tods 2010 annual report

2010 ANNUAL REPORT

(Translation of the 2010 Annual report approved in Italian,solely for the convenience of international readers)

TABLE OF CONTENTS

Letter to our Shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9Company’s data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10Corporate Governance bodies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11TOD’S Group . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12Group’s organizational chart . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13Distribution network as of December 31st 2010 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14Key consolidated financial figures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15Highlights of results . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16

TOD'S Group - IAS/IFRS Annual Report as of December 31st 2010

Report on operationsIntroduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29Alternative indicators of performances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29Group’s activity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29Group’s brands . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30Organizational structure of the Group. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30Foreign currency markets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31Main events and operations during the period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31Group’s results in 2010 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32Research and development . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39Reconciliation of the result for the period and net equity of the Group withthe analogous values of the Parent Company. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39Corporate Governance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39Significant events occurring after the end of the year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40Business outlook . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41Approval of Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41

Financial StatementsConsolidated Profit & Loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44Consolidated comprehensive Income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45Consolidated Statement of Financial position. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46Consolidated Statement of Cash Flows . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48Consolidated Statement of changes in equity. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49

Supplementary notes1. General notes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 522. Financial statements formats: choice of form and classification principles . . . . . . . . . . . . . . . . . . . . . . . . . . 523. Highlights of the accounting principles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 534. Segment reporting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 605. Dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 626. Earnings per share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 627. Assets held for sale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 638. Assets with indefinite useful life. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 639. Key money and Other intangible assets with definite useful life. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6410. Tangible fixed assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6411. Impairment losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6512. Investment property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6613. Equity investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6614. Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6815. Other current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6916. Shareholders’ equity. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6917. Bank overdrafts and financing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7118. Derivative financial instruments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7219. Hedging of financial risks (IFRS 7) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7320. Deferred tax assets and liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7621. Other current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7622. Provisions and potential liabilities and assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7723. Reserves for employees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7824. Transactions with related parties. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7925. Personnel costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8226. Financial income and expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8227. Income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83

2010Annual Report

4 Table of contents

Report of Independent Auditors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86

TOD'S S.p.A. - IAS/IFRS Annual Report as of December 31st 2010

Report on operationsIntroduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 91Alternative indicators of performances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 91Operating performances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 91Research and development . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 95Information on Share Capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 96Personal data processing disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97Corporate Governance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97Management and coordination activities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 98Significant events occurring after the end of the fiscal year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 98Business outlook . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 98Motion for allocation of the profit for the year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 99

Financial StatementsProfit & Loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 102Comprehensive Income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 103Statement of Financial Position . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 104Statement of Cash flow . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 106Statement of changes in equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 107

Supplementary notes1. General notes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1102. Financial statements format: choice of form and classification principles. . . . . . . . . . . . . . . . . . . . . . . . . . . 1103. Highlights of the accounting principles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1104. Dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1175. Earnings per share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1176. Assets with indefinite useful life. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1187. Other assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1188. Tangible fixed assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1199. Impairment losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11910. Investment property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12011. Investments in subsidiaries, joint ventures, and associated companies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12012. Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12213. Other current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12214. Financial assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12315. Shareholders’ equity. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12316. Bank overdraft and financing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12517. Derivative financial instruments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12618. Hedging of financial risks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12619. Deferred tax assets and liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12920. Other current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13021. Provisions and potential liabilities and assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13122. Reserves for employees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13223. Transactions with related parties. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13224. Personnel costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13725. Financial income and expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13726. Income from equity investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13727. Income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13828. Independent Auditors compensation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13929. Certification of the Separate Financial Statements of TOD’S S.p.A. and the Consolidated

Financial Statements of the TOD’S Group pursuant to Article 81-ter of Consob Regulationno. 11971 of May 14th, 1999, as amended . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 139

Report of the Board of Statutory Auditors. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 142

Report of Independent Auditors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 145

2010Annual Report

5 Table of contents

2010Annual report

Diego DellaValleChairman and Chief Executive Officer

2010Annual Report

9 Letter to our Shareholders

Letter to our Shareholders

Dear Shareholders,

Our Group achieved excellent results once again this year.Sales grew at double digit rates, with excellent results in all our markets and product categories.

In an operating context that had improved from 2009 but which had not yet returned to normal, our customersshowed increasing appreciation for our products and their extremely high quality.These products are not relatedto fashion trends, instead representing timeless icons.

Revenue growth sustained improved profitability, through our customary focus on costs and a lean productionorganisation in a perfect marriage of artisanal culture and efficiency.The company’s location in the renowned Italian high-quality shoe district helps us recruit highly qualified personnel.

Our Group has an extremely solid financial situation: a well-balanced inventory management, customarily highquality receivables, and a solidly positive cash balance.

Once again this year, we invested the resources necessary both for opening new boutiques and for continuousupdating of the image of existing shops. We introduced the new “Tod’s Home” concept at leading Tod’s brandboutiques: the stores are furnished like a real home,where customers can feel like welcome guests in an extremelyfriendly environment that best expresses Tod’s values: quality, tradition and exclusivity.

To support brand development, we maintained close attention and adequate investments in research, while wecontinued to invest in advertising and marketing,with targeted advertising campaigns and special events to promoteour Group’s “made in Italy” products. In this regard, we recall the collaboration with Teatro alla Scala and theagreement as sole, exclusive sponsor for financing restoration work on the Coliseum in Rome.

From a strictly financial point of view, 2010 was an extremely important year, marking the tenth year of listing.Theoverall result of this experience has been positive, not only due to the strong appreciation of our stock price fromthe listing price of 40 euros, but also due to the visibility that listing has given to our company, further reinforcingour dedication to rigour, discipline and managerial skill.In December, our stock was included in the FTSE Mib index, which is comprised of the 40 most representativestocks on the Italian stock exchange, major recognition for the solidity of our Group.

We decided on a very interesting dividend for shareholders once again this year, increasing the ordinary dividendby over thirty per cent, in addition to the extraordinary dividend paid in October.The strong and continuousgeneration of cash leaves the Group with all the resources necessary for continuing its solid growth and expansionon international markets.

As always, I would like to express my sincere appreciation to all Group employees, whose commitment is thefoundation for our success, and to you shareholders, for your confidence in our company and acceptance of ourstrategy.We obviously extend our gratitude to all our supporters and loyal customers.

Cordially,Diego DellaValleChairman of the Board of Directors

2010Annual Report

10 Company’s data

Company’s data

Registered office

TOD’S S.p.A.Via Filippo DellaValle, 163811 Sant’Elpidio a Mare (Fermo) - ItalyTel. +39 0734 8661

Legal dataParent company

Share Capital resolved euro 61,218,802Share Capital subscribed and paid euro 61,218,802Fiscal Code and Registration Number on Company Register of Court of Fermo: 01113570442Registered with the Chamber of Commerce of Fermo under n. 114030 R.E.A.

Offices and Showrooms Dusseldorf - Kaistrasse, 2Hong Kong - Three Pacific Place, 1 Queen’s Road EastLondon - Old Bond Street, 16Milan - CorsoVenezia, 30Milan -Via Savona, 56Milan -Via Serbelloni 1-4Milan -Via della Spiga, 22Milan -Viale Montenero 63NewYork - 450,West 15th StreetParis Rue Royale, 20Seoul 89-10, Cheongdam-dong, Kangnam-kuShanghai - 1366 Nanjing West Road, Plaza 66 Tower 2Tokyo Omotesando Building, 5-1-5 Jingumae

Production facilities Comunanza (AP) -Via Merloni, 7Comunanza (AP) -Via S.Maria, 2-4-6Sant’Elpidio a Mare (FM) -Via Filippo DellaValle, 1Bagno a Ripoli, Loc.Vallina (FI) -Via del Roseto, 60Bagno a Ripoli, Loc.Vallina (FI) -Via del Roseto, 50Tolentino (MC) -Via Sacharov 41/43

2010Annual Report

11 Corporate Governance bodies

Corporate Governance bodies

Board of directors (1) Diego DellaValle ChairmanAndrea DellaValle Vice- ChairmanLuigi AbeteMaurizio BoscaratoLuigi CambriLuca Cordero di MontezemoloEmanuele DellaValleFabrizio DellaValleEmilio MacellariPierfrancesco SaviottiStefano SinciniVitoVarvaro

Executive Committee Diego DellaValle ChairmanAndrea DellaValleFabrizio DellaValleEmilio MacellariStefano SinciniVitoVarvaro

Compensation Luigi Abete ChairmanCommittee Luigi Cambri

Pierfrancesco Saviotti

Internal Control and Maurizio Boscarato ChairmanCorporate Governance Luigi CambriCommittee Pierfrancesco Saviotti

Independent Directors Luigi Abete ChairmanCommittee Luigi Cambri

Pierfrancesco Saviotti

Board of statutory (2) Enrico Colombo ChairmanAuditors Gian Mario Perugini Acting stat. auditor

Fabrizio Redaelli Acting stat. auditorMassimo Foschi Substitute auditorGilfredo Gaetani Substitute auditor

Indipendent Auditors (3) Deloitte & Touche S.p.A.

Manager charged with preparinga company’s financial report Rodolfo Ubaldi

(1) Term of the office: 2009-2011 (resolution of the Shareholders’ meeting as of April 20th 2009)(2) Term of the office: 2010-2012 (resolution of the Shareholders’ meeting as of April 22nd 2010)(3) Term of the office: 2006-2011 (resolution of the Shareholders’ meeting as of April 28th 2006)

2010Annual Report

12 Composition of the Group

TOD’S S.p.A.Parent Company,owner of theTOD’S,HOGAN andFAY brands and licensee of the ROGER VIVIERbrand.

Del.Com. S.r.l.Subholding for operation of internationalsubsidiaries and DOS in Italy.

TOD’S International B.V.Subholding for operation of internationalsubsidiaries and DOS in The Netherlands.

An.Del. Usa Inc.Subholding for operation of subsidiaries inthe United States.

Del.Pav S.r.l.Company that operates DOS in Italy.

Filangieri 29 S.r.l.Company that operates DOS in Italy.

Re.Se.Del. S.r.l.Company for services.

Gen.del. SACompany that operates DOS in Switzerland.

TOD’S Belgique S.p.r.l.Company that operates DOS in Belgium.

TOD’S Deutschland GmbhCompany that distributes and promotesproducts in Germany and manages DOS inGermany.

TOD’S Espana SLCompany that operates DOS in Spain.

TOD’S France SasCompany that distributes and promotesproducts in France and manages DOS inFrance.

TOD’S Luxembourg S.A.Company that operates DOS in Luxembourg.

TOD’S Hong Kong LtdCompany that distributes and promotesproducts in Far East and South Pacific andmanages DOS in Hong Kong.

TOD’S Japan KKCompany that operates DOS in Japan.

TOD’S Korea Inc.Company that promotes products in Korea.

TOD’S Macao Ltd Company that operatesDOS in Macao.

TOD’S Retail India Private LtdCompany that operates DOS in India.

TOD’S Saint Barth SasNot operating company.

TOD’S (Shanghai)Trading Co. LtdCompany that operates DOS in China.

TOD’S Singapore Pte LtdCompany that operates DOS in Singapore.

TOD’S UK LtdCompany that operates DOS in Great Britain.

Webcover LtdCompany that distributes and promotesproducts in Great Britain and manages DOSin Great Britain.

Cal.Del. Usa Inc.Company that operates DOS in California(USA).

Colo. Del. Usa Inc.Not operating company.

Deva Inc.Company that distributes and promotesproducts in North America, and manages ofDOS in New Jersey (USA).

Flor. Del. Usa Inc.Company that operates DOS in Florida (USA).

Hono. Del. Inc.Company that operates DOS in Hawai (USA).

Il. Del. Usa Inc.Company that operates DOS in Illinois (USA).

Neva. Del. Inc.Company that operates DOS in Nevada (USA).

Or. Del. Usa Inc.Company that operates DOS in California(USA).

TOD’STex. Del. Usa Inc.Company that operates DOS inTexas (USA).

Holpaf B.V.Real estate company

Sandel SANot operating company.

Un.Del. KftProduction company.

Alban.Del Sh.p.k.Production company.

TOD’S Group

2010Annual Report

13 Composition of the Group

Group’s organizational chart

TOD’S S.p.A.

Gen.Del. SAZurich - Switzerland

S.C. Chf 200,000

TOD’S Belgique S.p.r.l.Bruxelles - BelgiumS.C. - Euro 300,000

TOD’S Japan KKTokio - Japan

S.C. - Jpy 100,000,000

TOD’S Saint Barth SasSaint Barthélemy

S.C. - Euro 500,000

Un.Del KftTata - Hungary

S.C. - Huf 42,900,000

TOD’S Macao LdaMacao

S.C. Mop 20,000,000

Cal.Del. USA Inc.Beverly Hills, Ca U.S.A.

S.C. - Usd 10,000

Deva Inc.Wilmington, DE U.S.A.

S.C. - Usd 500,000

Hono.Del. Inc.Honolulu, Hi U.S.A.S.C. - Usd 10,000

Neva.Del. Inc.Carson City, Nv U.S.A.

S.C. - Usd 10,000

Del.Pav. S.r.l.S. Elpidio a Mare - Italy

S.C. - Euro 50,000

TOD’S Espana SLMadrid - Spain

S.C. - Euro 468,539,77

TOD’S Korea IncSeoul - Korea

S.C.Won 1,600,000,000

TOD’S Singapore LtdSingapore

S.C. - Sgd 300,000

TOD’S Luxembourg S.A.Luxembourg

S.C. Euro 31,000

Sandel SASan Marino

S.C. - Euro 258,000

Colo.Del. USA IncDenver, Co U.S.A.S.C. - Usd 10,000

Flor.Del. USA Inc.Tallahassee, Fl U.S.A.

S.C. - Usd 10,000

Il.Del. USA Inc.Springfield, Il U.S.A.S.C. - Usd 10,000

Or.Del. USA Inc.Sacramento, Ca U.S.A.

S.C. - Usd 10,000

Re.Se.Del. S.r.l.S. Elpidio a Mare - Italy

S.C. - Euro 25,000

Filangieri 29 S.r.l.S. Epidio a Mare- ItalyS.C. - Euro 100,000

TOD’S International BVAmsterdam - The Netherlands

S.C. - Euro 2,600,200

TOD’S Deutschland GmbhDusseldorf - GermanyS.C. - Euro 153,387,56

Holpef B.V.Amsterdam - The Netherlands

S.C. - Euro 5,000,000

ALBAN.DEL Sh.p.kTirana - Albania

S.C. - Euro 720,000

TOD’S India Retail Private LtdMumbai - India

S.C. INR 113,900,000

An.Del. USA Inc.NewYork U.S.A.

S.C. - Usd 3,700,000

Del.Com S.r.l.S. Epidio a Mare- Italy

S.C. - Euro 31,200

100%

99%

100%

100%

100%

90%

99%

1%

10%

1%

100%

100%

100%

100%

TOD’S Tex. Del. Inc.Dallas,Tx U.S.AS.C. Usd 10,000

100%

50%

100%

100%

100%

100%

100%

50%

100%

100%

100%

100%

100%

100%

50%

100%

TOD’S France SasParis - France

S.C. - Euro 780,000

100%

100%

100%

100%

TOD’S (Shanghai)Trading Co.LtdShanghai - China

S.C. USD 6,000,000

TOD’S UK LtdLondon - Great Britain

S.C. - Gbp 350,000

TOD’S Hong Kong LtdHong Kong

S.C. - Usd 16,550,000

100% 50% 1%Webcover Ltd

London - Great BritainS.C. - Gbp 1.000

50%

100%

Distribution network as of December 31st 2010

2010Annual Report

14 Distribution network

DOS, 2010 new openings Franchised stores, 2010 new openings

EuropeCapri (Italy)Milan (Italy)Milan (Italy)Rome (Italy)Ingolstadt (Germany)

Far EastSeoul (Korea)Osaka (Japan)Tokyo (Japan)Tokyo (Japan)Tokyo (Japan)Chengdu (China)Fuzhou (China)Hangzhou (China)Shangai (China)Shenzhen (China)

Middle EastKaohsiung (Taiwan)

For a complete list of retail outlets operated by the DOS and franchising network, reference should be made to the corporate web site:www.todsgroup.com

EUROPE (D) (F)Italy 40 6Belgium 1France 11Germany 9Great Bretain 5 1Greece 5Luxembourg 1Netherlands 1Portugal 1Russia 2Spain 1 1Switzerland 3Turkey 1TOTAL 72 17

RoW (D) (F)Saudi Arabia 2Baharain 2U.A.E. 5Kuwait 2Lebanon 2Qatar 1TOTAL 14

ASIA (D) (F)Japan 30 1China 22 4Korea 8 7Philippines 2Hong Kong 8 1India 2Indonesia 3Macau 1 1Malaysia 2Singapore 2 1Taiwan 14Thailandia 3Usa 1TOTAL 73 40

USA (D) (F)USA 14

(D) = DOS (F) = FRANCHISED STORES

2010Annual Report

15 Key consolidated financial figures

Key consolidated financial figures

P&L key figures (Euro mn)

FY 10 FY 09 FY 08

Revenues 787.5 713.1 707.6

EBITDA 193.1 24.5% 158.7 22.2% 155.6 22.0%

EBIT 159.9 20.3% 126.4 17.7% 126.0 17.8%

PRE TAX PROFIT 163.4 20.7% 126.5 17.7% 125.4 17.7%

Net income 110.8 14.1% 86.1 12.1% 83.9 11.9%

Key Balance Sheet figures (Euro mn)

Dec. 31st, 10 Dec. 31st, 09 Dec. 31st, 08

Net working capital (*) 298.7 373.4 308.2

Net fixed capital 363.2 297.4 309.7

Shareholders’ equity 618.4 659.9 602.6

Net financial position 96.5 177.2 72.8

Capital expenditures 96.1 21.3 40.8

(*) Current Assets - Current Liabilities

Financial key figures (Euro mn)

Dec. 31st, 10 Dec. 31st, 09 Dec. 31st, 08

Free cash flow (44.7) 102.8 (2.6)

Self financing 144.8 122.8 116.5

Cash flow from operation 169.0 154.2 89.2

2010 Revenues - % by brand

2010 Revenues - % by region

2010 Revenues - % by product

TOD’S51.7%

HOGAN34.1%

FAY11.4%

RogerVivier2.8%

Europe20.8%

NorthAmerica

6.8%RoW18.4%

Italy54.0%

Leathergoods15.6% Appar.

12.6%

Shose71.7%

2010Annual Report


Highlights of results

Revenues: 2010 revenues of 787.5 million euros, 773.8million euros on a comparable exchange rate basis, forgrowth of 10.4% and 8.5%, respectively, as compared with2009 revenues.The DOS network had sales of 403.8 millioneuros (+15.6%).

EBITDA: this totalled 193.1 million euros, up 21.7% from2009 (158.7 million euros).The ratio of EBITDA to sales roseto 24.5%.

EBIT: this totalled 159.9 million euros (126.4 million eurosin 2009), with growth of 33.5 million (+26.5%).

Net profit: consolidated net profit for FY 2010 was 110.8million euros, up 28.6% from 2009.

Net financial position (NFP): the Group had 171.7million euros in liquid assets at December 31st 2010.The netfinancial position at the same date was 96.5 million euros(net of dividends paid for 153 million euros).

Capital expenditures: 96.1 million euros were spent in2010, including 66.3 million euros for the real estatepurchased in Tokyo.

Distribution network: a total of 15 new DOS wereopened during the financial year: at December 31st 2010 thesingle brand distribution network comprised 149 DOS and78 franchised stores.

Revenues (Euro mn)

FY 10 FY 10 FY 09 FY 08comp. ex.rate basis

787.5773.8713.1 707.6

EBITDA (Euro mn)


193.1186.9

158.7 155.6

EBIT (Euro mn)


159.9154.4

126.4 126.0

NFP (Euro mn)

free cash FY 10 FY 09 FY 08flow (*)

96.5108.3

177.2

72.8

(*) gross of dividends

2010Annual Report


The Group’s employees

FY 10 FY 09 FY 08 FY 07

Year to date 3.194 2.840 2.814 2.472

Average 3.098 2.829 2.698 2.421

EX = executives

WHC = white collar employees

BLC = blue collar employees

Earning per share (Euro) Stock performance

FY 10 FY 09 FY 08

2.80

3.56

2.71

2010 Group’s employees

BLC34%

WHC65%

EX1%

Main Stock Market indicators (Euro)

Official price at 01.04.2010 51.20

Official price at 12.30.2010 74.02

Minimum price in 2010 45.11

Maximum price in 2010 84.96

Market capitalization at 01.04.2010 1,567,100,626

Market capitalization at 12.30.2010 2,265,675,722

Extraordinary Dividend 2010 per share 3.50

Dividend per share 2009 1.50

Dividend per share 2008 1.25

Number of outstanding shares 30,609,401

35,00

45,00

55,00

65,00

75,00

85,00

95,00

January-December 2010

euro

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18 2010 Annual Report

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TOD'S GROUP – IAS/IFRS ANNUAL REPORTAS OF DECEMBER 31ST 2010

REPORT ON OPERATIONS

Group2010Annual Report

29 Report on operations

Introduction

The Report of the Board of Directors on Operations is based on the TOD’S Group Consolidated FinancialStatements at December 31st 2010, prepared in accordance with IAS/IFRS (International Accounting Standards –IAS, and International Financial Reporting Standards –IFRS) issued by the IASB and approved by the EuropeanUnion at the same date. IAS/IFRS refers also to all revised International Accounting Standards (IAS) and allinterpretative documents issued by the IFRIC (International Financial Reporting Interpretations Committee), previouslynominated Standing Interpretations Committee (SIC).The Consolidated Financial Statements have been prepared on the assumption that the Group can operate as agoing concern.The Group believes that there are no asset, liability, financial or organisational indicators of materialuncertainties, as defined in paragraph 25 of IAS 1 on business continuity.The Report on Operations must be read together with the Financial Statements and Notes to the FinancialStatements, which are an integral part of the 2010 Consolidated Annual Report.The Report on Operations alsoincludes the additional information required by CONSOB,pursuant to the orders issued in implementation ofArticle9 of Legislative Decree 38/2005 (Resolutions 15519 and 15520 of July 27th, 2006 and memorandum DEM/6064293of July 28th 2006), as well as all subsequent notices containing provisions regarding financial disclosures.

Alternative indicators of performances

In order to strip the effects of changes in exchange rates with respect to the average values for the previous yearfrom the results for the 2010 financial year, the typical economic reference indicators (Revenues, EBITDA andEBIT) have been recalculated by applying the average exchange rates for 2009, rendering them fully comparablewith those for the previous reference period. Note that on the one hand, these principles for measurement ofbusiness performance represent a key to interpretation of results not envisaged in IFRSs, and on the other hand,must not be considered as substitutes for what is set out in those standards.

Group’s activity

The TOD’S Group operates in the luxury sector under its proprietary brands (TOD’S, HOGAN and FAY) andlicensed brands (ROGERVIVIER). It actively creates, produces and distributes shoes, leather goods and accessories,and apparel. The firm’s mission is to offer global customers top-quality products that satisfy their functionalrequirements and aspirations.

Development of production. The Group’s production structure is based on complete control of the productionprocess, from creation of the collections to production and then distribution of the products. This approach isconsidered key to assuring the prestige of its brands.Shoes and leather goods are produced in Group-owned plants,with partial outsourcing to specialized workshops.All of these outsourcers are located in areas with a strong tradition of shoe and leather good production. Thispreference reflects the fact that an extremely high standard of professional quality is required to make these items,with a significantly high level of added value contributed to the final product by manual work.The Group relies exclusively on selected specialized outsourcers, which enables it to exploit their respectivespecializations in crafting the individual products sold as part of the apparel line.

Distribution structure. The prestige of the Group’s brands and the high degree of specialization necessary tooffer the respective products to customers entails distribution through a network of similarly specialized stores.Accordingly, the Group relies principally on three channels: DOS (directly operated stores), franchised retailoutlets, and a series of selected, independent multibrand stores.The Group’s strategy is focused on development of the DOS and franchising networks, given that these channelsoffer greater control and more faithful transmission of the individual brands. It is also clear that, in particular



market situations, distribution through independent multibrand stores is more efficient. This channel is of keyimportance to the Group.

Group’s brands

The TOD’S brand is positioned on the luxury market and combines tradition, top quality and modernity. It offersconsumers shoes, leather goods, accessories and apparel whose design is exclusive, functional and neverostentatious, interpreting timeless elegance.TOD’S products embody the high quality of goods “Made in Italy” that are handcrafted for daily use while offeringa sophisticated and elegant look. Certain products, such as the Gommino, the Ballerina and the D-Bag, beloved bycelebrities and leaders around the world, have become icons representing a unique and recognisably elegant stylefor men and women

The HOGAN brand is positioned in the elegant luxury sportswear market,offering consumers contemporary styleshoes, leather goods, accessories and apparel with an international vision. HOGAN products, which aredistinguished by their innovative character and high quality, have created a unique style, contributing to changes inthe fashion habits of consumers who want a functional, comfortable, but also sporty and elegant product foreveryday life. HOGAN products are trend-setters in defining an elegant and sporty look. Some of its models arebest sellers, such as its Interactive shoes.

This brand offers consumers a line of high-quality apparel that is distinguished by the technical treatment of fabrics,obsession for detail and extreme functionality, combining style and quality with excellence. FAY products can beworn everywhere: from the sports stadium to the office, and from the city to the countryside. In every season,the FAY collection offers innovative, recognisable products for men, women and children.

Organizational structure of the Group

The Group’s organisational configuration rotates around TOD’S S.p.A. that is at the heart of the Group’sorganisation, its parent company that owns theTOD’S,HOGAN and FAY brands, holds the licenses to the ROGERVIVIER, and manages the Group’s production and distribution.Through a series of sub-holdings, the organisationis rounded out by a series of commercial companies that are delegated complete responsibility for retaildistribution through the DOS network.Certain of them, strategically located on international markets, are assignedmajor roles in product distribution, marketing and promotion, and public relations processes along the “valuechain”, while simultaneously guaranteeing the uniform image that Group brands must have worldwide.



Foreign currency markets

Especially in the first half of the year, FY 2010 was dominated by the steady weakening of the euro against othermajor global currencies.As compared with the average exchange rates with major currencies for FY 2009, thechanges in the Korean won and Japanese yen were particularly significant.

Main events and operations during the period

Purchase of Omotesando building. In November 2010, the Group purchased the building in Tokyo (whosemarket value was appraised at JPY 7.2 billion, or about 66.3 million euros at the year-end exchange rate).Thisbuilding has been used entirely byTod’s Japan K.K. since 2005, as the headquarters for its administrative offices andlocation for the most importantTOD’S flagship store in Japan.The purchase was made through acquisition by theGroup of the entire share capital of Holpaf B.V., the holding company that constructed the building and owns it.This deal is classifiable as a related party transaction, insofar as Holpaf B.V. was indirectly controlled by DiegoDellaValle & C. SAPA, a company belonging to Diego e Andrea DellaValle, and controlled by Diego DellaValle.Ten years after the first direct investment through its own operating organisation, the Japanese market nowrepresents one of the drivers for the Group’s strategy to consolidate and develop its business throughout theAsianand South Pacific areas. No longer needing the operating flexibility that characterised the start-up phase of thebusiness, the Group decided to consolidate its presence in the Asia-Pacific region by purchasing the building.Thedecision was based on an assessment of the prospective purchase on the income and financial position of thecompany as compared with a property lease arrangement.The building’s distinctive architecture represents animportant tool for promoting the visibility of the TOD’S brand in Japan and on Asian markets.In financial terms, the impact of acquisition of Holpaf B.V.on the Group’s cash position was about 22.7 million euros,of which about 2.1 million euros for the transfer of shares and 20.6 million euros for reimbursement by HolpafB.V. of a shareholder loan made by the previous owner.The impact of the deal on the overall net financial position at December 31st 2010 was about 63.0 million euros.This mainly reflected, aside from the outlays indicated above, the two bonds issued in 2006 by Holpaf B.V. torefinance the original purchase of the land and construction of the building that the Group has taken over.The fairvalue of the land and building at December 31st 2010 was 41.2 million euros.The impact on 2010 income wasimmaterial,with the positive effects (stemming from replacement of the lease instalments with depreciation of thebuilding) being limited to just one month (December 2010).

Payment of extraordinary dividend. On October 14th 2010, the parentTOD’S S.p.A. paid out an extraordinarydividend, approved by the Shareholders’ Meeting held on September 21st 2010, for a total of 107.1 million euros,at the rate of 3.50 euros per share.

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6

4

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Average exchange rate2010 vs 2009 (change %)

GBP HKD JPY KRW SGD USDCHF

9.5

3.84.7

12.0

15.7

12.1

4.9



This payment, in addition to the ordinary dividend totalling 45.9 million euros resolved by the Shareholders’Meeting held to approve the 2009 annual report, was made in consequence of the large amount of cash on hand,but above all the Group’s consolidated capacity to manage and generate cash.These conditions allowed it to payout surplus cash to the shareholders without compromising the Group’s equity, financial position and income, orrealisation of its growth targets and implementation of planned investments.

Development of Chinese market. FY 2010 was a very important year for consolidation of the Group’spresence in mainland China, which has recently confirmed its position as a strategic market for the developmentof business, both by the Group and the entire luxury goods segment. With the five new DOS that opened(including the ROGER VIVIER boutique in Shanghai, the first store opened by this brand in China), the single-brand network in China totalled 28 retail outlets at December 31st 2010, topped only by the Italian and Japanesenetworks.

Group’s results in 2010

The Group performed outstandingly in FY 2010.The excellent earnings results, all of which grew at double-digitrates, were generated by development processes affecting all business segments and markets where the Groupoperates. Revenues during the year grew by 74.4 million euros, from 713.1 million euros in 2009 to 787.5 millioneuros in 2010 (773.8 million euros on a comparable exchange rate basis). Growth as measured by operatingmargins was even stronger. EBITDA and EBIT totalled 193.1 million euros and 159.9 million euros, respectively (FY2009: EBITDA 158.7 million euros, EBIT 126.4 million euros).Net profit rose sharply: consolidated net profit was 110.8 million euros, up 28.6% from the 86.1 million eurosreported in FY 2009.

