2009 Annual Meeting of Stockholders

PROXY STATEMENT

ATTENDANCE AND VOTING MATTERS

Introduction

The Annual Meeting of the stockholders of Tiffany & Co. (the “Company”) will be held on Thursday,
May 21, 2009, at 9:00 a.m. in the Cosmopolitan Suite of the Four Seasons Hotel, 57 East 57^th Street between Madison and Park Avenue, New York, New York.

This proxy statement and accompanying material, including the form of proxy, was first sent to the Company’s stockholders on or about April 9, 2009. It was sent to you on behalf of the Company by order of the Company’s Board of Directors (the “Board”).

You are entitled to vote at our 2009 Annual Meeting because you were a stockholder, or held Company stock through a broker, bank or other nominee, at the close of business on March 23, 2009, the record date for this year’s Annual Meeting. That is why you were sent this Proxy Statement and accompanying material.

This proxy statement has been bound with our Annual Report on Form 10-K, which contains financial and other information about our business during Fiscal 2008 (February 1, 2008 to January 31, 2009). As is the practice of many other companies, the Company is now providing proxy materials by a “notice and access” process through the Internet. This enables the Company to reduce the cost of paper, printing and postage and, of great importance, to substantially reduce paper use in order to benefit our environment. Those stockholders who wish to receive a paper report may request one.

You may also find important information about the Company, with its principal executive offices at 727 Fifth Avenue, New York, New York 10022, on our website at http://investor.tiffany.com and you will find additional information concerning some of the subjects addressed in this document.

Matters to Be Voted On at the 2009 Annual Meeting

There are three matters scheduled to be voted on at this year’s Annual Meeting:

	•		The election of the Board;
	•		Ratification of the selection of the independent registered public accounting firm to audit our Fiscal 2009 financial statements; and
	•		Approval of an amendment to the Tiffany & Co. 2005 Employee Incentive Plan to increase by 2,500,000 the maximum number of shares that may be issued under the Plan.

In addition, such other business as may properly come before the Annual Meeting or any adjournment or postponement thereof may be voted on.

How to Vote Your Shares

You can vote your shares at the Annual Meeting by proxy or in person.

You can vote by proxy by having one or more individuals who will be at the Annual Meeting vote your shares for you. These individuals are called “proxies” and using them to cast your ballot at the Annual Meeting is called voting “by proxy.”

If you wish to vote by proxy, you must do one of the following:

	•		Complete the enclosed form, called a “proxy card,” and mail it in the envelope provided; or
	•		Call the telephone number listed on your proxy card or notice and follow the pre-recorded instructions; or
	•		Use the Internet to vote by going to the Internet address listed on your proxy card or notice; have your proxy card or notice in hand as you will be prompted to enter your control number and to create and submit an electronic vote.

If you do one of the above, you will have designated three officers of the Company to act as your proxies at the 2009 Annual Meeting. One of them will then vote your shares at the Annual Meeting in accordance with the instructions you have given them on the proxy card, the telephone or the Internet with respect to each of the proposals presented in this Proxy Statement. If you sign and return your proxy card but do not give voting instructions, your proxy will vote the shares represented thereby for the election of each of the director nominees listed in Proposal No. 1 below, for approval of Proposal No. 2, which is discussed below and for approval of Proposal No. 3, which is also discussed below. Proxies will extend to, and be voted at, any adjournment or postponement of the Annual Meeting.

Alternatively, you can vote your shares in person by attending the Annual Meeting. You will be given a ballot at the meeting.

While we know of no other matters to be acted upon at this year’s Annual Meeting, it is possible that other matters may be presented at the meeting. If that happens and you have signed and not revoked a proxy card, your proxy will vote on such other matters in accordance with his best judgment.

A special note for those who plan to attend the Annual Meeting and vote in person: if your shares are held in the name of a broker, bank or other nominee, you must bring a statement from your brokerage account or a letter from the person or entity in whose name the shares are registered indicating that you are the beneficial owner of those shares as of the record date. In addition, you will not be able to vote at the meeting unless you obtain a legal proxy from the record holder of your shares.

How to Revoke Your Proxy

If you decide to vote by proxy (including by mail, telephone or Internet), you can revoke – that is, change or cancel – your vote at any time before your proxy casts his vote at the Annual Meeting. Revoking your vote by proxy may be accomplished in one of three ways:

	•		You can send an executed, later-dated proxy card to the Secretary of the Company, call in different instructions, or access the Internet voting site;
	•		You can notify the Secretary of the Company in writing that you wish to revoke your proxy; or
	•		You can attend the Annual Meeting and vote in person.

The Number of Votes That You Have

Each share of the Company’s common stock has one vote. The number of shares, or votes, that you have at this year’s Annual Meeting is indicated on the enclosed proxy card.

What a Quorum Is

A “quorum” is the minimum number of shares that must be present at an Annual Meeting for a valid vote. For our stockholder meetings, a majority of shares outstanding on the record date and entitled to vote at the Annual Meeting must be present.

The number of shares outstanding at the close of business on March 23, 2009, the record date, was 123,925,208. Therefore, 61,962,605 shares must be present at our 2009 Annual Meeting for a quorum to be established.

To determine if there is a quorum, we consider a share “present” if:

•

The stockholder who owns the share is present at the Annual Meeting, whether or not he or she chooses to cast a ballot on any proposal; or

•

The stockholder is represented by proxy at the Annual Meeting.

If a stockholder is represented by proxy at the Annual Meeting, his or her shares are deemed present for purposes of a quorum, even if:

•

The stockholder withholds his or her vote or marks “abstain” for one or more proposals; or

•

There is a “broker non-vote” on one or more proposals.

What a “Broker Non-Vote” Is

Shares held in a broker’s name may be voted by the broker, but only in accordance with the rules of the New York Stock Exchange. Under those rules, your broker must follow your instructions. If you do not provide instructions to your broker, your broker may vote your shares based on its own judgment or it may withhold a vote. Whether your broker votes or withholds its vote is determined by the New York Stock Exchange rules and depends on the proposal being voted upon.

If your broker withholds its vote, that is called a “broker non-vote.” As stated above, broker non-votes are counted as present for a quorum.

What Vote Is Required To Approve Each Proposal

Each nominee for director shall be elected by a majority of the votes cast “for” or “against” her or him at the Annual Meeting. That means that the number of shares voted “for” a nominee must exceed the number of shares voted “against” that nominee. To vote “for” or “against” any of the nominees named in this Proxy Statement, you can so mark your proxy card or ballot or, if you vote via telephone or Internet, so indicate by telephone or electronically.

You may abstain on the vote for any nominee but your abstention will not have any effect on the outcome of the election of directors.  A broker non-vote has the same effect as an abstention: neither will have any effect on the outcome of the election of directors. To abstain on the vote on any or all of the nominees named in this Proxy Statement, you can so mark your proxy card or ballot or, if you vote via telephone or Internet, so indicate by telephone or electronically.

The proposal to ratify the selection of PricewaterhouseCoopers LLP as the independent registered public accounting firm for Fiscal 2009 will be decided by the affirmative vote of the majority of shares present at the meeting. That means that the proposal will pass if more than half of those shares present at the meeting vote “for” the proposal.  Therefore, if you “abstain” from voting -- in other words, you indicate “abstain” on the proxy card, by telephone or by Internet -- it will have the same effect as an “against” vote. Broker non-votes on this proposal will be treated the same as abstentions:  both will have the same effect as an “against” vote.

The proposal to approve the amendment to the Tiffany & Co. 2005 Employee Incentive Plan will be decided as follows. First, a majority of shares outstanding on March 23, 2009, must actually vote on the proposal. For this purpose, abstentions will count as votes cast but broker non-votes will not. Second, a majority of those shares actually voting on the proposal must vote in favor of it. For this purpose, abstentions will have the same legal effect as a vote “against” the proposal and broker non-votes will be disregarded. That means that holders of 61,962,605 shares of common stock must actually vote “for” or “against” the proposal (or submit their proxies but “abstain” from voting on the proposal) and at least a majority of those voting must vote “for” the proposal.

Proxy Voting on Proposals in the Absence of Instructions

If you do not give any specific instructions as to how your shares are to be voted when you sign a proxy card or vote by telephone or by Internet, your proxies will vote your shares in accordance with the following recommendations of the Board:

•

FOR the election of all nine nominees for director named in this Proxy Statement;

•

FOR the ratification of the appointment of PricewaterhouseCoopers LLP as the independent registered public accounting firm to examine our Fiscal 2009 financial statements; and

•

FOR the approval of the amendment to the Tiffany & Co. 2005 Employee Incentive Plan.

Shares held in the Company’s Employee Profit Sharing and Retirement Savings Plan will not be voted by the Plan’s trustee unless specific instructions for voting are given by plan participants to whose accounts such shares have been allocated.

How Proxies Are Solicited

We have hired the firm of Georgeson Inc. to assist in the solicitation of proxies on behalf of the Board. Georgeson Inc. has agreed to perform this service for a fee of not more than $7,500, plus out-of-pocket expenses.

Employees of Tiffany and Company, a subsidiary of the Company, may also solicit proxies on behalf of the Board. These employees will not receive any additional compensation for their work soliciting proxies and any costs incurred by them in doing so will be paid for by Tiffany and Company.

This particular solicitation is being made by mail, but proxies may also be solicited in person, by facsimile, by telephone or by electronic mail (e-mail).

In addition, we will pay for any costs incurred by brokerage houses and others for forwarding proxy materials to beneficial owners.

OWNERSHIP OF THE COMPANY

Stockholders Who Own At Least Five Percent of the Company

The following table shows all persons who were known to us to be “beneficial owners” of at least five percent of Company stock as of March 27, 2009. Footnote a) below provides a brief explanation of what is meant by the term “beneficial ownership.” This table is based upon reports filed with the Securities and Exchange Commission, commonly referred to as the SEC. Copies of these reports are publicly available from the SEC.

Name and Address

Amount and Nature

Percent

of Beneficial Owner

of Beneficial Ownership (a)

of Class

Trian Fund Management, L.P. 280 Park Avenue, 41st Floor New York, NY 10017

8,488,600

(b

) (c)

6.90%

a)		“Beneficial ownership” is a term broadly defined by the SEC and includes more than the typical form of stock ownership, that is, stock held in the person’s name. The term also includes what is referred to as “indirect ownership” such as where, for example, the person has or shares the power to vote the stock, sell it or acquire it within 60 days. Accordingly, some of the shares reported as beneficially owned in this table may actually be held by other persons or organizations. Those other persons and organizations are described in the reports filed with the SEC.
b)		The “Filing Persons” discussed below reported such beneficial ownership to the SEC on their Schedule 13D as of March 27, 2009 and that they shared voting power and shared dispositive power with respect to such shares. According to said Schedule 13D, the Filing Persons are Trian Partners GP, L.P., Trian Partners General Partner, LLC, Trian Partners, L.P., Trian Partners Master Fund, L.P., a Cayman Islands limited partnership, Trian Partners Parallel Fund I., L.P., Trian Partners Parallel Fund I General Partner LLC, Trian Partners Parallel Fund II L.P., Trian Partners Parallel Fund II GP, L.P., Trian Partners Parallel Fund II General Partner,

		LLC, Trian Fund Management, L.P., Trian Fund Management GP, LLC, Nelson Peltz, Peter W. May and Edward P. Garden.
c)		Peter W. May, referred to in Note (b) above, is a nominee of the Board for election as a director. See Item 1 – Election of Directors below.

