shares, which were canceled at the end of October. The Extraordinary General Meeting of October 31, 2013 canceled the 681,000 treasury shares owned by Marcolin by transferring the nominal value directly to the sole Shareholder, and eliminating the nominal value of the Company's shares in accordance with Italian Civil Code Article 2436, paragraphs 2 and 3. ***** As a result of the merger, on December 31, 2013 the Parent Company's share capital was euro 32,312,475.00, fully paid-in, comprised of 61,458,375 ordinary shares, without par value. On that date the share capital was wholly owned by the sole shareholder, Marmolada S.p.A., a single-member company based in Milan. After the above-described transactions, Marcolin shares retained normal dividend rights and they continue to be encumbered by liens (previously claimable by the Financing Banks). At the end of 2013, Marcolin issued bond notes, secured by collateral for the same amount of the obligations assumed with the bondholders, including a lien on the shares of the Issuer, Marcolin, representing 100% of share capital. This transaction and the related guarantees are described herein. No changes occurred as at December 31, 2014 that changed the composition of equity, which therefore is in line with the equity composition reported at December 31, ***** 9

12 General Information MARCOLIN GROUP STRUCTURE AS AT DECEMBER 31,

13 Marcolin Group MARCOLIN GROUP STRUCTURE AS AT MARCH 27,

14 General Information THE MARCOLIN GROUP Marcolin, a well-established company based in Longarone (Belluno) in the Italian eyewear district, is a designer, manufacturer and distributor of eyewear products. As a renowned leader in the global eyewear business, Marcolin stands out for its premium quality products, design skills, production capabilities, attention to detail and first-rate distribution. In 2014 the Marcolin group sold an estimated 15 million pairs of eyeglasses and sunglasses worldwide, with sales exceeding euro 360 million. At the end of 2013 Marcolin acquired the Viva International group (hereinafter also Viva ), one of the most important international eyewear groups, by acquiring from the American group HVHC Inc. a 100% stake in Viva Optique, Inc. (the group's parent company based in New Jersey, with branches in New York and Miami). The Viva International group, with some 8.5 million eyewear items sold, 300 employees and sales of nearly $190 million dollars (55% of which in the United States), was the ninth largest eyewear company in the world and the second largest in the United States, where it had an especially strong position in the vision segment. With a network of more than 160 agents operating on the American market and a brand portfolio that included Guess, Guess by Marciano, Gant, Harley Davidson, and other brands targeted specifically to the U.S. "diffusion" market, Viva controlled affiliates in major countries of strategic interest (with subsidiaries in France, the United Kingdom, Hong Kong and Brazil, and partnerships in Mexico, Australia and Germany). In 2014 Marcolin successfully moved forward with the Viva integration plan, which entailed reorganizing distribution networks on an international scale, reviewing logistic flows, improving the efficiency of business structures in the countries present, and consequentially revising the cost structures. Those activities were completed according to schedule in the initial months of 2015; currently the rationalization of the corporate structure is being completed, after which the Group's structure will be definitive. Thanks to Viva's products and markets complementing those of the Marcolin group, Viva integration has improved Marcolin's standing as a highly global eyewear company in terms of its brand portfolio, products, geographic presence and markets. In 2014, combined with Viva, the Marcolin group had sales exceeding euro 360 million and some 1,500 employees (including 570 in the American affiliates), plus a widespread, well-structured network of independent agents. Today Marcolin has a strong brand portfolio, with a good balance between luxury and mainstream ("diffusion") products, men's and women's products, and eyeglass frames and sunglasses. The luxury segment includes glamorous fashion brands such as Tom Ford, Tod s, Balenciaga, Roberto Cavalli, Montblanc and the recent additions Zegna, Agnona and Pucci (whose distribution will commence in 2015); the diffusion segment includes Diesel, Swarovski, DSquared2, Just Cavalli, Timberland, Cover Girl, Kenneth Cole New York and Kenneth Cole Reaction. Viva International has added to this portfolio the brands Guess, Guess by Marciano, Gant, Harley Davidson, and other brands targeted specifically to the U.S. market. The house brands are WEB, National and Marcolin. The Viva acquisition has bolstered Marcolin s distribution capacity on the American market. The Group is now present in all major countries across the world through direct affiliates, partnerships (joint ventures) and exclusive distribution agreements with major players. ***** 12