Euro 000’sMain economic indicators Year 10 Year 09 Change %

Sales revenues 787,539 713,135 74,404 10.4

EBITDA 193,059 158,653 34,406 21.7

Deprec., amort.,write-downs and advances (33,115) (32,205) (910) 2.8

EBIT 159,944 126,448 33,496 26.5

Pre-Tax 163,352 126,545 36,807 29.1

Consolidated net profit 110,786 86,140 24,646 28.6

Foreign exchange impact on revenues (13,700)

Adjusted Sales revenues 773,839 713,135 60,704 8.5

Foreign exchange impact on operating costs 7,500

Adjusted EBITDA 186,859 158,653 28,206 17.8

Foreign exchange impact on deprec.& amort. 700

Adjusted EBIT 154,444 126,448 27,996 22.1

EBITDA % 24.5 22.2

EBIT % 20.3 17.7

Adjusted EBITDA % 24.1 22.2

Adjusted EBIT % 20.0 17.7

Tax rate % 32.2 31.9



Euro 000’sMain Balance Sheet Indicators 12.31.10 12.31.09 Change

Net working capital (*) 192,688 200,129 (7,441)

Non current assets 363,186 297,367 65,819

Other current assets/liabilities (33,928) (14,752) (19,176)

Net assets held for sale - - -

Invested capital 521,946 482,744 39,202Net financial position 96,495 177,189 (80,694)

Shareholders’ equity 618,441 659,933 (41,492)

Capital expenditures 96,067 21,310 74,757

Cash flow from operations 168,950 154,164 14,786

Free cash flow (44,708) 102,837 (147,545)

(*)Trade receivables + inventories - trade payables

Revenues. Group consolidatedrevenues totalled 787.5 millioneuros in FY 2010, up 10.4% from FY2009. Revenue growth acceleratedcontinuously over the course of theyear: +3.4% in Q1 2010, +7.4% inQ2 2010, +15.5% in Q3 2010 and+16.1% in Q4 2010. On acomparable exchange rate basis, i.e.using the same average exchangerates for FY 2009, revenues wouldtotal 773.8 million euros, up 8.5%from the previous year.In FY 2010, revenues to third partiestotalled 383.7 million euros,up 5.5%from 2009. Excellent results werereported on the entire DOSnetwork. Total revenue in the direct channel was 403.8 million euros, or 51.3% of Group sales.Growth during the year was 15.6%, or 12.2% on a comparable exchange rate basis.The Same Store Sales Growth(SSSG) figure, calculated as the worldwide average of revenue growth rates reported at the DOS existing onJanuary 1st 2009 with comparable data, was an outstanding 13% for all of FY 2010.At December 31st 2010, theGroup’s distribution network was comprised by 159 DOS and 71 franchised stores, compared with 149 DOS and78 franchised stores at December 31st 2009.The TOD’S brand reported excellent results, with revenue of about 407 million euros in FY 2010, up 16.7% fromFY 2009. Growth was 27.3% in Q4 2010 alone. Excellent results were reported for all product categories and inall markets where the Group operates. On a comparable exchange rate basis, the brand posted growth of 13.2%in FY 2010.HOGAN brand revenue totalled 268.3 million euros in FY 2010, up 4.4% from the previous year.Results were alsopositive in Italy.

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FY 10 FY 09

800

0

(Euro mn) FY 10 % FY 09 % Change %

DOS 403.8 51.3 349.3 49.0 54.5 15.6

Third parties (WS) 383.7 48.7 363.8 51.0 19.9 5.5

Total 787.5 100.0 713.1 100.0 74.4 10.4

WS48.70% WS

DOS DOS

WS

DOS51.3%



The brand is reorganising itsinternational presence, in view ofreinforcing its image on foreignmarkets through, among otherinitiatives, collaboration with therenowned designer Karl Lagerfeldand the opening of the first DOS inShanghai.The FAY brand reported revenue of89.7 million euros in FY 2010,against91.6 million euros in FY 2009,confirming in Q4 2010 the positiveresults generated the start of wintercollection sales. Finally, the ROGERVIVIER brand reported revenue of21.7 million euros in FY 2010, up45.3% from the previous year.As hasbeen said on numerous occasionsbefore, analysis of the resultsgenerated by this brand is not yetentirely significant, insofar as it is stillin the phase of launching andconsolidating its exclusive cachet andprestige.

At the level of individual merchandisecategories, the Group confirmed itsuncontested leadership in its coreshoe business.This category posteddouble-digit sales gains in FY 2010.Revenue totalled 564.6 millioneuros, up 11.6% from FY 2009.Leather good revenues alsoaccelerated dramatically (+35% inQ4 2010, +16% in Q3 2010), beingpropelled by the excellent results ofthe entire TOD’S brand collectionof handbags and accessories. Thetotal revenues for leather goodsand accessories in FY 2010 totalled123.2 million euros, up 10.6% fromthe previous year. Finally, apparelrevenues totalled 99.1 million eurosin FY 2010, up 4.3% from FY 2009.

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FY 10 FY 09

800

0


TOD’S 407.0 51.7 348.8 48.9 58.2 16.7

HOGAN 268.3 34.1 256.9 36.0 11.4 4.4

FAY 89.7 11.4 91.6 12.9 (1.9) (2.2)

ROGERVIVIER 21.7 2.7 15.0 2.1 6.7 45.3

Other 0.8 0.1 0.8 0.1 0.0 n.s.

Total 787.5 100.0 713.1 100.0 74.4 10.4

TOD’S51.7%

HOGAN34.1%

FAY11.4%

RV 2.7%RV

HOGAN

TOD’S

FAYFAY

HOGAN

TOD’S

RV

100

200

300

400

500

600

700

900

FY 10 FY 09

800

0


Shoes 564.6 71.7 506.1 71.0 58.5 11.6

Leather goods 123.2 15.6 111.4 15.6 11.8 10.6

Apparel 99.1 12.6 95.0 13.3 4.1 4.3

Other 0.6 0.1 0.6 0.1 0.0 n.s.

Total 787.5 100.0 713.1 100.0 74.4 10.4

Apparel

Leathergoods

Shoes

Apparel

Leathergoods

Shoes

Apparel12.6%

Shoes71.7%

Leathergoods15.6%



The Group’s strength on thedomestic market was confirmed,with Italian revenues totalling 425.7million euros in FY 2010, up 5.1%from the previous year.The results reported for the rest ofEurope were also positive, with theGroup posting total sales of 163.7million euros, up 8.6% from theprevious year. Excellent resultswere also reported on the UnitedStates market, which experienced abig jump in sales (+23% in Q4 2010,+13.5% in Q3 2010).Aggregate Group revenue on thismarket totalled 53.4 million euros inFY 2010, with growth of 15% fromthe previous year. On a comparableexchange rate basis, this marketgrew by 10.2% in FY 2010.The“Asiaand Rest ofWorld” area reported excellent results, with revenue of 144.7 million euros, up 30.5% from 2009. Saleswent into overdrive in this area as well during Q4 2010 (+65% in Q4 2010, +25% in Q3 2010).The results postedby China, Hong Kong,Taiwan and South Korea were particularly outstanding. On a comparable exchange ratebasis, the brand posted growth of 21.6% in FY 2010.

Operating results. Group EBIDTA leapt forward, from 158.7 millioneuros in FY 2009 to 193.1 million euros in FY 2010, for a change of 34.4million euros, or +21.7%. EBITDA amounted to 24.5% of consolidatedrevenues, up 230 basis points from FY 2009, when it was 22.2% of sales.On a comparable exchange rate basis, or with application of the averagecross rates for the previous year, EBIDTA would be about 186.9 millioneuros, or 24.1% of sales.Growing revenues had an especially significant impact on profit margins. Salesin FY 2010 were characterised by the significant weight of the like for likecomponent,as well as a qualitative component that was more heavily impactedin 2010 than in 2009 by full-price sales rather than promotional sales, and bythe revenues realised on higher-profit markets (especiallyAsia).The impact ofthe product mix is also positive,being tied to growth in the contribution madeto overall sales by leather goods, which guarantees higher profits than shoes.Industrial margins were also positively impacted by high production efficiency, resulting from the streamlining ofindustrial processes.On the contrary, lease and rental expenses, personnel expense, and marketing and communication expenses wereup slightly, rising steadily during the year in support of continuous sales growth.The expense during the period for leases and rentals (leases for use of locations outside Italy, and royalties for useof licenses) totalled 58.7 million euros, for a change of 7.3 million euros from 2009 (when it was 51.4 million euros).The percentage of these costs in terms of revenues thus rose from 7.2% in 2009 to 7.5% in 2010.Aside from the changes in foreign exchange rates compared with the previous year (less than approximately 2million euros on a comparable exchange rate basis), the incremental costs were mainly due to the new openingof DOS in 2010 and the growth in the variable component of leases and rents tied to sales performance, resultingfrom the steep rise in revenues in Asia.

100

200

300

400

500

600

700

900

FY 10 FY 09

800

0


Italy 425.7 54.0 405.1 56.8 20.6 5.1

Europe 163.7 20.8 150.7 21.1 13.0 8.6

North America 53.4 6.8 46.4 6.5 7.0 15.0

RoW 144.7 18.4 110.9 15.6 33.8 30.5

Total 787.5 100.0 713.1 100.0 74.4 10.4

NorthAmerica

6.8%

RoW18.4%

Italy54.0%

RoW

North Am.Europe

Italy

RoW

North Am.Europe

Italy

Europe20.8%

EBITDA (Euro mn)

FY 10 FY 10 FY 09comp. ex.rates basis

186.9 193.1

158.7



The change in personnel costs is related principally to the increase inheadcount.Wages and salaries totalled 117.8 million euros, compared with107.3 million euros in the previous year, for an increase of 10.5 millioneuros in absolute terms.This cost is equal to 15.0% of Group revenues(15.1% in 2009.At December 31st 2010, the Group had 3,194 employees,354 more than at December 31st 2009 (2,840 employees at that date).Mostof the employees who were newly hired during 2010 were used to buildup the Group’s production organisation and operate new retail outlets.Depreciation costs were substantially the same as in the previous financialyear. Amortisation, depreciation and impairment for FY 2010 totalled 32.1million euros, as compared with 31.0 million euros in 2009. At December31st 2010, amortisation and depreciation equalled 4.1% of Group revenues, ascompared with 4.4% in the previous year.

Benefiting from this recovery in marginal costs, EBIT amounted to 159.9million euros (126.4 million euros in 2009), for growth of 33.5 million euros.This represented a 26.5% increase, greater than the increase in EBITDA.EBIT in 2010 was equal to 20.3% of consolidated sales (FY 2009: 17.7%).On a comparable exchange rate basis, EBIT during the period would havebeen 154.4 million euros, representing 20.0% of consolidated sales. Accrualsfor doubtful accounts and generic risks totalled 1.0 million euros.

Net financial income was a positive 3.4 million euros in 2010,mainly due tothe positive 2.5 million euros difference in net foreign exchange gains.By including the effect of foreign exchange risk hedging (negative 1.9 millioneuros), the total balance of foreign exchange gains and losses was still apositive 1.5 million euros.Interest income accrued on cash and cash equivalents totalled 2.1 millioneuros.

GROUP’S EMPLOYEES

FY 10 FY 09 FY 08 FY 07

3.194

2.840 2.814

2.472

EBIT (Euro mn)

FY 10 FY 10 FY 09comp. ex.rates basis

154.4

126.4

159.9

FINANCIAL INC/EXP. (Euro mn)

2.5

1.4

Foreignexch.

gains &losses

Net interests

Other

-0,5



Income taxes owed for the period (including the effects of deferred taxes)totalled 52.6 million euros.The tax rate was 32.2%, substantially the sameas in 2009.Net profit was outstanding, amounting to 110.8 million euros in 2010, up28.6% from 2009, when it totalled 86.1 million euros (+24.6 million euros).This profit is equal to 14.1% of consolidated revenues, as compared with12.1% in the previous year.

Capital expenditure. Capital expenditures totalled 96.1 million euros in 2010.This figure includes 66.3 millioneuros for the building inTokyo that houses the head office of the subsidiaryTOD’S Japan and the flagship store inOmotesando, which was bought in 2010. Net of this asset, capital expenditure during the period totalled 29.8million euros, as compared with 21.3 million euros in 2009.

Capital expenditure on the DOS network rose sharply (to about 16.1million euros, from 10.7 million euros in the previous year), to set up thenew stores opened during the year and renovation work on existingboutiques, which is performed on a rotating basis.Capital expenditure on industrial devices and equipment totalled 6.9million euros (5.6 million euros in 2009), for normal and periodicreplacement and modernisation activities.

Tax Rate

FY 10 FY 09 FY 08 FY 07

32.2% 31.9% 33.1%

37.8%

INVESTMENT BY ALLOCATION

DOS17%

Produc.7%

Other7%

FY 10 FY 09 FY 08 FY 07 FY 06

96.1

21.3

40.8 45.2

30.5

Tangible & IntangibleassetsCapital expenditures(Euro mn)

Real estate invest.69%

Net financial position and cash flow. The Group’s net financial position at December 31st 2010 was 96.5 millioneuros, reflecting a change of 80.7 million euros from December 31st 2009 (177.2 million). Cash and cash equivalents of171.7 million euros (which totalled 204 million euros at December 31st 2009) are set off against liabilities of 75.2 millioneuros (26.8 million euros at December 31st 2009).These liabilities include 41.2 million euros (about JPY 4.5 billion forthe face value of the bonds that were granted) as the aggregate fair value (short and long-term) of the non-convertiblebonds that the Group took over through acquisition of the controlling interest in Holpaf B.V.The latter company isowner of theTokyo property where the Group’s Japanese subsidiary has its head office.Those bonds had been issuedby Holpaf B.V. to obtain the financial resources necessary for purchasing the property and remodelling the building.The overall impact of the acquisition on the Group’s net financial position at December 31st 2010 was about 63.0million euros.This amount includes not only the financial assets and liabilities contributed by Holpaf, but also theacquisition value of company shares (2.1 million euros) and 20.6 million euros for full repayment to the formershareholders for the loan they had made prior to the acquisition.In FY 2010, cash was also heavily impacted by the previously mentioned payment by the parent company tostockholders of an extraordinary dividend of 107.1 million euros, by drawing on available equity reserves, in additionto the 45.9 million euros paid upon approval of the 2009 annual report.

Euro 000’sNet financial position 12.31.10 12.31.09 Change

Current financial assetsCash and cash equivalents 171,729 204,009 (32,280)

Cash 171,729 204,009 (32,280)Current financial liabilitiesCurrent account overdraft (27,283) (18,480) (8,803)

Current share of medium-long term financing (5,146) (1,521) (3,625)

Current financial liabilities (32,429) (20,001) (12,428)Current net financial position 139,300 184,008 (44,708)Non-current financial liabilitiesFinancing (42,805) (6,819) (35,986)

Non-current financial liabilities (42,805) (6,819) (35,986)Net financial position 96,495 177,189 (80,694)

Operating cash flow totalled 169.0 million euros in 2010, up 14.8 million euros from the 154.2 million eurosgenerated in 2009, due to the positive and growing contribution of cash flow, confirming the Group’s structuralcapacity to generate cash.

Euro 000’sStatement of cash flow Year 10 Year 09

Profit loss for the period 109,076 85,668Non-cash items 35,704 37,166

Cash Flow 144,780 122,834Changes in operating net working capital 24,170 31,330

Cash Flow from operations 168,950 154,164Cash Flow generated (used) in investment activity (98,101) (20,136)

Cash Flow generated (used) in financing activity (115,558) (31,191)

Cash Flow received (used) continuing operations (44,708) 102,837Cash Flow from assets held for sale - -

Cash Flow received (used) (44,708) 102,837

Net financial position at the beginning of the period 184,008 81,171

Net financial position at the end of the period 139,300 184,008

Change in current net financial position (44,708) 102,837



Working capital generated a positive 24.2 million euros during the financial year. Investments grew during FY 2010,totalling 29.8 million euros (with disinvestments totalling 0.5 million), net of the property asset acquired inTokyo,as compared with 19.3 million euros in 2009.The total net investment of short-term cash resources for purchaseof the Tokyo property impacted FY 2010 cash flow by 25.4 million euros.Net of dividend payments (totalling 153 million euros) and the effects of the property deal on the short-term netfinancial position, the total amount of liquidity generated by cash flow in FY 2010 would be 133.8 million euros,compared with 141.1 million euros in 2009 (gross of dividends paid that year).

Research and development

Given the particular nature of the Group’s production, research and development activity consists of continuoustechnical/stylistic revision of models and constant improvement of the materials used to realise the product.Since this activity is exclusively ordinary, the associated costs are charged entirely to income in the year that theyare incurred, and thus recognised as normal production costs.Research and development costs, as defined above, have assumed major importance due to operating realisationof projects connected with expansion of the existing product line with new types of merchandise thatcomplement current ones. These will increase the number of brands offered and stimulate increased sales to endcustomers.

Reconciliation of the result for the period and net equity of the Group with the analogousvalues of the Parent Company

The following table illustrates the reconciliation of the result for the period and net equity of the Group with theanalogous values of the Parent Company, in accordance with CONSOB memorandum DEM/6064293 dated July28th 2006.

Euro 000’s 12.31.10 12.31.09Net Profit Share.equity Net Profit Share.equity

Parent Company 82,974 552,853 71,921 622,874Difference between book value of consolidated

Companies and net equity method valuation 30,202 82,637 13,410 50,747

Goodwill from Business combination Parent Company (13,242) (13,242)

Goodwill from Business combination Group 11,789 11,789

Others (*) (4,100) (22,499) 337 (17,517)

Minority interest 1,710 6,903 472 5,282

Group 110,786 618,441 86,140 659,933

(*) Mainly dividends and intercompany profits.

Corporate Governance

The Corporate Governance system. The corporate governance system of the parent companyTOD’S S.p.A. isbased on the traditional system, or “Latin model”.The corporate bodies are:– the Shareholders’ Meeting, which has the prerogative of resolving at its ordinary and extraordinary meetings

on the matters reserved to it by law or the articles of association;– the Board of Directors, which is vested with full, unlimited authority for ordinary and extraordinary

management of the Company, with the right to perform all those acts that it deems appropriate to implementand realise the corporate purpose, excluding only those reserved by law to the Shareholders’ Meeting;



– the Board of Statutory Auditors, which is delegated by law to monitor i) compliance with the law,memorandum of association and compliance with the principles of proper management; ii) the adequacy ofthe organisational structure for matters falling under its purview, its internal control system and administrativeand accounting system, as well as the adequacy of the latter in fairly reporting operating performance; iii) theadequacy of directives issued toTOD’S Group companies in regard to the information that they must providein compliance with disclosure obligations; iv) the procedures for effective implementation of the corporategovernance rules set out in the Corporate Governance Code adopted by the Group; Legislative Decree39/2010 delegates the Board of Statutory Auditors the task of monitoring the process of financial disclosureand the effectiveness of the risk control and management systems, as well as independent audits andcertification of the annual accounts and consolidated accounts, and the independence of the accounting firmretained to do so;

– the Manager in charge of preparing the company financial documents.The Board of Directors has set up several internal committees: the Executive Committee, the Internal Controland Corporate Governance Committee, the Compensation Committee and the Independent DirectorsCommittee.The adopted corporate governance model is substantially based on the Corporate Governance Code for ListedCompanies, in its latest version as prepared by the Corporate Governance Committee for Listed Companies(sponsored by Borsa Italiana S.p.A. and comprised by representatives from several of the leading Italian companiesand experts in this area), whose principles have been implemented by TOD’S S.p.A. with a series of Board ofDirectors resolutions since November 2006, as well as the reference models represented by international bestpractice.In implementation of the Related PartyTransactions Regulation adopted by CONSOB with Resolution no. 17221of March 12th 2010, as amended by Resolution no. 17389 of June 23rd 2010,TOD’S S.p.A. modified (by extendingthem to all Group companies) its existing procedures governing the transparency and substantive fairness ofrelated party transactions, to bring them in line with the principles set out in the cited CONSOB Regulation. Itconsequently appointed an Independent Directors Committee.This committee is delegated the role and relevantduties assigned by the Regulation to the committee comprised only of independent directors (modifications to theprocedure for related party transactions; examination and issuance of binding opinions on the most significanttransactions; the Internal Control and Corporate Governance Committee is instead delegated with responsibilityfor examination and issuance of non-binding opinions on less significant transactions).

Disclosure pursuant toArticle 123-bis of Legislative Decree 58/1998 (“TUF”).At its meeting on March 14th

2011, the Board of Directors of the parent company TOD’S S.p.A. approved the annual Report on CorporateGovernance and Shareholdings, which provides the disclosures mandated pursuant to Article 123-bis (1) of theConsolidated Law on Finance (T.U.F.).That report also analytically illustrates the corporate governance system ofTOD’S S.p.A., and it includes not only the information required under Article 123-bis (2) T.U.F., but also acomprehensive examination of the status of implementation of the corporate governance principles recommendedby the Corporate Governance Code in accordance with the “comply or explain” rule.The Report also satisfies the requirements imposed by CONSOB pursuant to Article 114(5) T.U.F. with noticeDEM/11012984 of February 24th 2011, in regard to the remuneration, self-evaluation and succession plans of theBoard of Directors.The reader is referred to the Annual Corporate Governance Report, which is available to the public togetherwith this Report on Operations and accounting documentation. It may be consulted in the corporate section ofthe www.todsgroup.com website.

Significant events occurring after the end of the year

On January 21st 2011, the parent companyTOD’S S.p.A. reached an agreement with the Italian Ministry of CulturalAffairs (“Ministero per i Beni e le attività culturali”) and the Rome Special Fine Arts Service for Archaeological



Monuments (“Soprintendenza speciale per i beni archeologici di Roma”), for the purpose of financing restorationwork on the Colosseum as sole and exclusive sponsor.The agreement calls for the sponsor to put up a total, all-inclusive amount of 25 million euros, to be disbursed overseveral years according to the actual progress of restoration work approved by the delegated Commissioner andthe Fine Arts Service.

Business outlook

FY 2010 ended on a high note in terms of revenues, profit margins and profitability,with growth steadily acceleratingover the course of the year. Sales and financial figures have confirmed that consumers appreciate the high qualityproducts offered by the Group’s brands. By being fairly unsusceptible to seasonal changes, they guarantee a statusthat goes beyond fashion.In regard to business forecasts for the current year, the Spring-Summer 2011 collection sales campaign results andthe excellent sales trends suggested by distribution network figures for the beginning of the current seasonreasonably allow us to expect superb results again in 2011.

Approval of Financial Statements

The consolidated financial statements of the TOD’S Group were approved by the Board of Directors on March14th 2011.

Milan, March 14th 2011The Chairman of the Board of Directors

Diego DellaValle



FINANCIAL STATEMENTS

Consolidated Profit & Loss

Euro 000’sNotes Year 10 Year 09

RevenuesSales revenues 787,539 713,135

Other revenues and income 18,819 15,454

Total revenues and income 806,358 728,589Operating CostsChange in inventories of work in process and finished goods 952 (48,111)

Costs of raw materials, supplies and materials for consumption (178,829) (145,998)

Costs for services (238,514) (201,343)

Costs of use of third party assets 22 (58,714) (51,377)

Costs of labour 25 (117,751) (107,340)

Other operating charges (20,443) (15,767)

Total operating costs (613,299) (569,936)

EBITDA 193,059 158,653Amortisation, depreciation and write-downsAmortisation of intangible assets 9 (7,599) (7,242)

Depreciation of tangible assets 10 (24,476) (23,237)

Other adjustments 11 - (562)

Total amortisation, depreciation and write-downs (32,075) (31,041)Provisions 15-22 (1,040) (1,164)

EBIT 159,944 126,448Financial income and chargesFinancial income 26 19,371 14,256

Financial charges 26 (15,963) (14,159)

Total financial income (charges) 3,408 97Income (losses) from equity investments - -

Profit before taxes 163,352 126,545Income taxes 20-27 (52,566) (40,405)

Consolidated profit 110,786 86,140Minority interests (1,710) (472)

Net Profit of the group 109,076 85,668

EPS (in euro) 6 3.56 2.80

EPS diluted (in euro) 6 3.56 2.80

44 Financial Statements


Consolidated Comprehensive Income

Euro 000’sYear 10 Year 09

Profit (loss) for the period (A) 110,786 86,140Other profits/(losses):Derivative financial instruments (cash flow hedge) (*) (477) 1,016

Profit/(loss) from foreign subsidiaries F/S translation 1,736 3,471

Total other profits/(losses) (B) 1,259 4,487Total profit/(loss ) (A)+(B) 112,045 90,627

Shareholders of Parent company 110,146 90,115

Minority interests 1,899 512

(*) Income taxes of the period include tax effect.



Consolidated Statement of Financial position

Euro 000’sNotes 12.31.10 12.31.09

Non current assetsIntangible fixed assetsAssets with indefinite useful life 8 149,024 149,024

Key money 9 27,679 31,823

Others intangible assets 9 12,380 10,613

Total Intangible fixed assets 189,083 191,460Tangible fixed assetsBuildings and land (1) 10 105,721 40,720

Plant and machinery 10 3,962 4,991

Equipment 10 12,573 11,852

Leasehold improvement 10 30,595 29,794

Others 10 21,252 18,550

Total Tangible fixed assets 174,103 105,907Other assetsReal estate investments 12 46 49

Equity investments 13 20 20

Deferred tax assets 20 32,027 22,472

Others 7,789 7,579

Total other assets 39,882 30,120Total non current assets 403,068 327,487Current assetsInventories 14 203,136 196,051

Trade receivables 15 119,560 107,999

Tax receivables 15 3,856 2,215

Derivative financial instruments 18 2,084 594

Others 15 12,263 9,006

Cash 171,729 204,009

Total current assets 512,628 519,874Assets held for sale - -

Total assets 915,696 847,361

to be continued

Note 1:This item includes 66.3 million euros for the value of the building acquired in a related party transaction (notes 10, 13 and 24).



continuing

Euro 000’sNotes 12.31.10 12.31.09

Shareholders’ equityShare Capital 16 61,219 61,219

Capital reserves 16 214,055 214,055

Treasury stock 16 - -

Hedging and translation 16 (4,263) (5,333)

Retained earnings 16 231,451 299,042

Accumulated earnings/losses 16 - -

Income for the period 16 109,076 85,668

Group interest in Shareholders’ equity 611,538 654,651Minority interestShare Capital and reserves 5,193 4,810

Income for the period 1,710 472

Minority interest in Shareholders’ equity 6,903 5,282Total Shareholders’ equity 618,441 659,933Non-current liabilitiesProvisions for risks 22 1,369 825

Deferred tax liabilities 20 27,722 22,369

Reserve for employee 23 11,419 10,960

Bank borrowings (2) 17 42,805 6,819

Total non-current liabilities 83,315 40,973Current liabilitiesTrade payables 21 130,008 103,921

Tax payables 21 20,064 4,170


Others 21 29,106 17,670

Bank (2) 17 32,429 20,001

Total current liabilities 213,940 146,455Liabilities held for sale - -

Total Shareholders’ equity and liabilities 915,696 847,361

Note 2:These items include 41.2 million euros (of which 37.6 million euros for medium/long-term debt and 3.6 million euros for short-term debt) for thebonds that the Group took over following a related party transaction (notes 13, 17 and 24).



Consolidated Statement of Cash Flows


Profit (loss) for the period 109,076 85,668Non-cash adjustments:Amortizat., deprec., revaluat., and write-downs 9-10-11-14-15 37,928 37,369

Change in employee severance indemnity reserve 23 1,077 1,121

Change in deferred tax/liabilities 20 (4,202) (1,957)

Other changes 22-23 902 633

Cash flow (a) 144,780 122,834Change in current assets and liabilities:Inventories 14 (11,084) 40,278

Trade receivables 15 (11,915) (195)

Tax receivables 15 (1,641) (603)

Other current assets 15 (4,747) 7,024

Trade payables 21 26,087 (9,193)

Tax payables 21 15,894 (1,737)

Other current liabilities 18-21 11,576 (4,244)

Change in operating working capital (b) 24,170 31,330Cash flow from operations (c) = (a)+(b) 168,950 154,164Net investments in intangible and tangible assets 9-10-12 (29,238) (19,335)

Acquisition of Assets (Holpaf B.V.) 10 (66,267) -

Other changes in fixed assets 9-10 (2,389) 586

Reduction (increase) of other non-current assets (207) (1,387)

Cash flow generated (used) in investment activities (d) (98,101) (20,136)Dividends paid 5 (153,047) (38,262)

Changes in long term loans 17 (2,568) (2,557)

Medium-long term part of bonded loans (Holpaf B.V.) 17 37,578 -

Capital increase 16 - 4,664

Other changes in shareholders’ equity 16 858 4,610

Changes in minority interests 1,621 354

Cash flow generated (used) in financing (e) (115,558) (31,191)Cash flow from continuing operations (f)=(c)+(d)+(e) (44,708) 102,837Cash flow from assets held for sale (g) - -

Cash flow generated (used) (h)=(e)+(g) (44,708) 102,837

Net Financial position at the beginning of the period 184,008 81,171

Net Financial position at the end of the period 139,300 184,008




Consolidated Statement of changes in equity

Year 2010In euro 000’s Reserve

Share Capital for Retained Group Minoritycapital reserves translation earnings Interest interest Total

Balances as of 01.01.10 61,219 214,055 (5,333) 384,710 654,651 5,282 659,933Profit/(Loss) recognized in the periodProfit & Loss account 109,076 109,076 1,710 110,786

Directly in equity 1,070 1,070 189 1,259

Total Profit/(Loss) - - 1,070 109,076 110,146 1,899 112,045Dividends (results of 2009) (45,914) (45,914) (838) (46,752)

Extraordinary Dividends (107,133) (107,133) (107,133)

Capital increase -

Share based payments -

Other (212) (212) 560 348

Balances as of 12.31.10 61,219 214,055 (4,263) 340,527 611,538 6,903 618,441

Year 2009In euro 000’s Reserve

Share Capital for Retained Group Minoritycapital reserves translation earnings Interest interest Total

Balances as of 01.01.09 60,962 213,983 (9,780) 332,497 597,662 4,929 602,591Profit/(Loss) recognized in the periodProfit & Loss account 85,668 85,668 472 86,140

Directly in equity 4,447 4,447 40 4,487

Total Profit/(Loss) - - 4,447 85,668 90,115 512 90,627Dividends (38,262) (38,262) (159) (38,421)

Capital increase 257 4,407 4,664 4,664

Share based payments 309 309 309

Other (4,644) 4,807 163 163

Balances as of 12.31.09 61,219 214,055 (5,333) 384,710 654,651 5,282 659,933

Note: for detailed information about each Reserve, please refer to Note 16.



SUPPLEMENTARY NOTES

1. General notes

The Notes to the Consolidated Financial Statements were prepared in accordance with IAS/IFRS and supplementedby the additional information required by CONSOB and the orders it issued in implementation of Article 9 ofLegislative Decree 38/2005 (Resolutions 15519 and 15520 of July 27th 2006 and memorandum DEM/6064293 ofJuly 28th 2006, pursuant to Article 114(5) of the Consolidated Law on Finance-TUF), Article 78 of the IssuerRegulation, the EC document of November 2003 and, when applicable, the Italian Civil Code. Consistently withthe financial statements for the previous year, certain information is provided in the Report by the Board ofDirectors on Operations.The consolidated financial statements at December 31st 2010 include the balance sheet and profit and loss accountof TOD’S S.p.A. and its Italian and foreign subsidiaries, which are jointly referred to as the TOD’S Group. Theconsolidated financial statements are prepared on the basis of draft Financial Statements at December 31st 2010(January 1st - December 31st) approved by the respective boards of directors or, if there was no board of directors,by the sole directors. Because the closing date of its fiscal year does not coincide with the reference date of theconsolidated financial statements,Tod’s India Retail Pte. Ltd was included on the basis of interim financial statementsfor twelve months, referring to the date of the consolidated financial statements.The consolidated financial statements were approved by the Board of Directors ofTOD’S S.p.A.on March 14th 2011.

