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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 
 FORM 20-F
 ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
 For the Fiscal Year Ended: December 31, 2009
 Commission file number: 001-11854
 NATUZZI S.p.A.
  NATUZZI S.p.A.
  Republic of Italy
  Via Iazzitiello 47, 70029 Santeramo in Colle Bari, Italy
  Mrs. Silvia Di Rosa
Tel. +39 335 78 64 209
sdirosa@natuzzi.com
 Via Iazzitiello 47, 70029 Santeramo in Colle Bari, Italy
 Securities registered or to be registered pursuant to Section 12(b) of the Act:
 Title of each class
    
    Name of each exchange on which registeredAmerican Depositary Shares, each representing one 
Ordinary Share 
Ordinary Shares, with a par value of 1.00 each
    
    New York Stock ExchangeNew York Stock Exchange
(for listing purposes only)
 Securities registered or to be registered pursuant to Section 12(g) of the Act:
 (Title of Class)
 Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act:
 (Title of Class)
 Indicate the number of outstanding shares of each of the issuers classes of capital or
common stock as of the close of the period covered by the annual report:
 As of December 31, 2009: 54,853,045 Ordinary Shares
 Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in
Rule 405 of the Securities Act.
 o þ
 If this report is an annual or transition report, indicate by check mark if the registrant
is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934.
 o þ
 Indicate by check mark whether the registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12
months (or for such shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90 days.
 þ o
 Indicate by check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be submitted and
posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the
preceding 12 months (or for such shorter period that the registrant was required to submit
and post such files).
 o o þ
 Indicate by check mark whether the registrant is a large accelerated filer, an accelerated
filer, or a non-accelerated filer. See definition of accelerated filer and large
accelerated filer in Rule 12b-2 of the Exchange Act. (Check one):
 Large accelerated filer o
    
    Accelerated filer þ
    
    Non-accelerated filer o
 Indicate by check mark which basis of accounting the registrant has used to prepare the
financial statements included in this filing:
 U.S. GAAP o
    
    IFRS o
    
    Other þ
 If Other has been checked in response to the previous question, indicate by check mark
which financial statement item the registrant has elected to follow.
 o þ
 If this is an annual report, indicate by check mark whether the registrant is a shell
company (as defined in Rule 12b-2 of the Exchange Act).
 o þ




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TABLE OF CONTENTS
 PagePART IItem 1. Identity of Directors, Senior Management and Advisers
    
    
    2Item 2. Offer Statistics and Expected Timetable
    
    
    2Item 3. Key Information
    
    
    2Selected Financial Data
    
    
    2Exchange Rates
    
    
    5Risk Factors
    
    
    6Forward Looking Information
    
    
    11Item 4. Information on the Company
    
    
    11Introduction
    
    
    11Organizational Structure
    
    
    13Strategy
    
    
    14Manufacturing
    
    
    16Product
    
    
    22Advertising
    
    
    24Retail Development
    
    
    24Markets
    
    
    24Incentive Programs and Tax Benefits
    
    
    29Management of Exchange Rate Risk
    
    
    31Trademarks and Patents
    
    
    31Regulation
    
    
    31Environmental Regulatory Compliance
    
    
    31Insurance
    
    
    31Description of Properties
    
    
    32Capital Expenditures
    
    
    33Item 4 A. Unresolved Staff Comments
    
    
    33Item 5. Operating and Financial Review and Prospects
    
    
    34Critical Accounting Policies
    
    
    34Results of Operations
    
    
    36Liquidity and Capital Resources
    
    
    44
  i




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TABLE OF CONTENTS
 PageContractual Obligations and Commitments
    
    
    45Related Party Transactions
    
    
    47New Accounting Standards under Italian and U.S. GAAP
    
    
    47Item 6. Directors, Senior Management and Employees
    
    
    48Compensation of Directors and Officers
    
    
    52Share Ownership
    
    
    53Statutory Auditors
    
    
    53External Auditors
    
    
    54Employees
    
    
    54Item 7. Major Shareholders and Related Party Transactions
    
    
    56Major Shareholders
    
    
    56Related Party Transactions
    
    
    57Item 8. Financial Information
    
    
    57Consolidated Financial Statements
    
    
    57Export Sales
    
    
    57Legal and Governmental Proceedings
    
    
    57Dividends
    
    
    59Item 9. The Offer and Listing
    
    
    59Trading Markets and Share Prices
    
    
    59Item 10. Additional Information
    
    
    60By-laws
    
    
    60Certain Contracts
    
    
    68Exchange Controls
    
    
    68Taxation
    
    
    69Documents on Display
    
    
    74Item 11. Quantitative and Qualitative Disclosures About Market Risk
    
    
    75Item 12. Description of Securities Other than Equity Securities
    
    
    77PART IIItem 13. Defaults, Dividend Arrearages and Delinquencies
    
    
    77
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TABLE OF CONTENTS
 PageItem 14. Material Modifications to the Rights of Security Holders and Use of Proceeds
    
    
    77Item 15. Controls and Procedures
    
    
    77Item 16. [Reserved]
    
    
    80Item 16.A Audit committee financial expert
    
    
    80Item 16.B Code of Ethics
    
    
    80Item 16.C Principal Accountant Fees and Services
    
    
    80Item 16.D Exemption from the Listing Standards for Audit Committees
    
    
    81Item 16.E Purchases of Equity Securities by the Issuer and Affiliated Purchasers
    
    
    81Item 16.F Change in Registrants Certifyng Accountant
    
    
    81Item 16.G Corporate Governance
    
    
    82PART IIIItem 17. Financial Statements
    
    
    86Item 18. Financial Statements
    
    
    86Item 19. Exhibits
    
    
    87Exhibit 8.1Exhibit 12.1Exhibit 12.2Exhibit 13.1Exhibit 15.1
   iii




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PRESENTATION OF FINANCIAL INFORMATION
 
      1




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PART I
 
 Item 1. Identity of Directors, Senior Management and Advisers
  
 Item 2. Offer Statistics and Expected Timetable
  
 Item 3. Key Information
 
 Selected Financial Data
    2




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Year Ended At December 31,2009
    
    
    2009
    
    
    2008
    
    
    2007
    
    
    2006
    
    
    2005(millions ofdollars, exceptper OrdinaryShare)(1)
    
    
    (millions of euro, except per Ordinary Share)Statement of Operations Data:Amounts in accordance with Italian GAAP:Net sales:Leather- and fabric-upholstered
furniture
    
    $
    628.8
    
    
    
    450.6
    
    
    
    587.8
    
    
    
    563.5
    
    
    
    660.2
    
    
    
    594.8Other(2)
    
    
    90.4
    
    
    
    64.8
    
    
    
    78.2
    
    
    
    70.9
    
    
    
    75.2
    
    
    
    75.1Total net sales
    
    
    719.2
    
    
    
    515.4
    
    
    
    666.0
    
    
    
    634.4
    
    
    
    735.4
    
    
    
    669.9Cost of sales
    
    
    (460.2
    )
    
    
    (329.8
    )
    
    
    (478.8
    )
    
    
    (460.6
    )
    
    
    (490.5
    )
    
    
    (459.4
    )Gross profit
    
    
    259.0
    
    
    
    185.6
    
    
    
    187.2
    
    
    
    173.8
    
    
    
    244.9
    
    
    
    210.5Selling expenses
    
    
    (208.8
    )
    
    
    (149.6
    )
    
    
    (172.3
    )
    
    
    (173.9
    )
    
    
    (186.2
    )
    
    
    (182.2
    )General and administrative expenses
    
    
    (65.0
    )
    
    
    (46.6
    )
    
    
    (49.9
    )
    
    
    (49.0
    )
    
    
    (42.2
    )
    
    
    (43.0
    )Operating income (loss)
    
    
    (14.8
    )
    
    
    (10.6
    )
    
    
    (35.0
    )
    
    
    (49.1
    )
    
    
    16.5
    
    
    
    (14.7
    )Other income (expense),
net(3) (4) (5) (6)
    
    
    4.3
    
    
    
    3.1
    
    
    
    (25.8
    )
    
    
    (2.6
    )
    
    
    2.8
    
    
    
    3.0Earnings (loss) before taxes and
minority interests
    
    
    (10.5
    )
    
    
    (7.5
    )
    
    
    (60.8
    )
    
    
    (51.7
    )
    
    
    19.3
    
    
    
    (11.7
    )Income taxes
    
    
    (13.7
    )
    
    
    (9.8
    )
    
    
    (1.5
    )
    
    
    (11.4
    )
    
    
    (7.1
    )
    
    
    (3.1
    )Earnings (loss) before minority interests
    
    
    (24.2
    )
    
    
    (17.3
    )
    
    
    (62.3
    )
    
    
    (63.1
    )
    
    
    12.2
    
    
    
    (14.8
    )Minority interest
    
    
    0.6
    
    
    
    0.4
    
    
    
    0.4
    
    
    
    0.5
    
    
    
    0.1
    
    
    
    0.2Net earnings (loss)
    
    
    (24.8
    )
    
    
    (17.7
    )
    
    
    (61.9
    )
    
    
    (62.6
    )
    
    
    12.3
    
    
    
    (14.6
    )Net earnings (loss) per Ordinary Share
    
    $
    (0.45
    )
    
    
    (0.32
    )
    
    
    (1.13
    )
    
    
    (1.14
    )
    
    
    0.23
    
    
    
    (0.27
    )Dividends declared per share
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Amounts in accordance with U.S. GAAP:Net sales
    
    
    706.0
    
    
    
    506.0
    
    
    
    670.1
    
    
    
    635.9
    
    
    
    736.8
    
    
    
    672.0Operating income (loss)
    
    
    (19.8
    )
    
    
    (14.2
    )
    
    
    (40.0
    )
    
    
    (46.4
    )
    
    
    22.7
    
    
    
    (4.5
    )Net earnings (loss)
    
    
    (35.9
    )
    
    
    (25.7
    )
    
    
    (55.7
    )
    
    
    (60.0
    )
    
    
    14.5
    
    
    
    (6.9
    )Net earnings (loss) per Ordinary
Share (basic and diluted)
    
    $
    (0.65
    )
    
    
    (0.47
    )
    
    
    (1.02
    )
    
    
    (1.09
    )
    
    
    0.26
    
    
    
    (0.13
    )Weighted average number of Ordinary
Shares Outstanding
    
    
    54,853,045
    
    
    
    54,853,045
    
    
    
    54,850,643
    
    
    
    54,817,086
    
    
    
    54,733,796
    
    
    
    54,681,628Balance Sheet Data:Amounts in accordance with Italian GAAP:Current assets
    
    $
    432.7
    
    
    
    301.9
    
    
    
    318.5
    
    
    
    364.1
    
    
    
    407.3
    
    
    
    384.5Total assets
    
    
    728.9
    
    
    
    508.6
    
    
    
    543.8
    
    
    
    617.5
    
    
    
    674.7
    
    
    
    664.9Current liabilities
    
    
    167.4
    
    
    
    116.8
    
    
    
    136.3
    
    
    
    146.0
    
    
    
    133.0
    
    
    
    136.2Long-term debt
    
    
    8.4
    
    
    
    5.9
    
    
    
    3.3
    
    
    
    2.1
    
    
    
    2.4
    
    
    
    3.6Non controlling interest
    
    
    2.7
    
    
    
    1.9
    
    
    
    0.8
    
    
    
    0.1
    
    
    
    0.6
    
    
    
    0.7Shareholders equity (7)
    
    
    465.8
    
    
    
    325.0
    
    
    
    345.2
    
    
    
    411.6
    
    
    
    478.9
    
    
    
    473.0Amounts in accordance with U.S. GAAP:Shareholders equity
    
    $
    469.5
    
    
    
    327.6
    
    
    
    353.3
    
    
    
    408.5
    
    
    
    468.4
    
    
    
    453.7
 1)
    
    Income Statement amounts are converted from euros into U.S. dollars by using the average
Federal Reserve Bank of New York euro exchange rate for 2009 of U.S.$ 1.3955 per 1 euro. Balance
Sheet amounts are converted from euros into U.S. dollars using the Federal Reserve Bank of New York
Noon Buying Rate of U.S.$ 1.4332 per 1 euro as of December 31, 2009.  3




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2)
    
    Sales included under Other principally consist of sales of polyurethane foam and leather to
third parties and sales of living room accessories.3)
    
    Other income (expense), net is principally affected by gains and losses, as well as interest
income and expenses, resulting from measures adopted by the Group in an effort to reduce its
exposure to exchange rate risks. See Item 5. Operating and Financial Review and Prospects 
Results of Operations  2009 Compared to 2008, Item 11. Quantitative and Qualitative
Disclosures about Market Risk and Notes 3, 23 and 24 to the Consolidated Financial Statements
included in Item 18 of this annual report.4)
    
    Other income (expense), net, in 2005 was affected by the change in accounting principles for
the translation of foreign subsidiaries financial statements under Italian GAAP. See Note 3(d) to
the Consolidated Financial Statements. In addition, other income (expense), net, in 2005 was
positively affected by revenues for capital grants. See Note 23 to the Consolidated Financial
Statements included in Item 18 of this annual report.5)
    
    Other income (expense), net, in 2006 was negatively affected by the provisions for contingent
liabilities. See Note 23 to the Consolidated Financial Statements included in Item 18 of this
annual report.6)
    
    Other income (expense), net in 2008 was negatively affected by the impairment losses of
long-lived assets, a one-time employee termination benefit and the provision for contingent
liabilities. See Note 23 to the Consolidated Financial Statements included in Item 18 of this
annual report.7)
    
    Share capital as of December 31, 2009, 2008, 2007, 2006 and 2005 amounted to 
54.9 million,
 54.9 million,
 54.8 million,  54.7 million and  54.7 million, respectively. Shareholders
Equity represents the Total Equity attributable to Natuzzi S.p.A and its subsidiaries.  4




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Exchange Rates
  Year:
    
    Average(1)
    
    
    At Period End2005
    
    
    1.2400
    
    
    
    1.18422006
    
    
    1.2661
    
    
    
    1.31972007
    
    
    1.3797
    
    
    
    1.46032008
    
    
    1.4695
    
    
    
    1.39192009
    
    
    1.3955
    
    
    
    1.4332
 Month ending:
    
    High
    
    
    Low31-Dec-09
    
    
    1.5100
    
    
    
    1.424329-Jan-10
    
    
    1.4536
    
    
    
    1.387026-Feb-10
    
    
    1.3955
    
    
    
    1.347631-Mar-10
    
    
    1.3758
    
    
    
    1.334430-Apr-10
    
    
    1.3664
    
    
    
    1.313031-May-10
    
    
    1.2563
    
    
    
    1.2224
 
 (1)
    
    The average of the Noon Buying Rates for the relevant period, calculated using the
average of the Noon Buying Rates on the last business day of each month during the period.
Source: Federal Reserve Statistical Release on Foreign Exchange RatesHistorical Rates
for Euro Area.   5




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Risk Factors
  The Group has a recent history of losses; the Groups future profitability and financial
condition depend on its ability to continue to successfully restructure its operations        
  
    
    price competition from low-cost manufacturers;
    
    continuing sluggishness of the global economy; and
    
    recurring unfavorable currency conditions.
    6




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The current worldwide economic downturn has impacted the Groups business and could continue
to significantly impact our operations, sales, earnings and liquidity in the foreseeable future 
 A failure to achieve our projected mix of product sales could result in a decrease in our
future earnings  Italsofa
 Our growth strategy includes, in part, the development of new stores each year. If we and our
dealers are not able to open new stores or effectively manage the growth of these stores, our
ability to grow and our profitability could be adversely affected 
 Demand for furniture is cyclical and may fall in the future
  The Group operates principally in a niche area of the furniture market 
  7




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The furniture market is highly competitive 
     Fluctuations in currency exchange rates have adversely affected and may adversely affect the
Groups results 
 The Group faces risks associated with its international operations 
  8




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The price of the Groups principal raw material is difficult to predict 
 Introduction of a new integrated management system 
 
    
    improved quality, reliability and timeliness of information;
    
    improved integration and visibility of information stemming from
different management functions and countries; and
    
    optimization and global management of corporate processes.
 
  The Groups past results and operations have significantly benefited from government incentive
programs, which may not be available in the future 
  9




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The Group is dependent on qualified personnel 
 Investors may face difficulties in protecting their rights as shareholders or holders of ADSs
 Statuto
 One shareholder has a controlling stake of the company 
    10




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Forward Looking Information
    
 Item 4. Information on the Company
 
 Introduction
    11




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12




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Organizational Structure
   Percentage ofName
    
    ownership
    
    
    Registered office
    
    
    ActivityItalsofa Nordeste S/A
    
    
    100.00
    
    
    Bahia, Brazil
    
    
    (1)Italsofa Shanghai Ltd.
    
    
    96.50
    
    
    Shanghai, China
    
    
    (1)Softaly Shanghai Ltd.
    
    
    100.00
    
    
    Shanghai, China
    
    
    (1)Natuzzi China Ltd.
    
