Annual report 2007

C I R

CONSOLIDATED FINANCIAL STATEMENTS, STATUTORY FINANCIAL STATEMENTS AND

MANAGEMENT REPORT

FINANCIAL YEAR 2007

C O N T E N T S

ADMINISTRATIVE BODIES ................................................................................................................................ 4 LETTER TO THE SHAREHOLDERS ..................................................................................................................... 7

MANAGEMENT REPORT..................................................................................................................................... 9 1. PERFORMANCE OF THE GROUP...........................................................................................................................14 2. PERFORMANCE OF THE PARENT COMPANY…………. ..........................................................................................18

CHART RECONCILING THE FIGURES OF THE PARENT COMPANY WITH THOSE OF THE CONSOLIDATED FINANCIAL STATEMENTS.................................................................................19

3. PERFORMANCE OF THE BUSINESS SECTORS …………………................................................................................21 4. OTHER ACTIVITIES ..............................................................................................................................................29 5. SIGNIFICANT EVENTS WHICH OCCURRED AFTER THE CLOSE OF THE YEAR.......................................................29 6. OTHER INFORMATION .........................................................................................................................................30 7. PROPOSED ALLOCATION OF NET INCOME FOR THE YEAR ..................................................................................33

CONSOLIDATED FINANCIAL STATEMENTS AS OF DECEMBER 31 2007 1. BALANCE SHEET .................................................................................................................................................36

2. INCOME STATEMENT..........................................................................................................................................37 3. CASH FLOW STATEMENT....................................................................................................................................38 4. STATEMENT OF CHANGES IN FINANCIAL POSITION...........................................................................................39 5. EXPLANATORY NOTES TO THE FINANCIAL STATEMENTS..................................................................................40

CONSOLIDATED FINANCIAL STATEMENTS OF THE DIRECT SUBSIDIARIES........................................................ 101 STATUTORY FINANCIAL STATEMENTS OF CIR S.P.A. AS OF DECEMBER31 2007

1. BALANCE SHEET .................................................................................................................................................112 2. INCOME STATEMENT..........................................................................................................................................113 3. CASH FLOW STATEMENT....................................................................................................................................114 4. STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY.....................................................................................115 5. EXPLANATORY NOTES TO THE FINANCIAL STATEMENTS..................................................................................116

STATUTORY FINANCIAL STATEMENTS OF THE DIRECT SUBSIDIARIES ............................................................. 161 LIST OF EQUITY INVESTMENTS AT DECEMBER 31 2007 .............................................................................. 187 CERTIFICATION OF THE CONSOLIDATED FINANCIAL STATEMENTS IN ACCORD- ANCE WITH ART. 81-TER OF CONSOB REGULATION NO. 11971 OF MAY 14 1999 AND SUBSEQUENT AMENDMENTS AND ADDITIONS........................................................................................... 197 CERTIFICATION OF THE STATUTORY FINANCIAL STATEMENTS IN ACCORDANCE WITH ART. 81-TER OF CONSOB REGULATION NO. 11971 OF MAY 14 1999 AND SUBSEQUENT AMENDMENTS AND ADDITIONS................................................................................................... 199 REPORT OF THE BOARD OF STATUTORY AUDITORS ..................................................................................... 201 REPORTS OF THE INDEPENDENT AUDITORS .................................................................................................. 209

COMPAGNIE INDUSTRIALI RIUNITE

Limited-liability corporation - Share capital € 395,490,233.50 - Registered Office: Strada Volpiano, 53 – 10040 Leinì (Turin) - www.cirgroup.it

R.E.A. n. 3933 – Turin Company Register / Fiscal Code / VAT no. 00519120018 Company subject to the management and coordination action of COFIDE S.p.A.

Head Office: Via Ciovassino, 1 – 20121 Milan – Tel. +39 02 72270.1

Office in Rome: Via del Tritone, 169 – 00187 Rome – Tel. +39 06 692055.1

BOARD OF DIRECTORS Chairman CARLO DE BENEDETTI (1) (5) Chief Executive and RODOLFO DE BENEDETTI (2) General Manager Directors GIAMPIO BRACCHI FRANCO DEBENEDETTI PIERLUIGI FERRERO (3) GIOVANNI GERMANO (5) FRANCO GIRARD (3) PAOLO MANCINELLI (6) (7) LUCA PARAVICINI CRESPI (6) CLAUDIO RECCHI (6) (7) MASSIMO SEGRE (4) GUIDO TABELLINI (8) UMBERTO ZANNI (5) Secretary to the Board FRANCA SEGRE

BOARD OF STATUTORY AUDITORS Chairman PIETRO MANZONETTO Statutory Auditors LUIGI NANI RICCARDO ZINGALES Alternate Auditors MARCO REBOA GIANLUCA PONZELLINI LUIGI MACCHIORLATTI VIGNAT

INDEPENDENT AUDITORS

PRICEWATERHOUSECOOPERS S.p.A.

Notice in accordance with the recommendation of Consob contained in its Communiqué no. DAC/RM/97001574 of February 20 1997:

(1) Power to sign all documents relating to ordinary and extraordinary administration with single signature except for those reserved by law to the Board of Directors (2) Power to sign documents relating to ordinary administration with single signature (3) Power to sign documents specified in mandate with joint signature (4) Power to sign documents specified in mandate with single signature (5) Member of the Compensation Committee (6) Member of the Internal Control Committee (7) Member of the Surveillance Body (8) Lead Independent Director

CIR S.p.A. 102nd Year of Business

ANNUAL GENERAL MEETING OF THE SHAREHOLDERS

Turin, April 28 2008, 1st call Turin, April 29 2008, 2nd call

NOTICE OF ANNUAL GENERAL MEETING

Shareholders are invited to attend the Ordinary Sessions of the Annual General Meeting of the Shareholders of the Company to he held in the Congress Centre of the Unione Industriale di Torino in Turin - Via Fanti 17, on April 28 2008 at 10.30 a.m. at the first call and on April 29 2008 at the same time and the same place, if a second call is necessary, in order to discuss and pass resolution on the following:

AGENDA 1. Annual Report and Financial Statements for the year ended December 31 2007. Report of the Board of Statutory Auditors. Resolutions pertaining to the above. 2. Decision as to the number of Directors, election of the members of the Board of Directors for financial years

2008-2010 and decisions as to their compensation. 3. Appointment of the Board of Statutory Auditors for financial years 2008-2010 and decision as to their compensation. 4. Award, in accordance with the terms of D.Lgs. 58/98, for financial years 2008-2016, of audit mandates for the

audit of the annual financial statements, of the consolidated accounts, of the semi-annual interim accounts and the ongoing check that the accounts are being held correctly; decision on the fees for the same.

5. Proposal to revoke the resolution adopted on April 27 2007 authorizing the buy-back of the Company’s own

shares and the disposal of the same and proposal for a new authorization. 6. Proposal regarding the approval of incentive plans for the year 2008. Directors are elected on the basis of lists presented by the Shareholders which list the candidates in numerical order. The lists of candidates, endorsed by the Shareholders who have presented them, must be filed with the Company headquarters at least fifteen days before the date fixed for the first call of the Shareholders Meeting. Only Shareholders who alone or together with other Shareholders represent at least 2% (two per cent) of the share capital with voting rights at the Annual General Meeting can present lists. Further procedures for the preparation and presentation of lists and for putting them to the vote are contained in Article 8 of the Company Bylaws the current text of which is available to Shareholders at the Company headquarters or can be consulted online on the internet website of the Company www.cirgroup.it. The Statutory Auditors are appointed on the basis of lists of candidates. The lists of candidates, endorsed by the Shareholders who are presenting them, must be filed with the Company headquarters at least fifteen days before the date fixed for the first call of the Shareholders’ Meeting. Only Shareholders who alone or together with other Shareholders represent at least 2% (two per cent) of the share capital with voting rights at the Annual General Meeting can present lists. Further procedures for the preparation and presentation of lists and for putting them to the vote are contained in Article 19 of the Company Bylaws the current text of which is available to Shareholders at the Company headquarters or can be consulted online on the internet website of the Company www.cirgroup.it.

Shareholders are entitled to attend the Meeting of Shareholders provided that their intermediaries have sent in the notification required by Article 23 of Consob / Bank of Italy Measure of February 22 2008 at least two working days before the meeting. Any holders of shares that have not yet been dematerialized should present their share certificates to an authorized intermediary for input into the centralized clearing system in electronic form, in accordance with the provisions of Article 38 of Consob / Bank of Italy Measure of February 22 2008, and should request that the notification as above be sent in within the time limit mentioned above. As from April 12 2008 Shareholders may obtain a copy of the documentation regarding the items on the agenda from the offices of the Company and from Borsa Italiana S.p.A. The Financial Statements of the Company as of December 31 2007 and the Consolidated Accounts of the Group as of the same date will be available from March 28 2008 from the Company headquarters and from Borsa Italiana S.p.A.

THE BOARD OF DIRECTORS Notice of this meeting was published in the newspapers "Il Sole-24 Ore" and "la Repubblica" on March 27 2008

Management Report 9

MANAGEMENT REPORT ON THE PERFORMANCE OF OPERATIONS IN FINANCIAL YEAR 2007

Dear Shareholders, In 2007 the CIR Group reported consolidated net income of € 82.6 million, down from € 101.1 million in 2006, a decline of € 18.5 million. Consolidated revenues totalled € 4,214.9 million and were up by 1.9% from € 4,136.8 million in the previous year. The income for the year was penalized for € 64.6 million by the write-down of the investment in the Oakwood group made in a joint venture with Merrill Lynch. This write-down mainly affected the companies of the Oakwood group present in the British market in the subprime loan sector and was brought about by the global credit crunch that became evident in the second half of the year, which caused some of the companies of the group to go out of business. The effect of this non-recurring charge was partly offset by gains of € 30.3 million resulting from the subscription of rights issues reserved for minority shareholders of the companies Sorgenia and HSS. Excluding these non-recurring items consolidated net income would be € 116.9 million, up by € 15.8 million (+15.6%). In 2007 the CIR Group pursued its industrial vocation, confirming the strategy of creating value for its Shareholders over the medium term and during the year further consolidated its growth, strengthening its presence in the sectors in which it operates while devoting constant attention to optimizing the profitability of its industrial businesses. In the utilities sector in particular, it should be noted that Sorgenia has now expanded into the European renewable sources market through its acquisition at the end of the year of the company SFE, which is the second operator in France in wind power, for an enterprise value of approxi-mately € 350 million. In the healthcare sector, HSS during the year acquired the S.Stefano group for a value of approximately € 109 million, thus extending its presence in the rehabilitation sector significantly. The current configuration of the CIR Group includes five business sectors: utilities (electricity and gas), the media (publishing, radio, television and the internet), automotive components (filters and suspension components), healthcare (residences for the elderly, hospital and rehabilitation ser-vices) and financial services (non-performing loans and financial products for non-prime clients). For a better assessment of the profitability of the Group, the performance in 2007 is presented be-low showing a breakdown of the economic contribution and the balance sheet figures of the oper-

10 Management Report

ating groups and of the holding, which includes the figures of CIR and its financial holding sub-sidiaries (CIR International, Cirfund, Ciga Luxembourg and Cir Investment Affiliates). The contribution of the operating groups to consolidated net income rose by € 8.3 million (+ 7.4%) from € 111.6 million in 2006 to € 119.9 million in 2007. The contribution of the finan-cial subsidiaries came to € 20.1 million with an improvement of € 5.1 million (up from € 15 mil-lion in 2006) due to capital gains from the sale of shares in hedge funds by Medinvest. The result of the holding before non-recurring items, a negative € 23.1 million (€ 25.5 million in 2006) was the result of the following: - Overheads of € 16.6 million (€ 17.3 million in 2006); - Amortization charges and adjustments to the value of investments valued at equity for € 1.8

million; - Net financial expense of € 29.6 million (€ 21.1 million in 2006), up by € 8.5 million from the

previous year due to the rise in interest rates and a different allocation of funds; - Net gains from trading and the valuation of securities of € 0.3 million (€ 4.3 million in 2006); - Current tax assets of € 24.6 million (€ 9.1 million in 2006). The results for the year 2007 of the operating groups are shown below for each of the main busi-ness sectors. In the utilities sector the Sorgenia group continued in 2007 to roll out its industrial plan which in-volves a significant development of its business in the power generating sector, devoting particu-lar attention of sources with a low environmental impact and to renewable sources, as the above-cited acquisition of Société Française d’Eoliennes (SFE) in December shows. In 2007 the group reported sales revenues of € 1,861.7 million, down slightly from € 1,916.1 million in 2006 and net income of € 65.2 million, with a rise of some 16% from € 56.3 million in 2006. In 2007 the group almost trebled its number of clients (400 thousand at year end) and increased its competitive posi-tioning in the Italian market, especially in the segment of clients with lower consumption but higher profitability. In the media sector the Espresso group reported consolidated sales revenues for 2007 of € 1,098.2 million (-0.4% compared with 2006) and posted consolidated net income of € 95.6 million, down from € 103.6 million in the previous year. Its growth in advertising revenues, which were above market for all media, and the rise in the price of newspapers enabled the group to neutralize the impact of the reduction in revenues and in the margins on add-on products, which were widely expected owing to the gradual stabilization of the market. Again in 2007 the daily newspaper la Repubblica confirmed its ranking as number one newspaper in terms of number of readers and the radio stations of the Espresso group confirmed their top position in Italy in terms of audience. The Sogefi group, the important producer of automotive components, confirmed its leadership in Europe in the two sectors in which it operates (filters and suspension components). Despite stag-nation in the main world vehicle markets and the rises in the cost of certain raw materials and en-ergy, the group was able to increase its revenues in 2007 by 5.2% to € 1,071.8 million, thanks to the good performance of South American markets, and improved its profitability posting consoli-dated net income of € 52.2 million, up by 2.8% from € 50.8 million in 2006. In order to optimize its capital structure, lowering its average cost of capital, a dividend distribution of around € 158 million (€ 22.4 million in 2007) was put before the Shareholders.

Management Report 11

The HSS group – Holding Sanità e Servizi continued to develop its operating activities in 2007 and identified new investment opportunities to consolidate its presence in the healthcare sector. In July, as mentioned above, HSS acquired the S.Stefano group, leader in the Marche region in reha-bilitation both in hospital and outside hospital. This deal strengthened the HSS group considera-bly, enabling it to reach consolidated revenues of € 182.9 million (€ 99.2 million in 2006), and reach over 4,600 beds under management. In 2007 the group reported net income of € 0.3 million which compares with a net loss of € 4.4 million in 2006. In the financial services sector the CIR Group is present with the Oakwood group and the com-pany Jupiter Finance. The investment made by the CIR Group in Oakwood Global Finance amounted to € 128.4 million and, as shown earlier, was written down by approximately € 64.6 million, which referred mainly to the value of the companies operating in the UK market which went out of business following the crisis in the financial markets, especially in the subprime sector. The crisis had fewer reper-cussions on the Australian company and on the Italian company Ktesios, active in the sector of loans secured on a fifth of employee incomes. The company Jupiter Finance operates in the non-performing loan business and at December 31 2007, in its role as master servicer, was managing portfolios of non-performing loans with a gross book value of € 870 million acquired for a price of € 106.2 million. In particular during 2007 Jupiter defined a securitization program for loan portfolios through the vehicle company Zeus Fi-nance. This program involves the issue of securities for a maximum amount of € 400 million which will be underwritten by CIR International and prime institutional investors. In December part of this program was launched with an initial issue worth approximately € 89 million. The charts on the following pages show a breakdown by business sector of the economic results and the balance sheets of the Group, a breakdown of the contribution of the main subsidiaries and the aggregate results of the CIR holding and its financial holding company subsidiaries (CIR In-ternational, Cirfund, Ciga Luxembourg and Cir Investment Affiliates).

INCOME STATEMENT BY BUSINESS SECTOR AND CONTRIBUTIONS TO THE RESULTS OF THE GROUP

(in millions of euro)2006

CONSOLIDATED Revenues Costs of Other Adjustments Amortization Net Dividends, Income Income Minority Net income Net incomeproduction operating to the value of depreciation & financial gains and taxes (Loss) income (loss) of (loss) of

income & investments write-downs income & losses from from the Group the Groupexpense valued at expense trading businesses

equity & valuing soldAGGREGATE securitiesSorgenia group 1,861.7 (1,742.8) (17.9) 51.2 (25.2) (20.7) 0.3 (29.7) -- (39.4) 37.5 33.1 Espresso group 1,098.2 (873.1) (2.8) 1.2 (42.8) (17.6) -- (66.5) -- (44.7) 51.9 54.1 Sogefi group 1,071.8 (915.6) (21.4) -- (44.0) (10.4) 0.1 (25.4) -- (25.0) 30.1 29.7 HSS group 182.9 (157.3) (5.4) -- (9.1) (7.8) 0.5 (3.5) 0.1 (0.2) 0.2 (3.8)Other subsidiaries 0.3 (12.2) 14.3 -- (0.1) (2.1) -- (0.1) -- 0.1 0.2 (1.5)

Total operating subsidiaries 4,214.9 (3,701.0) (33.2) 52.4 (121.2) (58.6) 0.9 (125.2) 0.1 (109.2) 119.9 111.6

Financial subsidiaries -- (2.2) -- -- -- (0.5) 26.8 -- -- (4.0) 20.1 15.0

Total subsidiaries 4,214.9 (3,703.2) (33.2) 52.4 (121.2) (59.1) 27.7 (125.2) 0.1 (113.2) 140.0 126.6

CIR and financial holding companies

Revenues -- -- -- Management costs (20.6) (20.6) (22.1)Other operating revenues and costs 4.0 4.0 4.8 Adjustments to the value of investmentsvalued at equity (0.9) (0.9) -- Amortization, depreciation & write-downs (0.9) (0.9) (0.5)Net financial income and expense (29.6) (29.6) (21.1)Dividends, gains & losses from trading securities 0.4 (0.1) 0.3 4.3 Income taxes 24.6 24.6 9.1

Total CIR & financial holding companiesbefore non-recurring items -- (20.6) 4.0 (0.9) (0.9) (29.6) 0.4 24.6 -- (0.1) (23.1) (25.5)

Non-recurring items -- -- -- (8.6) -- -- (20.6) -- (5.1) (34.3) --

Consolidated total of the Group 4,214.9 (3,723.8) (29.2) 42.9 (122.1) (88.7) 7.5 (100.6) 0.1 (118.4) 82.6 101.1

2007

CONSOLIDATED BALANCE SHEET FIGURES BY BUSINESS SECTOR

(in millions of euro)31.12.2006

CONSOLIDATED Fixed assets Other net Net Net financial Total of Minority Group Group equitynon-current working position equity which: equity equity

AGGREGATE assets & liabil. capitalSorgenia group 1,398.3 78.0 1.4 (897.3) (*) 580.4 278.6 301.8 251.8

Espresso group 904.5 (158.8) 65.7 (264.9) 546.5 256.1 290.4 293.7

Sogefi group 359.3 (49.1) 108.9 (92.4) 326.7 147.2 179.5 163.3

HSS group 247.4 (21.0) 27.2 (148.6) 105.0 35.5 69.5 54.2

Other subsidiaries 0.3 60.2 2.5 (42.6) 20.4 5.1 15.3 43.4

Total subsidiaries 2,909.8 (90.7) 205.7 (1,445.8) 1,579.0 722.5 856.5 806.4

CIR and financial holding companies

Fixed assets 125.4 125.4 -- 125.4 103.0

Other net non-current assets & liabilities 197.2 197.2 (0.5) 197.7 107.3

Net working capital 27.9 27.9 -- 27.9 (14.7)

Net financial position 112.3 112.3 (0.1) 112.4 258.2

Total consolidated of Group 3,035.2 106.5 233.6 (1,333.5) 2,041.8 721.9 1,319.9 1,260.2

(*) The financial position includes the free cash flow of Energia Holding S.p.A.

31.12.2007


1. PERFORMANCE OF THE GROUP Consolidated revenues for 2007 came in at € 4,214.9 million, up from € 4,136.8 million in 2006, with a rise of € 78.1 million (+1.9%). Consolidated revenues can be broken down by business sector as follows: (in millions of euro) Change 2007 % 2006 % absolute %

Utilities

Sorgenia Group 1,861.7 44.2 1,916.1 46.3 (54.4) (2.8)

Media Espresso Group 1,098.2 26.1 1,102.6 26.7 (4.4) (0.4)

Automotive components

Sogefi Group 1,071.8 25.4 1,018.6 24.6 53.2 5.2

Healthcare

HSS Group 182.9 4.3 99.2 2.4 83.7 84.3

Other sectors 0.3 - 0.3 -- - -

Total consolidated revenues 4,214.9 100.0 4,136.8 100.0 78.1 1.9

of which: ITALY 3,248.9 77.1 3,213.9 77.7 35.0 1.1

FOREIGN COUNTRIES 966.0 22.9 922.9 22.3 43.1 4.7

The key figures of the consolidated income statement are as follows: (in millions of euro) 2007 % 2006 %

Revenues 4,214.9 100.0 4,136.8 100.0

Consolidated gross operating margin (EBITDA) 504.8 12.0 442.4 10.7

Consolidated operating income (EBIT) 382.7 9.1 339.5 8.2

Financial management result (81.2) (1.9) (35.6) (0.9)

Income taxes (100.6) (2.4) (89.5) (2.2)

Net income (loss) on assets held for disposal 0.1 - (0.9) --

Net income including minority interests 201.0 4.8 213.5 5.2

Net income attributable to minority interests (118.4) (2.8) (112.4) (2.7)

Net income of the Group 82.6 2.0 101.1 2.4

The consolidated gross operating margin (EBITDA) was € 504.8 million (12% of sales) in 2007, up from € 442.4 million in 2006 (10.7% of sales), with a rise of € 62.4 million (+ 14.1%). This result was mainly due to the sizeable improvement of around € 32 million obtained by the Sorgenia group, which benefited for the whole year from the power production of the Termoli plant that had started operating in the second half of 2006, but also to the increased profitability of the HSS group thanks to its new acquisitions. The consolidated operating margin (EBIT) for 2007 was a positive € 382.7 million (9.1% of sa-les) up from € 339.5 million (8.2% of sales) in 2006 with a rise of 12.7%.


The financial management result, a negative € 81.2 million, was the result of the following fac-tors: - net financial expense of € 88.7 million (€ 62.6 million in 2006); - dividends and net gains from trading securities of € 70.6 million (€ 43.9 million of net gains in

2006) which include gains from the subscription of capital increases reserved for minority shareholders of the companies Sorgenia and HSS;

- adjustments to the value of financial assets of € 63.1 million (€ 17 million in 2006) due mainly to the write-down of the investment in Oakwood.

The key figures of the consolidated balance sheet of the CIR Group at December 31 2007, compared with the same figures at December 31 2006, are as follows: : (in millions of euro) 31.12.2007 31.12.2006

Fixed assets 3,035.2 2,282.3

Other net non-current assets and liabilities 106.5 129.3

Net working capital 233.6 418.9

Net invested capital 3,375.3 2,830.5

Net financial debt (1,333.5) (850.6)

Total shareholders’ equity 2,041.8 1,979.9

Equity of the Group 1,319.9 1,260.2

Equity of minority Shareholders 721.9 719.7

Net invested capital stood at € 3,375.3 million at December 31 2007 up from € 2,830.5 million at December 31 2006, with a rise of € 544.8 million due mainly to the significant investment made during the year by the Sorgenia and HSS groups in particular. The net financial position at December 31 2007 showed net debt of € 1,333.5 million (up from € 850.6 million at December 31 2006) resulting from: - a financial surplus for CIR and its financial holding subsidiaries of € 112.3 million which

compares with € 258.2 million at December 31 2006. The contraction of € 145.9 million that took place during the year was mainly due to disbursements for equity investments, financial receivables and own shares for € 147.8 million, for buying back tax credits of € 18 million, only partially offset by the positive balance of € 20.3 million between dividends received and those paid out, and capital increases following the exercise of stock options for € 14.7 million;

- total net debt for the operating groups of € 1,445.8 million, up from € 1,108.8 million at De-

cember 31 2006. This rise of € 337 million was the result of investments in fixed assets for € 1,009.5 million, made principally by the Sorgenia and HSS groups, of the receipt of repay-ment of a loan by Tirreno Power for € 127.4 million, disbursements for capital increases, the buyback of own shares and the distribution of dividends for a total of € 167.8 million and the cash flow generated by operations for € 545.3 million.

Total Shareholders’ equity stood at € 2,041.8 million at December 31 2007 up from € 1,979.9 million at December 31 2006, with a rise of € 61.9 million after the distribution of € 37.3 million in dividends by CIR and a total of € 56.6 million by the subsidiaries to their minority sharehold-ers.


The Shareholders’ equity of the Group rose from € 1,260.2 million at December 31 2006 to € 1,319.9 million at December 31 2007, with a net rise of € 59.7 million. Minority Shareholders’ equity also rose by € 2.2 million from € 719.7 million at December 31 2006 to € 721.9 million at December 31 2007. The net financial debt and the shareholders’ equity at December 31 2007 include € 133.4 million from the fair value adjustment of available-for-sale securities, held mainly by the company Medinvest. In fact the accounting treatment of Medinvest involves recognizing any changes in the fair value of the funds directly to shareholders’ equity. The total increase in these funds during 2007, before the amounts realized in the period (€ 20.9 million) and before any hedges was € 40.6 million compared to € 39.0 million in 2006. Since inception (April 1994) the performance of Medinvest has been particularly satisfactory up to and including 2007, giving the portfolio a weighted average annual return in dollar terms of 9.9%. In 2007 too, performance gave a positive return, net of commissions, of 11.8%. On the basis of the data available to date, performance was negative by around 1.3% in the first two months of 2008. The evolution of consolidated shareholders’ equity is given in the Explanatory Notes to the Fi-nancial Statements.


The consolidated cash flow statement for 2007, prepared according to a “managerial” format which, unlike the format used in the statements attached, shows the changes in net financial posi-tion instead of the changes in cash and cash equivalents, can be broken down as follows:

(in millions of euro) 2007 2006

SOURCES OF FUNDS

Net income for the period including minority interests 201.0 213.5

Amortization, depreciation and write-downs and other non-monetary changes 156.4 109.3

Self-financing 357.4 322.8

Change in working capital 183.5 (174.0)

CASH FLOW GENERATED BY CURRENT OPERATIONS 540.9 148.8

Capital increases 46.8 10.4

Repayment of loan by Tirreno Power 127.4 -

TOTAL SOURCES OF FUNDS 715.1 159.2

APPLICATIONS

Net investment in fixed assets (1,005.1) (434.5)

Buy-back of own shares (73.9) (15.6)

Payment of dividends (93.9) (90.8)

Other changes (25.1) (3.7)

TOTAL APPLICATIONS OF FUNDS (1,198.0) (544.6)

FINANCIAL SURPLUS (DEFICIT) (482.9) (385.4)

NET FINANCIAL POSITION AT THE BEGINNING OF THE PERIOD (850.6) (465.2)

NET FINANCIAL POSITION AT THE END OF THE PERIOD (1,333.5) (850.6)

The composition of the net financial position is given in the Explanatory Notes to the Financial Statements. During 2007 the net debt figure rose from € 850.6 million to € 1,333.5 million. The change is explained in detail in the breakdown of the items that make up the cash flow statement. There was in particular a significant reduction in net working capital attributable mainly to the Sorgenia group. The sources of funding include the capital increases, especially of HSS, and the partial repayment of the loan by Tirreno Power to Energia Italiana (Sorgenia group). Applications mainly referred to the investments made by the Sorgenia group and HSS and to the investment made in joint venture in the Oakwood group. At December 31 2007 the Group had 12,422 employees, up from 11,102 at December 31 2006.


2. PERFORMANCE OF THE PARENT COMPANY The Parent Company CIR S.p.A. closed financial year 2007 with net income of € 79.9 million (up from € 36.7 million in 2006). Shareholders’ equity stood at € 983.8 million at December 31 2007 compared with € 940.7 mil-lion al December 31 2006. The key income statement figures of CIR S.p.A. for 2007, with a comparison with those of 2006, are as follows: (in millions of euro) 2007 2006

Net operating costs (10.8) (12.5)

Other operating costs and amortization (2.8) (2.3)

Financial management result 68.9 42.4

Income before taxes 55.3 27.6

Income taxes 24.6 9.1

Net income 79.9 36.7

Net operating costs for 2007, which amounted to € 10.8 million (€ 12.5 million in 2006), include charges resulting from the IAS/IFRS treatment of stock option and phantom stock option plans for € 3.6 million which compare with € 2.2 million in 2006. Other operating costs amounted to € 2.8 million and compare with € 2.3 million in 2006. The financial management result includes the dividends of subsidiaries, which totalled € 126 mil-lion in 2007 compared to € 61.1 million in 2006, net financial expense of € 8.9 million (€ 8.2 mil-lion in 2006), negative adjustments to the fair value of bonds and notes of € 6.6 million (€ 7 mil-lion in 2006) and losses from trading securities of € 42.2 million (€ 3.4 million in 2006). The rise in the figure of dividends from subsidiaries was in particular due to the distribution made by CIR International as part of a corporate reorganization process, which involved the transfer of its hold-ing in Medinvest to CIR Fund, a company 100% owned by CIR S.p.A. through CIGA Luxem-bourg. Lastly, 2007 benefited from a positive net tax position of € 24.6 million, up from € 9.1 million in 2006. This rise was mainly due to advance taxes set aside for the losses on a financial transaction that was closed out before maturity by the company in view of the crisis in the financial markets that took place as from July 2007.


The key balance sheet figures of CIR S.p.A. at December 31 2007, compared with the situation at December 31 2006, are as follows: (in millions of euro) 31.12.2007 31.12.2006

Fixed assets 1,052.6 966.7

Other net non-current assets and liabilities (1.8) (0.1)

Net working capital 48.8 42.3

Net invested capital 1,099.6 1,008.9

Net financial position (115.8) (68.2)

Shareholders’ equity 983.8 940.7

The net financial position at December 31 2007 was one of net debt for € 115.8 million which compares with a net debt position of € 68.2 million at December 31 2006. The net change of € 47.6 million was mainly due to investments in own shares for approximately € 15.6 million, shareholdings for € 75 million, the buy-back of € 18 million of tax credits sold in prior periods to a prime factoring company, as well as financial charges of € 68.6 million only partly offset by net dividends received of € 89.3 million, capital increases of € 14.7 million and the repayment of loans made to subsidiaries for approximately € 31 million. The rise in shareholders’equity from € 940.7 million at December 31 2006 to € 983,8 million at December 31 2007 was mainly caused by the earnings figure for the year minus dividends distrib-uted for € 37.3 million and the effects of the IAS/IFRS treatment of own shares bought back. At December 31 2007 there were 39,644,000 own shares in the portfolio, equal to 5.01% of capi-tal, for a total value of € 92.2 million, compared with 34,094,000 at December 31 2006. 3. CHART RECONCILING THE BALANCE SHEET FIGURES OF THE PARENT COM-

PANY WITH THOSE OF THE CONSOLIDATED FINANCIAL STATEMENTS The following chart shows the reconciliation of the results for the year and the shareholders’ eq-uity of the Group with the figures of the parent company. (in thousands of euro) Shareholders’ equity

31.12.2007 Net result

2007

Figures of the parent company CIR S.p.A. 983,773 79,904

- Dividends from companies included in consolidation (126,492) (126,492) - Reversal of valuations and cover of losses on investments in companies included in the consolidation 1,045 1,045

- Net contribution of consolidated companies 388,535 124,912 - Difference between carrying value of subsidiaries and portion of consolidated shareholders’ equity, net of contributions 69,824 -

- Other consolidation adjustments 3,196 3,196

Consolidated figures, the Group’s share 1,319,881 82,580

MAIN EQUITY INVESTMENTS OF THE GROUPAT DECEMBER 31 2007

Media

Utilities

Healthcare

SORGENIASORGENIA

CIRCIR

57.5% (*)

56.9%

67.6%

ESPRESSOESPRESSO54.3%

AutomotiveComponentsSOGEFISOGEFI

HSSHSS

(*) Percentage of indirect control through Energia Holding

JUPITERJUPITER

OAKWOODOAKWOOD

Financial Services

47.5%

98.8%


4. PERFORMANCE OF THE BUSINESS SECTORS UTILITIES SECTOR In 2007 the Sorgenia Group reported consolidated revenues of € 1,861.7 million, down slightly from € 1,916.1 million in 2006. The use of new sales channels and the offer of energy efficiency solutions to the market enabled the Sorgenia group to almost triple its number of clients in 2007, reaching 400 thousand by the end of the year (150 thousand at the end of 2006), and to improve its competitive position in the Italian market at the same time, especially in the segment of clients with lower consumption but higher profitability. In 2007 the Sorgenia group reported consolidated net income of € 65.2 million, with a rise of 15.9% from € 56.3 million in the previous year. Consolidated revenues can be broken down as follows: (in millions of euro) 2007 2006 Change Values % Values % %Electricity 1,249.1 67.1 1,275.7 66.6 (2.1)

Natural gas 603.0 32.4 634.5 33.1 (5.0)

Other revenues 9.6 0.5 5.9 0.3 n.s.

TOTAL 1,861.7 100.0 1,916.1 100.0 (2.8) The consolidated gross operating margin (EBITDA) rose by 26.3%, from € 120.4 million in 2006 to € 152.1 million. EBITDA benefited from the full availability for the whole year of the power produced by the Termoli plant (over 4 TWh), which started operating in the second half of 2006, and from the success of the group’s commercial policies with regard to optimizing the client port-folio. Consolidated operating income (EBIT) for 2007 was € 127 million compared to € 112.7 million in the previous year. The consolidated net financial position of the Sorgenia group at December 31 2007 showed net debt of € 904.9 million, up from € 601.9 million at December 31 2006. This rise of € 303 million, was due mainly to investments relating to the acquisition of Société Française d’Eoliennes (SFE), to the acquisition of 16% of Energia Italiana and to investment made in new production capacity, relating in particular to the construction of the Modugno power plant and of the photovoltaic plants of Soluxia. At December 31 2007 the group had 276 employees compared with 208 at December 31 2006. The Board of Directors of Sorgenia S.p.A., which met on February 25 2008, proposed distributing dividends for a total of € 11.5 million, up from € 9.3 million in the previous year, corresponding to a dividend of € 0.014 per share up from € 0.0115 in 2006. During 2007 the Sorgenia group continued to roll out its industrial plan, which involves signifi-cant development of business in the power generating sector, with particular attention being de-voted to sources with a low environmental impact and to renewables. The industrial objectives of the program include, after the entry into production of the Termoli plant, the construction of three


more combined cycle gas fired plants (CCGTs) each with an output of 770 MW and the comple-tion of the repowering of the power plants of the subsidiary Tirreno Power. The plan also involves investment in the construction of wind plants in Italy for 450 MW, some of which are currently being built, for an authorized output of approximately 70 MW, in the local districts of Minervino Murge, Castelnuovo di Conza and San Gregorio Magno. With the objective of expanding its business abroad too, in December Sorgenia completed the ac-quisition of Société Française d’Eoliennes (SFE), an important step forward in its growth in the European renewable sources market. SFE is the second wind energy provider in France and can count on 100 MW of installed capacity, 39 MW have already been authorized and are soon to be built and around 1,000 MW are at various stages of development. The company is also developing photovoltaic plants in the South of France for around 37 MW. The acquisition, for a price of € 246.1 million and with SFE debt totalling € 98 million, was financed by Sorgenia using credit lines that it had available. In the solar energy sector, in 2007 the subsidiary Soluxia activated the national grid connections of six new photovoltaic plants each with an output of approximately 1 MW. Production is ex-pected to be in the region of 8.4 GWh per year. Such investment in the photovoltaic energy is fur-ther confirmation of the decision of the Sorgenia group to invest in renewable sources and in pro-duction technologies with a higher level of environmental compatibility, privileging both effi-ciency and the protection of the environment. Regarding the group’s program of investment in thermoelectric plants, during 2007 work pro-gressed on the construction of the combined cycle plant at Modugno (Puglia) which is scheduled to start operating at the end of this year. The repowering program of the plants of Tirreno Power is proceeding according to plan. During 2007 the combined cycle unit with an output of around 760 MW of the Vado Ligure plant started operating and construction work continued on a new 380 MW combined cycle module at Napoli Levante, which will start operating in 2008. To finance the repowering, in June the company signed a new credit facility for € 1.2 billion for a period of 7 years. This loan enabled the previous € 900 million loan facility to be repaid and the shareholder loan to be partially repaid. In 2007 Tirreno Power reported revenues of € 1,051.6 million, which were up by 6.9% from € 983.9 in 2006, with a net production volume of some 11.5 TWh. The gross operating margin ro-se by 17.6% to € 254.4 million from € 216.4 million in 2006. Net income rose to € 102.6 million from € 66 million in 2006 (+55.4). In September 2007, Sorgenia increased its control in Energia Italiana, acquiring 16% of its shares from financial shareholders Banca Monte dei Paschi di Siena and BNL International Investments, for a total of € 59.5 million. With this deal, Sorgenia brought its stake in Energia Italiana up to 78% (the remaining 22% is owned in equal parts by Iride and Hera). Energia Italiana and Eblacea (70% Electrabel and 30% Acea) have equal share joint control of Tirreno Power. At the end of September, Banca Monte dei Paschi di Siena subscribed a capital increase in Sorge-nia for an amount of approximately € 33 million, acquiring a stake of 1.2%. Regarding the likely outcome of this current year the schedules set out in the industrial plan are confirmed, particularly regarding the completion of the Modugno plant and the start of construc-tion work on the wind parks of Castelnuovo di Conza (Salerno) and Minervino (Bari), as well as the start of building work on two power plants to be located at Lodi and Aprilia.


MEDIA SECTOR The Espresso group closed financial year 2007 with consolidated revenues of € 1,098.2 million compared to € 1,102.6 million in 2006 (-0.4%). Consolidated net income was € 95.6 million, down from € 103.6 million in the previous year. The net result for 2007 benefited from two extraordinary items linked to regulatory changes: the different accounting treatment of severance and leaving indemnity (TFR), which had a positive effect on earnings of € 7.8 million, and the reduction of IRAP and IRES tax rates introduced by Budget 2008, which led to a recalculation of deferred taxes giving a benefit of € 10.3 million. A comparison of the net income of the two years shows that there was also the absence in 2007 of deferred tax assets of € 22.3 million relating to prior losses of the subsidiary Elemedia, appropria-tion for which was completed in 2006. The revenues of the group can be broken down as follows: (in millions of euro) 2007 2006 Change Values % Values % %Circulation 405.1 36.9 456.6 41.4 (11.3)

Advertising 657.1 59.8 615.8 55.9 6.7

Other revenues 36.0 3.3 30.2 2.7 19.2

TOTAL 1,098.2 100.0 1,102.6 100.0 (0.4)

The growth in advertising, higher than market in all of the media, and the rise in the price of ne-wspapers (from € 0.90 to one euro) enabled the Espresso group to neutralize the expected fall in revenues and decline in margins on add-on products, due to the gradual stabilization of the mar-ket. The consolidated gross operating margin for 2007 was € 223.4 million, up from € 204.4 million in 2006 and the consolidated operating income figure for 2007 was € 180.6 million, up from € 163.3 million in the previous year. Excluding the contribution of optional products and the benefit form the different accounting treatment of TFR, consolidated revenues rose from € 908.1 million in 2006 to € 966.3 million in 2007 (+6.4%) and operating income rose both in absolute terms to € 130.4 million (+19.1%), and in terms of ratio to sales (from 12.1% to 13.5%). Total advertising revenues reached € 657.1 million in 2007 with a rise of 6.7% from 2006. The rise in advertising both in la Repubblica and the local papers of the group was 5.2% compared with a market average of 3.5% (source FCP). This difference compared to the competition was positive for the other media of the group too: advertising on the three radio stations rose by 8.5% compared to the market’s 8% (source Nielsen) and advertising on the internet website network rose by 64% compared with a market average of 40.6% (source FCP), reaching 4.6% of total ad-vertising revenues. Circulation revenues, excluding the revenues from optional products, rose by 5.1% thanks to the rise in the cover price of newspapers which led to a slight decline in the number of copies sold. In particular, la Repubblica sold 621 thousand average copies compared with 628 thousand in 2006, but maintained its leadership over other Italian newspapers in terms of readership with a-


round 3 million readers (source Audipress), with a lead of almost 10% over the nearest competi-tor. The local newspaper titles of the group recorded circulation figures of 473 thousand average cop-ies, substantially unchanged from last year, reaching an overall total of over 2.9 million readers. L’espresso maintained circulation results in line with 2006 at 396 thousand average copies per week, thanks to a growing number of subscriptions which offset the lower quantities of copies sold with optional products. The listening figures of the radio stations of the group were also positive, reaching an audience of 8.9 million listeners on an average day and 23.1 million over seven days (source Audiradio). Dee-jay maintained its top ranking among private broadcasters with 5.6 million listeners on an average day and 13.2 million over the week; Radio Capital consolidated its listeners at around 1.9 million on an average day and at 6.3 million over seven days; m2o increased its daily audience signifi-cantly to 1.4 million and its weekly audience to 3.5 million. All Music recorded over 2.8 million viewers in the 15-34 age group (IPSOS). Strong growth was also evident from the user figures of the group internet websites which in January 2008 reached 14.3 million unique users and 630 million page views. Repubblica.it con-firmed its position as the number one Italian news site with 12 million unique users, up by 46% compared to a year ago. The figures for the audio-video area were also significant, with Repubbli-caTV reaching more than 2 million users. Lastly, much of the content produced by the titles of the group is at the top of the Italian podcast charts. The consolidated net financial debt figure, which stood at € 264.9 million at December 31 2007, remained virtually unchanged from the end of 2006 (€ 262.7 million) thanks to the good perform-ance of the cash flow from operations (€ 163.6 million) which balanced out the distribution of dividends for € 67.2 million, the buy-back of own shares for € 58.6 million and net disbursements for investment of € 40.7 million. Consolidated shareholders’ equity decreased from € 562.8 million at December 31 2006 to € 535.4 million at December 31 2007. At December 31 2007 there were 3,414 employees on the group payrolls, up by 30 from 3,384 at December 31 2006. The Board of Directors of the parent company Gruppo Editoriale L’Espresso, which met on Feb-ruary 20 2008, proposed the distribution of a dividend of € 0.17 per share (€ 0.16 in 2006). At the same meeting the Board of Directors also voted to cancel own shares held for 5.8% of the company’s share capital. In the first two months of 2008 circulation of the titles of the group were substantially in line with the same period of last year, the optional products launched at the beginning of 2008 are perform-ing satisfactorily and advertising revenues, after a negative month in January, showed signs of re-covery in February. To date it is difficult to give an indication of the results that can be obtained in 2008 because these depend largely on the performance of advertising, which has still not picked up visibly. In any ca-se the results for this current year will certainly be affected by the lack of the positive boost that occurred on a one-off basis in 2007 as a result of the new TFR legislation and to the calculation of deferred taxes, but they will benefit from a lower tax liability when the new IRAP and IRES tax rates take effect.


AUTOMOTIVE COMPONENTS SECTOR In 2007 the Sogefi group reported sales revenues of € 1,071.8 million, with a rise of 5.2% from € 1,018.6 million the previous year, thanks to the good performance of the South American mar-kets, to a better market share in the industrial vehicle sector and to the rise in demand by French car manufacturers in the second part of the year. Consolidated net income came in at € 52.2 million, up by 2.8% from € 50.8 million in the previ-ous year, despite the greater impact of tax than in 2006 which had benefited from advantages brought about by the reorganization of the companies. The breakdown of consolidated sales of the Sogefi group by business sector is as follows: (in millions of euro) 2007 2006 Change Values % Values % %Filters 548.2 51.2 527.2 51.7 4.0

Suspension components and precision springs 524.6 48.9 491.6 48.3 6.7

Intercompany elimination (1.0) (0.1) (0.2) -- n.a.

TOTAL 1,071.8 100.0 1,018.6 100.0 5.2

Operating profitability benefited from a partial transfer on to selling prices of the rises in the cost of steel, from a reduction in overheads despite higher volumes of business, and a general im-provement in production efficiency. Consolidated EBITDA in 2007 came in at € 134.6 million (12.6% of sales revenues) with a rise of 4.7% from € 128.5 million (12.6% of sales) in the previous year. Consolidated EBIT was € 89.9 million (8.2% of sales) with a rise of 7.7% from the figure of € 83.5 million (8.2% of sales) reported in 2006. These results were affected by non-recurring charges for a total of € 12.9 million, partially offset by non-recurring gains of € 6.4 million. In 2007 income before taxes and minority interests was € 80.6 million, up by 7.6% from € 74.9 million in 2006, thanks to lower interest expense due to the reduction in the amount of debt. At December 31 2007 the consolidated net financial position was one of net debt for € 92.4 mil-lion, down by a further € 33.9 million from € 126.3 million at December 31 2006. The group had 6,200 employees on its payrolls at December 31 2007 compared to 6,168 at De-cember 31 2006. The Board of Directors of Sogefi, which met on February 26 2008, proposed distributing a to-tal dividend of € 1.40 per share, of which € 0.22 as the ordinary dividend entitlement (€ 0.20 in 2006) and € 1.18 as an extraordinary payout. By distributing an extraordinary dividend the group is able to optimize its equity structure, lowering its average cost of capital.