2. Financial statements formats: choice of form and classification principles

For presentation of its operating income, assets and liabilities following transition to IFRS, the Group opted in favorof complete continuity of the balance sheet and profit and loss account formats envisaged for disclosures preparedpursuant to Italian GAAP in the presentation of its financial position. These financial statements, complemented asnecessary by the Report of the Board of Directors on Operations and the notes to the financial statements, areconsidered to be those that provide the best organized representation of the Group’s financial position and income.More specifically, the balance sheet format shows current items separately from non-current items (both assetsand liabilities). On the profit and loss account, the format of representing revenues and costs by nature is followed,indicating the EBITDA and EBIT results as in the past, since they are considered representative indicators ofcompany performance.The “indirect” method is used for the statement of cash flows.

3. Highlights of the accounting principles

The consolidated financial statements are prepared in accordance with IAS/IFRS (International AccountingStandards-IAS, and International Financial Reporting Standards-IFRS) issued by the IASB, on the basis of the textpublished in the Official Journal of the European Union (OJEU). Furthermore, they are prepared on the basis ofhistoric costs, with the sole exception of derivative financial instruments, which are measured at fair value.

Accounting principles,amendments, interpretations applicable since January 1st 2010 and not relevant forthe GroupThe following accounting standards are applicable since 1st January 2010 and refer to situations or cases that werenot applied to TOD’S Group Financial Statements of the year ending at December 31st 2010:þ IFRS 3 (2008) - Business combinations.The updated version of IFRS 3 introduced major changes, principally in

regard to: the regulations governing incremental acquisitions of subsidiaries; the option of fair value measurementof any third party interests acquired in a partial acquisition; the charging to income of all costs connected withthe business combination and recognition at the acquisition date of the liabilities for conditional payments.

þ IAS 27 (2008) - Consolidated and Separate Financial Statements.The changes to IAS 27 principally concern theaccounting treatment of transactions or events that modify equity interests in subsidiaries and the allocationof losses by the subsidiary to minority interests.


52 Supplementary notes

The following amendments, interpretations are also applicable since January 1st 2010 and refer to situations or casesthat were not applied to TOD’S Group Financial Statements of the year ending at December 31st 2010:þ Improvement to IFRS 5 - Non-current Assets Held for Sale and Discontinued Operations.þ Amendments to IAS 28 - Investments in Associates and to IAS 31 - Interests in Joint Ventures consequential

to the amendment to IAS 27.þ Improvements to IAS/IFRS (2009).þ Amendment to IFRS 2 - Share based Payment: Group Cash-settled Share-based Payment Transactions.þ IFRIC 17 - Distributions of Non-cash Assets to Owners.þ IFRIC 18 - Transfers of Assets from Customers.þ Amendment to IAS 39 - Financial Instruments: Recognition and Measurement: Eligible Hedged items.

3.1 Subsidiaries. Subsidiaries include all entities in which theTOD’S Group has direct or indirect control overthe financial and operating policies of an entity in order to obtain benefits from its activity, as defined in IAS 27 –Consolidated and Separate Financial Statements.The financial statements of subsidiaries are included on the consolidated financial statements from the date whencontrol is acquired until such control terminates.Acquisitions of subsidiaries are recognized according to the cost method.The cost of a business combination isrepresented by the aggregate sum, at the acquisition date, of the fair values of the sold assets, the liabilities incurredor assumed, and the instruments representing capital issued in exchange for control of the acquired entity.The identifiable assets, liabilities, and potential liabilities of the acquired entity that satisfy the recognition criteriaenvisaged in IFRS 3 are recognised at their fair value on the date of purchase, with the exception of non-currentassets (or groups available to sale) that are classified as held for sale in accordance with IFRS 5.The portion of the acquisition cost that exceeds the fair value of the acquired net assets is recognised as goodwill.If the acquisition cost is less than the fair value of the net assets of the acquired entity, the difference is recogniseddirectly on the profit and loss account.Once control of an entity has been acquired, the transactions where the controlling entity acquires or transfersadditional non-controlling interests without altering control over the subsidiary are transactions with shareholdersand are thus recognised in equity.Subsidiaries are consolidated according to the line-by-line method from the date on which control is transferredto the Group. They are deconsolidated starting on the date when such control ceases.Intercompany transactions and the profits and losses generated by transactions between consolidated enterprisesare eliminated from both the balance sheet and the profit and loss account.When necessary, the balance sheets and profit and loss accounts of the subsidiaries are adjusted in order to bringthe applied accounting policies in line with those used by the Group.

3.2 Minority interests. Minority interests in the capital and reserves of the subsidiaries are indicated undershareholders’ equity as “Minority interest”.The minority interest in the acquired business is initially determinedin an amount equal to their share of the fair value of the assets, liabilities, and potential liabilities recorded on thedate of the original acquisition date and subsequently adjusted according to the changes in shareholders’ equity.Likewise, this account reflects the changes in minority interests and any losses allocable to them.

3.3 Transactions in foreign currency.i. Functional and reporting currency.All accounts recognised on the financial statements of the subsidiariesare measured by using the currency of the principal economic environment in which the entity operates (i.e. itsfunctional currency). The Consolidated Financial Statements are stated in euro (rounded to the nearest thousand),since this is the currency in which most Group transactions are executed.

ii. Transactions in foreign currency.The financial statements of the individual Group entities are prepared in thefunctional currency of each individual enterprise. When the individual financial statements are prepared, the foreigncurrency transactions of Group enterprises are translated into the functional currency (currency of the prevalent



economic area in which each entity operates) by applying the exchange rate in effect at the date of the transaction.Monetary assets and liabilities denominated in foreign currencies at the date of the financial statements are translatedby using the exchange rate in effect at the closing date. Non-monetary assets and liabilities are valued at their historiccost in foreign currency and translated by using the exchange rate in effect at the transaction date.The foreign exchange differences arising upon settlement of these transactions or translation of cash assets andliabilities are recognized on the profit and loss account, with the exception of those deriving from derivativefinancial instruments qualified as hedging of financial flows. In fact, these differences are recognized as a separatecomponent of shareholders’ equity or on the profit and loss account.

iii. Presentation of financial statements drafted in foreign currency. In order to present the financialstatements of consolidated entities that are expressed in a functional currency different from the consolidationcurrency, the balance sheet items are translated using the exchange rates in effect at the end of the period, whileitems on the profit and loss account are translated using the average exchange rate for the period. The differencebetween the result for the period resulting from translation at the average exchange rates and the result oftranslation at the end of period rates, on the one hand, and the impact on assets and liabilities of changes in theexchange rate relationships between the beginning and end of the period, on the other hand, are recognized undershareholders’ equity in a special “Translation reserve.”The translation differences recognized under shareholders’ equity are transferred to the profit and loss accountat the time of disposal or liquidation of the controlled entity.The rates applied to translation, compared with those used in the previous year, are indicated in the following table:

Year 2010 Year 2009Exch. rates as Average Exch. rates as Average

Base of year end exch. rate of year end exch. rate

U.S. dollar 1 0.748 0.755 0.694 0.720

UK pound sterling 1 1.162 1.166 1.126 1.123

Swiss franc 1 0.800 0.725 0.674 0.662

Hong Kong dollar 100 9.629 9.721 8.9518 9.2855

Japanese yen 100 0.920 0.862 0.751 0.770

Hungarian forint 1,000 3.598 3.634 3.698 3.571

Singapor dollar 1 0.583 0.554 0.495 0.495

Korean WON 10,000 6.671 6.531 5.9989 5.6471

Macao Pataca 100 9.345 9.444 8.697 9.018

Chinese Renmimbi 100 11.335 11.158 10.168 10.536

Indian Rupia 100 1.673 1.653 1.492 1.487

Albanian Lek 100 0.720 0.726 0.724 0.749

3.4 Derivative financial instruments. TheTOD’S Group uses derivate financial instruments (mainly currencyfutures contracts) to hedge the risks stemming from foreign exchange exposure deriving from its operating activity,without any speculative or trading purposes, and consistently with the strategic policies of centralized cashmanagement dictated by the Board of Directors.When derivative transactions refer to a risk connected with the variability of forecast transaction cash flow, theyare recognized according to the rules for cash flow hedge until the transaction is recorded on the books.Subsequently, the derivatives are treated in accordance with fair value hedge rules, insofar as they can be qualifiedas instruments for hedging changes in the value of assets or liabilities carried on the balance sheet.The hedge accounting method is used at every financial statement closing date. This method envisages postingderivatives on the balance sheet at their fair value. Posting of the changes in fair value varies according to the typeof hedging at the valuation date:• for derivatives that hedge forecast transactions (i.e. cash flow hedge), the changes are recognized in

shareholders’ equity,while the portion for the ineffective amount is recognized on the profit and loss account,under financial income and expenses;



• for derivatives that hedge receivables and payables recognized on the balance sheet (i.e. fair value hedge), thefair value differences are recognized entirely on the profit and loss account, adjusting operating margins.Furthermore, the value of the hedged item (receivables/payables) is adjusted for the change in value attributableto the hedged risk, using the item financial income and expenses as a contra-entry.

3.5 Intangible fixed assetsi. Goodwill. All business combinations are recognized by applying the acquisition method.Goodwill represents the portion of the cost paid for the acquisition that exceeds the Group’s interest in the fairvalue of the assets, liabilities, and identifiable potential liabilities of the subsidiary or jointly controlled entity at theacquisition date.If the Group’s interest in the fair value of assets, liabilities, and identifiable potential liabilities exceeds the cost ofthe acquisition (negative goodwill) after redetermination of these values, the excess is immediately recognized onthe profit and loss account.For acquisitions prior to January 1st 2004, the date of transition to IAS/IFRS, goodwill retained the values recognizedon the basis of the previous Italian GAAP, net of accumulated amortization up to the transition date.Goodwill is recognized on the financial statements at its cost adjusted for impairment losses. It is not subject toamortization, but the adequacy of the values is annually subjected to the impairment test, in accordance with therules set forth in the section Impairment losses.

ii. Trademarks.These are recognized according to the value of their cost and/or acquisition, net of accumulatedamortization at the date of transition to IAS/IFRS.TOD’S,HOGAN and FAY trademarks are classified as intangiblefixed assets with an indefinite useful life and thus are not amortized, insofar as:• they play a primary role in the Group’s strategy and are an essential driver thereof;• the corporate structure, construed as organized property, plant, and equipment, and organization itself in a

figurative sense, is closely correlated with and dependent on dissemination and development of the trademarkson the markets;

• the trademarks are proprietary, properly registered, and constantly protected pursuant to law, with optionsfor renewal of legal protection, upon expiration of the registration periods, that are not burdensome, easilyimplemented, and without external impediments;

• the products sold by the Group with these trademarks are not subject to particular technologicalobsolescence, which is characteristic of the luxury market in which the Group operates; on the contrary,they are consistently perceived by the market as being innovative in the national and/or international contextcharacteristic of each trademark, they are distinguished by market positioning and notoriety that ensurestheir dominance of the respective market segments, being constantly associated and compared withbenchmark brands;

• in the relative competitive context, it can be affirmed that the investments made for maintenance of thetrademarks are proportionately modest with respect to the large forecast cash flows.

The adequacy of the values is annually subjected to the impairment test, in accordance with the rules set forth inthe section Impairment losses.

iii. Research and development costs. The research costs for a project are charged fully to the profit and lossaccount of the period in which they are incurred.The development costs of an activity are instead capitalized if the technical and commercial feasibility of the relativeactivity and economic return on the investment are certain and definite, and the Group has the intention andresources necessary to complete the development.The capitalized costs include the costs for materials, labor, and an adequate portion of overhead costs. They arerecognized at cost, net of accumulated amortization and depreciation (see below) and impairment losses.

iv. Other intangible fixed assets. These are identifiable non-monetary intangible assets under the control ofthe company and capable of causing the Group to realize future economic benefits.



They are initially recognized at their purchase cost, including expenses that are directly attributable to them duringpreparation of the asset for its intended purpose or production, if the conditions for capitalization of expensesincurred for internally generated expenses are satisfied.The cost method is used for determining the value reported on subsequent statements, which entails posting theasset at its cost net of accumulated amortization and write-downs for impairment losses.

v. Subsequent capitalization.The costs incurred for these intangible fixed assets after purchase are capitalizedonly to the extent that they increase the future economic benefits of the specific asset they refer to. All the othercosts are charged to the profit and loss account in the fiscal year in which they are incurred.

vi. Amortization. Intangible fixed assets (excluding those with an indefinite useful life) are amortized on a straight-line basis over the period of their estimated useful life, starting from the time the assets are available for use.

3.6 Tangible assets.i. Property, plant, and equipment owned by the company. They are first recognized at their purchase costor at the cost recalculated at the date of transition to IFRS, including any directly attributable ancillary expenses.Following first-time recognition, these assets are reported net of their accumulated depreciation and impairmentlosses (i.e. in accordance with the cost model).For those assets whose depreciation must be calculated using the component approach, the portions of costallocable to the individual significant components characterized by a different useful life are determined. In thiscase, the value of land and buildings is kept separate, with only buildings being depreciated.

ii. Leasing. Lease agreements in which the Group assumes all the risks and benefits deriving from ownership ofthe asset are classified as finance leasing.The assets (real estate, plant, and machinery) possessed pursuant to theseagreements are recorded under property, plant, and equipment at the lesser of their fair value on the date theagreement was made, and the current value of the minimum payments owed for leasing, net of accumulateddepreciation and any impairment losses (according to the rules described in the section Impairment losses). A financialpayable for the same amount is recognized instead under liabilities, while the component of interest expenses forfinance leasing payments is reported on the profit and loss account according to the effective interest method.

iii. Subsequent capitalizations. The costs incurred for property, plant, and equipment after purchase arecapitalized only to the extent that they increase the future economic benefits of the asset. All the other costs arecharged to the profit and loss account in the fiscal year in which they are incurred.

iv. Real estate investments. Real estate investments are originally recognized at cost, and then recognized attheir cost as adjusted for accumulated depreciation and impairment losses.Depreciation is calculated on a systematic, straight-line basis according to the estimated useful life of the buildings.

v. Depreciation. Property, plant, and equipment were systematically depreciated at a steady rate according tothe depreciation schedules defined on the basis of their estimated useful life. Land is not depreciated. The principaldepreciation rates applied are as follows:

% depreciation

Industrial buildings 2.5-3%

Machinery and plant 12.5%

Equipments 25%

Forms and punches, clichés, molds and stamp 25%

Furniture and furnishings 12%

Office machines 20%

Cars and transport vehicles 20%-25%



The costs for leasehold improvements, which mainly include the costs incurred for set up and modernization of theDOS network and all the other real estate that is not owned but used by the Group (and thus instrumental to itsactivity) are depreciated according to the term of the lease agreement or the useful life of the asset, if this is shorter.

3.7 Impairment losses.In the presence of indicators, events, or changes in circumstances that presume the existence of impairment losses,IAS 36 envisages subjecting intangible fixed assets and property, plant and equipment to the impairment test inorder to assure that assets with a value higher than the recoverable value are not recognized on the financialstatements.This test is performed at least once annually for non-current assets with an indefinite life in the sameway as that used for non-current assets that have not yet been placed in service.Confirmation of the recoverability of the values recognized on the balance sheet is obtained by comparing the bookvalue at the reference date and the fair value net of sale costs (if available) or usage value. The usage value of atangible or intangible fixed asset is determined according to the estimated future financial flows expected from theasset, as actualized through use of a discount rate net of taxes, which reflects the current market value of thecurrent value of the cash and risks related to Group’s activity, as well as the cash flows deriving from disposal ofthe asset at the end of its useful life.If it is not possible to estimate an independent financial flow for an individual asset, the cash generating unit to whichthe asset belongs and with which it is possible to associate future cash flows that can be objectively determinedand independent from those generated by other operating units is identified. Identification of the cash generatingunits was carried out consistently with the organizational and operating architecture of the Group.If the impairment test reveals an impairment loss for an asset, its book value is reduced to the recoverable valueby posting a charge on the profit and loss account, unless the asset is revalued. In that case, the write-down isrecognized in the revaluation reserve.When the reasons for a write-down cease to exist, the book value of the asset (or the cash generating unit), withthe exception of goodwill, is increased to the new value resulting from the estimate of its recoverable value, butnot beyond the net book value that the asset would have had if the impairment loss had not been charged. Therestored value is recognized immediately on the profit and loss account, unless the asset is revalued, in which casethe restored value is recognized in the revaluation reserve.

3.8 Current assets.i. Financial assets. These are recognized and cancelled on the balance sheet according to the trading date andare initially valued at cost, including costs directly connected with the purchase.At the subsequent financial statement dates, the financial assets that the Group intends and is able to hold untilmaturity (securities held until maturity) are recognized at the cost amortized according to the effective interestmethod, net of impairment losses.Financial assets other than those held until maturity are classified as held for trading or available for sale, and arerecognized at their fair value at the end of each period. When the financial assets are held for trading, the profitsand losses deriving from changes in the fair value are recognized on the profit and loss account for the period. Inthe case of financial assets available for sale, the profits and losses deriving from changes in the fair value arerecognized directly in shareholders’ equity until they are sold or have sustained a loss in value. At that time, theaggregate profits or losses that were previously recognized in shareholders’ equity are recognized on the profitand loss account of the period.

ii. Inventories. These are recognized at the lower of purchase cost and their assumed disposal value.The netdisposal value represents the best estimate of the net sales price that can be realized through ordinary businessprocesses, net of any production costs not yet incurred and direct sales costs.The cost of inventories is based on the weighted average cost method. The production cost is determined byincluding all costs that are directly allocable to the products, regarding – for work in progress and/or semi-finishedproducts – the specific stage of the process that has been reached. The values that are thus obtained do not differappreciably from the current production costs referring to the same classes of assets.



A special depreciation reserve is set aside for the portion of inventories that are no longer considered economicallyuseable, or with a presumed disposal value that is less than the cost recognized on the financial statements.

iii. Trade receivables and other receivables. These are valued and recognized on a prudent basis accordingto their presumed disposal value, by means of adjusting the face value with a specific allowance for doubtfulaccounts determined as follows:• receivables under litigation, with certain and precise evidence documenting the impossibility of collecting

them, have been analytically identified and then written down;• for other bad debts, prudent allowances for write-downs have been set aside, estimated on the basis of

information updated at the date of this document.

iv. Cash.This includes cash on hand, bank demand deposits, and financial investments with a maturity of no morethan three months. These assets are highly liquid, easily convertible into cash, and subject to a negligible risk ofchange in value.

v. Assets held for sale. Non-current assets are classified as held for sale when their carrying value will berecovered through disposal rather than through continuous use thereof. They are not amortised or depreciatedand are recognised at the lesser of their carrying and fair value, net of sales costs.

3.9 Benefits for employees.i. Defined contribution plans.The payments for eventual defined contribution plans are charged to the profitand loss account in the period that they are owed.

ii. Defined benefit plans.For defined benefit plans, the cost of the provided benefits is determined by using theprojected unit credit method, carrying out actuarial valuations at the end of every fiscal year. The accumulatedactuarial profits and losses not recognized at the beginning of the fiscal year are recognized only to the extent thatthey exceed 10% of the greater between the current volume of defined benefit plan liabilities of the Group andthe fair value of the assets of the program at that date. The cost of past work services is recognized immediatelyin the amount in which the benefits have already accrued or is otherwise amortized at a constant rate by theaverage period in which it is expected that the benefits will accrue.The liabilities for benefits paid out after termination of the employment relationship reported on the financialstatements represent the current value of liabilities for defined benefit plans adjusted to take into account theactuarial profits and losses that were not recognized and the costs for past work services that were not recognized,and reduced by the fair value of the program assets. Any net assets resulting from this calculation are limited tothe value of the unreported actuarial losses and the cost for the past work services that were not recognized, plusthe current value of any reimbursements and reductions in the future contributions to the plan.

iii. Share based payments. The payments based on shares are assessed at their fair value on the assignment date.This value is recognized on the profit and loss account on a straight-line basis throughout the period of accrual of therights. This allocation is made on the basis of a management estimate of the stock options that will actually accrue infavor of vested employees, considering the conditions for use thereof not based on their market value.The fair value is determined by using the binomial method. The useful life utilized in the model has been adjustedaccording to an estimate by management in order to take into account the effects of non-transferability of theoptions, restrictions on exercise thereof, and the assumed behavior of individuals.

3.10 Payables.i. Bank overdrafts and financing. Interest-bearing financing and bank overdrafts are recognized on the basisof the amounts collected, net of transaction costs, and subsequently valued at the amortized cost, using the effectiveinterest method.

ii. Trade payables and other payables. These are their face value.



3.11 Revenues recognition. Revenues are recognized on the profit and loss account when the significantrisks and benefits connected with ownership of the transferred assets are transferred to the buyer. In referenceto the principal types realized by the Group, revenues are recognized on the basis of the following principles:i. Sales of goods - retail. The Group operates in the retail channel through its DOS network. Revenues arerecognised when the goods are delivered to customers. Sales are usually collected in the form of cash or throughcredit cards.

ii. Sales of goods - wholesale. The Group distributes products on the wholesale market. These revenues arerecognised when the goods are shipped and considering the estimated effects of returns at the end of the year.

iii. Provision of services. This income is recognised in proportion to the percentage of completion for theservice provided on the reference date.

iv. Royalties. These are recognised on the financial statements according to the principle of period allocation.

3.12 Financial income and expenses.These include all financial items recognized on the profit and loss account for the period, including interestexpenses accrued on financial payables calculated by using the effective interest method (mainly current accountoverdrafts, medium-long term financing), foreign exchange gains and losses, gains and losses on derivative financialinstruments (according to the previously defined accounting principles), received dividends, the portion of interestexpenses deriving from accounting treatment of assets held under finance leasing (IAS 17) and employee reserves(IAS 19).Interest income and expenses are recognized on the profit and loss account for the period in which they arerealized/incurred, with the exception of capitalized expenses.Dividend income contributes to the result for the period in which the Group accrues the right to receive thepayment.

3.13 Income taxes.The income taxes for the period include determination both of current taxes and deferred taxes. They arerecognized entirely on the profit and loss account and included in the result for the period, unless they aregenerated by transactions recognized directly to shareholders’ equity during the current or another period. In thiscase, the relative deferred tax liabilities are also recognized under shareholders’ equity.Current taxes on taxable income for the period represent the tax burden determined by using the tax rates ineffect at the reference date, and any adjustments to the tax payables calculated during previous periods. Deferredtax liabilities refer to the temporary differences between the book values of assets and liabilities on the balancesheets of consolidated companies and the associated values relevant for determination of taxable income.The tax liability of all temporary taxable differences,with the exception of liabilities deriving from initial recognitionof an asset or liability in a transaction other than a business combination that, at the time of the transaction, doesnot influence either the income (loss) reported on the financial statements or taxable income (tax loss).Deferred tax assets that derive from temporary deductible differences are recognized on the financial statements onlyto the extent that it is likely taxable income will be realized for which the temporary deductible difference can beused. No allocation is envisaged if the deferred tax asset derives from business combinations, or from the initialposting of an asset or liability in a transaction other than a business combination that, at the time of the transaction,does not influence either the income (loss) reported on the financial statements or taxable income (tax loss).The tax benefits resulting from tax losses are recognised on the financial statements in the period when thosebenefits are accrued, if it is likely that the Group’s entity which recognised the tax loss will have sufficient taxableincome before the right to use that benefit expires.The taxes in question (deferred tax assets and liabilities) aredetermined on the basis of a forecast of the assumed percentage weight of the taxes on the income of the fiscalyears in which the taxes will occur, taking into account the specific nature of taxability and deductibility. Theeffect of change in tax rates is recognized on the profit and loss account of the fiscal year in which this changetakes place.



3.14 Provisions.These are certain or probable liabilities that have not been determined at the date they occurred and in theamount of the economic resources to be used for fulfilling the obligation, but which can nonetheless be reliablyestimated. They are recognized on the balance sheet in the event of an existing obligation resulting from a pastevent, and it is likely that the Group will be asked to satisfy the obligation.If the effect is significant, and the date of the presumed discharge of the obligation can be estimated with sufficientreliability, the provisions are recognized on the balance sheet by actualizing future financial flows.The provisions that can be reasonably expected to be discharged twelve months after the reference date areclassified on the financial statements under non-current liabilities. Instead, the provisions for which the use ofresources capable of generating economic benefits is expected to take place in less than twelve months after thereference date are recognized as current liabilities.

3.15 Share capital.i. Share capital. The total value of shares issued by the parent company is recognized entirely undershareholders’ equity, as they are the instruments representing its capital.

ii. Treasury stock.The consideration paid for buy-back of share capital (treasury stock), including the expensesdirectly related to the transaction, is subtracted from shareholders’ equity. In particular, the par value of the sharesreduces the share capital, while the excess value is recognized as an adjustment to additional paid-in capital.

iii. Dividends. The allocation of dividends to persons possessing instruments representing share capital afterthe reference date of the financial statement is not recognized under financial liabilities on the same reference date.

3.16 Statement of cash flow.The statement of cash flows is drafted using the indirect method. The net financial flows of operating activity aredetermined by adjusting the result for the period of the effects deriving from change to net operating workingcapital, non-monetary items, and all the other effects connected with investment and financing activities.Cash at the beginning and end of the period represents the net-short-term financial position of the Group.

4. Segment reporting

The search for higher levels of operating efficiency has identified as key element for maximising profitability via thecondivision of a significant portion of service activities (first and foremost production), both at the central andperipheral levels; on the contrary, aggressive segmentation of the business appears uneconomical, under currentcircumstances.At the operating level, the Group’s organisation is based on an articulated matrix structure according to thedifferent functions/activities in the value chain, alternatively according to brand, product, channel and geographicalarea.The overall organisation envisages a unified strategic vision of the business.This type of organisation is reflected in the ways in which management monitors and strategically focuses theGroup’s activities.The Report of the Board of Directors includes operating information, including a breakdown of consolidatedrevenues by BRAND, CHANNEL, PRODUCT and REGION, and INCOME STATEMENT for the business.Complete information is provided as follows.





2010 Capital expenditures

The amounts are shown net of the property investment (the value of the asset was 66.3 million euros at December31st 2010) made by the Group in Japan (note 10).

Distribution channel

TOD’S Group - Distribution channel12.31.10 12.31.09

Italy DOS 40 36

FRANCHISED STORES 6 8

Europe DOS 32 31


USA DOS 14 14

FRANCHISED STORES - -

RoW DOS 73 68


Total DOS 159 149Total FRANCHISED STORES 71 78

By investment allocation (Euro mn) By region (Euro mn)

6.9 6.85.6 5.0

16.1

10.7

FY 2010

FY 200915.3

4.2

1.5

8.8

0.1

4.0

1.93.3

12.0

FY 2010

FY 2009

Key money DOS Prod. Altro Italy Europe North. Am. RoW Not local.

TOD'S HOGAN

106

59

99

62

12

10

12 12

DOS Franchised stores FY 2010 FY 2009

DOS Franchised stores FY 2010 FY 2009



5. Dividends

In FY 2010, the Shareholders’ Meeting of the parent companyTOD’S S.p.A. approved payment of a total 153 millioneuros, broken down as follows:i) ordinary dividends to be charged against the net profit for FY 2009 (Shareholders’ Meeting of April 22nd 2010),totalling 45,914,101.50 euros, at the rate of 1.50 euros per share;ii) extraordinary dividends, to be charged to the extraordinary reserve (Shareholders’ Meeting of September 21st

2010), for 107,132,903.50 euros, at the rate of 3.50 euros per share;in favour of the owners of the 30,609,401 outstanding ordinary shares comprising the share capital, entitled toparticipate in profits on the coupon detachment date (May 24th 2010 and October 11th 2010, respectively).Regarding the net profit for FY 2010 the parent company has proposed to distribute a dividend for two euros pershare.The dividend is subject to approval by the annual Shareholders’ Meeting, and was not included among theliabilities reported on this balance sheet.The dividend proposed for FY 2010, totalling 61,218,802.00 euros on thebasis of the currently outstanding shares (Note 16), is payable to all shareholders entered on the register ofshareholders at the coupon detachment date.

6. Earnings per share

The calculation of base and diluted earnings per share is based on the following:

i. Reference Profit

Euro 000’sFor continuing and discontinued operations Year 10 Year 09

Profit used to determine basic earning per share 109,076 85,668

Dilution effects - -

Profit used to determine diluted earning per share 109,076 85,668

Euro 000’sFor continuing operations Year 10 Year 09

Profit attributable to equity holders of the Company 109,076 85,668

Income (Loss) from discontinued operations - -

Profit used to determine basic earning per share 109,076 85,668Dilution effects - -


1

FAYROGERVIVIER

3

2

3

2

7

1

6

DOS Franchised stores

FY 2010 FY 2009

DOS Franchised stores

FY 2010 FY 2009



In both fiscal 2010 and 2009, there were no dilutions of net consolidated earnings, partly as a result of activitiesthat were discontinued during the periods in question.

ii. Reference number of shares

Year 10 Year 09

Weighted average number of shares to determine basic earning per share 30,609,401 30,609,401

Share options - -

Weighted average number of shares to determine diluted earning per share 30,609,401 30,609,401

iii. Base earnings per share. Calculation of the base earning per share for fiscal year 2010 is based on the netconsolidated income allocable to holders of ordinary shares of the parent companyTOD’S S.p.A., totalling 109,076thousand euros (85,668 thousand euros in 2009), and on the average number of ordinary shares outstandingduring the same period, totalling 30,609,401 (unchanged respect to year 2009).

iv. Diluted earnings per share.Calculation of the diluted earnings per share for the period January-December2010 coincides with calculation of earnings per share, insofar as conclusion of the Stock Options Plan in year2009.

7. Assets held for sale

The Group did not have any available for sale assets at December 31st 2010.

8. Assets with indefinite useful life

Assets with indefinite useful life amount to 149,024 thousand euros, and are constituted as follows:

Euro 000’s12.31.10 12.31.09

Trademarks 137,235 137,235

Goodwill 9,689 9,689

Consolidation differences 2,100 2,100

Total 149,024 149,024

Trademarks. This item includes the values of the three proprietary brands of the Group (TOD’S, HOGAN andFAY).

Euro 000’s12.31.10 12.31.09

Tod’s 3,741 3,741

Hogan 80,309 80,309

Fay 53,185 53,185

Total 137,235 137,235

Goodwill and consolidation differences. These accounts reflect the differences between the amount paid toacquire the equity investments in subsidiaries, associated companies, and joint ventures, which is eliminated, andthe corresponding interest in the shareholders’ equity of the entities at the acquisition date.



9. Key money and Other intangible assets with definite useful life

The following table details the movements of these assets in the current and previous fiscal year:

Euro 000’s Other Intangible assetsKey Other Other

money trademarks Software assets Total

Balance as of 01.01.09 36,121 669 9,025 1,408 11,102

Translation differences (19) -

Increases 419 862 1,762 24 2,648

Decreases (478) (115) (115)

Impairment losses (Note 11) -

Other changes -

Amortization for the period (4,220) (198) (2,504) (320) (3,022)

Balance as of 12.31.09 31,823 1,333 8,283 997 10,613

Translation differences 15 5 5

Increases 5 858 2,925 1,450 5,233

Decreases (2) (34) (36)


Other changes -

Amortization for the period (4,164) (242) (2,911) (282) (3,435)

Balance as of 12.31.10 27,679 1,949 8,300 2,131 12,380

Goodwill represents the amounts paid for this purpose by the Group to take over certain leases of commercialspaces where some DOS operate (key money).The changes in “Brands” are comprised by long-term charges with a defined useful life incurred to protect thebrands owned by the Group, classified as assets with an indefinite useful life.