    
    100.00
    
    
    Shanghai, China
    
    
    (1)Italsofa Romania
    
    
    100.00
    
    
    Baia Mare, Romania
    
    
    (1)Natco S.p.A.
    
    
    99.99
    
    
    Bari, Italy
    
    
    (2)I.M.P.E. S.p.A.
    
    
    90.83
    
    
    Qualiano, Italy
    
    
    (3)Nacon S.p.A.
    
    
    100.00
    
    
    Bari, Italy
    
    
    (4)Lagene S.r.l.
    
    
    100.00
    
    
    Bari, Italy
    
    
    (4)Natuzzi Americas Inc.
    
    
    100.00
    
    
    High Point, NC, USA
    
    
    (4)Natuzzi Iberica S.A.
    
    
    100.00
    
    
    Madrid, Spain
    
    
    (4)Natuzzi Switzerland AG
    
    
    100.00
    
    
    Kaltbrunn, Switzerland
    
    
    (4)Natuzzi Nordic
    
    
    100.00
    
    
    Copenaghen, Denmark
    
    
    (4)Natuzzi Benelux S.A.
    
    
    100.00
    
    
    Geel, Belgium
    
    
    (4)Natuzzi Germany Gmbh
    
    
    100.00
    
    
    Dusseldorf, Germany
    
    
    (4)Natuzzi Sweden AB
    
    
    100.00
    
    
    Stockholm, Sweden
    
    
    (4)Natuzzi Japan KK
    
    
    100.00
    
    
    Tokyo, Japan
    
    
    (4)Natuzzi Services Limited
    
    
    100.00
    
    
    London, UK
    
    
    (4)Natuzzi Trading Shanghai Ltd.
    
    
    100.00
    
    
    Shanghai, China
    
    
    (4)Natuzzi Oceania PTI Ltd.
    
    
    100,00
    
    
    Sidney, Australia
    
    
    (4)OOO Natuzzi Russia
    
    
    100,00
    
    
    Moscow, Russia
    
    
    (4)Italholding S.r.l.
    
    
    100.00
    
    
    Bari, Italy
    
    
    (5)Natuzzi Netherlands Holding
    
    
    100.00
    
    
    Amsterdam, Holland
    
    
    (5)Natuzzi Trade Service S.r.l.
    
    
    100.00
    
    
    Bari, Italy
    
    
    (6)La Galleria Limited
    
    
    100.00
    
    
    London, UK
    
    
    (7)Natuzzi United Kingdom Limited
    
    
    100.00
    
    
    London, UK
    
    
    (7)Kingdom of Leather Limited
    
    
    100.00
    
    
    London, UK
    
    
    (7)
 (1)
    
    Manufacture and distribution(2)
    
    Intragroup leather dyeing and finishing(3)
    
    Production and distribution of polyurethane foam(4)
    
    Services and Distribution(5)
    
    Investment holding(6)
    
    Transportation services(7)
    
    Dormant   13




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Strategy
  
  1.
    
    increasing competitiveness;2.
    
    improving service to clients;3.
    
    improving product quality;4.
    
    striving for innovation;5.
    
    the worldwide launch of the new B2B trademark Edition;6.
    
    creating more efficiency in the manufacturing and procurement
process by revising product cost structures and focusing more on the R&D and
engineering process; and7.
    
    eliminating waste and redundancies in Group processes, with a
focus on increasing integration within the Group by completing the SAP rollout.
  Repositioning the Brand Portfolio Strategy of the Group
  14




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The Natuzzi brand
  The Italsofa brand
 The Natuzzi Editions / Editions Brand
     15




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Improvement of the Groups Retail Program and Brand Development
   Product Diversification and Innovation-
   
 Manufacturing
    16




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Natuzzi Natuzzi
    17




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Raw Materials 
  18




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i.e
      19




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Supply-Chain Management
 Procurement Policies and Operations Integration 
 Production Planning (Order Management, Production, Procurement) 
      20




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On demand
 Upon forecast
     Load Optimization 
   21




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Transportation 
  
 Product
     22




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(a)
    
    Natuzzi Collection: an inspirational, high-end brand, vigorously promoted worldwide as
Made in Italy;(b)
    
    Editions/Natuzzi Editions Collection: a trademark that aims to generate volumes
necessary to regain market share; and(c)
    
    Italsofa Collection: a brand that aspires to provide customers with
tastefuldesigns at affordable prices.
     Innovation
   23




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Advertising
   
 Retail Development
  1.
    
    to determine and define the retail business model for the Group;2.
    
    to design an auditing and control system for the Groups retail business model under
the supervision of top management;3.
    
    to define the consumer segments to be targeted;4.
    
    to define a product mix more consistent with the needs of targeted consumers and the
market;5.
    
    to define a store concept consistent with the Natuzzi brands high-end positioning;6.
    
    to define store formats (e.g., size, location, aesthetic and commercial features);7.
    
    to define development plans and network re-positioning; and8.
    
    to define the correct communication tools and training.
  
 Markets
 Divani & Divani by Natuzzi Natuzzi Natuzzi Divani & Divani by Natuzzi
  24




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##### Table of Contents



Leather and Fabric Upholstered Furniture, Net Sales (in millions of euro)
 2009
    
    
    
    
    
    
    2008
    
    
    
    
    
    
    2007Americas(1)
    
    
    139.9
    
    
    
    31.0
    %
    
    
    208.6
    
    
    
    36.0
    %
    
    
    198.6
    
    
    
    35.2
    %Natuzzi
    
    
    71.7
    
    
    
    15.9
    %
    
    
    110.4
    
    
    
    18.8
    %
    
    
    114.4
    
    
    
    20.3
    %Italsofa
    
    
    68.2
    
    
    
    15.1
    %
    
    
    98.2
    
    
    
    16.7
    %
    
    
    84.2
    
    
    
    14.9
    %Europe
    
    
    263.7
    
    
    
    58.5
    %
    
    
    323.7
    
    
    
    55.1
    %
    
    
    319.4
    
    
    
    56.7
    %Natuzzi
    
    
    160.1
    
    
    
    35.5
    %
    
    
    189.3
    
    
    
    32.2
    %
    
    
    191.8
    
    
    
    34.0
    %Italsofa
    
    
    103.6
    
    
    
    23.0
    %
    
    
    134.4
    
    
    
    22.9
    %
    
    
    127.6
    
    
    
    22.6
    %Rest of the world
    
    
    47.0
    
    
    
    10.4
    %
    
    
    55.5
    
    
    
    9.4
    %
    
    
    45.5
    
    
    
    8.1
    %Natuzzi
    
    
    27.8
    
    
    
    6.2
    %
    
    
    32.8
    
    
    
    5.6
    %
    
    
    29.9
    
    
    
    5.3
    %Italsofa
    
    
    19.2
    
    
    
    4.3
    %
    
    
    22.7
    
    
    
    3.9
    %
    
    
    15.6
    
    
    
    2.8
    %Total
    
    
    450.6
    
    
    
    100.0
    %
    
    
    587.8
    
    
    
    100
    %
    
    
    563.5
    
    
    
    100
    %
  25




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##### Table of Contents



Leather and Fabric Upholstered Furniture, Net Sales (in seats) (2)
 2009
    
    
    
    
    
    
    2008
    
    
    
    
    
    
    2007Americas (1)
    
    
    785,156
    
    
    
    40.8
    %
    
    
    1,272,559
    
    
    
    46.7
    %
    
    
    1,176,585
    
    
    
    45.4
    %Natuzzi
    
    
    332,910
    
    
    
    17.3
    %
    
    
    554,492
    
    
    
    20.4
    %
    
    
    560,647
    
    
    
    21.6
    %Italsofa
    
    
    452,246
    
    
    
    23.5
    %
    
    
    718,067
    
    
    
    26.4
    %
    
    
    615,938
    
    
    
    23.8
    %Europe
    
    
    943,103
    
    
    
    49.0
    %
    
    
    1,211,939
    
    
    
    44.5
    %
    
    
    1,225,882
    
    
    
    47.3
    %Natuzzi
    
    
    415,582
    
    
    
    21.6
    %
    
    
    487,821
    
    
    
    17.9
    %
    
    
    523,054
    
    
    
    20.2
    %Italsofa
    
    
    527,521
    
    
    
    27.4
    %
    
    
    724,118
    
    
    
    26.6
    %
    
    
    702,828
    
    
    
    27.1
    %Rest of the world
    
    
    194,961
    
    
    
    10.1
    %
    
    
    237,809
    
    
    
    8.7
    %
    
    
    189,926
    
    
    
    7.3
    %Natuzzi
    
    
    70,855
    
    
    
    3.7
    %
    
    
    90,430
    
    
    
    3.3
    %
    
    
    87,950
    
    
    
    3.4
    %Italsofa
    
    
    124,106
    
    
    
    6.5
    %
    
    
    147,379
    
    
    
    5.4
    %
    
    
    101,976
    
    
    
    3.9
    %Total
    
    
    1,923,220
    
    
    
    100.0
    %
    
    
    2,722,307
    
    
    
    100.0
    %
    
    
    2,592,393
    
    
    
    100.0
    %
 (1)
    
    Outside the United States, the Group also sells its products to customers in
Canada and Central and South America (collectively, the Americas).(2)
    
    Includes seats produced at Group-owned facilities and by subcontractors.
Seats are a unit measurement. A sofa consists of three seats; an armchair of one. 1. United States and the Americas.
  139.9 million, 
    26




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##### Table of Contents



Natuzzi Natuzzi Italsofa Natuzzi
 2. Europe.
  
 Italy Divani & Divani Divani & Divani by
Natuzzi Divani & Divani by Natuzzi Natuzzi Natuzzi
 Outside Italy. Divani & Divani by Natuzzi Italsofa Natuzzi Natuzzi Natuzzi
  3. Rest of the World.
 Middle East.  10.8 million 
  27




---



##### Table of Contents



Natuzzi
 Italsofa
 Asia-Oceania-Africa.  
 Natuzzi
 Natuzzi
 Italsofa
 India. Natuzzi Italsofa
 Expansion into New Markets 
 Customer Credit Management 
  28




---



##### Table of Contents



Incentive Programs and Tax Benefits
         
         
  29




---



##### Table of Contents



     4.1 million).   
  
  
 The Italian
Ministry of Education, University and Research Piano Operativo Nazionale    
   30




---



##### Table of Contents



Management of Exchange Rate Risk
  
 Trademarks and Patents
  
 Regulation
  
 Environmental Regulatory Compliance
  
 Insurance
   31




---



##### Table of Contents



Description of Properties
  Size(approximate
    
    
    
    
    Productionsquare
    
    
    
    
    Capacity
    
    
    Unit ofLocation
    
    meters)
    
    
    Function
    
    per day
    
    
    MeasureSanteramo in Colle (BA) 
Italy
    
    
    29,000
    
    
    Headquarters, prototyping, manufacturing of wooden frames, showroom (Owned)
    
    
    704
    
    
    FramesSanteramo in Colle, Iesce
(BA)  Italy
    
    
    28,000
    
    
    Sewing and product assembly (Owned)
    
    
    1,400
    
    
    SeatsMatera La Martella  Italy
    
    
    38,000
    
    
    General warehouse of sofas and accessory furnishing (Owned)
    
    
    N.A.
    
    
    N.A.Ginosa (TA)  Italy
    
    
    16,000
    
    
    Sewing and product assembly (Owned)
    
    
    900
    
    
    SeatsLaterza (TA)  Italy
    
    
    11,000
    
    
    Leather cutting (Owned)
    
    
    7,500
    
    
    Square MetersLaterza (TA)  Italy
    
    
    13,000
    
    
    Fabric and lining cutting, leather warehouse (Owned)
    
    
    6,000
    
    
    Linear MetersLaterza (TA)  Italy
    
    
    20,000
    
    
    Accessory Furnishing Packaging and Warehouse (Owned)
    
    
    N.A.
    
    
    N.A.Qualiano (NA)  Italy
    
    
    12,000
    
    
    Polyurethane foam production (Owned)
    
    
    87
    
    
    TonsPozzuolo del Friuli (UD)
 Italy
    
    
    21,000
    
    
    Leather dyeing and finishing (Owned)
    
    
    14,000
    
    
    Square MetersHigh Point  North
Carolina  U.S.A.
    
    
    10,000
    
    
    Office and showroom for Natuzzi Americas (Owned)
    
    
    N.A.
    
    
    N.A.Baia Mare  Romania
    
    
    75,600
    
    
    Leather cutting, sewing and product assembly, manufacturing of wooden
frames, polyurethane foam shaping, fiberfill production and wood and
wooden product manufacturing (Owned)
    
    
    2,900
    
    
    SeatsShanghai  China
    
    
    44,000
    
    
    Leather cutting, sewing and product assembly, manufacturing of wooden
frames, polyurethane foam shaping, fiberfill production (Owned)
    
    
    4,000
    
    
    SeatsShanghai (Fengpu)  China
    
    
    14,500
    
    
    Leather cutting, leather and fabric warehouse (Leased)
    
    
    10,800
    
    
    Square MetersFabric cutting
    
    
    420
    
    
    Linear MetersSalvador de Bahia (Bahia)
 Brazil
    
    
    28,700
    
    
    Leather cutting, sewing and product assembly, manufacturing of wooden
frames, polyurethane foam shaping, fiberfill production (Owned)
    
    
    700
    
    
    Seats
  32




---



##### Table of Contents



Capital Expenditures
  Year ending December 31,(millions of Euro)2009
    
    
    2008
    
    
    2007Land and plants
    
    
    0.3
    
    
    
    1.1
    
    
    
    3.3Equipment
    
    
    1.6
    
    
    
    5.1
    
    
    
    10.1Other assets
    
    
    6.7
    
    
    
    9.8
    
    
    
    13.1Total
    
    
    8.6
    
    
    
    16.0
    
    
    
    26.5
 Natuzzi Natuzzi 
 
 Item 4A. Unresolved Staff Comments
   33




---



##### Table of Contents



Item 5. Operating and Financial Review and Prospects
  
 Critical Accounting Policies
 Use of Estimates 
 Recoverability of Long-lived Assets Including Goodwill and Other Intangible Assets 
    34




---



##### Table of Contents



Recoverability of Deferred Tax Assets 
     Allowances for Returns and Discounts 
 Allowance for Doubtful Accounts 
  35




---



##### Table of Contents



Revenue Recognition 
 
 Results of Operations
 Summary      Natuzzi   Natuzzi Italsofa   Italsofa
 Natuzzi
  Natuzzi
  36




---



##### Table of Contents



Year Ended December 31,2009
    
    
    2008
    
    
    2007Net sales
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %Cost of sales
    
    
    64.0
    
    
    
    71.9
    
    
    
    72.6Gross profit
    
    
    36.0
    
    
    
    28.1
    
    
    
    27.4Selling expenses
    
    
    29.0
    
    
    
    25.9
    
    
    
    27.4General and administrative expenses
    
    
    9.0
    
    
    
    7.4
    
    
    
    7.7Operating loss
    
    
    (2.0
    )
    
    
    (5.2
    )
    
    
    (7.7
    )Other income (expense), net
    
    
    0.6
    
    
    
    (3.9
    )
    
    
    (0.4
    )Income taxes
    
    
    1.9
    
    
    
    0.2
    
    
    
    1.8Net loss
    
    
    (3.3
    )
    
    
    (9.3
    )
    
    
    (9.9
    )
  2009 Compared to 2008
 Net Sales  
   587.8 million Natuzzi Italsofa
    
   208.6 million Italsofa Natuzzi   Natuzzi Italsofa   Natuzzi Italsofa
  37




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##### Table of Contents



Natuzzi   332.6 million Natuzzi  
 Divani & Divani by Natuzzi Natuzzi Stores  
    Natuzzi Brand . Natuzzi (-49.3%),
  Italsofa Brand Italsofa
 Other Net Sales  
 Cost of Sales  
 Gross Profit.  
 Selling Expenses  
 General and Administrative Expenses.  
  38




---



##### Table of Contents



Operating Loss.   35.0 million
 Other Income (expenses), net.   
1.1 million, 
  
 
    
    a net realized loss of  3.1 million in 2009 (compared to a loss of
 1.3 million in 2008) on domestic currency swaps due to the difference between
the forward rates of the domestic currency swaps and the spot rates at which the
domestic currency swaps were closed (the Group uses the forward rate to hedge its
price risks against unfavourable exchange rate variations);
 
    
    a net realized gain of  2.1 million in 2009 (compared to a loss of
 6.3 million in 2008), from the difference between invoice exchange rates and
collection/payment exchange rates;
 
    
    a net unrealized gain of  7.9 million in 2009 (compared to an
unrealized gain of  1.1 million in 2008) on accounts receivable and payable; and
 
    
    a net unrealized loss of  0.06 million in 2009 (compared to an
unrealized loss of  4.4 million in 2008), from the mark-to-market of domestic
currency swaps.
  