Ownership by Directors, Director Nominees and Executive Officers

The following table shows the number of shares of the Company’s common stock beneficially owned as of March 23, 2009 by those persons who are director nominees or who were, as of the end of Fiscal 2008, directors, the principal executive officer (the “CEO”), the principal financial officer (the “CFO”) and the three next most highly compensated executive officers of the Company:

Amount and Nature of

Name

Beneficial Ownership

Percent Of Classa

Directors

Rose Marie Bravo

86,216

b

*

Gary E. Costley

16,000

c

*

Lawrence K. Fish

20,000

d

*

Abby F. Kohnstamm

67,000

e

*

Michael J. Kowalski (CEO)

1,431,352

f

1.2

Charles K. Marquis

231,620

g

*

Peter W. May

10,738,600

h

8.7

J. Thomas Presby

41,900

i

*

William A. Shutzer

322,562

j

*

Executive Officers

James E. Quinn

754,523

k

*

Beth O. Canavan

338,233

l

*

James N. Fernandez (CFO)

526,639

m

*

Jon M. King

161,774

n

*

All executive officers and directors as a group (19 persons):

15,609,784

o

12.6

a)		An asterisk (*) is used to indicate less than 1% of the class outstanding.
b)		Includes 82,216 shares issuable upon the exercise of “Vested Stock Options,” which are stock options that either are exercisable as of March 23, 2009 or will become exercisable within 60 days of that date.
c)		Includes 15,000 shares issuable upon the exercise of Vested Stock Options.
d)		Includes 20,000 shares issuable upon the exercise of Vested Stock Options.
e)		Includes 65,000 shares issuable upon the exercise of Vested Stock Options.
f)		Includes 1,017,500 shares issuable upon the exercise of Vested Stock Options.
g)		Includes 109,732 shares issuable upon the exercise of Vested Stock Options.

h)		As of March 27, 2009 Trian Fund Management L.P. reduced its holdings to 8,488,600 shares. See Stockholders Who Own At Least Five Percent of the Company above and reference Trian Fund Management, L.P. and Peter W. May in Note b) thereto. Includes 20,000 shares issuable upon the exercise of Vested Stock Options.
i)		Includes 40,000 shares issuable upon the exercise of Vested Stock Options.
j)		Includes 75,000 shares issuable upon the exercise of Vested Stock Options, 5,100 shares held by or for Mr. Shutzer’s minor child, 114,000 shares held by KJC Ltd. of which Mr. Shutzer is the sole general partner and 6,000 shares held in a defined benefit plan. Mr. Shutzer disclaims beneficial ownership of Company stock held by KJC Ltd.
k)		Includes 685,500 shares issuable upon the exercise of Vested Stock Options; 140 shares credited to Mr. Quinn’s account under the Company’s Employee Profit Sharing and Retirement Savings Plan; 57,883 shares held by Mr. Quinn’s wife; 4,000 shares owned by Mr. Quinn’s minor child under the UGMA.
l)		Includes 316,000 shares issuable upon the exercise of Vested Stock Options and 566 shares credited to Mrs. Canavan’s account under the Company’s Employee Profit Sharing and Retirement Savings Plan.
m)		Includes 489,500 shares issuable upon the exercise of Vested Stock Options and 139 shares credited to Mr. Fernandez’s account under the Company’s Employee Profit Sharing and Retirement Savings Plan.
n)		Includes 149,000 shares issuable upon the exercise of Vested Stock Options and 440 shares credited to Mr. King’s account under the Company’s Employee Profit Sharing and Retirement Savings Plan.
o)		Includes 3,887,288 shares issuable upon the exercise of Vested Stock Options and 2,735 shares held in the Company’s Employee Profit Sharing and Retirement Savings Plan.

See “COMPENSATION OF THE CEO AND OTHER EXECUTIVE OFFICERS, Compensation Discussion and Analysis, Equity Ownership by Executive Officers and Directors” on page PS-31 below for a discussion of the Company’s share ownership policy.

Compliance of Directors, Executive Officers and Greater-Than-Ten-Percent Stockholders with Section 16(a) Beneficial Ownership Reporting Requirements

Section 16(a) of the Securities Exchange Act of 1934 requires the Company’s directors, executive officers and greater-than-ten-percent stockholders to file reports of ownership and changes in ownership with the SEC and the New York Stock Exchange. These persons are also required to provide us with copies of those reports.

Based on our review of those reports and of certain other documents we have received, we believe that, during and with respect to Fiscal 2008, all filing requirements under Section 16(a) applicable to our directors, executive officers and greater-than-ten-percent stockholders were satisfied.

RELATIONSHIP WITH INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM

PricewaterhouseCoopers LLP (“PwC”) serves as the Company’s independent registered public accounting firm and, through its predecessor firms, has served in that capacity since 1984.

The Audit Committee has selected PwC as the independent registered public accounting firm to audit the Company’s financial statements and effectiveness of internal controls for the fiscal year ending January 31, 2010. This Audit Committee is directly responsible for appointing the independent auditors. In making this selection, the Audit Committee considered the independence of PwC, and whether the audit and non-audit services PwC provides to the Company are compatible with maintaining that independence.

The Audit Committee has adopted a policy requiring advance approval of PwC’s fees and services by the Audit Committee; this policy also prohibits PwC from performing certain non-audit services for the Company including: (i) bookkeeping, (ii) systems design and implementation, (iii) appraisal or valuation, (iv) actuarial, (v) internal audit, (vi) management or human resources, (vii) investment advice or investment banking, (viii) legal services, and (ix) expert services unrelated to the audit. All fees paid to PwC by the Company as shown in the table that follows were approved by the Audit Committee pursuant to this policy.

Fees and Services of PricewaterhouseCoopers LLP

The following table presents fees for professional audit services rendered by PwC for the audit of the Company’s consolidated financial statements and the effectiveness of internal controls over financial reporting for the years ended January 31, 2009 and 2008, and for its reviews of the Company’s unaudited condensed consolidated interim financial statements. This table also reflects fees billed for other services rendered by PwC.

		January 31, 2009				January 31, 2008
Audit Fees		$	2,436,500			$	2,320,500
Audit-related Feesa			22,300				79,250
Audit and Audit-related Fees			2,458,800				2,399,750
Tax Feesb			1,544,350				1,477,100
All Other Feesc			12,600				16,300
Total Fees		$	4,015,750			$	3,893,150

	a)		In 2007, audit related fees consisted principally of fees for audits of financial statements of certain employee benefit plans. In 2008, the Company did not use PwC for the audits of these benefit plans.
	b)		Tax fees consist of fees for tax consultation and tax compliance services. These fees included tax filing and compliance fees of $1,337,150 for the year ended January 31, 2009 and $1,090,200 for the year ended January 31, 2008.
	c)		All other fees consist of costs for software used by the Finance Division and other advisory services for the years ended January 31, 2009 and January 31, 2008.

BOARD OF DIRECTORS AND CORPORATE GOVERNANCE

The Board, In General

The Company is a Delaware corporation. Our principal subsidiary is Tiffany and Company, a New York corporation. In this Proxy Statement, Tiffany and Company will be referred to as simply “Tiffany.”

The Board is currently comprised of nine members. The Board can also fill vacancies and newly created directorships, as well as amend the By-laws to provide for a greater or lesser number of directors.

Directors are required by our By-laws to be less than age 72 when elected or appointed unless the Board waives that provision with respect to an individual director whose continued service is deemed uniquely important to the Company. Under the Company’s Corporate Governance Principles, directors may not serve on a total of more than six public company boards. Service on the Board is included in that total.

The Role of the Board in Corporate Governance

The Board plays several important roles in the governance of the Company, as set out in the Company’s Corporate Governance Principles. The Corporate Governance Principles may be viewed on the Company’s website http://investor.tiffany.com/governance.cfm and as Appendix I to this Proxy Statement. The responsibilities of the Board include:

	•		Management succession;
	•		Review and approval of the annual operating plan prepared by management;
	•		Monitoring of performance in comparison to the operating plan;
	•		Review and approval of the Company’s strategic plan prepared by management;
	•		Consideration of topics of relevance to the Company’s ability to carry out its strategic plan;
	•		Review and approval of a delegation of authority by which management carries out the day-to-day operations of the Company and its subsidiaries;
	•		Review of the Company’s investor relations program;
	•		Review of the Company’s schedule of insurance coverage; and
	•		Review and approval of significant actions by the Company.

Executive Sessions of Non-management Directors/Presiding Non-management Director

Non-management directors meet regularly in executive session without management participation. This encourages open discussion. At those meetings, Charles K. Marquis, Chairman of the Nominating/Corporate Governance Committee, presides. In addition, at least once per year the independent directors meet separately in executive session.

Communication with Non-management Directors

Stockholders may send written communications to the entire Board or to any of the non-management directors by addressing their concerns to Mr. Marquis, Chairman of the Nominating/Corporate Governance Committee (presiding director), at the following address:  Corporate Secretary (Legal Department), Tiffany & Co., 600 Madison Avenue, Eighth floor,

New York, New York 10022. All communications will be compiled by the Corporate Secretary and submitted to the Board or an individual director, as appropriate, on a periodic basis.

Director Attendance at Annual Meeting

The Board schedules a regular meeting on the date of the Annual Meeting of Stockholders to facilitate attendance at the Annual Meeting by the directors. All nine directors attended the Annual Meeting held in May 2008.

Independent Directors Constitute a Majority of the Board

The Board has affirmatively determined that each of the following directors (each of whom is also a nominee for re-election) is “independent” under the listing standards of the New York Stock Exchange in that none of them has a material relationship with the Company (directly or as a partner, shareholder or officer of any organization that has a relationship with the Company): Rose Marie Bravo, Gary E. Costley, Lawrence K. Fish, Abby F. Kohnstamm, Charles K. Marquis, Peter W. May, and J. Thomas Presby.

The Board also considered the other tests of independence set forth in the New York Stock Exchange Corporate Governance Rules and has determined that each of the above directors and nominees is independent as defined in such Rules.

In addition, the Board has affirmatively determined that J. Thomas Presby, Gary E. Costley, Lawrence K. Fish, Abby F. Kohnstamm, and Charles K. Marquis meet the additional, heightened independence criteria applicable to audit committee members under New York Stock Exchange rules.

In determining that Ms. Kohnstamm is independent, the Board considered that IBM Corporation, of which she was an officer until January 2006, sells data-processing and communication hardware, software and services to Tiffany and Tiffany sells business gifts to IBM. However, these sales constitute far less than one percent of the consolidated sales of each seller (IBM and Tiffany, respectively). The Board considered all relevant facts and circumstances, including the amount of such sales in the context of the size of the businesses of the Company and IBM Corporation, the fact that Ms. Kohnstamm was not responsible at IBM Corporation for such sales in the course of her duties, and that such sales were long-standing business practices prior to the time Ms. Kohnstamm was recruited to the Board.

In determining that Mr. May is independent, the Board considered the Commentary set forth in the New York Stock Exchange’s Listed Company Manual, section 303A.02, which states “... as the concern is independence from management, the Exchange does not view ownership of even a significant amount of stock, by itself, as a bar to an independence finding.” See “OWNERSHIP OF THE COMPANY, Stockholders Who Own At Least Five Percent of the Company” above.

In determining that Mr. Fish is independent, the Board considered banking relationships that exist between ABN/AMRO and the Company. Both ABN/AMRO and Citizens Financial Group are subsidiaries of the Royal Bank of Scotland Group. Mr. Fish was, until recently, an employee of Citizens Financial Group and a director of Royal Bank of Scotland Group. A portion of the operations of ABN/AMRO was recently acquired by Royal Bank of Scotland Group. The Company does banking business with ABN/AMRO.

To our knowledge, none of the other independent directors has any direct or indirect relationship with the Company, other than as a director, and none of the independent directors serves as an

executive officer of any charitable organization to which the Company or any of its affiliates have made any significant contributions within the preceding three years other than as follows: Mr. May serves as Chairman of The Mount Sinai Medical Center Board of Trustees; in Fiscal 2008, 2007, 2006 and 2005 respectively the Company donated approximately $2,840, $11,000, $58,000 and $50,000 in cash and/or goods to this institution. Mr. May was not involved in soliciting these donations.

Meetings and Attendance during Fiscal 2008

In Fiscal 2008, the Board held a total number of 7 meetings (including telephonic meetings). All current and incumbent directors attended at least 84% of the aggregate number of meetings of the Board and those committees (including the Audit Committee, Compensation Committee, Stock Option Subcommittee, Nominating/Corporate Governance Committee, and the Finance Committee) on which they served during their period of service (Messrs. Fish and May joined the Board in May 2008 and hence did not serve for the full year).

Committees of the Board

Committees Composed Entirely of Independent Directors

	Audit               J. Thomas Presby, Chair             Gary E. Costley             Lawrence K. Fish (joined in March 2009)             Abby F. Kohnstamm             Charles K. Marquis			Nominating/Corporate Governance               Charles K. Marquis, Chair             Rose Marie Bravo             Gary E. Costley             Abby F. Kohnstamm             J. Thomas Presby
	Compensation               Gary E. Costley, Chair             Rose Marie Bravo             Abby F. Kohnstamm             Charles K. Marquis             Peter W. May			Stock Option Subcommittee               Gary E. Costley, Chair             Rose Marie Bravo             Abby F. Kohnstamm             Charles K. Marquis             Peter W. May

Committees Including Non-Independent Directors

	Finance               William A. Shutzer, Chair             Lawrence K. Fish             Peter W. May			Corporate Social Responsibility               Lawrence K. Fish, Chair             Abby F. Kohnstamm             Michael J. Kowalski
	Dividend               Michael J. Kowalski

Nominating/Corporate Governance Committee

The primary function of the Nominating/Corporate Governance Committee is to assist the Board in matters of corporate governance. The Nominating/Corporate Governance Committee operates under the charter adopted by the Board. The charter may be viewed on the Company’s website, http://investor.tiffany.com/governance.cfm. Under its charter, the role of the Nominating/Corporate Governance Committee includes recommending to the Board:

	•		Policies on the composition of the Board;
	•		Criteria for the selection of nominees for election to the Board;
	•		Nominees to fill vacancies on the Board; and
	•		Nominees for election to the Board.