10. Tangible fixed assets

At December 31st 2010 the net residual value of Group’s tangible fixed assets was a 174.1 millions euros (FY 2009:105.9 millions euros).

Euro 000’s Land Plantand and Leasehold

buildings machin. Equip. improve Others Total

Balance as of 01.01.09 41,952 5,845 12,750 33,649 19,216 113,412Translation differences (1) (6) (470) (90) (567)

Increases 27 1,155 5,448 5,744 5,869 18,243

Decreases (229) (858) 17 (312) (1,382)

Impairment losses (Note 11) (2) (245) (315) (562)

Other changes -

Depreciation for the period (1,258) (1,780) (5,480) (8,901) (5,818) (23,237)

Balance as of 12.31.09 40,720 4,991 11,852 29,794 18,550 105,907Translation differences 1 (1) 41 1,864 636 2,541

Increases 66,287 859 6,903 8,252 8,526 90,827

Decreases (121) (420) (155) (696)


Other changes -

Depreciation for the period (1,287) (1,766) (5,803) (9,315) (6,305) (24,476)

Balance as of 12.31.10 105,721 3,962 12,573 30,595 21,252 174,103



The item“land and buildings” consists primarily of the values of the buildings and land on which the parent companyoperating headquarters stand, the Omotesando building in Tokyo (to which the 66,267 thousand euros increaseduring the year is attributable), which is used by the parent company TOD’S Japan K.K. as its administrative headoffice and as the location for the most importantTOD’S flagship store in Japan.The Group purchased the buildingin November 2010 through acquisition of the entire share capital of Holpaf B.V. (note 13).

11. Impairment losses

The recoverability of the residual value of assets with an indefinite and definite useful life, as well as property, plantand equipment, was determined to ensure that assets with a value higher than the recoverable value were notrecognised on the financial statements,which refers to their “value in use.”The criterion used to determine“valuein use” is based on the provisions of IAS 36, and is based on the current value of expected future cash flows(Discounted cash-flow analysis - DCF), which is presumed to derive from the continual use and disposal of an assetat the end of its useful life, discounted at a net interest rate that reflects current market rates for borrowingmoney and the specific risk associated with the individual cash generating unit.In application of the method prescribed by IAS 36, theTOD’S Group has identified the cash generating units (CGU)that represent the smallest, identifiable group of assets that can generate cash flows and which are fully independenton the consolidated financial statements.The organisational structure and type of business was considered indetermining the CGU.The TOD’S Group subsequently identified the directly operated stores (DOS) as CGU.The impairment test wasthen carried out at the following levels:First level.The CGU identified at this level are represented by the individual DOS.The assets that may be exactlyallocated to each DOS were tested.Second level.A single CGU at the level of theTOD’S Group was identified at this level, and the Group’s assets as awhole were tested.This approach is based on the unified view of the business (also see IFRS 8 - Operating Segments,paragraph 4), organised as a matrix structure, which may be alternatively broken down by brand, product, channeland region, according to the different functions/activities on the value chain, where the transverse nature of manycentral and peripheral service activities (especially the supply chain, sales and distribution, finance and administration,legal, human resources and information technology), ensure maximisation of the levels of profitability.The recoverability of the amounts recognised on the financial statements was verified by comparing the net bookvalue attributed to the CGU with the recoverable value (value in use).The value in use is represented by thediscounted value of future cash flows that are expected from continuous use of the assets associated with the cashgenerating unit and by the terminal value attributable to them (the latter is applied only to the second level CGU).The discounted cash flow analysis was carried out by using the FY 2011 budget as its basis.That budget wasprepared and approved by the Board of Directors of the parent companyTOD’S S.p.A.on the assumption that theGroup would be a going concern for the foreseeable future.The Board of Directors first assessed the methodsand assumptions used in developing the model. In particular:i. The medium term projection of budget figures for FY 2011 was carried out on a time horizon limited to theforeseeable future, using an average rate of sales growth of 5%, a constant EBITDA margin and a constant tax rateof 33%.These prudent assumptions represent trends that are lower than the historic (including recent) trend ofthe Group. Consequently, the budget projections comply with the prescriptions of IAS 36.ii. The terminal value was determined as disposal value. In regard to strategic assets (brands), it was preparedaccording to the royalties method, using the same prudent growth rate used to extrapolate budget data (5%) forfuture projections, as well as the rates of return on brand positioned at the lower end of the market for licenses.iii. To determine the “value in use,” aWACC,net of taxes, of 8.84% was used (theWACC rate used at December31st 2009 was 8.6%), determined by referring to the discounting rates used by a series of international analysts infinancial reports on the Group.The analyses performed on the recoverability of Group’s assets (including 137.2 million euros represented byproprietary brands and 11.8 million euros in goodwill from business combinations) showed that there was a



positive difference between the value of forecast cash flows and the aggregate amount of assets (cover), exceeding1 billion euros.Moreover, the analysis carried out at the level of individual cash generating units (DOS) did nt revealed indicatorsof impairment for each of the cash generating units (DOS).The sensitivity analysis performed on the impairment test in accordance with IAS 36, in order to reveal the effectsproduced on the “value in use” by a reasonable change in the basic assumptions (WACC, growth rates, EBITDAmargin) and determination of the terminal value (perpetual annuity), did not reveal an appreciable impact ondetermination of the “value in use” and cover. Given the significant value assumed by the cover, it would benecessary to make unrealistic base assumptions to render the “value in use” equal to the book value of Groupassets (the breakeven hypothesis).

12. Investment property

This account refers to a property owned by the Group as a real estate investment and leased to third parties.

Euro 000’s

Historic cost 115

Accumulated depreciation (66)

Balance as of 01.01.10 49Increases -

Decreases -

Depreciation for the period (3)

Balance as of 12.31.10 46

No changes in the fair value of this investment, about 250 thousand euros, have been recognised since this previousfinancial year.This estimate is based on the market prices for similar properties in terms of location and condition.

13. Equity investments

On November 26th 2010 (the closing date) the Group acquired 100% of the shares of Holpaf B.V., a Dutch companywith head office in Amsterdam.This deal is classifiable as a related party transaction, insofar as Holpaf B.V. wasindirectly controlled, through Goral Investment Holding B.V., by Diego DellaValle & C. SAPA, a company belongingto Diego and Andrea DellaValle, and controlled by Diego DellaValle (also see note 24).Holpaf B.V. owns a property (land and building) in the Shibuya district ofTokyo,on one of the most prestigious andheavily trafficked streets of the quarter popularly known as Omotesando.TOD’S Japan K.K. has used this buildingon an exclusive basis since 2005, pursuant to a lease agreement made on February 22nd 2005 with Holpaf B.V.Thebuilding houses the administrative offices of TOD’S Japan and also serves as the location for the most importantTOD’S flagship store in Japan.The price for sale of the company shares was agreed in the total amount of JPY 230 million, about Euros 2.1million at the exchange rate in effect on the closing date (JPY 110.92/EUR 1).This figure was based on the valueof the pro-forma net equity of Holpaf B.V. at September 30th 2010, while also considering the Japanese tax liabilityfor the higher market value of the property as opposed to its cost recognised for tax purposes, and adjustmentof the price according to the differences between the net financial position of the acquired company at the closingdate and the pro-forma net financial position at September 30th 2010.The transaction does not represent a business combination for accounting purposes.Therefore, as indicated in IFRS3, the individual assets (principally comprised by the real property) and the individual liabilities that were acquired(substantially represented by bonds) have initially been recognised at their fair value, in accordance with thereference accounting standards (IAS 16, IAS 32 and IAS 39).



The following table illustrates the principal effects of the financial position of Holpaf B.V. on the Group’sconsolidated assets and liabilities at December 31st 2010:

Euro mn

Operating working capital (0.6)

Tangible fixed assets (Land and Building) 66.3

Other non-current assets (liabilities) (2.6)

Capital invested 63.0

Bonded loan - long term (37.6)

Net used cash flow 25.4Cash 2.2

Bonded loan - short term (3.6)

Cash (1.4)

Impact on Equity 24.0

There was no material impact on income for the year, insofar as the acquisition was completed only on November26th 2010. At the same time it acquired the share capital, the Group fully repaid a shareholder loan for 20.6 millioneuros, which had been granted by the previous owner before the acquisition, in accordance with the sale andpurchase agreement signed by the parties.For a complete analysis of the transaction, please see the Disclosure drafted in compliance with the rules set outin the new Annex 3 of the Related Parties Regulation no. 17221/2010, which is also available on the corporatewebsite www.todsgroup.com.

The scope of consolidation at December 31st 2010 is fully illustrated as follows:

Parent Company

TOD’S S.p.A.S. Elpidio a Mare - ItalyShare Capital (S.C.) - euro 61,218,802

Direct subsidiaries

TOD’S Deutsch. Gmbh TOD’S France Sas An.Del. USA Inc. TOD’S International BVDusseldorf - Germany Paris - France NewYork - U.S.A Amsterdam - NetherlandsS.C. - euro 153,387.56 S.C. - euro 780,000 S.C. - Usd 3,700,000 S.C. - euro 2,600,200% held: 100% % held: 100% % held: 100% % held: 100%

Del.Com S.r.l. Holpaf B.V.S. Elpidio a Mare - Italy Amsterdam - NetherlandsS.C. - Euro 31,200 S.C. - Euro 5,000,000% held: 100% % held: 100%

Indirect subsidiaries

Cal.Del. USA Inc. Colo.Del. USA Inc. Deva Inc. Flor.Del. USA Inc.Beverly Hills, Ca - U.S.A. Denver, Co - U.S.A. Wilmington, DE - U.S.A. Tallahassee, Fl - U.S.A.S.C. - Usd 10,000 S.C. - Usd 10,000 S.C. - Usd 500,000 S.C. - Usd 10,000% held: 100% % held: 100% % held: 100% % held: 100%

Hono.Del. Inc. Il.Del. USA Inc. Neva.Del. Inc. Or.Del. USA Inc.Honolulu, Hi - U.S.A. Springfield, Il - U.S.A. Carson City, Nv - U.S.A. Sacramento, Ca - U.S.A.S.C. - Usd 10,000 S.C.- Usd 10,000 S.C. - Usd 10,000 S.C. - Usd 10,000% held: 100% % held: 100% % held: 100% % held: 100%

to be continued



continuing

Indirect subsidiaries

TOD’S Tex Del USA Inc. Gen.Del SA Sandel SA TOD’S Belgique S.p.r.l.Dallas,Tx - U.S.A Geneva - Switzerland San Marino Bruxelles - BelgiumS.C. - Usd 10,000 S.C. - Chf 200,000 S.C. - euro 258,000 S.C. - euro 300,000% held: 100% % held: 100% % held: 100% % held: 100%

TOD’S Espana SL TOD’S Hong Kong Ltd TOD’S Japan KK TOD’S Saint Barth SasMadrid - Spain Hong Kong Tokio - Japan Saint BarthélemyS.C. - euro 468,539.77 S.C. - Usd 16,550,000 S.C. - Jpy 100,000,000 S.C. - euro 500,000% held: 100% % held: 100% % held: 100% % held: 100%

TOD’S Singapore Pte Ltd Un.Del Kft TOD’S UK Ltd Webcover LtdSingapore Tata - Ungary London - Great Britain London - Great BritainS.C. - Sgd 300,000 S.C. - Huf 42,900,000 S.C. - Gbp 350,000.00 S.C. - Gbp 1,000.00% held: 100% % held: 100% % held: 100% % held: 50%

TOD’S Luxembourg SA TOD’S Korea Inc. TOD’S Macao ltd TOD’S (Shanghai) Tr. Co LtdLuxembourg Seoul - Korea Macao Shanghai - ChinaS.C. - euro 31,000.00 S.C. - Won 1,600,000,000 S.C. - MOP 20,000,000 S.C. - USD 6,000,000% held: 50% % held: 100% % held: 100% % held: 100%

TOD’S India Retail Pte Ltd Re.Se.Del. S.r.l. Del.Pav. S.r.l. Filangieri 29 S.r.l.Mumbai - India S. Elpidio a Mare - Italy S. Elpidio a Mare - Italy Napoli - ItalyS.C. - INR 113,900,000 S.C.- euro 25,000.00 S.C. - euro 50,000 S.C.- euro 100,000% held: 51% % held: 100% % held: 50% % held: 50%

Alban.Del Sh.p.k.Tirana - AlbaniaS.C. - euro 720,000% held: 100%

It is assumed that the Group controls those companies in which it does not own more than 50% of the capital, andthus disposes of the same percentage of voting power at the Shareholders’ Meeting, where the Group has thepower to exercise direct or indirect control of those companies’ financial and operating policies in view of realizingbenefits from their activities.

14. Inventories

They totaled 203,136 thousand euros at December 31st 2010, and include:

Euro 000’s12.31.10 12.31.09 Change

Raw materials 51,485 47,819 3,666

Semi-finished products 5,702 6,239 (537)

Finished products 158,412 150,601 7,811

Advances 1 21 (20)

Write-down (12,464) (8,629) (3,835)

Total 203,136 196,051 7,085

The allowance for inventory write-downs reasonably reflects the technical and stylistic obsolescence of the Group’sinventories at December 31st 2010.The impairment charged to income for FY 2010 totalled 5.7 million euros.



15. Other current assets

15.1 Trade receivables. They represent Group’s exposure in consequence of its wholesale distributionactivity.

Euro 000’s12.31.10 12.31.09 Change

Trade receivables 122,716 111,348 11,368

Impairment losses (3,156) (3,349) 193

Net Trade receivables 119,560 107,999 11,561

The allowances for doubtful accounts represent the reasonable estimate of impairment due to the specific andgeneric risk of not being able to collect the trade receivables recognised on the financial statements.The amountaccrued for FY 2010 totalled 366 thousand euros.The following schedule shows the changes during the year inthe allowances for doubtful accounts:

Euro 000’s

Balance as of 01.01.10 3,349Increases 366

Used during year (559)

Balance as of 12.31.10 3,156

15.2 Tax receivables. These total 3,856 thousand euros (FY 2009: 2,215 thousand euros) and are mainlycomprised of receivables for Value Added Tax claimed by the Group from the tax authorities of the countrieswhere it operates.

15.3 Other current assets.

Euro 000’s12.31.10 12.31.09 Change

Deferred costs 7,633 6,005 1,628

Others 4,630 3,001 1,629

Total other current assets 12,263 9,006 3,257

The other current assets are shown net of impairment for 310 thousand euros.

16. Shareholders’ equity

16.1 Share capital. At December 31st 2010, the company share capital totalled 61,218,802 euros, and wasdivided into 30,609,401 shares having a par value of 2 euros each, fully subscribed and paid in.All shares haveequal voting rights at the general meeting and participation in profits.At December 31st 2010 the Group didnot own treasury shares in the parent TOD’S S.p.A., and it did not execute any transactions on those sharesduring the year.

16.2 Capital reserves. Capital reserves are exclusively related to share premium reserve, amounting to 214,055thousand of euros as of 31 December 2010. Such reserve has not changed in respect of last year.



Euro 000’s Additional StockPaid-in capital options

reserve reserve Total

Balance as of 01.01.09 208,843 5,140 213,983Share based payments 309 309

Options exercised/expired 5.212 (805) 4,407

Others (4,644) (4,644)

Balance as of 01.01.10 214,055 - 214,055Share based payments -

Options exercised/expired -

Others -

Balance as of 12.31.10 214,055 - 214,055

16.3 Hedging and translation reserves. The following schedule illustrates the changes in fiscal 2010:

Euro 000’s Translation Hedgingreserve reserve Total

Balance as of 01.01.09 (8,698) (1,082) (9,780)Increase in fair value of hedging derivatives 132 132

Exchange differences 3,431 3,431

Transfer to P&L Account of hedging derivatives 884 884

Others -

Balance as of 01.01.10 (5.267) (66) (5.333)Increase in fair value of hedging derivatives (2,667) (2,667)

Exchange differences 1,547 1,547

Transfer to P&L Account of hedging derivatives 2,190 2,190

Others -

Balance as of 12.31.10 (3,720) (543) (4,263)

The hedging reserve includes the measured value of derivatives, for currency futures contracts (see Note 18), thathedge expected transactions (i.e. cash flow hedges).

16.4 Earnings reserves. These reserves include the equity reserves of the parent company TOD’S S.p.A., thedifference between the shareholders’ equity of the subsidiaries, and the carrying values of the equity investments,as well as the effects of consolidation adjustments on shareholders’ equity.

Euro 000’s Retained Profit(loss)earnings of period Total

Balance as of 01.01.09 249,743 82,754 332,497Allocation of 2008 result 44,492 (44,492) -

Dividends (38,262) (38,262)

Profit for the period 85,688 85,688

Other changes 4,807 4,807

Balance as of 01.01.10 299,042 85,668 384,710Allocation of 2009 result 39,754 (39,754) -

Extraordinary Dividends (107,133) (45,914) (153,047)


Other changes (212) (212)

Balance as 12.31.10 231,451 109,076 340,527



The profits reserve was drawn down by 107.1 million euros, being used to pay out the extraordinary dividend (ata rate of 3.50 euros per share) approved by Shareholders’ Meeting of the parent company at September 21st 2010(Note 5).

17. Bank overdrafts and financing

The Group’s bank borrowings at December 31st 2010 are broken down as follows:

Euro 000’s 12.31.10 12.31.09 Change

Current account overdraft 27,283 18,480 8,803

Financing - short term 5,146 1,521 3,625

Total financing short-term 32,429 20,001 12,428Financing - long term 42,805 6,819 35,986

Total 75,234 26,820 48,414Total Financing (short/long term) 47,951 8,340 39,611

Financing. At December 31st 2010 they were represented by three position to medium-long term:

(Currency 000’s) Res. Debt Res. DebtType Counterpart Currency Maturity in currency in Euro

Mortgage loan Unicredit Bank Euro 2014 6,819 6,819

Notes A-1 Intesa San Paolo Jpy 2017 785,892 7,233

Notes A-2 Société Européenne de Banque Jpy 2021 3,683,074 33,899

Total 47,951

The mortgage loan is a long-term floating rate loan contracted by the parent TOD’S S.p.A.The financial liabilitiesindicated as Notes A-1 and A-2 represent two amortised, non-convertible fixed-rate bonds denominated in yen,issued in 2006 by the subsidiary Holpaf B.V. to refinance the debt assumed for purchase of the land and constructionof the building in Omotesando, which the Group took over following acquisition of the entire share capital ofHolpaf B.V. (also see notes 13 and 24).The two bonds were fully subscribed by banks, and specifically by Intesa SanPaolo (Notes A-1) and Société Européenne de Banque (Notes A-2).The debt referred to at NotesA-1 andA-2 includes the residual debt for principal (NoteA-1: 7,078 thousand euros,and NoteA-2: 31,925 thousand euros) and the interest accrued for the year, 80 thousand euros and 914 thousandeuros, respectively, and the effect of fair value measurement upon initial recognition, for 75 thousand euros and1,060 thousand euros, respectively.For an analysis of the guarantees securing the two bonds, please see the section Provisions, contingent liabilitiesand assets (note 22).The following table illustrates the repayment schedule of principal (face value) for the aggregate amount of loans.

Euro 000’sLoan Notes A-1 Notes A-2

2011 1,592 755 1,805

2012 1,665 838 2,415

2013 1,741 911 2,497

2014 1,821 1,003 2,575

2015 2,086 2,667

over 5 years 2,485 19,965

Total 6,818 7,078 31,925



The breakdown by currency of the balance of bank overdrafts and financing at the reporting date is as follows:

12.31.10Euro 000’s Euro Inr Jpy Total

Bank overdraft 2,072 25,211 27,283

Financing 6,818 41,132 47,951

Total 6,818 2,072 66,343 75,234

12.31.09Euro 000’s Euro Inr Jpy Total

Bank overdraft 701 17,779 18,480

Financing 8,340 8,340

Total 8,340 701 17,779 26,820

For interest rate sensitivity analysis (IFRS 7), see Note 19.

18. Derivative financial instruments

TheTOD’S Group, characterised by its major presence on international markets, is exposed to exchange rate riskprincipally for revenues denominated in currencies other than the euro (see Note 19). In order to realise theobjectives envisaged in the risk management policy adopted by the Group,derivative contracts were made for everysingle foreign currency to hedge a specific percentage of revenue (and cost) volumes expected in the individualcurrencies other than the functional currency. At each reporting date, the hedge accounting method is applied.This requires recognition of the derivatives in equity at their fair value and recognition of the changes in fair value,which varies according to the type of hedge at the valuation date.At the closing date of the financial statements, the notional amount of the currency futures agreements (sale andpurchase) entered into by the Group are summarized as follows:

(Currency 000’s) Sale PurchaseNotional Notional Notional Notional

in currency in euro in currency in euro

US dollar 24,000 17,961

Hong Kong dollar 407,000 39,189 141,000 13,576

JapaneseYen 1,552,000 14,284

British pound 6,150 7,145

Swiss franc 13,300 10,637 -

Singapor dollar 10,300 6,011

Euro 12,050 12,050 6,388 6,388

Canadian dollar 1,780 1,336

Total 108,613 19,964

At the same date, the net fair value of foreign currency hedges was negative for 249 thousand euros, including assetsfor 2,084 thousand euros (FY 2009: 594 thousand euros) and liabilities for 2,333 thousand euros (FY 2009: 693thousand euros).The net fair value of foreign currency hedges that were earmarked for cash flow hedges was 469thousand euros (liability) at December 31st 2010.Against the contracts for these last hedges, which were closedbetween January and December 2010, 2,190 thousand euros in hedge derivatives were transferred to the profitand loss account, including 1,935 thousand euros recognised as a reduction in revenues and 255 thousand as anincrease in costs.



19. Hedging of financial risks (IFRS 7)

The TOD’S Group has implemented a system for monitoring its financial risks in accordance with the guidelinesset out in the Corporate Governance Code of Listed Companies. As part of this policy, the Group constantlymonitors the financial risks connected with its operations, in order to assess their potential negative impact andundertake appropriate action to mitigate them.The following analysis of risks faced by theTOD’S Group highlights the Group’s level of exposure. It also includesa sensitivity analysis designed to quantify the potential impact of hypothetical fluctuations in benchmark parameterson final results.

i. Credit riskCredit risk represents the exposure of the TOD’S Group to potential losses stemming from failure to dischargeits obligations towards trading counterparties. Group’s revenues are fairly broken down between revenuesgenerated by the directly operated store network (51%) and non-captive sales to third parties (49%).The Groupsubjects these revenues to a hedging policy designed to streamline credit management and reduction in theassociated risk. In particular, the Group’s policy does not envisage granting credit to customers, with periodicanalyses of the creditworthiness of all customers, both long-standing and potential ones, in order to monitor andprevent possible solvency crises.

The following table illustrates the ageing of trade receivables outstanding at December 31st 2010:

In euro 000’s OverdueCurrent 0>60 60>120 Over Total

From third parties 83,254 29,125 6,827 3,510 122,716

The prudent estimate of losses on the entire credit mass existing at December 31st 2010 was 3.2 million euros.

ii. Liquidity riskLiquidity risk is the risk that the Group will not dispose of the funds necessary to meet its short-termcommitments and financial requirements.The principal factors that determine the Group’s degree of liquidityare the resources generated or used by operating and investment activities and, on the other hand, the duedates or renewal dates of its payables or the liquidity of its financial investments and market conditions. In thespecific case, the Group’s profitability, and its current and historic capacity to generate cash and its relativelyinsignificant exposure to the banking system are factors that lead to the conclusion that it faces no liquidityrisk over the foreseeable future. Also at December 31st 2010 financial resources were far higher than theGroup’s debt exposure: net financial position was 96.5 million euros, comprised by 171.7 million euros inassets and 75.2 million euros in liabilities, including 42.8 million euros in medium-long term liabilities. Moreover,the outstanding debt exposure at December 31st 2010 was heavily impacted by the payment of an extraordinarydividend of 107.1 million euros (note 5) and the previously mentioned acquisition of Holpaf B.V. (notes 13 and24). The Group’s policy for financial assets is to keep all of its available liquidity invested in demand bankdeposits without recourse to financial instruments, even on the money market, and dividing the depositsamongst a reasonable number of bank counterparties, prudently selecting them according to the return ondeposits and their solidity.

iii. Market riskIFRS 7 includes in this category all risks that are directly or indirectly connected with the fluctuation in prices onphysical and financial markets to which the company is exposed:– exchange rate risk;– interest rate risk;– commodity risk, connected with the volatility of prices for the raw materials used in the production process.



TheTOD’S Group is exposed to exchange rate and interest rate risk, since there is no physical market subject toactual fluctuations in the purchase prices for raw materials used in the production process.The following paragraphs analyse the individual risks, using sensitivity analysis as necessary to highlight the potentialrisk on final results stemming from hypothetical fluctuations in benchmark parameters.As envisaged by IFRS 7, theseanalyses are based on simplified scenarios applied to the final results for the periods referred to. By their verynature, they cannot be considered indicators of the actual effects of future changes in benchmark parameters ofa different asset and liability structure and financial position different market conditions, nor can they reflect theinterrelations and complexity of the reference markets.

Exchange rate risk. Due to its commercial operations, the Group is exposed to fluctuations in the exchangerates for currencies in which some of its commercial transactions are denominated (particularly USD, GBP, CHFand those of certain countries in the Far East), against a cost structure that is concentrated principally in theeurozone.TheTOD’S Group realises greater revenues than costs in all these currencies; therefore, changes in theexchange rate between the euro and the aforementioned currencies can impact the Group’s results.With the exception of the foregoing, the Group is not particularly exposed to foreign exchange risk.The residualcomponent of this risk is connected principally with “translation risk”.This risk stems from the fact that the assetsand liabilities of consolidated companies whose functional currency is different from the euro can have differentcountervalues in euros according to changes in foreign exchange rates.The measured amount of this risk isrecognised in the “translation reserve” in equity.The Group monitors the changes in the exposure.No hedges of this risk existed at the reporting date.Governanceof individual foreign currency operations by the Group’s subsidiaries is highly simplified by the fact that they arewholly owned by the parent company.The Group’s risk management policy aims to ensure that the average countervalue in euros of receipts onwholesale transactions denominated in foreign currencies for each collection (Spring/Summer and Fall/Winter) isequal to or greater than what would be obtained by applying the pre-set target exchange rates.The Group pursuesthese aims by entering into forward contracts for each individual currency to hedge a specific percentage of theexpected revenue (and cost) volumes in the individual currencies other than the functional currency. Thesepositions are not hedged for speculative or trading purposes, consistently with the strategic policies adopted forprudent management of cash flows. Consequently, the Group might forego opportunities to realise certain gains,but it avoids running the risks of speculation.The Group defines its exchange risk a priori according to the reference period budget for the reference periodand then gradually hedges this risk upon acquisition of orders, in the amount according to which they correspondto budget forecasts.The process of hedging exchange rate risk inside the Group is broken down into a series of activities that can begrouped into the following distinct phases:• definition of operating limits;• identification and quantification of exposure;• implementation of hedges;• monitoring of positions and alert procedures.The breakdown of forward currency contracts (for sale and purchase) made by the Group is illustrated in Note18.The balance sheet accounts denominated in foreign currency were identified for the sensitivity analysis. In orderto determine the potential impact on final results, the potential affects of fluctuations in the exchange rate for theeuro against the principal currencies to which the Group is exposed were analysed.The following table illustratesthe sensitivity to reasonably likely changes in exchange rates on pre-tax profit (due to changes in the value ofcurrent assets and liabilities denominated in foreign currency) and Group equity (due to changes in the fair valueof foreign exchange risk hedge instruments) while holding all other variables constant:



Euro Impact on pre-tax profit Impact on pre-tax profit5% writedown of the foreign currency 5% revaluation of the foreign currency

Currency Country FY 2010 FY 2009 FY 2010 FY 2009

CAD Canada (7,012.2) (2,241.7) 7,750.3 2,477.7

CHF Switzerland (1,110.2) (21,482.0) 1,226.8 23,743.2

GBP UK 3,564.9 6,237.5 (3,940.2) (6,894.1)

HKD Hong Kong (20,123.1) (9,563.9) 22,241.3 10,570.7

JPY Japan (34,580.5) (14,718.8) 38,220.5 16,268.2

KRW South Korea 2,887.9 5,127.9 (3,191.9) (5,667.7)

RMB China 57,167.5 24,797.4 (63,185.1) (27,407.6)

SGD Singapore 6,877.0 (27,787.6) (7,600.9) 30,712.6

USD USA (347,645.6) (309,861.5) 384,239.9 342,478.5

EUR Europe (39,484.3) 5,859.2 43,640.5 (6,475.9)

Other n.a. (12,143.4) 4,004.3 13,421.6 (4,425.8)

Total (391,601.8) (339,629.3) 432,823.0 375,379.8

Euro 000’s Revaluation/Writedown Impact on Impact onforeign currency pre-tax profit Shareholders’ equity

5% 432.8 (4,146.6)FY 2010

-5% (391.6) 2,416.9

The analysis did not include assets, liabilities and future commercial flows that were not hedged, since fluctuationsin exchange rates impact income in an amount equal to what is recognised in the fair value of adopted hedgeinstruments.

Interest rate risk. The exposure of the TOD’S Group to interest rate risk is limited to its own adjustable ratedebt instruments, issued in the eurozone. Interest rate risk is hedged consistently with consolidated practice,which is designed to reduce the risks of interest rate volatility by simultaneously pursuing the aim of minimisingassociated financial expenses. Considering the insignificant amounts involved (Note 17), there were no currentinterest rate hedges current at December 31st, 2010.The sensitivity analysis carried out on interest rates has shown that a hypothetically unfavourable change of 10%in short-term interest rates applicable to the adjustable rate financial liabilities existing at December 31st 2010would have a net pre-tax impact of about 56 thousand euros in additional expenses (FY 2009: 58 thousand euros).Finally, the financial liabilities (Notes A1 and A2) assumed in 2010 following the acquisition of Holpaf B.V. (notes13 and 24) are subject to a fixed rate of 2.94% and 3.239%, respectively, which were consistent with applicablemarket rates.

iv. Categories of measurement at fair valueIn accordance with IFRS 7, the financial instruments carried at fair value have been classified according to a hierarchyof levels that reflects the materiality of the inputs used to estimate their fair value.The following levels have beendefined:Level 1 – quoted prices obtained on an active market for the measured assets or liabilities;Level 2 – inputs other than the quoted prices indicated hereinabove,which are observable either directly (prices)or indirectly (derived from prices) on the market;Level 3 – inputs that are not based on observable market data.The fair value of derivative financial instruments existing at December 31st 2010 (Note 18) has been classified asLevel 2.