 
    
    a  3.8 million contingent-liabilities provision for estimated
losses related to some claims (including tax claims) and legal actions in 2009,
while in 2008, the provisions for contingent liabilities amounted to  3.2
million;
 
    
    other expenses of 0.6 million deriving from the write-off of fixed
assets in 2009, while in 2008, the other expenses deriving from the write off of
fixed assets amounted to  1.2 million;
 
    
    the Group did not record any expenses due to the impairment of
long-lived assets, while in 2008 it recorded  4.7 million for such expense;
 
    
    the Group did not record any expenses for one-time termination
benefits, while in 2008 it recorded  4.6 million for such expenses; and
 
    
     2.9 million as other income, net in 2009, compared to other
expenses, net of  0.8 million in 2008.
   39




---



##### Table of Contents



Income Taxes
 i.e.
   Net Loss.    
      
 2008 Compared to 2007
 Net Sales   634.4 million
   563.5 million Natuzzi Italsofa
  40




---



##### Table of Contents



   
   198.6 million Italsofa Natuzzi   Natuzzi Italsofa   Natuzzi Italsofa
 Natuzzi   Natuzzi  
 Divani & Divani by Natuzzi Natuzzi Stores  
    Natuzzi Brand . Natuzzi (-1.0%).
  Italsofa Brand Italsofa
 Other Net Sales  
 Cost of Sales  
  41




---



##### Table of Contents



Gross Profit.  
 Selling Expenses  
 General and Administrative Expenses.  
 Operating Loss.   49.1 million
 Other Income (expenses), net.    
  
 
    
    a net realized loss of  1.3 million in 2008 (compared to a gain of
 5.9 million in 2007) on domestic currency swaps due to the difference between
the forward rates of the domestic currency swaps and the spot rates at which the
domestic currency swaps were closed (the Group uses the forward rate to hedge its
price risks against unfavourable exchange rate variations);
 
    
    a net realized loss of  6.3 million in 2008 (compared to a loss of
 3.9 million in 2007), from the difference between invoice exchange rates and
collection/payment exchange rates;
 
    
    a net unrealized gain of  1.0 million in 2008 (compared to an
unrealized loss of  10.1 million in 2007) on accounts receivable and payable;
and
 
    
    a net unrealized loss of  4.4 million in 2008 (compared to an
unrealized gain of  0.9 million in 2007), from the mark-to-market of domestic
currency swaps.
  
 
    
    a  4.7 million expense due to the impairment of long-lived assets
in 2008, while no such expenses were registered in 2007;
 
    
    a  4.6 million expense for the one-time termination benefits
incurred in 2008, while no such expenses were registered in 2007;
  42




---



##### Table of Contents




    
    a  3.2 million contingent-liabilities provision for estimated
losses related to some claims (including tax claims) and legal actions in 2008,
while in 2007, the provisions for contingent liabilities amounted to  3.0
million;
 
    
    other expenses of  1.2 million deriving from the write-off of
fixed assets in 2008, while in 2007, the other expenses deriving from the write
off of fixed assets amounted to  2.3 million;
 
    
    the Group did not register any refunds from tax authorities in
2008, while in 2007 it registered a refund of  3.0 million obtained from the
Italian tax authorities for income and other taxes not due related to prior years
(in addition in 2007, the Italian tax authorities confirmed that a portion of the
income tax of  0.7 accrued in year 2006, was no longer due);
 
    
    the Group did not register any provisions or reversals for legal
actions in 2008, while in 2007 it registered an income of  1.5 million due to
the write off of a provision for legal actions accrued in 2006, which resulted
from a settlement of the claim; and
 
    
     0.8 million as other expense, net in 2008, compared to other
income, net of  2.9 million in 2007.
  Income Taxes
     43




---



##### Table of Contents



Net Loss.    
      
 
 Liquidity and Capital Resources
  
       
    
  
  45.8 million,  
  44




---



##### Table of Contents



  
 
 Contractual Obligations and Commitments
     
   45




---



##### Table of Contents



Payments Due by Period
(thousands of euro)Less than
    
    
    
    
    
    
    
    
    
    
    After 5Contractual Obligations
    
    Total
    
    
    1 year
    
    
    2-3 years
    
    
    4-5 years
    
    
    yearsLong-Term Debt(1)
    
    
    6,980
    
    
    
    1,123
    
    
    
    2,149
    
    
    
    1,634
    
    
    
    2,074Interest due on Long Term Debt (2)
    
    
    324
    
    
    
    81
    
    
    
    126
    
    
    
    76
    
    
    
    41Operating Leases (3)
    
    
    87,438
    
    
    
    16,245
    
    
    
    28,631
    
    
    
    21,855
    
    
    
    20,707Total Contractual Cash Obligations
    
    
    94,742
    
    
    
    17,449
    
    
    
    30,906
    
    
    
    23,565
    
    
    
    22,822
 
 (1)
    
    Please see Note 16 to the Consolidated Financial Statements included in Item 18 of
this annual report for more information on the Groups long-term debt.(2)
    
    Interest due on long-term debt has been calculated using fixed rates contractually
agreed with lenders(3)
    
    The leases relate to the leasing of manufacturing facilities and stores by several
of the Groups companies. Amount of Commitment Expiration PerPeriod (thousands of euro)TotalAmounts
    
    
    Less than
    
    
    
    
    
    
    
    
    
    
    After 5Other Commitments
    
    Committed
    
    
    1 year
    
    
    2-3 years
    
    
    4-5 years
    
    
    yearsGuarantees(1)
    
    
    11,595
    
    
    
    11,595
    
    
    
    
    
    
    
    
    
    
    
    
 
 (1)
    
    The guarantee is primarily comprised of a guarantee letter provided by a bank in
connection with the Natuzzi 2000 project. The guarantee letter will expire when the Italian
Ministry of Economic Development provides the Company with the final disbursement of the capital
grants already provided. See Item 4. Information on the Company  Incentive Programs and Tax
benefits.    
  46




---



##### Table of Contents




 
 Related Party Transactions
  
 New Accounting Standards under Italian and U.S. GAAP
 Process of Transition to International Accounting Standards 
 Italian GAAP 
 U.S. GAAP 
 Accounting Standards Update (ASU) No. 2009-17, Improvements to Financial Reporting by
Enterprises involved with Variable Interest Entities (Formerly FASB Statement No. 46R):
 Improvements to Financial Reporting by Enterprises involved with Variable Interest
Entities
  47




---



##### Table of Contents



Accounting Standards Update (ASU) No. 2010-06, Fair Value Measurements and Disclosures:
 Fair
Value Measurements and Disclosures
 Accounting Standards Update (ASU) No. 2010-13, CompensationStock Compensation:
  
 Item 6. Directors, Senior Management and Employees
   Name
    
    Age
    
    Position with the CompanyPasquale Natuzzi *
    
    
    70
    
    
    Chairman of the Board of Directors, Chief
Executive OfficerAntonia Isabella
Perrone *
    
    
    40
    
    
    DirectorAnnamaria Natuzzi *
    
    
    44
    
    
    DirectorGiuseppe Antonio
DAngelo *
    
    
    45
    
    
    Independent DirectorMaurizia Iachino Leto
di Priolo *
    
    
    61
    
    
    Independent DirectorFrancesco Giannaccari *
    
    
    45
    
    
    Independent Director
  48




---



##### Table of Contents



Name
    
    Age
    
    Position with the CompanyMario Lugli *
    
    
    63
    
    
    Independent DirectorGiacomo Santucci **
    
    
    54
    
    
    Independent DirectorVittorio Notarpietro
    
    
    47
    
    
    Chief Financial Officer, IR & ITAnnunziata Natuzzi
    
    
    46
    
    
    Program Reshaping Committee DirectorFrancesco Basile
    
    
    42
    
    
    Chief Human Resources and Organization OfficerUmberto Bedini
    
    
    54
    
    
    Chief Operation OfficerGiuseppe Cacciapaglia
    
    
    42
    
    
    Chief Internal Control Systems OfficerCosimo Cavallo
    
    
    51
    
    
    Chief Commercial OfficerGiambattista Massaro
    
    
    48
    
    
    Chief Procurement OfficerStefano Sette
    
    
    41
    
    
    Chief Marketing & Product Development OfficerGiacomo Ventolone
    
    
    42
    
    
    Chief Institutional Relations & Corporate
Communication Officer
 *
    
    The above mentioned Members of the Board of Directors were elected at the Companys Annual
Ordinary Shareholders Meeting held on July 2, 2008. Their term will expire at the next Ordinary
Shareholders Meeting that will approve the annual accounts for the year ended December 31, 2010.**
    
    Mr Santucci was appointed at the General Shareholders Meeting held on May 5, 2009. Pasquale Natuzzi
 Antonia Isabella Perrone
 Annamaria Natuzzi
 Giuseppe Antonio DAngelo
  49




---



##### Table of Contents



Maurizia Iachino Leto di Priolo
 Francesco Giannaccari
 Mario Lugli
 Giacomo Santucci
 Vittorio Notarpietro
  50




---



##### Table of Contents



Annunziata Natuzzi
 Francesco Basile
 Umberto Bedini
 Giuseppe Cacciapaglia
 Cosimo Cavallo
 Giambattista Massaro
 Stefano Sette
  51




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##### Table of Contents



Giacomo Ventolone
 
 Compensation of Directors and Officers
  
  Name
    
    Base CompensationPasquale Natuzzi
    
    
    280,000Antonia Isabella Perrone
    
    
    30,000Annamaria Natuzzi
    
    
    30,000Giuseppe Antonio DAngelo
    
    
    30,000Maurizia Iachino Leto di Priolo
    
    
    30,000Francesco Giannaccari
    
    
    30,000Mario Lugli
    
    
    30,000Giacomo Santucci
    
    
    19,667Aldo Uva (*)
    
    
    16,400
 (*)
    
    Due to his resignation on March 23, 2009.   52




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##### Table of Contents



Share Ownership
  
 Statutory Auditors
  Name
    
    PositionCarlo Gatto
    
    ChairmanGianvito Giannelli
    
    MemberCataldo Sferra
    
    MemberCostante Leone
    
    AlternateGiuseppe Pio Macario
    
    Alternate
 
   53




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##### Table of Contents



External Auditors
  
 Employees
   Changebetween2009 andQualification
    
    2008
    
    
    2009
    
    
    2008Top managers
    
    
    56
    
    
    
    61
    
    
    
    +5Middle managers
    
    
    127
    
    
    
    141
    
    
    
    +14Employees
    
    
    1.306
    
    
    
    1.125
    
    
    
    -181Blue collars
    
    
    6.080
    
    
    
    5.608
    
    
    
    -472Total
    
    
    7,569
    
    
    
    6,935
    
    
    
    -634
    29.6 million
  54




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##### Table of Contents



Cassa
Integrazione Guadagni
     
    
    has launched a new organization, mainly directed at the customer, which is able to act
efficiently and effectively to guarantee further management simplification and cost
rationalization. For the Group, this new organization became necessary to ensure the
creation of value for the consumer and all the stakeholders going forward;
 
    
    has launched a revised management plan, entitled My Way, whose objective is to
specify, by the end of 2010, the tools necessary to define the HR management model founded
on the uniqueness of the Company and on the entrepreneur approach. To this end, the
Groups partnership with IULM University of Milan, which has launched a real program of
research in order to define both the Company values (My Vision) and the managing
guidelines (My Making), has been crucial in developing this plan. The results of the plan
will be reflected in the new Values Charter and Natuzzi Management Style;
 
    
    has joined the Business International Training Network, which offers different
services, such as institutional and management events about economics, finance, and
development; and
 
    
    has confirmed the initiatives of retraining and re-qualification for workers
participating in CIG, in order to facilitate a more effective reintegration of such
workers in the workplace through structured paths in the fields of IT, and workplace
safety.
   55




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##### Table of Contents



Item 7. Major Shareholders and Related Party Transactions
 
 Major Shareholders
    Number ofShares
    
    
    PercentOwned
    
    
    OwnedPasquale Natuzzi (1)
    
    
    29,358,089
    
    
    
    53.5
    %Schroder Investment Management North America Ltd
(2)
    
    
    4.085.100
    
    
    
    7.448
    %Quaeroq CVBA(3)
    
    
    2,760,400
    
    
    
    5.0
    %
 
 (1)
    
    Includes ADSs purchased on April 18, 2008. If Mr. Natuzzis Ordinary Shares are
aggregated with those held by members of the Natuzzi Family, the amount owned would be 32,158,091
and the percentage ownership of Ordinary Shares would be 58.7%.(2)
    
    According to the Schedule 13G filed with the SEC by Schroder Investment Management
North America on February 16,2010(3)
    
    According to the Schedule 13G filed with the SEC by Quaeroq CVBA on November
18, 2008.    56




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##### Table of Contents



Related Party Transactions
  
 Item 8. Financial Information
 
 Consolidated Financial Statements
  
 Export Sales
 
 
 Legal and Governmental Proceedings
       
  57




---



##### Table of Contents




 
 
 
 
 
 
    58




---



##### Table of Contents



Dividends
    
 Item 9. The Offer and Listing
 
 Trading Markets and Share Prices
   New York Stock ExchangePrice per ADSHigh
    
    
    Low(in US dollars)2005
    
    
    11.65
    
    
    
    6.762006
    
    
    8.65
    
    
    
    6.322007
    
    
    9.60
    
    
    
    4.362008
    
    
    4.63
    
    
    
    1.632009
    
    
    3.51
    
    
    
    1.002008First quarter
    
    
    4.63
    
    
    
    3.20Second quarter
    
    
    4.10
    
    
    
    3.16Third quarter
    
    
    4.04
    
    
    
    2.61Fourth quarter
    
    
    3.43
    
    
    
    1.63
  59




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##### Table of Contents



High
    
    
    Low2009First quarter
    
    
    1.96
    
    
    
    1.00Second quarter
    
    
    2.30
    
    
    
    1.00Third quarter
    
    
    2.79
    
    
    
    1.75Fourth quarter
    
    
    3.51
    
    
    
    2.60Monthly dataDecember 2009
    
    
    3.39
    
    
    
    3.03January 2010
    
    
    3.80
    
    
    
    3.26February 2010
    
    
    4.65
    
    
    
    3.40March 2010
    
    
    5.76
    
    
    
    4.50April 2010
    
    
    4.99
    
    
    
    4.51May 2010
    
    
    4.98
    
    
    
    3.44June 2010 (through June 18)
    
    
    3.73
    
    
    
    3.19
 
 Item 10. Additional Information
 
 By-laws
 Statuto
   General   1.00
   60




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##### Table of Contents



Authorization of Shares   
 Form and Transfer of Shares 
 Dividend Rights 
  Voting Rights 
  61




---



##### Table of Contents



Board of Directors 
 presidente amministratori delegati
  direttore generale
 e-mail
  62




---



##### Table of Contents



Statutory Auditors  ollegio sindacale
   63




---



##### Table of Contents



External Auditor 
    Meetings of Shareholders 
  64




---



##### Table of Contents



Il Sole 24 Ore, Corriere della Sera La
Repubblica
        65




---



##### Table of Contents



Preemptive Rights 
 Preference Shares. Other Securities 
  Segregation of Assets and Proceeds 
  Liquidation Rights  pari passu
 Purchase of Shares by the Company 
  66




---



##### Table of Contents



Notification of the Acquisition of Shares 
 Minority Shareholders Rights. Withdrawal Rights 
   67




---



##### Table of Contents



Liability for Mismanagement of Subsidiaries 
  
 Certain Contracts
  
 Exchange Controls
   68




---



##### Table of Contents




 
  
 Taxation
   69




---



##### Table of Contents



Italian Tax Considerations 
    70




---



##### Table of Contents



United States Tax Considerations
  71




---



##### Table of Contents



Taxation of Capital Gains
 Italian Tax Considerations 
   72




---



##### Table of Contents



United States Tax Considerations 
  Taxation of Distributions from Capital Reserves
 Italian Tax Considerations 
  73




---



##### Table of Contents



Other Italian Taxes
 Estate and Inheritance Tax 
 
    
    Transfers to a spouse or direct descendants or ancestors up to Euro
1,000,000 to each beneficiary are exempt from inheritance and gift tax. Transfers
in excess of such threshold will be taxed at a 4% rate on the value of the
Ordinary Shares or ADSs exceeding such threshold;
 
    
    Transfers between relatives within the fourth degree other than
siblings, and direct or indirect relatives-in-law within the third degree are
taxed at a rate of 6% on the value of the Ordinary Shares or ADSs (where
transfers between siblings up to a maximum value of Euro 100,000 for each
beneficiary are exempt from inheritance and gift tax); and
 
    
    Transfers by reason of gift or death of Ordinary Shares or ADSs to
persons other than those described above will be taxed at a rate of 8% on the
value of the Ordinary Shares or ADSs.
   
