International Accounting Standards transition (IFRS)

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					International Accounting Standards transition (IFRS)
Contents


Introduction                                                                           3


O ptions envisaged in IFRS 1                                                           4


A ccounting Principles and Valuation Criteria                                          5



R econciliation schedule of Consolidated Shareholders’ Equity and Net Income from
Previous Accounting Standard to IAS/IFRS                                              10


E xplanatory Notes on the Major IAS/IFRS Adjustments to Shareholders’ equity and Net
Income at 1 January 2004, at 31 December 2004 and at 30 June 2005                     10


R econciliation Schedules for Accounting Balances of Balance Sheet and Income
Statement                                                                             14
   •   Consolidated IAS/IFRS Balance Sheet at 1 January 2004, 31 December 2004 and 30 June
       2005
   •   Consolidated IAS/IFRS Income Statement for the Year to 31 December 2004 and period
       to 30 June 2005




                                             2
Introduction


Following the implementation of European Regulation No. 1606/2002, companies with securities admitted
for trading on a market regulated by member states of the European Union must draw up, with effect
from 2005, consolidated financial statements which conform with International accounting standards
(IAS/IFRS) issued by the International Accounting Standard Board (IASB).
In accordance with the Consob regulations set out in Resolution No. 14490 of 14 April 2005
which    approved      certain   modifications    to   the   Regulations    relating    to   interim   financial
statements and to the transitional arrangements to I nternational accounting principles, and
provides a transitional regime for the adoption of IAS principles, the Brembo Group:
    1.   has maintained unchanged its practices for the First Quarterly Report of 2005 in terms of timing
         (within 45 days), producing the quarterly data according to Italian accounting standards and
         providing information on the transitional arrangements put in place ;
    2.   has maintained unchanged its practices for the second quarterly report of 2005 in terms of timing
         (within 45 days), producing the data for the second quarter according to Italian accounting
         principles and providing, in this document, a reconciliation of the final accounting balances
         shown in the financial statements compared to the values calculated following the adoption of
         the International accounting principles (article 82 bis of the Regulations);
    3.   will make available and approve the half-yearly Consolidated Report by 30 September 2005
         according to the provisions of article 81 bis of the Regulations, that is producing the half-yearly
         data according to Italian principles and providing a quantitative reconciliation of the
         shareholders’ equity at the half-year date compared to the values calculated following the
         adoption of the International accounting principles.


This note therefore provides:
    •    The reconciliation schedules and the related explanatory notes required by IFRS1 – for the first
    adoption of IFRS – of the consolidated net equity and net income according to previous and current
    accounting principles as well as the reconciliation schedules for the accounting balances shown in
    the accounts compared to the values calculated following the adoption of the International
    accounting principles:
         •   at the transition date (1/1/2004)
         •   at the date of the period shown for comparative purposes (31/12/2004)
         •   at the reference date for this current quarterly report (30/6/2005)
    •    The relevant International accounting principles and the accounting policies adopted by the
    Group which are expected to be adopted in drawing up the Consolidated 2005 financial statements .


These schedules are provided solely for the purposes of the transitional arrangements for drawing up the
first Consolidated financial statements at 31 December 2005 completed according to IFRS as required by
the European Community. This document does not set out all the schedules, comparative data and
explanatory notes which would be necessary to provide a complete disclosure of the balance sheet
position and operating results of the Brembo Group according to IFRS principles.



                                                       3
The information provided in this note was approved by the Board of Directors meeting of 29 July 2005 and
is unaudited; it is nevertheless subject to review by the external auditors who are in the process of
undertaking a full audit of the data shown as part of the transitional arrangements, the results of which will
be published together with the half-yearly Report at 30 June 2005.


Finally, it should be noted that IFRS1 reconciliation schedules will form the comparative data published in
the first Consolidated financial statements completed according to IFRS; these amounts could be subject
to certain adjustments which may be necessary should any of the international accounting principles be
revised or modified prior to the publication of such financial statements.




O ptions envisaged in IFRS 1


IFRS 1 has a retroactive effect (“the opening balance sheet must be restated as if it were prepared
according to the principles and interpretations applying in the first year of adoption”).
With reference to the preparation of the opening Balance Sheet, except as explained below, the Brembo
Group has:
    •   recognised all the assets and liabilities where recognition is required by IAS/IFRS;
    •   not recognised as assets or liabilities those items which are required not to be accounted for under
    IAS/IFRS;
    •   reclassified certain items in the accounts according to the provisions of IAS/IFRS;
    •   applied IFRS in the valuation of all the assets and liabilities shown.


As part of its first-time adoption, Brembo has made certain choices relating to the exemption options
envisaged in IFRS1 for the preparation of the opening balance sheet.
                In particular, the principal options relate to:
    •   Employee benefits: actuarial profits and losses accumulated from the beginning of the plans to
    the date of IFRS adoption are recognised in full in shareholders’ equity.
    •   Business combinations: transactions preceding the transition date (1 January 2004) have not been
    retroactively restated;
    •   Accumulated translation differences: accumulated currency translation differences for all
    overseas operations are assumed to be zero at the date of IFRS adoption;
    •   Fair value: the net book value (historic cost less amortization fund or accumulated depreciation)
    has been used as a substitute for cost for tangible and intangible fixed assets;
    •   Financial instruments: the principles of IAS 32 and 39 have already been applied in the opening
    balance sheet at 1/1/2004.




                                                           4
Accounting Principles and Valuation Criteria


In relation to the IFRS which permit options in their application, a summary of the principal choices made
by the Group is set out below.
    •    IAS1 - Presentation of the Financial Statements: for the balance sheet, there is separate disclosure
    of the current and non-current assets and the current and non-current liabilities. For the income
    statement, costs are analysed on the basis of their nature.
    •    IAS 2 - Inventories: Inventory cost is calculated based on average cost.
    •    IAS14 – Segment information: the primary segment analysis is based on the application concerned
    (business) while the secondary analysis is based on geography, reflecting the location of the
    operation.
    •    IAS16 – Fixed assets, plant and machinery: valuation subsequent to first accounting for the asset is
    based on cost.
    •    IAS19 – Employee benefits: cumulative actuarial profits and losses at 1 January 2004 have been
    recognised in full in shareholders’ equity. For subsequent periods, any profits and losses resulting from
    changes to actuarial assumptions are recognised based on the “corridor” method which permits
    amortisation of the actuarial differences in excess of 10% of the greater of the current value of the
    benefit obligation and the fair value of the plan asset.
    •    IAS20 – Government grants: Government grants for interest are shown in the financial statements
    as income and credited to the income statement on the basis of the costs or useful life of the assets to
    which they relate.
    •    IAS23 – Borrowing costs: borrowing costs, even if attributable to the purchase, construction or
    production of an asset, are written off in the year in which they are incurred.
    •    IAS31 – Interests in joint ventures: the basis of accounting and disclosure is the shareholders’ equity
    of the investment.
    •    IAS39 – Financial instruments: as defined on this standard, own shares are shown as a reduction of
    net equity.



The accounting principles and most significant valuation criteria used in preparing reconciliation schedules and
which it is planned to adopt in drawing up the Consolidated financial statements for 2005 are summarised
below.


Tangible assets

Tangible fixed assets are stated at their production or purchase cost.
Revaluation of tangible fixed assets is not permitted.
This cost includes all costs directly attributable and other production costs insofar as they are reasonably
attributable to the asset with the exception of borrowing costs and exchange differences. Wherever significant
parts of the tangible assets have differing useful lives, these components are separately recorded so that they
can be depreciated over a period consistent with their useful life (component approach).
Land, including land linked to buildings, is recorded separately and is not depreciated since it is regarded as
having an undefined useful life.
Certain assets which have been revalued in periods prior to the transition to IFRS, are stated at their revalued
amount at the revaluation date which is considered a substitute cost value (deemed cost).