15 Marcolin Group THE GROUP'S FINANCIAL HIGHLIGHTS Sales revenues by geographical area (destination market) Pro Forma * Sales and adjusted EBITDA (euro/millions) excluding non-current costs incurred for extraordinary transactions Equity (euro/millions) Net financial debt (euro/millions) * with a constant perimeter, including the Viva group for 12 months 13

16 General Information 14

17 Marcolin Group GROUP REPORT ON OPERATIONS FOR THE YEAR ENDED DECEMBER 31,

18 Report on operations for the year ended December 31,

19 Marcolin Group GROUP REPORT ON OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 2014 Consistently with previous periods, the Annual Financial Report for the year ended December 31, 2014 (which includes the consolidated financial statements of the Marcolin group and the separate financial statements of Marcolin S.p.A.) was prepared in conformity with the valuation and measurement criteria established by the international accounting standards (IAS/IFRS) adopted by the European Commission with Regulation 1606/2002, Article 6, of the European Parliament and of the Council of July 19, 2002 on the application of international accounting standards, and with the measures enacting Legislative Decree n. 38/2005. BUSINESS PERFORMANCE The eyewear industry 6 Global economic growth accelerated at the end of summer and beginning of fall, driven by the United States and China in particular. However, the advanced economies of the euro area, lacking the structural reforms to promote growth and employment, remained on the brink of a recession accompanied by deflation. Italy's economy remained stable, although with very low domestic demand and production. Thanks to exports, which reached new records near the end of the year assisted by a stronger U.S. dollar and low oil prices, Italian eyewear production grew by 9.4% from Exports of eyeglass frames, sunglasses and lenses rose by 11.8% year on year, a record high. This positive trend affected primarily large companies, which are better structured to seize opportunities quickly, whereas small and medium enterprises (SMEs and craft enterprises) benefited to a lesser extent, as they require more effort to cope with the difficult situation due to inherent limitations mainly related to their size, and are less organized and flexible with respect adapting to market changes. Overall, in 2014 the number of businesses remained the same as that of the previous year; for every business that closed down, a new business entered the market, demonstrating renewed vitality in the industry. Employment rose by an annual 2.3% (excluding employees with temporary contracts). In fact, the eyewear industry is experiencing a reshoring phenomenon, i.e. manufacturing activities are returning to Italy: in reaction to the inflation in China but also stimulated by the need to be closer to the market with greater manufacturing flexibility, and to meet the demands expressed by the clientele for high-end, prestigious, high-quality products made in Italy. In this record year for Italian eyewear exports, both Europe and the United States were experiencing full recovery for the second year in a row. Europe, which had good results in 2013 only for some countries, presents some important turnarounds (Spain, Portugal, Greece), with resumed growth for eyewear exports. Europe remains the major export market, accounting for nearly 50% of the total and having double-digit annual growth. Exports to the United States, which account for nearly 30% of the total, had nearly double-digit growth (9.6%) for both eyeglass frames and sunglasses. Exports to North America increased by practically 13%. Exports to Asia, up by 15% from 2013, had the highest growth. Although the levels remain low, Italian eyewear exports to emerging markets remain positive, both in the established eyewear markets and in "new" markets, in the context of a continuously evolving global scenario. 6 Source: ANFAO Associazione Nazionale Fabbricanti Articoli Ottici (Italian Association of Eyewear Article Manufacturers) Annual Report 17