 Documents on Display
   74




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##### Table of Contents



Item 11. Quantitative and Qualitative Disclosures About Market Risk
   Exchange Rate Risks
     
     
 U.S.$ 22.2 million, 
  75




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##### Table of Contents



Euro equivalent of contractual amounts
    
    December 31,of forward exchange contracts as of
    
    2009
    
    
    2008U.S. dollars
    
    
    15,323
    
    
    
    62,561Euro
    
    
    10,714
    
    
    
    25,292British pounds
    
    
    6,652
    
    
    
    11,988Australian dollars
    
    
    5,164
    
    
    
    9,771Canadian dollars
    
    
    1,915
    
    
    
    11,463Swiss francs
    
    
    795
    
    
    
    1,973Norwegian kroner
    
    
    718
    
    
    
    2,492Swedish kroner
    
    
    587
    
    
    
    1,644Danish kroner
    
    
    470
    
    
    
    1,675Japanese yen
    
    
    311
    
    
    
    360Total
    
    
    42,649
    
    
    
    129,219
 Euro equivalent* of contractual amounts
    
    December 31,of zero-costs collar options as of
    
    2009
    
    
    2008U.S. dollars
    
    
    8,095
    
    
    
    0Total
    
    
    8,095
    
    
    
    0
 *
    
    The euro equivalent is prudentially evaluated at the upper strike-price of each zero-cost
collar. Depending on the market price of the EUR-USD exchange rate at every single maturity, the
euro equivalent (in thousands) coming from the exercise of the options would range from  8,095 to
 8,372.  
  December 31, 2009
    
    
    December 31, 2008Contract
    
    
    Unrealized
    
    
    Contract
    
    
    UnrealizedAmount
    
    
    gains (losses)
    
    
    Amount
    
    
    gains (losses)Assets
    
    
    13,281
    
    
    
    318
    
    
    
    38,898
    
    
    
    6,799Liabilities
    
    
    37,463
    
    
    
    (380
    )
    
    
    90,321
    
    
    
    (11,270
    )Total
    
    
    50,744
    
    
    
    (62
    )
    
    
    129,219
    
    
    
    (4,471
    )
  76




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##### Table of Contents



 5.4 million.
  Interest Rate Risks
 
  
 Item 12. Description of Securities Other than Equity Securities
  
 PART II
 
 Item 13. Defaults, Dividend Arrearages and Delinquencies
  
 Item 14. Material Modifications to the Rights of Security Holders and Use of Proceeds
  
 Item 15. Controls and Procedures
 (a) Disclosure Controls and Procedures 
  77




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##### Table of Contents



(b) Managements Annual Report on Internal Control Over Financial Reporting 
    (c ) Attestation Report of the Registered Public Accounting Firm
 Report of Independent Registered Public Accounting Firm
  Internal Control 
Integrated Framework
  78




---



##### Table of Contents



Internal
Control  Integrated Framework
   
  79




---



##### Table of Contents



Item 16. [Reserved]
 
 Item 16A. Audit Committee Financial Expert
  
 Item 16B. Code of Ethics
  
 Item 16C. Principal Accountant Fees and Services
  2009
    
    
    2008(in euros)Audit fees
    
    
    1,055,697
    
    
    
    1,090,681Audit-related fees
    
    
    
    
    
    
    Tax fees
    
    
    
    
    
    
    Other fees
    
    
    
    
    
    
    Total fees
    
    
    1,055,697
    
    
    
    1,090,681
    80




---



##### Table of Contents



Item 16D. Exemptions from the Listing Standards for Audit Committees.
  1)
    
    the board of statutory auditors is established and selected pursuant to Italian law expressly
permitting such a board;
 2)
    
    the board of statutory auditors is required under Italian law to be separate from the
Companys Board of Directors;
 3)
    
    the board of statutory auditors is not elected by management of the Company and no executive
officer of the Company is a member of the board of statutory auditors;
 4)
    
    Italian law provides for standards for the independence of the board of statutory auditors
from the Company and its management;
 5)
    
    the board of statutory auditors, in accordance with applicable Italian law and the Companys
governing documents, is responsible, to the extent permitted by Italian law, for the
appointment, retention and oversight of the work (including, to the extent permitted by law,
the resolution of disagreements between management and the auditor regarding financial
reporting) of any registered public accounting firm engaged for the purpose of preparing or
issuing an audit report or performing other audit, review or attest services for the Company,
and
 6)
    
    to the extent permitted by Italian law, the audit committee requirements of paragraphs
(b)(3), (b)(4) and (b)(5) of Rule 10A-3 apply to the Board of Statutory Auditors.
  
 Item 16E. Purchases of Equity Securities by the Issuer and Affiliated Purchasers
  
 Item 16F. Change in Registrants Certifying Accountant
    81




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##### Table of Contents



Item 16G. Corporate Governance
  società per azioni
 consiglio di amministrazione collegio sindacale revisore contabile
   82




---



##### Table of Contents



Independent Directors
 NYSE Domestic Company Standards
  Our Practice
 inscritto nel registro dei revisori contabili
 Executive Sessions
 NYSE Domestic Company Standards
 Our Practice
  83




---



##### Table of Contents



Audit Committee and Internal Audit Function
 NYSE Domestic Company Standards
 Our Practice
  Compensation Committee
 NYSE Domestic Company Standards
 Our Practice
 Nominating Committee
 NYSE Domestic Company Standards
 Our Practice
  84




---



##### Table of Contents



Corporate Governance and Code of Ethics
 NYSE Domestic Company Standards
 Our Practice
 Certifications as to Violations of NYSE Standards
 NYSE Domestic Company Standards
   85




---



##### Table of Contents



Our Practice
  Shareholder Approval of Adoption and Modification of Equity Compensation Plans
 NYSE Domestic Company Standards
 Our Practice
 
 PART III
 
 Item 17. Financial Statements
  
 Item 18. Financial Statements
  PageReport of Independent Registered Public Accounting Firm
    
    
    F-1Consolidated Balance Sheets as of December 31, 2009 and 2008
    
    
    F-2Consolidated Statements of Operations for the Years Ended December
31, 2009, 2008 and 2007
    
    
    F-3Consolidated Statements of Changes in Shareholders Equity for the
Years Ended December 31, 2009, 2008 and 2007
    
    
    F-4Consolidated Statements of Cash Flows for the Years Ended December
31, 2009, 2008 and 2007
    
    
    F-6Notes to the Consolidated Financial Statements
    
    
    F-8
  86




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##### Table of Contents



Item 19. Exhibits
 1.1
    
    
    English translation of the by-laws (Statuto) of the Company, as amended and restated as of
January 24, 2008 (incorporated by reference to the Form 20-F filed by Natuzzi S.p.A. with the
Securities Exchange Commission on June 30, 2008, file number 1-11854).2.1
    
    
    Deposit Agreement dated as of May 15, 1993, as amended and restated as of December 31, 2001,
among the Company, The Bank of New York, as Depositary, and owners and beneficial owners of
ADRs (incorporated by reference to the Form 20-F filed by Natuzzi S.p.A. with the Securities
and Exchange Commission on July 1, 2002, file number 1-11854).8.1
    
    
    List of Significant Subsidiaries.12.1
    
    
    Certification of the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002.12.2
    
    
    Certification of the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002.13.1
    
    
    Certifications pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.15.1
    
    
    Letter of Agreement from KPMG, dated June 29, 2010.
  87




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##### Table of Contents



Internal Control  Integrated Framework
  
  F-1




---



##### Table of Contents



Natuzzi S.p.A. and Subsidiaries
 
 Consolidated Balance Sheets

 as of December 31, 2009 and 2008
  December 31,
    
    
    December 31,2009
    
    
    2008ASSETSCurrent assets:Cash and cash equivalents (note 4)
    
    
    66,330
    
    
    
    47,307Marketable debt securities (note 5)
    
    
    4
    
    
    
    4Trade receivables, net (note 6)
    
    
    97,045
    
    
    
    122,783Other receivables (note 7)
    
    
    54,538
    
    
    
    46,185Inventories (note 8)
    
    
    81,565
    
    
    
    92,012Unrealized foreign exchange gains (note 24)
    
    
    318
    
    
    
    4,724Prepaid expenses and accrued income
    
    
    1,415
    
    
    
    1,259Deferred income taxes (note 14)
    
    
    702
    
    
    
    4,219301,917
    
    
    
    318,493Non current assets:Property plant and equipment (notes 9 and 21)
    
    
    405,276
    
    
    
    406,147Less accumulated depreciation (notes 9 and 21)
    
    
    (211,442
    )
    
    
    (194,366
    )Net property, plant and equipment
    
    
    193,834
    
    
    
    211,781Other assets (note 10)
    
    
    12,813
    
    
    
    13,342Deferred income taxes (note 14)
    
    
    
    
    
    
    179Total assets
    
    
    508,564
    
    
    
    543,795LIABILITIES AND SHAREHOLDERS EQUITYCurrent liabilities:Bank Overdrafts (note 11)
    
    
    760
    
    
    
    9,701Current portion of long-term debt (note 16)
    
    
    1,124
    
    
    
    514Accounts payable-trade (note 12)
    
    
    66,499
    
    
    
    68,577Accounts payable-other (note 13)
    
    
    29,266
    
    
    
    29,743Unrealized foreign exchange losses (note 24)
    
    
    380
    
    
    
    9,195Income taxes (note 14)
    
    
    3,708
    
    
    
    1,798Salaries, wages and related liabilities (note 15)
    
    
    15,054
    
    
    
    16,811Total current liabilities
    
    
    116,791
    
    
    
    136,339Long-term liabilities:Employees leaving entitlement (note 3 (n) )
    
    
    29,565
    
    
    
    31,677Long-term debt (note 16)
    
    
    5,857
    
    
    
    3,266Deferred income taxes (note 14)
    
    
    47
    
    
    
    Deferred income for capital grants (note 3 (m) )
    
    
    11,208
    
    
    
    12,058Other liabilities (note 17)
    
    
    18,209
    
    
    
    14,442Shareholders equity (note 18) :Share capital
    
    
    54,853
    
    
    
    54,853Reserves
    
    
    42,780
    
    
    
    42,780Additional paid-in capital
    
    
    8,282
    
    
    
    8,282Retained earnings
    
    
    219,112
    
    
    
    239,303Total equity attributable to Natuzzi
S.p.A. and subsidiares
    
    
    325,027
    
    
    
    345,218Non controlling interest (note 18)
    
    
    1,860
    
    
    
    795Total Shareholders equity
    
    
    326,887
    
    
    
    346,013Commitments and contingent liabilities (notes 20 and 23)
    
    
    
    
    
    
    Total liabilities and shareholders equity
    
    508,564
    
    
    543,795
 See accompanying notes to the consolidated financial statements
  F-2




---



##### Table of Contents



Natuzzi S.p.A. and Subsidiaries
 
 Consolidated Statements of Operations
 Years ended December 31, 2009, 2008 and 2007
  2009
    
    
    2008
    
    
    2007Net sales (note 21)
    
    
    515,352
    
    
    
    666,026
    
    
    
    634,402Cost of sales (note 22)
    
    
    (329,742
    )
    
    
    (478,770
    )
    
    
    (460,589
    )Gross profit
    
    
    185,610
    
    
    
    187,256
    
    
    
    173,813Selling expenses
    
    
    (149,596
    )
    
    
    (172,338
    )
    
    
    (173,885
    )General and administrative expenses
    
    
    (46,585
    )
    
    
    (49,914
    )
    
    
    (49,038
    )Operating loss
    
    
    (10,571
    )
    
    
    (34,996
    )
    
    
    (49,110
    )Other income (expense), net (note 23)
    
    
    3,121
    
    
    
    (25,818
    )
    
    
    (2,646
    )Loss before taxes
and noncontrolling interest
    
    
    (7,450
    )
    
    
    (60,814
    )
    
    
    (51,756
    )Income taxes (note 14)
    
    
    (9,802
    )
    
    
    (1,556
    )
    
    
    (11,387
    )Net loss
    
    
    (17,252
    )
    
    
    (62,370
    )
    
    
    (63,143
    )Net (income) loss attributable to noncontrolling interest
    
    
    (434
    )
    
    
    432
    
    
    
    496Net loss attributable to Natuzzi S.p.A. and Subsidiares
    
    
    (17,686
    )
    
    
    (61,938
    )
    
    
    (62,647
    )Basic loss per share (note 3 (z))
    
    
    (0.32
    )
    
    
    (1.13
    )
    
    
    (1.14
    )Diluted loss per share (note 3 (z))
    
    
    (0.32
    )
    
    
    (1.13
    )
    
    
    (1.14
    )
 See accompanying notes to the consolidated financial statements
  F-3




---



##### Table of Contents



Natuzzi S.p.A. and Subsidiaries
 
 Consolidated Statements of Changes in Shareholders Equity
 Years ended December 31, 2009, 2008 and 2007
  Share Capital
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    EquityNumber of
    
    
    
    
    
    
    
    
    
    
    Additional
    
    
    
    
    
    
    attributable to
    
    
    
    
    
    
    TotalOrdinary
    
    
    
    
    
    
    
    
    
    
    paid in
    
    
    Retained
    
    
    Natuzzi
    
    
    Noncontrolling
    
    
    Shareholdersshares
    
    
    Amount
    
    
    Reserves
    
    
    capital
    
    
    earnings
    
    
    S.p.A.
    
    
    interest
    
    
    equityBalances at December 31, 2006
    
    
    54,738,538
    
    
    
    54,739
    
    
    
    42,292
    
    
    
    8,282
    
    
    
    373,529
    
    
    
    478,842
    
    
    
    605
    
    
    
    479,447Increase share
capital
    
    
    85,689
    
    
    
    85
    
    
    
    
    
    
    
    
    
    
    
    (85
    )
    
    
    
    
    
    
    
    
    
    
    Exchange difference on
translation of financial
statement
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (4,598
    )
    
    
    (4,598
    )
    
    
    37
    
    
    
    (4,561
    )Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (62,647
    )
    
    
    (62,647
    )
    
    
    (496
    )
    
    
    (63,143
    )Balances at December 31, 2007
    
    
    54,824,227
    
    
    
    54,824
    
    
    
    42,292
    
    
    
    8,282
    
    
    
    306,199
    
    
    
    411,597
    
    
    
    146
    
    
    
    411,743Majority Shareholder contribution
    
    
    
    
    
    
    
    
    
    
    488
    
    
    
    
    
    
    
    
    
    
    
    488
    
    
    
    
    
    
    
    488Increase share
capital
    
    
    28,818
    
    
    
    29
    
    
    
    
    
    
    
    
    
    
    
    (29
    )
    
    
    
    
    
    
    
    
    
    
    Exchange difference on
translation of financial
statement
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (4,929
    )
    
    
    (4,929
    )
    
    
    (1,081
    )
    
    
    (3,848
    )Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (61,938
    )
    
    
    (61,938
    )
    
    
    (432
    )
    
    
    (62,370
    )Balances at December 31, 2008
    
    
    54,853,045
    
    
    
    54,853
    
    
    
    42,780
    
    
    
    8,282
    
    
    
    239,303
    
    
    
    345,218
    
    
    
    795
    
    
    
    346,013
  F-4




---



##### Table of Contents



Share Capital
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    EquityNumber of
    
    
    
    
    
    
    
    
    
    
    Additional
    
    
    
    
    
    
    attributable to
    
    
    
    
    
    
    Totalordinary
    
    
    
    
    
    
    
    
    
    paid in
    
    
    Retained
    
    
    Natuzzi
    
    
    Noncontrolling
    
    
    Shareholdersshares
    
    
    Amount
    
    
    Reserves
    
    
    capital
    
    
    earnings
    
    
    S.p.A.
    
    
    interest
    
    
    equityBalances at December 31, 2008
    
    
    54,853,045
    
    
    
    54,853
    
    
    
    42,780
    
    
    
    8,282
    
    
    
    239,303
    
    
    
    345,218
    
    
    
    795
    
    
    
    346,013Exchange difference on
translation of financial
statement
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,505
    )
    
    
    (2,505
    )
    
    
    (45
    )
    
    
    (2,550
    )Purchase noncontrolling interest
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (23
    )
    
    
    (23
    )Increase for share capital of
noncontrolling interest
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    699
    
    
    
    699Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (17,686
    )
    
    
    (17,686
    )
    
    
    434
    
    
    
    (17,252
    )Balances at December 31, 2009
    
    
    54,853,045
    
    
    
    54,853
    
    
    
    42,780
    
    
    
    8,282
    
    
    
    219,112
    
    
    
    325,027
    
    
    
    1,860
    
    
    
    326,887
 See accompanying notes to the consolidated financial statements
  F-5




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##### Table of Contents



Natuzzi S.p.A. and Subsidiaries
 
 Consolidated Statements of Cash Flows
 Years ended December 31, 2009, 2008 and 2007
  2009
    
    
    2008
    
    
    2007Cash flows from operating activities:Net loss
    
    
    (17,686
    )
    
    
    (61,938
    )
    
    
    (62,647
    )Adjustments to reconcile net earnings (loss) to net cash
provided by (used in) operating activities:Depreciation and amortization
    
    
    26,565
    
    
    
    31,086
    
    
    
    30,331Write off of fixed assets
    
    
    595
    
    
    
    1,189
    
    
    
    2,285Impairment of long lived assets
    
    
    
    
    
    
    4,703
    
    
    
    Employees leaving entitlement
    
    
    6,525
    
    
    