In 2007 the revenues of the filter division rose to € 548.2 million from 527.2 million in 2006 (+4%), thanks in particular to the significant improvement in sales in Latin America and to the rise in revenues of the original equipment market. The profitability of the Division declined due to appropriation for restructuring provisions: EBI-TDA came in at € 67.8 million (12.4% of sales) compared to € 70.2 million (13.3% of sales) in 2006, while EBIT was € 49.1 million (9% of sales) compared to € 51.9 million (9.8% of sales) in the previous year. The suspension components division reported revenues of € 524.6 million in 2007, with a rise of 6.7% from € 491.6 million in 2006, thanks to a considerable rise in sales in the South American market and in the industrial vehicle sector. Profitability improved significantly as well, benefiting from higher production efficiency and from the transfer on to selling prices of most of the rises in the cost of steel. EBITDA thus rose to € 75.8 million (14.4% of sales) from € 63.4 million in 2006 (12.9% of sales). EBIT reached € 50.3 million (9.6% of sales) with a rise of 34.5% from € 37.4 million (7.6% of sales) in 2006. In 2008 the negative evolution of the world economic scene will affect even the vehicle market in which Sogefi operates. The group should however be able to counter any decline in the European market with the further growth expected in South American markets and with more production restructuring action which is on the cards. HEALTHCARE SECTOR In 2007 the HSS group continued to develop and manage the new initiatives that it has undertaken in this sector and to identify new opportunities for investment. In financial year 2007 the HSS group reported revenues of € 182.9 million, up from € 99.2 million in the previous year (+ 84.4%), with a rise of € 83.7 million, of which € 33.8 million from the companies acquired during the year. Consolidated EBITDA was € 20.2 million (11% of sales revenues) against € 6.4 million in 2006 and consolidated EBIT was € 11.1 million (6.1% of sales) with a rise of € 8.8 million from € 2.3 million in 2006. Net income came in at € 0.3 million (compared with a net loss of € 4.4 million in 2006) and was affected by higher net financial expense (from € 3.3 million in 2006 to € 7.9 million in 2007) due to the higher level of debt following the acquisitions. At December 31 2007 the HSS group had net financial debt of € 148.6 million compared with € 110.7 million at December 31 2006. The rise of € 37.9 million was mainly due to the acquisition of the shareholding in S.Stefano, which involved a rise in debt of approximately € 100 million, partially offset by the sale of real estate for € 23 million and by capital increases, of which € 16.2 million was reserved for Morgan Stanley and € 21.6 million was reserved for the company S.Stefano Partecipazioni. These deals represent prestigious recognition of the results reached so far and confirm the value created in HSS. At 31 December 2007 consolidated shareholders’ equity stood at € 102.8 million up from € 63.5 million at December 31 2006.


The business of the HSS group is currently directed at managing three kinds of services: 1) Residences and nursing homes (RSAs), through the companies Anni Azzurri (which has in-

corporated Villa Margherita and Casaverde), Meia, Le colline del Po, Abitare il tempo and Casa argento, giving a total of 34 residences under management;

2) Rehabilitation with the S.Stefano group (three centres), the companies Rehab, active in functional recovery and rehabilitation (one centre) and Redancia which manages eight psy-chiatric care communities;

3) Hospital services, with the company Ospedale di Suzzara, which in 2004 was awarded man-agement of the Presidio Ospedaliero F.lli Montecchi di Suzzara (Mantua) and with the company Medipass, which manages diagnostic imaging units in public and private hospi-tals.

Currently the HSS group manages a total of around 4,600 beds plus another 400 or so that are un-der construction. The employees of the group totalled 2,472 at December 31 2007, up from 1,302 at December 31 2006. In July HSS acquired the S.Stefano group, leader in the Marche region in rehabilitation both in hospital and outside hospital. The S.Stefano group has been operating for over 40 years and has recently extended the sphere of its activity to residences for the non self-sufficient elderly. It man-ages a total of some 730 beds and in 2006 posted consolidated revenues of approximately € 71 million with an EBITDA of € 10.2 million. The enterprise value of the deal amounted to approximately € 109 million while the amount actu-ally disbursed or the equity value was in the region of € 62 million, financed with the company’s own resources for € 38 million and with bank debt for the remaining € 25 million. This deal enabled the HSS group to strengthen its presence in the rehabilitation sector considera-bly. During the second half of 2007 the integration of the S.Stefano group into the HHS group be-gan and its corporate structure was simplified. With reference to the outlook for this year the HSS group should continue action in 2008 to stren-gthen its operating subsidiaries and to identify new business opportunities. FINANCIAL SERVICES SECTOR The CIR Group has recently extended its sphere of activity in the financial services sector with the establishment of the company Jupiter Finance and investment in the Oakwood group, details of which are given below. JUPITER FINANCE – This company, which operates in the sector of non-performing loans, was set up at the end of 2005 with the aim of becoming an independent industrial partner of Italian banks and businesses in the management of non-performing loans, both for bloc sales on a non-recourse basis and for programs of optimization of a credit portfolio over a period of time, taking the role of a servicer. The company thus carries out a debt collection activity and collects payment in securitization de-als as master servicer, providing both operational services and carrying out a guarantee function, making sure that the procedures of the securitization process are followed correctly. At December 31 2007 the total number of loan receivables under the management of Jupiter Finance as master servicer amounted to € 872.2 million of gross book value purchased for a price of € 106.2 million.


During 2007 Jupiter Finance, in its role of master servicer, set up a program of securitization of portfolios of loans through the vehicle company (as per law 130) Zeus Finance which was in-cluded in the consolidated financial statements of CIR. This program involves the issue of securi-ties for a maximum amount of € 400 million, in two different classes, a senior class for a maxi-mum amount of € 200 million and a junior class for a maximum amount of € 200 million, which is subordinate for both capital and interest to the former. At December 31 2007 the securities is-sued, amounting to € 89 million, were subscribed by CIR International for the junior part amount-ing to € 38 million, and by CIR S.p.A. for the senior part, which amounted to € 51 million. The latter was then sold on March 5 2008 to a prime financial institution on finalization of the contract for selling the whole of the senior tranche for a total of € 200 million. In July 2007 Jupiter Finance started operating abroad, focusing on certain specific countries in central and southern Europe: as of December 31 2007 three acquisitions had been made for a total nominal value of € 41 million for a purchase price of € 11 million. OAKWOOD – In January 2007 CIR, through its subsidiary CIR International, completed the acqui-sition of an investment, in a 50-50 joint venture with Merrill Lynch, of 47.52% in Oakwood Glo-bal Finance with a total disbursement at the close of the period of € 128.4 million and a further commitment for € 2.5 million. The Oakwood group specializes in the establishment, acquisition and management of companies making loans to non-conforming individual clients who do not satisfy the traditional lending crite-ria especially in the segment of mortgage loans and salary-secured loans. As explained in the first part of this report, because of the serious crisis that has affected the financial markets in this sector of business, it was necessary to make a significant write-down of CIR’s investment in the Oak-wood group, actually writing off the value of the companies operating in the United Kingdom (edeus, Blue Motor Finance and OWL) which ceased operating. This decision was due to the credit crunch that made it impossible to find the necessary funding. The crisis in the markets affected, albeit to a lesser extent, the company Pepper, which operates in the Australian non-conforming mortgage market and which did a securitization deal in the month of November, and the Italian company Ktesios, which specializes in loans to private individuals secured on a fifth of their salaries or pensions. Ktesios was 90% acquired by the Oakwood group in April 2006 and is a leader in Italy in its market sector with a share of 18%. In 2007 loans were made for a total of € 600 million, up from approximately € 520 million in 2006.


5. OTHER ACTIVITIES CIR VENTURES – At the end of 2007 the portfolio of CIR Ventures, the venture capital fund of the Group, contained investments in seven companies of which six in the United States and one in Is-rael. These companies all operate in the sector of information and communications technology. The total fair value of these investments at December 31 2007 was 17.9 million dollars. In the early months of 2007 the sale was completed of the investment in Bitfone to Hewlett-Packard, which generated a capital gain of 1.2 million dollars. The management activity of the fund is still mainly directed towards supporting the companies in the portfolio and identifying opportunities to take profit. The prospects for the evolution of the business of these companies remain cautiously optimistic within a scenario of a general improve-ment in the technology sector. INVESTMENT IN PRIVATE EQUITY FUNDS – Through its subsidiary CIR International the CIR group holds a diversified portfolio of funds and minority private equity holdings, the fair value of which determined on the basis of the NAV provided by the various funds was approximately € 80 million at December 31 2007. Remaining commitments outstanding as of the same date amounted to € 46 million. During 2007 approximately € 19.6 million of realized gains were recognized to the accounts. 6. SIGNIFICANT EVENTS WHICH OCCURRED AFTER THE CLOSE OF THE YEAR With regard to the principal events which have taken place since December 31 2007 and the out-look for business in this current year, detailed information has already been given in the section of the report on the performance of the business sectors. On January 31 2008 an Extraordinary Meeting was held of the Note Holders of the € 300 million CIR S.p.A. 5.75% 2024 Note, which followed the Extraordinary Meeting held on December 10 2007 of the holders of the € 300 million CIR International S.A. 6.375% 2011 Note (guaranteed by CIR S.p.A.) and of the holders of the € 500 million CIR International S.A. 5.25% 2009 Note (guaranteed by CIR S.p.A.). The Noteholders’ Meetings made certain changes to the Regulations of each note issue, limiting the scope of application of the cross default clause to the debt of CIR S.p.A. and of its financial subsidiaries and excluding the debt of its operating subsidiaries, in line with the current strategy of CIR S.p.A.. As far as own-share deals are concerned, it should be pointed out that between January 1 2008 and today (March 11 2008) CIR bought back 1,950,000 of its own shares for a total of € 4.1 million. As of today, therefore, treasury stock held amounts to 41,594,000 equal to 5.258% of share capi-tal. It should also be noted that between January 1 2008 and today 49,800 shares have been issued in exercise of options by the beneficiaries of existing stock option plans. After this operation the share capital consisted of 790,980,467 shares each with a nominal value of € 0.50, for a total value of € 395,490,233.50.


7. OTHER INFORMATION

Information on shares held by Directors, General Managers and Statutory Auditors The chart below gives the information required by Art. 79 of Consob Resolution no. 11971 of May 14 1999 and subsequent amendments and additions.

SHARES HELD BY DIRECTORS, STATUTORY AUDITORS AND GENERAL MANAGERS

Last name and first name Company in which shares are held Number of shares owned at end of

Number of shares

Number of shares

Number of shares owned at end

No-tes

previous year purchased sold of this year

DE BENEDETTI CARLO CIR S.p.A. 358,708,621 750,000 -- 359,453,621 (1)

DE BENEDETTI CARLO GRUPPO EDITORIALE L’ESPRESSO S.p.A. 220,776,235 1,600,000 1,600,000 220,776,235 (2)

DE BENEDETTI CARLO SOGEFI S.p.A. 65,194,962 -- -- 65,194,962 (3)

DE BENEDETTI RODOLFO CIR S.p.A. 7,047,500 8,265,000 -- 15,312,500

DEBENEDETTI FRANCO CIR S.p.A. 375,000 -- -- 375,000

FERRERO PIERLUIGI CIR S.p.A. 350,000 -- 50,000 300,000

FERRERO PIERLUIGI GRUPPO EDITORIALE L’ESPRESSO S.p.A. 30,000 -- 10,000 20,000

FERRERO PIERLUIGI SOGEFI S.p.A. 10,000 5,000 -- 15,000

GERMANO GIOVANNI SOGEFI S.p.A. 2,012,000 -- -- 2,012,000

GERMANO GIOVANNI SOGEFI S.p.A. 1,004,312 -- -- 1,004,312 (4)

GIRARD FRANCO CIR S.p.A. 128,000 -- -- 128,000

GIRARD FRANCO SOGEFI S.p.A. 10,000 -- -- 10,000

GIRARD FRANCO GRUPPO EDITORIALE L’ESPRESSO S.p.A. 10,000 -- -- 10,000

PARAVICINI CRESPI LUCA CIR S.p.A. 333,333 -- -- 333,333

PARAVICINI CRESPI LUCA GRUPPO EDITORIALE L’ESPRESSO S.p.A. -- 4,827,212 -- 4,827,212 (5)

SEGRE MASSIMO GRUPPO EDITORIALE L’ESPRESSO S.p.A. 3,000 -- -- 3,000

PIASER ALBERTO CIR S.p.A. -- 462,000 -- 462,000 (1) Owned indirectly through COFIDE S.p.A. (2) At December 31 2007 the shares were held through the following subsidiaries:

CIR S.p.A. 220,775,235 ROMED S.p.A. 1,000

(3) Owned indirectly through CIR S.p.A. (4) Owned indirectly through Siria S.r.l. (5) Owned indirectly through Alpa S.r.l. and Fiduciaria Biennebi S.p.A.

Transactions with companies of the Group and related parties During the year CIR S.p.A. provided management and strategic support services to its sub-sidiaries and affiliates which involved, among other things, supplying administrative and financial services, making loans, and issuing guarantees. Transactions with the controlling parent company consisted of providing services of an administrative and financial nature and being supplied with management support and communication services. The main concern of CIR and its counterparties in relation to these services is to ensure quality and a high level of efficiency of the services rendered, which derive from CIR’s specific knowledge of the businesses of the Group. Transactions between companies of the Group are settled at normal market conditions on the basis of the quality and the specific nature of the services rendered. The most significant financial transactions between CIR and its subsidiaries are analysed in detail in the Explanatory Notes particularly under the item Miscellaneous receivables,


Other payables and Borrowings from subsidiaries in the Balance Sheet and under the items Miscellaneous revenues and income, Financial expenses and Dividends in the Income Statement. Regarding the main equity transactions reference should be made to the appropriate sec-tions of the Explanatory Notes. It should be pointed out that the CIR Group did not enter into any transactions with related parties, according to Consob’s definition, of a non-typical or unusual nature beyond nor-mal business administration or such as to have any significant impact on the economic, fi-nancial or equity situation of the Group. The code of conduct governing transactions with related parties was defined by the Board of Directors of the Company in September 2002. National Tax Consolidation As is known, the new Income Tax Consolidation Act (TUIR) introduced the possibility for companies belonging to the same group to determine a single total income figure corre-sponding more or less to the sum of the taxable income of the various companies (parent company and subsidiaries controlled directly and/or indirectly for at least 50% according to certain requisites) and thus to calculate a single income tax figure for the income of the companies of the group. In the last few months of 2004 the Boards of Directors of 28 com-panies belonging to the Espresso, Sorgenia, Sogefi and HSS subgroups voted to take part in the “CIR Tax Consolidation” for the three years 2004-2007, signing a general agreement (“General Rules of the CIR Tax Consolidation”), which sets out the rights and obligations of CIR and its subsidiaries, resulting from their taking part in the tax consolidation. During 2007 CIR and the companies belonging to the Espresso, Sorgenia, Sogefi, HSS and Jupiter sub-groups renewed their participation in the “CIR Tax Consolidation” for the three years 2007-2009. At December 31 2007 there were 32 companies taking part in the CIR Tax Consolidation. Report on Corporate Governance It should be noted that the full text of the “Annual Report on Corporate Governance” for the year 2007 was approved – in its entirety – by the Board of Directors’ Meeting convened to approve the Financial Statements for the year ended December 31 2007. This annual Report will be available to anybody who requests it, according to the condi-tions stipulated by Borsa Italiana for publishing the same. The Report will also be available on the website of the Company in the section "Investor relations”. In relation to D.Lgs. 231/01, issued with the aim of bringing regulations on the subject of the administrative liability of entities into line with international agreements signed by It-aly, on March 7 2003 the Board of Directors of the Company approved the adoption of a Code of Ethics of the CIR Group, published as an attachment to the “Annual Report on Corporate Governance”, which defines the values which the Group follows in the achieve-ment of its objectives and establishes binding principles of conduct for its Directors, em-ployees and those who have a relationship with the Group. Moreover, on September 5 2003, the Board of Directors of the company approved the “Organization Model – the Or-


ganizational and Management Model as defined by D.Lgs. no. 231/01”, in line with the in-structions laid down in the decree which aimed to ensure correctness and transparency in the conduct of business and corporate activities. On April 27 2006 the Board of Directors approved an update to the Organizational and Management Model as defined by D.Lgs. no. 231/01 which was needed after law no. 62 of April 18 2005 took effect. This law amended decree 231/2001 inserting art. 25-sexties which establishes fines for offences involving the abuse of privileged information and ma-nipulation of the market. Lastly it should be noted that the companies of the Group have complied with the provi-sions of Art. 2497-bis of the Civil Code. Preparation of the “Security Policy Document (DPS)” D.Lgs. no. 196/03, giving instructions on the protection of personal information, stipulates that by March 31 of each year the organization responsible for the treatment of personal in-formation should draw up a formal security policy document containing, among other things, appropriate information regarding the following: - the list of the types of treatment of personal information followed by the organization; - the distribution of responsibilities and tasks relating to the treatment of such informa-

tion; - a description of the measures to be taken to guarantee the integrity and the availability

of the information and the protection of the areas set aside for storing it and making it accessible;

- the description of the criteria and the procedures for restoring access to the said informa-tion in the event of it being destroyed or damaged;

- the description of the criteria to be adopted in order to guarantee that the minimum measures of security are followed when the treatment of personal information is en-trusted, in conformity with the Civil Code, to someone outside the organization of the Officer Responsible.

Article 26 of the Technical Rules states that the preparation or amendment of the Security Policy Document must be mentioned in the Management Report accompanying the Finan-cial Statements when appropriate. The Security Policy Document was updated with the support of specialist consultants in this field who have been certified as BS7799 lead auditors by the British Standard Institute. Other The company CIR S.p.A. – Compagnie Industriali Riunite has its registered office in Strada Volpiano 53, Leinì (To), Italy and its operating headquarters in Via Ciovassino 1, Milan, Italy. CIR shares, which have been quoted on the Milan Stock Exchange since 1973, since 2004 have been traded on the Blue-chip segment (Reuter code: CIRX.MI, Bloomberg code CIR IM). This Annual Management Report for the period January 1 – December 31 2007 was ap-proved by the Board of Directors on March 11 2008.


PROPOSED ALLOCATION OF NET INCOME FOR THE YEAR Dear Shareholders, The Financial Statements for the year ended December 31 2007 that we are submitting to your ap-proval closed with net income of € 79,919,598.40. We propose: . distributing a dividend of € 0.050 to each of the shares in circulation with dividend rights as of

January 1 2007 (with the exclusion of own shares held as treasury stock), using the net income for the year of € 79,919,598.40 and allocating the difference to the item “Retained earnings”.

The proposed allocation of the net income for the year: ¨ takes into account the provisions of Art. 2357 ter, 2nd paragraph, of the Civil Code which stipu-

lates that the dividend rights on own shares be allocated pro rata to the other shares; ¨ will take into account the dividend entitlement of the 4,941 shares servicing 810 former Sasib

privileged shares, the conversion of which has not yet been requested. It should be pointed out that the actual amounts to be allocated to dividends and the reserve “Re-tained earnings” will be based on the number of own shares held as treasury stock and the ordinary shares in circulation as of the date of the Shareholders’ Meeting, in case any further shares are bought back in the meantime or any new shares are issued in execution of the exercise of options by beneficiaries of the various stock option plans outstanding.

THE BOARD OF DIRECTORS Milan March 11 2008


Consolidated Financial Statements 35

CIR Group

Consolidated Financial Statements as of December 31 2007

BALANCE SHEET

INCOME STATEMENT

CASH FLOW STATEMENT

STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY

1. CONSOLIDATED BALANCE SHEET

(in thousands of euro)

ASSETS Notes 31.12.2007 31.12.2006

NON-CURRENT ASSETS 3,476,271 2,742,536 INTANGIBLE ASSETS (7.a) 1,250,196 951,009

TANGIBLE ASSETS (7.b) 1,473,320 1,091,030

REAL ESTATE INVESTMENTS (7.c) 19,259 17,604

INVESTMENTS IN COMPANIES VALUED AT EQUITY (7.d) 280,554 214,163

OTHER EQUITY INVESTMENTS (7.e) 11,885 8,530

OTHER RECEIVABLES (7.f) 251,493 250,991 of which with related parties (*) (7.f) 111,614 169,905 SECURITIES (7.g) 96,534 98,583

DEFERRED TAXES (7.h) 93,030 110,626

CURRENT ASSETS 2,863,062 2,984,189 INVENTORIES (8.a) 203,967 217,082

CONTRACTED WORK IN PROGRESS 2,564 1,685

TRADE RECEIVABLES (8.b) 1,070,273 996,477 of which with related parties (*) (8.b) 3,404 7,943 OTHER RECEIVABLES (8.c) 206,441 273,992

FINANCIAL RECEIVABLES (8.d) 37,171 21,354

SECURITIES (8.e) 275,897 654,248

AVAILABLE-FOR-SALE FINANCIAL ASSETS (8.f) 372,622 372,867

CASH AND CASH EQUIVALENTS (8.g) 694,127 446,484

ASSETS HELD FOR DISPOSAL (2.c) 6,756 47,589

TOTAL ASSETS 6,346,089 5,774,314

LIABILITIES AND SHAREHOLDERS' EQUITY 31.12.2007 31.12.2006

SHAREHOLDERS' EQUITY 2,041,793 1,979,912 SHARE CAPITAL (9.a) 395,466 390,240

RESERVES (9.b) 393,161 367,779

RETAINED EARNINGS (LOSSES) (9.c) 448,674 401,016

NET INCOME FOR THE YEAR 82,580 101,120

SHAREHOLDERS' EQUITY OF THE GROUP 1,319,881 1,260,155 MINORITY SHAREHOLDERS' EQUITY 721,912 719,757

NON-CURRENT LIABILITIES 2,812,212 2,288,420 BONDS AND NOTES (10.a) 1,189,672 1,187,750

OTHER BORROWINGS (10.b) 1,281,170 758,514

OTHER PAYABLES 286 1,178

DEFERRED TAXES (7.h) 139,888 137,743

PERSONNEL PROVISIONS (10.c) 159,278 166,554

PROVISIONS FOR RISKS AND LOSSES (10.d) 41,918 36,681

CURRENT LIABILITIES 1,492,084 1,469,640 BANK OVERDRAFTS 92,032 265,180

OTHER BORROWINGS (11.a) 150,425 134,134

TRADE PAYABLES (11.b) 941,841 748,901 of which with related parties (*) (11.b) 13,712 17,567 OTHER PAYABLES (11.c) 244,958 273,962

PROVISIONS FOR RISKS AND LOSSES (10.d) 62,828 47,463

LIABILITIES HELD FOR DISPOSAL (2.c.) -- 36,342

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY 6,346,089 5,774,314

(*) As per Consob resolution no. 6064293 of July 28 2006

2. CONSOLIDATED INCOME STATEMENT


Notes 2007 2006

TRADE REVENUES (12) 4,214,921 4,136,769 of which from related parties (*) (12) 1,539 13,702

CHANGE IN INVENTORIES 2,119 2,206

COSTS FOR PURCHASE OF GOODS (13.a) (2,330,124) (2,457,185) of which from related parties (*) (13.a) (85,284) (111,750)

COSTS FOR SERVICES (13.b) (768,252) (711,792)

PERSONNEL COSTS (13.c) (617,954) (575,342)

OTHER OPERATING INCOME (13.d) 66,433 80,263

OTHER OPERATING COSTS (13.e) (105,248) (66,651)

ADJUSTMENTS TO THE VALUE OF INVESTMENTS

VALUED AT EQUITY (7.d) 42,904 34,154

AMORTIZATION, DEPRECIATION AND WRITE-DOWNS (122,044) (102,938)

INCOME BEFORE INTEREST AND TAXES( E B I T ) 382,755 339,484

FINANCIAL INCOME (14.a) 68,683 67,176 of which from related parties (*) (14.a) 13,777 6,898

FINANCIAL EXPENSE (14.b) (157,403) (129,763)

DIVIDENDS 748 1,470

GAINS FROM TRADING SECURITIES (14.c) 154,202 96,539

LOSSES FROM TRADING SECURITIES (14.d) (84,372) (54,030)

ADJUSTMENTS TO THE VALUE OF FINANCIAL ASSETS (14.e) (63,128) (16,958)

INCOME BEFORE TAXES 301,485 303,918

INCOME TAXES (15) (100,626) (89,478)

POST-TAX INCOME FROM OPERATING ACTIVITIES 200,859 214,440

INCOME/(LOSS) FROM BUSINESSES HELD FOR DISPOSAL 176 (932)

NET INCOME FOR THE YEAR INCLUDING MINORITY INTERESTS 201,035 213,508

- NET INCOME OF MINORITY SHAREHOLDERS (118,455) (112,388)

- NET INCOME OF THE GROUP 82,580 101,120

BASIC EARNINGS PER SHARE (in euro) (16) 0.1102 0.1351

DILUTED EARNINGS PER SHARE (in euro) (16) 0.1093 0.1343

(*) As per Consob resolution no. 6064293 of July 28 2006

CONSOLIDATED CASH FLOW STATEMENT


2007 2006

OPERATING ACTIVITY

NET INCOME FOR THE YEAR INCLUDING MINORITY INTERESTS 201,035 213,508

ADJUSTMENTS:

AMORTIZATION, DEPRECIATION AND WRITE-DOWNS 122,044 102,938

SHARE OF THE RESULT OF COMPANIES VALUED AT EQUITY (42,904) (34,154)

ACTUARIAL VALUATION OF STOCK OPTION PLANS 6,988 9,726

CHANGE IN PERSONNEL PROVISIONS, PROVISIONS FOR RISKS AND LOSSES 13,326 956

ADJUSTMENTS TO THE VALUE OF FINANCIAL ASSETS 63,128 16,958

INCREASE (REDUCTION) IN NON-CURRENT RECEIVABLES & PAYABLES 13,566 (12,763)

(INCREASE) REDUCTION IN NET WORKING CAPITAL 169,927 (174,004)

OTHER NON-MONETARY CHANGES -- 39,960

CASH FLOW FROM OPERATING ACTIVITY 547,110 163,125

of which:- interest income (expense) (78,963) (70,679)- income tax disbursements (117,447) (50,909)

INVESTMENT ACTIVITY

(PURCHASE) SALE OF SECURITIES 372,440 (210,573)

NET DISBURSEMENT FOR COMPANY ACQUISITIONS (246,109) (73,752)

NET INFLOWS FROM DISPOSALS -- 637

PURCHASE OF FIXED ASSETS (758,966) (361,395)

CASH FLOW FROM INVESTMENT ACTIVITY (632,635) (645,083)

FUNDING ACTIVITY

INFLOWS FROM CAPITAL INCREASES 46,787 10,372

OTHER CHANGES IN SHAREHOLDERS' EQUITY (25,129) (3,666)

DRAWDOWN/(REPAYMENT) OF OTHER BORROWINGS 525,052 55,640

FINANCIAL RECEIVABLES FROM JOINT VENTURES 127,406 -- BUY-BACK OF OWN SHARES (73,938) (15,564)

DIVIDENDS PAID OUT (93,862) (90,847)

CASH FLOW FROM FUNDING ACTIVITY 506,316 (44,065)

INCREASE (REDUCTION) IN NET CASH AND CASH EQUIVALENTS 420,791 (526,023)

NET CASH AND CASH EQUIVALENTS AT START OF YEAR 181,304 707,327

NET CASH AND CASH EQUIVALENTS AT END OF YEAR 602,095 181,304

4. STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY

(in thousands of euro) Minority Total

Share Reserves Retained Net income Total Interestscapital earnings(losses (loss) for year

BALANCE AT DECEMBER 31 2005 389,621 401,794 305,945 87,675 1,185,035 671,348 1,856,383

Capital increases 619 1,076 -- -- 1,695 8,677 10,372

Dividends to Shareholders -- -- -- (37,520) (37,520) (53,327) (90,847)

Retained earnings -- -- 50,155 (50,155) -- -- --

Cancellation of AGM resolution of April 272005 to buy back own shares -- (54,816) 54,816 -- -- -- --

Fair value measurement of hedging instruments -- 478 -- -- 478 357 835

Fair value measurement of securities -- 33,075 -- -- 33,075 -- 33,075

Securities fair value reserve recognized to income statement -- (16,893) -- -- (16,893) -- (16,893)

Adjustment for own share transactions -- (5,664) (9,900) -- (15,564) -- (15,564)

Notional recognition of stock options -- 2,213 -- -- 2,213 -- 2,213

Effects of equity changes in subsidiaries -- 20,751 -- -- 20,751 (18,953) 1,798

Currency translation differences -- (14,235) -- (14,235) (733) (14,968)

Net income for the year -- -- -- 101,120 101,120 112,388 213,508


Capital increases 5,226 9,442 -- -- 14,668 32,119 46,787

Dividends to Shareholders -- -- -- (*) (37.243) (37,243) (56,619) (93,862)

Retained earnings -- -- 62,960 (62,960) -- -- --

Amount at disposal of Board of Directors -- -- -- (917) (917) -- (917)

Unclaimed dividends as per Art. 23 of Bylaws -- 55 -- -- 55 -- 55

Fair value measurement of hedging instruments -- 372 -- -- 372 170 542

Fair value measurement of securities -- 34,195 -- -- 34,195 458 34,653

Securities fair value reserve recognized to income statement -- (13,836) -- -- (13,836) (156) (13,992)

Adjustment for own share transactions -- (74) (15,302) -- (15,376) -- (15,376)

Notional recognition of stock options -- 1,929 -- -- 1,929 -- 1,929

Effects of equity changes in subsidiaries -- 17,591 -- -- 17,591 (90,964) (73,373)

Currency translation differences -- (24,292) -- -- (24,292) (1,308) (25,600)

Net income for the year -- -- -- 82,580 82,580 118,455 201,035


(*) AGM of April 27 2007: dividend € 0.05 per share

Attributable to Shareholders of the parent company

40 Consolidated Financial Statements

EXPLANATORY NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 1. STRUCTURE AND CONTENT OF THE FINANCIAL STATEMENTS These consolidated financial statements have been prepared in accordance with IAS/IFRS interna-tional accounting standards supplemented by the interpretations of the Standing Interpretation Committee issued by the International Accounting Standards Boards (IASB). The Consolidated Financial Statements for the year ended December 31 2007 include the Parent Company CIR S.p.A. (hereinafter “CIR”) and its subsidiaries. The Consolidated Financial Statements for the year ended December 31 2007 were prepared using the statements of the individual companies included in the consolidation, i.e. either their statutory financial statements (known as “individual” or “separate” in IAS/IFRS terminology), or the con-solidated statements of the sub-groups, examined and approved by their respective boards and amended and re-stated where necessary to bring them into line with the accounting principles listed below and, where there is compatibility, with Italian regulations. The various statements a-dopted are as follows: - The Balance Sheet is organized in offsetting items classified as current and non-current assets

and liabilities; - The Income Statement shows a breakdown according to nature of expenses; - The Cash Flow Statement was prepared using the indirect method; - The Statement of Changes in Shareholders’ Equity gives a breakdown of the changes that took

place during the year and in the previous year. These financial statements were prepared in thousands of euro, which is the “functional” and “presentation” currency of the Group according to the terms of IAS 21, except where expressly indicated otherwise. 2. CONSOLIDATION PRINCIPLES 2.a. Consolidation methods Subsidiaries All the companies in which the Group exercises control according to the terms of IAS 27, SIC 12 and IFRIC Interpretation 2 are considered as subsidiaries. In particular, companies and investment funds are considered as controlled companies when the Group has the power to make decisions regarding financial and operating policy. The existence of this power is presumed to exist when the Group possesses the majority of the voting rights of a company, including potential voting rights that are exercisable without any restrictions or when it has in any case effective control over Shareholders’ Meetings. Subsidiaries are fully consolidated as from the date on which the Group takes control and are de-consolidated when such control ceases to exist. Consolidation is carried out using the full line-by-line consolidation method. The main criteria adopted for the application of this method are generally the following: - The book value of the holding is eliminated against the appropriate portion of shareholders’ eq-uity and the difference between acquisition cost and the shareholders’ equity of investee compa-nies is posted, where the conditions exist, to the items of assets and liabilities included in the con-


solidation. Any remaining part is recognized to the statement of income when it is negative or to the “Goodwill” item of the assets when it is positive. Goodwill is subjected to an impairment test to determine its recoverable value; - Significant transactions between consolidated companies are eliminated as are payables, receiv-ables and unrealized income resulting from transactions between companies of the Group, net of any tax; - Minority shareholder’ equity and their share of net income for the period are shown in special items of the consolidated balance sheet and income statement; - In the event of a reduction of the shareholding, not involving a loss of control, due to an increase in the capital held by minority shareholders, except for cases resulting from the subscription of stock option plans, any gains or losses from the dilution are recognized to the income statement in application of the Parent Company method. Associates All those companies in which the Group has a significant influence, without having control, in ac-cordance with the terms of IAS 28, are considered as associated companies or associates. Signifi-cant influence is presumed to exist when the Group holds a percentage of the voting rights of be-tween 20% and 50% (excluding cases where there is joint control). Associates are consolidated using the equity method as from the date on which the Group acquires significant influence in the associate and they are de-consolidated from the moment when signifi-cant influence ceases to exist. The criteria adopted for applying the equity method are mainly the following: - The book value of the holding is eliminated against the appropriate portion of shareholders’ eq-uity and any positive difference, identified at the time of the acquisition, net of any lasting loss of value resulting from an impairment test to establish its recoverable value; the corresponding share of the net income or loss for the period is recognized to the income statement. Whenever the part attributable to the Group of the losses of the associate exceeds the carrying value of the invest-ment in the accounts, the value of the investment is written off and the share of any further losses are not recognized unless the Group has any contractual obligation to do so; - Any unrealized gains and losses generated by transactions between companies of the Group are netted out except in cases where losses represent a permanent loss of value of the assets of the as-sociate; - The accounting principles of the associate are amended, where necessary, in order to make them compatible with the accounting principles adopted by the Group. Joint ventures: All companies in which the Group exercises control jointly with another company according to the terms of IAS 31 are considered as joint ventures. In particular it is presumed that joint control exists when the Group owns half of the voting rights of a company. International accounting standards give two methods for consolidating investments in joint ven-tures: . the reference method, which involves pro-rata consolidation . the alternative method which involves consolidation using the equity method. The Group has adopted the equity method of consolidation.


2.b. Translation of foreign companies’ financial statements into euro The translation into euro of the financial statements of foreign subsidiaries not belonging to the single currency, none of which has an economy subject to hyperinflation according to the defini-tion given in IAS 29, is carried out at the year-end exchange rate for the balance sheet and at the period average exchange rate for the income statement. Any exchange rate differences resulting from the translation of shareholders’ equity at the year-end exchange rate and from the translation of the income statement at the average rate for the period are recorded in the item “Other re-serves” under shareholders’ equity. The main exchange rates used are the following: 31.12.2007 31.12.2006

Average rate 31.12.2007 Average rate 31.12.2005

US Dollar 1.37048 1.4721 1.2556 1.1797

UK Sterling 0.6842 0.7333 0.6729 0.6853

Swedish Krona 9.2515 9.4411 9.2524 9.3888

Brazilian Real 2.6625 2.6108 2.7292 2.7432

Argentine Peso 4.2622 4.6369 3.8565 3.5727

Chinese Renminbi 10.4134 10.7527 10.004 9.5202

Slovene Tolar n.a. n.a. 239.8082 239.2345

2.c. Consolidation area The consolidated financial statements as of December 31 2007 and the consolidated financial statements for the previous year of the Group are the result of the consolidation at those dates of the Parent Company CIR and of all the companies directly or indirectly controlled, jointly con-trolled or associated, with the exception of any companies being wound up. Assets and liabilities scheduled for disposal are reclassified in the items of assets and liabilities that show such an even-tuality. Specifically in 2007 the assets refer to properties of the Sogefi group that are being held for dis-posal in 2008. The main changes in the area of consolidation from the previous year are due to the acquisition by Sorgenia of the company Société Française d’Eolienne (SFE), the second energy provider in France, and the acquisition by HSS of the S.Stefano group. The main figures relating to the ac-quired companies are analysed in paragraph 21 of these Explanatory Notes. It should be noted that in application of the Standing Incorporations Committee 12 (SIC 12), the securitization vehicle company Zeus Finance S.r.l. has been consolidated. The list of equity investments included in the consolidation, with an indication of the method used, and of those not included is given in the appropriate section of this document.


3. ACCOUNTING PRINCIPLES APPLIED 3.a. Intangible assets (IAS 38) Intangible assets are recognized only if they can be separately identified, if it is probable that they will generate future economic benefits and if their cost can be measured reliably. Intangible assets with a finite useful life are valued at purchase or production cost net of amortiza-tion and impairment. Intangible assets are initially recognized at purchase or production cost. Purchase cost is repre-sented by the fair value of the means of payments used to purchase the asset and any additional direct cost incurred for preparing the asset for use. The purchase cost is the equivalent price in cash as of the date of recognition and, where payment is deferred beyond normal terms of credit, the difference compared with the cash price is recognized as interest for the whole period of de-ferment. Amortization is calculated on a straight-line basis following the expected useful life of the asset and starts when the asset is ready for use. The carrying value of intangible assets is maintained as long as there is evidence that this value can be recovered through use; to this end at least once a year an impairment test is carried out to check that the intangible asset is able to generate future cash flows. However intangible assets with an indefinite useful life are not amortized but are constantly moni-tored for any permanent loss of value. It is mainly the newspaper and magazine titles and frequen-cies of the Espresso Group that are considered as intangible assets with an indefinite useful life. Development costs are recognized as intangible assets when their cost can be measured reliably, when there is a reasonable assumption that the asset can be made available for use or for sale and that it is able to generate future benefits. Once a year or any time there are reasons which justify it, capitalized costs are subjected to an impairment test. Research costs are charged to the income statement as and when they are incurred. Trademarks and licenses, which are initially recognized at cost, are subsequently accounted for net of amortization and any impairment. The period of amortization is defined as the lower of the contractual duration for use of the license and the useful life of the asset. Software licenses, including associated costs, are recognized at cost and are recorded net of amor-tization and of any impairment. Goodwill represents the excess of the cost of an acquisition over the fair value of the subsidiaries and associates, with reference to the net values of their assets and liabilities identifiable as of the date of the acquisition. After initial recognition, goodwill is valued at cost less any impairment. Goodwill resulting from acquisitions made after March 31 2004 is no longer amortized whereas goodwill already recorded prior to that date is no longer amortized as from January 1 2004. Goodwill always refers to identified income-producing assets, the ability of which to generate in-come and cash flows is constantly monitored for any impairment.


3.b. Tangible assets (IAS 16) Tangible assets are recognized at purchase price or at production cost net of accrued depreciation. Cost includes associated expenses and any direct and indirect costs incurred at the moment of ac-quisition and necessary to make the asset ready for use. Financial expense relating to specific loans for long-term investments are capitalized until the date when the assets start operating. Where there are contractual or compulsory obligations for decommissioning, removing or clearing sites where fixed assets are installed, the value recognized includes an estimate of costs that will be incurred on disposal of the same, discounted to present value. Fixed assets are depreciated on a straight-line basis for each year in relation to their remaining useful life. Land, assets under construction and advance payments are not subject to depreciation. Real estate and land not used for corporate operating purposes are classified under a special item of assets and are accounted for on the basis of the terms of IAS 40 “Investment properties” (see paragraph 3.e. below). Should there be any events which one can assume will cause a lasting reduction in the value of an asset, its carrying value is checked against its recoverable value, which is the higher of its fair value and its value in use. Fair value is defined on the basis of values expressed by the active mar-ket, by recent transactions or from the best information available to determine the potential amount obtainable from the sale of the asset. Value in use is determined from the net present value of cash flows resulting from the use expected of the same asset, applying the best estimates of its residual useful life and a rate that also takes into account the implicit risk of the specific business sectors in which the Group operates. This valuation is carried out for each individual as-set or for the smallest identifiable cash generating unit (CGU). Where there is a negative difference between the values stated above and the carrying value, the asset’s carrying value is written down, while as soon as the reasons for such loss in value cease to exist the asset then undergoes an upward revaluation. Write-downs and revaluations are posted to the income statement. 3.c. Public entity grants Any grants from a public entity are recognized when there is a reasonable degree of certainty that the receiving company will comply with all the conditions stipulated for such a grant, independ-ently of whether or not there is a formal resolution awarding the said grant, and the certainty that the grant will actually be received. Capital contributions are recognized in the balance sheet either as deferred income, which is po-sted to the income statement on the basis of the useful life of the asset for which it has been granted so that the depreciation can be reduced, or else they are deducted directly from the asset to which they refer. Any public entity grants obtained in the form of reimbursement of expenses and costs already in-curred or with the purpose of providing immediate support for the beneficiary company without there being any future related costs, are recognized as income in the period in which they can be claimed.


3.d. Leasing contracts (IAS 17) Leasing contracts for assets where the lessee substantially assumes all the risks and rewards of ownership are classified as finance leases. Where there are such finance lease contracts out-standing the asset is recognized at the lower of its fair value and the present value of the minimum lease payments stipulated in the relevant contracts. The total lease payments are allocated between the liability and finance charges so as to achieve a constant rate on the finance balance out-standing. The residual lease payments, net of financial expense, are classified as borrowings. The interest expense is charged to the income statement over the lease period. Assets acquired with fi-nancial leasing contracts are depreciated to an extent consistent with the nature of the asset. Leasing contracts in which the lessor substantially retains the risks and rewards of ownership are, on the other hand, classified as operating leases and payments made under such leases are charged to the income statement on a straight-line basis over the period of the lease. In the event of a sale and lease-back agreement, any difference between the price of sale and the carrying value of the asset is not recognized to the income statement unless there is a loss repre-senting an impairment of the asset itself. 3.e. Real estate investments/investment property (IAS 40) An investment property is a property, either land or building – or part of a building – or both, o-wned by the owner or by the lessee, through a financial leasing agreement, for the purpose of re-ceiving lease payments or for obtaining a return on the capital invested or for both of these rea-sons, rather than for the purpose of directly using it for the production or supply of goods or ser-vices or for administration of the company or for sales, in ordinary business activities. The cost of an investment property is represented by its purchase price, any improvements made, any replacements and extraordinary maintenance. For self-constructed investment property an estimation is made of all costs incurred as of the date on which the construction or the development was finished. Until that date the conditions set forth in IAS 16 apply. In the event of an asset held through a finance lease contract, the initial cost is determined accord-ing to IAS 17 from the lower of the fair value of the property and the present value of the mini-mum lease payments due. The Group has opted for the cost method to be applied to all investment property held. According to the cost method, measurement is made net of depreciation and any impairment. At the moment of disposal or in the event of permanent non-use of the assets, all related income and expenses will be charged to the income statement. 3.f. Impairment of assets (IAS 36) Periodically and whenever there are specific indications, tangible and intangible assets are sub-jected to an impairment test to see whether they have undergone any loss in value. The impairment test consists of an estimate of the recoverable value of the asset and a subsequent comparison with its net carrying amount. If the recoverable value is lower than the carrying amount, the latter is written down and the impairment loss is charged to the income statement. If at a later date the reasons for the write-down cease to exist, the original carrying amount is re-stored with the relative posting to the income statement.


3.g. Other equity investments Investments in companies where the Parent Company does not exercise a significant influence are accounted for in accordance with IAS 39 and are therefore classified as available-for-sale invest-ments and are measured at fair value or at cost if the estimation of fair value or market price is not reliable. 3.h. Receivables and payables (IAS 32, 39 and 21) Receivables are recognized at amortized cost and measured at their presumed realization value, while payables are recognized at amortized cost. Receivables and payables in foreign currencies, which are originally recognized at the spot rates of the transaction date, are adjusted to the year-end spot exchange rates and any exchange gains and losses are recognized to the income statement. 3.i. Securities (IAS 32 and 39) In accordance with IAS 32 and IAS 39 investments in companies other than subsidiaries and as-sociates are classified as available-for-sale financial assets and are measured at fair value. Gains and losses resulting from fair value adjustments are recorded in a special equity reserve. When there are impairment losses or when the assets are sold, the gains and losses recognized previously to shareholders’ equity are then posted to the income statement. Purchases and sales are recognized on the date of the trade. This category also includes financial assets bought or issued that are classified as either held for trading or at fair value through profit and loss on adoption of the fair value option. For a more complete description of the principles regarding financial assets we would refer read-ers to the note specially prepared on the subject. 3.l. Income taxes (IAS 12) Current taxes are recorded and determined on the basis of a realistic estimate of taxable income following current tax regulations of the country in which the company is based and taking into ac-count any exemptions that may apply and any tax credits that may be claimed. Deferred taxes are calculated on the basis of time differences, whether taxable or deductible, be-tween the carrying values of assets and liabilities and their tax bases and are classified under non-current assets and liabilities. The carrying value of deferred tax assets is subject to periodic analysis and is reduced to the ex-tent to which it is no longer probable that there will be sufficient taxable income to allow the benefit of this deferred asset to be utilized.


3.m. Inventories (IAS 2) Inventories are recorded at the lower of purchase or production cost, calculated using the wei-ghted average cost method, and their presumed realizable value. 3.n. Cash and cash equivalents (IAS 32 and 39) Cash and cash equivalents include cash in hand, call deposits and short-term and high-liquidity financial assets, which are easily convertible into cash and have an insignificant risk of change in value. 3.o. Shareholders’ equity Ordinary shares are recorded at nominal value. Costs directly attributable to the issuance of new shares are deducted from the shareholders’ equity reserves, net of any related tax benefit. Own shares are classified in a special item which is deducted from reserves; any subsequent transaction of sale, re-issuance or cancellation will have no impact on the income statement but will affect only shareholders’ equity. Unrealized gains and losses, net of tax, on financial assets classified as available for sale are re-corded under shareholders’ equity in the fair value reserve. The reserve is reversed to the income statement when the asset is realized or when a impairment loss is recognized. The hedging reserve is formed from the fair value movements of derivatives which, under IAS 39, have been designated as “cash flow hedges” or as “hedges of net investments in foreign opera-tions”. The portion of the profit and loss considered as “effective” is recognized to shareholders’ equity and is reversed to the income statement as and when the elements hedged are in turn recognized to the income statement, i.e. when the subsidiary is sold. When a subsidiary prepares its financial statements in a currency different from the Group’s func-tional currency, the subsidiary’s financial statements are translated accounting any differences re-sulting from such translation in a special reserve. When the subsidiary is sold the reserve is re-versed to the income statement with a detail of any gains or losses resulting from the subsidiary’s disposal. The item “Retained earnings (losses)” includes accrued income and losses and the transfer of bal-ances from other equity reserves when these become free of any restrictions to which they have been subject. This item also shows the cumulative effect of the changes in accounting principles and/or the cor-rection of errors which are accounted for in accordance with IAS 8. 3.p. Borrowings (IAS 32 and 39) Loans are initially recognized at cost represented by their fair value net of ancillary costs incurred. Subsequently loans are measured at amortized cost calculated by applying the effective interest rate, taking into consideration any issuance costs incurred and any premium or discount applied at the time in which the instrument is settled.