20. Deferred tax assets and liabilities

At the reporting date, recognition of the effects of deferred tax assets, determined on the basis of temporarydifferences between the pre-tax result on the financial statements and taxable income of consolidated subsidiaries,lead to the following tax assets and liabilities:

Euro 000’s12.31.10 12.31.09 Change

Deferred tax assets 32,027 22,472 9,555

Deferred tax liabilities (27,722) (22,369) (5,353)

Net balance 4,305 103 4,202

When determining future tax impact (IAS 12), reference was made to the presumed percentage weight of the taxesthat will be imposed on income in the years when those taxes will be charged, according to current tax laws in thevarious countries involved and any changes in tax rates following currently known tax reforms, and that will beapplicable starting from FY 2011. In this regard, no significant changes have been reported as at today by the taxdepartments in the countries where the Group operates. Following is reported the composition of the amount ofdeferred tax assets and liabilities at year end, highlighting items that mainly contributed to its determination:

Euro 000’s 12.31.10 12.31.09Assets Liabilities Assets Liabilities

Amortization, depreciation and write-downs 6,415 22,182 5,694 17,291

Provisions

Property, plant and equipment (leasing) 3,841 3,997

Cost deductible over several years 1,746 44 710

Inventory (internal profits and write-downs) 14,099 9,501

Tax losses that can be carried forward 7,999 5,634

Derivative financial instruments 343 246 187 93

Other 1,425 1,409 746 988

Total 32,027 27,722 22,472 22,369

Deferred tax assets, recognised by certain subsidiaries as losses that can be carried forward pursuant to local taxlaws, and not yet used by the Group at December 31st 2010, totalled 7,999 thousand euros (FY 2009: 5,634thousand euros). New deferred tax assets of 1.9 million euros were recognised on the 2010 financial statementsfor losses that can be carried forward.

21. Other current liabilities

Euro 000’s12.31.10 12.31.09 Change

Trade payables 130,008 103,921 26,087

Tax payables 20,064 4,170 15,894

Other liabilitiesPayables to employee 7,731 4,659 3,072

Social security istitutions 5,558 5,042 516

Other 15,817 7,969 7,848

Total other liabilities 29,106 17,670 11,436



Tax payables at December 31st 2010 include 16.5 million euros for the payable (net of prepayments and ofreceivables that can be offset upon payment) to institutions in the various countries where the Group operatesand accrued on FY 2010 income (FY 2009: 0.4 million euros).“Other” includes advances from customers of 4.2 million euros, and 3.5 million euros for the variable portion ofthe compensation of parent company directors accrued in 2010 (note 24).

22. Provisions and potential liabilities and assets

22.1 Provisions. They include 1,369 thousand euros (825 thousand euros in 2009) as the prudent estimate ofliabilities that the Group might incur if it loses a series of pending lawsuits. Accruals for the year totalled 673thousand euros.

22.2 Potential liabilities and other commitments.i. Guarantees granted to third parties.At December 31st 2010, the Group granted a total of 2,295 thousandeuros in guarantees (FY 2009: 1,925 thousand euros) to secure the contractual commitments of certainsubsidiaries.

ii. Guarantees received from third parties. Guarantees received by theTOD’S Group from banks as securityfor contractual commitments totalled 12,706 thousand euros (11,843 thousand euros in 2009).

iii. Mortgages. Group real estate has been encumbered by the following mortgages:Production plant at Sant’Elpidio a Mare – Referring to the loan obtained by the parent company (note 17), firstmortgage in favour of the lending bank Unicredit, recognised for 30 million euros, as collateral for the lent principaland all expenses resulting from the loan agreement;Tokyo building –As collateral for two bonds issued by the subsidiary Holpaf B.V. (note 17), a first mortgage in favourof Intesa San Paolo for JPY 1,000 million (9.2 million euros), and a first mortgage in favour of Société Européennede Banque for JPY 5,652.8 million (52.0 million euros), both as collateral for the principal and all expenses resultingfrom the loan agreement.

iv. Other guarantees. As additional security for repayment of the bonds indicated at sub-indent iii. b)hereinabove, the parent company TOD’S S.p.A. (when taking over the contractual obligations assumed by theprevious guarantor, Holpaf B.V., vis-à-vis the subscribing banks), issued the following additional guarantees:a) Property Purchase Option: a put option granted to Intesa San Paolo on the Omotesando property, which may

be exercised only if Holpaf B.V. defaults during the term of the bonds and the creditor demands payment ofthe mortgage. In this scenario,TOD’S S.p.A.must purchase the property at a specific price that varies over theterm of the option (decreasing price, equal to the amount of the residual debt of the two bonds not repaidby Holpaf B.V. at the time of default).

b) Earthquake Indemnity Letter; TOD’S S.p.A. has undertaken to hold harmless the rights to repayment of thebonds held by Intesa San Paolo and Société Européenne de Banque even in the event of damage or destructionof the property in an earthquake;

c) All Risks Indemnity Letter;TOD’S S.p.A. has undertaken to hold harmless the rights to repayment of the bondsheld by Intesa San Paolo and Société Européenne de Banque even in the event of damage or destruction ofthe property due to any event.

At December 31st 2010, the residual face value of the principal for the two bonds amounted to JPY 4,238 million(39.0 million euros).

22.3 Derivative financial instruments. During the year, the Group used derivative financial instruments tohedge transactions in currencies other than the euro. For an analysis of this detail, see Note 18. All derivativecontracts made with leading financial institutions will expire in 2011.



22.4 Lease agreements. The leases entered into by the Group are for rental of spaces used as offices,production plants, and DOS. At the reporting date, the rents still owed by the Group under current agreementswere as follows:

Euro mn2010 2009

2010 47.5

2011 56.7 45.3

2012 46.9 38.7

2013 38.6 28.7

2014 35.1 25.6

2015 29.6

Over 5 years 111.0 94.9

Total 317.9 280.7

Operating lease instalments totalled euros 55.1 million in fiscal 2010.

23. Reserves for employees

23.1 Defined contribution plans. The Group has a defined contribution retirement plan (employee severanceindemnities – TFR) in favour of employees at Group’s Italian companies with more than 50 employees (see thefollowing section in this regard) and the Japanese and Korean subsidiaries. At December 31st 2010, the liabilityaccrued vis-à-vis employees was 2,195 thousand euros (December 31st 2009: 1,477 thousand euros), and relatingonly to the twoAsian companies, since the amounts accrued in favour of Italian employees have all been transferredto funds outside the Group.The amount charged to profit and loss for the period totals 586 thousand euros.

23.2 Defined benefit plans. Following the statutory amendments introduced beginning January 1st 2007,employee severance indemnities, a deferred payment plan in favour of all employees of the Group’s Italiancompanies,were classified as a defined benefits plan (IAS 19) only for firms with less than 50 employees, for whichthe Group’s obligation does not terminate with payment of the contributions accrued on the paid compensation,but extends until the end of the employment relationship (1). For these types of plans, the principle requires thatthe accrued amount be projected into the future in order to determine the amount to be paid upon terminationof the employment relationship, with an actuarial assessment that accounts for the rate of rotation of employees,expected evolution of compensation, and other factors:


Initial balance 9,483 9,562Current benefits 119 173

Financial expenses 372 440

Benefits paid (750) (692)

Final balance 9,224 9,483

(1) The statutory amendment envisaged that for firms with more than 50 employees, the employee severance indemnities accrued from January 1st 2007had to be allocated to supplemental retirement plans (pension funds) or, alternatively, to aTreasury Fund set up at the INPS (Italian National Social SecurityInstitute). Since all obligations of firms towards their employees ceased starting on January 1st 2007 , all accrued employee severance indemnities arecovered by the rules governing defined contribution plans.



24. Transactions with related parties

In implementation of the Related PartyTransactions Regulation adopted by CONSOB with Resolution no. 17221of March 12th 2010, as amended by Resolution no. 17389 of June 23rd 2010, theTOD’S Group modified its existingprocedures governing the transparency and substantive fairness of related party transactions, to bring them in linewith the principles set out in the cited CONSOB Regulation. (The complete text of the“Related PartyTransactionsProcedure of TOD’S S.p.A.” can be found at www.todsgroup.com).The new related parties procedure was approved – after receiving the favourable opinion of independent directors– by the Board of Directors of the parent company on November 11th 2010 and came into force on January 1st

2011. However, in accordance with its own tradition of applying best practices on the market, before the newregulation issued by CONSOB came into force, the Group always subjected significant related party transactionsto detailed investigation and, inter alia, the a priori favourable opinion of the Internal Control and CorporateGovernance Committee (the committee that performed the relevant functions before the new regulation cameinto force).Consequently, significant related party transactions were previously subjected, and shall continue to be subjectedin future, to a detailed investigation involving, inter alia: (i) a complete, prompt transmission of materialinformation to the delegated Board of Directors committees (the Internal Control and Corporate GovernanceCommittee and – beginning January 1st 2011 – the Independent Directors Committee, each within the ambit oftheir delegated responsibilities, where the majority or all members of these committees are independentdirectors), who in the performance of their functions also avail themselves of the assistance of independentexperts; (ii) the issuance of an opinion (either binding or non-binding, as applicable) before approval of thetransaction by the Board of Directors (or, if appropriate, by the body delegated to resolve on the transaction).Without prejudice to the principles of procedural fairness cited hereinabove, no unusual related partytransactions, or other related party transactions that might compromise corporate assets or the completenessand fairness of Group accounting and other information were executed during the financial year.All transactions– which are connected with the normal operations of TOD’S Group companies – were executed solely onbehalf of the Group by applying contractual conditions consistent with those that can theoretically be obtainedon an arm’s length basis.

Most significant transactions concluded during the periodAs previously described in note 13,TOD’S S.p.A. acquired the entire share capital of HOLPAF B.V. from GoralInvestment Holding B.V., a Dutch company fully owned by Diego Della Valle & C. SAPA (a company owned byDiego and Andrea Della Valle, and controlled by Diego Della Valle) on November 25th 2010, after approval bythe Board of Directors of TOD’S S.p.A., and after issuance of a favourable opinion by the Internal Control andCorporate Governance Committee (already in line with the CONSOB regulation that would enter into forceon January 1st 2011, as previously mentioned). Through acquisition of the shareholding, the TOD’S Groupacquired ownership of the Omotesando building (the company’s sole asset).This building has been used entirelyby the Group since 2005 under a lease agreement made on February 22nd 2005 byTod’s Japan K.K. with HOLPAFB.V., as the seat for administrative offices and location for the most important flagship store of theTOD’S Groupin Japan.The total price paid for acquisition of 100% of the shares of HOLPAF B.V.was JPY 230 million (equal to 2.1 millioneuros), considering the value of the pro-forma equity of the target company at September 30th 2010, the Japanesetax liability for the higher market value of the property as compared with its recognised tax cost, and theadjustment for differences between the net financial position of the acquired company at the closing date and itspro-forma net financial position at September 30th 2010.Pursuant to the agreement, the Group also fully repaidGoral Investment Holding B.V. for the shareholder loan previously made to HOLPAF B.V., in the amount of 20.6million euros (principal and interest accrued at the share transfer date).For complete information about the transaction, please see the Disclosure drafted in compliance with the rulesset out in the new Annex 3 of the Related Parties Regulation no. 17221/2010, which is also available on thecorporate website www.todsgroup.com.



Developments of related party transactions pending at December 31st 2009In continuation of contractual relationships already existing in 2009, the TOD’S Group continued to maintain aseries of contractual relationship with related parties (directors/controlling or significant shareholders) in 2010.The principal object of the transactions was the sale of products, lease of sales spaces, show rooms and offices,use of the ROGERVIVIER brand license and the provision of advertising services.

i. Commercial transactions with related parties - Revenues

Euro 000’sSales of Rendering Sales of Operating Other

products of services assets Royalties lease operations

Year 2010Parent company (*) 1,995 11,111 1,716 53

Directors 4 68

Exec. with strat. respons.

Other related parties

Total 1,999 11,111 - 1,716 121

Year 2009Parent company (*) 1,372 9,141 635 13 88

Directors 12 21 32



Total 1,384 9,141 - 635 34 120

ii. Commercial transactions with related parties - Costs

Euro 000’sSales of Rendering Sales of Operating Other

products of services assets Royalties lease operations

Year 2010Parent company (*) 1,881 89 1,884 7,262 10

Directors 3,162 612



Total 1,881 3,251 - 1,884 7,874 10

Year 2009Parent company (*) 1,062 1,125 6,551 16

Directors 3,474



Total 1,062 3,474 - 1,125 6,551 16

iii. Commercial transactions with related parties - Receivables and payables

Receivables and payables 12.31.10 12.31.09Euro 000’s Receivables Payables Receivables Payables

Parent company (*) 8,519 1,682 8,193 726

Directors 4 1,365 12 1,406



Total 8,523 3,047 8,205 2,132

(*) Companies directly or indirectly controlled by Chairman of the Board of Directors Diego DellaValle.



iv. Commercial transactions with unconsolidated subsidiaries


Special Purpose Entities (**) - - 1,050 3

Total - - 1,050 3

(*) Financial balances referred to the period prior to acquisition of the activities.

Given the insignificance of these amounts, they have not been separately listed in the accounts.Transactions between Group companies included in the scope of consolidation have been eliminated from theconsolidated financial statements. Consequently, they have not been highlighted in these notes.

Compensation of Directors, Statutory Auditors, and General Managers.The following table illustrates the compensation accrued in fiscal 2010 by each of the Directors, StatutoryAuditors,Executives with Strategic Responsibilities of TOD’S S.p.A. (including for the activities that they performed atsubsidiaries) for any reason and in any form:

Euro 000’s Compensat. Non BonusCompensation per part. cash and other Compens. Other

for office in Commit. benefits incentives as employ. compens.

DirectorsDiego DellaValle (*) 925.7 6.7 2,100.0

Andrea DellaValle (**) 625.7 6.7 1,400.0

Luigi Abete 24.7 5.7

Maurizio Boscarato 25.7 7.5 (2) 148.2

Luigi Cambri 25.7 12.9 (4) 6.2

Luca C. di Montezemolo 24.8 0.2

Emanuele DellaValle 24.5

Fabrizio DellaValle (****) 225.2 6.7

Emilio Macellari (****) 225.7 6.7 (2) 480.0

Pierfrancesco Saviotti 25.0 12.4

Stefano Sincini (***) 309.7 6.7 (1) 111.0

VitoVarvaro 25.7 6.7

Total Directors 2,488.1 78.9 3,500.0 745.4

Statutory AuditorsEnrico Colombo (*****) 90.0 (3) (4) 33.2

Gian Mario Perugini 60.0 (3) 11.3

Fabrizio Redaelli 60.0

Total Statutory Auditors 210.0 44.5Executives with strategic responsibilities 2.5 423.1 606.3

Legend

(*) Chairman of Board of Directors (1) Director of subsidiary(**) Vice Chairman of Board of Directors (2) Consultant of TOD’S S.p.A.(***) Member of Executive Committee (3) Statutory Auditor of subsidiary(****) Chairman of the Statutory Board (4) Member of the Compliance Program Supervisory Body

No severance indemnity is provided for Directors and Executives with Strategic Responsibilities.

25. Personnel costs

The personnel costs incurred by the Group in FY 2010 as compared with those for FY 2009 are illustrated asfollows:

Euro 000’s % on salesYear 2010 Year 2009 Change 2010 2009

Wages and salaries 89,922 81,327 8,595 11.5 11.4

Social security contributions 23,811 21,791 2,020 3.0 3.1

Employee sev. indem. (service cost) 4,018 3,913 105 0.5 0.5

Stock options - 309 (309) n.s n.s

Total 117,751 107,340 10,411 15.0 15.1

The following table illustrates the breakdown of Group’s employees by category:

12.31.10 12.31.09 Average 10 Average 09

Executives 46 43 46 42

White-collar employees 2,069 1,893 1,997 1,937

Blue-collar employees 1,079 904 1,003 860

Total 3,194 2,840 3,046 2,829

26. Financial income and expenses

The breakdown of financial income and expenses in fiscal 2010 is as follows:

Euro 000’sYear 10 Year 09 Change

IncomeInterest income on current account 2,131 1,359 772

Foreign exchange gains 17,035 12,774 4,261

Other 205 123 82

Total income 19,371 14,256 5,115

ExpensesInterest on medium-long term financing (215) (260) 45

Interest on short term borrowings (453) (390) (63)

Foreign exchange losses (14,505) (12,573) (1,932)

Other (790) (936) 146

Total expenses (15,963) (14,159) (1,804)Total net income and expenses 3,408 97 3,311



27. Income taxes

Tax expenses allocable to FY 2010, including deferred taxes, totalled 52.6 million euros, and are broken down intocurrent and deferred taxes as follows:


Current taxes 57,008 41,585

Deferred taxes (4,442) (1,180)

Total 52,566 40,405Tax rate 32.2% 31.9%

The parent company’s theoretical tax rate for FY 2010 (impact of theoretical tax on pre-tax profit) was 33.6%,determined by applying the IRES and IRAP tax rates applicable to 2010 taxable income as reported on the financialstatements, while the theoretical tax rate for FY 2010 of other Group companies operating outside Italy variesfrom country to country according to local law.

The following schedule reconciles theoretical taxes, calculated by using the theoretical tax rate of the parentcompany, and the taxes actually charged to income:

Euro mnTaxes Rate %

Theoretical income taxes at the rate of parent company 54.9 33.6Tax effect of non-deductible or

partially deductible costs 0.3 0.2

Effect connected with the different rates of the

foreign subsidiaries (2.6) (1.6)

Effective income taxes 52.6 32.2



REPORT OF INDEPENDENT AUDITORS

86 Report of Independent Auditors

TOD'S S.p.A. - IAS/IFRS ANNUAL REPORTAS OF DECEMBER 31ST 2010

REPORT ON OPERATIONS


Introduction

The Report by the Board of Directors on Operations is based on the Separate Financial Statements ofTOD’S S.p.A.at December 31st 2010, prepared in accordance with IAS/IFRS (International Accounting Standards – IAS, andInternational Financial Reporting Standards - IFRSs) issued by the IASB and approved by the European Union atthe same date, on the assumption of the company’s status as a going concern.The Report on Operations must beread together with the Financial Statements and Notes to the Financial Statements,which are integral parts of the2010 separate annual report.These documents include the additional information required by CONSOB,with themeasures issued in implementation ofArticle 9 of Legislative Decree 38/2005 (resolutions 15519 and 15520 of July27th 2006 and DEM/6064293 memorandum of July 28th 2006), as well as all subsequent notices containing provisionsregarding financial disclosures.Separate Financial Statements is approved by the Board of Directors of TOD’S S.p.A. in March 14th 2011.

Alternative indicators of performances

In order to strip the effects of changes in exchange rates with respect to the average values for the previous yearfrom the results for the 2010 financial year, the typical economic reference indicators (Revenues, EBITDA andEBIT) have been recalculated by applying the average exchange rates for 2009, rendering them fully comparablewith those for the previous reference period.Note that on the one hand, these principles for measurement of business performance represent a key tointerpretation of results not envisaged in IFRSs, and on the other hand, must not be considered as substitutes forwhat is set out in those standards.

Operating performances

In line with expectations, the company performed outstandingly in FY 2010, both in sales and margins results. Salesrevenues are equal to 577.0 million euros in FY 2010 against 526.5 million euro in FY 2009, for an increase of 50.5million euros.Net profit for the year amounts to 83.0 million euros which increases by 11.1 million euros (+15.4%) in respectof FY 2009. EBIT is equal to 124.2 million euros in FY 2010, against 106.5 million in FY 2009.

S.p.A.2010Annual Report



Euro 000’sMain economic indicators Year 10 Year 09 Change %

Sales revenues 577,031 526,491 50,540 9.6

EBITDA 138,544 120,592 17,952 14.9

Deprec., amort.,write-downs and advances (14,390) (14,073) (317) 2.3

EBIT 124,154 106,519 17,635 16.6

Pre-Tax 125,841 106,856 18,985 17.8

Consolidated net income 82,974 71,921 11,053 15.4

Foreign exchange impact on revenues (5,600)

Adjusted Sales revenues 571,431 526,491 44,940 8.5

Impact on operating cost 3,100

Adjusted EBITDA 136,044 120,592 15,452 12.8

Adjusted EBIT 121,654 106,519 15,135 14.2

EBITDA % 24.0 22.9

EBIT % 21.5 20.2

Adjusted EBITDA % 23.8 22.9

Adjusted EBIT % 21.3 20.2

Euro 000’sMain Balance Sheet Indicators 12.31.10 12.31.09 Change

Net working capital (*) 178,402 205,911 (27,509)

Non current assets 221,227 221,704 (477)

Other current assets/liabilities 96,296 75,209 21,087

Invested capital 495,925 502,824 (6,899)Net financial position 56,929 120,050 (63,121)

Shareholders’ equity 552,854 622,874 (70,020)

Capital expenditures 13,600 9,164 4,436

Cash flow from operations 141,915 121,155 20,760

Free cash flow (64,713) 79,323 (144,036)

(*) Trade receivables + inventories - trade payables.


Revenues. Sales during the period totalled 577.0 million euros, up 50.5 million euros from 2009, when revenueswere 526.5 million euros. On a comparable exchange rate basis, i.e. using the average exchange rates for FY 2009,revenues would have been 571.4 million euros in FY 2010.

Euro 000’sFY 10 % FY 09 % Change %

BrandTOD’S 245,072 42.5 211,548 40.2 33,524 15.8

HOGAN 231,676 40.1 219,830 41.8 11,846 5.4

FAY 81,882 14.2 82,437 15.7 (555) (0.7)

ROGERVIVIER 14,939 2.6 9,463 1.8 5,476 57.9

Other 3,461 0.6 3,213 0.65 248 7.7

Total 577,031 100.0 526,491 100.0 50,540 9.6

ProductShoes 419,423 72.7 384,134 73,0 35,289 9.2

Leather goods 65,108 11.3 55,342 10.5 9,766 17.6

Apparel 89,431 15.5 84,233 16.0 5,198 6.2

Other 3,069 0.5 2,782 0.5 287 10.3

Total 577,031 100.0 526,491 100,0 50,540 9.6

RegionItaly 369,573 64.1 348,435 66.2 21,138 6.1

Europe 114,506 19.8 111,663 21.2 2,843 2.5

North America 28,297 4.9 24,201 4.6 4,096 16.9

RoW 64,654 11.2 42,192 8.0 22,462 53.2

Total 577,031 100.0 526,491 100.0 50,540 9.6

TheTOD’S brand reported excellent results:with revenues of 245.1 million euros, it grew by 15.8% compared with2009. Growth was very strong in all product categories and in all markets.HOGAN brand revenue totalled 231.7 million euros in FY 2010, up 5.4% from the previous year.The brand isreorganising its presence at the international level in order to reinforce its image both the domestic andforeign markets. For this purpose, it has established a collaborative relationship with the famous designer KarlLagerfeld.FAY brand revenues were substantially unchanged at 81.9 million euros in FY 2010 (FY 2009: 82.4 million euros).The ROGERVIVIER brand leapt upwards by 57.9% from 2009, with sales totalling 14.9 million euros.As has beenremarked repeatedly, analysis of the results generated by this brand is not yet entirely significant, insofar as it isstill in the phase of launching and consolidating its exclusive cachet and prestige.While the company confirms its unchallenged leadership in its core shoe business, where revenues grew by9.2% in FY 2010 to 419.4 million euros, the strong growth in leather goods sales was particularly significant incomparison with FY 2009 (+17.6%), reflecting the excellent results of the entire collection of TOD’S brandhandbags and accessories. Aggregate leather good and accessory revenues totalled 65.1 million euros in FY2010.Finally, apparel revenues totalled 89.4 million euros in FY 2010, up 6.9% from FY 2009.The geographical breakdown of revenues shows the strength of the company on the domestic market, whererevenues totalled 369.6 million euros in 2010, up 6.1% from 2009.The sales results for the rest of Europe werepositive as well: revenues totalled 114.5 million euros, up 2.5% from the previous year.However, the best performance was reported on the American and Asian markets.The United States marketreported outstanding results, where revenues grew by 16.9% to 28.3 million euros in FY 2010.The “Asia and Restof World” area also reported fantastic growth. Sales reached 64.7 million euros, up 53.2% from 2009.The resultsposted in China, Hong Kong,Taiwan and South Korea were particularly brilliant.




Operating results. EBITDA totalled 138.5 million euros in FY 2010, rising by 18.0 million euros in absoluteterms from the previous year (+14.9%).At December 31st 2010 EBITDA amounted to 24.0% of sales,with the grossprofit margin rising 110 basis points from FY 2009, when it hit 22.9% of revenues.On a comparable exchange rate basis, i.e. using the average exchange rates for 2009, EBITDA would have been136.0 million euros, and it would have been equal to 23.8% of revenues.Gross operating profit in FY 2010 also benefited from the vigorous growth in sales volumes in terms of quality.The breakdown of 2010 revenues compared with the previous year is characterised by the greater contributionmade by certain product categories (especially leather goods) that guarantee a higher sales margin for the company.The impact of improved production efficiency also had a positive impact on profitability.This was the result ofcontinuous streamlining of industrial processes.The percentage impact of amortisation and depreciation did not change significantly, with these costs totalling13.5 million euros in FY 2010 (13.1 million euros in FY 2009). Net of accruals for contingent liabilities and chargestotalling 0.9 million euros, EBIT in FY 2010 totalled 124.2 million euros, up 17.6 million euros from EBIT in 2009.At December 31st 2010, EBIT represented 21.5% of company sales. In FY 2009 EBIT was 106.5 million euros,representing 20.2% of revenues.On a comparable exchange rate basis (average for 2009), EBIT would have been 121.7 million euros, or 21.3% ofrevenues.Net financial income amounted to 1.7 million euros, due to net foreign exchange gains and the major contributionmade by interest accrued on cash. Pre-tax profit for 2010 totalled 125.8 million euros, compared with 106.9 millioneuros in 2009.Net of income taxes (including deferred taxes) for a total of 42.9 million euros (FY 2009: 34.9 million euros),which translated into a tax rate of 34.1%, (32.7% in the previous year), net profit for the year totalled 83.0 millioneuros, up 11.1 million euros compared with FY 2009, when it totalled 71.9 million euros. Net profit grewsignificantly: at December 31st 2010, net profit was 14.4% of revenues, compared with 13.7% in FY 2009.

Capital expenditures. Capex totalled 13.6 million euros in FY 2010, up from 9.2 million euros in 2009.About6.1 million euros were used for procurement of the accessory industrial equipment used to create its collections(lasts, hollow punches and moulds).A major share of capex (2.9 million euros) targeted development of corporate information systems, while 0.9million euros was spent on protecting company brands, which represent a strategic asset.

Net financial position (NFP). Net liquid assets at December 31st 2010 totalled 56.9 million euros, down 63.1million euros from December 31st 2009 (120.1 million euros). Financial balances were heavily impacted by threetransactions during the year. First of all, shareholders were paid an extraordinary dividend (Shareholders’ Meetingresolution of September 21st 2010) totalling 107.1 million euros, at the rate of 3.50 euros per share, in addition tothe ordinary dividend of 45.9 million euros resolved upon approval of the 2009 annual report, with which thecash exceeding business requirements was distributed.Second of all, the entire share capital of Holpaf B.V. was acquired in November 2010.This is the Dutch companythat owns the building that has housed the head office and flagship store of the subsidiaryTOD’S Japan KK inTokyosince 2005.The impact of the acquisition on the company’s net financial position was about 24.1 million euros, ofwhich 2.1 million euros for the transfer of company shares and 22 million euros for a capital grant to Holpaf B.V.so that it could repay the previous shareholders for a loan (for 20.6 million euros) granted by them before thesale of shares pursuant to the Sale & Purchase Agreement signed by the parties (TOD’S S.p.A. and Goral InvestmentHolding B.V.).Finally, in order to assure a balanced financial structure for certain indirect subsidiaries in the Far East, the companycontributed 16.2 million euros to recapitalisation of the sub-holding TOD’S International B.V.On the liabilities side, the only financial exposure to the banking system remains the long-term loan obtained in2003 and due in 2014.


Euro 000’sNet financial position 12.31.10 12.31.09 Change

Current financial assetsCash and cash equivalents 63,747 128,390 (64,643)

Cash 63,747 128,390 (64,643)Current financial liabilitiesCurrent account overdraft - - -

Current share of medium-long term financing (1,591) (1,521) (70)

Current financial liabilities (1,591) (1,521) (70)Current net financial position 62,156 126,869 (64,713)Non-current financial liabilitiesFinancing (5,227) (6,819) 1,592

Non-current financial liabilities (5,227) (6,819) 1,592Net financial position 56,929 120,050 (63,121)

When stripped of the flows resulting from the transactions described above, the net financial position at December31st 2010 would be 250.2 million euros.

Euro 000’sStatement of cash flow Year 10 Year 09

Profit (loss) for the period of the Company 82,974 71,921Non-cash items 23,085 21,170

Cash Flow (A) 106,059 93,091Changes in operating net working capital (B) 35,856 28,064

Cash Flow from operations (C) = (A)+(B) 141,915 121,155Cash Flow generated (used) in investment activity (D) (51,535) (7,239)

Cash Flow generated (used) in financing activity (E) (155,093) (34,593)

Cash Flow received (used) (C+D+E) (64,713) 79,323

Net financial position at the beginning of the period 126,869 47,546

Net financial position at the end of the period 62,156 126,869


Operating cash flow continued to grow to 141.9 million euros from the previous year, when it totalled 121.2million euros, confirming the structural capacity of the company to generate cash with its own industrial activity.Cash flow contributed 106.1 million euros, compared with 93.1 million euros in 2009.Working capital made apositive contribution of 35.9 million euros during the year.A total of 13.6 million euros were used for investments (gross of disposals of 0.6 million euros).These investmentswere made in financial assets, comprised principally, as previously mentioned,of the payment of 153.9 million eurosin dividends, the recapitalisation of subsidiaries for 16.2 million, and the acquisition of the entire share capital ofHolpaf B.V. (24.1 million euros).

Research and development

Given the particular nature of the production, research and development activity consists of continuoustechnical/stylistic revision of models and constant improvement of the materials used to realise the product.

Since this activity is exclusively ordinary, the associated costs are charged entirely to income in the year that theyare incurred, and thus recognised as normal production costs.




Research and development costs, as defined above, have assumed major importance due to operating realisationof projects connected with expansion of the existing product line with new types of merchandise thatcomplement current ones.These will increase the number of brands offered and stimulate increased sales toend customers.

Information on Share Capital

As of December 31st 2010, the share capital ofTOD’S S.p.A. consists of 30,609,401 shares,with a par value of euro2 euro each.In response to market suggestions to increase the liquidity of the shares of the parent companyTOD’S S.p.A., andconsequently facilitate investments by major institutional investors, the DellaValle family floated an “AcceleratedBookbuilt Offer” coordinated by Mediobanca, placing 3,060,000 shares with institutional investors on December15th 2010.All these shares were sold at a price of 76 euros. Of these shares, 6.08% were offered by Diego DellaValle & C. S.A.P.A., 1.96% by Diego DellaValle and 1.96% by Andrea DellaValle.Following this sale, the direct and indirect participation in the share capital of the company owned by Mr DiegoDellaValle,Chairman of the Board of Directors, fell to 56.762% at December 31st 2010, compared with his previousshareholding of 64.779%.

Shares owned by Directors, Statutory Auditors, General Managers, and Executives with strategicresponsibilities. The following table shows all the shareholdings in Tod’s S.p.A. and in the companies controlledby it, held, directly or indirectly, by Directors, StatutoryAuditors,Generals Managers and Executives with strategicresponsibilities, as contained in the declarations given to the company.