                                                         5
Depreciation represents the economic and technical reduction of value of the asset and is charged from
when the asset is available for use; it is calculated on the straight-line method using the rate considered
representative of the useful life of the asset.
The principal technical-economic lives used are as follows:



                       Category                                               Useful life

 Land                                                                        Undefined
 Buildings                                                                  20 - 35 years
 Plant and machinery                                                         5 - 10 years
 Industrial and commercial equipment                                        2,5 - 4 years
 Other assets                                                                4 - 10 years




Costs are written off in the year in which they are incurred where they relate to maintenance, repair,
expansion, updating and replacement and do not lead to any significant and measurable increase in
productive capacity or in the useful life of the relevant asset.
Improvements to leased assets (operating leases) are accounted for in the category of asset to which they
refer and, if separable, are depreciated over their useful lives; if not separable they are amortised over the
lesser of the relevant asset useful lives and the remaining period of the relevant contract.


Leasing

Goods under financial leases (for which the company assumes substantially all the risks and all the benefits) are
accounted for as tangible fixed assets (historic cost of the asset and depreciation provision) and classified in
specific categories.


Intangible fixed assets


The company recognises intangible fixed assets when the following conditions are met:

a) the asset is separable, or can be separated or removed from the entity;
b) the asset is controlled by the company;
c) it is probable that the company will enjoy future benefits attributable to the asset.
Intangible assets are shown at cost, net of amortisation calculated on the straight-line method for a period
corresponding to the useful life of the asset and any permanent impairment of value. The useful life is reviewed
at annual intervals. Particularly:
    Start-up and capital costs: these may not be recognised as intangible assets.
    Development costs: an intangible asset, generated in the development phase of an internal project, which
    satisfies the definition of development indicated in IAS 38, is recorded as an intangible asset if it is probable
    that the company will enjoy expected future benefits attributable to the asset and if the cost of the asset
    can be accurately measured. No assets generated in the research phase are included in intangible assets.
    Similarly, if the company acquires externally an asset which qualifies as R&D it records as an asset only the
    costs attributable to the development phase. These costs are recorded as intangible assets in progress and
    only when the project is closed can the costs relating to it be classified as development costs under the
    intangible assets category and amortisation begin.


                                                          6
    In the period in which internal costs (wages and salaries, depreciation, consumables) are incurred for
    projects which are to be capitalised, these costs are excluded from the income statement as Additions to
    fixed assets produced internally and shown in the appropriate income statement item as “other operating
    costs”. Amortisation of development costs ranges from 5-7 years, on the basis of useful life/duration of the
    relevant project.
    Advertising and promotional expenses: These costs are never recognised as intangible fixed assets.
    Other internally generated costs: Internally generated trademarks are not recorded as intangible fixed
    assets.
    Goodwill, consolidation differences and trademarks: Goodwill arising from the purchase of joint venture,
    associate or subsidiary companies is initially recorded at cost and represents the excess of purchase cost
    compared to the acquired share of net fair value attributed to the identifiable assets and liabilities, both
    actual and potential. After initial recording, the net book value of goodwill and trademarks with an
    undefined useful life is not amortised and is subject to an impairment test at the end of each year. If the
    recoverable value is less than the book value, the asset is written down to impaired value. If a trademark
    has a defined useful life it is amortised using the straight-line method based on its useful life estimated by
    reference to the strategic plans which envisage its use.


Inventories

Warehouse inventories are valued at the lower of purchase or production cost and presumed net realisable
value. The inventory cost of raw materials, finished goods, goods for resale and work-in-progress is based on the
formula of average cost weighted by period.


Employee benefits

Benefits guaranteed to employees at the end of their employment or subsequently through defined benefit
programmes (Employee severance indemnity, pension fund) or other long-term benefits are recognised in the
period in which the benefit right matures.
The liability for defined benefit programmes, net of any plan assets, is calculated based on actuarial
assumptions and is accounted for on an accruals basis in accordance with the employment required to obtain
the benefit; the liabilities calculation is performed by independent actuaries.
Profits and losses arising from actuarial calculations are recorded in the income statement as costs or income
when the net value of the actuarial profits and losses not recorded for each plan at the closure of the previous
period exceeds by more than 10% the higher of the related obligations relating to the plans and the fair value
of the plan assets at that date (corridor method).


Provision for contingencies and charges

Provision is made for liabilities where their nature is determined and their existence certain or determinable but
their duration or amount is uncertain when:
    the company has an actual obligation (legal or contractual) as a result of a past event;
    it is probable that resources will be needed to settle the obligation;
    a reasonable estimate can be made of the amount of the obligation.
When the obligation is due more than twelve months after the accounting date it is disclosed at net present
value and if the value of the obligation increases with the passage of time, the amount of the increase is
charged to income under “Financial income and costs”.



                                                         7
Government grants

Contributions received for specific costs are recorded under other financial liabilities and credited to the
income statement through systematic criteria in the periods required to offset the related costs.
Contributions received for specific assets which are recorded as fixed assets are either recorded as a direct
reduction of these assets or shown as other financial liabilities and credited to the income statement in relation
to the period in which depreciation is charged for the relevant assets.


Financial instruments

Financial assets – Financial assets for which the company has both the intention and the capacity to hold to
maturity are recorded at cost and, after initial recording, are valued at amortized cost using the effective
interest rate method.
Financial assets available for sale are valued at fair value with the effects of the valuation reflected in the
income statement.


Financial receivables, trade receivables and other receivables – These receivables are shown using the
criterion of amortized cost. Short-term receivables which do not bear interest are normally shown at the
nominal value originally shown on the invoice. Long-term receivables for which a market interest rate is not
specified are recorded by discounting future cash flows if the receivable value increases through the passage
of time. This increase is credited to income under “Financial income and costs”.


Cash and equivalents - Cash and equivalents include cash balances and unrestricted deposits. An investment
can be considered as available liquidity when it is instantly convertible to cash with minimal risk of any
fluctuation in value and, further, when such equivalent liquidity has the scope of meeting short-term cash
requirements and has not been effected as an investment.


Financial payables and trade payables – Loans, payables and financial or trade liabilities with a fixed or
determinable maturity are disclosed in this category. These payables are shown using the criterion of amortized
cost at the effective interest rate.
Long-term payables for which a market interest rate is not specified are recorded by discounting future cash
flows if the payables value increases through the passage of time. This increase is charged to income under
“Financial income and costs”.


Financial derivatives – The Group uses derivative instruments in order to cover its exposure to the risk of
movements in interest rates and exchange rates. In accordance with its defined strategy, the Group does not
undertake transactions in derivatives on a speculative basis. Nevertheless, in the event that such transactions
are not, in accounting terms, qualified as hedging operations, they are accounted for as speculative
operations. Derivatives are classified as hedging operations when the relationship between the derivative and
the object of the hedge is formally documented and the degree of coverage is high. When derivatives cover
the risk of fluctuation in the cash flow of the hedged transaction (cash flow hedge) the fair value adjustment is
initially recorded in shareholders’ equity and subsequent recording in the income statement corresponds to the
economic effect of the operation hedged. Variations in the fair value of derivatives which do not satisfy the
criteria to qualify as hedging operations are recorded in the income statement.