3.q. Provisions for risks and losses (IAS 37) Provisions for risks and losses refer to liabilities which are extremely likely but where the amount and/or maturity are uncertain. They are the result of past events which will cause a future cash outflow. Provisions are recognized exclusively in the presence of a current obligation, either legal or constructive, towards third parties which implies an outflow and when a reliable estimate of the amount involved can be made. The amount recognized as a provision is the best estimate of the disbursement required to fulfil the obligation as of the balance sheet date. The provisions recog-nized are re-examined at the close of each accounting period and are adjusted to represent the best current estimate. Changes in the estimate are recognized to the income statement. When the estimated disbursement relating to the obligation is expected in a time horizon longer than normal payment terms and the discount factor is significant, the provision represents the pre-sent value, discounted at a risk-free interest rate, of the expected future outflows to discharge the obligation. Contingent assets and liabilities (possible assets and liabilities, or those not recognized because no reliable estimate can be made) are not recognized. However adequate disclosure on such items is given. 3.r. Revenue recognition (IAS 18) Revenues from the sale of goods are recognized at the moment when ownership and the risks of the goods are transferred. Revenues are recognized net of returns, discounts and rebates. Revenues for the rendering of services are recognized at the moment when the service is rendered, with ref-erence to the state of completion of the activity as of the balance sheet date. Income from dividends, interest and royalties is recognized as follows: - Dividends, when the right to receive payment is established (with an offset in receivables when

distribution is approved); - Interest, using the effective interest rate method (IAS 39); - Royalties, on an accruals basis, in accordance with the underlying contractual agreement. 3.s. Employee benefits (IAS 19) Benefits to be paid to employees after the termination of their employment and other long term benefits are subject to actuarial valuation. Following this methodology, liabilities recognized represent the present value of the obligation adjusted for any actuarial gains or losses which have not been accounted for. Financial Law no. 296/2006 (Budget) made important changes to severance and leaving indem-nity (TFR) regulations, introducing the possibility for workers to transfer their TFR maturing after January 1 2007 to selected pension schemes. Thus the TFR accruing as of December 31 2006 for employees who exercised the above option, while remaining within the sphere of defined benefit plans, was determined using actuarial methods that exclude the actuarial / financial components that relate to future salary dynamics. Given that this new method of calculation reduces the vola-tility of actuarial gains / losses the decision was taken to abandon the corridor method and recog-nize all the actuarial gains and losses to the Income Statement.


Accounting principle IFRS 2 “Share based payments” issued in February 2005 but applicable as from January 1 2005 stated in its transition instructions that application would be retrospective for all transactions where stock options were awarded before November 7 2002 and where, as of the date of its taking effect, the vesting conditions contained in the various plans had not yet been sat-isfied. In compliance with this principle the CIR Group measures the notional cost of stock options and recognizes it to the income statement under personnel costs during the vesting period of the bene-fit, with a corresponding posting to the appropriate reserve in shareholders’ equity. The cost of the option is determined at the award date of the plan applying special models and multiplying by the number of options exercisable over the respective period, which is evaluated with the aid of appropriate actuarial variables. Similarly the cost resulting from the award of phantom stock options is determined in relation to the fair value of the options at the award date and is recognized to the income statement under personnel costs throughout the vesting period of the benefit; the offsetting entry, unlike for stock options, is made in the liabilities (miscellaneous personnel provisions) and not in an equity re-serve. Until this liability is extinguished its fair value is recalculated at each balance sheet date and on the date of actual disbursement and all the fair value changes are posted to the income statement. 3.t. Derivative instruments (IAS 32 and 39) Derivative instruments are measured at fair value. The Group uses derivatives mainly to hedge risks, in particular interest rate, foreign exchange and commodity price risks. The hedging purpose of the derivative is formally documented and the de-gree of “effectiveness” of the hedge is specified. For accounting purposes hedging transactions can be classified as: - fair value hedges – where the effects of the hedge are recognized to the income statement. - cash flow hedges – where the effective portion of the hedge is recognized directly to share-

holders’ equity while the non-effective part is recognized to income statement. - hedge of a net investment in a foreign operation – where the effective portion of the hedge is

recognized directly to shareholders’ equity while the non-effective part is recognized to the in-come statement.

3.u. Foreign currency translation (IAS 21) The Group’s functional currency is the euro, which is the currency in which its financial state-ments are prepared and published. The companies of the Group prepare their financial statements in the currencies that are used in their respective countries. Transactions carried out in foreign currencies are initially recognized at the spot exchange rate on the date of the transaction. At the balance sheet date monetary assets and liabilities denominated in foreign currencies are translated at the spot exchange rate prevailing on that date. Non-monetary items measured at historical cost in a foreign currency are translated using the his-torical exchange rate prevailing on the date of the transaction. Non-monetary items measured at fair value are translated using the spot exchange rate at the date on which the measurements are determined for the financial statements.


The assets and liabilities of the companies within the Group whose functional currency is not the euro are valued using the following procedures: - assets and liabilities are translated using the spot exchange rate prevailing at the balance sheet

date; - costs and revenues are translated using the average exchange rate for the period; Exchange rate differences are recognized directly to a special reserve under shareholders’ equity. Should an investment in a foreign operation be sold, the accumulated exchange rate differences recognized in the equity reserve are reversed to the income statement. 3.v. Adoption of new accounting standards In financial year 2007 the Group adopted the following Principles, Interpretations and Updates to the standards already published: - IFRIC 7 – The application of the restatement method as required by IAS 29 in hyperinflationary economies; - IFRIC 8 – The scope of application of IFRS 2; - IFRIC 9 – The revaluation of embedded derivatives; - IFRIC 10 – Interim financial reporting and impairment; - IFRS 7 – Financial instruments: new disclosures; - IAS 1 – (Update) notes on capital. Moreover the Group did not opt for the early adoption of the following Principles, Interpretation and Updates: - IFRS 8 (Operating segments) - IFRIC 11 (Group and treasury share transactions – IFRS 2) - IFRIC 12 (Service concession arrangements) - IFRIC 13 (Customer loyalty programme) - IFRIC 14 (The limit on a Defined Benefit Asset, Minimum Funding Requirements and their Interaction) - IAS 23 (Borrowing costs) revised - IAS 1 Presentation of Financial Statements (revised) - IFRS 3 Business combinations (revised) - IAS 27 Consolidated and separate Financial Statements (revised) - IFRS 2 Share-based payment vesting conditions and cancellations (revised) which will become obligatory in following years. 3.w. Earnings per share (IAS 33) Basic earnings per share are determined by dividing the net income attributable to the ordinary shareholders of the Parent Company by the weighted average number of ordinary shares in circu-lation during the period. Diluted earnings per share are calculated by adjusting the weighted average number of ordinary shares in circulation to take into account the effect of all potential ordinary shares, resulting for example from the possibility of the exercise of stock options assigned, which can have a dilutive effect.


4. FINANCIAL INSTRUMENTS Financial instruments take on a particular significance in the economic and financial structure of the CIR Group; for this reason, in order to give a better and clearer understanding of the financial issues involved, it was considered useful to devote a special section to the accounting treatment of IAS 32 and IAS 39. According to IAS 32 financial instruments are classified in four categories:

a) Financial instruments that are valued at fair value with an offsetting entry in the income statement (“fair value through profit and loss” - FVTPL) in application of the fair value option, which are held for trading purposes;

b) Investments held to maturity (HTM); c) Loans and receivables (L&R); d) Available-for-sale financial assets (AFS).

Classification depends on Financial Management’s intended use of the financial instrument in the business context and each involves a different measurement for accounting purposes. Financial transactions are recognized on the basis of their value date. Financial instruments at fair value through profit and loss Instruments are classified as such if they satisfy one of the following conditions: - they are held for trading purposes; - they are a financial asset designated on adoption of the fair value option, the fair value of

which can be reliably determined. Trading generally means frequent buying and selling with the aim of generating profit on price movements in the short term. Derivatives are included in this category unless they are designated as hedging instruments. The initial designation of financial instruments, other than derivatives and those held for trading, as instruments at fair value through profit and loss in adoption of the fair value option is limited to those instruments that meet the following conditions:

a) The fair value option designation eliminates or significantly reduces an accounting mis-match;

b) A group of financial assets, financial liabilities, or both are managed and their perform-ance is evaluated on a fair value basis, in accordance with a documented investment risk management strategy, and

c) An instrument contains an implicit derivative which meets particular conditions. The designation of an individual instrument to this category is definitive, is made at the moment of initial recognition and cannot be modified. Investments held to maturity This category includes non-derivative instruments with fixed payments or payments that can be determined and that have a fixed maturity, and which it is intended and possible to hold until ma-turity. These instruments are measured at amortized cost and constitute an exception to the general prin-ciple of measurement at fair value. Amortized cost is determined by applying the effective interest rate of the financial instrument, taking into account any discounts or premiums received or paid at the moment of purchase, and recognizing them throughout the whole life of the instrument until its final maturity.


Amortized cost represents the initial recognition value of a financial instrument, net of any capital repayments and of any impairment, plus or minus the cumulated amount of the differences be-tween its initial net value and the nominal amount at maturity calculated using the effective inter-est rate method. The effective interest rate method is a calculation criterion used to assign financial expenses to their appropriate time period. The effective interest rate is the rate that gives a correct present value to expected future cash flows until maturity, so as to obtain the net present carrying value of the financial instrument. If even one single instrument belonging to this category is sold before maturity, for a significant amount and where there is no special justification for this, the tainting rule is applicable and re-quires that the whole portfolio of securities classified as Held To Maturity be reclassified and measured at fair value, and this category cannot then be used in the following two years. Loans and receivables This refers to financial instruments which are not derivatives, have payments that are either fixed or can be determined, which are not quoted on an active market and which are not intended to be traded. This category includes trade receivables (and payables), which are classified as current assets or liabilities with the exception of the part due in over 12 months from the balance sheet date. The measurement of these instruments is made by applying the method of amortized cost, using the effective interest rate and taking into account any discounts or premiums obtained or paid at the moment of acquisition and recognizing them throughout the whole life of the instrument until its final maturity. Available-for-sale financial assets This is a “residual” category which includes non-derivative financial instruments that are desig-nated as available for sale and are not included in any of the previous categories. Financial instruments held for trading are recognized at their fair value plus any transaction costs. Gains and losses are recognized to a special equity reserve until the financial instruments are sold or have been impaired. In such cases the profit or loss accrued under shareholders’ equity is re-leased to the income statement. Fair value is the amount for which an asset can be exchanged or a liability can be settled, between knowledgeable, willing parties in a transaction at arm’s length. In the case of securities listed on regulated markets, the fair value is the bid price at the close of trading on the last day of the accounting period. Where no market prices are available, fair value is determined either on the basis of the fair value of another financial instrument that is substantially similar or by using appropriate financial tech-niques (for example the discounted cash flow method). Investments in financial assets can be eliminated from the balance sheet, or derecognized, only when the contractual rights to receive their respective financial cash flows have expired or when the financial asset is transferred to third parties together with all its associated risks and rewards. 5. ACCOUNTING PRINCIPLES, CHANGES IN ACCOUNTING ESTIMATES AND ERRORS The criteria for making estimates and measurements are re-examined on a regular basis and are based on historical experience and on other factors such as expectations of possible future events that are reasonably likely to take place.


If the initial application of a principle affects the current year or the previous one, its effect is rec-ognized by indicating the change resulting from any transitional rules, the nature of the change, the description of the transitional rules, which may also affect future years, and the amount of any adjustments relating to years preceding those being presented. If a voluntary change of a principle affects the current or previous year this effect is shown by in-dicating the nature of the change, the reasons for the adoption of the new principle, and the amount of any adjustments made for years preceding those being presented. In the event of a new principle/interpretation issued but not yet in force, an indication is given of the fact, of its potential impact, the reason for the principle/interpretation, the date on which it will take effect and the date on which it will first be applied. A change in accounting estimates involves an indication of the nature and the impact of the change. Estimates are used mainly to show impairment of assets recorded, provisions made for risks, employees benefits, taxes and other provisions and reserves. Estimates and assumptions are reviewed regularly and the effects of any changes are reflected in the income statement. The treatment of accounting errors involves an indication of the nature of the error, the amount of the adjustments and corrections to be made at the beginning of the first accounting period after it was recognized. 6. NON-CURRENT ASSETS HELD FOR SALE (IFRS 5) A non-current asset is held for sale if its carrying value will be recovered principally through a sale rather than through use. For this condition to be satisfied the asset must be immediately sella-ble in its present condition and the sale must be considered as highly likely. The assets or groups of assets for disposal that are classified as held for sale are valued at the lower of their carrying value and fair value less costs to sell. Individual assets or assets belonging to a group classified as held for sale are not amortized. The above assets are shown in the financial statements in a single item of the income statement giving the profits and losses net of taxes resulting from the sale. Similarly the assets and liabilities must be shown on a separate line of the Balance Sheet.

NOTES ON THE BALANCE SHEET

7. NON-CURRENT ASSETS

7.a. INTANGIBLE ASSETS

2006Historical Accum. amort. Net balance Acquisitions

cost and write-downs 31.12.2005(in thousands of euro) increases decreasesStart-up and expansion costs 3,199 (3,168) 31 -- -- -- Capitalized development costs - purchased -- -- -- -- -- -- - produced internally 34,805 (18,934) 15,871 6,469 -- -- Industrial patents andintellectual property rights 21,794 (18,869) 2,925 418 -- -- Concessions, licenses, trademarks & similar rights 52,807 (40,579) 12,228 4,104 70 (9)Titles and trademarks 400,245 -- 400,245 -- -- -- Frequencies 195,961 -- 195,961 5,025 -- -- Goodwill 284,067 (52,572) 231,495 34,540 39,501 (451)Assets under construction and advance payments - purchased 2,135 -- 2,135 4,783 -- -- - produced internally 1,519 -- 1,519 235 -- -- Others 10,303 (8,277) 2,026 1,625 -- 34 Total 1,006,835 (142,399) 864,436 57,199 39,571 (426)

2007Historical Accum. amort. Balance Acquisitions

cost and write-downs 31.12.2006(in thousands of euro) increases decreasesStart-up and expansion costs 38 (27) 11 -- 6 -- Capitalized development costs - purchased -- -- -- -- -- -- - produced internally 44,743 (26,932) 17,811 7,283 -- -- Industrial patents andintellectual property rights 19,916 (18,071) 1,845 1,812 7 -- Concessions, licenses, trademarks & similar rights 57,110 (45,490) 11,620 3,552 1,485 Titles and trademarks 400,245 -- 400,245 -- -- -- Frequencies 200,572 -- 200,572 11,026 -- -- Goodwill 359,739 (54,596) 305,143 287,382 -- Assets under construction and advance payments - purchased 4,872 -- 4,872 5,312 82 (755) - produced internally 1,702 -- 1,702 1,275 755 -- Others 15,129 (7,941) 7,188 1,227 -- Total 1,104,066 (153,057) 951,009 318,869 2,335 (755)

Combinations

Changes in the periodOpening position

Combinationssales of businesses

sales of businesses

Opening position Changes in the period

Intangible assets rose from € 951,009 thousand at December 31 2006 to € 1,250,196 thousand at December31 2007.The item Goodwill increased during the year mainly as a result of the consolidation difference generated onthe initial consolidation of Société Française d'Eoliennes (SFE), the company acquired in December 2007by Sorgenia S.p.A.

Exchange Other Net Amort. and Historical Accum. amort. Balancerate changes disposals write-downs cost and write-downs 31.12.2006

differences cost-- (16) -- (4) 38 (27) 11

-- -- -- -- -- -- -- (144) 1,145 (22) (5,508) 44,743 (26,932) 17,811

(2) 85 (1) (1,580) 19,916 (18,071) 1,845 (49) 1,097 (337) (5,484) 57,110 (45,490) 11,620

-- -- -- -- 400,245 -- 400,245 -- -- (414) -- 200,572 -- 200,572 1 57 -- -- 359,739 (54,596) 305,143

(70) (1,976) -- -- 4,872 -- 4,872 (19) -- (33) -- 1,702 -- 1,702 (44) 3,970 -- (423) 15,129 (7,941) 7,188

(327) 4,362 (807) (12,999) 1,104,066 (153,057) 951,009

Exchange Other Net Amort. and Historical Accum. amort. Balancerate changes disposals write-downs cost and write-downs 31.12.2007

differences cost-- (1) -- (10) 75 (69) 6

-- -- -- -- -- -- -- 95 2,700 (123) (6,531) 53,907 (32,672) 21,235

(8) 988 -- (2,077) 21,754 (19,187) 2,567 (28) 1,088 (391) (6,576) 61,155 (50,405) 10,750

-- -- -- -- 400,245 -- 400,245 -- 100 (78) -- 211,620 -- 211,620 -- (7) -- -- 647,170 (54,652) 592,518

(32) (4,137) -- (307) 5,035 -- 5,035 (44) (1,577) -- -- 2,111 -- 2,111 (23) 3,559 (3,440) (4,402) 11,507 (7,398) 4,109 (40) 2,713 (4,032) (19,903) 1,414,579 (164,383) 1,250,196

Changes in the period

Closing positionChanges in the period

Closing position


AMORTIZATION RATES Description % Capitalized development costs 20-33% Industrial patents and intellectual property rights 4-20% Concessions, licenses, trademarks and similar rights 16-30% Other intangible assets 16-30% A more detailed analysis of the main items making up the item intangible assets is given in the following charts. Titles and Trademarks: (in thousands of euro) 31.12.2007 31.12.2006

la Repubblica 229,952 229,952 Il Piccolo / Messaggero Veneto 104,527 104,527 Local newspapers 61,222 61,222 Other titles and trademarks 4,544 4,544 Total 400,245 400,245

Frequencies: (in thousands of euro) 31.12.2007 31.12.2006

Radio frequencies 74,301 63,491 Television frequencies 137,319 137,081 Total 211,620 200,572

Goodwill: (in thousands of euro) 31.12.2007 31.12.2006

Gruppo Editoriale L’Espresso S.p.A. 137,779 116,307 Sogefi S.p.A. 91,293 91,293 Energia Holding S.p.A. 252,934 23,602 Holding Sanità e Servizi S.p.A. 110,512 73,941 Total 592,518 305,143

For the purposes of carrying out the Impairment test on goodwill, the estimate of the value recov-erable for each cash generating unit, as defined by IAS 38, was carried out on the basis of the value in use calculated by discounting to net present value, at an appropriate discount rate, the fu-ture cash flows generated by the unit in its productive phase and at the moment of its disposal (discounted cash flow method). The cash flows of the single operating units were extrapolated from the budgets and forecasts made by management. These plans were then processed on the basis of economic trends recorded in previous years and using the forecasts made by leading analysts on the outlook for the respec-tive markets and more in general on the evolution of each business sector. In order to determine the discount rate to use, an estimate was made of the weighted average cost of capital invested (WACC) net of inflation, gross of taxes and independently of the financial structure of the individual company/subgroup. The impairment tests carried out using the cash flow method and other methods of valuation showed that there had been no losses of value.


It should also be noted that the impairment test carried out on publication titles and radio and te-levision frequencies, considered as assets with an indefinite useful life, ascertained that there were no losses in value to be recorded in the balance sheet. For estimating the recoverable value of each asset the higher of fair value less costs to sell and value in use was used. Calculating the value in use of Cash Generating Units To determine the value in use of Cash Generating Units, future financial cash inflows and out-flows generated by the unit in its productive phase and at the moment of its final disposal were discounted to present value using an appropriate discount rate. In other words, value in use was calculated by applying the unlevered (or asset side) variation of the Discounted Cash Flow model, with the formula that includes discounting the expected flows analytically within the time horizon of forecast projection (2008-2012) and determining terminal value. To estimate the value in use of a Cash Generating Unit correctly, it is necessary to assess the size of the expected cash flows of the unit; expectations regarding possible variations in the amount and timing of the flows; the discount rate to be used; any risk factors caused by the conditions under which the investment in that unit was made. Regarding the characteristics of the flows to be discounted, international accounting standards re-quire explicitly that, for the purposes of checking value, no account should be taken of inflows and outflows generated by financing activities, or relating to income tax receipts or payments. The flows to be discounted are, therefore, operating cash flow, unlevered and differential (be-cause they refer to the single unit). As the discount rate, the average cost of invested capital (wacc) of the Espresso group, 8.8%, was used. The calculation of fair value less costs to sell of Cash Generating Units IAS 36 states that the fair value less costs to sell of an asset or a group of assets (e.g. a Cash Gen-erating Unit) is best expressed in the price “made” in a binding sale agreement between inde-pendent parties, net of any direct disposal costs. If this is not evident, the fair value net of costs to sell can be determined in relation to the following trading prices, in order of importance: the cur-rent price traded in an active market; the previous price for a similar transaction; the estimated price based on information obtained from the company. In this particular instance, fair value less costs to sell was determined following a different meth-odological approach for the two business sectors. For the publishing business, for which there is no actively traded market, reference was made to direct valuation multipliers, while for the TV and radio business a price/users type multiple was used, observing the trading prices of similar frequencies based on the amount of population potentially reachable by the signal. In order to determine the possible “price” of the publishing Cash Generating Unit, entity-side multiples were used in the trailing version (or historical/point multiples) or in the leading version (expected/average multiples). The estimation of fair value less costs to sell of the radio and television operating units was car-ried out starting from the observation of trading prices of frequencies similar to those under ex-amination in relation to the population potentially reachable by the signal. This valuation ap-proach makes it possible to estimate the fair value of radio and TV frequencies considering the ratio of the price that the market is prepared to pay to purchase the frequency to the number of inhabitants that the signal can reach.

2006Historical Accum. deprec. Net balance Acquisitions

cost & write-downs 31.12.2005(in thousands of euro) increases decreases Land 26,533 (152) 26,381 1,206 2,775 -- Buildings used for business 202,408 (89,028) 113,380 2,240 43,785 -- Plant and machinery 917,526 (613,797) 303,729 24,290 14,098 (82)Power plants 5,928 (949) 4,979 255 501 -- Industrial & commercial equipment 100,800 (84,094) 16,706 5,723 2,309 (249)Other assets 153,349 (111,494) 41,855 15,189 16,422 (195)Assets under construction & advance payments 390,942 -- 390,942 149,369 2,517 -- Total 1,797,486 (899,514) 897,972 198,272 82,407 (526)

2007Historical Accum. deprec. Balance Acquisitions

cost & write-downs 31.12.2006(in thousands of euro) increases decreases Land 30,306 (142) 30,164 2,950 2,466 -- Buildings used for business 276,868 (93,958) 182,910 8,888 33,187 -- Plant and machinery 975,864 (664,664) 311,200 23,774 3,733 Power plants 345,161 (4,730) 340,431 20,662 101,330 -- Industrial & commercial equipment 103,120 (82,611) 20,509 3,950 667 -- Other assets 190,782 (129,711) 61,071 18,236 967 -- Assets under construction & advance payments 145,230 (485) 144,745 274,182 14,033 (671)Total 2,067,331 (976,301) 1,091,030 352,642 156,383 (671)

DEPRECIATION RATES

Description %

Buildings used for business 3.00%Plant and machinery 10-25%

Other assets:

- Electronic office equipment 20%- Furniture and fittings 12%- Motor vehicles 25%

sales of businesses

Opening position Changes during the year

7.b. TANGIBLE ASSETS

Opening positionCombinations

sales of businesses

Changes during the year

Combinations

Capitalized Exchange Other Net Depreciation Historical Accum. deprec. Balancefinancial rate changes disposals & write-downs cost & write-downs 31.12.2006expense differences cost

-- (60) 77 (215) -- 30,306 (142) 30,164 1,500 42 30,149 (712) (7,474) 276,868 (93,958) 182,910

609 (2,662) 30,360 (1,101) (58,041) 975,864 (664,664) 311,200 16,292 -- 322,185 -- (3,781) 345,161 (4,730) 340,431

98 (55) 4,281 (1,002) (7,302) 103,120 (82,611) 20,509 -- (420) 1,975 (791) (12,964) 190,782 (129,711) 61,071 -- (255) (397,346) (482) -- 145,230 (485) 144,745

18,499 (3,410) (8,319) (4,303) (89,562) 2,067,331 (976,301) 1,091,030


-- 27 (4,750) (1,789) -- 29,068 -- 29,068 -- (782) 16,372 (19,292) (9,582) 303,662 (91,961) 211,701 -- (2,498) 13,907 (2,579) (54,672) 985,289 (692,424) 292,865 -- -- 17,074 (76) (14,440) 492,775 (27,794) 464,981 -- (237) 151 (285) (5,811) 101,370 (82,426) 18,944 -- (467) 8,158 (266) (17,079) 219,791 (149,171) 70,620

6,543 (274) (52,990) (427) -- 385,245 (104) 385,141 6,543 (4,231) (2,078) (24,714) (101,584) 2,517,200 (1,043,880) 1,473,320

Closing positionChanges during the year

Closing positionChanges during the year


cost & write-downs 31.12.2005(in thousands of euro) increases decreases Properties 7,050 (106) 6,944 3,119 -- -- Total 7,050 (106) 6,944 3,119 -- --


cost & write-downs 31.12.2006(in thousands of euro) increases decreases Properties 18,087 (483) 17,604 974 -- -- Total 18,087 (483) 17,604 974 -- --

DEPRECIATION RATES

Description %

Buildings 3.00%

Combinationssales of businesses

Opening position Changes during the year

7.c. REAL ESTATE INVESTMENTS

Opening position

sales of businesses

Changes during the yearCombinations

Real-estate investments rose from € 17,604 thousand at December 31 2006 to € 19,259 thousand atDecember 31 2007. The increases during the year were mainly the completion of renovation workon a property in the centre of Milan, which is recorded in the balance sheet at a value that issubstantially its market value. The item "Other changes" refers to the reclassification of the land on which the buildings stated inthis item are built from "Land" under "Tangible assets" to this item.


-- -- 7,918 -- (377) 18,087 (483) 17,604 -- -- 7,918 -- (377) 18,087 (483) 17,604


-- -- 1,238 -- (557) 20,299 (1,040) 19,259 -- -- 1,238 -- (557) 20,299 (1,040) 19,259

Changes during the year Closing position

Changes during the year Closing position


LEASING The position of assets under leasing as of December 31 2007 and of restrictions applied to tangi-ble assets on account of guarantees and commitments is as follows: (in thousands of euro) Gross leasing amount Accrued depreciation Restrictions for

guarantees and commitments 2007 2006 2007 2006 2007 2006 Land 2,513 3,556 -- -- 1,039 1,851

Buildings 34,715 54,403 4,593 4,340 6,707 36,573

Plant and machinery 56,792 32,382 12,792 12,999 211,650 569,392

Other assets 4,208 2,937 1,227 804 273 4,910

Assets under construction & advance payments -- -- -- -- 299,779 --

The significant reduction in “Restrictions for guarantees and commitments” under the item “Plant and machinery” refers to the repayment of collateralized loans by Energia Molise S.p.A.. The increase in “Restrictions for guarantees and commitments” under the item “Assets under construction and advance payments” refers to collateralized loans made to Energia Modugno S.p.A.. 7.d. INVESTMENTS IN COMPANIES VALUED AT EQUITY (in thousands of euro)

2006 % Balance Increases Decreases Dividends Portion of net result Other Balance 31.12.2005 Loss Income changes 31.12.2006 Aire/Tirreno Power 50.00 193,745 -- -- (39,960) -- 33,018 252 187,055

Le Scienze S.p.A. 50.00 348 -- (285) -- -- 129 -- 192

Saire S.r.l. 50.00 363 -- -- -- -- 16 -- 379

Editoriale La Libertà S.p.A. 35.00 22,543 -- (875) -- -- 1,072 -- 22,740

Editoriale Corriere di Romagna S.r.l. 49.00 -- 2,940 -- -- -- 41 -- 2,981

Altrimedia S.p.A. 35.00 671 -- (105) -- -- 149 -- 715

Allevard Ressorts Composites S.A. 50.00 372 -- -- -- (271) -- -- 101

KS Automotive Suspensions Asia Private Ltd -- 3,000 -- (3,000) -- -- -- -- --

Total 221,042 2,940 (4,265) (39,960) (271) 34,425 252 214,163 (in thousands of euro)

2007 % Balance Increases Decreases Dividends Portion of net result Other Balance 31.12.2006 Loss Income changes 31.12.2007 Aire/Tirreno Power 50.00 187,055 -- -- -- -- 51,315 11,124 249,494

Le Scienze S.p.A. 50.00 192 -- -- (128) -- 133 -- 197

Saire S.r.l. 50.00 379 -- -- -- -- -- (379) --

Editoriale La Libertà S.p.A. 35.00 22,740 -- -- (700) -- 805 -- 22,845

Editoriale Corriere di Romagna S.r.l. 49.00 2,981 -- -- -- -- 94 -- 3,075

Altrimedia S.p.A. 35.00 715 -- -- (140) -- 174 -- 749

Allevard Ressorts Composites S.A. 50.00 101 -- -- -- -- -- -- 101

Oakwood Global Finance S.C.A. 47.52 -- 8,593 -- -- (8,593) -- -- --

Resource Energy B.V. 47.50 -- 1,497 -- -- (907) -- -- 590

GICA S.A. 25.00 -- 525 -- -- (31) -- -- 494

Fingas S.r.l. 50.00 -- 2,916 -- -- (86) -- -- 2,830

Epense 25.00 -- 179 -- -- -- -- -- 179

Total 214,163 13,710 -- (968) (9,617) 52,521 10,745 280,554


7.e. OTHER INVESTMENTS (in thousands of euro) % 31.12.2007 31.12.2006

Sanatrix S.r.l. 26.40 5,105 --

Ansa S. Coop. A.R.L. 17.32 2,209 2,209

E-Ink Corporation 0.05 1,481 1,481

Tecnoparco Valbasento 20.00 516 516

Fidia S.r.l. 50.00 402 --

Emittenti Titoli S.p.A. 5.44 132 132

Dumenil Leblé Belgium (in liquidation) -- -- 298

Others -- 2,040 3,894

Total 11,885 8,530

The values recorded in the balance sheet correspond to cost, less any impairment, if applicable, and are considered to be substantially equivalent to the fair value of the same investments. 7.f. OTHER RECEIVABLES The item “Other receivables” at December 31 2007 had a balance of € 251,493 thousand com-pared to € 250,991 thousand at December 31 2006 and refers for € 42,499 thousand (€ 169,905 thousand at December 31 2006) to the long-term loan made by Energia Italiana to Tirreno Power at market conditions to finance its development plan, for € 69,115 thousand to the subscription of Preferred Equity Certificates (PECS) by CIR International S.A. and CIR Investment Affiliate S.A. in the company Oakwood Financial Investments (a jointly controlled entity) which have a return of 8%. The original investment, inclusive of the interest accrued during the year, of € 131,111 thousand was written down for an amount of € 61,996 thousand due to the crisis in the UK subprime mortgage sector in which the Oakwood group mainly operates. At December 31 2007 this item also included € 85,768 thousand of receivables (unsecured and mortgage-based) of the securitization company Zeus Finance S.r.l., € 16,138 thousand (€ 48,967 thousand at December 31 2006) of tax receivables from Inland Revenue for IVA rebates applied for by the Sorgenia group. The decrease from the previous year was due to the rebate received by Energia Molise S.p.A.. It should be noted that this item includes € 17,347 thousand of security deposits paid to suppliers of the Sorgenia group for the purchase of CIP 6 energy (€ 6 million) and for the purchase of wind turbines € 9.5 million). 7.g. SECURITIES “Securities” amounted to € 96,534 thousand at December 31 2007 down from € 98,583 thousand at December 31 2006 and refer mainly to investments in private equity funds. These funds were measured at fair value recognizing to the fair value reserve an amount of € 20,934 thousand (€ 20,352 thousand at December 31 2006). During the year the part of the fair value reserve relat-ing to these funds released to the income statement was € 9,804 thousand. At December 31 2007 the remaining commitment for investment in private equity funds stood at € 46 million.


7.h. DEFERRED TAXES The amounts refer to taxes resulting from deductible temporary differences and from losses car-ried forward, which are deemed to be recoverable. The breakdown of “Deferred tax assets and liabilities” by type of temporary difference, is as fol-lows: (in thousands of euro) 2007 2006

Amount of temporary

differences Tax

effect

Amount of temporary

differences Tax

effect

Temporary difference liabilities from: - write-down of current assets 54,714 15,966 46,286 16,257 - write-down of fixed assets 48,785 15,247 40,816 14,096 - revaluation of current liabilities 9,377 2,963 8,545 2,734 - revaluation of personnel provisions 39,803 12,158 38,484 12,676 - revaluation of provisions for risks and losses 55,061 15,748 41,041 13,366 - revaluation of long-term debt 22 6 -- -- - write-down of financial instruments 7,428 2,070 10,810 3,644 - tax losses from prior periods 103,981 28,872 143,379 47,853 Total deferred tax assets 319,171 93,030 329,361 110,626

Temporary difference assets from: - revaluation of current assets 3,992 1,085 4,626 1,499 - revaluation of fixed assets 405,267 127,755 356,276 128,871 - write-down of current liabilities 6,968 2,419 4,704 1,513 - valuation of personnel provisions 21,297 5,872 7,558 2,504 - write-down of provisions for risks and losses 3,620 1,166 2,391 806 - revaluation of financial instruments 5,076 1,591 6,905 2,550 Total deferred tax liabilities 446,220 139,888 382,460 137,743

Net deferred taxes (46,858) (27,117)

Law no. 244 of December 24 2007 (Budget 2008) reduced from January 1 2008 IRES and IRAP tax rates: IRES was reduced from 33% to 27.5% and IRAP was reduced from 4.25% to 3.9%. Following these reductions, in accordance with international accounting standards, the deferred tax assets and liabilities already present in these accounts were adjusted to the new rates. The ef-fect of this adjustment is commented on in paragraph “15. – Income taxes”. The deferred taxes debited directly to shareholders’ equity during the period amounted to € 149 thousand. Earlier losses not utilized for the calculation of deferred taxes refer to the Espresso group for € 17.4 million, € 11.3 million of which can be carried forward indefinitely, the company CIR In-ternational for € 430.3 million, all of which can be carried forward indefinitely, the Sogefi group for € 9.2 million and the HSS group for € 0.2 million. It should be pointed out that no deferred tax assets were calculated for these losses because at present conditions are such that there is no certainty that they can be recovered.


8. CURRENT ASSETS 8.a. INVENTORIES Inventories can be broken down as follows: (in thousands of euro) 31.12.2007 31.12.2006

Raw materials, secondary materials and consumables 74,866 76,973

Work in progress and semi-finished goods 14,287 13,033

Finished goods and merchandise 114,775 127,043

Advance payments 39 33

Total 203,967 217,082

The value of stocks is shown net of any write-down made either in past periods or in this current one and take into account the degree of obsolescence of finished goods, merchandise and secon-dary materials. 8.b. TRADE RECEIVABLES (in thousands of euro) 31.12.2007 31.12.2006

Receivables - clients 1,066,869 988,534

Receivables – subsidiaries and joint ventures 2,644 6,914

Receivables – associated companies 760 1,029

Total 1,070,273 996,477

“Receivables - clients” are non-interest bearing and have an average maturity in line with market conditions. The net increase is mainly due to the increase in revenues. Trade receivables are shown net of any write-downs taking credit risk into account. During 2007 provisions were made to the reserve for the write-down of receivables for the sum of € 15,964 thousand compared with € 10,515 thousand in 2006. “Receivables – subsidiaries and joint ventures” represent intercompany receivables not elimi-nated because they refer to companies not fully consolidated line-by-line. The balance at Decem-ber 31 2007 refers mainly to receivables from Tirreno Power S.p.A.. 8.c. OTHER RECEIVABLES (in thousands of euro) 31.12.2007 31.12.2006

Receivables – associated companies 715 --

Tax receivables 148,123 163,862

Receivables - others 57,603 110,130

Total 206,441 273,992


The decrease in the item “Receivables - others” refers to the receivables at December 31 2006 of Jupiter Finance S.p.A. for € 43.5 million from the securitization company Zeus Finance S.r.l., which was not consolidated last year, and which were repaid during the year. 8.d. FINANCIAL RECEIVABLES “Financial receivables” rose from € 21,354 thousand at December 31 2006 to € 37,171 thousand at December 31 2007 and refer mainly for € 16,975 thousand to the accrued interest for the period on the swap relating to the CIR International S.A. Note maturing 2009 and for € 14,169 thousand to the fair value measurement by the Sorgenia group of differential contracts settling CIP6 tariffs for the 2008 assignations, which is offset for the same amount in 11.a “Other financial payables”. 8.e. SECURITIES This item consists of the following categories of securities: (in thousands of euro) 31.12.2007 31.12.2006

Italian Government securities or equivalent securities 4,012 25,208

Investments funds or similar funds 16,057 248,578

Bonds and Notes 42,275 49,947

Certificates of deposit and miscellaneous securities 213,553 330,515

Total 275,897 654,248

The measurement at fair value of the item “Securities” involved a negative adjustment to the in-come statement of € 6.2 million. 8.f. AVAILABLE-FOR-SALE FINANCIAL ASSETS This item refers in its entirety to shares in hedge funds and redeemable shares in asset manage-ment companies held by Medinvest which collects excess liquidity that the Group has available on a regular basis. The degree of liquidity of the investment is a function of the time required for the redemption of the funds in which Medinvest invests, which normally varies from one to three months. Diversification between categories of funds give the performance of Medinvest a low level of volatility. Assigning a fair value to the funds held by Medinvest meant making an adjustment to the value of these funds of € 153,310 thousand (€ 146,075 thousand at December 31 2006). The effects of this valuation on CIR’s shareholders’ equity for the amount pertaining to the Group came to € 133,410 thousand (€ 127,115 thousand at December 31 2006). The amount of fair value cred-ited to the income statement after the sale of some of the funds came to € 4,032 thousand. To cover the exchange rate risk resulting from the translation of the part of the equity of Medin-vest denominated in USD into the functional currency of the Group, hedging contracts were en-tered into, the effects of which are indicated under item 9.b. “Reserves” in the breakdown of the ”Translation reserve”.


8.g. CASH AND CASH EQUIVALENTS Cash and cash equivalents rose from € 446,484 thousand at December 31 2006 to € 694,127 thousand at December 31 2007. A breakdown of the change during the period is given in the cash flow statement. 9. SHAREHOLDERS’ EQUITY 9.a. SHARE CAPITAL Share capital rose from € 390,239,533.50 at December 31 2006 (comprising 780,479,067 shares each with a nominal value of € 0.50) to € 395,465,333.50 (790,930,667 shares) at December 31 2007 as a result of the issuance of 10,451,600 shares following the exercise of options by the beneficiaries of stock option plans outstanding. At December 31 2007 the Company was holding 39,644,000 of its own shares (5.01% of capital) for a total value of € 92,187 thousand, up from 34,094,000 shares for a value of € 76,862 thou-sand at December 31 2006. In application of IAS 32, as from January 1 2005 the treasury stock held by the Parent Company is being deducted from shareholders’ equity. The share capital is fully subscribed and paid up. No shares carry any rights, privileges or restric-tions on the distribution of dividends, except for the own shares held a treasury stock. It should be pointed out that Board of Directors was given the power for a period of five years starting from April 27 2005 to increase the share capital either in one or several tranches up to a maximum of € 500 million (nominal value) and for a further maximum of € 20 million (nominal value) in favour of employees of the Company and its subsidiaries and parent companies. Regarding stock option plans, at December 31 2007 there were 30,959,000 options in circulation, corresponding to the same number of shares. The total notional cost of the stock options assigned to employees, which was posted to a special equity reserve, totalled € 1,929 thousand at December 31 2007.


9.b. RESERVES The evolution and breakdown of the item “Reserves” is given below:

(in thousands of euro) Share Legal Fair value Translation Stock option Other Total premium reserve reserve reserve reserve reserves reserves reserve

Balance at December 31 2005 6,419 115,969 130,950 7,785 7,652 133,019 401,794

Capital increases 1,076 -- -- -- -- -- 1,076 Cancellation of AGM resolution of April 27 2005 to buy back own shares 16,422 -- -- -- -- (71,238) (54,816)

Fair value measurement of hedging instruments -- -- 478 -- -- -- 478

Fair value measurement of securities -- -- 33,075 -- -- -- 33,075

Securities fair value reserve recognized to income statement -- -- (16,893) -- -- -- (16,893)

Adjustment for own share transactions -- -- -- -- -- (5,664) (5,664)

Recognition of notional cost of stock options -- -- -- -- 2,213 -- 2,213

Effects of equity changes in subsidiaries -- -- -- -- -- 20,751 20,751

Currency translation differences -- -- -- (14,235) -- -- (14,235)

Balance at December 31 2006 23,917 115,969 147,610 (6,450) 9,865 76,868 367,779

Capital increases 9,442 -- -- -- -- -- 9,442

Dividends unclaimed as per Art. 23 of the Bylaws -- -- -- -- -- 55 55

Fair value measurement of hedging instruments -- -- 372 -- -- -- 372

Fair value measurement of securities -- -- 34,195 -- -- -- 34,195

Securities fair value reserve recognized to income statement -- -- (13,836) -- -- -- (13,836)

Adjustment for own share transactions -- -- -- -- -- (74) (74)

Recognition of notional cost of stock options -- -- -- -- 1,929 -- 1,929

Effects of equity changes in subsidiaries -- -- -- -- -- 17,591 17,591

Currency translation differences -- -- (13,481) (10,811) -- -- (24,292)

Balance at December 31 2007 33,359 115,969 154,860 (17,261) 11,794 94,440 393,161

The “Share premium reserve” totalled € 33,359 thousand at December 31 2007, up from € 23,917 thousand at December 31 2006. The change was due to the subscription of stock option plans for € 9,442 thousand. The “Fair value reserve” stood at € 154,860 thousand at December 31 2007 and referred for € 20,934 thousand to the valuation of “Securities” in item 7.g., for € 133,411 thousand to the valuation of “Available-for-sale financial assets” in item 8.f. and for € 515 thousand to the valua-tion of hedging instruments.


The “Translation reserve” had a negative balance of € 17,261 thousand at December 31 2007 with the following breakdown:

(in thousands of euro) 31.12.2006 Increases Decreases 31.12.2007

Sogefi group 4,976 -- (1,762) 3,214

CIR Ventures (2,214) -- (1,363) (3,577)

Medinvest 2,777 -- (34,407) (31,630)

Medinvest hedging effect (12,081) 26,900 -- 14,819

Sorgenia -- -- (179) (179)

Others 92 -- -- 92

Total (6,450) 26,900 (37,711) (17,261)

The item “Other reserves” had the following breakdown at December 31 2007: (in thousands of euro)

Reserve for capital increases 3

Extraordinary reserve 76

Reserve as per Art. 6 of D.Lgs no. 38 of 28/02/2005 (74) Reserve for the difference between the carrying values of investee companies and the respective portions of consolidated shareholders’ equity 94,435 Total 94,440

The changes in treasury stock during the year were as follows: (in thousands of euro) Number of shares Value

Balance at December 31 2006 34,094.000 76,862

Increases 5,850.000 16,022

Decreases (300,000) (697)

Balance at December 31 2007 39,644,000 92,187

The decrease was due to the execution of stock option plans during the year. 9.c. RETAINED EARNINGS (LOSSES) The changes in Retained earnings (losses) are shown in the “Statement of Changes in Sharehold-ers’ Equity”.