20 Report on operations for the year ended December 31, 2014 ***** Introduction In the above-described scenario, 2014 was for Marcolin a year of important events and extraordinary transactions that impacted the corporate and organizational aspects of the Group, and which were reflected in the annual financial and business performance. During the year Marcolin implemented its plan to integrate the Viva International group, acquired at the end of 2013 through Marcolin USA with a 100% stake in the group's parent company, Viva Optique, Inc. The Viva group integration process was immediately initiated in early 2014, beginning with the rationalization and consolidation of the business on an international level (distribution and logistics in primis), and proceeding with the organizational and corporate restructuring, accompanied by a revision of cost structures. The integration plan entailed incurring non-recurring costs, but the operational and cost synergies that had been identified at the time of the Viva acquisition were effectively realized. Currently, the synergies are estimated to arrive at euro 10 million annually, some of which were already realized in The integration plan is concluding in the initial months of 2015, perfectly on schedule. In addition, some important investments were made in 2014, especially in products and the brand portfolio but also in the area of distribution and organization. Activities to develop the license portfolio resulted in the announcement of new agreements with important groups in the luxury segment (Zegna, Agnona, Pucci) and the relaunching of Web, the house brand, which played a significant role in the comeback of the domestic market. Additional activities were carried out to develop new markets, including through partnerships under joint-venture agreements (in China, Russia and Northern Europe). Due to their scale, such transactions, particularly those referring to Viva integration, impacted significantly the results of operations of the companies involved. For this reason, the annual performance is presented along with the Group's normalized results, i.e. those excluding the nonrecurring costs incurred in the year, including in the comparison with the previous year. Moreover, due to the need to present homogeneous data for the two years, pro-forma information consolidating the Viva group for 12 months is provided for 2013 in order to provide comparability with the same consolidation perimeter of 2014 ("pro-forma" shall mean Viva International for 12 months). ***** Viva integration On the path of growth pursued by Marcolin, Viva integration has turned the Group into a true global player by expanding its scale, geographical presence, brand portfolio and product range. The complementarity of the brands managed, completion of the "diffusion" product range and the balance achieved between men's and women's products and between eyeglass frames and sunglasses are among the strategic factors behind the important acquisition. Moreover, Viva's strong presence in the overseas market has made Marcolin stronger in North America by enabling it to cover one third of the market, while maintaining a focus on the Far East and Europe. Thanks to the complementarity of the reciprocal distinctive characteristics and expertise, the Viva acquisition and integration has created an important, globally competitive eyewear company: by bringing its know-how and background to a wider scale, Marcolin offers significant added value to the market in terms of both product range and global distribution. 18

21 Marcolin Group Integration of the Viva group was one of the most important projects carried out in 2014, and is now practically concluded. In early 2015 the final operations planned in the United States will be carried out, ending the rationalization of the distribution network, logistics, cost structure and organizational and corporate structures. The timetable being observed will enable important synergies to unfold within the Marcolin group starting in 2015; at least in the countries in which integration was first implemented, some synergies were already achieved near the end of 2014, and account for some euro 3.6 million. Now that the integration process is almost finished, the synergies are exceeding those originally budgeted, and are estimated to reach euro 10 million. The synergies derive from rationalization of the organizational and corporate structures, including logistics, but also from opportunities ensuing from the integration of the sales and distribution networks on an international scale. During the year activities planned to integrate the foreign affiliates of Marcolin and Viva in countries in which both groups already existed were carried out, beginning with the strategic affiliates in North America, the United Kingdom and Hong Kong, and then in France and Brazil in the second half of In early 2014, Marcolin had already separated the key functions that had been centered at the organization of the former shareholder, HVHC, Inc. As noted, the plan to rationalize the sales force was implemented in the United States first, and was continued throughout the first half of The plan to integrate information technology processes and systems, necessary for the achievement of the planned synergies, was immediately begun with the assistance of international collaborators. The reorganization process then involved all countries in which companies of both the Viva group and the Marcolin group co-existed, in the order of Far East countries, the United Kingdom, France, Brazil and South American countries. In July a new company structure was set up in Hong Kong, with the objective of combining the distribution of Marcolin and Viva products through a new organization operating directly in the Far East. That organization, established in July 2014 through a transfer of Viva Hong Kong's operating business, was the object of a subsequent business transfer by Marcolin S.p.A., which continued to serve the Asian market directly until the end of the year, when it transferred the entire Asia Pacific Distribution business to the new structure (taking effect on January 1, 2015). Due to a sales decline that prevented it from breaking even, Viva Hong Kong had accumulated losses and was burdened by some impaired accounts (referring to the Australian joint venture and associate Viva Brazil) and some pending disputes. Within the scope of the complex organizational and corporate restructuring process required for Viva/Marcolin integration, it was considered opportune to identify and carve out the viable operating division of Viva Hong Kong, and transfer it to the newly established Hong Kong branch of Marcolin UK Ltd. The transfer took place at the beginning of July. After absorbing the business division relating to Viva products, the Hong Kong branch's mission included the distribution of Marcolin products in the same areas of the Far East, with clear advantages in terms of economies of scale and cost and top -line synergies. In fact, previously Marcolin S.p.A., which used to distribute its products directly in the Far East, had to import the products into Italy to the logistical center in Longarone and then send them out again to clients and distributors in Asia, a costly and time-consuming process. Instead the Hong Kong branch sources directly from Chinese suppliers thanks to the size and scale achieved, thereby saturating overheads by distributing into outlying markets autonomously and fully exploiting the cost benefits arising on operational gearing to improve sales. The transactions made it possible to create the Group's third sales hub, due to the critical mass represented by the sales of Marcolin and Viva brands, enabling to invest in structures and means to better penetrate markets cost-effectively as a result of the streamlining and synergies realizable from the new size. 19