12.31.09 12.31.10Company N° of N° of shares N° of shares N° of

Owned share held buy sell shares held

Diego DellaValle Tod’s S.p.A. 19,834,624 (2,460,000) 17,374,624

Andrea DellaValle Tod’s S.p.A. 868,716 (600,000) 268,716

Luigi Abete Tod’s S.p.A. - -

Maurizio Boscarato Tod’s S.p.A. - -

Luigi Cambri Tod’s S.p.A. 435 435

Emanuele DellaValle Tod’s S.p.A. 5,000 5,000

Fabrizio DellaValle Tod’s S.p.A. - -

Emilio Macellari Tod’s S.p.A. 5,000 5,000

Luca C. di Montezemolo Tod’s S.p.A. 273,200 273,200

Pierfrancesco Saviotti Tod’s S.p.A. 3,200 3,200

Stefano Sincini Tod’s S.p.A. - -

Enrico Colombo Tod’s S.p.A. - -

Gianmario Perugini Tod’s S.p.A. - -

Fabrizio Redaelli Tod’s S.p.A. 750 750

Rodolfo Ubaldi Tod’s S.p.A. - -

Own shares and shares or quotas of controlling companies. As of December 31st 2010 the Company did notpossess any of its own share nor did it possess any shares or quotas of the controlling companies, neither Sincethe date on which the shares of the Company were listed on the Milan Stock Exchange, the Company has not beena party to any transactions with reference to its own shares.


Personal data processing disclosure

The Company implemented and updated its Security Policy Document (SPD) in accordance with the PersonalData Protection Code.

Corporate Governance

The Corporate Governance system. The corporate governance system of the parent companyTOD’S S.p.A.is based on the traditional system, or “Latin model.” The corporate bodies are:– the Shareholders’ Meeting, which has the prerogative of resolving at its ordinary and extraordinary meetings

on the matters reserved to it by law or the articles of association;– the Board of Directors, which is vested with full, unlimited authority for ordinary and extraordinary

management of the Company, with the right to perform all those acts that it deems appropriate to implementand realise the corporate purpose, excluding only those reserved by law to the Shareholders’ Meeting;

– the Board of Statutory Auditors, which is delegated by law to monitor i) compliance with the law,memorandum of association and compliance with the principles of proper management; ii) the adequacy ofthe organisational structure for matters falling under its purview, its internal control system and administrativeand accounting system, as well as the adequacy of the latter in fairly reporting operating performance; iii) theadequacy of directives issued toTOD’S Group companies in regard to the information that they must providein compliance with disclosure obligations; iv) the procedures for effective implementation of the corporategovernance rules set out in the Corporate Governance Code adopted by the Group; Legislative Decree39/2010 delegates the Board of Statutory Auditors the task of monitoring the process of financial disclosureand the effectiveness of the risk control and management systems, as well as independent audits andcertification of the annual accounts and consolidated accounts, and the independence of the accounting firmretained to do so;

– the Manager in charge of preparing the company financial documents.

The Board of Directors has set up several internal committees: the Executive Committee, the Internal Control andCorporate Governance Committee, the Compensation Committee and the Independent Directors Committee.The adopted corporate governance model is substantially based on the Corporate Governance Code for ListedCompanies, in its latest version as prepared by the Corporate Governance Committee for Listed Companies(sponsored by Borsa Italiana S.p.A. and comprised by representatives from several of the leading Italian companiesand experts in this area),whose principles have been implemented byTod’s S.p.A.with a series of Board of Directorsresolutions since November 2006, as well as the reference models represented by international best practice.In implementation of the Related PartyTransactions Regulation adopted by CONSOB with Resolution no. 17221of March 12th 2010, as amended by Resolution no. 17389 of June 23rd 2010,TOD’S S.p.A. modified (by extendingthem to all Group companies) its existing procedures governing the transparency and substantive fairness ofrelated party transactions, to bring them in line with the principles set out in the cited CONSOB Regulation. Itconsequently appointed an Independent Directors Committee.This committee is delegated the role and relevantduties assigned by the Regulation to the committee comprised only of independent directors (modifications to theprocedure for related party transactions; examination and issuance of binding opinions on the most significanttransactions; the Internal Control and Corporate Governance Committee is instead delegated with responsibilityfor examination and issuance of non-binding opinions on less significant transactions).

Disclosure pursuant to Article 123-bis of Legislative Decree 58/1998 (“TUF”).At its meeting on March14th 2011, the Board of Directors of TOD’S S.p.A. approved the annual Report on Corporate Governance andShareholdings, which provides the disclosures mandated pursuant to Article 123-bis (1) of the Consolidated Lawon Finance (T.U.F.).That report also analytically illustrates the corporate governance system of TOD’S S.p.A., andit includes not only the information required underArticle 123-bis (2)T.U.F., but also a comprehensive examination


of the status of implementation of the corporate governance principles recommended by the CorporateGovernance Code in accordance with the “comply or explain” rule.The Report also satisfies the requirements imposed by CONSOB pursuant to Article 114(5) T.U.F. with noticeDEM/11012984 of February 24th 2011, in regard to the remuneration, self-evaluation and succession plans of theBoard of Directors.The reader is referred to the Annual Corporate Governance Report, which is available to the public togetherwith this Report on Operations and accounting documentation. It may be consulted in the corporate section ofthe www.todsgroup.com website.

Management and coordination activities

Although TOD’S S.p.A. is subject to the control (pursuant to Article 93 of Legislative Decree 58/1998) of DI.VI.Finanziaria S.A.p.A., neither this latter company or any other party has dictated policy or interferred in themanagement of TOD’S S.p.A. (or any of the subsidiaries of TOD’S S.p.A.). Indeed, management of the issuer andits subsidiaries was not subject to any influence by third parties outside the TOD’s Group.TOD’S S.p.A. is not subject to management and coordination by the parent company DI.VI. Finanziaria SapA orany other party pursuant to Sections 2497 et seq. Italian Civil Code.Pursuant to the Corporate Governance Code, transactions that have a particularly significant impact on TOD’sS.p.A. strategy, operations, assets, liabilities, and financial position are subject to exclusive review and approval bythe Board of Directors of the issuer TOD’S S.p.A. Its members include independent directors without executiveresponsibilities at the company, in accordance with the rules set out in Article 3 of the Corporate GovernanceCode.The expertise and authority of the independent directors without executive responsibilities and their materialimpact on decisions taken by the Board of Directors represent a further guarantee that all decisions by the Boardof Directors are taken exclusively on behalf ofTOD’S S.p.A.without being influenced by instructions or interferenceby third parties representing interests opposed to the Company’s.All subsidiaries of TOD’S S.p.A. are subject to management and coordination by the issuer.

Significant events occurring after the end of the fiscal year

On January 21st 2011,TOD’S S.p.A. reached an agreement with the Italian Ministry of Cultural Affairs (“Ministeroper i Beni e le attività culturali”) and the Rome Special Fine Arts Service for Archaeological Monuments(“Soprintendenza speciale per i beni archeologici di Roma”), for the purpose of financing restoration work on theColosseum as sole and exclusive sponsor.The agreement calls for the sponsor to put up a total, all-inclusive amount of 25 million euros, to be disbursed overseveral years according to the actual progress of restoration work approved by the delegated Commissioner andthe Fine Arts Service.

Business outlook

FY 2010 ended on a high note in terms of revenues, profit margins and profitability,with growth steadily acceleratingover the course of the year. Sales and financial figures have confirmed that consumers appreciate the high qualityproducts offered by the Group’s brands. By being fairly unsusceptible to seasonal changes, they guarantee a statusthat goes beyond fashion.In regard to business forecasts for the current year, the Spring-Summer 2011 collection sales campaign results andthe excellent sales trends suggested by distribution network figures for the beginning of the current seasonreasonably allow us to expect superb results again in 2011.



Motion for allocation of the profit for the year

It is proposed that the net profit for FY 2010, 82,974,255.62 euros, be allocated as follows:i. 21,755,453.62 euros to the extraordinary reserve;ii. 61,218,802.00 euros, to be distributed to shareholders in the form of a dividend of 2.00 euros per share for

each of the outstanding 30,609,801 shares.

Milan, March 14th 2011

The Chairman of the Bord of DirectorsDiego DellaValle



FINANCIAL STATEMENTS



Profit & Loss


RevenuesSales revenues (1) 577,031 526,491

Other revenues and income 15,012 11,742

Total revenues and income 592,043 538,233Operating CostsChange in inventories of work in process and finished goods 6,739 (29,820)

Cost of raw materials, supplies and material for consumption (170,638) (140,189)

Costs for services (208,676) (173,511)

Costs of use of third party assets (7,263) (6,456)

Costs of labour 24 (62,224) (58,723)

Other operating charges (11,437) (8,942)

Total operating costs (453,499) (417,641)EBITDA 138,544 120,592Amortisation, depreciation and write-downsAmortisation of intangible assets 7 (3,419) (3,010)

Depreciation of tangible assets 7-10 (10,044) (10,063)

Other adjustments - -

Total amortisation,depreciation and write-downs (13,463) (13,073)Provisions 21 (927) (1,000)

EBIT 124,154 106,519Financial income and chargesFinancial income 25 11,422 11,023

Financial charges 25 (9,735) (10,686)

Total financial income (charges) 1,687 337Income (losses) from equity investments - -

Profit before taxes 125,841 106,856Income taxes 19-27 (42,867) (34,935)

Profit for the year 82,974 71,921

EPS (Euro) 2.71 2.35

EPS diluted (Euro) 2.71 2.35

Note 1: Sales revenues includes transactions with the Group’s entities for 183.5 and 134.3 million euros, respectively, in the fiscal year 2010 and 2009.

Comprehensive Income


Profit/(loss) for the period (A) 82,974 71,921Other profit/(loss):Derivative financial instruments (cash flow hedge) (*) 53 819

Total Other Comprehensive Income/(Losses) (B) 53 819Total profit/(loss) (A)+(B) 83,027 72,740

(*) Income taxes of the period include tax effect.





Statement of Financial Position

Euro 000’sNotes 12.31.10 12.31.09

Non-current assetsIntangible fixed assetsAssets with indefinite useful life 6 150,476 150,476

Others 7 12,339 10,574

Total Intangible fixed assets 162,815 161,050Tangible fixed assetsBuildings and land 8 38,845 40,070

Leasehold improvement 8 666 981

Plant and machinery 8 3,289 4,252

Equipment 8 11,475 10,991

Others 8 4,137 4,360

Total Tangible fixed assets 58,412 60,654Other assetsReal estate investments 10 46 49

Equity investments (1) 11 143,196 102,773

Deferred tax assets 19 7,251 3,119

Others 1,208 1,187

Total other assets 151,701 107,128Total non current assets 372,928 328,832Current assetsInventories 12 137,993 137,508

Trade receivables (2) 13 165,460 167,452

Tax receivables 13 8,442 6,836


Others 13 7,407 7,701

Cash 63,747 128,390

Total current assets 385,041 448,243Total assets 757,969 777,075

to be continued

Note 1:The balance includes for 2.1 million euros the acquisition cost of Holpaf B.V. investment which is a transaction with a related party (Note 11 and23).

Note 2:Trade receivables includes receivables from Group’s entities for 60.0 and 68.3 million euros, respectively, at December 31st 2010 and December31st 2009.

continuing

Euro 000’sNotes 12.31.10 12.31.09

Shareholders’ equityShare Capital 15 61,219 61,219

Capital reserves 15 213,975 213,975

Treasury stock - -

Hedging and translation 15 74 21

Retained earnings 15 194,612 275,738

Income for the period 15 82,974 71,921

Shareholders’ equity 552,854 622,874Non-current liabilitiesProvisions for risks 21 1,200 665

Deferred tax liabilities 19 24,192 21,666

Reserve for employee severance indemnity 22 7,972 8,158

Bank borrowings 16 5,227 6,819

Total non-current liabilities 38,591 37,308Current liabilitiesTrade payables (3) 20 125,051 99,049

Tax payables 20 14,788 3,326

Derivative financial instruments 17 595 353

Other 20 24,499 12,644

Bank 16 1,591 1,521

Total current liabilities 166,524 116,893Total Shareholders’ equity and liabilities 757,969 777,075

Note 3: Trade payables includes payables to Group’s entities for 6.1 and 4.0 million euros, respectively, at December 31st 2010 and December 31st 2009.



Statement of Cash flow


Profit (loss) for the period 82,974 71,921Non-cash adjustments:Amortizat., deprec., revaluat., and write-downs 7-8-10-12-13 23,835 19,349

Change in employee severance indemnity reserve 22 321 379

Change in deferred tax/liabilities 19 (1,606) 1,152

Other changes 535 290

Cash flow (A) 106,059 93,091Change in current assets and liabilities:Inventories 12 (3,577) 25,879

Trade receivables 13 1,642 8,998

Tax receivables 13 (1,606) (3,222)

Other current assets 13 (3,234) 3,329

Trade payables 20 26,002 (3,413)

Tax payables 20 11,462 (340)

Other current liabilities 20 5,167 (3,167)

Change in operating working capital (B) 35,856 28,064Cash flow from operations (C) = (A)+(B) 141,915 121,155Net investments in intangible and tangible assets 7-8 (12,986) (7,939)

(Increase) decrease of equity investments (1) 11 (40,423) -

Other changes in fixed assets 14 1,892 1,436

Reduction (increase) of other non-current assets (18) (736)

Cash flow generated (used) in investment activities (D) (51,535) (7,239)Dividend paid 4 (153,047) (38,262)

Changes in long term loans 16-22 (2,099) (2,123)

Capital increase 15 - 4,664

Other changes in shareholders’ equity 15 53 1,128

Cash flow generated (used) in financing (E) (155,093) (34,593)Cash flow generated (used) (C+D+E) (64,713) 79,323

Net Financial position at the beginning of the period 126,869 47,546

Net Financial position at the end of the period 62,156 126,869


Nota 1:The balance includes for 2.1 million euros the acquisition cost of Holpaf B.V. investment which is a transaction with a related party (Note 11 and23).



Statement of changes in equity

Year 2010Euro 000’s

ReserveShare Capital for Retained

capital reserves translation earnings Total

Balances as of 01.01.10 61,219 213,975 21 347,659 622,874Profit/(Loss) recognized in the periodProfit & Loss account 82,974 82,974

Directly in equity 53 53

Total Profit/(Loss) - - 53 82,974 83,027Dividends (distribution Income of year 2009) (45,914) (45,914)

Extraordinary dividends (107,133) (107,133)

Capital increase -

Share based payments -

Other -

Balances as of 12.31.10 61,219 213,975 74 277,586 552,854

Year 2009Euro 000’s

ReserveShare Capital for Retained

capital reserves translation earnings Total

Balances as of 01.01.09 60,962 213,903 (798) 309,356 583,423Profit/(Loss) recognized in the periodProfit & Loss account 71,921 71,921

Directly in equity 819 819

Total Profit/(Loss) - - 819 71,921 72,740Dividends (38,262) (38,262)

Capital increase 257 4,407 4,664

Share based payments 309 309

Other (4,644) 4,644 -

Balances as of 12.31.09 61,219 213,975 21 347,659 622,874

Note: For detailed information on Reserves see also Note 15.



SUPPLEMENTARY NOTES

110 Supplementary Notes


1. General notes

The Notes to the Separate Financial Statements were prepared in accordance with IAS/IFRS and supplementedby the additional information required by CONSOB and the orders it issued in implementation of Article 9 ofLegislative Decree 38/2005 (Resolutions 15519 and 15520 of July 27th 2006 and memorandum DEM/6064293 ofJuly 28th 2006, pursuant to Article 114(5) of the Consolidated Law on Finance-TUF), Article 78 of the IssuerRegulation, the EC document of November 2003 and, when applicable, the Italian Civil Code.Consistently with the financial statements for the previous year, certain information is provided in the Report bythe Board of Directors on Operations.The Separate financial statements were approved by the Board of Directors of TOD’S S.p.A. on March 14th 2011.

2. Financial statements format: choice of form and classification principles

On transition to IFRSs,TOD’S S.p.A.opted to continue using the same balance sheet and income statement formatsused in its disclosures pursuant to Italian GAAP for presentation of its financial position and operating results.Thesefinancial statements, complemented as necessary by the Report of the Board of Directors on Operations and thenotes to the financial statements, are considered to be those that provide the best organized representation ofthe company financial position and income.More specifically, the balance sheet format shows current items separately from non-current items (both assetsand liabilities).On the profit and loss account, the format of representing revenues and costs by nature is followed,indicating the EBITDA and EBIT results as in the past, since they are considered representative indicators ofcompany performance.The “indirect” method is used for the statement of cash flows.

3. Highlights of the accounting principles

The consolidated financial statements are prepared in accordance with IAS/IFRS (International AccountingStandards-IAS, and International Financial Reporting Standards-IFRS) issued by the IASB, on the basis of the textpublished in the Official Journal of the European Union (OJEU). Furthermore, they are prepared on the basis ofhistoric costs, with the sole exception of derivative financial instruments, which are measured at fair value.

Accounting principles, amendments, interpretations applicable since January 1st 2010 and notrelevant for the GroupThe following accounting standards are applicable since 1st January 2010 and refer to situations or cases that werenot applied to TOD’S Group Financial Statements of the year ending at December 31st 2010:þ IFRS 3 (2008) - Business combinations.The updated version of IFRS 3 introduced major changes, principally in

regard to: the regulations governing incremental acquisitions of subsidiaries; the option of fair value measurementof any third party interests acquired in a partial acquisition; the charging to income of all costs connected withthe business combination and recognition at the acquisition date of the liabilities for conditional payments.

þ IAS 27 (2008) - Consolidated and Separate Financial Statements.The changes to IAS 27 principally concern theaccounting treatment of transactions or events that modify equity interests in subsidiaries and the allocationof losses by the subsidiary to minority interests.

The following amendments, interpretations are also applicable since 1st January 2010 and refer to situations or casesthat were not applied to TOD’S Group Financial Statements of the year ending at December 31st 2010:þ Improvement to IFRS 5 - Non-current Assets Held for Sale and Discontinued Operations.þ Amendments to IAS 28 - Investments in Associates and to IAS 31 - Interests in Joint Ventures consequential

to the amendment to IAS 27.þ Improvements to IAS/IFRS (2009).þ Amendment to IFRS 2 - Share based Payment: Group Cash-settled Share-based Payment Transactions.


þ IFRIC 17 - Distributions of Non-cash Assets to Owners.þ IFRIC 18 - Transfers of Assets from Customers.þ Amendment to IAS 39 - Financial Instruments: Recognition and Measurement: Eligible Hedged items.

3.1 Transactions in foreign currency. The functional currency (the currency used in the principal economicarea where the company operates) used to present the financial statements is the Euro. Foreign currencytransactions are translated into the functional currency by applying the exchange rate in effect at the date of thetransaction.Monetary assets and liabilities denominated in foreign currencies at the date of the financial statementsare translated by using the exchange rate in effect at the closing date.Non-monetary assets and liabilities are valuedat their historic cost in foreign currency and translated by using the exchange rate in effect at the transaction date.The foreign exchange differences arising upon settlement of these transactions or translation of cash assets andliabilities are recognized on the profit and loss account, with the exception of those deriving from derivativefinancial instruments qualified as hedging of financial flows. In fact, these differences are recognized as a separatecomponent of shareholders’ equity or on the profit and loss account.

3.2 Derivative financial instruments. The company uses derivate financial instruments (mainly currencyfutures contracts) to hedge the risks stemming from foreign exchange exposure deriving from its operating activity,without any speculative or trading purposes, and consistently with the strategic policies of centralized cashmanagement dictated by the Board of Directors.When derivative transactions refer to a risk connected with the variability of forecast transaction cash flow, theyare recognized according to the rules for cash flow hedge until the transaction is recorded on the books.Subsequently, the derivatives are treated in accordance with fair value hedge rules, insofar as they can be qualifiedas instruments for hedging changes in the value of assets or liabilities carried on the balance sheet.The hedge accounting method is used at every financial statement closing date.This method envisages postingderivatives on the balance sheet at their fair value. Posting of the changes in fair value varies according to the typeof hedging at the valuation date:• for derivatives that hedge forecast transactions (i.e. cash flow hedge), the changes are recognized in

shareholders’ equity, while the portion for the ineffective amount is recognized on the profit and loss account,under financial income and expenses;

• for derivatives that hedge receivables and payables recognized on the balance sheet (i.e. fair value hedge), thefair value differences are recognized entirely on the profit and loss account, adjusting operating margins.Furthermore, the value of the hedged item (receivables/payables) is adjusted for the change in value attributableto the hedged risk, using the item financial income and expenses as a contra-entry.

3.3 Intangible fixed assets.i. Goodwill. All business combinations are recognized by applying the acquisition method.Goodwill representsthe portion of the cost paid for the acquisition that exceeds the company’s interest in the fair value of the assets,liabilities, and identifiable potential liabilities of the subsidiary or jointly controlled entity at the acquisition date.If the company’s interest in the fair value of assets, liabilities, and identifiable potential liabilities exceeds the costof the acquisition (negative goodwill) after redetermination of these values, the excess is immediately recognizedon the profit and loss account.For acquisitions prior to January 1st 2004, the date of transition to IAS/IFRS, goodwill retained the values recognizedon the basis of the previous Italian GAAP, net of accumulated amortization up to the transition date.Goodwill is recognized on the financial statements at its cost adjusted for impairment losses. It is not subject toamortization, but the adequacy of the values is annually subjected to the impairment test, in accordance with therules set forth in the section Impairment losses.

ii. Trademarks.These are recognized according to the value of their cost and/or acquisition, net of accumulatedamortization at the date of transition to IAS/IFRS.Trademarks TOD’S, HOGAN e FAY are classified as intangiblefixed assets with an indefinite useful life and thus are not amortized, insofar as:




• they play a primary role in company strategy and are an essential driver thereof;• the corporate structure, construed as organized property, plant, and equipment, and organization itself in a

figurative sense, is closely correlated with and dependent on dissemination and development of the trademarkson the markets;

• the trademarks are proprietary, properly registered, and constantly protected pursuant to law,with options forrenewal of legal protection, upon expiration of the registration periods, that are not burdensome, easilyimplemented, and without external impediments;

• the products sold by the company with these trademarks are not subject to particular technologicalobsolescence, which is characteristic of the luxury market in which the company operates; on the contrary,they are consistently perceived by the market as being innovative and trendy, to the point of being models forimitation or inspiration;

• in the national and/or international context characteristic of each trademark, they are distinguished by marketpositioning and notoriety that ensures their dominance of the respective market segments, being constantlyassociated and compared with benchmark brands;

• in the relative competitive context, it can be affirmed that the investments made for maintenance of thetrademarks are proportionately modest with respect to the large forecast cash flows.

The adequacy of the values is annually subjected to the impairment test, in accordance with the rules set forth inthe section Impairment losses.

iii. Research and development costs. The research costs for a project are charged fully to the profit and lossaccount of the period in which they are incurred.The development costs of an activity are instead capitalized if the technical and commercial feasibility of the relativeactivity and economic return on the investment are certain and definite, and the company has the intention andresources necessary to complete the development.The capitalized costs include the costs for materials, labor, and an adequate portion of overhead costs.They arerecognized at cost, net of accumulated amortization and depreciation (see below) and impairment losses.

iv. Other intangible fixed assets. These are identifiable non-monetary intangible assets under the control ofthe company and capable of causing the company to realize future economic benefits.They are initially recognized at their purchase cost, including expenses that are directly attributable to them duringpreparation of the asset for its intended purpose or production, if the conditions for capitalization of expensesincurred for internally generated expenses are satisfied.The cost method is used for determining the value reported on subsequent statements, which entails posting theasset at its cost net of accumulated amortization and write-downs for impairment losses.

v. Subsequent capitalization.The costs incurred for these intangible fixed assets after purchase are capitalizedonly to the extent that they increase the future economic benefits of the specific asset they refer to.All the othercosts are charged to the profit and loss account in the fiscal year in which they are incurred.

vi. Amortization. Intangible fixed assets (excluding those with an indefinite useful life) are amortized on a straight-line basis over the period of their estimated useful life, starting from the time the assets are available for use.

3.4 Tangible fixed assets.i. Property, plant, and equipment owned by the company. They are first recognized at their purchase costor at the cost recalculated at the date of transition to IFRS, including any directly attributable ancillary expenses.Following first-time recognition, these assets are reported net of their accumulated depreciation and impairmentlosses (i.e. in accordance with the cost model).For those assets whose depreciation must be calculated using the component approach, the portions of costallocable to the individual significant components characterized by a different useful life are determined. In this case,the value of land and buildings is kept separate, with only buildings being depreciated.


ii. Leasing. Lease agreements in which the Company assumes all the risks and benefits deriving from ownershipof the asset are classified as finance leasing.The assets (real estate,plant, and machinery) possessed pursuant to theseagreements are recorded under property, plant, and equipment at the lesser of their fair value on the date theagreement was made, and the current value of the minimum payments owed for leasing, net of accumulateddepreciation and any impairment losses (according to the rules described in the section Impairment losses).A financialpayable for the same amount is recognized instead under liabilities, while the component of interest expenses forfinance leasing payments is reported on the profit and loss account according to the effective interest method.

iii. Subsequent capitalizations. The costs incurred for property, plant, and equipment after purchase arecapitalized only to the extent that they increase the future economic benefits of the asset.All the other costs arecharged to the profit and loss account in the fiscal year in which they are incurred.

iv. Real estate investments. Real estate investments are originally recognized at cost, and then recognized attheir cost as adjusted for accumulated depreciation and impairment losses.Depreciation is calculated on a systematic, straight-line basis according to the estimated useful life of the buildings.

v. Depreciation. Property, plant, and equipment were systematically depreciated at a steady rate according tothe depreciation schedules defined on the basis of their estimated useful life. Land is not depreciated.The principaldepreciation rates applied are as follows:

% depreciation

Industrial buildings 3%

Machinery and plant 12.5%

Equipments 25%

Forms and punches, clichés, molds and stamp 25%

Furniture and furnishings 12%

Office machines 20%

Car and transport vehicles 20%-25%

The costs for leasehold improvements, which mainly include the costs incurred for set up and modernization ofthe DOS network and all the other real estate that is not owned but used by the company (and thus instrumentalto its activity) are depreciated according to the term of the lease agreement or the useful life of the asset, if thisis shorter.

3.5 Impairment losses. In the presence of indicators, events, or changes in circumstances that presume theexistence of impairment losses, IAS 36 envisages subjecting intangible fixed assets and property, plant and equipmentto the impairment test in order to assure that assets with a value higher than the recoverable value are notrecognized on the financial statements.As previously mentioned, this test is performed at least once annually for fixed assets with an indefinite useful life,and likewise for fixed assets that are not yet in use.Confirmation of the recoverability of the values recognized on the balance sheet is obtained by comparing the bookvalue at the reference date and the fair value net of sale costs (if available) or usage value.The usage value of atangible or intangible fixed asset is determined according to the estimated future financial flows expected from theasset, as actualized through use of a discount rate net of taxes, which reflects the current market value of thecurrent value of the cash and risks related to the Group activity, as well as the cash flows deriving from disposalof the asset at the end of its useful life.If it is not possible to estimate an independent financial flow for an individual asset, the cash generating unit to whichthe asset belongs and with which it is possible to associate future cash flows that can be objectively determinedand independent from those generated by other operating units is identified. Identification of the cash generatingunits was carried out consistently with the organizational and operating architecture of the Company.




If the impairment test reveals an impairment loss for an asset, its book value is reduced to the recoverable valueby posting a charge on the profit and loss account, unless the asset is revalued. In that case, the write-down isrecognized in the revaluation reserve.When the reasons for a write-down cease to exist, the book value of the asset (or the cash generating unit), withthe exception of goodwill, is increased to the new value resulting from the estimate of its recoverable value, butnot beyond the net book value that the asset would have had if the impairment loss had not been charged.Therestored value is recognized immediately on the profit and loss account, unless the asset is revalued, in which casethe restored value is recognized in the revaluation reserve.

3.6 Investments in subsidiaries and associated companies. The investments in subsidiaries, joint ventures,and associated companies that are not classified as held for sale in compliance with IFRS 5 are recognised at theirhistoric cost.The value recognised on the financial statements is periodically subjected to the impairment test, asenvisaged by IAS 36, and adjusted for any impairment losses.

3.7 Current assets.i. Financial assets. These are recognized and cancelled on the balance sheet according to the trading date andare initially valued at cost, including costs directly connected with the purchase.At the subsequent financial statement dates, the financial assets that the company intends and is able to hold untilmaturity (securities held until maturity) are recognized at the cost amortized according to the effective interestmethod, net of impairment losses.Financial assets other than those held until maturity are classified as held for trading or available for sale, and arerecognized at their fair value at the end of each period.When the financial assets are held for trading, the profitsand losses deriving from changes in the fair value are recognized on the profit and loss account for the period. Inthe case of financial assets available for sale, the profits and losses deriving from changes in the fair value arerecognized directly in shareholders’ equity until they are sold or have sustained a loss in value.At that time, theaggregate profits or losses that were previously recognized in shareholders’ equity are recognized on the profitand loss account of the period.

ii. Inventories. These are recognized at the lower of purchase cost and their assumed disposal value.The netdisposal value represents the best estimate of the net sales price that can be realized through ordinary businessprocesses, net of any production costs not yet incurred and direct sales costs.The cost of inventories is based on the weighted average cost method.The production cost is determined byincluding all costs that are directly allocable to the products, regarding – for work in progress and/or semi-finishedproducts – the specific stage of the process that has been reached.The values that are thus obtained do not differappreciably from the current production costs referring to the same classes of assets.A special depreciation reserve is set aside for the portion of inventories that are no longer considered economicallyuseable, or with a presumed disposal value that is less than the cost recognized on the financial statements.

iii. Trade receivables and other receivables. These are valued and recognized on a prudent basis accordingto their presumed disposal value, by means of adjusting the face value with a specific allowance for doubtfulaccounts determined as follows:• receivables under litigation,with certain and precise evidence documenting the impossibility of collecting them,

have been analytically identified and then written down;• for other bad debts, prudent allowances for write-downs have been set aside, estimated on the basis of

information updated at the date of this document.

iv. Cash.This includes cash on hand, bank demand deposits, and financial investments with a maturity of no morethan three months.These assets are highly liquid, easily convertible into cash, and subject to a negligible risk ofchange in value.


3.8 Employee benefits.i Defined contribution plans.The payments for eventual defined contribution plans are charged to the profitand loss account in the period that they are owed.

ii. Defined benefit plans. For defined benefit plans, the cost is determined by using the projected unit creditmethod, carrying out actuarial valuations at the end of every fiscal year.The accumulated actuarial profits andlosses not recognized at the beginning of the fiscal year are recognized only to the extent that they exceed 10%of the greater between the current volume of defined benefit plan liabilities and the fair value of the assets of theprogram at that date.The cost of past work services is recognized immediately in the amount in which the benefitshave already accrued or is otherwise amortized at a constant rate by the average period in which it is expectedthat the benefits will accrue.The liabilities for benefits paid out after termination of the employment relationship reported on the financialstatements represent the current value of liabilities for defined benefit plans adjusted to take into account theactuarial profits and losses that were not recognized and the costs for past work services that were not recognized,and reduced by the fair value of the program assets.Any net assets resulting from this calculation are limited tothe value of the unreported actuarial losses and the cost for the past work services that were not recognized, plusthe current value of any reimbursements and reductions in the future contributions to the plan.

iii. Share based payments.The payments based on shares are assessed at their fair value on the assignment date.This value is recognized on the profit and loss account on a straight-line basis throughout the period of accrualof the rights.This allocation is made on the basis of a management estimate of the stock options that will actuallyaccrue in favor of vested employees, considering the conditions for use thereof not based on their market value.The fair value is determined by using the binomial method.The useful life utilized in the model has been adjustedaccording to an estimate by management in order to take into account the effects of non-transferability of theoptions, restrictions on exercise thereof, and the assumed behavior of individuals.