    7,026
    
    
    
    7,389Deferred income taxes
    
    
    3,743
    
    
    
    (3,107
    )
    
    
    8,463Non controlling interest
    
    
    434
    
    
    
    (432
    )
    
    
    (496
    )Loss on disposal of assets
    
    
    492
    
    
    
    284
    
    
    
    116Unrealized foreign exchange (gain) and losses
    
    
    (4,409
    )
    
    
    5,417
    
    
    
    4,517Deferred income for capital grants
    
    
    (850
    )
    
    
    (1,274
    )
    
    
    (743
    )Equity in affiliated company
    
    
    
    
    
    
    
    
    
    
    1,221Change in assets and liabilities:Receivables, net
    
    
    16,903
    
    
    
    (3,462
    )
    
    
    599Inventories
    
    
    10,842
    
    
    
    14,916
    
    
    
    (6,932
    )Prepaid expenses and accrued income
    
    
    (157
    )
    
    
    588
    
    
    
    108Accounts payable
    
    
    (4,766
    )
    
    
    (21,372
    )
    
    
    16,474Income taxes
    
    
    1,910
    
    
    
    213
    
    
    
    (3,026
    )Salaries, wages and related liabilities
    
    
    (1,832
    )
    
    
    (720
    )
    
    
    (4,143
    )Other liabilities
    
    
    3,795
    
    
    
    3,576
    
    
    
    406Employees leaving entitlement
    
    
    (8,637
    )
    
    
    (8,692
    )
    
    
    (9,315
    )Total adjustments
    
    
    51,153
    
    
    
    29,939
    
    
    
    47,254Net cash provided by (used in) operating activities
    
    
    (33,467
    )
    
    
    (31,999
    )
    
    
    (15,393
    )
  F-6




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##### Table of Contents



2009
    
    
    2008
    
    
    2007Cash flows from investing activities:Property, plant and equipment:Additions
    
    
    (4,191
    )
    
    
    (11,884
    )
    
    
    (21,445
    )Disposals
    
    
    1,137
    
    
    
    174
    
    
    
    589Other assets
    
    
    (4,382
    )
    
    
    (4,097
    )
    
    
    (5,039
    )Purchase of business, net of cash acquired
    
    
    (1,040
    )
    
    
    
    
    
    
    (230
    )Disposal of business and affiliated company
    
    
    
    
    
    
    2,262
    
    
    
    Net cash used in investing activities
    
    
    (8,476
    )
    
    
    (13,545
    )
    
    
    (26,125
    )Cash flows from financing activities:Long-term debt:Proceeds
    
    
    3,900
    
    
    
    2,038
    
    
    
    Repayments
    
    
    (699
    )
    
    
    (691
    )
    
    
    (318
    )Short-term borrowings
    
    
    (8,941
    )
    
    
    2,125
    
    
    
    3,775Majority Shareholder Capital contribution
    
    
    
    
    
    
    488
    
    
    
    Net cash provided by (used in) financing activities
    
    
    (5,740
    )
    
    
    3,960
    
    
    
    3,457Effect of translation adjustments on cash
    
    
    (228
    )
    
    
    1,432
    
    
    
    (2,589
    )Increase (decrease) in cash and cash equivalents
    
    
    19,023
    
    
    
    (40,152
    )
    
    
    (40,650
    )Cash and cash equivalents, beginning of the year
    
    
    47,307
    
    
    
    87,459
    
    
    
    128,109Cash and cash equivalents, end of the year
    
    
    66,330
    
    
    
    47,307
    
    
    
    87,459Supplemental disclosure of cash flow information:Cash paid during the year for interest
    
    
    130
    
    
    
    327
    
    
    
    665Cash paid during the year for income taxes
    
    
    5,258
    
    
    
    1,399
    
    
    
    5,409
 See accompanying notes to consolidated financial statements
  F-7




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##### Table of Contents



Notes to consolidated financial statements
  1.
    
    Description of business and Group composition
 The consolidated financial statements include the accounts of Natuzzi S.p.A. (Natuzzi or
the Company) and of its subsidiaries (together with the Company, the Group). The
Groups primary activity is the design, manufacture and marketing of contemporary and
traditional leather and fabric upholstered furniture.
 The subsidiaries included in the consolidation at December 31, 2009, together with the
related percentages of ownership, are as follows:
 Percent of
    
    
    RegisteredName
    
    ownership
    
    
    office
    
    
    ActivityItalsofa Nordeste S.A.
    
    
    100.00
    
    
    Salvador, Brazil
    
    
    
    (1)Italsofa
Shanghai Ltd.
    
    
    96.50
    
    
    Shanghai, China
    
    
    
    (1)Softaly
Shanghai Ltd.
    
    
    100.00
    
    
    Shanghai, China
    
    
    
    (1)Natuzzi China Ltd.
    
    
    100.00
    
    
    Shanghai, China
    
    
    
    (1)Italsofa Romania
    
    
    100.00
    
    
    Baia Mare, Romania
    
    
    
    (1)Natco S.p.A.
    
    
    99.99
    
    
    Bari, Italy
    
    
    
    (2)I.M.P.E. S.p.A.
    
    
    90.83
    
    
    Qualiano,Italy
    
    
    
    (3)Nacon S.p.A.
    
    
    100.00
    
    
    Bari, Italy
    
    
    
    (4)Lagene S.r.l.
    
    
    100.00
    
    
    Bari, Italy
    
    
    
    (4)Natuzzi Americas Inc.
    
    
    100.00
    
    
    High Point, NC, USA
    
    
    
    (4)Natuzzi Iberica S.A.
    
    
    100.00
    
    
    Madrid, Spain
    
    
    
    (4)Natuzzi Switzerland AG
    
    
    100.00
    
    
    Kaltbrunn, Switzerland
    
    
    
    (4)Natuzzi Nordic
    
    
    100.00
    
    
    Copenaghen, Denmark
    
    
    
    (4)Natuzzi Benelux S.A.
    
    
    100.00
    
    
    Geel, Belgium
    
    
    
    (4)Natuzzi Germany Gmbh
    
    
    100.00
    
    
    Dusseldorf, Germany
    
    
    
    (4)Natuzzi Sweden AB
    
    
    100.00
    
    
    Stockholm, Sweden
    
    
    
    (4)Natuzzi Japan KK
    
    
    100.00
    
    
    Tokyo, Japan
    
    
    
    (4)Natuzzi Services Limited
    
    
    100.00
    
    
    London, UK
    
    
    
    (4)Natuzzi
Trading Shanghai Ltd.
    
    
    100.00
    
    
    Shanghai, China
    
    
    
    (4)Natuzzi
Oceania Ltd.
    
    
    100.00
    
    
    Sidney, Australia
    
    
    
    (4)Italholding S.r.l.
    
    
    100.00
    
    
    Bari, Italy
    
    
    
    (5)Natuzzi Netherlands Holding
    
    
    100.00
    
    
    Amsterdam, Holland
    
    
    
    (5)Natuzzi Trade Service S.r.l.
    
    
    100.00
    
    
    Bari, Italy
    
    
    
    (6)Natuzzi United Kingdom Limited
    
    
    100.00
    
    
    London, UK
    
    
    
    (7)Kingdom of Leather Limited
    
    
    100.00
    
    
    London, UK
    
    
    
    (7)La Galleria Limited
    
    
    100.00
    
    
    London, UK
    
    
    
    (7)
 (1)
    
    Manufacture and distribution(2)
    
    Intragroup leather dyeing and finishing(3)
    
    Production and distribution of polyurethane foam  F-8




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##### Table of Contents



Notes to consolidated financial statements
  (4)
    
    Distribution(5)
    
    Investment holding(6)
    
    Transportation services(7)
    
    Dormant During October 2009, in an effort to maximize the efficiency of the Groups organizational
structure, Italsofa Bahia Ltd (97.99% owned by the Company) has been merged into the other
brazilian subsidiary Minuano Nordeste S.A. (wholly owned by the Company) whose name,
further, was changed in Italsofa Nordeste S.A.. Subsequent to the merger, the Company
acquired the remaining noncontrolling interest for a consideration of 23. The acquisition
did not result in any goodwill.
 In 2009 the Company incorporated two new subsidiaries, Natuzzi Trading Shanghai Ltd and
Natuzzi Oceania Ltd, which provide sales support for the Group in the respective country.
 In July 2009 the Company acquired 100% of a business composed by a store located in
Florence. The cash consideration paid by the Company for this acquisition was 125. This
business was operating as a Natuzzi franchisee. At the date of the acquisition the
franchisee agreement between Natuzzi and the original business had not expired. The
primary reason for this acquisition was the opportunity to maintain the market presence in
Florence. The main factor that contributed to the determination of the purchase price was
the presence of the stores in a key location. The acquisition was accounted for using the
acquisition method and it resulted in a goodwill of 85, which represents the excess of the
purchase price over the fair value of assets acquired and liabilities assumed. The
following table summarizes the estimated fair value of the assets acquired and liabilities
assumed at date of acquisition.
 Goodwill
    
    
    85Current assets
    
    
    40Purchase price
    
    
    125
 The results of this business acquisition have been included in the consolidated statement
of operations from the date of acquisition.
  F-9




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##### Table of Contents



Notes to consolidated financial statements
  In November 2009 the Company acquired 100% of a business composed by three Divani &
Divani by Natuzzi stores, located in Bologna, Cesena and Rimini, for a consideration of
892. This business was operating as a Natuzzi franchisee. At the date of the acquisition
the franchisee agreement between Natuzzi and the original business had not expired. The
primary reason for this acquisition was the opportunity to maintain the market presence in
Emilia Romagna region. The main factor that contributed to the determination of the
purchase price was the presence of the stores in key locations. The acquisition was
accounted for using the acquisition method and it resulted in a goodwill of 566, which
represents the excess of the purchase price over the fair value of assets acquired and
liabilities assumed. The following table summarizes the estimated fair value of the assets
acquired and liabilities assumed at date of acquisition.
 Goodwill
    
    
    566Fixed assets
    
    
    42Current assets
    
    
    358Current liabilities
    
    
    (74
    )Purchase price
    
    
    892
 The results of this business acquisition have been included in the consolidated statement
of operations from the date of the acquisition.
 During July 2008 the Company sold six retail stores to a third party for a consideration
of 912. The stores disposed of are located in the central part of Italy. Leather and
fabric upholstered furniture sold by these stores to final consumers were bought from
Natuzzi.
 On June 14, 2007, the Company acquired from a third party 100% of a business which main
asset was a store located in one of the several shopping and commercial areas of Rome
(Tiburtina area). The cash consideration paid by the Company for this acquisition was 230.
At the date of the acquisition there were no employees, inventory or revenues associated
with this asset. The net assets acquired were composed mainly as follows: (a) operating
lease agreement; (b) leasehold improvements incorporated in the store; (c) commercial
license authorization obtained from the Rome Municipality for trading sofas and other
furniture to the public. During 2008, the Company set up in this store the Natuzzis
layout selling system. The acquisition resulted in a goodwill of 225, which represents the
excess of purchase price over fair value of the acquired net assets. The fair value of
assets acquired was as follows:
 Goodwill
    
    
    225Leasehold improvements
    
    
    5Cash paid
    
    
    230
 The main factor that has contributed to the determination of the consideration paid is the
presence of the store in a key geographic location of Rome. The results of this business
acquisition have been included in the consolidated statement of operations from the date
of acquisition.
 In March 2007 the Company incorporated a new subsidiary, Natuzzi China Ltd, which is
engaged in the cutting of leather hides to be used as upholstery.
  F-10




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##### Table of Contents



Notes to consolidated financial statements
  2.
    
    Basis of preparation
 The financial statements utilized for the consolidation are the financial statements of
each Group company at December 31, 2009, 2008 and 2007. The 2009, 2008 and 2007 financial
statements have been approved by the respective shareholders of the relevant companies.
The 2009 consolidated financial statements have been approved by the Board of Directors of
the Company.
 The financial statements of subsidiaries are adjusted, where necessary, to conform to
Natuzzis accounting principles and policies, which are consistent with Italian legal
requirements governing financial statements considered in conjunction with established
accounting principles promulgated by the Italian Accounting Profession.
 Established accounting principles in the Republic of Italy vary in certain significant
respects from generally accepted accounting principles in the United States of America.
Information relating to the nature and effect of such differences is presented in note 26
to the consolidated financial statements.
 3.
    
    Summary of significant accounting policies
 The significant accounting policies followed in the preparation of the consolidated
financial statements are outlined below.
 a)
    
    Principles of consolidation
 The consolidated financial statements include all affiliates and companies that Natuzzi
directly or indirectly controls, either through majority ownership or otherwise. Control
is presumed to exist where more than one-half of a subsidiarys voting power is controlled
by the Company or the Company is able to govern the financial and operating policies of a
subsidiary or control the removal or appointment of a majority of a subsidiarys board of
directors. Where an entity either began or ceased to be controlled during the year, the
results of operations are included only from the date control commenced or up to date
control ceased. However, the pre-acquisition results of an acquired entity could be
reflected in the operating results of the acquiring entity provided that the acquisition
is completed within 6 months of the beginning of the acquiring entitys fiscal year.
 The assets and liabilities of subsidiaries are consolidated on a line-by-line basis and
the carrying value of intercompany investments held is eliminated against the related
shareholders equity accounts. The noncontrolling interests of consolidated subsidiaries
are separately reported in the consolidated balance sheets and consolidated statements of
operations. All intercompany balances and transactions are eliminated in consolidation.
  F-11




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##### Table of Contents



Notes to consolidated financial statements
  b) Foreign currency transactions
  c) Forward and collars exchange contracts
  d) Financial statements of foreign operations
    (a)
    
    if the foreign subsidiary was considered an integral part of the parent
company due to various factors including intercompany transactions, financing, and
cash flow indicators, its financial statements expressed in the foreign currency were
translated directly into euro from the local currency as follows: (i) year-end
exchange rate for monetary assets and liabilities, (ii) historical exchange rates for
non monetary assets and liabilities, share capital and retained earnings, and (iii)
average exchange rates during the year for revenues and expenses except for those
revenues and expenses related to assets and liabilities translated at historical
exchange rates. The resulting exchange differences on translation were recognized in
other income (expense), net, in the consolidated statements of operations;
  F-12




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##### Table of Contents



Notes to consolidated financial statements
  (b)
    
    if the foreign subsidiary was not considered an integral part of a parent
company, its financial statements expressed in the foreign currency were translated
directly into euro as follows: (i) year-end exchange rate for assets and liabilities,
(ii) historical exchange rates for share capital and retained earnings, and (iii)
average exchange rates during the year for revenues and expenses. The resulting
exchange differences on
translation were recorded as a direct adjustment to shareholders equity.
  e) Cash and cash equivalents
  f) Marketable debt securities
    g) Accounts receivable and payable
  h) Inventories
   F-13




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##### Table of Contents



Notes to consolidated financial statements
    i) Property, plant and equipment
  j) Other assets
   k) Impairment of long-lived assets and long-lived assets to be disposed of
   F-14




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##### Table of Contents



Notes to consolidated financial statements
  l) Income taxes
  m) Government grants
         F-15




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##### Table of Contents



Notes to consolidated financial statements
  n) Employees leaving entitlement
     o) Net sales
   p) Cost of sales, selling expenses, general and administrative expenses
   F-16




---



##### Table of Contents



Notes to consolidated financial statements
     q) Shipping and handling costs
  r) Advertising costs
   F-17




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##### Table of Contents



Notes to consolidated financial statements
  s) Commission expense
  t) Warranties
  u) Research and development costs
  v) Contingencies
  w) Use of estimates
   F-18




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##### Table of Contents



Notes to consolidated financial statements
  x) Earnings per share
  2009
    
    
    2008
    
    
    2007Net earnings (loss) attributable to
ordinary shareholders
    
    
    (17,686
    )
    
    
    (61,938
    )
    
    
    (62,647
    )Weighted-average number of ordinary
shares outstanding during the year
    
    
    54,853,045
    
    
    
    54,850,643
    
    
    
    54,817,086Increase resulting from assumed conversion
of share grants and options
    
    
    
    
    
    
    
    
    
    
    Weighted-average number of ordinary
shares and potential shares outstanding
during the year
    
    
    54,853,045
    
    
    
    54,850,643
    
    
    
    54,817,086
 4.
    
    Cash and cash equivalents
  2009
    
    
    2008Cash on hand
    
    
    176
    
    
    
    261Bank accounts in Euro
    
    
    22,974
    
    
    
    13,234Bank accounts in foreign currencies
    
    
    43,180
    
    
    
    33,812Total
    
    
    66,330
    
    
    
    47,307
  5.
    