If you would like to submit the name of a candidate for the Nominating/Corporate Governance Committee to consider as a nominee of the Board for director, you may send your submission at any time to the Nominating/Corporate Governance Committee, c/o Mr. Patrick B. Dorsey, Corporate Secretary (Legal Department), Tiffany & Co., 600 Madison Avenue, New York, New York 10022. Candidates for director shall be selected on the basis of their business experience and expertise, with a view to supplementing the business experience and expertise of management and adding further substance and insight into board discussions and oversight of management. The Nominating/Corporate Governance Committee evaluates candidates recommended by stockholders in the same manner as it evaluates director candidates suggested by others. See our Corporate Governance Principles which are available on our website http://investor.tiffany.com/governance.cfm and as Appendix I to this Proxy Statement.

Dividend Committee

The Dividend Committee declares regular quarterly dividends in accordance with the dividend policy established by the full Board. The Dividend Committee acts by unanimous written consent and did not meet in Fiscal 2008. Mr. Kowalski is the sole member of the Dividend Committee.

Compensation Committee

The primary function of the Compensation Committee is to assist the Board in compensation matters. The Compensation Committee operates under its charter which may be viewed on the Company’s website, http://investor.tiffany.com/governance.cfm. Under its charter, the Compensation Committee’s responsibilities include:

	•		Approval of remuneration arrangements for executive officers; and
	•		Approval of compensation plans in which officers and employees of Tiffany are eligible to participate.

For additional information regarding the operation of the Compensation Committee, including the role of consultants and management in the process of determining the amount and form of executive compensation, see “Compensation Committee Process” beginning on page PS-37 of the “Compensation Discussion and Analysis” below. The Compensation Committee’s report appears on page PS-40.

Compensation for the non-management members of the Board is set by the Board with advice from the Nominating/Corporate Governance Committee.

Stock Option Subcommittee

The Stock Option Subcommittee determines the grant of options, restricted stock units, cash incentive awards and other matters under our 2005 Employee Incentive Plan. All members of the Compensation Committee are members of this subcommittee.

Compensation Committee Interlocks and Insider Participation

No director serving on the Compensation Committee or its Stock Option Subcommittee during any part of Fiscal 2008 was, at any time either during or before such fiscal year, an officer or employee of Tiffany & Co. or any of its subsidiaries. No interlocking relationship exists between the Board or Compensation Committee and the board of directors or compensation committee of any other company, nor has any interlocking relationship existed during Fiscal 2008.

Audit Committee

The Company’s Audit Committee is an “audit committee” established in accordance with Section 3(a) (58)(A) of the Securities Exchange Act of 1934. The primary function of the Audit Committee is to assist the Board in fulfilling its oversight responsibilities with respect to the Company’s financial matters. The Audit Committee operates under a charter adopted by the Board; that charter may be viewed on the Company’s website, http://investor.tiffany.com/governance.cfm. Under its charter, the Audit Committee’s responsibilities include:

	•		Retaining and terminating the Company’s independent registered public accounting firm, reviewing the quality-control procedures and independence of such firm and evaluating their proposed audit scope, performance and fee arrangements;
	•		Approving in advance all audit and non-audit services to be rendered by the independent registered public accounting firm;
	•		Reviewing the adequacy of our system of internal control over financial reporting;
	•		Establishing procedures for complaints regarding accounting, internal accounting controls or auditing matters; and
	•		Conducting a review of our financial statements and audit findings in advance of filing, and reviewing in advance proposed changes in our accounting principles.

The Board has determined that all members of the Audit Committee are financially literate, that at least one member of the Audit Committee meets the New York Stock Exchange standard of having accounting or related financial management expertise, and that Mr. Presby meets the SEC criteria of an “audit committee financial expert.” Mr. Presby is a member of the National Association of Corporate Directors and chairs the audit committees of four public companies in addition to that of the Company. In view of Mr. Presby’s full-time commitment to work as an independent director, the Board has determined that his simultaneous service on five audit committees will not impair his ability to effectively serve on the Company’s Audit Committee. The report of the Audit Committee is on page PS-17.

Finance Committee

In May 2008, the Board formed the Finance Committee to assist the Board with its oversight of the Company’s capital structure, dividend policy, repurchase of the Company’s capital stock, debt and equity financings, and the retention of investment bankers and other financial advisors to the Board. The Finance Committee operates under the charter adopted by the Board. The charter may be viewed on the Company’s website, http://investor.tiffany.com/governance.cfm.

Corporate Social Responsibility Committee

In March 2009, the Board formed the Corporate Social Responsibility Committee to assist the Board with its oversight of the Company’s policies and practices involving the environment, vendor workplace conditions and employment practices, community affairs, sustainable product sourcing, corporate charitable giving, governmental relations, political activities and diversity in employment. The Corporate Social Responsibility Committee operates under the charter adopted by the Board. The charter may be viewed on the Company’s website, http://investor.tiffany.com/governance.cfm.

Self-Evaluation

The independent directors who serve on the Board conduct an annual evaluation of the workings and efficiency of the Board and of each of the Board committees on which they serve and make recommendations for change, if required.

Resignation on Job Change or New Directorship

Under the Company’s Corporate Governance Principles, a director must submit a letter of resignation to the Nominating/Corporate Governance Committee on a change in employment or significant change in job responsibilities and upon accepting or resolving to accept a directorship with another public company. The Committee may either accept or reject such resignation, but must act within 10 days after considering, in light of the circumstances, the continued appropriateness of the continued service of the director.

Business Conduct Policy and Code of Ethics

Since the 1980s, the Company has had a policy governing business conduct for all Company employees worldwide. The policy requires compliance with law and avoidance of conflicts of interest and sets standards for various activities to avoid the potential for abuse or the occasion for illegal or unethical activities. This policy covers, among other activities, the acceptance or giving of gifts from or to those seeking to do business with the Company, processing one’s own transactions, political contributions and reporting dishonest activity. Each year, all employees are required to review the policy, report any violations or conflicts of interest and affirm their obligation to report future violations to management.

The Company has a toll-free “hotline” to receive complaints from employees, vendors, stockholders and other interested parties concerning violations of the Company’s policies or questionable accounting, internal controls or auditing matters. The toll-free phone number is 877-806-7464. The hotline is operated by a third party service provider to assure the confidentiality and completeness of all information received. Users of this service may elect to remain anonymous.

We also have a Code of Business and Ethical Conduct for the directors, the Chief Executive Officer, the Chief Financial Officer and all other officers of the Company. The Code advocates, and requires those persons to adhere to, principles and responsibilities governing professional and ethical conduct. This Code supplements our business conduct policy. Waivers may only be made by the Board. A summary of our business conduct policy and a copy of the Code of Business and Ethical Conduct are posted on our website, http://investor.tiffany.com/governance.cfm. We have also filed a copy of the Code with the SEC as an exhibit to our Annual Report on Form 10-K for Fiscal 2008. The Board has not adopted a policy by which it will disclose amendments to, or waivers from, the Company’s Code of Business and Ethical Conduct on our website. Accordingly, we will file a report on Form 8-K if that Code is amended or if the Board has granted a waiver from such Code, including an implicit waiver. We will file such a report only if the waiver applies to the Company’s principal executive officer, principal financial officer, principal accounting officer or controller, and if such waiver relates to: honest and ethical conduct; full, fair, accurate, timely, and understandable disclosure; compliance with applicable governmental laws, rules and regulations; the prompt internal reporting of violations of the Code; or accountability for adherence to the Code.

The Nominating/Corporate Governance Committee, Audit Committee and Compensation Committee charters as well as the Code of Ethics and the Corporate Governance Principles are available in print to any stockholder who requests them.

Limitation on Adoption of Poison Pill Plans

On January 19, 2006, the Board terminated the Company’s stockholder rights plan (typically referred to as a “poison pill”) and adopted the following policy:

  “This Board shall submit the adoption or extension of any poison pill to a stockholder vote before it acts to adopt such poison pill; provided, however, that this Board may act on its own to adopt a poison pill without first submitting such matter to a stockholder vote if, under the circumstance then existing, this Board in the exercise of its fiduciary responsibilities deems it to be in the best interests of the Company and its stockholders to adopt a poison pill without the delay in adoption that is attendant upon the time reasonably anticipated to seek a stockholder vote. If a poison pill is adopted without first submitting such matter to a stockholder vote, the poison pill must be submitted to a stockholder vote within one year after the effective date of the poison pill. Absent such submission to a stockholder vote, and favorable action thereupon, the poison pill will expire on the first anniversary of its effective date.”

TRANSACTIONS WITH RELATED PERSONS

The Board has adopted policies and procedures for the review, approval or ratification of transactions with the Company (or any subsidiary) in which any director or executive officer, any nominee for election as a director, any immediate family member of such an officer, director or nominee or any five-percent holder of the Company’s securities has a direct or indirect material interest. Such transactions are referred to the Nominating/Corporate Governance Committee for review. In determining whether to approve or ratify any transaction, the Committee applies the following standard after considering the facts and circumstances of the transaction: whether, in the business judgment of the Committee members, the interests of the Company appear likely to be served by such approval or ratification.

EXECUTIVE OFFICERS OF THE COMPANY

The executive officers of the Company are:

						Year Joined
Name		Age		Position		Tiffany
Michael J. Kowalski		57		Chairman of the Board and Chief Executive Officer		1983
James E. Quinn		57		President		1986
Beth O. Canavan		54		Executive Vice President		1987
James N. Fernandez		53		Executive Vice President and Chief Financial Officer		1983
Jon M. King		52		Executive Vice President		1990
Victoria Berger-Gross		53		Senior Vice President – Global Human Resources		2001
Pamela H. Cloud		39		Senior Vice President – Merchandising		1994
Patrick B. Dorsey		58		Senior Vice President – General Counsel and Secretary		1985
Patrick F. McGuiness		43		Senior Vice President – Finance		1990
Caroline D. Naggiar		51		Senior Vice President – Chief Marketing Officer		1997
John S. Petterson		50		Senior Vice President – Operations		1988

Michael J. Kowalski. Mr. Kowalski assumed the role of Chairman of the Board in January 2003, following the retirement of William R. Chaney. He has served as the Registrant’s Chief Executive Officer since February 1999 and on the Registrant’s Board of Directors since January 1995. After joining Tiffany in 1983 as Director of Financial Planning, Mr. Kowalski held a variety of merchandising management positions and served as Executive Vice President from 1992 to 1996 with overall responsibility in the areas of merchandising, marketing, advertising, public relations and product design. He was elected President in 1997. Mr. Kowalski is a member of the Board of Directors of the Bank of New York Mellon. The Bank of New York Mellon is Tiffany’s principal banking relationship, serving as Administrative Agent and a lender under Tiffany’s credit agreement and as the trustee and investment manager for Tiffany’s Employee Pension Plan; and BNY Mellon Shareowner Services serves as the Company’s transfer agent and registrar.

James E. Quinn. Mr. Quinn was appointed President effective January 31, 2003. He had served as Vice Chairman since 1998. After joining Tiffany in July 1986 as Vice President of branch sales for the Company’s business-to-business sales operations, Mr. Quinn had various responsibilities for sales management and operations. He was promoted to Executive Vice President on March 19, 1992. He has responsibility for Tiffany & Co. sales outside the U.S. and Canada. Mr. Quinn is a member of the board of directors of Mutual of America Capital Management, Inc.

Beth O. Canavan. Mrs. Canavan joined Tiffany in May 1987 as Director of New Store Development. She later held the positions of Vice President, Retail Sales Development, Vice President and General Manager of the New York flagship store, and Eastern Regional Vice President. In 1997, she assumed the position of Senior Vice President for U.S. Retail. In January 2000, she was promoted to Executive Vice President responsible for retail sales activities in the U.S. and Canada and retail store expansion. In May 2001, Mrs. Canavan assumed additional responsibility for direct sales and business-to-business sales activities in the U.S. and Canada.

James N. Fernandez. Mr. Fernandez joined Tiffany in October 1983 and has held various positions in financial planning and management prior to his appointment as Senior Vice President–Chief Financial Officer in April 1989. In January 1998, he was promoted to Executive Vice President–Chief Financial Officer. He has responsibility for accounting, treasury, investor relations, information technology, financial planning, financial services, business development, diamond operations, real estate operations and overall responsibility for distribution, manufacturing, customer service and

security. Mr. Fernandez serves on the Board of Directors of The Dun & Bradstreet Corporation and is a member of the Audit Committee and Board Affairs Committee.

Jon M. King. Mr. King joined Tiffany in 1990 as a jewelry buyer and has held various positions in the Merchandising Division, assuming responsibility for product development in 2002 as Group Vice President. In 2003, he was promoted to Senior Vice President–Merchandising. In June 2006, he was promoted to Executive Vice President and, in addition to his Merchandising leadership role, assigned responsibility for Marketing and Public Relations.

Victoria Berger-Gross. Dr. Berger-Gross joined Tiffany in February 2001 as Senior Vice President–Human Resources.

Pamela H. Cloud. Ms. Cloud joined Tiffany in 1994 as an Assistant Buyer and has since advanced through positions of increasing management responsibility within the Merchandising Division.  In January 2007, she was promoted to Senior Vice President–Merchandising, responsible for all aspects of product planning and inventory management.

Patrick B. Dorsey. Mr. Dorsey joined Tiffany in July 1985 as General Counsel and Secretary.