22 Report on operations for the year ended December 31, 2014 Afterward, in order to adapt to the Marcolin group's sales and logistical organization, the operational divisions of Viva Eyewear UK Ltd (domestic and international distributor of Viva products) were transferred to Marcolin UK Ltd (domestic market) and Marcolin S.p.A. (international market for distribution to Italy, the rest of Europe, and the other non-eu countries to which Viva UK had exported). The business transfers, which took place at the beginning of September, considerably downsized the U.K. company (which retained only some non-operating activities), whose operating structures became redundant, allowing to realize the cost synergies planned. Activities formerly performed by Viva UK are now carried out by Marcolin UK and Marcolin S.p.A., with minimum costs compared to before the transfer. In early 2015, as part of the reorganization, the business division dealing with distribution of Marcolin products in South America (excluding Brazil) was transferred from the former Marcolin USA, Inc. (now Marcolin USA Eyewear, Corp.) to Marcolin S.p.A. The transfer completed the redistribution of international markets in accordance with the Group's plans for the geographical hubs and a new sales organization. The transactions described above (Marcolin S.p.A.'s acquisition of the international business division and Marcolin UK Ltd's acquisition of the domestic division, and the transfer of the Asia Pacific Distribution division from Marcolin S.p.A. to subsidiary Marcolin UK Ltd) are linked, being part of a plan to reorganize and establish three geographical hubs (Europe, USA and Far East), from which the Group may benefit from considerable cost and top-line synergies (the latter of which are difficult to quantify in advance). ***** Concerning the French market, on October 31, 2014 Marcolin France Sas acquired Viva France Sas (formerly owned by Viva Eyewear UK Ltd), the distributor of Viva products in France. This transaction, a step toward the subsequent merger of Viva into Marcolin France (by way of the dissolution sans liquidation of Viva France and trasmission universelle du patrimoine de Viva France à Marcolin France, effective on January 1, 2015), had the stated objective of reducing and streamlining the structures and related costs by integrating the two businesses into one organization with a sole management, in order to manage, including prospectively, the related market more efficiently and effectively. Through the merger, the operations, assets and liabilities of the absorbed company continue to survive in the acquirer. A similar transaction took place in Brazil, where two identical sales organizations existed, one for the distribution of Marcolin products (Marcolin do Brasil Ltda) and the other for the distribution of Viva products (Viva Brasil Comercio Produtos Opticos Ltda). In this case as well, after Marcolin do Brasil acquired all Viva Brasil shares (at the end of December), it initiated a merger to absorb such company (which took place on January 1, 2015). Similarly to the French market, in Brazil the business management was assigned to a newly appointed manager with extensive experience in the eyewear industry, in order to fully exploit cost and top-line synergies that only full integration of the two structures would allow. ***** As noted, in North America integration started immediately with the sales organization and rationalization of the sales force, with the objective of reassigning products and markets according to a single, coordinated logic in order to optimize the distribution of Marcolin and Viva products. In October the switch to a new SAP system (Group ERP) was completed, which resulted in the full replacement of the information systems formerly used by Viva, and operating procedures and processes were revised in the light of the larger Group. 20