    Marketable debt securities
  2009
    
    
    2008Foreign corporate bonds
    
    
    4
    
    
    
    4Total
    
    
    4
    
    
    
    4
  F-19




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Notes to consolidated financial statements
   Gross unrealized
    
    
    Fair2009
    
    Cost
    
    
    Gains
    
    
    Losses
    
    
    valueForeign corporate bonds
    
    
    4
    
    
    
    
    
    
    
    
    
    
    
    4Total
    
    
    4
    
    
    
    
    
    
    
    
    
    
    
    4
 Gross unrealized
    
    
    Fair2008
    
    Cost
    
    
    Gains
    
    
    Losses
    
    
    valueForeign corporate bonds
    
    
    4
    
    
    
    
    
    
    
    
    
    
    
    4Total
    
    
    4
    
    
    
    
    
    
    
    
    
    
    
    4
  6.
    
    Trade receivables, net
  2009
    
    
    2008North American customers
    
    
    33,778
    
    
    
    52,016Other foreign customers
    
    
    46,951
    
    
    
    45,962Domestic customers
    
    
    21,731
    
    
    
    27,474Trade bills receivable
    
    
    3,915
    
    
    
    5,946Total
    
    
    106,375
    
    
    
    131,398Allowance for doubtful accounts
    
    
    (9,330
    )
    
    
    (8,615
    )Total trade receivables, net
    
    
    97,045
    
    
    
    122,783
   F-20




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##### Table of Contents



Notes to consolidated financial statements
   Trade receivables
    
    N° of customers
    
    
    % on trade receivables2009
    
    
    2
    
    
    
    14
    %2008
    
    
    2
    
    
    
    16
    %2007
    
    
    3
    
    
    
    21
    %Net sales
    
    N° of customers
    
    
    % net sales2009
    
    
    2
    
    
    
    17
    %2008
    
    
    2
    
    
    
    22
    %2007
    
    
    2
    
    
    
    23
    %
    2009
    
    
    2008
    
    
    2007Balance, beginning of year
    
    
    8,615
    
    
    
    5,699
    
    
    
    6,057Charges-bad debt expense
    
    
    1,859
    
    
    
    3,550
    
    
    
    1,789Reductions-write off of uncollectible accounts
    
    
    (1,144
    )
    
    
    (634
    )
    
    
    (2,147
    )Balance, end of year
    
    
    9,330
    
    
    
    8,615
    
    
    
    5,699
  2009
    
    
    2008U.S. dollars
    
    
    27,354
    
    
    
    48,639Canadian dollars
    
    
    9,517
    
    
    
    6,489British pounds
    
    
    5,417
    
    
    
    4,193Australian dollars
    
    
    4,883
    
    
    
    3,759Other currencies
    
    
    3,704
    
    
    
    3,159Total
    
    
    50,875
    
    
    
    66,239
  F-21




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##### Table of Contents



Notes to consolidated financial statements
  7.
    
    Other receivables
  2009
    
    
    2008Receivable from National Institute for Social Security
    
    
    19,626
    
    
    
    10,729Government capital grants
    
    
    10,213
    
    
    
    10,633VAT
    
    
    7,246
    
    
    
    8,084Receivable from tax authorities
    
    
    7,024
    
    
    
    6,526Advances to suppliers
    
    
    2,608
    
    
    
    3,625Other
    
    
    7,821
    
    
    
    6,588Total
    
    
    54,538
    
    
    
    46,185
     8.
    
    Inventories
  2009
    
    
    2008Leather and other raw materials
    
    
    42,802
    
    
    
    52,049Goods in process
    
    
    12,254
    
    
    
    13,868Finished products
    
    
    26,509
    
    
    
    26,095Total
    
    
    81,565
    
    
    
    92,012
   F-22




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##### Table of Contents



Notes to consolidated financial statements
  9.
    
    Property, plant and equipment and accumulated depreciation
  Cost or
    
    
    Accumulated
    
    
    Annual rate of2009
    
    valuation
    
    
    depreciation
    
    
    depreciationLand and industrial buildings
    
    
    193,700
    
    
    
    (54,590
    )
    
    
    0  10
    %Machinery and equipment
    
    
    118,122
    
    
    
    (93,245
    )
    
    
    10  25
    %Airplane
    
    
    24,075
    
    
    
    (8,667
    )
    
    
    3
    %Office furniture and equipment
    
    
    23,420
    
    
    
    (21,120
    )
    
    
    10  20
    %Retail gallery and store furnishings
    
    
    31,058
    
    
    
    (24,217
    )
    
    
    25  35
    %Transportation equipment
    
    
    5,821
    
    
    
    (4,941
    )
    
    
    20  25
    %Leasehold improvements
    
    
    8,508
    
    
    
    (4,662
    )
    
    
    10  20
    %Construction in progress
    
    
    572
    
    
    
    
    
    
    
    Total
    
    
    405,276
    
    
    
    (211,442
    )
 Cost or
    
    
    Accumulated
    
    
    Annual rate of2008
    
    valuation
    
    
    depreciation
    
    
    depreciationLand and industrial buildings
    
    
    193,108
    
    
    
    (48,946
    )
    
    
    0  10
    %Machinery and equipment
    
    
    118,521
    
    
    
    (86,608
    )
    
    
    10  25
    %Airplane
    
    
    24,075
    
    
    
    (7,946
    )
    
    
    6
    %Office furniture and equipment
    
    
    23,503
    
    
    
    (19,700
    )
    
    
    10  20
    %Retail gallery and store furnishings
    
    
    31,753
    
    
    
    (22,111
    )
    
    
    25  35
    %Transportation equipment
    
    
    6,038
    
    
    
    (5,159
    )
    
    
    20  25
    %Leasehold improvements
    
    
    8,545
    
    
    
    (3,896
    )
    
    
    10  20
    %Construction in progress
    
    
    604
    
    
    
    
    
    
    
    Total
    
    
    406,147
    
    
    
    (194,366
    )
     F-23




---



##### Table of Contents



Notes to consolidated financial statements
        F-24




---



##### Table of Contents



Notes to consolidated financial statements
  10.
    
    Other assets
  2009
    
    
    2008Software and other
    
    
    28,952
    
    
    
    25,384Goodwill
    
    
    9,136
    
    
    
    12,538Equity in affiliated enterprise
    
    
    1,429
    
    
    
    1,429Total, gross
    
    
    39,517
    
    
    
    39,351Less accumulated amortization
    
    
    (26,704
    )
    
    
    (26,009
    )Total, net
    
    
    12,813
    
    
    
    13,342
  Gross carrying
    
    
    Accumulated
    
    
    Net book2009
    
    amount
    
    
    depreciation
    
    
    valueSoftware
    
    
    21,276
    
    
    
    (13,746
    )
    
    
    7,530Trademarks, patents and other
    
    
    7,676
    
    
    
    (6,048
    )
    
    
    1,628Total
    
    
    28,952
    
    
    
    (19,794
    )
    
    
    9,158
 Gross carrying
    
    
    Accumulated
    
    
    Net book2008
    
    amount
    
    
    depreciation
    
    
    valueSoftware
    
    
    17,555
    
    
    
    (10,896
    )
    
    
    6,659Trademarks, patents and other
    
    
    7,829
    
    
    
    (5,978
    )
    
    
    1,851Total
    
    
    25,384
    
    
    
    (16,874
    )
    
    
    8,510
   2009
    
    
    2008Gross carrying amount
    
    
    9,136
    
    
    
    12,538Less accumulated depreciation
    
    
    (6,910
    )
    
    
    (9,135
    )Net book value
    
    
    2,226
    
    
    
    3,403
  F-25




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##### Table of Contents



Notes to consolidated financial statements
    Balance as of December 31, 2007
    
    
    6,686Write-off for disposal
    
    
    (776
    )Amortization
    
    
    (2,507
    )Balance as of December 31, 2008
    
    
    3,403Acquisition of four retail stores
    
    
    651Amortization
    
    
    (1,828
    )Balance as of December 31, 2009
    
    
    2,226
   11.
    
    Bank overdrafts
  2009
    
    
    2008Bank overdrafts
    
    
    760
    
    
    
    9,701
   2009
    
    
    2008
    
    
    2007Bank borrowings
    
    
    
    
    
    
    6.22
    %
    
    
    6.18
    %Bank overdrafts
    
    
    1.18
    %
    
    
    3.31
    %
    
    
    5.03
    %
  F-26




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##### Table of Contents



Notes to consolidated financial statements
   12.
    
    Accounts payable-trade
  13.
    
    Accounts payable-other
  2009
    
    
    2008Provision for warranties
    
    
    8,706
    
    
    
    10,717Advances from customers
    
    
    6,820
    
    
    
    5,953Cooperative advertising and quantity discount
    
    
    4,376
    
    
    
    4,123Withholding taxes on payroll and on others
    
    
    2,571
    
    
    
    2,301Payable to noncontrolling interests for dividends
    
    
    
    
    
    
    593Other
    
    
    6,793
    
    
    
    6,056Total
    
    
    29,266
    
    
    
    29,743
  2009
    
    
    2008
    
    
    2007Balance, beginning of year
    
    
    10,717
    
    
    
    8,627
    
    
    
    6,561Charges to profit and loss
    
    
    227
    
    
    
    4,735
    
    
    
    4,962Reductions for utilization
    
    
    (2,238
    )
    
    
    (2,645
    )
    
    
    (2,896
    )Balance, end of year
    
    
    8,706
    
    
    
    10,717
    
    
    
    8,627
 14.
    
    Taxes on income
  2009
    
    
    2008
    
    
    2007IRES (state tax)
    
    
    27.50
    %
    
    
    27.50
    %
    
    
    33.00
    %IRAP (regional tax)
    
    
    3.90
    %
    
    
    3.90
    %
    
    
    4.25
    %
  F-27




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##### Table of Contents



Notes to consolidated financial statements
         2009
    
    
    2008
    
    
    2007Domestic
    
    
    (36,319
    )
    
    
    (30,986
    )
    
    
    (47,137
    )Foreign
    
    
    28,869
    
    
    
    (29,828
    )
    
    
    (4,619
    )Total
    
    
    (7,450
    )
    
    
    (60,814
    )
    
    
    (51,756
    )
  F-28




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##### Table of Contents



Notes to consolidated financial statements
   2009
    
    
    2008
    
    
    2007Expected income tax (benefit) expense charge
at full tax rates
    
    
    (2,049
    )
    
    
    (16,724
    )
    
    
    (17,079
    )Effects of:Tax exempt income
    
    
    (2,570
    )
    
    
    (2,489
    )
    
    
    (6,320
    )Aggregate effect of different tax
rates in foreign jurisdictions
    
    
    (2,855
    )
    
    
    (3,258
    )
    
    
    (2,903
    )Italian regional tax
    
    
    1,304
    
    
    
    2,057
    
    
    
    1,793Non-deductible expenses
    
    
    2,194
    
    
    
    3,384
    
    
    
    3,286Provisions for contingent liabilities
    
    
    380
    
    
    
    373
    
    
    
    566Depreciation and impairment of goodwill
    
    
    5
    
    
    
    228
    
    
    
    273Effect of net change in valuation allowance
established against deferred tax assets
    
    
    13,121
    
    
    
    18,799
    
    
    
    28,503Effect of change in tax rates
    
    
    
    
    
    
    
    
    
    
    3,809Tax effect of unremitted earnings
    
    
    271
    
    
    
    (814
    )
    
    
    (541
    )Actual tax charge
    
    
    9,802
    
    
    
    1,556
    
    
    
    11,387
   2009
    
    
    2008
    
    
    2007Current:Italian
    
    
    1,684
    
    
    
    2,057
    
    
    
    1,331Foreign
    
    
    4,375
    
    
    
    2,606
    
    
    
    1,593Total (a)
    
    
    6,059
    
    
    
    4,663
    
    
    
    2,924Deferred:Italian
    
    
    
    
    
    
    
    
    
    
    7,507Foreign
    
    
    3,743
    
    
    
    (3,107
    )
    
    
    956Total (b)
    
    
    3,743
    
    
    
    (3,107
    )
    
    
    8,463Total (a + b)
    
    
    9,802
    
    
    
    1,556
    
    
    
    11,387
   F-29




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##### Table of Contents



Notes to consolidated financial statements
   2009
    
    
    2008Deferred tax assets:Tax loss carryforwards
    
    
    62,240
    
    
    
    51,847Provision for warranties
    
    
    2,501
    
    
    
    3,641Allowance for doubtful accounts
    
    
    2,663
    
    
    
    2,864Unrealized net losses on foreign exchange
    
    
    833
    
    
    
    2,798Impairment loss of long-lived assets
    
    
    1,959
    
    
    
    1,674One-time termination benefits
    
    
    562
    
    
    
    1,266Inventory obsolescence
    
    
    1,439
    
    
    
    1,187Goodwill
    
    
    1,384
    
    
    
    1,019Intercompany profit on inventory
    
    
    1,041
    
    
    
    803Provision for contingent liabilities
    
    
    1,163
    
    
    
    777Provision for sales representatives
    
    
    392
    
    
    
    398Other temporary differences
    
    
    1,092
    
    
    
    756Total gross deferred tax assets
    
    
    77,269
    
    
    
    69,030Less valuation allowance
    
    
    (74,626
    )
    
    
    (62,452
    )Net deferred tax assets (a)
    
    
    2,643
    
    
    
    6,578Deferred tax liabilities:Unrealized net gains on foreign exchange
    
    
    (562
    )
    
    
    (935
    )Unremitted earnings of subsidiaries
    
    
    (856
    )
    
    
    (585
    )Government grants
    
    
    (570
    )
    
    
    (570
    )Other temporary differences
    
    
    
    
    
    
    (90
    )Total deferred tax liabilities (b)
    
    
    (1,988
    )
    
    
    (2,180
    )Net deferred tax assets (a + b)
    
    
    655
    
    
    
    4,398
    F-30




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##### Table of Contents



Notes to consolidated financial statements
     2009
    
    Current
    
    
    Non current
    
    
    TotalGross deferred tax assets
    
    
    11,860
    
    
    
    65,409
    
    
    
    77,269Valuation allowance
    
    
    (10,643
    )
    
    
    (63,983
    )
    
    
    (74,626
    )Net deferred tax assets
    
    
    1,217
    
    
    
    1,426
    
    
    
    2,643Deferred tax liabilities
    
    
    (515
    )
    
    
    (1,473
    )
    
    
    (1,988
    )Net deferred tax assets
    
    
    702
    
    
    
    (47
    )
    
    
    655
 2008
    
    Current
    
    
    Non current
    
    
    TotalGross deferred tax assets
    
    
    14,748
    
    
    
    54,282
    
    
    
    69,030Valuation allowance
    
    
    (9,504
    )
    
    
    (52,948
    )
    
    
    (62,452
    )Net deferred tax assets
    
    
    5,244
    
    
    
    1,334
    
    
    
    6,578Deferred tax liabilities
    
    
    (1,025
    )
    
    
    (1,155
    )
    
    
    (2,180
    )Net deferred tax assets
    
    
    4,219
    
    
    
    179
    
    
    
    4,398
  2010
    
    
    2,9052011
    
    
    5,4532012
    
    
    43,3942013
    
    
    20,8432014
    
    
    35,539Thereafter
    
    
    104,621Total
    
    
    212,755
   F-31




---



##### Table of Contents



Notes to consolidated financial statements
   15.
    
    Salaries, wages and related liabilities
  2009
    
    
    2008Salaries and wages
    
    
    4,939
    
    
    
    4,142Social security contributions
    
    
    6,987
    
    
    
    7,191Vacation accrual
    
    
    3,128
    
    
    
    3,385One-time termination benefits
    
    
    
    
    
    
    2,093Total
    
    
    15,054
    
    
    
    16,811
  16.
    
    Long-term debt
  2009
    
    
    20082.25% long-term debt payable in annual equal installments
with final payment due May 30, 2015
    
    
    1,702
    
    
    
    1,9610.25% long-term debt payable in semi-annual installments with
final payment due July 2013
    
    
    1,305
    
    
    
    1,6720.96% long-term debt payable in annual installments with
final payment due September 2010
    
    
    74
    
    
    
    1470.74% long-term debt payable in annual installments with
final payment due April 2018
    
    
    3,900
    
    
    
    Total long-term debt
    
    
    6,981
    
    
    
    3,780Less current installments
    
    
    (1,124
    )
    
    
    (514
    )Long-term debt, excluding current installments
    
    
    5,857
    
    
    
    3,266
  F-32




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##### Table of Contents



Notes to consolidated financial statements
    2011
    
    
    1,0692012
    
    
    1,0802013
    
    
    9122014
    
    
    722Thereafter
    
    
    2,074Total
    
    
    5,857
   17.
    
    Other liabilities
  2009
    
    
    2008Provision for contingent liabilities
    
    
    14,952
    
    
    
    10,545One-time termination benefits
    
    
    2,046
    
    
    
    2,512Termination indemnities for sales agents
    
    
    1,211
    
    
    
    1,385Total
    
    
    18,209
    
    
    
    14,442
     F-33




---



##### Table of Contents



Notes to consolidated financial statements
  18.
    
