TOTO S.P.A. COSTRUZIONI GENERALIBOARD OF DIRECTORSServing until the approval of the 2011 financial statementsAlfonso TOTO, Chairman and Managing DirectorPaolo TOTO, DirectorValentina TOTO, DirectorBOARD OF STATUTORY AUDITORSServing until the approval of the 2011 financial statementsGiovanni SMARGASSI, ChairmanFrancesco CANCELLI, Standing auditorVito RAMUNDO, Standing auditorLucio RAIMONDI, Alternate auditorGiovanni D'AQUINO, Alternate auditorAUDITING FIRMKPMG S.p.A.Directors’ Report to the financial statements as of 31/12/2011 Page 2
TOTO S.P.A. COSTRUZIONI GENERALIDear Shareholders,2011 saw the completion of the process of restructuring the group, which was aimed atcreating the new corporate structure with a parent industrial holding company calledTOTO Holding, which controls the operating companies in the various business sectors.Following the transfer by the parent TOTO Holding of "Ramo <strong>Costruzioni</strong> <strong>Toto</strong>" (<strong>Toto</strong>Construction Branch), comprising all the assets, movables and immovables, investmentsin subsidiary, affiliated and other companies, liabilities and legal relations pertaining to thetransferred branch including its employees, their employee severance indemnities andother accounting entries, your company became operational on 1 November 2011.In the meeting held on 23 March 2012 the Board of Directors resolved, in accordancewith art. 2342, third paragraph of the Italian Civil Code (hereinafter C.C.) to approve theevaluations contained in the sworn evaluation report on "Ramo <strong>Costruzioni</strong> <strong>Toto</strong>" drawnup by certified accountant Paolo Palumbo and certified on 17 June 2011, theshareholders' equity being valued at € 70,579,616 on the date on which the transfer tookeffect (1 November 2011).The year ended 31 December 2011, which for business activities only relates to twomonths (November and December), concluded positively.Net profit stood at € 556,468 after amortisation of intangible fixed assets and depreciationof tangible fixed assets for € 1,804,199 and current taxes totalling € 933,076.Operating conditions and business developmentYour company operates in the large infrastructure construction sector and is among thetop 30 general building companies in Italy, and the leading one in Abruzzo. Its mainbusiness involves the construction of large transport infrastructure.The company's target market is the domestic one, for which TOTO carries out projects forthe main public and private clients, such as ANAS, Autostrade per l'Italia, Strada deiParchi S.p.A. and other organisations.Operating performanceGeneral conditionsAfter a promising start to the year, the second part of 2011 saw a steady deteriorationof the macroeconomic situation, as a result of both strong tension on the sovereigndebt markets and the signs of slowdowns from emerging countries.The latest figures from the national accounts unfortunately confirmed a further decline ininvestments by businesses and the persisting weakness of private consumption. Afteronly 2 years, Italy has once again entered an awkward recessive period. Thesituation which is taking shape is proving very worrying since it falls within a contextalready deeply marked by over three years of crisis, which resulted in a painful cullingof businesses, a reduction in production and subsequent weakening of the labour market.After Greece's default, Italy and Spain are now under close observation. Even if officialsources categorically exclude the possibility of a request for EU aid the markets no longershowed themselves certain that Spain would exit the crisis with its own means alone,hence the strong volatility of the indices of the European stock exchanges. Italy'smacroeconomic environment is clearly no more bright; according to estimated, 2012 willend with a GDP dropping by 1.2%, a debt/GDP ratio up to 123.4% and unemployment at9.3%. These figures would only be able to improve from 2013.Directors’ Report to the financial statements as of 31/12/2011 Page 3
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