Revenues and costs

Revenues and costs are recognised in the income statement according to the accruals principle.
                                                        8
Sales are recognised when transfer of title occurs, defined as the transfer of all the risks and benefits related to
the asset.
Income and costs for interest are recorded based on the accruals principle on the basis of interest matured on
the net value of the related asset or liability using the effective interest rate and the market interest rate.


Deferred taxes

Taxes paid in advance and deferred taxes are recorded in order to reflect the temporary timing
differences at the balance sheet date between the value attributed to an asset/liability for tax purposes
and that attributed for reporting purpose (IFRS). Amounts are based on the tax rates estimated for the
period in which the timing differences arise. Taxes paid in advance are recorded only if it is probable that
a tax benefit will materialise in the years in which the differences are reversed. Assets and liabilities for
taxes paid in advance and deferred taxes are shown net if there are legal grounds for offset and shown
as a receivable or payable on the Balance Sheet.


Dividends

Dividends are recorded in the period in which the distribution resolution is passed.




                                                           9
R econciliation Schedule of Consolidated Shareholders’ Equity and Net Income from
Previous Accounting Standards to IAS/IFRS


Set out below is a description of the principal differences between Italian accounting standards and IFRS which
have had an effect on the Consolidated financial statements of Brembo. The amounts shown are stated on
Euro thousands and gross of the related tax impact which is summarised separately.



                                                                                       Income                         Income
                                                               Note    Equity at                     Equity at                   Equity at
                                                                                      Statement                      Statement
                                                                      01/01/2004         2004       31/12/2004       30/06/2005 30/06/2005

Amounts according to the Italian GAAP                                      181.238        34.330        211.002          14.650    221.513


     IAS 2         Inventories valuation                       (1)            (818)          618           (201)             17      (186)

                   Tangible assets (separation of land, and
     IAS 16                                                    (2)           1.429           136          1.569             267      1.837
                   useful life of the assets)

     IAS 19        Employee benefits (TFR, Pension Funds)      (3)          (4.497)          458         (4.042)            (95)    (4.417)

                   Government Grants (subsidised interest
     IAS 20                                                    (4)             578           (12)           497             (77)       357
                   rates, grants)
                   The effects of changes in foreign
     IAS 21                                                    (5)           2.671        (2.671)                0            0          0
                   exchange rates
                   Impairment of the goodwill and of the
 IAS 36 - IFRS 3                                               (6)           1.361         1.724          2.996           2.763      4.740
                   business combination differences
                   Present value of other long term
     IAS 37                                                    (7)             112            23            134             (44)        90
                   liabilities
                   Intangible assets (recognition of
                   development costs as an intangible
     IAS 38                                                    (8)           2.569         6.635          9.198           4.984     14.191
                   assets and write off of start-up costs as
                   legal and secretarial costs)
                   Financial Instruments (own shares and
     IAS 39                                                    (9)         (15.587)        (840)        (16.423)             (3)   (16.492)
                   fair value of derivates)

Total adjustments                                                          (12.182)        6.070        (6.272)           7.812        121

     IAS 12        Fiscal effects of the adjustments           (10)         (1.242)       (1.656)        (2.899)         (2.292)    (5.109)

Total adjustments after the fiscal effects                                 (13.424)        4.414        (9.171)           5.520     (4.989)

Amounts according to the IAS / IFRS GAAP                                   167.814        38.744        201.831          20.170    216.524




E xplanatory Notes on the Major IAS/IFRS Adjustments to Shareholders’ Equity and Net
Income at 1 January 2004, at 31 December 2004 and at 30 June 2005.


(1) IAS 2 – Inventory: In accordance with IAS 2 the LIFO method of inventory valuation, where applied, has
    been discontinued in favour of the weighted average cost method. The adjustment refers principally
    to Brembo S.p.A. which used to value the major part of its warehouse categories using the LIFO
    method (no longer permitted under IFRS). This change of accounting policy has the effect of reducing
    the inventory value by €818 thousand at 1 January 2004 with a negative impact of €513 thousand on
    opening shareholders’ equity, net of €305 thousand taxes paid in advance. The impact in 2004 was
    positive, with an adjustment of €388 thousand on the result, reducing the negative adjustment on
    inventory to €201 thousand and the adjustment to closing shareholders’ equity to €125 thousand.
                                                                      10
   Finally, at 30 June 2005 the impact was €10 thousand as increase on net income and €118 thousand
   as decrease on net shareholders’ equity.

   (2) IAS 16 – Tangible fixed assets: The value of buildings has been restated, with the separation of
   those components no longer subject to depreciation which, in the transition phase, were reclassified
   as land. This change of accounting policy, primarily applied to the Holding Company Brembo S.p.A.,
   has the effect of increasing the value of land by €1,429 thousand at 1 January 2004 with a positive
   effect of €906 thousand on opening shareholders’ equity, net of €523 thousand of deferred taxes. The
   net impact in 2004 was positive, improving the result by €87 thousand and the closing shareholders’
   equity by €997 thousand. Finally, at 30 June 2005 the impact was not relevant on net income and was
   positive of €1,167 thousand on shareholders’ equity. In complying with the principles of IAS16 which
   provides for the definition of different useful lives for the significant components of the same asset, the
   Group has undertaken a review of the useful life of certain assets. In particular, with reference to the
   Group’s cast iron foundries, the application of the new useful lives has resulted in a reduction of
   depreciation with effect from 2005 of €202 thousand with a net positive impact on net income of €127
   thousand and €136 thousand on the equity.

(3) IAS 19 – Employee benefits: The methods of valuation and accounting for certain benefits, based on
   IAS 19, are different from those previously used by the Group. In particular, the valuation of the
   pension plans and other employee benefits has been carried out with the assistance of an
   international firm specialized in actuarial calculations. In relation to post-employment benefits for the
   Italian companies in the Group, the restatement of the accrued liability to employees under the
   Employee severance indemnity through use of an actuarial methodology has resulted in a positive
   effect on the equity reserves. Nevertheless, the impact on opening IFRS shareholders’ equity at 1
   January 2004 was negative for €3,202 thousand net of €1,295 thousand of taxes paid in advance. The
   reduction of shareholders’ equity is attributable to the pension plans of the English company
   compared to a modest positive impact in relation to the Italian companies. The net impact in 2004
   was positive for some €310 thousand, thus reducing the negative impact on closing shareholders’
   equity to some €2,894 thousand. Finally, at the end of June 2004 the decrease of net income was €47
   thousand and the decrease of shareholders’ equity was €3,141 thousand.

(4) IAS 20 – Government grants: The recalculation at market rates of the government grants received at
   subsidised rates of interest, primarily impacting on research and development costs, and the grants
   received for productivity investments credited to the income statement over the period of
   depreciation of the relevant asset has resulted in a positive impact at 1 January 2004 of €299
   thousand on opening shareholders’ equity, net of €279 thousand of deferred taxes. The impact on the
   2004 result was negative for €8 thousand and was positive on shareholders’ equity at 31 December
   2004 for €221 thousand. Finally, at 30 June 2005 the impact was negative of €52 thousand on net
   income and positive on net shareholders’ equity of €107 thousand.

(5) IAS 21- Effect of movements in foreign exchange rates: The cumulative differences on conversion,
   amounting to a deficit of €17,730 thousand, have been written off to retained earnings. Furthermore,
   the Holding Company has recognised positive exchange differences of €1,790 thousand on opening
   shareholders’ equity at 1 January 2004, net of the related tax impact of €882 thousand, due to the
   conversion of receivables and payables in foreign currency at the end of fiscal year 2003, which, in
   previous financial statements, had not been recognised for reasons of prudence and favourable tax


                                                    11
    treatment. This adjustment had an equal and opposite effect on the income statement in 2004 (less
    positive exchange differences). With effect from 31 December 2004, the recording of exchange
    differences, including gains, has already been effected in the statutory financial statements of the
    individual companies as well as in the consolidated financial statements.