10. NON-CURRENT LIABILITIES 10.a. BONDS AND NOTES The detail of the item “Bonds and Notes”, net of intercompany elimination, is as follows: (in thousands of euro) Effective rate 31.12.2007 31.12.2006

CIR S.p.A. 5.75% Note 2004/2024 5.90% 266,548 266,382

CIR International S.A. 6.375% Note 2003/2011 6.03% 198,175 198,677

CIR International S.A. 5.25% Note 1999/2009 5.41% 413,232 414,192

Gruppo Editoriale L’Espresso S.p.A. 5.125% Note 2004/2014 4.82% 307,875 308,499

Société Française d’Eoliennes (SFE) 6.5% Note 2006/2016 6.50% 3,842 --

Total 1,189,672 1,187,750

In application of IAS 32 and 39, at January 1 2005 the original values of bond and note issues were written down to account for expenses incurred and bond issuance discounts. Liabilities re-lating to fixed/floating interest rate swaps entered into to hedge the CIR International S.A. 5.25% Note 1999/2009 were also recognized for an amount of € 4.9 million. At December 31 2007 CIR International was holding a nominal € 30,000 thousand (unchanged from December 31 2006) of the CIR 5.75% Note issue 2004/2024. 10.b. OTHER BORROWINGS (in thousands of euro) 31.12.2007 31.12.2006

Collateralized bank loans 148,874 170,304

Other bank loans 1,055,474 558,140

Leasing 67,836 16,305

Other borrowings 8,986 13,765

Total 1,281,170 758,514

The item “Other bank loans” consists mainly of the following: - € 59,000 thousand made in 2003 to Energia Italiana by Banca Monte dei Paschi di Siena at a floating rate, maturing in 2010, and with a current interest rate of 5.15%; - € 149,500 thousand made to Sorgenia by Banca Intesa SanPaolo at a floating rate, maturing in 2012, and with a current interest rate of 5.27%; - € 50,000 thousand made to Sorgenia by Banca Intesa SanPaolo at a floating rate, maturing in 2011, and with a current interest rate of 5.28%; - € 280,000 thousand made to Sorgenia by Banca Monte dei Paschi di Siena at a floating rate, ma-turing in 2012, with a current interest rate 4.93%; - € 153,972 thousand made to Energia Modugno S.p.A. by Banca Monte dei Paschi di Siena at a floating rate, maturing in 2014, and with a current interest rate of 5.98%; - € 216,000 thousand made to Energia Molise S.p.A. by Banca Monte dei Paschi di Siena at a floating rate, maturing in 2013, and with a current interest rate of 5.37%;


- € 49,888 thousand, as partial drawdown of a loan facility of € 50,000 thousand, obtained by So-gefi S.p.A. maturing in September 2012, at a floating rate, and with a current interest rate of 5.14%; - € 49,757 thousand, as partial drawdown of a loan facility of € 100,000 thousand, obtained by Sogefi S.p.A. maturing in 2012, at a floating rate, and with a current interest rate of 5.10%. 10.c. PERSONNEL PROVISIONS The detail of this item is the following: (in thousands of euro) 31.12.2007 31.12.2006

Employee severance and leaving indemnity (TFR) 118,359 126,794

Retirement funds and similar obligations 40,919 39,805

Total 159,278 166,554

(in thousands of euro) 31.12.2007 31.12.2006

Opening balance 166,554 163,671

Provisions made for work done during the period 18,955 18,924

Increases for interest 5,966 5,416

Actuarial income or expense (2,975) (781)

Benefits paid out (36,721) (25,734)

Increases or decreases due to changes in consolidation area 11,038 5,018

Other changes (3,539) 40

Closing balance 159,278 166,554

As was already indicated in the Accounting Principles, following the changes made to the “Em-ployee severance and leaving indemnity” by Law no. 296 of December 27 2006, and subsequent Decrees and Regulations issued in the early months of 2007, the amounts accrued as from Janu-ary 1 2007 and channelled into both complementary pension plans and the Treasury’s Fund with INPS are considered as “defined contribution plans”. These sums are not, therefore, subject to ac-tuarial valuation and are no longer paid into the Employee severance and leaving fund (TFR pro-vision). The “TFR” accrued until December 31 2006 remains a “defined benefit plan” with the conse-quent need for actuarial calculations, which will however no longer take into account any future salary increases. The application of the new rules involved recognizing a positive change to the Income Statement of € 13,711 thousand, net of actuarial losses not recorded previously. TFR and Defined Benefit Provision

Annual technical discount rate 4.0% - 4.25%

Annual inflation rate 2%

Annual rate of pay increases 2% - 3%

Annual rate of TFR increase 3%

Annual probability of making advance payouts 4%

Voluntary resignation rate 2% - 5% of staff


Pension Funds

Annual technical discount rate for calculating present value 4.8%

Annual inflation rate 2.8%

Annual rate of pay increases 3.25% - 4%

Return on assets servicing the plan 3.25% - 6%

Retirement age 63

STOCK OPTION PLANS OUTSTANDING AT DECEMBER 31 2007 The following chart shows the stock option plans of the Parent Company CIR S.p.A..

Options in circulation

at start of year Options awarded during the year

Options exercised during the year

Options in circulation at close of year

Options exercisable at close of year

No. of options

Weighted average

strike price

No. of options

Weighted average

strike price

No. of options

Weighted average

strike price

No. of options

Average strike price

Average duration (years)

No. of options

Weighted average

strike price

Stock Option Plan March 7 2000 3,110,000 3.70 -- -- -- -- 3.110.000 3,70 2,75 3,110,000 3.70

Stock Option Plan September 13 2000 70,000 4.06 -- -- -- -- 70.000 4,06 3,25 70,000 4.06

Stock Option Plan January 30 2001 1,743,000 2.62 -- -- -- -- 1,743,000 2.62 3.75 1,743,000 2.62

Stock Option Plan September 7 2001 2,258,800 1.28 -- -- 2,032,000 1.28 226,800 1.28 4.00 226,800 1.28

Stock Option Plan March 14 2002 508,300 1.20 -- -- 450,200 1.20 58,100 1.20 4.75 58,100 1.20

Stock Option Plan September 13 2002 687,100 1.02 -- -- 617,600 1.02 69,500 1.02 5.17 69,500 1.02

Stock Option Plan March 7 2003 705,300 0.84 -- -- 640,100 0.84 65,200 0.84 5.75 65,200 0.84

Stock Option Plan September 5 2003 1,254,800 1.13 -- -- 1,101,500 1.13 153,300 1.13 6.17 153,300 1.13

Stock Option Plan March 12 2004 1,940,400 1.60 -- -- 1,448,100 1.60 492,300 1.60 6.75 237,800 1.60

Stock Option Plan June 8 2004 3,500,000 1.60 -- -- 3,500,000 1.60 -- -- -- -- --

Stock Option Plan September 6 2004 2,115,500 1.56 -- -- 451,500 1.56 1,664,000 1.56 7.17 1,093,100 1.56

Stock Option Plan March 11 2005 4,232,400 2.34 -- -- 210,600 2.34 4,021,800 2.34 7.76 2,515,600 2.34

Stock Option Plan September 6 2005 2,705,000 2.49 -- -- 2,705,000 2.49 8.17 1,421,600 2.49

Stock Option Plan 2006 1st tranche 2,765,000 2.50 -- -- -- 2,765,000 2.50 9.01 995,400 2.50

Stock Option Plan 2006 2nd tranche 2,765,000 2.47 -- -- -- 2,765,000 2.47 9.50 663,600 2.47

Total 30,360,600 2.14 -- -- 10,451,600 1.40 19,909,000 2.53 6.93 12,423,000 2.63

TREASURY STOCK HELD

Stock Option Plan January 11 2005 11,350,000 2.15 -- -- 300,000 2.15 11,050,000 2.15 2.33 11,050,000 2.15

Total 11,350,000 2.15 -- -- 300,000 2.15 11,050,000 2.15 2.33 11,050,000 2.15

Grand total 41,710,600 2.14 -- -- 10,751,600 1.42 30,959,000 2.39 5.29 23,473,000 2.40

Options in circulation at start of year

Options awarded during the year


Options in circulation at close of year

Options exercisable at close of year

No. of options

Weighted average

strike price

No. of options

Weighted average

strike price

No. of options

Weighted average

strike price

No. of options

Average strike price

Average duration (years)

No. of options

Weighted average

strike price

Phantom 2007 – 1st tranche -- -- 3,052,500 3.0877 -- -- 3,052,500 3.0877 9.76 549,450 3.0877

Phantom 2007 – 2nd tranche -- -- 3,052,500 2.7344 -- -- 3,052,500 2.7344 10.25 -- --

Total -- -- 6,105,000 2.9111 6,105,000 2.9111 10.01 549,450 3.0877


10.d. PROVISIONS FOR RISKS AND LOSSES The breakdown and changes in the non-current part of these provisions are as follows: (in thousands of euro)

Provision fordisputes in progress

Provision forrestructuring charges

Provisions for miscellaneous risks

Total

Balance at December 31 2006 17,075 5,905 13,701 36,681

Sums set aside during the year 575 6,767 3,733 11,075

Withdrawals (375) (4,958) (1,329) (6,662)

Exchange rate differences 446 2 10 458

Other changes (1,772) (1,046) 3,184 366


The breakdown and changes in the current part of these provisions is as follows: (in thousands of euro)

Provision for disputes in progress

Provision forrestructuring charges

Provisions for miscellaneous risks

Total


Sums set aside during the year 3,384 1,296 26,704 31,384

Withdrawals (2,661) (1,699) (8,839) (13,199)

Other changes (95) -- (2,725) (2,820)


Apart from the libel disputes regarding the Espresso group, which are typical of all publishing businesses, the Provision for disputes in progress includes risks for disputes of a commercial na-ture and labour disputes. The Provision for restructuring charges includes sums set aside for restructuring action that has been announced to the parties concerned and in particular refers to the production reorganization programs of the Sogefi group. The Provisions for miscellaneous risks is mainly to cover tax disputes outstanding with local tax authorities. 11. CURRENT LIABILITIES 11.a. OTHER BORROWINGS (in thousands of euro) 31.12.2007 31.12.2006

Collateralized bank loans 23,079 43,339

Other bank loans 44,205 30,211

Finance leases 5,713 2,602

Other borrowings 77,428 57,752

Loans from subsidiaries -- 230

Total 150,425 134,134


The item “Other borrowings” includes the fair value of € 14,169 thousand of differential con-tracts settling CIP6 tariffs for 2008 assignations. 11.b. TRADE PAYABLES (in thousands of euro) 31.12.2007 31.12.2006

Payables – subsidiaries and joint ventures 12,406 16,928

Payables – associated companies 1,306 639

Payables - suppliers 926,793 730,658

Advance payments 1,286 627

Payables in the form of notes 50 49

Total 941,841 748,901

The item “Payables – subsidiaries and joint ventures” refers mainly to the trade payables of Sor-genia S.p.A. to Tirreno Power S.p.A.. The increase of € 196,135 thousand in the item “Payables - suppliers” refers mainly to the rise of € 181.2 million relating to the Sorgenia group. 11.c. OTHER PAYABLES (in thousands of euro) 31.12.2007 31.12.2006

Due to employees 69,332 65,913

Tax payables 68,833 111,267

Social security payables 44,654 34,385

Other payables 62,139 62,397

Total 244,958 273,962

The item “Tax payables” at December 31 2006 includes the payable to Inland Revenue of € 17,733 thousand resulting from the tax consolidation. It should also be noted that following an appeal filed by CIR S.p.A. against a tax request for IR-PEG and ILOR for the year 1989, the Tax Office has now cancelled this request. While the dis-pute is not yet closed, the amount of € 11,239 thousand was posted prudentially to the item “Pro-visions for risks and losses” netting out the same amount of the tax payable.


NOTES ON THE INCOME STATEMENT 12. REVENUES BREAKDOWN BY BUSINESS SECTOR (in millions of euro) 2007 2006 Change amount % amount % %

Utilities 1,861.7 44.2 1,916.1 46.3 (2.8)

Media 1,098.2 26.1 1,102.6 26.7 (0.4)

Automotive components 1,071.8 25.4 1,018.6 24.6 5.2

Healthcare 182.9 4.3 99.2 2.4 84.3

Others 0.3 -- 0.3 -- --

Total consolidated revenues 4,214.9 100.0 4,136.8 100.0 1.9

BREAKDOWN BY GEOGRAPHICAL AREA (in millions of euro) 2007 Total Italy Other European North South Asia Other revenues countries America America countries Utilities 1,861.7 1,861.7 -- -- -- -- --

Media 1,098.2 1,098.2 -- -- -- -- --

Automotive components 1,071.8 105.8 774.0 26.5 148.5 13.1 3.9

Healthcare 182.9 182.9 -- -- -- -- --

Others 0.3 0.3 -- -- -- -- --

Total consolidated revenues 4,214.9 3,248.9 774.0 26.5 148.5 13.1 3.9

Percentages 100.0% 77.1% 18.4% 0.6% 3.5% 0.3% 0.1%

(in millions of euro) 2006 Total Italy Other European North South Asia Other revenues countries America America countries Utilities 1,916.1 1,913.3 2,8 -- -- -- --

Media 1,102.6 1,102.6 -- -- -- -- --

Automotive components 1,018.6 98.5 757.5 25.1 123.4 9.6 4.5

Healthcare 99.2 99.2 -- -- -- -- --

Others 0.3 0.3 -- -- -- -- --

Total consolidated revenues 4,136.8 3,213.9 760.3 25.1 123.4 9.6 4.5

Percentages 100.0% 77.7% 18.4% 0.6% 3.0% 0.2% 0.1%

The types of products marketed by the Group and the nature of the business sectors in which it operates mean that revenues flows are reasonably linear throughout the year and are not subject to any particular cyclical phenomena provided that the basis of consolidation remains unchanged.


13. OPERATING COSTS AND REVENUES 13.a. COSTS FOR THE PURCHASE OF GOODS This item declined from € 2,457,185 thousand in 2006 to € 2,330,124 thousand in 2007 . This decline, despite a rise in sales revenues of 1.9%, was mainly attributable to the Sorgenia group which, with the entry into production of the Termoli power plant, produced electricity di-rectly instead of buying it in the market. 13.b. COSTS FOR SERVICES This item rose from € 711,792 thousand in 2006 to € 768,252 thousand in 2007, as can be seen from the following breakdown: (in thousands of euro) 2007 2006

Technical and professional consulting 110,506 95,407

Distribution and transportation costs 55,711 45,727

Outsourcing 85,855 110,514

Other expenses 516,180 460,144

Total 768,252 711,792

The higher costs for services (+7.9%) were mainly the result of a rise, for the Sorgenia group, of sales and distribution costs such as the cost of advertising and direct marketing aimed at obtaining new market share and new clients and, for the HSS group, of increased business and a change in the consolidation area following the acquisition of the S.Stefano group. 13.c. PERSONNEL COSTS Personnel costs totalled € 617,954 thousand in 2007 (€ 575,342 thousand in 2006). The Group had an average of 11,687 employees on its payrolls in 2007. (in thousands of euro) 2007 2006

Salaries and wages 431,567 396,869

Social security contributions 133,661 121,902

Severance and leaving indemnity 3,488 14,099

Retirement and similar benefits 12,492 4,007

Valuation of stock option plans 6,988 9,726

Other costs 29,758 28,739

Total 617,954 575,342

The increase in the item “retirement and similar benefits” refers mainly to the appropriate portion of the change in the employee Phantom stock option incentive plans.


13.d. OTHER OPERATING REVENUES This item can be broken down as follows: (in thousands of euro) 2007 2006

State grants and contributions 5,934 6,608

Capital gains on disposals 6,131 5,008

Non-recurring gains and other income 54,368 68,647

Total 66,433 80,263

The item “Non-recurring gains and other income” was positively affected last year by the penal-ties billed by the Sorgenia group to the EPC Contractor as “liquidated damage costs”. 13.e. OTHER OPERATING COSTS This item can be broken down as follows: (in thousands of euro) 2007 2006

Write-downs and losses on receivables 18,324 12,070

Provisions made for risks and losses 10,119 9,430

Indirect taxes 20,864 17,589

Taxes relating to prior periods 7 24

Restructuring charges 7,558 5,234

Capital losses on disposal of assets 900 209

Non-recurring losses and other charges 47,476 22,095

Total 105,248 66,651

The increase in the item “Non-recurring losses and other charges” was essentially caused by the Sorgenia Group for contingent losses relating to balancing charges in thermal year 2005 that were not notified by suppliers in prior periods.


14. FINANCIAL INCOME AND EXPENSE 14.a. FINANCIAL INCOME The item “Other income” includes the following: (in thousands of euro) 2007 2006

Interest income on bank accounts 17,309 15,048

Interest on securities 16,768 20,924

Other interest income 22,223 14,968

Interest rate derivatives 321 4,801

Exchange rate gains 6,676 3,721

Other financial income 5,386 7,714

Total 68,683 67,176

14.b. FINANCIAL EXPENSE This item includes the following: (in thousands of euro) 2007 2006

Interest expense on bank accounts 48,459 27,759

Interest expense on bonds 63,443 63,455

Other interest expense 19,635 21,638

Interest rate derivatives 633 944

Losses from exchange rate differences 10,717 8,352

Other financial expenses 14,516 7,615

Total 157,403 129,763

The item “Interest rate derivatives” for the sum of € 633 thousand includes € 176 thousand which refers to the net fair value measurement of hedging transactions. The item “Other financial expenses” includes € 5,289 thousand that refers to the write-down of the investment in Oakwood Global Finance.


14.c. GAINS FROM TRADING SECURITIES The breakdown of “Gains from trading securities” is the following: (in thousands of euro) 2007 2006

Shares and options - subsidiaries 36,484 1,069

Shares and options - other companies 15,276 44,536

Other securities and other gains 102,442 50,934

Total 154,202 96,539

The item “Shares and options - subsidiaries” includes € 36,026 thousand of gains from the sub-scription of capital increases reserved for Minority Shareholders of the company Sorgenia (€ 21,516 thousand) and HSS (€ 14,510 thousand). 14.d. LOSSES FROM TRADING SECURITIES The breakdown of “Losses from trading securities” is the following: (in thousands of euro) 2007 2006

Shares and options - subsidiaries 436 2,384

Shares and options - other companies 23,682 40,061

Other securities and other losses 60,254 11,585

Total 84,372 54,030

14.e. ADJUSTMENTS TO THE VALUE OF FINANCIAL ASSETS This item, amounting to € 63,128 thousand, refers essentially for € 56,707 thousand to the write-down of the investment in Oakwood Global Finance and for € 6,156 thousand to the fair value measurement of the “Securities” recorded under Current assets. 15. INCOME TAXES Income taxes can be broken down as follows: (in thousands of euro) 2007 2006

Current taxes 88,271 104,447

Deferred taxes 12,355 (14,969)

Total 100,626 89,478

The reduction of the tax rates, as indicated above, led to the recalculation of deferred tax assets and liabilities, adjusting them to the new rates. The total amount, posted entirely to the income statement, was a lower tax liability of € 8,365 thousand.


The following chart shows the reconciliation of the ordinary tax rate and the effective tax rate for financial year 2007:

(in thousands of euro) 2007

Pre-tax income resulting from financial statements 301,485

Theoretical income taxes 99,490

Tax effect of non-deductible costs 16,498

Tax effect of losses of prior periods that generate deferred tax assets in the period (4,202)

Tax effect of losses of prior periods that did not generate deferred tax assets (60,072)

Tax effect on interest rate differentials of foreign companies (7,914)

Non-taxable grants (1,224)

Other 33,417

Income taxes 75,993

Average effective tax rate 25.2%

Theoretical tax rate 33%

IRAP and other taxes 24,633

Total taxes from financial statements 100,626

16. EARNINGS PER SHARE The basic earnings per share is calculated by dividing the net income for the period attributable to ordinary Shareholders by the weighted average number of shares in circulation. The diluted earn-ings per share is calculated by dividing the net income for the period attributable to ordinary Shareholders by the weighted average number of ordinary shares in circulation during the period, adjusted for the capital dilution effects of any options outstanding. The calculation of the shares in circulation does not include own shares held as treasury stock. The company has only one category of potential ordinary shares, which are those shares resulting from the stock options assigned to employees. The dilutive effect of the ordinary shares to be issued or assigned in favour of stock options plans on earnings per share is not significant. To determine the average number of options, the average fair value of the shares for the period under examination (the financial year) was used. The average fair value of CIR ordinary shares in 2007 was € 2,789 compared to an average fair value of € 2,391 in 2006.


The following chart shows the information on the shares used to calculate the basic and diluted earnings per share.

2007 2006

Net income attributable to the Shareholders (in thousands of euro) 82,580 101,120

Weighted average number of ordinary shares in circulation 749,200,834 748,300,414

Earnings per share (euro) 0.1102 0.1351

2007 2006

Net income attributable to the Shareholders (in thousands of euro) 82,580 101,120


Weighted average number of options 35,560,667 38,608,367

Fair value of weighted average number of options 6,618,701 4,575,961

Adjusted weighted average number of shares circulation 755,819,534 752,876,375

Diluted earnings per share (euro) 0.1093 0.1343

17. OTHER INFORMATION IFRS 7 – FINANCIAL RISK MANAGEMENT: ADDITIONAL DISCLOSURES The CIR Group operates in different sectors of industry and services both at national and at inter-national level and thus its business is exposed to various kinds of financial risk, including market risk (exchange rate risk and price risk), credit risk, liquidity risk and interest rate risk. To minimize these risks the Group uses financial derivative instruments for hedging purposes. Risk management is carried out by the central finance and treasury function on the basis of poli-cies approved by the Management of CIR and transmitted to the subsidiaries on July 25 2003. Market risk

Foreign currency risk Some companies of the Group (especially of the Sogefi group) are exposed to exchange rate risk resulting from the use of different currencies. Changes in foreign exchange rates can affect the fair value of assets and liabilities. This kind of risk is however limited because the companies operate in the local currency, they are active both in their own domestic markets and abroad and in the event of need financial resources are raised locally. With reference to the net capital invested in Medinvest Plc, which is denominated in USD, a spe-cial hedging strategy is followed which aims to protect the investment from the volatility of the spot EUR/USD exchange rate when translating the capital of the subsidiary into the functional currency of the Group, i.e. the euro. Any rise or fall in the exchange rate would not have any sig-nificant effect on the equity or financial situation of the Group.

Price risk The Group is exposed to price risk on various raw materials or commodities, such as for example, paper, cellulose products, steel, plastic products, aluminium, oil and gas.


Risk is managed centrally by the individual groups by diversifying their sourcing and, where deemed necessary, using appropriate hedging derivatives. Regarding the Sorgenia Group in particular, commodity risk is managed by entering into deriva-tive contracts with prime financial institutions with a high credit rating. These instruments are ge-nerally fixed to floating interest rate swaps or vice versa. Although the commodity derivatives are traded for hedging purposes, they are not managed according to the rules of hedge accounting (IAS 39). Thus the income effects of the changes in their fair value are recognized directly to the Income Statement under the item Other operating income/losses. The fair value of these derivative contracts with a duration of no longer than 12 months is deter-mined using market forward prices or, where these are not available, using valuation models de-veloped internally based on data and information provided by third party sources that are recog-nized and reliable. At December 31 2007 the commodity derivatives positions were all closed and thus their fair va-lue was equal to zero (negative for € 1,226 thousand at December 31 2006). A 5% rise or fall in commodity prices, limited to the hedging derivatives, would have had the fol-lowing changes in the income statement.

Sensitivity Analysis 31.12.2007 31.12.2006 Changes -5% +5% -5% +5% Effect (477) 477 2,818 (2,818)

Credit risk Credit risk can be valued both in commercial terms relating to client type, the terms of the con-tract and the concentration of sales, and in financial terms connected with the type of counterparty dealt with in financial transactions. Within the Group there is no significant concentration of credit risk. Some time ago adequate policies were put in place to ensure that sales are made to clients with an appropriate credit history. Counterparties for derivative products and cash transactions are exclu-sively financial institutions with a high credit rating. The Group has policies that limit credit ex-posure to individual financial institutions. Credit risk is different for the various sectors of business in which it occurs. In the energy sector, for example, the assessment of exposure to credit risk is made using internal processes and with the aid of companies with expertise both in the sector of assessment and granting credit lines and in credit recovery. The number of clients and their diversification make exposure to a concentra-tion of credit risk irrelevant. In relation to the “Automotive components” sector, there is no evidence of any excessive concen-tration of credit risk since the “Original Equipment” and “After market” distribution channels with which the group operates consist of car manufacturers or large purchasing Groups. The “Media” sector has no areas of risk for trade receivables of a significant entity and in any case the Group adopts operating procedures that prevent the sale of products or services to clients wi-thout an adequate credit profile or a collateral guarantee. The healthcare sector does not present any concentration of credit risk because credit exposure is spread over a large number of clients and counterparties especially in the sector of residences for the elderly. The hospital sector, however, has a higher concentration of risk because the most sig-nificant counterparties are the local health authorities. The CIR Group since 2006 has been acquiring and managing non-performing loans and has put in place procedures for evaluating and establishing the fair value of its portfolios. On one of the fol-lowing pages there is a chart showing the breakdown of credit risk and the changes in the provi-sion for the write-down of receivables.


Liquidity risk Prudent management of liquidity risk implies maintaining sufficient liquidity and short term secu-rities and ensuring an adequate supply of credit lines to ensure that sufficient financial resources can be raised. The Group meets its maturities and commitments systematically, and such conduct enables it to operate in the market with the necessary flexibility and reliability to maintain a correct balance between funding and the application of its financial resources. The companies that head the four most significant business sectors manage their liquidity risk di-rectly and independently. Tight control is exercised over the net financial position and its evolu-tion in the short, medium and long term. In general the CIR Group follows an extremely prudent financial policy using funding structures mainly in the long term. The operating Groups manage their liquidity in a centralized manner. On one of the following pages there is a chart showing a breakdown of liquidity risk for the oper-ating groups. Interest rate risk (fair value risk and cash flow risk) Interest rate risk depends on the movements in interest rates in the market which can cause chan-ges in the fair value of the cash flows of financial assets and liabilities. Interest rate risk mainly concerns long-term bond and note borrowings which are issued at a fixed rate thus exposing the Group to the risk of fair value changes on the loans themselves as interest rates move. Following risk management policies, the Parent Company and the subsidiaries have entered into various IRS contracts throughout the years in order to hedge the interest rate risk on their bond and note issues and on loan agreements. Sensitivity analysis A parallel shift of one percentage point in the 3 months Euribor curve would have the following effect on the floating rate assets and liabilities of CIR S.p.A. and CIR International S.A.:

31.12.2007 31.12.2006 Changes -1% +1% -1% +1% Effect (8,300) 7,530 (6,671) 6,025

A change of this entity applied to the operating companies of the Group would not have had any significant effects. Derivative instruments Derivative instruments are recognized at their fair value. For accounting purposes hedging transactions are classified as: - fair value hedges if they are subject to price changes in the market value of the underlying as-

set or liability; - cash flow hedges if they are entered into to protect from the risk of changing cash flows from

an existing asset and liability, or from a future transaction. - hedges of a net investment in a foreign operation if they are entered into to protect from the

exchange rate risk in the conversion of the equity of subsidiaries denominated in a currency other than the functional currency of the Group.


For derivative instruments classified as fair value hedges gains and losses resulting from both the determination of their market value and the adjustment to fair value of the element underlying the hedge are posted to the statement of income. For instruments classified as cash flow hedges (for example interest rate swaps) gains and losses from marking them to market are posted directly to shareholders’ equity for the part which “effec-tively” covers the risk they are intended to cover, while any “non-effective” part is posted to the income statement. For instruments classified as hedges of a net investment in a foreign operation gains and losses obtained from marking them to market are posted directly to shareholders’ equity for the part which “effectively” hedges the risk they are intended to cover, while any “non-effective” part is posted to the income statement. Derivatives used for hedging purposes, when the hedge accounting is entered, are accompanied by a hedging relationship which designates the individual instrument as entered into for the purposes of hedging and gives the parameters of effectiveness of the hedge in relation to the financial in-strument being hedged. The level of effectiveness of the hedge is evaluated at regular intervals and the effective part of the relationship is posted to shareholders’ equity while any non-effective part is charged to the in-come statement. More specifically, the hedge is considered to be effective when the change in fair value or in the financial flows of the instrument hedged is almost entirely compensated for by the change in the fair value or the financial flows of the hedging instrument and when the results achieved are in a range of between 80% and 125%. Derivative contracts At December 31 2007 in particular, the Group had the following derivatives contracts booked as hedges at their notional value: (a) Interest rate swaps:

fixed to floating hedging interest expense on CIR International bond issue (€ 400 million) ma-turing in 2009;

hedging Sogefi bank loans, notional value € 20 million – maturing in 2008; hedging Sorgenia bank loans, notional value € 108 million – maturing in 2013; (b) Foreign currency hedges:

forward sales of a total of USD 533 million hedging the investments in Medinvest Plc and in private equity funds;

forward sale of USD 28 million and purchase of EUR maturing in 2008; forward purchase of EUR 2.3 million against GBP maturing in 2008; forward purchase of USD 13.7 million against Brazilian Reals maturing in 2009. Capital parameters Management regulates the use of leverage to guarantee solidity and flexibility in the asset and li-ability structure of CIR and its financial holding companies, measuring the ratio of funding sources to the asset invested in. Leverage is calculated as the ratio between net financial debt (rep-resented by bond or notes issued net of free cash flow and investments in financial instruments considered as liquid, according to parameters agreed on with the rating agency) and the total in-vestment assets measured at fair value (including equity investments and the remaining part of in-vestments in financial instruments). Management’s objective is to maintain a sold and flexible financial structure in order to maintain this ratio below 30%. Today it stands at 19%.

CATEGORIES OF FINANCIAL ASSETS AND LIABILITIES SHOWN IN THE BALANCE SHEETFINANCIAL YEAR 2007

(in thousands of euro)Items of Value in Assets at FV Assets at FV Loans and Investments Available Liabilities at FV Liabilities at FV Liabilities at Fair value Effect Effect on

bal. Sheet bal. Sheet through P&L throught P&L receivables held to for sale through P&L through P&L amortized on income equitydesignated as classified as maturity assets designated as classified as cost statement

such from initial held for such from initial held forrecognition trading recognition trading

NON-CURRENT ASSETS

Other equity investments 7.e 11,885 -- -- -- -- 11,885 -- -- -- 11,885 637 (1)

Other receivables (*) 7.f 232,262 -- -- 232,262 -- -- -- -- -- 232,262 (35,631) --

Securities 7.g 96,534 -- -- -- 153 96,381 -- -- -- 96,534 16,903 798

CURRENT ASSETS

Trade receivables 8.b 1,070,273 -- -- 1,070,273 -- -- -- -- -- 1,070,273 8,390 --

Other receivables (**) 8.c 58,318 -- -- 58,318 -- -- -- -- -- 58,318 70 --

Financial receivables 8.d 37,171 19,098 -- 17,463 -- 610 -- -- -- 37,171 7,963 1,975

Securities 8.e 275,897 259,737 16,160 -- -- -- -- -- -- 275,897 (1,859) --

Available-for-sale financial assets 8.f 372,622 -- -- -- -- 372,622 -- -- -- 372,622 25,765 7,235

Cash and cash equivalents 8.g 694,127 -- -- 694,127 -- -- -- -- -- 694,127 17,334 --

NON-CURRENT LIABILITIES

Bonds and notes 10.a (1,189,672) -- -- -- -- -- -- -- (1,189,672) (1,149,978) (62,544) --

Other borrowings 10.b (1,281,170) -- -- -- -- -- -- -- (1,281,170) (1,502,035) (44,699) --

CURRENT LIABILITIES

Bank overdrafts (92,032) -- -- -- -- -- -- -- (93,032) (92,032) (6,624) --

Other borrowings 11.a (150,425) -- -- -- -- -- (14,194) -- (136,231) (154,236) (5,224) --

Trade payables 11.b (941,841) -- -- -- -- -- -- -- (941,841) (941,841) 341 --

(*) Not including € 19,231 thousand of tax receivables(**) Not including € 148,123 thousand of tax receivables


(in thousands of euro)Items of Value in Assets at FV Assets at FV Loans and Investments Available Liabilities at FV Liabilities at FV Liabilities at Fair value Effect on Effect on

bal. Sheet bal. Sheet through P&L through P&L receivables held to for sale through P&L through P&L amortized income equitydesignated as classified as maturity assets designated as classified as cost statement

such from initial held for such from initial held forrecognition trading recognition trading

NON-CURRENT ASSETS

Other equity investments 7.e 8,530 -- -- -- -- 8,530 -- -- -- 8,530 (20) 7

Other receivables (*) 7.f 199,481 -- -- 199,481 -- -- -- -- -- 199,481 7,911 --

Securities 7.g 98,583 -- -- -- 1,252 97,331 -- -- -- 98,583 11,998 10,863

CURRENT ASSETS

Trade receivables 8.b 996,477 -- -- 996,477 -- -- -- -- -- 996,477 5,453 --

Other receivables (**) 8.c 110,130 -- -- 110,130 -- -- -- -- -- 110,130 1,070 --

Financial receivables 8.d 21,354 4,379 -- 16,975 -- -- -- -- -- 21,354 4,656 379

Securities 8.e 654,248 636,636 17,612 -- -- -- -- -- -- 654,248 4,062 --

Available-for-sale financial assets 8.f 372,867 -- -- -- -- 372,867 -- -- -- 372,867 21,388 9,551

Cash and cash equivalents 8.g 446,484 -- -- 464,484 -- -- -- -- -- 446,484 14,968 --


Bonds and notes 10.a (1,187,750) -- -- -- -- -- -- -- (1,187,750) (1,163,154) (52,948) --

Other borrowings 10.b (758,514) -- -- -- -- -- -- -- (758,514) (750,396) (29,408) --

CURRENT LIABILITIES

Bank overdrafts (265,180) -- -- -- -- -- -- -- (265,180) (265,180) (4,631) --

Other borrowings 11.a (134,134) -- -- -- -- -- (5,266) -- (128,866) (138,696) (7,430) (105)

Trade payables 11.b (748,901) -- -- -- -- -- -- -- (748,901) (748,901) (1,671) --

(*) Not including € 51,510 thousand of tax receivables(**) Not including € 163,862 thousand of tax receivables

CLASSES OF RISK - FINANCIAL YEAR 2007

(in thousands of euro)Bal. Sheet Value in Liquidity Int. Rate Exch. Rate Credit

items Bal. Sheet risk risk risk risk

NON-CURRENT ASSETS

Other equity investments 7.e 11,885 -- -- -- 11,885

Other receivables 7.f 232,262 -- -- -- 232,262

Securities 7.g 96,534 -- -- -- 96,534

CURRENT ASSETS

Trade receivables 8.b 1,070,273 -- -- -- 1,070,273

Other receivables 8.c 58,318 -- -- -- 58,318

Financial receivables 8.d 37,171 -- -- -- 37,171

Securities 8.e 275,897 -- 275,897 -- --

Available-for-sale financial assets 8.f 372,622 -- -- -- 372,622 Cash and cash equivalents 8.g 694,127 -- 694,127 -- --


Bonds and notes 10.a (1,189,672) (1,189,672) -- -- --

Other borrowings 10.b (1,281,170) (1,281,170) -- -- --

CURRENT LIABILITIES

Bank overdrafts (92,032) (92,032) -- -- --

Other borrowings 11.a (150,425) (150,425) -- -- --

Trade payables 11.b (941,841) (941,841) -- -- --


(in thousands of euro)Bal. Sheet Value in Liquidity Int. Rate Exch. Rate Credit

items Bal. Sheet risk risk risk riskNON-CURRENT ASSETSOther equity investments 7.e 8,530 -- -- -- 8,530 Other receivables 7.f 199,481 -- -- -- 199,481 Securities 7.g 98,583 -- -- -- 98,583 CURRENT ASSETSTrade receivables 8.b 996,477 -- -- -- 996,477 Other receivables 8.c 110,130 -- -- -- 110,130 Financial receivables 8.d 21,354 -- -- -- 21,354 Securities 8.e 654,248 -- 654,248 -- -- Available-for-sale financial assets 8.f 372,867 -- -- -- 372,867 Cash and cash equivalents 8.g 446,484 -- 446,484 -- -- NON CURRENT LIABILITIESBonds and notes 10.a (1,187,750) (1,187,750) -- -- -- Other borrowings 10.b (758,514) (758,514) -- -- -- CURRENT LIABILITIESBank overdrafts (265,180) (265,180) -- -- -- Other borrowings 11.a (134,134) (134,134) -- -- -- Trade payables 11.b (748,901) (748,901) -- -- --

CREDIT RISK


Position at December 31 2007 Bal. Sheet Total Not yet Overdue 0 - 30 days 30 - 60 60 - 90 over 90 Amt. due Write-items receivable due from > settled downs

Other receivables (non-current assets) 7.f 232,262 146,494 85,768 -- -- -- 85,768 --

Gross receivables 294,258 208,490 85,768 -- -- -- 85,768 --

Provision for write-down (61,996) (61,996) -- -- -- -- -- -- (61,996)

Trade receivables 8.b 1,070,273 821,397 248,876 96,713 43,535 22,535 80,059 6,034

Gross receivable 1,113,449 826,764 286,685 103,254 47,260 24,645 105,492 6,034

Provision for write-down (43,176) (5,367) (37,809) (6,541) (3,725) (2,110) (25,433) -- (15,963)

Other receivables (non-current assets) 8.c 58,318 58,318 -- -- -- -- -- --

Gross receivable 58,702 58,702 -- -- -- -- -- --

Provision for write-down (384) (384) -- -- -- -- -- -- (1)

Total 1,360,853 1,026,209 334,644 96,713 43,535 22,535 165,827 6,034 (77,960)


Position at December 31 2006 Bal. Sheet Total Not yet Overdue 0 - 30 days 30 - 60 60 - 90 over 90 Amt. due Write-items receivable due from > settled downs

Other receivables (non-current assets) 7.f 199,481 199,481 -- -- -- -- -- --


Provision for write-down -- -- -- -- -- -- -- -- --

Trade receivables 8.b 996,477 779,021 217,456 96,963 24,128 14,557 70,570 11,238

Gross receivable 1,027,830 783,827 244,003 100,002 24,934 15,242 92,587 11,238

Provision for write-down (31,353) (4,806) (26,547) (3,039) (806) (685) (22,017) -- (10,486)

Other receivables (non-current assets) 8.c 110,130 110,130 -- -- -- -- -- --


Provision for write-down (384) (384) -- -- -- -- -- -- (12)

Total 1,306,088 1,088,632 217,456 96,963 24,128 14,557 70,570 11,238 (10,498)

PROVISION FOR WRITE-DOWN OF RECEIVABLES


Position at December 31 2007 Starting Write- Withdrawals Exch. Rate Business Closingbalance downs diff. +/- combin. +/- balance

Provision for write-down of receivables (31,737) (77,960) 6,574 94 (2,527) (105,556)


Position at December 31 2006 Starting Write- Withdrawals Exch. Rate Business Closingbalance downs diff. +/- combin. +/- balance

Provision for write-down of receivables (25,677) (10,498) 4,927 71 (560) (31,737)

LIQUIDITY RISK - FINANCIAL YEAR 2007

(in thousands of euro)<1 >1 <2 >2 <3 >3 <4 >4 <5 >5 Totalyear years years years years years

Non-derivative financial liabilities

Bonds and notes 64,337 464,337 43,309 228,299 31,506 788,955 1,620,743

Other borrowings:- From banks 72,618 174,474 240,613 216,001 586,994 273,593 1,564,293 - From leasing companies 9,418 6,316 6,064 5,588 5,075 20,657 53,118 - From other lenders 68,118 1,712 1,484 1,255 1,157 5,778 79,504

Bank overdrafts 92,032 -- -- -- -- -- 92,032

Trade payables 941,841 -- -- -- -- -- 941,841

Derivative financial liabilities

Hedging derivatives 3,619 446 (225) (192) (162) (121) 3,365

Non-hedging derivatives 26 -- -- -- -- -- 26

TOTAL 1,252,009 647,285 291,245 450,951 624,570 1,088,862 4,354,922




Bonds and notes 63,694 63,694 463,694 42,694 227,694 817,950 1,679,420

Other borrowings:- From banks 121,866 165,624 151,694 172,405 169,120 135,652 916,361 - From leasing companies 6,511 5,423 4,753 4,681 4,536 31,325 57,229 - From other lenders 52,974 628 509 514 621 625 55,871

Bank overdrafts 265,180 -- -- -- -- -- 265,180

Trade payables 748,901 -- -- -- -- -- 748,901

Derivative financial liabilities

Hedging derivatives 1,542 1,527 517 183 90 113 3,972

Non-hedging derivatives 1,258 2 -- -- -- -- 1,260

TOTAL 1,261,926 236,898 621,167 220,477 402,061 985,665 3,728,194


INTEREST RATE RISK The following chart gives a breakdown of interest rate risk for groups of assets and liabilities by year of maturity. The information was extrapolated from the balance sheets for the year ended December 31 2007. This information is shown over a time horizon of 5 years according to the way in which the inter-est accrues. (in thousands of euro) <1 year >1<2 >2<3 >3<4 >4<5 >5 Total

INTEREST BEARING

Fixed rate

Trade receivables -- -- -- -- -- -- --

Other receivables 12,845 -- 16,138 -- 167,797 196,780

Financial receivables 16,975 -- -- -- -- -- 16,975

Securities 70 1,014 172 -- -- -- 1,256

Available-for-sale financial assets -- -- -- -- -- -- --

Cash and cash equivalents 151,880 -- -- -- -- -- 151,880

Bank overdrafts (13) -- -- -- -- -- (13)

Bonds and notes (3,789) (1,111) (1,143) (199,371) (1,262) (569,764) (776,440)

Other borrowings (18,924) (17,729) (17,117) (15,915) (13,848) (38,985) (122,518)

Trade payables -- -- -- -- -- -- --

Other payables -- -- -- -- -- -- --

Floating rate


Other receivables -- -- -- -- 42,499 675 43,174

Financial receivables 1,507 -- -- -- -- -- 1,507

Securities 8,244 -- 55,005 19,464 160,088 242,801



Bank overdrafts (92,019) -- -- -- -- -- (92,019)

Bonds and notes -- (413,232) -- -- -- -- (413,232)

Other borrowings (68,634) (82,795) (149,394) (80,428) (721,463) (139,152) (1,241,866)

Trade payables -- -- -- -- -- -- --

Other payables -- -- -- -- -- -- --

NON INTEREST BEARING

Trade receivables 1,068,426 1,790 33 22 2 -- 1,070,273

Other receivables 200,470 6,448 -- 5,222 5,222 618 217,980

Financial receivables 18,689 -- -- -- -- - 18,689

Securities 31,993 -- 4,076 -- 92,305 128,374

Available-for-sale financial assets 372,622 -- -- -- -- -- 372,622


Bank overdrafts -- -- -- -- -- -- --

Bonds and notes -- -- -- -- -- -- --

Other borrowings (64,161) (191) (191) (191) (191) (2,286) (67,211)

Trade payables (941,841) -- -- -- -- -- (941,841)

Other payables (238,478) (217) (6,549) -- -- -- (245,244)


18. GUARANTEES AND COMMITMENTS At December 31 2007 the position of guarantees and commitments was the following: CIR and financial holding companies - Guarantees in favour of Inland Revenue for VAT credits totalling € 6,781 thousand; - Commitments for investment in private equity funds by CIR International for € 46 million; - An annual commitment to cover just the running costs of the company Oakwood Global Fi-

nance SCA, the holding company of the Oakwood group. Sorgenia Group Within the group there are guarantees made to third parties for a total amount of € 274,297 thou-sand. These are mainly bonds deposited as collateral for sums to be paid. These relate to the purchase and transportation of electricity and gas and to commitments in favour of the Inland Revenue for quarterly IVA for which a rebate has been applied for. Also in this category are guarantees re-quested for obtaining the energy account grant. As collateral for loans obtained by the jointly controlled company Tirreno Power S.p.A., shares worth € 123,577 thousand representing 50% of the capital of Tirreno Power S.p.A. have been pledged. It should also be noted that there is a commitment to make a financial contribution to the associ-ated company GICA S.A. and to the subsidiary Noventi Ventures II LP respectively of a maxi-mum of € 15,000 thousand and USD 30,000 thousand (of which USD 6,690 thousand have al-ready been paid in). Espresso Group Guarantees issued totalled € 2,502 thousand and referred to guarantees made by the parent com-pany of the Group and the subsidiaries Elemedia and A. Manzoni & C. for the lease of their re-spective premises and by the subsidiary Ksolutions in favour of Public Administration clients with whom they have service contracts. Commitments outstanding, for a total of € 6,855, referred to: - contracts for the purchase of plant and equipment (€ 2,355 thousand) mainly for Repubblica

and Finegil Editoriale for the full-colour project; - a contract for the purchase of a property as the new headquarters of the Mantua operating divi-

sion of Finegil Editoriale for € 4,500 thousand. Sogefi Group Operating Leases For accounting purposes, leasing and hire contracts are classified as operating leases when the fol-lowing conditions apply: - a significant part of the risks and benefits of ownership are maintained by the lessor; - there are no options giving the right to buy the leased property at a price that does not represent

the presumed market value of the same at the close of the period;


- the duration of the contract does not extend over most of the useful life of the property rented or hired.

The rental payments for operating leases are recognized to the income statement in line with the underlying contracts.

The main operating lease refers to a contract signed by the American subsidiary Allevard Spring U.S.A. Inc. for the lease of the production site situated in Prichard (West Virginia). The contract terminates on October 27 2018 and the remaining instalments total USD 4,181 thousand, of which USD 386 thousand by the end of the year. Against this contract Sogefi S.p.A. has issued a guarantee for approximately 50% of the remain-ing lease instalments which is renewed at the end of each year on the basis of the remaining amount. There are no restrictions of any kind connected with this kind of leasing and at the end of the contract the US company will have the right to buy the property at a market price. Future lease payments in relation to the operating lease contracts of the Sogefi group at December 31 2007 are as follows:

(in thousands of euro) 2007 2006

Up to 1 year 3,856 4,265

Over 1 year but up to 5 10,174 11,594

Over 5 years 2,138 3,148

Total 16,168 19,007

Commitments for investments At December 31 2007 there were commitments for investments for a total of € 3,591 thousand. Guarantees issued The detail of these guarantees is as follows:

(in thousands of euro) 2007 2006

Guarantees in favour of third parties 2,744 3,008

Other guarantees in favour of third parties 9,714 9,714

Collateral security provided for debt shown in the balance sheet 5,681 5,681

Guarantees issued refer to borrowings and to guarantees given to certain clients and are recog-nized at the value of the commitment outstanding as of the balance sheet date. The item “Other guarantees in favour of third parties” refers to the commitment of LPDN GmbH towards the employee pension fund of the two business divisions at the time of the acquisition made in 1996. This commitment is covered by contractual obligations on the part of the vendor, a prime German economic operator. Collateral security refers to bonds or privileges granted to lenders against loans obtained for the purchase of assets. Other risks At December 31 2007 the Sogefi group had assets belonging to third parties on the premises of its companies for € 5,937 thousand.


19. INFORMATION ON THE BUSINESS SECTORS The business sectors coincide with the Groups of companies over which CIR S.p.A. has control. These are specifically: - the Sorgenia group: utilities; - the Espresso group: media; - the Sogefi group: automotive components; - the HSS group: healthcare. Geographically, with the exception of the Sogefi group, the business is carried out almost exclu-sively in Italy. A chart showing the breakdown of income components and balance sheet information of the pri-mary sector is shown in the Management Report while details regarding revenues by geographical area (secondary sector) are given in the notes to the financial statements in the section regarding revenues (note 14). The breakdown by geographical area of assets, investments and amortization and write-downs as required by IAS 14 is shown in the following chart. (in thousands of euro) Assets Investments Depreciation/

write-downs Italy 4,906,118 354,715 90,209

Other European countries 1,807,075 30,407 29,670

North America 48,346 826 (877)

South America 95,920 20,918 4,414

Asia 8,531 430 324

Other countries -- -- --

Consolidation adjustments (519,901) (9,783) (1,696)

Total assets 6,346,089 397,513 122,044

20. JOINT VENTURES As of December 31 2007 the joint ventures were Tirreno Power and Oakwood. The latter, as sta-ted above, was acquired in the month of January in a joint venture with Merrill Lynch. International accounting standards give two methods for consolidating holdings in joint ventures: . the usual method, which involves pro-rata consolidation; . the alternative method which involves use of the equity method. The Group has adopted the equity method for the sake of consistency with the way the accounts were presented previously. The chart below shows the key financial figures of the company Tirreno Power and of the Oak-wood group.