23 Marcolin Group On January 1, 2015 the corporate restructuring was in effect by way of the dissolution and absorption of American companies Marcolin USA, Inc., Viva Europa, Inc., Viva International, Inc. and Viva IP, Corp. into Viva Optique, Inc. (the effective time and date of the merger was as of the close of business on December 31, 2014). Viva Optique's name was changed to Marcolin USA Eyewear, Corp. A plan to streamline the logistics structures in North America, which will reduce the number of plants currently operating, is being developed. When the Scottsdale, Arizona location is closed down, the U.S. market will be served by the establishment in Somerville, New Jersey. In 2015, the operations of Viva Canada will be evaluated to complete the organizational and corporate rationalization process. ***** Once Viva and Marcolin are fully integrated, the Group's business operations will be concentrated into three geographical hubs: the U.S. hub, directed by Marcolin USA Eyewear, Corp. (sole legal entity, which will focus on distribution in the North and Central American markets); the European hub, directed by Marcolin S.p.A., which will address the European rim and its complementary and neighboring countries (in terms of both geography and business, such as South America and the Middle East), including through direct affiliates and joint ventures; the Asian hub, where companies have been set up to manage the Far East markets, distant and difficult to penetrate. Indeed, only by operating there directly may such markets be developed (as noted, the business divisions dealing with the distribution of Viva products in the Far East, and then the division dealing with Marcolin product distribution division in Asia Pacific were transferred to the Marcolin UK Ltd Hong Kong branch). The reorganization entailed overhauling the logistical flows on an international scale through the establishment of the three main hubs (for distribution management) in order to render the integrated logistics more agile and efficient, thereby reducing costs, shortening the distance to the end customer, and consequently improving the effectiveness of response to the market. ***** Products and licenses Within the scope of its brand portfolio consolidation and development, the Marcolin group moved forward with the following activities in 2014, which were dedicated to both licensed brands and house brands: an important strategic alliance was created at the end of 2013 with the stipulation of licenses for prestigious eyewear brands Ermenegildo Zegna and Agnona. The licensing agreement has a tenyear duration and involves the exclusive design, manufacturing and global distribution of sunglasses and eyeglass frames. Marcolin's high quality and design standards will be combined with the exclusive style and international appeal of the Zegna group brands, renowned throughout the world as an example of Italian excellence. The strength of the Marcolin-Zegna partnership is a dual project focused on product innovation for the Zegna brand and development of the women's segment for Agnona, which Marcolin's core competencies can offer to the Belluno group through its distribution network, presence in American markets recently expanded with the Viva acquisition, and ability to penetrate emerging markets assisted by partnerships and exclusive distribution agreements (in China and the Middle East). The initial Ermenegildo Zegna and Couture collections were launched in January 2015; an exclusive worldwide license agreement was stipulated with Emilio Pucci, a classic, highly prestigious fashion and luxury brand for more than sixty years; the five-year, renewable license took effect in January 2015; early license renewals were stipulated for the Timberland brand and, pursuant to previous contractual negotiations, the Tom Ford license was extended; 21