(6) IAS 36/IFRS 3 – Business combinations: Following application of IFRS3, goodwill is no longer subject to
   amortisation but is subject to an annual impairment test of the carrying value. This test has been
   carried out according to the principles of IAS36. At 1 January 2004 and at 31 December 2004, the
   Company has subjected each CGU (Cash Generating Unit) for which a goodwill value had been
   recognised to a check of impairment of value. The tests were carried out by discounting to present
   value the cash flows expected from the operation of each CGU. The discount rate used is determined
   by the WACC (Weighted average cost of capital) method. These tests did not give rise to impairment
   adjustments in the opening shareholders’ equity at 1 January 2004.
    In the 2004 income statement, the cancellation of the amortisation of goodwill, the reclassification
    amongst expenses of certain deferred costs incurred for new projects in the start up phase and the
    recalculation of the implicit financing component resulting from the dilution of the acquisition
    payment for the business branch of Bradi S.p.A., have a positive impact on the net result of €1,860
    thousand, net of taxes paid in advance amounting to €136 thousand. The net effect on the closing
    shareholders’ equity at 31 December 2004 has been an increase of €3,132 thousand. The effect on the
    income statement and shareholders’ equity at 30 June 2005 is respectively positive of €2,392 thousand
    and €4,505 thousand.

(7) IAS 37 – Other current liabilities discount: these refer primarily to the discounting to present value of
    probable costs where payment is deferred to future periods. The amount of this adjustment overall is
    not significant.

(8) IAS 38 – Intangible fixed assets: certain types of deferred costs (set up and expansion costs) can no
   longer be capitalised. The net accounting values on the date of transition have therefore been
   reversed to balance sheet reserves. In addition, the development costs that meet the requirements
   laid down by IAS38 for capitalisation have been capitalised and then amortised from the start of
   production and throughout the average economic life of the related products.
   During 2004 development costs were deferred relating to job orders opened during the year and job
   orders opened in 2003 for which further development costs were incurred; in addition was recorded
   amortization relating to development costs for job orders closed during the year.
    The change in criteria on the above mentioned items has had the effect of increasing the opening
    shareholders’ equity of €1,712 thousand net of €857 thousand of deferred taxes. The 2004 impact due
    to reduced amortisation and for internal generated assets has been positive and amounts to €4,114
    thousand increased income bringing to €5,813 thousand the positive impact on the closing
    shareholders’ equity. Finally the impact at 30 June 2005 was €3,080 thousand of increase net income
    and €8,910 thousand on net shareholders’ equity.

(9) IAS 32 and 39 – Financial instruments: transactions which, with regard to the risk management policies
   put in place by the Group, are capable of meeting the prerequisites set out for treatment as hedge
   accounting have been classified as hedging operations; the others, by contrast, although
   nevertheless established with the intention of managing risk exposure, have been classified as dealing
   transactions. The effect of valuation at fair value of the contracts covering interest rate risk (IRS) in


                                                     12
   relation to the medium-term financing undertaken by certain Group companies and operated to
   provide exchange rate cover by Brembo S.p.A has been to increase net financial assets by €802
   thousand and increase the opening shareholders’ equity by €543 thousand. In 2004, the impact of
   these operations on the income statement was negative by €563 thousand net of the tax effect of
   €277 thousand, whilst the net reduction effect on the shareholders’ equity at 31 December 2004 was
   €15 thousand.
   Own shares, previously stated in financial fixed assets, have been reclassified to reduce shareholders’
   equity. The overall impact can be summarised as a reduction in non-current financial assets of €16,389
   thousand with a corresponding reduction in the opening consolidated shareholders’ equity at 1
   January 2004 and 31 December 2004, remaining unchanged also at 30 June 2005.

(10) IAS 12 – Accounting for deferred taxes: the item includes the effect of the net impact of deferred
   taxes on the IFRS adjustments previously mentioned amounting to €1,242 thousand reduction in the
   initial shareholders’ equity, €1,656 thousand increased taxes in the 2004 income statement and €2,899
   thousand overall reduction in the shareholders’ equity at 31 December 2004.




                                                   13
R econciliation Schedules for Accounting Balances of Balance Sheet and Income
Statement.
Changes in the individual balance sheet and income statement items may result from the
application of a number of International accounting standards, some of which have a
marginal impact. The tables following the schedules refer to the principles that have a
prevalent impact.
Consolidated IAS/IFRS Balance Sheet at 1 January 2004, 31 December 2004 and 30 June 2005.




                                                                         Italian GAAP      Results of      IAS / IFRS GAAP
                                                                       according to IAS                    according to IAS
                                                                        classification     IAS / IFRS        classification
                Balance sheet as at 1 January 2004               Notes
                                                                                          adjustments
                                  (€ thousands)
ASSETS
NON-CURRENT ASSETS
  Property, plant, equipment and other equipment                                183.626           3.418             187.044
  Development costs                                                                 377           3.001               3.378
  Goodwill and other undefined useful life assets                                13.710           1.129              14.839
  Other intangible assets                                                        11.611         (2.189)               9.422
  Investments accounted for using the equity method                               4.929               0               4.929
  Other financial assets (investments in other companies)                        22.121        (16.389)               5.732
  Deferred tax assets                                                             1.953             253               2.206
TOTAL NON-CURRENT ASSETS                                                        238.327        (10.778)             227.549
CURRENT ASSETS
  Trade receivables                                                             148.251              560            148.811
  Inventories                                                                   109.896            (818)            109.078
  Other receivables and current assets                                           17.374          (1.515)             15.859
  Financial current assets                                                            0              802                802
  Cash and cash equivalent                                                       33.359                0             33.359
TOTAL CURRENT ASSETS                                                            308.880            (971)            307.909
NON-CURRENT ASSETS HELD FOR SALE AND DISCONTINUED OPERATION                           0                                   0
TOTAL ASSETS                                                                    547.207        (11.749)             535.458

EQUITY AND LIABILITIES
GROUP EQUITY
  Share capital                                                                  36.317               0              36.317
  Other reserves                                                                 86.965        (16.389)              70.576
  Retained earnings                                                              19.530           3.093              22.623
  Profit / (loss) for the year                                                   29.303               0              29.303
TOTAL GROUP EQUITY                                                              172.115        (13.296)             158.819
MINORITY INTERESTS                                                                9.123            (128)              8.995
TOTAL EQUITY                                                                    181.238        (13.424)             167.814

NON-CURRENT LIABILITIES
  Non-current financial payables                                                 61.818               0              61.818
  Other non-current financial payables                                           19.934               0              19.934
  Other non-current payables                                                        193               0                 193
  Long term provisions                                                              530               0                 530
  Long term provisions for employee benefits                                     19.620           2.982              22.602
  Deferred tax liabilities                                                        5.448           1.495               6.943
TOTAL NON-CURRENT LIABILITIES                                                   107.543           4.477             112.020
CURRENT LIABILITIES
  Current financial payables                                     (11)            82.033         (2.492)              79.541
  Other current financial liabilities                                             3.383               0               3.383
  Trade payables                                                                132.499           (467)             132.032
  Current tax payables                                                           15.606               0              15.606
  Other current payables                                                         24.905             156              25.061
TOTAL CURRENT LIABILITIES                                                       258.426         (2.802)             255.624
TOTAL EQUITY AND LIABILITIES                                                    547.207        (11.749)             535.458