Patrick F. McGuiness. Mr. McGuiness joined Tiffany in 1990 as an Analyst in Accounting & Reporting and has held a variety of management positions within the Finance Division, most recently as Group Vice President–Finance, and in Merchandising from 2000 to 2002 as Vice President–Merchandising Process Improvement.  In January 2007, he was promoted to Senior Vice President–Finance, responsible for Tiffany’s worldwide financial functions.

Caroline D. Naggiar. Ms. Naggiar joined Tiffany in June 1997 as Vice President–Marketing Communications. She assumed her current responsibilities as head of advertising and marketing in February 1998 and in 2007 she was assigned additional responsibility for the Public Relations department and named Chief Marketing Officer.

John S. Petterson. Mr. Petterson joined Tiffany in 1988 as a management associate. He was promoted to Senior Vice President–Corporate Sales in May 1995. In May 2001, Mr. Petterson assumed the role of Senior Vice President–Operations, with responsibility for worldwide distribution, customer service and security activities. His responsibilities were expanded in February 2003 to include manufacturing operations.

COMPENSATION OF THE CEO AND OTHER EXECUTIVE OFFICERS

Contents

Compensation Discussion and Analysis		Page PS-21
Report of the Compensation Committee		Page PS-40
Summary Compensation Table – Fiscal 2006, 2007 and 2008		Page PS-41
Grants of Plan-Based Awards Table – Fiscal 2008		Page PS-44
Equity Compensation Plan Information		Page PS-45
Discussion of Summary Compensation Table and Grants of Plan-Based Awards		Page PS-46
Outstanding Equity Awards at Fiscal Year-end Table		Page PS-51
Option Exercises and Stock Vested Table – Fiscal 2008		Page PS-54
Pension Benefits Table		Page PS-55
Nonqualified Deferred Compensation Table		Page PS-59
Potential Payments on Termination or Change in Control		Page PS-61
Director Compensation Table – Fiscal 2008		Page PS-64

COMPENSATION DISCUSSION AND ANALYSIS

Overview

The Compensation Committee of the Board of Directors (the “Committee”) has established an executive compensation plan that contains the following key components:

	Compensation Component			Objective			Key Features
	Salary			Provide cash compensation that is not at risk.			Designed to retain key executives by being competitive; not the primary means of recognizing performance.
	Annual incentive (annual incentive award or bonus)			Motivate and reward achievement of the annual financial results.			Cash payments dependent on the degree of achievement of the annual profit plan – Committee retains substantial discretion to reduce awards.
	Long-term incentives (performance-based restricted stock units and stock options)			Align management interests with those of stockholders; retain executives; motivate and reward achievement of sustainable earnings growth.			Stock unit awards vest upon achievement of Company financial goals over a three- year performance period and require continued employment. Stock option awards vest ratably over four years of continued employment.
	Benefits			Retain executives over the course of their careers.			A comprehensive program of benefits that includes a defined benefit retirement program that provides a special stay- incentive for experienced executives. Life insurance benefits that build cash value.

Summary of Significant Committee Actions in 2008

These are the most significant actions that the Committee has taken with respect to the compensation of executive officers since the 2008 meeting of stockholders:

	•		Maintained 2009 base salaries and target annual incentive compensation at 2008 levels in all but one instance;
	•		Paid no annual incentive awards for 2008 because Company earnings were below 2007 levels;
	•		Established a threshold net earnings target for 2009 annual incentives at $116 million and a target goal for net earnings from continuing operations of $193,016,000;
	•		Established the following threshold for earnings from continuing operations if the performance-based restricted units granted in January of 2009 are to vest: $300 million in any one of the fiscal years in the three-year period ending January 31, 2012;
	•		Eliminated all gross-ups, including those on change in control severance payments and on life insurance premiums; and
	•		Completed a comprehensive review of all change in control arrangements and made the following significant changes:

	○		Adopted a more limited definition of “change of control” and applied it consistently across all arrangements;
	○		Reduced change in control severance payout amounts for the chief executive officer and the president;
	○		Eliminated change in control credit for additional years of service for retirement plan purposes;
	○		Limited the circumstances in which equity awards will vest on a change in control; and
	○		Limited the circumstances in which an executive may resign and be paid a change in control severance payment.

Short- and Long-term Planning for Sustainable Earnings Growth

The performance of management in planning, execution and brand stewardship and variable external factors determine the Company’s success in achieving its financial goals – both short- and long-term.

As part of each year’s planning process, the executive officers develop and submit for Board approval:

	•		a four-year strategic plan that balances earnings with “brand stewardship” (see below); and
	•		a profit plan for the fiscal year.

Both plans must incorporate challenging but achievable goals for sales growth, merchandising, gross margins, marketing expenditures, staffing, other expenses, capital spending and all other components of the Company’s financial statements.

“Brand stewardship” refers to actions taken by management to maintain, in the minds of consumers, strong associations between the TIFFANY & CO. brand and product quality, product exclusivity, the highest levels of customer service, compelling store design and product display, and responsible product sourcing practices.

The Board recognizes that tradeoffs between short-term objectives and brand stewardship are often difficult. For example, variations in product mix can positively affect gross margins in the short term while negatively affecting brand image, and increased staffing can positively affect customer service while negatively affecting earnings. Through the planning process management must bring into balance expectations for quarterly and annual earnings growth and concerns for brand stewardship and sustainable earnings growth.

Objectives of the Executive Compensation Program

The Committee has established the following objectives for the compensation program:

	•		to attract, motivate and retain the management talent necessary to develop and execute both the annual and strategic plans;
	•		to reward achievement of annual and long-term financial goals; and
	•		to link management’s interests with those of the stockholders.

The total executive compensation program includes base salary, annual and long-term incentives and benefits.

Base Salary

The Committee pays the executive officers competitive salaries as one part of a competitive total compensation program to attract and retain them, but does not use salary increases as the primary means of recognizing talent and performance. For a discussion of how the Committee determines that the Company’s base salaries for executives are competitive, see below under the heading Competitive Compensation Analysis.

The Committee last made a general adjustment to executive salaries in 2008. At that time the Committee determined that salaries would, in the future, be adjusted every other year if warranted by competitive conditions and individual performance factors.

Actions Taken:		For 2009 the Committee maintained salaries at 2008 levels in all but one instance. The Committee increased the 2009 base salary of one executive officer because the Competitive Compensation Analysis discussed below indicated that this executive was paid well below the market value for a comparable position.

Short-term Incentives

The Committee uses short-term incentives to motivate executive officers to achieve the annual profit plan. Short-term incentives consist of annual incentive awards for the five named executive officers and bonus eligibility for the other executive officers. Annual incentive awards are primarily formula-driven, with payments based on the degree of achievement of the annual profit plan. Bonuses are entirely discretionary.

Although annual incentive awards are contingent upon the degree to which the annual profit plan is achieved, the Committee has the discretion to take other considerations into account. Such considerations include events, unanticipated at the time that incentive award targets were set, that affect earnings, and contributions to business outcomes consistent with the strategic plan. (For a description of the Incentive Awards, including incentive award targets from year-to-year and the conditions under which the Committee may exercise discretion, see DISCUSSION OF SUMMARY COMPENSATION TABLE AND GRANTS OF PLAN-BASED AWARDS – Non-Equity Incentive Plan Awards.)

The Committee awards annual bonuses to the other executive officers. Although the Committee retains discretion with respect to bonuses, in practice it aligns bonuses with the annual incentive awards.

For Fiscal 2008 the Committee set targets and maximums for annual incentive awards for each of the named executive officers as follows:

								Maximum Incentive as
				Target Incentive as a				a Percent of Base
Executive		Position		Percent of Base Salary				Salary
Michael J. Kowalski		Chairman & CEO			100	%			200	%
James E. Quinn		President			70	%			140	%
Beth O. Canavan		Executive Vice
		President			70	%			140	%
James N. Fernandez		Executive Vice
		President & CFO			70	%			140	%
Jon M. King		Executive Vice
		President			70	%			140	%

Action Taken:		In January 2009, the Committee determined to maintain target and maximum incentives for Fiscal 2009 at the same levels set for Fiscal 2008. See above.

At the beginning of Fiscal 2008, the Committee established, as a condition to awarding the maximum incentive awards, that the Company attain 80% of the earnings objective of the Fiscal 2008 profit plan. At the same time, the Committee also advised the executive officers that the Committee planned to exercise its discretion to reduce annual incentive awards and bonuses to zero if Fiscal 2008 earnings did not equal or exceed earnings for Fiscal 2007. That condition was not satisfied.

Action Taken:		After reviewing and concurring with the recommendation of the chief executive officer, the Committee, in the exercise of its retained discretion, determined not to pay any annual incentive awards or bonuses to any executive officer for Fiscal 2008.

Action Taken:		At the beginning of Fiscal 2009, the Committee established, as a condition to awarding the maximum incentive awards, that the Company attain Fiscal 2009 net earnings of $116 million. At the same time the Committee also advised the executive officers that, in the absence of other factors, the Committee will exercise its discretion as follows:

	•		to reduce the award to zero if Fiscal 2009 earnings from continuing operations do not equal or exceed $135,111,200;
	•		to pay 80% of the target incentive award if Fiscal 2009 earnings from continuing operations equal $173,714,400;
	•		to pay the target incentive award if Fiscal 2009 earnings from continuing operations equal $193,016,000;

	•		to pay 120% of the target incentive award if Fiscal 2009 earnings from continuing operations equal $212,317,600;
	•		to pay the maximum award if Fiscal 2009 earnings from continuing operations equal or exceed $250,920,800; and
	•		to vary the incentive award payable if Fiscal 2009 earnings from continuing operations fall between the amounts set forth above.

Strategic Incentives

The Committee uses long-term incentives to promote the retention of executive officers and motivate them to achieve sustainable earnings growth.

The Committee considers equity-based awards to be appropriate because, over the long term, the Company’s stock price should be a good indicator of management’s success in achieving sustainable earnings growth.

The Committee awards both performance-based restricted stock units and stock options because each form of award complements the other in helping the Company retain and motivate its executive officers.

In its decision to use both forms of award, the Committee took into account the difficulty of setting appropriate strategic performance goals. This difficulty arises due to the significant degree of influence that noncontrollable and highly variable external factors have upon the Company’s performance and the fact that the market does not always respond immediately to earnings growth.

Performance-based restricted stock units have the advantage of rewarding executives for meeting financial goals – even if the achievement of those goals is not reflected in the share price.

Stock options, on the other hand, do not reward executives in a declining market. However, they do provide gains commensurate with those of shareholders, whether or not financial goals have been met.

In order to provide balance to the Company’s long-term incentives, the Committee determined that the ratio of the estimated value of performance-based restricted stock unit awards to the estimated value of stock options awards should be as nearly 50/50 as practicable. For purposes of achieving this ratio the Committee values the awards as follows:

	•		for options, on the basis of the Black-Scholes model; and
	•		for performance-based restricted stock units, using the per share market value immediately prior to the grant on the assumption that units would vest at target.

Performance-Based Restricted Stock Unit Grants Prior to 2009

Complete vesting of performance-based restricted stock units granted prior to January 2009 is dependent upon achievement of both a cumulative earnings per share (“EPS”) goal and an average return on assets (“ROA”) goal over the three-year performance period following the grant.

•

Like most companies, the Company’s stock price over the long term is primarily driven by growth in EPS. EPS performance is the primary determiner of vesting and no shares will vest unless a threshold level of EPS performance is achieved.

	•		The Company’s ROA is also likely to significantly affect its stock price over the long term. This is due, in part, to the significance of inventory and store fitting-out expenses in its business. Thus the Committee used ROA as a supplemental indicator of management’s success in achieving sustainable earnings growth.
	•		The EPS and ROA goals were set by the Committee in conformance to, and as part of the process of approving, the Company’s strategic plan.

Due to the Company’s financial performance in Fiscal 2008, performance-based restricted stock unit grants made in January 2007 for the 2007-2009 performance cycle and made in January 2008 for the 2008-2010 performance cycle are unlikely to vest. Unit grants made in January 2006 vested at 36.4% of maximum (72.8% of target) due to the mix of financial performance over the 2006-2008 performance cycle.

Performance-Based Restricted Stock Unit Grants Made in January 2009

When the Committee met in January 2009, it considered:

	•		the Company’s projected financial performance for Fiscal 2008;
	•		the economic circumstances and uncertainty confronting retailers of luxury goods and jewelry retailers in particular;
	•		the difficulty of planning for Fiscal 2009 in the face of such uncertainty;
	•		the diminished realizable and retentive value of equity awards made to the executive officers in prior fiscal years due to the effect of significant declines in the market value for the Company’s stock and the Company’s financial performance in Fiscal 2008; and
	•		whether the vesting provisions of performance-based restricted stock unit grants to be made in respect of the three-year performance period ending on January 31, 2012 should be changed, relative to those made for prior performance periods (see above), to provide a clearer opportunity for achievement in the face of economic uncertainty and concomitantly, to provide the Company with a better opportunity to retain the executives.