3.9 Payables.i. Bank overdrafts and financing. Interest-bearing financing and bank overdrafts are recognized on the basisof the amounts collected, net of transaction costs, and subsequently valued at the amortized cost, using the effectiveinterest method.

ii. Trade payables and other payables. These are their face value.

3.10 Revenues recognition. Revenues are recognized on the profit and loss account when the significantrisks and benefits connected with ownership of the transferred assets are transferred to the buyer. In referenceto the principal types realized by the company, revenues are recognized on the basis of the following principles:a. Sales of goods - retail.The company operates in the retail channel through its DOS network. Revenues are

recognised when the goods are delivered to customers. Sales are usually collected in the form of cash orthrough credit cards;

b. Sales of goods - wholesale.The company distributes products on the wholesale market.These revenues arerecognised when the goods are shipped and considering the estimated effects of returns at the end of theyear;

c. Provision of services.This income is recognised in proportion to the percentage of completion for the serviceprovided on the reference date;

d. Royalties.These are recognised on the financial statements according to the principle of period allocation.

3.11 Financial income and expenses. These include all financial items recognized on the profit and lossaccount for the period, including interest expenses accrued on financial payables calculated by using the effectiveinterest method (mainly current account overdrafts, medium-long term financing), foreign exchange gains andlosses, gains and losses on derivative financial instruments (according to the previously defined accounting


principles), received dividends, the portion of interest expenses deriving from accounting treatment of assets heldunder finance leasing (IAS 17) and employee reserves (IAS 19).Interest income and expenses are recognized on the profit and loss account for the period in which they arerealized/incurred, with the exception of capitalized expenses.Dividend income contributes to the result for the period in which the company accrues the right to receive thepayment.

3.12 Income taxes. The income taxes for the period include determination both of current taxes and deferredtaxes.They are recognized entirely on the profit and loss account and included in the result for the period, unlessthey are generated by transactions recognized directly to shareholders’ equity during the current or anotherperiod. In this case, the relative deferred tax liabilities are also recognized under shareholders’ equity.Current taxes on taxable income for the period represent the tax burden determined by using the tax rates ineffect at the reference date, and any adjustments to the tax payables calculated during previous periods.Deferred tax liabilities refer to the temporary differences between the book values of assets and liabilities on thebalance and the associated values relevant for determination of taxable income.The tax liability of all temporarytaxable differences, with the exception of liabilities deriving from initial recognition of an asset or liability in atransaction other than a business combination that, at the time of the transaction, does not influence either theincome (loss) reported on the financial statements or taxable income (tax loss).Deferred tax assets that derive from temporary deductible differences are recognized on the financial statementsonly to the extent that it is likely taxable income will be realized for which the temporary deductible differencecan be used. No allocation is envisaged if the deferred tax asset derives from business combinations, or from theinitial posting of an asset or liability in a transaction other than a business combination that, at the time of thetransaction, does not influence either the income (loss) reported on the financial statements or taxable income(tax loss).The tax benefits resulting from tax losses are recognized on the financial statements of the period in which thebenefits accrued, if it is likely that taxable income will be realized and for which the tax loss can be used.The taxes in question (deferred tax assets and liabilities) are determined on the basis of a forecast of the assumedpercentage weight of the taxes on the income of the fiscal years in which the taxes will occur, taking into accountthe specific nature of taxability and deductibility.The effect of change in tax rates is recognized on the profit andloss account of the fiscal year in which this change takes place.

3.13 Provisions. These are certain or probable liabilities that have not been determined at the date theyoccurred and in the amount of the economic resources to be used for fulfilling the obligation, but which cannonetheless be reliably estimated.They are recognized on the balance sheet in the event of an existing obligationresulting from a past event, and it is likely that the company will be asked to satisfy the obligation.If the effect is significant, and the date of the presumed discharge of the obligation can be estimated with sufficientreliability, the provisions are recognized on the balance sheet by actualizing future financial flows.The provisions that can be reasonably expected to be discharged twelve months after the reference date areclassified on the financial statements under non-current liabilities. Instead, the provisions for which the use ofresources capable of generating economic benefits is expected to take place in less than twelve months after thereference date are recognized as current liabilities.

3.14 Share capital.i. Share capital. The total value of shares issued by the parent company is recognized entirely undershareholders’ equity, as they are the instruments representing its capital.

ii. Treasury stock. The consideration paid for buy-back of share capital (treasury stock), including theexpenses directly related to the transaction, is subtracted from shareholders’ equity. In particular, the par valueof the shares reduces the share capital, while the excess value is recognized as an adjustment to additional paid-in capital.




iii. Dividends. The allocation of dividends to persons possessing instruments representing share capital afterthe reference date of the financial statement is not recognized under financial liabilities on the same referencedate.

3.15 Statement of cash flows. The statement of cash flows is drafted using the indirect method.The netfinancial flows of operating activity are determined by adjusting the result for the period of the effects deriving fromchange to net operating working capital, non-monetary items, and all the other effects connected with investmentand financing activities.Cash at the beginning and end of the period represents the net-short-term financial position.

4. Dividends

In FY 2010, the Shareholders’ Meeting of the parent companyTOD’S S.p.A. approved payment of a total 153 millioneuros, broken down as follows:i) ordinary dividends to be charged against the net profit for FY 2009 (Shareholders’ Meeting of April 22nd 2010),totalling 45,914,101.50 euros, at the rate of 1.50 euros per share;ii) extraordinary dividends, to be charged to the extraordinary reserve (Shareholders’ Meeting of September 21st

2010), for 107,132,903.50 euros, at the rate of 3.50 euros per share;in favour of the owners of the 30,609,401 outstanding ordinary shares comprising the share capital, entitled toparticipate in profits on the coupon detachment date (May 24th 2010 and October 11th 2010, respectively).Regarding the net profit for FY 2010, totalling 82,974,255.62, the Board of Directors has proposed to distributea dividend for two euro per share, totalling 61,218,802.00 euros.The dividend is subject to approval by the annualShareholders’ Meeting, and was not included among the liabilities reported on this balance sheet.

5. Earnings per share

The calculation of base and diluted earnings per share is based on the following:

i. Reference profit

Euro 000’sFor continuing and discontinued operations Year 10 Year 09


Dilution effects - -


Euro 000’sFor continuing operations Year 10 Year 09

Net profit of the year 82,974 71,921

Income (loss) from discontinued operations - -

Profit used to determine basic earning per share 82,974 71,921Dilution effects - -


In both fiscal 2010 and 2009, there were no dilutions of net consolidated earnings, partly as a result of activitiesthat were discontinued during the periods in question.


ii. Reference number of shares

Year 10 Year 09

Weighted average number of shares to determine basic earning per share 30,609,401 30,609,401

Share options - -

Weighted average number of shares to determine diluted earning per share 30,609,401 30,609,401

iii. Base earnings per share. Calculation of the base earning per share for fiscal year 2010 is based on the netincome allocable to holders of ordinary shares of TOD’S S.p.A., totalling euro 82,974 thousand (71,921 thousandeuros in 2009), and on the average number of ordinary shares outstanding during the same period, totalling30,609,401 (unchanged respect to year 2009).

iv. Diluted earnings per share. Calculation of the diluted earnings per share for the period January-December2010 coincides with calculation of earnings per share, insofar as conclusion of the Stock Options Plan in year 2009.

6. Assets with indefinite useful life

These include 137,235 thousand euros for the value of Group owned brands and goodwill from businesscombinations for 13,241 thousand euros arisen before First Time Adoption of IAS/IFRS.The value of Brands isbroken down amongst the various brands owned by the Company (TOD’S, HOGAN and FAY):

Euro 000’s12.31.10 12.31.09

TOD’S brand 3,741 3,741

HOGAN brand 80,309 80,309

FAY brand 53,185 53,185

Total 137,235 137,235

The balance of assets with an indefinite useful life did not change from its value at December 31st 2009.

7. Other assets

The following table details the movements of these assets in the current and previous fiscal year:

Euro 000’s Other Othertrademarks Software assets Total

Balance as of 01.01.09 668 8,981 1,296 10,945

Increases 862 1,753 24 2,639

Decreases -

Impairment losses -

Other changes -

Amortization of the period (198) (2,492) (320) (3,010)

Balance as of 01.01.10 1,332 8,242 1,000 10,574

Increases 858 2,909 1,417 5,184

Decreases -

Impairment losses -

Other changes -

Amortization of the period (242) (2,895) (282) (3,419)

Balance as of 12.31.10 1,948 8,256 2,135 12,339



8. Tangible fixed assets

The following table illustrates the changes during the current and previous fiscal year.

Euro 000’s Land Plantand and Leasehold

buildings machin. Equip. improve Others Total

Balance as of 01.01.09 41,282 5,381 11,830 1,409 5,512 65,414

Increases 19 694 5,145 162 505 6,525

Decreases (200) 853 (15) (154) (1,222)

Impairment losses -

Other changes -

Depreciation of the period (1,231) (1,623) (5,131) (575) (1,503) (10,063)

Balance as of 01.01.10 40,070 4,252 10,991 981 4,360 60,654

Increases 9 712 6,281 108 1,308 8,418

Decreases (97) (360) (159) (616)

Impairment losses -

Other changes -

Depreciation of the period (1,234) (1,578) (5,437) (423) (1,372) (10,044)

Balance as of 12.31.10 38,845 3,289 11,475 666 4,137 58,412

9. Impairment losses

The recoverability of the residual value of assets with an indefinite and definite useful life, as of property, plant andequipment and Equity Investments in subsidiaries (“Assets”) was determined to ensure that assets with a valuehigher than the recoverable value were not recognised on the financial statements, which refers to their “value inuse.” The criterion used to determine “value in use” is based on the provisions of IAS 36, and is based on thecurrent value of expected future cash flows (discounted cash-flow analysis - DCF), which is presumed to derivefrom the continual use and disposal of an asset at the end of its useful life, discounted at an interest rate (net oftaxes) that reflects current market rates for borrowing money and the specific risk associated with the individualcash generating unit.The recoverability ofAssets was verified by comparing the net book value with the recoverable value (value in use).The value in use is represented by the discounted value of future cash flows that are expected from Assets andby the terminal value attributable to them.The discounted cash flow analysis was carried out by using the FY 2010 budget as its basis.That budget was preparedand approved by the Board of Directors on the assumption that the Company would be a going concern for theforeseeable future: the Board of Directors first assessed the methods and assumptions used in developing the model.In particular:i. The medium-term projection of budget figures for FY 2011 was carried out on a time horizon limited to theforeseeable future, using an average rate of sales growth of 5%, a constant EBITDA margin and a constant tax rateof 32%.These prudent assumptions represent trends that are lower than the historic (including recent) trend ofthe Group. Consequently, the budget projections comply with the prescriptions of IAS 36.ii. The terminal value of strategic assets (brands), was determined by using the same prudent growth rate usedto extrapolate budget data (5%) for future projections, as well as the rates of return on brands positioned at thelower end of the market for licenses.iii. To determine the “value in use,” aWACC,net of taxes, of 8.84% was used (theWACC rate used at December31st 2009 was 8.6%), determined by referring to the discounting rates used by a series of international analysts infinancial reports on the TOD’S Group.



The analyses carried out on the recoverability of Company assets (including 137.2 million euros represented byproprietary brands and 13.2 million by goodwill from business combinations) and equity investments in subsidiaries(worth 143.2 million euros at December 31st 2010) did not show any sign of impairment.The sensitivity analysis performed on the impairment test in accordance with IAS 36, in order to reveal the effectsproduced on the “value in use” by a reasonable change in the basic assumptions (WACC, growth rates, EBITDAmargin) and determination of the terminal value (perpetual annuity), did not reveal an appreciable impact ondetermination of the “value in use” and its coverage. Given the significant value assumed by the cover, it would benecessary to make unrealistic base assumptions to render the “value in use” equal to the book value of Groupassets (the break-even hypothesis).

10. Investment property

The residual value of investment property at December 31st 2010 was euro 46 thousand. It consisted exclusivelyof real estate leased to third parties.The fair value of these investments is estimated to be euro 250 thousand,according to the market prices for similar properties available for rent at similar conditions.

Euro 000’s

Historic cost 115

Accumulated depreciation (66)

Balance as of 01.01.10 49Increases (decrease) -

Amortization of the period (3)


11. Investments in subsidiaries, joint ventures, and associated companies

The value of equity investments owned by the Company at December 31st 2010 totalled 143,196 thousand euros.On November 26th 2010 (the closing date) the Group acquired 100% of the shares of Holpaf B.V., a Dutch companywith head office in Amsterdam.This deal is classifiable as a related party transaction, insofar as Holpaf B.V. wasindirectly controlled, through Goral Investment Holding B.V., by Diego DellaValle & C. SAPA, a company belongingto Diego and Andrea DellaValle, and controlled by Diego DellaValle (also see note 23).Holpaf B.V. owns a property (land and building) in the Shibuya district of Tokyo, on one of the most prestigiousand heavily trafficked streets of the quarter popularly known as Omotesando.TOD’S Japan K.K. has used thisbuilding on an exclusive basis since 2005, pursuant to a lease agreement made on February 22nd 2005 withHolpaf B.V.The building houses the administrative offices ofTOD’S Japan and also serves as the location for themost important TOD’S flagship store in Japan.The price for sale of the company shares was agreed in the totalamount of JPY 230 million, about euro 2.1 million at the exchange rate in effect on the closing date (JPY110.92/EUR 1).This figure was based on the value of the pro-forma net equity of Holpaf B.V. at September 30th

2010, while also considering the Japanese tax liability for the higher market value of the property as opposedto its cost recognised for tax purposes, and adjustment of the price according to the differences between thenet financial position of the acquired company at the closing date and the pro-forma net financial position atSeptember 30th 2010.At the same time it acquired the shares, the company recapitalised Holpaf B.V. for 22 million euros (share premium),to provide it with the financial resources necessary for full repayment of a shareholder loan of 20.6 million euros,granted by the previous owners prior to the acquisition, pursuant to the Sale & Purchase Agreement signed by theparties (TOD’S S.p.A. and Goral Investment Holding B.V.). For a complete analysis of the transaction, please seethe Disclosure drafted in compliance with the rules set out in the new Annex 3 of the Related Parties Regulationno. 17221/2010, which is also available on the corporate website www.todsgroup.com.



Finally, in order to assure a balanced financial structure for certain indirect subsidiaries in the Far East, the companycontributed 16.2 million euros to recapitalisation of the sub-holding TOD’S International B.V., consequentlyincreasing the value of the shareholding by this amount. Finally, the value of the shareholdings in the indirectsubsidiaries TOD’S Hong Kong Ltd and TOD’S Macao Lda increased by 121 thousand euros and 18 thousandeuros, respectively, following the capital increases carried out by these companies, for the 1% share owned directlyby TOD’S S.p.AThe impairment tests performed at the reporting date showed no impairment (also see note 9). Information aboutthe subsidiaries follows below:

Shareholders’ Net profit Book valueCompany Currency equity (loss) (Euro)

TOD’S Deutsch, GmbhDusseldorf - GermanyS.C - euro 153,387.56% direct held: 100% euro 10,340,840.89 1,596,178.86 3,153,387.56

TOD’S France SasParis - FranceS.C. - euro 780,000% direct held: 100% euro 11,885,732.88 2,197,022.09 5,707,622.45

An.Del, USA Inc, (*)

NewYork - U.S.A.S.C. - Usd 3,700,000% direct held: 100% usd 34,691,339.67 (80,221.43) 34,656,431.69

TOD’S Internat, BV (*)

Amsterdam - NetherlandsS.C. - euro 2,600,200% direct held: 100% euro 76,647,914.85 14,901,525.86 24,170,662.59

Del.Com S.r.l. (*)

S. Elpidio a Mare - ItalyS.C. - euro 31,200% direct held: 100% euro 80,005,331.49 8,416,077.65 51,107,501.41

TOD’S Hong Kong LtdHong KongS.C. - Usd 16,550,000% direct held: 1% hkd 447,986,898.33 101,345,198.23 129,046.56

Holpaf BVAmsterdam - NetherlandsS.C. - euro 5,000,000% direct held: 100% jpy 3,040,015,876 (294,163,434) 24,083,377.88

Un.Del KftTata - HungaryS.C. - Huf 42,900,000% direct held: 10% huf 138,862,448.00 59,618,685.00 18,054.44

TOD’S Macao LdaMacaoS.C. - Mop 20,000,000% direct held: 1% mop 15,933,272.21 2,770,880.86 18,551.07

(*)The figures for the companies that are directly controlled through sub holdings are reported on the Consolidated Financial Statement ofTOD’S S.p.A.



12. Inventories

Euro 000’s12.31.10 12.31.09 Change

Raw materials 51,298 47,812 3,486

Semi-finished goods 5,543 6,143 (600)

Finished products 92,551 91,997 554

Advances 1 21 (20)

Write-downs (11,400) (8,465) (2,935)

Total 137,993 137,508 485

The recognised allowance for inventory write-downs reasonably reflects the technical and stylistic obsolescenceof Group inventories at December 31st 2010. Of the amount of allowances existing at December 31st 2009, 1.9million euros were used during FY 2010.The amount accrued during FY 2010 totalled 4.8 million euros.

13. Other current assets

13.1 Trade receivables.

Euro 000’s12.31.10 12.31.09 Change

Third parties 108,608 102,358 6,250

Group’s entities 59,962 68,319 (8,357)

Impairment loss (3,110) (3,225) 115

Net trade receivables 165,460 167,452 (1,992)

Receivables from third parties. These represent the credit exposure stemming from sales made through thewholesale channel.

Receivables from subsidiaries. They include the Company’s receivables from Group entities and stem primarilyfrom commercial transactions and, to a lesser extent, provision of services.

Allowances for bad debts.The amount of the adjustment to the face value of the receivables represents the bestestimate of the impairment loss determined against the specific and generic risk of inability to collect identified inthe receivables recognised on the balance sheet.The changes in the allowances for bad debts are illustrated asfollows:

Euro 000’s12.31.10 12.31.09

Balance as of 01.01.10 3,225 2,693Increase 350 600

Decrease (465) (68)

Balance as of 12.31.10 3,110 3,225

13.2 Tax receivables. Totalling 8,442 thousand euros (FY 2009: 6,836 thousand euros), they are largelyrepresented by 3.5 million euros in receivables from the Italian subsidiaries that participated in the tax consolidationprogramme (see Note 27) andVAT receivables for 4.5 million euros.



13.3 Other.

Euro 000’s12.31.10 12.31.09 Change

Prepaid expenses 1,836 592 1,244

Financial assets (Note 14) 4,146 6,038 (1,892)

Other 1,425 1,071 354

Total 7,407 7,701 (294)

14. Financial assets

Financial assets are comprised exclusively by loans granted to the Group’s companies:

Euro 000’s12.31.10 12.31.09 Change

Current account overdraft 925 3,410 (2,485)

Financing within 12 month 3,221 2,628 593

Total current assets 4,146 6,038 (1,892)Financing beyond 12 months -

Total financial assets 4,146 6,038 (1,892)

The amount of 3,221 thousand euros refers a loan denominated in JPY granted to the subsidiaryTOD’S Japan KK.Repayment of the last instalment is scheduled for 2011.The balance at December 31st 2010 is denominated in thefollowing currencies:

Euro 000’sEuro Jpy Total

Current account overdraft 925 925

Financing 3,221 3,221

Total 925 3,321 4,146

15. Shareholders’ equity

15.1 Share Capital. At December 31st 2010, the company share capital totalled 61,218,802 euros, and wasdivided into 30,609,401 shares having a par value of 2 euros each, fully subscribed and paid in. All shares have equalvoting rights at the general meeting and participation in profits.

15.2 Capital reserves. The following schedule illustrates the changes in fiscal 2010:



Balance as of 01.01.09 208,763 5,140 213,903

Share based payments 309 309

Options exercised 5,212 (805) 4,407

Other (4,644) (4,644)

Balance as of 01.01.10 213,975 - 213,975

to be continued



continuing



Share based payments

Options exercised

Other

Balance as of 12.31.10 213,975 - 213,975

15.3 Hedging reserve. The derivatives resulting from forward currency contracts (see Note 17) used to hedgeexpected transactions (i.e. cash flow hedges) were recognised in the reserve for derivative financial instruments.

Euro 000’sHedging reserve

Balance as of 01.01.09 (798)

Change in fair value of hedging derivates 529

Transfer to Profit and Loss Account of hedging derivates 290

Other -


Change in fair value of hedging derivates (2,003)

Transfer to Profit and Loss Account of hedging derivates 2,056

Other -


15.4 Earning reserves. The following schedule illustrates the changes in fiscal 2010:

Euro 000’sRetained Profit (loss)earnings of the period Total

Balance as of 01.01.09 239,511 69,845 309,356

Allocation of 2008 result 31,583 (31,583) -

Dividends (38,262) (38,262)


Other changes 4,644 4,644

Balance as of 01.01.10 275,738 71,921 347,659

Allocation of 2009 result 26,007 (26,007) -

Extraordinary dividends (107,133) (45,914) (153,047)


Other changes - - -

Balance as of 12.31.10 194,612 82,974 277,586

The profits reserve was drawn down by 107.1 million euros, being used to pay out the previously mentionedextraordinary dividend.



15.5 Information on distributable reserves. The following table provides information on the possible useand distribution of each specific account under shareholders’ equity and their possible use during the past threeyears:

In euro 000’s Possibility Available Uses in the preceding 3 yearsDescription of use amount Coverage of losses Others

Capital reservesShare capital --- --- - -

Share premium A,B,C (1) 213,975 - -

Stock options reserve -

Hedging reserveHedging reserve -

Retained earningsLegal B 12,244 - -

Extraordinary A,B,C 182,369 - 107,133

(1) Pursuant to section 2431 Italian Civil Code, the entire amount of the reserve may be distributed only when the legal reserve has reached the limits

set forth in Section 2430 Italian Civil Code

A - for capital increase

B - for coverage of losses

C - for distribution to shareholders

16. Bank overdraft and financing

Euro 000’s12.31.10 12.31.09 Change

Current account overdraft - - -

Financing 6,819 8,340 (1,521)

Total 6,819 8,340 (1,521)

The entire exposure to the bank system is comprised a long-term mortgage loan (see Note 21) denominated ineuro.The portion payable after twelve months totals 5,227 thousand euros.The loan amortisation schedule is asfollows:

Euro 000’s12.31.10 12.31.09

2010 1,521

2011 1,592 1,592

2012 1,665 1,665

2013 1,741 1,741

2014 1,821 1,821

Total 6,819 8,340

The loan is recognised at cost, a value that approximates its fair value, since the difference between the nominaland effective interest rates for the transaction are insignificant.



17. Derivative financial instruments

Given the Company’s major presence on international markets, it is exposed to exchange rate risk, principally forrevenues denominated in currencies other than the euro (see Note 18).The principal currencies that pose thisrisk are the U.S. dollar,Hong Kong dollar, Swiss franc, and British pound. In order to realise the objectives envisagedin the risk management policy, derivative contracts were made for every single foreign currency to hedge a specificpercentage of revenue (and cost) volumes expected in the individual currencies other than the functional currency.At each reporting date, the hedge accounting method is applied.This requires recognition of the derivatives inequity at their fair value and recognition of the changes in fair value, which varies according to the type of hedgeat the valuation date. At the closing date, the notional amount of the currency futures sales agreements aresummarized as follows:

Currency/000 Sale PurchaseNotional Notional Notional Notionalcurrency Euro currency Euro

US dollar 24,000 17,961 - -

Hong Kong dollar 407,000 48,818 - -

JapaneseYen 350,000 3,221 - -

British pound 6,150 7,145 - -

Swiss Franc 5,800 4,639 - -

Canadian dollar 1,780 1,636 - -

Total 73,491 -

At the same date, the net fair value of foreign currency hedges was 1,397 thousand euros, including assets for 1,992thousand euros (FY 2009: 356 thousand euros) and liabilities for 595 thousand euros (FY 2009: 353 thousandeuros).The net fair value of foreign currency hedges that were earmarked for cash flow hedges was 118 thousandeuros (asset) at December 31st 2010.Against the contracts for these last hedges, which were closed between January and December 2010, 2,056thousand euros in hedge derivatives were transferred to the profit and loss account, recognised as a reduction inrevenues.

18. Hedging of financial risks

The company has implemented a system for monitoring its financial risks in accordance with the guidelines set outin the Corporate Governance Code of Listed Companies.As part of this policy, the financial risks connected withits operations are constantly monitored in order to assess their potential negative impact and undertakeappropriate action to mitigate them. These risks are analysed as follows, highlighting the company’s level ofexposure. It also includes a sensitivity analysis designed to quantify the potential impact of hypothetical fluctuationsin benchmark parameters on final results.

i. Credit riskCredit risk represents the exposure to potential losses stemming from failure to discharge obligations towardstrading counterparties. The company generates its revenues through three main channels: Group companies(directly operated store network), franchisees and customers (multi-brand).There is practically no credit risk onreceivables from the Company, since almost all the entities belonging to the TOD’S Group are wholly owned bythe Group.The receivables from independent customers (franchisee e wholesale), are subject to a hedging policydesigned to streamline credit management and reduce the associated risk. In particular, company policy does notenvisage granting credit to customers,while the creditworthiness of all customers, both long-standing and potentialones, is periodically analysed in order to monitor and prevent possible solvency crises.



The following table shows the ageing of trade receivables to third parties (and thus excluding intercompanypositions) outstanding at December 31st 2010:

Euro 000’s ExpiredCurrent 0>60 60>120 Over Total

Third parties 74,780 23,625 6,816 3,388 108,609

The prudent estimate of losses on the entire credit mass existing at December 31st 2010 was 3.1 million euros.

ii. Liquidity riskLiquidity risk is the risk that the company will not dispose of the funds necessary to meet its short-termcommitments and financial requirements.The principal factors that determine the company’s degree of liquidityare the resources generated or used by operating and investment activities and, on the other hand, the due datesor renewal dates of its payables or the liquidity of its financial investments and market conditions.In the specific case, the company faces no liquidity risk due to its profitability, current and historic capacity togenerate cash, and its limited exposure to the banking system.At December 31st 2010 the company’s cash and cash equivalents totalled 63.7 million euros; its debt exposure was6.8 million euros, and was represented by a medium-long term loan (see Note 16).The Company’s policy forfinancial assets is to keep all of its available liquidity invested in demand bank deposits without recourse to financialinstruments, even on the money market, and dividing the deposits amongst a reasonable number of bankcounterparties, prudently selecting them according to the return on deposits and their solidity.

iii. Market riskIFRS 7 includes in this category all risks that are directly or indirectly connected with the fluctuation in prices onphysical and financial markets to which the company is exposed:– exchange rate risk;– interest rate risk;– commodity risk, connected with the volatility of prices for the raw materials used in the production process.The company is exposed to exchange rate and interest rate risk, since there is no physical market subject to actualfluctuations in the purchase prices for raw materials used in the production process.The following paragraphs analyse the individual risks, using sensitivity analysis as necessary to highlight the potentialrisk on final results stemming from hypothetical fluctuations in benchmark parameters.As envisaged by IFRS 7, theseanalyses are based on simplified scenarios applied to the final results for the periods referred to. By their verynature, they cannot be considered indicators of the actual effects of future changes in benchmark parameters ofa different asset and liability structure and financial position different market conditions, nor can they reflect theinterelations and complexity of the reference markets.

Exchange rate risk. Due to its commercial operations, the company is exposed to fluctuations in the exchangerates for currencies in which some of its commercial transactions are denominated (particularly USD, GBP, CHFand those of certain countries in the Far East), against a cost structure that is concentrated principally in theeurozone.The company realises greater revenues than costs in all these currencies; therefore, changes in theexchange rate between the euro and the aforementioned currencies can impact the company’s results.With the exception of the foregoing, the company is not particularly exposed to foreign exchange risk.The residualcomponent of this risk is connected principally with “translation risk”.This risk stems from the fact that the assetsand liabilities of consolidated companies whose functional currency is different from the euro can have differentcountervalues in euros according to changes in foreign exchange rates.The measured amount of this risk isrecognised in the “translation reserve” in equity.The company monitors the changes in the exposure. No hedges of this risk existed at the reporting date.Governance of individual foreign currency operations by Group subsidiaries is highly simplified by the fact that theyare wholly owned by the parent company.



The company’s risk management policy aims to ensure that the average countervalue in euros of receipts onwholesale transactions denominated in foreign currencies for each collection (Spring/Summer and Fall/Winter) isequal to or greater than what would be obtained by applying the pre-set target exchange rates.The companypursues these aims by entering into forward contracts for each individual currency to hedge a specific percentageof the expected revenue (and cost) volumes in the individual currencies other than the functional currency.Thesepositions are not hedged for speculative or trading purposes, consistently with the strategic policies adopted forprudent management of cash flows.Consequently, the company might forego opportunities to realise certain gains,but it avoids running the risks of speculation.The company defines its exchange risk a priori according to the reference period budget for the reference periodand then gradually hedges this risk upon acquisition of orders, in the amount according to which they correspondto budget forecasts.The process of hedging exchange rate risk is broken down into a series of activities that canbe grouped into the following distinct phases:• definition of operating limits;• identification and quantification of exposure;• implementation of hedges;• monitoring of positions and alert procedures.The breakdown of forward currency contracts (for sale and purchase) outstanding at December 31st 2010 isillustrated in Note 17.The assets and liabilities that are denominated in foreign currency are identified as part of the sensitivity analysisof exchange rates. In order to determine the potential impact on final results, the potential effects of fluctuationsin the cross rates for the euro and major non-EU currencies have been analysed.The following table illustrates thesensitivity to reasonably likely changes in exchange rates on pre-tax profit (due to changes in the value of currentassets and liabilities denominated in foreign currency) while holding all other variables constant:

Euro Impact on pre-tax profit Impact on pre-tax profit5% writedown of the foreign currency 5% revaluation of the foreign currency

Currency Country FY 2010 FY 2009 FY 2010 FY 2009

CAD Canada (7,012.2) (2,241.7) 7,750.3 2,477.7

CHF Switzerland (883.2) (21,377.8) 976.1 23,628.1

GBP UK 24,657.3 19,040.3 (27,252.8) (21,044.6)

HKD Hong Kong 55,077.4 16,319.6 (60,875.0) (18,037.5)

JPY Japan (1,784.4) (11,217.9) 1,972.2 12,398.8

KRW South Korea (10.0) (7.7) 11.1 8.5

RMB China (33.0) (2.7) 36.5 2.9

SGD Singapore (17,491.4) (11,562.1) 19,332.6 12,779.2

USD USA 72,878.5 49,311.4 (80,550.0) (54,502.1)

Other n.a. 1,278.9 (2,094.3) (1,413.5) 2,314.7

Total 126,678.0 36,167.2 (140,012.5) (39,974.2)

Euro 000’s Revaluation/Writedown Impact on Impact onforeign currency pre-tax profit Shareholders’ equity

5% (140.0) (2,548.2)FY 2010

-5% 126.7 1,314.1

The analysis did not include assets, liabilities and future commercial flows that were not hedged, since fluctuationsin exchange rates impact income in an amount equal to what is recognised in the fair value of adopted hedgeinstruments.