                                                            14
                                                                           Italian GAAP          Results of       IAS / IFRS GAAP
                                                                         according to IAS        IAS / IFRS       according to IAS
           Balance sheet as at 31 December 2004                  Notes    classification        adjustments         classification

                                 (€ thousands)
ASSETS
NON-CURRENT ASSETS
  Property, plant, equipment and other equipment                                   216.797                5.263            222.060
  Development costs                                                                     25                9.491              9.516
  Goodwill and other undefined useful life assets                                   11.524                3.289             14.813
  Other intangible assets                                                           10.415              (4.013)              6.402
  Investments accounted for using the equity method                                  8.708                    3              8.711
  Other financial assets (investments in other companies)                           21.904             (16.389)              5.515
  Deferred tax assets                                                                1.005                (156)                849
TOTAL NON-CURRENT ASSETS                                                           270.378              (2.512)            267.866
CURRENT ASSETS
  Trade receivables                                                                151.843                    0            151.843
  Inventories                                                                      118.675                (201)            118.474
  Other receivables and current assets                                              27.217              (2.512)             24.705
  Financial current assets                                                               0                 (34)                (34)
  Cash and cash equivalent                                                          27.516                    0             27.516
TOTAL CURRENT ASSETS                                                               325.251              (2.747)            322.504
NON-CURRENT ASSETS HELD FOR SALE AND DISCONTINUED OPERATION                                 0                 0                  0
TOTAL ASSETS                                                                       595.629              (5.259)            590.371


EQUITY AND LIABILITIES
GROUP EQUITY
  Share capital                                                                     36.317                    0             36.317
  Other reserves                                                                    97.330             (16.389)             80.941
  Retained earnings                                                                 33.273                2.960             36.233
  Profit / (loss) for the year                                                      34.330                4.411             38.741
TOTAL GROUP EQUITY                                                                 201.250              (9.018)            192.232
MINORITY INTERESTS                                                                   9.752                (153)              9.599
TOTAL EQUITY                                                                       211.002              (9.171)            201.831
NON-CURRENT LIABILITIES
  Non-current financial payables                                                    44.279                    0             44.279
  Other non-current financial payables                                              19.092                    0             19.092
  Other non-current payables                                                        10.230                (841)              9.389
  Long term provisions                                                               2.754                    0              2.754
  Long term provisions for employee benefits                                        22.121                2.640             24.761
  Deferred tax liabilities                                                           6.377                2.744              9.121
TOTAL NON-CURRENT LIABILITIES                                                      104.853                4.543            109.396
CURRENT LIABILITIES
  Current financial payables                                     (11)              105.283                (834)            104.449
  Other current financial liabilities                                                2.516                    0              2.516
  Trade payables                                                                   138.082                    0            138.082
  Current tax payables                                                               4.756                    0              4.756
  Other current payables                                                            29.137                  204             29.341
TOTAL CURRENT LIABILITIES                                                          279.774                (630)            279.144
TOTAL EQUITY AND LIABILITIES                                                       595.629              (5.259)            590.371




(11) The reduction in net financial borrowing resulting from the adjustments carried out for
purposes of compliance with IAS/IFRS principles is attributable:
•   in the opening financial statements, to the adjustment of the foreign exchange items
(foreign currency advances) to year-end exchange rates amounting to €1,645 thousand with
zero effect on the balances at 31 December 2004;

                                                            15
•      to the recalculation of preferential-rate medium-term borrowings, in order to show the
benefit arising from preferential interest rates, amounting to €847 thousand, in opening
shareholders’ equity. This effect, in the closing financial statements, including the benefit of
new preferential-rate finance obtained net of the higher financial costs resulting from the
adjustment to market rates of existing preferential-rate finance, was €834 thousand.



                                                                       Italian GAAP          Results of      IAS / IFRS GAAP
                                                                     according to IAS        IAS / IFRS      according to IAS
                         Balance sheet as at 30 June 2005             classification        adjustments       classification

                                            (€ thousands)
    ASSETS

    NON-CURRENT ASSETS
      Property, plant, equipment and other equipment                           245.705              2.633             248.338
      Development costs                                                             20             14.412              14.432
      Goodwill and other undefined useful life assets                           11.429              4.048              15.477
      Other intangible assets                                                    6.642            (1.046)               5.596
      Investments accounted for using the equity method                          8.563                   5              8.568
      Other financial assets (investments in other companies)                   21.904           (16.389)               5.515
      Deferred tax assets                                                        1.270                (51)              1.219
    TOTAL NON-CURRENT ASSETS                                                   295.533              3.611             299.144

    CURRENT ASSETS
      Trade receivables                                                        176.827                  0             176.827
      Inventories                                                              125.285              (186)             125.099
      Other receivables and current assets                                      46.048            (1.408)              44.640
      Financial current assets                                                   1.744              (103)               1.641
      Cash and cash equivalent                                                  34.915                  0              34.915
    TOTAL CURRENT ASSETS                                                       384.819            (1.696)             383.123

    NON-CURRENT ASSETS HELD FOR SALE AND DISCONTINUED OPERATION                         0                                       0

    TOTAL ASSETS                                                               680.352              1.915             682.267

    EQUITY AND LIABILITIES

    GROUP EQUITY
      Share capital                                                             36.317                  0              36.317
      Other reserves                                                           115.668           (16.389)              99.279
      Retained earnings                                                         44.148              6.056              50.204
      Profit / (loss) for the year                                              14.650              5.520              20.170
    TOTAL GROUP EQUITY                                                         210.783            (4.813)             205.970

    MINORITY INTERESTS                                                          10.729              (175)               10.554

    TOTAL EQUITY                                                               221.512            (4.988)             216.524

    NON-CURRENT LIABILITIES
      Non-current financial payables                                            52.648                  0              52.648
      Other non-current financial payables                                      18.192                  0              18.192
      Other non-current payables                                                 9.257              (841)               8.416
      Long term provisions                                                       2.827                  0               2.827
      Long term provisions for employee benefits                                23.166              3.010              26.176
      Deferred tax liabilities                                                   7.283              5.055              12.338
    TOTAL NON-CURRENT LIABILITIES                                              113.373              7.224             120.597

    CURRENT LIABILITIES
      Current financial payables                                               131.125              (757)             130.368
      Other current financial liabilities                                        2.736                  0               2.736
      Trade payables                                                           161.186                  0             161.186
      Current tax payables                                                      11.595                  0              11.595
      Other current payables                                                    38.825                437              39.262
    TOTAL CURRENT LIABILITIES                                                  345.467              (320)             345.147

    TOTAL EQUITY AND LIABILITIES                                               680.352              1.915             682.267



                                                                16
Consolidated IAS/IFRS Income Statement for the Year to 31 December 2004 and period to 30 June 2005

                                                                                                Results of
                                                                             Italian GAAP                            IAS / IFRS GAAP
               Income statement for the year ended 31                      according to IAS     IAS / IFRS           according to IAS
                                                                  Notes     classification                             classification
                          December 2004                                                        adjustments


                                    (€ thousands)



              Sales of good and services                                             678.180                 0                 678.180
              Other revenues and income                                               13.738               841                  14.579
              Cost of raw materials, consumables and goods                         (322.150)               618               (321.532)
              Other operating costs                                                (133.145)             5.780               (127.365)
              Personnel expenses                                                   (134.225)             1.317               (132.908)

         GROSS OPERATING INCOME                                                      102.398             8.555                110.954