Tirreno Power

(in millions of euro) Financial year Financial year Change in Change 2007 2006 absolute terms % Income statement

Electricity sold (TWh) 12.6 12.4 0.2 --

Revenues from sales and services 1,051.6 983.9 67.7 6.9

Gross operating margin 254.4 216.4 38.0 17.6

Net income 102.6 66.0 36.6 55.5

31.12.2007 31.12.2006 Change in absolute terms Balance sheet

Net invested capital 1,445.4 1,309.5 135.9

Net financial debt 1,008.4 978.2 30.2

Shareholders’ equity 436.9 331.2 105.7

No. of employees 607 626 (19.0)

The pertinent part of the earnings of Tirreno Power, consolidated using the equity method on the basis of values determined by the application of IAS/IFRS accounting standards, totalled € 51.3 million in 2007, up from € 33 million in 2006. Oakwood

(in millions of euro) 31.12.2007

Assets - Current 167,248 - Non-current 1,526,053

Total assets 1,693,301

Liabilities and equity - Current 1,717,507 - Non-current 116,188

Shareholders’ equity (140,394)

Total liabilities and equity 1,693,301

Income statement Interest income 105,709 Commission income 132,682

Total income 238,391

Interest expense 105,064

Commission expense 105,319

Operating costs and other 153,884

Taxes 699

Total costs 364,966

Net income 126,575


In accordance with the terms of the revised IAS 38, the goodwill of Tirreno Power and Oakwood was subjected to an impairment test at December 31 2007. 21. BUSINESS COMBINATIONS Effective for accounting purposes as from July 1 2007 the HSS group acquired the S.Stefano group. The following chart shows the main balance sheet figures of the S.Stefano group as of the acquisition date: (in thousands of euro)

Asset items Equity and liability items

Intangible assets 536 Group equity 24,232

Tangible assets 37,327 Minority interests 1,649

Financial assets 6,522 TFR Fund 11,038

Total fixed assets 44,385 Banks and borrowings 50,199

Trade receivables 56,017 Other borrowings 132

Cash and cash equivalents 3,822 Trade payables 5,487

Other receivables 4,761 Other payables 16,248

Total assets 108,985 Total equity and liabilities 108,985

The excess amount paid for acquiring the identifiable assets and liabilities as well as any potential liabilities as of the date of the acquisition represents goodwill, which in this case was recognized to the extent of € 33,352 thousand. In December 2007 Sorgenia acquired 99.9% of the capital of Société Française d’Eoliennes (SFE), whose balance sheet details as of December 31 2007 are shown in the chart below: (in thousands of euro)

Balance sheet asset items Equity and liability items

Intangible assets 59 Risk provisions 3,951

Tangible assets 115,071 Banks and borrowings 117,456

Financial assets 10,985 Other payables 4,775

Total fixed assets 126,115 Total payables 126,182

Cash and cash equivalents 9,979 Group Shareholders’ equity 16,825

Current assets 6,930 Minority interests 17

Total assets 143,024 Total equity and liabilities 143,024

On acquisition of the company, goodwill was recognized for an amount of € 229.3 million.


22. NET FINANCIAL POSITION The net financial position, in accordance with the terms of Consob resolution no. 6064293 of July 28 2006, can be broken down as follows: (in thousands of euro) 31.12.2007 31.12.2006

A. Cash and bank deposits 694,127 446,484

B. Other free cash flow 372,622 372,867

C. Securities held for trading 275,897 654,248

D. Cash and cash equivalents (A) + (B) + (C) 1,342,646 1,473,599

E. Current financial receivables 37,171 21,354

F. Current bank borrowings (*) (159,316) (338,730)

G. Current part of non-current debt (83,141) (60,353)

H. Other current borrowings -- (231)

I. Current financial debt (F) + (G) + (H) (242,457) (399,314)

J. Net current financial position (I) + (E) + (D) 1,137,360 1,095,639

K. Non-current bank borrowings (**) (1,204,348) (728,444)

L. Bonds and notes issued (1,189,672) (1,187,750)

M. Other non-current borrowings (**) (76,822) (30,070)

N. Non-current financial debt (K) + (L) + (M) (2,470,842) (1,946,264)

O. Net financial position (J) + (N) (1,333,482) (850,625)

(*) The amount of € 67,284 thousand (€ 159,316 - € 92,032) is classified in the Balance Sheet under the item “Other borrowings”. (**) Classified under the item “Other borrowings” – Non-current liabilities

23. LEGAL DISPUTES It should be remembered that certain companies of the Group have legal proceedings outstanding against which their respective Boards have set aside risk provisions for amounts considered to be appropriate, taking into account the opinion of their consultants and based on the degree of likeli-hood that significant liabilities will actually occur.


CHART SHOWING FEES FOR THE YEAR FOR SERVICES PROVIDED TO THE COM-PANY BY THE FIRM OF AUDITORS AND BY ENTITIES BELONGING TO THE NET-WORK OF THE FIRM OF AUDITORS (Consob Resolution no. 11971/99) As required by CONSOB resolution 11971/99, the chart below shows the fees charged for ser-vices provided by the firm of auditors PricewaterhouseCoopers S.p.A. and by other entities be-longing to the same network:

(in thousands of euro) 2007

Fees charted to the Parent Company of the Group:

a) by the firm of auditors, for auditing services 152

b) by the firm of auditors:

- for auditing services for the purposes of certification 15

- for other services 40

c) by entities belonging to the network of the firm of auditors, for providing other services --

Fees charge to the subsidiaries:

a) by the firm of auditors, for auditing services 1,442

b) by the firm of auditors:

- for auditing services for the purposes of certification 89

- for other services 468

c) by entities belonging to the network of the firm of auditors, for providing other services 267


24. CHART SHOWING THE KEY FIGURES OF THE FINANCIAL STATEMENTS FOR 2006 OF THE PARENT COM-PANY COFIDE S.p.A. (Art. 2497-bis paragraph 4 Civil Code)

BALANCE SHEET (in euro)

ASSETS 31.12.2006

NON-CURRENT ASSETS 570,613,897

CURRENT ASSETS 170,714,131

TOTAL ASSETS 741,328,028

LIABILITIES AND SHAREHOLDERS’ EQUITY 31.12.2006

SHAREHOLDERS’ EQUITY 576,863,179

NON-CURRENT LIABILITIES 161,979,575

CURRENT LIABILITIES 2,485,274

TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY 741,328,028 INCOME STATEMENT (in euro)

MISCELLANEOUS REVENUES AND INCOME 2,004,989

COSTS FOR PURCHASE OF GOODS (69,268)

COSTS FOR SERVICES (2,800,264)

PERSONNEL COSTS (1,654,389)

OTHER OPERATING COSTS (482,476)

AMORTIZATION, DEPRECIATION AND WRITE-DOWNS (74,439)

OPERATING RESULT (3,075,847)

FINANCIAL INCOME 3,144,162

FINANCIAL EXPENSE (5,170,762)

DIVIDENDS 20,894,631

GAINS FROM TRADING SECURITIES --

LOSSES FROM TRADING SECURITIES (102,282)

ADJUSTMENTS TO THE VALUE OF FINANCIAL ASSETS (490,269)

INCOME / LOSS BEFORE TAXES 15,199,633

INCOME TAXES (81,309)

NET INCOME (LOSS) FOR THE YEAR 15,118,324 The financial highlights of the parent company COFIDE S.p.A. are shown in the chart above, which is required by article 2497-bis of the Civil Code. The figures were extrapolated from the financial statements of that company for the year ended December 31 2006. For a correct and full understanding of the equity and financial situation of COFIDE S.p.A. at December 31 2006, and of the results the company obtained in the year ended as of that date, we would refer readers to the financial statements in question which of course include the Report of the Statutory Auditors and that of the Independent Auditors and are available at the Company offices or from Borsa Italiana.


101

CIR Group

Consolidated Financial Statements of the directly controlled subsidiaries as of December 31 2007

SORGENIA GROUP

ESPRESSO GROUP

SOGEFI GROUP

HSS GROUP

SORGENIA GROUP

CONSOLIDATED BALANCE SHEET(in thousands of euro)

ASSETS 31.12.2007 31.12.2006

NON-CURRENT ASSETSIntangible assets 241,761 13,011 Tangible assets 879,340 507,524 Investments in companies valued at equity 252,997 187,055 Other equity investments 550 2,899 Other non-current receivables 76,348 219,710 Non-current securities 4,076 -- Advance taxes 17,749 11,004

TOTAL NON-CURRENT ASSETS 1,472,821 941,203

CURRENT ASSETSInventories 56,845 65,956 Current trade receivables 472,682 444,818 Other current receivables 71,861 117,142 Cash and cash equivalents 111,912 59,756 Shareholder receivables for capital to be called up 70 420

TOTAL CURRENT ASSETS 713,370 688,092

TOTAL ASSETS 2,186,191 1,629,295


SHAREHOLDERS' EQUITYShare capital 8,179 8,077 Other accumulated reserves 341,678 371,613 Retained earnings (losses) of Group 124,003 76,709 Payment on account of dividends to minority shareholders -- (8,513)Net income (loss) for the year 76,855 69,217

TOTAL SHAREHOLDERS' EQUITY 550,715 517,103 of which:SHAREHOLDERS' EQUITY OF THE GROUP 487,231 396,906 MINORITY SHAREHOLDERS' EQUITY 63,394 120,196

NON-CURRENT LIABILITIESNon-current bonds in circulation 3,445 -- Other non-current borrowings 34,660 -- Other non-current liabilities 180 -- Deferred taxes 1,241 1,337 Personnel provisions 8,230 1,730 Provisions for risks and losses 10,486 5,358 Non-current loans from banks 921,424 428,276

TOTAL NON-CURRENT LIABILITIES 979,666 436,701

CURRENT LIABILITIESCurrent bank borrowings 46,373 233,347 Current bonds in circulation 397 -- Other current borrowings 25,981 9 Current trade payables 533,618 379,110 Other current liabilities 37,504 52,927 Provisions for current risks and losses 11,937 10,098

TOTAL CURRENT LIABILITIES 655,810 675,491


SORGENIA GROUP

CONSOLIDATED INCOME STATEMENT(in thousands of euro)

2007 2006

SALES REVENUES 1,861,692 1,916,085

Change in inventories 16,302 46,812

Costs for purchase of goods (1,650,809) (1,847,333)

Costs for services (76,559) (42,624)

Personnel costs (30,749) (18,715)

Other operating income 19,563 49,249

Other operating costs (38,523) (16,098)

Adjustments to the value of investments valued at equity 51,197 33,018

Amortization, depreciation and write-downs (25,161) (7,731)

OPERATING INCOME 126,953 112,663

Financial income 13,454 12,509

Financial expense (34,345) (21,322)

Dividends 261 24

INCOME (LOSS) BEFORE TAXES FROMOPERATING ACTIVITY 106,323 103,874

Income taxes (29,468) (34,657)

NET INCOME (LOSS) AFTER TAXES FROMOPERATING ACTIVITY 76,855 69,217

Net income (loss) from discontinued operations -- --

NET INCOME (LOSS) FOR THE YEAR 76,855 69,217

of which:

- NET INCOME/LOSS - MINORITY INTERESTS 65,186 56,264

- NET INCOME/LOSS - THE GROUP 11,669 12,953

ESPRESSO GROUP


ASSETS 31.12.2007 31.12.2006

Intangible assets with indefinite useful life 649,211 638,163 Other intangible assets 3,982 4,432 Intangible assets 653,193 642,595

Tangible assets 220,362 233,337 Investments valued at equity 26,866 27,007 Other equity investments 4,088 4,043 Non-current receivables 1,910 3,075 Deferred tax assets 45,631 68,667

NON-CURRENT ASSETS 952,050 978,724

Inventories 30,532 35,631 Trade receivables 303,253 285,804 Securities 50 50 Tax receivables 22,969 37,205 Other receivables 27,574 25,437 Cash and cash equivalents 152,140 172,643

CURRENT ASSETS 536,518 556,770

TOTAL ASSETS 1,488,568 1,535,494


Share capital 65,167 65,150 Reserves 310,447 344,215 Retained earnings (losses) 64,153 49,828 Net income (loss) for the year 95,598 103,561

Shareholders' equity of the Group 535,365 562,754

Minority shareholders' equity 11,103 10,526

SHAREHOLDERS' EQUITY 546,468 573,280

Borrowings 396,511 413,898 Provisions for risks and losses 10,846 12,018 TFR and other personnel provisions 92,639 107,704 Deferred tax liabilities 102,895 110,818

NON-CURRENT LIABILITIES 602,891 644,438

Borrowings 20,549 21,517 Provisions for risks and losses 15,460 12,500 Trade payables 187,046 175,989 Tax payables 24,705 22,769 Other payabes 91,449 85,001

CURRENT LIABILITIES 339,209 317,776

TOTAL LIABILITIES 942,100 962,214


ESPRESSO GROUP


2007 2006

Sales revenues 1,098,166 1,102,565

Change in product inventories 662 (327)

Other operating income 17,640 17,284

Costs for purchases (167,287) (171,407)

Costs for services (422,483) (439,622)

Other operating expenses (20,459) (17,021)

Valuation of investments at equity 1,206 1,407

Personnel costs (284,039) (288,464)

Amortization, depreciation and write-downs (42,815) (41,165)

Operating income 180,591 163,250 Net financial income/(expense) (17,576) (19,601)

Income before taxes 163,015 143,649 Taxes (66,494) (39,750)

NET INCOME ( LOSS) 96,521 103,899

Net income - Minority Shareholders (923) (338)Net income - the Group 95,598 103,561

Basic earnings per share 0.230 0.243

Diluted earnings per share 0.221 0.234

SOGEFI GROUP


ASSETS 31.12.2007 31.12.2006

CURRENT ASSETSCash and cash equivalents 63,753 51,519 Other financial assets 956 160 Working capitalInventories 113,168 111,709 Trade receivables 220,097 226,992 Other receivables 5,982 6,010 Tax receivables 10,730 10,952 Other assets 2,551 2,391 TOTAL WORKING CAPITAL 352,528 358,054

TOTAL CURRENT ASSETS 417,237 409,733 NON-CURRENT ASSETSFIXED ASSETS

Land 11,354 15,623 Buildings, plant and machinery 224,284 229,176 Other tangible assets 4,406 4,450 of which finance leases 12,653 18,259 Intangible assets 118,674 117,403

TOTAL FIXED ASSETS 358,718 366,652 OTHER NON-CURRENT ASSETS

Investments in associated companies 101 101 Other available-for-sale financial assets 497 450 Financial receivables -- 301 Other receivables 4,974 5,305 Advance taxes 25,167 26,819

TOTAL OTHER NON-CURRENT ASSETS 30,739 32,976 TOTAL NON-CURRENT ASSETS 389,457 399,628 NON-CURRENT ASSETS HELD FOR SALE 6,756 2,646 TOTAL ASSETS 813,450 812,007


CURRENT LIABILITIESCurrent bank loans 12,418 13,278 Current part of long-term loans and other loans 13,696 18,578 of which finance leases 1,340 1,186 TOTAL SHORT-TERM BORROWINGS 26,114 31,856 Other short-term borrowings for derivatives 469 -- TOTAL SHORT-TERM BORROWINGS AND DERIVATIVES 26,583 31,856 Trade payables and other payables 228,858 234,514 Tax payables 11,821 8,210 Other current liabilities 2,984 2,359

TOTAL CURRENT LIABILITIES 270,246 276,939 NON-CURRENT LIABILITIESMEDIUM/LONG TERM BORROWINGS AND DERIVATIVES

Bank borrowings 118,005 128,402 Other medium/long term loans 12,492 18,000 of which finance leases 9,133 15,306 TOTAL MEDIUM/LONG TERM BORROWINGS 130,497 146,402 Other medium/long term financial liabilities for derivatives -- --

TOTAL MEDIUM/LONG TERM BORROWINGS AND DERIVATIVES 130,497 146,402 OTHER LONG-TERM LIABILITIES

Long-term provisions 58,765 68,465 Deferred taxes 27,228 24,478

TOTAL OTHER LONG-TERM LIABILITIES 85,993 92,943 TOTAL NON-CURRENT LIABILITIES 216,490 239,345 SHAREHOLDERS' EQUITY

Share Capital 59,595 58,826 Reserves and retained earnings (losses) 199,093 170,013 Net income (loss) for the year of the Group 52,200 50,767

TOTAL EQUITY OF SHAREHOLDERS OF THE PARENT COMPANY 310,888 279,606 Minority interests 15,826 16,117

TOTAL SHAREHOLDERS' EQUITY 326,714 295,723 TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY 813,450 812,007

SOGEFI GROUP


2007 2006

Sales revenues 1,071,765 1,018,579

Variable production costs 699,415 653,215

CONTRIBUTION MARGIN 372,350 365,364

Fixed production costs, research and development 115,151 114,264

Amortization and depreciation 44,695 45,036

Fixed sales and distribution costs 38,440 37,719

Administrative and general expenses 60,497 61,761

OPERATING INCOME 113,567 106,584

Restructuring costs 7,558 5,234

Capital losses (gains) on disposals (4,622) (3,969)

Exchange rate (gains) losses 943 843

Other non-operating costs (income) 19,821 21,010

- of which non-recurring 6,116 6,547

EBIT 89,867 83,466

Net financial expense (income) 9,418 10,182

Losses (income) from equity investments (108) (1,594)

INCOME BEFORE TAXES AND MINORITY INTERESTS 80,557 74,878

Income taxes 25,390 21,543

NET INCOME BEFORE MINORITY INTERESTS 55,167 53,335

Loss (income) attributable to minority interests (2,967) (2,568)

NET INCOME OF THE GROUP 52,200 50,767

Earnings per share (Euro):

Basic 0.465 0.457

Diluted 0.461 0.454

HSS GROUP


ASSETS 31.12.2007 31.12.2006

NON-CURRENT ASSETS 251,886 175,576 INTANGIBLE ASSETS 111,505 74,589 TANGIBLE ASSETS 130,052 96,168 OTHER EQUITY INVESTMENTS 5,855 10 TRADE RECEIVABLES 100 -- OTHER RECEIVABLES 1,375 1,332 SECURITIES 153 1,252 DEFERRED TAXES 2,846 2,225

CURRENT ASSETS 106,706 52,852 INVENTORIES 1,543 1,044 TRADE RECEIVABLES 80,961 39,252 OTHER RECEIVABLES 7,140 3,898 FINANCIAL RECEIVABLES 610 -- CASH AND CASH EQUIVALENTS 16,452 8,658

NON-CURRENT ASSETS HELD FOR DISPOSAL -- 44,943

TOTAL ASSETS 358,592 273,371


SHAREHOLDERS' EQUITY 105,034 64,060 SHARE CAPITAL 5,405 4,286 RESERVES 107,515 69,635 RETAINED EARNINGS (LOSSES) (10,094) (10,435)

SHAREHOLDERS' EQUITY OF THE GROUP 102,826 63,486 MINORITY SHAREHOLDERS' EQUITY 2,208 574

NON-CURRENT LIABILITIES 126,758 83,271 OTHER BORROWINGS 101,340 74,825 TRADE PAYABLES 69 -- OTHER PAYABLES 37 1,178 DEFERRED TAXES 8,402 917 PERSONNEL PROVISIONS 16,910 6,351

CURRENT LIABILITIES 126,800 89,698 BANK OVERDRAFTS 25,189 9,776 OTHER BORROWINGS 39,170 34,763 TRADE PAYABLES 38,519 31,266 OTHER PAYABLES 19,023 12,571 PROVISIONS FOR RISKS AND LOSSES 4,899 1,322

LIABILITIES DIRECTLY ASSOCIATED WITH NON-CURRENT ASSETS HELD FOR DISPOSAL -- 36,342

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY 358,592 273,371

HSS GROUP


2007 2006

SALES REVENUES 182,942 99,189

CHANGE IN INVENTORIES -- --

COSTS FOR PURCHASE OF GOODS (13,277) (8,147)

COSTS FOR SERVICES (85,879) (57,071)

PERSONNEL COSTS (58,144) (23,162)

OTHER OPERATING INCOME 3,630 1,752

OTHER OPERATING COSTS (9,068) (6,111)

ADJUSTMENTS TO THE VALUE OF INVESTMENTSVALUED AT EQUITY -- --


OPERATING INCOME (EBIT) 11,124 2,340

FINANCIAL INCOME 475 372

FINANCIAL EXPENSE (8,335) (3,656)

DIVIDENDS -- --

GAINS FROM TRADING SECURITIES 539 --

LOSSES FROM TRADING SECURITIES -- --

ADJUSTMENTS TO THE VALUE OF FINANCIAL ASSETS -- --

PRE-TAX INCOME/(LOSS) 3,803 (944)

INCOME TAXES (3,535) (2,934)

INCOME/(LOSS) FROM DISCONTINUED OPERATIONSAND ASSETS HELD FOR DISPOSAL 176 (933)

NET INCOME/(LOSS) FOR YEAR INCL. MINORITY INTERESTS 444 (4,811)

- NET INCOME/LOSS - MINORITY INTERESTS 97 (379)

- NET INCOME/LOSS OF THE GROUP 347 (4,432)

Earnings per share 0.0642 (1.0342)Diluted earnings per share 0.0598 (0.9882)

110

CIR S.p.A. 111

CIR S.p.A.

Statutory Financial Statements as of December 31 2007

BALANCE SHEET

INCOME STATEMENT

CASH FLOW STATEMENT

STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY

1. BALANCE SHEET

(in euro)

ASSETS Notes %(**) 31.12.2007 %(**) 31.12.2006

NON-CURRENT ASSETS 1,054,025,294 968,361,309 INTANGIBLE ASSETS (4.a) 207,122 80,583

TANGIBLE ASSETS (4.b) 3,381,283 4,575,792

REAL-ESTATE INVESTMENTS (4.c) 19,258,243 17,604,580

EQUITY INVESTMENTS (4.d) 1,029,797,850 944,482,717

MISCELLANEOUS RECEIVABLES (4.e) 146,590 188,832

DEFERRED TAXES (4.f) 1,234,206 1,428,805

CURRENT ASSETS 268,682,706 357,257,579 MISCELLANEOUS RECEIVABLES (5.a) 74,463,317 86,031,991 of which with related parties (*) (5.a) 15,163,047 20.4 34,450,292 40.0

SECURITIES (5.b) 65,645,001 206,493,818

AVAILABLE-FOR-SALEFINANCIAL ASSETS (5.c) 50,735,295 --

CASH AND CASH EQUIVALENTS (5.d) 77,839,093 64,731,770

TOTAL ASSETS 1,322,708,000 1,325,618,888

LIABILITIES AND SHAREHOLDERS' EQUITY %(**) 31.12.2007 %(**) 31.12.2006

SHAREHOLDERS' EQUITY 983,773,408 940,738,402 SHARE CAPITAL (6.a) 395,465,334 390,239,534

RESERVES (6.b) 323,337,102 311,985,099

RETAINED EARNINGS / (LOSSES) (6.c) 185,051,374 201,816,767

NET INCOME FOR THE YEAR 79,919,598 36,697,002

NON-CURRENT LIABILITIES 299,018,240 297,378,012 BONDS AND NOTES (7.a) 295,806,231 295,640,119

DEFERRED TAXES (4.f) -- 179,863

PERSONNEL PROVISIONS (7.b) 3,212,009 1,558,030

CURRENT LIABILITIES 39,916,352 87,502,474 BANK OVERDRAFTS -- 1,903

BORROWINGS FROM RELATED PARTIES (8.a) 14,196,284 43,756,650

OTHER PAYABLES (8.b) 11,561,122 40,709,217 of which to related parties (*) (8.b) 5,924,081 51.2 2,570,661 6.3

PROVISIONS FOR RISKS AND LOSSES (8.c) 14,158,946 3,034,704

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY 1,322,708,000 1,325,618,888

(*) As per Consob resolution no. 6064293 of July 28 2006(**) Percentage of the whole

2. INCOME STATEMENT

(in euro)

Notes %(**) 2007 %(**) 2006

SUNDRY REVENUES AND INCOME (9) 8,114,059 6,276,030 of which with related parties (*) (9) 6,441,000 79.4 5,560,164 88.6

COSTS FOR SERVICES (10) (10,854,272) (9,719,835) of which from related parties (*) (10) (2,251,000) 20.7 (1,955,000) 20.1

PERSONNEL COSTS (11) (8,062,217) (9,090,746)

OTHER OPERATING COSTS (12) (1,977,853) (1,771,695)


OPERATING RESULT (13,602,222) (14,853,929)

FINANCIAL INCOME (13) 9,962,941 12,728,507

of which from related parties (*) 1,154,066 11.6 180,453 1.4

FINANCIAL EXPENSE (14) (18,835,352) (20,958,308) of which with related parties (*) (995,276) 5.3 (1,953,683) 9.3

DIVIDENDS (15) 126,523,162 61,079,051 of which from related parties (*) 126,491,619 100.0 61,045,596 100.0

GAINS FROM TRADING SECURITIES (16) 13,976,745 1,520,047

LOSSES FROM TRADING SECURITIES (17) (56,137,895) (4,913,463)

ADJUSTMENTS TO VALUE OF FINANCIAL ASSETS (18) (6,586,415) (6,972,689)

INCOME / (LOSS) BEFORE TAXES 55,300,964 27,629,216

INCOME TAXES (19) 24,618,634 9,067,786


BASIC EARNINGS PER SHARE (in euro) (20) 0.1067 0.0490 DILUTED EARNINGS PER SHARE (in euro) (20) 0.1057 0.0487

(*) As per Consob resolution no. 6064293 of July 28 2006(**) Percentage of the whole

3. CASH FLOW STATEMENT

(in euro)

OPERATING ACTIVITY


ADJUSTMENTS:

AMORTIZATION, DEPRECIATION AND WRITE-DOWNS 821,939 547,683

LOSSES/(GAINS) FROM SALE OF INVESTMENTSAND CURRENT SECURITIES (9,061,350) 4,135,940

ACTUARIAL VALUATION OF STOCK OPTION PLANS 3,610,327 2,212,607

PROVISIONS TO TFR FUND 259,447 239,739

ADJUSTMENTS TO VALUE OF FINANCIAL ASSETS 6,586,415 6,972,689

(INCREASE) REDUCTION IN NET WORKING CAPITAL (36,654,448) (24,846,430) of which with related parties 43,622,555 (27,928,023)

CASH FLOW FROM OPERATING ACTIVITY 45,481,928 25,959,230

of which:- interest income (expense) (8,510,508) (6,182,035)- dividends received 126,523,162 61,079,051 - income tax receipts (payments) * 9,631,908 9,527,755

INVESTMENT ACTIVITY

(PURCHASE)/SALE OF CURRENT SECURITIES 82,328,019 (35,440,285)

PURCHASE OF FIXED ASSETS (76,462,327) (50,850,254)

CASH FLOW FROM INVESTMENT ACTIVITY 5,865,692 (86,290,539)

FUNDING ACTIVITY

RECEIPTS FOR CAPITAL INCREASES 14,667,635 1,695,042

PAYMENT OF SEVERANCE AND LEAVING INDEMNITY (286,480) (144,020)

PURCHASE OF OWN SHARES (15,376,909) (15,563,782)

DIVIDEND PAYOUT (37,242,640) (37,520,180)

CASH FLOW FROM FUNDING ACTIVITY (38,238,394) (51,532,940)

INCREASE (REDUCTION) IN NET CASH AND CASH EQUIVALENTS 13,109,226 (111,864,249)

NET CASH AND CASH EQUIVALENTS AT START OF YEAR 64,729,867 176,594,116

NET CASH AND CASH EQUIVALENTS AT CLOSE OF YEAR 77,839,093 64,729,867

* The amounts refer to current tax inflows after joining the tax consolidation

2007 2006

4. STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY

(in euro) Share Reserves Retained Net income Totalcapital earnings (losses) for the year

BALANCE AT DECEMBER 31 2005 389,620,834 369,175,921 189,622,482 4,798,476 953,217,713 Capital increases 618,700 1,076,342 -- -- 1,695,042 Dividends to Shareholders -- -- (32,721,704) (4,798,476) (37,520,180)Cancellation of AGM resolution of April 27 2005to buy back own shares -- (54,815,390) 54,815,390 -- -- Adjustment for own share transactions -- (5,664,381) (9,899,401) -- (15,563,782)Notional recognition of stock options -- 2,212,607 -- -- 2,212,607 Net income for the year -- -- -- 36,697,002 36,697,002

BALANCE AT DECEMBER 31 2006 390,239,534 311,985,099 201,816,767 36,697,002 940,738,402 Capital increases 5,225,800 9,441,835 -- -- 14,667,635 Dividends to Shareholders -- -- (1,463,063) (35,779,577) (37,242,640)Amount available to Board of Directors -- -- -- (917,425) (917,425)Unclaimed dividends as per Bylaws art. 23 -- 55,431 -- -- 55,431 Adjustment for own share transactions -- (74,579) (15,302,330) -- (15,376,909)Notional recognition of stock options -- 1,929,316 -- -- 1,929,316 Net income for the year -- -- -- 79,919,598 79,919,598

BALANCE AT DECEMBER 31 2007 395,465,334 323,337,102 185,051,374 79,919,598 983,773,408

116 CIR S.p.A.

EXPLANATORY NOTES TO THE FINANCIAL STATEMENTS OF THE PARENT COMPANY 1. ACCOUNTING PRINCIPLES APPLIED These financial statements have been prepared in accordance with international accounting stan-dards (IAS/IFRS) and their respective interpretations (Standing Interpretation Committee) pub-lished by the International Accounting Standards Boards (IASB) and are expressed in euro. The balance sheet is shown in terms of current and non-current assets and liabilities, while the in-come statement gives a breakdown into the different items of expense. The consolidated cash flow statement was prepared using the indirect method. 1.a. Intangible assets (IAS 38) Intangible assets are recognized only if they can be separately identified, if it is probable that they will generate future economic benefits and if the cost can be measured reliably. Intangible assets with a finite useful life are valued at purchase or production cost net of accumu-lated amortization and impairment. Intangible assets are initially recognized at purchase or production cost. Purchase cost is repre-sented by the fair value of payments and any additional cost directly incurred for preparing the as-set for use. The purchase cost is the equivalent price in cash as of the date of recognition and therefore, where payment is deferred beyond normal terms of credit, the difference compared with the cash price is recognized as interest for the whole period of deferment. Amortization is calculated on a straight-line basis following the expected useful life of the asset and starts when the asset is ready for use. The carrying value of intangible assets is maintained as long as there is evidence that this value can be recovered through use; to this end at least once a year an impairment test is carried out to check that the intangible asset is able to generate future cash flows. Intangible assets with an indefinite useful life are not amortized but are constantly monitored for any permanent loss of value. Development costs are recognized as intangible assets when their cost can be measured reliably, when there is a reasonable assumption that the asset can be made available for use or for sale and that it is able to generate future benefits. Once a year or any time there are reasons which justify it, capitalized costs are subjected to an impairment test. Research costs are charged to the income statement as and when they are incurred.

CIR S.p.A. 117

Trademarks and licenses, which are initially recognized at cost, are subsequently accounted for net of amortization and any impairment. The period of amortization is defined as the lower of the contractual duration for use of the license and the useful life of the asset. Software licenses, including associated costs, are recognized at cost and are recorded net of amor-tization and of any impairment. 1.b. Tangible assets (IAS 16) Tangible assets are measured at purchase price or at production cost and are recognized net of any accrued depreciation. Cost includes associated expenses and any direct and indirect costs incurred at the moment of ac-quisition and necessary to make the asset ready for use. Fixed assets are depreciated on a straight-line basis each year in relation to the remaining useful life of the various assets. Real estate not held for instrumental or operating purposes (investment properties) is classified under a special item of assets and is accounted for on the basis of the terms of IAS 40 “Investment properties”. Should there be any events which one can assume will cause a lasting reduction in the value of an asset, its carrying value is checked against its recoverable value, which is the higher of fair value and value in use. Fair value is defined on the basis of values expressed by the active market, by recent transactions or from the best information available to determine the potential amount obtainable from the sale of the asset. Value in use is determined from the net present value of cash flows resulting from the use ex-pected of the same asset, applying the best estimate of its residual useful life and a rate that also takes into account the implicit risk of the specific business sectors in which the company operates. This valuation is carried out for each individual asset or for the smallest identifiable independent cash generating unit (CGU). Where there is a negative difference between the values stated above and the carrying value then the asset is written down, while as soon as the reasons for such loss in value cease to exist then the asset is revaluated. Write-downs and revaluations are posted to the income statement. 1.c. Real estate investments/investment property (IAS 40) An investment property is a property, either land or building – or part of a building – or both, o-wned by the owner or by the lessee, with a financial leasing agreement, for the purpose of receiv-ing lease payments or for obtaining a gain on the capital invested or for both of these reasons, ra-ther than for the purpose of directly using it for the production or supply of goods or services or for the administration of the company or for sales, in ordinary business activities.

118 CIR S.p.A.

The cost of an investment property is represented by its purchase price, any improvements made, and any replacement or extraordinary maintenance. According to the cost method, estimation is made net of depreciation and of any accumulated im-pairment. At the moment of disposal or in the event of permanent non-use of the asset, all related income and expense will be charged to the income statement. 1.d. Impairment of tangible assets (IAS 36) Periodically and whenever there is any specific indication, tangible assets are subjected to an im-pairment test to see whether they have undergone any loss in value. The impairment test consists of an estimate of the recoverable value of the asset which is then compared with its net carrying amount. If the recoverable value is lower than the carrying amount, the latter is written down and the impairment loss is charged to the statement of income. If at a later date the reasons for the write-down cease to exist, the original carrying amount is re-stored and posted to the income statement. 1.e. Investments in subsidiaries (IAS 27) In accounting for investments in subsidiaries the cost method was adopted rather than fair value measurement. 1.f. Other equity investments Investments in companies where the Company does not exercise a significant influence are ac-counted under IAS 39 and are therefore classified as available-for-sale investments and are meas-ured at fair value or at cost if it is not possible to determine a fair value or a market price. 1.g. Receivables and payables (IAS 32 and 39) Receivables are recognized at amortized cost and measured at their presumed realization value, while payables are recognized at amortized cost. Receivables and payables in foreign currencies, which are originally recognized at the spot rates of the transaction date, are adjusted to the year-end spot exchange rates and any exchange gains and losses are recognized to the income statement. 1.h. Securities (IAS 32 and 39) In accordance with IAS 32 and IAS 39 investments in companies other than subsidiaries and as-sociates are classified as available-for-sale financial assets and are measured at fair value. Gains and losses resulting from fair value adjustments are recorded in a special equity reserve. In the event of permanent losses of value or of disposal, the gains and losses recognized previously to shareholders’ equity are then posted to the income statement.

CIR S.p.A. 119

It should be noted that purchases and sales are recognized on the trading date of the transaction. This category also includes financial assets either bought or issued and then held for trading purposes or classified at fair value through profit and loss in application of the fair value op-tion. For a more complete description of the treatment of financial instruments we would refer readers to the note specially prepared on the subject. 1.i. Income taxes (IAS 12) Current taxes are recorded and determined on the basis of a realistic estimate of taxable income according to current tax regulations and taking into account any exemptions that may apply. Deferred taxes are calculated on the basis of time differences, which are taxable or deductible, be-tween the carrying values of assets and liabilities and their tax bases and are classified under non-current assets and liabilities. A deferred tax asset is recognized to the extent that it is probable that future taxable profit will be available against which the deductible temporary differences can be utilized. The carrying value of deferred tax assets is subject to periodic analysis and is reduced to the ex-tent to which it is no longer probable that there will be sufficient taxable income to allow the benefit of this deferred asset to be utilized. 1.l. Cash and cash equivalents (IAS 32 and 39) Cash and cash equivalents include cash in hand, call deposits and short-term and high-liquidity financial assets, which are easily convertible into cash and which have a risk of change in value that is irrelevant. 1.m. Shareholders’ equity Ordinary shares are recorded at nominal value. Costs directly attributable to the issuance of new shares are deducted from the shareholders’ equity reserves, net of any related tax benefit. Own shares are classified in a special item and are deducted from reserves; any subsequent trans-action of sale, re-issuance or cancellation will have no impact on the income statement but will affect only shareholders’ equity. Unrealized gains and losses, net of tax, on financial assets classified as “available for sale” are re-corded in shareholders’ equity in the fair value reserve. The reserve is reversed to the income statement when the asset is realized or when a permanent impairment loss to the said asset is recognized. The item “Retained earnings (losses)” includes accrued earnings and balances transferred from other reserves when these become free of any limitations to which they have been subject. This item also shows the cumulative effect of the changes in accounting principles and/or the correc-tion of errors which are accounted for in accordance with IAS 8.

120 CIR S.p.A.

1.n. Borrowings (IAS 32 and 39) Loans are initially recognized at cost, represented by their fair value net of any transaction costs incurred. Subsequently loans are measured at amortized cost calculated by applying the effective interest rate, taking into consideration any issuance costs incurred and any premium or discount applied at the time when the instrument is settled. 1.o. Provisions for risks and losses (IAS 37) Provisions for risks and losses refer to liabilities which are extremely likely but where the amount and/or maturity is uncertain. These are the result of past events which will cause a future dis-bursement. Provisions are recognized exclusively in the presence of a current obligation, either legal or constructive, towards third parties which implies an outflow and when a reliable estimate of the amount involved can be made. The amount recognized as a provision is the best estimate of the disbursement required to fulfil the obligation as of the balance sheet date. The provisions rec-ognized are re-examined at the closing date of each accounting period and are adjusted to repre-sent the best current estimate. Changes in the estimate are recognized to the income statement. When the estimated disbursement relating to the obligation is expected in a time horizon longer than normal payment terms and the discount factor is significant, the provision represents the pre-sent value, discounted at a risk-free interest rate, of the expected future payments necessary to dis-charge the obligation. Contingent assets and liabilities (possible assets and liabilities, or those not recognized because no reliable estimate can be made) are not recognized. However specific disclosure on such items is given. 1.p. Revenue recognition (IAS 18) Revenues for the rendering of services are recognized at the moment when the service is rendered, with reference to the state of completion of the activity as of the balance sheet date. Dividend and interest income are recognized as follows: - Dividends, in the year in which they are received; - Interest, using the effective interest rate method (IAS 39). 1.q. Employee benefits (IAS 19) Benefits to be paid to employees after the termination of their employment and other long term benefits are subject to actuarial valuation. Following this methodology, liabilities recognized represent the present value of the obligation adjusted for any actuarial gains or losses which have not been accounted for. Financial Law no. 296/2006 (Budget 2007) introduced some important changes to the way the TFR is regulated and introduced the possibility for workers to transfer their TFR maturing as from January 1 2007 to pension schemes of their choice. All TFR that had accumulated as of December 31 2006 for employees who exercised this choice, while still remaining as a defined benefit plan, was determined using actuarial methods which, however, excluded the actuarial/financial ele-

CIR S.p.A. 121

ments that refer to future salaries. In view of the fact that this new calculation method reduces the fluctuation of actuarial gains/losses, the decision was made to abandon the so-called corridor method and to recognize all actuarial gains and losses to the Income Statement. Accounting standard IFRS 2 “Share-based payments” issued in February 2005 with validity as form January 1 2005 requires in its transitional instructions that application should be retrospec-tive in all cases where stock options were assigned after November 7 2002 and for which on the date on which this condition took effect the vesting conditions of the plans had not yet matured. In accordance with this principle the CIR Group now measures and recognizes the notional cost of stock options to the income statement under personnel costs and apportions them throughout the vesting period of the benefit, with an offset in the appropriate reserve of shareholders’ equity. The cost of the option is determined at the moment when the plan is awarded using special models and multiplying by the number of options exercisable in the reporting period, which are deter-mined using the aid of appropriate actuarial variables. Similarly, the cost of awarding phantom stock options is determined with reference to the fair va-lue of the options at the award date and is charged to the income statement under personnel costs on the basis of the vesting period. Unlike for stock options, the offset is in liabilities (miscellane-ous personnel provisions) and not in an equity reserve. Until the liability has matured, its fair value is recalculated at each balance sheet date and on the date on which disbursement is actually made, posting all fair value changes to the income statement. 1.r. Derivative instruments (IAS 32 and 39) Derivative instruments are measured at fair value. Derivatives not for hedging purposes are classified as financial instruments at fair value through profit and loss (FVTPL). The classification of a derivative as a hedge must be formally documented and the degree of “ef-fectiveness” of the hedge must be specified. For accounting purposes hedging transactions can be classified as: - Fair value hedges – where the effects of the hedge are recognized to the income statement; - Cash flow hedges – where the effective portion of the hedge is recognized directly to share-

holders’ equity while the non-effective part is recognized to income statement; - Hedges of a net investment in a foreign operation – where the effective portion of the hedge is

recognized directly to shareholders’ equity while the non-effective part is recognized to the income statement.

As of December 31 2007 there were no hedging derivatives on the books. 1.s. Foreign currency translation (IAS 21) The Company’s functional currency is the euro, which is the currency in which its financial state-ments are prepared and published. Transactions carried out in foreign currencies are initially recognized at the spot exchange rate on the date of the transaction.

122 CIR S.p.A.

At the balance sheet date monetary assets and liabilities denominated in foreign currencies are translated at the spot exchange rate prevailing on that date. Non-monetary items measured at historical cost in a foreign currency are translated using the his-torical exchange rate prevailing on the date of the transaction. Non-monetary items measured at fair value are translated using the spot exchange rate at the date on which the measurements are determined for the financial statements. There were no assets or liabilities in foreign currencies recorded in the financial statements as of December 31 2007. 1.t. Adoption of new accounting standards It should be stated that in financial year 2007 the Group adopted the following Principles, Inter-pretations and Updates to the standards already published: - IFRIC 7 – Applying the Restatement Approach under IAS 29 in Hyperinflationary Economies; - IFRIC 8 – Scope of application of IFRS 2; - IFRIC 9 – Reassessment of Embedded Derivatives; - IFRIC 10 – Interim Reporting and Impairment; - IFRS 7 – Financial Instruments: Disclosures; - IAS 1 – (Update) Notes on Capital; - IAS 23 – (Update) Borrowing Costs. The Group decided not to opt for the early adoption of the following Principles, Interpretations and Updates: - IFRS 8 (Operating Segments) - IFRIC 11 (Group and Treasury Share Transactions – IFRS 2) - IFRIC 12 (Service Concession Arrangements) - IFRIC 13 (Customer Loyalty Programmes) - IFRIC 14 (The Limit on a Defined Benefit Asset, Minimum Funding Requirements and their Interaction) - IAS 23 (Borrowing Costs) revised - IAS 1 Presentation of Financial Statements (revised) - IFRS 3 Business Combinations (revised) - IAS 27 Consolidated and Separate Financial Statements (revised) - IFRS 2 Share-based Payments - Vesting Conditions and Cancellation (revised) which will become mandatory in following years. 1.u. Earnings per share (IAS 33) Basic earnings per share are determined by dividing the net income attributable to ordinary share-holders by the weighted average number of ordinary shares in circulation during the period. Diluted earnings per share are calculated by adjusting the weighted average number of ordinary shares in circulation to take into account the effect of all potential ordinary shares.

CIR S.p.A. 123

2. FINANCIAL INSTRUMENTS Financial instruments take on a particular significance in the economic and financial structure of the CIR Group and for this reason, in order to give a better and clearer understanding of financial issues, it was considered useful to devote a special section to the accounting treatment of IAS 32, IAS 39 and IFRS 7. According to IAS 32 financial instruments are classified into four categories:

a) Financial instruments that are valued at fair value through profit and loss (FVTPL) in ap-plication of the fair value option, which are held for trading purposes;

b) Investments held to maturity (HTM); c) Loans and receivables (L&R); d) Available-for-sale financial assets (AFS).

Classification depends on Financial Management’s intended use of the financial instrument in the business context and each involves a different measurement for accounting purposes. Financial transactions are recognized on the basis of their value date. Financial instruments at fair value through profit and loss Instruments are classified as such if they satisfy one of the following conditions: - They are held for trading purposes; - They are a financial asset designated on adoption of the fair value option, the fair value of

which can be reliably determined. Trading generally means frequent buying and selling with the aim of generating profit on price movements in the short term. Derivatives are included in this category unless they are designated as hedge instruments. The initial designation of financial instruments, other than derivatives and those held for trading, as instruments at fair value through profit and loss in adoption of the fair value option is limited to those instruments that meet the following conditions:

a) Designation according to the fair value option eliminates or significantly reduces account-ing mismatches;

b) A group of financial assets, financial liabilities or both are managed and their performance is measured on the basis of their fair value following a documented investment risk strat-egy, and

c) An instrument contains an implicit derivative which meets particular conditions. The designation of an individual instrument to this category is definitive, is made at the moment of initial recognition and cannot be modified. Investments held to maturity This category includes non-derivative instruments with fixed payments or payments that can be determined and that have a fixed maturity, and which it is intended and possible to hold until ma-turity. These instruments are measured at amortized cost and constitute an exception to the general measurement principle of fair value. Amortized cost is determined by applying the effective interest rate of the financial instrument, taking into account any discounts or premiums received or paid at the moment of purchase, and recognizing them throughout the whole life of the instrument until its final maturity.