    Shareholders equity
  2009
    
    
    2008Mr. Pasquale Natuzzi
    
    
    53.5
    %
    
    
    53.5
    %Miss Anna Maria Natuzzi
    
    
    2.6
    %
    
    
    2.6
    %Mrs. Annunziata Natuzzi
    
    
    2.5
    %
    
    
    2.5
    %Public investors
    
    
    41.4
    %
    
    
    41.4
    %100
    %
    
    
    100
    %
  2009
    
    
    2008Legal reserve
    
    
    11,199
    
    
    
    11,199Monetary revaluation reserve
    
    
    1,344
    
    
    
    1,344Government capital grants reserve
    
    
    29,749
    
    
    
    29,749Majority shareholder capital contribution
    
    
    488
    
    
    
    488Total
    
    
    42,780
    
    
    
    42,780
       F-34




---



##### Table of Contents



Notes to consolidated financial statements
  Noncontrolling interest
  19.
    
    Share grants and options
 
    F-35




---



##### Table of Contents



Notes to consolidated financial statements
     AdditionalMBO 2004
    
    Shares
    
    
    Options
    
    
    options
    
    
    TotalBalance at December 31, 2008
    
    
    
    
    
    
    123,023
    
    
    
    
    
    
    
    123,023Granted
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Exercised
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Forfeited
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Expired
    
    
    
    
    
    
    (123,023
    )
    
    
    
    
    
    
    (123,023
    )Balance at December 31, 2009
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Weighted average remaining
contractual life
    
    
    
    
    
    
    
    
    
    
    
 AdditionalMBO 2005
    
    Shares
    
    
    Options
    
    
    options
    
    
    TotalBalance at December 31, 2008
    
    
    
    
    
    
    82,721
    
    
    
    
    
    
    
    82,721Granted
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Exercised
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Forfeited
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Expired
    
    
    
    
    
    
    (82,721
    )
    
    
    
    
    
    
    (82,721
    )Balance at December 31, 2009
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Weighted average remaining
contractual life
    
    
    
    
    
    
    
    
    
    
    
  F-36




---



##### Table of Contents



Notes to consolidated financial statements
          F-37




---



##### Table of Contents



Notes to consolidated financial statements
  20.
    
    Commitments and contingent liabilities
  2010
    
    
    16,2452011
    
    
    14,9802012
    
    
    13,6512013
    
    
    12,0022014
    
    
    9,853Thereafter
    
    
    20,707Total
    
    
    87,438
      F-38




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##### Table of Contents



Notes to consolidated financial statements
    21.
    
    Segmental and geographical information
   2009
    
    
    2008
    
    
    2007Leather upholstered furniture
    
    
    413,751
    
    
    
    535,178
    
    
    
    502,913Fabric upholstered furniture
    
    
    36,805
    
    
    
    52,607
    
    
    
    60,597Total
    
    
    450,556
    
    
    
    587,785
    
    
    
    563,510
   F-39




---



##### Table of Contents



Notes to consolidated financial statements
   2009
    
    
    2008
    
    
    2007Sales of upholstered furnitureUnited States of America
    
    
    103,174
    
    
    
    165,445
    
    
    
    159,289Italy
    
    
    53,454
    
    
    
    65,739
    
    
    
    68,734England
    
    
    29,701
    
    
    
    31,458
    
    
    
    31,965Canada
    
    
    28,076
    
    
    
    37,345
    
    
    
    34,190France
    
    
    27,500
    
    
    
    36,311
    
    
    
    29,433Spain
    
    
    27,304
    
    
    
    37,383
    
    
    
    41,677Belgium
    
    
    26,665
    
    
    
    27,572
    
    
    
    24,138Germany
    
    
    24,491
    
    
    
    27,045
    
    
    
    26,714Holland
    
    
    14,371
    
    
    
    16,965
    
    
    
    15,594Australia
    
    
    12,118
    
    
    
    16,172
    
    
    
    15,354Other countries (none greater than 2%)
    
    
    103,702
    
    
    
    126,350
    
    
    
    116,422Total
    
    
    450,556
    
    
    
    587,785
    
    
    
    563,510
 2009
    
    
    2008Long lived assetsItaly
    
    
    108,621
    
    
    
    120,883Romania
    
    
    24,577
    
    
    
    27,366China
    
    
    20,579
    
    
    
    22,572United States of America
    
    
    14,982
    
    
    
    16,761Brazil
    
    
    17,572
    
    
    
    15,069Other countries
    
    
    7,503
    
    
    
    9,130Total
    
    
    193,834
    
    
    
    211,781
  22.
    
    Cost of sales
  2009
    
    
    2008
    
    
    2007Opening inventories
    
    
    92,012
    
    
    
    107,290
    
    
    
    100,358Purchases
    
    
    195,783
    
    
    
    301,811
    
    
    
    308,234Labor
    
    
    78,505
    
    
    
    97,720
    
    
    
    101,664Third party manufacturers
    
    
    10,627
    
    
    
    18,474
    
    
    
    16,499Other manufacturing costs
    
    
    34,380
    
    
    
    45,487
    
    
    
    41,124Closing inventories
    
    
    (81,565
    )
    
    
    (92,012
    )
    
    
    (107,290
    )Total
    
    
    329,742
    
    
    
    478,770
    
    
    
    460,589
  F-40




---



##### Table of Contents



Notes to consolidated financial statements
   23.
    
    Other income (expense), net
  2009
    
    
    2008
    
    
    2007Interest income
    
    
    482
    
    
    
    1,614
    
    
    
    3,557Interest expense and bank commissions
    
    
    (1,624
    )
    
    
    (1,855
    )
    
    
    (1,884
    )Interest (expense) income, net
    
    
    (1,142
    )
    
    
    (241
    )
    
    
    1,673Gains (losses) on foreign exchange, net
    
    
    6,931
    
    
    
    (6,589
    )
    
    
    (8,096
    )Unrealized exchange gains (losses)
on exchange derivative instruments, net
    
    
    (62
    )
    
    
    (4,471
    )
    
    
    946Gains (losses) on foreign exchange, net
    
    
    6,869
    
    
    
    (11,060
    )
    
    
    (7,150
    )Other, net
    
    
    (2,606
    )
    
    
    (14,517
    )
    
    
    2,831Total
    
    
    3,121
    
    
    
    (25,818
    )
    
    
    (2,646
    )
  2009
    
    
    2008
    
    
    2007Net realized (losses) gains on
exchange derivative instruments
    
    
    (3,101
    )
    
    
    (1,263
    )
    
    
    5,877Net realized gains (losses) on accounts
receivable and payable
    
    
    2,083
    
    
    
    (6,281
    )
    
    
    (3,865
    )Net unrealized gains (losses) on
accounts receivable and payable
    
    
    7,949
    
    
    
    955
    
    
    
    (10,108
    )Total
    
    
    6,931
    
    
    
    (6,589
    )
    
    
    (8,096
    )
  F-41




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Notes to consolidated financial statements
   2009
    
    
    2008
    
    
    2007Provisions for contingent liabilities
    
    
    (3,846
    )
    
    
    (3,200
    )
    
    
    (2,956
    )Settlement of INPS contingent liability
    
    
    (1,080
    )
    
    
    
    
    
    
    Impairment losses of long-lived assets
    
    
    
    
    
    
    (4,703
    )
    
    
    One-time termination benefits
    
    
    
    
    
    
    (4,605
    )
    
    
    Tax refund
    
    
    
    
    
    
    
    
    
    
    2,961Write off of a provision
    
    
    
    
    
    
    
    
    
    
    1,500Income tax not due
    
    
    
    
    
    
    
    
    
    
    668Write off of fixed assets
    
    
    (595
    )
    
    
    (1,189
    )
    
    
    (2,285
    )Other, net
    
    
    2,915
    
    
    
    (820
    )
    
    
    2,943Total
    
    
    (2,606
    )
    
    
    (14,517
    )
    
    
    2,831
 Provisions for contingent liabilities
           F-42




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Notes to consolidated financial statements
   Settlement of INPS contingent liability
  Impairment losses of long-lived assets
    F-43




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##### Table of Contents



Notes to consolidated financial statements
  One-time termination benefits
   Tax refund
  Write off of a provision
   F-44




---



##### Table of Contents



Notes to consolidated financial statements
  Income tax not due
  Write off of fixed assets
  24.
    
    Financial instruments and risk management
   F-45




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##### Table of Contents



Notes to consolidated financial statements
   2009
    
    
    2008U.S. dollars
    
    
    23,418
    
    
    
    62,561Euro
    
    
    10,714
    
    
    
    25,292Canadian dollars
    
    
    1,915
    
    
    
    11,463British pounds
    
    
    6,652
    
    
    
    11,988Australian dollars
    
    
    5,164
    
    
    
    9,771Swiss francs
    
    
    795
    
    
    
    1,973Norwegian kroner
    
    
    718
    
    
    
    2,492Swedish kroner
    
    
    587
    
    
    
    1,644Danish kroner
    
    
    470
    
    
    
    1,675Japanese yen
    
    
    311
    
    
    
    360Total
    
    
    50,744
    
    
    
    129,219
  2009
    
    
    2008Contract
    
    
    Unrealized
    
    
    Contract
    
    
    Unrealizedamount
    
    
    gains (losses)
    
    
    amount
    
    
    gains (losses)Assets
    
    
    13,281
    
    
    
    318
    
    
    
    38,898
    
    
    
    6,799Liabilities
    
    
    37,463
    
    
    
    (380
    )
    
    
    90,321
    
    
    
    (11,270
    )Total
    
    
    50,744
    
    
    
    (62
    )
    
    
    129,219
    
    
    
    (4,471
    )
      F-46




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Notes to consolidated financial statements
  25.
    
    Fair value of financial instruments
  2009
    
    
    2008Carrying
    
    
    Fair
    
    
    Carrying
    
    
    Fairvalue
    
    
    value
    
    
    value
    
    
    valueAssets:- Marketable debts securities
    
    
    4
    
    
    
    4
    
    
    
    4
    
    
    
    4Liabilities:- Long-term debt
    
    
    6,981
    
    
    
    6,214
    
    
    
    3,780
    
    
    
    2,906
    26.
    
    Application of generally accepted accounting principles in the United States of America
    F-47




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Notes to consolidated financial statements
   Reconciliation of net loss:
 2009
    
    
    2008
    
    
    2007Net loss under Italian GAAP
    
    
    (17,686
    )
    
    
    (61,938
    )
    
    
    (62,647
    )Adjustments to reported income:(a) Revaluation of property,
plant and equipment
    
    
    27
    
    
    
    27
    
    
    
    27(b) Government grants
    
    
    610
    
    
    
    811
    
    
    
    1,188(c) Revenue recognition
    
    
    (2,652
    )
    
    
    2,330
    
    
    
    1,887(e) Goodwill and intangible assets
    
    
    1,505
    
    
    
    (2,634
    )
    
    
    1,970(f) Share grants and options
    
    
    
    
    
    
    (2
    )
    
    
    (56
    )(g) Translation of foreign financial statements
    
    
    (5,193
    )
    
    
    753
    
    
    
    191(h) One-time termination benefits
    
    
    (2,559
    )
    
    
    4,605
    
    
    
    (i) Impairment of long-lived assets
    
    
    (12
    )
    
    
    400
    
    
    
    Tax effect of US GAAP adjustments
    
    
    223
    
    
    
    (14
    )
    
    
    (2,567
    )Net loss in conformity with US GAAP
    
    
    (25,737
    )
    
    
    (55,662
    )
    
    
    (60,007
    )Basic loss per share in conformity
with US GAAP
    
    
    (0.47
    )
    
    
    (1.02
    )
    
    
    (1.09
    )Diluted loss per share in conformity
with US GAAP
    
    
    (0.47
    )
    
    
    (1.02
    )
    
    
    (1.09
    )
 Reconciliation of equity attributable to Natuzzi S.p.A. and subsidiaries:
 2009
    
    
    2008Total equity attributable to Natuzzi S.p.A.
and subsidiaries under Italian GAAP
    
    
    325,027
    
    
    
    345,218(a) Revaluation of property, plant and equipment
    
    
    (507
    )
    
    
    (534
    )(b) Government grants
    
    
    (11,427
    )
    
    
    (12,037
    )(c) Revenue recognition
    
    
    (4,695
    )
    
    
    (2,043
    )(e) Goodwill and intangible assets
    
    
    6,226
    
    
    
    4,721(g) Translation of foreign financial statements
    
    
    13,208
    
    
    
    15,895(h) One-time termination benefits
    
    
    2,046
    
    
    
    4,605(i) Impairment of long-lived assets
    
    
    388
    
    
    
    400Tax effect of US GAAP adjustments
    
    
    (2,700
    )
    
    
    (2,923
    )Equity attributable to Natuzzi S.p.A.
and subsidiaries in conformity with US GAAP
    
    
    327,566
    
    
    
    353,302
  F-48




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Notes to consolidated financial statements
   Condensed Consolidated Balance Sheets as at December 31, 2009 and 2008
 December 31, 2009
    
    
    December 31, 2008ASSETSCurrent assets
    
    
    295,125
    
    
    
    314,695Non current assets
    
    
    225,962
    
    
    
    245,784Total assets
    
    
    521,087
    
    
    
    560,479LIABILITIES AND SHAREHOLDERS EQUITYCurrent liabilities
    
    
    118,354
    
    
    
    135,707Long-term liabilities
    
    
    73,307
    
    
    
    70,675Equity attributable to Natuzzi S.p.A.
    
    
    327,566
    
    
    
    353,302Non controlling interest
    
    
    1,860
    
    
    
    795Total Liabilities and Shareholders Equity
    
    
    521,087
    
    
    
    560,479
 Condensed Consolidated Statements of Operations Years Ended
December 31, 2009, 2008 and 2007
 2009
    
    
    2008
    
    
    2007Net sales
    
    
    506,026
    
    
    
    670,130
    
    
    
    635,883Cost of sales
    
    
    (333,667
    )
    
    
    (496,905
    )
    
    
    (468,654
    )Gross profit
    
    
    172,359
    
    
    
    173,225
    
    
    
    167,229Selling expenses
    
    
    (140,021
    )
    
    
    (163,265
    )
    
    
    (164,514
    )General and administrative expenses
    
    
    (46,585
    )
    
    
    (49,916
    )
    
    
    (49,094
    )Operating loss
    
    
    (14,247
    )
    
    
    (39,956
    )
    
    
    (46,379
    )Other expenses, net
    
    
    (1,248
    )
    
    
    (14,313
    )
    
    
    (2,207
    )Loss before taxes and noncontrolling interest
    
    
    (15,495
    )
    
    
    (54,269
    )
    
    
    (48,586
    )Income taxes
    
    
    (9,808
    )
    
    
    (1,825
    )
    
    
    (11,917
    )Net loss
    
    
    (25,303
    )
    
    
    (56,094
    )
    
    
    (60,503
    )Net loss attributable to the
noncontrolling interest
    
    
    (434
    )
    
    
    432
    
    
    
    496Net income (loss) attributable to
Natuzzi S.p.A. and subsidiaries
    
    
    (25,737
    )
    
    
    (55,662
    )
    
    
    (60,007
    )
  F-49




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Notes to consolidated financial statements
   Reconciliation of net sales from Italian GAAP to US GAAP
 2009
    
    
    2008
    
    
    2007Net sales Italian GAAP
    
    
    515,352
    
    
    
    666,026
    
    
    
    634,402(b) Government grants (reclassification)
    
    
    (953
    )
    
    
    (990
    )
    
    
    (1,026
    )(c) Revenue recognition (adjustment)
    
    
    (5,144
    )
    
    
    9,430
    
    
    
    6,828(k) Cost paid to resellers (reclassification)
    
    
    (3,229
    )
    
    
    (4,336
    )
    
    
    (4,321
    )Net sales US GAAP
    
    
    506,026
    
    
    
    670,130
    
    
    
    635,883
 Reconciliation of operating loss from Italian GAAP to US GAAP
 2009
    
    
    2008
    
    
    2007Operating loss Italian GAAP
    
    
    (10,571
    )
    
    
    (34,996
    )
    
    
    (49,110
    )(a) Revaluation property, plant and
equipment (adjustment)
    
    
    27
    
    
    
    27
    
    
    
    27(b) Government grants (adjustment)
    
    
    610
    
    
    
    811
    
    
    
    1,188(c) Revenue recognition (adjustment)
    
    
    (2,652
    )
    
    
    2,330
    
    
    
    1,887(e) Goodwill and intangible assets (adjustment)
    
    
    1,505
    
    
    
    (2,634
    )
    
    
    1,970(f) Share grants and options (adjustment)
    
    
    
    
    
    
    (2
    )
    
    
    (56
    )(h) One-time termination benefits
    
    
    (2,559
    )
    
    
    
    
    
    
    (i) Impairment of long-lived assets (reclassification)
    
    
    
    
    
    
    (4,703
    )
    
    
    (i) Impairment of long-lived assets (adjustment)
    
    
    (12
    )
    
    
    400
    
    
    
    (j) Write-off of tangible assets (reclassification)
    
    
    (595
    )
    
    
    (1,189
    )
    
    
    (2,285
    )Operating loss US GAAP
    
    
    (14,247
    )
    
    
    (39,956
    )
    
    
    (46,379
    )
  (a)
    