              Depreciation, amortization and other write-downs                      (42.869)             3.204                (39.665)

         NET OPERATING INCOME                                      (12)               59.529            11.759                 71.289

              Net financial income (charges)                                           (728)           (4.471)                 (5.199)
              Adjustments of financial asset value                                     (728)           (1.222)                 (1.950)

         INCOME BEFORE TAXES                                                          58.073             6.066                 64.140

              Taxes                                                                 (22.658)           (1.657)                (24.315)

         INCOME BEFORE MINORITY INTERESTS                                             35.415             4.409                 39.825

              Minority interests                                                     (1.085)                    4              (1.081)

         NET INCOME                                                (13)               34.330             4.413                 38.744




                                                                                                Results of
                                                                            Italian GAAP                             IAS / IFRS GAAP
              Income statement for the period ended 30                    according to IAS      IAS / IFRS           according to IAS
                                                                 Notes     classification                              classification
                            June 2005                                                          adjustments

                                    (€ thousands)



              Sales of good and services                                            373.864                      0             373.864
              Other revenues and income                                               2.677                      0               2.677
              Cost of raw materials, consumables and goods                        (185.336)                     17           (185.319)
              Other operating costs                                                (69.738)                  4.871            (63.343)
              Personnel expenses                                                   (71.392)                    288            (71.104)

         GROSS OPERATING INCOME                                                     50.075               5.176                  56.775

              Depreciation, amortization and other write-downs                     (21.039)                  1.699            (19.235)

         NET OPERATING INCOME                                    (12)               29.036               6.875                  37.540

              Net financial income (charges)                                        (2.926)                  (371)             (3.623)
              Adjustments of financial asset value                                    (119)                      2               (117)

         INCOME BEFORE TAXES                                                        25.991               6.507                  33.800

              Taxes                                                                (11.094)             14.846                (13.386)

         INCOME BEFORE MINORITY INTERESTS                                           14.897              21.353                  20.414

              Minority interests                                                      (247)                     3                (244)

         NET INCOME                                              (13)               14.650              21.356                  20.170




In the income statement, the main reclassifications have been carried out in order to
apportion over the individual lines of the income statement the positive and negative
components recorded as exceptional costs and revenues in accordance with the preceding
principles.

                                                                 17
(12) As a result of the adjustments carried out, analysed in the following schedules, the net
consolidated revenues do not change; the net operating margin changes from:
- €59,529 thousand to €71,289 thousand at 31 December 2004;
- €29,036 thousand to €37,540 thousand at 30 June 2005.
The results have been influenced positively, in the first place, by the capitalisation of
development costs net of related amortisation (€6,488 and €4,918 thousand at 31/12/04 and
30/6/05 respectively) and the suspension of amortisation of goodwill and consolidation
differences (€3,050 and €1,525 thousand at 31/12/04 and at 30/6/05).
(13) The net result changes from:
- €34,330 thousand to €38,744 thousand at 31 December 2004;
- €14,650 thousand to €20,170 thousand at 30 June 2005.
In addition, the net result in 2004 was affected by the retrospective application of IAS 39 to the
financial instruments held at that date, as well as the separate identification of the financial
component resulting both from the discounting of the preferential-rate borrowings and
liabilities due to employees. The aforementioned financial components have had no significant
impact on the net result for the first half of 2005.




                                                  18
                                                                Italian GAAP            1                                                                                                                                                Results of      IAS / IFRS GAAP
                                                                                                         2               3            4            5            6                7             8             9            10
                                                              according to IAS                                                                                                                                                                           according to IAS
                                                                                                                                                                                                                                         IAS / IFRS
                  Balance sheet as at 1 January 2004           classification    Reclassification       IAS 2        IAS 16         IAS 19       IAS 20       IAS 21       IAS 36 -IFRS 3    IAS 37        IAS 38        IAS 39
                                                                                                                                                                                                                                        adjustments
                                                                                                                                                                                                                                                           classification

                                    (€ thousands)
ASSETS
NON-CURRENT ASSETS
  Property, plant, equipment and other equipment                       183.626               1.989                       1.429                                                                                                                  3.418             187.044
  Development costs                                                        377                                                                                                                                   3.001                          3.001               3.378
  Goodwill and other undefined useful life assets                       13.710                                                                                                       1.139                        (10)                          1.129              14.839
  Other intangible assets                                               11.611              (1.989)                                                                                    222                       (422)                        (2.189)               9.422
  Investments accounted for using the equity method                      4.929                                                                                                                                                                      0               4.929
  Other financial assets (investments in other companies)               22.121                                                                                                                                           (16.389)            (16.389)               5.732
  Deferred tax assets                                                    1.953                               305         (512)         1.295                                                                     (877)         42                 253               2.206
TOTAL NON-CURRENT ASSETS                                               238.327                      0        305           917         1.295              0            0             1.361             0         1.692   (16.347)            (10.778)             227.549
CURRENT ASSETS
  Trade receivables                                                    148.251                                                                                      560                                                                            560            148.811
  Inventories                                                          109.896                            (818)                                                                                                                                  (818)            109.078
  Other receivables and current assets                                  17.374                                                       (1.515)                                                                                                   (1.515)             15.859
  Financial current assets                                                   0                                                                                                                                                 802                 802                802
  Cash and cash equivalent                                              33.359                                                                                                                                                                       0             33.359
TOTAL CURRENT ASSETS                                                   308.880                      0     (818)                0     (1.515)              0         560                 0              0            0          802               (971)            307.909
NON-CURRENT ASSETS HELD FOR SALE AND DISCONTINUED OPERATION                  0                                                                                                                                                                                          0
TOTAL ASSETS                                                           547.207                      0     (513)              917       (220)              0         560              1.361            0          1.692   (15.545)            (11.749)             535.458

EQUITY AND LIABILITIES
GROUP EQUITY
  Share capital                                                         36.317                                                                                                                                                                      0              36.317
  Other reserves                                                        86.965                                                                                                                                            (16.389)           (16.389)              70.576
  Retained earnings                                                     19.530                            (513)              931     (3.202)           385       1.790               1.361            75         1.725         543              3.093              22.623
  Profit / (loss) for the year                                          29.303                                                                                                                                                                      0              29.303
TOTAL GROUP EQUITY                                                     172.115                      0     (513)              931     (3.202)           385       1.790               1.361            75         1.725   (15.847)            (13.296)             158.819
MINORITY INTERESTS                                                       9.123                                               (25)                      (86)                                           1           (13)            (5)           (128)               8.995
TOTAL EQUITY                                                           181.238                      0     (513)              906     (3.202)           299       1.790               1.361            75         1.712   (15.852)            (13.424)             167.814

NON-CURRENT LIABILITIES
  Non-current financial payables                                        61.818                                                                                                                                                                      0              61.818
  Other non-current financial payables                                  19.934                                                                                                                                                                      0              19.934
  Other non-current payables                                               193                                                                                                                                                                      0                 193
  Long term provisions                                                     530                                                                                                                                                                      0                 530
  Long term provisions for employee benefits                            19.620                                                         2.982                                                                                                    2.982              22.602
  Deferred tax liabilities                                               5.448                                                11                       279          882                               37          (20)         307              1.495               6.943
TOTAL NON-CURRENT LIABILITIES                                          107.543                      0           0             11       2.982           279          882                 0             37          (20)         307              4.477             112.020
CURRENT LIABILITIES
  Current financial payables                                            82.033                                                                      (847)      (1.645)                                                                        (2.492)              79.541
  Other current financial liabilities                                    3.383                                                                                                                                                                      0               3.383
  Trade payables                                                       132.499                                                                                   (467)                                                                          (467)             132.032
  Current tax payables                                                  15.606                                                                                                                                                                      0              15.606
  Other current payables                                                24.905                                                                        268                                          (112)                                          156              25.061
TOTAL CURRENT LIABILITIES                                              258.426                      0           0              0             0      (578)      (2.111)                  0          (112)            0              0          (2.802)             255.624
TOTAL EQUITY AND LIABILITIES                                           547.207                      0     (513)              917       (220)              0         560              1.361             0         1.692   (15.545)            (11.749)             535.458