124 CIR S.p.A.

Amortized cost represents the initial recognition value of a financial instrument, net of any capital repayments and of any impairment, plus or minus the cumulated amount of the differences be-tween its initial value and its value at maturity calculated using the effective interest rate method. The effective interest rate method is a calculation criterion used to assign financial expenses to their appropriate time period. The effective interest rate is the rate that gives a correct present value to expected future cash flows until maturity, so as to obtain the net present carrying value of the financial instrument. If even one single instrument belonging to this category is sold before maturity, for a significant amount and where there is no special justification for this, the tainting rule is applicable and re-quires that the whole portfolio of securities classified as Held To Maturity be reclassified and measured at fair value, and this category cannot then be used in the two following years. Loans and receivables This refers to financial instruments which are not derivatives, have payments that are either fixed or can be determined, which are not quoted on an active market and which are not intended to be traded. This category includes trade receivables (and payables), which are classified as current assets with the exception of the part due in over 12 months from the balance sheet date. The measurement of these instruments is made by applying the method of amortized cost, using the effective interest rate and taking into account any discounts or premiums obtained or paid at the moment of acquisition and recognizing them throughout the whole life of the instrument until its final maturity. Available-for-sale financial assets This is a “residual” category which includes non-derivative financial instruments that are desig-nated as available for sale and are not included in any of the previous categories. Financial instruments held for trading are recognized at their fair value plus any transaction costs. Gains and losses are recognized to a separate item of equity until the financial instruments are sold or have been impaired. In such cases the profit or loss accumulated under shareholders’ eq-uity is released to the income statement. Fair value is the amount for which an asset can be exchanged or a liability can be settled, between knowledgeable, willing parties in a transaction at arm’s length. In the case of securities listed on regulated markets, the fair value is the bid price at the close of trading on the last day of the accounting period. Where no market prices are available, fair value is determined either on the basis of the fair value of another financial instrument that is substantially similar or by using appropriate financial tech-niques (for example the discounted cash flow method). Investments in financial assets can be eliminated from the balance sheet, or derecognized, only when the contractual rights to receive their respective financial cash flows have expired or when the financial asset is transferred to third parties together with all its associated risks and rewards. 3. ACCOUNTING PRINCIPLES, CHANGES IN ACCOUNTING ESTIMATES AND ERRORS The criteria for making estimates and measurements are re-examined on a regular basis and are based on historical experience and on other factors such as expectations of possible future events that are reasonably likely to take place.

CIR S.p.A. 125

If the initial application of a principle affects the current year or the previous one, its effect is rec-ognized by indicating the change resulting from any transitional rules, the nature of the change, the description of the transitional rules, which may also affect future years, and the amount of any adjustments relating to years preceding those being presented. If a voluntary change of a principle affects the current or previous year this effect is shown by in-dicating the nature of the change, the reasons for the adoption of the new principle, and the amount of any adjustments made for years preceding those being presented. In the event of a new principle/interpretation issued but not yet in force, an indication is given of the fact, of its potential impact, the reason for the principle/interpretation, the date on which it will take effect and the date on which it will first be applied. A change in accounting estimates involves an indication of the nature and the impact of the change. Estimates are used mainly to show impairment of assets recorded, provisions made for risks, employees benefits, taxes and other provisions and reserves. Estimates and assumptions are reviewed regularly and the effects of any such changes are reflected in the income statement. Lastly, the treatment of accounting errors involves an indication of the nature of the error, the a-mount of the adjustments to be made at the beginning of the first accounting period after it was discovered.

4. NON-CURRENT ASSETS

4.a INTANGIBLE ASSETS

2006Historical Accum. amort. Balance

(in thousands of euro) cost and write-downs 31.12.2005

Concessions, licenses, trademarks and similar rights 421 (365) 56

2007Historical Accum. amort. Balance

(in thousands of euro) cost and write-downs 31.12.2006

Concessions, licenses, trademarks and similar rights 474 (393) 81 Assets under construction and advance payments -- -- -- Total 474 (393) 81

Description %

Concessions, licenses, trademarks and similar rights 5-30%

AMORTIZATION RATES

BALANCE SHEET

Opening position

Opening position

Acquisitions Amort. and Historical Accum. amort. Balancecost acc. amort. write-downs cost and write-downs 31.12.2006

53 -- -- (28) 474 (393) 81

Acquisitions Amort. and Historical Accum. amort. Balancecost acc. amort. write-downs cost and write-downs 31.12.2007

32 -- -- (34) 506 (427) 79 128 -- -- -- 128 -- 128 160 -- -- (34) 634 (427) 207

Closing positionDisposals


Changes in the period Closing positionDisposals

4.b. TANGIBLE ASSETS

2006 Changes in the periodHistorical Accum. deprec. Balance Acquisitions

(in thousands of euro) cost and write-downs 31.12.2005Land 1,961 -- 1,961 -- Buildings 4,179 (4,100) 79 66 Plant and machinery 782 (743) 39 208 Other assets 3,623 (2,022) 1,601 452 Assets under constr. & adv. payments 8,231 -- 8,231 -- Total 18,776 (6,865) 11,911 726


(in thousands of euro) cost and write-downs 31.12.2006Land 1,961 -- 1,961 -- Buildings 4,245 (4,105) 140 6 Plant and machinery 969 (753) 216 14 Other assets 4,279 (2,020) 2,259 254 Assets under constr. & adv. payments -- -- -- -- Total 11,454 (6,878) 4,576 274

Description %

Buildings and real-estate investments 3.00%Plant and machinery

Other assets:

- Electronic office equipment 20.00%- Furniture and fittings 12.00%- Motor vehicles 25.00%

DEPRECIATION RATES

10.00-25.00%

Opening position

Opening position

Tangible fixed assets declined from € 4,576 thousand at December 31 2006 to € 3,381 thousandat December 31 2007.It should be noted that for the sake of clarity, the land on which "Real Estate Investments" arebuilt has been reclassified under that item.

Restatements Depreciation Historical Accum. deprec. Balancecost acc. dep. & write-downs cost and write-downs 31.12.2006

-- -- -- -- 1,961 -- 1,961 -- -- -- (5) 4,245 (4,105) 140 8 (29) 29 (39) 969 (753) 216

305 (101) 101 (99) 4,279 (2,020) 2,259 (8,231) -- -- -- -- -- -- (7,918) (130) 130 (143) 11,454 (6,878) 4,576


(1,238) -- -- -- 723 -- 723 -- -- -- (6) 4,251 (4,111) 140 -- -- -- (68) 983 (821) 162 -- -- -- (157) 4,533 (2,177) 2,356 -- -- -- -- -- -- --

(1,238) -- -- (231) 10,490 (7,109) 3,381

Disposals

Closing positionDisposals

Changes in the period Closing position


4.c. INVESTMENT PROPERTY


(in thousands of euro) cost and write-downs 31.12.20057,050 (106) 6,944 3,119


(in thousands of euro) cost and write-downs 31.12.200618,087 (483) 17,604 974

Opening position

Opening position

Investment property rose from € 17,604 thousand at December 31 2006 to € 19,259 thousand atDecember 31 2007. The increases in the period referred to the completion of the renovation workon a building located in the centre of Milan.Its carrying value in the accounts corresponds substantially to its market value.


7,918 -- -- (377) 18,087 (483) 17,604


1,238 -- -- (557) 20,299 (1,040) 19,259



4.d. EQUITY INVESTMENTS 2006

(in thousands of euro) Opening position Changes in the year Closing position

Write-downs/

Revaluations

31.12.2005 Restatements Increases Decreases Recovery 31.12.2006

no. shares amount no. shares amount no. shares amount no. shares amount of amount no. shares amount

Subsidiaries

ENERGIA HOLDING S.p.A. 88,337,809 184,858 -- -- -- -- -- -- -- 88,337,809 184,858

GRUPPO EDITORIALEL’ESPRESSO S.p.A. 218,825,235 333,862 -- -- 1,950,000 7,818 -- -- -- 220,775,235 341,680

SOGEFI S.p.A. 65,194,962 105,193 -- -- -- -- -- -- -- 65,194,962 105,193

HOLDING SANITÀ E SERVIZI S.p.A. 1,889,382 32,790 -- -- 1,765,363 38,838 -- -- -- 3,654,745 71,628

DRY PRODUCTS S.p.A. 55,000 -- -- -- -- -- -- -- -- 55,000 --

CIR INTERNATIONAL S.A. 25,000,000 238,686 -- -- -- -- -- -- -- 25,000,000 238,686

CIRINVEST B.V. (in liquidation) 18,152 24 -- -- -- -- (18,152) (5) (19) -- --

COFIDEFIN SERVICOS LDA 93,000 180 -- -- -- -- -- -- -- 93,000 180

INTERGEFI S.r.l. 500,000 512 -- -- -- -- -- -- -- 500,000 512

CIR VENTURE S.r.l. 10,000 10 -- -- -- 6 -- -- (6) 10,000 10

CIRINVEST S.p.A.(formerly Scala Capital S.p.A.) 1,000,000 1,000 -- -- -- -- (878,250)* -- (878) 121,750 122

JUPITER FINANCE S.p.A. 592,800 1,482 -- -- -- 296 -- -- (296) 592,800 1,482

Total subsidiaries 898,597 -- 46,958 (5) (1,199) 944,351

Other companies

C IDC S.p.A.(in liquidation and settlementwith creditors) 1,231,319 -- -- -- -- -- -- -- -- 1,231,319 --

EMITTENTI TITOLI S.p.A. 232,000 132 -- -- -- -- -- -- -- 232,000 132

FILIPPO FOCHI S.p.A.(in extraordinary administration) 409,520 -- -- -- -- -- -- -- -- 409,520 --

IST. EDIL. ECONOM.POPOLARE S.r.l. 1,350 1 -- -- -- -- -- -- -- 1,350 1

Total other companies 133 -- -- -- -- 133

TOTAL EQUITY INVESTMENTS 898,730 -- 46,958 (5) (1,199) 944,484

Increases in the period refer mainly to the purchase of shares in Gruppo Editoriale L'Espresso S.p.A. as a result of favourable market conditions and to thesubscription of a rights issue for HSS to finance its development activity, in particular the acquisition of the company Anni Azzurri.The reduction in the period is mainly due to the write-off of the capital of the company Scala Capital S.p.A. renamed Cirinvest S.p.A..

4.d. EQUITY INVESTMENTS 2007

(in thousands of euro) Opening position Changes in the period Closing position

Write-downs/

Revaluations

31.12.2006 Restatements Increases Decreases Recovery 31.12.2007

no. shares amount no. shares amount no. shares amount no. shares amount of amount no. shares amount

Subsidiaries

ENERGIA HOLDING S.p.A. 88,337,809 184,858 -- -- -- -- -- -- -- 88,337,809 184,858

GRUPPO EDITORIALEL’ESPRESSO S.p.A. 220,775,235 341,680 -- -- -- -- -- 220,775,235 341,680

SOGEFI S.p.A. 65,194,962 105,193 -- -- -- -- -- -- -- 65,194,962 105,193

HOLDING SANITÀ E SERVIZI S.p.A. 3,654,745 71,628 -- -- -- -- -- 3,654,745 71,628

DRY PRODUCTS S.p.A. 55,000 -- -- -- -- -- -- -- -- 55,000 --

CIR INTERNATIONAL S.A. 25,000,000 238,686 -- -- -- -- (24,900,000) (237,686) -- 100,000 1,000

COFIDEFIN SERVICOS LDA 93,000 180 -- -- -- -- -- -- -- 93,000 180

INTERGEFI S.r.l. 500,000 512 -- -- -- -- -- -- -- 500,000 512

CIR VENTURE S.r.l. 10,000 10 -- -- -- 9 -- -- (9) 10,000 10

CIRINVEST S.p.A. 121,750 122 -- -- -- 301 -- (301) 121,750 122

JUPITER FINANCE S.p.A. 592,800 1,482 -- -- -- 5,744 -- -- (744) 592,800 6,482

CIR FUND LDA -- -- -- -- 1 318,000 (1) (318,000) -- -- --

CIGA LUXEMBOURG S.A.R.L. -- -- -- -- 318,200 318,000 -- -- -- 318,200 318,000

Total subsidiaries 944,351 -- 642,054 (555,686) (1,054) 1,029,665

Other companies

C IDC S.p.A.

(in liquidation and settlementwith creditors) 1,231,319 -- -- -- -- -- -- -- -- 1,231,319 --

EMITTENTI TITOLI S.p.A. 232,000 132 -- -- -- -- -- -- -- 232,000 132

FILIPPO FOCHI S.p.A.(in extraordinary administration) 409,520 -- -- -- -- -- -- -- -- 409,520 --

IST. EDIL. ECONOM.POPOLARE S.r.l. 1,350 1 -- -- -- -- -- -- -- 1,350 1

Total other companies 133 -- -- -- -- 133

TOTAL EQUITY INVESTMENTS 944,484 -- 642,054 (555,686) (1,054) 1,029,798

The increase during the year refers mainly to the acquisition and subsequent capital increase of the company CIR Fund LDA later spun off into the companyCIGA Luxembourg S.A.r.l. with subscription of a capital increase for the same amount.The decrease in the period refers to the capital repayment made by CIR International S.A..

IFRS7 - Additional information: it should be noted that the required information is given only for the investments in other companies.

134 CIR S.p.A.

LIST OF INVESTMENTS IN SUBSIDIARIES AT DECEMBER 2007 (Art. 2427 no. 5 Civil Code) (in thousands of euro) Head Office Share Total Result for Percentage Carrying capital equity the year owned value Name GRUPPO EDITORIALE L’ESPRESSO S.p.A. Rome 65,167 375,594 166,162 50.82 (*) 341,680

ENERGIA HOLDING S.p.A. Turin 120,351 260,973 7,472 73.4 184,858

SOGEFI S.p.A. Mantua 59,595 258,202 26,034 56.88 (**) 105,193

DRY PRODUCTS S.p.A. (***) Milan 100 1,270 (282) 55.00 --

CIR INTERNATIONAL S.A. Luxembourg 1,000 65,798 114,079 100.00 1,000

COFIDEFIN SERVICOS DE CONSULTORIA LDA Madeira 125 6,639 6,375 74.40 180

INTERGEFI S.r.l. Milan 500 492 (298) 100.00 512

CIR VENTURE S.r.l. Milan 10 6 (5) 100.00 10

HSS - HOLDING SANITÀ E SERVIZI S.p.A. Milan 5,405 103,873 (2,727) 67.63 71,628

JUPITER FINANCE S.p.A. Milan 600 6,248 (269) 98.80 6,482

CIRINVEST S.p.A. Milan 122 130 (37) 100.00 122

CIGA LUXEMBOURG S.A.r.l. Luxembourg 318,200 318,012 (143) 100.00 318,000

(*) 54.25% of voting rights (**) 57.74% of voting rights (***) Financial Statements for year ended March 31 2007

4.e. MISCELLANEOUS RECEIVABLES The balance at December 31 2007 includes security deposits with a nominal value of € 144 thou-sand (€ 166 thousand at December 31 2006) and tax advances on Severance and leaving indem-nity (TFR), revalued as per the terms of the law by € 2 thousand (€ 23 thousand at December 31 2006). 4.f. DEFERRED TAXES The breakdown of “Deferred tax assets and liabilities” by type of temporary difference, is as fol-lows:

(in thousands of euro) 31.12.2007 31.12.2006

Amount of Amount of Amount of Tax temporary temporary temporary effect differences differences differences

Deferred tax assets:

Write-downs of fixed assets -- -- 1,751 578

Risk provisions and other 4,488 1,234 2,579 851

Total deferred tax assets 1,234 1,429

Deferred tax liabilities:

Valuation of financial instruments -- -- (54) (19)

Capital gain on sale of properties -- -- (3,068) (161)

Total deferred tax liabilities -- -- (180)

Total net deferred taxes 1,234 1,249

CIR S.p.A. 135

Law no. 244 of December 24 2007 (Budget 2008) reduced as from January 1 2008 IRES and I-RAP tax rates: IRES was reduced from 33% to 27.5% and IRAP from 4.25% to 3.9%. Following these reductions, in line with international accounting standards, deferred/advance tax assets and liabilities already in the accounts were adjusted to the new rates. The effect of these changes is commented on under item “19. – Income taxes”. During the year no deferred taxes were recognized directly to shareholders’ equity. There are no prior losses for which the company has not set aside deferred taxes. 5. CURRENT ASSETS 5.a. MISCELLANEOUS RECEIVABLES (in thousands of euro) 31.12.2007 31.12.2006

Tax receivables 56,038 18,977

Financial receivables with subsidiaries 4,570 34,450

Other receivables with related parties 10,593 29,357

Receivables with others 3,262 3,248

Total 74,463 86,032

The item “Tax receivables” rose from € 18,977 thousand at December 31 2006 to € 56,038 thou-sand mainly on account of the receivable from the Tax Authorities resulting from the tax consoli-dation of € 18,954 thousand and the purchase for € 17,954 thousand of tax credits sold in previous years to a prime factoring company. The item “Financial receivables with related parties” can be broken down as follows: (in thousands of euro) 31.12.2007 31.12.2006

Jupiter Finance S.p.A. -- 31,122

Intergefi S.r.l. 3,515 3,328

CIGA Luxembourg S.A.R.L. 1,055 --

Total 4,570 34,450

The decrease of the balance of the item “Financial receivables with related parties” refers to the repayment made in December by Jupiter Finance S.p.A.. The item “Other receivables with related parties” refers for € 10,509 thousand to receivables with companies that took part in the tax consolidation (€ 4,138 with the Sorgenia group and € 6,371 thousand with companies of the Espresso group) and for € 84 thousand to the receivable from Holding Sanità e Servizi S.p.A. for services provided during 2007. IFRS7 – Additional information: it should be noted that the information required does not include the item “Tax expense”.

136 CIR S.p.A.

5.b. SECURITIES The item “Securities” includes the following categories of securities: (in thousands of euro) 31.12.2007 31.12.2006

Italian Government securities or similar securities -- 21,391

Investment funds or similar funds -- 35,556

Bonds and notes 1,034 21,193

Sundry securities 64,611 128,354

Total 65,645 206,494

The measurement at fair value of the item “securities” involved a negative adjustment to the in-come statement of € 5,533 thousand. The item “Sundry securities” refers to short-term investments of liquidity and the securities have a credit rating of “double A” or above. 5.c. AVAILABLE-FOR-SALE FINANCIAL ASSETS This item, amounting to € 50,735 thousand, refers to the subscription on December 27 2007 of “Senior” securities as part of the securitization of receivables carried out by the company Zeus Fi-nance S.r.l.. These securities were allocated to this item as they were then sold to Mediobanca S.p.A. on March 5 2008. 5.d. CASH AND CASH EQUIVALENTS The balance of this item rose by € 13,107 thousand from € 64,732 thousand to € 77,839 thousand. A breakdown of the changes is shown in the cash flow statement.

CIR S.p.A. 137

6. SHAREHOLDERS’ EQUITY 6.a. SHARE CAPITAL Share capital increased from € 390,239,533.50 at December 31 2006 (comprising 780,479,067 shares each worth a nominal € 0.50) to € 395,465,333.50 (790,930,667 shares) at December 31 2007 following the issuance of 10,451,600 shares on the exercise of stock options. At December 31 2007 the Company owned 39,644,000 of its own shares (5.01% of capital) for a value of € 92,187 thousand, up from 34,094,000 shares at December 31 2006. It should be noted that during the year 5,850,000 own shares were bought back at an average price of € 2.74 per share and 300,000 shares were sold at € 2.15 per share following the exercise of stock options. The share capital is fully subscribed and paid up. No shares have any rights, privileges or limita-tions on the distribution of dividends with the exception of the own shares held as treasury stock. It should be noted that the Board of Directors was authorized for a period of five years starting from April 27 2005 to increase once or more than once the share capital up to a maximum of € 500 million (nominal value) and by a further maximum of € 20 million (nominal value) in fa-vour of employees of the Company, its subsidiaries and parent companies.

138 CIR S.p.A.

6.b. RESERVES The breakdown of the item “Reserves” is as follows:

(in thousands of euro) Share Legal Statutory Reserve for Reserve for Reserve Art. 6 Own shares “First Stock Reserve for Total premium reserve reserves own shares buy-back of D.Lgs. no. 28 of held as adoption option future reserves reserve held own shares 28/02/2005 treasury of IFRS” reserve capital stock reserve increases

Balance at December 31 2005 6,419 115,969 21 61,321 76,902 -- (61,321) 162,210 7,652 3 369,176

Capital increases 1,076 -- -- -- -- -- -- -- -- -- 1,076

Adjustment for own share transactions -- -- -- 15,563 (5,664) -- (15,563) -- -- -- (5,664) Cancellation of AGM resolution of April 27 2005 to buy back own shares 16,422 -- -- -- (71,238) -- -- -- -- -- (54,816)

Notional cost of stock options credited -- -- -- -- -- -- -- -- 2,213 -- 2,213

Balance at December31 2006 23,917 115,969 21 76,884 -- -- (76,884) 162,210 9,865 3 311,985

Capital increases 9,442 -- -- -- -- -- -- -- -- -- 9,442

Unclaimed dividends as per Art, 23 of Company Bylaws -- -- 55 -- -- -- -- -- -- -- 55

Adjustment for own share transactions -- -- -- 15,303 -- (74) (15,303) -- -- -- (74)

Notional cost of stock options credited -- -- -- -- -- -- -- -- 1,929 -- 1,929

Balance at December 31 2007 33,359 115,969 76 92,187 -- (74) (92,187) 162,210 11,794 3 323,337

CIR S.p.A. 139

It should be remembered that on April 27 2007 the General Ordinary Meeting of the Shareholders voted to cancel the previous resolution of April 27 2006 to buy back own shares and to give a new authorization for eighteen months from that date to buy back a maximum of 40,000,000 own shares at a minimum unit price of € 0.50 and a maximum of € 3.00. The “Stock option reserve” refers to the value of the notional cost of the stock options assigned to employees, which were approved after November 7 2002. 6.c. RETAINED EARNINGS (LOSSES) The changes in Retained earnings (losses) are shown in the “Statement of Changes in Sharehold-ers’ Equity”. INFORMATION AS PER ART. 2427 – 7BIS – CIVIL CODE The following chart gives a breakdown of the items of shareholders’ equity and shows how they can be utilized: (in thousands of euro) Amount at Possible Part Summary of uses made December 31 2007 uses available in the last three periods (*) For covering For distributing Other losses as dividends

CAPITAL 395,465 -- -- -- -- --

Capital reserves: Share premium reserve 33,359 ABC -- -- -- --

Legal reserve 12,678 B -- -- -- --

Capital reserve 3 A -- -- -- --

Earnings reserves: Legal reserve 103,291 B -- -- -- --

Statutory reserve 76 ABC -- -- -- --

Art. 6 D.Lgs no. 38 reserve (74) ABC -- -- -- --

“First adoption of IFRS” reserve 162,210 ABC -- -- -- --

Stock Option reserve 11,794 ABC -- -- --

Retained earnings 185,051 ABC -- -- (44,794) (76,884)

TOTAL 903,853 -- -- (44,794) (76,884) Key = A: for capital increases; B: for covering losses; C: for distribution to shareholders

(*)The uses shown are those that caused a reduction in total equity

140 CIR S.p.A.

7. NON-CURRENT LIABILITIES 7.a. BONDS AND NOTES The item “Bonds and notes” had a balance of € 295,806 thousand at December 31 2007, com-pared to € 295,640 thousand at December 31 2006 and referred to the bond issued by the Com-pany in December 2004 for a nominal principal of € 300 million with maturity in 2024 at an inter-est rate of 5.75%. Using the amortized cost method this loan was recognized including the ac-crued interest for the period and deducting the issuance discount and transaction costs. The effec-tive interest rate is 5.90%. The bonds are listed on the Luxembourg Bourse. 7.b. PERSONNEL PROVISIONS Changes in the provision “Employee Severance and Leaving Indemnity (TFR)” are shown in the chart below: (in thousands of euro) 31.12.2007 31.12.2006

Starting balance 1,558 1,462

Amount accrued 259 240

Sums paid out (286) (144)

Total 1,531 1,558

As from January 1 2007 the Budget and the various decrees implementing it introduced important changes to the way the TFR is regulated, introducing among other things the right for the worker to decide where his accumulated TFR should be paid. TFR cash flows can now be paid by work-ers into their chosen pension schemes or else can be kept in the company. Of the employees on the books at December 31 2006, four opted to pay their TFR into pension funds. The item “Personnel reserves” also includes an amount of € 1,681 thousand relating to the fair va-lue change, including ancillary charges as per the terms of the law regarding employee income, of the Phantom stock option plans assigned on May 15 2007 and October 15 2007. 8. CURRENT LIABILITIES 8.a. BORROWINGS FROM RELATED PARTIES The balance at December 31 2007 of € 14,196 thousand (€ 43,756 thousand at December 31 2006) refers to a loan from CIR International S.A., including interest of € 637 thousand at the rate of 4.7% that accrued during the year. The lower balance relates to repayment made in February for an amount of € 30,197 thousand including interest.

CIR S.p.A. 141

8.b. OTHER PAYABLES (in thousands of euro) 31.12.2007 31.12.2006

Tax payables 1,704 30,779

Payables related parties 5,924 2,570

Trade payables suppliers 573 1,904

Other payables 3,360 5,456

Total 11,561 40,709

The item “Tax payables” at December 31 2006 included the Inland Revenue payable of € 17,733 thousand resulting from the tax consolidation. It should be noted that following the appeal lodged last year against a tax request for Irpeg and I-lor regarding the year 1989, the Tax Office has now cancelled the tax request. However since the dispute has not yet been settled, an amount of € 11,239 thousand has been set aside prudentially under “Provisions for risks and losses” removing it from the item tax payables. The item “Payables to related parties” refers for € 4,706 thousand to payables to companies that took part in the tax consolidation (€ 3,406 thousand to companies of the Sogefi group, € 1,009 thousand to companies of the HSS group, € 173 thousand to companies of the Sorgenia group, € 51 thousand to Jupiter Finance S.p.A. and € 67 thousand to companies of the Espresso group), and for € 240 thousand to the payable with the subsidiary Dry Products for the charge-back of costs. IFRS7 – Additional information: it should be noted that the information required refers to the i-tems “Payables related parties” and “Trade payables suppliers”. 8.c. PROVISIONS FOR RISKS AND LOSSES The breakdown of these provisions with the changes during the year can be seen in the following chart: (in thousands of euro) Balance at Paid in Withdrawn Balance at 31.12.2006 31.12.2007

Others 3,035 11,239 (115) 14,159

Total 3,035 11,239 (115) 14,159

The increase in this item refers to the restatement already commented on under the item “Other payables”.

142 CIR S.p.A.

INCOME STATEMENT 9. MISCELLANEOUS REVENUES AND INCOME This item contains the following: (in thousands of euro) 2007 2006

Services to subsidiaries 5,910 5,044

Services to parent company 531 516

Income from real estate 1,006 640

Other income and recovery of costs 588 76

Other non-recurring revenues 79 --

Total 8,114 6,276

Revenues from services provided to subsidiaries are the chargeback of fees for strategic and man-agement support and special administrative, financial and tax assistance supplied to them. The services provided to the parent company were mainly of an administrative and financial nature. Income from services to companies of the Group in 2007 can be broken down as follows: (in thousands of euro) 31.12.2007 31.12.2006

COFIDE S.p.A. 531 516

Gruppo Editoriale L'Espresso S.p.A. 2,510 2,440

Sorgenia S.p.A. 810 700

Sogefi S.p.A. 2,500 1,850

Holding Sanità e Servizi S.p.A. 70 50

Jupiter Finance S.p.A. 20 4

Totale 6,441 5,560

10. COSTS FOR SERVICES This item can be broken down as follows: (in thousands of euro) 2007 2006

Administrative, fiscal, legal and corporate governance consulting fees 4,121 3,158

Services provided by the parent company COFIDE S.p.A. 2,011 1,955

Directors’ and Statutory Auditors’ fees 1,799 1,792

Other expenses 2,923 2,814

Total 10,854 9,720

CIR S.p.A. 143

11. PERSONNEL COSTS Personnel costs declined by € 1,029 thousand from € 9,091 thousand in 2006 to € 8,062 thousand in 2007. This item includes the notional cost of € 1,929 thousand (€ 2,213 thousand in 2006), from the valuation of the stock options of the various plans in existence, approved after November 7 2002 and the cost of € 1,681 thousand pertaining to the valuation of the Phantom stock option plans assigned on May 15 2007 and October 15 2007. The chart below shows the changes in the number of employees in the different categories during the year:

31.12.2006 Hires Departures 31.12.2007 Average for the year Executives 9 1 -- 10 10

Managers and Office Staff 18 -- -- 18 18

Total 27 1 -- 28 28

12. OTHER OPERATING COSTS (in thousands of euro) 2007 2006

Non-deductible IVA and other taxes 870 823

Other charges and non-operating expense 1,108 935

Other non-recurring expense -- 13

Total 1,978 1,771

13. FINANCIAL INCOME This item consists of the following: (in thousands of euro) 2007 2006

Interest income from securities 6,576 9,822

Interest income from deposits 1,414 2,021

Interest income from subsidiaries 1,154 181

Other interest income 819 704

Total 9,963 12,728

The breakdown of the interest income from subsidiaries is as follows: (in thousands of euro) 2007 2006

Jupiter Finance S.p.A. 986 43

Intergefi S.r.l. 160 118

CIGA Luxembourg S.A.R.L. 8 --

Dry Products S.p.A. -- 20

Total 1,154 181

144 CIR S.p.A.

14. FINANCIAL EXPENSE This item consists of the following: (in thousands of euro) 2007 2006

Interest expense on bonds and notes 17,360 17,354

Interest expense on borrowings from subsidiaries 995 1,953

Other interest expense and bank charges 480 1,651

Total 18,835 20,958

The item “Interest expense on borrowings from subsidiaries” in 2007 refers for € 755 thousand to interest accrued on the loan made by CIR International S.A. and for € 240 thousand to interest due to companies of the Group who took part in the tax consolidation process (€ 67 thousand due to the Espresso group and € 173 thousand to the Sorgenia group). 15. DIVIDENDS This item consists of the following: (in thousands of euro) 2007 2006

Dividends from related parties:

Gruppo Editoriale L’Espresso S.p.A. 35,324 31,730

Energia Holding S.p.A. 4,417 3,666

Sogefi S.p.A. 13,039 11,409

CIR International S.A. 69,248 10,000

Cofidefin Serviços de Consultoria 4,464 4,241

Total dividends from related parties 126,492 61,046

Dividends from other companies 31 33

Total dividends 126,523 61,079

16. GAINS FROM TRADING SECURITIES These amount to € 13,977 thousand (€ 1,520 thousand in 2006) and refer for € 458 thousand to premium transactions on equities, for € 1,013 thousand to securities trading, for € 1,192 thousand to trading investment funds and similar funds and for € 11,314 thousand to the gain on the capital repayment made by the subsidiary CIR International S.A.. 17. LOSSES FROM TRADING SECURITIES These amount to € 56,138 thousand (€ 4,913 thousand in 2006); they refer for € 51,680 thousand to the result of a short-term financial transaction closed early because of the severe instability in global financial markets during the summer months and for € 4,457 thousand to equity and bond trading.

CIR S.p.A. 145

18. ADJUSTMENTS TO FINANCIAL ASSETS This item consists of the following: (in thousands of euro) 2007 2006

Write-down of bonds (5,563) (6,627)

Write-down of investments in subsidiaries (1,054) (1,199)

Revaluation of bonds and notes 30 268

Revaluation of investment funds and similar funds -- 585

Total (6,587) (6,973)

The item “Write-down of bonds” refers specifically to medium-long term structured bonds in-dexed to the yield curve from 2 to 10 years. The measurement at fair value of these bonds gave rise to a loss that should be recovered if long term interest rates rise as expected. 19. INCOME TAXES This item consists of the following: (in thousands of euro) 2007 2006

Current taxes 24,633 9,090

Deferred taxes (15) (22)

Total 24,618 9,068

The reduction of the tax rates, as already mentioned, meant that deferred tax assets and liabilities had to be recalculated and adjusted to their new values. The total impact of this was a higher pay-able of € 154 thousand which was recognized entirely to the income statement. RECONCILIATION OF THE THEORETICAL AND EFFECTIVE TAX LIABILITY Taxable inocme Tax rate % Amount of tax

RESULT BEFORE TAXES 55,301 33 18,249

Effect of increases (decreases) compared to ordinary tax rate

- Dividends (120,197) 33 (39,665)

- Temporary differences deductible in subsequent periods 2,015 33 665

- Deductible temporary differences from prior periods (2,045) 33 (675)

- Non-deductible costs 4,232 33 1,397

Other sundry permanent differences (11,314) 33 (3,733)

SUB-TOTAL (72,008) 33 (23,762)

Adjustments to taxable income for participation in national tax consolidation (2,639) 33 (871)

Taxable income / Income tax for the year (74,647) 33 (24,633) Note: Because of its specific characteristics, IRAP was not considered for the purposes of this chart, which refers just to IRES

146 CIR S.p.A.

20. EARNINGS PER SHARE The basic earnings per share is calculated by dividing the net income for the period attributable to the ordinary Shareholders by the weighted average number of shares in circulation. The diluted earnings per share is calculated by dividing the net income for the period attributable to the ordi-nary Shareholders by the weighted average number of ordinary shares in circulation during the pe-riod, adjusted for the dilutive effects of outstanding options. Own shares held as treasury stock are not included in the shares in circulation. The company has only one category of potential ordinary shares, those deriving from stock op-tions awarded to employees. The dilutive effect that these ordinary shares to be issued or assigned to stock option plans will have on earnings per share is not significant. In calculating the average umber of options the average fair value of the shares for each financial year was used. The average fair value of each CIR ordinary share in financial year 2007 was € 2.789 compared with an average fair value of € 2.391 in 2006. The chart below shows the information on the shares used to calculate the basic and diluted earn-ings per share. 2007 2006

Net income attributable to the Shareholders (in thousands of euro) 79,919,598 36,697,002


Earnings per share (euro) 0.1067 0.0490

2007 2006

Net income attributable to the Shareholders (in thousands of euro) 79,919,598 36,697,002


Weighted average number of options 35,560,667 38,608,367

Weighted average number of options at fair value 6,618,701 4,575,961

Adjusted weighted average number of shares in circulation 755,819,534 752,876,375

Diluted earnings per share (euro) 0.1057 0.0487

21. GUARANTEES AND COMMITMENTS At December 31 2007 the position of guarantees and commitments was the following: - guarantees for € 611.4 million issued to banks on behalf of CIR International to cover the note

issues; - Guarantees in favour of Inland Revenue for VAT credits totalling € 6,781 thousand; 22. RELATED PARTY TRANSACTIONS Information regarding the impact that related party transactions have on the financial and equity situation and on the result for the year are given in the comment on the individual items of the fi-nancial statements.

CIR S.p.A. 147

The paragraph “Other information” in the Management Report shows the different types of re-lated party transactions, the amounts of which are given in the Explanatory Notes. 23. NET FINANCIAL POSITION The net financial position, in accordance with the terms of Consob resolution no. 6064293 of July 28 2006, can be broken down as follows: (in thousands of euro) 31.12.2007 31.12.2006

A. Cash and banks 77,839 64,732

B. Other free cash flow 50,735 --

C. Securities held for trading 65,645 206,494

D. Cash and cash equivalents (A) + (B) + (C) 194,219 271,226

E. Current financial receivables -- --

F. Current bank borrowings -- (2)

G. Current part of non-current borrowings -- --

H. Other current borrowings from related parties (14,196) (43,757)

I. Current financial debt (F) + (G) + (H) (14,196) (43,759)

J. Net current financial position (I) + (E) + (D) 180,023 227,467

K. Non-current bank borrowings -- --

L. Bonds and notes issued (295,806) (295,640)

M. Other non-current borrowings -- --

N. Non current financial debt (K) + (L) + (M) (295,806) (295,640)

O. Net financial position (J) + (N) (115,783) (68,173)

24. OTHER INFORMATION IFRS7 – FINANCIAL RISK MANAGEMENT: ADDITIONAL INFORMATION Regarding the risks of the business, the main financial risks identified, monitored and actively managed by the company are the following: a) The interest rate risk from exposure to movement in interest rates; b) The credit risk from the possibility of a counterparty defaulting; c) The liquidity risk resulting from a lack of financial resources to meet short term commit-

ments.

148 CIR S.p.A.

Interest rate risk Fluctuation in interest rates affects the market value of financial assets and the level of net finan-cial expense. The company continuously monitors its exposure to interest rate risk and manages this risk by in-vesting in financial instruments that are consistent with its long-term funding through the CIR bond 5.75%/2024. Credit risk Credit risk means the exposure of the company to potential losses resulting from the failure of the counterparty to meet its obligations. In relation in particular to the financial counterparty risk re-sulting from the investment of liquidity and from derivatives positions, counterparties are selected according to guidelines which set out the characteristics of the counterparties suitable for financial transactions. The list of possible counterparties includes both national and international companies with a high credit rating.. The company has not had any cases of default of its counterparties. At December 31 2007 there were no significant concentrations of credit risk. Liquidity risk Liquidity risk is the risk that financial resources may not be available or may be available only at a monetary cost. The company’s long-term debt, which refers to the note issued in December 2004 for a nominal 300 million with maturity in 2024, was given a rating of BBB- by Standard & Poor’s. As things stand today the company believes that it will be able to fulfil its expected finan-cial needs on the basis of its free cash flow and expected future cash inflows. The objective of li-quidity risk management is not only that of guaranteeing sufficient available financial resources to cover short term commitments, but also to ensure where necessary a sufficient level of operating flexibility for the development programs within the Group. In compliance with the requirements of accounting principle IFRS7, the following charts give in-formation regarding the various categories of financial assets and liabilities and the classes of risk of financial instruments.


(in thousands of euro)Items of Value in Assets at FV Assets at FV Loans and Investments Available Liabilities at FV Liabilities at FV Liabilities Fair value Effect on Effect onbalance balance through P&L through P&L receivables held to for sale through P&L through P&L at amortized income equity

sheet sheet designated as classified as maturity assets designated as classified cost statementsuch on initial held for such on initial as held for

recognition trading recognition trading

NON-CURRENT ASSETS

Other equity investments 4.d 133 -- -- -- -- 133 -- -- -- 133 31 --

Other receivables 4.e 146 -- -- 146 -- -- -- -- -- 146 -- --

CURRENT ASSETS

Miscellaneous receivables 5.a 18,425 -- -- 18,425 -- -- -- -- -- 18,425 1,225 --

Securities 5.b 65,645 49,485 16,160 -- -- -- -- -- -- 65,645 (787) --

Available-for-sale financial assets 5.c 50,735 -- -- -- -- 50,735 -- -- -- 50,735 35 --

Cash and cash equivalents 5.d 77,839 -- -- 77,839 -- -- -- -- -- 77,839 1,409 --


Bonds and notes 7.a (295,806) -- -- -- -- -- -- -- (295,806) (272,547) (17,420) --

CURRENT LIABILITIES

Bank overdrafts -- -- -- -- -- -- -- -- -- -- -- --

Other borrowings 8.a (14,196) -- -- -- -- -- -- -- (14,196) (14,196) (755) --

Trade payables 8.b (6,497) -- -- -- -- -- -- -- (6,497) (6,497) -- --


(in thousands of euro)Items of Value in Assets at FV Assets at FV Loans and Investments Available Liabilities at FV Liabilities at FV Liabilities Fair value Effect on Effect onbalance balance through P&L through P&L receivables held to for sale through P&L through P&L at amortized income equity

sheet sheet designated as classified as maturity assets designated as classified as cost statementsuch on initial held for such on initial held for

recognition trading recognition trading

NON-CURRENT ASSETS

Other equity investments 4.d 133 -- -- -- -- 133 -- -- -- 133 33 --

Other receivables 4.e 188 -- -- 188 -- -- -- -- -- 188 1 --

CURRENT ASSETS

Miscellaneous receivables 5.a 67,054 -- -- 67,054 -- -- -- -- -- 67,054 252 --

Securities 5.b 206,494 188,882 17,612 -- -- -- -- -- -- 206,494 655 --

Available-for-sale financial assets 5.c -- -- -- -- -- -- -- -- -- -- -- --

Cash and cash equivalents 5.d 64,732 -- -- 64,732 -- -- -- -- -- 64,732 2,021 --


Bonds and notes 7.a (295,640) -- -- -- -- -- -- -- (295,640) (281,203) (17,425) --

CURRENT LIABILITIES

Bank overdrafts (2) -- -- -- -- -- -- -- (2) (2) -- --

Other borrowings 8.a (43,757) -- -- -- -- -- -- -- (43,757) (43,757) (1,654) --

Trade payables 8.b (4,474) -- -- -- -- -- -- -- (4,474) (4,474) -- --


(in thousands of euro)Items of Values in Liquidity Int. rate Exch. rate Credit

bal. sheet bal. sheet risk risk risk risk

NON-CURRENT ASSETS

Other equity investments 4.d 133 -- -- -- 133

Other receivables 4.e 146 -- -- -- 146

CURRENT ASSETS

Miscellaneous receivables 5.a 18,425 -- 4,570 -- 13,855

Securities 5.b 65,645 -- 65,645 -- --

Available-for-sale financial assets 5.c 50,735 -- 50,735 -- --

Cash and cash equivalents 5.d 77,839 -- 77,839 -- --


Bonds and notes 7.a (295,806) (295,806) -- -- --

CURRENT LIABILITIES

Bank overdrafts -- -- -- -- --


Trade payables 8.b (6,497) (6,497) -- -- --


(in thousands of euro)Items of Value in Liquidity Int. rate Exch. rate Credit

bal. sheet bal. sheet risk risk risk risk

NON-CURRENT ASSETS

Other equity investments 4.d 133 -- -- -- 133

Other receivables 4.e 188 -- -- -- 188

CURRENT ASSETS

Miscellaneous receivables 5.a 67,054 -- 34,450 -- 32,604

Securities 5.b 206,494 -- 206,494 -- --

Available-for-sale financial assets 5.c -- -- -- -- --

Cash and cash equivalents 5.d 64,732 -- 64,732 -- --


Bonds and notes 7.a (295,640) (295,640) -- -- --

CURRENT LIABILITIES

Bank overdrafts (2) (2) -- -- --


Trade payables 8.b (4,474) (4,474) -- -- --

CREDIT RISK


Position at December 31 2007 Items of Total Not yet Overdue 0 - 30 days 30 - 60 days 60 - 90 days over 90 Amount Write-bal. sheet receivable due by > negotiated downs

Other receivables 4.c 146 146 -- -- -- -- -- --

Gross receivable 146 146 -- -- -- -- -- --

Write-downs -- -- -- -- -- -- -- -- --

Miscellaneous receivables 5.a 13,855 13,843 12 12 -- -- -- --

Gross receivable 13,855 13,843 12 12 -- -- -- --

Write-downs -- -- -- -- -- -- -- -- --

Total 14,001 13,989 12 12 -- -- -- -- --


Position at December 31 2006 Items of Total Not yet Overdue 0 - 30 days 30 - 60 days 60 - 90 days over 90 Amount Write-bal. sheet receivable due by > negotiated downs

Other receivables 4.c 188 188 -- -- -- -- -- --

Gross receivable 188 188 -- -- -- -- -- --

Write-downs -- -- -- -- -- -- -- -- --

Miscellaneous receivables 5.a 32,604 32,578 26 26 -- -- -- --

Gross receivable 32,604 32,578 26 26 -- -- -- --

Write-downs -- -- -- -- -- -- -- -- --

Total 32,792 32,766 26 26 -- -- -- -- --




Bonds and notes 17,250 17,250 17,250 17,250 17,250 507,000 593,250

Other borrowings- borrowings from subsidiaries (*) 14,196 -- -- -- -- -- 14,196

Bank overdrafts -- -- -- -- -- -- --

Trade payables 6,497 -- -- -- -- -- 6,497

TOTAL 37,943 17,250 17,250 17,250 17,250 507,000 613,943




Bonds and notes 17,250 17,250 17,250 17,250 17,250 524,250 610,500

Other borrowings- Borrowings from subsidiaries (*) 43,757 -- -- -- -- -- 43,757

Bank overdrafts 2 -- -- -- -- -- 2

Trade payables 4,474 -- -- -- -- -- 4,474

TOTAL 65,483 17,250 17,250 17,250 17,250 524,250 658,733

(*) It should be noted that the loans in this item are renewable annually

154 CIR S.p.A.

The following chart shows interest rate exposure, grouping together types of assets and liabilities by year of maturity. This information is given over a time horizon of 5 years on the basis of the way the interest ac-crues. (in thousands of euro) <1 year >1<2 >2<3 >3<4 >4<5 >5 Total

INTEREST BEARING

Fixed rate


Other receivables 7,619 -- -- -- -- -- 7,619

Financial receivables -- -- -- -- -- -- --

Securities 20 -- 1,014 -- -- 1,034


Cash and cash equivalents -- -- -- -- -- -- --

Bank overdrafts -- -- -- -- -- -- --

Bonds and notes -- -- -- -- -- (295,806) (295,806)

Other borrowings (14,196) -- -- -- -- -- (14,196)

Trade payables -- -- -- -- -- -- --

Other payables -- -- -- -- -- -- --

Floating rate


Other receivables -- -- -- -- -- -- --


Securities 314 -- -- -- -- 64,297 64,611

Available-for-sale financial assets 50,735 -- -- -- -- -- 50,735


Bank overdrafts -- -- -- -- -- -- --

Bonds and notes -- -- -- -- -- -- --

Other borrowings -- -- -- -- -- -- --

Trade payables -- -- -- -- -- -- --

Other payables -- -- -- -- -- -- --

NON INTEREST BEARING

Trade receivables 10,639 -- -- -- -- -- 10,639

Other receivables 56,205 -- -- -- -- 146 56,351


Securities -- -- -- -- -- -- --


Cash and cash equivalents -- -- -- -- -- -- --

Bank overdrafts -- -- -- -- -- -- --

Bonds and notes -- -- -- -- -- -- --

Other borrowings -- -- -- -- -- -- --

Trade payables (6,497) -- -- -- -- -- (6,497)

Other payables (5,064) -- -- -- -- -- (5,064)

CIR S.p.A. 155

EMOLUMENTS PAID TO DIRECTORS, STATUTORY AUDITORS AND GENERAL MAN-AGERS The chart below shows the information required by Article 78 of Consob Resolution no. 11971 of May 14 1999 and subsequent amendments and additions. (in thousands of euro) Last name and first name Position held Dates Expiry of mandate Emoluments Non-monetary Bonuses Other Notes position held for the position benefits and other fees in the company incentives preparing the Financial statements

DE BENEDETTI CARLO Chairman of the Board 1.1.07-31.12.07 Appr. Fin. Stat. 2007 -- 113 -- -- (1)

DE BENEDETTI RODOLFO Chief Executive and General Manager 1.1.07-31.12.07 Appr. Fin. Stat. 2007 720 -- -- 766 (2)

PIASER ALBERTO General Manager 1.1.07-31.12.07 -- -- -- -- 523 (2)

BRACCHI GIAMPIO Director 1.1.07-31.12.07 Appr. Fin. Stat. 2007 20 -- -- --

DEBENEDETTI FRANCO Director 1.1.07-31.12.07 Appr. Fin. Stat. 2007 20 -- -- --

FERRERO PIERLUIGI Director 1.1.07-31.12.07 Appr. Fin. Stat. 2007 70 -- 47 (3)

GERMANO GIOVANNI Director 1.1.07-31.12.07 Appr. Fin. Stat. 2007 20 -- -- 17 (3)

GIRARD FRANCO Director 1.1.07-31.12.07 Appr. Fin. Stat. 2007 20 -- -- 17 (3)

MANCINELLI PAOLO Director 1.1.07-31.12.07 Appr. Fin. Stat. 2007 35 -- -- -- (3)

PARAVICINI CRESPI LUCA Director 1.1.07-31.12.07 Appr. Fin. Stat. 2007 35 -- -- 40 (3)

RECCHI CLAUDIO Director 1.1.07-31.12.07 Appr. Fin. Stat. 2007 35 -- -- --

SEGRE MASSIMO Director 1.1.07-31.12.07 Appr. Fin. Stat. 2007 20 -- -- 547 (4)

TABELLINI GUIDO Director 1.1.07-31.12.07 Appr. Fin. Stat. 2007 20 -- -- --

ZANNI UMBERTO Director 1.1.07-31.12.07 Appr. Fin. Stat. 2007 20 -- -- --

MANZONETTO PIETRO Chairman of Board of Statutory Auditors 1.1.07-31.12.07 Appr. Fin. Stat. 2007 50 -- -- --

NANI LUIGI Statutory Auditor 1.1.07-31.12.07 Appr. Fin. Stat. 2007 33 -- -- --

ZINGALES RICCARDO Statutory Auditor 1.1.07-31.12.07 Appr. Fin. Stat. 2007 33 -- -- 183 (5)

(1) Fees of € 520 thousand as Chairman of CIR S.p.A., € 23 thousand as Chairman of Sogefi S.p.A. and € 530 thousand as Chairman Gruppo Editoriale L’Espresso S.p.A are paid to ROMED S.p.A..