24 Report on operations for the year ended December 31, 2014 long-term licensing agreements with Skechers USA, Harley-Davidson and M.lle Catherine Deneuve were renewed; they had initially been stipulated through Viva International partnerships, which are now extended to Marcolin; Marcolin renewed its licensing agreement with Procter & Gamble for the design, manufacturing and distribution of the Covergirl Eyewear brand in the American market; the Diesel brand license was also extended; moreover, Diesel communicated its intention to stop selling apparel with the 55 DSL brand, so Marcolin ceased production of 55 DSL models, while continuing to distribute the products in stock until December 2014; a similar agreement to extent the duration of a license was reached during the year for the Swarovski brand; in October an agreement concerning one of the Group's most important licenses was revised to provide for less royalty and advertising payments from 2015 until the license expiration, in exchange for a lump-sum payment of transaction fees. The Marcolin group pursued an important initiative to rationalize and optimize its product collections. Part of the Swarovski brand collection was repositioned in order to offer a product with a more balanced price/quality ratio, partly drawing on imports from Asian markets; this was very well received by the market, and boosted the sales. With respect to product innovation, Tom Ford introduced a new collection in metal, the "Essential" line, combining Italian design and production capabilities with Marcolin's special expertise. Sales of the Essential line commenced in February 2014 and contributed to the important sales growth realized by the brand in Diesel's new "Denim Eye" line, designed in 2013 with an exclusive Marcolin patent, was put on the market. Conceived for young consumers by combining the brand image with Marcolin's expertise and production capacity, it was extremely well received by the market. The relaunching of the house brand, WEB, continued with a "Made in Italy" eyeglass frame collection positioned in a highly competitive price range. It is a service product created with the specialized skills of the internal product development structures, saturating their costs, and the manufacturing capability of the eyewear district. Its success was behind the comeback of the domestic market, which grew significantly in 2014, especially considering the difficulties persisting due to the crisis that has been present for years. Balenciaga was relaunched, after the fashion house's designer was changed, with a sophisticated and elegant collection having great complexity, which was presented to a group of selected retailers. It was extremely successful in the international markets. In general, a great effort was made to enhance the collections, expand the eyeglass frame segment and add new lines and new products. The design and product departments were directly involved with exceptional designing activities aimed to adapt the collections to more international (Asian-fitting) distribution, with stylish and exclusive designs while improving the capacity to produce the new models and focusing on opportunities deriving from the availability of new, original materials. ***** Sales activities Sales activities aimed to strengthen relationships with the distribution network continued in 2014, with the objective of greater penetration into the markets sustaining the Group's growth. Within the scope of the Viva integration plan, the foregoing sections describe the rationalization of the distribution networks and international sales organizations (establishment of the new Hong Kong branch that will manage distribution of Viva and Marcolin products, Marcolin/Viva integration in the United States, France and Brazil, the closing of Viva UK's operating activities, which were transferred to Italy and to the pre-existing U.K. branch of Marcolin, all of which were carried out in 2014, and the transfer of the Latin American business to the Parent Company, which will take effect in early 2015). 22

25 Marcolin Group In order to manage distribution directly in mainland China, at the end of 2014 a joint venture was set up with the Gin Hong Yu International Co. Ltd group (Ginko Group), a well-known and respected business operating in the Chinese eyewear market. Distribution operations will be managed by Ginlin Optical Shanghai Ltd Co., based in Shanghai, a subsidiary controlled indirectly (through Ging Hong Lin International Co. Ltd), by way of joint ownership by Marcolin S.p.A. and the Ginko group. Still regarding the Group's international development, a joint venture was set up with Sover-M, a wellestablished, prestigious company operating in the eyewear business in Russia, for the distribution of all Marcolin and Viva products. The Italian Parent Company controls 51% of Sover-M. Sover-M's shares were acquired in December In Europe, an affiliate was started up in Frösundaviks (Stockholm), Sweden. Marcolin Nordic began operating at the end of February 2015, and its mission is to manage the Nordic market (Denmark, Finland, Norway, Iceland and Sweden) closely and effectively in order to distribute there all brands in the Marcolin/Viva portfolio. Much attention was dedicated to the reorganization of the Italian sales network. When a new Italian Sales Director with a proven track record in the industry joined Marcolin in 2013, a review of the sales force was begun that led to a reorganization of the independent agents, an important step for relaunching on the domestic market. In parallel, a thorough review of the affiliates' sales organization was performed (which led to a change in the management of the Brazilian affiliate at the beginning of 2014). Those initiatives continued during the year within the scope of the Viva integration process, beginning with the review of the distribution network and sales force, with the objective of maximizing the distribution synergies possible and promoting cost efficiencies. New, prestigious offices were located in strategic countries (France, Brazil, Hong Kong) in consideration of the need to provide support to sales that have grown considerably as a result of Viva integration. In the marketing area, some collections and parts of collections were repositioned in term of product and price. Price lists for the public were reviewed on one hand and margins for the distribution network on the other. Revisions were implemented to support volumes, focusing specifically on collections that are more sensitive to the market demand curve. ***** Logistics and organizational activities The Group's reorganization process was carried out in the logistical area as well. Investments continued to be made in resources and systems in the production and sales planning areas, strengthening the central supply chain management function in order to better handle the integrated logistics. The objective is to achieve better allocation of resources by way of more careful and more rational demand planning, exploiting upstream and downstream synergies. As a result, the organizational activities (focusing on planning processes, which led to the creation of the demand planning function) enabled to improve internal efficiency, effectiveness in responding to the market and customer service, with positive effects on sales and key performance indicators. With respect to resources and systems, the new ERP (SAP) system was successfully implemented internationally at all Viva companies: in Hong Kong, France, Brazil, through the operations integrating Viva businesses into the Marcolin ones; in the United States, SAP roll-out was completed in October 23

