1.	BACKGROUND

On May 19, 2011, Retail Ventures, Inc. (“Retail Ventures” or “RVI”) shareholders and DSW Inc. (“DSW”) shareholders approved the proposal presented to them at their respective special meetings of shareholders to adopt the merger agreement between DSW and Retail Ventures and to approve the merger (the “Merger”). The Merger closed on May 26, 2011. Pursuant to the terms and conditions of the Agreement and Plan of Merger, Retail Ventures merged with and into DSW MS LLC (“Merger Sub”), with Merger Sub surviving the Merger and continuing as a wholly owned subsidiary of DSW. Upon the closing of the Merger, each outstanding Retail Ventures common share was converted into the right to receive 0.435 DSW Class A Common Shares, unless the holder properly and timely elected to receive a like amount of DSW Class B Common Shares in lieu of DSW Class A Common Shares. In connection with the Merger, RVI shareholders received 10.6 million DSW Class A Common Shares and 11.5 million DSW Class B Common Shares. Prior to the Merger, RVI held 27.4 million DSW Class B Common Shares, and as of the merger date, Merger Sub holds those common shares, they are constructively retired for financial reporting purposes and thus are no longer included in DSW's outstanding common shares. Of these 27.4 million DSW Class B Common Shares, 5.2 million are held in escrow as collateral for the Premium Income Exchangeable Securities (“PIES”). Retail Ventures common shares, without par value, which traded under the symbol “RVI,” ceased trading on, and were delisted from, the New York Stock Exchange on May 26, 2011.

The Merger is accounted for as a reverse merger with Retail Ventures as the accounting acquirer and DSW (the surviving legal entity) as the accounting acquiree. As this is a common control transaction under Accounting Standard Codification (“ASC”) 805, Business Combinations, the Merger is accounted for as an equity transaction in accordance with ASC 810, Consolidation as the acquisition of a noncontrolling interest and purchase accounting has not been applied. As a result, there has been no adjustment to the historical cost carrying amounts of assets and liabilities reflected in the accompanying balance sheet. For financial reporting purposes, the Merger is accounted for as if the following transactions took place:

Retail Ventures acquired all of the outstanding noncontrolling interests in DSW in exchange for 17.1 million newly issued Class A Common Shares, thus eliminating the noncontrolling interests. Legally, these DSW Class A Common Shares are the shares that were publicly held prior to the Merger;

Retail Ventures declared and implemented a reverse stock split at an exchange ratio of 0.435 applicable to all outstanding Common Shares;

Retail Ventures established a new class of unregistered common shares, Class B Common Shares, with special voting rights. DSW Class A Common Shares are entitled to one vote for each share. DSW Class B Common Shares are entitled to eight votes for each share; and

Retail Ventures offered to all common shareholders as of the date immediately prior to the closing of the Merger the opportunity to tender Class A Common Shares in exchange for newly issued Class B Common Shares, resulting in the issuance of 11.5 million Class B Common Shares and the retirement of the same number of Class A Common Shares.

Pre-merger financial information presented in the DSW consolidated financial statements represents consolidated Retail Ventures' financial information. References to Retail Ventures or RVI refer to the pre-merger entity. The pre-merger financial information has been and will be in future filings retrospectively recast for the following matters:

Share and per share information- DSW has recast all RVI historical share and per share information, including earnings per share, to reflect the 0.435 conversion ratio for all periods presented.

Segment presentation- DSW is maintaining its historical segment presentation, which is consistent with how the chief operating decision maker reviews the business. DSW sells products through three channels: DSW stores, dsw.com and leased business division. DSW stores and dsw.com are aggregated and presented as one reportable segment, the DSW segment, and the leased business division is a reportable segment. In order to reconcile to the condensed consolidated financial statements, DSW includes other, which consists of assets, liabilities and expenses that are not attributable to the two reportable segments. The pre-merger or prior period condensed consolidated financial statements and notes have been recast to reflect the two reportable segments and other.

Cost of sales- DSW conformed its accounting policies and has recast its prior period or pre-merger financial statements and notes for warehousing and store occupancy costs historically reported by Retail Ventures within operating expenses to be consistent with DSW's historical classification of these costs within cost of sales. For the three months and six months ended July 31, 2010, store occupancy and warehousing expenses of $61.8 million and $122.4 million, respectively, which were included in operating expenses for RVI are included in cost of sales for DSW.