(2) Other fees include emoluments for the position of Director in other companies of the Group and employee salary

(3) Other fees include emoluments for the position of Director in other companies of the Group

(4) Other fees refer to fees for professional services

(5) Other fees include emoluments for the position of Statutory Auditor in other companies of the Group

Stock option plans As required by Consob Resolution no. 11971 of May 14 1999 and subsequent amendments and additions, it should be stated that CIR has set up stock option plans for employees of the Group. At December 31 2006 stock option plans issued as from the year 2000 were still valid for a total of 30,360,600 options, as can be seen from the chart on page 78 of the Explanatory Notes to the Consolidated Financial Statements. With reference to the plans issued in the last three years, it should be said that: - On March 12 2004 the Board of Directors voted to assign to executives of the Company and

its parent company options for the subscription of shares according to the terms and condi-tions laid down in the Regulations of “Stock Option Plan March 12 2004”, which was ap-proved at that same meeting. This plan gives the beneficiaries the right to exercise options to subscribe a total maximum of 2,545,000 newly issued shares at a given price and within a

156 CIR S.p.A.

predefined period of time. The Regulations also require that in order to be entitled to exercise the option the beneficiaries must be employed by the Company or its parent company at when the option is exercised except in cases of retirement, permanent invalidity or death. The sub-scription price was fixed at € 1.60. The options can be exercised by each beneficiary starting from September 30 2004, at three-monthly intervals until the final maturity of September 30 2014.

- On September 6 2004 the Board of Directors voted to assign options to subscribe a further

2,595,000 newly issued shares at the unit price of € 1.56 reserved for subscription by execu-tives of the Company and its parent company who are beneficiaries of “Stock Option Plan September 6 2004”, approved at that same meeting. The Regulations of this plan stipulate terms and conditions identical to those of the previous plan except for the date on which the options become exercisable (February 28 2005) and the final expiration date of the same op-tions (February 28 2015).

- Furthermore on June 8 2004 the Board of Directors approved the award of further options for

the subscription of 4,150,000 shares at the price of € 1.60 per share reserved for the executives of the Company and its parent company who are beneficiaries of “Stock Option Plan June 8 2004” approved during that same meeting. The Regulations of this plan stipulate that the op-tions can be exercised at any time from June 15 2004 to June 15 2009.

- On January 11 2005 the Board of Directors voted to award options for the purchase of

11,700,000 shares at the price of € 2.15 per share – shares which are currently in the portfolio of CIR – to executives of the Company and its parent company, in accordance with the terms and conditions set forth in the document “Regulations of Extraordinary Stock Option Plan January 11 2005”. The options can be exercised at any time from April 30 2005 to April 30 2010.

- On March 11 2005 the Board of Directors voted to assign to executives of the Company and

its parent company options for the subscription of shares according to the terms and condi-tions laid down in the Regulations of “Stock Option Plan March 11 2005”, which was ap-proved at the same time. This plan gives the beneficiaries the right to exercise options to sub-scribe a total maximum of 2,670,000 newly issued shares at a given price and within a prede-fined period of time. The Regulations also require that in order to be entitled to exercise the options the beneficiaries must be employed by the Company or its parent company when the option is exercised except in cases of retirement, permanent invalidity or death. The subscrip-tion price was fixed at € 2.34 per share. The options can be exercised by each beneficiary starting from September 30 2005, at three-monthly intervals, until the final maturity of Sep-tember 30 2015. On the same date a resolution was also passed assigning 1,760,000 newly is-sued shares at the price of € 2.34 to employees of CIR S.p.A., of its subsidiary CIR Interna-tional and of its parent company, who are beneficiaries of “Stock Option Plan 2005”, which was approved at the same time. The regulations of this plan give terms, conditions and exer-cise periods identical to those of “Stock Option Plan 11.03.2005”.

- On September 6 2005 the Board of Directors voted to assign options to subscribe a further

2,790,000 newly issued shares at the price of € 2.49 per share reserved for subscription by ex-ecutives of the Company and its parent company and the subsidiary Dry Products S.p.A., who are beneficiaries of “Stock Option Plan September 6 2005”, approved during the same meet-ing. The Regulations of this plan specify terms and conditions identical to those of the previ-ous plan except for the date on which the options become exercisable (February 28 2006) and

CIR S.p.A. 157

their final expiration date (February 29 2016). It should be remembered that the Board of Di-rectors Meetings as above approved the relative share capital increases (for a total maximum amount of € 3,610,000.00 through the issuance of a maximum of 7,220,000 shares) on the ba-sis of the authorization given by the Extraordinary Meetings of Shareholders held on May 12 2000 and April 27 2005.

- On April 27 2006 the Board of Directors voted to assign to executives of the Company, of its

subsidiary Dry Products S.p.A. and of its parent company options to subscribe shares accord-ing to the terms and conditions defined in the Regulations of “Stock option plan 2006”, which was approved at the same time. This plan gives the beneficiaries the right to exercise options to subscribe a total of 5,530,000 newly issued shares at a given price and within a predefined pe-riod of time. The options will be divided into two tranches, each of 2,765,000 options. The Regulations also require that in order to be entitled to exercise the options the beneficiaries must be employed by the Company, its subsidiary or its parent company when the option is ex-ercised except in cases of retirement, permanent invalidity or death. The subscription price was fixed at € 2.50 for the first tranche options and at € 2.47 for the second tranche options.

- On April 27 2007 the Shareholders’ Meeting voted to assign to the Chief Executive Officer

and executives of the Company options, each of which will give the right to receive a gross sum equal to the difference between the market value of the share in the vesting period and the market value of the share at time the option was assigned, according to terms and conditions set out in the Regulations of “Incentive plan (phantom stock options) 2007”, which was ap-proved at the same time. These options were assigned in 2 equal tranches for a total of 6,105,000 options.

The Regulations also stipulate that the essential condition for exercise of the options is that the assignee must be permanently employed by the Company as of the date of exercise of the op-tions, except in cases of retirement, permanent invalidity or death.

The subscription price was set at € 3.0877 per share for the first tranche options and at € 2.7344 per share for the second tranche options.

The first tranche options can be exercised by each beneficiary as from September 30 2007, every three months, up to the final maturity of September 30 2017, while the second tranche options can be exercised by each beneficiary from March 31 2008, every three months, until the final maturity of March 31 2018.

The following chart shows information regarding stock options assigned to Directors and General Managers.

158 CIR S.p.A.

STOCK OPTIONS ASSIGNED TO DIRECTORS AND GENERAL MANAGERS

Options held at beginning of year

Options assigned during the year


Options expiring

during year

Options held at end of year

Last name and first name Position held

Number of options

Average Strike place

Average expiry (years)

Number of options

Average strike place


Number of options


Average market price at exercise

date

Number of options

Number of options



DE BENEDETTI RODOLFO CEO & G.M.

Stock Option Plan 7/3/2000 1,500,000 3.70

1,500,000 3.70


1,000,000 2.62


2,000,000 1.28 -- 1.28

Stock Option Plan 14/3/2002 340,000 1.20

340,000 1.20

-- 1.20


460,000 1.02

-- 1.02


315,000 0.84

-- 0.84


675,000 1.13

112,500 1.13


975,000 1.60

275,000 1.60


3,500,000 1.60

-- 1.60


1,250,000 1.56


10,000,000 2.15


1,350,000 2.34


1,250,000 2.49

Stock Option Plan 2006 1st tranche 1,250,000 2.50 1,250,000 2.50

Stock Option Plan 2006 2nd tranche 1,250,000 2.47 1,250,000 2.47

TOTAL 27,502,500 2.05 6,6 8,265,000 1.41

19,237,500 2.32 6.33

PIASER ALBERTO G.M.


8,000 1.20

-- 1.20


32,000 1.02 -- 1.02


70,000 0.84 -- 0.84


100,000 1.13 -- 1.13


126,000 1.60 30,000 1.60


126,000 1.56 66,000 1.56


400,000 2.34


300,000 2.49

Stock Option Plan 2006 1st tranche 300,000 2.50 300,000 2.50

Stock Option Plan 2006 2nd tranche 300,000 2.47 300,000 2.47

TOTAL 1,858,000 2.12 7.97 462,000 1.33

1,396,000 2.38 7.73

FERRERO PIERLUIGI Dir.


220,000 3.70


125,000 2.62

TOTAL 345,000 3.31 4.25

345,000 3.31 3.25

CIR S.p.A. 159

PHANTOM STOCK OPTIONS ASSIGNED TO DIRECTORS AND GENERAL MANAGERS

Options held at beginning of year

Options assigned during the year


Options expiring

during year

Options held at end of year

Last name and first name Position held

Number of options

Average Strike place


Number of options



Number of options


Average market price at exercise

date

Number of options

Number of options



DE BENEDETTI RODOLFO A.D. e D.G.

Phantom stock option plan 2007 - 1st tranche 1,750,000 3.0877 1,750,000 3.0877

Phantom stock option plan 2007 – 2nd tranche 1,750,000 2.7344 1,750,000 2.7344

TOTAL 3,500,000 2.9111 10

3,500,000 2.9111 10

PIASER ALBERTO D.G.

Phantom stock option plan 2007 - 1st tranche 420,000 3.0877 420,000 3.0877

Phantom stock option plan 2007 – 2nd tranche 420,000 2.7344 420,000 2.7344

TOTAL 840,000 2.9111 10

840,000 2.9111 10

25. SIGNIFICANT EVENTS THAT TOOK PLACE AFTER YEAR END It should be noted that on January 22 2008 the Turin Tax Police Department began a partial tax inspection of entities of a significant size, which includes CIR S.p.A.. This inspections is for tax year 2006 and regards only income taxes. To date nothing has been contested.

160 CIR S.p.A.

161

Statutory Financial Statements of the Direct Subsidiaries as of December 31 2007

ENERGIA HOLDING S.p.A.

GRUPPO EDITORIALE L’ESPRESSO S.p.A.

SOGEFI S.p.A.

HSS – HOLDING SANITÀ E SERVIZI S.p.A.

DRY PRODUCTS S.p.A.

CIR INTERNATIONAL S.A.

COFIDEFIN SERVIÇOS DE CONSULTORIA Lda

INTERGEFI S.r.l.

CIR VENTURE S.r.l.

JUPITER FINANCE S.p.A.

CIRINVEST S.p.A.

CIGA LUXEMBOURG S.A.

ENERGIA HOLDING S.p.A.Registered office: TURINShare capital at 31.12.2007: € 120,351,238.00

BALANCE SHEET(in euro)

ASSETS 31.12.2007 31.12.2006

A - SHAREHOLDER RECEIVABLES FOR PAYMENTS STILL DUE -- --

B - FIXED ASSETSI Intangible assets

Start-up and expansion costs 1,879 4,064 Concessions, licenses and trademarks 1,297 1,513

Total intangible assets 3,176 5,577

II Tangible assets -- --

III Financial assetsInvestments in subsidiaries 254,907,476 254,582,461

Total financial assets 254,907,476 254,582,461

TOTAL FIXED ASSETS 254,910,652 254,588,038

C - CURRENT ASSETSI Inventories -- -- II Receivables

Subsidiaries - due in up to 12 months 72,290 -- Subsidiaries - due in over 12 months -- 34,711 Others - due in up to 12 months 89 3,370

Total receivables 72,379 38,081 III Financial assets not classified as fixed assets -- --

IV Cash and cash equivalentsBank and Post Office deposits 6,081,136 5,016,322

Total cash and cash equivalents 6,081,136 5,016,322

TOTAL CURRENT ASSETS 6,153,515 5,054,403

D - ACCRUED INCOME AND PREPAID EXPENSE -- --

TOTAL ASSETS 261,064,167 259,642,441


A - SHAREHOLDERS' EQUITYI Capital 120,351,238 120,351,238 II Share premium reserve 131,485,190 131,485,190 III Revaluation reserves -- -- IV Legal reserve 1,402,797 1,084,709 V Statutory reserves -- -- VI Reserve for treasury stock held -- -- VII Other reserves 10,173 10,171 VIII Retained earnings (losses) 252,369 226,278 IX Net income (loss) for the year 7,471,642 6,361,741

TOTAL SHAREHOLDERS' EQUITY 260,973,409 259,519,327

B - PROVISIONS FOR RISKS AND LOSSES -- --

C - EMPLOYEE SEVERANCE AND LEAVING INDEMNITY -- -- D - ACCOUNTS PAYABLE

Parent companies - due in up to 12 months 12,959 -- Suppliers - due in up to 12 months 70,586 121,696 Tax payables 7,213 1,418

TOTAL ACCOUNTS PAYABLE 90,758 123,114

E - ACCRUED EXPENSE AND DEFERRED INCOME -- --


ENERGIA HOLDING S.p.A.Registered office: TURINShare capital at 31.12.2007: € 120,351,238.00

INCOME STATEMENT(in euro)

2007 2006

A - VALUE OF PRODUCTIONOther revenues and income 42,916 --

TOTAL VALUE OF PRODUCTION 42,916 --

B - COSTS OF PRODUCTIONServices 83,717 92,479 Lease and rental 49 -- Amortization, depreciation and write-downs

Amortization of intangible assets 2,400 2,416 Miscellaneous operating costs 19,998 25,325

TOTAL COSTS OF PRODUCTION 106,164 120,220 OPERATING INCOME (LOSS) (63,248) (120,220)

C - FINANCIAL INCOME AND EXPENSEIncome from equity investments

Subsidiaries 7,361,247 6,339,364 Other financial income

Receivables classified as fixed assetsSubsidiaries 72,290 --

Income other than the aboveOther 165,837 148,992

Interest and other financial expenseOther 183 --

TOTAL FINANCIAL INCOME AND EXPENSE 7,599,191 6,488,356 D - ADJUSTMENTS TO THE VALUE OF FINANCIAL ASSETS -- --E - EXTRAORDINARY INCOME AND EXPENSE

Income 121,968 104,600 Expense -- --

EXTRAORDINARY ITEMS 121,968 104,600

RESULT BEFORE TAXES 7,657,911 6,472,736

Income taxes for the year (186,269) (110,995)NET INCOME (LOSS) FOR THE YEAR 7,471,642 6,361,741

GRUPPO EDITORIALE L’ESPRESSO S.p.A.Registered office: ROMEShare capital at 31.12.2007: € 65,167,018.20


ASSETS

Intangible assets with an indefinite useful life 220,660,859 220,660,859 Other intangible assets 2,186,885 2,811,161 Intangible assets 222,847,744 223,472,020

Tangible assets 60,932,448 68,035,523 Equity investments 391,852,524 391,694,134 Non-current receivables 355,890 348,290 Deferred tax assets 10,880,437 14,733,787

NON-CURRENT ASSETS 686,869,043 698,283,754

Inventories 25,386,816 30,398,197 Trade receivables 125,486,069 119,111,943

of which with related parties 106,975,400 102,261,915 Tax receivables 18,357,150 25,115,809

of which with related parties 1,536,742 2,437,298 Other receivables 11,357,180 11,194,173 Cash and cash equivalents 224,813,331 219,313,119

of which with related parties 89,661,263 59,859,659

CURRENT ASSETS 405,400,546 405,133,241

TOTAL ASSETS 1,092,269,589 1,103,416,995

LIABILITIES AND SHAREHOLDERS' EQUITY

Share capital 65,167,018 65,149,551 Reserves 80,113,273 131,897,461 Retained earnings (losses) 64,152,161 49,826,975 Net income (loss) for the year 166,161,981 85,927,510

SHAREHOLDERS' EQUITY 375,594,433 332,801,497

Borrowings 332,984,564 338,744,633 Provisions for risks and losses 5,472,701 6,969,941 TFR and other personnel provisions 41,025,570 47,576,131 Deferred tax liabilities 39,666,643 40,676,591

NON-CURRENT LIABILITIES 419,149,478 433,967,296

Borrowings 125,891,488 168,319,724 of which from related parties 117,393,406 159,078,867

Provisions for risks and losses 4,019,207 2,847,972 Trade payables 115,641,354 115,232,168

of which to related parties 23,576,097 23,847,651 Tax payables 10,388,649 12,128,359

of which to related parties 2,910,531 6,188,844 Other payables 41,584,980 38,119,979

CURRENT LIABILITIES 297,525,678 336,648,202

TOTAL LIABILITIES 716,675,156 770,615,498

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY 1,092,269,589 1,103,416,995

31.12.2007 31.12.2006

31.12.2007 31.12.2006

GRUPPO EDITORIALE L’ESPRESSO S.p.A.Registered office: ROMEShare capital at 31.12.2007: € 65,167,018.20


Revenues 618,807,483 657,905,137 of which from related parties 339,457,703 3,176,940

Change in product inventories 395,516 (1,011,526)

Other operating income 8,031,654 7,222,198 of which from related parties 565,149 97,926

Costs for purchases (113,491,609) (122,957,111)of which from related parties (1,723,069) 472,261

Costs for services (311,843,729) (332,542,877)of which from related parties (104,380,664) (97,828,025)

Other operating expenses (8,879,672) (6,242,749)of which with related parties (184) (4,476)

Personnel costs (109,060,755) (112,035,293)of which with related parties (324,489) 67,359

Amortization, depreciation and write-downs (13,973,081) (13,251,245)

Operating income 69,985,807 77,086,534

Net financial income/(expense) (15,288,579) (14,958,372)of which from related parties (3,008,693) (2,514,835)

Dividends 135,500,045 56,319,888 of which from related parties 135,500,045 56,319,888

Result before taxes 190,197,273 118,448,050 Income taxes (24,035,292) (32,520,540)

NET INCOME 166,161,981 85,927,510

Basic earnings per share 0.399 0.201

Diluted earnings per share 0.384 0.195

2007 2006

SOGEFI S.p.A.Registered office: MANTUAShare capital at 31.12.2007: € 59,594,595.84


ASSETS 31.12.2007 31.12.2006CURRENT ASSETS

Cash and cash equivalents 3,851,805 6,201,827 Centralized treasury accounts with subsidiaries 8,444,930 21,460,909 Other financial assets 476,926 4,442 Loans to subsidiaries and similar financial receivables 12,856,819 26,123,308 WORKING CAPITALTrade receivables 4,821,063 2,304,693 of which from subsidiaries 1,724,878 1,773,649 of which from parent company 3,088,273 529,804 Other receivables 80,236 130,437 Tax receivables 255,380 275,643 Other assets 182,358 215,594 of which with subsidiaries 117,021 139,316

TOTAL WORKING CAPITAL 5,339,037 2,926,367 TOTAL CURRENT ASSETS 30,969,517 56,716,853 NON-CURRENT ASSETSFIXED ASSETS

Real-estate investments: land 12,154,000 12,154,000 Real-estate investments: other property 14,525,000 15,173,100 Other tangible assets 81,490 101,090 Intangible assets 228,495 47,049

TOTAL FIXED ASSETS 26,988,985 27,475,239 OTHER NON-CURRENT ASSETS

Investments in subsidiaries 260,552,372 256,420,932 Other available-for-sale financial assets 7,642 10,180 Loans and similar financial receivables 100,182,773 91,759,986 of which to subsidiaries 100,182,773 91,459,301 of which other medium-long term assets for derivatives -- 300,685 Other receivables 2,513 2,513 Advance taxes 536,474 1,415,582

TOTAL OTHER NON-CURRENT ASSETS 361,281,774 349,609,193 TOTAL NON-CURRENT ASSETS 388,270,759 377,084,432 TOTAL ASSETS 419,240,276 433,801,285

LIABILITIES AND SHAREHOLDERS' EQUITY 31.12.2007 31.12.2006CURRENT LIABILITIES

Bank borrowings 3,559,209 7,098,833 Centralized treasury accounts with subsidiaries 48,789,311 58,205,452 Current part of long-term loans and other loans 1,276,174 2,750,444 of which from subsidiaries 313,611 -- TOTAL SHORT TERM BORROWINGS 53,624,694 68,054,729 Other financial liabilities for derivatives -- -- TOTAL SHORT-TERM BORROWINGS AND DERIVATIVES 53,624,694 68,054,729 Trade payables and other payables 3,568,791 5,840,632 of which with subsidiaries 900,992 763,866 Tax payables 255,159 230,443 Other current liabilities 534,240 435,618

TOTAL CURRENT LIABILITIES 57,982,884 74,561,422 NON-CURRENT LIABILITIESMEDIUM-LONG TERM BORROWINGS AND DERIVATIVES

Loans from banks 101,685,332 102,634,967 TOTAL MEDIUM-LONG TERM BORROWINGS 101,685,332 102,634,967 Other medium-long term financial liabilities for derivatives -- --

TOTAL MEDIUM-LONG TERM BORROWINGS AND DERIVATIVES 101,685,332 102,634,967 OTHER LONG-TERM LIABILITIES

Long term provisions 988,637 1,464,715 Deferred taxes 380,938 5,032,080

TOTAL OTHER LONG TERM LIABILITIES 1,369,575 6,496,795 TOTAL NON-CURRENT LIABILITIES 103,054,907 109,131,762 SHAREHOLDERS' EQUITY

Share capital 59,594,596 58,826,348 Reserves and retained earnings (losses) 172,573,698 168,997,307 Net income (loss) for the year 26,034,191 22,284,446

TOTAL SHAREHOLDERS' EQUITY 258,202,485 250,108,101 TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY 419,240,276 433,801,285

SOGEFI S.p.A.Registered office: MANTUAShare capital at 31.12.2007: € 59,594,595.84


2007 2006

FINANCIAL INCOME AND EXPENSE1) Income from equity investments - dividends and other income from subsidiaries 34,504,944 28,744,713 - dividends and other income from other companies 353 270 TOTAL 34,505,297 28,744,983 2) Other financial income - from securities included in current assets held for trading -- 36,534 - income other than the above interest income and commissions from subsidiaries 7,035,939 5,830,120 interest income and commissions from others and sundry income 764,395 461,350 foreign exchange gains 1,678,049 503,193 TOTAL 9,478,383 6,831,197 3) Interest expense and other financial charges - with subsidiaries 1,983,075 1,155,049 - with others 6,071,791 5,489,882 - foreign exchange losses 1,793,481 945,270 TOTAL 9,848,347 7,590,201 ADJUSTMENTS TO THE VALUE OF FINANCIAL ASSETS4) Revaluations -- -- 5) Write-downs 5,196,839 1,346,557 TOTAL VALUE ADJUSTMENTS (5,196,839) (1,346,557)6) OTHER OPERATING INCOME 8,226,441 9,974,550 of which from subsidiaries 8,178,177 9,718,535 OTHER OPERATING COSTS7) Non-financial services 4,952,856 5,791,708 of which from subsidiaries 672,539 476,806 of which from parent company 1,850,000 1,850,000 8) Lease and rental expense 436,397 385,402 9) Personnel 4,390,399 4,277,725 10) Amortization, depreciation and write-downs 41,376 42,702 11) Risk provisions -- -- 12) Other provisions -- -- 13) Miscellaneous operating costs 1,128,794 1,142,168 TOTAL OTHER OPERATING COSTS 10,949,822 11,639,705 OPERATING INCOME 26,215,113 24,974,267 NON-OPERATING INCOME AND EXPENSE14) Income -- -- 15) Expense 6,787,067 3,116,430 of which non-recurring charges - third parties 4,623,336 2,171,515 of which non-recurring charges - parent company 650,000 -- NON-OPERATING INCOME (LOSS) (6,787,067) (3,116,430)RESULT BEFORE TAXES 19,428,046 21,857,837 16) Income taxes for the year (6,606,145) (426,609)NET INCOME FOR THE YEAR 26,034,191 22,284,446

HSS - HOLDING SOCIETÀ E SERVIZI S.p.A.Registered office: MILANShare capital at 31.12.2007: € 5,405,266.00


ASSETS 31.12.2007 31.12.2006A - SHAREHOLDER RECEIVABLES FOR PAYMENTS STILL DUE -- --B - FIXED ASSETS

I Intangible assetsConcessions, licenses, trademarks and similar rights 145,235 317,606 Assets under constuction and advance payments 30,240 -- Other 71,425 37,091

Total intangible assets 246,900 354,697 II Tangible assets

Land and buildings 13,652,591 1,524,553 Plant and machinery 13,514 13,339 Industrial and commercial equipment 4,415 4,196 Other assets 283,732 239,182 Assets under construction and advance payments 500,000 7,180,053

Total tangible assets 14,454,252 8,961,323 III Financial assets

Investments in subsidiaries 75,673,095 46,753,095 Receivables

Subsidiaries - up to 12 months 49,741,809 8,729,141 Subsidiaries - over 12 months -- 26,718 Other companies - up to 12 months 413,096 310 Other companies - over 12 months 2,651 415,437

Total financial assets 125,830,651 55,924,701 TOTAL FIXED ASSETS 140,531,803 65,240,721 C - CURRENT ASSETS

I Inventories -- -- II Accounts receivable

Clients - up to 12 months 18,545 18,587 Subsidiaries - up to 12 months 3,611,776 3,529,742 Parent companies - up to 12 months 1,435,638 893,798 Tax receivables - up to 12 months 1,376,922 779,648 Tax receivables - over 12 months 12,284 -- Others - up to 12 months 844,570 561,815 Others - over 12 months 162,500 --

Total receivables 7,462,235 5,783,590 III Financial assets not classified as fixed assets -- -- IV Cash and cash equivalents

Bank and Post Office deposits 2,197,084 1,871,932 Cash and valuables on hand 1,948 694

Total cash and cash equivalents 2,199,032 1,872,626 TOTAL CURRENT ASSETS 9,661,267 7,656,216 D - ACCRUED INCOME AND PREPAID EXPENSES

Accrued income 39,552 -- Prepaid expenses 245,022 53,562

TOTAL ACCRUED INCOME AND PREPAID EXPENSES 284,574 53,562 TOTAL ASSETS 150,477,644 72,950,499

LIABILITIES AND SHAREHOLDERS' EQUITY 31.12.2007 31.12.2006A - SHAREHOLDERS' EQUITY

I Capital 5,405,266 4,285,610 II Share premium reserve 106,350,908 69,402,258 III Revaluation reserves -- -- IV Legal reserve -- -- V Statutory reserves -- -- VI Reserve for treasury stock held -- -- VII Other reserves 1 1 VIII Retained earnings (losses) (5,155,430) (2,318,130)IX Net income (loss) for the year (2,727,280) (2,837,300)

TOTAL SHAREHOLDERS' EQUITY 103,873,465 68,532,439 B - PROVISIONS FOR RISKS AND LOSSES 18,633 -- C - EMPLOYEE SEVERANCE AND LEAVING INDEMNITY 119,009 81,595 D - ACCOUNTS PAYABLE

Bank borrowings - up to 12 months 27,076,667 -- Bank borrowings - over 12 months 17,523,333 -- Due to suppliers - up to 12 months 1,027,203 2,125,058 Due to subsidiaries - up to 12 months -- 7,363 Due to parent companies - up to 12 months 84,000 -- Tax payables - up to 12 months 109,490 82,474 Social security and pension payables - up to 12 months 186,142 94,454 Social security and pension payables - over 12 months -- 50,870 Other payables - up to 12 months 412,328 1,227,692 Other payables - over 12 months -- 662,960

TOTAL PAYABLES 46,419,163 4,250,871 E - ACCRUED EXPENSES AND DEFERRED INCOME

Other accrued expenses and deferred income 47,374 85,594 TOTAL ACCRUED EXPENSES AND DEFERRED INCOME 47,374 85,594 TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY 150,477,644 72,950,499

MEMORANDUM ACCOUNTS 31.12.2007 31.12.2006(in euro)

Guarantees issuedGuarantees

Subsidiaries 42,685,527 54,207,508 Others 532,034 515,785

TOTAL MEMORANDUM ACCOUNTS 43,217,561 54,723,293

HSS - HOLDING SOCIETÀ E SERVIZI S.p.A.Registered office: MILANShare capital at 31.12.2007: € 5,405,266.00


2007 2006

A - VALUE OF PRODUCTIONRevenues from sales and services 32 -- Other revenues and income 1,763,978 1,443,685

TOTAL VALUE OF PRODUCTION 1,764,010 1,443,685

B - COSTS OF PRODUCTIONRaw materials, secondary materials, consumables, goods 38,075 -- Services 2,289,107 2,493,526 Lease and rental 243,439 149,466 Personnel costs

Salaries and wages 1,614,705 1,178,789 Social contributions 504,105 366,763 Severance and leaving indemnity 107,589 71,571 Other costs 56,851 --

Amortization, depreciation and write-downsAmortization of intangible assets 86,423 29,679 Depreciation of tangible assets 230,682 35,282

Miscellaneous operating costs 449,714 645,123 TOTAL COSTS OF PRODUCTION 5,620,690 4,970,199 OPERATING INCOME (LOSS) (3,856,680) (3,526,514)

C - FINANCIAL INCOME AND EXPENSEIncome from equity investments

Subsidiaries 984 174,141 Total income from equity investments 984 174,141 Other financial income

Financial income other than the aboveSubsidiaries 490,706 -- Other receivables 197,763 197,162

Total other financial income 688,469 197,162 Interest and other financial expense

To creditors (995,691) (191,932)Foreign exchange gains and losses -- --

TOTAL FINANCIAL INCOME AND EXPENSE (306,238) 179,371 D - ADJUSTMENTS TO THE VALUE OF FINANCIAL ASSETS -- -- E - EXTRAORDINARY GAINS AND LOSSES

Gains -- -- Losses

Capital losses on disposals -- (328,600)

TOTAL EXTRAORDINARY GAINS AND LOSSES -- (328,600)INCOME BEFORE TAXES (4,162,918) (3,675,743)

Income taxes for the yearCurrent taxes 1,435,638 838,443 Deferred and advance taxes -- --

NET INCOME (LOSS) FOR THE YEAR (2,727,280) (2,837,300)

DRY PRODUCTS S.p.A.Registered office in Milan: Via Ciovassino 1Share capital at March 31 2007: € 100,000.00


ASSETS 31.03.2007 * 31.03.2006

A) SHAREHOLDER RECEIVABLES FOR PAYMENTS STILL DUE -- -- B) FIXED ASSETS

I Intangible assets -- -- II Tangible assets

Other assets 703 1,299 Total tangible assets 703 1,299 III Financial assets

Investments in subsidiaries 4,032 188,000 Total financial assets 4,032 188,000

TOTAL FIXED ASSETS 4,735 189,299 C) CURRENT ASSETS

I Inventories -- -- II Accounts receivable ** **

Subsidiaries -- -- -- -- Parent companies -- 50,000 -- 40,000 Others -- 34,608 -- 138,089

Total receivables -- 84,608 -- 178,089 III Financial assets not classified as fixed assets

Financial receivables with subsidiaries -- -- Total financial assets -- -- IV Cash and cash equivalents

Bank and Post Office deposits 1,297,287 3,198,268 Cash and valuables on hand 410 403

Total cash and cash equivalents 1,297,697 3,198,671 TOTAL CURRENT ASSETS 1,382,305 3,376,760 D) ACCRUED INCOME AND PREPAID EXPENSES 2,803 2,095 TOTAL ASSETS 1,389,843 3,568,154

LIABILITIES AND SHAREHOLDERS' EQUITY 31.03.2007 * 31.03.2006

A) SHAREHOLDERS' EQUITYI Capital 100,000 100,000 II Share premium reserve -- --III Revaluation reserves -- --IV Legal reserve 102,576 50,955 V Reserve for treasury stock held -- --VI Statutory reserves -- --VII Other reserves -- --VIII Retained earnings (losses) 1,349,737 368,957 IX Net income (loss) for the year (282,299) 1,032,401

TOTAL SHAREHOLDERS' EQUITY 1,270,014 1,552,313 B) PROVISIONS FOR RISKS AND LOSSES

Other -- -- TOTAL PROVISIONS FOR RISKS AND LOSSES -- -- C) EMPLOYEE SEVERANCE AND LEAVING INDEMNITY 30,673 25,284 D) ACCOUNTS PAYABLE ** **

Due to suppliers -- 2,006 -- 51,202 Due to parent companies -- -- -- 1,897,427 Tax payables -- 52,862 -- 5,750 Social security payables -- 9,183 -- 7,340 Other payables -- 23,811 -- 28,838

TOTAL PAYABLES -- 87,862 -- 1,990,557 E) ACCRUED EXPENSES AND DEFERRED INCOME 1,294 -- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY 1,389,843 3,568,154

* Financial year ended March 31 2007* * of which due in over 12 months

DRY PRODUCTS S.p.A.Registered office in Milan: Via Ciovassino 1Share capital at March 31 2007: € 100,000.00


2007 * 2006

A) VALUE OF PRODUCTIONOther revenues and income 222,383 1,572,701

TOTAL VALUE OF PRODUCTION 222,383 1,572,701 B) COSTS OF PRODUCTION

Services 50,217 32,035 Lease and rental 13,852 15,776 Personnel costs:

Salaries and wages 157,926 166,641 Social contributions 51,146 54,805 Severance and leaving indemnity 11,224 9,225

Amortization, depreciation and write-downs 596 559 Risk provisions -- -- Miscellaneous operating costs 34,003 27,813

TOTAL COSTS OF PRODUCTION 318,964 306,854 OPERATING INCOME (LOSS) (96,581) 1,265,847 C) FINANCIAL INCOME AND EXPENSE

Other financial income:Income other than the above

Interest income and commissions from subsidiaries -- 10,464 Interest income and commissions from others and sundry income 11,622 3,430

Total other financial income 11,622 13,894 Interest and other financial expense:

Parent companies 2,027 191,268

Others 526 269 Total interest and other financial expense 2,553 191,537 Foreign exchange gains and losses (29) 31

TOTAL FINANCIAL INCOME AND EXPENSE 9,040 (177,612)

D) ADJUSTMENTS TO THE VALUE OF FINANCIAL ASSETSRevaluations:

of equity investments -- -- Write-downs:

of equity investments 183,968 --

TOTAL ADJUSTMENTS TO THE VALUE OF FINANCIAL ASSETS (183,968) --

E) EXTRAORDINARY GAINS AND LOSSES

Gains:Capital gains on disposals -- --

Losses:Capital losses on disposals -- 5,834 Other charges 3,000 50,000

TOTAL EXTRAORDINARY GAINS AND LOSSES (3,000) (55,834)

RESULT BEFORE TAXES (274,509) 1,032,401

Income taxes for the period (7,790) --

Net income (loss) for the year (282,299) 1,032,401

* Financial year ended March 31 2007

CIR INTERNATIONAL S.A.Registered office: LUXEMBOURGShare capital at 31.12.2007: € 1,000,000.00


ASSETS 31.12.2007 31.12.2006

Fixed assets

- tangible assets 21,466 4,536 - investments 193,619,801 94,077,977

193,641,267 94,082,513 Current assets

- receivables 18,398,491 61,518,209 - marketable securities 226,279,390 660,136,205 - cash at banks and in hand 243,824,833 76,886,207

488,502,714 798,540,621 Prepaid expenses and accrued income 24,065,259 32,266,160

Total assets 706,209,240 924,889,294

LIABILITIES AND SHAREHOLDERS’ EQUITY 31.12.2007 31.12.2006

Share capital 1,000,000 250,000,000 Legal reserve 3,718,741 3,684,059 Profit (Loss) brought forward -- 15,588,730 Distribution of interim dividend (53,000,000) -- Profit for the year 114,078,951 693,651

Total shareholders’ equity 65,797,692 269,966,440

Provisions for risks and charges 21,077,969 31,865,154

Long term debt 585,000,000 585,000,000

CURRENT LIABILITIES- short term debt -- 230,022 - other liabilities 3,660,687 6,863,947

3,660,687 7,093,969

Accrued expenses and deferred income 30,672,892 30,963,731

Totale liabilities 640,411,548 654,922,854

Total liabilities and shareholders' equity 706,209,240 924,889,294

CIR INTERNATIONAL S.A.Registered office: LUXEMBOURGShare capital at 31.12.2007: € 1,000,000.00


2007 2006

INCOME

Fixed assets income 21,705,479 20,259,080

Current assets income 335,312,611 149,916,272

Other income 1,772,964 1,925,000

Total income 358,791,054 172,100,352

EXPENSES

Value adjustment on- tangible assets 3,155 1,715 - investments 68,675,339 1,263,138 - marketable securities 3,436,164 6,733,486

72,114,658 7,998,339

Loss from sale of fixed assets 3,092,716 597,319

Interest and other financial expenses 164,676,685 157,501,644

Other expenses 4,694,044 5,189,399

Extraordinary expenses 134,000 120,000

Profit for the year 114,078,951 693,651

Total expenses 358,791,054 172,100,352

COFIDEFIN SERVICOS de CONSULTORIA LdaRegistered office: MADEIRAShare capital at 31.12.2007: € 125,000.00


ASSETS 31.12.2007 31.12.2006

Debts

Other debtors -- --

Total current assets -- --

Bank deposits and cash

Time deposits -- 3,396,950 Current accounts 3,681,005 57,119 Total bank deposits and cash 3,681,005 3,454,069

Accruals and deferred itemsAccruals and income 3,754,900 3,571,112 Deferred costs -- -- Total accruals and deferred items 3,754,900 3,571,112

TOTAL ASSETS 7,435,905 7,025,181

LIABILITIES AND SHAREHOLDERS’ EQUITY 31.12.2007 31.12.2006

SHAREHOLDERS’ EQUITY

Share capital 125,000 125,000 Legal reserve 25,000 25,000 Results carried forward 113,837 76,127 Results for the financial year 6,375,344 6,037,709

Total shareholders’ equity 6,639,181 6,263,836

Accruals deferred itemsCost accruals 796,724 761,345

Total liabilities 796,724 761,345 TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY 7,435,905 7,025,181

COFIDEFIN SERVICOS de CONSULTORIA LdaRegistered office: MADEIRAShare capital at 31.12.2007: € 125,000.00


2007 2006

INCOME

Services provided 7,939,078 7,596,422 Financial income 72,037 60,704

Total income 8,011,115 7,657,126

EXPENSESFinancial expenses 84,676 137,782 General and administrative expenses 1,551,095 1,481,634

Total expenses 1,635,771 1,619,416

PROFIT (LOSS) FOR THE YEAR 6,375,344 6,037,710

Total expenses 8,011,115 7,657,126

INTERGEFI S.r.l.Registered office: MILANShare capital at 31.12.2007: € 500,000.00


ASSETS 31.12.2007 31.12.2006

A - SHAREHOLDER RECEIVABLES FOR PAYMENTS STILL DUE -- --B - FIXED ASSETS

I Intangible assets -- --II Tangible assets -- --III Financial assets -- --

TOTAL FIXED ASSETS -- --C - CURRENT ASSETS

I InventoriesFinished properties 4,239,358 4,239,358 Advances 6,090 --

Total inventories 4,245,448 4,239,358 II Accounts receivable

Clients up to 12 months 32,543 381,490 Tax receivables up to 12 months 13,859 12,739 Tax receivables over 12 months 364 364 Others 463 463

Total receivables 47,229 395,056 III Financial assets not classified as fixed assets -- --IV Cash and cash equivalents

Bank and Post Office deposits -- -- Cash and valuables on hand 455 465

Total cash and cash equivalents 455 465 TOTAL CURRENT ASSETS 4,293,132 4,634,879 D - ACCRUED INCOME AND PREPAID EXPENSES

Other accrued income and prepaid expenses -- --TOTAL ACCRUED INCOME AND PREPAID EXPENSES -- --

TOTAL ASSETS 4,293,132 4,634,879


A - SHAREHOLDERS' EQUITYI Capital 500,000 500,000 II Share premium reserve -- --III Revaluation reserves -- --IV Legal reserve 27,306 20,000 V Statutory reserves -- --VI Reserve for treasury stock held -- --VII Other reserves 262,546 123,732 VIII Retained earnings (losses) -- --IX Net income (loss) for the year (297,756) 146,119

TOTAL SHAREHOLDERS' EQUITY 492,096 789,851 B - PROVISIONS FOR RISKS AND LOSSES -- --C - EMPLOYEE SEVERANCE AND LEAVING INDEMNITY FUND -- --D - ACCOUNTS PAYABLE

Bank borrowings up to 12 months 249,541 240,491 Bank borrowings over 12 months -- 249,089 Borrowings from other lenders 91 91 Due to suppliers 21,032 13,797 Due to parent companies 3,515,409 3,328,090 Tax payables 14,436 12,638

TOTAL PAYABLES 3,800,509 3,844,196 E - ACCRUED EXPENSES AND DEFERRED INCOME 527 832


INTERGEFI S.r.l.Registered office: MILANShare capital at 31.12.2007: € 500,000.00


2007 2006

A - VALUE OF PRODUCTIONRevenues from sales and services 354,534 349,595 Other revenues and income 41,119 1,161

TOTAL VALUE OF PRODUCTION 395,653 350,756 B - COSTS OF PRODUCTION

Raw and secondary materials, consumables and goods -- -- Services 27,503 23,605 Personnel costs

Salaries and wages -- --Social contributions -- --Severance and leaving indemnity -- --

Changes in inventories of raw and secondarymaterials, consumables and goods -- -- Miscellaneous operating costs 474,485 32,306

TOTAL COSTS OF PRODUCTION 501,988 55,911 OPERATING INCOME (LOSS) (106,335) 294,845 C - FINANCIAL INCOME AND EXPENSE

Income from equity investments -- --

Other financial incomeIncome other than the above

Other 4,051 9,641 Total other financial income 4,051 9,641

Interest and other financial expenseParent companies 159,848 117,690 Others 21,188 28,040

Total interest and other financial expense 181,036 145,730 TOTAL FINANCIAL INCOME AND EXPENSE (176,985) (136,089)D - ADJUSTMENTS TO THE VALUE OF FINANCIAL ASSETS -- -- E - EXTRAORDINARY GAINS AND LOSSES

GainsMiscellaneous -- 1

LossesMiscellaneous -- --

TOTAL EXTRAORDINARY GAINS AND LOSSES 1 RESULT BEFORE TAXES (283,320) 158,757

Income taxes for the year (14,436) (12,638)NET INCOME (LOSS) FOR THE YEAR (297,756) 146,119

CIR VENTURE S.r.l.Registered office: MILANShare capital at 31.12.2007: € 10,000.00


ASSETS 31.12.2007 31.12.2006

A - SHAREHOLDER RECEIVABLES FOR PAYMENTS STILL DUE -- --

B - FIXED ASSETSI Intangible assets -- --II Tangible assets -- --III Financial assets -- --

TOTAL FIXED ASSETS -- --

C - CURRENT ASSETSI Inventories -- --II Receivables -- --

Receivables - up to 12 months 2,482 3,197 Total receivables 2,482 3,197

III Financial assets not classified as fixed assets -- --IV Cash and cash equivalents 3,455 2,886

TOTAL CURRENT ASSETS 5,937 6,083

D - ACCRUED INCOME AND PREPAID EXPENSES -- --

TOTAL ASSETS 5,937 6,083


A - SHAREHOLDERS' EQUITY

I Capital 10,000 10,000 II Share premium reserve -- -- III Revaluation reserves -- -- IV Legal reserve -- -- V Statutory reserves -- -- VI Reserve for treasury stock held -- -- VII Other reserves - Cover of losses 769 -- VIII Retained earnings (losses) -- -- IX Net income (loss) for the year (4,864) (9,231)

TOTAL SHAREHOLDERS' EQUITY 5,905 769


C - EMPLOYEE SEVERANCE AND LEAVING INDEMNITY -- --

D - ACCOUNTS PAYABLE

Due in up to 12 months 32 5,314

TOTAL PAYABLES 32 5,314

E - ACCRUED EXPENSES AND DEFERRED INCOME -- --

TOTAL LIABILITIES 5,937 6,083

CIR VENTURE S.r.l.Registered office: MILANShare capital at 31.12.2007: € 10,000.00