Actions Taken:		The Committee determined that the performance-based restricted stock unit grants made in January 2009 for the three-year performance period ending January 31, 2012 will vest 100% for those executives who remain employed through the end of the performance period, if consolidated earnings from continuing operations equal or exceed $300 million in any one of the three fiscal years ending during the performance period. Unlike prior grants, there will be no incremental opportunity for the executives if the earnings goal is over-achieved, and no partial vesting for partial performance.

To see the number of performance–based restricted share units granted to each of the named executive officers on January 28, 2009 refer to GRANTS OF PLAN-BASED AWARDS Fiscal 2008, 2005 Employee Incentive Plan below.

The Committee does not expect to use the metrics used in January 2009 for performance-based restricted stock unit grants in the future.

For a more complete description of the performance-based restricted stock units, including a description of the circumstances in which a portion of the units may vest in various circumstances of death, disability, a Change of Control or at the initiative of the executive’s employer and the

goals set from year-to-year, see DISCUSSION OF SUMMARY COMPENSATION TABLE AND GRANTS OF PLAN-BASED AWARDS – Equity Incentive Plan Awards – Performance-Based Restricted Stock Units.)

Stock Option Grants Made in January 2009

The Committee grants stock options in order to clarify the link between the interests of the executive officers and those of the Company’s stockholders in long-term growth in share value and to support the brand stewardship over the long term. (For a description of the stock options see DISCUSSION OF SUMMARY COMPENSATION TABLE AND GRANTS OF PLAN-BASED AWARDS – Options.)

Action Taken:		As has been its practice, the Committee granted stock options to the executive officers on January 28, 2009.

To see the number of stock options granted to each of the named executive officers on January 28, 2009 refer to GRANTS OF PLAN-BASED AWARDS Fiscal 2008, 2005 Employee Incentive Plan below.

Retirement Benefits

Retirement benefits are offered to executive officers because the Committee seeks to retain them over the course of their career, especially in their later years when they have gained experience and become more valuable to the Company and to its competitors. (For a description of the retirement benefits see PENSION BENEFITS – Features of the Retirement Plans.)

Retirement benefits are not contingent upon corporate performance factors, although the average final compensation of each executive officer, on which retirement benefits are based, will be determined, in part, by reference to bonus and incentive awards made in the past. Such awards were determined by corporate performance factors.

Executives participate in three retirement plans: they participate in the same tax-qualified pension plan available to all full-time U.S. employees hired before January 1, 2006 and also receive incremental benefits under the Excess Plan and the Supplemental Plan.

The Excess Plan credits salary and bonus in excess of amounts that the Internal Revenue Service (IRS) allows the tax-qualified pension plan to credit in computing benefits, although benefits under both of these plans are computed under the same formula. The Committee considers it fair and consistent with the employee retention purpose of the tax-qualified pension plan to maintain for executives the relationship established for employees compensated below the IRS limit between annual cash compensation and pension benefits.

The Supplemental Plan serves as a stay-incentive for experienced executives by increasing the percentage of average final compensation provided as a benefit when the executive reaches specified service milestones.

Actions Taken:		The Committee approved various changes to the Excess Plan and the Supplemental Plan to bring the plans into compliance with IRS rules governing deferred compensation.
		The Committee also approved changes to the Supplemental Plan governing early vesting on a change in control. For a discussion of these changes please see Review of Change of Control Provision below.

Life Insurance Benefits

IRS limitations render the life insurance benefits that the Company provides to all full-time U.S. employees in multiples of their annual salaries largely unavailable to the Company’s executive officers. Prior to 2003, the Company maintained the relationship established for lower-compensated employees between annual salaries and life insurance benefits through “split dollar” life insurance arrangements with executive officers. Split dollar arrangements were an income tax-favored means of providing death benefits in excess of the IRS limitations, but such arrangements became untenable as the result of IRS rule changes and the Sarbanes-Oxley Act.

In 2003, after considering alternatives to the split dollar arrangements, the Committee arranged for the Company to pay life insurance premiums as taxable compensation to the executives and to pay additional amounts (“gross-ups”) in order to prevent the executive officers from being subjected to increased income taxes as a result of this change in the executive life insurance program. (For an explanation of the key features of the life benefits, see DISCUSSION OF SUMMARY COMPENSATION TABLE AND GRANTS OF PLAN-BASED AWARDS – Life Insurance Benefits.)

In 2008, the Committee re-examined the executive life insurance benefits, consulting with its independent advisor, Independent Compensation Committee Advisor, LLC. The Committee asked Towers-Perrin to include the increase in cash value on each of the whole life policies owned by the executives as part of their target total direct compensation for purposes of the Competitive Compensation Analysis discussed below. The Committee also considered the cost to the Company of the gross-up payments discussed above.

Action Taken:		The Committee determined that, notwithstanding the tax-advantaged legacy of the life insurance program, gross-ups on perquisites will no longer be paid. Accordingly, the Committee determined that no gross-up payments will be made on executive life insurance benefits in Fiscal 2009 or any subsequent year. Such gross-ups were paid in Fiscal 2008.

Disability Insurance Benefits

The Committee provides executive officers with special disability insurance benefits because their salaries are inconsistent with the income replacement limits of the Company’s standard disability insurance policies. Thus, these special disability benefits maintain the relationship established for employees compensated below the IRS limit between annual cash compensation and disability benefits. Disability insurance premiums are taxable to the executives and no gross-up is paid.

Competitive Compensation Analysis

Each year the Committee refers to competitive compensation (market) data because the Committee believes that such data are helpful in assessing the competitiveness of the total compensation offered to the Company’s executive officers. However, the Committee does not consider such market data sufficient for a full evaluation of appropriate compensation for any individual executive officer. Accordingly, the Committee:

	•		has not set a “benchmark” to such data for any executive officer, although it does look to see if the Company’s total executive program falls between the 25th and 75th percentile of market data;
	•		does not rely exclusively on compensation surveys or publicly available compensation information when it determines the compensation of individual executive officers; and

•

also considers:

	○		the comparability of compensation as between executive officers of comparable experience and responsibility;
	○		job comparability with market positions;
	○		the recommendations of the chief executive officer; and
	○		the Committee’s own business judgment as to an individual’s maturity, experience and tenure, capacity for growth, demonstrated success and desirability to the Company’s competitors.

The Committee reviewed a comparability analysis prepared on November 19, 2008 by Towers Perrin, a nationally recognized compensation consulting firm.

The analysis included the following elements of compensation for each executive officer:

	•		base salary;
	•		target annual incentive or bonus as a percentage of salary;
	•		target total cash compensation (salary plus target incentive/bonus award);
	•		actual total cash compensation (salary plus actual incentive/bonus granted in the prior year);
	•		expected value of long-term incentives as a percentage of salary;
	•		target total direct compensation (target total cash compensation, life insurance cash value increases and the expected value of long-term incentives granted in the prior year);
	•		actual total direct compensation (actual total cash compensation plus life insurance cash value increases and the expected value of long-term incentives granted in the prior year); and
	•		pay mix.

The Committee believes that a competitive market for the services of retail executives exists, even among firms that operate in a different line of business. To fully understand market compensation levels for comparable executive positions, the analysis includes data for both retail and general industry companies, with greater emphasis on the former.

The analysis included data concerning compensation for senior positions provided by:

	•		a survey of 16 public companies in the specialty retail industry with median revenues of $3.2 billion (see A below);
	•		a survey of 11 public and private companies in the retail industry with median revenues of $2.4 billion (see B below); and
	•		a survey of 182 companies in general industry with median revenues of $2.9 billion.

Management consulted with Towers Perrin on the selection of companies for comparison, but Towers Perrin has maintained its own judgment in that regard.

***

(A) Specialty Retail Companies: Abercrombie & Fitch; Ann Taylor Stores; COACH; Foot Locker; J. Crew; Limited Brands; Liz Claiborne; Movado; Nordstrom; Pier 1 Imports; Polo Ralph Lauren; Saks Fifth Avenue; Sotheby’s; Talbot’s; Williams Sonoma; Zale Corporation.

(B) Retail Companies: Abercrombie & Fitch; Ann Taylor Stores; Chanel; COACH; GAP; Harry Winston/Aber Diamond; J. Crew; Limited Brands; L.L. Bean; Nordstrom Inc.; and Zale Corporation.

***

For retail-specific positions, the analysis of competitive compensation was determined by reference only to surveys of the retail industry mentioned above.

Because the chief executive officer and the chief financial officer do not occupy retail-specific positions, the analysis of competitive compensation was determined by reference to surveys of the retail industry mentioned above and to the general industry survey mentioned above.

From the competitive compensation analysis and other factors discussed above, the Committee learned that, as of December 2008:

•

the chief executive officer was being compensated:

	○		at the 50th percentile in terms of salary;
	○		below the 50th percentile in terms of target annual incentive as a percentage of salary, target total cash compensation, and long-term incentives as a percent of salary and target total direct compensation; and
	○		between the 50th and 75th percentiles in terms of actual total cash compensation;

•

the named executive officers in retail-specific positions (Mrs. Canavan, and Messrs. Quinn and King) were being compensated:

	○		generally below the 75th percentile on all measures;
	○		in the case of one, below the 50th percentile on target total direct compensation; and
	○		in the case of one other, above the 75th percentile on target total direct compensation;

•

the chief financial officer has significant operating responsibilities beyond those typically assigned to those with this title in the surveyed companies and, for that reason, Towers Perrin elected to compare his compensation to those in a chief financial officer position and to those in a chief operating officer position;

	○		when compared to the chief operating officer position, the chief financial officer was being compensated below the 75th percentile on all measures other than long term incentives as a percent of salary and actual total cash compensation, where he was being compensated above the 75th percentile; and
	○		when compared to the chief financial officer position, the chief financial officer was being compensated above the 75th percentile on most measures.

Action Taken:		The Committee did not make a general adjustment in base salaries or target incentive compensation for 2009 because the Committee determined, in Fiscal 2008, that such adjustments will be made, if at all, on a two-year cycle. The Committee did, however, increase the 2009 base salary of one executive officer in January 2009 because competitive compensation data indicated that this executive was paid below the market value for a comparable position.

Relative Values of Key Compensation Components

The Committee believes that the portion of an executive officer’s compensation that is “at risk” (subject to adjustment for corporate performance factors) should vary proportionately to the amount of responsibility the executive officer bears for the Company’s success. The Committee also believes that a minimum of 50% of the total compensation opportunity of the chief executive officer and 40% of the total compensation opportunity of the other executive officers should be comprised of long-term incentives. The Committee uses the following ratios to base salary as a

means of awarding short- and long-term incentives. The Committee splits the estimated value of the long-term incentives evenly between the estimated value of performance-based restricted stock units and the estimated value of stock options.

										Maximum Short-
							Target Short-term			term Incentive as			Long-term
							Incentive as a			a Percent of			Incentive as
	Executive			Position			Percent of Salary			Salary			Percent of Salary
	Michael J. Kowalski			Chairman & CEO			100%			200%			300%
	James E. Quinn			President			70%			140%			162%
	Beth O. Canavan			Executive Vice President			70%			140%			200%
	James N. Fernandez			Executive Vice President & CFO			70%			140%			225%
	Jon M. King			Executive Vice President			70%			140%			200%

Equity Ownership by Executive Officers and Directors

In July 2006, the Committee proposed and the Board adopted a share ownership policy for executive officers to better align management’s interests with those of stockholders over the long-term. This policy was amended in March 2007 to include directors who are not executive officers. In Fiscal 2008, the Committee reviewed the policy with Towers Perrin to assure that the levels and design remained competitive and appropriate; no change was made as a consequence of that review.

Under this policy, executive officers and non-executive directors are required to own shares of the Company’s common stock having a total market value equal to the following multiples of their base salaries (minimum annual retainer in the case of directors):

		Market Value of Company Stock Holdings as a
		Multiple of Base Salary (Minimum Annual
Position/Level		Retainer in the case of Non-Executive Directors)
Chief Executive Officer		Five Times
Non-Executive Directors		Five Times
President		Four Times
Executive Vice President		Three Times
Senior Vice President		Two Times

Under the share ownership policy, so long as 25% of the required market value consists of shares of the Company’s common stock owned by an executive officer or director, 50% of the positive current value of his or her vested (exercisable) stock options may also be counted towards compliance. For this purpose, the current value of a vested option is calculated as follows: current market value of the number of shares covered by the option less the total option exercise price.

Prior to satisfying this stock ownership requirement, an executive officer or director may not sell any shares except to:

	•		satisfy required withholding for income taxes due upon exercise of stock options or vesting of performance-based restricted stock units;
	•		pay the exercise price upon exercise of stock options; and
	•		dispose of no more than 50% of the remaining shares issued upon exercise of stock options or vesting of performance-based restricted share units (after paying the exercise price and tax withholding).

Executive officers and directors have until July 2011 to satisfy the stock ownership requirement. The Committee reviewed progress toward compliance with the policy in July 2008 and January 2009. In July, all executive officers had fully satisfied their stock ownership requirements; by January all executive officers other than the chief executive officer had fallen from compliance due to the lower market value for the Company’s shares. In July, four directors had fully satisfied their stock ownership requirements; by January, three directors remained in compliance.