                                                                                                                    19
                                                              Italian GAAP                1                2                3                4                5                6                    7                8             9              10              Results of       IAS / IFRS GAAP
                                                            according to IAS                                                                                                                                                                                      IAS / IFRS       according to IAS
       Balance sheet as at 31 December 2004                  classification        Reclassification                                                                                                                                                                                  classification
                                                                                                          IAS 2           IAS 16           IAS 19           IAS 20           IAS 21           IAS 36 -IFRS 3       IAS 37        IAS 38          IAS 39          adjustments
                             (€ thousands)
ASSETS
NON-CURRENT ASSETS
  Property, plant, equipment and other equipment                      216.797                  3.782                               1.569                                                                                                (89)                               5.263            222.060
  Development costs                                                        25                                                                                                                                                          9.491                               9.491              9.516
  Goodwill and other undefined useful life assets                      11.524                                                                                                                            3.292                            (3)                              3.289             14.813
  Other intangible assets                                              10.415                 (3.782)                                                                                                     (30)                         (201)                             (4.013)              6.402
  Investments accounted for using the equity method                     8.708                                                                                                                                3                                                                 3              8.711
  Other financial assets (investments in other companies)              21.904                                                                                                                                                                      (16.389)             (16.389)              5.515
  Deferred tax assets                                                   1.005                                      302          (517)             1.262                                                  (277)                         (945)             19                (156)                849
TOTAL NON-CURRENT ASSETS                                              270.378                         0            302          1.053             1.262                 0                0               2.988                         8.254       (16.370)              (2.512)            267.866
CURRENT ASSETS
  Trade receivables                                                   151.843                                                                                                                                                                                                  0            151.843
  Inventories                                                         118.675                                     (201)                                                                                                                                                    (201)            118.474
  Other receivables and current assets                                 27.217                                                                    (1.402)                                                (1.110)                                                          (2.512)             24.705
  Financial current assets                                                  0                                                                                                                                                                             (34)              (34)                (34)
  Cash and cash equivalent                                             27.516                                                                                                                                                                                                  0             27.516
TOTAL CURRENT ASSETS                                                  325.251                         0           (201)               0          (1.402)                0                0              (1.110)                             0             (34)           (2.747)            322.504
NON-CURRENT ASSETS HELD FOR SALE AND DISCONTINUED OPERA                        0                                                                                                                                                                                               0                  0
TOTAL ASSETS                                                          595.629                         0            102          1.053               (140)               0                0               1.877                         8.254       (16.405)              (5.259)            590.371


EQUITY AND LIABILITIES
GROUP EQUITY
  Share capital                                                        36.317                                                                                                                                                                                                  0             36.317
  Other reserves                                                       97.330                                                                                                                                                                      (16.389)             (16.389)             80.941
  Retained earnings                                                    33.273                                     (513)           935            (3.204)              337            1.790               1.275              74         1.726            541                2.960             36.233
  Profit / (loss) for the year                                         34.330                                       388            87                310               (8)         (1.790)               1.857              15         4.108          (556)                4.411             38.741
TOTAL GROUP EQUITY                                                    201.250                         0           (125)         1.022            (2.894)              329               (0)              3.132              89         5.834       (16.404)              (9.018)            192.232
MINORITY INTERESTS                                                      9.752                                                       (25)                             (108)                                                  1             (21)                             (153)              9.599
TOTAL EQUITY                                                          211.002                         0           (125)             997          (2.894)              221              (0)               3.132              90         5.813       (16.404)              (9.171)            201.831
NON-CURRENT LIABILITIES
  Non-current financial payables                                       44.279                                                                                                                                                                                                  0             44.279
  Other non-current financial payables                                 19.092                                                                                                                                                                                                  0             19.092
  Other non-current payables                                           10.230                                                                                                                            (841)                                                             (841)              9.389
  Long term provisions                                                  2.754                                                                                                                                                                                                  0              2.754
  Long term provisions for employee benefits                           22.121                                                                     2.640                                                                                                                    2.640             24.761
  Deferred tax liabilities                                              6.377                                      228               56             112               275                                 (414)             44         2.442                0              2.744              9.121
TOTAL NON-CURRENT LIABILITIES                                         104.853                         0            228               56           2.752               275                0              (1.254)             44         2.442                0              4.543            109.396
CURRENT LIABILITIES
  Current financial payables                                          105.283                                                                                        (834)                                                                                                 (834)            104.449
  Other current financial liabilities                                   2.516                                                                                                                                                                                                  0              2.516
  Trade payables                                                      138.082                                                                                                                                                                                                  0            138.082
  Current tax payables                                                  4.756                                                                                                                                                                                                  0              4.756
  Other current payables                                               29.137                                                                                          338                                               (134)                                               204             29.341
TOTAL CURRENT LIABILITIES                                             279.774                         0              0                0                0             (497)               0                     0         (134)              0               0              (630)            279.144
TOTAL EQUITY AND LIABILITIES                                          595.629                         0            102          1.053               (142)              (0)             (0)               1.878              0          8.255       (16.404)              (5.259)            590.371




                                                                                                                                           20
                                                                Italian GAAP                1             2                 3             4             5             6                7             8              9            10             Results of     IAS / IFRS GAAP
                                                              according to IAS                                                                                                                                                                  IAS / IFRS     according to IAS
                     Balance sheet as at 30 June 2005          classification        Reclassification                                                                                                                                                            classification
                                                                                                         IAS 2          IAS 16          IAS 19        IAS 20        IAS 21       IAS 36 -IFRS 3    IAS 37         IAS 38        IAS 39         adjustments
                                        (€ thousands)
ASSETS

NON-CURRENT ASSETS
  Property, plant, equipment and other equipment                        245.705                   861                           1.837                                                                                 (65)                             2.633            248.338
  Development costs                                                          20                                                                                                                                     14.412                            14.412             14.432
  Goodwill and other undefined useful life assets                        11.429                                                                                                            4.048                                                       4.048             15.477
  Other intangible assets                                                 6.642                  (861)                                                                                      (26)                        (159)                        (1.046)              5.596
  Investments accounted for using the equity method                       8.563                                                                                                                5                                                           5              8.568
  Other financial assets (investments in other companies)                21.904                                                                                                                                                  (16.389)           (16.389)              5.515
  Deferred tax assets                                                     1.270                                  292            (518)         1.324                                        (235)                     (928)             14               (51)              1.219
TOTAL NON-CURRENT ASSETS                                                295.533                     0            292            1.319         1.324            0             0             3.791             0      13.259       (16.375)              3.611            299.144

CURRENT ASSETS
  Trade receivables                                                     176.827                                                                                                                                                                            0            176.827
  Inventories                                                           125.285                               (186)                                                                                                                                    (186)            125.099
  Other receivables and current assets                                   46.048                     0                                     (1.408)                                                                                                    (1.408)             44.640
  Financial current assets                                                1.744                                                                                                                                                     (103)              (103)              1.641
  Cash and cash equivalent                                               34.915                                                                                                                                                                            0             34.915
TOTAL CURRENT ASSETS                                                    384.819                     0         (186)                0      (1.408)              0             0                0              0             0       (103)             (1.696)            383.123