2007 2006

A - VALUE OF PRODUCTION -- --

B - COSTS OF PRODUCTIONServices 4,149 6,831 Miscellaneous operating costs 715 2,436

TOTAL COSTS OF PRODUCTION 4,864 9,267

OPERATING INCOME (LOSS) (4,864) (9,267)

C - FINANCIAL INCOME AND EXPENSEOther financial income

Financial income other than the above:from other receivables -- 79

Total other financial income -- 79 Interest and other financial expense

Other creditors -- (43)Total interest and other financial expense -- (43)

TOTAL FINANCIAL INCOME AND EXPENSE -- 36

D - ADJUSTMENTS TO THE VALUE OF FINANCIAL ASSETS -- --

E - EXTRAORDINARY GAINS AND LOSSESExtraordinary gains -- -- Extraordinary losses

capital losses from sale of investments -- -- TOTAL EXTRAORDINARY GAINS AND LOSSES -- --

RESULT BEFORE TAXES (4,864) (9,231)

Income taxes for the year -- -- NET INCOME (LOSS) FOR THE YEAR (4,864) (9,231)

JUPITER FINANCE S.p.A.Registered office: MILANShare capital at 31.12.2007: € 600,000.00


ASSETS 31.12.2007 31.12.2006

Cash and cash equivalents 307 40

Accounts receivable 8,861,169 44,868,747

Equity investments 4,300,000 4,300,000

Tangible assets 142,600 202,481

Intangible assets 164,370 95,582

Tax assets 541,102 634,809 a) current 137,745 161,218 b) advance 403,357 473,591

Other assets 42,878 4,125

TOTAL ASSETS 14,052,426 50,105,784


Accounts payable 5,343,640 48,658,221

Tax liabilities 187,657 43,570 a) current 154,321 30,533 b) advance 33,336 13,037

Other liabilities 2,224,657 620,697

Employee severance and leaving indemnity 48,324 18,389

Capital 600,000 600,000

Share premium 900,000 900,000

Reserves 5,017,630 17,630

Net income (loss) for the year (269,482) (752,723)


JUPITER FINANCE S.p.A.Registered office: MILANShare capital at 31.12.2007: € 600,000.00


2007 2006

Interest income and similar income 2,879,709 391,629

Interest expense and similar expense (2,141,306) (277,620)

INTEREST MARGIN 738,403 114,009

Commission income 1,816,730 100,331

Commission expense -- --

NET COMMISSIONS 1,816,730 100,331

INTERMEDIATION MARGIN 2,555,133 214,340

Administrative expense: (2,669,083) (1,504,250)a) personnel costs (1,234,667) (670,503)b) other administrative expense (1,434,416) (833,747)

Net adjustments to the net value of tangible assets (32,738) (18,929)

Net adjustments to the value of intangible assets (77,069) (29,157)

Other operating costs (3,451,345) (584,796)

Other operating income 3,439,121 567,354

OPERATING INCOME (LOSS) (235,981) (1,355,438)

Net gain (loss) from sale of investments 106,200 143,385

INCOME (LOSS) FROM CURRENT OPERATIONS BEFORE TAX (129,781) (1,212,053)

Taxes for the year on income from current operations (139,701) 459,330

NET INCOME (LOSS) FROM CURRENT OPERATIONS AFTER TAX (269,482) (752,723)

NET INCOME (LOSS) FOR THE YEAR (269,482) (752,723)

CIRINVEST S.p.A.Registered office: MILANShare capital at 31.12.2007: € 121,750.00


ASSETS 31.12.2007 31.12.2006

A - SHAREHOLDER RECEIVABLES FOR PAYMENTS STILL DUE

B - FIXED ASSETS 4,678 7,119

I INTANGIBLE ASSETS 4,678 7,016 Start-up and expansion costs 4,678 7,016 Historical cost 11,694 11,694

- Accrued amortization (7,016) (4,678)Concessions, licenses, trademarks and similar rights -- -- Historical cost 13,800 13,800

- Accrued amortization (13,800) (13,800)

II TANGIBLE ASSETS -- --

III FINANCIAL ASSETS -- 103

Receivables with others -- 103

C - CURRENT ASSETS 138,413 343,515

I INVENTORIES -- --

II RECEIVABLES 3,602 12,872 Tax credits claimable in over 12 months 3,602 8,605 Other receivables in over 12 months -- 4,267

III FINANCIAL ASSETS NOT CLASSIFIED AS FIXED ASSETS -- --

IV CASH AND CASH EQUIVALENTS 134,811 330,643

D - ACCRUALS AND DEFERRALS -- 2,045

TOTAL ASSETS 143,091 352,679


A - SHAREHOLDERS' EQUITY 130,260 (134,053)

I Capital 121,750 121,750 II Share premium reserve -- -- III Revaluation reserves -- -- IV Legal reserve -- -- V Statutory reserves -- -- VI Reserve for treasury stock held -- -- VII Other reserves 45,201 837,664 VIII Retained earnings (losses) -- -- IX Net income (loss) for the year (36,691) (1,093,467)


C - EMPLOYEE SEVERANCE AND LEAVING INDEMNITY -- 4,899

D - ACCOUNTS PAYABLE 12,831 481,833 Due to suppliers - up to 12 months 4,615 30,387 Tax payables due - up to 12 months -- 61,332 Social security payables - up to 12 months 4,716 34,013 Other payables - up to 12 months 3,500 356,101

E - ACCRUALS AND DEFERRALS -- --

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY 143,091 352,679

CIRINVEST S.p.A.Registered office: MILANShare capital at 31.12.2007: € 121,750.00


2007 2006

A - VALUE OF PRODUCTION 8,806 2,189 Other revenues and income 8,806 2,189

B - COSTS OF PRODUCTION (45,106) (1,097,777)

For services (21,036) (305,853)- consulting (15,253) (106,764)- Directors' and Statutory Auditors' fees (3,500) (162,963)- other (2,283) (36,126)Lease and rental costs (17,204) (27,562)Personnel costs -- (667,392)a) salaries and wages -- (563,620)b) social contributions -- (88,850)c) severance and leaving indemnity -- (14,922)e) other costs -- -- Amortization, depreciation and write-downs (2,339) (16,947)a) Amortization of intangible assets (2,339) (2,339)b) Depreciation of tangible assets -- (808)c) Other write-downs of fixed assets -- (13,800)Miscellaneous operating costs (4,527) (80,023)

OPERATING INCOME (LOSS) (36,300) (1,095,588)

C - FINANCIAL INCOME AND EXPENSE (391) (665)Other financial income 30 149 Interest and financial expense (421) (814)

D - ADJUSTMENTS TO THE VALUE OF FINANCIAL ASSETS -- --

E - EXTRAORDINARY GAINS AND LOSSES -- 2,786 Gains -- 2,786

INCOME (LOSS) BEFORE TAXES (36,691) (1,093,467)

Income taxes for the year -- --

NET INCOME (LOSS) FOR THE YEAR (36,691) (1,093,467)

CIGA LUXEMBOURG S.A.r.l.Registered office: LUXEMBOURGShare capital at 31.12.2007: € 318,200,000.00


ASSETS 31.12.2007 31.12.2006

Intangible assets 3,778 6,243 Tangible assets -- -- Financial assets 318,655,480 783,352 Total I 318,659,258 789,595

Receivables 28,622 10,312 Marketable securities 300,700 1,312,731 Cash and cash equivalents 134,179 105,045 Total II 463,501 1,428,088

GRAND TOTAL 319,122,759 2,217,683

LIABILITIES AND EQUITY 31.12.2007 31.12.2006

Capital 318,200,000 3,500,000 Retained earnings (losses) (45,552) (5,992,266)Net income (loss) for the year (142,750) 46,714 Total I 318,011,698 (2,445,552)

Borrowings and sundry financial debt 1,055,121 4,584,575 Trade payables and other payables 28,560 42,313 Tax and social contribution payables 24,646 33,479 Other payables 2,734 2,868 Total III 1,111,061 4,663,235

GRAND TOTAL 319,122,759 2,217,683

CIGA LUXEMBOURG S.A.r.l.Registered office: LUXEMBOURGShare capital at 31.12.2007: € 318,200,000.00


2007 2006

Operating costsConsumption of materials/ third parties 243,034 398,801 Taxes, duties and similar payments 12,205 10,289 Total I 255,239 409,090

Financial expense 28,667 (79,996)

Extraordinary charges 1,789 252,109

Credit balance -- 46,714

GRAND TOTAL (CHARGES) 285,695 627,917

Operating incomeOther operating revenues 40,969 (52,267)Total 40,969 (52,267)

Financial income 101,976 680,184

Debit balance 142,750 --

GRAND TOTAL (REVENUES) 285,695 627,917

186

187

LIST OF EQUITY INVESTMENTS AT DECEMBER 31 2007

in accordance with Art. 38.2 of

D.Lgs. no. 127/91

188

SUBSIDIARIES CONSOLIDATED USING THE FULL INTEGRATION METHOD

(in euro or foreign currency) Name of company Registered

office Share

capital Currency Parent companies % of

ownership

CIR GROUP

CIR INTERNATIONAL S.A. Luxembourg 1,000,000.00 € CIR S.p.A. 100.00

INTERGEFI S.r.l. Italy 500,000.00 € CIR S.p.A. 100.00

COFIDEFIN SERVICOS DE CONSULTORIA Lda Portugal 125,000.00 € CIR S.p.A. 74.40

CIRINVEST S.p.A. Italy 121,750.00 € CIR S.p.A. 100.00

JUPITER FINANCE S.p.A. Italy 600,000.00 € CIR S.p.A. 98.80

JUPITER MARKETPLACE S.p.A. Italy 5,000,000.00 € JUPITER FINANCE S.p.A. 100.00

CIGA LUXEMBOURG S.A.r.l. Luxembourg 318,200,000.00 € CIR S.p.A. 100.00

SORGENIA GROUP

ENERGIA HOLDING S.p.A. Italy 120,351,238.00 € CIR S.p.A. 73.40

SORGENIA S.p.A. Italy 8,179,537.65 € ENERGIA HOLDING S.p.A. 78.28

ENERGIA ITALIANA S.p.A. Italy 26,050,000.00 € SORGENIA S.p.A. 78.00

ENERGIA PLASSIER S.r.l Italy 50,000.00 € SORGENIA S.p.A. 100.00

ENERGIA LUCANA S.p.A. Italy 750,000.00 € SORGENIA S.p.A. 80.00 TECNOPARCO VALBASENTO S.p.A. 20.00 100.00

ENERGIA PROGETTI S.r.l. Italy 500,000.00 € SORGENIA S.p.A. 80.00

ENERGIA MOLISE S.p.A. Italy 14,600,000.00 € SORGENIA S.p.A. 100.00

ENERGIA APRILIA S.r.l. Italy 10,000.00 € SORGENIA S.p.A. 90.00

ENERGIA MINERVINO S.p.A. Italy 1,700,000.00 € SORGENIA S.p.A. 75.00

ENERGIA LOMBARDA S.p.A. Italy 120,000.00 € SORGENIA S.p.A. 100.00

ENERGIA MODUGNO S.p.A. Italy 5,250,300.00 € SORGENIA S.p.A. 90.00

SOLUXIA S.r.l. Italy 670,000.00 € SORGENIA S.p.A. 100.00

ANEMON S.p.A. Italy 1,343,156.00 € SORGENIA S.p.A. 100.00

ELIGENT S.r.l. Italy 136,050.00 € SORGENIA S.p.A. 70.00

ITALIA ENERGIA S.r.l. (in liquidation) Italy 10,000.00 € SORGENIA S.p.A. 100.00

NOVENTI VENTURES II LP United States 9,179,041.00 USD SORGENIA S.p.A. 72.88

SOLARE SARDA S.r.l. (in liquidation) Italy 10,200.00 € SORGENIA S.p.A. 100.00

SOLUXIA SARDA S.r.l. Italy 85,200.00 € SOLUXIA S.r.l. 90.00

COMPAGNIE FINANCIERE DE SUROIT S.A. France 310,700.00 € SORGENIA S.p.A. 100.00

SOCIÉTÉ FRANÇAISE D’EOLIENNES France 9,808,287.00 € SORGENIA S.p.A. 84.19 COMPAGNIE FINANCIERE DE SUROIT S.A. 15.70 99.89

SOCIÉTÉ FRANÇAISE DES ALIZÉS France 580,125.00 € SOCIÉTÉ FRANÇAISE D’EOLIENNES 100.00

SAINT CRÉPIN France 1,657,000.00 € SOCIÉTÉ FRANÇAISE D’EOLIENNES 100.00

ARGONNE France 2,179,000.00 € SOCIÉTÉ FRANÇAISE D’EOLIENNES 100.00

CÔTE DE CHAMPAGNE SUD France 802,000.00 € SOCIÉTÉ FRANÇAISE D’EOLIENNES 100.00

CÔTE DE CHAMPAGNE France 2,179,000.00 € SOCIÉTÉ FRANÇAISE D’EOLIENNES 100.00

VALLÉE DE L'AUTHIE France 37,000.00 € SOCIÉTÉ FRANÇAISE D’EOLIENNES 100.00

BERNAY ST MARTIN France 37,000.00 € SOCIÉTÉ FRANÇAISE D’EOLIENNES 100.00

EOLE CONSTRUCTION ET MAINTENANCE France 37,000.00 € SOCIÉTÉ FRANÇAISE D’EOLIENNES 100.00

189

Name of company Registered

office Share


ownership

EPTE France 37,000.0 € SOCIÉTÉ FRANÇAISE D’EOLIENNES 100.00

HOLDING DES PARCS EOLIENS DE LA BAUME France 7,700.00 € SOCIÉTÉ FRANÇAISE D’EOLIENNES 100.00

HOLDING VOIE SACRÉE France 9,757,000.00 € SOCIÉTÉ FRANÇAISE D’EOLIENNES 100.00

LONGEVILLE France 37,000.00 € SOCIÉTÉ FRANÇAISE D’EOLIENNES 100.00

MAURECHAMPS France 1,117,000.00 € SOCIÉTÉ FRANÇAISE D’EOLIENNES 100.00

ORME CHAMPAGNE France 37,000.00 € SOCIÉTÉ FRANÇAISE D’EOLIENNES 100.00

EOLIENNES NORD PAS DE CALAIS France 1,973,300.00 € SOCIÉTÉ FRANÇAISE D’EOLIENNES 100.00

RAIVAL France 1,117,000.00 € SOCIÉTÉ FRANÇAISE D’EOLIENNES 100.00

VALETTE France 1,117,000.00 € SOCIÉTÉ FRANÇAISE D’EOLIENNES 100.00

VILLER France 577,000.00 € SOCIÉTÉ FRANÇAISE D’EOLIENNES 100.00

BOUILLANCOURT EN SÉRY France 37,000.00 € SOCIÉTÉ FRANÇAISE D’EOLIENNES 100.00

MESNIL REAUME France 37,000.00 € SOCIÉTÉ FRANÇAISE D’EOLIENNES 100,00

SAINT GERMAIN MARENCENNES France 37,000.00 € SOCIÉTÉ FRANÇAISE D’EOLIENNES 100.00

ECHELLE France 37,000.00 € SOCIÉTÉ FRANÇAISE D’EOLIENNES 100.00

BLOMBAY France 37,000.00 € SOCIÉTÉ FRANÇAISE D’EOLIENNES 100.00

CÔTE DE LA SAUSETTE France 37,000.00 € SOCIÉTÉ FRANÇAISE D’EOLIENNES 100.00

MACHAULT France 37,000.00 € SOCIÉTÉ FRANÇAISE D’EOLIENNES 100.00

SEMIDE CONTREUVE France 37,000.00 € SOCIÉTÉ FRANÇAISE D’EOLIENNES 100.00

LEFFINCOURT France 37,000.00 € SOCIÉTÉ FRANÇAISE D’EOLIENNES 100.00

LA RENARDIÈRE France 37,000.00 € SOCIÉTÉ FRANÇAISE D’EOLIENNES 100.00

PLAINCHAMP France 37,000.00 € SOCIÉTÉ FRANÇAISE D’EOLIENNES 100.00

FRESNOY FOLNY France 37,000.00 € SOCIÉTÉ FRANÇAISE D’EOLIENNES 100.00

JONQUIÈRES France 37,000.00 € SOCIÉTÉ FRANÇAISE D’EOLIENNES 100.00

SOCIÉTÉ FRANÇAISE DE PHOTOVOLTAIQUE France 37,000.00 € SOCIÉTÉ FRANÇAISE D’EOLIENNES 100.00

GRAND RHÔNE France 37,000.00 € SOCIÉTÉ FRANÇAISE D’EOLIENNES 100.00

HERBISSONNE France 37,000.00 € SOCIÉTÉ FRANÇAISE D’EOLIENNES 50.00

ESPRESSO GROUP

GRUPPO EDITORIALE L’ESPRESSO S.p.A. (*) Italy 65,167,018.20 € CIR S.p.A. 50.82

FIN.E.GI.L. EDITORIALE S.p.A. Italy 18,161,000.00 € GRUPPO EDITORIALE L’ESPRESSO S.p.A. 100.00

S.E.T.A. S.p.A. Italy 774,750.00 € GRUPPO EDITORIALE L’ESPRESSO S.p.A. 71.00

A. MANZONI & C. S.p.A. Italy 15,000,000.00 € GRUPPO EDITORIALE L’ESPRESSO S.p.A. 100.00

CENTRO PREPARAZIONE STAMPA – C.P.S. S.p.A. Italy 520,000.00 € GRUPPO EDITORIALE L’ESPRESSO S.p.A. 100.00

ROTOCOLOR S.p.A. Italy 23,000,000.00 € GRUPPO EDITORIALE L’ESPRESSO S.p.A. 100.00

SOMEDIA S.p.A. Italy 500,000.00 € GRUPPO EDITORIALE L’ESPRESSO S.p.A. 100.00

ROTOSUD S.p.A. Italy 2,860,000.00 € GRUPPO EDITORIALE L’ESPRESSO S.p.A. 100.00

ELEMEDIA S.p.A. Italy 25,000,000.00 € GRUPPO EDITORIALE L’ESPRESSO S.p.A. 100.00

EDITORIALE FVG S.p.A. Italy 87,959,976.00 € GRUPPO EDITORIALE L’ESPRESSO S.p.A. 92.12

EDITORIALE LA NUOVA SARDEGNA S.p.A. Italy 775,500.00 € FIN.E.GI.L. EDITORIALE S.p.A. 100.00

E.A.G. S.p.A. Italy 815,000.00 € FIN.E.GI.L. EDITORIALE S.p.A. 100.00

EDIZIONI NUOVA EUROPA S.p.A. Italy 104,000.00 € FIN.E.GI.L. EDITORIALE S.p.A. 100.00

(*) 54.25% of voting rights

190


office Share

capital Currency Parent companies

% of

ownership

EDITORIALE LA CITTÀ S.p.A. Italy 332,000.00 € FIN.E.GI.L. EDITORIALE S.p.A. 100.00

S.E.L.P.I. S.p.A. Italy 1,000,000.00 € GRUPPO EDITORIALE L’ESPRESSO S.p.A. 70.00 FIN.E.GI.L. EDITORIALE S.p.A. 30.00 100.00

EDIGRAF S.r.l. Italy 312,000.00 € EDITORIALE FVG S.p.A. 66.67

KATAWEB NEWS S.r.l. Italy 10,330.00 € ELEMEDIA S.p.A. 100.00

KSOLUTIONS S.p.A. Italy 1,000,000.00 € ELEMEDIA S.p.A. 100.00

EDITORIALE METROPOLI S.p.A. Italy 500,000.00 € ELEMEDIA S.p.A. 100.00

RETE A S.p.A. Italy 13,198,000.00 € GRUPPO EDITORIALE L’ESPRESSO S.p.A. 100.00

ALL MUSIC S.p.A. Italy 6,500,000.00 € RETE A S.p.A. 100.00

SAIRE S.r.l. Italy 46,800.00 € GRUPPO EDITORIALE L’ESPRESSO S.p.A. 100.00

SOGEFI GROUP

SOGEFI S.p.A. (**) Italy 59,594,595.84 € CIR S.p.A. 56.88

REJNA S.p.A. Italy 5,200,000.00 € SOGEFI S.p.A. 99.84

FILTRAUTO S.A. France 5,750,000.00 € SOGEFI S.p.A. 99.99

SOGEFI FILTRATION Ltd UK 5,126,737 GBP SOGEFI S.p.A. 100.00

SOGEFI FILTRATION B.V. Netherlands 1,125,000.00 € SOGEFI S.p.A. 100.00

SOGEFI FILTRATION A.B. Sweden 100,000 SEK SOGEFI S.p.A. 100.00

SOGEFI FILTRATION S.A. Spain 12,953,713.60 € SOGEFI S.p.A. 86.08 FILTRAUTO S.A. 13.92 100.00

SOGEFI FILTRATION d.o.o. Slovenia 10.291.798.00 € SOGEFI S.p.A. 100.00

ALLEVARD REJNA AUTOSUSPENSIONS S.A. France 36.000.000.00 € SOGEFI S.p.A. 99.98

SOGEFI Inc. United States 1,000 USD SOGEFI S.p.A. 100.00

SOGEFI FILTRATION S.p.A. Italy 21,951,000.00 € SOGEFI S.p.A. 100.00

FILTRAUTO GmbH (in liquidation) Germany 51,130.00 € SOGEFI FILTRATION B.V. 100.00

SOGEFI FILTRATION DO BRASIL Ltda Brazil 29,857,374 Real SOGEFI FILTRATION S.A. 99.99

SOGEFI FILTRATION ARGENTINA S.A. Argentina 10,691,607 Pesos SOGEFI FILTRATION DO BRASIL Ltda 91.90 FILTRAUTO S.A. 7.28 SOGEFI FILTRATION S.p.A. 0.81 99.99

SHANGHAI SOGEFI FILTRATION Co., Ltd China 3,600,000 USD SOGEFI FILTRATION S.p.A. 70.00

ALLEVARD SPRINGS Co. Ltd UK 4,000,002 GBP ALLEVARD REJNA AUTOSUSPENSIONS S.A. 99.99

ALLEVARD FEDERN GmbH Germany 50,000.00 € ALLEVARD REJNA AUTOSUSPENSIONS S.A. 100.00

ALLEVARD REJNA ARGENTINA S.A. Argentina 600,000 Pesos ALLEVARD REJNA AUTOSUSPENSIONS S.A. 99.97

IBERICA DE SUSPENSIONES S.L. (ISSA) Spain 10,529,668.00 € ALLEVARD REJNA AUTOSUSPENSIONS S.A. 50.00

ALLEVARD MOLAS DO BRAZIL Ltda Brazil 37,161,683 Real ALLEVARD REJNA AUTOSUSPENSIONS S.A. 99.99 ALLEVARD SPRINGS Co. Ltd 0.01 100.00 UNITED SPRINGS Ltd UK 6,500,000 GBP ALLEVARD REJNA AUTOSUSPENSIONS S.A. 100.00

UNITED SPRINGS B.V. Netherlands 254,979.00 € ALLEVARD REJNA AUTOSUSPENSIONS S.A. 100.00

SHANGHAI ALLEVARD SPRINGS Co. Ltd China 5,335,308.00 € ALLEVARD REJNA AUTOSUSPENSIONS S.A. 60.58 UNITED SPRINGS S.A.S. France 10,218,000.00 € ALLEVARD REJNA AUTOSUSPENSIONS S.A. 99.99 (**) 57.74% of voting rights

191


office Share


ownership

ALLEVARD SPRINGS U.S.A. Inc. United States 20,055,000 USD SOGEFI S.p.A. 100.00

LUHN & PULVERMACHER – DITTMANN & NEUHAUS GmbH Germany 50,000.00 € ALLEVARD FEDERN GmbH 100.00

FILTRAUTO DO BRASIL Ltda Brazil 354,600 Real SOGEFI FILTRATION DO BRASIL Ltda 99.00 FILTRAUTO S.A. 1.00 100.00

HOLDING SANITÀ E SERVIZI GROUP

HSS – HOLDING SANITÀ E SERVIZI S.p.A. Italy 5,405,266.00 € CIR S.p.A. 67.63

REDANCIA S.r.l. Italy 100,000.00 € HOLDING SANITÀ E SERVIZI S.p.A. 100.00

REHAB S.r.l. Italy 120,000.00 € HOLDING SANITÀ E SERVIZI S.p.A. 100.00

OSPEDALE DI SUZZARA S.p.A. Italy 1,000,000.00 € HOLDING SANITÀ E SERVIZI S.p.A. 65.00

MEDIPASS S.p.A. Italy 700,000.00 € HOLDING SANITÀ E SERVIZI S.p.A. 100.00

RESIDENZE ANNI AZZURRI S.r.l. Italy 27,079,034.00 € HOLDING SANITÀ E SERVIZI S.p.A. 100.00

RESIDENZE ANNI AZZURRI MONZA S.p.A. Italy 2,064,000.00 € RESIDENZE ANNI AZZURRI S.r.l. 100.00

MEIA S.r.l. Italy 50,000.00 € RESIDENZE ANNI AZZURRI S.r.l. 100.00

ISTITUTO DI RIABILITAZIONE S. STEFANO S.r.l. Italy 2,080,000.00 € HOLDING SANITÀ E SERVIZI S.p.A. 100.00

ABITARE IL TEMPO S.r.l. Italy 99,000.00 € ISTITUTO DI RIABILITAZIONE S. STEFANO S.r.l. 55.00

CASA ARGENTO S.r.l. Italy 1,096,500.00 € ABITARE IL TEMPO S.r.l. 51.00

ARIEL TECHNOMEDICAL S.r.l. Italy 10,000.00 € ISTITUTO DI RIABILITAZIONE S. STEFANO S.r.l. 51.00

SANITECH S.r.l. Italy 100,000.00 € ISTITUTO DI RIABILITAZIONE S. STEFANO S.r.l. 50.10

HEALTH EQUITY S.r.l. Italy 100,000.00 € ISTITUTO DI RIABILITAZIONE S. STEFANO S.r.l. 60.00

CYBER THERAPHY S.r.l. Italy 100,000.00 € ISTITUTO DI RIABILITAZIONE S. STEFANO S.r.l. 20.00 HEALTH EQUITY S.r.l. 60.00

80.00

DRY PRODUCTS GROUP

DRY PRODUCTS S.p.A. Italy 100,000.00 € CIR S.p.A. 55.00 FOOD MACHINERY MEDIUM VOLUME S.p.A. (in liquidation) Italy 3,000,000.00 € DRY PRODUCTS S.p.A. 100.00

CIR INTERNATIONAL GROUP

CIR VENTURES L.P. United States 20,020,000 USD CIR INTERNATIONAL S.A. 99.00

CIR INVESTMENT AFFILIATE S.A. Luxembourg 276,326.00 € CIR INTERNATIONAL S.A. 95.98

CIGA LUXEMBOURG GROUP

CIRFUND – CONSULTADORIA ECONOMICA E PARTECIPAÇOES, SOCIEDADE UNIPESSOAL LDA Portugal 318,000,000.00 € CIGA LUXEMBOURG S.A.r.l. 100.00

MEDINVEST Plc Ireland 361,489.87 USD CIRFUND – CONSULTADORIA ECONOMICA E PARTECIPAÇOES, SOCIEDADE UNIPESSOAL LDA 87.02

192

INVESTMENTS IN JOINT VENTURES AND ASSOCIATES CONSOLIDATED USING THE EQUITY METHOD

(in euro or foreign currency)

Name of company Registered office

Share capital

Currency Parent companies % of ownership

SORGENIA GROUP

TIRRENO POWER S.p.A. Italy 91,130,000.00 € ENERGIA ITALIANA S.p.A. 50.00

FIN GAS S.r.l. Italy 10,000.00 € SORGENIA S.p.A. 50.00

LNG MED GAS TERMINAL S.r.l Italy 8,440,655.10 € FIN GAS S.r.l 62.61

GICA SA Switzerland 3,500,000.00 CHF SORGENIA S.p.A. 25.00

VOIE SACRÉE France 2,197,000.00 € SOCIÉTÉ FRANÇAISE D’EOLIENNES 24.86

EPENSE France 802,000.00 € SOCIÉTÉ FRANÇAISE D’EOLIENNES 25.00

ESPRESSO GROUP

LE SCIENZE S.p.A. Italy 103,400.00 € GRUPPO EDITORIALE L’ESPRESSO S.p.A. 50.00

EDITORIALE CORRIERE ROMAGNA S.r.l. Italy 2,856,000.00 € FIN.E.GI.L. EDITORIALE S.p.A. 49.00

EDITORIALE LIBERTÀ S.p.A. Italy 1,000,000.00 € FIN.E.GI.L. EDITORIALE S.p.A. 35.00

ALTRIMEDIA S.p.A. Italy 517,000.00 € FIN.E.GI.L. EDITORIALE S.p.A. 35.00

SOGEFI GROUP

ALLEVARD RESSORTS COMPOSITES S.A.S. France 300,000.00 € ALLEVARD REJNA AUTOSUSPENSIONS S.A. 50.00


OAKWOOD GLOBAL FINANCE S.C.A. Luxembourg 545,711.25 € CIR INTERNATIONAL S.A. 35.79 CIR INVESTMENT AFFILIATE S.A. 11.73 47.52

RESOURCE ENERGY B.V. Netherlands 100,000 € CIR INTERNATIONAL S.A. 47.50

193

INVESTMENTS IN SUBSIDIARIES AND ASSOCIATES CONSOLIDATED USING THE COST METHOD (*)



Share capital Currency Parent companies % of ownership

CIR GROUP

CIR VENTURE S.r.l. (non-operational) Italy 10,000.00 € CIR S.p.A. 100.00

SORGENIA GROUP

TECNOPARCO VALBASENTO S.p.A. Italy 945,000.00 € SORGENIA S.p.A. 20.00

E-ENERGY S.r.l. Italy 15,000.00 € SORGENIA S.p.A. 20.00

EOLICA BISACCIA S.r.l. Italy 10,000.00 € SORGENIA S.p.A. 20.00

TORRE MAGGIORE WIND POWER S.r.l. Italy 10,000.00 € SORGENIA S.p.A. 75.00

ESPRESSO GROUP

ENOTRYA S.r.l. (in liquidation) Italy 78,000.00 € ELEMEDIA S.p.A. 70.00

ZIVAGO S.p.A. (in liquidation) Italy 3,096,000.00 € ELEMEDIA S.p.A. 50.00 CELLULARMANIA.COM S.r.l. (in liquidation) Italy 10,400.00 € ELEMEDIA S.p.A. 100.00 UHURU MULTIMEDIA S.r.l. (non-operational) Italy 10,400.00 € KSOLUTIONS S.p.A. 100.00

BENEDETTINE S.r.l. (in liquidation) Italy 255,000.00 € FIN.E.GI.L. EDITORIALE S.p.A. 35.00

ROTONORD S.p.A. (non-operational) Italy 120,000.00 € ROTOCOLOR S.p.A. 100.00

SOGEFI GROUP

MAKKAWI CARS & LORRIES Co. Sudan 900,000 Ls.Pt. REJNA S.p.A. 25.00

HOLDING SANITÀ E SERVIZI GROUP

OSIMO SALUTE S.p.A. Italy 750,000.00 € ABITARE IL TEMPO S.r.l. 25.50

CONSORZIO OSPEDALE DI OSIMO Italy 20,000.00 € ABITARE IL TEMPO S.r.l. 24.70

FIDIA S.r.l. Italy 10,200.00 € HEALTH EQUITY S.r.l. 50.00

JESILAB S.r.l. Italy 119,000.00 € HEALTH EQUITY S.r.l. 17.73 ISTITUTO DI RIABILITAZIONE S. STEFANO S.r.l. 32.77 50.50 SANATRIX S.r.l. Italy 843,700.00 € ISTITUTO DI RIABILITAZIONE S. STEFANO S.r.l. 26.40


BANQUE DUMENIL LEBLE S.A. (in liquidation) France 16,007,146.81 € CIR INTERNATIONAL S.A. 100.00

DUMENIL LEBLE (SUISSE) S.A. Switzerland 441,650 CHF CIR INTERNATIONAL S.A. 100.00

PHA – Participations Hotelières Astor France 12,150.00 € CIR INTERNATIONAL S.A. 99.99

CIR VENTURES MANAGEMENT CO. L.L.C. United States 7,100 USD CIR INTERNATIONAL S.A. 20.00

OAKWOOD GLOBAL FINANCE MANAGEMENT S.A. Luxembourg 31,000.00 € CIR INTERNATIONAL S.A. 34.69 CIR INVESTMENT AFFLILIATE S.A. 11.31

46.00

(*) Investments that are non-significant, non-operational or that have been recently acquired, unless stated otherwise

194

INVESTMENTS IN OTHER COMPANIES CONSOLIDATED USING THE COST METHOD (*)




CIR GROUP

C IDC S.p.A. (in liquidation and settlement with creditors) Italy 4,000,000.00 € CIR S.p.A. 1.23

SORGENIA GROUP

8.2 ENERGIA S.r.l. Italy 100,000.00 € ANEMON S.p.A. 2.50

ESPRESSO GROUP

A.G.F. S.r.l. Italy 30,000.00 € GRUPPO EDITORIALE L’ESPRESSO S.p.A. 10.00

AGENZIA A.N.S.A. S. COOP. A.r.l. Italy 12,307,880.82 € GRUPPO EDITORIALE L’ESPRESSO S.p.A. 3.21 FIN.E.GI.L. EDITORIALE S.p.A. 3.21 EDITORIALE LA NUOVA SARDEGNA S.p.A. 3.21 EDITORIALE FVG S.p.A. 3.21 S.E.T.A. S.p.A. 2.56 E.A.G. S.p.A. 1.92 17.32

CONSULEDIT S. CONSORTILE a.r.l. Italy 20,000.00 € GRUPPO EDITORIALE L’ESPRESSO S.p.A. 6.62 FIN.E.GI.L. EDITORIALE S.p.A. 3.99 EDITORIALE LA NUOVA SARDEGNA S.p.A. 0.62 S.E.T.A. S.p.A. 0.49 EDITORIALE FVG S.p.A. 0.47 E.A.G. S.p.A. 0.39 12.58

E-INK CORPORATION United States 165,456,000 USD GRUPPO EDITORIALE L’ESPRESSO S.p.A. 0.05

IMMOBILIARE EDITORI GIORNALI S.r.l. Italy 830,462.00 € S.E.T.A. S.p.A. 0.17 EDITORIALE LA NUOVA SARDEGNA S.p.A. 0.12 0.29

TRENTO PRESS SERVICE S.r.l. Italy 260,000.00 € S.E.T.A. S.p.A. 14.40

AGENZIA INFORMATIVA ADRIATICA d.o.o. Slovenia 12,767.75 Sit. EDITORIALE FVG S.p.A. 19.00

CLUB D.A.B. ITALIA – CONSORZIO Italy 18,075.96 € ELEMEDIA S.p.A. 14.29

AUDIRADIO S.r.l. Italy 258,000.00 € A. MANZONI & C. S.p.A. 3.63

PRESTO TECHNOLOGIES Inc. (non- operational) United States 7,663,998.4 USD ELEMEDIA S.p.A. 7.83

CERT – CONSORZIO EMITTENTI RADIO TELEVISIVE Italy 177,531.00 € RETE A S.p.A. 6.67

CONSORZIO COLLE MADDALENA Italy 62,224.99 € RETE A S.p.A. 4.17

TELELIBERTÀ S.p.A. Italy 500,000.00 € FIN.E.GI.L. S.p.A. 19.00

SOGEFI GROUP

AFICO FILTERS S.A.E. Egypt 10,000,000 EGP SOGEFI FILTRATION S.p.A. 19.00

(*) Holdings of less than 20%

195

INVESTMENTS IN SUBSIDIARIES AND ASSOCIATES AND IN OTHER COMPANIES NOT INCLUDED IN THE CONSOLIDATED FINANCIAL STATEMENTS




CIR GROUP

C.B.D.O. - COMPAGNIE BOURGUIGNONNE DES OENOPHILES EURL (in liquidation) France 9,000.00 € CIGA LUXEMBOURG S.A.r.l. 100.00

SO.GE.LOC. S.a.r.l. (in liquidation) France 7,622.45 € C.B.D.O. EURL 99.80

VICTOR HUGO CENTRE D’AFFAIRES S.A.r.l. (in liquidation) France 7,622.45 € C.B.D.O. EURL 76.00

FINAL S.A. (in liquidation) France 2,324,847.00 € C.B.D.O. EURL 47.73

SORGENIA GROUP

OWP Parc Eolienne du Banc des Olives France 10,000.00 € SOCIÉTÉ FRANÇAISE D’EOLIENNES 20.00

OTA France 37,000.00 € SOCIÉTÉ FRANÇAISE D’EOLIENNES 50.00

SOGEFI GROUP INTEGRAL S.A. Argentina 2,515,600 Pesos FILTRAUTO S.A. 93.50 SOGEFI FILTRATION ARGENTINA S.A. 6.50 100.00

LES NOUVEAUX ATELIERS Belgium 2,880,000.00 € SOGEFI S.p.A. 74.90 MECANIQUES S.A. (in liquidation) REJNA S.p.A. 25.10 100.00

AUTORUBBER S.r.l. Italy 50,000.00 € REJNA S.p.A. 100.00

196

198

200

201

Report of the Board of Statutory Auditors

202

203

C.I.R. S.p.A.

REPORT OF THE BOARD OF STATUTORY AUDITORS IN ACCORDANCE WITH THE TERMS OF ARTICLE 153 D. LGS. NO. 58/1998

(TRANSLATION FROM THE ORIGINAL ISSUED IN ITALIAN)

To the Meeting of the Shareholders of C.I.R. S.p.A.

During financial year ended December 31 2007 we performed the surveillance activities re-

quired of us by law, according to the Principles of Conduct for Statutory Auditors recom-

mended by the National Councils of Business Consultants and Accountants. In the prepara-

tion of this report we took into account both the aforesaid principles and the indications

given by Consob in its Communiqué no. 1025564 of April 6 2001 and subsequent updates.

In relation to the way in which the duties contained in our mandate were carried out, we

hereby attest that:

– We attended all the Shareholders’ Meetings and all the Meetings of the Board of Direc-

tors that were held during the year under examination and obtained from the Directors

timely and suitable information on the activity carried out by the Company and the

Group of companies which it controls, with particular regard to the most significant

transactions from the economic, financial and equity points of view. We also attest that

we attended all the meetings of the Internal Control Committee, even individually, and

read the minutes of the meetings of the Compensation Committee set up by the Board

of Directors;

– We obtained a degree of knowledge necessary to carry out the duties contained in our

mandate regarding compliance with the principles of sound administration and on the

adequacy of the organizational structure, the internal control systems and the adminis-

trative and accounting systems of the Company. This we did through direct investiga-

tion, collecting data and information from the heads of the main departments involved

and from the firm of auditors PricewaterhouseCoopers S.p.A;

– We checked the functionality of the control systems of investee companies and verified

the adequacy of the instructions given to them, even according to the terms of Article

114.2 of D.Lgs. 58/98;

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– We checked that the rules of corporate governance as set out in the Code of Conduct for

Listed Companies promoted by Borsa Italiana S.p.A. had been adopted by the Company

and were being put into practice ;

– We verified that the provisions of the law and of regulations were being complied with

in relation to the preparation, the organization and the layout of the Statutory Financial

Statements and the Consolidated Financial Statements and the documents accompany-

ing them. We also checked that the Management Report for financial year 2007 con-

formed to current laws and regulations and was consistent with the resolutions adopted

by the Board of Directors and also with the events represented in the Statutory Financial

Statements for the period and in the consolidated accounts. The Semi-Annual Interim

Report and the Quarterly Interim Reports did not require any observations to be made

by the Board of Statutory Auditors and were made public as required by law and by

regulations on the subject.

In the course of our surveillance activity, carried out as above, no significant facts emerged

requiring notification to Surveillance Bodies nor do we have any proposals to make regard-

ing the financial statements, the approval thereof or any other matter relating to our man-

date.

* * *

The specific indications that this report must provide are listed below, in accordance with

the above-cited Consob Communiqué of April 6 2001 and subsequent updates.

- We obtained sufficient information on the most significant transactions from the eco-

nomic, financial and equity viewpoint which were entered into by the Company and its

subsidiaries. On the basis of the information obtained, we found that these transactions

complied with the law and with the Company Bylaws and were not imprudent, rash, in

conflict of interest, in contrast with the resolutions adopted by the Shareholders or in

any way such as to compromise the integrity of the Company’s capital and assets.

- On the basis of the information available to us, nothing emerged regarding the existence

of any non-typical and/or unusual transactions.

- Adequate information was given to us regarding routine intercompany transactions and

transactions with related parties. Based on the information gathered, we ascertained that

these transactions complied with the law and with the Company Bylaws, were in the in-

terests of the Company and did not give rise to any doubts as to the correctness and

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completeness of the information given in the financial statements, the existence of situa-

tions of conflict of interest, the protection of the company capital and assets and safe-

guarding minority shareholders.

- In the Management Report and the Explanatory Notes the directors have indicated and

described the main transactions with third parties, intercompany and related parties, de-

scribing the main characteristics of these deals. On this subject it should be noted that in

the “Annual Report on the system of Corporate Governance and on compliance with the

Code of Conduct for Listed companies” of CIR S.p.A. there is a description of the prin-

ciples of conduct approved by the Board of Directors for entering into transactions with

related parties.

- On April 8 2008 the firm PriceWaterhouseCoopers S.p.A. issued their Audit Reports for

the Statutory Financial Statements for the year and the Consolidated Financial State-

ments as of December 31 2007 without any objections or requests for further informa-

tion;

- We did not receive any complaints as per Article 2408 of the Civil Code or any peti-

tions, neither did we hear of any such complaints being made to others;

- During the year 2007 CIR S.p.A. gave further mandates to PricewaterhouseCoopers, in

addition to the obligatory audit mandate, for various other audit service for the purpose

of certification (Euro 89,000) and for other services (Euro 568,000). Lastly the compa-

nies of the Group as a whole gave mandates to entities belonging to the network of the

firm of auditors for other services for a total amount of Euro 267,000.

- During 2007 the Board of Statutory Auditors gave a favourable opinion on the appoint-

ment of the General Manager of the Company, Mr Alberto Piaser, as Officer responsi-

ble for the preparation of the company’s financial statements in accordance with art.

154 bis, D.Lgs 58/1998, and it also gave a favourable opinion in accordance with art.

2389 of the Civil Code on the resolutions of the Board of Directors regarding the remu-

neration of the Chairman and the Chief Executive Officer.

- During 2007 the Board of Directors met 7 times, the Internal Control Committee met

twice and the Compensation Committee also met twice. During this same year the

Board of Statutory Auditors met 6 times.

- We have no particular observations to make concerning compliance with the principles

of correct administration because these appear to have been constantly observed.

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- We have no observations to make on the adequacy of the organizational structure which

we found to be appropriate for fulfilling the operational and control needs of the Com-

pany.

- The system of internal control appeared to be adequate for the size and type of opera-

tions of the Company. The Internal Audit Manager of the Group and the Officers re-

sponsible for the Internal Control System in accordance with the Code of Conduct for

Listed Companies made sure that there was the necessary functional and information

link with the Board of Statutory Auditors even by taking part assiduously in all their

meetings.

- We have no observations to make regarding the adequacy of the administrative and ac-

counting system or its reliability to represent operating events correctly. We should

point out that, regarding the accounting information contained in the statutory and con-

solidated financial statements as of December 31 2007, on April 8 2008 for the first

time the Chief Executive and the Executive Responsible for the preparation of the com-

pany’s financial statements in accordance with art. 154 bis, paragraph five, of D.Lgs.

58/1998 certified the financial statements.

- We have no observations to make regarding the adequacy of information flows from the

subsidiaries to the Parent Company to ensure the timely fulfilment of communication

obligations required by law.

- During the regular exchanges of information and data between the Board of Statutory

Auditors and the external auditors, in accordance also with art. 150, paragraph 3, of

D.Lgs. 58/1998, no aspects emerged that needed to be highlighted in this report.

- The Company has substantially adhered to the recommendations contained in the Code

of Conduct prepared by the Committee for the Corporate Governance of Listed Compa-

nies, and has illustrated its corporate governance model in the report that will be pub-

lished in accordance with the Instructions to the Rules of Borsa Italiana S.p.A. To the

extent of our responsibility we have monitored the way in which the rules of corporate

governance that the Company has publicly stated that it adheres to are actually being

implemented, ensuring among other things that the Corporate Governance Report of

CIR S.p.A. contained the results of the regular check that the Board of Statutory Audi-

tors has the necessary requisites of independence, which are determined on the same ba-

sis as those for the Members of the Board of Directors. CIR S.p.A. has also adopted an

“Organizational Model” as per the terms of D.Lgs. 231/2001, as well as a Code of Eth-

207

ics governing conduct and has appointed the Surveillance Body required by the above-

cited Decree.

- Our surveillance activity was carried out on a routine basis during 2007 and did not re-

veal any omissions, facts that could be censured or any irregularities worthy of note.

- In short, after the surveillance activity we carried out during the year we have no pro-

posals to make as per art. 153, parag. 2. of D.Lgs. 58/98 regarding the separate financial

statements of CIR SpA as of December 31 2007, on the approval thereof or on any other

matter within our jurisdiction, just as we have no observations to make on the proposed

allocation of the net income for the year contained in them.

We must of course remind readers that the three-year mandate of this Board of Statutory

Auditors has come to an end as has indeed the mandate given to the firm of auditors as per

art. 159 of D.Lgs. 58/98.

While expressing our thanks for the trust you placed in us, we would ask you to take action

on this subject and refer you to our proposal in accordance with art. 159 of D.Lgs. 58/1998

on the subject of the appointment of a firm of auditors.

Milan, April 9 2008

THE BOARD OF STATUTORY AUDITORS

Prof. Pietro Manzonetto – Chairman of the Board of Statutory Auditors

Dott. Riccardo Zingales – Statutory Auditor

Dott. Luigi Nani – Statutory Auditor

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209

Reports of the Independent Auditors

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212

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Documents

Annual report 2007