Speculative Transactions

The Board has directed executive officers not to engage in transactions of a speculative nature in Company securities, such as the purchase of calls or puts, selling short or speculative transactions as to any rights, options, warrants or convertible securities related to Company securities. This policy does not affect the right to exercise or hold a stock option issued to the executive by the Company.

Review of Change of Control Provisions

In Fiscal 2008, the Committee undertook a review of all compensatory change in control arrangements. The Committee determined to undertake this review out of concern that the existing agreements might be considered overly generous or overly liberal when viewed through the lens of evolving principles of corporate governance. As used in this discussion, this review shall be referred to as the “CIC Review”.

To coordinate and organize the CIC Review the Committee asked its independent advisor Independent Compensation Committee Adviser, LLC (“Independent Consultant”), to review and comment on all arrangements that provide or accelerate the timing of compensation to executive officers if a change of control has occurred. Towers Perrin provided market data for use by Independent Consultant in the CIC Review. Independent Consultant reviewed and commented upon the following arrangements containing change in control provisions:

	•		retention Agreements in effect with each of the executive officers;
	•		stock option grant terms – grants made prior to January 2009;
	•		time-vesting restricted stock terms – grants made prior to January 2009 (such grants have not been made to executive officers);
	•		performance-based restricted stock terms – grants made prior to January 2009 to executive officers; and
	•		the Supplemental Retirement Income Plan.

Consistent Definition of “Change in Control”

After discussion, the Committee determined that the definition of “change in control” should:

•

be consistent across all the arrangements;

•

eliminate any after-the-fact or subjective determination by the Committee as to whether a change in control has occurred; and

•

eliminate the possibility of a change in control being deemed to occur before an actual transaction has occurred.

Action Taken:		The Committee amended all relevant compensatory arrangements to provide that a “Change in Control” will be deemed to occur only in the following four situations:

	•		a 35% share acquisition;
	•		incumbent directors (including those who are nominated by the incumbent directors) cease to be a majority;
	•		a corporate transaction, such as a merger, in which the shareholders prior to the transaction do not own 51% of the Company’s shares; and
	•		a sale of all or substantially all of the assets of the Company or Tiffany.

Other actions taken as a consequence of the CIC Review will be described below under the discussion of the various compensatory arrangements.

Retention Agreements

The Committee continues to believe that, during any times of possible or actual transition of corporate control, it would be important to keep the team of executive officers in place, free of distractions that might arise out of concern for personal financial advantage or job security. The Company has not had a single controlling stockholder for many years, and, depending upon the circumstances, executive officers could consider acquisition of a controlling interest as described in the retention agreements to be a prelude to a significant change in corporate policies and an incentive to leave. For these reasons, the Company has entered into retention agreements with each of the executive officers that provide financial incentives for them to remain in place during

any such times. (For a description of the retention agreements see POTENTIAL PAYMENTS ON TERMINATION OR CHANGE IN CONTROL – Retention Agreements.)

The Committee believes that the retention agreements serve the best interests of the Company’s stockholders because such agreements:

	•		will increase the value of the Company to a potential acquirer that requires delivery of an intact management team;
	•		will help to keep management in place and focused should any situation arise in which a change of control looms but is not welcome or agreement has not yet been reached;
	•		are a prudent defense to the possibility that one or more senior executive officers might retire or take a competing job offer during a time of transition; and
	•		are not overly generous.

The Committee also believes that the independent directors are fully capable of weighing the merits of any proposed transaction and reaching a proper conclusion in the interests of the stockholders, even in the face of management’s advocacy of a transaction that would provide change in control payments to the executive officers.

No Other Employment Agreements or Severance Plans for Executives

Apart from the retention agreements, the Company:

	•		is not party to any employment agreement with any executive officer that provides for severance benefits on termination of employment;
	•		does not maintain any severance payment policy for executive officers; and
	•		has the right to terminate the employment of any executive for any reason or no reason prior to the occurrence of a change of control.

Dual Triggers

The retention agreements are “dual-trigger” arrangements in that they provide no benefits unless two events occur: (i) a change in control followed by (ii) a loss of employment.

Matters Considered

In the course of the CIC Review the Committee considered evolving corporate governance concerns and market practices with respect to:

	•		the amount of severance;
	•		payment of “gross-ups” (payments used to eliminate the effect of the golden parachute excise tax);
	•		the propriety of providing extra years of unearned service credit for retirement plan purposes;
	•		the circumstances under which an executive may be fired for “Cause” and reap no severance benefit; and
	•		the circumstances in which the executive may resign for “good reason” and still receive a severance benefit.

Actions Taken:		After completing the CIC review, the Committee approved a new form of retention agreement and asked the executive officers to sign it in place of the old form. All executive

officers have done so. The new form accomplishes the following significant changes:

	•		for the chief executive officer and the president, reduces the term of employment following a change in control, and the amount of years compensation payable as severance, from three years to two; as a consequence, two years is consistently employed across the executive officer group;
	•		eliminates the gross-up for the golden parachute excise tax;
	•		eliminates added, unearned years of service from the pension calculation;
	•		changes the bonus component payable as severance to the “target” bonus as opposed to the highest bonus of the last three years before termination of employment, but no less than the target bonus;
	•		limits the circumstances in which an executive may resign for “good reason” and receive severance and requires that the resignation occur within one year of a change in control; and
	•		broadens the definition of “Cause”; under the changed definition executives may be terminated without severance if they violate the Company’s Code of Conduct or fail to cooperate in an internal investigation.

Equity Grant Change in Control Provisions

For grants made prior to January 2009, the Company’s stock option and performance-based restricted stock unit award agreements provide for accelerated vesting of options and restricted stock units upon a change in control.

During the course of the CIC Review, the Committee adopted a more focused view of the change in control circumstances which should permit accelerated vesting of stock options and performance-based restricted stock units. The Committee applied this view to equity grants made in January 2009 and expects to do so for future grants.

The Committee believes that:

	•		where practicable, executives should be required to meet the service vesting provisions of equity grants following a change in control;
	•		the definition of “Change in Control” (see above) includes circumstances where it is sensible to require the executive to remain employed in order to vest in his/her equity grant and other circumstances where it not sensible;
	•		following a change in control, an executive should have the benefit of his/her equity grants if terminated without cause or if he/she resigns with good reason;
	•		performance-based equity grants should be treated separately from grants that are purely time-vested because a change in control may result in a change in business strategy making it difficult, if not impossible, for the Company to achieve the performance criteria; and

•

the independent directors are fully capable of weighing the merits of any proposed transaction and reaching a proper conclusion in the interests of the stockholders, even in the face of management’s advocacy of a transaction that would provide change in control payments to the executive officers.

Actions Taken:		The Committee varied the change in control provisions of the terms of the equity grants made in or after January 2009 (“new” grants) from those made in prior years in the following respects:

	•		New option grants require a post-change continued service earn-out unless the change in control is a “Terminating Transaction”;
	•		Terminating Transactions are those in which the Company would cease to exist or in which 80% or more of the outstanding stock is acquired;

○

However, it is not a Terminating Transaction if the acquirer arranges to assume or replace the grant;

	•		New performance-based grants will vest (in whole or in part) without a continued service earn-out requirement on the effective date of a change in control except as follows: a service earn-out is required if the change in control occurs only because of a 35% share acquisition;
	•		Whenever a service earn-out is required, it will be satisfied if termination of employment occurs after the change in control because of an “Involuntary Termination” (termination without Cause or a resignation for Good Reason);
	•		New performance-based grants that vest following a change in control will now vest as follows:

	○		100% following a Terminating Transaction;
	○		100% if vesting occurs in the last fiscal year of a three-year performance period;
	○		70% if vesting occurs in the second fiscal year of a three-year performance period; and
	○		30% if vesting occurs in the first fiscal year of a three-year performance period.

Supplemental Plan Change in Control Provisions

Consistent with its view that Change in Control entitlements should be triggered, in most circumstances, only on a loss of employment (a “dual-trigger”), the Committee’s CIC Review also focused on the Supplemental Plan for executive retirement benefits. The Committee determined that the Plan, as previously structured, was inconsistent with that view.

Action Taken		In January 2009 the Committee revised the Change in Control vesting requirements of the Supplemental Plan as follows:

	•		Those who have not met the minimum age (55) and years of service qualification (10) on a Change of Control Date will only be “tentatively” vested under plan;
	•		Until such time as those executives meet the minimum age and years of service requirement they will not be paid a plan benefit on voluntary resignation from employment; they will be paid a plan benefit if they

	○		are involuntarily terminated without cause; or
	○		resign for good reason.

Termination for Cause and Violation of Non-Compete Covenants

Stock options granted under the 2005 Employee Incentive Plan may not be exercised after a termination for cause. Performance-based restricted stock units will not vest if termination for cause occurs before the conclusion of the three-year performance period.

All executive officers have signed non-competition covenants that have a two-year post-employment term. For those who are age 60 or older at termination of employment or who attain age 60 within six months of termination, the term ends six months after termination. For all executive officers, the term ends in six months after termination if a change in control (as defined in the retention agreements) has occurred prior to termination of employment or during the six-month period. For all executive officers, once the six-month minimum period has passed, a change of control will result in an early end to the term.

Violation of the non-compete covenants will result in:

	•		loss of benefits under the Excess Plan and the Supplemental Plan;
	•		loss of all rights under stock options and performance-based restricted stock units; and
	•		mandatory repayment of all proceeds from stock options exercised or restricted stock units vested during a period beginning six months before termination and throughout the duration of the non-competition covenant.

Compensation Committee Process

			Independent advice
			The decision to retain Towers Perrin to assist the Committee was made by the Committee Chair. Management recommended Towers Perrin and has assisted in arranging meetings between Towers Perrin and the Committee.
			Because Towers Perrin also consults with management on compensation to be paid to non-executive employees, the Committee has retained and consulted with a separate independent compensation advisor, Independent Compensation Committee Adviser, LLC (“Independent Consultant”), to help the Committee understand all of the relevant compensation, financial and technical information it needs to make proper decisions regarding executive compensation.
			The Independent Consultant is available to the Committee, as requested, to:

•

review recommendations from management (and any consultants retained by management) and provide an additional layer of peer review to their analyses and recommendations to the Committee;

	•		join other consultants in explaining relevant information and provide additional feedback to the Committee;
	•		help the Committee to identify key issues and ask probing questions; and
	•		review and comment upon all plans, agreements or other documents or actions the Committee is asked to adopt or approve.

The Compensation Committee has told the Independent Consultant that:

	•		they are to act independently of management;
	•		they are to act at the direction of the Compensation Committee; and
	•		their ongoing engagement will be determined by the Committee.

			Accordingly, the Independent Consultant provides no other services for the Company.
			Tally sheets
			The Committee reviews “tally sheets” in July, November and January so that the total compensation and equity position in Company stock for each executive officer can be compared. The tally sheets are prepared by the Company’s Human Resources Department for each executive officer and provided to the Committee.

Action Taken		Working with Independent Consultant, the Committee revised the format of the tally sheets to include more information.

The tally sheets now include historical compensation and wealth accumulation data concerning:

	•		current salary and potential threshold, target and maximum annual incentive awards;
	•		salary and annual incentive award grants in prior years;
	•		total cash compensation (salary plus annual incentive award for the previous year);
	•		potential threshold, target and maximum returns on performance-based restricted stock unit awards and estimated value of stock option awards;
	•		performance-based restricted stock unit and stock option awards made in prior years;
	•		potential threshold, target and maximum returns on unvested performance-based restricted stock unit awards and unrealized potential gains from outstanding stock options holdings, both under current conditions and under various hypothetical stock price and termination or change- in-control scenarios;
	•		realized gains on stock options previously exercised;
	•		shareholdings and progress towards compliance with stock ownership requirements;
	•		retirement and life insurance benefits and perquisites;
	•		comparison of one-year increase or decrease in total compensation and wealth accumulation to one-year total shareholder return; and

•

estimated value of salary, annual incentive or bonus, unvested restricted stock units and stock options, and retirement and health benefits upon a hypothetical change in control scenario.