    Certain property, plant and equipment have been revalued in accordance with
Italian laws. The revalued amounts are depreciated for Italian GAAP purposes. US GAAP
does not allow for such revaluations,
and depreciation is based on historical costs. The revaluation primarily relates to
industrial buildings. The adjustment to net loss and shareholders equity represents
the reversal of excess depreciation recorded under Italian GAAP on revalued assets.
 (b)
    
    Under Italian GAAP until December 31, 2000 government grants related to
capital expenditures were recorded, net of tax, within reserves in shareholders
equity. Subsequent to that date such grants have been recorded as deferred income and
recognized in the consolidated statement of operations as revenue or other income, as
appropriate under Italian GAAP (see note 3 (m)), on a systematic basis over the
useful life of the asset.
  F-50




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##### Table of Contents



Notes to consolidated financial statements
  
    (c)
    
    Under Italian GAAP, the Group recognizes sales revenue, and accrued costs
associated with the sales revenue, at the time products are shipped from its
manufacturing facilities located in Italy and abroad. A significant part of the
products is shipped from factories directly to customers under terms that risks and
ownership are transferred to the customer when the customer takes possession of the
goods. These terms are delivered duty paid, delivered duty unpaid, delivered ex
quay and delivered at customer factory. Delivery to the customer generally occurs
within one to six weeks from the time of shipment.
  F-51




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Notes to consolidated financial statements
  
  2009
    
    
    2008Effects
    
    
    EffectsIncrease
    
    
    IncreaseConsolidated balance sheets
    
    (Decrease)
    
    
    (Decrease)Trade receivables, net
    
    
    (18,607
    )
    
    
    (13,463
    )Inventories
    
    
    11,818
    
    
    
    9,665Total effect on current assets (a)
    
    
    (6,789
    )
    
    
    (3,798
    )Accounts payable-trade
    
    
    (2,094
    )
    
    
    (1,755
    )Income taxes
    
    
    (413
    )
    
    
    (468
    )Total effect on current liabilities (b)
    
    
    (2,507
    )
    
    
    (2,223
    )Total effect on shareholders equity (a-b)
    
    
    (4,282
    )
    
    
    (1,575
    )
 Consolidated statements of operations
    
    2009
    
    
    2008
    
    
    2007Net sales
    
    
    (5,144
    )
    
    
    9,430
    
    
    
    6,828Gross profit
    
    
    (2,991
    )
    
    
    3,149
    
    
    
    2,950Operating income (loss)
    
    
    (2,652
    )
    
    
    2,330
    
    
    
    1,887Total effect on net operations
    
    
    (2,707
    )
    
    
    2,709
    
    
    
    235
 (d)
    
    On June 14, 2007 (see notes 1 and 26 (e)) the Company acquired from a third
party 100% of a business which main asset was a store located in one of the several
shopping and commercial areas of Rome (Tiburtina area). The cash consideration paid
by the Company for this acquisition
was 230. At the date of the acquisition there were no employees, inventory or
revenues associated with this asset. The net assets acquired were composed mainly as
follows: (a) operating lease agreement; (b) leasehold improvements incorporated in
the store; (c) commercial license authorization obtained from the Rome Municipality
for trading sofas and other furniture to the public. Further during 2008, the Company
started some construction work in order to set up in this store the Natuzzi layout
selling system.
 Determining Whether a Nonmonetary
Transaction Involves Receipt of Productive Assets or of a Business
  F-52




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Notes to consolidated financial statements
   US GAAP
    
    
    IT GAAP
    
    
    DifferenceGoodwill
    
    
    
    
    
    
    225
    
    
    
    (225
    )Intangible assets
    
    
    359
    
    
    
    
    
    
    
    359Leasehold improvements
    
    
    5
    
    
    
    5
    
    
    
    Deferred tax liabilities
    
    
    (134
    )
    
    
    
    
    
    
    (134
    )Cash paid
    
    
    230
    
    
    
    230
    
    
    
    
 (e)
    
    Under Italian GAAP, the Company amortizes the goodwill arising from
business acquisitions on a straight-line basis over a period of five years. US GAAP
states that goodwill acquired in a purchase business combination completed after July
1, 2001 is not amortized, but instead tested for impairment at least annually in
accordance with provisions of Accounting Standards Codification (ASC) No. 350,
Intangibles Goodwill and Other(Formerly FASB Statement No. 142).
 Impairment or Disposal of Long-Lived Assets
  Goodwill
    
    
    Intangibles
    
    
    Deferred taxesUS
    
    
    Italian
    
    
    US
    
    
    Italian
    
    
    US
    
    
    ItalianBalance at December 31, 2006
    
    
    7,760
    
    
    
    9,301
    
    
    
    6,792
    
    
    
    
    
    
    
    (2,381
    )
    
    
    (517
    )Acquisition of other stores
    
    
    
    
    
    
    225
    
    
    
    359
    
    
    
    
    
    
    
    (134
    )
    
    
    Amortization
    
    
    
    
    
    
    (2,840
    )
    
    
    (870
    )
    
    
    
    
    
    
    438
    
    
    
    (404
    )Balance at December 31, 2007
    
    
    7,760
    
    
    
    6,686
    
    
    
    6,281
    
    
    
    
    
    
    
    (2,077
    )
    
    
    (921
    )Impairment of goodwill
    
    
    (1,500
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Write off of goodwill
    
    
    
    
    
    
    (776
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Impairment of an intangible asset
    
    
    
    
    
    
    
    
    
    
    (3,583
    )
    
    
    
    
    
    
    1,218
    
    
    
    Amortization
    
    
    
    
    
    
    (2,507
    )
    
    
    (834
    )
    
    
    
    
    
    
    274
    
    
    
    (486
    )Balance at December 31, 2008
    
    
    6,260
    
    
    
    3,403
    
    
    
    1,864
    
    
    
    
    
    
    
    (585
    )
    
    
    (1,407
    )Acquisition of stores
    
    
    651
    
    
    
    651
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Amortization
    
    
    
    
    
    
    (1,827
    )
    
    
    (322
    )
    
    
    
    
    
    
    100
    
    
    
    (526
    )Balance at December 31, 2009
    
    
    6,911
    
    
    
    2,227
    
    
    
    1,542
    
    
    
    
    
    
    
    (485
    )
    
    
    (1,933
    )
  F-53




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Notes to consolidated financial statements
   Intangibles Goodwill and Other
    F-54




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##### Table of Contents



Notes to consolidated financial statements
   (f)
    
    Under Italian GAAP the Company does not record in the consolidated
statement of operations the compensation expense related to share based compensation
plans.
 Compensation  Stock Compensation Accounting for Stock-Based
Compensation
   F-55




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Notes to consolidated financial statements
        Expected life and performance related conditions
    
    2 years  5.3 yearsExpected volatility of the underlying share
    
    23%Expected dividend yield of the underlying share
    
    2%Risk-free interest rate
    
    2.43%  3.79%
 (g)
    
    Under Italian GAAP effective on December 31, 2005, the financial statements
of the foreign subsidiaries expressed in a foreign currency (which is deemed to be
the functional currency) are translated directly
into euro as follows: (i) year-end exchange rate for assets and liabilities, (ii)
historical exchange rates for share capital and retained earnings, and (iii) average
exchange rates during the year for revenues and expenses. The resulting exchange
differences on translation is recorded as a direct adjustment to shareholders equity
(see note 3 (d)).
  F-56




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Notes to consolidated financial statements
  Foreign Currency Transactions
  (h)
    
    Under Italian GAAP, the Company has recognized in the consolidated
statement of operations for the year ended December 31, 2008 the cost of one-time
termination benefits of 4,605 related to the employees to be terminated on a
involuntary basis as indicated in the plan of termination (see note 23). In
accordance with Italian GAAP this cost
has been recognized in 2008 as in such year the Company has formally decided to adopt
the termination plan (approval by the Board of Directors) and is able to reasonably
estimate the related one-time termination benefits. Before or on December 31, 2008
the Company did not make any official announcement or notification to the terminated
employees related to the work termination plan and one-time termination benefits.
Under Italian GAAP for the recognition of the cost for the termination benefits
related to the terminated workers the communication or announcement to third parties
of the plan of termination of workers is not relevant.
  F-57




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Notes to consolidated financial statements
  Compensation  Retirement Benefits
     (i)
    
    The Company in October 2008, in order to improve its manufacturing
efficiency and in connection with the adoption of the three year business plan,
decided to close and sell a manufacturing facility located in Brazil in the State of
Bahia. As a result of this decision the Company, in accordance with its Italian
accounting policy (see note 3 (k)), performed an impairment analysis and determined
that the carrying value of such manufacturing facility as of December 31, 2008 was
more than the fair value less costs to sell. Therefore, as of December 31, 2008 the
carrying value of such manufacturing facility was reduced to fair value less costs to
sell. This resulted in an impairment loss of 2,911, recorded under the line other
income (expense), net of the consolidated statement of operations for the year ended
December 31, 2008, in accordance with its Italian accounting policy (see note 23).
Companys management estimated the fair value based on third-party independent
appraisals. In addition, as of December 31, 2008 and 2009 the Company, in accordance
with its Italian accounting policy, has classified this manufacturing facility under
the line property, plant and equipment held and used of the consolidated balance
sheet (see note 9) as there is a current expectation that it is more-likely-than not
that this asset will be sold in the medium long-term period (more than one year from
the balance sheet date).
  F-58




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Notes to consolidated financial statements
  
 Impairment
or Disposal of Long-Lived
  F-59




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##### Table of Contents



Notes to consolidated financial statements
      note 9).
 (j)
    
    During 2009, 2008 and 2007 the Company under Italian GAAP has recognized
the write-off of tangible assets of 595, 1,189 and of 2,285, respectively, as part of
non operating loss. Under US GAAP such write-off charge would be included as part of
operating loss.
  F-60




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Notes to consolidated financial statements
  (k)
    
    Under Italian GAAP certain costs paid to resellers are reflected as part of
selling expenses. Under US GAAP, in accordance with Accounting Standard Codification
(ASC) No. 605-50 Revenue Recognition  Customer Payments and Incentive (Formerly
EITF 01-09), these costs should be recorded as a reduction of net sales. Such
expenses include advertising contributions paid to resellers which amounted at
December 31, 2009, 2008 and 2007 to 3,229, 4,336 and 4,321, respectively.
 (l)
    
    Under Italian GAAP, the Company includes its warranty cost as a component
of selling expenses in the consolidated statement of operations. Under US GAAP,
warranty costs would be included as a component of cost of sales. For the years ended
December 31, 2009, 2008 and 2007 warranty cost amounting to 4,503, 4,607 and 4,143,
respectively, would be reclassified from selling expenses to cost of sales under US
GAAP.
 (m)
    
    Under Italian GAAP the Company includes the component income taxes included
in the provisions for contingent tax liabilities under the line other income
(expense), net in the consolidated statement of operations. For the years ended
December 31, 2009, 2008 and 2007 the above income taxes amount approximately to 229,
255 and 519. Under US GAAP these amounts would be classified in the line income taxes
of the consolidated statements of operations.
 (n)
    
    During 2007 the Company obtained from tax authorities a refund of income
taxes related to prior years for an amount of 1,888. In addition, during 2007 a
subsidiary of the Company obtained from tax authorities the confirmation that a
portion of income tax of 668 related to 2006 was not due. As these amounts were not
recorded previously due to uncertainty, the Company recorded in 2007 such amounts in
other income (expense), net (see note 23). Under US GAAP these amounts would be
classified in the line income taxes of the consolidated statement of operations for
the year ended December 31, 2007.
 (o)
    
    Under Italian GAAP the Company records a tax contingent liability (income
tax exposure) when it is probable that the liability has been incurred and the amount
of the loss can be reasonably estimated.
 Income Taxes Overall
  F-61




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Notes to consolidated financial statements
   2009
    
    
    2008Balance, beginning of the year
    
    
    1,715
    
    
    
    1,460Additions based on tax positions related to the current year
    
    
    
    
    
    
    2Additions for tax positions of prior years
    
    
    351
    
    
    
    483Reductions due to statute of limitations expiration
    
    
    (122
    )
    
    
    (230
    )Settlements
    
    
    
    
    
    
    Balance, end of year
    
    
    1,944
    
    
    
    1,715
     US GAAP
    
    
    IT GAAP
    
    
    DifferenceBalance at January 1, 2009
    
    
    1,715
    
    
    
    1,715
    
    
    
    Additions based on tax positions related
to the current year
    
    
    
    
    
    
    
    
    
    
    Additions for tax positions of prior years
    
    
    351
    
    
    
    351
    
    
    
    Reductions due to statute of limitations expiration
    
    
    (122
    )
    
    
    (122
    )
    
    
    Settlements
    
    
    
    
    
    
    
    
    
    
    Balance at December 31, 2009
    
    
    1,944
    
    
    
    1,944
    
    
    
    
  F-62




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Notes to consolidated financial statements
  US GAAP
    
    
    IT GAAP
    
    
    DifferenceBalance at January 1, 2008
    
    
    1,460
    
    
    
    1,460
    
    
    
    Additions based on tax positions related
to the current year
    
    
    2
    
    
    
    2
    
    
    
    Cumulative translation adjustment
    
    
    483
    
    
    
    483
    
    
    
    Reductions due to statute of limitations expiration
    
    
    (230
    )
    
    
    (230
    )
    
    
    Settlements
    
    
    
    
    
    
    
    
    
    
    Balance at December 31, 2008
    
    
    1,715
    
    
    
    1,715
    
    
    
    
 US GAAP
    
    
    IT GAAP
    
    
    DifferenceBalance at January 1, 2007
    
    
    941
    
    
    
    941
    
    
    
    Additions based on tax positions related
to the current year
    
    
    435
    
    
    
    435
    
    
    
    Additions for tax positions of prior years
    
    
    358
    
    
    
    358
    
    
    
    Reductions due to statute of limitations expiration
    
    
    (274
    )
    
    
    (274
    )
    
    
    Settlements
    
    
    
    
    
    
    
    
    
    
    Balance at December 31, 2007
    
    
    1,460
    
    
    
    1,460
    
    
    
    
  (p)
    
    The consolidated statements of cash flows for the years ended December 31,
2009, 2008 and 2007 prepared by the Company under Italian GAAP is in conformity with
US GAAP (Accounting Standards Codification (ASC) No. 230, Statement of Cash Flow
(Formerly FASB Statement No. 95)).
  F-63




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Notes to consolidated financial statements
  Comprehensive Income
  Recently issued Accounting Pronouncements
  Accounting Standards Codification (ASC) No. 805-10, Business Combination (Formerly FASB
Statement No. 141R) and Accounting Standards Codification (ASC) No. 810, Consolidation (Formerly FASB Statement No. 160):
 Business Combination Consolidation
 Accounting Standards Codification (ASC) No. 815-10, Derivatives and Hedging  Overall (Formerly FASB Statement No. 161):
 Derivatives and Hedging  Overall
  F-64




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Notes to consolidated financial statements
  Accounting Standards Codification (ASC) No. 855, Subsequent Events (Formerly FASB
Statement No. 165):
 Subsequent
Events
 Accounting Standards Codification (ASC) No. 350, Intangibles  Goodwill and others (Formerly FASB Statement No. 142-3):
 Intangibles  Goodwill and others
  F-65




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##### Table of Contents



Notes to consolidated financial statements
  Accounting Standards Update(ASU) No. 2009-17, Improvements to Financial Reporting by
Enterprises involved with Variable Interest Entities (Formerly FASB Statement No. 46R):
 Improvements to Financial Reporting by Enterprises
involved with Variable Interest Entities
 Accounting Standards Update (ASU) No. 2010-06, Fair Value Measurements and Disclosures:
 Fair
Value Measurements and Disclosures
  F-66




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##### Table of Contents



Notes to consolidated financial statements
  Accounting Standards Update (ASU) No. 2010-13, CompensationStock Compensation:
   F-67




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##### Table of Contents



SIGNATURE
  NATUZZI S.p.A.By:
    
    /s/ Pasquale NatuzziName:
    
    Pasquale NatuzziTitle:
    
    Chief Executive Officer




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##### Table of Contents



Exhibit Index
 1.1
    
    
    English translation of the by-laws (Statuto) of the Company, as amended and restated as of
January 24, 2008 (incorporated by reference to the Form 20-F filed by Natuzzi S.p.A. with the
Securities and Exchange Commission on June 30, 2008, file number 1-11854).2.1
    
    
    Deposit Agreement dated as of May 15, 1993, as amended and restated as of December 31, 2001,
among the Company, The Bank of New York, as Depositary, and owners and beneficial owners of
ADRs (incorporated by reference to the Form 20-F filed by Natuzzi S.p.A. with the Securities
and Exchange Commission on July 1, 2002, file number 1-11854).8.1
    
    
    List of Significant Subsidiaries.12.1
    
    
    Certification of the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002.12.2
    
    
    Certification of the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002.13.1
    
    
    Certifications pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.15.1
    
    
    Letter of Agreement from KPMG, dated June 29, 2010.