26 Report on operations for the year ended December 31, 2014 at Viva Optique Inc.'s U.S. affiliate, an achievement attained with a minimal impact on the business and on market service. ***** Marcolin is preparing to double its Italian manufacturing operation with the purchase of a new 3,500 square meter factory in Longarone (Fortogna locality), in the heart of the eyewear district, close to its historic headquarters. This will benefit employment levels by dedicating important resources to production. The project will be executed from the second half of 2015 (Marcolin s new acetate division in Fortogna will become operational by the summer of 2015), and will ensure the production expansion necessary to meet the demands arising from both the new brands added to the brand portfolio and the structural expansion of some markets. Consistently with the Company's medium/long-term growth plans, the operation aims to create value by maximizing the opportunities offered by the development of the high-end collections that have always represented Marcolin's design concept. The production layout of the Longarone plant (currently housing the acetate production, which will be transferred to Fortogna) will be changed by overhauling the Metal, Product Development and Prototype divisions. It will cost some euro 4.5 million (partly for the purchase of the Fortogna factory, and the rest to transfer and outfit the new acetate division in Fortogna, renew the floor space that will be made available in Longarone, and purchase plant and machinery to expand production capacity). This opportunity will enable to immediately undertake the business plan necessary to promote the Group's growth, and to obtain savings from the insourcing of production beginning in the second half of Reasons for which the consolidation and development of its production capacity in Italy are important to Marcolin include: reduced dependence on external suppliers, which will enable to shorten the manufacturing lead time, and thus increase the ability to seize market opportunities (and improve the time to market); made in/made out realignment according to the eyewear industry standards (and those of the main competitors); expansion of the capacity to produce more Italian-made products, which are increasingly perceived as having added value by the Italian and international clientele; as an essential condition for managing the inflation risk in the Chinese sourcing market, production insourcing will allow greater control of production factors, and not only in terms of costeffectiveness. ***** The Asian suppliers were reviewed and monitored from a quantitative and qualitative point of view (quality, reliability and service), in light of the particular social and economic dynamics characterizing that sourcing market. In 2014, thanks to the critical mass deriving from the higher volumes sourced after the Viva acquisition, it was possible to contain the impact of the current inflation in China on the product cost. A new company will be established in China that shall monitor the production of Chinesemanufactured products, perform quality control and check production work in progress for all the Group's companies that source from that market: Marcolin S.p.A., Marcolin USA Eyewear Corp., and Marcolin (UK) Hong Kong Branch. The new company, Marcolin Technical Services (Shenzhen) Co. Ltd, is owned directly by Marcolin S.p.A. and is based in Shenzhen, Guangdong Province, China. It has been operating since mid 2015, providing technical services regarding production, such as supplier selection in China, quality control and monitoring of production work in progress, and general manufacturing-related services. ***** 24