			The Committee meets with the chief executive officer regularly and solicits his recommendations with respect to the compensation of the executive officers. In this context, his views as to the performance of the individual officers are provided to the Committee. Individual performance has not factored significantly in terms of incentive pay, although the Committee has reserved discretion in that regard, see DISCUSSION OF SUMMARY COMPENSATION TABLE AND GRANTS OF PLAN-BASED AWARDS, Non-Equity Incentive Awards.
			In January, the Committee reviews a forecast of the prior fiscal year financial results with the chief financial officer and calculates the tentative payouts for short- and long-term incentives on that basis. Revised calculations and adjustments are prepared at the March meeting, when fiscal year financial results are nearly final and ready for public release, and when the annual profit plan and the strategic plan are presented for approval by the Board. After the public release of the financial results, the final calculation is made and the Committee authorizes management to make payment on prior year annual incentive awards and performance-based restricted stock unit awards for which the three-year performance period ended in the prior year and to enter into agreements with respect to current year annual incentive awards.
			The Committee has limited discretion under the 2005 Employee Incentive Plan to adjust incentive awards for certain events, unanticipated at the time that incentive award targets were set, that affect earnings or for special contributions to other business outcomes consistent with the strategic plan. (For a description of the Incentive Awards, including the incentive awards set and the conditions under which the Committee may exercise discretion, see DISCUSSION OF SUMMARY COMPENSATION TABLE AND GRANTS OF PLAN-BASED AWARDS, Non-Equity Incentive Awards.)
			The Committee awards stock options to executive officers at the January meeting or when individual promotions are recognized. The Committee has never authorized management to make awards of stock options. Since 2005, awards of performance-based restricted stock units have also been made at the January meeting with reference to a preliminary draft of the Company’s strategic plan, although the specific financial goals are not set until the March meeting when the strategic plan is adopted.

Limitation under Section 162(m) of the Internal Revenue Code

Section 162(m) of the Internal Revenue Code generally denies a federal income tax deduction to the Company for compensation in excess of $1 million per year paid to any of the named executive officers. This denial of deduction is subject to an exception for “performance-based compensation” such as the performance-based restricted stock units, stock options and annual incentive awards discussed above. Although the Committee has designed the executive compensation program with tax considerations in mind, the Committee does not believe that it would be in the best interests of the Company to adopt a policy that would preclude compensation arrangements subject to deduction limitations.

The compensation paid to the executive officers is deductible by the Company except in the following respect: that portion of compensation paid the chief executive officer labeled “Salary” and “All Other Compensation” in the Summary Compensation Table that, in the aggregate, exceeds $1 million in any single year.

REPORT OF THE COMPENSATION COMMITTEE

We have reviewed and discussed with the management of Tiffany & Co. the Compensation Discussion and Analysis section of this Proxy Statement. Based on our review and discussions, we recommend to the Board of Directors, to the chief executive officer and to the chief financial officer that the Compensation Discussion and Analysis be included in this Proxy Statement and the Annual Report on Form 10-K for the fiscal year ended January 31, 2009.

Compensation Committee and its Stock Option Subcommittee:

Gary E. Costley, Chair
Rose Marie Bravo
Abby F. Kohnstamm
Charles K. Marquis
Peter W. May

March 18, 2009

SUMMARY COMPENSATION TABLE
Fiscal 2008, Fiscal 2007, and Fiscal 2006

																										Change in
																										Pension
																										Value and
																						Non-				Nonquali-
																						Equity				fied
																						Incentive				Deferred				All
																						Plan				Compen-				Other
Name and														Stock				Option				Compen-				sation				Compen-
Principal						Salary				Bonus				Awards				Awards				sation				Earnings				sation				Total
Position		Year				($) (a)				($) (b)				($) (c)				($) (d)				($) (e)				($) (f)				($)				($)
Michael J. Kowalski Chairman and CEO			2008			$	1,037,975				---			$	(838,140	)		$	1,473,547				---			$	453,947			$	322,342	(g)		$	2,449,671
			2007			$	972,382				---			$	2,374,481			$	1,760,844			$	1,852,500			$	370,793			$	340,293	(h)		$	7,671,293
			2006			$	972,382				---			$	1,699,300			$	1,869,000			$	1,123,541			$	1,219,355			$	153,367	(i)		$	7,036,945
James E. Quinn President			2008			$	766,398				---			$	(522,217	)		$	836,003				---			$	231,007			$	197,357	(j)		$	1,508,548
			2007			$	738,013				---			$	1,477,923			$	1,103,274			$	1,036,000			$	190,821			$	241,440	(k)		$	4,787,471
			2006			$	738,013				---			$	1,058,611			$	1,211,307			$	628,334			$	1,452,588			$	119,235	(l)		$	5,208,088
Beth O. Canavan Executive Vice President			2008			$	625,163				---			$	(296,645	)		$	537,492				---			$	235,562			$	173,370	(m)		$	1,274,942
			2007			$	528,577				---			$	827,617			$	589,111			$	689,000			$	743,079			$	160,339	(n)		$	3,537,723
			2006			$	526,275				---			$	587,714			$	656,997			$	417,878			$	249,113			$	91,659	(o)		$	2,529,636
James N. Fernandez Executive Vice President and CFO			2008			$	770,694				---			$	(421,930	)		$	748,641				---			$	185,802			$	222,348	(p)		$	1,505,555
			2007			$	658,228				---			$	1,165,376			$	851,203			$	858,000			$	136,439			$	214,437	(q)		$	3,883,683
			2006			$	655,543				---			$	821,349			$	946,829			$	520,377			$	448,086			$	118,495	(r)		$	3,510,679
Jon M. King Executive Vice President			2008			$	626,774				---			$	(267,729	)		$	506,442				---			$	181,745			$	168,060	(s)		$	1,215,292
			2007			$	498,657			$	650,000			$	671,302			$	494,351				---			$	175,006			$	149,904	(t)		$	2,639,220
			2006			$	483,698			$	394,225			$	446,083			$	499,315				---			$	223,538			$	87,120	(u)		$	2,083,979

Notes to Summary Compensation Table:
(a)		Salary amounts include amounts deferred at the election of the executive under the Tiffany and Company Executive Deferral Plan (the “Deferral Plan”) and under the 401(k) feature of the Company’s Employee Profit Sharing and Retirement Savings Plan (the “401(k)”). Amounts deferred to the Deferral Plan are also shown in the Nonqualified Deferred Compensation Table. Salary amounts paid during Fiscal 2008 exceeded the annual salary rate because 27 pay periods occurred during the fiscal year instead of the standard 26 pay periods.
(b)		Bonus amounts include amounts deferred at the election of the executive under the Deferral Plan and under the 401(k). Bonus amounts are earned in the fiscal year ended January 31, and paid in April.
(c)		Amounts shown represent the dollar amount of compensation cost recognized for performance-based restricted stock unit awards in accordance with SFAS No. 123R. In 2008, compensation expense related to the January 2006 and January 2007 grants was reversed in accordance with SFAS No. 123R. In valuing such awards, the Company made certain assumptions. For a discussion of those assumptions, please refer to Part II of the Company’s Annual Report on Form 10-K for the fiscal year ended January 31, 2009. See Note N. “STOCK COMPENSATION PLANS”, in Notes to Consolidated Financial Statements, under Item 8. Financial Statements and Supplementary Data.

(d)		Amounts shown represent the dollar amount of compensation cost recognized for stock options in accordance with SFAS No. 123R. In valuing option awards, the Company made certain assumptions. For a discussion of those assumptions, please refer to note (c) above.
(e)		This column reflects cash annual incentive awards under the 2005 Employee Incentive Plan. These awards are earned in the fiscal year ended January 31 and are paid on the basis of achieved Performance Goals after the release of the Company’s financial statements for the fiscal year. (For a description of the Performance Goals, see DISCUSSION OF SUMMARY COMPENSATION TABLE AND GRANTS OF PLAN-BASED AWARDS – Non-Equity Incentive Plan Awards.) This column includes amounts deferred at the election of the executive under the Deferral Plan. Amounts so deferred are also shown in the Nonqualified Deferred Compensation Table.
(f)		This column represents the aggregate change, over the course of the fiscal year, in the actuarial present value of the executive’s accumulated benefit under all defined benefit and actuarial plans. This column does not include earnings under the Deferral Plan because the Deferral Plan does not pay above-market or preferential earnings on compensation that is deferred.
(g)		Mr. Kowalski’s Fiscal 2008 compensation included the following elements whose total incremental cost to the Company is shown in the column titled “All Other Compensation”: life insurance premium ($162,175); tax gross-up paid on the life insurance premium ($136,560); disability insurance premium ($14,207); 401(k) matching contribution ($6,750); and medical exam ($2,650).
(h)		Mr. Kowalski’s Fiscal 2007 compensation included the following elements whose total incremental cost to the Company is shown in the column titled “All Other Compensation”: life insurance premium ($171,055); tax gross-up paid on the life insurance premium ($144,286); disability insurance premium ($15,952); 401(k) matching contribution ($6,500); and medical exam ($2,500).
(i)		Mr. Kowalski’s Fiscal 2006 compensation included the following elements whose total incremental cost to the Company is shown in the column titled “All Other Compensation”: life insurance premium ($66,542); tax gross-up paid on the life insurance premium ($54,073); disability insurance premium ($16,627); 401(k) matching contribution ($7,500); medical exam ($2,375); and tax accounting fees ($6,250).
(j)		Mr. Quinn’s Fiscal 2008 compensation included the following elements whose total incremental cost to the Company is shown in the column titled “All Other Compensation”: life insurance premium ($94,340); tax gross-up paid on the life insurance premium ($77,925); disability insurance premium ($15,967); medical exam ($2,375); and 401(k) matching contribution ($6,750).
(k)		Mr. Quinn’s Fiscal 2007 compensation included the following elements whose total incremental cost to the Company is shown in the column titled “All Other Compensation”: life insurance premium ($108,311); tax gross-up paid on the life insurance premium ($90,043); disability insurance premium ($17,711); 401(k) matching contribution ($6,500); tax accounting fees ($14,680); and health club membership ($4,195).
(l)		Mr. Quinn’s Fiscal 2006 compensation included the following elements whose total incremental cost to the Company is shown in the column titled “All Other Compensation”: life insurance premium ($47,325); tax gross-up paid on the life insurance premium ($37,258); disability insurance premium ($17,386); 401(k) matching contribution ($7,500); medical exam ($2,375); tax accounting fees ($3,815); and health club membership ($3,576).

(m)		Mrs. Canavan’s Fiscal 2008 compensation included the following elements whose total incremental cost to the Company is shown in the column titled “All Other Compensation”: life insurance premium ($79,048); tax gross-up paid on the life insurance premium ($69,497); disability insurance premium ($15,425); 401(k) matching contribution ($6,750); and medical exam ($2,650).
(n)		Mrs. Canavan’s Fiscal 2007 compensation included the following elements whose total incremental cost to the Company is shown in the column titled “All Other Compensation”: life insurance premium ($71,796); tax gross-up paid on the life insurance premium ($62,918); disability insurance premium ($15,750); 401(k) matching contribution ($6,500); medical exam ($2,500); and health club membership ($875).
(o)		Mrs. Canavan’s Fiscal 2006 compensation included the following elements whose total incremental cost to the Company is shown in the column titled “All Other Compensation”: life insurance premium ($35,484); tax gross-up paid on the life insurance premium ($29,017); disability insurance premium ($16,579); 401(k) matching contribution ($7,500); medical exam ($2,375); and health club membership ($704).
(p)		Mr. Fernandez’s Fiscal 2008 compensation included the following elements whose total incremental cost to the Company is shown in the column titled “All Other Compensation”: life insurance premium ($111,161); tax gross-up paid on the life insurance premium ($88,105); disability insurance premium ($16,332); and 401(k) matching contribution ($6,750).
(q)		Mr. Fernandez’s Fiscal 2007 compensation included the following elements whose total incremental cost to the Company is shown in the column titled “All Other Compensation”: life insurance premium ($101,927); tax gross-up paid on the life insurance premium ($84,520); disability insurance premium ($17,740); 401(k) matching contribution ($6,500); and tax accounting fees ($3,750).
(r)		Mr. Fernandez’s Fiscal 2006 compensation included the following elements whose total incremental cost to the Company is shown in the column titled “All Other Compensation”: life insurance premium ($52,029); tax gross-up paid on the life insurance premium ($41,322); disability insurance premium ($13,829); 401(k) matching contribution ($7,500); and tax accounting fees ($3,815).
(s)		Mr. King’s Fiscal 2008 compensation included the following elements whose total incremental cost to the Company is shown in the column titled “All Other Compensation”: life insurance premium ($84,188); tax gross-up paid on the life insurance premium ($64,037); disability insurance premium ($13,085); and 401(k) matching contribution ($6,750).
(t)		Mr. King’s Fiscal 2007 compensation included the following elements whose total incremental cost to the Company is shown in the column titled “All Other Compensation”: life insurance premium ($71,602); tax gross-up paid on the life insurance premium ($54,261); disability insurance premium ($13,410); 401(k) matching contribution ($6,500); medical exam ($2,500); and health club membership ($1,631).
(u)		Mr. King’s Fiscal 2006 compensation included the following elements whose total incremental cost to the Company is shown in the column titled “All Other Compensation”: life insurance premium ($35,285); tax gross-up paid on the life insurance premium ($26,013); disability insurance premium ($13,010); 401(k) matching contribution ($7,500); medical exam ($2,625); and health club membership ($2,687).