Interest rate risk. The company’s exposure to changes in interest rates is limited to an adjustable rate loandenominated in euros. Interest rate risk is hedged consistently with consolidated practice, which is designed toreduce the risks of interest rate volatility by simultaneously pursuing the aim of minimising associated financialexpenses. Considering the insignificant amounts involved (Note 16), there were no current interest rate hedgescurrent at December 31st 2010.The sensitivity analysis carried out on interest rates has shown that a hypotheticallyunfavourable change of 10% in short-term interest rates applicable to the adjustable rate financial liabilities existingat December 31st 2010 would have a net pre-tax impact of about 10 thousand euros in additional expenses (FY2009: 26 thousand euros).

iv. Categories of measurement at fair valueIn accordance with IFRS 7, the financial instruments carried at fair value have been classified according to a hierarchyof levels that reflects the materiality of the inputs used to estimate their fair value.The following levels have beendefined:Level 1 – quoted prices obtained on an active market for the measured assets or liabilities;Level 2 – inputs other than the quoted prices indicated hereinabove,which are observable either directly (prices)or indirectly (derived from prices) on the market;Level 3 – inputs that are not based on observable market data.The fair value of derivative financial instruments existing at December 31st 2010 (Note 17) has been classified asLevel 2.

19. Deferred tax assets and liabilities

At the reporting date, recognition of the effects of deferred tax assets, determined on the basis of temporarydifferences between the pre-tax result on the financial statements and taxable income, shows a net balance (liability)of 16,941 thousand euros (FY 2009: liability for 18,547 thousand euros):

Euro 000’s12.31.10 12.31.09 Change

Deferred tax assets 7,251 3,119 4,132

Deferred tax liabilities (24,192) (21,666) (2,526)

Total (16,941) (18,547) 1,606

When determining future tax impact (IAS 12), reference was made to the presumed percentage weight of the taxesthat will be imposed on income in the years when those taxes will be charged.The balance of deferred tax assetsand liabilities at December 31st 2010 is shown in the following table, highlighting those components that contributedto their formation:

Euro 000’s 12.31.10 12.31.09Assets Liabilities Assets Liabilities

Amortization, depr. and write-downs 82 (19,855) 48 (17,057)

Provisions 314 (544) 171 (544)

Property, plants and equipment (leasing) (3,746) (3,997)

Costs deductible over several years 1,029 210

Partially deductible costs

Inventory (write-downs) 5,789 2,673

Derivative financial instruments 20 6

Other 17 (47) 11 (68)

Total 7,251 (24,192) 3,119 (21,666)




Tax suspension reserves.The following information is provided on reserves in shareholders’ equity that, ifdistributed, will constitute taxable income for the company, in connection with the situation following the capitaltransactions carried out pursuant to the August 5th 2000 resolution of the extraordinary Shareholders’ Meeting:a. for the reserves in equity, only the extraordinary reserve remains; formed with income that was regularly

subjected to taxation, it would not constitute taxable income for the company were it to be distributed;b. previously defined reserves have been converted into the form of share capital, as follows:

Euro

Reserve for adjustments art. 15 paragraph 10 DL 429/82 149,256.04

Reserve for greater deduction of VAT 508.19

Reserve for inflation adjustments pursuant to Law n. 72/’83 81,837.76

Reserve for deduction art. 14 c. 3 - Law n. 64/’86 5,783.80

for a total of euro 237,385.80, which, if distributed, would represent taxable income for the company.

20. Other current liabilities

20.1 Trade payables

Euro 000’s12.31.10 12.31.09 Change

Third parties 118,936 95,086 23,850

Subsidiaries 6,115 3,963 2,152

Total 125,051 99,049 26,002

ToThird parties.These stem exclusively from commercial transactions as part of ordinary processes for purchaseof goods and services.

To subsidiaries. These represent payables to Group entities, principally for provision of services.

20.2 Tax payable.

Totalling 14,788 thousand euros (FY 2009: 3,326 thousand euros), mainly include, for 11,330 thousand euros, theIRES (corporate income tax) and IRAP (regional tax on production activity) payables resulting from calculation ofthe tax liability for the financial year, net of prepayments and credits that may be offset upon payment (taxwithholding charged to the company). The balance also includes 3,454 thousand euros in payables for taxwithholding on compensation paid to employees and independent contractors.

20.3 Other.

Euro 000’s12.31.10 12.31.09 Change

Payable to employees 5,060 3,087 1,973

Social security institutions 3,775 3,489 286

Others 15,664 6,068 9,596

Total 24,499 12,644 11,855

Payables to employees reflected amounts accrued in their favour (including unused holiday leave) that had not yetbeen paid at the reporting date. Other liabilities is comprised principally of the variable portion of Directors’compensation, totalling 3.5 million euros (note 23) and the estimate of returns at the end of the financial year.

21. Provisions and potential liabilities and assets

21.1 Provisions. They include euro 1,200 thousand (euro 665 thousand in 2009) as the prudent estimate ofliabilities that the Group might incur if it loses a series of pending lawsuits.Accruals for the year are equal to 577thousand euros, of which 42 thousand euros for use of the provisions existing at December 31st 2009.

21.2 Potential liabilities and other commitmentsGuarantees granted to others. A total of euro 57,348 thousand in suretyships had been granted to others atDecember 31st 2010 (euro 46,752 thousand in 2009) to secure the contractual commitments of subsidiaries.Theamount of 55,053 thousand euros is comprised by bank credit lines provided to the subsidiaries, for which thecompany acts as guarantor (FY 2009: 44,827 thousand euros).

Guarantees received from others. The guarantees received from banks to cover their own contractualcommitments totalled euro 7,171 thousand (euro 6,571 thousand in 2009).

Mortgages. A first mortgage on a owned building (production plant in Sant’Elpidio a Mare) for euro 30 millionwas granted to the lender for a loan received by the company (see Note 16).This mortgage secures the lentcapital and all expenses deriving from the agreement.

Other guarantees. Following the acquisition of Holpaf B.V. (note 11), TOD’S S.p.A. became guarantor (bytaking over from the previous guarantor for the contractual obligations assumed by Holpaf B.V.) in favour ofthe banks that subscribed the two non-convertible, amortised and fixed-rate bond loans (Intesa San Paolo andSociété Européenne de Banque), issued in 2006 by the subsidiary Holpaf B.V. to refinance the debt assumedto purchase the land and construction of the building in Omotesando,Tokyo. In detail, these covenants concern:a) Property Purchase Option: a put option granted to Intesa San Paolo on the Omotesando property, which may beexercised only if Holpaf B.V. defaults during the term of the bonds and the creditor demands payment of themortgage. In this scenario,TOD’S S.p.A. must purchase the property at a specific price that varies over the termof the option (decreasing price, equal to the amount of the residual debt of the two bonds not repaid by HolpafB.V. at the time of default).b) Earthquake Indemnity Letter;TOD’S S.p.A. has undertaken to hold harmless the rights to repayment of the bondsheld by Intesa San Paolo and Société Européenne de Banque even in the event of damage or destruction of theproperty in an earthquake;c) All Risks Indemnity Letter;TOD’S S.p.A. has undertaken to hold harmless the rights to repayment of the bondsheld by Intesa San Paolo and Société Européenne de Banque even in the event of damage or destruction of theproperty due to any event.At December 31st 2010, the residual face value of the principal for the two bonds amounted to JPY 4,238 million.

21.3 Derivative financial instruments. For a detailed analysis of derivative financial instruments, used for thecoverage of transaction in foreign currency, please see Note 17. All derivative contracts made with leading financialinstitutions will expire in 2011.



21.4 Operating lease agreements. The operating leases entered into by the Company are for use ofproperties used to conduct its operating activities (offices, production plants).The amount of lease instalmentspayable after the reporting date pursuant to these agreements is as follows:

(Euro millions)2010 2009

2010 4.1

2011 4.3 3.1

2012 3.7 2.8

2013 2.6 1.6

2014 2.4 1.4

2015 2.3

Over 5 years 2.0 0.8

Total 17.3 13.8

The operating lease instalments allocable to fiscal 2010 totalled 4.7 million euros (Fiscal 2009 4.8 millionseuros).

22. Reserves for employees

Following changes in the law, beginning January 1st 2007 all amounts for employee severance indemnities (“TFR,”a deferred benefits plan in favour of company employees) accrued after that date are covered by the rules applicableto defined contribution plans.These no longer require actuarial calculation and discounting processes, since all ofthe business’s obligations to employees have ceased (1).The following table illustrates the changes in liabilities duringyear 2010:

(Euro millions)Year 10 Year 09

Initial Balance 8,158 8,381Financial expenses 321 379

Benefits paid (507) (602)

Final Balance 7,972 8,158

23. Transactions with related parties

In implementation of the Related PartyTransactions Regulation adopted by CONSOB with Resolution no. 17221of March 12th 2010, as amended by Resolution no. 17389 of June 23rd 2010, theTOD’S Group modified its existingprocedures governing the transparency and substantive fairness of related party transactions, to bring them in linewith the principles set out in the cited CONSOB Regulation. (The complete text of the“Related PartyTransactionsProcedure of TOD’S S.p.A.” can be found at www.todsgroup.com).The new related parties procedure was approved – after receiving the favourable opinion of independent directors– by the Board of Directors of the parent company on November 11th 2010 and came into force on January 1st

2011. However, in accordance with its own tradition of applying best practices on the market, before the newregulation issued by CONSOB came into force, the Group always subjected significant related party transactionsto detailed investigation and, inter alia, the a priori favourable opinion of the Internal Control and Corporate



(1)The statutory amendment envisaged that for firms with more than 50 employees, the employee severance indemnities accrued from January 1st 2007had to be allocated to supplemental retirement plans (pension funds) or, alternatively, to aTreasury Fund set up at the Istituto Nazionale di PrevidenzaSociale (Italian National Social Security Institute).

Governance Committee (the committee that performed the relevant functions before the new regulation cameinto force).Consequently, significant related party transactions were previously subjected, and shall continue to be subjectedin future, to a detailed investigation involving, inter alia: (i) a complete, prompt transmission of material informationto the delegated Board of Directors committees (the Internal Control and Corporate Governance Committeeand – beginning January 1st 2011 – the Independent Directors Committee, each within the ambit of their delegatedresponsibilities, where the majority or all members of these committees are independent directors), who in theperformance of their functions also avail themselves of the assistance of independent experts; (ii) the issuance ofan opinion (either binding or non-binding, as applicable) before approval of the transaction by the Board ofDirectors (or, if appropriate, by the body delegated to resolve on the transaction).Without prejudice to theprinciples of procedural fairness cited hereinabove, no unusual related party transactions, or other related partytransactions that might compromise corporate assets or the completeness and fairness of Group accounting andother information were executed during the financial year.All transactions – which are connected with the normal operations ofTOD’S Group companies – were executedsolely on behalf of the Group by applying contractual conditions consistent with those that can theoretically beobtained on an arm’s length basis.

Most significant transactions concluded during the periodAs previously described in note 11,TOD’S S.p.A. acquired the entire share capital of HOLPAF B.V. from GoralInvestment Holding B.V., a Dutch company fully owned by Diego Della Valle & C. SAPA (a company owned byDiego and Andrea Della Valle, and controlled by Diego Della Valle) on November 25th 2010, after approval bythe Board of Directors of TOD’S S.p.A., and after issuance of a favourable opinion by the Internal Control andCorporate Governance Committee (already in line with the CONSOB regulation that would enter into forceon January 1st 2011, as previously mentioned). Through acquisition of the shareholding, the TOD’S Groupacquired ownership of the Omotesando building (the company’s sole asset).This building has been used entirelyby the Group since 2005 under a lease agreement made on February 22nd 2005 byTod’s Japan K.K. with HOLPAFB.V., as the seat for administrative offices and location for the most important flagship store of theTOD’S Groupin Japan.The total price paid for acquisition of 100% of the shares of HOLPAF B.V.was JPY 230 million (equal to 2.1 millioneuros), considering the value of the pro-forma equity of the target company at September 30th 2010, the Japanesetax liability for the higher market value of the property as compared with its recognised tax cost, and theadjustment for differences between the net financial position of the acquired company at the closing date and itspro-forma net financial position at September 30th 2010.Pursuant to the agreement, the Group also fully repaid Goral Investment Holding B.V. for the shareholder loanpreviously made to HOLPAF B.V., in the amount of 20.6 million euros (principal and interest accrued at the sharetransfer date).For complete information about the transaction, please see the Disclosure drafted in compliance with the rulesset out in the new Annex 3 of the Related Parties Regulation no. 17221/2010, which is also available on thecorporate website www.todsgroup.com.

Developments of related party transactions pending at December 31st 2009In continuation of contractual relationships already existing in 2009, the TOD’S Group continued to maintain aseries of contractual relationship with related parties (directors/controlling or significant shareholders) in 2010.The principal object of the transactions was the sale of products, lease of sales spaces, show rooms and offices,use of the ROGERVIVIER brand license and the provision of advertising services.



i. Commercial transactions with related parties - Revenues

Euro 000’sSales of Rendering Sales Operating Other

products of services of assets Royalties leases operations

Year 2010Parent company (*) 1,931 9,845 1,716

Board Directors

Executives with strat resp.


Total 1,931 9,845 - 1,716 - -

Year 2009Parent company (*) 1,305 7,984 635 22

Board Directors



Total 1,305 7,984 - 635 - 22

ii. Commercial transactions with related parties - Costs

Euro 000’sPurchases Rendering Purchases Operating Other

of products of services of assets Royalties leases operations

Year 2010Parent company (*) 1,598 87 1,884 2,909

Board Directors 3,162 612



Total 1,598 3,249 1,884 3,520

Year 2009Parent company (*) 848 1,125 2,722

Board Directors 3,474



Total 848 3,474 - 1,125 2,722 -

iii. Commercial transactions with related parties - Receivables and payables


Parent company (*) 7,282 1,499 7,033 688

Board Directors 1,365 1 1,406



Total 7,282 2,864 7,034 2,094

(*) Companies directly or indirectly controlled by Chairman of the Board of Directors Diego DellaValle.



Compensation of Directors, Statutory Auditors, and General Managers.The following table illustrates the compensation accrued in fiscal 2010 by each of the Directors, StatutoryAuditors,Executives with strategic responsibilities of TOD’S S.p.A. (including for the activities that they performed atsubsidiaries) for any reason and in any form:

Euro 000’s Compensat. Non BonusCompensat. for part. cash and other Compens. Other

For office in Commit. benefits incentives as emplo. compens.

DirectorsDiego DellaValle (*) 925.7 6.7 2,100.0

Andrea DellaValle (**) 625.7 6.7 1,400.0

Luigi Abete 24.7 5.7

Maurizio Boscarato 25.7 7.5 (2) 148.2

Luigi Cambri 25.7 12.9 (4) 6.2

Luca C. di Montezemolo 24.8 0.2

Emanuele DellaValle 24.5

Fabrizio DellaValle (****) 225.2 6.7

Emilio Macellari (****) 225.7 6.7 (2) 480.0

Pierfrancesco Saviotti 25.0 12.4

Stefano Sincini (***) 309.7 6.7 (1) 111.0

VitoVarvaro 25.7 6.7

Total 2,488.1 78.9 3,500.0 745.4

Statutory auditorsEnrico Colombo (*****) 90.0 (3) (4) 33.2

Gian Mario Perugini 60.0 (3) 11.3

Fabrizio Redaelli 60.0

Total 210.0 44.5

Executives with strategic responsibilities 2.5 423.1 606.3

Legend

(*) Chairman of Board of Directors (1) Director of subsidiary(**) Vice Chairman of Board of Directors (2) Consultant of TOD’S S.p.A.(***) Member of Executive Committee (3) Statutory Auditor of subsidiary(****) Chairman of the Statutory Board (4) Member of the Compliance Program Supervisory Body

Directors and Key Executives do not receive severance indemnities.



Intercompany transactions.TOD’S S.p.A. has commercial and financial relationships with the companies in which it directly or indirectly ownsa controlling equity interest.The transactions executed with them substantially involve the exchange of goods,provision of services and the provision of financial resources.They involve ordinary operations and are settled onan arm’s length basis.The following table shows the country breakdown of the value of commercial relationshipswith subsidiaries in 2010:

Euro 000’s 12.31.10 12.31.09Revenues/ Revenues/

N° Companies Receivables Payable (cost) net Receivables Payable (cost) net

Italy 4 23,736 (474) 66,784 24,646 (528) 53,817

Albania 1 26 (109) (760) 566 (49) (59)

France 1 4,234 (1,036) 10,185 6,727 (717) 7,379

Germany 1 3,498 (476) 6,562 1,525 (329) 2,248

Great Britain 2 2,796 (438) 7,819 2,246 (327) 5,631

Luxembourg 1 150 - 621 96 - 619

Netherlands 2 375 - 1,033 339 - 1,040

Switzerland 1 1,819 (4) 6,779 1,489 (2) 5,567

Spain 1 246 1,387 273 1,004

Hungary 1 602 (611) (1,158) 419 (374) (685)

Belgium 1 119 - 1,507 300 - 972

Usa 10 8,578 (1,348) 14,876 7,439 (882) 12,249

Japan 1 180 (140) 255 2,748 (106) 360

Hong Kong 1 17,040 (1,682) 54,594 25,988 (676) 31,290

Singapore 1 18 (3) 78 12 - 79

Korea 1 12 - 90 18 - 101

Macao 1 3 - 16 58 - 13

China 1 124 - 338 121 - 148

Indian 1 109 (7) 22 82 (6) 27

Total 34 63,664 (6,327) 171,028 75,092 (3,996) 121,799

The receivables and payables recognised by the Italian companies include the receivables and payables resulting fromthe tax consolidation programme, totalling 3,702 thousand euros and 212 thousand euros, respectively.Following below are the details of the financial and capital transactions executed in 2010:

Year 2010 FinancingEuro 000’s Capitalizations 12.31.10 12.31.09

TOD’S International B.V. 16,200

TOD’S Hong Kong Ltd 121

TOD’S Macao Ltd 18

TOD’S Japan KK 3,221 2,628

TOD’S France Sas 700 3,200

ALBAN. DEL. Sh.p.k. 225 210

Holpaf B.V. 22,000

Total 38,339 4,146 6,038



24. Personnel costs

The personnel costs incurred by the Group in FY 2010 as compared with those for FY 2009 are illustrated asfollows:

Euro 000’s % on revenuesYear 10 Year 09 Change 2010 2009

Wages and salaries 45,384 42,727 2,657 7.9 8.1

Social security contribution 14,001 13,225 776 2.4 2.5

Employee sev. Indem. 2,839 2,771 68 0.5 0.5

Total 62,224 58,723 3,501 10.8 11.2

The following table illustrates the breakdown of the Group’s employees by category:

12.31.10 12.31.09 Aver. 10 Aver. 09

Executives 44 43 44 42

White-collar employees 635 601 632 632

Blue-collar employees 746 727 734 740

Total 1,425 1,371 1,410 1,414

25. Financial income and expenses

The breakdown of financial income and expenses in fiscal 2010 is as follows:


IncomeInterest income on current account 1,560 941 619

Foreign exchange gains 9,468 9,061 407

Other 394 1,021 (627)

Total income 11,422 11,023 399

ExpensesInterest on medium-long term financing (100) (258) 158

Foreign exchange losses (8,925) (9,631) 706

Other (710) (797) 87

Total expenses (9,735) (10,686) 951Total net income and expenses 1,687 337 1,350

26. Income from equity investments

Just as in the previous financial year, the Company did not receive dividends from its subsidiaries.



27. Income taxes

The tax liability for fiscal 2010 (current and deferred) was 42.9 million euros, giving a tax rate of 34.1% (FY 2009:32.7%). Income taxes for the period are broken down into current and deferred taxes, as follows:


Current taxes 44,474 32,723 11,750

Deferred taxes (1,607) 2,212 (3,819)

Total 42,867 34,935 7,931

The theoretical tax rate for FY 2010 (the impact of theoretical taxes on pre-tax profit) was 33.6%, determined byapplying the applicable tax rates for IRES (corporate income tax) and IRAP (regional tax on production activity)to the respective taxable bases as documented by the annual report at December 31st 2010.The following schedulereconciles theoretical taxes, calculated by using the theoretical tax rate of the parent company, and the taxesactually charged to income:

Euro 000’sTaxes Rate %

Theoretical income taxes 42,250 33.6%Tax effect of non-deductible of partially deductible costs 1,385 1.1%

Non-deductible taxes 40 0.0%

Non taxable income (252) (0.2%)

Other (441) (0.3%)

Previous year taxes (116) (0.1%)

Effective income taxes 42,866 34.1%

Tax consolidation program. The company, exercising the option envisaged by the new version of the TUIR andthe implementing decree pursuant toArticle 129, together with the Italian subsidiaries that are presumably subjectto a controlling relationship pursuant to Article 120 TUIR, decided to have the Group participate in the nationaltax consolidation program for IRES.According to this law,TOD’S S.p.A., as controlling company, has aggregated its income with that of the subsidiariesparticipating in the national tax consolidation program since fiscal 2004. It does so by fully offsetting all the positiveand negative taxable amounts, thereby benefiting from any losses contributed by the subsidiaries and assuming theexpenses transferred from those subsidiaries with positive taxable income.TOD’S S.p.A. essentially acts as a “clearing house” for taxable income (profits and losses) of all Group companiesparticipating in the tax consolidation program, as well as financial relationships with revenue agency offices.At thesame time, it recognizes liabilities or credits vis-à-vis those subsidiaries that produced tax losses and those that,on the contrary, transferred taxable income.Independently of the taxes that are paid, the company’s net result is impacted exclusively by the income taxesaccrued on its own taxable income.



28. Independent Auditors compensation

Pursuant to Article 149-duodecies of the Issuers Regulation, the compensation received in FY 2010 by theindependent auditor Deloitte & Touche S.p.A. and the companies belonging to its network are illustrated below,as broken down into auditing services and the provision of other services:

Type of service Company Receiver Fees

Auditing services Deloitte & Touche S.p.A TOD’S S.p.A. 175

Other services Deloitte & Touche S.p,A TOD’S S.p.A. -

Auditing services Deloitte & Touche S.p.A Subsidiaries 123

Total Deloitte & Touche S.p.A 298Auditing services Deloitte & Touche (network) Subsidiaries 73

Total Deloitte & Touche 371

29. Certification of the Separate Financial Statements of TOD’S S.p.A. and theConsolidated Financial Statements of the TOD’S Group pursuant to Article 81-ter ofConsob Regulation no. 11971 of May 14th 1999, as amended

1. The undersigned Stefano Sincini, Chief Executive Officer of TOD’S S.p.A., and Rodolfo Ubaldi, managerresponsible for the drawing up of the financial reports of TOD’S S.p.A., certify, in accordance with the provisionsof Article 154-bis, subsections 3 and 4, of Legislative Decree no. 58 of February 24th 1998:• the adequacy in terms of the company’s characteristics and• effective applicationof administrative and accounting procedures for preparation of the Separate Financial Statements and ConsolidatedFinancial Statements during the period January 1st 2010 to December 31st 2010.

2. They also certify that the Separate Financial Statements and Consolidated Financial Statements:a) have been prepared in compliance with the International Financial Reporting Standards recognised in the

European Union pursuant to Regulation EC 1606/2002 of the European Parliament and Council of July 19th

2002.b) correspond with the account books and ledger entries;c) give a true and fair view of the assets, liabilities, income and financial position of the issuer and entities

included in the scope of consolidation.

3. report on operations provides a reliable analysis of the issuer’s operating performance and income, as wellas the financial position of the issuer and all the businesses included in the scope of consolidation, together witha description of the principal risks and uncertainties to which they are exposed.

Milan, March 14th 2011

Stefano Sincini Rodolfo UbaldiChief Executive Officer Manager responsible for the drawing

up of the financial reports



REPORT OF THE BOARD OF STATUTORY AUDITORS

REPORT BY THE BOARD OF AUDITORS TO THE GENERAL MEETING OFSHAREHOLDERS OF TOD’S S.p.A., PURSUANT TO ARTICLE 153 OF LEGISLATIVEDECREE N° 58/1998 AND ARTICLE 2429 OF THE ITALIAN CIVIL CODE(Translation of the document issued in Italian solely for the convenience of international readers)

Dear Shareholders,In the year ended on December 31st, 2010, we discharged the supervisory tasks imposed under law, in accordance withthe rules of conduct for the Board of Auditors as provided for by the Italian Board of Professional Accountants andAuditors, attending the meetings of corporate organs, carrying out periodic checks and meeting with the IndependentAuditors’ managers, the Company’s Internal Control managers and the Executive in charge of drawing up of theCompany’s accounting documents, to exchange information on the activities undertaken by them, and to assess thetimetable of scheduled internal control operations.Pursuant to article 153 of legislative decree no. 58/1998 and section 2429 of the Italian Civil Code, as well as taking intoaccount the indications provided by CONSOB, we report the following:• we have supervised and checked compliance with the law and the instruments of incorporation;• the directors provided us, with the required periodicity, information on the activities undertaken by them, and on

the most significant economic, financial and capital transactions effected by the Company and its subsidiaries,ensuring us that the same were in accordance with law and the articles of association and were not manifestlyimprudent or risky, in potential conflict of interest, in breach of the resolutions passed by the General Meeting ofShareholders or susceptible of compromising the integrity of the Company’s assets;

• we have not found nor received information from the Board of Directors, the Independent Auditors or theInternal Control and Corporate Governance Committee regarding the existence of atypical and/or unusualtransactions effected with third parties, related parties or between group companies;

• in the explanatory notes attached to the consolidated financial statements of the Tod’s Group, as well as in theexplanatory notes attached to the separate financial statements of Tod’s S.p.A., the directors have provided anaccount of the transactions undertaken with other group companies and/or related parties during the course ofthe financial year. More specifically, the said explanatory notes contained a detailed description of the highlysignificant related-party transaction effected during the accounting, and entailing the acquisition of the entire sharecapital of Holpaf B.V, which owns the Omotesando building in Tokyo that houses not only the registered officesof the Japanese operations of the Tod’s Group but also the latter’s largest flagship store in Japan.Reference is here made to the aforesaid documents with regard to matters falling within our purview, andespecially in respect of the features and economic effects of the transactions undertaken with other groupcompanies and/or related parties.With regard to such transactions, the Board of Auditors, with the help of the Board of Directors and the InternalControl and Corporate Governance Committee, checked for the imposition of and compliance with proceduresaimed at ensuring that the said transactions are concluded at suitable terms and in the Company’s interest.Following due assessment, the Related-Party Transaction Procedure approved by the Board of Directors of Tod’sS.p.A. on 11 November 2010, was found to be fully compliant with the principles entrenched in the Regulationsadopted pursuant to CONSOB Resolution no. 17221 of 12 March 2010 (and subsequently amended by CONSOBResolution no. 17389 of 23 June 2010);

• since the conditions therefore have not been met, no mention has been made of atypical and/or unusualtransactions;

• the information pertaining to transactions with group companies and/or related parties, contained, in particular, inthe paragraphs “Transactions with related entities” in the explanatory notes attached to the IAS/IFRS consolidatedfinancial statements of the Tod’s Group, and “Transactions with related parties” in the explanatory notes to theseparate IAS/IFRS financial statements of Tod’s S.p.A., are adequate in light of the Company’s size and structure;

• the independent auditors have expressed an opinion without comment on the financial statements, therebyattesting that the same are in accordance with the rules governing financial statements;

• neither complaints - pursuant to article 2408 of the Italian Civil Code - nor reports were received during thecourse of the financial year;

• the information received indicates that in 2010,Tod’s S.p.A. did not entrust the Independent Auditors nor anyother subjects belonging to the “network” other tasks in addition to those pertaining to the auditing of the

142 Report of Statutory Auditors


financial statements of the Company and its subsidiaries.The assessment carried out by the board of auditors inrespect of independence of the auditing firm pursuant to article 19 of Legislative Decree no. 39/2010, revealedno critical aspects worthy of mention;

• during the course of the year we have issued our opinions as provided for by the law;• during the course of the financial year we attended 7 meetings of the Board of Directors and 6 meetings of the

Executive Committee. Furthermore, 6 meetings of the Board of Auditors were held;• to the extent of our powers and purview, we oversaw and checked for compliance with the principles of good

corporate governance and the appropriateness of the organisational structure and the instructions imparted bythe Company to subsidiaries pursuant to article 114, paragraph 2 of Legislative Decree no. 58/1998, through directobservation, information gathered during meetings with company officers in charge of corporate organisation, andexchanges of significant information during meetings with the Independent Auditors and with the Executive incharge of drawing up of the Company’s accounting documents;

• to the extent of our powers and purview, we oversaw and checked, pursuant to article 19 of Legislative Decreeno. 39/2010, the appropriateness and efficacy of the internal control and risk management system, as well as theactivities undertaken by staff in charge of internal control and the administrative/accounting system and thereliability of the latter to faithfully reflect corporate management, by obtaining information from the companyofficers in charge of the relevant corporate departments, examining corporate documents and analysing theresults of the work undertaken by the Independent Auditors, attending Internal Control and CorporateGovernance Committee meetings and meetings with the Executive Director in charge with the supervision ofInternal Control as well as with the Executive in charge of drawing up of the Company’s accounting documents;

• the financial reporting processed was monitored as required pursuant to article 19 of Legislative Decree no.39/2010;

• following the contacts with the corresponding bodies of the subsidiaries, where no members of the board ofauditors were already present, no material aspects have emerged;

• no significant aspects or issues worthy of mention arose during the meetings held with the Independent Auditorspursuant to article 150(3) of Legislative Decree no. 58/1998, nor have any significant shortfalls been found in theinternal control system as far as the financial reporting process is concerned;

• we checked the procedures for the proper implementation of the rules of corporate governance entrenched inthe Self-Regulatory Code of the Corporate Governance Committee of listed companies, adopted by the Boardof Directors on November 13th, 2006. At the meeting of November 11th 2009,Tod’s S.p.A’s Board of Directorsidentified Tod’s (Shanghai) Trading Co. Ltd., as well as Tod’s France Sas,Tod’s Japan KK, Deva Inc., and Tod’s HongKong Ltd. - namely those companies which were identified in the meeting held on November 12th 2008, as“strategically significant subsidiaries”;

• through direct checks and information obtained from the Independent Auditors and the Executive in charge ofDrawing up of the Company’s accounting documents,we oversaw compliance with statutory provisions pertainingto the preparation and layout of the consolidated financial statements of the Tod’s Group, the separate financialstatements of Tod’s S.p.A. and the related reports. Our oversight activities did not reveal any facts warranting areport to internal control organs or worthy of mention in this report;

• pursuant to article 19 of Legislative Decree no. 39/2010, the statutory auditing of the annual accounts and theconsolidated accounts was duly monitored.

The company adopted an Organizational and Managerial Model pursuant to Legislative Decree no. 231/2001.In light of the above, and with regard to matters falling within our purview, we have not found any reasons hindering theapproval of the financial statements as at December 31st, 2010 and we have no comments to make on the proposeddistribution of dividends as recommended in the directors’ report to the separate IAS/IFRS financial statements ofTod’sS.p.A.

Milan, March 22nd, 2011The Board of Auditors

Dr. Enrico Colombo - ChairmanDr. Gian Mario Perugini - Auditor in officeDr. Fabrizio Redaelli - Auditor in office

143 Report of Statutory Auditors


REPORT OF INDEPENDENT AUDITORS

tods 2010 annual report

Documents