27 Marcolin Group Lastly, concerning organizational restructuring, the management team was consolidated and increased in 2014, consistently with the projects and challenges that have involved the Group in the past and will continue to do so in the future. The Group underwent a comprehensive reorganization process, with changes made in top and middle management from recruiting from the outside and using internal mobility. ***** INCOME STATEMENT HIGHLIGHTS In order to provide comparability between 2014 and the prior year, the 2013 values presented hereinafter were obtained by summing up the Marcolin group's results with those of the Viva group for the period of January to December 2013 (2013 pro forma). In fact, the information presented in the 2013 consolidated financial statements included Viva's income statement results from the acquisition date (December 3, 2013) to the annual closing date, whereas the statement of financial position as at December 31, 2013 already fully consolidated the Viva group, so the key financial ratios were not truly meaningful. For this reason, the 2013 pro-forma accounts presented herein for comparison purposes include the Viva International group results for the entire 12 months. ***** As noted, in 2014 Marcolin was involved in many new projects and activities of consolidation and especially of development and global reorganization at all levels. Accordingly, 2014 must be considered a year of strong change, in which many activities were introduced that will bring returns only in the future. The activities carried out had a significant impact on the results of the year, requiring the 2014 financial statements to be interpreted in the light of such extraordinary events. The organizational activities are described previously herein, particularly the Marcolin/Viva integration process, and the sales-related activities, with the rationalization of the distribution networks on an international scale and continued restructuring of the brand portfolio thanks to the stipulation of new prestigious licensing agreements that will bring important results in terms of future sales and margins. As a result of the extraordinary activities in progress, particularly those referring to Viva integration, the income statement results were adversely affected by some non-recurring events, which need to be highlighted. For all the foregoing reasons, where significant, the main changes of the year are also reported herein by showing the impact of the extraordinary activities and thus of the non-recurring costs, also providing comparability, with the same consolidation perimeter, of the 2014 data with the 2013 data, by presenting normalized income for both years. Upon completion of the Viva integration process, an estimated euro 10.0 million in cost synergies will be realized, exceeding those originally estimated. The synergies, euro 3.6 million of which were realized in 2014, will fully benefit future years starting from 2015 in an amount of euro 10.0 million. ***** The following table summarizes the Group s key performance indicators. 25

28 Report on operations for the year ended December 31, 2014 As noted, the pro-forma data includes the full contribution of Viva International for 12 months, and so is comparable with the corresponding results of Year Net % of % of % of ROS ROI ROE (euro/ ) Sales YOY EBITDA revenue EBIT revenue Net Result revenue % % % % 12.1% 28.6% 23.7% % % % % 12.9% 29.5% 22.2% (4.5)% % % % 5.1% 5.2% 3.8% 2013 * (0.8)% % % % 4.7% 2.6% 5.6% 2013 ** % % % (8.6) (2.5)% 5.6% 5.0% (4.0)% % % % % 5.5% 4.8% 0.2% EBITDA: is EBIT before amortization, depreciation and annual allowance for doubtful debts EPS: Earnings per share = Net result/number of shares ROS: Return on sales = EBIT/Net sales ROE: Return on equity = Net result/ Net Equity * Viva consolidated 1 month ** Pro-forma (Viva consolidated 12 month) The net revenues of 2014 were euro million, compared to the euro million of 2013 (proforma). Ebitda was euro 29.4 million, or 8.1% of sales (2013 pro-forma: euro 28.5 million, corresponding to 8.2% of sales). Ebit was euro 19.9 million, or 5.5% of sales (2013 pro-forma: euro 19.2 million, 5.6% of sales). As noted, the Group s margins were greatly influenced by non-recurring transactions; in 2014, the costs of those transactions reduced Ebitda by euro 14.5 million (in 2013, including the costs of the absorbed company, Cristallo, the Ebitda decrease was nearly euro 10.4 million). In order to better understand the business performance, those effects, mainly referring to costs incurred for Viva integration, must be eliminated. The following costs were involved: euro 9.4 million incurred for the Viva integration process, reported primarily by subsidiaries Viva Optique, Inc. (USA), Viva Eyewear (UK) Ltd, Viva France, Viva Brasil and Viva Hong Kong, and by the Parent Company, Marcolin S.p.A.; most costs were incurred for termination of redundant personnel, severance benefits paid to employees, restructuring of the sales force particularly regarding terminated or revised agency agreements, and legal, corporate, organizational and logistics consulting services and other professional services rendered by third parties to assist the integration process; euro 2.0 million in extraordinary expenses deriving from ad-personam agreements for changes in top management positions and mobility within the scope of organizational changes; euro 2.7 million in non-recurring expenses referring to the renewal and development of new licenses for brands that have not generated revenues yet, including Zegna, Agnona and Pucci; other non-recurring costs of euro 0.4 million. Excluding the effects of the transactions described above, the 2014 normalized ("adjusted") Ebitda is euro 43.8 million (12.1% of sales), against the 2013 pro-forma amount of euro 38.8 million (11.2% of sales). Excluding such effects, the 2013 adjusted Ebit (Operating Income) is euro 34.6 million (9.5% of sales), against the 2013 pro-forma amount of euro 30.6 million (8.8% of sales). The normalized (adjusted) key performance indicators, filtered of the effects of the non-recurring costs, are as follows: 26