GRANTS OF PLAN-BASED AWARDS
Fiscal 2008
2005 Employee Incentive Plan

																																										All Other
																																										Option
																																										Awards:
																																										Number					Exercise
																																										of					or Base
																																										Securities					Price of					Grant Date
																																										Under-					Option					Fair Value of
												Estimated Future Payouts															Estimated Future Payouts															lying					Awards					Equity
							Grant					Under Non-Equity															Under Equity Incentive															Options					($/SH)					Awards
	Name		Award Type				Date					Incentive Plan Awards															Plan Awards															(#)					(b)					(c) (d)
																											Threshold					Target
																											Number					Number					Maximum
												Threshold					Target					Maximum					of Shares					of					Number
												($)					($)					($)					(a)					Shares					of Shares
	Michael J. Kowalski			Annual Incentive Award								$	0				$	1,000,000				$	2,000,000
				Performance- Based RSU				1/28/09																			65,200						65,200				65,200															$	1,369,200
				Stock Option				1/28/09																																			155,000				$	23.00				$	1,492,340
	James E. Quinn			Annual Incentive Award								$	0				$	518,000				$	1,036,000
				Performance- Based RSU				1/28/09																			26,100						26,100				26,100															$	548,100
				Stock Option				1/28/09																																			62,000				$	23.00				$	596,936
	Beth O. Canavan			Annual Incentive Award								$	0				$	420,000				$	840,000
				Performance- Based RSU				1/28/09																			26,100						26,100				26,100															$	548,100
				Stock Option				1/28/09																																			62,000				$	23.00				$	596,936
	James N. Fernandez			Annual Incentive Award								$	0				$	518,000				$	1,036,000
				Performance- Based RSU				1/28/09																			36,200						36,200				36,200															$	760,200
				Stock Option				1/28/09																																			86,000				$	23.00				$	828,008
	Jon M. King			Annual Incentive Award								$	0				$	420,000				$	840,000
				Performance- Based RSU				1/28/09																			26,100						26,100				26,100															$	548,100
				Stock Option				1/28/09																																			62,000				$	23.00				$	596,936

Notes to Grants of Plan-Based Awards Table
(a)		Assumes that the Earnings from Continuing Operations Target is met in any of three fiscal years 2009, 2010, or 2011 (see DISCUSSION OF SUMMARY COMPENSATION TABLE AND

		GRANTS OF PLAN-BASED AWARDS – Equity Incentive Plan Awards – Performance-Based Restricted Stock Units).
(b)		The exercise price of all options was equal to or greater than the closing price of the underlying shares on the New York Stock Exchange on the grant date. The Committee adopted the following pricing convention on January 18, 2007: the higher of (i) the simple arithmetic mean of the high and low sales price of such stock on the New York Stock Exchange on the grant date or (ii) the closing price on such Exchange on the grant date. Options granted before that date were priced at the simple arithmetic mean of the high and low sales price of such stock on the New York Stock Exchange on the grant date.
(c)		The grant date fair value of each option award was computed in accordance with SFAS NO. 123R.
(d)		The grant date fair value of each performance-based award was computed assuming threshold payout and in accordance with SFAS NO. 123R. For additional information regarding performance-based compensation, see the table titled “OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END” beginning on page PS-51.

EQUITY COMPENSATION PLAN INFORMATION

Column A

Column B

Column C

Number of securities

remaining available

Number of securities

for future issuance

to be issued upon

Weighted average

under equity

exercise of

exercise price of

compensation plans

outstanding options,

outstanding options,

(excluding securities

Plan category

warrants and rights

warrants and rights

reflected in column A)

Equity compensation plans approved by security holders

7,892,845

a

$

34.24

5,531,642

b

Equity compensation plans not approved by security holders

0

0

0

Total

7,892,845

a

$

34.24

5,531,642

b

(a)		Shares indicated do not include 2,194,868 shares issuable under awards of stock units already made.
(b)		Shares indicated are the aggregate of those available for grant under the Company’s 2005 Employee Incentive Plan (the “Employee Plan”) and the Company’s 2008 Directors Equity Plan (the “Directors Plan”). All plans provide for the issuance of options and stock awards. However, under both plans the maximum number of shares that may be issued (11,000,000 under the Employee Plan and 1,000,000 under the Directors Plan) is subject to reduction by 1.58 shares for each share that is delivered on vesting of a stock award. Column C reflects this reduction assuming that all shares granted as stock awards will vest.

DISCUSSION OF SUMMARY COMPENSATION TABLE
AND GRANTS OF PLAN-BASED AWARDS

Non-Equity Incentive Plan Awards

None of the named executive officers was paid a cash (non-equity) annual incentive award for Fiscal 2008 although all were eligible for such a payment.

For awards made at the beginning of Fiscal 2008, the Committee retained the discretion to reduce incentive awards from a maximum. The Committee used that discretion to reduce awards to zero.

	•		At the beginning of Fiscal 2008, the Committee established a performance goal. The performance goal required the Company to attain earnings of $243,000,000. After adjustment for certain non-recurring items, this goal was met. Because the goal was met each of the named executive officers was eligible to receive a maximum incentive award of 200% of base salary.
	•		At the beginning of Fiscal 2008 the Committee communicated to the named executive officers earnings objectives above the performance goal. The Committee indicated that, in the absence of other relevant factors (see below), the Committee would exercise its discretion as follows: to reduce the maximum award to zero if earnings from continuing operations did not equal or exceed those in Fiscal 2007. That goal was not met and the Committee reduced the awards accordingly.

For cash (non-equity) awards made at the beginning of Fiscal 2009 the Committee has retained discretion similar to that retained for the Fiscal 2008 awards.

	•		The performance goal established for Fiscal 2009 is consolidated net earnings (subject to adjustment as permitted in the Plan) of $116 million. If this goal is reached, each of the named executive officers will be eligible to receive a maximum incentive award of 200% of base salary.
	•		The Committee has also communicated to the named executive officers that it will reduce the maximum incentive award:

	o		to zero, if Fiscal 2009 earnings from continuing operations do not equal or exceed $135,111,200;
	o		to 80% of the “target amount” (100% of base salary for the chief executive officer and 70% of base salary for each of the other named executive officers), if earnings from continuing operations equal $173,714,400;
	o		to the target amount, if earnings from continuing operations equal $193,016,000; and
	o		to 120% of the target amount if earnings from continuing operations equal $212,317,600.

•

The Committee has also communicated that the maximum award will only be made if earnings from continuing operations equal or exceed $250,920,800. If earnings fall between the markers indicated, the award will be prorated accordingly.

The Committee has also communicated that it reserves the right to consider other relevant factors in reducing an annual incentive award below the maximum allowable based on achievement of the 162(m) performance goal and the other earnings objectives set forth above.

The “other relevant factors” that the Committee has indicated it will consider are:

•

annual progress towards strategic plan objectives;

	•		business unit growth and/or profitability (where the executive officer has responsibility for such growth and/or profitability);
	•		organizational development;
	•		contributions to the working environment of his/her team and/or development of a positive working environment for employees;
	•		business process improvement; and
	•		cost containment and/or cost reduction efforts.

In Fiscal 2007 and 2006 annual incentive awards were paid out as follows:

	•		In Fiscal 2007, the Company exceeded its net earnings objectives and annual incentive awards and bonuses were paid out at 200% of the target amount.
	•		In Fiscal 2006, the Company exceeded its net earnings objectives and annual incentive awards and bonuses were paid out at 121.3% of the target amount.

Annual incentive awards paid to the five named executive officers differ from bonuses paid to other executive officers as follows:

	•		Annual incentive awards are paid under the terms of the 2005 Employee Incentive Plan and will be paid only if the Company meets objective performance goals. This promise is set out in written agreements.
	•		Bonuses are not subject to written agreements. The Compensation Committee has the discretion to increase, decrease or withhold such bonuses. It has been the Committee’s practice to align bonuses with annual incentive awards.
	•		Annual incentive awards are designed so that the amounts paid out will be deductible to the Company and not count against the one million dollar limitation under Section 162(m) of the Internal Revenue Code. Each of the named executive officers is subject to that limitation.
	•		If a bonus is paid to an executive officer other than a named executive officer, and the total annual cash compensation paid to that executive in the year of bonus was to exceed the one million dollar limitation, the excess would not be deductible to the Company for federal income tax purposes.

Equity Incentive Plan Awards – Performance-Based Restricted Stock Units

In January 2005, the Compensation Committee first awarded equity incentive awards – Performance- Based Restricted Stock Units (“Units”) to the executive officers. Units were subsequently granted in January of 2006, 2007, 2008 and 2009. The 2009 award is reflected in the GRANTS OF PLAN-BASED AWARDS table under the column headed “Estimated Future Payouts Under Equity Incentive Plan Awards.”

Units were granted in 2006, 2007 and 2008 under the 2005 Employee Incentive Plan on the following terms:

	•		Units will be exchanged on a one-to-one basis for shares of the Company’s common stock when and if the Units vest;
	•		Vesting is determined at the end of a three-year performance period;
	•		No Units will vest if the executive voluntarily resigns, retires or is terminated for cause during the three-year performance period, although partial vesting is provided for in cases of termination for death or disability;

	•		No Units will vest (other than for reasons of death, disability or on a change in control) if the Company fails to meet a three-year cumulative EPS performance threshold set by the Compensation Committee at the time the Units are granted;
	•		Units will tentatively vest based on the following EPS performance hurdles:

	o		30% at threshold;
	o		50% at target; and
	o		87.5% at maximum;

	•		In the event of EPS performance above threshold and below target or above target and below maximum the number of Units that tentatively vest will be prorated. No Units will vest if threshold earnings performance is not achieved. After tentative vesting has been determined, a ROA test will be applied. If met, the tentatively vested number of Units will be increased by 15% (but not to over 100%); if not met, the tentatively vested number of Units will be reduced by 15%;
	•		100% vesting will occur only if the Company meets both the EPS maximum and ROA goal; and
	•		No dividends are paid, accrued or credited to Units until vesting.

Units were granted in 2009 under the 2005 Employee Incentive Plan on the following terms:

	•		Units will be exchanged on a one-to-one basis for shares of the Company’s common stock when and if the Units vest;
	•		Vesting is determined at the end of a three-year performance period;
	•		No Units will vest if the executive voluntarily resigns, retires or is terminated for cause during the three-year performance period, although partial vesting is provided for in cases of termination for death or disability;
	•		No Units will vest (other than for reasons of death, disability or on a change in control) if the Company fails to achieve consolidated earnings from continuing operations of $300 million in any one of the three years within the performance period;
	•		Units will vest 100% or not at all; and
	•		No dividends are paid, accrued or credited to Units until vesting.

The grants of Units made in January 2006 were subject to satisfaction of the following performance tests over the performance period ending January 31, 2009^†:

	•		Threshold: cumulative net EPS of $5.67;
	•		Target: cumulative net EPS of $6.52;
	•		Maximum: cumulative net EPS of $6.98; and
	•		Return on assets: 9.8%.

After earnings were adjusted for extraordinary transactions the Units vested at 36.4% of maximum (72.8% of target).

The grants of Units made in January 2007 are subject to satisfaction of the following performance tests over the performance period ending January 31, 2010^†:

	•		Threshold: cumulative net EPS of $6.72;
	•		Target: cumulative net EPS of $7.76;
	•		Maximum: cumulative net EPS of $8.31; and
	•		Return on assets: 10.6%.

^† Note: the performance tests for Units granted in January 2006 and January 2007 has been appropriately restated to reflect the adoption of the average cost method for inventory accounting in the first quarter of Fiscal 2008.

The grants of Units made in January 2008 are subject to satisfaction of the following performance tests over the performance period ending January 31, 2011:

	•		Threshold: cumulative net EPS of $8.54;
	•		Target: cumulative net EPS of $9.87;
	•		Maximum: cumulative net EPS of $10.62; and
	•		Return on assets: 11.5%.

The grants of Units made in January, 2009 are subject to satisfaction of the following performance test over the performance period ending January 31, 2012: consolidated earnings from continuing operations of $300 million in any one of the three years within the performance period.

The Compensation Committee will properly adjust achieved performance so that executive officers will not be advantaged or disadvantaged in meeting the net EPS goals by extraordinary transactions.

Options

Options vest (become exercisable) in four equal annual installments:

•

Vesting of each installment is contingent on continued employment, except in the event of death, disability or change in control (see Explanation of Potential Payments on Termination or Change in Control).

The exercise price for each share subject to an option is its fair market value on the date of grant. (For an explanation of the method of determining the exercise price of options, see Note (b) to the GRANTS OF PLAN-BASED AWARDS table).

Options expire no later than the 10^th anniversary of the grant date. Options expire earlier on:

	•		termination of employment (three months after termination); or
	•		death, disability or retirement (two years after the event).

Life Insurance Benefits

The key features of the life insurance benefit that the Company provides to its executive officers are:

	•		executive officers own whole life policies on their own lives;
	•		the death benefit is three times annual salary and target annual incentive award or bonus, as the case may be;
	•		the Company pays the premium on such policies in an amount sufficient to accumulate cash value;
	•		premiums are calculated to accumulate a target cash value at age 65;
	•		the target cash value will allow the policy to remain in force without payment of further premiums with a death benefit equivalent to twice the executive officer’s average annual salary and target annual incentive or bonus amount;