NON-CURRENT ASSETS HELD FOR SALE AND DISCONTINUED OPERATION                      0                                                                                                                                                                                                0

TOTAL ASSETS                                                            680.352                     0            106            1.319          (83)            0             0             3.791             0      13.259       (16.478)              1.915            682.267

EQUITY AND LIABILITIES

GROUP EQUITY
  Share capital                                                          36.317                                                                                                                                                                            0             36.317
  Other reserves                                                        115.668                                                                                                                                                  (16.389)           (16.389)             99.279
  Retained earnings                                                      44.148                               (126)             1.021     (3.093)             287            0             2.119           89           5.841        (82)              6.056             50.204
  Profit / (loss) for the year                                           14.650                                   8               170        (48)            (52)                          2.390         (30)           3.082         (1)              5.520             20.170
TOTAL GROUP EQUITY                                                      210.783                     0         (118)             1.191     (3.141)            235             0             4.509           59           8.923    (16.472)            (4.813)            205.970

MINORITY INTERESTS                                                       10.729                                                  (24)                       (128)                                            0           (18)            (5)           (175)              10.554

TOTAL EQUITY                                                            221.512                     0         (118)             1.167     (3.141)            107             0             4.509            59          8.905    (16.477)            (4.988)            216.524

NON-CURRENT LIABILITIES
  Non-current financial payables                                         52.648                                                                                                                                                                            0             52.648
  Other non-current financial payables                                   18.192                                                                                                                                                                            0             18.192
  Other non-current payables                                              9.257                                                                                                            (841)                                                       (841)              8.416
  Long term provisions                                                    2.827                                                                                                                                                                            0              2.827
  Long term provisions for employee benefits                             23.166                                                               3.010                                                                                                    3.010             26.176
  Deferred tax liabilities                                                7.283                                  224             152             47          250                                            31          4.352            (1)           5.055             12.338
TOTAL NON-CURRENT LIABILITIES                                           113.373                     0            224             152          3.057          250             0             (841)            31          4.352            (1)           7.224            120.597

CURRENT LIABILITIES
  Current financial payables                                            131.125                                                                             (757)                                                                                      (757)            130.368
  Other current financial liabilities                                     2.736                                                                                                                                                                            0              2.736
  Trade payables                                                        161.186                                                                                                                                                                            0            161.186
  Current tax payables                                                   11.595                                                                                                                                                                            0             11.595
  Other current payables                                                 38.825                                                                               400                           127          (90)                                            437             39.262
TOTAL CURRENT LIABILITIES                                               345.467                     0              0               0             0          (357)            0              127          (90)              0              0            (320)            345.147

TOTAL EQUITY AND LIABILITIES                                            680.352                     0            106            1.319          (84)            0             0             3.795            (0)     13.257       (16.478)              1.915            682.267




                                                                                                                       21
                                                                               1                2             3              4             5              6               7             8              9            10             Results of
                                                     Italian GAAP                                                                                                                                                                                   IAS / IFRS GAAP
   Income statement for the year ended 31           according to IAS                                                                                                 IAS 36 -IFRS                                                  IAS / IFRS       according to IAS
                                                     classification     Reclassification       IAS 2        IAS 16         IAS 19        IAS 20         IAS 21                        IAS 37         IAS 38        IAS 39                            classification
              December 2004                                                                                                                                               3                                                       adjustments


                      (€ thousands)



 Sales of good and services                                  678.180                                                                                                                                                                           0              678.180
 Other revenues and income                                    13.738                                                                                                           841                                                           841               14.579
 Cost of raw materials, consumables and goods              (322.150)                                 618                                                                                                                                     618            (321.532)
 Other operating costs                                     (133.145)                                                               116                                    (1.109)                          6.773                           5.780            (127.365)
 Personnel expenses                                        (134.225)                                                             1.249                                                         67                                          1.317            (132.908)

GROSS OPERATING INCOME                                       102.398                       0         618              0          1.366             0             0            (268)            67          6.773             0             8.555             110.954

 Depreciation, amortization and other write-downs           (42.869)                1.225                         136                                                         1.989                        (147)                           3.204             (39.665)

NET OPERATING INCOME                                          59.529                1.225            618          136            1.366             0             0            1.721            67          6.626             0            11.759              71.289

 Net financial income (charges)                                (728)                                                             (908)         (12)       (2.671)                           (44)                      (835)              (4.471)              (5.199)
 Adjustments of financial asset value                          (728)               (1.225)                                                                                       3                                                       (1.222)              (1.950)

INCOME BEFORE TAXES                                           58.073                       0         618          136             458          (12)       (2.671)             1.724            23          6.626      (835)                6.066              64.140

 Taxes                                                      (22.658)                                (230)         (49)           (148)             4          882              136             (8)     (2.521)           277             (1.657)             (24.315)

INCOME BEFORE MINORITY INTERESTS                              35.415                       0         388             87           310             (8)     (1.790)             1.860            15          4.105      (558)                4.409              39.825

 Minority interests                                           (1.085)                                                                                                                                         9             (5)                 4             (1.081)

NET INCOME                                                    34.330                       0         388             87           310             (8)     (1.790)             1.860            15          4.114      (563)                4.413              38.744




                                                                                                                      22
                                                                               1                2              3               4             5             6                7             8             9             10           Results of
                                                      Italian GAAP                                                                                                                                                                                      IAS / IFRS GAAP
  Income statement for the period ended 30          according to IAS                                                                                                                                                               IAS / IFRS           according to IAS
                                                     classification     Reclassification       IAS 2         IAS 16       IAS 19           IAS 20        IAS 21       IAS 36 -IFRS 3    IAS 37        IAS 38         IAS 39                              classification
                June 2005                                                                                                                                                                                                         adjustments

                       (€ thousands)



 Sales of good and services                                   373.864                                                                                                                                                                               0             373.864
 Other revenues and income                                      2.677                                                                                                                                                                               0               2.677
 Cost of raw materials, consumables and goods               (185.336)                                  17                                                                                                                                          17           (185.319)
 Other operating costs                                       (69.738)                                                                58                                         (414)                       5.227                               4.871            (63.343)
 Personnel expenses                                          (71.392)                                                               288                                                                                                           288            (71.104)

GROSS OPERATING INCOME                                        50.075                       0           17             0             347              0            0             (414)             0         5.227             0             5.176                  56.775

 Depreciation, amortization and other write-downs            (21.039)                                              267                                                          1.777                       (345)                               1.699            (19.235)

NET OPERATING INCOME                                          29.036                       0           17          267              347              0            0             1.363             0         4.882             0             6.875                  37.540

 Net financial income (charges)                               (2.926)                                                              (441)            12                            43             14                           1                 (371)             (3.623)
 Adjustments of financial asset value                           (119)                                                                                                              2                                                                2               (117)

INCOME BEFORE TAXES                                           25.991                       0           17          267              (95)            12            0             1.408            14         4.882             1             6.507                  33.800

 Taxes                                                       (11.094)                                  (7)         (98)              48          168                             373      16.404        (2.042)               0            14.846                (13.386)

INCOME BEFORE MINORITY INTERESTS                              14.897                       0           10          169              (47)         180              0             1.781     16.418            2.840             1            21.353                  20.414

 Minority interests                                             (247)                                                                                                                             1            (3)            5                    3                (244)

NET INCOME                                                    14.650                       0           10          169              (47)         180              0             1.781     16.419            2.837             6            21.356                  20.170




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